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PBS Frontline : The Retirement Gamble, sorta Must See (1 Viewer)

Wooderson said:
Right the 100k was the initial goal for an emergency fund. Then I started reading and thought maybe I was over doing with 100k. 




 
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Not sure about that.  Six months income is a decent cushion.  Sounds like she has a fairly high power job that may take longer to find another job in case something happens.  

 
Wooderson said:
Right the 100k was the initial goal for an emergency fund. Then I started reading and thought maybe I was over doing with 100k. 
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I think it's fine to have 6 months in a completely risk free account (online savings)  and then with the next 6 months I feel like it's ok to have a mix of relatively conservative investments (like preferred stocks, or a big ETF or something)  where the value could fluctuate, but is highly unlikely to drop even as much as 20-30% unless the sky is falling 2008 style.  I feel like that gives you some chance for gains while keeping yourself pretty liquid.

 
Wooderson said:
I guess your right it's not a nightmare just thought it was always a better idea to have a mix of taxed and untaxed money at retirement. 
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Having a mix is fine.  Having real cash on hand is a nice, nice thing.  In retirement vehicles it's somewhat locked away.  There's always a give and take there.  If you want to retire early you need the taxable accounts to get you to 59.5, anyway.

I just wanted to point out that you're mathematically doing the right thing.  You're way, way better off in terms of growing your money putting it in a tax deferred vehicle than keeping it on the taxable side.  I'll see if I can find an article tonight (just read it, but I'm at work).

If you want to feel better by comparison I'm up to 10 account types (that's types, not accounts) that can't be combined.  

 
Wooderson said:
No not at all. 

With mortgage rate so low I hesitate to pay it off. But we are getting close to 100k in savings. We have thought about rental property but would like to wait for the kids to be in school so I can matain it. 

Im worried that that all of our investments are pre tax.  It's going to be a tax nightmare in 30 years. 
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you do any backdoor roth?

 
Sand said:
I wouldn't pay off the mortgage if you have a good rate.  Stay liquid.  If you itemize your real rate is even lower - very safe leverage on investments made with your liquid stash.

On your comments about pre-tax investments - tax nightmare?  You're doing exactly the right thing.  It's unlikely that your tax rate in retirement will get anywhere near where it is now.  Right now you are taking monies that otherwise would have 35% lopped off of them and putting them in a vehicle where, when you take them out, you're likely looking at 15-25% tax rates.  Those monies you defer come off the top of the marginal scale - so the most precious to protect, if you can.  And, if you live in a high tax state, you're doing even better since you can move upon retirement and save a bundle on those.   States like CA and NY are ridiculous.

If you retire early there's the opportunity to move monies from tax deferred to tax free at low/no federal taxes, as well.  So don't sweat this, just keep packing it away.
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details?

 
FUBAR said:
looking at the backdoor Roth, or the equivalent... tell me where my logic fails.

Forecasting ahead to our 60s, I expect to have two pensions worth roughly $60k / year at age 62 (in today's money).  I'll wait until 67 to take SS.  That gives me 5 years of getting the pensions but not SS.  Right now, I have a substantial amount in the traditional TSP but have stopped putting money into the traditional - 100% is now going into the Roth TSP.  I'd consider moving the traditional into Roth now but don't like the tax implications.  Would it make sense to leave it as is now and withdraw substantial amounts from the traditional before we receive SS but after full time retirement? 

We're currently in the 15% tax bracket (due to credits), and it looks like I could move around $15k without bumping up into the next tax bracket.  Would it be wiser to move the max we can while staying in the 15% bracket?  This would be a long process.
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I don't see any reason to move the traditional into the Roth now, but it's not like you have to decide now anyway.  Based on what you described you'll be in a higher tax bracket in retirement than you are now, so since you are in that lower tax bracket now, it makes very good sense to have everything going into the Roth TSP.  You can eventually use those funds to bridge you to age 67 when you get social security.  You will have to roll that Roth TSP money out though, because when you take withdrawals from the TSP it will be based on your holdings.  If it's 70/30 Roth then each distribution is 70/30, so to eliminate that you just remove the Roth funds and move them over to a Roth IRA.   

