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spwrozek posted:For sure. I was kind of assuming the op's sister will be in that situation starting a job at $300k+. I sure would hope so! I'd still be inclined to max the 401(k) contributions in her position even with a bad set of ERs, because that knocks $7K off the Federal income tax bill. That pays for some pretty lousy expense ratios.
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Dec 21, 2022 17:28
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KYOON GRIFFEY JR posted:I agree with your assumption that preserving the ability to do a backdoor Roth IRA contribution is valuable. As someone new to doing back door Roths can someone explain how rolling 401k into IRA impacts this? My wife is about to change jobs and was assuming to roll 401k into IRA but want to understand what impacts this has that we don’t realize
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Dec 21, 2022 18:07
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Joose Caboose posted:As someone new to doing back door Roths can someone explain how rolling 401k into IRA impacts this? My wife is about to change jobs and was assuming to roll 401k into IRA but want to understand what impacts this has that we don’t realize A backdoor Roth IRA is typically performed by first making contributions to a traditional IRA account, and then immediately converting that trad IRA balance to a Roth. When you do that conversion, you owe taxes on any gains made on the balance that was in the traditional IRA, and you must convert all of it - that's why you do it right away. You have to pay taxes on any deduction you previously took on your traditional IRA balance. So if you already have a traditional IRA, and that money has earned anything or you already did your taxes for the year you made contributions, you'll pay a tax hit when you do the conversion. If you've been contributing for years, deducting 6k from your income annually, etc. you could have to pay a lot. This is why if you may ever do a backdoor Roth in the future, it's best to have no balance in traditional IRA money. No, you cannot get around this by putting money in a different bank's trad IRA or something, the IRS knows. Here's a good page and the important bit about taxes: https://www.investopedia.com/terms/b/backdoor-roth-ira.asp#toc-tax-implications-of-a-backdoor-roth-ira e. I'll note that even if you have a traditional IRA balance, it can still make sense to do a conversion and start doing backdoor Roth. You're paying taxes now that you would have paid in retirement when you took distributions from your trad, although the exact rate of taxation varies depending on your top marginal rate, etc. But you're getting the benefit of being able to make tax advantaged contributions to your Roth for the rest of your working life, which may save you far more. So it's not a disaster if you already have a trad IRA and you want to start doing backdoor Roth, it's just a significant tax hit the year you start doing it and you will want to be aware of it and ready to pay, and if you can avoid this situation by not rolling a 401k into a trad IRA, that's for the best. Leperflesh fucked around with this message at 18:35 on Dec 21, 2022 |
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Dec 21, 2022 18:27
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Backdoor related question: if I have a Solo 401k, Solo Roth 401k, and Roth IRA (all vanguard if it matters), is it possible for me to backdoor the Solo401k into the Roth? I haven't been able to find clear information on how or if this even works with a solo 401k. This isn't anything I'd do right now anyway, but I may in the near future have a low income year that presents an opportunity to do so with a lower tax hit, so curious if it is an option.
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Dec 21, 2022 18:56
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Xenoborg posted:What’s the best thing to do with large 401ks when you don’t have a good one to roll into? I’m in this scenario, and I’ve just left my stuff in the old company 401k. I think I end up paying about $10/quarter in management fees, which isn’t too bad, and it just stays there invested in decent funds. If my current one ever gets a sub-1% ER or a 500 index fund or something, I’ll transfer, but for now it’s just one more account.
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Dec 21, 2022 21:25
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G-Hawk posted:Backdoor related question: if I have a Solo 401k, Solo Roth 401k, and Roth IRA (all vanguard if it matters), is it possible for me to backdoor the Solo401k into the Roth? I haven't been able to find clear information on how or if this even works with a solo 401k. This isn't anything I'd do right now anyway, but I may in the near future have a low income year that presents an opportunity to do so with a lower tax hit, so curious if it is an option. You generally don't refer to rolling over 401ks as "backdooring" so if you look for that people are going to be confused. The backdoor is specifically a means of bypassing the income limits on contributing to a Roth IRA by putting money into a Traditional IRA instead, and then immediately rolling it over. E.g., you get your annual IRA contribution into a Roth IRA through a back door labeled "Trad to Roth IRA conversions." You can roll over a 401k into a traditional IRA (these are both instruments in which you contributed pre-tax dollars, but pay tax on your distributions). You can roll over a Roth 401k into a Roth IRA (these are both instruments in which you contribute post-tax dollars, but take distributions tax-free). If you want to get the money from a regular 401k into a Roth, you'll be converting, and paying taxes on the conversion. There's no free lunch here. If you are willing to pay the taxes, I believe you can roll your 401k into a traditional IRA and then convert the traditional IRA to a Roth IRA. Leperflesh fucked around with this message at 21:51 on Dec 21, 2022 |
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Dec 21, 2022 21:48
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G-Hawk posted:Backdoor related question: if I have a Solo 401k, Solo Roth 401k, and Roth IRA (all vanguard if it matters), is it possible for me to backdoor the Solo401k into the Roth? I haven't been able to find clear information on how or if this even works with a solo 401k. This isn't anything I'd do right now anyway, but I may in the near future have a low income year that presents an opportunity to do so with a lower tax hit, so curious if it is an option. Looks like yes: https://www.solo401k.com/mega-backdoor-roth-ira-solo-401k/ quote:Once you make the voluntary after-tax contribution, you can either convert those funds “in-plan” to be part of your Roth Solo 401k, or withdraw/rollover those funds to your Roth IRA. The result? Instead of making $6,000 in Roth IRA contributions, you can make up to $57,000 in mega backdoor Roth IRA contributions.
