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401k salary deferral questions

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  • 401k salary deferral questions

    I just opened up a solo defined benefit pension plan AND solo 401(k) profit sharing plan. Should I elect to make my 18k/yearly salary deferral into my solo 401k pre-tax or post-tax? I'm leaning towards making a post-tax (401k Roth) salary deferral and then never have to worry about paying taxes on that money again. Wud appreciate any advice..

  • #2
    Slightly unrelated - curious where you opened the solo 401k - am deciding between Fidelity and TD Ameritrade. Got the paperwork for TDA and it was A LOT. Is Fidelity easier??

     

    Choice to do Roth vs regular pre-tax is a personal decision. Most of us can really use the tax break now vs later. If possible, a combo of both Roth and non-Roth contributions would be optimal to diversify retirement pots.

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    • #3
      The strategy is to convert as much of the taxable contributions into Roth, and there are several ways to do it.  You should develop a model that takes into account the entire picture, and includes all of your contributions into various accounts, your projected retirement age and income needs, rates of return, etc.  Only after doing this type of analysis can one answer this type of question.  Anything else would be just a bunch of guesswork because the answer will depend on your specific financial situation and future plans.  Converting to Roth can be done at/after retirement because then you will presumably be in a lower bracket.  However, depending on your age, income and the amount of contribution you might also benefit from Roth contributions early on as well.
      Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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      • #4




        I just opened up a solo defined benefit pension plan AND solo 401(k) profit sharing plan. Should I elect to make my 18k/yearly salary deferral into my solo 401k pre-tax or post-tax? I’m leaning towards making a post-tax (401k Roth) salary deferral and then never have to worry about paying taxes on that money again. Wud appreciate any advice..
        Click to expand...


        In the absence of a good crystal ball, your next best choice is to follow your financial plan. I lean toward Roth as much as you can afford, but whether that will be the best decision depends upon your behavior in the management of a properly diversified investment portfolio.

        There is no one answer that will fit everyone - yours is a highly personal decision based upon your resources, goals, and specific situation.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Have you already maxed out your tax deferred space already? I would do that to the utmost capacity first unless for some reason you quickly drop to the 15% brackets...

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          • #6
            Ok thanks for the input all!

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