New answers tagged

6

Do I qualify for "First Time Home Buyer" in the first place? You don't qualify as a first-time home buyer. It doesn't have to truly be the first home you've purchased, but you can't have owned a house for the last two years. I could take out a loan against the 401K, right? Would there be tax implications for this? Would this be a qualified reason for ...


1

A variable annuity is a contract with an insurance company that invests your money in mutual funds. The annuity will provide payments to you either immediately or at a future date, for the rest of your life, guaranteeing that you won't outlive your assets. The death benefit guarantees that your beneficiary will receive at least the amount of your ...


3

Some points: When the company offers you a match, not contributing to your 401(k) is -- in no uncertain terms -- a pay cut. If this is your first home purchase then you'll be able to exclude $10K from the 10% penalty you'll pay on the 401(K) withdrawal. You'll have to pay income tax on the whole value of your 401(k). Thus, put aside 20-25% of the value of ...


0

You don't mention Mom, so I'll talk about single filers. In 2019, the standard deduction is $12,200. The key thing, in my opinion, is his marginal rate. After the deduction, say his taxable income is $35,000. This is an opportunity to convert $4,475 from the 401(k) to Roth, to "top off" that bracket. Paying 12% on this conversion, and accumulating tax free ...


1

Justin's answer is absolutely correct. I'd like to focus on the aspect of 'withheld tax' vs 'tax due'. Say I retired early. 55, so no penalty to withdraw from 401(k), and no social security income yet. At $100K withdrawn, and a standard deduction of $24,400, (married filing joint), I'd have a taxable $75,600 and a tax due of $8684, ($1940 + 12% of amount ...


9

That seems reasonable given the facts presented. Normally, a 401(k) is a tax deferred account (you can have after tax money in there but that is less common so I ignore that possibility). The money wasn't taxed when it went in so it has to be taxed as regular income on the way out. If federal taxes were $989, that's 19.78%. If your father is single, ...


4

rollover into new employer plan so all my money is compounding This is not an issue. Your money will compound the same whether it's in one account or two. Suppose you have $100 in two accounts, each of which earns 10% for two years. In one year you'd have $110 after the first year and $121 after the second year in each account for a total of $242. If ...


2

This is my understanding: By law, companies are required to vest a company match using a graded or cliff plan. If they use the cliff plan, they must vest no slower than 100% at 3 years (this is apparently what you previously had). If they use the graded plan, they must vest no slower than 20% each year, starting after 2 years. So, the good news is, if you ...


0

To make the math for non-math inclined folks simpler. Employer matches are usually denoted as a percentage of the salary (e.g. up to 10% of salary), if you want to get all of that, and you’re expecting a raise mid-year...you would have to bust out Excel to make projections while 10% guarantees maximum whatever that amount is (on a pay period basis at least). ...


0

0.25% per paycheck of a $50,000/year salary is only $4.81. 401(k) administrators might just Keep It Simple and stick to integer values (since there's no worry about floating point rounding errors and it simplifies the programming a bit). I agree with @dwizum though: I don't think there's a clear standard, which makes a question of "why is X the standard,...


4

There's no harm - some providers apparently just choose to only use whole numbers. If this is a problem for you, talk to your benefits department and see if there's a way to choose a non-whole number off-line.


1

Last year at my company our 401K election was a dollar amount, and this year it was changed to be a percentage instead. I specifically asked HR why and was told that "studies have shown that employees will contribute more if they are given a percentage option instead of a dollar amount". I pointed out that if someone wants to max out their 401K it's much ...


19

A variety of factors likely contribute. Generally, companies want to encourage all employees but particularly lower paid employees to contribute as much as possible to their 401(k). Companies have to pass nondiscrimination tests in order to ensure that their highly compensated employees can actually contribute the max to their 401(k). These tests look ...


9

When I first started putting money into my 401(k) back in the 1980's the only options we had were by percentage. That was fine for me because I was interested in getting the maximum match, and I was never going to hit the annual maximum. Over the decades the maximum match percent started getting closer to the annual maximum. My income was also increasing ...


