Roth Option

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Designated Roth Account

    An individual retirement plan in which employees can have all ...
  2. 401(k) Plan

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

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
  4. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  5. Risk

    The chance that an investment's actual return will be different ...
  6. Roth IRA

    An individual retirement plan that bears many similarities to ...
Related Articles
  1. Tax Treatment Of Roth IRA Distributions
    Taxes

    Tax Treatment Of Roth IRA Distributions

  2. 3 Retirement Account Rules To Know
    Taxes

    3 Retirement Account Rules To Know

  3. Roth Feature Boosts Benefits For 401(k) ...
    Retirement

    Roth Feature Boosts Benefits For 401(k) ...

  4. Saver's Tax Credit: A Retirement Savings ...
    Savings

    Saver's Tax Credit: A Retirement Savings ...

comments powered by Disqus
Hot Definitions
  1. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  2. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  3. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  4. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  5. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  6. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
Trading Center