That's not even enough for retirement, any other ways to save for retirement?





That's not even enough for retirement, any other ways to save for retirement?





401(k), SEP, retirement savings outside of tax advantaged plans, Social Security, the list is probably endless.





Indeed, it's totally possible to save for retirement outside of the gov't sanctioned 'tax advantaged' plans. This is actually growing in importance given the recent discussions / proposals that money placed within gov't sanctioned 'tax advantaged' retirement plans may become subject to future new gov't regulations ... which could stem from forcing that money to be invested in a new type of gov't annuity / bond, to the retroactive imposition of additional taxes on that money, to the 'means testing' of future Social Security benefits ( i.e. you won't start receiving gov't SSI checks until you have first spent all of the money within your gov't sanctioned 'tax advantaged' retirement plan(s)).
It's also possible to achieve some tax advantages by other means besides gov't sanctioned retirement plans. In high tax rate states like California, New York, Illinois etc. buying tax free state Municipal Bonds, or buying mutual funds / ETF's consisting of tax free state Muni Bonds, is becoming increasingly popular.





Saving outside the government sanctioned plans is a good idea on many levels as Mel points out. My own personal retirement plan has a pension (from my time with the VC) a roll over IRA from my former employer's 401(k) plan, my own company's 401(k), my company's stock which I have already started gifting to my daughter, my Roth IRA and my, now somewhat depleted, investment portfolio. Other than the IRA, 401(k), Roth and pension, I am free to sell the other assets long before I retire without additional penalty. There are rules for the tax advantaged programs that at the very least penalize early sales. That's why I make use of everything. If I hit 60 or so and don't need the tax advantaged retirement accounts, all the better. To be sure, it's a mix. But, I don't ever rely on the government for my future security. That's on me. I'll take advantage of what the government offers though.
HTH
Z
ROTH IRA has those limits, like Zofia said, check out a SEP IRA. Stands for self employed pension plan. When we take the money out at retirement age we are then taxed on it. We do not pay taxes on that money now. There are limits there too, 25% of total income I believe.
In the case of the ROTH, we pay taxes on that money on the way in. As long as we take it out at retirement age we do not pay more fees.
Last edited by shasta; 12-10-2012 at 07:51 PM.





Again, just trying to paint an accurate picture. While it's still true at this moment that future withdrawls of ROTH IRA funds will not be subject to additional taxes, there's nothing to stop the gov't from leveeing a retroactive tax on the capital gains, interest and dividends earned by investments held under a Roth IRA umbrella at the time the money is withdrawn. And while it's not true at this moment, saving a dollar in an IRA or 401k may wind up costing the prudent retirement saver 50 cents worth of future Social Security benefits. And while it's not true today, there's nothing to stop the gov't from forcing IRA and 401k investments to be 'converted' into a proposed gov't backed annuity ... which would pay the recipient a guaranteed amount every month until they die, but with any remaining money being 'confiscated' by the gov't instead of passed on to inheriting relatives. This is the 'curse' of all of these gov't sanctioned 'tax favored' retirement accounts ... you have to follow the 'rules', but the government does not !!!As long as we take it out at retirement age we do not pay and more fees



buy real estate. Break even if you have to (profit is better) because when the mortgage is paid off, it's going to be great asset and good cashflow.




Crap, I started my ROTH in 2011, thinking that was the best option after researching.
Mel, what are your takes on buying a house (to live in, and then possibly sell later on) vs renting? Also, is real estate, given the upkeep and maintenance that needs to be done on it, still a good investment?





Awesome!
@pinups4: I'm gonna buy a house within the next two years, or earlier.




There is nothing wrong with IRAs of any kind. It is extremely unlikely that IRAs will be changed.
The 5.5k is the max you can put into them. But once inside the IRA, there is no limit to the gains.
Think of an IRA as a bucket you can put stocks, mutal funds, CDs, any investment inside for retirement tax benifits.
I would suggest either reading web sites and books about retirement options And/Or visiting a financial advisor to get more ideas.
Nature knows no indecencies; man invents them. ~ Mark Twain




^(I know that wasnt just for me, so thanks for the info) I went to a financial advisor, and holy crap I just felt like i was being hustled the entire time, and it was awful. I'm taking 2 finance courses in school next term, but it's not investing classes. How the hell do people learn this shit?! The only book I was referred to was Random Walk On Wall Street so far. I really want to get into investing more and it really makes it hard to get started, or know how/where to put money. I feel so good about saving/spending money the right way..and get to investing..and i'm just all.




