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I'm confused by the Roth IRA cutoff. If I'm a single person that grossed $165k/year, can I even put anything in one if I get my AGI low enough, or is it like AMT where your actual gross is the basis? I've already maxed out my 401k and tradition IRA, so just curious. Looking for another tax shelter since ca income tax is loving 9%.
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Jan 12, 2015 21:33
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RaoulDuke12 posted:I'm confused by the Roth IRA cutoff. If I'm a single person that grossed $165k/year, can I even put anything in one if I get my AGI low enough, or is it like AMT where your actual gross is the basis? The one you use is MAGI (modified AGI). It's unlikely you can get it low enough. If you don't have a pre-existing traditional IRA, you can do a backdoor Roth IRA http://www.bogleheads.org/wiki/Backdoor_Roth_IRA.
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Jan 12, 2015 21:38
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RaoulDuke12 posted:I'm confused by the Roth IRA cutoff. If I'm a single person that grossed $165k/year, can I even put anything in one if I get my AGI low enough, or is it like AMT where your actual gross is the basis? $5500 is the contribution limit to both traditional and Roth IRAs in one year. If you have maxed your traditional IRA, you cannot contribute to a Roth regardless of your income.
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Jan 13, 2015 00:01
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Lol the fukkin 401k company gave us the wrong information and the company match is actually 100% for the first 1% and then 50% up to 6%. Great job everyone. Thinking about not even bothering with this plan now the expense ratios are poo poo anyway.
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Jan 13, 2015 01:47
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Dude, 0.9% expense ratio on the S&P500 index is not bad enough to give up 4% of your salary.
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Jan 13, 2015 01:54
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Yeah I suppose, I just have other worries too about being here long enough for the vest because I have never actually been at any job in my life for that long.
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Jan 13, 2015 01:56
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dupersaurus posted:A quick study suggests that Roth is the way to go (income limits aren't a problem). I'll have to pay taxes on the amount I roll over, yes? Should I do this before or after this year's taxes, or will that all be handled for me? I was planning on using USAA for this since I'm already using them for a bunch of other things. It makes sense to shop around for a lower expense ratio. Vanguard seems to be the most popular option. Fidelity isn't half bad either since they offer iShares products commission free and they also have low cost spartan funds too.
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Jan 13, 2015 02:37
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100 HOGS AGREE posted:Lol the fukkin 401k company gave us the wrong information and the company match is actually 100% for the first 1% and then 50% up to 6%. Great job everyone. What is your vesting schedule?
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Jan 13, 2015 02:58
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RaoulDuke12 posted:I'm confused by the Roth IRA cutoff. If I'm a single person that grossed $165k/year, can I even put anything in one if I get my AGI low enough, or is it like AMT where your actual gross is the basis? Are you joint or single filing? For single filing the cutoff is under $110k to contribute to a Roth for the max amount. For 114k to 129k you can only make a smaller contribution to the Roth Account. Above 128k no Roth contributions are allowed, which brings you back to clever back door Roth IRA trick people always talking about in this thread. http://www.rothira.com/what-is-a-Roth-IRA
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Jan 13, 2015 04:49
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Nail Rat posted:The one you use is MAGI (modified AGI). It's unlikely you can get it low enough. Backdooring a Roth only makes sense if you have a lower income than usual though, correct? Like, if down the road I have a down year, that would be the time to do it. etalian posted:Are you joint or single filing? Single filing. I actually didn't realize I couldn't do both a traditional and Roth IRA though, I guess it doesn't make a lot of sense to do a Roth at the tax bracket I'm in anyway.
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Jan 13, 2015 05:31
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SiGmA_X posted:Thats weird... Sounds like you have REALLY lovely HR, I'm sorry. What you described originally was a SOP Safe Harbor plan/match. What's this weird "matching" thing everyone is talking about? 
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Jan 13, 2015 05:37
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RaoulDuke12 posted:Backdooring a Roth only makes sense if you have a lower income than usual though, correct? Like, if down the road I have a down year, that would be the time to do it.
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Jan 13, 2015 05:38
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RaoulDuke12 posted:Backdooring a Roth only makes sense if you have a lower income than usual though, correct? Like, if down the road I have a down year, that would be the time to do it. No the backdoor Roth tends to be used by people who have such high AGI they are not longer able to Roth contributions. In your case you are out of both Roth range and also get a standard IRA tax deduction.
