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drat Bananas posted:Question that hasn't been answered in all the links I've read: How do IRAs make money/How are they better than the average savings account? Other than what I put in each year of course, does it make interest? Is it invested in stocks? Black magic? IRA and ROTH IRA are just like 401k. They aren't an investment in upon themselves, but rather the name for the TYPE of the investment's tax status. With IRAs you can invest them into stocks, savings accounts, bonds, etc. Dead Pressed fucked around with this message at 14:22 on Feb 14, 2012 |
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Feb 14, 2012 14:17
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Okay, I confused myself reading some stuff online and am looking for clarification. My wife and I make about 120k between us, my wife gets no benefits, I hit 401k match, and we've maxed our Roth's each of the last two years. We make some untaxed money on the side, which will be reported to the IRS. If I switch from Roth to traditional IRAS, that 5.5k is taken off the top of our income in whole, correct? (Edit, for investing in future, not a conversion.. ) Some of the stuff I read said at our income, there is no tax deduction. What? Is that lop off the top still valid, is that an additional deduction they were mentioning? I was hoping to use the traditional IRA break to substitute our outside earnings taxes due, but am lost now. Also, I'd appreciate opinions on this: my wife and I did Roth early in our marriage (we're 25 now) for an emergency fund alternative. With how much we make, I thinking it might be more prudent to move to traditional IRAS tax wise, as I don't think we'll be pulling 100k out annually in retirement.
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Feb 11, 2014 01:27
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I think I've got an interesting situation here, and apparently I need to provide an answer by Monday (according to my wife's boss). My wife works for a very small company and makes good money; however, she does not get any benefits. That's okay, as I do. We've been fortunate enough to put away 6% of my pretax into 401k, and I've got an employer match over the last two years bumping that up to 10% pretaxed income. We've also fully maxed out our Roth in the last two years, putting us at about $50k or so in savings in 2 years of marriage. My wife was just offered retirement benefits for the first time. Unfortunately, the only option is a "variable annuity" via a "SIMPLE IRA" in which her employer would match 3%. We do have our pick of a variety of funds, Northwestern Mutual, Fidelity, and a couple other small ons. Frankly, I think this annuity thing is bullshit, and the guy with Northwestern Mutual didn't sound any more "with it" than I am, if not less. He said their fees are about 2% across the board, which is obviously high---but we're getting an immediate 100% return (in a goddamned annuity at 25, ugh) and its hard to turn that down. Should I go ahead and have her contribute the 3%? I'd likely go hog wild on the aggressiveness, as we won't really miss the money, but I'm not exactly pumped about an annuity, and I'm not entirely sold on Northwestern... All thoughts are appreciated. 
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Feb 22, 2014 00:42
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I don't know offhand, just got all the information today and have yet to fully review. Kind of feels like a bully situation here, with such a quick answer requested.
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Feb 22, 2014 01:16
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OP posted:Roth IRAs, 401(k)...I'm confused. Where do I start? Personally, I shoot for about 1/2 pretax and 1/2 posttax savings to hedge my bets against government playing with tax rates in the future. That said, I'm also at an income level at which I project to break even between either advantage if they maintain the status quo. In your case, not knowing what tax bracket you're in, since the employer contribution is variable and maybe unpredictable I'd look at keeping your 401k contribution where its at with Roth contributions to match. If saving 8% is too much, consider dropping your 401k a bit and putting the difference in a Roth IRA. This option may be more appealing if the 401k is high cost---especially since you could get into bed with Vanguard, which is an incredible servicer IMO, for a low expense ratios & cost of entry ($1-3k for most funds). That's just my $0.02, though.
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Feb 26, 2014 00:20
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evensevenone posted:I think since you're always allowed to withdraw the original investment of a Roth IRA and I haven't earned any interest, I can just withdraw it and reinvest it somewhere else, and since it's all happening in the same investment year there's really no way I could be penalized. Yeah, but you're only allowed to contribute $5,500 in a given year. Whatever you've stocked away will ding that limit---unless you could somehow do a "rollover" or something.... EG, if you put away 3 and withdraw it, now you can only put 2.5 away...I think. IANAFA.
