Personal Retirement Funds

[Dangerkitty]

I will post more later today...but....

...How are you "pissing money away? Can you prove this statement? You are leaving out a lot of variables. Please post your assumptions and a few examples that back up your statements above since they are quite absolute. I'm not trying to be a d-ck here DangerKitty but you are making statements with absolute certainty but not backed up by any data or facts. Thanks.

-Neal

Neal,

I would have PM'd you a little more detailed information but my ability to PM has been stripped as I have been deemed a threat to Neal and flightinfo.com

Smellthejeta basically stated what I was going to state. Here is the way I would do it:

1. Invest in the 401k up to the company match and nothing more.

2. Then max out the Roth IRA.

3. If anything is left over then invest in a traditional IRA.

401k's grow tax deferred. So you get the tax benefit NOW but have to pay Uncle Sam later. With a Roth you pay with after tax money but it grows tax free.

So lets say you retire with $1 million in a 401k and $1 million in a Roth and you are in the 30% tax bracket.

With the Roth you keep every last cent. With the 401k you owe uncle same $300,000 over the life of withdrawing the 401k.

The tax benefit you get now is not enough to make up the taxes you pay later in the 401k.

 

[PC800]

I, too, agree that Dangerkitty is making statements that are absolute as well.

He is, and he's wrong on a lot of them:

1. As noted earlier in the thread, he's confused about benefits provided by Long Term Care insurance as opposed to medical insurance.

2. He says everybody should have term life insurance in the amount of ten times their annual income. In reality, some people (single with no dependents) don't need life insurance at all, while others may need far more. It depends on who would be affected financially by your death, and what other assets you have.

3. He says you should pay off debt before investing in retirement funds. This is true ONLY if the after-tax cost of servicing the debt is higher than the after-tax earnings of money deposited in the retirement account. Credit card debt, absolutely pay it off first; student loan or other low interest debt, probably not.

4. He's stated repeatedly that federal taxes will take 30 to 40% of your income when you withdraw money from your retirement funds. That's highly unlikely for most of us-- the 33% tax bracket doesn't start (for a couple filing a joint return) until income tops $182,000. Even then, you'd only pay 33% on the amount of income OVER $182,000-- the rest would be taxed at lower rates. A more realistic example: a married couple filing a joint tax return, who don't itemize deductions, would pay approximately $15,000 (15%) in federal taxes on an income of $100,000.


To give credit where credit's due, he's not wrong about everything-- term insurance IS far better for most people than whole life or universal. And, his recommendation to max out the 401k to take full advantage of the company match, then maxing out a Roth IRA, is right on the money. But he's wrong about enough of the other stuff that I wouldn't rely on DangerKitty for insurance or financial advice.

 

[LarryinTN]

Hey DangerKitty... Are you 'better than you deserve'?

 

[Dangerkitty]

He is, and he's wrong on a lot of them:

1. As noted earlier in the thread, he's confused about benefits provided by Long Term Care insurance as opposed to medical insurance.

I have been selling LTC insurance for the past 4 years. I am appointed with all the big names in the industry. John Hancock, GE, Metlife, AFLAC, etc etc.
I have sold 100's of LTC policies. I think I know what I am talking about.

What are your insurance credentials?

2. He says everybody should have term life insurance in the amount of ten times their annual income. In reality, some people (single with no dependents) don't need life insurance at all, while others may need far more. It depends on who would be affected financially by your death, and what other assets you have.

Most of us here have families in which dependents are counting on us. If you intend to be single with no family for the rest of your life then go ahead and do not get any life insurance. I bet soon you are going to be telling me that single people dont need LTD insurance.

3. He says you should pay off debt before investing in retirement funds. This is true ONLY if the after-tax cost of servicing the debt is higher than the after-tax earnings of money deposited in the retirement account. Credit card debt, absolutely pay it off first; student loan or other low interest debt, probably not.

Debt is debt. I could care less (to a certain extent) what the interest rate it. Pay the debt off now and the then double up on retirement savings. Most people could have their debt paid off in under 2 years if they really kicked some tail and attacked the debt. That is what I am talking about.

4. He's stated repeatedly that federal taxes will take 30 to 40% of your income when you withdraw money from your retirement funds. That's highly unlikely for most of us-- the 33% tax bracket doesn't start (for a couple filing a joint return) until income tops $182,000. Even then, you'd only pay 33% on the amount of income OVER $182,000-- the rest would be taxed at lower rates. A more realistic example: a married couple filing a joint tax return, who don't itemize deductions, would pay approximately $15,000 (15%) in federal taxes on an income of $100,000.

I am sorry that you have set such low goals for yourself. Some of us have bigger goals and with a few years I will be in that very tax bracket. I might as well max out my Roth while I can invest in one.

To give credit where credit's due, he's not wrong about everything-- term insurance IS far better for most people than whole life or universal. And, his recommendation to max out the 401k to take full advantage of the company match, then maxing out a Roth IRA, is right on the money. But he's wrong about enough of the other stuff that I wouldn't rely on DangerKitty for insurance or financial advice.

We can argue all day long about different financial strategies but it still boggles my mind that you think I dont know what I am talking about when it comes to insurance. So again I will ask you. What have I stated that is wrong in regards to LTC and what are your insurance credentials?

 

[Dangerkitty]

Hey DangerKitty... Are you 'better than you deserve'?

