|
I have hopefully an easy question; if I have an old 401k and want to convert it to an IRA do I have to convert it to a traditional?
|
#
?
Jan 14, 2015 07:35
|
|
|
|
| # ? May 26, 2024 14:46 |
|
|
etalian posted:15% is the max discount i've seen in industry but I'm not sure what sort of holding period is in the plan. I Am Not Spor posted:I have hopefully an easy question; if I have an old 401k and want to convert it to an IRA do I have to convert it to a traditional?
|
|
#
?
Jan 14, 2015 15:17
|
|
|
baquerd posted:No, although if you convert it to a Roth you need to pay taxes on it. I'm already losing a little of the money in the 401k rolling over to an IRA, so gently caress that. Thanks.
|
|
#
?
Jan 14, 2015 16:32
|
|
|
I Am Not Spor posted:I'm already losing a little of the money in the 401k rolling over to an IRA, so gently caress that. Thanks. I'd roll it to a Traditional at Vanguard if you don't want to pay the taxes on it. Simple and free.
|
|
#
?
Jan 14, 2015 16:47
|
|
|
SiGmA_X posted:What? How? Non vested employer contributions? If so that makes sense. If not, please explain. The former: I get all of what I put in, but I only get something like 20% of what my employer put in. I'm pulling out (heh) because every fund in my former employer's plan underperformed like crazy last year. I opened at Fidelity. I already had an account and they have a brick and mortar close to me if I ever need to go in.
|
|
#
?
Jan 14, 2015 18:19
|
|
|
I've got an retirement asset allocation question. I'm 25 and don't plan on retiring until my 60s at the earliest. My current target allocation breaks down like this:
 I don't have enough money in my IRA to hold both my international stock and all my bond funds while keeping my target allocation, and the international stock funds in my 401k have even worse ERs (1.2%-1.5%). I talked to my HR department last year and convinced them to add two new funds to our 401k plan, though they're still not great. They will be adding PMFPX Principal MidCap S&P 400 Index R5 Fund (0.47% ER) and LIGRX Loomis Sayles Investment Grade Bond Fund Class A (0.83% ER).I am currently planning to reallocate my domestic stock holdings to be closer to the total market using the new MidCap index fund (since it won't cost my any extra), though still keeping a slight tilt towards small-cap (I'm thinking an 80/10/10 allocation where the "total market" is 81/12/7). For bonds, I'm not quite sure what to do. It's tempting for me to transfer all of my bond holdings to the new Loomis Sayles fund but looking back it performed significantly worse than the PIMCO fund during 2008 and times like those are where stability is important. I also used Morningstar to look at what kinds of bonds the LIGRX and PTRRX funds are holding and it looks like the PIMCO fund is mostly government bonds while the Loomis Sayles fund is mostly corporate. Comparing them to the Vanguard Total Bond fund it seems if I invested a 66%/33% split between the PIMCO fund and the Loomis Sayles fund would give me a similar overall split between government and corporate. I'm also thinking I should add an international bond component. I currently have an approximate ~2% excess investment in my international stock fund which I could shift over to BNDX. This would also mirror the 80/20 US/international bond split in the Vanguard target retirement funds. So, given the above my target fund allocation would be:
Does this fund selection seem reasonable given my target allocation?
|
|
#
?
Jan 14, 2015 18:35
|
|
|
Sounds to me like you've got a clear handle on what you're doing. Just pick a strategy and roll with it. It would be perfectly reasonable to stick with the 4 funds for easier tracking and rebalancing, knowing that you miss the corporate bond market. It would also be perfectly reasonable to do what you're describing with the 7 funds, if you don't mind a little extra fidgeting with the portfolio every year. I would say, don't compare funds based on their performance at specific times: LIGRX lost to Pimco in 2008, who cares? They both bounced back at the same time anyway. They have completely different holdings and management strategies and you should judge them on that instead, i.e. gov't vs corporate as you have considered.
|
|
#
?
Jan 14, 2015 19:26
|
|
|
Question on filing taxes and Roth IRA contributions: I know I have until April to open and fund a Roth IRA for the previous fiscal year. Would I need to wait to file my taxes for 2014 until after I've opened up my account and funded it? Or does it not matter because the contribution is not tax deductible?
|
|
#
?
