Comments on: Where Should You Invest First – 401(k) or IRA? http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/ Money Management, Small Business, Career Fri, 20 Nov 2009 20:44:55 -0500 http://wordpress.org/?v=2.8.6 hourly 1 By: Patrick http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/comment-page-1/#comment-19836 Patrick Sat, 26 Sep 2009 01:28:47 +0000 http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/#comment-19836 Robson, It's possible there was an error in either the information you were given or an error on the part of the IRS. Another possibility is contributing to an IRA when you were above the contribution limit. For example, if you contributed to a Traditional IRA and claimed a tax deduction, but earned too much to qualify. My recommendation is consulting with a CPA for more information specific to your situation. Robson, It’s possible there was an error in either the information you were given or an error on the part of the IRS. Another possibility is contributing to an IRA when you were above the contribution limit. For example, if you contributed to a Traditional IRA and claimed a tax deduction, but earned too much to qualify.

My recommendation is consulting with a CPA for more information specific to your situation.

]]> By: Robson http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/comment-page-1/#comment-19835 Robson Sat, 26 Sep 2009 01:24:49 +0000 http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/#comment-19835 Hello, I'm in shock! I just got a letter from the IRS asking for 1300. plus penalties for my 2007 return. I contributed the max to my company 401K and opened an IRA for 5000 that year. My bank and employer advised adding the 5k as I was over 591/2 and eligible. Now the IRA is disallowing it and I'll be hit for the 2008 return also. Did I make a mistake? Will I be able to 'remove' that 5k from my IRA - I don't want to be hit with taxes when I withdraw. Thank you! Hello,

I’m in shock! I just got a letter from the IRS asking for 1300. plus penalties for my 2007 return. I contributed the max to my company 401K and opened an IRA for 5000 that year. My bank and employer advised adding the 5k as I was over 591/2 and eligible.
Now the IRA is disallowing it and I’ll be hit for the 2008 return also. Did I make a mistake? Will I be able to ‘remove’ that 5k from my IRA – I don’t want to be hit with taxes when I withdraw.
Thank you!

]]> By: ERIC http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/comment-page-1/#comment-18877 ERIC Tue, 07 Jul 2009 14:53:22 +0000 http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/#comment-18877 Infor on 401K. I put in 15%. I think they only match up to 5%. Infor on 401K. I put in 15%. I think they only match up to 5%.

]]> By: Kelly http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/comment-page-1/#comment-16459 Kelly Thu, 05 Feb 2009 21:25:06 +0000 http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/#comment-16459 My husband is putting in the max matched at his company 401k. Last year he pulled most of that ($34,000) and put it into a traditional ira. he put the ira in a 7 month cd because he's thinking about pulling $20,000 from it in July to pay off his truck and rolling the balance into a roth. He will continue to put into his 401k until he retires in another year. This is our plan at this point -- what would you advise? Thanks. My husband is putting in the max matched at his company 401k. Last year he pulled most of that ($34,000) and put it into a traditional ira. he put the ira in a 7 month cd because he’s thinking about pulling $20,000 from it in July to pay off his truck and rolling the balance into a roth. He will continue to put into his 401k until he retires in another year. This is our plan at this point — what would you advise?
Thanks.

]]> By: Patrick http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/comment-page-1/#comment-15826 Patrick Sat, 20 Dec 2008 03:07:46 +0000 http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/#comment-15826 <strong>Hello Richard, </strong>Yes, you can have both a 401(k) plan, which is sponsored through an employer, and an IRA, which is directed by the individual. You can invest in both at the same time, only in one or the other, or in neither. They are subject to contribution limits and some other rules. Generally it is best to contribute to a 401(k) plan up to the company match before contributing elsewhere because that is free money. Then decide where it is best to contribute any additional funds. Hello Richard, Yes, you can have both a 401(k) plan, which is sponsored through an employer, and an IRA, which is directed by the individual.

You can invest in both at the same time, only in one or the other, or in neither. They are subject to contribution limits and some other rules.

