Jeff Opdyke of the Wall Street Journal wrote an article titled Roth 401(k) Picks up Steam, which details the fact that the Roth 401(k) is now being offered by GM.
Deciding whether or not to use the Roth 410(k) will most likely be a more difficult decision for people than choosing their asset allocation. The article does a good job of explaining how the Roth 401(k). It is a great choice for younger lower-wage earners because chances are good that they will be in a higher tax bracket when they retire.
The Roth 401(k) can also be a great choice for highly-paid executives because they are normally not allowed to use the Roth IRA because of income limitations. By using the Roth 401(k), highly-paid employees will be able to manage their taxes during retirement since withdrawals from the Roth will be tax free.
One potential negative I can see with the Roth 401(k) is the Alternative Minimum Tax. Since contributions to a regular 401(k) reduce income, they could conceivably keep a person from having to pay AMT. That’s something worth considering.
If my wife’s company ends up offering the Roth 401(k) I’ll have to look into more. As of right now, it looks like an interesting alternative.