My prior employer takes a long time to allow former employees to roll over funds. The 401k plan documents say that "Distributions payable as a result of termination for reasons other than death, Disability or retirement shall be paid as soon as administratively feasible after the end of the year Valuation Date following the date during which employment termination occurs." Apparently this means at least 10 months after December 31 of the year employment ends. In some cases, I have heard of it taking more than 2 years to get funds out. Does anyone know what time-frame is required?
NutsAboutGolf said: calwatch said: deucedown said: I have an ING and MetLife 403(b) account. Should I roll everything into a Vanguard account?
Generally Vanguard is cheaper but not always. Read the first few pages of the prospectus or the fund data sheet, which should have expense ratios clearly identified. Index funds generally have the lowest ratios but there are a few good active funds out there (Morningstar 5 star funds) which have low expense ratios (though never as low as the index funds).
Index funds aren't actively managed (funds never change)...Most of Vanguards funds require a $3K minimum to open to get a good expense ratio...However, the real goal should you choice Vanguard Indexed funds is to get $10K into your account so you can invest in the admiral class (requires a $10K minimum) in which a few funds have an ungodly low expense ratio of .08%...Index funds do change, when the index changes. In fact, there was an S&P change last week, and all of the index funds had to change to match.
The Vanguard STAR Fund doesn't have the $3k minimum, and, in any case, there's always the Vanguard ETFs. The expense ratios on the ETFs are quite low, although you, then, have to deal with bid-ask spread.
calwatch said: caplank said: this has probably been asked 100 times in this thread but....i'm a 22 year old looking to start up a roth ira. Are stocks and bonds more on the agressive side, or should I look into other investments?
Also, I'm looking at Charles Schwabb as the custodian, unless someone can steer me towards another company
How about making sure you have an emergency fund first, and perhaps using the Roth IRA as a start for that emergency fund? This would result in investing in CDs or short term bond funds (which unfortunately pay very little).
I wouldn't recommend relying on a Roth or any retirement vehicle for that matter as an emergency fund or savings...Many checking accounts offer a 3% APR, that is a very good strategy to use as both an emergency fund and savings...The overwhelming majority of financial advisers recommend building a small emergency fund, paying off all debt then saving 3-12 months (depends of who you ask) of income before investing assuming there is no 401k match...When there is a match there are still many that believe you need to save up something before investing...I would recommend using a Roth IRA to hold an emergency fund *if* you do not have enough money to fully fund the Roth and save for an emergency.
One can always get Roth contributions back with no penalty, and, if an emergency doesn't arise, then the money grows tax-free. You can save outside of the IRA, as well; when there's enough to fulfill your emergency fund, you can stop considering any of the Roth money for that purpose.
elgrifo said: That seems like an unbelievable timeframe to payout benefits. Is the plan invested in illiquid investments like private loans or real estate?
I don't know of any rules that will help you, but I would reach out to the EBSA to see if they can do anything to speed that process. http://www.dol.gov/ebsa/contactEBSA/consumerassistance.htmlAs far as I know, they only hold mutual funds and possibly some CDs. I think the excuse they use is that they don't decide how much employer contribution to fund until September of the following year and so somehow that means that they can't make distributions until then. Thanks for the link.
sechs said: Index funds do change, when the index changes. In fact, there was an S&P change last week, and all of the index funds had to change to match.
The Vanguard STAR Fund doesn't have the $3k minimum, and, in any case, there's always the Vanguard ETFs. The expense ratios on the ETFs are quite low, although you, then, have to deal with bid-ask spread.
Yes, I stand corrected...Index funds do change; terrible choice of wording as I meant there isn't a funds manager changing the funds...I did say MOST, not ALL, funds require a $3K minimum...In the interest of thoroughness, please elaborate on why you mention VG STAR fund...Is it a personal recommendation that one invest into it? Also, once one accrues a certain number, such as $10K for example, do you recommend keeping it parked the STAR fund or going to the admiral class?
