Where to Invest Money Right Now?

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Originally Posted by dannynoonan

Like they say over in the bitcoins thread, buy the dip, eh comrade?

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Yup.

I-bonds are a good move right now but you're limited with a max contribution.

I think some of the tech stocks have sold off too far, but who knows. I like META, I think they're R&D in Oculus and VR will go a long way.

New job: Roll existing 401k into new company's 401k, or into an IRA and start the new 401k from scratch?

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Originally Posted by Dantheman

New job: Roll existing 401k into new company's 401k, or into an IRA and start the new 401k from scratch?

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I see zero upside to give your existing 401K money to your new employer. Same for leaving it with your old employer.

Roll it into an IRA so that YOU control it.


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Originally Posted by Harry

I see zero upside to give your existing 401K money to your new employer. Same for leaving it with your old employer.

Roll it into an IRA so that YOU control it.


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Generally, that's probably the right move.

Couple things to consider: whether your old employer's 401k has lower fee offerings vs new/IRA (eg institutional funds) - and same Q for new employer's 401k. Also whether old employer's 401k allows you to continue to hold your $ there without charging you for the maintenance fees. Also what the choice of funds are in new vs old employer 401k. Also whether new employer's 401k even allows you to do roll-in contributions. Also there are withdrawal rules that are beneficial to a 401k vs IRA (eg, if you leave the employer during the year you turn age 55, you can withdraw from that employer's 401k without penalty - but only that employer you just left, and not earlier 401k - and for future planning, IRAs have age 70 minimal withdrawal requirements).

Most likely the IRA rollover will be the best suited choice. But not an absolute.

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Originally Posted by Dantheman

New job: Roll existing 401k into new company's 401k, or into an IRA and start the new 401k from scratch?

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My job pays all the fees for fund administration and offers free consulting and investment help. I dunno what it'd cost otherwise, but I tell myself that it all adds up. Not sure if you'd have a vesting schedule, but that'd prob only be for the funds they contributed.
In my case it was worth transferring it to new job, but ymmv.

Chup makes good points and I'll add one. Rolling into your new company's 401k is relevant if you take it in the backdoor (NTTIAWWT). Rollover IRAs complicate taxes in backdoor moves.

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Originally Posted by El Chupacabra

Generally, that's probably the right move.

Couple things to consider: whether your old employer's 401k has lower fee offerings vs new/IRA (eg institutional funds) - and same Q for new employer's 401k. Also whether old employer's 401k allows you to continue to hold your $ there without charging you for the maintenance fees. Also what the choice of funds are in new vs old employer 401k. Also whether new employer's 401k even allows you to do roll-in contributions. Also there are withdrawal rules that are beneficial to a 401k vs IRA (eg, if you leave the employer during the year you turn age 55, you can withdraw from that employer's 401k without penalty - but only that employer you just left, and not earlier 401k - and for future planning, IRAs have age 70 minimal withdrawal requirements).

Most likely the IRA rollover will be the best suited choice. But not an absolute.

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Good info. Also, I think that there is a waiting period before you can transfer those funds out of the 401K to a new account 401k/or IRA. I remember that when I had to do it once. Ended up returning to the first job anyway so never transferred the money.

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Originally Posted by Dantheman

New job: Roll existing 401k into new company's 401k, or into an IRA and start the new 401k from scratch?

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FYI

If you play or plan to play the backdoor roth conversions money in a self-directed IRA go againtst tax calculations whereas 401K doesn't. If everything is in 401K, then an immediate conversion is essentially $0 tax bill.

One upside to a rollover is the 401k loan or hardship withdrawals. In most cases you can borrow 50% of your vested balance. All rollover funds are immediately vested. Used a 401k loan to help put a down payment on my new house, then paid it off after I sold my old house.

Nice option to have if needed.


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Originally Posted by AK47bp

One upside to a rollover is the 401k loan or hardship withdrawals. In most cases you can borrow 50% of your vested balance. All rollover funds are immediately vested. Used a 401k loan to help put a down payment on my new house, then paid it off after I sold my old house.

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Quite risky but works out in some cases. Was the interest rate you paid roughly the same as market rates for similar loans? Did the interest you paid go into your account (paying yourself interest) or did the interest paid go to a third party (administrator, bank, etc.)?

