Roth 401k

[Delaney21]

Does anyone know if their company will be offering the Roth 401k next year? I read some where that only 35% of companies are preparing for it and we should give them a little push if they aren't considering it. I'm planning on talking to HR about it on Monday, but I just wanted to see what other people have heard from their companies.

[mir322]

Here's more info about it from Fatwallet:

http://tinyurl.com/az4j9

[southhavenjen]

I heart Fatwallet! :D

[Delaney21]

mir322 Is your company offering it?

[southerner]

What's the difference between a Roth 401 and a Roth IRA? I've never heard of a Roth 401K before!

And I thought I was somewhat savvy when it came to financial stuff :rolleyes:

[mir322]

mir322 Is your company offering it?

No - I can't do those because I teach. We just have the 403b and 457.

[numberlady]

Our company will not be offering it at this time but we might in the future. I work for a large medical practice and the doctors look to put as much away pre-tax as possible through the corp. and anything after tax they do on their own.

I have read a little about these, but I haven't understood what the benefit is to the employer. I know that it is meeting the needs of employees, but is there anything else?

[southhavenjen]

No - I can't do those because I teach. We just have the 403b and 457.

We have a 403b where I work, too, and my understanding is under the new law, there will be a provision for Roth 403b's . Same rules apply to the Roth 403b's as Roth 401k's.

For those who don't know, a 403b is the equivalent of the 401k, for nonprofits.

[mir322]

Here's another site with great info:

http://www.roth401k-center.com

In a nutshell: "The new Roth 401k will allow employees to contribute after-tax dollars to a 401k account. The new “Roth” 401k plan combines features of a traditional Roth IRA account with those of regular 401k account. Roth 401k account contributions must be made with after-tax dollars. Roth 401k accounts grow tax-free and withdrawals won’t be subject to income tax (after age 59.5)."

[mir322]

I think this majorly benefits those who can afford to make large contributions. Not many people can afford to fully fund a Roth IRA, IRA, 401k, AND a Roth 401k. I wonder if there's a salary cap? I'm still looking for info on the Roth 403b - I'll post if I find any.

[Delaney21]

There isn't a salary cap on the Roth 401k which makes it so much better than the Roth IRA.

[laura]

I haven't heard anything about this, and thus I have no idea if my company will be participating.

For companies who do pariticipate: What about employer match? And will it be something that companies offer instead of a traditional 401K, or in addition to?

[mir322]

Here's an article from today:

http://money.cnn.com/2005/07/21/retirement/new_401k/index.htm


On tap: 401(k), version 2.0
Your retirement plan's a-changin' -- here's what you need to know
July 22, 2005: 11:48 AM EDT
By Jeanne Sahadi, CNN/Money senior writer

NEW YORK (CNN/Money) – Coming soon to a retirement plan near you: big changes.

If you have a 401(k) or 403(b) at your job, you may be seeing some substantial differences in your options over the next six months or so.

Specifically, your employer may simplify your plan to make investing easier and automate a number of actions designed to save you from yourself.

At the same time, employers also may add a complicating twist to your plan – which will present you with a choice that may not be as advantageous as it may seem at first.

Here's a primer on what to expect if your employer tells you that your 401(k) will change:
401(k): The simple life

Research has shown that those of us eligible to participate in our companies' 401(k) plans are not a very proactive bunch.

We're slow to join the plan, feel overwhelmed if faced with too many investment choices, and rarely, if ever, rebalance our portfolios. Plus, few of us even contribute the maximum allowed, or regularly increase our contributions.

So employers are moving toward a streamlined 401(k) that will have a number of default options designed to improve workers' chances of building a solid nest egg.

The changes include far fewer investment choices, automatic enrollment, automatic rebalancing and automatic deferral contribution increases.

See the full story here.
Roth 401(k): A merger of unclear merit

Starting in 2006, the law will allow employers to offer a new option in 401(k) plans: to contribute after-tax money that will grow tax-free.

Currently, your 401(k) contributions are pre-tax, meaning you get a deduction the year you make the contribution, and you pay income taxes on your contributions plus earnings when you retire.

The new option is called a Roth 401(k) -- or a Roth 403(b) if you work for a non-profit. It's not a separate plan from your existing 401(k), but rather a new element to it.

So you will be asked first how much of your gross income you'd like to contribute to your retirement plan -- say, 15 percent. And then of that, you'll indicate how much you'd like to put in the pre-tax portion of the plan and the after-tax portion – say, 7.5 percent in each.

The new element is similar to a Roth IRA, which also lets savers invest after-tax money that grows tax-free. But it differs in significant ways.

And while the promise of tax-free growth may seem hard to resist, deciding to take advantage of the Roth 401(k) is hardly a no-brainer.

[Roth-401k]

Roth 401k Forum (http://www.roth-401k-forum.com/)

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.

•Roth 401(k)’s will be available after January 1, 2006, and until December 31, 2010, if employers choose to offer them.

•Employees will be able to contribute after-tax dollars to the Roth 401(k). The money will be held in a separate account from contributions to your regular 401(k). You decide what percentage of your retirement plan contributions go to either account.

•You'll be able to make the maximum contribution allowable under 401(k) rules. The 2006 401(k) contribution limits allow employees less than age 50 to sock away up to $15,000 -- $20,000 for employees age 50 or older.

•For those who want to save after-tax money, this is a much quicker route than saving in the Roth IRA, which has contribution limits of $4,000 for those less than age 50 and $5,000 for those age 50 and above in 2006. If you have a Roth IRA, or plan to open one, you can still contribute the maximum allowable to that account in addition to your Roth 401(k) contributions.

•If your company provides a matching contribution, it will be pretax money and will go only into the regular 401(k) account.

•The Roth 401(k) is open to all employees who qualify for the regular 401(k). This is a boon to higher-paid employees who may be excluded from having a Roth IRA account because of its income limitations.

•Contributions are irrevocable. Once the money goes into the account, it falls under all of the IRS rules and penalties for 401(k) accounts; you can't change your mind and have it switched over to your regular 401(k).

•Money can be withdrawn tax- and penalty-free as long as you're at least age 59½ and have held the account for at least five years.

•The Roth 401(k) has the same distribution requirements as the 401(k). You'll need to begin taking minimum distributions by the time you reach age 70½. This contrasts with the Roth IRA, which has no distribution requirements.

•You can roll over your Roth 401(k) contributions to a Roth IRA when you retire or if your employment is terminated.

•Once the Roth 401(k) program ends, for now its scheduled to end in 2010, you cannot add any more funds to this account; however, they can remain in the plan until distribution.

Is a Roth 401(k) right for your retirement? You make the choice.

Roth 401k (http://www.roth-401k-forum.com/) Forum

[Katy]

I wanted to pop in and give a quick reminder here...

...remember to do your own research and make an educated decision regarding something as important as your financal future.

That said, we received a report regarding the above post (from Roth 401K) and after a lengthy discussion amongst the mods, we've concluded that the post does not violate any community rules. Therefore we will not be removing the post. We have also PM'd the poster regarding our solicitation/selling rule for any future reference.

Thank you all for bringing this to our attention.
Katy