Retirement investment philosophies/strategeries

[crazyqx83_rivals88013]

Neither me or my wife are offered 401k's so we both have a traditional and roth ira. Her traditional was from a rollover from a previous 403b and mine was from a gift from the parents. I basically have been contributing only to the roth's because I basically listened to advice that the tax free growth is where it's at. But I'm starting to have thoughts/concerns that are twofold to the current strategy:

1) the remote chance that the government backtracks on the "roth's are tax free upon distribution" promise. Would this even be possible? I haven't studied the tax code.

2) if i take minimum distributions from the traditional when i hit 65, and if my only taxable income is the traditional ira, wouldn't i have a relatively low tax liability? Obviously ss and the tax rates 35 years from now are relatively unpredictable, but am i hedging any risk to diversify between traditional and roth and take the guaranteed tax break now?

Can anyone recommend a fiduciary financial advisor in lexington? I've been pretty much managing my own in vanguard but the more it grows the more i think it makes sense to get a respectable professional involved.

I am 32, fwiw.

 

[Dig Dirkler]

I am 32, fwiw.

What do you do for a living?

 

[crazyqx83_rivals88013]

What do you do for a living?

Architect

 

[DSmith21]

crazy, if you live in Kentucky, the first $41,000 or so of your retirement income (traditional IRA withdrawals, pensions, etc.) are exempted from state income tax. So a traditional IRA is actually better than a Roth for state tax purposes because you get to take your contribution as a deduction and still pay no income tax on the back end. That is just one more thing to consider. One of the most important things is figuring out what your tax bracket will be at retirement. That is often hard to do.

The best advice that I can give you if you want to retire comfortably is start saving as much as you can now (at least 10% of income). Don't try to play catch up on retirement savings in your late 40's and 50s.

 

[Dig Dirkler]

Architect

That's what I thought. Didn't you start a thread a few years ago asking why we as a society don't let people "retire" in their 20s, live it up while they are young and feel good, and then start working when they get older? Or was it that businesses should arbitrarily pay employees more when they're younger and then decrease their wages as they age, or some stupid **** like that, right?

 

[crazyqx83_rivals88013]

That's what I thought. Didn't you start a thread a few years ago asking why we as a society don't let people "retire" in their 20s, live it up while they are young and feel good, and then start working when they get older? Or was it that businesses should arbitrarily pay employees more when they're younger and then decrease their wages as they age, or some stupid **** like that, right?

The first part doesn't make sense, I don't agree with and unless I was drunk or high (and I don't get high) don't think I would have posted anything making that argument.

The second part I don't agree with either, but I guess there is a remote chance I posted something similar as it relates to my opinion that boomers developed their careers in one of the most generous economic climates in human history.

Maybe your memory is just skewed

 

[Dig Dirkler]

That's what I thought. Didn't you start a thread a few years ago asking why we as a society don't let people "retire" in their 20s, live it up while they are young and feel good, and then start working when they get older? Or was it that businesses should arbitrarily pay employees more when they're younger and then decrease their wages as they age, or some stupid **** like that, right?

The first part doesn't make sense, I don't agree with and unless I was drunk or high (and I don't get high) don't think I would have posted anything making that argument.

The second part I don't agree with either, but I guess there is a remote chance I posted something similar as it relates to my opinion that boomers developed their careers in one of the most generous economic climates in human history.

Maybe your memory is just skewed

Nah it was you, but under a different name, of course. I have neither the time, nor the desire, to search the archives, but you were lambasted by multiple posters for your ignorant economic beliefs and started using a different name shortly thereafter.

 

[crazyqx83_rivals88013]

Nah it was you, but under a different name, of course. I have neither the time, nor the desire, to search the archives, but you were lambasted by multiple posters for your ignorant economic beliefs and started using a different name shortly thereafter.

Who are you, again? It says you've been a member here for 6 months yet you're citing made up posts from "a few" years ago? Maybe it was YOU that posted that under YOUR previous username that you dropped when YOU got lambasted and YOU'RE mis-remembering...

So why don't you run a long and let the big boys talk while you go off and idolize a fictional male pornstar. Weirdo.

 

[vhcat70]

crazy, if you live in Kentucky, the first $41,000 or so of your retirement income (traditional IRA withdrawals, pensions, etc.) are exempted from state income tax. So a traditional IRA is actually better than a Roth for state tax purposes because you get to take your contribution as a deduction and still pay no income tax on the back end. That is just one more thing to consider. One of the most important things is figuring out what your tax bracket will be at retirement. That is often hard to do..

Assumes person lives in KY.

