71
votes
Accepted
Company with high match for 401K vs IRA, which to choose?
Max out the 401k. The uncapped match is a free 50% rate of return and no other investment can match this.
- 7,615
57
votes
Can I hire my kid and start a Roth IRA for him?
Forget the Roth for one moment.
Having a $5500 deduction for your LLC would be great. Parents hire their kids all the time. To do real work at a reasonable wage. Do you have work that's appropriate ...
54
votes
I'm 18 and have 6 grand. What should I do with it?
A Roth IRA is a great idea. You can only put in as much as you earn (as in, get in paychecks) each year, but that shouldn't be too much of a problem for you right now. You're paying nothing in taxes,...
- 35.7k
52
votes
I'm 18 and have 6 grand. What should I do with it?
Unlike others, I do NOT recommend putting your $6k into a retirement fund this early. It's a bad idea.1
If you're overflowing with money after college and don't know what to do with this $6,000 then, ...
- 3,369
49
votes
Accepted
Why is half of your IRA Required Minimum Distribution forfeited if you do not make minumum withdrawals by 70.5 years of age?
According to the link below, it does appear that you must take an RMD, or Required Minimum Distribution, from your IRA at age 70½, or face a 50% penalty of the RMD AMOUNT that has NOT been taken, ...
- 2,735
48
votes
Should I open a Roth IRA or invest in the S&P 500?
Your question indicates confusion regarding what an Individual Retirement Account (whether Roth or Traditional) is vs. the S&P 500, which is nothing but a list of stocks.
IOW, it's perfectly ...
- 50.6k
40
votes
Accepted
IRS sent me a letter...I messed up by unwittingly taking money out of a Roth IRA and reporting it incorrectly
There could be a few reasons for this, my first guess is that you didn't report the distribution on your return (indicated on line 15 of your 1040, pictured below), the IRS got a copy of the 1099-R, ...
- 69.1k
38
votes
Accepted
Is a Roth IRA good for a high schooler?
You are correct that if your income is low enough that you don't have to pay taxes, then a Roth will let you avoid taxation at both ends, because Roth withdrawals are tax-free.
You are also correct ...
- 24k
33
votes
Accepted
My company is suspending its 401K match; what is the best thing to do with my money?
Based on your comment, I see no reason to stop all contributions to your 401k except for the following reasons:
Your investment choices in the 401k are horrendous (bad funds, high fees) or the ...
- 8,456
32
votes
Accepted
Did I make Roth IRA contribution after the deadline?
You are misunderstanding the deadlines. The deadline for 2017 contributions is April 15, 2018. And the deadline for 2018 contributions is April 15, 2019.
The contribution you made on July 5, 2017 ...
- 115k
31
votes
I withdrew contributions from a Roth IRA. Why is my tax service imposing a 10% penalty? I am only withdrawing contributions, not earned income
I think you're misunderstanding Code J. It doesn't mean "this withdrawal is definitely subject to a 10% penalty", it means "neither of the two exceptions to the penalty apply" (Q - ...
- 1,878
30
votes
Is there any reason to invest in stocks, ETFs, etc. outside of a tax-advantaged account?
Some thoughts:
There's a limit to how much you can put in a tax-advantaged account. Even with mega back-door and other ways to move money around, there's still limits into how much you can contribute
...
- 130k
29
votes
I'm 18 and have 6 grand. What should I do with it?
First, it's great that you're considering these options at all, and that you're trying to be responsible and forward-thinking about planning for your future.
I'm also going to break with the ...
- 444
28
votes
Accepted
When do you actually pay taxes on Roth IRA contributions?
There's no additional income tax burden created when you decide to make Roth IRA contributions, your Roth IRA contributions are taxed at the same time all your income is taxed.
If you earned that $...
- 69.1k
27
votes
Why is half of your IRA Required Minimum Distribution forfeited if you do not make minumum withdrawals by 70.5 years of age?
You elected to defer paying taxes by contributing to an IRA. Lawmakers simply want to make sure that they collect those taxes by requiring you to either withdraw the money (incurring a tax liability) ...
- 32.7k
23
votes
Are Roth IRA dividends taxable?
For a Roth IRA, everything withdrawn is tax free as long as you meet the age/time requirements.
You are correct that the contributions have been taxed; but the dividends, interest, and growth due to ...
- 136k
22
votes
Accepted
Why are there income limits for Roth IRAs?
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 ...
- 510
22
votes
Company with high match for 401K vs IRA, which to choose?
It's very tempting to max out the 401(k), for the reason Hilmar mentioned. Remember, though, that there's more in life to save for than emergencies. For example:
House down payment
Vehicle ...
- 50.6k
17
votes
My company is suspending its 401K match; what is the best thing to do with my money?
It depends much upon your plans for the future and other financial information.
My advice would be to make sure you are out of consumer debt and have a healthy emergency fund in place. You could ...
- 76.1k
16
votes
Accepted
Using a Roth IRA instead of a college savings account
One problem with this plan is that the individual must have earned income to contribute to a Roth IRA. If you have an infant, unless she is the new Gerber baby or something like that, there is ...
- 276
16
votes
What can we do when we are stuck in a conservative 401(k)?
401(k)s are designed to provide easier access for average workers to save for retirement, and provide an incentive for employers to provide plans that help by either matching contributions, or ...
- 130k
15
votes
Accepted
Does a Roth IRA offer any explicit benefits over a Traditional IRA?
Your math is correct. As you point out, because of the commutative property of multiplication, Roth and traditional IRAs offer the same terminal wealth if your tax rate is the same when you pull it ...
- 15.1k
14
votes
Accepted
Why would I ever invest in a traditional IRA over a Roth IRA
Your confusion is that that answerer is not comparing a $5500 Roth IRA contribution to a $5500 Traditional IRA contribution. Rather, they were comparing a $3600 Roth IRA contribution to a $5000 ...
- 16.9k
13
votes
Accepted
What's the deadline to contribute to a Roth IRA
According to the IRS page on Roth IRAs:
You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions).
...
- 35.7k
13
votes
Can I contribute to a 401k, Roth 401k and Roth IRA at the same time?
Yes, you're allowed to contribute to both a Roth 401k and a regular 401k; it's fairly common to do so for the purposes of diversification. You can also contribute to a Roth IRA, assuming you're under ...
- 35.7k
13
votes
Accepted
Is it more difficult to cash in an IRA with multiple funds?
No, holding multiple funds, stocks, or any other asset in one IRA does not make it substantially more difficult to get the money out in retirement. Your IRA is your own investment account and you're ...
- 5,310
13
votes
Roth vs. investing a taxable account
With a "standard" investment account, you have to pay taxes on dividends when you receive them, and on capital gains when you sell for a gain.
With a Roth, growth and dividends are not taxed....
- 130k
12
votes
Accepted
Deductions greater than Income : Traditional IRA to Roth Conversion?
Yes. A most emphatic yes.
I suggest you look at your 2014 return and project what 2015 will look like. I'd convert enough to "top off" the 15% bracket. Note, if you overshoot it, and in April 2016, ...
12
votes
Should I pay off my 401k loan or reinvest the funds elsewhere?
Pay the 401(k) loan back as soon as possible.
To be clear, the money from your 401(k) loan is no longer invested and working for you. It doesn't make sense to pull money out of your 401(k) ...
- 115k
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 ...
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