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Old 12-30-2014, 09:25 AM   #21
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Bump up.....anyone familiar with what Gauss was discussing?

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Old 12-30-2014, 09:40 AM   #22
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Originally Posted by younginvestor2013 View Post
Bump up.....anyone familiar with what Gauss was discussing?

If I may try

I think your referring to after-tax 401K contributions and conversions to Roth IRA. If so, then:

You can contribute up to 17K to a 401K each year and deduct it from your taxable income (employer
reports taxable income with 401K contributions removed already).
After this, if your plan allows and depending on other limits you can contribute after tax money to
the 401K. Since this is already taxed, you can roll it into a Roth IRA without paying taxes. Thus you
can contribute above the 17K limit on 401K and 5K limit on IRA. You will want to convert as soon
as allowed after the contributons so that you don't pay any taxes on any gains.
There are several items that you need to take into account when doing this, and not all 401K plans
will allow this, but it is very helpful if you need to move more into retirement savings.

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Old 12-30-2014, 11:42 AM   #23
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Thanks for the nice summary in my absence RetireBy90.

I am referring to a feature of some 401k employer plans that accept after tax contributions.

The strategy that I described will allow you the advantage to fund Roth IRAs at about 10 X the normal ~5K limit which would not be possible with plain brokerage accounts.

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Old 01-05-2015, 05:24 AM   #24
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I think that what Gauss was eluding to as well is that you can access the rolled over Roth IRA after five years and access this money tax free.

One interesting approach that you might like is to do a Roth IRA conversion ladder... Do a google search or read this link:

In essence it allows you, if you have the funds to carry your expenses for five years, to do a low tax cost roll over every year until you deplete your tax deferred account and after five years years you can access the converted amount tax free and after 59.5 be able to access the gains tax free.

Be vary of stopping your contributions to live a little.... When you do that, you are automatically increasing your spend and your plane ER withdrawals are now at a higher level.

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