Roth IRAs have income limits of $189,000 for couples and $120,000 for an individual. This makes it essentially inaccessible to higher income earners. However, it turns out that those limits aren’t applicable to Roth 401(k)s.
The tax-free withdrawals later on from Roth 401(k)s will far outweigh what you’re going to get even with the tax benefits that you’re going to get right now if you opt for a traditional 401(k).Roth 401(k)s are appealing because like Roth IRA, contributions are done post-taxation which makes withdrawals free from further taxation and penalties if you’re 59 ½ years old and have had the account for more than 5 years.
This makes the Roth 401(k) a better option for older workers and the traditional 401(k) better suited to the needs of young wage earners who tends to make better use of the decade’s worth of tax benefits of the traditional 401(k).
It’s also not just when you’re ready to cash in on your investments that the Roth is better. When you make a withdrawal from your traditional 401(k), it is treated as income so could have a huge implication on your social security and health care premiums.