Take this key step to strengthen your retirement savings in 2019

Personal Finance

As of the end of 2017, more than 2 in 3 retirement plans at Vanguard offered a Roth 401(k) option, and 12 percent of participants with these plans chose to contribute to them.

While a traditional 401(k) allows you to save money on a pretax basis, you’re using after-tax dollars to contribute to a Roth 401(k). At employers that offer both, the most you can contribute combined is $18,500, plus the additional $6,000 if over 50.

Direct contributions to Roth IRAs are subject to income limits — you cannot contribute directly to the account if your modified adjusted gross income exceeds $135,000 if single or $199,000 if married.

However, your Roth 401(k) doesn’t have any income limits.

“For the people who understand it, the in-plan Roth conversion is a nice tax-planning feature,” said Edwards.

You may also be able to convert some of the money in your traditional 401(k) to your Roth 401(k), if it’s available at your employer.

Don’t forget: You must be ready to pay income taxes on the amount converted.

This is known as an “in-plan Roth rollover” or “in-plan Roth conversion.”

Today’s income tax rates may also make Roth conversions attractive; the rates have been trimmed due to the Tax Cuts and Jobs Act.

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