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Mar 13, 2014 23:50
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Yeah, I disagree too. Especially if he's putting it into the 2013 category---there's really nothing to lose, especially if he puts it in a safe money market, bond, etc fund. I can see a temporary circumstance where you would not want to put the money into a Roth immediately. E.g., In May of 2014 you have $5,500 or less to your name, with no contributions to a Roth for '14 and no notable safety fund. You plan on the ability to make a surplus within the next 12 months and would like to contribute to a Roth. I wouldn't put that $5,500 into the Roth just yet---as if you put it in and immediately pull it out you've basically lost your ability to contribute for '14 in the case you had an emergency early in the year. I'd hold onto the money until you have a buffer built up where if something happened you wouldn't rely on Roth first, or towards March/April of 2015 as is the timeline we're in currently----whichever comes first. That's a highly temporary circumstance, especially if you're interested in long term investing and retirement... and I certainly wouldn't assume it to be the standard recommendation.
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Mar 29, 2014 15:38
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No. You can only put in $5,500 total, regardless of how much is ever pulled out. That's why you don't want your "immediate" emergency fund to be placed into the Roth if you're going to pull it out. You can't go back and "backfill".
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Mar 29, 2014 17:17
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Dead Pressed posted:No. slap me silly posted:Why not? It's all happening in the same year. It's fine. Because you already "contributed" that amount. Just because you take the withdrawl out doesn't mean you can redeposit it later in the year. You are absolutely limited to the $5,500 limit in contributions, not net value of contributions and withdraws. E.g., I put $5k in May 1st. I withdraw all $5k June 1st for X. I get a bonus in September for $5k. I can't just put $5k back into the account. My total contribution is limited to $5.5k. I have already contributed $5k. Thus, I am limited to just the $500 remaining to equate to $5.5k total contributions. http://www.bankrate.com/finance/retirement/use-roth-ira-as-your-backup-emergency-fund.aspx posted:Don't be tempted to dip into your Roth for vacations or other nonessentials. For one thing, you can't simply "return" the money later. Any money you put back into your Roth is considered part of your allowed contribution for that particular year. It's out of the scope of the original conversation... but there is a "60 day rule" where one has 60 days to replenish contributions (both Roth and Traditional are eligible for this). This is not recommended as its a play with fire type of game. Miss the reup on your contributions for any reason and you've subject to all taxes and penalties that are in place. slap me silly posted:I guess you have to withdraw any earnings from the first contribution as well though. You don't have to withdraw any earnings on the Roth. You can pull just the contributions 100% at any time without any tax implications or penalties. That's the reason many people use the Roths as an outlet for a high-level savings fund in the first place... Its the earnings made that are subject to penalties and special circumstances such as first time home buyers, etc. Dead Pressed fucked around with this message at 20:02 on Mar 29, 2014 |
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Mar 29, 2014 19:42
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slap me silly posted:Curious to know what you are getting this from. I am reading Pub 590 which says "If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them." From that I infer that you could make a contribution later in the year in the normal way. I linked the article I pulled it from, so no be-wonderment is needed. There is nothing in your linked document for "putting in, taking out, putting back in". I would not infer anything not explicitly written in the 590 documentation. The section you've pulled that from is for "excess" contributions. Eg, I am over the income limit, and am only eligible for $3k in contributions, but I have put in $5.5k prior to knowing my contribution is to be limited for the year. I can withdraw the extra $2.5k prior to the end of the tax year, as well as those earnings (and paying tax on them). This withdrawal equates to never over-contributing, and I am not dinged with penalties. This does not equate to contributing, withdrawing, and contributing again.
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Mar 30, 2014 00:04
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The hell? Where exactly is that through vanguard? I get that service through my JPMorgan 401k w/ current employer, but would like to see how its set up with Vanguard (and I can't find it---maybe its just through your employer?)
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Jun 7, 2014 13:01
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 Literally always forget about search. Looks like its only for folks with $50k+. My wife and my roths are split, and my 401k is through JPMorgan, so I'm not quite at that threshold yet.... oh well. I do get it from JPMorgan (though they charge $5/month per $10k invested for the service, I think).
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Jun 7, 2014 14:28
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As an aside, it may help to do entire portions within the separate vehicles. By doing so, you may gain access to more "restricted" class shares, eg. Admiral shares in Vanguard as opposed to investor. This may decrease your fees substantially over time.
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Jun 12, 2014 20:20
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ETB posted:As most everyone will tell you here, roll it over to a Vanguard (Roth) IRA and stick it in a Target Date Fund.
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Jun 22, 2014 16:12
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Question. I have an older friend (boss) who has an old pension from a previous employer. It's worth about 75k lump sum if he cashes it out, which he is interested in doing. I've seen a lot about 401k rollovers and what not, but can you do the same with a pension payout? Would Vanguard be the go to place here, as well? I'd assume the answer is yes to both, but I didn't find any substantial answers during a quick Google while riding shotgun on the highway.
