New Roth option

Discussion in 'UPS Discussions' started by brownelf, Jul 28, 2011.

  1. brownelf

    brownelf Active Member

    we are now able to contribute directly into a Roth IRA as an option to our existing 401K plans. About time.
  2. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    Uh, hate to burst your bubble, but you may have read this wrong. One of our investments options is a Roth 401k. We can roll over our account when we turn 59 1/2 to a Roth IRA. Hope this helps you.
  3. brett636

    brett636 Well-Known Member

    Uh, hate to burst your bubble, but you may have read this wrong. One of our investments options is a Roth 401k. We can roll over our account when we turn 59 1/2 to a Roth IRA. Hope this helps you.[/QUOTE]

    While his terminology was off the benefit is still the same. Contributing to a roth 401k is still after tax money that grows tax free and is withdrawn tax free. Another way of putting it is 10% to 20% of every dollar in your traditional 401k goes straight to the government when you withdraw it. So contributing to a roth 401k is like adding 10-20 percent more to your retirement savings since you don't have to pay taxes on it when it is withdrawn.
  4. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    Would this still apply if I choose to roll my 401k in to a Roth IRA when I am eligible to do so?
  5. brett636

    brett636 Well-Known Member

    Would this still apply if I choose to roll my 401k in to a Roth IRA when I am eligible to do so?[/QUOTE]

    You can roll your traditional 401k into a roth IRA, but you are still going to have to pay taxes on the amount that's rolled over. It's just the growth from there on out will be tax free.
  6. DorkHead

    DorkHead Active Member

    Or the loss........
  7. brett636

    brett636 Well-Known Member

    Or the loss........[/QUOTE]

    Perhaps you were being sarcastic, but losses are not taxed. Losses can occur when investing, but someone who is in retirement should not be investing heavily in volatile investments like stocks.
  8. DorkHead

    DorkHead Active Member

    Not being sarcastic, just adding to your comment-- " It`s just the growth or the loss from there on out will be tax free"
  9. 40 and out

    40 and out Active Member

    With a Roth you pay taxes on the money you contribute now,but pay no taxes later. With a regular 401K you pay no taxes on contributions now,but pay taxes on earnings from it later. Hearing nasty rumors that tax benefits from both could go away in the future in an effort to get us out of the financial mess we are in.
  10. brett636

    brett636 Well-Known Member

    As someone who has prepared literally hundreds of individual tax returns I can assure you that no loss is taxed on anything. If you are simply wanting to point out that losses can occur when investing for retirement you would be right, and if you don't want to incur said losses its best to keep your money in less risky investments. You won't earn as much money, but you will keep your principle in tact if that is your goal. My retirement is a good 30 years away so I'm not afraid to risk my money now for bigger returns later.

    I haven't heard anything specific lately, but I do know hearings have been held on capital hill about either confiscating all privately held retirement funds and dumping them into one big government pot to be delved out when a person retires. Or requiring 401ks, IRAs, and other retirement vehicles to invest a certain percentage of the money they hold into government bonds as a way to fund the government's insatiable apetite for money. Both ideas should anger anyone who wants to save for their own retirement because all that is the government attempting to control yet another part of our lives that they have simply no business being apart of.
  11. DorkHead

    DorkHead Active Member

    This is exactly what I was trying to say. You pointed out growth in your previous statement and I added "or loss" Sorry if I was being so dense.
  12. satellitedriver

    satellitedriver Moderator Staff Member

    Brett, this a complicated tax issue.
    It is a bet-( read as a crystal ball gamble)- on future tax rates and future growth rates.
    The rollover would be taxed at earned income rates, not capital gains.
    Many of us nearing 59 1/2yrs old have well over $250,000 in our 401k and that is the "new" benchmark for being one of the evil rich that needs to pay more in taxes. That 250+ would be taxed as if we earned it in 1 year. Big damn hit.
    I can see a retiree, already in a lower tax bracket, splitting their bet.
    One could move a portion of their 401k and take the hit and leave the rest in a tradition 401k , then dollar cost average the taxes paid on dismemberment against the growth.
    As I stated, this presently is a complicated situation for someone nearing,or in retirement.
    Who the hell knows, with certainty, which direction future taxes and growth will go?
    Not me.
    On the flip side, if one is under 45yrs old, it is a no brainer.
    Flip and take the hit and hope for the best.

  13. hypocrisy

    hypocrisy Banned

    Roth 401k's are Clark Howard approved so I moved all of mine today. Glad they got something right for once.
  14. brownelf

    brownelf Active Member

    somethings tells me those of us in the middle class are going to be paying increasingly higher taxes in the future, I'll take the hit now while I have some time to recover from it. With the hours I've been working lately I can afford it.

    QKRSTKR Active Member

    I'm glad they have this now. Gonna max mine out for this year. You can only contribute $5000 a year for the 2011 year. So you can't just dump as much as you want into this. Also have to make under 109,000 single, or 169,000 married filing jointly. So if your spouse has a good job, you may not be eligible.