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Old 29 February 2020, 12:58 AM   #61
AAP8
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Originally Posted by gnuyork View Post
This is a very good question, and one that I think about now and then... My accountant who is very smart with his own money, swears that a traditional Roth is the way to go... He uses the analogy "A bird in the hand"

I do realize the ROTH advantage is paying the tax now and not later on the gains, but you can invest more by not paying the tax now, and deduct from your income. A bird in the hand...

Any thoughts on this?
the part I bolded is the part that for some makes traditional better - but I would argue - that if you start off with the Roth and just keep raising the amount each year - once you max it out its not tough to adjust - it might take a few years - but its possible.
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Old 29 February 2020, 01:01 AM   #62
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How about in principle, just starting from scratch?
If you are starting an IRA for the very first time then yes a Roth is the best option.

https://www.schwab.com/ira/roth-ira/what-is-a-roth-ira
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Old 29 February 2020, 01:12 AM   #63
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Well, it was a hypothetical question... I'm not starting fresh, though I do have a small amount in a Roth, but I have been making SEP contributions for the past several years, so that's where I am at. I'm just curious about the ROTH thing. Wondering if I should start maxing out a ROTH and then contribute the remaining in my SEP. But it probably makes sense to continue with the SEP for the income deduction. I don't know...
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Old 29 February 2020, 01:23 AM   #64
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Lots of smashed technicals today, could be the start of a wash out however the ARMS is not quite low enough as of 10:24
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Old 29 February 2020, 01:30 AM   #65
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Originally Posted by gnuyork View Post
Well, it was a hypothetical question... I'm not starting fresh, though I do have a small amount in a Roth, but I have been making SEP contributions for the past several years, so that's where I am at. I'm just curious about the ROTH thing. Wondering if I should start maxing out a ROTH and then contribute the remaining in my SEP. But it probably makes sense to continue with the SEP for the income deduction. I don't know...
Conventional wisdom would be to max your SEP, 401k, or other tax deferred space first, then contribute to the Roth, especially if there is an employer match or profit sharing contribution.

That's assuming you have good low cost investment options in your SEP. If not, at least contribute to the match, and then max the Roth. Ideally, max them both.

Keep in mind you cannot directly contribute to a Roth over certain income levels, and in that case you must contribute to a traditional IRA and backdoor to a Roth.
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Old 29 February 2020, 01:38 AM   #66
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I think starting from scratch - Roth is the way to go assuming you can invest the same amount. My last job didn't have a Roth 401K option, so when I left, I had about 10 years of 401K which I rolled into a Traditional IRA. At my new job I use the Roth 401K. I am 37, my plan is to take my Traditional IRA to my Roth IRA over the next few years while the US Tax Law has lower rates and have about 50/50 between the 2 IRA's its 80/20 right now. Depending on how the market goes - I may even push to have the Roth in the 80% pile - but that all depends on my ability to pay the taxes each year. I know I will pay 10-12K in taxes on each roll over - but the gains over the next 20 years should quickly pay for that loss. The answer would be different if I was 50.

If you can't invest the same amount - running the numbers makes sense. I dont know if taxes will go up or down - I do all my math assuming the same tax rate as today - an example I am running right now is below:
  • Target Rollover Amount: $100,000
  • Tax Rate: 24%
  • Projected Tax Bill: $24,000
  • Age 37
  • Assuming 5% Gains for 20 years: $100,000 -> $265,000 (rounded the figure)
  • Tradition Tax Bill in 20 Years: $265,000 * .24 -> $63,600
  • Projected Tax Saved: $39,600

Yes, all of these assumptions can change, if the tax rate was 12% in 20 years I would likely break even, but if its 32% - I would save more - this is why I do my math at the same rate - I know 5% is also conservative - so that will impact it as well.

Overall - in addition to the tax hedge - I like the laws around how the taxes on Roth IRA work for when I leave it for my family - they also wont get hit with a tax bill. I have every intention of draining my traditional IRA first - so my major growth is tax free.
If you expect to be in a higher tax bracket when you retire than you are now - use a Roth 401k.
If you expect to be in a lower tax bracket when you retire than you are now - use a Traditional 401k.

For many people who are good earners and savers this means the best course of action is to max a 401k, max a Roth IRA, and contribute anything additional to a taxable account.
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Old 29 February 2020, 01:43 AM   #67
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If you expect to be in a higher tax bracket when you retire than you are now - use a Roth 401k.
If you expect to be in a lower tax bracket when you retire than you are now - use a Traditional 401k.

For many people who are good earners and savers this means the best course of action is to max a 401k, max a Roth IRA, and contribute anything additional to a taxable account.
Ah OK... that's what I am doing then, sort of. Maxing out SEP, and additional goes to my TD Ameritrade acct (fun money). Which hasn't been so fun this past week

But can you in theory max out a SEP and a ROTH? I am confused about that, maybe I need to read up...
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Old 29 February 2020, 01:45 AM   #68
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Ah OK... that's what I am doing then, sort of. Maxing out SEP, and additional goes to my TD Ameritrade acct (fun money). Which hasn't been so fun this past week

But can you in theory max out a SEP and a ROTH? I am confused about that, maybe I need to read up...
You need to consult your plan documentation, if the SEP is a SEP IRA then the limits would be combined for both IRA's.

Check this out before you over fund, the penalties for that are severe.
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Old 29 February 2020, 02:51 AM   #69
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You need to consult your plan documentation, if the SEP is a SEP IRA then the limits would be combined for both IRA's.

Check this out before you over fund, the penalties for that are severe.
If an employer contributes to a SEP IRA on your behalf, that does not limit your ability to contribute to your own personal IRA.