 
Wooderson said:
So I can do this even if we already invest 50k a year for retirement?

Also am I able to do it with me not showing any income? 

Thanks 
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Woody

I was joking on my $50K comment.  I see now the joke may have gone too far.  There is no $50K restriction, please ignore

 
Wooderson said:
So I can do this even if we already invest 50k a year for retirement?

Also am I able to do it with me not showing any income? 

Thanks 
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While I'm no CPA, our (wife and I) current retirement contributions are over $50k/year b/w the following: 401ks, Backdoor Roth, Company contributions to 401k, and pension contributions (from company)

ETA: Re-read again, and ours would be lower than $50k/year if you took out the Backdoor Roth.  But I'm still not sure where that $50k # came from

 
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wilked said:
I think the government only allows individuals to save $50,000 on a given year.  Anything additional is subject to forfeiture per CFR 2.3.42
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This was me messing around.  There is no CFR 2.3.42.  Do not use the above to make any decisions!

 
You asked if there was a limit to how much you could save, which made me think of some communist country where people aren't allowed to save, and thus my dry humor.

 
Re: 529 and turning that an "investment" or retirement vehicle

I think I've posted before (can't remember which finance thread), that I started a 529 for each of my kids and deposit the max each year ($4800/kid).  I've also set up a spreadsheet that will forecast the growth of the account (5% conservatively) vs the projected college costs for books and room/board (2016 #s adjusted for 3% inflation in costs each year - which I will update annually).  

My intention at a minimum is to purchase property (or properties if they go to separate schools) under an LLC and have them pay rent to the LLC out of their 529 distributions.  If they went to LSU :excited:, I should be able to apply $64k per child (using 2016 $ to illustrate buying power) over the 4 years into the properties.  

If my #s projections hold, I'll be able to use about 85-90% of my actual 529 contributions towards a physical asset which I can resell or continue to rent.

With 529s, you also want to be careful not to over contribute and you really want to watch the types of investment vehicles you are using b/c of the relatively short time span (0-18) years that you'll have until you maximize the 529 utility.  Just be careful you're not caught in down market.

 
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Tiger Fan said:
Re: 529 and turning that an "investment" or retirement vehicle

I think I've posted before (can't remember which finance thread), that I started a 529 for each of my kids and deposit the max each year ($4800/kid).  I've also set up a spreadsheet that will forecast the growth of the account (5% conservatively) vs the projected college costs for books and room/board (2016 #s adjusted for 3% inflation in costs each year - which I will update annually).  

My intention at a minimum is to purchase property (or properties if they go to separate schools) under an LLC and have them pay rent to the LLC out of their 529 distributions.  If they went to LSU :excited:, I should be able to apply $64k per child (using 2016 $ to illustrate buying power) over the 4 years into the properties.  

If my #s projections hold, I'll be able to use about 85-90% of my actual 529 contributions towards a physical asset which I can resell or continue to rent.

With 529s, you also want to be careful not to over contribute and you really want to watch the types of investment vehicles you are using b/c of the relatively short time span (0-18) years that you'll have until you maximize the 529 utility.  Just be careful you're not caught in down market.
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Seems like the ideal use for an affordable target date fund.

 
Tiger Fan said:
I think I've posted before (can't remember which finance thread), that I started a 529 for each of my kids and deposit the max each year ($4800/kid).
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I didn't think there was a maximum contribution to 529 plans other than anything in excess of $14,000/year requires a gift tax return.

 
Don''t pay for your kid's college (Many financial pros agree), even if it hurts your soul.  Let them pay the way, motivates you in the end.  If you have $$$ to help them after the fact, cool.   

 
Doctor Detroit said:
Don''t pay for your kid's college (Many financial pros agree), even if it hurts your soul.  Let them pay the way, motivates you in the end.  If you have $$$ to help them after the fact, cool.   
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I think there's a lot of folks between 30-40 who came out with major loan debt and see how it delayed their major life achievements (marriage, house, children) and want to do what they can to have their kids not be burdened with the Sisyphean load of accrued interest. I can understand how debt load is motivating, but it's also demoralizing.

I understand that you don't want to forego saving for retirement to pay for college (I think that's where you're going with the financial pros statement), but I'd gladly give up retirement luxury to help my kid with college.

