401k Post Tax vs Brokerage Question

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infinitix
Posts: 18
Joined: Thu Jan 25, 2018 2:09 pm

401k Post Tax vs Brokerage Question

Post by infinitix » Thu Nov 08, 2018 8:48 am

Hi All,

I am looking for some guidance on how I should focus my future contributions. I am currently 29.

Planned 2019 Contributions
401k - $19,000 Pre-Tax; $5k Post-Tax
HSA - $3,500
Roth IRA - $6,000 via Backdoor
Taxable Brokerage - $1k/mos

I just learned that my employer allows post-tax 401k contributions up to the total contribution limit, and allows for in-service distributions of post-tax dollars to an IRA. My ultimate goal is to eventually max out total 401k contributions and annually distribute post-tax contributions to my Roth IRA for mega backdoor conversions.

Until my income can fully support that, would it be more beneficial to reduce my taxable brokerage contributions and increase my 401k? It seems to me the best move to grow my Roth IRA for tax-free growth. But am I not considering any implications to that strategy?

Thanks!

PFInterest
Posts: 2535
Joined: Sun Jan 08, 2017 12:25 pm

Re: 401k Post Tax vs Brokerage Question

Post by PFInterest » Thu Nov 08, 2018 9:01 am

mega backdoor is preferable to taxable for retirement savings.

retiredjg
Posts: 34165
Joined: Thu Jan 10, 2008 12:56 pm

Re: 401k Post Tax vs Brokerage Question

Post by retiredjg » Thu Nov 08, 2018 9:18 am

After-tax rolled out to Roth is preferable to taxable unless you need more liquidity. For a short term goal, I'd probably just use taxable.

infinitix
Posts: 18
Joined: Thu Jan 25, 2018 2:09 pm

Re: 401k Post Tax vs Brokerage Question

Post by infinitix » Thu Nov 08, 2018 10:20 am

Thanks! Just wanted to make sure I wasn't missing some fine print implication. I appreciate the quick replies.

2cents2
Posts: 328
Joined: Sun Mar 02, 2014 11:31 am

Re: 401k Post Tax vs Brokerage Question

Post by 2cents2 » Thu Nov 08, 2018 10:40 am

There could be a couple of potential downsides depending on what your plans are for the $$. You would not be able to take your Roth earnings penalty free if you needed the money prior to 59.5. Also, you would not be able to tax loss harvest if you had any losses.

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