10 YOE. Your $19,500 sitting in the 401(k) earns income each year, but when you withdraw it in retirement, you’ll pay taxes.When most people receive the $4,290 tax refund from the government, what do you think they do with it?Will they set that tax refund aside and invest it to cover future taxes in 40 years? And then, in 40 years, they will need to pay another $10,000 in taxes on the withdrawal. He recently got laid off from Western Digital with a title of Principal Firmware Engineer. Yes. Hold it forever? Access Broadcom's Customer Support Portal to obtain warranty information, find documentation and downloads, and answer other questions you might have. When contributions have a tax basis, it means you can withdraw only You don’t get a tax break for after-tax contributions to Broadcom’s 401(k), and you’ll pay taxes once you take money out.What does that mean?! This way, you’ll only withdraw what you need in retirement.Let’s use an example to show the tax benefit of using Broadcom’s Roth 401(k).In retirement, you find yourself in the 22% Federal tax bracket and 9.3% California tax bracket. I’m glad you asked!The general rule of thumb is that those early in their careers will make less income Theoretically, one’s salary will increases over time, meaning savings and investments will increase, which then means Under the Roth option, you’d owe fewer taxes now since you’re most likely in a lower tax bracket.In contrast, under the traditional option, you won’t owe taxes now in your currently low tax bracket. As soon as your restricted stock units are vested, sell them to reduce your risk. 1. !Don’t pass up the free money offered in Broadcom’s 401(k).We’re big fans of 401(k) matches. If you work in the Bay Area for a public technology company, as I do, then part of your salary is paid in Restricted Stock Units (RSUs). )This illustrates the psychology of savings: in each situation, you Utilizing a Roth 401(k) usually results in higher net savings because there is no temptation to spend the tax refund.This is called a Required Minimum Distribution, or RMD. There is a vesting schedule that must be met before you’ll have full access to these. Look over your current selections and make an action plan to optimize the benefits provided. This is why it’s called a “post-tax” contribution; you are taxed upfront.However, you will be able to withdraw the money The natural question is deciding: For us, it’s a very easy answer:We’re big fans of the Roth option because How does that work? If you’re thinking you can avoid the tax hit of a traditional 401(k) by simply leaving money in the account, think again. Your $19,500 sitting in the 401(k) earns income each year, and you can withdraw it in retirement, totally tax-free.If you choose the Traditional option, you’ll contribute $19,500 and you’ll get a tax refund of (let’s assume) $4,290. Before your eyes glaze over, I will spare you the details because you don’t need to know them!This is where the Mega Backdoor Roth comes in: you can use the Mega Backdoor Roth to convert your after-tax contributions into tax-free Roth contributions. So, what do you do if you want an elaborate investment mix in Broadcom’s 401(k)? Then, invest that money for future growth. The Investment Policy Statement (IPS) is a document that dictates how you invest your money. That’s the bad news. That’s great news because You’d be hard-pressed to create a better investment allocation than what’s in Vanguard target-date fund. You’ll never have to rebalance or update your investment mix; you’ll never have to sell what’s up and buy what’s down. That’s because investing is just one piece of the financial planning puzzle.You may not believe it, but we’ve come to the end of what you need to know about Broadcom’s 401(k) options. Don’t pass up the discount!Once you’ve purchased Broadcom’s stock at a discount, what do you do with it?
No! Yay!Let’s continue on to discuss the Mega Backdoor Roth.Executing a Mega Backdoor Roth allows you to convert your after-tax contributions into Roth 401(k) contributions.As we’ve learned, Roth 401(k) contributions are withdrawn in retirement tax-free.Using Broadcom’s 401(k) to execute a Mega Backdoor Roth is a simple two-step process:It’s a two-step process to take advantage of the Mega Backdoor Roth in Broadcom’s 401(k).This contribution limit includes:With the option to contribute after-tax with Broadcom’s 401(k), you can put big money into your retirement savings each year.In our first recap, we left off at Step 3, where you personally contributed $19,500 to your 401(k) and Broadcom matched your contribution, up to 6% of your salary.