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Thanks for the info, everybody!
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Jan 7, 2014 17:38
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flowinprose posted:Each IRA account is owned by one person only. Each person can contribute $5,500 per year, married or not, into their own IRA account(s). The only difference for married persons is that the earned income requirement need not come from the individual that owns the account as long as the earned income for the jointly-filing couple is enough for the total contributions between the two accounts. That hasn't been my experience at all. The contribution limit is the same whether you're single or married filing jointly. On our returns, the IRS has never cared how many accounts the money is split into.
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Jan 7, 2014 17:55
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But you two are saying the same thing 
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Jan 7, 2014 18:01
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Papercut posted:That hasn't been my experience at all. The contribution limit is the same whether you're single or married filing jointly. On our returns, the IRS has never cared how many accounts the money is split into. Yes, but you can't go putting $11,000 into one account. Hence the "advantage" of having two accounts is that you can contribute the max for both partners.
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Jan 7, 2014 18:02
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Actually reading the IRS website now, I am wrong, married filing jointly can contribute $5500 to an IRA for each partner. Maybe it was different a few years ago, or we had to recharacterize contributions because my wife is part of a pension program.
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Jan 7, 2014 18:46
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Ok, first off, full disclosure I am a financial retard. The only reason I have a 401k is because my company offers one and my boss told me it would be a good idea to have one. Anyway, our company is switching who we get our 401k through. I'll stare at the funds and stuff long enough to figure that out, but there's something else I have a question about. As of right now, I have $75,000 in my current 401k, that will be rolled over into the one with this new company. This new place also offers a Roth IRA. We get 100% match up to 4% pretax. I'm 30 years old, make about 70k a year. Just from casual conversation with the guy who came today to explain everything, since I'm on the younger side, it wouldn't be a bad idea to go with an IRA, but I don't know enough about this to know what to do. What I'm thinking is, roll over my current 401k into the new one, and keep contributing 5% to that to get the employer match, and also start a Roth IRA and contribute another 5% to that? I'm not in a financial situation where I think I could contribute much more than that. So, can someone point me in the right direction?
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Jan 7, 2014 20:24
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A Proper Uppercut posted:Ok, first off, full disclosure I am a financial retard. The only reason I have a 401k is because my company offers one and my boss told me it would be a good idea to have one. You have more options in a IRA you open yourself, so generally if you have an opportunity to roll over a 401k to an IRA, you should. It doesn't have to be at the new plan provider, either, you can roll it over to an IRA at any company you like (we'd suggest Vanguard). What would make keeping it in the new 401k attractive is if they offer a good selection of index funds with low expense ratios. That information should be in the literature for the new plan they've given you. Either way, you'll want to keep contributing to the new 401k to get your match. You probably have a limited amount of time before you have to make a decision to get informed, so if you post a list of what's available we can help point you in the right direction. You should read Four Pillars regardless to have a better understanding of this stuff in the future, it's a pretty approachable and reasonably short read. Be aware that if you roll it over to a Roth IRA, then unless it was a Roth 401k to begin with, you'll have to pay tax on that $75k as income. Kilty Monroe fucked around with this message at 20:59 on Jan 7, 2014 |
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Jan 7, 2014 20:57
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Kilty Monroe posted:You have more options in a IRA you open yourself, so generally if you have an opportunity to roll over a 401k to an IRA, you should. It doesn't have to be at the new plan provider, either, you can roll it over to an IRA at any company you like (we'd suggest Vanguard). What would make keeping it in the new 401k attractive is if they offer a good selection of index funds with low expense ratios. That information should be in the literature for the new plan they've given you. Either way, you'll want to keep contributing to the new 401k to get your match. Honestly, I don't know how misguided this is, but I would rather use the one through work for simplicity's sake, unless it's going to royally screw me over for some reason. My current 401k is a regular 401k. I was informed about paying taxes if I rolled it over to a Roth so I'm not doing that. Looking at the literature for this new place, quite a few of the funds are actually Vanguard. There's no comprehensive list online, but let me try this. I have- These target funds On This page I have Money Market, Total Bond Index, Intermediate Term Bond. On This page I have Balance Allocation And Large Cap Index. And on This page I have Large Cap Blend 3, Small Cap Index, Small Cap Growth, Internation Large Index, International Growth. So would there be no advantage to rolling over my 401k to a new one with this company and also starting a Roth IRA? Or would I just be better off just keeping the 401k and putting 10% into that? This assuming I would be sticking with the through my work idea. Thanks for any help. I think I will get that book on my Kindle and see if I can understand it. I've always wanted to learn more about this stuff, it just seems kinda insurmountable when you have no experience.
