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| Author |
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| 25 new of 96 responses total. |
jep
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response 64 of 96:
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Feb 2 19:45 UTC 2006 |
re resp:62: Thanks for the overview! It is unlikely I'll be able to
contribute $15,000 in a single year any time soon.
Is that limit the pre-tax limit? How does it work if you put in money
after taxes? Are you double taxed; once when you earn the money and
then again when you take it out of your 401(k)?
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marcvh
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response 65 of 96:
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Feb 2 19:55 UTC 2006 |
That's the contribution limit; the sum of your pre-tax and post-tax
contributions may not be more than that number. It is adjusted upward
for inflation (one change made by Bush's tax changes which is not terribly
controversial.) Pre-tax contributions are taxed upon withdrawal;
post-tax are not, so there's no double taxing. Pre-tax is better for
most people IMHO.
I'm not sure that I'm enthused about this increase in "speciality"
savings vehicles with tax advantages. Retirement savings I can
understand, but now with special separate accounts for education, for
medical expenses, and so on it makes me wonder what else we'll see.
Roof repair savings accounts? Transmission failure savings accounts?
Bigscreen TV savings accounts?
The wet dream of the Bush admin, of course, is to simply create a single
Lifetime Savings Account (LSA) which has all the tax advantages of the
other account types but has few or no restrictions on withdrawals. The
net result would be, for most people, to eliminate the income tax on
unearned income, which is the real goal anyway.
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tod
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response 66 of 96:
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Feb 2 20:09 UTC 2006 |
We know where Neil went after S&L but where's Marvin Bush?
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gull
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response 67 of 96:
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Feb 2 20:31 UTC 2006 |
Re resp:51: The problem, of course, is that almost no one has enough
money in their 401(k). I saw an article recently that said that
because most people will have to cover their medical bills as well as
their living expenses out of their 401(k) proceeds, people over age 40
should be putting at least 25% of their income into retirement
accounts. Do you know anyone who's doing this? Me either. We're in
for some interesting times.
Re resp:56: My employer doesn't have a 401(k), either. They had one
with no match, for a while, but it was cancelled due to lack of
interest. (I find that totally understandable -- with no company
match, it makes more sense to open an IRA and have more flexibility.)
My previous employer had a Pricipal 401(k). I need to roll my money
out of it and into something with lower fees, one of these days.
Re resp:61: HSAs are a really interesting idea. I'm wondering how
they'll work out in practice. Early results suggest that people who
have HSAs are less likely to spend money on preventative care, so they
could backfire. I also noticed that HSA money can be invested pretty
aggressively; I suspect eventually we'll hear about an Enron-esque
scenario where a bunch of people will lose not only their retirement
money, but their health care money as well. Still, I think there's
potential. For real savings to occur we need more transparency in
health care pricing, though; currently there's no real way for people
to shop around.
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jep
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response 68 of 96:
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Feb 2 20:51 UTC 2006 |
I've never heard this idea of a Lifetime Savings Account mentioned
before. Has it been publicly proposed anywhere?
I can agree to some extent with your disapproval of the targeted tax-
free savings accounts. But to some extent they make sense.
For large investments like education and retirement, or for expenses
which can become large like medical expenses, they encourage people to
think ahead and work toward saving the money they will need in the
future. (There are also child care flexible spending accounts.)
I imagine they also have some beneficial effects on creating money for
financial institutions to use for their investments such as new
factories and homes and such. Americans tend to spend whatever they
have, as quickly as they can, and then borrow to spend more. Targeted
saving is one way to get people to put a little money aside.
When the idea is as badly implemented as FSAs which must be used in the
same calendar year, though, the concept gets unbearably frustrating.
FSAs are a wager system, not unlike buying lottery tickets. It's
inexcusable that you can't even roll the money over from one year to
the next.
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klg
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response 69 of 96:
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Feb 2 20:52 UTC 2006 |
Despite what VH says, $15K is the limit for pre-tax, not pre + post
tax, unless the post tax plan is a Roth 401(k).
The distribution of post tax contributions $$ is not taxable. Earnings
on post tax money are, however, taxable at distribution. There's no
tax benefit if you lose money on your investments.
