Financial Advice- Roth IRA or pay student loans

Off Topic
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[quote]dmaddox wrote:

[quote]countingbeans wrote:

[quote]csulli wrote:

[quote]countingbeans wrote:

[quote]csulli wrote:
Roth allows you to defer for most of your life in a lower tax bracket than you’re going to end up in at your peak income. These earnings are also not taxable, which more than makes up for inflation.[/quote]

Roth allows you to avoid taxation on the earnings of principle. It doesn’t defer taxation on the principle you contribute. It is non deductible contribution. [/quote]
Right. I didn’t say anything different than that did I…[/quote]

Another point in favor of a Roth IRA over a 401(k) or Traditional IRA is any withdrawals from them could force you to have to pay taxes on your social security, withdrawals from your IRA are exempt when making those calculations. LOL As long as were talking about the lower incomes. I do here what you are saying about income producing properties if you dont mind being a land lord. One of the best ways I can think of for a young person to get ahead would be to purchase a duplex, live in one side and rent the other. The rent would then reduce the payment and give them a start in rental property.

I was unclear on it.

I’m not busting balls for the sake I think you’re math is wrong. You are likely correct. I’m just clarifying really. [/quote]

CB has a point here. Census shows that almost 90% of Americans retire at or below poverty income levels. In fact, of 100 Americans that reach age 65, 5 will retire wealthy, 45 will retire in need of government assistance, and the other 50 will be dead.

With that said, statistically you are more likely to be in a lower tax bracket when you retire than when you contribute. Starting at age 22 you are ahead of the game, and more likely to be one of the 5 that retire wealthy though.

I like the Roth, but have stopped contributing, and actually thinking about taking it all out and buying an apartment complex. I am big on buying income producing assets so all IRA’s and 401k’s do not produce any income. Is there anyone here that collects a check monthly from their IRA or 401k who is not retired?

Saving is a great strategy, but where you invest the money is the biggest question to ask. [/quote]

42

[quote]dmaddox wrote:
CB has a point here. Census shows that almost 90% of Americans retire at or below poverty income levels. In fact, of 100 Americans that reach age 65, 5 will retire wealthy, 45 will retire in need of government assistance, and the other 50 will be dead.

With that said, statistically you are more likely to be in a lower tax bracket when you retire than when you contribute. Starting at age 22 you are ahead of the game, and more likely to be one of the 5 that retire wealthy though.
[/quote]
That’s basically my whole point lol. The fact that 45 of the 50 non-dead Americans will fuck up doesn’t mean you need to. If you defer 15% of your annual income through some combination of your own contributions, employer match, and employer profit sharing contributions into Roth from some point in your 20’s onward, that will end up better than if you do a traditional 401(k). It just will. You will not be one of the people who retire in poverty and need government assistance. You will retire in a higher tax bracket than when you started, and you will save a boatload in taxes in the long run.

Statistically, you’re likely to be a fat piece of shit, but those of us here are living proof that you don’t want to be average in just about anything in America.

43

[quote]csulli wrote:

[quote]dmaddox wrote:
CB has a point here. Census shows that almost 90% of Americans retire at or below poverty income levels. In fact, of 100 Americans that reach age 65, 5 will retire wealthy, 45 will retire in need of government assistance, and the other 50 will be dead.

With that said, statistically you are more likely to be in a lower tax bracket when you retire than when you contribute. Starting at age 22 you are ahead of the game, and more likely to be one of the 5 that retire wealthy though.
[/quote]
That’s basically my whole point lol. The fact that 45 of the 50 non-dead Americans will fuck up doesn’t mean you need to. If you defer 15% of your annual income through some combination of your own contributions, employer match, and employer profit sharing contributions into Roth from some point in your 20’s onward, that will end up better than if you do a traditional 401(k). It just will. You will not be one of the people who retire in poverty and need government assistance. You will retire in a higher tax bracket than when you started, and you will save a boatload in taxes in the long run.

Statistically, you’re likely to be a fat piece of shit, but those of us here are living proof that you don’t want to be average in just about anything in America.[/quote]

You being a TPA know that most people when they leave a job take the retirement money as a cash distribution. I used to be in that industry, and felt like I was butting my head against a wall. If he truly will never use the money and let it grow till he retires his likelihood of being one of the 5 is greater, but that is not a guarantee. I was in HR in my last job, and it was amazing how many people took a loan out on their 401k to go on a vacation.

I see your points, but there is no guarantee. My father told me to always save 20% of my income. I did that for 14 years and when I took that money and invested it in real estate I doubled that money in 18 months while unemployed. Went from $500k to $1 MM in 18 months. Did better outside my 401k and IRA than inside it. Everyone has the ability to save money, but taking control of your money and investing it in the correct vehicle is where you really make your money.

