Let's say that you have $86,000.00 in your 401 and for whatever reason when you started it you chose not to pre tax and handle the taxes when I took out the funds instead.Okay - I am making a big assumption here, because you are not being clear about which 'funds' you are 'handling taxes on' when you 'took them out'. I am assuming that you are referring to making contributions that you had already paid taxes on to a Roth 401(k) account. If not, you need to better define what 'funds' you are talking about and where they are going to and from when you 'handle the taxes'.Did I screw up by doing this?Well, whether choosing to make Roth contributions to a 401(k) is highly dependent on your tax situation is now vs. what you think your tax situation will be when you go to withdraw the funds. And what you think your tax situation will be when you withdraw the funds is highly dependent on what you think the tax laws will be when you plan to withdraw the funds (including if you will have moved to someplace that has different tax laws than where you live now) - tax brackets, tax rates, deductions, etc. So - it's hard to say whether you 'screwed up' without understanding a lot more about your situation.In general - if you think you are paying lower tax rates now than you will pay when you withdraw the money, it's probably better to use the Roth option; if you think you are paying higher rates now than you will pay when you withdraw the money, then it's probably better to use the pre-tax option. There's lots of issues that have to do with the specifics of your tax situation in those generalities, though.I will say - making the choice to put money away for your retirement, even if you did 'screw up' by choosing a tax treatment that may be less beneficial to you in the long run is still much less of a 'screw up' than not putting money away for your retirement at all.If I took all of it out tomorrow let's say to buy a house, approx. how much would I be left with after all the fees and taxes.I live in Texas and I'm 57 yrs. old......Well, it could be anything from almost the entire $86k down to something a lot closer to $40k. What it actually would be depends on a whole lot of things:- What tax bracket do you expect to be in this year?- What tax bracket would you be in if you added the $86k to your income? Are there any additional taxes, loss of deductions or AMT issues because your income will have increased by $86k?- What kind of fees, if any, does the plan charge you to make the withdrawal?- Will you be rolling over to an IRA before you withdraw the money? If so, would you qualify for the first time homebuyer exemption from penalties?- Are you still working for the company where you have/had the 401(k)?- If you are not working for that company, how old were you when you left employment with them?- Did the company make any contributions (matching or profit-sharing) to the 401(k) on your behalf? If they made contributions on your behalf, how much of the $86k was generated from the company contributions and gains on the company contributions vs. how much was generated from your contributions and the gains on your contributions?Thanks for your insight..and for not laughing...The answers for the questions that you are asking have a lot to do with taxes and your tax situation. So, if you are really concerned about getting answers to what would happen in your particular situation, you would be best off to consult a tax professional.AJ
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar. Earnings Estimates, Analyst Ra