The main difference is when the money is being taxed. With Traditional 401(k), your contributions are before tax money. You pay no tax during accumulation, but you are taxed at withdrawal. As for Roth 401(k), contributions are after tax money. All the taxes are front loaded. There is no tax during accumulation or at withdrawal.

It depends. It is mainly a tax trade between paying taxes now versus later. Since no one knows what the future tax rate is going to be, many financial advisors are suggesting clients to hedge their bets by having two pots of money. For younger contributors who expect their tax rates to go up as their earnings go up, Roth is probably more ideal. Since Traditional 401(k) and Roth 401(k) contributions can also affect your marginal tax rate, it is best to consult a tax advisor. For a more complete analysis, please refer to the Roth powerpoint on my website: www.pensionmaxima.com.


Types of Limitation 2021
401(k) and 403 (b) Maximum Annual Elective Deferral Limit $19,500
457 Maximum Annual Elective Deferral Limit $19,500
SIMPLE Maximum Annual Elective Deferral Limit $13,500
401(k), 403(b), or 457 plans Catch-up Contribution Limit for individuals aged 50 or over $6,500
SIMPLE 401(k) or SIMPLE IRA Catch-up Contribution Limit for individuals aged 50 or over $3,000
Defined Benefit Plan Annual Limit under section 415 $230,000
Annual Allowable Compensation Limit for deduction, benefit and contribution purposes $290,000
Defined Contribution Plan Annual Limit Lesser of $58,000 with $6,500 catchup or 100% of compensation
Traditional IRA Contribution Limit $6,000 with $1,000 catch-up


Fund choices, fees, service features for participants and sponsors. Also check for hidden fees, other billable fees to participants and conflicts of interests.

Not too much to induce information paralysis and enough to build a well diversified portfolio for most investors. In general, you would need a fixed income fund, a domestic equity and a foreign equity fund. In order to satisfy the QDIA or "Qualified Default Investment Alternative" Safe Harbor requirement, you should also include one of the following:

  • Life-cycle or targeted-retirement-date funds;
  • Balanced funds; or
  • Professionally managed accounts.

    If you are unsure whether your platform is well diversified, we offer a risk gap analysis. Please email info@pensionmaxima.com for a free analysis.

(ERISA) defines a plan fiduciary as a person or entity that:

  • Exercises control or authority over the management of the plan or the plan's assets
  • Provides investment advice for a fee
  • Has discretionary authority over plan administration

Although the plan sponsor has the authority to designate a named fiduciary to manage the operations of the plan, however with ERISA's broad definition of fiduciary, plan sponsors are almost always fiduciaries to their plans.

ERISA's "Prudent Man" rule says that plan fiduciaries have to act with the care, skill, prudence, and diligence of a person who is knowledgeable about participant-directed retirement plans. Under ERISA, fiduciaries can be held personally liable for losses to a benefit plan incurred as a result of alleged errors, omissions, or breach of their fiduciary duties.