The Plan Sponsor Council of America has reported that the amount of 401(k) plans that now also have a Roth savings option grew to 86% in 2020, an 11% growth over 2019 and far surpassing the 49% of plans that offered it 10 years ago, reports CNBC.

Roth savings accounts are an after-tax type of retirement account that can benefit particular individuals over pre-tax ones. Workers that are contributing to a Roth account pay their taxes up front, and then the investment growth and withdrawals made in retirement are tax-free; more traditional pre-tax savings plans mean that workers don’t pay taxes now but will pay them later when withdrawing or potentially growing the fund.

The growth is attributed to more employers and workers becoming aware of the benefits to a Roth account, particularly for younger individuals or those currently in lower tax brackets who might be in higher ones by the time they retire. By contributing money now and being taxed at a lower bracket, workers can accumulate more money with less taxes than they would pay later on in life when their income might bump them into a higher tax bracket and lead to more highly taxed contributions.

Some individuals are skeptical of the benefits of a Roth account, believing that their tax bracket will be lower, along with their spending, the closer to retirement they get, but this is not always the case. It’s important to work with a financial advisor to determine a realistic retirement plan based on each person’s needs and time frame.

Roth savings accounts also offer benefits beyond just their tax-free status later on. Individuals who roll a Roth 401(k) into a Roth individual retirement account are not required to take minimum distributions, which provides retirees with a lot of flexibility. Traditional pre-tax plans require minimum distributions starting at the age of 72, regardless of whether they are needed or not. It is important to note also that the investment growth in a Roth account is only tax-free for withdrawal purposes if done after the age of 59 and a half.

Another major benefit to Roth accounts is that they help reduce the annual premiums for Medicare Part B; because withdrawals made from a Roth account are tax-free income, using money strategically from a Roth can help a retiree stay within the bounds of the Medicare income thresholds that are based on taxable income.

For advisors looking for other ways to help clients who are looking to build their retirement portfolio, Nationwide offers a variety of actively managed ETFs for advisors that cater to a range of investment exposures and strategies.

For more news, information, and strategy, visit the Retirement Income Channel.