Saving for Retirement

[Handbag Lady]

I have a 401k and a ROTH IRA and I play the ponies.

 

[manning]

We put everything into the 401(k)s. I haven't found any advantage for us in adding an IRA to the mix.

Look into the Roth IRA

 

[golfgal]

It's a good idea to diversify your retirement investments. That is, it's good to have your money divided into numerous small places rather than one big pot -- if something happens to one of eight accounts, you might have to tighten your belt, but you won't find yourself unable to retire. If you have it all in one place, and something goes badly . . . Well, you're in big trouble.

Having said that, we each have 401ks, I have a good pension, we each have an IRA, and we have stocks. In addition, we have a paid for house, which we will sell when we retire, and we have land for the house we plan to build.

The pension is a double-edged sword. Yes, it's great to know that I will have a pension for life, but I am tied to living in this state. If I move (while I am still working), it'll hurt my retirement. Also, it's impossible to know right now whether I will "win" the pension game or not. I will complete my 30 years at age 57. If I live to be 100 and collect my pension all those years, I will clearly "win" -- that is, I will collect more than I paid in. On the other hand, if I die at 60, the state will keep a good bit of the money I paid in. In contrast, if that money were in a 401k, my children would get to keep the portion I had not used.

Every pension I have seen has some kind of survivor benefit attached to the pension. It would be unusual not to have some way to take a lump sum or have some kind of survivor benefit for the pension-usually equal to your contributions plus interest.

 

[pearlieq]

Not this year-other years, yes.

Things could always change, but everything I've been reading has says that they expect the Roth IRA rollover loophole to persist over the next several years.

So far this is the only year you can spread the tax bill out over two years, but you can still do the rollover in 2011. Your taxes (if any) would just be due right away.

 

[msjprincess]

Every pension I have seen has some kind of survivor benefit attached to the pension. It would be unusual not to have some way to take a lump sum or have some kind of survivor benefit for the pension-usually equal to your contributions plus interest.

I know when my mother retired there was no lump sum option and survivor benefits were only for spouses. With mine there are different options depending on how old the beneficiary is.

 

[golfgal]

Things could always change, but everything I've been reading has says that they expect the Roth IRA rollover loophole to persist over the next several years.

So far this is the only year you can spread the tax bill out over two years, but you can still do the rollover in 2011. Your taxes (if any) would just be due right away.

You can always roll over to a Roth if you are under $100,000, it isn't a loophole. This year was a special year where ANYONE could roll over. It was done to save taxes later on or the real reason--to boost tax revenues over the next two years in a bad economy .

 

[pearlieq]

You can always roll over to a Roth if you are under $100,000, it isn't a loophole. This year was a special year where ANYONE could roll over. It was done to save taxes later on or the real reason--to boost tax revenues over the next two years in a bad economy .

What I'm saying is that the income restriction has been lifted indefinitely. Until something changes, anyone can convert, regardless of income, from now on.

The only thing special about 2010 is the ability to spread the tax payment over 2 years.

 

[WDWBarb]

A ROTH IRA has different income retirements than a traditional IRA:

Who Can Establish a Roth IRA?
Any individual who has taxable compensation or self-employment income (earned by sole proprietors and partners) for the year may establish and fund a Roth IRA. To be eligible to make a participant contribution, the individual must have a modified adjusted gross income (MAGI) that is less than a certain amount, depending on the tax-filing status of the individual. Here are the MAGI limits:

$166,000 for individuals who are married and file a joint tax return.
$100,000 for individuals who are married, lived with their spouse at anytime during the year, and file a separate tax return.
$114,000 for individuals who file as single, head of household, or married filing separately and did not live with his or her spouse at any time during the year.

I believe in putting money both into a 401K (or similar plan) and a ROTH so that all of your income post-retirement will not be taxable.

 

[golfgal]

A ROTH IRA has different income retirements than a traditional IRA:



I believe in putting money both into a 401K (or similar plan) and a ROTH so that all of your income post-retirement will not be taxable.

401K money WILL be taxed when you take it out because it is going in before tax now.

 

[pearlieq]

I believe in putting money both into a 401K (or similar plan) and a ROTH so that all of your income post-retirement will not be taxable.

401ks (and similar) and Traditional IRAs are tax deferred. You invest with pre-tax dollars now, but they money you draw out when you retire is taxable.

Roth IRAs are opposite. You invest with post-tax dollars now, but the withdrawals will (hopefully!) be tax-free when you retire.

Non-deductible IRAs are useless, as far as I can tell, except as vehicles for people who exceed the Roth income limits who will use them for conversions every year.

 

[WDWBarb]

401K money WILL be taxed when you take it out because it is going in before tax now.

Correct. And your ROTH contributions (post-tax) will not. That's why I do a combination of both.

 

[pearlieq]

Correct. And your ROTH contributions (pre-tax) will not. That's why I do a combination of both.

Generally I think that's a good plan. I prefer to keep my investments somewhat spread among several investment schemes. Who knows what Congress is going to do 30 years from now? At least I can try to spread out the risk.

 

[golfgal]

Correct. And your ROTH contributions (pre-tax) will not. That's why I do a combination of both.

You can't contribute to a Roth pre-tax

 

[eliza61]

I have a traditional pension and a 401K. I wouldn't get the tax benefits from an IRA due to over the limit income.

 

[WDWBarb]

You can't contribute to a Roth pre-tax

Sorry, I meant post-tax. That's what I get for watching Dr. Who and DIS'ing at the same time.

 

[travelbug]

I have a traditional pension, a 403B, and both Roth and traditional IRAs.

 

[manning]

For those who plan on a lump-sum distrbution and want to save a ton on taxes take it in kind (stock). This will explain it.

http://www.themoneyalert.com/lumpsumdistributions.html