A recent article in the San Diego Union-Tribune cited the benefits of a Roth 401(k) and recommended that employees whose plans offer the Roth 401(k) take advantage of the opportunity to participate in one.

With a Roth 401(k), employee contributions are made on after-tax basis, therefore, the account is not taxed when the participant retires and begins withdrawing money. According to an accountant interviewed for the article, taxes may rise in the years ahead to help pay for Social Security and Medicare. Contributing to a Roth 401(k) may help protect retirees from those higher taxes.

In addition, any individual whose employer offers a Roth 401(k) can save up to $15,500 (indexed for inflation) in the plan. This unlike a Roth Individual Retirement Account (IRA) where there are income limits.  Contributions to a Roth IRA cannot be more than $5,000 and decreases once the person’s adjusted gross income reaches $99,000 (single filers) or $156,000 (married persons filing jointly).

Of course, there are participants who need the immediate tax break that comes with participating in a traditional 401(k) plan. And, some might choose to participate in both (as long as the combined contribution does not exceed the $15,500 limit). All employees should consider their individual circumstances when reviewing their options.

NADART is pleased to offer the Roth 401(k) among its retirement plan features, including automatic enrollment, target dated funds, and 24/7 account access. If you would like to learn more about the Roth 401(k) or any of our other features, please contact a NADART representative at (800) 462-3278, ext. 7161 or e-mail nadart401k@nada.org.