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nharmon
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response 70 of 96:
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Feb 2 20:59 UTC 2006 |
Re 67: Its important to find out if your HSA is an investment account,
or a regular deposit account. Not all HSAs are FDIC insured and are
subject to investment risks. My advice? Stay the -f- away from HSAs that
are not FDIC insured.
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gull
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response 71 of 96:
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Feb 2 21:11 UTC 2006 |
The HSA my employer offers is not FDIC insured. It's administered by
Wells Fargo. The ability to invest in the stock market was pitched as
one of the benefits of the plan. I didn't take it mainly because I'm
in a domestic partnership, which the IRS doesn't recognize, so my HSA
would be off limits to him.
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marcvh
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response 72 of 96:
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Feb 3 16:31 UTC 2006 |
kludge is correct; if you're talking about some other post-tax investment
like a Roth IRA, the limits are different. I was addressing jep, who
appeared to be talking about a Roth 401(k). He is wrong about taxes,
though. Earnings on a Roth IRA or Roth 401(k) are not taxable at
distribution (or at any other time); if they were then there would be
little point in using one.
LSAs are heavily promoted at www.lifetimesavingsaccount.com. Personally
I think they're a bad public policy idea, although I suppose I would
personally derive some benefit from them.
As for the 25% thing, I don't make a habit of discussing it at length
with friends and relatives, but I don't get the idea that it's typical.
I'm sure the 25% is just a rough guideline anyway; if the biggest
unknown is medical expenses then that's really something which is fixed
rather than dependent on your lifestyle choices. A person with a higher
income may choose a more expensive car or a more expensive home, but
isn't so likely to choose more expensive heart medication.
I personally save about 20% of my gross income in tax-advantaged
retirement vehicles, and I'm not 40 yet. I guess that means I'm doing
OK so far, but I have no illusions that I'm typical.
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keesan
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response 73 of 96:
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Feb 3 16:41 UTC 2006 |
Self-employed people can contribute both to an IRA (I think the limit is now
up to $3500 if you are over a certain age) and a SIMPLE IRA (limit $6000, I
don't recall if you can pay taxes on it before investing or it is like a
regular IRA, whereas ROTH IRAs let you pay taxes and then invest and not pay
taxes on money withdrawn).
HSAs require not just a high deductible but 100% payment by the insurance
company after you reach the deductible. Those of us who got cheaper plans
where they pay 70 or 80% of the next $10,000 are therefore not eligible, and
I can't switch plans because of a preexisting condition, which is costing me
$8000/year, therefore they are not of any use to people who need them most.
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klg
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response 74 of 96:
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Feb 3 17:09 UTC 2006 |
VH is making himself out as some sort of expert on this topic.
Are you an expert, VH?
Where did JPJR indicate he was talking about a Roth?
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marcvh
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response 75 of 96:
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Feb 3 17:34 UTC 2006 |
Well, I sometimes look things up instead of just posting my offhand
half-remembered opinion. By Grex standards, maybe that makes me an
expert; draw your own conclusions.
He indicated he was talking about post-tax payroll deductions going
into a retirement plan. I inferred a Roth 401(k) from that; if he
meant something else then he can tell us what that would be.
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klg
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response 76 of 96:
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Feb 3 17:38 UTC 2006 |
I conclude that you are not an expert.
But I am.
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mcnally
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response 77 of 96:
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Feb 3 18:07 UTC 2006 |
re #76: I'm imagining that as the House Grosse family motto,
inscribed on your coat of arms in Latin.
"Ego infero ut vos es non professor. Tamen ego sum."
(Horrible Latin translation provided courtesy of the first
English-to-Latin web translator I came across.. Apologies
to Mr. Kaiser, whose high school Latin instruction I've
more or less completely forgotten..)
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slynne
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response 78 of 96:
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Feb 3 18:11 UTC 2006 |
I just got my 401(k) statement and I have calculated that if I were to
retire RIGHT NOW, I have enough money to last me 6 months. I guess I
better start putting a bit more into the account.
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tod
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response 79 of 96:
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Feb 3 18:26 UTC 2006 |
re #78
What if you retire in El Salvador?
