Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Roth 401k
Old 09-17-2021, 06:34 PM   #1
Recycles dryer sheets
 
Join Date: Dec 2018
Posts: 174
Roth 401k

Just my luck.

Planning to FIRE in December and I can finally have a Roth 401k starting October 1.

I think I’m going to pass.

The plan is to manage taxable income 2022-2026 until we both are eligible for Medicare. DW has an adjunct college professor salary with no “affordable” medical insurance.

I’m hindsight, we have too much in tax deferred accounts.

We will draw from our cash and Roth IRAs to carry us through.

I stopped contributing to the regular 401k earlier this year, paid the tax, and am adding it to the 2022 cash to live on.

The “5 year rule” tells me it’s not worth depositing my entire pay for October-December to max out the Roth 401k because I might incur a penalty for “early withdrawal”.

Roth conversions this year also have a 5 year rule, so I’ve ruled that out.

Wondering if I’m missing anything here as I over-analyze these last few months?

I’ll be glad after I just “take the plunge”.
a60dan 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 09-17-2021, 08:48 PM   #2
Thinks s/he gets paid by the post
Out-to-Lunch's Avatar
 
Join Date: Jan 2020
Location: Milwaukee
Posts: 3,938
Can you clarify: Did/do you have a Roth IRA that you started earlier?

Also, may I ask how old you are? That mkes a difference when thinking about whether a Roth makes sense for you.
__________________
The closing years of life are like the end of a masquerade party, when the masks are dropped. -Arthur Schopenhauer, philosopher (1788-1860)
Out-to-Lunch is offline   Reply With Quote
Old 09-17-2021, 09:29 PM   #3
Thinks s/he gets paid by the post
 
Join Date: Nov 2013
Posts: 1,027
Why pull out of Roth taxable until Medicare? Is your wife continuing to work? If you have too much in tax deferred you might want to convert or withdraw to minimize taxes later on. At least to the top of your current bracket I’d you will be in a higher bracket at some later point.
NgineER is offline   Reply With Quote
Old 09-17-2021, 11:08 PM   #4
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: 16,973
OP - if you have children, tell them to open a Roth and fund it with a small amount, so they can start the 5 yr rule.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Roth 401k
Old 09-18-2021, 05:18 PM   #5
Recycles dryer sheets
 
Join Date: Dec 2018
Posts: 174
Roth 401k

Quote:
Originally Posted by Out-to-Lunch View Post
Can you clarify: Did/do you have a Roth IRA that you started earlier?

Also, may I ask how old you are? That mkes a difference when thinking about whether a Roth makes sense for you.


Roth IRAs for each of us both started more the 5 years ago. Fully funded through 2021.

Age is 61.
a60dan is offline   Reply With Quote
Old 09-18-2021, 05:22 PM   #6
Recycles dryer sheets
 
Join Date: Dec 2018
Posts: 174
Quote:
Originally Posted by NgineER View Post
Why pull out of Roth taxable until Medicare? Is your wife continuing to work? If you have too much in tax deferred you might want to convert or withdraw to minimize taxes later on. At least to the top of your current bracket I’d you will be in a higher bracket at some later point.


Insufficient post-tax savings. Too much in tax deferred.

Yes - adjunct college professor. Medical insurance is “more than I earn “ [emoji3]

I’m still mulling over Roth IRA conversion this last year of full taxable income, but don’t want to withdraw from it for the “bridge to Medicare”
a60dan is offline   Reply With Quote
Old 09-18-2021, 07:10 PM   #7
Confused about dryer sheets
 
Join Date: Aug 2021
Posts: 5
Quote:
Originally Posted by a60dan View Post
Roth IRAs for each of us both started more the 5 years ago. Fully funded through 2021.

Age is 61.
I think the "5 Year Rule" for Roth only applies to those who are under 59.5 year old? Let's say you have Roth 401k even less than 5 years old, you can still withdraw without penalty since you are older than 59.5? you can also rollover your Roth 401k to Roth IRA, and withdraw without any restrictions since the Roth IRA is 5 years old and you are over 59.5.
Leon Q is offline   Reply With Quote
Old 09-18-2021, 09:01 PM   #8
Thinks s/he gets paid by the post
Out-to-Lunch's Avatar
 
Join Date: Jan 2020
Location: Milwaukee
Posts: 3,938
Yes, I think you are misinterpreting the withdrawal rules. If you are over 59.5, and your oldest Roth is over 5 years old, there are ZERO restrictions on your withdrawals. ALL of your withdrawals (including contributions and earnings) are qualified:

https://www.bogleheads.org/wiki/Roth_IRA
__________________
The closing years of life are like the end of a masquerade party, when the masks are dropped. -Arthur Schopenhauer, philosopher (1788-1860)
Out-to-Lunch is offline   Reply With Quote
Old 09-19-2021, 03:18 PM   #9
Full time employment: Posting here.
teetee's Avatar
 
Join Date: Jul 2019
Posts: 679
If I have a rollover IRA account from my previous 401k created more than five years ago, can I roll over my current 401k to the same IRA account if today I decide to quit my current job?
teetee is offline   Reply With Quote
Old 09-19-2021, 06:59 PM   #10
Confused about dryer sheets
 
Join Date: Aug 2021
Posts: 5
Quote:
Originally Posted by teetee View Post
If I have a rollover IRA account from my previous 401k created more than five years ago, can I roll over my current 401k to the same IRA account if today I decide to quit my current job?
For 401k to IRA rollover, I think there is no "5 year rule". You can rollover when you quit your current job, disregard when the IRA was opened.
Leon Q is offline   Reply With Quote
Old 09-19-2021, 09:19 PM   #11
Full time employment: Posting here.
teetee's Avatar
 
Join Date: Jul 2019
Posts: 679
Quote:
Originally Posted by Leon Q View Post
For 401k to IRA rollover, I think there is no "5 year rule". You can rollover when you quit your current job, disregard when the IRA was opened.
Oh yeah that makes sense. It only applies when with Roth account creation.
teetee is offline   Reply With Quote
Old 09-22-2021, 04:02 PM   #12
Recycles dryer sheets
 
Join Date: Feb 2014
Posts: 329
did you really have too much 401k? honestly if you were in the 35% bracket then probably not. You can probably easily convert or withdraw at a lower rate that it always makes sense. At least that's how i look at it. If i had paid 37% plus state income taxes on the bulk of it?
livingalmostlarge is offline   Reply With Quote
Old 09-22-2021, 04:08 PM   #13
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 3,587
I would consider maxing out the contributions to the Roth 401k if your alternative is to receive after tax cash instead (assuming that you don't need the after tax cash).

You should be able to roll the Roth 401k to the Roth IRA and since you are over 59 1/2 and you have had your first Roth IRA at least 5 years, any withdrawals from the Roth IRA should be qualified meaning no tax/penalty.

-gauss
gauss is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
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
Roth 401k and non-Roth 401k CSdot FIRE and Money 12 11-27-2020 10:04 AM
Confused choosing between: 401K, Roth 401K, Roth IRA or Traditional IRA? krldrummerboy FIRE and Money 22 05-26-2016 11:46 AM
401K, Roth IRA, Roth 401K - Need advice please tsturbo FIRE and Money 15 05-10-2009 02:08 PM
Traditional 401k or Roth 401k HatePayingTaxes Young Dreamers 4 12-30-2006 09:59 PM

» Quick Links

 
All times are GMT -6. The time now is 12:49 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.