Understanding Designated Roth Accounts in 401(k), 403(b), and 457 Plans
Many retirement plans now allow taxpayers to make Roth contributions if the plan includes a Designated Roth account. Your plan may also allow in-plan Roth rollovers or loans, depending on its rules.
Check with your employer to see if your 401(k), 403(b), or 457 governmental plan has a Designated Roth account and whether it permits in-plan rollovers or plan loans.
Pretax Deferrals vs. Roth Contributions
Pretax contributions are made before taxes and reduce your taxable income for the year. Taxes are owed when you withdraw funds, including earnings.
Roth contributions are made after taxes, so you pay upfront. Withdrawals, including earnings, are tax-free if they are qualified distributions, which occur at least five years after your first Roth contribution and either after age 59½, due to disability, or to your beneficiary after your death.
While Roth contributions increase taxable income in the year you contribute, future withdrawals, including earnings, can be tax-free.
Contribution Limits for 2026
- Roth IRA: Maximum contribution is $6,500 ($7,500 if age 50 or older), limited by filing status and AGI.
- Designated Roth accounts (401(k), 403(b), 457): Maximum contribution is $23,000 ($30,500 if age 50 or older). Contribution limits are not affected by filing status or AGI.
Employer Matching Contributions
Since 2023, employers may allow matching contributions to go into a Roth account instead of a traditional pretax account. Previously, only employee elective deferrals could go to a Roth account, and employer matches went to pretax accounts.
Check with your HR or plan administrator to confirm your plan’s options for Roth matching contributions.
Is a Designated Roth Account Right for You?
Contributing to a Roth account may make sense if you expect to be in a higher tax bracket in retirement, want tax-free withdrawals, or prefer flexibility for retirement planning. Because each situation is unique, consult a tax professional to determine whether contributing to a Roth account is the best choice for your 2026 strategy. We are here to help.