Small business 401K question

[billyfsu76]

The owner of the company I work for (small, locally-owned) sold to another person last month. The 401K plan the old owner offered has been stopped. The new owner is not offering one at least for the first year (young guy / just getting started).

I have to do something with the old 401K money. Most of the other employees have opened rollover accounts and are moving it there. I'm 40 years old so won't be taking it out for a while. Before I decide what I'll be doing with all this new extra money each month, I need to figure out where to move this old money.

 

[LesClaypool]

1. Roll it over into a Fidelity (or some other discount broker) IRA.

2. Start a Roth IRA w/the money you were contributing, at that same discount broker.

3. Find another job where the people you work for value their employees enough to give them retirement plans w/matching contributions.

 

[West Duval Nole]

Why wouldn't you just roll it over? What were you thinking about doing? Cashing out and taking the tax hit? As far as extra money you should open a Roth IRA and try to contribute the max per year to it

 

[Fijimn]

Vegas........blow.......hookers (don't let them film you).

/thread

 

[OsceolaNole]

Fidelity is good. Also take a look at Vanguard.

 

[billyfsu76]

Fidelity is good. Also take a look at Vanguard.

Thanks. I will check them out.

 

[billyfsu76]

3. Find another job where the people you work for value their employees enough to give them retirement plans w/matching contributions.

I think it's coming. The guy seems like a really good guy but just invested over $1Million to buy this place, has two young kids and not much money coming in just yet. I'm going to give him some time for that.

 

[LesClaypool]

I think it's coming. The guy seems like a really good guy but just invested over $1Million to buy this place, has two young kids and not much money coming in just yet. I'm going to give him some time for that.

If he can drop 1 mil on a business, AND if you're a valued employee...then I'd say, "Listen man, I appreciate that you can't set up a full-blown retirement plan just yet, but I need some sort of compensation for what I was formerly receiving in the way of retirement benefits...whether that's a one-time bonus or a bump in pay...something."

 

[12Nole]

Hi, I'm William Devane!

 

[Finance85]

I don't understand why some are recommending a Roth IRA over a traditional IRA. There are pros and cons to each, and the best answer depends on circumstances and goals.

 

[seminole97]

Have you considered investing in a timeshare?

 

[seminoledq]

1. Roll it over into a Fidelity (or some other discount broker) IRA.

2. Start a Roth IRA w/the money you were contributing, at that same discount broker.

3. Find another job where the people you work for value their employees enough to give them retirement plans w/matching contributions.

I was going to post these first two and the more I think about it the more I like #3 as well.

 

[Finance85]

LOL

 

[OsceolaNole]

I don't understand why some are recommending a Roth IRA over a traditional IRA. There are pros and cons to each, and the best answer depends on circumstances and goals.

Bingo. Do both. And if your income doesn't qualify you for Roth, back door the thing.

 

[gwgwi]

Finance 85 has valid points...can't say more...in the retirement business. It's a highly regulated environment and I'm not all that comfortable even posting this.

 

[cgj0198]

Definitely need to get that money rolled over to another account. Let me know when you're ready so I can give you the account #.

 

[Gonolz]

Finance 85 has valid points...can't say more...in the retirement business. It's a highly regulated environment and I'm not all that comfortable even posting this.

I'm with the U.S. Department of Labor's Employee Benefits Security Administration. You've gone too far. We will be in touch.

 

[gwgwi]

. Good one

 

[Thebear612]

Remind the owner that he does NOT have to stop the 401k plan. He can keep it open but NOT do any company matches, now or ever if he wants. Having the plan available without matches still can accomplish tax deferred saving for those employees that still contribute and feel this is appropriate versus other retirement vehicles like Roths and Simple IRAs....

 

[OrlandNole]

If he can drop 1 mil on a business, AND if you're a valued employee...then I'd say, "Listen man, I appreciate that you can't set up a full-blown retirement plan just yet, but I need some sort of compensation for what I was formerly receiving in the way of retirement benefits...whether that's a one-time bonus or a bump in pay...something."

Agreed. Labor costs - including 401(k) - should have been factored into the pro forma when he decided to buy the business. He may save a few bucks in the short term but will suffer long term consequences in employee satisfaction and loyalty.

 

[West Duval Nole]

I don't understand why some are recommending a Roth IRA over a traditional IRA. There are pros and cons to each, and the best answer depends on circumstances and goals.

I plan to be in a higher tax bracket at retirement than I am now and would rather the earnings from investments be tax free, when I retire at 59 1/2. Also, I plan that the earnings from the investments to be a good size portion of retirement since I started it when I was about 22 years old. Also liked the option to have been able to withdrawal without penalty to use money as a down payment for a house. I didn't have to use it for that, but glad the option was there. Also you can withdrawal the amount you have put in without penalty if needed to, but I do not plan on doing that. Nice to have that option though in case of an emergency.

My understanding would for the traditional would be the advantage would be if you believe your income tax bracket at retirement will be lower than you are currently at. Thus the tax you pay when you retire will be less than if you let it be taxed at your current rate.

I am no Certified Financial Planner or CPA, so I could be wrong. What other potential scenario would you say the traditional IRA is better than the Roth?

