Unfortunately I didn't have money to put into a Roth until I had too much money to qualify for a Roth. I only have $10k in the Roth. I plan on getting married next year so I will likely qualify again.

quote:

Originally posted by Skins2881:
Unfortunately I didn't have money to put into a Roth until I had too much money to qualify for a Roth. I only have $10k in the Roth. I plan on getting married next year so I will likely qualify again.

You can do a ROTH conversion from a traditional IRA. You will be taxed on the withdrawal from the IRA as ordinary income, but are not penalized the 10% as you would for a regular withdrawal before age 59 1/2. You will have to find those taxes from another place rather than use some of the IRA withdrawal to pay taxes in order to avoid that 10% penalty (I believe that is correct).

If your present tax bracket is reasonable, the conversion frequently makes sense.

Another possibility to explore is if your employer offers a ROTH 401k. Basically the same thing as ROTH IRA but in the company 401k. Company match will go into the traditional 401k, your contributions go into the ROTH 401k.

I agree with chellim about the beauty of a Roth! Every year I convert as much as I can (within tax bracket threshold) from my Rollover IRA into my Roth. Of course I pay the tax, but I feel it's worth it.

As for contributing to a Roth, despite some years of "not being able to qualify", I still did and paid the penalty. I don't know if the rules have changed, but it was worth it to me to do it.

As to the market in general, I'm almost fully invested. I keep very little cash on the sidelines besides what I consider to be a comfortable emergency amount. I've done pretty well overall. As I've gotten older, I've rotated much of my accounts into income stocks with a long track record of success and regular dividend increases. My taxable account contains mostly dividend stocks, but the few more growth stocks I have, remain in place and I would not consider selling at this point unless they drop and stop being a good investment. Of course the dividend income is taxed and I now take that as part of my cash flow.

The last couple of years my IRA conversion into my Roth have been dividend stocks. My overall retirement income now is social security, dividend income and rental income. They say to hold the Roth until the end, but for me this works.

At 73, in another six years, I'll be facing required minimum distributions. I'm not looking forward to that, but them's the rules.

I do believe President Trump that we are and will be in a "golden age" for some time and have confidence in the market. I've been investing in the stock market since 1980 when I got out of college and it's done well for me. 2000 did hurt me and coincidentally at the same time, I was going through a nasty divorce. 2008/2009 was also a tough time, but I didn't stop buying. It was right around then I bought a fair amount of Netflix and that was the biggest and best investment of my life. Nvidia in the mid 2000 teens was/is a close second. Thankfully, those are in my Roth.

I don't mean to blabber, but I think the stock market is a great place to be for the long term and its a way to make a big difference in ones life with some good research and good decisions.

I’m happy with my Roth 401k.

quote:

Originally posted by 6guns:
I agree with chellim about the beauty of a Roth! Every year I convert as much as I can (within tax bracket threshold) from my Rollover IRA into my Roth. Of course I pay the tax, but I feel it's worth it.

I'd love to, but as you mentioned the rollover conversion rules have changed. Not only do I not want to get taxed at 35% to do it. Additionally I'm already relying on the $23k deduction from my tax bill.

Also, I anticipate much of my income in retirement to be capital gains and qualified dividends, so the tax free at 15% tax rates vs the hit to do conversation doesn't mean much to me, at least at once. I may do a series of small partial rollovers once I hit 50 and can use catch-up contributions to gain extra $11k in deductions.

I'm also getting married next year, so my hope is that I can use the tax bracket downgrade (she's not high earner) to my advantage. I will have to figure out my plans at that point as my calculations are like to change significantly.

Reviving old thread again.
I'm at 16% YTD with my Vanguard. I'm pleased with that. Retired four years, with that and SS I make about what I did working. But I'm nervous, waiting for the inevitable correction.
I'm at 70/30 stock/bond, Brothers who know more than I said leave it alone. And I have a pretty good amount of cash on hand. Barring major medical I think I'll be ok.
What say you?

I've been advised, aside from the 70/30 (or in my case, 60/40 ratio), have enough in the cash / bond side to live through a correction, at least 3-5 years, conservative risk averse perhaps 10 years.

I am NOT an expert. Just how I've been advised and to consider actual fund amounts not just ratios.

What I also do is re-balance; whenever the stock side goes up about 10-15%, I pull that out and put it into the bond side. If there is a correction, I may shift some funds back to the stock side where there are signs of recovery. It's the same stupid approach I have for fun gambling - I have a set amount. I gamble that, any winnings get pulled out and set aside. I only gamble the set amount.

I'm up 21% YTD, with around a 90/10 ratio since I'm still 20+ years from retirement.

70-30 In retirement goes against most traditional recommendations. But traditional recommendations have not really applied for several years now. So how knows. Crazy times we live in now. I have thoughts something major was coming for several years and have been wrong.

25 months to 37 months from retirement (i.e. depends on market and whether or not work is fun)

My 401k is at 10.59% year to date. It's a 60/40, but employer's stock is under-performing broad market until the last 30 days.

