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Will graduate with 20k in loans, what to do with biglaw cash?
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Date: February 4th, 2010 6:51 PM Author: impertinent soul-stirring water buffalo I'm going to pay off the loans in my first three months (they're at 6.8%). What should I do with the rest of 'dem big face huneds? I'm going to max out my 401k, but I also want to save the most amount possible. (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14016093) |
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Date: February 4th, 2010 6:56 PM Author: Indigo effete telephone trump supporter You starting this year? There is a huge opportunity to put as much money as you want in a Roth IRA (tax-free growth) only available in 2010. Google "Roth IRA 2010" for more info. OR ask me questions. (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14016126) |
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Date: February 4th, 2010 6:58 PM Author: impertinent soul-stirring water buffalo I already have a Roth IRA. Isn't there a 5k limit/year? (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14016153) |
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Date: February 4th, 2010 7:00 PM Author: Indigo effete telephone trump supporter for contributions
but in 2010, you can convert an unlimited amount of traditional IRA to roth. And you can contribute as much as you want to a traditional IRA (maybe limited by your income for the year). So you can effectively put as much money as you want into a roth, but only in 2010. |
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Date: February 4th, 2010 7:22 PM Author: impertinent soul-stirring water buffalo good advice. should i dump money into the ira instead of paying off my loans in 2010 (other than the minimum)? (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14016311) |
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Date: February 4th, 2010 8:04 PM Author: Vibrant Sinister Pervert A traditional IRA has exactly the same limit. (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14016804) |
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Date: February 5th, 2010 1:28 AM Author: racy bat-shit-crazy rehab puppy ty (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14020909) |
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Date: February 5th, 2010 4:25 AM Author: stirring lemon base I don't know about the conversion, but, biglaw salaries are too big for a Roth. I think the limit for a single filer is 100k or something like that. Everybody just uses a traditional. (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14022366) |
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Date: February 4th, 2010 7:01 PM Author: Snowy magical stage hunting ground why max out 401K if your firm wont match? (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14016172) |
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Date: February 4th, 2010 7:06 PM Author: Indigo effete telephone trump supporter avoid taxes, d00d3r (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14016209) |
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Date: February 4th, 2010 7:20 PM Author: impertinent soul-stirring water buffalo Yep, by putting in 15k (or whatever the limit is). My taxable income goes from 160k to 145k. Which is about 5k in tax savings. (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14016289) |
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Date: February 5th, 2010 1:30 AM Author: Excitant seedy parlour Instant 33% return. (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14020930) |
Date: February 5th, 2010 1:24 AM Author: insanely creepy razzle-dazzle antidepressant drug karate Subject: Roth not the amazing way to save in your stub year, you should max 401K contribution, and you'll likely still qualify for a Roth, so max that out too. If you're working all of 2010, you won't qualify for a Roth, but will qualify for a regular IRA. In the event the tax rates you face today are the same you will face in retirement, putting money into a regular IRA or putting it into a regular IRA and then converting that into a Roth are equivalent. The question you have to ask yourself is will the tax rates you face 40 years from now (or later) when you're retired be higher or lower than those you face today? If you're retired and not earning much, probably they're higher now. You likely also have a fairly inefficient means of income now--you're a wage laborer which is the absolute worst way to make money in this country. Maybe in retirement you'll have better means of sheltering income, get it in more tax efficient ways, and even if you're making more, be paying lower tax rates. On the flip side, Congress is more likely to raise tax rates generally than lower them given our deficits. This brings me to a another worry, albeit very low chance. Traditional IRA gives you your tax benefit today - you don't pay the tax on money you put away. Roth IRA implicitly gives you your benefit in the future - you pay tax today, and then get to withdraw it without paying tax on the growth. this is a promise by congress. As Roth IRA balances get larger and Congress looks for more tax wealth, that's something they could tax. the fortunate thing about a traditional IRA is that you already got the tax benefit, it has yet to be taxed. Most importantly, you may get hit by the AMT, in which case you face very steep marginal rates. I'm in a very similar place and here's my strategy:
1) Max out 401K 2) Save in a regular brokerage account in tax efficient ways. For me, currently, that's high dividend yielding stocks because of the tax preference, and my belief that equities overall will withstand the massive inflation we may hit, and will definitely withstand interest rate rises to combat that inflation better than bonds. 3) Stay on the look our for a good investment outside the public equity markets. Maybe a house, maybe an investment in a business, maybe a private fund. Not much outside the public equity markets are available to you if you put the money all into retirement accounts only. Given low liquifity, you can likely garner some decent buying power once your assets hit 100K.
