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So this is interesting and also terrifying. The stimulus pack the senate passed will allow you to withdraw up to $100k from your 401k penalty free. https://www.cnbc.com/2020/03/26/you-can-now-make-penalty-free-withdrawals-from-retirement-savings.html Me personally, I see it as a tool, but I think most Americans would completely mortgage their future if given the chance. I think I would use it to move money from my 401k to my Roth IRA. Pay the taxes on some of the traditional money now while my account balance is in the shitter and I'm young and in a low tax bracket.
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Mar 26, 2020 22:24
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acidx posted:Me personally, I see it as a tool, but I think most Americans would completely mortgage their future if given the chance. you act like that's not the plan 
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Mar 26, 2020 22:35
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Pull out $100K from my 401(k) while the market is down 30%, pay taxes on it, and then use it to hoard toilet paper? Why thank you!
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Mar 26, 2020 22:40
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Sundae posted:Pull out $100K from my 401(k) while the market is down 30%, pay taxes on it, and then use it to hoard toilet paper? Why thank you! "I lost all my money when coronavirus crashed the stock market"
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Mar 26, 2020 22:42
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How would that work? Take out of your current company 401k, put in a personal 401k ,then roll over to Roth so it's just a conversion and not limited?
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Mar 26, 2020 22:42
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Most of those people who would loot their 401(k)s in a heartbeat, already don't contribute, or already looted it while paying all the penalties to do so. Like, say, my brother, who decided to take a year off to try and make videogames for a living and funded it by cashing out his 401(k) a couple years ago. This worked out exactly how you'd expect. He's lucky he's not divorced now.
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Mar 26, 2020 22:42
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 that the government's advice to people in the middle of a pandemic and economic meltdown is "sell your retirement stocks low and buy a house".Leperflesh posted:Most of those people who would loot their 401(k)s in a heartbeat, already don't contribute, or already looted it while paying all the penalties to do so. Like, say, my brother, who decided to take a year off to try and make videogames for a living and funded it by cashing out his 401(k) a couple years ago. This worked out exactly how you'd expect. He's lucky he's not divorced now. holy poo poo
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Mar 26, 2020 22:42
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The Big Jesus posted:How would that work? Take out of your current company 401k, put in a personal 401k ,then roll over to Roth so it's just a conversion and not limited? I'd withdraw the money directly from my current 401k. It's traditional money, so I'd have to pay the taxes now. But the market is down, which means my account balance is down, so I can pay the taxes now for a bargain. Plus I'm young and in a low tax rate so now is as good a time as any. Then move that money from my checking account into the Roth IRA as a contribution. For me, I have enough in my emergency fund to cover it, so I would probably just invest with cash into my IRA as soon as my 401k withdrawal started processing. Then I'd just kind of reimburse myself with the withdrawal whenever it cleared. I'd assume it would be a week plus and I wouldn't want the market to jump up 10% while I'm waiting. If they hurry I could get it done quick enough to get it in as a 2019 contribution. acidx fucked around with this message at 22:56 on Mar 26, 2020 |
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Mar 26, 2020 22:53
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Pollyanna posted:
Sell to those wealthy enough to have cash on hand to buy, my friend. If we learned anything in the last week it's that there is no bottom to these people.
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Mar 26, 2020 22:57
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acidx posted:I'd withdraw the money directly from my current 401k. It's traditional money, so I'd have to pay the taxes now. But the market is down, which means my account balance is down, so I can pay the taxes now for a bargain. Plus I'm young and in a low tax rate so now is as good a time as any. Then move that money from my checking account into the Roth IRA as a contribution. For me, I have enough in my emergency fund to cover it, so I would probably just invest with cash into my IRA as soon as my 401k withdrawal started processing. Then I'd just kind of reimburse myself with the withdrawal whenever it cleared. I'd assume it would be a week plus and I wouldn't want the market to jump up 10% while I'm waiting. If they hurry I could get it done quick enough to get it in as a 2019 contribution.
