Personal finance guru Suze Orman joined HuffPost Live on Tuesday to to impart her financial wisdom, including breaking down why a Roth 401(k) trumps a regular 401(k).
"In a regular 401(k), you put money in it with pre-tax money, so you've never paid taxes on that," Orman told host Josh Zepps
. "And then that money grows and grows and grows, and later on when you're old like me, and you go to take money out of your 401(k), you're going to have to pay ordinary income tax on that money."
The problem with that, Orman explained, is that there's no way to predict the future tax rate you'll have to pay when you eventually withdraw those 401(k) savings.
"In a Roth 401(k) ... you pay taxes on it now, you invest it, it grows tax-free," Orman said. "Later on in life, when you go to take it out, you're not going to have to pay a penny of taxes on it."
For additional financial advice, Orman is launching an online personal finance course, which is available free from Sept. 23 to 25 on Today.com.
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