Thanks to the American Taxpayer Relief Act, consumers will soon be able to switch over from a traditional 401(k) to a Roth 401(k) if they want, according to Business Insider.
During the past 10 years, tax laws didn’t allow savers who were younger than 59 1/2 to switch accounts. With the new act, the government plans to collect revenue when workers convert to a different account.
It’s a personal choice of which type of savings to use, as both traditional 401(k)s and Roth 401(k)s have good and bad aspects.
Roth’s advantages are that taxes are paid at the time the money goes in, so when the money is withdrawn it’s tax-free. If the consumer has a few decades to save, Business Insider says a Roth is the best option as far as taxes go.
If money is withdrawn before 59 1/2, there are no penalties, compared to the 10 percent penalty fees that come from dipping into a regular 401(k) early.
Roths have income requirements. Those who expect to be a lower tax bracket when retiring could fare better in a regular 401(k).
- The best Black Friday deals of 2014
- Can a cash grocery budget save you money?
- Which home improvements give the best ROI?
- 4 reasons why you shouldn't shop on Black Friday
- BLACK FRIDAY LIVE: Protests, beer and prison
- Why Utahns are some of the biggest spenders,...
- 6 steps to better budgeting
- What women can do to prepare for retirement
- Working on Thanksgiving Day? Here's why... 12
- Why Utahns are some of the biggest... 12
- Immigration reform will boost the... 8
- In our opinion: Fear, intentions can... 7
- Thanksgiving trumps Black Friday for deals 4
- What women can do to prepare for... 3
- Why Salt Lake City is one of the best... 2
- 5 ways to talk about money with your... 2