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What do I do with my 401K and Roth IRA?

Discussion in 'Investing/Trading/Cryptocurrency/Altcoins' started by Cutter, Mar 9, 2016.

  1. Cutter
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    Cutter New Contributor

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    After reading the book, I understand that 401Ks and Roth IRAs are NOT good methods to BECOME rich.

    I stopped contributing to them last year, but what do I do now?

    What's the Fastlane approach? Do I just let the money sit in those accounts? Cash out? Convert 401K into Rollover IRA?

    I'm 37, work an office job, but also have a Web Design company on the side (an LLC).
     
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  2. W4RHRSE
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    W4RHRSE High Speed, Low Drag Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    I like gold and silver, but see inherent issues with them as well...
     
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  3. DaveC
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    DaveC Bronze Contributor FASTLANE INSIDER Speedway Pass

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    IANAL but....you will most likely take a hit just taking the money out. Rolling the money over to an IRA allows more control over the money than the standard company 401(k) in the meantime.

    That said, in general, you should move money to where you think you can get a better return. For most people, that's their business ventures.

    There are ways to invest in your business ventures through IRAs without taking a withdrawal hit but its a bit convoluted. Definitely consult a lawyer/tax expert.
     
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    i've got a 401K and really dont feel like its the dumbest thing i could be doing with my money. In fact my intention was to bring that sum up to a respectable number where it can sit idle for 30years and i still a sizable chunk of money if i need it. I am not financial expert so maybe this is a totally dumb thing to do, but i feel like this is actually enabling me to save and have some reserves, more so than regular methods would.

    Now, as far as what i could do with the money instead? well i am still working on figuring that out. I rather bootstrap and make something out of merely thin air then throwing a chunk of money at something that still has greater than 80% of failure.

    as far as fastlane strategy - well i am not the guy to talk to about that, sorry.
     
  5. bringitnow28329
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    bringitnow28329 Bronze Contributor

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    There is nothing wrong with having an IRA, Roth IRA, SEP IRA, 401k etc. These should be a part of everyone's portfolio in addition to a taxable brokerage for any money that can be contributed beyond the maximums allowed in these other tax deferred and tax exempt accounts. The alternative is paying taxes and putting money in the bank earning .25% or under your mattress, both of which will yield a negative return after inflation.

    Yes of course you should try to set outside money to invest towards a fastlane business or some other passive income ventures, but the fact is not everyone is going to strike it rich and win the lottery so to speak like MJ did, so you need a back up plan in my opinion especially since social security payments are next to nothing, and may not even be around 15+ years from now.

    Gold and silver have done terribly over the past 2 years. These are useful as a way to ad diversification to a portfolio but they should only be a very small part, perhaps 1-2%. Imagine if you had 50 or 100% of your money in gold or silver and had planned to retire in 2015 or 2016. You would still be working for another 5+ years.
     
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  6. Cutter
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    Cutter New Contributor

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    --
    Thank you.

    Seems like my best approach is to leave my current 401K and Roth IRA alone and stop putting money in. In the meantime, focus on my Fastlane business and, if I'm making a lot of money down the road, maybe I can put some of that excess in my 401K and/or Roth IRA.
     
  7. GregK
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    GregK Contributor

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    Well if you have the 401k option, why not contribute to the max they match? In my shortsightedness I would say that will double your investment...
     
  8. Cutter
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    Cutter New Contributor

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    I'm not sure that makes sense since I don't have a lot of leftover cash to play with.

    If I put more money into my 401K that leaves me with ZERO to invest in my Fastlane business and higher ROI opportunities. That's the Slowlane approach most people follow and which I want to avoid.

    My big question right now is what to do with my old 401K (which I have from my old job) and my Roth IRA. I'm not making any contributions to either account and the money is just sitting there, going up and down with the market.

    So I'm just trying to understand whether I should:

    A) Leave those retirement accounts alone
    B) Move the money in those accounts somewhere else
     
  9. Caonex Abreu
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    Caonex Abreu Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    What you need to understand is that a 401k's, IRA, mutual funds are vehicles to protect wealth not create it. That is one of the fundamental points made in TMFL. You do not have to stop contributing to these, you just need to understand that they will not make you rich fast. It does not mean that they don't make sense. I contribute to my 401k to my employer match and invest in stocks, but fully understand that these vehicles probably won't make me rich in the next 5 years. I suggest not touching that money unless you can make it grow much faster than the penalties attached to taking the money out and only if you are in dire need of cash to fund said investment.
     
