The Roth is Not Right for Everyone

I run a small bakery and employ sales people who get paid through sales commissions at Christmas time. I am not sure a Roth is the most beneficial plan for them.- Lorrie Gillyard from Pembroke Pines, Florida.

You are perfectly right, Lorrie. The Roth is generally not a good option for people who earn high incomes on a temporary basis. The earnings of your sales staff will be higher during the Christmas season but much lower during the other months of the year. If they choose a Roth 401K, they have to pay taxes before the contribution is deducted from the paycheck. That is, they contribute with taxed dollars. If their enhanced earnings puts them in a high tax bracket, the whole purpose of saving with a retirement benefit plan is laid waste.

Remember that you can only offer a Roth plan in addition to your regular 401K. If you do add this option, you can simply advise your sales staff to avoid choosing it. The Roth option can still be open to other employees whose income does not fluctuate seasonally. For a detailed comparative analysis of Roths and traditional 401Ks, you can take a look at http://smallemployer401k.com. You will also find a comprehensive software package offered onsite that can make your 401k/ Roth 401k plan administration a breeze.

Choosing a DIY 401K suite like this one also lets your employees get a greater degree of control over their retirement planning funds. This boosts their confidence in the plan and encourages them to participate to the best of their financial capacity.

About Elliot Earl, Director, Pension Trade Association
Director, Pension Trade Association Founded in 1982, the Pension Trade Association [California Domestic Nonprofit Corporation #C1629080] is dedicated to helping workers save for their retirement through expanded coverage of 401k -type defined contribution pension plans.

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