What is a roth deferral?

A Roth deferral is a type of retirement savings plan in which individuals contribute after-tax income into a designated account, typically a Roth IRA or Roth 401(k). The contributions are made on an after-tax basis, meaning that the money is taxed upfront, but any investment earnings and withdrawals in retirement are tax-free.

Unlike traditional retirement plans, which offer tax deductions on contributions but tax withdrawals in retirement, Roth deferrals provide tax benefits in retirement by allowing individuals to withdraw their contributions and earnings without paying any taxes.

Roth deferrals are often recommended for individuals who anticipate being in a higher tax bracket during retirement or who want to diversify their tax liabilities. However, there are income limits for contributing to a Roth IRA, so not everyone may be eligible to participate in a Roth deferral plan.

Overall, Roth deferrals can be a valuable tool for saving for retirement and can provide tax advantages for individuals looking to maximize their retirement savings.