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Post by steelpony10 on Feb 23, 2023 15:03:57 GMT
This is advice I gave my kids (4) who are now 37+. Just like here I’ll never know what they did but I have a good idea. We never really talk about it and rarely does anyone ask me anything even though I think I would be a good resource to use. Contrary to them I used 3. 1. Count on costs being 3* what they are now 2* if you’re in your 40’s. I didn’t believe it either, but cars were about 7k when I started investing. I was told if that is wrong I’d be that much better off or closer to my actual fixed expenses. 2. Put as much away ASAP for your future. Balance your life style to that goal up to retirement. Leave everything on reinvestment. Keep it simple as possible. You are your own worse enemy.
3. I split our portfolio 10 years from our start around 1988 into income investments and growth investments, so cash flow to fill in SS shortages and pure capital gains. I think now that a variety of indexes are around I’d go invest in a core holding like VTI or VOO with 45%, a safe bond fund or index at 20% and an explore holding of about 20% with about 10-15% cash for future market sales.
4. The explore holding lets you try different amateur investing techniques and/or find out you stink at everything so you can quit quickly and start that 20% compounding and making real money. I stunk but wouldn’t admit it. I did hit on AAPL, MSFT, (plus INTC as told by my growth guru which we switched to AMZN later on). Investing in the supplies everyone had to have like the gold rush so maybe battery makers now.
5. If you have no interest in investing, put your hard earned money in the hands of a reputable money manager and he’ll diversify and allocate your money into many smaller pieces. I never saw the reason to carry any perpetual losers. Your salad is still the same volume as before. I’m a blue cheese wedge guy myself. I cut my pieces as needed.
6. You have to check things every year to see if your still on track and tweak when necessary like steering a car. An easy way is to match your estimated SS with sure income. That number gets more accurate as you age. Your equities and bond money then becomes secondary income and you’ll be close income wise to what you can afford to do on a monthly basis in retirement. You just keep steering yearly as your personal facts become known or goals change.
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Post by Deleted on Feb 23, 2023 20:10:53 GMT
This is advice I gave my kids (4) who are now 37+. Just like here I’ll never know what they did but I have a good idea. We never really talk about it and rarely does anyone ask me anything even though I think I would be a good resource to use. Contrary to them I used 3. 1. Count on costs being 3* what they are now 2* if you’re in your 40’s. I didn’t believe it either, but cars were about 7k when I started investing. I was told if that is wrong I’d be that much better off or closer to my actual fixed expenses. 2. Put as much away ASAP for your future. Balance your life style to that goal up to retirement. Leave everything on reinvestment. Keep it simple as possible. You are your own worse enemy. 3. I split our portfolio 10 years from our start around 1988 into income investments and growth investments, so cash flow to fill in SS shortages and pure capital gains. I think now that a variety of indexes are around I’d go invest in a core holding like VTI or VOO with 45%, a safe bond fund or index at 20% and an explore holding of about 20% with about 10-15% cash for future market sales. 4. The explore holding lets you try different amateur investing techniques and/or find out you stink at everything so you can quit quickly and start that 20% compounding and making real money. I stunk but wouldn’t admit it. I did hit on AAPL, MSFT, (plus INTC as told by my growth guru which we switched to AMZN later on). Investing in the supplies everyone had to have like the gold rush so maybe battery makers now. 5. If you have no interest in investing, put your hard earned money in the hands of a reputable money manager and he’ll diversify and allocate your money into many smaller pieces. I never saw the reason to carry any perpetual losers. Your salad is still the same volume as before. I’m a blue cheese wedge guy myself. I cut my pieces as needed. 6. You have to check things every year to see if you're still on track and tweak when necessary like steering a car. An easy way is to match your estimated SS with sure income. That number gets more accurate as you age. Your equities and bond money then becomes secondary income and you’ll be close income wise to what you can afford to do on a monthly basis in retirement. You just keep steering yearly as your personal facts become known or goals change. Good post. It is so easy to discount proximate voices of knowledge, perhaps due to familiarity. Perhaps, it doesn't "breed contempt", but often it breeds disinterest. I am thrilled that my son is always willing to listen/learn. We just collaborated on his applying for a new job, by gaming out interview responses, and a cover letter, and putting to use some "insider knowledge", that I had obtained. I knew, through some connections, that he was up against a more experienced person, but there was concern that this person was over-qualified and might not stick around long. We made certain that he emphasized that he was both open to learning/challenges and looking for a longer term opportunity to grow with a stable team. All things that I knew the hiring manager valued substantially. He hit it out of the park and now we find out next week if he is selected for the position. I review his investments every 6 months or so and make recommendations, along with my rationale. Often he follows my advice and sometimes he doesn't. That works out well, as far as I am concerned.
