A "Roth" retirement account is the greatest savings vehicle ever invented, because all investment profits (earnings) in a Roth account are totally income-tax-free (see exceptions at the end of this article). The only problem is, how do you get money into a Roth account without undue tax cost? This month and next month, two case studies will illustrate little-known ways that some workers can maximize their Roth contributions to a 401(k) at a low (or no) tax cost.
Meet the Code's Contribution Limits
These contribution stories arise out of the tax code's two sets of limits on contributions to a 401(k) plan. I gratefully acknowledge the assistance of Denise Appleby of Appleby Retirement Consulting for helping me sort out these tricky limits.