When it comes to planning for retirement, most employees utilize the 401K plan offered by their employer for achieving the retirement savings goals. But what many may not know is that there is a brand new retirement plan on the market that offers a unique blend of benefits of a Roth IRA with the features of a traditional 401K plan or an a gold IRA. While these plans are currently not offered by all employers, here are a few benefits you should keep in mind should your employer consider offering this unique retirement investment option to you.
Investors, who previously were unable to contribute to a Roth IRA due to their high income, can contribute to the Roth 401K plan. With the standard Roth IRA, participants could no longer contribute to the plan if their salary fell in between $112,000 and 127,000 for single filers, and $173,000 and $183,000 for joint filers. With the Roth 401K these restrictions have been lifted allowing investors in all earnings brackets to save for retirement. It is important to note that there are still limits of how much an individual can contribute in a given tax year. Those under the age of 50 can contribute a maximum of $17,000 a year, while those over 50 can contribute $23,000, allowing participants to save more towards retirement in a particular calendar year than they otherwise would have been able to with a standard Roth IRA. If you’re new to IRA, check this site for beginners.
Another benefit of the Roth 401K is that the funds you contribute to the plan are after tax dollars, so the funds grow tax free for as long as you have the plan. Unlike a traditional 401K that utilizes pre-tax dollars to fund the account, the funds in a Roth 401K have already had the taxes paid on them allowing the participant to withdraw the funds tax free once they hit the minimum withdrawal age of 59 and a half. Participants also have to have owned the account for a minimum of five years before any tax free withdrawals can be made. If you want to know more, check this valuable information on the main page.
Lastly, a Roth 401K does not require plan participants to start taking mandatory withdrawals once they hit a certain age. With a traditional 401K plan, participants are required to start taking the minimum withdrawal amount from the plan once they turn 70 and a half. If they choose to not take the required distributions the plan then charges a 50% penalty on the minimum distribution amount. A Roth 401K eliminates all these mandatory withdrawals, and gives the participant the ability to leave the money in the plan for as long as they would like before they start taking withdrawals. Allowing the money to continue growing until the time comes that the participant needs to use to funds to supplement their income in retirement.
These are just a few of the benefits of a Roth 401K over a traditional investment option. With no mandatory withdrawal requirements, and a higher maximum yearly contribution, this investment option may just be able to help you achieve your goals of saving for retirement quicker than you ever thought was possible.