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

[Otis]

This is an example of penny wise but most likely pound foolish behavior.

Should we spend it

I guess what I don't get about that Acorns program is that it just takes money that you would otherwise have and puts it in this account.

Say I make $20,000 of credit card purchases in a year, and let's say that my Acorns spending (with rounding up) totals $22,000. So Acorns has rounded up my $20,000 purchases to $22,000. I now have $2,000 in an Acorns account (?), paying a management fee and a small monthly fee. But if I don't use Acorns, I can just take that $2,000 that I still have in my bank account and put it in a Vanguard fund or something.

It does seem like a great dumbed-down investing tool for new investors or clueless investors. But I fail to see how it works for me .

For me it just seems like a really easy way to divert "pocket change" into something useful. Im not a great planner or saver, and any way I can hide savings in painless ways is a good thing.

Are we still talking about pennies?

PENNIES?

Otis, even with your free wheel spending credit card swiping lifestyle we're talking about PENNIES... you're not even going to accumulate enough over the course of a quarter for a steak dinner.

This is absolutely ridiculous... we still talking about PENNIES?

When those pennies end up 25k sitting in an account for use on a whim when I'm 60, it'll be all good

Saving in a non-optimal way is better than not saving. This is basically the same reason why I got a 15 year mortgage and will be dumping more money toward my house than getting a 30 year and 'investing' the difference. I don't trust myself.

And it's more fun to see how these little transactions add up than just transferring the money each month.

 

[Steve Tasker]

I don't have a problem with someone using this Acorns system or paying down a mortgage early. I am a very risk-averse and debt-averse person and paid my student loans off pretty much ASAP once I could afford it.

But I just don't think the Acorns system is really worth it for people who already have the discipline to save. It should be (and seems to be) geared toward people who know they otherwise won't save, or won't save enough. That's great, but most people in this thread seem to be financial professionals and other financial experts like Dentist who don't really need this tool. That's all I was saying.

 

[eaganwildcats]

I don't have a problem with someone using this Acorns system or paying down a mortgage early. I am a very risk-averse and debt-averse person and paid my student loans off pretty much ASAP once I could afford it.

But I just don't think the Acorns system is really worth it for people who already have the discipline to save. It should be (and seems to be) geared toward people who know they otherwise won't save, or won't save enough. That's great, but most people in this thread seem to be financial professionals and other financial experts like Dentist who don't really need this tool. That's all I was saying.

Yeah, it just seems like a kind of cool idea.

 

[kutta]

This is an example of penny wise but most likely pound foolish behavior.

I don't see how it's even close to pound foolish.

You might be able to make the argument that it's not penny wise because there is a slightly better way to invest your money. But it's not pound foolish.

 

[humpback]

It amazes me how so many seemingly intelligent, successful people can be so bad/undisciplined with money.

 

[Dentist]

This is an example of penny wise but most likely pound foolish behavior.

I don't see how it's even close to pound foolish.

You might be able to make the argument that it's not penny wise because there is a slightly better way to invest your money. But it's not pound foolish.

sorry, that was directed in Otis's direction and I didn't do a reply.

what I meant was that when it comes to your savings and net worth accumulations you can't make crazy real estate transactions and have high end scotch and guitars but expect much to change due to an app designed for people probably with household incomes under $35K a year who don't have $500 to their name that really just need some way to start and generate some savings somehow through financial self-trickery

 

[Dentist]

It amazes me how so many seemingly intelligent, successful people can be so bad/undisciplined with money.

People have difficulty in life finding balance.

It's rare to see someone successful in nearly all aspects of their life ranging from business, financial discipline, family, fitness, their own moral code, etc.

Almost always someone extremely successful in one area such as business lack in another area of their life... oftentimes discipline, fitness, or family, or moral code.

Whereas an average joe with an average to below average income might have great financial discipline and family life.

They discuss this in Millionaire next door... how often times doctors and lawyers are horrible wealth accumulators, but educators are frequently excellent wealth accumulators despite the former generating more year to year income.

 

[Otis]

It amazes me how so many seemingly intelligent, successful people can be so bad/undisciplined with money.

People have difficulty in life finding balance.

It's rare to see someone successful in nearly all aspects of their life ranging from business, financial discipline, family, fitness, their own moral code, etc.

Almost always someone extremely successful in one area such as business lack in another area of their life... oftentimes discipline, fitness, or family, or moral code.

