401k with no employer match

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Topic Author
afr
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401k with no employer match

Post by afr »

Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
rkhusky
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Re: 401k with no employer match

Post by rkhusky »

afr wrote: Sun Dec 25, 2022 10:34 am Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?
It pays to max 401k contributions while you are in the 24% bracket and expect to be in the 12% bracket in retirement. Have you computed your expected bracket when taking SS and when RMD’s kick in?
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FiveK
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Re: 401k with no employer match

Post by FiveK »

Consider the suggestions in Prioritizing investments and how they apply to your situation.

One might forego 401k contributions if faced with Expensive or mediocre choices, but because you are close to retirement (and thus the ability to roll the 401k over to an IRA of your choice) that probably doesn't apply to you.
Topic Author
afr
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Re: 401k with no employer match

Post by afr »

FiveK wrote: Sun Dec 25, 2022 12:34 pm Consider the suggestions in Prioritizing investments and how they apply to your situation.

One might forego 401k contributions if faced with Expensive or mediocre choices, but because you are close to retirement (and thus the ability to roll the 401k over to an IRA of your choice) that probably doesn't apply to you.
I’ve read that link previously. This statement left me in a bit of a quandary-“. If there is no match, the power of tax-deferred compounding and automatic contributions still favors using the plan with limited contributions”. Limited contributions? Similar to what I’ve been doing by not adding the catch-up contributions? I contribute to two funds-70%VFIAX(Vanguard500/0.04%) and 30%RGVGX(AF US Gov't Securities R6/0.24%) and only do so to reduce my taxable income. The administrative costs are a bit steep however.
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FiveK
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Re: 401k with no employer match

Post by FiveK »

afr wrote: Sun Dec 25, 2022 12:46 pm
FiveK wrote: Sun Dec 25, 2022 12:34 pm Consider the suggestions in Prioritizing investments and how they apply to your situation.

One might forego 401k contributions if faced with Expensive or mediocre choices, but because you are close to retirement (and thus the ability to roll the 401k over to an IRA of your choice) that probably doesn't apply to you.
I’ve read that link previously. This statement left me in a bit of a quandary-“. If there is no match, the power of tax-deferred compounding and automatic contributions still favors using the plan with limited contributions”. Limited contributions? Similar to what I’ve been doing by not adding the catch-up contributions? I contribute to two funds-70%VFIAX(Vanguard500/0.04%) and 30%RGVGX(AF US Gov't Securities R6/0.24%) and only do so to reduce my taxable income. The administrative costs are a bit steep however.
Good point - the Prioritizing investments section about 401(k) plans with high cost funds probably should do little more than reference the Expensive or mediocre choices section of the 401(k) wiki (or vice versa).

The "limited contributions" wording is indeed unclear and perhaps misleading. The 401(k) article wording may be better, because "it depends..." on things that will vary from person to person.

What do you think of the wording in the Expensive or mediocre choices section?
MorgansRun
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Re: 401k with no employer match

Post by MorgansRun »

rkhusky wrote: Sun Dec 25, 2022 10:46 am
afr wrote: Sun Dec 25, 2022 10:34 am Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?
It pays to max 401k contributions while you are in the 24% bracket and expect to be in the 12% bracket in retirement. Have you computed your expected bracket when taking SS and when RMD’s kick in?
Are you in the 24% bracket after the standard deduction? My employer also does not provide a 401k match and I’m in the 22% bracket, but after the standard deduction, I land in the 12%. Or am I thinking about my tax bracket incorrectly?
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ruralavalon
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Re: 401k with no employer match

Post by ruralavalon »

afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
In the 24% federal tax bracket and expecting the 12% bracket during retirement, I suggest making the maximum annual employee deferral including catch up contributions even if there is no employer match or employer contribution.
afr wrote: Sun Dec 25, 2022 12:46 pm
FiveK wrote: Sun Dec 25, 2022 12:34 pm Consider the suggestions in Prioritizing investments and how they apply to your situation.

One might forego 401k contributions if faced with Expensive or mediocre choices, but because you are close to retirement (and thus the ability to roll the 401k over to an IRA of your choice) that probably doesn't apply to you.
I’ve read that link previously. This statement left me in a bit of a quandary-“. If there is no match, the power of tax-deferred compounding and automatic contributions still favors using the plan with limited contributions”. Limited contributions? Similar to what I’ve been doing by not adding the catch-up contributions? I contribute to two funds-70%VFIAX(Vanguard500/0.04%) and 30%RGVGX(AF US Gov't Securities R6/0.24%) and only do so to reduce my taxable income. The administrative costs are a bit steep however.
Vanguard 500 Index Fund (VFIAX) ER 0.04% and American Funds US Government Sec R6 (RGVGX) ER 0.24% are very good fund choices in my opinion, with low expense ratios. This argues in favor of making the maximum annual employee deferral including catch up contributions.

How much are the a administrative expenses? If not outrageous then in my opinion it's still best to make the maximum annual employee deferral including catch up contributions.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
afr
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Re: 401k with no employer match

Post by afr »

ruralavalon wrote: Sun Dec 25, 2022 3:01 pm
afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
In the 24% federal tax bracket and expecting the 12% bracket during retirement, I suggest making the maximum annual employee deferral including catch up contributions even if there is no employer match or employer contribution.
afr wrote: Sun Dec 25, 2022 12:46 pm
FiveK wrote: Sun Dec 25, 2022 12:34 pm Consider the suggestions in Prioritizing investments and how they apply to your situation.

