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Hello, I have invested in my first 401k for one month (January 2008)
before getting laid off. Good start for retirement savings, huh!?
Now that I am doing my 2007 taxes and would like to invest 4k into an
IRA. So here are a few questions that I can't seem to get answered
from what I have read, and forgive me for my ignorance but investing
is fairly new to me so perhaps in laymen terms would be best.
What is the best way to rollover my 401k into an IRA or a Roth IRA if
possible? I understand that there is a direct rollover plan but I am
unsure if I can use this to rollover in an IRA and Roth IRA. And what
about the fact I started this 401k this year in January, does that
matter?
Also is it common to see in ones portfolio an IRA and Roth IRA? I am
thinking about doing this because I don't know if I would want the tax
deferred or exempt; which seems to me it's like having one foot on ice
and the other on fire.
Thanks.
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m...@y...com wrote:
> What is the best way to rollover my 401k into an IRA or a Roth IRA if
> possible? I understand that there is a direct rollover plan but I am
> unsure if I can use this to rollover in an IRA and Roth IRA. And what
> about the fact I started this 401k this year in January, does that
> matter?
You can only roll over a 401(k) after you leave a job. It sounds like
you're still with that company.
> Also is it common to see in ones portfolio an IRA and Roth IRA? I am
> thinking about doing this because I don't know if I would want the tax
> deferred or exempt; which seems to me it's like having one foot on ice
> and the other on fire.
Would a traditional IRA be deductible for you? If not, then it's no
question, the Roth would be better.
Brian
--
If televison's a babysitter, the Internet is a drunk librarian who
won't shut up.
-- Dorothy Gambrell (http://catandgirl.com)
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
m...@y...com wrote:
> Hello, I have invested in my first 401k for one month (January 2008)
> before getting laid off. Good start for retirement savings, huh!?
> Now that I am doing my 2007 taxes and would like to invest 4k into an
> IRA. So here are a few questions that I can't seem to get answered
> from what I have read, and forgive me for my ignorance but investing
> is fairly new to me so perhaps in laymen terms would be best.
> What is the best way to rollover my 401k into an IRA or a Roth IRA if
> possible? I understand that there is a direct rollover plan but I am
> unsure if I can use this to rollover in an IRA and Roth IRA. And what
> about the fact I started this 401k this year in January, does that
> matter?
> Also is it common to see in ones portfolio an IRA and Roth IRA? I am
> thinking about doing this because I don't know if I would want the tax
> deferred or exempt; which seems to me it's like having one foot on ice
> and the other on fire.
You have two things going on;
If you had earned income in 2007, you may deposit the $4,000 into an
IRA. How much did you earn in 2007? Do you think you will find a new job
in 2008? I suggest the deductible IRA for 2007, and request a direct
transfer of the 401(k) money into that account this year.
My opinion on Roth is that people earning low incomes (15% Federal
bracket or lower) may be better off with a Roth, others should convert
based on changes in bracket. Maybe you were in the 25% bracket in 07.
$4000 will get you back $1000 in taxes. In 08, if you are not employed a
few months, you may be in the 15% bracket. You convert and pay $600 in
tax. You are ahead $400. This is a simple example, but should help
illustrate my thoughts. If you have any follow on questions, come back.
Those here are kind, knowledgeable, and wish to help.
Joe
www.blog.joetaxpayer.com
--------------------------------------
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m...@y...com writes:
> Hello, I have invested in my first 401k for one month (January 2008)
> before getting laid off. Good start for retirement savings, huh!?
> Now that I am doing my 2007 taxes and would like to invest 4k into an
> IRA. So here are a few questions that I can't seem to get answered
Did you make any IRA contributions in 2007 already (for tax-year
2007)? (since it was possible to make a contribution in 2007
for tax-year 2006). If not, you may still make a 2007 contribution.
Were you working someplace in 2007 where
you had access to an employer-sponsored plan (ie. 401k)?
If not, then that 2007 contribution may be deductible on
your 2007 income taxes. Or you may be able to make a 2007
Roth contribution (very likely a better idea, especially
if your tax bracket in 2007 was low). But bear in mind
that you have to have earned money in 2007. Did you?
> What is the best way to rollover my 401k into an IRA or a Roth IRA if
> possible? I understand that there is a direct rollover plan but I am
If you're no longer with that company where you made that 401k
contribution, you may roll that money over into an IRA, or
into a Roth IRA, though if you roll into a Roth, you'll have
to pay taxes (2008 taxes - not due for a year) on that money.
> Also is it common to see in ones portfolio an IRA and Roth IRA? I am
Sure - why not? There are times when one is eligible to put
money into one but not the other.
> thinking about doing this because I don't know if I would want the tax
> deferred or exempt; which seems to me it's like having one foot on ice
> and the other on fire.
