|
ScurvyKip posted:Yeah this is basically what it is. It makes a lot more sense when presented to me this way. I also learned I have the option to put into a Roth as part of this company plan, or am I better off using another company for opening one up? You should almost certainly do the 401k, at least enough to get the match. What's the cost of the managed fund? What are the other options? The 401k can be Roth or not-Roth. If you're not making a ton of money Roth is probably a good bet. The company match will be not-Roth regardless, so you'd get a balance. The tax implications are different: if Roth, it's taxed now; if not-Roth, it's taxed when you retire. An IRA is something else you can add to the mix completely independently of your company, if you have more money you want to put toward retirement. This can also be Roth or not-Roth, but most people do Roth because the perceived tax benefit is higher and the rules are more flexible. The reason to use any of those is (1) company match=free money and (2) tax advantages. This comes at the cost of not being able to get some/all of the money out until late in life without paying a big penalty. A good starting target for the total amount going into all your retirement accounts is 15% of your gross income, but every little bit counts.
|
#
?
Sep 9, 2014 04:12
|
|
|
|
| # ? May 28, 2024 07:55 |
|
|
slap me silly posted:The company match will be not-Roth regardless, so you'd get a balance. Huh, interesting. Is this statutory or just pervasive practice?
|
|
#
?
Sep 9, 2014 04:14
|
|
|
It's an IRS rule, yeah.
|
|
#
?
Sep 9, 2014 04:15
|
|
|
IIRC you can convert your matched funds to roth if you want if you're willing to pay taxes on them.
|
|
#
?
Sep 9, 2014 04:19
|
|
|
So if I put 4% of my income towards my 401k, my next goal would be to put 11% or $5500 a year towards a Roth IRA, whichever is lower? I also have bonds that are maturing, is there a good time to cash those out and re-invest them or should I sit on them? I have a long while to decide on that one though, the one I've had the longest doesn't fully mature until 2032.
|
|
#
?
Sep 9, 2014 04:36
|
|
|
4% plus 4% match is aaaaalmost 8% of your gross income, leaving 7-8% for the IRA if you are targeting 15% total. But yeah, that's a reasonable approach. Regarding the bonds... it really depends entirely on the details. Do you want to use that money for retirement? If so, do you want that large of a bond component in your portfolio? Etc.
|
|
#
?
Sep 9, 2014 05:02
|
|
|
slap me silly posted:4% plus 4% match is aaaaalmost 8% of your gross income, leaving 7-8% for the IRA if you are targeting 15% total. But yeah, that's a reasonable approach. Regarding the bonds... it really depends entirely on the details. Do you want to use that money for retirement? If so, do you want that large of a bond component in your portfolio? Etc. I'm not sure what I want to do with it honestly, so I'm thinking just sit on them and let them gain some interest while I think of a better use for them. I really do appreciate all the help, I think I got caught up in all the numbers and technical jargon and this really did help me gather my thoughts.
|
|
#
?
Sep 9, 2014 05:47
|
|
|
Celot posted:
It isn't constant though. That first 5-10% of bonds is much smaller of a drop in returns per amount of risk reduction. Above that I'd agree. Chin Strap fucked around with this message at 12:05 on Sep 9, 2014 |
|
#
?
Sep 9, 2014 12:03
|
|
|
Wanting to make sure I have about the correct idea of what to do. I work for state government in which we pay towards a separate 401(k)-like retirement plan that the employer matches, from what I understand (I probably don't). So I wouldn't pay for a 401(k) then unless I go to private sector (which I will probably do). Then I should invest in a Roth IRA and do a target retirement date fund. Should I play around with the 403(b) also available? I don't think I'll have much left after to do so right now to begin with (or to max the Roth IRA for that matter).
|
|
#
?
Sep 9, 2014 19:55
|
|
|
Mr. Glass posted:IIRC you can convert your matched funds to roth if you want if you're willing to pay taxes on them. slap me silly posted:4% plus 4% match is aaaaalmost 8% of your gross income, leaving 7-8% for the IRA if you are targeting 15% total. But yeah, that's a reasonable approach. Regarding the bonds... it really depends entirely on the details. Do you want to use that money for retirement? If so, do you want that large of a bond component in your portfolio? Etc.
|
|
#
?
Sep 9, 2014 21:49
|
|
|
SiGmA_X posted:Only when parting the company, but you're right. I did that with my last 401k, I figured it was the cheapest time to do it as I was making jack, so my tax rate was very low. You can do an in-plan conversion with the non-roth funds, similar to how you do the Roth IRA backdoor.
|
|
#
?
Sep 9, 2014 21:57
|
|
|
Are there any good articles about traditional vs roth 401ks? I always find myself revisiting if I should try to balance my pre and post tax contribution going forward or just do the suggested, 401k to match, roth ira to max, 401k to max.
|
|
#
?
