87 replies to this topic

[Cisc-O's]

General questions can be answered here.  Of course not what to buy or direct advice but advice around product mechanisms, questions about taxes, pretax after tax products, 401k and how much you should look to contribute etc...  

 

 

Also any loan questions, interest rate, car loans, business loans, "I have a business for two years and do everything out of my personal credit".  Everything besides jumbo loans or very intricate mortgage questions. I do have people that can answer them though.  If you have them I will try to get them answered in a timely manor.  

 

 

 

 

I know there are a few of us here to answer your questions multiple ways so Ricker or others feel free to jump in.

[Mackus]

Is there a tool anywhere to judge the implications of pre-tax (401k) versus after-tax (403b).  I've been doing after for a while now, since I've got some pretty big deductions otherwise (mortgage, property tax, etc) and I'm working with the logic that letting it grow tax-free would be great and I very well may be at a higher tax rate when I end up withdrawing than I am at now.  But I've just based that decision on those sorts of "yeah that makes sense" sort of thoughts rather than actually crunch any numbers.

[RShack]

Is there a tool anywhere to judge the implications of pre-tax (401k) versus after-tax (403b).  I've been doing after for a while now, since I've got some pretty big deductions otherwise (mortgage, property tax, etc) and I'm working with the logic that letting it grow tax-free would be great and I very well may be at a higher tax rate when I end up withdrawing than I am at now.  But I've just based that decision on those sorts of "yeah that makes sense" sort of thoughts rather than actually crunch any numbers.

 

I think you meant traditional 401(k) or 403(b) vs a Roth version....  both 401(k) and 403(b) are pre-tax... 403(b) is just a version of 401(k) for educators... you pay tax when you take withdrawals from it... Roth = post-tax, no tax paid later...

 

Anyway, here's a calculator re: which is better... http://www.bankrate....calculator.aspx

[Cisc-O's]

Is there a tool anywhere to judge the implications of pre-tax (401k) versus after-tax (403b). I've been doing after for a while now, since I've got some pretty big deductions otherwise (mortgage, property tax, etc) and I'm working with the logic that letting it grow tax-free would be great and I very well may be at a higher tax rate when I end up withdrawing than I am at now. But I've just based that decision on those sorts of "yeah that makes sense" sort of thoughts rather than actually crunch any numbers.

https://www.valic.co...223_431831.html

Serves the same purpose usually most people don't have the option to do both.

403b that you have may offer the option of after tax dollars and some 401ks do as well. They are basically the same though.

[Cisc-O's]

401ks are important if you job matches. You need to only put in what they match though. If you find yourself with more money to put away look for alternative options. It is a waste to use extra money dumping it in a 401k unless you are fine with term,whole and dont want an annuities. If you ha e to people willing to match by all means do both.

[mweb08]

I have yet to research this and it doesn't deal with retirement, but I figure you may be able to help.

 

I want to basically setup a fund for my niece that I will contribute to on a yearly basis and she'll be able to use for her first trip of her own when she becomes old enough. I know when I was a kid I got a lot of savings bonds, but I'm not sure if those are still common and there's probably a better way.

 

We're talking about 16+ years of contributions of 100+ dollars.

 

Any suggestions?

[Mackus]

I believe there is something very similar to a College Savings Plan (529) which will be held until the beneficiary reaches a certain age that doesn't require the designee to actually be attending college.  Basically its a trust fund, but obviously not with the connotation that term usually carries.

[Cisc-O's]

I believe there is something very similar to a College Savings Plan (529) which will be held until the beneficiary reaches a certain age that doesn't require the designee to actually be attending college. Basically its a trust fund, but obviously not with the connotation that term usually carries.

Coverdell Education Savings Accounts, These accounts are not for college specific like 529 but account for type of trade, like ecpi, mechanic, baber etc it has a lot of flexibility where you may only have a few funds in 529.

529 funds have under performed by some going lower then 2% on your money.



To whoever else is looking for advice please don't take this for gospel just information.....


In some common situations I look to Whole life plans for a couple reasons. More options number 1. Number 2 life insurance does not count towards finical aid. So you can legally cover up the big pot of savings for your children that you can not do with anything else and not affect any type of aid they may get you also can make 6-10% on your money on any given year, they usually carry a floor percent you make.
 

