Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 11-16-2017, 12:29 PM   #21
Full time employment: Posting here.
UnrealizedPotential's Avatar
 
Join Date: May 2014
Posts: 748
Quote:
Originally Posted by RunningBum View Post
I dislike being disagreed with, but learning something outweighs that. Sometimes I get disagreed with because I don't express my ideas well, but even that is learning something.
I guess I express myself not so well. All I was trying to do was to help others. It seemed everyone was against me. I guess I have strong opinions and sometimes they are wrong.

But the bottom line is the thread was headed in a direction which didn't benefit anyone. I was hoping the subject might help someone or at least get their interest up. Sometimes the best of intentions go wrong.
__________________

__________________
Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things. Charlie Munger
UnrealizedPotential is offline   Reply With Quote
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!

Old 11-16-2017, 12:30 PM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 19,321
Quote:
Originally Posted by UnrealizedPotential View Post
I just was hoping to reach out to younger people or maybe even those who never considered a Roth Ira before to take a look. I did not in anyway mean to start arguments or anything close to it. I was just trying to help in a small way if I could to those whom it might help.

Of course I invite those who may disagree with me. But it seemed everyone wanted to argue with me. If that's how my post seemed to others then I did a terrible job of communicating. Maybe my opinions seem strong. Maybe they're wrong. But everyone can disagree with me and that doesn't mean they are right. No one on this forum is God nor does any one single opinion count more than another.

We must all live in this World together. We must all strive to reach out and help each other. That is all I was trying to do.
OK, so maybe it was just a communication problem, I have had more than my share of those.

But if you are interested in that, let me explain where the communication went wrong for me. In your OP, you said:

"... So for all those who can , contribute to a Roth Ira. ...
... If you haven't already done so, get started now."


So this came across as fact, no ifs and buts, no other considerations - just do it.

And that was immediately followed by informed comments that there are other considerations. That's not "arguing", that is trying to shed some light on statements that might be taken at face value. I think every response was meant to be helpful.

There was no attack on you. OK, maybe one comment that could be viewed (but it wasn't IMO) as an 'attack' on the statement - but that's fair game.

Stick around, share and learn - you''ll be fine. But be extra careful with the one-size-fits all generalities. Life is too complex for those in most cases.

-ERD50
__________________

ERD50 is offline   Reply With Quote
Old 11-16-2017, 12:33 PM   #23
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 1,868
UP--I disagreed with a couple of your strong comments, but I may know the reason... or at least have a guess. "Its hard to convert with no income or after you can't contribute to Roths. My guess is that you are looking at this with most of your assets are in TIRA/401ks/Annuities.

Try standing in my shoes... 56% after tax/39% TIRA/5% other. I'm below 59.5yo
If I invest the taxable in equity ETFs (low income) and I have after tax $ to pay taxes on Roth conversions.

If I had to pull everything from a TIRA, it would be expensive tax wise.

Sometimes when people disagree it is more that they see something different because they are looking at something different or a different set of conditions.

or I could be full of it.
bingybear is offline   Reply With Quote
Old 11-16-2017, 12:33 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 19,321
Quote:
Originally Posted by UnrealizedPotential View Post
....

But the bottom line is the thread was headed in a direction which didn't benefit anyone. I was hoping the subject might help someone or at least get their interest up. Sometimes the best of intentions go wrong.
But it may have helped someone. What should be the takeaway is that if anyone thought a ROTH was right in all cases, they should realize it is more complicated than that. It might be right in many cases, or some cases - it depends. and they would have learned some of the things it depends on.

That's a good thing.

edit/add - one other good thing about having some money in a ROTH that gets lost in the calculations. Lets say one year in retirement you have a very large expense (maybe buy a new home before you sell your old one, or a new car, boat, and decide to pay cash, or whatever). If you have that much in the ROTH, you can withdraw it, and have no tax concerns. Take it out of tIRA and it is income. Sell investments, you may have cap gains. ROTH is a non-event tax-wise. That much income in one year could put you in the tax bracket of the rich & famous, lose deductions, face AMT, etc. ROTH good.

-ERD50
ERD50 is offline   Reply With Quote
Old 11-16-2017, 12:34 PM   #25
Full time employment: Posting here.
UnrealizedPotential's Avatar
 
Join Date: May 2014
Posts: 748
Quote:
Originally Posted by ERD50 View Post
OK, so maybe it was just a communication problem, I have had more than my share of those.

But if you are interested in that, let me explain where the communication went wrong for me. In your OP, you said:

"... So for all those who can , contribute to a Roth Ira. ...
... If you haven't already done so, get started now."


So this came across as fact, no ifs and buts, no other considerations - just do it.

And that was immediately followed by informed comments that there are other considerations. That's not "arguing", that is trying to shed some light on statements that might be taken at face value. I think every response was meant to be helpful.

