Michael

If you are going to use a financial advisor, the only one that should be used is an independent financial advisor (pay per hour). However you'll find that it is more of a hand holding session than any advice that you can't find with google.

About a month ago, I talked to my SIL on the phone and she said she saw a financial advisor and I tried to tell her to be very careful about the type of planner because the only one that will likely get rich is the financial advisor if the wrong one is chosen. She's 70 years old and she said "I don't know anything about investing so I need someone to do it for me" and she told me some of the things that the financial advisor did and I cringed. She said he doesn't charge for the service and I knew exactly what she had gotten herself into. They don't charge since all they do is sell clients are front load funds, annuities, and other products that pay them a high commission.

I tried to explain but she just got more confused so I decided to leave it alone since it's already too late to do much. However I'm worried that the financial advisor will have her move from one front loaded fund to another front loaded fund.

petitefrancaise

Totally agree Michael.

petitefrancaise

Agree and this is what tony robbins says in his book, he specifically mentions vanguard and morningstar too to be fair to him.

Our 401k is matched up to 5% of salary by the employer so it's worth us sticking with them and switching to another product. But for the OP I would check out the plan that his employer is offering and considering that he may well do better investing it himself somewhere.

Hubby and I were discussing (in a down the pub, not very knowledgeable way it has to said) whether to switch to roth 401k ie pay the tax now rather than in the future. My point is that we currently have dependants at home but when we retire we won't. I also think that tax is only going to go up. His point is that we probably won't have quite so much money when we retire so our tax bracket may be lower... (Oh dear god, I hope that one isn't true!)

thoughts?

Hotscot

You could do an individual 401k which has both Roth and non-Roth components if you wanted.

I max my own Individual 401k and then put after tax money into a Roth IRA.
Anything left is in a taxable investment account.

Michael

I didn't realize that companies can offer a Roth 401K since 2006 since you were the first to bring up a Roth 401K. The biggest issue with a Roth is that you'll be paying taxes at your highest marginal tax rate (both federal and state) before you put the money into the Roth account.

Michael

When you were working for a company, there were before tax and after tax contributions to a 401K but that is different than a Roth 401K since the only thing that was tax free at retirement for after tax contributions was the contributions.

Hotscot

I was referring to this. But I don't know the employment situation with petitefrancaise

'Roth Type Contributions: With IRAs, those who earn high incomes are disallowed from contributing to a Roth IRA or, in most years, converting their IRA to a Roth IRA. The solo 401(k) plan contains a built in Roth sub-account which can be contributed to without any income restrictions.'

technolog

Thanks for the input everyone, it looks like I've got some research to do.

JAJ

There are actually three types of 401k contribution: before tax (which is the norm), after-tax and Roth. Many plans offer an after-tax option, which is often overlooked as a choice. As far as I understand, Roth 401k has only been an option since 2006 and relatively few plans offer this option.

The difference between after-tax 401k contributions and Roth 401k contributions, is that in the Roth case the earnings may be tax free. With traditional after-tax 401k contributions, earnings are taxable as ordinary income - but only when a distribution is taken, which may be many years into the future. In the meantime, the earnings have grown tax free.

Giantaxe

My employer offers a Roth 401(K). Apparently the uptake is very low, perhaps because I work in high tech and wages - and thus marginal tax rates - are high.

dunroving

That book got slammed in a recent Guardian article. He may have charisma and a successful business hut he is no financial expert. In 2010 he was recommending people pull all of their investments out of the stock market.

Michael

I completely agree with you. He is a motivational speaker and nothing more. He may have a basic knowledge about investing but I believe that I understand significantly more.

petitefrancaise

Lucky you!
I've lived in 4 different countries, we've got pensions all over the place. We're both well educated and yet, we haven't sorted out the US end of things - too busy with getting on with life, I suppose.

Tony Robbins meant this book to be a bit of a wake-up call to people like us and the main thing I've got out of it is that a helping hand would be a very good idea indeed.

Anybody care to recommend someone who can advise us on the tax implications of all these pensions? We don't even know if we will stay in the US for retirement yet. I fancy Spain but adding another country to the mix may be more than we can handle at 65!

jackattack

I'm confused about this bit - any insight on what the restrictions are on converting IRA to ROTH? Other than having to pay the tax (at marginal rates), I didn't think that there were any restrictions.

I have contributed to "back door ROTH" because we are not eligible for the regular ROTH.

Michael

There aren't any income restrictions anymore on converting traditional IRAs to Roth IRAs. That is why a "back door Roth IRA" works now.