Retirement Funds

[ushdadude]

Draw from maxed out Roth first year after retirement so your active income for the year is 0. Now you are at low tax bracket to draw from traditional.

[Kobe Bryant]

Draw from maxed out Roth first year after retirement so your active income for the year is 0. Now you are at low tax bracket to draw from traditional.

You want to have many different retirement buckets to manipulate AGI.

[ShimshonK]

But you need actual payroll and not just distributions

I suggested it as an alternative to the solo 401k.

[ShimshonK]

There are many variables to calculate, such as FICA. local, state and federal. ETR is the truest measure.

Firstly, ETR is generally just the effective rate of federal income taxes, not all the others. Though, maybe you were referring to the effective rate with all taxes included.

In any case, I still fail to understand how it's the truest measure, as opposed to basing it off of the top brackets.

[elazarmn]

You want to have many different retirement buckets to manipulate AGI.

for some this isn't always the most lucrative since they need to monthy paycheck to be enough to pay the bills. If you distribute money off your paycheck to get into a different bracket then you essentially taking home less but saving a little more at the end of the year.

(not sure how much sense this made but basically putting away isn't always possible even to lower AGI)

[ExGingi]

Bonds don’t have such great returns. Are you diversified?

Say what?

Bonds can have phenomenal returns (price appreciation as bond yields decline).

[ExGingi]

Why would you own municipal bonds in a tax advantaged account? They sell for a premium because the interest is tax free and you don't realize that benefit in a tax advantaged account. You would be much better off with taxable bonds.

+1

Except if you're buying for the price appreciation rather than the income.

[ExGingi]

HSA if you have a HDHP. I'd argue that HSA should be prioritized over Roth IRA.

My priorities are:

1. Roth 401k to max out employer match
2. HSA to the IRS max
3. Roth IRA to the IRS max
4. Roth 401k to the IRS max
5. Prepay mortgage
6. After-tax, non-Roth 401k for mega backdoor Roth IRA
7. Taxable accounts

How does #5 fit in with any of the above? Might be non-tax efficient (and return is fixed at mortgage interest saving).

[Kobe Bryant]

for some this isn't always the most lucrative since they need to monthy paycheck to be enough to pay the bills. If you distribute money off your paycheck to get into a different bracket then you essentially taking home less but saving a little more at the end of the year.

(not sure how much sense this made but basically putting away isn't always possible even to lower AGI)

I am talking about retirement.

[Kobe Bryant]

How does #5 fit in with any of the above? Might be non-tax efficient (and return is fixed at mortgage interest saving).

You discussed at length in the DRP thread.

[farmbochur]

How does #5 fit in with any of the above? Might be non-tax efficient (and return is fixed at mortgage interest saving).

Tax efficient for those who take the standard deduction, no?

[ExGingi]

Tax efficient for those who take the standard deduction, no?

Which is why I said MIGHT be. Regardless, it is a fixed return at the mortgage rate (which is usually low).

[farmbochur]

Which is why I said MIGHT be. Regardless, it is a fixed return at the mortgage rate (which is usually low).

Which is why I wrote MY priorities. I'd take the fixed return of mortgage prepayments and shift other investment allocation toward risky assets to reflect my overall risk appetite.

[ExGingi]

Which is why I wrote MY priorities. I'd take the fixed return of mortgage prepayments and shift other investment allocation toward risky assets to reflect my overall risk appetite.

I fully get that. But at the current going mortgage rates I can think of other places with equal or higher safe return and greater liquidity (remember - prepaying a mortgage is converting the most liquid asset you have into an asset that isn't immediately liquid, and can even decline in value).

[farmbochur]

I fully get that. But at the current going mortgage rates I can think of other places with equal or higher safe return and greater liquidity (remember - prepaying a mortgage is converting the most liquid asset you have into an asset that isn't immediately liquid, and can even decline in value).

I don't see it that way. The house is on my balance sheet either way. Prepayment is essentially sacrificing relatively few dollars today for many dollars tomorrow.

Regarding liquidity, true there is no payoff until the house is sold or the mortgage is paid off, but there is flexibility in that there are no mandatory contributions. Unlike a cash value insurance arrangement which would require me to make premium payments.

[ShimshonK]

I fully get that. But at the current going mortgage rates I can think of other places with equal or higher safe return and greater liquidity

I'm curious what investments you're referring to

[Kobe Bryant]

Say what?

Bonds can have phenomenal returns (price appreciation as bond yields decline).

Which bonds consistently beat the market?

[ExGingi]

Which bonds consistently beat the market?

I don't know about beating the market, and it all depends on timeframe, but in the past 40 years or so constant maturity long dated treasuries did very well.

[Der Deutsche Jude]

Which bonds consistently beat the market?

First of all, which market are you talking about? Secondly, why does it have to be about beating a benchmark? It’s good to add diversity to your investments.

[Kobe Bryant]

First of all, which market are you talking about? Secondly, why does it have to be about beating a benchmark? It’s good to add diversity to your investments.

In general “The Market” is the S&P 500.
I’m ok with diversifying a portfolio for risk tolerance. Hence

Bonds don’t have such great returns. Are you diversified?