Preparing for Retirement

[Neb]

Yes. My main point is, invest in something before you retire.
Market up or down doesn't make much difference in the long run *.
Doing nothing however, will guarantee that it is what you'll have.
And buying the latest&greatest skiboat will not help you much after you retire.
Sometimes paying off bills is the best investment because it vaporizes them from being income you will need in retirement years...forever.
*Unless people are 5 years from retirement and the country plunges into a recession.

We are mostly in cash then gold and few other things. We are down about 5% from our high but flat for the last 365 days.

Gold is supposed to be our hedge for inflation but it is a mystery why it is not moving up with inflation. Could it be due to Russia's move to fold backed?

This the price of gold in Ruble for the last year.

This the price of gold in dollars for the year.

Those charts first show the volatility of the dollar compared to the ruble. It also shows the price of gold in dollars is up while it is down in rubles.

So compared to the ruble the dollar is down. Weird because it is almost like the ruble in the face of inflation in the US is acting like one expect gold as the standard!

There be some normalcy bias with the gold market in dollars refusing to accept reality. If true eventually the truth should come to light and the price of gold should jump in dollars. And if it does prove to be the hedge if inflation it has been in the past.

We don't like having a large position in cash because inflation eats away at the value.

We are putting together on paper portfolios that are intended to perform well in at least 3 scenarios.

1
The economy recovers from the hit from the shutdowns. Older demographics etc.

2
We are in a recession now but it is not official yet.

3
We are headed into a depression and some companies will fail and other companies that provide required goods and services will survive and possibly thrive.

How well the fed reserve manages to reduce inflation and how high interest rates have to go to pull back all of the extra dollars in the system will determine what is ahead. Technically it has never been done previously.

Well that is how I see what is coming on the topic of preparing for retirement in the coming future.

Your thoughts?

Ben

 

[LadyLocust]

We are mostly in cash then gold and few other things. We are down about 5% from our high but flat for the last 365 days.

Gold is supposed to be our hedge for inflation but it is a mystery why it is not moving up with inflation. Could it be due to Russia's move to fold backed?

This the price of gold in Ruble for the last year.

View attachment 88873

This the price of gold in dollars for the year.

View attachment 88874

Those charts first show the volatility of the dollar compared to the ruble. It also shows the price of gold in dollars is up while it is down in rubles.

So compared to the ruble the dollar is down. Weird because it is almost like the ruble in the face of inflation in the US is acting like one expect gold as the standard!

There be some normalcy bias with the gold market in dollars refusing to accept reality. If true eventually the truth should come to light and the price of gold should jump in dollars. And if it does prove to be the hedge if inflation it has been in the past.

We don't like having a large position in cash because inflation eats away at the value.

We are putting together on paper portfolios that are intended to perform well in at least 3 scenarios.

1
The economy recovers from the hit from the shutdowns. Older demographics etc.

2
We are in a recession now but it is not official yet.

3
We are headed into a depression and some companies will fail and other companies that provide required goods and services will survive and possibly thrive.

How well the fed reserve manages to reduce inflation and how high interest rates have to go to pull back all of the extra dollars in the system will determine what is ahead. Technically it has never been done previously.

Well that is how I see what is coming on the topic of preparing for retirement in the coming future.

Your thoughts?

Ben

I think 2 & 3 are true. (My opinion, no data, but I have eyes.)

 

[Supervisor42]

I currently have a call in to our CPA to find out how much we can pull from retirement either by Roth conversion or just out without changing the big picture on our taxes. It's maddening since we are still contributing and would like to retire some day.

Depending on how much you pull out, it will likely make little difference in the percentage you pay in taxes, you will just have to pay that percentage on more money.
It usually takes a bunch to bump someone into a higher tax bracket.
The good news is, when you stop working (retire) and your salary income goes away, you drop by a lot in the tax brackets.
Ours went from about 22% to less than 12% .
Rough scale 2021 taxes:

Doya think I'm worried about pulling some from my IRA and paying 11% on it instead of 22%?
(And just ignore that 'effective tax rate' tax thing or Joe will pee his diaper)

 

[Neb]

Depending on how much you pull out, it will likely make little difference in the percentage you pay in taxes, you will just have to pay that percentage on more money.
It usually takes a bunch to bump someone into a higher tax bracket.
The good news is, when you stop working (retire) and your salary income goes away, you drop by a lot in the tax brackets.
Ours went from about 22% to less than 12% .
Rough scale 2021 taxes:
View attachment 88876
Doya think I'm worried about pulling some from my IRA and paying 11% on it instead of 22%?
(And just ignore that 'effective tax rate' tax thing or Joe will pee his diaper)

Yes but the current tax brackets are temporary. They go away in 2025?

