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Re: Pre tax vs after tax contribution spread--what to do

May I ask why backdoor roth IRAs are preferable to in-plan conversions to the Roth 401k? (I tend to prefer my 401k when possible as I have a very good plan with insanely low expense-ratio funds available. Lower than the corresponding ETFs. (Further, due to using betterment and hoping to get some be...
by retiredjg
Tue Nov 25, 2014 6:31 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pre tax vs after tax contribution spread--what to do
Replies: 10
Views: 336

Re: Porfolio review, consolidation needed

My reasoning on holding same fund in multiple 401Ks is only toi keep them out of rolloever tIRA. Also, I am not all that impressed with current 401K at MassMutual. I am still working to identify any management fees in my Fidelity and Schwab orphan 401Ks. If I do find fees I will consider rolling in...
by retiredjg
Tue Nov 25, 2014 6:20 pm
 
Forum: Investing - Help with Personal Investments
Topic: Porfolio review, consolidation needed
Replies: 12
Views: 790

Re: Pre tax vs after tax contribution spread--what to do

In the 33% tax bracket, I think you should do this: $17,500 to His pre-tax 401k $17,500 to Her pre-tax 403b $5,500 to His Roth IRA (back door) $5,500 to Her Roth IRA (back door) anything else into taxable or after-tax in the 401k - either converted to Roth 401k regularly or rolled out to Roth IRA re...
by retiredjg
Tue Nov 25, 2014 5:00 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pre tax vs after tax contribution spread--what to do
Replies: 10
Views: 336

Re: 401k Get off Target Year Fund with high expense ratio

The allocation is reasonable and that split of 500 and Russell 2000 is about as close as you will get to total stock market. You are not missing mid-caps by any means, but the amount of mid caps is a little lower than TSM and the amount of small caps is a little higher. I don't think it is enough to...
by retiredjg
Tue Nov 25, 2014 4:02 pm
 
Forum: Investing - Help with Personal Investments
Topic: 401k Get off Target Year Fund with high expense ratio
Replies: 4
Views: 210

Re: [Merged Post]

One thing I'm unclear on though. Up until a few weeks ago I was working with a financial planner/investment manager. They are the ones who pointed out this mega-backdoor opportunity. So far, you have described a couple of things, but neither is the "mega back door" (at least as far as the...
by retiredjg
Tue Nov 25, 2014 3:27 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pre tax vs after tax contribution spread--what to do
Replies: 10
Views: 336

Re: Pre tax vs after tax contribution spread--what to do

- If we backdoor roth in the year that the rollover tIRA existed (tax year 2014), will that cause a pro-rata tax? Or no since at the end of the tax year that amount was no longer in a tIRA? If there is nothing in that person's IRA (including SEP IRA and SIMPLE IRA) on 12/31, nothing gets prorated. ...
by retiredjg
Tue Nov 25, 2014 3:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pre tax vs after tax contribution spread--what to do
Replies: 10
Views: 336

Re: Pre tax vs after tax contribution spread--what to do

The first thing you need to do is get a handle on your actual current tax brackets. There is no 39% or 38.2% bracket, so maybe you are adding in state tax or something. Compare your taxable income from last year (line 43 on Form 1040) to this chart, making sure you click the right year and the right...
by retiredjg
Tue Nov 25, 2014 3:09 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pre tax vs after tax contribution spread--what to do
Replies: 10
Views: 336

Re: Porfolio review, consolidation needed

5. Start backdoor contributions to Roth accounts. (2015) It may be a year before you do the taxes on this. Write yourself a note for the following spring that you didn't contribute to Roth IRA. You did two steps and it has to be reported that way. Contribute to tIRA, do not deduct, convert to Roth....
by retiredjg
Tue Nov 25, 2014 2:41 pm
 
Forum: Investing - Help with Personal Investments
Topic: Porfolio review, consolidation needed
Replies: 12
Views: 790

