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This might be the best thread for this question. I have a traditional IRA that a former employer set up for me after they discontinued their pension program. I want to save this $2200 for retirement. Does converting the traditional IRA into a Roth IRA make sense to anyone else? My financial advisor thinks 25% will be taxed but I'm guessing that this will be less of a hit than waiting for it to be taxed when I hit retirement age.
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Nov 10, 2014 20:55
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| # ? May 29, 2024 16:48 |
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Employers do not open IRAs, only you can do this (using your SSN, no less). Did they open a traditional 401k? You can't convert that into a Roth 401k but you can roll it over to either a traditional IRA (no tax hit) or a Roth IRA (tax hit).
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Nov 10, 2014 21:58
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Hey guys, just wanted to ask regarding my change of status from employed to self employed. I currently have about 30k (30% of my income this year) set aside to be paid into self employment taxes, would investing a chunk of these funds into a 401k lower my income/self employment tax overall? Apologize if it's a dumb question, but It's my first year working for my self.
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Nov 10, 2014 22:16
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The self-employment tax is calculated to be equal to FICA, so retirement deductions don't apply.
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Nov 10, 2014 22:29
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GoGoGadgetChris posted:Employers do not open IRAs, only you can do this (using your SSN, no less). It's probably a SEP IRA, which small businesses can open for their employees.
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Nov 10, 2014 22:36
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GoGoGadgetChris posted:Employers do not open IRAs, only you can do this (using your SSN, no less). Did they open a traditional 401k? You can't convert that into a Roth 401k but you can roll it over to either a traditional IRA (no tax hit) or a Roth IRA (tax hit). I've checked the paperwork and it definitely says that it's a Merrill Lynch traditional IRA, not a 401k or any other type of IRA. This is kind of strange, because the company is a Fortune 500 company so it's not a small business... I know it was originally a pension, which I didn't realize I was accruing because I was only with them for three years. About a year after I quit I got a letter saying that they were discontinuing their pension program and everyone who didn't respond in a timely fashion would have traditional IRAs opened up. (Also, I hate to be snippy, but because other people have asked me this offline--I am very certain that this was a pension, not a 401k. I rolled over my 401k from that employer, and I didn't even think I had a pension because I was only with them for three years. The paperwork calls it a traditional IRA, too...) legsarerequired fucked around with this message at 22:51 on Nov 10, 2014 |
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Nov 10, 2014 22:49
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legsarerequired posted:This might be the best thread for this question. I have a traditional IRA that a former employer set up for me after they discontinued their pension program. I want to save this $2200 for retirement. It depends on your current total IRA balance, use this calculator here: http://www.archimedes.com/vanguard/roth/RothConsumer.phtml Basically if you have almost no IRA balance you pay a much lower conversion tax rate, than if you have a very large total IRA balance.
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Nov 10, 2014 23:59
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I have about $2200 in the traditional IRA. Huh, the graph is different than I expected. I was thinking that the traditional IRA would lose much more in taxes since it would be taxed when I withdraw as a 60-year old at the end of her career (verses the roth being taxed when I withdraw as a 26-year old and have much less in my IRA account). However this is saying the Roth would have a $28k balance, and the traditional would have a $32k. This is also the opposite of what my financial advisor told me. Although this chart also seems to assume that the IRA would be my only retirement savings, which isn't true because I also have a 401k, and I'm aiming to put more in my IRA every year. The roth IRA is also going to be there so I can withdraw for a house if I want to. EDIT: lol under a very specific set of circumstances it could get huge..... When I turn 92. 
legsarerequired fucked around with this message at 00:26 on Nov 11, 2014 |
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Nov 11, 2014 00:19
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The other aspect of traditional IRAs is assuming you have a low enough income you can deduct the full amount in your yearly taxes. It's basically tax savings now vs tax savings in the future.
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Nov 11, 2014 03:31
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My employer's HSA manager/custodian is terrible, I need to find a new one to move the money into every year that either offers a cheap index fund or allows you to invest the money yourself. hsabank looks fairly good (can link to a TD ameritrade account w/o fees if you have more than 5k - if I'm reading it right). Anyone have better alternatives though?
