stock market

[doitmyself]

Thank you gentlemen.

- It's tough for a lay person (me) to understand the outcome of a Roth input vs. a *supplemental 403B contribution (tax deduction) that lowers the taxable income. Maybe I should have studied about Roths a little more seriously 10+ years ago when I added them to my portfolio.

- Also, if your spouse dies and you switch to single tax filing, it seems that your tax bracket will change drastically - for me 12% now vs. 22%. Is that correct?

* supplemental = in addition to my employer match maximum.

 

[Warstud]

I think anyone putting money into this market right now are just throwing money out the window.

 

[Zee09]

I think anyone putting money into this market right now are just throwing money out the window.

 

[Dave Hess]

I think anyone putting money into this market right now are just throwing money out the window.

You don’t think it will rise more in the near future ?

 

[PimTac]

I think anyone putting money into this market right now are just throwing money out the window.

Nobody has a crystal ball. Dollar Cost Averaging takes care of those worries over the long term.

 

[Warstud]

Zee09....I mentioned Phillips a while back and looking at the charts it's breaking up thru resistance and should hold up well if see a selloff.

 

[Zee09]

Zee09....I mentioned Phillips a while back and looking at the charts it's breaking up thru resistance and should hold up well if see a selloff.

It has been all over the place lately but I flip it it regularly and am going to steal the dividends and move over to another more safer stock and do the same. I rotate often. I wish you the best of luck and many $$$$.

 

[JeffKeryk]

If you buy something with after tax money (Roth) you lose the compounding effect of the tax dollars over the investment years.
There is no free lunch...

 

[Warstud]

Zee09...This is why you should hold onto it. Breakout

 

[Zee09]

Zee09...This is why you should hold onto it. Breakout

View attachment 52645

Im in and out of it daily...
But im just a margin player.
I took it for $6500 Thursday.
I was in Exxon and Chevron as well as AT&T , WESTLAKE and was flipping Tesla on a $40 to $70 spread. I came from muscling volatile penny stocks which about drove me nuts. I now just flip the spreads and stop during dividend time and take it and hop on another wave...lol

With oil stocks one stupid comment can send them tumbling and I don't want to get stuck for several months until they come back but i agree it did start picking up steam.

 

[Warstud]

You don’t think it will rise more in the near future ?

If your a long term investor or if your contributing to a 401k or IRA I wouldn't put it into the market right now. Right now the indexes are overbought (70 RSI ) on the Monthly plus PE's are crazy high.

 

[supton]

Thank you gentlemen.

- It's tough for a lay person (me) to understand the outcome of a Roth input vs. a *supplemental 403B contribution (tax deduction) that lowers the taxable income. Maybe I should have studied about Roths a little more seriously 10+ years ago when I added them to my portfolio.

- Also, if your spouse dies and you switch to single tax filing, it seems that your tax bracket will change drastically - for me 12% now vs. 22%. Is that correct?

* supplemental = in addition to my employer match maximum.

I know my taxes will go up, just not sure how much—once the kids are gone I certainly lose some exemptions/credits!

I sometimes wonder if this fear of higher tax bracket in retirement more likely applies to either super-savers who maxed out retirement early in life, then worked a long career—or those who had three careers and are going to draw from a multitude of retirement options. Someone would went military, police, private for example. Which is to say, for the average Joe who did 5-10 or even 15% for 30 or even 40 years into a 401k probably isn’t going to break out of their current tax bracket, and thus this 401k vs Roth issue is not something to lose sleep over.

 

[Dave Hess]

Taxes are not the end of the world.

Obviously you want to pay the minimum amount of taxes..... but it’s a blessing to have $70K+ a year in retirement from various sources of retirement accounts / social security / pension, etc....

Verses being retired and just keeping your head above water and paying almost zero taxes.

 

[JeffKeryk]

Taxes are not the end of the world.

Obviously you want to pay the minimum amount of taxes..... but it’s a blessing to have $70K+ a year in retirement from various sources of retirement accounts / social security / pension, etc....

Verses being retired and just keeping your head above water and paying almost zero taxes.

I love paying taxes! Wish I paid much much more! Every stinkin' year!
I know someone who paid way more than $100K one year. What a great problem to have!

 

[ArrestMeRedZ]

I think the problem (if you can call it that) is that we make a lot of worst case assumptions for retirement income in order to insure we have enough to meet our needs. What if I have to retire early because of medical, disability, dated job skills, hate my boss, etc. What if we have inflation again like in the early 70s and 80s. What if, what if.
We also always make the assumption we will earn a lot less in retirement than we do while working and that is frequently not the case when the worst case assumptions don't come true. Paid off rental real estate fully depreciated = income. House paid off = no deductions. Kids grown = less exemptions. Social Security = income, now 85% taxed if above a certain income, Minimum Distribution Requirements (IRA and 401k) = income.
Even if you are in a lower bracket in retirement, the way regular IRA distributions are taxed at the ordinary income rate is a problem. If you had bought a stock, mutual fund or ETF and held onto it for over a year in a normal account then sold it, gains would be taxed at the capital gains rate. In the IRA, you lose the prefential tax treatment no matter how long you held onto an investment. There is a reason CEOs and other rich people structure their income to be mostly capital gains.

