When recommending retirement plans to my younger friends, I’ve always pointed them towards a Roth IRA. Because most people at the beginning of their career will continue to climb tax brackets as they age, it just makes sense to go with a plan that offers tax relief later in life rather than early on.

But lately, I’ve become more aware of another Roth option that offers similar benefits – and some advantages over its IRA counterpart. The Roth 401k, though a relatively new offering, is starting to pick up recognition as the best retirement plan for many investors.

Read on to find out if a Roth 401k is right for you, and what to do if your employer doesn’t offer one.

What is a Roth 401k?

The Roth 401k has been around for 10 years, but it still feels like a novel concept to most people. I remember when I told my money-savvy parents I was eligible for a Roth 401k, they weren’t even aware it was a real option. They assumed I meant a Roth IRA.

A Roth 401k is an employer-sponsored plan where the contributions are not tax-deductible, but withdrawals can be made tax-free later on. They’re a great choice for young employees who want to save for retirement, but don’t need to take any tax deductions right now.

A Roth 401k offers significant advantages over a Roth IRA. Like a regular 401k, contributions limits are high with a Roth IRA. You can set aside up to $18,000 a year or $24,000 if you’re 50 or older. In total, you and your employer can contribute $54,000 or 100% of your income, whichever is lesser.

There are no income limits with a Roth 401k, while the Roth IRA caps contributions for high-income earners. This is probably one of the biggest distinctions between the two, and one more reason why the Roth 401k is an amazing choice for investors looking to maximize their retirement contributions.

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When Is It a Good Option?

For years, people had to settle for the traditional, tax-deferred 401k option. Now, many employers are offering the Roth 401k, which lets employees contribute to retirement and receive tax-free withdrawals in their golden years.

If you’re young and just beginning your career, a Roth 401k is almost always better than a traditional 401k. When you’re not earning a lot, your tax bracket is lower and you don’t need the tax deductions that come with a traditional account. You’re better off saving on taxes when you’re retired, especially considering the fact that tax burdens tend to increase in general over the years for every bracket.

Marguerita Cheng, CFP® of Blue Ocean Global Wealth said many investors go with either a Roth or traditional retirement plan, but it’s often better to do both.

“To be honest, I think clients benefit from tax diversification just as much as they do investment diversification,” she said. “It may make sense to have pre-tax & post-tax 401(k) contributions.”

However, if you’re an extremely high earner and relatively certain that you’ll have a smaller income in retirement (even including withdrawals and social security), it’s better to take a tax deduction now and go with the traditional 401k or IRA.

If you’re not sure which 401k or IRA to use, consider hiring a financial planner who can help you decide the best strategy for you. They can run the calculations to determine which retirement plans will save you the most on taxes, and answer any questions you have about the minutiae of your plan in clear, easy-to-understand terms.

A financial planner can also examine the funds available through your 401k and recommend the best ones for your needs. If you prefer to go the DIY route, Cheng says you can use sites such as “Morningstar or Lipper [to] evaluate the funds in terms of fees, consistent performance, style purity, etc.”

If You Don’t Have Access to a Roth 401k

Interested in a Roth 401k, but don’t have access to one through your employer? Don’t fear. You can still open a Roth IRA, which is available to any individual who has earned income. There are income limitations on contributions, so make sure you understand if your salary falls into that group.

The Roth IRA has a couple downsides compared to a Roth 401k, mainly because an IRA has a much smaller contribution limit ($5,500 compared to $18,000). Those differences will add up quickly, so if you want to contribute more, consider starting a traditional 401k through your employer.

If you don’t currently have a Roth IRA, you can open one with an investment firm or robo advisor. A financial planner can also help create and manage it for you. Remember, you can find a licensed planner in your state through the Guidevine search tool.

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Zina Kumok

Zina Kumok

Zina Kumok is a personal finance freelance writer. Her work has been featured in Forbes, Learnvest and DailyWorth. She writes a blog about how to be mindful with your money. Follow Zina on Twitter and ConsciousCoins.com