Are you (or your clients) missing out on the Roth 401(k)?

The wealthy can still benefit from a Roth 401(k), because of the flexibility it offers. For example, a retired couple wants to splurge on a $40,000 round-the-world cruise. If they take that money from a traditional retirement account, they'll need to pay taxes on it. That one-time expense may bump them up to a higher tax bracket. But any withdrawals from a Roth 401(k) are tax-free, so retirees can cover big expenses without worrying about the tax consequences. 

Another way Roth accounts are more flexible than traditional ones: By law, retirees must make regular withdrawals — "required minimum distributions" — from their traditional retirement accounts after age 70 and a half. But retirees can leave assets in a Roth account for as long as they want. That can keep investments growing tax-free well into retirement.Con: The rigors of tax prognostication

No one knows for sure what the U.S. tax system will look like in five years. Predicting tax rates in 30 or 40 years is just about impossible. Roth plans could end up being a bad deal if lawmakers eventually lower income tax rates and replace them with value-added or sales taxes. Roths would become a better deal, though, if the income tax burden on seniors goes up. The higher income taxes are on retirees, the more benefit a Roth account provides; the lower they are, the more a traditional plan makes sense. 

Of course, the uncertainty about future tax rates is also a good argument for hedging your bets by using a mix of both Roth and traditional accounts. Pro: Flexibility before retirement

If you withdraw money from a traditional 401(k) plan before you turn 59 and a half, you pay both taxes and a 10 percent penalty. There's no penalty for withdrawals from a Roth 401(k), as long as you take back only the amount of your original contribution and leave any earnings in the 401(k). That can make a Roth account valuable in emergencies or if you retire early.

Then again, for savers without much willpower, Roths can make it tempting to blow throughretirement money too early.Con: Tax credits and the AMT

If you're poor enough, a traditional 401(k) can lower your taxable income and may help you qualify for benefits like the Earned Income Tax Credit. If you're wealthy, the choice between Roth and traditional can affect whether you're subject to the Alternative Minimum Tax, or AMT. The AMT is an alternative tax system that limits the deductions wealthier taxpayers can take. Because the AMT is extraordinarily complex, a Roth can either trigger the AMT or help taxpayers avoid it, depending on their circumstances. If an AMT is a possibility for you, a tax accountant may be able to tell you which retirement plan to choose. Pro: A higher savings limit

Workers under age 50 can save up to $18,000 in a 401(k) account every year. Past age 50, they can save an extra $6,000.

Those limits are the same for Roth and traditional accounts, but any after-tax dollars put in a Roth go farther, because you still owe taxes on any money put in a traditional account. That makes Roth plans a nice option for workers who want to put as much money in their retirement accounts as possible.Con: Employer match formulas

Companies match their employees' contributions to retirement plans in dozens of different ways. But generally, the more an employee contributes, the more an employer kicks in. And, because it's easier to save in pre-tax dollars than in post-tax dollars, it may be possible to get more matching dollars out of your employer with a traditional account.