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Hello Everyone,

I have been away from the land of the Fools for awhile, longer than I wanted but I finally made it back! I have been reading through the many post that have accumulated while I was gone in search of knowledge regarding a situation I will be faced with very soon. I write the following in hopes someone can lead me in the right direction:

Status: I am married with no children and my wife and I both work, together we make about $106k each year. We both contribute the max to our 401ks and we also have a brokeage account with Schwab that we fund each month into index funds.

Situation: My wife is taking another job in about one week and I am trying to decide what to do with her 401k money??? There is almost $10k in her account, of course, I could just let it roll over into her new company's 401k but they do not have the type of funds that are Foolish. I would prefer to use that money to open a Traditional or Roth IRA with Vanguard to purchase the Vanguard Balanced Index Fund and continue to contribute to that separately. Then, my wife could start her new company's 401k.

I already feel the Vanguad fund mentioned above would be a better place for the money as long as I am able to do this and do not get bashed with taxes. So, is this an option available to me? Would a Traditional or Roth IRA work better? Should I split the money and open some type of IRA account in each of our names? Any help with this would be greatly appreciated!!!


Jim
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Jim wrote:
Situation: My wife is taking another job in about one week and I am trying to decide what to do with her 401k money??? There is almost $10k in her account, of course, I could just let it roll over into her new company's 401k but they do not have the type of funds that are Foolish. I would prefer to use that money to open a Traditional or Roth IRA with Vanguard to purchase the Vanguard Balanced Index Fund and continue to contribute to that separately. Then, my wife could start her new company's 401k.

>>>IMHO I would roll it into an IRA so that I could have the investment choices that appeal most to me.>>

Jim wrote:I already feel the Vanguad fund mentioned above would be a better place for the money as long as I am able to do this and do not get bashed with taxes.

>>>Vanguard is a wonderful choice for people who want index funds. I'm not sure whether a Vanguard brokerage account will allow you to by and sell individual stocks. If, and when, you desire to get into individaul stocks if they don't allow you to trade stocks you can always transfer the IRA. There are no tax consequences if you roll it into a trditional IRA. If you convert it to a Roth you will get taxed at your income tax rate for all contributions made. You didn't say how old you are or when you plan on tapping the money so it is impossible to say whether you should opt for a Roth. If you have more than a few years until you begin taking distributions IMHO you should go with the Roth.

jeffy3>>
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If, in a year or two, your joint taxable income is close to the upper limit of the 28% tax bracket, you and your wife should try to max out your contributions to the 401k in order to avoid the next higher tax bracket. The 28percent Federal income tax for a joint return is a taxable income of approx. $42K to $114K. This assumes that in retirement you will not be in an even higher bracket. You can also contribute $2k per year to a Roth IRA. Your tax on the Roth amount next year will be no more than 28%.
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