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72

The ROI on a racing stallion can be astronomical. American Pharoah's stud fee started at $200k per live breeding (and they can breed a tremendous number of times each season). Dressage, polo, rodeo, any equestrian sport will create demand (and therefore potential ROI) for horses that perform well. Typically the winnings during their career are dwarfed by ...


58

Do not use your IRA to pay off this debt! If the penalties are indeed as high as you state, it's like paying almost 50% interest on your debt! Your $3500 balance is real money. You can consolidate your rollover accounts if you don't like having small amounts in several places. It's not just some "random account". If you had $3500 in cash right now, would ...


49

I'd encourage you to use rules of thumb and back-of-the-envelope. Here are some ideas that could be useful: save at least 10% of your income, but 15% is better. Your savings rate will need to cover everything (retirement, emergencies, houses, cars, kids) and 10% probably isn't good enough for that. you might withdraw 4% per year in retirement, which implies ...


49

According to the link below, it does appear that you must take an RMD, or Required Minimum Distribution, from your IRA at age 70½, or face a 50% penalty of the RMD AMOUNT that has NOT been taken, which is going to be much less than 50% of your entire account balance. Why specifically this happens would be opinion based on my interpretation of the reasoning ...


49

Your question indicates confusion regarding what an Individual Retirement Account (whether Roth or Traditional) is vs. the S&P 500, which is nothing but a list of stocks. IOW, it's perfectly reasonable to open a Roth IRA, put your $3000 in it, and then use that money to buy a mutual fund or ETF which tracks the S&P 500. In fact, it's ridiculously ...


47

If it was me, I'd cut my lifestyle and be done with the debt. You make a great income and I assume you take home around 6000/month. The IRA is not very much and you will probably need it in retirement. This statement alarms me: In order to survive I had no choice but to use my credit cards It was unlikely that dramatic, if you chose to NOT to use ...


42

It means both. The IRS currently calls them Individual Retirement Arrangements, as seen on the titles of Publications 590-A and 590-B. However, in the tax code, they are called Individual Retirement Accounts (Title 26, Section 408). In my experience, you will see it described as Individual Retirement Accounts nearly everywhere you look except for the IRS ...


35

Horses can generate income from winning horse races. The owner of the winner of the 2018 Kentucky Derby took home $1.24 million while second place received $400,000. Horses can be put out to stud, especially if they have won lots of races. Top stallions that are not racing thoroughbreds may command $20,000 for one breeding, racing thoroughbreds will be ...


28

There's no additional income tax burden created when you decide to make Roth IRA contributions, your Roth IRA contributions are taxed at the same time all your income is taxed. If you earned that $100 by working a job, then your employer likely withheld taxes when they paid you. If you earned it through self-employment, then you'll pay estimated taxes on ...


27

You elected to defer paying taxes by contributing to an IRA. Lawmakers simply want to make sure that they collect those taxes by requiring you to either withdraw the money (incurring a tax liability) or pay a penalty (tax).


26

Besides the employer match, a 401(k) plan has other benefits that IRAs do not have: A 401(k) is convenient. The investment is automatically taken out of every paycheck. This encourages setting an investment plan and sticking to it. For some people, it can be tempting to skip planned investments into an IRA. 401(k) plans can have higher annual investment ...


22

I'm concerned about your extreme focus on Roth. In today's dollars it would take nearly $2 million to produce enough of an annual withdrawal to fill the 15% bracket. If you are able to fund both 401(k)s and 2 IRAs (total $43K) you're clearly in the 25% bracket or higher. If you retire 100% with Roth savings, and little to no pretax money, you miss the ...


21

The matching funds are free money, so it is a very good idea to take that money off the table. Look at it as free 100% return: you deposit $1000, your employer matches that $1000, you now have $2000 in your 401(k). (Obviously, I'm keeping things simple. Vesting schedules mean that the employer match isn't yours to keep immediately, but rather after some ...


21

Your assumptions are flawed or miss crucial details. An employer sponsored 401k typically limits the choices of investments, whereas an IRA typically gives you self directed investment choices at a brokerage house or through a bank account. You are correct in noticing that you are limited in making your own pre-tax contributions to a traditional IRA in ...


