42
votes
Accepted
Could my employer match contribution have caused me to have an excess 401K contribution?
The limit of $19,500 (plus an additional $6,500 for those 50 and over, for a total of $26,000) only applies to employee pre-tax contributions to Traditional 401(k) and employee contributions to Roth ...
- 17.5k
40
votes
Accepted
Why should I invest so much in 401(k)?
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 ...
- 142k
34
votes
Why should I invest so much in 401(k)?
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 ...
28
votes
Accepted
With tax-free earnings, isn't Roth 401(k) almost always better than 401(k) pre-tax for a young person?
You say you're in one of the highest federal tax brackets now, but your math assumes a 10% tax rate now, and an unspecified rate in retirement. Using realistic numbers let's say you're in the 35% ...
- 16.2k
25
votes
Accepted
Is your future tax bracket the ONLY consideration for Roth vs Traditional 401(k) accounts?
Personally, I view Traditional/ROTH as another form of diversification. Sure, you can look at existing tax tables and come up with what is the absolute most efficient option. BUT, over 30 years your ...
- 49.1k
21
votes
Accepted
If you inherit a Roth 401(k), is it taxed?
Well, no.
True, a Roth has no income tax. The tax was already paid on deposit and no more tax due.
But, the Roth, IRA or 401, still might be subject to estate tax, as it is still part of the ...
17
votes
Employer offering Roth 401k as well as traditional 401(k), established in career
The Roth/Traditional decision is complex, but can be broken down into a set of simple rules.
Ideally, you want to choose to tax your money at the lowest possible rate. This specifically refers to ...
16
votes
Is your future tax bracket the ONLY consideration for Roth vs Traditional 401(k) accounts?
No, not always. I would also add that your tax bracket at the time you invest also makes a difference in some cases.
For example: if you make very little (like a teenager summer camp job), will not ...
- 24.4k
16
votes
Is your future tax bracket the ONLY consideration for Roth vs Traditional 401(k) accounts?
One thing that's not been fully mathed here is that deposits into a pretax 401(k) are at one's marginal rate, but withdrawals at the average rate.
Say that while one is working, they make $100K/yr. ...
13
votes
Accepted
Should I consolidate my retirement plans if both are performing well?
To me, return isn't a huge consideration when deciding to roll over a 401(k) into an IRA or another 401(k). The main differences to me are :
convenience - it is typically less hassle to have all ...
- 142k
12
votes
Roth 401k when reached maximum AGI
As D Stanley correctly stated, no, the income limit doesn't touch the 401(k), Roth or traditional. And, no, the Roth 401(k) deposit doesn't lower your income, and doesn't impact AGI. The traditional ...
11
votes
Accepted
Roth 401k when reached maximum AGI
Does the same rule apply to a Roth 401k?
No - there is no income limit to participate in a Roth 401(k)
If hypothetically subtracting 36K from our annual income means we are below the limit for ...
- 142k
10
votes
Roth 401k Contribution limits reset on job change
Rollovers are different than Contributions.
You can rollover any amount as often as you want in every year, as it is basically just a transfer to an equivalent ('already taxed retirement') account. ...
- 38k
10
votes
Accepted
When rolling over a Roth 401(k) to a Roth IRA, does one have to pay any tax?
No, Roth accounts are from already taxed money, and changing the provider has no effect.
The only tax you pay for Roth money is on the gains you made and only if you take it out before you are 59.5 ...
- 38k
10
votes
Accepted
Is there a point to contributing to a nondeductible traditional IRA?
There are at least two reasons to contribute to an IRA:
A backdoor Roth IRA. You can still get your money into a Roth IRA to grow tax free. However, there may be some pitfalls.
Deferred tax on growth....
- 9,553
10
votes
Accepted
Rollover Roth 401(k) when not eligible for Roth IRA
Your income may be too high to make a new deposit into a Roth IRA, but that is not what you are trying to do. Regardless of your income, you are allowed to create the new account to either receive ...
9
votes
Accepted
Can I still contribute to a traditional IRA if it is not deductible? Should I?
To your question. Yes. What you propose is typically called the back door Roth. You make the (non-deductible) IRA deposit, and soon after, convert to Roth. As long as you have no other existing IRA, ...
9
votes
What are the advantages of a tax deferred investment account?
The piece you're missing about a traditional IRA is the up-front tax savings that may apply. If you were taxed at 25% and able to deduct the full contribution then you could contribute 33% more to a ...
- 71.2k
9
votes
Accepted
Is it forbidden to have more than one Roth account?
No. No rule against it. There are rules concerning how much you can contribute to each in a year (which are easily searchable and change yearly), but no rule against having both.
- 142k
8
votes
Employer offering Roth 401k as well as traditional 401(k), established in career
In addition to JoeTaxpayer's thorough answer, I just want to tackle one particular question that was also asked:
...all employer contributions are pretax?
There are a few main reasons that ...
- 47.3k
8
votes
Accepted
When should I contribute to my IRA over my 401(k)?
you have already deposited up to the employer match on the 401(k) and the IRA is more attractive. (Features listed in other bullet points)
the 401(k) does not offer the Roth version, and you prefer ...
8
votes
Should I consolidate my retirement plans if both are performing well?
I wouldn't pay much attention to performance, especially timeframe you're talking about. Everyone's up double digits, 10-15% annual return; you're happy that your funds are in that group but it's ...
- 35.9k
8
votes
Accepted
How should I split my contributions to Roth IRA and Roth 401k?
Generally, (and not considering Roth vs traditional status) the way you would want to prioritize/order these contributions would be the following:
401(k) up to whatever is required to capture maximum ...
- 9,553
8
votes
Accepted
What current tax bracket is used for Roth 401(k)? What happens if it's incorrect?
A contribution to a Roth 401(k) has no bearing on your income tax at all. The contribution is made with after-tax money. For income tax purposes, a contribution to a Roth does not affect the amount ...
- 116k
8
votes
Accepted
Roth 401k - Contributions are not going in as after tax?
5% contribution rate refers to your salary, regardless of the taxes. The employer has no knowledge of your effective tax rate.
The difference between pre-tax and after-tax/Roth contributions is that ...
- 184k
7
votes
Accepted
Roth 401k Contribution limits reset on job change
if I roll over existing Roth 401k to Roth IRA, will it allow me to put a full 18k in the new Roth 401k from the new employer?
No. The contribution limit for one year is $18k for all employee ...
- 142k
7
votes
Accepted
which types of investments should be choosen for 401k at early 20's?
I can't find a decent duplicate, so here are some general guidelines:
First of all by "stocks" the answers generally mean "equities" which could be either single stocks or mutual funds that consist ...
- 142k
7
votes
Accepted
Post Tax 401k or Taxable Brokerage Account?
With my additional savings is there any reason i would want to do a post-tax 401k instead of keeping it in a regular taxable brokerage account?
Let's clarify what you mean by "post-tax 401k".
First ...
- 5,107
7
votes
Accepted
401K Liquidation
I contributed to a 401(k) for the past three years and due to market volatility there is no gain in my contribution.
That is not surprising as we have had a market crash recently and while there has ...
- 79.6k
7
votes
What is a 401k plan in some contracting agency that is 0% to 100% contribution and limited to 25 funds?
The IRS limits the amount of your salary you can defer into a 401(k). In 2021, that limit is $19,500 but it changes year-to-year. If you are over 50, you can make an additional $6,500 catch-up ...
- 28.3k
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