Personal Finance Advice and Education! (1 Viewer)

[Peggy]

@-OZ- @Sand Hang on. Unless I was misunderstanding you guys. I just read in one of my books about Nondeductable IRAs

- Taxes on capital gains, dividends and interest are deferred and due when you withdraw the money.
- Taxes are not due on your original contribution since these were made with "after tax" money.
- Warning: It requires extra book keeping and complexity when filing taxes.

So there still is an advantage to contributing to an IRA even your income is too high for it to be deductible. You could get 8k in each year in that defers all capital gains taxes on sales (div+int) unlike a taxable account, with the downside being the record keeping required to keep everything straight. Especially if you have a mixture of pre and post tax monies.

From a tax perspective, I don't think this is as difficult as you're making it out to be. If you make a nondeductible traditional IRA contribution, you track your previously-taxed (i.e. the amount you contributed but couldn't deduct) cost basis on form 8606. When you take a distribution, a portion of the distribution gets applied to the cost basis, and a portion gets applied to taxable income. The computation is illustrated on the tax form - any tax software worth its salt will be able to handle these computations.

Good to know. So when Turbo Tax shouted at me "Your income is too high to deduct your IRA contribution" it will keep track 20 years from now and apply cost basis for me?

I know that Fidelity keeps track of all the different Pre Tax401K - 401K Roth - After Tax 401K contributions so when I call them to roll ABC over to XYZ they can work in the background and make it happen. Is it fair to say that Bank of America/Merrill Edge isn't keeping track of Pre Tax IRA vs. After Tax IRA? I know it's a question they ask when you contribute, but, I didn't know nor did I click the right button until I did my taxes.

I understand what you're saying about form 8606, but, I think I need to keep track of at least total contributions Pre and Post.

 

[Payne]

I was planning on rolling old 401k into a Fidelity IRA

I’m probably not consensus. Assuming your 401K is traditional and you’ll be rolling to a traditional IRA, or ROTH to ROTH, that’s what I’d do. I wonder if some think you’re going Traditional to ROTH by the way you phrased it and that’s why the opposition?

I have a very small portion of my 401k in Roth. 99% of it is traditional 401k to traditional IRA.

 

[Payne]

Ok, it has been a month since I asked my question about rolling over old company 401k.

From talking to people it seems the general consensus is to:
1) Keep my funds in current 401k
2) Transfer to new company 401k ONLY IF it is deemed an improvement over current 401k.
3) Rollover to IRA seems to be everyone's last resort.

This would go against what I was planning to do.

Again, I am 50. Have quite a large sum in current 401k.
Started new job and have yet to start new 401k.
I was planning on rolling old 401k into a Fidelity IRA where my Roth is held to make it easier for me to manage.

I have reached out to an advisor because I want to do what's right for me as I near retirement.
But, in the meantime, I was looking to see what those of you with far more knowledge think.

Personally I disagree with 3. I think it is the best option, in general. Three caveats - what are the fees in the current 401k (or new 401k)? They usually suck compared to ETFs. Does the new 401k allow for partial withdrawals at 55 (if you need this money and will retire at 55)? What are the legal protections in your state between a 401k and IRA?

I place a large premium on that last one. I'd hate to be sued out of the IRA when it would have been safe in a 401k. If the fees suck, you don't expect to need that money at 55-59.5, and your IRA is legally protected I'd absolutely roll to Fidelity.

I shouldn't need the money by 59.5. SHOULDN'T. Michigan appears to protect both equally.

 

[Peggy]

Just to keep my retirement scenario going a step further. Early retirement, virtually no income living on cash:

I think it would behoove anyone to do everything they can to get $8,000 in earned income. Sell crap on Ebay, hold a garage sale, mow lawns. Because:

1 - 8K more directly into Roth per individual.
2 - 8K deducted from income.
3 - When rolling 401K to Roth in a low tax bracket you can Roll more because of #2.

Am I thinking correct for #3?

 

[-OZ-]

8K deducted from income.

I’m Missing something here.

 

[Peggy]

8K deducted from income.

I’m Missing something here.

Never mind. Roth contribution isn't deductible. I'm trying too hard.

 

[Sand]

30ish years ago. Not too far off.

 

[-OZ-]

30ish years ago. Not too far off.

That’s a pretty nice vacation and car (not basic). Otherwise, pretty close.

 

[matttyl]

30ish years ago. Not too far off.

They must like Five Guys. A vacation and a car can easily cost that much.

 

[Steve Tasker]

@-OZ- @Sand Hang on. Unless I was misunderstanding you guys. I just read in one of my books about Nondeductable IRAs

- Taxes on capital gains, dividends and interest are deferred and due when you withdraw the money.
- Taxes are not due on your original contribution since these were made with "after tax" money.
- Warning: It requires extra book keeping and complexity when filing taxes.