What's crazy is that there is a state income tax. Those w/o seem to work just fine. Also, SS is exempt from KY taxes in addition to the $41K/person (their own retirement accounts.).

Who knows, but I think there would be a revolt if Roths were taxed since people were sucked into them on the tax-free assumption. Good things to put in Roths are collectibles since they're taxed at a higher rate.

 

[Anon1640710541]

Save 10%+ of your income. Start really early. Avoid debt. Invest aggressively in tax advantaged vehicles.

No need to over complicate the minutiae.

 

[crazyqx83_rivals88013]

Save 10%+ of your income. Start really early. Avoid debt. Invest aggressively in tax advantaged vehicles.

No need to over complicate the minutiae.

That's what I'm asking about. Is there an advantage to diversifying?

 

[fuzz77]

What's crazy is that there is a state income tax. Those w/o seem to work just fine.

Most of the states w/o income taxes have other streams of revenue to make up for their lack of income tax. Florida taxes the hell out of tourist, Texas and New Hampshire have some of the highest property taxes in the nation. Nevada had gambling revenue... they all have higher sales taxes... The difference in the overall tax burden between the highest taxed (New Jersey) and lowest taxed (Alaska) is only 5%. While 5% may sound significant when one figures in the cost of living and salaries paid in those areas, most of it washes out pretty even.
I've lived in Ky, Tn, Mo, Al, Tx and Ga...TX and TN have no state income tax but housing was more expensive. It's pretty much you'll pay Peter or you'll pay Paul...but you will pay.

 

[LadyCat92]

That's what I'm asking about. Is there an advantage to diversifying?

You have options of a traditional IRA, Roth IRA, a healthcare savings account ($6500 / yr), cash value life insurance, and if you have kids you might consider a 529. Obviously see a financial advisor.

 

[Get Buckets]

It's pretty much you'll pay Peter or you'll pay Paul...but you will pay.

What about Fuzz paying his bet to Brady?

 

[UKserialkiller]

What about Fuzz paying his bet to Brady?

[laughing]

 

[UKGrad93]

No to hijack the thread, but is it true that the second million is easier to make than the first million?

 

[_nelson3]

One4Porchlights

 

[_nelson3]

You're an architect, but have zero knowledge (or ability to research, apparently) of basic financial fundamentals? Porchlight on for you.

 

[BlueThruAndThru_rivals115784]

Two words:

Beanie Babies.

YWIA

 

[starchief]

Most of the states w/o income taxes have other streams of revenue to make up for their lack of income tax. Florida taxes the hell out of tourist, Texas and New Hampshire have some of the highest property taxes in the nation. Nevada had gambling revenue... they all have higher sales taxes... The difference in the overall tax burden between the highest taxed (New Jersey) and lowest taxed (Alaska) is only 5%. While 5% may sound significant when one figures in the cost of living and salaries paid in those areas, most of it washes out pretty even.
I've lived in Ky, Tn, Mo, Al, Tx and Ga...TX and TN have no state income tax but housing was more expensive. It's pretty much you'll pay Peter or you'll pay Paul...but you will pay.

Yup.

 

[starchief]

No to hijack the thread, but is it true that the second million is easier to make than the first million?

My observation is that the more money you have, the less often you have pay the tab Somebody is always saying, "here, I'll get that, " hoping to ingratiate themselves to you. Except your kids, of course. They rarely pay the tab ever in life..

 

[crazyqx83_rivals88013]

You're an architect, but have zero knowledge (or ability to research, apparently) of basic financial fundamentals? Porchlight on for you.

Are you that big of an idiot?

 

[Anon1640710541]

That's what I'm asking about. Is there an advantage to diversifying?

Diversifying, like how?

By intentionally investing in NON tax advantaged vehicles just on the off chance that their tax advantaged counterparts may one day not be so?

No. That's actually incredibly stupid.

 

[crazyqx83_rivals88013]

Diversifying, like how?

By intentionally investing in NON tax advantaged vehicles just on the off chance that their tax advantaged counterparts may one day not be so?

No. That's actually incredibly stupid.

A traditional IRA is tax advantaged. It's tax deferred. How is this that difficult for you all to understand?

 

[_nelson3]

Are you that big of an idiot?

Obviously, because I come to the Paddock seeking financial advice from a bunch of randos.

 

[DSmith21]

Most of the states w/o income taxes have other streams of revenue to make up for their lack of income tax. Florida taxes the hell out of tourist, Texas and New Hampshire have some of the highest property taxes in the nation. Nevada had gambling revenue... they all have higher sales taxes... The difference in the overall tax burden between the highest taxed (New Jersey) and lowest taxed (Alaska) is only 5%. While 5% may sound significant when one figures in the cost of living and salaries paid in those areas, most of it washes out pretty even.
I've lived in Ky, Tn, Mo, Al, Tx and Ga...TX and TN have no state income tax but housing was more expensive. It's pretty much you'll pay Peter or you'll pay Paul...but you will pay.

