01-10-2019 Columns

Investing in Your Future

Roth vs. traditional 401(k): Which is right for you? For many years, employees of companies that offered 401(k) plans only faced a couple of key decisions – how much to contribute and how to allocate their dollars among the various investment options in their plan. But in recent years, a third choice has emerged: The traditional versus Roth 401(k). Which is right for you? To begin with, you need to understand the key difference between the two types of 401(k) plans. When you invest in a traditional 401(k), you put in pre-tax dollars, so the more you contribute, the lower your taxable income. Your contributions and earnings grow tax-deferred until you begin taking withdrawals, which will be taxed at your ordinary tax rate. With a Roth 401(k), the situation is essentially reversed. You contribute after-tax dollars, so you won’t lower your taxable income, but withdrawals of contributions and earnings are tax-free at age 59-1/2, as long as you’ve held the account at least five years. So, now that you’ve got the basics of the two types of 401(k) plans, which should you choose? There’s no one right answer for everyone. You essentially need to ask yourself these questions: When do you want to pay taxes? And what will your tax rate be in the future? If you’re just starting out in your career, and you’re in a relatively low income tax bracket, but you think you might be in a higher one when you retire, you might want to consider the Roth 401(k). You’ll be paying taxes now on the money you earn and contribute to your Roth account, but you’ll avoid being taxed at the higher rate when you start taking withdrawals. Conversely, if you think your tax rate will be lower when you retire, you might be more inclined to go with the traditional 401(k), which allows you to avoid paying taxes on your contributions now, when your tax rate is high. Of course, you can see the obvious problem with these choices – specifically, how can you know with any certainty if your tax bracket will be lower or higher when you retire? Many people automatically assume that once they stop working, their tax liabilities will drop, but that’s not always the case. Given their sources of retirement income from investment accounts and Social Security, many people see no drop in their tax bracket once they retire. Since you can’t see into the future, your best move might be to split the difference, so to speak. Although not all businesses offer the Roth 401(k) option, many of those that do will allow employees to divide their contributions between the Roth and traditional accounts. If you chose this route, you could enjoy the benefits of both, but you still can’t exceed the total annual 401(k) contribution limit, which for 2019 is $19,000 or $25,000 if you’re 50 or older. You may want to consult with your tax advisor before making any decisions about a Roth or traditional 401(k) – or Roth and traditional 401(k) – but in the final analysis, these are positive choices to make, because a 401(k), in whatever form, is a great way to save for retirement. Try to take full advantage of it. This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

My legislative priorities are your priorities

By Kim LaSata It is a tremendous privilege to continue serving Southwest Michigan at the Capital. As your Senator, I am honored to serve alongside State Representatives Pauline Wendzel, Brad Paquette and Aaron Miller. Working together will become very important as we roll up our sleeves and begin tackling tough challenges in the 100th Legislature. Our state faces many problems that will require teamwork and tough decisions. I have had the opportunity to talk with many of you about your priorities. From auto insurance reform to roads and education, your priorities are my priorities. Michigan drivers pay some of the highest vehicle insurance premiums in the nation, and something should be done to reform the state’s unique auto no-fault system. We must prioritize finding a real solution to lower costs and improve this system, and I am committed to doing so. We must also find a way to improve our roads, but this must be done in a deliberative, thoughtful way. Part of that means seeing through the reforms the Legislature approved in 2015, which will be fully implemented in 2020. By then, we will have a clearer picture of future, long-term road funding. In the meantime, I will continue to prioritize our roads in the budgeting process to make sure we are doing what we can to make things better. Finally, education will always have a special place in my heart. There is nothing more important to a person’s future success than having a quality education. I will continue to focus on improving educational opportunities for all, from ensuring more dollars get into our K-12 classrooms, to investing in more skilled trades and career training programs, and improving the affordability of our colleges and universities. As we begin our legislative work, I will work hard to be your voice and advocate for Southwest Michigan. I look forward to hearing your thoughts on the important issues facing Southwest Michigan. You can reach me at 517-373-6960 or SenKLaSata@senate.michigan.gov.

116th Congress kicks off

by Fred Upton

On Thursday I voted to fund nearly all of the government agencies that have been unnecessarily shuttered since December 22, 2018. Please know that I will continue working with my colleagues in the House and Senate to ensure the government is fully funded and our border is secure. Needless to say, much work remains.

To learn more about this and other important legislative issues, please visit my website: upton.house.gov or call my offices in Kalamazoo (269-385-0039), St. Joseph/ Benton Harbor (269-982-1986), or Washington, D.C. (202-225-3761).

Looking forward

By Representative Beth Griffin As the new legislative term begins, I am thankful and eager to continue my work as your State Representative in the 2019-2020 term. I look forward to working with our state Senate and our new governor to continue to pass budgets on time. It’s important we maintain record investments in our schools and infrastructure as well as pay down debt.