As an intermediary to going to funds with higher minimums, it's a fine choice. It's a pretty basic 60/40 balanced fund.
Frankly, you'd want to get to an appropriate asset allocation before worrying about making it to the Admiral class. You're likely to get more, in the long term, out of good allocation than a lower ER.
I suggest that people look into the resources at bogleheads.org, particularly the wiki and fora.
sechs said: As an intermediary to going to funds with higher minimums, it's a fine choice. It's a pretty basic 60/40 balanced fund.
Frankly, you'd want to get to an appropriate asset allocation before worrying about making it to the Admiral class. You're likely to get more, in the long term, out of good allocation than a lower ER.
I suggest that people look into the resources at bogleheads.org, particularly the wiki and fora.
Fine recommendations with bogleheads wiki/fora...You can get a "good" allocation from the admiral class, just may take a while for most to get there...As already quoted, I was curious to why you singled out the STAR fund...Like you say, read BH and get a good allocation
STAR is the most famous of the Vanguard funds that requires only $1k to get in, but they recently changed so all the Target Retirement funds also have a $1k minimum.
Quick question, does anybody know how to report a 2010 IRA->Roth conversion where 50% of the conversion needs to be reported in 2011, and the other 50% in 2012. Do I just enter it on my 1040, or do I need to report it on a separate pub? PM me if you know.
FKAKS said: Quick question, does anybody know how to report a 2010 IRA->Roth conversion where 50% of the conversion needs to be reported in 2011, and the other 50% in 2012. Do I just enter it on my 1040, or do I need to report it on a separate pub? PM me if you know.Refer to the Form 1040 instructions for line 15. Look at the bottom of the left column on page 23 under the heading "2010 Roth IRA conversions."
I have around $100k in a Traditional Ira and in a 403b. I couldnt contribute to a Roth previously because of my salary, but now I can as I make less. Should I move the money to a Roth? (I'm 42). Thanks in advance.
This may have been covered here before so apologies in advance.
I have recently received my W-2s and noticed an error on my part. In 2011, I contributed $288.46 to a 401k of a previous employer before switching jobs. I forgot about this contribution and contributed $16,500 with my new employer in 2011. I rolled over the $288.46 into an IRA. So it seems i have over-contributed by 288.46. My online search results seem to indicate that I need to contact the previous administrator to try and correct this mistake. But since I rolled the amount into an IRA I am not sure that this is the correct action.
I realize that this is a pretty small amount, but can anyone advise what steps I should take to avoid double taxation? Will TurboTax catch this overcontribution?
SoBlessed said: This may have been covered here before so apologies in advance.
I have recently received my W-2s and noticed an error on my part. In 2011, I contributed $288.46 to a 401k of a previous employer before switching jobs. I forgot about this contribution and contributed $16,500 with my new employer in 2011. I rolled over the $288.46 into an IRA. So it seems i have over-contributed by 288.46. My online search results seem to indicate that I need to contact the previous administrator to try and correct this mistake. But since I rolled the amount into an IRA I am not sure that this is the correct action.
I realize that this is a pretty small amount, but can anyone advise what steps I should take to avoid double taxation? Will TurboTax catch this overcontribution?
You should be able to receive the excess contribution back from either 401k plan, I imagine. I essentially did the same thing in the 2010 tax year, and I asked my new employer's retirement plan servicing company for assistance. They had me go ahead and get back the "excess" amount back from them, which was returned to me as a check for the excess amount plus applicable gains on that amount.
TurboTax was pretty good about walking me through the tax return implications.
Here is a copy of the letter I personally used with T. Rowe Price:
My name is <x>, and my Social Security Number is <y>. An excess deferral for tax year <year> was made into the plan <plan name>, Plan No. <plan number>.
I would like to request a removal of the excess deferral in the amount of $<amount of excess>.
The excess deferral was made on <date>. Of the <entire contribution amount> deferred on <date>, <amount of excess> was my excess deferral. All of the <entire deferral amount> amount was placed in the Equity Index 500 fund.