Thoughts?
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Date: February 5th, 2010 1:34 AM Author: Excitant seedy parlour If you're planning on investing in your Roth IRA for 30 or 40 years, aren't the tax savings on the gains likely to be much greater than the tax savings on the money invested?
I think you're making an improper comparison by looking at tax rates now vs. speculative tax rates later because the rates won't be levied on the same base amount. |
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Date: February 5th, 2010 1:45 AM Author: insanely creepy razzle-dazzle antidepressant drug karate Subject: commutative property Roth amount at retirement = [(1-tax rate)*(principal)]* [(1+rate)^(years invested)] Traditional amount at retirement = [(principal)*(1+rate)^(years invested)]*(1-tax rate)
in other words, see what happens if you take $5,000 pay 25% tax (you're left with $3,750), and then earn 10% a year for 40 years (the Roth option) or take $5,000 earn 10% a year for 40 years, and then pay 25% tax when you withdraw it.
Roth was and is much better than traditional because Congress goofed and made the NOMINAL amounts the same. In other words, they said you can put $5,000 after tax into a Roth or $5,000 pre-tax in a traditional, thus making it as if you could put effectively more into the Roth. |
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Date: February 5th, 2010 1:49 AM Author: Excitant seedy parlour Your hypo is all wrong - why would you only contribute $3750/yr to your ROTH? You don't literally pay tax on the contributions, the contributions just come out of after-tax income.
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Date: February 5th, 2010 1:51 AM Author: insanely creepy razzle-dazzle antidepressant drug karate Subject: Roth contribution Rules The only way he's going to be able to contribute to Roth is by first contributing to traditional, and roll over into Roth. Check the contribution limits for Roth. Read earlier posts about why he can only do this in 2010. (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14021210) |
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Date: February 5th, 2010 1:52 AM Author: Excitant seedy parlour Oh sorry, was confused about what you were getting at. Thought you were comparing the advantages of Roth vs. IRA in general.
EDIT: So you mean if you roll traditional into ROTH you have to pay taxes on the rolled-over money I assume? |
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Date: February 5th, 2010 1:55 AM Author: insanely creepy razzle-dazzle antidepressant drug karate Any general thoughts about the three I suggested? Also, am I correct that if my employer has 401K and I'm making biglaw salary, I can't contribute to an IRA anyway? http://www.irs.gov/retirement/participant/article/0,,id=188235,00.html (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14021270) |
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Date: February 5th, 2010 4:15 PM Author: fragrant pocket flask Yeah people, forget about IRAs. Roth is separate from 401k, but you make too much money to contribute. Trad is same bucket as 401k, so no go there either.
If you do have a 401k, you might consider converting it this year. Especially if you have low income this year and you have money to pay the taxes with (i.e. recently laid off with severance last year). |
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Date: February 5th, 2010 11:35 AM Author: impertinent soul-stirring water buffalo I like this method. I think I may do the same thing. Although I live in an area where it is possible to buy a nice condo/house for less than 300k so I may do this as well as a hedge against inflation. I know there are many cons to home ownership but now seems like the best time to buy. (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14023618) |
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Date: February 5th, 2010 1:30 AM Author: godawful new version Spend a week in Panama City, Panama (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14020927) |
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Date: February 5th, 2010 1:35 AM Author: Pontificating Mad Cow Disease National I believe you mean Panama City, FLorida. (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14020983) |
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Date: February 5th, 2010 11:41 AM Author: multi-colored point dopamine NO. He meant Panama City, NIGGER. (http://www.autoadmit.com/thread.php?thread_id=1212519&forum_id=2#14023660) |
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Date: February 5th, 2010 4:25 PM Author: French Glittery Ceo Stead Does 20k go farther in Panama City, FL or Panama?
Florida: tattoo parlors, spring break co-eds showing boobies for beads
Panama: hats, lightly regulated sex trade
Advantage? |