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Old 11-03-2018, 02:37 PM
 
8,871 posts, read 5,145,585 times
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Quote:
Originally Posted by kokonutty View Post
Not exactly. You can withdraw your contributions but any appreciation that you take out early will be taxed and penalized except for first house buying and education.
After 5 years. And of course, limited to 10k.
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Old 11-04-2018, 04:00 AM
 
Location: PA
33 posts, read 8,511 times
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Quote:
Originally Posted by Petunia 100 View Post
Did you intend to quote my post about one million turning into 500k over 36 years at 2% inflation. 333k at 3% inflation? I think you must have, because the post you did quote had nothing to do with inflation. Please correct me if this is not the case.

Indeed, no one should "be scared" of market movements. But you also should not kid yourself. If you are calculating the future value of $X per year, compounding at Y% for Z years, the answer to your math question is given in absolute dollars, not inflated dollars.

One million dollars was once a sum which made a person wealthy. Today, 40k per year (annual income 1 million provides using the 4% safe withdrawal rate) no longer makes a person wealthy. In another 36 years, 40k per year may be below the poverty line.
Yes my mistake, not sure how I did that.

So you are saying the inflation can wipe out your compounding interest of all those years?

My point was simply as inflation or deflation occurs, the shares or money invested hold the same value and will increase and decrease with the market.

Looking simply at a income of 40k per year, the markets also adjusted and now people who used to make 40k a year. Now make 80k a year.

A nickel once bought a coke when people made 20,000 a year., now it cost 2.00 per coke.. But the coke held basically the same amount of value.
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Old 11-04-2018, 04:17 AM
 
2,446 posts, read 2,076,017 times
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Sadly where I work only 57% contribute to the available 401K that matches 60 cents on the dollar up to 6%. 43% are leaving money on the table.
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Old 11-04-2018, 06:15 AM
 
Location: Wooster, Ohio
1,036 posts, read 788,898 times
Reputation: 1490
Quote:
Originally Posted by foodyum View Post
If you are young and expect your earnings to increase, Roth is a good way to go because you will be taxed at the lower income level when you make your contributions. Some people (me) are taxed at a high level in retirement due to the lifestyle they maintain in later years vs earlier (struggling) years. Better to be taxed when it goes it then when you take it out.
That was my situation, too. There was no way I was going to retire until my retirement pay exceeded my take home pay from work. When the Roth IRA became available, I converted my traditional IRA and paid the taxes. The market dropped after I did that, but it did not cause me to lose any sleep (If I had converted it after the market dropped, my taxes would have been less).

The income limits for a Roth IRA are much better than those of a traditional IRA:
https://www.fidelity.com/retirement-...mits-deadlines
I can make a full Roth IRA contribution this year, but my income is too high to make any traditional IRA contribution.

There are no Required Minimum Distributions (RMD) for a Roth IRA, so I can pass the entire amount to my beneficiary when I die. My beneficiary will have to take RMDs, however:
https://www.rothira.com/roth-ira-beneficiary-rules
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Old 11-04-2018, 08:26 AM
 
8,871 posts, read 5,145,585 times
Reputation: 10152
Quote:
Originally Posted by Inquiringmind33 View Post
Yes my mistake, not sure how I did that.

So you are saying the inflation can wipe out your compounding interest of all those years?

My point was simply as inflation or deflation occurs, the shares or money invested hold the same value and will increase and decrease with the market.

Looking simply at a income of 40k per year, the markets also adjusted and now people who used to make 40k a year. Now make 80k a year.

A nickel once bought a coke when people made 20,000 a year., now it cost 2.00 per coke.. But the coke held basically the same amount of value.
Yes, agreed. Thats how it would work with a million dollar nest egg too, if you had that million dollars right now and invested it right now. In 36 years, the total balance
in the account would no longer be one million; it would be some larger number. If total return averaged 6%, the balance would be 8 million. If total return averaged 8%, the balance would be 16 million.

However, starting with $0 today, investing $5,940 per year each year for the next 36 years, assuming a reasonable rate of return, calculating the value, and getting an answer of one million, is a very different scenario. That's one million of today's dollars in hand 36 years from now.
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Old 11-04-2018, 08:30 AM
 
8,871 posts, read 5,145,585 times
Reputation: 10152
Quote:
Originally Posted by mshultz View Post
That was my situation, too. There was no way I was going to retire until my retirement pay exceeded my take home pay from work. When the Roth IRA became available, I converted my traditional IRA and paid the taxes. The market dropped after I did that, but it did not cause me to lose any sleep (If I had converted it after the market dropped, my taxes would have been less).

The income limits for a Roth IRA are much better than those of a traditional IRA:
https://www.fidelity.com/retirement-...mits-deadlines
I can make a full Roth IRA contribution this year, but my income is too high to make any traditional IRA contribution.

There are no Required Minimum Distributions (RMD) for a Roth IRA, so I can pass the entire amount to my beneficiary when I die. My beneficiary will have to take RMDs, however:
https://www.rothira.com/roth-ira-beneficiary-rules
There are no income limits to make traditional IRA contributions. The income limits are for deducting the contributions.
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Old 11-04-2018, 01:50 PM
 
Location: Wooster, Ohio
1,036 posts, read 788,898 times
Reputation: 1490
Quote:
Originally Posted by Petunia 100 View Post
There are no income limits to make traditional IRA contributions. The income limits are for deducting the contributions.
You are right. At the time I had a traditional IRA, the income limit for a tax deduction was not a factor for me. The loss of the tax deduction does reduce the value of a traditional IRA as an investment.
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