Comments on: Developing Strategies To Remain Debt Free – Strategy 1 In The Series http://www.ncnblog.com/2008/08/18/developing-strategies-to-remain-debt-free-strategy-1-in-the-series/ Debt Reduction Rocks - We Are Living Debt Free! Fri, 10 Feb 2012 00:09:10 +0000 hourly 1 By: chris http://www.ncnblog.com/2008/08/18/developing-strategies-to-remain-debt-free-strategy-1-in-the-series/comment-page-1/#comment-128598 chris Wed, 10 Sep 2008 15:20:08 +0000 http://www.ncnblog.com/?p=1658#comment-128598 I find a great motivator to remain debt free is too think about how short lived any feeling from purchasing something lasts, compared the the pain of paying it off. I therefore find it a better long term feeling to save and pay in cash. I find a great motivator to remain debt free is too think about how short lived any feeling from purchasing something lasts, compared the the pain of paying it off. I therefore find it a better long term feeling to save and pay in cash.

]]> By: Mark L http://www.ncnblog.com/2008/08/18/developing-strategies-to-remain-debt-free-strategy-1-in-the-series/comment-page-1/#comment-126161 Mark L Sat, 23 Aug 2008 02:25:20 +0000 http://www.ncnblog.com/?p=1658#comment-126161 Aaron, The decision on Roth vs. Traditional IRA can be tricky, but you are correct to point out that it is when you want your tax burden. With the Roth plans (which now include both IRAs and some 401(k) plans) you pay taxes now. With the traditional plans (most 401(k)s and 403(b)s), you pay them later. Many people will - in retirement - live on less annual income than they do now. They have no kids, no house payment, no insurance, etc. So, a 100K income earner might only need 70k in retirement to have the same standard of living. In that case, the traditional plan works better since the tax burden is lower. However, if you are really savvy and expect to have a lot of investments, and a lot of wealth, then you may find that you will have a higher income in retirement - and that you want to enjoy it. That makes the Roth plans better since you've already paid taxes. Personally, I'm doing a hybrid. I am fully funding (10K) the Roth IRA plans, and putting another 7k in the traditional 401(k). The reason I'm putting more in the Roth now is that I've been heavily invested in the traditional for many years, but just started with the Roth. The other reason to like the Roth over the 401(k) specifically, is the options. WIth a personal Roth account, you get all the market as potential investments. In the 401(k), you just have the company choices. So, to go back to the list, I would redo it slightly: 1) Fund tax-favored company retirement plan to maximum match (typically 3-5%) 2) Fully fund personal IRA account (Roth preferred, but Traditional okay) 3) Assuming you haven't gotten to 15-20% of your income in retirement yet, fund tax-favored company plan to that level. Aaron,

The decision on Roth vs. Traditional IRA can be tricky, but you are correct to point out that it is when you want your tax burden. With the Roth plans (which now include both IRAs and some 401(k) plans) you pay taxes now. With the traditional plans (most 401(k)s and 403(b)s), you pay them later.

Many people will – in retirement – live on less annual income than they do now. They have no kids, no house payment, no insurance, etc. So, a 100K income earner might only need 70k in retirement to have the same standard of living. In that case, the traditional plan works better since the tax burden is lower.

However, if you are really savvy and expect to have a lot of investments, and a lot of wealth, then you may find that you will have a higher income in retirement – and that you want to enjoy it. That makes the Roth plans better since you’ve already paid taxes.

Personally, I’m doing a hybrid. I am fully funding (10K) the Roth IRA plans, and putting another 7k in the traditional 401(k). The reason I’m putting more in the Roth now is that I’ve been heavily invested in the traditional for many years, but just started with the Roth.

The other reason to like the Roth over the 401(k) specifically, is the options. WIth a personal Roth account, you get all the market as potential investments. In the 401(k), you just have the company choices.

So, to go back to the list, I would redo it slightly:

1) Fund tax-favored company retirement plan to maximum match (typically 3-5%)
2) Fully fund personal IRA account (Roth preferred, but Traditional okay)
3) Assuming you haven’t gotten to 15-20% of your income in retirement yet, fund tax-favored company plan to that level.

]]> By: Mike Sweeney http://www.ncnblog.com/2008/08/18/developing-strategies-to-remain-debt-free-strategy-1-in-the-series/comment-page-1/#comment-126150 Mike Sweeney Fri, 22 Aug 2008 23:01:52 +0000 http://www.ncnblog.com/?p=1658#comment-126150 Great post and 1st strategy. Great post and 1st strategy.

]]> By: Jane http://www.ncnblog.com/2008/08/18/developing-strategies-to-remain-debt-free-strategy-1-in-the-series/comment-page-1/#comment-126112 Jane Fri, 22 Aug 2008 14:20:32 +0000 http://www.ncnblog.com/?p=1658#comment-126112 Debt free always, that's the best way to not only to gain financial stability but also to get a piece of mind. It's not easy though when we are bombarded with commercial after commercial about products that we don't really need. Debt free always, that’s the best way to not only to gain financial stability but also to get a piece of mind. It’s not easy though when we are bombarded with commercial after commercial about products that we don’t really need.

]]> By: Aaron http://www.ncnblog.com/2008/08/18/developing-strategies-to-remain-debt-free-strategy-1-in-the-series/comment-page-1/#comment-126027 Aaron Thu, 21 Aug 2008 17:21:58 +0000 http://www.ncnblog.com/?p=1658#comment-126027 I would make #1 fully fund 403(b) up to the match, then make fully funding the Roth #2. Shouldn't the question be will your tax rate be higher or lower when you retire? We currently live in a time with historically low tax rates. It's likely taxes will be raised to pay for entitlement programs for the retiring baby boomers. Therefore I'd rather pay taxes now then later. I would make #1 fully fund 403(b) up to the match, then make fully funding the Roth #2. Shouldn’t the question be will your tax rate be higher or lower when you retire? We currently live in a time with historically low tax rates. It’s likely taxes will be raised to pay for entitlement programs for the retiring baby boomers. Therefore I’d rather pay taxes now then later.

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