As a Boeing employee, you can contribute to a traditional 401(k) or a Roth 401(k). Each option has its own benefits and tax rules. So which one is right for you?
Key Takeaways
Pre-tax contributions reduce your taxable income now, allowing for tax-deferred growth until retirement. Withdrawals are taxed as ordinary income later.
Roth contributions are made with after-tax dollars. You pay the tax now, but investments grow tax-free and qualified withdrawals are also untaxed.
Boeing also allows additional after-tax contributions beyond the standard limits that can be converted to Roth via the mega backdoor Roth strategy.
Contributing to Your Boeing 401(k)
The Boeing 401(k) lets employees contribute a portion of their paycheck to save for retirement. Boeing offers an employer match as well, matching all non-union employee contributions dollar-for-dollar up to 10% of eligible pay. (Union employees may have a different rate based on their agreement with Boeing.)
In 2026, you can contribute up to $24,500 annually, though employees age 50 or older can invest even more through catch-up contributions. Once the money is in your Boeing 401(k), you can invest it to grow over time, boosting your retirement savings all the more. However, when making these contributions, you will have to choose which type you want to make: traditional or Roth. This decision can have a profound impact on your long-term tax strategy.
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Traditional Contributions
Pre-tax contributions are taken from your paycheck before taxes are applied. That means your taxable income for the year is reduced by the amount you contribute. The contributions and any earnings in your 401(k) will grow tax-deferred as long as they remain in your account. When you make withdrawals later, your distributions will be taxed as ordinary income.
For example, let’s say you earn $150,000 and contribute $20,000 to your Boeing 401(k) on a pre-tax basis. That $20,000 will now be excluded from your income for the current year, lowering your taxable income to $130,000. You can then invest that $20,000 to grow over time, and you will not be taxed on your returns as long as they remain in your 401(k). Once you retire, any withdrawals you make from your 401(k) will be added to your taxable income for the year in which you take a distribution.
Pros:
Immediate tax relief: Contributions are subtracted from your taxable income for the year, which can lower your tax bill and possibly even keep you in a lower tax rate.
Compound growth: Investments grow tax-deferred, meaning you won't pay taxes on any earnings until you withdraw the money. This allows your savings to compound more efficiently over time.
Lower taxes in retirement: If you expect to be in a lower tax bracket during retirement, deferring your taxes until then could give you a lower tax bill so you can keep more of your retirement savings for yourself.
Cons:
Required minimum distributions (RMDs): Pre-tax 401(k)s are subject to RMDs. Once you reach age 73, you will be required to start distributions every year, even if you don’t need them. Depending on your income, this could push you into a higher tax bracket. It will also leave you with less in your account to invest and grow over time.
Early withdrawal fees: Under normal rules, your pre-tax 401(k) is locked until age 59½. If you withdraw funds before then, the distribution will be subject to a 10% early withdrawal penalty. (One notable exception to this is the rule of 55, which states that if you leave Boeing during or after the year in which you turn 55, you can make penalty-free withdrawals right away. This can make early retirement more practical for many employees.)
When Are Pre-Tax Contributions a Good Idea?
Pre-tax contributions are ideal if:
You expect to be in a lower tax bracket during retirement than you are now.
You want to reduce your taxable income now, which can be helpful if you currently have other financial goals or expenses.
You prefer immediate tax savings over tax-free withdrawals in retirement.
Roth Contributions
Unlike a traditional 401(k), Roth contributions are made with after-tax dollars. This means you pay taxes on the money before it goes into your 401(k). However, once the funds are in your account, your investments grow tax-free, and qualified withdrawals will be tax-free later. “Qualified” means that the account must be at least five years old and you have reached age 59½. If you meet those requirements, all distributions are tax-free. If not, any earnings you made from your investments will be taxed as ordinary income.
For example, if you make $150,000 and contribute $20,000 to a Roth 401(k), the full $150,000 will be taxed in the current year. But the distributions you take in retirement will not be taxed at all. Even if you doubled your contribution through investments, the additional $20,000 of growth would be entirely tax-free as long as you meet the standards for a qualified withdrawal.
Pros:
Qualified tax-free withdrawals: Once you meet the standards for a qualified withdrawal, the full amount in your Roth 401(k) can be taken tax-free. That includes any investment growth. Even if you doubled your money through investments, any distributions from those earnings will never be taxed.
No RMDs: Unlike a traditional 401(k), Roth 401(k)s are no longer subject to RMDs. You can leave the money in your account to grow and compound for as long as you choose.
