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But most people say to put money in Roth 401k contribution anyway.
There's no one universal answer. If you're 33% bracket or higher and paying a hefty state income tax, that $24K 401(k) shelter (at age 50+) is a really good deal.
Only 6% of wage earners max out their Social Security so most people are in the 25% bracket or maybe the 28% bracket where it's not as big a deal.
And just as obviously, those scenarios are tiny compared to the actual scenarios of folks that have bought and paid for their homes.
I have a friend that is "rent slave" (your words), and has been her entire life (she's 50). She worked 3 jobs to put daughter through college, and currently works as an office manager that is of average wages. She decided a year ago that she was going to buy a home. She scrimped, saved and did odd jobs to increase her bank account for the down payment. She is currently looking at homes in the hottest market in the US (DFW area). She hasn't found the right house yet, but she will.
She is buying a house the right way - hard work, frugal spending habits, a determination to own, and an unwillingness to fall back on excuses.
I have never seen a frugal burger flipper buy a home, and i have worked with many.
This is what scares me about roth IRAs... Their attractiveness is as a tax hedge so you pay the piper now and avoid taxation on the gains in the future. IMO they will chase wherever the money goes. So you will end up paying both the tax now and later when they get greedy.
Clearly no idea about the true costs of owning a home. The mortgage is only one part of it, and is the only expense that goes away when the home is paid off.
You've raised an interesting point, however. If the poverty-level retiree could afford to buy and pay off a home before retirement, why couldn't the poverty-lever employee that rents?
He didn't say or allude to a poverty level retiree being able to afford a house.
He did say a retiree with a paid off home, could do it.
In most cases, that is true.
And I live in a very expensive area of California
Remember the actual mortgage is generally the largest expense of owning
Not homeowners insurance or property taxes, generally.
With Trumps tax plan aka bullets unveiled, it appears doubling the standard deduction would allow for a low income married couple to put away about 4K more per year, UNTAXED..... into an already TAXED Roth (or 401kRoth). So they'd likely never pay taxes on that amount anyhow.
Or a single person, just half it to 2K. Not much $$ compared to his tax breaks for the rich though....
UNLESS he allows for the personal exemptions to remain. That is yet to be seen though so I am guessing this is not the case
And he's not published any actual numbers of the tax brackets so the above ^^ is based on todays stats
This is what scares me about roth IRAs... Their attractiveness is as a tax hedge so you pay the piper now and avoid taxation on the gains in the future. IMO they will chase wherever the money goes. So you will end up paying both the tax now and later when they get greedy.
This is why my plan is to contribute to tax deferred accounts to the max while we are in 28% tax bracket, then live off savings and taxable accounts for 5-10 years, while converting to Roth and setting up a Roth ladder. I don't think I can outsmart the system, but I will try to minimize tax payments where I can.
This is why my plan is to contribute to tax deferred accounts to the max while we are in 28% tax bracket, then live off savings and taxable accounts for 5-10 years, while converting to Roth and setting up a Roth ladder. I don't think I can outsmart the system, but I will try to minimize tax payments where I can.
You can give your children a certain amount of tax free gift $$ per year
aka giving their inheritance early. Just a thought
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