One might forego 401k contributions if faced with Expensive or mediocre choices, but because you are close to retirement (and thus the ability to roll the 401k over to an IRA of your choice) that probably doesn't apply to you.
I’ve read that link previously. This statement left me in a bit of a quandary-“. If there is no match, the power of tax-deferred compounding and automatic contributions still favors using the plan with limited contributions”. Limited contributions? Similar to what I’ve been doing by not adding the catch-up contributions? I contribute to two funds-70%VFIAX(Vanguard500/0.04%) and 30%RGVGX(AF US Gov't Securities R6/0.24%) and only do so to reduce my taxable income. The administrative costs are a bit steep however.
Vanguard 500 Index Fund (VFIAX) ER 0.04% and American Funds US Government Sec R6 (RGVGX) ER 0.24% are very good fund choices in my opinion, with low expense ratios. This argues in favor of making the maximum annual employee deferral including catch up contributions.

How much are the a administrative expenses? If not outrageous then in my opinion it's still best to make the maximum annual employee deferral including catch up contributions.

The administrative fees cost me about 40 basis points annually.
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ruralavalon
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Re: 401k with no employer match

Post by ruralavalon »

afr wrote: Mon Dec 26, 2022 9:21 am
ruralavalon wrote: Sun Dec 25, 2022 3:01 pm
afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
In the 24% federal tax bracket and expecting the 12% bracket during retirement, I suggest making the maximum annual employee deferral including catch up contributions even if there is no employer match or employer contribution.
afr wrote: Sun Dec 25, 2022 12:46 pm
FiveK wrote: Sun Dec 25, 2022 12:34 pm Consider the suggestions in Prioritizing investments and how they apply to your situation.

One might forego 401k contributions if faced with Expensive or mediocre choices, but because you are close to retirement (and thus the ability to roll the 401k over to an IRA of your choice) that probably doesn't apply to you.
I’ve read that link previously. This statement left me in a bit of a quandary-“. If there is no match, the power of tax-deferred compounding and automatic contributions still favors using the plan with limited contributions”. Limited contributions? Similar to what I’ve been doing by not adding the catch-up contributions? I contribute to two funds-70%VFIAX(Vanguard500/0.04%) and 30%RGVGX(AF US Gov't Securities R6/0.24%) and only do so to reduce my taxable income. The administrative costs are a bit steep however.
Vanguard 500 Index Fund (VFIAX) ER 0.04% and American Funds US Government Sec R6 (RGVGX) ER 0.24% are very good fund choices in my opinion, with low expense ratios. This argues in favor of making the maximum annual employee deferral including catch up contributions.

How much are the a administrative expenses? If not outrageous then in my opinion it's still best to make the maximum annual employee deferral including catch up contributions.

The administrative fees cost me about 40 basis points annually.
In my opinion in the 24% federal tax bracket the benefit of the tax deferral outweighs the impact of the relatively reasonable administrative fee.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
afr
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Re: 401k with no employer match

Post by afr »

ruralavalon wrote: Mon Dec 26, 2022 9:33 am
afr wrote: Mon Dec 26, 2022 9:21 am
ruralavalon wrote: Sun Dec 25, 2022 3:01 pm
afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
In the 24% federal tax bracket and expecting the 12% bracket during retirement, I suggest making the maximum annual employee deferral including catch up contributions even if there is no employer match or employer contribution.
afr wrote: Sun Dec 25, 2022 12:46 pm
FiveK wrote: Sun Dec 25, 2022 12:34 pm Consider the suggestions in Prioritizing investments and how they apply to your situation.

One might forego 401k contributions if faced with Expensive or mediocre choices, but because you are close to retirement (and thus the ability to roll the 401k over to an IRA of your choice) that probably doesn't apply to you.
I’ve read that link previously. This statement left me in a bit of a quandary-“. If there is no match, the power of tax-deferred compounding and automatic contributions still favors using the plan with limited contributions”. Limited contributions? Similar to what I’ve been doing by not adding the catch-up contributions? I contribute to two funds-70%VFIAX(Vanguard500/0.04%) and 30%RGVGX(AF US Gov't Securities R6/0.24%) and only do so to reduce my taxable income. The administrative costs are a bit steep however.
Vanguard 500 Index Fund (VFIAX) ER 0.04% and American Funds US Government Sec R6 (RGVGX) ER 0.24% are very good fund choices in my opinion, with low expense ratios. This argues in favor of making the maximum annual employee deferral including catch up contributions.

How much are the a administrative expenses? If not outrageous then in my opinion it's still best to make the maximum annual employee deferral including catch up contributions.

The administrative fees cost me about 40 basis points annually.
In my opinion in the 24% federal tax bracket the benefit of the tax deferral outweighs the impact of the relatively reasonable administrative fee.
Including adding on the catch-up contribution?
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ruralavalon
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Re: 401k with no employer match

Post by ruralavalon »

afr wrote: Mon Dec 26, 2022 9:56 am
ruralavalon wrote: Mon Dec 26, 2022 9:33 am
afr wrote: Mon Dec 26, 2022 9:21 am
ruralavalon wrote: Sun Dec 25, 2022 3:01 pm
afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
In the 24% federal tax bracket and expecting the 12% bracket during retirement, I suggest making the maximum annual employee deferral including catch up contributions even if there is no employer match or employer contribution.
afr wrote: Sun Dec 25, 2022 12:46 pm

I’ve read that link previously. This statement left me in a bit of a quandary-“. If there is no match, the power of tax-deferred compounding and automatic contributions still favors using the plan with limited contributions”. Limited contributions? Similar to what I’ve been doing by not adding the catch-up contributions? I contribute to two funds-70%VFIAX(Vanguard500/0.04%) and 30%RGVGX(AF US Gov't Securities R6/0.24%) and only do so to reduce my taxable income. The administrative costs are a bit steep however.
Vanguard 500 Index Fund (VFIAX) ER 0.04% and American Funds US Government Sec R6 (RGVGX) ER 0.24% are very good fund choices in my opinion, with low expense ratios. This argues in favor of making the maximum annual employee deferral including catch up contributions.

