Dumb question abt a ROTH IRA.. or maybe not so dumb... (million, rate)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
income taxes have been dropping by about 3% a year now for 40 years
purchase a life insurance policy for the same amount
A lot of people think the days of lower income and capital gains taxes may be ending and actually reversing. I don't know.
What do life insurance premiums cost at an age that you would expect to die within the term's period? I bought a 20 year term life in 1998 when I was 37 and it was cheap. I bought it for exactly the reason it was designed for, if I die (when I am younger and have not built an estate) the life insurance payout can help my family. When I am 57 and theoretically I have built my estate, I really don't need the life insurance (as much) anymore, thus the 20 year term. If I were to buy a term policy now or in ten years or 15 years, the premiums will not be cheap and (though I haven't crunched the numbers) I'd hesitate to see the benefit. Meaning, life insurance companies are in the game to make money; if everyone bought policies to pay out on their deaths then the companies wouldn't profit.
great question: the life insurance companes make money by the fact most folks pay pay and pay and stop the policies before they pay out...... most cancel the policies like yourself when you feel you dont need it anymore .
even the ones that have a cash value are constructed in a way that if you try to let the policy pay for its own premiums the cost of insurance keeps going higher and higher even though your premium dosnt so by the time your well in your 80's that cash value is eaten up to nothing and the policy terminates unless you dump in more money.
but heres the trade secreat:statiscally those that take it later in life for asset passing dont pay anything close to what they get out when they die. life insurance companies would shudder at the thought of this being done on a large scale.premiums would be so high it would close the beauty of doing this .
their are also only certain single premium policies that qualify if your going that route.....
Last edited by mathjak107; 10-09-2010 at 08:41 AM..
Location: Prescott Valley,az summer/east valley Az winter
2,061 posts, read 4,124,538 times
Reputation: 8190
With proper planning and saving~ and inflation at about average levels I would expect most people's retirement income to be about where they ended their careers. If you feel your income level will not go up as you advance through then maybe your ROTh is not a good idea~ but most retirees with proper retirement planning will tell you that the income they are paying taxes on is the highest income of their lives.
My current income is 1.3 times my highest working earnings.
With proper planning and saving~ and inflation at about average levels I would expect most people's retirement income to be about where they ended their careers. If you feel your income level will not go up as you advance through then maybe your ROTh is not a good idea~ but most retirees with proper retirement planning will tell you that the income they are paying taxes on is the highest income of their lives.
My current income is 1.3 times my highest working earnings.
I like that. You need to tell me what you did to bring that about.
Wow! Thanks everyone for the responses - I didn't expect so many answers! I appreciate it!
I guess I'm still slightly confused on one thing though... what "income" do you make if you are retired? Maybe I don't get it.. but when I retire I'm assuming I'm only taking in $$ from my retirement vehicles, investments, maybe a pension... but no 'job' because I don't plan to work.
So basically - the "income" during retirement years is a combination of pension (if app.), retirement vehicles, and $$ from other investments (rental income, dividends..).. right?
If that's the case I guess I have to sit down and try to do an analysis to "estimate" how much $$ I'd be pulling out annually during my retirement years. I know it's a total shot in the dark.. but I enjoy this type of stuff - so it would be fun to try.
Tax rates at the lowest ever means only one thing... it has nowhere to go but UP and combine that with the federal and state government starving for money = bad idea to wait on future taxes.. already, I have seen state governments INCREASE their tax rates... the federal government isn't so far behind...
if you thought that 20 years ago that we would go higher since we dropped so much over the last 40 years you would have been very wrong. every year we drop by almost another 3% or so
Even if you are in the same tax bracket when you retire you'll still save money deferring taxes since it is tiered.
In other words, all the money you're avoiding paying taxes on would have been taxed at your highest bracket, but when later when withdraw some of it would be at zero, some at 10%, some at 15%, etc. because it is a tiered tax system with different rates for different slices of the pie.
well thats the beauty of that 3% drop every year . each year more and more income goes thru at lower rates. thats why for most of us with no pensions its tough to beat taking the tax deductions up front in a traditional.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.