Roth 401(k)

Is a Roth 401(k) in your future?

An often overlooked way to makeup lost investments is to look into an employer Roth 401(k). Of course, the contributions an employee makes to the Roth 401(k) are on an after-tax basis; that is, you don’t receive a reduction of taxable compensation for Federal income tax purposes, but you do have the opportunity to grow income on a tax free basis.

The aggregate deferrals to both a traditional 401(k) and a Roth 401(k) cannot exceed $17,500 plus $5,500.00 in “catch up contributions” for individuals age 50 or over for 2013.

And if you establish a Roth 401(k), distributions are tax-free and penalty-free, at a later date, if you hold the Roth 401(k) for a period of at least five years. Qualified distributions aren’t included in income. Qualified distributions include distributions: 1) after the participant attains age 59 1/2, 2), at or after death (to a beneficiary or estate), or 3) due to disability.

Roth 401(k) accounts are subject to the required minimum distributions. So that when you reach age 70 1/2, you must examine the options for receiving the required minimum distribution.

As tax rules continuously change, you should consult a professional.

If you would like more information about Pennsylvania Elder Law, Business Law or Tax Law, please contact an experienced Pennsylvania Lawyer who is also a Certified Public Accountant (CPA) via email or phone us at (724) 216.6551 at our office in Greensburg, Pennsylvania.

The Iezzi Law Office serves clients in southwestern Pennsylvania, including Greensburg, Pittsburgh, Delmont, Monroeville, Murrysville, Latrobe, Irwin, Uniontown, Connellsville, Indiana, Somerset, and other towns located in Westmoreland County, Allegheny County, Fayette County, Indiana County, and Somerset County.

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To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.