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401k vs Roth 401k

Old 01-12-2017, 01:38 PM
  #11  
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This is a great thread, discussing a very important issue. I retired 11 years ago, and (retrospectively) didn't make any major mistakes in my retirement planning. However, the planning process is a minefield. The best thing you could do in this regard is find a Certified Financial Planner (CFP) that comes recommended, and go visit him/her. Pick one that charges a "fee for service", not one trying to sell you some product.
Grab your spouse, if you have one, and blow a couple of hundred dollars to get good, solid, informed professional advice.
Before you go, give thought to something that was already mentioned on this thread. A crucial element in the "Roth or not" decision is tax rates. So, look at your current income tax rate, the years until retirement, and guess what taxes will look like then. That's an unknown in the equation that you have to sort out.
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Old 01-12-2017, 04:24 PM
  #12  
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Originally Posted by kwri10s View Post
I asked and Vanguard said we cannot convert the after tax contributions into the Roth 401k. Don't know if that's right, they've given me a whole bunch of wrong info the last week or so. But it sounds right.
Fedex allows you 2 in-service distributions each year from your after-tax account as long as the amount is at least $500. You can move that money into your Roth IRA if you have one. You'll pay taxes on any earnings, but it shouldn't be too much. This allows you to add more than $5500 to your IRA each year.


So ask Vanguard about an "in-service distribution of your after tax account to your IRA". I believe you can even roll the earnings to your normal IRA (not Roth) and not get taxed on anything. I just haven't done that myself.
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Old 01-12-2017, 04:27 PM
  #13  
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Tangential Question:

I have been maxing out my 401k. I put all the money I can in before tax, then put an extra 5% into "after tax" savings.

Is it possible to put the 5% "after tax" into the Roth 401K?

I tried to do that on the website, and it didn't want to let me do it.

Has anyone else tried this?

I will call the union and Vanguard if no one knows, and report back.
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Old 01-12-2017, 04:39 PM
  #14  
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Originally Posted by Nightflyer View Post
Tangential Question:

I have been maxing out my 401k. I put all the money I can in before tax, then put an extra 5% into "after tax" savings.

Is it possible to put the 5% "after tax" into the Roth 401K?

I tried to do that on the website, and it didn't want to let me do it.

Has anyone else tried this?

I will call the union and Vanguard if no one knows, and report back.
I asked Vanguard this very question earlier this week since I want to save 4% after-tax. It does not let you put it into the Roth 401k. It goes into the after-tax account.

Contributions to the Roth 401k are after-tax and count against the 401k limit and catch-up limit. You could put 5% in the Roth 401k but it counts against the 401k and catch-up limits.
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Old 01-12-2017, 04:43 PM
  #15  
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Thanks for the answer, but I sure wish it wasn't that way.

Heck, it's after tax money, let us put it in the Roth 401k!

Tax laws are so crazy!
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Old 01-12-2017, 04:48 PM
  #16  
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Originally Posted by Nightflyer View Post
Thanks for the answer, but I sure wish it wasn't that way.

Heck, it's after tax money, let us put it in the Roth 401k!

Tax laws are so crazy!
Agree completely!
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Old 01-12-2017, 05:00 PM
  #17  
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Please excuse my ignorance as a new guy here, but what is the point of having a Roth IRA option for FedEx pilots? When the IRS income limitations are 117,000 for filing single and 187,000 for filing married of earned income. From my probably misguided information if you make more than this you can not legally contribute to a ROTH without a penalty. These income limitations were for earned income in 2016 and the amount of earned income does increase annually for inflation, but don't most pilots here make more than these limitations? I know I don't on first year pay, but after first year no one here qualifies for a ROTH without paying penalty.
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Old 01-12-2017, 05:12 PM
  #18  
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It's a Roth 401k not an IRA. Those limits don't apply. Still limited to the 401k limit of $18000 and $6000 catch-up.
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Old 01-12-2017, 05:20 PM
  #19  
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Thanks Knight, I knew I had to be missing something.
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Old 01-12-2017, 05:21 PM
  #20  
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PurpleTail, since you are new and your income is probably not too high (unless your spouse is highly paid), I really recommend you put as much as you possibly can into the Roth 401K. If you are not highly taxed now, you are not losing out on much of the tax break from a regular 401K, and that Roth will keep growing for decades, tax free. The very best candidates for a Roth 401K are younger people who are not paying much in taxes. You might feel like you're paying a lot, but wait till you get into the 39.6% tax bracket!

Totally agree with Knightflyer's post, Roth 401K's are not income limited. It's a great deal for many.
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