| HN Mirror

$18k is the maximum yearly contribution to a 401(k) - it can be either a Roth or a traditional account. The money in your Roth 401(k) is less accessible than that in a Roth IRA until you convert the 401(k) into an IRA. You have to be lucky enough to have an employer whose 401(k) plan includes an S&P 500 fund with a decent management expense ratio. You also need to be lucky enough to have one which allows you to contribute to Roth accounts.

Roth accounts only make sense when you expect your effective income tax rate in retirement to be higher than your current marginal tax rate. In the current US system, your marginal rate at $35k is 15%. A Roth account would make sense for such an earner who expects to earn at least $45k or so a year in retirement. However, once your marginal rate is 25%, you have to be well into the six figures (around $230-240k) before your effective rate hits 25%. For almost anyone in the 25% bracket in the US, the traditional 401k/IRA makes more sense. If you're actually expecting six figure retirement income, you should be trying to shift as much of that into long term capital gains as possible. This also all assumes a single earner - double the income thresholds if you're a married couple.