Investing

[BaldBil]

I am not a big investor, really don't trust the bastards. The markets is rigged for the big boys. My only participation is with mutual funds, the slow growth type.

I am a big believer in "coffeecan" investment. Squirrel your money away, out of the system where only you can find it. It will grow on its' own. Forget about the bank points they are a waste of time. I also don't believe in credit cards, one is all you need and use it sparingly. Those things cost you more than an old school bookie.

[ssigman]

1. you're taking money out of circulation by hoarding it away in a coffee can

2. you're not getting any return on your hidden money

3. cc's are evil but are necessary in this day and age

[BtownBeers]

BIL!!! Glad to see ya!

Oddly enough...I had you pegged as that type of guy...don't ask me why...just my perception of you.

[BaldBil]

Originally Posted by ssigman

1. you're taking money out of circulation by hoarding it away in a coffee can

2. you're not getting any return on your hidden money

3. cc's are evil but are necessary in this day and age

I like having my money out of circulation. That bway when some bueuracrat with a mission wants it he can't find it.

CC's are not neccessary, you've just bought into the same baloney they've been selling everybody else.

[ssigman]

you could at least put it into a savings account..the gov't can't just take your money..on a side note...i'd like to go to salem and have a look around bil's place...i can use an infusion of cash

[BtownJay]

I don't have a CC anymore. Sure, i'm still paying of CC debt, those things were very very evil for me to have. Got rid of them.

I dont' get into stocks at all, for whatever reason they won't take monopoly money.

[ssigmanstinks]

Originally Posted by BtownJay

1. IRA vs. Roth IRA - With the regular IRA you pay the taxes on the money when you withdrawl from it. I forget the actual age, but eventually you are forced to take money from it, and will owe the tax on it when you take it out. With the Roth IRA, you pay taxes on the money as you contribute to it, and don't pay when you take it out.

IMO, for you, the Roth would be the better option since it will probably be easier to afford the taxes now, while you are working. Rather than later when you aren't and on what will probably be a fixed income.

Its been over 4 years since i was a bank manager, so there is a lot that i've forgotten about them, and there could have been some changes since then as well.

Can't help much with 401's or stocks.

Edit - nevermind, i'm sure those links are 10x's better than what i posted.

This is as far as I've read thusfar, so I apologize if I repeat.

You want to pay the taxes later, and allow the money you would otherwise be spending immediately on taxes to accrue interest, not only increasing the entire fund on which interest accrues, but lessening the overall tax burden by allowing each years taxable amount to age and accrue interest over 20+ years.

[ssigman]

but if i understand jay correctly...you'd be putting money in after taxes were taken already and then it would sit and grow without being taxed at 59 1/2...which means its a risk/reward...if the taxes taken out now were 8% for example now and 16% when you turn 59 1/2..you'd win the game and save paying 2 times more...but it also could work in reverse

[BaldBil]

I keep a little in savings and of course a little in checking. I have a safety deposit box(2 actually). For a few years I was into buying gold by the 1/4 oz. I on ocassion buy municipal bonds and US savings bonds. I have collected some pretty nice knives and some older small firearms. These are kept in the boxes. I have traveled quite a bit and have always made it a point to bring some foreign currency back with me. I of course had to convert the francs and lira's a few years back. These monies are also in the boxes.

The day I die there will be more than a few relatives trying to figure out where the boxes are.

[ssigman]

did i make sense there?? hahaha i'm not sure

i think of it this way

1000 dollars pre-tax...8% tax rate in 2008 for example..1000 goes in and it grows but when it comes out, it gets taxed at the rate the year you take it out in...16% for example in 2048...so the original 1000 is really 840 dollars....

1000 dollars post-tax...same 8%..so 920 goes and sits for 40 years...when you take it out...that 920 dollars doesn't get taxed

do both the ira's and 401k's grow at the same rate??

[BtownJay]

I could be wrong about the IRA's... its been a really long time since i worked with them. We were told the Roth was better for younger people and the TIRA was good for older people to start.

There are caps on how much you can contribute every year Sigs... but the rate of growth depends on what type of accounts the money is in.

[ssigmanstinks]

Originally Posted by ssigman

did i make sense there?? hahaha i'm not sure

i think of it this way

1000 dollars pre-tax...8% tax rate in 2008 for example..1000 goes in and it grows but when it comes out, it gets taxed at the rate the year you take it out in...16% for example in 2048...so the original 1000 is really 840 dollars....

1000 dollars post-tax...same 8%..so 920 goes and sits for 40 years...when you take it out...that 920 dollars doesn't get taxed

do both the ira's and 401k's grow at the same rate??

not exactly, lets say you invest the original 1000 for 41 years, it is going to earn on a very conservative note 3%. (Roth is at 4.5% - 5% currently) Now after the 41 years, that 1000 is 3359.90, where as if you elect to tax first, you are taking in your example (which is very low by the way, current tax bracket you are in would be at least 15- 25% federal) 8% out of the equation costing you 270 bucks over the life of the loan, or 27% of the initial investment.

take what I hope are more real world examples and invest 1000 of after tax income if in the 15% bracket you would have invested 850 which would grow at 4.5% to $5166 , on the other hand if you invest in a non-roth IRA that is tax deductable (pre-tax not sure if deductible is the right phrase) you have grown your nest egg to 6078

honestly, you don't gain a whole lot by investing pre-tax dollars, but you do gain even at the modest 3-4% interest rates. Not only that, but I know if in my current tax situation I want to have 100 bucks in my pocket after taxes and deductions I have to earn about 157 as I only keep 64% of my earned money each pay period, so it's much easier for me to put away 100 bucks pre-tax to earn interest since it is essentially 30+ % less of an out of weekly paycheck deduction.

[ssigmanstinks]

does your job offer any match on 401K? that is the ideal situation since most companies will match .50 cents on the dollar up to 6 percent or so causing an instant 50 percent return on your money that will earn interest over time.

[ssigmanstinks]

As far as the taxes doubling, if you are making more than 31k this year, you'd be in the 25% bracket, I can't imagine taxes for anyone not making six figures every doubling to 50%.

Also, I'm reading now that IRA contributions are "tax deductible" and not pre-tax investments, let me see what sources I can dig up and I'll post more.

[ssigmanstinks]

seems that the Roth is paid with after tax money:
Income is post tax money and no taxes have to be paid under normal distributions

a standard IRA :
Contributed money is at first post tax money. However, contributions are tax deductible which reduce your tax b