Roth 401(k)

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DEFINITION of 'Roth 401(k)'

An employer-sponsored investment savings account that is funded with after-tax money. After the investor reaches age 59.5, withdrawals of any money from the account (including investment gains) are tax-free. Unlike the Roth IRA, the Roth 401(k) has no income limitations for those investors who want to participate - anyone, no matter what his or her income, is allowed to invest up to the contribution limit into the plan.

INVESTOPEDIA EXPLAINS 'Roth 401(k)'

This type of investment account is well-suited to people who think they will be in a higher tax bracket in retirement than they are now. The traditional 401(k) plan is funded with pretax money, which increases the amount invested in the account; however, all withdrawals are taxed. As for the Roth IRA, which is also an after-tax program, it restricts investors with high income from participating, but the Roth 401(k) has no such restriction.

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    The current contribution limit for a designated Roth 401(k) account for the 2014 fiscal year is $17,500. In addition, account ... Read Full Answer >>
  3. Can savings from a Roth 401(k) be used for college without penalty?

    With college tuition ever on the rise, many parents look to their retirement savings to assist with university fees. However, ... Read Full Answer >>
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    According to U.S. News & World Report, the contribution limits for the 2014 tax year for a 401(k) and a Roth 401(k) are ... Read Full Answer >>
  5. What are the main differences between a Roth 401(k) and a 401(k)?

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