Team of millennial colleagues sharing ideas for new business start up, togetherness, innovation, diversity10’000 Hours | Digitalvision | Getty ImagesMore workers are getting access to a Roth savings option in their 401(k) plans.In 2022, 89.1% of employers that sponsor a 401(k) plan allowed workers to set aside money in a Roth account, according to a recent poll by the Plan Sponsor Council of America, a trade group.That share has increased significantly over the past decade: Just 58.2% of employers made a Roth 401(k) available in 2013, PSCA found. It also rose slightly over the past year, from 87.8% in 2021.More from Personal Finance:Retirees face significantly higher Medicare Part D premiums in 2024More part-time workers to get access to employer retirement plans next yearThese behavioral traits lead to greater retirement savingsA Roth is a type of after-tax account. Workers pay tax up front on 401(k) contributions, but investment growth and account withdrawals in retirement are tax-free. This differs from traditional pretax savings, whereby workers get a tax break upfront but pay later.”Offering Roth as an option is a relatively easy-to-administer customization that offers employees more flexibility in their retirement savings approach,” Hattie Greenan, PSCA research director, explained in an email. “Offering this choice has become a best practice over the last 10 years.”Why workers may miss out on a Roth 401(k)However, Roth uptake by employees remains relatively low by comparison: About 21% of workers made a Roth contribution in 2022, according to PSCA data. By comparison, 72% saved in a traditional pretax account. (Workers can opt to use either, or both.)There are a few reasons why usage likely doesn’t correspond with overall availability.For one, automatically enrolling employees into 401(k) plans has become popular: 64% of plans used so-called auto enrollment in 2021, PSCA found. Companies often choose pretax — not Roth — accounts as the receptacle for automatic contributions. That means workers would have to make a proactive decision to switch their allocation.High earners may also mistakenly think there are income limits to contribute to a Roth 401(k), as there are with a Roth individual retirement account.Roth accounts are poised to b …
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[mwai_chat context=”Let’s have a discussion about this article:nnTeam of millennial colleagues sharing ideas for new business start up, togetherness, innovation, diversity10’000 Hours | Digitalvision | Getty ImagesMore workers are getting access to a Roth savings option in their 401(k) plans.In 2022, 89.1% of employers that sponsor a 401(k) plan allowed workers to set aside money in a Roth account, according to a recent poll by the Plan Sponsor Council of America, a trade group.That share has increased significantly over the past decade: Just 58.2% of employers made a Roth 401(k) available in 2013, PSCA found. It also rose slightly over the past year, from 87.8% in 2021.More from Personal Finance:Retirees face significantly higher Medicare Part D premiums in 2024More part-time workers to get access to employer retirement plans next yearThese behavioral traits lead to greater retirement savingsA Roth is a type of after-tax account. Workers pay tax up front on 401(k) contributions, but investment growth and account withdrawals in retirement are tax-free. This differs from traditional pretax savings, whereby workers get a tax break upfront but pay later.”Offering Roth as an option is a relatively easy-to-administer customization that offers employees more flexibility in their retirement savings approach,” Hattie Greenan, PSCA research director, explained in an email. “Offering this choice has become a best practice over the last 10 years.”Why workers may miss out on a Roth 401(k)However, Roth uptake by employees remains relatively low by comparison: About 21% of workers made a Roth contribution in 2022, according to PSCA data. By comparison, 72% saved in a traditional pretax account. (Workers can opt to use either, or both.)There are a few reasons why usage likely doesn’t correspond with overall availability.For one, automatically enrolling employees into 401(k) plans has become popular: 64% of plans used so-called auto enrollment in 2021, PSCA found. Companies often choose pretax — not Roth — accounts as the receptacle for automatic contributions. That means workers would have to make a proactive decision to switch their allocation.High earners may also mistakenly think there are income limits to contribute to a Roth 401(k), as there are with a Roth individual retirement account.Roth accounts are poised to b …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]