Sep 9, 2014 22:30
|
|
|
.Z. posted:Are there any good articles about traditional vs roth 401ks? It generally comes down to "will you be in a lower or higher tax bracket when you retire?" And in most cases, the answer is lower because: You'll only spend what you need You'll frequently have some expenses go away due to not working You might have a house paid off at that point At least some of your income (Roth IRA) won't be taxable If you liquidate taxable accounts, you'll only pay capital gains on the appreciation That said, I would only dump money that's in the 25% or higher bracket into pretax. If you are in the 15% bracket, then it might make a lot of sense to dump a lot of it into Roth 401k especially if you expect your income to climb as you age.
|
|
#
?
Sep 9, 2014 23:33
|
|
|
I've changed companies. Both the new and old company had a 401k program through Fidelity, and I have access to both on 401k.com. I haven't touched the money in the old company account since quitting. I did get a little notice that I'll now have to pay the account management fee for the old company account (something like $15 a quarter?) since I left and the old company won't. It appears my two tax-deferring options if I don't want to pay that fee are to rollover the money into either: 1. A new Fidelity IRA - this is a tax free rollover, right? (option online to rollover) 2. New employer's 401k plan (not seeing an option online, will have to call). I'll probably have more fund options with the IRA than what my new company offers, but are there disadvantages I'm not realizing? I also have a Roth IRA through Vanguard I max out every year.
|
|
#
?
Sep 10, 2014 03:29
|
|
|
RedQueen posted:I've changed companies. Both the new and old company had a 401k program through Fidelity, and I have access to both on 401k.com. I haven't touched the money in the old company account since quitting. I did get a little notice that I'll now have to pay the account management fee for the old company account (something like $15 a quarter?) since I left and the old company won't.
|
|
#
?
Sep 10, 2014 16:14
|
|
|
How does that work with regards to contribution limits? Can you roll $50k of 401k into an IRA in a single year?
|
|
#
?
Sep 10, 2014 16:47
|
|
|
DNK posted:How does that work with regards to contribution limits? Can you roll $50k of 401k into an IRA in a single year? Yes, as much as you want, it's a non-taxable event.
|
|
#
?
Sep 10, 2014 16:59
|
|
|
Yes, rollovers don't count toward your IRA contribution limit.
|
|
#
?
Sep 10, 2014 16:59
|
|
|
DNK posted:How does that work with regards to contribution limits? Can you roll $50k of 401k into an IRA in a single year? Contributions and rollovers are entirely separate and distinct. You could roll over $500K of 401k into an IRA (assuming you had that much), still make your contribution for the year, and the IRS wouldn't care.
|
|
#
?
Sep 10, 2014 17:01
|
|
|
Hm. Wouldn't rolling most of your 401k into an IRA be a better choice purely because of fund choices? For example: I have a couple institutional vanguard index funds in my 401k that I wouldn't be able to access in an IRA, but I'd have better large cap funds within an IRA. Convoluted, but maybe a good once/year thing. That is, if I can access those funds without leaving my company. No idea about the regulations on that.
|
|
#
?
Sep 10, 2014 17:24
|
|
|
If your 401k is good, I would hesitate to roll over to a traditional IRA because you'll lose the benefit of being able to do a tax-free backdoor Roth IRA contribution (assuming you don't have any other traditional IRA assets). But if that's not a concern, roll away.
|
|
#
?
Sep 10, 2014 17:28
|
|
|
Guinness posted:If your 401k is good, I would hesitate to roll over to a traditional IRA because you'll lose the benefit of being able to do a tax-free backdoor Roth IRA contribution (assuming you don't have any other traditional IRA assets). But if that's not a concern, roll away. I'd always roll it over into an IRA if backdoor issues aren't a problem. 401k blackouts/malfeasance are very real, and can happen to you. Don't be more dependent on your employer's goodwill and good behavior than you have to be, you already are for your job.
|
|
#
?
Sep 10, 2014 17:30
|
|
|
DNK posted:Hm. Wouldn't rolling most of your 401k into an IRA be a better choice purely because of fund choices? You can't rollover a 401k to an IRA unless you are leaving the company or retiring.
|
|
#
?
Sep 10, 2014 18:55
|
|
|
So a potentially interesting situation has arisen. My bank apparently desperate to loan out money has offered my a personal loan at a lower rate than my mortgage. Im pondering taking the loan and using it against the mortgage. Ive run the numbers and I stand to save ~20-40k and cut down the length by 7-10 years by doing this. Assuming the lower loan to value ratio opening lower mortgage rates, (checked with my mortgage lender and it takes off 2pc currently) in turn the lower payments allowing more overpayments. Loan amount would be 15k. Assuming I check the details and double check the numbers like you should on any financial move this big does this make sense? Am I missing something? Motgage is held with a different bank. Can easily affodd repayments. Pensions and savings are well taken care of.
|
|
#
?
