Traditional vs Roth 401(k)
The second episode of our 401(k) season takes on the enrollment choice most workers make in ninety seconds and live with for thirty years: pay tax now or pay tax later. John, Maria, Melissa and Steve build the complete comparison. The two doors defined paycheck by paycheck, with the payroll tax nuance most guides miss; the short history of the Roth 401(k), authorized in 2001 and available from 2006; two Money Math proofs showing that at equal tax rates the two doors finish identical to the dollar, and that the winner flips only when the rates flip; marginal versus effective rates and the bracket staircase a retiree actually climbs, with a fully worked invented example; the early-career case for Roth and the peak-earner case for traditional; why the employer match lands on the traditional side in most plans even when your own money is Roth; tax diversification as the deliberate strategy, including the gap-year conversion opportunity flagged for its own episode ahead; required minimum distributions, including the rule change that exempted Roth plan accounts from 2024; the Roth five-year clock and rollover clocks; the combined contribution limit with the 2025 figures and the quiet asterisk that a maximum Roth contribution shelters more real spending power; state-to-state moves, the saver's credit, and inheritance angles; a clearly labelled invented case study of two coworkers, Daniel and Priya, whose mixed and single-door retirements differ in control more than in wealth; the six-lesson practical checklist, the six traps, and a six-question audit to run on your own plan this week. Education only — no recommendations, no predictions.
Sources referenced (public, dated): Internal Revenue Service — 401(k) plan guidance, Roth comparison chart, contribution limits for 2025 and required minimum distribution guidance on irs.gov; U.S. Department of Labor — consumer publications on workplace retirement plans; the Economic Growth and Tax Relief Reconciliation Act of 2001 and the SECURE 2.0 Act of 2022, including the provision exempting Roth employer-plan accounts from required minimum distributions beginning in 2024. Contribution figures are stated for 2025; listeners should confirm the current year's limits on irs.gov. The case study and the worked tax examples are invented and illustrative; the arithmetic examples are teaching calculations, not forecasts.
Audio format: MP3, 128 kbps CBR, 44.1 kHz, mono, -16 LUFS.
This episode is for financial education only and is not investment advice. Narration is AI-generated.
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