If you exceed the Roth contribution you have several options listed in this article.
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You withdraw the excess contributions. Ideally you do this before you file your taxes to avoid a 6% penalty for each year the excess remains in the account. You may transfer the money to an after-tax IRA. You may then be able to roll it into a backdoor Roth. Your financial advisor can give you the pros and cons of doing so.
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Not sure if someone has mentioned this beforeâŠif you are employed with company health insurance, you do not have to sign up for Medicare part A or B. If you do sign up for Medicare then you are not eligible to contribute to HSA, only FSA.
My firmâs benefit language on this matter made it sound like I had to sign up for Medicare or I wouldnât be eligible for the firmâs health insurance. I got it all cleared up. I am going to wait to sign up for Medicare when I retire and now I am now trying to switch from FSA to HSA.
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Caution - youâll need to make sure that you stop contributing to your HSA 6 months before you enroll in Medicare Part A.
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Thanks for that info. I didnât see that.
Question: If I have both Part A and company insurance and i should go to a hospital, how would it work? Would Medicare be the primary and my company insurance would pick up the rest?
Iâm not sure - it might depend on the companyâs plan? I think there are some people who have worked in benefits on this thread, so hopefully they will chime in.
Also, I should clarify:
This only applies if youâre signing up for Medicare Part A after your normal at-65 sign up period due to having employer insurance after 65. It doesnât apply for those signing up for Part A at 65, who can contribute up to the month before starting on Medicare.
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Very helpful @MarylandJOE. Just to clarify. Assume I am still working but am forced to make a withdrawl from the 401k. Are you saying that I would not have to pay SS or Medicare on the withdrawal from the 401k? That would make my number considerably lower.
Yes this is the huge benefit of having your own company that makes your retirement contributions (eg SEP-IRA) as opposed to deducting them from salary. That way you avoid SS and Medicare deductions on both the way in and the way out (because the contributions arenât part of your W-2 income). If contributions are made from your salary then you pay the SS and Medicare on the way in (not the way out).
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Seems that if they gifted you money, itâs now yours to do what you want? And perhaps the point of opening an account in your name is so they can keep gifting without having to write a check. I have thought about doing that for family, with the thought that I also have access to it and can invest it for them in the way that I choose, maybe thatâs what they want? If theyâve been doing pretty well, they might want to do the same for you. Anyways, seems like the FA meeting will be helpful. Thatâs very good that they want your husband to meet with the FA, and hopefully all questions will be answered. Sounds like your in laws are definitely feeling their mortality, and itâs fantastic that they still have the mental capacity to direct their money where they want it to go.
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Sort of on the top end of the bell curve.
Some good friends of mine (HS classmates) came back from overseas work and they bought a brownstone very close to a subway station. This was in the early 2000âs, and the one they purchased had the original woodwork (beautiful wood ceiling) on the main floor. The elderly owner was in FL and the roof was not kept up, so water damage destroyed the upstairs features. They dug out a sub-basement so their residence was two floor plus a recreational area below their tenantâs walk down flat. But their grandchildren were in our home town, and the wife insisted on being in WI. So they had leased out their residence (a major league baseball player had it leased before they sold it). I was visiting when they had all the fireplaces (I believe 5) re-pointed or whatever it is called to have them all be working properly.
Their realtor said one gentleman owned four similar brownstones before he allowed his cocaine addiction to bankrupt him.
DD1/SILâs kids go to a very good Catholic school with the highest SAT average test scores in all of their very large TX city. Some of the parents are very well paid professional people that donât flash their financial blessings, while others make the sacrifices in their lifestyle to have the school worked in their household budget. Some families home school, and some get into the lottery based classical school offered by public schooling.