Please remove the $<amount of excess> excess deferral from the fund, as well as any earnings on that excess deferral. Please remit this in a check payable to me at your earliest convenience. The distribution code will be “P” from what I understand.
I have a SIMPLE IRA and I made a mistake this year; I contributed after-tax funds to the SIMPLE from my personal bank account rather than withholding salary. I then correctly contributed the employer match. The IRS says they will get back to me in a month with an answer. Does anyone know how I can fix this? I have not yet issued my W2 to myself. S-Corp if it matters. Thanks
If you rollover a 401k into a Roth IRA, I understand that you will need to pay for the taxes in doing that. But once that process is completed, is that 401k amount (Say 50,000), now treated as normal contributions that you would have made to a Roth IRA and eligible to be used if needed for an emergency fund, like a normal $5000 contribution you may have made year to year?
I recently quit my job at the end of 2011 and started a new job in 2012. I had vacation pay, last two weeks pay, and bonus pay paid to me in early 2012, and from those payments they deducted 401(k) money (I had thought they wouldn't since I was no longer an employee). The amount they deducted was approximately $11,000.
My new employer has a 401(k) match (my previous employer didn't), on a dollar for dollar basis up to 6% of my salary, up to $15,000. I will hit that mark by the end of the year.
Here are my questions:
1. Can I require my previous employer to reverse the contribution under any rule? I asked my previous plan administrator and my previous employer to reverse the contribution, and they refused.
2. If I max out my 401(k) at the new job, I'll have 11K + 17K of pretax contributions into a 401(k) for this plan year. What is my best solution and what are the tax consequences?
3. Should I seek a corrective distribution for the 11K in the beginning of 2013 (but prior to April 15)? What are the tax consequences?
4. Are there any tax mitigation strategies I should employ?
5. Should I divert the 11K overcontribution into a cash management fund so that I am not also paying taxes on the gain?
I apologize if I missed this, and thanks in advance.
I am doing a backdoor Roth IRA for 2012. I have made my non-deductible IRA contribution. Do I need to wait before converting to Roth IRA, or can I do this immediately?
beatme said: I apologize if I missed this, and thanks in advance.
I am doing a backdoor Roth IRA for 2012. I have made my non-deductible IRA contribution. Do I need to wait before converting to Roth IRA, or can I do this immediately? No need to wait.
heyeaglefn said: If you rollover a 401k into a Roth IRA, I understand that you will need to pay for the taxes in doing that. But once that process is completed, is that 401k amount (Say 50,000), now treated as normal contributions that you would have made to a Roth IRA and eligible to be used if needed for an emergency fund, like a normal $5000 contribution you may have made year to year?
There's a "seasoning period" for any conversions, which is five years after each conversion. Once the seasoning period is past you can withdraw the converted amount with no penalty; it would always be without regular tax since you paid that at the time of the conversion. Actually what you would be doing is going from 401k to traditional and then traditional to Roth.
razorweb said: I recently quit my job at the end of 2011 and started a new job in 2012. I had vacation pay, last two weeks pay, and bonus pay paid to me in early 2012, and from those payments they deducted 401(k) money (I had thought they wouldn't since I was no longer an employee). The amount they deducted was approximately $11,000.
My new employer has a 401(k) match (my previous employer didn't), on a dollar for dollar basis up to 6% of my salary, up to $15,000. I will hit that mark by the end of the year.
Here are my questions:
1. Can I require my previous employer to reverse the contribution under any rule? I asked my previous plan administrator and my previous employer to reverse the contribution, and they refused.
2. If I max out my 401(k) at the new job, I'll have 11K + 17K of pretax contributions into a 401(k) for this plan year. What is my best solution and what are the tax consequences?
3. Should I seek a corrective distribution for the 11K in the beginning of 2013 (but prior to April 15)? What are the tax consequences?
