vania-janet/multiturn-rag-retrieval-data huggingface dataset:
"401(k) doesn't have a ""return rate"", because 401(k) is not a type of investment -- it is a vehicle for investment, with certain tax treatments. Just like your money that's not in a 401(k), you can invest it in either the bank, a CD, stocks, mutual funds, bonds, etc., you can similarly (depending on the options given to you by your 401(k) plan) invest the money in the 401(k) in a cash account, buy stocks, mutual funds, etc. Your return is dependent on how you invest your money, not whether it's in a 401(k) or not. Whether it's in a (Roth or Traditional) 401(k) simply affects when and how it gets taxed. (It is true that most 401(k) plans offer little variety in types of investments you can choose; however, this is not a big deal, as chances are that in a few years, you will leave your company, at which point you are able to rollover the 401(k) into an IRA, at which point you will have many, many options for how to invest it.) To make a valid comparison, you should be comparing the same type of investment in both cases. That means, you should assume the same return for both the money outside the 401(k), and the money inside the 401(k), and only consider the taxes and penalties (if you plan to withdraw early)."
If you leave your job with money that you contributed to the 401K, the company will have a policy about whether you can leave the money in the 401K or whether you must take it with you.  I have normally seen that if it is a small amount, then it must be taken and if it is over a certain amount (maybe $10K) then you have the option of leaving it in the account or taking it out. If you take it out, then you should contact a brokerage first and get instructions from them for how to have it transferred into a rollover account to avoid having to pay tax.  If the company makes the check out to you or transfers money into a non-retirement account, then they will very easily cause a taxable event and they will likely withhold tax from the payment.   If you leave the money in the 401K after you leave, you will generally have fewer investment choices, higher fees, and you may have higher risks.  Occasionally companies in hard times fraudulently raid their 401K accounts and when this happens it can be very difficult to get it back. (For examples see the Dept Of Labor page at http://www.dol.gov/ebsa/newsroom/criminal/main.html and look for 401k or retirement in titles). As far as having the money invested for several years, that time can be your friend if you get a reasonable rate of return.  Over 30 years your money should be able to double multiple times.  (At 8% return it will take less than 10 years to double the money. [see http://buyupside.com/calculators/doublemoneyfeb08.htm])
The simplest thing is to transfer to your current account. You'll have the ability to borrow (assuming employer allows) 50% of the balance if you need to, and one less account to worry about.  Transferring to an IRA is the other common choice. This offers the ability to convert to a Roth IRA and to invest any way you choose. The 401(k) options may be limited.  Without more details, it's tough to decide. For example, if you are in the 15% bracket, the Roth conversion can be a great idea. And the 401(k) might be not so great, just deposit to the match, and then use the IRA. For example.
The first step is to contact the company you are considering using as an administrator. Ask if they have a loan provision.  For what it's worth, I looked at Schwab, and it seems to indicate they do not offer loans against this type of 401(k). That doesn't mean no one does, just that you may need to look around.
"1 - in most cases, the difference between filing joint or married filing single is close to zero. When there is a difference you're better off filing joint. 2 - The way the W4 works is based on how many allowances you claim. Unfortunately, even in the day of computers, it does not allow for a simple ""well my deduction are $xxx, don't tax that money."" Each allowance is equal to one exemption, same as you get for being you, same as the wife gets, same as each kid. 3 people X $3800 = $11,400 you are telling the employer to take off the top before calculating your tax. She does this by using Circular E and is able to calculate your tax as you request. If one is in the 15% bracket, one more exemption changes the tax withheld by $570. So if you were going to owe $400 in April, one few exemption will have you overpay $170. i.e. in this 15% bracket, each exemption changes annual withholding by that $570. For most people, running the W4 numbers will get them very close, and only if they are getting back or owing over $500, will they even think of adjusting. 3 - My recently published Last Minute Tax Moves offers a number of interesting ideas to address this. The concept of grouping deductions in odd years is worth noting. 4 - I'm not sure what this means, 2 accounts each worth $5000 should grow at the same rate if invested the same. The time it makes sense to load one person's account first is if they have better matching. You say you are not sure what percent your wife's company matches. You need to change this. 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.
