Someone taught me about Roth IRAs when I was an associate and I want to share. If you don’t know about them, research. Max out 401k company match and then Roth IRA is next best. See more in comments

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I would agree in most cases that Roth is better, but you also have to think down the line a bit. Right now I work in CA which has a pretty high state income tax rate. I plan to retire in a zero state income tax state like TX, TN, WA etc. If I put my retirement savings in a traditional right now, I am able to avoid at least 8% of tax on the for permanently as long as I do end up retiring in a zero income tax state. Obviously there are risks of changing tax law here, but those risks exist with a Roth too if tax rates significantly decrease. But again, I do agree that Roth is preferred in most cases.

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I understand the difference between a Roth 401k, Roth IRA, and post tax traditional 401k. I wasn't specific in my reply, but I was lumping post tax 401k and Roth 401k together as they have the same tax mechanics (but different contribution limits). So why bother rolling a post-tax 401k (whether Roth or traditional post-tax) into an IRA during your term of service (since you can do the tax free rollover out of the 401k at any time with regards to the post-tax funds) unless you're unhappy with the investment choices?

Despite common knowledge they actually don’t have income limits either via a tax “backdoor”. If you are above income limits, you put money in traditional and converted to Roth. Easy to do on Etrade (not an ad). You can invest the money anyway you want- sticks, options, bonds. Of course, I would suggest index funds for inexperienced investors. Start when you are young!!! It pays off.

AA1- are you doing regular or Roth 401k? I’ve always done regular since I want my taxable income now to be lower (CA has high income taxes) and I will get taxed on the gains when I withdraw. The Roth IRA gave me another way to save where my gains won’t be taxed at retirement. So, money goes in after tax and I can do aggressive investments and not pay tax when I pull out the money in retirement. Hope that helps.

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