Jan 14, 2015 19:35
|
|
|
Well, there's a IRA-sized hole between gross income and claimed taxable income that shows up. You can do your taxes now, you'll just have to file an amendment.
|
|
#
?
Jan 14, 2015 20:55
|
|
|
For a Roth? There is no IRA-sized hole to fill in your return. You can contribute after you file, as long as it is before deadline. No problem at all. No amendment needed.
|
|
#
?
Jan 14, 2015 21:13
|
|
|
I must be doing my taxes wrong. I had to declare it all, though there was no "proof", I just plugged in the number even though I hadn't actually contributed yet. This is why I'm getting an accountant this year!
|
|
#
?
Jan 14, 2015 21:19
|
|
|
Bhodi posted:I must be doing my taxes wrong. I had to declare it all, though there was no "proof", I just plugged in the number even though I hadn't actually contributed yet. This is why I'm getting an accountant this year! Are you talking about something like Turbotax? They ask you if you plan on contributing but this is just for their own tracking, as well as give you the opportunity for the saver's credit. In fact, I should mention that as a potential area to watch for... if you plan to contribute and your AGI is low enough to qualify for a saver's credit, definitely tell Turbotax you PLAN to contribute to a Roth, and then make sure you actually do it so that your filed return is correct. But other than a fringe case like that, a Roth IRA is not declared on your tax return, even if Turbotax asks you.
|
|
#
?
Jan 14, 2015 21:23
|
|
|
Yep, turbotax
|
|
#
?
Jan 14, 2015 21:34
|
|
|
I'm sure they are also checking your contribution against your AGI to let you know if you are liable for any penalties if you overcontributed directly to a Roth. I doubt they would notify you of the ability to use the backdoor method.
|
|
#
?
Jan 14, 2015 22:02
|
|
|
How to report backdoor Roth IRA contributions using Turbo Tax: http://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html
|
|
#
?
Jan 14, 2015 23:48
|
|
|
Henrik Zetterberg posted:How to report backdoor Roth IRA contributions using Turbo Tax: Yeah, thats how go about reporting it if you already knew what you were doing when you made the contribution, but if you tell TurboTax you contributed 5500 to a Roth IRA when your limit turned out to be 0 for the year (or even something like 2500), then what does it suggest you do?
|
|
#
?
Jan 15, 2015 00:25
|
|
|
Honestly I feel like if you're savvy and wealthy enough to do roth backdooring, you probably should just pay a little extra for a real live tax preparer.
|
|
#
?
Jan 15, 2015 00:34
|
|
|
flowinprose posted:Yeah, thats how go about reporting it if you already knew what you were doing when you made the contribution, but if you tell TurboTax you contributed 5500 to a Roth IRA when your limit turned out to be 0 for the year (or even something like 2500), then what does it suggest you do? I don't see what the issue is? Just report the non-deductible IRA contribution, which you are allowed to make, as well as the conversion (which you are also allowed to make).
|
|
#
?
Jan 15, 2015 00:42
|
|
|
80k posted:I don't see what the issue is? Just report the non-deductible IRA contribution, which you are allowed to make, as well as the conversion (which you are also allowed to make). I'm saying someone who wasn't particularly knowledgable about these things, who had already contributed 5500 to his Roth IRA... then files his taxes using TurboTax and sees "oh hey, I contributed $5500, but TurboTax is telling me that based on my income, my max Roth IRA contribution was actually $2500" I'm just curious (it isn't really an "issue" to me, since I am not in this situation) what something like TurboTax actually does in a situation like this? Also, aren't these transactions directly reported to the IRS, such that they would see that the money never touched a traditional IRA prior to going into the Roth IRA? So in this bizarro situation, would you have to recharacterize the money to a traditional IRA and then convert it right back into a Roth? It seems like some insane mumbo jumbo, but I have seen the IRS have a shitfit about similar things. flowinprose fucked around with this message at 00:55 on Jan 15, 2015 |
|
#
?
