vania-janet/multiturn-rag-retrieval-data huggingface dataset:
In your case I think you are doing just fine.  Index funds, by their nature, have lower transaction costs and fewer taxable events than actively managed funds, good work.   Index funds do not preclude the generation of dividends, and by their nature they probably generate slightly more than actively managed funds.   You could take capital gain or dividend or both distributions, rather than reinvest them, if paying the taxes are a hardship.  Otherwise look at the taxes you pay as your contributions to these funds.  It stinks, but this is why 401K/IRA were rather revolutionary when they were formed.  It was a really good deal to not have people's capital gains eaten by taxes when they occurred.  Now its old hat, but it was pretty darn cool at the time. Should you prefer VTMSX rather than VFIAX?  We can't really make the call on that one.  Which one will perform better after taxes?  Its anyone's guess. It is kind of a good problem to have.
Once upon a time, money rolled over from a 401k or 403b plan into an IRA could not be rolled into another 401k or 403b unless the IRA account was properly titled as a Rollover IRA (instead of Traditional IRA - Roth IRAs were still in the future) and the money kept separate (not commingled) with contributions to Traditional IRAs. Much of that has fallen by the way side as the rules have become more relaxed.  Also the desire to roll over  money into a 401k plan at one's new job has decreased too --  far too many employer-sponsored retirement plans have large management fees and the investments are rarely the best available: one can generally do better  keeping ex-401k money outside a new 401k, though of course new  contributions from salary earned at the new employer perforce must be put into the employer's 401k. While consolidating one's IRA accounts at one brokerage or one fund family certainly saves on the paperwork, it is worth keeping in mind that putting all one's eggs in one basket might not be the best idea, especially for those concerned that an employee might, like Matilda, take me money and run Venezuela. Another issue is that while one may have diversified investments at the brokerage or fund family, the entire IRA must have the same set of beneficiaries: one cannot leave the money invested in GM stock (or Fund A) to one person and the money invested in Ford stock (or Fund B) to  another if one so desires.  Thinking far ahead into the future, if one is interested in making charitable bequests, it is the best strategy tax-wise to make these bequests from tax-deferred monies rather than from post-tax money. Since IRAs pass outside the will, one can keep separate IRA accounts with different companies, with, say, the Vanguard IRA having primary beneficiary United Way and the Fidelity IRA having primary beneficiary the American Cancer Society, etc. to achieve the appropriate charitable bequests.
Mostly you nailed it.  It's a good question, and the points you raise are excellent and comprise good analysis. Probably the biggest drawback is if you don't agree with the asset allocation strategy.  It may be too much/too little into stocks/bonds/international/cash.   I am kind of in this boat.  My 401K offers very little choices in funds, but offers Vanguard target funds.  These tend to be a bit too conservative for my taste, so I actually put money in the 2060 target fund.  If I live that long, I will be 94 in 2060.   So if the target funds are a bit too aggressive for you, move down in years.  If they are a bit too conservative, move up.
If it were my money, I wouldn't put it in a 401(k) for this purpose. If you were working at a company that provided 401(k) matching, then it might be worth it to put the money in your employer's 401(k) because the employer chips in based on what you put in. But you're self-employed, so there's no matching unless you match it yourself.  (Correct?) So, given that there's no matching, a 401(k) arrangement would have more restrictions than a non-tax-advantaged account (like a bank account, or a taxable money market account).  This would be taxable in the year you earn the money, but then that's it. If you're expecting to pull out the money pre-retirement, I wouldn't put it in in the first place.
At your age, I don't think its a bad idea to invest entirely in stocks. The concern with stocks is their volatility, and at 40+ years from retirement, volatility does not concern you. Just remember that if you ever want to call upon your 401(k) for anything other than retirement, such as a down payment on a home (which is a qualified distribution that is not subject to early distribution penalties), then you should reconsider your retirement allocations. I would not invest 100% into stocks if I knew I were going to buy a house in five years and needed that money for a down payment. If your truly saving strictly for a retirement that could occur forty years in the future, first good for you, and second, put it all in an index fund. An S&P index has a ridiculously low expense ratio, and with so many years away from retirement, it gives you an immense amount of flexibility to choose what to do with those funds as your retirement date approaches closer every year.