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Dec 21, 2022 23:28
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If I have a few grand each in a few disparate 401ks from my last few jobs, does it behoove me to roll them into the pension plan at my current job? Or the Vanguard (mostly Vanguard ETFs) or Fundrise accounts that I trickle money into on the side for savings? Trying to take this whole LTIR thing seriously now that I'm in my 30s and earning decent!
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Dec 22, 2022 00:04
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Has anyone read a good article on the potential new changes to 401k plans that congress is talking about?
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Dec 22, 2022 14:33
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smackfu posted:Has anyone read a good article on the potential new changes to 401k plans that congress is talking about? https://www.washingtonpost.com/business/2022/12/21/401-k-changes-secure-20/ quote:Here are some of the key proposals for retirement savings.
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Dec 22, 2022 18:09
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That "you are going to automatically get 10-15% of your wages garnished for retirement" thing is going to gently caress low earners. They should have forced the companies to pay the money in addition to their normal wages, otherwise nobody is getting raises to compensate.
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Dec 22, 2022 18:14
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They're just changing the defaults, employees can still do whatever.
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Dec 22, 2022 18:16
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KillHour posted:That "you are going to automatically get 10-15% of your wages garnished for retirement" thing is going to gently caress low earners. They should have forced the companies to pay the money in addition to their normal wages, otherwise nobody is getting raises to compensate. Presumably the auto-enrollment and contribution percentage is a default that can be overridden, just like many 401ks have default funds they'll put your contributions into if you don't choose.
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Dec 22, 2022 18:18
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AreWeDrunkYet posted:They're just changing the defaults, employees can still do whatever. Also existing plans don’t have to do it at all, so it will take effect very slowly.
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Dec 22, 2022 18:27
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Seems slightly better than today's system, we'll see if anything actually goes through.
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Dec 22, 2022 18:29
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I pulled the trigger on my GF loss harvest and need to do the reinvest. Question about the reinvestment, Sold VTSAX and VFIAX and I basically see these options: VTSAX -> VFIAX (or VOO) or 80% VFIAX & 20% VEXAX for total match VTIAX -> VFWAX (or VEU) or 90% VEU & 10% VSS or 75% VEA & 25% VWO The additional splits give better coverage of the whole market but ultimately is just more rebalance work for me (which is fine I suppose). Also it looks like you can get fractional ETF shares now at Vanguard, does that mean you can do auto investments in the ETFs?
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Dec 22, 2022 18:31
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KillHour posted:That "you are going to automatically get 10-15% of your wages garnished for retirement" thing is going to gently caress low earners. They should have forced the companies to pay the money in addition to their normal wages, otherwise nobody is getting raises to compensate. Even if "the company has to pay the difference" the distribution of the costs won't necessarily be to the employer. Many taxes that are statutorily placed on a supplier, the tax incidence actually is born by the consumer. It has to do with the price sensitivity of demand (for jobs). The way our system is rigged means that the cost to a person for not having a job is much higher than the cost to an employer for not filling a position, so you'd expect, regardless of where they say who has to pay, the burden will fall on the employee. the exception would be people affected by minimum wage laws, since there's little (though some) flexibility there.
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Dec 22, 2022 18:31
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Wow, a 50% match up to $2000 is a huge cash contribution from the government. Sounds like a good thing, but also sounds massively expensive and thus doomed to not pass (also, if the government has trillions of dollars a year to pour into private 401ks, maybe it should put that into social security instead).
