quote:

Originally posted by Sig209:

quote:

Originally posted by Kranky:


Why do you want to invest in a t-IRA at Vanguard if you have not maxed out your 401k?

quite frankly - some companies 401k options aren't very good. plus may come with higher expenses.

i agree to contribute AT LEAST enough to get the full - if any - company match

beyond that - IRAs may be a better option for some people

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Agree with this, but may not be the OP's reason.

Trying to understand his reasoning. Everyone is jumping to A or B, without understanding what he is trying to do.

--K

quote:

Originally posted by Kranky:

quote:

Originally posted by Sig209:

quote:

Originally posted by Kranky:


Why do you want to invest in a t-IRA at Vanguard if you have not maxed out your 401k?

quite frankly - some companies 401k options aren't very good. plus may come with higher expenses.

i agree to contribute AT LEAST enough to get the full - if any - company match

beyond that - IRAs may be a better option for some people

----------------------------------------

Agree with this, but may not be the OP's reason.

Trying to understand his reasoning. Everyone is jumping to A or B, without understanding what he is trying to do.

--K

Everyone?

Many, myself included, have asked the OP questions, along with providing information, in an attempt to clarify the OP's situation.

However, the OP has chosen not to respond to those inquiries, and you have chosen to mischaracterize what many on this thread, myself included, have done.

This message has been edited. Last edited by: DMF,

I've used Vanguard for my IRA and traditional investing since the mid 80's. I have nothing but good things to say about them.

1) Contribute enough into the company 401K to get the maximum company match, if they offer matching contributions.
2) Then max out a Roth IRA via Vanguard
3) Then if you have funds left, max out your 401K annual contributions


I personally believe that tax rates are going to get jacked up, way up, in the next 10-30 years, so in my opinion, paying the lower rate now via a Roth IRA, might be the smart move. Thus, perhaps avoid the traditional IRA and stick with the Roth IRA.

If you are over the income limits for a Roth IRA, then the Traditional IRA might be your best option.

quote:

Originally posted by triggertreat:
Go to https://www.bogleheads.org/wiki/Main_Page. Do a little research.

This 100000%

Please educate yourself.

quote:

If you are over the income limits for a Roth IRA, then the Traditional IRA might be your best option.

This may not appeal or apply to the OP, but I've learned that the penalty regarding income and a fully funded Roth IRA is worth paying.

You can convert a traditional IRA to a Roth even if you don't meet the income limits. Look up Backdoor Roth.

May also be limited in his contributions to IRA, as might others. Doesn't sound like the case, but be mindful of this:

Linky

For most people the reason to roll their 401(k) ASAP is to get to an IRA with lower fees for that bucket of money. Employer sponsored plans almost always have fees ranging from high to my-BIL-is-the-manager-high.

Doesn't sound like that's an option for OP either, but if it is I would roll that on out!

Just happened to come across this.

https://www.fidelity.com/viewp.../why-have-a-roth-ira

I may be missing something, but my reason is as follows:

The 401k amount gets the maximum match and a more. We increase the contributions. I don't think we can just add more money from our own funds can we? I thought this was just via paychecks. (For clarity, its only one of us with a 401k, we just add extra to kindof cover us both) The return on the employer sponsored account sucks. All risk levels are returning something like 1% the last time I checked.

My biggest issue is we have been fortunate to have increases in income each year. The downside is we come up short on our Fed taxes. I was thinking the traditional IRA could be used as a tool to avoid paying the shortage to Uncle Sam. As a simple example, if I owed $500 in taxes I could just dump around $2k into an IRA instead before the tax deadline.

If there are better ways to do this between Jan and April for the prior tax year, I would appreciate the advice.

I'm no expert, but the yearly 401k max contribution is $18,500 for 2018. It goes up to $19,000 in 2019. Yes, those contributions come from your payroll checks and the matching employer contributions.

You can also contribute to an IRA if your income doesn't exceed a certain amount. Sorry, I don't know exactly what that is. You can contribute a max of $5500 to a Roth in 2018 and goes up to $6000 in 2019. Keep in mind that if you're older than 50, the allowable contribution to 401k's and Roths go up. $1000 more into Roths and $6000 in 401k's.

