Roth 401(k) Plans

A Roth 401(k) is not really a separate plan type. It is a feature that may be added to any 401(k) plan. Participants in a Roth 401(k) plan have the option to designate their deferrals as standard 401(k) pretax deferrals or as Roth contributions. Roth contributions have the same contribution limits as standard 401(k) deferrals $19,500 ($26,000 if the participant is age 50 or older by plan year end).

401(k) pretax deferrals are deposited without income tax being withheld. Upon withdrawal of 401(k) pretax deferrals from the plan, taxes are paid on the entire amount including any gains.

Roth contributions are post-tax contributions; any income taxes are paid up front. The eventual withdrawal of the Roth contributions is therefore done on a tax-free basis. The withdrawal of any earnings is also tax free so long as the Roth contributions have been in the plan for at least five years and the distribution is being made to a participant who has died, become disabled, or is at least 59.5 years old.