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Nov 11, 2014 17:56
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Baddog posted:My employer's HSA manager/custodian is terrible, I need to find a new one to move the money into every year that either offers a cheap index fund or allows you to invest the money yourself. hsabank looks fairly good (can link to a TD ameritrade account w/o fees if you have more than 5k - if I'm reading it right). Elfcu may be better if you only down one or two transfers a year. It's got a much higher transfer cost, but it's also got a much lower savings account minimum. You can read more about it over here: http://thefinancebuff.com/elfcu-best-hsa-adds-fee.html
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Nov 11, 2014 18:15
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Nail Rat posted:Social security payouts may decrease or the age may go up, but the logistics involved in cutting it would make it impossible.
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Nov 11, 2014 23:22
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Dik Hz posted:They don't have to cut social security. They will just under-report inflation and ratchet up the age to claim benefits, while keeping the early-claim trap in place. Just like what's been happening for the past 10 years. Is early claim really a trap? I thought if you compare the numbers to insurance actuarial tables, it's pretty spot-on assuming you live an average lifespan.
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Nov 11, 2014 23:24
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SlightlyMadman posted:Is early claim really a trap? I thought if you compare the numbers to insurance actuarial tables, it's pretty spot-on assuming you live an average lifespan. It's too complicated to make broad generalizations about but yes in theory it's designed to be a total wash of lifetime purchasing power collected for a single earner. However there are a number of provisions, most specifically related to guaranteed minimum survivor benefits for female spouses (who statistically live longer than men), that make waiting a better option to collect the most money out of social security if you're able to work until full retirement age. The exception when it would be better to collect early would be if you are in very poor health and not likely to live long enough to recoup your paid-in benefits on the long tail of expected lifespan.
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Nov 12, 2014 01:31
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Did anyone ever try Brokerage link for Fidelity? From the looks of it, it's just a way to have more 401k investment options, right now most of my 401k fund options are the really expensive active management type. Seems like a decent deal to score a lower ER since fidelity and iShares trades are free. etalian fucked around with this message at 02:52 on Nov 12, 2014 |
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Nov 12, 2014 02:45
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Until now, I have had the option of changing contribution rates for my 401(a) every January. We have been receiving notice since January that this January 2015 will be our last opportunity to change contribution rates, due to some legislation or something. Anyway, after that the only way to change the contribution rate would be to quit my job and teach in a new school district. So currently, I contribute 10% to my 401(a) and last year started a Roth IRA which I contribute $100/mo to. Not much, but, it's what I can do right now. Once I am finished with grad school and get the subsequent raise I would obviously like to bump the Roth IRA contribution up. Thinking ahead, should I lower my contribution rate and just contribute more to my Roth? The returns on my 401(a) have been fine, and I am satisfied with everything, but the inflexibility makes me a little nervous.
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Nov 12, 2014 03:14
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Depending on your current income you might be better contributing to a standard IRA since it's tax deductible.
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Nov 12, 2014 03:46
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Baddog posted:My employer's HSA manager/custodian is terrible, I need to find a new one to move the money into every year that either offers a cheap index fund or allows you to invest the money yourself. hsabank looks fairly good (can link to a TD ameritrade account w/o fees if you have more than 5k - if I'm reading it right). To piggyback off of this, how is HSA Bank in general? I'm switching from my employer's HMO plan to their high-deductible PPO option for 2015 and the HSA is through HSA Bank (employer would contribute $350 annually). Trying to find people's opinions on it before I throw money into something that potentially could be regarded as hot garbage.
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Nov 12, 2014 03:59
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I've found their website and customer service to be pretty bad, but I didn't find a better option back when I was researching =/
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Nov 12, 2014 04:58
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Should I be including my defined contribution pension plan (401k equivilant?) in my portfolio distribution? I just picked whatever low MER funds my work offered (Blackrock life path). I believe they are basically funds that have an equity / fixed income distribution based on your retiremnet date. I know how much money is in there, I just don't know how it factors in for my networth / financial planning.
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Nov 13, 2014 00:12
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I discovered a nice thing for Fidelity 401ks, they have something called Brokeragelink which allows you transfer money out of your company plan and to a more standard brokerage account. It's still considered part of the pre-tax 401k plan, I found it to be pretty good way to solve the high expensive ratio problem and lovely fund picks issue while keeping some advantages of a 401k over a IRA. Two main reasons to not rollover are 401ks have better bankruptcy protection and also there's a special case in which you can retire from your job at 55, then dip into your account without the tax penalty. Another nice thing is both Fidelity and iShares investments can be traded at no cost.
