Roth 401(k)
Roth 401(k) Meaning:
In retirement terminology, the term Roth 401(k) refers to a United States retirement plan. In general, the Roth 401(k) Plan will meet the requirements of the Internal Revenue Code or IRC’s Section 401(k), and will combine the 401(k) with a Roth Individual Retirement Account or IRA.
In retirement terminology, the term Roth 401(k) refers to a United States retirement plan. In general, the Roth 401(k) Plan will meet the requirements of the Internal Revenue Code or IRC’s Section 401(k), and will combine the 401(k) with a Roth Individual Retirement Account or IRA.
For example, a Roth 401(k) allows the taxpayer that wishes to save for retirement, but is subject to income limits, to accrue savings tax free with the Roth IRA part of the instrument. With a Roth 401(k), the holder can make post-tax contributions which can then be withdrawn tax-free after retirement, and even income resulting from the investment of these funds is tax-free. The Roth 401(k) is employer sponsored and early withdrawal will result in excise taxes. As of 2009, U.S. employees can place up to $16,000 per year in Roth 401(k) Plans, and with some employers even making matching contributions, this type of retirement plan can offer many advantages to anyone who has one available to them.