|
kaishek posted:It depends on your company policy. My previous employer made one final contribution for me in January of the year after I left, but many employers (including the recent controversy about AOL changing their policy on 401k matches, require that you be employed at the time the match is disbursed (thus penalizing everyone that left during the year and saving them money). Yeah, my previous employer required that you be employed as of December 31st of the previous year, and they distribute at the end of the first quarter the next year. At least, that's what their policy says (which I definitely saved a copy of). If I don't get my match at the end of March, words will be exchanged. New company matches in every paycheck, which is basically the awesome way to do it because not only do you get the match immediately, the match grows for you immediately too.
|
#
?
Feb 24, 2014 18:52
|
|
|
|
| # ? May 11, 2024 16:58 |
|
|
baquerd posted:New company matches in every paycheck, which is basically the awesome way to do it because not only do you get the match immediately, the match grows for you immediately too. Maybe.
|
|
#
?
Feb 24, 2014 19:19
|
|
|
Some companies also have explicit vesting periods for their matching funds, so it could be that you won't get matching for the 12 trailing months from when you leave the company. It really all depends on the exact language in your 401(k) plan.
|
|
#
?
Feb 24, 2014 20:18
|
|
|
In a year or two I am planning on starting to save for a downpayment on a house. Since it will be my first one, am I wanting to try to stash away 10k in an IRA,Roth Ira, or a savings account? I don't think this works for 401k, but I've heard that you can pull it from your IRA/roth. Also this would need to be pulled with in the 5 years that it would be put in, which I believe causes a penalty.
|
|
#
?
Feb 24, 2014 20:27
|
|
|
Veskit posted:In a year or two I am planning on starting to save for a downpayment on a house. Since it will be my first one, am I wanting to try to stash away 10k in an IRA,Roth Ira, or a savings account? I don't think this works for 401k, but I've heard that you can pull it from your IRA/roth. Also this would need to be pulled with in the 5 years that it would be put in, which I believe causes a penalty. Save for your house separately from your retirement. If you can't afford to save for a house on top of your retirement, you can't afford a house. Cranbe fucked around with this message at 21:20 on Feb 24, 2014 |
|
#
?
Feb 24, 2014 20:29
|
|
|
Cranbe posted:Save for your house separately from your retirement. If you can't afford to save for a house on top of your retirement, you can afford a house. Well I mean that's pretty obvious and completely avoids my situation so I'll rephrase it. Where is the BEST place to put in savings for a first time purchase of a house?
|
|
#
?
Feb 24, 2014 20:42
|
|
|
Veskit posted:Well I mean that's pretty obvious and completely avoids my situation so I'll rephrase it. That you'll need within a few years? Laddered CDs.
|
|
#
?
Feb 24, 2014 20:47
|
|
|
Veskit posted:Well I mean that's pretty obvious and completely avoids my situation so I'll rephrase it. Right now, a savings account. Preferably a high yield one, you can beat money markets with any number of online savings accounts. Don't buy stocks or bonds with money you need soon.
|
|
#
?
Feb 24, 2014 20:47
|
|
|
Veskit posted:Well I mean that's pretty obvious and completely avoids my situation so I'll rephrase it. It doesn't really avoid your situation, though: you gave three options, two of which are retirement accounts. The answer is that it isn't a good idea to treat your retirement account as a vehicle for something that isn't retirement. Use laddered CDs or a savings account. You could use an investment account, but you'd have to be prepared for the chance that it would lose value.
|
|
#
?
Feb 24, 2014 21:16
|
|
|
Thank you for the responses. Last question then that'll let it seep into my brain for better understanding. If I already had 10K in an IRA, would you then recommend using that money to fund a 20% down payment on a house, or is it a really really really bad idea to use retirement accounts like that?
|
|
#
?
Feb 24, 2014 22:27
|
|
|
OK, the thing to understand here is that you only get a limited amount that you can put in your Roth IRA per year. So say the amount is $5,000, and you're going to be putting money into it for another 30 years, that means you get $5,000 * 30 = $150,000 of contributions that you can ever put into your Roth IRA. If you contribute $10,000 in the first year, then take it out a few years later, you can never go back and put that $10,000 back in, it's just gone now. The new total amount that you'll be able to put in to your IRA has been reduced to $140,000. Even worse, the $10,000 you just pulled out is money you put in at the start of your Roth IRA's lifetime, which is worth more than the money you're going to put in when you're old. You've sacrificed all the tax-free gains that money would have made over the next 30-odd years.
|
|
#
?
