Long Term Investing & Retirement: The second best time is now

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > Long Term Investing & Retirement: The second best time is now

TheOP: Sep 12, 2002

I've got a question about rollovers.

At my current job I'm enrolled in a Roth 401k with a 6% employer match. I put enough in to reach the match. When I leave the job and rollover the account will my contributions be rolled into a Roth IRA and the employer match be rolled into a traditional IRA?

It's my understanding that all the employer contributions in a Roth 401k are before tax.

# ¿ Aug 5, 2008 01:54

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# ¿ May 4, 2024 04:42

TheOP: Sep 12, 2002

Father Boddingtons posted:

Lots of Funds

Ok, so I'm in the basically the same situation as you. I haven't invested in nearly as many funds, however.

My question is once you quit a company and rollover you 401(k) to a IRA, do you rollover the actual mutual funds in the 401(k) or is everything cashed out and you just get a lump-sum cash payment in your IRA.

If it's the former, you could pay a lot in trading fees if you want to get out of the Fidelity funds, especially since you are so diversified. Personally, I plan on selling out of the Fidelity funds once I rollover. I want to find some funds with lower expenses.

But hey, I'm no expert on this stuff, so I could be totally wrong.

# ¿ Jun 12, 2009 07:53

TheOP: Sep 12, 2002

var1ety posted:

Let's talk about Roth 401k accounts. My work is offering them next year, but the more I read about them, the more it seems like they're a bad idea for most situations.

Here is a concise article that talks about reasons not to use one (and cases where you would want to):

http://thefinancebuff.com/2008/03/case-against-roth-401k.html

It talks about a few points -

IRA contributions come off the "top" of your income, but withdrawals fill in your income from the bottom. You need a lot of retirement income to get to the tax bracket where the Roth 401k makes sense (a pension or other defined benefit would help "fill in" the bottom of your bracket).

If you have state income tax then the Roth makes you pay more of it than a traditional 401k would.

A traditional 401k lowers your income, which can let you qualify for tax breaks (including Roth IRA contributions). The Roth lacks this advantage.

The article was written in 2008. One thing that I believe has changed since then is that there is now a conversion path from a Roth 401k to a Roth IRA.

To those people who are funding a Roth 401k, what made you decide it made financial sense for you?

I've been maxing out a Roth 401(k) for the last 3 years, the first 3 years of my career. I make around ~75k and my reasons for funding it are as follows:

-I plan on fully funding my Roth 401(k) every year until age 32 or so. I will then cut down on my contributions for the remainder of my life (compounding interest FTW). This strategy is aggressive, and leaves me with little savings. I wanted the ability to withdraw my contributions without penalty if need be. I also feel that maximizing my 401k allows me to "save more" than $16,500 vs. a traditional IRA because I'm saving after tax income.
-I don't own or lease a car, which allows me to save more.
-I live in a relatively low income tax state. I plan to live in California later in life and ideally in retirement. I can only imagine what taxes in Cali will be like 20 years from now.

That said, I actually was researching this topic this week, and read the article you linked to. It's interesting and brings up great points I had not thought of. After reading, I don't believe that the Roth 401k makes sense for most people.

# ¿ Nov 13, 2010 05:43

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