vania-janet/multiturn-rag-retrieval-data huggingface dataset:
Start with the tax delta. For example, you'd hope to deposit at 25% bracket, but take withdrawals while at a marginal 15%. In this case, you're 10% to the good with the 401(k) and need to look at the fee eating away at this over time. Pay an extra 1%/yr and after 10 years, you're losing money. That's too simple, however. Along the way, you need to consider that the capital gain rate is lower than ordinary income. It's easier to take those gains as you wish to time them, where the 401(k) offers no flexibly for this. Even with low fees, this account is going to turn long term gains to ordinary income. (Note - in 2013, a couple with up to $72,500 in taxable income has a 0% long term cap gain rate. So, if they wish, they can sell and buy back a fund, claim the gain, and raise their cost basis. A tiny effort for the avoidance of tax on the gains each year.) First paragraph, don't forget, there are the standard deduction, exemption, and 10% bracket. While you are in the range to save enough to create he income to fill the low end at withdrawal, there's more value than just the 10% I discussed earlier.  Last, there's a phenomenon I call The Phantom Tax Rate Zone when one's retirement withdrawals trigger the taxation of Social Security.  It further complicates the math and analysis you seek.
You are not locked in to this percentage of new money forever, you may change it every paycheck. Pick a split that makes you feel comfortable. Then revisit how you allocate new money every year. If congress makes changes to the brackets; or your compensation changes; or the rules regarding retirement funds changes: adjust accordingly. Note that the Roth IRA came long after the IRA; and that the Roth 401K came long after the 401K. You have no idea what types of investments you will be able to contribute to with your next employer, or how your martial situation and income will change the scope of available retirement options. Heck you can even convert non-Roth to Roth in the future if that makes sense. Pick a percentage for now, but don't forget to revisit it.
The 401K match has limits, but it is not taxable until you withdraw the money from the account. You can think of it as an initial lump of interest or gain.  When you leave the company you are allowed to keep it, if you are vested. You can then roll it over into a IRA, or another 401K. When you withdraw money in retirement you will pay taxes on the match and all the gains from the match. Taxes on what you contribute will depend on if it was pre-tax or post-tax, or if it was deposited into a Roth IRA. The amount you deposit pretax is noted on the W-2, which you attach to the 1040 form. The company match does not appear anywhere on the w-2 or 1040. It should show on your 401-K statements. Those statements should also tell you how much of the match has been vested.
One should fund a 401(k) or matched retirement account up to the match, even if you have other debt. Long term, you will come out ahead, but you must be disciplined in making the payments. If one wants to point out the risk in a 401(k), I'd suggest the money need not be invested in stocks, there's always a short term safe option.
No, you cannot. 401k must not be discriminatory, i.e.: you cannot have different matching for different employees.
These are the basics in order: Max your employer contributions to your 401k if available Pay off any loans Contribute to an IRA  Perhaps max out your 401k Look into other investment options (refinance your mortgage, buy stocks) Those are the typical rules, special situations may need specials actions...
Paying off the high-interest debt is a good first start. Paying interest, or compound interest on debt is like paying somebody to make you poor. As for your 401k, you want to contribute enough to get the full match from your employer. You might also consider checking out the fees associated with your 401k with an online fee analyzer. If it turns out you're getting reamed with fees, you can reduce them by fiddling with your investments. Checking your investment options is always a good idea since jobs frequently change them. Opening an IRA is a good call. If you're eligible for both Roth and Traditional IRAs, consider the following: Most financial institutions (brokers or banks) can help you open an IRA in a matter of minutes. If you shop around, you will find very cheap or even no fee options. Many brokers might try to get your business by giving away something for ‘free.' Just make sure you read the fine print so you understand the conditions of their promotional offer.  Whichever IRA you choose, you want to make sure that it's managed properly. Some people might say, ‘go for it, do it yourself’ but I strongly disagree with that approach. Stock picking is a waste of time and market timing rarely works.  I'd look into flat fee financial advisors. You have lots of options. Just make sure they hear you out, and can design/execute an investment plan specific to your needs At a minimum, they should: Hope this is helpful.
Great questions -- the fact that you're thinking about it is what's most important. I think a priority should be maximizing any employer match in your 401(k) because it's free money. Second would be paying off high interest debt because it's a big expense. Everything else is a matter of setting good financial habits so I think the order of importance will vary from person to person. (That's why I ordered the priorities the way I did: employer matching is the easiest way to get more income with no additional work, and paying down high-interest debt is the best way to lower your long-term expenses.) After that, continue to maximize your income and savings, and be frugal with your expenses. Avoid debt. Take a vacation once in a while, too!
