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dennisaschmidt writes:

I read the Pixy article "Even More Money for Your Retirement", there is mention of an after tax 401k contribution...

"Starting in 2006, 401(k) and 403(b) plans may allow participants to make after-tax contributions to a Roth IRA-like account under separate plan-accounting procedures. These after-tax contributions and all earnings therein will not be taxed on withdrawal provided the account is open for at least five tax years and the participant is age 59 1/2 or older at the time of the distribution. "

From purely a retirement after-tax contributions perspective, does this essentially erase the contribution limit on Roth IRAs? Obviously, the investment vehicles would not be the same hence there will be different ways you are allowed to manage that money. Does this mean that in 2006 we will be able to contribute potentially 100% of our earned income into a "Roth-Like" account (if, of course, your employer offers such a plan), no matter what our salary is?!! If this is true, would there be any reasons left to contribute to a Roth IRA versus the new "Roth-Like Account?"

Great Article!


In 2006, there is an absolute dollar limit of $15K on employee contributions to a 401(k)/403(b) (the limit is $20K for those 50 and over). This absolute dollar limit will apply to Roth-style 401(k)/403(b)'s as well, i.e. the total of all your contributions to 401(k)'s (Roth plus non-Roth) cannot exceed this dollar limit. The absolute dollar limit will be indexed for inflation after 2006.

The other limits mentioned in Pixy's article


would also apply to Roth-style 401(k)/403(b)'s (such as employee contributions not exceeding 100% of compensation). But you cannot exceed the absolute dollar limit in any case.

It seems to me that if you want to make Roth-style contributions, you should first fund a Roth 401k/403b up to the point of obtaining the maximimum possible matching contribution from your employer. But beyond that point, there are some advantages (as you mention) to the Roth IRA: namely, you can choose your investment vehicle.

Besides Pixy's excellent article, a couple of other good sites for the effects of the new tax bill on IRA/401k/403b's are:
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