So there still is an advantage to contributing to an IRA even your income is too high for it to be deductible. You could get 8k in each year in that defers all capital gains taxes on sales (div+int) unlike a taxable account, with the downside being the record keeping required to keep everything straight. Especially if you have a mixture of pre and post tax monies.

From a tax perspective, I don't think this is as difficult as you're making it out to be. If you make a nondeductible traditional IRA contribution, you track your previously-taxed (i.e. the amount you contributed but couldn't deduct) cost basis on form 8606. When you take a distribution, a portion of the distribution gets applied to the cost basis, and a portion gets applied to taxable income. The computation is illustrated on the tax form - any tax software worth its salt will be able to handle these computations.

Good to know. So when Turbo Tax shouted at me "Your income is too high to deduct your IRA contribution" it will keep track 20 years from now and apply cost basis for me?

I know that Fidelity keeps track of all the different Pre Tax401K - 401K Roth - After Tax 401K contributions so when I call them to roll ABC over to XYZ they can work in the background and make it happen. Is it fair to say that Bank of America/Merrill Edge isn't keeping track of Pre Tax IRA vs. After Tax IRA? I know it's a question they ask when you contribute, but, I didn't know nor did I click the right button until I did my taxes.

I understand what you're saying about form 8606, but, I think I need to keep track of at least total contributions Pre and Post.

I've never personally used TurboTax, but let's say you make a nondeductible contribution of $7,000 during 2024. You enter the information into TurboTax, and it spits out that you have a $7,000 cost basis at 12/31/2024 on your 2024 Form 8606. Then in 2025, you decide not to contribute, you don't do anything. You still file form 8606 for 2025, you would report a beginning basis of $7,000 and an ending basis of $7,000. Rinse repeat until you eventually start withdrawing.

I don't know if TurboTax will auto-fill your 2025 return based on your 2024 return, but when you save a PDF (or paper, whatever) copy of your 2024 tax return for your records, the form 8606 will be in there. You'll need to file one every year in perpetuity, so long as you still have any cost basis that you haven't used.

 

[Desert_Power]

Ok, it has been a month since I asked my question about rolling over old company 401k.

From talking to people it seems the general consensus is to:
1) Keep my funds in current 401k
2) Transfer to new company 401k ONLY IF it is deemed an improvement over current 401k.
3) Rollover to IRA seems to be everyone's last resort.

This would go against what I was planning to do.

Again, I am 50. Have quite a large sum in current 401k.
Started new job and have yet to start new 401k.
I was planning on rolling old 401k into a Fidelity IRA where my Roth is held to make it easier for me to manage.

I have reached out to an advisor because I want to do what's right for me as I near retirement.
But, in the meantime, I was looking to see what those of you with far more knowledge think.

Count me as team IRA on this one, particularly with some of the bonuses out there for doing so. I quit my job recently and would be rolling into something with a bonus if not about to go to Europe for a couple weeks.

Others have listed the pros and cons of each approach. I just really value being able to pick my own investments. I have no desire to pay higher fees to the investment industry (that includes advisors). You could always roll it back into a 401k down the road if you really want.

I have never been super interested in the Backdoor Roth though. NTTAWWT

 

[Peggy]

@-OZ- @Sand Hang on. Unless I was misunderstanding you guys. I just read in one of my books about Nondeductable IRAs

- Taxes on capital gains, dividends and interest are deferred and due when you withdraw the money.
- Taxes are not due on your original contribution since these were made with "after tax" money.
- Warning: It requires extra book keeping and complexity when filing taxes.

So there still is an advantage to contributing to an IRA even your income is too high for it to be deductible. You could get 8k in each year in that defers all capital gains taxes on sales (div+int) unlike a taxable account, with the downside being the record keeping required to keep everything straight. Especially if you have a mixture of pre and post tax monies.

From a tax perspective, I don't think this is as difficult as you're making it out to be. If you make a nondeductible traditional IRA contribution, you track your previously-taxed (i.e. the amount you contributed but couldn't deduct) cost basis on form 8606. When you take a distribution, a portion of the distribution gets applied to the cost basis, and a portion gets applied to taxable income. The computation is illustrated on the tax form - any tax software worth its salt will be able to handle these computations.

Good to know. So when Turbo Tax shouted at me "Your income is too high to deduct your IRA contribution" it will keep track 20 years from now and apply cost basis for me?

I know that Fidelity keeps track of all the different Pre Tax401K - 401K Roth - After Tax 401K contributions so when I call them to roll ABC over to XYZ they can work in the background and make it happen. Is it fair to say that Bank of America/Merrill Edge isn't keeping track of Pre Tax IRA vs. After Tax IRA? I know it's a question they ask when you contribute, but, I didn't know nor did I click the right button until I did my taxes.

I understand what you're saying about form 8606, but, I think I need to keep track of at least total contributions Pre and Post.

