401k Question - roth or no? is it worth it?

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NYCaviator
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401k Question - roth or no? is it worth it?

Post by NYCaviator »

This is a follow up to my previous post on S-Corps. We've decided to go that route, but it will affect my 401k. My S-Corp is part of a larger control group, so I cannot create my own retirement plan. The control group's 401k allows the regular $20,500 deferral as an employee, and there is an "employer' match which "matches" 4% of compensation up to $305,000 - so an additional $12,200. I say "match," because as an owner, I have to write a check for both sides of the contribution. The only benefit I get is the tax deferral.

With the S-Corp, my match will be reduced by $6,200 Our 401k plan isn't terrible, it offers fidelity index funds, and the quarterly "admin" fees are about 0.1% (not bad). I am above the 30% bracket on taxes (state and fed). I max 401k, backdoor roths, and contribute a significant amount to taxable.

Is the $6,200 I will lose on the "employer" side that big of a deal? It would be nice to contribute more, but I'm ultimately saving more taxes with the S-Corp.

Should I consider making roth contributions to the 401k?
exodusNH
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Re: 401k Question - roth or no? is it worth it?

Post by exodusNH »

NYCaviator wrote: Fri May 13, 2022 7:46 am This is a follow up to my previous post on S-Corps. We've decided to go that route, but it will affect my 401k. My S-Corp is part of a larger control group, so I cannot create my own retirement plan. The control group's 401k allows the regular $20,500 deferral as an employee, and there is an "employer' match which "matches" 4% of compensation up to $305,000 - so an additional $12,200. I say "match," because as an owner, I have to write a check for both sides of the contribution. The only benefit I get is the tax deferral.

With the S-Corp, my match will be reduced by $6,200 Our 401k plan isn't terrible, it offers fidelity index funds, and the quarterly "admin" fees are about 0.1% (not bad). I am above the 30% bracket on taxes (state and fed). I max 401k, backdoor roths, and contribute a significant amount to taxable.

Is the $6,200 I will lose on the "employer" side that big of a deal? It would be nice to contribute more, but I'm ultimately saving more taxes with the S-Corp.

Should I consider making roth contributions to the 401k?
At a 30% tax bracket? No, unless you expect to be in that bracket in retirement as well.
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retired@50
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Re: 401k Question - roth or no? is it worth it?

Post by retired@50 »

NYCaviator wrote: Fri May 13, 2022 7:46 am Should I consider making Roth contributions to the 401k?
There is a wiki page on this topic. You might find it helpful as you consider your plans.

Traditional versus Roth: https://www.bogleheads.org/wiki/Traditional_versus_Roth

Regards,
This is one person's opinion. Nothing more.
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