Just want to tack on for the OP (or anyone else): Look at the fees. The fees will destroy your retirement. Both the individual fund fees and the account management fees.
For example on my 401K provider they have funds with fees ranging from 0.19% (index fund) up to 0.58% (fully managed fund). You'd think that the fully managed funds outperform the index funds which makes the fees worthwhile, but actually the reverse is true (that the index funds have outperformed the managed funds historically).
If you don't manually select which funds to invest in they put a lot of your money into the more expensive funds.
If you have a fairly low AGI (thus low overall tax rate): Roth.
If you'll need to withdraw the principal before retirement: Roth (you can withdraw principal penalty free from a RothIRA).
If your tax rate will remain the same for withdraw as it does now, it doesn't really matter since the after tax value is the same whether you take out taxes now or later (i.e., tax_rate x (principal^gains) = (tax_rate x principal)^gains.
Assuming the money you invest goes up in value, aren't you better off in this scenario with a 401k over a Roth so that you can make gains on the money that would go toward taxes? You still have to pay taxes on the principal and the gains but compared to paying taxes on the money immediately, you're in effect borrowing money from the government at 0% to gamble with and keeping a portion of the return.
(Similarly, the expression tax_rate x (principal^gains) = (tax_rate x principal)^gains isn't true (beyond not being the right expression)).
.7 * (100000^1.07) != (.7 * 100000)^1.07 (assuming paying 30% in taxes and making 7% gains)
I think an advantage of a Roth is that you don't have to pay tax on the money you earn via investing. For example, if your money in a Roth doubles then you only need to pay tax on the half of it that was there when you added money to the fund. Whereas for a traditional 401k you pay tax on money as it comes out which includes money earned via the investment.
(i.e., tax_rate x (principal^gains) = (tax_rate x principal)^gains.
Gains should be multiplied rather than an exponential factor here. (I think this expression was created because gains are calculated as roughly (1+rate)^(number years) but at this higher level it should just be multiplied by the tax rate and the principal.
I would split 50/50 in this case to hedge against what and where tax rates/brackets might be in retirement.
When you say 'Roth', do you mean Roth 401K or Roth IRA? This is what had me confused the entire part of a year - Roth IRA vs Roth 401k.
>If you'll need to withdraw the principal before retirement: Roth (you can withdraw principal penalty free from a RothIRA).
I'm not the original commenter but in regards to the advantages and situations mentioned, they apply to both Roth IRAs and Roth 401k's.
Although, check your company's plans as to when you can take early distributions. If you can't unless you retire or leave the company then "If you'll need to withdraw the principal before retirement: Roth (you can withdraw principal penalty free from a RothIRA)." might be moot. I know with my companies plan I don't believe I can even withdraw my Roth 401k contributions without quitting or retiring. With most Roth plans you are allowed to withdraw your contributions tax and penalty free, but you won't be able to "re-add" above and beyond the yearly annual contribution limits, which is why you shouldn't withdraw them.
Max out the 401K first before you think of anything else. Who cares if you change jobs frequently. You can always do a roll over into an IRA with providers such as Fidelity or Vanguard for free.