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Roth 401(k)

With a Roth 401(k) plan, employees can make contributions to their retirement account using income that has already been taxed.

Commonly referred to as Roth 401(k) plan, Roth 401(k) retirement plan and after-tax retirement plan

Do I Qualify for a Roth 401(k)?

If your employer offers a Roth 401(k) plan, you can designate all or a portion of your elective deferrals as after-tax Roth contributions.

2022 Roth 401(k) Details

If your employer offers a qualified Roth contribution program as part of its 401(k) plan, you can designate all or a portion of your elective deferrals as after-tax Roth contributions.

How Do Roth Contributions Work?
Unlike traditional 401(k) contributions, Roth contributions aren't excluded from your taxable income. Instead, you pay taxes on your contributions in the current year, and when you take withdrawals after age 59½, they will be tax free. This type of investment account may be right for you if you think you will be in a higher tax bracket in retirement than you are now.

Roth 401(k) Contribution Limits
Roth contributions are still subject to the annual contribution limits. If you designate a portion of your contributions as traditional tax-deferred 401(k) contributions and a portion of them as Roth contributions, the total of the two types combined must be within the annual limit. Electing Roth treatment for some or all of your contributions does not increase the total amount you can contribute in a year. The same catch-up rules allowing additional contributions for those who are age 50 or older apply.

Employer Contributions
Employer contributions can only be made to a traditional 401(k) plan. If your employer offers a match for your 401(k) contributions, be sure to make traditional contributions in whatever amount is required to get the full benefit of the employer match before making any Roth contributions.

Roth 401(k)

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Your savings grow tax free.
Distributions are tax free if you have held the account for five years or more and you are older than 59½.


Your contributions are not tax deductible in the current year.
Loans can not be taken from a Roth 401(k).
Conflicting strategies: Traditional 401(k) for Individuals, Solo 401(k) for Individuals, SIMPLE IRA for Individuals, SIMPLE 401(k) for Individuals

Assumptions When Taking the Roth 401(k)

The participant wishes to make the maximum allowable Roth 401(k) contribution.

Conflicting Strategies

SIMPLE 401(k) (Individual)
SIMPLE IRA (Individual)

Requirements to Claim the Roth 401(k)

The 401(k) plan must allow both traditional 401(k) and Roth 401(k) options.

Business Entities That Can Claim the Roth 401(k)

• Individual

The material discussed on this page is meant for general illustration and/or informational purposes only and is not to be construed as investment, tax, or legal advice. You must exercise your own independent professional judgment, recognizing that advice should not be based on unreasonable factual or legal assumptions or unreasonably rely upon representations of the client or others. Further, any advice you provide in connection with tax return preparation must comply in full with the requirements of IRS Circular 230.

Prosperity Tax Advisors
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