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Posted: 1/15/2024 11:57:28 PM EDT
So I can almost max a 457, make a good dent in hsa max and nothing in Roth. I've been thinking of switching to maxing hsa, maxing Roth then remainder into 457. Thoughts on that idea?25% is my max bracket.
The fact I can withdraw from 457 with no 10% penalty is enticing for fire purposes. |
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That man is a homo and a liar-TrojanMan
Hell, a Ford just breaks down on you. It doesn't fall apart AND try to kill you at the same time-Bloodsport2885 |
[#1]
Max or otherwise, it’s nice to have at least some Roth in order to better manage your cash flow and taxes once you start or are required to make withdrawals.
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If the truth makes you uncomfortable, don't blame the truth. Blame the lie that made you comfortable. -James Ng Uni
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[#2]
@Chromekilla
Assuming this is a govt 457b- You should check to see if your 457 has the ability to do Roth conversions or dedicated roth savings inside of the 457 plan? It would be contained within it, so it still has no penalty for withdrawing before 59 1/2, so long as you are actually retired from that main job. My 457b plan had zero mention of the ability to do roth conversions within it, nor any mention of the ability to do roth savings in it, nobody else seemed to know about it, and only when I was going to roll money out of it and then into an IRA to do a Roth conversion (and also lose my ability to withdraw before 59 1/2), that they mentioned that they had the ability to do it all within the 457b plan. At the time I would have eventually needed to roll the roth portion out as RMD’s were still required, but I just learned that those RMD requirements went away for the Roth portion. (Yay!) So essentially- put money into a dedicated Roth portion of the 457b plan now. Maintain the ability to pull all of it out prior to age 59 1/2. Plus after you retire, or whenever, you can continue to convert traditional funds within the 457b into Roth funds, and work on eliminating the RMD’s later. Keeps you able to use all of your money as soon as you retire, if you need to, instead of having a Roth IRA with an age 59 1/2 requirement if you want to avoid the penalty. And it would be a lot cleaner to have just the 457b, instead of multiple accounts. Of course if you can afford to put money into a Roth IRA after maxing out the 457b as well that would be great, but are you certain you are eligible for the Roth IRA anyhow? (I always was above the income phase out line, so unable to do a Roth IRA when I was working, but maybe that has changed?) And keep in mind that if you plug 20k of Roth money into the 457b, that is worth more later, since you already paid the taxes, than 20k in traditional funds where you will be paying taxes on withdrawal. (Of course figuring out your estimated income and tax rate in retirement compared to today is what will tell you how much of your retirement savings you might want to do as Roth funds). |
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2021 can’t come soon enough!
Edit- well maybe 2020 wasn’t so bad after all..... |
[#3]
Originally Posted By tac556: @Chromekilla Assuming this is a govt 457b- You should check to see if your 457 has the ability to do Roth conversions or dedicated roth savings inside of the 457 plan? It would be contained within it, so it still has no penalty for withdrawing before 59 1/2, so long as you are actually retired from that main job. - Yes, already asked and was told no. My 457b plan had zero mention of the ability to do roth conversions within it, nor any mention of the ability to do roth savings in it, nobody else seemed to know about it, and only when I was going to roll money out of it and then into an IRA to do a Roth conversion (and also lose my ability to withdraw before 59 1/2), that they mentioned that they had the ability to do it all within the 457b plan. At the time I would have eventually needed to roll the roth portion out as RMD’s were still required, but I just learned that those RMD requirements went away for the Roth portion. (Yay!) So essentially- put money into a dedicated Roth portion of the 457b plan now. Maintain the ability to pull all of it out prior to age 59 1/2. Plus after you retire, or whenever, you can continue to convert traditional funds within the 457b into Roth funds, and work on eliminating the RMD’s later. Keeps you able to use all of your money as soon as you retire, if you need to, instead of having a Roth IRA with an age 59 1/2 requirement if you want to avoid the penalty. And it would be a lot cleaner to have just the 457b, instead of multiple accounts. Of course if you can afford to put money into a Roth IRA after maxing out the 457b as well that would be great, but are you certain you are eligible for the Roth IRA anyhow? (I always was above the income phase out line, so unable to do a Roth IRA when I was working, but maybe that has changed?)- Trouble is I don't love the fee costs, or investment options in 457. But the fact it doesn't have 10% withdrawal penalty like the rest of my options makes it such that I elected to put all in. And keep in mind that if you plug 20k of Roth money into the 457b, that is worth more later, since you already paid the taxes, than 20k in traditional funds where you will be paying taxes on withdrawal. (Of course figuring out your estimated income and tax rate in retirement compared to today is what will tell you how much of your retirement savings you might want to do as Roth funds). View Quote I'm leaning towards maxing the HSA, maxing the roth, and then making sure I only put up to max match in 457. I am under the income tier where I can't do Roth thankfully. But am above the one where I can contribute to a trad ira. |