Whereas an average joe with an average to below average income might have great financial discipline and family life.

They discuss this in Millionaire next door... how often times doctors and lawyers are horrible wealth accumulators, but educators are frequently excellent wealth accumulators despite the former generating more year to year income.

Pretty good posting here. I've always, since I was probably 13 years old, been a hard worker, a good earner, but a big spender. I went out and got paper routes and always worked and always earned. But I also spent. Never cared much for wealth accumulating.

Now that I'm nearing 40 and have a wife, two kids, and a hefty mortgage, that all is starting to change at least a little bit. I don't spend much money on "stuff" like I used to, but I'm also not naturally a saver. I'm planning on making a big push in that direction this coming year, now that our "forever home" purchase is behind us and we're settled in.

 

[Dentist]

It amazes me how so many seemingly intelligent, successful people can be so bad/undisciplined with money.

People have difficulty in life finding balance.

It's rare to see someone successful in nearly all aspects of their life ranging from business, financial discipline, family, fitness, their own moral code, etc.

Almost always someone extremely successful in one area such as business lack in another area of their life... oftentimes discipline, fitness, or family, or moral code.

Whereas an average joe with an average to below average income might have great financial discipline and family life.

They discuss this in Millionaire next door... how often times doctors and lawyers are horrible wealth accumulators, but educators are frequently excellent wealth accumulators despite the former generating more year to year income.

Pretty good posting here. I've always, since I was probably 13 years old, been a hard worker, a good earner, but a big spender. I went out and got paper routes and always worked and always earned. But I also spent. Never cared much for wealth accumulating.

Now that I'm nearing 40 and have a wife, two kids, and a hefty mortgage, that all is starting to change at least a little bit. I don't spend much money on "stuff" like I used to, but I'm also not naturally a saver. I'm planning on making a big push in that direction this coming year, now that our "forever home" purchase is behind us and we're settled in.

And Otis I had the very opposite experience growing up.

I mowed lawns from about age 12-13 through college. It was hard work and I didn't really enjoy it that much.

And one of the things I learned from the experience was that it's really not money that you're earning/spending.. it's life effort/time from one thing used on something else.

So when I would spend an hour mowing a lawn and earn like $10 or $20 or something.. and then it came time to turn around and spend $50 for a Nintendo game or $8 for a movie ticket, etc... in my head I was always like "wait, is this item I'm about to purchase really worth the X hours I spent mowing that lawn?" Sometimes the answer was yes, but most of the time it was no.

I didn't like mowing those lawns anymore than I like giving someone another shot or doing another root canal..... I imagine money could be easier to spend if you actually got up in the morning really excited to goto your job because your job was also a hobby of yours that didn't bring frustration and stress.

In addition... my parents always had a system for me growing up regarding impulse purchases.. if I saw a toy I wanted at the store and asked if I could have it.. their answer was nearly always yes... provided I still wanted the toy 2-3 weeks later... thus teaching delayed gratification. Sometimes I would in fact still want that toy, but of course, most of the time I forgot about it as most people would with most purchases if a store told them "we'd be happy to sell you this, but let's make sure you want it and we will hold it for you until next week"

It was a good system and I recommend it.

 

[Doctor Detroit]

I guess what I don't get about that Acorns program is that it just takes money that you would otherwise have and puts it in this account.

Say I make $20,000 of credit card purchases in a year, and let's say that my Acorns spending (with rounding up) totals $22,000. So Acorns has rounded up my $20,000 purchases to $22,000. I now have $2,000 in an Acorns account (?), paying a management fee and a small monthly fee. But if I don't use Acorns, I can just take that $2,000 that I still have in my bank account and put it in a Vanguard fund or something.

It does seem like a great dumbed-down investing tool for new investors or clueless investors. But I fail to see how it works for me .

exactly

Did you two miss the part where it was designed for those under 25? Or that it might be fun for more experienced investors?

If you don't like it, fine.

 

[moleculo]

It amazes me how so many seemingly intelligent, successful people can be so bad/undisciplined with money.

People have difficulty in life finding balance.

It's rare to see someone successful in nearly all aspects of their life ranging from business, financial discipline, family, fitness, their own moral code, etc.

Almost always someone extremely successful in one area such as business lack in another area of their life... oftentimes discipline, fitness, or family, or moral code.

Whereas an average joe with an average to below average income might have great financial discipline and family life.