My portfolio managed by my financial advisor is at 21.04% year to date. Best one sentence summary is more sophisticated and more diversified version of Marc Faber Portfolio . Prior to hiring him, I did 20 year backwards comparison and ran some Monte Carlo analysis models comparing traditional Marc Faber Portfolio versus what big firms were proposing. Long story short is achieving similar returns with lower risks by having both smaller peaks and smaller valleys. For example, I'd lose a lot less if I happen to retire and the next year is like 2008.

In retirement now, currently up about 9.5% YTD. Hoping to end the year at 10%+

-3.57% last 30 days. Up 22.02% YTD. Moved a lot to cash, sold all quantum stocks. Waiting for correction to bounce back in if it seems to make sense. Sitting at almost 20% cash, 5% bonds, 10% dividend paying stocks, rest pretty aggressive mix of tech, defense, biopharmaceuticals, and a moonshot or two.

Doing really well this year. Especially silver and gold, but also all the etfs.

I'm now about 40% t-bills, 30% metals, 30% stocks. That's out of balance, but it is because of how much everything has risen.

A more conservative ratio would be 30%-40% stocks, and the remainder in bonds or equivalent.

Being retired, the number one goal is to preserve capital. Not chase gains. So the gains are nice but rebalancing is important.

Retired since 2021
401K W/Fidelity
Up 14% YTD
60/40 Stocks/Bonds(Mutual Funds-Vanguard)

Is it too late to even start a 401k? I never started one because we had a deferred compensation program at work. And I am 3 years into a deferred retirement option program. I have to retire in 5 years from my current pension system. I'm still going to work somewhere as I will only be 56. But at 56, I will stop contributing into the deferred comp and the DROP so I was thinking of starting something else.

quote:

Originally posted by Chowser:
Is it too late to even start a 401k? I never started one because we had a deferred compensation program at work. And I am 3 years into a deferred retirement option program. I have to retire in 5 years from my current pension system. I'm still going to work somewhere as I will only be 56. But at 56, I will stop contributing into the deferred comp and the DROP so I was thinking of starting something else.

It's never too late to start a 401k when you do switch jobs, but it's a benefit offered in corporate America.

I do a lot of mentoring at work with both fresh out of college grads as well as experienced hires. The one thing I tell everybody is that it's free money if you put in the minimum to get the employer's maximum matching (e.g. some employer's match employee's contribution 1:1 up to 6% of paycheck). Some employer's (e.g. mine), even allow the employee to contribute after tax (i.e. can withdraw anytime w/o IRS penalties and your money isn't "tied up" long-term like some people worry about) and the company will put their match in tax advantaged after tax account.

There are 2 main math reasons for a 401k. First, get the employer match. That's free money as tatortodd posted. The second is the expectation that your tax rate will be lower in retirement than while you're working, which may or may not be true. I'd say it is a decent bet to make. If your budget allows, you can put a lot into the 401k every year.

Another reason to have a 401k is the forced saving. Since humans tend to spend all of their paychecks, taking it out before it hits your bank account and making it inaccessible until age 59 1/2 might be about the only real savings a lot of people have.

There is one downside, which is that every dollar you take out of the 401k is considered taxable income. You will likely want to spend about the same amount in early retirement that you are spending before retirement. Which means you need about the same income. Why this matters is your Social Security gets progressively more taxed when your other income (401k withdrawals, interest, capital gains) increases.

A ROTH account is frequently superior for tax reasons. You might be able to have a ROTH 401k, or you can start a regular ROTH IRA. It is a good idea to start one now even with just a small deposit. Your ROTH is locked for 5 years, so you want to start the clock asap.

ROTH growth and withdrawals are never taxed. So it never counts against you for Social Security taxation, or for subsidies like Obamacare or perhaps state income tax credits or property tax relief. The one downside is if you pay a high tax rate today and expect a low tax rate in retirement. In that case the 401k or regular IRA are better.

quote:

Originally posted by Chowser:
Is it too late to even start a 401k? I never started one because we had a deferred compensation program at work. And I am 3 years into a deferred retirement option program. I have to retire in 5 years from my current pension system. I'm still going to work somewhere as I will only be 56. But at 56, I will stop contributing into the deferred comp and the DROP so I was thinking of starting something else.

Even if you don't have a 401k at work, you can contribute to an IRA or Roth IRA.

That's what I've been doing since early in my LE career... Contribute to the state pension system, plus a Roth IRA.

I personally would worry about Roth IRA'S. You paid your tax before you put it in, but their are a lot of politicians drooling over how much are in those Roths.
Fifteen years from now they will want to tax it again when you withdraw funds. You know, you need to pay your "fair share". You don't deserve it!
This country is headed for economic collapse, everything will be fair game.
My two cents. Flame away!

Up 24%…but I manage and trade hard almost daily mainly in LEAPS.