Determining the optimal contribution strategy between pretax and Roth 401(k) plans involves a specific calculation. Experts recommend analyzing the long-term financial goals and tax implications of each option. The pretax contribution allows for immediate tax deductions, reducing current tax liability. Conversely, the Roth option deferral minimizes taxes on earnings when withdrawn in retirement. The chosen strategy depends on an individual’s tax bracket and projected future tax rates. Careful consideration of these factors is crucial for making informed decisions about retirement savings.
Credits: US Top News and Analysis
