Solutions 4 Financial Independence: 02/13/18

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BRIDGEPORT, W.Va (WDTV)- Question: I’m a doctor and our 401(k) plan offers a Roth option. I make $300,000. Am I over the income limit to make contributions?

Answer (John Halterman-Beacon Wealth Management): "Natalie, congratulations you are making great money. I understand your concern about income limits because in a Roth IRA you cannot make over $200,000 as a couple and also make contributions straight out.

But in a 401(k), it is completely different. There is no contribution limits to a Roth 401(k)."

Question: Is this an option she could keep in mind?

Answer (John Halterman-Beacon Wealth Management): "Well, it is definitely an option, but what it really boils down to is if it is in her best interest. Because a lot of times the income limits of boils down to if it is in the person’s best interest.

As an example, it is pre-tax tax deduction versus after-tax tax-free. The theory is, if you’re making over $200,000 to get the max tax benefit, you want to take the tax free in the end. But for someone who is a high income earner, and $300,000 is extremely high, that person needs to look at if I took my tax deduction and saved it in addition to what I am putting into my plan, that extra money that you save and build up, even though you don’t pay taxes on it, will end up still being more net money in your retirement.

For someone making her kind of money, I don’t think it’s the best option."