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Post by Capital on Feb 23, 2023 20:31:29 GMT
If I had to do it all again I would have (1) started earlier and (2) put as much in Roth IRAs as possible.
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Post by marpro on Feb 23, 2023 20:44:49 GMT
"I review his investments every 6 months or so and make recommendations."
LOL, it is just the opposite in my case. I learned a lot from my son than anybody else on investments and jobs too. His gurus are Buffet and Munger. I see all of those books – a big library right in front of my desk. I asked him to move to Nashville last year. He rejected and found a high paying job to work from home right nearby where he lives. The only thing that I can think of teaching him on the CEFs for retirement.
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Post by Deleted on Feb 23, 2023 20:50:45 GMT
If I had to do it all again I would have (1) started earlier and (2) put as much in Roth IRAs as possible. I too was late to the Roth game, though I maxed out 401K relatively early. I could actually switch my 401K to Roth contributions and should probably ponder that option.
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Post by Deleted on Feb 24, 2023 1:50:06 GMT
If I had to start over, I would put enough money to do the 401K match only to get the free money from the company and invest rest in Roth and Non-Taxable accounts! Regardless I am doing fine financially. I will do Roth conversions as much as I can until I hit 64, four more years to go.
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Post by steelpony10 on Feb 24, 2023 11:41:35 GMT
I was also late to the game for a Roth. Apparently I looked at retirement a whole different way then others. We had 40+ years of ordinary income and taxes so to keep things simpler for us as we aged we stuck with just the TIRA.
We chose to live off of generated ordinary income from our TIRA delaying SS for both of us as long as possible. We eventually got to within about 100/mo of the family max at the time when we finally applied for SS. This enabled us to receive near the max COLA $ for life and withdraw minimum amounts of ordinary income for an extended period from our TIRA. So SS is partially tax free and our TIRA compounds at a more assured higher rate in our case with minimal withdrawals to fill the income gap.
Bottom line is our taxes are less then half of our working wages, income is higher, our remaining investable assets keep building and spend down is delayed further. If your young a Roth is the way to go but my hunch is it may be phased out instead of tampering with SS and TIRA RMD’s will be eliminated but not the taxes.
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Post by steadyeddy on Feb 24, 2023 12:42:04 GMT
I was also late to the game for a Roth. Apparently I looked at retirement a whole different way then others. We had 40+ years of ordinary income and taxes so to keep things simpler for us as we aged we stuck with just the TIRA. We chose to live off of generated ordinary income from our TIRA delaying SS for both of us as long as possible. We eventually got to within about 100/mo of the family max at the time when we finally applied for SS. This enabled us to receive near the max COLA $ for life and withdraw minimum amounts of ordinary income for an extended period from our TIRA. So SS is partially tax free and our TIRA compounds at a more assured higher rate in our case with minimal withdrawals to fill the income gap. Bottom line is our taxes are less then half of our working wages, income is higher, our remaining investable assets keep building and spend down is delayed further. If your young a Roth is the way to go but my hunch is it may be phased out instead of tampering with SS and TIRA RMD’s will be eliminated but not the taxes. good post. I agree taxes have to go up. We already saw a few changes in the last couple of years with inherited IRAs and also the new secure act 2.0 forces catch-up contributions to be taxed first (thus only roth) starting 2025 I think.
