How To Save For Retirement

It is important to save for your retirement. There are many ways to accomplish this, so this article will look at the Roth IRA and the Roth 401(k) opportunities. There are many rules that vary when compaing the Roth plans to the traditional plans.The Economic Growth and Tax Relief Reconciliation Act of 2001 started the 401(k) plans. They are often referred to as hybrids, meaning they are a cross between the traditional 401(k) plan and the Roth IRA. A Roth 401(k) is an option under the traditional 401(k) plan. So a plan cannot exist with only a Roth 401(k), plans must offer both pre- and after tax contribution options. An after tax contribution is made by designating a portion of your compensation as a Roth 401(k) contribution. You must know that this designation is irrevocable, you will not be able to reassign a Roth 401(k) contribution to have it later treated as a conventional pre-tax contribution.Roth 401(k) contributions will not reduce your W-2 income. The amount of the contribution will be included in your income and be reported on your W-2 as taxable wages and compensation. The advantage is that earnings can then build up tax free.Traditional 401(k)s and Roth […]

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