The Workday Supersaver – A High Earner’s Guide to Maximizing Workday’s Benefits
Exhale Wealth Management is not affiliated with Workday. While Exhale Wealth Managementt communicates with its clients regarding their Workday employee benefits, and educates itself on the Workday Benefits, there is no guarantee that the information we have provided is accurate. Workday employees are encouraged to contact their employer should they have any questions regarding their specific employee benefits.
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So, you’re maxing out your 401k… Amazing! But what comes next?
This article highlights five common strategies that can be used by high-earning Workday employees, along with their 2023 contribution limits and potential tax benefits, to reach over $100,000 per year of tax-advantaged savings.
The below strategies each include some level of restriction on the use of funds; as such, individuals should consider saving separately for short and mid-term goals.
Contribution Limit (2023) | Overview | |
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Employee Stock Purchase Plan (ESPP) | $25,000 ($21,250 Investment + Minimum 15% Purchase Discount) | Financial Benefit – A minimum 15% discount on your purchase price and potential favorable tax treatment of gains for Qualifying Dispositions. Restrictions on Use of Funds – Unlike other strategies, you need to make it through the 6-month purchase period, then there are no restrictions on selling the shares and using the proceeds as you see fit. Highlights – Workday’s ESPP satisfies the three factors we look for in any ESPP and is a powerful tool for building wealth.
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401k + Match | $22,500 + $9,900 WDAY Match (+ $7,500 at age 50) | Financial Benefit:
Restrictions on Use of Funds – There is a penalty if withdrawn before age 59.5, with certain exceptions. Highlights – Workday’s 401k offers Traditional, Roth, and After-tax options with various low-cost investment options. While the target date fund options have higher expense ratios than we would like to see, they are still reasonable. For individuals who take a more hands-on approach, you can replace the target date funds with a combination of lower-cost Vanguard funds or utilize Brokerage Link to access a broader set of investment options. |
Mega Backdoor Roth 401k | $33,600 | Financial Benefit – Tax-free growth and tax-free withdrawals in retirement. Restrictions on Use of Funds – Penalty if withdrawn before age 59.5, with certain exceptions. Highlights – Alert for high earners looking to turbocharge their retirement! These are done by making after-tax contributions, then converting those funds to Roth. There is an overall cap of $66,000 across i) Traditional/Roth 401k deferrals, ii) WDAY's employer match, and iii) After-tax 401k contributions. |
Backdoor Roth IRA | $6,500 (+$1,000 at age 50) | Financial Benefit – Tax-free growth and tax-free withdrawals in retirement. Restrictions on Use of Funds – There is a penalty if withdrawn before age 59.5, with certain exceptions. Highlights – This is not specific to Workday but still an excellent tool for high earners. Precautions need to be taken to avoid the pro-rata rule. If individuals run into issues with the pro-rata rule due to existing funds in a traditional IRA, Workday’s 401k allows employees to roll Traditional IRA funds INTO the plan, allowing you to “re-open the backdoor.” |
HSA | $3,850 Single / $7,750 Family (+$1,000 catch-up at age 55) | Financial Benefit:
Restrictions on Use of Funds – There is a penalty if not used for qualified medical expenses, although there is additional flexibility after 65 to make taxable withdrawals without penalty (similar to a Traditional IRA). Highlights – Only available for those with a High Deductible Healthcare Plan (HDHP). Expenses can be reimbursed at any point in the future, creating the ability to pay for medical expenses out of pocket today (save your receipts), still get tax-free growth, and get reimbursed years into the future. |
TOTAL | $101,350 ($110,850 with catch-up contributions) | Yes, that’s some serious savings!!
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Honorable Mentions |
| Charitable Contributions Match from Workday – Dollar-for-dollar match up to $1,000. 529 Education Savings Accounts – Not specific to Workday, but 529 plans offer tax-free growth and tax-free withdrawals for qualified education expenses. There is also the potential for additional state tax deductions (sadly, not California as of 2023). RSUs
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