I have seen the earlier post that doesn't advise after=tax contribution.
sethuvs wrote:The concern about after-tax contribution comes from this thread: viewtopic.php?t=71035
sethuvs wrote:oh btw, Company Savings Plan has been designed to comply with section 409A of the Internal Revenue Code.
retiredjg wrote:When the money is distributed to you, is it taxed at your marginal rate? If so, you will have turned what would have been capital gains (lower tax rate) into ordinary income (higher tax rate). I'm just talking about the earnings, not the contributions which would be taxed at your marginal rate either way.
What I'm thinking is this - if the money comes out all at one time, especially in a year in which you also have salary, your ordinary tax rate may be as high as you are paying now. If that's the case, what would be the benefit of putting this money away in a tax-deferred location? The way I understand it, the whole point of deferring taxes is to be able to pay taxes at a later time at a lower rate.
I'm not trying to suggest one plan over the other - I don't know enough to have much of an opinion. Mostly, I'm thinking out loud and trying to learn something about this type of plan.
sethuvs wrote:yes, you are right. there is a gap of $15K that I can contribute to after tax. I have never invested in a qualified after-tax account. I' have mixed opinion on after-tax 401K, esp., with record-keeping and benefits against regular taxable accounts. We maintain after -tax investments in very low expense index funds that are tax-efficient and I really don't see advantages in after-tax 401K. Unless I am missing something.
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