Sep 10, 2014 20:08
|
|
|
The only thing I would say is make sure the numbers still work out to be better after taking into account that you get a tax deduction for mortgage interest, but not interest on a loan used to pay a mortgage.
|
|
#
?
Sep 10, 2014 20:10
|
|
|
Nail Rat posted:The only thing I would say is make sure the numbers still work out to be better after taking into account that you get a tax deduction for mortgage interest, but not interest on a loan used to pay a mortgage. Its always important to mention where you live. Uk here where neither is deductible.
|
|
#
?
Sep 10, 2014 20:11
|
|
|
Cast_No_Shadow posted:So a potentially interesting situation has arisen. My bank apparently desperate to loan out money has offered my a personal loan at a lower rate than my mortgage. Seems like it's a no-brainer, but why would the bank offer an unsecured loan at a lower rate? You might be able to win even bigger by looking at refinancing your mortgage.
|
|
#
?
Sep 10, 2014 20:17
|
|
|
baquerd posted:Seems like it's a no-brainer, but why would the bank offer an unsecured loan at a lower rate? You might be able to win even bigger by looking at refinancing your mortgage. You've also got me wondering how bankruptcy and loan discharge laws are in the UK. I would find it HIGHLY unethical to consider taking the separate loan, paying off the house, and then immediately declaring bankruptcy, but it is an interesting thought experiment.
|
|
#
?
Sep 10, 2014 20:22
|
|
|
Might be to do with how uk mortgages work. Many people, myself included, have fixed rate deals. Unlike the us where I believe you fix a rate for mortgage life we fix for 2-5 years then go to a rate that is base rate + X%. So im fixed at a slightly higher rate for a few months meanwhile base rates have fallen and so I can get an unsecured loan for a lower rate. You also get better rates with the loan to value ratio and the loan enables me to hit another banding which takes a couple of points off as I hit ultra safe bank will even get money back with a firesale in a depression category. Currently have about 90k left and they dont do unsecured loans for people like me that go that high! I guess thats what holds that thought experiment together, once you can get an unsecured loan for it your mortgage is small enough compared to income that bankruptcy doesnt seem like a good plan?
|
|
#
?
Sep 10, 2014 20:43
|
|
|
Cast_No_Shadow posted:Might be to do with how uk mortgages work. Many people, myself included, have fixed rate deals. Unlike the us where I believe you fix a rate for mortgage life we fix for 2-5 years then go to a rate that is base rate + X%. So im fixed at a slightly higher rate for a few months meanwhile base rates have fallen and so I can get an unsecured loan for a lower rate. You also get better rates with the loan to value ratio and the loan enables me to hit another banding which takes a couple of points off as I hit ultra safe bank will even get money back with a firesale in a depression category. Currently have about 90k left and they dont do unsecured loans for people like me that go that high! Your conclusion is pretty much correct. There's the old saying that if you owe the bank $10,000 you have a problem, but if you owe the bank $10 million the bank has a problem. Refinancing via a mortgage broker and getting your current mortgage to a revolving credit account using the house as security may yield a better rate. In my experience my mortgage broker managed to get much better interest rates than what I could have negotiated. He even managed to split the mortgage into revolving credit, a 2 year fixed rate and 3 year fixed rate mortgage.
|
|
#
?
Sep 11, 2014 00:20
|
|
|
The fiancee rolled over her 401k through Fidelity into a Rollover IRA. She lost her asset allocation (10% bonds, 90% large cap), and now everything is in a short-term QUSCQ. I don't know what that is, or if it was supposed to happen. When you rollover, do you need to buy shares in new investments? First, I figured her portfolio would remain unchanged during the rollover. And second, I guess I thought she'd have a selection of investments displayed for her, similar to how her employer 401k portfolio would display 15 or so available investments. I think I misunderstood the rollover process. It looks like her investments were basically liquidated and now we get to start over and pick new ones? But because the Rollover IRA isn't associated with a large company, she's just a personal investor and doesn't get access to some of the nicer funds? Fidelity also has a higher minimum investment into Vanguard retirement funds than Vanguard and requires a transaction fee too. I am confused. Donald Kimball fucked around with this message at 03:52 on Sep 11, 2014 |
|
#
?
Sep 11, 2014 03:48
|
|
|
Donald Kimball posted:It looks like her investments were basically liquidated and now we get to start over and pick new ones?
|
|
#
?
