@mongstradamus wrote:
@Revelate wrote:
@mongstradamus wrote:for me who isn't that knowledgable in picking stocks or anything like that. I would do this put as much in your 401k as your employer matches, then max out roth ira, then try to max out your 401k if possible. If you can do all that then you can try and invest in other accounts like hsa or 429, then lastly would be an regular taxable account.
One thing to note is that 401k contributions are pre-tax: and as such can reduce your tax burden especially living in high tax areas (Cali, sigh). While I don't disagree with your assertion of using a 401k and a Roth IRA, sometimes it makes sense to put more than the minimum employer match (which should *always* be done at a bare minimum in my opinion) when it comes to a 401k.
Likewise if you can't contribute to a Roth due to income limits, push the 401k as far as you can.
I haven't kept up on HSA's but I think they were changed somewhat recently, personally after the 401k and Roth (when I can contribute) I go straight for the taxable brokerage accounts.
The only reason I feel that 401k to match then Roth IRA is because some 401k you may not get best choice of mutual funds or etfs. At least when you with Roth you get to choose what funds you want to be investing in.
I also feel more comfortable with Roth IRA because its easier to withdraw from it.so if you want to play it an bit riskier.you can put some of your emergency fund into Roth IRA,since you can withdraw easier.
I agree that an account with more options can be more attractive than the majority of 401k's, some of which frankly aren't very good as you allude to.
I don't agree with stuffing money into a Roth to withdraw it later; that's just bad financial planning advice in my estimation. There are still penalties even if you don't pay taxes on the withdrawl like you would in a 401k. If it's not a qualified reason, it still gets slapped with the same 10% penalty that traditional IRA's do is my understanding.
Short-term emergency fund isn't a good thing to hold in a retirement account of any sort... especially when it should be kept in a short-term CD, savings account, or money-market account or similar anyway, not exactly a huge tax burden frankly given current interest rates. Emergency fund much like housing downpayments shouldn't be held in a volatile investment: whole purpose is to have it there for when you need it.
@compassion101 wrote:
@Revelate wrote:
@mongstradamus wrote:
@Revelate wrote:
@mongstradamus wrote:for me who isn't that knowledgable in picking stocks or anything like that. I would do this put as much in your 401k as your employer matches, then max out roth ira, then try to max out your 401k if possible. If you can do all that then you can try and invest in other accounts like hsa or 429, then lastly would be an regular taxable account.
One thing to note is that 401k contributions are pre-tax: and as such can reduce your tax burden especially living in high tax areas (Cali, sigh). While I don't disagree with your assertion of using a 401k and a Roth IRA, sometimes it makes sense to put more than the minimum employer match (which should *always* be done at a bare minimum in my opinion) when it comes to a 401k.
Likewise if you can't contribute to a Roth due to income limits, push the 401k as far as you can.
I haven't kept up on HSA's but I think they were changed somewhat recently, personally after the 401k and Roth (when I can contribute) I go straight for the taxable brokerage accounts.
The only reason I feel that 401k to match then Roth IRA is because some 401k you may not get best choice of mutual funds or etfs. At least when you with Roth you get to choose what funds you want to be investing in.
I also feel more comfortable with Roth IRA because its easier to withdraw from it.so if you want to play it an bit riskier.you can put some of your emergency fund into Roth IRA,since you can withdraw easier.
I don't agree with stuffing money into a Roth to withdraw it later; that's just bad financial planning advice in my estimation. There are still penalties even if you don't pay taxes on the withdrawl like you would in a 401k. If it's not a qualified reason, it still gets slapped with the same 10% penalty that traditional IRA's do is my understanding.
As long as it's contributions you made, it would not be penalized or taxed.
I agree that planning to take it out before putting it in isn't financially the soundest thing to do, but establishing a non-interest-earning emergency fund seems like throwing money away when you could establish a Roth and have it double as your emergency fund.
http://www.irs.gov/publications/p590/ch02.html#en_US_2013_publink1000231057
I didn't read it fully; however, looking at the IRS regulations, the majority of withdrawals in the emergency fund scenario would indeed be penalized.
Attempted cut and paste of the relevant information:
What Are Qualified Distributions?