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Mar 26, 2020 22:58
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acidx posted:I'd withdraw the money directly from my current 401k. It's traditional money, so I'd have to pay the taxes now. But the market is down, which means my account balance is down, so I can pay the taxes now for a bargain. Plus I'm young and in a low tax rate so now is as good a time as any. Then move that money from my checking account into the Roth IRA as a contribution. For me, I have enough in my emergency fund to cover it, so I would probably just invest with cash into my IRA as soon as my 401k withdrawal started processing. Then I'd just kind of reimburse myself with the withdrawal whenever it cleared. I'd assume it would be a week plus and I wouldn't want the market to jump up 10% while I'm waiting. If they hurry I could get it done quick enough to get it in as a 2019 contribution. Why would you pay a guaranteed 10% penalty on an early 401k withdrawal to save an unknown amount of future taxes? I'm guessing that you're under age 59.5. Edit: I forgot the covid forgiveness. balancedbias fucked around with this message at 23:19 on Mar 26, 2020 |
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Mar 26, 2020 23:06
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Hoodwinker posted:You could just do the conversion directly and then save yourself the contribution space for the IRA at the same time. You don't need to do these extra steps. Our plan doesn't allow in-service conversions, and I can't quit here for a minimum of 5 more years due to the vesting schedule. Another fun condition is that I'm invested in the bone stock index fund in my 401k at .31%, as it's the cheapest fund they offer. Compared to VTSAX in my Roth IRA. balancedbias posted:Why would you pay a guaranteed 10% penalty on an early 401k withdrawal to save an unknown amount of future taxes? I'm guessing that you're under age 59.5. They're talking about temporarily waiving the penalty in the coronavirus stimulus bill thing.
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Mar 26, 2020 23:13
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There is some fine print to keep in mind... CARES Act A coronavirus-related distribution means a distribution made on or after Jan. 1, 2020, and before Dec. 31, 2020, to an individual: Who is diagnosed with COVID-19. Whose spouse or dependent is diagnosed with COVID-19. Who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off, having work hours reduced, being unable to work due to lack of child care as a result of COVID-19, the closing or reduction of hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.
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Mar 26, 2020 23:48
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H110Hawk posted:I gotta say I read your other post and now this post and basically thought "ok what's the problem?" This is basically where I'm at, and didn't respond before now because I wanted to see if my gut reaction was way off base. This type of "investing" sounds like a pain in the rear end to deal with (recording, reporting) and is too small to constitute making any meaningful cash off of the "investor" other than to hold their float. Times are tough, the fed rate is down, they need more float to make the same money that finances this "investing strategy." The entire thing sounds more "gimmick" than "strategy." Why are you investing this way? If you have such small amounts to invest do you really think that at the end of the day your difference between going in $10 at a time vs $25 at a time is going to have a meaningful impact? Have you tried back testing that theory?
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Mar 27, 2020 02:45
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Okay so given my trad IRA balance, I think I might have sort of an idea on how to backdoor Roth? 1) Convert my current trad IRA balance to Roth and just eat the taxes since the balance is low now thanks to line go down (Is there some way to estimate how much I'd owe in taxes?) 2) Save $6000 for 2021 3) Make a $6000 contribution to the trad IRA 4) Wait for it to show up 5) Convert the contribution to the Roth IRA 6) Repeat for wife's IRA 7) Repeat from 2021 through retirement
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Mar 27, 2020 13:25
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MJP posted:(Is there some way to estimate how much I'd owe in taxes?) Yes, it's taxed as income. So whatever your marginal rate is times the amount you take out to convert. Keeping in mind that depending on where you are in your bracket and how much money we are talking about, part of it may be taxed at a higher rate if it bumps to the next bracket. The tables are public and the calculation is pretty easy to do.
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Mar 27, 2020 13:59
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Untagged posted:There is some fine print to keep in mind... I mean , it’s vague enough where you can practically make up a reason “Covid related” and they’re gonna have so many cases they won’t dig deeply. People shouldn’t withdraw retirement unless it’s literally the differences between being on the street or not, but yeah, lots of people will.
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Mar 27, 2020 14:00
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MJP posted:Okay so given my trad IRA balance, I think I might have sort of an idea on how to backdoor Roth? Or just dump it into your 401k for the spread in cost of the target date fund. Unless you are keen to make it Roth right now and pay taxes on it.
