Only 17% of Americans Use This Amazing Retirement Account

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

[[{“value”:”Image source: Getty Images
Saving for retirement is most Americans’ biggest financial goal. It can take hundreds of thousands of dollars, or more, to enjoy a happy, secure retirement.Alert: highest cash back card we’ve seen now has 0% intro APR into 2026
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes. That’s why we need to make the most of our retirement savings. That means investing as much as possible and using retirement accounts that offer big tax breaks.Yet millions of American workers don’t use one of the best retirement accounts out there. Let’s go over what it is, how it works, and how it could save you huge sums of money.The retirement account only 17% of workers useOnly 17% of workers who have access to a Roth 401(k) contribute to one, according to Vanguard’s 2024 “How America Saves” report. That’s despite the fact that 82% of 401(k) plans offer a Roth account.If your employer offers a Roth 401(k), then you may want to start contributing to it now. Here’s why.How Roth 401(k)s workA Roth 401(k) is a lot like a traditional 401(k). For example:Your contributions are automatically taken out of your paycheck.Investments held in the account are not subject to capital gains tax or dividend tax.Most employers will match contributions up to a certain amount.But there’s one big difference between Roth 401(k)s and traditional 401(k)s.Traditional 401(k) contributions are free from income tax, which means you get an upfront tax break. But when you retire, you’ll pay income tax on the money you withdraw.Roth 401(k) contributions are subject to income tax, but qualified withdrawals are not. That means your Roth 401(k) can be a source of tax-free retirement income.Why use a Roth 401(k) instead of a traditional 401(k)?Traditional and Roth 401(k)s are both fantastic retirement savings accounts. And there’s a good argument for picking a traditional 401(k): If your income is higher now than you expect it to be in retirement, then the upfront tax break will, in theory, save you more money.But the reason I invest in a Roth 401(k) is that the future is uncertain. Even if retirement is only five years away, any number of things could throw your plan off track.For example:Income tax rates could go up.You may be forced to retire early due to health problems or job market conditions.The stock market could tank, causing your retirement savings to take a big hit.Social Security benefits could be reduced.A Roth 401(k) takes a lot of uncertainty out of the equation. You’ll pay more in taxes now, but you’ll rest easy knowing that you’ll save a bundle on income taxes once you’re retired and living on a fixed income.Don’t have a Roth 401(k)? Here’s a great alternativeSome employers don’t offer Roth 401(k)s. The good news is that you can enjoy all the same benefits (except for an employer match) with a Roth IRA. This is a type of individual retirement account that allows you to contribute up to $7,000 per year (or $8,000 if you’re 50 or older).You can open a Roth IRA through almost any stock broker, so long as your income isn’t over a certain amount (read up on the Roth IRA rules to find out). Roth IRAs also have one huge benefit that Roth 401(k)s don’t: endless investment options. While a 401(k) comes with a limited menu of investments, a Roth IRA lets you choose from thousands of stocks, funds, bonds, and other investments.I recently opened a Roth IRA, and the whole process took minutes. I set up recurring investments in an S&P 500 index fund, so I’m getting a diversified stock portfolio with almost no work. Even better, my broker matches 1% of my IRA contributions.Ready to open a Roth IRA and start building tax-free retirement income? Click here to see our list of the best Roth IRA brokers and open an account today.Alert: highest cash back card we’ve seen now has 0% intro APR into 2026
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes. SoFi disclosure:⁸ Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.”}]] [[{“value”:”

Saving for retirement is most Americans’ biggest financial goal. It can take hundreds of thousands of dollars, or more, to enjoy a happy, secure retirement.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

That’s why we need to make the most of our retirement savings. That means investing as much as possible and using retirement accounts that offer big tax breaks.

Yet millions of American workers don’t use one of the best retirement accounts out there. Let’s go over what it is, how it works, and how it could save you huge sums of money.

The retirement account only 17% of workers use

Only 17% of workers who have access to a Roth 401(k) contribute to one, according to Vanguard’s 2024 “How America Saves” report. That’s despite the fact that 82% of 401(k) plans offer a Roth account.

If your employer offers a Roth 401(k), then you may want to start contributing to it now. Here’s why.

How Roth 401(k)s work

A Roth 401(k) is a lot like a traditional 401(k). For example:

• Your contributions are automatically taken out of your paycheck.
• Investments held in the account are not subject to capital gains tax or dividend tax.
• Most employers will match contributions up to a certain amount.

But there’s one big difference between Roth 401(k)s and traditional 401(k)s.

Traditional 401(k) contributions are free from income tax, which means you get an upfront tax break. But when you retire, you’ll pay income tax on the money you withdraw.

Roth 401(k) contributions are subject to income tax, but qualified withdrawals are not. That means your Roth 401(k) can be a source of tax-free retirement income.

Why use a Roth 401(k) instead of a traditional 401(k)?

Traditional and Roth 401(k)s are both fantastic retirement savings accounts. And there’s a good argument for picking a traditional 401(k): If your income is higher now than you expect it to be in retirement, then the upfront tax break will, in theory, save you more money.

But the reason I invest in a Roth 401(k) is that the future is uncertain. Even if retirement is only five years away, any number of things could throw your plan off track.

For example:

• Income tax rates could go up.
• You may be forced to retire early due to health problems or job market conditions.
• The stock market could tank, causing your retirement savings to take a big hit.
• Social Security benefits could be reduced.

A Roth 401(k) takes a lot of uncertainty out of the equation. You’ll pay more in taxes now, but you’ll rest easy knowing that you’ll save a bundle on income taxes once you’re retired and living on a fixed income.

Don’t have a Roth 401(k)? Here’s a great alternative

Some employers don’t offer Roth 401(k)s. The good news is that you can enjoy all the same benefits (except for an employer match) with a Roth IRA. This is a type of individual retirement account that allows you to contribute up to $7,000 per year (or $8,000 if you’re 50 or older).

You can open a Roth IRA through almost any stock broker, so long as your income isn’t over a certain amount (read up on the Roth IRA rules to find out). Roth IRAs also have one huge benefit that Roth 401(k)s don’t: endless investment options. While a 401(k) comes with a limited menu of investments, a Roth IRA lets you choose from thousands of stocks, funds, bonds, and other investments.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

SoFi disclosure:
⁸ Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.”}]] Read More