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Effective January 1st, 2006, employers now have the ability to combine the retirement options provided by traditional 401k retirement plans and Roth IRA plans into one effective plan, called simply, the Roth 401k. The Roth 401k is essentially similar to the traditional 401k and Roth IRA plans but differs in some ways as well. Below, …
1) What’s the difference between a Roth 401k and traditional 401k pre-tax deferral plan? In a traditional 401k plan, annual contributions are made with pre-tax dollars (meaning BEFORE taxes have been paid). On the other hand, a Roth 401k plan requires annual contributions to be made with AFTER-tax dollars (after taxes have been paid). For …
Starting December 30th, 2005, the US Treasury Department issued and confirmed the Roth 401k Rules for 401k retirement plan savers. These Rules come into effect starting January 3rd, 2006 and we will look indepth at some of these Roth 401k rules. Required Minimum Distribution Rules Confirmed Since Regular Roth IRAs are not subject to the …
Pre-tax contribution is the amount of deductions you make from your monthly gross wage into your 401k retirement savings account, BEFORE taxes have been deducted. By making pre-tax contributions, you are lowering your current taxable income. For example, if you earn $10,000 per month, and contribute 10% of it towards a 401k retirement savings account, …
Rather than receiving a monthly check upon retirement (annuity payments), many people think of taking out a lump sum distribution (a one time distribution) of their retirement assets. If you do decide to take out a lump sum distribution of your 401k assets, consider the Pension Protection Act of 2006 which could severely reduce the …
401k Minimum Required Distributions (MRDs) are established by the Internal Revenue Code to make sure that retirees actually withdraw their money upon retirement (and use it for their day to day expenses) as opposed to passing on this wealth to their heirs. As soon as you reach the age of 70.5, you must start withdrawing …