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Alexis Leondis

Love Yourself Some Roth 401(k)

More people — especially younger workers — should be using retirement accounts that allow for tax-free withdrawals.

There are better ways to save.

There are better ways to save.

Photographer: Bloomberg

As more US workers start new jobs, they should take a closer look at their employers’ options for retirement savings. An underused account called a Roth 401(k) could help minimize taxes in the long run and multiply how much savers eventually have.

Unlike a traditional 401(k), contributions to a Roth 401(k) aren’t tax-deductible, but withdrawals are tax-free in retirement. A helpful way to think about it: With a Roth 401(k), the balance is what you’ll actually get in retirement (since you’ve already paid income taxes on what’s in there) whereas with a regular 401(k), a chunk of that balance will go to paying income taxes when you’re retired and withdraw money from it.