Feb 24, 2014 22:51
|
|
|
Cranbe posted:Save for your house separately from your retirement. If you can't afford to save for a house on top of your retirement, you can afford a house. What's confusing about this? Fund your IRA and then don't use it for a house.
|
|
#
?
Feb 24, 2014 22:51
|
|
|
Echo 3 posted:OK, the thing to understand here is that you only get a limited amount that you can put in your Roth IRA per year. So say the amount is $5,000, and you're going to be putting money into it for another 30 years, that means you get $5,000 * 30 = $150,000 of contributions that you can ever put into your Roth IRA. If you contribute $10,000 in the first year, then take it out a few years later, you can never go back and put that $10,000 back in, it's just gone now. The new total amount that you'll be able to put in to your IRA has been reduced to $140,000. Even worse, the $10,000 you just pulled out is money you put in at the start of your Roth IRA's lifetime, which is worth more than the money you're going to put in when you're old. You've sacrificed all the tax-free gains that money would have made over the next 30-odd years. Well that's.... terrifying. Thank you for teaching me in a horrifying manner why pulling money out of your roth ira is a bad bad idea. slap me silly posted:What's confusing about this? Fund your IRA and then don't use it for a house. What you're failing to do is explain why it's a bad idea, as opposed to echo who just made it very very clearly why that's an awful idea. I'm not trying to argue it, I'm just trying to learn. If you tell me 50 times it's a bad idea it's not going to sink unless it makes sense of why it's a bad idea. From what I've learned pulling money from your IRA for the house is fine but there's risk involved with puting your money into high yield accounts designed to help you retire when you need short term money for a house. I'm just confused because it seems like any any tax reductions you wuold get from dumping this money into an ira seems like a good idea, even though everyone says it's not. Cept the Roth IRA, I fully understand that one.
|
|
#
?
Feb 24, 2014 22:59
|
|
|
Veskit posted:What you're failing to do is explain why it's a bad idea, as opposed to echo who just made it very very clearly why that's an awful idea. I'm not trying to argue it, I'm just trying to learn. If you tell me 50 times it's a bad idea it's not going to sink unless it makes sense of why it's a bad idea. From what I've learned pulling money from your IRA for the house is fine but there's risk involved with puting your money into high yield accounts designed to help you retire when you need short term money for a house. I'm just confused because it seems like any any tax reductions you wuold get from dumping this money into an ira seems like a good idea, even though everyone says it's not. If the stocks crash or bonds crash in the next two years, you're hosed. The volatility of stocks is such that it can easily drop 50% one year to another. Bonds, 25%.
|
|
#
?
Feb 24, 2014 23:14
|
|
|
Veskit posted:I'm just confused because it seems like any any tax reductions you wuold get from dumping this money into an ira seems like a good idea, even though everyone says it's not. I'm certain that pulling money out of a regular IRA for a house still means that you have to pay income taxes on that money in the year you pull it out. The only thing you could possibly gain there is not having to pay the 10% penalty for an early distribution. If you are putting the money in something volatile like stocks or bonds, you also may end up either paying more taxes as the gains aren't capital gains or being able to deduct the losses like you would in a non-tax advantaged account. You really, *really* shouldn't do this for any money you expect to need within the 5 years minimum anyway because it is risky as hell no matter what kind of account you are putting it in. No, a Traditional to Roth conversion and just using your non-tax advantaged for the downpayment would make more sense here. Fancy_Lad fucked around with this message at 00:49 on Feb 25, 2014 |
|
#
?
Feb 24, 2014 23:27
|
|
|
Let's say you want to save $4000 in cash this year for a house. For the sake of simplicity we'll assume that you are also saving for a decent amount for retirement in the form of a 401k, but not a Roth IRA. Option 1 is to just keep the cash in a savings account until you have enough for a down payment. Option 2 is to put the cash into a Roth IRA and invest it in a safe fund (money market, or even just cash). You then withdraw it for your down payment when the time comes. From a STRICTLY financial perspective option 2 is objectively better, because if all goes as planned you are in the same situation as option 1, but if you end up not buying a house you are ahead of the game with regards to IRA contributions. However it's hard to recommend option 2 even for the most disciplined folks here. From a psychological perspective it is a much worse position since it gets you used to treating retirement accounts as temporary and raidable. Once that happens it gets really hard to resist withdrawing from your 401k when you need cash suddenly. I'm not saying that you are weak minded or will definitely fall into that trap, but why take the risk of getting into that habit. Understanding your own psychology can be worth a lot more money than understanding the financial parts.
|
|
#
?
