Broker Check

Rolling over a Roth 401(k) vs a Traditional 401(k)

February 23, 2023

The decision to rollover a 401(k) plan can have long-lasting implications for your financial future.  Understanding the difference between rolling over a Roth 401(k) vs. a Traditional 401(k) is important to making the best choice for you.

A Roth 401(k) is a type of 401(k) that is funded with after-tax dollars, meaning you pay taxes on your contributions now and qualified distributions are tax free in the future.  On the other hand, a 401(k) is funded with pre-tax dollars, meaning you defer taxes until you withdraw the funds in the future.

When rolling over a Roth 401(k), you have the option to roll over the funds into a Roth IRA which continues with after-tax contributions and provides for tax-free withdrawals in the future.  Rolling over a Traditional 401(k) into a Traditional IRA will also continue to defer taxes until you take withdrawals.

The key differences in rolling over a Roth 401(k) vs. a Traditional 401(k) is the tax implications.  Therefore, it’s important to consider your financial goals and circumstances when deciding to rollover a 401(k) plan.  It may be beneficial to speak with a Financial Advisor for personalized guidance.

Contact | Wayfinder Capital (