SAD: I can't afford the new Bronco. :(

[moresmoke]

Just a curiosity here: Why NOT Roth?
I put in 10% weekly, employer matches 4% and a 2-5% annual bonus match, so potentially about 19% annual gross income going in and gaining interest for me.
Yes, a std. 401k is pre-tax, lowering your burden each paycheck, and giving you a buffer come filing time, and it has been nice to have and get a little refund every March.
But I started really studying this about 8 years ago.
All the std 401k does is save you some tax burden now, not later (deferred taxation).
Roth, you pay the taxes as it goes in and don't have to pay on what is in there when you retire.
A couple of points to consider:
-What is the tax rate going to be when you DO retire and take it out? Higher? Probably. Lower? probably not.
-Example: In a std. 401k-If you put 200k in there of your money in your lifetime and gain another 400k, you will owe taxes on 600k at whatever rate is present when you retire.
In a Roth, you pay the taxes on your 200k as it goes in. When you retire and see that 600k in there, it's yours. You don't get double-taxed.
I've moved all mine to Roth and will just pay taxes on the portion saved the first few years of std.
at roughly 18-30% annual return on top of my input and match, unless the economy tanks in a depression-era style or they pass laws to tax your retirement above what is already done, I should be sitting pretty well by 60 or so.
Just a thought.

EDIT:
Also, I absolutely agree with saving the extra. However, if one does a bit of homework, Etrade (or something similar) would be a better option if one is looking to dip into it as needed.
Putting it in a retirement plan comes with not only standard taxes but a 10% penalty tax above std tax rate if you take it out before 59.5 yrs old.
So you roughly would get half after taxes. And on top of that lovely situation, your dispersement gets added to your gross income for that year, so you more than likely would end up in a higher tax bracket, therefore paying more tax AGAIN come filing time.

FYI I do the Roth AND dabble with trading on my own as I can afford to drop some extra in there and play with. Advice is don't EVER invest money in stocks expecting an immediate return, don;t freak out if it drops (let it sit and buy more at a cheaper rate), and don't EVER invest money you're not ok with losing in a worst case scenario. Kinda like going to a Casino. Don't take your mortgage payment in there expecting to triple it.

It’s pretty much a wash between the two. The caveat is that you need to start with the same pre tax investment amount for both accounts. Your initial investment in a traditional IRA or 401k will be higher, therefore the balance is larger at a given point in the future. But, you pay more tax on that bigger value.

The ROTH account has a smaller starting balance, (initial -tax) but as said at the same future date it is all yours.

If you invest the same dollar amount in both accounts, the Roth wins hands down.

You didn’t think the government was going to give you something for nothing did you?

Sponsored

 

[moresmoke]

You can't take your toys or experiences with you, worst case is your troubles are over. The dead don't get hungry, or cold (just room temperature), or live in a shitty nursing home where you get bed sores. Prepare for the worst (living a long, long time without being able to work) and hope for the best. My best involves rum based cocktails, a pool to float around in and eventually a high end nursing home where they turn you over occasionally. If I go at 55, then my family gets my savings and they have more comfort in their old age. While I wish you luck with the whole "Don't need to save because I possibly maybe might die 25 years earlier then average." It does seems a tad... Shortsighted.

I‘ve watched too many people work 60+ hours a week and squirrel everything away just to drop dead within a year of retirement.

Now I am not advocating no savings or retirement planning, just that there has to be a balance between that and living life. I have some retirement savings, I cannot retire by 55, but wouldn’t want to anyway. Will I work the same job forever? No, at some point I will slow down and do different work. I happen to be in an area where there is plenty of work for an older guy that is willing to be part time/seasonal.

And I disagree that you don’t take your experiences with you. As far as material things, my wife will get to have one hell of an auction when I am gone. ?

To the OP, we all need to make the choices that work for us as individuals. Some people here can buy their top end Bronco and be fine. Me, I just canceled a day 2 reservation after figuring out that Ford wouldn’t let me have what I want for less than $50k. Bought a used Jeep with 15k mi on it for $20 less. Almost a twin to my current Jeep, just a different color and 85k less miles.

 

[Cheshire]

Just a curiosity here: Why NOT Roth?
I put in 10% weekly, employer matches 4% and a 2-5% annual bonus match, so potentially about 19% annual gross income going in and gaining interest for me.
Yes, a std. 401k is pre-tax, lowering your burden each paycheck, and giving you a buffer come filing time, and it has been nice to have and get a little refund every March.
But I started really studying this about 8 years ago.
All the std 401k does is save you some tax burden now, not later (deferred taxation).
Roth, you pay the taxes as it goes in and don't have to pay on what is in there when you retire.
A couple of points to consider:
-What is the tax rate going to be when you DO retire and take it out? Higher? Probably. Lower? probably not.
-Example: In a std. 401k-If you put 200k in there of your money in your lifetime and gain another 400k, you will owe taxes on 600k at whatever rate is present when you retire.
In a Roth, you pay the taxes on your 200k as it goes in. When you retire and see that 600k in there, it's yours. You don't get double-taxed.
I've moved all mine to Roth and will just pay taxes on the portion saved the first few years of std.
at roughly 18-30% annual return on top of my input and match, unless the economy tanks in a depression-era style or they pass laws to tax your retirement above what is already done, I should be sitting pretty well by 60 or so.
Just a thought.

EDIT:
Also, I absolutely agree with saving the extra. However, if one does a bit of homework, Etrade (or something similar) would be a better option if one is looking to dip into it as needed.
Putting it in a retirement plan comes with not only standard taxes but a 10% penalty tax above std tax rate if you take it out before 59.5 yrs old.
So you roughly would get half after taxes. And on top of that lovely situation, your dispersement gets added to your gross income for that year, so you more than likely would end up in a higher tax bracket, therefore paying more tax AGAIN come filing time.