I've never personally used TurboTax, but let's say you make a nondeductible contribution of $7,000 during 2024. You enter the information into TurboTax, and it spits out that you have a $7,000 cost basis at 12/31/2024 on your 2024 Form 8606. Then in 2025, you decide not to contribute, you don't do anything. You still file form 8606 for 2025, you would report a beginning basis of $7,000 and an ending basis of $7,000. Rinse repeat until you eventually start withdrawing.

I don't know if TurboTax will auto-fill your 2025 return based on your 2024 return, but when you save a PDF (or paper, whatever) copy of your 2024 tax return for your records, the form 8606 will be in there. You'll need to file one every year in perpetuity, so long as you still have any cost basis that you haven't used.

Thanks. I only have this year, last year and maybe one more to worry about this situation so I'm pretty confident, even at my mistake prone level ,that I should be able to figure it out. Then carry it forward.

 

[jm192]

Finished up this year's Roth IRA contribution/conversions. Need to do some serious re-balancing.

 

[Instinctive]

Just to keep my retirement scenario going a step further. Early retirement, virtually no income living on cash:

I think it would behoove anyone to do everything they can to get $8,000 in earned income. Sell crap on Ebay, hold a garage sale, mow lawns. Because:

1 - 8K more directly into Roth per individual.
2 - 8K deducted from income.
3 - When rolling 401K to Roth in a low tax bracket you can Roll more because of #2.

Am I thinking correct for #3?

Not wrong per se, but I think your #2 should just be "of your standard deduction", and your #3 is whatever is left of standard deduction for sure (no taxes) and then as much as you're willing to pay in taxes.

Or if you have a huge amount in 401k, who cares about earned income, just roll over at least the standard deduction.

 

[Peggy]

Just to keep my retirement scenario going a step further. Early retirement, virtually no income living on cash:

I think it would behoove anyone to do everything they can to get $8,000 in earned income. Sell crap on Ebay, hold a garage sale, mow lawns. Because:

1 - 8K more directly into Roth per individual.
2 - 8K deducted from income.
3 - When rolling 401K to Roth in a low tax bracket you can Roll more because of #2.

Am I thinking correct for #3?

Not wrong per se, but I think your #2 should just be "of your standard deduction", and your #3 is whatever is left of standard deduction for sure (no taxes) and then as much as you're willing to pay in taxes.

Or if you have a huge amount in 401k, who cares about earned income, just roll over at least the standard deduction.

Yeah I screwed that up. But along the lines where I was going is the 12% tax bracket is quite the jump dollars wise from the 10% bracket for only 2% moe then jumps up to 22%

So, married filing jointly with no earned income does it make sense to take $94,000 plus the standard deduction $27,000 and rolling over $121,000 of 401K?

Pay 12% on 94K which is 11k. I guess I need to pay taxes so really only rolling $110,000. Age 55. 15 years to RMD.

Gain is 15 years at say 6% of $110,000 turns into $140,000 you won't pay taxes on.

Loss is $11,000 versus the same $140,000 taxed at _______. Let's say 22% is $31,000. 11K vs 31K

Put your total 401K into a RMD calculator and figure out how many years to do roll overs until your RMD drops to the lower 12% tax bracket.

Assuming you don't need the money sooner and the tax bracket never changes!!!!

Lol. Have no idea if any of that is right.

 

[stbugs]

30ish years ago. Not too far off.

They must like Five Guys. A vacation and a car can easily cost that much.

It’s not just Five Guys. Every single non fast food restaurant is likely $20-25 for a burger, fries, drink and tax/tip. Wendy’s combo meals for burgers start at $11+ with tax.

 

[-OZ-]

Wendy’s combo meals for burgers start at $11+ with tax.

$5 biggie bag isn’t horrible.

But we usually just avoid fast food and most restaurants

 

[Buckna]

Most of the fast food places have Apps now where you can get rewards and usually significantly cheaper deals than on the regular menu. Straight off the menu items have gotten ridiculously expensive.

Not sure how they are making money off people using the cheap deals on the Apps, probably tracking data and selling it these days. I know the food delivery services are pretty much razor thin margins to a loss for most restaurants, especially fast food but they have to stay on those platforms to not drive customers away.

 

[Instinctive]

Guys we have a thread where we complain about fast food prices and how to order off their apps.

 

[stbugs]

Wendy’s combo meals for burgers start at $11+ with tax.

$5 biggie bag isn’t horrible.

But we usually just avoid fast food and most restaurants

$5 for a lot of food = very low quality. Remember when McDonald’s got rid of the pink slime? They switched over to real beef of some sort but that only applied to quarter pounders/Big Macs. Makes you wonder what the cheeseburger and double cheeseburger are.

 

[ghostguy123]

Ok, it has been a month since I asked my question about rolling over old company 401k.