Re: Questions about implementing 'mega backdoor roth'

Yes, it does make sense that both the back door and the mega back door would reach their 5 year clock at the same time, if converted in the same calender year. To this end, I would also assume that all pre-conversion earnings (back door + mega back door) would need to come out before any after-tax ...
by retiredjg
Tue Nov 25, 2014 6:31 am
 
Forum: Investing - Help with Personal Investments
Topic: Questions about implementing 'mega backdoor roth'
Replies: 29
Views: 1995

Re: Roth IRA for my fun money

I don't have fun money, but if I did...it would definitely not be in Roth space. Getting money into Roth status is valuable and most people simply "can't get enough". Do not gamble with that space. Gamble in a taxable account and just don't sell anything that is a short term gain unless yo...
by retiredjg
Mon Nov 24, 2014 6:23 pm
 
Forum: Investing - Help with Personal Investments
Topic: Roth IRA for my fun money
Replies: 5
Views: 576

Re: Approximating total stock market

I assume (but do not know) that Vanguard is using the CRSP definitions for size. Regardless of whether that is correct or not, different index makers and possibly different custodians classify size in different ways. So if you use more than one system to compare things, you end up with apples and or...
by retiredjg
Mon Nov 24, 2014 6:04 pm
 
Forum: Investing - Theory, News & General
Topic: Approximating total stock market
Replies: 3
Views: 412

Re: Thank you and see you later

Have a great trip! I predict that you won't miss computer time too much.
by retiredjg
Mon Nov 24, 2014 5:00 pm
 
Forum: Investing - Theory, News & General
Topic: Thank you and see you later
Replies: 1
Views: 726

Re: I think I'm missing something about the backdoor roth

My concern here is whether the rollover can be accomplished by 12/31. Things just slow down from Thanksgiving to New years. Missing the 12/31 deadline would mess up the whole thing if our poster has already done the conversion. It could be fixed, but you'd have to do a re-characterization. So starti...
by retiredjg
Mon Nov 24, 2014 4:46 pm
 
Forum: Investing - Help with Personal Investments
Topic: I think I'm missing something about the backdoor roth
Replies: 21
Views: 1500

Re: New to Vanguard and serious about retirement planning

Welcome! You've done well and now will enjoy the fruits. I had to laugh at your first paragraph - everybody tried to sell you something....except VG. It is so true. 1. We feel the 60/40 mix is right for us. Does the recommended allocation adequately diversify? Yes. 2. Should we include a REIT compon...
by retiredjg
Mon Nov 24, 2014 4:33 pm
 
Forum: Investing - Help with Personal Investments
Topic: New to Vanguard and serious about retirement planning
Replies: 9
Views: 1043

Re: Backdoor Roth Question

I can't help with part of your question, but unless things have changed, a Vanguard individual 401k will not accept a rollover from an IRA. They will accept a rollover from a 401k plan. If this is important to you, consider opening your individual 401k at Fidelity. I would start being worried about ...
by retiredjg
Mon Nov 24, 2014 4:07 pm
 
Forum: Investing - Help with Personal Investments
Topic: Backdoor Roth Question
Replies: 7
Views: 480

Re: Questions about implementing 'mega backdoor roth'

I wasn't considering pre-conversion earnings to be the same grouping as post-conversion earnings, however I didn't realize the ordering rules prevented access to the contributions unless the penalty is paid on the pre-conversion earnings that came in the same rollover. Thanks much for pointing out ...
by retiredjg
Mon Nov 24, 2014 3:58 pm
 
Forum: Investing - Help with Personal Investments
Topic: Questions about implementing 'mega backdoor roth'
Replies: 29
Views: 1995

Re: Porfolio review, consolidation needed

1) Roll all the orphans and the rollover IRA into His Current 401k. The choices are good there. 2) Fill the Current 401k with PIMCO Total Return Fund PTTRX 0.46 and Vanguard Total Stock Market Index Fund Admiral Shares VTSAX 0.05 and hold you international allocation in the taxable account. 3) I too...
by retiredjg
Mon Nov 24, 2014 2:06 pm
 
