New Roth 401(k) off to a slow start - December 28, 2005

[roth401k]

New Roth 401(k) off to a slow start

December 28, 2005
By HOMER BRICKEY homerbrickey@theblade.com
BLADE SENIOR BUSINESS WRITER


Workers in northwest Ohio and across the country will have another retirement-planning option Jan. 1, but few people or employers seem interested.

The new instrument is a Roth 401(k), which allows workers to put part of their paycheck into an account to be tapped after they reach retirement age.

The contributions, however, are made after taxes are taken out of gross pay, and then withdrawals from the account later are not taxed. This is opposite what occurs with a traditional 401(k), in which contributions from a paycheck are made before taxes, but the withdrawals later are taxed.

Permitted next year by a new law are contributions up to $15,000 a year to the new Roth accounts. In general, experts say the plans may be helpful particularly to younger workers and people with high income and big estates.

But.....

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