Retirement PLANning

[psysicx]

If your roth is maxed out get another one. The best thing to do is put as much money in your 401K that will be matched. There is no reason to put anymore. Then put it in a Roth and max it out. Don't they have a limit of $2,000 a year that you can put in Roth?

 

[AZ Typed]

If your roth is maxed out get another one. The best thing to do is put as much money in your 401K that will be matched. There is no reason to put anymore. Then put it in a Roth and max it out. Don't they have a limit of $2,000 a year that you can put in Roth?

The limit for 2005 is $4,000 if under age 50 ($4,500 if over). Even if you have 10 ROTHS...your contribution limit is still $4,000 or $4,500 - divided up among the 10 ROTHS. You only need one with a reputable company. And toss it into a VA with living benefits and you have an insurance policy on your IRA - a great strategy for those concerned about losing money in their IRA.

AZT

 

[miles otoole]

I know you probably know this already and decided to not get too detailed, but to those uniformed on Roth IRA's, you will pay taxes on any earnings earned on your contributions that are considered after-tax.

Not true. Roth IRA contributions are ALL after tax and therefore never subject to any taxes. You put in $4,000 when you are 18, it grows to $100,000, and you withdraw it when you are 60, you pay not a dime of tax. The $96,000 "earned" through investing is tax free. This is the great thing about Roth IRAs.
One loophole, if you will, is the ability to withdraw $10,000, penalty free, from an IRA for a first home purchase after having an IRA for 5 years. Actually, a first home means a home bought for the first time in 2 years.
Therefore, you can contribute to an IRA for 5 years, grow the money, and take out $10,000, no penalty, no tax, toward a home. Again, a little known loophole.

http://www.fool.com/money/allaboutiras/allaboutiras12.htm

 

[Slim]

AZ Typed mentioned life insurance and the "preferred" rates from ALPA:angryfire and AOPA . I agree!

If you need term life insurance, try First Penn Pacific. I have a 250K, 20 year policy with them. The annual premium is $400. I pay quarterly, so it's $472 per year.

They are pilot friendly. My neighbor, who sells life insurance and is also retired National Guard, found this to replace my SGLI.

 

[CTS]

This all sounds good, but be careful

The above insurance reference is correct I purchased 1.4mil of life insurance for the same price as ALPA's 500K policy and it is much better that what the company offered. Also I locked in the rate for 20yrs as to the 10yrs offered by ALPA or the aged based with the company. However I have no bad health history and do not do any GA flying.

Retirement savings,

Some hear may be good at picking stocks, however I encourage you to be cautious. You want to diversify your risk and its takes a minimum amount of money to do this. There are different types of risk. Overall market risk (rising interest rates, and oil prices), company risk (Enron, Global Crossings) and sector risk (the horse buggy sector has not done very well this year). And I should add for international stocks, Political risk. In the beginning a mutual fund can help you diversify your risk, although I am not a big fan of mutual funds. I prefer ETF's(www.ishares.com) or (www.vanguard.com), much like mutual funds, but no fund manager to screw things up. ETF's are computer models that track indexes and cot 1/10th the price of a MF.

While it is nice to hear what our fellow pilots are doing, I would sit down with a CFP (certified financial planner) in your area and develop a "flight plan for your retirement savings). This blue print, as long as you stick to it, will be your key to financial independence. Let a professional tell you if a 401K or ROTH is better for your specific situation. They can tell you exactly how much to save each month and where to put it to reach your goal.

Don't go to a broker; go to a Fee Based Financial Advisor. This way, you pay for his/her independent advice rather than a person who works on commission trying to sell you something. (I.E. a mutual fund)


CTS
www.wiserinvestor.com

 

[Mike man]

go to a financial palnner!

 

[DetoXJ]

I just hit my $14,000 Max out on my 401K. The fact that I didn't pay tax on any of that $14K really means that it only cost me about 10K since thats all I would have gotten had it been "taxable income" In addition to that the company will match 75% of 9% of my salary. Assuming I will make $100K this year, the company will put in almost $7000. What this boils down to is I have $14000+$7000 going into my 401K as opposed to $10K if I didn't do the 401K. Thats over a 100% return just for playing.

 

[Singlecoil]

I just hit my $14,000 Max out on my 401K. The fact that I didn't pay tax on any of that $14K really means that it only cost me about 10K since thats all I would have gotten had it been "taxable income" In addition to that the company will match 75% of 9% of my salary. Assuming I will make $100K this year, the company will put in almost $7000. What this boils down to is I have $14000+$7000 going into my 401K as opposed to $10K if I didn't do the 401K. Thats over a 100% return just for playing.

That's where the real gains are, the immediate 25-30% return because the government isn't getting the money they would have. Some have said the Roths are better because you will be in the "50%" tax bracket when you are taking the money out. Not true. When you are taking the money out, you will be retired! Your house will be paid for (hopefully) and your income will be low because it will only consist of social security, pension income, and whatever money you take out of your 401K, IRA, and/or Roth accounts. Also, maybe by then the rules will be changed by congress to lower taxes on 401K disbursements. You never know.

 

[AZ Typed]

AZ Typed mentioned life insurance and the "preferred" rates from ALPA:angryfire and AOPA . I agree!

If you need term life insurance, try First Penn Pacific. I have a 250K, 20 year policy with them. The annual premium is $400. I pay quarterly, so it's $472 per year.

They are pilot friendly. My neighbor, who sells life insurance and is also retired National Guard, found this to replace my SGLI.

The key is to be sure you're covered under 121 or 135 if that's your line of work. In that case - you'll likely be eligable for preferred rates. It's the GA & 91 flying that raises rates. I have 1M with AIG (the biggest in the nation) for 20 years at $500 a year (montly payments of $42) as a 135 pilot. If I start flying a 172 around for fun - the game changes. So - be sure you disclose the type of flying you're doing and the type of flying you expect to do. When / if I go back to flying around the patch for fun - I'll be revising the policy. Otherwise if I spiral the 172 into the dirt under 91, my beneficiaries get nothing. And if I stack up the jet under 135 - my beneficiaries will get the full $1M. You can't "unscrew-up" the application - so be sure it's accurate before it's sent off to the company. Also - NEVER do this through the mail. Sit down with a licensed advisor or planner. Otherwise you're just tossing a dart at the map and hoping you are correctly insured. That's what most people do...and that's why most people are not correctly insured and are paying WAY to much for what they do have.

Here's a question: Do you all have some references for disability insurance for PILOTS? In other words, insurance that covers us with a lump sum (for example) in the event we lose our medical? I know ALPA offers this...but that's not available to the mom & pop operators out there. Any suggestions would be appreciated!

AZT

 

[de Pez]

I just hit my $14,000 Max out on my 401K. The fact that I didn't pay tax on any of that $14K really means that it only cost me about 10K since thats all I would have gotten had it been "taxable income" In addition to that the company will match 75% of 9% of my salary. Assuming I will make $100K this year, the company will put in almost $7000. What this boils down to is I have $14000+$7000 going into my 401K as opposed to $10K if I didn't do the 401K. Thats over a 100% return just for playing.

In addition, since your 401k is "pre-tax", you've just reduced your taxable income from $100,000 to $86,000.

AND, since a Roth IRA is the other topic of conversation here, your ability to invest the full $4,000 (for 2005) in the Roth begins to be reduced at an income level starting at $95,000. Since you've just lowered your taxable income to $86,000, you can contribute the full amount to your IRA as well.