I'm in my 50s. Should I still participate in my company's Roth 401(k)?
Participating in an employer-sponsored Roth 401(k) program is an excellent way to plan for retirement at any age. The longer you participate, the greater your retirement savings once you are finally ready to use them. Because contributions to designated Roth accounts are made with post-tax funds, your money can be withdrawn tax-free after you retire. This can be an especially helpful feature for those who may be in a higher tax bracket at retirement than when they were working.
While there are limits to the amount employees may contribute to their Roth 401(k) plans, these limits are revised each year to accommodate for inflation. Over the course of a career, a person can easily accumulate a nice nest egg. For the 2015 calendar year, the contribution limit for all 401(k) accounts is $18,000. However, this limit applies to the aggregate of all contributions to traditional accounts and Roth accounts.
In addition, many employers provide programs that match employee contributions up to a certain amount. However, any matched funds contributed by the employer are directed to a traditional 401(k) rather than to the designated Roth account. For example, if your employer provides a 4% matching program and you contribute $100 of each paycheck to your Roth 401(k), the company contributes an additional $4 each pay period to your traditional 401(k).
One of the benefits of contributing to a 401(k) or IRA in your 50s is that the limit for allowable contributions is raised. The IRS provides for increased contributions to enable employees who are nearing retirement age to bulk up their accounts during their final earning years. In 2015, the IRS allows an additional annual contribution of $6,000 for those over the age of 50. This means people nearing retirement age are eligible to contribute up to $24,000 annually to traditional or Roth 401(k) plans.