4. Are there any tax mitigation strategies I should employ?
5. Should I divert the 11K overcontribution into a cash management fund so that I am not also paying taxes on the gain?
Thanks!If you are 100% sure that you will max out your contributions with the new employer, you best course of action is to ask for the overcontribution back from the administrator of the plan at your old employer. You will need to pay taxes on it, as well as a penalty on any gains.
Don't forget to roll the money in the old plan into the new one.
I was doing my taxes and noticed if I contribute $2K worth of saved income to a roth ira I could get a refund greater by $200. This seems like a no brainier to me. My only question is, if I put the $2k in the roth, I know I can remove contributions when I need to, but come next year will that $200 be taken back if I was to remove it?
The Retirement Savings Credit never has to be paid back. However, taking the money out will impact your eligibility for the next three years following.
Double check if you could get more from the Retirement Savings Credit if you put it in a traditional IRA. It is worth more in retirement anyway (and you can convert from traditional to Roth at a later date).
calwatch said: The Retirement Savings Credit never has to be paid back. However, taking the money out will impact your eligibility for the next three years following.
Double check if you could get more from the Retirement Savings Credit if you put it in a traditional IRA. It is worth more in retirement anyway (and you can convert from traditional to Roth at a later date).
I guess I wanted to put the money in the traditional, reap the benefits of it as they are greater. Then convert to a roth. I guess I only expect my marginal tax rate to go up in the following years, so converting to a roth may be best now.
razorweb said: I recently quit my job at the end of 2011 and started a new job in 2012. I had vacation pay, last two weeks pay, and bonus pay paid to me in early 2012, and from those payments they deducted 401(k) money (I had thought they wouldn't since I was no longer an employee). The amount they deducted was approximately $11,000.
My new employer has a 401(k) match (my previous employer didn't), on a dollar for dollar basis up to 6% of my salary, up to $15,000. I will hit that mark by the end of the year.
Here are my questions:
1. Can I require my previous employer to reverse the contribution under any rule? I asked my previous plan administrator and my previous employer to reverse the contribution, and they refused.
2. If I max out my 401(k) at the new job, I'll have 11K + 17K of pretax contributions into a 401(k) for this plan year. What is my best solution and what are the tax consequences?
3. Should I seek a corrective distribution for the 11K in the beginning of 2013 (but prior to April 15)? What are the tax consequences?
4. Are there any tax mitigation strategies I should employ?
5. Should I divert the 11K overcontribution into a cash management fund so that I am not also paying taxes on the gain?
Thanks!1. You can ask your previous employer to return the contribution. Regrettably, your former employer is not required to grant your request.
2. You've asked your former employer to return the 11k, and they have refused. If you let things go the way they are, you will have an 11k excess deferral. That means you'll have to pay tax on 11k at your normal marginal tax rate. I don't know what your tax rate is, but let's say it's 30% (state plus federal). So you'll pay $3300 in extra tax. On the other hand, if I read your OP correctly, your current employer will give you $15k in matching funds. Is it worth paying $3300 in extra taxes to get $15,000 in matching contributions? I think you can figure that out.
You'll find many places on the net where someone has posted that there is a 6% per year penalty for excess deferrals until you withdraw the excess. THAT IS NOT TRUE. They are confused by the 6% penalty for overcontributions to an IRA. The 6% does NOT apply to 401k plans. The only penalty is that you lose the tax deferral on the excess deferral. In other words, you'll have to pay tax on the excess $11k both in 2011 and again when you withdraw the funds after you retire.
The only thing I can suggest is that if your current 401k plan allows after-tax contributions to the plan (NOT Roth 401k contributions), you can ask to have $11k contributed after-tax and $6k before-tax. Some plans allow after-tax contributions to a traditional 401k, but most don't. (I am not talking about Roth 401k plans.) After-tax contributions do not count towards the $17k annual limit.
3. You can ask. But your old employer already told you they won't do it. Unless you think something will change by the end of the year, you might as well not count on it. If you mean asking your current employer, they will almost surely take back the matching funds. That would be counter-productive.
4. If you have the option of making after-tax contributions to your traditional 401k, that would pretty much solve your problems.