From talking to people it seems the general consensus is to:
1) Keep my funds in current 401k
2) Transfer to new company 401k ONLY IF it is deemed an improvement over current 401k.
3) Rollover to IRA seems to be everyone's last resort.

This would go against what I was planning to do.

Again, I am 50. Have quite a large sum in current 401k.
Started new job and have yet to start new 401k.
I was planning on rolling old 401k into a Fidelity IRA where my Roth is held to make it easier for me to manage.

I have reached out to an advisor because I want to do what's right for me as I near retirement.
But, in the meantime, I was looking to see what those of you with far more knowledge think.

If you are 50 and retirement is a thought, doesn't it pretty much always make sense to roll it over to the new company?
See "rule of 55"

 

[-OZ-]

Wendy’s combo meals for burgers start at $11+ with tax.

$5 biggie bag isn’t horrible.

But we usually just avoid fast food and most restaurants

$5 for a lot of food = very low quality. Remember when McDonald’s got rid of the pink slime? They switched over to real beef of some sort but that only applied to quarter pounders/Big Macs. Makes you wonder what the cheeseburger and double cheeseburger are.

Oh, I’m aware. This is like an every other month thing if that.

 

[-OZ-]

If you are 50 and retirement is a thought, doesn't it pretty much always make sense to roll it over to the new company?
See "rule of 55"

Possibly. But fees matter far more to us than being able to withdraw at 55.

 

[matttyl]

Ok, it has been a month since I asked my question about rolling over old company 401k.

From talking to people it seems the general consensus is to:
1) Keep my funds in current 401k
2) Transfer to new company 401k ONLY IF it is deemed an improvement over current 401k.
3) Rollover to IRA seems to be everyone's last resort.

This would go against what I was planning to do.

Again, I am 50. Have quite a large sum in current 401k.
Started new job and have yet to start new 401k.
I was planning on rolling old 401k into a Fidelity IRA where my Roth is held to make it easier for me to manage.

I have reached out to an advisor because I want to do what's right for me as I near retirement.
But, in the meantime, I was looking to see what those of you with far more knowledge think.

If you are 50 and retirement is a thought, doesn't it pretty much always make sense to roll it over to the new company?
See "rule of 55"

Possibly. Rule of 55 might not be available with all plans, and apparently some of them require you to pull all funds rather than just pulling income.

 

[Payne]

Ok, it has been a month since I asked my question about rolling over old company 401k.

From talking to people it seems the general consensus is to:
1) Keep my funds in current 401k
2) Transfer to new company 401k ONLY IF it is deemed an improvement over current 401k.
3) Rollover to IRA seems to be everyone's last resort.

This would go against what I was planning to do.

Again, I am 50. Have quite a large sum in current 401k.
Started new job and have yet to start new 401k.
I was planning on rolling old 401k into a Fidelity IRA where my Roth is held to make it easier for me to manage.

I have reached out to an advisor because I want to do what's right for me as I near retirement.
But, in the meantime, I was looking to see what those of you with far more knowledge think.

If you are 50 and retirement is a thought, doesn't it pretty much always make sense to roll it over to the new company?
See "rule of 55"

Hey Ghost. I shouldn't need it at 55. Key word, of course, is "shouldn't".

 

[SFBayDuck]

If you are 50 and retirement is a thought, doesn't it pretty much always make sense to roll it over to the new company?
See "rule of 55"

Possibly. But fees matter far more to us than being able to withdraw at 55.

BrokerageLink at Fidelity is a game changer in my eyes. I mean back in the day 401K options were so limited and expensive - here are the 20 funds you have available, and we're taking 100-150 bps (or more). That's obviously gotten a lot better, but now I can transfer those funds, within the 401K wrapper, to an account with access to pretty much the same choices as I have available to me in my taxable Fidelity account, so the whole world of low/no cost funds and even individual stocks is open to me now within that account.

I have two rollover IRAs from past 401K plans...think I'm going to transfer the smaller one into my 401K just to see how much of a hassle it is, and put it in the BrokerageLink account. It's all at Fidelity, so hopefully should be simple(ish). If not too bad, I'll likely move the other one as well to have it all in one place and open up the backdoor roth possibility and possibly rule of 55 (if I can make it 3 1/2 more years!).

 

[-OZ-]

If you are 50 and retirement is a thought, doesn't it pretty much always make sense to roll it over to the new company?
See "rule of 55"

Possibly. But fees matter far more to us than being able to withdraw at 55.

BrokerageLink at Fidelity is a game changer in my eyes. I mean back in the day 401K options were so limited and expensive - here are the 20 funds you have available, and we're taking 100-150 bps (or more). That's obviously gotten a lot better, but now I can transfer those funds, within the 401K wrapper, to an account with access to pretty much the same choices as I have available to me in my taxable Fidelity account, so the whole world of low/no cost funds and even individual stocks is open to me now within that account.

