PSA: 401k contributions going up…

[Coronita]

You could probably have predicted this.

But next year it will be $17,500

NEW YORK (CNNMoney) — Starting next year, employees will be able to stash an extra $500 per year in their 401(k)s, tax-free.
The tax-free contribution limit for retirement plans will increase to $17,500 for 2013, up from $17,000 this year, the IRS announced Thursday.

http://money.cnn.com/2012/10/18/pf/taxes/401k-contribution-limit/index.html?iid=HP_LN&hpt=hp_t3

[an]

Very cool. I wonder how many people are actually taking advantage of this increase.

[an]

dup.

[Coronita]

I don’t know, but at my company we have the ability to split our contributions between a traditional 401k and a roth 401k… I kinda do both, although right now, part of my contributions go to repaying a loan.

[UCGal]

I am.

My contributions are going to $23k from $22.5k.
(Gotta love the extra 5.5k you get for being old.)

[an]

[quote=flu]I don’t know, but at my company we have the ability to split our contributions between a traditional 401k and a roth 401k… I kinda do both, although right now, part of my contributions go to repaying a loan.[/quote]
I totally agree about tax diversification. I was doing Roth for a few years and now I’m doing traditional. It depends on my tax bracket for that year and the balance of the roth vs traditional bucket.

[Coronita]

[quote=AN][quote=flu]I don’t know, but at my company we have the ability to split our contributions between a traditional 401k and a roth 401k… I kinda do both, although right now, part of my contributions go to repaying a loan.[/quote]
I totally agree about tax diversification. I was doing Roth for a few years and now I’m doing traditional. It depends on my tax bracket for that year and the balance of the roth vs traditional bucket.[/quote]

Doing full roth hurts me way too much after tax. And I have concerns doing full traditional (paying too much taxes later on)…Then again, the entire economy could blow up, and nothing matters.

Looks like we’re starting earning seasons, and while numbers look ok, I guess expectations are out of wack…

[an]

[quote=flu]Doing full roth hurts me way too much after tax. And I have concerns doing full traditional (paying too much taxes later on)…Then again, the entire economy could blow up, and nothing matters.

Looks like we’re starting earning seasons, and while numbers look ok, I guess expectations are out of wack…[/quote]
Like I said, it depend on your tax situation. When I did full Roth, we weren’t making that much, so even with full Roth, my effective tax rate was only 7-8%. I don’t mind doing full traditional right now, since my traditional bucket isn’t huge, so even when RMD kicks in, it won’t affect my tax much. Now, when the balance of that bucket gets big enough, then I might reconsider doing 1/2 and 1/2. One advantage of traditional is, lets say I decide to retire early at 55. The next year, I can do a conversion and my tax rate would be much lower than if I do Roth today, since my income for that year would be near $0 + the conversion amount.

[The-Shoveler]

[quote=flu] Then again, the entire economy could blow up, and nothing matters.

Looks like we’re starting earning seasons, and while numbers look ok, I guess expectations are out of wack…[/quote]

Yea I keep thinking, they are holding the euro-zone together with duct tape until after the election.

[blake]

What’s the chance that one day you will be asked to pay your “fair share” of tax on your Roth withdrawal if it reaches a certain threshold?

[Coronita]

[quote=blake]What’s the chance that one day you will be asked to pay your “fair share” of tax on your Roth withdrawal if it reaches a certain threshold?[/quote]

Possible…anything is possible. That’s another reason why I’m splitting the contributions.

[an]

[quote=blake]What’s the chance that one day you will be asked to pay your “fair share” of tax on your Roth withdrawal if it reaches a certain threshold?[/quote]
The day they can retroactively change the rule like that is the day I’ll buy gold bar and stick them somewhere safe.

[livinincali]

[quote=blake]What’s the chance that one day you will be asked to pay your “fair share” of tax on your Roth withdrawal if it reaches a certain threshold?[/quote]

That’s why I don’t waste time with a Roth anymore. I’ll take the guaranteed tax advantage now. It will be easy to attack the 10% of the population that benefits from a Roth in the future. Just like it’s easy to say tax the rich.

[CAwireman]

[quote=flu]I don’t know, but at my company we have the ability to split our contributions between a traditional 401k and a roth 401k… I kinda do both, although right now, part of my contributions go to repaying a loan.[/quote]

Flu, don’t you earn too much to do Roth IRA’s???

[Coronita]

[quote=CAwireman][quote=flu]I don’t know, but at my company we have the ability to split our contributions between a traditional 401k and a roth 401k… I kinda do both, although right now, part of my contributions go to repaying a loan.[/quote]

Flu, don’t you earn too much to do Roth IRA’s???[/quote]

There’s a difference between self contributed Roth IRA and Roth 401k…

http://en.wikipedia.org/wiki/Roth_401(k)

Roth IRA’s I can’t contribute to…. Roth 401k, there is no income restrictions on that, but only if an employer sponsors that. What’s nice is in the case of a roth 401k, any sort of employer matching also goes into the roth401k…Ideally, it would be nice to specify that all company matching up to the maximum limit would go into the roth401k, and no matching goes into the traditional 401k… Employers don’t do that though… It’s split based on the percentage into each type of 401k account.

Also, once funded in each account, (ok, maybe it’s just me), you can’t really move things around.

Also, when you rebalance, you can’t do it in a specific account type. It applies to both (again, maybe just the plan I’m in)

Also, I found out when you borrow, you can’t specify which account to borrow from. Ideally, it would have been nice to borrow all from the traditional, and let the roth 401k portion in there…

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