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4 things you need to know before opening Roth 401k.



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hey Dustin Tippett's here financial

adviser with jazz wealth managers and

today we're going to talk about a few

things that you need to know if you're

considering the Roth 401k which is a

topic suggested to us by one of our

subscribers thank you very very much so

let's get started alright chances are

you've shown up to work he got a new job

they slap a big old pile of papers on

your desk and say choose one choose

investments and we'll talk to you in a

little bit you have no idea what's going

on every call I get from people that

just started a jobs like Dustin there's

a list of things I don't even know what

I'm supposed to do I don't know who I'm

supposed to give these back to can you

please help well look one of those

choices may be the Roth 401k so let's

take a look at that first of all what

are the differences you've got the

traditional 401k everybody's heard of

that usually not too many questions

there you just choose the investments

but now about 50% of all employers offer

what's called a Roth 401k so there's a

difference we need to talk about the

differences one of the main differences

is the way these things are taxed right

so in a 401k or a Roth 401k you can

contribute the same amount they don't

change right it's $18,000 if you're over

50 then you can put an additional six

thousand so that's the max you can go

but statistics show that only about 22%

of you max out your actual 401k whether

it's a Roth or it's a traditional all

right so if you're considering the Roth

401k it just don't know what the

benefits are or whatever let's go over

four things that you should know before

you decide on the Roth 401k well the

first thing you should know is that in a

rough 401k you cannot take contributions

out if you change your mind see in a

Roth IRA you could be putting money in

you know years in years out you're

putting money in and then something

happens and you need to take that money

out or some of it well on a Roth IRA you

can do that in a Roth 401k not gonna be

the case so keep that in mind if you're

thinking about a Roth 401k and you may

need that money in the future that's not

gonna probably be your best vehicle the

second thing I want you to keep in mind

is that your employer will still make

contributions hopefully to your 401k

your

401k and if they do that money is not

tax-free that money's actually kept

separately in a pre-tax column so when

you do retire and you start taking out

your Roth 401k contributions and

earnings tax-free well whatever your

employer contributed along the way then

you're gonna pay tax on that

don't worry that'll be kept track for

you you don't have to actually do the

work there but the third thing I want

you to consider is required minimum

distributions which is not something we

normally talk about when we use the word

Roth so in a Roth 401k you're actually

required to take distributions when you

turn age seventy and a half that's not

the case in a Roth IRA but a simple

sneaky little trick is when you get to

that age if you still don't want to take

money out we can just move that Roth

401k into a Roth IRA which does not

require you to take money out and you'll

be all set but you should know that if

you have a Roth 401k and you do not

transfer that when you turn 70 and a

half you're gonna have to start taking

money out and the fourth thing to

consider is that there is no income

limit for the Roth 401 K C in a Roth IRA

if you make too much money then you're

not even allowed to contribute to the

account well a sneaky way around that is

to go to your employer and use the Roth

401 K if you're making a lot of money

then when you leave that employer one

day we can transfer that to a Roth IRA

no problem we'll sneak that money in and

you still won't have to pay taxes on it

so just now in a Roth 401 K no max

income amounts that will phase you out

you're free to contribute to it as you

go

one last thing I'll throw in there this

may be a big deal to you it may not but

in a 401 K your contributions are made

pre-tax which lowers your adjusted gross

income in a Roth 401 K your

contributions are made after tax which

does not lower your adjusted gross

income not sure if that's something that

matters to you maybe you're doing

something and you need to lower your

adjusted gross income or you're trying

to buy something and you don't want to

lower your adjusted gross income there's

a number of

different scenarios they're just know

that in a 401k it will lower your

adjusted gross income because of the

pretext and in a Roth IRA a Roth 401k

sorry it will not lower your adjusted

gross income well if this helps let me

know leave a comment below if you have a

401k if you have a Roth 401k and how's

that going for you did you know some of

these things about the Roth 401k

otherwise if you have questions go to

jazz wealth com click chat with jazz up

at the top I'm happy to help no strings

attached just keep us in mind if you

have other retirement accounts or you'd

like to open a retirement account we can

certainly help you with that you can

click invest now right on our website

we'll get started on the application and

I hope to talk to you soon

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