Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Accessing your money
Old 01-20-2018, 07:41 PM   #1
Recycles dryer sheets
 
Join Date: Dec 2016
Posts: 75
Accessing your money

For those of you with significant Roth funds, accessing money for your living needs is pretty easy right? How about for those of you with 401k’s? I know with my plan you can only get it monthly, quarterly or yearly. It would be nice to pull it whenever I wanted to! I’m also hesitant doing the back door roth conversion, is take a 20% haircut to do that, correct?

Cheers
__________________

Tetto is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-20-2018, 08:14 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 3,142
Quote:
Originally Posted by Tetto View Post
For those of you with significant Roth funds, accessing money for your living needs is pretty easy right? How about for those of you with 401k’s? I know with my plan you can only get it monthly, quarterly or yearly. It would be nice to pull it whenever I wanted to! I’m also hesitant doing the back door roth conversion, is take a 20% haircut to do that, correct?

Cheers
If your not working why not shop for a rollover IRA to send your 401k to, those are easy to do.
__________________

meierlde is offline   Reply With Quote
Old 01-20-2018, 08:26 PM   #3
Recycles dryer sheets
 
Join Date: Dec 2016
Posts: 75
Quote:
Originally Posted by meierlde View Post
If your not working why not shop for a rollover IRA to send your 401k to, those are easy to do.
I am still working and will for probably another 8-10 years. My question is just for planning/curiosity at this point, very focused on FI right now. So one answer is simply roll to a traditional or Roth after I retire?
Tetto is offline   Reply With Quote
Old 01-20-2018, 08:51 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 3,142
Quote:
Originally Posted by Tetto View Post
I am still working and will for probably another 8-10 years. My question is just for planning/curiosity at this point, very focused on FI right now. So one answer is simply roll to a traditional or Roth after I retire?
Yes if you roll to the appropriate kind of IRA depending on the kind of 401k you can eliminate a number of the rules sponsors put on 401ks. I recenlty rolled my megacorp 401k to an IRA and besides eliminating the rule that orders to sell company stock had to be in by 1 pm est, it also allowed making direct charitable withdrawls that count against the RMD which you can not do with a 401.
meierlde is offline   Reply With Quote
Old 01-20-2018, 09:31 PM   #5
Full time employment: Posting here.
HawkeyeNFO's Avatar
 
Join Date: Jan 2010
Location: Inside the Beltway
Posts: 628
I just did this Friday. Called Vanguard and it was easy.
HawkeyeNFO is offline   Reply With Quote
Accessing your money
Old 01-20-2018, 11:40 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 3,758
Accessing your money

Easy on both my 401k's., but if we had restricted access, I'd just move a year or so of expenses over to a liquid IRA.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Old 01-21-2018, 01:03 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 5,763
I just take out what I expect to spend in a year at one time when selling investments. Throw it into CD's while it waits to get spent.

For the dividends, I transfer it over once it has accumulated enough to bother.

I don't have any need for monthly income on a regular basis, as I can ignore the $8K sitting in my spending account.
Sunset is offline   Reply With Quote
Old 01-21-2018, 03:08 AM   #8
Administrator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee ba gum
Posts: 23,006
Quote:
Originally Posted by Tetto View Post
For those of you with significant Roth funds, accessing money for your living needs is pretty easy right? How about for those of you with 401k’s? I know with my plan you can only get it monthly, quarterly or yearly. It would be nice to pull it whenever I wanted to! I’m also hesitant doing the back door roth conversion, is take a 20% haircut to do that, correct?

Cheers
I don’t understand your 20% haircut comment. If you do a back door Roth it is because your income is too high to make a Roth contribution, so instead you make an after tax non deductible IRA contribution and immediately convert it to a Roth so it grows tax free.

Withdrawals from the Roth or IRA after age 59.5 is easy, anytime, any amount. I now withdraw dividends from my Roth as they are tax free in the UK as well as US.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
Alan is online now   Reply With Quote
Old 01-21-2018, 08:10 AM   #9
Recycles dryer sheets
 
Join Date: Dec 2016
Posts: 75
Quote:
Originally Posted by Alan View Post
I don’t understand your 20% haircut comment. If you do a back door Roth it is because your income is too high to make a Roth contribution, so instead you make an after tax non deductible IRA contribution and immediately convert it to a Roth so it grows tax free.