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Post by Capital on Feb 24, 2023 12:42:54 GMT
I was also late to the game for a Roth. Apparently I looked at retirement a whole different way then others. We had 40+ years of ordinary income and taxes so to keep things simpler for us as we aged we stuck with just the TIRA. We chose to live off of generated ordinary income from our TIRA delaying SS for both of us as long as possible. We eventually got to within about 100/mo of the family max at the time when we finally applied for SS. This enabled us to receive near the max COLA $ for life and withdraw minimum amounts of ordinary income for an extended period from our TIRA. So SS is partially tax free and our TIRA compounds at a more assured higher rate in our case with minimal withdrawals to fill the income gap. Bottom line is our taxes are less then half of our working wages, income is higher, our remaining investable assets keep building and spend down is delayed further. If your young a Roth is the way to go but my hunch is it may be phased out instead of tampering with SS and TIRA RMD’s will be eliminated but not the taxes. I'm not really sure we/I as a younger person fully understood the power of the Roth. I kept hearing that if your tax rate in retirement was going to be less than your current rate go Traditional not Roth. What escaped that logic was that you were saving the tax on a smaller amount when young and paying taxes on a larger amount when older/retired. Case in point at the turn of the century I converted a $20k Traditional IRA to a Roth. I took advantage of the law that allowed me to pay the tax over 4 years. What that did was allowed me to pay the tax on $20k; however, that has since grown to a $200k Roth. I will not pay tax on the $180K of growth over the last 23 years. At the time I was not really aware of how good an idea it really was.
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Post by retiredat48 on Feb 24, 2023 14:52:13 GMT
I was also late to the game for a Roth. Apparently I looked at retirement a whole different way then others. We had 40+ years of ordinary income and taxes so to keep things simpler for us as we aged we stuck with just the TIRA. We chose to live off of generated ordinary income from our TIRA delaying SS for both of us as long as possible. We eventually got to within about 100/mo of the family max at the time when we finally applied for SS. This enabled us to receive near the max COLA $ for life and withdraw minimum amounts of ordinary income for an extended period from our TIRA. So SS is partially tax free and our TIRA compounds at a more assured higher rate in our case with minimal withdrawals to fill the income gap. Bottom line is our taxes are less then half of our working wages, income is higher, our remaining investable assets keep building and spend down is delayed further. If your young a Roth is the way to go but my hunch is it may be phased out instead of tampering with SS and TIRA RMD’s will be eliminated but not the taxes. I'm not really sure we/I as a younger person fully understood the power of the Roth. I kept hearing that if your tax rate in retirement was going to be less than your current rate go Traditional not Roth. What escaped that logic was that you were saving the tax on a smaller amount when young and paying taxes on a larger amount when older/retired. Case in point at the turn of the century I converted a $20k Traditional IRA to a Roth. I took advantage of the law that allowed me to pay the tax over 4 years. What that did was allowed me to pay the tax on $20k; however, that has since grown to a $200k Roth. I will not pay tax on the $180K of growth over the last 23 years. At the time I was not really aware of how good an idea it really was. Capital,...Hi. --What was this rule " took advantage of the law that allowed me to pay the tax over 4 years." Still exist? --What was the percent tax paid on the initial conversion to roth? TIA R48
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Post by Capital on Feb 24, 2023 15:44:44 GMT
"What was this rule "took advantage of the law that allowed me to pay the tax over 4 years." Still exist" retiredat48 , in 1998 there was a special law passed by Congress to raise some revenue. It allowed anyone with a Traditional IRA and under $100k of total income to make a conversion to a Roth and split the income from the conversion over the year of the conversion and the following 3 years. I qualified in 1998 to do so. The rule has long since sunset. See page 39 section titled "Conversion of 1998 withdrawal from a traditional IRA" at the LINK That year there was a special line 17 on the Form 8606 for the election - see page 28.
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Post by steelpony10 on Feb 24, 2023 16:27:43 GMT
Capital , That worked well for you. I took the approach I wouldn’t know that result 20+ years down the line, a total unknown, one of my major hangups. In my eyes a more conservative approach to balance our income approach. We aimed for max SS and to delay spend down as I mention often. That I could approximate based on present or changing personal facts which I have some control over. What that adds up to $ wise with raises is a good amount. No state taxes at all which in our state is 4%+. Having more control drawing out less ordinary income delaying more taxes and compounding those amounts adds up also. So who knows. It just seemed simpler to pass on to my wife and heirs in all aspects. I did tell our kids to use a Roth from the start though.
