Dear Dave,
My current employer offers a regular 401(k) and a Roth 401(k). I’ve got several years before I retire, so which one should I choose?
Jennifer
Dear Jennifer,
Take the Roth!
If you put your money into a Roth 401(k), and by retirement age there’s $1 million in there, that money is yours tax-free. By comparison, if it’s in a regular 401(k), you’ll pay taxes on that $1 million, which will come out to about $300,000—maybe $400,000 at the rate things are going now. You’ll lose 30 to 40 percent of your money.
My personal 401(k) is a Roth. And in this situation, yours should be too!
—Dave
* Dave Ramsey is America’s trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, EntreLeadership and Smart Money Smart Kids. His newest best-seller, Smart Money Smart Kids, was written with his daughter Rachel Cruze, and recently debuted at #1. The Dave Ramsey Show is heard by more than 8 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.