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So tell me, what's the point of having a traditional IRA if you've got access to a 401K??
I'm lost as to the point of that.
It serves as an additional tax-advantaged instrument to save money for retirement. There are people out there (I am one of them) who can max out both a 401k account and a traditional IRA, and the more money you can save for retirement, the better.
You also need a traditional IRA account if you want o do the backdoor Roth IRA trick.
So tell me, what's the point of having a traditional IRA if you've got access to a 401K??
I'm lost as to the point of that.
aside from maxing both out...
what if your 401k doesn't provide the funds you want? An IRA that you can open where you choose, can provide it.
Like you want to invest in a foreign fund/market, most 401ks don't do that. Or if you want to invest in a rental property, again 401ks don't let you. Or what about just stock piling gold? All of these you can do with a IRA in some form or another (self-directed IRA)
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WHAT I NEED TO PUSH AT OUR NEXT CONTRACT -- IS SEE IF THE COMPANY WILL LET US HAVE A ROTH 401K!!!
thought most places offer that these days, you could check if you can roll money out while still employed. Some plans let you do that. Roll out the previous year's 401k contributions to a roth ira, pay the taxes with paycheck and repeat each year. since roll overs don't count as contributions, you can still add up to normal limits too.
TSP lets people do 1 rollover without closing the account, many seem to roll half into an IRA, while leaving the other half in TSP (G fund is a good reason to keep TSP). Then from IRA they can manage money however they like. Plus if they have both a TSP and Roth TSP, any withdraws taken, it is taken proportionally from both, you can't specify which it comes out of. So rolling money out lets people have more control too.
…for when I might be in a lower tax bracket, once hopes.
You don't even have to be in a lower tax bracket in retirement, in fact you can be in a higher one and still come out ahead with a 401k. Reason = the money you put away would have been taxed at your highest marginal tax rate but it is withdrawn at your effective tax rate, which is often much lower.
For example if Sally make $80k and maxes out her 401k she's deferring taxes on money she would have paid 25% fed income tax on. If she retires and wtihdraw same amount about $10k with be taxed at 0% (std deduction+exemption), the next $9k at 10%, $17k at 15%, and finally the rest at the original 25% rate. Her effective tax rate in retirement would be 16.5%, much lower than the 25% she would have been taxed on that 401k contribution despite having the exact same income.
Of course there is social security, RMDs, etc. like other poster said it all depends on personal situation. After retiring my wife and I pay exactly $0 in fed income tax since 15% tax bracket (up to about 90k for couple filing jointly) is 0% for lt cap gains and qualified dividends. We do have some dividends that are nonqual but that easily falls within the 20k-whatever-it-is std deduction and exemption free tax tier, and we do Roth conversions to fill the rest of it.
I didn't know that Traditional IRAs have no income limits.
IRAs DO have income limits and it's the same for traditional and Roth. It sounds like you are not making legal contributions to an IRA.
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Originally Posted by selhars
So tell me, what's the point of having a traditional IRA if you've got access to a 401K??
I'm lost as to the point of that.
You can buy anything in an IRA and you're limited to the funds selection in a 401k.
When you move jobs, your IRA account is your account and not some account with a previous employer.
Our 401k has restrictions on moving money and even taking it out costs hundreds of dollars when you are retired.
I can't imagine any reason to have my money in a 401k if I could have it in an IRA. I only use the 401k to put more money in than I am allowed to stick in an IRA. When I change jobs, I'll roll it over to an IRA ASAP.
It sounds like you are not making legal contributions to an IRA.
No. You've made a presumption about which income I was speaking of -- gross or taxable.
2) From T. Rowe Price: "Traditional IRA…..No income limit
There are no income restrictions on eligibility to contribute. However, there could be a limit on tax deduction if you are also contributing to a 401(k)."
I can't imagine any reason to have my money in a 401k if I could have it in an IRA. I only use the 401k to put more money in than I am allowed to stick in an IRA. When I change jobs, I'll roll it over to an IRA ASAP.
AFAIK IRAs don't have income limits. Just a limit on what can be deducted.
Roth IRAs have no income limits if you convert to them (super easy to do) after contributing to an IRA.
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Originally Posted by selhars
No. You've made a presumption about which income I was speaking of -- gross or taxable.
2) From T. Rowe Price: "Traditional IRA…..No income limit
There are no income restrictions on eligibility to contribute.
However, there could be a limit on tax deduction if you are also contributing to a 401(k)."
I didn't make a presumption. I first assumed that you made less than $70k and then you said that you made more.
The text highlighted in brick above is the part that says IRAs have income limits.
-o- If you make more than $70k you cannot contribute to an IRA. That's an income limit.
-o- If you make between $60k and $70k. There is a phase-out. That's an income limit.
-o- If you make under $60k ( all these are MAGI ) you can knock yourself out.
I'll stop contributing to this thread after the next response since you are getting ticked that I'm being presumptuous, but you feel like keeping your numbers a secret is necessary even though you asked for ideas. Sorry to be a pain.
This is an advertisement from Financial Finesse and not an article.
Their arguments:
Lower fees. Not true. Period. This is a lie.
Earlier penalty-free access. Only true if you are over 55 and are ready to retire at that time.
Low or no cost guidance and advice. I can get all the guidance I want from my IRA broker. The reason someone would want to roll over the 401k is to have better investment options. For the person looking for more options ( me ), I really don't need some company drone giving me canned advice. I've yet to meet a 401k rep that knows even a fraction of what most of the people on this forum know. Even jotucker99 blows them away.
Stronger protection against personal lawsuits. For most people, rollng over a million-dollar+ IRA and being sued for it is not a consideration. Using OJ Simpson as an example is a ridiculous stretch.
Ability to borrow against the funds. For an ex-employee, rolling over, this is simply not true. Rather, I should say for anyone rolling over a 401k this is not true. It also points out that the CFP who wrote this ad is a dunce.
Better investment options. Another lie. You get to pick what they select for you. Not only can you duplicate any selections with funds in an IRA, you can also buy Exxon, or Intel, or SPY or gold or whatever. Lie lie lie,.
Simplicity. This is code for less choices.
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