Multiple Retirement Account Questions

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PeanutButter
Posts: 2
Joined: Tue Oct 09, 2018 11:14 am

Multiple Retirement Account Questions

Post by PeanutButter » Tue Oct 09, 2018 11:26 am

I have many questions in this post, I hope I formatted it properly. It took me almost a week to gather all the info and type this up, this excercise alone was very informative to me.

Emergency funds: Two months (and building) with an additional two months in Brk.b

Debt:
Mortgage - $300k @ 3.75% fixed
HELOC – $100k @ 4.664% fixed
Student Loans - $55k @ mostly 4.00-4.55% fixed
Car Loan - $22k @ 1.75% fixed

Tax Filing Status: Married Filing Jointly w/2 dependent children
Tax Rate: 24% Federal, 0% State
State of Residence: FL
Age: 39 / 35 wife
Desired Asset allocation: 100% stocks / 0% bonds
Desired International allocation: 0% of stocks

I would prefer 100% in S&P 600 index funds, not value or growth or Russell, but the real deal S&P 600 index, right now my only option may be VIOO. I am open to having a percentage in a REIT.

Overall Portfolio is $6-700k. Combined income is $240k+.
Everything is going in to a Roth 401(k) for the simple reason that effectively forces me to save 24% more than I would otherwise. I also currently have more in Traditional than Roth accounts and with my matching it will take a while to get a 50/50 spit. I am also going to try and save EVERY possible HSA receipt so I can pull as much as possible out tax free at a later date.


Current retirement assets (101% total due to rounding)

0% Taxable
Nothing

6% His 457(b) at Fidelity
$35-40k, 100% Fidelity® 500 Index Fund Institutional Class (FXSIX) 0.015%

4% His Pension Plan
$20-25k, 100% in a Russel 3000 index fund at 0.02%

50% His Rollover IRA at USAA
$310-320k, 100% Vanguard 500 Index Admiral (VFIAX), 0.04%

26% His Roth IRA at USAA
$140-150k, 87% Vanguard 500 Index Admiral (VFIAX), 0.04%;
$20-25k, 13% USAA S&P 500 Index Fund Member Shares (USSPX) 0.27%

1% Her 401(k) at ADP
$5-10k, 100% State Street Equity 500 Index Fund (SSSYX) (0.11%)

8% Her Rollover IRA at USAA
$50-55k, 100% USAA S&P 500 Index Fund Member Shares (USSPX) 0.27%

6% Her Roth IRA at USAA
$35-40k, 100% USAA S&P 500 Index Fund Member Shares (USSPX) 0.27%


Contributions

New annual Contributions (assume starting 2019)
Max his Roth 401k at ADP + $8,500 employer Match (and I will attempt to have bonus money used to hit the ~$55k limits starting in 2020)
Max her Roth 401k at ADP + no employer match
Max his HAS (individual only, rest of family is on a different plan)
Questions about both IRA/Roth IRA contributions below


Available funds

Funds available in his 457(b) at Fidelity
Fidelity® 500 Index Fund Institutional Class (FXSIX) 0.015%
Fidelity® Blue Chip Growth Fund Class K (FBGKX) 0.62%
Vanguard Equity-Income Fund Admiral Shares (VEIRX) 0.17%
Fidelity® Extended Market Index Fund Premium Class (FSEVX) 0.045%
Fidelity® Low-Priced Stock Fund Class K (FLPKX) 0.53%
Fidelity® Mid-Cap Stock Fund Class K (FKMCX) 0.51%
American Beacon Small Cap Value Fund Class Institutional (AVFIX) 0.83%
Fidelity® Small Cap Index Fund Premium Class (FSSVX) 0.025%
Vanguard Explorer Fund Admiral Shares (VEXRX) 0.32%
American Funds New Perspective Fund® Class R-6 (RNPGX) 0.45%
Fidelity® Diversified International Fund Class K (FDIKX) 0.82%
Fidelity® International Index Fund Premium Class (FSIVX) 0.045%
Fidelity® Real Estate Investment Portfolio (FRESX) 0.76%
Fidelity® Balanced Fund Class K (FBAKX) 0.46%
Fidelity Freedom® 2005 Fund Class K (FSNJX) 0.43%
Fidelity Freedom® 2010 Fund Class K (FSNKX) 0.46%
Fidelity Freedom® 2015 Fund Class K (FSNLX) 0.5%
Fidelity Freedom® 2020 Fund Class K (FSNOX) 0.54%
Fidelity Freedom® 2025 Fund Class K (FSNPX) 0.57%
Fidelity Freedom® 2030 Fund Class K (FSNQX) 0.61%
Fidelity Freedom® 2035 Fund Class K (FSNUX) 0.64%
Fidelity Freedom® 2040 Fund Class K (FSNVX) 0.65%
Fidelity Freedom® 2045 Fund Class K (FSNZX) 0.65%
Fidelity Freedom® 2050 Fund Class K (FNSBX) 0.65%
Fidelity Freedom® 2055 Fund Class K (FNSDX) 0.65%
Fidelity Freedom® 2060 Fund Class K (FNSFX) 0.65%
Fidelity Freedom® Income Fund Class K (FNSHX) 0.42%
MIP CL 1 0.77%
Fidelity® GNMA Fund (FGMNX) 0.45%
FID US BOND IDX PR (FSITX) 0.025%
PIM TOTAL RT INST (PTTRX) 0.55%
VANG INFL PROT ADM (VAIPX) 0.1%