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Originally Posted by Mazderati

Quite risky but works out in some cases. Was the interest rate you paid roughly the same as market rates for similar loans? Did the interest you paid go into your account (paying yourself interest) or did the interest paid go to a third party (administrator, bank, etc.)?

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401k loan interest goes back to the participant. So you essentially pay yourself back. All this is easily setup with payroll deductions from your employer.

The 401k record keeper likely charges a small loan application fee ($25-$50) but they don’t receive interest. At least the plans I’ve been on.

I can’t recall the rate I paid but it was right around prime at the time. (3%-5%)

Great option to have access to your own money in a pinch.


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Originally Posted by El Chupacabra

Generally, that's probably the right move.

Couple things to consider: whether your old employer's 401k has lower fee offerings vs new/IRA (eg institutional funds) - and same Q for new employer's 401k. Also whether old employer's 401k allows you to continue to hold your $ there without charging you for the maintenance fees. Also what the choice of funds are in new vs old employer 401k. Also whether new employer's 401k even allows you to do roll-in contributions. Also there are withdrawal rules that are beneficial to a 401k vs IRA (eg, if you leave the employer during the year you turn age 55, you can withdraw from that employer's 401k without penalty - but only that employer you just left, and not earlier 401k - and for future planning, IRAs have age 70 minimal withdrawal requirements).

Most likely the IRA rollover will be the best suited choice. But not an absolute.

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Awesome, thanks. Haven't signed up for benefits yet so I don't know how fees compare or if roll-in is allowed. Good to know that IRA conversion is usually the best option.

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Originally Posted by Mazderati

Chup makes good points and I'll add one. Rolling into your new company's 401k is relevant if you take it in the backdoor (NTTIAWWT). Rollover IRAs complicate taxes in backdoor moves.

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What's the back door?

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Originally Posted by Dantheman

What's the back door?

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Traditional to Roth IRA backdoor conversion. Useful in some circumstances. Existence of a rollover IRA has (negative for you) tax implications. If you don't plan to complete a backdoor conversion none of this matters.

^Backdoor Roth IRA is a way to get money into a Roth IRA for people who have income too high for a regular Roth IRA and often for people who have income high enough to not benefit from tax advantages of a traditional IRA.

You have to put money into a traditional IRA, then roll it over into a Roth IRA. The issue is that the the traditional IRA needs to be a zero balance before and after the rollover or it complicates things from a tax standpoint.

TLDR- a backdoor Roth IRA is a way to get $6k per year into a Roth IRA if your income is otherwise too high for a regular Roth IRA.

I utilize a backdoor Roth IRA, so instead of rolling old 401Ks into an IRA or rolling them into my employer's 401k, I created a self directed 401k and rolled into that. It was pretty easy to set up.


I really wish my employer allowed mega backdoor Roth conversions out of the 401k. That's my personal finance white whale. It is a huge benefit if you are already maxing 401k, IRA and HSA contributions and then continuing to invest in a taxable brokerage account.

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Originally Posted by AK47bp

401k loan interest goes back to the participant. So you essentially pay yourself back. All this is easily setup with payroll deductions from your employer.

The 401k record keeper likely charges a small loan application fee ($25-$50) but they don’t receive interest. At least the plans I’ve been on.

I can’t recall the rate I paid but it was right around prime at the time. (3%-5%)

Great option to have access to your own money in a pinch.

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Good to know about the process and payback.

My comment about risk relates to the potential for a called loan at what could be a very inopportune time; leaving a job or being fired from it. Options are good. I'm sure there is nuance.

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Originally Posted by Mazderati

Good to know about the process and payback.

My comment about risk relates to the potential for a called loan at what could be a very inopportune time; leaving a job or being fired from it. Options are good. I'm sure there is nuance.

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Oh yea. If you’re fired or quit the option is to pay it back in full immediately or it becomes a taxable distribution with possible penalties depending on your age.


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Originally Posted by Kevo

^Backdoor Roth IRA is a way to get money into a Roth IRA for people who have income too high for a regular Roth IRA and often for people who have income high enough to not benefit from tax advantages of a traditional IRA.

You have to put money into a traditional IRA, then roll it over into a Roth IRA. The issue is that the the traditional IRA needs to be a zero balance before and after the rollover or it complicates things from a tax standpoint.

