Investment opinions??

Discussion in 'Homesteading Questions' started by Beeman, Dec 30, 2005.

  1. Beeman

    Beeman Well-Known Member

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    A retirement account investment question. Do you think it's better to max 401k contribution including catch up money or just put enough to get the match money and invest the rest in a Roth IRA. Obviously you would pay taxes on the IRA deposited money, but it would already be taxed and be free upon withdrawl.
     
  2. Michael W. Smith

    Michael W. Smith Well-Known Member

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    It probably depends on how old you are. If you are talking about doing the catch up thing, I'm assuming you must be in your 50's. If so, you'll have to base it on what your future taxes will be. Depending on how much taxable income you will have when you retire, versus your income now should guide you in what to do.

    For sure put the maximum in the 401K to get the company match. Anything after that will depend on what your taxable income is now, compared to what it will be once you retire.

    Strictly speaking my opinion, I would probably put in the 401K to get the full company match and put the rest in the ROTH IRA. Even though putting any extra in the 401k would have you in a lower tax bracket for now, I'm guessing the way things are going with our government that higher taxes are in our future with all the debt we have.

    Since ROTH IRA money is withdrawn totally tax free, that would be the way to go. But if you are over 57, then the 401K would probably be the better deal.
     

  3. agmantoo

    agmantoo agmantoo Supporter

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    Beeman, there is a little known method to avoid some massive taxes on company stock, that has a low basis, owned by an individual. The individual can pay the tax on the basis (which is typically very low) of the stock. This will be at earned income tax bracket, say 28%. Then instead of rolling the stock with tax due upon leaving the company the stock can be placed in a holding account with the taxes paid or left in a 401 but with no tax due on the purchase money. Upon retirement/withdrawal time the stock can be sold and then based on the individual's earned income will fall in a 5 to 15% tax bracket as long term capital gains thus avoiding a lot of tax. This is definitely permissible and legal.

    As per your question, always max the amount that the employer matches. Any money that is not matched is best placed in a Roth, IMO. I am not qualified to give this advice but experience and exposure says it works for me.
     
  4. Beeman

    Beeman Well-Known Member

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    I did know about the company stock and have some invested there, but like all companies it is a risk.

    My main reason for asking is just what you've alluded to about the gov't changing the rules. They've changed them in the past and they'll surely change them more in the future. I look at 401k's being looked at hard when SS comes up as an issue again, should be about another year year and a half before we drag that horse out and whip it again.
     
  5. Michael W. Smith

    Michael W. Smith Well-Known Member

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    Well, I'm waiting for the government to figure out how much tax money they are losing with the ROTH IRA's. I'm figuring once they find out, they will either close all Roth IRA's (not allowing anymore contributions), or just raise taxes to make up for it.

    Of course, I'm also waiting for the government to tell us that social security distributions, will also take into account how much money you have saved whether it be cash in the bank, pension, 401K, or IRA; and if we have too much saved, we won't get any social security at all.

    Government: "You have saved and did without so you could retire in comfort, while your neighbor spent all of his money as he made it. You have money to live on while your neighbor doesn't, so he will get a social security check and you won't."

    You: "But I put money in social security just like my neighbor did."

    Government: "Yes, and your neighbor appreciates you putting money away for him."

    You: (With mouth fallen open) "But . . . . but . . . . . THAT isn't fair."

    Government: "Mmmmm, maybe not, but we have to keep social security afloat somehow. Tell you what, once you burn through all your savings and investments, come back and see us. Perhaps then we might be able to start to give you a little bit of social security . . . . . . . . maybe."

    Only the future will tell, if us that saved for the future did so wisely or if we will be penalized for it.
     
  6. Selena

    Selena proud to be pro-choice

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    I agree only put into your 401K up to the amount your employer matches. While catch up is fine, social security (and you're close enough where you'll probably collect at least some) is based on earnings. Matter of fact, closer you are to collecting, the less pre-tax dollars you want coming out of your check. The big selling point of 401Ks was lowering your tax rate today and pay taxes later when the rate would be lower. IMHO, it ain't gonna be lower in the future. I'd put the excess monies in a Roth and take the risk that they won't change the rules on Roth IRAs like they did on regular IRAs.
     
