Posted on 08 May 2012
By Mark Miller
Roth workplace accounts, which have grown more popular in recent years, are about to get a shot in the arm from Uncle Sam. This week the federal government started rolling out a Roth option to 3.3 million employees who participate in its main retirement program.
Unlike tax-deferred retirement accounts, Roth contributions are made with after-tax dollars. Contributions and investment returns can be withdrawn tax-free as long as the account holder is over age 59-1/2 and the account has been established for at least five years.
Workplace Roth accounts offer several compelling advantages over standard Roth IRAs, especially for high-income workers and “power savers” seeking to maximize their contributions.
In the private sector, 39 percent of retirement plans offer a Roth savings option, with 29 percent more likely to add it this year, according to a survey of more than 500 employers by consulting firm Aon Hewitt. But the sign-up rate at companies that offer the option has been slow.