Esta página de Internet está disponible sólo en inglés.

Página principal

What Is a Roth 401(k)?

Your employer-sponsored retirement plan may have a Roth 401(k) option. A Roth 401(k) is a type of employee contribution that allows you to save money in your retirement account through payroll deductions on an after-tax basis. Even if you are making pretax contributions, you may also be able to make Roth contributions. However, a combination of both pretax and Roth contributions cannot exceed the combined annual Internal Revenue Service (IRS) contribution limits. 

The benefit of making Roth contributions is that earnings on contributions can be withdrawn tax-free, if certain criteria are met. Deciding whether Roth or pretax contributions are right for you depends on your individual circumstances.

Factors to consider

  • Number of years until retirement — The longer you have to save, the more time your earnings on Roth contributions have the potential to grow tax-free.
  • Your income tax assumptions — Roth 401(k) contributions may appeal to people who expect their tax rate, in general, to rise.
  • Impact to your take-home pay — Contributing the same dollar amount to your retirement account with Roth 401(k) contributions (which are made on an after-tax basis) will cost more up front than the same amount contributed on a pretax basis.
  • Tax diversification — Designating a portion of your contributions as Roth 401(k) could be an effective hedge against rising taxes.
  • Roth IRA eligibility — Your income today may be too high to be eligible to contribute to a Roth Individual Retirement Account (IRA). However, if available, you are permitted to contribute Roth 401(k) contributions to your retirement plan, up to the annual IRS contribution limits or plan limits.

How do you choose?

Roth 401(k) Pretax
  • Taxes on contributions subject to current tax rate
  • Tax-free distributions of contributions at retirement
  • Tax-free distributions on earnings at retirement, if certain conditions are met
  • Helps reduce current tax burden
  • Taxable distributions of contributions at retirement
  • Taxable distributions on earnings at retirement


A withdrawal from a Roth 401(k) is generally considered a "qualified distribution" and not taxed if:

  1. The withdrawal is taken after death, disability or upon reaching age 59 ½,
  2. The withdrawal occurs at least 5 years after you make your first Roth 401(k) contribution. The 5-year requirement starts with the first day of the taxable year (generally January 1) of the year the contribution is made.

Qualified Roth 401(k) distributions are not subject to state and local taxation in most states. Withdrawals may be subject to an IRS 10% additional tax if distributions are taken prior to age 59½. You may want to consult with your tax advisor before deciding whether to make pretax or Roth contributions. 

Investment and Insurance Products are:
  • Not Insured by the FDIC or Any Federal Government Agency
  • Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or Any Bank Affiliate
  • Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested