Oh, there’s also an adoption credit (not deduction) worth up to $14,400 in 2021 and indexed to inflation. I’ve never put one on a tax return but I believe it’s a dollar-for-dollar credit for the first $14,400 of eligible adoption expenses. Doesn’t count for adopting step-children, and it phases out at incomes between $216,660 and $254,520.
You don’t have to take it all in one year, but you can. You’ve got up to 6 years to claim the whole thing. So like if you get the kid in late December and have high income that year but then take a bunch of time off the following year to bond and your income is lower, I think you can take more in the following year. Double check that though.
There are also state adoption credits out there and I know even less about them.
The original post said Roth 401k, which I believe actually doesn’t allow you to withdraw deposits before 59 1/2, like a Roth IRA does. I’m not 100% certain though.
Maybe the OP meant IRA, not 401k, but that seems like a potentially important distinction.
I’m in the same boat with having DBP and 401k separately. I get lost in all the popular retirement number rules because the DBP doesn’t have a ‘balance’ so it seems hard to actually benchmark myself against anything.
Since it’s a function of final years’ salary, I don’t really know what it’ll be though right? I’m 33, so that projection is the significant estimate in question I think. Yeah I can make some assumptions but there’s a lot of potential volatilitiy given the time frame. I’ll meet all the qualifications for full payout at 57, so 24 years of salary projections, with exams left to take, potential job changes, etc. A lot could happen in 24 years!
right. that’s a long way to project. also assumes you stay there as opposed to leaving.
but since we are spreadsheet savvy (or so I hear) you could take the earned benefit as if you left the place today and value it at the age you plan on retiring. the number will grow a lot obv over time.
Doesn’t the 4% rule account for needing to take larger distributions each year?
I think you’d want to discount a DBP further if there are no COLAs. My DBP pays out a flat monthly benefit, so I think using a 1/.04 might overstate the value.
I’ve worked for two companies that froze their pension plans. I never had a lot vested in either, but I remember the collective gasp at the second company when that was announced by the CEO. Chances are if that happens they’ll do what many other companies do and give you extra $ and leave the investment risk with you, time will tell.
i’ve been at 2 or 3 companies that froze the plan. one went classic db to cash balance. other just ended the db and went to full dc. a third ended it pretty much right before hiring me.
so…avoid working with me if you value the pension plan.
I know they’ve looked at switching it out for a 401k match previously. The did some form of retro analysis and determined that it would’ve taken an 8 or 9% match to equate to the plan benefits. Opted not to change at the time. I’m sure it’ll be discussed again, particularly during a time period that includes relatively low investment returns.
I would have guessed that there are almost no companies left that offer DB plans anymore, so the possibility of working for one that ends it is remote.
What is the difference you mention between “cash balance” and DC plan? I equate the two terms.
Cash Balance is a type of Defined Benefit that “looks like a defined contribution plan” but the contribution and interest credits are guaranteed by the plan document and your benefit is back by the assets in the plan. The actual assets of the plan may be more or less than the sum of the balances.
A Defined contribution plan, is what ever money goes in plus earnings is your account.
We had a brief stop in cash balance land on the way to fully frozen. It’s very similar to DC, but you have no choice in how the money is invested and receive interest instead.