20

You have 60 days from the time it came out to deposit the money into an IRA. Tell the IRA custodian it's not a 2012 deposit, but a rollover from a 401(k). Last - it's practice for these withdrawals to have 20% withheld. Be sure to deposit the full amount (i.e. add back in the 20% withheld) and also be sure it's all reconciled on your 2012 tax return. Edit ...


19

You can compare formulas all you want, and you can compare yourself to your peers all you want, but that doesn't mean that the formulas are correct, or that the peers who are "losing" are actually any worse off than you are. Consider yourself and your life. Consider how your assets would hold up against different stresses: marriage, children, medical ...


19

That's unlikely to be a good move. After the penalties, you would have roughly $40k-$45k to apply to your debt. But then what? You'd still have $100k of debt, with no change in your income situation. You would be sacrificing half of your retirement fund to reduce your debt by only a third. Two points from your question are notable. First, you say your ...


16

Does your company offer a 401(k) and are you taking maximum advantage of it? 2015 limit is $18,000, an extra $5,500 if you are 50 or older. The RMD shouldn't be too large, it depends on your age, of course. You're in no worse shape than anyone hitting age 70-1/2 and having to start taking their RMDs. If you are younger, your RMDs start pretty low. If I look ...


16

Zero. Zero is reasonable. That's what Schwab offers with a low minimum to open the IRA. The fact is, you'll have expenses for the investments, whether a commission on stock purchase or ongoing expense of a fund or ETF. But, in my opinion, .25% is criminal. An S&P fund or ETF will have a sub-.10% expense. To spend .25% before any other fees are added is ...


16

At the risk of getting down-voted on my first post to this site, I've got to point out a couple of things here that can help. I personally got in a little over my head with debt about a decade ago. It was on the same scale as this relative to my income at the time. Look for a better deal on interest. As one of the other answers notes, credit card debt is ...


15

I agree with the other answers that it is a benefit, but wanted to add another explanation for this: Also, why a company would prefer matching someone's contributions (and given him or her additional free money) instead of just offering a simple raise? In addition to a match being a benefit that is part of your total compensation, 401ks have special ...


15

You do not report the Roth IRA on your 1040 because it has no implication to your current tax situation (as you fund it with after-tax dollars). Your IRA custodian(s) would report the contributions to the IRS on form 5948, which would then be used to determine if all of your contributions for the tax year were under the Roth IRA limits. If you did over-...


15

Couple of clarifications to start off: Index funds and ETF's are essentially the same investments. ETF's allow you to trade during the day but also make you reinvest your dividends manually instead of doing it for you. Compare VTI and VTSAX, for example. Basically the same returns with very slight differences in how they are run. Because they are so ...


15

Since I am over 59 would I be exempt from the 10% penalty? Correct, but you will pay tax on the distribution. Depending on any other income and how much you withdraw, that tax could be as low as 10% or as high as 38%. Since you will pay the tax at some point anyways (unless you leave it as an inheritance), cashing out is one option, but you must also ...


15

Your math is correct. As you point out, because of the commutative property of multiplication, Roth and traditional IRAs offer the same terminal wealth if your tax rate is the same when you pull it out as when you put it in. Roth does lock in your tax rate as of today as you point out, which is why it frequently does not maximize wealth (most of us have a ...


14

I like Dr Stanley's work, "Stop Acting Rich" being my favorite. The equation above is lacking. A 20 year old can't have two years income saved, and by 50, one should have a bit more than 5 times. I wrote a brief saving spreadsheet, in which you can load your present numbers, saving rate and assumed rate of return. Part of the issue is how to decide on your ...


14

IRA is not necessarily superior. You have to consider all the things together. Here are some potential benefits of not rolling over from 401k to IRA: Investment options. IRA is generally allowed for more variety, but in 401k you may have negotiated rates and the funds you do have there - are cheaper than they could have been if purchased through IRA. You ...


14

The link you originally included had an affiliate code included (now removed). It is likely that your "friend" suggested the site to you because there is something in it for your "friend" if you sign up with their link. Seek independent financial advice, not from somebody trying to earn a commission off you. Don't trust everything you read online – ...


14

First, check out some of the answers on this question: Oversimplify it for me: the correct order of investing When you have determined that you are ready to invest for retirement, there are two things you need to consider: the investment and the account. These are separate items. The investment is what makes your money grow. The type of account provides ...


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