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Plan Differences TRADITIONAL 401(K) ROTH 401(K)
Funding Funded with pre-tax dollars Funded with after-tax dollars
Employer Matching Contributions Made on a pre-tax basis. Taxed as ordinary income when withdrawn.
Employee Contribution Limits $19,000 ($25,000 if age 50 or older)
If you make a combination of Traditional and Roth 401(k) deferrals,
your limit cannot exceed contribution limit
Investment Earnings Tax-deferred Tax-free
Taxes Pay taxes on withdrawals Pay taxes now
Reduces current income now Tax-free withdrawals at retirement
Access to Money You can access your money when you leave your job, become disabled,
die, or if the plan provides, you reach age 59-1/2
Tax-free Distribution N/A 2 conditions must be met:
(1) Distribution must be a “qualified
distribution” - attainment of age
59-1/2, death or disability
(2) Special 5-year rule: contributions
must remain in the plan for 5
years of the first Roth 401(k)
contribution to receive the tax-
free advantage
Minimum Required Distribution Age 70-1/2 Age 70-1/2
A Roth 401(k) can be rolled over to a
Roth IRA and minimum distribution
rules don’t apply to distributions
made before death
Rollovers Can be rolled over into a traditional Can be rolled over into a Roth IRA
IRA. May also be rolled into a Roth
IRA, but taxes will be due