I have two rollover IRAs from past 401K plans...think I'm going to transfer the smaller one into my 401K just to see how much of a hassle it is, and put it in the BrokerageLink account. It's all at Fidelity, so hopefully should be simple(ish). If not too bad, I'll likely move the other one as well to have it all in one place and open up the backdoor roth possibility and possibly rule of 55 (if I can make it 3 1/2 more years!).

We have the TSP and the rule of 55 applies. I can see a scenario where I transfer my traditional IRA into it and then retire at 57. The cost would be about $1,000 / month less in the pension than if I waited until 62.
We’ll probably be okay even with the early retirement but that’s a decent amount of money left on the table over the course of our lifetime.
Of course I could find another job at that point. We’ll see how things play out.

 

[Peggy]

If you are 50 and retirement is a thought, doesn't it pretty much always make sense to roll it over to the new company?
See "rule of 55"

Possibly. But fees matter far more to us than being able to withdraw at 55.

BrokerageLink at Fidelity is a game changer in my eyes. I mean back in the day 401K options were so limited and expensive - here are the 20 funds you have available, and we're taking 100-150 bps (or more). That's obviously gotten a lot better, but now I can transfer those funds, within the 401K wrapper, to an account with access to pretty much the same choices as I have available to me in my taxable Fidelity account, so the whole world of low/no cost funds and even individual stocks is open to me now within that account.

I have two rollover IRAs from past 401K plans...think I'm going to transfer the smaller one into my 401K just to see how much of a hassle it is, and put it in the BrokerageLink account. It's all at Fidelity, so hopefully should be simple(ish). If not too bad, I'll likely move the other one as well to have it all in one place and open up the backdoor roth possibility and possibly rule of 55 (if I can make it 3 1/2 more years!).

I think they've been around longer than people think. I remember having to call in and talk to about 4 different people before I found the guy that knew how to set up and transfer funds to a brokerage section. That was in 2002-ish. Ameritrade, then they moved our accounts to Wells Fargo, then finally Fidelity. Brokerage account just moved along with each move. I was helping younger engineers set them up recently and was surprised to find its just push of a button now at Fidelity.

 

[Payne]

If you are 50 and retirement is a thought, doesn't it pretty much always make sense to roll it over to the new company?
See "rule of 55"

Possibly. But fees matter far more to us than being able to withdraw at 55.

BrokerageLink at Fidelity is a game changer in my eyes. I mean back in the day 401K options were so limited and expensive - here are the 20 funds you have available, and we're taking 100-150 bps (or more). That's obviously gotten a lot better, but now I can transfer those funds, within the 401K wrapper, to an account with access to pretty much the same choices as I have available to me in my taxable Fidelity account, so the whole world of low/no cost funds and even individual stocks is open to me now within that account.

I have two rollover IRAs from past 401K plans...think I'm going to transfer the smaller one into my 401K just to see how much of a hassle it is, and put it in the BrokerageLink account. It's all at Fidelity, so hopefully should be simple(ish). If not too bad, I'll likely move the other one as well to have it all in one place and open up the backdoor roth possibility and possibly rule of 55 (if I can make it 3 1/2 more years!).

Oh come on.....now what is this we are talking about? I seriously thought I knew enough about this stuff to be dangerous.
Turns out I know very little.

I am debating rolling my 401k from previous employer to Fidelity IRA so the highlighted areas interest me.

 

[Sand]

If you are 50 and retirement is a thought, doesn't it pretty much always make sense to roll it over to the new company?
See "rule of 55"

Possibly. But fees matter far more to us than being able to withdraw at 55.

BrokerageLink at Fidelity is a game changer in my eyes. I mean back in the day 401K options were so limited and expensive - here are the 20 funds you have available, and we're taking 100-150 bps (or more). That's obviously gotten a lot better, but now I can transfer those funds, within the 401K wrapper, to an account with access to pretty much the same choices as I have available to me in my taxable Fidelity account, so the whole world of low/no cost funds and even individual stocks is open to me now within that account.

I have two rollover IRAs from past 401K plans...think I'm going to transfer the smaller one into my 401K just to see how much of a hassle it is, and put it in the BrokerageLink account. It's all at Fidelity, so hopefully should be simple(ish). If not too bad, I'll likely move the other one as well to have it all in one place and open up the backdoor roth possibility and possibly rule of 55 (if I can make it 3 1/2 more years!).

Oh come on.....now what is this we are talking about? I seriously thought I knew enough about this stuff to be dangerous.
Turns out I know very little.

I am debating rolling my 401k from previous employer to Fidelity IRA so the highlighted areas interest me.

Well, you have to be lucky enough to have Fidelity as your 401k provider for that to be relevant. To roll the opposite of normal, IRA to 401k, is possible. Just like the rule of 55, though, the 401k plan has to allow it.

