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Originally Posted by XtremeF150
(Post 1576102)
All this is correct and the 415 limit this year is suppose to be 52,000. So if one's only goal was to save for retirement they could shovel a ton of money into that account. 15% + (employee contribution)
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Originally Posted by Vikz09
(Post 1576366)
Hey Bro, you finished with your 88 training?
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Originally Posted by Vikz09
(Post 1576364)
You are correct. You can have anywhere from 0%-100% of the profit sharing put directly into your 401k. I did 100% last year to avoid the taxes on the bonus which tend to be higher than your tax bracket. Bonus money seems to be taxed at roughly 30-40 % which you can recoup some of that on year end taxes.
I have recently flown with several guys who are only contributing to the ROTH 401K (after taxes) because they hit the IRS limit by September. May as well keep putting money in year round but when you make 250k and the company contributes 15% the company is alone putting away 37500 per year toward your IRS limit of 52k. May as well put the 14.5 into a ROTH 401K :). Unfortunately, I do not have this same dilemma. Your profit sharing that you don't put in your 401k is just income....just like your regular paycheck, when you get your W2 at the end of the year(OK, January for previous year). The difference is that a profit sharing payout has a fixed mandatory 25% federal withholding taken out + state(GA=6%) + FICA(7.65%) + ALPA dues (1.9%). So for example a GA resident gets hit with 40.55% withheld from that PS check + DPMA dues on the amount if you're in that. But when you do your taxes the following year, the profit sharing is just part of your W2 earnings and the 25% they withheld is just part of your total federal tax withheld on the W2. How much fed tax you really end up paying on the PS is a function of what tax bracket you ultimately end up in after all your deductions... Don't forget that the PS is pensionable as defined in the PWA so you get an extra 15% of the PS amount into your 401k. |
Originally Posted by ATL7ER
(Post 1576926)
Don't confuse "withholding" on your profit sharing with tax rate.
Your profit sharing that you don't put in your 401k is just income....just like your regular paycheck, when you get your W2 at the end of the year(OK, January for previous year). The difference is that a profit sharing payout has a fixed mandatory 25% federal withholding taken out + state(GA=6%) + FICA(7.65%) + ALPA dues (1.9%). So for example a GA resident gets hit with 40.55% withheld from that PS check + DPMA dues on the amount if you're in that. But when you do your taxes the following year, the profit sharing is just part of your W2 earnings and the 25% they withheld is just part of your total federal tax withheld on the W2. How much fed tax you really end up paying on the PS is a function of what tax bracket you ultimately end up in after all your deductions... Don't forget that the PS is pensionable as defined in the PWA so you get an extra 15% of the PS amount into your 401k. |
Originally Posted by ATL7ER
(Post 1576926)
Don't forget that the PS is pensionable as defined in the PWA so you get an extra 15% of the PS amount into your 401k.
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Originally Posted by Vikz09
(Post 1576364)
You are correct. You can have anywhere from 0%-100% of the profit sharing put directly into your 401k. I did 100% last year to avoid the taxes on the bonus which tend to be higher than your tax bracket. Bonus money seems to be taxed at roughly 30-40 % which you can recoup some of that on year end taxes.
I have recently flown with several guys who are only contributing to the ROTH 401K (after taxes) because they hit the IRS limit by September. May as well keep putting money in year round but when you make 250k and the company contributes 15% the company is alone putting away 37500 per year toward your IRS limit of 52k. May as well put the 14.5 into a ROTH 401K :). Unfortunately, I do not have this same dilemma. If you are making 250k a year, you don't qualify for a ROTH anymore. |
Originally Posted by Left Handed
(Post 1577225)
If you are making 250k a year, you don't qualify for a ROTH anymore.
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A few comments from what I've read on this thread. It seems I read this stuff over and over and it's not clearly understood......
If you're a high earner, if all you care about is making tax free withdrawals when you retire (assuming you meet the requirements for the Roth withdrawal to be tax free), sure contribute to the Roth. Uncle Sugar is happy to have you pay higher taxes now then you might otherwise in the future. I don't get the fascination with the Roth. It's a tool in your financial toolbox. For some, it's a great tool. For others, not so great. Contributing to a Roth is not necessarily your best option unless you just enjoy paying taxes. If I was making $250K, I doubt I'd be contributing to a Roth unless I was going to be making a crapload of money in retirement or there was some extenuating circumstance. If you get a lump sum of money and a large percentage is withheld, it doesn't mean you're paying that % in tax. The amount of tax you are going to pay is the sum of lines 45 and 46, shown on line 47 of your 1040. It doesn't matter if your employer withholds 100%, 0%, 25%, one dollar, or a million dollars. You go into the tax tables with the number on line 43, and that's the base tax you're going to owe (assuming no "other taxes" which applies to few). If a lot is withheld, you get a lot back or you owe less. If a little is withheld, you get less back (or owe more). Contributing to a Roth 401K doesn't get you around the 415c limit. It's $52K for 2014. If you're 50 or older and you contribute to a 401k, you can exceed that 415c limit by the catch-up amount of $5,500. |
Originally Posted by gloopy
(Post 1577162)
How is it any "extra" in the long run?
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Originally Posted by globalexpress
(Post 1577524)
A few comments from what I've read on this thread. It seems I read this stuff over and over and it's not clearly understood......
If you're a high earner, if all you care about is making tax free withdrawals when you retire (assuming you meet the requirements for the Roth withdrawal to be tax free), sure contribute to the Roth. Uncle Sugar is happy to have you pay higher taxes now then you might otherwise in the future. I don't get the fascination with the Roth. It's a tool in your financial toolbox. For some, it's a great tool. For others, not so great. Contributing to a Roth is not necessarily your best option unless you just enjoy paying taxes. If I was making $250K, I doubt I'd be contributing to a Roth unless I was going to be making a crapload of money in retirement or there was some extenuating circumstance. If you get a lump sum of money and a large percentage is withheld, it doesn't mean you're paying that % in tax. The amount of tax you are going to pay is the sum of lines 45 and 46, shown on line 47 of your 1040. It doesn't matter if your employer withholds 100%, 0%, 25%, one dollar, or a million dollars. You go into the tax tables with the number on line 43, and that's the base tax you're going to owe (assuming no "other taxes" which applies to few). If a lot is withheld, you get a lot back or you owe less. If a little is withheld, you get less back (or owe more). Contributing to a Roth 401K doesn't get you around the 415c limit. It's $52K for 2014. If you're 50 or older and you contribute to a 401k, you can exceed that 415c limit by the catch-up amount of $5,500. |
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