They discuss this in Millionaire next door... how often times doctors and lawyers are horrible wealth accumulators, but educators are frequently excellent wealth accumulators despite the former generating more year to year income.

Pretty good posting here. I've always, since I was probably 13 years old, been a hard worker, a good earner, but a big spender. I went out and got paper routes and always worked and always earned. But I also spent. Never cared much for wealth accumulating.

Now that I'm nearing 40 and have a wife, two kids, and a hefty mortgage, that all is starting to change at least a little bit. I don't spend much money on "stuff" like I used to, but I'm also not naturally a saver. I'm planning on making a big push in that direction this coming year, now that our "forever home" purchase is behind us and we're settled in.

And Otis I had the very opposite experience growing up.

I mowed lawns from about age 12-13 through college. It was hard work and I didn't really enjoy it that much.

And one of the things I learned from the experience was that it's really not money that you're earning/spending.. it's life effort/time from one thing used on something else.

So when I would spend an hour mowing a lawn and earn like $10 or $20 or something.. and then it came time to turn around and spend $50 for a Nintendo game or $8 for a movie ticket, etc... in my head I was always like "wait, is this item I'm about to purchase really worth the X hours I spent mowing that lawn?" Sometimes the answer was yes, but most of the time it was no.

I didn't like mowing those lawns anymore than I like giving someone another shot or doing another root canal..... I imagine money could be easier to spend if you actually got up in the morning really excited to goto your job because your job was also a hobby of yours that didn't bring frustration and stress.

In addition... my parents always had a system for me growing up regarding impulse purchases.. if I saw a toy I wanted at the store and asked if I could have it.. their answer was nearly always yes... provided I still wanted the toy 2-3 weeks later... thus teaching delayed gratification. Sometimes I would in fact still want that toy, but of course, most of the time I forgot about it as most people would with most purchases if a store told them "we'd be happy to sell you this, but let's make sure you want it and we will hold it for you until next week"

It was a good system and I recommend it.

I think there's something to the delayed gratification thing.

I heard an interesting story in NPR a while ago that found correlation between kids cool with delayed gratification and success later on in life. The test was this: I will give you one marshmallow now, or two marshmallows in 5 minutes. I've been meaning to try this on my kids, but, of course, I keep eating all of the marshmallows first

 

[Doctor Detroit]

Speaking of NPR, I find the Planet Money podcast either boring or fantastic.

Stacking Benjamins is my favorite financial podcast (this is where I heard of Acorns). Also enjoy the Rick Edelman show although he spends a lot of time directing people to financial planners.

 

[Judge Smails]

Most of the well-known financial advisors advise against paying for your kids college. Personally I think it's something you should do if you can, but agree that if it is at the detriment of you own retirement, you shouldn't do it. Lots of stories of people who paid for their kids college and have almost nothing set aside for themselves.

I know what they say, and I agree that it should never be in lieu of retirement savings. But the joy I get for helping my kids get a head start in life is worth it. Reading all of the articles about adults saddled with student loan debt for decades, who put off home ownership because of it, etc might make some of the experts rethink their position. If I'm not wasteful I'll have plenty in retirement.

 

[humpback]

It amazes me how so many seemingly intelligent, successful people can be so bad/undisciplined with money.

People have difficulty in life finding balance.

It's rare to see someone successful in nearly all aspects of their life ranging from business, financial discipline, family, fitness, their own moral code, etc.

Almost always someone extremely successful in one area such as business lack in another area of their life... oftentimes discipline, fitness, or family, or moral code.

Whereas an average joe with an average to below average income might have great financial discipline and family life.

They discuss this in Millionaire next door... how often times doctors and lawyers are horrible wealth accumulators, but educators are frequently excellent wealth accumulators despite the former generating more year to year income.

Oh, I know, but it still amazes me. We're not talking about day trading commodities here, we're talking about putting a tiny percentage of your large earnings into some type of savings account, which can be set up to happen automatically any number of ways. It boggles my mind that there are successful lawyers who are happy to pay those fees to do the equivalent of having a change jug in their house.

 

[FUBAR]

Speaking of NPR, I find the Planet Money podcast either boring or fantastic.

Stacking Benjamins is my favorite financial podcast (this is where I heard of Acorns). Also enjoy the Rick Edelman show although he spends a lot of time directing people to financial planners.

I've been wanting to add a new podcast to my list. Thanks.

 

[FUBAR]

It amazes me how so many seemingly intelligent, successful people can be so bad/undisciplined with money.

