Introducing the Roth 401(k) - June 9, 2005

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Introducing the Roth 401(k)

By Aleksandra Todorova Published: June 9, 2005

ATTENTION WORKERS: An exciting new retirement-savings option is coming in 2006.
It's called a Roth 401(k), and, as its name suggests, it combines features of the traditional 401(k) with those of the Roth IRA. It will be offered by employers like a regular 401(k) plan, but as with a Roth IRA, contributions will be made with after-tax dollars. While you won't get an upfront tax-deduction, the account will grow tax-free, and withdrawals taken during retirement will not be subject to income tax, provided you're at least 59 1/2 and you've held the account for five years or more.

The Roth 401(k) concept was introduced with the Economic Growth and Tax Relief Reconciliation Act of 2001, which stipulated that employers could start offering these plans on Jan. 1, 2006. So far, 35% of the 198 respondents to the latest survey by Hewitt Associates, an employee benefits consulting firm, have indicated that they're likely do so.

The Roth 401(k) could be a boon for high-income individuals who haven't been able to contribute.........

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