Investment showdown -- beyond the Roth, SDP, & TSP

[TheNewGazmo]

19 hours ago, HossHarris said:

That’s 5-6 year narrowbody captain pay at delta just flying an average line … with no contract ninja-in. 
 

you can be a narrowbody captain the same year you’re hired currently. 
 

It’s not fantastic nor out of the ordinary. That’s everyday, walkin around Money. 
 

(expectation management)

Sorry, I misspoke about FO's making that kind of money.   Maybe at Purple, but not quite anywhere else. I quickly glanced at the "single" tax tables, which would put you into the 32% tax bracket at $182,100 - 231,250 in 2023.  I wish I was single making that type of money, but that's besides the point.  Married is $364,200 - 462,500.

I max my Roth 401k.  Most of the time, I teeter/totter on the Roth IRA limits depending on whether or not my wife is in the mood to be employed at any given time (Hehehe...).  Lots of different scenarios can steer people people in different directions.  I am not counting on Social Security being what it is today in 20 years.  I hope noone else is here either.  I fully expect the Fed's to cut the "5%" off of it at some point.  This may effect how much you pull out of retirement.  Instead of 3-4%, you may need 5-6%.  You may choose to live on dividend income, which would be great to live on if they were tax free, built up in a Roth account.  

Of course, most of us airline people have the lucrative privilege to be faced with 1st world, 5% problems.  Most of us are putting more money away in a retirement account than over 50% of the people in this country make in a year.

Edited March 13, 2023 by TheNewGazmo

[ViperMan]

One additional benefit of having a Roth IRA even if you are a "high" earner is that it becomes a vehicle you can use to take extreme risk if you choose to. It doesn't make a whole lot of sense to purchase bonds in your Roth IRA. It could make a whole lot of sense to invest in something with unlimited upside...

[TheNewGazmo]

One additional benefit of having a Roth IRA even if you are a "high" earner is that it becomes a vehicle you can use to take extreme risk if you choose to. It doesn't make a whole lot of sense to purchase bonds in your Roth IRA. It could make a whole lot of sense to invest in something with unlimited upside...

The downside is that the income limits to a Roth IRA are $153,000 MAGI if you are single and $228,000 MAGI if you are married, so that will only go so far, especially if your spouse works, but it is better than nothing. That would be $255,700 before your standard deduction. That is why having the Roth 401k is such a great deal. No income limits.

The tricky part is figuring out which investments are best suited for each of your accounts. That's what I am trying to figure out right now - how to build an index fund/ETF portfolio that takes advantage of both my taxed and non-taxed retirement accounts. There are a trazillion different funds to play with.

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[nsplayr]

16 minutes ago, TheNewGazmo said:

There are a trazillion different funds to play with.

Don’t count out simplicity. VTSAX and then spend those free brain bites on hand-building a wooden canoe or a kit bush plane or whatever. To each his own.

While I think a lot about investing and spending and optimization and the psychology around all of it, I spend next to no time thinking about particular funds or trading or any of that. So many people I know spend TONS of time thinking about that stuff, especially trading, and I’m just not convinced the juice is worth the squeeze unless you really love the thrill of it. I also don’t really enjoy gambling or sports betting so maybe it’s just who I am and I get that people are different.

Simple stock indices, simple bonds, some real estate, a mil pension eventually. More than sufficient for me at least to feel rich as hell.

[Pooter]

2 hours ago, nsplayr said:

Don’t count out simplicity. VTSAX and then spend those free brain bites on hand-building a wooden canoe or a kit bush plane or whatever. To each his own.

While I think a lot about investing and spending and optimization and the psychology around all of it, I spend next to no time thinking about particular funds or trading or any of that. So many people I know spend TONS of time thinking about that stuff, especially trading, and I’m just not convinced the juice is worth the squeeze unless you really love the thrill of it. I also don’t really enjoy gambling or sports betting so maybe it’s just who I am and I get that people are different.

Simple stock indices, simple bonds, some real estate, a mil pension eventually. More than sufficient for me at least to feel rich as hell.