Forum: Investing - Help with Personal Investments
Topic: Porfolio review, consolidation needed
Replies: 12
Views: 790

Re: Backdoor Roth Question

-- If that is a problem, then what's my best solution? Call Vanguard. I think you can take the money out of the tIRA and it will be as if the money was never there. This might be called a re-characterization, but I'm not sure if that word describes what I'm suggesting. Can you roll the Rollover IRA...
by retiredjg
Mon Nov 24, 2014 1:45 pm
 
Forum: Investing - Help with Personal Investments
Topic: Backdoor Roth Question
Replies: 7
Views: 480

Re: I think I'm missing something about the backdoor roth

Epsilon Delta wrote:I'm with retiredjg on this one.

But JW and I said the same thing. :D
by retiredjg
Mon Nov 24, 2014 1:32 pm
 
Forum: Investing - Help with Personal Investments
Topic: I think I'm missing something about the backdoor roth
Replies: 21
Views: 1500

Re: I think I'm missing something about the backdoor roth

If you do have to or want to use the back door, convert exactly $5,500 this week and get all the rest of the money into your 401k BEFORE 12/31. If you cannot get that money moved before 12/31, don't do either the conversion or the rollover in 2014.
by retiredjg
Mon Nov 24, 2014 12:50 pm
 
Forum: Investing - Help with Personal Investments
Topic: I think I'm missing something about the backdoor roth
Replies: 21
Views: 1500

Re: I think I'm missing something about the backdoor roth

It isn't whether you are above the MAGI to deduct it's whether you are above the MAGI to make direct Roth IRA contributions as that is superior to backdoor Roth since it's less complicated and you don't have to do anything with the current IRA but if you can't then your plan makes sense. This is wh...
by retiredjg
Mon Nov 24, 2014 12:47 pm
 
Forum: Investing - Help with Personal Investments
Topic: I think I'm missing something about the backdoor roth
Replies: 21
Views: 1500

Re: Questions about implementing 'mega backdoor roth'

Ok, so I would have an option of rolling over after-tax 401k earnings to a traditional IRA. This sounds like best option to avoid the penalties if I ever needed to withdrawal the rollovers before 59.5. I don't have a traditional IRA because I am over the income limits. Can I open one just for the p...
by retiredjg
Mon Nov 24, 2014 10:29 am
 
Forum: Investing - Help with Personal Investments
Topic: Questions about implementing 'mega backdoor roth'
Replies: 29
Views: 1995

Re: Questions about implementing 'mega backdoor roth'

However, if one had to reconstruct 10 years from now, only 401k earnings in the 5 years prior would be relevant. Yes, but if you don't keep the records, you don't know if the 5 years has passed or not. That's my point. :happy If rollovers are managed strategically, the portion of the Roth which rep...
by retiredjg
Mon Nov 24, 2014 10:24 am
 
Forum: Investing - Help with Personal Investments
Topic: Questions about implementing 'mega backdoor roth'
Replies: 29
Views: 1995

Re: Help: Three Fund Portfolio at Fidelity

Well, it appears I edited (and thus deleted) the post I made earlier today. In short, since all of your space is 401k and IRA, tax-efficiency is not relevant. If you have Spartan Funds available in your 401k, it is unlikely you also have identical Vanguard funds available except through a brokerage ...
by retiredjg
Mon Nov 24, 2014 10:09 am
 
Forum: Investing - Theory, News & General
Topic: Help: Three Fund Portfolio at Fidelity
Replies: 25
Views: 2221

Re: 20K Inheritance, now what?

