When you get it because your 401K plan has failed the IRS' non-discrimination test and the amount is being refunded from your 401K contribution for 2012 and will increase your taxable income in 2013!!! Boo. Sooooooooooooooooo annoying.
I do everything right to save for retirement and the government penalizes me at every turn -- my IRA contribution (which I max out every year) is not deductible. Now my only tax advantaged account which I am legally allowed to contribute $17,500 to (or whatever the # is) is reduced by several thousand dollars -- more than 20% of my contribution returned!!! I think the government should encourage everyone to save, and if "high income" savers save more they shouldn't be penalized. In reality, the government probably does not do this because they care about encouraging lower income savers, but because they want to get their hands on as much income as possible from high-income earners so they can tax it. Ugh. Well, I'm just going to have to save more in my taxable account and spend less to make up for the government's constant blocking of my attempts to save in tax-advantaged accounts.
Showing posts with label IRA. Show all posts
Showing posts with label IRA. Show all posts
Sunday, March 24, 2013
Sunday, February 7, 2010
Morningstar X-Ray
Earlier in the summer I spent a lot of time trying to analyze my holdings across all of my accounts (I have 2 401Ks, 3 IRAs and two taxable accounts). I complained that I couldn't find a good tool and a reader recommended the Morningstar tools. Today I signed up for the free trial of the Morningstar X-Ray.
The analysis was a good confirmation that I have balanced portfolio. It also confirmed that I have a higher weighting of mid and small cap value and growth funds than the Wilshire 5000 at least.
For next steps, I'm thinking of buying some GLD and some more bonds -- I only have 9% of my holdings in bonds.
The analysis was a good confirmation that I have balanced portfolio. It also confirmed that I have a higher weighting of mid and small cap value and growth funds than the Wilshire 5000 at least.
For next steps, I'm thinking of buying some GLD and some more bonds -- I only have 9% of my holdings in bonds.
Sunday, January 17, 2010
Savings Strategy
Now that I received my bonus (a little more than last year which is great), I have to figure out what to do with my savings. I also realized that my online savings account rate where a lot of my cash is has fallen to 1.1%! Ouch. It's tough times for savers. So, this is my strategy:
-- $10,000 contribution to non-deductible IRA (5K in 2010 and 5K in 2009). This way even if I want to buy an apartment at some point, I can use this money towards that). It also lets me do something with this money i.e. invest it. And, it gives me the option to convert it to a Roth IRA, without having to pay any taxes since its a new account. Seems like a solid strategy.
-- $50,000 1 year CD. My credit union has a good rate for a 1-year CD -- 2.5%. I'm a little nervous about locking the $ up for a year, but I can always pull it and pay the penalty if I need to.
The rest of my cash will stay in my high yield checking account which still has an interest rate of 3.25% or something in the 3s anyway.
Sound like a good plan? I like it because it boosts my retirement savings, which I'm very behind in according to my Puddin Score. And it lets me invest that money, tax free. While I still have a strong cash cushion.
-- $10,000 contribution to non-deductible IRA (5K in 2010 and 5K in 2009). This way even if I want to buy an apartment at some point, I can use this money towards that). It also lets me do something with this money i.e. invest it. And, it gives me the option to convert it to a Roth IRA, without having to pay any taxes since its a new account. Seems like a solid strategy.
-- $50,000 1 year CD. My credit union has a good rate for a 1-year CD -- 2.5%. I'm a little nervous about locking the $ up for a year, but I can always pull it and pay the penalty if I need to.
The rest of my cash will stay in my high yield checking account which still has an interest rate of 3.25% or something in the 3s anyway.
Sound like a good plan? I like it because it boosts my retirement savings, which I'm very behind in according to my Puddin Score. And it lets me invest that money, tax free. While I still have a strong cash cushion.
Saturday, October 3, 2009
Retirement Savings: u r doin it rong
I started doing some research this week on retirement savings. I've been saving at least 6% of my gross salary since I started working about 12 years ago (minus one year in grad school). So I assumed I'd be fine.
What should I be saving?
When I started playing around with the calculators, it seems I am underfunded by about half. My Pudding Score is 52. The more I researched the more I came to believe, however, that there is no real way to tell how much one needs to save to retire. All of the calculators make you make rediculous guesses about expected investment returns and other factors that if you knew you'd be a millionaire from being able to read the future.
