difference of opinion on use of retirement savings
wkate640
10 years ago
Featured Answer
Sort by:Oldest
Comments (16)
patty_cakes
10 years agomaifleur01
10 years agoRelated Discussions
Need some retirement saving advice please.
Comments (18)So do I. Congratulations on realizing your need and setting out on this journey of learning about your money and how to work with it effectively. There are two basic issues ... one is your income and how to deal with it to make each of those dollars coming in work most effectively. The other is your asset base and how to manage it to make it grow well, working harder for you than for the other guys ... and avoiding having too much of snipped off by the purportedly big-deal managers to slip into their pockets. Better to learn what you're doing, over the years, and become your own manager! Pay yourself those fees that they charge (probably wise to deduct the cost of some of your mistakes, as you learn). In the investment group that I've attended monthly for about 7 years, we call them the tuition fees in the University of Learning How to Manage Your Own Money! I bought some equity-based mutual funds over 20 years ago, charging 2.5% of the value of the current asset value of the account, annually. When you multiply 2.5 by 20+ ... what do you get? 50% of the value of my asset, right? Is that the original asset amount? No - the creeping value of the asset as it grew, over time. I started a thread (I think over on KT) a couple of weeks ago asking whether people had ever seen stock certificates grow like rabbits! Had a person bought 1 share of JNJ at the beginning of 1970 (I'm using this for illustration, not suggesting that you should buy it, or not buy it) about how many shares would they think that they'd own, now? If you go to Yahoo->Finance and put JNJ in the "Get quotes" box at upper left, you'll get a page that shows a lot of info about current situation of the shares, including a chart at lower right of the stock price movements today. Clicking at a long-term period under that chart will show you share prices over your choice of various periods ... plus info about several stock splits - twice 3:1, and 4 times 2:1. What does that produce? 1->3->9->18->36->72->144 ... right? Price in 1970 $180./share (in dollars each of which was "worth" a lot more than each dollar is now). Current price about $63.00. That is, $180. grew to about $9,072. How do you like them apples? Not only that ... I read somewhere a while ago about a numberof stocks which had increased their dividend annually for 25 years ... I think JNJ has increased theirs annually for 40 years, if I'm not mistaken. Which adds some sugar to the applesauce, right? When did you ever hear of a Guaranteed Investment Certificate acting like that? Also wise for you to learn to deal with both income and assets in a tax-effective way. If you can reduce taxes now, often a good idea to do so, if the system at issue is useful in your case. Deferral is frequently a good idea, as well, when available. In Canada, a number of people look at the current rate on a GIC and at the rates paid by a stock, and say they like the interest rate better than the dividend rates usually offered. But when Canadians earn a dividend on a Canadian stock, the tax rate used to be lower, and last year the system of calculation changed to make it even lower again. I can't believe how many Canadians I've run into over the years who didn't know that! Quite often ignorance carries a substantial price. I think that I've said to thousands, over the years, that learning how money works is an interesting hobby ... **that pays well**!! (I've said it so often, around here, that I think that people must be getting sick of hearing it!) Not only that, if you put your dollars into a investment where their numbers are guaranteed not to shrink ... they're almost always guaranteed not to grow either. I bought a stock over 40 years ago for about $4. and change, which at that time paid about a (tax-advantaged) nickel or a dime. Over the years the value of that stock has gone up, down and sideways. I could have sold it last May for about $107. ... and it pays me an annual dividend now of $3.48. There's one catch - it has been doubly involved in the U.S. sub-prime mortgage debacle. The share price dropped to the $80.s, then recovered to near $100., then slipped back into the $80.s ... and in the past few weeks, as the sub-prime issue got more complex, far-reaching and distressng, the share price dropped down through the $70.s, into the $60.s, closing since the first of the year in the $60.s ... and I suspect that the dividend rate will likely be cut. Am I about to sell it? No. I paid $4.20 over 40 years ago, and if I sell now, I deduct the $4.20 amount that I paid from the current $68.20 or so, leaving me with $64.00 capital gain. I divide that by 2, leaving me with $32.00 on which I must pay tax at my usual rate (i.e., added to the top of my other income this year). But it does leave me with the other $32.00 realized free of tax. However, I'm getting close to 80 years of age (79 next Wed.) and my current tax bracket is lower that will be the case if I leave all of those assets intact till I kick the bucket - for then some of them will be taxed at lower rates, but after that's used, others will be