Meet the new 401(k) - Boston Globe - August 28, 2005

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Meet the new 401(k)

Your options for saving money for retirement are about to grow
By Leonard Wiener, Globe Correspondent | August 28, 2005

The lure for participating in a 401(k) retirement plan is being turned on its head.

Since 401(k)s took off two decades ago to become the primary plans at many firms, the big attraction has been an immediate cut in income tax. The share of salary an employee directs to a 401(k) is excluded from taxable income, as are any matching contributions by the employer. Put $7,000 of a $70,000 salary into a 401(k) and you only report $63,000 of taxable salary to the IRS, an immediate payoff that can lead to a bigger tax refund when you file your return. It's when you make withdrawals of the deposits and the account's investment earnings that tax is due.

Starting Jan. 1, employers will be allowed to offer a new type of 401(k) that turns things around by letting you......

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