Broke NFL player says Don't invest in a 401k

[pb4uski]

We have sizeable gains in our taxable account so, we fill up the 15% income tax bracket with CGs @ ZERO tax for now, and the next several years. We do this instead of Roth conversions, until we’re out of CG, because ZERO tax guaranteed seems better than paying LOW tax on the conversion and hoping our future tax rate is lower.

I’d be interested in hearing how others approach this choice.

That is a decision that I had to make.... in fact, the first year that I retired it was unclear how long the 0% LTCG would be available and I filled up the 15% tax bracket with LTCG (gains trading) rather than Roth conversions. Then they made 0% "permanent" and since I only had at most 13 years to do low cost Roth conversions I shifted to those... assuming that I can do 0% LTCG later.

However, in reality I do both since we are living off of our taxable portfolio that is all equities other than cash and I replenish the cash annually when I rebalance by selling equities. For example, last year 57% of our tax return income was LTCG since I sold equities for a winter condo that we bought and 28% was Roth conversions. For this year, I think it will be more like 30% LTCG and 40% Roth conversions.

 

[CardsFan]

We have sizeable gains in our taxable account so, we fill up the 15% income tax bracket with CGs @ ZERO tax for now, and the next several years. We do this instead of Roth conversions, until we’re out of CG, because ZERO tax guaranteed seems better than paying LOW tax on the conversion and hoping our future tax rate is lower.

I’d be interested in hearing how others approach this choice.

In our case we are living off of the after tax div/int/ cap gains distributions (no selling) and then pulling from my tIRA for spending (only Div/int and cap gains dist. as well) and DW's tIRA for Roth rollovers. If we need a little extra, to stay in the 15% bracket that will come from cash.

I know it is kind of backwards, but the logic is:
- Our WR is Low (2.5-3%), and will be a LOT lower when SS kicks in at FRA (3+ years)
- We have one son who will inherit our stash when we cease to be here.
- Odds are high that we can live, comfortably, only off of my tIRA funds
- Taxes WILL be paid on my tIRA, by someone, sometime
- After tax account will get stepped up value when we pass

This may not be the PERFECT way to do it, but it works for us. I guess we are paying taxes now to save it from DS, but we are still paying, at most, 15% on money that was deferred at 25% to 28%. Effective tax rate is mid single digits.

FWIW, there are dozens (hundreds?) of methods to use, and I am not really worried if I left 1-2% on the table to the feds.

We are comfortable, and have a plan to follow.

YMMV.

 

[43210]

Hmm, should I invest money with this person.
Broke ...
Strike one
NFL player ...
Strike two
says Don't invest in a 401k
Strike three

Any time I hear someone say, "Don't invest in a 401k" (or "empty it out and let me look after it") it just sounds like someone trying to gather AUM at their clients' great expense.

 

[ChiliPepr]

And if my employer could have been taxed as a non-profit,

The NFL teams have never been taxed as a non profit, the NFL League Office used to be a tax-exempt entity, but that was given up in 2015.

 

[jazz4cash]

Much more positive ex NFL player story:
Ex-NFL player who lived on $25,000 a year shares the key to saving
https://www.cnbc.com/2017/11/03/nfl...-25000-a-year-explains-how-to-save-money.html

 

[harley]

I'm glad Urschel can do math, because the reporter certainly can't. Just because you live on 4% of your income doesn't mean you get to save the other 96%. I guess she's never heard of income tax, FICA, state and local taxes (every state a player plays in gets a chunk). At $600K he'd be lucky to save 50%. Not that that's not pretty good, but still...

 

[JoeWras]

I'm glad Urschel can do math, because the reporter certainly can't. Just because you live on 4% of your income doesn't mean you get to save the other 96%. I guess she's never heard of income tax, FICA, state and local taxes (every state a player plays in gets a chunk). At $600K he'd be lucky to save 50%. Not that that's not pretty good, but still...

Union dues. Fines. Agent fees. Etc.

Otherwise, the article is great and he'd fit right in here on this forum.

 

[jazz4cash]

I don't think it was mentioned in the article but I heard he retired at 26 out of concern for CTE risk. He's certainly got skills to make a good living after football.