Roth 401(k) contributions are salary deferrals contributed on an after-tax basis to your retirement plan account. Roth 401(k) deferrals are taxed before they are contributed to your employer’s retirement plan and the contributions and earnings grow tax-free. If all criteria are met for a “qualified” distribution, then distributions from your Roth account at retirement are 100% income tax free. Traditional 401(k) contributions are salary deferrals contributed on a pre-tax basis. Traditional 401(k) contributions are not taxed before they are contributed to your employer’s plan and the contributions and earnings grow tax-deferred. Distributions in retirement from traditional 401(k) contributions are taxed at ordinary income tax rates, when withdrawn.
