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Old 06-30-2018, 09:03 AM   #21  
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Originally Posted by Gunfighter View Post
MOST IMPORTANT STEP:
Get competent financial advice outside of APC keyboard warriors. There is a reason we fly airplanes instead of manage hedge funds.
I can't stress this enough...."Professional Financial Advice" is typically a licensed salesman. Now, I'm not saying APC should be your go-to resource. However, the financial services industry has created this facade that saving and investing for retirement is something we cannot handle as individuals. It's completely false, and if we spend time educating ourselves on this stuff we can make A LOT more money and save ourselves A LOT of BS advisory fees. Long-term buy and hold is really all we need to do. Invest systematically on a regular basis, sit on your hands and watch it grow. Hedge fund managers are highly paid salesmen and very few actually outperform a good benchmark. I'm guessing that sometime in the next decade hedge funds will cease to exist, they're simply too expensive for the performance they generate.

NOW, the actual complicated part of all of this is undoubtedly the tax side. A good fee-only tax advisor is absolutely necessary, in my opinion.

As far as picking investments and doing these financial "maneuvers" such as the backdoor Roth, it can be done on your own with a simple call to Fidelity, they won't lead you astray. Don't be afraid to keep them on the phone until you absolutely understand what is going on, I've spent many hours in the past on the phone with them. In fact, I've found many of the reps find this refreshing, seeing folks take control of their finances.

Just remember, most financial advisors do not have your best interest in mind. With that being said, they are out there, the good ones, it just takes a bit of legwork on your end. This place is a great start, but keep digging in and working towards financial literacy, I have no doubt it is going to pay off exponentially in the future.

Last edited by mispoken; 06-30-2018 at 09:16 AM.
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Old 06-30-2018, 09:29 AM   #22  
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- I currently direct Delta's 16% into Fidelity BrokerageLink.
- I also direct 24% individual contribution and 100% of profit share into BrokerageLink. ALL of the individual contributions are AFTER TAX or 401(a).

- Delta's contributions cannot be moved out of the 401k.
- Every two weeks, immediately after I see the after tax money sitting in my BrokerageLink account, I call Fidelity and tell them, "I'd like to transfer all the after tax money into my Roth IRA. (You want to do this right away, because if that after-tax money has a chance to gain earnings, they become taxable, and the earnings cannot be moved into the Roth IRA.)

- From there, it is actually a two-step process. First, it must be moved from the BrokerageLink side to the DPSP side. After that is done, it is moved from the DPSP to the Roth IRA. Fidelity handles both of those steps. It usually takes 2-3 days from my phone call before it is sitting in the Roth IRA. (As a side note, you may be able to get this down to a single step if you direct your money directly into the DPSP, but my process works for me.)

- The best way to think of this (and how it was explained to me), is that you are in a race against Delta. Delta is putting in money every two weeks (based on the number of hours you fly). The TOTAL combined limit is $55,000. The goal is to get to $55,000 as quickly as possible. The quicker you do it, the greater YOUR percentage of $55,000 is, and thus, the greater amount you can get into your Roth IRA each year. Some guys get there in February with Profit Sharing and contributing 75% of their pay.
Thanks for explaining this!! Awesome info. I assume you could just put the money into a money market with the dpsp to help the time factor of any gains. Also can fidelity transfer money into a vanguard Roth IRA? Or does it have to be Fidelity?
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Old 06-30-2018, 12:40 PM   #23  
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Fidelity can cut a check to you in care of vanguard. They would send you the check then you would send the check to vanguard. They may be able to send the check to vanguard directly. Either way it adds additional steps, I think you can find funds and etfs with competitive expense ratios at Fidelity, so it may simply your life to have fidelity move it to an account in house. Your choice.
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Old 06-30-2018, 01:53 PM   #24  
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More great info, thanks! Obviously I'm not going to base large financial decisions solely on what I've read on APC, but it's good to open your eyes to other options out there.
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Old 07-01-2018, 07:43 AM   #25  
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Quote:
Originally Posted by mispoken View Post
I can't stress this enough...."Professional Financial Advice" is typically a licensed salesman. Now, I'm not saying APC should be your go-to resource. However, the financial services industry has created this facade that saving and investing for retirement is something we cannot handle as individuals. It's completely false, and if we spend time educating ourselves on this stuff we can make A LOT more money and save ourselves A LOT of BS advisory fees. Long-term buy and hold is really all we need to do. Invest systematically on a regular basis, sit on your hands and watch it grow. Hedge fund managers are highly paid salesmen and very few actually outperform a good benchmark. I'm guessing that sometime in the next decade hedge funds will cease to exist, they're simply too expensive for the performance they generate.

NOW, the actual complicated part of all of this is undoubtedly the tax side. A good fee-only tax advisor is absolutely necessary, in my opinion.