"Aggressiveness in a retirement portfolio is usually a function of your age and your risk tolerance. Your portfolio is usually a mix of the following asset classes: You can break down these asset classes further, but each one is a topic unto itself. If you are young, you want to invest in things that have a higher return, but are more volatile, because market fluctuations (like the current financial meltdown) will be long gone before you reach retirement age. This means that at a younger age, you should be investing more in stocks and foreign/developing countries. If you are older, you need to be into more conservative investments (bonds, money market, etc). If you were in your 50s-60s and still heavily invested in stock, something like the current financial crisis could have ruined your retirement plans. (A lot of baby boomers learned this the hard way.) For most of your life, you will probably be somewhere in between these two. Start aggressive, and gradually get more conservative as you get older. You will probably need to re-check your asset allocation once every 5 years or so. As for how much of each investment class, there are no hard and fast rules. The idea is to maximize return while accepting a certain amount of risk. There are two big unknowns in there: (1) how much return do you expect from the various investments, and (2) how much risk are you willing to accept. #1 is a big guess, and #2 is personal opinion. A general portfolio guideline is ""100 minus your age"". This means if you are 20, you should have 80% of your retirement portfolio in stocks. If you are 60, your retirement portfolio should be 40% stock. Over the years, the ""100"" number has varied. Some financial advisor types have suggested ""150"" or ""200"". Unfortunately, that's why a lot of baby boomers can't retire now. Above all, re-balance your portfolio regularly. At least once a year, perhaps quarterly if the market is going wild. Make sure you are still in-line with your desired asset allocation.
"when you contribute to a 401k, you get to invest pre-tax money. that means part of it (e.g. 25%) is money you would otherwise have to pay in taxes (deferred money) and the rest (e.g. 75%) is money you could otherwise invest (base money). growth in the 401k is essentially tax free because the taxes on the growth of the base money are paid for by the growth in the deferred portion. that is of course assuming the same marginal tax rate both now and when you withdraw the money. if your marginal tax rate is lower in retirement than it is now, you would save even more money using a traditional 401k or ira. an alternative is to invest in a roth account (401k or ira). in which case the money goes in after tax and the growth is untaxed. this would be advantageous if you expect to have a higher marginal tax rate during retirement. moreover, it reduces tax risk, which could give you peace of mind considering u.s. marginal tax rates were over 90% in the 1940's. a roth could also be advantageous if you hit the contribution limits since the contributions are after-tax and therefore more valuable. lastly, contributions to a roth account can be withdrawn at any time tax and penalty free. however, the growth in a roth account is basically stuck there until you turn 60. unlike a traditional ira/401k where you can take early retirement with a SEPP plan. another alternative is to invest the money in a normal taxed account. the advantage of this approach is that the money is available to you whenever you need it rather than waiting until you retire. also, investment losses can be deducted from earned income (e.g. 15-25%), while gains can be taxed at the long term capital gains rate (e.g. 0-15%). the upshot being that even if you make money over the course of several years, you can actually realize negative taxes by taking gains and losses in different tax years. finally, when you decide to retire you might end up paying 0% taxes on your long term capital gains if your income is low enough (currently ~50k$/yr for a single person).
ok if you haven't rolled in the 401k assets yet, you're fine and should put them into a traditional.  if your earnings + roth conversions will put you at or below your anticipated tax bracket during retirement, then the roth conversion might make sense.  in some cases, employers will give you a roth 401k option, but you are right that it's not the default.
Adding to the excellent answers already given, we typically advise members to contribute as much as needed to get a full employer match in their 401K, but not more.  We then redirect any additional savings to a traditional IRA or ROTH IRA (depending on their age, income, and future plans).  Only once they've exhausted the $5000 maximum in their IRA will we look at putting more money into the 401K. The ROTH IRA is a beautiful and powerful vehicle for savings.  The only reason to consider taking money out of the ROTH is in a case of serious catastrophe.
I'll respect the mod's suggestion. I'd answer with a warning. The concept of 401(k) pretax saving is to save at a high rate, while working, and withdraw at a lower rate. An annual expense pushing 1% or higher is likely to negate the benefit of the account over time.  If your employer offers the Roth 401(k), I'd suggest using that for your deposits, and only up to the match. Then invest outside the 401(k). In the 25% bracket, it's good to have a mix of both pre and post tax retirement money.
A 401k is pretty good, but it's not magic. Personally, I'd consider a 30k salary with a 401k and a 2k employer match less valuable than a 36k salary, let alone a 48k salary. If worried about retirement savings simply set up that IRA and put in the full 5.5k allowance.
If you can afford to put more money into the 401(k) -- which is what paying yourself back at a higher rate than you're earning would amount to -- why not just put more money into the 401(k)?  Or into an IRA, if you've maxed out what the 401(k) will allow. That would seem to have the same positive effects you're looking for, while avoiding the negative ones.
Your employer decides what options you have in the 401k. You can talk to your HR about that. There are requirements for diversity of various types of investments, money-market funds is being one of them. That is the investment account equivalent of cash. While it is not really cash but rather short term bonds - the term is generally very short and the risk is very limited. You can't earn much there, and you can't lose much there - so for all intents and purposes you can treat is as a cash-equivalent.
