By most accounts the single best retirement savings plan is the Roth IRA.
The main reason: Since you've already paid tax on the money going in, you don't have to pay taxes on accumulated gains when you withdraw money during retirement. And earnings limit on conversions to a Roth is set to end in 2010.
Employer-Sponsored Retirement Savings Plans
If you are over 59.5 years old and still working at your company, you can withdraw the money in your employer's 401(k) plan without penalty and place it in a Roth. Your company pension plan documentation must allow for such an "in-service' distribution (while you are still employed), and a majority of large companies permit it. "The move can potentially save you a lot in future taxes," says Laurence Kotlikoff, an economist at Boston University and head of Economic Security Planning, a financial advisory firm.
The benefits of an in-service withdrawal from a 401(k) to a Roth extend beyond income, too. For one thing, no minimum distribution is required at age 70.5 from a Roth like there is from a 401(k). And withdrawals from a Roth aren't counted in adjusted gross income, either.
Source: BUSINESSWEEK, November 2, 2009
For more on the joys and challenges of Baby Boomers, visit Ann Harrison, founder of Contemporary Retirement Coaching and creator of the Retirement Detox Program, who is hosting this week's Blogging Boomer Carnival #136.
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