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Residency Evil posted:Kind of a simple question, but if all of my income is going to be W-2 moving forward, as a single, unmarried person my maximum tax-advantaged retirement space is only 5.5k (IRA) + 18k (401k), correct? The rest has to go in regular accounts? When I married and my spouse works, it doubles, correct?
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Jan 7, 2017 21:18
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Residency Evil posted:
It's bonkers for your net worth, because "pay yourself first" is far and away the best personal retirement strategy I've found. It's very easy to budget to spend within your means when your paycheck is just X when X is whatever is left after you put all that money away for retirement, and the more you can sock away out of your paycheck automatically (advantaged and Roth) the better.
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Jan 7, 2017 22:43
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EAT FASTER!!!!!! posted:It's bonkers for your net worth, because "pay yourself first" is far and away the best personal retirement strategy I've found. It's very easy to budget to spend within your means when your paycheck is just X when X is whatever is left after you put all that money away for retirement, and the more you can sock away out of your paycheck automatically (advantaged and Roth) the better. is there any way to replicate this but with a taxable Vanguard account automatic deposit or something?
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Jan 7, 2017 23:02
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Blinky2099 posted:is there any way to replicate this but with a taxable Vanguard account automatic deposit or something? Yes, Vanguard has an automatic investment option that let's you say "I want to put $X every [month/week/two weeks/twice a month] into [pick your fund]." You don't get the tax deduction, but you also don't pay ordinary income tax when you cash it out.
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Jan 7, 2017 23:16
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Residency Evil posted:Kind of a simple question, but if all of my income is going to be W-2 moving forward, as a single, unmarried person my maximum tax-advantaged retirement space is only 5.5k (IRA) + 18k (401k), correct? The rest has to go in regular accounts? When I married and my spouse works, it doubles, correct? In an academic center you'll probably have a 403b and a likely a 457 account to work with in addition to the backdoor Roth IRA option. The base amounts you'd have to work with are $18,000 into the 403b, $18,000 into the 457b and the $5500 into the backdoor Roth IRA. However, there are some considerations to keep in mind. First, it would be a good idea to check to see if the 403b account allows after tax contributions. This is different from a Roth 403b, as you're contributing above the $18,000 limit instead of choosing between traditional vs Roth contributions. In fact, you're able to contribute up to the $53k limit in this case. On it's own this isn't that helpful, as the money is taxed going in, and is taxed again at regular income tax rates coming out (like a non-deductible trad IRA), so it'd be better to do a normal taxable account to get long-term capital gains rates instead. However, if the 403b also allows in-service rollovers, meaning that you can roll money from the account to an IRA, then you officialy have access to the 'mega-backdoor Roth', where all the money you contribute above the $18k after-tax can be rolled into a Roth IRA, dramatically increasing your tax-free retirement space. I believe any employer match also counts toward the $53k limit in the 403b though, and usually academic medical centers give a fairly generous match, but you'd still likely have $10k-$20k of additional space to work with. The 457b account would allow tax deferred contributions up to an additional $18k. However, unless you're working for a government organization, which I suspect you're not, then non-governmental 457b's have a few things to look into before using them. First, they're technically being held by the institution, so if they go under and have creditors to pay, your retirement funds could potentially to toward paying off creditors first. This is probably very unlikely at a large academic medical center, but something to know about. Next, the rules about fees being transparent aren't as strict as they are with 401k/403b accounts, so you want to do your due diligence about who is administering the account. Third, the fund choices may not be the same between the 457b and the 403b, so you may not have great choices available. Finally, non-governmental 457(b)s can't be rolled over into an IRA or a 401k/403b later on if you leave that organization. It can only be rolled over into another non-governmental 457b, and only if the accepting organization specifically allows it, as they don't have to. If you can't roll it over,then hopefully they allow you to leave it with them, but most places I've seen require it to be disbursed on termination/retirement. The options for disbursement are usually limited, either only as 1 lump sum (which may mean you may end up paying more in tax on it at the end since a lot would likely be taxed at the highest marginal rate if you're still working), or as equal distributions over a number of years (often 5 or so). One benefit that they have over 401k/403b plans is that there's no minimum age for disbursements, so if you decide to retire early for some reason, you could take money out of the 457b without any additional penalty. The rules around non-governmental 457bs are very variable depending on the institution, so look closely at yours before deciding if you want to use it, but if you do use it, you'd definitely want to draw from this account first. When you marry, the space available to the two of you does not change. She would similarly have access to a 401k/403b + backdoor Roth IRA and a 457b if her institution offers it. So together it does double, but it's the same amount of space you each individually had before marrying. The only difference is that you could theoretically contribute to a spousal IRA up to $5.5k if she wasn't working, but since she's also a physician, she has that space available already.
