I'm a long time lurker (from the Nest days) and I cannot tell you how invaluable reading this board has been over the years. My husband and I are getting financial goals defined and we're in a better place now to start really contributing to my retirement. I've been looking over my company's 401k options and also reading what you all have posted about Vanguard/Fidelity. I'm torn between contributing to the company plan (assume no employer match) which is managed by Key Bank via John Hancock, or going with a Vanguard/Fidelity account as I've heard their fees are lower. I'm still very new at this so I would appreciate any questions, thoughts, reviews, or advice you may have.
Post by gogreengowhite on Jan 29, 2014 20:29:38 GMT -5
I have both a 401k through John Hancock and a Roth IRA with vanguard.
I am happy with both. But the big thing I think you want to look at is what you want your pre vs post tax contributions to be.
We make a decent amount but pay a lot in daycare so we don't "bring home" much money. So for right now I'm focusing on pre-tax contributions to get our taxable value down.
Good to know on both fronts. For some reason I thought I could do a 401k through Vanguard or Fidelity, but you are correct that I would have to go for an IRA. And unfortunately I can't do a Roth IRA because we MFS for taxes to lower my income based student loan payment (this saves around $500/month). Oh well. I'm thinking a Roth 401k is the way to go for the time being.
Good to know on both fronts. For some reason I thought I could do a 401k through Vanguard or Fidelity, but you are correct that I would have to go for an IRA. And unfortunately I can't do a Roth IRA because we MFS for taxes to lower my income based student loan payment (this saves around $500/month). Oh well. I'm thinking a Roth 401k is the way to go for the time being.
Yes, 401(k) plans are offered only through employers so you will have to use whatever administrator your firm has hired to manage the plan (sounds like John Hancock). Since you have no match, I would actually start by contributing to an IRA first, which will give you more investment options and control, then go to the 401(k). IRA contribution limits are $5,500 whereas 401(k)s are much higher at $17,500.
As for whether you qualify for a Roth, it has nothing to do with how you file your taxes but rather how much you earn. More on the qualifying rules here or at the IRS website. Even if you don't qualify for the Roth IRA directly, you can always access one via a "backdoor Roth" by contributing to a traditional IRA and then immediately converting it into a Roth. You can do this because in...2011?...the law that had income limits for converting expired and was not renewed.
Yes, mine does do a Roth 401k. Although when I did a regular 401k vs Roth 401k calculator yesterday it gave the higher payout with the standard 401k (assuming less is contributed to the Roth 401k due to taxes). When I compared them putting in the same amount they were even. Hmmm....
Yes, mine does do a Roth 401k. Although when I did a regular 401k vs Roth 401k calculator yesterday it gave the higher payout with the standard 401k (assuming less is contributed to the Roth 401k due to taxes). When I compared them putting in the same amount they were even. Hmmm....
I don't understand what this means. There's no way to know what your respective final pots will be because we don't know what's going to happen to tax rates in the future. Deciding between Roth vs. traditional retirement accounts is a bit of a tax guessing game. Will you be in a higher or lower tax bracket than today when you retire? What will the tax brackets even be by then? Because no one can answer these questions (well, not the latter anyway), lots of people advocate for hedging your bets and putting some money in pre-tax accounts, some in post-tax. You have to decide what's best for your personal situation, but really the most important thing is that you're setting aside money for retirement at all, so kudos to you!
Aw, thanks! I thought about the whole tax guessing game too. Clearly its somewhat of a guessing game. I'm just happy I'm starting somewhere. :-)