What exactly is a Roth 401(k) contribution?

  1. Unlike “traditional” 401(k) contributions which are tax-deductible, Roth 401(k) contributions are not tax-deductible in the year you make the contribution.
  2. Unlike “traditional” 401(k) account balances that are taxable upon distribution from your plan, earnings on your Roth account balance are tax-free when withdrawn – providing the distribution is a “qualified distribution.”
    1. For a distribution to be “qualified”, two conditions must be met:
      1. You are over the age of 59 ½;
      2. The Roth account has existed for 5 years.
    2. Distribution of Roth contributions are always tax-free. The question is whether the earnings on the Roth balances are taxable or not.