To Roth or not to Roth:
photo by Anirudh Koul
The only way to decide whether to use a Roth and make it your rock star is through knowledge.
Find out if a Roth 401(k) plan is right for you!!
Beginning January 1, 2006, employers had a new retirement savings option to offer employees. The plan, commonly referred to as a “Roth 401(k),” is a hybrid that combines features of Roth IRAs and traditional 401(k) plans, but differs in important aspects.
A Roth 401(k) is similar to a Roth IRA in that it allows after-tax contributions to fund tax-free retirement income. However, a Roth 401(k) allows for sharply higher annual contribution amounts than a Roth IRA — up to $15,500 ($20,500 if older than age 50) in the 2008 tax year versus just $5,000 for a Roth IRA.
As a general rule, Roth 401(k) fits particularly well with highly-paid employees who will be in a high tax bracket during retirement. It is also a good fit for financially savvy employees because an analysis is required to make an intelligent decision about Roth deferrals.
Wondering if a Roth is for you or your employees? Contact your local financial advisor or benefits provider to see if it’s the right fit for you.
This article comes to you from The Online 401(k), a provider of 401(k)s for small businesses. For more information or a free consultation on your 401(k) plan or to find out if Roth is right for you, call John Wasiejko at jwasiejko@theonline401k.com or call us at 415.477.8800 xt 828.
