Retirement

rodoheel said:
I mean this light-heartedly but it's the inheritance that helped you, not the real estate, lol.

(Real estate is certainly an option if you have access to plenty of capital and that's your thing. But I think most advisors would not recommend it as anything other than a luxury, "sure if you can afford it" portion of a retirement plan. And personally I have no desire to get involved with property management and having tenants.)
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Meh, the inheritance certainly allowed me to have options, but I'm not sure what else I could have done that would have created as much wealth and income.

1) Most advisors seek to make a living from their advice. They can't get paid of the sell or management of real estate.
2) I think your confusing investment property with a second home.
3) Run from an advisor who recommends what you have relayed.
 
Purple Nurple said:
Meh, the inheritance certainly allowed me to have options, but I'm not sure what else I could have done that would have created as much wealth and income.

1) Most advisors seek to make a living from their advice. They can't get paid of the sell or management of real estate.
2) I think your confusing investment property with a second home.
3) Run from an advisor who recommends what you have relayed.
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1. What makes you think I'm confusing an investment property with a second home? I talked about having tenants right there in the post. I know you're talking about investment property. You generally have to rent investment property to make money off of it. Hence the reference to tenants. (Unless you are just talking about buying and flipping stuff.)

2. The historical returns on real estate investments are lower than the historical returns on stock. Which is not to mention the fact that you either have to invest additional time managing the property, or pay someone to do it, which you don't have to do with stock. That's why an advisor is not likely to recommend investing in real estate instead of putting money into a 401k or brokerage account. You're generally not wrong about the fees part but it doesn't change the baseline proposition that real estate is historically not as safe an investment.

3. We're currently in the midst of a historically great run for residential real estate. So it certainly may be true that a real estate investment has done better for you over the last few years than other forms of investment. Might that continue? Sure. But if you're banking on home prices and rental returns continuing to rise at the rate they have over the last few years I think you're probably going to be disappointed.
 
rodoheel said:
1. What makes you think I'm confusing an investment property with a second home? I talked about having tenants right there in the post. I know you're talking about investment property. You generally have to rent investment property to make money off of it. Hence the reference to tenants. (Unless you are just talking about buying and flipping stuff.)

2. The historical returns on real estate investments are lower than the historical returns on stock. Which is not to mention the fact that you either have to invest additional time managing the property, or pay someone to do it, which you don't have to do with stock. That's why an advisor is not likely to recommend investing in real estate instead of putting money into a 401k or brokerage account. You're generally not wrong about the fees part but it doesn't change the baseline proposition that real estate is historically not as safe an investment.

3. We're currently in the midst of a historically great run for residential real estate. So it certainly may be true that a real estate investment has done better for you over the last few years than other forms of investment. Might that continue? Sure. But if you're banking on home prices and rental returns continuing to rise at the rate they have over the last few years I think you're probably going to be disappointed.
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1) The language of "luxury" and "if you can afford it portion of your portfolio" speak to traditional thoughts about vacation homes rather than investment property.

2) No, historically real estate is seen as a safer investment than stocks. Plus real estate is tangible and the bank likes it. On the surface stock returns look higher. I'm not sure that analysis has done a good job of capturing the dividend reinvestment of real estate or the ability to use leverage.

3) Sure, timing is always important. I'm not to worried about the values as I've been doing this 15 years. I expect rents to al least keep pace with inflation.
 
Purple Nurple said:
1) The language of "luxury" and "if you can afford it portion of your portfolio" speak to traditional thoughts about vacation homes rather than investment property.

2) No, historically real estate is seen as a safer investment than stocks. Plus real estate is tangible and the bank likes it. On the surface stock returns look higher. I'm not sure that analysis has done a good job of capturing the dividend reinvestment of real estate or the ability to use leverage.

3) Sure, timing is always important. I'm not to worried about the values as I've been doing this 15 years. I expect rents to al least keep pace with inflation.
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Thanks. I meant "luxury" in the sense of "an investment to make if you have more than enough money in stocks and tax-advantaged investments already." I find it hard to believe that there is an investment advisor anywhere who, if you walk in and say "I am already contributing the max to my 401k and have an extra 200k I need to invest somehow" will say "what I would recommend you do is invest that 200k in an investment property." And I don't think that's only because the advisor won't make any money off of your real estate investment.
 
rodoheel said:
Thanks. I meant "luxury" in the sense of "an investment to make if you have more than enough money in stocks and tax-advantaged investments already." I find it hard to believe that there is an investment advisor anywhere who, if you walk in and say "I am already contributing the max to my 401k and have an extra 200k I need to invest somehow" will say "what I would recommend you do is invest that 200k in an investment property." And I don't think that's only because the advisor won't make any money off of your real estate investment.
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They'll also preach diversification while having all your assets exposed to financial markets. They like real estate just fine if it's a REIT ETF. Most advisors aren't very savvy.
 
dcphx said:
The Roth account will grow tax free and does not have any RMD requirements. It will continue to grow tax free forever, including when your heirs inherit it. When the heirs inherit a Roth IRA, they need to withdraw the money within 10 years but there still is no RMD requirement and all of the money coming out is tax free. So they can keep it in the Roth growing tax free for 10 years before they have to address it at all.

