Comments on: Saving With Purpose: Retirement Phase II http://frugaldad.com/2010/02/01/saving-with-purpose-retirement/ Money Saving Insights: Coupons, Smart Spending and Promotional Codes Mon, 13 Feb 2012 04:37:44 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: gn http://frugaldad.com/2010/02/01/saving-with-purpose-retirement/#comment-37805 gn Wed, 10 Feb 2010 23:28:01 +0000 http://frugaldad.com/?p=4704#comment-37805 Couple thoughts: If long-term capital-gains taxes stay lower than expected retirement-time income taxes, there can be a real benefit to holding growth stocks in normal, taxable accounts. Awesome tax treatment for charitable giving, can borrow against them (margin), step-up basis for estates, etc. I doubt the government can renege on the tax-free nature of Roth IRAs completely, but they could "means-test" the tax-freeness or just enact a big VAT tax and have the last laugh on everyone who thought they were avoiding the IRS (this is my expectation). Couple thoughts:

If long-term capital-gains taxes stay lower than expected retirement-time income taxes, there can be a real benefit to holding growth stocks in normal, taxable accounts. Awesome tax treatment for charitable giving, can borrow against them (margin), step-up basis for estates, etc.

I doubt the government can renege on the tax-free nature of Roth IRAs completely, but they could “means-test” the tax-freeness or just enact a big VAT tax and have the last laugh on everyone who thought they were avoiding the IRS (this is my expectation).

]]> By: janette http://frugaldad.com/2010/02/01/saving-with-purpose-retirement/#comment-37318 janette Wed, 03 Feb 2010 03:53:59 +0000 http://frugaldad.com/?p=4704#comment-37318 Remember Crystal- teacher's pensions are also a part of the government (unless he is a private school teacher). I know, both my husband's and my pensions are dependent on a good government return! Remember Crystal- teacher’s pensions are also a part of the government (unless he is a private school teacher).
I know, both my husband’s and my pensions are dependent on a good government return!

]]> By: Crystal http://frugaldad.com/2010/02/01/saving-with-purpose-retirement/#comment-37284 Crystal Tue, 02 Feb 2010 14:53:18 +0000 http://frugaldad.com/?p=4704#comment-37284 My hubby and I (26 and 27 respectively) are also planning for early retirement. We are also not expecting to get much if anything from Social Security. If we're wrong, woot! More cruises for us! If we're right, I'll be angry at being taken for 30 years, but we will have a nice retirement anyway. Our planning includes my husband's pension from teaching, my 401k that is matched 100% up to 6%, a Roth IRA we started in 2008, a Roth IRA we're starting this year, our Scottrade account, and several savings accounts for emergencies and regular expenses. We may also have a rental property as early as 2012. It just seems smarter to me to plan for the worst...we want to retire comfortably at age 52 whether the government comes through for us or not. My hubby and I (26 and 27 respectively) are also planning for early retirement. We are also not expecting to get much if anything from Social Security.

If we’re wrong, woot! More cruises for us! If we’re right, I’ll be angry at being taken for 30 years, but we will have a nice retirement anyway.

Our planning includes my husband’s pension from teaching, my 401k that is matched 100% up to 6%, a Roth IRA we started in 2008, a Roth IRA we’re starting this year, our Scottrade account, and several savings accounts for emergencies and regular expenses. We may also have a rental property as early as 2012.

It just seems smarter to me to plan for the worst…we want to retire comfortably at age 52 whether the government comes through for us or not.

