401a

[WRBT]

The state of Arizona is planning to offer a 401a plan next year.

Right now the wife maxes out her 457 (from her employer a city) and does pension contributions thru state, but we still stash away about 4500/month post tax. Apparently this 401a allows her to put away up to 44k pretax, which sounds like a pretty solid deal for further reducing our taxable income. We're very likely in the "lower tax bracket post retirement" group so my first impulse is to make sure we've got enough to fund our Roths and pile the rest into this 401a.

They didn't have much more information and I did some cursory googling but was hoping some of the wise ones that frequent this forum have more info, insight, or warnings on 401as. I've never heard of one before reading the state retirement newsletter.

 

[Martha]

I don't know much about 401a plans, but if I recall correctly although employers can put a bunch of money in for their employees pretax (up to $45,000 in 2007), there are circumstances where any employee contributions if allowed are post tax, not pre-tax. It may be that the employer has the option to decide what kind of employee contributions to allow. I do know that there are at least some of these plans which only allow post tax employee contributions.


I think the 401a plans are very flexible from an employer standpoint so it would also be nice to know how your employer intends on calculating the amount of money it will contribute to the plan on your wife's behalf.

EDIT: Also, these can be either defined benefit or defined contribution plans, so be sure you know what you are getting.

 

[WRBT]

Yeah that's what caused googling to be of little help, it seems a 401a can be all sorts of things.

The blurb in the newsletter says it's defined contribution, and it blathers on about a three pronged retirement solution of the 401a, the pension, and ss. From what I can gather they aren't contributing jack, it's all employee.

Perhaps I should wait until more specific literature comes out.