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Jan 13, 2015 05:52
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RaoulDuke12 posted:Single filing. I actually didn't realize I couldn't do both a traditional and Roth IRA though, I guess it doesn't make a lot of sense to do a Roth at the tax bracket I'm in anyway. To be clear, you can't actually get a tax deduction for your traditional IRA because you make way too much for that. http://en.wikipedia.org/wiki/Traditional_IRA#Income_limits
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Jan 13, 2015 06:13
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baquerd posted:To be clear, you can't actually get a tax deduction for your traditional IRA because you make way too much for that. Man, this whole "making more money" thing is confusing. This is all new to me, last year I didn't even make close to that much. So I fund an IRA (I don't have one actually set up yet, just the $5500 to put into one), making a non-deductible $5500 contribution, then I convert that to a Roth IRA? That's the loophole? And I can just do that every year? RaoulDuke12 fucked around with this message at 06:39 on Jan 13, 2015 |
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Jan 13, 2015 06:30
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RaoulDuke12 posted:So I fund an IRA (I don't have one yet), making a non-deductible $5500 contribution, then I convert that to a Roth IRA? And I can just do that every year?
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Jan 13, 2015 06:36
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RaoulDuke12 posted:Man, this whole "making more money" thing is confusing. This is all new to me, last year I didn't even make close to that much. Yup it only works tax-wise very well when you don't have a existing vanilla IRA balance. The backdoor trick is mainly a way to get around the income limit problem.
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Jan 13, 2015 06:39
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RaoulDuke12 posted:Backdooring a Roth only makes sense if you have a lower income than usual though, correct? Like, if down the road I have a down year, that would be the time to do it. The Roth actually makes a lot of sense for high earners - you're limited on the total amount you can put in, but $5500 in post-tax money that won't be taxed later is worth quite a bit more (and effectively costs more) than $5500 of tax-deferred money. It's almost like a higher contribution limit. You still want to keep some money in traditional tax-deferred accounts, because progressive taxation means that the first chunk of ordinary income is tax-free or taxed at a very low rate. If you can max out a traditional 401(k) and a Roth IRA, though, you're well set to take best advantage of tax advantaged accounts. Guessing the exact allocation split depends on your income over your career (already not easy to predict) and future tax policy (the best anyone can tell you is that rates will probably go up at some point over their current, historically low levels, but who knows how) but as a general rule it's not bad at all.
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Jan 13, 2015 07:33
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ohgodwhat posted:What's this weird "matching" thing everyone is talking about? Hey there no matching buddy   In my case I guess I do get some sort of employer contribution I suppose. I work for an Illinois municipality, so in addition to my elective 457(b) I also participate in the IMRF defined benefits plan (Illinois' most in-shape pension program  ). Both I and my employer contribute to this every pay period.The problem--for me, at least--is that I don't vest until I've made 10 years of contributions. If I leave before then, which is fairly likely, I'll have to decide whether to pull out my contributions (which resets my contribution clock to zero and does not include interest or employer contributions) or leave them in the system in the hopes that I come back to an IMRF employer someday to round out to at least 10 years.
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Jan 13, 2015 14:33
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SiGmA_X posted:Thats weird... Sounds like you have REALLY lovely HR, I'm sorry. What you described originally was a SOP Safe Harbor plan/match. The plan vests after two years from inception (not hire date) so since it started up beginning of this year it'll vest at the end of 2016.
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Jan 13, 2015 16:40
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RaoulDuke12 posted:Backdooring a Roth only makes sense if you have a lower income than usual though, correct? Like, if down the road I have a down year, that would be the time to do it. If you make too much money to be able to deduct a traditional IRA and too much to contribute to a Roth, the Roth is the way to go. Either way the contribution won't be tax deductible, and with the traditional you'd need to pay taxes on it later.
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Jan 13, 2015 17:02
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Chaucer posted:The mega backdoor Roth. If you can do in-service rollovers of your after-tax, non-Roth contributions, you can contribute like 30k to a Roth IRA in one year. Quoted this from way back to add some info. I tried to set this up at work, but allowing after-tax contributions to your plan removes your safe harbor plan status and you once again would have to do plan discrimination testing. That probably makes it a lot more of a pain to allow for a lot of companies.
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Jan 13, 2015 18:08
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This is a really dumb question. I funded my Roth IRA with Vanguard for the first time a couple weeks ago. It says my target allocation is 90% stocks and 10% Bonds with the way I answered questions. Great! But all my money is sitting in 'Short Term Reserves' How the hell do I get it to actually get into stocks and bonds?
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Jan 13, 2015 18:34
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Captain Apollo posted:This is a really dumb question. I funded my Roth IRA with Vanguard for the first time a couple weeks ago. It says my target allocation is 90% stocks and 10% Bonds with the way I answered questions. Great! Vanguard puts all your money when you first deposit it into a Money Market account. You go to your assets page and click exchange, then you sell some of your money market funds and choose to buy other vanguard funds. Then you type in the symbol for the fund you want. I'd suggest a target retirement date fund.