[Cisc-O's]

I have yet to research this and it doesn't deal with retirement, but I figure you may be able to help.

 

I want to basically setup a fund for my niece that I will contribute to on a yearly basis and she'll be able to use for her first trip of her own when she becomes old enough. I know when I was a kid I got a lot of savings bonds, but I'm not sure if those are still common and there's probably a better way.

 

We're talking about 16+ years of contributions of 100+ dollars.

 

Any suggestions?

Sorry I missed this I thought Mackus was asking the question let me think on this a bit more.

[Cisc-O's]

I have yet to research this and it doesn't deal with retirement, but I figure you may be able to help.

 

I want to basically setup a fund for my niece that I will contribute to on a yearly basis and she'll be able to use for her first trip of her own when she becomes old enough. I know when I was a kid I got a lot of savings bonds, but I'm not sure if those are still common and there's probably a better way.

 

We're talking about 16+ years of contributions of 100+ dollars.

 

Any suggestions?

Webber you really can do any of the following but to me savings bonds, a roth ira, savings account/CD sounds good

 

Couple questions do you invest now?  Do you know what  mutual funds/etfs are and have you used them before?

 

Mutual Funds usually have superstar investors leading them and are a collection of stocks.  They are usually geared to multiple industries to avoid losing to much. They can be invested in Pharma to foods to gold. Funds can normally give you a good amount of return but it is not guaranteed.  

 

ETF's stand for exchange traded funds.  You invest in like the S&P 500 meaning all stocks under it.  The buy is usually low and you are very diversified.  You can look at the exchanges as they will be Large Cap, Mid Cap and Small cap.  They are classified based on how much equity the companies have.  Small cap you see spikes of up and down growth.  Mid you can still see spikes but a little more consistency.  Large caps are mainly blue chips which go up and down but are more consistent and have much less movement on both sides.

 

Bonds have the lowest potential but are normally looked at as the safest.  Be careful what you invest in though as some can forfeit it.  There are all types you can buy city bonds so the city can do structure upgrades ect but like I said be very careful. Bonds have grades that help you determine what is good or isn't.

 

How would you go about funds etfs?  Start an account with etrade or scotstrade and make it a roth IRA with permission you can put her in as primary and you can take tax write offs at the end of the year for gifting.  

 

Bonds there are multiple way you can buy bonds most are done online now though.

 

CD's are done through your bank and you can renew and add money to it yearly.  Interest rates are very low now though so we are talking pennies you make on your money if you go this route.

[mweb08]

Thanks for the advice. Definitely helpful. I have invested in mutual funds before so that will be something I consider.

[Matt_P]

Doesn't a ROTH IRA require the child to earn taxable income? If so, that's not a possibility in Weber's case.

 

Mackus is referring to a custodial account. I suppose that's a possibility. http://www.marketwat...kids-2013-05-28

 

If you want my opinion, I'd ask whether you want it to be used specifically for a trip or for anything? If you give it to your niece, she can do pretty much what she wants with it. If you put it in a custodial account, then when she turns 21, she can use it as a downpayment or can spend it at the casino of her choice. If you want it for a trip, I'd keep control of the account myself and invest it into the investment of my choice.

 

The interest rate is low right now which means that savings bonds and CDs will get a low rate of return. But, they are a lot less riskier then putting your money in the stock market. Mutual funds may require a large ($3k) minimum balance so keep that in mind.

[Cisc-O's]

Doesn't a ROTH IRA require the child to earn taxable income? If so, that's not a possibility in Weber's case.

 

Mackus is referring to a custodial account. I suppose that's a possibility. http://www.marketwat...kids-2013-05-28

 

If you want my opinion, I'd ask whether you want it to be used specifically for a trip or for anything? If you give it to your niece, she can do pretty much what she wants with it. If you put it in a custodial account, then when she turns 21, she can use it as a downpayment or can spend it at the casino of her choice. If you want it for a trip, I'd keep control of the account myself and invest it into the investment of my choice.

 

The interest rate is low right now which means that savings bonds and CDs will get a low rate of return. But, they are a lot less riskier then putting your money in the stock market. Mutual funds may require a large ($3k) minimum balance so keep that in mind.

Depends if he wants it in her name or not.

