Pre-Tax vs. Roth 401(k): Which One Should I Choose?

Your 401(k) might offer both pre-tax and Roth deferral options. Each has different tax advantages.

• Deducted from your pay before taxes

• Reduces your current taxable income

• Taxes are due when you withdraw the money in retirement

Best for: People who want to reduce current tax bills or expect lower income in retirement.

• Deducted from your pay after taxes

• No immediate tax benefit

• Withdrawals (including earnings) are tax-free in retirement, if qualified

Best for: Younger earners, those expecting higher income later, or those seeking tax-free withdrawals.

You can split contributions between both types. Consider:

• Your current vs. expected future tax rate

• Whether you want tax savings now or in retirement

• How long your money will grow tax-free