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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Roth 401(k) "Conversion"

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If in doubt, please send a new question or ask for an update.

Q: I want to convert my business 401(k) plan to a Roth 401(k). What is the best way to do this?

A: Actually, this is not a "conversion" but rather an investing option that can be added to an existing 401(k) plan. In other words, it is not possible to offer the "after-tax" Roth 401(k) plan without the traditional "before-tax" 401(k) investment features. Theoretically, the process is simple: first adapt an amended plan documents, distribute them to employees and then open a new investment account and direct future contributions into it. But due to the slow pace at which most retirement plan administrators are making these new services available, you will probably have to wait awhile longer. We are not aware of any prominent 401(k) administrators who are offering the Roth 410(k) as of today (1/30/06). This will change in the near future but the large majority of 401(k) plan participants will stick with the traditional pre-tax type of 401(k) plan. If you absolutely need to do this now, will help with the plan amendments, but I strongly discourage it at this time. It will be expensive, the usual professional assurances are not available and the Roth investment accounts must be "designated IRAs". If you wait awhile, it will become a commonplace option at all major 401(k) providers.


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