By contributing to a 401k, you're lowering your taxable income, so that's good thing. General thinking is to max out your 401k first and then contribute to an IRA. I would personally go the Roth route.

As for your taxes, sounds like you should change your allowances to have a bit more taken out each check in taxes. I'd employ an accountant to advise you on what number to pick. I like to have enough taken out to cover my tax requirement and just a bit more. I'd rather have use of the money over the course of the year and not the gov. I don't plan on a large refund ever.

quote:

Originally posted by Oz_Shadow:
I may be missing something, but my reason is as follows:

The 401k amount gets the maximum match and a more. We increase the contributions. I don't think we can just add more money from our own funds can we?

No, the funds would come straight from your paycheck, and the total is limited by the max allowed by law. See the IRS website for current limits.

quote:

The return on the employer sponsored account sucks. All risk levels are returning something like 1% the last time I checked.

Over what time frame? The stock market has had a market correction in the preceding few months, so if you're just looking at the last 6 months, then I'd expect most funds that are heavily invested in stocks to be showing poor returns. What are the numbers like for the last 5, 10, and 15 years. While past performance is no guarantee of future performance, unless something big has changed in the fund management, past performance is a good indicator. When I say "fund" I mean the individual funds (usually "mutual funds") within the 401(k) plan.

If the funds available in your 401(k) plan truly underperform the market indices, both in the short term, and over the long term, then it is wise to put money into an IRA, after you get the matching funds from the company, for example, if your company matches on the first 5% of your income, then after you get that, additional funds could be put into IRAs for both you and your spouse. After fulling funding the IRAs, you would need to decide where to put any additional money you wish to invest.

Also, if the funds in your 401(k) plan truly do underperform the market, both short and long term, that is another reason why I don't understand your ealier statement, "So far in life retirement funding has been limited to 401k type plans. These will stay in place and NOT be rolled over." If the funds your employer has picked truly are dogs, then that would be a huge incentive to move the money out of the plan once you leave that employer.

Next, the question is would a traditional IRA, or Roth IRA be appropriate.

Once again I would ask, is your 401(k) money all in a "traditional" account, or are some of the funds in a "Roth" account? Keep in mind employer "matching funds" will be put in a "traditional" account, regardless of whether your contributions are in a "traditional" or "Roth" account.

If you are already deferring income through a "traditional" 401(k), you may want to hedge your tax strategy for retirement, by utilizing Roth 401(k) (if available), and/or a "Roth" IRA, instead of deferring more income.

quote:

My biggest issue is we have been fortunate to have increases in income each year. The downside is we come up short on our Fed taxes. I was thinking the traditional IRA could be used as a tool to avoid paying the shortage to Uncle Sam. As a simple example, if I owed $500 in taxes I could just dump around $2k into an IRA instead before the tax deadline.

Well, I'm of the mindset that I try to "zero out" my taxes at the end of the year, so I don't owe anything, or get anything back, when I file my return. However, I am happy with +/-$500, and actually prefer to owe a little (as long as I don't incur penalties). Ideally for all "zeroing out" at return time is the way to go, but if there is a choice between me giving an interest free loan to the government (getting a return), or the government giving me an interest free loan (owing a very small amount), I'll go with the latter.

You certainly could use putting money into a traditional IRA, as a short term way to reduce the amount you owe, but why not just adjust your withholding, to better account for your income?

You will need to look at what is best for you, but I think you would be best served to spend some time considering other strategies, including "Roth" plans (both 401(k) and IRA), and adjusting your withholding.

quote:

If there are better ways to do this between Jan and April for the prior tax year, I would appreciate the advice.

If you're just talking about the previous tax year (2018), and you'd rather defer the income tax, than pay the small amount this year, getting money into the "traditional IRA" during the grace period is a good option. However, for long term planning, I'd look at other ways to accomplish this, as stated above.

Again, good luck moving forward.