Thanks to the SECURE Act 2.0, company matches for your 401k can now be made into Roth!
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Mike Bernard, CFP® offers advisory services through KFG Wealth Management, LLC dba Korhorn Financial Group. This information is for general financial education and is not intended to provide specific investment advice or recommendations. All investing and investment strategies involve risk including the potential loss of principal. Asset allocation & diversification do not ensure a profit or prevent a loss in a declining market. Past performance is not a guarantee of future results….(read more)
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Good news for those looking to maximize their retirement savings – many companies are now offering the option to contribute to your 401k plan and receive the match in a Roth account. This means that you can take advantage of the tax benefits of a Roth account while still benefiting from your employer’s contribution.
Traditionally, 401k contributions are made on a pre-tax basis, meaning that you do not pay taxes on the money you contribute until you withdraw it in retirement. On the other hand, Roth contributions are made with after-tax dollars, so you pay taxes on the money upfront but can withdraw it tax-free in retirement.
By choosing to contribute to your 401k and receive the match in a Roth account, you get the best of both worlds. You can take advantage of your employer’s contribution while also benefiting from tax-free withdrawals in retirement. This can be especially beneficial if you expect to be in a higher tax bracket in retirement or if you want to diversify your tax strategy.
It’s important to note that not all companies offer this option, so it’s worth checking with your HR department to see if it’s available to you. If it is, it’s a good idea to consider the impact on your overall financial strategy and consult with a financial advisor if needed.
In addition, if you already have a traditional 401k account, you may be able to roll over some or all of your balance into a Roth 401k account. This can be a great way to maximize your savings and take advantage of the benefits of a Roth account.
Overall, the ability to contribute to your 401k and receive the match in a Roth account is a great option for those looking to boost their retirement savings and optimize their tax strategy. Be sure to explore this option with your employer and consider the potential benefits for your financial future.
has anyone been able to actually do this? in the spring of 23 I asked my HR and they checked into it and my 401K provider said its not possible yet.
Oh Boy! This guy is clueless!
Never, ever, ever contribute more than it takes to get the match amount.
RIP to those who’ve been laid off.
If it’s treated as an immediate conversion, wouldn’t you be required to make quarterly estimates tax payments?
Why not just make company matches non-taxable. Then we could have our cake and eat it too.
What’s going to happen when your employer part put you over the limit for a Roth contribution?
Mike, you said payroll taxes will be due on the company match if you elect to have these dollars go into the Roth portion of your 401k. If I choose to do this, will I also owe FICA taxes on these contributions?