taxed at higher rates until they get to the top rate, and my executor will have to pay that on some of those realized capital gains, then. Also ... since I have no spouse (to which the tax-deferred retirement account could be transferred, tax-free at the moment, to be added to her assets, to provide her with income and on her death to have the residue added to her income and taxed then, at whatever rate) they'll be added to my income in that year, as well. Likely taxed at top rate. I've thought of selling some of the stocks that I've held for years, in order to have the taxable portion of the capital gain taxed now, at my usual lower rate ... ... but if I do that, I have fewer dollars to re-invest, to go on not only growing, but adding to earnings in those years, until my demise. As it is, I add those $3,000. or so that I'm required to withdraw from my tax-deferred retirement account annually to my annual income. Do you think that I should follow the advice of some hot-shot financial advisors who tell how to get that payment out tax-free? Borrow $50,000. to invest it in a variety of stocks, using well over $100,000. (I wish!) of stock certificates as collateral, making it a fully secured line of credit, at interest of 6%, i.e $3,000. per year, using my $3,000. annual payout from my retirement account to pay the interest. My deal with the lender is that I pay interest only on the loan. As the loan is used for investment, the interest is deductible. As an old fart that doesn't want to take heavy risks, I invest in some quality Canadian stocks - paying about 3% interest, and as they are taxed at low rate, I have about 2.5% after-tax income, which in other circumstances I would use to help pay the interest on the loan. Suppose I'd borrowed that money 15 years ago, paying interest only through those years. If my Dad died and left me $50,000. as a legacy, and I took it to the bank to pay off the loan, how much would I owe them? That'd be $50,000., right? That would have bought a lot of good things, 15 years ago ... much more than now. I gained from inflation. Suppose you'd put $50,000. into the bank, 15 years ago, and the bank paid you the agreed upon rent on your money, in the years between ... and you went to collect the value of your GIC today ... how much would the bank give you? Right! Exactly $50,000. That would have bought a couple of good cars, 15 years ago ... not now. I gained from inflation ... you lost. Such strategies should be used with discretion, taking into account various possible scenarios, some of them quite unattractive, with the operator able to deal with them without serious inconvenience. I never want to see my friends get margin calls on such loans, unless they're able to meet the shortfall, whether with other assets ... or immediate cash. Good wishes for using both your income and assets increasingly skillfully! As you have further questions, feel free to ask. If some of them seem a bit too private for you to feel comfortable with discussing in this public place, I'm sure that several of us who have responded here would be pleased to offer you our opinions should you contact us privately. ole joyful...See MoreHow do you keep the peace when you and SO have different opinions
Comments (51)This is an entertaining thread. I've read all the way through, and realize that dh and I are extremely fortunate in that our tastes coincide on so many levels, and he's very agreeable after I spend hours researching agonizing over selections. What I have learned though, after we built a home 10 years ago, is that it all needs to be done at the outset. Because after the initial construction is finished he is extremely resistant to more construction mess. I had FREE labor offering to help me finish my sewing studio - no go. And the backsplash that we were going to finish after we moved in and lived with a kitchen for awhile - never happened. We sold the house 7 years later, and it was still ABB. So this house, my studio has been an integral part of the plan, AND I just found my perfect backsplash. I can't join the ABB club, or I will forever be without a backsplash. It's all just knowing your own particular dynamic. I'm agonizing right now over which sink to put into the kitchen. I've asked his opinion - he said "get whatever you want" We've gone over our plans with a fine tooth comb in the last week, and I found a few places where we could change selections or leave off, and he pretty much added everything back in....See MoreUsing Different Criteria When Shopping for Future Retirement Home
