After discussion, Plan trustees voted to add a Roth 401(k) piece to the TAG Plan. This will mean that participants will have the option to contribute wages into a Roth account. Unlike traditional 401(k) accounts, employees will pay taxes on Roth contributions, after which those contributions will be free of taxes evermore.
Not all studios will necessarily participate in the TAG Roth 401(k), but we're hopeful that most of them will. (Roth 401(k)s came into existence in 2006 and have been rolling out slowly since then. Today over half the 401(k) Plans in the country own a Roth component.)
You'll find answers to various questions regarding Roth 401(k)s at this handy government website. A number of people have wanted this option for some time; we're happy that we'll soon be able to provide this new option.
From Vanguard:
-- An important benefit of the Roth 401(k) is the strategy known as "tax diversification".
-- Just as investors hedge the risks of stocks by holding bonds, so participants can hedge the risk of uncertain future tax rates by holding both Roth and pre-tax savings.
-- While this strategy can be attractive to high earners, it may also be useful for participants at any income level who are on track for replacing a high percentage of their income.
-- The Roth 401(k) may also make sense for participants saving at the maximum and for participants paying a low rate o tax today.
-- A second benefit of the Roth 401(k) is the ability to increase the effective value of retirement savings by pre-paying retirement taxes today.
Adoption Statistics
-- 52% of eligible Vanguard plans have elevated Roth 401(k).
-- Average participant adoption by plan is 13%.
The TAG Roth 401(k) will be kicking in during the first half of 2015.
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1 comments:
For those interested, The Finance Buff has a good essay on who might benefit the most from a Roth 401(k):
The Case Against Roth 401(k)
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