]]> By: Sid in Missouri http://frugaldad.com/2010/02/01/saving-with-purpose-retirement/#comment-37279 Sid in Missouri Tue, 02 Feb 2010 13:48:57 +0000 http://frugaldad.com/?p=4704#comment-37279 Janette makes a good point about taxes. The big question mark I still have about Roth's is: what if the govt decides to change tax law? The nice thing about traditional IRAs is you get your deduction now. True, Roths are supposed to be tax free at withdrawl time, but what's to keep Congress from passing a new law to take that advantage away? Is the old 'bird in the hand (tax deductible traditional IRA) worth two in the bush (Roth IRA tax free deductions years from now)'? I'm still sticking with the Roth for future contributions, but I'm not rolling over my traditional IRA anytime soon. I also believe SS will be around in some form for people in their 20's and 30's now, but the benefits will probably be greatly reduced or the age to qualify for benefits will increase, possibly up into the late 60's early 70's. It's either that or taxes are going sky high. Another old saying: only two things are sure - death and taxes. I believe the best one can do is to take advantage to pay off debt as quickly as possible and stockpile enough cash to keep you liquid as the rules change. Stocks/mutual fund are still a best bet for most people. And if you're feeling particularly ambitious, some income real estate is a great way to go, though certainly it takes a bit more 'hands-on' approach than setting up an automatic debit to your retirement account. Janette makes a good point about taxes. The big question mark I still have about Roth’s is: what if the govt decides to change tax law? The nice thing about traditional IRAs is you get your deduction now. True, Roths are supposed to be tax free at withdrawl time, but what’s to keep Congress from passing a new law to take that advantage away? Is the old ‘bird in the hand (tax deductible traditional IRA) worth two in the bush (Roth IRA tax free deductions years from now)’?
I’m still sticking with the Roth for future contributions, but I’m not rolling over my traditional IRA anytime soon.
I also believe SS will be around in some form for people in their 20′s and 30′s now, but the benefits will probably be greatly reduced or the age to qualify for benefits will increase, possibly up into the late 60′s early 70′s. It’s either that or taxes are going sky high.
Another old saying: only two things are sure – death and taxes.
I believe the best one can do is to take advantage to pay off debt as quickly as possible and stockpile enough cash to keep you liquid as the rules change. Stocks/mutual fund are still a best bet for most people. And if you’re feeling particularly ambitious, some income real estate is a great way to go, though certainly it takes a bit more ‘hands-on’ approach than setting up an automatic debit to your retirement account.

]]> By: janette http://frugaldad.com/2010/02/01/saving-with-purpose-retirement/#comment-37252 janette Tue, 02 Feb 2010 04:42:11 +0000 http://frugaldad.com/?p=4704#comment-37252 I disagree that SS will not be there for you. If it is not there for you- it will not be there for the millions who depend on it now. If it goes away, I think you will see a major restructure of the government (because old people vote) Saying that, I am preparing for the worst- with a decent flow into savings. I gave up on IRAs since we are so close(52/59). Does it really matter that stocks grow tax free- when you are still taxed at the end? I don't want to be tied up in another government accounting program where taxes could be out of control. Sounding like a pessimist? Oh well, we saved so we can be that way;>0 I have the house paid off- the question is will I be able to pay the taxes on the house in twenty years...... Yowy- I bought enough land so the "kids" can always move back! I disagree that SS will not be there for you. If it is not there for you- it will not be there for the millions who depend on it now. If it goes away, I think you will see a major restructure of the government (because old people vote)
Saying that, I am preparing for the worst- with a decent flow into savings. I gave up on IRAs since we are so close(52/59). Does it really matter that stocks grow tax free- when you are still taxed at the end? I don’t want to be tied up in another government accounting program where taxes could be out of control.
Sounding like a pessimist?
Oh well, we saved so we can be that way;>0
I have the house paid off- the question is will I be able to pay the taxes on the house in twenty years……
Yowy- I bought enough land so the “kids” can always move back!

]]> By: Chase http://frugaldad.com/2010/02/01/saving-with-purpose-retirement/#comment-37237 Chase Tue, 02 Feb 2010 00:45:09 +0000 http://frugaldad.com/?p=4704#comment-37237 I agree that us young people will not see a dime out of Social Security. When the program was first started, there were something like twenty workers per person getting payments. Today, that is around four. Soon it will be less than that. It is a very wise decision to max out those IRAs and 401(k)s as young as possible. I agree that us young people will not see a dime out of Social Security. When the program was first started, there were something like twenty workers per person getting payments. Today, that is around four. Soon it will be less than that. It is a very wise decision to max out those IRAs and 401(k)s as young as possible.

