Pre-Tax vs. Roth

Choosing between pre-tax and Roth 401(k) contributions can significantly impact your long-term tax outcomes. Here are the core points from the lesson:

• The net tax advantage between pre-tax and Roth depends on your current vs. future tax rates; Roth may be ideal if you're in a lower bracket now, but pre-tax offers flexibility for future low-tax Roth conversions
• Roth IRAs offer penalty-free access to contributions anytime, while Roth 401(k)s have stricter withdrawal rules, often treating withdrawals as a mix of contributions and earnings
• Pre-tax retirement accounts are subject to Required Minimum Distributions (RMDs) starting at age 73, which can force taxable income in retirement
• Doing Roth conversions during low-income years (e.g., early retirement) can reduce future RMD burdens and smooth your tax liability over time

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