Feel the same way. I totally recognize investing and getting into the details is a full blown hobby for some, but for me it's a means to an end. Shoveling money into a reliable index fund combined with maxing out your roths/401k is more than enough to get to a 90% solution and it takes next to no brain bytes once it's set up. 
 

It's trite but the older I get the more I've begun to truly value my time, and if I make a marginally less by not gnats-assing my finances but get more time to do the things I enjoy, that's a worthy trade off to me

[FourFans]

44 minutes ago, Pooter said:

It's trite but the older I get the more I've begun to truly value my time, and if I make a marginally less by not gnats-assing my finances but get more time to do the things I enjoy, that's a worthy trade off to me

A: It's not trite at all to value your time.

B: Repeating the above, as not nearly enough people realize how life enhancing this realization is.

[nunya]

9 hours ago, TheNewGazmo said:

The downside is that the income limits to a Roth IRA are $153,000 MAGI if you are single and $228,000 MAGI if you are married, so that will only go so far, especially if your spouse works, but it is better than nothing. That would be $255,700 before your standard deduction. That is why having the Roth 401k is such a great deal. No income limits.

There are effectively no income limits on a Roth IRA, either. It's been hashed before on here I'm sure, but young guys rise up all the time.

https://www.investopedia.com/terms/b/backdoor-roth-ira.asp

[FDNYOldGuy]

14 hours ago, TheNewGazmo said:

The downside is that the income limits to a Roth IRA are $153,000 MAGI if you are single and $228,000 MAGI if you are married, so that will only go so far, especially if your spouse works, but it is better than nothing. That would be $255,700 before your standard deduction. That is why having the Roth 401k is such a great deal. No income limits.

100% this. As @nunya said, you can still do the backdoor option (sts) and it is legal, through the recent IRS paper, but it's  got a few extra steps, one that could end up closed through legislation, and could potentially raise a red flag for audit radar purposes. But, definitely worth doing, if you're up for the extra hoops to jump through. 

That said, making sure you at least open a Roth IRA ASAP and working on pumping money into a Roth 401k that you one day roll over into the Roth IRA is clutch. You get (most of) the best of all worlds, with the exception being Roth 401k's don't really allow for as risky/nuanced/particular single stock investments and are usually whatever the Large/Medium/Small/etc funds are your company offers. But, no income limits, easy to put money in without a hassle, and usually reasonable fees, with the option to bail out and roll it into a Roth IRA upon retirement that helps you avoid RMDs and pick individual securities.

[nunya]

Roth 401k RMDs are history. 
 

https://www.fool.com/retirement/2023/02/06/secure-act-rule-changes-every-roth-401k-owner/

[HossHarris]

1 hour ago, FDNYOldGuy said:

100% this. As @nunya said, you can still do the backdoor option (sts) and it is legal, through the recent IRS paper, but it's  got a few extra steps, one that could end up closed through legislation, and could potentially raise a red flag for audit radar purposes. But, definitely worth doing, if you're up for the extra hoops to jump through. 

That said, making sure you at least open a Roth IRA ASAP and working on pumping money into a Roth 401k that you one day roll over into the Roth IRA is clutch. You get (most of) the best of all worlds, with the exception being Roth 401k's don't really allow for as risky/nuanced/particular single stock investments and are usually whatever the Large/Medium/Small/etc funds are your company offers. But, no income limits, easy to put money in without a hassle, and usually reasonable fees, with the option to bail out and roll it into a Roth IRA upon retirement that helps you avoid RMDs and pick individual securities.

What you can put your 401k/Roth 401k into JS entirely employer dependent. 
 

at delta, you can buy anything but delta stock. Individual Stocks, bonds, mutual funds, foreign stuff, etc. 

[TheNewGazmo]

What you can put your 401k/Roth 401k into JS entirely employer dependent. 
 
at delta, you can buy anything but delta stock. Individual Stocks, bonds, mutual funds, foreign stuff, etc. 

