At a time when every dollar counts, is it wise to save for retirement using a Roth 401(k)?

KANSAS CITY, Mo. - Saving for retirement stresses a lot of us out.  The big question seems to be, how do you stash enough away while trying to keep up with the monthly bills?

Now, more and more companies are offering another option to their employees for retirement savings; the Roth 401(k).

The Roth 401(k) is similar to the Roth IRA.  You contribute money to the account after it is taxed.  But, you do not pay taxes on that money and the earnings when you withdraw it after you retire.

A recent Wall Street Journal article spells out " The ins and out of the Roth 401(k)" , stating it is simple to understand.  That article states it requires "Careful assessment of both your current and future tax situation".

As a general rule, the article states, you might benefit from the Roth 401(k) if you expect your tax rate to be higher in retirement than it is today.    If you think your tax rate will be lower, go with a conventional 401(k), where you invest pre-tax dollars.

Keep in mind, a traditional 401(k) reduces your gross income which lowers the amount of pay that is subject to tax.  The result can be a bigger net paycheck.   With the Roth 401(k), there will be no reduction in gross pay and less take home pay in your paycheck. However, you will see a payoff down the road in retirement.

With any financial planning decision, remember it's best to consult a professional.  Many financial plans through work have experts you can call.

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