401k

[Dos Perros]

So funny the way to limit discrimination is to purposely harm a subset of people.

 

[texag10]

AI would’ve clarified that the requirements are based on their MAGI

Took a wild guess that someone asking this question isn't getting a lot of muni bond interest payments....

 

[Ucsdryder]

It's likely your plan failed non discrimination testing and you are considered a highly compensated employee ($155k/yr for 2024 look back), so you are limited on what you can contribute due to lower earners not participating/contributing.

If the above is correct, and you are a highly compensated employee, you cannot make a deductible Traditional IRA contribution. Depending on earned income levels and what type of health plan you have, options include: contributing to a Roth IRA (not an option if income is above 165k single/246k married filing jointly), making a non deductible contribution to a traditional IRA, then immediately transferring to a Roth IRA (known as a backdoor Roth, if you have a pretax IRA balance this becomes much less attractive), contributing to an HSA if you have a high deductible health plan. If none of those are options, saving money in a regular taxable account, or maybe looking a a deferred variable annuity could make sense.

Source: 15 years of working in financial planning, no AI needed.

The value of a Roth plan is that it is tax sheltered. You never will owe tax on capital gains for the Roth. You put post tax money in, the investment grows, can take those earnings out without paying additional capital gains tax on retirement or after 5 years.

Where a standard, non retirement, brokerage account you're investing post tax money going in, and then paying some capital gains when you liquidate an investment holding to take cash out.

There can be Roth contributions to a 401K, or other employer sponsored retirement plan, and Roth contributions to an IRA. Depending on tax bracket it can be a better option to do Roth contributions to a 401K and frontload tax on retirement investments, because of future growth potential and likely higher tax rates in the future.

Eff me. This crap is all over my head. I need to find someone to help me.

I know lots of Colorado guys on here. If someone can help me, or knows someone please shoot me a DM.

 

[texag10]

Eff me. This crap is all over my head. I need to find someone to help me.

I know lots of Colorado guys on here. If someone can help me, or knows someone please shoot me a DM.

Message sent.

 

[Wprinkle]

Voya is heavily used by the GOV.. if you have a traditional pension or other means of company "funded" retirement that may be the reason...

 

[MallardSX2]

Unrelated - Does anyone know if an HSA can be used to fund a private insurance plan for early retirees?

Example: Say a person wants to retire at 55, can you use the HSA money to fund a private plan until Medicare at 65 kicks in?

 

[The_Jim]

I’m another +1 for the Roth.

Also a +1 for a good financial planner - they can explain the strategy better than myself.

 

[Ucsdryder]

I’m always amazed at the wealth of knowledge on here. Thanks everyone and @texag10 for picking up the phone and walking me through some stuff!

 

[Wprinkle]

Unrelated - Does anyone know if an HSA can be used to fund a private insurance plan for early retirees?

Example: Say a person wants to retire at 55, can you use the HSA money to fund a private plan until Medicare at 65 kicks in?

Mine can. I fully fund the HSA every year never use it and will use it for "insurance."

 

[texag10]

Unrelated - Does anyone know if an HSA can be used to fund a private insurance plan for early retirees?

Example: Say a person wants to retire at 55, can you use the HSA money to fund a private plan until Medicare at 65 kicks in?

Check with a CPA for sure, but the answers I'm seeing are consistently saying no, you can only use an HSA to pay for these types of medical insurance premiums:

-COBRA coverage
-Health care coverage while receiving unemployment benefits
-Long term care premiums
-Medicare premiums

 

[180ls1]

I’m always amazed at the wealth of knowledge on here. Thanks everyone and @texag10 for picking up the phone and walking me through some stuff!

Sounds like Tex is the man.

Is there an advisor on the plan? Funny enough, I'm going to setup a 401(k) for a company in 2hrs. Let me know if you have any other questions, sometimes these plans are setup by advisors who know personal planning - not business.

PS: the max (plan dependent) can be more like $70K - it may be worth looking at after-tax (not Roth) contributions. That said, the fact they are offering a match but still possibly failing testing for the $23k limit is not a good sign for that capability.

 

[texag10]

Sounds like Tex is the man.

Is there an advisor on the plan? Funny enough, I'm going to setup a 401(k) for a company in 2hrs. Let me know if you have any other questions, sometimes these plans are setup by advisors who know personal planning - not business.

PS: the max (plan dependent) can be more like $70K - it may be worth looking at after-tax (not Roth) contributions. That said, the fact they are offering a match but still possibly failing testing for the $23k limit is not a good sign for that capability.

I am definitely a man, don't know about the man.

Sounds like you'd be good for @Ucsdryder to talk to.

 

[Wrench]

I'm able to contribute a percentage AND a dollar amount. I screwed myself last year by over contributing and missed a few checks of matching.... don't so that.

 

[skipper907]

I would be doing the max pre tax 401 and then make up the difference with the roth 401 and if you are under the limits also add money to an roth ira.

 

[cuerro viejo]

So funny the way to limit discrimination is to purposely harm a subset of people.

Yelp, you can get booted out of FSA also every year, for same IRS reasons


Only thing I have to add to this is With Roth 401k you can loose the pre tax capital appreciation over the life span of your 401k. You may come out a head that way, but you may not. Paying taxes up front means less money invested.

 

[MountainTracker]

Many have suggested it, but the Roth IRA through a brokerage firm could be a good option. Once you hit your limit on the 401k move start contributing to the Roth. It’s all after tax money, dividends and capital gains grow without being taxed. There are limits as to when you can start pulling it out.

It does make the head spin all the different accounting rules. Sounds like you have gotten some good advice from folks here.


Sent from my iPhone using Tapatalk

 

[Dos Perros]

They can’t limit you on your contribution as long as it’s under the year limit for a standard 401k.

Did you read the thread?

 

[Matthew57]

Mine can. I fully fund the HSA every year never use it and will use it for "insurance."

I've never heard of that, do you have any resources showing an HSA can be used for insurance premiums if you retire early?

 

[Wprinkle]

I've never heard of that, do you have any resources showing an HSA can be used for insurance premiums if you retire early?

By "insurance" I mean pay cash when you go to doctor.. the HSA IS the insurance.. or COBRA but that pretty pricey

 

[sodaksooner]

Yes they offer a Roth that I can participate in as well. I just don’t see the value in the Roth since I’m putting post tax money away with an investor already.

The advantage of the roth is you pay tax up front and not when you withdraw. So with a standard 401k, I pay tax on the withdrawl, Roth you pay when you put it in, so there is no tax liability when you withdraw. BIG ADvantage....as long as you make money in the Roth. I'd rather pay tax on the 10K I invested when I was was 25 than the $200k when I retire.... (just an example)