Jan 15, 2015 00:52
|
|
|
flowinprose posted:I'm saying someone who wasn't particularly knowledgable about these things, who had already contributed 5500 to his Roth IRA... then files his taxes using TurboTax and sees "oh hey, I contributed $5500, but TurboTax is telling me that based on my income, my max Roth IRA contribution was actually $2500" Ah, I thought you were referring to the backdoor... Turbotax will tell you what your excess contribution is, and then you file a removal of excess contribution with the custodian. Last time I did this was several years ago, so I can't remember all the steps, but as long as you remove the excess, Turbotax and your own records should be reconciled based on the correct contribution limit after removal of excess.
|
|
#
?
Jan 15, 2015 00:55
|
|
|
Bhodi posted:Honestly I feel like if you're savvy and wealthy enough to do roth backdooring, you probably should just pay a little extra for a real live tax preparer. Backdooring is extremely routine. Non-deductible contributions have always been routine reporting and so has Roth conversions. The only thing special about backdooring as a recent phenomenon is because high income earners are now allowed to convert. The gymnastics involved if you have to rollover to an employer plan, etc, etc, is the tedious part. But the actual tax reporting is very straightforward and does not need a hired preparer to do.
|
|
#
?
Jan 15, 2015 01:01
|
|
|
slap me silly posted:Sounds to me like you've got a clear handle on what you're doing. Just pick a strategy and roll with it. It would be perfectly reasonable to stick with the 4 funds for easier tracking and rebalancing, knowing that you miss the corporate bond market. It would also be perfectly reasonable to do what you're describing with the 7 funds, if you don't mind a little extra fidgeting with the portfolio every year. Thanks. I mainly wanted to make sure I wasn't going overboard with my slicing and dicing, but given the fund choices at my disposal it's hard to avoid. I also signed up for an HSA this year so I get to add another account's worth of funds on this next January (I won't be able to start investing my HSA contributions until August due to the account's minimum cash balance requirement).
|
|
#
?
Jan 15, 2015 01:01
|
|
|
pig slut lisa posted: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. Sounds like yours is set up similarly to mine, except I don't get to see what my employer contributions are and the interest they give on the account (that I can see and/or potentially take out) is less than what their investments make. An example on my pension plan: if I had 10 years of service with my entity @ age 35 I might have $40k in the account that I could pull. If I left, that money would have to sit in the account for 15 years until I reached age 50, at which point I could take a reduced benefit pension... like maybe... $5,000 a year. If I waited until the age of unreduced benefits - another 10 years to age 60 - I might get $10,000 a year. The decision becomes very different if I have 10 years of service at age 49 instead of age 35 because all of the $ values would be the same, but instead of waiting 15 years I'm only waiting 1 for reduced benefits. From the sounds of it you're going to want that money available at age 40-ish so keeping it in that system doesn't do you any good until like... age 50 or 55 or whatever your pension plan says. If you're capable of rolling that balance into your 457 you might be able to make use of it at that age, but you'd be forfeiting the pension. The question would be, can you outperform the plan if you cash out? A benefit to cashing out is that when you die, the money is still there... if you haven't spent it all.
|
|
#
?
Jan 15, 2015 01:10
|
|
|
flowinprose posted:I'm saying someone who wasn't particularly knowledgable about these things, who had already contributed 5500 to his Roth IRA... then files his taxes using TurboTax and sees "oh hey, I contributed $5500, but TurboTax is telling me that based on my income, my max Roth IRA contribution was actually $2500" I am in this exact situation. Contributed $1400 to my Roth, then liquidated a bunch of stock, resulting in cap gains. I backdoored the rest of my $5500, and I'm pretty sure my MAGI is going to be over the limit to have contributed $1400. I think I have to either withdraw it or pay a penalty and deduct that much from my $5500 for next year. I should know more once I start plugging everything into Turbotax after I get my W2s.
|
|
#
?
Jan 15, 2015 01:35
|
|
|
baquerd posted:I'm allowed to purchase at market price and after a year they match 50% shares. Limited to $150/month in purchases though, and I have to buy the same amount every month for a year and then re-up for the program. Sounds like a good deal, a good ESPP is basically free money each year especially if you work for a large cap company like Walmart that's not going to go out of business overnight.
|
|
#
?
