AUTHOR: Cheryl Low on 11/13/2024 FIRST: luvtoride44afe9eb1e on 11/13/2024 | RECENT: Jonathan Clements on 11/25/2024
Comments
Glad to hear she has a Roth with a reasonable amount. I'm bringing this up since, with your excellent guidance, she will have a sizeable portfolio in her 401K/T-IRA. Many of us baby boomers didn't have Roth accounts available, so when they did become available it was difficult to contribute to a Roth account AND covert T-IRA to a Roth IRA. As result, we have the (nice) problem of having to take RMDs from our T-IRA. This can be quite the balancing act at tax time since so many thresholds are based on AGI. Roth IRAs have the advantage that you can take out your contributions at any time, no tax/penalty on withdrawal after 591/2, and no required minimum distributions. Total flexibility in retirement.
And I like that she is investing in low-cost, index? ETFs.
On her next raise, I would recommend splitting a portion of her 401k contributions in a Roth 401K (if her work offers it) or a portion of her brokerage account in a Roth IRA.
To be a true 12% flat tax, the proposal would need to mitigate the 'tax torpedo' which triggers downstream increased taxes (i.e., bypass AGI/MAGI so it wouldn't impact the SS amount taxed, IRMAA adjustments, senior bonus, capital gains, etc) or push you into a higher tax bracket. The proposal is worth discussing. For example, there could be two flat tax rates (12% and X% tax) based on income thresholds.
Here’s an idea that worked well for two of our grandkids: Keep the receipt (or jot down the items) for everything you buy. Then circle the amounts for anything you didn’t really need. At the end of the week, add up the circled amounts. And at the end of the month, total the four weekly amounts.
Now you have a clear picture of how much you could have saved. Do this for a few months, and the goal is that you'll start resisting impulse buys.
We paid off our mortgage 7 years before retirement and continued to make contributions to our Roth IRAs. Two changes we made after paying off the mortgage were to do annual Roth conversions and shift more into a Roth 401k vs Trad 401k, as long as it didn't push us into a higher tax bracket.
We treat our four children, nine grandchildren, and two great-grandchildren equally. We believe it’s important for them to work through their own financial challenges. It can be painful to watch, but those experiences tend to stick, and they don't repeat the same mistake. We’re always willing to guide them, whether that means helping them refinance a mortgage at a better rate, open Roth IRAs, start investing, or understand their options for financing college and other major expenses. A couple of years ago, we gifted the grandkids 5k each. As part of the gift, I offered to help them set up a Roth IRA. Six of the nine grandkids took me up on it, two used the gift towards a down payment on a home, and one used it for college. What I appreciated most was how it opened the door to other conversations about money. I’ve been able to walk them through their options and, if needed, help them through the process.
We used a HELOC to build our current home on some acreage we had previously purchased. The HELOC had a fixed rate of 3.4% and no fees. It helped provide a smooth transition from our old home to our new home. The HELOC was paid off as part of the closing on our old home.
Under legislation enacted in 1983, the Social Security Trust Funds receive income based on Federal income taxation of benefits up to 50 percent of benefits from single taxpayers with incomes over $25,000 and from taxpayers filing jointly with incomes over $32,000.
Legislation enacted in 1993 extended taxation of benefits. The legislation increased the limitation on the amount of benefits subject to taxation from 50 percent to 85 percent for single taxpayers with incomes over $34,000 and for taxpayers filing jointly with incomes over $44,000. All additional tax income resulting from the 1993 legislation is deposited in Medicare's Hospital Insurance Trust Fund.
Comments
Glad to hear she has a Roth with a reasonable amount. I'm bringing this up since, with your excellent guidance, she will have a sizeable portfolio in her 401K/T-IRA. Many of us baby boomers didn't have Roth accounts available, so when they did become available it was difficult to contribute to a Roth account AND covert T-IRA to a Roth IRA. As result, we have the (nice) problem of having to take RMDs from our T-IRA. This can be quite the balancing act at tax time since so many thresholds are based on AGI. Roth IRAs have the advantage that you can take out your contributions at any time, no tax/penalty on withdrawal after 591/2, and no required minimum distributions. Total flexibility in retirement.
