Employer-Sponsored Roth 401(k)s Available in 2006

[roth401k]

Employer-Sponsored Roth 401(k)s Available in 2006

Beginning on January 1, 2006, Roth 401(k) will become another retirement savings option for employees. After January 1, partici-pants in 401(k) and 403(b) plans (the nonprofit world’s equivalent to a 401(k)), will be able to defer a portion of their salary into an account that shares many features of the individual Roth IRA.

As in a Roth IRA, employees will make their Roth 401(k) con-tributions with after-tax dollars, not pre-tax dollars as in a traditional 401(k). Although participants’ contributions to a Roth 401(k) face a current tax bite, they will grow tax-free and eligible participants will be able to make withdrawals free of income taxes. Funds in a Roth 401(k) can also grow for a longer period of time than in a traditional IRA or 401(k). These plans require participants to begin making withdrawals by age 70½. Minimum withdrawals depend on the participant’s remaining life expectancy (or the life expectancy of the participant and his/her spouse), as calculated in IRS life expectancy tables. Roth IRAs and 401(k)s do not require participants to begin withdrawals at age 70½....................


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http://www.kdbenefits.com/assets/EBR%2005-04%20PDF%20KD%20Benefits.pdf