Traditional IRA pre-tax money, everything coming out is taxed. There is a RMD when you turn 72-75 which can be an issue if your distributions/SS/RMDs push you into a tax bracket/IRMAA bracket you don't want to be in. When your heirs inherit, they have to withdraw in 10 years and take RMDS each year and pay tax on all of the withdrawals. Depending on when they inherit, it could be during higher income years pushing them into a tax bracket that is unfavorable.

Post Tax Traditional IRA is the same as the pre-tax but only the gain is taxed when withdrawn, the initial contribution is not. But at least there is no tax as it grows. So long as you don't have an existing pre-tax IRA, there is no real downside to converting the Post-Tax IRA contribution to a Roth IRA assuming that it is a longer term investment that you know will stay there at least 5 (tax) years.

If you are mixing pre-tax and post tax IRA's, there are a number of problems starting with the custodian doesn't have to keep track of what funds are pre-tax and what are post tax. If you cannot roll your IRA into a 401k, it just isn't worth the hassle of doing a post tax IRA (IMO). When you withdraw, I believe the current rule is that it is pro-rata, ie you cannot withdraw the post tax first.

If you have an existing traditional post tax IRA, you want to roll it into a 401k before trying to do a backdoor roth. If you cannot do that, you may not want to bother with the post tax traditional, it's not a large amount and you may be better off just putting that same money into a brokerage account.
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Wow, thanks for all the info. I'm with NYCBlueBlood about not thinking of this stuff yet!

My Trad Ira(s) are largely pre-tax (from various employer 401k rollovers over the yrs). I'm probably only 10 to 15 yrs from retirement so i'll leave them since the pro-rata stuff sounds messy.

But might pursue the mega backdoor approach with some cash (post-tax earnings) if my 401k will allow that.
 
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CFordUNC said:
If you are philanthropically inclined at all, and if you reach a point in retirement where you don’t really need the income from it, a great use of an IRA is to either gift it outright to a charitable organization of your choice or to take advantage of a QCD (qualified charitable distribution) from your RMD (required minimum distribution). Either way you can significantly reduce your federal income tax liability by doing so, and the charitable organization receives the entirety of the gift tax-free. As an example, I’m in the wealth management space and I’m working with a client who wants to gift both his and his wife’s IRAs entirely to charity, because the IRAs are so substantial (multiple seven figures each) that their children/heirs would be hit with a major tax bomb.
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I’d be fine with someone bequeathing me a seven figure IRA even if I did get hit with a major tax bomb.
 
CFordUNC said:
If you are philanthropically inclined at all, and if you reach a point in retirement where you don’t really need the income from it, a great use of an IRA is to either gift it outright to a charitable organization of your choice or to take advantage of a QCD (qualified charitable distribution) from your RMD (required minimum distribution). Either way you can significantly reduce your federal income tax liability by doing so, and the charitable organization receives the entirety of the gift tax-free. As an example, I’m in the wealth management space and I’m working with a client who wants to gift both his and his wife’s IRAs entirely to charity, because the IRAs are so substantial (multiple seven figures each) that their children/heirs would be hit with a major tax bomb.
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So, if there is a large tax burden with gifting retirement funds to our children, does it make sense to start giving them some each year, that they can invest?

For the last couple of years I've given each of my daughters some money in an Roth, I hope that works out well.
 
aGDevil2k said:
Right??? Oh no! I only just got $700K. This sucks. I would much rather have gotten $23.
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I don’t think anyone would be upset about inheriting $700k, but it’s prudent to implement tax planning strategies to reduce the tax burden on your kids if possible.
 
My dad was a stock broker and said that one of his clients said "I've been poor and I've been rich....rich is better!"
When I was very young and just learning about money I asked my dad why not get one of his clients to give us a million dollars? His response was that they didn't get a million dollars giving it away. He followed up that many of his clients with that kind of money were really cheap skates and yet even with the wealth very unhappy.
 
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