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Jan 7, 2014 21:40
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General advice is to follow these steps: 1 - contribute enough to the company 401(k) so you get all of the available match 2 - contribute the yearly maximum allowed to a Roth IRA (max allowable is $5,500 per year) 3 - contribute more to the company 401(k) up to the maximum allowed ($17,500 per year) In your case: 1 - save 4% in your company 401(k) 2 - open a Roth IRA and contribute $5,500 divided by the number of paychecks you get per year (typically 26 paychecks per year -> 5500/26 = $211/paycheck) 3 - any extra you can afford to save, add to your company 401(k) contribution
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Jan 7, 2014 21:46
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You say you're in a financial situation where you can't afford to do more than 4% in the 401k and perhaps 5% in an IRA on top of it. That comes out to 233 per month in the 401k and 189 in the IRA. Why is that? If you don't have kids and aren't supporting a non-working partner(in which case ignore the rest of this), you can probably find a way to tighten up your budget and contribute close to, if not the full 458 a month to the IRA contribution. Every dollar you save right now(with 3-plus decades left) in that Roth IRA will easily be worth three to four dollars in inflation-adjusted non-taxable money when you're retiring. Put another way, if you put 5500 in this year to a target retirement fund(the contribution limit), and didn't touch it, and you got 6% returns(pretty conservative) you'd end up with about 42,000. Even if you assumed 100% total inflation between now and then(kind of high) that's almost a 400% return in buying power. Finding a way to fit that 5500 into your budget each year will mean you'll retire comfortably instead of working until the day you die. Nail Rat fucked around with this message at 22:01 on Jan 7, 2014 |
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Jan 7, 2014 21:57
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A Proper Uppercut posted:Honestly, I don't know how misguided this is, but I would rather use the one through work for simplicity's sake, unless it's going to royally screw me over for some reason. Your options are pretty good, though I don't like their target fund allocations. Do you get the option to pick any of those funds in the IRA, or is it still limited to just the ones you identified here?
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Jan 7, 2014 21:58
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Nail Rat posted:You say you're in a financial situation where you can't afford to do more than 4% in the 401k and perhaps 5% in an IRA on top of it. That comes out to 233 per month in the 401k and 189 in the IRA. Why is that? If you don't have kids and aren't supporting a non-working partner(in which case ignore the rest of this), you can probably find a way to tighten up your budget and contribute close to, if not the full 458 a month to the IRA contribution. Every dollar you save right now(with 3-plus decades left) in that Roth IRA will easily be worth three to four dollars in inflation-adjusted non-taxable money when you're retiring. Debt, essentially. I'm in the middle of a plan paying off some old credit card debt, which will all be gone in about 1.5 years. More results of my lack of financial sense and education, unfortunately. Also, yea, I do contribute significantly more to me and my girlfriend's expenses because I make quite a bit more than she does. quote:Your options are pretty good, though I don't like their target fund allocations. Do you get the option to pick any of those funds in the IRA, or is it still limited to just the ones you identified here? No, I get the same options with the IRA and the 401k. Is what I have available workable? Also, you guys are awesome, thank you.
