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Originally Posted by AF OneWire
(Post 3851290)
That’s why you should do both. Max out the before tax contributions, then do after tax contributions immediately converted to Roth. This will give you Roth and non Roth dollars in retirement allowing you to manage your tax rate. Only downside is more RHA spill which will go away once we figure out the Market Based Cash Balance plan.
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Originally Posted by Merequetengue
(Post 3850604)
Hey guys, I spoke with a couple of pilots who mentioned that they try to maximize their 401(k) as early in the year as possible (ideally within the first six months), even though the company’s 17% would fully maximize it by the end of the year. Does anyone understand that strategy? What’s the benefit, or did I misunderstand? All this retirement plan stuff is new to me, so I’m just trying to learn from people with more experience. Thanks in advance!
Maxxing out as early as possible give you more exposure for dividends and dividend reinvestment. For instance let’s say you max out by April every year… that’s 8 months of exposure, over a 20 year career that’s 13+ YEARS of extra time in the market to capture and reinvest dividends. |
Originally Posted by Grumble
(Post 3851523)
Another simpler answer… time in the market will always beat timing the market.
Maxxing out as early as possible give you more exposure for dividends and dividend reinvestment. For instance let’s say you max out by April every year… that’s 8 months of exposure, over a 20 year career that’s 13+ YEARS of extra time in the market to capture and reinvest dividends. out of curiosity, how is your Schwab investment instructions split up? |
The advice in here regarding traditional/roth allocations is good for some and bad for others. It’s good to understand the mechanics of manipulating your accounts to put the type of contributions into their respective allocations; however, don’t rely on advice here as to how to allocate the tax-treatment of your money.
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Anyone familiar with our "PRAP Cash" that pays out after hitting 10k into the health account? It triggered for me with a small amount last paycheck that I didn't try to calculate and now the Mid NOV pay stub shows what looks like about 7% of gross paying out as PRAP Cash. I would have assumed I'd see 17%. Am I missing something? TIA
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Originally Posted by Chuck D
(Post 3851671)
Anyone familiar with our "PRAP Cash" that pays out after hitting 10k into the health account? It triggered for me with a small amount last paycheck that I didn't try to calculate and now the Mid NOV pay stub shows what looks like about 7% of gross paying out as PRAP Cash. I would have assumed I'd see 17%. Am I missing something? TIA
Hope that helps. |
Originally Posted by UALinIAH
(Post 3851691)
It's 17% after about $403,800 so your entire pay period probably wasn't over that amount. Next paycheck should be a full 17%. Add up your regular pay and profit sharing and anything over the $403.8k and see if that excess X 17% is what your paycheck shows. Also it's in arrears. So it would be on the 1st when you went over and paid out on the 16th check.
Hope that helps. |
Originally Posted by Chuck D
(Post 3851671)
Anyone familiar with our "PRAP Cash" that pays out after hitting 10k into the health account? It triggered for me with a small amount last paycheck that I didn't try to calculate and now the Mid NOV pay stub shows what looks like about 7% of gross paying out as PRAP Cash. I would have assumed I'd see 17%. Am I missing something? TIA
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Originally Posted by topcat
(Post 3851039)
Didn't see anyone mention putting money in an IRA account after 401k is maxed out.
the problem with this strategy is that if you already have a traditional IRA with pre-tax (ie tax deferred) funds in it, the conversion has to be done on what’s called a “pro-Rafa” basis meaning some of the converted funds will be from the pre-tax and some from the post-tax. Keep in mind, any and all traditional IRA sources are considered in this rule so just opening A new trad Ira to try and avoid this doesnt work. 401k conversions do not use the pro-rata rule. example; 94,000 pre-tax in a tradition IRA and you put in 6000 post tax with the intent to immediately convert it to Roth giving you a total of 100,000 in the account. if you try to convert the 6000 you just put in, only 6% of the 6000 will get converted from the post tax fund or about 360. The remaining 5640 has to come from the pre-tax money that was already in the account which would then generate a tax bill on that amount and also leave 5640 of post tax money in your IRA. |
Originally Posted by 744ButtonPusher
(Post 3851904)
it’s a valid strategy but given our income levels it most likely has to be Done on a post-tax (ie paying taxes on it this year) basis to a traditional IRA and then if you choose to do so , back door covert it to Roth,
the problem with this strategy is that if you already have a traditional IRA with pre-tax (ie tax deferred) funds in it, the conversion has to be done on what’s called a “pro-Rafa” basis meaning some of the converted funds will be from the pre-tax and some from the post-tax. Keep in mind, any and all traditional IRA sources are considered in this rule so just opening A new trad Ira to try and avoid this doesnt work. 401k conversions do not use the pro-rata rule. example; 94,000 pre-tax in a tradition IRA and you put in 6000 post tax with the intent to immediately convert it to Roth giving you a total of 100,000 in the account. if you try to convert the 6000 you just put in, only 6% of the 6000 will get converted from the post tax fund or about 360. The remaining 5640 has to come from the pre-tax money that was already in the account which would then generate a tax bill on that amount and also leave 5640 of post tax money in your IRA. |
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