Intel’s 401(k) Retirement
Intel’s 401(k) Retirement Benefits
Avier Wealth Advisors is not affiliated with Intel. While Avier communicates with its clients regarding their Intel employee benefits and educates itself on Intel’s benefits, there is no guarantee that the information we have provided is accurate. Intel employees are encouraged to contact their employer should they have any questions regarding their specific employee benefits.
Intel’s 401(k): The Basics
The Intel 401(k) is a retirement savings plan that allows employees to invest a portion of their salary into long-term investments and save for their retirement. Your contribution and the 5% salary match provided by Intel are 100% vested from day one with the company.
The 401(k) plan allows you to make pre-tax contributions, reducing your annual taxable income. Your 401(k) earnings grow on a tax-deferred basis, meaning the dividends and capital gains accumulating within your plan are not subject to tax until they are withdrawn at retirement, when many people are in a lower tax bracket.
Intel’s 401(k) Contribution Matching System
In 2021, you can contribute up $19,500 on a pre-tax or Roth basis into your 401(k), and if you’re age 50 or older, you can contribute an additional $6,500. As of 2021, Intel will match up to 5% of your salary. For example, if you make $200,000, Intel will contribute $10,000 (pre-tax) to your 401(k), assuming you contribute at least $10,000, too.
There are two ways that employees can contribute to their regular 401K ($19,500):
- Traditional Pre-Tax 401(k): Make contributions before taxes. You get a tax break up front, lowering your current income tax bill; however, money withdrawn at retirement will be taxed.
- Roth 401(k): Make contributions after taxes. With this option, when you withdraw savings for retirement, you are not taxed.
Intel’s Mega Backdoor Roth 401(k) Benefit
Intel offers employees an After-Tax Roth conversion feature in the Intel 401(k), also known as the Mega Backdoor Roth. This is a fantastic benefit that Intel employees ought to be leveraging along with your other benefits, like the Intel stock purchase plan, RSUs, and SERPLUS.
To illustrate the advantage of this contribution option, we can take the hypothetical example of an Intel employee, John, earning $150,000 per year and under age 50. He can max fund his 401(k) at Intel, with $19,500 going in as a contribution, plus Intel’s 5% match: that adds another $7,500 total. With $27,500 total going into the 401(k) from John and Intel. Many people do not realize that the Federal limit for total contributions into a 401(k) is $58,000 (if you’re under 50) and $64,500 (if you’re over 50) This leaves a gap of $31,000. The Intel 401(k) plan allows you to fill that gap of $31,000 with after tax contributions that can be immediately converted to Roth dollars.
The power of this strategy is in the tax benefits it provides. Previously, if you had extra dollars to invest, you would open up a taxable brokerage account, in which you would have interest, capital gains, and dividends, all of which would be taxable every single year. Now, thanks to Intel’s advantageous benefit structure, you can make after-tax contributions to your 401(k) and can immediately convert those dollars to Roth dollars, never to be taxed again.
How Can I Determine if the Mega Backdoor Roth Benefit is Best for Me?
If you are currently maxing out your annual 401(k) contribution, you should consider taking advantage of the Mega Backdoor Roth benefit at Intel. The long-term benefits of increasing your retirement savings, particularly by utilizing the Intel Mega Backdoor Roth Conversion strategy, could make a massive positive impact on what your retirement looks like.
MORE INTEL INSIGHTS
For more information and advice from our Intel-focused advisors visit our other pages focused on Intel Compensation and Miscellaneous Benefits page, Intel SERPLUS, or Intel 401(k) & Retirement page.
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