- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Start traditional IRA or bump up 401k?
Posted on 12/8/17 at 7:25 pm
Posted on 12/8/17 at 7:25 pm
Academic discussion leaving Roth out of the mix.
For the same amount of pre-tax money would the traditonal IRA offer any advatnage over just putting an equal amount in a 401k?
For the same amount of pre-tax money would the traditonal IRA offer any advatnage over just putting an equal amount in a 401k?
This post was edited on 12/8/17 at 7:53 pm
2
Posted on 12/8/17 at 8:00 pm to weagle99
Does your employer match any part of your 401K contributon? That would be the primary consideration. After that, the contribution limit is higher for a 401K's then an IRA. IRA advantage would be that you have many more choices of what you can invest in. So my advice would be to fund the 401K up to max that the employer matches, then the IRA up to the limit or as much as you can afford.
Posted on 12/8/17 at 9:05 pm to PlanoPrivateer
Thanks. I’m way above employer match.
Sounds like fund diversification is the main benefit for the IRA.
Sounds like fund diversification is the main benefit for the IRA.
This post was edited on 12/8/17 at 9:05 pm
Posted on 12/9/17 at 3:59 pm to weagle99
The 401k has the advantage that you can take a loan from it up to 50k. The loan doesn't require a credit check, the interest is paid to yourself and isn't taxable (unless u default).
I will be taking a 401k loan myself for buying a new home next year. That will let me buy the new home first and sell the old one after we move. Then I'll pay off the loan once the house sells.
There is a myth that 401k loans are bad because you're paying tax twice on the principal, but it's not true. The interest is taxed twice yes, but it's still most likely cheaper than the cost of borrowing from a lender.
I would only do a 401k loan if you have the intention of paying it back quickly or have the ability to do so. If you get laid off, some plans require you to pay it off very quickly (luckily mine doesn't).
I will be taking a 401k loan myself for buying a new home next year. That will let me buy the new home first and sell the old one after we move. Then I'll pay off the loan once the house sells.
There is a myth that 401k loans are bad because you're paying tax twice on the principal, but it's not true. The interest is taxed twice yes, but it's still most likely cheaper than the cost of borrowing from a lender.
I would only do a 401k loan if you have the intention of paying it back quickly or have the ability to do so. If you get laid off, some plans require you to pay it off very quickly (luckily mine doesn't).
Posted on 12/11/17 at 10:38 am to gpburdell
quote:
The interest is taxed twice yes, but it's still most likely cheaper than the cost of borrowing from a lender.
Don't forget to also consider the opportunity cost of lost gains made on that money you took out of the market.
I agree, it's not a bad deal if it is only temporary (i.e.6 months or less).
Posted on 12/11/17 at 11:12 am to gpburdell
quote:Not all 401(k)s have loan features (it is not automatic). Also, when taking a loan, remember that there is also the cost of loss of earnings on the funds to consider as well.
The 401k has the advantage that you can take a loan from it up to 50k. The loan doesn't require a credit check, the interest is paid to yourself and isn't taxable (unless u default).
I will be taking a 401k loan myself for buying a new home next year. That will let me buy the new home first and sell the old one after we move. Then I'll pay off the loan once the house sells.
There is a myth that 401k loans are bad because you're paying tax twice on the principal, but it's not true. The interest is taxed twice yes, but it's still most likely cheaper than the cost of borrowing from a lender.
I would only do a 401k loan if you have the intention of paying it back quickly or have the ability to do so. If you get laid off, some plans require you to pay it off very quickly (luckily mine doesn't).
Posted on 12/11/17 at 1:44 pm to seawolf06
quote:
Don't forget to also consider the opportunity cost of lost gains made on that money you took out of the market.
I have more than 50k bonds in my 401k. When I take a loan, I'll tap those. So I'll maintain the same level of equity exposure. I realize not everyone will be in that situation.
You make a good point about earnings especially if 50k represents a significant portion of your entire portfolio. I wouldn't recommend it in that case if you plan to keep the loan for more than a year.
Posted on 12/11/17 at 2:15 pm to gpburdell
Check with your plan to see if they'll allow you to dictate which funds are used for the loan. Most places won't - it's strictly pro-rata.
Posted on 12/11/17 at 6:23 pm to gpburdell
quote:
The interest is taxed twice yes, but it's still most likely cheaper than the cost of borrowing from a lender.
Understand that I haven't had my fifth cup of coffee yet, so be patient. But apart from when you begin taking distributions and pay taxes, how is the interest (I'm assuming you mean that paid to yourself on the loan) taxed twice?
Posted on 12/12/17 at 12:01 am to Jag_Warrior
Yes, I am talking about when you take a distribution in the future. Repaying a 401k loan, you are using after tax dollars from your paycheck.
When you take a distribution and pay taxes, the interest amount you paid to the 401k is being taxed for a second time.
When you take a distribution and pay taxes, the interest amount you paid to the 401k is being taxed for a second time.
Page 1 of 1
Popular
Back to top
Follow TigerDroppings for LSU Football News