So we switched to Wells Fargo for our 401(k) provider at work. I currently invest 6% of my income into my 401(k) and the company matches that @ 100% for the first 1% and 50% for the next 5%, so in other words 9.5% of my income goes into my 401(k) plan. Pretty standard stuff.
What this new plan offers that I don't recall having before is the option to put some or all of your retirement savings into an IRA instead of a 401(k), which shifts the tax liability.
What do people think about that? Does it make sense to try to hedge against future tax shifts by putting half of my retirement into one plan and half into the other?
Put your money into 40k. For the Emperor!
Keep going in the 401k like you are. Any that you want to add to your retirement savings over and above that, put in the IRA.
Frankly if I had the option I'd do the IRA. Take the tax hit now-- your taxes will probably be higher when you start drawing from it.
The two guys who do the "Simply Money" show here on 550AM in the evenings are big proponents of either going full IRA or 50/50 IRA/401k.
Quote from: derspiess on December 20, 2012, 02:35:29 PM
Frankly if I had the option I'd do the IRA. Take the tax hit now-- your taxes will probably be higher when you start drawing from it.
For christ sake, they gave up the armed struggle several years ago. :rolleyes:
Quote from: derspiess on December 20, 2012, 02:35:29 PM
Frankly if I had the option I'd do the IRA. Take the tax hit now-- your taxes will probably be higher when you start drawing from it.
Standard IRA you don't take the tax hit now. Roth IRA you do.
Cal, only difference i can see is IRAs and 401s have differrent tax free limits.
Hopefully for you Fredo will see this thread. He is some sort of level 13 Master Paladin Mage Bean Counter I think.
First criteria is the matching money. That's immediate 100% profit for Cal, and contributing less to the 401k and missing out on it would be dumb, regardless of taxes.
Quote from: derspiess on December 20, 2012, 02:35:29 PM
Frankly if I had the option I'd do the IRA. Take the tax hit now-- your taxes will probably be higher when you start drawing from it.
The two guys who do the "Simply Money" show here on 550AM in the evenings are big proponents of either going full IRA or 50/50 IRA/401k.
I have a Roth IRA myself, but I wonder...while at the same time, Congress could make taxes higher later, they could just as easily roll back the Roth tax-immunity on earnings.
And don't even try to sell me that politicians would never break that "promise". :P
In theory there are Roth 401ks and Roth IRAs--both of which are after tax contributions. But most employers don't offer the Roth 401k.
The easiest answer is that you should definitely take advantage of the Company's 401k match before anything else.
The next easiest answer is that you should max out both your IRA and 401k--they have separate limits. The 401k is $17k, I think the IRA is ~$5k but decreases to zero after you get to higher income levels.
But in terms of whether you should prefer after tax or before tax contributions, the answer is it depends. Do you expect to be making decent money in retirement (say out of a pension fund)? If so after tax may be better, otherwise, before tax may be the way to go. It may be smart to have tax diversification and mix the two. Since after tax contributions aren't considered income in retirement, having some income from those sources can keep you in lower tax brackets in retirement.
I guess I misunderstood. I thought he would get the matching with either option,. So yeah I would never leave employer contributions on the table.
Quote from: alfred russel on December 20, 2012, 06:26:06 PM
The next easiest answer is that you should max out both your IRA and 401k--they have separate limits. The 401k is $17k, I think the IRA is ~$5k but decreases to zero after you get to higher income levels.
:unsure: Not sure if serious.
You want Cal to put 22 K/year into his retirement savings?
Quote from: Admiral Yi on December 20, 2012, 07:13:02 PM
Quote from: alfred russel on December 20, 2012, 06:26:06 PM
The next easiest answer is that you should max out both your IRA and 401k--they have separate limits. The 401k is $17k, I think the IRA is ~$5k but decreases to zero after you get to higher income levels.
:unsure: Not sure if serious.
You want Cal to put 22 K/year into his retirement savings?
I do. I max everything I can.
Quote from: Admiral Yi on December 20, 2012, 07:13:02 PM
Quote from: alfred russel on December 20, 2012, 06:26:06 PM
The next easiest answer is that you should max out both your IRA and 401k--they have separate limits. The 401k is $17k, I think the IRA is ~$5k but decreases to zero after you get to higher income levels.
:unsure: Not sure if serious.
You want Cal to put 22 K/year into his retirement savings?
If you have the $$$ and don't need the money soon, why not take advantage of the tax benefits?
Also, there are some caveats, but if you use Roth funds you can generally withdraw the amount of your contributions without a penalty.
