Comments on: How Your 401(k) Is Sabotaging Your Retirement — Maybe Postponing It

By: Real Estate Investing Links for September 16, 2009 - Lifestyles Unlimited

Real Estate Investing Links for September 16, 2009 - Lifestyles Unlimited — Wed, 16 Sep 2009 08:01:42 +0000

[...] The Bawld guy writes about how your 401(k) is sabatoging or postponing your retirement. [...]

By: fwisp.com

fwisp.com — Sat, 01 Aug 2009 01:24:10 +0000

How Your 401(k) Is Sabotaging Your Retirement — Maybe Postponing It…

What with all the sound and fury concerning the economy in general and real estate specifically, there’s a lesson being taught to literally millions of Americans which has, from where I sit, gone unnoticed, maybe even by those who’ve been ‘taken to sch…

By: BawldGuy

BawldGuy — Fri, 17 Jul 2009 21:29:01 +0000

An EIUL should be strongly considered as part of one’s group of significant ‘baskets’ for sure. That was coming up.

By: Dave Shafer

Dave Shafer — Fri, 17 Jul 2009 20:28:11 +0000

Now its my turn to chime in with:

You might consider funding an EIUL and avoid some of that teeth knashing over taxation.

@AI

You are so right about having flexibility and actively managing your assets. It is rarely a good idea to put all your eggs into one basket!

By: BawldGuy

BawldGuy — Fri, 17 Jul 2009 16:31:17 +0000

AI — The points you make illustrate the difference between the vast majority of folks out there, and a relatively sophisticated investor. Though many may argue particular points with you, if they’re among the majority, you’ll make mistakes and still be better off then they are.

Assuming tax laws will remain cast in stone is not recommended, true enough. There are certain changes though, that if made would trash certain markets.

Your observation about SS payments and inflation is classic.

By: Another Investor

Another Investor — Fri, 17 Jul 2009 13:26:48 +0000

Oops. The first sentence in the second paragraph should say tax deferred, not taxable. You can use these assets to supplement your other sources of income from age 59 1/2 to when you collect social security. When the RMD’s kick in, your balance in those accounts will be much lower. If, when it’s your turn in the retirement barrel, social security is reduced or the currency is inflated to the point the payments buy you a couple of coffees and cookies at Starbucks, you will have the tax deferred assets to supplement your other income sources over a longer period of time.

The point is to be flexible and to employ some hedging in your plan. If the rules change, don’t be in a position where you are locked into one asset class. Educate yourself and actively manage your assets.

By: Another Investor

Another Investor — Fri, 17 Jul 2009 05:02:51 +0000

Stipulated that a 401(k) plan by itself is not a good retirement plan. However, tax deferral has its place and some taxable income later in life is not an altogether bad thing. Maxing out your tax deferred workplace accounts may even reduce your taxable income to the point you can use more of the paper losses on your real esrate investments or even contribute to a Roth IRA. Worked for me for a few years a while back.

If you get out of the workforce well before 65, the taxable accounts can be used effectively before social security kicks in and before you have to deal with those nasty RMD’s. You can use them to smooth out your income while letting your tax exempt accounts percolate. During this phase, your real estate capital can continue to grow, and you can work on maximizing your tax sheltered income.

However, if you think taxes are going to go up (and I do), understand there’s no guarantee the favorable tax treatment of real estate will continue. The thirst for revenue is, ummm, unquenchable, and real estate tax advantages are constantly under attack. We have already seen changes in the mortgage interest deduction and the implementation of recapture of depreciation upon sale for investment properties. Because the tax structure for real estate may change dramatically, I choose to split my bets among several of the strongest horses instead of betting everything on real estate.

A retirement PLAN is a multi-faceted complex object, not a 401(k) or a couple of properties. Tax deferred accounts, Roth IRA’s, taxable accounts, pensions for a few, social security, and real estate should all be included as appropriate.

Real estate is a wonderful way to leverage your capital growth and (for now) to create tax sheltered income. However, projecting the ability to leverage and to shelter income and capital gains from taxes over one’s lifetime is risky, so PLAN accordingly.