countrygirl2
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Post by countrygirl2 on Mar 10, 2021 14:10:07 GMT -5
You need to look and be realistic about health care costs and also taxes. If you have taxable income from 401k's and have anyother income you may pay a chunk. Ours are going up a bunch, because hubs was putting rent money back in rentals we had losses, now this year I note on taxes we are making a profit. I wanted to sell one property this year but both wanted them last year so let them go.
Also be careful especially for singles, you may find that a lot of your SS is taxable or even for couples. Extra income pushes the taxable amounts up quickly.
Our SS is 85% taxable, I likely need to start having it deducted from each check and have not.
We are spending down retirement savings. I usually recouped but with the extremely low interest and the safe funds we are in not a lot of growth.
But we have no payments on anything, just living expenses and wants. Have bought more cars then we should have but we are ok. I could reduce our expenses a lot more but we are ok. We have rental income and when the properties are sold a year at a time we will have that income we can use too. All bought and paid for courtesy of our renters sadly. But they need places to live and we provide nice ones and the maintenance is quick and current so I feel they are being treated fairly.
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countrygirl2
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Post by countrygirl2 on Mar 10, 2021 14:12:16 GMT -5
I have talked with son about this, I didn't know, had to learn on my own. But he is moving all his into non taxable accounts in his investments. He is paying the taxes each year to do so. He is also pretty savy about investments. We did not have that option back then unless I started trading and didn't. Still we are ok, he just may not inherit as much, LOL!
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tskeeter
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Post by tskeeter on Mar 10, 2021 15:17:58 GMT -5
I have talked with son about this, I didn't know, had to learn on my own. But he is moving all his into non taxable accounts in his investments. He is paying the taxes each year to do so. He is also pretty savy about investments. We did not have that option back then unless I started trading and didn't. Still we are ok, he just may not inherit as much, LOL! I think your son is displaying his financial savvy. His income tax rate now is probably quite a bit lower than it will be when he is retired. Youth is a great time to bulk up those after tax accounts. Save the tax deferred stuff for later, or for when caps on Roth type contributions limit what you can do. Wish I had been as astute as your son is when I was his age.
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countrygirl2
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Post by countrygirl2 on Mar 10, 2021 15:42:43 GMT -5
Well now he does lean on mom for advice also. But he is adding to it. I had noone to tell me anything nor hubs, and hubs doesn't want to know what I can do. I did some changes back in his 401k and made us more money. But they stopped active trading in it, durn. Then they started making you wait a month or two and various things so it stopped me, but for awhile I was doing good.
My folks had no idea what to do other then put money in the bank. Not buying and selling real estate or anything. Hubs saves a fortune on fixing things and we both look at ways to do things though I would have been more aggressive in investing and we would have had more. Oh well.
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countrygirl2
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Post by countrygirl2 on Mar 10, 2021 15:47:08 GMT -5
Son and I are looking at a couple of IPO's he thinks is coming up. I'm possibly going to invest in both. Problem is IPO's are generally to high for me.
But now he has sold his house, he doesn't know when he is going to get transferred. With stuff trump did, he started some drawdowns in Germany, and pulling money out, I think its in chaos right now in the military. Going to have to review and see where they are, so not good for him. However, today I heard that interest rates are starting to raise and may clip house sales. So he may still be ok, he said maybe house prices will go down.
