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Employer retirement plan limit questions - does this make sense?

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  • Employer retirement plan limit questions - does this make sense?

    Hello all,

    2 years into practice, trying to understand my retirement contribution limits and our sponsoring financial institution is of little help.

     

    About me:

    • Early thirties, surgical specialist, family of four, spouse at home

    • Base salary: $800k+; bonuses/teaching/ancillary income:  ~$150-200k

    • Student loans:  refinanced ~$500k @ 3.115% in March '17, aggressively paying, now down to $200k with goal to pay off by 7/1/18


    With most of my disposable income going to aggressively pay off my loans before opening 529's next year, I am also trying to maximize my employer plans which include:

    • Pre-tax 403(b):  $18,000

    • Post-tax 403(b):  $18,000

    • 457(b):  $18,000

    • 401(a) employer contribution:  $16,824


    My questions:

    1. Can I safely maximize contributions to all three accounts (pre-403b, post-403b, 457b) without exceeding limits?

    2. Is a "Post-tax 403(b)" plan the same as a Roth 403(b)?

    3. If I max a Roth 403(b), can I still open a traditional IRA and perform backdoor Roth conversion?

    4. Can I still open a spousal IRA and perform backdoor Roth conversion?

    5. Any advantage to superfunding 529's this year ($70,000 x 2) rather than paying an additional $150,000 toward my loan burden next month?


    Thanks in advance, much appreciated advice for a novice.

     

  • #2


    Can I safely maximize contributions to all three accounts (pre-403b, post-403b, 457b) without exceeding limits?
    Click to expand...


    If you have a true NRAT (Non-Roth After Tax) option on your 403b, your 403b can receive a combination of $54k in contributions from you and your employer.


    Is a “Post-tax 403(b)” plan the same as a Roth 403(b)?
    Click to expand...


    No. If you had a Roth 403b option, you would be able to contribute only a total of $18k max from pre-tax and Roth contributions.


    If I max a Roth 403(b), can I still open a traditional IRA and perform backdoor Roth conversion?
    Click to expand...


    Yes. However, the backdoor conversion will be at least partially taxed if you have any pre-tax IRAs in your name.


    Can I still open a spousal IRA and perform backdoor Roth conversion?
    Click to expand...


    Yes.


    Any advantage to superfunding 529’s this year ($70,000 x 2) rather than paying an additional $150,000 toward my loan burden next month?
    Click to expand...


    In general, I'd go for the student loan payoff; however, the answer to that truly lies in the goals of your family's overall comprehensive financial plan.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

    Comment


    • #3
      I'm going to guess based on the limits that the OP has listed, there is a single $18K employee deferral limit between a traditional 403b (pre-tax) and a Roth 403b (post-tax). There doesn't appear to be anything indicating there are any employee after-tax contributions allowed to the 403b, but the OP may want to check on that. The 457 has a separate $18K limit because it is a non-qualified plan. As long as any 401a employee contributions are mandatory and not elective deferrals they would not be limited. So short of any contradicting information:

      1. There is only one 2017 $18K limit combined, between traditional and Roth deferrals of all employers. There is a separate 2017 $18K limit for the 457 because it is not a qualified plan. So a total of $36K between the three plus the $16,824 401(a) employer contribution.

      2. It is highly likely they are referring to a Roth 403b. You might hear Roth accounts described as after-tax, but employee after-tax contribution are rarely referred to as "post-tax".

      3. Employee contributions and balances of non-IRA accounts do not interfere at all with a Backdoor Roth. However, any (traditional, SEP, or SIMPLE) IRA pre-tax balances you have will interfere with the efficiency of a Backdoor Roth.

      4. if spouse A's compensation is sufficient for both spouse's IRA contributions. Even with no compensation, spouse B can just open a traditional IRA account and make a spousal IRA contribution based on spouse A's compensation. The second sentence from above will apply.

      5. As Johanna suggested, it would probably be better to pay off the loans. However, if your state offers a tax deduction for 529 contributions, I would contribute enough to 529(s) plans to get the full tax deduction.

      Comment


      • #4
        I just had to chime in and say congrats on making it into a very successful sub-specialty.  That salary!  Wow.  I agree with you that you should just go ahead and get rid of the student loans before worrying about a 529 (you only have about 9 months of payments left!).  You could easily fully fund several 529's in absolutely no time at all with what you make, so no rush there.

        In addition to contributing to your plans as above, just start dumping cash into a taxable account once your student loans are gone.  If you live well below your means, you could be FI in probably the next 4-5 years.  It's all about what you decide to spend vs save.

        Comment


        • #5
          as a pediatrician, still congrats, but that salary is gratuitous.

           

          1) look out for the wording. after tax usually means after the standard contribution of 18K while ROTH would denote the separate choice. Dbl check. but Jfox is correct about the 54K if it is after tax.

          2) see above

          3) yes IRA in individual so separate. also assuming no other trad IRAs.

          4) yes your income is her income. also again, assuming no other trad IRAs.

          5) probably not. but with 1MM does it really matter what you do?

          Comment

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