 
Gawain said:
I think there's a lot of folks between 30-40 who came out with major loan debt and see how it delayed their major life achievements (marriage, house, children) and want to do what they can to have their kids not be burdened with the Sisyphean load of accrued interest. I can understand how debt load is motivating, but it's also demoralizing.

I understand that you don't want to forego saving for retirement to pay for college (I think that's where you're going with the financial pros statement), but I'd gladly give up retirement luxury to help my kid with college.
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That's fine, but I won't do it.  I pay for three kids to go to private school now, after that they are on their own.  I paid for all of my school with the help of the Air Force, and I wouldn't have it any other way.  18 years is enough of a burden, people gotta people. 

 
Doctor Detroit said:
That's fine, but I won't do it.  I pay for three kids to go to private school now, after that they are on their own.  I paid for all of my school with the help of the Air Force, and I wouldn't have it any other way.  18 years is enough of a burden, people gotta people. 
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That's understandable too. I think the concept of not coddling is valid as well. I do wonder if this is a generational difference. I think your outlook is right in line with Gen X parents and my view is much more in line with Millennials. That being said, with college costs and Millennials in a fair amount of debt themselves, finding the money could be tough.

 
Gawain said:
Doctor Detroit said:
That's fine, but I won't do it.  I pay for three kids to go to private school now, after that they are on their own.  I paid for all of my school with the help of the Air Force, and I wouldn't have it any other way.  18 years is enough of a burden, people gotta people. 
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That's understandable too. I think the concept of not coddling is valid as well. I do wonder if this is a generational difference. I think your outlook is right in line with Gen X parents and my view is much more in line with Millennials. That being said, with college costs and Millennials in a fair amount of debt themselves, finding the money could be tough.
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I'm pretty set in my ways on reverse mortgages and whole life insurance, but if you want to pay for your kids to go to college, I'm cool with that.  If I were wealthy I'd do it too, but for normal folks I think kids need to assume the burden.  At minimum I'd make them pay until they produced some sheep skin, then I'd take the debt.  But so many kids go to college and then change their minds after two years because they want to become a Sherpa or something.  I'm not paying $30k for my kid to become a Sherpa, :no:

 
Doctor Detroit said:
Don''t pay for your kid's college (Many financial pros agree), even if it hurts your soul.  Let them pay the way, motivates you in the end.  If you have $$$ to help them after the fact, cool.   
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probably worth another separate thread...but I think for the most part I agree with you.  But when I learned about the purchase of the home thing..it adds another level there.

 
yeah, and I think @NewlyRetired probably is in the "perfect dilemma", by having the money to afford to pay for his kid's college, but (my words, not his) "not being 100% comfortable with their choice of major".  

Obvously, as parents, you want to strike the balance of taking care of your kids w/o babying them and making sure they take away the appropriate experiences/lessons from being on their own.

There's no right or wrong answer here, but it's a discussion that I would like to entertain b/c it's one that often comes up in my head when I think about the way I want to raise my kids.  Personally, my parent's paid for my undergrad with subsidized loans (meaning that they took on the loans themselves), but I was entrusted to manage the money (Above and beyond the tuition) and I was expected to meet a certain GPA.  I did that with no problem and they paid the loans off eventually.  That taught me alot, and I ultimately was accountable for a lot of the responsibility. 

Now, if I'm about to sink $200k into a 529 over the course of 20 years, I want to see my return.....but I also want to make sure my kids don't take anything for granted.

At this point, I'm just venting....but I enjoy reading people's varying perspectives on the topic.

:popcorn:

 
Ideally, I'd like to have my kids walk away with 20-30k in loans in school loans.   Give them a little skin in the game.  I'm not sure that it matters to the way they'll view money.   If they choose a good major, they'll have no problem paying that back.

 
people talk about graduating with serious debt, and and how they don't want to burden their children. If you don't want to burden them, explain to them early the impact of debt, and how the choice of a school impacts that. How choosing a state school can mean graduating with $50k less in debt, say $300 - 400 more in their pocket each month (equivalent to a starting salary of say $10k more annual). 

