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How is a Roth 401(k) plan different from a regular 401(k)?

Roth 401(k) is a relatively new option that some employers offer along with a traditional 401(k). It's basically the opposite of a traditional 401(k) plan - meaning you pay the taxes on your contributions, but not your withdrawals. So while you do have to fund it with after-tax dollars, the money grows tax free and you won't have to pay income tax on any money you take out.

Roth 401(k)s are subject to required minimum distribution rules. So after you turn 70 ½, you will be required to start withdrawing money from the account.

If your employer offers both types of plans, you can divide your savings among them - they will have the same investment options - but your combined annual contributions cannot exceed $18,000 in 2016 ($24,000 for people 50 or older).

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