Yet, there’s also an obvious reason why you don’t see as many employees using Roth 401 plans.
Jack Towarnicky, Of Counsel at Koehler Fitzgerald, LLC in Powell, Ohio, says, “More than 95% of 401 plans with automatic features default employees into pre-tax contributions, even though: 1) Most new hires are in as low of a marginal income tax bracket as they will experience during their working careers; 2) Most non-participants may be in as low of a marginal income tax bracket as they will ever see for the rest of their lives; and, perhaps most importantly, 3) The median tenure of American...
Despite this, even when the Roth option is available or the IRA), retirement savers simply aren’t accessing it. To some extent, and particularly among older savers who have been ingrained with the priority of saving taxes today, the Roth simply doesn’t offer what they’re looking for. “Many people avoid a Roth option despite qualifying for one because contributing to a traditional option helps reduce taxable income, which may help to save a person money when their tax bill is due,” says Erik Wright, Owner of New Horizon Home Buyers in Chattanooga, Tennessee.
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