Agreed that the Roth 401(k) is an awesome new addition, but I don't feel comfortable putting ALL contributions in the Roth, it is not always better. I think for higher income earners, deferring the taxes could be a great benefit
The Roth IS always better except in extremely specific, stranger circumstances... because with a traditional 401k, you are eventually paying taxes on the contributions AND investment earnings as opposed to a Roth IRA where earnings are tax free in almost all cases. It is more than just a timing difference on when you pay taxes. Even if you think you'll be paying less tax in retirement, are you willing to gamble that the tax brackets and tax percentages will be the same in retirement as they are now with the government in trillions of dollars of debt?
@@Robertjohnson-qj4vf Actually that's the thing. Contributions AREN'T taxed. If you have the same tax rate and average growth rate, the math works out to the same final number
Favor contributing to traditional 401(k) when in relatively high tax bracket and favor contributing to Roth 401(k) when in relatively low tax bracket: single making less than $47k thus 12% federal tax bracket should favor Roth 401(k). As default traditional 401(k) + Roth IRA.
I have both and make max contributions to both. I wish I would've started using the Roth 401k earlier instead of the Traditional 401k. I use the backdoor method to contribute to the Roth IRA but I heard that Congress is probably going to do away with that this year. Unfortunately, I cannot do Roth Conversions until after I leave my company which won't be for another 4 years.
I'm age 65 I've had a Roth IRA for over 5 years I have three years into a Roth 401k can I roll the Roth 401k that have had for 3 years until my Roth IRA
Your video saved me! Wow, I did not understand the 5 year rule on Roth 401 k's. I have had a personal Roth for about 15 years now and thought it's 5 year rule covered me completely. I opened a Roth 457 with my employer late last year (60 years old at the time) with $27,000 a year going into it. I am 61 now and plan to retire at 65. I started Roth conversions from my traditional 457. I had planned to convert nearly all of it, but I need to live on the distributions until I take Social Security at FRA or 70. Undecided yet. Now I need to alter my plans to work around the 5 year rule. At least I now have the time to figure it out. Thank you for this timely video!
@@stevegould5185 coincidently, my situation is exactly the same as yours (nice seeing someone w/ 457b like me; most ppl ask 401K questions). I plan to convert all my 457b to roth 457 then may roll over to my roth IRA eventually to avoid RMD later on. I have pension to live off until SS at FRA (so i don't need to tap this roth 457 right away). From what i know, you can convert your 457b to Roth 457b after you retire. However, I think it would make sense if you don't convert and pay the tax then withdraw the fund right away. People talk about at least 10 years out after the conversation to reap its benefit.
@@oceanwaves3139 Glad to hear from others with similar situations! I called my 457 custodian for more info. They don't allow Roth roll overs within their organization, but do allow me to roll it directly into my Personal Roth. That will solve the 5 year rule. I am doing big conversions now while the tax rates are low because anything smaller wasn't going to make a big enough difference. My wife and I just wish we knew all this a few years ago when smaller conversions would have worked.
Does a Roth conversion go against your income? In other words, if we do a large conversion and puts us above 214k, can we still contribute to Roth IRA? Don’t want to be in the wrong. Thanks
@JR. don’t do a large conversion. Why would you. Just do 100k two separate years. 25k standard deduction and you’re in a lower tax bracket of 12% for married filing jointly. There is some cushion in there also if you’re 65 or older. You can go higher than 100k each of two years. Make sure you have enough cash set aside to pay the taxes on the conversion. If you’re still receiving “earned” income you can contribute to IRA. And as person stated there is no income limits from the conversion.
I am 45 years old with very little set aside for retirement at this point plus social security. I have always been curious about the stock market and have witnessed some people who played the game right and retired early because they used the stock market. When I ask them, most said that they invested very little to start with, but their portfolio grew. I do have a significant amount of capital that is required to start up but I have no idea what strategies and direction I need to approach to help me make decent returnsRead more
I recommend to pick up and read a few books. Peter Lynch is where I was recommended to start. Learn different strategies so that you might develop your own
When it comes to making such big retirement planning decision,I’d suggest you look into passive index fund investing and learn some more. Buy Companies stock which you think has huge potential to grow. For me, I hired a stock expert and she provides entry and exit points on the security I focus on while I go about my other businesses. Investing has no one way to do it, eyes on the prize!!! Mistakes are expensive
@@wildtxboy6083 ’Stacey Lee Jamieson’ is my coach, you may have come across her on a few interviews, just look her up online to get in touch wit h her, her details are provided online
if i need professional financial help i would use Eric (the one who made these videos). IMO, I found his videos were very well made -- which gave good indications that he is well versed.
Great information as always! How does the 5 year clock and what's considered "contributions" work with a Roth 401k to Roth IRA rollover? Say you have money in a Roth 401k and retire prior to age 59.5, and you roll it over into a Roth IRA. Does the total amount get counted as "contribution" at that point and the 5 year clock starts then? Or do they actually look at contribution vs earnings in the Roth 401k to determine what's allowable to withdraw without penalty from the Roth IRA prior to age 59.5?
If you already have a Roth IRA and rollover the 401K Roth money to the Roth IRA ( I just did that last year when I retired), the 5 year rule is the original for the IRA Roth. So if you opened a Roth IRA 6 years ago and then rollover the Roth 401K, you have access to it all, both original Roth IRA and the previous Roth 401K money immediately. If you have to open a Roth IRA to rollover the Roth 401K, a 5 year clock starts immediately, i.e. have to wait 5 years to access it. So my suggestion is if you don't already have a Roth IRA, open one immediately. Even if it is not the maximum allowed by IRS rules just so you can get that 5 year clock rolling.
Your 401(k) plan should generally allow you to transfer Roth 401(k) to Roth IRA as you wish but check to see their rules and restrictions on frequency. This is not a tax event so nothing prevents you from transferring entire Roth 401(k) balance to Roth IRA.
My company let me rollover the Roth 401K to a ROTH IRA, or vice versa rollover from a ROTH IRA into the ROTH 401K. Is the tax different between a "normal" ROTH and a rollover ROTH?
why would you want to roll your roth IRA to your roth 401K (you can't do this anyway). Roth IRA doesn't have RMD; what you don't use up, you can pass on to your beneficiary; they have 10 years to w/draw tax-free growth.
Thanks for the response is there anyway that I can get a 401(k) Roth option without having an employer sponsored plan or could I get a part-time job with a 401(k) Roth option and contribute money made outside of work into that plan just curious to hit the maximum 26,000
If you can contribute $7,000 to Roth IRA (50+) then you may contribute *$27,000* to 401(k). With part time job, Roth 401(k) _might_ not be available unless you work full time. If you had own business you could start solo 401(k). Have you already contributed $7,000 to your *2021* Roth IRA and $7,000 to 2022 Roth IRA?
Excellent video? My new job Has 401k without Roth. My understanding I could contribute 26,000 of that but because they don’t have it I have to go on the outside and get a Roth IRA and I can only contribute 7000 is there any way around this
Thank you! You are correct, it is up to your 401k to offer a Roth. A decent percentage don’t unfortunately leaving investors with only Roth IRAs or Conversions. Great question!
If your employer's plan doesn't have a Roth option, you can actually talk to the people in charge of the plan and ask them to see if the Roth option can be added. It often doesn't cause any expense to the employer, it just takes some paperwork to be filed.