People have difficulty in life finding balance.

It's rare to see someone successful in nearly all aspects of their life ranging from business, financial discipline, family, fitness, their own moral code, etc.

Almost always someone extremely successful in one area such as business lack in another area of their life... oftentimes discipline, fitness, or family, or moral code.

Whereas an average joe with an average to below average income might have great financial discipline and family life.

They discuss this in Millionaire next door... how often times doctors and lawyers are horrible wealth accumulators, but educators are frequently excellent wealth accumulators despite the former generating more year to year income.

Pretty good posting here. I've always, since I was probably 13 years old, been a hard worker, a good earner, but a big spender. I went out and got paper routes and always worked and always earned. But I also spent. Never cared much for wealth accumulating.

Now that I'm nearing 40 and have a wife, two kids, and a hefty mortgage, that all is starting to change at least a little bit. I don't spend much money on "stuff" like I used to, but I'm also not naturally a saver. I'm planning on making a big push in that direction this coming year, now that our "forever home" purchase is behind us and we're settled in.

And Otis I had the very opposite experience growing up.

I mowed lawns from about age 12-13 through college. It was hard work and I didn't really enjoy it that much.

And one of the things I learned from the experience was that it's really not money that you're earning/spending.. it's life effort/time from one thing used on something else.

So when I would spend an hour mowing a lawn and earn like $10 or $20 or something.. and then it came time to turn around and spend $50 for a Nintendo game or $8 for a movie ticket, etc... in my head I was always like "wait, is this item I'm about to purchase really worth the X hours I spent mowing that lawn?" Sometimes the answer was yes, but most of the time it was no.

I didn't like mowing those lawns anymore than I like giving someone another shot or doing another root canal..... I imagine money could be easier to spend if you actually got up in the morning really excited to goto your job because your job was also a hobby of yours that didn't bring frustration and stress.

In addition... my parents always had a system for me growing up regarding impulse purchases.. if I saw a toy I wanted at the store and asked if I could have it.. their answer was nearly always yes... provided I still wanted the toy 2-3 weeks later... thus teaching delayed gratification. Sometimes I would in fact still want that toy, but of course, most of the time I forgot about it as most people would with most purchases if a store told them "we'd be happy to sell you this, but let's make sure you want it and we will hold it for you until next week"

It was a good system and I recommend it.

We do something similar with our kids - except instead of us buying it, we make the kids earn it through doing their chores. My oldest (11) is really good about saving up for bigger purchases, his brothers could do better but they're learning and they're young. Last year they all put their money together and bought a Wii-U before Christmas.

I actually enjoyed my newspaper route as a kid, Sunday mornings were the best when I would ride in the back of the van, jump out at each house on the route, run and put the paper on the person's porch or in their door. But I still spent money, a whole lot more than my parents seemed to think, on baseball cards. The lesson there might be more important than anything learned in school.

 

[FUBAR]

It amazes me how so many seemingly intelligent, successful people can be so bad/undisciplined with money.

People have difficulty in life finding balance.

It's rare to see someone successful in nearly all aspects of their life ranging from business, financial discipline, family, fitness, their own moral code, etc.

Almost always someone extremely successful in one area such as business lack in another area of their life... oftentimes discipline, fitness, or family, or moral code.

Whereas an average joe with an average to below average income might have great financial discipline and family life.

They discuss this in Millionaire next door... how often times doctors and lawyers are horrible wealth accumulators, but educators are frequently excellent wealth accumulators despite the former generating more year to year income.

Oh, I know, but it still amazes me. We're not talking about day trading commodities here, we're talking about putting a tiny percentage of your large earnings into some type of savings account, which can be set up to happen automatically any number of ways. It boggles my mind that there are successful lawyers who are happy to pay those fees to do the equivalent of having a change jug in their house.

These are completely different skill sets. Lawyers, at least the highly successful ones, tend to develop a one-track mind and focus on winning no matter the work that has to go into it. Although the trials / negotiations can be long, it's not really delayed gratification. It's the shark eating dinner. Saving is more akin to a bird building a nest. It can be difficult to switch mentalities.

We also get Choice Overload / Overchoice which can cause highly analytical people (lawyers) to freeze instead of making a choice. With all the investment options available, it can be difficult to choose the "right" one. So they choose not to decide and still have made a choice.