A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.
It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and
The payment or distribution is:
Made on or after the date you reach age 59½,
Made because you are disabled (defined earlier),
Made to a beneficiary or to your estate after your death, or
One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit).
Additional Tax on Early Distributions
If you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions as explained in the following paragraphs.
Distributions of conversion and certain rollover contributions within 5-year period. If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over (the conversion or rollover contribution) that you had to include in income (recapture amount). A separate 5-year period applies to each conversion and rollover. See Ordering Rules for Distributions , later, to determine the recapture amount, if any.
The 5-year period used for determining whether the 10% early distribution tax applies to a distribution from a conversion or rollover contribution is separately determined for each conversion and rollover, and is not necessarily the same as the 5-year period used for determining whether a distribution is a qualified distribution. See What Are Qualified Distributions , earlier.
For example, if a calendar-year taxpayer makes a conversion contribution on February 25, 2013, and makes a regular contribution for 2012 on the same date, the 5-year period for the conversion begins January 1, 2013, while the 5-year period for the regular contribution begins on January 1, 2012.
Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover contribution that you had to include in income because of the conversion or rollover.
You must pay the 10% additional tax in the year of the distribution, even if you had included the conversion or rollover contribution in an earlier year. You also must pay the additional tax on any portion of the distribution attributable to earnings on contributions.
Other early distributions. Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions.
Exceptions. You may not have to pay the 10% additional tax in the following situations.
You have reached age 59½.
You are totally and permanently disabled.
You are the beneficiary of a deceased IRA owner.
You use the distribution to buy, build, or rebuild a first home.
The distributions are part of a series of substantially equal payments.
You have unreimbursed medical expenses that are more than 10% (or 7.5% if you or your spouse was born before January 2, 1949) of your adjusted gross income (defined earlier) for the year.
You are paying medical insurance premiums during a period of unemployment.
The distributions are not more than your qualified higher education expenses.
The distribution is due to an IRS levy of the qualified plan.
The distribution is a qualified reservist distribution.
@Revelate wrote:
@compassion101 wrote:
@Revelate wrote:
@mongstradamus wrote:
@Revelate wrote:
@mongstradamus wrote:for me who isn't that knowledgable in picking stocks or anything like that. I would do this put as much in your 401k as your employer matches, then max out roth ira, then try to max out your 401k if possible. If you can do all that then you can try and invest in other accounts like hsa or 429, then lastly would be an regular taxable account.
One thing to note is that 401k contributions are pre-tax: and as such can reduce your tax burden especially living in high tax areas (Cali, sigh). While I don't disagree with your assertion of using a 401k and a Roth IRA, sometimes it makes sense to put more than the minimum employer match (which should *always* be done at a bare minimum in my opinion) when it comes to a 401k.
Likewise if you can't contribute to a Roth due to income limits, push the 401k as far as you can.
I haven't kept up on HSA's but I think they were changed somewhat recently, personally after the 401k and Roth (when I can contribute) I go straight for the taxable brokerage accounts.
The only reason I feel that 401k to match then Roth IRA is because some 401k you may not get best choice of mutual funds or etfs. At least when you with Roth you get to choose what funds you want to be investing in.
I also feel more comfortable with Roth IRA because its easier to withdraw from it.so if you want to play it an bit riskier.you can put some of your emergency fund into Roth IRA,since you can withdraw easier.
I don't agree with stuffing money into a Roth to withdraw it later; that's just bad financial planning advice in my estimation. There are still penalties even if you don't pay taxes on the withdrawl like you would in a 401k. If it's not a qualified reason, it still gets slapped with the same 10% penalty that traditional IRA's do is my understanding.
As long as it's contributions you made, it would not be penalized or taxed.
I agree that planning to take it out before putting it in isn't financially the soundest thing to do, but establishing a non-interest-earning emergency fund seems like throwing money away when you could establish a Roth and have it double as your emergency fund.
http://www.irs.gov/publications/p590/ch02.html#en_US_2013_publink1000231057
I didn't read it fully; however, looking at the IRS regulations, the majority of withdrawals in the emergency fund scenario would indeed be penalized.