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Dec 22, 2022 19:11
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Is the backdoor Roth safe for now? It was intermittently on the chopping block for some of these retirement plan overhauls, I think?
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Dec 22, 2022 19:19
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GoGoGadgetChris posted:Is the backdoor Roth safe for now? It was intermittently on the chopping block for some of these retirement plan overhauls, I think? looks safe https://smartasset.com/retirement/backdoor-roth-ira-preservation
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Dec 22, 2022 19:21
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smackfu posted:Has anyone read a good article on the potential new changes to 401k plans that congress is talking about? From Morningstar: "The Retirement Savings for Americans Act 2022" A big idea, and a bipartisan one at that. by John Rekenthaler 22 Dec 2022 11:41 The 401(k) structure has three clear and obvious flaws. First, it is not universal. Thirty-six percent of American workers lack access to 401(k) plans, or their equivalent. Second, the accounts are not portable. That’s a severe flaw, given that from ages 18 to 54, American workers on average have 12 different employers. Third, many 401(k) plans require participant action. That does not sound like much of an impediment, but people often freeze when asked to make investment decisions. In addition, there is a fourth, less-discussed problem: inefficiency. With the exception of businesses that participate in Multiple Employer Plans, each 401(k) sponsor must construct its own plan rather than use another’s. Given that the United States contains 600,000 401(k) plans, this makes for a great deal of duplicated effort—requests for proposals, hearings, and documentation. Any truly ambitious proposition to improve the 401(k) structure must address at least the initial three issues, and ideally also the fourth. In 2020, I offered such a recommendation, in an article entitled “The New American Retirement Plan.” That column advocated that the nation possess a single 401(k) plan run by the federal government. Rather than be the plans’ primary sponsors, as they are today, employers would have no role save to connect workers with the system. The proposal, I acknowledged, was unrealistic. “Congress will almost certainly not” advance bold retirement-planning legislation, I wrote, given its “current inability to craft broad bipartisan legislation.” As a result, anything resembling a national plan is “politically unfeasible.” The New Bill Wrong again! So much for my political prognostications. To my surprise and delight, Congress earlier this month introduced the Retirement Savings for Americans Act of 2022, which advances the idea of a national 401(k) plan. What’s more, the bill carries both bipartisan and bicameral support, as it is backed in the Senate by Democrat John Hickenlooper and Republican Thom Tillis, and in the House by Democrat Terri Sewell and Republican Lloyd Smucker. To be sure, the act is less sweeping than my suggestion. Rather than replace the existing system, it would supplement it, by installing the “American Worker Retirement Plan” in all companies that lack acceptable 401(k) plans. The AWRP also lacks the full power of the 401(k) structure. Its contribution limit is a modest $6,000; it cannot be used by higher-income employees; and it does not provide an immediate tax benefit, as it is structured like a Roth IRA. Key Features That said, some aspects of the act go even further than I had proposed. The legislation is not shy. Here are its key characteristics. 1) A single plan.—AWRP’s investment options would resemble those of the federal government’s Thrift Savings Plan. It would contain 1) a government bond fund, 2) a stable-value fund, 3) a large-company U.S. stock fund, 4) a small-company U.S. stock fund, 5) an international-stock fund, and 6) target-date funds. The assets would be indexed. AWRP accounts would be portable among companies within the system. They also could be rolled into either an existing Roth IRA or a Roth 401(k) plan. 2) Automatic enrollment.—Eligible participants would be automatically enrolled in AWRP at a 3% contribution rate. As with most 401(k) automatic-enrollment programs, employees who do not select their own investment options would be slotted into an age-appropriate target-date fund. AWRP also echoes existing automatic-enrollment programs by permitting unwilling workers to opt out at any time. 3) Tax credit.—So far, the AWRP resembles my New American Retirement Plan proposal. But it also contains several features that I had not considered. One is the AWRP’s version of a company match. Mandating that companies put their own moneys into AWRP is a political nonstarter. So, too, would be directly using government funds to bankroll a match. But AWRP’s creators found a method that might appeal to both parties: tax credits! Participants could receive up to a 5% refundable government match tax credit designed to mimic a 401(k) employer match. This would include an automatic 1% contribution as long as the participant remained employed, and a matching contribution equal to 100% on the first 3% of their contribution rate and 50% on the next 2%. The bill also specifies that only low- and moderate-income workers would be eligible for the credit. Whether this arrangement will survive after the CBO calculates its estimate of forgone tax revenue is another matter. But it scores points for ambition. 4) Income and contribution limits.