This is very true but it reminds me of the old Steve Martin "how to be a millionaire and never pay taxes" where step one is to get a million dollars.

The first assumption in this strategy is that you have enough cash reserves to last a year and not panic sell when things go south....

The second is on top of that that you have enough left after your cash reserves to invest and make a fortune.

In other words this is great advice if you are already "rich" by normal standards.

Its no different then any other form of gambling... dont risk money you cant afford to lose so you dont panic or do something stupid. People fail at that daily.

Just not true, investing ANY amount, at the earliest age possible and receiving the benefit of the "power of compounding" is the ONLY way to go and get "rich", depending on your definition over the long term. PERIOD.

The last part of your statement is actually TERRIBLE advice.

You need to get yourself a "power of compounding" calculator. Just saying. Lol

A better saying to live by is by Buffett, "Don't risk what you have and what you NEED, for what you don't have and what you don't need".

I understand all that... I was just referring to the advice in the article.

"The idea that you keep a large cash cushion so you don't have a worry about seeing your stock portfolio tank. With six to 12 months worth of expenses in the bank, you decrease the risk you're going to panic sell to retreat to the relative safety of cash. You already enjoy the relative safety of cash. You invest - and ride out stock market storms - from a position of strength, not anxiety."

Not for much longer.

Can you explain this to me? Or point me in the right direction? Is that were you move your 401k (paying the penalty) into a Roth?

My assumption is that I should talk to a financial advisor before I would move forward?

"We have PINS to the left, PINS to the right"

"Can't you feel 'em closin' in, honey
Can't you feel 'em schoolin' around
You got PINS to the left, PINS to the right
And you're the only girl in town"

IF it sells back to $34 range again you know what to do.

No you don't pay a penalty by converting money from a traditional IRA to a ROTH IRA.

You do pay "ordinary income tax rates" on the money you just converted in that year. Taxes are on sale this year.

When you look at your COMBINED INCOME, wages, cap gains, etc., as a general rule of thumb for me and my clients, don't put yourself ABOVE the 24% marginal tax bracket.

Meaning, you can have a COMBINED INCOME of up to $326,600 in 2020 before the NEXT dollars above that limit gets taxed at 32%

The Biden plan proposes to RAISES TAXES at EVERY SINGLE INCOME LEVEL if you actually earn a living.

Gotcha, thanks! As for the taxes, can you use some of the conversion to pay the taxes? Meaning if I were to convert $100k, I'm assuming I need to write a $22k check for Federal taxes and then whatever my rate is to the state?

I'm thinking it might not be smart to remove $100k from a 401k, only to reduce my investment in a Roth by $22k to pay taxes. Or maybe it would be....

ICE, because you deserve it.
You give really good advice.

I believe he is talking about moving his 401k to a ROTH IRA. My understanding is this will have a penalty attached to it.

Yeah that's the other issue i just dealt with this AM.

ALWAYS pay the tax bill from non ira assets to the extent those are available.

Remember, your "effective rate" or average rate would be around 20% if you maxed it out. It's the "marginal rate" you want to make sure you don't exceed that 24%, thus giving the 20% average roughly.

Thanks. It's the tax bill that would prevent me from converting a chunk of my 401k. This year has been hard on our finances with my wife getting laid off for months and my business taking a shot in the ass.

NO PENALTY attached to that conversion regardless of when you do it or your AGE, OR regardless of how much money you make.

Gotta take advantage of any "freebies" the government throws your way

Also see my "back door Roth" discussion above.

Some 401k plans allow an "in service" conversion.

Then wait until you can in the future, sorry to hear that. But always keep it in the back of your mind for the future.

But any little bit helps on that conversion to Roth.

Thanks for the clarification.

No need to apologize, such is life. I'm just happy we were able to power through it with our savings.

Looking for long term (20 years). I have picked stocks in:
5G
Renewable energy
Electrical vehicles
Tech
Assisted living (tools to help seniors), gonna have plenty hit that age in the near future
Pot
Pharma
Entertainment
SPAC
Small amount in Airlines (waiting for the other shoe to drop before investing there)
Waste Management

Is the Roth IRA loophole still open? It was as of a few years ago. You could contribute the max to a standard IRA then convert it to a Roth, regardless of income amount. SO the idea was to have a standard IRA open with nothing but pennies in it, so you didn't have anything to keep track of for tax purposes. Contribute to it at the max, let it clear and leave it uninvested. Then convert to your Roth. Voila.

But I don't know if they ever closed that loophole.

EDIT: lol, didn't see that was what Ice was talking about above. Guess it is still open.

I’m really trying to understand this but having a hard time. Recommended reading for someone with very little savings who just started their 401k match for their employer? I’m in my 20s here and all I want to focus is on investing as much as humanly possible so I don’t end up a broke bastard in my 50s (like many of the men I’ve worked with)
One of my coworkers worked 20 years for a company, took all the money upfront, skipped any of the savings options and now he’s got absolutely nothing at 56. No savings, no safety net and a body that’s getting old.