As Dave and Jeff say, being in a position to owe a lot of taxes because of a high income is a great position to be in. But do what you can to minimize the bite.

Don't get me started on market timing. I've tried it. It didn't turn out well. Long term investing with a bucket of cash equivalents to avoid sequence of return risk works for me, thank you.

 

[Wolf359]

There is a reason CEOs and other rich people structure their income to be mostly capital gains.

That's why Warren Buffet doesn't really have dividends to spit out of Berkshire Hathaway. You can just buy shares and hold onto it for a long time and it's almost like an IRA/Roth in that you don't pay taxes until you sell. Although it's kinda the worst of both, you use after tax dollars like a Roth to buy shares but only pay capital gains like an IRA instead of full income tax. Tax law can always change though, I remember when max capital gains was just 10% now it goes higher depending on your income bracket now up to 20% on stocks.

 

[JeffKeryk]

Don't get me started on market timing. I've tried it. It didn't turn out well. Long term investing with a bucket of cash equivalents to avoid sequence of return risk works for me, thank you.

This cannot be overstated. The best investment I ever made was the earliest. Crazy lucky; crazy good.

 

[PandaBear]

If you buy something with after tax money (Roth) you lose the compounding effect of the tax dollars over the investment years.
There is no free lunch...

Basically.

Roth is pretty much a loan to the government so they get paid now vs get paid later. It may work if they keep their end of the deal and you know you will make more money after retirement. It may not work if you are broke right now and pay little tax, need to borrow more to make up for the money stuck in Roth till retirement.

Taxman has it all figured out already.

 

[PandaBear]

Taxes are not the end of the world.

Obviously you want to pay the minimum amount of taxes..... but it’s a blessing to have $70K+ a year in retirement from various sources of retirement accounts / social security / pension, etc....

Verses being retired and just keeping your head above water and paying almost zero taxes.

To me tax is just a number. You do your math, you find the optimal path to the least tax, you don't get emotional over it.

Yes, I can pack up and move to Texas and pay a lot less taxes, a lot more toll, a much higher cooling bill, and get paid a lot less in my career, away from my family, away from my career. I also will lose the opportunity of locking into prop 13 if I move there and potential future real estate appreciation. I also think CA's culture is a better fit to me and my cost of living is low here after I lock in the prop 13 from years ago. I like raising my kids here and pass on the prop 13 properties to them, let them have a good start in a high income area instead of a low cost area.

So yes, the trade off for more tax is good in my case. It may not work for you, and it is a good personal choice to move if it doesn't.

Getting hate and angry over tax is just silly. The number eventually balance out and things eventually get to equilibrium as we have seen over the last several decades. The economy, the cost of living, the income, the tax, the toll, the local services, the home appreciation, etc all settle to where things are. Texas and California can both grow, neither of them sink into the ocean yet. So, just turn off the TV and start making money instead of hating taxes and brand them all being evil. Things are where they are and will be where they will be eventually.

p.s. people pay for better school district all the time, so they can pay more tax to fund better school, and increase their property values, and live away from high crime area with low home price and low property taxes. It is a fact.

 

[PandaBear]

Wolf, you nailed it. The cynic in me is of the belief the only reason 401k/IRA custodians don't push Roth accounts more is because the taxable accounts have a little more money in them if the current tax savings are invested. Which means slightly more fees/commissions.
I did get a clue while still working that I didn't exploit. A co-worker's wife (who is an IRS enrolled agent) put his contributions into a Roth 401k. I knew he had high income so a light should have come on. It didn't until I was about to retire, a little too late.

It really depends. If you push people into Roth and they end up not liking it then you can bet they will say you lock them in a tight spot. Traditional you can always count on the number there being bigger and before tax, so people will be less upset about "after tax" money getting stuck in there like Roth does.

Not everything is about tax. If you need cash for liquidity they come in handy without having to go out and get a loan. Let's say you are buying a house, that extra down payment helps, and if you lock down your cash because you did too much Roth contribution you would be kicking yourself.

What if you are savvy and you can use the liquidity to grow a business, invest in a deal, and make even more money than stuck in a Roth waiting for market return? There is no way to tell what works better, and one size fits all do Roth for all approach won't work. I just don't like this idea.

On the other hand if you know you are not a discipline person and you may blow the cash away, then Roth is a good idea.