If if you save $200k for them (for instance), what motivation do they have to use cost as a basis for comparing universities? On the other extreme, if you make it clear that paying for college is up to them, I would guess they will be a lot more cost conscious when choosing between a liberal arts degree at Sarah Lawrence College vs education degree at the state school. 

I personally plan to save some, maybe enough for 25% of costs? i agree with the others on the 'skin in the game' concept

 
wilked said:
people talk about graduating with serious debt, and and how they don't want to burden their children. If you don't want to burden them, explain to them early the impact of debt, and how the choice of a school impacts that. How choosing a state school can mean graduating with $50k less in debt, say $300 - 400 more in their pocket each month (equivalent to a starting salary of say $10k more annual). 

If if you save $200k for them (for instance), what motivation do they have to use cost as a basis for comparing universities? On the other extreme, if you make it clear that paying for college is up to them, I would guess they will be a lot more cost conscious when choosing between a liberal arts degree at Sarah Lawrence College vs education degree at the state school. 

I personally plan to save some, maybe enough for 25% of costs? i agree with the others on the 'skin in the game' concept
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I don't have kids, but I've thought about this a lot.

I went to private school from K to high school. My parents paid for my college education: UC for 1.5 years, then changing majors and taking community college courses for 1 year, and then finished up 3 years for my BSN at a state college. However, everything else I had to pay for except for my room and board during my time at UC. I am forever grateful to them, but I also chose a major that pays well financially.

So here's my plan for my children:

(1) Show them the average salary that each major makes.

(2) Be upfront and tell them how much my spouse and I make to support the family.

(3) You want to live like us.... you need to make at least this much or marry well. You want to live better? Make more money. You want to study ethnic studies or become a dance major? Then you better be ok living less comfortably.

Hopefully, with that information they will be better able to decide what career path they want to take. If they want to pursue music/acting/modeling/painting.... I'd rather they focus all their efforts from 18-21. That way they find out early if they can make it or not. Whenever they choose to go to school:

- I will help pay for community college and state college regardless of major.

- I will help pay for UC if it is a science major (non-psychology).

- I will help pay for private ONLY if they get into an Ivy league school regardless of major.

Really, I don't think there is much difference between a state school and UC & private schools unless we're talking about the cream of the crop where the name alone carries weight.

Agin, that's the plan from someone with no children.

 
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wilked said:
people talk about graduating with serious debt, and and how they don't want to burden their children. If you don't want to burden them, explain to them early the impact of debt, and how the choice of a school impacts that. How choosing a state school can mean graduating with $50k less in debt, say $300 - 400 more in their pocket each month (equivalent to a starting salary of say $10k more annual). 

If if you save $200k for them (for instance), what motivation do they have to use cost as a basis for comparing universities? On the other extreme, if you make it clear that paying for college is up to them, I would guess they will be a lot more cost conscious when choosing between a liberal arts degree at Sarah Lawrence College vs education degree at the state school. 

I personally plan to save some, maybe enough for 25% of costs? i agree with the others on the 'skin in the game' concept
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that's pretty much where we are.  I plan to have around $30k plus one year of the 911 GI bill for each of them.  That's probably going to be the most we contribute unless we pay off some of their debt after graduation.  If they decide to stay in state (and our plan to not move again holds) , Bama gives some money based on grades and scores which will help reduce costs.  

We'll tell them we'll match outside scholarships and the cash they pay but not loans (we'll probably have to cosign for those anyway) and let them use the GI bill after their first two years.

 Friends paid for their kids room and board but not tuition, that encouraged their kids to attend a good state school. Seems to have worked well for them. 

 
I firmly plan to NOT help with my kids college tuition, and am taking the advice of "plan for your retirement first and foremost".

However, I will be STRONGLY encouraging, teaching, guiding, and whatever else I can do to help make sure they do not go into crazy debt while choosing a stupid major, providing as much teaching as I can about finances and life choices. 

And another however, if we are doing well by the time the kids graduate, if they have some student debt then at THAT time we can help out.  I am not going to pay for college tuition at the expense of at least some sort of halfway comfortable retirement.  If I can help after the fact when I know I have that halfway decent retirement looming, then sure, I will help out.