There was no attack on you. OK, maybe one comment that could be viewed (but it wasn't IMO) as an 'attack' on the statement - but that's fair game.

Stick around, share and learn - you''ll be fine. But be extra careful with the one-size-fits all generalities. Life is too complex for those in most cases.

-ERD50
Point taken. I also deleted the last sentence as I could see where it was wrong to make it.
__________________
Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things. Charlie Munger
UnrealizedPotential is offline   Reply With Quote
Old 11-16-2017, 12:36 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 18,438
Quote:
Originally Posted by UnrealizedPotential View Post
I just was hoping to reach out to younger people or maybe even those who never considered a Roth Ira before to take a look. ...
That is all fine and good, but at the same time it is important that they are getting a full understanding so they can make good decisions.

I love Roths and wish that they had been around more of my career. If you are in a relatively low tax bracket they are great... tax-free income for life. Great for DS... that is all he has now... no t-IRA needed.
__________________
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...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 11-16-2017, 12:51 PM   #27
Full time employment: Posting here.
UnrealizedPotential's Avatar
 
Join Date: May 2014
Posts: 748
Quote:
Originally Posted by bingybear View Post
UP--I disagreed with a couple of your strong comments, but I may know the reason... or at least have a guess. "Its hard to convert with no income or after you can't contribute to Roths. My guess is that you are looking at this with most of your assets are in TIRA/401ks/Annuities.

Try standing in my shoes... 56% after tax/39% TIRA/5% other. I'm below 59.5yo
If I invest the taxable in equity ETFs (low income) and I have after tax $ to pay taxes on Roth conversions.

If I had to pull everything from a TIRA, it would be expensive tax wise.

Sometimes when people disagree it is more that they see something different because they are looking at something different or a different set of conditions.

or I could be full of it.
I tend to have strong opinions. Sometimes that's good , sometimes it's not. But the thing is through all this, I learned a few things. I hope someone else has as well.
__________________
Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things. Charlie Munger
UnrealizedPotential is offline   Reply With Quote
Old 11-16-2017, 01:06 PM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 18,438
Quote:
Originally Posted by UnrealizedPotential View Post
I tend to have strong opinions. ....
Me too. That personality trait could occasionally cause me problems when I was working but luckily my batting average was pretty good so my boss and our clients put up with me.
__________________
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...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 11-16-2017, 01:55 PM   #29
Full time employment: Posting here.
 
Join Date: Feb 2012
Posts: 548
I don't think it has been mentioned, but once the back door Roth became available, I started funding a non-deductible IRA each year (income too high for Roth IRA) then converted to ROTH the next day. All tax deferred monies were in a 401K therefore I was able to convert the non-deductible IRA's w/o tax impact. DH on the other hand had a large IRA, therefore, the back door Roth did not make sense for him. My Roth is in 100% equities and it has more than doubled. I only funded it for 4 years until I retired and moved my 401K to an IRA.
TrvlBug is offline   Reply With Quote
Old 11-16-2017, 02:04 PM   #30
Full time employment: Posting here.
 
Join Date: Jun 2017
Location: Western NC
Posts: 652
Matching with my kid now while they're still in undergrad to max out their Roth.

If they get into med school and I'll do the same while they're still earning not much at all as a student, then resident.
ncbill is offline   Reply With Quote
Old 11-16-2017, 02:10 PM   #31
Thinks s/he gets paid by the post
 
Join Date: Aug 2013
Location: North
Posts: 1,052
Quote:
Originally Posted by pb4uski View Post
Me too. That personality trait could occasionally cause me problems when I was working but luckily my batting average was pretty good so my boss and our clients put up with me.
You don't need to like me, just my work That's what I say.
__________________
AA (Stock/Bond/Cash ): 99/0/1% MIX (Small/Mid/Large): 50/25/25% BLEND(US/Foreign): 100/0%, REIT (Real Estate Equity): 50% of Assets

FIRE in 2031 @ 50yrs old (+/- 2yrs) w/ a hypothetical $2.5mil portfolio, 3 appreciated homes worth $1.0mil and rental income to fund my gap years until RMD. Assets will go to an inherited IRA where I plan on watching the investments grow until I die or the trust gets executed.
kgtest is offline   Reply With Quote
Old 11-16-2017, 02:32 PM   #32
Full time employment: Posting here.
 
Join Date: Jul 2013
Posts: 691
Personally I've always followed this order:

1. 401k, HSA
2. T-IRA (though I haven't been able to contribute to T-IRA due to the AGI limits)
3. ROTH (many years I haven't qualified for this either due to the AGI limits)
4. Taxable accounts
dvalley is offline   Reply With Quote
Old 11-16-2017, 02:37 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 18,438
^^^^ For those in a high tax bracket who expect to be in a lower tax bracket in retirement, the above makes perfect sense.
__________________
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...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 11-16-2017, 03:22 PM   #34
Recycles dryer sheets
 
Join Date: Feb 2013
Posts: 198
I am a big proponent of Roth IRA / 401k.

