Potential Financial Steps for T-Mobile Employees in January
By Kevin Estes
Potential Steps This Month
Financial steps T-Mobile employees might take in January include:
Submit dependent care reimbursements
Update net worth estimate
Refresh long-term projections
Evaluate Mega Roth
Begin gathering tax forms
Plan summer vacations and camps
1. Submit Dependent Care Reimbursements
The biggest benefit of the dependent care Flexible Spending Account (FSA) is tax savings.
Limits
A single filer or a married couple filing jointly may contribute up to $5,000 to a dependent care FSA. Doing so saves federal and often state income taxes.
The biggest downside is potentially losing the funds! A carryover does not apply to a dependent care FSA.
Fortunately, there’s a 2.5 month grace period to incur expenses - until March 15th. Participants then have until April 30th to receive reimbursement for expenses during the grace period. However, it’s best to do so well in advance in case there are any issues!
The goal of the Flexible Spending Account is to provide a tax break so family members can work. These funds can’t be used to pay for:
Kindergarten or other tuition expenses,
overnight camps, or
for dependent children age 13 or older - unless they’re physically or mentally unable to care for themselves.
Others Uses
Dependent care FSA funds can be used for the care of an adult who is unable to care for themselves and lives with the employee. That’s why the FSA is named dependent care, not child care!
2. Update Net Worth Estimate
Net worth = what you owe - what you owe.
Consider a car worth $20,000 with a loan of $15,000. The impact on net worth is +$5,000 ($20,000 - $15,000).
Depends on Wealth
Asset type depends on wealth:
Less affluent households tend to have more real estate and consumer durable goods.
More affluent households tend to have more corporate equities and private businesses.
What’s More Important?
Some people focus on growing income. Why sweat the small stuff when you can spend that time to earn more?
Others try to spend less. How much can you really impact your income?
A third option is to focus on growing net worth! It’s more direct and what drives financial independence. One of the episodes in this course is devoted to what net worth is and isn’t.
3. Refresh Long-Term Projections
The step after calculating net worth is to forecast it.
This is crucial! It’s empowering - and shocking - to see how much impact small changes can have.
For instance, multiple clients owned real estate and charged below market rent. Raising rent $200 a month and earning an 7% return on investments might result in an extra:
$14,000 after 5 years,
$34,000 after 10 years,
$104,000 after 20 years, and
$245,000 after 30 years!
My family and I used a template to forecast our net worth each January. I don’t budget. However, I consider forecasting the most important part of financial planning.
The episode after Net Worth in the Financial Independence Course is devoted to helping people Forecast The Potential. You may be less behind than you think!
4. Evaluate Mega Roth
T-Mobile Match
The biggest benefit of contributing to the 401(k) is the company match. T-Mobile matches:
100% of the first 3% of contributions and
50% of the next 2%.
Let’s say a single, unmarried employee earns $100,000 a year. If they contribute $3,000 (3%), T-Mobile will also contribute $3,000 (3%).
If the employee contributes $5,000 (5%), T-Mobile will contribute $4,000 (3% + half of the 4% and 5% contributions).
Many of us are willing to trade $5,000 for $9,000 each year!
Tax Savings
However, there’s another benefit: tax savings.
Contributing to a pre-tax retirement account like a 401(k) reduces taxable income for the year. That reduces state and/or federal income taxes for the year.
It may be possible for someone to minimize their lifetime taxes by:
lowering taxable income in high-income years and
raising it in low-income year.
Tax Benefit
Let’s revisit the six-figure earner.
A single employee earning $100,000 a year would likely fall in the 22% federal income tax bracket after the standard deduction. They might be in their state’s 8% income tax bracket.
That’s 30% of income off the top. Poof!
Contributing $5,000 could lower taxable income $1,500 for the year:
$5,000 * 30% = $1,500
The maximum 401(k) contribution for an employee in 2025 is $23,500.
There are also catch-ups of:
$7,500 for those aged 50 and wiser or
$11,500 for those aged 60-63.
Assume the employee is 35 years old. If they contribute the full $23,500, they may save $7,050 in taxes for the year:
$23,500 * 30% = $7,050
That’s not bad! Between the T-Mobile matching contribution of $4,000 and the $7,050 tax savings, the employee would be $11,050 ahead.