 

[Dentist]

We also get Choice Overload / Overchoice which can cause highly analytical people (lawyers) to freeze instead of making a choice. With all the investment options available, it can be difficult to choose the "right" one. So they choose not to decide and still have made a choice.

That is seen so frequently in the investing world that it's unbelievable.

I see it even at my office... there are like 25 options and people are like "well which one is the RIGHT choice!" They would rather make no choice than the "wrong" choice.. but in reality if they just made ANY choice just to be invested in some way it would almost always be superior to just being 100% cash like so many people are.

Their obsession with never losing money because money lost would be 10X more bitter than the sweetness of money earned causes them to go broke slowly without them even realizing it due to inflation >>> money market 1% rates and that's somehow satisfactory rather than the ups and down but long term ups of the stock market.

People's irrationality in the face of facts is mind-numbingly stupid... but at the end of the day if there weren't so many stupid people I guess it would be harder to be exceptional and thus get paid for a higher level knowledge and skill set... so I should probably be thankful.

 

[Tiger Fan]

FWIW, I'll be starting the "backdoor Roth" next year. I sat with my financial advisor and started the paperwork to transfer both my wife and my rollover IRA funds to our current retirement plan, so essentially that will "zero out" the rollover IRA. Then, we will put aftertax $ into the rollovers and "backdoor" them into the Roth.

 

[wilked]

FWIW, I'll be starting the "backdoor Roth" next year. I sat with my financial advisor and started the paperwork to transfer both my wife and my rollover IRA funds to our current retirement plan, so essentially that will "zero out" the rollover IRA. Then, we will put aftertax $ into the rollovers and "backdoor" them into the Roth.

How are you handling the basis?

 

[Buddy Ball 2K3]

Speaking of NPR, I find the Planet Money podcast either boring or fantastic.

Stacking Benjamins is my favorite financial podcast (this is where I heard of Acorns). Also enjoy the Rick Edelman show although he spends a lot of time directing people to financial planners.

I only listen to the after show

 

[Tiger Fan]

FWIW, I'll be starting the "backdoor Roth" next year. I sat with my financial advisor and started the paperwork to transfer both my wife and my rollover IRA funds to our current retirement plan, so essentially that will "zero out" the rollover IRA. Then, we will put aftertax $ into the rollovers and "backdoor" them into the Roth.

How are you handling the basis?

all of this money was pre-tax money

 

[eoMMan]

Speaking of NPR, I find the Planet Money podcast either boring or fantastic.

Stacking Benjamins is my favorite financial podcast (this is where I heard of Acorns). Also enjoy the Rick Edelman show although he spends a lot of time directing people to financial planners.

I only listen to the after show

Stacking Benjamins is good stuff.

 

[Tiger Fan]

Acorns and the like are good if you're not disciplined with saving. Works for some, doesn't make sense for others

 

[inca911]

On a somewhat related topic, the following documents should be completed as part of any sound financial retirement plan:

• Revocable Living Trust: avoid the delay and hassle of probate upon death, capturing your wishes upon your death
• Pour-Over Will: for anything that was missed being put in the trust
• Power of Attorney: granting financial decision-making authority to a trusted person when you are not able
• Health Care Directive: granting health care decision-making authority to a trusted person when you are not able

I just finished getting these in place. I met with several lawyers, and the fees to complete these docs ranged from $800 - $2,500.

 

[humpback]

It amazes me how so many seemingly intelligent, successful people can be so bad/undisciplined with money.

People have difficulty in life finding balance.

It's rare to see someone successful in nearly all aspects of their life ranging from business, financial discipline, family, fitness, their own moral code, etc.

Almost always someone extremely successful in one area such as business lack in another area of their life... oftentimes discipline, fitness, or family, or moral code.

Whereas an average joe with an average to below average income might have great financial discipline and family life.

They discuss this in Millionaire next door... how often times doctors and lawyers are horrible wealth accumulators, but educators are frequently excellent wealth accumulators despite the former generating more year to year income.

Oh, I know, but it still amazes me. We're not talking about day trading commodities here, we're talking about putting a tiny percentage of your large earnings into some type of savings account, which can be set up to happen automatically any number of ways. It boggles my mind that there are successful lawyers who are happy to pay those fees to do the equivalent of having a change jug in their house.

These are completely different skill sets. Lawyers, at least the highly successful ones, tend to develop a one-track mind and focus on winning no matter the work that has to go into it. Although the trials / negotiations can be long, it's not really delayed gratification. It's the shark eating dinner. Saving is more akin to a bird building a nest. It can be difficult to switch mentalities.

