What's the difference between the Roth 401K and the regular 401K and is there an advantage to one over the other?

__________________

I have both. I don't know a lot (I usually just listen to dh regarding this kind of stuff) But, I do know that my regular the money is put in pretax and the roth it is put in after it has been taxed.

Yes! There is a benefit.

Just like the Roth IRA, if you are in a lower tax bracket now, but expect to be in a higher one at retirement age you would be better off in a Roth 401k. Pay the lower taxes on the money now and get tax free dividends later.

I found this article about them. It's very informative.
http://en.wikipedia.org/wiki/Roth_401(k)

I think a lot of people assume they will be making less in retirement then they do now, in which case the regular 401K makes more sense. Money goes in pre-tax so more money goes in. But it is taxed when you take it out, presumably when your regular income has stopped and you have less money.

However, those who will have a higher income upon retirement should consider the Roth, where they put the funds in post tax. Less money post tax but it grows tax deferred all those years AND no taxes upon withdrawal.

But who would have more money upon retirement then to do now? Those that work at paying off their debts & mortgage early and begin to invest the extra. If they start early enough, with the miracle of compound interest, they should have a lot more money in retirement then they do now.

Hard decision since none of us knows what the future holds. If there is an employer matching 401K, then it makes sense to at least go up to the match. If not, does it make sense to put money into both?

I'm still trying to wrap my brain around this today. Anyone else have any thoughts on this?

__________________

As with Roth vs. Regular IRAs, it depends on your situation. Keep in mind, you may not even have a choice yet because Roth 401ks are new enough that your employer may not offer them yet.
Avoid the Roth 401k if you have less than 5 year to retirement. If distributions are made before the 5-year gap, it becomes an unqualified distribution, meaning it is subject to taxes.

Dave Ramsey LOVES the Roth 401ks & IRAs! Basically you're taxed now instead of later - and I think most people are making less now then they will when they retire!

__________________
Stay at home mom to my 3 boys... ages 5, 3 & 1!

I can do all things through CHRIST who strengthens me. Philippians 4:13