Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[Buehler445]

Originally Posted by eDave

I'd reduce to 5% because it's foolish not to take the match. Until she finds new work. But a 3% differential probably isn't that much. And with this crazy market it might not be a bad idea anyway. Really depends on how long you think she will be out of work and how snug you really are.

Perhaps invest the 3% into an IRA so you can access if needed.

Sound advice. If you do the IRA thing make sure it is a Roth. The rules are less stringent.

[Amnorix]

Originally Posted by Pushead2

I'm a n00b to this thread, but my spouse just lost her job and I'm taking care of all the bills. Things are snug, but we're not worrying about our lights being shut off.

My question to everyone is should I lower my 401K contribution until she finds something new? Sure in the short term I'll get a little extra in my check, but is it worth it to do so in the long term? Currently, I put in 8% with my company matching up to 5%.

Agree with eDave. Go to 5% to take the match. NEVER say no to free money! The three percent probably doesn't matter much either way, but in case your spouse's reemployment takes longer than expected, you might prefer it in your pocket.

[DaFace]

Not that we need more agreement with eDave, but here's one more. Don't touch the 5% unless things are getting REALLY sketchy.

[Fat Elvis]

Think of it this way: That 5% match is a 100% return on your investment....

[Amnorix]

Originally Posted by Fat Elvis

Think of it this way: That 5% match is a 100% return on your investment....

Yeah, but just to emphasize - a 100% TAX DEFERRED return on your investment, with both the investment and the match growing in a TAX DEFERRED manner as well.

Honestly, if you aren't searching the couch for quarters, you shouldn't be cutting into that 5%.

[ChiliConCarnage]

Originally Posted by Buehler445

Sound advice. If you do the IRA thing make sure it is a Roth. The rules are less stringent.

Also, having a mix of traditional and Roth money in retirement gives you more flexibility in terms of tax avoidance in retirement. At least, for average joe's, I think this normally makes sense.

[eDave]

Originally Posted by ChiliConCarnage

Also, having a mix of traditional and Roth money in retirement gives you more flexibility in terms of tax avoidance in retirement. At least, for average joe's, I think this normally makes sense.

When you have a moment, would you please expand on this?

Thank you.

[lewdog]

Originally Posted by eDave

When you have a moment, would you please expand on this?

Thank you.

You don’t want all your income in retirement to come from taxable investments such as 401k or IRAs.

That’s why it’s important for many to contribute to a ROTH. It’s not counted as income in retirement, thus lowering your tax bracket for many.

[Buehler445]

Originally Posted by lewdog

You don’t want all your income in retirement to come from taxable investments such as 401k or IRAs.

That’s why it’s important for many to contribute to a ROTH. It’s not counted as income in retirement, thus lowering your tax bracket for many.

Eh. That’s a little wonky.

401s and traditional IRAs have some theoretical advantages.

You’ve paid tax on contributions to ROTH where as 401s and traditional IRAs are not taxed at contribution. In theory your tax rate will be lower in retirement so there may benefits there. Where the ROTH shines is the gains aren’t taxed.

So the gamble you’re taking is the tax on the basis at the time of contribution is less than the tax on the basis and gain at the time of distribution.

Typically it is but is still a gamble.

[ChiliConCarnage]

Originally Posted by eDave

When you have a moment, would you please expand on this?

Thank you.

Sure, to really simplify it, if you have 400k in pre-tax/traditional retirement savings. The Fed has a 15% tax rate up to 32k and 23.5% from 32 to 62k.

If you need 45k to live this year, you'll need to pay 13k at the 23.5% rate.

If you have 300k pre-tax and 100k roth, you can use 32k pre-tax and pay 15% then withdraw 13k from your post tax roth money and avoid the higher tax rate.

This can all get into some talk about whether your taxes will be higher now or in retirement in general. I think for regular people this is incredibly hard to answer and that almost everyone should have some both pre and post tax funds for flexibility.

edit: also, these numbers don't make sense lol. It's just the idea that you can avoid higher tax brackets lol

[Hog's Gone Fishin]

Anybody have any thoughts on (IQ) .It's an ipo came out recently ,supposed to be the Chinese version of Netflix. Could it do what NFLX has done ? This would be ground zero if so.

It's at 17.41 right now

[Hog's Gone Fishin]

Well, I'm in at 17.35

Drop Box is doing well at 32.32

[lewdog]

I don’t like IPOs. Over 90% tank and aren’t worth original prices.

[Cornstock]

With the current tax rate dropping a bit, and taking into account the current political climate, I think the current tax rate is the lowest we'll see for the rest of our lives.

This is pure conjecture of course. But if that is true, it would be advantageous to max out your Roth to avoid paying taxes at a higher rate in retirement. There are nuances to this but I don't feel like getting into that now.

Moral of the story: unless you're reduced to eating ramen until she gets a job, try to max out contributions to a Roth, and make sure you are getting the full max in your 401k.

[Hog's Gone Fishin]

Originally Posted by lewdog

I don’t like IPOs. Over 90% tank and aren’t worth original prices.

Here's a list of the last 100 IPO's to come out. According to this list the number in negative territory is 43%

https://www.iposcoop.com/last-100-ipos/