As Lord Ratner pointed out to me a few weeks ago in this thread, if your 401k is with Fidelity (AAL), you can open up BrokerageLink accounts for both your traditional and Roth 401k contributions, which are pretty much standard brokerage accounts linked to your 401k funds. Once you do this, you can have the system automatically transfer your (and company) contributions to the BrokerageLink accounts, and then the sky is the limit on what you can invest in. Pretty neat, actually. You are then free to invest in anything you want - ETF's, Index, mutual funds, and/or individual stocks.

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[FDNYOldGuy]

3 hours ago, nunya said:

Roth 401k RMDs are history. 
 

https://www.fool.com/retirement/2023/02/06/secure-act-rule-changes-every-roth-401k-owner/

That's huge! I didn't know that had happened. Thanks for the SA! Just makes sense that they don't force you to take it; the taxes are already paid, so you taking it doesn't benefit Uncle Sam at all. 

 

3 hours ago, HossHarris said:

What you can put your 401k/Roth 401k into JS entirely employer dependent. 
 

at delta, you can buy anything but delta stock. Individual Stocks, bonds, mutual funds, foreign stuff, etc.

1 hour ago, TheNewGazmo said:

You are then free to invest in anything you want - ETF's, Index, mutual funds, and/or individual stocks.

Thank you for this info, as well. I had thought that could potentially be the case, but I don't have any airline/real world experience with Roth 401ks, so was a little ignorant and going off of what the TSP/NYC Deferred Comp allows...which is not much. NYCDCP does have a self-directed option with TD for up to 20% of the amount in the plan, but even that only allows you to buy mutual funds, which doesn't make it that worth it. Great to hear the airlines let you boogie down with some riskier stuff and individual securities, though. 

[TheNewGazmo]

Bringing this back to life a bit as I have done a bit more reading on the "Secure Act 2.0".  I haven't heard about changes at AAL, but has anyone working anywhere else heard if their company is now able to contribute to their Roth 401k?  According to the Secure Act 2.0 changes, employer Roth 401k contributions are now allowed:

Employers have long been able to make matching contributions to employees' Roth 401(k)s, but those matches have always been with pre-tax dollars. They had to go into a pre-tax account, like a traditional 401(k), and you have to pay taxes on the money when you withdraw it later on. That's still better than not getting a match at all, but it's not as convenient as a Roth match.

The SECURE 2.0 Act now makes it possible for employers to make matching contributions to employees' Roth 401(k)s. Unlike many provisions of the new law, this went into effect immediately upon passage of the act. But it's important to recognize that it is optional. Employers may still elect to make pre-tax matches or they may not provide a company match at all.

If you're unsure if Roth 401(k) matches are available to you, reach out to your employer for clarification. Even if it's not an option right now, it could be available to you in the future, so keep an eye out for any notifications you get about plan changes as well.

[BashiChuni]

On 3/13/2023 at 10:33 PM, nsplayr said:

Don’t count out simplicity. VTSAX and then spend those free brain bites on hand-building a wooden canoe or a kit bush plane or whatever. To each his own.

While I think a lot about investing and spending and optimization and the psychology around all of it, I spend next to no time thinking about particular funds or trading or any of that. So many people I know spend TONS of time thinking about that stuff, especially trading, and I’m just not convinced the juice is worth the squeeze unless you really love the thrill of it. I also don’t really enjoy gambling or sports betting so maybe it’s just who I am and I get that people are different.

Simple stock indices, simple bonds, some real estate, a mil pension eventually. More than sufficient for me at least to feel rich as hell.

and you should pay a FUCK ton of taxes on your riches! pay your fair share bro!!!

[TheNewGazmo]

and you should pay a ton of taxes on your riches! pay your fair share bro!!!

Pay your taxes now, and max contribute the Roth. Even in the 32% tax bracket, you are better off paying them now than later. People talk about living on 4%, but what if you want to pull out $300,000 of your millions one year to buy that custom 911 Turbo S you've always wanted? Do you want to pull out $300k or $450k to get $300k?

