To prepare for retirement you can contribute to a 401K or a Roth 401K.
These funds are similar, but for Tax purposes they are very different.
For example if you invest in a 401K, the money that goes in to this fund is pre tax.
For example, your paycheck is $1000, you deposit $100 in your 401K. The amount you pay tax on is $900.
When you get to retirement age the money you withdraw is taxed on every cent.
With the Roth 401K you pay tax on the $1000 paycheck. You then deposit $100 in your Roth 401K.
When you get to retirement age you do not pay tax on any of your withdrawals. It is Tax free.
Because the future will be very different and taxes are likely to get much higher through the years, the Roth 401k may be the better option.
