Personal Finance & Estate › Retirement accounts & pensions › 401(k) plan
Roth 401(k)
Since 2006· Account or plan
Law or rule (2026)Set by statute, regulation or the agency; numbers change yearly.
The Roth option inside a 401(k), 403(b) or 457(b): contributions are taxed now, qualified withdrawals come out tax-free.
See it on the Personal Finance & Estate map →How it works
Authorized in 2001 and offered since 2006, it shares the $24,500 2026 deferral limit with pre-tax deferrals, and unlike a Roth IRA it has no income limit. Since 2024 it has no RMDs for the owner. From 2026, workers with over $150,000 of FICA wages the prior year must make catch-up contributions as Roth. Employer matches can now be Roth too, if the plan allows, but are taxable. Main trap: paying tax now at a peak bracket. Ask your CPA.
Why it matters for you
It gives high earners a large Roth door with no income test, adding tax diversification for retirement and for heirs.
Rules, limits and sources (2026)
IRC Sec. 402A; SECURE 2.0 Secs. 325 (no RMDs), 603 (Roth catch-up) and 604 (Roth employer contributions); IRS final catch-up regulations (September 2025).
Watch out for
Pre-tax versus Roth hinges on tax rates decades away; studies disagree on which most workers should favor.
Inside this (1)
Connections (3)
▸Roth 401(k) is the after-tax option inside 401(k) planLaw or rule (2026)
How they connect
A Roth 401(k) is not a separate plan but a 'designated Roth account' inside the same 401(k). Workers split one $24,500 deferral limit between pre-tax and Roth, use the same investment menu, and get the same employer match, which stays pre-tax unless the plan offers Roth matching.
When it applies
Authorized by the 2001 EGTRRA tax law; employers could first offer it on January 1, 2006, and a 2006 law made it permanent.
The rule
IRC Sec. 402A defines designated Roth accounts as part of a 401(k), 403(b) or governmental 457(b) plan.
Watch out for
Employers choose whether to offer it; most large plans now do, but why so few workers use it is debated.
▸Mega-backdoor Roth (after-tax 401(k) to Roth) is a supersized route into Roth 401(k)Standard practice
How they connect
After-tax 401(k) contributions build taxable earnings until converted. An in-plan Roth conversion moves them into the plan's Roth 401(k) account, where future growth is tax-free; alternatively they go to a Roth IRA. Done promptly, tens of thousands of dollars a year can enter Roth accounts.
When it applies
Workable since IRS Notice 2014-54 (September 2014); available only in plans that allow after-tax contributions and conversions.
How sure?
IRS Notice 2014-54 and IRC Sec. 402A(c)(4), the in-plan Roth rollover rule expanded by a 2012 law; plan documents.
Watch out for
Congress has eyed closing it; whether employers keep offering it, given nondiscrimination testing problems, is uncertain.
▸Roth 401(k) is exempt (since 2024) from Required minimum distributions (RMDs)Law or rule (2026)
How they connect
Before 2024, Roth 401(k) owners had to take RMDs even though the money came out tax-free, unlike Roth IRA owners; many rolled to a Roth IRA to escape them. SECURE 2.0 ended that, so Roth 401(k) money can stay invested for life. Heirs still face the 10-year rule.
When it applies
SECURE 2.0 Section 325, effective for 2024 and later years.
The rule
Statute text and IRS final RMD regulations (2024); IRS Publication 575 and plan notices reflect it.
Watch out for
Whether to keep Roth money in a 401(k) or move it to a Roth IRA now turns on fees, investments and creditor protection.