Posted: 11/6/2025 8:32:00 PM EDT
|
So, this year, my base salary is high enough that I am offered to enroll in the non-qualified deferred compensation plan in addition to 401K - basically designed for high earners to set aside more money after you max your 401K and IRA, and also provides a matching compensation to those who are over the limit for 401K match (I am not high enough for that). I already max my 401K, including catch-up, and contribute $7000 yearly to an IRA, even though I don't get any tax break on it, just so I can trade without capital gains tax. Roth is not an option for me. I am thinking about stopping paying into the IRA and instead dumping money into this plan? if anyone here is familiar with this type of benefit, is there something I need to know? pros, cons? I work for a Fortune 25 company, so the risk of it going belly up is low |
IDF, A.A. 215, "Scorpion" Company. 1993-1996
|
The company I used to work at offered them for the upper management. There were big restrictions on when you could get your money back out. Each year you had to decide the future payment plan. Many people used them to fund retirement before social security kicked in. I wouldn’t recommend dropping your regular IRA. |
|
Originally Posted By MarkBinSC: The company I used to work at offered them for the upper management. There were big restrictions on when you could get your money back out. Each year you had to decide the future payment plan. Many people used them to fund retirement before social security kicked in. I wouldn't recommend dropping your regular IRA. |
IDF, A.A. 215, "Scorpion" Company. 1993-1996
|
You said Roth is not an option for you, but you should be doing backdoor Roth with your IRA every year. It’s already after tax money because of the income limits so you might as well convert it every year. Also, suggest you check to see if your 401k allows for after tax mega Roth contributions. Most large company programs do these days, particularly if they are through Fidelity. It can get you up to 70 to 80k limits, depending on your age. Deferred comp can be a nice addition, but you do want to know the details. |
|
When I max out my 401k both standard and Roth, fidelity just started a separate one. I didn’t know this was a thing until it became a thing for me. Currently fidelity is killing it for me. I had to reduce my contributions after that first time that happened and still going from 30% contributions to 10% my account has almost doubled in 3 years. So I pumped it back up a few percentage points just this week. Once you get your balance up past a few hundred K it climbs fast. |
|
Originally Posted By SideCarGT: You said Roth is not an option for you, but you should be doing backdoor Roth with your IRA every year. It's already after tax money because of the income limits so you might as well convert it every year. Also, suggest you check to see if your 401k allows for after tax mega Roth contributions. Most large company programs do these days, particularly if they are through Fidelity. It can get you up to 70 to 80k limits, depending on your age. Deferred comp can be a nice addition, but you do want to know the details. unfortuantely my IRA has a mix of pre-tax money from the previous rollovers and the current after-tax money from current contributions. I guess I could open another IRA account and do conversions from there? My 401K does have Roth option, but at my current tax rate, not sure it's a better option, that's why was looking at this new benefit. I just max my 401K up with pre-tax money every year. |
IDF, A.A. 215, "Scorpion" Company. 1993-1996
|
Originally Posted By m200maker: When I max out my 401k both standard and Roth, fidelity just started a separate one. I didn't know this was a thing until it became a thing for me. Currently fidelity is killing it for me. I had to reduce my contributions after that first time that happened and still going from 30% contributions to 10% my account has almost doubled in 3 years. So I pumped it back up a few percentage points just this week. Once you get your balance up past a few hundred K it climbs fast. I am not sure what you refer to. max out the contributions? yes, that's for sure, doing it. no matter how many 401K/IRA plans you have, your limit is the same - depending on age - $6000/7000 for IRA a year and $23500/31000 for 401K. am I wrong? |
IDF, A.A. 215, "Scorpion" Company. 1993-1996
Joined:
Sep 2022
Posts:
1961
EE: 0% (0)
USA
|
Originally Posted By Samal: I guess I could open another IRA account and do conversions from there? My 401K does have Roth option, but at my current tax rate, not sure it's a better option, that's why was looking at this new benefit. I just max my 401K up with pre-tax money every year. No as the pro-rata rule would eat you alive. You'd essentially be paying ordinary income rates or STCG on the conversion. My wife, by design, has $0 Trad Ira balance. We use that for our backdoor action (weird statement in this forum). My IRA is 7 digits so I don't touch Roth backdoors. Just fyi, moving forward in 2025 and beyond, your catchups are blended. https://www.ar15.com/forums/general/Did-you-know-401k-Catch-ups-new-rule-in-2026-What-a-rip-/133-2814839/ Edit: At your stage, you're walking a fine line balancing your tax footprint now, delayed compensation, future income tax brackets and then IRA to Roth conversions, while avoiding RMD's and then building a Trad-IRA tax BOMB in 20 years. It's expensive to do conversions when you have an income of any sort including LTCG as your conversions will sit on top of those values in the tax table. |
|
Originally Posted By Samal: unfortuantely my IRA has a mix of pre-tax money from the previous rollovers and the current after-tax money from current contributions. I guess I could open another IRA account and do conversions from there? My 401K does have Roth option, but at my current tax rate, not sure it's a better option, that's why was looking at this new benefit. I just max my 401K up with pre-tax money every year. Roll your pre-tax IRA to the 401k. Keep any Roth IRA where it is. Continue to pump $7,000 of after tax money into the IRA each year. Convert to a backdoor Roth the next day. If you only have Roth IRA balances, the Pro-rata rule shouldn't hurt you. |
In the beginning, the universe was created. This made a lot of people very angry, and has been widely regarded as a bad move. -Douglas Adams