For someone who's going to buy and hold, does it matter much? No. If you already know how to use ETFs, it does not matter. Just go with your personal preference. Not sure what you mean about "how to use." That's part of the reason i'm confused, i dont see much of a difference other than h...
by retiredjg
Mon Nov 24, 2014 9:49 am
 
Forum: Investing - Help with Personal Investments
Topic: 20K Inheritance, now what?
Replies: 50
Views: 3527

Re: Need Help Allocating Assets

You do not have anything in Roth IRA. Is there a reason for that? Rather than send any after-tax money to your pension, I'd send it to Roth IRA. His and Hers if you have enough money to contribute and if you can contribute directly to Roth IRA. There is no reason other than I have more room in my t...
by retiredjg
Mon Nov 24, 2014 9:42 am
 
Forum: Investing - Help with Personal Investments
Topic: Need Help Allocating Assets
Replies: 14
Views: 1064

Re: Need Help Allocating Assets

ReefDiverDan, I've been looking over this again. I've concluded that what you said you want and what you showed us you want are not the same things. You said you wanted a 70/30 portfolio counting the pension as bonds. But what you showed us is that you've set things up with most accounts being somet...
by retiredjg
Mon Nov 24, 2014 9:38 am
 
Forum: Investing - Help with Personal Investments
Topic: Need Help Allocating Assets
Replies: 14
Views: 1064

Re: Help: Three Fund Portfolio at Fidelity

And what difference does it make whether Total Stock or Total International has the highest expected return? I see now why you asked that. I had missed Taylor's post yesterday. I don't think there is a big enough difference in the expected return of Total Stock vs Total International to use that as...
by retiredjg
Mon Nov 24, 2014 7:34 am
 
Forum: Investing - Theory, News & General
Topic: Help: Three Fund Portfolio at Fidelity
Replies: 25
Views: 2221

Re: IRA Contribution Question and Age

ANY earnings or gains in a traditional retirement account will be taxed as regular income. Taxable accounts receive a break on dividends and capital gains. Roths have no taxes. If you plan to invest in things that would benefit from the lower dividend/capital gains rates, it would be foolish to inv...
by retiredjg
Sun Nov 23, 2014 8:58 pm
 
Forum: Investing - Help with Personal Investments
Topic: IRA Contribution Question and Age
Replies: 18
Views: 1653

Re: Help: Three Fund Portfolio at Fidelity

In my Fidelity account I found FSITX (Spartan US Bond Index - Advantage Class) and VBMFX (Total Bond Market Index - Investor Shares): FSITX has a .17% Gross ER and .1% Net ER VBMFX has a .2% Gross & Net ER Check your facts again. If you want a fair comparison to Spartan Advantage Class, you'd n...
by retiredjg
Sun Nov 23, 2014 8:51 pm
 
Forum: Investing - Theory, News & General
Topic: Help: Three Fund Portfolio at Fidelity
Replies: 25
Views: 2221

Re: Saving Strategy For a Young Person?

2. Do the regular 401k up to the allowed (tax deductible) maximum. <--I would vote for Roth 401k since he is in the 15% bracket at this point. Or at least some Roth 401k. This would eliminate the $1000 possible saver's tax credit though, and I'm not 100% convinced that Roth 401k is the better choice...
by retiredjg
Sun Nov 23, 2014 2:12 pm
 
Forum: Investing - Theory, News & General
Topic: Saving Strategy For a Young Person?
Replies: 17
Views: 1471

Re: IRA Contribution Question and Age

In my experience as a single person with a federal pension, it does not take much "other income" to make 85% of SS taxable. And even if you can avoid that, probably 50% will be taxable. Not saying you should not try, but I'm not sure there is much you can do. Have you seen the chart in the...
by retiredjg
Sun Nov 23, 2014 2:05 pm
 
Forum: Investing - Help with Personal Investments
Topic: IRA Contribution Question and Age
Replies: 18
Views: 1653

Re: Saving Strategy For a Young Person?