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Jan 7, 2014 22:24
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A Proper Uppercut posted:Debt, essentially. I'm in the middle of a plan paying off some old credit card debt, which will all be gone in about 1.5 years. More results of my lack of financial sense and education, unfortunately. Also, yea, I do contribute significantly more to me and my girlfriend's expenses because I make quite a bit more than she does. It is mostly workable, between the Large Cap Index, International Large Cap Index and Total Bond Index. It'd be best if you could get the Mid-Cap Index as well. Since you can't, though, you really would be better rolling it over to an IRA at Vanguard. Having money in two places really isn't that much hassle, there are a number of portfolio trackers that will tie in to all your accounts and will give you a big-picture view of your money. I'm suddenly much more concerned about your debt, though. The market only returns 7-9% annually on average, and credit card interest is generally much more than that. I'd forgo further investing until you can pay that off completely (possibly excepting the 401k match, it's hard to pass up 100%), and look for expenses you can cut from your budget to make that happen faster.
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Jan 7, 2014 23:13
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Kilty Monroe posted:It is mostly workable, between the Large Cap Index, International Large Cap Index and Total Bond Index. It'd be best if you could get the Mid-Cap Index as well. Since you can't, though, you really would be better rolling it over to an IRA at Vanguard. Having money in two places really isn't that much hassle, there are a number of portfolio trackers that will tie in to all your accounts and will give you a big-picture view of your money. Well, since all my money is in a 401k already, the only way to roll it over would be into another 401k to avoid any fees or taxes, correct? Or do you think I should roll it into the new 401k at work, and set up a Roth IRA at Vanguard? As for my debt...ugh, when I actually start writing it all down I realize how hosed up my money situation has been for most of my adult life. However, it's not that bad any more (I don't think). Three years ago I had 25k in credit card debt. I managed to pay that down to under 10k about 6 months ago. I managed to get a personal loan at 7% and consolidated my cards on that. Through all this the 4% has always been going into the 401k, and now that I've mostly straightened out my credit card situation, insofar that I have a sure way of paying it off at not ridiculous interest rates, I figure I could put a little more towards investing. And since my work is changing companies for our 401k, I figure this was a good a time as any.
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Jan 7, 2014 23:52
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A Proper Uppercut posted:Well, since all my money is in a 401k already, the only way to roll it over would be into another 401k to avoid any fees or taxes, correct? Or do you think I should roll it into the new 401k at work, and set up a Roth IRA at Vanguard? No, 401k's and traditional IRAs can be rolled to and from one another with no penalty. That said, your plan may charge you for a rollover, but this is not usually dependent on where it's going.
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Jan 8, 2014 00:10
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A Proper Uppercut posted:As for my debt...ugh, when I actually start writing it all down I realize how hosed up my money situation has been for most of my adult life. However, it's not that bad any more (I don't think). Three years ago I had 25k in credit card debt. I managed to pay that down to under 10k about 6 months ago. I managed to get a personal loan at 7% and consolidated my cards on that. Through all this the 4% has always been going into the 401k, and now that I've mostly straightened out my credit card situation, insofar that I have a sure way of paying it off at not ridiculous interest rates, I figure I could put a little more towards investing. And since my work is changing companies for our 401k, I figure this was a good a time as any. Put 4% into your 401k to get your maximum match. Then, before doing anything else, get completely out of debt first. From a retirement savings standpoint, you have a reasonable total amount of assets in your 401k based on your age. It's not perfect, and you could always be doing better, but 1x your salary is decent. http://www.sfgate.com/business/networth/article/Retirement-rule-of-thumb-from-Fidelity-3860834.php Expected returns from the market average about 9-10%, but carry much risk with them. If your loans were at 4% or less, then it might have been fine to leave the debt, but given a guaranteed 7% gain over a risky 9-10% possible gain depending on year, most people here will likely say to take the 7% instead. Basically, it sounds like it wouldn't be that difficult for you to bring that credit card debt to 0. Keep that as a goal for 2014, and you'll be pretty much set. ntan1 fucked around with this message at 00:22 on Jan 8, 2014 |
