| Savings plan to retire extra early. |
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suffer1034
New Poster
Cash: $ 0.45
Posts: 2
Joined: 19 Feb 2012
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| Savings plan to retire extra early. |
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My spouse and I are trying to call it quits with our day jobs by 45 for me, and 50-55 for her (she wants to work longer). I might do some stuff on the side afterwards, but I want it to be a choice rather than a requirement.
Anyway, my question relates to how should I be allocating money into our investments when we won't be eligible to tap our 401k and IRA's for 15 years after "retirement."
Currently, I max 2 IRA's every year, make considerable contributions to 401ks, but our taxable accounts do not contain a lot of money. If I allocate everything into tax deferred accounts, then we are left without money for 15 years until 59 1/2.
So the best plan I can come up with is to max out our tax deferred accounts until roughly age 40, then divert some of that money at age 40 into taxable accounts, hopefully giving us enough to get by. However, I'm pretty unhappy with this idea and hoping someone might have some better suggestions. Thanks all.
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Sun Feb 19, 2012 1:52 am |
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oldguy
Senior Member
Cash: $ 427.90
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Joined: 21 May 2006
Location: arizona
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For our taxable account, I used the SP500 Index Fund, it grows tax-deferred, it is instantly available as a fall-back EF. If you sell some, the profits are subject to capital gains tax only (15% max), and if you leave it to heirs the tax will never be due ('stepped up basis' rule).
We funded it during our full working lives - used it for rental houses, kid's colleges, etc - and used it for retirement from age 58 to 70 1/2. Now we are moving money back into it - we have to sell some IRA funds each years for the RMD.
But it doesn't matter much whether you fund it incrementally or wait for the last 5 yrs, the end point is the same. We liked the flexibility/safety of having a personal account - IMO people are so fixated with Qualified accounts that they have lost sight of the practicality of the old fashioned brokerage account.
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Sun Feb 19, 2012 3:23 am |
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fast
Senior Member
Cash: $ 45.05
Posts: 220
Joined: 20 Oct 2009
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quote:
Originally posted by oldguy
For our taxable account, I used the SP500 Index Fund, it grows tax-deferred, it is instantly available as a fall-back EF. If you sell some, the profits are subject to capital gains tax only (15% max), and if you leave it to heirs the tax will never be due ('stepped up basis' rule).
I'm confused by your use of the definite article "the" when you say, "the SP500 Index Fund." Aren't there at least a few?
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Sun Feb 19, 2012 4:19 am |
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suffer1034
New Poster
Cash: $ 0.45
Posts: 2
Joined: 19 Feb 2012
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quote:
Originally posted by oldguy
For our taxable account, I used the SP500 Index Fund, it grows tax-deferred, it is instantly available as a fall-back EF. If you sell some, the profits are subject to capital gains tax only (15% max), and if you leave it to heirs the tax will never be due ('stepped up basis' rule).
I'm quite confused by this. How can a taxable account containing an SP500 index fund grow tax deferred...Every year you are responsible for the income generated by the dividends paid from the companies in that fund. Capital gains are not taxed initially, but are taxed upon sale, which you obviously take the money out at some point. You also had to pay taxes on the money you initially invested in the account prior to purchase of the index fund assuming those monies were generated by your "job" or legally in some fashion.
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Sun Feb 19, 2012 4:30 am |
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coaster
Senior Advisor
Cash: $ 1529.15
Posts: 7516
Joined: 11 Oct 2005
Location: Wisconsin
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quote:
Originally posted by suffer1034
How can a taxable account containing an SP500 index fund grow tax deferred...
He uses the word grow which, to me, means capital gains, which are --- yes --- tax-deferred until selling, but perhaps the confusion arises from who does the selling: if the fund sells and reaps a gain, it's distributed to the shareholder during the year of the sale and is taxed as a capital gain in that year; if the shareholder holds and does not sell, that gain is tax-deferred for however long he chooses to hold.
An index fund should have very little in the way of capital-gains distributions anyway; only what's necessary due to meeting fund redemptions and to readjust holdings for indexing changes.
He also clearly indicated his comments were regarding taxable accounts, so the distinction you make over taxation in your last sentence is a non-issue.
~Tim~
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Sun Feb 19, 2012 6:24 am |
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oldguy
Senior Member
Cash: $ 427.90
Posts: 2054
Joined: 21 May 2006
Location: arizona
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quote:
I'm confused by your use of the definite article "the" when you say, "the SP500 Index Fund." Aren't there at least a few?
You're right. Each of the major no-load fund companies has an SP500 Fund, Vanguard, TR Price, Fidelity. And many brokerages - Schwab, etc. And you can buy Spyders, yet another way to own the SP500 Index. Any one of them gets you to about the same place. 
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Sun Feb 19, 2012 3:31 pm |
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Iona99
Member
Cash: $ 4.40
Posts: 20
Joined: 10 Jul 2012
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| Savings plan to retire extra early. |
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We have to make our children future. So we ave to make good plan for our children and for ourself. So if we earn a lot of money. It will finished in sometime. We should must open factory. And start other business. that's a plan of future.
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Tue Jul 17, 2012 9:32 pm |
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