you can control it until RMD’s come due, at which time you will be required to take out a certain amount per year or face stiff penalties.
True!
If it’s more than you need, you can reinvest the money in a non-tax-deferred account. Or if you are still doing any kind of paid work, you could likely redeposit it into a Roth IRA.
Not sure too many of us will be working at age 73 though. I sure don’t plan to.
Something new I learned: Roth contributions to a workplace account such as a 401(k) DO have RMDs - or at least they did until this year. I’d been wondering.
Retirement plan and IRA Required Minimum Distributions FAQs | Internal Revenue Service (irs.gov)
When I leave this job, I know I could roll my 401(k) into an IRA; presumably the distribution would be split into 2 parts. One into a regular IRA, one into a Roth?
exactly! I couldn’t imagine still working in my 70’s…I hope to retire by 55 (and have made life choices to ensure I save enough of my paycheck where that is quite likely)
I may not want to have to work in my 70’s, but I’d like to be capable of working in my 70’s. Huge difference between necessity and choice.
Ever since my 20’s I planned to work until 70. Mainly because some of the life choices I made resulted in fantastic experiences but not great compensation.
Or, if you will never need the money, and don’t want to pay taxes on your RMD, you can perform a Qualified Charitable Distribution (QCD) and have some or all of your RMD (up to $100k) go directly to a charity or charities of your choice. You must inform your IRA trustee of your desire to do this and that institution will perform the actual movement of funds. You will never see the money.
Note that a QCD is not deductible from your income when you file your taxes.
Which makes sense: you never had that as income, so you shouldn’t deduct it.
With tax law changes in recent years, fewer and fewer people are able to take itemized deductions anyway, so doing a QCD is better, tax-wise, than making the same donation (and taking the income from the IRA).
Exactly. I was going to put that in my earlier post but neglected to do so. Thanks for making this point.
Actually what I took out every year was pretty close to what I have to take out now for my RMD. What got me was Social Security at age 70. By taking out money from your IRA before that you can live on it without taking SS and letting it increase.
GE was the only place where I was allowed to contribute more than the federal max, but anything over the limit ($15k-ish at the time) was post-tax.
After I left and rolled that into my fidelity IRA they automatically put all the post-tax into a Roth. If I had known I would have put a lot more in there.
Useful to know!
One year at my former employer, they goofed and listed a bit from my last paycheck of the year as post-tax. It may have been a hundred bucks or so. IIRC, when I rolled it into an IRA a few years later, they simply cut me a check for that amount; I don’t recall whether it included the earnings or not (likely not).
Presumably I could have rolled it into a Roth IRA, but the subject never even arose. The amount was so trivial I didn’t worry about it.
They likely only rolled the post-tax contributions to a Roth and left the earnings, since the earnings are considered pretax. This should be a strong incentive for anyone with post-tax trad. 401k funds to roll them over into an IRA as soon as possible.
Dave Ramsey, whose financial advice I would consider to be on a par with that of my idiot brother-in-law, explains how Americans without a 401k plan at work can save for retirement.
And Ramsey explains that his number one recommendation is for people without access to 401(k) plans at work to invest in Roth individual retirement accounts (IRAs).
Furthermore,
Ramsey believes strongly in growth stock mutual funds for creating long-term wealth.
Shit, anybody can find the same advice just by reading through this thread and other here on the Dope. And our advice is free.
The earnings would still be tax-free until withdrawn whether you roll the funds into an IRA or leave them in the 401(k).
But yeah, otherwise, it seems likely that the money put in a Roth was just the contributions, not the earnings, since you need to pay taxes on the earnings. Interesting that it got put into a Roth IRA - basically that let you bypass the Roth IRA limits for whatever year you earned the money.
Interesting article today on Washington Post, about people doing something like what @Broomstick plans (living in a multi-person household with roommates). They use the term “Boommates”:
Unfortunately, that links requires a subscription and/or making an account by which the Post will undoubtedly plague one to subscribe.
Does this gift link work?
Sorta. It made me sign into WAPO, then let me read the article. I expect someone w/o an account would have to make one.
Nope. Requires a sign up.
And what I’m planning to do isn’t so much “intergenerational” housemates as a group of friends with little family left who intend to watch out for each other in old age while pooling resources. It’s not one person renting out space to another, which I gather is the main thrust in this article I can’t really read. We’re all going to be joint owners of our retirement home. It’s possible we might add others later, but we’ll be full partners.
When I sought out a professional financial planner and mentioned this he said he had been about to suggest it, and that he’s seeing more and more of that sort of arrangement. That was 6 years ago, so it’s not entirely new but not mainstream yet.
Odd. I posted the “gift link” version.
In any case, the gist of the article was older people sharing homes; in several cases, the sharing was multi-generational (an older person renting out a basement apartment to a family, and the like).
It’s really more like something in between. The “boommates” in the article don’t jointly own the house but it’s also not a situation where there are two or three units in the house and everyone lives more or less separately. (another situation described in the article) The boommates each have their own bedroom and bathroom and share the common spaces and kitchen. It’s not either of the types of of rented room that I often see , where 4 bedrooms are rented separately and when room #3 moves out, the landlord finds a replacement or the sort where the landlord rents a bedroom/bathroom to someone who doesn’t have use of the rest of the house. The boommates described in the article are just a particular type of roommate, where instead of you and I sharing an apartment that we rent from someone else, we are sharing a house that one of us owns. It’s something that has always been fairly common in certain situations- for example a widowed homeowner whose sibling or a friend lives with them. The difference is that the newer version doesn’t involve a pre-existing relationship
There were also people who rented out a separate basement apartment, but renting out a second unit is not really anything new. (What might be new in some places is being allowed to have a separate unit)