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  10. Cutter
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    Cutter New Contributor

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    Right, I understand the idea about protecting vs. creating and that's what led to my questions since I already have money in those vehicles and wasn't sure what to do next.

    Good points, so thank you for clarifying.
     
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  11. jesseissorude
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    jesseissorude Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    They are not good methods to BECOME rich, you are right, but they do protect your money if you don't know what else to do with them.

    If your only other option is to cash it out and take a huge tax penalty, then don't do it. You want to talk about slowlane: I had a friend who's boyfriend thought he had a "system" for blackjack and quit his job, cashed out his 401k (taking a huge tax penalty), and used that money to live on.

    Also, if your company offers a match for your contributions, then take advantage of it! My old company offered a dollar-for-dollar match on contributions I made from my paycheck up to 8%. An instant 100% return is a no-brainer.

    If you don't know what to do with your money yet, leave it in your accounts.

    Also, when you stopped contributing to your 401k last year, what did you do with the extra cash you were getting? 1) it was taxed, 2) it was put into a savings account for you to invest later.... riiiiiiight?
     
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  12. MRSupply
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    MRSupply Contributor Read Millionaire Fastlane Speedway Pass

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    Another thing to think about is doing a self-managed IRA and investing the funds in real estate.

    Alternatively, the IRS does allow a one-time withdrawal from a Roth IRA for the purchase of your primary residence (up to $10,000). This can actually be done every three years I believe as long as you don't purchase another property within those three years.

    As always, please check with your tax adviser before taking action on this advice.
     
  13. RyanSki
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    I've been wondering the same thing lately. I feel like it's good to have a little money in these accounts. I've been putting 10% away for later (or whatever your income allows). But I know that I won't get rich off this money. No reason to put all your money in one basket (your business). I'm still working on my Fastlane business. If I need more money to get it off the ground, I'll put less in my 401 K. I've heard you can remove all the money you contributed to a Roth IRA that year without penalty. My dad is 62 and he is a saver. He has 1.1 million in his 401K and Roth IRA and won't retire for a few more years. I've always been against that since I want to be rich in my 30's and not wealthy when I'm 65. What's the point. But having a little cheddar tucked isn't a bad idea, right??
     
  14. Kinematic
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    Kinematic Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    RyanSki New Contributor Read Millionaire Fastlane FASTLANE INSIDER

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    Thanks. I'll take a look.
     
  16. Daniel Newton
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    You should convert to Roth.

    1) A Roth IRA gives you the option of accessing the contributed capital with no penalty (after 5 years) while a traditional IRA imposes a penalty for early withdrawal.

    2) A Roth IRA does not require minimum required distributions during the owner's lifetime while traditional IRA's require minimum distributions at [70]. This means, you can compound more capital tax free for a longer period with a Roth.

    3) Many are speculating that taxes will go up given the fiscal situation of the US. A Roth is a way to hedge the risk of a higher future tax rate.

    4) Even if taxes don't go up, you may accumulate enough capital and savings for retirement such that you don't actually drop to a lower tax bracket upon retirement and thus are subject to the same tax rate.

    5) A Roth IRA is good for intra-generational wealth transfer as it allows your beneficiaries to continue to compound capital tax free.

    6) Assuming your tax rates are equivalent during retirement, a Roth IRA allows you to invest more on a tax-neutral basis ($5000/yr after tax) than a traditional IRA ($5000/yr before tax, which is then taxed later = less than $5000 after tax).

    Risk factor: There is legislative risk in Roth IRAs in that it is possible for Congress to revoke tax exemption on the capital gains in a Roth IRA. Unlikely in the short term, but possible if debt / budget deficits become a much larger problem than currently. (A traditional IRA doesn't run this risk as you are paying taxes on withdrawals anyways)
     
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  17. CareCPA
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    CareCPA Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    As I mentioned in the other thread, if you convert a traditional 401k to a Roth IRA, you will pay taxes on it, so make sure you do it in a "down" income year if possible. You can convert a traditional 401k to a traditional IRA with no tax consequences.
    Also, if you are still at the job with the 401k, you might not be able to do anything with it. Many plans do not allow in-service rollovers. In that case, your decision is made for you.
     
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    i've got a 401K and really dont feel like its the dumbest thing i could be doing with my money. In fact my intention was to bring that sum up to a respectable number where it can sit idle for 30years and i still a sizable chunk of money if i need it. I am not financial expert so maybe this is a totally dumb thing to do, but i feel like this is actually enabling me to save and have some reserves, more so than regular methods would.
     

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