Roth 401(k)
Definition
An employer-sponsored retirement account that combines features of a traditional 401(k) and a Roth IRA. Contributions are made with after-tax dollars (no upfront tax deduction), but qualified withdrawals in retirement are completely tax-free. The 2025 contribution limit is $23,500 ($31,000 if age 50 or older). Unlike Roth IRAs, Roth 401(k)s have no income limit for contributions. Starting in 2024, Roth 401(k)s are no longer subject to required minimum distributions (RMDs).
Example
You contribute $10,000 to your Roth 401(k). You pay tax on that $10,000 now, but when you withdraw it (plus decades of growth) in retirement, the entire distribution is tax-free.