Roth 401(k) Plans: A Growing Trend in Employee Benefits

ARTICLE | October 29, 2024

Authored by Vasquez + Company

The traditional 401(k) plan remains a cornerstone of American retirement planning, with $7.8 trillion in assets as of 2024. However, Roth 401(k) plans are gaining popularity for their tax-free withdrawal benefits, which may attract employees with diverse financial goals. This article, "Roth 401(k) Plans Have New Appeal for Employers," explores key differences between traditional and Roth 401(k) plans, recent tax law changes, and factors driving increased adoption by employers.

Key Points:

• Traditional 401(k) Plans: Employees contribute pre-tax dollars and withdraw funds in retirement, paying taxes on distributions.
• Roth 401(k) Plans: Contributions are made after-tax, enabling tax-free withdrawals, especially appealing to high earners without contribution phaseouts.
• Key Tax Law Changes: Secure Act and Secure 2.0 provisions now permit matching contributions to Roth accounts, eliminate required minimum distributions, and adjust catch-up contributions for high earners.

Roth 401(k) plans offer expanded flexibility, tax benefits, and greater appeal as a retirement savings tool.

Read the full article here to see how a Roth 401(k) could enhance your company’s benefits package.

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