Potential layoff - question on retirement savings

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FoolF5
Posts: 17
Joined: Thu Feb 14, 2013 11:23 pm

Potential layoff - question on retirement savings

Post by FoolF5 » Sat Jan 13, 2018 10:38 pm

Greetings.

There is a round of layoffs coming at my company and my role is very likely to be included (Sidenote - this would be welcomed news by me). I'm working on tying up some loose ends/getting organized before it is official. This leads me to some questions about what I can use for retirement accounts.

Stats that may be helpful:
Tax Filing Status: Married Filing Jointly (pay quarterly)
Tax Rate: 37% Federal, 7.85% State
Emergency fund = one year
Husband has his own business and take home is $250K to high six figures
My base is $180K + up to 50% bonus
Retirement specific vehicles: He puts $54K in 401K; I max at $18K

Scenarios:
A: I have regular pay checks through January (putting 25% into 401K) + a quarterly bonus payout of maybe $20K + 6 months of severance. (Basically, I look at this as my opportunity to take a sabbatical that I have been debating. I would spend the summer with my kiddos and then work on what is career 3.0)

B: same as above but I start a new job a few months later. This would give me access to a 401K for 2018. (This option accounts for discussions I've had with another firm. They would like me to join but aren't sure when they would have approval to add head count.)

Questions:
- If scenario A plays out - what vehicles do I have for retirement savings? In the past I've had too much income for Roth IRA etc. I suppose I may be over those limits again with my serverance? Assuming severance is treated as the same as my regular paycheck income?
- If I went into 2019 without a new job - then what are my retirement savings options as a non-working spouse?
- The voice in my head says not to move over my 401K to vanguard as I may have opportunity to take some other actions (e.g. Backdoor roth) but I really don't know what options I should consider.

Appreciate you reading and thank you in advance for your comments.

PFInterest
Posts: 1043
Joined: Sun Jan 08, 2017 12:25 pm

Re: Potential layoff - question on retirement savings

Post by PFInterest » Sun Jan 14, 2018 1:15 pm

1) set paycheck to max. my company allows 75% of a paycheck.
2) backdoor rIRA.
3) still backdoor rIRA. your husbands income qualifies you. also a regular taxable account is still great.
4) leave the 401k because yes, backdoor rIRA. once you get a new 401k, if it is better, then move the old 401k to the new one.

ralph124cf
Posts: 1870
Joined: Tue Apr 01, 2014 11:41 am

Re: Potential layoff - question on retirement savings

Post by ralph124cf » Sun Jan 14, 2018 2:16 pm

UNLESS you already have post-tax funds in an IRA, there would be no reason to not roll 401(k) funds to a Vanguard IRA, and then do a partial IRA to ROTH conversion. The reason for backdoor ROTHs is that you cannot pull out money from a 401(k) while working for that firm. You can always convert from an IRA to a ROTH.

Ralph

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Watty
Posts: 13048
Joined: Wed Oct 10, 2007 3:55 pm

Re: Potential layoff - question on retirement savings

Post by Watty » Sun Jan 14, 2018 2:25 pm

If you have a flexible spending healthcare account then it would be good to max it out as soon as possible because you do not need to pay it back after you leave the job.

For example if you put $100 a month into it and you have a $1,200 dental bill in January that is not covered by dental insurance, then you get reimbursed that $1,200 from the FSA even though you have only contributed $100 so far. If you are laid off at the end of January then you never have to pay back the extra $1,100.

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