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The benefits of a Roth 401(k)

This story appears in the January 2007 issue of Entrepreneur. Subscribe »

Exchange-traded funds win raves as great low-fee alternatives to mutual funds. Introduced in January 2006, the new Roth 401(k) gets similar kudos for enabling Americans to put after-tax funds into retirement plans for tax-free withdrawal after age 59 and a half. So some brokerages are beginning to couple the two for a new retirement plan concept: the ETF-based Roth 401(k).

One new ETF-based Roth 401(k) from ShareBuilder Corp. is primairly aimed at small businesses with 25 or fewer employees as well as self-employed workers. "The program is expected to be most attractive to higher-income small-business owners and younger workers with at least 10 years until retirement," explains Stephan C. Roche, vice president and general manager of the Small Business Group for Sharebuilder in Bellevue, Washington.

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