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educate me 401-k

  1. #2801
    Angry Gumball RandyO's Avatar
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    Re: educate me 401-k


    Quote Originally Posted by OreoGaborio View Post
    My company added an HSA to my bennies last year but I haven't really looked into it. All I know is that it looks like they're contributing 200 bucks per quarter cuz I've got 800 in there.

    Trying to edjumukate myself now... Prob shoulda done this a month ago when I still coulda done something in the 2021 calendar year, eh?
    it's $$ you never pay tax on, for all practical purpose,

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    RandyO
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  2. #2802
    Super Moderator OreoGaborio's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by RandyO View Post
    for all practical purpose,
    Except it's not for all practical purposes.

    But I'm guessing (hoping) that's not what you meant to imply...

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  3. #2803
    Angry Gumball RandyO's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by OreoGaborio View Post
    Except it's not for all practical purposes.

    But I'm guessing (hoping) that's not what you meant to imply...
    anything medical, and that can be stretched quite a bit, a bed for yer back, sporting goods for exercise

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    RandyO
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  4. #2804
    Lifer
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    Re: educate me 401-k

    Also, with an HSA you never lose the money and you have until 4/15/2022 to find contributions that can be deducted in 2021.

    An FSA is use it or lose it.

    Maybe I can find the account with enough to pay for that GSX S1000gt+ with pre tax dollars as a mental health expense in lieu of therapy

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    Last edited by SteveM; 01-06-22 at 08:04 PM.

  5. #2805
    Lifer
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    Re: educate me 401-k

    I have a coworker that was able to use the HSA money to get an emotional support puppy so I guess anything is possible.

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  6. #2806
    Lifer
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    Re: educate me 401-k

    Question for you fine gentlemen.
    I just retired and I need to put my 401k somewhere. I'm already with fidelity so I would like to stay with them. I know squat about ira's at the moment but thats what I should be looking at right? They have a roll over ira and a traditional IRA, any advantage to either one? I'm going to be parking this money for at least 21 years. I'm not sure how much I will contributing to it so some flexibility is needed in that regard. I just don't want to get hit with any penalties or taxes. I have call planned with an advisor at the end of the week and a little extra knowledge won't hurt.

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  7. #2807
    Lifer jimmycapp's Avatar
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    Re: educate me 401-k

    Fidelity is good, vanguard too. I have fidelity for regular trading account and vanguard for Roth and traditional ira. 401k pre tax contributions (more common) can be rolled right into a traditional ira without any tax. Youíll pay tax when you start withdrawing at 59.5. Any after tax or Roth contributions in your 401k can be rolled into a Roth IRA.

    Since you are retiring, if you wanted to use some of that money before 59.5 (or avoid paying taxes on future gains), look into Roth conversion ladder. You can roll over pre tax retirement money into Roth account ( you pay tax on that conversion but being retired, your income is Low so your tax is low, if you donít rollover too much ) after the rollover, you have to wait 5 years to touch that money ( if you wanted). You could withdraw those contributions. Doesnít sound like much but that means when you turn 59.5 and start pulling some of that money out, thereís no tax on any gains so your withdraws are tax free ( just paid a low rate at the time of the conversion). Not sure why I typed all this out since there are a bunch of articles explaining it better than this, but check it out. Might make sense for your situation.

    *not a financial planner. Just a dude.

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    Last edited by jimmycapp; 01-12-22 at 06:48 AM.

  8. #2808
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    My $0.02: Pick a large provider with cheap fund options that you like and go. Fidelity checks this box IMO. Vanguard does so just slightly better-I like that they are investor owned and have been leaders in keeping costs down. I value that. But Fidelity doesn't suck either.

    Theoretically you could leave it all in the 401k depending on your employers' plan rules. But usually the investment options aren't as great in a corporate 401k as they are in a self-selected IRA. If my employer permitted in-service roll-overs I'd be moving my $ out to an IRA. But that isn't an option.

    Roll the entire 401k into an IRA and start doing the roth conversion mentioned above as long as you can stomach the tax bill. Get that roth 5-year rolling conversion ladder going. That's my plan.

    I can't tell what the difference between a "traditional" and a "rollover" IRA is. My read is they are the same thing. There must be a difference though as otherwise why would we have the labels? I dunno.

