401k->Roth?

[purbeast0]

why not do both?

i have a 401k and my own personal roth IRA and just contribute to both.

 

[thegimp03]

Forgive my naivety, but why would they?

They daydream about the additional tax revenue (i.e. money they can turn around and waste).

 

[thegimp03]

Keep in mind that contributions to Roth IRAs phase out if your MAGI is above certain limits - so if you make a bunch of money you probably can't use a Roth IRA. Check the tax code but I think it's around $105K for single filers and $169K for joint filers.

 

[overst33r]

They daydream about the additional tax revenue (i.e. money they can turn around and waste).

Is it all that much (nationally)? Is it even worth it for them?

 

[JS80]

Is it all that much (nationally)? Is it even worth it for them?

http://www.quora.com/What-are-the-t...invested-in-IRAs-401-k-s-and-Roths-separately

$18.2 trillion in total retirement assets, as of end of 2Q 2011 (I just updated Mike's ICI numbers):

$4.9 trillion in IRA's - $265 billion in Roths, the rest traditional, SEP, SAR-SEP and SIMPLE ;
$3.16 trillion in 401(k); but no easily available breakout, yet, between Roth and non-Roth 401(k); it's possible that's because the conversion feature was very recently allowed for in-plan conversions to Roth's of 401k's and 457b (government accounts), and some plan sponsors have yet to adopt and offer the feature.

 

[darkxshade]

Why wouldn't they?

Going after retirement income is political suicide? I don't know how it'll go over with the masses by telling them they did real good saving for retirement, in fact so good, the gov wants a piece of it.

 

[JS80]

Going after retirement income is political suicide? I don't know how it'll go over with the masses by telling them they did real good saving for retirement, in fact so good, the gov wants a piece of it.

Not really. They'll characterize Roth holders as tax evading 1%ers and the populists will buy it. It'll end up being political gain on the left.

 

[darkxshade]

Not really. They'll characterize Roth holders as tax evading 1%ers and the populists will buy it. It'll end up being political gain on the left.

Except I would say more than 1% of the populace has a stake in Roth... I would hope.

Plus letting them go after any retirement income would set a precedent that would open the gates to taxation on say 401k[traditional]. I mean after all, they aren't all that much different. Before you know it, they'll be taxing SS because everyone should pay their fair share.

 

[JS80]

Except I would say more than 1% of the populace has a stake in Roth... I would hope.

Plus letting them go after any retirement income would set a precedent that would open the gates to taxation on say 401k[traditional]. I mean after all, they aren't all that much different. Before you know it, they'll be taxing SS because everyone should pay their fair share.

All those things are entirely possible. Hopefully the US disintegrates and crumbles before that happens.

 

[GotIssues]

Not really. They'll characterize Roth holders as tax evading 1%ers and the populists will buy it. It'll end up being political gain on the left.

1%ers can't participate in Roth IRA. Once you pass a certain AGI, you are no longer allowed to contribute to a Roth IRA.

 

[JS80]

1%ers can't participate in Roth IRA. Once you pass a certain AGI, you are no longer allowed to contribute to a Roth IRA.

You can put it in to traditional IRA (with no tax deduction) and convert to Roth (without paying tax on it cuz you never took the deduction). But that's beside the point. Politicians will characterize Roth owners with hundreds of thousands of dollars in their account as tax evader to the populists who chose not to save and call them 1%ers.

 

[Brovane]

you got quite the nice gig, pension plus 401k contribution. i would agree with others here to go the roth ira route to give you tax flexibility when you retire as money taken out of roth is not taxed. with a pension and SS, you'll end up losing most of your SS with i think the windfall tax that reduces your benefit if you have a pension. you'll get something but not a lot to count on.

only concern is asset allocation and managing the balance between the 401k and roth ira as they should be viewed together and not separate. take a look at both target funds in both sides and see if you can piece together a pair that look pretty close and change assets at the same times.

FYI - The windfall provision is only if you don't have SS tax taken out. For example you work as a school teacher and you have a Pension but don't pay SS. If you also worked long enough in a job to also qualify for SS. If you went to collect SS you pension would be reduced by any amount you got from SS. However if you had SS taken out as you as you where accumulating your pension you wouldn't get the windfall provision. It really applies to government workers that sometimes work in area where they dont contribute to SS.

 

[JEDI]

I am contemplating my retirement plan. My employer contributes ~5% into my 401k.(not a match, they just contribute to it) I currently contribute ~6% into it. I have been thinking of stopping my contributions and opening a Roth. I know jack about investing and if I go this method it would most likely be with Vanguard and the 2035 or 2040 target fund.(26-28 years until retirement) The way I was looking at it is it will even out my tax situation as I would say there is a 90%+ change my tax rate will be higher when I retire than it is now. If I am understanding it correctly my tax liability will be higher and my take home pay lower, but would it be worth it in the long run? Thoughts?

