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Veskit posted:What's the difference between a roth 401k and a roth ira? 401k is through your work (using their funds) and an IRA is, well, an individual retirement account, through anybody (Vanguard).
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Mar 19, 2014 18:16
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I'm almost eligible for my 401k accounts, and am excited to find that we have vanguard funds! Does that mean if I don't have the upfront plop down money on the table to get hte fund rolling money, it'd be beneficial to fund my roth ira through my company's 401k options if i'm ok with the 3 vanguard funds offered? (VBTSX, VINIX and VIVIX) These lovely trow price retirement funds scare me in comparison.
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Mar 19, 2014 18:27
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Veskit posted:I'm almost eligible for my 401k accounts, and am excited to find that we have vanguard funds! Does that mean if I don't have the upfront plop down money on the table to get hte fund rolling money, it'd be beneficial to fund my roth ira through my company's 401k options if i'm ok with the 3 vanguard funds offered? (VBTSX, VINIX and VIVIX) These lovely trow price retirement funds scare me in comparison. I'm not sure what you're asking here. An IRA is 100% independent from your 401k. You can go open an IRA right now today with whoever you want and contribute as much money as you want (up to the $5500 annual limit) and invest it in whatever you want. It has no connection to your 401k at all. If you don't already have an IRA that you are contributing to, I recommend making that a top priority. Your 401k contributions have to be deducted from your paycheck to be eligible for the deferred taxes and you are limited to the custodian and funds that your employer has selected.
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Mar 19, 2014 18:31
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Huh, I just checked the funds I can invest in through my company's 401k. Vanguard's VIIIX is in there and I had no clue. I'm currently just using Fidelity's target 2045 fund.
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Mar 19, 2014 18:40
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Guinness posted:An IRA is 100% independent from your 401k. Unless.... it's a 401k roth ira? That's where I'm confused. I get they're 2 separate accounts that work in different ways, but what's the benefit of going through a roth ira and a roth 401k ira? Is it just convenience of having automatic deductions from your paycheck, and not having to put a "down payment" on the various funds? Does this also mean I can contribute post tax dollars and have them matched by my company to their max matching? (4%) I'm just  about the whole thing sorry.
Veskit fucked around with this message at 19:18 on Mar 19, 2014 |
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Mar 19, 2014 19:15
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Veskit posted:Unless.... it's a 401k roth ira? That's where I'm confused. I get they're 2 separate accounts that work in different ways, but what's the benefit of going through a roth ira and a roth 401k ira? Is it just convenience of having automatic deductions from your paycheck, and not having to put a "down payment" on the various funds?
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Mar 19, 2014 19:16
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There's no such thing as a 401k IRA. You can have a Roth IRA, or make Roth contributions to your 401k. I don't see any practical difference between the two except that you may have to roll over the 401k if you leave your job.
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Mar 19, 2014 19:16
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The Roth 401(k) will force you to use the funds available in your company's 401(k) plan. A Roth IRA allows you to choose whatever custodian you prefer and pick from their funds. If you work for a huge company with great funds, it might be better to go the Roth 401(k) option. Otherwise there are good choices out there in the IRA world too. If your employer offers 401(k) matching, obviously you'd want to contribute to the Roth 401(k) to get that free money from your employer. Their contributions will go into the traditional portion of your 401(k). You can contribute up to $17,500 per year to the 401(k), but only $5,500 per year to an IRA be that Roth contributions or traditional contributions. Actually here is a handy wikipedia page that highlights all of the differences. It's ok to be confused about it all. The differences can seem rather subtle at first.
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Mar 19, 2014 19:25
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OK, I'm getting the wording down better and alleviating my confusion so thank you all for that. slap me silly posted:You can have a Roth IRA, or make Roth contributions to your 401k. I don't see any practical difference between the two except that you may have to roll over the 401k if you leave your job. Can I contribute the matching dollars my company provides to my roth 401k, or do they only do that for pre taxed dollars? That's the biggest benefit I would be able to come up with besides automatic deductions and the lack of needing to put in a large amount of money to get these accounts started.
