Targeting the right 401(k) choice for you - December 8, 2005

[roth401k]

Targeting the right 401(k) choice for you

By Sandra Block, USA TODAY

Workers who invest in 401(k) retirement plans face a blizzard of choices, from choosing the right mutual funds to deciding how much money to contribute.

Starting Jan. 1, savers will confront a new wrinkle: the Roth 401(k).

The Roth 401(k) resembles a traditional 401(k) plan, but contributions are made in after-tax dollars. As long as you leave the money alone until you retire, withdrawals are tax-free.

Employers are allowed to offer these plans to workers starting in 2006.

With traditional 401(k) plans, contributions are made on a pretax basis, which reduces your taxable income. But once you retire, withdrawals are taxed at your regular income tax rate.

That works out nicely if your tax rate is lower in retirement. But....

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