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This may be a stupid question, but here goes..
Why would the Fed be planning to cut rates when inflation is still above 2%, and consumer spending ( excluding purchase of homes) is still very strong?
It would seem if you take out the crazy years of close to zero interest rates, that current rates are in the “normal” range.
Not a stupid question .... your right in your thinking ...... the Fed hasn't cut rates for the reason you stated .
 
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Is there some retirement thought process to using long term capitol gains (more than a year holding) on a stock sale (15%? taxable)?? If one profits $100,000 on a stock sale then only 15,000 is included as ordinary income. Is that better than taking RMD's from one's 401K or regular IRA?
 
Not a stupid question .... your right in your thinking ...... the Fed hasn't cut rates for the reason you stated .
I’m learning but the financial system is pretty complicated.
I don’t understand why all this talk about rate cuts. The economy seems to still be pretty hot. All anyone talks about is when and how many rate cuts are coming. Is that just because folks want the markets to continue growing? Even though the data shows rates should stay where they are for a while?
 
This may be a stupid question, but here goes..
Why would the Fed be planning to cut rates when inflation is still above 2%, and consumer spending ( excluding purchase of homes) is still very strong?
It would seem if you take out the crazy years of close to zero interest rates, that current rates are in the “normal” range.
My guess? To impact the cost of home ownership. If folks start blaming the cost of RE and mortgages, then they can show the mortgage cost dropping going into an election cycle, and say how they did this and that.
 
Is there some retirement thought process to using long term capitol gains (more than a year holding) on a stock sale (15%? taxable)?? If one profits $100,000 on a stock sale then only 15,000 is included as ordinary income. Is that better than taking RMD's from one's 401K or regular IRA?
Very good point. 401k/IRA distributions (regular or RMD) are fully taxed as ordinary income. All the capital gain tax advantages on dollars you earned in those accounts are lost. There are some financial planners that recommend only funding a 401k with enough to get the company match, and saving the rest in an IRA (up to the annual max) or a normal brokerage account (which can take advantage of the capital gains rate).
I'm a big proponent of getting as much as possible into a Roth 401k or Roth IRA through funding or rollover as early as feasible. You have to pay the ordinary income tax on the rollover, but any gains in the Roth after that aren't taxed at all. That's even better than being taxed at the capital gains rate.
 
This may be a stupid question, but here goes..
Why would the Fed be planning to cut rates when inflation is still above 2%, and consumer spending ( excluding purchase of homes) is still very strong?
It would seem if you take out the crazy years of close to zero interest rates, that current rates are in the “normal” range.
There are a number of reasonably well respected economists who think that you do. I’ve heard more than one of them say they are likely won’t be any cuts this year. So certainly not a stupid question.

The talking head reasoning for the masses is simply that as we get closer to the 2% target, we need to start putting on the brakes so we don’t overshoot.

The technically accurate and more complicated version of the early braking theory, has to do with bank liquidity and an inverted yield curve. The banks borrow short from depositors, and lend long to other customers. They can deal with an inverted yield curve for quite a while, but not forever. At some point, they run out of liquidity, and stop making loans. The longer the curve is inverted and the more inverted it is, the less likely banks are to make loans. So there is some incentive for the Fed to get out ahead of that.

I think the Fed will stay high as long as they think they can get away with it. Having said that after November 5th, it’s quite possible we see a new rule book. It has nothing to do with what happens on November 5, only that November 5th is over so they don’t have to be accused of being political.

If something breaks, of course, all bets are off.
 
Very good point. 401k/IRA distributions (regular or RMD) are fully taxed as ordinary income. All the capital gain tax advantages on dollars you earned in those accounts are lost. There are some financial planners that recommend only funding a 401k with enough to get the company match, and saving the rest in an IRA (up to the annual max) or a normal brokerage account (which can take advantage of the capital gains rate).
I'm a big proponent of getting as much as possible into a Roth 401k or Roth IRA through funding or rollover as early as feasible. You have to pay the ordinary income tax on the rollover, but any gains in the Roth after that aren't taxed at all. That's even better than being taxed at the capital gains rate.
So if one were to keep working to 70 and wait as late as 70 to collect SS how late could one wait to fund a Roth IRA or Roth 401k? Assuming here that income would be much less.
 
So if one were to keep working to 70 and wait as late as 70 to collect SS how late could one wait to fund a Roth IRA or Roth 401k? Assuming here that income would be much less.
Better, I think, to get your funds into the Roth (401k or IRA) as early as possible. That way all your gains would be tax free, and over a long time those gains would be a lot. Plus, after retiring at 70, you probably wouldn't have the earned income to fund retirement accounts.
My company offered a Roth 401k, but I thought my tax rate while working was higher than it would be after retirement so I funded my regular one instead. As it turned out, with inflation, waiting till 70 to collect SS, RMDs, and other income my tax rate will be much higher than I expected. If the tax cuts expire as expected, I'll be paying more income taxes in retirement than when I was working.
 
Is there some retirement thought process to using long term capitol gains (more than a year holding) on a stock sale (15%? taxable)?? If one profits $100,000 on a stock sale then only 15,000 is included as ordinary income. Is that better than taking RMD's from one's 401K or regular IRA?
Some things to consider:
You have to keep in mind that there is a tax benefit to the IRA or 401K. Traditional IRA or 401K will lower your taxes today, with the tax bill coming due at retirement (RMD time). A Roth IRA or 401K you are paying the taxes upfront with no taxes due when the money is distributed (and no requirement for RMDs with the Roth accounts). In both cases there are no taxes on the in between years - you can buy and sell as you please as long as the account rules let you and there are no tax implications.

Keeping the money outside a retirement account you will have paid the taxes today, could technically let the money sit and then pay capital gains when you go to sell in retirement (you have to keep the money invested in the same place from day 1 until retirement, or recognize that every time you sell, even though it may have been long, you are losing 15% on the gains, which you aren't in a retirement account).

Some obvious caveats/assumptions you have to live with (long term capital gains will continue to be taxed at 15%, or less than ordinary income for example).
 
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Very good point. 401k/IRA distributions (regular or RMD) are fully taxed as ordinary income. All the capital gain tax advantages on dollars you earned in those accounts are lost. There are some financial planners that recommend only funding a 401k with enough to get the company match, and saving the rest in an IRA (up to the annual max) or a normal brokerage account (which can take advantage of the capital gains rate).
I'm a big proponent of getting as much as possible into a Roth 401k or Roth IRA through funding or rollover as early as feasible. You have to pay the ordinary income tax on the rollover, but any gains in the Roth after that aren't taxed at all. That's even better than being taxed at the capital gains rate.
Difficult part to that strategy (401K up to company match, then IRA then brokerage) is you lose the option to roll to the Roth account at some point in the future. I don't have an opinion on what is "right" necessarily just something for people considering where to put the next dollar to keep in mind.

I share your opinion about Roth dollars though I don't know what the right mix is (at least for me) when retirement comes.
 
Better, I think, to get your funds into the Roth (401k or IRA) as early as possible. That way all your gains would be tax free, and over a long time those gains would be a lot. Plus, after retiring at 70, you probably wouldn't have the earned income to fund retirement accounts.
My company offered a Roth 401k, but I thought my tax rate while working was higher than it would be after retirement so I funded my regular one instead. As it turned out, with inflation, waiting till 70 to collect SS, RMDs, and other income my tax rate will be much higher than I expected. If the tax cuts expire as expected, I'll be paying more income taxes in retirement than when I was working.
Move to a state that doesn’t tax ss
 
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