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401K and health

401K and health

Old Apr 11th 2008, 5:02 pm
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Default 401K and health

Just thinking about the future....

I will possibly be transferred to US in next 18 months.

The company has a very good 401k (so a colleague told me) & as someone in their mid thirties if I decide to stay and retire in the US will that give me enough to retire or is it like 'how long is a piece of string' question? do US citizens without 401K get state pension? I know answers to this depend on a lot of facts but let me say I earn $70K and pay maximum tax free contributions.

Also what do average income US citizens do about medical when they retire?
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Old Apr 11th 2008, 5:51 pm
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Default Re: 401K and health

A good 401k is one where the employer gives a good matching contribution, so if you put 6% in they put another 9% in or something like that.My employer doesn't match at all so I don't bother, but my husband has something like the above.
How much your 401k is worth depends on what you put in it, what you put the funds in etc.
US citizens get Medicare (or Medicaid, can never remember which way round it is) and then supplement that as they can afford.
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Old Apr 11th 2008, 5:59 pm
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Default Re: 401K and health

arthur, a 401K is like a very fancy savings account. If you don't put anything/much/continuing in, you won't get much out at the other end.

The 'state pension' here is Social Security: www.ssa.gov

Medicare is the health plan for seniors.

PBS just ran a show called The Retirement Revolution that was very interesting, and explained how all these programs work.
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Old Apr 11th 2008, 6:02 pm
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Default Re: 401K and health

Originally Posted by arthur36 View Post
I know answers to this depend on a lot of facts but let me say I earn $70K and pay maximum tax free contributions.
That would be $15,500 per year. They say that will go up by $500 a year. That's a lot to contribute from 70k per year considering all the other deductions and expenses you will have.

You will also have to see if the US government lets you stay and retire. Wanting to and actually being able to do it could be 2 completely different things.
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Old Apr 11th 2008, 6:25 pm
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Default Re: 401K and health

Originally Posted by arthur36 View Post
The company has a very good 401k (so a colleague told me) & as someone in their mid thirties if I decide to stay and retire in the US will that give me enough to retire or is it like 'how long is a piece of string' question? do US citizens without 401K get state pension?
I doubt just a 401(k) will be enough. That kind of plan should just be part of your retirement savings portfolio. There are various other vehicles you should take advantage of as well. You can set up a regular IRA, Roth IRA, etc. It's good that you're thinking about this now. A word of caution about the 401(k), though. Check very carefully how the funds are invested. If the investment is largely in the company's own stock, be very careful. Take advantage of it, especially if there is a match, but you MUST diversify If the bulk of your retirement is in a single stock, and it tanks, you could lose much or all of your savings very quickly.
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Old Apr 11th 2008, 7:46 pm
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Default Re: 401K and health

Originally Posted by Bill_S View Post
I doubt just a 401(k) will be enough. That kind of plan should just be part of your retirement savings portfolio. There are various other vehicles you should take advantage of as well. You can set up a regular IRA, Roth IRA, etc. It's good that you're thinking about this now. A word of caution about the 401(k), though. Check very carefully how the funds are invested. If the investment is largely in the company's own stock, be very careful. Take advantage of it, especially if there is a match, but you MUST diversify If the bulk of your retirement is in a single stock, and it tanks, you could lose much or all of your savings very quickly.
Definitely see who manages the 401K fund....IRA is good, but you might as well max the 401K first as that lowers your taxable income and is before tax rather than afterwards, but IRA is worth doing if you can afford to, can't remember how much you can put in though off the top of my head.

The thing to look out for is the tax penalty for taking the money out before you retire, especially if you move back to blighty as it'll be pretty crushing.

Worth continuing to contribute the NI too to get a full UK state pension, good value for money that.
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Old Apr 11th 2008, 8:43 pm
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Default Re: 401K and health

Originally Posted by Bob View Post
Definitely see who manages the 401K fund....IRA is good, but you might as well max the 401K first as that lowers your taxable income and is before tax rather than afterwards, but IRA is worth doing if you can afford to, can't remember how much you can put in though off the top of my head.

The thing to look out for is the tax penalty for taking the money out before you retire, especially if you move back to blighty as it'll be pretty crushing.

Worth continuing to contribute the NI too to get a full UK state pension, good value for money that.
I disagree actually Bob; I'd contribute up to the company match only in the 401k first, then I'd max a Roth IRA (pay tax now, not later; other big benefit is in a pinch/hard times you can withdraw your contributions early with no penalty); after that, (if there's owt left!) I'd then go back to the the 401k.
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Old Apr 11th 2008, 9:17 pm
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Default Re: 401K and health

Originally Posted by Dan725 View Post
I disagree actually Bob; I'd contribute up to the company match only in the 401k first, then I'd max a Roth IRA (pay tax now, not later; other big benefit is in a pinch/hard times you can withdraw your contributions early with no penalty); after that, (if there's owt left!) I'd then go back to the the 401k.
That's true, but it depends on what tax bracket you are on, if your on the hedge between going up or not, then it'll be worth paying into the 401K, that was my situation and I probably should have mentioned that
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Old Apr 11th 2008, 9:30 pm
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Default Re: 401K and health

Originally Posted by Dan725 View Post
I disagree actually Bob; I'd contribute up to the company match only in the 401k first, then I'd max a Roth IRA (pay tax now, not later; other big benefit is in a pinch/hard times you can withdraw your contributions early with no penalty); after that, (if there's owt left!) I'd then go back to the the 401k.
We shouldn't forget to tell the OP that there are income limits on Roth contributions. If he's earning 70K, now is the time to get into a Roth; years from now he could be over the limit and not able to use a Roth.
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Old Apr 12th 2008, 1:05 am
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Default Re: 401K and health

Originally Posted by arthur36 View Post
Just thinking about the future....