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Nov 13, 2014 01:25
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Pieces posted:Should I be including my defined contribution pension plan (401k equivilant?) in my portfolio distribution?
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Nov 13, 2014 03:47
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When paying off my student loan debt, can I write it off on my income tax return? What about tuition?
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Nov 13, 2014 05:51
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DrSunshine posted:When paying off my student loan debt, can I write it off on my income tax return? What about tuition? MAGI has to be under $75k to deduct your student loan interest. http://www.irs.gov/publications/p970/ch04.html quote:Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education.
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Nov 13, 2014 07:20
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Henrik Zetterberg posted:MAGI has to be under $75k to deduct your student loan interest. Also there is a cap on the amount you can deduct, I want to say it is $2500 a year?
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Nov 13, 2014 12:09
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Tyro posted:Also there is a cap on the amount you can deduct, I want to say it is $2500 a year? That is correct. Don't forget you can deduct capitalized interest as well. You won't get a 1098-E for it, but you can still claim the deduction. Obviously you can't cheat the cap this way.
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Nov 13, 2014 13:09
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I am currently maxing out my Roth IRA contributions and putting 10% towards my 401k. What are my options for the rest of my money? I am 22 and don't want to put away even more money that I wont be able to use for another 37 years and have no loans or payments outside of taxes on my home. I also don't have the time or confidence to pick stocks. Is it strip club or bust for me?
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Nov 13, 2014 16:29
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JohnGalt posted:I also don't have the time or confidence to pick stocks. Good, because no one here was going to recommend picking stocks anyway. Why not just buy mutual funds in a taxable account? They're not just for retirement accounts, you know. You could use one of the Vanguard LifeStrategy funds or make your own mix of stocks and bonds, probably want to tilt to a much less risky asset allocation than retirement stuff if you're thinking medium-term like maybe 8-10 years or something for this money. If it's shorter-term like something you'll want in the next 2-4 years, just put it in a high-yield savings account.
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Nov 13, 2014 16:32
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Echo 3 posted:Good, because no one here was going to recommend picking stocks anyway. Why not just buy mutual funds in a taxable account? They're not just for retirement accounts, you know. You could use one of the Vanguard LifeStrategy funds or make your own mix of stocks and bonds, probably want to tilt to a much less risky asset allocation than retirement stuff if you're thinking medium-term like maybe 8-10 years or something for this money. Looking at both time frames. What kind of returns can I expect for those types of investments ? I have this idea that if I'm not beating inflation after taxes I am better off spending it immediately, am I wrong?
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Nov 13, 2014 17:00
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JohnGalt posted:Looking at both time frames. What kind of returns can I expect for those types of investments ? I have this idea that if I'm not beating inflation after taxes I am better off spending it immediately, am I wrong? Christ man, just put it into VOO and you should handily beat inflation over the long term. Even if you bought right at the peak of 2008, if you held on for at least five years you'd be beating inflation.
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Nov 13, 2014 17:27
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JohnGalt posted:I am currently maxing out my Roth IRA contributions and putting 10% towards my 401k. What are my options for the rest of my money? I am 22 and don't want to put away even more money that I wont be able to use for another 37 years and have no loans or payments outside of taxes on my home. I also don't have the time or confidence to pick stocks. Is it strip club or bust for me? Meh. max out your 401k. You don't need to wait 37 years to touch it. Read about Roth conversion ladders. Or just make half of the money you are putting in your 401k be Roth instead of pre-tax and then once you roll it into your Roth IRA you can pull it out 5 years later without penalty. Need the money in 2-4 years? Look for a good CD or high interest savings or fairly low risk taxable. Otherwise take advantage of every bit of tax advantaged space you can. I sure as hell am and I'm planning on touching at least some of the money well before I hit 59.5.
