What retirement strategy other than SS?

[Wolf359]

Originally Posted By: Alfred_B
Originally Posted By: Wolf359

But you would have had the same problem if you didn't put it in. You would have paid taxes on it back then. The way it's supposed to work in theory is that when you're working, you're in a higher tax bracket and then when you retire, you would be in a lower tax bracket. Now if it turns out that you're actually in a higher tax bracket, well, no planning is perfect. You might actually still be ahead if you did the math because you had all those years for the initial investment to grow tax deferred.


Somewhat true, except that when the higher income is due to capital gains. If they were in the market, you would pay income tax on the principal and 15% capital gains tax on the gains. With 401k type vehicle, you defer the income tax on the principal, and then you pay income tax on the principal AND the gains. So you can potentially lose a lot of money.


But paying income taxes lowers your initial investment and you'd have to pay that 15% for capital gains every year which also reduces the amount that can grow. I guess it all depends on how much it pushes you over into the next bracket. You could do a greater distribution now to lower the minimum distribution so you might end up in a lower bracket in the future.

 

[Alfred_B]

15% is when you realize the gain (i.e. sell the asset). There is no tax on unrealized gains.

 

[Astro14]

No Bitcoin advocates?

I mean, if we're going to include Powerball, AKA wishful thinking, as a "strategy", why not Bitcoin? Or Beanie Babies?

Hey, they could make a comeback!

 

[Wolf359]

Originally Posted By: Astro14
No Bitcoin advocates?

I mean, if we're going to include Powerball, AKA wishful thinking, as a "strategy", why not Bitcoin? Or Beanie Babies?

Hey, they could make a comeback!

Did you see the latest price? It was under 10k at one point today, but it's back up a little.

 

[csandste]

I ran the public libraries in my county for 35 years. The Friends of the Library store sold Beanie Babies and sold about $800,000 worth in the peak year. A couple of elderly volunteers were roughed up in fights that broke out between customers when new issues hit the shelves.

 

[JohnnyJohnson]

Originally Posted By: Alfred_B
Originally Posted By: Wolf359
Originally Posted By: csandste
I wish I'd put more money directly into the market instead of funding my pre-Roth IRA to the max-- my MDR is killing me, paying capital gains would have been less painful.


I don't understand your problem with MDR. I think you're referring to required minimum distribution requirements. Maybe you just need to switch the account to a different brokerage. My mom deals with those, and at Fidelity, she has it set up so that they automatically sell off whatever is needed and sends her a check every year. You can then invest those in a regular account. They don't really charge any extra fees. The roth has tax savings that you don't get with a regular account. Believe me, some years even when I didn't think I made that much money percentage wise, some mutual funds have kicked out enough in capital gains to exceed the price of a new car.


It's not the MDR itself, it's the tax on it. 401k is deferred income and when you draw, it's ordinary income, not capital gains. In this case, the RMDA is large enough to have bumped to a higher income bracket.


That's why you want a ROTH IRA and you want to start it as early as you can in life. Its tax free.

 

[csandste]

Originally Posted By: JohnnyJohnson
Originally Posted By: Alfred_B
Originally Posted By: Wolf359
Originally Posted By: csandste
I wish I'd put more money directly into the market instead of funding my pre-Roth IRA to the max-- my MDR is killing me, paying capital gains would have been less painful.


I don't understand your problem with MDR. I think you're referring to required minimum distribution requirements. Maybe you just need to switch the account to a different brokerage. My mom deals with those, and at Fidelity, she has it set up so that they automatically sell off whatever is needed and sends her a check every year. You can then invest those in a regular account. They don't really charge any extra fees. The roth has tax savings that you don't get with a regular account. Believe me, some years even when I didn't think I made that much money percentage wise, some mutual funds have kicked out enough in capital gains to exceed the price of a new car.


It's not the MDR itself, it's the tax on it. 401k is deferred income and when you draw, it's ordinary income, not capital gains. In this case, the RMDA is large enough to have bumped to a higher income bracket.


That's why you want a ROTH IRA and you want to start it as early as you can in life. Its tax free.


Yep. Roths are great!

 

[JohnnyJohnson]

Originally Posted By: csandste
Yep. Roths are great!


They even be greater if after 20 some years they increased the yearly contribution to 10K a year.

 

[Astro14]

Originally Posted By: Wolf359
Originally Posted By: Astro14
No Bitcoin advocates?

I mean, if we're going to include Powerball, AKA wishful thinking, as a "strategy", why not Bitcoin? Or Beanie Babies?

Hey, they could make a comeback!

Did you see the latest price? It was under 10k at one point today, but it's back up a little.


Actually, my comeback statement was directed towards the Beanie Baby market, they're back up, too...

To, like, $5.00, I think...I'll have to check...so, all those people who bought them at $4.75, and kept a hundred of them, they will be up, well, what, millions??

 

[cashmoney]

Max out your 401K or SEP contributions every year without exception from the year you first get a full time job. Invest in low cost index funds that own the entire stock and bond markets or use an appropriate target date fund for your age. And then save another 15-20% of your income as regular savings or use that money to pay off your home mortgage as quickly as possible. Enjoy your life but also plan and SAVE for the future of your life. Start following this advice in your middle 20's and retire no later than when you are 55-60 years old when you have become completely financially independent with a very significant investment portfolio.

Or just spend almost everything you earn as fast as you earn it on lots of toys, eating out, fancy cars and trucks, boats, expensive vacations, expensive hobbies, etc. for the next 40 years and end up broke, in debt, and keep working until you are too sick to continue and then have to learn to like the flavor and texture of purina products for the duration.