How much are the a administrative expenses? If not outrageous then in my opinion it's still best to make the maximum annual employee deferral including catch up contributions.

The administrative fees cost me about 40 basis points annually.
In my opinion in the 24% federal tax bracket the benefit of the tax deferral outweighs the impact of the relatively reasonable administrative fee.
Including adding on the catch-up contribution?
Yes.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Outer Marker
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Re: 401k with no employer match

Post by Outer Marker »

afr wrote: Mon Dec 26, 2022 9:56 am Including adding on the catch-up contribution?
A guaranteed 12% tax savings swamps the small administrative fee. I'd take as much of that deal as I could get.
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afr
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Re: 401k with no employer match

Post by afr »

Thanks everyone for your replies. Wishing you all Happy Holidays and a happy,healthy and prosperous New Year.
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afr
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Re: 401k with no employer match

Post by afr »

Outer Marker wrote: Mon Dec 26, 2022 10:27 am
afr wrote: Mon Dec 26, 2022 9:56 am Including adding on the catch-up contribution?
A guaranteed 12% tax savings swamps the small administrative fee. I'd take as much of that deal as I could get.
Considering my 401k withdrawals will be taxed at regular rates, would it make more sense to contribute to my joint taxable account instead, since those withdrawals will be taxed at capital gains rates?
MrJedi
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Re: 401k with no employer match

Post by MrJedi »

afr wrote: Fri Jan 06, 2023 6:11 am
Outer Marker wrote: Mon Dec 26, 2022 10:27 am
afr wrote: Mon Dec 26, 2022 9:56 am Including adding on the catch-up contribution?
A guaranteed 12% tax savings swamps the small administrative fee. I'd take as much of that deal as I could get.
Considering my 401k withdrawals will be taxed at regular rates, would it make more sense to contribute to my joint taxable account instead, since those withdrawals will be taxed at capital gains rates?
It would cost 24% in tax to go to taxable account. I would say no. If you're considering this, making Roth contributions or conversions would be better than taxable since there will be no taxes on gains at all vs taxable dividends and capital gains. Then the decision goes back to traditional vs Roth.
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Re: 401k with no employer match

Post by Outer Marker »

afr wrote: Fri Jan 06, 2023 6:11 am
Outer Marker wrote: Mon Dec 26, 2022 10:27 am
afr wrote: Mon Dec 26, 2022 9:56 am Including adding on the catch-up contribution?
A guaranteed 12% tax savings swamps the small administrative fee. I'd take as much of that deal as I could get.
Considering my 401k withdrawals will be taxed at regular rates, would it make more sense to contribute to my joint taxable account instead, since those withdrawals will be taxed at capital gains rates?
No. Your current marginal rate is higher than your expected marginal rate in retirement. You’d be paying full tax on all of your money in order to achieve a small reduction, if any, on the gains only. Max out your 401k.
livesoft
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Re: 401k with no employer match

Post by livesoft »

We had 401(k) without matches for part of our careers -- unless you call the high expense ratios a match that just lit a fire and burned up our 401(k)s!

But it still worked out quite well because of the tax savings from the earlier deferral AND now that we are in the 12% tax bracket we have rolled my spouse's 401(k) over into an IRA and are making Roth conversions. In 2022 she was able to put more than $80,000 into a Roth IRA via contributions and conversions and pay hardly any income tax on that. Imagine saving 24% to 33% income tax while working and paying less than 6% effective tax on a Roth conversion. To help one think about it, that's like a risk-free 18% to 27% return.

I think by not contributing the catch-up contributions available, one has really cost themselves a lot of money.
Please let that sink in.
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Topic Author
afr
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Re: 401k with no employer match

Post by afr »

Thank you all once again for your sage advice.
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ruralavalon
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Re: 401k with no employer match

Post by ruralavalon »

afr wrote: Fri Jan 06, 2023 6:11 am
Outer Marker wrote: Mon Dec 26, 2022 10:27 am
afr wrote: Mon Dec 26, 2022 9:56 am Including adding on the catch-up contribution?
A guaranteed 12% tax savings swamps the small administrative fee. I'd take as much of that deal as I could get.
Considering my 401k withdrawals will be taxed at regular rates, would it make more sense to contribute to my joint taxable account instead, since those withdrawals will be taxed at capital gains rates?
No.

Don't forget the current benefit of the tax deduction and the impact of compounding of gains tax-deferred.

In general it's better to make maximum annual contributions to all available tax-advantaged accounts as a priority ahead of investing in a taxable brokerage account.

Wiki article Prioritizing Investments.