  7. via media

    via media Tub-thumper

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    :eek: Really??? DH and I don't own much at all but have no debt and are doing our best to put back for our retirement. I'd better not be cheated out of what (little) I should be getting :viking:

    /VM
     
  8. Beeman

    Beeman Well-Known Member

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    Plan on the worst because the money has to come from somewhere. The whole pension, social security plan is just a pyramid scam. Unfortunately the pyramid is getting smaller at the bottom so the money doles out has to get smaller and smaller. Besides the SS problem we also have to figure out who or how we're going to pay for the increasing number of gov't employees and gov't retirees.
     
  9. texican

    texican Well-Known Member

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    The best investment is land. Plain and simple Land. Can you eat your 401K, if the companies that you own stock in go belly up? At least that was one of the last pieces of advice my father gave me, before I shoveled the dirt on his casket. He said people come and go. Businesses come and go. The land will always be there. Take care of it and it'll take care of you. You may never get rich, but you'll never go hungry or cold. Food and shelter are about the only two things you have to have to survive.

    I have no illusions that SS will be there in 25 - 30 years, more if they keep raising the age. I DO drive by my investment of pine trees on a daily basis.
     
  10. Beeman

    Beeman Well-Known Member

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    I agree land is a good investment, if you can afford to keep it. You can't eat your land either and it costs taxes, insurance and basic upkeep to have land. It's also not as easy to convert if you need to sell especially if things get tight. No big deal if you're 30 because if you wait long enough it usually turns around and values increase. Unfortunately if you need the money and you're in your 70's you might not be able to wait it out, especially if the reason you need money is for food, medical care, or medicine.
     
  11. Mike in Ohio

    Mike in Ohio Well-Known Member

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    Beeman, there are too many variables specific to your situation (which you haven't and probably shouldn't post on a public board). For example, You can be forced to take distributions from a 401k or regular IRA (I think beginning at age 70) but not from a ROTH IRA.

    Another point to consider about ROTH IRAs is that you can take out your principal contributions (without penalty) starting 5 years after you first contributed. This makes a nice source o emergency money (I wouldn't touch it except for a true, major emergency).

    Generally you should put at least up to the limit of company match into your 401k (It's like free money!). On the other hand, if the 401k offered by your company has limited or not very good choices it may make sense to take the hit for taxes and contribute to a ROTH. That depends on how good you are at managing your investments.

    Just a few thoughts.

    Mike
     
  12. Jane in southwest WI

    Jane in southwest WI Well-Known Member

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    I use to think that too, but with the Kelo decision and escalating property taxes I'm not so sure. While the Fed government may eventually deny the savers and investers the S.S. that they've paid into all their lives, the state and local governments will also be trying to tax us out of our homes. It's hard knowing what to invest in or where to live where the gov. won't confiscate what you have through taxation.
     
  13. heather

    heather Well-Known Member

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    Don't be so sure -
    We are moving closer & closer to socialization -
    You've already seen the decisions made that have taken people's land away

    You can't eat your land either - Yes, you can grow something on it maybe, but if it's taken away, you have nothing - not even any money to go anywhere else!


    Invest all you can in your 401K to get the match (it's FREE money!) and then go with the Roth IRA (try to find one who's funds have low expenses - use Morningstar to do some comparison reports)
     
  14. edcopp

    edcopp Well-Known Member

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    Do you have both types of retirement accounts right now? If not you may not be able to start a Roth if you work for an employer who now contributes to a 401-K for you. Check the rules.

    That said, I would put all that I could into the 401-K to get the maximum match money. If you can start a Roth now or you already have one you can do a partial roll-over from the 401-K to the Roth at any time without penalty. The funds coming out of the 401-K will be taxed at that time and then grow tax free in the Roth. :)
     
  15. texican

    texican Well-Known Member

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    Ya'll need to move on down to Texas. On second hand, we're all full up, sorry... Seriously, we passed a law overturning Kelo type confiscations.

    My land doesn't require upkeep. Taxes yes... the only way to escape taxes is to live under the bridge... Insurance? You mean I'm supposed to insure my dirt? Reckon I better have a chat with my insurance agent.

    On the socialist front...to accept the govt. handouts, SS, Medicare/caid, etc., just enables them to further socialize a person. And to 'depend' on those handouts to survive, is the definition of slavery.