"A SEP-IRA is a traditional IRA that holds contributions made by an employer under a SEP plan. You can both receive employer contributions to a SEP-IRA and make regular, annual contributions to a traditional or Roth IRA. Employer contributions made under a SEP plan do not affect the amount you can contribute to an IRA on your own behalf." From IRS.gov.
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Old 29 February 2020, 02:51 AM   #70
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First bounce attempt of the day VIX was over 49, RSI at 20 selling pressure exhausting itself just like this time yesterday.

Will be interesting to see what the 2 pm margin calls are like and what the news is going into the close if anyone wants to hold or sell before the weekend.

And in 10 minutes massive sell programs hit, back down again
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Old 29 February 2020, 04:03 AM   #71
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Another bounce try, some tech names catching a bid
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Old 29 February 2020, 04:06 AM   #72
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This is precisely my plan. I am a dividend investor. So when a dividend stock drops enough that the dividend yield becomes high, I buy.
Yep. OXLC is my benefactor.
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Old 29 February 2020, 04:13 AM   #73
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I just want to say I'm loving this thread, and I appreciate the updates from beshannon - thanks!
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Old 29 February 2020, 04:14 AM   #74
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I just want to say I'm loving this thread, and I appreciate the updates from beshannon - thanks!
Thanks, I try to add something
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Old 29 February 2020, 04:41 AM   #75
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Failed second bounce, heading for 2pm, Will be interesting to see the market on close order imbalance today.

VIX heading back up, I expect a ugly close
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Old 29 February 2020, 04:44 AM   #76
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I fully expect a slaughter at close. I’ll hazard we outdo yesterday’s numbers. Am I putting my money where my mouth is? No.
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Old 29 February 2020, 04:48 AM   #77
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why has it been holding OK throughout the day and then sinking at the end of the day?
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Old 29 February 2020, 04:49 AM   #78
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I am expecting weakness into the close, looking to start adding on Monday. I don’t think many are going to want to hold over the weekend.


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Old 29 February 2020, 04:50 AM   #79
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why has it been holding OK throughout the day and then sinking at the end of the day?
Just my .02

Sporadic buying in oversold names, lack of significant news, margin calls not yet priced in . . .

Short term traders have had two great bounces yesterday and today to trade but no one will want to hold long over the weekend.

Need to hold 2850 on the S&P

Fed Chair Powell's statement put a floor under the market, will see where the close is as the market is very orderly
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Old 29 February 2020, 06:12 AM   #80
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It’s a very difficult situation. These kinds of pandemics even historically loose steam and we are getting close to spring which will pose a headwind to the spread of the illness to some degree. However, the bigger question is the damage to the market in general. I think the recent market buildup has been masking cracks for a while now, slowing in Asia and Europe, increasing personal and national debt, etc. the holding of interest rates have been fueling a bonanza in the market for how many years. But 70% of the market is driven by consumer spending and consumers are spending on borrowed dollars as real income has been flat for decades. Low interest rates tend to drive goods higher And pinching the consumer. Now, the Fed has very little left to intervene.

So the long game looks good as it always does, but the short to medium term does not. However from the behavioral economics side, is primarily fear driving the sell off rather than the virus causing a massive halt to things. With news everywhere now, this panic feeds on itself. Remember, we really did not have smart phones back in 2007-2008, so News travels faster now.
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Old 29 February 2020, 06:26 AM   #81
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Im buying a little this afternoon. AAPL, MSFT, GOOG, AMZN.

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Done. Let's see how this goes.

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Old 29 February 2020, 07:24 AM   #82
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Well that run up at the last minute was unexpected!
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Old 29 February 2020, 07:35 AM   #83
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Well that run up at the last minute was unexpected!
Saved the weekend! Let's Party!
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Old 29 February 2020, 07:38 AM   #84
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Well that run up at the last minute was unexpected!
Algos buying up the oversold condition, I just saw that there was a massive flow out of bonds into equities at the close, likely institutional

The weekend news will determine the futures, I would rather see a sell open on Monday and would have rather seen more down at the close today.

I do not believe this is washed out yet.
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Old 29 February 2020, 07:43 AM   #85
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Been short all week - mostly TSLA.

Something about making $$ while the market tanks is extra satisfying.
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Old 29 February 2020, 07:46 AM   #86
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Something about making $$ while the market tanks is extra satisfying.
Well Karma is a Bi**h.
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Old 29 February 2020, 08:07 AM   #87
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Talk about juicing the run into the close on US markets. Trading into the close like they did today is what they do with penny stocks, shameful manipulation only breeds contempt. Plunge protectors are afraid based on that close.
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Old 1 March 2020, 08:23 AM   #88
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looking forward to see next beshannon next post. solid info for beginners like me.
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Old 1 March 2020, 08:45 AM   #89
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With Roth IRAs it is critical to know that there is an income limitation. If you make more than that, you cannot benefit, AT ALL.
SEP IRAs are great vehicles that let you defer more income.

As someone said, everyone has a different situation and if you expect to make more money later in life past the post retirement age, you may wish to re-evaluate the deferral strategy combined with your plans to provide for your children (or even grandchildren) if any.

If your post retirement income is dividends and capital gains, they are presently tax advantaged. That may not last depending on how the politics unfolds over the next few decades (I personally expect that the flagrant government spending deficits will change this advantage by a matter of necessity to raise revenue by any means possible).

Then, there is the estate tax to consider...
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Old 1 March 2020, 11:53 PM   #90
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looking forward to see next beshannon next post. solid info for beginners like me.
Thanks

Just to be clear: All my posts are my own opinions, I try to post sources when possible. Everyone should do their own due diligence and check their information before making decisions.
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