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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By BenefitsPRO editors | June 19, 2024

For the third year, the LUMINARIES Awards will shine a spotlight on the individuals and organizations that are impacting the benefits industry for the better. Submit a candidate before the July 3 nomination deadline!

Nominate now for BenefitsPRO's Luminaries Awards!

By Lynn Cavanaugh | June 06, 2024

Since employees generally go along with most retirement plan provisions, adding plan design features, such as auto-enrollment and auto-increase, are some of the fastest ways to help boost participation rates, says a new survey.

Retirement roadblocks: Why are many employees not participating in their 401(k)s?

By Lynn Cavanaugh | June 04, 2024

The contruction firm is being sued over the fees retirement plan participants paid after being defaulted into managed accounts, which were "essentially expensive target-date funds," according to the ERISA lawsuit

Bechtel employees file ERISA lawsuit over 401(k) plan excessive fees
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