No, its not all the same and it doesn't wash out for everyone. States with punitive income tax for high earners like California where the top rate is over 13% are much worse than Nevada or Arizona where there is no income tax. Plus your cost of living argument fails because the cost of living in CA is higher than AZ and NV. States like Indiana are able to keep some of their taxes low because of income from Casinos.

You can google a list of 10 states where its cheapest to retire rated on overall favorability of tax treatment (income, property, pension income taxation, property tax, death tax, etc). Almost all of the states that make the best list are in the south or southwest.

 

[gamecockcat]

Disclosure: I'm a CFP with 20+ years experience and currently work for a trust company (fee-only).

The big gamble between traditional and Roth is 'will I be in a higher tax bracket when I retire?' If not, then the traditional can make some sense (although time value of money plays into the calculation). If yes and the Roth maintains its tax-free withdrawal status, then the Roth is the better choice. Two other benefits of the Roth: no required distributions at 70-1/2 and your contributions are accessible without tax or penalty any time. Growth on the Roth has to be kept in the account until 59-1/2 but contributions may be withdrawn at any time. Not so with the traditional IRA.

I don't think the government would rescind the tax advantages of the Roth but they certainly could. Or change other rules that would lessen the advantages of owning a Roth.

I've always counseled clients that tax diversification is important. Have money in taxable accounts to take advantage of accessibility and capital gains tax rates, tax-deferred accounts like IRAs and 401(k)s and tax-free accounts like a Roth or cash value life insurance. When you get to retirement, you should have enough flexibility to pull from whichever account minimizes your taxes and maximizes your income.

And why posters come on this thread to give you crap instead of answering your question is beyond me. If you don't have an answer to the OP, why get obnoxious and hijack the thread? Just to massage your ego? Get a life, people.

 

[fuzz77]

No, its not all the same and it doesn't wash out for everyone. States with punitive income tax for high earners like California where the top rate is over 13% are much worse than Nevada or Arizona where there is no income tax. Plus your cost of living argument fails because the cost of living in CA is higher than AZ and NV. States like Indiana are able to keep some of their taxes low because of income from Casinos.

You can google a list of 10 states where its cheapest to retire rated on overall favorability of tax treatment (income, property, pension income taxation, property tax, death tax, etc). Almost all of the states that make the best list are in the south or southwest.

I never said that it was all the same and washed out for everyone. I said "...when one figures in the cost of living and salaries paid in those areas, most of it washes out pretty even" and that is true when taken on the whole. If you want to be specific about every possible situation then it's going to take more than just a couple of paragraphs to cover it.

Every system, every state has it's advantages and disadvantages for people in different income groups and ways that income is derived.
Tennessee has no state income tax but it does have an income tax on investment earnings. You can earn $1 million in wages and pay $0 in state income tax but a retiree (or anyone) that has $30,000 of income from investment earnings will pay 6% tax...but if that $30,000 is from a pension, it isn't taxed.
Cost of living varies widely from area to area...and in general, places with higher costs of living come with higher salaries and wages. Cost of living may be higher in CA than in AZ or NV but the median income in CA is $67,458 and in AZ and NV it is $46,709 and $48,927 respectively. If you are earning 40% more then you can afford to pay a little more. The cost of living in Mississippi is really low...so are incomes with a median of $36,919. If you are going to earn $100K regardless of where you live then you're obviously going to be better off in an a lower cost of living area but that is rarely how it works. Average teaching salaries in CA are $70K...in NV they are $49K.
Where I choose and where most will choose to retire will involve more than simply tax treatment...and opinions on where is best to retire are highly subjective. cnn.money rated the 10 best states to retire as
1. WY
2. CO
3. UT
4. ID
5. VA
6. IA
7. MT
8. SD
9. AZ
10. NE
Their criteria was "The group ranked all 50 states based on weather, cost of living, crime, quality of health care, state and local taxes, and general well-being.".
Bankrate ranked the top 10 cities as
1. Mesa, AZ
2. Arlington, VA
3. Prescott, AZ
4. Tucson, AZ
5. Des Moines, IA
6. Denver, CO
7. Austin, TX
8. Cape Coral, FL
9. Colorado Springs, CO
10. Franklin, TN
Bankrate's criteria was " walkability, cost of living, crime rate, health care quality, tax rates and weather."

