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VERTICAL WIPE! posted:Step 1. Fund 401(k) up to max company matching levels (you've got this down) Oh now this is interesting. I'm doing steps 1 and 3, which is to say, I am maxing out my 401(k). I only receive matching funds up to 5%, though. Should I go ahead and scale back my 401(k) contributions immediately and contribute the difference to the Roth, or should I just do it properly next year? (I had planned to fund a Roth this year, but I sometimes get upset at myself that I can't save cash for my emergency fund AND max out my retirement vehicles AND overpay my student loans AND live in a nice location AND...)
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Jul 10, 2008 16:36
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I was wondering, how does inflation impact the real rate of return for equities? It seems fairly simple for something like a savings account -- during inflationary periods, a bank offers higher nominal interest rates to compensate for inflation. For something like stocks, I'm not so sure. I'm trying to separate the effects of inflation from the degree of risk; is that even a valid statement? For instance, I imagine inflation could manifest itself through increased dividend payments, which, if reinvested, would have the overall effect of increasing the value of a portfolio. But I am also wondering how inflation effects the price of the actual equity. Does a stock that was $10 today tend to drift upward toward $11 to keep pace with inflation, or does that imply an intrinsic value that simply can't be determined in a vacuum? I hope these are valid questions, but I could be completely misunderstanding things.
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Mar 28, 2009 21:05
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80k posted:Equities are a claim to real assets, so there is an element of inflation-hedging involved in equities, which can be especially pronounced with leveraged businesses. However, it is minute compared to the negative effects that inflation has on equities: increased business risk and increased borrowing costs (nominal and real interest rates go up). Thus, unexpected rise in inflation should have a net negative effect on the value of a business. Thanks. If you don't mind a followup question, what would be the general strategy if one simply wants to beat inflation? Less risky investments, like a money market account?
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Mar 30, 2009 22:37
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80k posted:A money market account will barely beat inflation before taxes, and will underperform inflation after taxes (unless it's in an IRA). On the other hand, money market and short-term bonds are really the only reasonable way to keep up with inflation over the short-term (other than I-bonds, which also pay next to nothing). I'm really just trying to internalize some of these concepts for myself. I know that one wants to move into safer investments as one gets older. I would characterize this as "preserving capital," and not necessarily the same thing as beating inflation. But then I started to wonder if the former implies the latter. Going by your answer, I don't think that's the case. Thanks again, that helps to give me a sense of what might happen if I pulled some of the different levers in a hypothetical portfolio.
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Mar 31, 2009 02:57
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I have a few questions about 401k rollovers. As I understand, one can rollover a 401k to a Traditional IRA, then convert that TIRA to a Roth. I have also read that doing so affects one's MAGI, which must be less than $100k, but only until 2010 when that requirement is phased out. My first question is, how exactly do taxes come into play during the IRA -> Roth conversion? If I had a fictional $10k in a TIRA and my fictional flat tax rate was 25%, would I end up with $7500 in the Roth, or would the full $10k go into the Roth with a bill for $2,500 for me to pay out of pocket? Second, does a conversion count against the annual Roth contribution limits? Finally, is there any time limit to the conversion, e.g., can I just leave it in a TIRA until next year if I think converting will blow my '09 MAGI? Could I convert part of the TIRA now, and do the rest later?
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Apr 10, 2009 01:32
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80k posted:What MAGI are you worried about "blowing"? The MAGI requirement is to determine whether you are eligible for the Roth conversion. Once you meet that requirement, you can convert to Roth beyond the MAGI requirement. Oh OK, I misinterpreted that then. Thanks for the good advice, as usual.
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Apr 10, 2009 20:17
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Sounds like you really have two questions: What to do with your existing 401k money, and how to invest in the future. For you existing money in the 401k, yeah, just roll it into a traditional IRA with someone like Vanguard. I did the exact same thing last week; it was extremely easy to do. In fact, Vanguard even set up a conference call between me and my 401k company on my behalf. What ended up happening was that my old company mailed me a check for the value of my 401k, which I then mailed to Vanguard. Couldn't have been much easier. For future investments, use a Roth IRA. You contribute post-tax dollars so that you don't have to pay taxes on future earnings. Finally, if you have the cash on hand, you can convert your rollover IRA to a Roth IRA by paying taxes on it now. I plan to do that with my rollover IRA next year, when I have the extra money.
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May 2, 2009 22:56
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Well, one thing to keep in mind, if you cash out your 401k you have to pay a federal and state taxes on it, plus a 10% penalty.
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May 2, 2009 23:58
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I'm looking for a retirement calculator that will help me checkpoint my goals. There are plenty of calculators that will project a balance at retirement, given current balance and contributions, but I want something that sheds a bit of light on the intermediate years. I'd like to get a sense of where I should be at 30, 35, 40, etc., just to play around with the numbers. Does anyone know of a calculator like this?