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tskeeter
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Post by tskeeter on Mar 10, 2021 17:40:17 GMT -5
Well now he does lean on mom for advice also. But he is adding to it. I had noone to tell me anything nor hubs, and hubs doesn't want to know what I can do. I did some changes back in his 401k and made us more money. But they stopped active trading in it, durn. Then they started making you wait a month or two and various things so it stopped me, but for awhile I was doing good. My folks had no idea what to do other then put money in the bank. Not buying and selling real estate or anything. Hubs saves a fortune on fixing things and we both look at ways to do things though I would have been more aggressive in investing and we would have had more. Oh well. Yes, good advice goes a long way. Years ago I was asking the financial professionals we worked with about the wisdom of Roth conversions. They weren’t supportive of the idea, so I did nothing. Not once did any of them comment that our net worth was pretty 401K/Traditional IRA heavy. (Tax deferred investments were more than 80% of our retirement portfolio.). Nor did they ask about our effective tax rate (about 14% - 15%). Suddenly, after the Trump tax reductions, they are all talking about Roth conversions. Crap! Now that we’re retired, we’re doing Roth conversions at a 24% tax rate instead of at the 15% or so we could have paid while we were working. And the conversions are driving up our income so we have to pay surcharges on our Medicare benefits. Why are we doing conversions? We’re trying to avoid future RMD’s that force us into the ludicrous Medicare surcharges territory. Wish I’d had someone tell me 15 years ago than given our circumstances, doing a Roth conversion every year looked like a good idea. Should have trusted my instincts and not relied on the professionals.
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jerseygirl
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Post by jerseygirl on Mar 10, 2021 18:40:30 GMT -5
Well now he does lean on mom for advice also. But he is adding to it. I had noone to tell me anything nor hubs, and hubs doesn't want to know what I can do. I did some changes back in his 401k and made us more money. But they stopped active trading in it, durn. Then they started making you wait a month or two and various things so it stopped me, but for awhile I was doing good. My folks had no idea what to do other then put money in the bank. Not buying and selling real estate or anything. Hubs saves a fortune on fixing things and we both look at ways to do things though I would have been more aggressive in investing and we would have had more. Oh well. Yes, good advice goes a long way. Years ago I was asking the financial professionals we worked with about the wisdom of Roth conversions. They weren’t supportive of the idea, so I did nothing. Not once did any of them comment that our net worth was pretty 401K/Traditional IRA heavy. (Tax deferred investments were more than 80% of our retirement portfolio.). Nor did they ask about our effective tax rate (about 14% - 15%). Suddenly, after the Trump tax reductions, they are all talking about Roth conversions. Crap! Now that we’re retired, we’re doing Roth conversions at a 24% tax rate instead of at the 15% or so we could have paid while we were working. And the conversions are driving up our income so we have to pay surcharges on our Medicare benefits. Why are we doing conversions? We’re trying to avoid future RMD’s that force us into the ludicrous Medicare surcharges territory. Wish I’d had someone tell me 15 years ago than given our circumstances, doing a Roth conversion every year looked like a good idea. Should have trusted my instincts and not relied on the professionals. Same here, financial advisors either said nothing or actively discouraged Roth I changed advisors and am now trying to convert some every year - but at 24% rate
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CCL
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Post by CCL on Mar 10, 2021 19:47:11 GMT -5
Aren't most kids moved out by the time the parents retire? It just happened that my youngest moved out at about the same time we retired. Sold my house and bought a smaller one, too. This was all part of my retirement "plan."
Gira, I never thought much about retired folks paying more for convenience foods. I cook/prepare most foods from scratch. There are some exceptions like Costco rotisserie chicken for $5, but even that makes 2-3 meals for us.
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CCL
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Post by CCL on Mar 10, 2021 20:01:58 GMT -5
Son and I are looking at a couple of IPO's he thinks is coming up. I'm possibly going to invest in both. Problem is IPO's are generally to high for me. But now he has sold his house, he doesn't know when he is going to get transferred. With stuff trump did, he started some drawdowns in Germany, and pulling money out, I think its in chaos right now in the military. Going to have to review and see where they are, so not good for him. However, today I heard that interest rates are starting to raise and may clip house sales. So he may still be ok, he said maybe house prices will go down. How are you going to get in on an IPO? They aren't usually available to the general public. I know what you mean about having to learn about investing on your own. I never had any help with anything, either. I think most younger people have no idea how much easier it is to educate yourself now. I remember trying to figure out how to invest in a 401k, but I had to figure out what it was first lol. Back in the 80s when I worked at a hospital they offered me free money in the form of shares in something called Magellan. I had no idea what they were talking about. They even mentioned that it might lose value, but I didn't care. It was free and I don't turn down free money. That was how I got my start in investing.
