![]() However, if you make both regular 401(k) deferrals and Roth 401(k) deferrals in the same calendar year, a single limit applies to the sum of both types of deferrals. Is there a limit on how much I may defer?įor 2022, the Roth 401(k) deferral limit is $20,500 ($26,500 if you are allowed to make catch-up contributions), the same limit as the regular 401(k) deferral limit. When you elect how much you want to contribute, you must also specify whether the contribution is either a Roth 401(k) deferral or a regular 401(k) deferral. You elect to contribute a certain percentage or dollar amount of your pay. You make a Roth 401(k) deferral contribution the same way that you make a regular 401(k) deferral contribution (i.e., from your pay via payroll withholding). How do I make a Roth 401(k) deferral contribution? This means that the distribution of the Roth 401(k) earnings can be tax-free, not just tax-deferred. In addition, if you satisfy certain distribution conditions, you won’t have to pay tax on the earnings either. Since you have already paid tax on the deferral, you won’t pay tax on it again when you receive a distribution of your Roth 401(k) deferral. The result is that the tax on the regular 401(k) deferrals and earnings is only postponed.Ī Roth 401(k) deferral is an after-tax contribution, which means you must pay current income tax on the deferral. However, you will eventually pay tax on these contributions and earnings when the plan distributes the regular 401(k) deferrals and earnings to you. ![]() ![]() For a regular 401(k) deferral, the taxable wages on your W-2 are reduced by the deferral contribution therefore, you pay less current income tax. Under either a regular 401(k) deferral or a Roth 401(k) deferral, you make a deferral contribution by electing to set aside part of your pay (by either a certain percentage or a certain dollar amount). What is the difference between a regular 401(k) deferral (pre-tax) and a Roth 401(k) deferral? ![]()
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