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Jul 22, 2014 21:48
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I'm pretty sure Bernstein highlights real gains at a realistic 2 to 3 percent all inclusive of dividends and inflation. Better to prepare as a pessimist and be pleasantly surprised than vice versa.
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Aug 12, 2014 02:50
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Why do you have insurance? If you have no dependents (kid/wife) you don't need any. If you decide to keep some for your parents, siblings, etc, get rid of the whole plan. Whole insurance is 99 percent of the time a rip off and you'd be better of with separate savings and insurance plans. If you don't want to invest in taxable accounts, consider maxing out a health savings account as possible. Otherwise, sounds like you have your ducks in a row. 401k to match, Roth to max, 401k to max, hsa, then taxable investments.
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Aug 13, 2014 18:12
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I read all about asset allocation by Ferri, and it examined some nice things, but I didn't leave with much more than your age in bonds diversified risk to an appropriate amount. I recommend it, but it wouldn't be my first choice.
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Sep 6, 2014 20:53
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Matching instantly doubles your money and no management fees will completely counteract that benefit. Invest to get the full match, but only that much. Anything above that put into a Roth IRA.
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Sep 9, 2014 03:37
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slap me silly posted:I think by managed account he means something with a high expense ratio, vs. an index fund. Can you list in detail your 401k options? No. I'm pretty sure it isn't. ScurvyKip posted:Right now it's asking me if I want to do a managed account or not. As far as I've been able to discern, it's basically just some third party that makes investments for you and takes a percentage of your returns. It sounds like a managed account available via financial engines, which great west does business with, where they basically have a computer generated model shove you into different allocations based on your risk analysis and they wanted to charge me around $5 per 10k invested /month. That's basically a target retirement date fund but allocated outside of any one specific mutual fund. Dead Pressed fucked around with this message at 03:49 on Sep 9, 2014 |
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Sep 9, 2014 03:47
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slap me silly posted:This is a solid course of action. Go for it and cry no tears about the extra % that you may or may not have gotten. Yeah. Three percent is a nice rate to begin to create this internal dilemma. You could do better in the market as the debt will roughly match inflation, but you're guaranteed that return by otherwise paying it off. If you've got any heartache about having that debt active into the future---go ahead and pay it off. Peace of mind is PRICELESS.
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Sep 28, 2014 13:27
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Just have to share this because my wife didn't seem to understand why this is such a big deal, my company announced an increase in 401k from "100% on first 3, 50% on next 2" to "full match through 6%, plus profit sharing (1% give or take on EBITDA performance)" for all salaried employees. Wow! I was giving roughly 7% anyways, but this is certainly a great bump. My only hope is they don't kill the bonus program in lieu of the profit sharing. EDIT FOR BELOW. 1 for 1 matching if I contribute anywhere from 0-6% of salary. Dead Pressed fucked around with this message at 01:26 on Oct 21, 2014 |
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Oct 21, 2014 00:47
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The way I do that is via quicken, and keep explicit monies spread exclusively in each account. Eg, bonds is in traditional 401k rolled into ira (that isn't getting contributed to anymore, and is okay since I want low bond exposure), REITS is in Roth IRA with international funds split as desired, wife's 401k has domestic YYYY, wife's roth has international ZZZ. I monitor via Quicken to see spreads, and allocate as necessary if one gets out of whack. It is a little difficult for the time being (as in, I don't have enough in each fund to had admiral funds for everything), but I fudge it enough to try and make it work with loose percentages. Quicken has done a decent enough job of monitoring the allocations, and I'll just have to change it as deemed necessary through each account (though, not much, yet). It helps I get decent funds via my 401k and can make up any shortfalls in any category there without any major added expense.
