Roth 401(k)s Are on the Rise: Here Are 5 Benefits You Should Know About
When we think about 401(k) plans, we generally imagine the traditional setup, where you designate an amount to be deducted from each paycheck, and that money goes into your retirement plan tax-free. Roth 401(k)s work a bit differently in that your contributions are funded with after-tax dollars. So you don't get an immediate tax break for participating in your employer's plan.
But despite that fact, a growing number of workers are opting to save for retirement in a Roth 401(k), as opposed to a traditional one. According to a recent study by Bank of America Merrill Lynch, Roth 401(k) contributions increased 25% last year, compared to just 16% for pre-tax contributions. And interestingly enough, younger workers are the ones embracing the Roth, with 56.5% of contributions coming from savers 40 and under.
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Source: Fool.com