I did find a few more simple, logical guidelines. Dave Ramsey says save 15% for retirement. Apparently T.Rowe price says the same thing.
I feel kind of cheated to be learning this now. I had always heard that I should be contributing 6% of my salary to retirement. I think I would have contributed more if I'd had known I'd be "behind" at this point.
Non-Deductible IRA?
I had been planning to max out my 401K contribution this year which takes me to a little more than 10% of my gross saved. There's not really any other tax-advantaged way for me to save, as I don't qualify for a Roth IRA and if I were to contribute to an IRA, it is not tax-deductible. It seemed at first this was still a good deal, but I like how this CNN article describes the advantage. Basically it will only help me if I convert it next year to a Roth IRA. I think I will end up doing that. So even though my stragtegy was to have as much cash as possible for an apartment down payment, I think I'm going to throw an extra $5K into my IRA to take me to both the contribution limit and 15% of my salary saved. Even one of my fave bloggers thinks 15% is high, but since I am apparently sooo behind in my savings, I think I'll do it this year. I've hit my social security taxable income limit, so I should get about an extra $2K to contribute from that.
What should I be saving?
When I started playing around with the calculators, it seems I am underfunded by about half. My Pudding Score is 52. The more I researched the more I came to believe, however, that there is no real way to tell how much one needs to save to retire. All of the calculators make you make rediculous guesses about expected investment returns and other factors that if you knew you'd be a millionaire from being able to read the future.
I did find a few more simple, logical guidelines. Dave Ramsey says save 15% for retirement. Apparently T.Rowe price says the same thing.
I feel kind of cheated to be learning this now. I had always heard that I should be contributing 6% of my salary to retirement. I think I would have contributed more if I'd had known I'd be "behind" at this point.
Non-Deductible IRA?
I had been planning to max out my 401K contribution this year which takes me to a little more than 10% of my gross saved. There's not really any other tax-advantaged way for me to save, as I don't qualify for a Roth IRA and if I were to contribute to an IRA, it is not tax-deductible. It seemed at first this was still a good deal, but I like how this CNN article describes the advantage. Basically it will only help me if I convert it next year to a Roth IRA. I think I will end up doing that. So even though my stragtegy was to have as much cash as possible for an apartment down payment, I think I'm going to throw an extra $5K into my IRA to take me to both the contribution limit and 15% of my salary saved. Even one of my fave bloggers thinks 15% is high, but since I am apparently sooo behind in my savings, I think I'll do it this year. I've hit my social security taxable income limit, so I should get about an extra $2K to contribute from that.
Saturday, June 20, 2009
Potentially Good News on Roth IRAs
An article in the Wall Street Journal caught my eye tonight, as I still have my 401ks and IRA on my mind. The article claims that there will be new rules for Roth IRAs and that the income limit, which I currently exceed, will be lifted. Apparently the rules about income for converting (but not funding) will demolish the income limit. The catch? There are taxes involved. This is all new to me because once I saw the income limits I stopped investigating Roth IRAs. When (if) I convert my 401k to a Roth IRA, I will have to pay income tax on the contributions and the earnings.
So how would this influence my decision to transfer my old 401K? The article answers just that question:
“If you’re thinking about doing a Roth conversion, leave your 401(k) alone” rather than rolling it into an IRA beforehand to keep your share of nondeductible contributions higher in the calculation above, says John Carl, president of the Retirement Learning Center LLC in New York
Another factor to consider when I try to decide what to do with the old 401K. Does anyone else spend this much time strategizing around where to keep assets? I don't even have a lot of assets, relatively speaking.
So how would this influence my decision to transfer my old 401K? The article answers just that question:
“If you’re thinking about doing a Roth conversion, leave your 401(k) alone” rather than rolling it into an IRA beforehand to keep your share of nondeductible contributions higher in the calculation above, says John Carl, president of the Retirement Learning Center LLC in New York
Another factor to consider when I try to decide what to do with the old 401K. Does anyone else spend this much time strategizing around where to keep assets? I don't even have a lot of assets, relatively speaking.
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