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CCL
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Post by CCL on Mar 10, 2021 20:06:41 GMT -5
Well now he does lean on mom for advice also. But he is adding to it. I had noone to tell me anything nor hubs, and hubs doesn't want to know what I can do. I did some changes back in his 401k and made us more money. But they stopped active trading in it, durn. Then they started making you wait a month or two and various things so it stopped me, but for awhile I was doing good. My folks had no idea what to do other then put money in the bank. Not buying and selling real estate or anything. Hubs saves a fortune on fixing things and we both look at ways to do things though I would have been more aggressive in investing and we would have had more. Oh well. Yes, good advice goes a long way. Years ago I was asking the financial professionals we worked with about the wisdom of Roth conversions. They weren’t supportive of the idea, so I did nothing. Not once did any of them comment that our net worth was pretty 401K/Traditional IRA heavy. (Tax deferred investments were more than 80% of our retirement portfolio.). Nor did they ask about our effective tax rate (about 14% - 15%). Suddenly, after the Trump tax reductions, they are all talking about Roth conversions. Crap! Now that we’re retired, we’re doing Roth conversions at a 24% tax rate instead of at the 15% or so we could have paid while we were working. And the conversions are driving up our income so we have to pay surcharges on our Medicare benefits. Why are we doing conversions? We’re trying to avoid future RMD’s that force us into the ludicrous Medicare surcharges territory. Wish I’d had someone tell me 15 years ago than given our circumstances, doing a Roth conversion every year looked like a good idea. Should have trusted my instincts and not relied on the professionals. I always wonder how smart those "professionals" really are. If they know so much about investing, why are they still working? It sounds like you did fine, anyway.
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wvugurl26
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Post by wvugurl26 on Mar 10, 2021 20:12:59 GMT -5
My grandma does use more convenience stuff now. After my grandpa died I went with her to the grocery store for the first time. I about bawled in the frozen food aisle when she put a bunch of single meals in the cart. I have come to realize that after 60 some years of cooking for others she was DONE.
It leveled out to a mix of convenience stuff, scratch stuff and meals out.
I think expenses will shift throughout retirement from one category to another.
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Post by The Walk of the Penguin Mich on Mar 10, 2021 20:19:33 GMT -5
Yes, good advice goes a long way. Years ago I was asking the financial professionals we worked with about the wisdom of Roth conversions. They weren’t supportive of the idea, so I did nothing. Not once did any of them comment that our net worth was pretty 401K/Traditional IRA heavy. (Tax deferred investments were more than 80% of our retirement portfolio.). Nor did they ask about our effective tax rate (about 14% - 15%). Suddenly, after the Trump tax reductions, they are all talking about Roth conversions. Crap! Now that we’re retired, we’re doing Roth conversions at a 24% tax rate instead of at the 15% or so we could have paid while we were working. And the conversions are driving up our income so we have to pay surcharges on our Medicare benefits. Why are we doing conversions? We’re trying to avoid future RMD’s that force us into the ludicrous Medicare surcharges territory. Wish I’d had someone tell me 15 years ago than given our circumstances, doing a Roth conversion every year looked like a good idea. Should have trusted my instincts and not relied on the professionals. Same here, financial advisors either said nothing or actively discouraged Roth I changed advisors and am now trying to convert some every year - but at 24% rate Before the tax cuts in 2017, we would have been converting to Roth’s at a 28% rate rather than at a 24% rate that started in 2018, so converting then would make no sense. We are converting up to the 24% rate to Roth’s right now, but are still untaxed heavy and RMDs are going to look pretty ugly.