Funds available in her 401(k) at ADP, as far as I can tell there are no changes to the expense ratios although there is a quarterly fee which is currently less than $3
TIAA-CREF Small Cap Blend Index Fund - Institutional Class (TISBX)
iShares MSCI EAFE International Index Fund - Class K (BTMKX) 0.06%
Vanguard Growth Index Fund - Admiral Class (VIGAX) 0.05%
Vanguard Target Retirement 2050 Fund - Investor Class (VFIFX) 0.15%
Vanguard Target Retirement 2030 Fund - Investor Class (VTHRX) 0.14%
Vanguard Target Retirement 2060 Fund - Investor Class (VTTSX) 0.15%
Vanguard Intermediate Term Bond Index Fund - Admiral Class (VBILX) 0.07%
State Street Equity 500 Index Fund - Class K (SSSYX) 0.02%
Vanguard Target Retirement 2025 Fund - Investor Class (VTTVX) 0.14%
iShares MSCI Total International Index Fund - Class K (BDOKX) 0.11%
Vanguard Target Retirement 2015 Fund - Investor Class (VTXVX) 0.07%
Vanguard Small Cap Growth Index Fund - Admiral Class (VSGAX) 0.07%
Vanguard Real Estate Index Fund - Admiral Class (VGSLX) 0.12%
Vanguard Target Retirement Income Fund - Investor Class (VTINX) 0.13%
Vanguard Mid-Cap Index Fund - Admiral Class (VIMAX) 0.05%
Vanguard Value Index Fund - Admiral Class (VVIAX) 0.05%
Vanguard Target Retirement 2035 Fund - Investor Class (VTTHX) 0.14%
Vanguard Target Retirement 2045 Fund - Investor Class (VTIVX) 0.15%
Vanguard Target Retirement 2020 Fund - Investor Class (VTWNX) 0.13%
Vanguard Small Cap Value Index Fund - Admiral Class (VSIAX) 0.07%
Vanguard Target Retirement 2040 Fund - Investor Class (VFORX) 0.15%
Vanguard Small Cap Index Fund - Admiral Class (VSMAX) 0.05%
Vanguard Emerging Markets Stock Index Fund - Admiral Class (VEMAX) 0.14%
iShares Russell 1000 Large-Cap Index Fund - Class K (BRGKX) 0.08%
Vanguard Target Retirement 2055 Fund - Investor Class (VFFVX) 0.15%
Vanguard Balanced Index Fund - Admiral Class (VBIAX) 0.07%

Questions:
1. Is there any reason to keep the pension plan open? It only has proprietary funds although there is a brokerage option. Unless I am missing a feature in the plan I will roll this over to a traditional 401(k) or IRA.

