stock market

alarmguy said:
Its a great feeling, even though always remember, you haven't made 56%, you have a 56% unrealized gain until you sell it. I only say that because I got used to reminding myself as well. I am, have been doing quite well, just remember, its not real money or "realized" gain until you sell it.
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That's a very good point. From the perspective of a retirement account, when the market's down, everything is just on sale. When it's the other way, eh. I guess that's why I did so well this year, because I happened to rebalance my investments to be all in big tech companies and retailers, such as Amazon and Walmart. Well, then COVID hit and everyone quit shopping in-person. So yeah, the stock prices are up, but they'll go back down if the vaccines work and everyone is able to get back to whatever the hell the new version of "normal" is.
 
10 years ago I was recommending Amazon as a long term core holding for portfolio.

I own a few shares.
 
Will Caterpillar (CAT) be a good buy with the BIG infrastructure spending that someone wants ?

A few trillions for infrastructure to rebuild the crumbling roadways, bridges and tunnels.
 
Wolf359 said:
And you can always roll the 401k into an IRA if you switch jobs and then convert that IRA into a Roth if you have a low income year.
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Can you expand on this a bit? I've been talking to several local retirement advisors this past winter (1.5 years away). One advised to cut back on my 403B supplemental input and start building up my Roth IRA instead. I've studied the subject matter (Roths). Many sources say that if you believe your annual retirement income will be less than your current income, growing your Roth now may not be wise?

Comments or advise about where to learn more, please (not specific financial advice). What am I missing with the idea that I might pay more taxes now with Roth investment compared to lower taxes on reduced retirement income? Right now, I "think" that I will remain in the same tax bracket post retirement. Thank you - sorry if this is going off topic.
 
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doitmyself said:
Can you expand on this a bit? I've been talking to several local retirement advisors this past winter (1.5 years away). One advised to cut back on my 403B supplemental input and start building up my Roth IRA instead. I've studied the subject matter (Roths). Many sources say that if you believe your annual retirement income will be less than your current income, growing your Roth now may not be wise?

Comments or advise about where to learn more, please (not specific financial advice). What am I missing with the idea that I might pay more taxes now with Roth investment compared to lower taxes on reduced retirement income? Right now, I "think" that I will remain in the same tax bracket post retirement. Thank you - sorry if this is going off topic.
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I think that theory might be correct if you're just getting 2-3% returns. However if you stick it in a fund and average 10% over several decades, you might end up just investing 150k over 30 years but it could be worth 800k and you'd a lot more in income taxes. The Roth would save you that income tax. The Roth might also prevent you from going into a higher tax bracket. Hard to say what will happen in the future, I think the Roth gives you some protection in that the tax rates might go up in the future. There's enough rumbling in this thread about how the debt is too high and someone will have to pay for it eventually and that's probably through higher tax rates. While they could also change the rules for the Roth, they'd probably just grandfather it or it could be one of those things like social security where they would just leave it alone. The other advantages are that you can withdraw the money without a penalty and there are no minimum withdrawal amounts like a traditional IRA.

dqydj.com

S&P 500 Periodic Reinvestment Calculator, With Dividends– DQYDJ

What if you invested in the S&P 500 periodically over the years... how would your ETF or mutual fund have performed? We guess at fees and taxes too.
dqydj.com dqydj.com
 
Wolf has a lot of good points, but let me address it from my personal experience, having "recently" retired.
I had done forced investing for years with negative cash flow real estate. In '96 I got my first job with a 401k with company match. Was broke, so I started at only 5% with a 4% company match. Figured my tiny military retirement (ahem, divorce involved) and Social Security, along with rental income from real estate would fund a nice retirement. Only contributed to a 401k to get the match and figured it would be my "pin" money. Travel, tools, hobby car, that kind of stuff.

Over 20 years, as my pay increased, my 401k contributions increased to 10%, then, in the two or three years before retirement to the max allowed, with catchup.

Fast forward to retirement 5 years ago. My 401k (rolled to an ordinary IRA) went from Corvette and cruise money to real money. No longer just pin money I couldn't just stash it and ignore it. Started rolling about $40k-$50k a year into a Roth, but the gains are such the IRA hasn't gone down.

What the financial planners don't tell you is that with average gains (say an S&P 500 index fund) your 401k/IRA will be a multiple of your contributions over your career and during retirement. Even though you get to deduct your contributions and save a few tax bucks during your working years, the fact that 100% of those contributions and (here is the rub) 100% of the gains are taxed as ordinary income upon withdrawal means that you are going to pay a lot in taxes. If the money was in a Roth, only the contributions would have been taxed, and the gains are 100% tax free.

Regardless of your tax bracket before and after retirement, and regardless of what the future holds for increased taxes, put everything into a Roth IRA after contributing enough into the ordinary 401k to get the company match. If your company offers a Roth 401k you can contribute to and still get the match, even better.

The only two cases this strategy doesn't work is if you park your 401k money and won't have gains, or if you are close to retirement and plan on depleting your retirement accounts shortly thereafter.
 
I briefly touched on that. If you use that S&P 500 calculator and invest about 5k in a Roth over 30 years, you'll have invested around 150k and paid taxes on it. After 30 years, that 150k will be worth around 800k. Paying taxes on 150k is a lot less than paying taxes on 800k although 800k isn't worth as much as it was 30 years ago. And you can let that 800k sit for another 10+ years after retirement and it will continue to grow and you'll owe no taxes on it when you withdraw. The key thing that people don't get with investments is that after 5-10 years, it doesn't seem like it grows that much, but after 20-30 years, it can grow a lot. I've run into many people who blow their Roth/IRA on whatever after 5-10 years and have nothing to show for it decades later although to be fair, they had to do it sometimes due to job losses.
 
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.
 
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