Sep 11, 2014 11:18
|
|
|
Donald Kimball posted:The fiancee rolled over her 401k through Fidelity into a Rollover IRA. She lost her asset allocation (10% bonds, 90% large cap), and now everything is in a short-term QUSCQ. I don't know what that is, or if it was supposed to happen. When you rollover, do you need to buy shares in new investments? Out of curiosity, why did she pick Fidelity for her IRA? An IRA is entirely self-directed. You can buy essentially any ETF, mutual fund, stock, or bond with it. It's true that with more money invested, you can generally find funds with lower expense ratios, but it is an extremely rare 401k that both offers funds with a institutional grade expense ratio (e.g. 0.02% for the $200mm VIIIX) and doesn't have any other fees.
|
|
#
?
Sep 11, 2014 15:05
|
|
|
baquerd posted:Out of curiosity, why did she pick Fidelity for her IRA? Fidelity has a pretty good rep, picking them for your IRA seems fine especially if you have a 401k with them already. I prefer Vanguard, but Fidelity tends to be on most people's short lists of "good" investment companies. As for good 401ks, I think this is more common than people realize. You hear all the horror stories but a lot of companies pull this together appropriately and leverage their plan size into cheaper funds as they are supposed to. The bigger the company the more common this is. Someone needs to pay for record keeping (typically $60 per year) but if you get /any/ matching that more than makes up for that cost and using profit sharing (ugh) to pay for it is becoming less common throughout the industry.
|
|
#
?
Sep 11, 2014 15:18
|
|
|
Does anybody do sector specific ETFs? They sound fun, right?
|
|
#
?
Sep 11, 2014 19:30
|
|
|
ZentraediElite posted:Does anybody do sector specific ETFs? They sound fun, right? Just buy a single broad global market index and you own all the sectors.
|
|
#
?
Sep 11, 2014 19:48
|
|
|
ZentraediElite posted:Does anybody do sector specific ETFs? They sound fun, right? We have sector specific funds in our 401k plan and its a terrible idea imo. Everyone picks the sector that are familiar with and then they get even more exposure to a class they are already over exposed to. It is also uncompensated risk in the name of "diversifying" which is not usually a good thing.
|
|
#
?
Sep 11, 2014 22:15
|
|
|
In an earlier post here I was grappling with the balance of mortgage and retirement savings. I have refined my ideas. At this point I bought a new house roughly 4 months ago. I have been pouring quite a bit of my income into paying off the revolving credit portion of the mortgage. I think I will continue to do this for the next 2-3 years at which point I should own at least 50%+ of the house. The issue I originally had was that I was concerned that if I invested (for the purpose of retirement savings) that I would risk being worse off as the interest rates here are 6-6.75% (unlike the US). With investment gains not necessarily matching or performing better. Now my concern is that my entire equity will be all in the house putting me in a situation of not only having all my eggs in one basket but I also wouldn't get growth or dividend gains like owning stocks. I see value in diversifying my investments but I'm also cautious as any money I put into ETFs or stocks is effectively costing me 6%+ interest. Does anyone have some thoughts on what the right balance is? Should I invest a small portion of income, nothing or perhaps increase my mortgage repayment plan from 7 years out to 10-15 years?
|
|
#
?
Sep 12, 2014 02:07
|
|
|
My company pays out a bonus as stock grants to an eTrade account. It's just a personal account, not an IRA or anything. I don't want to keep all the stock that has vested necessarily as stock. I also have a 401K and a SEP IRA (rolled over to Vanguard from an old employer). What can I do with this eTrade stuff? Can I sell it and buy index funds (like, say, VOOG) just via eTrade instead of selling it, moving it to my bank account, then transferring it to Vanguard? It seems weird that I can only contribute $5500/year to my IRA at Vanguard, but it looks like this eTrade account will just let me buy whatever. Is this the dumbest question ever?
|
|
#
?
Sep 12, 2014 03:22
|
|
|
|
| # ? May 28, 2024 07:55 |
|
|
Obsolete posted:My company pays out a bonus as stock grants to an eTrade account. It's just a personal account, not an IRA or anything. I don't want to keep all the stock that has vested necessarily as stock. I also have a 401K and a SEP IRA (rolled over to Vanguard from an old employer). What can I do with this eTrade stuff? Can I sell it and buy index funds (like, say, VOOG) just via eTrade instead of selling it, moving it to my bank account, then transferring it to Vanguard? It seems weird that I can only contribute $5500/year to my IRA at Vanguard, but it looks like this eTrade account will just let me buy whatever. you can buy and sell whatever index funds you want in a regular brokerage account, either at etrade or vanguard, it just won't be tax-advantaged like the IRA (that's the point of the IRA).
|
|
#
?
Sep 12, 2014 03:47
|
|