"Rolling an old 401k into a new 401k is generally only for ease of management. For example, how many bank accounts do you really want? As long as the funds are reasonably allocated I've found it can be a useful ""mind game"" to leave it separate. Sometimes it's desirable to ignore an account and let it grow, and it is a nice surprise when finally adding all the account balances together. In other words, I keep thinking I've got X (the amount of my biggest or current 401k), which affects/helps my habits and desire to save. When I add them all together I'm shocked to find out I've got Y (the total of all accounts). Personally, I've had big paperwork problems transferring an old 403b (same type process as 401k) even when I had an adviser helping me move it. In the end it was worth moving it, because I'm having the adviser manage it. I'm actually writing this answer specifically because I recently moved a big 401k into a Traditional IRA. A rep from the brokerage, representing my previous employer, kept calling me to find out how they could help (I didn't brush him off). I found that using an IRA provided me with the opportunity to do self-guided investments in funds or even individual stocks, well beyond the limited selection of the old company's 401k. It was useful/interesting to me to invest in low-fee vehicles such as index funds (ie: the Buffett recommendation), and I'll find some stocks as well. Oh and when the old company 401k has certain funds being discontinued, I didn't want to notice the mandated changes years later. So, I'd suggest you consider management and flexibility of the 401k or equivalent, and any of your special personal circumstances/goals. If you end up with a few retirement accounts, I suggest you use an account aggregating website to see or follow your net worth. I know many who, based on various concerns and their portfolio, find an acceptable website to use."
"See if they offer a ""Target Date"" plan that automatically adjusts throughout your career to balance gains against preserving what you've already built up.  You can adjust for more or less aggressive by selecting a plan with a later or sooner target date, respectively. (But check the administrative fees; higher fees can eat up a surprisingly large part of your growth since they're essentially subtracted from rate of return and thus get compounded.) If they don't have that option, or charge too much for it, then yes, you may want to adjust which plan your money is in over time; you can usually ""exchange"" between these plans at no cost and with no tax penalty. NOTE: The tax-advantaged 401(k) investments should be considered in the context of all your investments. This is one of the things an independent financial planner can help you with. As with other investment decisions, the best answer for you depends on your risk tolerance and your time horizon."
You could check with the new 401k provider to see if they allow rollover-in contributions. You can likely take the exact amount of the rollover check that was put in the IRA and put it in the new 401k and then take a loan. Loan amount is calculated as 1/2 vested balance less any outstanding loans or $50k, whichever is less. Hopefully this helps...
It is not necessarily proportional. 401k are all unique per the plan and how they are set up. It is impossible to find any two exactly alike. You should have separate buckets of the money types. Pre tax, after tax, roth, employer contribution,etc... If the plan is good you may have a Source Specific Withdraw option which allows you to take only roth or pretax at your choosing. They should track the growth of each bucket separately. It does indeed appear complicated but just think of it as different buckets of cash store in the same vault. Most people end up rolling over the 401k into an ira when they retire for flexibility to get out from under the plan rules. When you do this you will create a roth ira and a traditional ira. Then you can pick and choose when you want to take what type of money.
If you're not careful you can end up paying two commissions (in two different accounts) to sell off / purchase enough of a category to get back to your targets. Another problem I had is that only one account (401k) is receiving deposits on a regular basis, and that's all going into an S&P 500 index fund. This makes it so that my allocation is off by a fair amount every quarter or so -- too much in large cap equities, not enough of everything else. My solution to this going forward is to ""over-rebalance"" a couple of times a year: sell enough SPY from my other accounts so that I'm under-allocated in large caps by the amount I expect to add to my 401k over the next 3 months. (So that in six months at my next rebalancing I'm only 3 months over-allocated to large caps -- plus or minus whatever gains/losses there are.)"
Bottom line is our system is broken.  For three years running I am 0% return with over 600k in.  Yet, the 401k admin institution charges us all enormous fees that most aren't even aware exist.  A helpful tip is to also check out your expense ratios and learn how those work as well so you know how much you are paying in hidden fees.
You want to take the hit now.   There are tons of calculators out there, but the rule of 70 should be enough to help convince you: Assume you can put an extra $10k in a 401k now, or keep it.  If you pay ~30% in taxes, you  can have either: A) $7k now, or: B) What $10K will grow to in your 40 years till retirement less taxes at the end. The rule of 70 is a quick, dirty way to calculate compounded returns.  It says that if you divide 70 by your assumed return, you get the approximate number of years it will take to double your money.   So let's say you assume a 5% rate of return (you can replace that with whatever you want): 1) 70/5 is 14, so you'll double your $10k every 14 years. 2) In 40 years, you'll double your money almost 3 times (2.86) 3) That means you'll end up with almost $80k before taxes 4) Even if we assume the same tax rate at retirement of 30% (odds are decent it's lower, since you'll have less income, presumably), you still have $56k. Whatever you think inflation will be, $56k later is a LOT better than $7k now.
