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JustTheBeesKnees said:   
mikemoto said:   
atca1999 said:   so i transfered an old roth from like a decade ago into ameritrade.. my question is, when it comes to withdrawing in XX years, how does the government know its a roth ira? on my taxes i just indicate that?
1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

 Atca1999... is right on the money.  Clearly you haven't pulled money out of your Roth IRA(s) before.  At the end of each year that you do withdraw money from your Roth, your investment firm will send you a 1099-R form that indicates how much you pulled out that year.  But remember, this only "really" matters if you are pulling it out before retirement because the government will want to know if any of the money you pulled out included interest.  If it was only your contributions (i.e. you deposited $5,500 and withdrew $1,000) then you are clear of tax liability.  Once in retirement.. you're in the clear.  Aaaahhh... dreaming of that day if it ever comes.

  Good luck with that. When the government runs out of money, you know the first thing they'll start taxing is Roth IRA earnings...

rated:
Hey guys,

I'm 29 years old, Single w/ 100k Salary. No debts or student loans.  Currently renting an apartment in NYC. I have ~35k in Savings. ~45k in a Traditional Rollover 401k Account, and ~5K in my current company's Traditional 401k.

My employer actually offers BOTH Traditional 401k and Roth 401k. 6% Match after the first year, which starts next month.

I've been reading up on Roths. Seems like something I should take advantage of. I was thinking of upping my contributions and splitting it between the two types of 401ks. Right now I'm doing just 6% in a Traditional 401k. Thinking of doing 6% in Traditional AND 6% in Roth. I've also been doing 3% in my employer's ESPP.  

Good idea?  

Any reason I should change up those percentages? Higher on one? Lower one one? Higher/Lower on both?

Appreciate the feedback.

rated:
I would rather do a Roth IRA than Roth 401k with employer, however you are over the income limit. If the Traditional Rollover 401k Account is truly a 401k and not an IRA, then you could do backdoor Roth IRA. Or if your "Rollover 401k" actually is an IRA, if you can roll that into your current employer's 401k then you could do backdoor Roth IRA. That maxes out at 5.5K. If you have more to save on top of that (seems like you should with no dependents, no debts, and 100k income), then maybe some Roth 401k. I like to diversify and do so, but at a similar income level I favor Traditional to Roth. Keep in mind that you company's 6% match will be in Tradition regardless of whether you do Traditional or Roth, so that weights you heavier in Traditional.

rated:
My Rollover Account (with ~45k) is actually a Rollover IRA, my mistake.  I have that account separate with Schwab. I basically rolled a few old 401k accounts in there at the end of 2012 and haven't touched it since.  What do you mean by backdooring?  Why is the Roth IRA better than the Roth 401k?  

Thanks for the response!

rated:
I'm planning to quit my job this summer and not work for at least the next year and half. I'd like to take advantage of these low income years when it comes to retirement planning.

  • This year I'm contributing $17,500 to a Roth 401(k) since my tax rate will be much lower than usual with only six months of employment.
  • Next year, I would like to convert a Rollover IRA ($7,000) to a Roth IRA. With a standard deduction and personal exemption of ~$10,000 and zero income, I would pay zero taxes on this transaction.
  • Next year as well, I would like to convert a 401(k) ($40,000) to a Roth 401(k). With the remaining $3,000 from the standard deduction and personal exemption and zero income, I would pay ~$5,100 in taxes on $37,000 in income. Of course, the value of these accounts will most likely increase by January 2015 and I'll need to pay more taxes.

Am I missing anything obvious? Retirement accounts aside, is there any other way to benefit from these low income years?
 

rated:
dave4128 said:   Hopefully this is the right place, looking for some suggestions.

33 Years Old, no wife , or GF currently (currently back at parents house).
salary 65k
Looking to buy a House/Condo 250-300k
Cash On Hand 225k
Going to Max 401k this year (did last year - prior to that i wasn't doing enough)
Already did a roth this year and last...

So the question becomes, putting down money on a house... From my reading, I know I should be able to get more in the market than i'd pay in interest in the house so i probably should just put down 20 % or so..  I am FAR from an expert in investing.. So from a FW perspective, what kind of funds should I look into If I put 20 %ish down, and then have 100-150k liquid cash...  Can anyone point me in some form of direction?