That's actually a risk-lowering move we call "tax diversification"
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
On Mar 12, 11:32 am, m...@y...com wrote:
> Hello, I have invested in my first 401k for one month (January 2008)
> before getting laid off. Good start for retirement savings, huh!?
> Now that I am doing my 2007 taxes and would like to invest 4k into an
> IRA. So here are a few questions that I can't seem to get answered
> from what I have read, and forgive me for my ignorance but investing
> is fairly new to me so perhaps in laymen terms would be best.
> What is the best way to rollover my 401k into an IRA or a Roth IRA if
> possible? I understand that there is a direct rollover plan but I am
> unsure if I can use this to rollover in an IRA and Roth IRA. And what
> about the fact I started this 401k this year in January, does that
> matter?
> Also is it common to see in ones portfolio an IRA and Roth IRA? I am
> thinking about doing this because I don't know if I would want the tax
> deferred or exempt; which seems to me it's like having one foot on ice
> and the other on fire.
>
> Thanks.
>
Many brokerage will help you set up a rollover IRA, easy piecey. Try
Fidelity or Schwab. I rolled my 401K into a rollover IRA acct at
Fidelity. You can have many combinations of IRA and Roth IRA in your
portfolio.
I hope you find a job real soon, if not already.
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
"joetaxpayer" <j...@n...com> wrote in message
news:wOadneJLeol5p0XanZ2dnUVZ_qWtnZ2d@comcast.com...
> m...@y...com wrote:
>
>
> You have two things going on;
> If you had earned income in 2007, you may deposit the $4,000 into an IRA.
> How much did you earn in 2007?
Doesn't the IRA have to be established by 12/31/07 to make 2007
contributions?
Elizabeth Richardson
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
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Elizabeth Richardson wrote:
>
> "joetaxpayer" <j...@n...com> wrote in message
> news:wOadneJLeol5p0XanZ2dnUVZ_qWtnZ2d@comcast.com...
> > m...@y...com wrote:
> >
> >
> > You have two things going on;
> > If you had earned income in 2007, you may deposit the $4,000 into
> > an IRA. How much did you earn in 2007?
>
> Doesn't the IRA have to be established by 12/31/07 to make 2007
> contributions?
No, basically tax day.
Brian
--
If televison's a babysitter, the Internet is a drunk librarian who
won't shut up.
-- Dorothy Gambrell (http://catandgirl.com)
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
Elizabeth Richardson wrote:
> "joetaxpayer" <j...@n...com> wrote in message
> news:wOadneJLeol5p0XanZ2dnUVZ_qWtnZ2d@comcast.com...
>
>>m...@y...com wrote:
>>
>>
>>You have two things going on;
>>If you had earned income in 2007, you may deposit the $4,000 into an IRA.
>>How much did you earn in 2007?
>
>
> Doesn't the IRA have to be established by 12/31/07 to make 2007
> contributions?
>
> Elizabeth Richardson
No, there are some plans that do require that, but IRA has tax day
deadline, whenever it falls.
Joe
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
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Newsgroup.
"joetaxpayer" <j...@n...com> wrote in message
news:YbmdnR5mjbwU_0XanZ2dnUVZ_rninZ2d@comcast.com...
>
>
> No, there are some plans that do require that, but IRA has tax day
> deadline, whenever it falls.
Ok, maybe they've changed it. It used to be that to make a 2007 contribution
in 2008, you had to have established the account by 12/31/07. You couldn't
open an account in 2008 and fund it for 2007 (or 2006, or some other prior
year). I know that for an already established account you can back fund it.
Elizabeth Richardson
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
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Elizabeth Richardson wrote:
> "joetaxpayer" <j...@n...com> wrote in message
> news:YbmdnR5mjbwU_0XanZ2dnUVZ_rninZ2d@comcast.com...
>
>>
>>No, there are some plans that do require that, but IRA has tax day
>>deadline, whenever it falls.
>
>
> Ok, maybe they've changed it. It used to be that to make a 2007 contribution
> in 2008, you had to have established the account by 12/31/07. You couldn't
> open an account in 2008 and fund it for 2007 (or 2006, or some other prior
> year). I know that for an already established account you can back fund it.
Well, I just searched a bit, and found that a Self-Employed 401(k) has a
deadline to open by 12/31. And Roth conversions must happen by 12/31 as
well. And RMDs for IRAs.
Here's my question back to you - will a broker open a zero balance IRA?
There are those who, even by 12/31, don't know if they can deduct the
IRA, and are inclined to wait till March to open one, or deposit to a
new one. I guess once the account is open, this discussion is moot
beyond that point. If nothing else, this continues to prove my point,
"too many retirement accounts, too many rules."
Joe
--------------------------------------
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guidelines include a request for brevity and another for trimming posts to
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