A good general rule is to save 15% of your income for retirement.  As for where you put it: Put as much as it takes to maximize your employer match into your 401(k), but no more.  The employer match is free money, and you can't beat free money If you still haven't put in 15%, put the rest into a Roth IRA.  By historical standards, taxes are pretty low today.  They are almost certainly going to be higher in retirement, especially since you likely won't have the deductions in retirement that you may have now (kids, mortgage, etc). If you've maxed our the allowed contribution for your Roth and still haven't saved 15%, put the rest in a traditional IRA.
Does your employer offer a 401(k) match? If so, contribute enough to maximize that--it's free money. After that, contribute to an IRA where you can invest in funds with low expenses. After you max that out, if you still have money left over, max out your 401(k) despite the high expenses for the tax advantages. Remember when you leave the company you can roll over the balance into an IRA and switch to lower-cost investments. Of course this is general advice without knowing your situation. If you're looking to buy a home soon, for example, you might want to keep extra money in a taxable account for a downpayment rather than maxing out your 401(k).
Try to avoid actually pulling money out of your retirement savings. Not only are you paying that stiff penalty today, but you're actually stealing form your future. Many 457 plans allow you to borrow against the balance, usually up to 50% of the plan balance. I'd roll the 401k into the 457 and borrow against it if you really need the money. Borrow a little extra to help you make the first few payments if you need to.
For both of your retirement plans you need to know every detail, exact way to maximize matching, expense ratios for the investments you choose, any other fees, etc. Knowledge is power, and all that. In What is an appropriate level of 401k fees or expenses in a typical plan? I go on to preach about how fees can wipe out any tax benefit over time. For any new investor, my first warning is always to understand what you are getting into. If you can't explain it to a friend, you shouldn't be in it. Edit - you first need to understand what choices are within the accounts. The 4% and 6% are in hindsight, right? These are not fixed returns. You should look at the choices and more heavily fund the account with the better selection. Deposit to her account at least to grab the match. As far as the longer term goals, see how the house purchase goes. Life has a way of sending you two kids and forcing you to tighten the budget. You may have other ideas in three years. (I have no P2P lending experience, by the way.) Last - many advise that separate finances are a bad path for a couple. It depends. Jane and I have separate check books, and every paycheck just keep enough to write small checks without worry, most of the money goes to the house account. Whatever works for you is what you should do. We've been happily married for most of the 17 years we've been married."
Regarding #1: use the free online version of turbotax and start to play with the numbers for the different options for filing. It can make a difference, based on the imbalance between the couples income. Also filing married but separate can eleiminate some deductions/credits. Regarding #2: when you submit your taxes use the forecasting tool in turbotax to see if you should adjust your withholding. 2012 will be tricky because unless you changed your withholding in early 2011 to account for the change in status, your refund/owe number for 2011 will be unrelated to what will happen in 2012.  Make sure you meet the safe harbor requirements, enough withheld to equal the previous years tax. Joe Taxpayer tried to give you a formula regarding exemptions, here is another explanation: Each exemption is worth a percent of $3800. If you are in the 10% bracket that means it is worth $380 per year.  If you got a big refund or wrote a big check, adjust accordingly. Regarding #4: getting a match is great. Make sure you leave nothing on the table. Other than that it won't make a difference which one you pick.  Look at the funds available, investment types, expenses and go with the one that makes the most sense to maximize. Remember you are not getting interest on the 401Ks you are investing and getting returns. There is no way to know which investment fund will be better in 2012.
Companies usually have a minimum account balance required to keep a 401k for former employees. You will have to check whether $10k is sufficient to keep your funds in your former employer's 401k. If you are below their threshold, you will have to move your money. One option is to rollover into the new employer's 401k.  You can rollover a 401k into a traditional IRA account that is independent of your employer. A traditional IRA has the same tax benefits as a 401k; it grows tax-free until you withdraw money from the account. Companies that offer IRAs include Vanguard, Fidelity, TIAA.  Many companies have significant overhead costs in the their 401k management. It may be better for you to rollover your money into an IRA to save on these costs.  I am not knowledgeable about loaning from retirement accounts, so I cannot help with that.