2. Can I roll my wife’s traditional IRA into her work Roth 401(k)? If so is it worth doing this so I can do a backdoor Roth? Do I need to make a small contribution to the taxable 401(k) first to “activate” this portion of the account? My assumption is the choices are poor and the fees are high so it is not worth doing this.
3. Similar to above, should I consider rolling over my traditional IRA to either my Fidelity 457(b) or my new ADP 401(k) where I do not know the funds so I can do a backdoor Roth?
4.a. My income is such that if I do a traditional IRA contribution it is probably not deductible. Should I skip any backdoor Roth ideas with this additional info?
4.b. Should I just do an IRA contribution without a tax deduction (this will force me to save and allow my earnings to grow in a tax sheltered account). Sorry if my questions do not make sense.
5.a. I would prefer to be 100% in low cost S&P 600 index funds which don’t really exist. Should I invest in VIOO instead in the accounts that allow this?
5.b. Related to this question is should I transfer my USAA accounts (assuming I don’t transfer them in the previous questions) to Vanguard? I am assuming the answer will be yes but in real dollars the savings will be minimal and I like USAA so I am not sure if there is much of an advantage.
5.c. Related to the first part of this question is my wife has the Vanguard S&P 600 Value and Growth options in her 401(k), can I split the contributions in a way that it is equivalent to the regular S&P 600?
6. I am planning to open a savings account with Ally and then transfer my savings from USAA to the Ally account with Zelle, are there any other recommendations? I do not want this to be too complicated.

bloom2708
Posts: 5005
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Multiple Retirement Account Questions

Post by bloom2708 » Tue Oct 09, 2018 2:16 pm

Welcome.

Lots to unpack. Your questions are more around moving things around. You can "move" a traditional IRA into a Roth 401k if they 401k allows roll-ins. But, you would also pay tax.

The bigger things I think you should look at:

1. Roth 401k/457 - You are paying a lot of 24% tax now. This is keeping your income higher and is allowing you to save less. Not more.
2. No bonds - 40 years old and no bonds. The next drop will sting. 20% floor at 40.
3. Debt - I would start to think about clearing some of this. Your peak earning years are ahead, but windows can close quickly.

Pick the fewest broad based, total market funds you can in each account. Your portfolio is all one big account. 1 maybe 2 funds in each. 3 if necessary. Don't get stuck on small stocks. More risk.

Bonds in 401k/457

Roth and Taxable - Stocks unless you can fit your bonds (none now) in 401k/457.

Deferring pre-tax lowers your income by $37k. 24% deferred fills a good chunk of your $11k to Roth IRAs. You need $2 million + to get to $80k income pre-tax using 4% rule. I would not be stuck on having equal Traditional and Roth.

I'll let others try to help with the pension. You are in the right place to make some good headway and changes. I would focus more on the big ticket items, being tax efficient and protecting yourself from big drops.

Welcome!
Last edited by bloom2708 on Wed Oct 10, 2018 9:45 am, edited 2 times in total.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

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ruralavalon
Posts: 14254
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Multiple Retirement Account Questions

Post by ruralavalon » Tue Oct 09, 2018 4:43 pm

Welcome to the forum :) .

Some additional information might be helpful. You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.


Why Small-cap growth?
PeanutButter wrote:
Tue Oct 09, 2018 11:26 am
I would prefer 100% in S&P 600 index funds, not value or growth or Russell, but the real deal S&P 600 index, right now my only option may be VIOO.
. . . . .
5.a. I would prefer to be 100% in low cost S&P 600 index funds which don’t really exist. Should I invest in VIOO instead in the accounts that allow this?
Why do you want 100% in a S&P Small-cap 600 fund or ETF? You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

In my opinion 100% in any asset type is a bad idea.

That index is somewhat "growth" oriented, as is Vanguard S&P Small-Cap 600 ETF (VIOO). The Morningstar style box for that ETF is:
00/00/00
01/04/09
24/31/31
The fund is 40% growth stocks.

"Small-cap growth stocks have been euphemistically called 'The Black Hole of Investing.' The reason is that they have produced the lowest returns of any of the major U.S. equity asset classes." Larry Swedroe, etf.com (10/11/2013), "The 'Black hole of Investing' ". That article shows both the annualized returns and the annual standard deviations for the period 1927-2012 (75 years).


Pension?
PeanutButter wrote:
Tue Oct 09, 2018 11:26 am
4% His Pension Plan
$20-25k, 100% in a Russel 3000 index fund at 0.02%
. . . . .
Questions:
1. Is there any reason to keep the pension plan open? It only has proprietary funds although there is a brokerage option. Unless I am missing a feature in the plan I will roll this over to a traditional 401(k) or IRA.
What sort of pension plan is that? How much is currently in your account in that plan? Are you allowed to move that money? What are the benefits at retirement if it's stays in the pension plan? You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

In selecting funds strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). The Russell 3000 Index Fund (total U.S. stock market) ER 0.02% in the "pension plan" is an excellent fund choice. The fund is very broadly diversified, with a very low expense ratio.

