Roth 401(k)

20 Mar

Roth in your 401(k)? Yes please!

Does your employer have a Roth option in your 401(k)? If not, WHY NOT?  Since 2006, this option has been available.

If you work for a Santa Rosa or Sonoma County company with a 401(k) plan that does not have a Roth option, introduce us to the person in charge and we’ll share some information with them as to why this should be a standard option today. It isn’t likely to cost the company a dime and it certainly could save (especially younger workers) thousands in taxes down the road.

The Roth 401(k) combines elements of both a Roth IRA and a traditional 401(k) plan. The Roth 401(k):

  • Does not limit participation by income, unlike the Roth IRA.
  • Allows participants to contribute on an after-tax basis, like the Roth IRA, up to the amounts permitted under a traditional 401(k).

Therefore, higher-income employees who are ineligible to open a Roth IRA can instead contribute to a Roth 401(k) at higher amounts than are permitted in a Roth IRA. In addition, although some plans permit employees to make after-tax contributions to 401(k) plans, earnings on those contributions are taxed when distributed. By contributing to a Roth 401(k) plan, employees can contribute on an after-tax basis without being taxed in the future.

It just makes sense!  Let us know if you’d like more info on this.  Here is a good link –

http://www.groom.com/media/publication/1161_Roth_401k_Plans.pdf

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