401K or Roth IRA account?

[Mayfriday0529]

My company gives 401k plan, but they don?t match anything for every dollar you put in, I had it for about a year or so now and have put in about 1200$, should I just close that 401k plan and roll it over to a Roth IRA?

Any advice is welcome.

 

[neovan]

I'm wondering the same question. Bump for financial advice.

 

[Jzero]

401k is a tax shelter. You should contribute at least some to that because it will lower your tax burden, especially if you can contribute enough to get to a lower bracket. The downside is that you will be assessed tax on the money when you take it out when you get older, and you will be taxed at those rates. So it may not be beneficial to contribute everything to it (read: contributing the legal limit).
If you still have money leftover, consider a Roth IRA.

 

[dirtboy]

I don't think you can roll a 401k into a ROTH without atleast taxes and possibly early withdrawal penalties.

Max out your pretax account first, then when you have leftover money, consider a ROTH.

 

[royaldank]

With a ROTH, aren't you paying taxes up front at your current tax bracket? Why not put it in something where you pay taxes while you are taking money out, since you'll be in a far lower tax bracket at that point?

 

[Mayfriday0529]

huh huh

i just got a brain dump where i'm confused.

your saying lower tax bracket so if i still keep it i get taken less taxes of my paycheck because its pre-tax right.

i dont make lots of money, only 22,000 which means i take a 440 check gross and i contribute only 5% so i get taken about 20 dollars a week.

so each week 20 dollars go into my 401k so right now i have 1313$ in 401k. But to me its like just taking 20 dollars a week and putting it in a savings account. I thought the point of 401k's was for companys to match at least some amount that way it grows.

so far with the amount i had i have only gain about 2%

 

[Jzero]

Originally posted by: royaldank
With a ROTH, aren't you paying taxes up front at your current tax bracket? Why not put it in something where you pay taxes while you are taking money out, since you'll be in a far lower tax bracket at that point?

Presumably, the tax rate will be much higher in ~30 years when you take the distributions. It could be more beneficial to put enough in your 401k to lower your current tax bracket (of course if you are close enough to the borderline) and then contribute to your Roth at the lower tax rate and take the distributions for free 30 yaers from now.

 

[CPA]

Originally posted by: Jnetty99
huh huh

i just got a brain dump where i'm confused.

your saying lower tax bracket so if i still keep it i get taken less taxes of my paycheck because its pre-tax right.

i dont make lots of money, only 22,000 which means i take a 440 check gross and i contribute only 5% so i get taken about 20 dollars a week.

so each week 20 dollars go into my 401k so right now i have 1313$ in 401k. But to me its like just taking 20 dollars a week and putting it in a savings account. I thought the point of 401k's was for companys to match at least some amount that way it grows.

so far with the amount i had i have only gain about 2%

When your taxes are computed on your paycheck, 401K contributions are subtracted prior to the calculation. this is called pre-tax and you benefit with an immediate tax reduction. Compare that to say a credit union savings account deduction which would have tax calculated, then the deduction withheld.

And 401K plans were not designed for companies to match, they were designed as a pre-tax method of savings. If a company matches, then it is an additional benefit of you company's plan.

 

[austin316]

Originally posted by: Jnetty99
huh huh

i just got a brain dump where i'm confused.

your saying lower tax bracket so if i still keep it i get taken less taxes of my paycheck because its pre-tax right.

i dont make lots of money, only 22,000 which means i take a 440 check gross and i contribute only 5% so i get taken about 20 dollars a week.

so each week 20 dollars go into my 401k so right now i have 1313$ in 401k. But to me its like just taking 20 dollars a week and putting it in a savings account. I thought the point of 401k's was for companys to match at least some amount that way it grows.

so far with the amount i had i have only gain about 2%

401K advantages
1. Usually more than 2% growth, especially if you choose funds that match or closely match the market (IE S&P 500 Fund)
2. Usually a company will match like 50-100% of your donation up to 6% or so of your salary.
3. The gov't. only taxes your income AFTER your 401k is already taken out.

 

[royaldank]

Originally posted by: Jzero

Originally posted by: royaldank
With a ROTH, aren't you paying taxes up front at your current tax bracket? Why not put it in something where you pay taxes while you are taking money out, since you'll be in a far lower tax bracket at that point?

Presumably, the tax rate will be much higher in ~30 years when you take the distributions. It could be more beneficial to put enough in your 401k to lower your current tax bracket (of course if you are close enough to the borderline) and then contribute to your Roth at the lower tax rate and take the distributions for free 30 yaers from now.

I see. It's sort of a game then and you're risking either way. Right now I'm working full time and fall into a fairly decent tax bracket. In 30 years, taxes could be higher, but it could also be a flat tax at a lower rate than I'm currently paying on. ROTH isn't a bad idea, but it's probably not as great as most folks will lead you to believe.

 

[CPA]

Originally posted by: Jnetty99
My company gives 401k plan, but they don?t match anything for every dollar you put in, I had it for about a year or so now and have put in about 1200$, should I just close that 401k plan and roll it over to a Roth IRA?

Any advice is welcome.