Withdrawals from the Roth or IRA after age 59.5 is easy, anytime, any amount. I now withdraw dividends from my Roth as they are tax free in the UK as well as US.
Perhaps I’m confused; our combined income falls just below the income limit rules, so we do have a Roth. But I thought if I moved 401 monies to a roth, al “back door” method, it would trigger a 20 tax on my pre tax 401k monies. No 10% penalty though, or so I thought.
Tetto is offline   Reply With Quote
Old 01-21-2018, 08:16 AM   #10
Full time employment: Posting here.
VanWinkle's Avatar
 
Join Date: Oct 2017
Location: Brighton
Posts: 745
Quote:
Originally Posted by Tetto View Post
Perhaps I’m confused; our combined income falls just below the income limit rules, so we do have a Roth. But I thought if I moved 401 monies to a roth, al “back door” method, it would trigger a 20 tax on my pre tax 401k monies. No 10% penalty though, or so I thought.
I don't think you are describing a "back door" conversion. You are describing a 401K to Roth IRA conversion. You will pay your current tax rate on the 401K money if it was tax deferred money to start with. If you are in the 25% tax brkt, and convert 401K to Roth, you will pay 25% on the conversion amount.
__________________
Retired May 13th(Friday) 2016 at age 61.
VanWinkle is offline   Reply With Quote
Old 01-21-2018, 08:54 AM   #11
Administrator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee ba gum
Posts: 23,006
Quote:
Originally Posted by VanWinkle View Post
I don't think you are describing a "back door" conversion. You are describing a 401K to Roth IRA conversion. You will pay your current tax rate on the 401K money if it was tax deferred money to start with. If you are in the 25% tax brkt, and convert 401K to Roth, you will pay 25% on the conversion amount.
Exactly.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
Alan is online now   Reply With Quote
Old 01-21-2018, 09:32 AM   #12
Full time employment: Posting here.
 
Join Date: Mar 2013
Location: Coronado
Posts: 845
Quote:
Originally Posted by Tetto View Post
Perhaps I’m confused; our combined income falls just below the income limit rules, so we do have a Roth. But I thought if I moved 401 monies to a roth, al “back door” method, it would trigger a 20 tax on my pre tax 401k monies. No 10% penalty though, or so I thought.
"Back door" conversion is an unofficial term for a loophole in the law that is used by people who earn too much to do a direct contribution to a Roth IRA. If you earn less than the income limit, then you will never need to use the "back door" loophole. Just make a direct contribution. (I'm assuming you're below the lower end of the limited range and can make a full contribution. If you're in the phase out range, a back door process might be better because it allows you to do the full amount.)

If you rollover 401K money to a Roth IRA, then that's a normal fully taxable conversion. There's no penalty. Just ordinary income tax, which might be more or less than 20%. It depends on how much you earn from other sources and how much is in the 401K. If you do the rollover in the year after you stop working and you have no other income, then some of the rollover will be taxed at 0%, some at 10%, some at 12%, some at 20%, etc, as you fill up each income bracket. When you get to that point, look at your financial situation and other income and consider whether it's better to rollover to a tIRA and then do one or more partial conversions to your Roth.
cathy63 is offline   Reply With Quote
Old 01-21-2018, 10:15 AM   #13
Recycles dryer sheets
 
Join Date: Dec 2016
Posts: 75
Quote:
Originally Posted by cathy63 View Post
"Back door" conversion is an unofficial term for a loophole in the law that is used by people who earn too much to do a direct contribution to a Roth IRA. If you earn less than the income limit, then you will never need to use the "back door" loophole. Just make a direct contribution. (I'm assuming you're below the lower end of the limited range and can make a full contribution. If you're in the phase out range, a back door process might be better because it allows you to do the full amount.)

If you rollover 401K money to a Roth IRA, then that's a normal fully taxable conversion. There's no penalty. Just ordinary income tax, which might be more or less than 20%. It depends on how much you earn from other sources and how much is in the 401K. If you do the rollover in the year after you stop working and you have no other income, then some of the rollover will be taxed at 0%, some at 10%, some at 12%, some at 20%, etc, as you fill up each income bracket. When you get to that point, look at your financial situation and other income and consider whether it's better to rollover to a tIRA and then do one or more partial conversions to your Roth.

Thank you, now I understand
__________________

Tetto is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Accessing the Loot! hguyw FIRE and Money 14 11-17-2009 10:18 PM
safety of accessing accounts on public wireless simple girl Other topics 15 11-05-2008 08:26 PM
Cheap PC just for accessing finanacial information. landover Other topics 3 01-27-2007 07:06 PM
Accessing the internet while travelling overseas MJ Life after FIRE 32 12-23-2006 02:37 PM

» Quick Links

 
All times are GMT -6. The time now is 04:18 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.