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89% of workers miss this important option of retirement – the colorful fool

As social security does not provide enough income to feed the elderly themselves, workers today need to strive to save themselves independently for retirement. Today, 401 (k) generous annual contribution limits apply: $ 19,000 for workers under 50 years and $ 25,000 for workers over 50 years of age.

Unfortunately, most people with 401 (k) use no main feature: the Roth-saving option.

Roth's savings were not always widespread at 401 (k), but today it is estimated that 70% of companies are offered. Despite the many benefits that a Roth 401 (k) offers, only 11% of workers save. If you do not have any money left in a Roth 401 (k), it's worth rethinking that decision –

; especially if you want more financial flexibility later.

<img alt = "Road sign with the inscription Roth with the arrow to the right [19659005] IMAGE SOURCE: GETTY IMAGES.

Why save in a Roth 401 (k)?

If you put money into a traditional 401 (1965) If your retirement benefits are paid out, then these distributions will be taxed as ordinary income.

Roth 401 (k) behaves as a taxpayer You will not receive tax relief on the money paid in, but once it's paid in, your account will grow tax-free, which means you will not have to pay any taxes on your investment income, and if you're prepared to withdraw in retirement, these are for you This could give you much more financial leeway later in life, especially if you are limited to a fixed income.

Unlike Roth IRAs, Roth 401 (k) also does not prohibit higher earners from contributing. You can earn as much as you can and the Roth 401 (k) will still be on the table.

It is worth considering a Roth 401 (k) if you expect to be in a higher tax bracket retirement than you currently are. In general, a Roth 401 (k) makes sense if you are on the young side and your income has not nearly reached its peak.

Note that both traditional and Roth 401 (k) minimum requirements meet distributions or RMDs once you turn 70 1/2. At this point, you must withdraw some of your balance every year or risk paying a hefty 50% penalty for that amount to the IRS. With a standard 401 (k), your RMD automatically increases your tax debt, even if you do not choose to use that money so much as to be forced to do so. But with a Roth 401 (k), this compulsory payout is not added to your tax bill.

That is, you do not have to put all of your money into a Roth 401 (k) . Rather, you can split your savings between a conventional 401 (k) and a Roth to get tax cuts in advance, but you can also deduct a portion of your savings tax-free.

In fact, the beauty of the Roth 401 (k) is that it gives you more peace of mind in retirement by eliminating any tax implications for taking withdrawals. Even if you assume that your tax code will be the same in later life as it is today, it is still worth investing a portion of your savings in a Roth.

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