Do you max out 401K and Roth IRA? (55, state, ignorant)

[Info Guy]

Do you all maximize 401K to $17,000 and Roth IRA to $5,000?

Do most people do that?

I wonder what their income is when they do maximize it?

[flyonpa]

401K No, just up to company match
Roth Yes, (Sort of) Put it in non-deductible IRA, then roll it into Roth.

No
Lots

[Info Guy]

Originally Posted by flyonpa

401K No, just up to company match
Roth Yes, (Sort of) Put it in non-deductible IRA, then roll it into Roth.

No
Lots

Your reason to not invest to $17,000?

You mean transfer the Traditional IRA to Roth?

So most people don't do that?

Lots? How much is lots?

$17K + $5K is only $22K.

[Wwanderer]

Would someone care to explain the difference between an IRA and a 401K to an ignorant Canadian?

Here we have what's called an RRSP (registered retirement saving plan), which is tax sheltered up to certain limits. After age 71, this is rolled over into an RRIF (registered retirement income fund), from which you draw income, which is taxable.

Is this similar to the American system? I've always wondered.

[stockproipi]

Originally Posted by Wwanderer

Would someone care to explain the difference between an IRA and a 401K to an ignorant Canadian?
.

Here is a brief explanation of the 2 types:

IRA is a tax-deferred retirement savings account completely in controlled by the individual. The individual is free to invest in anything he wants. The maximum annual contribution is $6K (provided that you have no other retirement vehicles such as 401K, 403B, etc.)

401K is a tax-deferred retirement savings accounts offered through your place of employment and managed by the employee. They offered a limited choices of investments. The maximum annually is between $17k and $22K depending on your age.

[Info Guy]

So who are the type who do the $22K maximum? I wonder what their income is.

[StealthRabbit]

I'm with Flyonpa,
Same answers. I ALWAYS max my 'Tax Free future withdrawals"... i.e. ROTH and it is my Guess... that will be REALLY HANDY someday in the future. (I may be wrong...)

I have only MAXED my 401k on rare occasions.
I run MANY IRS scenerios every yr. I do what makes sense for ME. High earning yr or not.

(I have WAY too much imbalance in 'qualified' accounts, having always saved for retirement for nearly 40 yrs of employment).

YMMV (which I would expect!)

My kids opened their self managed ROTHs when they were age 12. They are doing extremely well for not being over age 30, and either could pull ALL their contributions TAX / Penalty FREE and keep earnings working for them. (They did very speculative investing as kids and college students, thus they have a sizable asset based on earnings alone). ROTH = a GREAT savings account for young folks. SO much flexibility! Making max contributions for nearly 20 yrs, they have enough for a down payment on a house. Though they each built their own house in Jr High School, so don't need real estate equity. I suspect they will use ROTH contributions for Grad school, or a few yrs off work to travel.

[Info Guy]

Roth IRA only allows $5K though. They should allow more.

401K saves you on pre-tax.

YMMV?

Why would you even want to touch Roth principal until retirement anyway?

Originally Posted by StealthRabbit

I'm with Flyonpa,
Same answers. I ALWAYS max my 'Tax Free future withdrawals"... i.e. ROTH and it is my Guess... that will be REALLY HANDY someday in the future. (I may be wrong...)

I have only MAXED my 401k on rare occasions.
I run MANY IRS scenerios every yr. I do what makes sense for ME. High earning yr or not.

(I have WAY too much imbalance in 'qualified' accounts, having always saved for retirement for nearly 40 yrs of employment).

YMMV (which I would expect!)

My kids opened their self managed ROTHs when they were age 12. They are doing extremely well for not being over age 30, and either could pull ALL their contributions TAX / Penalty FREE and keep earnings working for them. (They did very speculative investing as kids and college students, thus they have a sizable asset based on earnings alone). ROTH = a GREAT savings account for young folks. SO much flexibility! Making max contributions for nearly 20 yrs, they have enough for a down payment on a house. Though they each built their own house in Jr High School, so don't need real estate equity. I suspect they will use ROTH contributions for Grad school, or a few yrs off work to travel.

[StealthRabbit]

Originally Posted by Info Guy

Roth IRA only allows $5K though. They should allow more. $6k for us 'ole-timers' Only to $183k income (joint)... which is POVERTY according to Obama,,, thinking $250k is 'normal'

401K saves you on pre-tax. You can also do a ROTH 401K, BUT 401K WILL trigger REQUIRED Distributions @ age 70.5

YMMV? Your Mileage may Vary

Why would you even want to touch Roth principal until retirement anyway?

There are many unexpected events in life that REQUIRE you to scrape the bottom of the piggy bank (though you certainly don't want to touch 'qualified' $$ if avoidable). The ROTH is nice, in allowing you to take out initial contributions without penalty. (after 24 months)

ROTH is a PERFECT way to shelter assets from FAFSA (Student Loan Qualification). If you apply as a student with bucks in accessible accts... 100% is expected contribution. If in a ROTH... 0% is expected contribution (tho 100% of ROTH is accessible for EDU (up to limits)).

Then there is the 401k 'Catchup' (additional $5500 above the 'kid's' (buckaroo's) $17k cap)

I have found it nice when taking an early severence / Golden Parachute payout. but BEWARE Beware Playing 401(k) Catch-Up Close to Retirement - US News and World Report

I am hoping to do Multiple 'Golden Parachutes'. I have coworkers that got as many as 4... (get paid to leave, then paid extra to come back, then paid to leave again... Good Gig !) Unfortunately, the Company has wised up and they now reduce subsequent payouts But still you get the miminum (Or more) usually 6 mo to 1 yr salary. Currently I'm trying the 'reverse' sabatical, Off seven, then work one, then off seven

[rjm1cc]

Originally Posted by Info Guy

Do you all maximize 401K to $17,000 and Roth IRA to $5,000?

Do most people do that?

I wonder what their income is when they do maximize it?

If you can afford to then you should.
If you can not afford to then use the 401k up to the company match, then the ROTH and then back to the 401k for anything that is left.

Remember you will probably (might have to have the ROTH open for 5 years)be able to take your ROTH contribution (no earnings) out without penalties if you run into problems down the road.