Roth 401(k) Plans

Roth 401(k) Plans are employer-sponsored retirement savings accounts that combine features of both traditional 401(k) plans and Roth IRAs. Contributions to a Roth 401(k) are made with after-tax dollars, meaning that taxes are paid on the income before contributions are made.

This allows for tax-free growth of investments, and qualified withdrawals in retirement are also tax-free, provided certain conditions are met. Employers may offer matching contributions, which are typically placed in a traditional 401(k) account.

For example, if an employee contributes to a Roth 401(k) and withdraws funds after reaching age 59½ and having the account for at least five years, those withdrawals, including any investment gains, are tax-free.