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Making Sense of Roth 401(k)

Making Sense of Roth 401(k)

| March 14, 2022

The Roth 401(k) is becoming very popular—and with good reason. It is a type of retirement savings plan that allows you to make contributions after taxes have been taken out. This means that income tax is paid immediately on the earnings that the employee deducts from each paycheck and deposits into the account. Unfortunately, it also carries numerous rules that impact its tax treatment. So, in this episode, I will be sharing what you need to know about Roth 401(k)s.

Listen in as I explain the two criteria to consider to ensure that distributions from a Roth 401(k) qualify for tax-free treatment. You will learn what to do if you have a Roth 401(k) with an employer that you want to leave, how to avoid future tax increases, and why you shouldn’t cash out any of your retirement savings ahead of time.

Listen To The Episode Here:

What You’ll Learn

  • What a Roth 401(k) is.
  • What to consider when applying for a Roth 401(k).
  • Two criteria that ensure distributions qualify for tax-free treatment.
  • What happens if you leave an employer where you were receiving Roth 401(k).
  • The benefit of making a contribution before a pay raise (if you know it is going to happen).
  • How to avoid future tax increases.

Ideas Worth Sharing

“If the criteria are not met [for Roth 401(k)], they are subject to taxes and possible penalties.” - Regina McCann Hess

“There are rollover options if you have a Roth 401(k) with one employer and then leave for another job.” - Regina McCann Hess

“You’ll need as much money as possible in your retirement, so cashing it out could hurt your financial plan.” - Regina McCann Hess


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