 

[Payne]

If you are 50 and retirement is a thought, doesn't it pretty much always make sense to roll it over to the new company?
See "rule of 55"

Possibly. But fees matter far more to us than being able to withdraw at 55.

BrokerageLink at Fidelity is a game changer in my eyes. I mean back in the day 401K options were so limited and expensive - here are the 20 funds you have available, and we're taking 100-150 bps (or more). That's obviously gotten a lot better, but now I can transfer those funds, within the 401K wrapper, to an account with access to pretty much the same choices as I have available to me in my taxable Fidelity account, so the whole world of low/no cost funds and even individual stocks is open to me now within that account.

I have two rollover IRAs from past 401K plans...think I'm going to transfer the smaller one into my 401K just to see how much of a hassle it is, and put it in the BrokerageLink account. It's all at Fidelity, so hopefully should be simple(ish). If not too bad, I'll likely move the other one as well to have it all in one place and open up the backdoor roth possibility and possibly rule of 55 (if I can make it 3 1/2 more years!).

Oh come on.....now what is this we are talking about? I seriously thought I knew enough about this stuff to be dangerous.
Turns out I know very little.

I am debating rolling my 401k from previous employer to Fidelity IRA so the highlighted areas interest me.

Well, you have to be lucky enough to have Fidelity as your 401k provider for that to be relevant. To roll the opposite of normal, IRA to 401k, is possible. Just like the rule of 55, though, the 401k plan has to allow it.

Well the "new" 401k I can enroll in at my new employer is through Fidelity. My "old" 401k is currently sitting with Empower.

 

[Sand]

If you are 50 and retirement is a thought, doesn't it pretty much always make sense to roll it over to the new company?
See "rule of 55"

Possibly. But fees matter far more to us than being able to withdraw at 55.

BrokerageLink at Fidelity is a game changer in my eyes. I mean back in the day 401K options were so limited and expensive - here are the 20 funds you have available, and we're taking 100-150 bps (or more). That's obviously gotten a lot better, but now I can transfer those funds, within the 401K wrapper, to an account with access to pretty much the same choices as I have available to me in my taxable Fidelity account, so the whole world of low/no cost funds and even individual stocks is open to me now within that account.

I have two rollover IRAs from past 401K plans...think I'm going to transfer the smaller one into my 401K just to see how much of a hassle it is, and put it in the BrokerageLink account. It's all at Fidelity, so hopefully should be simple(ish). If not too bad, I'll likely move the other one as well to have it all in one place and open up the backdoor roth possibility and possibly rule of 55 (if I can make it 3 1/2 more years!).

Oh come on.....now what is this we are talking about? I seriously thought I knew enough about this stuff to be dangerous.
Turns out I know very little.

I am debating rolling my 401k from previous employer to Fidelity IRA so the highlighted areas interest me.

Well, you have to be lucky enough to have Fidelity as your 401k provider for that to be relevant. To roll the opposite of normal, IRA to 401k, is possible. Just like the rule of 55, though, the 401k plan has to allow it.

Well the "new" 401k I can enroll in at my new employer is through Fidelity. My "old" 401k is currently sitting with Empower.

You may have gotten pretty lucky there. Fidelity tends to be pretty good. I have Empower, as well (they're fine, better than some worse than others).

 

[-OZ-]

Might be a mistake but I went ahead and transferred my traditional IRA to Robin Hood for the 3% bonus. That will be over $10,000 and I’m not touching it for the next 15 years. Not contributing, not withdrawing. I’m also on the waitlist for the gold card (3% back on all purchases).

This account is about 1/4 of our portfolio. I’m probably keeping our Roth IRAs and regular brokerage in place. The ones were still contributing.

 

[Sand]

Might be a mistake but I went ahead and transferred my traditional IRA to Robin Hood for the 3% bonus. That will be over $10,000 and I’m not touching it for the next 15 years. Not contributing, not withdrawing. I’m also on the waitlist for the gold card (3% back on all purchases).

This account is about 1/4 of our portfolio. I’m probably keeping our Roth IRAs and regular brokerage in place. The ones were still contributing.

This is tempting. I'm greedy, but damn that's a pain in the *** to track and keep straight.

 

[-OZ-]

Might be a mistake but I went ahead and transferred my traditional IRA to Robin Hood for the 3% bonus. That will be over $10,000 and I’m not touching it for the next 15 years. Not contributing, not withdrawing. I’m also on the waitlist for the gold card (3% back on all purchases).

This account is about 1/4 of our portfolio. I’m probably keeping our Roth IRAs and regular brokerage in place. The ones were still contributing.

This is tempting. I'm greedy, but damn that's a pain in the *** to track and keep straight.

I’m not overly worried about the tracking in the tIRA. I would be in the Roth IRAs especially as we might pull some contributions at some point in the not too distant future.

