I’m very lucky to have a Roth 401k retirement plan through work. In addition to the Roth IRA maximum contribution of $5,000 in 2010, I’m also allowed to make a contribution of $16,500 to my Roth 401(k). Most people don’t have that opportunity and I think there’s a problem with the system.
Why should retirement plans be dictated by work? It doesn’t seem fair that I am able to contribute more post-tax (which is great if you’re young and not making that much money) than my friend who works for Starbucks. Our employers don’t dictate how much we can contribute to our Roth IRA plans, so why should they have such a say in our Roth 401(k) plans? Why not let everyone contribute to flexible savings accounts or a health savings accounts?
I understand that with certain jobs, there are perks. Some people get discounts, some get profit-sharing, and some get a nice healthy 401(k) match. That’s amazing and I’m jealous of them, but I understand that they are sponsored by the company. So why should companies get to dictate how much I contribute to certain types of accounts?
Is the Roth 401(k) really a perk? Some companies feel that the administrative burden outweighs the benefits, but for employees, many would prefer to contribute their post-tax dollars to their retirement account instead of being forced to contribute pre-tax money.
Why not enact a law that makes it mandatory to give employees the option to set up a Roth 401(k) if the company already allows employees to contribute to a traditional 401(k) plan? I can’t imagine the administrative fees for Roth 401(k) plans are higher than traditional 401(k) plans. Under my proposal, people would be able to do what’s best for their situation and companies wouldn’t be able to dictate how much employees can contribute pre-tax and post-tax.
There are always fees for employers, but I think this one is worthwhile. Why should they choose to only allow traditional retirement accounts and not allow for the Roth versions? Not all employees are in the same situation, and they shouldn’t be treated like they are. As new changes are made (allowing Roth 401(k)s in the first place), changes need to be made in workplace policies as well.
Readers, do you have the option to contribute to a Roth 401(k)? If you could, would you take advantage of another $16,500 in Roth contributions?