All Forum Posts by: David C.

@Walt Payne - I think you are certainly onto something.  Here are my thoughts:

Emergencies:  I don't account for emergencies in my retirement saving.  I save for emergencies in accounts outside my retirement.  If we are talking 'all or nothing' or someone with very limited resources - the access to your contributions is  HUGE Roth advantage.  It would take a tremendous emergency for me to consider going near any retirement assets.

Retirement Income: I'm still going with my plan: I have basically no income plan for retirement, I will live off retirement accounts, and taxable accounts.  I will sell taxable stocks for long-term gains - nice tax treatment there with today's rules.  I will withdraw maybe 70,000/year from my 401k until the rules demand I take more.

I already have zero debt, not even a mortgage.  My income needs and wants are tiny.

Assuming I am still married: my first 18,000 is taxed at 10%

18,000 -> 73,000 is taxed at 15%.

73,000 -> 148,000 is taxed at 25%

So I avoid 28% or 33% taxes today, grow tax free, and pay ~13% taxes later.

I agree, if you plan to draw 130,000+ from your 401k each year in retirement, then a Roth is a better option.  OR if you have other sources of retirement income that will push you into high tax brackets.

If I want more than 100,000/year to spend, I can pull from non-retirement accounts, selling assets(stocks, mutual funds, etc..).  Those are not taxed as income, so they will not push me into a higher bracket.

@Account Closed is positioned for a high income retirement, so for him - Roth is the way to go, it removes uncertainty and pays his taxes at known rates today that he is confident are lower then his retirement rates.

For many other folks in less abundant situations, planning for reality makes more sense.  If you have modest retirement savings, and are in your highest earning years - taking the tax deduction today is going to work out the best mathematically - you can take the money off the top today when your income is high, and pull the money out later at near-zero tax rates when you are trying to live off a too-small 401k.

If you are young and in a low tax bracket, the Roth is golden, you are missing out on a known small tax savings for the long term benefit of not having to worry about income tax policy.

@Account Closed 

he did address it, he pointed out it is an actual, real tax rate.

Whether you think you need to worry about ever being in it, is a matter of opinion.

He's sticking with his book that has examples of very high 401k fees, which do exist, they are slowly going away and getting fixed, but sadly - he is correct - there are high fee plans out there.  Also high-fee choices in many plans.  Like the 'target date' funds, where they charge you .5% to put your money into funds that charge 1.2%.  If you are not careful you can wind up in a high fee 401k situation.

As for tax rates - those are for us all to guess about - we will be taxed on withdrawl if we did not pay taxes on the way in.  Based on each of our situations, and whatever tax law changes happen - this could be at high rates, or low rates.

No need to fight with him - he has a very strong opinion that I disagree with, but it is based on some true facts.

@Jerry W. I'm with you 100%  I did not really mean to say that I thought the site was responsible for anyone's success or failure, or that it was misleading people, I can see how my original post sounds that way.

There will be survivorship bias, I guess I'm just curious how big it is?  Do 90% of new members only post once?

What % of 'my first flip' posters stay active on the site?

Maybe stats like that are meaningless, people could leave the site for many reasons but still be out there kicking butt.

Is there any value in these posts as fodder for statistical analysis?

Many people are familiar with 'survivorship bias' when it comes to mutual fund investing, the basics are this:  a fund company may start many funds over its lifetime with different strategies.  The ones that do poorly fail to attract enough money to stay open, or are closed when failure is acknowledged.  Those closed funds are rarely included when the fund company, or mutual funds in general are evaluated.  So the same fund company, if they started 10 funds, 3 of them managed an average 15% return, and 7 of them managed 1% returns, but they closed 5 of those 7.  They are left with 5 funds, 3 with 15% and 2 with 1%, and then they come up with 'average performance' using only those 5.

I'm curious about 'survivorship bias' in real estate investing.  Specifically, can we analyze the data on the bigger pockets message boards to get any idea about it?  The amount of users on here seems to keep growing, so: are we nearing 'big data'? where the data does not have to be perfect to come to some conclusions?

Can the guys who run the site mine the old 'new member posts' to see how many realestate hopefuls actually stick around and post?  How about 'my first flip' posts, how many people announce the start of their first project on here, but then never come back?

The successful people on here have strong track records, but I'm afraid at times that it is guru-esque: the failures disappear, so we're only left with the successes.  How many lives are being destroyed by the perception that 'its easy' or 'all it takes is hard work' or 'house prices are low and interest rates are low, you can't go wrong' or 'real estate is way better than the stock market' ?

Anecdotal stories of success are only told by the winners, so following this post with a lot of personal stories of your own successes does not add to the discussion.  Where's the data?  A similar post by Dave Krulac about most real estate investors only owning a single property hinted to there being a disconnect between the perception that there are many people out there building small real estate empires vs. maybe the truth that there are many people out there building tiny real estate investments that they overpaid for and run poorly.

Just pondering if we have enough data on these boards to come up with anything that fosters discussion.

@Scott Trench I think he has you confused with @Account Closed 

 who boasts a long term 20% ROR.

At least that's how I read it.

@Walt Payne don't sacrifice too much, you never know how long you'll live. If you are in the position where you might face very high tax rates in retirement, I'd say you have saved too much ;)

I sat next to a guy who did his pension calculation every day.  He died about a year before retirement from his government job.  A life spent calculating something he never saw.

@Vince Beusan is using extreme examples because he read an extreme book and believes it.

My expense ratios are around 1% - my 401k is at Vanguard.

@Account Closed your tax rates are right on.

Extreme arguments are useful to shake people up - to get us thinking.  I started reading this thread as a very strong 'tax deferred traditional 401k' proponent, but the debate got me thinking, and researching.  It seems like being married, most years I'm dodging a 28% tax, and I expect to be in a 25% tax bracket when I retire.  That tax rate delta is pretty small, but there is the additional benefit of tax-free compound growth.  My risk is: what if things keep going well for me?  if my business does well and grows and my wife gets back to work, we could easily have 10 years of $80,000/year 401k contributions ahead of us.  Another 800,000 dumped on top of what's already there, plus some mediocre stock performance - and suddenly I may be looking at a high retirement tax bracket.

The examples in the books will compare a 401k vs. a single buy and hold stock that you never sold for 40 years, but that's a straw man, even dedicated investors very rarely stick with an investment for that long.  The world changes.  People sell stocks, and pay taxes, all through their life.  Inside the 401k investments can be shifted and rebalanced without taxes.  You can even use that to your advantage to prevent selling taxable investments.  If your mix gets out of whack, move 401k assets until your overall mix matches your goals.  Each part of your assets is out of whack, but in total you are better off.

The other straw man will be: if you want to plan for a low-income retirement you are a loser - so we have to use 39% as the retirement tax rate.  That's just silly.  These message boards have a survivorship bias - the folks who lose $20k on their first flip and never try again disappear.  Only the lucky and skilled stick around to sell how its possible.  For most people, putting 10,000/year into a tax-deferred 401k for their career will put them in a fairly nice place when they retire.  By doing it tax-deferred - the week-in/week-out bite to their paycheck is smaller.

Steelton is right by the Susquehanna river, did you check your flood maps?  and flood insurance premiums?  With all that biggert-waters act stuff, Steelton could be a disaster.

I'm local - but did not grow up near Harrisburg.

Similar test scores to Harrisburg schools, but a much higher graduation rate.  So the culture respects education, but the education quality is poor.

If we start teaching basic finance in schools,  the teachers might figure out what a ridiculously bad deal they are getting and they will all quit. 

Then who will teach our kids to follow their dreams and passion and the money will follow?