A Roth 401(k) is a retirement savings plan available through employer-sponsored programs, authorized by the United States Congress under the Internal Revenue Code. It combines features of a traditional 401(k) and a Roth IRA. Since January 1, 2006, employers have been able to amend their 401(k) plan to allow employees to elect Roth IRA-type tax treatment for their contributions. Contributions to a Roth 401(k) are made with after-tax dollars, meaning there's no tax deduction upfront. However, qualified withdrawals in retirement are entirely tax-free, offering a significant advantage, especially if you anticipate being in a higher tax bracket in the future.
Key features of a Roth 401(k) include tax-free growth and withdrawals, provided the account has been held for at least five years and the account holder is at least 59½ years old. Unlike Roth IRAs, Roth 401(k)s do not have income restrictions, allowing high-income earners to participate. For 2026, employees can contribute up to $24,500. Those aged 50 and over can make an additional "catch-up" contribution of $8,000, and those between 60 and 63 can contribute up to $11,250 as a "super" catch-up contribution if their plan allows. These limits are subject to annual adjustments by the IRS. Roth 401(k) plans are widely available; nearly 90% of retirement plans now permit them.
