I'm concerned about taxation at retirement age. I won't have the usual deductions that keep me in lower tax brackets. How do I structure my money so I don't end up in a higher tax bracket at retirement?
@Shaina P., I came across this post today from 1500 Days to Freedom, and it made me think about your tax concerns. Hope this helps you.
@Aaron G thank you! I'll check it out now!
I need a financial advisor to open a Roth IRA
@Aaron G thank you! I'll check it out now!
Here is a follow-up to yesterday's post based on some reader comments. He adjusts his Roth IRA conversion strategy and touches briefly upon healthcare in early retirement.
I need a financial advisor to open a Roth IRA
One doesn't need a financial advisor to open a Roth IRA. Are you saying you need a financial advisor because you want to open a Roth IRA and want an advisor to guide you through the process?
You can open an IRA yourself at any brokerage such as Fidelity or Vanguard. You do not need a financial advisor to open.
I am trying to do research to prepare for investing in retirement (though I expect it will take me 6-8 months before I am able [I recently used my emergency savings and want to replenish it first]).
I believe I want to invest in a Roth-type account as that at least gives some cushion incase there is a big unexpected emergency [as long as I keep up with the actual contributions amount] in the future. I am 24-years at this time, so I feel I do not have enough information about "full-adult financial situations" as I am renting at my parent's house (much less expensive that way).
However, I have not considered before reading this chain about what happens after death. I know I want to establish something like a trust where it is "easy" to transfer what is left to my beneficiaries…
Does anyone know of resources that could help me find which one makes "death and beneficiary taxes" the simplist? (I remember when my mom got her portion of the inheritance it caused a lot of problems because it kicked her into a "higher bracket" just because of "resources" despite her income still being "food-stamp" level.
Thanks for all the great advice.
To always save part of your income and put it away for long-term savings, not just saving up to buy new bigger tv or updated stuff….
I started saveing when I started my first job in 2018. It really pays off just saveing 5$ each time.
Per @ Kristen O.
I am trying to do research to prepare for investing in retirement (though I expect it will take me 6-8 months before I am able [I recently used my emergency savings and want to replenish it first]).
It's never too late to start and replenishing your emergency savings is a great priority.
I believe I want to invest in a Roth-type account as that at least gives some cushion incase there is a big unexpected emergency [as long as I keep up with the actual contributions amount] in the future. I am 24-years at this time, so I feel I do not have enough information about "full-adult financial situations" as I am renting at my parent's house (much less expensive that way).
Awesome. Without knowing your full situation, I would say in about 80% of the people I've coached, the Roth is the account to go with.
However, I have not considered before reading this chain about what happens after death. I know I want to establish something like a trust where it is "easy" to transfer what is left to my beneficiaries…
This is very far in advance thinking and there are plenty of books out there. However, it's information overload as much of it will give you tools that don't necessarily apply to your situation. Not to leave you with nothing let's go over a quick overview (hopefully it also helps others with a general blueprint to follow):
For all:
If you're single or a couple:
The above allows all the major accounts and house to pass to listed beneficiary without probate and is what I advise for single people because they don't generally have a lot of people they wish to pass their assets to.
However if that is the case you may want to draw up a will, but that will enter probate, in such cases a trust would be best. You literally do the same things as above but the beneficiary becomes the trust and you will work with a lawyer who will draw up a trust to how to use the assets it receives upon your death. Give it to certain people or donate etc.
Trusts if written correctly would also help with taxes to prevent a person to go to a higher bracket. However, trusts are also not tax efficient themselves because they pay higher taxes if it is held in it as a brokerage account and they take a fee.
If you have kids:
I would probably just go the trust route as it you will be able to more specifically indicate what to do with the money. In fact some people have made their kids go through a finance 101 class before they can access their money.
Does anyone know of resources that could help me find which one makes "death and beneficiary taxes" the simplist? (I remember when my mom got her portion of the inheritance it caused a lot of problems because it kicked her into a "higher bracket" just because of "resources" despite her income still being "food-stamp" level.
As to making a trust you'll need to talk to an experience Estate Lawyer. They will have a cost, but it's best to get it right. Then you will have to bring in a CPA to see how to make the passing tax efficient. If they hold dual titles that might also be an advantage.
As to resources:
Hope it helps a bit.
Disclaimer: All opinions expressed are my own. Please consult a certified professional before making any financial decisions.
I wish I would have known the pro's and con's of retirement.
I'm worried that my debt is never going to get resolved so I can actually save more toward retirement…I'm 40
Thank you everyone for your helpful information in this thread!
Good for you guys!
Great thread
start today - save a little - increase when you can
dear
What institution would you advise to set up a Roth IRA through and how do you go about setting up regular contributions to it?
What institution would you advise to set up a Roth IRA through and how do you go about setting up regular contributions to it?
I have Roth IRA positions with Vanguard and Fidelity. They both offer low cost investment options and the ability to set up periodic contributions.
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retired and loving it
Which is better - an IRA Roth account or Traditional account, and why?
The answer is that it really depends on your specific situation. Do you expect your tax rate to be higher now or in the future? This likely depends on how much income you have now versus how much income you expect when you begin making withdrawals from the account. However, it also depends on what tax rates will be in the future. Another consideration is the amount of income you have now and whether it phases you out of making contributions to a tax-deductible traditional IRA or direct contributions to a Roth IRA. Consider that if you are planning to max out your annual contributions to the IRA limit, doing so in a Roth IRA would effectively result in a greater contribution than a traditional IRA because they would be after-tax dollars. Considerations during retirement include whether or not you want to be subject to RMDs or if you plan to leave your IRA to your heirs. If you aren't sure about any of these, you may want to consult a financial advisor.
Great information! Thank you!
Which investments require you to withdraw from or you will face penalties?
Thank you for all this information.
