Roth 401(k) - Is It Right For You?

Many businesses now offer employer-sponsored Roth 401(k) retirement accounts alongside traditional 401(k) plans, giving employees an additional option for saving for retirement. But should you consider using the Roth 401(k) option?

You probably know how a traditional 401(k) plan works: an employee contributes pre-tax dollars and they can choose from a menu of investment options. The contributions and potential earnings are taxed when withdrawn, usually in retirement.

However, a Roth 401(k) changes when you pay income tax. Just like a Roth Individual Retirement Account (IRA), contributions to a Roth 401(k) are made with after-tax dollars. Any earnings within the account grow tax-free, and you pay no taxes on withdrawals in retirement.

Roth 401(k)s have gained popularity among employers. Today, nearly 80% of 401(k) plans offer participants the Roth option.

For those who don’t expect a tax liability decrease in retirement or for those who are interested in maximizing assets in their estate plan, the Roth 401(k) is worth considering. With help from our partners at Charles Schwab, we utilize a Roth versus traditional calculator whereby we can assist you in determining what may be in your best interest to optimize your retirement plan and estate.

We work closely with plan sponsors to ensure the Roth 401(k) feature is included to provide participants with more planning capabilities. In addition, we are evaluating options that would allow participants to convert traditional 401(k) monies to Roth 401(k) while still working.

For anyone interested in learning more about DCM’s 401(k) plan services, don’t hesitate to reach out to one of our advisors.

Phone: 833-DCM-401k • Email:

This report was prepared by Donaldson Capital Management, LLC, a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Information in these materials are from sources Donaldson Capital Management, LLC deems reliable, however we do not attest to their accuracy.

An index is a portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance to certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Past performance is not a guarantee of future results. The mention of specific securities and sectors illustrates the application of our investment approach only and is not to be considered a recommendation by Donaldson Capital Management, LLC.

S&P 500: Standard & Poor’s (S&P) 500 Index. The S&P 500 Index is an unmanaged, capitalization-weighted index designed to measure the performance of the broad U.S. economy through changes in the aggregate market value of 500 stocks representing all major industries.