The exception would be if you had some shorter-term use for the money rather than helping to fund normal retirement.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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afr
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Re: 401k with no employer match

Post by afr »

ruralavalon wrote: Fri Jan 06, 2023 9:14 am
afr wrote: Fri Jan 06, 2023 6:11 am
Outer Marker wrote: Mon Dec 26, 2022 10:27 am
afr wrote: Mon Dec 26, 2022 9:56 am Including adding on the catch-up contribution?
A guaranteed 12% tax savings swamps the small administrative fee. I'd take as much of that deal as I could get.
Considering my 401k withdrawals will be taxed at regular rates, would it make more sense to contribute to my joint taxable account instead, since those withdrawals will be taxed at capital gains rates?
No.

Don't forget the current benefit of the tax deduction and the impact of compounding of gains tax-deferred.

In general it's better to make maximum annual contributions to all available tax-advantaged accounts as a priority ahead of investing in a taxable brokerage account.

Wiki article Prioritizing Investments.

The exception would be if you had some shorter-term use for the money rather than helping to fund normal retirement.
Thanks. I’ve read that article previously, but did not see an unmatched 401k listed.
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ruralavalon
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Re: 401k with no employer match

Post by ruralavalon »

afr wrote: Fri Jan 06, 2023 10:19 am
ruralavalon wrote: Fri Jan 06, 2023 9:14 am
afr wrote: Fri Jan 06, 2023 6:11 am
Outer Marker wrote: Mon Dec 26, 2022 10:27 am
afr wrote: Mon Dec 26, 2022 9:56 am Including adding on the catch-up contribution?
A guaranteed 12% tax savings swamps the small administrative fee. I'd take as much of that deal as I could get.
Considering my 401k withdrawals will be taxed at regular rates, would it make more sense to contribute to my joint taxable account instead, since those withdrawals will be taxed at capital gains rates?
No.

Don't forget the current benefit of the tax deduction and the impact of compounding of gains tax-deferred.

In general it's better to make maximum annual contributions to all available tax-advantaged accounts as a priority ahead of investing in a taxable brokerage account.

Wiki article Prioritizing Investments.

The exception would be if you had some shorter-term use for the money rather than helping to fund normal retirement.
Thanks. I’ve read that article previously, but did not see an unmatched 401k listed.
"If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA . . . . " Moreso for priority over a taxable brokerage account.

Your employer's plan offers good funds with low expense ratios. As mentioned earlier "Vanguard 500 Index Fund (VFIAX) ER 0.04% and American Funds US Government Sec R6 (RGVGX) ER 0.24% are very good fund choices in my opinion, with low expense ratios. This argues in favor of making the maximum annual employee deferral including catch up contributions."

The presence or absence of an employer match does not enter into decision about making the maximum annual employee deferral.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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afr
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Re: 401k with no employer match

Post by afr »

ruralavalon wrote: Fri Jan 06, 2023 9:14 am
afr wrote: Fri Jan 06, 2023 6:11 am
Outer Marker wrote: Mon Dec 26, 2022 10:27 am
afr wrote: Mon Dec 26, 2022 9:56 am Including adding on the catch-up contribution?
A guaranteed 12% tax savings swamps the small administrative fee. I'd take as much of that deal as I could get.
Considering my 401k withdrawals will be taxed at regular rates, would it make more sense to contribute to my joint taxable account instead, since those withdrawals will be taxed at capital gains rates?
No.

Don't forget the current benefit of the tax deduction and the impact of compounding of gains tax-deferred.

In general it's better to make maximum annual contributions to all available tax-advantaged accounts as a priority ahead of investing in a taxable brokerage account.

Wiki article Prioritizing Investments.

The exception would be if you had some shorter-term use for the money rather than helping to fund normal retirement.
So I'd also assume that its preferable to prioritize non-deductible tIRA contributions ahead of taxable accounts?
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ruralavalon
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Re: 401k with no employer match

Post by ruralavalon »

afr wrote: Sun Jan 08, 2023 12:17 pm
ruralavalon wrote: Fri Jan 06, 2023 9:14 am
afr wrote: Fri Jan 06, 2023 6:11 am
Outer Marker wrote: Mon Dec 26, 2022 10:27 am
afr wrote: Mon Dec 26, 2022 9:56 am Including adding on the catch-up contribution?
A guaranteed 12% tax savings swamps the small administrative fee. I'd take as much of that deal as I could get.
Considering my 401k withdrawals will be taxed at regular rates, would it make more sense to contribute to my joint taxable account instead, since those withdrawals will be taxed at capital gains rates?
No.

Don't forget the current benefit of the tax deduction and the impact of compounding of gains tax-deferred.

In general it's better to make maximum annual contributions to all available tax-advantaged accounts as a priority ahead of investing in a taxable brokerage account.

Wiki article Prioritizing Investments.

The exception would be if you had some shorter-term use for the money rather than helping to fund normal retirement.
So I'd also assume that its preferable to prioritize non-deductible tIRA contributions ahead of taxable accounts?
No.

Prioritize deductible contributions to an IRA, and Roth IRA contributions over contributions to a taxable brokerage account.

Non-deductible IRA contributions are almost never wise.
afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
Why all these hypothetical questions about priority? The actual facts of your situation are imortant to investing priority issues.

If you want real advice you need to provide this information in this format: Asking Portfolio Questions.

I never had an employer match and always contributed as much as practical to my 401k account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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afr
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Re: 401k with no employer match

Post by afr »

ruralavalon wrote: Sun Jan 08, 2023 12:21 pm
afr wrote: Sun Jan 08, 2023 12:17 pm
ruralavalon wrote: Fri Jan 06, 2023 9:14 am
afr wrote: Fri Jan 06, 2023 6:11 am
Outer Marker wrote: Mon Dec 26, 2022 10:27 am
A guaranteed 12% tax savings swamps the small administrative fee. I'd take as much of that deal as I could get.
Considering my 401k withdrawals will be taxed at regular rates, would it make more sense to contribute to my joint taxable account instead, since those withdrawals will be taxed at capital gains rates?
No.

