Question for the group, do you guys do traditional 401K's or Roth 401K's? My new job has a roth version, I signed up for the regular out of habit, but now I am thinking the Roth is better. Yes my take home will be lower, but $19.5K/yr in a Roth 401k is worth ~25% more than a traditional since it is already taxed.
I guess the flip side is, if I invest the tax savings from a traditional it is probably a wash in the end? Does this make sense?
Most financial advisors won't tell you this, but there are really two issues to consider. One is the math of pretax dollars versus after tax dollars. Generally they are pretty good at that. The other one that doesn't get talked about is Congress.
A traditional investment vehicle offers more compounding. You're depositing a dollar rather than 80 cents or whatever. The future value of that extra 20 cents is huge...usually negating the advantage of the Roth to the point that it's either a push or close to it.
However, Congress is capable of doing should scare any investor to death. One should fully expect the rug to get pulled out from Roth's at some point in the future when the political class is turning over stones looking for money. For those who don't believe me, look at how the taxation of Social Security benefits came to be.
Smart business people defer taxes as long as possible so that they can use that money to grow their pie. Individuals who want to build wealth should do the same.