/biz/ - Business & Finance

>>192636
what's wrong with them again?

>>192641
You can't pull any money out of them.

roth ira is based
think about it
why do you think the max is 5.5k

cause the rich would get even more rich if there was no limit
if you make more than gross adjusted income of >119k you cant contribute to roth ira
think about why the concept of backdoor ira even exists

401k is good because its free money from employer goy

>>192649
The other 2 eggs in the OP.

>>192646
mm that's gay

what are the alternatives?

>What are you going to do when you need to take money out of it for your kid's college?
He doesn't know that you can freely withdraw roth shekels.

http://en.wikipedia.org/wiki/Roth_IRA
>Direct contributions to a Roth IRA (principal) may be withdrawn tax and penalty free at any time.
>Distributions from a Roth IRA do not increase Adjusted Gross Income.
>Assets in the Roth IRA can be passed on to heirs.
>The Roth IRA does not require distributions based on age.

>>192646
That's literally wrong you fucking retard. You can make early withdraws from a Roth IRA without penalty, you will just have to pay tax on the earnings.

>>192653
Not for education

>>192650
If you are rich you wouldn't contribute at all. 5.5k is NOTHING to a rich man. If you don't have money, than you may need to pull it out more freely and you should go with a traditional

>>192657
Let's say you are in my situation, recent graduate and new into the working world. You expect your income to increase over time, so why not contribute money that can grow tax deferred (when your income bracket is low)?

Speaking of which, if you guys could please help with this: >>192644

>>192666
All your options (401k, traditional ira, roth ira) grow tax differed. Where they differ is when you need to pull it out at the end (or prematurely).

Putting away retirement money is more valuable when you are in a higher tax bracket but it's always good to do

>>192672
Right they all grow tax deferred, what I meant rather was I don't get gimped when I pull the money out if I were to do a traditional 401k so since my tax income bracket (gross 35k or so) is relatively low, I figured I would contribute on a Roth 401k basis (to get the employer match which is traditional 401k of course) and then contribute into a Roth IRA.

I just don't know if I should allocate some money into a regular bank in the event I need money for a down deposit on my first home purchase. I understand that there are some scenarios and I can take out a certain amount for situations like this but I am not sure which one is more ideal that's all.

My parents are more traditional and say HEY JUST SAVE MONEY AND BUY A HOUSE ITS THE BEST INVESTMENT YOU WILL EVER MAKE

vs.

At work, you should always seek to max out your retirement money quotas per year so you retire rich!!

>>192657
>If you are rich you wouldn't contribute at all
The rich got rich by avoiding taxes, and investing. Even if their net worth is 5 million, do you really think they wont take advantage of that?

>>192650
>tfw no qt employer 401k matching

>>192672
That isn't correct, though. Traditionals IRAs, and 401ks are tax differed. You pay no taxes to begin with, and pay a huge amount of capital gains when you withdraw. On Roth IRAs you use post tax, or take home pay, to fun it, and pay no capital gains when you withdraw it. You can also pull out the principle money penalty free anytime, as long as the account has been open for 5 years.

>>192636

They exist so you can enjoy tax-free growth on investment income leading to significantly higher returns.

>>192690
you don't buy a house to make money unless you're renting it out. you will probably not even break even. if you want to allocate savings towards a house for quality of life improvements, that's your decision (and often a good call) but please don't be delusional and believe, after inflation, taxes, fees, expenses, and price volatility, that you are going to come out ahead financially.

>>192822
wait you get taxed pulling out Roth 401k money when you are 59.5? but didn't the salary reduction into a Roth 401k already go in as post tax money?

so you technically can contribute more money if you go with a Roth 401k vs a traditional 401k, right? Because the money goes in post tax you're really putting more than you would on a pre-tax basis with a 401k.

I guess the rational for me choosing Roth 401k is I expect (at least, hope) to make more money as I get older...


