|
Need a few investment opinions
12-18-2014, 02:33 PM
|
#1
|
Dryer sheet aficionado
Join Date: Jun 2014
Posts: 41
|
Need a few investment opinions
DW & I are 55 y.o., thus far we have the vast majority of our investments in tax advantaged accounts (401k's, 401k conversions to IRA's) about 80% of total portfolio, the rest in a couple traditional IRA's.
The scenario: We want to further build our after tax accounts however we are at a combined income level that we cannot deduct any IRA contributions, nor can we open a ROTH/contribute to a ROTH if we did a "back door" conversion. We thought about converting one pre-tax funded IRA to a ROTH but, paying our tax rate of today on conversion amount verse our hopefully lower rate at age 59, we don't think there's enough time to build gains to make up the delta between tax rates. (unless we left it alone for 10-15 yrs)
Question: Are there any alternatives we are missing here? Am I stuck simply funding traditional IRA's with no immediate tax benefit and paying the capital gains rate upon withdraw? We're at a combined income of just under $300k I forget what our MAGI was last year but it did exceed all ROTH limits and regular IRA tax benefit limits. Any sage advice from some folks here would be most appreciated.....
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
12-18-2014, 02:43 PM
|
#2
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
|
After-tax savings in taxable accounts isn't the worst thing in the world, but I assume that you are looking for retirement savings alternatives that will trim your tax bill. I would favor taxable accounts over non-deductible IRAs because of the preferential tax rates if the investments are in instruments that provide qualified dividends or long term capital gains whereas IRA growth would be taxed at ordinary rates.
I assume that you are already maxing out your 401ks and you are not self employed.
If you have HDHI that is HSA eligible you could max out HSA contributions and leave the money in there to grow - used in that manner it is similar to a Roth but with no income restrictions.
Another thing you could do is do after-tax contributions to your 401ks and then roll that money into a Roth once you retire (or even before you retire if your plan allows in-service rollovers).
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
12-18-2014, 04:04 PM
|
#3
|
Thinks s/he gets paid by the post
Join Date: Nov 2012
Location: Madeira Beach Fl
Posts: 1,403
|
Roth 401(k).
__________________
_______________________________________________
"A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do" --Bob Dylan.
|
|
|
12-18-2014, 04:50 PM
|
#4
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
|
A joint taxable account invested tax-efficiently is very tax efficient. If invested in something like a Total Stock Market index fund or a Large-cap index fund expect to pay about 0.5% or less of the total fund value in taxes each year. And as a bonus, one can do tax-loss harvesting when you have a loss and get other taxpayers to help pay for any losses.
|
|
|
12-18-2014, 07:00 PM
|
#5
|
Thinks s/he gets paid by the post
Join Date: Oct 2011
Location: Philadelphia
Posts: 1,360
|
Quote:
Originally Posted by LOL!
A joint taxable account invested tax-efficiently is very tax efficient. If invested in something like a Total Stock Market index fund or a Large-cap index fund expect to pay about 0.5% or less of the total fund value in taxes each year. And as a bonus, one can do tax-loss harvesting when you have a loss and get other taxpayers to help pay for any losses.
|
+1. Managed properly a taxable brokerage account doesn't kick off much tax obligation. Just stash the right parts of your AA in the right types of accounts.
__________________
Luck is when Preparation meets Opportunity.
FIRE'd 1/1/24
|
|
|
12-18-2014, 07:46 PM
|
#6
|
Recycles dryer sheets
Join Date: Mar 2004
Posts: 257
|
Quote:
Originally Posted by gregory r.
DW & I are 55 y.o., thus far we have the vast majority of our investments in tax advantaged accounts (401k's, 401k conversions to IRA's) about 80% of total portfolio, the rest in a couple traditional IRA's.
The scenario: We want to further build our after tax accounts however we are at a combined income level that we cannot deduct any IRA contributions, nor can we open a ROTH/contribute to a ROTH if we did a "back door" conversion. We thought about converting one pre-tax funded IRA to a ROTH but, paying our tax rate of today on conversion amount verse our hopefully lower rate at age 59, we don't think there's enough time to build gains to make up the delta between tax rates. (unless we left it alone for 10-15 yrs)
Question: Are there any alternatives we are missing here? Am I stuck simply funding traditional IRA's with no immediate tax benefit and paying the capital gains rate upon withdraw? We're at a combined income of just under $300k I forget what our MAGI was last year but it did exceed all ROTH limits and regular IRA tax benefit limits. Any sage advice from some folks here would be most appreciated.....
|
I don't think you would pay capital gains rates here... it would be ordinary income tax rates.
You could try a low cost annuity through Vanguard to shelter more from tax, but at 55 it's probably a bit late for that.
I bonds for $10k each per calendar year will shelter a little more, and give you some inflation protection.
Best bet, as LOL! says, is to use low cost stock index funds in a taxable account.
__________________
too cheap to even use dryer sheets - never mind recycle them!
|
|
|
12-18-2014, 08:15 PM
|
#7
|
Thinks s/he gets paid by the post
Join Date: Nov 2013
Posts: 1,027
|
Quote:
Originally Posted by pb4uski
Another thing you could do is do after-tax contributions to your 401ks and then roll that money into a Roth once you retire (or even before you retire if your plan allows in-service rollovers).
|
+1
You don't pay any taxes on these contributions, gives you opportunity to squirrel away tax free money.
|
|
|
12-18-2014, 11:29 PM
|
#8
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 16,973
|
Quote:
Originally Posted by LOL!
A joint taxable account invested tax-efficiently is very tax efficient. If invested in something like a Total Stock Market index fund or a Large-cap index fund expect to pay about 0.5% or less of the total fund value in taxes each year. And as a bonus, one can do tax-loss harvesting when you have a loss and get other taxpayers to help pay for any losses.
|
+1
Also you could buy some BRK (Berkshire Hathaway Inc) shares in a taxable account. They pay zero dividends so you only pay capital gains when you sell the shares which is on your timetable.
I like to think of Warren Buffet as a cheap mutual fund manager
|
|
|
12-19-2014, 01:42 AM
|
#9
|
Recycles dryer sheets
Join Date: Aug 2014
Location: Western Canada
Posts: 393
|
__________________
I'm not crazy. Honest, the judge had me tested.
|
|
|
12-22-2014, 08:08 AM
|
#10
|
Dryer sheet aficionado
Join Date: Jun 2014
Posts: 41
|
Thanks all for the suggestions, This gives me a few avenues to ponder.
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|