5 Biggest 401(k) Mistakes to Avoid

1. Ignoring Roth 401(k) Options

If you overlook the benefits of Roth 401(k) options, it can potentially impact your tax planning and distribution strategy in retirement. As discussed previously in the article, Roth 401(k) contributions are made with after-tax dollars, meaning withdrawals in retirement are tax-free. This can be particularly advantageous for individuals expecting higher income tax rates in retirement.

If individuals don’t consider them, they may miss the opportunity to diversify their tax strategies, and potentially reduce future tax liabilities. Additionally, Roth 401(k)s have no required minimum distributions (RMDs) during the account owner’s lifetime, thereby offering them flexibility to manage their retirement income. Failing to leverage the benefits of Roth contributions could result in a less tax-efficient retirement strategy.

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