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Mar 27, 2020 14:53
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Just curious if anyone knows if I can take back my backdoor roth for the year if I haven't yet submitted it / declared it on my taxes? I'm hoping i don't need to do that, but I put money into backdoor in 2019, haven't yet submitted the tax paperwork on it, so was wondering if I could withdraw it and just pay taxes on what was earned in the interim. Anyone have a good reference to research this?
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Mar 27, 2020 15:34
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Did some tax loss harvesting just now. Exciting.
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Mar 27, 2020 19:52
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I need to do this. Is VFIAX a reasonable substitute for VTSAX?
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Mar 27, 2020 20:21
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Happiness Commando posted:I need to do this. Is VFIAX a reasonable substitute for VTSAX? Yup
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Mar 27, 2020 20:24
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MJP posted:Okay so given my trad IRA balance, I think I might have sort of an idea on how to backdoor Roth? I don't think there's any need to wait a year. If you were to get rid of your traditional IRA by reverse rollover , you couldn't backdoor for 2019 because form 8606 asks for the balances of your trad IRAs as of Dec 31 2019 and that's already happened. You could backdoor for 2020, though, as long as you got rid of the trad IRA balance by Dec 31 2020. But the entire sequence I just described is to avoid paying tax on the balance of your trad IRA -- and you're already paying taxes by converting it to Roth. I can't think of a reason, then, that you couldn't still backdoor for 2019 between now and April 15, and you can definitely backdoor for 2020. Sorry, this stuff is stupidly convoluted.
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Mar 28, 2020 02:37
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KS posted:I don't think there's any need to wait a year. If you were to get rid of your traditional IRA by reverse rollover , you couldn't backdoor for 2019 because form 8606 asks for the balances of your trad IRAs as of Dec 31 2019 and that's already happened. You could backdoor for 2020, though, as long as you got rid of the trad IRA balance by Dec 31 2020. No no, I'm the one who's sorry for not quite grokking it. You and this entire thread have the patience of a thread full of saints, and I'm grateful for it. Thank you for clarifying! My current 401k does allow for reverse rollovers and I started the process yesterday. I'll do the same for my wife's trad IRA on Monday. Chances are it'll be a few days for both to complete but it's not like I'm gonna miss out on massive gains, and now I can change up my cash savings to ensure my wife and I can backdoor some Roths next year.
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Mar 28, 2020 14:40
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I also posted this in the stock thread but figured I'd get a different answer here. Is anyone here trying to buy into sector-specific ETFs/funds due to the nature of this crash instead of just going with non-sector-specific indexes? For example, the vanguard consumer staples ETF may be more resilient than a S&P500 index if this turns out to be a bad recesssion? https://investor.vanguard.com/etf/profile/performance/vdc It has outperformed VOO since Fall '18 overall, and also during this crash, but S&P did recover better from the '18 bottom. I am also thinking of putting small bets on the vanguard healthcare etf (VHT) due to the nature of this crisis, and utility etf (VPU) for diversification. These would complement my general index plays on S&P, tech growth stocks, and dividend stocks. Trying to map out my equity investments as I get back in, and I want to avoid internationals for now, so I'm not just dumping into a target date fund. This is aside from any specific stock buys or bond holdings. Thoughts?
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Mar 28, 2020 19:19
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pmchem posted:I also posted this in the stock thread but figured I'd get a different answer here. Is anyone here trying to buy into sector-specific ETFs/funds due to the nature of this crash instead of just going with non-sector-specific indexes? Not really, because I never take the time to research different sectors. I don't care about resilience per se, unless you're referring to 30+ year resilience because I don't need all of my invested money for at least 10-15 years. I don't plan on getting out, so I admit I don't match the needed mindset to "get back in." I'm sticking with my personal investment policy statement of 70% Total US, 20% International, 10%Bond/cash and rebalancing (usually via contributions) once per year unless there's been a huge market shift. The bear hit, so I rebalanced in my taxable account which was easily accomplished via new buying.