TLDR- a backdoor Roth IRA is a way to get $6k per year into a Roth IRA if your income is otherwise too high for a regular Roth IRA.

I utilize a backdoor Roth IRA, so instead of rolling old 401Ks into an IRA or rolling them into my employer's 401k, I created a self directed 401k and rolled into that. It was pretty easy to set up.


I really wish my employer allowed mega backdoor Roth conversions out of the 401k. That's my personal finance white whale. It is a huge benefit if you are already maxing 401k, IRA and HSA contributions and then continuing to invest in a taxable brokerage account.

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I know some people using the turbo Roth options combined with being 50+ and maxing out all the contributions can actually get $64,500 in their 401k accounts. At least back in 2021


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Originally Posted by AK47bp

I know some people using the turbo Roth options combined with being 50+ and maxing out all the contributions can actually get $64,500 in their 401k accounts. At least back in 2021


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Yep. That's the dream.

My company has everything set up to allow this except a few payroll people who do not understand how to allow for after-tax contributions. Everything else is in place and it is so frustrating.

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Originally Posted by Kevo

^Backdoor Roth IRA is a way to get money into a Roth IRA for people who have income too high for a regular Roth IRA and often for people who have income high enough to not benefit from tax advantages of a traditional IRA.

You have to put money into a traditional IRA, then roll it over into a Roth IRA. The issue is that the the traditional IRA needs to be a zero balance before and after the rollover or it complicates things from a tax standpoint.

TLDR- a backdoor Roth IRA is a way to get $6k per year into a Roth IRA if your income is otherwise too high for a regular Roth IRA.

I utilize a backdoor Roth IRA, so instead of rolling old 401Ks into an IRA or rolling them into my employer's 401k, I created a self directed 401k and rolled into that. It was pretty easy to set up.


I really wish my employer allowed mega backdoor Roth conversions out of the 401k. That's my personal finance white whale. It is a huge benefit if you are already maxing 401k, IRA and HSA contributions and then continuing to invest in a taxable brokerage account.

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Got it, thanks. I don't make enough for any of that to be a concern.

Anyone investing now? Or everyone nervously waiting?


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I pretty much sold off everything in my "Fuck You Money" brokerage account to cash. Did it about the right time a couple of months ago. I've basically been waiting.

Only thing I've bought is a little more of the stocks that I didn't sell just to lower my cost basis on them.

I'm thinking that by August/September the market is going to really start rallying again. This is purely based off of the Nancy Pelosi options she bought back in December that expire mid-September 2022.

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Originally Posted by Kevo

the traditional IRA needs to be a zero balance before and after the rollover or it complicates things from a tax standpoint.

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How so?

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Originally Posted by jm2e

Anyone investing now? Or everyone nervously waiting?


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i do the boglehead thing and am throwing a chunk in on monday. s and p 500 / international fund / and 15% into bonds.

can't time the market they say

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Originally Posted by Marshall Tucker

How so?

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Pro-rata rule is the first thing that comes to mind.

But of course, the pro-rata rule.

Attachment 413305

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Originally Posted by ötzi

But of course, the pro-rata rule.

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Heh. Marshall knows he is a money man. IRA related.

https://www08.wellsfargomedia.com/as...-rata-rule.pdf

Yes, the pro rata rule.

You are allowed to contribute $6k per year to an IRA or Roth IRA. If you make enough money, you don't qualify for a Roth IRA and you also get no tax break from contributions to a regular IRA.

To get around this, you have toto first put money in an IRA and then roll it over into a Roth account.

So, you want to do $6k per year into your IRA, then roll it over into a Roth IRA.

If you end with a 0 balance in your IRA, then the IRS allows all of the money new money in the Roth IRA to grow tax free forever. If you roll over $6k out of a $60k balance IRA, the IRS says only 10% of the money that you put into the Roth IRA qualifies for "Roth" tax free growth.

Anyone wishing to get around the pro rata rule that has an existing IRA can roll the balance of the IRA first to a 401k (either employer sponsored or individual), then go through the backdoor process as stated above.

I have a self directed 401k I'm addition to my employer 401k for this reason- it allowed me to roll an IRA balance out of my IRA so that I had a clean slate for a backdoor roth.

