Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

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MikesChevelle
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by MikesChevelle » Tue Feb 13, 2018 4:43 pm

According to this site, I should fall in the 12% rate. I guess I dont understand the difference between that and being able to claim exempt and still not owing at the end of the year.

https://www.fool.com/taxes/2017/12/13/y ... -2018.aspx

CantPassAgain
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by CantPassAgain » Tue Feb 13, 2018 4:47 pm

IMO I wouldn't worry myself thinking about the savers credit, based on what you have told us so far. From what I can surmise:

$55,000 gross income
$400 monthly health insurance ($400 x 12 = $4,800 annually)
14% 401K contribution = $7,700
AGI = $55,000 - $4,800 - $7,700 = $42,500

After 2018 2017* standard deduction $12,700 MFJ and 4 personal exemptions of $4,050 each:

Taxable Income = $13,600
$13,600 x 10% = $1,360 tax before credits

After two child tax credits of $2,000 OP owes no tax. OP would have to look at his 1040 to confirm. The saver's credit is nonrefundable so that does no good.

It might be good to take a look at the new standard deduction, tax brackets, and child tax credits for 2018 and try to reduce your 401k contributions just to where you have $0 tax liability or maybe even owe a little and then save the remainder in a Roth IRA.

*Edit to correct year
Last edited by CantPassAgain on Tue Feb 13, 2018 5:22 pm, edited 2 times in total.

KlangFool
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by KlangFool » Tue Feb 13, 2018 5:03 pm

MikesChevelle wrote:
Tue Feb 13, 2018 3:49 pm
Ok, so if I understand this correctly.

Fund the Roth 401k up to my company match, open a Roth IRA under the wife and get that up to $2k, lastly open my own ROTH IRA and fund that to $2k or more.

Along with that, have an initial layer (primary layer) of cash in a savings account for the first part of the emergency fund.

OR do I do a pre tax company 401k?
MikesChevelle,

You should use the tax software and check the number. The problem is at your income level, if you contribute Roth 401K instead of Trad. 401K, you may lose your saver's credit. So, all normal standard advice does not apply to you.

KlangFool

CantPassAgain
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by CantPassAgain » Tue Feb 13, 2018 5:09 pm

MikesChevelle wrote:
Tue Feb 13, 2018 4:43 pm
According to this site, I should fall in the 12% rate. I guess I dont understand the difference between that and being able to claim exempt and still not owing at the end of the year.

https://www.fool.com/taxes/2017/12/13/y ... -2018.aspx
This is a training wheels explanation but I think it will help you understand how taxes work:

You start with your gross income. What is you and your wife's total salary and other sources of income? That is the starting point.

From there you exclude certain things. For most people, the big ones are health insurance premiums you pay (either directly or as withheld from your paycheck), and traditional (not Roth) 401K contributions.

After these exclusions you arrive at your AGI (Adjusted Gross Income).

From your adjusted gross income you subtract your standard deduction and personal exemptions. For 2017, you get to claim an exemption for each spouse and dependent. For the 2018 tax year the standard deduction has just about doubled and the personal exemption has been abolished.

After these deductions you arrive at your taxable income.

This number is applied progressively to the tax table for your filing status. For 2017 the tax table for married filing jointly is as follows:

If taxable income is Between:
$0-$18,650 the tax due is 10%
$18,651-$75,900 the tax due is 15%
$75,901-$153,100 the tax due is 25%
.....and so on up to 39.6%.

Note that the tax tables for 2018 will change significantly.

So you then calculate your tax. Whatever that number pops out to be, then you apply what are called tax credits. A credit can be either refundable (meaning if it reduces your tax liability below zero the gov't will actually pay you) or non-refundable (meaning it they will only reduce you tax liability to zero, you do not get money sent to you for additional credit beyond your tax liability). The big one for most people is the child tax credit. For 2017 this is $1,000 for each child before is starts to phase out if you make too much money. Some of this credit might be refundable in the form of the "additional" child tax credit. For 2018 the child tax credit has been doubled to $2,000 before phase out.