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Nov 2, 2014 23:58
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Dik Hz posted:
Edit....they were talking Roth Ira,and you jumped to 401k....nmy original post below or targeted at the assumption you're still talking Roth Ira... No. Contributions can be withdrawn at any time free of any penalty. Per cnnmoney, Google, Wikipedia. You may withdraw your contributions to a Roth IRA penalty-free at any time for any reason, but you'll be penalized for withdrawing any investment earnings before age 59 ½, unless it's for a qualifying reason. This is why a lot of people, including myself, recommend utilizing a Roth as a faux emergency fund when starting out. If you need the money you can pull it out, if not, it has effectively been utilized as retirement contributions. Dead Pressed fucked around with this message at 12:15 on Nov 14, 2014 |
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Nov 14, 2014 12:08
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Quick check to make sure I'm not off my rocker, since we're all having this roth/traditional discussion already. My wife and I both make about 60-75k each, we're 26. Putting us at roughly $130k combined (estimate, as my wife bills her time). I get a 6% match on 401k, and max this. She gets a 3% match on a SIMPLE IRA, and maxes this. We both max our ROTHs annually, so that's another $11k. I also contribute the deductible amount annually to my HSA (and get an additional 1/2 of it comp'ed by the company to push people away from 100% and 80/20 coverage). Through work, I can do a traditional or ROTH 401k. At the time I started working for this company, I opted for the traditional thinking that I'd save on the highest bracket of taxes I'm subject to. Additionally, my wife and I could (obviously) live on less than this $130k, as we're aggressively paying off mortgage, cars, student loans, etc---so I don't plan on extracting $130k annually when we retire. This being the case---should I go ahead and put my 401k contributions in as ROTH? I guess I was thinking we were getting roughly 50/50 roth/traditional split and that was fair "futureproofing" future tax rates and policy changes, but maybe I need to take advantage of all of the ROTH I can now, as I do definitely anticipate making more in the future (super niche industry, experience is aging out quickly). Dead Pressed fucked around with this message at 23:26 on Dec 3, 2014 |
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Dec 3, 2014 23:19
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SiGmA_X posted:I'd go Roth now if you see potential for more income growth. You're young and it's very likely you'll be up a few brackets later in life. But what I make now vs. later shouldn't matter. It should just be "what tax bracket am I in now" vs "what tax bracket am I projected to be within when I withdraw the money". Right? As I won't need the $130k/yr we're making now, and will most likely live on the $60k/yr estimate or less---my tax bracket would theoretically be lower at my retirement date---thus making traditional the way to go. Unless I'm looking at this wrong...at which point please correct me! khysanth posted:Neither of us have 401k options through our employers, so for now we have just been maxing my Roth IRA for retirement. We had planned on opening one for her as well that we would try to max each year, but is the HSA a better option? She wouldn't have any employer contributions. Still trying to wrap my head around it all. The way I do this is contribute enough to the HSA to cover the deductible and then put money into other channels. This way you have enough to cover everything until you start "getting help" from the insurance company---and you get the benefit of the pre-tax savings for healthcare. So, after the $2k I'd put it all towards a Roth. Reason being---its there as as accessible fund if you had an emergency that couldn't be provided for otherwise. My opinion changes if the HSA is available to invest depending on the options. e.g. I have all my HSA funds invested in the stock market through a provider that basically mimics a 401k. That's just my spin, though. Dead Pressed fucked around with this message at 01:33 on Dec 4, 2014 |
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Dec 4, 2014 01:30
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khysanth posted:A follow-up question. If she is doing the HSA account as an individual, how does she get the money into the account pre-tax? We also live in CA and I understand that just affects our state tax return. I'm hypothesizing here, as mine is taken directly out of my paycheck, but I would figure its like a traditional IRA. Pay with post tax dollars and get the tax refund at the end of the year?
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Dec 4, 2014 01:44
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I'm invested in REITs for a couple of reasons. First, I'm interested in investment property but don't make enough to warrant those investments outside of a tax protected account, so I go after them as best I can in my Roth account. Two, as a young, risky investor, I am not interested in bonds to diversify my accounts at this point in time. From what little I know, for me, there's not enough upside in the current bond market with their high prices, low returns to utilize them as my hedge. REITs slide right in to give me something other than straight up stocks to invest in that's not directly correlated to the market. As I age I'll probably reduce my allocation in REITs and increase that in bonds, but at 26 it's a seemingly good hedge outside of stocks. My split is roughly 80% stocks, 18% REITs, 2% bonds.
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Dec 28, 2014 22:31
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etalian posted:I often wonder how companies even pick the horrible menageries of available investments for their 401k plans. I always kind of rolled my eyes when people mentioned reaching out to your hr group about benefits, but after some changes in my 401k plan (Jp Morgan retirement sold to some brand I have never heard of, then started undergoing a branding change) I wrote to a rep to bitch about it. Long story short, she said they were happy to hear my comments (changes were unexpected and unannounced to them) and that they take the comments to the advisory meetings (coo, ceo, and ee members) every three months. I thought that was pretty cool, hopefully my begging for vanguard will go noticed. Shortly after this contact they upped our match by 2% at least.