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Post by Capital on Feb 24, 2023 17:01:35 GMT
steelpony10 , I started my kids Roth IRAs in their teens. I filled out their taxes with Schedules Cs and included all the side jobs that they did over the year. They hardly ever owed any taxes on those earnings. Annually I gifted them enough money to pay he max into those Roths and to pay any SE Tax that filing the 1040 caused.
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Post by retiredat48 on Feb 24, 2023 17:34:45 GMT
steelpony10 , I started my kids Roth IRAs in their teens. I filled out their taxes with Schedules Cs and included all the side jobs that they did over the year. They hardly ever owed any taxes on those earnings. Annually I gifted them enough money to pay he max into those Roths and to pay any SE Tax that filing the 1040 caused. When I started same IRAs when my kids were age 12, we didn't have ROTHs (from memory!). R48
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Post by retiredat48 on Feb 24, 2023 17:36:47 GMT
"What was this rule "took advantage of the law that allowed me to pay the tax over 4 years." Still exist" retiredat48 , in 1998 there was a special law passed by Congress to raise some revenue. It allowed anyone with a Traditional IRA and under $100k of total income to make a conversion to a Roth and split the income from the conversion over the year of the conversion and the following 3 years. I qualified in 1998 to do so. The rule has long since sunset. See page 39 section titled "Conversion of 1998 withdrawal from a traditional IRA" at the LINK That year there was a special line 17 on the Form 8606 for the election - see page 28. Capital,...what about this question: "--What was the percent tax (you) paid on the initial conversion to roth?" R48
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Post by liftlock on Feb 24, 2023 18:51:28 GMT
If I had to start over, I would put enough money to do the 401K match only to get the free money from the company and invest rest in Roth and Non-Taxable accounts! Regardless I am doing fine financially. I will do Roth conversions as much as I can until I hit 64, four more years to go. I agree with the idea of doing what is necessary to obtain any free 401K match. Beyond that, I would be inclined to contribute to a T-IRA / 401K if I could avoid / defer taxes in the 22% or higher tax brackets. Contributing to a Roth makes more sense if tax deferral would only be 10-15%.
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Post by steelpony10 on Feb 24, 2023 22:09:04 GMT
steelpony10 , I started my kids Roth IRAs in their teens. I filled out their taxes with Schedules Cs and included all the side jobs that they did over the year. They hardly ever owed any taxes on those earnings. Annually I gifted them enough money to pay he max into those Roths and to pay any SE Tax that filing the 1040 caused. Oh boy I’m putting your name in for “Dad Of The Year”. I see I was brought up way way different. This summarizes our parenting skills: www.youtube.com/watch?v=PFGyhSifqzAMostly they’re left alone to find their own way.
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Post by johntaylor on Feb 25, 2023 0:28:29 GMT
Would invest in tech stock earlier. In 1986, with Intel's 80386, began buying not just home computers but the usual array of tech stuff.
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Post by yakers on Feb 25, 2023 3:35:03 GMT
Invest up to employeer match 401k, fund Roth then fill our rest of 401k/tIRA an then save something in taxable. Keep things simple, maybe just a balanced fund or target date fund unless you really want to dive deeper.
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Post by steadyeddy on Feb 25, 2023 14:19:08 GMT
If I were to start investing again, I would: 1. Recognize that stocks vs bonds allocation has more impact on your long-term (several decade) performance, not which stocks or which bonds you own. 2. Recognize that Indexing can't be beat over the long term 3. Not chase the leaders of yesteryear for my new investment dollars.
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Post by Capital on Feb 25, 2023 14:51:05 GMT
"What was this rule "took advantage of the law that allowed me to pay the tax over 4 years." Still exist" retiredat48 , in 1998 there was a special law passed by Congress to raise some revenue. It allowed anyone with a Traditional IRA and under $100k of total income to make a conversion to a Roth and split the income from the conversion over the year of the conversion and the following 3 years. I qualified in 1998 to do so. The rule has long since sunset. See page 39 section titled "Conversion of 1998 withdrawal from a traditional IRA" at the LINK That year there was a special line 17 on the Form 8606 for the election - see page 28. Capital ,...what about this question: "--What was the percent tax (you) paid on the initial conversion to roth?" R48 retiredat48, I do not know the answer. Those tax returns were discarded years ago. Good question though.