 

  You want to open a broker account that does not charge fees for having the account (example: Scottrade, or vanguard with your amount of $$$), there are others.
Then if the $$$ can sit there, meaning you keep some cash for emergencies, you could do what Warren Buffet suggests for his heirs and put it all into
some kind of  S&P 500 etf  one of which is Vanguards VOO  , its fee is: .05%  which is extremely low.
Just don't sell it when the market dips, leave it for years untouched.
 


rated:
traveler321 said:   I'm planning to quit my job this summer and not work for at least the next year and half. I'd like to take advantage of these low income years when it comes to retirement planning.

  • This year I'm contributing $17,500 to a Roth 401(k) since my tax rate will be much lower than usual with only six months of employment.
  • Next year, I would like to convert a Rollover IRA ($7,000) to a Roth IRA. With a standard deduction and personal exemption of ~$10,000 and zero income, I would pay zero taxes on this transaction.
  • Next year as well, I would like to convert a 401(k) ($40,000) to a Roth 401(k). With the remaining $3,000 from the standard deduction and personal exemption and zero income, I would pay ~$5,100 in taxes on $37,000 in income. Of course, the value of these accounts will most likely increase by January 2015 and I'll need to pay more taxes.

Am I missing anything obvious? Retirement accounts aside, is there any other way to benefit from these low income years?

  If you have any regular accounts that have done well, as long as you keep total income for year below (single 37K) you can sell and re-buy those investments to harvest the capital gain tax free. If you have a bunch, might be worth it to hold off on 401K conversion.

rated:
BlueSeaLake said:   
traveler321 said:   I'm planning to quit my job this summer and not work for at least the next year and half. I'd like to take advantage of these low income years when it comes to retirement planning.

  • This year I'm contributing $17,500 to a Roth 401(k) since my tax rate will be much lower than usual with only six months of employment.
  • Next year, I would like to convert a Rollover IRA ($7,000) to a Roth IRA. With a standard deduction and personal exemption of ~$10,000 and zero income, I would pay zero taxes on this transaction.
  • Next year as well, I would like to convert a 401(k) ($40,000) to a Roth 401(k). With the remaining $3,000 from the standard deduction and personal exemption and zero income, I would pay ~$5,100 in taxes on $37,000 in income. Of course, the value of these accounts will most likely increase by January 2015 and I'll need to pay more taxes.

Am I missing anything obvious? Retirement accounts aside, is there any other way to benefit from these low income years?

  If you have any regular accounts that have done well, as long as you keep total income for year below (single 37K) you can sell and re-buy those investments to harvest the capital gain tax free. If you have a bunch, might be worth it to hold off on 401K conversion.

  Thanks for the information. I didn't realize that about capital gains taxation.

rated:
abracadaver said:   Hey guys,

I'm 29 years old, Single w/ 100k Salary. No debts or student loans.  Currently renting an apartment in NYC. I have ~35k in Savings. ~45k in a Traditional Rollover 401k Account, and ~5K in my current company's Traditional 401k.

My employer actually offers BOTH Traditional 401k and Roth 401k. 6% Match after the first year, which starts next month.

I've been reading up on Roths. Seems like something I should take advantage of. I was thinking of upping my contributions and splitting it between the two types of 401ks. Right now I'm doing just 6% in a Traditional 401k. Thinking of doing 6% in Traditional AND 6% in Roth. I've also been doing 3% in my employer's ESPP.  
 

  
No Roth! You are in a high tax bracket in NY state, you want to defer taxes with a Traditional 401k and hopefully retire somewhere with lower tax than NY. I think you should up your contribution % since 29 & single is the perfect time to max out your retirement savings (before kids get in the way). 

rated:
traveler321 said:   I'm planning to quit my job this summer and not work for at least the next year and half. I'd like to take advantage of these low income years when it comes to retirement planning.

  • This year I'm contributing $17,500 to a Roth 401(k) since my tax rate will be much lower than usual with only six months of employment.
  • Next year, I would like to convert a Rollover IRA ($7,000) to a Roth IRA. With a standard deduction and personal exemption of ~$10,000 and zero income, I would pay zero taxes on this transaction.
  • Next year as well, I would like to convert a 401(k) ($40,000) to a Roth 401(k). With the remaining $3,000 from the standard deduction and personal exemption and zero income, I would pay ~$5,100 in taxes on $37,000 in income. Of course, the value of these accounts will most likely increase by January 2015 and I'll need to pay more taxes.

