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A place for Get Rich Slowly readers to ask questions
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 Post subject: Re: Just starting out, need advice
PostPosted: Wed Jan 02, 2013 10:38 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 278
Location: Atlanta, Georgia
VinTek wrote:
As recently as August, http://helpdesk.blogs.money.cnn.com/2012/08/09/irs-taxing-roth-ira-withdrawals/, at least in the case of Roth IRAs.

"And even if Congress did tinker with Roth IRAs someday — perhaps taxing withdrawals or eliminating Roths altogether — such changes probably wouldn't affect money already invested, say tax experts. 'There would certainly be an uproar,' says Tax Policy Center co-director Eric Toder." Uproar? Um, yeah, I would be PISSED OFF! I don't know the legalities about how these rules can change, but it just seems to me that contributing under one set of rules is sort of like a contract -- i.e., I agree to make nondeductible contributions in exchange for the promise that later distributions will not be taxed. If they were to change that and take away the benefit bargained for, isn't that some sort of government "taking"? And "takings" are prohibited without "just compensation." So I think they're kind of locked into giving us what we expected at the time our contributions were made. Sorry, this is just very quick thinking, so I could be way off...


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 Post subject: Re: Just starting out, need advice
PostPosted: Wed Jan 02, 2013 10:56 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1802
LeRainDrop wrote:
VinTek wrote:
As recently as August, http://helpdesk.blogs.money.cnn.com/2012/08/09/irs-taxing-roth-ira-withdrawals/, at least in the case of Roth IRAs.

"And even if Congress did tinker with Roth IRAs someday — perhaps taxing withdrawals or eliminating Roths altogether — such changes probably wouldn't affect money already invested, say tax experts. 'There would certainly be an uproar,' says Tax Policy Center co-director Eric Toder." Uproar? Um, yeah, I would be PISSED OFF! I don't know the legalities about how these rules can change, but it just seems to me that contributing under one set of rules is sort of like a contract -- i.e., I agree to make nondeductible contributions in exchange for the promise that later distributions will not be taxed. If they were to change that and take away the benefit bargained for, isn't that some sort of government "taking"? And "takings" are prohibited without "just compensation." So I think they're kind of locked into giving us what we expected at the time our contributions were made. Sorry, this is just very quick thinking, so I could be way off...

I'm in full agreement with you. The whole backdoor conversion thing came about because the government needed the revenue from all that money locked away in traditional IRAs. Since so many people bit the bullet, paid the taxes, and did the conversion, it would be political suicide to alter the deal. If it makes you feel any better, read the other link I posted about it's unlikely to happen.


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 Post subject: Re: Just starting out, need advice
PostPosted: Wed Jan 02, 2013 11:52 pm 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
VinTek wrote:
N2Deep wrote:
Tightwad wrote:
The gov't will figure out a way to tax the Roth IRA before it's over. They may not call it a "tax" but that will be too much money sitting in those accounts for the Democrats not to 'redistribute' in some way to the deadbeats & slackers so they can get re-elected.


This is already under discussion from what I have read. Only they were talking about hitting ALL private retirement funds... in order to redistribute the wealth.

Link please. As recently as August, at least in the case of Roth IRAs.


Ask and ye shall receive

If someone would have told me about this a few years back when it started (2010) I would have laughed in their face. Of course at that time I didn't think or Govt or even the Supreme Court would mandate the American People to buy a product or face a fine.

Now this scares the hell out of me because it could actually happen. The part right under "Via the National Seniors Council:" was posted on their site back in 2010 when this came to light and is part of the write up below.

This was posted on Sunday, December 09, 2012
http://www.naturalnews.com/038278_private_pension_funds_Obama_confiscation.html

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 Post subject: Re: Just starting out, need advice
PostPosted: Wed Jan 02, 2013 11:59 pm 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
LeRainDrop wrote:
'There would certainly be an uproar,' says Tax Policy Center co-director Eric Toder." Uproar? Um, yeah, I would be PISSED OFF! ...


