UPS Prudential 401k after I retire questions?

[UpstateNYUPSer(Ret)]

I am sure your financial "advisor" has only your best interest at heart.
You can not just roll over a traditional 401k into a Roth IRA without paying taxes on the amount transferred. Those monies transferred are taxed as earned income.
As an example, if you transferred $200,000.00 from your 401k to a Roth you would pay an effective tax rate of 18.6%, which would be about about $37,000.00.
If you transferred $400,000.00 your effective tax rate would be 28.8%, which would be about $115,000.00.
That being said, you "expect" a 8% return, not a guaranteed 8%. Only an annuity can make that promise.
Now that your nest egg has been reduced by paying taxes, your "advisor" will still take 1.5% yearly commission on your monies no matter what percent the funds make. If you "make" 8%, you only keep 6.5%. If you lose 10%, your "advisor" still makes 1.5% on what you have left.
For young people under the age of 45, the Roth is the best way to go. I will not go into the math of why that is the case.
If you only take 5% out of your 401k yearly, you will pay less effective tax rate and not give away your hard earned money to an "advisor".

You are incorrect in your assumption that I will have to pay taxes on the rollover.

 

[oldngray]

No taxes if you rollover to a traditional IRA but you ARE taxed if you convert it to a Roth.

 

[oldupsman]

No taxes if you rollover to a traditional IRA but you ARE taxed if you convert it to a Roth.

Correct. I know I tried to do it. And paying the taxes on the rollover to the Roth didn't
make financial sense to me. Rather spread paying the taxes out over a period of time.

 

[oldngray]

Correct. I know I tried to do it. And paying the taxes on the rollover to the Roth didn't
make financial sense to me. Rather spread paying the taxes out over a period of time.

By the time you retire it doesn't make sense to take the tax hit to convert to a Roth. If you are younger Roth is definitely the way to go but not if you don't have enough years for that tax free interest to compound.

 

[olroadbeech]

There would be a huge difference between 1% and 0.30% over time when it comes to our portfolio because it is in the high 6 figures.

We have been very happy with Vanguard. Very low expenses and quality customer service and advice.

 

[oldngray]

There would be a huge difference between 1% and 0.30% over time when it comes to our portfolio because it is in the high 6 figures.

We have been very happy with Vanguard. Very low expenses and quality customer service and advice.

I have a lot of my money in Vanguard funds. The financial advisors hate them because they can't make any money from them.

 

[olroadbeech]

By the time you retire it doesn't make sense to take the tax hit to convert to a Roth. If you are younger Roth is definitely the way to go but not if you don't have enough years for that tax free interest to compound.

I whole heartily agree. We looked into this several years ago when all you could hear from the so-called "experts" was to convert to a Roth.

So we did our homework , which I am telling young people to do, and realized it would not make sense.

Sure, we have to pay taxes when we take money out of our Ira's and 401k ( haven't touched yet) but in retirement your income is much lower and you will be taxed at a lower rate.

When young and your IRA has a small amount, yes, convert to Roth. But do your homework first.

 

[olroadbeech]

I have a lot of my money in Vanguard funds. The financial advisors hate them because they can't make any money from them.

We do also. We do not have their S&P 500, Precious Metals , and International Funds under advisorship but we recently received a sizable inheritance so we had them help us invest in some Income funds for retirees like the Wellsley Fund and a couple others.

The expense is only $450 a year and we think it is worth every penny. ( on 150k )

Your right about them hating not having those other funds we own under advisorship. They call us about that and send us mailings about it. We set up those funds under a different account.

 

[oldngray]

We do also. We do not have their S&P 500, Precious Metals , and International Funds under advisorship but we recently received a sizable inheritance so we had them help us invest in some Income funds for retirees like the Wellsley Fund and a couple others.

The expense is only $450 a year and we think it is worth every penny. ( on 150k )

Their Admiral funds (10k minimum I think) are very good with extremely low fees.

 

[olroadbeech]

Their Admiral funds (10k minimum I think) are very good with extremely low fees.

Thanks, we'll do some homework on that fund.

 

[oldngray]

Thanks, we'll do some homework on that fund.

Not one fund but a series. Most funds will also have Admiral shares.

