401k

[ExGingi]

Just to connect the dots here, if you 'establish that if everything remains equal (tax rates, tax bracket, growth rates)', then while Roth and Traditional are mathematically identical, the above point makes the Roth much more attractive. This eliminates a barrier many people erect for themselves when it comes to saving/investing: sure I have money sitting around that I can save/invest, but if I put money in my Traditional 401k/IRA it's locked in. What if I need the money later? Well with a Roth, you can still get at the principal at any time.

Making money available early on can also come back to hurt people, as they might not leave enough around for retirement. I am not saying you are wrong, there are just so many different attitudes, that there's no one answer that is right or wrong across the board. Furthermore, there are other issues that come into play, such as changing tax environment as well as cash flow needs.

This is more or less how I arrived at my retirement savings strategy over the last 5-10 years. I put whatever I had to into a Traditional 401k to get the full match from my employer, and I maxed our Roth IRA contributions. Now I can't do IRA's anymore so I have to figure out a workaround (thankfully this won't be too hard).

There's the backdoor ROTH IRA for those that are over the income limit. There are also other tax advantaged products, that if set up and structured properly, can work extremely favorably.

[skyguy918]

There's the backdoor ROTH IRA for those that are over the income limit.

I've been assuming this is what I'd do, but haven't looked into all the minutiae yet. So practically speaking, can I open a Traditional IRA, dump in whatever amount, and immediately convert it to a Roth IRA (or even better, roll it over to my existing Roth IRA), thus stepping around any and all tax considerations? Will all brokerages do this for me? If I want to do this annually, do I have to create a new account each time, or can I keep using the empty Traditional IRA?

[ExGingi]

I've been assuming this is what I'd do, but haven't looked into all the minutiae yet. So practically speaking, can I open a Traditional IRA, dump in whatever amount, and immediately convert it to a Roth IRA (or even better, roll it over to my existing Roth IRA), thus stepping around any and all tax considerations? Will all brokerages do this for me? If I want to do this annually, do I have to create a new account each time, or can I keep using the empty Traditional IRA?

Nondeductible traditional IRA contributions are still subject to contribution maximums, it's just that there's no upper income limit.

When converting Nondeductible Traditional IRAs to ROTH, any gains will be taxed. There are aggregation rules, so if you have one account with gains, you can't just say I'll open up a new account and convert on day 1, you will still face taxation on the gain in the other IRA (I can't recall at the moment if it's proportional or another method).

If you have your own business, you can set up a ROTH 401k. If you have no employees other than yourself and your spouse, you can set up a Solo 401k for much less than a regular 401k would cost.

If you qualify, you might also be able to set up a well overfunded life insurance policy. That won't allow you to invest in individual stocks, but you could invest in separate accounts that are similar to mutual funds, or if you prefer using it for fixed or guaranteed assets, you could do that. If done properly this can be quite advantageous, and isn't subject to some of the maximums that IRAs are subject to.

[skyguy918]

Nondeductible traditional IRA contributions are still subject to contribution maximums, it's just that there's no upper income limit.

When converting Nondeductible Traditional IRAs to ROTH, any gains will be taxed. There are aggregation rules, so if you have one account with gains, you can't just say I'll open up a new account and convert on day 1, you will still face taxation on the gain in the other IRA (I can't recall at the moment if it's proportional or another method).

If you have your own business, you can set up a ROTH 401k. If you have no employees other than yourself and your spouse, you can set up a Solo 401k for much less than a regular 401k would cost.

If you qualify, you might also be able to set up a well overfunded life insurance policy. That won't allow you to invest in individual stocks, but you could invest in separate accounts that are similar to mutual funds, or if you prefer using it for fixed or guaranteed assets, you could do that. If done properly this can be quite advantageous, and isn't subject to some of the maximums that IRAs are subject to.

I don't have any other traditional IRA's, and there should be no gains if I convert right away. I would just do contribute to the Roth option in my 401k, but my 401k is not quite up to snuff in terms of what's offered within the plan.

[ExGingi]

I don't have any other traditional IRA's, and there should be no gains if I convert right away. I would just do contribute to the Roth option in my 401k, but my 401k is not quite up to snuff in terms of what's offered within the plan.

Does your 401k allow in-service withdrawals? A ROTH 401k will allow much larger contributions, that might trump investment option considerations.

[Htx]

Larger dollar opportunity in after tax non roth bucket typically if the plan allows it. It can be really helpful too if the plan allows the inservice withdraw of that bucket which is more likely than allowing inservice of pretax or roth contributions

[greatluck]

Is it worth for someone with a big family and small income to invest in a 401k?

[mercaz1]

Is it worth for someone with a big family and small income to invest in a 401k?

if there is an employer match then definitely

[ExGingi]

if there is an employer match then definitely

+1

That's another way to get money (even if only available for retirement), and that employer match will never be subject to FICA (under current law).