Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 02-15-2015, 07:10 AM   #41
Recycles dryer sheets
 
Join Date: Nov 2013
Posts: 358
Quote:
Originally Posted by jlenhart80 View Post
Hi Pb4uski. I did some looking into this and call my 401K broker my company uses. They told me I can in-fact do this, but I cannot do it while I am in-service (an employee). While I am an employee I can contribute up to 75% of my after tax dollars into a Roth 401K and can invest in the same funds that are available to my tax deferred 401K. When/if I leave the company I can at that time roll the after tax money into a Roth IRA. And of course, I can roll the tax deferred money into a traditional IRA, if I want.



Seem correct?

That sounds right. You should be able to roll over your contributions to your AT 401k into a Roth 401k.
Most companies do not allow rollovers to IRA's while in service as they want to keep your money with them.
__________________

__________________
NgineER 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 02-15-2015, 08:39 AM   #42
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,425
Quote:
Originally Posted by jlenhart80 View Post
Hi Pb4uski. I did some looking into this and call my 401K broker my company uses. They told me I can in-fact do this, but I cannot do it while I am in-service (an employee). While I am an employee I can contribute up to 75% of my after tax dollars into a Roth 401K and can invest in the same funds that are available to my tax deferred 401K. When/if I leave the company I can at that time roll the after tax money into a Roth IRA. And of course, I can roll the tax deferred money into a traditional IRA, if I want.

Seem correct?
Yes.
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 02-15-2015, 01:44 PM   #43
Dryer sheet wannabe
 
Join Date: Feb 2015
Location: El Paso
Posts: 15
I skimmed most of the comments but can tell you that you need to invest in Vanguard's S&P 500.


Why?
-Less than 4% of funds have beaten the S&P 500
-The one's that do, you need big money to invest with them
-Most funds do not beat the index even using Morningstar's 5 star grade, it's easy to fudge the numbers since past results are not a guarantee of future success
-The market is too volatile and you don't want to pay someone to manage your money. Anything higher is like giving your mutual fund company free money
__________________
TomH is offline   Reply With Quote
Old 02-20-2015, 05:32 PM   #44
Dryer sheet aficionado
 
Join Date: Nov 2014
Posts: 32
Quote:
Originally Posted by pb4uski View Post
Yes.
Well, I did some more checking on the Roth 401K and there seems to be another limitation. I can contribute a MAXIMUM of $18,000 between the 401K and Roth 401k.

With that fact, it seems more effective to contribute the full $18,000 into my 401K and not my Roth 401K. I went to a couple different comparison calculators on the web and they all basically gave me a similar result (better to contribute to 401K), assuming that the taxes saved by investing in traditional contributions is invested elsewhere (e.g. individual account).

Here is an example of one of the calculators I went to:
Traditional 401k or Roth IRA Calculator

If you disagree for some reason, I welcome your comments.
__________________
jlenhart80 is offline   Reply With Quote
Old 02-20-2015, 05:51 PM   #45
Recycles dryer sheets
 
Join Date: Nov 2013
Posts: 358
The idea I proposed is that you'd contribute $18,000 to your tax deferred 401k, and any extra you have left over you can invest in your AFTER TAX 401k, not the Roth 401k. The after tax portion can later be rolled over into a Roth 401k while you are working, or into a Roth IRA when you leave your company.

Hope this helps.
__________________
NgineER is offline   Reply With Quote
Old 02-20-2015, 05:54 PM   #46
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,425
If your expected tax rate when you withdraw the 401k funds (presumably in retirement) is lower than your current marginal tax rate (the tax on the last $1 of income), then the 401k is typically viewed as preferable because of the tax savings.

For example, most of my deferrals were at the 28% rate or higher when I was working and I expect my withdrawals will generally be at 15% or less so I'm saving a bundle.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 02-20-2015, 06:06 PM   #47
Recycles dryer sheets
 
Join Date: Nov 2013
Posts: 358
Here is more information...

http://www.bogleheads.org/wiki/After-tax_401%28k%29
__________________
NgineER is offline   Reply With Quote
Old 02-20-2015, 06:19 PM   #48
Full time employment: Posting here.
UnrealizedPotential's Avatar
 
Join Date: May 2014
Posts: 573
Quote:
Originally Posted by haha View Post
We have a young guy with a lot of money. I think it takes a lot of nerve to tell him he is doing it wrong. Of course, it's easier to have a lot of nerve when it comes to someone else's money.

Jlenhart, I have no advice, but I do offer my congratulations in your excellent job so far.

Ha
That is precisely the reason I usually do not post in threads like this. I read them , but that is about it. I will probraly have $250k in investable assets sometime this year which compared to the OP is not a level which justifies giving him advice. But I tip my hat off to the OP. He is doing well and has a nice asset base going forward.
__________________
Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things. Charlie Munger
UnrealizedPotential is offline   Reply With Quote
Old 02-20-2015, 06:22 PM   #49
Dryer sheet aficionado
 
Join Date: Nov 2014
Posts: 32
Quote:
Originally Posted by pb4uski View Post
If your expected tax rate when you withdraw the 401k funds (presumably in retirement) is lower than your current marginal tax rate (the tax on the last $1 of income), then the 401k is typically viewed as preferable because of the tax savings.

For example, most of my deferrals were at the 28% rate or higher when I was working and I expect my withdrawals will generally be at 15% or less so I'm saving a bundle.
I am in the 28% bracket and I do expect my withdraws to be in the 15% bracket as well. So it seems I am doing the right thing in this case.

Thanks!
__________________
jlenhart80 is offline   Reply With Quote
Old 02-20-2015, 06:28 PM   #50
Dryer sheet aficionado
 
Join Date: Nov 2014
Posts: 32
Quote:
Originally Posted by molof View Post
The idea I proposed is that you'd contribute $18,000 to your tax deferred 401k, and any extra you have left over you can invest in your AFTER TAX 401k, not the Roth 401k. The after tax portion can later be rolled over into a Roth 401k while you are working, or into a Roth IRA when you leave your company.

Hope this helps.
Thanks for this...and thanks for the bogleheads link in your other post. I just called my companies investment provider and asked them about an AFTER TAX 401k contribution. They seem to think an AFTER TAX 401k contribution is not allowed as part of my company's plan. I am going to speak to the plan administrator at my company on Monday.

Thanks again. I do understand more clearly the difference between the 401k, after tax contribution for a 401K, and Roth 401K.
__________________

__________________
jlenhart80 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
Age 29 Status Check thriftyhipster Young Dreamers 7 11-18-2014 10:16 PM
Law school debt (check), debt paid down (check), retirement (...) WhatsinaName Hi, I am... 7 08-13-2014 03:13 AM
Five years: a status report REWahoo Life after FIRE 37 06-09-2010 11:56 AM
Fan lined up?check.Excrement ready to hit? check poboy Other topics 130 04-23-2006 09:48 PM
Living Check To Check: Saving Too... MYPROcheckGRESS Young Dreamers 38 02-16-2006 04:36 PM

 

 
All times are GMT -6. The time now is 03:12 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.