Saving for Retirement 101: Advantages associated with using a Roth 401(k)

 In Elder Law, Estate Planning, Tax Law

Many large companies offer their employees a 401(k)-retirement plan; a decision that may come with this benefit is whether to choose a traditional 401(k) or a Roth 401(k).

Here are some reasons why choosing a Roth 401(k) may be beneficial.

Save now and enjoy later.

Roth 401(k)s use after-tax funds, meaning you will not pay income tax on account withdrawals in your retirement years. This means that taking an immediate hit to your income today could lead to greater wealth in your retirement years. Younger individuals who have substantial time for their money to grow and expect their income to grow throughout the duration of their careers may choose to use this type of savings account.

Roth 401(k) & Estate Planning

 Roth 401(k)s are also helpful for estate planning; heirs may enjoy Roth 401(k) funds tax-free, just as the account owner would. Individuals who retire can take distributions from their Roth 401(k) account and roll over the funds into a new or existing Roth IRA account. From there, you have the ability to make your heirs the account’s beneficiaries, which preserves the tax-free nature of the funds in the account.

 Note: heirs do not have to pay taxes to the IRS but will have to start taking RMDs.


Estate Planning is an important component of financial planning. At Bach, Jacobs & Byrne, P.A., we address tax issues and avoidance as part of estate planning. If you live in Sarasota, Manatee, or Charlotte County, contact Bach, Jacobs and Byrne, P.A. at (941) 906-1231 to evaluate whether your estate plan is tax efficient.

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