A Roth 401(k) plan lets business owners increase their retirement savings contributions while offsetting future tax liability. Unlike a Roth IRA, which is unavailable to high-income business owners, a Roth 401(k) does not have income restrictions and can be especially attractive to holders of private company stock.
A Roth 401(k) is a relatively new retirement savings option with far less constraints than a Roth IRA or traditional 401(k). A Roth 401(k) can easily be added as an option to a traditional pretax 401(k) defined contribution plan, or it can stand alone as a single plan.
There is no income limit to participate and each business owner can contribute $18,000 per year ($24,000 per year for ages 50+). Equally important is the tax ramification, since taxes are paid up-front based on the contribution rather than on the total dollars realized (contributions plus returns) at time of withdrawal! (Note: The account must be held for five or more years, with the qualified distribution made at age 59 ½+, on/after death, or due to disability.)