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May 19, 2009 18:13
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8% has always been the estimated rate of return I've heard. The amount of money you need when you retire depends on when you plan to retire (number of years you'll need the money) and how much you plan to spend per year, adjusted for inflation.
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May 19, 2009 18:29
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Not a lot of data here either, but income tax rates are at pretty low, historically speaking. I can't honestly imagine taxes ever being lower than they are now, which made the Roth 401(k) a no-brainer for me. EDIT: Also consider any gains are also post-tax already, which makes a huge deal in the long run. Sure you may pay 25% on your $100k of lifetime investments, but the million you end up with is all free and clear. With a traditional 401(k), that $100k is all pre-tax dollars, so you end up paying 25% of that hypothetical million instead. $25k paid in taxes vs. $250k, in my completely arbitrary and made up example! Kobayashi fucked around with this message at 07:32 on Jun 11, 2009 |
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Jun 11, 2009 07:28
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greasyhands posted:Just use shorter timelines in the retirement calculators... i.e. put in your expected rate of return and your rate of investment and see where it will be 10 years from now. Ahh, I knew I posted this question somewhere, but I couldn't find it. I put together a very rough estimate in Excel to get a sense of how things might behave under ideal circumstances. Very simply, I take the balance at the beginning of the year, increase the amount by the average expected return (7% in this case), and then add the gains due to contributions:  What I'd like to do now is also put in a field for rate of inflation, so I can see what these numbers might look like in terms of real dollars. So far the most interesting thing I found from this little experiment is that gains from returns start to matter more than contributions after about 10 years of maximum contributions. My situation is a bit different than the sheet I posted, but I thought it best to start from scratch. Do those numbers look generally OK? E: I know the columns are somewhat screwy, but again, I did this in a few minutes just to get a sense of things. I like numbers, so I think I'll try again with a clearer layout. Kobayashi fucked around with this message at 15:48 on Jun 11, 2009 |
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Jun 11, 2009 15:39
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I have a 401k with a previous employer. I left before the employer contributions vested. Fund selection and fees aside, is there any value in leaving the 401k with the employer's provider? From my perspective, my portfolio is artificially inflated because I see gains on contributions that aren't really mine. I feel like I should take the hit and roll it over to my Vanguard account now, but it's been a while since I've researched the specifics, so I want to make sure I'm not missing something.
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Feb 11, 2015 21:03
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Thanks, that's what I figured. I'll start the rollover process this week. As a followup, I'm interested in what happens to my unvested contributions and the unrealized gains on that money from the employer's perspective. Does that automatically roll over to some general pool with the employer? Tax-wise, how are the contributions and subsequent gains treated for the employer?
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Feb 12, 2015 06:01
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I'm working full time for a smaller company that does not (yet) have a 401k. I make too much to contribute to a Roth IRA. Do I have any other tax advantaged options besides a traditional IRA? I looked at the SEP IRA and Solo 401k, but at first glance I do not think I qualify because I am not self-employed or freelancing.
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May 31, 2015 15:34
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Kobayashi posted:I'm working full time for a smaller company that does not (yet) have a 401k. I make too much to contribute to a Roth IRA. Do I have any other tax advantaged options besides a traditional IRA? I looked at the SEP IRA and Solo 401k, but at first glance I do not think I qualify because I am not self-employed or freelancing. Asked this a few pages ago but didn't see anything. Is there anything I should look at other than a traditional IRA?
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Jun 10, 2015 04:48
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| # ¿ Apr 16, 2024 04:54 |
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etalian posted:Without 401k or other workplace plan your other retirement funding options are pretty limited. Desuwa posted:Backdoor Roth. You contribute to an after tax IRA and convert it to a Roth. You pay additional tax on the earnings between the contribution and the conversion but if it's only there for a few days before converting that burden is tiny. If you have an existing pre-tax IRA you will pay tax on part of the conversion according to the percentage of your IRA that's pre-tax. Awesome, that's what I figured. My new employer is a fast-growing startup that should have a 401k program in place in the next few months. In the meantime I'll take the money that I ordinarily would have contributed to my 401k and put that into a traditional IRA. Since I may be able to influence what my employer does, is a Roth 401k still a good option to lobby for? As for converting, I rolled two 401k accounts from previous employers over to Vanguard earlier. I now have a rather large rollover IRA in my Vanguard account. It's my understanding that this presents substantial tax implications for any future traditional IRA conversions. Is it possible to incrementally convert my rollover IRA as I can afford it? I'll have to save quite a bit of money to afford the entire conversion.
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Jun 10, 2015 05:33
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