QUESTION: I was reading an article you wrote about rolling money over from a solo 401k to a designated Roth solo 401k. My understanding is that you pay income tax on that money when you do the rollover, but from that point on any earnings on the Roth solo 401k are tax free. Why would someone want to do this? It seems like you lose the ability to earn income on pre-tax money. Plus the income tax would be at a higher tax rate, assuming that you are employed and earning other income at the time. Is there some case I am missing where you are better off converting money to a Roth solo 401k now vs just deferring the taxes until you take distributions during retirement?
ANSWER: The idea behind the Roth 401k is that if you pay taxes now on the amount converted from pretax to Roth, all the earnings will grow tax free, and also anticipate that income tax rates will rise in the future.
I personally prefer to have the best of both worlds: Invest some in Roth and some in pretax.