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Mar 19, 2014 19:27
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Veskit posted:Can I contribute the matching dollars my company provides to my roth 401k, or do they only do that for pre taxed dollars? That's the biggest benefit I would be able to come up with besides automatic deductions and the lack of needing to put in a large amount of money to get these accounts started.
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Mar 19, 2014 19:31
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Saint Fu posted:They'll match your dollars you contribute to your Roth 401(k) but their funds will go into a traditional portion of your 401(k). Basically they will be taxed when you withdraw them as opposed to your Roth contributions which won't be taxed. So if I set myself up to do the maximum allowed amount into my roth 401k of 5500 dollars, they will take the money out post taxed, BUT will then also contribute 4% of my gross income and throw that into my traditional 401k, which is not taxed immediately, but will be taxed when I take out the money.
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Mar 19, 2014 19:38
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Veskit posted:So if I set myself up to do the maximum allowed amount into my roth 401k of 5500 dollars, they will take the money out post taxed, BUT will then also contribute 4% of my gross income and throw that into my traditional 401k, which is not taxed immediately, but will be taxed when I take out the money.
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Mar 19, 2014 19:40
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Saint Fu posted:Correct except you can contribute up to $17,500 to your Roth 401(k). Not $5,500 as you mentioned. The rest of what you said is right (assuming your company matches up to 4%). It also assumes that what you contribute ($5,500 in your example) is more than 4% of your salary. Well, that's exciting. I know the general rule of thumb is contribute 401k matching, then max roth ira then the rest of 401k, do I need to then sit down and figure out what to do with that cash, or should I just make the assumption that I'm going to be in a higher tax bracket. I mean I'm only 29, and starting late in this but I'll probably move up a tax bracket by the time I retire. Do I just focus completely on puting in as much as I can into my roth IRA? The 5500 is definitely over 4% of my gross income.
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Mar 19, 2014 19:47
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Veskit posted:Well, that's exciting. I know the general rule of thumb is contribute 401k matching, then max roth ira then the rest of 401k, do I need to then sit down and figure out what to do with that cash, or should I just make the assumption that I'm going to be in a higher tax bracket. I mean I'm only 29, and starting late in this but I'll probably move up a tax bracket by the time I retire. Do I just focus completely on puting in as much as I can into my roth IRA? I will note that Roth IRA contributions are generally slightly preferable to unmatched roth 401k contributions because they're a little more flexible on withdrawals and if something changes you can re-characterize your contribution from Roth to traditional before the end of the tax year (probably won't matter). No Wave fucked around with this message at 20:13 on Mar 19, 2014 |
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Mar 19, 2014 20:10
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I have a chunk of money in a Vanguard Brokerage Account in a mix of stock and bond EFTs. Dividends/gains are set to automatically re-invest. I started this back when I thought life was going to get stable. Years later that hasn't happened, so I have basically put nothing in. Seems like a waste, so I'd like to get my money out and close the account. Looking online, it says that there are no fees when closing a brokerage account. However, how do I "end" things with ETFs? Sorry for such a dumb question, but I really have avoided this, and because of that have learned nothing. Do I just sell the whole lot, it goes back into my money market account, I transfer that amount into another checking/savings/whatever account, and then close the brokerage account? Does that sound right? I feel like there are going to be some huge fees with just stopping, but thats based on nothing. I could of course call Vanguard, but I'd rather ask here first since the last time I called them they were less than helpful.
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Mar 19, 2014 21:14
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moflika posted:Sorry for such a dumb question, but I really have avoided this, and because of that have learned nothing. Do I just sell the whole lot, it goes back into my money market account, I transfer that amount into another checking/savings/whatever account, and then close the brokerage account? Does that sound right? I feel like there are going to be some huge fees with just stopping, but thats based on nothing. Basically this. There shouldn't really be any fees. But unless you need the cash right now, why cash out the account?
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Mar 19, 2014 21:16
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I might be making a move that would have a higher chance of succeeding if I give myself a nicer cushion. Aside from that, I'd have nothing against leaving it alone for x years as I've already been doing  Regardless, thanks for the reply!
