How do I enter a Roth 401k into the RetirementView software? We have one of these retirement plans at work and I want to know how to model that in the retirement program.
Good question. A Roth 401k is like a 401k except you fund it with after tax dollars. Thus, you do not get any tax deduction for your contributions. When you reach retirement, though, you can withdraw from that account without owing any taxes on it.
To model this in the program, you simply use the Tax Free investments bucket to model both your balance and your contributions. Since the Retirement View program does not model the working years, it does not model any tax deductions for your Roth 401k contributions. Thus we don't try to model that part. The Tax Free bucket accumulates and grows Tax Free, and also the distributions are tax free.
In addition, a Roth 401k is not subject to Required Minimum Distributions (RMDs).
So again, using the Tax Free investments bucket is the easiest way to model that in our RetirementView software.