3 Drawbacks of Saving for Retirement in a Roth 401(k)

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When it comes to saving for retirement, you have a number of choices. You could house your savings in a traditional IRA and lower your near-term tax bill in the process, or open a Roth IRA and enjoy tax savings later in life. Or, you could save in your employer’s 401(k) plan — whether in the form of a traditional account or a Roth.

These days, a growing number of 401(k)s offer a Roth savings feature, and they work as follows: You put in money on an after-tax basis, so there’s no immediate tax break on contributions. Once invested, though, your money gets to grow tax-free (meaning, gains in your account aren’t taxed), and then withdrawals are tax-free once you’re eligible to start taking them.

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