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Jan 13, 2015 18:38
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For future reference you can fund vanguard mutual funds directly from a checking account and skip the money market account.
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Jan 13, 2015 19:18
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nelson posted:For future reference you can fund vanguard mutual funds directly from a checking account and skip the money market account. Yeah, I just figured this out the other day when I funded my IRA for 2015. Nice to be able to skip the settlement fund step. Works for ETFs, too.
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Jan 13, 2015 19:23
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My Roth IRA now has $40 left in the money market account after investing the rest in ETFs. What should I do with it? It just seems so sad I can't invest it anywhere. 
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Jan 13, 2015 19:27
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Money market funds are investment equivalent of cash, so just count it as a low-risk/low-return asset. Or dump $60 in the fund so that you can hit the $100 minimum incremental amount.
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Jan 13, 2015 19:30
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RaoulDuke12 posted:Backdooring a Roth only makes sense if you have a lower income than usual though, correct? Like, if down the road I have a down year, that would be the time to do it. 100 HOGS AGREE posted:Lol the fukkin 401k company gave us the wrong information and the company match is actually 100% for the first 1% and then 50% up to 6%. Great job everyone. Don't forget, any money you put into a taxable account has an "Expense ratio" built-in - the yearly tax on dividends from whatever you put it in. Depending on your marginal tax rate and asset allocation, this can eat up quite a bit of the savings you might get. ChipNDip fucked around with this message at 21:27 on Jan 13, 2015 |
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Jan 13, 2015 21:25
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pig slut lisa posted:Hey there no matching buddy Are you sure the vesting period just isn't the minimum amount of time you have to work for the IMRF employer before you can take a retirement package at whatever age they choose is an appropriate retirement age? Do you get to pull the cash, employer contributions and interest if you make 10 years? Is the interest comparable to what the market can get you? My pension plan has a vesting period of a similar # of years but what that means is I have to be at least 50y/o and have worked those years to take a pension at severely reduced benefits. In my case taking the money out just nullifies my chance of getting a pension and I'd be free to do whatever I wanted with the money. I love my job, and if I got the opportunity to round out my years for full benefits that would be great, but it would really not be fun if I felt chained to a job just to round out the years for benefits. Is whatever interest you might have made worth being chained to something for an extra 2, 4, or however many years? On a different note... If I have access to a 401k, Roth 401k, 457, and Roth 457 with about 10-15 funds (couple of indexes like S&P500, small/mid, and international with fairly low ER and some standard funds with about 0.80% ER) what should I contribute to? I max out a Roth IRA and have around a hundred left over for others. Also, if given the chance to have a 457(b) why would anyone not take it over a 401k?
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Jan 14, 2015 01:58
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I figure this is a better spot to ask than in the Personal Finance or the Stock Picking threads, since it's employer-related and I'm viewing it as a potential future asset, so........ I just got a part-time job working overnight at a new Sam's Club near me. I don't qualify for their 401k since I'm not full-time, however, I do have access to the ESPP. I can get a $0.15 match per $1.00 contribution, up to my first $1800/year. I have no clue if that's subpar, average, or decent, since I've never worked for a private company that offered an ESPP. I'm thinking about putting my $75/paycheck in to max that, provided those of you that know about ESPPs don't yell at me saying it's a horrid idea, (for any reasons other than Walmart being the devil of course). I've had full time employment with a County government for the last 15 years, (35yo), and have no plans of leaving. We have a great funded Defined Contribution plan (7% required employee contribution with a 2.25 employer match & 7% interest credited every Jan based on our Dec 31st balance, with final pension based on account balance and not some crazy 'highest x years' method that has unfortunately bankrupted so many public DB plans in the past). I also have access to a Roth and regular 457b, (which I contribute a modest amount into my Roth 457, but by no means am I close to being able to max it). I also have a Roth IRA with Vanguard, but since we added the Roth option to our 457 last year, I've focused on that instead. Should I mess with the ESPP at Sam's, or leave it be and just increase my 457 contributions by the $75/paycheck with my FT employer? Does/should an ESPP even have a place in my asset planning? (For reference, I picked up this gig to help supplement my meager but decent civilian salary and pay down some debt/save for a rainy day/buy stupid poo poo I don't need, so I'm at a loss here. Logic tells me to either avoid it or increase my 457, but I don't want to ignore it if this is a good opportunity either).
