Should you contribute to your company’s Roth 401(k)?

The basic difference between a traditional 401(k) and a Roth 401(k) is when you pay the taxes. In a traditional 401(k), you make contributions with pre-tax dollars, so you get a tax break up front that lowers your current income tax bill. With a Roth 401(k), it’s the reverse: you make contributions with after-tax dollars, but withdrawals of contributions and earnings are 100% tax-free at age 59½, so long as you’ve held the account for five years. Although everyone’s situation will be different, many advisors suggest splitting your contributions between your traditional 401(k) and Roth 401(k) to enjoy their dual tax benefits.