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URL:  http://boards.fool.com/madbrain-quoti-didnt-separate-out-the-earnings-28985427.aspx

Subject:  Re: Poll: Did your 401k recover from the 2008 de Date:  12/27/2010  6:40 PM
Author:  JAFO31 Number:  67968 of 76078

madbrain: "I didn't separate out the earnings on 2009 and 2010 personal and matching contributions. If I made zero additional contributions in those two years, the return would have been lower, and I wouldn't be as close to recovery. I can estimate that by assuming the same rate of return and deducting the contributions. Something to add to my spreasheet later on."

Ok. I am not tyring to make your life more complicated.

"In the later part of 2010, I made a lot of contributions to money market account that have basically no return. This is the case for a good chunk of the after-tax 401k contributions. That is partly because I intend to roll them over to a Roth IRA next year, and I want to minimize the taxes at the time I do the rollover. It's actually better to have low/no earnings on them. [I want to come back to these two statements] My employer lets me do 1 or 2 annual in service withdrawals for the after-tax contributions. The other reason is because I was very invested nearly 100% in equities and it's not a bad thing to have a few % of my assets less at risk."

The latter sentences suggest that you thought about the issue and have good reasons for doing your calculations that way you did; those reasons were not readily apparent in the initial posts and looked like you might have a "Beardstown Ladies" problem.

That is partly because I intend to roll them over to a Roth IRA next year, and I want to minimize the taxes at the time I do the rollover. It's actually better to have low/no earnings on them."

Why not invest in very agressive stocks and if they decline in value then you have even fewer dollars of tax to pay?

IOW, I do not believ that argment as framed has much merit. In the context where the total dollars available outside the rollover amount to pay the taxes on the rollover amount is limited, I can see wanting to keep the rollover amount limited, but that is because of the limited funds available outside the rollover amount to pay taxes and wanting to avoid using any of the rollover funds to pay taxes because of the penalty associated therewith and not because it is good on an absolute basis to have "low/no earnings".

The goal for most rational people in the USA is not to pay the least amount of taxes, but to have the most dollars available after taxes are paid.

If not, I have a fool-proof method for paying no taxes and an offer (that no one has ever accepted to date) to pay less in taxes.

Regards, JAFO
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