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[VMFA187]

1 hour ago, TheNewGazmo said:

to buy that custom 911 Turbo S 
 

Have you been listening to my conversations with my wife?

[BashiChuni]

2 hours ago, TheNewGazmo said:

Pay your taxes now, and max contribute the Roth. Even in the 32% tax bracket, you are better off paying them now than later. People talk about living on 4%, but what if you want to pull out $300,000 of your millions one year to buy that custom 911 Turbo S you've always wanted? Do you want to pull out $300k or $450k to get $300k?

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32%?!?!

disgusting.

should be 95%

[ClearedHot]

Change associated with the Secure 2.0 Act delayed for two years.

People Who Make $145K: IRS Delays New Catch-Up Contribution Rule Until 2026

 

[Lord Ratner]

Any Airbnb landlords feeling the squeeze? I'm trying to get a sense for if there's going to be a lot of surprise inventory as the post-COVID travel boom winds down.

[VMFA187]

12 hours ago, Lord Ratner said:

Any Airbnb landlords feeling the squeeze? I'm trying to get a sense for if there's going to be a lot of surprise inventory as the post-COVID travel boom winds down.

Our AirBnB has no current bookings for the month but netted $6k last month. My wife is annoyed since that's one of her forms of income. Fortunately it's just our pool house in the back yard so we don't need that income but it's certainly looking like the past couple years won't continue into the future.

I hope those that FOMO'd into the STR business in the past year or two aren't f***ed, but it's looking that way if one bought one or more homes just for STRs. They're going to have to transition to long term rent or sell and walk away with any potential equity they have. 

[Day Man]

not airbnb, but had to knock 10-15% off rent for a LTR in the greater PHX area in the last month or so

[nsplayr]

2 hours ago, VMFA187 said:

I hope those that FOMO'd into the STR business in the past year or two aren't f***ed...

Other than on...certain websites...I never like to see people getting f*cked. That being said, FOMOing into investments and getting burned is basically Adam Smith's invisible hand pimp-slapping people for being dumb.

IMHO boring investments and ones you really, really understand win every time. Index funds. Rental real estate where you know the area. Businesses where you have specific domain expertise or unique value over potential competitors.

YOLOing into STRs, crypto, NFTs, laundromats, "creator class" revenue streams (onlyfans, selling courses, whatever) will almost never work out for most people.

[ClearedHot]

17 hours ago, Lord Ratner said:

Any Airbnb landlords feeling the squeeze? I'm trying to get a sense for if there's going to be a lot of surprise inventory as the post-COVID travel boom winds down.

Demand was definitely down this year, especially as compared to last year when I grossed $206K off my three properties. There are 30% more Airbnb properties in my market this year as well so that is not helping.

I had solid longer-term snow bird bookings this winter and was about 50% booked from March-May.  I was fully booked May-August but it slacked off a few weeks early.  I've lowered my price point strategically to grab some last minute bookings but defiantly feel the dropoff the rest of the year.  

Very lucky that all of ours are paid off and being fully booked over the summer more than doubles what I would make with straight rent.

[Lord Ratner]

6 hours ago, VMFA187 said:

They're going to have to transition to long term rent or sell and walk away with any potential equity they have.

Apparently something like 25% of the STR homes bought in the pandemic years are on adjustable rate mortgages. That'll hurt.

 

4 hours ago, Day Man said:

not airbnb, but had to knock 10-15% off rent for a LTR in the greater PHX area in the last month or so

I think you're in ground zero. PHX, AUS, and BOI are the holy trinity of pandemic housing bubbles.

1 hour ago, ClearedHot said:

Very lucky that all of ours are paid off and being fully booked over the summer more than doubles what I would make with straight rent.

That's good to hear. Debt, as always, is going to ruin a lot of lives in the next few years I think.

[Day Man]

2 hours ago, Lord Ratner said:

I think you're in ground zero. PHX, AUS, and BOI are the holy trinity of pandemic housing bubbles.

looking for options to 1031 it...until then we're well in the black on it even if the value drops 50%