"You're getting great wisdom and options. Establishing your actionable path will require the details that only you know, such as how much is actually in each paycheck (and how much tax is withheld), how much do you spend each month (and yearly expenses too), how much spending can you actually cut or replace, how comfortable are you with considering (or not considering) unexpected/emergency spending. You mentioned you were cash-poor, but only you know what your current account balances are, which will affect your actions and priorities. Btw, interestingly, your ""increase 401k contributions by 2% each year"" will need to end before hitting the $18K contribution limit. I took some time and added the details you posted into a cash-flow program to see your scenario over the next few years. There isn't a ""401k loan"" activity in this program yet, so I build the scenario from other simple activities. You seem financially minded enough to continue modeling on your own. I'm posting the more difficult one for you (borrow from 401k), but you'll have to input your actual balances, paycheck and spending. My spending assumptions must be low, and I entered $70K as ""take-home,"" so the model looks like you've got lots of cash. If you choose to play with it, then consider modeling some other scenarios from the advice in the other posts. Here's the ""Borrow $6500 from 401k"" scenario model at Whatll.Be: https://whatll.be/d1x1ndp26i/2 To me, it's all about trying the scenarios and see which one seems to work with all of the details. The trick is knowing what scenarios to try, and how to model them. Full disclosure: I needed to do similar planning, so I wrote Whatll.Be and I now share it with other people. It's in beta, so I'm testing it with scenarios like yours. (Notice most of the extra activity occurs on 2018-Jan-01)"
"The principle to follow is called ""pay yourself first"". Have your savings deducted from your paycheck before it hits your checking account. You spending will change to accommodate the reduction. If you have a 401(k) available from your employer, start saving some money via that. If not, figure out a way to have something moved out of your checking account to a separate savings account when your paycheck hits. Then as you get raises, up the amount of automatic savings by half of the raise. You will find this hurts less than you think and it will let you build an emergency fund, which is the first thing you need. When the emergency fund is 6 months of normal spending, then you can start to invest."
Keep in mind that in the usual circumstances, 401k disbursements are taxable. Finally, many financial advisors will also suggest establishing an ""emergency fund"", which is money that you will not use unless you suffer an emergency that has an impact on your normal income--loss of job, medical emergency, etc. These funds are often kept in highly liquid accounts (savings accounts, money-market funds, etc.) so they can be accessed immediately when you run into one of ""life's little surprises"". Generally, it is advised that an emergency fund between $500-$1000 is established ASAP, and over time the emergency fund should be increased until it has reached a value equivalent to the sum of 8 months' worth of expenses. If funding an IRA is preventing you from working towards such an emergency fund, then you may want to consider waiting on maxing out the IRA before you have that EF established. Of course, it goes without saying that credit card balances with APRs other than 0.00% (or similar) should be paid off before an IRA is funded, since while you can only hope to match the market at best (between 10-15% a year) in your IRA investments, paying down credit card balances is an instant ""return"" of whatever the APR is, which usually tends to be between a 15-30% APR. In a nutshell, assuming you are maxing out your 401k (if applicable), have an emergency fund established, are not carrying any high-APR credit card balances, and are able to do so, historical price movements in the markets suggest that funding your Roth IRA upfront and investing these funds immediately in a broadly diversified portfolio will yield a higher expected return than funding the account periodically throughout the year (using dollar cost averaging or similar strategies). If this is not the case, take some time to consider the opportunity costs you are incurring from not fully contributing to your 401k, carrying high credit card balances, or not having a sufficient emergency fund established. This is not financial advice specific to any individual and your mileage may vary. Consider consulting a Certified Financial Planner, Certified Public Accountant, etc. before making any major financial decisions."
The best option for maximizing your money long-term is to contribute to the 401(k) offered by your employer. If you park your inheritance in a savings account you can draw on it to augment your income while you max out your contributions to the 401(k). You will get whatever the employer matches right off the bat and your gains are tax deferred. In essence you will be putting your inheritance into the 401(k) and forcing your employer to match at whatever rate they do. So if your employer matches at 50 cents on the dollar you will turn your 50 thousand into 75 thousand.
You should try to take out other loans sufficient to pay off your 401(k) loan if you can.   Maybe you can take out a home equity loan?  You can also ask your bank about unsecured loans.  You should also check the rules for your new employer's 401(k), if you're rolling over your 401(k).  There's a small possibility that you could take out another loan right now and apply it to the previous loan balance. Or if you need to wait, you could use it to help pay off any temporary loans that were needed to avoid the distribution penalty.
"One description of what happened is at 401(k) Plan Fix-It Guide.  The issue is the plan was ""Top Heavy,"" i.e. those making a high income were making disproportionately larger deposits than the lower paid employees. As the IRS article suggests, a nice matching deposit from the employer can eliminate the lower limit caused by the top heavy-ness.  Searching on [top heavy 401(k)] will yield more details if you wish to research more."