The self directed 401k also allows me to contribute income from consulting that I do one the side into the self directed 401k as an employer contribution (I'm my own employer in this situation), above and beyond the employee maximum contribution that I'm limited to in my full time employer's plan.

Important to note that anyone can have a self directed 401k with or without side income though.

And yes, JM2E- I'm investing automatically, twice a month both inside and outside retirement accounts even though I have every expectation that the market could go lower.

Mazarati I have no doubt that ou're smarter than me, but maybe you can enlighten me here - who has basis in an IRA or a 401k?

The whole point of an IRA is that you don't have basis in it.

Timberland.


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Originally Posted by Cono Este

Timberland.

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Want to buy some?

Anyone have advice regarding rolling a 401k over from a previous job? I didn't work there long prior to quitting so I believe I've only got about 4k in the plan. I already have been maxing out my Roth IRA. Is there a way with this rollover process that I could get some more money into my Roth?

That’s good shit right there.


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Take the tax hit and buy BTC, but I'll probably get mocked for that, but mark it dude.

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Originally Posted by John_B

Anyone have advice regarding rolling a 401k over from a previous job? I didn't work there long prior to quitting so I believe I've only got about 4k in the plan. I already have been maxing out my Roth IRA. Is there a way with this rollover process that I could get some more money into my Roth?

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Were your 401k contributions Roth (after tax) or traditional?

If you have Roth money in a 401k, you can easily roll it into your Roth IRA.

Employer contributions are always non-roth, so they need to be rolled into a traditional IRA. If you don't have one, it's easy to set up a tradional IRA at the same place where you have your Roth IRA.

Since the total amount you are dealing with is low enough to backdoor, if any money in your 401k is tradional, you can roll it into a tradional IRA and then backdoor into a Roth IRA so long as total Roth IRA contributions and rollover are less than $6k per year.

I really don't see what you're acomplishing here. you are making a taxable contribution to a roth. "Backdoor" as I use the term just gets you around the $6k/7k limit but the contribution is taxable. Pro-rata may let some of the contribution become non-taxable, but again, who has basis in a 401k/IRA? If you do you generally fucked something up.

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Originally Posted by Kevo

Yes, the pro rata rule.

You are allowed to contribute $6k per year to an IRA or Roth IRA. If you make enough money, you don't qualify for a Roth IRA and you also get no tax break from contributions to a regular IRA.

To get around this, you have toto first put money in an IRA and then roll it over into a Roth account.

So, you want to do $6k per year into your IRA, then roll it over into a Roth IRA.

If you end with a 0 balance in your IRA, then the IRS allows all of the money new money in the Roth IRA to grow tax free forever. If you roll over $6k out of a $60k balance IRA, the IRS says only 10% of the money that you put into the Roth IRA qualifies for "Roth" tax free growth.

Anyone wishing to get around the pro rata rule that has an existing IRA can roll the balance of the IRA first to a 401k (either employer sponsored or individual), then go through the backdoor process as stated above.

I have a self directed 401k I'm addition to my employer 401k for this reason- it allowed me to roll an IRA balance out of my IRA so that I had a clean slate for a backdoor roth.

The self directed 401k also allows me to contribute income from consulting that I do one the side into the self directed 401k as an employer contribution (I'm my own employer in this situation), above and beyond the employee maximum contribution that I'm limited to in my full time employer's plan.

Important to note that anyone can have a self directed 401k with or without side income though.

And yes, JM2E- I'm investing automatically, twice a month both inside and outside retirement accounts even though I have every expectation that the market could go lower.

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Buy and hold BTC.

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Originally Posted by Marshall Tucker

I really don't see what you're acomplishing here. you are making a taxable contribution to a roth. "Backdoor" as I use the term just gets you around the $6k/7k limit but the contribution is taxable. Pro-rata may let some of the contribution become non-taxable, but again, who has basis in a 401k/IRA? If you do you generally fucked something up.

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The entire point of a backdoor roth is to be able to legally contribute to a Roth IRA if your income is otherwise too high.

If you follow the pro-rata rule by rolling 100% of the balance of an IRA into a Roth, than none of the backdoor contribution is taxable, forever. A properly performed backdoor Roth contribution is not taxable and the money grows tax free once it is in the Roth IRA account.

See details here-
https://www.bogleheads.org/wiki/Backdoor_Roth