Hopefully at least one of my kids wants to go into nursing.  Would be great.  Such an easy (assuming they have the personality for it) path where you start making good money by the time you are 20 or 21 and then have your job pay for extra schooling for your bachelors, and then grad school if you choose.  In the area I live now there are at least a few good community colleges where you can get your RN license, and it is absolutely ZERO difference than getting it at any other school.  The license is what is important, not where you attend school.  And the bet part is they would have zero student loans.  The schooling is pretty cheap and all the programs will find you part time jobs in nearby hospitals while you are in school. 

 
I plan on being aggressive with the 529 saving as soon as our first arrives in February, but my plan has always been for us to tell the kids that we have some money saved for college but not all of it (even if we do) so they know they will have some skin in the game when they make their decision on where to go. I'd love to have them pay for their own books or their meal plan through summer jobs, and then if things work out, be able to give them that money back after they graduate to help them get started. 

 
I went to a Ric Edelman seminar tonight not expecting a whole lot, but I actually learned some things. 

For the people who regularly post in this thread I think it's absolutely worth the 90 minutes spent.  You usually get a free book, I got Rescue Your Money which is $11 at Amazon, you get a free pen ( i took two extras :mellow: ), and they validate parking!  All that for $15 for an individual, and $25 for a couple.  Plus no bs sales pitches.  They ended the session, said two financial advisors were available if anyone needed help, and I walked out after turning in my survey with no one hassling me. 

Some good stuff too.  Lots of historical data like the fact that Dalbar reported that over the past 30 years US stock funds returned an average of 11% while investors averaged gains of 4% in stock funds because they keep trying to time the market.  I learned that inflation reduces the value money by half over 24 years (3% per year), and that if you missed the best 15 days of the S&P 500 between 2011-2015 you came away with nothing while those who stayed invested earned 10%. 

Good stuff.  Also if anyone wants a cheap financial plan Edelman is doing a PBS special towards the end of August where you can get one for a $240 donation to PBS.  Usually a financial plan from the firm costs $800, which is very reasonable IMO.  I don't need it in my position but I will someday, I think Edelman is good ####.  :thumbup: These seminars vary in scope and topic, look for them in your area.  This is also a solid risk tolerance and allocation guide IMO. 

 
Doctor Detroit said:
I went to a Ric Edelman seminar tonight not expecting a whole lot, but I actually learned some things. 

For the people who regularly post in this thread I think it's absolutely worth the 90 minutes spent.  You usually get a free book, I got Rescue Your Money which is $11 at Amazon, you get a free pen ( i took two extras :mellow: ), and they validate parking!  All that for $15 for an individual, and $25 for a couple.  Plus no bs sales pitches.  They ended the session, said two financial advisors were available if anyone needed help, and I walked out after turning in my survey with no one hassling me. 

Some good stuff too.  Lots of historical data like the fact that Dalbar reported that over the past 30 years US stock funds returned an average of 11% while investors averaged gains of 4% in stock funds because they keep trying to time the market.  I learned that inflation reduces the value money by half over 24 years (3% per year), and that if you missed the best 15 days of the S&P 500 between 2011-2015 you came away with nothing while those who stayed invested earned 10%. 

Good stuff.  Also if anyone wants a cheap financial plan Edelman is doing a PBS special towards the end of August where you can get one for a $240 donation to PBS.  Usually a financial plan from the firm costs $800, which is very reasonable IMO.  I don't need it in my position but I will someday, I think Edelman is good ####.  :thumbup: These seminars vary in scope and topic, look for them in your area.  This is also a solid risk tolerance and allocation guide IMO. 
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I've read that before, but it's worth bringing up again.  

Auto purchase S&P funds for the majority of my retirement account right now (37 years old) :thumbup:

 
NutterButter said:
Ideally, I'd like to have my kids walk away with 20-30k in loans in school loans.   Give them a little skin in the game.  I'm not sure that it matters to the way they'll view money.   If they choose a good major, they'll have no problem paying that back.
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This is pretty much what my parents did and where I'd like to end up.  If they want an ultra expensive private school, they'll have more in loans.  I don't have kids yet though, and who the hell knows what college tuition will look like ~20 years from now, so I'll definitely be saving something.

 
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