Quote from: Admiral Yi on December 20, 2012, 07:13:02 PM
Quote from: alfred russel on December 20, 2012, 06:26:06 PM
The next easiest answer is that you should max out both your IRA and 401k--they have separate limits. The 401k is $17k, I think the IRA is ~$5k but decreases to zero after you get to higher income levels.
:unsure: Not sure if serious.
You want Cal to put 22 K/year into his retirement savings?
Is there anything wrong with that? :huh:
You guys are making a lot of bread.
Just FYI, @ 6% invested I am maxing out on employer contribution as well and I am already doing this, so I obviously agree with that piece of advice and don't need to keep receiving it. :)
Quote from: MadImmortalMan on December 20, 2012, 02:41:49 PM
First criteria is the matching money. That's immediate 100% profit for Cal, and contributing less to the 401k and missing out on it would be dumb, regardless of taxes.
You forgot 'This.'
I have a Roth 401k, but my employer only matches up to 4% of my base salary. :(
Quote from: Caliga on December 20, 2012, 07:51:30 PM
You forgot 'This.'
I'm writing the Kentucky colonels to have you expelled.
Quote from: Phillip V on December 20, 2012, 07:52:04 PM
I have a Roth 401k, but my employer only matches up to 4% of my base salary. :(
Be careful; mine matched 6% with an additional 50% match up to 8%, and you see where that got me.
4% may just be enough not to bother the shareholders with your lack of value.
Al -
If you have a pre-tax (deductible contribution) 401(k), what happens at death - does the basis step up to make it effectively non-taxable to the reicipient (aside from taxes levied on the estate?)
Quote from: The Minsky Moment on December 21, 2012, 01:20:58 PM
Al -
If you have a pre-tax (deductible contribution) 401(k), what happens at death - does the basis step up to make it effectively non-taxable to the reicipient (aside from taxes levied on the estate?)
I don't know, but I don't think so.
Quote from: MadImmortalMan on December 20, 2012, 02:30:32 PM
Keep going in the 401k like you are. Any that you want to add to your retirement savings over and above that, put in the IRA.
This.
Free money is worth the tax hit, but when the match ends, go into a Roth IRA.
Quote from: Admiral Yi on December 20, 2012, 07:28:14 PM
You guys are making a lot of bread.
Sure, not everybody has enough income to be even able to consider maxing out (Lord knows I don't), but if you do have that much income you should max out your retirement.
Quote from: dps on December 23, 2012, 07:26:04 PM
Quote from: Admiral Yi on December 20, 2012, 07:28:14 PM
You guys are making a lot of bread.
Sure, not everybody has enough income to be even able to consider maxing out (Lord knows I don't), but if you do have that much income you should max out your retirement.
I make jack shit, but 100% match up to 5% is 100% match up to 5% -- my damned Weiner Kids can eat Ramen for breakfast, lunch & dinner before I'll pass up free money...
:ccr
Quote from: C.C.R. on December 25, 2012, 06:00:30 PM
Quote from: dps on December 23, 2012, 07:26:04 PM
Quote from: Admiral Yi on December 20, 2012, 07:28:14 PM
You guys are making a lot of bread.
Sure, not everybody has enough income to be even able to consider maxing out (Lord knows I don't), but if you do have that much income you should max out your retirement.
I make jack shit, but 100% match up to 5% is 100% match up to 5% -- my damned Weiner Kids can eat Ramen for breakfast, lunch & dinner before I'll pass up free money...
:ccr
We weren't talking just about maxing out your employer's contributiion--we were talking about putting the maximum allowed by law into your 401K or IRA.
Quote from: dps on December 25, 2012, 07:13:10 PM
We weren't talking just about maxing out your employer's contributiion--we were talking about putting the maximum allowed by law into your 401K or IRA.
Yes. I employed an old Languish trick of changing the subject of a thread to interest me & help improve my poor self esteem. Did I ruin the thread?
Quote from: C.C.R. on December 25, 2012, 07:17:58 PM
Quote from: dps on December 25, 2012, 07:13:10 PM
We weren't talking just about maxing out your employer's contributiion--we were talking about putting the maximum allowed by law into your 401K or IRA.
Yes. I employed an old Languish trick of changing the subject of a thread to interest me & help improve my poor self esteem. Did I ruin the thread?
Meh, an ACW hijack would have been better.
Quote from: dps on December 25, 2012, 07:19:03 PM
Quote from: C.C.R. on December 25, 2012, 07:17:58 PM
Yes. I employed an old Languish trick of changing the subject of a thread to interest me & help improve my poor self esteem. Did I ruin the thread?
Meh, an ACW hijack would have been better.
If the US Army had better 401(k) matching than the CSA, they would have gotten more of the good generals at the start of the war.