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Post by retiredat48 on Feb 25, 2023 15:35:56 GMT
Capital ,...Thanks for reply. So just out of interest, I took a hypothetical look at your Roth conversion using an assumption of 31% conversion tax rate, and an RMD rate of 28% projected when RMD starts. Here's what I got: $20,000 converted at 0.31 tax = $6200 paid in tax. Your Roth is now $200,000, or a growth of 10X since then. Thus the tax paid, if kept invested, would have grown 10X (same investments assumed), or to $62,000. (Assume invested in capital appreciation type stock funds). So the non converted portfolio is worth $262,000. At first RMD you will withdraw $262000 times about 3.7% = $9694 RMD. Now tax this at 28% equals $2714 tax due. Not very much. You have a long way to go with RMDs before you break even with (have more in) the $200,000 Roth. I also looked up two baseline cap growth type funds to see how ones money would do if invested in them, in the time frame you cited. For FSPTX Fido high tech fund, the $6200 saved by not converting would have grown to an additional $98,000. If invested in VHCOX Vanguard's capital appreciation fund, the amount extra would be $124,500. (eyeballing charts). I doubt the ROTH plus future tax savings during retirement, will ever catch up with these amounts of extra portfolio value. This info/experience tells me: Do not convert at higher tax brackets. Rather save this tax money and invest it. Invest it in a capital appreciation managed fund or index fund. Hold for decades. If money is in an IRA it grows tax free. If the tax savings is in a taxable account, buy Exchange Traded Funds (ETFs) which have special tax advantages like nil annual cap gains to pay. Hold for example small cap growth ETF, and you pay little if any annual dividend income tax, and no cap gains taxes along the way. Like a mini-IRA. However, no RMDs. Sell when you want. Hold till you die, and heirs get a step-up in capital basis. good to discuss. R48
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Post by Capital on Feb 25, 2023 15:57:31 GMT
retiredat48 , Thanks for the analysis. I have a different view due to my specific needs. The Roth does not have RMDs and, for me, serves as a tax-free stash of equity. If I were to pull out the $200k today from the Roth I would have $200k after tax. If I were to pull out the $262K from a Traditional IRA I would need to pay $73,360 in tax ($262k x 28%) leaving me with $188,640 after tax. I'm also looking at giving money to my children in the future to fund their IRAs. By taking from my IRA to fund those gifts I can circumvent the 10-year payout rule. Having the ROTH withdrawal flexibility works well for me in that regard. Many different ways to look at this all depending on your personal needs. All that said you are right in that the lower the rate at conversion the better.
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Post by marpro on Feb 25, 2023 17:06:12 GMT
retiredat48 , Thanks for the analysis. I have a different view due to my specific needs. The Roth does not have RMDs and, for me, serves as a tax-free stash of equity. If I were to pull out the $200k today from the Roth I would have $200k after tax. If I were to pull out the $262K from a Traditional IRA I would need to pay $73,360 in tax ($262k x 28%) leaving me with $188,640 after tax. I'm also looking at giving money to my children in the future to fund their IRAs. By taking from my IRA to fund those gifts I can circumvent the 10-year payout rule. Having the ROTH withdrawal flexibility works well for me in that regard. Many different ways to look at this all depending on your personal needs. All that said you are right in that the lower the rate at conversion the better. Besides, you can make up all the high rates of lower amounts in a few years without paying any tax and non-taxable growth. In retirement, even if you withdraw 200k from ROTH, it does not count towards determining the amount to be taxable part of your SS. On the other hand, RMDs and T-IRA withdrawals count towards the amount to be taxable part of your SS. This will be the first year, I will be for 85% of the SS since 2016. I can cut it by sacrificing my other income from PIMCO CEFs. Why would, or should, I sacrifice my income just because I am going 25% of the income to the FEDs? I will still make more than 10% from these CEFs. Pay the taxes, even if it is high rate, and be done with it. I know that there is a mental satisfaction by not paying huge taxes but, should it at the expense of making more money? I think not.
Add: None can simplify this math in simple terms even with a big and long spreadsheet because (1) it depends on each family situation and the legacy they want to leave, and (2) it is highly non-linear because the tax rates are in steps, not linear.
