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re: Switch to 100% post tax retirement contributions into a Roth at midpoint of career?
Posted on 7/26/18 at 3:43 pm to weagle99
Posted on 7/26/18 at 3:43 pm to weagle99
quote:
maxed out HSA.
I’m still trying to convince my company to alter our healthcare plan offerings so I can take advantage of an HSA. Sweet baby Jesus do I want one lol
1
Posted on 7/26/18 at 4:16 pm to notsince98
Another plus for Roth IRA is it doesn't have RMDs and no tax burden to beneficiaries unlike inherited 401k
Posted on 7/26/18 at 4:20 pm to TorchtheFlyingTiger
Yep.
Back to the OP’s questions at hand. I do believe it would be good for you to have some type of tax free retirement income source if for nothing more than being able to diversify where your funds come from depending on how tax laws fluctuate during your retirement.
Can you clarify your post a little more? Are you planning on eventually rollinging the entire 401k into a Roth IRA? I’m having trouble wrapping my head around what you’re describing with the 1st half vs 2nd half stuff.
Back to the OP’s questions at hand. I do believe it would be good for you to have some type of tax free retirement income source if for nothing more than being able to diversify where your funds come from depending on how tax laws fluctuate during your retirement.
Can you clarify your post a little more? Are you planning on eventually rollinging the entire 401k into a Roth IRA? I’m having trouble wrapping my head around what you’re describing with the 1st half vs 2nd half stuff.
This post was edited on 7/26/18 at 4:21 pm
Posted on 7/26/18 at 4:21 pm to GoCrazyAuburn
Yeah pretty much nothing beats an HSA.
Posted on 7/26/18 at 4:24 pm to castorinho
quote:
Yeah pretty much nothing beats an HSA.
I believe it is the only investment vehicle where the money is never taxed as long as used on medical expenses, correct?
Posted on 7/26/18 at 4:26 pm to GoCrazyAuburn
Sure. The 1st half of my career has been almost all pre-rax investments for retirement. I am wondering if in the 2nd half I should go all after tax.
I’m not planning on rolling my pre-tax 401k into a Roth, just letting it grow via gains and company matches (and rebalancing). All of my out of pocket contributions for the remainder of my working life would be after tax into a Roth. Just what I am considering.
My pre-tax contribution to a 401k is now capped at $8000.
I’m not planning on rolling my pre-tax 401k into a Roth, just letting it grow via gains and company matches (and rebalancing). All of my out of pocket contributions for the remainder of my working life would be after tax into a Roth. Just what I am considering.
My pre-tax contribution to a 401k is now capped at $8000.
Posted on 7/26/18 at 4:28 pm to lynxcat
quote:
believe it is the only investment vehicle where the money is never taxed as long as used on medical expenses, correct?
Yes. And the money can be invested within the HSA. The rate of return on my HSA investments YTD are equal or better than anything else I have.
Once you reach a certain age you can withdraw the money without penalty and use it for anything (although it will be taxed as income). This is the ‘stealth 401k’ feature of the HSA.
This post was edited on 7/26/18 at 4:29 pm
Posted on 7/26/18 at 4:31 pm to weagle99
quote:
Sure. The 1st half of my career has been almost all pre-rax investments for retirement. I am wondering if in the 2nd half I should go all after tax.
I’m not planning on rolling my pre-tax 401k into a Roth, just letting it grow via gains and company matches (and rebalancing). All of my out of pocket contributions for the remainder of my working life would be after tax into a Roth. Just what I am considering.
My pre-tax contribution to a 401k is now capped at $8000
Okay that makes more sense. I was thinking you were talking about doing after tax contributions to your traditional 401k then rolling them over. That would be more complicated.
So basically, you’d stop your 401k contributions above your match point, and go into a Roth IRA?
ETA: apologies for all the questions. Got out of this world a few years ago, so my brain isn’t firing on all cylinders.
This post was edited on 7/26/18 at 4:34 pm
Posted on 7/26/18 at 4:33 pm to weagle99
quote:
Yes. And the money can be invested within the HSA. The rate of return on my HSA investments YTD are equal or better than anything else I have.
Once you reach a certain age you can withdraw the money without penalty and use it for anything (although it will be taxed as income). This is the ‘stealth 401k’ feature of the HSA.
Yep. When used for health reasons, it is tax free. Easy to use too because it does not have to be a direct expense. It can reimburse you, so just save the receipt. Just makes paying for things much easier.
Then at retirement age, it works just like a normal 401k outside of medical expenses. Basically becomes a 401k with tax free medical reimbursement.
Posted on 7/26/18 at 4:37 pm to GoCrazyAuburn
Read his first post, he intends to convert/roll over post tax 401k contributions to Roth. He will also max his Roth IRA contributions separately.
This post was edited on 7/26/18 at 4:39 pm
Posted on 7/26/18 at 4:38 pm to GoCrazyAuburn
I was uneasy making the move to an HSA three years ago. We just had a baby. So I made the move solo, wife stayed on her employers plan. I started accumulating money in my HSA with company match and growth, then following year all moved to my plan and we haven't had to use much of the money , and our potential oop max is covered for two years. Son just had tubes put in and reached his oop max and we didn't bat an eye, just swiped.
