Making Roth work for millennials

Reforming Roth provisions may be key to improving savings rates for millennials.

By Greg Carpenter | November 24, 2014 at 04:31 AM

The Roth 401(k) concept is outstanding – it provides an excellent way to build long-term wealth and may provide outstanding tax benefits for those positioned to make the most of its advantages. The problem is that very few plan participants use it, let alone understand it.

We also have a savings deficit for millennial employees. As a group, millennials are not saving enough for retirement, yet they are the group (young, lower-wage, lower current tax bracket) best-situated to take advantage of Roth accounts.

Appropriately utilized, Roth can create the strongest incentives – save a generous employer match – to incent employees to save and build wealth.  I believe we have reached a political consensus in the country that all employees are at least partially responsible for saving for retirement. Short of forced enrollment or higher taxes, we can only incent workers to save. The Roth concept – slightly tweaked – can be reimagined as a powerful tool to radically increase contributions and wealth. In addition, these changes can be targeted to assist and incent Millennials to start saving early and participate for the long term.

Two issues are holding back greater use of Roth accounts within small business retirement plans:

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