Investment/Debt Related Questions

#26
#26
All my contributions are Roth right now, but I read something in the past that there was an advantage of cycling them to traditional as I get closer to retirement age. Can anyone explain what the benefit to that is?
income is typically lower in retirement so some income is acceptable.
You can decide how much of each IRA to withdraw on your taxable/non-taxable income during the year.
 
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#27
#27
All my contributions are Roth right now, but I read something in the past that there was an advantage of cycling them to traditional as I get closer to retirement age. Can anyone explain what the benefit to that is?

A tax guy needs to confirm, but if non-Roth IRA account will pass to beneficiaries with the same stepped up cost basis tax advantage as non-retirement assets, then a regular IRA shelters the account appreciation and income while never being taxed. Roth’s are taxed on the front end and are then (supposed) to never be taxed again. Of course some politicians will attempt to change the rules after they aren’t able to steal enough money from the people.
 
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#28
#28
IIRC, Roths do not have any minimum required withdrawals rules whereas regular IRAs have the MRW at a certain age.
 
#29
#29
A tax guy needs to confirm, but if non-Roth IRA account will pass to beneficiaries with the same stepped up cost basis tax advantage as non-retirement assets, then a regular IRA shelters the account appreciation and income while never being taxed. Roth’s are taxed on the front end and are then (supposed) to never be taxed again. Of course some politicians will attempt to change the rules after they aren’t able to steal enough money from the people.

Yeah, who knows what the rules will be in the future for a 30 year old today. Life expectancy and politics.
I'm not required to take a RMD until age 73, and then it'll be about 4%. Ouch!
OTOH, when I prepared tax returns I used to love to listen to people complain about making too much money.
 
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#30
#30
Well, showing my ignorance, found out this week that I can only contribute 22.5 between both TSPs. So now I’m having to do a bunch of math to make sure I still get the employer matching contributions the rest of the year. I guess with the money left over I will be starting an IRA. Any suggestions on where to start? I plan to self manage.
 
#31
#31
Well, showing my ignorance, found out this week that I can only contribute 22.5 between both TSPs. So now I’m having to do a bunch of math to make sure I still get the employer matching contributions the rest of the year. I guess with the money left over I will be starting an IRA. Any suggestions on where to start? I plan to self manage.

I’m a Vanguard guy and have a Roth there. Make sure you maximize your wife’s account(s) too if you are truly “til death do us part.” Lol
 
#32
#32
Well, showing my ignorance, found out this week that I can only contribute 22.5 between both TSPs. So now I’m having to do a bunch of math to make sure I still get the employer matching contributions the rest of the year. I guess with the money left over I will be starting an IRA. Any suggestions on where to start? I plan to self manage.

Roth for you and spouse. I am a T Rowe Price guy but Vanguard is good as well....

Does your wife have a SEP or SIMPLE IRA for her self employment gig?
 
#33
#33
After saving up during the covid student loan forbearance, we are ready to write a fat check once the Supreme Court makes their ruling and payments resume. With student loan debt paid off, that will just leave the mortgage (4.5%) and car loan (2.5%.) It has us thinking where our money would be better served, doubling up on loan payments or redirecting funds towards a side hustle.

I think I’m pretty well set for retirement, so ideally I’d like to start generating some passive income that we can use as travel or Vols season ticket money. Any tips for entering the rental property game? Any one with experience franchising businesses? Anyone here buy up property or mineral rights?

30 years old. Married to a target/amazon addict with a little one for context.
There are better investments IMO to residential rentals. Even storage buildings generate good income without the headaches and government interference.

Purchased an 80 acre farm a few years back. About 20 acres are in corn/soybeans. I split the sale with the guy who farms it for me. Just to give you a rough idea, a yield of 130 bu/ac on 20 produces about 2600 bushels @ $6/bu... $15,600 split between us. I have another 24 acres in conservation @ around $150/acre. There is some reinvestment and maintenance but that's all deductible.

We're a lot closer to retirement than you but a solid $8-10K per year long term income is a good part of our plan. There are other investments that make more money but this is a solid income that will grow over time.

If we didn't hunt we could probably rent it for $3000-$4000 per year.

