How should my daughter save for retirement?

[Koolau]

I'd look for a professional FA (by the hour) with expertise in this subject. If you're lucky, you'll find an expert out of the first 20 you call, pay them $1000 and find a suitable alternative to the 401(k).

Might be something really esoteric like incorporation or other weird approach.

 

[TheWizard]

VOO presently has a dividend around 1.1% per year.
But large cap growth funds like VGT, MGK, QQQ are half that or less and often have higher Total Return as well.

For reference, a 1% dividend on $10M is $100k per year, mostly qualified in the above mentioned funds...

 

[TickTock]

Another big challenge is she makes well over $200K in a job she does entirely remotely. Works from her spare bedroom 100% and they make her clock out at 40 hours per week. So great pay and tremendous convenience.
My employers worked me like a mule.

I think I'd be inclined to ride that wave as long as I could, even with no 401(k) option.

 

[DougJohnson]

I think you are letting the tax tail wag the investment dog. Sure. Take advantage of the tax deferred opportunities when they're available, but don't disparage taxable savings. One big advantage is the money is all yours. No restrictions on when you can withdraw it. Want to buy a car? Go ahead. Don't want to withdraw it at RMD time? Fine.

For the long term, pick investments skewed towards capital gains. Cap gains are generally taxed at lower rates than income. ETF's usually spin off little income each year. Funds like Vanguard's Tax Managed funds do likewise.

 

[RetMD21]

I was in a similar situation with the business terminating its plan. Unfortunately you have to live with the nondiscrimination rules as they exist. I used to complain to DW about having so much of the savings going into taxable accounts but really the dividends are mostly taxed at a lower rate and we can manage the capital gains. The dividends precluded ACA subsidies as Diogenes notes but probably the alternative would have been much worse RMD issues.

I did well with stock investing but now we have appreciated assets including some positions that should be sold. It would make my current life easier if more of the assets were in low turnover index funds.

I might consider real estate syndicates for the heroine. There are tax advantages and you can roll over gains with 1031 exchanges. I never did it myself,

 

[imnontrad]

She may just have to suck it up and invest all of that money returned into a regular taxable portfolio. And starting now, help educate other employees about 401Ks so they will invest and this won't happen again. But also have her look at the investments in that 401K and the fees. it could be that some are not investing because the investment choices are lousy and/or the administrative fees are high. Then she should also work with HR to get better investment options that benefit the employees, not the person who convinced the company to offer those options.

 

[samcat]

Her job sounds fabulous! She should save after tax in a brokerage account maybe after doing the Roth backdoor.. She will be set in 30 years and will have a lot of flexibility because she won't have RMDs.

 

[pjigar]

Like someone said, don't let the tax tail wag the investment dog. Other than backdoor Roth, she has the following options (all in the taxable accounts):
* BRK-B (mentioned)
* VOO or other instruments which through low capital gains and/or dividend (mentioned)
* Land or other real estate (Illiquid and work)
* Zero-coupon bonds (but those chickens will come home to roost someday)

Another radical idea: Can current employer transfer her to "1099" position? Employer will have to bump her pay to account for FICA and other benefits company pays for your daughter today. If this is possible then she can open "Solo 401(k)", write off employment related expense, and a whole lot more because 1099 is a business income.

 

[indiajust]

How about a rental husband? Set up an SEP for him so that all the payments go to his SEP. Set herself as beneficiary! In a similar vein, buy some deductions. Doctors in the 70's had all kinds of tax shelters. Marry a tax shelter.

 

[Koolau]

How about a rental husband? Set up an SEP for him so that all the payments go to his SEP. Set herself as beneficiary! In a similar vein, buy some deductions. Doctors in the 70's had all kinds of tax shelters. Marry a tax shelter.

Always wondered about "a marriage of convenience" when two people lose their respective spouses and find themselves facing a tax bomb. The marriage wouldn't even require that they cohabitate as long as the paperw*rk was legal. Of course, it would require a fair amount of trust between the two "participants" - just as in a marriage based on mutual attraction, love, children, etc. Heh, heh, in most states, it wouldn't even require different sexes these days.

How far we have come.

When I pass, DW will likely make a good "catch" for such a M-O-C. I'm leaving her instructions to make my exit-announcement in these pages. (Hey, she'll have a nice condo with a great view!)