Contribution limit includes funds in both 401(k) types



I am going to be able to use the new Roth 401(k) for the first time. If I put a maximum contribution of $15,000 into a 401(k) plan this year, can I also put another $15,000 into a Roth 401(k)? Or is there another limit on Roth 401(k)'s?

- B.D., Rocky Hill, Conn.

You are fortunate to have access to this option in your company's 401(k) plan. Few employers are offering it yet.

If you use a Roth 401(k), it will merge the best of two retirement savings options: the ease of using a 401(k) at work, plus a benefit people typically have received only in Roth IRAs - the right to build up savings that won't be taxed when you use them for retirement after age 59 1/2 .

That's a fabulous deal because you will have certainty when you are retired and living on a fixed income.

Of course, to get this deal later in life, you give up the upfront tax break that you have come to expect from a traditional 401(k). When you contribute money to a Roth 401(k), you won't be able to reduce your income or taxes during the year you make your contributions at work.

The federal government wants to make sure you don't shield too much money from taxes by pouring it into a 401(k) of any kind. So for this year, you can put a total of $15,000 into any 401(k) plan. It doesn't matter whether you select a traditional 401(k) option, the new Roth 401(k) option or a combination of both.

That's unless you are 50 or older. Then, Uncle Sam wants you to catch up for all the years when you weren't saving enough. You can contribute an additional $5,000, for a total contribution of $20,000 this year, to your retirement plan at work.

I have a predicament with a broker that parallels the points you recently made about brokers masquerading as financial planners. In my case, I am experiencing a substantial paper loss today for recommendations that the broker appears to have made for self-serving reasons. What recourse do people have when they feel they've been "counseled" unjustly?

- R.P., Sykesville, Md.

When you first went to a broker, you probably signed a paper stating that if you ever thought you'd been treated unjustly, you would resolve it through official arbitration.

This is standard procedure, typically a requirement before a broker will touch your money. It insulates the industry from court cases.

Within academic and legal circles, there's a debate about whether individuals are well-served by arbitration. Only 43 percent of those who went through securities arbitration cases last year recovered any money, according to the NASD, the industry policing group that facilitates most cases.

Since that's the option available, however, here's how Robert Banks, a Portland, Ore., attorney and president of the Public Investors Arbitration Bar Association, suggests you proceed: Write a letter to the NASD, explaining what happened, how much money you lost and that you would like it resolved.

Once you've sent your complaint to the NASD, you can have a hearing before a three-person panel if you have lost more than $25,000. If it's less than that, a single arbitrator reviews your case in writing.

You also have the option of going to a mediator. This process is based less on technical legal issues and more on finding a compromise. Most people who go through the mediation process recover some money, said Jill Gross, director of the Pace Investor Rights Project at Pace Law School.

Messages for Gail MarksJarvis also can be left at 312-222-4264.

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