>>192852
I didn't really plan on making money from buying a house. At the moment, I live with my parents so eventually, it would be nice to get a home that I can call my own (even if that is not until later as my parents' house is a generous size, I get along with them, and I'm too lazy to cook/laundry, etc.)....
I don't know where you got your assumption/thoughts from. Anyway, what would be a good amount for a down deposit on a home? Obviously, the higher the better. I am sure my parents will end up helping me with the down payment on the house when it comes time for it

Hence why I am tempted to just contribute as much as possible towards the Roth 401k

>>192888
Everything you just said was backwards. Try rereading what I wrote again

>>192821
I know that feel

>>192646

You can pull money out, just get penalized or some shit.

>>192636
>If you have that much money, you shouldn't be contributing to a 401k in the first place you fucking moron.
Employers typically match contributions up to a certain percent. So you're throwing away free money for not participating.

>>193238
I meant to say you shouldn't be contributing to an IRA if you have that much money.

>>192945
;/

>>193242
why?? it's still tax deferred growth. I don't understand....or is this some next level bait

>>193242
You could possibly be the dumbest person I've encountered all day. Congrats on that.

I can assure you that the wealthy most certainly take advantage of tax advantaged accounts (technically known as qualified accounts) to the greatest extent possible.

I'm also pleased to inform your ignorant ass that the annual contribution limits to qualified accounts is substantially higher than you are aware. The limit in 2014, for example, is $52,000. Perhaps you should spend more time learning about SEP IRAs and Deferred Compensation Plans before handing out bad advice on the internet.

What's wrong OP, your parents didn't cash out their retirement to pay for your women's studies degree?

>>192852
>please don't be delusional and believe, after inflation, taxes, fees, expenses, and price volatility, that you are going to come out ahead financially.

There significant tax advantages to owning a home versus renting. Your property taxes are deductible (straight-line credit), and your mortgage interest is deductible on Schedule A. Home equity lines of credit are also deductible, as are interest on loans for home improvement. Furthermore, most states offer an additional homestead credit.

I do agree that you don't (normally) buy a residence on the expectation that its value will dramatically rise over time. The stock markets are a far more reliable long-term investment for capital appreciation. That much is true.

But, even aside from the tax benefits, owning a home can be an incredibly useful tool for long-term financial planning. It allows you to reliably estimate your housing costs into the future, and, the equity you build provides a nice cushion should you ever need past your more liquid holdings.

>>192650
>be rich
>be an angel investor
>put $5500 worth of private company stock in your roth
>wait 6 years
>company gets acquired/goes public
>stock is worth millions
>never have to pay taxes on it since it grew in your roth

>>193511
should i change my roth ira which is basically 100% invested in target retirement 2060 (vanguard) into something more volatile like small cap growth stocks?

>>193516
Don't do that if you're not angel investor rich already. There are things you can do though like optimizing your allocation based on account type

http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement#Step_2:_Place_your_least_tax_efficient_funds_first`

>>193533
>>193516
The short version being

>start with your optimal asset allocation
>consider putting bond funds in 401k because most bond income comes from dividends, which is taxable when you receive it (as opposed to stocks which come from capital gains, when you sell)
>consider putting international stocks in taxable account so you can claim foreign tax credits
>consider putting growth stock funds (if you have them) in your roth
>put the rest (total market index funds) whereever you have money leftover

>>193541
I'm a complete noob/idiot and I'm trying to follow that the best I can. But why would I even bother with bonds if the returns on it are pathetic given I'm only 23?

I thought the whole Bogle philosophy was just pick target retirement, or index stocks and just forget about it (with consistent money going into it of course after you set that up)

The picture attached is the asset allocation for my Roth 401k account.

Otherwise, I have a

Roth IRA $11k (2013 + 2014) in Vanguard Target Retirement Fund 2060

and

Personal Account $1000 in Vanguard Target Retirement Fund 2060 also

So what would be the actionable steps? Should I change much? I'm very timid and uninformed with investing (if you couldn't already tell)

>>193575
http://www.bogleheads.org/wiki/Three-fund_portfolio
http://www.bogleheads.org/wiki/Lazy_portfolios
http://www.bogleheads.org/wiki/Asset_allocation

Target date funds are okay, but they don't always have the right level of risk for what you might be comfortable with. With Vanguard specifically they also have higher fees than if you can get admiral shares (or you can do ETFs if you don't have the money to afford admiral shares yet).

