| Options for tax deferred investing |
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Publius
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Location: Georgia
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| Options for tax deferred investing |
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I am considering changing jobs and the company I would begin working for does not offer a 401k. My wife and I currently max out both her 401k and my 403b, but I won't have access to the 403b any longer if I make this change. Is my only option to fund an IRA (we make too much for a ROTH) and make up the difference in a taxable account, or is there a method for having a personal 401k?
Thanks.
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Mon Oct 15, 2012 3:03 pm |
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clydewolf
Senior Member
Cash: $ 50.25
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| Re: Options for tax deferred investing |
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quote:
Originally posted by Publius
I am considering changing jobs and the company I would begin working for does not offer a 401k. My wife and I currently max out both her 401k and my 403b, but I won't have access to the 403b any longer if I make this change. Is my only option to fund an IRA (we make too much for a ROTH) and make up the difference in a taxable account, or is there a method for having a personal 401k?
Thanks.
Publius,
Congratulations on the job offer.
From what you describe, generally your only option is an After Tax Contribution to a Traditional IRA (TIRA). If this will be your only TIRA, when you make that after tax contribution you can immediately Convert that amount to a ROTH IRA. This is sometimes referred to as a "Back Door ROTH Contributon". Doing this immediately would be a non-taxable event.
You can do the same for your wife too if she has no TIRA with any tax deferred money.
When we do a Conversion of TIRA funds to a ROTH IRA, the IRS looks at all of our TIRAs as one. When that all that is in our TIRA is After-Tax money, there is no tax to pay on the amount that is being converted.
When we have both After-Tax and Tax deferred money (gains are tax deferred money), the Conversion must consist of each type of money based on a ratio of one type to the other type. Example: we have a TIRA with tax deferred contributions
contributions of $12,000, plus gains of $3,000 and then we make a $5,000 After Tax Contribution to our TIRA. We want to convert a $5,000 amount to a ROTH IRA.
The ratio of After-Tax Money to Tax Deferred money is 3 to 1. Thus 75% of any Roth Conversion would be taxable in this example.
When the TIRA contains only After Tax Money, the Conversion to a ROTH IRA is tax free.
For more information see IRS Pub 590, Individual Retirement Arrangements: http://www.irs.gov/pub/irs-pdf/p590.pdf
If you are self employed you have some other options such as a SEP or a Simple.
For more information see IRS Pub 560, Retirement Plans for Small Businesses: http://www.irs.gov/pub/irs-pdf/p560.pdf
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Mon Oct 15, 2012 6:49 pm |
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bolainmarsh5
New Poster
Cash: $ 0.40
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Joined: 15 Nov 2012
Location: bristol
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I can't think of any investment that you can use
pre-tax money for your child's college fund unless you
are at least 42 years old (so that when your child is
ready for college, you can withdraw your retirement
account without penalty).
Yes, any income earned by a non-deductible IRA is tax
deferred until you withdraw the funds. But if you are
under age 59˝, then any withhdrawals would be subject a
10% federal penalty, unless the money is withdrawn
ratably over your life expectancy. Another vehicle is
an annuity, but I normally will not recommend such an
investment.
S&P 500 mutual funds are quite "tax-friendly" as there
is little turn over of the investment, and thus, little
to no capital gain.
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Thu Nov 15, 2012 1:33 pm |
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Anton Martin
Full Member
Cash: $ 15.00
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Joined: 23 Nov 2012
Location: Florida, USA
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| Re: Options for tax deferred investing |
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quote:
Originally posted by Publius
I am considering changing jobs and the company I would begin working for does not offer a 401k. My wife and I currently max out both her 401k and my 403b, but I won't have access to the 403b any longer if I make this change. Is my only option to fund an IRA (we make too much for a ROTH) and make up the difference in a taxable account, or is there a method for having a personal 401k?
Thanks.
Well publius, I would like to recommend you to refer this concern to your financial advisor. It is always better option to refer your financial advisor for such queries as they are well qualifies person to look after such issues and you will get better solution on this.
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Mon Dec 03, 2012 8:47 am |
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clydewolf
Senior Member
Cash: $ 50.25
Posts: 248
Joined: 27 May 2012
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quote:
Originally posted by hullfinancial
Another option is if you can get into a high deductible healthcare plan (HDHP) with a health savings account (HSA). The money you don't use from your HSA can be withdrawn at retirement age as if it was an IRA. There are some special circumstances to use it, but it is another idea for deferring tax.
Under the PPACA (obamacare), the HDHP plan is projected to become more costly, thus making the HSA not as lucrative as it has been. This happens because the indiviuals contributions to the HSA are not counted in determining the actuarial value of the HDHP. Here is more: http://www.advisorone.com/2012/07/27/hsas-losing-luster-under-obamacare
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Tue Dec 04, 2012 12:50 am |
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