dear QBN retirement dept.,
- Started
- Last post
- 16 Responses
- kerus
Having recently left my FT job to "live the dream" freelance style, I am a bit confused..
How do 401k accounts work now? Am I able to keep contributing pre-tax on a monthly basis to my existing account? Or do i have to wait until the end of the year? Or can I only do some sort of Roth/IRA action now?
signed,
confoozt
- mrdobolina0
roth ira
- Randd0
we do IRAs and SEPs
- cosmo0
take the tax money and run to Mexico. Be rich for 10 days and then return.
- Mojo0
- skelly_b0
There is accounts designed just for the self-employed. I would talk to your accountant about this. If you don't have one, go get one. If you're young Roth IRA may be your best bet. No tax savings today, but all that money will be tax-free when you retire.
- StratusGD0
You should also check to see how long you have to maintain your money in your 401k. Some force to you rollover or withdraw your money within 90 days. Some allow 1 year, or have no time period.
You want to know because, if you run out of time and they automatically send you a check, they will probably withhold the early-distribution penalty/taxes. Otherwise, you can roll it into a new IRA (or 401k, should you get a FT job in the future) tax free, penalty free.
- flashbender0
what's up with the cigar in that pic?
- ohhhhhsnap0
QBNers with 401k's.
I'm thinking about cashing out early. Anyone think this is a bad idea? If so... why?
- bulletfactory0
^ the penalties are almost cost prohibitive - at least 10% off the top for early withdrawal, plus the tax burden.
https://www.wellsfargo.com/inves…
I was looking into cashing out a traditional IRA early for a downpayment on an apartment, but just couldn't justify it.
Roll the 401k into a traditional IRA, or a Roth IRA if you can afford to pay the taxes on the amount immediately. Roth is invested after-tax, so there are no taxes for withdrawal (unless you withdrawal early).
- ohhhhhsnap0
bulletfactory thanks for the low down. the wellsfargo link is on point.
i have some thinking to do. i appreciate this.
- identity0
This place has been turning around for the better lately
- ohhhhhsnap0
When i called the Company who holds my 401k, the person on the phone was almost tripping over herself to get my money over to me. Was the strangest thing, was under the impression that it'd serve them more if I didn't move my $ or cashout.
Would've expected it to be like finding the "Deactivate Account" button on many social networking sites (a few years ago, at least).
- thisfreelancelife0
You can rollover your 401k into an IRA at your bank, just go on in and tell them. It's pretty simple.
Being self-employeed the future of your retirement with be mainly in IRAs, but the benefit is, is that as you make more money you can can save more depending on the IRA. I believe it's up to 15-20% of your gross income.
But definitely get an accountant to walk you through this. Being self-employeed you'll need a good accountant ;)
- I have an excellent CPA, will ask him for advice + inform the thread.ohhhhhsnap
- ohhhhhsnap0
When "cashing out", there are various "hardship case clauses" they will allow for avoiding the 10 % penalty (when it comes time to pay taxes), but not the additional income tax that would be assessed on the withdrawal.
He said I can offset the additional tax due on the new found income by using your expenses related to your business (regardless of the reasons for the widthdrawal). Could minimize the income tax burden of 20%, but wouldn't be able to offset altogether the self employment tax of 15% ...but can be reduced.