Understanding Roth

Key Takeaway

Your plan may provide the option of making either traditional or Roth contributions. See your enrollment materials or contact your plan sponsor for details about your plan. The following is an overview of the Roth feature.


If your plan offers Roth contributions, you can participate once you meet the plan’s eligibility requirements. There are no income restrictions, so high-income individuals can contribute as well; subject to tax or plan limits that may apply. Check with your employer to see if Roth is available.


You can contribute up to the maximum limits set by the IRS and your plan sponsor. If you make both regular pre-tax contributions and Roth contributions, your combined contributions can’t exceed these limits. Check the chart below for current IRS limits.


Roth contributions are made with after-tax dollars so the account grows tax free and qualified withdrawals will not be taxed. If you expect your tax bracket during retirement to be higher than now, Roth contributions may make sense for you. Seek advice from a tax professional for more detail.


Distributions must be “qualified” if they are to be treated as tax free. A distribution is qualified if made after you reach age 59½, are deceased, or become disabled, and it is made at least five years after your first Roth contribution.

Matching Contributions

Any matching employer contributions on Roth contributions are made with pre-tax dollars, as with traditional contributions.

Changing Jobs

If you leave your employer, you can roll over your Roth account to a Roth IRA or to a new employer’s plan, if it accepts such rollovers.

Required Minimum Distributions

Unlike a Roth IRA, employer sponsored retirement plans must distribute required minimum distributions (RMDs) once you terminate employment and reach age 72. Once you are eligible to request a distribution, consider rolling your Roth account to a Roth IRA, thereby avoiding the RMD rules.

DetailsTraditional 401(k)Roth 401(k)Roth IRA
2024 Income LimitsNoneNoneSingle: $161,000
Married: $240,000
ContributionsPre-taxAfter taxAfter tax
2024 Contribution LimitCombined $23,000Combined $23,000$7,000
2024 Age 50 Catch-UpCombined $7,500Combined $7,500$1,000
Investment EarningsTax deferredTax freeTax free
AccessibilityRequires distributable eventRequires distributable eventRequires distributable event
WithdrawalsTaxable: subject to ordinary income tax and 10% penalty tax if taken prior to age 59½Tax free if in plan five years and have reached age 59½ or taken due to death or disabilityTax free if in account five years and have reached age 59½ or taken due to health, disability, or first-time home purchase
Minimum DistributionsAge 72*Age 73**None
RolloversYes, to another retirement plan or an IRAYes, to another Roth plan or a Roth IRAYes, to another Roth IRA

Source: irs.gov
*Individuals attaining age 70½ prior to January 1, 2020, are subject to pre-SECURE Act distribution requirements.