After-Tax 401(k)
However, there’s another contribution limit. In 2025, it’s a combined $70,000 for both employee and employer contributions.
Our saver has only used $27,500 of the $70,000:
Employee contributions of $23,500
Employer contributions of $4,000
How could they contribute the extra $42,500 ($70,000 - $27,500)?
Through after-tax 401(k) contributions!
This example isn’t realistic. Almost no-one who:
makes $100,000 a year and
pays up to $30,000 in income taxes
could contribute $70,000 to retirement accounts!
The limits are high enough that most employees run out of cash first.
Benefits of a Mega Roth
After-tax contributions can then be transferred to a Roth Individual Retirement Arrangement (IRA) account. That’s called a Mega Roth.
A few years ago, T-Mobile enabled employees to contribute to an after-tax 401(k) and take in-service distributions. That opened up the Mega Roth to employees.
Unlike pre-tax 401(k) contributions, after-tax contributions 401(k) are included in taxable state and federal income. They don’t save income taxes on the front end.
However those funds may never be taxed again! They may avoid taxes as the investments grow and be withdrawn tax-free if criteria are met.
This is especially helpful for estate planning, as it avoids forcing heirs to pay an unpaid income tax bill.
It’s such a good deal that high earners aren’t allowed to contribute directly to a Roth Individual Retirement Arrangement (IRA). That’s why a Mega Roth is sometimes called a Mega Backdoor Roth.
It’s a rare situation in which both Congress and taxpayers are happy:
Congress receives taxes now and
taxpayers avoid taxes later!
Costs of a Mega Roth
The primary costs of a Mega Roth are:
administrative complexity and
cash flow.
The pain of both can be reduced by contributing some of the annual bonus to the 401(k). That would be done through the after-tax bonus contribution option. A salaried employee would receive less to their checking account when the bonus (Short Term Incentive Plan) is paid in the back half of February.
Someone would only need to transfer the after-tax 401(k) contribution to their Roth IRA once a year. It’s best to do so immediately before the investment values change. Fidelity may be able to whisk these contributions away if the employee calls to set that up in advance.
Ideally, someone would be able to save all of their bonus! However, that may not be possible and bonuses aren’t guaranteed.
Mega Roth Example
Let’s assume our employee who earns $100,000 a year is paid:
$80,000 base salary paid throughout the year
$20,000 annual bonus paid in February
They’ve already saved $23,500 into their 401(k). Now, they might be able to:
save $15,000 into their after-tax 401(k) and
then transfer it immediately to their Roth IRA.
T-Mobile caps the contribution rate at 75% for 401(k) contributions.
The employee might save $42,500 into their retirement accounts:
$23,500 traditional 401(k) employee contributions
$4,000 T-Mobile traditional 401(k) match
$15,000 after-tax 401(k) contribution transferred to their Roth IRA
Caution! it may not make sense for someone earning $100,000 a year to make heavy Mega Roth contributions. It depends on many factors.
5. Begin Gathering Tax Forms
It’s important to store tax information in a safe place.
Employers are still required to mail paper versions of these forms. My wife and I dedicate a special folder to taxes each year.
Some important tax return forms for T-Mobile employees are:
Form W-2 - income and tax withholding information,
Form 3922 - detail on stock purchased through the Employee Stock Purchase Plan (ESPP),
Form 1099-B - investment capital gain or loss detail, and
Form 1099-DIV - investment dividend information.
The W-2 and 3922 forms must generally be sent by January 31st. However, they may take longer to hit mailboxes.
The 1099-B and 1099-DIV typically need to be downloaded from a custodian like Fidelity, Vanguard, etc.
6. Plan Summer Vacations and Camps
Finally, it’s important to schedule summer vacations and camps!
Camping spots book early - especially for national parks.
Some summer camps fill up by January or February.
Paid Time Off
Booking early can save on travel expenses and ensure others can join.
Many T-Mobile teams have limited coverage. Requesting Paid Time Off (PTO) early can be like calling dibs!
Summer Camps
If you have younger children and aren’t certain which camps to attend, consider visiting a camp fair. They’re often at a nearby school on the weekend and give you the opportunity to interview many camps on one day.
If you’re interested in a review of your specific situation…
Disclaimer
In addition to the usual disclaimers, neither this post nor these images include any financial, tax, or legal advice.
