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Weigh the tax benefits of new Roth 401(k)s

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in Small Business Tax,Small Business Tax Deduction Strategies

Here’s the ultimate question for retirement-savers: Which type of plan is better— the traditional 401(k) plan or the new Roth 401(k) version? This special report aims to answer that question, but first here’s a primer on the two plans:

Comparing Roth and traditional 401(k)s

With a traditional 401(k) plan, you can make contributions with pre-tax dollars, usually in the form of payroll deductions. The dollars in your account are invested and can accumulate on a tax-deferred basis. When you begin taking withdrawals from the plan—typically at retirement— you’re taxed at ordinary income rates on the full amount of the payout.

In contrast, you don’t receive any upfront tax benefits with a Roth 401(k), but you come out ahead tax-wise on the back-end.

With a Roth 401(k), your salary deferrals are made on an after-tax basis, so there are no immediate tax savings for employee contributions. As with a regular 401(k), the contributions ...(register to read more)

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