We also get Choice Overload / Overchoice which can cause highly analytical people (lawyers) to freeze instead of making a choice. With all the investment options available, it can be difficult to choose the "right" one. So they choose not to decide and still have made a choice.

I understand that they are different skill sets, but that's not what I'm saying. The minimal skill set required to set up an account like this is roughly the same as the minimal skill set required to set up an automatic contribution into Vanguard or any number of better options than this. Again, we're not talking about becoming a CFP or mastering every aspect of your finances, we're talking about setting aside a little bit of money in an S&P 500 index. There is no way that smart, successful individuals lack the skill set to do that.

 

[Judge Smails]

On a somewhat related topic, the following documents should be completed as part of any sound financial retirement plan:

• [SIZE=11pt]Revocable Living Trust: avoid the delay and hassle of probate upon death, capturing your wishes upon your death[/SIZE]
• Pour-Over Will: for anything that was missed being put in the trust
• Power of Attorney: granting financial decision-making authority to a trusted person when you are not able
• Health Care Directive: granting health care decision-making authority to a trusted person when you are not able

I just finished getting these in place. I met with several lawyers, and the fees to complete these docs ranged from $800 - $2,500.

I have done the Living Trust, Power of Attorney and Health Care Directives with the best guy in town. I'm not sure of a Pour-Over-Will - is that standard?

 

[Judge Smails]

I need some guidance on the back door Roth. I'll go to a professional, but would love to hear guidance from the FFA gurus.

I max out 401K's with the catch up provision since I'm over 50. I'm over the income threshold for a Roth and have never set one up. I have one IRA account that is managed by Wells Fargo Advisors. Basically any 401K's that I've been a part of in the past have rolled over into that 1 account. Now, I am rolling over 130K or so from my most recent employer 401K (just switched to a new firm). My plan was to roll that over to my new company's 401K strictly to take advantage of the 55 rule (can get access to the funds without penalty at 55 instead of 59 1/2 with an IRA). Is that wise? Or should I consider a back door Roth? It sounds sorta tricky from a calculation perspective.

I'm also looking at greatly increasing retirement contributions the next 8 years with all my kids out of college soon. My goal is an additional 100K a year. Don't know if I'll hit it, but that's my goal. Trying to figure out how to best invest the amounts after I max out 401K's and be wise from a tax perspective. Thoughts?

 

[wilked]

FWIW, I'll be starting the "backdoor Roth" next year. I sat with my financial advisor and started the paperwork to transfer both my wife and my rollover IRA funds to our current retirement plan, so essentially that will "zero out" the rollover IRA. Then, we will put aftertax $ into the rollovers and "backdoor" them into the Roth.

How are you handling the basis?

all of this money was pre-tax money

ahh, so pro-rata doesn't apply? I have a similar situation, rollover IRA (all from former 401ks), I assumed pro-rata would apply

 

[Tiger Fan]

I need some guidance on the back door Roth. I'll go to a professional, but would love to hear guidance from the FFA gurus.

I max out 401K's with the catch up provision since I'm over 50. I'm over the income threshold for a Roth and have never set one up. I have one IRA account that is managed by Wells Fargo Advisors. Basically any 401K's that I've been a part of in the past have rolled over into that 1 account. Now, I am rolling over 130K or so from my most recent employer 401K (just switched to a new firm). My plan was to roll that over to my new company's 401K strictly to take advantage of the 55 rule (can get access to the funds without penalty at 55 instead of 59 1/2 with an IRA). Is that wise? Or should I consider a back door Roth? It sounds sorta tricky from a calculation perspective.

I'm also looking at greatly increasing retirement contributions the next 8 years with all my kids out of college soon. My goal is an additional 100K a year. Don't know if I'll hit it, but that's my goal. Trying to figure out how to best invest the amounts after I max out 401K's and be wise from a tax perspective. Thoughts?

Someone might know better than me, but I think you're screwed b/c you don't have an existing Roth IRA. I hope I'm wrong, but I'm not sure

 

[Tiger Fan]

FWIW, I'll be starting the "backdoor Roth" next year. I sat with my financial advisor and started the paperwork to transfer both my wife and my rollover IRA funds to our current retirement plan, so essentially that will "zero out" the rollover IRA. Then, we will put aftertax $ into the rollovers and "backdoor" them into the Roth.