You have very good instincts and you listen to them. That is a great start!
It takes time and study. You are right financial advisors are not all the same. Shop around there are some good ones out there.
If you are looking for a conservative low risk, no nonesense approach I suggest Dave Ramnsey.
But as far as investing in more risky stocks that takes time.
http://www.morningstar.com/Cover/Funds.aspx one way I started was just looking at fact sheets about mutal funds. Learning what was in them, how others deterimine risk vs how i view risk levels, and plotting what I think was the preformance. I did that before i invested a dime to see if had good instincts.
Read read read read!!!! But the first rule, if a stock is being hyped on tv... run the other way!!
Nature knows no indecencies; man invents them. ~ Mark Twain




I need some good authors (besides suze orman) to read up on lol! I'll look into Dave Ramnsey thanks. Stocks I'm definitely not ready for just yet, at least indiv ones. The real estate auction/flipping houses like that actually sounds really, really cool. And then my head won't go batty trying to plot stocks/funds too! Its all mental- that I'm gambling with my money when I invest (which I know, is the whole point of gaining a big return back, but, I'm not a gambler! Real estate *sounds* safer, but I'm sure there's plenty headache with it too.




Real Estate can be safer and simpler but it also has pitfalls.
The biggest pitfall is outstanding liens on foreclosed properties. Tax liens (usually property tax) stick to the property and become the responsibility of the new buyer. So in addition to the sale price you are also paying this additional cost. Some banks and short sellers try to hide these issues until the last minute.
The other biggest pitfall right now is buying a house in the wrong market. Not all housing markets are rebounding at the same rate.
Now for my biggest advice....
Whatever you do, DO NOT buy condos, unless you are buying in New York City. Why? The lending requirements have changed for condos. They are now requiring all loans for condos must be in condo associations that are at least 51% owner occupied. Meaning 51% of people living there own the condo they are living in. They can not be rented out or time shares. The majority of people who bought condos before the boom did so as an investment. They were renting them out and then selling them. So there are very few associations that fit the 51% threshold. Also condos have had a HUGE foreclosure rate. So the condo market is going to be totally fucked for a long time. The chance of resale is extremely low.
I have seen many rent to own condo scams because the average person is not aware of this change. They think they are getting a deal until they try to get a cross over loan. When they cant, by no fault of their own, they are stuck with a huge bill for the total amount.
The other scam is over charging customs for condos because they have cash to pay. Always get an unbiased outside appraisal.
I am not trying to discourage you. I am just giving you some things to look for. There is risk in ANY kind of investment you choose. Some have less risk then others. But the best way to reduce risk is to educate yourself.
Nature knows no indecencies; man invents them. ~ Mark Twain



I pay my financial consultants by the hour...not a commission. And i dont buy through that person. I bonus them on performance
CLARK howard gave me the idea...it makes sense. They win if i win, not if theyre getting promotional benefits.




That makes a lot of sense, thank you for the info! Real estate definitely INTERESTS me more than buying/selling stocks funds bonds, so I feel like that will make me want to learn/understand more, because I'm actually interested. I'm definitely not discouraged, but also have no idea how to even get started with doing auctions like that (and certainly dont want to go in unprepared). How did you get started/ learn about it at the start? How to learn which markets are good/not good to buy in (this also goes for where I'm planning to move- I have very little clue where I want to move to, aside from the investing side).




My profession was being a branch banker for 12 years.
I dont have a college degree. I accidentally fell into being a telemarketer for a credit card company when I couldnt finish college. I didnt know anything about banking or investments, but I was deterimined. I worked my way up the food chain so to speak. Getting promotions and changing jobs. My last banking job I was a loan officer at a national bank. I taught myself alot by reading and doing the things I mentioned. But the other huge information tool is relationships.
I made friends with underwriters (people who approve or deny loans), lawyers (tax attorneys are a world of info), executives, etc. Markets are constantly changing. For example, that condo issue didnt exist five years ago. But people love talking about their work if they feel they can trust you. Once that trust is established you can learn ALOT from them. When I had questions about big issues I had a network of people to ask. But it works both ways. Even though I felt these people knew more then I did, I went out of my way to make sure they knew I was there for them too. They all called me with something at least once.
Now I am sure you are thinking..... how the hell am I going to meet these kinds of people? You can meet them online too. I have met alot of them on different sites. Bdsm sites seem to be the main place they hang out lol. I have talked finance in the middle of bondage chat rooms lol. When you talk about your passion others are drawn to it too.
Nature knows no indecencies; man invents them. ~ Mark Twain





