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<blockquote data-quote="SDMF" data-source="post: 292860" data-attributes="member: 412">I AM NOT A FINANCIAL PLANNER, I HAVE NO TIES AT ALL TO THE FINANCIAL SECTORHere's the Captaincies obvious version:While you're working, 401K comes out of your paycheck pre-tax and lowers your tax burden during that time.&nbsp; These $$ grow (hopefully) or shrink completely free from any taxation until you reach 59.5yrs old.&nbsp; @ 59.5, you can begin to draw upon your 401K. Those withdrawals will be taxed at whatever your tax rate is in the withdrawal year.&nbsp; The idea being once you retire, you're income will be lower than it was while you were working and you'll pay less taxes on the withdrawals than you would've if you'd taken that $$ during your working years.Roth $$ is post-tax $$ invested into an account that also cannot be drawn upon until you're 59.5, so you've taken regular income and agreed to have it invested until retirement.&nbsp; Once you reach 59.5, you may withdraw from your Roth without any taxes at all, they were all paid up front.I don't know the rules are regarding precisely what you can and cannot invest in with these $$.</blockquote>

[QUOTE="SDMF, post: 292860, member: 412"] I AM NOT A FINANCIAL PLANNER, I HAVE NO TIES AT ALL TO THE FINANCIAL SECTOR Here's the Captaincies obvious version: While you're working, 401K comes out of your paycheck pre-tax and lowers your tax burden during that time. These $$ grow (hopefully) or shrink completely free from any taxation until you reach 59.5yrs old. @ 59.5, you can begin to draw upon your 401K. Those withdrawals will be taxed at whatever your tax rate is in the withdrawal year. The idea being once you retire, you're income will be lower than it was while you were working and you'll pay less taxes on the withdrawals than you would've if you'd taken that $$ during your working years. Roth $$ is post-tax $$ invested into an account that also cannot be drawn upon until you're 59.5, so you've taken regular income and agreed to have it invested until retirement. Once you reach 59.5, you may withdraw from your Roth without any taxes at all, they were all paid up front. I don't know the rules are regarding precisely what you can and cannot invest in with these $$. [/QUOTE]

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