|
bam thwok posted:You're deferring taxes, not avoiding them.
|
#
?
Jul 11, 2013 21:16
|
|
|
|
| # ? May 26, 2024 17:30 |
|
|
No Wave posted:The part that's been weird for me - especially as a self-employed individual - is how low your tax rates can actually become. I mean, with self-employed 401k you can put away $17,500 PLUS 20% of your income, tax-free. I mean, as far as I can tell by maximizing all my 401k contributions I can get my federal tax burden down to 5.8%. I mean what the gently caress? I can't believe this is legal. This isn't even including the bonus I get from the Roth IRA down the line. Maybe I'm off on this - I'm just looking for a sanity check here. Where does the extra 20% come from?
|
|
#
?
Jul 11, 2013 21:39
|
|
|
enthe0s posted:Where does the extra 20% come from? I'm still learning more about this, so if anyone has expertise and can jump in/correct me let me know.
|
|
#
?
Jul 11, 2013 21:45
|
|
|
No Wave posted:You contribute as the employer - basically, you have to set up your own company (with only one employee) that receives the payments that the other companies make. Then you contribute as yourself, the employee, and as yourself, the employer - so effectively the employer contribution is a business expense and the employee contribution is a personal one. solo401(k) is just OP as gently caress, needs a nerf next patch. Effective total contribution limits are something like 50k/year if you make enough. You'll find the more you make, the more incredibly unfairly tilted everything is in your favor. The first time I made more than the withholding limit and stopped paying those taxes before the end of the year was very 
Unormal fucked around with this message at 22:58 on Jul 11, 2013 |
|
#
?
Jul 11, 2013 22:53
|
|
|
No Wave posted:When did you guys feel "satisfied" that your plan was right? It seems like there's always more to read, but I feel pretty solid on this now. I'm a person who needs to understand some degree of statistics and probability (standard deviation, history, sample size, etc.) to do my job. What was recommended by economists and all of the investment books basically struck a cord with me. There was a lot of data and evidence involved in their analysis, which most of the CEO analysts on television do not have. Beyond this, all of my coworkers and many of the people in my company do something similar, and these people tend to be pretty wealthy.
|
|
#
?
Jul 12, 2013 01:52
|
|
|
No Wave posted:Right - apologies. But I expect to be in a lower bracket during retirement anyways, and I get to enjoy the larger principal as it compounds. Like...... gently caress. I am so glad I got into this at a fairly young age. Be careful; as mentioned earlier, if you're already in a pretty low tax bracket and plan to sock a lot away then you might end up in a higher tax bracket than you think in 35+ years. A Roth 401k may save you more money than a traditional 401k. What's your current income?
|
|
#
?
Jul 12, 2013 08:19
|
|
|
QuarkJets posted:Be careful; as mentioned earlier, if you're already in a pretty low tax bracket and plan to sock a lot away then you might end up in a higher tax bracket than you think in 35+ years. A Roth 401k may save you more money than a traditional 401k. What's your current income? I'm going to think hard about whether I'm planning my current income to be higher or lower than my future retirement income. My future for the next few years is a little in flux right now and I might do something very different and low-paying for the next year. Given that - to totally abuse the gently caress out of this poo poo I'll probably max out the 401(k) this year to save on tax and convert to Roth next year or another year when my income is low. gently caress! I'll try to see what I can do about making sure that the account I create at Vanguard can be converted to Roth 401(k). EDIT: Oh my god, this is so nuts for people with variable incomes. You can just convert money in your 401(k) to a Roth in years that your income is low and pay the taxes on the Roth contributions on your low-income years. The implications are just insane. Like... what???? It's an amazing backdoor way to make having a variable income come out the same way tax-wise as a consistent one. Also, in an ideal scenario I'd have both the Roth 401(k) and the normal 401(k) set up - I'll have to anyways if I want to invest in a Roth because all of my employer contributions have to be standard 401(k). This means that I can target a tax bracket and max out my Roth contributions until I get there, then do standard 401(k) contributions after that point. Well, this has been enlightening. No Wave fucked around with this message at 11:21 on Jul 12, 2013 |
|
#
?
