High income? You may still be unprepared for retirement.

Have you heard of a Roth 401(k)?

You’re probably familiar with traditional 401(k) plans, and we hope you know about Roth IRAs as well. (If not, check out these 5 things you should know about Roth IRAs). But did you know there’s also a Roth 401(k)? Basically, a Roth 401(k) is a 401(k) account to which you can contribute either pre-tax dollars, like a regular 401(k), or post-tax dollars, like a Roth IRA. All your contributions grow tax-free, but your pre-tax contributions will be taxable when you withdraw them in retirement and your post-tax contributions will be tax-free. It’s technically called a “designated Roth” account, and it’s an option your employer can add to your company 401(k) plan. The same provision for a Roth option can also be added to other kinds of qualified retirement plans, such as 403(b) or 457 plans. If you own a business and sponsor a qualified retirement plan for yourself and your employees, you may want to consider adding a Roth option. And if you’re self-employed and have no employees except your spouse, you could establish a solo 401(k) plan that allows Roth contributions. So why would you need a Roth 401(k) if you already have a Roth IRA? Here are four ways

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Rolling over your traditional 401(k) to a Roth IRA

Do you have a 401(k)? Ever wondered if you could roll over that account into a Roth IRA? You might be surprised to hear that it’s possible. You can make a direct or 60-day rollover from a 401(k) plan (or other qualified plan, 403(b) plan, or governmental 457(b) plan) to a Roth IRA, as long as you meet certain requirements.* First, you must be entitled to withdraw money from your plan. If you no longer work for the employer who sponsored that 401(k), then you would be eligible to do this rollover, and in some cases you may be able to withdraw your contributions or your employer’s contributions while you’re still working (for example, once you’ve reached age 59½).  Second, your distribution must be an “eligible rollover distribution.” Distributions that cannot be rolled over include hardship withdrawals, certain periodic payments, and required minimum distributions (RMDs). Third, you must include the taxable portion of the distribution in your gross income in the year you make the rollover (“conversion”). But that’s the price you have to pay to potentially receive tax-free qualified distributions from your Roth IRA in the future. Fourth, if your distribution includes both after-tax and pre-tax dollars, you can

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3 common 401(k) mistakes employers and employees should avoid

For most people, saving in a 401(k) retirement plan is vital for their future financial health. Trying to save for retirement in a taxable account is not only challenging, but it’s nearly impossible to duplicate the same tax deferred compounding you get from a tax deferred (and often tax deductible) retirement account. Therefore, employers and their employees will want to avoid these 3 mistakes: The first mistake is not following an appropriate investment plan. Being equipped with an appropriate plan is essential to protecting yourself from acting irrationally in volatile markets. Instead of panicking and selling your portfolio when markets are down, stick to your plan and view such times as a buying opportunity. Don’t turn paper losses into real losses and consider this: if a security is down 50% it must rise 100% just to break even! Think about it in dollar terms: a stock that drops 50% from $10 to $5 ($5/$10 = 50%) must rise by $5, or 100% ($5/$5 = 100%), just to return to the original $10 purchase price.Of course, your plan needs to factor in your age and risk tolerance and be well diversified. For example: taking too much risk in volatile stocks when

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Three best practices for remitting 401(k) contributions

By Maha Ahmed Qualified Plan Financial Consultant Sponsoring a business retirement plan like a 401(k) can be a smart way to save big on taxes, maximize retirement savings, and attract and retain qualified employees. As sponsors, employers have certain responsibilities under the plan; the most important is properly managing plan contributions. Failure to comply with Department of Labor (DOL) rules may mean the employer will have to pay additional interest and earnings to plan participants. Take last year’s DOL case against a Pennsylvania-based dentist. The dentist was fined for the misuse of plan funds that were intended for the business’s 401(k) plan. According to the DOL, the employer failed to deposit employee and employer contributions into the plan in a timely manner from 2009 through 2012. A district judge ordered the defendant to repay nearly $45,000, including lost interest and earnings, to plan participants. Employers can avoid this type of litigation by following these 3 simple rules: Segregate your retirement plan assets from company assets. Never look at elective deferrals as if they are the company’s money. Elective deferrals come directly from an employee’s paycheck and are amounts they specified to go into their retirement plan. This money should never

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Top 5 mistakes employees make with 401(k)s

The results are in, and our advisors have agreed that these are the five most common mistakes employees make with their 401(k) plans: 1.       Not participating: The biggest mistake you can make is not contributing to a 401(k) if you are eligible, especially if your employer matches your contributions.  Start out with small contributions and increase them gradually, otherwise you are missing out on an effective pretax and tax-deferred investment.  The only reason not to start contributing is if you have an outstanding debt, as paying off your debt should be a priority. 2.       Not contributing enough:  Contribute enough to receive your employer’s match. Many employers will match your contribution up to a certain percentage. Otherwise, you are basically walking away from free money. For 2013, you can contribute as much as 17,500 in addition to a catch up of $5500 for those 50 or older. For example, if your employer matches you dollar-for-dollar up to 5%, and you make $100,000 annually, then you should aim for a minimum contribution of $5,000 so that you will receive a match of $5,000 from your employer. 3.       Forgetting to rollover or cashing out your 401(k) when switching jobs: In the hassle of

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