—AWRP is intended for lower- to middle-income workers, not corporate executives. Consequently, it excludes highly compensated workers, as defined by the IRS. The program’s annual contribution limit, as previously mentioned, is the Roth IRA maximum of $6,000. However, AWRP does permit higher contributions for employees over the age of 50, per the IRS’ catch-up provisions. 5) Payout options.—The bill’s proponents also got creative with AWRP’s distribution options. Besides requesting 1) a lump sum, as with 401(k) plans, retirees can also use their assets to 2) buy an immediate annuity or 3) establish a fixed annual withdrawal schedule. They may also blend those three choices, in any combination. The Future? Having flopped almost entirely with my last effort, I will avoid making a political forecast this time around, other than to note that while marshaling bipartisan and bicameral support is encouraging, the bill does carry the drawback of costing the federal government money. Even if the matching tax credit is excised, the legislation would forfeit substantial future IRS receipts by generating much higher Roth IRA participation. That prospect will not please fiscal conservatives. Should the proposal advance, hard questions will also be asked about its practical effects. As my Morningstar colleague Aron Szapiro points out, AWRP’s existence would in some cases discourage companies from starting their own retirement plans, since they could painlessly use the government’s version. Such decisions would squeeze employees who hope to contribute more than AWRP’s $6,000 annual limit. They would also prevent such workers from enjoying a 401(k) plan’s immediate tax benefit. (In response, the bill’s authors state that they believe that the crowd-out problem would be modest because of how they have designed their plan.) But those, so to speak, are problems of prosperity. May the discussion for the Retirement Savings for Americans Act reach that level. That alone would be a victory. Here and Now More modestly, but still meaningfully, Congress has recently updated the Secure Act, which was initially passed in 2019. Unlike the Retirement Savings for America Act, which stakes out new ground, the Secure Act enhances existing programs. Among other items, the new version of the Secure Act would further raise the mandatory starting age for required minimum distributions, halve the penalty for missing an RMD, and standardize the 401(k) rollover process. All useful items, if less exciting for a columnist than a ground-up proposal. Further details may be found here.
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Dec 22, 2022 19:34
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drk posted:Wow, a 50% match up to $2000 is a huge cash contribution from the government. Sounds like a good thing, but also sounds massively expensive and thus doomed to not pass (also, if the government has trillions of dollars a year to pour into private 401ks, maybe it should put that into social security instead). It is not that much money. Here's a CBO read on it. Estimates are about 90 million in cash outlays per year. First of all, it's only up to $1,000 for an individual max, and to hit that max they have to contribute $2K to their 401(k). Then, it's means tested so you only get the money if you made less than $71k in MAGI. You have to keep in mind that most people not making much money do not save for retirement. $2K on less than $71K gross is a lot of money.
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Dec 22, 2022 19:36
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If $90M is the real number it seems like they would be spending an awful lot of effort to set up the recordkeeping, calculations, and direct depositing to only benefit <0.5% of wage earners. I.e. $90M / $1,000 = 90,000 people at $1,000 each, would be 0.075% of the 120M wage earners in the US Edit: From the link, the actual credit would cost $2.1b per year starting 2027, and that's the net additional amount compared to the current Saver's credit. esquilax fucked around with this message at 20:29 on Dec 22, 2022 |
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Dec 22, 2022 20:12
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You're on a very affluent and financially literate forum here where people are interested in saving for retirement, have the means to do so, and are really in to minmaxing because of  Many people do not have access to a 401(k) and they're disproportionately low income earners. So not all low income earners can benefit. Then, in order to access the matching money, you have to contribute to that 401(k). Lower income earners are less likely to enroll in their 401(k), and are likely to contribute smaller amounts of money. $1,000 is the max benefit. Most people will likely not get the maximum benefit. I think you're also overstating the effort in setting up record keeping. 401(k) contributions are already reported to the federal government.
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Dec 22, 2022 20:29
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KYOON GRIFFEY JR posted:You're on a very affluent and financially literate forum here where people are interested in saving for retirement, have the means to do so, and are really in to minmaxing because of OK but you looked at the wrong number and were off by at least an order of magnitude, probably 2 From the link, the actual credit would cost $2.1b per year starting 2027, and that's the net additional amount compared to the current Saver's credit (which already costs an amount of money I can't find) We're looking at section 102 right? I'm not the one missing something am I?
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Dec 22, 2022 20:35
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Yeah I misread that. Section 102 claims 9.5 billion over 10 years, so 950 mil a year.