Don't forget the current benefit of the tax deduction and the impact of compounding of gains tax-deferred.

In general it's better to make maximum annual contributions to all available tax-advantaged accounts as a priority ahead of investing in a taxable brokerage account.

Wiki article Prioritizing Investments.

The exception would be if you had some shorter-term use for the money rather than helping to fund normal retirement.
So I'd also assume that its preferable to prioritize non-deductible tIRA contributions ahead of taxable accounts?
No.

Prioritize deductible contributions to an IRA, and Roth IRA contributions over contributions to a taxable brokerage account.

Non-deductible IRA contributions are almost never wise.
afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
Why all these hypothetical questions about priority? The actual facts of your situation are imortant to investing priority issues.

If you want real advice you need to provide this information in this format: Asking Portfolio Questions.

I never had an employer match and always contributed as much as practical to my 401k account.
We don’t meet the income qualifications for an IRA deduction and the costs to convert to a Roth IRA is too high for us due to pro rata. Just going to have to wait til retirement to start converting.
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afr
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Re: 401k with no employer match

Post by afr »

Still planning to retire in a little over 3 years and just found out that I'm able to do a direct rollover(into my 401k) of the non-deductible contributions made to my tIRA. The current value of my tIRA is $185,900(all of it in Vanguard Life Strategy Moderate Growth and all were non-deductible contributions) with a basis of $80,000. Would it be wise to proceed at this time considering my timeline and unsure what I'll do with the 401k once I retire?
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afr
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Re: 401k with no employer match

Post by afr »

Anyone?
placeholder
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Re: 401k with no employer match

Post by placeholder »

afr wrote: Sun Apr 07, 2024 11:23 am Still planning to retire in a little over 3 years and just found out that I'm able to do a direct rollover(into my 401k) of the non-deductible contributions made to my tIRA. The current value of my tIRA is $185,900(all of it in Vanguard Life Strategy Moderate Growth and all were non-deductible contributions) with a basis of $80,000. Would it be wise to proceed at this time considering my timeline and unsure what I'll do with the 401k once I retire?
You can roll over the pretax amounts not the basis which would be an excellent idea and allow you to convert the basis with little tax impact so I would do that.
Topic Author
afr
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Re: 401k with no employer match

Post by afr »

placeholder wrote: Sun Apr 07, 2024 10:15 pm
afr wrote: Sun Apr 07, 2024 11:23 am Still planning to retire in a little over 3 years and just found out that I'm able to do a direct rollover(into my 401k) of the non-deductible contributions made to my tIRA. The current value of my tIRA is $185,900(all of it in Vanguard Life Strategy Moderate Growth and all were non-deductible contributions) with a basis of $80,000. Would it be wise to proceed at this time considering my timeline and unsure what I'll do with the 401k once I retire?
You can roll over the pretax amounts not the basis which would be an excellent idea and allow you to convert the basis with little tax impact so I would do that.
All of my tIRA contributions were after-tax and non-deductible.
Topic Author
afr
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Re: 401k with no employer match

Post by afr »

placeholder wrote: Sun Apr 07, 2024 10:15 pm
afr wrote: Sun Apr 07, 2024 11:23 am Still planning to retire in a little over 3 years and just found out that I'm able to do a direct rollover(into my 401k) of the non-deductible contributions made to my tIRA. The current value of my tIRA is $185,900(all of it in Vanguard Life Strategy Moderate Growth and all were non-deductible contributions) with a basis of $80,000. Would it be wise to proceed at this time considering my timeline and unsure what I'll do with the 401k once I retire?
You can roll over the pretax amounts not the basis which would be an excellent idea and allow you to convert the basis with little tax impact so I would do that.
All of my tIRA contributions were after-tax and non-deductible. Hence, I will not be permitted to do a reverse rollover since government rules do not allow for a reverse rollover of after-tax(non-deductible) IRA funds into my 401k.
HomeStretch
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Re: 401k with no employer match

Post by HomeStretch »

Edit based on your last post - will your plan not allow the $106k pretax TIRA earnings only to be rolled over into your 401k? It’s understandable that the $80k TIRA basis itself cannot be rolled into your traditional 401k as no plan allows that.
______________

The TIRA earnings on non-deductible TIRA contributions are pretax. Your TIRA balance of $186k has pretax growth of $106k and basis of $80k. Consider rolling over the $106k pretax balance into your Traditional 401kIRA and converting the $80k basis to your Roth IRA. There are no tax consequences to this. After conversion, the $80k in the Roth IRA will grow tax free.

Also prioritize contributing to your/spouse’s Roth IRAs. If your income is too high to directly contribute, then do backdoor Roths (this works best if you don’t have any other pretax IRA balances). Use the Taxable account dividends and gains to fund this if you need to.

The more $ you can prioritize contributing to Roth rather than Taxable, the better. Lower taxable income in retirement means:
- lower taxes each year
- higher ACA premium subsidies if you will use ACA coverage
- lower IRMAA MAGI which may help lower additional Medicare premiums surcharges (IRMAA), if any.

