After-Tax Contributions with In-Plan Roth Conversion vs Brokerage Investing

Investing
#1

Good evening all,

I’ve already been maxing my work sponsored 401K for the past couple of years (Currently I’m 28). I’ve been offered the opportunity to consider After-Tax contribution in that same plan with an In-Plan Roth Conversion on a quarterly basis.

  1. Is that After-Tax/In-Plan Roth Conversion worth considering given that the withdrawals are still subject to the IRS rules with age limits (59.5)?

  2. OR is it better to take that already taxed money and simply go to a brokerage?

  3. Finally, my banking is mainly with Chase. Any reason I shouldn’t just open with them the brokerage and buy mutual funds such as VTSAX or VFFVX vs opening the brokerage with Vanguard?

#2

Hi Mo,

  1. Given your age, it is wise to contribute to a Roth 401k or participate in the In-Plan Roth Conversion. This is especially true if you believe your income will increase in the future.

  2. If you do not plan on touching the money until after age 59.5, then it is better to leave the money in your 401k.

  3. It is perfectly fine to open a Chase Invest brokerage account instead of a Vanguard account. This decision comes down to fees, user experience, and customer service. Please double-check with Chase to make sure they offer Vanguard mutual funds for free.

Good luck!

1 Like