Jul 12, 2013 11:03
|
|
|
Brain Curry posted:I have 1000 fully-vested stock options that are trading for about 70$/share over my price. Aside from my 401k, this represents my only investment, and is more "money" at one time than I've ever had, and probably more my parents ever had, so I'm pretty clueless. I don't really have any plans for this money in the short-term, although I guess we'll probably need to replace one or two cars in the next five years. I've been thinking about selling off about half my options over the next few months, putting aside money for taxes, starting an IRA, and putting the rest in to some index funds. Does this seem right? I only put about 13,000 in to my 401k last year, but I plan to max it out this year. Just wanted to say thanks to those of you who replied to me back in March. The stock has gone up about 30$/share in the last four months. I sold about 10% of my options last month, and I'm planning to sell another 10% in the next few days. My company has it all set up through e-trade, and they automatically withhold the purchase price and tax at the time of sale, so it's pretty simple. Since it's withheld at the maximum tax rate, which I am not going to hit, I shouldn't have to worry about taxes next year. Also thanks for this thread, I've learned a lot about retirement savings and allocations from lurking it the last few months.
|
|
#
?
Jul 12, 2013 15:55
|
|
|
I'm up 3% on my first week of investing! Rock out with your ROTH out!
|
|
#
?
Jul 12, 2013 21:57
|
|
|
INTJ Mastermind posted:I'm up 3% on my first week of investing! Rock out with your ROTH out! So is the S&P.
|
|
#
?
Jul 12, 2013 22:00
|
|
|
Erwin posted:So is the S&P. Hell yeah, VTSMX fo' life yo!
|
|
#
?
Jul 12, 2013 22:02
|
|
|
inb4 stocks go down by 5% again.
|
|
#
?
Jul 12, 2013 22:07
|
|
|
The only time it matters is when you retire. If the stock market collapsed tomorrow I would be happy Well not for those that are hurt by it because stocks would be cheap. If the stock market soared tomorrow I wouldn't care because I'm not retired or a trust fund baby.
Sephiroth_IRA fucked around with this message at 00:11 on Jul 13, 2013 |
|
#
?
Jul 13, 2013 00:07
|
|
|
yes  that was the joke.
|
|
#
?
Jul 13, 2013 00:28
|
|
|
How does early retirement work with regards to IRAs and 401ks? I know there's heavy penalties for withdrawing from them before you're 59 or something like that. So where do people get their income from when they retire early?
|
|
#
?
Jul 14, 2013 11:05
|
|
|
enraged_camel posted:How does early retirement work with regards to IRAs and 401ks? I know there's heavy penalties for withdrawing from them before you're 59 or something like that. So where do people get their income from when they retire early? Other investments? Just plain ol taxable investments.
|
|
#
?
Jul 14, 2013 11:17
|
|
|
silvergoose posted:Other investments? Just plain ol taxable investments. Should those be prioritized over Roth/401k if goal is early retirement, then?
|
|
#
?
Jul 14, 2013 11:32
|
|
|
enraged_camel posted:Should those be prioritized over Roth/401k if goal is early retirement, then? Not really, you're unlikely to reach a sum that lets you retire early by just investing in tax advantaged accounts. And even if you retire early, the vast majority of your time in retirement will be spent past the minimum wage (speaking from probability, of course you may just drop dead at 58).
|
|
#
?
Jul 14, 2013 12:40
|
|
|
enraged_camel posted:Should those be prioritized over Roth/401k if goal is early retirement, then? As it stands right now you can take penalty free distributions from an IRA as long as you take about the same amount each year until you are eligible to retire, or 5 years, whichever is longer. E.G. from 50 to 65 you can take whatever amount you want as long as you do it for all 15 years without paying the extra penalty. I think you can get penalty free withdrawals from a 401k if you are still employed past 55, without even bothering with the periodic payments. So basically if you want to retire "early" at 50+, I wouldn't do anything different at all since you will be able to get your money. I would probably prioritize tax-deferred vehicles, since in general the government wants money NOW NOW NOW and they are more likely to leave options open to take early withdrawals from a taxable retirement account compared to a roth, since it lets them get money. If you want to retire before 50 you probably should do some more careful planning on where the money to fund those years will come from. Technically the same process would work, but it's hard to stash that much in a retirement account. With that being said - an average couple with good jobs with profit sharing/matching can save around 50k tax deferred. If you do that for 25 years and live a modest lifestyle you wouldn't really have a problem funding retirement.
|
|
#
?