 

With a Roth IRA, you can withdraw any contributions, but not the investment earnings, for any reason without tax or penalty. If your child is a minor (under age 18 in most states; under age 19 and 21 in others), many banks, brokers and mutual funds will let you set up a custodial or guardian IRA.

 

Let me take it further if you do not go the Roth way or put in her name you will be also paying taxes on it at the end of the year and have to claim it.  That is why it better to not just open a regular account you intend to grow.

 

Mackus may clarify later but 529 and coverdell are types of accounts.  Custodial, joint, sole are labeling with in the account.  Hope that makes sense.  

[RShack]

Regardless of the mechanism you use... here's what I would do...

 

Given your 16-year time frame, you've got lots of time for long-term trends to overcome the normal ups and downs... because of that, I'd pick some Biotech mutual fund or ETF...  or one that's *global* technology... you'd be buying a basket of them, and if just one of them turns out to be a home run, she'd be traveling in First Class all the way around the world...

[Matt_P]

With a Roth IRA, you can withdraw any contributions, but not the investment earnings, for any reason without tax or penalty. If your child is a minor (under age 18 in most states; under age 19 and 21 in others), many banks, brokers and mutual funds will let you set up a custodial or guardian IRA.

 

Let me take it further if you do not go the Roth way or put in her name you will be also paying taxes on it at the end of the year and have to claim it.  That is why it better to not just open a regular account you intend to grow.

 

Mackus may clarify later but 529 and coverdell are types of accounts.  Custodial, joint, sole are labeling with in the account.  Hope that makes sense.  

 

I understand that you can set up a custodial Roth IRA for a child under 18. What I questioned was whether you can open up a custodial Roth IRA for a child WITHOUT INCOME. For example, a 12 year old can receive income for babysitting and receive a 1099. A 15 year old can work at a camp during the summer and earn taxable income. Therefore you can open up a Roth IRA for them. Can you open up a Roth IRA for a 3 year old that doesn't work?

 

http://www.kiplinger...a-roth-ira.html

 

Agreed that Weber will have to pay any taxes on dividends, interest or capital gain if it is in his name and not in an IRA. Also agree that while his niece is responsible for taxes if it is a custodial account, her tax rates will hopefully be lower than his. If he wants the cash to go to a trip though, then he needs to control the money. Otherwise, his niece can do whatever with it. 

[Cisc-O's]

So I looked at it a little deeper Weber. You can open an IRA up for a child but if they have no income it falls under you. Depending how old you are, you can put a max amount of 5500 dollars if you are under 50, over is 6500 a year. It will just be included under your IRA totals meaning you could put 5400 dollars in your personal one if need be.

One option I left off the table and completely neglected is a whole life plan on a child that is three years old would only cost 10-11 dollars a month. It grows tax free and will do exactly what you want it to do. Some people will look at that as morbid but it is not the case and it has very good benefits. You will have the premium every month though instead of just putting a lump 100 when you need to.

I did this for my daughters and forgot how cheap the premiums were.

[Matt_P]

One option I left off the table and completely neglected is a whole life plan on a child that is three years old would only cost 10-11 dollars a month. It grows tax free and will do exactly what you want it to do. Some people will look at that as morbid but it is not the case and it has very good benefits. You will have the premium every month though instead of just putting a lump 100 when you need to.

 

Can you buy whole life insurance for a niece? Certainly you can for your own child because you have an insurable interest. But do you have an insurable interest in a niece?

[Cisc-O's]

Can you buy whole life insurance for a niece? Certainly you can for your own child because you have an insurable interest. But do you have an insurable interest in a niece?

Yeah owners are the parents, Aunt and Uncle are third party payers.  Just trying to catch me huh?

[Cisc-O's]

It is open discussion and illegal for me to solicit and talk about specific products/companies over the web.  This is just general information for you to do research and have your own people look at the fine details.  I like this thread because a lot are good questions and people need to know their options as some people in the industry get paid by others to limit you to few products or investments so they in turn can make more money.  I have a bit of anonymity here but I could be tracked so it needs to stay out of the weeds and more about knowledge and general ideas.  Just keep that in mind please, and thank you.

[Matt_P]

Yeah owners are the parents, Aunt and Uncle are third party payers.  Just trying to catch me huh?

 

Clever loophole.