Having a mix of traditional and Roth 401(k)s or IRAs, or “tax diversification,” gives you some financial flexibility when you’re withdrawing money later in life. With a Roth, for example, you don’t have to worry about what tax rates might be 30 years down the line and whether the income you take out will bump you into a higher tax bracket, as you do with a traditional 401(k).
The lack of good data on the likely impact of moving to 100 percent Roth 401(k)s alarms Hansen.
“It’s scary to me that we’d implement a policy with no research or analytics to back up that it would expand or improve the retirement system,” he said. “There’s a concern that with any massive shift to Roth there will be a drop in participation and in contributions, which would devastate the retirement system in America.”
Even though the Trump administration has said it will protect retirement savings, “we are not out of the woods yet,” Hansen said. —With Sahil Kapur in Washington, D.C.
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