Is a Roth 401(k) just a Roth IRA inside a workplace plan?

By Kaz · Published 28 September 2026 · How this site checks figures

Summary

No. The tax treatment is the same: you pay tax on the money going in, and qualified withdrawals come out tax-free. But a Roth 401(k) is an account inside your employer's plan and runs on plan rules. It has no income limit, its five-year clock starts with your first Roth deferral to that plan, and its money can only move to a Roth IRA or another plan's Roth account.

What the IRS calls it

The formal name is a designated Roth account: "a separate account in a 401(k) or 403(b) plan to which designated Roth contributions are made." Those contributions "are not excluded from gross income and are currently taxed," which is the whole difference from a regular pretax deferral. Put $500 of a paycheck into the pretax side and your taxable pay drops by $500; put it into the Roth side and your taxable pay doesn't change.

A plan can't offer only the Roth side. The IRS says a plan "must also offer traditional, pre-tax elective contributions" to offer Roth ones, and the annual deferral limit covers both sides together.

Where it parts ways with a Roth IRA

Income. Roth IRA contributions can be limited by filing status and income. Designated Roth contributions can't; the IRS FAQ says there are "no limits on your income." If you earn too much for a Roth IRA, your employer's Roth option is still open, and the IRS confirms you can contribute the maximum to both in the same year, with the Roth IRA's income limits still applying to that side.

The five-year clock. For a Roth 401(k), the period "begins on the first day of your taxable year for which you first made designated Roth contributions to the plan" and ends after five consecutive taxable years. A qualified distribution also has to come at 59½ or later, after death, or because of disability. A Roth IRA runs its own clock, and years in the 401(k) don't transfer to it; the article on the Roth five-year rule works through that case.

Required withdrawals. None for either while the owner is alive. The IRS's RMD page covers "Roth IRAs, or ... Designated Roth accounts in a 401(k) or 403(b) plan" in the same sentence. Beneficiaries are subject to the RMD rules.

Taking money out too early

A withdrawal that isn't qualified is split between your contributions and the earnings in proportion to the account, and only the earnings part is taxed. The IRS FAQ gives the numbers: take $5,000 from an account holding $9,400 of Roth contributions and $600 of earnings, and $4,700 counts as contributions and $300 as earnings. You'd report $300 as income.

Sources

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