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Jan 7, 2017 23:46
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im leaving my job in a few weeks and means ill be leaving my 401k. but now i'm kind of confused what i'm supposed to do with the money I already pledged ($7k+). Am I supposed to leave it in there for ever now? Or should I somehow take it out? I'm totally confused  .Thanks any help
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Jan 8, 2017 02:32
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Empress Brosephine posted:im leaving my job in a few weeks and means ill be leaving my 401k. but now i'm kind of confused what i'm supposed to do with the money I already pledged ($7k+). You basically have three options. First: cash it out and take the money. Don't do this; not only are you giving up your retirement money, you'll also pay substantial tax penalties. Second: since your balance is over $5,000, you can keep it in the 401(k) until retirement. You might want to do this if the plan is exceptionally good (low/no plan fees and access to ultra-low-cost institutional funds), or you are/reasonably expect to be a high earner who will go past the Roth IRA income cap. Third: roll it into an IRA. Do this if you're not sure. If you already have an IRA, you should be able to roll it in with your current provider. If not, now's a great time to open up one with Vanguard. The only downside is that, if you do need to do backdoor Roth IRA contributions, they'll be a bit more expensive thanks to a larger traditional IRA balance.
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Jan 8, 2017 02:56
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Hm okay thank you for the help. Roth IRA's confuse the hell out of me and I'm pretty sure my plan is exceptionally good (from what I can tell) so I will probably do that, I should research it more. If I leave it in there it's going to grow albeit really slowly still over the next 50 years or will it always stay 7k?
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Jan 8, 2017 03:12
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Space Gopher posted:You basically have three options. Fourth, if your next job has a 401(k) plan, you may be able to roll the assets directly into that. This can be worth it if your new 401(k) plan is better than the old one.
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Jan 8, 2017 03:15
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Empress Brosephine posted:Hm okay thank you for the help. Roth IRA's confuse the hell out of me and I'm pretty sure my plan is exceptionally good (from what I can tell) so I will probably do that, I should research it more.
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Jan 8, 2017 03:24
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Also relevant, how long have you been there and what is the vesting schedule.
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Jan 8, 2017 03:31
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I've been on the plan for 2 years and they put money back in in around August. I admitedbly don't know jack poo poo about the 401k we all were kind of forced into doing it by our old administration so I never really paid much attention to it 
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Jan 8, 2017 03:41
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if I looked this up right the expense ratio is 0.47 and this is what it said about administration fees: A portion of these services are paid from the plan’s investments. This is reflected in each investment’s expense ratio and reduces the investment returns. If an additional amount is required to cover your plan’s administrative expenses, your employer expects that it will be paid from the plan’s forfeiture assets or from the general assets of your employer. The plan may also incur unexpected expenses that may be deducted from participant accounts. If your plan’s investments generate more revenue than is necessary to cover the costs of administrative services for your plan, the excess amount will be used to pay other plan expenses or allocated to participants
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Jan 8, 2017 03:47
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Chu020 posted:Awesome info. Thanks a ton dude, this is great.
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Jan 8, 2017 04:05
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I have enjoyed reading this thread from start to finish, and also the Canadian Finance and Investing thread. But, wouldn't it make more sense to make this the American Savings and Tax thread? I mean, there's a good amount of posts about overall investing strategy, but the majority of posts are concerned with IRAs and 401(k)s and similar vehicles and strategies, which only apply to you Americans. I know that's probably by far the largest readership of this thread, but I'd love to hear the consolidated wisdom of the massive international SA hivemind on investing and savings ideas, strategies, financial vehicles, diversification, and other thinking. It just seems to me that's what the title of this thread implies it is, but the content is different.
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Jan 8, 2017 05:00
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Space Gopher posted:You basically have three options. Do you know how this works with pensions? I have a CALPERs account that's been sitting around with $2,000 in it for a few years (accruing interest) that I don't know what to do with. I only worked for a year at the spot where I was earning it. Can I roll that over somewhere? Cash it out? I just don't know 
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Jan 8, 2017 06:29
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mr.belowaverage posted:I have enjoyed reading this thread from start to finish, and also the Canadian Finance and Investing thread. But, wouldn't it make more sense to make this the American Savings and Tax thread? I mean, there's a good amount of posts about overall investing strategy, but the majority of posts are concerned with IRAs and 401(k)s and similar vehicles and strategies, which only apply to you Americans. I would love to read more posts that aren't taxchat! Got any questions or discussion to share? 