Why do you want to leave this pension plan?


Prioritizing investments.
PeanutButter wrote:
Tue Oct 09, 2018 11:26 am
Debt:
Mortgage - $300k @ 3.75% fixed
HELOC – $100k @ 4.664% fixed
Student Loans - $55k @ mostly 4.00-4.55% fixed
Car Loan - $22k @ 1.75% fixed
. . . . .
Contributions

New annual Contributions (assume starting 2019)
Max his Roth 401k at ADP + $8,500 employer Match (and I will attempt to have bonus money used to hit the ~$55k limits starting in 2020)
Max her Roth 401k at ADP + no employer match
Max his HAS (individual only, rest of family is on a different plan)
Questions about both IRA/Roth IRA contributions below
It sounds like you expect bonus money around $28k starting in 2020. In my opinion that could be better utilized in paying down the higher interest debt (over 4%). Paying off higher interest debt should ordinarily be the highest priority, when there is no employer match. Non-deducible contributions to tax-advantaged accounts are ordinarily the lowest priority.

Here is a general account funding priority that usually works well for many people (when there is no employer match):
2) Pay off high interest debt (a guaranteed high return, the next best thing to free money);
3) Contribute to a Health Savings Account (HSA) if available (unlike many other tax deductions, there are no income restrictions to contribute to an HSA)
4) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances;
5) Contribute the maximum employee contribution to the work-based accounts (401k, 403b, 457, SIMPLE IRA, TSP, etc.);
6) Contribute to a taxable investing account; and
7) Contribute to non-deductible IRAs (may be better than taxable in certain circumstances) or annuities.

"If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA." Please see the wiki article "Prioritizing investments".



Roth versus traditional contributions.
PeanutButter wrote:
Tue Oct 09, 2018 11:26 am
Tax Rate: 24% Federal, 0% State
. . . . .
Overall Portfolio is $6-700k. Combined income is $240k+.
Everything is going in to a Roth 401(k) for the simple reason that effectively forces me to save 24% more than I would otherwise. I also currently have more in Traditional than Roth accounts and with my matching it will take a while to get a 50/50 spit.
You state that you should are in the 24% tax bracket, a tax deduction could be very valuable. It may be better to make traditional contributions to the work-based accounts.

For most people traditional 401k contributions will likely be better.

The income tax code is progressive, with a lower tax rate for lower income. Retirement usually means that employment income has ended. Therefore, most people are in a lower tax bracket in retirement and for most people traditional 401k contributions will probably be better. In addition when you withdraw from your 401k in retirement, your income is not all taxed at your marginal tax rate specified for your tax bracket. TFB blog post, "The case against Roth 401k". "I think for most people the majority, if not 100%, of the contribution should go to a Traditional 401(k)."

Will you be eligible for a substantial pension? Do you contribute to Social Security? A pension changes that analysis, so that Roth contributions are likely better if you have a significant pension coming in addition to Social Security. TFB blog post, "Most TSP participants should switch to the Roth TSP". That post discussed the effect of a federal pension, but the analysis should hold for other pensions.

Wiki article, "Traditional vs Roth".
"Tax considerations:
* If your current marginal tax rate is 15% or less, prefer a Roth.
* If you expect to have higher marginal rates than your current marginal rate for most of your career, prefer a Roth.
* If you will have a traditional account or a pension large enough to meet your expected retirement expenses (and you expect to take that pension shortly after retiring), prefer a Roth.
* Otherwise, prefer a traditional account."


Funds in work-based plans.
PeanutButter wrote:
Tue Oct 09, 2018 11:26 am
3. Similar to above, should I consider rolling over my traditional IRA to either my Fidelity 457(b) or my new ADP 401(k) where I do not know the funds so I can do a backdoor Roth?
In my opinion his 457(b) @ Fidelity offers very good funds to use. In my opinion the better funds to consider use in his 457(b) @ Fidelity include:
1) Fidelity® 500 Index Fund Institutional Class (81% of U.S. stock market) (FXSIX) 0.015%
2) Fidelity® International Index Fund Premium Class (developed markets only) (FSIVX) 0.045%
3) Fidelity® Real Estate Investment Portfolio (FRESX) 0.76%
4) Fidelity U.S. Bond Index Fund Premium Class (FSITX) 0.025%

So I think its reasonable to rollover his traditional IRA Into his 457(b) @ Fidelity if that plan will accept the rollover.