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ruralavalon
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by ruralavalon » Tue Feb 13, 2018 5:38 pm

MikesChevelle wrote:
Tue Feb 13, 2018 4:40 pm
ruralavalon wrote:
Tue Feb 13, 2018 4:25 pm

Yes keep that $20k invested and growing until retirement. What funds is your $20k currently invested in? What other funds are offered in your 401k? Please give fund names, tickers and expense ratios.
I have currently (using Fidelity's Brokerage Link)

$10k in FSELX(FIDELITY SELECT SEMICONDUCTORS PORT) expense ration gross/net - .77%/.77%
$3200 in FSTMX (FIDELITY TOTAL MKT INVESTOR CLASS) expense ration gross/net - .09%/.09%
$5600 in FTIGX (FIDELITY TOTAL INTL INDEX FD INVESTOR CL) expense ration gross/net - .17%/.17%
The large holding in Fidelity Select Semiconductors is not well diversified, and has a high expense ratio.

Adding a bond fund should reduce portfolio volatility (risk). Please see the wiki article "Asset Allocation" and the wiki article "Boglehead's Investment Philosophy".

In selecting funds strive for a combination of broad diversification to decrease portfolio volatility (risk) and low expense ratios (to increase your net return). To simply and easily achieve both I suggest using the three-fund portfolio.

Please see the wiki article "Three-fund Portfolio" and the forum discussion "The Three-fund Portfolio".

If this is your only account, and you are in your early 30s, then I suggest something like this for the $18.8k in your 401k:
60%, $11.3k, Fidelity Total Market Index Fund Premium Class (FSTVX) ER 0.035%;
20%, $03.8k, Fidelity Total International Index Fund Investor Class (FTGIX) ER 0.17%; and
20%, $03.8k, Fidelity U.S. Bond Index Fund Investor Class (FBIDX) ER 0.14%.
Last edited by ruralavalon on Tue Feb 13, 2018 5:41 pm, edited 1 time in total.
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AlwaysAStudent
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by AlwaysAStudent » Tue Feb 13, 2018 5:39 pm

I saved this a long time ago, either from here (Bogleheads) or from MMM, I don't remember, but I find it to be a very useful plan to follow. It doesn't not answer you initial question of 3 vs 6 months emergency fund because that is pretty personal for what your family is comfortable with but it will give good guidance for what else to do.
WHAT
0. Establish an emergency fund to your satisfaction
1. Contribute to your 401k up to any company match
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.
3. Max HSA
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)
6. Fund a mega backdoor Roth if applicable.
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.
8. Invest in a taxable account with any extra.

WHY
0. Give yourself at least enough buffer to avoid worries about bouncing checks
1. Company match rates are likely the highest percent return you can get on your money
2. When the guaranteed return is this high, take it.
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs for that purpose.
At worst, the HSA behaves much the same as a tIRA after age 65.
4. Rule of thumb: traditional if current federal marginal rate is 25%; Roth if 10% or lower, or if MAGI is too high to deduct a traditional IRA; flip a coin otherwise.
See Credits can make Traditional better than Roth for lower incomes and other posts in that thread about some exceptions to the rule.
See Traditional versus Roth - Bogleheads for even more details and exceptions. State tax (or lack thereof) should also be considered.
The 'Calculations' tab in the Case Study Spreadsheet can show marginal rates for savings or withdrawals*.
5. See #4 for choice of traditional or Roth for 401k. In a 401k there are no income-based limits for deductions or contributions.
6. Applicability depends on the rules for the specific 401k
7. Again, take the risk-free return if high enough. Note that embedded in "high enough" is the assumption that your alternative is "all stocks" or a "fund of funds"
(e.g., target retirement date) that provides a blend of stock and bond returns. If you wish to consider separate bond funds, compare the yield on a fund
with a duration similar to the time remaining on the loan, and put your money toward the one with the higher interest/yield.
8. Because any earnings, even if taxed, will help your FI journey.