My family experience, and DHâs was not with many family vacations - but they were memorable. We had a few family trips â most expensive was Alaska, but that also was helped by my brother - who allowed us to use his vehicle while he used a work vehicle, and since he had his house going to be sold - his wife had a house that they decided to remodel, we had use of the 3 BR house while we were in Anchorage. After we left, they replaced some floors and got the house sold quickly (Anchorage was limited in housing that most of us live in with the lower 48). We actually had split the grand prize two years in a row with our DDâs Catholic HS (a draw down, $8K total). Our DDs traveled internationally with several programs. DH and I went to Switzerland together at my 30th birthday - his only time there (I have been to Switzerland 5X starting at age 12; I am a dual citizen and my first language was Schweitzer-Deutsch). I will see if I can get all done and settled in 2025 to go again in 2026 - working on better health (diet and exercise). 2024, I had my hands full with two homeowner insurance claims and all the activities I am in. DH breaking his leg Jan 2024 - DH now realizes he needs to respect limitations (do not go out walking when the roads are closed due to ice storm - good thing my car has all wheel drive and he brought his phone along).
What exactly does all this home remodeling, SAT scores, international travel, insurance claims, Brownstones, custom hones, etc have to do with retirement?
Yes, many here have big homes and spend lots of money on remodeling them,vacations, education, fancy cars, etc. Perhaps that will affect how much you need to retire one day?
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Thanks, I think you are right. My fil is showing his age and his memory isnât what it used to be.
I think we might be nervous to spend money that his parents have, I mean they had trouble spending it. It might also be informative to see how different investment firms do with our money and maybe this firm is better than the one we have.
Like I say, I am glad not for myself but glad that my in laws have decided to spread some of their wealth as it wonât probably change anything for us but it may for other family members
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I think itâs better to start gifting than sit on a big pile of money, not using it. Really glad your in-laws have recognized that. My mother is sitting on her pile, afraid to spend anything, and her gift checks to the grandkids keep getting smaller every year (down to $50 now). I hope if Iâm in her situation in the future, that I could see the big picture and add a couple of zeros to those checks.
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I like the idea of gifting with warm hands, not cold ones.
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I know that their FA has been trying to persuade them for a few years. And I wonder if the fact that we contributed a fair amount to our granddaughterâs college fund made them think.
We are happy to have done that.
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Unless asset is cash, it is better to gift after death because you could get a free âstep upâ and not pay tax on it.
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Some states (looking at you, WA) have a much smaller estate tax exemption than federal. But gifting is unlimited!
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In our case, weâd be withdrawing on top of other income, at least for a while so our marginal rate would be pretty high. Plus weâd have state tax. 4% would have to be grossed up to reflect the tax rate. Alternatively and more sensibly, the 4% rule doesnât apply directly so long as we also have employment income.
The 4% is generally thought of as a âsafeâ rate that could be withdrawn from a retirement account and generally expect those funds to last for thirty years.
If you still have employment income coming in I would assume you wouldnât need to withdraw 4% in the first place if you had enough standard income coming in and have a big enough retirement nest egg.
Perhaps half of your spending needs could be supplied by your job and youâd only need to withdraw 1% or 2% a year to make up the difference. This is really going to depend on your specific situation.
So yes, the 4% âruleâ isnât a hard a fast for every person or situation. Itâs kind of more a general idea of what the maximum that could be safely taken yearly.
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The good news is that until I really slow down, I donât need the withdrawals at all. The bad news is that the marginal tax rate on the incremental income will be pretty high. And, the RMD rate for age 73 is 3.77% if I understand it correctly. But, having excess cash will help me clean up some debt I have from one of my entities. So not all bad.
Given the Massachusetts estate tax that would be paid on any significant balance in my 401k at the time of my death, I think I need to think about starting to withdraw funds to gift them. In addition to giving to the kids when they will get maximum benefit from the gift, there is a balance between tax-free appreciation within a 401k and the estate tax that would be owned on death. If after Objective 1 (ShawWife and I donât run out of money) is met, Objective 2 would be to maximize the after-tax benefit to my kids of any funds we would give them. And this calculation is done a little differently because Iâm in MA.
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