I would suggest you rollover your Roth 401k to a Roth IRA.  Then pay off your debt before investing anymore money. In the long run you will be better off to have all your debt paid off. But I would not withdraw from the Roth 401k to pay down your debt. The penality is too steep.
Dollar cost averaging is a great strategy to use for investment vehicles where you can't invest it in a lump sum. A 401K is perfect for this. You take a specific amount out of each paycheck and invest it either in a single  fund, or multiple funds, or some programs let you invest it in a brokerage account so you can invest in virtually any mutual fund or stock. With annual or semi-annual re-balancing of your investments dollar cost averaging is the way to invest in these programs. If you have a lump sum to invest, then dollar cost averaging is not the best way to invest. Imagine you want to invest 10K and you want to be 50% bonds and 50% stocks. Under dollar cost averaging you would take months to move the money from 100% cash to 50/50 bonds/stocks. While you are slowly moving towards the allocation you want, you will spend months not in the allocation you want. You will spend way too long in the heavy cash position you were trying to change. The problem works the other way also. Somebody trying to switch from stocks to gold a few years ago, would not have wanted to stay in limbo for months. Obviously day traders don't use dollar cost averaging. If you will will be a frequent trader, DCA is not the way to go.  No particular stock type is better for DCA. It is dependent on how long you plan on keeping the investment, and if you will be working with a lump sum or not. EDIT: There have be comments regarding DCA and 401Ks. When experts discuss why people should invest via a 401K, they mention DCA as a plus along with the company match. Many participants walk away with the belief that DCA is the BEST strategy. Many articles have been written about how to invest an inheritance or tax refund, many people want to use DCA because they believe that it is good. In fact in the last few years the experts have begun to discourage ever using DCA unless there is no other way.
I would always suggest rolling over 401(k) plans to traditional IRAs when possible.  Particularly, assuming there is enough money in them that you can get a fee-free account at somewhere like Fidelity or Vanguard.  This is for a couple of reasons. First off, it opens up your investment choices significantly and can allow you significantly reduced expenses related to the account.  You may be able to find a superior offering from Vanguard or Fidelity to what your employer's 401(k) plan allows; typically they only allow a small selection of funds to choose from.  You also may be able to reduce the overhead fees, as many 401(k) plans charge you an administrative fee for being in the plan separate from the funds' costs. Second, it allows you to condense 401(k)s over time; each time you change employers, you can rollover your 401(k) to your regular IRA and not have to deal with a bunch of different accounts with different passwords and such.  Even if they're all at the same provider, odds are you will have to use separate accounts. Third, it avoids issues if your employer goes out of business.  While 401(k) plans are generally fully funded (particularly for former employers who you don't have match or vesting concerns with), it can be a pain sometimes when the plan is terminated to access your funds - they may be locked for months while the bankruptcy court works things out. Finally, employers sometimes make it expensive for you to stay in - particularly if you do have a very small amount.  Don't assume you're allowed to stay in the former employer's 401(k) plan fee-free; the plan will have specific instructions for what to do if you change employers, and it may include being required to leave the plan - or more often, it could increase the fees associated with the plan if you stay in.  Getting out sometimes will save you significantly, even with a low-cost plan.
Where is the money coming from? If you already have the money (inheritance, gifts or similar) sitting in your account, you can just buy e.g. index funds from Vanguard, Robinhood or other low-cost brokerages. But first you should estimate how much money you need for your studies - it is a bit of a gamble to invest money that you'll need to withdraw in a few years time. Even though the average return may be quite high (12% sounds like an overestimate, more commonly quoted figure is 7%), over short timespans your stocks will go up and down randomly. Once you actually have a job and have income from it, then the 401k and IRA and similar retirement accounts start to make sense. There is no need to have all your savings in the same account, so you can start saving now already.
If it's a Roth 401k, all other things being equal, (you are able to choose the same investments with your HSA as you can choose in your 401K, and the costs are the same), then you are better off leaving the money in your HSA rather than pulling it out and putting it into the Roth 401k. The reason is that there is no tax difference, and once you put it into the 401K you (probably) can't touch it (for free) until you retire. With the HSA, if you could have taken a distribution but chose not to, then you can take that amount of money out anytime you want to without any consequences, just like your normal checking account. However, if you have a traditional 401k, and if taking HSA distributions would increase your cash flow such that you could afford to contribute more to the 401k, then this would lower your tax burden that year by reducing your taxable income."
