Smart use of Roth 401(k) can boost nest - Jan 30, 2006

[roth401k]

Smart use of Roth 401(k) can boost nest

New deferral feature gives participants another way to save
Claudia Allen
Monday, January 30, 2006

Women small business owners are notorious for putting the immediate concerns of work ahead of planning for their own future. If you are running a business, you probably have set up a 401(k) plan, but you probably are not using all the features it can offer to maximize your retirement savings.

For instance, tax code provisions permitting "Roth 401(k) deferrals" became effective Jan. 1. Adding this feature gives 401(k) plan participants an alternative way to save. Roth 401(k) deferrals work the same way as contributions to Roth IRAs: contributions are made in after-tax dollars, but earnings are never taxed if they are received in a "qualified distribution."

Since higher wage earners are foreclosed from using Roth IRAs by a limit on income ($110,000 for single filers and $160,000 for married filing jointly), you may not have seriously considered the impact of this Roth-type of saving plan. However, the Roth IRA income limit does not apply to Roth 401(k) deferrals, so all plan participants are able to take advantage of this savings opportunity.

While the Roth 401(k) rules are simple.....

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