401K or IRA what would you do

[Russ Smith]

My new employer doesn't currently do 401K matching. They have a 401K, but no match.

I already have 4 IRA's from 3 previous 401K's rolled over, and the 4th is an inherited IRA.

Is there any advantage or disadvantage to just not doing the 401k and instead depositing money into one of my existing IRA's? I know the new 401K would reduce my taxable income, but so does contributing to an existing IRA.

 

[thirty-two]

What are the options for the new 401k? Anything different than the offerings you’re invested in now? Any with lower fees?

 

[AZCrazy]

Fee structure may be vastly different, and that is worth looking at. The biggest difference is the amount you are able to contribute to each. 401k limits are around 18500 dollars, while IRA is limited to 5500 dollars per year if you're under 50. It's 24,500 for 401K and 6500 for IRA if over 50. Your ability to contribute to a 401k also fades out if you have a high income level, over about 180-190K. Depends on your situation.

 

[Russ Smith]

Fee structure may be vastly different, and that is worth looking at. The biggest difference is the amount you are able to contribute to each. 401k limits are around 18500 dollars, while IRA is limited to 5500 dollars per year if you're under 50. It's 24,500 for 401K and 6500 for IRA if over 50. Your ability to contribute to a 401k also fades out if you have a high income level, over about 180-190K. Depends on your situation.

Yeah that's what I was thinking but to be honest at this point, 52, I'm not really interested in putting in up to 18,500 a year. I have enough over 4 IRA's that with regular expected growth I'm not overly concerned about that. I'm actually more interested in "cash". My plan was to take whatever they matched and put that in, and the rest just save in CD's, or in my etrade brokerage account and buy stocks with it. I start Monday but I read today that they don't actually have matching yet. So I'm thinking I might just put my savings into cash and at the end of the year figure out what's better tax wise, putting the 6500 in to lower my taxable income, or just keeping the 6500 in cash. One of the great things is you don't have to make IRA (or 401K I think) contributions in the taxable year. that is you can make an IRA contribution in 2019, that goes to your 2018 taxes. In turbotax you can play with it, if I put X in what happens to my taxes.

I might just play around with the numbers and come up with some midpoint where it helps my taxes and leaves me enough money in cash too.

I've never had a job before that didn't do matching on 401k, so I always contribute at least up to what they match so you get the free money, so not having matching is a new one for me. Since I haven't been working this year, even with the tax overhaul this year I think I'll still get a refund this year, but next year I might not so this exercise will be more valuable next year.

 

[AZCrazy]

If there's no 'free money' involved with employer matches, consider how long you want to work as part of the equation as well. Deferring taxes in a retirement account is a nice thing, but that money is out of your hands and can't be touched until retirement age, without a big penalty. If you want more liquid access, there are some good no-load funds you could drop it into, or CD's or bonds that are really safe. No way to know what the market's going to do or what taxes will be like in 15 years.

 

[Cardsfanstl]

Are your IRA's traditional or ROTH? If traditional you can still put money into your IRA and 401K and received a tax break for each.

Does your 401K offer a Roth option? If they do and your employer does not match you might want to put money into that. Then when you retire and start to withdraw from the Roth it should be tax free so all your retirement income is not taxable.

You will have to research it and maybe talk to a Financial Advisor.

 

[Russ Smith]

Are your IRA's traditional or ROTH? If traditional you can still put money into your IRA and 401K and received a tax break for each.

Does your 401K offer a Roth option? If they do and your employer does not match you might want to put money into that. Then when you retire and start to withdraw from the Roth it should be tax free so all your retirement income is not taxable.

You will have to research it and maybe talk to a Financial Advisor.

Traditional no Roth and yes that's what I meant where next year working a full year I may just put some into IRA's so it reduces my taxable income. I don't know yet what my take home is going to look like, new job, new tax scam err plan etc.

Turns out they made my decision easy. We have Trinet right now but are switched Jan 1 and the 401K will switch too. It sounds like Trinet does not make it "easy" to just transition 401K's so everyone would have to roll their old one into whoever handles the new one and we were told in orientation "we don't expect it to be seamless, that's why we're dumping Trinet." So they actually advised us to NOT use the 401K until January to avoid the hassle.

So I'm not doing any 401K until they switch and then I'll see what I do.

Trinet is pretty sketchy IMO, they essentially make you do everything, fill it all out, every other link was broken, the dashboard keeps hanging etc, very unimpressed. Lucy had it a few years ago and we had similar problems there too.