Roth 401K
Just got word today that my employer will be offering the option to invest in a Roth 401K through Fidelity. Unlike the traditional 401K in which you invest pretax dollars you invest after tax dollars into the Roth. Why you might ask is this a good thing you are not enjoying the tax relief of investing pretax dollars? What makes the Roth 401K attractive is there are no taxes on the gains provided you do not withdraw from the account before 59 1/2 years of age. Imagine 30-40 years of compounding interest with no taxes due at the end. That sounds almost too good to be true and I will be taking advantage of this investment option when it is made available.
Will they be considered two different retirement instruments and what effect or change, if any, will that do to the cap?
ReplyDeleteYes they are considered different, but they share the same $16500 dollar maximum annual contribution cap. There is a good article on the Roth 401k at http://www.investopedia.com/articles/retirement/05/introRoth401k.asp#axzz1lHFYSOzd
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