Old 11-01-2021 | 07:02 PM
  #158  
NotMrNiceGuy
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Originally Posted by detpilot
I think I'm fairly financially smart, but I'm barely grasping these concepts. I talked to a financial planner about it and I didn't feel like he really s any help. Any recommendations for a professional who can break out down?

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Could you be more specific? Are you asking about types of retirement accounts or contribution limits?

Just as an example, here is how I fund my retirement in priority. Everyone has their own principles.

1) Traditional IRA - $6,000 for me and $6,000 for my wife. Provides the most flexibility for investments. Vanguard, Fidelity, and Charles Schwab are the market leaders for low expense ratio index funds. I’m a Bogelhead. $6,000 is the current limit.

2) HSA - $7,300 contribution limit for family. Triple tax advantaged. Tax deduction on the front end. Grows tax free. Can be withdrawn tax free for medical expenses. I don’t withdraw from this account and will not for retirement. I save all my medical receipts and keep an excel spreadsheet. I let the account grow and will withdraw in retirement and apply my medical receipts at that time. This gives me all the growth tax free and the withdrawals for medical tax free when I need extra money. There is no time limit for these withdrawals for medical spending.

3) Pre-tax or Roth 401(k) - I prefer the Roth just because I like knowing exactly how much I have in the account, I believe taxes are likely to go up, and I believe I will spend and earn more in retirement than present. Contribution limit is $19,500.

4) After Tax 401(k) - The combined contribution limit is $58,00, I believe. Changes annually, so double check me on that. This is the combination of your pre-tax/ Roth Contribution ($19,500 limit), the company contribution, and after tax contributions. Many companies allow you to immediately convert after tax contributions to Roth inside the 401(k). This limits the amount of growth tax to be paid. Roth grows tax free, however After Tax contributions are taxed in the same way pre-tax contributions are. Clear as mud?

5) 529 College Savings - preferred over ESA because of much higher contribution limits. You could also look into UTMA accounts for a savings vehicle for minors that you would like to gift money to when they come of age. Grows tax free when used for educational purposes. If your kid gets a scholarship, you get the money back. Not sure if the growth is taxed in that circumstance.

6) Brokerage Account - No tax advantages here.

Money Guy Show podcast is pretty informative. Bogelhead forums are a wealth of information. Get Rich Slowly has a great archive as does Free Money Finance. ESImoney.com has some good millionaire interviews that offer real world insight. That’s all I got for now. As I said, I’m mostly an index fund investor. It’s basically a financial philosophy that doesn’t get lost in the weeds. Mostly S&P and large basket stocks. Very limited exposure to limited or individual stock offerings. Keeps things simple, which is a plus.

Last edited by NotMrNiceGuy; 11-01-2021 at 07:25 PM.