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.

BREAKING DOWN 'Roth Option'

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.

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