"Unquestionably I think the priority should be funding retirement through ROTH/IRA/401K over HSA extra.  Obviously you need to fund your HSA for reasonable and expected medical expenses.  Also there is some floor to your more traditional retirement funding. Beyond that what does one do with excess dollars?  Given the lack of flexibility and fees, it seems clear to do ROTH IRA and 401K. Beyond that what then?  You may want to decide to ""take some money home"" and pay taxes on it.  Do you have a desire to own rental property or start/purchase a business?  Upgrade your home? etc... If all those things are taken care of, only then would I put money into an HSA. YMMV but most people, maxing a ROTH IRA alone, will have plenty of money for retirement given a reasonable rate of return."
As a rule, one should have a retirement. HOWEVER, you also have over a half a million dollars of debt.  Paying down debt is another way to prepare for retirement.  I would say throwing your excess money at your debts is a fine strategy right now.  Especially the student loan (the mortgage probably has a lower rate and brings tax savings, so paying it off is less urgent). If I were you I'd probably put SOMETHING into tax deferred retirement accounts because in your tax bracket, the savings from doing so are significant. The max you can put in tax deferred is $5,500 per year (each) in IRA's and up to $17,000 to your 401(k) each.  The tax-saving contribution opportunities will not come up again...you can't make up for it later. Any retirement saving beyond the tax advantaged part makes no sense while you have outstanding debt.
"With no match, the traditional 401(k) for someone otherwise in the 15% bracket makes little sense. I'd suggest contributing just enough if you were in the 25% bracket to be in the taxable 15% but no more. Use a Roth IRA if you are saving more than that.  I'm adding this based on OP's statement that the fees on the 401(k) range .8-1.4%. I wrote an article Are you 401(k)o’ed? in which I discuss how fees of this range negate the benefit of the mantra ""save at 25% to withdraw at 15%"" and if one were in the 15% bracket to start, this level off fee will cost you money in no time at all.  The people advising you to max out the 401(k) first, given the rest of your situation and that of the account, are misguided. I'd given them the benefit of the doubt and assume they don't have all the details.  And with all due respect to the other posters here, everyone of them a bright, valued colleague, your answers should be addressed to the OP's exact situation. 15% bracket, no match, high fees. I suspect some of answers will change on reviewing this."
I moved from contributing 10% to maxing as my salary rose over the course of three years after graduation.  Because of my raises, my monthly take home still increased, so it was a pretty painless way to increase my 401(k) contribution and also avoid lifestyle inflation. That said, I would not do it if you have any credit card debt, school loans, or an auto loan.  Pay that off first.  Then work on maxing the 401(k).  Personally I rate owning a home behind that, but that's partially because I'm in an area where the rent ratios are barely on the side of buying, so I don't find buying to be a pressing matter. One thing to investigate is if your company offers a Roth 401(k) option.  It's a nice option where you can go Roth without worrying about income limits.  My personal experience does not include a Roth IRA because when I still qualified for one I didn't know much about them, and now that I know about them I have the happy issue of not qualifying.