I’ve worked with enough guys like this already and the experience really lit a fire. I don’t want to end up like that.

My best investments so far have been my pins. Prices are ridiculous now! It’s surprising how it’s changed since 4 years ago when I first got in.

You will be set up very well in the future if you take action now like you are wanting to do. I tell my kids (16), when they start working to max out their 401k and Roth IRA, every year. Live on whats left over and they should be able to hit retirement much much earlier then the traditional working person if they so desire.

You have TIME and the magic of compounding on your side. Take full advantage of it!

Great advice, these have all been solid performers.

A lot of talk about back door IRA’s. One thing to keep in mind is that the rate is taxed at the level of all of your traditional IRA’s. If you have a lot of money in your IRA then this might not be as advantaged as you think. More info below.

https://investorjunkie.com/retirement/backdoor-roth-ira-contribute-dont-qualify/

The key take away is to know when to Hold em and know when to Fold em or buy low and sell high. Good luck my friend

I'm wait for the second wave to hit at this point. Just stocking cash for the next few weeks and then go on a buying fenzy. Hopefully that plan will payoff

This is what i PM'ed you on April 22nd Frost.

"Yep Frost, the whole thing is overblown BS!

Even still, wait until this dust settles but if you are long term then you will do great.

Look at Apple AAPL, Pinterest PINS, Trade Desk TTD and SHOP if it sells off further.

PINS is going to go up tomorrow on the Snapchat earnings today."

Don't get caught up in the day to day.

Save what you can every single month, time is on your side, "power of compounding". Google and read about that concept and you will do great!

Then have a game plan and understand the consequences of what you spend versus what you save.

Yo @iceman44, do you think we will ever get SALT tax deductions back or do we think that genie will never get put back in the bottle?

Interesting paper about this that extrapolates both options.

https://www.williamblair.com/-/media/Downloads/Insights/PWR-Assets/2018/WilliamBlair-RP_Roth-IRA-Conversions.pdf?as=1&la=en

Anyone who wants to learn about and needs help with choosing long term high growth stocks Ice was super helpful (again) and referred this subscription service a while ago here. Its like $24 a month. I subscribed and it changed the way I view investing. Not a day trading site but long term view.

https://seekingalpha.com/checkout?service_id=mp_1180

I also just spent money for this service that gives guidance on which way the market is headed.

https://seekingalpha.com/checkout?service_id=mp_1201

You can do trials on these. And check out Seeking Alpha. A lot of great info.

Battery day seems to be a bust for Tesla - at least market reaction. Took a bath b/c of it haha. well they have a tendency to bounce back with wild swings. I think next swing I'm out - putting it towards JJP 6!

Kinda having my mind blown by this backdoor Roth IRA tip. Excited and embarrassed I didn’t know about it.

It’s like ordering off the not so secret menu for the first time.

I watched it live and yeah it’s not the immediate gratification the market was hoping for it is exciting developments for long term success that just might keep Tesla in the lead. Today made me feel confident to stay long on the stock and ignore the swings except when it dips deep to buy more.

Nothing to be embarrass about. It is kind of known but not really. Sadly, I can not really take advantage of it.

Here you go. . And then see below. Oh the irony of it all!!!

"Mr. Biden, Nancy Pelosi and Charles Schumer don’t agree on everything, but on this specific issue they speak with one voice: the $10,000 cap on deductions for state and local tax (better known as the SALT deduction) must go.

The House of Representatives has already passed legislation removing the cap, allowing the amount of the deduction to rise. If the Senate turns blue in November, Democrats have promised to return to the issue. “I want to tell you this,” Senator Schumer said in July, “If I become majority leader, one of the first things I will do is we will eliminate” the SALT cap “forever.” It “will be dead, gone and buried.”

"But there was one seriously progressive element, a single diamond in a lot of rough: the introduction of the SALT cap. Lifting it would therefore reverse one of the few good things about the 2017 bill. Almost 60 percent of the benefit of removal would go to the top 1 percent of households (of which 90 percent are white). For the superrich, the top 0.1 percent, repeal would make for an average tax cut of around $145,000 a year. In isolation, this change would be more skewed to the rich than the Republican tax bill as a whole."

And further..............

"By pushing for repeal of the cap, Democrats are leaving themselves wide open to criticisms of hypocrisy and opportunism. As Senator Michael Bennet, one of the few Democrats opposed to removing the SALT cap, pointed out to his Senate colleagues in October 2019: “We can say we are for a progressive tax code and for fighting inequality, or we can support the SALT deduction. But it is really hard to do both.” Alexandria Ocasio-Cortez also voted against repeal."

HIGHLY recommend Andres as at least a good guide and starting point for "growth" investing and I can tell you that i pay at least $15k a year for various Motley Fool research services and there is a lot of overlap, equities showing up on both of their "screens" etc.

