If taking tax-free distributions from your employer-sponsored retirement plan appeals to you, then you may consider looking into a Roth 401(k) plan. A Roth 401(k) combines features of a traditional 401(k) with those of a Roth IRA. Like a traditional 401(k), workers contribute through payroll deduction. But, like a Roth IRA, contributions are after tax and participants may make withdrawals free of taxes and penalties after age 59 1/2.
Under the Roth 401(k), employees can decide to contribute funds on an after-tax basis, in addition to, or instead of, pre-tax contributions within their traditional 401(k) plans.
The annual maximum contribution for 2010 is the same as for a traditional 401(k): $16,500 plus an additional $5,500 catch-up contribution for employees aged 50 and older.
Employers who provide a matching contribution are required to allocate the match to a traditional 401(k), not a Roth account.
Traditional 401(k) vs Roth 401(k) Comparison Chart
As of January 1, 2006 employers have been free to amend their 401(k) plan document to allow employees to elect Roth IRA type tax treatment for a portion or all of their retirement plan contributions. The Roth retirement plan provision was enacted as a provision of the Economic Growth and Tax Relief Reconciliation Act of 2001.
The longer you remain invested in a Roth 401(k), the more you are likely to benefit from tax-free growth. If you plan to retire in five years or less, a shorter-term time horizon may limit the benefit of tax-free withdrawals.
We would be happy to meet with you to discuss whether the Roth 401(k) makes sense
for you as well as other aspects of your retirement planning.
Andrew D. Grace, CMFC
Financial Advisor
The Conte~Browne Group, LLC
2009 Market Street
Camp Hill, PA 17011
(717) 975-8800
(717) 975-0646 Fax
Andy.grace@contebrowne.com
Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and The Conte~Browne Group, LLC are not affiliated.
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