How do you save?

Ehhhh, unless you have highly variable income, or expect to be in a higher bracket in retirement (perhaps because of inheritances), then I don't see the point of backdoor Roth.  If your tax rates remain constant, then the value of the Roth IRA and 401k are identical.  Most people are going to come out ahead putting that conversion cost into a brokerage account and paying l-t capital gains on the returns.

When you do the conversion, you're taxed at ordinary rates....and if you put that tax instead into a brokerage account, that can grow to be a sizeable amount (investment returns subject to 15% long-term capital gain), which means your income bracket in retirement has to be significantly higher than now for a Roth conversion to make sense.

posted by kizer permanente

Man i'm slacking compared to you guys lol.
I max 401k and max an IRA that I rolled an old 401k into. The rest stays in my account to use as needed. Hopefully the 401k and IRA will be enough.

You're much further ahead than the average American. 

I have 2 safes one for ammo and the other is cash, gold 

I put 10% into my 401k and 10% into company stock. My oldest daughter is in college, so as soon as the stock hits long term, I sell and use that to pay her tuition. Once she's out of college I'll probably find another way to invest that money. (I've had bad luck picking stocks and I know people who have been screwed because they were too heavily invested in company stock.)

posted by FatHobbit

I put 10% into my 401k and 10% into company stock. ...

Unless you are high-enough up or otherwise in the know to basically be an "insider", buying your company stock is a HORRIBLE diversification play.

If things go south, you're liable to be whacked twice - once on your paycheck, the other on the stock.  The academics even go a step further to argue you shouldn't overinvest in your industry, like don't overweight airlines if you're a pilot for Delta.

posted by gut

Unless you are high-enough up or otherwise in the know to basically be an "insider", buying your company stock is a HORRIBLE diversification play.

I think it depends on the health of the Company and discount. I get a 10% discount at mine, and am high enough up to know the direction of the Company and believe it will go up. My wife gets a 15% discount at a humongous health insurance company, and it’s 15% off of the lowest price during that month. We don’t put a ton in but it’s free money as long as they go up, and little risk that they go down THAT much. We can also afford the risk. But I agree in not putting your retirement in your own Company or putting it into stock prior to maximizing your 401k or other savings tools.  

posted by gut

Unless you are high-enough up or otherwise in the know to basically be an "insider", buying your company stock is a HORRIBLE diversification play.

If things go south, you're liable to be whacked twice - once on your paycheck, the other on the stock.  The academics even go a step further to argue you shouldn't overinvest in your industry, like don't overweight airlines if you're a pilot for Delta.

 

I'm sure he gets a nice match from his employer on purchasing his company's stock. Otherwise, there is practically 0 reason to buy your own company's stock.

posted by iclfan2

I think it depends on the health of the Company and discount. I get a 10% discount at mine, and am high enough up to know the direction of the Company and believe it will go up.

Everyone should take advantage of the discount.  But if they aren't high enough up to understand if the company will outperform public expectations, then they should flip the stock as soon as whatever holding period requirement passes.

Most people aren't high enough up to know that.  I'd argue at a Fortune 100 that it's a really tough bet to take even at the EVP level.

STRS which will probably be broke by the time I retire in 20 years.  Nothing for my wife.  We will get SS for her, as well as my STRS match in my death.

posted by gut

Unless you are high-enough up or otherwise in the know to basically be an "insider", buying your company stock is a HORRIBLE diversification play.

If things go south, you're liable to be whacked twice - once on your paycheck, the other on the stock.  The academics even go a step further to argue you shouldn't overinvest in your industry, like don't overweight airlines if you're a pilot for Delta.

 

We get a 15% discount on the price and they also look back 6 months and we buy at that price if it's lower. This month was the first time in 5 years with the company that we didn't buy at the 6 month look back price. But I agree with your points about being diversified which is why I sell as soon as it's long term. 

Our stock is currently at $268 and I have friends who bought at $35 so they made a shit ton of money and they think I was crazy to sell. I did miss out, but I don't like putting all of my eggs in one basket. I think (know) I made the right decision but man...

posted by gut

Ehhhh, unless you have highly variable income, or expect to be in a higher bracket in retirement (perhaps because of inheritances), then I don't see the point of backdoor Roth.  If your tax rates remain constant, then the value of the Roth IRA and 401k are identical.  Most people are going to come out ahead putting that conversion cost into a brokerage account and paying l-t capital gains on the returns.

When you do the conversion, you're taxed at ordinary rates....and if you put that tax instead into a brokerage account, that can grow to be a sizeable amount (investment returns subject to 15% long-term capital gain), which means your income bracket in retirement has to be significantly higher than now for a Roth conversion to make sense.