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That man is a homo and a liar-TrojanMan
Hell, a Ford just breaks down on you. It doesn't fall apart AND try to kill you at the same time-Bloodsport2885 |
[#4]
Originally Posted By Chromekilla: I'm leaning towards maxing the HSA, maxing the roth, and then making sure I only put up to max match in 457. I am under the income tier where I can't do Roth thankfully. But am above the one where I can contribute to a trad ira. View Quote You can contribute to a trad IRA, it’s just not tax deductible. Order of operations to be most tax efficient (for most of us): 1. Emergency fund (3-6 months of expenses. More if you can’t replace you income in that timeframe) 2. Contribute to employer plan up to the full employer match. If no match, skip this step. 3. Max HSA (triple tax advantaged). Don’t use this to pay for medical expenses if you can help it 4. Get rid of high interest debt 5. Roth IRA for you/wife up to the max (backdoor/mega backdoor if you hit income limits) 6. Go back and max employer plan especially if it has Roth options and your federal tax rate is not above 24%. If tax rate is over 24%, pre-tax may make the most sense. 7. If you didn’t use the mega backdoor option in step 5, consider doing that now as long as your federal tax rate is 24% or less. 8. Consider Roth conversions based on age, current tax rate and pre-tax balance's 9. Brokerage, rental assets 10. Speculation (e.g crypto). 11. Full term life/annuities |
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[#5]
Originally Posted By Joe_Blacke: 1. Emergency fund (3-6 months of expenses. More if you can’t replace you income in that timeframe) 2. Contribute to employer plan up to the full employer match. If no match, skip this step. 3. Max HSA (triple tax advantaged). Don’t use this to pay for medical expenses if you can help it 4. Get rid of high interest debt 5. Roth IRA for you/wife up to the max (backdoor/mega backdoor if you hit income limits) 6. Go back and max employer plan especially if it has Roth options and your federal tax rate is not above 24%. If tax rate is over 24%, pre-tax may make the most sense. 7. If you didn’t use the mega backdoor option in step 5, consider doing that now as long as your federal tax rate is 24% or less. 8. Consider Roth conversions based on age, current tax rate and pre-tax balance's 9. Brokerage, rental assets 10. Speculation (e.g crypto). 11. Full term life/annuities View Quote This is a good list. However, I'd put getting rid of high interest debt at the very top. High interest debt is a wealth killer. Here is my order of operations: https://www.ar15.com/forums/general/A-new-year-s-guide-to-financial-freedom/5-2697138/ |
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[#6]
Originally Posted By FALARAK: This is a good list. However, I'd put getting rid of high interest debt at the very top. High interest debt is a wealth killer. Here is my order of operations: https://www.ar15.com/forums/general/A-new-year-s-guide-to-financial-freedom/5-2697138/ View Quote Yeah, that could be a good example of something that is situationally dependent. If you are young, good health, in a very stable job, then tackling high interest debt may be a priority. If you have health problems, job insecurity, or other factors then an emergency fund might be a better call. Not having an emergency fund when you are at high risk, might end up causing you to finance things on your credit card and worsen your high interest debt position. |
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[#7]
I'm curious about this.
If there is sufficient medical bills such that HSA can be withdrawn from... I know the theory is to let it ride, due to triple tax advantage. However, I question my ability to remember and provide documentation for medical bills in 20 years. Could I not do a withdrawl from HSA up to maxxing my Roth? They money would come back to me tax free, but then would come out tax free including growth which is all I care about... |
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That man is a homo and a liar-TrojanMan
Hell, a Ford just breaks down on you. It doesn't fall apart AND try to kill you at the same time-Bloodsport2885 |
[#8]
I do not like the HSA unless you plan on working for a long time. Personally, I want to be able to leave work at 55.
As such I would suggest a 457 is your primary account, the ROTH IRA as next in line, and the HSA as the last bucket to fill. Depending on your income, I would look at a traditional/roth options within my 457 Your mileage may vary. |
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WTF is up with this bullshit anti-bayo lug crap. Was there a group of irrate japanese guys bonzai charging disabled school children and puppies that I wasn't aware of?
