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34

They might not have to open accounts at 12 bank because the coverage does allow multiple accounts at one institution if the accounts are joint accounts. It also treats retirement accounts a separate account. The bigger issue is that most millionaires don't have all their money siting in the bank. They invest in stocks, bonds, government bonds, international ...


22

Because Congress said so. Now, if you're asking for the legislators' rationale, it's something along the lines of: We only create tax shelters when we "need" to; otherwise we just make our deficit worse for no reason. Absent a particular need, better to just lower the tax rate in general. It's a national priority that people be able to secure their ...


21

I think the currently accepted answer misses the most typical way that larger contributions can be made. The $19.5k limit applies to employee pre-tax and Roth contributions. Employee after-tax contributions are not subject to this limit, and can be used to reach the $57k total. After-tax contributions sound like a bad deal (contributions taxed going in and ...


20

You asked: In a unlikely case of my friend not paying the car, I suppose the bank will use the lien and will sell the car first and will ask me to pay any difference. No. If your friend does not pay the loan installments, the bank will come after you for the whole loan, or at least whatever part your friend hasn't paid off. The bank does not want a ...


18

Rich people use "depositor" banks the same way the rest of us use banks; to keep a relatively small store of wealth for monthly expenses and a savings account for a rainy day. The bulk of a wealthy person's money is in investments. Money sitting in a bank account is not making you more money, and in fact as Kaushik correctly points out, would be losing ...


17

Employer contributions do not count toward the individual contribution limit, which for 2017 is, 18K. However they do count toward the combined contribution limit, which for 2017, is 54K. See this link for a less timely explanation.


16

Yes, they are within their rights to do so. The dollar limit of $18,000 (in 2015) and percentage limit of 100% are the maximum an employer can allow an employee to contribute, but the employer can set a lower limit. http://www.smart401k.com/Content/retail/resource-center/retirement-investing-basics/maximum-contribution-limits says: Contribution limits ...


16

I moved from a job that did not have a 401k plan to a job that does have a 401k plan. I have not contributed to any other IRA or 401k so far this year. Because you have not contributed any money to a 401K plan this year, you can put the full amount into your 401K by the end of the year. Keep in mind that that for the purposes of the $18,500 or $24,500 ...


14

Your question seems to be based on an incomplete understanding of the mechanics of how banks pursue loans when things go poorly. I'm saying this because of they way you described the situation here: In a unlikely case of my friend not paying the car, I suppose the bank will use the lien and will sell the car first and will ask me to pay any difference or ...


13

If there were no contribution limits, you could shelter practically all of your income from income tax. The government would not have sufficient tax revenue. Hence, there are limits which ensure some personal income remains taxable today. Similarly, when you retire, there are rules for minimum required distributions (withdrawals) which ensure the government ...


13

Employers can offer matches more than 100%, and can also offer contributions that are not tied to your contributions. This increases participation without forcing employees to contribute, which helps employers pass the "highly compensated employee" test and allow all employees to fully participate. For example, an employer may contribute 5% of your ...


12

Some institutions enforce the limits, some don’t. However, one aspect that you may not realize is that they really don’t know what your contribution limits are. Lots of things affect your contribution limits. For the HSA specifically, your limits can be reduced if you are only eligible for part of the year, or if you have another HSA account that you are ...


10

Because 401k's are also used by self employed. A person who has a schedule C profitable income can open a 401k and "match" in whatever ratio he wants, up to 25% of the net profits or the limits you stated. This allows self-employed to defer more income taxes to the future. Why only self-employed? Good question. Ask your congressman. My explanation would be ...


10

A Roth IRA is still a tax shelter. It allows for tax-free gains.


10

No. No lender is going to touch such a weird deal, because it breaks all their risk models. Further, it doesn't work like that. The usual bad outcome is blam, suddenly there's a rather bad mark on your credit report. It's completely out-of-the-blue. Some days later you'll get a nasty letter in the mail. The damage is done. It turns out your friend ...


9

From [Roth-Comparison-Chart][IRS} Designated Roth 401(k) Account: No income limitation to participate The lack of an big income limit is a benefit of the Roth 401K. There is no penalty because there is no limit of the Roth version of the 401K. It get the company match, and it grows tax free. There is still a maximum amount that each person can contribute,...


