My employer is offering roth 401k contributions starting 1/1/23 in addition to the normal pre and post tax contribution options. I have been using the post-tax contribution method since I started a little over 3 years ago.

Based on what I’ve read about the two different methods, I don’t understand why anyone would ever choose post tax contributions over roth. From what I understand, post tax is contributed after your paycheck is taxed, and you will be taxed on any additional gains made when withdrawn in retirement. For roth contributions, it seems the same is true where the money is contributed after taxes, but additional gains made are tax free in retirement? 

I feel like I understand it correctly but then that raises the question for me of why would anyone ever choose post tax over roth if the gains on roth contributions aren’t taxed? It seems too good to be true that you can just make capital gains and not be taxed on them?
You're right that Roth 401(k) contributions are made with after-tax dollars and allow for tax-free withdrawals of both contributions and earnings in retirement, assuming you meet certain requirements (like being at least 59.5 years old and having had the Roth account for at least five years). This can be a great advantage, especially if you believe your tax rate will be higher in retirement than it is now.

The traditional, pre-tax 401(k) allows for contributions to be made with pre-tax dollars, reducing your taxable income now. You pay taxes on contributions and earnings when you withdraw in retirement. This can be beneficial if you think your tax rate will be lower in retirement than it is now.

The post-tax 401(k), which is less common, is similar to the Roth in that contributions are made with after-tax dollars. However, unlike the Roth, you will pay taxes on the earnings when you withdraw them in retirement. In this sense, it's less beneficial than either the Roth or the traditional 401(k).

So why might someone choose a post-tax 401(k) over a Roth 401(k)? One potential reason is if they've already maxed out their contribution limits for the Roth and traditional 401(k) and want to save more for retirement. The IRS allows overall contributions to a 401(k), including pre-tax, after-tax, and employer contributions, up to a higher limit ($58,000 in 2021). This strategy is sometimes part of a "mega backdoor Roth" strategy, in which post-tax contributions are then rolled over into a Roth account, allowing for potentially larger amounts of tax-free growth and withdrawals.

However, the "mega backdoor Roth" strategy can be complex and isn't right for everyone. It's also worth noting that the future of this strategy is uncertain, as recent proposed legislation may eliminate it.

As with any financial decision, it's important to consider your individual circumstances, tax situation, and retirement goals. It may be helpful to consult with a financial advisor or tax professional.
### Human
My employer is offering roth 401k contributions starting 1/1/23 in addition to the normal pre and post tax contribution options. I have been using the post-tax contribution method since I started a little over 3 years ago.

Based on what I’ve read about the two different methods, I don’t understand why anyone would ever choose post tax contributions over roth. From what I understand, post tax is contributed after your paycheck is taxed, and you will be taxed on any additional gains made when withdrawn in retirement. For roth contributions, it seems the same is true where the money is contributed after taxes, but additional gains made are tax free in retirement? 

I feel like I understand it correctly but then that raises the question for me of why would anyone ever choose post tax over roth if the gains on roth contributions aren’t taxed? It seems too good to be true that you can just make capital gains and not be taxed on them?

### Assistant
You're right that Roth 401(k) contributions are made with after-tax dollars and allow for tax-free withdrawals of both contributions and earnings in retirement, assuming you meet certain requirements (like being at least 59.5 years old and having had the Roth account for at least five years). This can be a great advantage, especially if you believe your tax rate will be higher in retirement than it is now.

The traditional, pre-tax 401(k) allows for contributions to be made with pre-tax dollars, reducing your taxable income now. You pay taxes on contributions and earnings when you withdraw in retirement. This can be beneficial if you think your tax rate will be lower in retirement than it is now.

The post-tax 401(k), which is less common, is similar to the Roth in that contributions are made with after-tax dollars. However, unlike the Roth, you will pay taxes on the earnings when you withdraw them in retirement. In this sense, it's less beneficial than either the Roth or the traditional 401(k).

So why might someone choose a post-tax 401(k) over a Roth 401(k)? One potential reason is if they've already maxed out their contribution limits for the Roth and traditional 401(k) and want to save more for retirement. The IRS allows overall contributions to a 401(k), including pre-tax, after-tax, and employer contributions, up to a higher limit ($58,000 in 2021). This strategy is sometimes part of a "mega backdoor Roth" strategy, in which post-tax contributions are then rolled over into a Roth account, allowing for potentially larger amounts of tax-free growth and withdrawals.

However, the "mega backdoor Roth" strategy can be complex and isn't right for everyone. It's also worth noting that the future of this strategy is uncertain, as recent proposed legislation may eliminate it.

As with any financial decision, it's important to consider your individual circumstances, tax situation, and retirement goals. It may be helpful to consult with a financial advisor or tax professional.<eos_token>