Otherwise, it sounds like your best course is to just pay the penalty on the excess deferral. Giving up a 100% match will cost you more. Since your employer only matches the first $15k of contributions, you might want to limit your contribution to $15k instead of $17k.
5. I don't understand why your choice of investments should make any difference. Invest both 401k balances in whatever investment will get you the best return.
i386 said: calwatch said: The Retirement Savings Credit never has to be paid back. However, taking the money out will impact your eligibility for the next three years following.
Double check if you could get more from the Retirement Savings Credit if you put it in a traditional IRA. It is worth more in retirement anyway (and you can convert from traditional to Roth at a later date).
I guess I wanted to put the money in the traditional, reap the benefits of it as they are greater. Then convert to a roth. I guess I only expect my marginal tax rate to go up in the following years, so converting to a roth may be best now.If you want to convert to a Roth IRA, that's not a problem. Making a conversion to a Roth IRA will not impact your eligibility for the the credit in future years.
I participated in my former employers 401(k) plan through August of last year. Effective September 1, the company was acquired by another entity that does not offer a retirement plan. I rolled the 401(k) over to a traditional IRA. My question is, since my contributions to the 401(k) stopped August 30, can I contribute an additional amount to the IRA for 2011? Is the max contribution prorated? Thanks.
rhinoman1 said: I participated in my former employers 401(k) plan through August of last year. Effective September 1, the company was acquired by another entity that does not offer a retirement plan. I rolled the 401(k) over to a traditional IRA. My question is, since my contributions to the 401(k) stopped August 30, can I contribute an additional amount to the IRA for 2011? Is the max contribution prorated? Thanks.Everyone under age 70.5 who has taxable compensation income may contribute to a traditional IRA, whether or not they participate in a 401(k) plan. However, if you participated in a 401(k) plan at work even one day during the year, you are limited in your ability to claim a deduction for your contribution.
Whether you can claim a deduction for your traditional IRA contribution depends on your Modified Adjusted Gross Income for the year. You can compute your MAGI using Worksheet 1-1 on page 14 of Publication 590. You can then look in Table 1-2 on page 13 of Publication 590 to determine whether you are allowed a full deduction, a partial deduction, or no deduction.
lastgaspjr said: i386 said: calwatch said: The Retirement Savings Credit never has to be paid back. However, taking the money out will impact your eligibility for the next three years following.
Double check if you could get more from the Retirement Savings Credit if you put it in a traditional IRA. It is worth more in retirement anyway (and you can convert from traditional to Roth at a later date).
I guess I wanted to put the money in the traditional, reap the benefits of it as they are greater. Then convert to a roth. I guess I only expect my marginal tax rate to go up in the following years, so converting to a roth may be best now.If you want to convert to a Roth IRA, that's not a problem. Making a conversion to a Roth IRA will not impact your eligibility for the the credit in future years.
Can I open a traditional ira, contribute and convert all before the end of tax season?
i386 said: Can I open a traditional ira, contribute and convert all before the end of tax season? Sure. Go right ahead.
Just remember that a conversion performed now (in 2012) will go on your 2012 tax return (which you file in 2013). Although you may still make 2011 IRA contributions until April 2012, the grace period does not apply to conversions. All conversions made during 2012 are reportable on your 2012, not 2011, return.
If I am already maxing out my TSP can I still make a $5,000 contribution to an IRA for myself? Also, can I additionally make one for my wife (who is not employed)?
From the reading I've done online it seems that I can do both, but I want to make sure.
7lowe said: If I am already maxing out my TSP can I still make a $5,000 contribution to an IRA for myself? Also, can I additionally make one for my wife (who is not employed)?
From the reading I've done online it seems that I can do both, but I want to make sure.Everyone under age 70.5 who has taxable compensation income may contribute to a traditional IRA, whether or not they participate in a 401(k) or TSP plan. However, if you participated in a 401(k) or TSP plan at work even one day during the year, you are limited in your ability to claim a deduction for your contribution.
