Side note to all investors - take a close look at the ROTH IRA. You can put in up to $5,000 per year. Grows tax free and the proceeds are tax free after 59 and 1/2. You can't take out until after that time point but $5,000 one time invested at 8% from 20 till 60 (40 years) would be $108K
My last employer added a Roth 401k option to our existing 401k plan.
The employer match was the same for both - a rather generous 100% employer match up to 3% and a 50% match up to 6%. And the investment options, which were numerous and very good and very low fee, were the same. The company also made/contributed an annual profit sharing employer contribution, tax free, that usually ran around 2-3% of the employee’s annual contribution.
The only thing with the Roth option is that, yes, withdrawals starting at 59 and ½ are tax free, they are not tax deferred (not pre-tax deductions like with the 401k).
I opted to keep my 401k pre-tax contribution at 6% an added the Roth at 2% but the combined 401k and Roth was subject to annual contribution limits as well as the employer contribution limits.
https://www.irs.gov/retirement-plans/designated-roth-accounts-contributing-to-a-designated-roth-accountIn “theory” tax deferment is preferable if one is in their high earning years. The idea is that once retired, they will fall into a lower tax bracket and therefore pay less in taxes on the withdrawals (assuming no huge tax increase or changed to the tax brackets or other post retirement investment income) and will therefore make out on the tax deferment.
Personally I would suggest that if your employer has a good, well managed 401k plan with a generous match, take full advantage of the match and the tax deferment. Add either an employer sponsored Roth or a personal Roth as is affordable with after tax dollars. Younger employees, however, at the lower end of their earnings probably do well to contribute more to a Roth.
Just something to consider.