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supplemental contribution plan vs taxable account?

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  • Zzyzx Zzyzx 
    Participant
    Status: Physician
    Posts: 62
    Joined: 09/24/2018
    WCICon18

    Already contributing to 457, 401k, & 401a and am wondering if it makes sense to contribute to a supplemental contributions plan (SCP) instead of vanguard taxable account (currently in tax exempt munis, VOO, VEA) ?

    Details:

    “participants may make periodic cash contributions or after-tax payroll deductions. You may change your contribution amount and allocation, and transfer account balances among a variety of investment options. SCP allows you to voluntarily invest after-tax contributions into an account where all earnings grow tax deferred until the participant begins to take withdrawals in retirement or upon separation from employment. Upon distribution, you only pay taxes on the pretax earnings.”

    SCP Plan is with Voya: mainly target date funds around 0.6% ER + maintenance fee of $50 per year + admin fee of 0.51% per year

    Thoughts?

    It’s psychosomatic. You need a lobotomy. I’ll get a saw.

    #171807 Reply
     Peds 
    Participant
    Status: Physician
    Posts: 2110
    Joined: 01/08/2016

    after tax with inservice rollovers?

    otherwise at 1%……no way.

    #171808 Reply
     jz 
    Participant
    Status: Physician
    Posts: 581
    Joined: 01/09/2016

    Post-tax earnings tax deferred. But with high ERs.
    Taxable accounts have become so much more tax efficient, using growth ETFs and munis, that I’m doubtful of any long term advantage. A taxable account is more flexible. I’d prefer the plain taxable account.

    #171809 Reply
    Liked by Zaphod
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 4782
    Joined: 01/12/2016

    How is this different than a taxable account which you have total control over and have tlh, etc…where is the supposed benefit?

    #171810 Reply
    Zzyzx Zzyzx 
    Participant
    Status: Physician
    Posts: 62
    Joined: 09/24/2018

    Post-tax earnings tax deferred. But with high ERs.
    Taxable accounts have become so much more tax efficient, using growth ETFs and munis, that I’m doubtful of any long term advantage. A taxable account is more flexible. I’d prefer the plain taxable account.

    Click to expand…

    agreed, living in CA the vanguard CA munis are very useful and their funds/ETFs grow way better than what I’m seeing with this SCP

    How is this different than a taxable account which you have total control over and have tlh, etc…where is the supposed benefit?

    Click to expand…

     

    that’s also what I’m thinking

    thanks!

    It’s psychosomatic. You need a lobotomy. I’ll get a saw.

    #171811 Reply
    Hank Hank 
    Moderator
    Status: Attorney
    Posts: 992
    Joined: 03/27/2017

    Pretty ugly fees for what they’re offering.

    If you plan to retire in a state without income tax, this might be a way to avoid California income tax while working.  I’d run the number to see if avoiding 9.3% to 12.3% in immediate taxation is worth the crappy fees and limited flexibility.

    #172030 Reply

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