Unpacking the Difference Between a Roth 401(k) and Roth IRAs

While Roth IRAs have been a standard retirement investment option for years, millions of Americans have only recently gained access to Roth 401(k) savings options through their employers. Those clients may be wondering whether there's any difference between their employer-sponsored Roth plan and a standard Roth IRA. The answer is, of course, yes. Roth 401(k)s allow an employee to stash away up to $20,500 in after-tax dollars in 2022 ($27,000 for clients aged 50 and older). Roth IRAs, however, are limited to $6,000 ($7,000 with catch-up contributions). Roth 401(k)s aren't subject to any income restrictions, so even high earning clients can contribute directly. On the other hand, Roth 401(k)s are subject to required minimum distribution rules once the client reaches age 72--although the client does have the option of rolling the funds into a Roth IRA, which aren't subject to any lifetime RMD rules. For more information on Roth accounts, visit Tax Facts Online. : Q 3660