A Roth 401(k) is a type of retirement savings plan that is authorized by the United States Congress under the Internal Revenue Code, section 402A). It is an employer-sponsored retirement savings account that is funded using after-tax dollars. Contributions are made through payroll deductions and the contributions grow tax-free in the account. Withdrawals are also tax-free as long as youve held the account for at least five years and youre at least 59½. The Roth 401(k) combines some of the most advantageous aspects of both the 401(k) and the Roth IRA). Here are some key features of a Roth 401(k):

• Contributions: Employees may contribute funds on a post-tax elective deferral basis, in addition to or instead of pre-tax elective deferrals under their traditional 401(k) plans).
• Contribution Limits: An employees combined elective deferrals whether to a traditional 401(k), a Roth 401(k), or both cannot exceed the IRS limits for deferral of the traditional 401(k)).
• Tax Benefits: The Roth 401(k) offers the advantage of tax-free distribution but is not constrained by the same income limitations as a Roth IRA).
• Employer Matching: Employer matching contributions to Roth 401(k)s are treated like contributions to a traditional 401(k), meaning that those contribution amounts are considered taxable income when you withdraw them later on.

A Roth 401(k) is a good choice for individuals who expect to make more money later on in life. It is also a good option for those who want to diversify their retirement savings and have tax-free income in retirement.