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Pennsylvania Institute of CPAs Say Consider New Retirement Savings Option; New Roth 401(k) Will Benefit Most TaxpayersPosted by Roth-IRA-401k on: 2005-12-20 18:36:18 in category:
Roth 401k [ Print | Permalink / 0 Comment(s) ] Pennsylvania Institute of CPAs Say Consider New Retirement Savings Option; New Roth 401(k) Will Benefit Most Taxpayers PHILADELPHIA--(BUSINESS WIRE)--Dec. 20, 2005--Starting in 2006, a new retirement savings option will be available to all Americans. The Roth 401(k) is a new, tax-free version of the popular savings plan. Money is deposited into a Roth 401(k) account using post-tax dollars and invested similar to the traditional 401(k). Funds can be withdrawn from the account without incurring additional taxes if it has been held for at least five years and the recipient is at least 59 1/2 years old. What makes the Roth version different is that it accepts post-tax dollar contributions so when the funds are withdrawn they are not subject to any more taxes. Withdraws from traditional 401(k)s are taxed as income because money was contributed with pretax dollars. Also, unlike a Roth IRA, there are no income limits determining who can contribute to the new Roth 401(k). High-income earners will benefit most from the new plan since there are no income limits and their tax brackets may rise with age because of an ability to save and invest more. Younger taxpayers who anticipate they are at a lower tax rate now than they probably will be in the future should also consider the new plan. However since most people generally increase their tax bracket as they age, the new Roth 401(k) could benefit most taxpayers. Employer-matched funds cannot be contributed to a Roth 401(k). Those funds would still have to be put into a traditional 401(k) account. Also, this new account option will expire in 2010 unless Congress acts to continue its availability. Funds contributed will still be available as intended after the 2010 sunset, but the post-tax contribution option may no longer be available. The Roth 401(k) can be an excellent part of a retirement plan but factors like age, current and future income status, existing savings, and long-term tax strategies should be considered. Individuals should consult with a tax advisor to determine the best plan for them. Pa. residents can visit www.IneedaCPA.org to find a CPA in their local area. The Pennsylvania Institute of Certified Public Accountants (PICPA) is a professional association of more than 19,000 CPAs working together to improve the profession and better serve the public interest. Members of the media can sign up to receive weekly money management tips from the PICPA by visiting www.picpa.org/pressroom. Contacts Pennsylvania Institute of Certified Public Accountants (PICPA) Meg Killian, 215-496-9272 mkillian@picpa.org Open community website http://www.business-business.biz http://www.investment-investment.us http://www.retirement-retirement.com Recommended sites Open community website http://www.business-business.biz http://www.investment-investment.us http://www.retirement-retirement.com Recommended sites To design your custom retirement plan. http://www.retirement-plan.us For planning an IRA rollover this is the site to review. http://www.ira-rollover.us For professional asset allocation and the wonders it can do. http://www.asset-allocation.us Managers selected to fit your needs. http://www.money-managers.us |
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