Investing: Difference between revisions
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A 401(k) or 403(b) is an employer-sponsored retirement plan.<br> | A 401(k) or 403(b) is an employer-sponsored retirement plan.<br> | ||
That means, it is managed by a company cooperating with your employer.<br> | That means, it is managed by a company cooperating with your employer.<br> | ||
If you work for a for-profit company, you will have a 401k. | If you work for a for-profit company, you will have a 401k. | ||
If you work for a public school or non-profit company, you get a 403b.<br> | |||
If you work for the federal government, you will have a thrift savings plan.<br> | If you work for the federal government, you will have a thrift savings plan.<br> | ||
For the most part, 401k and 403b rules are identical. | For the most part, 401k and 403b rules are identical. | ||
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===Traditional IRA=== | ===Traditional IRA=== | ||
In a traditional IRA, you deposit pre-tax money. | In a traditional IRA, you deposit pre-tax money (see notes). | ||
Thus, your deposit counts as a tax-deduction. | Thus, your deposit counts as a tax-deduction. | ||
You pay taxes when you withdraw your money. | You pay taxes when you withdraw your money. | ||
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* You must start taking required minimum distributions (RMDs) at age 72 | * You must start taking required minimum distributions (RMDs) at age 72 | ||
* No more contributions after age 70.5 | * No more contributions after age 70.5 | ||
* While there are no income limits to contributing to a traditional IRA, there are income limits to deducting from your taxes | |||
** See [https://www.irs.gov/retirement-plans/ira-deduction-limits IRA Deduction Limits] | |||
** To avoid being double taxed on your Traditional IRA contributions, be sure to complete [https://www.irs.gov/forms-pubs/about-form-8606 IRS Form 8606] | |||
===Roth IRA=== | ===Roth IRA=== | ||
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===Backdoor Roth IRA=== | ===Backdoor Roth IRA=== | ||
If you are a high-earner and believe you will earn more money in retirement, | |||
you may want to do a backdoor Roth IRA to grow your retirement account tax-free rather than tax-deferred. | |||
===Mega Backdoor Roth | ;Basic Idea | ||
* Contribute to a traditional IRA | |||
* Convert the traditional IRA into a Roth IRA | |||
;Notes | |||
* To avoid tax complications, you should eliminate all other pre-tax IRAs beforehand by rolling them over to a 401k. Otherwise, you will be subject to the pro-rata rule. | |||
===Mega Backdoor Roth=== | |||
Requirements: Your 401k allows after-tax contributions and non-hardship withdrawals. | |||
;Basic Idea: | |||
* Max out after-tax contributions to your 401k | |||
* Rollover or withdraw the after-tax portion to a Roth IRA or Roth 401K | |||
==ETFs== | ==ETFs== | ||
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25 basis points is an annual fee of 0.25%.<br> | 25 basis points is an annual fee of 0.25%.<br> | ||
The following classifications are stolen from Wealthfront and Acorns<br> | The following classifications are stolen from Wealthfront and Acorns<br> | ||
==Robo-Investors== | ==Robo-Investors== | ||
===Wealthfront=== | ===Wealthfront=== | ||
{{main | Wealthfront }} | {{main | Wealthfront }} | ||
; [https://www.wealthfront.com/c/affiliates/invited/AFFA-BMT8-AIJ3-FS7E Referral]<br> | ; [https://www.wealthfront.com/c/affiliates/invited/AFFA-BMT8-AIJ3-FS7E Referral]<br> | ||
; | |||
; Cash Account | |||
Wealthfront offers a cash account. | |||
Wealthfront offers a cash | This account is distributed between up to several banks so it is FDIC Insured up to $3 million <ref name="wealthfrontfdic" />. | ||
This account is distributed between | |||
==References== | |||
{{reflist|refs= | |||
<ref name="wealthfrontfdic">https://www.wealthfront.com/blog/wealthfront-fdic-insurance/</ref> | |||
}} | |||