I get what you are saying, but there is a fairly significant chance we are going to get a huge detrimental revision to the tax code. So i'm more hedging against a dramatic regime swing than trying to maximize the total dollar amount. I'm also banking on losing 100% of my SS contributions (even if they find a way to fund it when i am eligible, under current code i'm only going to see 15%). 

Anyone have a good, inexpensive site to buy/sell stocks?

Fidelity is $4.95 per trade, I believe Schwab is as well.

Got a little request on what I should do. I think I know the route I'll take, but just wanted to get some additional feedback.

Here's the situation: I have two different student loans. I will pay off one by October this year. I also have one child coming off childcare costs in May, and another one in May 2020. Should I...

1. Take what I'm paying for childcare (either all or partial, doesn't matter) and put that toward my other student loan?
2. Stay course with the regular student loan payments and utilize the childcare expenses towards other things (savings, house, cars, etc.)?

I am already paying between 3-4x my regular student loan monthly payments. The difference between payoff time from #1 to #2 is only 13 months (1 -- June 2022; 2 -- July 2023).

As long as you have 6 months worth of expenses in your savings, I would pay off the higher interest student loan debt with the extra money.

If your car loan is only at 2% or so, I wouldn’t worry about paying that early as you can make more in the market or even in a savings account.

After that, the harder decision is whether to put the extra money in the market vs pay more on a mortgage. This is the internal struggle I have. 

Make more money than I spend

Yeah, long-term you have to look at what offers the best return for your money.  You should be able to average at least 6% after-tax in the market.  After-tax your mortgage interest should be about 3% or less (on an asset that should be appreciating at about that rate).

That's not advocating that you overspend, but any time you can borrow at a low rate and then save/invest at a higher rate...you do that all day.

posted by queencitybuckeye

Fidelity is $4.95 per trade, I believe Schwab is as well.

I don't really advise people buy individual stocks - it's pretty much straight-up gambling once you understand the people driving stock valuation have WAY MORE time and information than you do.  Spend your time on asset allocation, that drives most of the return, anyway.

Vanguard has a ton of very low-cost ETF's, and you can buy/sell their ETF's with no transaction fees up to like 24 times a year.  Now I've not found good ETF's, really anywhere, for fixed income.  But you can make almost every broad equity play you want with ETF's - small cap, large cap, value, growth, emerging market, EMEA, tech, healthcare, etc....

posted by j_crazy

I get what you are saying, but there is a fairly significant chance we are going to get a huge detrimental revision to the tax code.

Hard to argue with that.

My plan is in the first 5-10 years of retirement to live off savings in a brokerage (i.e. low taxable income) and then do Roth backdoor conversions until the marginal rate doesn't make sense to convert more. I'm banking backdoor conversions aren't done away with, obviously.

So that's how I will achieve balance between taxable 401K distribution and non-taxable Roth IRA distributions.  There's always going to be progressive tax, so up to a certain amount of income should always come from your 401K (less any social security received).  Then, once you're into higher marginal rates, you would draw income from a Roth IRA or from a brokerage account (which would be subject to a 15% capital gains, that may increase but the lower bracket for cap gains has been 15-20% for a long, long time).

To me a Roth conversion is very costly, especially if you believe SS is going away.  Because you might be drawing up to $80k from a 401K until you a married couple hits a marginal rate over 15%.  That means, in today's dollars, you should have about $2M in your 401K before you start thinking about shorting your 401k contribution for a Roth or Brokerage account.

I also haven't mentioned state taxes.  The 401K contribution is not taxable at the state level - a Roth conversion is (because it's ordinary income).  This is very significant, especially when you consider many people might retire to a state with no income tax....so you're not just deferring but completely avoiding the state income tax on that money.

posted by gut

I don't really advise people buy individual stocks - it's pretty much straight-up gambling once you understand the people driving stock valuation have WAY MORE time and information than you do.  Spend your time on asset allocation, that drives most of the return, anyway.

Vanguard has a ton of very low-cost ETF's, and you can buy/sell their ETF's with no transaction fees up to like 24 times a year.  Now I've not found good ETF's, really anywhere, for fixed income.  But you can make almost every broad equity play you want with ETF's - small cap, large cap, value, growth, emerging market, EMEA, tech, healthcare, etc....

Ill look into the ETF's.

My 401Ks have been at over 8% so far this year and both my full and part time jobs match 5% so that has been going decent.  I was just looking to be a novice and also teaching the boy savings and investing and such.

I had seen an add long ago about robinhood so I did that as it is free.  I really just wanted to start investing in cannibus stocks.  Not really throwing much money, just throwing some $$ at it from time to time that I would be blowing on nothing anyways.