Attempted cut and paste of the relevant information:
What Are Qualified Distributions?A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.
It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and
The payment or distribution is:
Made on or after the date you reach age 59½,
Made because you are disabled (defined earlier),
Made to a beneficiary or to your estate after your death, or
One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit).
Additional Tax on Early DistributionsIf you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions as explained in the following paragraphs.
Distributions of conversion and certain rollover contributions within 5-year period. If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over (the conversion or rollover contribution) that you had to include in income (recapture amount). A separate 5-year period applies to each conversion and rollover. See Ordering Rules for Distributions , later, to determine the recapture amount, if any.The 5-year period used for determining whether the 10% early distribution tax applies to a distribution from a conversion or rollover contribution is separately determined for each conversion and rollover, and is not necessarily the same as the 5-year period used for determining whether a distribution is a qualified distribution. See What Are Qualified Distributions , earlier.
For example, if a calendar-year taxpayer makes a conversion contribution on February 25, 2013, and makes a regular contribution for 2012 on the same date, the 5-year period for the conversion begins January 1, 2013, while the 5-year period for the regular contribution begins on January 1, 2012.
Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover contribution that you had to include in income because of the conversion or rollover.
You must pay the 10% additional tax in the year of the distribution, even if you had included the conversion or rollover contribution in an earlier year. You also must pay the additional tax on any portion of the distribution attributable to earnings on contributions.
Other early distributions. Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions.
Exceptions. You may not have to pay the 10% additional tax in the following situations.
You have reached age 59½.
You are totally and permanently disabled.
You are the beneficiary of a deceased IRA owner.
You use the distribution to buy, build, or rebuild a first home.
The distributions are part of a series of substantially equal payments.
You have unreimbursed medical expenses that are more than 10% (or 7.5% if you or your spouse was born before January 2, 1949) of your adjusted gross income (defined earlier) for the year.
You are paying medical insurance premiums during a period of unemployment.
The distributions are not more than your qualified higher education expenses.
The distribution is due to an IRS levy of the qualified plan.
The distribution is a qualified reservist distribution.
Has Roth IRA always been like that I thought for sure that the reason Roth Ira was better to traditional was the fact you weren't getting taxed on early withdrawals. Since the money you put into an roth ira was getting taxed already. I have been putting money into my roth ira for the sole purpose of being able to withdraw if an emergency were to occur. I may have to reconsider this and just put money into an traditional ira instead since its money i dont plan on touching for 20+ years.
@compassion101 wrote:
@Revelate wrote:
@compassion101 wrote:
@Revelate wrote:
@mongstradamus wrote:
@Revelate wrote:
@mongstradamus wrote:for me who isn't that knowledgable in picking stocks or anything like that. I would do this put as much in your 401k as your employer matches, then max out roth ira, then try to max out your 401k if possible. If you can do all that then you can try and invest in other accounts like hsa or 429, then lastly would be an regular taxable account.
One thing to note is that 401k contributions are pre-tax: and as such can reduce your tax burden especially living in high tax areas (Cali, sigh). While I don't disagree with your assertion of using a 401k and a Roth IRA, sometimes it makes sense to put more than the minimum employer match (which should *always* be done at a bare minimum in my opinion) when it comes to a 401k.
Likewise if you can't contribute to a Roth due to income limits, push the 401k as far as you can.
I haven't kept up on HSA's but I think they were changed somewhat recently, personally after the 401k and Roth (when I can contribute) I go straight for the taxable brokerage accounts.
The only reason I feel that 401k to match then Roth IRA is because some 401k you may not get best choice of mutual funds or etfs. At least when you with Roth you get to choose what funds you want to be investing in.
I also feel more comfortable with Roth IRA because its easier to withdraw from it.so if you want to play it an bit riskier.you can put some of your emergency fund into Roth IRA,since you can withdraw easier.
I don't agree with stuffing money into a Roth to withdraw it later; that's just bad financial planning advice in my estimation. There are still penalties even if you don't pay taxes on the withdrawl like you would in a 401k. If it's not a qualified reason, it still gets slapped with the same 10% penalty that traditional IRA's do is my understanding.
