Saving for Retirement 101: Roth 401(k)

 In Elder Law, Estate Planning, Tax Law

What is a Roth 401(k)?

A Roth 401(k) is a type of retirement savings account that is less prevalent than the traditional 401(k) but is growing in popularity. These accounts have features similar to traditional 401(k)s and Roth IRAs.

Like the Roth IRA, employee contributions are made with after-tax dollars. This means that income earned from interest, dividends, or capital gains is saved tax-free in your account. Therefore, where a traditional 401(k) reduces your taxable income, Roth 401(k)s will not.

The Roth 401(k) has no income limit, making them available to everyone regardless of income earned. Additionally, a Roth 401(k) has no required minimum distributions or any other annual withdrawal requirement in retirement (unless you are still working or are not a 5% owner in the company sponsoring your plan).

Like a traditional 401(k), Roth 401(k) has contribution limits, and employees can receive matching contributions from their employers.

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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