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Message
Bonus at the end of year
Posted on 11/30/12 at 5:14 pm
Posted on 11/30/12 at 5:14 pm
Anyone roll their bonus into a 401k so as to avoid paying taxes on it now?
Looking at a hefty one and I'm thinking about the best ways to invest and plan with the money. I'm pretty young and my debt is all at good interest rates...
What would you do with a five-figure bonus?
Looking at a hefty one and I'm thinking about the best ways to invest and plan with the money. I'm pretty young and my debt is all at good interest rates...
What would you do with a five-figure bonus?
4
Posted on 11/30/12 at 5:19 pm to Rev1897
401k contributions have caps. Does your employer offer deferred compensation plan?
Posted on 11/30/12 at 5:44 pm to Llama
What's the cap? Not sure if they do.
Posted on 11/30/12 at 5:58 pm to Rev1897
cap is about 17k and that includes what you've already put in during the year
Posted on 11/30/12 at 9:47 pm to Rev1897
I plan on funding my roth and 529 plans with my 10k in Jan.
Posted on 11/30/12 at 10:15 pm to Zilla
Its never a bad idea to set aside 4-6 months of living expenses in savings. Roth is a great idea, if eligible to contribute... Still wont solve his tax dilemma this year, but would pay off down the road in my opinion.
Posted on 12/1/12 at 8:08 am to Llama
Yea, I'm currently reviewing the Roth v traditional IRa. Looks like Roth may be better for me
Posted on 12/1/12 at 9:24 am to Rev1897
If you had asked me 5 years ago, I would have said that any fiddling with deferred accounts would be impossible. Not saying TPTB are going to take the accounts, but some rules changes will come.
As the gov needs more and more money, then anything is possible and one cannot put all of one's eggs in the same basket...
Time
As the gov needs more and more money, then anything is possible and one cannot put all of one's eggs in the same basket...
quote:
One of the earliest fears about tax-favored savings accounts like IRAs and 401(k) plans was that when this pool of savings grew large enough Congress would not be able to resist tapping it to help solve the nation’s debt problems. We’re about to find out if those fears—persistent for decades—have been justified.
Time
Posted on 12/1/12 at 9:28 am to Blakely Bimbo
Well that's scary. I guess that makes me lean toward a traditional IRA then.
Posted on 12/1/12 at 10:28 am to Rev1897
Depending on your/my current income and tax deductions available, my answer could be take it now, pay the income tax, and put it to work earning tax-free income or unearned income with added depreciation opportunities. I am never a fan of delaying my payment of income tax to an unknown future of income tax rates.
Posted on 12/1/12 at 10:50 am to BestBanker
Roth is better if you are in a lower tax-bracket and expect to have a lower tax rate now than in the future. I'm sure you know that by now.
I'm fresh out of school, and I'm putting 10% a paycheck aside (7% into Roth and 3% into a regular IRA).
It would be really hard for you to shelter that 10k from taxes, or the IRS will come swoopin down on you
I'm fresh out of school, and I'm putting 10% a paycheck aside (7% into Roth and 3% into a regular IRA).
It would be really hard for you to shelter that 10k from taxes, or the IRS will come swoopin down on you
Posted on 12/2/12 at 9:21 am to Tmacelroy12
quote:
Roth is better if you are in a lower tax-bracket and expect to have a lower tax rate now than in the future. I'm sure you know that by now.
I've always heard that, but I don't think it's true.
Oh, it's true if you are close to needing to pull money from it, but not in general.
But even at the highest tax bracket, you'll recoup what was lost within 10 years, assuming inflation and the most conservative growth of stock.
I haven't sat down and did the comparison of the opportunity cost of growth vs having to pay taxes on the growth, but it seems to be that for your 20s and 30s, that maxim does not apply. Put every cent that you can in a Roth, period. Focus more on traditional IRA's later in life, and draw from them first in retirement (after you have drawn down taxable investments) to further increase the advantages of a Roth.
This post was edited on 12/2/12 at 11:50 am
Posted on 12/2/12 at 11:23 am to Siderophore
Every young person should be doing their absolute best to max out a Roth every year.
Posted on 12/2/12 at 2:18 pm to jso0003
quote:
Every young person should be doing their absolute best to max out a Roth every year.
why do you say this? It's only $5,000 per person, right?
I am already maxing out my 401k and have a significant savings/equities account.
Posted on 12/2/12 at 3:23 pm to Rev1897
Because of the massive tax advantages associated with a Roth if you can give it time to compound interest significantly.
I have my Roth as my primary retirement vehicle. I put the max for employer matching in my 401k, but I plan on rolling it over into my Roth when I move.
Also, a Roth can double as an emergency fund by allowing you to withdraw contributions no questions asked and penalty free.
I have my Roth as my primary retirement vehicle. I put the max for employer matching in my 401k, but I plan on rolling it over into my Roth when I move.
Also, a Roth can double as an emergency fund by allowing you to withdraw contributions no questions asked and penalty free.
Posted on 12/3/12 at 11:42 am to Rev1897
quote:
why do you say this? It's only $5,000 per person, right?
I am already maxing out my 401k and have a significant savings/equities account.
rule #1 - make sure you are contributing up to what your employer matches with your 401K. You will not make a better initial ROI that having your employer match.
rule #2 - if you are young enough to see the ROTH growth then contribute up to the max of ROTH limits
rule #3 - any more retirement money you have to invest, back into a 401k or traditional IRA
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