Question
Employee X has been working for an employer for a year and is now eligible to participate in the company's 401K plan.The employer explains to
Employee X has been working for an employer for a year and is now eligible to participate in the company's 401K plan.The employer explains to employee X that the 401K plan has a "Roth" feature, which means that if employee X defers amounts from their pay to put into the 401K, employee X can make either traditional contributions or Roth contributions.
- Which should employee X do in this case and the tax implication of each option?
2. What factors should be considered in deciding which option to take?
3. Can the employee do both?
4. What would you advise employee X to do, and why?
I am trying to make sure I understand this correctly. I feel a Roth would be better for long term 401K, but needed these explained.
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