Am I missing anything obvious? Retirement accounts aside, is there any other way to benefit from these low income years?

Ever since I came to the realization that I was an early middle-aged "obsolete", "unemployable" American programmer, I threw in the towel and filed for Chapter 7 bankruptcy a few years ago and became an English teacher abroad, my official income has been $0, so I have been doing a Roth conversion in the amount of my 0% tax bracket (which is the standard deduction + standard exemption + $3K for long term capital loss) - it's essentially a free Roth conversion.  I probably could have be doing more (i.e., up through the 10% & 15% brackets), but I have the feeling that I won't be in any higher tax brackets in the future.
 

rated:
Psycho41 said:   
JustTheBeesKnees said:   
mikemoto said:   
atca1999 said:   so i transfered an old roth from like a decade ago into ameritrade.. my question is, when it comes to withdrawing in XX years, how does the government know its a roth ira? on my taxes i just indicate that?
1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

 Atca1999... is right on the money.  Clearly you haven't pulled money out of your Roth IRA(s) before.  At the end of each year that you do withdraw money from your Roth, your investment firm will send you a 1099-R form that indicates how much you pulled out that year.  But remember, this only "really" matters if you are pulling it out before retirement because the government will want to know if any of the money you pulled out included interest.  If it was only your contributions (i.e. you deposited $5,500 and withdrew $1,000) then you are clear of tax liability.  Once in retirement.. you're in the clear.  Aaaahhh... dreaming of that day if it ever comes.
 

  Good luck with that. When the government runs out of money, you know the first thing they'll start taxing is Roth IRA earnings...
 

That's an interesting concept.  I have often wondered what would happen if folks would have stocked so much of their retirement assets in a Roth that the government would not be getting enough revenue.  I suppose that if the political situation were to be such that there are a lot more folks who are, to use the Romneyesque phrase, "takers" - or otherwise income tax payers (i.e., regular income and traditional IRA distributions, etc.) - than folks who have Roth IRAs, then I could see that side of the Roth IRA taxation debate saying to go ahead and screw the Roth IRA owners (perhaps giving them back the taxes they paid by doing the Roth conversion or by not taking the traditional IRA deduction - perhaps even without an interest ).  Perhaps the addition of a VAT could recover lost taxes, but that would end up hitting folks paying income taxes very hard (especially the workers).

No, I think that the interest group of Roth IRA owners would be sufficiently strong as to deflect this, with the result being confiscatory taxes on the wealthy to overcome any revenue deficit.

rated:
I over-contributed to my 401k a few years ago and as a result I have about $1500 in after-tax money in there. My employer allows in-service rollovers so I should theoretically be able to roll it into my existing Roth IRA. However, whenever I start filling out the form on the website, it seems like I have to roll over a portion that is pre-tax as well for some reason. In other words, if I pick $1500, it ends up saying ~$350 pre-tax and ~$1150 after tax. To roll over the full $1500 after-tax, I need to choose $2000 at which point it lets me to $1500 and $500 pre-tax. 

What is the reason for this weird mix of pre and post tax funds? I called my 401k provider and asked about this but they didn't have a great answer.

Also, if I did a Backdoor Roth conversion this year, how does that affect this?

If I can figure out a way to roll over just the after-tax portion, it seems like I could over contribute a lot (like up to $51k total) and get a lot more $ into my Roth. 

rated:
swampwiz said:   
....

No, I think that the interest group of Roth IRA owners would be sufficiently strong as to deflect this, with the result being confiscatory taxes on the wealthy to overcome any revenue deficit.

  can never be sure.  many years ago, Social Security payments were tax free but now up to 85% is taxable despite the strong seniors' interest groups.

rated:
-Removed to start own topic for more views

rated:
Hi, looking for some suggestions.

The private company I was employed at was bought by a public company a little over a year ago. I am now employed by the public company. I had ESOP shares in my private company and now I need to roll that somewhere. I have close to $60k in ESOP shares. I also have a 401k from the private company that I have almost $200k in, that should be available to be rolled in a couple of months, assuming the IRS doesn't go on strike.

My new employer has very crappy 401k options, so I do not want to roll the money in with them.