Does your 401k offer a mega backdoor Roth?
Last edited by HomeStretch on Mon Apr 08, 2024 9:25 pm, edited 1 time in total.
Topic Author
afr
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Re: 401k with no employer match

Post by afr »

HomeStretch wrote: Mon Apr 08, 2024 8:48 am The TIRA earnings on non-deductible TIRA contributions are pretax. Your TIRA balance of $186k has pretax growth of $106k and basis of $80k. Consider rolling over the $106k pretax balance into your Traditional IRA and converting the $80k basis to your Roth IRA. There are no tax consequences to this. After conversion, the $80k in the Roth IRA will grow tax free.

Also prioritize contributing to your/spouse’s Roth IRAs. If your income is too high to directly contribute, then do backdoor Roths (this works best if you don’t have any other pretax IRA balances). Use the Taxable account dividends and gains to fund this if you need to.

The more $ you can prioritize contributing to Roth rather than Taxable, the better. Lower taxable income in retirement means:
- lower taxes each year
- higher ACA premium subsidies if you will use ACA coverage
- lower IRMAA MAGI which may help lower additional Medicare premiums surcharges (IRMAA), if any.

Does your 401k offer a mega backdoor Roth?
Thank you as I now fully understand. Unfortunately my DW does not have a 401k through her employer.
HomeStretch
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Re: 401k with no employer match

Post by HomeStretch »

afr wrote: Mon Apr 08, 2024 8:54 am
HomeStretch wrote: Mon Apr 08, 2024 8:48 am The TIRA earnings on non-deductible TIRA contributions are pretax. Your TIRA balance of $186k has pretax growth of $106k and basis of $80k. Consider rolling over the $106k pretax balance into your Traditional 401k IRA and converting the $80k basis to your Roth IRA. There are no tax consequences to this. After conversion, the $80k in the Roth IRA will grow tax free.

Also prioritize contributing to your/spouse’s Roth IRAs. If your income is too high to directly contribute, then do backdoor Roths (this works best if you don’t have any other pretax IRA balances). Use the Taxable account dividends and gains to fund this if you need to.

The more $ you can prioritize contributing to Roth rather than Taxable, the better. Lower taxable income in retirement means:
- lower taxes each year
- higher ACA premium subsidies if you will use ACA coverage
- lower IRMAA MAGI which may help lower additional Medicare premiums surcharges (IRMAA), if any.

Does your 401k offer a mega backdoor Roth?
Thank you as I now fully understand. Unfortunately my DW does not have a 401k through her employer.
Ok, so a backdoor Roth (IRA) is not a great idea for your spouse as the Roth conversion (part 2 of a backdoor Roth) will be subject to pro-rated taxes. Only contribute to her Roth IRA if your joint income allows her to do so directly.

For you, consider:
1) the rollover of the TIRA pretax growth to your T401k
2) doing an annual Roth IRA contribution either direct or via a backdoor Roth (IRA).
3) looking into whether your 401k offers a mega backdoor Roth (401k).

If you are not familiar with the backdoor IRA and 401k methods I am referencing, these BH wiki pages may be helpful:
IRA - https://www.bogleheads.org/wiki/Backdoor_Roth
401k - https://www.bogleheads.org/wiki/Mega-backdoor_Roth

Good luck with your retirement countdown!!!
Last edited by HomeStretch on Mon Apr 08, 2024 9:26 pm, edited 1 time in total.
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ruralavalon
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Re: 401k with no employer match

Post by ruralavalon »

afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
If your employer's 401k plan offers any decent funds then in my opinion it makes sense to make maximum annual employee contributions (including catch-up contributions) to the plan even with no employer match.

What funds are offered in your employer's plan? Please give fund names, tickers and expense ratios.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
afr
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Re: 401k with no employer match

Post by afr »

HomeStretch wrote: Mon Apr 08, 2024 9:12 am
afr wrote: Mon Apr 08, 2024 8:54 am
HomeStretch wrote: Mon Apr 08, 2024 8:48 am The TIRA earnings on non-deductible TIRA contributions are pretax. Your TIRA balance of $186k has pretax growth of $106k and basis of $80k. Consider rolling over the $106k pretax balance into your Traditional IRA and converting the $80k basis to your Roth IRA. There are no tax consequences to this. After conversion, the $80k in the Roth IRA will grow tax free.

Also prioritize contributing to your/spouse’s Roth IRAs. If your income is too high to directly contribute, then do backdoor Roths (this works best if you don’t have any other pretax IRA balances). Use the Taxable account dividends and gains to fund this if you need to.

The more $ you can prioritize contributing to Roth rather than Taxable, the better. Lower taxable income in retirement means:
- lower taxes each year
- higher ACA premium subsidies if you will use ACA coverage
- lower IRMAA MAGI which may help lower additional Medicare premiums surcharges (IRMAA), if any.

Does your 401k offer a mega backdoor Roth?
Thank you as I now fully understand. Unfortunately my DW does not have a 401k through her employer.
Ok, so a backdoor Roth (IRA) is not a great idea for your spouse as the Roth conversion (part 2 of a backdoor Roth) will be subject to pro-rated taxes. Only contribute to her Roth IRA if your joint income allows her to do so directly.

For you, consider:
1) the rollover of the TIRA pretax growth to your T401k
2) doing an annual Roth IRA contribution either direct or via a backdoor Roth (IRA).
3) looking into whether your 401k offers a mega backdoor Roth (401k).