And why would you want to roll it over if you are still with the company. You get 0 benefit from doing this. Now when you leave, you will most likely be given the option to take it lump sum or roll it over (because your balance is less than $5K), but that option will come from the plan administrator.

 

[SuperTool]

You put after tax money into Roth, but it grows tax free, so you don't pay capital gains on it when you retire.
Who knows what the capital gains tax will be when you retire. If you have spare money after 401k, put it into Roth. I max out my 401k and Roth.
The conventional wisdom is put at least what employers match into 401k, then max out Roth, then put more into 401k, so I guess if you don't have matching, put into Roth first, then 401k.

 

[Mayfriday0529]

I would love to put the maximum 401k contribution but i can't afford it, between 401k and insurance and suplemental no way.

I think i have over year and half contributing and i barely have 1313$ not even close to the maximum allowed.

if i had the extra cash i would open a Roth IRA but can't afford that one either, maybe next income tax return.

 

[CPA]

Originally posted by: Jnetty99
I would love to put the maximum 401k contribution but i can't afford it, between 401k and insurance and suplemental no way.

I think i have over year and half contributing and i barely have 1313$ not even close to the maximum allowed.

if i had the extra cash i would open a Roth IRA but can't afford that one either, maybe next income tax return.

get rid of your supplemental insurance and put that money in the 401K. Your supplemental is not pre-tax, either.

 

[Mayfriday0529]

Originally posted by: CPA

Originally posted by: Jnetty99
I would love to put the maximum 401k contribution but i can't afford it, between 401k and insurance and suplemental no way.

I think i have over year and half contributing and i barely have 1313$ not even close to the maximum allowed.

if i had the extra cash i would open a Roth IRA but can't afford that one either, maybe next income tax return.

get rid of your supplemental insurance and put that money in the 401K. Your supplemental is not pre-tax, either.

AFLAC, i just got it, i rather keep it paying only 12 bucks and i could have used it two years ago when i was out of work for 2 months sick.

 

[CPA]

Originally posted by: Jnetty99

Originally posted by: CPA

Originally posted by: Jnetty99
I would love to put the maximum 401k contribution but i can't afford it, between 401k and insurance and suplemental no way.

I think i have over year and half contributing and i barely have 1313$ not even close to the maximum allowed.

if i had the extra cash i would open a Roth IRA but can't afford that one either, maybe next income tax return.

get rid of your supplemental insurance and put that money in the 401K. Your supplemental is not pre-tax, either.

AFLAC, i just got it, i rather keep it paying only 12 bucks and i could have used it two years ago when i was out of work for 2 months sick.

Doesn't your employer have Short-Term Disability or Long-Term Disability?

 

[oog]

The limit of how much you can contribute to your 401(K) is higher than the limit on what you can put into an IRA in a given year. Unless the investment options within the 401(K) are terrible, I would keep it.

 

[Mayfriday0529]

Originally posted by: CPA

Originally posted by: Jnetty99

Originally posted by: CPA

Originally posted by: Jnetty99
I would love to put the maximum 401k contribution but i can't afford it, between 401k and insurance and suplemental no way.

I think i have over year and half contributing and i barely have 1313$ not even close to the maximum allowed.

if i had the extra cash i would open a Roth IRA but can't afford that one either, maybe next income tax return.

get rid of your supplemental insurance and put that money in the 401K. Your supplemental is not pre-tax, either.

AFLAC, i just got it, i rather keep it paying only 12 bucks and i could have used it two years ago when i was out of work for 2 months sick.

Doesn't your employer have Short-Term Disability or Long-Term Disability?

we have but it doesnt cover everything, got the supplemental juts in case, plus the cancer policy.

 

[LeadMagnet]

max them both out. You'll be glad you did when you're 60

 

[CPA]

Originally posted by: Jnetty99

Originally posted by: CPA

Originally posted by: Jnetty99

Originally posted by: CPA

Originally posted by: Jnetty99
I would love to put the maximum 401k contribution but i can't afford it, between 401k and insurance and suplemental no way.

I think i have over year and half contributing and i barely have 1313$ not even close to the maximum allowed.

if i had the extra cash i would open a Roth IRA but can't afford that one either, maybe next income tax return.

get rid of your supplemental insurance and put that money in the 401K. Your supplemental is not pre-tax, either.

AFLAC, i just got it, i rather keep it paying only 12 bucks and i could have used it two years ago when i was out of work for 2 months sick.

Doesn't your employer have Short-Term Disability or Long-Term Disability?

we have but it doesnt cover everything, got the supplemental juts in case, plus the cancer policy.

You remind me of my boss, he has insurance for everything. I guess if it's only 12 bucks it's not that big of a deal. I know I would get rid of it, though.

 

[Mayfriday0529]

Originally posted by: CPA


You remind me of my boss, he has insurance for everything. I guess if it's only 12 bucks it's not that big of a deal. I know I would get rid of it, though.

its the first year they offer it so i took it. i got
Personal Accident policy
Personal Cancer Plan
Personal Short Term Disability

I'm only 24 but i already had two surgerys at age 22, back then had no benifits like this so i spend 2 months without pay.