44

[quote]dmaddox wrote:

[quote]csulli wrote:

[quote]dmaddox wrote:
CB has a point here. Census shows that almost 90% of Americans retire at or below poverty income levels. In fact, of 100 Americans that reach age 65, 5 will retire wealthy, 45 will retire in need of government assistance, and the other 50 will be dead.

With that said, statistically you are more likely to be in a lower tax bracket when you retire than when you contribute. Starting at age 22 you are ahead of the game, and more likely to be one of the 5 that retire wealthy though.
[/quote]
That’s basically my whole point lol. The fact that 45 of the 50 non-dead Americans will fuck up doesn’t mean you need to. If you defer 15% of your annual income through some combination of your own contributions, employer match, and employer profit sharing contributions into Roth from some point in your 20’s onward, that will end up better than if you do a traditional 401(k). It just will. You will not be one of the people who retire in poverty and need government assistance. You will retire in a higher tax bracket than when you started, and you will save a boatload in taxes in the long run.

Statistically, you’re likely to be a fat piece of shit, but those of us here are living proof that you don’t want to be average in just about anything in America.[/quote]

You being a TPA know that most people when they leave a job take the retirement money as a cash distribution. I used to be in that industry, and felt like I was butting my head against a wall. If he truly will never use the money and let it grow till he retires his likelihood of being one of the 5 is greater, but that is not a guarantee. I was in HR in my last job, and it was amazing how many people took a loan out on their 401k to go on a vacation.

I see your points, but there is no guarantee. My father told me to always save 20% of my income. I did that for 14 years and when I took that money and invested it in real estate I doubled that money in 18 months while unemployed. Went from $500k to $1 MM in 18 months. Did better outside my 401k and IRA than inside it. Everyone has the ability to save money, but taking control of your money and investing it in the correct vehicle is where you really make your money.
[/quote]
Yes x10000000 to the cash outs and loans lol. If it were up to me taking a loan out of your 401(k) would not exist as an option.

Nice job in real estate. I’m way too scared to go into that lol.

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I second the real estate as a scary prospect. I’d go so far to say its riskier than the stock market (in many cases). Owning real estate can be a very profitable venture - assuming you have good, responsible tenants. Once you pay the initial costs for closure and refurbishing (as needed) you can either have all expenses paid by tenants until the place is paid off and then its pure cash cow, or you make a small profit even initially depending on demand and what people are willing to pay.

I have a friend, same day job as me, who owns a duplex home. Lives in one half and rents out another. He recently bought another small home to fix up and will rent that out as well. At age 26, same as me, he’s not paying for his own home (the renter’s payment pays for the entire duplex) and will soon be profitting by another rental property once paid off (he bought it foreclosed and paid cash, so he just has to regain his investment). I call him Daddy Warbucks. Good, smart kid. I training him in his day job - so I feel I somehow contributed to his life :P.

That being said, I have other friends who also own real estate. Tenants who don’t pay are difficult to kick out, can cause a host of problems, and if they get government assistance, good luck getting money from them. He has a current tenant who hasn’t paid in 6 months. He can’t evict them because he doesn’t have someone else to move in, and boarding up a home in a city you aren’t living in to keep track of, means it will likely be robbed, broken into , or have freeloaders in it anyway. Can’t find a tenant because no one wants a home thats currently being “lived in” and messy.

There are plusses and minuses everywhere. I can see the worth of real estate, but for me, its a nervous prospect. High potential, but you’re trusting people to be decent - and we all know how that goes.

Also, wish regards to the IRA versus a Roth IRA. IRA you pay at the end, when you intend to withdraw. Roth IRA you pay now and don’t pay taxes later. There are pro’s/con’s to both. Yes, its not to invest money pre-tax now. But you will pay later. We also don’t know what tax will be later, its not garaunteed to stay where it is, especially with more and more people going on government assistance (how will the government pay for this, by more heavily taxing those who still make money). You also have to consider inflation. What will the dollar be worth when you plan to retire compared to what its worth today? If you can invest an extra 6% instead of it going to taxes (or whatever that percentage is, I don’t honestly know) that “extra” can “grow” more money for you. Then you pay a similar (hypothetically) percentage later but “profit” the money that it accrued for you. At the same time, many people like that the money will be there’s when they retire. They won’t see what’s in their account, go to withdraw, and watch said account take a hit. They know for a fact what’s in there is theirs.