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Post by retiredat48 on Feb 25, 2023 20:09:05 GMT
retiredat48 , Thanks for the analysis. I have a different view due to my specific needs. The Roth does not have RMDs and, for me, serves as a tax-free stash of equity. R48 reply in bold...I never had ROTHs available to me when working. However, I now have a huge roth also. How? By making conversions through my age sixties and creating a zero percent tax bracket time. Created by not taking trad IRA withdrawals. Younger investors do not need to start taking rmds until age 75...plenty of time to not work/and convert! BYTW I think we are coming to a time via tax law changes whereby RMDs are done away with completely. If I were to pull out the $200k today from the Roth I would have $200k after tax. If I were to pull out the $262K from a Traditional IRA I would need to pay $73,360 in tax ($262k x 28%) leaving me with $188,640 after tax. But I think we agree, no-one does this. Why would anyone fully redeem their trad IRA just when they retire, or the year rmd's start? I'm also looking at giving money to my children in the future to fund their IRAs. By taking from my IRA to fund those gifts I can circumvent the 10-year payout rule. Good point. For those inclined to fund kid's IRS, one can take money from their roth, and give it as gifts, thus reducing the roth value, and thus meaning the ten year beneficiary rule impact is reduced. Although no cost to redeem over ten years, it does move monies out of this most favorable tax status if required to be zero in ten years.Having the ROTH withdrawal flexibility works well for me in that regard. Many different ways to look at this all depending on your personal needs. All that said you are right in that the lower the rate at conversion the better. --------------------------------------- R48 in bold.
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Post by Deleted on Feb 25, 2023 21:38:57 GMT
retiredat48 , Thanks for the analysis. I have a different view due to my specific needs. The Roth does not have RMDs and, for me, serves as a tax-free stash of equity. R48 reply in bold...I never had ROTHs available to me when working. However, I now have a huge roth also. How? By making conversions through my age sixties and creating a zero percent tax bracket time. Created by not taking trad IRA withdrawals. Younger investors do not need to start taking rmds until age 75...plenty of time to not work/and convert! BYTW I think we are coming to a time via tax law changes whereby RMDs are done away with completely. If I were to pull out the $200k today from the Roth I would have $200k after tax. If I were to pull out the $262K from a Traditional IRA I would need to pay $73,360 in tax ($262k x 28%) leaving me with $188,640 after tax. But I think we agree, no-one does this. Why would anyone fully redeem their trad IRA just when they retire, or the year rmd's start? I'm also looking at giving money to my children in the future to fund their IRAs. By taking from my IRA to fund those gifts I can circumvent the 10-year payout rule. Good point. For those inclined to fund kid's IRS, one can take money from their roth, and give it as gifts, thus reducing the roth value, and thus meaning the ten year beneficiary rule impact is reduced. Although no cost to redeem over ten years, it does move monies out of this most favorable tax status if required to be zero in ten years.Having the ROTH withdrawal flexibility works well for me in that regard. Many different ways to look at this all depending on your personal needs. All that said you are right in that the lower the rate at conversion the better. --------------------------------------- R48 in bold. Can you explain that a little more? How does SS fit into such a plan, if at all? I figure that I will have about a decade before I am required to take RMDs after I retire (age 65) based on Secure 2.0. And barring additional changes. 401K and TIRAs are the bulk of our portfolio. I can defer taking SS for 5 years, if it matters. And if beneficial, tap taxable funds for about 5 years. Our current tax bracket is 22%. After retirement, I can stay in the 12% bracket (with or without SS), based on income needs, until RMDs. After that, I might be maxing out the 22% bracket and even into the 24% bracket. Thoughts?