Jan 15, 2015 01:54
|
|
|
Mr.Radar posted:I've got an retirement asset allocation question. I'm 25 and don't plan on retiring until my 60s at the earliest. My current target allocation breaks down like this: I struggled with a similar question a couple years ago as I was building my asset allocation. Keep in mind asset allocation across multiple accounts Here is a hypothetical example to help: -------------------------------------------------------------------------- Mirrored Asset Allocation Roth IRA 70% US Stocks (low expense ratio) 20% Int Stocks (low expense ratio) 10% Bonds (low expense ratio) 401k 70% US Stocks (medium expense ratio) 20% Int Stocks (high expense ratio) 10% Bonds (high expense ratio) -------------------------------------------------------------------------- Bucketed Asset Allocation Roth IRA 20% US Stocks (low expense ratio) 40% Int Stocks (low expense ratio) 20% Bonds (low expense ratio) 401k 100% US Stocks (medium expense ratio) -------------------------------------------------------------------------- The total portfolio allocation for these two examples are the same, but the second portfolio has a far lower average expense ratio. edit just reread your post and realized you are already doing this! I'll leave the post up to hopefully help someone else. Velochis fucked around with this message at 09:22 on Jan 15, 2015 |
|
#
?
Jan 15, 2015 09:17
|
|
|
Just wanted to vent a little. Primerica sucks and I hate what it does to it's 'employees'. My wife's aunt and cousin are both heavily involved in Primerica, and constantly having to fend them off is a exercise in familial stress. I do have life insurance coverage through Primerica that I think is fairly priced and good coverage, and I was happy to help him out by getting set up through him since I'm sure he gets some sort of kickback. I also did something through Primerica that shopped around for auto+renter's insurance and got better deal than I currently had. However, he is insistent on getting involved in our financial planning. I recently started a new job a couple months ago, and ever since he found out that I got a new job + raise my wife's cousin has been constantly hounding us to do some financial planning with him. I made the mistake of agreeing to meet with him before I really understood long term investing and retirement savings, and he almost got me to roll over my old 401k into a IRA with Primerica and invest it in one of their mutual funds. Thankfully I didn't have all the financial info available at the time, so nothing happened in that meeting. Afterwards, I started reading BFC and this thread and realized that this is something I could easily handle and didn't need any outside assistance, and going through Vanguard (my new company's 401k is also through Vanguard) would let me keep all my investments in the same place. Plus Vanguard has great expense ratios for the mutual funds I can choose from, and it lets me go wholesale with my Roth IRA, traditional IRA and 401k into the same target retirement fund. So I call him up and leave a voicemail telling him thanks for the offer but I don't want to go through with the Primerica rollover. He then texts me saying he still wants to get together to 'go over some things about your wife's account' (He got her way early on when she was working part time while going to school, having her put $25/mo into a IRA and $25/mo into some money market 'emergency' fund. She only contributed for a while before poor student issues took over and she stopped). I take a look at my wife's previous Primerica paper statement (Primerica makes you call in to get a password to get into their lovely web interface...  ) and he has her invested in some fund that has like a ~1.6% ER and over 5% front load fees! I'm sure that's the same fund he wanted to roll my 401k into.So we keep making excuses about the holidays being busy and deflecting when he says he wants to get together, but he is insistently texting us every week to see if we are available. Finally we decide to bite the bullet and have him come over. What he wants to 'go over' is seriously him just trying to have us go through and set up a budget with him, I'm sure so he can say "Oh look, you can totally afford to max out your IRA this year with me!". I am firm in telling him we are already using YNAB and have already determined what we can afford to contribute while we are in debt-reduction mode. He said multiple times that the max IRA contribution is $6000/year, even though we are both in our mid-20s. He also repeatedly tried to use scare tactics with me about how complicated IRAs/rollovers can be, how hard it is to be prepared when you retire and that he can 'take call of all the complicated roll over stuff'. I tell him no seriously 3 times, that I have it handled with Vanguard, but even when leaving out the door he look at me and says "So... if you want I