A Roth 401(k) is a type of retirement savings plan that blends some of the characteristics of a traditional 401(k) with those of a Roth IRA. Within the 401(k) industry, it represents a retirement savings option where contributions are made with after-tax dollars, meaning the money is taxed before it goes into the account.

Here are the key features of a Roth 401(k):

After-Tax Contributions: Unlike a traditional 401(k) plan where contributions are made pre-tax, Roth 401(k) contributions are made with after-tax income.
Tax-Free Withdrawals: The earnings on investments in a Roth 401(k) grow tax-free, and withdrawals taken during retirement are not subject to federal taxes, provided certain conditions are met (typically, the account must be held for at least five years and withdrawals must begin after the age of 59½).
No Income Limits: There are no income limits for contributing to a Roth 401(k), which is different from a Roth IRA where there are income limits that can restrict high earners from participating.
Required Minimum Distributions (RMDs): Roth 401(k) plans are subject to RMDs, unlike Roth IRAs. This means that starting at age 72, account holders must begin taking minimum distributions.
Employer Match: Employers can offer a match to Roth 401(k) contributions, but the match must go into a pre-tax account, separate from the Roth contributions.
Early Withdrawal Penalties: If you withdraw funds from a Roth 401(k) before age 59½, you may be subject to penalties and taxes on the earnings portion of the withdrawal.

The Roth 401(k) offers more flexibility for individuals who believe they will be in a higher tax bracket in retirement than they are currently, allowing them to pay taxes at their current lower rate. It’s a powerful tool within the 401(k) industry for retirement planning, especially for those who want to lock in their tax liabilities and benefit from tax-free growth and withdrawals in retirement.