It is really hard to tell where you should withdraw money from. So instead, I'll give you some pointers to make it easier for you to make the decision for yourself, while keeping the answer useful to others as well. I have 3 401ks, ... and some has post tax, non Roth money Why keeping 3 401ks? You can roll them over into an IRA or the one 401k which is still active (I assume here you're not currently employed with 3 different employers). This will also help you avoiding fees for too low balances on your IRAs. However, for the 401k with after tax (not Roth) balance - read the next part carefully. Post tax amounts are your basis. Generally, it is not a good idea to keep post-tax amounts in 401k/IRA, you usually do post-tax contributions to convert them to Roth ASAP. Withdrawing from 401k with basis may become a mess since you'll have to account for the basis portion of each withdrawal. Especially if you pool it with IRAs, so that one - don't rollover, keep it separately to make that accounting easier. I also have several smaller IRAs and Roth IRAs, Keep in mind the RMD requirements. Roth IRAs don't have those, and are non-taxable income, so you would probably want to keep them as long as possible. This is relevant for 401k as well. Again, consolidating will help you with the fees. I'm concerned about having easily accessible cash for emergencies. I suggest keeping Roth amounts for this purpose as they're easily accessible and bear no taxable consequence. Other than emergencies don't touch them for as long as you can. I do have some other money in taxable investments For those, consider re-balancing to a more conservative style, but beware of the capital gains taxes if you have a lot of gains accumulated. You may want consider loss-harvesting (selling the positions in the red) to liquidate investments without adverse tax consequences while getting some of your cash back into the checking account. In any case, depending on your tax bracket, capital gains taxes are generally lower (down to 0%) than ordinary income taxes (which is what you pay for IRA/401k withdrawals), so you would probably want to start with these, after careful planning and taking the RMD and the Social Security (if you're getting any) into account.
After-tax money in Traditional IRA has a similar problem -- the contribution is after tax, but after it grows into principal + earnings, the ""earnings"" part is taxed again, except it is worse than the capital-gains case because it is taxed as regular income. Like above, you can take the same numbers as for the Roth IRA, $1000 * 0.75 * 1.05^10 = $1221.67, but where the $471.67 ""earnings"" is taxed again at 25%, so you lose another $117.92 in tax and are left with $1103.75. So although the nominal amount of tax paid is the same as for pre-tax money in Traditional IRA, it ends up being a lot worse. (Everything I said above about pre-tax money in Traditional IRA, after-tax money in Traditional IRA, and Roth IRA, also applies to pre-tax money in Traditional 401(k), after-tax money in Traditional 401(k), and Roth 401(k), respectively.) Regarding the question you raise in the title of your question, why someone would get contribute to a Traditional IRA if they already have a 401(k), the answer is, mostly, they wouldn't. First, note that if you merely have a 401(k) account but neither you nor your employer contributes to it during the year, then that doesn't prevent you from deducting Traditional IRA contributions for that year, so basically you can contribute to one or the other; so if you only want to contribute below the IRA contribution limit, and don't need the bigger 401(k) contribution limit, and the IRA's investment options are more attractive to you than your 401(k)'s, then it might make sense for you to contribute to only Traditional IRA. If you or your employer is already contributing to your 401(k) during the year, then you cannot deduct your Traditional IRA contributions unless your income is very low, and if your income is really that low, you are in such a low tax bracket that Roth IRA may be more advantageous for you.
"One approach is to invest in ""allocation"" mutual funds that use various methods to vary their asset allocation. Some examples (these are not recommendations; just to show you what I am talking about): A good way to identify a useful allocation fund is to look at the ""R-squared"" (correlation) with indexes on Morningstar. If the allocation fund has a 90-plus R-squared with any index, it probably isn't doing a lot. If it's relatively uncorrelated, then the manager is not index-hugging, but is making decisions to give you different risks from the index. If you put 10% of your portfolio in a fund that varies allocation to stocks from 25% to 75%, then your allocation to stocks created by that 10% would be between 2.5% to 7.5% depending on the views of the fund manager. You can use that type of calculation to invest enough in allocation funds to allow your overall allocation to vary within a desired range, and then you could put the rest of your money in index funds or whatever you normally use. You can think of this as diversifying across investment discipline in addition to across asset class. Another approach is to simply rely on your already balanced portfolio and enjoy any downturns in stocks as an opportunity to rebalance and buy some stocks at a lower price. Then enjoy any run-up as an opportunity to rebalance and sell some stocks at a high price. The difficulty of course is going through with the rebalance. This is one advantage of all-in-one funds (target date, ""lifecycle,"" balanced, they have many names), they will always go through with the rebalance for you - and you can't ""see"" each bucket in order to get stressed about it. i.e. it's important to think of your portfolio as a whole, not look at the loss in the stocks portion. An all-in-one fund keeps you from seeing the stocks-by-themselves loss number, which is a good way to trick yourself into behaving sensibly. If you want to rebalance ""more aggressively"" then look at value averaging (search for ""value averaging"" on this site for example).