Again, plusses and minuses, have to weigh everything. If I had to guess, I’d say taxes will increase in the future, social security will NOT exist, and the way money is being printed inflation will happen. Though if inflation happens to much, our money isn’t worth anything anyways. Keep in mind my theory is for 30 years from now, not for those retiring in the next 10 years or so.

My goal personally, retire by age 50. There is a small cameo in there that in order to be considered “eligible for retirement” I need to have put in 30 years with them. That would put me at 52… close enough for me. If I can do that, and come out with a healthy, comfortable lifestyle, I’ll consider myself having been a success in my financial/business life.

46

[quote]JCMPG wrote:
Did you read my whole post? [/quote]

Kinda, sorta…but c’mon…you want me to read and then take the time for a coherent argument??? Ai yi yi. :slight_smile:

47

retiring by 50 sounds good. Where do I start?

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[quote]StevenF wrote:
retiring by 50 sounds good. Where do I start? [/quote]

Twenty years ago.

49

[quote]Testy1 wrote:

[quote]StevenF wrote:
retiring by 50 sounds good. Where do I start? [/quote]

Twenty years ago.
[/quote]

hmm … I was only 9!

50

[quote]StevenF wrote:

[quote]Testy1 wrote:

[quote]StevenF wrote:
retiring by 50 sounds good. Where do I start? [/quote]

Twenty years ago.
[/quote]

hmm … I was only 9!
[/quote]

sorry, nine years ago. Get to saving.

51

[quote]24Animal7 wrote:
Hello,

I recently graduated college with about 14,500 total in student loans. I have a Stafford loan, which is about 4500 dollars, and the rest is a private loan, about 10 grand.

Both loans are in their grace period until November. I know the private loan has a variable interest rate which hovers between 2.9 and 3.2 percent. I’m unsure about the Stafford loan’s interest rate. Anyways, I’d like to pay these loans off quickly. I’d also like to open a Roth IRA and contribute $5,500 per year until I retire.

I earn around 58,000 per year, and I could pay off my loans entirely this year before January 1st, 2014 but I wouldn’t be able to contribute to my Roth IRA until next year. Since I began my job in June, I’ll earn around 28K this year.

I’m also in desperate need of a newer vehicle, as my toyota corrolla is about to shit the bed. I’m looking to purchase a vehicle for around 20K this year or the next, so its an anticipated expense that’s coming up fast.

So is it better to pay some interest on the loans and contribute to the Roth IRA? I don’t want to miss a year of the effect that compounding has on a Roth IRA, but I don’t want to lose money paying interest on student loans either.

Could anyone provide some insight on what’s best to do? I appreciate your help!
[/quote]
Self-directed Roth IRA’s are contributed with after-tax dollars while Roth’s are contributed with pre-tax and are taxed when withdrawn, I believe while self-directed are not taxed as the money contributed has already been taxed. I would advise you to look at a QRP, I don’t know a whole lot about it other than you can contribute up to 50k per year and invest in almost anything you want without having to get permission from a custodian. Look into investing into private trust deeds or mortgages. You should get around 10-12% return, sometimes even more. Sure beats leaving your money in a bank CD. And is safer, IMO, than the stock market.

52

[quote]Zeppelin795 wrote:

[quote]24Animal7 wrote:
Hello,

I recently graduated college with about 14,500 total in student loans. I have a Stafford loan, which is about 4500 dollars, and the rest is a private loan, about 10 grand.

Both loans are in their grace period until November. I know the private loan has a variable interest rate which hovers between 2.9 and 3.2 percent. I’m unsure about the Stafford loan’s interest rate. Anyways, I’d like to pay these loans off quickly. I’d also like to open a Roth IRA and contribute $5,500 per year until I retire.

I earn around 58,000 per year, and I could pay off my loans entirely this year before January 1st, 2014 but I wouldn’t be able to contribute to my Roth IRA until next year. Since I began my job in June, I’ll earn around 28K this year.

I’m also in desperate need of a newer vehicle, as my toyota corrolla is about to shit the bed. I’m looking to purchase a vehicle for around 20K this year or the next, so its an anticipated expense that’s coming up fast.

So is it better to pay some interest on the loans and contribute to the Roth IRA? I don’t want to miss a year of the effect that compounding has on a Roth IRA, but I don’t want to lose money paying interest on student loans either.

Could anyone provide some insight on what’s best to do? I appreciate your help!
[/quote]
Self-directed Roth IRA’s are contributed with after-tax dollars while Roth’s are contributed with pre-tax and are taxed when withdrawn, I believe while self-directed are not taxed as the money contributed has already been taxed. I would advise you to look at a QRP, I don’t know a whole lot about it other than you can contribute up to 50k per year and invest in almost anything you want without having to get permission from a custodian. Look into investing into private trust deeds or mortgages. You should get around 10-12% return, sometimes even more. Sure beats leaving your money in a bank CD. And is safer, IMO, than the stock market.[/quote]

A 401(k) by definition is a QRP (Qualified Retirement Plan) and anything that is tax qualified is going to have limitations on it as far as the amount that you can invest in a year.