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countrygirl2
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Post by countrygirl2 on Mar 10, 2021 21:49:00 GMT -5
Same thing I said, kept telling hubs why was he so sure the tax rate would be less, he was listening to all the guys investing he worked with and like all of you have said it was all about not paying tax on the money so it could grow more. Yeah right. I kept saying I think the tax rate will be more.
And not a soul told us about surcharges on medicare, I just sent my son information on that. And he didn't know you could earn all you want after age 70 and not get penalized, well, not lose SS. I think he has 3 more years to have a pension, hope he makes it. Then he will have that 3 legged stool. Pension, SS, and savings, better then us. He will be 53 this birthday.
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susana1954
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Post by susana1954 on Mar 10, 2021 22:32:14 GMT -5
I invested in an IRA the year before Roths became available. I immediately converted and did a Roth ever since. But I still have $400k in an IRA. I have tried to convert a few thousand every year, whatever I could afford the taxes on. This year I accidentally made 85% of my SS taxable. I will convert a few more $$$ next year while being more careful.
If you do want to convert, try to do it before SS and Medicare.
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CCL
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Post by CCL on Mar 10, 2021 22:38:58 GMT -5
I don't really get what you mean by the tax rates being more now than in the past. They are the lowest I can remember and definitely more than when hubby was working and we were contributing to the 401k and IRAs. Or maybe our tax rate is lower due to our lower income and you all have a lot more than we do?
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jerseygirl
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Post by jerseygirl on Mar 10, 2021 22:46:20 GMT -5
I don't really get what you mean by the tax rates being more now than in the past. They are the lowest I can remember and definitely more than when hubby was working and we were contributing to the 401k and IRAs. Or maybe our tax rate is lower due to our lower income and you all have a lot more than we do? Just wait a year or so. All that magic money the government is shoveling out for Covid (and much much more) will probably need to start taxes increasing . Or maybe just for our kids and grandkids
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CCL
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Post by CCL on Mar 10, 2021 23:05:10 GMT -5
Yes I'm expecting the tax rates to increase within a few years. That's why I'm trying to convert as much as I can now, but trying to stay in 12% bracket.
I've also read that Biden wants to eliminate the stepped-up basis on inheritances and change the capital gains tax.
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Knee Deep in Water Chloe
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Post by Knee Deep in Water Chloe on Mar 10, 2021 23:46:19 GMT -5
The first question any financial consultant asks is "How much will your income needs go down in retirement?" And I always say that I expect to spend more, as I will have more free time. Not one of them seems to take me seriously. I do say that I will stop saving, so, it will go down by my saving rate. Besides getting rid of my kids, maybe paying off my mortgage - why would my expenses go down? What percentage of your previous income do you need in retirement? For us to retire, we must have debt paid off that currently consists of 20% of our take-home. We also have 20% of our gross put into retirement accounts. Those expenses would then gone.
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Post by Deleted on Mar 11, 2021 7:57:46 GMT -5
Just wait a year or so. All that magic money the government is shoveling out for Covid (and much much more) will probably need to start taxes increasing . Or maybe just for our kids and grandkids That's a major concern of mine- makes it very hard to plan. The conventional wisdom on tax-deferred savings was that you'd be paying taxes at a lower level in retirement. When you withdraw from deferred account, though, it's all ordinary income- no favorable treatment for dividends or LT gains. You also end up paying IRMAA surcharges on Medicare premiums if your income is high enough. Sometimes I wonder if I'd have been better off keeping all my savings in after-tax accounts. And yes, paying the bill for all the stimulus packages worries me a lot. We either increase taxes or kick the can down the road and leave the bill to our children and grandchildren. It's one of the reasons I plan to file for SS next year at age 69 rather than waiting to age 70. I may as well have another year of collecting the additional SS on my record before I get socked with RMDs and the associated taxes and before my taxes increase to pay for the stimulus payments. Which I didn't get, BTW.