Whether you can claim a deduction for your traditional IRA contribution depends on your Modified Adjusted Gross Income for the year. You can compute your MAGI using Worksheet 1-1 on page 14 of Publication 590. You can then look in Table 1-2 on page 13 of Publication 590 to determine whether you are allowed a full deduction, a partial deduction, or no deduction.
If you had at least $5000 in taxable compensation income and are under age 70.5, you may make a contribution to a Traditional IRA. If you file jointly, your wife is also under age 70.5, and you jointly have at least $10,000 in taxable compensation income, she may also make a $5000 contribution to a Traditional IRA.
The same is true of making a contribution to a Roth IRA except 1) the age 70.5 limit does not apply and 2) your joint Modified Adjusted Gross Income must be less than $169,000. See Worksheet 2-1 on page 56 of Publication 590 to calculate your Modified Adjusted Gross Income. If your MAGI is too high to qualify, you may make a contribution to a Traditional IRA and then convert it to a Roth IRA provided you meet the requirements for making a Traditional IRA contribution.
Thanks! Looks like being covered by a retirement plan also factors in too. But, my MAGI is low enough that I can still get the full deduction. So, I just have to decide between traditional or Roth now.
The upcoming advent of the Roth TSP has me thinking: I currently contribute $13k (before matching) to the traditional TSP. I max out a Roth IRA at $5k. I estimate that I'll save ~$7k in a taxable account this year. I may or may not want to buy a house in the next few years. Provided that I keep my Roth IRA in something safe until I know whether I expect to use it, is there any reason not to increase my Roth TSP up to the max, with the understanding that I could withdraw the Roth IRA contributions if I wanted to? (I read here that when making in-service TSP withdrawals, you will not be able to designate between Roth and traditional; they are pro-rata based on account value).
DPG said: I have a small amount ~$1,000 in an Traditional IRA with a brokerage that I want to leave. They charge a $75 account out fee.
What is they best way to get the money out and move it to my preferred broker?
With some brokers, you can circumvent the fee by taking a cash withdrawal, and then doing a "rollover" with the cash to your new broker. Make sure you tell your existing brokerage NOT to withhold any taxes, and make sure to roll the cash within 60 days of withdrawing it.
My IRA is with Fidelity & I'm wanting to open one for my wife, so I emailed them about it. They've pretty much ticked me off now, so I'm looking for other suggestions. I'd love to be able to open it completely online without having to print stuff out, sign it & mail it in. Faxing or scanning & emailing is OK, but mailing stuff just takes too long from where I am. Any suggestions?
Edited to ask if anyone has used USAA for their IRAs? I have my checking account & insurance there & they've been pretty awesome, but I've not known anyone who used them for retirement accounts.
Psycho41 said: DPG said: I have a small amount ~$1,000 in an Traditional IRA with a brokerage that I want to leave. They charge a $75 account out fee.
What is they best way to get the money out and move it to my preferred broker?
With some brokers, you can circumvent the fee by taking a cash withdrawal, and then doing a "rollover" with the cash to your new broker. Make sure you tell your existing brokerage NOT to withhold any taxes, and make sure to roll the cash within 60 days of withdrawing it.
DPG said: Psycho41 said: DPG said: I have a small amount ~$1,000 in an Traditional IRA with a brokerage that I want to leave. They charge a $75 account out fee.
What is they best way to get the money out and move it to my preferred broker?
With some brokers, you can circumvent the fee by taking a cash withdrawal, and then doing a "rollover" with the cash to your new broker. Make sure you tell your existing brokerage NOT to withhold any taxes, and make sure to roll the cash within 60 days of withdrawing it.
I thought the 20% withholding was mandatory?Withholding from an IRA distribution is not mandatory. If you fail to notify the custodian otherwise, the default is 10%.
You are perhaps thinking of distributions from an employer plan such as a 401(k). There is mandatory 20% withholding from such plans except for direct transfers to another plan or IRA.
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