.

[usedcarguy]

Question for the group, do you guys do traditional 401K's or Roth 401K's? My new job has a roth version, I signed up for the regular out of habit, but now I am thinking the Roth is better. Yes my take home will be lower, but $19.5K/yr in a Roth 401k is worth ~25% more than a traditional since it is already taxed.

I guess the flip side is, if I invest the tax savings from a traditional it is probably a wash in the end? Does this make sense?

Most financial advisors won't tell you this, but there are really two issues to consider. One is the math of pretax dollars versus after tax dollars. Generally they are pretty good at that. The other one that doesn't get talked about is Congress.
A traditional investment vehicle offers more compounding. You're depositing a dollar rather than 80 cents or whatever. The future value of that extra 20 cents is huge...usually negating the advantage of the Roth to the point that it's either a push or close to it.

However, Congress is capable of doing should scare any investor to death. One should fully expect the rug to get pulled out from Roth's at some point in the future when the political class is turning over stones looking for money. For those who don't believe me, look at how the taxation of Social Security benefits came to be.

Smart business people defer taxes as long as possible so that they can use that money to grow their pie. Individuals who want to build wealth should do the same.

 

[bos]

I hope it never gets that low because a very large % of my portfolio is already in there. I don't see it getting that low, frankly.

I personally don’t believe it will.

 

[BCClone]

Most financial advisors won't tell you this, but there are really two issues to consider. One is the math of pretax dollars versus after tax dollars. Generally they are pretty good at that. The other one that doesn't get talked about is Congress.
A traditional investment vehicle offers more compounding. You're depositing a dollar rather than 80 cents or whatever. The future value of that extra 20 cents is huge...usually negating the advantage of the Roth to the point that it's either a push or close to it.

However, Congress is capable of doing should scare any investor to death. One should fully expect the rug to get pulled out from Roth's at some point in the future when the political class is turning over stones looking for money. For those who don't believe me, look at how the taxation of Social Security benefits came to be.

Smart business people defer taxes as long as possible so that they can use that money to grow their pie. Individuals who want to build wealth should do the same.

Not true. Always best to max out the 12% tax bracket no matter what you are doing. Even when it was 15, it was smart to get as close to 22/28 as possible. Too many self employed people will try to pay almost no tax and wait. Well, those people in about ten years when depreciation drops off from machinery or buildings find out that they are now getting hammered from all the income defers and preloaded expenses and end up in the 30s and beg for their CPA to wave a magic wand and make it disappear, but they can't.

Now @bos, traditional or Roth? Roth 99% of the time. You don't have to take out at 70 (I plan to just pass mine on as inheritance), your growth is tax free which means you can take out however much you want (after 59.5 obviously) whenever you want and not worry about tax issues, you don't have to worry about tax brackets then (honestly, do you see tax brackets going down with this debt we are piling up?), you can take the principle out for certain things (like buying a house, education and such) and pay no penalties because it was after tax dollars. There are just so many advantages to the Roth over a traditional that I honestly have not seen anyone have an advantage with a traditional. I said 99% percent because you can never say 100% because someone might be making millions and now put much away and actually have a lower tax bracket when they retire. Some years you may want to take out extra and some years you may not need any, with a roth your taxes (0) won't change.

 

[bos]

Wait what? Did I ask something?

 

[BCClone]

Wait what? Did I ask something?

Sorry, wrong mod. Guess @brianhos asked.

 

[CycloneDaddy]

Not true. Always best to max out the 12% tax bracket no matter what you are doing. Even when it was 15, it was smart to get as close to 22/28 as possible. Too many self employed people will try to pay almost no tax and wait. Well, those people in about ten years when depreciation drops off from machinery or buildings find out that they are now getting hammered from all the income defers and preloaded expenses and end up in the 30s and beg for their CPA to wave a magic wand and make it disappear, but they can't.

Now @bos, traditional or Roth? Roth 99% of the time. You don't have to take out at 70 (I plan to just pass mine on as inheritance), your growth is tax free which means you can take out however much you want (after 59.5 obviously) whenever you want and not worry about tax issues, you don't have to worry about tax brackets then (honestly, do you see tax brackets going down with this debt we are piling up?), you can take the principle out for certain things (like buying a house, education and such) and pay no penalties because it was after tax dollars. There are just so many advantages to the Roth over a traditional that I honestly have not seen anyone have an advantage with a traditional. I said 99% percent because you can never say 100% because someone might be making millions and now put much away and actually have a lower tax bracket when they retire. Some years you may want to take out extra and some years you may not need any, with a roth your taxes (0) won't change.

