Why More Employers are Offering Roth Options: SECURE 2.0 and Beyond

by Prof. Robert Bloink and Prof. William H. Byrnes

While Roth 401(k)s have been around for a long time, it’s widely expected that many more employers will start offering the option given the SECURE Act 2.0’s mandate that higher-income taxpayers classify catch-up contributions as Roth contributions. That means advisors should expect an uptick in questions surrounding the Roth 401(k) retirement savings vehicle—namely, questions regarding rollovers and conversions. Today’s high-inflationary environment may be a great time to execute a Roth conversion and create a source of tax-free retirement income. Clients with Roth 401(k) balances may also wish to roll those balances into Roth IRAs when leaving employment. The rules governing Roth conversions and rollovers can be complicated and it’s important for clients to understand how to maximize these planning opportunities in today’s climate.

Tax Treatment of Roth 401(k) Rollovers