53

[quote]JCMPG wrote:

[quote]Zeppelin795 wrote:

[quote]24Animal7 wrote:
Hello,

I recently graduated college with about 14,500 total in student loans. I have a Stafford loan, which is about 4500 dollars, and the rest is a private loan, about 10 grand.

Both loans are in their grace period until November. I know the private loan has a variable interest rate which hovers between 2.9 and 3.2 percent. I’m unsure about the Stafford loan’s interest rate. Anyways, I’d like to pay these loans off quickly. I’d also like to open a Roth IRA and contribute $5,500 per year until I retire.

I earn around 58,000 per year, and I could pay off my loans entirely this year before January 1st, 2014 but I wouldn’t be able to contribute to my Roth IRA until next year. Since I began my job in June, I’ll earn around 28K this year.

I’m also in desperate need of a newer vehicle, as my toyota corrolla is about to shit the bed. I’m looking to purchase a vehicle for around 20K this year or the next, so its an anticipated expense that’s coming up fast.

So is it better to pay some interest on the loans and contribute to the Roth IRA? I don’t want to miss a year of the effect that compounding has on a Roth IRA, but I don’t want to lose money paying interest on student loans either.

Could anyone provide some insight on what’s best to do? I appreciate your help!
[/quote]
Self-directed Roth IRA’s are contributed with after-tax dollars while Roth’s are contributed with pre-tax and are taxed when withdrawn, I believe while self-directed are not taxed as the money contributed has already been taxed. I would advise you to look at a QRP, I don’t know a whole lot about it other than you can contribute up to 50k per year and invest in almost anything you want without having to get permission from a custodian. Look into investing into private trust deeds or mortgages. You should get around 10-12% return, sometimes even more. Sure beats leaving your money in a bank CD. And is safer, IMO, than the stock market.[/quote]

A 401(k) by definition is a QRP (Qualified Retirement Plan) and anything that is tax qualified is going to have limitations on it as far as the amount that you can invest in a year.[/quote]

Don’t take investing or Political advice from Zep. Especially the Private Trust Deeds. Get ready to loose your money on those.

54

This is useful information for the question asked. I frequent this site quite a bit, this guy is bright, freely provides good information, and is already highly profitable at his age. I’ve literally spent hours reading his articles and have gained so much knowledge (and headache) from the reading.

http://www.joshuakennon.com/traditional-ira-investing-guide/

http://www.joshuakennon.com/roth-ira-investing-guide/

He’s also the same guy who wrote all of this, which is a great starting point for anyone trying to enter the world of investing! I expect many thanks and respect for my sharing of this pertinent, valuable information.

http://beginnersinvest.about.com/

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2816×2112 1.51 MB

To give you guys a sample of what frugal living can do for you, here is a picture taken from the inside of my parents house. Unfortunatelly I don’t have pictures I can show of the house. Trust me though, it is really nice and the view is like that all the way around. Actually a lot more impressive from other angles.

They built the house with cash.

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[quote]on edge wrote:
To give you guys a sample of what frugal living can do for you, here is a picture taken from the inside of my parents house. Unfortunatelly I don’t have pictures I can show of the house. Trust me though, it is really nice and the view is like that all the way around. Actually a lot more impressive from other angles.

They built the house with cash.[/quote]

Is that a reflection of stained glass windows behind you in the lower left of the pic?

Aside from being a nice feature it looks really spooky floating there.

Beautiful view too.

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[quote]SkyzykS wrote:

[quote]on edge wrote:
To give you guys a sample of what frugal living can do for you, here is a picture taken from the inside of my parents house. Unfortunatelly I don’t have pictures I can show of the house. Trust me though, it is really nice and the view is like that all the way around. Actually a lot more impressive from other angles.

They built the house with cash.[/quote]

Is that a reflection of stained glass windows behind you in the lower left of the pic?

Aside from being a nice feature it looks really spooky floating there.

Beautiful view too.
[/quote]

The reflection is the window on the front door.

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OP may I ask what kind of work you do? 58k is DAYM good for a fresh grad.

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That is pretty sweet On Edge. Did you mention what state this is? Looks like my kind of place.

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[quote]usmccds423 wrote:
That is pretty sweet On Edge. Did you mention what state this is? Looks like my kind of place. [/quote]

It’s St. George Utah. Southern Utah is pretty awesome. Check out Moab too.