 

[NutterButter]

Might be a mistake but I went ahead and transferred my traditional IRA to Robin Hood for the 3% bonus. That will be over $10,000 and I’m not touching it for the next 15 years. Not contributing, not withdrawing. I’m also on the waitlist for the gold card (3% back on all purchases).

This account is about 1/4 of our portfolio. I’m probably keeping our Roth IRAs and regular brokerage in place. The ones were still contributing.

Damn, also tempted, but I see its just until the end of the month and I don't move that quickly.

 

[Runkle]

Random possibly dumb question, my lady friend's new job offers her participation in a "Capital Accumulation Plan (CAP), a 401(k) plan". They specifically phrase it like that several times in the start paperwork... 'Get started in your Capital Accumulation Plan (CAP), a 401(k) plan, today', 'Take advantage of your Capital Accumulation Plan (CAP), a 401(k) plan', and 'Enroll in your Capital Accumulation Plan (CAP), a 401(k) plan'.

That's just a normal 401k, right? I mean, is there any particular difference in what I think of as a normal 401k versus a "Capital Accumulation 401k"? I assume it's just some jargon this new company uses? Or are there any particular nuances or pitfalls I should be aware of before helping her sign up?

 

[matttyl]

Am I correct in that if my minor child has over $1,250 in dividend income this year I’ll either need to file a return for them or add that income in with mine on my return?

Given what high yield savings accounts are paying, that’s not too difficult.

 

[matttyl]

Random possibly dumb question, my lady friend's new job offers her participation in a "Capital Accumulation Plan (CAP), a 401(k) plan". They specifically phrase it like that several times in the start paperwork... 'Get started in your Capital Accumulation Plan (CAP), a 401(k) plan, today', 'Take advantage of your Capital Accumulation Plan (CAP), a 401(k) plan', and 'Enroll in your Capital Accumulation Plan (CAP), a 401(k) plan'.

That's just a normal 401k, right? I mean, is there any particular difference in what I think of as a normal 401k versus a "Capital Accumulation 401k"? I assume it's just some jargon this new company uses? Or are there any particular nuances or pitfalls I should be aware of before helping her sign up?

Sounds like one in the same.

 

[Peggy]

Random possibly dumb question, my lady friend's new job offers her participation in a "Capital Accumulation Plan (CAP), a 401(k) plan". They specifically phrase it like that several times in the start paperwork... 'Get started in your Capital Accumulation Plan (CAP), a 401(k) plan, today', 'Take advantage of your Capital Accumulation Plan (CAP), a 401(k) plan', and 'Enroll in your Capital Accumulation Plan (CAP), a 401(k) plan'.

That's just a normal 401k, right? I mean, is there any particular difference in what I think of as a normal 401k versus a "Capital Accumulation 401k"? I assume it's just some jargon this new company uses? Or are there any particular nuances or pitfalls I should be aware of before helping her sign up?

Small independent business? I think that's just terminology that smaller businesses use instead of big business contracting 401ks with big bank.

 

[Runkle]

Random possibly dumb question, my lady friend's new job offers her participation in a "Capital Accumulation Plan (CAP), a 401(k) plan". They specifically phrase it like that several times in the start paperwork... 'Get started in your Capital Accumulation Plan (CAP), a 401(k) plan, today', 'Take advantage of your Capital Accumulation Plan (CAP), a 401(k) plan', and 'Enroll in your Capital Accumulation Plan (CAP), a 401(k) plan'.

That's just a normal 401k, right? I mean, is there any particular difference in what I think of as a normal 401k versus a "Capital Accumulation 401k"? I assume it's just some jargon this new company uses? Or are there any particular nuances or pitfalls I should be aware of before helping her sign up?

Small independent business? I think that's just terminology that smaller businesses use instead of big business contracting 401ks with big bank.

Fortune 100 company, strangely enough.

 

[Sand]

Random possibly dumb question, my lady friend's new job offers her participation in a "Capital Accumulation Plan (CAP), a 401(k) plan". They specifically phrase it like that several times in the start paperwork... 'Get started in your Capital Accumulation Plan (CAP), a 401(k) plan, today', 'Take advantage of your Capital Accumulation Plan (CAP), a 401(k) plan', and 'Enroll in your Capital Accumulation Plan (CAP), a 401(k) plan'.

That's just a normal 401k, right? I mean, is there any particular difference in what I think of as a normal 401k versus a "Capital Accumulation 401k"? I assume it's just some jargon this new company uses? Or are there any particular nuances or pitfalls I should be aware of before helping her sign up?

Small independent business? I think that's just terminology that smaller businesses use instead of big business contracting 401ks with big bank.

Fortune 100 company, strangely enough.

No surprising at all. To make govt. ratios they really want the lowest paid folks to be in the 401k. This sounds like it's going after those folks.