If you are not familiar with the backdoor IRA and 401k methods I am referencing, these BH wiki pages may be helpful:
IRA - https://www.bogleheads.org/wiki/Backdoor_Roth
401k - https://www.bogleheads.org/wiki/Mega-backdoor_Roth

Good luck with your retirement countdown!!!
Thank you. My employer 401k plan does not allow for a mega-backdoor Roth.
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afr
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Re: 401k with no employer match

Post by afr »

ruralavalon wrote: Mon Apr 08, 2024 9:31 am
afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
If your employer's 401k plan offers any decent funds then in my opinion it makes sense to make maximum annual employee contributions (including catch-up contributions) to the plan even with no employer match.

What funds are offered in your employer's plan? Please give fund names, tickers and expense ratios.
I contribute to two funds-60%VFIAX(Vanguard500/0.04%) and 40%RGVGX(AF US Gov't Securities R6/0.24%).
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ruralavalon
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Re: 401k with no employer match

Post by ruralavalon »

afr wrote: Mon Apr 08, 2024 9:38 am
ruralavalon wrote: Mon Apr 08, 2024 9:31 am
afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
If your employer's 401k plan offers any decent funds then in my opinion it makes sense to make maximum annual employee contributions (including catch-up contributions) to the plan even with no employer match.

What funds are offered in your employer's plan? Please give fund names, tickers and expense ratios.
I contribute to two funds-60%VFIAX(Vanguard500/0.04%) and 40%RGVGX(AF US Gov't Securities R6/0.24%).
Those are both good funds in my opinion.

So I suggest making maximum amount employee contributions (including catch-up) to your employer's plan.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
placeholder
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Re: 401k with no employer match

Post by placeholder »

afr wrote: Mon Apr 08, 2024 8:30 am All of my tIRA contributions were after-tax and non-deductible. Hence, I will not be permitted to do a reverse rollover since government rules do not allow for a reverse rollover of after-tax(non-deductible) IRA funds into my 401k.
This is not accurate because while you can't roll aftertax into the 401k you don't need to you just roll any taxable earnings in then convert the remaining basis which is largely nontaxable depending on what happens during the rollover process.
placeholder
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Re: 401k with no employer match

Post by placeholder »

afr wrote: Mon Apr 08, 2024 7:46 am All of my tIRA contributions were after-tax and non-deductible.
Unless you had no growth in the ira then there is a taxable portion.
Navillus1968
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Re: 401k with no employer match

Post by Navillus1968 »

afr wrote: Mon Apr 08, 2024 8:30 am
placeholder wrote: Sun Apr 07, 2024 10:15 pm
afr wrote: Sun Apr 07, 2024 11:23 am Still planning to retire in a little over 3 years and just found out that I'm able to do a direct rollover(into my 401k) of the non-deductible contributions made to my tIRA. The current value of my tIRA is $185,900(all of it in Vanguard Life Strategy Moderate Growth and all were non-deductible contributions) with a basis of $80,000. Would it be wise to proceed at this time considering my timeline and unsure what I'll do with the 401k once I retire?
You can roll over the pretax amounts not the basis which would be an excellent idea and allow you to convert the basis with little tax impact so I would do that.
All of my tIRA contributions were after-tax and non-deductible. Hence, I will not be permitted to do a reverse rollover since government rules do not allow for a reverse rollover of after-tax(non-deductible) IRA funds into my 401k.
The IRS allows (requires, really) you to segregate the pre-tax earnings from the post-tax contributions in your TIRA and do a reverse rollover of just the pre-tax funds, leaving the basis behind in the TIRA.
The only question is whether your 401k also allows this process- some plans won't allow a TIRA with basis to be part of a reverse rollover because they are terrified that post-tax funds will be mistakenly introduced into the Trad 401k. You need to clarify with your custodian what their policy is.

Assuming your 401k custodian is OK with the reverse rollover, once the reverse rollover is complete, that should allow you to rollover your TIRA basis tax-free to a Roth, plus do the backdoor Roth process in your TIRA each year until retirement.
Three years of BDR won't amount to a ton of money, but the real advantage is to have 3 year's tax-free earnings on your 16 year's of prior post-tax contributions happening in your Roth IRA instead of them generating pre-tax earnings in your TIRA. The BDR contributions are more of a lagniappe, as the Cajuns say.
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afr
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Re: 401k with no employer match

Post by afr »

Navillus1968 wrote: Mon Apr 08, 2024 9:14 pm
afr wrote: Mon Apr 08, 2024 8:30 am
placeholder wrote: Sun Apr 07, 2024 10:15 pm
afr wrote: Sun Apr 07, 2024 11:23 am Still planning to retire in a little over 3 years and just found out that I'm able to do a direct rollover(into my 401k) of the non-deductible contributions made to my tIRA. The current value of my tIRA is $185,900(all of it in Vanguard Life Strategy Moderate Growth and all were non-deductible contributions) with a basis of $80,000. Would it be wise to proceed at this time considering my timeline and unsure what I'll do with the 401k once I retire?
You can roll over the pretax amounts not the basis which would be an excellent idea and allow you to convert the basis with little tax impact so I would do that.
All of my tIRA contributions were after-tax and non-deductible. Hence, I will not be permitted to do a reverse rollover since government rules do not allow for a reverse rollover of after-tax(non-deductible) IRA funds into my 401k.
The IRS allows (requires, really) you to segregate the pre-tax earnings from the post-tax contributions in your TIRA and do a reverse rollover of just the pre-tax funds, leaving the basis behind in the TIRA.
The only question is whether your 401k also allows this process- some plans won't allow a TIRA with basis to be part of a reverse rollover because they are terrified that post-tax funds will be mistakenly introduced into the Trad 401k. You need to clarify with your custodian what their policy is.