Her 401k @ ADP offers some very good funds. In my opinion the funds to consider using in her 401k @ ADP include:
1) State Street Equity 500 Index Fund - Class K (81% of U.S. stock market) (SSSYX) 0.02%
2) iShares MSCI Total International Index Fund - Class K (both developed and emerging markets) (BDOKX) 0.11%
i didn't notice any bond funds offered in her ADP plan. Are there any bond funds offered?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

megabad
Posts: 828
Joined: Fri Jun 01, 2018 4:00 pm

Re: Multiple Retirement Account Questions

Post by megabad » Tue Oct 09, 2018 5:26 pm

PeanutButter wrote:
Tue Oct 09, 2018 11:26 am
1. Is there any reason to keep the pension plan open? It only has proprietary funds although there is a brokerage option. Unless I am missing a feature in the plan I will roll this over to a traditional 401(k) or IRA.
Sorry can't speak to this.
2. Can I roll my wife’s traditional IRA into her work Roth 401(k)? If so is it worth doing this so I can do a backdoor Roth? Do I need to make a small contribution to the taxable 401(k) first to “activate” this portion of the account? My assumption is the choices are poor and the fees are high so it is not worth doing this.
Depends on the plan rules. I would definitely do this if allowed. I do not understand your questions about "activate" and "poor" plan choices. The choices look great to me and I have never heard of activating a 401k subaccount. Best way to get clarity is to call provider and ask though.
3. Similar to above, should I consider rolling over my traditional IRA to either my Fidelity 457(b) or my new ADP 401(k) where I do not know the funds so I can do a backdoor Roth?
As above, depends on plan rules. As above, I would probably do this if allowed to clear pathway for backdoor Roth.
4.a. My income is such that if I do a traditional IRA contribution it is probably not deductible. Should I skip any backdoor Roth ideas with this additional info?
This does not affect backdoor Roth. I would do backdoor Roth if you can get the TIRA monies into your other qualified plans.
4.b. Should I just do an IRA contribution without a tax deduction (this will force me to save and allow my earnings to grow in a tax sheltered account). Sorry if my questions do not make sense.
No. Unless you prefer to pay the governmental more in taxes than you normally would.
5.a. I would prefer to be 100% in low cost S&P 600 index funds which don’t really exist. Should I invest in VIOO instead in the accounts that allow this?
I don't understand. What's wrong with VIOO? Or is it that you want to be 100% SP600 in every single account? If so, I agree with other posters that I would probably not be solely invested in only a small segment of the US Stock Market.
5.b. Related to this question is should I transfer my USAA accounts (assuming I don’t transfer them in the previous questions) to Vanguard? I am assuming the answer will be yes but in real dollars the savings will be minimal and I like USAA so I am not sure if there is much of an advantage.
I am not a fan of IRA providers that charge transaction fees to get into my preferred index funds, so I would move the money to a true low cost brokerage. Ultimately if you don't mind paying the fees, this is up to you.
5.c. Related to the first part of this question is my wife has the Vanguard S&P 600 Value and Growth options in her 401(k), can I split the contributions in a way that it is equivalent to the regular S&P 600?
No. Not really. These are different indices and so you will have misweightings and overlaps. I would stick to VIOO in your IRAs.
6. I am planning to open a savings account with Ally and then transfer my savings from USAA to the Ally account with Zelle, are there any other recommendations? I do not want this to be too complicated.
I don't know what Zelle or why to use it (why involve another 3rd party?), but the move to Ally sounds good to me.

PeanutButter
Posts: 2
Joined: Tue Oct 09, 2018 11:14 am

Re: Multiple Retirement Account Questions

Post by PeanutButter » Wed Oct 10, 2018 11:31 am

Hey all, thank you so much for the responses. It will take me a few days to review everything and have a full response including edits to my original post however I do have quick items.

I agree on the debt! I have paid down about $40k in principle in the past two years and with my new job and higher wages I am going to be paying this off faster.

