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Started By
Message
401K Newbie
Posted on 5/25/19 at 9:20 am
Posted on 5/25/19 at 9:20 am
Morning fellas. I've been in education the last 9 years and am leaving the field for a job that pays more money. That said, all of my employment contributions have gone into my pension, so I've never contributed to a 401K. My new employer matches my contributions up to 5%. So I have a couple of questions:
1. Should I only invest 5% into the 401K and individually contribute into a Roth? The 401 contributions go into a Vanguard fund
2. I have contributed roughly 40K into the pension. I feel like I should just leave it alone, but I do have the option of pulling it out and investing it elsewhere.
Wife, two kids, really no debt. Our household income should be just a little over 100K. Thanks in advance!
1. Should I only invest 5% into the 401K and individually contribute into a Roth? The 401 contributions go into a Vanguard fund
2. I have contributed roughly 40K into the pension. I feel like I should just leave it alone, but I do have the option of pulling it out and investing it elsewhere.
Wife, two kids, really no debt. Our household income should be just a little over 100K. Thanks in advance!
7
Posted on 5/25/19 at 9:35 am to adavis
quote:
I have contributed roughly 40K into the pension. I feel like I should just leave it alone, but I do have the option of pulling it out and investing it elsewhere.
Since you are vested, a lot depends on your age. How long before you can start collecting pension payouts?
Posted on 5/25/19 at 9:53 am to TigerintheNO
I'm 36, so I've got a while before I can collect anything. To be honest, I'm not 100% sure how the pension works. My monthly payout wouldn't be much though, according to the projections. Social security will probably pay me more.
Posted on 5/25/19 at 10:02 am to adavis
quote:
Social security will probably pay me more.
have you paid into social security for the past decade?
Posted on 5/25/19 at 10:04 am to TigerintheNO
Yeah, I've been paying into social security with my side gigs while teaching. Granted, I've paid more into the pension.
This post was edited on 5/25/19 at 10:07 am
Posted on 5/25/19 at 10:09 am to adavis
your pension payout it rough estimate is
# of years * 2% * average of your highest 5 years of pay
(the % jumps to 2.5% with 25 years of service)
# of years * 2% * average of your highest 5 years of pay
(the % jumps to 2.5% with 25 years of service)
Posted on 5/25/19 at 10:16 am to TigerintheNO
Will I be able to draw the pension if I don't go back into education though?
Posted on 5/25/19 at 10:27 am to adavis
yes
quote:
Membership on or after July 1, 1999 With a 2.5% benefit factor:
Age 60 with 5 years of service credit
Age 55 with 25 years of service credit
Any age with 30 years of service credit
Any age with 20 years of service credit* (actuarially reduced)
Posted on 5/25/19 at 10:36 am to TigerintheNO
Hmmmmmm. It might be worth leaving it in there then
Posted on 5/25/19 at 11:04 am to adavis
In twenty years you will be in your mid 50s and your kids will be out of the house. There would be nothing stopping you from going back and teaching for a few years.
Not only would it raise the number of years from 9 to 14, but also base your payouts on teacher salaries in 2038 not 2018. Salaries will be higher in 20 years.
Not only would it raise the number of years from 9 to 14, but also base your payouts on teacher salaries in 2038 not 2018. Salaries will be higher in 20 years.
Posted on 5/25/19 at 1:28 pm to adavis
Lots of unknowns here, so I will make some assumptions. I would leave the pension alone. 40k isn't really a lot of money. Not sure the rules on withdraw if you would pay taxes or not if you transfered to a 401k. Ideally, you put 19000 into your 401k moving forward. You are behind. It also reduce taxable income. Good luck. Private sector can be a bitch.
Posted on 5/25/19 at 1:32 pm to adavis
quote:
Hmmmmmm. It might be worth leaving it in there then
If the probability of you doing it is anything like 50% (or more), then I would agree with this.
Otherwise, you really need a hardcore A/B (or A/B/C) analysis for net return if you:
A. Leave it
B. Reinvest it elsewhere (with any corresponding penalties/transfer costs)
C. Debt reduction
Posted on 5/25/19 at 2:13 pm to adavis
quote:
Should I only invest 5% into the 401K and individually contribute into a Roth? The 401 contributions go into a Vanguard fund
Different schools of thought based on your tax situation.
Many recommend you put 5% into the 401, max out the Roth, and then put whatever is left in the 401.
Do you have an HSA? You should max that out too.
Posted on 5/25/19 at 3:46 pm to Ace Midnight
quote:you forgot to add the tax caveat in this one.
C. Debt reduction
Posted on 5/25/19 at 5:31 pm to adavis
Where do you live?
Some state pensions are set up that once you pull the money out, you can never be vested in the state plan again.
Some state pensions are set up that once you pull the money out, you can never be vested in the state plan again.
Posted on 5/25/19 at 7:19 pm to adavis
Is a Roth 401k available at your new job? At your combined income level and low tax rate, a Roth 401k would be your best choice. IMO.
Posted on 5/26/19 at 7:09 am to hottub
Louisiana
Posted on 5/26/19 at 7:13 am to weagle99
An HSA is available with my new job. I've thought about going with an HSA insurance plan
Posted on 5/26/19 at 9:36 pm to adavis
You can invest the money within the HSA also. They offer tremendous tax benefits.
Posted on 5/27/19 at 8:36 pm to adavis
quote:
1. Should I only invest 5% into the 401K and individually contribute into a Roth? The 401 contributions go into a Vanguard fund
At a minimum you invest to the company's match. Mac is roughly $18k a year. Personally I would worry about getting to $18k max a year vs individual contribute to Roth. Your company may even let you treat 401k like Roth.
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