The idea is that you pick three index funds to keep things simple - US stocks (VTSAX/VTI), international stocks (VTIAX/VXUS), bonds (VBTLX/BND), then match that to your desired allocation. I only posted admiral shares and ETF options so you get the lowest fees.

You don't have to do the tax hacking tricks if you're not comfortable with them yet either.

>>193602
I don't have enough money (30,000 for 3 admirals to play with)

I have a vague understanding of asset allocation. I am young and was going to invest 90% in stocks anyway, I figured Target Retirement Fund 2060 is mostly stocks at 90% 10% bonds anyhow. I do realize that there is no admiral status on the Target Retirement Funds.

Leddit, funnily enough, did a hypothetical situation which would basically be mine:

Let's assume you're investing $5000 per year and the expense ratio difference between target date and admiral funds is .12%. Over 45 years, assuming 5% net annual returns, that would be a loss of $30000, or 3.5%

I don't really know what ETF's are even after reading about them. I have to pre-clear ETF/stock purchases because the company I work for is in the investments industry which may be a headache

>>193616
ETFs are exchange traded funds. They're like mutual funds but instead of buying with the fund directly, you buy shares of it on the market like stocks. Which is probably why you have to clear it with your company first.

>>192636
Someone here explain the benefits of tax deferrment roths vs forward taxes on regular iras?

they hsould be mathematically advantageous in different situations, right?

>>193460
>There significant tax advantages to owning a home versus renting.
But the initial cost of buying the house (20% down, real estate costs, property taxes depending on location, maintenance, your wife whining about the color of a room) far offset any tax recovery. Plus its not an investment, if you need money right this second you can't exactly sell half of your house, its all or nothing, and you'll once again be raped by real estate fees and other shit.

>>193655
I didn't know this till I was making too much money to use Roth. Feels bad man

Benefit of a Roth IRA:

>"Backloaded" aka you make taxed contributions up front, withdraw tax free after retirement.

But, but anon, why would i want to do that?! 401(k)s grow tax diferred!!1!1

If you think you are going to be in a higher tax bracket when you are older (aka if you plan on making more money any time in the future (like get a promotion)) then you should do a Roth IRA. That way, you are taxed at your current tax bracket instead of a higher one later on.

You can pull from a Roth IRA after 5 years, however i believe you will incur a 10% tax penalty along with your normal income tax percentage. Best to wait until you are 59.5 years old.

>>193652
just to follow up, the real estate market is so fucking distorted in this country it's sick.

Renting is by FAR the best option in most of the developed world because laws on renters stop them from colluding to drive up prices.

>>193655
If I inherit a roth IRA does that mean I have to wait until I'm 60 to withdraw without penalty?

>>193652
1. If you need the money "right now this second" then you probably didn't establish an appropriate emergency fund. Or you purchased a house beyond your means. Or both.

>These aren't problems associated with home ownership. They're problems associated with being dumb.

2. If you are getting "raped by real estate fees and other shit" then perhaps you are finding the mortgage lending market a bit too confusing.

>See note above.

>>192636
The gains aren't taxable. The only question is why anyone invests in traditional 401(k)s/IRAs. Man up and support your future. Stop blowing your money on stupid shit now.

>>193628
I see. Yeah I'd just rather not (for now) because of lack of information (new to investing) and the principal I have is low


>>193652
well I understand you guy and iHaz are debating about real estate. It's just that I do EVENTUALLY need a primary residence and not live on my parents.

I obviously wouldn't rely on housing/real estate to be a reliable form of money investment (although one of my friends, his mother has like 24 properties so its viable there)

>>193667
I don't think so that only applies to the principal owner of the Roth IRA account

>>193670
That employer match is literally free money

>>193667
I'm not sure if there's a penalty, but you have to pay taxes on it.

>>193670
I have a traditional 401k because I'm rich and it lowers my tax bracket. But I also have a Roth so I can get some tax free gains too.

>>193658
That will happen my friend. But at least you are making "too much money"

>>193667
I believe you have to roll it over into your own Roth or you can take a lump sum but it will be taxed.

>>193675
Right, I'm aware, because it's tax deferred. But the roth IRA means the taxes are at the initial income bracket, rather than the higher one, right?

