@Shawbridge, since it is close to water, have you priced out flood insurance?
@SilverGrass - Lol, there goes my raise!
I canât find the info - did the passed act include the SIMPLE changes to IRAs?
Looks like the SIMPLE is going up $500 also.
Idk, i feel like I am waiting for the other shoe to drop (is that the saying?). It hope the market stays steady for a long time, then goes up again. Instead of a big drop then up.
Well, not retirement news, just news if you want to hear. DH just got a verbal offer from another tech company. He is with his current company for 22 years. Itâs very tough to leave but the new company gave him an offer he couldnât refuse. He wasnât looking at all, the executive recruiting company approached him.
@cbreeze, yes. I have gotten a price for flood insurance. Had our first meeting with the architect yesterday. Great ideas.
ShawSon called me with a retirement question today. He said his company (of which he is a co-founder) has created non-contributory 401k and Roth 401k plans and he wondered what he should do. I asked if he could contribute to both and what the caps were. He said he thought $19K for each and that one could contribute to both. I suggested he check with my financial advisor to see if the cap is a total of $19K for both. I suggested he fund over time but with an emphasis on sooner as it is always good to get the earnings working without tax. Other than rent, he doesnât spend a lot of money. As his sister commented when she moved in, ShawSon has no things.
I also think the Roth is a great vehicle for him if he wants to invest later in other startups (that he doesnât run) â he appears connected in a segment of the Silicon Valley startup world. If any pop, he gets the appreciation with no tax.
$19k is the total amount one can contribute to a 401(k) per year. We old ferts get the catch-up âbonus.â 
If he is in CA, his money gets taxed by the Feds and by CA. Does CA tax 401(k) contributions? If it does not, he is better off with a pretax.
@BunsenBurner thanks. He is in CA. He can allocate between them but up to a cap of $19K?
If California taxes the contributions, then you are saying he is better off in a Roth 401k and if it does not he is better off in a conventional 401k. Correct?
If he is trying to put as much possible in, wouldnât $19k in Roth be effectively more than $19k in traditional (think of it in pre-tax terms)?
In terms of state income tax, wouldnât it be the same as federal â Roth pays taxes at the front door, traditional pays taxes at the back door? Of course, if your tax rate changes for any reason between now and when you take the money out, then the end result could differ.
CA does not tax conventional 401k contributions. Whether that means a conventional 401k would be preferable to a Roth, where contributions would be taxed by the state, is unknowable based on the information given.
If in fact he does plan to invest in startups with IRA money, then a Roth is way better. but the decision to do one vs. the other is complicated, thereâs a lot of factors and guesswork about the future. Itâs really almost impossible to pick and be sure it is the financially optimal path.
There was a lot of analysis around this earlier in the thread, if you search for it. There was one report posted with a detailed analysis which concluded pre-tax is better for most people.
Weâve only ever done pre-tax because for most of the time we were adding large amounts every year, our incremental rate was around 40% (35% AMT deduction phaseout hole, and state income tax), which should be far in excess of what we pay in retirement. Unless, of course, it isnât. 
Depends on his marginal tax rate. If still low, than a Roth makes more sense to me. OTOH, if he is making bank at say, Big Law compensation, then pretax might be better.
Check out this post and the link in it, while the article is a bit of a slog to get through, itâs still the best analysis of pre-tax/post-tax retirement contributions that Iâve seen:
http://talk.qa.collegeconfidential.com/discussion/comment/17470496/#Comment_17470496
Or you move to a state that has no income tax or doesnât tax retirement income. Then the traditional has saved you all of the state taxes.
I remember a while back CA started trying to track down people who had contributed pre-tax, and moved out of state for retirement, so they could tax the distributions and re-claim the tax. In response to the uproar, the Federal govât passed a law prohibiting states from taxing retirement income of non-residents.
@shawbridge , if your son is an owner/principal, have him ask your advisor about maximum funding of the 401k on the employer side, too. If he is not spending much money, can he work out any deferred comp options?
So I literally just got an email from my work - the verbiage seems generic enough, seems like it applies to everyone:
New Limits for 2020
The Internal Revenue Service (IRS) published updated limits for contributions to a 401(k) plan in 2020:
⢠Elective deferral limit for Pre-Tax and/or Roth contribution increased from $19,000 to $19,500
⢠Annual contribution limit, including Company Match, increased from $56,000 to $57,000
⢠Annual compensation limit increased from $280,000 to $285,000
⢠Catch-up contribution limit increased from $6,000 to $6,500
As a reminder you will need to contribute 6% or more (Pre-tax, Roth, Post-tax, or combination of all three) from each paycheck of the year to receive the full Company Match.
What I do not understand is the last 2 bullets - is this the same for everyone?
Sounds like it applies to everyone who got sent that email. I didnât get the email, so I guess I keep on getting my $500 company match. Iâd like a 6% company match, however.
⢠Annual compensation limit increased from $280,000 to $285,000
⢠Catch-up contribution limit increased from $6,000 to $6,500
If these are the two bullets youâre talking about, those are federal limits under Section 415Š.
Comp limit is the maximum amount of compensation that can be used to calculate benefits (ie, match, deferrals, etc.) For example, if you make $400,000 and get a 10% percent match in your 401k plan, the employer can only use the $280k to determine the amount of the 10% match.
The catch-up limit applies to people who are age 50 or older, who are able to contribute an additional $6500 to their 401k plans. That makes the maximum employee deferral $26,000 (19,500 plus 6500) for people over age 50, starting 1/1/2020.
(wearing my former 401k plan administrator hat)
WWYDâŚthe bubble feels like itâs about to burst and I am nervous about our aggressive pre-tax accounts. Iâd happily take advice if anyone would offer.
Hubby and I are just north of 50 and plan to maybe work 10 more years. Iâm in a state pension system so I feel like I canât completely figure present value of my benefit. My SS will be severely limited because of the WEP. Health insurance is lifetime in my system. Hubby is at a 403(b) defined comp position in higher ed with no pension. SS will not be super high for him as he was at home with our kids for nearly a decade. Three kids just entering the college years and first kid is attending with little cost because of tuition benefit. Not so lucky with second and she will attend a college next year not in the network. Jury is still out on the third. Will leverage first home for a bit of college costs and own a vacation home outright.
Our âcollectionâ of pre-tax accounts, which has been our primary savings vehicle beyond my pension and our real estate, has a pretty aggressive profile and done well like many have recently mentioned upthread. I am contemplating a rebalance to a far more conservative approach from now until after the 2020 election.
Smart or stupid plan is the question?? My crystal ball is hazy!
Personally, not a fan of market timing. (Bcos of the politics ban on cc, I wonât throw out my thoughts on the marketâs reaction to Nov-20.) But if you are getting uncomfortable in your AA and having trouble sleeping at night, you can always sell off 5-10% of equities and move them into bonds. One of the advantages of pretax accounts is that you can rebalance easily without a tax hit today. (fwiw, Iâm doing just the opposite.)