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Jan 8, 2014 00:13
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Roll the old 401k into a traditional IRA at Vanguard so you'll have control and won't have to pay tax. Put enough in your new 401k to get the match. After that, pay off your 7% loan before you do any additional investing; once the loan gone, open a new Roth IRA at Vanguard. Haha, beaten like a rug
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Jan 8, 2014 00:13
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A Proper Uppercut posted:Well, since all my money is in a 401k already, the only way to roll it over would be into another 401k to avoid any fees or taxes, correct? Or do you think I should roll it into the new 401k at work, and set up a Roth IRA at Vanguard? You can still roll it over to a traditional IRA just fine. The taxes on a Roth rollover stem from the fact that you're converting pre-tax dollars to post-tax dollars. Roll over to Vanguard, and set up a Roth IRA when your debt's paid off. 7% is still enough to nearly wipe out your expected return from your investments. For a simple asset allocation: pick somewhere between 10% (aggressive) to 30% (conservative) to hold in Total Bond Market Index. 3/10ths of what's left goes to Total International Stock Index. The rest goes to Total Stock Market Index. In the 401k, you'll have to use the 500 Index (Large Cap Index) instead of Total Stock Market Index, so you'll want to complement that with some Extended Market Index in your IRA so that combined, they approximate Total Stock Market Index. Right now the ratio's at about 80% S&P 500/20% Extended. This is tricky if you freeze contributions to the IRA to pay down your debts while still getting your 401k match, since there's a mandatory minimum investment of $3k in the fund and you don't want to be rebalancing every paycheck. Some "tilt" towards mid- and small-caps can be desirable anyways, so if you do keep contributing to the 401k I'd say just get enough Extended Market Index in the rollover to match as much 500 Index you plan to buy before your debt is paid off and call it a day. Kilty Monroe fucked around with this message at 00:50 on Jan 8, 2014 |
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Jan 8, 2014 00:48
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Whoa, information overload. Thanks for all the help! I think what I'm going to do right now is just let me my current 401k roll over to the new company and keep putting in my 4%. After my debt is cleared up, roll that over to an IRA and then also start a Roth IRA. So, at that point I would be putting in the 4% in my 401k to get the match, and also contributing to my IRA and Roth? Goddamn it I thought I had figured this out. Does it make sense to have both an IRA and a 401k?
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Jan 8, 2014 17:04
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A Proper Uppercut posted:Does it make sense to have both an IRA and a 401k? Yes. You need to save a lot more for a comfortable retirement than most people think. I highly suggest reading The Four Pillars of Investing which is recommended in the OP. It lays out in terms easy to understand for the layperson what financial companies obfuscate behind a lot of jargon and misleading figures.
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Jan 8, 2014 17:12
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It is perfectly fine to have both a 401(k) and an IRA (and a Roth IRA too). You probably can't roll over your 401(k) to an IRA unless you leave the company. Just move it to the new 401(k) and keep contributing. When you retire or change companies you can roll it all to an IRA.
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Jan 8, 2014 18:30
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I have been focusing on clearing out my student loan debt and I'm currently on track to do it in 10 years (107k @ 6.8%). Should I continue to focus on it and use any future salary increases to pay it off even quicker or should I use those future salary increases as retirement contributions? I'm already getting my employee 401K match and have a pretty good emergency fund. I'm just afraid that I'm going to miss out on those Roth contributions for the next few years but I also want to get rid of my debt. Does it make sense to do both?
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Jan 8, 2014 19:32
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7% is high and IRA returns are uncertain. Pay off the loans as fast as you can.
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Jan 8, 2014 19:35
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Kilty Monroe posted:
I haven't picked this book up yet, but is there a reason you're linking to an older edition? I know some books the newer editions are worse... But for a book that everyone touts as essential reading, I just want to make sure before I buy it. edit: It looks like the same book with a 14 page postscript. But if I haven't bought any edition I suppose the newer one is probably the better choice.