Want to talk about PISSED OFF!... try this on for size.

I am going to copy bits and pieces from this piece… but you’ll get enough of an idea that it will make you sick. I know it does me.

Quote:

While New Year’s day isn’t until next week, those that invest in the G fund for their current or future retirement always find it of interest when there is a debate about raising the debt ceiling. The reason: The federal government has to come up with money until the debt ceiling is approved. Your G fund investments will help fund the government while our elected representatives haggle and debate over what to do about the ever increasing debt and the need to, yet again, increase the amount of debt that can legally be incurred by the government.

The Treasury recently announced a series of measures that will delay the day the government will exceed its legal borrowing authority as imposed by Congress. These steps could delay the inevitable for up to two months depending on how much the government spends each day beyond what it takes in during that time.

One of these first measures to be taken by the Treasury Department is to suspend investment in the G fund and, presumably, the Civil Service Retirement and Disability Fund. According to Treasury Secretary Timothy Geithner, these steps, including suspending investments in the G fund, “can create approximately $200 billion in headroom under the debt limit.”

We know from past experience that the Treasury Department can use some retirement funds of federal employees to avoid increasing the debt limit which is capped by law. That is likely to happen again if the debt limit is not raised by Congress.

When the debt ceiling limit was last raised in 2011 the debt ceiling went from $14.29 trillion to more than $16.39 trillion. We don’t know what the next debt ceiling will be, perhaps as much as $20 trillion or so. Of course, the federal government pays interest on the money that it borrows. While interest rates are currently at historically low levels, largely as a result of the Federal Reserve printing money and buying much of the debt, in 2011, these interest payments claimed $230 billion, or about 6 percent of the budget. Since the government is printing a large amount of money each month which is then used to purchase the government debt, there are inflationary pressures building in the economy. When or how large the ultimate inflation will be remains to be seen. But, when interest rates do finally go up, the amount of money spent by the government to finance the debt will go up rapidly.

In short, the current debt ceiling debate is only part of the problem. And, in addition to the pay freeze that has been in effect, federal employees are also helping with the problem through the involuntary use of G fund as explained above.


Once again the federal workforce is a ******* ATM to these folks. They have in the past (and possibly will agian real soon) invade our retirement acounts because they are too stupid to live within their means. God I need to quit this job. Everytime I turn around we are getting bent over with no lube.

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I can not dwell over that to which I have no control...


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 Post subject: Re: Just starting out, need advice
PostPosted: Thu Jan 03, 2013 6:33 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1802
N2Deep wrote:
VinTek wrote:
N2Deep wrote:
This is already under discussion from what I have read. Only they were talking about hitting ALL private retirement funds... in order to redistribute the wealth.

Link please. As recently as August, at least in the case of Roth IRAs.


Ask and ye shall receive

If someone would have told me about this a few years back when it started (2010) I would have laughed in their face. Of course at that time I didn't think or Govt or even the Supreme Court would mandate the American People to buy a product or face a fine.

Now this scares the hell out of me because it could actually happen. The part right under "Via the National Seniors Council:" was posted on their site back in 2010 when this came to light and is part of the write up below.

This was posted on Sunday, December 09, 2012
Took out the link here because I'm limited to 1 URL per post

Thanks for the link. I did read it, but I don't buy into what it says. It doesn't link to any source but itself to support its contentions. I'd actually like to see what this White House report on the middle class actually says, in context. I'm surprised that they don't "name names" about which Congressional members would support such a thing. And I'd like to see what Joe Biden really means when he talks about Guaranteed Retirement Accounts.

Besides, 401(k) accounts are owned by the account holders. The government can't legally seize them. And the National Seniors Council guy is full of it. He knocks the Healthcare law but not Medicare. His attitude is basically "I've got mine because I'm old, but I really hate the idea of anyone else being covered."