I will possibly be transferred to US in next 18 months.

The company has a very good 401k (so a colleague told me) & as someone in their mid thirties if I decide to stay and retire in the US will that give me enough to retire or is it like 'how long is a piece of string' question? do US citizens without 401K get state pension? I know answers to this depend on a lot of facts but let me say I earn $70K and pay maximum tax free contributions.

Also what do average income US citizens do about medical when they retire?
You may not get the "company matched" money for 3 or 5 years, this is vesting. In which case, if you quit or move back or get fired, your money may as well have been put into a Roth IRA. Or whatever.
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Old Apr 12th 2008, 1:30 am
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Default Re: 401K and health

Originally Posted by Bob View Post
Definitely see who manages the 401K fund....IRA is good, but you might as well max the 401K first as that lowers your taxable income and is before tax rather than afterwards, but IRA is worth doing if you can afford to, can't remember how much you can put in though off the top of my head.

The thing to look out for is the tax penalty for taking the money out before you retire, especially if you move back to blighty as it'll be pretty crushing.

Worth continuing to contribute the NI too to get a full UK state pension, good value for money that.
Don't forget he will also be paying 9% of his income into Social Security.

And unless his employer has a good health plan, he's in for a huge Health Insurance tab.
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Old Apr 12th 2008, 6:30 am
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Default Re: 401K and health

Originally Posted by dakota44 View Post
Don't forget he will also be paying 9% of his income into Social Security.

And unless his employer has a good health plan, he's in for a huge Health Insurance tab.
Social Security is 6.2% and Medicare is 1.45% so I am not sure where that "9%" came from ...

But, of course, there is also state income tax which could be anywhere from 0% up to 9.3% for someone with a hypothetical income of $75,000 and not a whole lot of deductions.

As for health plans. yes he should definitely check into what his employer will be providing well in advance of accepting any offer of a transfer, but I have a hard time believing that any multi-national company (which this presumably is) wouldn't have a decent health plan for their US employees.

Similarly, while you should also check up on 401K matching contributions and any vesting requirements, none of the employers that I have worked for had any vesting period for the employer's matching contribution, but perhaps I have just been lucky ...
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Old Apr 12th 2008, 11:41 am
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Default Re: 401K and health

Originally Posted by arthur36 View Post
Just thinking about the future....

I will possibly be transferred to US in next 18 months.

The company has a very good 401k (so a colleague told me) & as someone in their mid thirties if I decide to stay and retire in the US will that give me enough to retire or is it like 'how long is a piece of string' question? do US citizens without 401K get state pension? I know answers to this depend on a lot of facts but let me say I earn $70K and pay maximum tax free contributions.
There are lots of assumptions, and it may be tough to make the maximum contributions - as someone has said, that is currently $15,500, but from age 50 you can contribute an extra $5k/year. Let us assume:

maximum contributions
3% inflation
employer matches 50% up to 6% contribution from you (3% from employer)
investment growth of 8%
salary growth of 4%

Then after 25 years you will have $897k in today's terms. This will get you $36k - $45k/annum (taxable) assuming you withdraw only 4 - 5% per year.

After 30 years it would be $1.237m, giving income of about $50k - $62k.

You can take more income if you like - you just might risk running out of money.
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Old Apr 12th 2008, 12:50 pm
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Default Re: 401K and health

Originally Posted by md95065 View Post
Social Security is 6.2% and Medicare is 1.45% so I am not sure where that "9%" came from ...

But, of course, there is also state income tax which could be anywhere from 0% up to 9.3% for someone with a hypothetical income of $75,000 and not a whole lot of deductions.

As for health plans. yes he should definitely check into what his employer will be providing well in advance of accepting any offer of a transfer, but I have a hard time believing that any multi-national company (which this presumably is) wouldn't have a decent health plan for their US employees.

Similarly, while you should also check up on 401K matching contributions and any vesting requirements, none of the employers that I have worked for had any vesting period for the employer's matching contribution, but perhaps I have just been lucky ...
My booboo..I was lumping the two together, and meant to say 8% just rounding off...hasty typing.

Seriously better to go for a State with no income tax. Then of course there is sales tax, except for certain States as well.

One thing for sure, he will have a much better tax situation than in Canada, (better deductions for kids, higher personal deduction, mortgage interest deduction etc.) but the Health Care costs could be a killer. This day and age even large companies are cutting back on health plans and requiring higher financial participation by the employee and with higher deductibles. But it is certainly something for him to investigate.
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Old Apr 12th 2008, 1:57 pm
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Default Re: 401K and health

Originally Posted by arthur36 View Post
if I decide to stay and retire in the US
Other people have a say in this decision, too. It's never guaranteed.
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