Getting Started

Why over 20% of Gen Z use a Roth IRA or 401(k)—and should you? Learn why Roth accounts offer tax-advantaged growth, higher contribution limits, and no income cap — and why they can be a good place to start. Roth accounts are popular among new investors. Around 25% of Gen Z use a Roth IRA and over 20% of Gen Z are choosing to use a Roth 401(k). In fact, Gen Z is more likely than any other generation to use a Roth 401(k). So, why are Roth accounts popular? Roth IRAs and Roth 401(k)s offer something that traditional IRAs and 401(k)s don’t… The chance to pay taxes on your contributions now at today's rates, and potentially avoid federal income taxes on qualified withdrawals later—including any earnings—if IRS requirements are met. This guide breaks down exactly what Roth IRAs and Roth 401(k)s are, how they compare to traditional accounts, and how to decide whether they make sense for your situation. What are Roth IRA and Roth 401(k) accounts—and what are the tax advantages? Roth IRAs and Roth 401(k)s are retirement accounts funded with after-tax dollars—meaning: You don't receive an upfront tax deduction Earnings can go tax-deferred Qualified withdrawals in retirement are free of federal income tax, including investment gains, if IRS rules are met (state and local tax treatment may vary) The key difference is access: A Roth IRA is opened independently through a brokerage or investing platform and gives you a wider range of investment options. A Roth 401(k) is employer-sponsored with higher contribution limits and includes the potential for matching contributions from your employer. Do Roth accounts grow tax-free? They can offer tax-free treatment on qualified withdrawals. You typically won’t owe federal income tax on growth or withdrawals if both of the following are true: You're at least 59½ years old The account has been open for at least five years Meet those requirements and, in general, your contributions and any earnings can be withdrawn without federal income tax. For example, a 25-year-old who starts contributing has the potential for decades of tax-advantaged growth. Roth IRA vs. Roth 401(k) vs. traditional 401(k): What's the difference? Three accounts, two tax structures. Here's how they compare: Roth IRA Roth 401(k) Traditional 401(k) 2026 contribution limit $7,500 $24,500 $24,500 Income limits Yes — phases out starting at $153,000(single) and $242,000 (married) None None Tax on contributions After-tax (no deduction) After-tax (no deduction) Pre-tax (reduces taxable income) Tax on qualified withdrawals Generally tax-free (if IRS requirements are met) Generally tax-free (if IRS requirements are met) Taxed as ordinary income Employer match eligible No Yes Yes Required min. distributions No No Yes (age 73) May be a good fit for Flexible complement; more withdrawal control Earlier-career investors expecting higher taxes later Higher earners now who expect a lower bracket in retirement Roth 401(k) vs. traditional 401(k): With a traditional 401(k), contributions are generally made pre-tax, and you’ll owe ordinary income tax on withdrawals in retirement. With a Roth 401(k), contributions are made after-tax, and qualified withdrawals in retirement are generally free from federal income tax if IRS requirements are met (state and local tax treatment may vary). Roth IRA vs. Roth 401(k) — the key practical differences: The Roth 401(k) contribution limit in 2026 is $24,500—nearly three times the $7,500 Roth IRA limit. The Roth 401(k) has no income restrictions; Roth IRA eligibility phases out for single filers at ~$150,000–$165,000 and married filers at ~$236,000–$246,000. If your income exceeds those thresholds, the Roth 401(k) may be your only direct path to Roth-style tax-advantaged savings. One important note: Employer matching contributions have traditionally gone into a pre-tax (traditional) account, though some plans now allow Roth matching contributions under SECURE 2.0. Check with your employer or plan administrator to confirm how your match is treated. Should you choose a Roth IRA or 401(k) in your 20s? Here's how to decide For most people early in their careers, the Roth IRA or Roth 401(k) can be a good option. Your current tax rate is likely lower than it will be at peak earning years, so paying taxes now and taking qualified tax-advantaged withdrawals in retirement can work strongly in your favor. A simple framework for choosing: Choose a Roth IRA if: you're within the income eligibility limits (under $153,000 MAGI for single filers/under $242,000 for joint filers in 2026), want more investment options than your employer's plan offers, or want the flexibility to withdraw contributions penalty-free before retirement—the 2026 contribution limit is $7,500 for those under 50, or $8,600for those 