 

[-OZ-]

If you decided to buy something for $55,000 would you:
1. take a loan for 36 months at 6.5%
2. Take a loan for 72 months at 6.89%
3. sell stocks to cover the expense, and pay the capital gains.

 

[gianmarco]

If you decided to buy something for $55,000 would you:
1. take a loan for 36 months at 6.5%
2. Take a loan for 72 months at 6.89%
3. sell stocks to cover the expense, and pay the capital gains.

#1 pretty easily for me.

In general, I'm not keeping debt for a long time that is charging interest higher than I can easily earn.

I'd look to pay it off if possible before the end of the loan, too. But I'm not selling stocks to avoid it since it's not THAT much higher than you can earn in a HYSA.

On the flipside, I currently have a car loan at 4.5% and I'll keep that as long as possible since I can earn higher.

 

[-OZ-]

If you decided to buy something for $55,000 would you:
1. take a loan for 36 months at 6.5%
2. Take a loan for 72 months at 6.89%
3. sell stocks to cover the expense, and pay the capital gains.

#1 pretty easily for me.

In general, I'm not keeping debt for a long time that is charging interest higher than I can easily earn.

I'd look to pay it off if possible before the end of the loan, too. But I'm not selling stocks to avoid it since it's not THAT much higher than you can earn in a HYSA.

On the flipside, I currently have a car loan at 4.5% and I'll keep that as long as possible since I can earn higher.

I’ll be looking to see if I can get lower but that’s USAA which is usually decent for loans.
Earning 5% on the HYSA right now, but not enough in it to cover the full amount.

 

[SFBayDuck]

If you decided to buy something for $55,000 would you:
1. take a loan for 36 months at 6.5%
2. Take a loan for 72 months at 6.89%
3. sell stocks to cover the expense, and pay the capital gains.

Is there an option to "borrow" from yourself? Tap into an emergency fund or cash savings to cover the expense. Then instead of making payments to someone else, with interest, you pay yourself to fill it back up over 24-36 months. Without #3 as an option I wouldn't go this route, but you could always sell stocks to cover a true emergency if need be. Downside would be possible forced selling during a market correction instead of now at ATHs, but hey, your CG taxes would be less.

ETA: I don't usually keep that much cash in savings, because I could sell investments if need be. But you strike me as a 6-12 month emergency fund kind of guy.

 

[-OZ-]

If you decided to buy something for $55,000 would you:
1. take a loan for 36 months at 6.5%
2. Take a loan for 72 months at 6.89%
3. sell stocks to cover the expense, and pay the capital gains.

Is there an option to "borrow" from yourself? Tap into an emergency fund or cash savings to cover the expense. Then instead of making payments to someone else, with interest, you pay yourself to fill it back up over 24-36 months. Without #3 as an option I wouldn't go this route, but you could always sell stocks to cover a true emergency if need be. Downside would be possible forced selling during a market correction instead of now at ATHs, but hey, your CG taxes would be less.

ETA: I don't usually keep that much cash in savings, because I could sell investments if need be. But you strike me as a 6-12 month emergency fund kind of guy.

nope. I’m a “keep the next month or two expenses in savings, invest the rest” guy. Don’t forget, I’m a federal civilian with a military pension. Job and second income streams are secure.
We just paid for a new fence too, which took the equivalent of one month’s expenses.

 

[matttyl]

If you decided to buy something for $55,000 would you:
1. take a loan for 36 months at 6.5%
2. Take a loan for 72 months at 6.89%
3. sell stocks to cover the expense, and pay the capital gains.

#4 - not buy a brand new car.
#5 (and I know this won’t go over well here) - borrow out of my life insurance policy. 5% interest, I pay it back when and in whatever amounts I want.

I mixed 4 and 5 during covid and purchased a used Tahoe for $20some k. Loaned some money out of my policy, which at the time was only 3.5% interest - nearly half of used car rates at the time. Paid it back over 3 years in random chunks here and there.

Honestly, too many factors here to tell you which way to go.

 

[Instinctive]

#6 is start saving for the thing and buy it when you have the savings

 

[-OZ-]

If you decided to buy something for $55,000 would you:
1. take a loan for 36 months at 6.5%
2. Take a loan for 72 months at 6.89%
3. sell stocks to cover the expense, and pay the capital gains.

#4 - not buy a brand new car.
#5 (and I know this won’t go over well here) - borrow out of my life insurance policy. 5% interest, I pay it back when and in whatever amounts I want.

I mixed 4 and 5 during covid and purchased a used Tahoe for $20some k. Loaned some money out of my policy, which at the time was only 3.5% interest - nearly half of used car rates at the time. Paid it back over 3 years in random chunks here and there.

Honestly, too many factors here to tell you which way to go.

4 - we can wait, and probably will for a bit. But we drive our cars at least ten years (bought the odyssey 13 years ago)

5 - TSP loans seem like a bad idea for us. No whole life.