How to retire tax-free

A brand new savings tool will provide TAX FREE retirement revenue for participants that will keep Uncle Sam away out of the golden years.

The Roth 401(k), which operates under the same tax treatment as a Roth IRA that allow contributions to grow tax-free, made its debut January 1 and is available for employers to offer participants through existing retirement plans and new plans.

Argent Financial Group offers the Roth 401(k) provision to all existing plans and for all new plans. Legislation that created the Roth option makes no provision that plan providers offer the new tool to participants.

"This is one more tool to be used by employees as they save for retirement," said Ann Marie Mills, Argent Senior Vice President/Employee Benefits and Retirement Specialist.

"Pay tax now or pay tax later is the deciding factor," Mills said.

Younger employees may be in a lower tax bracket now, but would benefit greatly if they are in a higher tax bracket at retirement and take withdrawals tax free.
Mid-career employees should consider the risk that tax rates might be higher when they retire and this would shield their income from Uncle Sam.
High-income participants have the opportunity to make Roth contributions not available to them in a Roth IRA.

Also, tax-free distributions at retirement may also lessen the risk of taxability on your Social Security benefits. Those wanting to leave an inheritance can leave the funds in a Roth rollover beyond age 701/2 and pass it to beneficiaries tax free.

Once the Roth option is added to a plan, employees can designate their contributions as pre-tax or as Roth after-tax deductions. The same limits apply to both types of 401(k) contributions ($15,000 in 2006 plus $5,000 catch-up contributions for those over 50). Employer matching contributions will continue to be pre-tax contributions that are taxable upon withdrawal.

Distributions of Roth 401(k) and earnings will be tax-free if they are distributed at least five years following the first Roth contribution AND are distributed due to the participant attaining age 59 ½, becoming disabled or due to death.

For more information on the Argent's Roth 401(k) option, call Ann Marie Mills at (318) 251-5855 or (800) 375-4646. Or call the same 800 number and ask for a free Roth 401(k) brochure.

Call Ann Marie Mills at (318) 251-5800 or email her at ammmils@argentmoney.com.