Roth 401(k) plans are an often-missed retirement savings opportunity

But few employees are taking advantage of Roth 401(k) plans. Just 18.1 percent of workers across all plan sizes had made an after-tax Roth contribution to their workplace plan in 2016, PSCA data shows.

Nor are users putting much in. The average percentage of salary higher-paid employees defer to a Roth 401(k) is 4.8 percent, versus 7 percent for pre-tax 401(k) contributions, according to PSCA. (Among lower-paid employees, the average rates of Roth vs. pre-tax are 4.3 percent and 6.1 percent, respectively.)

Financial advisors say that low usage rate likely stems from a combination of factors, including lack of awareness and a mistaken belief that they make too much to contribute to a Roth 401(k). (To reiterate: That’s not true.)

“I always ask clients if this is an option in their plan and the most frequent reply I get is, ‘I’ll have to check,'” said certified financial planner Howard Pressman, a partner at Egan Berger & Weiner in Vienna, Virginia.

Brian Schmehil, a CFP and the director of financial planning for The Mather Group in Chicago, says beefing up Roth contributions can also be a tough sell for the young workers who stand to benefit the most from those decades of tax-free growth.

“It’s hard to pay tax now and have a much smaller paycheck, and have the foresight to know you’re saving money in the long run,” he said.

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