Also my 401k fund options aren't regular funds but custom funds put together by the folks that run our pension fund.

pffftt.. you're on ATOT where everyone (ie: me):

maxes out both 401k and roth (via IRa conversion).
and $10k/yr into I-Bonds (well, maybe not this May offering 😱 )

 

[Net]

Questions to ask your employer:

1. Do they have a Roth 401k? This is the same tax advantage as a Roth IRA
2. Do they allow you to fill out a form to manage your own assets in your 401k? This will open you up to the rest of the market and not just their own pre-selected funds.

If non of the above work out still do at least the minimum to get the match. You can roll over a 401k to a Roth IRA

 

[disappoint]

Anything named Roth has got to be a gut idea. I for one welcome our Rothchild overlords.

 

[Gintaras]

What I prefer is my 401k with my company...

They put 10% in every year regardless if I put 0% or 3%....

10% every year is pretty solid... So of course I have a pretty decent retirement currently... if the stock market will ever get good, I will be golden 🙂

When you dream while you asleep - pretty normal, however, when you start to dream while you awake - mental condition...

 

[Chess]

When you dream while you asleep - pretty normal, however, when you start to dream while you awake - mental condition...

you aint kidding... its a mixture of both haha

 

[brianmanahan]

Go introduce yourself at Bogleheads.org. They will help you.

this * 9000

 

[brianmanahan]

pffftt.. you're on ATOT where everyone (ie: me):

maxes out both 401k and roth (via IRa conversion).
and $10k/yr into I-Bonds (well, maybe not this May offering 😱 )

pfft, no taxable investment in addition to your 401k + Roth? chump change. 😀

 

[brianmanahan]

Not really. They'll characterize Roth holders as tax evading 1%ers and the populists will buy it. It'll end up being political gain on the left.

derp, obviosuly didnt read IRS publication 590

 

[Capt Caveman]

You can put it in to traditional IRA (with no tax deduction) and convert to Roth (without paying tax on it cuz you never took the deduction). But that's beside the point. Politicians will characterize Roth owners with hundreds of thousands of dollars in their account as tax evader to the populists who chose not to save and call them 1%ers.

No you can't, same AGI limits apply to traditional IRAs. You must not be a 1%er.

 

[brianmanahan]

No you can't, same AGI limits apply to traditional IRAs. You must not be a 1%er.

actually the limit on trad ira is less than on roth, at least if you are single (which sucks)

 

[PowerEngineer]

One other nice thing about the ROTH IRA is that the balance is not subject to the minimum withdrawal requirements applied to traditional IRA's and 401k's (which currently set in at 70.5 years of age)

 

[Tequila]

actually the limit on trad ira is less than on roth, at least if you are single (which sucks)

No you can't, same AGI limits apply to traditional IRAs. You must not be a 1%er.

Wow you guys are clueless. The AGI limit on traditional IRA only applies to how much you can deduct. You can still contribute 5k if you are over the AGI limit and then convert that to a Roth IRA. Just make sure you file your form 8606 every year so you don't get taxed on that non-deductable contribution amount when you convert it. I've been making non deductable trad IRA contributions for several years and finally converted to a Roth IRA last tax year and plan on converting my 5k contribution from my trad IRA every year herein.

 

[boomhower]

Go introduce yourself at Bogleheads.org. They will help you.

Will do.

how about 401k + Roth 401k?

Not available.

you got quite the nice gig, pension plus 401k contribution. i would agree with others here to go the roth ira route to give you tax flexibility when you retire as money taken out of roth is not taxed. with a pension and SS, you'll end up losing most of your SS with i think the windfall tax that reduces your benefit if you have a pension. you'll get something but not a lot to count on.

only concern is asset allocation and managing the balance between the 401k and roth ira as they should be viewed together and not separate. take a look at both target funds in both sides and see if you can piece together a pair that look pretty close and change assets at the same times.

That latter is an issue, but again I'll be using a target fund in the Roth. My 401k is rebalanced every quarter automatically.

As has already been said, it depends on the tax rate now and when you retire and what withdrawal strategy you use. However, taxes will rise by the time you retire (assuming it's 10+ years). We need to pay down the national debt somehow, and I don't see spending cuts doing it alone.

That's what I was thinking.

Keep in mind that contributions to Roth IRAs phase out if your MAGI is above certain limits - so if you make a bunch of money you probably can't use a Roth IRA. Check the tax code but I think it's around $105K for single filers and $169K for joint filers.

Not an issue for me.

FYI - The windfall provision is only if you don't have SS tax taken out. For example you work as a school teacher and you have a Pension but don't pay SS. If you also worked long enough in a job to also qualify for SS. If you went to collect SS you pension would be reduced by any amount you got from SS. However if you had SS taken out as you as you where accumulating your pension you wouldn't get the windfall provision. It really applies to government workers that sometimes work in area where they dont contribute to SS.

I pay full SS. Actually my pension is through the state. When I retire the city I work for will pay what my SS will be until I get to SS age. (I'll be eligible to retire at 55 with full pension at 57.)

Questions to ask your employer:

1. Do they have a Roth 401k? This is the same tax advantage as a Roth IRA
2. Do they allow you to fill out a form to manage your own assets in your 401k? This will open you up to the rest of the market and not just their own pre-selected funds.

If non of the above work out still do at least the minimum to get the match. You can roll over a 401k to a Roth IRA

1. Nope
2. Nope