The Frugal Fiduciary Small Business 401(k) Blog
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Happy Holidays from the Frugal Fiduciary! As 2017 comes to a close, we looked back through this year’s blogs to find the most read.
In a 2016 401k plan design study of 2,767 small businesses, we found 66% permit participants to make after-tax Roth deferrals to their personal account. I think it’s safe to assume the high adoption rate of this 401k plan feature is due to participant demand.
Ever hear of voluntary 401k contributions? If you are like most people, probably not. They are after-tax employee contributions like Roth deferrals, but subject to different ERISA rules. Voluntary contributions have been around decades longer than Roth deferrals, but are less popular – mostly because their earnings can’t be withdrawn tax-free at retirement like Roth deferrals.
The Roth 401k concept is outstanding – it provides an excellent way to build long-term wealth and may provide outstanding tax benefits for those positioned to make the most of its advantages. The problem is that very few plan participants use it, let alone understand it.