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ohmomto2boys
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Post by ohmomto2boys on Mar 11, 2021 9:09:34 GMT -5
Financial adviser at my office encourages new employees to put their contribution in a Roth because the company match (4%) goes in the traditional 401k pot. He has been doing this for the past few years. I keep telling myself that I should split up my 12% contribution to traditional and Roth, but DH and I have it set that we don't get any taxes back each year (typically pay a couple hundred) so it is a hard change for me to make.
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teen persuasion
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Post by teen persuasion on Mar 11, 2021 10:11:43 GMT -5
Well now he does lean on mom for advice also. But he is adding to it. I had noone to tell me anything nor hubs, and hubs doesn't want to know what I can do. I did some changes back in his 401k and made us more money. But they stopped active trading in it, durn. Then they started making you wait a month or two and various things so it stopped me, but for awhile I was doing good. My folks had no idea what to do other then put money in the bank. Not buying and selling real estate or anything. Hubs saves a fortune on fixing things and we both look at ways to do things though I would have been more aggressive in investing and we would have had more. Oh well. Yes, good advice goes a long way. Years ago I was asking the financial professionals we worked with about the wisdom of Roth conversions. They weren’t supportive of the idea, so I did nothing. Not once did any of them comment that our net worth was pretty 401K/Traditional IRA heavy. (Tax deferred investments were more than 80% of our retirement portfolio.). Nor did they ask about our effective tax rate (about 14% - 15%). Suddenly, after the Trump tax reductions, they are all talking about Roth conversions. Crap! Now that we’re retired, we’re doing Roth conversions at a 24% tax rate instead of at the 15% or so we could have paid while we were working. And the conversions are driving up our income so we have to pay surcharges on our Medicare benefits. Why are we doing conversions? We’re trying to avoid future RMD’s that force us into the ludicrous Medicare surcharges territory. Wish I’d had someone tell me 15 years ago than given our circumstances, doing a Roth conversion every year looked like a good idea. Should have trusted my instincts and not relied on the professionals. I've seen a lot of this discussion on Bogleheads. I think 15 years ago, it wasn't an issue they recognized. Earlier retirees didn't have the big tax deferred balances, because they didn't have access to 401k accounts thruout their working life, and early contribution limits were low. Then the stock market growth over larger balances contributed over more years - big RMDs and a tax bomb. Plus SS taxation levels are not indexed for inflation, so more SS becomes taxable, faster. Perfect storm. As you said, now, suddenly everyone is touting Roth accounts to younger people, because they now see the dangers of having too much tax deferred. But going all Roth is just as unbalanced. There's no one size fits all advice. You have to know what you will have in retirement, and when you will retire. If you have a pension, go more Roth, because that pension income fills up your lower brackets and makes SS mostly taxable, filling more brackets, so any IRA income is higher rate. If you will work forever, go more Roth, because more years of contributions plus growth means big RMDs. If you want to retire early, go more traditional, because you can Roth convert over time in the lower brackets before you take SS.
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CCL
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Post by CCL on Mar 11, 2021 11:20:06 GMT -5
I was just thinking, one reason we didn't put much in Roths is the contribution limits were low. I can't remember exactly, maybe a few thousand per year?
So far, we are ahead on the tax savings. Right now I think the best thing is to max Roths and also to take advantage of any 401k matching.
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buystoys
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Post by buystoys on Mar 11, 2021 16:47:15 GMT -5
Yes, Roth limits are low as are IRAs. It's a huge benefit to have access to a 401(k) program. I never did max mine out, but contributed 15% and did a Roth every year I could. When Roths first came out, I converted everything I had in my IRA. I remember how pinched it made me to have those extra taxes to pay for two years! But I'd do it all over again.
