jraitsev[at]cme.com wrote:
- quote -

I would first look into your employers contribution(if any) and max
that out. Since you are in the 25% tax bracket, you prolly would
qualify for a Roth IRA. I would suggest next is to max that out every
year(its $4000 this year and $5000 the next). Money you put into a Roth
IRA can be taken out at any time. Here is a link about witdrawals of
earnings of a Roth IRA(http://planning.yahoo.com/cash3.html) Your money
in 401K and IRA are available to you without the 10% penalty after age
59.5 not age 65. There are exemptions to touch your 401k money other
than a loan without penalty before that age so check out this
website(http://planning.yahoo.com/cash2.html) for the details. The only
reason why I dont suggest putting more money above what the employer
matches in a 401k plan is that even though there are tax savings for
the current year, you would be paying those taxes in your retirement
years and whose to say that taxes will stay at current levels(probably
would increase as time goes by). So say you have 1 million in your 401K
when you retire. If you decide to take that out lump sum, you would
have a big tax bill. If you take 100K that would put you in the 25-33%
current tax bracket depending how you file your taxes. After taking out
100K for 4 years you have paid about 120K in taxes to the gov't. That's
why I would take the tax hit now while you are still working and invest
in a good mutual fund where here the capital gains tax is only 15%(if
you held the shares for more than a year) or shelter that money in a
variable universal life that has good investment options. Now I know
there might be some objections to this suggestion from other people who
post here from what I have read in other posts, but for me I rather
take the tax hit now, have my money going toward life insurance and
overfund the VUL. Yes it is life insurance first and foremost but it is
also used as a tax shelter. The cash value is professionally money
managed just like funds in a 401k and IRAs(and there are portfolios
inside VULs that track the S&P 500 jus like index funds), it grows
tax-deferred and you can take out the cash value(principle + earnings)
through withdrawals and loans without worrying about taxes. Now there
would be posts about permanent life insurance products and a VUL is one
of them and in order to take advantage of the tax shelter of the VUL
you must keep the life insurance for life. If you are overfunding the
VUL and your investment options are doing well, the cash value will be
large enough for the VUL to pay for itself in your retirement years and
help supplement your retirement savings along with your 401k and Roth
IRA. In my view I always see a need for life insurance because its the
only insurance on earth that will pay your beneficiaries for something
bound to happen in everyone's life, death. If you don't have a wife
and/or kids getting life insurance may not seem needed but everyone
plans on getting married and starting a family at some point in their
lives and the great thing about VULs is that you can change the death
benefit. We all know the need for life insurance when you have a
family. But people miss the point of having life insurance when their
old. The death benefit could be used to pay for debt (debt doesnt die
with us), medical expenses(cause we all know medical costs are rising
at a exponential rate), supporting the spouse, or inheritance for the
children and grandchildren.

BreadWithSpam[at]fractious.net wrote:

- quote -

Is this true for IRAs too? thanks,
Joe

BreadWithSpam[at]fractious.net writes:

- quote -

Actually, as Elizabeth pointed out, 401k money is unavailable
until an age substantially less than 65. Unfortunately, she
said it was 59-1/2, and that's not quite right.

If said investor retires, quits or is fired from that job,
he may take penalty-free (though, like all of them, taxable)
distributions from his 401k starting at age 55.

Moreover, even before that, he could start the stream
of "substantially equal periodic payments" which requires
that he take a stream of distributions for a minimum
of either 5 years or the time it takes him to reach 59-1/2,
whichever is _longer_. So, in theory, if he's saving in
the 401k from age, say, 25 until age 40 and then retires
and wants to get penalty-free access to that money, he
can - in periodic distributions - so long as once he
starts them, he keeps them up for quite a while. Not the
most beautiful option, but still, it's all there.

And while the money is in the 401k, it's (a) tax deferred,
(b) protected in a variety of states/ways from judgements
against the individual, (c) not counted towards things
like, say, financial aid for his kids for college.

So, again, I ask this individual:

- quote -

Note that in the absolute worst case scenario, any
money he sticks into the 401k may be accessible by
paying taxes and the 10% penalty. If he gets an
employer match, almost certainly will have more than
offset that penalty. Moreover, if he takes the
distribution in a year in which he's no longer working,
his marginal income-tax rate will very likely be
lower than it was when he was working anyway.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

- quote -

Only a couple of observations. First, the money isn't available until age
59-1/2, not age 65, if you are no longer employed. It doesn't matter what
the plan document says, after you terminate employment you can roll it over
to an IRA, which is available to you at age 59-1/2.

Putting money in the non-retirement account means you'll be paying income
taxes on whatever dividends/capital gains are earned in this account. This
could get spendy, or not, depending on a lot of things, but you'll want to
think about your allocations carefully in order to minimize taxes.

Good for you to be looking at this at age 25!

Elizabeth Richardson

jraitsev[at]cme.com writes:

- quote -

This is retirement money, no?
How is that a problem?

Or, better: What, exactly, are you trying to do?

(ie. maximize savings for retirement, etc)

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

Option A:
---------
$14,000 go to 401k
Given that you are in 25% bracket you realize savings of
$3,500
Problem is your money is unavailable until you're 65

Option B:
---------
$7,000 go to 401k
Tax savings are about $1750
Money is unavailable until 65

$7,000 go to non-retirement account
Money is available right away

Has anyone done any type of analysis that determines whether any option
is more preferable? What happens in terms of person's age, income etc?
I would love to hear your thoughts on the matter