"The error in the example is here: ""Now, if you contribute 5% to a Roth 401(k), your employer would match your after-tax 5% contribution. If the tax rate is 25%, that would be 5% of $60,000, which is $3,000. However, that $3,000 is put in to a traditional 401(k), so it is taxed when withdrawn. Assuming the tax rate is still 25% when you withdraw, you are only getting $2,250. Essentially you are giving up $750 of free money in this case."" You set your contribution to Roth 401k as a function of the gross, 80,000.  You choose 5% and contribute 4000 Your employer matches 4000. At the end of the year, your taxable income to the IRS is 80000, and you pay 30% or 24000.  You have 80K-4K-24K to live on, or 52K If you chose the alternate regular 401k,then you contribute 4K, your income to the IRS is (80-4=) 76k, and you pay 30%, 22.8K in tax.  You have 80-4-22.8 or 53.2K to live on. Or, to come at it the other way, you have 4000*30% =1200 extra tax reduction in your income this year.   If the extra income in 401k versus extra current year tax in Roth IRA means you have to reduce less, like 2800K to the roth so you maintain a 53.2K lifestyle, then yes, the Roth IRA match is reduced.  If you have the cash flow to prepay the current year tax and maximum-match contribution, you will get the full match based on your gross income."
If, after several years of maxing out your 401(k) you decide that saving for the house is the top priority, you'll see money flow to the money-market account marked for the down payment at a substantial monthly rate, thanks to that savings culture. As for the increasing future earnings - no. Most people I've known for a long time, if they saved 20% when they made $20K/year, they continued to save 20% or more when they later made $100K/year. People who spent the entire paycheck while making $50K/year, always say, if only I got a raise to $60K/year, I'd save a few thousand. But they eventually graduate to $100K/year and still spend the entire paycheck. It's all about your savings culture. On the second part of your question - yes, Roth is a great tool, especially if you believe that the future tax rates will be higher (to fix the long-term budget deficits). So, contributing to 401(k) to maximize the match, then max out Roth, as others suggested, is a great advice. After you've done that, see what else you can do: more 401(k), saving for the house, etc."
Apply as many deductions as you are legally entitled to. Those are taxes you may never ever pay.  Then turn around and put any more monies above the maximum retirement contributions into a taxable account. But this time invest in tax efficient investments. For example, VTI or SPY will incur very minimal taxes and when you withdraw, it will be at lower tax rate (based on current tax laws). Just as you diversify your investments, you also want to diversify your taxes.
Does your employer provide a matching contribution to your 401k?  If so, contribute enough to the 401k that you can fully take advantage of the 401k match (e.g. if you employer matches 3% of your income, contribute 3% of your income).  It's free money, take advantage of it. Next up, max out your Roth IRA.  The limit is $5000 currently a year. After maxing your Roth, revisit your 401k.  You can contribute up to 16,500 per year. You savings account is a good place to keep a rainy day fund (do you have one?), but it lacks the tax advantages of a Roth IRA or 401k, so it is not really suitable for retirement savings (unless you have maxed out both your 401k and Roth IRA). Once you have take care of getting money into your 401k and Roth IRA accounts, the next step is investing it.  The specific investment options available to you will vary depending on who provides your retirement account(s), so these are general guidelines. Generally, you want to invest in higher-risk, higher-return investments when you are young.  This includes things like stocks and developing countries. As you get older (>30), you should look at moving some of your investments into things that less volatile.  Bond funds are the usual choice.  They tend to be safer than stocks (assuming you don't invest in Junk bonds), but your investment grows at a slower rate. Now this doesn't mean you immediately dump all of your stock and buy bonds.  Rather, it is a gradual transition over time.  As you get older and older, you gradually shift your investments to bond funds. A general rule of thumb I have seen: 100 - (YOUR AGE) = Percentage of your portfolio that should be in stocks Someone that is 30 would have 70% of their portfolio in stock, someone that is 40 would have 60% in stock, etc. As you get closer to retirement (50s-60s), you will want to start looking at investments that are more conservatie than bonds.  Start to look at fixed-income and money market funds.
