James: I believe your website "Next Quarter Century" links via Wix are no longer working. Is there another way I can contact you directly for follow up questions? I want to bounce some thought off you re: spousal SS timing, and re: enrolling in MC for the first time when I turn 65 next summer 2025...thanks!
A stitch in time saves nine (Francis Baily, 1797). [Don't skip those oil changes when due, people!! Best $50 - $100 you will ever spend on your car! This useful reminder is just as true in relationships... ;<)
Great, timeless post! Thanks Jonathan for reposting it recently, else I likely never would have come across it. Which made me think about something else: There is a wealth of valuable historical content in Humble Dollar like this. How does one increase the odds such articles, which in this case is completely timeless (ie this post IMHO will be as relevant 3 years from now as it today, and was when first published 3 years ago in 2021) will be seen once they're no longer scanned by site reviewers browsing (primarily just) the latest, new content? Having a keyword of some type included right in the title might increase the chance people will click on an older article a few years after it's first published, if you can capture their attention and the content is something that might otherwise appeal to them. An observant editor who still has his wits (& near perfect recall!) can certainly repost a link to it periodically, when something else on-subject prompts a comparison to a recent article or posting. (As Jonathan did here). But a "keyword" in the original article title could become a permanently imbedded search reference for new readers to discover. (Like something very direct/ explicit: "Magic Number - Consider Tithing"). I suspect the vagueness was somewhat intentional, because it probably created additional curiosity when the article first came out, and caused some readers (like me?) to click on it who might otherwise have skipped over it, looking for yet another article w/ technical tips on Roth Conversions (etc!). Some of the mystery or surprise could be preserved if just a clue was provided what the "magic" was about, even while the specific idea is not laid bare in the title. Perhaps "Magic Number (for Your Soul)"...? I just entered "Tithing" in the Humble Dollar search bar and this article came up as the 2nd reference, so that ensures people actively looking for articles with this content can always find it...very well done. Another idea would be to create a link to this article under the "Guide" section, under the "Giving" subcategory. Or under "Humans" => "Happiness" subcategories. I don't mean to quibble here - GREAT article, it really made me think.
I've been reading Humble Dollar for years, glad I finally came across it!
This question essentially focuses on the taxation aspects of different types of retirement accounts. When thinking about this I am reminded of an excellent book I read a few years ago called "The Power of Zero", by David McKnight. (https://www.amazon.com/gp/product/1984823078?tag=randohouseinc30439-20). It provides a great explanation why no one single type of retirement account can deliver the maximum tax savings you're looking for to boost your retirement savings. For most people, the "Optimal" tax strategy is actually to have ALL THREE different types of brokerage accounts while saving for and to draw from during your retirement: Tax Free (Roth, HSA), Pre-Tax/ Tax Deferred accounts (Traditional IRA, 401-K), AND regular Taxable accounts.
They each offer certain different & powerful advantages vs the other two types of accounts. This may initially seem counter-intuitive. If you had your choice, why wouldn't you just want 100% of your retirement savings in a Roth account?? Simple! Done!! But as it turns out, the correct answer is actually "No", not ideally. Even taxable accounts offer certain powerful potential tax advantages which are unavailable to tax free and pre-tax retirement accounts. Each type of account can serve a different purpose, and to take advantage of some of the biggest tax breaks available in our tax code, you really need to have funds available in ALL THREE of these types of accounts. (Full disclosure; in an earlier life I was a CPA and I've been a finance guy my whole career, who does our own taxes every year w/ tax software, including about 14 K-1's on our 2023 return. But I do believe most people can understand the concepts explained clearly with examples in David's very readable book, which was not written "for CPA's"...) My wife & I currently have about 12% of our retirement savings in Tax Free retirement accounts, vs 61% in Pre-Tax/ Tax Deferred retirement and the remaining 27% in regular Taxable brokerage accounts. But I plan to max out our 22% marginal tax rate bracket with Roth conversions again in 2024, and then max out our 24% marginal rate with conversion in 2025, right before the Trump tax cuts are scheduled to expire. So, by the end of next year our Tax Free accounts ratio should climb to ~ 16%, our Pre-Tax accounts will still be the majority of our savings but reduced to ~ 57%, with the remaining 27% invested in regular Taxable brokerage accounts. It's true that I wish I'd been a little more diligent about allocating funds to my Roth account when I was younger, so these tax-free accounts would be closer to 30% (than only 16%) by the end of 2025. A "30/40/30" allocation would seem to me to be an almost ideal relative mix of tax free, tax deferred and taxable accounts in retirement. But I'm very confident we will still have enough assets left in our taxable accounts to give us the flexibility to still take advantage of all the various (underappreciated) tax benefits which are available ONLY within taxable accounts.
Comments:
James: I believe your website "Next Quarter Century" links via Wix are no longer working. Is there another way I can contact you directly for follow up questions? I want to bounce some thought off you re: spousal SS timing, and re: enrolling in MC for the first time when I turn 65 next summer 2025...thanks!