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  9. #2809
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by OreoGaborio View Post
    I also need to learn more about HSA's. My company also added an HSA to my bennies last year but I haven't really looked into it. All I know is that it looks like they're contributing 200 bucks per quarter cuz I've got 800 in there?
    HSA's kick ass as they are tax-free in, offer tax-free growth and assuming you can follow the rules they are tax-free to draw from as well.

    https://i.imgur.com/u0ocDRI.png

    This shows the HSA in the later purple stage of savings. I argue depending on the matching, options and rules your employer has it could be more important and lucrative than even a 401k or IRA (which is in the earlier blue stage). But whatever.

    I highly recommend making them part of your savings scheme, if you have the means.

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  10. #2810
    BMW track whore e30addict's Avatar
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    Re: educate me 401-k

    I'm a huge fan of keeping my stuff as easy to track as possible. I've been moving everything into Fidelity, so have an individual account, roth and roll over there now.

    Everytime I leave a company things are rolled over to Fidelity so I can do what I want with it.

    The difference between a rollover and a "regular" IRA is in the name. A rollover is designed to take pre-tax funds and put it in another pre-tax retirement account without dealing with contribution limits or fees. Same basic animal.

    A roth ladder is a huge tool if it works tax wise for whatever your situation is.

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  11. #2811
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    Re: educate me 401-k

    You would transfer your 401k into a rollover IRA (not a traditional IRA) at a brokerage of your choice. I have accounts at both Vanguard and Fidelity and recommend both, but there has been a lot of online complaints re Vanguards customer service and outdated website over the past 1+ years.

    The only real differences between a rollover IRA and Traditional IRA is that a rollover is, funded by a roll from a employer pre-tax sponsored plan (aka 401k). After the rollover you can contribute to it as a normal Traditional but you're subject to the normal income restrictions for tax deductions and contribution amounts.

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  12. #2812
    Lifer jimmycapp's Avatar
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    Re: educate me 401-k

    TIL

    “Rollover IRA” is just a subcategory of “traditional IRA.” In other words, a rollover IRA is a traditional IRA. Specifically, rollover IRAs are traditional IRAs that contain nothing but assets that came from an employer-sponsored plan.

    Because a rollover IRA is a traditional IRA, it gets all the same tax treatment as a normal traditional IRA. That is, distributions from the account are generally taxable; you can do a Roth conversion of the assets in the account; it’s treated the same way with regard to aggregation rules as other traditional IRAs; and so on.

    Rollover IRAs are designated as such (rather than just being called regular traditional IRAs) for two reasons.

    Reason #1: some employer plans only accept rollovers from an IRA when the IRA contains only assets from another employer-sponsored plan. So keeping those assets separate in their own IRA (rather than combining them with other assets in a traditional IRA) could preserve your ability to roll those assets into a different employer plan at a later date. But fewer and fewer employer plans have this policy every year, so this distinction is becoming less relevant.

    Reason #2: assets in an employer-sponsored plan have unlimited creditor protection in bankruptcy under federal law. In contrast, IRA assets are only protected up to a certain limit ($1,362,800 as of 2020). If assets from an employer-sponsored plan are rolled into an IRA and kept separate (i.e., kept in a separate “rollover IRA”), they continue to receive that unlimited protection. If the assets get commingled with other assets in a traditional IRA, then they might lose that unlimited protection and “only” be protected up to the $1,362,800 limit.

    That said, some people make the case that if you have good records and could prove that the assets in question came from an employer plan, you would still have unlimited protection for those assets. Also, many states provide additional protection to IRA assets beyond what federal law provides. And of course most people’s IRA assets are never going to exceed the federal protection limit anyway.

    To summarize, a rollover IRA is a traditional IRA and is taxed as such, but there are two reasons for keeping rollover IRA assets separate from other traditional IRA assets. It may well be the case, however, that neither of those two reasons is particularly applicable to your own circumstances.

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  13. #2813
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Good stuff.

    So in most cases you may not contribute to a "rollover" IRA once it is established, correct? Meaning if I rolled my 401k into a "rollover" IRA and then wanted to make contributions a year later I would have to open a new, "traditional" IRA.

    As you say, this is probably largely an institution by institution thing, rather than a law thing.

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  14. #2814
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    Re: educate me 401-k

    Quote Originally Posted by nhbubba View Post
    Good stuff.

    So in most cases you may not contribute to a "rollover" IRA once it is established, correct? Meaning if I rolled my 401k into a "rollover" IRA and then wanted to make contributions a year later I would have to open a new, "traditional" IRA.