Jul 14, 2013 13:24
|
|
|
So I'm looking into my 401k with greater detail and I noticed that the fund I'm invested in Hewitt EnnisKnupp 2050 Fund has a net expense ration of 0.70%. This seems a but high to me, but since I can only pick from what my work place provides I'm out of luck? I'm looking at other things aside from the pre-mixed portfolios and they are even higher at roughly 1% (small, mid and large U.S. Equity) and of course the company stock would be at 0%.
|
|
#
?
Jul 14, 2013 17:34
|
|
|
The lowest option I have is .9%, for the money market fund. Everything else is 1.1% or higher. From my perspective, your 401k looks amazing. Even so, I'd invest enough in the 401k to get your match, and put the rest in an IRA I control.
|
|
#
?
Jul 14, 2013 18:04
|
|
|
So, I'd like to start saving for a house down-payment. The time-frame is probably at least 5 years, if not longer. My girlfriend (not even married yet!) is soon to graduate med school and we will have some significant debt to pay down before considering a house. I think minimum 5 years is reasonable even though we will both have good salaries. With that in mind, how should I go about storing the down-payment money? I have 20k in equity right now. My current plan is to stop putting money into that account and instead start buying a bond fund as the main down-payment vehicle. I realize that bonds are volatile to an extent (compared to CDs), but since our timeline is 5+ years I think we can tolerate a delay in case the market isn't doing so hot. And the timeframe seems to long for CDs? Does this seem reasonable? I've never really thought about saving for something that is quasi-longterm but quasi-short-term. (I have my retirement savings all squared away - maxing personal IRA, hitting employer 401k match, etc)
|
|
#
?
Jul 14, 2013 19:24
|
|
|
obi_ant posted:So I'm looking into my 401k with greater detail and I noticed that the fund I'm invested in Hewitt EnnisKnupp 2050 Fund has a net expense ration of 0.70%. Do you have any non-managed funds, as in index funds? If not, stay with what you have (since it's the lowest exp ratio), check what types of assets it is composed of and their percentages, and then take that into account when calculating your broader asset allocation (which would involve things like IRAs). Depending on how much bureaucracy your company has, you may be able to lobby your HR's benefits person to have them add some low-cost index funds into the 401k options. I know people who have done that before, although it took a while, and many meetings. It may or may not be worth the battle in the grand scheme of things. Slow News Day fucked around with this message at 21:29 on Jul 14, 2013 |
|
#
?
Jul 14, 2013 21:26
|
|
|
I'm about to quit my employer of 5+ years. I know plenty about my 401k and all that jazz, IE I want the financial institutions to roll my 401k into whatever new account I throw it in so there's no chance of me touching it and incurring all kinds of fees. However, my current employer rules so Vanguard is what my 401k is through. I don't know what my new employer will use. I do know that they're dicks and only match my contributions 50%. So basically what I want to know are what my options are. Option 1: Roll over my old 401k into the new one, hope it's not terrible. Option 2: Roll old 401k into a new account that's unrelated to the new employer. Is this even a real option? Basically I don't want to be paying a huge expense ratio, but on the other hand throwing my 401k (about $60,000 currently) into its own account that will never have any money added to it obviously is a good way to kneecap it in its infancy, basically. Do I really even have a choice here or do I just have to hope my new employer's 401k broker company isn't terrible and roll my old account into this one?
|
|
#
?
Jul 15, 2013 01:34
|
|
|
You can roll over your old employer account to an IRA. My advice is to do the math and determine which is best for you.
|
|
#
?
Jul 15, 2013 02:04
|
|
|
You have three options: 1) Leave it with old employer (typically as long as you have several thousands dollars this is an option) 2) Roll it over into your new employers 401k 3) Roll it over into an IRA First of all there is no time limit. You can keep your old 401k around for five years and then roll it over so don't think you have to rush. Typically 3 is the best option because you can pick where to put it (typically Vanguard/Fidelity are recommended) so you can pick a place with cheap funds. What you probably want to do is call the place you want to put the money first and tell them you want to open a 'roll over IRA'. Because they want your business they'll typically do the legwork and even call your current custodian with you on the line and just get your authorization. To avoid any risk of fees tell them you want to do a 'direct' roll over meaning old 401k sends a check directly to new account directly (you'll never see it). If you do somehow end up with a check in the mail get it sent to your new IRA immediately to avoid any penalties.
|
|
#
?
