Roth Deferral: What It Is and How to Use It

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What Is Roth Deferral?

Roth deferrals are a type of post-tax contribution to retirement plans, and they get their name from the Roth IRA, another retirement savings account that allows for tax-free withdrawals.

Roth Calculator

Another way to maximize your tax-free income in retirement is with a Roth annuity. With a Roth annuity, you can have a guaranteed income stream for the rest of your life, even after the account drops to zero. This can give you peace of mind in retirement, knowing that you have a reliable source of income that won’t be subject to taxes. Check out our Roth calculator below to see how much-guaranteed income you can receive with a Roth annuity.

How Does Roth Deferral Work?

Employees that participate in a 401k plan typically can make their contributions on a pre-tax or post-tax basis.

  • With a pre-tax contribution, employees pay taxes on the money when they withdraw it during retirement.
  • With a post-tax contribution, employees pay taxes on the money when they contribute it, but they can withdraw it tax-free during retirement.

Like a traditional 401k, employees can make Roth deferrals through payroll deductions. And like a Roth IRA, employees will pay taxes on the money when they contribute it, but they can withdraw it tax-free during retirement.

 For many people, Roth deferrals are a great way to save for retirement because they offer the potential for tax-free growth. And since the money has already been taxed, there’s no need to worry about income tax rates changing in the future.

Which Retirement Plans Are Roth Deferred?

A few different retirement plans offer Roth deferral, allowing you to contribute after-tax dollars into your account. This money grows tax-free and can be withdrawn tax-free in retirement.

The main benefit of a Roth deferral is that you don’t have to pay taxes on the money when you withdraw it in retirement. This can be a massive benefit if you expect to be in a higher tax bracket in retirement than you are now.

Some retirement plans offer Roth-deferred status, including 401ks, IRAs, annuities, and life insurance.

Roth Deferral

Next Steps

The Roth deferral is an excellent option if you’re looking to save on taxes and grow your money tax-free. Contact our team today for more information about how to take advantage of this powerful savings tool. With a Roth IRA, you can look forward to a comfortable retirement without worrying about pesky taxes eating into your nest egg.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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