Cons:
No tax break today: Roth contributions do not reduce your taxable income in the year you make them. If you are in a high tax bracket now, that can eat away more of your income.
Possible tax inefficiency: If you expect to be in a lower tax bracket during retirement, paying taxes on your contributions now could mean a larger lifetime tax bill, leaving you with less of your hard-earned income.
When Are Roth Contributions a Good Idea?
Roth contributions are ideal if:
You expect to be in a higher tax bracket during retirement, making tax-free withdrawals more valuable.
You prefer to pay taxes now and enjoy tax-free income in retirement.
You want to avoid RMDs so your savings can grow tax-free for a longer period of time.
Pre-Tax vs. Roth: Comparing Your Options
| Features | Traditional Contributions | Roth Contributions |
|---|---|---|
| Tax impact at contribution | Reduces taxable income for the current year | No immediate tax benefit |
| Tax impact at withdrawal | Taxed as ordinary income | Tax-free as long as qualifying conditions are met |
| RMDs | Yes, starting at age 73 | No |
| Early withdrawals | Subject to additional 10% tax before age 59½ (or age 55 under the rule of 55 exemption) | Contributions are always untaxed; earnings are taxable if withdrawn before qualifying conditions are met |
| Flexibility in retirement | Less flexible due to tax at withdrawal and eventual RMDs | More flexible; no RMDs, qualifying withdrawals are tax-free |
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How to Make the Right Choice for You
Choosing the right contribution type depends on your personal financial situation and future expectations. Here are some key factors to consider and steps to help you make an informed decision.
1. Evaluate Your Current Tax Situation
Start by looking at your current income and tax bracket and comparing it to your estimated retirement income. If you are in a higher tax bracket now, traditional contributions might provide significant immediate tax savings and let you keep more of your money later. Conversely, if you are in a lower tax bracket now, Roth contributions may make more sense.
2. Assess Your Retirement Goals and Timeline
When and how are you hoping to retire? This will help you make your choice. For example, Roth contributions allow for tax-free growth, which can be particularly beneficial if you have a long investment horizon. Roth accounts also offer more flexibility with no RMDs, making them ideal if you want to leave your savings to grow tax-free for as long as possible.
3. Consider a Mix
When contributing to your Boeing 401(k), you don’t have to pick just one option. You can split your contributions between traditional and Roth. If you have the financial flexibility, consider using both to balance tax benefits now and in the future. This will also give you more flexibility in retirement with both tax-free and taxable accounts to choose from.
4. Consult a Financial Advisor
As with many aspects of a retirement plan, having the input for this choice can make all the difference. A fiduciary financial advisor can provide tailored recommendations based on your unique needs and goals. Working with a financial advisor isn’t a one-and-done thing, either. Your advisor should stick by you and help you stay on track and make necessary adjustments as your financial situation and goals evolve over time.
PRO TIP: If you’re already maxing out your 401(k) contributions, you can invest even more through Boeing’s mega backdoor Roth strategy. This strategy lets you invest after-tax dollars beyond the usual limits, then convert those funds to Roth, either through an in-plan conversion or a Roth IRA rollover. Using this method can unlock tens of thousands of dollars in additional tax-advantaged savings.
To learn more about this great opportunity, check out our complete guide on the mega backdoor Roth at Boeing.
Not Sure Which Is Best for You? Get Help from TrueWealth!
Deciding what type of 401(k) is best for you can be a major step toward boosting your savings. However, retirement planning is nothing if not complicated. For the best results, it’s always best to get some help from the pros.
At TrueWealth Financial Partners, we specialize in helping Boeing employees get the support they need to retire in style. We’ll take the time to get to know your unique needs and goals. Then, we’ll create a personalized plan tailored just for you!
Want to learn more? Let’s talk! Schedule a free consultation today, and we’ll be happy to help you in any way we can.
FAQs
Can I contribute to both pre-tax and Roth accounts?
Yes, you can split your contributions between pre-tax and Roth accounts to diversify your tax strategy. This approach allows you to benefit from both immediate tax savings and tax-free withdrawals in retirement.
How can I change my contribution type?
You can adjust your contribution type through your Boeing 401(k) account settings or by contacting your plan administrator.
Should I consult a financial advisor before making changes to my contributions?
Yes, consulting a financial advisor can help you make informed decisions based on your individual financial situation and retirement goals. A financial advisor can also provide personalized advice and help you create a strategy that maximizes your long-term growth.
Are employer matching contributions taxed the same way as my contributions?
Boeing’s matching contributions are always made on a pre-tax basis regardless of which type of contribution you make.
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