How are you handling the basis?

all of this money was pre-tax money

ahh, so pro-rata doesn't apply? I have a similar situation, rollover IRA (all from former 401ks), I assumed pro-rata would apply

I don't believe so (at least this was the way it was explained to me). Once you eliminate all pre-tax money from the rollover and put it into your existing retirement account; then you can fund that rollover with post tax $ and then make the "transfer" to the Roth.

I'm not sure if my advisor told me this was the best route b/c our 401K offers tons of options or not.

ETA: If I'm reading the example in this link correctly, maybe that's why he recommended I wait until next year

 

[Doctor Detroit]

$26 in my Acorns account!!!!!

 

[inca911]

I have done the Living Trust, Power of Attorney and Health Care Directives with the best guy in town. I'm not sure of a Pour-Over-Will, is that standard?

All three of the lawyers that I met with had the Will in their standard package of documents. As it was explained to me, the Will addresses any assets that are not within the trust, and manages their disposition. To me, it seemed like a duplication of effort with the Trust, but check with your guy.

 

[Doctor Detroit]

A Random walk down Wall Street is a book I read some years ago. Read it again today, highly recommended.

 

[Doctor Detroit]

The Obama Administration has recommended to the 2015 budget a required minimum distribution for the Roth IRA.

If he doesn't get it, some other administration will. Hundreds of billions of $$$ in Roth funds now, this is going to be the goose that laid the golden egg for politicians at some point. Getting taxed twice on Roth down the road isn't as ridiculous as it may sound. This kind of makes me to just want to keep all my 401k funds in the traditional.

I have $46 I'my Acorns account now, I'm not worried.

 

[Juxtatarot]

The Obama Administration has recommended to the 2015 budget a required minimum distribution for the Roth IRA.

If he doesn't get it, some other administration will. Hundreds of billions of $$$ in Roth funds now, this is going to be the goose that laid the golden egg for politicians at some point. Getting taxed twice on Roth down the road isn't as ridiculous as it may sound. This kind of makes me to just want to keep all my 401k funds in the traditional.

I have $46 I'my Acorns account now, I'm not worried.

There is a gigantic leap from requiring RMDs on Roths to double taxation.

 

[Tiger Fan]

All "They can do anything, they're the gov't" jokes aside....can they actually do that to Roth IRA holders? In practicality, you're taking potentially hundreds of thousands of dollars away from people's retirement. Will this fly reputation-wise?

 

[FUBAR]

All "They can do anything, they're the gov't" jokes aside....can they actually do that to Roth IRA holders? In practicality, you're taking potentially hundreds of thousands of dollars away from people's retirement. Will this fly reputation-wise?

probably not, but the people who actually get these guys elected aren't eligible for the Roth.

 

[Tiger Fan]

All "They can do anything, they're the gov't" jokes aside....can they actually do that to Roth IRA holders? In practicality, you're taking potentially hundreds of thousands of dollars away from people's retirement. Will this fly reputation-wise?

probably not, but the people who actually get these guys elected aren't eligible for the Roth.

they can do the backdoor!

 

[fourd]

The Obama Administration has recommended to the 2015 budget a required minimum distribution for the Roth IRA.

If he doesn't get it, some other administration will. Hundreds of billions of $$$ in Roth funds now, this is going to be the goose that laid the golden egg for politicians at some point. Getting taxed twice on Roth down the road isn't as ridiculous as it may sound. This kind of makes me to just want to keep all my 401k funds in the traditional.

I have $46 I'my Acorns account now, I'm not worried.

There is a gigantic leap from requiring RMDs on Roths to double taxation.

 

[Tom Hagen]

All "They can do anything, they're the gov't" jokes aside....can they actually do that to Roth IRA holders? In practicality, you're taking potentially hundreds of thousands of dollars away from people's retirement. Will this fly reputation-wise?

I think they could but doubt they will. If anything it would probably be like the taxation of social security benefits, if your income is over X then Y% of your Roth distribution will be taxed. It's easier to sell to voters if only people with incomes over (insert random number here) pay tax on Roth distributions.

 

[Steve Tasker]

All "They can do anything, they're the gov't" jokes aside....can they actually do that to Roth IRA holders? In practicality, you're taking potentially hundreds of thousands of dollars away from people's retirement. Will this fly reputation-wise?