    Even the non worked portion of my property feeds me. I took a large buck off the north section (a swampy wetland I'm revegging back into a hardwood/cypress swamp) Wednesday...enough red meat for half a year. Thursday, caught a large sow (210lbs) and a 95lb shoat in a hog trap, in the same area. A good 200lbs of processed pork. My lake produces more fish than I could ever possibly consume. I've got tons of acorns going to waste (have eaten/processed em in the past).... In other words, there are more wild edibles than I could ever use...this land feeds me....true, no ice cream...and if I need cash, I can sell dirt, clay, pine trees, oak, or even the land itself...I've been offered 4x what I paid for it ten years ago. Around here, you don't even mention land and sale in the same sentence, or you'll be crushed to death by people who want to buy....any size, 1/4 acre up to a thousand...

    Good luck with the IRA's and 401K's. Remember they're only good as long as the system works. When a bunch of us younger pups (tailend of the boomers) start demanding our share of the pie, the slices are going to suddenly get very very slim.

    I tend to think about SHTF scenarios. In those situations, I'll take my fishing pond over a million dollar annuity.

    No offense to anyone, if anyone was offended....
     
  16. homebirtha

    homebirtha Well-Known Member

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    Well, not your dirt, but yourself. If some idiot comes onto your land and gets hurt, you could lose it all in a lawsuit in the blink of an eye. And will you be able to pay your taxes when they're $500 a month? We just got our new tax assessment today. They assess every three years. It DOUBLED! In three years!!! We've got to pay for that somehow.

     
  17. Beeman

    Beeman Well-Known Member

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    Not offeneded in any way and agree with a lot of what you say. I'm not putting all of my money in my 401k or my IRA, I own land and will buy more but again all of my money won't go into land. Insurance, yes I guess you should talk to your agent. The whole idea of it sucks but who said life was fair? Got a fishing pond? I definetly would talk to the insurance man. Seriously if the SHTF in a big way you can probably burn your deed for heat because without any gov't or authority that means anything to say that land is yours nothing will matter. IRA's and 401K's don't get sliced any thinner because of the volume of us retireing. On the other hand the taxes on it and land will become greater and greater to overcome our gov't's foolishness. You can only sell land to people with money or buying power, that means for it to be worth anything so will stocks, bonds, IRAs, and 401ks.
     
  18. edcopp

    edcopp Well-Known Member

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    Insurance. Now you know when some trespasser shoots himself in the gut, or drowns in your lake it will be your fault. You are the one with the deep pockets, not to mention the attractive nusiance. So be sure to talk to your agent about liability insurance. :rolleyes:
     
  19. mowrey1999

    mowrey1999 Well-Known Member

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    In my opinion the 401 plans are a great way to invest since you usually get a guaranteed match from your company of whatever they tell you, say 25 cents for every dollar you invest up to 6% of your wage, the roth IRA is helpful to either catch up or just have another plan outside your 401, I have always put money in CD,s so that if I have a chance to quit working when I am 50,55 or 60 I will have interest income and even if social security goes under Hopefully I can sustain my self with the interest, if I get social security and the money I put in my 401 and Roth it is a bonus and hopefully I can just live that much better, So my plan is to live of my CD interest and not count on the government to give me or others what we have paid in since I am sure it will just disappoint me more to think I will be getting something .Just my take on retirement or self suffiency and dont count on something controlled by our govt.
     
  20. jnap31

    jnap31 garden guy

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    That's true,
    I am a conservative investor now,I saved every penny just about that I made the first time in the army,Never went to the movies or owned a truck/car till I was 25.I put it in cd's them mutual funds then bought my own bluechips and of course every year I putt he max I could into a roth $2000
    then I got greedy and put it in the nasdaq computer stocks right before they collapsed in 2000 Invested 34,000 had 54,000 when I left the army 3 months later had $15,000 never went up I cashed out and used the $ to put down for the $31,000 house I am buying now.Now i am just paying it off it will be paid off in 6 months at the present rate.The rest of the money I was thinking of putting in land to build my own place on if I sell my 2 acres and house but Like people say land confiscation and taxes have me wondering about the wisdom in that maybe a 5 acre property near a large national forest and lots of guns and Ammo would be a better investment.