Just recently my employer changed our 401K to a Roth 401k.
I am trying to figure out if this allows me to accelerate my savings.
The 401k is with Fidelity. I am 54 and contribute the max to the 401k at the moment ($25,000 for 2019)
From the blurb I got from HR:
Match:
For Non-Highly Compensated Employees, will match 50% of the first 4% of pay you
contribute, up to a maximum of 2%.
Roth 401(k):
Also effective January 1, 2019, in addition to being able to make pretax contributions, you will now also be able to make Roth 401(k) contributions. The Roth 401(k) contribution option lets you contribute to the plan on an after-tax basis and make potentially tax-free withdrawals in retirement. The plan will also begin accepting rollovers of Roth 401(k), Roth 403(b), and Roth 457(b) plans.
Roth In-Plan Conversion:
This new feature will give you the option to potentially reduce future income taxes on money eligible to be withdrawn by allowing you to change some of your pretax dollars into Roth after-tax dollars. By using this feature, you can:
• Diversify your retirement assets between Roth and non-Roth accounts
• Receive potentially federally tax-free earnings and withdrawals
Contribution Limits:
You can contribute 1%–60% of your eligible pay as pretax and/or Roth 401(k) contributions, up to the annual IRS dollar limit of $19,000 for 2019. If you have reached age 50 or will reach 50 during the calendar year January 1 to December 31 and are making the maximum plan or IRS pretax and/or Roth contribution, you may contribute up to $25,000.
The confusing part for me is that the plan says the limit is $25k which I will hit at the end of the year with pre tax contributions. So where do the after-tax contributions come in?
Also how does that roll over work?
Is there any impact because I already have a Roth IRA?
HR and the plan administrators seem to have no idea how all this works. All I have been able to get out of them is that I cannot contribute more than $25k.
Does anyone else have one of these and how does this make things better for me?