I think they could but doubt they will. If anything it would probably be like the taxation of social security benefits, if your income is over X then Y% of your Roth distribution will be taxed. It's easier to sell to voters if only people with incomes over (insert random number here) pay tax on Roth distributions.

I have to think that they'd grandfather-in already-existing Roths or something like that. Like an Old Roth and a New Roth type of thing.

 

[Jayrod]

No way will Roth distributions ever be taxable.

 

[Juxtatarot]

The Obama Administration has recommended to the 2015 budget a required minimum distribution for the Roth IRA.

If he doesn't get it, some other administration will. Hundreds of billions of $$$ in Roth funds now, this is going to be the goose that laid the golden egg for politicians at some point. Getting taxed twice on Roth down the road isn't as ridiculous as it may sound. This kind of makes me to just want to keep all my 401k funds in the traditional.

I have $46 I'my Acorns account now, I'm not worried.

As a hedge, I'm invested in tar, feathers, pitchforks, and torches.

Don't forget about rails.

 

[Freaky Styley]

The Obama Administration has recommended to the 2015 budget a required minimum distribution for the Roth IRA.

If he doesn't get it, some other administration will. Hundreds of billions of $$$ in Roth funds now, this is going to be the goose that laid the golden egg for politicians at some point. Getting taxed twice on Roth down the road isn't as ridiculous as it may sound. This kind of makes me to just want to keep all my 401k funds in the traditional.

I have $46 I'my Acorns account now, I'm not worried.

I don't agree with DD often, but he's correct on this point. My guess is that at some point retirement accounts are restructured to encourage investment in T-Bills or muni\state bonds or suffer a withdrawal penalty. Gotta keep up that deficit spending... If you don't think it could happen in 'Merica ask an Argentine how safe their retirement funds were to change by government mandate.

 

[humpback]

The Obama Administration has recommended to the 2015 budget a required minimum distribution for the Roth IRA.

If he doesn't get it, some other administration will. Hundreds of billions of $$$ in Roth funds now, this is going to be the goose that laid the golden egg for politicians at some point. Getting taxed twice on Roth down the road isn't as ridiculous as it may sound. This kind of makes me to just want to keep all my 401k funds in the traditional.

I have $46 I'my Acorns account now, I'm not worried.

I don't agree with DD often, but he's correct on this point. My guess is that at some point retirement accounts are restructured to encourage investment in T-Bills or muni\state bonds or suffer a withdrawal penalty. Gotta keep up that deficit spending... If you don't think it could happen in 'Merica ask an Argentine how safe their retirement funds were to change by government mandate.

That's still different than being taxed on the Roth twice.

 

[mquinnjr]

No way will Roth distributions ever be taxable.

Anything is possible when it comes to stripping away tax holidays like those that Roth IRA accounts currently enjoy, and I feel like it's irrational to think otherwise. I've been hammering away at these accounts with that in mind, so I'm sure someone will "fix the glitch" before I get to enjoy tax-free investment growth over multiple decades.

 

[Steve Tasker]

No way will Roth distributions ever be taxable.

Anything is possible when it comes to stripping away tax holidays like those that Roth IRA accounts currently enjoy, and I feel like it's irrational to think otherwise. I've been hammering away at these accounts with that in mind, so I'm sure someone will "fix the glitch" before I get to enjoy tax-free investment growth over multiple decades.

I really, really, really would be surprised if the government decides to fully tax Roth IRA distributions down the line.

I could see them doing away with the Roth altogether. I could see them changing Roths more along the lines of non-deductible IRAs - taxpayer allowed tax-deferred growth and has a basis in the IRA, with tax paid on income earned when distributed.

To me, the idea of grandfathering "old Roths" seems like something they would do. Or perhaps locking in a current value at a fixed date (December 31 20xx) as a non-taxable basis. Something like that. But I don't think they'll turn around and make the entire value of everyone's Roth IRA taxable. As much as we like to bag on the government and the IRS, the tax code is generally pretty fair, in my opinion. Declaring the entire value in everyone's Roth to be fully taxable is unfair. I have enough faith in the government that they'd recognize that and offer some sort of provision to avoid double-taxation on the amounts previously contributed.

 

[moleculo]

I think Roths are held by enough people that it would feel like raising taxes on the middle class. I think there is plenty of "tax the rich" stuff they will do before they get around to screwing the little guys.

 

[Tom Hagen]

To be clear, I think it's unlikely they will be taxed and if they are it would only be the earnings, not the initial contributions.