Generally it is best to contribute to a 401(k) plan up to the company match before contributing elsewhere because that is free money. Then decide where it is best to contribute any additional funds.

]]> By: Richard http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/comment-page-1/#comment-15825 Richard Fri, 19 Dec 2008 22:33:05 +0000 http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/#comment-15825 Is it possible to have a 401(k) AND an IRA at the same time? Just wondering... Is it possible to have a 401(k) AND an IRA at the same time? Just wondering…

]]> By: walkerny http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/comment-page-1/#comment-9156 walkerny Thu, 12 Jun 2008 15:28:11 +0000 http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/#comment-9156 Another VERY important thing to take into account is the state you live in now and the one you will retire to: I pay in to my 401K now in the highest tax state in the union, New York. So my tax break realized right now is 40% or more. If I pick a low state tax state to retire to, say the total Fed & State damage is 25%, It will make the 401K a 15% better deduction than the Roth. If you are from high tax states NY, CT, MA, PA, OH, IL, MD, etc you should take this into account. Another VERY important thing to take into account is the state you live in now and the one you will retire to:

I pay in to my 401K now in the highest tax state in the union, New York. So my tax break realized right now is 40% or more. If I pick a low state tax state to retire to, say the total Fed & State damage is 25%, It will make the 401K a 15% better deduction than the Roth.

If you are from high tax states NY, CT, MA, PA, OH, IL, MD, etc you should take this into account.

]]> By: walkerny http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/comment-page-1/#comment-9154 walkerny Thu, 12 Jun 2008 13:39:49 +0000 http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/#comment-9154 The tax free benefit of the Roth is based in part on faith the government will 'play fair' decades from now. I think they will be eye Roths as a hungry wolf eyes a lamb. I max out my 401K limit to the current 15500, and if I have any left it goes in a Roth. We also are working on being debt free. Hopefully in my mid 50's (ten years from now) we will be debt free and can both max our 401K's and Roths to the limit, including the catch-up limits. One thing to check on is whether either spouse can take part in either a Health Savings Account, or some other form of yearly medical savings plan. The ones you have to 'estimate' the next years med expenses (you lose any excess) are a pain, but if you have big "Known" medical costs looming (eyeglasses, braces, operation, Lasik, etc.) you can basically get 30-40% of these costs back in the form of a tax break. The tax free benefit of the Roth is based in part on faith the government will ‘play fair’ decades from now. I think they will be eye Roths as a hungry wolf eyes a lamb.

I max out my 401K limit to the current 15500, and if I have any left it goes in a Roth. We also are working on being debt free. Hopefully in my mid 50’s (ten years from now) we will be debt free and can both max our 401K’s and Roths to the limit, including the catch-up limits.

One thing to check on is whether either spouse can take part in either a Health Savings Account, or some other form of yearly medical savings plan. The ones you have to ‘estimate’ the next years med expenses (you lose any excess) are a pain, but if you have big “Known” medical costs looming (eyeglasses, braces, operation, Lasik, etc.) you can basically get 30-40% of these costs back in the form of a tax break.

]]> By: Dividend growth investor http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/comment-page-1/#comment-5887 Dividend growth investor Mon, 18 Feb 2008 22:20:36 +0000 http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/#comment-5887 Thanks for the nice article. I myself like cutting my taxable income by putting as much as possible into a 401k. I think that over time whether you invest into 401k or a ROTH ira doesn't matter, as long as you contribute for retirement. Thanks for the nice article. I myself like cutting my taxable income by putting as much as possible into a 401k. I think that over time whether you invest into 401k or a ROTH ira doesn’t matter, as long as you contribute for retirement.

]]> By: Dividends4Life http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/comment-page-1/#comment-5857 Dividends4Life Sun, 17 Feb 2008 12:47:24 +0000 http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/#comment-5857 You are doing it the right way. Don't leave any match dollars on the table, then fund your Roth, then work toward maxing out your 401(k). Best Wishes, D4L You are doing it the right way. Don’t leave any match dollars on the table, then fund your Roth, then work toward maxing out your 401(k).

Best Wishes,
D4L

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