I am 28, and will be in the 25% tax bracket for 2017. Hoping it will be 28% for 2018 .

I've been plowing money into Roth accounts since I've graduated college. Between my Roth 401k and Roth IRA, I have built up a balance of $158k. I think it will be amazing to be able to W/D and not have to pay taxes. But lately I've been concerned if the IRS were either A) to change the rule down the road and/or B) perform an audit on my tax return and make me prove out my post-tax contributions over a 30+ year period. I suppose on B) I could print out statements from my paystubs, etc. I'd imagine a number of folks could be audited on this with little proof on their balances. Does anyone have any insight on this concern? Or is the IRS audit only valid dating back a certain amount of years?
younginvestor2013 is offline   Reply With Quote
Old 11-16-2017, 03:34 PM   #35
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 3,122
Quote:
Originally Posted by RunningBum View Post
............................

I think most people here have given similar advice, though it's really based on income, not age. The young tend to have incomes this works for, but why not use the direct factor instead of equating young with low income, which may not be true.

....................................
The heart of the matter................
kaneohe is offline   Reply With Quote
Old 11-16-2017, 03:44 PM   #36
Full time employment: Posting here.
 
Join Date: Aug 2014
Posts: 669
Quote:
Originally Posted by pb4uski View Post
+1 IF your tax rates are the same when you defer as when you withdraw then tax-deferred vs Roth doesn't matter.

A brief example... a 30 year old with a 30% marginal tax rate has a decision to defer $10 of income or not.

If they defer the income and the $10k grows at 7%, in 30 years it is $76k.... and if they withdraw the $76k they end up with $53k that they can spend.

OTOH, if they go with a Roth then $3k is used to pay taxes on the $10 of incomeso only $7k ends up in the Roth. That $7k grows at 7% in 30 years to $53k that can be spent.

All else being equal, and advantage is gained only if the tax rate when withdrawn is lower than when deferred.

For me, when I deferred that income I expected that my tax rate in retirement would be lower than my tax rate while working and in early retirement that has been the case so I am coming out ahead.... but once we start SS I suspect that advantage will be diminished somewhat.

If I end up with a higher tax rate in retirement than when I deferred that income then it is a nice problem to have and the excess is a "success tax".
All I can say is, in my case, it does matter. Like another one, Roth conversion was delayed so that I could take advantage of the ACA subsidies. When I started saving in an IRA and 401K, 1) there was no such thing as a Roth, 2) there was no such thing as the ACA with, or without subsides and 3) SS was not taxed at all. I went full in on IRA's and 401K's at the time and I foolishly followed the mantra of "your taxes will be lower in retirement". It is now that I find my taxes will be essentially the same bracket as before since SS will be taxed 85%. Ignoring the equal tax bracket is a wash argument for a moment, I have to now consider SS being taxed, Medicare part B, Medicare part D being increased because of my income. Had I put money in Roth's way back then, those items would not cost me more than the guy down the street.

Roth conversions were not in my plan while working. "Don't pay for the conversion with IRA monies", they said. Then life changed and I needed to provide my own medical insurance. The ACA subsidies prevented me from doing Roth conversions.

I tell my kids now that, yeah, taxes may be a wash, but there are so many other things that you may be paying higher for just because you didn't put retirement investments in a Roth of some kind.
CRLLS is offline   Reply With Quote
New investors should look at Roth Ira
Old 11-16-2017, 06:22 PM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,741
New investors should look at Roth Ira

Quote:
Originally Posted by jkern View Post
I don't really agree with your statement about most people's income and taxes after retirement. Over the last 8 years of early retirement, my income is 1/10 of my pre-retirement income and my taxes have been next to zero.


I am a pensioner of the dinosaur type so I fit the exception. Most of my career my tax rate was lower than my retirement income and I retired into my highest working tax rate. Ya, I blew it mostly blowing off Roth contributions. I have been retired 7 years and made a point to make enough gig income to fully fund Roth every year in retirement. Funny how I am more worried about funding a Roth now, arguably when I need it the least.
Mulligan is offline   Reply With Quote
Old 11-16-2017, 06:29 PM   #38
Thinks s/he gets paid by the post
growing_older's Avatar
 