    As you say, this is probably largely an institution by institution thing, rather than a law thing.
    You can continue to contribute to a rollover IRA within IRS guidelines. But, as Jimmy stated if you ever had plans to transfer the IRA rollover to a new employer 401k plan (if the employer accepts the rollover) most employer plans won't accept them if you added additional contributions. A common reason to "roll" a rollover IRA to your new employer is to circumvent income restrictions and pro rata issues with performing backdoor Roth transactions.

    I have a sizeable rollover IRA from when I left my previous employer but no T-IRA due to income restrictions. I don't perform backdoor Roth conversions due to having the rollover IRA. Even though my current employer's 401K is via Fidelity, our Fund options are pretty restricted which is why I leave my rollover IRA separate and no reason to transfer it out of Vanguard.

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    Last edited by db79; 01-12-22 at 02:29 PM.

  15. #2815
    Lifer
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    Re: educate me 401-k

    All great info guys.

    For the record my employee 401k is already with fidelity albiet on the netbenefits side. I hold two stock brokerage accounts with them as well. For me, Fidelity has been great and I am planning on staying with them. I just need to switch the 401k to a different account.

    I'm not planning on touching that 401k, Maybe not even when I hit 65 which is in 21 years. I'm just going to park it and ignore it mostly. If I contribute to it at all it will only be for some weird reason that I'm not aware of yet.

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  16. #2816
    Fast is contagious JettaJayGLS's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by db79 View Post
    I have a sizeable rollover IRA from when I left my previous employer but no T-IRA due to income restrictions. I don't perform backdoor Roth conversions due to having the rollover IRA. Even though my current employer's 401K is via Fidelity, our Fund options are pretty restricted which is why I leave my rollover IRA separate and no reason to transfer it out of Vanguard.
    I am in the exact same boat and cannot backdoor without a tax penalty. I think it is some FIFO thing.
    I thought I read that you can roll a rollover IRA into your current 401k after like a year? Then I can backdoor without penalty. Does any of that ring a bell?

    If so the question is would I rather have a lot of investment options for the IRA money and not be able to backdoor, or would I be fine with it in my 401k and then be able to backdoor. I think the former - but I didn't know all the implications when I originally rolled it over into an IRA.
    So my main question is can I roll my rollover IRA into my current 401k and then backdoor?

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    Last edited by JettaJayGLS; 01-12-22 at 08:08 PM.
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  17. #2817
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by JettaJayGLS View Post
    So my main question is can I roll my rollover IRA into my current 401k and then backdoor?
    Depends on your plan. Some 401k's accept "in-service roll-ins". Some do not. Check your fine print.

    Be aware that many do not permit "in-service roll-out". So it may be a one-way move for you. Then you are stuck with whatever investment options your employer picks. And be aware that they can seemingly change those options whenever the hell they feel like it. ... Or so I've heard.

    But yes, rolling in your trad-IRA into a corporate 401k will allow you to clear the deck for a back-door ROTH IRA.

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  18. #2818
    Angry Gumball RandyO's Avatar
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    Re: educate me 401-k

    anyone here do private investments/mortgages ? one of my clients that buys & subdivides, harvests timber/gravel, etc. & sells land, can get me in on holding mortgages for land he sells, interest rates would be 8%-10% and would have real estate for collateral, risk ? , default would end up owning the property

    thinking of putting an egg in that basket

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    RandyO
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  19. #2819
    I've been here before. Mustang's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by RandyO View Post
    anyone here do private investments/mortgages ? one of my clients that buys & subdivides, harvests timber/gravel, etc. & sells land, can get me in on holding mortgages for land he sells, interest rates would be 8%-10% and would have real estate for collateral, risk ? , default would end up owning the property

    thinking of putting an egg in that basket
    I do that with a redevelopment company in metro Boston. Normally 10-18% returns.

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  20. #2820
    Angry Gumball RandyO's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by Mustang View Post
    I do that with a redevelopment company in metro Boston. Normally 10-18% returns.
    I would be working with land only, substantial down payments

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    RandyO
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  21. #2821
    Lifer
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    Re: educate me 401-k

    Is getting into that type of business worth it right now? With rates starting to creep up and building materials and property values still high I would worry about getting stuck with now over priced land if the buying trend drops. I can't see this market lasting too much longer.

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