As far as picking investments and doing these financial "maneuvers" such as the backdoor Roth, it can be done on your own with a simple call to Fidelity, they won't lead you astray. Don't be afraid to keep them on the phone until you absolutely understand what is going on, I've spent many hours in the past on the phone with them. In fact, I've found many of the reps find this refreshing, seeing folks take control of their finances.

Just remember, most financial advisors do not have your best interest in mind. With that being said, they are out there, the good ones, it just takes a bit of legwork on your end. This place is a great start, but keep digging in and working towards financial literacy, I have no doubt it is going to pay off exponentially in the future.
Agree. Do your homework. Avoid getting talked into a neighbor's or co-workers "get rich quick" scheme, or buying Iraqi dinar or Bitcoin on an exchange, to time the next market craze.

Read a book by John Bogle.

I didn't check to see if it had been mentioned before, but, I highly recommend you guys take a trip over to the bogleheads forum.

https://www.bogleheads.org/forum/index.php

That forum is full of physicians, attorneys and other professionals who are far along in their careers as well as starting out, that have, or expect to have in the future, (ask a poor ER resident ) a high-level of compensation and they need some advice on what to do to do with their compensation & retirement nest egg, just like you guys.

Instead of discussing contracts, cognac, and cockpit farts, they discuss the thriftiest ways to invest before and after tax, purchase a home, purchase investment properties, purchase a frugal car, send your kids to college, and the list goes on.

They won't lead you astray.

In fact, I'd be willing to wager that there is more sound financial information among those on that forum, than from the world's top 500 so-called "financial advisors" combined.

I've learned to stick with this mantra:

1) Invest you must
2) Time is your friend
3) Impulse is your enemy
4) Basic arithmetic works
5) Stay the course

Good luck with all your money.

Signed,

Poor freight trash
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Old 07-01-2018, 08:04 AM   #26  
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Another great read is "The Millionaire Next Door". This explains how a construction worker can have more wealth than a physician. Unfortunately, I believe many of our co-workers fall into this "highly paid and debt-laden" category. It's not easy to avoid keeping up with Joneses, but if we can we will have a lot more options than just flying the line in the future if we so choose!
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Old 07-01-2018, 11:09 AM   #27  
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This may be an outrageously stupid question, but why not use the 401k to defer tax til retirement when the income will be less? In other words, why have all the tax liability now during high income earning years?
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Old 07-01-2018, 11:30 AM   #28  
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Originally Posted by gliderguider View Post
This may be an outrageously stupid question, but why not use the 401k to defer tax til retirement when the income will be less? In other words, why have all the tax liability now during high income earning years?
I had the same question recently, and it was basically explained to me like this:

You shelter $18.5k from tax liability today via 401k, and it grows (for round numbers) to $200k...and you'll pay tax on the entire $200k as you make distributions from the account.

If you pay tax on the same $18.5k today and invest it via Roth 401k, and it grows to $200k...all you'll ever pay tax on is the initial $18.5k.

In "dumb pilot/round numbers" speak...35% of $18.5k is a LOT less than 25% of $200k.
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Old 07-01-2018, 11:41 AM   #29  
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Originally Posted by BoilerUP View Post
I had the same question recently, and it was basically explained to me like this:

You shelter $18.5k from tax liability today via 401k, and it grows (for round numbers) to $200k...and you'll pay tax on the entire $200k as you make distributions from the account.

If you pay tax on the same $18.5k today and invest it via Roth 401k, and it grows to $200k...all you'll ever pay tax on is the initial $18.5k.

In "dumb pilot/round numbers" speak...35% of $18.5k is a LOT less than 25% of $200k.
Just for fun, here's some more specific numbers. If you invest your max 18.5k @ $1541/month for 20 years at a growth rate of 8%, you'll end up with just shy of $910,000. Of that total you'll have put in $370,000, the other $540,000 is growth. If it's all in a traditional you'll have saved around $150,000 in taxes on the 370k, give or take, but you'll end up owing taxes on the whole 910k as you draw it down. Or you pay that tax bill up front and get 910k tax free.

Another way to look at it is that you're effectively investing more with your ROTH than with a traditional, assuming you're putting in the max 18.5k either way. With a traditional, when you factor in taxes, you're really only investing ~12k for yourself in the future. 18.5k put into a ROTH is as if you were investing ~24k into a traditional since the whole 18.5k is yours for the future.
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Old 07-01-2018, 11:52 AM   #30  
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Quote:
Originally Posted by BoilerUP View Post
I had the same question recently, and it was basically explained to me like this:

You shelter $18.5k from tax liability today via 401k, and it grows (for round numbers) to $200k...and you'll pay tax on the entire $200k as you make distributions from the account.

If you pay tax on the same $18.5k today and invest it via Roth 401k, and it grows to $200k...all you'll ever pay tax on is the initial $18.5k.

In "dumb pilot/round numbers" speak...35% of $18.5k is a LOT less than 25% of $200k.
I re-read this and it makes a lot more sense. Good short explanation. Thanks
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