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[Last Edit: Chromekilla]
[#9]
Originally Posted By Silverbulletz06: I do not like the HSA unless you plan on working for a long time. Personally, I want to be able to leave work at 55. As such I would suggest a 457 is your primary account, the ROTH IRA as next in line, and the HSA as the last bucket to fill. Depending on your income, I would look at a traditional/roth options within my 457 Your mileage may vary. View Quote On the HSA what are the implications of wanting to leave at 55? I don't want to work until 65, so this may be relevant to my interests. I do not have Roth in my 457, and cannot force/beg/or pay to get it. I've already tried, and I am pushing for us to go out for a change in plans because of the fees we have on 457 and garbagish options. The other thing that may be relevant to this thread. My HSA charges an admin fee, of something like .03% per month, up to a max of $10. Plus a flat fee to be able to invest. I am going to be doing a transfer from my work HSA yearly to an HSA with a high rated individually owned HSA to avoid those fees. |
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That man is a homo and a liar-TrojanMan
Hell, a Ford just breaks down on you. It doesn't fall apart AND try to kill you at the same time-Bloodsport2885 |
[Last Edit: Bubbles]
[#10]
Originally Posted By Chromekilla: I question my ability to remember and provide documentation for medical bills in 20 years. View Quote You do need to keep decent documentation. I pay the medical bills on the provider web site and use a credit card. Receipts for the bills typically arrive via email so just keep them backed up because two is one, one is none. I also store a copy of my CC's annual statement with them so I can match the bill to the CC payment. I really don't expect to have to dip into the HSA before I retire unless it's for something pretty catastrophic or I lose my job and use it for COBRA premiums. Otherwise it'll pay for long-term care insurance premiums. |
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Heller II - Challenging DC's bans on semi-automatic rifles, large-capacity ammunition feeding devices, and its onerous and expensive handgun registration process. http://www.HellerFoundation.org/
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[#11]
Originally Posted By Bubbles: You do need to keep decent documentation. I pay the medical bills on the provider web site and use a credit card. Receipts for the bills typically arrive via email so just keep them backed up because two is one, one is none. I also store a copy of my CC's annual statement with them so I can match the bill to the CC payment. I really don't expect to have to dip into the HSA before I retire unless it's for something pretty catastrophic or I lose my job and use it for COBRA premiums. Otherwise it'll pay for long-term care insurance premiums. View Quote I do save the annual statements from my HSA which appears to autolink as long as I try to use my health insurance for the transaction, even if I pay with CC. I do have the cc statement, which is saved electronic each year for taxes. |
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That man is a homo and a liar-TrojanMan
Hell, a Ford just breaks down on you. It doesn't fall apart AND try to kill you at the same time-Bloodsport2885 |
[#12]
Originally Posted By Chromekilla: On the HSA what are the implications of wanting to leave at 55? I don't want to work until 65, so this may be relevant to my interests. I do not have Roth in my 457, and cannot force/beg/or pay to get it. I've already tried, and I am pushing for us to go out for a change in plans because of the fees we have on 457 and garbagish options. The other thing that may be relevant to this thread. My HSA charges an admin fee, of something like .03% per month, up to a max of $10. Plus a flat fee to be able to invest. I am going to be doing a transfer from my work HSA yearly to an HSA with a high rated individually owned HSA to avoid those fees. View Quote IIRC, 65 is the withdrawal age as if it were a retirement account. Locking up a decent amount of assets, despite being triple advantaged, until 65 is not something I would want to do. |
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WTF is up with this bullshit anti-bayo lug crap. Was there a group of irrate japanese guys bonzai charging disabled school children and puppies that I wasn't aware of?
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[#13]
Originally Posted By Silverbulletz06: I do not like the HSA unless you plan on working for a long time. Personally, I want to be able to leave work at 55. As such I would suggest a 457 is your primary account, the ROTH IRA as next in line, and the HSA as the last bucket to fill. Depending on your income, I would look at a traditional/roth options within my 457 Your mileage may vary. View Quote I'm just the opposite. I *want* the HSA because I plan to retire early. 1. I will use the HSA money to pay for medical care (tax free) after I retire and before medicare. 2. I can reimburse myself tax free at any time if I need cash for any medical care I paid out of pocket (I just need to keep these receipts - we pitch ours in a simple folder in my office and I file them once a year) 3. At age 65, the HSA can be used just like a 401k/457 plan, and you can take withdrawals for any reason just like a 401k (but you must pay taxes) I would not want the BULK of my money in an HSA, but having $100k - $200k sitting in one certainly won't hurt during those early retirement years. |
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[#14]
Here is another Roth advantage I just learned about: you can withdraw CONTRIBUTIONS without penalty whenever you want.
So for example, you start maxing Roth contributions at age 25. At age 50, you want to purchase some real estate. Those 25 years of contributions (not the gains), that total dollar amount, can go towards the real estate transaction. This may be a bad idea depending on other factors, but it provides options other vehicles do not. |
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[#15]
Originally Posted By FALARAK: 1. I will use the HSA money to pay for medical care (tax free) after I retire and before medicare. 2. I can reimburse myself tax free at any time if I need cash for any medical care I paid out of pocket (I just need to keep these receipts - we pitch ours in a simple folder in my office and I file them once a year) 3. At age 65, the HSA can be used just like a 401k/457 plan, and you can take withdrawals for any reason just like a 401k (but you must pay taxes) View Quote 4. You can use it to pay for long term care insurance premiums without paying tax or getting hit with a penalty. https://www.goodrx.com/insurance/fsa-hsa/hsa-eligible-expenses |
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Heller II - Challenging DC's bans on semi-automatic rifles, large-capacity ammunition feeding devices, and its onerous and expensive handgun registration process. http://www.HellerFoundation.org/
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[#16]
Originally Posted By heavily_armed: Here is another Roth advantage I just learned about: you can withdraw CONTRIBUTIONS without penalty whenever you want. So for example, you start maxing Roth contributions at age 25. At age 50, you want to purchase some real estate. Those 25 years of contributions (not the gains), that total dollar amount, can go towards the real estate transaction. This may be a bad idea depending on other factors, but it provides options other vehicles do not. View Quote Don’t forget about conversions. After 5 years they are treated like contributions. However Rothschild are so valuable and powerful, I’d never recommend withdrawing contributions and conversions early. |
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