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I don't want to contribute to an IRA. Am I nuts?

Discussion in 'Investing and Trading' started by jesseissorude, Jan 10, 2017.

  1. jesseissorude
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    jesseissorude Bronze Contributor FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass

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    Hola my kittens!

    I don't want to contribute to a tax-advantaged IRA or Roth IRA since I can't pull my money out until age 59.5.*

    I want to invest my money in a normal brokerage account, so I can liquidate and invest it elsewhere if an opportunity comes up.

    Am I crazy? What do you think?


    *(Although I think I could since I've never owned a home and I can pull the money out for a down payment if I ever buy a house).
     
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  2. jlwilliams
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    jlwilliams Bronze Contributor Read The Millionaire Fastlane Speedway Pass

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    The tax ramifications of the 401k and the Roth 401k are powerful. I don't know what you overall picture looks like or how much money your talking about investing, but taxes are a huge drain on your productivity. Taking advantage of the tax code such that you either put current money outside of the tax man's reach or put tomorrow's money out of it (Roth) is sensible.

    Taxation is a giant monsterous leach. The more life it sucks from the economy the more it demands. It's everybody's duty to starve the monster.
     
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    458 Gold Contributor Read The Millionaire Fastlane Speedway Pass

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    What's an IRA?
     
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  4. MidwestLandlord
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    MidwestLandlord Gold Contributor FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass

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    That's a tough one. If your income level allows you to invest in it, it's tempting because it comes out pre-tax.

    But ultimately, it's a slowlaner game, and the "wins" associated with that game are small. Even the tax savings, in the grand scheme of things, is small. Plus since I assume it is employer sponsored, chances are the fees are high.

    I have money sitting in a Roth IRA (Vanguard) that I started when I was younger. The "returns" I see on that are laughable at best. I haven't put money into it for years.

    Even if my house of cards comes falling down and I go take a job somewhere, I'd personally never contribute to an IRA or 401(k), because I know I can put that money, even after taxes, to better use and see better returns than the market.

    This is long-term planning & soul-searching stuff. If you honestly see yourself in the fastlane at some point, it's a waste of money in my opinion. If you see yourself playing the slowlane game (nothing wrong with that), then it's probably a good thing to invest in.
     
  5. G-Man
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    G-Man Gold Contributor FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass

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    No. Putting your hard earned money into the hands of strangers only to have half of it evaporate in an economic downturn at age 60 after you've watched your most productive years pass you by, just so you can avoid some taxes on the front end,... that, sir, is crazy.
     
  6. lowtek
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    lowtek Silver Contributor FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass Summit Attendee

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    Not an investment adviser, but I do not contribute to retirement plans. As a tax deferment strategy, it's not very smart. You're losing more money (by setting it aside and not being able to touch it) than you save in taxes.

    It's kind of like buying a house to pay less in taxes. You lose out in absolute dollar terms.
     
  7. G-Man
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    G-Man Gold Contributor FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass

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    Real world example: I have 10k wrapped up in an IRA earning 5% max. If I had it in the pool of cash I'm using to finance AR for one of the side businesses I'm in, I'd have that 10k levered out to a 36% cash on cash return. FML.
     
  8. biophase
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    biophase Legendary Contributor LEGENDARY CONTRIBUTOR FASTLANE INSIDER Speedway Pass Summit Attendee

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    I would put money into a Roth if I still could. I've been maxing out my SEP IRA. It's all a numbers game.

    The idea of never paying taxes from a Roth is pretty powerful. If you stuck $10k into it and hit a few homeruns you can blow that thing up to $50k $100k, etc... and pay zero taxes when you withdraw. I just play options in my Roth. I do the risky trades in there because of the tax free gains, it's worth it to go aggressive.

    For the SEP IRA, the big difference was you either put in the money or get taxed on it. So you put in $50k, your AGI goes down $50k, or you put in $0 and pay $15k taxes on that $50k immediately.
     
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  9. G-Man
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    G-Man Gold Contributor FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass

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    This had never occurred to me. rep++
     
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  10. jesseissorude
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    jesseissorude Bronze Contributor FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass

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    Dang, all great stuff to think about! Thanks for the input so far!

    I don't have a 401(k) since I don't have a slowlane job anymore, but I do have a Roth IRA account I set up for myself. I'm very active in managing it and get way more than 5%, thanks to the Options Trading threads in the Insiders section and a few awesome stock picks I made (love you Nvidia!) :cool:


    So right now, I'm leaning toward moving a huge bulk of my savings over to a new brokerage account, and scaling back my contributions to the Roth.
     
  11. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass Summit Attendee

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    Admin Post
    No, I didn't for many years because my goal wasn't "retire at 65". So I didn't have them.

    However once you start acruing excess cash, you'll want to contribute to save on taxes.

    Now I max out everything simply to pay less tax.
     
  12. RHL
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    RHL can i get a comprehensive guide please LEGENDARY CONTRIBUTOR FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass Summit Attendee

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    For fastlaners, retirement fund investment is for people whose pile of cash has become so large that it is unwieldy or outright impossible to deploy it in more time-intensive managed investments (real estate, your biz, etc.). If you have $15,000 in the bank, no way in hell should you consider an IRA. If you've got $500,000+, eh, maybe.

    If you find yourself hustling or promoting/expanding your business to its limits, where more cash input from you literally cannot increase the return, and you cannot mange any more properties, and consistently have some money left at the end of every month, there are worse things you can do than sticking it into a fund like that.