Isnt there a RMD for a Roth 401 like a traditional 401? I thought the Roth IRA didnt have a RMD.

 

[BCClone]

Isnt there a RMD for a Roth 401 like a traditional 401? I thought the Roth IRA didnt have a RMD.

Not 100% positive but you could just roll it To an IRA by age 70 and avoid that. The employer match would be pretax so that would have an RMD.

 

[KnappShack]

The XLE is beating the hell out of me. Down 26% even with buying on the way down

Question is.....do I sit tight and enjoy the 11% distribution, cut bait, or go balls out and buy?

I hate being so overweight in tech, but that big girl is running

 

[cycloneG]

Quite the turn.

 

[dmclone]

Question for the group, do you guys do traditional 401K's or Roth 401K's? My new job has a roth version, I signed up for the regular out of habit, but now I am thinking the Roth is better. Yes my take home will be lower, but $19.5K/yr in a Roth 401k is worth ~25% more than a traditional since it is already taxed.

I guess the flip side is, if I invest the tax savings from a traditional it is probably a wash in the end? Does this make sense?

There are arguments for both. I decided about 10 years ago to just do a 50% mix. This will give me some flexibility in retirement. Then a few years ago I asked myself why I was relying on my companies 401k plan, with limited choices, when I could just start a Roth IRA.
So now I put up to my company math in Traditional 401k, max out my Roth IRA, and then the rest I put in Roth 401k. I do the same thing with my wifes job.
Then I invest most of my 401k in an S&P500 index, use the Roth for dividend centric funds, and the Roth 401k for reits.

 

[BCClone]

Quite the turn.

Been wanting to cut a poor performer. Did a fourth of it a week ago and another fourth today before the tank luckily.

 

[Busch__Latte]

Huh, so one of the stocks I've been holding for over a year has merged with a different company and now is doing a stock split. I've never experienced that before.

 

[bos]

Huh, so one of the stocks I've been holding for over a year has merged with a different company and now is doing a stock split. I've never experienced that before.

Which ones if you don’t mind me asking. I like to see which ones split.

 

[BCClone]

Huh, so one of the stocks I've been holding for over a year has merged with a different company and now is doing a stock split. I've never experienced that before.

Thought you put your whole life savings in bitcoin two years ago

 

[Busch__Latte]

Which ones if you don’t mind me asking. I like to see which ones split.

Vivint Solar merge with Sunrun

 

[Busch__Latte]

Thought you put your whole life savings in bitcoin two years ago

Oof, **** crypto. I think I lost around $300. I've since learned Crypto isn't a safe investment and to diversify my portfolio.

 

[SouthernCy]

Hopefully everyone kept whatever cash they had set aside for stocks this week as the markets have declined, has it always does around election time. I got caught on a couple debit spreads that expire friday and am not gonna fair to well on them haha. No matter who wins though research into the past shows us that it always rises roughly 4-5% if a new president is elected and 6-7% if the president stays the same. So growth will return!

 

[ArgentCy]

Hopefully everyone kept whatever cash they had set aside for stocks this week as the markets have declined, has it always does around election time. I got caught on a couple debit spreads that expire friday and am not gonna fair to well on them haha. No matter who wins though research into the past shows us that it always rises roughly 4-5% if a new president is elected and 6-7% if the president stays the same. So growth will return!

Not so fast my friend. This is no typical year. We may not even know the winner until, well who knows.

 

[SoapyCy]

Hopefully everyone kept whatever cash they had set aside for stocks this week as the markets have declined, has it always does around election time. I got caught on a couple debit spreads that expire friday and am not gonna fair to well on them haha. No matter who wins though research into the past shows us that it always rises roughly 4-5% if a new president is elected and 6-7% if the president stays the same. So growth will return!

Left cash over from when?

If they bought a month ago it would be cheaper than today. Two months ago? Cheaper than today. Three months ago? Cheaper than today.

 

[ArgentCy]

Left cash over from when?

If they bought a month ago it would be cheaper than today. Two months ago? Cheaper than today. Three months ago? Cheaper than today.

If they are smart they have cash from taking some off the table as things have soared. I am starting to do well with Gamestop. Short squeeze hasn't even started (waiting on up to date short interest data) but this could be epic.