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The Roth 401(k) - New Kid In Town Word Count: 313 Summary: A traditional 401k plan is an arrangement under tax law by which an employer can deduct pre-tax money from your paycheck and the employee can invest it rsspect.org In a traditional 401k this money is nontaxable until you withdraw it, at which time you will likely be in a lower tax bracket ambafrance-kwt.org Those who are looking into retirement savings plans should also take not of the Roth 401k that became effective in 2006 balletcompanynyc.com The Roth 401k is a hybrid between the traditional 401k and the Roth IRA, a... Keywords: Roth 401k, 401k, retirement Article Body: A traditional 401k plan is an arrangement under tax law by which an employer can deduct pre-tax money from your paycheck and the employee can invest it brainybirds.com In a traditional 401k this money is nontaxable until you withdraw it, at which time you will likely be in a lower tax bracket caribongoflorida.com Those who are looking into retirement savings plans should also take not of the Roth 401k that became effective in 2006 cfcgrace.com The Roth 401k is a hybrid between the traditional 401k and the Roth IRA, and was legislated in George W crossfirecafe.com Bush’s tax cut package. It operates differently than the traditional 401k plan. Below is an explanation of the pros and cons of the Roth 401k: The bad news: - Favorable tax treatment limited to those who are disabled, or at least 59.5 years old, or who have held the account for more than 5 years - it is not available to taxpayers with an income above a certain level at the time their account is opened. - There is no upfront tax deduction - employees whose employers do not offer Roth 410k plans are ineligible - Not many employers offer Roth 401k plans because it is new, and because it is expensive to introduce. The good news: - Any employee whose employer offers the plan is eligible. - Withdrawals taken after retirement are no subject to income tax - It can be rolled over into a Roth IRA if you quit your job. - There is no loss of eligibility for if your income exceeds maximum eligibility limits after your account is opened. - Because of the deferred tax benefits, Roth 401k accounts can appreciate faster than a traditional plan, leading to higher retirement income. This structure makes the Roth 401k suitable for youth who expect their income to grow over time. A traditional 401k plan will leave you more money now, but a Roth 401k will leave you better off after retirement.
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