5

Most likely because many companies set up matching as "X% of your contributions up to Y% of your pay", so setting up a percentage to guarantee matching (rather than a fixed amount) is easier in these situations, and adjusts automatically as pay adjusts. How do you guarantee that you get the full match if your salary fluctuates? Also setting up a fixed ...


0

Typically they will not match, which makes this strategy, failing other information, very unwise. The employee should normalize their contributions such that they reach the limit on the last paycheck of the year. This can be difficult with employees that are paid variable amounts, but is doable. Cash flow management can be tricky.


0

My thoughts with (2) are to contribute a little more into my 401k in order to reduce my taxable income some, and contribute the rest into my IRA to (up to the contribution limit of $6000) in order to take advantage of superior returns. This is making the best of the "bad" situation of earning $196K+/annum.


3

It sounds like your question can be boiled down to: is it worth contributing to a potentially less tax-optimal Roth account (versus a pre-tax account) in order to access better investment options? You are probably the only one that can answer that. But some points to consider: How superior would pre-tax versus Roth contributions be for you? The main factor ...


3

Will the company will still match or the employee lose the 401(k) match for the latter 6 months? There are some plans that do it each way. The particular term that controls this is called an annual "True-Up"... you should check your participant disclosure documents and/or ask your benefits coordinator whether your plan provides True-Up of the company match....


3

In such a situation, my former employer would make up the lost deposits in February of the following year. e.g. I deposit 90% of my income the first month, and that's it for the year for me. In February, the employer sees their yearly match should have been $3000, and they deposit the difference then. I agree with my fellow Joe, i.e. you should ask your ...


34

TLDR: That TD Ameritrade product isn't more aggressive, just razzle-dazzle. Invest like endowments. And invest very early, because time means compounding. Aggressiveness is the right strategy. But it's simple. Endowment manager here. Go all-in on retirement, and do it early. Time is money, friend. Endowments are forever-funds which are designed to ...


6

I'd like to add a spin to this issue, based on tax brackets. It appears that you don't itemize, and take only the standard deduction, $12,200. Meaning that at tax time, $8,000 or so will be taxed at the higher 22%, vs 10/12% of the lower brackets. I'd suggest you consider a mix of traditional and Roth in your company account. At some point, you might ...


40

The biggest benefit of using a Roth 401(k) vs a non-tax-advantaged investment account is that the growth is tax free (not just deferred like a traditional 401(k)). With the managed account, you'll pay taxes on all distributions and realized gains as you get them, which adds friction to long-term growth. The downside is obviously that you can't touch the ...


4

You are still young in your career and will likely have a number of large ticket expenses that you'll want to save for (like the house you mention). Having short-to-medium term investments to accomplish this goal is a totally normal thing to do. I recommend getting in touch with a CFP that can help you assess your risk tolerance and provide specific advice ...


-1

The nonvested money isn't coming out of anybody's pocket until it is actually vested. When you rollover your 401k to something you have complete control over you won't get the nonvested money. There's also a good chance that the 401k company is unaware of your change of employment and so they can't presume that you're not going to be able to vest it. If ...


7

The last time I switched companies the old company had a vesting policy that allowed a 5 year gap in employment. If the employee returned before the 5 year deadline then they would continue along the path to full vesting. In fact a few years later they changed their policy to shorten the vesting schedule, and in my case if I return before the 5 years is up I ...


6

Now I'm in a spot where I want to invest my business income into something. This is quite easy. You can open a SEP IRA for your self-employment income. SEP stands for "simplified employee pension" though in practice it seems more like a variant of a 401k than what is traditionally considered a pension. The best part is that your day job doesn't limit ...


-1

Make steady payments to your loans. Your loans will diminish in the percentage of your salary as you increase in income. Make hard investments in land, 401k, stocks etc which will increase in value as the years go by. Buy land anywhere corporate or private, the value of land tends to recover through 10 t0 30 years cycles of recessaion.


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