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Old 12-29-2020, 08:28 AM   #21
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Someguy, I'm continually surprised by a layer in this topic I was not aware of, so take everything I say with a grain of salt. I'll do my best to answer your questions.
Amen to that!

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The 415(c) limits are general plan limits as established by law. However, a specific 401k plan may effectively be more restrictive by not allowing certain contributions at all. For example the Fidelity prototype plan may not allow aftertax contributions (and I don't think it does). In that case, the limit of all contributions in such a plan is no higher than the sum of the income-eligible tax deferred contributions.
Fidelity may have been a bad example. I know other prototype plans from the majors allow after-tax contributions, ie to a Solo Roth 401(k) (because I have one). So what about then? Assuming your example again -- $60K net -- could that person contribute the standard $19.5K pre-tax and then $37K post-tax (ie, to Roth 401(k))? I'm trying to understand how that post-tax contribution would be different than the multi-step process outlined in your links?

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I'd like to address something you said earlier about generally maximizing tax deferred contributions in earning years. Since the 199A deduction has come into play, it adds an interesting wrinkle to this.
Yes. It's complex -- as you pointed out RMDs later factor in. Although your pre vs post tax savings ratio impacts this directly, plus your timing and the possibility of Roth conversion ladders between ER and RMDs (which is of course also dependent on your post tax savings).
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Old 12-29-2020, 10:09 AM   #22
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Fidelity may have been a bad example. I know other prototype plans from the majors allow after-tax contributions, ie to a Solo Roth 401(k) (because I have one). So what about then? Assuming your example again -- $60K net -- could that person contribute the standard $19.5K pre-tax and then $37K post-tax (ie, to Roth 401(k))? I'm trying to understand how that post-tax contribution would be different than the multi-step process outlined in your links?
This is my speculation but I think if the prototype plan allows after-tax contributions but not in service distributions the aftertax contribution could be made, but it could not be rolled over to a Roth account while in service. The gains on the after-tax contribution would be subject to income tax when distributed (but the principal would not). It would be like making an after-tax contribution to an IRA. The administrator would have to track the after-tax basis in the account.
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