As long as it's contributions you made, it would not be penalized or taxed.
I agree that planning to take it out before putting it in isn't financially the soundest thing to do, but establishing a non-interest-earning emergency fund seems like throwing money away when you could establish a Roth and have it double as your emergency fund.
http://www.irs.gov/publications/p590/ch02.html#en_US_2013_publink1000231057
I didn't read it fully; however, looking at the IRS regulations, the majority of withdrawals in the emergency fund scenario would indeed be penalized.
Attempted cut and paste of the relevant information:
What Are Qualified Distributions?A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.
It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and
The payment or distribution is:
Made on or after the date you reach age 59½,
Made because you are disabled (defined earlier),
Made to a beneficiary or to your estate after your death, or
One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit).
Additional Tax on Early DistributionsIf you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions as explained in the following paragraphs.
Distributions of conversion and certain rollover contributions within 5-year period. This part is not us, only applies to funds converted from traditional IRAs that were originally tax-exempt If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over (the conversion or rollover contribution) that you had to include in income (recapture amount). A separate 5-year period applies to each conversion and rollover. See Ordering Rules for Distributions , later, to determine the recapture amount, if any.The 5-year period used for determining whether the 10% early distribution tax applies to a distribution from a conversion or rollover contribution is separately determined for each conversion and rollover, and is not necessarily the same as the 5-year period used for determining whether a distribution is a qualified distribution. See What Are Qualified Distributions , earlier.
For example, if a calendar-year taxpayer makes a conversion contribution on February 25, 2013, and makes a regular contribution for 2012 on the same date, the 5-year period for the conversion begins January 1, 2013, while the 5-year period for the regular contribution begins on January 1, 2012.
Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover contribution that you had to include in income because of the conversion or rollover.
You must pay the 10% additional tax in the year of the distribution, even if you had included the conversion or rollover contribution in an earlier year. You also must pay the additional tax on any portion of the distribution attributable to earnings on contributions.
Other early distributions. This is us. Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions--we have no taxable part unless we are withdrawing earnings, the amount we contribute is not taxable. Only the taxable parts are potentially subject to a penalty (unless an exception applies)that are not qualified distributions.
Exceptions. You may not have to pay the 10% additional tax in the following situations.
You have reached age 59½.
You are totally and permanently disabled.
You are the beneficiary of a deceased IRA owner.
You use the distribution to buy, build, or rebuild a first home.
The distributions are part of a series of substantially equal payments.
You have unreimbursed medical expenses that are more than 10% (or 7.5% if you or your spouse was born before January 2, 1949) of your adjusted gross income (defined earlier) for the year.
You are paying medical insurance premiums during a period of unemployment.
The distributions are not more than your qualified higher education expenses.
The distribution is due to an IRS levy of the qualified plan.
The distribution is a qualified reservist distribution.
It is a bit confusing, but the contributions are not taxable. And only the taxable portions are potentially subject to an additional 10% penalty. If you contribute, say, 10k, and later withdraw 12k, the 2k of earnings would be both taxable and subject to hte penalty if no exception applies.
From what i understood only the gains were taxable, but your original contributions were not taxable when you would withdraw, since you paid tax on it when you put it into your roth IRA. Taxes in general make my head hurt every time i have to think about it.
What I did, and it worked pretty well for me, was set up my 401k, as soon as I was eligible for it.
I then set my budget on what I brought home on each check.
Every raise I got I put 50% of it in the 401k, and only kept 50% of the raise per paycheck . (not much, but every little bit helps.
I am now fully vested, 37 years old, and live on 80% of my salary, the other 20% goes into my 401k.
The tricky part is living on less then you make. If you can set yourself up to live on 70 to 80% of your salary, you never miss the money going into your account.
If you are single, you may benefit from contributing more, to drop your annual adjusted gross income into a lower tax bracket. This was my case.
Research the "rule of 72" and use some of the calculations from there.
Keep in mind.. you are saving for the LONG TERM.. not for next year... do the next year savings in a liquid account, even though the interest right now is not favorable.
OFFICIAL GARDEN START DATE: 10-05-2014... TARGET GARDEN END DATE: 06-01-2016 Lets Git 'r' dun