August 2018

I have a 20-year old memory of asking Bob Bova, the founder of Moneywatch Advisors, if he thought I could retire if we could accumulate $1 Million. At the time the company I worked for was being acquired – there’s no such thing as a merger – and I was particularly frustrated with the new management team. Bob and I were playing golf at Andover Country Club where it was abundantly clear that the PGA Tour was not a viable fallback career and I was at a professional low point and looking for some hope. In typical fashion, Bob didn’t say, “sure” and give me false hope. Or, “no way” and dash my hopes. He said, “Let’s sharpen our pencils and make a plan.”

Lisa and I had been clients of Moneywatch for 2-3 years at this point, signing on after observing my parents’ outstanding experience as clients for about a decade. Until then, they had primarily focused on managing the investments within our 401(k)s. But, what Bob developed for us now changed the course of our financial lives.

Recently a client of my approximate vintage asked if he should start contributing to his employer’s Roth 401(k) rather than the traditional 401(k). Roth 401(k)s and Roth 403(b)s are retirement account options commonly offered by employers, such as the University of Kentucky. The difference is that you put after-tax dollars into a Roth rather than pre-tax dollars and, when you take a withdrawal in retirement, you won’t pay income tax on that amount. In other words, the earnings growth is tax-free. Cool, you say, gimme some of that. But, the real question is, which account option will produce the most money in the long run?