Author Topic: Need your advice please: 401K, Roth, etc  (Read 559 times)

flowerofsun

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Need your advice please: 401K, Roth, etc
« on: February 22, 2019, 12:21:21 AM »
Hi guys,
will you please help me out?
I tend to borrow money from 401K, and feel like its too expensive...(I borrow pretax money but return aftertax money, I am in 30% bracket and do not like it)
Is borrowing from Roth  better?
Or, may be you could recommend what is the best way to save money in a stock market so it would allow to borrow from it without paying taxes or returning after tax money for borrowed before tax money (like in 401K case)?

terran

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Re: Need your advice please: 401K, Roth, etc
« Reply #1 on: February 22, 2019, 05:48:41 AM »
I think the bigger question is, why are you borrowing from your 401(k) in the first place?

There is no 30% tax bracket, so perhaps that's an effective rate, but either way a tax rate anywhere near that (either marginal or effective) indicates a very large income, so why can't you live within your means?

MDM

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Re: Need your advice please: 401K, Roth, etc
« Reply #2 on: February 23, 2019, 12:50:44 AM »
I think the bigger question is, why are you borrowing from your 401(k) in the first place?

There is no 30% tax bracket, so perhaps that's an effective rate, but either way a tax rate anywhere near that (either marginal or effective) indicates a very large income, so why can't you live within your means?
+1

flowerofsun, consider How To: Write a Case Study Topic.

flowerofsun

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Re: Need your advice please: 401K, Roth, etc
« Reply #3 on: February 27, 2019, 12:43:31 AM »
I will try to explain why. The first time I borrowed was when I was going through custody battle... Spent 25-30K on my attorney.
Now I am thinking of borrowing so I could buy real estate.
I do have good income (115K-145K depending on having a second job ) but being a single mom that is my only way to save up for investments...After taxes I do not bring home much. I did do a case study on this forum where I broke down all my expenses...

Going back to my original question:
1) I need to find a vehicle that lowers taxable income (like 401K does)
2) I need something that if I borrow from it before tax money I return before tax money...
3) does Roth lowers taxable income? I know that if I borrow from Roth then I am borrowing after tax money and will be returning after tax money, but the question is will it lower my taxable income?

Thank you guys!

MrThatsDifferent

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Re: Need your advice please: 401K, Roth, etc
« Reply #4 on: February 27, 2019, 01:30:58 AM »
OP, I would stick to using your case study to work through these questions. I just read your study and wow, youíve got a lot happening. I see youíre trying to deplete your 401k so you can keep buying investment properties and using that as your way to fund your retirement. If that works for you, thatís your call.

terran

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Re: Need your advice please: 401K, Roth, etc
« Reply #5 on: February 27, 2019, 05:47:49 AM »
I will try to explain why. The first time I borrowed was when I was going through custody battle... Spent 25-30K on my attorney.
Now I am thinking of borrowing so I could buy real estate.
I do have good income (115K-145K depending on having a second job ) but being a single mom that is my only way to save up for investments...After taxes I do not bring home much. I did do a case study on this forum where I broke down all my expenses...

Going back to my original question:
1) I need to find a vehicle that lowers taxable income (like 401K does)
2) I need something that if I borrow from it before tax money I return before tax money...
3) does Roth lowers taxable income? I know that if I borrow from Roth then I am borrowing after tax money and will be returning after tax money, but the question is will it lower my taxable income?

Thank you guys!

I haven't read your case study, so I'll leave budget discussions and the wisdom of taking money out of your 401(k) to invest in real estate to those who have. You make a great income though.

1) A tax deferred workplace plan like a 401(k) or a traditional IRA are the only options. You aren't eligible for a traditional IRA deduction if you or your employer contribute to a workplace retirement plan given your income.
2) There is no such thing.
3) No, Roth contributions do not reduce taxable income, but unlike tax deferred accounts, Roth withdrawals also don't increase taxable income. The only account that both reduces taxable income and does not increase taxable income on withdrawal is an HSA, and then only when used for medical expenses.