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Mar 19, 2014 21:25
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moflika posted:I might be making a move that would have a higher chance of succeeding if I give myself a nicer cushion. Aside from that, I'd have nothing against leaving it alone for x years as I've already been doing As long as your comfortable with your stock/bond split, doing nothing and ignoring your money is basically the optimal investment strategy. If you need less risk, by all means sell some into cash or lower risk funds, but realize you're going to take the capital gains tax (presuming you have some gains) when you sell. I'd only sell what I needed to get to my target cash amount. If the answer to "what's your target amount of cash" is "???", I'd think about that carefully before doing anything at all.
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Mar 19, 2014 23:44
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O, definitely. Ideally, I'll leave it alone. I ask all the ?s now, so that when I have to make quick moves later they won't feel rushed!
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Mar 20, 2014 00:01
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moflika posted:O, definitely. Ideally, I'll leave it alone. I ask all the ?s now, so that when I have to make quick moves later they won't feel rushed! Yeah the biggest mistake is making quick emotional decisions and not sticking to a original investment strategy. So pretty much figure out your risk tolerance, build a balanced portfolio and stick with it even in downcycles.
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Mar 20, 2014 05:36
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So I went with a new accountant this year who, in addition to preparing my 2013 tax filing, also corrected my 2012 tax filing. The result of the 2012 correction is that I am owed a refund from the IRS of about $3,500. Great news! ...Except that it also reduces the max I was allowed to contribute to my SEP IRA for TY 2012. In March 2013 I contributed what I then had calculated to be the maximum amount I could do for TY 2012--which is now about $1,500 too much. My accountant informs me I should probably still be able to reclassify that $1,500 portion as a TY 2013 contribution, since it was made in calendar year 2013 and the TY 2013 contribution deadline hasn't passed yet. But here's where it gets complicated. I'd opened and funded the SEP IRA through TD Ameritrade, but then around September 2013 I transferred everything (in kind) to new Vanguard account. So the contribution form required by the IRS would have been prepared and filed by TDA, but the funds are currently held by Vanguard. Do I contact Vanguard to handle this, or do I need to talk to TDA? I no longer have an active account with TDA. If I can avoid it, I'd rather not have to withdraw that money and pay the penalty, considering I'm just going to turn around and contribute that money for TY 2013 now anyway. Anybody have experience with anything like this?
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Mar 22, 2014 08:18
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Hello thread. After some less than ideal experiences with investments when I was younger, I've mostly stayed away from investing. I'm currently 25, married (though my wife does not currently work), and looking at saving about $2,000 a month through my job as a developer in SF. In addition, I've already got socked away ~$50,000 in a few savings accounts. I don't currently have any retirement accounts or investment vehicles of any sort and my employer doesn't offer any sort of 401k matching. I need to start figuring out how to invest my money effectively. One major caveat is that I'm both a traveler and an aspiring entrepreneur so it's possible that at any time my income will shrink down to nothing as we travel the world or attempt to start another business. With those likely future paths, how would you suggest I start to invest so that I can prepare for the future while also have flexibility with my more short term goals? Thank you!
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Mar 24, 2014 04:41
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It's hard to give good advice for vague goals. A good place to start is to figure out how much money you will take out of your accounts, and when. Since your situation sounds kind of unpredictable, figure out a range of likely scenarios. Much of the advice here is more or less assuming you will be gainfully employed until you are old, at which point you will need a lot of money. Is that reasonable for you?
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Mar 24, 2014 05:01
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The_Sinful_Youth posted:Hello thread. After some less than ideal experiences with investments when I was younger, I've mostly stayed away from investing. I'm currently 25, married (though my wife does not currently work), and looking at saving about $2,000 a month through my job as a developer in SF. In addition, I've already got socked away ~$50,000 in a few savings accounts. I don't currently have any retirement accounts or investment vehicles of any sort and my employer doesn't offer any sort of 401k matching. I have similar experience to you where a bad experience left me with analysis paralysis and I missed out on the growth from 2011 to today. How I decided to overcome it was to set aside a portion of my monthly savings into a in an "untouchable" fund for base level retirement. That way I'm still saving a large portion of my income, but I still have the flexibility to not feel like it's all locked away forever.