50 and older. Choose a Roth 401(k) if: you're in the 12% or 22% tax bracket, expect your income to grow significantly, or want tax-advantaged income in retirement—with no income limits restricting your contributions and an individual contribution limit of $24,500 in 2026. Additionally, choose a Roth 401(k) to get your employer’s matching contributions if available. Choose a traditional 401(k) if: you're in a high tax bracket today and expect lower taxes in retirement. Consider splitting if: you're uncertain, or want a mix of pre-tax and tax-advantaged income options at retirement. Many investors contribute to both a Roth IRA and a traditional or Roth 401(k) simultaneously. Roth IRA contribution and income limits for 2026 Here's what you need to know about how much you can contribute: Standard limit: $7,500 for employees under 50 Catch-up (age 50+): $8,600 Super catch-up (ages 60–63): an additional $1,100 Income limits: You can make a full contribution if your single salary is under $153,000. Learn more Roth 401(k) contribution and income limits for 2026 Here's what you need to know about how much you can contribute: Standard limit: $24,500 for employees under 50 Catch-up (age 50+): an additional $7,500 Super catch-up (ages 60–63): an additional $11,250 Income limits: None—any employee in an eligible 401(k) plan can choose the Roth option regardless of salary Combined limit: The contribution limit covers your combined Roth and traditional 401(k) contributions—your employer match doesn't count toward it No income limit is a major advantage over the Roth IRA. High earners who are ineligible for a Roth IRA can still access the same tax-advantaged growth benefits through their employer's Roth 401(k). How Betterment helps you make the most of your 401(k) If your employer uses Betterment to power their 401(k), you're working with a platform built for smart, easy investing. Here's what that means for you: Automated portfolio management: Your investments are managed based on your goals and timeline, without you having to pick individual funds Personalized goal-setting tools: See projections of where your retirement balance could go and adjust your contributions accordingly Built-in financial guidance: Help navigating Roth vs. traditional allocation, contribution rate decisions, and more — built directly into the platform Ready to make the most of your retirement plan? Add a Roth 401(k) to your account or explore the Betterment employee financial planning hub. Frequently asked questions Q: What are the benefits of a Roth 401(k) for new investors? The biggest benefits are: Qualified retirement withdrawals may be federally tax-free if IRS requirements are met (state and local taxes may vary) A higher contribution limit than a Roth IRA No income restrictions — open to all plan participants regardless of salary New investors typically start in lower tax brackets, making it advantageous to lock in today's rate Q: Is a Roth IRA or Roth 401(k) good for beginners? Both can be excellent starting points — and for many beginners, they're not mutually exclusive. If your employer offers a Roth 401(k) with a match, start there and contribute at least enough to capture the full match. Then, if you're within the income limits, consider opening a Roth IRA to complement it with more investment flexibility. For beginners without access to a workplace plan, a Roth IRA can be a good option for a first account. The contribution limits are lower ($7,500in 2026), but you'll have a wider range of investment options and the ability to withdraw your contributions—not earnings—penalty-free if you ever need the funds. Most importantly, both accounts are tax-advantaged, which can be a powerful benefit when you have decades of compounding ahead of you. Q: Should I choose a Roth 401(k) in my 20s? For most people in their 20s, yes. If your tax rate is lower now than you expect it to be later, paying taxes today and targeting tax-free qualified withdrawals in retirement (federally, if IRS requirements are met) can work in your favor. The exception: if you're already in a higher bracket and expect lower income in retirement, a traditional 401(k) may be the better fit. Q: Are there income limits for a Roth 401(k)? No. Unlike the Roth IRA, the Roth 401(k) has no income limits. Any employee in an eligible plan can choose the Roth option regardless of salary. Q: How much can I contribute to a Roth 401(k) in 2026? Under 50: $24,500 Age 50+: $32,500 (includes catch-up) Ages 60–63: $35,750 (includes $11,250 SECURE 2.0 super catch-up) Your employer match is separate and does not count toward these limits