You can use your own money and pay yourself back anytime you want. Everything about it is great.
You can use your own money and pay yourself back anytime you want. Everything about it is great.
Posted on 7/26/18 at 4:40 pm to GoCrazyAuburn
Sorta. My company will match even if I only contribute after tax dollars so I get their match, leave it in 401k, and move my aftet tax money out into a Roth at regualr intervals.
In addition I am also doing the $5500 / year Roth contribution out of pocket, although that number will start to drop as my salary increases.
In addition I am also doing the $5500 / year Roth contribution out of pocket, although that number will start to drop as my salary increases.
This post was edited on 7/26/18 at 4:41 pm
Posted on 7/26/18 at 4:40 pm to TorchtheFlyingTiger
quote:
Read his first post, he intends to convert/roll over post tax 401k contributions to Roth. He will also max his Roth IRA contributions separately.
This reads a little differently than his explanation above.
If this is the case, please correct me if I’m wrong, but you can’t do a 1-1 rollnover of post tax traditional 401k contributions to a Roth IRA. It is based on whatever % it is of the entire 401k. Or has that changed?
Posted on 7/26/18 at 4:43 pm to weagle99
quote:
Sorta. My company will match even if I only contribute after tax dollars so I get their match, leave it in 401k, and move my aftet tax money out into a Roth at regualr intervals.
In addition I am also doing the $5500 / year Roth contribution out of pocket, although that number will start to drop as my salary increases.
Got it. See above on rolling after tax traditional 401k. Say you had 100k in the account and 20k was after tax. If you rolled over $20k, only 20% of it could be the after tax monies.
As I said, if this has changed, someone please correct me.
Definitely donthe Roth IRA if you can though.
Posted on 7/26/18 at 4:45 pm to castorinho
quote:
castorinho
Nice! Yea I’m still young and single. I have few health expenses. I’m prime for being able to capitalize on the HSA without worrying about potential high out of pocket expenses (unless something tragic happens). Just can’t get one
Posted on 7/26/18 at 4:47 pm to GoCrazyAuburn
quote:
but you can’t do a 1-1 rollnover of post tax traditional 401k contributions to a Roth IRA. It is based on whatever % it is of the entire 401k. Or has that changed?
It was 1-1 on my latest rollover. All of my after tax money went to the Roth from my 401k. The plan administrator for the 401 cut a check and sent it to the Roth administrator.
This post was edited on 7/26/18 at 4:50 pm
Posted on 7/26/18 at 4:50 pm to weagle99
Guess that rule has changed. It’s been years since I’ve dealt with any of this so not surprising. That’s awesome though. That makes it so much easier. I see no problem with your idea, especially if there is even a chance your tax rate in retirement could be the same or higher than it is now. With a good traditional amount and the HSA contributions on the pre-tax side and the Roth on the after tax side, that is great diversification.
This post was edited on 7/26/18 at 4:55 pm
Posted on 7/26/18 at 4:56 pm to GoCrazyAuburn
Thanks for the feedback. And to everyone else in the thread also.
Posted on 7/26/18 at 5:09 pm to weagle99
We probably oversimplify it. My wife and I just both max out our employer 401k plans (currently 18.5k each and the employer match knocks a few thousand more in) and we both do 50% roth and 50% traditional for tax diversification. I gave up on trying to figure out which I should be doing so I took the "why not both" approach and called it a day. We also both essentially do 70% S&P, 20% international, 10% small/mid cap funds.
We used to try all kinds of different things, changing things around a good bit, but we have basically just set it and left it like this for a couple of years now and it seems to work as well as anything.
That's pretty much our entire retirement savings plan in addition to switching to a 15 year mortgage to accelerate equity in our home. That's our only real estate exposure.
We used to try all kinds of different things, changing things around a good bit, but we have basically just set it and left it like this for a couple of years now and it seems to work as well as anything.
That's pretty much our entire retirement savings plan in addition to switching to a 15 year mortgage to accelerate equity in our home. That's our only real estate exposure.
This post was edited on 7/26/18 at 5:13 pm
Posted on 7/26/18 at 5:15 pm to elposter
ABdolutely nothing wrong with what y’all are doing.
Generally I always said that for young people especially do 401k to match point, max Roth if Roth is available, then max 401k if still have leftover income as far as tax advantages investment accounts.
Personally I’d have maxed the Roth since you already have a ton of pretax goin into the 401k, but largely that is a personal choice. Nothing wrong with doing it your way either.
Generally I always said that for young people especially do 401k to match point, max Roth if Roth is available, then max 401k if still have leftover income as far as tax advantages investment accounts.
Personally I’d have maxed the Roth since you already have a ton of pretax goin into the 401k, but largely that is a personal choice. Nothing wrong with doing it your way either.
This post was edited on 7/26/18 at 5:25 pm
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