Andres has been about 30-35% cash in his model for quite some time and still crushing it performance wise as Pinny can attest to.

For short term money use VGSH, 1-3 treasuries, the yield right now is about 1.6% and has virtually no "interest rate risk". In this environment i use no other bonds. Plus the expense ratio from Vanguard is only .05% compared to the comparable SHY, .15%, which is Ishares version. It currently yields about 1.4% and costs more and because of the brand it has twice the assets as the VGSH.

Brad Thomas and iREIT is another GREAT resource for all things REIT's. It's about $500 per yr?

All you need to know about MAC

I utilize the backdoor Roth contribution every year.
For those that make too much to contribute to a tax advantaged IRA - A regular IRA contribution is taxed anyways and it's a no brainer to convert to a Roth

Yeah, but you get taxed at the rate of your traditional IRA's. I have been rolling my 401k's from various companies into my IRA so the tax consequences would be large for me.

Oh, the irony is strong. I am lucky that I got grandfathered in on the mortgage interest deduction cap when I bought my house in 2018 (started the process in 2017, so I got in under the wire) but the taxes are robust. We will see where this goes.

That article is very slanted in the last two paragraphs. There are many middle class families like mine in states like NY, NJ, Connecticut, Virginia, Maryland, California, and Florida that are getting shafted by double taxes on the income they are paying for state income tax, real estate property taxes, and vehicle property taxes. As a dink, double income and no kids, I have been shafted for over twenty years with a marriage penalty and the reduction of the SALT deduction was just another form for me to get screwed additionally. I am usually not one to complain about taxes either.

The other thing about the $24,000 standard deduction for married couples is that it takes away some of the incentive to buy a home. A large percentage of families can no longer deduct the interest they are paying on the mortgage because they stay below the standard deduction. The main thing that is keeping houses selling and values up is the historically low interest rates. If the interest rates go up, which they eventually will have to, then home sales and prices could be volatile.

The challenge that you and I have is that we live in a very expensive region with a high price of admission. Sadly, it is only getting worse. Between government and tech this region has a fair amount of wealth and is priced accordingly.

I don't know how it is in Chantilly but out here on the bay houses have sky rocketed. The bay market has always been strong but has gotten stronger as of late. The challenge out here is that for entry level waterfront homes, they normally are knock downs or complete gut jobs. Most of the homes are very dated and have not been kept up with, so the rehab is extensive. Throw in all the changes in zoning and building restrictions and it has become very slow and expensive to do construction out here.

There are so many new tech companies here where I am that were not here 20 years ago. A good portion of the people in my suburban neighborhood are in IT jobs and practically every new neighbor I have met in the last few years is in an IT job. I bought my house in 1997 and it is not far off from tripling in value.

But it's great if you've paid off your mortgage! I love not having to itemize deductions.

Not really when I have a mortgage on another similarly valued property and state real estate taxes on two properties on top of state income tax on two salaries (my wife and I). I still have to itemize but I lose probably about $15000 in deduction amount. Besides, itemizing is very easy with turbotax.

Some people earn too much to contribute to a tax advantaged IRA, so they pay taxes on their IRA contribution anyways and there is not much of a tax it to roll it into a roth

But look who is hitting you? State and Local governments. Are you getting really awesome value from your state and local governments for the higher taxes you pay? Folks just don’t look at where the money goes and say “it’s a write off whatever“ or “I live in a higher cost area so I should pay $12k is reasonable for property taxes” and they move on. I feel if folks can’t write off the income And property taxes It makes local governments more responsible. Also Why should the federal Govt have to subsidize higher taxes From states or mortgage payments from owners for the area you chose to live in and the mortgage payment you chose to take on? I would much rather see the lower income folks get a Tax break then six figure households not being able to write off. If you are middle class and write off over $24k a year in income, property and Mortgage interest are you may not be middle class?

Saying this in a nice non douche bag Anti Pinside way and full disclosure I was effected by the Tax change and had to pay more federal taxes because of it with capping my write offs, but I think think it’s fair.

Like I said, it's great if you don't have a mortgage. Paying off my house was top priority for me once I had the money to do so. Sure, I sold a lot of stock to do that, and I'm sure if I'd held that stock I'd have more money now (I don't care to do the math... what's done is done). But not having any debt for the last decade or so has been priceless. I sleep like a baby.

It was the federal government that had been promoting taking on debt on homes and deducting interest and taxes. They decided to pull the rug out from under people. To me the American Dream of owning a home has been a little bit of a sham all along to keep the economy moving when most people would have more assets in the long run if they rented something modest and invested the difference for the long term.

I was the same with paying off the house I live in. I have always been extremely conservative and that is why I was able to invest in a 2nd home after the primary home was paid off, and we even have been keeping our cars for over 15 years because we are that conservative.