 

[SeaPA]

I plan to be in a higher tax bracket at retirement than I am now and would rather the earnings from investments be tax free, when I retire at 59 1/2. Also, I plan that the earnings from the investments to be a good size portion of retirement since I started it when I was about 22 years old. Also liked the option to have been able to withdrawal without penalty to use money as a down payment for a house. I didn't have to use it for that, but glad the option was there. Also you can withdrawal the amount you have put in without penalty if needed to, but I do not plan on doing that. Nice to have that option though in case of an emergency.

My understanding would for the traditional would be the advantage would be if you believe your income tax bracket at retirement will be lower than you are currently at. Thus the tax you pay when you retire will be less than if you let it be taxed at your current rate.

I am no Certified Financial Planner or CPA, so I could be wrong. What other potential scenario would you say the traditional IRA is better than the Roth?

That's your plan, and you appear to have thought it out well. But you don't have any idea about the situation of the OP, nor does anyone else that was jumping in to suggest a particular course of action.

 

[West Duval Nole]

That's your plan, and you appear to have thought it out well. But you don't have any idea about the situation of the OP, nor does anyone else that was jumping in to suggest a particular course of action.

I am curious. For most people, which IRA is better? At least from your experience as a CPA? I am curious and have no clue, just figured for most people the Roth IRA would be more beneficial.

 

[LesClaypool]

I am curious. For most people, which IRA is better? At least from your experience as a CPA? I am curious and have no clue, just figured for most people the Roth IRA would be more beneficial.

Higher or lower, taxes will always hurt more in retirement, IMO. Doesn't matter what % you pay at the time, you're going to resent it and feel it more when you're drawing from a finite source of funds.

If you buy that line of reasoning, then that makes the overwhelming case for the Roth IRA, regardless of circumstances.

You'll ALWAYS appreciate and be able to utilize a tax-free source of funds.

 

[SeaPA]

I am curious. For most people, which IRA is better? At least from your experience as a CPA? I am curious and have no clue, just figured for most people the Roth IRA would be more beneficial.

In general, my preference is to see people have both, simply because it gives you flexibility (i.e. when you begin to draw, you can number crunch & draw from the regular up to the point of jumping to a higher tax bracket, then switch & draw from the Roth if you need additional $; that way you know you're staying in the lowest bracket achievable).

But it varies by the person and their situation; add in the fact that it's all guesswork, because nobody knows what the tax laws will be when they retire & it's obviously an inexact "science."

 

[Finance85]

Higher or lower, taxes will always hurt more in retirement, IMO. Doesn't matter what % you pay at the time, you're going to resent it and feel it more when you're drawing from a finite source of funds.

If you buy that line of reasoning, then that makes the overwhelming case for the Roth IRA, regardless of circumstances.

You'll ALWAYS appreciate and be able to utilize a tax-free source of funds.

Maybe, but everyone's circumstances are different. I'd like to point out that a traditional IRA provides tax free funds immediately because taxes are deferred. Like I said, there are pros and cons to both.

 

[OrlandNole]

Why do people assume their tax bracket will be higher at retirement? I assume mine will be lower. Am I missing something?

 

[LesClaypool]

Maybe, but everyone's circumstances are different. I'd like to point out that a traditional IRA provides tax free funds immediately because taxes are deferred. Like I said, there are pros and cons to both.

The merits of my case remain.

You’ll ALWAYS resent taxes and feel them worse during retirement and you’ll ALWAYS need and appreciate a tax-free source of funds during retirement.

Do the Roth now. No questions asked. You’ll need it later and you’ll appreciate having it then way more. Circumstances do not matter.

 

[SoddyNole]

Young guy with family buys small company with a large sum of money, most likely borrowed that is not making a lot of money at this time and cuts benefits from the get go.

I think 401K may be your least problem at this point.

#3 sooner or later I am guessing.

 

[Finance85]

The merits of my case remain.

You’ll ALWAYS resent taxes and feel them worse during retirement and you’ll ALWAYS need and appreciate a tax-free source of funds during retirement.

Do the Roth now. No questions asked. You’ll need it later and you’ll appreciate having it then way more. Circumstances do not matter.

I applaud the fact you will have more income in retirement than now, but most people won't, and a large number of people won't be subject to income taxes in retirement, and if they are paying, it will be a lower bracket.

Hey, your choice, but you shouldn't recommend something so strongly when it may be bad advice for others. Of course anyone who accepts advice on the internet deserves what they get.

Oh, with a standard IRA, I get to defer the taxes, and use the money to make additional investments.

The choices aren't necessarily mutually exclusive either.

 

[LesClaypool]

I applaud the fact you will have more income in retirement than now, but most people won't, and a large number of people won't be subject to income taxes in retirement, and if they are paying, it will be a lower bracket.

Hey, your choice, but you shouldn't recommend something so strongly when it may be bad advice for others. Of course anyone who accepts advice on the internet deserves what they get.

Oh, with a standard IRA, I get to defer the taxes, and use the money to make additional investments.

The choices aren't necessarily mutually exclusive either.

You just don't get it.

Oh well. I tried. I'm not banging my head against the wall any further.

 

[Finance85]

You just don't get it.

Oh well. I tried. I'm not banging my head against the wall any further.

Oh, I get it. That said, I'm glad you won't be banging your head against the wall. CTE will affect your ability to spend all that retirement money.