Similar to "put on your own oxygen mask before assisting others," you should fund your own retirement before funding 529 or similar plans for children's college costs.

MikesChevelle
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by MikesChevelle » Wed Feb 14, 2018 12:13 am

ruralavalon wrote:
Tue Feb 13, 2018 5:38 pm
MikesChevelle wrote:
Tue Feb 13, 2018 4:40 pm
ruralavalon wrote:
Tue Feb 13, 2018 4:25 pm

Yes keep that $20k invested and growing until retirement. What funds is your $20k currently invested in? What other funds are offered in your 401k? Please give fund names, tickers and expense ratios.
I have currently (using Fidelity's Brokerage Link)

$10k in FSELX(FIDELITY SELECT SEMICONDUCTORS PORT) expense ration gross/net - .77%/.77%
$3200 in FSTMX (FIDELITY TOTAL MKT INVESTOR CLASS) expense ration gross/net - .09%/.09%
$5600 in FTIGX (FIDELITY TOTAL INTL INDEX FD INVESTOR CL) expense ration gross/net - .17%/.17%
The large holding in Fidelity Select Semiconductors is not well diversified, and has a high expense ratio.

Adding a bond fund should reduce portfolio volatility (risk). Please see the wiki article "Asset Allocation" and the wiki article "Boglehead's Investment Philosophy".

In selecting funds strive for a combination of broad diversification to decrease portfolio volatility (risk) and low expense ratios (to increase your net return). To simply and easily achieve both I suggest using the three-fund portfolio.

Please see the wiki article "Three-fund Portfolio" and the forum discussion "The Three-fund Portfolio".

If this is your only account, and you are in your early 30s, then I suggest something like this for the $18.8k in your 401k:
60%, $11.3k, Fidelity Total Market Index Fund Premium Class (FSTVX) ER 0.035%;
20%, $03.8k, Fidelity Total International Index Fund Investor Class (FTGIX) ER 0.17%; and
20%, $03.8k, Fidelity U.S. Bond Index Fund Investor Class (FBIDX) ER 0.14%.

I had bonds, but they have been flat. Being somewhat young I moved to the semiconductors for the time being. They have had a very high return so far

MikesChevelle
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Joined: Wed Apr 12, 2017 11:55 am

Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by MikesChevelle » Wed Feb 14, 2018 12:19 am

Instead of quoting everyone, I just want to mass thank everyone so far. This has been very helpful.

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BL
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by BL » Wed Feb 14, 2018 1:16 am

You have received some good ideas here, but the fact is that only by using a tax program that handles EITC, CTC, Saver's Credit, etc., can you really get close to estimating your best method to maximize tax refund. There are just too many moving parts to get them all straight at once.

For example, the refundable Earned Income Tax Credit starts declining from over $6k credit at about $24k of "earned" income. That could be your biggest credit and it might be worthwhile getting near that maximum if your trad.401k can get you there.

Agree that the "Total" funds are more suitable for investing than an expensive sector fund. Bonds are meant to be "flat". I would have more in US than international.
Read this little pdf for great advice: https://www.etf.com/docs/IfYouCan.pdf

Here are a couple websites with some useful EITC info and a calculator on EITC:
https://www.irs.gov/credits-deductions/ ... -next-year

https://goodcalculators.com/eic-calculator/

indexonlyplease
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by indexonlyplease » Wed Feb 14, 2018 6:48 am

It depends on your career. Stable government job 3 months ok. Not sure 6 months better. Investing is ok until you have some emergency and have no emergency fund. You will have to stop investing and pay off the credit card you used for the emergency. So yes, get the emergency fund at 3-6 months. Then you can work on maxing out investing.

I like how your question went from emergency fund question to how to invest in your 401k. Maybe seperate post to stay with the question.

