To Roth or Not to Roth

[Bandito440]

Originally Posted By: Nate1979
Having a mix of funds (tax deferred, taxable, and tax free) for retirement gives a lot of flexibility for the future.

Agreed. A diversification of tax varieties is helpful.

 

[Ethan1]

Originally Posted By: Kuato
Originally Posted By: Ethan1
Traditional vs Roth involves a bit of crystal-ball-gazing about your future tax brackets, which is made almost impossible by the possibility of changes to the tax code.

Don't trust anyone who gives you a definite answer. Real financial advisers, like lawyers, know enough to never give a definite answer.


While your statement is true, if you take a peek at the US Guv's previous taxation history, it's easy to see that in the future, tax rates will NOT be decreasing!


No, not actually. Go ahead and take that look.

 

[JBinKC]

I think a risk does exist for ALL retirement accounts being potentially consficated and the assets sold then pooled into a government account in order to attempt to perpetuate the evil federal reserve system of enslavement given its a huge potential asset to tap.

As for a Roth it really depends if you can fund it and your future tax expectations while in retirement but I highly doubt they will change the terms because our federal fiscal problems are much worse than the tax revenues generated from this source.

 

[Bandito440]

That's awfully pessimistic. We go through one of these threads every few months. How do you save for retirement in a way that keeps your money from the evil reptilian illuminati?

 

[Ethan1]

I think that was sarcasm, but it's pretty much impossible to know for sure when it comes to conspiracy theories

 

[Bandito440]

Originally Posted By: Ethan1
I think that was sarcasm, but it's pretty much impossible to know for sure when it comes to conspiracy theories

It's so hard to tell here on the intertubes. He's been banned, but this is about the time I'd expect antiqueshell/givemeavowel to show up and start ranting about his favorite minority du jour. Then, we'd all be told to buy gold although he has no financial education nor retirement savings himself.

 

[firemachine69]

Originally Posted By: Bandito440
That's awfully pessimistic. We go through one of these threads every few months. How do you save for retirement in a way that keeps your money from the evil reptilian illuminati?



Not really. Ask our federal employees in Canada.

 

[Bandito440]

Tell us about it. Did Canadian federal employees have their retirement savings seized?

 

[doitmyself]

Conspiracy theory or not, these kinds of statements should cause everyone to pause and think quiver for a moment: "FDIC insurance is backed by the full faith and credit of the United States government".

https://www.fdic.gov/deposit/deposits/ It's only been around since the 1930's, so it is still in its infancy.

Have a good weekend everyone.

EDIT: Yes, this only applies to bank accounts, but to think that our retirement investments are 100% free from risks is wrong also. My father in law lost most of his retirement when the NW Indiana steel mill he worked at went belly up. I don't know the details. With our national debt, its not hard to think we could possibly have an economic meltdown. I don't dwell on this stuff.

 

[Bandito440]

Can you expand on your thoughts? How does it apply to our retirement accounts, which are not FDIC insured?

 

[surfstar]

The other posters have already hit the nail on the head regarding the priority order of contributions and not knowing future tax rates, so its go to have a mix.

Now we're drifting off into doomsday stuff.

Yes, the government will take all of your money, so spend it all now, retire on dogfood - that'll show them.

 

[Bandito440]

Originally Posted By: doitmyself
Conspiracy theory or not, these kinds of statements should cause everyone to pause and think quiver for a moment: "FDIC insurance is backed by the full faith and credit of the United States government".

https://www.fdic.gov/deposit/deposits/ It's only been around since the 1930's, so it is still in its infancy.

Have a good weekend everyone.

EDIT: Yes, this only applies to bank accounts, but to think that our retirement investments are 100% free from risks is wrong also. My father in law lost most of his retirement when the NW Indiana steel mill he worked at went belly up. I don't know the details. With our national debt, its not hard to think we could possibly have an economic meltdown. I don't dwell on this stuff.

This is why diversification is important, as well as rebalancing towards safer investments as retirement nears. A 1929-style meltdown won't destroy those of us who stick with proper management of investments (hint: don't panic). I hope that you were earnest about not dwelling on it, as your earlier statement about quivering over FDIC insurance suggests otherwise.

 

[doitmyself]

I agree with you, and no, I do not dwell on this at all. I am very diversified and my TIAA-CREF consultant, whom I meet with 2x annually, indicates I am at (actually ahead of) my retirement goals*. But, people need to remember that our current national fiscal system is relatively young and there are no guarantees that the global changes we are now encountering (China?) will not/has not altered the successful baby boomer formula. My dad (RIP) always drove into my head not to totally trust these "guaranteed" investments. I need to carry on at least part of his legacy.

*My work place not only matches my 5% contribution, they double it! 15% of my income into 403B monthly, plus my other investments. I laugh, because 39 years ago my supervisor said that once my fund hits $100,000 it would really start to grow. Now a days, people talk of $1,000,000 in a 401(3)K being a good target (depending on circumstances, of course).

Sorry to sway off topic. Yes, I have a portion in Roth and prefer it there as opposed to bank savings account with no interest. At my age, I can remove the Roth principle with no penalty if a huge emergency comes up beyond my rainy day funds.

 

[badtlc]

If unsure, go with 50/50 split (note this means more $ will go into your traditional each time than the Roth since your Roth contribution will be post taxes).

If you want a real answer, it depends on:
- current tax rate
- expected retirement age
- expected retirement income/tax bracket

If you think you are going to be living it up in retirement on a big income, as big or bigger than your working income when you retire, taxes will be lower while you work making Roth advantageous.

If you are in a hurry to get to retirement and plan on living on a lower income or know you will have to live on a lower income just to retire, traditional accounts make the most sense assuming you work until IRS allowed retirement age. If you are going to retire before that, Roths are nice because you can access the capital w/out penalties.

 

[Mr Nice]

doitmyself,

A million dollars is possible for a 401K or 403B... but it takes a lot of discipline over a career to get to that amount.

Like i said before in a different retirement thread, I put 30% of my gross pay towards company sponsored retirement plans.