KYOON GRIFFEY JR fucked around with this message at 20:42 on Dec 22, 2022 |
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Dec 22, 2022 20:40
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KYOON GRIFFEY JR posted:There is no such thing as a personal 401(k). Roth 401k ? That’s what I’m referencing.
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Dec 23, 2022 00:25
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spwrozek posted:I pulled the trigger on my GF loss harvest and need to do the reinvest. Question about the reinvestment, Sold VTSAX and VFIAX and I basically see these options: The fund options make sense. My preference is to not overthink it and just go with one fund, and given the current market I've thus far always been able to switch back to my preferred funds pretty quickly. However, it's always possible that the next TLH opportunity to switch back won't happen for a long time, so it's better to switch to funds you'd be comfortable holding long-term. If for you that means multiple funds for the closest correlation, so be it. Also, when TLHing with mutual funds, it's ideal to do an exchange instead of a sell and buy, so that you don't lose any time in the market and introduce the risk of a big swing while you're out. Of course, that's not possible if you're planning to switch to ETFs instead. And yeah, Vanguard added support for fractional ETF shares recently. They still don't support auto-investing in them, and I doubt they will any time soon considering AFAIK Fidelity still doesn't support that either.
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Dec 23, 2022 00:47
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Duckman2008 posted:Roth 401k ? That’s what I’m referencing. Don't those still need to be opened through an employer?
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Dec 23, 2022 00:51
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Unsinkabear posted:Don't those still need to be opened through an employer? Correct, your employer has to offer it
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Dec 23, 2022 01:31
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Wait what ? I have a personal Roth vanguard 401k that I opened under my name, no association with my employer , that I contribute up to $6000 a year post tax to. That is what I am referring to. What am I doing wrong on explaining this ?
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Dec 23, 2022 01:35
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Duckman2008 posted:Wait what ? I have a personal Roth vanguard 401k that I opened under my name, no association with my employer , that I contribute up to $6000 a year post tax to. I don’t think it’s a 401k, it’s just a personal Roth IRA. I could be wrong but I think 401k means employer sponsored, to have a “personal” one you must be a self employed business owner.
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Dec 23, 2022 01:39
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401k? IRA? They're all the same space! Doesn't anyone notice this?! I feel like I'm taking crazy pills!
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Dec 23, 2022 01:42
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The Four Horsemen of the Retirement Terminology Apocalypse are R.O.T.H I.R.A. Personal 401k Spousal IRA Gift Tax
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Dec 23, 2022 02:00
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Duckman2008 posted:Wait what ? I have a personal Roth vanguard 401k that I opened under my name, no association with my employer , that I contribute up to $6000 a year post tax to. you're either self employed or you are really bad at understanding that it's actually an IRA it's the latter
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Dec 23, 2022 02:08
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KYOON GRIFFEY JR posted:you're either self employed or you are really bad at understanding that it's actually an IRA it's the latter A. The answer is always I’m really bad at it and B. The latter is what it is.
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Dec 23, 2022 02:14
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runawayturtles posted:The fund options make sense. My preference is to not overthink it and just go with one fund, and given the current market I've thus far always been able to switch back to my preferred funds pretty quickly. However, it's always possible that the next TLH opportunity to switch back won't happen for a long time, so it's better to switch to funds you'd be comfortable holding long-term. If for you that means multiple funds for the closest correlation, so be it. Thanks. I ended up doing the 4 funds. I don't mind a little extra work and maybe i will be able to get it switched back over again next year. TBD. Also i calculated out all the wash sale info and that was completely pointless as vanguard does it automatically showing the wash portion and adding the basis in as well. So that is cool. Also i did calc it right from all the help i got up thread so thanks!
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Dec 23, 2022 03:15
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Duckman2008 posted:A. The answer is always I’m really bad at it and B. The latter is what it is. I really hope you haven't been contributing the 401k max instead of the IRA max somehow
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Dec 23, 2022 04:58
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Unsinkabear posted:I really hope you haven't been contributing the 401k max instead of the IRA max somehow Lol thank you, I’m just obviously bad at describing this poo poo.
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Dec 23, 2022 05:12
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god, the day i figured out an after tax/non-deductible ira contribution was something completely different from a roth ira contribution blew my loving mind. when you step back from it, the layers of different tax advantaged rules really are just a crock of poo poo. i get a perverse pleasure from learning about this stuff, and after years of reading about it, listening to podcasts about it, and talking on forums about it, i'm still finding new nuances i didn't know. i can't imagine how your average joe is supposed to parse all of this poo poo
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Dec 23, 2022 06:45
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