As part of the budget legislation passed on January 1, 2013, owners of traditional 401(k) plans may now convert any amount of those funds into Roth 401(k) designations if these plans are offered by their employers. Jaime Raskulinecz, CEO of Next Generation Trust Services, LLC, which manages self-directed retirement plans, explained that this new bill will allow more employees to take advantage of tax-free earnings upon their retirement.
“Conversions to Roth 401(k) plans had previously been limited to certain funds and to plans that allowed the switches,” said Raskulinecz. “Any amount may now be transferred from existing 401(k) accounts into Roth 401(k) plans, which means more people will be able to withdraw tax-free dollars when they retire.” There are currently $5 trillion in employer-sponsored defined benefit contribution plans, with $3.5 trillion of that in 401(k)s.
In traditional 401(k) plans savings grow tax-deferred and taxes are paid on the income when the money is withdrawn. With Roth plans, investors pay taxes on the contributions up front and enjoy tax-free withdrawals later.
Raskulinecz added that in addition to dropping restrictions on the type of funds that can be converted, age limits are also eliminated; therefore, younger employees may wish to convert some of their 401(k) funds to Roth plans, and allow the money to earn tax-free interest over a longer period of time.
Next Generation Trust Service’s clients own self-directed retirement plans, in which the investors make all their own investment decisions and may invest in a broad array of nontraditional assets such as real estate, tax liens, precious metals, loans, and much more. Next Generation Trust holds the assets and manages all the transactions for its clients to ensure transactions are done securely and in full compliance with IRS regulations. Self-employed consultants, sole proprietors, and contractors may open self-directed single 401(k) plans for themselves.
“Just as we caution our clients with self-directed retirement accounts to do their due diligence and research their investments fully, we also caution employees with 401(k) plans to ask a lot of questions and make sure that converting funds to a Roth401(k) makes sense for them,” said Raskulinecz. “Individual circumstances and financial goals differ and we strongly recommend people consult their financial advisors before converting any funds.”
For more information about the various types of self-directed retirement accounts, visit the web site area "What is a Self Directed IRA". For questions about self-directed single 401(k) plans, contact Next Generation Trust call (888) 857-8058 or email Info(at)NextGenerationTrust(dot)com.
About Next Generation Trust
Next Generation Trust Services (NGTS), headquartered in Roseland, New Jersey, is a professional third-party administrator of self-directed retirement plans. NGTS provides education, administrative support, and account maintenance to individuals interested in self-directing their retirement portfolios with a wide variety of investments that are not typically found in an IRA, such as real estate, precious metals, notes and mortgages, private placements, accounts receivables, limited partnerships, hedge funds, and much more. Next Generation Trust Services serves clients globally via its website, http://www.NextGenerationTrust.com. For more information on self-directing a retirement plan, call 973-533-1880, 888-857-8058 (toll free), or e-mail Info(at)NextGenerationTrust(dot)com.