As an accountant in Orlando, I know that one of the things that people like about the 401(k) is the fact that you get to stash away pre tax dollars. This leads to a lower tax bill for you. For instance if you made $3000 every month and you have to deal with a 30 percent tax rate. Now if you prefer not saving any money for retirement then you will end up paying $90 in just taxes. On the other hand if you do choose to contribute to a retirement plan then you get to do that before your gross income is adjusted, that is before it is taxed. Once you take out the retirement contribution you are left with $840 in taxes. This is the traditional 401(k).
The best accountant in Orlando will tell you that Roth 401(k) is different in the sense that it only allows you to contribute to the retirement plan once you have taxed your income. There is another way that you can work on things like these. That being said there are certain benefits to this plan that the traditional 401(k) cannot offer.
One of these advantages is that when it is time for you to withdraw your savings and the investment gains. Now because you paid taxes before you subtracted the amount for the Roth plan. This way you will not be under the implication of taxes when you withdraw taxes.
A wise accountant in Orlando will advise that the thing is that you are never sure when eth tax rates will change. If you go for the Roth system then you don’t have to pay a higher tax if the tax rate increases from your time of employment till you retire.
Sometimes you need to fill over all your investment from the 401(k) to an individual retirement account. People need to do this when they are changing jobs. If you have a Roth 401(k) then you will not be able to convert it into the traditional IRA. If you have a traditional 401(k) then you can convert into a traditional IRA.
Allowing a choice of which 401(k) employees prefer gives them the freedom to control their future. Those that choose the traditional method get an immediate tax break. Mostly people who go for the traditional 401(k) are ones with lower tax breaks and know that their savings will stack up over time. This way they will be in a much better place come retirement.
On the other hand people who opt for Roth simply do that because they are not entirely comfortable with what the future may hold, so they simply take care of it now. The best way is to simply reach out to a good accountant in Orlando and seek advice on your unique financial situation.
If you need more information about our Orlando accounting and tax services, please contact us at 407-344-1012. Freedomtax Accounting’s staff has been providing honest accounting services and tax services for 15 years. Our Orlando accounting and tax firm has its main offices in Kissimmee, FL. Our services are provided nationwide, but mainly in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, Clermont, Davenport, Hunters Creek, Lake Nona, Celebration, Winter Park, Windermere, Dr. Phillips, Maitland, Altamonte Springs, Winter Garden, Ocoee, Apopka, Belle Isle, Edgewood, and Oakland FL. Our tax accountants and IRS enrolled agents (irs ea) specialize in corporate accounting and bookkeeping, tax services, tax preparation, back taxes help, tax debt relief, tax resolution, tax planning, itin number, incorporations, and non profit 501c3 tax exempt.