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What is the recommended approach (if there is a consensus) on maxing out 401K to get match and then applying excess elsewhere vs maxing out 401K completely?

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gremln007 said:   What is the recommended approach (if there is a consensus) on maxing out 401K to get match and then applying excess elsewhere vs maxing out 401K completely?
 Depends on what choices you have in your 401k. If you have access to a large variety of funds (incl. many diversified index funds) with low expense ratios, you could max out 401k first before contributing to an IRA. One other benefit of a 401k is (if the plan allows) the ability to get loans --- this is usually not recommended but in extreme situations, a 401k loan is an option to consider.

If the 401k investment options are fairly limited and/or have high expense ratios, go with an IRA after contributing just enough to the 401k to max out employer match.

If you qualify, HSA is also something to contribute to --- you get a deduction and the distributions are tax-free if used for qualified medical expenses.

ETA: One other consideration: If you care for making pre-tax contribution, your ability to take a deduction for an IRA contribution is fairly limited if you are covered by a retirement plan. If you dont qualify for an IRA deduction, and do want to make pre-tax contribution, 401k is the way to do.

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Could someone please comment on Personal Retirement Annuities?

Fidelity is billing it as a means to invest tax-deferred without any IRS contribution limits. What's the catch?

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bicker1 said:   Could someone please comment on Personal Retirement Annuities?

Fidelity is billing it as a means to invest tax-deferred without any IRS contribution limits. What's the catch?

  Usually the fees cost more than taxes would.  A three fund portfolio of index funds held in a taxable account is pretty efficient, especially if you go the ETF route.

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gremln007 said:   What is the recommended approach (if there is a consensus) on maxing out 401K to get match and then applying excess elsewhere vs maxing out 401K completely?

There is no consensus because many factors at play (eg your tax rate/income/investment options/plan accepting post-tax and allowing post tax rolover etc).

There is no one-size-fit-all answer.

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bicker1 said:   Could someone please comment on Personal Retirement Annuities?

Fidelity is billing it as a means to invest tax-deferred without any IRS contribution limits. What's the catch?

 
Not necessary when capital gains is only 15% for most. Typically the fees are pretty high too.

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I(age 43) have around $80K in my 401K account and am a Mr. Mom now. 

TIA for the answers. 

1. 401K $ can only rollover to a Traditional IRA? If not, what's difference to rollover to Traditional IRA and Roth IRA?
2. Rollover 401K to an IRA account is penalty-free and withdraw from the IRA is tax-free as well?
3. Schwab, Fidelity......or which company would you recommend to roll it over my 401k?
4. Am I missing something?

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Traditional 401(k) balances can only rollover without tax year tax consequences into similarly qualified accounts, such as another traditional 401(k) or a traditional IRA. Rolling over tax advantaged 401(k) balances into any kind of Roth will incur tax year tax consequences, complicated by any other traditional IRA balances you may have. Withdrawing from traditional IRAs prior to age 59 1/2 carry penalties and tax on the withdrawal amounts as regular income. After age 59 1/2 just the tax.
Schwab and Fidelity are comparable. There are some people who say Vanguard is just as good, and other people who say that Vanguard offers far less than Schwab and Fidelity.

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bicker1 said:   Traditional 401(k) balances can only rollover without tax year tax consequences into similarly qualified accounts, such as another traditional 401(k) or a traditional IRA. Rolling over tax advantaged 401(k) balances into any kind of Roth will incur tax year tax consequences, complicated by any other traditional IRA balances you may have. Withdrawing from traditional IRAs prior to age 59 1/2 carry penalties and tax on the withdrawal amounts as regular income. After age 59 1/2 just the tax.
Schwab and Fidelity are comparable. There are some people who say Vanguard is just as good, and other people who say that Vanguard offers far less than Schwab and Fidelity.

 Thank you, Bicker. 
When doing the rollover, who(current 401k administrator or Schwab) has to initiate the process? 
Open the rollover traditional IRA with schwab, then let the 401k admin. know the new account info so they can do the rollover OR Schwab can initiate the rollover?
 

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jtclin said:   
bicker1 said:   Traditional 401(k) balances can only rollover without tax year tax consequences into similarly qualified accounts, such as another traditional 401(k) or a traditional IRA. Rolling over tax advantaged 401(k) balances into any kind of Roth will incur tax year tax consequences, complicated by any other traditional IRA balances you may have. Withdrawing from traditional IRAs prior to age 59 1/2 carry penalties and tax on the withdrawal amounts as regular income. After age 59 1/2 just the tax.
Schwab and Fidelity are comparable. There are some people who say Vanguard is just as good, and other people who say that Vanguard offers far less than Schwab and Fidelity.

 Thank you, Bicker. 
When doing the rollover, who(current 401k administrator or Schwab) has to initiate the process? 
Open the rollover traditional IRA with schwab, then let the 401k admin. know the new account info so they can do the rollover OR Schwab can initiate the rollover?

  The receiving custodian. IOW,

  • Open a rollover traditional IRA with Schwab
  • As part of the funding process (or otherwise) with Schwab, fill out the form to transfer funds from the 401k.

You will have to provide details about the 401k custodian (custodian name, your account number, etc.) to Schwab. They will do the necessary steps to get the funds to Schwab.

If you hold proprietary funds in the 401k, they will typically be liquidated by the 401k custodian and the cash proceeds will be sent to Schwab. If you hold common ETFs or MF, you can ask that they be transferred "in-kind" to Schwab. The thing with transferring as cash is that you will be out of the market during the transition process (which may be a good or bad thing depending on what the market does).

If you transfer to a a traditional IRA, there should be no tax consequence.

ETA: Some 401k custodians may insist on mailing the check to you directly. They will usually be made payable to "Schwab, FBO jtclin". If so, you will have to in turn mail the check to Schwab for credit into your IRA.

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fwuser12 said:   
If so, you will have to in turn mail the check to Schwab for credit into your IRA.

  Typically within a limited period of time. In my experience, within 30 days of the check being cut.

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I've started making contributions to may 401k to max out my employer max(yay!). Fidelity manages our 401k. What's the strategy for having the highest ROI? That's a loaded question, but between not being active in choosing funds, to being meticulous, where does the majority land?

Also, what is considered good versus risky? Index funds?

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post your plan's funds with expense ratios and we can help

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