Roth vs. Traditional: What’s the Difference? (Video)

Are you ready to take your retirement savings to the next level?

Depending on your current situation, this question may incite a range of different thoughts and emotions. For instance, you may be thinking, “I’m already contributing as much as I possibly can to my 401(k) plan — and now you’re suggesting that I contribute more?” Maybe you got a late start to saving and worry that you may have to work longer than expected in order to catch up. Or perhaps the sheer thought of retirement sparks feelings of anxiety and uncertainty — so much that you’re inclined to push the thought as far back into your mind as possible.

If you fall into any of these camps, repeat after me: breathe. Next, recognize that you’re not alone: according to a recent survey by Schwab Retirement Services, saving for retirement is the number-one financial stress among Americans today, even more than job security, paying off credit card debt and keeping pace with monthly expenses.1

So before you grab your 401(k) plan statement and frantically run some back-of-the-envelope numbers (or resort to breathing into a paper bag), here’s some food for thought: retirement planning is an ongoing process, a path that constantly evolves as your life and priorities change. At the same time, it’s not a set-it-and-forget-it type of situation, either. Even if you’re only making small steps forward, taking time to plan and prepare today will save you a big headache when your retirement date actually arrives. And it will arrive, so long as you take the proper measures in advance.

More good news: you’re in control of your own retirement outlook.

If you’re already contributing to your plan and have gradually started to boost your deferrals over time, you’re off to an amazing start! You also have the option of getting more strategic with your savings, which doesn’t necessarily translate into more money out of your pocket every two weeks — in fact, it can actually save you money.

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Up Your Strategy

Many employers have started to give their participants the option of choosing between two types of 401(k) plans: a Roth and a traditional. It may sound complex, but the primary difference between the two structures really comes down to everybody’s favorite topic: taxes.

So how do taxes factor into the Roth versus traditional debate? And most importantly, how can you decide which option is right for you and your retirement goals? Discover the differences in the second segment of “Big Future, Little Steps,” an educational series we’ve designed to help savers like you secure the retirement they’ve always wanted.

Want to Keep Learning?

Check out the first segment of our “Big Future, Little Steps” series, which explores the true impact that waiting to save can have on your long-term goals. Watch Part I

 

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Amanda Liberatore
Amanda Liberatore

Marketing Copyeditor

Amanda Liberatore is the Marketing Copyeditor for Hewins Financial Advisors, based in Chicago, IL. She is the managing editor of OneBite and heads the publication's editorial staff.

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Roth vs. Traditional: What’s the Difference? (Video)

time to read: 2 min