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Jan 14, 2015 05:22
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SweetSassyMolassy posted:On a different note... If I have access to a 401k, Roth 401k, 457, and Roth 457 with about 10-15 funds (couple of indexes like S&P500, small/mid, and international with fairly low ER and some standard funds with about 0.80% ER) what should I contribute to? I max out a Roth IRA and have around a hundred left over for others. Also, if given the chance to have a 457(b) why would anyone not take it over a 401k? I didn't think a governmental body could offer a 401k, (unless they were grandfathered in).
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Jan 14, 2015 05:28
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ESPPs are a good deal if you have piles of fun money to burn and also work for a large cap company. 15% is the max discount i've seen in industry but I'm not sure what sort of holding period is in the plan. A good ESPP is basically free money assuming you don't get greedy and you have enough discipline just cash out for the 15% minimum return. Here's a good blog post on ESPPs: https://blog.wealthfront.com/good-espp-no-brainer/
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Jan 14, 2015 05:30
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etalian posted:Here's a good blog post on ESPPs: Thanks much. I'll give it a good read in the morning once I've had my caffeine treatment.
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Jan 14, 2015 05:43
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SweetSassyMolassy posted:Are you sure the vesting period just isn't the minimum amount of time you have to work for the IMRF employer before you can take a retirement package at whatever age they choose is an appropriate retirement age? Yeah, that's how mine works. Sorry if it wasn't clear. If I hit 10 years and quit my job I still can't start drawing pension checks for another few decades. SweetSassyMolassy posted:Do you get to pull the cash, employer contributions and interest if you make 10 years? Is the interest comparable to what the market can get you? I'm pretty sure I only get to pull my portion of the contributions without interest. SweetSassyMolassy posted:In my case taking the money out just nullifies my chance of getting a pension and I'd be free to do whatever I wanted with the money. This is definitely the calculus I'll be facing. Due to my wife's current PhD/postdoc timeline, chances are I would be leaving this job (if at all) in mid-2017, which would put me at 4 years of service. Why might I leave the contributions in IMRF? If I thought there was a decent chance we'd be back in Illinois by 2023-2025 or so, I would leave them in so I could have the option to jump back in and round out my 10 years. But if I think we're done with Illinois, then I'd pull out my contributions. This is all colored by the fact that I'm hoping to at least partially retire by age 40-42, so I'd have to see the potential for another IMRF-qualified job fairly close on the horizon to leave in. Believe me, I would much rather have the ability to self-direct my and my employers' contributions, or hell even just my own! Right now my pension contributions feel like I'm stuffing cash under a mattress. The good news is we're still socking a ton of money away in my 457, both our IRAs, and even a taxable account. So whatever I do with my pension, it's not going to be a major factor in our financial future.
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Jan 14, 2015 05:43
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Madbullogna posted:I didn't think a governmental body could offer a 401k, (unless they were grandfathered in). Certain non-governmental employers (nonprofits I think) can offer both 401k and 457 plans. A non-governmental 457 is a little different from a governmental one though.
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Jan 14, 2015 05:46
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Madbullogna posted:Thanks much. I'll give it a good read in the morning once I've had my caffeine treatment. It's a even bigger benefit if Wallyworld uses the system in which you contribute the money at the beginning of he period and then stock gets purchased at the lowest price over the 5-6 month span.
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Jan 14, 2015 05:57
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etalian posted:ESPPs are a good deal if you have piles of fun money to burn and also work for a large cap company. Ha, my next ESPP period ends in a couple weeks and I was going to make a post asking about whether it's better to hold or just take the 15% (minutes taxes). Been working there 10 years building it up, not really knowing anything about money or stock. By advice of this thread, I sold it all (it was/is at a decade high, so I made a truck load) so I didn't have all my money tied up in the company I work for. I've been thinking long and hard on whether I just want to hold until LTCG kicks in, then sell it, or just sell it immediately. I'm probably just going to quick sale everything from here on out to eliminate the risk factor of the stock going down and being unable to make a profit at all. That article has given me further reason to do so.
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Jan 14, 2015 06:25
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Henrik Zetterberg posted:Ha, my next ESPP period ends in a couple weeks and I was going to make a post asking about whether it's better to hold or just take the 15% (minutes taxes). Yes you can wait longer to get the long term tax break but I pretty much agree with the article on how you don't want to be overweight in a single stock. It's just better selling after the holding period and making some profit instead of thinking you will get extra rich by holding tens of thousands of dollars in single company stock. A good ESPP basically gives you free money each year but don't get too greedy.
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Jan 14, 2015 06:42
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That article makes me sad that I only have a 10% discount and there's no "lower of beginning/end price" amazingness - I just get a 10% discount on buying it for the market price at the end of the offering period. 10% is still 10%, though.
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Jan 14, 2015 07:30
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