Post: Celebrating the Win
Link to comment from June 13, 2026
And I like that she is investing in low-cost, index? ETFs. On her next raise, I would recommend splitting a portion of her 401k contributions in a Roth 401K (if her work offers it) or a portion of her brokerage account in a Roth IRA.
Post: Celebrating the Win
Link to comment from June 12, 2026
Thanks for the heads-up!
Post: Money & Me (Kindle version) has dropped
Link to comment from May 26, 2026
To be a true 12% flat tax, the proposal would need to mitigate the 'tax torpedo' which triggers downstream increased taxes (i.e., bypass AGI/MAGI so it wouldn't impact the SS amount taxed, IRMAA adjustments, senior bonus, capital gains, etc) or push you into a higher tax bracket. The proposal is worth discussing. For example, there could be two flat tax rates (12% and X% tax) based on income thresholds.
Post: Should Retirees Get a Temporary Flat Tax Window on IRA and 401(k) Withdrawals?
Link to comment from May 20, 2026
Here’s an idea that worked well for two of our grandkids: Keep the receipt (or jot down the items) for everything you buy. Then circle the amounts for anything you didn’t really need. At the end of the week, add up the circled amounts. And at the end of the month, total the four weekly amounts. Now you have a clear picture of how much you could have saved. Do this for a few months, and the goal is that you'll start resisting impulse buys.
Post: The Monthly Mystery of the Vanishing Paycheck
Link to comment from February 12, 2026
We paid off our mortgage 7 years before retirement and continued to make contributions to our Roth IRAs. Two changes we made after paying off the mortgage were to do annual Roth conversions and shift more into a Roth 401k vs Trad 401k, as long as it didn't push us into a higher tax bracket.
Post: Should You Stop Contributing To Your IRA?
Link to comment from February 10, 2026
We treat our four children, nine grandchildren, and two great-grandchildren equally. We believe it’s important for them to work through their own financial challenges. It can be painful to watch, but those experiences tend to stick, and they don't repeat the same mistake. We’re always willing to guide them, whether that means helping them refinance a mortgage at a better rate, open Roth IRAs, start investing, or understand their options for financing college and other major expenses. A couple of years ago, we gifted the grandkids 5k each. As part of the gift, I offered to help them set up a Roth IRA. Six of the nine grandkids took me up on it, two used the gift towards a down payment on a home, and one used it for college. What I appreciated most was how it opened the door to other conversations about money. I’ve been able to walk them through their options and, if needed, help them through the process.
Post: Helping Adult Children
Link to comment from February 9, 2026
We used a HELOC to build our current home on some acreage we had previously purchased. The HELOC had a fixed rate of 3.4% and no fees. It helped provide a smooth transition from our old home to our new home. The HELOC was paid off as part of the closing on our old home.
Post: Advice I give to anyone who’ll listen!
Link to comment from February 2, 2026
The income taxes paid on SS benefits are split.
- Under legislation enacted in 1983, the Social Security Trust Funds receive income based on Federal income taxation of benefits up to 50 percent of benefits from single taxpayers with incomes over $25,000 and from taxpayers filing jointly with incomes over $32,000.
- Legislation enacted in 1993 extended taxation of benefits. The legislation increased the limitation on the amount of benefits subject to taxation from 50 percent to 85 percent for single taxpayers with incomes over $34,000 and for taxpayers filing jointly with incomes over $44,000. All additional tax income resulting from the 1993 legislation is deposited in Medicare's Hospital Insurance Trust Fund.
https://www.ssa.gov/oact/progdata/taxbenefits.html#:~:text=Under%20legislation%20enacted%20in%201983,Medicare's%20Hospital%20Insurance%20Trust%20Fund.Post: Is Social Security Going Bankrupt?
Link to comment from January 31, 2026
I'd also be in favor of 4 or 5 day deliveries per week.
Post: The future of mail and how it affects finances
Link to comment from January 5, 2026