Explain benefits of Roth 401k?

[Snowreap]

it's my understanding that the difference between a traditional 401(k) and a Roth 401(k) is essentially the same as the difference between a traditional IRA and a Roth IRA.

if you think that tax rates will go down as you get older, then a traditional 401(k) is probably better for you, because your contributions go in before being taxed (at your current high rate), but you pay tax on distributions later (when you expect tax rates to be low).

if you think that tax rates will go up as you get older, then a Roth 401(k) is probably better, because your contributions go in after being taxed (at your current low rate), and distributions are not taxed at all (thus evading future high tax rates).

for people in our parents' generation (and before) it has been fair to say that as they age and their income falls, their tax rate gets lowered. but with so many baby boomers now retiring, it is not clear that future generations will be able to assume that their retirement tax rate will be significantly lower, in fact it may go up significantly to pay for expanded social programs, to prevent the government from defaulting on its debt payments, or both.

-ken