Jul 15, 2013 02:07
|
|
|
Brian Fellows posted:on the other hand throwing my 401k (about $60,000 currently) into its own account that will never have any money added to it obviously is a good way to kneecap it in its infancy, basically.
|
|
#
?
Jul 15, 2013 02:23
|
|
|
Option: IRA brings up another question I never understood actually. I max out a Roth IRA every year. I thought that meant I couldn't roll my 401k into an IRA. Is this not the case?
|
|
#
?
Jul 15, 2013 02:38
|
|
|
Brian Fellows posted:Option: IRA brings up another question I never understood actually. I max out a Roth IRA every year. I thought that meant I couldn't roll my 401k into an IRA. Is this not the case? You can always roll it into an IRA. However, there may be implications if you try to then roll a traditional IRA into a Roth IRA. Based on what you've said, the question is whether or not your former employer vanguard 401k has access to institutional class shares. If your former employer's account does, and it's balanced and diversified, then it may make sense to keep the 401k with your former employer. If your new employer uses Vanguard and offer institutional class shares, use that. Otherwise, roll over to an IRA at a good company (like Vanguard!) and invest in Admiral-class equivalent shares. PS: a 50% match that's unrestricted is usually pretty drat good for 401ks.
|
|
#
?
Jul 15, 2013 03:22
|
|
|
I know, I'm just a child and am mad that my new super-rich giant company isn't matching as highly as my old super-rich giant company. I'll just ratchet up my % contribution by 3% so it will continue to grow at the rate I'm happy with. Thanks guys, that was quick help. And those are questions I've had for a very long time, so hopefully I didn't come off as one of the "STOP THE THREAD RIGHT NOW AND HELP ME" types. Years of passively browsing around here never 100% answered the questions and none of my friends (or family, sadly) are very up to speed on how to save for retirement.
|
|
#
?
Jul 15, 2013 04:06
|
|
|
Brian Fellows posted:I know, I'm just a child and am mad that my new super-rich giant company isn't matching as highly as my old super-rich giant company. I'll just ratchet up my % contribution by 3% so it will continue to grow at the rate I'm happy with. 50% unlimited is pretty insane, though. Even companies that give a 100% match usually have a really low cap (a few percent of pay). Take advantage of that poo poo, every little bit of matching is just free money. If you're comfortable with it, you should consider getting as close to your 401k contribution cap as possible if your employer is going to 50% match all of that.
|
|
#
?
Jul 15, 2013 12:21
|
|
|
My employer doesn't match a single cent. 
|
|
#
?
Jul 15, 2013 14:32
|
|
|
So I'm on a vesting schedule of 20% per year of rmy 401k. Year 1: 0% Year 2: 20% Year 3: 40% (about to enter year 4) ... Year 6+: 100% Does this mean that contributions in these years are matched at the given percentage? Or do they match 100% but if I leave prior to 6 years of tenure they will only allow me to retain X% of the matched funds? Just making sure I understand how vesting works with the new company (old employer's contract was taken over, and the new company honored my tenure, but do not have the same matching as the previous). edit: Followup question. The general advice I've seen is to max 401k, wipe out debts, make sure your emergency fund is in good situation, and max out a Roth. What's after this? My fiancee are just about wrapped up on our debts as of this month (about $300 left on one card, and $900 on the other, which will be paid in full this Friday). We're past the max income for a roth contribution, we both max our 401k, and we've got about 25k in savings at this point (and I dont have any interest in going below 20k as our emergency fund). I havent done a ton of reading on investing because we've been preoccupied with getting our poo poo together and fixing old bad habits and debts. What's next? edit2: VVV Thanks Walked fucked around with this message at 15:26 on Jul 15, 2013 |
|
#
?
Jul 15, 2013 15:18
|
|
|
Walked posted:if I leave prior to 6 years of tenure they will only allow me to retain X% of the matched funds? This is what it means...
|
|
#
?