Join Date: Jun 2007
Posts: 2,659
Quote:
But lately I've been concerned if the IRS were either A) to change the rule down the road and/or B) perform an audit on my tax return and make me prove out my post-tax contributions over a 30+ year period.
Of these two, I think A is more of a real concern. Once a program like this is started, it gets politically harder to change it, but there is always a possibility that could happen. One way to mitigate the risk is to put some eggs in all of the baskets. If tax law changes make Roth less advantageous, then having some of the portfolio in non-Roth IRA/401k softens the blow. There are no guarantees, but it is likely that sometime in a long career, Roth will be better some years and Trad in other years. Maybe you'll even want to save so much you get some taxable accounts, too. With the portfolio spread around you'll never get the maximum you could have, but you'll also spread the risks and can maybe increase the chances that you have "enough"

As for B, there is no specific reporting of after-tax contributions. The custodian will have records of your investments, and your tax returns will have records that you DIDN'T take a deduction, so they much be after tax. I've never heard of anyone being asked to prove this.
growing_older is offline   Reply With Quote
Old 11-16-2017, 06:33 PM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 18,438
Quote:
Originally Posted by CRLLS View Post
All I can say is, in my case, it does matter. Like another one, Roth conversion was delayed so that I could take advantage of the ACA subsidies. When I started saving in an IRA and 401K, 1) there was no such thing as a Roth, 2) there was no such thing as the ACA with, or without subsides and 3) SS was not taxed at all. I went full in on IRA's and 401K's at the time and I foolishly followed the mantra of "your taxes will be lower in retirement". It is now that I find my taxes will be essentially the same bracket as before since SS will be taxed 85%. Ignoring the equal tax bracket is a wash argument for a moment, I have to now consider SS being taxed, Medicare part B, Medicare part D being increased because of my income. Had I put money in Roth's way back then, those items would not cost me more than the guy down the street.

Roth conversions were not in my plan while working. "Don't pay for the conversion with IRA monies", they said. Then life changed and I needed to provide my own medical insurance. The ACA subsidies prevented me from doing Roth conversions.

I tell my kids now that, yeah, taxes may be a wash, but there are so many other things that you may be paying higher for just because you didn't put retirement investments in a Roth of some kind.
The impact of the taxation of SS is an interesting angle and arguably impacts the retirement marginal tax rate in making a decision and certainly tilts the decision in favor of the Roth for a lot of people.

But I guess the same argument could be made for Roth conversions... IOW, there is a tradeoff between doing higher Roth conversions now, say to the top of the 25% tax bracket rather than the top of the 15% tax bracket and pay more taxes now, in the hope of paying much less or no taxes later because SS would not be taxed.

Not quite sure how to qualtify it but it may make me rethink, and increase, my Roth conversions.
__________________
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...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 11-16-2017, 07:05 PM   #40
Full time employment: Posting here.
 
Join Date: Aug 2014
Posts: 669
Quote:
Originally Posted by pb4uski View Post
The impact of the taxation of SS is an interesting angle and arguably impacts the retirement marginal tax rate in making a decision and certainly tilts the decision in favor of the Roth for a lot of people.

But I guess the same argument could be made for Roth conversions... IOW, there is a tradeoff between doing higher Roth conversions now, say to the top of the 25% tax bracket rather than the top of the 15% tax bracket and pay more taxes now, in the hope of paying much less or no taxes later because SS would not be taxed.

Not quite sure how to qualtify it but it may make me rethink, and increase, my Roth conversions.
It's not SS taxation throughout our lives, it is also higher tax brackets during the conversion process and higher costs for various Medicare premiums small as they may be. Perhaps even controlling RMD taxation rates. To be perfectly honest, the number of variables for us trying to optimize Roth Conversions under these situations are beyond my comprehension. I know how "this" affects "that", and all the variables one on one. I have a hard time combining and quantifying them, then optimizing my choices under the current tax laws and other laws all around. Without invoking Porky, I won't mention about the possible upcoming uncertainty of changes in tax laws.

As much as I am against FA's in general, we have decided to hire one on a fixed-pay for services basis to run the numbers thru his "system" and come up with an optimal financial plan for us. He seems to think he can do that for us. If it passes the sniff test, then we may follow it. We have no other obligation to him beyond that.

So I go back to "I wish I knew then, what I know now." But hindsight is almost always 20/20. I have no regrets on what is past. I want to make the right choices going forward.
__________________

CRLLS is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
The New Look for Women's Figures...a look not seen in nature? Amethyst Other topics 19 11-15-2015 04:55 AM
Are vanguard investors more savvy investors? mathjak107 FIRE and Money 5 06-07-2014 02:40 AM
Should I move T-IRA into my active 401k and do backdoor ROTH IRA? dvalley FIRE and Money 6 01-17-2014 04:04 PM
converting IRA to Roth IRA based on new Roth Rules vs. 72t mbmmccoy FIRE and Money 27 09-28-2009 06:27 AM

 

 
All times are GMT -6. The time now is 02:16 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.