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    • PJ

      So I maxed out my wife's and my Roth IRAs today ($5,500 for 2017). We had just recently sold our first home together so it gave us a bit of a cushion to maximize contributions.

      Who out there plans to do the same or perhaps your contribution was maxed Jan 1st 2017? Any thoughts on early vs. last minute?

      Anyone still waiting to do their taxes? I had mine done a month ago or so although since we owed federal I kindly waited to pay that until today. Nothing like the one week remaining alarm to get that procrastination in check!

      Next question becomes what exactly do I put those contributions in at this point in the market cycle. Good news for me is I'm 35 and it has a lot of time to do its thing (compounding gains and the such!), bad news for me is retirement is likely decades off.. but one can dream right!

      I'm probably going to toss some of it in a broad tech ETF such as XLK and then maybe follow up with TDIV. I'm not super worried about the immediate market because the money will have 30 years or so to basically become more than it is today or so that's the hope!

      My portfolio in general consists of Banks and Tech stocks/ETFs it's just my comfort zone. Too young to invest in bonds... although I must say I'm not sure I'll ever invest in bonds. Unless something dramatically changes and the rates somehow become worth while again!

      If you're still holding off on some last minute tax deadline activities better act fast as next Tuesday April 17th 2018 is the cut off.

      Happy scrambling!

      **full disclosure the image came from the below article I did not create it**
      http://time.com/money/5105942/when-are-taxes-due-2018/

    • Chris

      You sound like a very wise man. I can't speak from a deep well of knowledge about financial instruments, but I can speak to the wisdom of marrying up to someone who has insisted we max out whatever we can every year since the first year we ever started working.

      We have a mixture of 401Ks and IRAs, depending on what our employers supported at the time. My understanding is you could contribute up to $18K to a 401K in the last couple of years, but you were limited to $5,500 for an IRA, no? We rolled ours into Vanguard and we've been very happy with the performance.

      If we had it to to again, we'd still choose max contribution every year if we could possibly swing it, from the earliest age we could.

    • PJ

      Certainly if you can afford to max out both you should.

      And after 50 you get an extra 1000 as a catch up contribution so you can put aside 6500 into an IRA. After certain income limits you won’t really get a tax deduction for your IRA but it could still make a lot of financial sense to put money aside in an IRA and do a backdoor Roth IRA rollover. A Roth has pretty restrictive income limitations so a backdoor allows you to get around that. Although this new tax law could change or close that up.

      IRA = tax deduction pending certain earning limits then you’re taxed when you withdrawal from it in retirement.

      Roth IRA = no tax deduction but because you used taxed money to contribute you don’t pay taxes on your withdrawals and gains. Like anything else there are some circumstances where the rules change a bit bit they are easy enough to navigate. Also at anytime you can take out your contribution only with no penalty so it makes a really good emergency savings vehicle. If no emergencies happen it grows for 40 plus years tax free and you have a nice chunk for retirement.

      When folks are starting out their careers and aren’t in a huge tax bracket and they have a lot of time for their money to work it makes sense to contribute to a Roth IRA over an IRA.

      You’re first option would always be to max your 401k if you can(especially if you’re offered a Roth 401k option), then work on your IRA.

      As personal finances could change what’s best for you I’d always consult with your tax professional and financial advisor to see what works best for you. Many will build you a basic road map for little or no charge.

      There is also many options for a business owner even if just running a small business and perhaps I’ll write about that soon or ask one of my friends in the financial advisor industry to list out some options.

    • Chris

      Quite fascinating. I would be a very sorry boy right about now if I didn't marry someone willing to focus on this. How did you become so knowledgeable? Is it part of your career, or simply a personal interest?

    • PJ

      I've always held an interest in personal finance and the myth of early retirement or independent wealth. However about 3 years ago I switched from the banking and finance industry to the personal finance industry and the Registered Investment Advisor (RIA) side of things. While I'm not client facing, I do the bulk of the trading and investment research for my firm so I pay a bit of attention to the world around me.

      I've always been one to try to fully understand the entire process of my job. Knowing what happens prior to my part and after etc. So when I have a question about the whole process I'll ask some of the wealth managers or even do a bit of research online until I find some satisfactory level of knowledge on the topic.

      One of the things to pay close attention to is there always happens to be some sort of caveat to each and every rule. So it's easy to end up down a rabbit hole researching each unique situation.

    • amacbean16

      I haven't yet pulled the trigger on tax returns but Monday is the day for me. I love tax planning and I even (mostly) enjoy filling in the zillion forms every year. Having a personal finance hobby has been incredibly rewarding for me because I don't like to pay any more taxes than I need to! I feel like the time I invest in educating myself has paid me back many fold.

      We max out as soon as we can for every tax sheltered account, simply because I believe the data convincingly shows time in the market beats most people's ability to time the market. I lost the chance to contribute to an HSA for 2017 because we're now using a "health share" rather than health insurance, but we made backdoor roth IRA contributions as well as solo 401k contributions (the limit here is more like 55k currently).

      We are low-cost index fund fans and I'm loyal to Vanguard so we have plenty in VTSAX along with some specifically international index funds and a bond index. We're young as well but hope to be financially independent before typical retirement age so we keep a more blended portfolio and pay attention to tax loss harvesting.

      My biggest tax-related fail: Not capturing our long-term capital gains before we experienced a big jump in income. We could have captured those at a 0% tax rate because we were in a lower tax bracket, but instead we had to pay 15%. Bummer.

      My biggest tax-related wins: Contributing to Roth IRAs early and consistently. Recognizing I can donate "in-kind" to charity via appreciated mutual fund shares so I don't have to be taxed on those gains first! (That partially offset my aforementioned fail. Phew.)

    • PJ

      I’ll let you know in 20 years or so haha... I’m aiming at early retirement as well! Only time will tell if I make it. That statement was more tongue in cheek then anything else.

    • PJ

      http://www.livefreemd.com/use-it-or-lose-it/

      The above article does a pretty good job explaining a good portion of the ROTH especially the back door ROTH.

      Some of the things it doesn't hit on is there is no Required Minimum Distribution that you are forced to take after a certain age. Also it's a good vehicle to pass down tax free wealth.

      Another note is you can also set money aside in a kid's ROTH up to the amount of money the child made, including for mowing lawns or doing choirs etc. What counts and doesn't count and what the limits are is a better set of questions for your accountant or financial advisor. But if your grandchild has a paper route and makes and spends 100 a month... it doesn't matter you can put 100 of your own money on their behalf.

    • amacbean16

      Good stuff. We're definitely considering a "Parent match" Roth for our kids, simply because they are such a great investment vehicle that is wasted on the young! You only get so much space each year for contributions (and any unused space is just lost forever), but most people don't figure that out until they've lost a few decades of potential tax sheltering.

    • PJ

      absolutely... I don't currently do the oh x amount of choir money thing although maybe i should. but when they get their first part time jobs assuming i can swing it i fully plan to match what ever they are making and put it in a ROTH or what ever the closest thing that exists in 8 years is! Who knows what will change.

    You've been invited!