On the other hand, I'd be contributing less than with a traditional   plan since it is taxed before being invested. You got it backwards. The effective limit is higher for a Roth 401k than a Traditional 401k. The nominal limit is the same -- $17000. But an amount of money in a Roth plan is equivalent to a greater amount of money in a Traditional plan, because money in a Traditional plan is pre-tax that will need to be taxed when taken out, resulting in less post-tax money. Conversely, for a Roth plan, that is post-tax money, which came from a greater amount of pre-tax money; and it won't be taxed again. So it is more money, tax-neutral comparison wise. Of course, since you say that you won't hit the limit, this consideration doesn't matter anyway.
Pay the 401(k) loan back as soon as possible.  To be clear, the money from your 401(k) loan is no longer invested and working for you. It doesn't make sense to pull money out of your 401(k) investments and then invest it in something else. If you want to invest for retirement, pay back the loan and invest that money inside your 401(k).  If you leave your job, the 401(k) loan needs to be paid back in full, or else taxes and penalties will apply. If you have put the funds in an IRA, they won't be available to you should you need to pay back the loan early.  Instead of making a monthly payment to the 401(k) loan, pay off the loan and then make a monthly investment to an IRA.
I found this website for some ammo if you need it. For plans with less than 100 participants the limit is 7 days after deduction from your paycheck, though an extension is possible with some paperwork. A DOL audit would probably land your employer in some trouble if they are regularly taking 4 weeks to deposit your funds in the 401k account.
Your max contribution to your Roth IRA and your traditional IRA share the same cap, so if you are maxing your Roth IRA you cannot have a traditional one as well. I would put the additional into your 401k or perhaps a 529 if you have any kids.
Your 401k IRA will now have three different sub-accounts, the one holding your Traditional (pre-tax) 401k contributions, the one holding your Roth 401k contributions, and the one holding the employer match contributions (which, as has been pointed out to you, cannot be considered to be Roth 401k contributions). That is, it is not true that So my next month's check shows $500+$500 going to the regular 401k, and $82+$82 going to the Roth 401k. Your next month's paystub will show $500 going into the regular 401k, $100 going into the Roth 401k, and if employer matching contributions are listed on the paystub, it will still show $600 going into the employer match. If you have chosen to invest your 401k in mutual funds (or stocks), shares are purchased when the 401k administrator receives the money and are also segregated in the three subaccounts. If you are paid monthly, then you will know on a month-by-month basis how many shares you hold in the three  separate subaccounts, and there is no end-of-year modification of how many shares were purchased with Roth 401k contributions versus how many were purchased with  pretax contributions or with employer matching funds as you seem to think.
$4,000 is a relatively small amount in the grand scheme of retirement. I think you should decide in general whether a Traditional or Roth makes more sense for you (with the intent that you will continue contributing to it in the future), and then treat the $4,000 like you would any other contribution.
"The limit on SEP IRA is 25%, not 20%. If you're self-employed (filing on Schedule C), then it's taken on net earning, which in your example would be 25% of $90,000. (https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people) JoeTaxpayer is correct as regards the 401(k) limits. The elective deferrals are per person - That's a cap in sum across multiple plans and across both traditional and Roth if you have those. In general, it's actually across other retirement plan types too - See below. If you're self-employed and set-up a 401(k) for your own business, the elective deferral is still aggregated with any other 401(k) plans in which you participate that year, but you can still make the employer contribution on your own plan. This IRS page is current a pretty good one on this topic: https://www.irs.gov/retirement-plans/one-participant-401k-plans Key quotes that are relevant: The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both: •Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit: ◦$18,000 in 2015 and 2016, or $24,000 in 2015 and 2016 if age 50 or over; plus •Employer nonelective contributions up to: ◦25% of compensation as defined by the plan, or ◦for self-employed individuals, see discussion below It continues with this example: The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $18,000 in 2015 and 2016. Although a plan's terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans. EXAMPLE Ben, age 51, earned $50,000 in W-2 wages from his S Corporation in 2015.
"Some 401k plans allow you to make ""supplemental post-tax contributions"". basically, once you hit the pre-tax contribution limit (17.5k$ in 2014), you are then allowed to contribute funds on a post-tax basis. Because of this timing, they are sometimes called ""spillover"" contributions. Usually, this option is advertised as a way of continuing to get company match even if you accidentally hit the pre-tax limit.  But if you actually pay attention to your finances, it is instead a handy way to put away additional tax-advantaged money.  That said, you would only want to use this option if you already maxed out your pre-tax and Roth options since you don't get the traditional tax break on contributions or the Roth tax break on the earnings. However, when you leave the company, you can transfer the post-tax money directly into a Roth IRA when you transfer the pre-tax money, match, and earnings into a traditional IRA."