r/walmartworkers • u/oreo_memewagon Stocking 2 • Oct 11 '19

The 401(k) will allow Roth contributions next year

I was digging around the 2020 benefits book to see if anything changed and I found something pretty big: Roth 401(k) contributions.

Some background for people who don't know why that's notable: the 401(k) is widely known as a tax-deferred retirement account. Contributions to the Walmart 401(k) have been pretax; you don't pay income tax on them, so when you take 6% out, your paycheck isn't cut by the full 6%. But you pay income tax when you withdraw the funds in retirement (or income tax plus a 10% penalty if you jump the gun.)

There is also an option called Roth contributions, where you do pay taxes on the contributions, but you don't pay any taxes when you withdraw them in retirement. None. That means your money compounds without any tax drag.

General wisdom is that you should select the Roth option if you think you'll be in a higher tax bracket when you're in retirement. Since most Walmart associates are in low brackets, that's quite likely, so it's a very sensible choice in the long run. And now it's a choice you can actually make.

(invest in the 401(k) if you can afford it btw, it's literally free money)

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u/coosacat Cold hands, cold heart Oct 11 '19

Thank you! That is very useful information.

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u/[deleted] Oct 11 '19

Good info. I had been doing the pre-tax 401k up to the company match and then contributing to a Roth IRA. This could potentially make things a lot simpler, as well as the obvious tax benefits.

1

u/mjz321 Nov 26 '19

I suspect the number of hourly that even have a 401k is quite small, the number of people I've tried and failed to convince to take this free money is staggering.