I will be very honest and state that Dave Ramsey has had a very big impact on my Insurance Business as well as giving me the motivation to be a CFP. His message is true and packed with common sense. Something that you do not see very much with other financial talkin heads.

 

[PC800]

Presumaly, you will be in a higher tax bracket then you are now,

Smellthejeta, there are a couple of flaws in your analysis:

1. Most people have a lower income after they retire than they did when they working-- which means they're in a lower tax bracket after retirement, not a higher one. That's supposed to be one of the advantages of a regular IRA or 401k-- rather than pay taxes on your contributions at your present higher rate, you pay taxes on it after retirement, when you're in a lower bracket.

2. If you're in, say, the 28% tax bracket, that does not mean that your entire income is taxed at 28%. For a joint return, in rough numbers, the first $15,000 is taxed at 10%, the next $45,000 at 15%, the next $60,000 at 25%; only amounts over $120,000 (and less than $182,000) would be taxed at 28%. The net effect of this is that the percentage of your gross income that goes to federal taxes is substantially less than your tax bracket. A retirement income of $100,000 would place the taxpayer in the 25% tax bracket-- but their federal tax would be around $15,000, or 15% of their gross income.

3. Tax brackets only go to 35%, not 50%-- and you'd have to have a annual retirement income of over $325,000 to reach that bracket. If you're going to make your living in the aviation industry, it ain't likely you're going to be retiring on $300k+ per year. <g>

 

[Dangerkitty]

Uh, no, it's not.

I have a very comprehensive Blue Cross/Blue Shield medical policy, and it provides very limited coverage skilled nursing care coverage-- and only for those enrollees that have Medicare Part A. Their benefits brochure specifically states, "Note: If you do not have Medicare Part A, we do not provide benefits for skilled nursing facility care."

OTOH, skilled nursing care coverage is a benefit of my John Hancock LTC policy. This is quite common in LTC policies, and often required by state law. For instance, for LTC policies sold in the State of New York, "The home care benefit must cover skilled nursing care, home health care, personal care and assisted living care."

You are so confused about this that you are falling into a trap that many seniors do. I used to work for BCBS in Texas and dealt with this all the time when I sold Medicare Supplements. What you just quoted is why seniors think that they have Long Term Care Coverage when they dont.

Let's break it down to the basics:

Skilled Nursing Care is care given to someone when the Condition WILL get better. Rehabbing of a knee replacement for example. LTC DOES NOT COVER THIS!!!

Un-skilled nursing care is care given to someone when the condition will never get better. Someone has Alzheimer's is always going to have Alzheimers and the condition will never improve. This is what LTC insurance covers. When someone has a condition where they are going to need care 24/7/365 LTC is what pays for it.

 

[Dangerkitty]

And by the way in the quote you made above you are actually proving my point but since you dont know what you are talking about in the first place you probably do not realize that.

Medicare has NOTHING and I mean NOTHING to do with unskilled Long Term care facilities, home health care or anything similar to that. When they state skilled nursing facilities they are referring to REHAB!

 

[PC800]

What have I stated that is wrong in regards to LTC and what are your insurance credentials?

You have stated that LTC insurance does NOT cover skilled nursing care, and that medical insurance does. In fact, the opposite is true.

I have no insurance "credentials"; I'm just a savvy consumer.


Your lack of expertise in financial matters is readily apparent, not only from your apparent misunderstanding of tax brackets, but from the following quote from your last post:

"Debt is debt. I could care less (to a certain extent) what the interest rate it."

If you hope to someday achieve your financial goals, you need to start caring about what the interest rate is. I don't like debt either, and have none, except for a small mortgage at 4.875%. I have the money to pay off that mortgage, but I don't-- because paying off low interest debt with money that is earning at a higher rate is financially stupid.

And before you ask, no, I don't have any financial planning credentials. However, I did manage to reach my financial goals and retire, very comfortably, 9 years ago-- at the age of 45.

 

[Dangerkitty]

You have stated that LTC insurance does NOT cover skilled nursing care, and that medical insurance does. In fact, the opposite is true.

I have no insurance "credentials"; I'm just a savvy consumer.


Your lack of expertise in financial matters is readily apparent, not only from your apparent misunderstanding of tax brackets, but from the following quote from your last post:

"Debt is debt. I could care less (to a certain extent) what the interest rate it."

If you hope to someday achieve your financial goals, you need to start caring about what the interest rate is. I don't like debt either, and have none, except for a small mortgage at 4.875%. I have the money to pay off that mortgage, but I don't-- because paying off low interest debt with money that is earning at a higher rate is financially stupid.

And before you ask, no, I don't have any financial planning credentials. However, I did manage to reach my financial goals and retire, very comfortably, 9 years ago-- at the age of 45.

PC800,

Again you are just plain stupid. You are like the little old man I use to have to try to explain the way Medicare and LTC Insurance worked. He heard from a friend who heard from a friend and thought he knew how it worked. Well 9 times out of 10 he was clueless.

For some reason you seem to think you know what a skilled nursing facility is when you couldn't be further from the truth.

Why dont you do a search and educate yourself because all you do here is state I am wrong but yet you can't back up your points.

Once again Skilled Nursing Care is rehab, which is covered under Medicare and or Medical Insurance. LTC only covers unskilled nursing facilities.
Why you can't get that through your thick head is beyond me.