How auto-enrollment in a 401(k) plan works: Benefits & what it means for your retirement savings Here's what it means for your retirement savings—and what steps you should take next. The best time to start saving for retirement is…now. Features like auto-enrollment and auto-escalation make it easy to save for your golden years with little effort on your part. If you’re unfamiliar with these features, keep reading to see how they can help you start saving today for tomorrow. While auto-enrollment and auto-escalation have been around for years, some employers are now required to turn on these features due to SECURE 2.0, legislation aimed at helping employees save for retirement. These features are designed to automatically enroll employees into their company’s 401(k) plan and increase contributions over time. So, how does auto-enrollment work, and what does it mean for your retirement savings plan? Scroll down to learn more about: What is auto-enrollment Benefits of auto-enrollment How to check if you've been auto-enrolled in your company’s 401(k) Changing your contribution rate How Betterment at Work can help you optimize your saving strategy What is auto-enrollment in a 401(k)? There are plenty of reasons why people hesitate to set money aside for retirement—daily expenses, not knowing how much to save, not knowing how to sign up, to name a few— but auto-enrollment can make it easy to get started. Companies will auto–enroll new hires at a default rate—typically 3-8%—which you can adjust at any time. Once your money is in the market, you’ll benefit from a little thing called compound interest: The interest your money earns also accrues interest over time. Let’s explore other ways auto-enrollment makes saving for retirement easy… Benefits of auto-enrollment in a 401(k): Automatically save for retirement: Starting a new job can be overwhelming with so many new benefits to consider (healthcare, life insurance, etc), but with auto-enrollment, you can start saving for retirement immediately without having to take any action. Employer match contributions: If your employer offers a match, auto-enrollment ensures you won’t miss collecting this sweet financial boost. Tax advantages: Good news! Since 401(k) contributions are made pre-tax, this lowers your taxable income —which can help you hold onto more of your hard-earned cash. Early and consistent long-term saving: You can stay on track with minimal effort, thanks to auto-escalation. If you’re auto-enrolled, your default rate will increase 1% each year, to a maximum set by your employer (no greater than 15%), unless you adjust the contribution rate yourself. Whenever you log in and adjust your contribution rate, auto-escalation is turned off. By incrementally upping your contribution rate, auto-escalation ensures you’re saving more over time—and simplifies the decision-making process. How to check if you’ve been auto-enrolled in your company’s 401(k): If you’ve never logged in before, you’ll first have to activate your account. Visit betterment.com/accountaccess to get started. Once you’re in, you can see the status of your account by selecting the “Retirement” goal from the left-hand side of the screen. Click on “Activity” to review your past contributions. It’s a good idea to monitor your contribution rate, and increase it when you can. Many experts recommend contributing 10–15% of your paycheck towards retirement so you have enough to live on. 10-15% may sound like a lot, so start with anything you’re comfortable with. Many auto-enrollment plans enroll employees at a low contribution rate, like 3% – but it’s important to keep in mind that that’s just a starting point. The point of auto-escalation is to keep it moving into that sweet spot of 10-15% over time. As always, Betterment is here to help you confidently plan for retirement, with the tools and resources you need to make smart decisions for your money. Remember, small, consistent contributions can really add up. With auto-enrollment and auto-escalation, you can put your savings on auto-pilot, so you can focus on the rest of your life.

How employer 401(k) matching works and why it matters Learn how employer 401(k) matching can boost retirement savings, and why this benefit is essential for a secure financial future. A 401(k) match is one of the most valuable benefits employers offer—yet many employees don’t really understand how it works, or how to take advantage of it. In 2025, 79% of U.S. employees surveyed in our Retirement Readiness Report received a 401(k) match—of those who didn’t, a whopping 92% named it as the benefit they’d most like to receive. So, what makes a 401(k) match so enticing? Below, we’ll explore: Different types of 401(k) matches How to make the most of a 401(k) match Vesting schedules How Betterment can help you take advantage of your employer match What is a 401(k) match? A 401(k) match is when employers contribute to your 401(k), matching a