Maybe this is the way to look at it, Leeraar. Since you are the one doing the asking, maybe it would be better for your son do the rinse and repeat approach rather than the mega back door approach (after tax sub account to Roth IRA). It's mighty confusing, even to people who have a good deal of life...
by retiredjg
Sun Nov 23, 2014 1:47 pm
 
Forum: Investing - Theory, News & General
Topic: Saving Strategy For a Young Person?
Replies: 17
Views: 1471

Re: Questions about implementing 'mega backdoor roth'

Well, that was a run-on sentence! So the way I understand this is that is long as you are 59.5 or older and your Roth is at least 5 years old none of the earnings are taxed or penalized at withdrawal yes, even those that were converted within 5 years yes , your direct or ordinary contributions are a...
by retiredjg
Sun Nov 23, 2014 1:34 pm
 
Forum: Investing - Help with Personal Investments
Topic: Questions about implementing 'mega backdoor roth'
Replies: 29
Views: 1995

Re: Saving Strategy For a Young Person?

You guys are making me nervous. I could be wrong, but I believe that some of these answers do not really apply to the situation you described about your son. Maybe he does want to use after-tax contributions and maybe he doesn't. But from the people here who do this, it appears that if his after-ta...
by retiredjg
Sun Nov 23, 2014 1:16 pm
 
Forum: Investing - Theory, News & General
Topic: Saving Strategy For a Young Person?
Replies: 17
Views: 1471

Re: Moving current 401k funds into brokerage link?

Google, once again, is our friend. :D http://www.wikinvest.com/stock/Hewlett-Packard_(HPQ)/Defined_Contribution_Plans Well, the link doesn't work unless you cut and paste the whole thing, but it does say.... Effective January 31, 2004, HP designated the HP Stock Fund, an investment option under the ...
by retiredjg
Sun Nov 23, 2014 1:02 pm
 
Forum: Investing - Help with Personal Investments
Topic: Moving current 401k funds into brokerage link?
Replies: 30
Views: 1534

Re: Questions about implementing 'mega backdoor roth'

Ask again if that link doesn't help.
by retiredjg
Sun Nov 23, 2014 12:28 pm
 
Forum: Investing - Help with Personal Investments
Topic: Questions about implementing 'mega backdoor roth'
Replies: 29
Views: 1995

Re: Moving current 401k funds into brokerage link?

What is the description of HP STOCK FUND(.02) ? OP, will you also answer the above question? My first thoughts are that it could be (a) a total U.S. stock index fund, which would be great, or (b) an option to invest money in company stock, which wouldn't be what we're looking for. What do the plan ...
by retiredjg
Sun Nov 23, 2014 12:22 pm
 
Forum: Investing - Help with Personal Investments
Topic: Moving current 401k funds into brokerage link?
Replies: 30
Views: 1534

Re: Need Help Allocating Assets

Here is one way to allocate what you currently have, not considering the pension as part of the mix. I'm considering the pension as a future income stream. If you cash it in, it becomes part of that mix at that time. Note the change in percentages. His 457b 54.1% 24.8% BNY Equity Index (500 Index) ....
by retiredjg
Sun Nov 23, 2014 11:58 am
 
Forum: Investing - Help with Personal Investments
Topic: Need Help Allocating Assets
Replies: 14
Views: 1064

Re: Need Help Allocating Assets

I'll give it a whirl. I guess there is no 401k balance at the present. Unless I take a survivor option the pension ends when I die and all money in the fund is forfeited. This worries me a lot. Yes, if you retire, you can take the max out and invest it and that would be fine. And in the meantime, yo...
by retiredjg
Sun Nov 23, 2014 11:09 am
 
Forum: Investing - Help with Personal Investments
Topic: Need Help Allocating Assets
Replies: 14
Views: 1064

Re: Questions about implementing 'mega backdoor roth'

See page 2 of this thread. Jack Holloway works through how money is taxed when coming out of a Roth IRA that contains these rollovers from after-tax accounts.