Where ALL real estate is concerned, it's 'location, location, location'. Pertinent questions to be asked are ...Mel, what are your takes on buying a house (to live in, and then possibly sell later on) vs renting? Also, is real estate, given the upkeep and maintenance that needs to be done on it, still a good investment?
- is the area where the house is located gaining jobs / growing economy, or losing jobs / declining economy ? Lots of homeowners in states with slow economies / high unemployment are 'trapped' because there are more local people looking to SELL their homes than relocating people looking to BUY homes.
- is the area where the house is located 'appropriate' for the price range ? With rising crime rates and cutbacks in local police protection, poor performing public schools, increasing municipal bankruptcies / budget problems, etc., potential middle class homebuyers are now VERY concerned about the composition of particular cities and neighborhoods.
- is the area where the house is located likely to jack property taxes sky high ? Some states have 'caps' in place to limit the maximum annual property tax increases which can be enacted ... others don't. And annual property taxes rising from $3,000 to $6,000 over the course of a couple of years can easily turn a 'winning' investment into a losing one from a cash flow standpoint.
- and as was previously pointed out, can you actually get a 100% 'clear' title to the property you 'think' you are buying ? Do 'mystery' leins exist against the property you 'think' you are buying ? While publicity in this regard has been supressed, indeed there are lots and lots of recent home 'buyers' who are now fighting through the courts re title and lein problems. Without a clear title and freedom from leins, the property can't be sold or used as collateral for other loans.
- is the property located in an area which is potentially prone to flooding, wildfires, or other weather related damage ? Due to the huge insurance payouts following hurricane Katrina, and again after Superstorm Sandy, the 'good ol days' of averaged out property insurance premiums are numbered. Future insurance premiums are more and more likely to reflect location specific insurance loss risk. As with property taxes, a $1000 homeowner's flood / fire insurance premium rising to $5,000 per year can also turn a 'winning' investment into a losing one from a cash flow standpoint. Homeowners in some flood prone areas have already been forced to prematurely pay off their mortgages in full in order to avoid the bank forcing them to pay the huge insurance premiums associated with risk appropriate insurance coverage.
... and I think of an IRA as a bucket which has a 'one-way' lid ... you can put money in, but you can't take money out ( without major losses ) until you meet a whole bunch of gov't imposed conditions ( present AND future ).Think of an IRA as a bucket you can put stocks, mutal funds, CDs, any investment inside for retirement tax benifits.




Yes there are restrictions on IRA withdrawls but they are pretty broad on Roth IRAs"There are several exceptions to the rule that penalties apply to distributions before age 59½. Each exception has detailed rules that must be followed to be exempt from penalties. The exceptions include:[7]
Traditional IRA you have to be 59 1/2 to start taking partial withdrawls. http://en.wikipedia.org/wiki/Individ...rement_account
- The portion of unreimbursed medical expenses that are more than 7.5% of adjusted gross income
- Distributions that are not more than the cost of medical insurance while unemployed
- Disability (defined as not being able to engage in any substantial gainful activity)
- Amounts distributed to beneficiaries of a deceased IRA owner
- Distributions in the form of an annuity (see substantially equal periodic payments)
- Distributions that are not more than the qualified higher education expenses of the owner or their children or grandchildren
- Distributions to buy, build, or rebuild a first home
- Distribution due to an IRS levy of the plan"
IRAs are not perfect. There isnt any investment that doesnt have limitations. The key is understanding the limitations of one investment vs another. Using one investment's strength to counter act another investments weakness. The benifit of IRA is the tax issue and the fact, in some states, they are protected from creditors and law suits.
Retirement investing needs to be well diversified. Everyone has different needs.
Nature knows no indecencies; man invents them. ~ Mark Twain





I totally agree with this ... but also point out that this is a practical impossibility where gov't sanctioned tax advantaged retirement accounts are concerned. Indeed you can understand TODAY's limitations ... but you have no way of reliably knowing TOMORROW's limitations. And if you don't like those additional future limitations, you have no way of getting your money back out without taking a 'major loss'.The key is understanding the limitations of one investment vs another




Thank you Mel and everyone who answered. I don't quite understand how you can tell if there are "ghost liens" or what happens for those for trying to buy their first house? I don't know what the right choice is right now and I'm not rushing into anything, but I don't think sinking money into a rental is the best option, either. If it weren't for my family, I'd move to an island like you mel![]()
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