 

[olroadbeech]

Not one fund but a series. Most funds will also have Admiral shares.

Maybe our funds are already in the Admiral group as they are all over a certain amount. We have a free advisor ( or a similar service ) on those aforementioned funds.

 

[satellitedriver]

You are incorrect in your assumption that I will have to pay taxes on the rollover.

Tax law is not an assumption.
The only way you can rollover into a Roth, without tax consequence, is if your 401k was already invested into a Roth. If that is the case, then correct me if I am wrong that I "assumed" you only invested into the traditional before tax 401k.
I have solely prepared my taxes since 1968.
Also, I have owned several companies, from then, to now. Some failed and some made money.
So therefore, in my retirement years, it scares me that people do not know that money growth is all based on percentages over time.
Reading what I wrote I seem arrogant, but the message I was trying to send was that I was born poor, married poor ( my wife made her wedding dress) and I would strive to educate myself, to protect my family financially.
Now that I am retired, the largest bills I have are taxes and insurance.

Took me along time to get back to the tax question.
Upstate, you are arrogant and ignorant on tax law.
Arrogance is not intelligence and intelligence is not knowledge.

 

[UpstateNYUPSer(Ret)]

Tax law is not an assumption.
The only way you can rollover into a Roth, without tax consequence, is if your 401k was already invested into a Roth. If that is the case, then correct me if I am wrong that I "assumed" you only invested into the traditional before tax 401k.
I have solely prepared my taxes since 1968.
Also, I have owned several companies, from then, to now. Some failed and some made money.
So therefore, in my retirement years, it scares me that people do not know that money growth is all based on percentages over time.
Reading what I wrote I seem arrogant, but the message I was trying to send was that I was born poor, married poor ( my wife made her wedding dress) and I would strive to educate myself, to protect my family financially.
Now that I am retired, the largest bills I have are taxes and insurance.

Took me along time to get back to the tax question.
Upstate, you are arrogant and ignorant on tax law.
Arrogance is not intelligence and intelligence is not knowledge.

Yawn.

 

[Brownslave688]

Yawn.

Serious question what in the world makes you think you could get by with NEVER paying taxes on that money?


You haven't paid taxes up til now and a Roth would mean you won't pay taxes when it's withdrawn.

Uncle Sam will get his.

 

[satellitedriver]

Yawn.

I assume,
I caught you waking up from your nap.
My missive was, indirectly speaking, to those that are awake enough to do due diligence for planning their financial future.
Since you proudly announced years ago that you were on the Dave Ramsey plan to your future financial success , I really had to laugh when you stated Edward Jones was your financial "advisor".
I could give a tinkers damn how you invest, but I do care that some readers on this forum may take your ignorance on tax law and investing as a model.

 

[Jones]

Did someone say "financial advisor"?

 

[UpstateNYUPSer(Ret)]

I assume,
I caught you waking up from your nap.
My missive was, indirectly speaking, to those that are awake enough to do due diligence for planning their financial future.
Since you proudly announced years ago that you were on the Dave Ramsey plan to your future financial success , I really had to laugh when you stated Edward Jones was your financial "advisor".
I could give a tinkers damn how you invest, but I do care that some readers on this forum may take your ignorance on tax law and investing as a model.

...and some may interpret your arrogance as being helpful...

 

[satellitedriver]

Not my arrogance, which I do possess, but my knowledge.
This is my quote that you reference.
"Arrogance is not intelligence and intelligence is not knowledge."
Tax law is not up to "interpretation", by a financial advisor.
The only true point I wished to make with my arrogance is that each individual should educate themselves to the realities of investing and the tax consequence.
There is a reason I could retire at the age of 60 years old three years ago totally debt free
and have more money in my 401k and other investments than when I retired.

Now, to the subject of arrogance.
As we say in Texas, "talk about the pot calling the kettle black".

 

[Jackburton]

Popped in here and noticed some of you guys favor Vanguard funds. TD ameritrade have some commission free funds, among them are Vanguard ETFs such as VBR, VBO, VBK, etc. might be worth looking into if you're looking to avg in on dips. Each fund has different prospectus, depending on what you're looking to invest in.