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Proposed new retirement savings options
09-05-2009, 09:51 AM
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#1
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Recycles dryer sheets
Join Date: Jan 2008
Posts: 160
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Proposed new retirement savings options
News story that the White House is proposing or enacting new rules for retirement savings.
Recession hits nest eggs; US promotes ways to save - Yahoo! News
Most of the changes seem pretty small - automatic enrollment - automatic percentage enrollment increase - option to take tax refund as Savings Bonds.
There was one section I'd like to know more about :
Quote:
Allowing workers, when leaving a job, to direct unused vacation pay to a retirement savings account rather than taking it in cash
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Is that in addition to 401k and IRA? Are there limits?
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09-05-2009, 02:08 PM
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#2
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Full time employment: Posting here.
Join Date: Mar 2008
Posts: 654
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The first thing that popped in my head when I saw this on the news was:
Do TIP bonds instead of regular savings bonds. If this starts to fly everyone needs to write congress to get the TIP thing going.
In my 457 plan at work we are allowed to direct built up vacation pay to the 457 at retirement. Max is currently 320 hours of pay.
Steve
Edit: After giving this a little more thought, the regular bonds are available in smaller denominations so would probably work better for a larger part of the population. But TIP's would be a nice option if it could be worked out by the genius's in congress.
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09-05-2009, 08:28 PM
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#3
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Full time employment: Posting here.
Join Date: Mar 2008
Posts: 654
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Maybe "I Bonds" would be a good way too, if this retirement savings thing gets off the ground. Basically anything with inflation protection built in.
Steve
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09-05-2009, 09:08 PM
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#4
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Recycles dryer sheets
Join Date: Dec 2008
Posts: 299
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Quote:
Originally Posted by quietman
There was one section I'd like to know more about :
Quote:
Allowing workers, when leaving a job, to direct unused vacation pay to a retirement savings account rather than taking it in cash
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Is that in addition to 401k and IRA?
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Probably not. Just a convenient way to bump up 401k contributions on the way out. Still has to stay under the annual limit. Going above the annual limit requires new legislation.
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09-06-2009, 09:24 AM
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#5
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Recycles dryer sheets
Join Date: Jan 2008
Posts: 160
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Thanks. I found the IRS rulings on the subject, but they were in impenetrable mess of references to other sections. The only actual dollar limit I found there was no more than $40,000 per year, but it was impossible to tell if that was a change or a reference to some other kind of retirement program I'm not familiar with. I'm hopeful someone who can "interpret" these kinds of regulations will discover that the squirrely language does indeed allow these contributions beyond the normal limits (probably unintentionally) and maybe we can take advantage of the window it opens before corrective language is enacted, but it's a long shot hope.
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09-06-2009, 10:23 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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I didn't make an attempt to read the regulations, but since these changes are from the executive branch they are probably not substantive. On the question of unused vacation pay, as tfb suggested, i would suggest that it means the unused vacation pay is just like any other paycheck: one could have 401(k) contributions withdrawn from it. One would still be subject to any statutory contribution limits as well as plan contribution limits. For example, you leave your job, but have not maxed out your 401(k) contributions for the year, so you adjust withholding from paycheck to your plan's limit of, say, 90%. So 90% of your unused vacation paycheck goes into your 401(k).
Since my employer plan does not match per-paycheck, I try to max out my 401(k) contributions as early in the year as possible. Then I don't have the "I didn't max out the 401(k) this year" clouding any decisions to quit later in the year.
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09-06-2009, 10:29 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Dec 2007
Posts: 4,764
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How about making all retirement contributions tax free
That would be a meaningful start.
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09-06-2009, 11:11 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Feb 2005
Location: Lou-evil
Posts: 2,025
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Nice of them to investigate new options at a time when 401k max amounts are likely to drop
How about scrap that idea too?
__________________
"These walls are kind of funny. First you hate 'em, then you get used to 'em. Enough time passes, gets so you depend on them"
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09-06-2009, 12:01 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Well, since food and utilities and health care and insurance and taxes are all so much cheaper with all this "deflation," why not?
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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09-06-2009, 01:34 PM
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#11
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Full time employment: Posting here.
Join Date: Mar 2008
Posts: 654
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On the unused vacation:
I'm over 50 so the make up & catch up parts of my 457 plan will help me build the fund up, right here at the end/retirement. Every little option and bit of money in helps. I wasted a lot of my working years as far as tax advantaged accounts. I just didn't realize how smart it would have been to take advantage of whats available in retirement funds, IRAs, etc. I contributed some but not near what I could have and should have.
I truly wish I had known about forums such as this early on in my career.
Steve
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09-06-2009, 03:54 PM
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#12
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Recycles dryer sheets
Join Date: Oct 2008
Posts: 295
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Stevewc?
Don't be hard on yourself on that .. Even if you did, most couldn't do wthout that $ and saving it, while Building a Family, home, etc.. It's easy to think one would have saved more, but not in most cases.. With a Family? There is Always a Home for $... and Many are taking $ out of their Savings /Pension plans to pay for their kids College and I think that is a Big mistake..We paid our own way and did alright and stayed in School alot longer and more graduate when they have their own $ on the line..and not having the parents sacrafice their Retirement..
Best Financial Commitments we made? Having a 15 yr Mortgage and pouring extra $ into the Home itself and into Camping trips as a Family.. Looking back, the wife agreed, if we had extra $, ( longer Mortge) she would have spent more on the kids and spoiled them alot more.. They all went to College or trade schools and are doing super..and paid their own ways..and are prouder than ever for forcing them to do that.
It's Like " Gee, I should have kept my 67' GTO or my 57' Chevy, etc.. look at what they're going for now? " fact is, If you did? It have 100k+ miles on it and cost you twice as much to keep it fixed up even from 70-2009 = 39 yrs at Ave $300/yr for storeage is over $11,700 alone. Throw inflation in and your over $15k alone.
I had both, BTW.. ;-)
and PS.. These Forums and the PC and Internet are not that Old .. Prior to the Late 90's? Most of us didn't play with them, let alone there were very few Sites in the first place..
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09-06-2009, 08:32 PM
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#13
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Recycles dryer sheets
Join Date: Dec 2008
Posts: 299
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Quote:
Originally Posted by LOL!
I didn't make an attempt to read the regulations, but since these changes are from the executive branch they are probably not substantive. On the question of unused vacation pay, as tfb suggested, i would suggest that it means the unused vacation pay is just like any other paycheck: one could have 401(k) contributions withdrawn from it. One would still be subject to any statutory contribution limits as well as plan contribution limits. For example, you leave your job, but have not maxed out your 401(k) contributions for the year, so you adjust withholding from paycheck to your plan's limit of, say, 90%. So 90% of your unused vacation paycheck goes into your 401(k).
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I read the revenue rulings. Basically if you have an option to receive the unused vacation time as cash, the contributions to your retirement plan counts as employee elective deferral, subject to the same 402(g) $16,500 limit. If a company does not give the cash option, and it automatically puts any unused vacations into the retirement plan, then the contributions do not count toward the employee elective deferral limit. I don't know of any company that does it this way though.
The plan's contribution limit as a % of compensation usually is per year, not per paycheck. Theoretically if the plan allows it, you can put 100% of the value of the unused PTO into your 401k if you haven't maxed both the $ limit and the % limit.
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