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Roth 401k?

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My employer announced yesterday that we now have the ability to contribute to a Roth 401k. Ed Slott is a big fan of Roth IRAs, but I'm wondering if there are any benefits to a Roth 401k over a Roth IRA. Perhaps different income limits?


Obviously I still need to read up on the differences between the two, but I thought I would ask if anyone here is investing in a Roth 401k. If so, do you mind explaining your decision process? TIA!

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The Roth 401k is post-tax while the traditional 401k is pre-tax, so you need to take in account what you think your tax situation will be when you retire. However, the earnings in the Roth grow tax-free under certain circumstances.

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FYI, here is some additional information I found on my retirement account website:


Is the Roth 401(k) contribution option the same as a Roth IRA contribution option?

No. There are some significant differences between a Roth 401(k) and a Roth IRA.

  • You may contribute to a Roth IRA only if your modified adjusted gross income falls below a certain amount. To be eligible to make an annual contribution to a Roth IRA, your modified adjusted gross income(MAGI) for 2009, the applicable year cannot exceed $120,000 if filing singly and $176,000 if married filing jointly. There are no income limits for those who want to contribute to a Roth 401(k) option within their plan.
  • A Roth IRA is an account that is separate from your retirement savings plan. Roth 401(k) contributions are part of your 401(k) retirement savings plan.
  • The 2009 contribution limit for a Roth IRA is $5,000 per year.
  • The combined IRS contribution limit for both Roth 401(k) and traditional 401(k) pre-tax contributions if you are under age 50 is $16,500 for 2009.
  • If you are over age 50 and are eligible to make catch-up contributions, the combined IRS contribution limit for both Roth 401(k) and traditional 401(k) pre-tax contributions is $22,000 for 2009. Please note, the amount of Roth 401(k) and traditional pre-tax contributions you may contribute to your plan could also be subject to specific Plan Limits. Contact your plan’s toll free number for more information.
  • In a Roth IRA, you do not have to take a required minimum distribution during your lifetime. With a Roth 401(k), you will have to take required minimum distributions generally after you have retired and attained age 70½.
  • Unlike a Roth IRA, contributions to a Roth 401(k) option are not specifically eligible for a tax-free distribution for the purchase of a participant’s first primary residence.

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