Suze Orman: Not Doing This With Your 401(k) Is ‘Nuts’

Core Insights - Many Americans are not taking full advantage of the Roth 401(k) option available in their retirement plans, potentially missing out on significant tax savings [1][3]. Group 1: Roth 401(k) Overview - Suze Orman emphasizes the importance of the Roth 401(k) as a valuable retirement savings tool that allows for tax-free withdrawals in retirement [2][6]. - According to Vanguard data, 86% of 401(k) plans offer a Roth 401(k) option, yet fewer than 20% of participants utilize it [3][5]. Group 2: Tax Implications - Contributions to a traditional 401(k) reduce taxable income in the year they are made, while withdrawals are taxed as ordinary income [5]. - In contrast, Roth 401(k) contributions do not provide an upfront tax break, but all withdrawals in retirement are tax-free, and there are no required minimum distributions [6][4]. Group 3: Strategic Recommendations - Orman recommends that individuals currently saving in a traditional 401(k) should consider contributing to a Roth 401(k) to diversify their tax exposure in retirement [7][6]. - Building savings in a Roth 401(k) can provide a significant advantage by allowing tax-free income during retirement [7].