All Forum Posts by: Benjamin C.

Hard to answer with the info you gave, what is the time period you want to have this money invested for? If short term, cash is good. We just got reminded that markets can go down

Why would you want to do that?

Michael Swan Congrats, you clearly have an inspirational story. Sounds like great achievements to be proud of.

I totally understand how folks have made their fortunes in real estate, that's why we're all on this website. But it also drives me crazy when people make the general statement "what are you gonna do, put your money in the stock market?" The stock market has returned 10% annualized for he last 10 years. That is an enormous return. I'm not saying that some don't do better then that in real estate, but do not error by dismissing the common logic based on years of evidence and some really smart people who all say you should put your money on stock index funds. I think a smart investor considers all of the opportunities available and builds a portfolio across those options. Read the intelligent investor by Ben Graham.

Hi All, I'm curious what tools folks use to track net worth. Personal Capital? Mint? Quicken? Excel? Something Else? I use Personal Capital myself. Ben

Ron Harris Hi Ron, Yes, the 529 is a powerful tool for college savings if that is a personal goal for you. I use it for my daughter. The power of federal tax free growth for 18 years can't be ignored. And it varies state by state, but in CT where I am I can deduct my contributions from my state income taxes up to 10k/yr. So I think it's a great way to both, create a fully separate college savings for your child and avoid taxes and thus receive a better after tax return. Ben

@Account Closed Sounds great, congrats!

Patrick Sheridan Hi Patrick, I was just reading this post from a year ago and was wondering if you could give an update. Did you wind up buying the property and if so, how has it gone? Were your cost assumptions accurate? Thanks Ben

Originally posted by @Rick Santasiere:

@Benjamin C.thanks for the explanation.  I too have a few "back-door roths" for my wife and I from our prior corporate jobs, but never earned nearly enough $$ to be even close to Roth Income limits. I did not realize you could convert (as we did as well, and paid the taxes), while still being in that income bracket.  So would that mean that a person who made $1 mil/year with a few million in 401k balance, could in essence, leave their job (because I believe you need to to release 401K funds) then convert to roth, pay the taxes and earn tax free until retirement?  If that's the case, that is excellent. Although, there might be a more prudent approach (again, I am not an economist/advisor by any means:)

 Hi Rick,

Yes, basically anyone can do it, even your $1M/yr income example. But a few things to consider. 

-Both a Roth and a traditional IRA/401k have tax advantages. In a hypothecatal example, if you knew for sure that your tax rate would be the same now and in retirement, and you put the exact same $s in and did the same withdrawal schedule, you'd wind up with the exact same after tax result from both accounts. So what matters is your own personal situation of what you think your marginal tax rate will be down the road vs what you pay now. Also a conservation is what you think tax rates will do in the fiture(have your crystal ball handy)

- The are some differences in the withdrawal requirements. The traditional IRA/401k has annual mandatory withdrawals once you hit a certain age. The Roth doesn't have that. So for example if you were in you 70s and one year decided to sell your business and earned a big payday, with a Roth you could simply not withdraw that year and not have to pay the top marginal tax rate, but with a traditional IRA/401k you'd have to take that wothdrawal and pay the higher tax rate.

So there are a few considerations on which is the optimal solution to minimize your taxes/maximize your after tax return. And of course there is no way to know for sure. 

Personally my plan is to have about an even split between the two account types to allow me flexiblilty on withdrawals and hedge my bets a bit on future tax rates.

Rick Santasiere it's called a back door roth. Basically anyone can elect to convert all or a portion of a traditional IRA(pretax money) into a Roth. The catch is you'll have to pay income tax on the amount you've converted. And there are no income limits to do the conversion. So someone over the income limit could fund a traditional IRA, then do the conversion each year and it would be the same net outcome as funding a roth. One other complication is if you have a combination of rollover/traditional IRA funds and a non deductible IRA, you can't choose which funds to convert but have to do the conversion evenly across the funds. from a tax perspective I think it can turn into a drag. I have a few friends who do non deductible IRAs but don't quite grasp the minimal benefit over a taxable brokerage account and the added complexity of tax accounting IMO. All that said, I'm not a financial advisor or tax accountant, just what I've learned from reading and my own tax planning.