Comments (26)"Sadly, our current home meets 90% of the requirements in your suggestions: one story, easy access, plenty lighting both indoor and outdoor, wide hallway & door way, wide space in the kitchen, all 3 bathrooms designed for aging...etc. We love our neighborhood. It seems we do not have sufficient reasons to move if it is not because the house and yard are too large for us." Do you want to move, or do you think you should move just because you're aging. If you love the neighborhood, love the house and it's designed for aging, there's really not a big argument in favor of moving. As someone above suggested, can always hire out the lawn work, and if you think the house is too big for you, just close off some rooms, leave them empty or use them for storage, that way you won't have to clean them, and you can shut off the vents to conserve air conditioning costs (heck, a lot of people do just that with a basement...). Not a big deal in my book. Filling in a pool would probably cost less money than paying a commission on the sale of your house combined with closing costs on a new house and the other associated costs with a new house (paint/decorating, minor repairs, etc). DH and I did think about the ability to age in place when we purchased our current house, although not to the extent of the some of the suggestions above (which are great and definitely things to think about down the road - our house is adaptable to a lot of the above). I had a tri-level for a long time, and we were adamant about a ranch. Period. I didn't care about a basement, but DH wanted a basement - man-cave and all that. We did think about ability to access necessities (grocer, drugstore, etc) when we're older and driving becomes more difficult. But, I wonder if that even matters -- in the next 10-15 years or so (if that) self-driving cars will be the norm, so if you're not at the point now where you can't see yourself driving in the next 10 or so years I wouldn't worry about transportation as a criteria for housing for seniors....See Moredoor installs-retired NY union contractor or Lowes-$1k difference
Comments (29)Funny, it seems as if the ones bashing unions are the ones in management - people who own businesses in the trades. Who would have thought it? :) MamaSage, if the referrals came from the tradesman himself, I'm sorry to say that they're not worth any more than online reviews. He's going to omit any negatives. The sad fact is that unless you can get a direct recommendation from a disinterested friend, relative, or co-worker, there's no really good way to predict how things will turn out. Even then, you sometimes get burned. Without that, you just have to trust your instinct. If possible, start by hiring the person for a small job. If you're satisfied with the results, hire him for a larger one. If you find someone who keeps doing good work, for goodness sake, hang on to him! Marry him if you have to. (Just kidding.) But you can't do this test with a large company, only an individual. When you hire a large company, the actual work will be done by an employee, or even by a subcontractor. You have no way to know who you'll get. You can read lots of examples of the potential results right here on GW. And to be fair, I'm sure we hear far more about the disasters than about the successes. But to show you what surprises can turn up, here's a personal one. Several years ago, I had a mini-split heat pump installed by a fairly large local HVAC company. They were well reviewed online (this was before I'd fully learned my lesson about that), and their bid was competitive. At the time, mini-splits weren't common for residential use in the USA (they still aren't really). The company assured me that they'd installed "hundreds" of them for businesses. That may have been true. But watching him, it hit me about halfway through the job that the specific employee they sent had never installed one before....See Moremaifleur01
10 years agowkate640
10 years agopatty_cakes
10 years agopatty_cakes
10 years agomaifleur01
10 years agofeedingfrenzy
10 years agomaifleur01
10 years agosherwoodva
10 years agoemma
10 years agowkate640
10 years agoemma
10 years agojoyfulguy
10 years agowkate640
10 years ago
Related Stories
DECORATING GUIDESNo Neutral Ground? Why the Color Camps Are So Opinionated
Can't we all just get along when it comes to color versus neutrals?
Full StoryHOUZZ TOURSHouzz Tour: Prairie Grain Bin Turned Bucolic Retirement Home
An agrarian structure and a big dream combine in this one-of-a-kind home that celebrates 250 acres of Montana grasslands
Full StoryDECORATING GUIDESStaging vs. Decorating: What's the Difference?
Unlike decorating, staging your home isn't about personal style — it's about creating ambiance and appeal for buyers
Full StoryDECORATING GUIDESBudget Decorator: How to Save When You Don’t DIY
You don’t have to be crafty to decorate your home inexpensively. Here are other ways to stretch your design dollars
Full StoryHOUZZ TOURSWe Can Dream: Rural Retirement Home a Haven of Beauty and Tranquillity
A retired couple builds a spacious Japanese-inspired indoor-outdoor sanctuary to enjoy with extended family
Full StoryLIFERetirement Reinvention: Boomers Plot Their Next Big Move
Choosing a place to settle in for the golden years? You're not alone. Where boomers are going and what it might look like
Full StoryTILEEpoxy vs. Cement Grout — What's the Difference?
Grout is grout, right? Nope. Cement and epoxy versions have different appearances, durability and rules of installation
Full StoryMOST POPULAR8 Little Remodeling Touches That Make a Big Difference
Make your life easier while making your home nicer, with these design details you'll really appreciate
Full StoryREMODELING GUIDESCarrara vs. Calacatta Marble: What Is the Difference?
The answer is in the color and veining of these popular Italian marbles
Full StoryHOUZZ TOURSHouzz Tour: Retiring to a Midcentury Modern Gem
Vintage furniture fits the tone of this 1950s home, designed by modernist A. Quincy Jones, to a T
Full StorySponsored
emma