Last year, the percentage of employers that allowed Roth 401(k) savings soared, enabling more workers to receive the financial benefits that accompany such contributions.

Roth is an after-tax account. Workers pay taxes on 401(k) savings in advance, but investment growth and account withdrawals after retirement are tax-free. This is different from traditional pre-tax savings. In traditional pre-tax savings, workers can reduce taxes first and then pay.

Not all plans allow employees to deposit funds into a Roth account. According to data from the U.S. Plan Sponsorship Committee of the trade organization, the percentage of 401(k) plans offering this option has increased from 75% in 2019 and 49% ten years ago to 86% in 2020.

“It has been growing steadily,” said Hattie Greenan, the organization’s research director.

Greennan said this may be because employers and employees have become more aware of the benefits of the Roth account over time, and they may put pressure on companies to increase the option.

As Democratic lawmakers weighed the rules restricting the use of such accounts as tax havens for the wealthy, the image of the Rose option may be further expanded this year. An article in ProPublica in June outlined how billionaires such as PayPal co-founder Peter Thiel used Ross accounts to accumulate huge amounts of wealth.

The largest employers are most likely to offer this option—about 91% of 401(k) plans with more than 5,000 savers have Roth capabilities.

According to the financial adviser, the Ross 401(k) donation is meaningful to investors who may now be at a lower tax rate than when they retire.

That’s because they now pay taxes at a lower tax rate and will accumulate more savings.

It is impossible to know your tax rate or exact financial situation after retirement, which may be decades in the future. However, Ross has some guiding principles.

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For example, Roth accounts usually have meaning for young people, especially those who have just entered the labor market, whose highest income year may be earlier. These contributions and any investment growth will be tax-free for decades. (An important note: investment growth is only tax-free for withdrawals after 59½.)

Some people may avoid Rose saving because they think their spending and tax levels will fall after retirement. But according to financial advisers, this does not always happen.

In addition to tax savings, the Roth account has other benefits.

For example, depositors who transfer Roth 401(k) funds to Roth IRA do not need to take the minimum required distribution. This is not the case with traditional pre-tax accounts. Retirees must withdraw funds from their pre-tax accounts from the age of 72, even if they do not need the money.

Roth savings can also help reduce Medicare Part B annual premiums based on taxable income. Since Roth withdrawals are considered tax-free income, strategically withdrawing funds from the Roth account can prevent a person’s income from exceeding certain medical insurance thresholds.

Some consultants recommend that 401(k) savings be allocated to pre-tax and Roth, regardless of age, as a hedging and diversification strategy.

In recent years, with wider availability, investors’ use of Roth 401(k) savings has increased. According to data from the U.S. Planning Sponsorship Council, about 26% of workers saving on 401(k) plans used the Roth option in 2020, up from 18% in 2016.

“As companies educate around it, usage tends to lag behind usability,” Greennan said.

There are many reasons why people may not make Ross contributions.

Automatic registration of employees to 401(k) plans has become popular—62% of plans use so-called “auto-registration.” Generally, companies do not set Roth savings as the default savings option, which means that automatically registered employees must actively switch assignments.

In addition, employers matching 401(k) savings will do so in the pre-tax savings bucket. High-income earners may also mistakenly believe that there are income restrictions on contributing to a Roth 401(k), just like Roth individual retirement accounts.