 

[Wolf359]

Originally Posted By: Astro14
Originally Posted By: Wolf359
Originally Posted By: Astro14
No Bitcoin advocates?

I mean, if we're going to include Powerball, AKA wishful thinking, as a "strategy", why not Bitcoin? Or Beanie Babies?

Hey, they could make a comeback!

Did you see the latest price? It was under 10k at one point today, but it's back up a little.


Actually, my comeback statement was directed towards the Beanie Baby market, they're back up, too...

To, like, $5.00, I think...I'll have to check...so, all those people who bought them at $4.75, and kept a hundred of them, they will be up, well, what, millions??

I feel bad for those that got into the beanie baby craze. I knew one woman at work who was an elderly secretary that was well known in the office for collecting them. She didn't sell them even when she could have made a profit. I'm guessing that she probably held onto all of them. I don't think she paid a premium for them though, she was just in the hunt for the rare ones.

There was another secretary that just had her 401k money in money market funds and didn't know which funds to put it in. I told her to put it the S&P index fund. A few years later she told me she did that and that it was up a few thousand. She said thanks.

 

[TinyVoices]

I'm 25 but I have a pretty good 401k plan and I have a Roth IRA I've been maxing the contributions on since I was 22.

 

[JohnnyJohnson]

Originally Posted By: Astro14
Originally Posted By: Wolf359
Originally Posted By: Astro14
No Bitcoin advocates?

I mean, if we're going to include Powerball, AKA wishful thinking, as a "strategy", why not Bitcoin? Or Beanie Babies?

Hey, they could make a comeback!

Did you see the latest price? It was under 10k at one point today, but it's back up a little.


Actually, my comeback statement was directed towards the Beanie Baby market, they're back up, too...

To, like, $5.00, I think...I'll have to check...so, all those people who bought them at $4.75, and kept a hundred of them, they will be up, well, what, millions??

You're really not up anything until you sell them that's why they call it a paper gain. They come a go in a hurry.

 

[wtd]

I retired last year at age 50 after almost 26 years of Gov't service. I have these for retirement:

FERS(Gov't pension)
TSP (basically a 401K)
Social Security supplement(because I have a Federal Law Enforcement retirement)
At age 62 my SS supplement ends and I'm eligible for Social Security.

I'm pretty much debt free so I can live on just my pension without touching my TSP.

I will say that getting divorced a little over half way through my career really hurt my retirement plans as I lost 65% of my TSP balance at the time to my ex-wife. The monthly child support really hurt how much I could contribute to my retirement after that point. I had to make a deal with her so she didn't get any of my pension but I had to give her extra out of my TSP so she wouldn't touch the pension.

The best laid out retirement plan can be devastated by a divorce and there is not much you can do about it unless your spouse has a better one than you do or you come to an agreement to not touch it.

The best thing you can do to prepare for retirement is invest as much into some type of IRA or employer based plan as you can afford and to start investing as early on as you can. Plan so that you are pretty much debt free when you plan on retiring.

Unfortunately most people do not plan well for retirement and end up working until they can't anymore.

 

[Mr Nice]

wtd,

Some people spend more time researching their next cellphone purchase than planning for retirement. Some idiots spend more time on website car shopping than on their 401K website researching investment options, fees, dividends, expense ratios, performance of fund, etc... etc...

A million dollar nest egg is easy to save for over a 30 year timeframe.

 

[supton]

My understanding about 401k vs Roth was if you were in a higher tax bracket in retirement then the Roth makes sense--but if you were going to be in a lower one, then just 401k was better. Pay taxes when it's lower.

I figure, since I only have SS & 401k, I don't have an incentive to go Roth--not until I max out the 401k. My RMD is probably what I need to pull anyhow.

 

[ArrestMeRedZ]

Originally Posted By: supton
My understanding about 401k vs Roth was if you were in a higher tax bracket in retirement then the Roth makes sense--but if you were going to be in a lower one, then just 401k was better. Pay taxes when it's lower.


What this does not take into account is the tax on gains from years of investment. What you put into a Roth or ordinary plan in the first year of a 30-year investment cycle may easily go up 10 times in investment gains before you withdraw. When you take it out of a Roth It's all tax free. It's all fully taxable as regular income when you take it out of a ordinary 401k or IRA. Even capital gains from those accounts are taxed at the higher ordinary income rate.

 

[supton]

Originally Posted By: ArrestMeRedZ
Originally Posted By: supton
My understanding about 401k vs Roth was if you were in a higher tax bracket in retirement then the Roth makes sense--but if you were going to be in a lower one, then just 401k was better. Pay taxes when it's lower.


What this does not take into account is the tax on gains from years of investment. What you put into a Roth or ordinary plan in the first year of a 30-year investment cycle may easily go up 10 times in investment gains before you withdraw. When you take it out of a Roth It's all tax free. It's all fully taxable as regular income when you take it out of a ordinary 401k or IRA. Even capital gains from those accounts are taxed at the higher ordinary income rate.



I see what you are saying, but most any internet advisor advice I've seen doesn't indicate that. I don't know if they assume one only has a certain dollar amount to put forward to savings; and as such, a 401k would be that full amount, but a Roth would be that amount minus their marginal tax rate? thus lowering what would be accumulating.

 

[Mr Nice]

The only negative to an IRA (traditional or Roth) is that the maximum yearly limits are very low.

It should be 3-4 times that amount set by the IRS.

 

[supton]

I agree, although I think HSA limits are low also. I understand why the gov has Roths set low--a country is not a cheap thing to run. But I've found that HSA contribution limit is only slightly higher than max out of pocket, and many with families are going to simply max out of pocket many times while raising families.

I'm not sure when I'll max out my 401k but once I do i'll work on Roth.