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Jan 8, 2017 06:46
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Residency Evil posted:Kind of a simple question, but if all of my income is going to be W-2 moving forward, as a single, unmarried person my maximum tax-advantaged retirement space is only 5.5k (IRA) + 18k (401k), correct? The rest has to go in regular accounts? When I married and my spouse works, it doubles, correct? If you have access to a HSA I believe you can use it similarly w/ $3.4k/yr.
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Jan 8, 2017 15:32
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Pie Colony posted:If you have access to a HSA I believe you can use it similarly w/ $3.4k/yr. I believe that only applies if you're enrolled in a High Deductible Plan?
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Jan 8, 2017 17:36
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Residency Evil posted:I believe that only applies if you're enrolled in a High Deductible Plan? Yes, and it has to be clearly a HDHP labeled with HSA.
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Jan 8, 2017 17:53
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Unless you're single and healthy, a HDHP is probably a bad decision. Research carefully before you start down that path. Edit: also the investment options for HSAs almost always have very high fees. MrKatharsis fucked around with this message at 18:33 on Jan 8, 2017 |
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Jan 8, 2017 18:22
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monster on a stick posted:Fourth, if your next job has a 401(k) plan, you may be able to roll the assets directly into that. This can be worth it if your new 401(k) plan is better than the old one. Wouldn't it also have to be better than the best IRA (probably Vanguard)? Otoh, having one less account to keep track of is nice, and you have to research your new 401k anyway.
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Jan 8, 2017 22:52
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smackfu posted:Wouldn't it also have to be better than the best IRA (probably Vanguard)? Except if you have a traditional IRA open then you get to deal with the pro-rata rule if doing the backdoor Roth. Also some companies have funds that have very low costs (better than TSP even) because of how they are set up.
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Jan 8, 2017 23:06
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smackfu posted:Wouldn't it also have to be better than the best IRA (probably Vanguard)? Aside from the backdoor Roth issue, it is possible for a 401k to have better options than a personal IRA. Vanguard, and other companies, offer funds with lower expense ratios that require minimum investment that is outside the reach of most personal investors. Vanguard's versions are called institutional and institutional plus and they require a ridiculous minimum investment of $5 million and $200 million respectively. VINIX, and VIIIX are the S&P500 versions and have expense ratios of 0.04% and 0.02% respectively slightly lower than the 0.05% of VFINX.
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Jan 9, 2017 03:20
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MrKatharsis posted:Unless you're single and healthy, a HDHP is probably a bad decision. Research carefully before you start down that path. Assuming you have a choice of something besides a HDHP... Lucky for me my only option offers low cost Vanguard funds.
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Jan 9, 2017 03:58
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MrKatharsis posted:Unless you're single and healthy, a HDHP is probably a bad decision. Research carefully before you start down that path. I'm surprised I don't see this opinion voiced more often. I have used HSAs in the past and still have one, but I certainly wouldn't recommend them. When you're shopping for insurance you should choose one from what is available to you based on how good a fit it is for your life and health needs, not whether or not you'll get access to a HSA. Making reasonable health decisions is more important than tax deductions. Not that I dumped a whole lot of money into my HSA, but if I could do it again, I wouldn't have gotten one, or if I had I would have been careful to only deposit what I needed. Now that I have different insurance the thing has turned into such a white elephant, and I cannot wait until I use it all up and get rid of it once and for all. The monthly fees, lovely to nonexistent investment options, and being locked into this weird tacked-on overly complicated administration structure is a huge pain in the rear end. I do not understand why this whole mess isn't as straightforward and easy to deal with as retirement accounts.
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Jan 9, 2017 03:59
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fartzilla posted:I'm surprised I don't see this opinion voiced more often. I have used HSAs in the past and still have one, but I certainly wouldn't recommend them. When you're shopping for insurance you should choose one from what is available to you based on how good a fit it is for your life and health needs, not whether or not you'll get access to a HSA. Making reasonable health decisions is more important than tax deductions. Can't you open a FreeSaver account with SelectAccount and roll it over to that? https://www.selectaccount.com/products/hsa/ Won't gain interest, but at least fees won't eat away at your balance
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Jan 9, 2017 04:23
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HSAs can be pretty amazing for investments, but you do need to find a good one (pretty much Elements CU, Saturna, HSA Bank). Unless your work is contributing your entire allocation for you, you can just pick whichever HSA you want and get a deduction on taxes. http://www.madfientist.com/ultimate-retirement-account/
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Jan 9, 2017 13:37
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How does all this work for expats? Could I just keep my existing bank and brokerage accounts but with a foreign address? Let them idle while abroad, take investment income via transfers to the foreign account(s)?
