There's a New 401k Coming to Town

Income tax rates have got been cut, the marriage punishment done away with, and the "death tax" is also on a way to no more. All of this is a consequence of the Shrub administration's Economic Growth and Tax Relief Reconciliation Act which was passed by a Republican Congress in 2001. Another proviso of that enactment travels into consequence on January 1st, 2006, a loanblend of a traditional 401k and a traditional Philip Philip Philip Roth individual retirement account called the Roth 401k.

Yet another employer sponsored nest egg plan, the new Roth 401k plant in almost the same manner as a traditional 401k plan. Workers put a part of their income into a monetary fund along with parts from their employer (if any). The difference is that the traditional 401k is funded with "pre-tax" dollars and the Philip Roth 401k program utilizes "after-tax" dollars. However, with the Philip Philip Roth 401k, backdown of your money at retirement will be tax free like a Roth IRA. The traditional 401k program defers the tax owed during your career until retirement.

Although it may sound like the best of both worlds, it is of import to observe that no employer is required to offer this new Philip Roth 401k plan. In fact, a recent study by employee benefits consulting firm Hewitt and Associates establish that lone 31 % of employers currently offering the traditional 401k program are considering implementing the new Philip Roth 401k.

Employees may now desire to get inquiring whether their employer will be offering the new retirement program in 2006. Contribution bounds for the retirement programs are: in 2005, $14,000 for a 401k and $4,000 for an IRA, whether Philip Roth or traditional. In 2006, this amount will increase to $15,000 for both 401k and IRAs.