Feb 25, 2014 00:29
|
|
|
Eyes Only posted:From a STRICTLY financial perspective option 2 is objectively better, because if all goes as planned you are in the same situation as option 1, but if you end up not buying a house you are ahead of the game with regards to IRA contributions. You can always toss the money into an IRA at the end of the year if you don't buy a house. So the only time this is true is if you're talking a 2 year time frame where Option 1 would cost you a year of contributions. The main problem is that taking out $10k for a house costs you (roughly) two years of contributions, no matter what. You can't justify using IRA space for house savings unless you truly weren't using it for retirement in the first place. Your point about the psychology is dead on - be clear about what you are using your money for so you don't trip yourself up.
|
|
#
?
Feb 25, 2014 00:52
|
|
|
Do people think the "R" in IRA stands for "Residence" or something? Who cares if you can use a retirement account to buy a house? It's a terrible use for it.
|
|
#
?
Feb 25, 2014 01:09
|
|
|
Eyes Only posted:Let's say you want to save $4000 in cash this year for a house. For the sake of simplicity we'll assume that you are also saving for a decent amount for retirement in the form of a 401k, but not a Roth IRA. I'd still probably recommend fully funding the IRA or Roth IRA before saving for a house, but I guess I could just be privileged and weight retirement saving fairly heavily. That much, I suppose, is a personal decision. Really though, I think the USA has it backwards: Seems like everybody thinks they should buy (or need to buy) a house, and only some people should bother (or at least, only some people do bother) saving for retirement. I think the exact opposite of that is a better scenario.
|
|
#
?
Feb 25, 2014 01:16
|
|
|
Oh I agree completely and I'm pretty heavily against homeownership in the US, at least in the northeast (I cant speak much to pricing and taxes in other regions). I was just giving an example of "if you are in this situation and really want to do this, then this is the best way, financially speaking."
|
|
#
?
Feb 25, 2014 01:21
|
|
|
Buying a house as a retirement investment made perfect sense if you lived in the 90s or the early aughts and houses were guaranteed to appreciate at 8+% a year. Talk to people whose investment knowledge comes exclusively from that era and you'll be called an idiot for not buying ASAP.
|
|
#
?
Feb 25, 2014 02:36
|
|
|
Shear Modulus posted:Buying a house as a retirement investment made perfect sense if you lived in the 90s or the early aughts and houses were guaranteed to appreciate at 8+% a year. Talk to people whose investment knowledge comes exclusively from that era and you'll be called an idiot for not buying ASAP. Honestly, even then it really didn't make sense because that was all just speculation. I was hearing "HOUSING GOES UP FOREVER BUY BUY BUY" right up until the collapse and even now I'm hearing people make the same claims. I'm actually hearing commercials about seminars on how to flip homes on the radio again I'm starting to think that most Americans want a bubble, even if they know what a bubble is. One of my co-workers still goes on and on about the $10-20k he made overnight trading tech stocks back during the tech bubble. Sure he lost it all and now has negative net worth but man what a high it was to be rich on paper for a little while!
|
|
#
?
Feb 25, 2014 02:52
|
|
|
Yeah. I love owning a house but I'm sure as hell not doing it for the return on investment.
|
|
#
?
Feb 25, 2014 02:53
|
|
|
slap me silly posted:Yeah. I love owning a house but I'm sure as hell not doing it for the return on investment. I love jlcollinsnh for this article: http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
|
|
#
?
Feb 25, 2014 11:23
|
|
|
I bought a condo in 2009 for 143k after it had lost 50% of its value. It's now worth about 90k and I'm 30k underwater even though I've put about 7k additional principal on it so far. If I ever get out from underwater, the next home I buy - if I buy any ever again - will be the place I die in. It's an investment the same way roulette is.
|
|
#
?