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Jan 9, 2017 13:57
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I had no idea Vanguard even had a fund with an ER lower than 4 basis points. Yeezus.
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Jan 9, 2017 14:24
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baquerd posted:Unless your work is contributing your entire allocation for you, you can just pick whichever HSA you want and get a deduction on taxes. You get screwed out of the FICA deduction then though unless I misunderstand it.
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Jan 9, 2017 15:17
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Nail Rat posted:You get screwed out of the FICA deduction then though unless I misunderstand it. Yeah, though if you're over the SS cap anyways, you're only really losing the medicare side of the taxes, or an effective 1.45% load. That's pretty bad, but not as bad as some HSA's investment choices!
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Jan 9, 2017 15:50
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Roth IRA: withdraw contributions at any time penalty free, even if your account has gains in it Roth 401k: you can't withdraw purely contributions if your account has grown. You can only withdraw the ratio of contributions to gains in your account and then you are taxed and penalized on the gains portion (e.g. $100k account, grows to $200k, you withdraw $50k from your account, $25k is tax/penalty free, $25k has early withdrawal penalty and gains tax) Taxable investment account: similar to Roth IRA, right? If you have a $100k account and it grows to $180k you can withdraw every penny up to $100,000.00 without getting taxed for any gains, e.g. leaving the full $80k of gains in your account?
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Jan 9, 2017 18:35
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Blinky2099 posted:Taxable investment account: similar to Roth IRA, right? If you have a $100k account and it grows to $180k you can withdraw every penny up to $100,000.00 without getting taxed for any gains, e.g. leaving the full $80k of gains in your account? No, you pay taxes on the gains (thus "capital gains tax"). So if you bought $100K of some stock (pretend it's at $10/share) and the stock went to $18/share, meaning the total value was $180K, then you sold 5555.5[5...] shares to give yourself $100K, then you'd pay capital gains on $8 per share. If you bought stock over time, then some stock would have a lower cost basis (meaning you'd pay more tax) and some would have a higher tax basis (so less tax.)
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Jan 9, 2017 19:11
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To expand on that a bit: capital gains taxes are incurred when that gain on a capital asset is 'realized' - basically whenever the tax code says that an increase in value that wasn't previously treated as income ought to be. The sale for cash is going to be a realization event. This is important to us because realized capital losses can be deducted from realized capital gains for the same year, so you can 'harvest' capital losses, when you have them in one part of your portfolio, to offset capital gains in another (and to a limited extent, ordinary income). If that might apply to you, look up tax loss harvesting.
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Jan 9, 2017 19:50
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Blinky2099 posted:Taxable investment account: similar to Roth IRA, right? If you have a $100k account and it grows to $180k you can withdraw every penny up to $100,000.00 without getting taxed for any gains, e.g. leaving the full $80k of gains in your account? It's a little more complicated than money in/money out. Remember, every time you contribute, you're actually buying shares than can go up or down in value. When you withdraw, you're selling those same shares, at which point you will have either less or more money than when you started. That's what you're taxed on. Also, if you bought shares of a mutual fund the amount of capital gains tax you pay can change based on the cost basis method: https://www.bogleheads.org/wiki/Cost_basis_methods
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Jan 9, 2017 20:04
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Yes in a taxable brokerage you owe tax on any gain from the sale of securities. It doesn't matter if you withdraw the cash or leave it there or even reinvest it. In a tax deferred account like an IRA you generally only owe tax (at income tax rates) when you withdraw.
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Jan 9, 2017 20:05
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Zero One posted:Yes in a taxable brokerage you owe tax on any gain from the sale of securities. It doesn't matter if you withdraw the cash or leave it there or even reinvest it.
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Jan 9, 2017 20:08
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 feels good putting money into my 401k.
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Jan 9, 2017 21:28
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I've been charged to research and propose a retirement plan for my startup. The best option I've found for keeping costs low is a SIMPLE IRA through Schwab, given it has no maintenance fees and a great selection of low-ER funds and ETFs. Does anyone else have a recommendation? Fidelity and Vanguard are costly in different ways, mostly through annual fees and/or minimum requirements before fee waiving.
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Jan 9, 2017 21:35
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