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Post by The Walk of the Penguin Mich on Mar 11, 2021 17:07:43 GMT -5
I don't really get what you mean by the tax rates being more now than in the past. They are the lowest I can remember and definitely more than when hubby was working and we were contributing to the 401k and IRAs. Or maybe our tax rate is lower due to our lower income and you all have a lot more than we do? Just wait a year or so. All that magic money the government is shoveling out for Covid (and much much more) will probably need to start taxes increasing . Or maybe just for our kids and grandkids The tax cuts that happened in 2017 are going to roll back to what they were before sometime soon. With what's happened with COVID, they can't keep them where they were. However, I never expected those tax cuts to last anything longer than the subscribed term.
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TheOtherMe
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Post by TheOtherMe on Mar 11, 2021 18:10:05 GMT -5
A lot of what was in the 2017 bill was intended for the rich. While it made my return easier to complete, doing away with the personal exemption increased my taxes.
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Post by Deleted on Mar 11, 2021 18:28:27 GMT -5
A lot of what was in the 2017 bill was intended for the rich. While it made my return easier to complete, doing away with the personal exemption increased my taxes. I was going to add that I wouldn't mind a rollback of the 2017 reforms because they increased MY taxes, too! I'm able to itemize due to high charitable deductions, and had investment expenses that were high enough to gave me a break Miscellaneous deductions. As a Single, the standard deduction was only $12K. I'm brushing up against the $10K SALT limitation, too, due mostly to high state taxes.
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jerseygirl
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Post by jerseygirl on Mar 11, 2021 18:29:07 GMT -5
We are somewhat resentful for higher taxes because we are obliged to take RMDs out that we don’t need. So paying 24% of this money to the government when we’d be fine leaving it in the account for our kids and grands
But then they’d be required to send large portion to the government
So government will get its piece whatever and fritter a fairly large amount away
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tallguy
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Post by tallguy on Mar 11, 2021 18:56:32 GMT -5
RMDs are the price to pay for the tax break up front and the years of tax-deferred increase. I'm not going to like them either, but that was the tradeoff. As far as taxes, I am less likely to be concerned by government taking tax money from people who don't need it than I am by government giving tax money to people who don't need it.
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dondub
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Post by dondub on Mar 11, 2021 19:26:50 GMT -5
I decided a good retirement strategy was accumulating rental units. I started this in 1976. Now my income goes up every year for life. During Covid people have moved and that has enabled rent increases. When the moritorium ends most of the leases will need to be renewed so more is coming.
Donnadub did 403b etc. throughout her nursing career so we have that coming in a little over 3 years.
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tskeeter
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Post by tskeeter on Mar 11, 2021 23:37:22 GMT -5
Yes, good advice goes a long way. Years ago I was asking the financial professionals we worked with about the wisdom of Roth conversions. They weren’t supportive of the idea, so I did nothing. Not once did any of them comment that our net worth was pretty 401K/Traditional IRA heavy. (Tax deferred investments were more than 80% of our retirement portfolio.). Nor did they ask about our effective tax rate (about 14% - 15%). Suddenly, after the Trump tax reductions, they are all talking about Roth conversions. Crap! Now that we’re retired, we’re doing Roth conversions at a 24% tax rate instead of at the 15% or so we could have paid while we were working. And the conversions are driving up our income so we have to pay surcharges on our Medicare benefits. Why are we doing conversions? We’re trying to avoid future RMD’s that force us into the ludicrous Medicare surcharges territory. Wish I’d had someone tell me 15 years ago than given our circumstances, doing a Roth conversion every year looked like a good idea. Should have trusted my instincts and not relied on the professionals. I always wonder how smart those "professionals" really are. If they know so much about investing, why are they still working? It sounds like you did fine, anyway. Yes, more and more I come to the conclusion that with stuff I’ve learned from places like this, I might be as smart about personal finance as many of the professionals. Too many of them are salespeople vs. true personal finance experts. And yes, we have done OK. But we could have done better. And I just hate giving away nearly 25% of the money we worked 80 to 100 hours a week to earn. Hopefully others can learn and avoid some of the mistakes I’ve made.
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