There is a new retirement plan soon be available. It's called a Roth 401k. President Bush was so in his 2001 tax cuts. This is a combination of two retirement funds - a 401k and a Roth IRA. But what does it mean?
Their plan is to grow 401k money aside pre-tax profit as an investment. Your employer has pre-tax money out of control and allows you to direct the funds usually into mutual funds. 401k's have another advantage --because it pre-tax money from your check to your net pay is lowered, whereby the amount of taxes paid. When you retire, then you out of your 401k what little you need and pay the taxes on them. When you retire, your income source is gone, and so is your tax bracket. As you pull out your money from your 401k, then you will hopefully be a relatively low tax bracket and pay little attention to the returns.
Enter the Roth IRA. A Roth IRA is under-funded after-taxDollars. Put everything into this account will never be taxed again. You can open your own Roth IRA account anywhere - even at a bank. Since the money after taxes, is the same as you paid your salary and go shopping. The good news: You will be taxed only once at the front end, and then later when you remove the money, you will not owe the government any taxes.
When you combine the two, you should be in your 401k to invest with U.S. dollars after taxes, and how it grows,and go into retirement when the funds they will not be taxed. 31% of employers who have 401k plans, say they plan to add this option for their employees. The bad news - your employer does not add this as an option.
Why should not I just go open my own Roth IRA and the funds directly into a fund? Good question. The real advantage for the average worker is that the money is taken from your check, and you will not see the money. Makes it easier to invest, too. You do not haveto see how they collected the money before they deposit your check to. The No. 1 rule is to fund your 401k no matter what choices they ask you. The new Roth 401k 1st start January 2006.
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