Roth 401(k) Plans

Who should use a Roth 401(k)?

  • Anyone who will be retiring in the same or higher tax bracket.
  • Anyone who will be retiring in a tax bracket within 10% of their current tax bracket.

For example, if you are in the 40% tax bracket and will retire in the 30% tax bracket, using a Roth plan is still a better financial tool than using a traditional tax-deferred retirement plan.

Click here to download a four-page summary showing you the real-world math and why Roth 401(k) plans are better than traditional tax-deferred plans.

A new retirement account was signed into law on August 17, 2006. It is a component of a “regular” 401(k) plan; however, the funding of a “Roth” 401(k) plan is with AFTER-TAX dollars. This is similar to the Roth IRA but with higher funding limits and no limit on earnings to contribute. Money contributed to a Roth 401(k) plan grows without tax and is distributed without tax. You have until April 15th of each year to make a contribution for the previous year. The funding limit for 2024 is $23,000, or $30,5000 if over the age of 50.

Ask yourself the following question: Will you grow more wealth funding a Roth 401(k) in a non-deductible manner where the money grows then comes out income tax-free, or will you grow more wealth income-tax deferring money into a traditional 401(k) where the money withdrawn is fully income taxable at your current income tax bracket?

The answer is… it depends. Since I know people are surfing this site for the “answers” and real math, the real world answer about Roth plans is that the vast majority of readers will, in fact, be better off using Roth plans over traditional income tax-deferred plans.


Certified Retirement Financial Advisors

We know that navigating the retirement world can be confusing due to the myriad of options available. A certified retirement financial advisor at Aspen Creek Financial will meet with you to gain a better understanding of your current financial situation and where you will be by the time you retire to recommend the right plan for you and your family.

If you are a small business owner and do not have a Roth 401(k) plan as an option in your business’s qualified retirement plan, please contact our office at admin@aspencreekfinancial.com for help. Not only will we help you implement a plan, but our certified financial advisors will look at all the various options to help you grow your wealth (like using a guaranteed 5%-8% guaranteed return (accumulation value) product that will provide for you a guaranteed lifetime income you can never outlive.

*Any guarantees mentioned are backed by the financial strength and claims paying ability of the issuing insurance company and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract

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