Retirement The Roth feature can help investors of all ages build retirement savings

Invesco logo
Invesco Opens in a new tab
September 12, 2025
Person looking aside

Whether you're just starting your career or approaching retirement, the Roth feature in a retirement account offers unique attributes to help future financial planning. Unlike traditional pre-tax retirement accounts, Roth contributions are made with after-tax dollars, allowing principal and investment earnings to be withdrawn tax-free when a qualifying event occurs. This flexibility makes the Roth option appealing across generations.

Benefits of the Roth feature

  • Tax-free earnings growth: Rather than taking a tax deduction now, contributions are made with money that has already been taxed. This allows for tax-free withdrawal of principal and potential earnings when eligibility requirements are met.1
  • Strategic tax planning: Roth accounts provide tax diversification, helping manage taxable income in retirement. If you're contributing to an employer-sponsored retirement plan where your employer makes matching or other contributions, those contributions are typically made on a pre-tax basis. This means, when withdrawals are made from those funds in retirement, they will be subject to income tax also — potentially increasing your taxable income during those years.
  • No mandatory distributions: Unlike traditional pre-tax contributions, required minimum distributions (RMDs) are not required at age 73 in Roth accounts, allowing individuals more control over the timing of those withdrawals.
  • Estate planning advantages: Roth accounts can be passed on with minimal tax impact. Rules vary depending on the type of Roth account and the relationship of the beneficiary to the decedent.
  • For all ages: Anyone with earned income can defer all or a portion of their retirement contributions as Roth. Younger investors benefit from decades of tax-free growth; older investors can use Roth conversions to manage RMDs. Refer to the chart for contribution maximums.

Expanded savings potential with Roth contributions in employer plans 

Unlike Roth IRAs, Roth contributions within employer-sponsored plans are not subject to income limitations and allow for significantly higher annual contribution limits.

2025 contribution maximums by age²

Plan Type Participant contribution 
up to age 49 		 Participant contribution 
up to age 503 to 64+		 Participant contribution 
up to age 60 to 634		 Income
eligibility requirement

Solo 401(k)5

$23,500

$31,000

$34,750

No

403(b)5

$23,500

$31,000

$34,750

No

SIMPLE IRA5, 6

(Roth effective 1/1/2026 plan year)

$16,500 – $17,600

$20,000 – $21,450

$21,750 – $22,850

No

Roth IRA7

$7,000

$8,000

N/A

Yes

Distribution highlights

  • No RMDs: No mandatory distributions required at age 73.
  • Tax-free distribution: Any earnings accumulated are eligible for tax-free distribution if the first contribution was made at least five years prior to distribution and the account owner is either age 59½ or older, disabled, or the distribution is due to death.
  • Early withdrawals: Generally subject to a 10% penalty if taken before age 59½, unless exceptions apply (e.g., disability, first-time home purchase for Roth IRA). Withdrawals from a SIMPLE IRA may incur a 25% penalties if the account is less than two years old, whereas principal contributions to a Roth IRA can be withdrawn at any time without penalty.

Final Thoughts

While Roth contributions to an employer-sponsored plan are only permitted if the employer elects the Roth feature, individuals can access Roth on their own through an IRA. From tax-free earnings to distribution flexibility, it can be a strategic allocation for building a resilient retirement plan.

Whether you're contributing to a Roth IRA or electing employee Roth contributions in a 401(k) like the Invesco Solo 401(k), 403(b), or SIMPLE IRA (effective for the 1/1/2026 plan year), understanding how these features work can help you make informed financial decisions, making it a powerful benefit for investors at every stage of life.

To learn more, see our retirement solutions offerings and speak with your financial professional.

  • 1

    Roth IRA accounts are eligible for tax-free distribution of earnings 5 years after the first contribution and the account owner is at least age 59 ½, deceased or disabled. 
  • 2

    Maximum contribution amounts are the lesser of the amounts shown or 100% of income.
  • 3

    The higher contribution amount indicated may begin January 1 of the year of turning age 50.
  • 4

    Enhanced contribution limits are permitted for participants aged 60–63; however, implementation of this provision is optional for employers. Please consult your Plan Administrator to determine whether your plan includes this feature. Once a participant turns age 64, they revert (back) to the age 50 catch-up contribution limit in effect for that year.
  • 5

    Employers with 25 or fewer employees are required to permit increased employee salary deferral limits. Employers with 26 to 100 employees may choose to allow these higher deferral limits.
  • 6

    Roth is an optional plan feature that must be adopted by the employer. See SIMPLE IRA for additional contribution amounts
  • 7

    Roth IRA contributions are subject to income eligibility and marital status.

Related insights