My City June 2022

MYFINANCES

To Roth 401k or Not to Roth 401k BY JOEL P. LAGORE CFP® AIF As the labor market has been gutted by COVID (early retirements and twenty-somethings who got used to the government sending them paychecks for 18 months and are not willing to work), employers are having to pay signicantly higher wages and o er new and exciting benets to coax people back into the workforce. One of these benets is an employer-spon sored 401k. is plan is a tax- e™cient way for employees to save for retirement through employee payroll deferral. One of the main benets to having a 401k is the ability to defer your current income until a time in the future, typ ically during retirement, when your income is lower. Your deferred payroll deposits are not included in your current taxable income and are allowed to be invested in di erent markets and grow tax-deferred, until you withdraw those funds when you retire. Another added benet to a 401k plan is that often, employers will match the contribution you make. en, this type of savings plan is even more ben ecial for the employee and becomes a very valuable part of their employment package. Some employers, in an e ort to try to retain and recruit good employees, have instituted match policies of up to 10% of the salary percentage that employees put away on their own. at is essentially a 10% increase in pay if you stay with the employer for a specic period of time, as laid out in the plan’s vesting schedule. A newer component that employers have added to these deferred compensation plans is the ability to contribute into a Roth 401k, which is on an after-tax basis. e money contrib uted into the Roth portion of the 401k could be able to grow completely tax-free for retirement if certain plan criteria and IRS rules are met. Although the employee is allowed to put money into the Roth portion of their 401k, the employer con tribution (or the “match”) can only be put into the tax-deferred side.Many of our friends and clients are often asking, “Should I be putting money into the Roth portion of my 401k instead of the traditional side?”You might think there would be a sim ple answer to this question, but I can assure you there is not.

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800.338.4586 olvinvest.com e Durant 607 E. 2nd Ave., Suite 100 Flint, MI 48502 jlagore@olvinvest.com is content is provided for informational purposes only and is not intended to serve as the basis for financial decisions. OLV Investment Group is an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives. Investing involves risk, including the potential loss of principal. None of the information contained in this article shall constitute an o er to sell or solicit any o er to buy a security. CFP Board owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® in the U.S. e Accredited Investment Fiduciary (AIF®) Designation demonstrates the individual has met educational standards to carry out a fiduciary standard of care and acting in a client’s best interest. Registered representatives o er securities through AE Financial Services, LLC (AEFS), member FINRA/SIPC. Investment advisory services and insurance o ered through OLV Investment Group, a Registered Investment Adviser independent of AEFS.

e decision to contribute to the Roth portion of your 401k as compared to the traditional portion takes into account many di erent variables that are very much based on the individual’s own circumstances. So there is no “rule of thumb” or cook ie-cutter answer. ese decisions are always best made with the guidance of a qualied nancial planner and/or investment advisor. Here are a few questions you can think through which will help guide you in this decision-making process. Are you at the lower end or beginning of your earnings career or toward the top? What is your current tax bracket and what tax bracket would you project to be in during retirement? What are your overall thoughts regarding the U.S. cur rent debt and tax structure? Do you think it will be higher during your retirement than it currently is? Considering your overall investment/retirement scenario, how many pools of money do you have to draw from? Having answers to these questions will be very helpful for you and your nancial advisor when deciding IF and how much of your contributions should be going into the Roth portion of your 401k. Before you spend time laboring over these questions, your rst point of order may be to con tact your employer’s HR department and ask whether your 401k even allows for a Roth portion. Hope you’re enjoying an amazing start to your summer here in Michigan. Gotta love the seasons our great state provides us! ®

Joel P. LaGore, Certified Financial Planner and partner with OLV Investment Group, focuses on money management. Joining the Down town Flint revitalization effort, his office is located in The Durant at 607 E. Second Ave., Suite 100. Joel and his wife Sonya are raising

two daughters in Flushing, where he enjoys philanthropic pursuits in his local community, in Flint at large and in Genesee County.

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