How many mistakes can YOU find?

[retire@40]

You know those games where you have to find pictures of different items hidden within a drawing?

I tend to do that now by finding mistakes within "retire early" articles like this one http://money.cnn.com/2005/07/05/pf/expert/ask_expert/

This guy isn't much of an "expert."

Here's one mistake:  He said about retirement accounts "...if you withdraw these funds before age 59 1/2, you'll also have to pay the 10 percent federal tax penalty."

Maybe this "expert" doesn't know about Sec. 72(t).

 

[Sillysal]

There is already a thread about this article. It's called "Ask the Expert."

 

[Helen]

Here's a mistake:

"I don't think you've got enough money to walk away from the work-a-day world just yet"

 

[Mr._johngalt]

Here's a mistake:

"I don't think you've got enough money to walk away from the work-a-day world just yet"

Yep, that's a mistake.

JG

 

[GTM]

After reading the first section below

You've got just under $1.6 million in your retirement accounts, CDs and other financial assets. Let's assume you'll use $50,000 of your home-sale profit as a down payment on a new home and that you'll invest the remaining $450,000, bringing your total investment stash to an even $2 million.
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If their total assets including their home are 1.6 million and they use 50k of it for another home
How do they have $2mm to invest?

They should have 1.55 to invest, they way I interpet it.

 

[MooreBonds]

ITEM #1:
"and we estimate we would net $500,000 in profit if we sold our house. Do you think we have enough to retire?"

While it may seem like semantics to some, and an obvious assumption to others....whenever I'm talking about $500,000, I try not to make ANY assumptions.

The reader says that they will "net $500,000 profit" upon selling the house. Many people interchange revenue/"making money"/profits/etc., so I would need the reader to clarify if she means that they will have a $500,000 net PROFIT, or net PROCEEDS. If she's talking $500,000 profit, then there's certainly more PROCEEDS than that, which may tip the scales slightly more in their favor. Shame on the "expert" for not clarifying that.

ITEM #2:
$750,000 "Retirement Accounts"
$100,000 Individual Stocks
$200,000 CDs/Savings Bonds
$50,000 529 Plans
$500,000 "Profit on house" (see above)

Does anyone else see the radically different possibilities for potential income tax liability?

$750,000 "Retirement Accounts"

While the odds are that most of it is in 'traditional/taxable' accounts, she doesn't specify how much/if any is in ROTHs (non-taxable). Big potential tax savings if a significant amount is in ROTHs.

$100,000 Individual Stocks

What is her total unrealized gain/loss? Does she have a cost basis of $300,000? Perhaps a cost basis of $50,000? Again, big difference. (also, not related to taxes, but what stocks does she hold? Is she going to diversify her assets? Is it all in GOOG, and subject to a sudden implosion if Google gets dumped on by analysts?)

$200,000 CDs/Savings Bonds

What is the breakdown between CDs and Savings Bonds? If most is CDs, then she's paying taxes on the interest each year as it accrues. If most of it is in Savings Bonds, does she pay taxes on it each year or (more likely) is she accumulating a (potentially large) income tax liability by paying taxes on the interest when she cashes it in? Are the Savings Bonds after 1990, and correctly titled to take advantage of the tax-free status if they're used for educational purposes?

Of course, the above are just the tip of the iceberg...there's tons of questions on what particular holdings she has, what their interest/dividend rates are, etc., etc..

--Peter