First million?

[yappy]

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Dont you guys have tax advantages if you're partners at practices/owners or something? Like, take a smaller draw from your practice and use other revenue pretax for stuff to limit your tax liability? I hope this is the case!

For example - your effective tax rate is really ~15-20%...

Or have I watched too many movies? lol.

 

[Robert Loblaw]

this is a little unrelated but fits under the general theme of personal finance, which I have been reading heavily about in hopes of being able to partially or wholly DIY it...

so the group I'm joining will eventually contribute $49k to my 401k after 18 month partnership track. additionally I would contribute the max I can, which is $16500. after that, I can send $5k to an IRA for me...can I send another $5k to an ira in my spouse's name? can I transfer the $5k from the traditional Ira to a Roth (back-door Roth) and invest a second 5k in the traditional? Does that mean the max tax-advantaged savings in a year on can make is $49k + $16.5k + $10k = $75.5k? To save more it would have to be taxable accounts...does it make sense to do so? Thanks...

 

[countingdays]

this is a little unrelated but fits under the general theme of personal finance, which I have been reading heavily about in hopes of being able to partially or wholly DIY it...

so the group I'm joining will eventually contribute $49k to my 401k after 18 month partnership track. additionally I would contribute the max I can, which is $16500. after that, I can send $5k to an IRA for me...can I send another $5k to an ira in my spouse's name? can I transfer the $5k from the traditional Ira to a Roth (back-door Roth) and invest a second 5k in the traditional? Does that mean the max tax-advantaged savings in a year on can make is $49k + $16.5k + $10k = $75.5k? To save more it would have to be taxable accounts...does it make sense to do so? Thanks...

You won't qualify for a tax deduction on an IRA.

 

[Robert Loblaw]

You won't qualify for a tax deduction on an IRA.

Deduction, deferral or both? The $16.5 employee contribution would be tax-deferred? So the backdoor Roth is a good idea since I'd not get a deferral on the traditional anyway?

 

[aneftp]

Took me until last year to hit one million in retirement /outside retirement investment account/money market. I was 36 years 6 months old.

Frankly without this housing crash. I had sold my previous house up north in 2009 and took a $150k real loss (never made any money selling home since it was first home. And now I am in Florida and my 120k down payment on a home a brought in 2009 has gone down in value also. So I don't even count any equity in my current house. Maybe I am still 30k above water on the mortgage. I always pay extra into mortgage and it's low. Only $2400 month. So in reality I lost over $250k on two of my homes and still manage to have more than 1 million in liquid assets.

I thought I would hit that number by age 35. And I owed $117k in student loans coming out in 2004. Married in 2008 with a kid and another on the way in a month a year.

I already have $20k saved for college education in a 529. I started that account 3 years BEFORE my son was born. I named myself as the original beneficiary. Once that account reached 11k and my son was born I switched it over to his name. I am a planner.

I probably average about 350-375k a year all 1099. Both my 2009 Audi Q7 and 2008 Hummer v8 were paid with cash. Student loans paid off. My wife doesn't work either.

Still taken tons of vacation around the world.

So you can make be a "millionaire" before you are 40 easy.

I am 37 now. Frankly a million isn't much these days. My real number I need to reach is 4-5 million for retirement. Why? Because 2 million of that can be placed in dividen paying stocks/municipal bonds that can generate 5-6%. You can literally live off dividend and interest once you hit 5 million. But it's going to take a while for me to hit 2 million.

My wife thinks I hoard money. But like I said we take 3-4 trips a year including 2 international trips.

Some of my buddies who make 400-500k a year really have nothing to show for it. Lamborghini, buying not one for 4 freaking Phillips plasma TVs (the high end model when they were $6k/each in 2005. They also buy boats etc. They don't even Max their retirement out.

So you can still have toys and have fun in your life and still make a million.

 

[aneftp]

Just want to add. I use a safe harbor IRA. So I put $49k for myself and another $21k for my wife. It's held in a trust in a 401k that I run personally. The IRS and congress has allowed safe habor ira since the mid 2000.

 

[aneftp]

this is a little unrelated but fits under the general theme of personal finance, which I have been reading heavily about in hopes of being able to partially or wholly DIY it...

so the group I'm joining will eventually contribute $49k to my 401k after 18 month partnership track. additionally I would contribute the max I can, which is $16500. after that, I can send $5k to an IRA for me...can I send another $5k to an ira in my spouse's name? can I transfer the $5k from the traditional Ira to a Roth (back-door Roth) and invest a second 5k in the traditional? Does that mean the max tax-advantaged savings in a year on can make is $49k + $16.5k + $10k = $75.5k? To save more it would have to be taxable accounts...does it make sense to do so? Thanks...

