Are you concerned about your money? The news is filled with anguish and pain associated with failed 401(k) plans hurting working adults in the US. Our state of economy requires maintaining control over your portfolio to ensure the stock hits are not going to harm your retirement dreams. Now, is the time to connect with your financial planner even more in regards to transferring your 401(k) into a Roth 401(k) plan through its sponsored program. Although this is a time of tightening belts, the option should be available through your employer. The passing of the Pension Protection Act of 2006 made this possible for retirement planners who have suffered a great loss at the hands of an economic downturn.

What is the difference?

Traditional 401(k) plans are sponsored, qualified plans for retirement savings offered through an employer. In this common investment vehicle, investors are given an option of deferring their cash into mutual funds, stocks, or bonds offered through the management company. Traditional 401(k) plans were the answers to many hard-working Americans in the early 1940s interested in retirement planning by working with an employer for 30 plus years. Now, things have changed.

Traditionally, an employer may offer to match contributions an employee makes up to its limit per year, but with the change of the economy, this is not happening as it did before. The change has driven the innovative investment vehicle called the Roth 401(k) plan. The Roth 401(k) allows after-tax contributions in which you save more money that will never be taxed after it is withdrawn. Traditional 401(k) plans are subject to tax deductions during the investment periods, but are taxed upon withdrawal or payouts begin.

Which is best in this economy?

The decision is based on the investor. An employer may not offer the Roth 401(k) option because it is an expensive proposition in a tight economy. The availability is limited to companies that may offer both, but the drawback is you will only earn matched contributions to the Traditional 401(k) plan instead of both plans. You also have to get contributions taxed today instead of later like Traditional 401(k) plans.

Before making a choice or converting your current 401(k) plan into a Roth, you must consider these factors: the availability of funds, contributions limits and IRS regulations, minimum distribution retirements at the age of 70.5. Investors are required to take distributions even if they do not want or need them from their plan. It is a major decision to make regarding your retirement savings.

Consult your Financial Planner

Your financial planner will be able to review the details of Roth 401(k) conversions, the affects on your portfolio, and if the risk is worth taking in the market. The news has drained the hope and optimism many investors have expected for retirement options; the Roth 401(k) was presented to help investors keep majority of their money without suffering from significant loss. If you are interested in learning more, please visit our website for details pertaining to these options in details.

Final Thoughts

For many, the losses associated with owning a Traditional 401(k) is not worth the trouble for retirement. Older adults must consider the consequences of these actions if the recession continues to drive businesses below profit levels. You also have to consider the preliminary requirements for converting a current plan into a Roth investment before retirement.

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Tags: finance, taxes, retirement, tax deductions, roth ira, income taxes, 401(k) plan, roth 401(k), tax-deferred