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ruralavalon
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Location: Illinois

Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by ruralavalon » Wed Feb 14, 2018 8:58 am

MikesChevelle wrote:
Wed Feb 14, 2018 12:13 am
ruralavalon wrote:
Tue Feb 13, 2018 5:38 pm
MikesChevelle wrote:
Tue Feb 13, 2018 4:40 pm
ruralavalon wrote:
Tue Feb 13, 2018 4:25 pm

Yes keep that $20k invested and growing until retirement. What funds is your $20k currently invested in? What other funds are offered in your 401k? Please give fund names, tickers and expense ratios.
I have currently (using Fidelity's Brokerage Link)

$10k in FSELX(FIDELITY SELECT SEMICONDUCTORS PORT) expense ration gross/net - .77%/.77%
$3200 in FSTMX (FIDELITY TOTAL MKT INVESTOR CLASS) expense ration gross/net - .09%/.09%
$5600 in FTIGX (FIDELITY TOTAL INTL INDEX FD INVESTOR CL) expense ration gross/net - .17%/.17%
The large holding in Fidelity Select Semiconductors is not well diversified, and has a high expense ratio.

Adding a bond fund should reduce portfolio volatility (risk). Please see the wiki article "Asset Allocation" and the wiki article "Boglehead's Investment Philosophy".

In selecting funds strive for a combination of broad diversification to decrease portfolio volatility (risk) and low expense ratios (to increase your net return). To simply and easily achieve both I suggest using the three-fund portfolio.

Please see the wiki article "Three-fund Portfolio" and the forum discussion "The Three-fund Portfolio".

If this is your only account, and you are in your early 30s, then I suggest something like this for the $18.8k in your 401k:
60%, $11.3k, Fidelity Total Market Index Fund Premium Class (FSTVX) ER 0.035%;
20%, $03.8k, Fidelity Total International Index Fund Investor Class (FTGIX) ER 0.17%; and
20%, $03.8k, Fidelity U.S. Bond Index Fund Investor Class (FBIDX) ER 0.14%.

I had bonds, but they have been flat. Being somewhat young I moved to the semiconductors for the time being. They have had a very high return so far
Try to think long-term, recent past performance is a bad way to try to predict future performance.

The primary purpose of a bond allocation is to reduce portfolio volatility (risk), rather than returns. A 20% bond allocation is expected to significantly reduce portfolio volatility, with a relatively modest reduction in returns.

However sector bets (like semiconductor) are expected to be very volatile, the winners and losers changing from year to year. Having 53% (10/18.8) of your investments in a narrow sector like semiconductor is very risky.

Fidelity Select Semiconductors (FSLEX) had a severe loss of about 52% in 2008, while Fidelity U.S. Bond Index Fund (FBIDX) sailed through the crisis unscathed.
Last edited by ruralavalon on Wed Feb 14, 2018 9:04 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

BogleMelon
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by BogleMelon » Wed Feb 14, 2018 9:02 am

KlangFool wrote:
Mon Feb 12, 2018 10:17 am
MikesChevelle wrote:
Mon Feb 12, 2018 10:03 am

My big question is should I lower my 401k contribution from 14% down to my employer match for a few months get get a good chunk of the 3 months saved up?
MikesChevelle,

That does not work. You have to pay tax on every dollar that you do not contribute to the 401K. Depending on your Federal marginal tax rate and state income tax rate, you may find that it is counterproductive.

KlangFool
Doesn't he need to pay tax on every dollar that he contributes to the 401K anyways but when withdrawing it at retirement? :wink:
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

Jack FFR1846
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by Jack FFR1846 » Wed Feb 14, 2018 9:14 am

I'll echo that you should get out of the semi fund. Not to get into the story too much but the days of dramatically reducing size has past. Physics always wins.
Bogle: Smart Beta is stupid

MikesChevelle
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by MikesChevelle » Wed Feb 14, 2018 9:36 am

BL wrote:
Wed Feb 14, 2018 1:16 am


For example, the refundable Earned Income Tax Credit starts declining from over $6k credit at about $24k of "earned" income. That could be your biggest credit and it might be worthwhile getting near that maximum if your trad.401k can get you there.

