Rob Base 2.0
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Post by Rob Base 2.0 on Mar 21, 2017 7:22:02 GMT -5
Let's say u have a goal to invest / save X% of money each paycheck.
It's "easier" to hit that percentage with "traditional" 401k than Roth because of the pretax thing.
Do do u factor that in?
For example my goal is to invest 25% but finding it a stretch with Roth 401k (TSP). So I'm thinking of bumping it down to 20% since the Roth is after tax and the hit to my pay would probably be the same as if I did 25% traditional....
Does that make sense?
I know I could just make it 25% traditional 401k ....but I like the pros of a Roth.
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Deleted
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Post by Deleted on Mar 21, 2017 7:33:19 GMT -5
I do as much as I can handle in a traditional 401K, then throw all the tax savings into a Roth IRA.
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resolution
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Post by resolution on Mar 21, 2017 7:52:26 GMT -5
I think that sounds reasonable. It's more important to go for the long term outcome you want than to meet a specific percentage number.
This year we messed up and hit the 25% bracket and made our qualified dividends taxable. So I am going to have to keep a closer eye on things and maybe start doing more traditional.
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giramomma
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Post by giramomma on Mar 21, 2017 10:35:59 GMT -5
I generally just spread the money around.
Right now, we're prioritizing funding an HSA over IRAs.
What's left of our available retirement contributions gets split equally between traditional and roth IRAs.
I figure, I'm covered no matter what happens.
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Deleted
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Post by Deleted on Mar 21, 2017 10:47:38 GMT -5
I go more by tax bracket, I was maxing my 401k as Roth prior to hitting the 33% tax bracket but now that I have hit 33% I max traditional. This could be a mistake, I have no idea what the tax rates will be in retirement but for now I'm fine maxing traditional and all excess goes to taxable investing.
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Deleted
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Post by Deleted on Mar 21, 2017 18:56:28 GMT -5
You are making this way too hard. If you want to invest 25%, then figure out what that number is and subtract the Roth. Then invest the rest of the number into your 401k. Forget about factoring in taxes. Or if you must, add 15% or whatever your tax bracket is into the number and invest that. I just figured out how much I could afford to invest. I do have a 7.5% pension contribution and SS also being deducted. Between the Roth and a 457 lookalike (RSA-1), it comes to 20% of my income. It is simple and works for me. If the state ever gives me an actual pay increase (without a corresponding insurance increase), I will increase it. Two more years . . .
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teen persuasion
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Post by teen persuasion on Mar 21, 2017 22:31:06 GMT -5
I put as much as possible in DH's HSA and 401k, to get our refundable credits as large as possible. Then put tax refunds in Roth IRAs.
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sesfw
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Post by sesfw on Mar 22, 2017 11:27:25 GMT -5
Please correct me if I'm wrong about HSA
This was developed to put pre-tax funds into an account to pay for any medical annual co-pays. This is for anyone within the household. So the amount going into a health savings account annually shouldn't bee too much more than your maximum out of pocket expenses.
When I reached the age of 65 I could no longer contribute to HSA because I signed up for Medicare. Consequently the account holder started charging a service fee. I closed the account as quickly as I could.
Ask questions and double check the fine print.
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Deleted
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Post by Deleted on Mar 22, 2017 11:33:06 GMT -5
Please correct me if I'm wrong about HSA This was developed to put pre-tax funds into an account to pay for any medical annual co-pays. This is for anyone within the household. So the amount going into a health savings account annually shouldn't bee too much more than your maximum out of pocket expenses. When I reached the age of 65 I could no longer contribute to HSA because I signed up for Medicare. Consequently the account holder started charging a service fee. I closed the account as quickly as I could. Ask questions and double check the fine print. Well yeah, it was intended as savings to pay for medical expenses, but it just happens to be a perfect retirement savings account too. If I had access, I'd max it before 401K or IRA. If you use it for medical expenses you get triple tax savings (tax deferred going in, tax-free growth and no tax going out). If you just use it for whatever after 59.5 it works just like a traditional IRA or 401K.
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Deleted
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Post by Deleted on Mar 22, 2017 12:30:23 GMT -5
Please correct me if I'm wrong about HSA This was developed to put pre-tax funds into an account to pay for any medical annual co-pays. This is for anyone within the household. So the amount going into a health savings account annually shouldn't bee too much more than your maximum out of pocket expenses. When I reached the age of 65 I could no longer contribute to HSA because I signed up for Medicare. Consequently the account holder started charging a service fee. I closed the account as quickly as I could. Ask questions and double check the fine print. Well yeah, it was intended as savings to pay for medical expenses, but it just happens to be a perfect retirement savings account too. If I had access, I'd max it before 401K or IRA. If you use it for medical expenses you get triple tax savings (tax deferred going in, tax-free growth and no tax going out). If you just use it for whatever after 59.5 it works just like a traditional IRA or 401K. Agreed, and as part of that triple tax advantage there is no FICA paid as long as the money you contribute is through your employer. If the new healthcare law is passed and HSA limits go up I'll max it and reduce taxable investing. From a tax standpoint it is probably the best account you can contribute to.
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teen persuasion
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Post by teen persuasion on Mar 22, 2017 21:05:03 GMT -5
Well yeah, it was intended as savings to pay for medical expenses, but it just happens to be a perfect retirement savings account too. If I had access, I'd max it before 401K or IRA. If you use it for medical expenses you get triple tax savings (tax deferred going in, tax-free growth and no tax going out). If you just use it for whatever after 59.5 it works just like a traditional IRA or 401K. Agreed, and as part of that triple tax advantage there is no FICA paid as long as the money you contribute is through your employer. If the new healthcare law is passed and HSA limits go up I'll max it and reduce taxable investing. From a tax standpoint it is probably the best account you can contribute to. Useful for financial aid purposes, too. If contributed thru payroll deduction, it lowers AGI without being added back (as 401k and tIRA contributions are). It is essentially invisible on the FAFSA.
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