401K
- Thread starter Dominic
- Start date
Only with an older 401K that I rolled over into another IRA account
Messi>CR7
GOLD
Investment losses are treated differently for IRA/401K than a normal brokerage account. Something to consider if you're not always picking winners.
How Are Capital Gains and Losses in a 401(k) or Rollover IRA Treated?
A 401(k) has tax-sheltered savings, but does that still apply if you've moved the money into an IRA? You won't face tax consequences, but you also won't get to deduct the loss on your taxes for the year. However, in some instances, you may qualify for a tax break if you suffer a huge loss.
finance.zacks.com
My 401K offers a brokerage that stays within your Plan.Investment losses are treated differently for IRA/401K than a normal brokerage account. Something to consider if you're not always picking winners.
How Are Capital Gains and Losses in a 401(k) or Rollover IRA Treated?
A 401(k) has tax-sheltered savings, but does that still apply if you've moved the money into an IRA? You won't face tax consequences, but you also won't get to deduct the loss on your taxes for the year. However, in some instances, you may qualify for a tax break if you suffer a huge loss.
I made the huge mistake of rolling into a big risk and lost it all. SOL. One of the MP of this heist was a fucking liar. Basically sold me BS about his phone system. Anyway, the ship sank so fast I lost all my gold. I was able to jump off but it was a long swim to shore. I lost a lot but I wont say on here, that's for sure. A few years ago, this guys teenage son was having a party and one.under age female was passed out. This MP raped the girl and his son caught him. Called 911 in his own dad. He was arrested and then posted bail. Shot himself in the head awaiting trial. Dont do it is my advice!!!
My 401k doesn’t offer brokerage services, set plan options, so I can’t comment on stock purchases outside of plan options.
That said, there are other aggressive strategies you might consider.
1) Roth conversion of a portion of your 401k if it has a Roth option. You pay taxes on the conversion at your current tax bracket as it is treated as income (you didn’t pay income tax on the contributions to date). but when cashing out or taking distributions in the future there are no taxes. With the traditional 401k you pay taxes on distributions at the then current rate.
In theory, your distributions will be smaller than your current income in retirement, so those distributions will be taxed at a lower rate. (Not political) However, the government will likely net more tax revenue in the long run as with compounding interest and investment performance the principal you will need to distribute will be greater than your tax deferred contributions.
Converting 30% or more of the 401k will allow you to tax plan with those distributions.
EX: 100k income in retirement from traditional 401k plans = 100k in income that year, taxed at the then present rate for 100k of income.
50k traditional 401k distribution + 50k Roth distribution = 100k in income of which only 50k is taxable, presumably at a much lower tax bracket if a tiered tax structure exists at that time.
(Possibly political, but not intended to be inflammatory) Tax rates at present are likely lower than when you deferred the tax on your initial contributions, possibly a win already. Changes in administrations and increasing national and state debt, put pressure to increase revenue for the government. That will most likely lead to increasing tax rates.
2) This is definitely aggressive... I believe under the cares act you are permitted to withdraw funds from your 401k without taxes or penalties before the end of the year, with the caveat that the amount of the withdrawal must be put back into the 401k in no more than 3years.
Possible ‘aggressive’ strategy (if you think the economy, stock market, or your investment vehicle of choice will be better in the next three years than it is at present) would be to withdraw those funds with the full intent to returning them within the allowed window. Then pursue your investment vehicle of choice (could even be real estate so long as you sell and/or have enough liquidity at that time to repay the 401k in time).
You would pay taxes on the investment gains, possibly at the capital gains tax rate instead of the income tax rate. You would still have the principle amount in your 401k when returnined, but you would have all of the investment gains as an asset that won’t be taxed again in the future.
Jose has returned
SILVER ELITE
I don't know the answer to that particular question but id like to add this tid bit i learned. If your plan offers a Roth IRA within it put all your money into the Roth side and pay the taxes now while you can still make up the money you might lose with a pre tax difference. I learned that from many retired guys.
Soccerfan2
GOLD
RE #2 - cares act limits 401k borrowing without penalty to covid positive (or out of work because of family member positive and quarantining). I don’t know what the check on this will be, but you’re not supposed to utilize this unless you’ve been directly affected by covid.
Not 401k specific, but... if the market trades on emotion than people are feeling good. Not sure that emotion based on vaccines will be as positive between now and when they are delivered to the general public.
If the market trades on net present value of future returns.... I think they forgot the losses.
If the market trades on net present value of future returns.... I think they forgot the losses.
Bruddah IZ
DA
If you want to go aggressive at something, use the equity in your house to pay off your mortgage faster and cheaper. Put less in your 401k. Maybe the percentage of your income equal to the percentage of returns (minus fees if not included in "returns) you earned on your 401k last year..... if you must. Same with matching retirement accounts. Only put in up to the amount the employer matches. Again only if you must.
interesting breakdowns of a few key points. There were some simplified examples/assumptions for demonstration purposes and was geared toward a somewhat general audience.
I like the assumption of retirement in a top tax bracket, from a tax planning perspective.
The tax on disbursement component was exactly why I’m a fan of Roth options in corporate 401Ks. You can always withdraw the principle contributions without tax or penalty, so some liquidity is preserved, and contributions still qualify for corporate matches, if available. Not to mention the distributions are sans tax as well (it’s paid up front). Corporate Roth 401K options also are not restricted by income, so high end wage earners can also participate.
Another option when dealing with non-current employer based retirement plans (former employer plans, personal IRAs, 401k Rollovers, 503’s, etc.) is an ERSOP or ROBS plan.
These plans allow for access to tax deferred retirement assets without early distribution penalties and taxes. Essentially liquidity in otherwise non-liquid asset classes, under certain circumstances.
Cliff Notes Version:
Establish a C-Corp
Establish a 401K plan for C-Corp Employees
Hire Yourself
Rollover your non-current employer 401K funds to your new 401K plan.
Issue Stock for your C-Corp
Authorize you C-Corp 401K plan to have an investment option of ‘purchase company stock’... in addition to any mutual/bond/index funds that are plan options.
Purchase C-Corp stock in your new 401K plan. Stock moves to 401K plan, cash moves to C-Corp general fund.
Invest C-Corp general funds as you see fit (buy a home as a rental property, buy a business, take advantage of opportunities, etc.)
Pay your shareholders dividends (aka your own 401K that owns the stock) or build up capital and do a stock buyback program (funnel cash back into your 401k).
... if you’re feeling aggressive and want liquidity from prior contributions. There are 401K maintenance fees and C-Corp fees to consider, but it adds options.
These plans allow for access to tax deferred retirement assets without early distribution penalties and taxes. Essentially liquidity in otherwise non-liquid asset classes, under certain circumstances.
Cliff Notes Version:
Establish a C-Corp
Establish a 401K plan for C-Corp Employees
Hire Yourself
Rollover your non-current employer 401K funds to your new 401K plan.
Issue Stock for your C-Corp
Authorize you C-Corp 401K plan to have an investment option of ‘purchase company stock’... in addition to any mutual/bond/index funds that are plan options.
Purchase C-Corp stock in your new 401K plan. Stock moves to 401K plan, cash moves to C-Corp general fund.
Invest C-Corp general funds as you see fit (buy a home as a rental property, buy a business, take advantage of opportunities, etc.)
Pay your shareholders dividends (aka your own 401K that owns the stock) or build up capital and do a stock buyback program (funnel cash back into your 401k).
... if you’re feeling aggressive and want liquidity from prior contributions. There are 401K maintenance fees and C-Corp fees to consider, but it adds options.
Bruddah IZ
DA
What are the max annual contributions for Coporate Roths?
Corporate Roth 401Ks follow the same contribution limits as traditional 401Ks ($19,500 for 2020, and extra $6,500 ‘catch-up’ contributions if over 50) Contributions can be split between Roth and traditional 401K deferments.
To maximize tax savings, contributions can be split pre-tax/post-tax. The key is to gauge your distributions from the plan in retirement. Ie figure out how much assets you will have in each class (pre-tax and post tax) and the amount of distributions you will take on an annual basis.
Ex: In 2020 there is 0% tax on income for married couples claiming the standard deduction up to $27,000. If you need $100K in distributions for your standard of living, taking $27,000 out of pre-tax funds (0% tax bracket) and the remainder out of Roth funds = 0% taxes (plus the benefit of no taxes on the initial contributions to the traditional 401K portion of your contributions that would have been at the highest tax bracket based on income at that time, double tax savings).
So as a rough rule of thumb.. figure out the % of your desired income in retirement that would equate to the 0% tax bracket at retirement and use that as the % of contributions to traditional 401K vs Roth to maximize tax benefits.