viewtopic.php?f=2&t=137366
by retiredjg
Sun Nov 23, 2014 10:19 am
 
Forum: Investing - Help with Personal Investments
Topic: Questions about implementing 'mega backdoor roth'
Replies: 29
Views: 1995

Re: Questions about implementing 'mega backdoor roth'

Thank you for the education. I am implementing the mega backdoor Roth and have been reading furiously and missed this This is why I was so specific in my earlier post about deciding where the earnings are going to go. If the earnings go into Roth IRA (paying taxes of course) the earnings can't be w...
by retiredjg
Sun Nov 23, 2014 10:06 am
 
Forum: Investing - Help with Personal Investments
Topic: Questions about implementing 'mega backdoor roth'
Replies: 29
Views: 1995

Re: Questions about implementing 'mega backdoor roth'

The five year rule starts at the first tax year that you make the initial contribution and establish the account, not for each contribution. IRS publication 590. http://www.irs.gov/publications/p590/ch02.html#en_US_2013_publink1000231061 What you are saying is correct. But there is another 5 year r...
by retiredjg
Sun Nov 23, 2014 9:51 am
 
Forum: Investing - Help with Personal Investments
Topic: Questions about implementing 'mega backdoor roth'
Replies: 29
Views: 1995

Re: Saving Strategy For a Young Person?

I understand livesoft's message and I'm neutral on that up to a point. But I would rather have money in Roth vehicles than in taxable vehicles (although I do see the downside of losing the ability to tax loss harvest). In this situation with a person who is probably not going to be able to max out b...
by retiredjg
Sun Nov 23, 2014 9:37 am
 
Forum: Investing - Theory, News & General
Topic: Saving Strategy For a Young Person?
Replies: 17
Views: 1471

Re: Saving Strategy For a Young Person?

1. IRA (at Vanguard), $5,500. At the moment this is Roth. Should it be Traditional? I think it should be Roth. 2. 401k, $17,500. Should this be Roth, if available? I'm not clear on this one. If there were no saver's credit, I think the answer should be Roth until he makes enough money to move out o...
by retiredjg
Sun Nov 23, 2014 7:24 am
 
Forum: Investing - Theory, News & General
Topic: Saving Strategy For a Young Person?
Replies: 17
Views: 1471

Re: Need Help Allocating Assets

Which one is your 401k?

I'm confused about the pension thing. It apparently has a dollar value. Can that change? Is it invested in some way? Do you plan to take this as an income stream or cash it in and put it in an IRA or something?
by retiredjg
Sat Nov 22, 2014 4:15 pm
 
Forum: Investing - Help with Personal Investments
Topic: Need Help Allocating Assets
Replies: 14
Views: 1064

Re: WiseBanyan AA question

Decide if this is a goal that you need to save for or if you can invest the money for this goal. Those are 2 different things. If your goal is a certain date or even a certain year, you need to save, not invest. CDs, money market, high yield savings, maybe a small amount in short term bonds.
by retiredjg
Sat Nov 22, 2014 3:46 pm
 
Forum: Investing - Help with Personal Investments
Topic: WiseBanyan AA question
Replies: 5
Views: 498

Re: WiseBanyan AA question

If you need the money at a certain time, you probably don't want any of it to be invested in stocks. If your goal can easily be delayed if there is a market crash, some stocks might be OK.
by retiredjg
Sat Nov 22, 2014 3:44 pm
 
Forum: Investing - Help with Personal Investments
Topic: WiseBanyan AA question
Replies: 5
Views: 498

Re: Please provide feedback on my current asset allocation

You could make your Taxable accounts simpler by going with a one fund Target Retirement Fund as you did in your Nontaxable, or one of the Lifestrategy Funds. They rebalance for you. I don't believe this is a good choice for taxable in the 33% tax bracket. The bonds are not tax-efficient and you can...
by retiredjg
Sat Nov 22, 2014 3:38 pm
 
Forum: Investing - Help with Personal Investments
Topic: Please provide feedback on my current asset allocation
Replies: 11
Views: 779
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