Roth Option


DEFINITION of 'Roth Option'

An option available within some employer-sponsored qualified plans that allows for Roth tax treatment of employee contributions. The Roth option allows employees to deposit money into their retirement plans on an after-tax basis. This feature is available for both 401(k) and 403(b) plans.


The Roth option is a godsend for highly compensated employees whose incomes are too high to permit Roth IRA contributions. Annual contributions can allow them to accumulate an enormous pool of tax-free cash by the time they retire.

  1. Designated Roth Account

    An individual retirement plan in which employees can have all ...
  2. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  3. Roth IRA

    An individual retirement plan that bears many similarities to ...
  4. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  5. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
  6. Risk

    The chance that an investment's actual return will be different ...
Related Articles
  1. Taxes

    Tax Treatment Of Roth IRA Distributions

    Learn the requirements for withdrawing funds tax and penalty free.
  2. Taxes

    3 Retirement Account Rules To Know

    Stay up-to-date on regulation amendments to avoid penalties as well as take advantage of new opportunities.
  3. Retirement

    Roth Feature Boosts Benefits For 401(k) And 403(b) Plans

    Roth accounts tend to beat Traditional plans over the long term by providing tax savings.
  4. Savings

    Saver's Tax Credit: A Retirement Savings Incentive

    Here's another reason to put money toward your retirement nest egg.
  5. Taxes

    Converting An IRA Annuity To A Roth: Know The Rules

    We look at the past and current legislation that governs IRA annuity conversions.
  6. Options & Futures

    Know The Rules For Roth 401(k) Rollovers

    Rolling a Roth 401(k) into a Roth IRA is usually the optimal thing to do.
  7. Retirement

    An Introduction To The Roth 401(k)

    The money that you earn today is taxed today, making tax-free retirement withdrawals a reality.
  8. Options & Futures

    Must-Know Rules For Converting A 401(k) To A Roth

    In 2008, the IRS spelled out the details for converting employer-plan funds directly to Roth IRAs.
  9. Retirement

    5 Reasons to Leave Retirement Planning to Your Wife

    Wives live longer than their husbands, so their retirement stakes are higher. Luckily, certain qualities make women especially good at long-term planning
  10. Professionals

    Are ETFs a Good Fit for 401(k) Plans?

    The popularity of ETFs among investors and advisors continues to grow. But are they a good fit for 401(k) plans?
  1. How safe are variable annuities?

    Life insurance companies are facing a challenging environment. Those that sell variable annuities have been able to mitigate ... Read Full Answer >>
  2. What is the size of the average retirement nest egg?

    According to a 2015 Government Accountability Office (GAO) study, people between the ages of 55 and 64 with any retirement ... Read Full Answer >>
  3. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  4. What are the risks of rolling my 401(k) into an annuity?

    Though the appeal of having guaranteed income after retirement is undeniable, there are actually a number of risks to consider ... Read Full Answer >>
  5. How can I determine if a longevity annuity is right for me?

    A longevity annuity may be right for an individual if, based on his current health and a family history of longevity, he ... Read Full Answer >>
  6. How does a Roth IRA grow over time?

    Your Roth IRA account grows over time thanks to two funding sources: contributions and earnings. While your contributions ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!