Author Topic: Roth 401K at my work  (Read 4681 times)

D Bopp

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Roth 401K at my work
« on: February 11, 2015, 07:14:06 PM »
I've been contributing to my 401K plan for the past 3 years at my current job.  We have the option of contributing to the regular 401K or a roth 401K.   We had a guy come in yesterday from the company managing our plans. I asked him some direct questions about contributions, but he didn't seem very confident with his answers and had to google a few while we were talking.

My questions are:
Is the max contribution to the Roth 401K $18,000, just like the regular 401K? And also, can I also contribute to a separate Roth IRA account outside of the Roth 401K?

My other question was: Can I pull the principle out of my Roth 401K before the standard retirement age? I think it's 55.



Bracken_Joy

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Re: Roth 401K at my work
« Reply #1 on: February 11, 2015, 07:19:03 PM »
Following.


I have no idea whatsoever. Sorry.

D Bopp

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Re: Roth 401K at my work
« Reply #2 on: February 11, 2015, 07:23:17 PM »
He told me that I can contribute up to the $18,000 in the Roth 401K, and I could not pull the principle out early before retirement age.

He also said the Roth 401K would not have anything to do with my separate Roth IRA as far as contribution limits.

He may be correct, but I wanted to find out from here also.

minimalist

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Re: Roth 401K at my work
« Reply #3 on: February 11, 2015, 07:24:07 PM »
Yes to both of your first questions.

You can rollover your Roth 401k contributions to a Roth IRA and withdraw the principle before retirement age per standard Roth IRA rules (five year rule, home purchase, etc).

seattlecyclone

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Re: Roth 401K at my work
« Reply #4 on: February 11, 2015, 07:25:09 PM »
I've been contributing to my 401K plan for the past 3 years at my current job.  We have the option of contributing to the regular 401K or a roth 401K.   We had a guy come in yesterday from the company managing our plans. I asked him some direct questions about contributions, but he didn't seem very confident with his answers and had to google a few while we were talking.

My questions are:
Is the max contribution to the Roth 401K $18,000, just like the regular 401K?

Yes.

Quote
And also, can I also contribute to a separate Roth IRA account outside of the Roth 401K?

Yes.

Quote
My other question was: Can I pull the principle out of my Roth 401K before the standard retirement age? I think it's 55.

Yes. The age is 59 unless you leave the company after age 55, in which case the age is 55.

What tax bracket are you in? Generally someone wishing to retire early will be better of making traditional 401(k) contributions.

D Bopp

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Re: Roth 401K at my work
« Reply #5 on: February 11, 2015, 07:30:26 PM »

What tax bracket are you in? Generally someone wishing to retire early will be better of making traditional 401(k) contributions.

I'm salary plus commission, so my income is somewhere between $70 and 85K.  And I think my CPA mentioned to me that I am in the 15% tax bracket after my adjusted gross income.  But I could be wrong about that.

MrMoogle

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Re: Roth 401K at my work
« Reply #6 on: February 11, 2015, 08:33:19 PM »
Quote
My other question was: Can I pull the principle out of my Roth 401K before the standard retirement age? I think it's 55.

Yes. The age is 59 unless you leave the company after age 55, in which case the age is 55.

What tax bracket are you in? Generally someone wishing to retire early will be better of making traditional 401(k) contributions.

For a Roth 401k, I believe you can pull out the contributions after you've left the company at any time.  The earnings off those contributions could be penalized:
http://www.obliviousinvestor.com/roth-401k-distribution-rules/

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If your distribution is a nonqualified distribution:
◾The portion of the distribution that represents your contributions to the account will be nontaxable (and not subject to the 10% penalty), and
◾The portion of the distribution that represents earnings (i.e., growth) will be taxable and potentially subject to the 10% penalty.
You can also roll it into a Roth IRA, and have to follow similar rules.

I do agree that a traditional 401k (and then IRA) is typically better for someone with your income levels:
http://www.madfientist.com/retire-even-earlier/

MDM

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Re: Roth 401K at my work
« Reply #7 on: February 11, 2015, 08:34:55 PM »

What tax bracket are you in? Generally someone wishing to retire early will be better of making traditional 401(k) contributions.

I'm salary plus commission, so my income is somewhere between $70 and 85K.  And I think my CPA mentioned to me that I am in the 15% tax bracket after my adjusted gross income.  But I could be wrong about that.
From your other posts your status is MFJ w/ 2 young kids.  Depending on exactly where in that $70K-$85K range you fall, contributing $18K to a traditional 401k could get you money from the Saver's Credit at tax time.  Something to consider..

Also might consider doing your own taxes and save the CPA fee.

Debtless in Texas

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Re: Roth 401K at my work
« Reply #8 on: February 12, 2015, 01:17:26 PM »
Quote
From your other posts your status is MFJ w/ 2 young kids.  Depending on exactly where in that $70K-$85K range you fall, contributing $18K to a traditional 401k could get you money from the Saver's Credit at tax time.  Something to consider..

He might also be able to get down to the 15% bracket and enjoy 0% capital gains tax...

MDM

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Re: Roth 401K at my work
« Reply #9 on: February 12, 2015, 01:25:52 PM »
He might also be able to get down to the 15% bracket and enjoy 0% capital gains tax...
Already there.  The Saver's Credit is based on AGI, while the tax brackets are based on the Taxable Income (AGI minus deductions and exemptions).

themagicman

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Re: Roth 401K at my work
« Reply #10 on: February 12, 2015, 01:32:15 PM »
I've been contributing to my 401K plan for the past 3 years at my current job.  We have the option of contributing to the regular 401K or a roth 401K.   We had a guy come in yesterday from the company managing our plans. I asked him some direct questions about contributions, but he didn't seem very confident with his answers and had to google a few while we were talking.

My questions are:
Is the max contribution to the Roth 401K $18,000, just like the regular 401K? And also, can I also contribute to a separate Roth IRA account outside of the Roth 401K?



Yes to both!

JackieTreehorn

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Re: Roth 401K at my work
« Reply #11 on: February 13, 2015, 10:05:38 AM »
Just want to point out that the $18,000 contribution limit is a combined contribution limit.  In other words, you are not allowed to contribute $18,000 pre-tax to a traditional 401(k) plus another $18,000 to your roth 401(k).  Total contributions to both 401(k) accounts can not exceed $18,000, assuming you are under age 50.