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Post by FD1000 on Feb 26, 2023 22:34:10 GMT
This is advice I gave my kids (4) who are now 37+. Just like here I’ll never know what they did but I have a good idea. We never really talk about it and rarely does anyone ask me anything even though I think I would be a good resource to use. Contrary to them I used 3. 1. Count on costs being 3* what they are now 2* if you’re in your 40’s. I didn’t believe it either, but cars were about 7k when I started investing. I was told if that is wrong I’d be that much better off or closer to my actual fixed expenses. FD: I bought my first new car in 1994, it was Honda Accord at about $19K. I bought a new Camry, which is similar in 2013 for about $21K. So, I paid about 10% after 19 years. Nothing close to double. 2023 Toyota Camry is about $28K. After about 29 years, the Camry is about 50%. 2. Put as much away ASAP for your future. Balance your life style to that goal up to retirement. Leave everything on reinvestment. Keep it simple as possible. You are your own worse enemy. FD: excellent advice. This is how I convinced my kids. Investor X starts investing at age 25 at $1000 monthly and stops after 10 year at age 35. Investor Y starts at age 35 and invests for 30 years until age 65. Let's assume a 8-10% average annual return and investor X will have more money at age 65, while he saved only a third compared to Y. This is the secret of compounding. 3. I split our portfolio 10 years from our start around 1988 into income investments and growth investments, so cash flow to fill in SS shortages and pure capital gains. I think now that a variety of indexes are around I’d go invest in a core holding like VTI or VOO with 45%, a safe bond fund or index at 20% and an explore holding of about 20% with about 10-15% cash for future market sales. FD: never pay attention to growth or income. If you want simple, use indexes, VTI or VOO are a great choice because they will reflect the prices of the best stocks regardless if they have no/low/high income. Cash is trash LT. Simple portfolio means up to 5 funds, with hardly any trades, and why you don't need cash. You sell one fund and buy another on the same date. 4. The explore holding lets you try different amateur investing techniques and/or find out you stink at everything so you can quit quickly and start that 20% compounding and making real money. I stunk but wouldn’t admit it. I did hit on AAPL, MSFT, (plus INTC as told by my growth guru which we switched to AMZN later on). Investing in the supplies everyone had to have like the gold rush so maybe battery makers now. FD: sure, why not starts with 10% and see how you do compare to your portfolio. Then increase. 5. If you have no interest in investing, put your hard earned money in the hands of a reputable money manager and he’ll diversify and allocate your money into many smaller pieces. I never saw the reason to carry any perpetual losers. Your salad is still the same volume as before. I’m a blue cheese wedge guy myself. I cut my pieces as needed. FD: diversification doesn't guarantee better performance or risk-adjusted returns. There are good manager with different style. FAIRX was very concentrated and well an excellent fund during the first 7-8 years. I would find funds/manager with better risk-adjusted performance which is the only thing that matters. PRWCX 25+ years. PIMIX 2009-2018. 6. You have to check things every year to see if your still on track and tweak when necessary like steering a car. An easy way is to match your estimated SS with sure income. That number gets more accurate as you age. Your equities and bond money then becomes secondary income and you’ll be close income wise to what you can afford to do on a monthly basis in retirement. You just keep steering yearly as your personal facts become known or goals change. FD: simple, and tweaking annually are good. Income isn't a better choice than low or no income. If a retiree doesn't mind the risk/volatility, she can invest it all in stocks, AKA VTI or VOO, and will do great, with low income. The only time you would select higher reasonable income should be based on risk-adjusted return, think SCHD. Most investor should avoid leveraged CEFs.
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Post by bb2 on Mar 16, 2023 18:38:26 GMT
More concentrated bets.
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Post by steelpony10 on Mar 17, 2023 1:52:35 GMT
I think I realized that 10 years in. All that endless allocation and diversification seems to be to shift your funds around based on short term market movements and more of a defensive technique. If you were perfect your net should be zero. It sure doesn’t help in this type of market or if you plan to spend down in retirement relying on equities and bonds. I decided to dump as much market influence as possible and concentrate on income only, with 2 possible sources of cash flow from 3 reliable income types all doing business in the most reliable financial market and country whose inflation I have to contend with.
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Post by richardsok on Mar 17, 2023 3:07:32 GMT
I think I realized that 10 years in. All that endless allocation and diversification seems to be to shift your funds around based on short term market movements and more of a defensive technique. If you were perfect your net should be zero. It sure doesn’t help in this type of market or if you plan to spend down in retirement relying on equities and bonds. I decided to dump as much market influence as possible and concentrate on income only, with 2 possible sources of cash flow from 3 reliable income types all doing business in the most reliable financial market and country whose inflation I have to contend with. That's interesting because I don't believe I could just remain sanguine about deep plunges in portfolio value; something "income only" investors MUST suffer from time to time. Preferreds, high dividend stocks, CEFs, long term debt of all kinds plunged terribly in 2022.
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