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Mar 24, 2014 05:16
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Exactly said as above. You can fail and overspend in many ways, so the money that you have to spend traveling or entrepeneuring needs to be money that isn't set for retirement. Which then leads to using your 401k.
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Mar 24, 2014 08:41
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I'm currently debating whether to utilize my IRA contribution limit for 2013. I know the standard answer is always "yes" but I have a few additional details, and I'm curious if they change the best approach for me. These details stem from the fact that I am an officer in the uniformed services, so that bit of background is important. 1. This gives me access to the TSP, but there is no employer match on any of my contributions. Additionally, because much of my income is tax-free currently, I am using entirely Roth allocations since I am in a fairly low tax bracket for my income. I contribute the maximum 17.5k into the Roth TSP each year. 2. I am eligible for a pension retirement after 20 years of service (16 years from now). I understand that things can change, and this is why I'm not depending on that pension as my only retirement plan (see contributions above.) But I do like what I do, and my branch of the uniformed services isn't terribly mentally or physically taxing. I was commissioned with the plan to stay in until retirement, and I'm currently just as enthusiastic about that plan or maybe more so since the time seems to be flying by. If all goes according to plan, I would "retire" with that pension between age 43-53. These two things combined have me wondering if I want my additional contribution earnings to be "trapped" until I'm 59 1/2, given my potential for early retirement. The alternative would be to open a non-IRA brokerage account with a similar long-term investing strategy, but which is accessible for me to withdraw from at any age. I'm very disciplined with my money, so the temptation to withdraw for silly reasons doesn't seem like a great threat. I think, in the future, the answer will be to do both - max out the IRA contribution and also put money away in a non-IRA brokerage. For this year and next year, though, I'm saving aggressively for a house down payment, so the $5k will either go to the IRA, down payment, or brokerage and I'm trying to choose between them. I recognize that it's a good problem to have, but it's still one I'm struggling with. It's difficult to know that it's one year of potential contributions that I'm letting pass by, even though I'm already loaded up on a Roth IRA-like fund.
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Mar 28, 2014 16:11
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If you can contribute to a Roth IRA, those contributions can be withdrawn at any time without penalty. You can invest now, let them (hopefully) grow for the next 15-20 years, then start pulling out the contributions and only touch the gains once you hit 59.5.
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Mar 28, 2014 16:28
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Saint Fu posted:If you can contribute to a Roth IRA, those contributions can be withdrawn at any time without penalty. You can invest now, let them (hopefully) grow for the next 15-20 years, then start pulling out the contributions and only touch the gains once you hit 59.5. Perfect, that way of looking at things helps. I still need to decide how I weight $5k towards retirement vs. $5k towards a house, but that's a personal debate that I can wrestle with. Thanks!
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Mar 28, 2014 16:30
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You can withdraw without penalty under certain circumstances. Google substantially equal periodic payments.
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Mar 28, 2014 16:42
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Saint Fu posted:If you can contribute to a Roth IRA, those contributions can be withdrawn at any time without penalty. You can invest now, let them (hopefully) grow for the next 15-20 years, then start pulling out the contributions and only touch the gains once you hit 59.5. Yeah it's another Pro of going the Roth IRA route, even though it has the fine detail of applying only to the original post-tax contributions. For example you could withdraw the 5,500 tax free but not the amount plus any earned equity. quote:A non-qualified distribution is subject to taxation of earnings and a 10% additional tax unless an exception applies. For Roth IRAs, you can always remove post-tax penalty contributions (also known as “basis”) from your Roth IRA without penalty. Consult your tax advisor about your particular situation. etalian fucked around with this message at 00:36 on Mar 29, 2014 |
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Mar 29, 2014 00:34
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I'm 25 and recently paid the last of my student loans in full, which was all the long term debt I had. I'm pretty well committed to opening a Vanguard Roth IRA at some point in the near future, but I'm still working towards building up savings for a year's worth of expenses. Would it be smarter to do the Roth ASAP and consider the withdraw-able contribution to be part of those emergency funds until I have it in proper savings? Once those are maxed and taken care of, I'm somewhat clueless about where to go, though I'd prefer to use the excess for possible medium term or annual gains, even if they're small like a few dollars a month, such as stock market dividend income. Is that viable (if I have my 401k and IRA prioritized and am willing to take on some degree of risk afterwards) or just a naive fantasy of probable death and destruction?