Show me some links to pending legislation and then maybe we'll have something to talk about.

Edit: okay, I found http://www.whitehouse.gov/sites/default/files/microsites/100226-annual-report-middle-class.pdf. Have a look at it and tell me just what's so dire in it.

Don't ever let anybody tell what a report says. Read it for yourself and determine what's really being said.


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 Post subject: Re: Just starting out, need advice
PostPosted: Thu Jan 03, 2013 8:07 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
N2Deep wrote:
Plus if you're ever in a real serious financial bind...you can pull what you contributed to your Roth tax free as long as you don't touch the dividends. You may still have to pay the 10% "I'm the govt so I get to tell you when you can retire" tax for early withdraw.


You should study up on these things before you speak and mislead people. First off, roth ordering rules for non-qualified distributions stipulate first out is contributions made directly to a Roth IRA (sometimes referred to as your basis). These are without tax and penalty.

Second, there are ways to get at your money, tax and penalty free before age 59.5. But, you can't blame the gubimint for wanting to make sure your social experiment doesn't fail (or at least minimizing the chances of such).

As far as a "double" taxation of Roth IRA's, there is a low chance (I consider it to be zero) that they will explicitly tax it again on withdrawal. But, such things as a VAT (which doesn't impact the decision Roth vs Trad), further means testing of Social Security to include assets and/or total withdrawals (not just taxable income), having all withdrawals count towards putting you up and over the bottom tax bracket (no more skating through with 0% LTCG/dividends), etc.

As much as it pains me to say this, I find the VAT to be the solution I like the most. But, that is because it ensures all are taxed. Misery loves company.

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"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Just starting out, need advice
PostPosted: Thu Jan 03, 2013 10:00 am 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
VinTek wrote:
Thanks for the link. I did read it, but I don't buy into what it says. It doesn't link to any source but itself to support its contentions. I'd actually like to see what this White House report on the middle class actually says, in context. I'm surprised that they don't "name names" about which Congressional members would support such a thing. And I'd like to see what Joe Biden really means when he talks about Guaranteed Retirement Accounts.

Besides, 401(k) accounts are owned by the account holders. The government can't legally seize them. And the National Seniors Council guy is full of it. He knocks the Healthcare law but not Medicare. His attitude is basically "I've got mine because I'm old, but I really hate the idea of anyone else being covered."


A few years ago... I wouldn't have bought into what was written either. But a few years ago I had my head in the sand thinking everything was just peachy. Then I started opening my eyes and seeing what was actually taking place in this country. Add into the mix the current obbumercare and if they have even just talked about it... it makes me nervous.

As for the govt cant legally seize them. The govt cant legally experiment on unsuspecting civilians either... but that didn't stop them from doing it. Our govt thinks they are above the law. Just look at all the insider trading that goes on in congress. We do it... we go to jail. And up until just recently... they got away with it scott free.

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I can not dwell over that to which I have no control...


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 Post subject: Re: Just starting out, need advice
PostPosted: Thu Jan 03, 2013 10:06 am 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
Bichon Frise wrote:
N2Deep wrote:
Plus if you're ever in a real serious financial bind...you can pull what you contributed to your Roth tax free as long as you don't touch the dividends. You may still have to pay the 10% "I'm the govt so I get to tell you when you can retire" tax for early withdraw.


You should study up on these things before you speak and mislead people. First off, roth ordering rules for non-qualified distributions stipulate first out is contributions made directly to a Roth IRA (sometimes referred to as your basis). These are without tax and penalty.


And I believe that is exactly what I said. "you can pull what you contributed to your Roth tax free as long as you don't touch the dividends."

Therefore I didn't mislead anyone. I do know what I'm talking about because I pulled money out of my Roth. What I put in came back tax free and the earnings were taxed. I also had the 10% "your not old enough to retire because the gubernet says you aint" fee. Learn to read before you start accusing people. We said the exact same thing.

