Schwab Sees Roth 401(k) Takeup Rates Rising

The number of employers offering a Roth 401(k) showed a dramatic increase between 2006 and 2007, according to data released by Charles Schwab.

A Schwab news release said 35% of Schwab-administered retirement plans offered the Roth 401(k) as of December 2007, up from the 26% a year earlier and well above the industry average of 22% as reported by the Profit Sharing/401(k) Council of America 2007 Roth 401(k) survey.

“We have seen a steady increase in interest in the Roth 401(k) across most types of employers, but we see the highest buy-in among professional services firms and their employees,” said Dean Kohmann, Charles Schwab vice president of 401(k) plan services, in the news release. “This is because employees at these types of firms are generally more likely to work with personal financial advisers who advise them to use Roth 401(k), they typically have higher salaries that disqualify them from contributing to a Roth IRA as part of their tax strategy, and their salaries give them greater leeway to save for retirement on an after-tax basis.”

Schwab also unveiled a Roth 401(k) Calculator on its Web site at that allows participants to enter basic information and get back a comparison of retirement income generated by a traditional 401(k) and a Roth 401(k).