Opinions are like ********...everybody has one. I've seen Elizabethtown on these lists... hell Hawaii is on the worst places to retire lists...but if you like Hawaii (and who doesn't) It sure would be nice.

 

[jameslee32]

That's what I'm asking about. Is there an advantage to diversifying?

Yeah, you can't get completely destroyed by a single sector. Mix in property and gold and those shorting S&P futures won't kill ya either.

 

[mrhotdice]

Neither me or my wife are offered 401k's so we both have a traditional and roth ira. Her traditional was from a rollover from a previous 403b and mine was from a gift from the parents. I basically have been contributing only to the roth's because I basically listened to advice that the tax free growth is where it's at. But I'm starting to have thoughts/concerns that are twofold to the current strategy:

1) the remote chance that the government backtracks on the "roth's are tax free upon distribution" promise. Would this even be possible? I haven't studied the tax code.

2) if i take minimum distributions from the traditional when i hit 65, and if my only taxable income is the traditional ira, wouldn't i have a relatively low tax liability? Obviously ss and the tax rates 35 years from now are relatively unpredictable, but am i hedging any risk to diversify between traditional and roth and take the guaranteed tax break now?

Can anyone recommend a fiduciary financial advisor in lexington? I've been pretty much managing my own in vanguard but the more it grows the more i think it makes sense to get a respectable professional involved.

I am 32, fwiw.

Stocks are paper. Gold and silver is the way to go. When the US debt hits 20 trillion it won't matter since the dollar value will be worthless. Also, plan to move overseas to a country were the cost of living is much less than anywhere in USA. Eat less, stay healthy, and good luck.

 

[Supreme Lord Z]

I have a great idea. Log onto the internet and ask random people on a sports message board how you should invest your life savings.

 

[dgtatu01]

We use a Roth IRA. My strategy is buy large low risk dividend paying companies when they are on a fowncycle of price thus a higher dividend yield. My goal is to have about $500-$600 thousand invested earning 3%-4% dividend to supplement SS, wife's pension and 401K. I don't want to touch the capital.

 

[crazyqx83_rivals88013]

Stocks are paper. Gold and silver is the way to go. When the US debt hits 20 trillion it won't matter since the dollar value will be worthless. Also, plan to move overseas to a country were the cost of living is much less than anywhere in USA. Eat less, stay healthy, and good luck.

What is the worth in silver and gold? They are relatively useless precious metals.

 

[DSmith21]

^ Silver and gold are simply hedges against a market disaster or runaway inflation. Silver is much more volatile of the two. Until you build up a fairly large stock portfolio, I would stay away from those two.

 

[UKGrad93]

I'm gonna ask again about maxing out a 401k/403b. I contribute enough to get the company match, but I see that I am allowed to put in up to $18k/yr. When people talk about maxing out the 401k/403b account do they just mean putting in enough to get the company match or putting in the whole $18k (?$21k with catch up)?

 

[CatsFanGG24]

^24k w/catch up if 401k - if they talk about maxing out, it would be their own employee contributions...if you max out with those, you will likely be receiving the max employer contribution (your plan is offering)anyways

 

[UKGrad93]

I guess I'm not doing as well as I thought. Counting the employer match, my wife and I have been saving 25-30%/year for almost 20 years now. But if we do the max, then we would be close to 50% of our income going to retirement savings.

 

[DSmith21]

I guess I'm not doing as well as I thought. Counting the employer match, my wife and I have been saving 25-30%/year for almost 20 years now. But if we do the max, then we would be close to 50% of our income going to retirement savings.

If you are saving a combined 25%-30% of your gross income (even counting the match), you are ahead of the curve. If you can afford to save more and you have several years before retirement, you should do it. All of that savings will get tax free growth until you pull it out plus if you live in a state like KY you will likely never have to pay state income tax on it (the 1st +$41,000 in retirement income in KY is tax free).

 

[UKGrad93]

If you are saving a combined 25%-30% of your gross income (even counting the match), you are ahead of the curve. If you can afford to save more and you have several years before retirement, you should do it. All of that savings will get tax free growth until you pull it out plus if you live in a state like KY you will likely never have to pay state income tax on it (the 1st +$41,000 in retirement income in KY is tax free).

I'm still 15-20 years from retirement and live outside of KY. I would like to move back to KY or somewhere toward the south when I retire. I'll need to keep an eye on retirement taxation schemes as part of my planning. $41k tax free + tax free Roth money could be worthwhile.

 

[mrhotdice]

^ Silver and gold are simply hedges against a market disaster or runaway inflation. Silver is much more volatile of the two. Until you build up a fairly large stock portfolio, I would stay away from those two.

Money aka stock has no value but metals will always have a true worth.