Highlights of a Roth 401k

[roth401k]

•Roth 401(k)’s will be available after January 1, 2006, and until December 31, 2010, if employers choose to offer them.

•Employees will be able to contribute after-tax dollars to the Roth 401(k). The money will be held in a separate account from contributions to your regular 401(k). You decide what percentage of your retirement plan contributions go to either account.

•You'll be able to make the maximum contribution allowable under 401(k) rules. The 2006 401(k) contribution limits allow employees less than age 50 to sock away up to $15,000 -- $20,000 for employees age 50 or older.

•For those who want to save after-tax money, this is a much quicker route than saving in the Roth IRA, which has contribution limits of $4,000 for those less than age 50 and $5,000 for those age 50 and above in 2006. If you have a Roth IRA, or plan to open one, you can still contribute the maximum allowable to that account in addition to your Roth 401(k) contributions.

•If your company provides a matching contribution, it will be pretax money and will go only into the regular 401(k) account.

•The Roth 401(k) is open to all employees who qualify for the regular 401(k). This is a boon to higher-paid employees who may be excluded from having a Roth IRA account because of its income limitations.

•Contributions are irrevocable. Once the money goes into the account, it falls under all of the IRS rules and penalties for 401(k) accounts; you can't change your mind and have it switched over to your regular 401(k).

• Money can be withdrawn tax- and penalty-free as long as you're at least age 59½ and have held the account for at least five years.

• The Roth 401(k) has the same distribution requirements as the 401(k). You'll need to begin taking minimum distributions by the time you reach age 70½. This contrasts with the Roth IRA, which has no distribution requirements.

• You can roll over your Roth 401(k) contributions to a Roth IRA when you retire or if your employment is terminated.

•Once the Roth 401(k) program ends, for now its scheduled to end in 2010, you cannot add any more funds to this account; however, they can remain in the plan until distribution.

[scott zuber]

Are there any proposed income limits?

[roth401k]

The Roth 401(k) is open to all employees who qualify for the regular 401(k). This is a boon to higher-paid employees who may be excluded from having a Roth IRA account because of its income limitations.

As it stands right now, there will be no income limits.

[guest]

I have retirement money in a 401K of a previous employer that I never rolled over into an IRA; it is still in my account with the previous employer. I wanted to roll it over into a Roth IRA, but am excluded due to the $100,000 income limit for conversions.

Can I convert this 401K to a Roth 401K assuming my current employer accepts funds from previous 401K plans?

Thanks for your help.