Message Boards Digest

December 26, 2017

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AlbanyConsultant created a topic in 401(k) Plans

Transition Relief Applicable? Jan. 1 Implementation Date Desired

The partners of Partnership A have created a new Partnership N -- with 90%+ the same partners -- to buy a business via asset sale. Partnership A already has a plan for its business. The purchased company had a plan. In an effort to make the changeover as seamless as possible to the employees, the partners of Partnership N want to install an exact copy of that company's plan ASAP while they figure out how to proceed in the future now that they have doubled in size. Does this meet the transition relief standards?
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remozseo created a topic in 401(k) Plans

401(k) Roth -- How to Calculate the Roth on Paychecks?

I just signed onto a 401k Roth plan. I don't understand the math behind my personal contributions. [1] My employer's contribution will be always pre-tax [employers match]. [2] My personal contribution is after-tax when choosing ROTH. Let's take an example with an annual gross income of $100,000. Personal Contribution: 6% Employer Contribution: up to 6% with 100%. TRADITIONAL 401k -- PRE TAX: When calculating the Traditional, it seems pretty easy. 6% from 100k is $6k. The employer match is 100%, which is another 6k. The 6% is taken from the gross. That makes a total of 12k annual contribution from both parties. 12k will be tax deferred and also invested into the 401k Traditional Funds.ROTH 401 -- AFTER TAX: The employer contribution will be handled like the Traditional 401k. It's pre-tax. So 6% from the gross of 100k is 6k. That money will be tax deferred. Question: How is the employee's contribution handled with the ROTH? The 6% contribution -- is that 6% calculated also from the gross of 100k? If so, we also would have 6k that can be invested; but somehow we have to pay taxes on those 6k before investing, right Otherwise it wouldn't be after tax?
  • How and when will the 6% for the 401k ROTH be taxed?
  • How is this thing calculated?
100.000 x 6% = $6,000 and from the $6,000 I'll have to pay taxes? Or is this all wrong such that I have to calculate my 6% Roth Contribution after tax, and I can't use the 100k as gross income, but instead I have to use the 100k for my gross income first, minus all the taxes, and then what's left over as my net pay. I'll have to multiply it by 6%? I'm totally lost on that.
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