can just handle the 401k rollover and get you in the same mutual fund as [wife]". I'm sure he just wants that 5% front load fee. I tell him no again and he goes on his way. It just sucks that Primerica fucks over these people who work for them and hawk their wares. Having them prey on family members sucks so hard, because money and family are very easy to attach emotions to, and combining them is a recipe for disaster. Thankfully from reading BFC I have a good understanding of it and can see through what he's trying to sell (When we got life insurance he wanted to get me insured for 15x my annual salary on a 35 year term, I told him flat out that was insanely high and I had never seen anybody recommend anything close to that high when we don't have a mortgage yet, no kids, etc. Ended up getting it down to much much more realistic coverage for our situation). However my wife, since it's her cousin, in insistent that "He's not out for himself, he's trying to help out his family" and feels like I'm sometimes too harsh with him. Right now I told him that the most we can contribute to the Primerica IRA is $25/mo again, and that maybe in the future once more debt is taken care of we can touch base and change it. However I'm just going to have my wife open a Vanguard Roth IRA, keep contributing the $300/year into the Primerica and put the other $5200 into the Vanguard account. If it was up to me I would just totally close out all the Primerica retirement stuff, but I figure $25/mo isn't the worst price to pay to keep family happy, and it's not like the Primerica mutual funds are a Ponzi scheme or anything. I just wish family wasn't involved in this whole mess. He's a great guy and I love hanging out with her family but Primerica is poison, and they're swallowing it up. lmao zebong fucked around with this message at 00:30 on Jan 17, 2015 |
|
#
?
Jan 17, 2015 00:26
|
|
|
Why do you let this happen to yourself? Just tell him it's a bad product, you aren't going to use it, and he can either stop bugging you or be removed from your life forever. I know you said your wife disagrees with you, but I can't imagine a spousal relationship where some dumb cousin trying to sell me poo poo got priority over my own opinion. So far he has successfully sold you multiple things you should not have bought, no wonder he keeps at it.
|
|
#
?
Jan 17, 2015 00:54
|
|
|
What has he sold me that I shouldn't have bought? My wife is in graduate school and has student loans, and I'm the only one working. I was looking into life insurance far before we decided to go with Primerica. The quotes I got for other companies were almost identical to what we ended up on getting, he didn't sell me on anything I didn't understand or think we didn't need. Primerica as a company/business practice is poo poo, but their actual life insurance products are decent. As far as the other 'multiple things he sold us', do you mean changing our insurance carrier? That was a next positive in monthly savings and worth it. My wife doesn't disagree with what I've told her, there is no argument there about what is the best option pragmatically, or her cousin getting 'priority' over my opinion. Her only issue is that she feels I am too blunt when I talk to him. She understands that a 0.18% ER with no front load fees is better than a 1.6% ER and 5% front load fees. I know from the other side of the internet it's easy to say "I will remove you from my life forever" to a family member that is annoying but reality has a bit more grey area than that. The $25/mo is still going to our retirement, and the expenses on that small amount of money is miniscule. Could I save that ~$10/year by closing it out? Yes. Do I feel like $10 a year is worth not having to constantly have this guy text me and ask me how my retirement planning is going and pushing me to switch it all over to him? I would say definitely. Throw a dog a bone and all that. Using a compound interest calculator at 6% interest rate that comes out to roughly $800 total over 30 years we're losing by paying these fees on this small contribution. That is a bit bigger than my mental math projected, but that's not even a half of a month of projected retirement expenses. I'm not sweating it. My issue is with Primerica leading these people to believe they will become rich by selling these lovely funds to people who don't know better, and making them focus on badgering family members and friends. It sucks seeing people you are close to drink the kool-aid of MLM and get rich quick schemes. I wish I had started getting more seriously into retirement planning and budgeting when I first started working out of school, instead of setting 10% of my monthly pay to go to my 401k and not doing anything else. My wife and I are way ahead of the game compared to all our friends but those extra couple of years could have made a real difference.
|
|
#
?
