Roth 401k?

[cute fuzzy bunny]

Without wallowing through the IRS doublespeak, and in the absence of really easy to find answers to the question via google...anyone know the answer to these two q's?

- My wifes employer does not offer a roth 401k. Can we start one with some 3rd party? Any suggestions?

- If my wife who has the earned income is not participating in a roth 401k, can I open one and contribute to it using similar spousal rules as the regular Roth?

 

[azanon]

- My wifes employer does not offer a roth 401k. Can we start one with some 3rd party? Any suggestions?

You can have a Roth IRA for her from any company you want, 4K/year limit for each of you (8K total) for 2006. You can have as many Roths as you want, as long as you dont contribute more than 4K for each of you in the sum total of your Roth's + traditionals.

- If my wife who has the earned income is not participating in a roth 401k, can I open one and contribute to it using similar spousal rules as the regular Roth?

Oh, I was wondering why you were calling it a 401K roth. .... I believe if her company doesnt offer a 401(k), you cant just go and create your own. She'll just get a regular Roth then, 4K limit for this year, only.

 

[Texas Proud]

Azanon,

I think you missed the question. He was asking about the new Roth 401(k), not the old Roth IRA.

From what I have read, not many companies have signed up because it is set to expire in 2010 or so... why do a lot of work that you will then have to account for many decades for only 4 years of investments...

I work for one of the 'big banks' and we are trying to get others to offer it so we can handle the money... but the bank does not offer it to it's own employees.

I will throw in another question... when does it make sense to invest in the ROTH 401 instead of the regular 401? Save taxes now vs in the future? Anybody know where this has been discussed?

 

[bamsphd]

- My wifes employer does not offer a roth 401k.  Can we start one with some 3rd party?  Any suggestions?

Change employers to a 3rd party that offers the Roth 401k. 

- If my wife who has the earned income is not participating in a roth 401k, can I open one and contribute to it using similar spousal rules as the regular Roth? 

Nope. 

- I will throw in another question... when does it make sense to invest in the ROTH 401 instead of the regular 401?  Save taxes now vs in the future?  Anybody know where this has been discussed?

I believe the analysis is equivalent to the Roth/Traditional IRA analysis.

 

[HnE]

http://early-retirement.org/forums/index.php?topic=4713.0

Future tax rates are unknown, so it is a difficult question to answer. 

 

[cute fuzzy bunny]

Texas Proud...the 2010 limit is very widely expected to be extended. Its a nice tool for both the very rich who can put a lot of money to work tax free and also for the not so rich who arent getting nicked too hard (under 15%) and can use an after tax vehicle like this to quickly squirrel away money.

 

[azanon]

I think you missed the question.  He was asking about the new Roth 401(k), not the old Roth IRA.

I'm aware that he's talking about the new 401(k) Roth.  His wife will not be able to use it if his company doesn't offer it to her specifically, as i said initially.   

You cant just go out and get your own "401(k)" of any type, unless maybe if you're a small business owner? Now with small business owners, i dont know anything about that and savings options there.  But he said his wife was employeed by someone.

when does it make sense to invest in the ROTH 401 instead of the regular 401?  Save taxes now vs in the future?  Anybody know where this has been discussed?

Every since the Roth came out, Roth vs Traditional has been discussed extensively.   The exact same variables will come into play with a regular 401(k) (which functions like a traditional IRA) and a Roth401(K) (which will function like a Roth).

 

[Martha]

Start a business. Open a solo 401k with a ROTH option. Make just enough money to contribute it all to the ROTH 401k. There you go.

 

[cute fuzzy bunny]

Ick.

 

[Sheryl]

I decided not to start up the Roth 401(k) for our company this year. It was just more paperwork than I wanted to face right now. I am the only one in the firm who even has a clue what it is or why we would want it, and probably the only one who would contribute to it. And I hope to be gone from there before I could put much in anyway.

Here's a funny... (digression, sorry): I admister the regular 401 so I see what everyone puts in. The other two senior partners close to retirement have actually contributed less than the 24 year old youngsters! Scary!!!

 

[cute fuzzy bunny]

That means the two of them intend to steal all the 401k money and run away together...

 

[sgeeeee]

I decided not to start up the Roth 401(k) for our company this year.  It was just more paperwork than I wanted to face right now.   . . 

This is the problem I've heard is the big stumbling block. There is apparently no incentive for companies to offer Roth 401(k)s. It just represents more accounts to manage without any incentive.

I also wonder if if makes sense for a lot of workers. Ideally, you want to contribute to a traditional tax deferred account when you are making money and in a high tax bracket, then withdraw from a Roth when you have limited income and are in a lower tax bracket. This suggests a strategy of contributin to a traditional, then converting in early retirement, and withdrawing from the Roth later on. But I'm sure there are circumstances where it would be advantageous to go straight to Roth -- especially if you believe tax rates are going to go up dramatically.

 

[retire@40]

Here's a funny... (digression, sorry):  I admister the regular 401 so I see what everyone puts in.    The other two senior partners close to retirement have actually contributed less than the 24 year old youngsters!   Scary!!! 

I don't know their financial situtation, but it may actually make sense for those senior partners not to contribute to a 401(k).

 

[retire@40]

Ideally, you want to contribute to a traditional tax deferred account when you are making money and in a high tax bracket, then withdraw from a Roth when you have limited income and are in a lower tax bracket.

I don't get why ideally it makes sense to withdraw from a Roth when you are in a lower tax bracket?

 

[cute fuzzy bunny]

Because if you withdraw from a regular IRA, it will increase your taxable income and your tax basis.

I know a good $400 tax guy you can talk to if you have any other questions

 

[Sheryl]

That means the two of them intend to steal all the 401k money and run away together...

They wouldn't have a clue how. Any financial discussion other than their bonuses makes their eyes glaze over. Besides they're not especially fond of each other.

Now me, on the other hand.... oh, never mind, 30% of the entire 401 is mine anyway.

 

[Sheryl]

I don't know their financial situtation, but it may actually make sense for those senior partners not to contribute to a 401(k).

Possibly. They are in their early 50's. One invests in real estate instead, and he thinks that's the better use of his $. He's more of a risk taker than I. The other is just trying to get two kids thru college before he worries about retirement... I'm the conservative money horder of the bunch.