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Jan 8, 2014 19:53
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Drewski posted:I haven't picked this book up yet, but is there a reason you're linking to an older edition? I know some books the newer editions are worse... But for a book that everyone touts as essential reading, I just want to make sure before I buy it. edit: It looks like the same book with a 14 page postscript. But if I haven't bought any edition I suppose the newer one is probably the better choice. It is literally the exact same edition with a "2010 Postscript" that is like 12 pages that comes after the bibliography. It's basically 12 pages of him saying "look how everything I said is still valid over the past decade." I have the newer edition because I didn't realize this, but I think you can just save yourself ten bucks and get the old one. Use that ten bucks for a used copy of one of the many other books he recommends as further reading 
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Jan 8, 2014 20:30
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Nail Rat posted:It is literally the exact same edition with a "2010 Postscript" that is like 12 pages that comes after the bibliography. It's basically 12 pages of him saying "look how everything I said is still valid over the past decade." I have the newer edition because I didn't realize this, but I think you can just save yourself ten bucks and get the old one. Use that ten bucks for a used copy of one of the many other books he recommends as further reading The postscript is (was?) also available online for free, though Google is failing me in finding it now.
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Jan 8, 2014 23:37
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Kilty Monroe posted:The postscript is (was?) also available online for free, though Google is failing me in finding it now. 10 of the 12 pages are available on Amazon's Look Inside feature.
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Jan 8, 2014 23:52
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Hi, new investor here, trying to figure out general investing knowledge and how to deal with an upcoming life change. Current Situation: I'm 25 years old, bouncing back from unemployment-and-food-stamps-level subsistence a few years ago to working full-time making $40k or so. I've been investing in my company's 401(k) up to the company match, and using my other "investment" money to pay down my debt (student loans and a car loan, no credit card debt at all). I have $4k in the 401(k) so far, split between the only two index funds they offer, and the account is fully vested. The Life Change: Provided everything goes well, I'll be going to graduate school in the fall. Before you ask, I'm applying to hard science and engineering PhD programs, so I won't be going further into debt to get it and I'll come out with a much higher earning potential. The Plan for while I'm at school: -When I leave, roll my 401(k) into a Vanguard Roth IRA, and put it into one of their lifecycle funds (since I won't have a high enough balance to do a three-fund portfolio). -If my school offers a 403(b), contribute to the match. No guarantees here, grad student labor is a weird grey market and rational rules don't always apply. -The student loans will go on deferment while I'm at school (about half are subsidized loans and don't accrue interest). -Continue paying down my car loan. This is where any extra money will go, since it has a higher interest rate. -Once the car loan is gone, start working on the student loans before contributing to my IRA. -Never buy a car via loan ever again. It was an act of necessity, and I'm still paying for it. Is there anything major I'm missing for the basic plan? I know I'll have to pay taxes on that Roth rollover, so I'll have a larger buffer than normal to take care of that. Other questions: I read about Roth IRAs as emergency funds, but that you can only withdraw your own contributions without complications. Would this be the entirety of my 401(k) rollover? If the account total drops, does the amount you can withdraw drop as well? I'm building a cash emergency fund as well, but this is just in case things get really bad. Once I have enough money in my IRA to do the three-fund portfolio, how often should I rebalance the funds to bring them back into the proportions I want? I'm not sure how much they tend to drift, if there are gains from doing it more often, or if there are fees they throw at you every time you readjust.
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Jan 9, 2014 04:34
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Sounds thoughtful. Roll the 401k into a traditional IRA if the taxes are a problem. It's hard to argue strongly for one or the other when the balance is only $4k (don't worry, you will have a lot more in 10-15 years). I've rebalanced my retirement accounts once or twice in fifteen years. Mostly I've just tweaked future contribution ratios to get where I want. There aren't any costs for me to rebalance, though that might depend on your provider. Don't use an IRA as an emergency fund. If things get really bad you won't even care about any tax hit that might happen. You are going to hate paying a car loan on a grad student income. I don't suppose you could ditch it somehow? Good luck with the PhD! Nolanar posted:If my school offers a 403(b) to grad students
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Jan 9, 2014 05:06
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raging bullwinkle fucked around with this message at 13:21 on Nov 25, 2015 |
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Jan 9, 2014 07:07
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Nolanar posted:Is there anything major I'm missing for the basic plan? I know I'll have to pay taxes on that Roth rollover, so I'll have a larger buffer than normal to take care of that. Depending on how little you'll be making as a grad student, you can roll it over to a traditional IRA now, and then to a Roth once your income is lower. With the Lifetime Learning Credit you could possibly wipe out the tax hit entirely.
