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Old 12-12-2009, 07:37 PM   #21
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Old 12-12-2009, 07:53 PM   #22
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I am hard pressed to figure out a scenario where non deductible contributions come out better than being smart about asset location.
With the 401K, the money is in an ERISA protected account. So if you live in a state with poor retirement savings protection laws that is huge plus. ERISA accounts have an anti-alienation feature.

This is a good article on it:
ERISA Anti-Alienation Provisions and Welfare Benefit Plans

Or if you convert the money to a Roth IRA, you give up the asset protection aspect of the after tax 401K contributions, but the earnings are now tax free forever, not just tax deferred.
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Old 12-12-2009, 08:45 PM   #23
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i think you overstate the benefit of ERISA protection. how many people have needed that or couldn't get needed protection via insurance?
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Old 12-12-2009, 09:59 PM   #24
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i think you overstate the benefit of ERISA protection. how many people have needed that or couldn't get needed protection via insurance?
I don't know how many people have needed it and it may not be something important to everyone or even most people. But personally if I can easily and inexpensively get ironclad protection for my decades of savings, I'm going to take advantage of it.

I found this article of interest -
IRAs Could Be Fair Game in Lawsuits -- latimes.com
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Old 12-13-2009, 08:02 AM   #25
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Too Frugal.........I'm w/ you on this one. Hopefully I'm understanding correctly that this protection is robust........pretty much only IRS and spouse can attack and I like to think I have some control over those (tho it may be delusional in the case of the latter ). I like the fact that the protection is pretty plain vanilla........no need to file successfully for bankruptcy and no limits. As you suggest, we're probably a very small minority but I have seen a trend over the years to more discussion about this topic.

Reading that article you referenced was a bit confusing to me. A reader could get the impression that CA had reasonable protection compared to a lot of states. My prior impression (which I will retain unless convinced otherwise) was that CA protection was actually among the worst.
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Old 12-16-2009, 07:28 PM   #26
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Update.... I called Fidelity and the rep said they are allowing customers to do after-tax 401k contributions only to Roth IRAs. However he also said the IRS has not made any official rulings on the subject, even though Fidelity has been trying to get an official ruling on the matter for the last couple of years. So we could do the conversion but roll the dice that the IRS may disallow it for some reason at a future date.
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