Spouse’s income/Finance question

[Retrograde_Nail]

Just checked. I made a crazy 17% returns this year on my 401k.
Thats a crazy amount
We did have a weird year where markets started in gutter and now back to booming.


Also, tomorrow is last day for backdoor roth conversion. If you dont know what that is you need to learn now.

Same and my 529 accounts for two kids are up 20%

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[Feli]

401/403 money goes in tax free, grows tax free, and only gets taxed as “income” upon withdrawal. Your gains aren’t taxed which you misstated or misrepresented previously. ...

Everything is taxed on 401/403... gains, original dividends, etc.
It's all the same pile for taxation when withdrawn.
You pay ~20% (or whatever your ordinary tax federal rate is set at when you take it out). Every dollar... gains or original contributions. You also pay state tax.

If you are talking unrealized gains in a 401/403, no... of course those aren't taxed (until withdrawn).

Ask anyone who is in retirement and doing 401k draws... it's ordinary income. It is all taxed. They keep maybe $75 net per $100 they withdraw... maybe up to $80 in Fla or TX or states with no state income tax.

401/403 = withdraw in retirement, standard tax rate on ever dollar withrawn
cash account = cash out anytime, pay capital gains tax (short or long term rate) on profits only (contributions were post-tax)
Roth IRA = no tax if retirement age (tax paid before contributing)
trad IRA and others = tax is way too complex for scope here

... And I’ve never had a 401k that didn’t have low fee index funds that perform as well as other index funds. Fees in my current 403B aren’t an issue. ...

This is good.^
That's what we should all target (and check on the funds annually).

I have barely ever seen a 401/403 option that indexes as well as simple VTI, VOO, SPY, IVV etc (because the 401 plan ones have higher ER, pay less divi, or both).

...I was saying that getting 17% in 401k when the S&P did 26% (and Nasdaq QQQ did roughly twice that) this 2023 year is a bit of a problem. That is almost always the 401 funds' fees and lack of dividends. That lagging return versus market avg is a HUGE problem over a decade or two. That should be brought up with employer 401 admins if possible.

For solo or SEP 401, fees/drag are no issue... can buy whatever one wants, trade options, anything... just like Roth or cash acct.

... There is another advantage for tax deferred accounts that everyone has ignored. There are plenty of people who currently pay state income taxes but upon retirement can/will relocate to a state without a state income tax. There are significant additional savings with putting away your money pre-tax in that scenario.

Yep, 100%. ^

Most people hope taxes overall might go down, they will be in a lower bracket, or they will be in a place with less/no state tax when taking withdrawals from pre tax accts.

 

[air bud]

401/403 money goes in tax free, grows tax free, and only gets taxed as “income” upon withdrawal. Your gains aren’t taxed which you misstated or misrepresented previously.

And I’ve never had a 401k that didn’t have low fee index funds that perform as well as other index funds. Fees in my current 403B aren’t an issue.

There is another advantage for tax deferred accounts that everyone has ignored. There are plenty of people who currently pay state income taxes but upon retirement can/will relocate to a state without a state income tax. There are significant additional savings with putting away your money pre-tax in that scenario.

Also later in life getting into real estate is a great way to change your taxable income once no longer practicing.

 

[air bud]

Just checked. I made a crazy 17% returns this year on my 401k.
Thats a crazy amount
We did have a weird year where markets started in gutter and now back to booming.


Also, tomorrow is last day for backdoor roth conversion. If you dont know what that is you need to learn now.

Holy cow bro you are full of misinformation. You can make a backdoor Roth up until April. 15th/tax filing deadline. You have 15.5 months each year to do these. Source: trust me bro. And the IRS.

 

[DYK343]

Holy cow bro you are full of misinformation. You can make a backdoor Roth up until April. 15th/tax filing deadline. You have 15.5 months each year to do these. Source: trust me bro. And the IRS.

You are correct and I was wrong.
Not sure where I got in my mind it needed to be done by Dec 31st.

The rest of what I said ill stand by.
Max out all tax deferred retirement accounts.
The logic is sound.

 

[heybrother]

