golfandfly

Smart people,

I've put money in the vanguard after tax plan for years, mainly just for putting money away before my wife spends it all.. Other than that, are their any advantages to putting money in this account vs any other account?

busdriver12

I'm assuming that before this point, you have fully maxed out your 401K contribution and put in the max into a backdoor Roth IRA. If you haven't done both of those things before putting money into an after tax IRA, you have done this incorrectly!

JohnnyViper

Rookie mistake! Asking pilots for financial advice. Come over to my house and my dog will teach you how to play Halo. ;-)

IslanderDriver

Because qualified plans are such a great way to build wealth and you have so much control over them.
Also, you can easily access the money and Congress would NEVER change the rules. (Sarcasm)

busdriver12

All you can do is make your best guess, and diversify. I intend to have millions (eventually) in both my Roth and 401K. You have a tremendous amount of control over a Roth. And real estate, and no debt, and pension, and maybe something else if I can come up with it. Oh--well employed kids who can take care of me, though I'm not sure if they want to. Then if something gets confiscated, oops, that would be "forfeited" or taxed to death, there are other options.

Some people have such a pessimistic view that they just decide to spend it all. Or stock up on bullets and MRE's. Meanwhile, missing investing in the stock market that has made a lot of people very wealthy. If you're going to invest in the market, you may as well do it tax free.

CrakPipeOvrheat

I like you busdriver12. You think the way I think. I max out my Roth 401k and both my wife and I's Roth IRA's every year and I'm in my late 20's. I work at a regional and I could do so for the rest of my career (I won't though) and still have more money to retire with at an earlier age than this guy. Spending it all now or more than all of it through financing, I call that living the "American dream". My friends tell me I'm "already ahead of the game just for the fact that I'm even thinking about retirement at my age". I tell them I'm not ahead of the "game". I'm ahead of the people who are behind in the game or not participating in the game. In my mind, I am still very much behind in the "game" due to many years stagnated in a regional FO seat.

FDXLAG

Not sure who you think "this guy" is whom you will have more money than, but the original poster was simply inquiring if he should invest his extra cash in the same accounts where the company puts his 401k money. That is where I put my extra money after taking out all my tax gimmicks money. I personally think it would be wiser to diversify to another company but I am to lazy.

Gnaw

After you've put in the normal max $17,500 , does FedEx allow you to make after-tax contributions up to the $52,000 limit? Does FedEx allow for non-hardship in-service withdrawals of after-tax contributions. Look at your retirement plan for the details. It should be spelled out clearly there. If so, you have an excellent opportunity to increase your Roth IRA greatly. Instead of being limited to $5500, you can put much more in.

Essentially, you roll that after-tax money out of your 401k into a Roth, pay the tax on any gains you've made, and then let the money grow tax free in your Roth.

Also, the earnings from your after-tax contributions to your 401k are taxed at ordinary income rates instead of the Long Term Capital Gains rate (15% bracket LTCG rate is 0%) So if your plan is to just leave the money there without rolling it out into a Roth, you'd be better off putting the money into a taxable account.

Tuck

I think the Roth AGI limits are too low here - very few Fedex pilots will qualify to put money in a Roth.

Gnaw

Backdoor that mofo


I love Bogleheads forum. So much good information that helps dumb folks like myself manage my finances better.