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Unless your retirement plan is managed by Vanguard Group, don't expect to see the Roth 401(k) pop up as an option in your benefits package yet. "It has turned out to be a dud," says Michael Weddell, a retirement consultant at Watson Wyatt in Southfield, Mich. "Most employers are not offering them right now."
Roth 401(k)s are taxed differently than traditional plans. When you put money into a conventional 401(k), you reduce your taxable income, but you must pay regular income tax when you take distributions. Participants in a Roth 401(k) pay their taxes up front.
Many benefits consultants thought Roth 401(k)s would be rolled out in January, yet companies are waiting for the Internal Revenue Service to clear up some murky tax rules -- such as how early withdrawals will be taxed. "There has been no guidance, that's true," says IRS spokesman Bruce Friedland. "The IRS intends to issue guidelines this fall." Vanguard spokesman John Demming said the firm has been talking to corporate clients and studying the Roth 401(k) for more than a year. "We are prepared for the decisions the IRS makes and are ready to offer it on Jan. 1," he says. Time is the investor's friend. The truth of this Wall Street adage is reinforced by the latest research on millions of 401(k) participants by the Employee Benefit Research Institute and the Investment Company Institute, a mutual fund industry group. They delved into their vast database to focus on those who participated in their company 401(k) plans for the five years ended in 2004 -- about 4 million people. Although the period included a nasty bear market, the average account balance rose by 36%, from $67,016 to $91,042. The gains came from contributions and investment returns.
The findings should assuage concerns that Americans aren't preparing for retirement. Maybe it was inertia, but 401(k) owners never fled stocks or abandoned their long-term goals. At the end of 2004, 67% of the average portfolio was invested in equities (46% in stock funds, 15% in company shares, and the equity portion of the 10% in balanced funds). Among other findings: Life cycle funds are increasingly popular, especially with younger participants. These funds make it easy to get a portfolio appropriate for their age and tolerance for risk. Here's a new product to go with your vanity license plates and personal postage stamps: customized playing cards. For $26.50 at newtscards.com, you can design your own deck by uploading a photo, picking a border, and adding text to the back of the cards. Newt's will print and ship the deck within a week. Try handing those out at your next poker party. Louis Comfort Tiffany's glass has inspired millions of stained glass knockoffs. But many people have never seen the real thing. The Seattle Art Museum (seattleartmuseum.org) will showcase more than 120 Tiffany vases, window panels (such as The Reader), lamps, and mosaics in the first broad exhibit of the artist's work since the late 1980s. Many of the pieces, which also include metalwork and furniture, have never been publicly exhibited before. The show will run from Oct. 13 to Jan. 4, then moves to Toledo, Dallas, and Pittsburgh.