1. I put the OP and fiance's income into a simple tax calculator. They should have more than enough income to max their 401K and hopefully pay $100K+ (hopefully more) to student loans. It shouldn't be an "or" situation, it should be an "and".
2. Never give a high earner an excuse to not fill a 401k, ROTH etc or in a few years there will be something else that is the reason they can't max the accounts. Private schools, boat payment etc. Its how we get those clickbait articles where a person says they are broke but make $350K.
3. There is a simple beauty to paying off the loans, I get it. I've always paid off my own loans as fast as I could. Yes, you potentially can generate superior returns elsewhere but your returns will have to exceed the taxes the returns will generate.
4. I'm technically up like 50% on my house but I'd have to sell it to get the money and then find a house in another rich neighborhood. Since I don't want to sell having my house go up in value really just means I pay more in taxes.
5. Everything you read concerning finances in newspaper has an incredible recency bias / "desperation to write something" effect. Consider Bond Index Funds. If you owned an Intermediate Bond Index fund over the last few years you started out being paid like 2% interest. Something miserable. Returns were boring. Everyone said - we need to be in stocks to make money. Then the underlying interest rates went up. In a bond index fund the principal of the fund decreases when rates increase. You appear to be losing money - that's how it looks on your account. However, you are also being paid a higher interest rate because the new bonds entering the fund will pay a higher interest rate. During that time period newspapers will write stories saying that you got slaughtered and took losses on your bond funds. Old people who don't know any better will sell their funds and take the loss for real not realizing that their fund literally went from paying 2% to paying 5% and that in a few years (the duration of the fund) they will be made whole. And then when things stabilize you'll hear that everyone should be in bonds because it pays a near risk free 5%. What will drive you crazy about the above is - all of the above can happen in the same year. People who write about these constantly have to be generating content. You can avoid most of the fluff by just understanding how these things work. Long story short - under everything you can about 401k, traditional and rollover IRA, ROTH IRA, stock index funds, bond index funds etc.
6. Fun thing to remember. I don't know about ya'll but my goal is not to practice till I'm ancient. I don't know how social security will function in the future. Right now delaying the time period till you draw social security generates an increase in your payment. You can draw from retirement vehicles usually by 59%. So if you want to retire earlier there is probably something to be said for having (a) brokerage type accounts on which you'd only owe long term capitol gains (b) retirement accounts that you can pull from and fill low brackets after 59 but before social security starts (c) and then ROTH, cash, social security, etc
7. The rules will unfortunately change along the way. Previously you could pass ROTH IRAs to your heirs who could essentially hold it forever. Now heirs have to draw from the accounts within 10 years of your passing - something like that.
8. An IRA and a conversion to a ROTH are different events. Most people on this forum probably didn't have retirement accounts/savings before becoming doctors so performing a ROTH conversion usually just just means funding an IRA and converting it. However, you can have rollover IRAs (ie. money rolled from a 401k into a IRA) that can be converted to ROTH albeit you'll have to pay taxes on them.

Roth Conversions | White Coat Investor

Roth Conversions aren't complicated. The decision about whether or not to do one and how much to convert absolutely can be. Here is a guide to help.

www.whitecoatinvestor.com

 

[Retrograde_Nail]

Write this down…

Park some money in crypto and watch it grow faster than any of your other investments this bullrun.

Park some money in cannibis stocks. The entire sector has been beaten down for 3 years due cannibis being classified as schedule 1 drug. There is strong sentiment that it will be reclassified. Once it is reclassified and becomes legalized we will see some crazy returns in all stocks in this sector.

 

[dtrack22]

Everything is taxed on 401/403... gains, original dividends, etc.
It's all the same pile for taxation when withdrawn.
You pay ~20% (or whatever your ordinary tax federal rate is set at when you take it out). Every dollar... gains or original contributions. You also pay state tax.

If you are talking unrealized gains in a 401/403, no... of course those aren't taxed (until withdrawn).

I guess I should have said the gains in a 401k themselves are not taxed separately. Or the money in your 401k is not taxed twice like it is in your taxable investment account.

Downplaying the tax advantages of a 401k/403b is kinda nuts

 

[Retrograde_Nail]

Write this down…

Park some money in crypto and watch it grow faster than any of your other investments this bullrun.

Park some money in cannibis stocks. The entire sector has been beaten down for 3 years due cannibis being classified as schedule 1 drug. There is strong sentiment that it will be reclassified. Once it is reclassified and becomes legalized we will see some crazy returns in all stocks in this sector.

Bitcoin mining stocks will do well this crypto bullrun as well. Easy gains

 

[Feli]

I guess I should have said the gains in a 401k themselves are not taxed separately. Or the money in your 401k is not taxed twice like it is in your taxable investment account.

Downplaying the tax advantages of a 401k/403b is kinda nuts

The 401 contribution for student loans payment bill passed, beginning this month...

Most major employers now let people get the guaranteed 7-8% return (pay their $ on loans), and then they can get the employer match to use for the 401/403 group of funds.

How to Get a 401(k) Match for Your Student Loan Payments

Rule changes mean paying down your student loans could soon help boost your retirement account.

www.wsj.com

 

[Bored Snorlax]

Write this down…

Park some money in crypto and watch it grow faster than any of your other investments this bullrun.

Park some money in cannibis stocks. The entire sector has been beaten down for 3 years due cannibis being classified as schedule 1 drug. There is strong sentiment that it will be reclassified. Once it is reclassified and becomes legalized we will see some crazy returns in all stocks in this sector.

They’re looking into rescheduling as schedule III. Just saw this on CNN.

 

[Retrograde_Nail]

View attachment 380956

They’re looking into rescheduling as schedule III. Just saw this on CNN.

Exactly. Entire sector/stocks will pump if approved

IF

Has potential

 

[GreenHousePub]

View attachment 380956

They’re looking into rescheduling as schedule III. Just saw this on CNN.

Get ready for a whole boatload of neuropathic patients. This could save podiatry in the way boomers didn't.

 

[Feli]

Bitcoin mining stocks will do well this crypto bullrun as well. Easy gains

But why roll the dice if no need to?
Aren't indexes and typical stocks and just paying loans to get 7% guaranteed easy gains too?
Why take the risk with an alt investment?

.

[I haven't seen this guy post in a week or two and know this'll get him back]

 

[Feli]

Get ready for a whole boatload of neuropathic patients. This could save podiatry in the way boomers didn't.

Shoot, the pothead neuropathy... alcoholic ankle fx... and the energy drinks too:
We will eventually have 50-something and even 40-somethings who did 4-Alani-cans-per-day or XXXL Monster can addiction as medicaid CVA patients to do RFC and drop foot braces for?

They should make APMA posters about this stuff.... growing need for podiatry due to vices.

 

[Feli]

Also can't forget people getting hit by cars while trying to be influencers... serious boon to F&A injuries?