rhino2
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I have a 401K at work. They won't match it (due to compensation restrictions), but I put 10% of my salary (each month).
I also have a traditional IRA (can't do roth due to income resections) and put in max each year (4K at the moment).
What are some other good long term retirement investments that I should look at? Bonds, annuities, other?
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Mon Sep 17, 2007 8:21 am |
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oldguy
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You can't have both a Deductable IRA and a 401k.
So you must have an IRA that you are not deducting? I would not do that - your money will be locked up until age 59.5, & you will pay full ordinary income tax when you sell - and you are getting no deduction. Instead invest in a taxable account - it will grow tax deferred and you will pay only cap gains tax - and no rules, no age 59.5, etc.
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Tue Sep 18, 2007 12:46 am |
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coaster
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quote:
Originally posted by oldguy
You can't have both a Deductable IRA and a 401k.
You can have both a traditional IRA and a 401(k), however, the contributions to the IRA may not be deductible, depending on how much went to the 401(k). i.e. what you really mean, I think, is that it doesn't make sense to have both, because they both can't be utililized for tax deferral.
quote:
Originally posted by old guy
Instead invest in a taxable account - it will grow tax deferred and you will pay only cap gains tax
Sorry, that doesn't make any sense to me.
~Tim~
Eye Candy : Why Whimsy
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Tue Sep 18, 2007 1:12 am |
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pf101
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Location: Portland, OR
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quote:
Originally posted by oldguy
You can't have both a Deductable IRA and a 401k.
Sure you can. Just depends on how much you make.
quote:
So you must have an IRA that you are not deducting? I would not do that - your money will be locked up until age 59.5, & you will pay full ordinary income tax when you sell - and you are getting no deduction. Instead invest in a taxable account - it will grow tax deferred and you will pay only cap gains tax - and no rules, no age 59.5, etc.
I agree with this. The only reason it may make sense to do a non-ded TIRA is if you plan on converting it to a Roth in 2010 when the income limits are raised. If that's your plan it may make sense because you'd only pay taxes on the earnings, not on the contributions (since you didn't take a ded) and then they'll grow according to Roth rules.
However, if you aren't planning on converting then I also think you should skip a non-ded IRA. There's no reason to do that and pay higher taxes than you would with a buy and hold taxable account.
To Coaster, I think what he means is that it's tax deferred because you'll only pay taxes in divis and cap gains distributions (if you're in a fund) until you sell - at which point you'll get the 15% LTCG rate. So it's sort of self-imposed tax deferral.
Personal Finance 101
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Tue Sep 18, 2007 2:33 am |
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rhino2
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You sure about this?
I can't get Roth IRA due to compenstation level.
I have both 401K and Tradtional IRA... The 401K is pre-tax and I was going to deduct the Traditonal IRA.
Anyone know the exact rule?
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Wed Sep 19, 2007 4:45 am |
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pf101
Senior Member
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Location: Portland, OR
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quote:
Originally posted by rhino2
You sure about this?
I can't get Roth IRA due to compenstation level.
I have both 401K and Tradtional IRA... The 401K is pre-tax and I was going to deduct the Traditonal IRA.
Anyone know the exact rule?
If you make too much for a Roth then you can't deduct a TIRA if you have a 401k.
Here are the limits for those who have employer plans:
Income limits for IRA deductions (MAGI)
Tax year 2007:
Married: Full ded if combined income is under $83k
Married: Partial ded if combined income is btwn $83,000–$103,000
Married: No ded if combined income is over $103k
Single: Full ded if income is under $52k
Single: Partial ded if income is btwn $52,000–$62,000
Single: No ded if income is over $62k
Those limits are going *down* in 2008
Here's a source: https://flagship.vanguard.com/VGApp/hnw/accounttypes/retirement/ATSTradIRAWhoContributeContent.jsp
Personal Finance 101
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Wed Sep 19, 2007 6:23 am |
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rhino2
Member
Cash: $ 2.10
Posts: 10
Joined: 17 Sep 2007
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well... crap.
So on my Traditional IRA... I'm putting money in Post-Tax and I can't deduct it. And when I withdrawl in 40 years it'll be taxed again?
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Thu Sep 20, 2007 4:50 am |
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coaster
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I'm not sure how that works; it's late and I'm not going to research it tonight, but I'm pretty sure you're not double-taxed. Maybe what you need to do is keep track of any non-deductible contributions you make. Maybe the way it works is that you deduct them when you take distributions? Dunno, sorry. Check the IRS website, it might have an answer.
~Tim~
Eye Candy : Why Whimsy
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Thu Sep 20, 2007 5:31 am |
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oldguy
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quote:
So on my Traditional IRA... I'm putting money in Post-Tax and I can't deduct it. And when I withdrawl in 40 years it'll be taxed again?
No, the contributions won't be taxed again. But the earnings on the contributions will be fully taxed as ordinary income. Instead of a NonDeductible IRA, use a regular Taxable Account and an Index Fund, that way your money will grow tax-deferred for 40 years. When you sell you will be taxed at cap gains rates only. And no age 59.5 rules. And if you don't sell, your heirs will get a stepped-up basisi, ie the tax will never be due.
BTW, I don't see any reason for a NonDeductable IRA. Is there?
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Thu Sep 20, 2007 11:03 pm |
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efflandt
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Location: Elgin, IL USA
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If you make too much for a Roth IRA (and are eligible for 401k, whether you participate or not), you can probably only make non-deductable contributions to a traditional IRA. Pub 590 has details (irs.gov). You do not get taxed twice on the after-tax part as long as you keep tax records or an accounting of it indefinitely until first distribution (last previous Form 8606). In some cases that could be many years. The after-tax and tax-deferred gains will be prorated when distributed according to Form 8606 (no you cannot withdraw the after-tax part first).
There will be special rules for converting IRA to Roth IRA in 2010 regardless of income, with tax paid in 2011 and 2012. So if you make non-deductable IRA contributions now, you can possibly convert that to a Roth IRA in 2010 and would only owe tax then on the "gains" at that time. After converted to the Roth, it would grow tax free. For example see http://www.investorguide.com/igu-article-1096-ira-converting-ira-money-to-a-roth-ira-in-2010.html or do a web search for "special ira to roth ira conversion 2010".
PS: When I first started doing gradual annual IRA to Roth conversions and had to determine the amount of a non-deductable contribution, I could not find tax records from over 15 years ago until the following year (had to file ammended return). So if you make non-deductable regular IRA contributions, keep tax records where you can find them forever.
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Thu Sep 20, 2007 11:03 pm |
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