patrick.net

I am wary of a lot of things including 401K and IRA

Peter, if you don't put any money into retirement accounts, what do you use as a write-off? My IRA/403b is about all I've got tax-deduction wise (no mortgage, no kids). Plus, with IRAs (and most 401/403s) you get to invest it pretty much any way you want to.

Peter, if you don’t put any money into retirement accounts, what do you use as a write-off?

I know... I am just uncomfortable with the idea of not having access to my money for decades. A lot of things can happen in a few decades.

Also, you cannot short or sell uncoved options in IRA/401K accounts. Most importantly, all such accounts are US-based so all investments are ultimately USD denominated . (I know of the internation mutual funds option, but your account is still paid in USD.)

Peter P: "I am just a bit wary of mutual funds."

Even passive index funds like vanguard? I like the strategy: its tough to beat the market without a lot of insider knowledge (which most people lack), so why not attack the area we can control: costs. 18 basis points. Tough to beat.

Peter P: "Also, you cannot short or sell uncoved options in IRA/401K accounts."

Why on *God's* earth would you do that, unless you wanted to make investing a full time job? _smile_

See y'all in the next thread.

Cheers,
prat

Why on *God’s* earth would you do that, unless you wanted to make investing a full time job?

That's what my accountant said. :)

It is difficult to get short-side exposure on IRA and 401K though.

You can withdraw money from an IRA/401k earlier if you need, there are just consequences. Also, some will let you take loans out against it.

The consequences (include that of loaning against the account) is too severe for me to fathom.

I know that a tax-deferred account provides superior compounded return but somehow my guts go not feel right about it.

I thought if you take a loan out against your 401k, then you have to pay it back with interest, and there is no penalty. To me, that sounds pretty good, considering your 401k plan pockets the interest.

But I thought the interest will be taxed. And if you somehow change employer, you will have to pay off the loan in full or pay the penalty. Maybe I am wrong, I don't know.

If you’re in the situation where you need all your money before 59.5, you’re screwed anyways.

Not if I intend to move the money offshore before 59.5 for whatever reason though.

I believe you are correct about paying back the loan at termination of employment. Otherwise I believe it is considered a distribution and subject to the penalty and income tax.

The interest that you pay to your 401k is not tax deductible. However, when you withdraw that money it will be taxed. So by borrowing from yourself you convert after-tax income to future taxable income.

How would you be able to move the money offshore?

But I gotta say, if you tell people you believe in renting AND you are skeptical of 401k/IRA’s, then most people will definitely think you’re views are backwards!

Perhaps they are. ;)

It is difficult for me to come up with a logical argument, and I do not expect you to agree with me on this. Trust me, I am lucky to have a tax accountant that agrees with me on this.

How would you be able to move the money offshore?

With tax-deferred accounts, I could not. This is one reason why I am very skeptical.

So by borrowing from yourself you convert after-tax income to future taxable income.

Hence double taxed. ;)

Yes. Double taxed eventually.

You mentioned moving the money offshore before 59.5 -- How can you do this without a taxable withdrawal?

You mentioned moving the money offshore before 59.5 — How can you do this without a taxable withdrawal?

It is not possible. So I am not very comfortable about it.