Bad 401K better than nothing?

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FelixTheCat
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Bad 401K better than nothing?

Post by FelixTheCat » Tue Apr 22, 2014 11:04 pm

I am in a temp job. I am eligible for the 401K. The lowest fee is 110 bp on a poorly performing target date fund.

Should I invest in the 401K? I am not eligible for a Roth nor Back-door Roth; I have a Rollover IRA I am not willing to convert. Should I open up a non-deductible IRA? Should i just contribute to my taxable index funds at Vanguard?
Felix is a wonderful, wonderful cat.

user5027
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Re: Bad 401K better than nothing?

Post by user5027 » Tue Apr 22, 2014 11:13 pm

Is there an employer match for your contributions to the 401k?

tpm871
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Re: Bad 401K better than nothing?

Post by tpm871 » Tue Apr 22, 2014 11:27 pm

It depends:

1. If there is an employer match, then you should probably contribute to the 401k.
2. If not, and you don't have enough to max out your IRA contribution, then you should contribute to the IRA instead.
3. If there's no match, you have money beyond the IRA max, and you're going to leave the job within a few years, then it may be worth contributing to the 401k and rolling it over into an IRA when you leave.

DSInvestor
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Re: Bad 401K better than nothing?

Post by DSInvestor » Tue Apr 22, 2014 11:44 pm

Are you going to change jobs? If yes, why not contribute and get big tax deduction? Rollover to low cost IRA when you leave. If your next employer has a great 401k, you can rollover this 401k and your Rollover IRA into new 401k to open the backdoor into Roth IRA.

If you decide not to participate in 401k, check your W-2 to see if the retirement plan box is checked? If none of the W-2s for 2014 have retirement plan box checked then you were not covered by an employer plan which means you may be able to contribute to Traditional IRA and take the full tax deduction. Watch out for MAGI limits to take the tax deduction if your spouse is covered by employer plan.

IRA deduction limits:
http://www.irs.gov/Retirement-Plans/IRA ... ion-Limits

There is no IRA called non-deductible IRA. You may be referring to non-deductible contributions to Traditional IRA. I would not suggest non-deductible contributions in your situation where you have significant rollover IRA assets and a high cost 401k. You're not in a good position to isolate the IRA basis and convert to Roth IRA.
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DVMResident
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Re: Bad 401K better than nothing?

Post by DVMResident » Wed Apr 23, 2014 12:13 am

Yes, if your IRA space is maxed, the 401k is worth it.

This is a temp job.
An ER 1.1% on $10k = $110/yr. Eh', not that big of deal over the short-term.

Avoid fixed fees like loads and 12b-1 fees.

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FelixTheCat
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Re: Bad 401K better than nothing?

Post by FelixTheCat » Wed Apr 23, 2014 10:56 am

Thanks for the advice.
Felix is a wonderful, wonderful cat.

placeholder
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Re: Bad 401K better than nothing?

Post by placeholder » Wed Apr 23, 2014 10:58 am

For a temp job load it up since you can move it when you go.

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Clever_Username
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Re: Bad 401K better than nothing?

Post by Clever_Username » Wed Apr 23, 2014 12:05 pm

placeholder wrote:For a temp job load it up since you can move it when you go.
If you need/want more tax-advantaged space, this is a great way to get it (as others have said). Bad 401(k)s have a habit of becoming good IRAs -- especially after a temp job!
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

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