Roth and Your 401(k)
As of next year (January 1, 2006) employers can offer their employees Roth-style features in their 401(k) plans. Essentially, employees would be able to contribute after-tax earnings into their employer 401(k) and the earnings will accumulate tax-free. Workers would be able to withdraw the money tax-free as long as they held the account for 5 years or are at least 59 1/2. This is unlike traditional 401(k) investments which are taxable as ordinary income when withdrawn.
The Roth 401k website (available here) has a slew of articles on the Roth 401(k) as well as links to the proposed regulations IRS issued earlier this month and Congressional committee reports.
Retirement done right. Or is it? You can pay now and save later with a Roth 401(k). The new Roth 401(k) retirement plan is basically a traditional 401(k) that is not bound by income thresholds, and is supplemented with the Roth IRA benefit of tax-free growth and withdrawals.
Roth 401(k) plans become effective January 1, 2006, and will allow you to contribute after-tax earnings into an employer 401(k). The contributions you make will grow tax-free, forever. When you make withdrawals from a Roth 401(k), you will owe no tax. None. Is a Roth 401(k) right for your retirement? You make the choice.
Discuss the New Roth 401k
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