Roth 401k question

User123

Member
The amount that is withdrawn from my check each week for my 401k is mathmatically the percent that i chose of my gross pay. For example if made 1000 and put in 10% my withdraw is gonna say 100. Well when i log into prudential it says i have a roth 401k. Should it not be taking 10 percent of my net income since that is actually after ive paid tax? Did i miss something?
 

User123

Member
I thought the whole idea was that you already paid taxes on the money and so you wouldnt have to pay taxes on its growth when you retire. If it comes off the gross then no taxes have been paid on it yet.
 
I thought the whole idea was that you already paid taxes on the money and so you wouldnt have to pay taxes on its growth when you retire. If it comes off the gross then no taxes have been paid on it yet.
Percentage wise it goes by your gross. You paid taxes in it and you won't have to pay taxes on it when you retire.
 

zero

Well-Known Member
Roth 401k here too and it doesnt seem right. it looks as though they are taking it off gross but no taxes
 

Jones

fILE A GRIEVE!
Staff member
Roth 401k here too and it doesnt seem right. it looks as though they are taking it off gross but no taxes
You get taxed the same all year, the tax break for contributions to the traditional gets applied when you file.
 

Jones

fILE A GRIEVE!
Staff member
They are talking about the ROTH.
I understand that, but I'm getting the impression that some people think they will see a change in the taxes on their weekly paycheck if they contribute to the roth vs the traditional. I was pointing out that it doesn't work like that.
 
I understand that, but I'm getting the impression that some people think they will see a change in the taxes on their weekly paycheck if they contribute to the roth vs the traditional. I was pointing out that it doesn't work like that.
Some people do not understand that you are paying the same amount in taxes if you choose the ROTH option. Honestly I really can't believe how uniformed some people are. You are talking about investing thousands of dollars a year and not doing any homework on it.

This is your future, take a few minutes and learn something about it.
 

oldngray

nowhere special
Some people do not understand that you are paying the same amount in taxes if you choose the ROTH option. Honestly I really can't believe how uniformed some people are. You are talking about investing thousands of dollars a year and not doing any homework on it.

This is your future, take a few minutes and learn something about it.
The difference is post tax money goes into a Roth and a traditional is untaxed off your gross income and you pay tax later. Not that complicated.
 

Pizza

Joe Biden is The Big Guy
I understand that, but I'm getting the impression that some people think they will see a change in the taxes on their weekly paycheck if they contribute to the roth vs the traditional. I was pointing out that it doesn't work like that.

Am i missing something here?

With a contribution of 10% on $1000 a roth and traditional both will deduct $100.

With a roth you pay federal tax on the $1000. Lets say 15% so $150.
With traditional you only pay federal tax on $900 so $135.
 

oldngray

nowhere special
Am i missing something here?

With a contribution of 10% on $1000 a roth and traditional both will deduct $100.

With a roth you pay federal tax on the $1000. Lets say 15% so $150.
With traditional you only pay federal tax on $900 so $135.

Exactly.

A traditional will lower your gross income so should lower your taxes. For now.

The benefit of the Roth is any growth is non taxable because you invested with post tax money. A traditional you pay the tax when you withdraw the money and you are presumably in a lower tax bracket. It takes several years before the benefits of a Roth really kicks in. If you are close to retirement age its usually better to stick with the traditional but if you are younger go for the Roth.
 
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