Introducing the Roth 401(k)/403(b)

Evan was telling me recently about a new retirement account offered for 2006 in which I very much wish I could participate – the Roth 401(k) (or, in my case, it would be the Roth 403(b), although my employer does not offer it). Taxwise, it functions similarly to a Roth IRA in that the tax on the money is paid now and the growth can be withdrawn tax-free at 59 1/2 years of age. This is beneficial for people who expect to earn more at the age of retirement than they currently earn – I am an example of such a person, and I pay lower taxes now than I expect to at 60. The Roth IRA also has contribution limits of $4000 annually and $5000 if you are over 50 (this is no different than in 2005), whereas the Roth 401(k) allows up to $15,000 annually ($20,000 for those over 50). You can skim the new contribution rules for 2006 by clicking here. Happy investing.