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Jan 4, 2015 05:35
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I think if you go to electronic delivery of statements they waive the fee anyways. The real reason to get over 10k in each fund is to utilize the admiral classification which carries a lower expense ratio.
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Jan 29, 2015 01:20
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Why are you worried about it? Why not just let the two sit in separate accounts? Unless you're paying outrageous fees, I wouldn't worry about it... Certainly wouldn't pay the tax you guys would be liable for in a backdoor conversion.
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Feb 9, 2015 02:19
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Blinky2099 posted:And one last question: my girlfriend says her company does not match 401k but matches her "simple IRA". Isn't this really unusual? That doesn't allow you to contribute more than the yearly $5,500 maximum does it? Simple Ira and your typical "traditional" / "Roth" Ira are completely separate entities, as the simple Ira is employer guided. You can contribute the full 5.5k to the traditional or Roth, and contribute to the full limits of the simple Ira. I'm surprised they have a simple Ira and 401k set up. I thought the simple Ira was more or less a convent option for small business to do retirement accounts without the headaches of 401k [note: limited by company size and contribution requirements]
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Feb 20, 2015 00:11
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Disclaimer: I am just a regular joe. I don't like bonds right now, personally. I know several will probably disagree with me in this due "timing the market" claims, but I'd stick it out for the time being and reallocate towards bonds a bit in another few to five years. What I'm doing (at 27) is essentially what you've got, but I've placed what would be my additional bond exposure into REITs for the needed diversification (roughly 10%) as I think those have a more profitable long term upside than bonds, and the risk doesn't bother me at this age. I personally am invested more in the international market, too. Would consider dropping a bit of you US shares and picking up more EU or broad world, though I don't think many would fault you there.
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Feb 26, 2015 12:28
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MJBuddy posted:Maybe I'm lost as to why you think real estate = not volatile. I didn't say that REITs were less volatile. I acknowledged there was more risk, but that I was purely looking for diversification from going solely stocks, and that the risk didn't bother me at the ripe age of 27. Unsure were you got lost there... You're more than welcome to disagree, but from my perspective the whole point of diversification at a young age isn't to ensure you have a portion of your funds in an incoming generating stream, it's to meter the losses of other investments. As REITs aren't strongly correlated to the stock market, I found them to be a worthy substitute to cash and/or bonds. The fact they pay dividends in addition to market appreciation of the tangible assets is just an additional perk. Dead Pressed fucked around with this message at 01:13 on Feb 27, 2015 |
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Feb 27, 2015 01:03
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MJBuddy posted:Having a standard of .9 basically implies that the only think correlated with stocks is stocks. Yeah, I'll agree to disagree completely with you. With regards to correlating autism to eating peanut butter, a 0.6 would in fact be a very high correlation that I'd worry about. When you're talking about financial numbers with an infinite number of variables, 0.6 is not highly correlated. http://sites.stat.psu.edu/~jls/stat100/lectures/lec16.pdf for reference. As a statistical note, yes, 0.5 is generally accepted a "high" correlation, but its just a shade of grey above "weak" correlation, and again---you have to meter in the context of the variables under discussion. Don't care to discuss it all too much more on my end, I already stated that the increased risk of importing REITS in lieu of bonds in my portfolio was a known risk increase, and I know its not for everyone. I'm surprised my derail even started when I qualified the discussion with 'I'm just an average joe'.
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Feb 28, 2015 20:59
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And reduced volatility CAN improve expected returns.
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May 18, 2015 21:34
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A rollover to traditional Ira does not count towards Ira contributions, and no one is forcing him into to backdoor Roth it. A simple rollover to vanguard emulates the exact same benefits as a 401k while providing better selection options with less expense ratios.
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May 31, 2015 08:47
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Huh, I never thought about that. So essentially I could drive uber and put 100% of the earnings into a self employment 401k?
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Jun 24, 2015 01:23
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Thanks for the clarification, and bringing this up in the first place. I'll have to dig into this a bit. We airbnb our place out, drive uber, and my wife consults on top of her regular employment. We probably have $ 25k of extraneous income we could defer this way.
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Jun 24, 2015 02:03
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Roth is after tax, so the Roth portion would not be taxed again as it rolled into a Roth IRA. However, employer contritions into 401k with a Roth component must be of a traditional contrition [eg, before tax] so any matching contributions would have to be taxed if you were to roll it over into a Roth IRA.
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Aug 1, 2015 10:14
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