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Nov 13, 2014 18:38
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JohnGalt posted:Looking at both time frames. What kind of returns can I expect for those types of investments ? I have this idea that if I'm not beating inflation after taxes I am better off spending it immediately, am I wrong? As for the tax implications of a brokerage account, if you buy something and sell it before 1 year's time, you pay for any gains as normal income. If you keep it for at least one year, you can pay the long-tem capital gains rate if it is lower. (Most people max their 401ks / Roths / etc instead and pay even lower taxes). Ulf fucked around with this message at 19:48 on Nov 13, 2014 |
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Nov 13, 2014 19:46
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Nov 13, 2014 20:00
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Where do HSAs fall on the priority list of: 1. Max 401k up to match 2. Max Roth 3. Whatever else 4. Max 401k to limit 5. Taxable account I am currently maxing a Roth, and I do not get a 401k match, but put ~8% into it at the moment. I just opened up an HSA through my employer for 2015 and stuffed an arbitrary $1250 into it to cover any health costs next year. $1k is the minimum balance to invest the HSA into mutual funds (Vanguard!) from my provider.
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Nov 14, 2014 00:49
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In that list, either number 2 or 3, especially if you have Vanguard funds in your HSA.
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Nov 14, 2014 01:13
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Ulf posted:While it's no guarantee of future performance, the market has beaten inflation in the last century assuming you keep it in the market long enough to recover from any crashes. There are plenty of index funds which serve to match the performance of the market as a whole, so you don't need to pick stocks. Yeah but as you point even for long periods of history stocks looked like a lovely investment. It's only when you look at the long term investment window 30+ that they look good in terms of having a good return after ifnlation. However always go for a diversified portfolio, things like bonds and REITs(tax free account only) really help reduce the worst case performance. Things like modern portfolio theory greatly simply investing since instead of wasting money and time on stock picking, just pick a collection low cost ETFs that match your long term goal. On a side note the Brokeragelink feature for fidelity 401ks is a pretty awesome, even though you need to be somewhat savy at things like calculating portfolio allocations or stock order type differents(market vs limit). It basically takes care of the lovely high expensive fund problem I had with my workplace 401k and you can trade blackrock iShare/Fidelity investments at no cost. etalian fucked around with this message at 01:44 on Nov 14, 2014 |
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Nov 14, 2014 01:39
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Henrik Zetterberg posted:Where do HSAs fall on the priority list of: For a young healthy person, a HDHP with an HSA is the next best thing to free money when it comes to investing.
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Nov 14, 2014 05:51
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Right now I contribute 10% to a Traditional 401k and the limit on a Roth IRA. The rest of my money has been going into a taxable mutual fund account. My employer is adding a Roth 401k option next year, but I wasn't sure whether I wanted to switch or maybe put some of my 401k money into Traditional and some into Roth, or whatever. I read up on the tax implications of Roth vs Traditional, pre and post retirement, and then I ran some numbers. It seems clear to me that the decision to choose one or the other comes entirely down to whether you expect your taxes to be higher or lower now versus when you retire. If you expect your taxes to be lower in retirement, then choose Traditional. If you expect your taxes to be higher in retirement, then choose Roth. Are there other aspects that I'm missing?
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Nov 14, 2014 06:41
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QuarkJets posted:I read up on the tax implications of Roth vs Traditional, pre and post retirement, and then I ran some numbers. It seems clear to me that the decision to choose one or the other comes entirely down to whether you expect your taxes to be higher or lower now versus when you retire. If you expect your taxes to be lower in retirement, then choose Traditional. If you expect your taxes to be higher in retirement, then choose Roth. Are there other aspects that I'm missing? Due to compounding the money that would otherwise go missing to taxes, a traditional IRA also wins in the case of you having the same taxes (or even slightly higher).
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Nov 14, 2014 06:44
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baquerd posted:Due to compounding the money that would otherwise go missing to taxes, a traditional IRA also wins in the case of you having the same taxes (or even slightly higher). But the money that comes out of a Traditional account all gets taxed, even the money that came from compounding, whereas all of the compounded money in a Roth comes out tax-free. So if the tax rate is the same pre and post retirement, your net income should be the same regardless of whether you put that money in a Traditional or Roth account Working out an example: Putting $100 in a traditional IRA with an annual compounding interest rate of 5%, you would have 432.19 after 30 years. If you withdraw at a tax rate of 10%, then you wind up withdrawing $388.97 after taxes. With a Roth IRA at the same tax rate, you would only put in $90. With an annual interest rate of 5%, after 30 years you wind up with $388.97, none of which is taxed.
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Nov 14, 2014 07:05
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