percentage of your salary—to help grow your retirement savings. But not all matches are created equal. Knowing what kind of match your employer offers is important, and there are a few variations, including: Dollar-for-Dollar Match: The employer matches each dollar contributed to the 401(k), up to a specified percentage. This amount varies by employer but typically ranges from 3-6% of the employee's salary. Here’s an example: Jack makes $80,000/ year, and puts $8,000 annually into his 401(k), which is 10% of his salary. His employer contributes up to 3% of his salary, or $2,400. Jack’s total contribution for the year, with the employer match, is: $10,400. Partial Match: The employer matches a percentage of the employee’s contributions. For example, the employer might match 50% of contributions, up to 6% of the employee’s salary. Let’s take a look, using Jack’s $80,000 salary: Jack contributes 10% of his salary, or $8,000. 6% of his salary is $4,800. If his employer contributes 50% up to 6% of his salary, the employer contribution is: $2,400/ year. Jack’s total contribution, with the employer match, is: $10,400. Tiered Match: The employer matches a percentage of contributions up to a limit, then offers a different percentage above that threshold. For example, the employer might match 100% up to 3% of the employee's salary, and then 50% on the next 3%. Jack contributes 10% of his $80,000 salary to his 401(k), which is $8,000 per year. His employer matches 100% of the first 3%, which is $2,400, plus 50% on the next 3%, which is $1,200. The employer contribution is $3,600 for the year. Jack’s total contribution, with the employer match, is $11,600. 401(k) Match on Student Loan Payments: With new SECURE 2.0 legislation, employers can now make 401(k) contributions based on qualified student loan payments. This means your student loan payments can unlock retirement savings—even if you’re not contributing directly to your 401(k). Over the last decade, student loan debt has increased by 56%, making it harder for many to save for retirement. If Jack earns $80,000 per year and pays $500 per month toward his student loans, totaling $6,000 annually. His employer offers a 100% match on contributions up to 4% of his salary—whether he allocates contributions solely to student loan payments or splits them between student loan payments and 401(k) contributions. Based on Jack’s payments, his employer will contribute $3,200 per year directly to his retirement plan. How to maximize your employer match Once you’ve determined what type of 401(k) match your employer offers, you’ll want to make sure you’re getting the most out of it. Here are some things to keep in mind: Get started as soon as possible: First, you’ll need to claim your 401(k) if you haven’t already. The sooner you start saving, the longer your contributions will have to grow, compounding over time (think of it as a snowball rolling downhill). Contribute enough to get the full 401(k) match: Don’t leave money on the table. Although some experts recommend contributing 10–15% of your paycheck, you can start smaller, increasing when it works for you. Pro tip: If you get a raise, you might want to consider increasing your contributions. Review vesting schedules: Some employers require you to stay with the company for a certain time before the matched funds are completely yours. We’ll dig into more on that below. Traditional vs. Roth 401(k) contributions with a 401(k) match If your employer offers a traditional 401(k) and a Roth 401(k), you can choose where to put your money. With Betterment, employer matching contributions go into a traditional 401(k), but this can vary with other plan providers. These contributions are tax-deferred. You won’t have to pay taxes on them until you withdraw the funds in retirement. Understanding vesting schedules You’ll want to read up on your company’s vesting schedule, so you know when you fully “own” your employer’s contributions to your 401(k). Immediate vesting means there is no waiting period. Once the employer contributions land in your account, they are fully yours. If you leave the company, you can take 100% of the matched contributions with you. With graded vesting, you gradually gain “ownership” over the employer match contributions. For example, you might get 25% after the first year, 50% after the second, and so on. Understanding your company’s vesting schedule is critical for making long-term career decisions. If your employer contributes to your 401(k), Betterment can help you track contributions, optimize your saving strategy, and ensure you’re making the most of your match. Ready to get started? Claim your account at betterment.com/accountaccess. Want to check to see if your employer offers a match? Log in to review your account.

