Quick Definition

A Roth 401(k) is a type of retirement savings plan that allows employees to contribute after-tax dollars, with withdrawals in retirement being tax-free.

Examples

• 1An employee opts to contribute $500 monthly to their Roth 401(k), ensuring that these funds grow tax-free and are not taxed upon withdrawal.
• 2A company offers a matching contribution to the Roth 401(k) plans of its employees, effectively doubling the retirement savings of those who participate.
• 3Upon retirement, an individual withdraws funds from their Roth 401(k) to cover living expenses, without the need to pay any additional taxes on these withdrawals.

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