]]> By: Holden http://frugaldad.com/2010/02/01/saving-with-purpose-retirement/#comment-37234 Holden Mon, 01 Feb 2010 23:50:24 +0000 http://frugaldad.com/?p=4704#comment-37234 First of all - great website!! But I had a quick question about the Roth IRA vs the 401K retirement investing options. I know that the Roth is funded by post tax dollars, the 401K by pre-tax dollars ... but my question is which one should I put my money into if I can only afford to do one (no employer match)? I'd think the 401K would have more growth potential (investing a larger sum over the course of years with the benefit of compounding interest). Even with the tax upon withdrawal I'd think the earning potential would be larger than the Roth (less money going in since it's after tax and hence less money growing over 20 or 30 years). Am I wrong? I certainly haven't done the math and am in a position of having to choose either to fund a 401K or a Roth IRA. I'm a total novice at this whole personal finance thing and am trying to chronicle the learning process with my own blog http://thedebtmarch.wordpress.com/. Anyways, I am looking for the wisdom of folks that have much more knowledge on these subjects than I do. Again ... great site you've got here! First of all – great website!! But I had a quick question about the Roth IRA vs the 401K retirement investing options. I know that the Roth is funded by post tax dollars, the 401K by pre-tax dollars … but my question is which one should I put my money into if I can only afford to do one (no employer match)? I’d think the 401K would have more growth potential (investing a larger sum over the course of years with the benefit of compounding interest). Even with the tax upon withdrawal I’d think the earning potential would be larger than the Roth (less money going in since it’s after tax and hence less money growing over 20 or 30 years). Am I wrong? I certainly haven’t done the math and am in a position of having to choose either to fund a 401K or a Roth IRA. I’m a total novice at this whole personal finance thing and am trying to chronicle the learning process with my own blog http://thedebtmarch.wordpress.com/. Anyways, I am looking for the wisdom of folks that have much more knowledge on these subjects than I do. Again … great site you’ve got here!

]]> By: Rob Bennett http://frugaldad.com/2010/02/01/saving-with-purpose-retirement/#comment-37218 Rob Bennett Mon, 01 Feb 2010 19:45:05 +0000 http://frugaldad.com/?p=4704#comment-37218 <i>I am not shying away from stocks</i> Um -- Never mind! Thanks for clearly that up, Jason. I apologize for the misunderstanding. Rob I am not shying away from stocks

Um — Never mind!

Thanks for clearly that up, Jason. I apologize for the misunderstanding.

Rob

]]> By: Frugal Dad http://frugaldad.com/2010/02/01/saving-with-purpose-retirement/#comment-37215 Frugal Dad Mon, 01 Feb 2010 18:56:09 +0000 http://frugaldad.com/?p=4704#comment-37215 @MoneyNing: Absolutely, nothing here set in stone. I plan to revisit often and make tweaks along the way. @Jackie: Having a minimal amount of monthly bills seems to be the best way to get to an early retirement. After all, with no debt, it wouldn't take much income to take care of our needs (and a few wants). @Janet: Excellent advice - particularly #4. It wasn't until I returned to school paying my own way that I really took matriculation seriously. I declared a major, met with advisors and planned out every single semester to get me there in the most efficient way possible. @Rob: I am not shying away from stocks, even single stocks, in fact. I just meant that we will always have a "larger than normal" cash emergency fund because of the experiences we have been through. I don't want too much tied up in investments, retirement or otherwise, that can lose significant value in a short time. That said, we plan to have more than a modest amount in both stocks and mutual funds. Thanks for your comments! @MoneyNing: Absolutely, nothing here set in stone. I plan to revisit often and make tweaks along the way.

@Jackie: Having a minimal amount of monthly bills seems to be the best way to get to an early retirement. After all, with no debt, it wouldn’t take much income to take care of our needs (and a few wants).

@Janet: Excellent advice – particularly #4. It wasn’t until I returned to school paying my own way that I really took matriculation seriously. I declared a major, met with advisors and planned out every single semester to get me there in the most efficient way possible.

@Rob: I am not shying away from stocks, even single stocks, in fact. I just meant that we will always have a “larger than normal” cash emergency fund because of the experiences we have been through. I don’t want too much tied up in investments, retirement or otherwise, that can lose significant value in a short time. That said, we plan to have more than a modest amount in both stocks and mutual funds. Thanks for your comments!

]]> By: MoneyNing http://frugaldad.com/2010/02/01/saving-with-purpose-retirement/#comment-37214 MoneyNing Mon, 01 Feb 2010 18:36:36 +0000 http://frugaldad.com/?p=4704#comment-37214 Jason, it's great to hear that you have a plan, which is key. However, I highly recommend that you revisit this plan at least every 6 months as your situation, goals and expectations will change. Good luck and I look forward to talking to you when we both retired early :) Jason, it’s great to hear that you have a plan, which is key. However, I highly recommend that you revisit this plan at least every 6 months as your situation, goals and expectations will change.

Good luck and I look forward to talking to you when we both retired early :)

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