To your exact scenario, 2.5% is cheap money. You can pretty easily invest your money in something gives you a net gain on that. Same with the mortgage except that your interest is usually front loaded.
 
#34
#34
If the 2.5% car loan is fixed and the rate will never go up, DO NOT PAY IT OFF EARLY.

Same with the 4.5% mortgage. If it is a fixed rate then keep it. You can easily invest that money at a higher rate. Although, there is a tax calculation to consider. Your marginal tax rate and whether or not you are taking the standard deduction or itemizing are the key considerations.

As far as investing, there are two questions. The second is what to invest in. Index tracking and/or total market and/ or dividend generating ETFs are good ideas. But the primary, and most important thing, is to put the maximum amount that you can into a ROTH IRA and also put all that you can into a 401(k) (or similar defined contribution plan if you are government worker(s)) at least up to the amount that will be matched by the employer. If you have, or plan to have, kids then the tax advantaged, education savings plans should be taken advantage of as well.

If you want to seek advice on specific investments there is an all things stocks thread in The Pub that kicks that question around regularly.

Again - put every last penny that you can into a ROTH IRA and take advantage of the employer match on their defined contribution plans.

I'm retired from the institutional money management industry and all I want to say is that I've been on this board for sometime and Thunder Good-oil is solid!! Listen to him
 
#35
#35
Yeah, I get the struggle with the side hustle aspiration. The whole rental property thing is popping off at the moment. I just bought a two-family house. We're living in one unit, and rent out the other. I gotta tell ya, it's definitely hard work, but rent checks coming in each month feels like free money, right? I'd say do your homework, check out neighborhoods, be aware of hidden costs, you know?
Franchising? There’s potential for great profits but also a lot of initial cash splash for startup costs. So tread carefully, do a lot of research beforehand.
I would also recommend using the services of a bankruptcy law center for managing your financial situation. I gotta tell ya, I can't do anything without consulting them first. The financial stress is being kept down to a minimum for us.
 
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#36
#36
I get the math on the Interest rate of your car and house payment but I’ll tell you my personal opinion/advice.

1) I haven’t financed a car in over 20 years because they’re a depreciating asset. Even after a low rate, you’re losing the depreciation too. Pay that sucker off.

2) I was in a similar situation and chose to pay off everything, including the mortgage and I didn’t regret it. There’s a psychological aspect to it. The peace of mind is worth it.

3) You’re 100% correct about about passive income not being totally passive. That why I decided to flip my investment property instead of rent.
 
#37
#37
I get the math on the Interest rate of your car and house payment but I’ll tell you my personal opinion/advice.

1) I haven’t financed a car in over 20 years because they’re a depreciating asset. Even after a low rate, you’re losing the depreciation too. Pay that sucker off.

2) I was in a similar situation and chose to pay off everything, including the mortgage and I didn’t regret it. There’s a psychological aspect to it. The peace of mind is worth it.

3) You’re 100% correct about about passive income not being totally passive. That why I decided to flip my investment property instead of rent.
Where did you reinvest the proceeds?
 
#38
#38
Where did you reinvest the proceeds?
I paid off my primary residence and maxed out all of our IRA’s & retirement. I did take a bigger tax hit by choosing to be debt free. I did REALLY well on the investment house. Paying the IRS stunk but we were substantially blessed beyond anything I planned with the flip house. I bought it right before the market skyrocketed and had a contract to sell as the Fed first raised rates, at its peak. I always wanted to be debt free before my kids went to college. After being furloughed during Covid, the peace of mind knowing that I owe nothing to anyone, have money in the bank and retirement, is an amazing feeling. You never know what life is going to bring.
 
#39
#39
I paid off my primary residence and maxed out all of our IRA’s & retirement. I did take a bigger tax hit by choosing to be debt free. I did REALLY well on the investment house. Paying the IRS stunk but we were substantially blessed beyond anything I planned with the flip house. I bought it right before the market skyrocketed and had a contract to sell as the Fed first raised rates, at its peak. I always wanted to be debt free before my kids went to college. After being furloughed during Covid, the peace of mind knowing that I owe nothing to anyone, have money in the bank and retirement, is an amazing feeling. You never know what life is going to bring.

Solid planning. Good job!
 

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