    Plus, it's great to have big investment plays that kick in at different epochs of your life to supercharge your financial future. You don't want to start retirement at age 60, but waking up to 6 figures that was heavily tax-advantaged on your 60th birthday would be pretty badass. I'm actually starting to look at some funds now.

    Also, if your employer matches contributions to a fund and you still have a job, that's a whole different ball of wax. As long as it doesn't defer your fastlane, that's free money. Grab it.
     
    Last edited: Jan 12, 2017
  13. eliquid
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    eliquid SaaS and PPC and SERPWoo .com FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass

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    Depends @jesseissorude

    Do you have any debt. Car, credit card, school, loans, etc?

    If you have debt, DO NOT put money into an IRA. Pay off the debt first.

    Once debt free, I'd put money into a business before an IRA/401k.

    You gotta get your freedom first/now, then start locking in freedom for when your older.
     
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  14. Unknown
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    Unknown Silver Contributor FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass

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    Retirement funds are very hard to get to if someone tries to sue you. It's not impossible, but retirement accounts are given an extra layer of protection due to the Slowlane world we live in.
     
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  15. Utopia
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    Utopia Bronze Contributor Speedway Pass

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    This is it.
     
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  16. jesseissorude
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    jesseissorude Bronze Contributor FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass

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    Between those two comments alone, I'd say that's "/thread" for me. Thank you guys for the perspective.

    No employer since I started my business, so no worry there. When I was employed, I'd always grab the matching contribution though.

    Proud to say "No!" :) I busted my ass in school to keep a merit scholarship, so no student loans. The only debt I've ever had was when I bought a car in 2013, but that's all paid off now.
     
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  17. Soulrize
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    Soulrize New Contributor FASTLANE INSIDER

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    Its not legal however I think is smart especially if its on a small scale, that is if you had a cash business, you simply put pre-tax dollars into the after tax account. Not sure how you feel about it but its just an option to consider. I've helped small businesses do so myself with their consent of course knowing the implications.
     
  18. biophase
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    biophase Legendary Contributor LEGENDARY CONTRIBUTOR FASTLANE INSIDER Speedway Pass Summit Attendee

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    I don't understand what you mean. So you put on your tax return that you contributed X dollars into an IRA, but instead you put it into a regular account? So basically you are submitting a tax return that has false information on it?
     
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  19. Soulrize
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    Soulrize New Contributor FASTLANE INSIDER

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    accident
     
  20. Soulrize
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    Soulrize New Contributor FASTLANE INSIDER

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    So since its a Roth account it is assumed that it is after tax dollars and thus you don't report your contributions on your tax return. From the cash component of your business, for example your sales are 1000 a day, and you takeout 10 dollars a day. So that is 70 a week that is contributed weekly into the roth ira while 990 is recorded each day as sales.
     
  21. biophase
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    biophase Legendary Contributor LEGENDARY CONTRIBUTOR FASTLANE INSIDER Speedway Pass Summit Attendee

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    Wtf?

    So basically you are recommending tax evasion in order to put money into a retirement account?

    In this case if you are going to under report income why would putting it into a Roth IRA even matter? You'd be better off doing nothing with it.

    You are basically doing something illegal and then depositing it into a bank account where it can be traced.

    The whole premise makes absolutely no sense at all.

    And btw there is a limit to what you can contribute into a Roth IRA and while it may not be reported it's easily recorded.

    Lastly, the dollar that you put into the Roth doesn't know where it came from. Its not like the actual cash pocketed is driven to the bank and deposited into the account.
     
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  22. Soulrize
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    Soulrize New Contributor FASTLANE INSIDER

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    The very first thing I said was it was illegal and I'm just putting it out there. Some people don't fear it because of the minimal amount you can put into

    a roth is 5,500 and thats about 16 a day and its just for knowledge. If everyone was ethical and paid what they owed with no shilly shallying then tax

    favorable investments wouldnt be a big deal. I would add that you simply use another person bank to transfer the money, but Its beyond the scope of

    this post. Under-reporting income is bad period, not a business owner I know doesn't do it, shamefully but if you can't control income and in the

    slowlane, options seem grim and more likely to commit to such actions. Kind of like focusing on small fishes(retirement reinvesting) ,better than no fish (doing nothing with it).
     
  23. MidwestLandlord
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    MidwestLandlord Gold Contributor FASTLANE INSIDER Read The Millionaire Fastlane Speedway Pass

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    Have you read TMF?

    In the book, MJ talks about risks that have very little upside, and tremendous potential downside. This is a perfect example of one of those risks. The "upside" to your suggestion is saving a few bucks on your taxes, the downside is an IRS audit, penalties, fees, potential jail time, and a criminal record.

    I'm glad you shared this example of taking a poor risk for us. I hope those that are bootstrapping it take this lesson to heart when money is tight and they are tempted by poor choices.
     
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  24. Soulrize
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    Soulrize New Contributor FASTLANE INSIDER

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    I have read TMF and taken every detail to heart. Your suppose to focus on income, and for alot of people, they believe its impossible to raise their income and thus do actions such as this.
     
  25. madmoney
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    madmoney New Contributor Read The Millionaire Fastlane

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    If you have extra disposable income, you should contribute to your Roth IRA. 2017 have another 5500$ in my IRA. You can pull out your money in case of emergency and do not have to wait til 59.5, only thing is you will get a penalty and not on principal either just the earning profits. I guess cost of doing business. Even if you do decide to get an Roth IRA be sure to gear them at the market, and purchase blue chip stocks. The earning aren't the fastlane but it beats a traditional bank any day.

    Q
     

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