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Jan 9, 2014 07:22
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When you do a rollover do you have to roll everything over or can you do a partial roll over?
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Jan 10, 2014 15:22
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Orange_Lazarus posted:When you do a rollover do you have to roll everything over or can you do a partial roll over? Depends on your plan provider. Legally/financially there's no reason you can't do a partial roll over.
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Jan 10, 2014 15:50
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Thanks for the advice, both of you!Kilty Monroe posted:Depending on how little you'll be making as a grad student, you can roll it over to a traditional IRA now, and then to a Roth once your income is lower. With the Lifetime Learning Credit you could possibly wipe out the tax hit entirely. This makes a lot of sense, but I ran the math and it seems like I'll just be moving from the top of the 25% bracket to the low-middle of it, once the normal deductions are factored in, so it doesn't seem to help me out much. And I don't think that credit applies, since tuition waivers are par for the course in these programs. That seems like a question for the tax thread though. slap me silly posted:I've rebalanced my retirement accounts once or twice in fifteen years. Mostly I've just tweaked future contribution ratios to get where I want. There aren't any costs for me to rebalance, though that might depend on your provider. Good to know that rebalancing isn't something I need to keep a constant eye on. It will be a Vanguard account with their funds, so I don't need to worry about costs being too much of an issue. Though if budgeting gets tight, I might not be able to do regular contributions to the IRA while I'm in grad school. Does that cause issues? And yeah, the car payments are definitely going to be my highest concern. I'm going to work on paying it down now while I have the wiggle room, but belt-tightening is something I'm good at after the unemployment stint. I'm no stranger to beans and rice, and the car is worth it. slap me silly posted:
Yeah, that's about what I figured. 
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Jan 10, 2014 16:07
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Is it even worth the stress to put 3% in a 401(k) if you get no employer match and live paycheck to paycheck or should I just wait until I get a new job that pays more? I'm 25 and currently job searching and have had some positive interviews. The 401(k) would be through John Hancock. I only contribute $100 monthly into a Roth IRA. This is my first time I can enroll in a 401(k) and I sort of want to do it just to get SOMETHING started, but i'm not sure if my budget can handle the strain. I have $2600 of credit card debt that should be paid off this year and 30k of student loan debt. cheese eats mouse fucked around with this message at 19:17 on Jan 10, 2014 |
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Jan 10, 2014 19:11
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Pay off your credit card bills first. Do you have an emergency fund?
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Jan 10, 2014 19:28
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Here's a funny thing that happened: My fiancee got a call from her dad, "Hey, I might have forgotten to tell you, but your grandmother left you $10k when she passed [five years ago]. I've been 'investing' it for you, there's about $6k left. Have you contributed to your Roth IRA yet? I'm pretty sure this stock is about to triple in value so you should put these holdings in your tax-sheltered account if possible. I'm transferring it to you now!" (We sold it, of course, and invested in our usual Vanguard portfolio. Then the stock tanked. I don't even know what to think)
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Jan 10, 2014 20:54
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SurgicalOntologist posted:Here's a funny thing that happened: My fiancee got a call from her dad, "Hey, I might have forgotten to tell you, but your grandmother left you $10k when she passed [five years ago]. I've been 'investing' it for you, there's about $6k left. Have you contributed to your Roth IRA yet? I'm pretty sure this stock is about to triple in value so you should put these holdings in your tax-sheltered account if possible. I'm transferring it to you now!" Wait wait, there was $10k and it dropped to $6k since her dad has been "investing" it for her?
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Jan 10, 2014 20:59
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Was it in the will or kind of a wink and a nod here's some money for the grandkids? Because there are some serious issues with that regardless. Is he a gambler? What's he put it in that's lost 40% of principal in the last five years. I'm thinking his online poker addiction.
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Jan 10, 2014 21:24
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Untagged posted:Was it in the will or kind of a wink and a nod here's some money for the grandkids? Because there are some serious issues with that regardless. When my dad managed my IRA, He thought he could pick the next up and coming emerging markets so put them in very country specific ETFs - they are all down about 40% (I've been selling them off)
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Jan 10, 2014 22:00
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