Chad Parks, Founder + CEO at Ubiquity Retirement + Savings, talks with Ben Steverman at Bloomberg Business about the pros and cons between a Roth 401(k) and a traditional 401(k).
Workers have been signing up, but quite slowly. Most people are confused by Roth plans, says Chad Parks, “It’s not an easy thing to grasp.”
With a traditional 401(k), you pay no taxes on contributions. Instead, you pay taxes when you withdraw the money in retirement. A Roth reverses that: There’s no tax break on contributions, but all withdrawals—including any investment gains—are tax-free.