Roth 401K for Owner Only Businesses

I run a fast growing owner only business in Salisbury, Maryland. Should I set up a traditional 401K or have a Roth option added to it?- Mathew Haskew- Freelance decorator.

The Roth 401K gives you the ability to arrange for tax free income in your retired years. This option is especially beneficial to people like you who run an owner only business. That is because this 401K option lets you stretch your assets and reduce your tax payable.

Revisions to the original law have made it possible for you to make higher annual contributions to this plan. When you compare it with a Roth IRA, the Roth 401K still wins hands down in this area. You can even move from an existing traditional 401K plan where contributions are made from pre- tax dollars to a Roth where you pay in taxed dollars so that future withdrawals are tax free.

The high contribution limits and the fact that the funds grow tax free combine to make this plan very attractive for business owners like you who are likely to grow in terms of earnings in future years. Look at it this way, right now you may fall within a lower tax bracket and you pay little by way of tax before you make contributions to your Roth 401K. Towards the end of your career, your business may have grown multiple times, moving you up the tax ladder to the highest tax bracket possible. Rather than ending up paying tax at those higher rates at withdrawal time, it is best for you to pay tax right now to ensure tax free retired income.

Choose an easy to use package like to set up and manage your 401K so that you can easily and quickly allocate the plan assets in line with your changing needs as your business grows. This way you can also reallocate assets to tax advantaged investments to give you the best savings as your business grows.

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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