8

Many times the best info is from the IRS: How Much Salary Can You Defer if You’re Eligible for More than One Retirement Plan? The amount of salary deferrals you can contribute to retirement plans is your individual limit each calendar year no matter how many plans you're in. This limit must be aggregated for these plan types: 401(k) 403(b) SIMPLE ...


8

The Roth IRA contribution income limit is based on the current year (2019)'s MAGI. If you are not sure whether you will be over the limit or not, you can 1) wait until January 1 - April 15 of 2020 to contribute to Roth IRA for 2019, or 2) do a "backdoor Roth IRA contribution" (assuming you have no money in pre-tax IRAs). If you have already contributed to ...


7

are you allowed to open multiple IRAs? Yes - but the contribution limit applies to all IRAs in total, so you cannot go over that limit by contributing to multiple IRAs. I was curious what people who want to invest more into a retirement account but don't have a 401k usually do. Invest in non-retirement accounts: 529 and other education savings plans ...


6

If the cards are with different banks, this is likely to make things worse instead of better, because it will cause your total card utilization to go up and alter the average age of open accounts. If your cards are with the same bank, you might be able to call them and request a credit line consolidation, where you move some of that total credit limit ...


6

I found out there is something called CDARS that allows a person to open a multi-million dollar certificate of deposit account with a single financial institution, who provides FDIC coverage for the entire account. This financial institution spreads the person's money across multiple banks, so that each bank holds less than $250K and can provide the ...


6

Not the US government, the US Congress, but yes - an attempt to slightly improve the horrible law. You may notice that the $2000 limit was from 1981. When you take that into account, the current level of $5500 is more or less matching the inflation. The original amounts were not automatically adjusted, and the Congress adjusted them "manually" through a ...


6

"Unfortunately, our combined income is above the allowed combined income to fund an IRA" - Sorry, not to be nit-picky, but you can deposit to a traditional IRA, you just may not be able to deduct it. As Craig hinted in a comment, if you have no existing IRA money, you can deposit, wait a moment, then convert to Roth. So the money is taxed, but never to be ...


6

There is an approach that might help you stash more cash ($3,300 -$6,650) for retirement pre-tax, but it only works in a pretty specific situation. If your employer has a qualified HDHP insurance plan and it makes sense* for you to enroll in it, then you will be eligible to set up and contribute to a Health Savings Account (HSA) and contribute to it on a ...


6

It is enforced long before distribution time. By May 31st of each year the trustee sends a copy of IRS form 5498 to you, they also send a copy to the IRS. This form tells the IRS that you made an IRA or Roth IRA contribution. The IRS will then match it to your tax form that you filed in April. If you shouldn't have made the contribution, or you over ...


6

When they say your total contributions do they mean combined traditional and Roth IRA, or do they mean traditional, separate, Roth separate? Yes, they mean that the amount you contribute to Traditional IRA that year, plus the amount you contribute to Roth IRA that year, cannot exceed that number.


6

My rule is very simple: If you have the money and want to give it to your friend, give him the money. If you don’t have the money, or don’t want to give it to your friend, don’t give him the money. Never co-sign. It breaks your bank, and it breaks friendships. If you want to, you can give your friend a $2,000 loan. Or a present. Possibly with money you ...


6

Does your 401k provider stop you when you hit your max? Here is a bogleheads discussion on the topic. Apparently different employers do different things. https://www.bogleheads.org/forum/viewtopic.php?t=133214 Some employers stop your contributions, some put the money in after-tax 401(k) contributions, and some stop their own matching contributions. ...


5

Back in the day when it wasn't possible to see your balance everyday or make changes every paycheck it was much more difficult to hit the max contribution exactly. We could only tell them what percent (an integer only) and we could only change it quarterly, and had to submit the paperwork 30 days in advance of the start of the quarter. The idea was to set ...


5

am I comparing apples and oranges? Yes - different purposes, different laws, different regulations. One rationale could be that HSA benefits are immediate while retirement benefits are deferred, so the benefit of employer contributions are not felt until retirement and thus do not need as stringent a limit, but that's a complete guess.


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