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Mar 28, 2020 19:41
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Is there some way to effectively game this new retirement distribution stuff with the repayment option? The main way I'd think would be to pull out from a 401k with bad plan options, invest in a taxable account with better/cheaper funds, and then in 2 1/2 years go and replace the money. Suppose existing 401k fund options are already good, is there any way to benefit here?
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Mar 29, 2020 04:20
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Conventional wisdom is that a tax-advantaged account with even the worst options is still going to outperform any taxable account. You can always try running the numbers yourself, but I think we'd all be pretty shocked to see a 401k so unconscionably awful that it underperforms a taxable account. Edit: Actually nvm, I think I totally misunderstood the premise. timn fucked around with this message at 04:42 on Mar 29, 2020 |
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Mar 29, 2020 04:37
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CubicalSucrose posted:Is there some way to effectively game this new retirement distribution stuff with the repayment option? I haven't looked at the details but can you contribute when you have the money out? missing the contributions for 2-3 years would be really bad. It does not seem at all worth trying to game the system to me (also my 401k has an average ER or .03 so my perspective may be different).
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Mar 29, 2020 04:39
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God drat does this thread make me tremendously appreciative that I have a well funded (for now, I guess?) pension plan with my state for retirement.
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Mar 29, 2020 10:33
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Kirios posted:God drat does this thread make me tremendously appreciative that I have a well funded (for now, I guess?) pension plan with my state for retirement. How so?
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Mar 29, 2020 15:36
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spwrozek posted:How so?
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Mar 29, 2020 17:28
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Pretty good earner target fund dumb baby here. Late 30s. I have enough in a 401k where - if I stop saving now, it may compound into fine retirement life. Look, I don’t see this thing getting any better. How catastrophically stupid would it be to just sell all the target fund into a cash balance and just sleep on it for a few months, then go back into the same target fund?
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Mar 29, 2020 21:16
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Bobcats posted:Pretty good earner target fund dumb baby here.
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Mar 29, 2020 21:22
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Stupid. "Catastrophically" is probably not the most apt adjective, but can't say for sure until after the fact.
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Mar 29, 2020 21:24
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Bobcats posted:Pretty good earner target fund dumb baby here. If the market drops more, could be great! But if the market goes up a bunch then you will have failed. Make sure that you are 100% sure about the future holds before making your decision!
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Mar 29, 2020 21:26
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You've already taken the losses. Your money is in the right place. In fact, put as much money there right now as you can. Everything is on sale. The numbers will go back up, would you rather keep them while they're low and ride them back up, or buy then when they're expensive again. Just leave things where they are. I'm no pro, but I know that much.
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Mar 29, 2020 21:49
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Bobcats posted:Look, I don’t see this thing getting any better. How catastrophically stupid would it be As a thought experiment, though, what would you do if you wait a few months and the market hasn't changed? What about if it's dropped another 20%? What about if it's gone up 30% and you'd be rebuying higher than you sold? What if in a few months there's something crazy like an election coming up and things are seesawing during the campaign season? Or whatever, you know, just go with your gut, that's never been a terrible idea for investors 
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Mar 29, 2020 22:20
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Bobcats posted:Pretty good earner target fund dumb baby here. It’s possible we haven’t seen the bottom of the market. In fact, I personally agree with you that things are likely to get worse. I feel like this is true. I feel it very strongly. However, here is a reality check: In January and February, I did not feel this way, clearly, because I did not take the money out of the market then. Neither did you. Remember, China had locked down Wuhan Jan 23. Nothing about my past actions gives much confidence in my ability to time the market. Same with yours. If you take the money out now, you also need to figure out how to put it back in. Remember, you are competing against a vast system of people and algorithms who are also trying to profit by jumping back in and out of the market at the right time. Ask yourself, “If I’m so smart about what the market is going to do, why didn’t I take my money out two months ago?” “Why do I think I’m smarter now?”
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Mar 29, 2020 22:23
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Do you have a good emergency fund? Would you feel better dialing back the contribution for a few months and saving some additional cash? 3 or 6 months of expenses?
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Mar 30, 2020 02:16
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