Now I didn't know there was a way around the 10%.

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 Post subject: Re: Just starting out, need advice
PostPosted: Thu Jan 03, 2013 10:25 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
N2Deep wrote:
Bichon Frise wrote:
N2Deep wrote:
Plus if you're ever in a real serious financial bind...you can pull what you contributed to your Roth tax free as long as you don't touch the dividends. You may still have to pay the 10% "I'm the govt so I get to tell you when you can retire" tax for early withdraw.


You should study up on these things before you speak and mislead people. First off, roth ordering rules for non-qualified distributions stipulate first out is contributions made directly to a Roth IRA (sometimes referred to as your basis). These are without tax and penalty.


And I believe that is exactly what I said. "you can pull what you contributed to your Roth tax free as long as you don't touch the dividends."

Therefore I didn't mislead anyone. I do know what I'm talking about because I pulled money out of my Roth. What I put in came back tax free and the earnings were taxed. I also had the 10% "your not old enough to retire because the gubernet says you aint" fee. Learn to read before you start accusing people. We said the exact same thing.

Now I didn't know there was a way around the 10%.


Normally I would apologize for you not being clear in your point(s), but I shouldn't have to do that. We didn't say exactly the same thing. Please don't bring me down to that level. You originally stated 2 inaccuracies, and you still state 2 inaccuracies. You may very well understand them, but you don't communicate them well. You make it sound like there is no tax but possibly a penalty for withdrawing contributions. And that is not true-no tax, no penalty for withdrawals which consist of ONLY direct Roth IRA contributions.

Also, you can retire whenever you like and use your IRA money. But, once the train starts moving, it is painful to stop it. It isn't a "way around the 10% penalty" in the context you are referring to.

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"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Just starting out, need advice
PostPosted: Thu Jan 03, 2013 1:38 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1802
N2Deep wrote:
Add into the mix the current obbumercare and if they have even just talked about it... it makes me nervous.

I don't want to derail this particular thread by diving into the healthcare debate but I do want to point you to this other thread where we discussed this at length. Let me know what you think. I'd welcome your opinion, but do respond directly that thread because I don't want hijack this one.


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 Post subject: Re: Just starting out, need advice
PostPosted: Tue Jan 08, 2013 12:39 pm 

Joined: Tue Jan 08, 2013 12:09 pm
Posts: 9
To me you just can't go wrong saving for retirement.

I like to max out my Roth IRA every year whenever possible.

(Sometimes) it makes sense to put those funds elsewhere.

But for you I think you'll be well served later in life
for having saved up for retirement early. And letting those
funds compound over time.

I agree with LeRainDrop in that you are certainly in a prime
position right now to be able to save for both school and
retirement.

Take advantage! Because it's a small window.

Later in life you will very likely find yourself incurring
additional expenses when you meet your spouse :)

Also - since you are currently living with your parents you
could save quite a bit on college as welll simply because
you don't have to pay room and board.

Certainly lots of options for you!


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 Post subject: Re: Just starting out, need advice
PostPosted: Tue Jan 08, 2013 4:49 pm 
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Posts: 5316
Bichon Frise wrote:
As much as it pains me to say this, I find the VAT to be the solution I like the most. But, that is because it ensures all are taxed. Misery loves company.


I think a national VAT is both the most evil and most likely major tax change we will see.

1. It hides the tax (if carried out as it is in Europe).

2. It impacts a broad range of people while having less impact on the most powerful groups of voters. (Seniors and retirees for example are a powerful voter group but they don't buy much so they will be less resistant to a VAT than SS changes or similar measures) Similarly, the very wealthy/powerful would not pay more with a VAT. They could potentially pay far less

3. It is very difficult to avoid so it solves the significant problem of undercollection that we (and many other countries) have.

4. It is simpler to administer than an income tax

Personally I would probably benefit greatly from a VAT if income taxes were reduced. But I still find the idea of a VAT appalling because it is so insidious.


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