My guy said he never saw a conversation to a Roth was worth it. Particularly if you are still working.

If you have the option put everything in a Roth to begin with. There is no telling what taxes will be like in the future when baby boomers become a smaller voting block.

Ben

 

[Supervisor42]

Yes but the current tax brackets are temporary. They go away in 2025?

They are counting on inflation causing wages to rise, booting the 'working people' into a higher percentage tax-bracket.
They won't have to raise taxes because they will be collecting a higher percentage of their income.
Canya see now why the guvment ain't very concerned about runaway inflation?
Sorry, I got off topic.
Preparing for retirement: Hide as much as you can from the tax vultures.

 

[Neb]

They are counting on inflation causing wages to rise, booting the 'working people' into a higher percentage tax-bracket.
They won't have to raise taxes because they will be collecting a higher percentage of their income.
Canya see now why the guvment ain't very concerned about runaway inflation?
Sorry, I got off topic.
Preparing for retirement: Hide as much as you can from the tax vultures.

Still off topic that is estate planning.

Ben

 

[Supervisor42]

Still off topic that is estate planning.

Ben

...I was talking about contributing as much as you can into 401K's/IRA's in preparing for retirement.

 

[Neb]

...I was talking about contributing as much as you can into 401K's/IRA's in preparing for retirement.

There is no hiding that rather it is a declaration.

Alternatives are gold silver lead tools preps... How would that be taxed if protected in a trust of some type ?

Ben

 

[UrbanHunter]

So, if you are working full time and above 59 1/2 is it logical to take a withdrawal to pay off bills while still making contributions to your 401K?

Here is my logic, if I am getting employer matching, say 5% and I contribute close to the maximum (lets say $25,000) but take a withdraw of $25,000 to pay off some bills, then I have to pay tax on the $25,000 I took out but the $25,000 I put in is tax differed (They are a wash), but I still get to keep the 5% employer matching that went into in the account. And my end of year taxes look like I didn't make a contribution. If the bills I am paying off are at a higher interest rate than what the 401K is returning it is a win.

Then again, if you can take out a loan against the account you have to pay yourself back with interest but you don't have the tax liability.
Playing these games can become important if you are rapidly approaching retirement and still have a few large bills hanging over your head.

 

[Supervisor42]

Still off topic that is estate planning.

Alternatives are gold silver lead tools preps... How would that be taxed if protected in a trust of some type ?

...I thought putting stuff into a "trust" was Estate Planning?
Maybe it's a Hunter Biden trust... I dunno.

 

[UrbanHunter]

So, if you are working full time and above 59 1/2 is it logical to take a withdrawal to pay off bills while still making contributions to your 401K?

Here is my logic, if I am getting employer matching, say 5% and I contribute close to the maximum (lets say $25,000) but take a withdraw of $25,000 to pay off some bills, then I have to pay tax on the $25,000 I took out but the $25,000 I put in is tax differed (They are a wash), but I still get to keep the 5% employer matching that went into in the account. And my end of year taxes look like I didn't make a contribution. If the bills I am paying off are at a higher interest rate than what the 401K is returning it is a win.

Then again, if you can take out a loan against the account you have to pay yourself back with interest but you don't have the tax liability.
Playing these games can become important if you are rapidly approaching retirement and still have a few large bills hanging over your head.

So here is the math on this line of thinking

You are making $75,000 per year and your normal tax burden would be $13,500, this assumes Federal of 12% and State at 6%, so you took home $61,500

Now assume that you contribute $25,000 pre-tax to the 401K and you took a $25,000 withdraw paying state and federal tax on that, so you end up taking home $61,500 but your employer paid $3,750 into your 401K as matching.
Now this does not account for lost interest or the opportunity costs but it does make your pre-tax income look more like $78,750 and if you use your money wisely, you will be closer to being debt free....

If you are 60 or older, the maximum you could do this for is about $27,000 per year before you start depleting your 401K. But if your 401K is close to where you want it to be, you can take the money out in January, pay it back in pre-tax contributions over the year, get the employer matching, and you would not be paying the higher interest on the debt your paid off during that time. Now for full disclosure you would only be getting about $21,600 of the $27,000 because Uncle Sam wants his 2 bits at the start, and you need to adjust your state withholding to pay the extra state tax as part of your payroll deductions.

 

[Plainflatlander]

Yes but the current tax brackets are temporary. They go away in 2025?

My guy said he never saw a conversation to a Roth was worth it. Particularly if you are still working.

If you have the option put everything in a Roth to begin with. There is no telling what taxes will be like in the future when baby boomers become a smaller voting block.

Ben

The possibility is there that Roths will have a different tax liability in the future. But prudent advise as of now.