A new retirement account was signed into law on August 17, 2006. It is a component of a “regular” 401(k) Plan; however, the funding of a “Roth” 401(k) Plan is with after-tax dollars. This is similar to the Roth IRA but with higher funding limits and no limit on earnings to contribute. Money contributed to a Roth 401(k) Plan grows without tax and is distributed without tax. For 2018, of which you have until April of 2019 to contribute, the funding limit is $18,500, or $24,500 if over the age of 50. The funding limits for 2019 contributions will be $19,000 and $25,000 if over age 50.

Ask yourself the following question: Will you grow more wealth funding a Roth 401(k) in a non-deductible manner where the money grows then comes out income tax-free, or will you grow more wealth income-tax deferring money into a traditional 401(k) where the money withdrawn is fully income taxable at your current income tax bracket?

The answer is… it depends. The real-world answer about Roth plans is that the vast majority of readers will in fact be better off using Roth Plans over traditional income tax-deferred plans.