A Roth 401k allows you to take tax free distributions from employer sponsored retirement plans. It combines features of a traditional 401k with those of a Roth IRA. Specifically, the Roth 401k allows workers to contribute via payroll deduction just like a traditional 401k plan.
However, these contributions are made after tax just like a Roth IRA, and so participants can withdraw their money free of taxes and fees after they turn 59 ½. To set up a Roth 401k, you should first confirm if your employer offers this option and request information on each of the employer sponsored retirement plans available to you. Collect all of the paperwork necessary to begin participation in the plan, and review your budget and determine your spending needs and how much you can afford to put into savings each month.
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