|Wealth Building Information|
Super-charge Your Dream of Retiring Rich with the Roth 401K!
This retirement account is so new and unique that you may not have heard of it. For additional reasons, I describe in my home study course, corporate insiders may not want to offer it to corporate employees. This is because some executives only consider their employees canon fodder.
The Roth 401(k) was created when the Economic Growth and Tax Relief Reconciliation Act of 2001 was passed. There is a provision in the law that allows employers to offer their employees the opportunity to make Roth 401(k) deferrals. Nobody paid much attention, since the new provisions applied only to tax years beginning after 2005, but now 2006 is almost here, and people are waking up.
Deductible IRAs and regular 401(k) plans work well for those taxpayers who expect their marginal tax rate to decrease during retirement because they will be making less money. This means that you're waiting until you retire to pay taxes on dollars you make today at a higher marginal tax rates. You pay on all that money during retirement when your marginal tax rate is less.
Some taxpayers who are smart investors actually expect their marginal tax rate to either remain the same or actually increase when they retire because they are a lot wealthier from their stock investments. They also want to spend and have fun since they taught their kids well how to fend for themselves. There are many investors out there that would certainly fall into this category, even if they don't know it quite yet from investing smart in the stock market as I teach in my home study course.
For those taxpayers who are going to be worth a boatload of money down the road, the Roth IRA used to be the absolute king. Like You pay taxes today when you aren't worth as much but get to take it out and go on world cruises and the like after you retire (assuming certain restrictions are met). And that's just "neater than peanut butter" for those taxpayers who expect to get whacked by the IRS on taxes when they retire. But don't forget that the nasty drawback to the Roth IRA for many people is the fact that contributions can't be made if income is above certain limitations.
For the Roth 401(k), this is longer the case. Beginning in 2006, a 401(k) plan may allow employees to designate some or all of their elective contributions as Roth contributions. Different from regular 401(k) contributions, which are excluded from the employee's taxable income, any amount designated as a Roth 401(k) contribution would be included as taxable income to the employee. But when you take cash out of your Roth 401(k) contributions at retirement it is completely free from federal tax. Also, unlike regular contributions, Roth 401(k) contributions are allowable regardless of your income level. So, if you are pulling down the big bucks this allows you to have the glorious benefits of the Roth IRA account I told before that you couldn't put money into because of your high income.
Your employer is going to kick up the administration fees but if you understand the great benefits you probably won't mind. In order to make this Roth 401(k) thing happen, the company that administers your regular 401(k) plan will have to perform additional accounting. The Roth 401(k), and the associated earnings, will have to be maintained in a separate account from your regular 401(k) monies. Additionally, the administrator will be required to separately to separate out, on a reasonable and consistent basis, gains and losses between the designated Roth contribution account and other accounts under the plan. Because of this increased accounting requirement, I guarantee that they are going to pass on these increased fees to you to administer these types of plans.
One of the drawbacks to the Roth 401(k) plan is that no employer matching contributions or plan forfeitures can be allocated to the Roth contribution account. That means that you won't get any matching and won't be able to roll over dough from your regular 401(k). If you study my course carefully you will understand why you probably won't care.
Here are some other notes relative to the new Roth 401(k) account:
? Section 403(b) Plans are eligible. While the new law specifically refers to 401(k) plans, 403(b) plans are also a go.
? Plans must be amended. Before accepting Roth contributions, 401(k) and 403(b) plans must be amended to allow for separate tracking of the Roth contributions. Again, this will be an additional expense to the employer that they will pass on to you.
? Plan changes are voluntary for the employer. There is nothing in the law that requires employers to change their 401(k) or 403(b) plans to allow for the Roth contribution. If this is the case with your employer, there is essentially nothing that you can do about it. It simply means that you will not be allowed the benefits of a Roth 401(k) with that employer. After you study my course you will understand why the executives up top may not want you to have a Roth 401(k).
? This is for a limited time only. Roth 401(k) plans are scheduled to expire at the end of 2010. Therefore, after 2010, Roth contributions could remain in the plan, but no new Roth contributions could be made after that time. Obviously, Congress could extend these provisions at some time in the future. This is likely should these plans become popular and the managing insiders let their corporations have the plan.
So it's not too soon to start hammering your corporate employer about this plan for 2006. You can see if your employer is interested in making the plan amendments. It's likely that the major corporations will be more interested in adding the Roth provision to their 401(k) plans than smaller corporations or businesses because of the cost but again it depends on where your employer's executive inside interests are aligned. You'll want to check with your employers to find out where they stand on the Roth 401(k) and how likely it might be that they will make the appropriate adoptions necessary to implement the plan.
ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., a.k.a. "The Wallet Doctor", is a successful futures trader, real estate investor, and stock investor. Dr. Brown holds a Ph.D. in finance from the University of South Carolina. His 1998 articles in Technical Analysis of Stocks and Commodities were prophetic in predicting an impending stock market crash. He has helped many people become profitable investors by teaching them to look out over many years to spot stocks that are low and primed for rise in the new bull market. His second article met with approval by Dr. Bob Shiller of Yale University. Dr. Shiller is the economist that Alan Greenspan most highly regards who coined the term "Irrational Exuberance." In 1998 he shouted to the world to "get out" of the stock market but now he is shouting to everyone that it is time to "get in!" The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing.
The 11 Best Money Saving Ideas of All Time - Part 2
At any time in history, no matter what the current state of the economy, no matter what the current trends, no matter what the unemployment rate is or where interest rates lurk, some money-saving ideas stay true.
Build Wealth From Home
As you sit in traffic, inching along between irate drivers, you think to yourself, "there must be a better way." You get to work, you endure another tirade from an incompetent boss, and you think, "there must be a better way." You work hard, you're underappreciated, underpaid, and fed up. After all this, you can barely pay the bills, and haven't taken a real vacation in years.
Creating Money, Prosperity, and Abundance Now (Part 2)
Giving and Receiving
Ben Franklin Didnt Quite Get it Right
When Ben Franklin said "a penny saved is a penny earned", he didn't quite get it right. Actually, a penny saved is worth more than a penny earned. Do you find this statement shocking? I am about to prove to you that what I'm saying is true.
Gain More Control of Your 401k - What It Can Mean to Your Future
Points to ponder as you consider what can be done to maximize your 401k returns:
Generate Savings with Smart Use of Electricity!
No matter what income level you are currently at, generating savings is always a smart move to make. So what is one area you can generate a satisfying level of savings? Change your habits and how you use electricity. Yes, do these simple steps and satisfyingly watch your electrical bills dwindle.
Self Improvement and Financial Security for the Future
Any successful person, or any anyone interested in self improvement and making a better life for themselves must be prepared to take responsibility for every aspect of their lives and their future.
Asset Diversification Is NOT Boring?And Will Make You Money
Jobless? You Stand To Be Rich!
This is a true story about a homeless man from Illinois. This man slept in alleys, park benches and wherever else he could find enough space for himself. This man used to beg for food and money. He had nothing but time to himself.
Personal Budget Programs
Do you have financial problems? Then a budget is the answer if you are tired of wondering where your income went. A budget is the answer, if you don't have savings. A budget is also the only solution to getting out of credit card debt.
An ellipsis to your success is hidden in the word prosperity. Take a letter; make a word; assign a meaning, discover a pathway to your prosperity. You might be tempted to think of this as a simple word game. Remember that to play is to use both halves of your brain.
A New Paradigm Shift In Earthly Wealth
Turn That Fixed Rate Mortgage Into A Goldmine
When you purchased your home, you most likely got a fixed interest rate mortgage with a 15 or 30 year term. These are the most popular mortgages in the industry. Even in the summer of 2004, when the interest-only or simple interest mortgage loans became popular, the average American stuck to the fixed rate. You see, the fixed rate offers security to conservative people, and the average American home buyer and home owner is a very conservative person.
Online Retirement Opportunity: Freelance Copywriting
For most of us, the idea of retiring simply on our pension is not a happy prospect.
Lesson 2 - The Commodity Of Kings!
What is "The Commodity of Kings"
Simple Tips on Saving
Simple tips on saving can very often make quite a big difference to your finances. Saving means giving up something now, so you will have more in the future. A consistent, long-term saving program can help you achieve your goals. It also can help you build a financial safety net. Experts recommend that you save from three to six months worth of living expenses for emergencies.
Why You Need To Buy and Sell Gold Coins (Part 4)
Top Investment Performance
Wealth Management, Wealth Protection, and Tax Planning
U.S. Supreme Justice Louis D. Brandeis
Offshore Strategies & Services
Offshore strategies may or may not be right for you. Moreover, there is a right way and a wrong way (legal and illegal) to execute offshore strategies. If you choose the wrong way you may wind up worse off than if you had done nothing at all.
Do You want to Live on Macaroni and Cheese when You Retire or Filet Mignon?
How Much Money Will I Need to Earn to Retire?
|home | site map|