My questions are as follows:
1) Where should I put the money, meaning what company?
2) I talked with briefly with a local wealth manager who charges 1%, do you view that as a good option. I'm starting to accumulate some wealth and having someone to talk to, even for a fee, would be helpful for long-term strategy.

Any suggestions would be appreciated.

rated:
Just roll it to a rollover IRA in a Target date fund with any of the big fund companies. The advisor probably won't beat the index and will certainly cost more.

rated:
For those of you considering setting up your own 401k accounts, there is a list of businesses offering various 401k services to sole proprietorships at http://www.401khelpcenter.com/pdf/Solok_Vendor_List.pdf . It was apparently updated last month (June, 2014), so I guess it's either new or actively maintained.

I have no affiliation with the providers of that list. It's just something I noticed in my web searches a few minutes ago and hadn't noticed before.

rated:
I have had a solo 401k at TD Ameritrade for a couple of years and would highly recommend it for many people, but I think that $10 per trade is becoming excessive for me, given that I pursue the counterintuitive tax strategy of preferring accounts that aren't taxed annually for my trades that I expect to exit in less than a year (except for some trades or investments that might have other tax advantages), many of which I hold only for a matter of days.

So, I am interested in knowing what the latest is regarding having a solo 401k at Interactive Brokers, as discussed in archived Fat Wallet threads http://www.fatwallet.com/forums/finance/1080504/ and http://www.fatwallet.com/forums/finance/566407/ . Like many brokerages, IB does not offer its own 401k documents, but offers a generic "trust account", which led me to seek 401k providers, causing me to come across the list I mentioned in my preceding message.

To save people the trouble of asking, I'll try to answer a couple of obvious questions. Firstly, I want to move my 401k rather than just open a SEP IRA account because I want to avoid basis problems when I annually do an unqualified IRA contribution which I immediately convert to a Roth IRA. Secondly, I have considered negotiating with TDA, but I want to have my alternative ready to go if I do negotiate, and I doubt TDA will be willing to get very close enough to IB's pricing to make it worthwhile for me to stay. Thirdly, I am aware that MB Trading and Lightspeed of pricing similar to IB, but they don't seem to offer quite the variety of instruments and orders, plus I already have a couple of accounts at IB.

By the way, updating prices in the first archived discussion I mentioned, my understanding is that theonline401k.com now charges $215/year for Solo 401k documents (includes Roth option) for 1-2 participants (but no employees working over 1000 hours/year), with the following additional fees: $25/year/additional non-employee participant (not sure how that works), $90/year to request 401k loan (which they require to be at a 5.25% interest rate), $195 to prepare an IRS form 5500, $95 to prepare an IRS form 1099 (if you don't want to prepare these forms yourself), $50 termination fee. This is much less than the commission savings I would expect from switching to IB.

Anyhow, I would be interested in any reports of recent experiences with putting a solo or small 401k at IB.

Thanks in advance for any advice on this.

rated:
A few questions about Roth contributions:

Is earned income the gross amount on the pay stub? Or is it after taxes? I'm assuming gross, but I wanted to make sure.

Does Vanguard charge a fee when I contribute to a Roth IRA account, and when I put money into a fund?
Can I contribute more than once each year?

I had a job for 2 months at the beginning of this year, and earned a little bit. I'd like to go ahead and put that into a Roth account.
I'm starting a new job on October, so I want to put the remaining (to the annual limit) just before April 15.

When Vanguard asks for employer information, what do I put? (Currently unemployed)

Thanks.

rated:
LokiMre said:   A few questions about Roth contributions:

Is earned income the gross amount on the pay stub? Or is it after taxes? I'm assuming gross, but I wanted to make sure.

Does Vanguard charge a fee when I contribute to a Roth IRA account, and when I put money into a fund?
Can I contribute more than once each year?

I had a job for 2 months at the beginning of this year, and earned a little bit. I'd like to go ahead and put that into a Roth account.
I'm starting a new job on October, so I want to put the remaining (to the annual limit) just before April 15.

When Vanguard asks for employer information, what do I put? (Currently unemployed)

Thanks.

  Gross income.

no, but a few new funds have 0.5% purchase fees. Yes, you can contribute more than once a year, but I believe they have a minimum new investment amount -- its not very high. Depending on the aggregate value of your investments, Vanguard charges a $20/year/fund fee if your don't select paperless statements.

your current employer should be "n/a".

 

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