No. Usually 16500 is w2 deferral and 33k is group contribution. So Max is still 49k.

Pointless to contribute to your wife Ira (if she's not working) since you can't deduct that Ira (5k) if you make over a certain amount of money. If your wife is working than she can contribute herself.

I have a safe harbor Ira. Google it. I pay my wife $21-23k a year and contribute. $21k to her Ira and 49k to my Ira.

 

[Robert Loblaw]

Thanks...I'll look it up now.

 

[cchoukal]

Just want to add. I use a safe harbor IRA. So I put $49k for myself and another $21k for my wife. It's held in a trust in a 401k that I run personally. The IRS and congress has allowed safe habor ira since the mid 2000.

I went to go read about safe harbor IRAs and it looks like it's just a default account for where money sits when you leave an employer-sponsored program (like between jobs). How are you making this work for you in an ongoing way?

 

[aneftp]

I went to go read about safe harbor IRAs and it looks like it's just a default account for where money sits when you leave an employer-sponsored program (like between jobs). How are you making this work for you in an ongoing way?

U didn't read the right link. That's how google searches fool people.

This is official IRS link explaining safe harbor Ira
http://www.retirementplans.irs.gov/choose-a-plan/401k-and-profit-sharing-plans/safe-harbor-401k/

 

[Robert Loblaw]

So did you have to incorporate yourself and then list your wife as an employee beige you could create your 401k plan?

 

[aneftp]

So did you have to incorporate yourself and then list your wife as an employee beige you could create your 401k plan?

Yes. You have to incorporate your business. Pay spouse w2 from business.

It cost about $500 a year to run. But IRS gives businesses a $500 credit each year for first 3 years since I am running my own IRA and run it inside its own trust.

There are many different avenues of retirement planning.
my brother out in California has a defined benefit plan that he puts $100k a year in.

My other buddy puts close to $200k a year into a grandfathered 412 plan. I think it was a 412i plan. Unfortunately Bush 43 and Congress closed the major loophole into one of the 412 i plans. Basically my friend will retire in 4 years at age 55. And he's got a guaranteed payout of $23k a month for life. He would have put in 3 million over 15 years. He's got an unbelievable deal cause its guaranteed $23k a month he will get for life after age 55. But bush 43 now makes u work till much longer so congress changed the rules.

 

[aneftp]

I might have been mistaken. Maybe it was 412e that bush 43 changed. Either way one of the 412 plans was really good. Wished I had more money to sock away.

 

[BLADEMDA]

What Is the 412(i) Plan?
The 412(i) plan is a tax-qualified, defined benefit pension plan for business owners and their employees that must be funded with a combination of life insurance and annuities, or annuities alone. The guarantees of the 412(i) plan are derived from the life insurance and/or annuity contracts that fund it and are dependent on the claims paying ability of the issuing life insurer. Therefore, it's essential to choose a reputable life insurance company with superior financial strength. (In addition to other tax-qualified rules, the Internal Revenue Code imposes limits on the amount of life insurance that can be purchased in a qualified retirement plan. As a result, a 412(i) plan cannot be funded solely by life insurance. Also, loans are not permitted under a 412(i) plan, and any forfeitures under the plan and dividends paid by the insurer will be used solely to reduce future premiums.) (Dividends are not guaranteed, nor are current dividends an estimate of future performance.)

Can the 412(i) Plan Work for You?
Generally, if you're in your peak earning years, the 412(i) defined benefit pension plan may be desirable, particularly if you:

• Are 45 years of age or older
• Own a small company or professional practice with five or fewer employees that's highly profitable, and have a steady revenue stream and cash flow, since level annual or more frequent contributions to the 412(i) plan are required
• Have a substantial tax liability and want a potentially significant income tax deduction each year

Maximum Retirement Savings and Maximum Tax Deductions
The 412(i) defined benefit pension plan has a number of advantages:

• Contributions are generally 100% tax-deductible for your business.
• There are potentially greater deductible contributions than those that can be made under traditional defined benefit plans.
• Plan benefits are guaranteed by the claims-paying ability of the issuing insurer, as long as the premiums are paid on time - and they are free of market risk.
• 412(i) plans are exempt from the minimum funding requirements usually applicable to traditional defined benefit plans, which can make the administration of a 412(i) plan simpler than that of a traditional defined benefit plan.