Author Topic: Last month at job - dilemma 401k, Roth, & SL  (Read 1585 times)

phimag512

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Last month at job - dilemma 401k, Roth, & SL
« on: September 09, 2017, 10:36:09 AM »
Hi all,

I'm changing jobs in October (9th) and I have 3 more pay checks with my current company.  I currently have a little over $11k contributed in my 401k for this current year.  The company (Whole Foods) doesn't match anything, however, they have Vanguard investments (with low fees), which I've kept it in and I've been able to get over 10% for the current year. 

I also have enough PTO that will cash out, which will account for 140 hrs of pay on top of it. My question is, should I just max this 401k out as much as I can to get the most money? I won't have enough to max it to $18,000, but I might be able to get close to $16,000.

My next job won't have a 401k, but I will possibly have a SIMPLE IRA which will be available to me around May of next year.  The emplyer would be starting this up new at his company but hasn't guaranteed it as of yet for 2018.

My other question is, because of the good investments, should I just leave it in the 401k with the company or roll it into my FIDELITY Roth account??

Then there is the Whole Foods 401k plan, which is still "technically not" being affected as of now, with the Amazon merger (unlike my stock shares and stock options which were cashed out).  There's a possibility down the road that all current holders will have to roll it into another investment vehicle if the Whole Foods 401k is removed, which I would think it would be, but there hasn't been any word on it.

I'm 38, and I have $34k left in my student loans, no other debt.  The rate is 2.75%, but it just bothers me so much that I have this debt. I almost wanted to start paying it off.... but I know I shouldn't and just keep investing.  With the minimum payments, I think it has me projected to pay it off in 16 years (age 54).  I could pay it off in 1 year, if I work really hard at it. My financial situation will be very good that I can afford to do so.

Option 1:
Max out 401k and then Roth in November

Option 2:
Max Roth and start paying down student loans

I'm also open to any other ideas, but those 2 are the ones I currently am facing myself with. Any advice is appreciated :)

Phil




GizmoTX

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Re: Last month at job - dilemma 401k, Roth, & SL
« Reply #1 on: September 09, 2017, 11:07:10 AM »
I'd make sure to max the $5,500 Roth IRA contribution if you haven't already done so. If I could, I'd then keep contributing to the t401k for your remaining paychecks, then roll it into a tIRA at Vanguard. You never want to leave money with a former employer, especially one likely to change the plan. However, you can't roll it into your Fidelity Roth account unless you are prepared to pay the deferred tax -- calculate this first.

Even though your student loans have low interest, it's still an expense. Assuming you have an emergency fund, I'd pay down all debt ASAP after fully funding the retirement accounts.


MDM

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Re: Last month at job - dilemma 401k, Roth, & SL
« Reply #2 on: September 09, 2017, 07:47:21 PM »
Option 1:
Max out 401k and then Roth in November

Option 2:
Max Roth and start paying down student loans

I'm also open to any other ideas, but those 2 are the ones I currently am facing myself with. Any advice is appreciated :)
See Investment Order for suggestions that apply to most people.

There is no problem per se leaving your 401k with a previous employer, especially if said employer offers funds with very low expenses.

As GizmoTX noted, converting t401k funds to Roth IRA has immediate tax implications, while rolling over t401k to tIRA is tax free for now.

Raenia

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Re: Last month at job - dilemma 401k, Roth, & SL
« Reply #3 on: September 09, 2017, 08:25:35 PM »
I always prefer to roll over my old employer 401k balances to my tIRA (with Vanguard, but Fidelity is great too), for consolidation and less to keep track of, more than anything else.  If the plan options aren't bad, there's no harm in leaving them alone, but do keep an eye on how the account may change with Amazon.  However, you do NOT want to convert it into your ROTH IRA account - if you don't already have a tIRA, you'll want to set that up before doing the rollover.  As mentioned earlier, that would cause a taxable event which you don't want to do.

Other than that, I recommend maxing the 401k with your last few paychecks (or as close as you can) and then filling your ROTH.  That 401k space can never be regained if you pass on it now, and your interest rates are low enough that the tax benefits plus market performance will give you a better return than paying off the debt.  I totally get wanting to be debt-free, but mathematically you're better off filling your tax-advantaged space first.

phimag512

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Re: Last month at job - dilemma 401k, Roth, & SL
« Reply #4 on: September 09, 2017, 09:27:01 PM »
Thank you, everyone, that was very helpful!  I had no idea about the taxes I would've had to pay by pushing it into the Roth IRA. 

I'm going to max the 401k as much as I can, fund the ROTH, then eventually move the existing 401k into a t-IRA.  I don't have a t-IRA currently, so I'll go with the Vanguard.

As for a fund, I'm guessing I should fund it into VTSAX? Unless anyone suggests a better fund with them.

MDM

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Re: Last month at job - dilemma 401k, Roth, & SL
« Reply #5 on: September 09, 2017, 10:37:49 PM »
As for a fund, I'm guessing I should fund it into VTSAX? Unless anyone suggests a better fund with them.
Depends on your desired Asset allocation.

phimag512

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Re: Last month at job - dilemma 401k, Roth, & SL
« Reply #6 on: October 28, 2017, 03:39:59 PM »
I know it's been a couple months, but I did it! With 1 paycheck left from my final PTO hours coming, I maxed out my 401k ($18,000). First time I've ever been able to do that, and I'll have enough to max my Roth before the end of next month. Thanks again everyone for your advice :)