Add Paycheck Post-Tax Deduction: 401(k) ROTH

qw_u$er

Currently, the PAYCHECK feature only allows for Pre-Tax 401(k) contribution, and associated Employer Match.

Proposal: Include a Post-Tax 401(k) [ROTH] and associated Employer Match deduction

I have a Roth 401(k) but have to create Custom Post-Tax Deduction entries to correctly reflect this transaction. Roth 401(k) plans have been available for years. Why hasn't Quicken kept up and added this feature to their program?

NotACPA

I don't understand your request.  Why can't you add your post-tax Roth 401k deduction into the Paycheck Wizard in the same manner as other post-tax deductions?

Only, in this case, it would be shown as a transfer to the Roth 401k account.

qw_u$er

To answer your question, you simply cannot add a post-tax Roth 401(k) deduction into the Paycheck Wizard in the *same manner* as other post-tax deductions.

To add a Post-Tax 401(k), it needs to be done as a custom entry using the "Other After-Tax Deduction" feature -- not a problem. The *problem* however is that there is no way to enter the corresponding [Roth] Employer Match as is the case if entering a Pre-Tax 401(k).

This is precisely my reason for recommending this program enhancement ... the ability to enter a Post-Tax 401(k) and associated Employer match in the *same manner* as other Post-Tax Deductions is not available.

You have made my point: What you say I should be able to do, the program does not allow.

Wish I post send screen shots.

J_Mike

I have no hands on experience with Roth 401(k) plans but have done some reading and have puzzled over how best to track in Quicken - during both the contribution and distribution phases.

The employee contributions are made post-tax and grow tax-free.
Distributions are tax free.

Th employer matching contributions are pre-tax and growth is tax-deferred.
Distributions are taxable as ordinary income - sane as a traditional 401(k).

One article suggested that employers actually maintain two accounts for employees - one account (Roth 401(k)) for the tax free funds and one account (traditional 401(k)) for the tax deferred funds.

This suggests - should one do the same in Quicken; i.e., maintain two separate accounts???
Looking ahead - distributions will be a mix of tax-free and taxable income - how managed in QWin>

Food for thought.
---------------------------------
As to recording the contributions to a Roth 401(k) in QWin;
I would record the employee contribution as a transfer in the Other After-Tax Deductions.
I would record the employer match in the Add Pre-Tax Deduction > 401(k)..... dialog (the employee Contribution would be left as $0 in this dialog.. This is he same as an employer match to a traditional 401(k).
One other change - the Transfers In tax attribute should be cleared for the Roth account - under Account Details.

J_Mike

One more thought on Distrutions from a Roth 401(k) - perhaps the Tax-free and the taxable  distributions are handled completely separate from each other???

If so, this would support the approach of maintaining two separate accounts in QWin.

qw_u$er

J_Mike, thanks for the tip. Your response prompted me to do some research and I discovered that I incorrectly presumed the Employee Match would be Roth. They are not. Although I have a Roth 401(k), the Employer Match goes into a Traditional 401(k).

**
Employer Matches
If an employer matches a traditional 401(k) plan contribution, it is standard for it to match one for a Roth 401(k). Unlike the employee's contribution, however, the employer's contribution is placed into a traditional 401(k) plan, and it is taxable upon withdrawal. The employee's contribution goes into a Roth 401(k).
**

All this said, although it would be nice for QWin to offer a dedicated Post-Tax 401(k) entry, it is not required...

For those with a Roth 401(k), when using the Paycheck Wizard, users will have to set up BOTH a Pre- and Post-Tax 401(k). The purpose of the Pre-Tax portion will be used to make the appropriate (Pre-Tax) Employer Match and the Pos-Tax (using the "Other After-Tax Deduction" feature) will be used for the employee's Roth contribution.

Hope this helps anyone with 401(k) Roths.

Invest wisely!

J_Mike

Thanks for the additional info.

This confirms that a participant in a Roth 401k plan should set up two separate accounts for tracking in Quicken;
A Rich 401k account for the employee contributions,
A traditional 401k account for the employer match.

Upon reaching retirement, distributions from the two accounts will be completely separate events - each governed by the respective rules for Roth and Traditional accounts.

Majes sense!!

weiand

J_Mike, a follow up question. Once I set up one Roth 401K account for employee contribution and a tradiction 401K account for employer match, what is a good automatic way to manage quicken download from my 401K account transactions from 401K account web site? The web site records all the transactions with one 401k account.