Assuming your 401k custodian is OK with the reverse rollover, once the reverse rollover is complete, that should allow you to rollover your TIRA basis tax-free to a Roth, plus do the backdoor Roth process in your TIRA each year until retirement.
Three years of BDR won't amount to a ton of money, but the real advantage is to have 3 year's tax-free earnings on your 16 year's of prior post-tax contributions happening in your Roth IRA instead of them generating pre-tax earnings in your TIRA. The BDR contributions are more of a lagniappe, as the Cajuns say.
Our office 401k manual and website has forms for incoming rollovers, however I had to get the office manager’s signature and was told that she needed to contact the brokerage first to find out if our plan allows it.
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afr
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Re: 401k with no employer match

Post by afr »

Just a follow up. Our 401k custodian received my paperwork and is moving forward for an incoming rollover of the untaxed $$$ in my Vanguard tIRA. I have 80k on basis so roughly a little over 100k(pre-tax gains) will be rolled into my 401k. My Vanguard tIRA holdings are100% in the Life Strategy Moderate Growth Fund. I requested an electronic transfer of funds to my 401k. Once the funds are transferred I’ll simply convert the remaining 80k in basis to my existing RothIRA which is 100% VTSAX.
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afr
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Re: 401k with no employer match

Post by afr »

Once the incoming rollover of 100k is transferred to my 401j, I should be left with a little over 80k, which is my basis. Can I convert all of the basis into my Roth IRA at once? What if there’s a few hundred dollars remaining in the tIRA? Do I just leave it or convert everything leaving nothing in the tIRA?
toddthebod
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Re: 401k with no employer match

Post by toddthebod »

afr wrote: Sat Apr 20, 2024 8:05 am Once the incoming rollover of 100k is transferred to my 401j, I should be left with a little over 80k, which is my basis. Can I convert all of the basis into my Roth IRA at once? What if there’s a few hundred dollars remaining in the tIRA? Do I just leave it or convert everything leaving nothing in the tIRA?
Convert everything, leave nothing behind. Check again in a month for any straggling dividends and convert those, too.
terran
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Re: 401k with no employer match

Post by terran »

If you've moved all the gains to 401(k) leaving only basis in the t.IRA then convert everything and you won't owe any tax. You can also start contributing and converting immediately (backdoor Roth) from here forward. It was awhile ago, so presumably you've settled this, but I would agree that you should contribute as much as you can afford (even if that means withdrawing from your taxable account) to the 401(k) including catchup regardless of the lack of match since you have good investment options and you expect your tax bracket to be lower in retirement.
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afr
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Re: 401k with no employer match

Post by afr »

Please excuse my ignorance, but is the incoming rollover from my tIRA to my 401k supposed to be initiated by me or the 401k folks? I gave my office manager the forms from the 401k custodian and requested a wire transfer of approximately 100k(an amount slightly lower than the actual gains from my tIRA leaving the basis only). Or do I initiate on my end requesting a check or wire transfer from Vanguard to my 401k? The completed forms were sent a week ago to the 401k company and I've heard nothing since.
chassis
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Re: 401k with no employer match

Post by chassis »

afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
I would contribute to taxable in your situation and not to tIRA or Roth.
toddthebod
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Re: 401k with no employer match

Post by toddthebod »

afr wrote: Tue Apr 23, 2024 6:29 am Please excuse my ignorance, but is the incoming rollover from my tIRA to my 401k supposed to be initiated by me or the 401k folks? I gave my office manager the forms from the 401k custodian and requested a wire transfer of approximately 100k(an amount slightly lower than the actual gains from my tIRA leaving the basis only). Or do I initiate on my end requesting a check or wire transfer from Vanguard to my 401k? The completed forms were sent a week ago to the 401k company and I've heard nothing since.
You would initiate it from Vanguard, but you will probably need to request some info from your 401(k) provider first.

When I did a reverse rollover from my Schwab IRA to my Fidelity 401(k), I called Fidelity to get the necessary info which includes the address they wanted the check mailed to and an account number for the employer's plan. Then I had to enter this info onto a form from Schwab and upload it to their message center.
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afr
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Re: 401k with no employer match

Post by afr »

chassis wrote: Tue Apr 23, 2024 6:36 am
afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
I would contribute to taxable in your situation and not to tIRA or Roth.
chassis,
Any particular reason why taxable over Roth?
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afr
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Re: 401k with no employer match

Post by afr »

Well, my employer signed off and submitted the incoming direct rollover election form I completed on April 22 to Raymond James, who in turn fowarded to American Funds/Capital Group. And I'm still waiting for this to go thru. Obviously not a priority for them.
Topic Author
afr
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Re: 401k with no employer match

Post by afr »

This is a copy of an email I just received from Capital Group/American Funds that was fowarded to me and my contact at Raymond James(who handles our 401k)-

Hello,
Our records doesn't indicate $100,000.00 has been received for Andrew. Just to be clear, the Incoming Direct Rollover forms do not initiate a rollover from another custodian. The participant must work with their former provider if they are rolling funds into this plan.
Upon receipt of the incoming rollover check, Incoming Direct rollover forms authorize Capital Group to deposit the check. The previous provider information isn't completed on the forms. Thank you.
If you have any questions, please do not hesitate to contact us at the number or email address below.

Cordially,
Retirement Plan Services

Does this mean I have to request a check from Vanguard(where I have my tIRA) to be sent to me and then send to Capital Group?
Locked