Do I inherit the lower income bracket as well?

>>193676
how do I become rich
thats my main problem right now

>>193686
I'm not a CPA, but my guess is that if you lost the tax-deferred status, it'd be ordinary income, and combined with the rest of your ordinary income for the year to determine your tax bracket.

>>193675
Wrong.

>>193690
Only if you elect lump-sum distribution of a non-spousal qualified account, which is generally a stupid thing to do.

The rules governing inheritance of a qualified account are quite complex, and depend on (a) whether the decedent is a spouse, and (b) the age of the decedent at death and the status of qualified account vis a vis RMDs. Consult an accountant or tax advisor.

>>193680
>roll it over or face taxes
Fuck.

Please PLEASE don't tell me I have to pay capital gains on an inheritance. That will literally steal 1/4 of the fucking value

>>193673
>you probably didn't establish an appropriate emergency fund.
Captain Hindsight to the rescue? Shit happens. There is no such thing as enough funds to survive every single potential disaster. I'm not going to list them all but to be blunt, blaming life on someone's stupidity or not doesn't change the fact a house is a lousy investment and the fees alone are not offset by tax breaks.

>>193697
I guess I'll have to consult someone, thanks though.

It's fucking bullshit, though. I'm poor as fuck but my grandparents saved tons of cash from before the economy was shot, and now I have to suck the government dick just to avoid having them raping me and giving that money to welfare niggers.

Fuck the government. They never did shit for me but if I fuck up they can take everything I'm worth.

When I get the money I'm fucking moving to singapore

>>193716
thank you obama, right?

>>193711
I do understand and agree with iHaz's argument but maybe his situation is different because he's probably in an extreme outlier of net worth. There are benefits even beyond taxes (mental and emotional security) in having your own home.

>>193716
Yeah, nice anti-government rant.

You're gonna feel like an idiot when you learn that you learn that inheriting a Roth IRA is not a taxable event, and that you can preserve the tax benefits of the inherited account over your entire lifetime, subject to RMDs. It's a pretty fair rule.

But go ahead and hate the government if it makes you happy.

>>193716
must suck to have rich grandparents

fuck the government

>>193711
>the fees alone

What are these fucking fees you keep prattling on about? It's pretty obvious that you don't have a mortgage and don't own a home, so I'm curious how you became an expert on the true cost of home ownership. Enlighten us.

>>193726
Why is the government entitled to anything a person saves in the first place? They take what we earn, they take what we spend, and they take what we save. Fuck that.

I can't even find a fucking job right now thanks to their retarded policies and they're trying to take away the only thing I have.

>>193740
Not rich. But enough to buy me some time. Like I said, I can't even find a fucking job. Even the fucking schoolbus drivers and telemarketers here require 3+ years experience. It's bulshit

>>193773
everyone has your mindset. we've just accepted it.

>>193779
Not everyone has accepted it. The swiss and the singaporeans don't seem to think it's a good policy to take half of what smart people earn to spend half of it feeding niggers.

Oh, go fucking figure, their society is prosperous with 3% unemployment.

>>193788
youll have to go there then, it will never change in america.

>dat debt

just wait for interest rates to rise on our trillions of dollars of debt. if the debt hits 20trillion and interest rates go to 10%, just the interest alone is more than the govt takes in annually.

cover your ass while you can.

sunthas 0 points 1 hour ago (1|1)
Found this on a forum: "I believe you can borrow/withdrawal from your 401k to purchase your first home without penalty. So it would make sense to put more of it in the 401k."

That's not true? A hardship withdrawal is subject to a 20% withholding, potential 10% IRS early withdrawal and state tax (Massachusetts is 5.5?)

I mean plus if I were to repay the money I withdraw, the money that goes in to cover the money is POST tax. Then I will be taxed again when I pull that money out. That just seems like a really bad idea. Was the person misinformed or baiting?

>>193773
>Need experience to get job, need job to get experience
>A week ago shotgun-applying for jobs at City Hall
>Jury Clerk: Need 1+ years experience as Court Clerk
>Court Clerk: Need 1+years experience as Jury Clerk
>mfw