Tax Implications

Money is deposited as "tax deferred" and then taxed at normal income bracket for distributions

Income is post tax money and no taxes have to be paid under normal distributions

Contributed money is at first post tax money. However, contributions are tax deductible which reduce your tax basis for that tax year. Then, distributions are taxed at the normal income for distributions

Income is post tax money and no taxes have to paid under normal distributions

Income Limits

Generally none, but somewhat complicated due to HCE (highly compensated employees) rules

Generally none, but somewhat complicated due to HCE (highly compensated employees) rules

Based upon MAGI; Single, HoH, MFS: full contrib to $52k, partial to $62k; MFJ; QW: full contrib to $83k, partial to $103k; can't contribute more than you make in that year

Based upon MAGI; Single: full contrib up to $99k, partial contrib to $114k; Married: full contrib up to $156k, partial contrib to $166k; can't contribute more than you make in that year

Contribution Limits

$15.5k/yr for under 50, $20.5k/yr for 50 and over in 2007; limits are a total of trad 401k and Roth 401k contributions. Employee and employer combined contributions must be lesser of 100% of employee's salary or $45k.

$15.5k/yr for under 50, $20.5k/yr for 50 and over in 2007; limits are a total of trad 401k and Roth 401k contributions. Employee and employer combined contributions must be lesser of 100% of employee's salary or $45k.

$4k/yr for age 49 or below; $5k/yr for age 50 or above in 2007; limits are total for trad IRA and Roth IRA contributions combined

$4k/yr for age 49 or below; $5k/yr for age 50 or above in 2007; limits are total for trad IRA and Roth IRA contributions combined

Employer or Individua

Employer sets up this plan

Employer sets up this plan

Individual sets up this plan

Individual sets up this plan

Matching Contributions

Matching contributions available from employers.

Matching contributions available through employers, but they must sit in a pretax account

No matching contributions available

No matching contributions available

Forced Distributions

Must start withdrawing funds at age 70 1/2 unless employee is still employed. Penalty is 50% of minimum distribution.

Must start withdrawing funds at age 70 1/2 unless employee is still employed. Penalty is 50% of minimum distribution.

Must start withdrawing funds at age 70 1/2 unless employee is still employed. Penalty is 50% of minimum distribution.

None.

Contribution Withdrawal

No, but loans from this plan are available depending upon employer's plan

Yes, tax and penalty free, as long as the account has been open for more than 5 years

No

At any point, the owner may withdraw the total contributed into the IRA

Early Withdrawal

10% penalty plus taxes including withdrawal for hardships

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10% penalty plus taxes for distributions before age 59 1/2 with exceptions

Early withdrawal that is more than contributions plus seasoned conversions are subject to normal income taxes and 10% penalty if not qualified distributions

Home Down Payment

Purchase of primary residence and avoidance of foreclosure or eviction of primary residence is subject to 10% penalty.

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Can withdraw up to $10k for a first time home purchase downpayment with stipulations

Up to $10k can be used for primary home downpayment. Must not have owned a home in previous 24 months. House must be owned by IRA owner or direct linear ancestors or descendents.

Education Expenses

Payment of secondary eductional expenses in last 12 months for employee, spouse, or dependents subject to 10% penalty

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Can withdraw for qualified education expenses of owner, children, and grandchildren

Can withdraw for qualified education expenses of owner, children, and grandchildren

Medical Expenses

Medical expenses not covered by insurance for employee, spouse, or dependents subject to 10% penalty

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Can withdraw for qualified unreimbursed medical expenses that are more than 7.5% of AGI; medical insurance during period of unemployment; during disability

Can withdraw for qualified unreimbursed medical expenses that are more than 7.5% of AGI; medical insurance during period of unemployment; during disability

Conversions

Upon termination of employment, can be rolled to IRA or Roth IRA. When rolled to a Roth IRA taxes need to be paid during the year of the conversion.

Cannot be converted to a trad 401k, but upon termination of employment, can be rolled into Roth IRA

Can be converted to a Roth IRA. Taxes need to be paid during the year of the conversion. Other limitations though.

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Changing Institutions

Can roll over to another employer's 401k plan or to an (traditional?) IRA at an indepenent institution.

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Funds can be either transferred to another institution or they can be sent to the owner of the trad IRA who has 60 days to put the money in another institution in a rollover contribution to another traditional IRA[1]

Funds can be either transferred to another institution or they can be sent to the owner of the Roth IRA who has 60 days to put the money in another institution in a rollover contribution to another Roth IRA[1]

Beneficiaries

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When owner dies, spouse is sole beneficiary and can roll both accounts into one Roth IRA account.

Other

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Seldom offered by employers since it was implemented in early 2006

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