Roth 401(k) vs. Traditional 401(k)

Once you reach age 73, you must begin taking required minimum distributions from your 401(k) or any other defined contribution plan in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

To qualify for tax-free and penalty-free withdrawal of earnings, Roth 401(k) distributions must meet a 5-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as the owner's death. Employer matching is pretax and not distributed tax-free during retirement.

The annual rate of returns is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.

If you have questions about your current tax rate or your expected retirement tax rate, you're encouraged to speak with your tax, legal, or accounting professional.