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slynne
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response 80 of 96:
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Feb 3 19:44 UTC 2006 |
I dont know about El Salvador but I once was bored and figured out how
much it would cost to live in Malawi at a cheapo resort by the big lake
there. By my calculations, I could live off my 401(k) for 15 years if I
lived in some sort of camper. Hmmm that 15 years doesnt include the
cost of the camper or the airfare though. The problem with retiring to
the third world is that it is all well and good until a person gets
sick. Then what? I guess you just die.
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tod
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response 81 of 96:
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Feb 3 20:04 UTC 2006 |
That's the trade off with 3rd world vs Industrial Super Power:
You either live like a cog under the Horatio Alger delusion but knowing that
you can probably survive a bad scrape up or ailment; or, you can live within
your means comfortably so long as you keep yourself out of harm's way and in
reasonably good health.
Most folks wouldn't entertain expatriation simply for the fact that we're
very spoiled with our bountiful resources. Plus, learning a 2nd language
would mean less tv time. From an experienced standpoint, most 3rd world
places tend to also operate openly on bribery and thats often too
offensive a hurdle for most Americans to adapt to.
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klg
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response 82 of 96:
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Feb 3 20:16 UTC 2006 |
One good story about savings is that the sooner you start, the better.
If Person A begins to save at age 20 and socks away $1k/yr for ten
years and stops, and Person B begins saving at $1k/yr and continues
doing so for 30 years, they will both end up with the same account
balance. (Don't quote me on the exact #s. You can probably find it on
Motley Fool.)
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tod
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response 83 of 96:
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Feb 3 20:33 UTC 2006 |
Motley Fool is great. They duped every middle class sucker into joining the
stock market. "Just buy the top 10 best performers every year and you can
someday be a Rockefeller!" Lo & Behold, the big dot com crash and Enron
scandal rolled around and anybody with a yacht that goes to Atlantis had
already pulled out. It was a conspiracy from the word go. All the Motley
Fool suckers were living high on themself because they TOO now had their own
brokers and charts and software to watch their mediocre fortunes plummet into
obscurity. That's ok. GW will help us. He'll give us $300 back from our
income taxes and at the same time give billions to his Atlantis yachting
pals.
Dude, the whole "save now and retire wealthy" thing is old hat.
Healthcare will be TOO EXPENSIVE and most likely so will heating your home,
paying the water bill, and buying basic produce at the grocer.
China and India are going to be the next paradise and the USA will quickly
sink into pre-Soviet Russia peasantry thanks to the big corporate coup
by GW and friends.
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slynne
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response 84 of 96:
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Feb 3 20:37 UTC 2006 |
Geez tod, stop sugar coating it
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tod
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response 85 of 96:
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Feb 3 20:53 UTC 2006 |
Sorry. I got on a lil rant after reading Scooter Libby gets his trial not
until Jan of 2007..probably perfect timing for a Presidential pardon when GW
leaves office.
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nharmon
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response 86 of 96:
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Feb 3 21:06 UTC 2006 |
Re 82: The power of compound interest is something I never fully
realized until I worked at a bank. The earlier you start the better is
god damn right. I'm planning on providing for the retirements of all of
my children. Here is how: $6,000 deposited into a Roth IRA at age 10, if
left untouched, will become $1,107,388.96 by the time the kid is 60
years old(1). Thats with zero contributions after the initial $6k.
1: Assumes an average return rate of 11%, compounded annually. This is a
healthy assumption based on the history of the stock market.
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jep
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response 87 of 96:
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Feb 3 21:27 UTC 2006 |
I didn't know there was any such thing as a "Roth 401(k)". I've heard
of "Roth IRAs", but I proved last year I don't know how IRAs work.
My on-line 401(k) site lets me change my allocations. I can designate
up to 75% of my income pre-tax, according to the site, and 10% after
tax, according to the site. Does that make the 10% part a "Roth 401
(k)"?
Just today, there's a new option to automatically increase my
contribution percent by 1% annually until I reach a pre-set limit.
I'll have to think about that.
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tod
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response 88 of 96:
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Feb 3 21:36 UTC 2006 |
re #86
After 60 years, what is $1,107,388.96 with inflation, etc worth?
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