How to pick a 401(k) contribution rate Your 401(k) contribution rate - also known as a deferral rate or savings rate - is a key part of a successful retirement strategy. You’ve taken that first step and have set up your Betterment 401(k) account - well done! One important piece to consider next is your contribution rate - how much from each paycheck will go into your account? With your Betterment 401(k), you could use a percentage or a fixed dollar amount, whichever you prefer. Here are a few other things to consider: Were you automatically enrolled? Many employers choose to automatically enroll their employees in the plan with a default contribution rate of 3% – if you're not sure, please check with your employer or take a look in your Retirement goal. Keep in mind, whatever the default contribution rate is, it’s just a starting point. You can (and probably should) increase that contribution rate at any time in your account. At least a decade without a paycheck Most experts recommend contributing 10%–15% of your paycheck to have enough to last you through retirement - which could be 20-30 years considering how long people are living! If you retire at age 65, with a healthy lifestyle and no major risk factors, you could live well into your 80s or 90s. That means you'll want to set yourself up for living off your personal savings and investments for about 20 years! Starting small is better than nothing If 10-15% of your paycheck sounds absurd to you right now - deep breath, think of that as something to aim for. You can start with something smaller, maybe 5 or 6%, and slowly but surely increase your savings rate every year – your birthday? Give yourself a gift and increase it by 1%. Your work anniversary? Cheers to you, bump it up again. And those 1% increases can actually be a big deal. Go for the max Because of its tax benefits, the IRS sets a limit on how much you can put into your 401(k) every year. So you could aim to contribute as much as the IRS allows! For people 50 and over, the limit is higher, which is referred to as “catch-up contributions.” And if you really want to be an over-achiever, you can also contribute to an IRA, an individual retirement account, to save even more. Tax considerations With your Betterment 401(k), you can make contributions into a traditional 401(k) account and/or a Roth 401(k). There are tax benefits to both: Traditional 401(k): Contributions are deducted from your paycheck before taxes are withheld, which can lower your taxable income. Both your contributions and investment earnings are “tax-deferred,” meaning you won’t pay taxes on what you contributed to the account as well as any earnings until you withdraw the money at retirement. In other words, save on taxes now, pay taxes later. Roth 401(k): Contributions are made with after-tax dollars so your withdrawals—both the contributions and earnings—are tax-free once you decide to retire (minimum age, 59½), and as long as you’ve held the Roth account for at least five years. In other words, pay taxes now, no taxes later. Remember that you can use both! Say you want to contribute 10% towards your retirement? You can put 5% into a traditional 401(k) and 5% into the Roth 401(k). This is one way you can balance your tax exposure. If you already have your account set up, log in today to adjust your contribution rate or reassess your traditional and Roth contributions. Haven’t started saving in your Betterment 401(k) yet? Check your email for an access link from Betterment, or get in touch: Send us an email: support@betterment.com Give us a call: (718) 400-6898, Monday through Friday, 9:00am-6:00pm ET

Getting started with your Betterment 401(k) Your employer chose Betterment as its 401(k) provider - so come on in and be invested for your future. Traveling around the world. Taking up a new hobby. Spending more time with family and friends. Whatever your retirement dreams are, a 401(k) can help you make them a reality. And luckily for you, your employer chose Betterment to manage its 401(k) plan. Top 3 perks of a 401(k) Participating in your employer’s 401(k) plan is a good idea for many reasons – here are the top three. With a 401(k), you can: Contribute via convenient, automatic payroll deductions (one less thing to think about!). Save on taxes, whether those savings happen today with a traditional 401(k) or at retirement with a Roth 401(k) (and the cool thing is that you can use both!). Invest more than with other retirement vehicles (individual retirement accounts (IRAs) have lower caps on how much you can put in). All said, saving for retirement with a 401(k) is basically a no-brainer. Without a regular paycheck in retirement, you’re going to rely on your own savings. And we’re not talking about cash-under-the-mattress savings or even safe-in-the-bank savings - but invested savings, which is what you get with a 401(k). (Why is it so critical to invest for long-term goals, rather than simply saving money in the bank? To tackle one word: Inflation.) Top Betterment features Betterment offers several features to help you pursue your retirement goals: Goal based – Your 401(k) will automatically be a “Retirement” goal on the Betterment platform (you could add additional goals for other things if you want). Our goal-based platform looks at your timeline until retirement and the desired amount you want to save, to help you invest in an expert-built portfolio. Low cost – Our approach uses low-cost exchange-traded funds (ETFs) so more of your money stays invested in your account. High tech –Certain portfolio strategies and goal types are automatically rebalanced and adjusted over time, and our tax-smart tools are available to you at no added management fee. Personalized – Betterment helps you work towards your long- and short-term financial goals with personalized advice. It’s easy to get started Betterment will contact you via email to set up your account via a secure link that’s unique to you. If you haven’t received an invitation from us to set up your account, please contact us. Once you’ve set up your account, be sure to set a contribution rate to help you pursue your goals (although starting with anything is far better than nothing!) and you’ll want to initiate a rollover of any old 401(k)s into your new Betterment 401(k). Were you automatically enrolled in your plan? If so, you still need to set up your account with a username and password. If your employer has determined an automatic contribution rate for your organization, know that you can adjust this in your account at any time. Betterment strives to make saving and investing for retirement easy. But we know you still might have questions, so we’re here to help: Explore our 401(k) employee resources Send us an email: support@betterment.com Give us a call: (718) 400-6898, Monday through Friday, 9:00am-6:00pm ET