I contributed 14% to my 401k this year and did not qualify for EIC. I had Child credits and "standard deduction" and that was really it outside student loan interest and childcare costs

retiredjg
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by retiredjg » Wed Feb 14, 2018 10:34 am

MikesChevelle wrote:
Wed Feb 14, 2018 9:36 am
I contributed 14% to my 401k this year and did not qualify for EIC. I had Child credits and "standard deduction" and that was really it outside student loan interest and childcare costs
See if you might qualify for the saver's credit. Link provided above. It is not too late to claim that.

If there was no tax to claim the credit against, see if putting your 14% into Roth 401k would have given you some tax to claim the credit against. If yes, that is a very good reason to be using Roth 401k instead of traditional 401k. You'd be getting money into Roth 401k tax free!

If you did qualify for the saver's credit, see if you still qualify if you had put your 14% (or part of it) into Roth 401k instead of traditional 401k.

MikesChevelle
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by MikesChevelle » Wed Feb 14, 2018 11:46 am

retiredjg wrote:
Wed Feb 14, 2018 10:34 am
MikesChevelle wrote:
Wed Feb 14, 2018 9:36 am
I contributed 14% to my 401k this year and did not qualify for EIC. I had Child credits and "standard deduction" and that was really it outside student loan interest and childcare costs
See if you might qualify for the saver's credit. Link provided above. It is not too late to claim that.

If there was no tax to claim the credit against, see if putting your 14% into Roth 401k would have given you some tax to claim the credit against. If yes, that is a very good reason to be using Roth 401k instead of traditional 401k. You'd be getting money into Roth 401k tax free!

If you did qualify for the saver's credit, see if you still qualify if you had put your 14% (or part of it) into Roth 401k instead of traditional 401k.
Turbo Tax claims to automatically work through the savers credit, it looks like I did not get it.

retiredjg
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by retiredjg » Wed Feb 14, 2018 12:10 pm

Turbo Tax claims to automatically work through the savers credit, it looks like I did not get it.
That could be because you have no tax to pay. The saver's credit is applied against your actual final tax for the year. If you have no tax, you get no credit.

Try running through TT again on a trial run, but increase your income by the amount you put into your 401k. See if that gets you the saver's credit. If that does not turn up anything, increase your income by something big - like $30k - and see what happens - just to check if TT is actually checking for saver's credit.

The point is to try to arrange your income so that you do owe tax which you do not pay because you apply the saver's credit against it.

MikesChevelle
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by MikesChevelle » Wed Feb 14, 2018 12:24 pm

retiredjg wrote:
Wed Feb 14, 2018 12:10 pm
[The point is to try to arrange your income so that you do owe tax which you do not pay because you apply the saver's credit against it.
How does that become a benefit? Doesnt that just put me in the same boat as now, I just took a different way to get there?

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Edie
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by Edie » Wed Feb 14, 2018 1:59 pm

If you owe tax but the government is paying it (through the credit), but you now have after-tax (and "tax-free" since the government paid the tax) dollars saved for retirement, you are better off than before when you had no tax, and you had pre-tax dollars saved for retirement. I would play with TT to see if splitting your contribution increases your tax and your credits to the point where it makes no change in your pocket, but increases the amount you don't have to pay taxes on later.

The max AGI for the smallest saver's credit MFJ (10% on 2000 per person) is above your gross income, so you have room for these machinations, and the 10% nicely matches the amount of tax incurred on your taxable income, so you can increase your taxable income by putting some money into your Roth 401k instead of the pre-tax 401k, incur more tax, and the saver's credit will offset the increased tax.

There isn't much you can do for this year (except add funds to the Roth IRA), but planning 2018 is a good idea, paying attention to the new tax law standard deductions and changed child tax credit.