Feb 25, 2014 14:41
|
|
|
baquerd posted:I love jlcollinsnh for this article: The bad thing about BFC is that it has highlighted how I shouldn't have neglected making Roth IRA contributions for about 5 years (because I was saving up more in cash and company stock than I needed), that I should've been putting away more toward my 401(k) than the max company match because I could've afforded it, and that buying my house was unwise from a strictly financial standpoint, but especially that trying to save for a second and make the first an investment property (at my parents' insistence) was *really* unwise. I'm glad I didn't pull the trigger on the second house and instead put that money into a taxable account at Vanguard, but it would be so much nicer to have had more of it in my retirement accounts instead. Maintenance has been a pain and very costly in some years, but home improvement has been personally enriching even if not financially so. Overall, I don't regret my home purchase because of the independence, space, and yard it has given me to get a dog, but obviously those things could've still been achieved by wisely selecting a rental and dealing with a slightly higher month to month cost while not looking myself down to a place.
|
|
#
?
Feb 25, 2014 15:41
|
|
|
Weird thing - people below a certain income threshold pay ZERO capital gains tax, even if they get a million a year from cap gains. So a super rich person getting 400K a year in investments would LOSE money by getting a job that paid less than 90K or so. Wtf. EDIT: Ah wait, nm, I'm wrong. The language just confused me. No Wave fucked around with this message at 18:52 on Feb 25, 2014 |
|
#
?
Feb 25, 2014 18:44
|
|
|
Schwab's Aggressive ETF Plan says to have 5% cash. But if I'm 30+ years from retirement is there any reason to have cash in my Roth IRA?
|
|
#
?
Feb 25, 2014 21:01
|
|
|
The only way I see that making sense is if you're rebalancing very often(the cash being stable will be there to help you rebalance to your desired asset allocation hopefully without having to sell too many shares of anything), unless I'm missing something else.
|
|
#
?
Feb 25, 2014 21:05
|
|
|
Nail Rat posted:The only way I see that making sense is if you're rebalancing very often(the cash being stable will be there to help you rebalance to your desired asset allocation hopefully without having to sell too many shares of anything), unless I'm missing something else. I looked a little more and they say the Aggressive Plan is for someone with a 15+ year outlook. So maybe they figure that you want 5% cash if you need the money in 15 years.
|
|
#
?
Feb 25, 2014 21:14
|
|
|
Nail Rat posted:The only way I see that making sense is if you're rebalancing very often(the cash being stable will be there to help you rebalance to your desired asset allocation hopefully without having to sell too many shares of anything), unless I'm missing something else. I thought that some small amount of cash was useful as a hedge, especially when inflation is incredibly low like it is now? We are in an environment where both stocks and bonds can fall at the same time, and in that case having a cash hedge would allow you rebalance back into stocks and bonds as they decline.
|
|
#
?
Feb 25, 2014 21:43
|
|
|
Twerk from Home posted:I thought that some small amount of cash was useful as a hedge, especially when inflation is incredibly low like it is now? We are in an environment where both stocks and bonds can fall at the same time, and in that case having a cash hedge would allow you rebalance back into stocks and bonds as they decline. Well that was part of the strategy I was suggesting, but I wasn't clear on that. Rebalancing would include if it was 70/25/5 stocks/bonds/cash and stocks fell to make it 63/25/12, using the cash buffer to rebalance to try to get closer to 70/25/5(which would include buying into stocks with a lot of cash).
|
|
#
?
Feb 25, 2014 22:16
|
|
|
I'm trying to figure out how to tweak my retirement contributions and would appreciate some advice. I currently contribute 4% pre-tax (and have been since I was hired in 2005) to my employer's 401K plan. They do not do any matching. The employer yearly contribution is simply a variable percentage of our base salary, which is set by the board of directors based upon the company's performance for that year. I want to put more into my retirement and am not sure whether to bump my 401K percentage, or just start a Roth IRA and dump it there since there is no matching on the 401K.
|
|
#
?
Feb 25, 2014 23:59
|
|
|
OP posted:Roth IRAs, 401(k)...I'm confused. Where do I start? Personally, I shoot for about 1/2 pretax and 1/2 posttax savings to hedge my bets against government playing with tax rates in the future. That said, I'm also at an income level at which I project to break even between either advantage if they maintain the status quo. In your case, not knowing what tax bracket you're in, since the employer contribution is variable and maybe unpredictable I'd look at keeping your 401k contribution where its at with Roth contributions to match. If saving 8% is too much, consider dropping your 401k a bit and putting the difference in a Roth IRA. This option may be more appealing if the 401k is high cost---especially since you could get into bed with Vanguard, which is an incredible servicer IMO, for a low expense ratios & cost of entry ($1-3k for most funds). That's just my $0.02, though.
|
|
#
?
