Base Wealth Management urges all 401(K) holders to consider a Roth Employer Match

SARASOTA, Fla., March 20, 2023 /PRNewswire/ -- In December 2022, a law that allows companies to make matching post-tax Roth contributions in place of tax-deferred contributions was passed. Roth contributions grow tax-free, allowing for convenient budgeting and a potentially lower tax bracket in retirement. In other great news, beginning in 2024, Roth 401(K)s will not be subject to Required Minimum Distributions, meaning they can continue to grow tax-free, which allows for greater flexibility in a retirement distribution plan. 

Roth withdrawals don't count as taxable income, keeping your Adjusted Gross Income (AGI) low. This is achieved through paying taxes on contributions rather than on earnings, unlike a regular 401(K). To stay in as low a bracket as possible in retirement, it's important to reduce taxable income as much as possible.

Any income received in retirement can lead to a higher tax bracket and thus higher Medicare premiums (up to 240% of the base rate), needlessly costing you potentially tens of thousands of dollars. Considering that taxes are at historically low levels, it is likely safe to presume that tax rates will be higher in the future. Therefore, it's reasonable to assume that paying taxes at today's rates is more beneficial than paying taxes in the future at higher rates.

Dan DiLascia, the founder of Base Wealth Management, has this to say about the Roth Matching Contribution:

"With Secure 2.0 allowing for matching Roth contributions, 401(K) holders are given more power and control to take advantage of tax-free withdrawals in retirement. This not only allows for hassle-free budgeting but also provides a clear understanding of the size of their nest egg, making it easier for individuals to plan for their future with confidence."

Now that a few months have passed since the changes came into effect, employers that currently offer a Roth 401(K) may have already made the changes to allow for direct Roth matches if they plan to offer them. Be sure to reach out to your HR representative today to enquire about your particular plan.

Then, contact a financial advisor to review your personal situation and ensure a Roth match makes sense, as there are many other factors to consider.

Contact:
Dan DiLascia
[email protected]

SOURCE Base Wealth Management