Roth 401(k) requires tax forecasting - September 3, 2005

[roth401k]

Roth 401(k) requires tax forecasting

Saturday, September 03, 2005

By Kaja Whitehouse, Dow Jones Newswires

NEW YORK -- Starting next year, you may have access to a brand new 401(k) option aimed at decreasing your tax burden in retirement.

Deciding whether or not to contribute to the new option -- known as a Roth 401(k) -- however, may require some crystal-ball gazing. Highly paid workers are the most likely to take the gamble and contribute to this new type of account. They are also the most likely to see it pay off, tax experts said.

The Roth 401(k) combines elements of the traditional 401(k) with the tax benefits of the Roth IRA. It allows people to contribute to tax-deferred savings accounts with after-tax dollars in exchange for the benefit of withdrawing that money tax-free in retirement. The traditional 401(k) is funded with pre-tax dollars and withdrawals are taxed as income.

Currently, ....

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