Feb 26, 2014 00:20
|
|
|
Dead Pressed posted:Personally, I shoot for about 1/2 pretax and 1/2 posttax savings to hedge my bets against government playing with tax rates in the future. That said, I'm also at an income level at which I project to break even between either advantage if they maintain the status quo. What do you mean by this? Are you right in the middle of a tax bracket? I'm just wondering what the standard assumptions are when deciding between Roth/simple. Tax rate changes aside, how much do people typically spend in retirement relative to early In their career?
|
|
#
?
Feb 26, 2014 00:32
|
|
|
Dead Pressed posted:Personally, I shoot for about 1/2 pretax and 1/2 posttax savings to hedge my bets against government playing with tax rates in the future. That said, I'm also at an income level at which I project to break even between either advantage if they maintain the status quo. In your case, not knowing what tax bracket you're in, since the employer contribution is variable and maybe unpredictable I'd look at keeping your 401k contribution where its at with Roth contributions to match. If saving 8% is too much, consider dropping your 401k a bit and putting the difference in a Roth IRA. This option may be more appealing if the 401k is high cost---especially since you could get into bed with Vanguard, which is an incredible servicer IMO, for a low expense ratios & cost of entry ($1-3k for most funds). Makes sense, although what do you mean by the 401k being high cost? I am already maxing out my stock purchase plan at 5%, but I could probably swing 6-8% combined retirement right now. I may split it at 3 each once our enrollment window opens up next month. Or should I max the Roth first then whatever is left over dump in 401k? My gross pay is approaching the point where the contribution max starts declining. As for the tax bracket, I just googled it and came across this: http://taxes.about.com/od/Federal-Income-Taxes/fl/Federal-Income-Tax-Rates-for-the-Year-2014.htm I am in the "28% on taxable income over $89,350 to $186,350" bracket.
|
|
#
?
Feb 26, 2014 00:39
|
|
|
Henrik Zetterberg posted:Makes sense, although what do you mean by the 401k being high cost? The general thinking is that your 401k fund choices are probably not as good as what is offered by Vanguard. The cost that is being referred to is the expense ratio of the funds. For example, my 401k has fund choices that have expense ratios of 1% or higher. Vanguard has better choices available for 0.18%
|
|
#
?
Feb 26, 2014 00:50
|
|
|
bam thwok posted:If I'm currently contributing to my 401K but leave my job in June of this year, will I still be entitled to employer matching funds in my 401K when they are disbursed next January? With 401ks pay close attention to the vesting time when you look over the job offer letter, for most companies if 2-3 years. Leave before then and the money goes back to the company. kaishek posted:The general thinking is that your 401k fund choices are probably not as good as what is offered by Vanguard. The cost that is being referred to is the expense ratio of the funds. For example, my 401k has fund choices that have expense ratios of 1% or higher. Vanguard has better choices available for 0.18% Yeah the big scam for 401ks is the high expense ratio actively managed fund that actually doesn't end up beating a better value index tracking ETF such as Vanguard VTI or VEU. etalian fucked around with this message at 06:28 on Feb 26, 2014 |
|
#
?
Feb 26, 2014 06:24
|
|
|
Of course if your 401k has Vanguard or Spartan funds that's alleviated somewhat. My fund choices more or less suck but I have Vanguard S&P 500 for my domestic stock for the 401k. No good small cap choices, so when my IRA is big enough for admiral shares of individual funds I'll probably use my 401k for nothing but large cap US.
Nail Rat fucked around with this message at 14:19 on Feb 26, 2014 |
|
#
?
Feb 26, 2014 14:15
|
|
|
|
| # ? May 11, 2024 16:58 |
|
|
Nail Rat posted:No good small cap choices, so when my IRA is big enough for admiral shares of individual funds I'll probably use my 401k for nothing but large cap US. This is what I do. My 401k offers what is essentially the Total US Stock Market (Vanguard's 500 Index and Extended Market Index, which at 80/20 are functionally identical to VTSAX). So I'm 100$ VTSAX in the 401k and use my Roth to add international and bond exposure. The much smaller contribution limit for the Roth makes it easy to keep my allocations, too. Does anyone have a good guide or pointers for maintaining good allocations when your funds are held in separate accounts? It's annoying that I can't directly sell VTSAX from the 401k and buy Total Intl in the Roth.
|
|
#
?
Feb 26, 2014 19:06
|
|