The pension plan allowed me to stay in a traditional pension plan or select more of a 401k type option, knowing that I was not going to stay at the company long enough to be fully vested I selected the 401k type option. My question was more of along the lines is there any advantage to keeping money in a pension plan instead of a 401k or IRA? If not I will roll it over.

With regards to the to the Roth v Regular 401k, maybe I am missing something. If I max out the Roth then I am saving $36k + paying (36k/(1-.24))-36k= $11.4k in taxes for a total of $47.4k I am putting towards retirement.

If I max out the traditional 401k I am putting $36k towards retirement, however the $11.4k in taxes from the Roth math I know will not get saved/invested/pay down debt/etc. I also know my tax savings on the $36k ($36k x .24 = $8.6k) will not be saved either.

With the current low taxes (historically low?) and the fact they will most likely expire in 2025 the Roth sounds like a good plan. If my tax rate goes up to 3x% then perhaps I would reconsider. I know my taxes will most likely be lower in retirement but even that is not guaranteed. My guess on the answers I have received related to this is that the responses are the ideal mathematical solution which ignores the fact my wife will spend it if it is available to spend. What am I missing on this?

bloom2708
Posts: 5005
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Multiple Retirement Account Questions

Post by bloom2708 » Wed Oct 10, 2018 11:58 am

I think you are missing a couple things on the Roth vs. Pre-tax.

If you eventually move into a 3X% tax bracket and are still working, that makes even MORE sense to do pre-tax.

It is your rate if/when you withdraw you are worried about. We don't know what that rate is, but your income likely will not put you anywhere close to 3x% for your marginal rate.

Why do you think you wouldn't save any of the ~$10k in tax savings? That is almost 2x Roths at $5,500 (front door or back door). You defer the tax, so your check is bigger.

You are also missing the power of saving more early and letting it grow for 20,30 years.

I find it interesting that people latch on to the saving more, low expense ratios stuff pretty fast, but are very willing to pay 24% and higher tax now. I value a Roth dollar high, but not before a pre-tax dollar plus a Roth dollar.

Something to chew on. It is a tough hill to climb and there are still those that will always vote for Roth even if you end up with far less money to spend later on. Many paths.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

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ruralavalon
Posts: 14254
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Multiple Retirement Account Questions

Post by ruralavalon » Wed Oct 10, 2018 3:51 pm

PeanutButter wrote:
Wed Oct 10, 2018 11:31 am
Hey all, thank you so much for the responses. It will take me a few days to review everything and have a full response including edits to my original post however I do have quick items.

I agree on the debt! I have paid down about $40k in principle in the past two years and with my new job and higher wages I am going to be paying this off faster.

The pension plan allowed me to stay in a traditional pension plan or select more of a 401k type option, knowing that I was not going to stay at the company long enough to be fully vested I selected the 401k type option. My question was more of along the lines is there any advantage to keeping money in a pension plan instead of a 401k or IRA? If not I will roll it over.
Is that "pension plan", the "401k type option", with a former employer?

Can you find out of plan it is?


PeanutButter wrote:With regards to the to the Roth v Regular 401k, maybe I am missing something. If I max out the Roth then I am saving $36k + paying (36k/(1-.24))-36k= $11.4k in taxes for a total of $47.4k I am putting towards retirement.

If I max out the traditional 401k I am putting $36k towards retirement, however the $11.4k in taxes from the Roth math I know will not get saved/invested/pay down debt/etc. I also know my tax savings on the $36k ($36k x .24 = $8.6k) will not be saved either.

With the current low taxes (historically low?) and the fact they will most likely expire in 2025 the Roth sounds like a good plan. If my tax rate goes up to 3x% then perhaps I would reconsider. I know my taxes will most likely be lower in retirement but even that is not guaranteed. My guess on the answers I have received related to this is that the responses are the ideal mathematical solution which ignores the fact my wife will spend it if it is available to spend. What am I missing on this?
How you know that the tax savings will be spent rather than invested? Why do you not trust yourselves? (You may have a reason, but its not readily apparent.)

You can easily set up automatic contributions to a taxable brokerage account from your checking account. Being on autopilot helps supply investing discipline.

Since you "know that [your] taxes will most likely be lower in retirement", it's most likely that you will be better off with traditional contributions to your 401k account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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