Also, I've suggested it elsewhere, but you might try another tax program to confirm what you're seeing with TurboTax. We have used TaxHawk for the past several years (getting close to a decade I think :shock: ) and really prefer it to both TT and HRBlock.

retiredjg
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by retiredjg » Wed Feb 14, 2018 2:12 pm

MikesChevelle wrote:
Wed Feb 14, 2018 12:24 pm
retiredjg wrote:
Wed Feb 14, 2018 12:10 pm
[The point is to try to arrange your income so that you do owe tax which you do not pay because you apply the saver's credit against it.
How does that become a benefit? Doesnt that just put me in the same boat as now, I just took a different way to get there?
No, it would put you ahead later on down the road if it works like I think it does.

Let' say you put $7k a year into traditional 401k. That appears to bring your taxable income down to a low enough level that no tax is due for the whole year and you don't even need to use the saver's credit. But eventually, you will pay tax on that $7k and its earnings as it comes out of the 401k in retirement (or IRA if you roll it to IRA when you leave the job).

In contrast, if you put the $7k into Roth 401k and you are still able to pay no income tax, because your income is still low enough or because you can apply the saver's credit against your tax....when you take the money out in retirement, there is no tax on either the $7k or its earnings.

Did that make sense?

MikesChevelle
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by MikesChevelle » Wed Feb 14, 2018 2:18 pm

retiredjg wrote:
Wed Feb 14, 2018 2:12 pm
MikesChevelle wrote:
Wed Feb 14, 2018 12:24 pm
retiredjg wrote:
Wed Feb 14, 2018 12:10 pm
[The point is to try to arrange your income so that you do owe tax which you do not pay because you apply the saver's credit against it.
How does that become a benefit? Doesnt that just put me in the same boat as now, I just took a different way to get there?
No, it would put you ahead later on down the road if it works like I think it does.

Let' say you put $7k a year into traditional 401k. That appears to bring your taxable income down to a low enough level that no tax is due for the whole year and you don't even need to use the saver's credit. But eventually, you will pay tax on that $7k and its earnings as it comes out of the 401k in retirement (or IRA if you roll it to IRA when you leave the job).

In contrast, if you put the $7k into Roth 401k and you are still able to pay no income tax, because your income is still low enough or because you can apply the saver's credit against your tax....when you take the money out in retirement, there is no tax on either the $7k or its earnings.

Did that make sense?
That does make sense. I was only looking at it from a filing stand point.

I do agree that being in the same spot when filing, it is much better to have retirement in Roth than pre tax.

Thanks

retiredjg
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by retiredjg » Wed Feb 14, 2018 2:32 pm

Let us know if you figure anything out. I don't recall this question coming up like this before. It would be interesting to learn what you learn.

MikesChevelle
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by MikesChevelle » Wed Feb 14, 2018 2:52 pm

One other thought, even if I do move to a tax liable situation moving to the Roth, I cant imagine it being that much. That should still be a net positive vs paying taxes on a pre tax at retirement correct?

KlangFool
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by KlangFool » Wed Feb 14, 2018 3:18 pm

BogleMelon wrote:
Wed Feb 14, 2018 9:02 am
KlangFool wrote:
Mon Feb 12, 2018 10:17 am
MikesChevelle wrote:
Mon Feb 12, 2018 10:03 am

My big question is should I lower my 401k contribution from 14% down to my employer match for a few months get get a good chunk of the 3 months saved up?
MikesChevelle,

That does not work. You have to pay tax on every dollar that you do not contribute to the 401K. Depending on your Federal marginal tax rate and state income tax rate, you may find that it is counterproductive.

KlangFool
Doesn't he need to pay tax on every dollar that he contributes to the 401K anyways but when withdrawing it at retirement? :wink:
BogleMelon,

We don't. We know how to work the system. I am paying less than 5% effective tax rate now while I am working.

KlangFool

retiredjg
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Re: Emergency fund question - 3 vs 6 months and should I lower my 401k contribution to get there...

Post by retiredjg » Wed Feb 14, 2018 3:38 pm

MikesChevelle wrote:
Wed Feb 14, 2018 2:52 pm
One other thought, even if I do move to a tax liable situation moving to the Roth, I cant imagine it being that much. That should still be a net positive vs paying taxes on a pre tax at retirement correct?
I think so.

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