In this situation I would recommend figuring out about what you would need to pay in taxes for the year.  You have two figures (your salary and dependents) , but not others.  Will you contribute to a 401K, do you itemize deductions, etc...  If things are uncertain, I would figure my taxes as if I took the standard deduction.   For argument's sake let's assume that comes out to $7300.  I would then add $500 on to my total to cover potential increases in taxes/fees.  You can adjust this up or down based on your ability to absorb having to pay or the uncertainty in your first calcuation. So now $7800, divide by 26 (the amount of paychecks you receive in a year) = $300 Then I would utilize a payroll calculator to adjust my exemptions and additional witholding so my federal withholding is as close as possible to this number.   Or you can sit with your payroll department and do the same.
You can probably roll it over into the new company's 401k too, so just talk to your HR rep there.  I set up a separate Vangard IRA so when I changejobs or anything, I just dump my investments into that account and don't have to worry about keep track of them all over the place.
"Use VTIVX. The ""Target Retirement 2045"" and ""Target Retirement 2045 Trust Plus"" are the same underlying fund, but the latter is offered through employers.  The only differences I see are the expense ratio and the minimum investment dollars.  But for the purposes of comparing funds, it should be pretty close. Here is the list of all of Vanguard's target retirement funds. Also, note that the ""Trust Plus"" hasn't been around as long, so you don't see the returns beyond the last few years.  That's another reason to use plain VTIVX for comparison. See also: Why doesn't a mutual fund in my 401(k) have a ticker symbol?"
You can anything you want with your 401K. It is not a good idea to borrow against yourself unless there are some critical situations you are facing.
"Close... Warning, I may be off a bit here; I'm sure someone will correct me if so. Traditional 401k or IRA: money goes in pre-tax (so, yes, you avoid paying tax on it now), grows untaxed, taxes are due when you retire and start taking money back out of the account -- but your income, including these withdrawals, is likely to be lower than your peak earning years so your tax rate will be lower. You don't avoid all the tax, but you delay it and hopefully reduce it, and by doing so there's more money in your account earning returns. Roth 401k or IRA: money goes in after taxes (you do pay income tax now). However, all returns on the money are untaxed (I believe), and you pay no tax when you're eligible to withdraw the funds.  Either or both kinds of 401k may be eligible for some percentage of matching funds from your employer (there are some incentives for them to offer this benefit). I believe that even if you're doing a Roth 401k, the matching funds legally have to go in as traditional plan. And yes, as that implies, it is possible to split your contribution between the two styles. Note: the matching funds are ""free money."" If your plan offers a match, it is highly recommended that you contribute enough to your 401k to capture the maximum match."
There are a couple of cases where I'd argue in favor of the 401k: Employer matching - If the employer matches your contributions, then it makes sense to get these additional investments which if you are in a low bracket may exist as highly-compensated employees may want those in the lower brackets to contribute as much as they can. Investment options - If the employer has enough assets in the plan, there could be access to institutional versions of those funds.  For example, compare Vanguard Institutional Index Instl Pl (VIIIX) with Vanguard 500 Index Inv (VFINX), where the expense ratio in the former is just .02% while the latter is .17%.  Granted this is a minor difference in expenses, there is something to be said for how much a .15% drag year over year could add up.