Jul 15, 2013 15:26
|
|
|
polyfractal posted:So, I'd like to start saving for a house down-payment. The time-frame is probably at least 5 years, if not longer. My girlfriend (not even married yet!) is soon to graduate med school and we will have some significant debt to pay down before considering a house. I think minimum 5 years is reasonable even though we will both have good salaries. If it's for a down payment, 5+ years, and you have a lot of flexibility on when to take it out, I'd say do a conservative portfolio for that income mixing short term reserves/cash, bonds, and stocks. Probably no more than 20-30% in stocks for sure.
|
|
#
?
Jul 15, 2013 18:24
|
|
|
Walked posted:Followup question. The general advice I've seen is to max 401k, wipe out debts, make sure your emergency fund is in good situation, and max out a Roth. What's after this? My fiancee are just about wrapped up on our debts as of this month (about $300 left on one card, and $900 on the other, which will be paid in full this Friday). We're past the max income for a roth contribution, we both max our 401k, and we've got about 25k in savings at this point (and I dont have any interest in going below 20k as our emergency fund). You could open a 529 and start saving for your future kids' college education.
|
|
#
?
Jul 15, 2013 19:04
|
|
|
Walked posted:edit:
|
|
#
?
Jul 15, 2013 19:12
|
|
|
Smart people said smart things here, but I ran into something odd when I rolled over a 401(k) into an IRA from an old employer. I had never heard of this happening until it happened to me. I worked for a major department store in college. They had their 401(k) administered through Wells Fargo, and matched 50% up to 5% or something. When it came time for me to roll over into an IRA (for a house downpayment, and because the fund choices were garbage), I learned something interesting. The fund was fully vested, and all the money inside belonged to me. However, the major department store set rules on the plan, which stipulated that no portion of the employer contributed funds could be withdrawn until 5 years after separation from the company. So I could withdraw the portion I contributed, but not the matched portion that they contributed. That money was absolutely, 100% locked in there for 5 years and I couldn't access it for any reason. It was pretty strange. The advisers said that it was pretty uncommon, but it does happen. I hope your previous company was cooler than mine, basically.
|
|
#
?
Jul 15, 2013 19:41
|
|
|
So I read through the OP and the first twenty or so pages of the thread. I might have missed it, but I didn't see anything that quite fits my situation. I started with a new employer in June. Right now, I'm contributing up to the employer match (6%) into my 401(k). I know that the typical advice is: 1) Contribute to 401(k) up to employer match 2) Max Roth IRA contribution for the year 3) Max 401(k) contribution for the year In my case, I'm over the salary cap for penalty-free contributions to a Roth IRA. I also have an option to invest in my employer's (relatively stable) stock at a 15% discount. Should I: a) Make a backdoor Roth contribution up to the yearly maximum, followed by maximizing my 401(k), before considering participation in the ESPP? b) Forget the Roth and maximize the 401(k) contribution before participation in the ESPP? c) Just stick with the employer match for the 401(k) and put as much as i can (up to 10% of With the ESPP, I'd contribute for six months at a time. The stock would then vest at the end of that six months, and I would receive (amount contributed / ( closing cost per share .* 85) ) in stock on the vesting day. I guess that a 15% discount seems substantial enough that it's worth participating in, since at the least I could expect that much return if I sold the stocks immediately after vesting and stuck the money in a money market fund. But that doesn't take taxes and fees into account, so I'm not really sure if I'd end up breaking even. Is this complex enough that I should hire an accountant or financial advisor? zorachus fucked around with this message at 23:49 on Jul 15, 2013 |
|
#
?
Jul 15, 2013 23:45
|
|
|
|
| # ? May 26, 2024 17:30 |
|
|
You can only truthfully do the standard backdoor roth contribution once, as the calculation for taxes is based on the total IRA assets. Quick question before we move on. Does your 401k offer an After Tax 401k option that is separate from a Standard 401k or Roth 401k? If so, then you're lucky and there is something else you can do. With ESPP, you are typically taxed on the discount (so the 15%). There are different definitions depending on whether you have held for an year (short term gain vs long term gain). Furthermore, future compounding interest is taxed. Hence, I'd still tell you to max your 401k completely before considering doing ESPP.
|
|
#
?
Jul 16, 2013 01:33
|
|