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The Most Common Roth 401K Misconception
by G.E. Miller on June 28, 20095 Comments
The Roth 401K Match Misconception
I’ve been hearing a common Roth 401K myth that I’d like to quickly dispel.
It goes something like this:
Why would anyone choose a Traditional 401K over a Roth 401K? After all, your company’s 401K match is equivalent and if it’s post tax with a Roth 401K, you’re really getting more money from your employer. Right?
SORRY!
Your employer’s match on Traditional 401K’s AND Roth 401K’s are both pre-taxed and always automatically put into a separate Traditional 401K account. Your match will be worth the same amount today and in the future, whether you contribute to the Traditional or the Roth. Clever thinking, but not reality.
Roth 401k Match Discussion:
Did you think that by contributing to a Roth 401K you were getting a bigger match?
Related Posts:
My name is G.E. Miller and 
so, wait, if you had a 401(K) Roth, then you would be investing in both a ROTH account & a traditional 401(k) account at the same time?
That’s awesome! takes the effort out of trying to split your money into two separate accounts… _IF_ i’m reading that right.
Not that it matters right now, for me, seeing as I am unemployed & all.
@ Allen – That’s correct.
My 401K investment strategy was simple, I moved my money to a safe haven, the stable value bond fund. After the market stopped bottoming out and I saw what I considered a sustained leveling off and some signs of life out there, I started incrementally moving money back into the stock index funds.
Thank you for your great article.
You can add this misconception also.
Don’t think that once you leave your former employer that it will be so easy to transfer your 401k.
My former employer was so upset that I left the company that they gave me a hard time and stalled on purpose when I asked them to transfer my funds into my new employers plan.
They help out for almost 1 full year before I got my money.
And not only that, but Roth 401k contributions are NOT tax deductible like regular 401k contributions, so you could end up keeping yourself in a higher tax bracket than might have been the case otherwise. Again, whether or not it makes sense to contribute to any given retirement account really depends on the individual financial circumstances of the person in question…