Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[Ming the Merciless]

^ everything 493 said and also no tax on the GROWTH.

with a traditional you DO have to pay tax on the growth..

so the longer it has to grow, the more sense a conversion makes because youre going to come out way ahead if it grows even normal amount

[UteChief]

Originally Posted by Ming the Merciless

I dont have the credentials you have but I think everyone's first 6500 - 7500 worth of savings every year should be in a ROTH or maybe trad. ira. (Unless they are broke)


you dont?


It just seems like a no brainer to get that ROTH tax free growth for retirement...

It depends on your situation. I think your first should be any company match. I get 6%, so I make 100% on my 401k contribution. After that, it depends. I don’t want all of my investments long term retirement. I also get a 15% discount on my ESPP. Everyone’s situation will be different.

[UteChief]

Originally Posted by 493rd

Not sure how old you are but think of it this way…it seems more likely than not that tax rates will be higher in the future so paying presumably lower taxes today will benefit you in the long run. As it currently stands the existing TCJA tax cuts are sunsetting in 2025 so keep that in mind. In addition, there are other factors to take into consideration like reducing future RMDs, building a legacy pool for kids, having greater tax flexibility in retirement planning, etc. Lots of potential benefits that most people would agree on. Does this mean you should convert a massive chunk of pretax dollars to your Roth? No of course not; it’s best done incrementally and when you have some tax flexibility. Most clients I work with like having different buckets of money in retirement.

While taxes may go up, so does the standard deduction. I think there is a balance between tax deferred and after tax retirement savings.

[493rd]

Originally Posted by UteChief

While taxes may go up, so does the standard deduction. I think there is a balance between tax deferred and after tax retirement savings.

The existing standard deduction is scheduled to be halved and taxes increased as it stands today. The goal is to give the government as little as possible. I’d suggest finding a good CPA.

[lewdog]

Originally Posted by 493rd

The existing standard deduction is scheduled to be halved and taxes increased as it stands today. The goal is to give the government as little as possible. I’d suggest finding a good CPA.

Links to the current standard deduction being halved?

[Ming the Merciless]

Originally Posted by UteChief

It depends on your situation. I think your first should be any company match. I get 6%, so I make 100% on my 401k contribution. After that, it depends. I don’t want all of my investments long term retirement. I also get a 15% discount on my ESPP. Everyone’s situation will be different.

for sure. I was referring to folks who don't have the option of a 401k.... if you can do a 401k ROTH then that's better than an IRA.

[UteChief]

Originally Posted by 493rd

The existing standard deduction is scheduled to be halved and taxes increased as it stands today. The goal is to give the government as little as possible. I’d suggest finding a good CPA.

I didn’t realize that, and I agree with what you said about different buckets. I have 20-23 years left, unless one of my investments really pays off or I get a windfall.

[UteChief]

Originally Posted by Ming the Merciless

for sure. I was referring to folks who don't have the option of a 401k.... if you can do a 401k ROTH then that's better than an IRA.

I’m not disagreeing with you, but there would still be advantages depending on income to make a tax deferred contribution. For example if you need to lower your tax burden, or if you wanted to make the biggest contribution you were able, but couldn’t max it out.

[UteChief]

Originally Posted by 493rd

The existing standard deduction is scheduled to be halved and taxes increased as it stands today. The goal is to give the government as little as possible. I’d suggest finding a good CPA.

I’m lucky. My boss is a CPA, so I can discuss it with her.

[Ming the Merciless]

Originally Posted by 493rd

The existing standard deduction is scheduled to be halved and taxes increased as it stands today. The goal is to give the government as little as possible. I’d suggest finding a good CPA.

going back to itemized deductions I guess!

[Buehler445]

Originally Posted by UteChief

Thanks Rainman, that makes a lot of sense for your situation. I’d love to hear others. An advisor started doing this for my SIL and I can’t figure out why!

I think it has a place with variable incomes if incomes are down.

I think there is a case to be made that if you want out of some investments that have a loss in a taxable account you could do Roth conversions for the loss amount. But that sounds…painful.

I think there is a case where you lose an expense and could do Roth conversions for that amount without much impact on your life. For instance, if you pay off your mortgage you could do a Roth conversion for the P&I of your mortgage and not feel it too much. But my (not very confident, but it’s what I’d do) opinion is if you have the time horizon to capitalize on ROTH benefits, you’re probably better off to take whatever tax savings you are trying to utilize and stick the cash amount of the tax savings into a taxable brokerage (or increase contributions to a qualified plan if you have room).

I recently made this ridiculous spreadsheet that evaluated some qualified plan options, the theory of the exercise was to maximize total assets given a set cash flow. My bias was to put everything into a Roth optioned 401K, but in point of fact, sticking it in a traditional 401K and investing the tax savings into a taxable brokerage outperformed the Roth + tax across every variable I looked at. Thats all assuming current tax rates which 493 points out could change soon.

I’m not ready to take the leap on the basis of potential tax changes like 493 is suggesting, but it’s probably the smart play. The 2017 tax cuts were signify d if they go the other way Mr T predicts PAIN. But who the hell knows what will happen. I wouldn’t have predicted Trump of all people would sign off on SALT limitations and as much as democrats rail on capital gains tax they never do anything about it. So I’m not willing to eat tax on the current betting on the future with tax. But I’m almost certainly wrong.

[493rd]

Originally Posted by UteChief

I’m lucky. My boss is a CPA, so I can discuss it with her.

Great resource to have for sure!!

[493rd]

Originally Posted by Ming the Merciless

going back to itemized deductions I guess!

Yup, assuming the Congress doesn’t get something done. We’ll see, we know how those clowns work!

[UteChief]

Originally Posted by 493rd

Yup, assuming the Congress doesn’t get something done. We’ll see, we know how those clowns work!

I’ll miss that standard deduction.

[Buehler445]

Originally Posted by UteChief

I’ll miss that standard deduction.

I’ll trade you the standard deduction if I get to keep the tax brackets and rates.