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Mar 29, 2014 12:25
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Zerstorung posted:I'm pretty well committed to opening a Vanguard Roth IRA at some point in the near future, but I'm still working towards building up savings for a year's worth of expenses. Would it be smarter to do the Roth ASAP and consider the withdraw-able contribution to be part of those emergency funds until I have it in proper savings? No.
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Mar 29, 2014 12:59
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I disagree, he's got a few weeks to get a 2013 IRA contribution. He loses nothing if he has to withdraw that money for an emergency, it's exactly what I did last year. YMMV.
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Mar 29, 2014 15:26
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Yeah, I disagree too. Especially if he's putting it into the 2013 category---there's really nothing to lose, especially if he puts it in a safe money market, bond, etc fund. I can see a temporary circumstance where you would not want to put the money into a Roth immediately. E.g., In May of 2014 you have $5,500 or less to your name, with no contributions to a Roth for '14 and no notable safety fund. You plan on the ability to make a surplus within the next 12 months and would like to contribute to a Roth. I wouldn't put that $5,500 into the Roth just yet---as if you put it in and immediately pull it out you've basically lost your ability to contribute for '14 in the case you had an emergency early in the year. I'd hold onto the money until you have a buffer built up where if something happened you wouldn't rely on Roth first, or towards March/April of 2015 as is the timeline we're in currently----whichever comes first. That's a highly temporary circumstance, especially if you're interested in long term investing and retirement... and I certainly wouldn't assume it to be the standard recommendation.
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Mar 29, 2014 15:38
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If you max your Roth IRA contribution for 2014, can you withdraw the contribution in case of emergency and then refill your Roth IRA for 2014 as long as you do it before April 15, 2015? For instance: 12/31/2013 Roth IRA balance is $0 1/1/2014 contribute $5500 to Roth IRA, balance is $5500 2/1/2014 withdraw $5500 from Roth IRA to pay for emergency, balance is $0 12/13/2014 contribute $5500 to Roth IRA, balance is $5500
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Mar 29, 2014 16:52
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No. You can only put in $5,500 total, regardless of how much is ever pulled out. That's why you don't want your "immediate" emergency fund to be placed into the Roth if you're going to pull it out. You can't go back and "backfill".
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Mar 29, 2014 17:17
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Why not? It's all happening in the same year. It's fine. I guess you have to withdraw any earnings from the first contribution as well though.
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Mar 29, 2014 17:45
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Zerstorung posted:
I would venture to say this is overkill, and instead of saving for a years worth of expenses, why not save for 3 months worth of expenses, then work on retirement funds while saving up to 6 months and stop at 6. A full year seems like too much to me.
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Mar 29, 2014 17:46
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Zerstorung posted:I'm 25 and recently paid the last of my student loans in full, which was all the long term debt I had. It's called an emergency fund because you want to be able to take it out ASAP if needed. Car repairs, unforseen bills, hospital stuff, family get kidnapped by ninjas and you need money to pay back the ransom etc. I suppose you can transfer the funds over to a checking, but that might take a few days and the possibility of you needed the cash sooner is always there. I have a very simple mind set for people when I talk to them about opening a ROTH. Just put money in it, and pretend it doesn't exist. Start a "real" emergency fund, like in a savings account and dip into that if you want. You're also taking away from the ROTHs compounding interest when you take the money out, which is how the ROTH really makes its money. If you're looking for more avenues to invest in, like I am, here are the steps which I'm looking at... 1. Emergency fund 2. 401k (up to employer match) 3. Max out Roth 4. Max out 401k I personally haven't done #4 yet, but I'm looking for other things to place my money into aside from my savings.
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Mar 29, 2014 18:02
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Veskit posted:I would venture to say this is overkill, and instead of saving for a years worth of expenses, why not save for 3 months worth of expenses, then work on retirement funds while saving up to 6 months and stop at 6. A full year seems like too much to me. That's actually precisely where I'm at right now and the decision I have to make is whether or not this is a good idea.
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Mar 29, 2014 18:18
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