Jan 17, 2015 01:24
|
|
|
lmao zebong posted:Do I feel like $10 a year is worth not having to constantly have this guy text me and ask me how my retirement planning is going and pushing me to switch it all over to him? I would say definitely. Throw a dog a bone and all that. Typically when you feed a dog, it doesn't go away - it keeps coming back for more. But it looks like you actually don't have any complaints about your Primerica services, so yay.
|
|
#
?
Jan 17, 2015 01:32
|
|
|
He is just trying to help out his family. HIS family. Not your family, not your wife, and not you. I would simply show him the math of how much money a front load + high ER steals from your savings over your lifetime. Its a lot of money. And then give him a copy of a book about boundaries, lol.
|
|
#
?
Jan 17, 2015 01:34
|
|
|
I agree. He's a great guy outside of this but god drat it sucks to see what Primerica is doing to him and his family. After he left last night, he texted my wife (not me or in our group chat text thread we had previously all been talking in) that he enjoyed seeing us but he "wanted to sit down with her again and do the Financial Wellness Worksheet more in depth because it goes over a lot more than what we were able to touch tonight". I'm sure he realizes that he won't get anywhere with me since I actually took the couple hours to Google and research about retirement planning, so he's hoping to pull her in emotionally and get her to up the monthly contributions. Thankfully my wife is way smarter than that and isn't falling for it, and knows why it's not worth it. I guess in summary, gently caress MLMs and what they do to susceptible people who are desperate to increase their income. But that's a story for the Bad with Money thread, not here.
|
|
#
?
Jan 17, 2015 01:45
|
|
|
Over 20 years (1990-2009 in this example), investing $5000 per year into an S&P 500 index fund:code:Droo fucked around with this message at 01:56 on Jan 17, 2015 |
|
#
?
Jan 17, 2015 01:51
|
|
|
Droo posted:
Good lord that's got to be one of the worst fee schedules I've ever seen, especially for an S&P fund. And I've seen some bad ones.
|
|
#
?
Jan 17, 2015 03:29
|
|
|
I like the bit in 4 Pillars on how the whole finance industry is hilariously dishonest through things such as giving bad investment advice or charing ripoff expense ratio fees.
|
|
#
?
Jan 17, 2015 03:30
|
|
|
Guinness posted:Good lord that's got to be one of the worst fee schedules I've ever seen, especially for an S&P fund. And I've seen some bad ones. I'm not on Bogleheads but don't they have a competition to see who can find the worst S&P index fund?
|
|
#
?
Jan 17, 2015 03:38
|
|
|
Guinness posted:Good lord that's got to be one of the worst fee schedules I've ever seen, especially for an S&P fund. And I've seen some bad ones. Primerica is also a extremely dubious company, basically operates a MLM/pyramid scheme similar to Herbalife.
|
|
#
?
Jan 17, 2015 21:05
|
|
|
I'm totally new to all of this. I have a lot of money saved up that is basically just sitting there doing nothing, but I'm in Japan and don't have access to any sort of fun price matching 401k or anything like that that everyone seems to be talking about. Is my best option to go to some place like Vanguard and just toss some money in there?
|
|
#
?
Jan 19, 2015 02:07
|
|
|
aherdofpenguins posted:I'm totally new to all of this. I have a lot of money saved up that is basically just sitting there doing nothing, but I'm in Japan and don't have access to any sort of fun price matching 401k or anything like that that everyone seems to be talking about. Is my best option to go to some place like Vanguard and just toss some money in there? Yeah if you don't have workplace retirement plan, then the best option is a IRA account. For either option you are capped $5500 for single filing and double that for joint filing. The other option is to open a taxable account once you have built up a decent sized emergency fund and also maxed out your retirement contributions for the year.
|
|
#
?
Jan 19, 2015 03:25
|
|
|
|
| # ? May 26, 2024 14:46 |
|
|
You have to be careful the way you do your taxes if you plan to open an IRA and you are exclusively earning income internationally. You can take the foreign tax credit if you are paying foreign taxes, and still be able to contribute to a Roth IRA, but if you are taking the foreign income exclusion you will deduct income that will then no longer be considered eligible for Roth contributions (excluded income is not 'earned" income, per the IRS).
|
|
#
?
Jan 19, 2015 03:38
|
|