Post: Don’t Delay
Link to comment from June 30, 2024
A stitch in time saves nine (Francis Baily, 1797). [Don't skip those oil changes when due, people!! Best $50 - $100 you will ever spend on your car! This useful reminder is just as true in relationships... ;<)
Post: What’s your favorite financial quote?
Link to comment from June 23, 2024
Great, timeless post! Thanks Jonathan for reposting it recently, else I likely never would have come across it. Which made me think about something else: There is a wealth of valuable historical content in Humble Dollar like this. How does one increase the odds such articles, which in this case is completely timeless (ie this post IMHO will be as relevant 3 years from now as it today, and was when first published 3 years ago in 2021) will be seen once they're no longer scanned by site reviewers browsing (primarily just) the latest, new content? Having a keyword of some type included right in the title might increase the chance people will click on an older article a few years after it's first published, if you can capture their attention and the content is something that might otherwise appeal to them. An observant editor who still has his wits (& near perfect recall!) can certainly repost a link to it periodically, when something else on-subject prompts a comparison to a recent article or posting. (As Jonathan did here). But a "keyword" in the original article title could become a permanently imbedded search reference for new readers to discover. (Like something very direct/ explicit: "Magic Number - Consider Tithing"). I suspect the vagueness was somewhat intentional, because it probably created additional curiosity when the article first came out, and caused some readers (like me?) to click on it who might otherwise have skipped over it, looking for yet another article w/ technical tips on Roth Conversions (etc!). Some of the mystery or surprise could be preserved if just a clue was provided what the "magic" was about, even while the specific idea is not laid bare in the title. Perhaps "Magic Number (for Your Soul)"...? I just entered "Tithing" in the Humble Dollar search bar and this article came up as the 2nd reference, so that ensures people actively looking for articles with this content can always find it...very well done. Another idea would be to create a link to this article under the "Guide" section, under the "Giving" subcategory. Or under "Humans" => "Happiness" subcategories. I don't mean to quibble here - GREAT article, it really made me think. I've been reading Humble Dollar for years, glad I finally came across it!
Post: Magic Number
Link to comment from June 23, 2024
This question essentially focuses on the taxation aspects of different types of retirement accounts. When thinking about this I am reminded of an excellent book I read a few years ago called "The Power of Zero", by David McKnight. (https://www.amazon.com/gp/product/1984823078?tag=randohouseinc30439-20). It provides a great explanation why no one single type of retirement account can deliver the maximum tax savings you're looking for to boost your retirement savings. For most people, the "Optimal" tax strategy is actually to have ALL THREE different types of brokerage accounts while saving for and to draw from during your retirement: Tax Free (Roth, HSA), Pre-Tax/ Tax Deferred accounts (Traditional IRA, 401-K), AND regular Taxable accounts. They each offer certain different & powerful advantages vs the other two types of accounts. This may initially seem counter-intuitive. If you had your choice, why wouldn't you just want 100% of your retirement savings in a Roth account?? Simple! Done!! But as it turns out, the correct answer is actually "No", not ideally. Even taxable accounts offer certain powerful potential tax advantages which are unavailable to tax free and pre-tax retirement accounts. Each type of account can serve a different purpose, and to take advantage of some of the biggest tax breaks available in our tax code, you really need to have funds available in ALL THREE of these types of accounts. (Full disclosure; in an earlier life I was a CPA and I've been a finance guy my whole career, who does our own taxes every year w/ tax software, including about 14 K-1's on our 2023 return. But I do believe most people can understand the concepts explained clearly with examples in David's very readable book, which was not written "for CPA's"...) My wife & I currently have about 12% of our retirement savings in Tax Free retirement accounts, vs 61% in Pre-Tax/ Tax Deferred retirement and the remaining 27% in regular Taxable brokerage accounts. But I plan to max out our 22% marginal tax rate bracket with Roth conversions again in 2024, and then max out our 24% marginal rate with conversion in 2025, right before the Trump tax cuts are scheduled to expire. So, by the end of next year our Tax Free accounts ratio should climb to ~ 16%, our Pre-Tax accounts will still be the majority of our savings but reduced to ~ 57%, with the remaining 27% invested in regular Taxable brokerage accounts. It's true that I wish I'd been a little more diligent about allocating funds to my Roth account when I was younger, so these tax-free accounts would be closer to 30% (than only 16%) by the end of 2025. A "30/40/30" allocation would seem to me to be an almost ideal relative mix of tax free, tax deferred and taxable accounts in retirement. But I'm very confident we will still have enough assets left in our taxable accounts to give us the flexibility to still take advantage of all the various (underappreciated) tax benefits which are available ONLY within taxable accounts.
Post: Do you favor Roth or traditional retirement accounts, and why?
Link to comment from June 22, 2024