FYI I do the Roth AND dabble with trading on my own as I can afford to drop some extra in there and play with. Advice is don't EVER invest money in stocks expecting an immediate return, don;t freak out if it drops (let it sit and buy more at a cheaper rate), and don't EVER invest money you're not ok with losing in a worst case scenario. Kinda like going to a Casino. Don't take your mortgage payment in there expecting to triple it.

Background: I used to manage equity mutual & pension funds. I was a quantitative analyst & manager and spent most time analyzing data, building & testing models, building optimal portfolios. I did all my own programming and database development to support this effort. I've moved on an now invest in real estate & private equity and my recent hobby has been retirement investing. I realized that all the books on the topic are useless, fluffy garbage and the advice of so called experts was abysmal, so I started writing a book on the subject. Six months in I came to Roth vs Traditional decision making. "Experts", tv and YouTube pundits all gave conflicting advice. I figured I do the math over a few weeks and get the right answer. That was a year ago and I'm finally wrapping up research on the Roth/Traditional question and I'm about ready to start writing about it. The subject turns out to be both complex and complicated. I'd need to know some things about your particular situation to run my model and give advice, but here some things to think about.

Higher future tax rates have an effect, but by far the #1 thing driving your future cumulative effective distribution tax rate is how much you save. If you don't save enough (most people) your future rate will be low regardless of tax policy. Say you're married in retirement, you'll have the equivalent of a 24,800 standard deduction. Did you know your deduction increases by $1300 per spouse once you turn 65? So, your deduction could be $27,400. You pay ZERO tax on this. Say you need your retirement income to last 30 years and you plan on distributing equal amount for those years. 30*27400 = $822,000. So, you'll be making $822,000 of distributions in the future that pay zero tax. So, a big chunk of your retirement distributions pay no tax. If married, you pay 10% on the first $19,750 of taxable income. 30*18750 = $592,500. 10% is $59,250. Combined you've distributed $1,414,500 and paid $59,250 tax. That's about 4.2% tax on your first $1.4 million of distributions. Every dollar you put in a Roth pays your marginal tax rate today (i.e. your highest marginal bracket). What's your marginal tax rate 15%, 22%, 24%, more?

Your double taxation in your example doesn't exist. The ONLY think that matters is your marginal tax rate on Roth conversions vs your total tax rate on distributions. If the two are equal, you are indifferent. Say your marginal rate is 24%, how much earned income do you need to make $200k of Roth contributions? .76x = 200. x=200/.76 = $263,158. You need to earn $268,158 to pay 24% tax and have $200,000 left to put in a Roth. The question is "are you better off investing $200,000 in a Roth or investing $263,158 in a Traditional account? You cannot compare a $200k Roth Contribution to a $200k Traditional contribution. The former costs you a lot more earned income. You could also compare a $200k Traditional contribution to a $152,000 (200*.76) Roth contribution. They are comparable because you have the same amount of dollars left in your pocket after either contribution. your example was 200 earns 400 (triple your $).
Let's assume our future total tax rate is also 24%. Income $200,000 - invest $200,000 in Traditional - grows to $600,000 - pay 24% tax - leaves $456,000 to spend. Alternative: earn $200,000 pay 24% tax now - leaves $152,000 - invest and triple your money - leaves $456,000, exactly the same as Traditional. There is nothing magic about paying tax now (Roth) vs paying tax later (Traditional). All that matters is your relative tax rates on contributions vs distributions.

Marital status is relatively important. If you are single today and think you'll be married in retirement, then that pushes you even more towards Traditional. When you do the math, given the average amount people save for retirement, most would be better off with Traditional only vs Roth only. It turns out that the best thing you can do is have a mix of Roth and Traditional which I call the Optimal mix. This optimal mix is different for every person given their salary, marital status and how much they plan to save. Some optimal mixes are 100% Traditional, but none are 100% Roth because of zero rate standard deduction buckets, etc.

I'd b happy to work with you in private chat to see if I could help with your particular situation. You said you put everything in a Roth. Not sure I understand that? I had/have quite a bit in Traditional accumulated when I had a big salary and high tax rate. I convert a chunk of this every year now while my income is minimal but I'm still several years away from minimum retirement age. Roth conversions are super powerful if done correctly over time. My marginal tax bracket was around 35% while working and all contributions were traditional. Now I'm converting at 5-10% the last few years. One huge advantage of Traditional is that if you have a period of low income where you're not really working, but you have not reached retirement years you can convert to Roth at low tax rates. With Roth, once you've paid the tax, there's no getting it back. Yes, I'm kind of obsessed with paying as little tax as possible which is what all red blooded Americans should do.

 

[Cheshire]

"If you invest the same dollar amount in both accounts, the Roth wins hands down."

That's equivalent to saying if you invest $150 you'll have more than if you invest $100.

 

[motman243]

Nowadays, $700 seems to be a bargain for new vehicles...unless you're wanting a Toyota Corolla...and those are starting to creep up in price! My build for the Badlands is coming out at $60k...which is about $1000 a month. That's hard to stomach given that it's a Ford! lol

$700 a month for a Corolla?

Lindsey Bluth, is that you?

 

[Frank N]

Why Roth when you can defer income....

 

[broadicustomworks]

Background: I used to manage equity mutual & pension funds. I was a quantitative analyst & manager and spent most time analyzing data, building & testing models, building optimal portfolios. I did all my own programming and database development to support this effort. I've moved on an now invest in real estate & private equity and my recent hobby has been retirement investing. I realized that all the books on the topic are useless, fluffy garbage and the advice of so called experts was abysmal, so I started writing a book on the subject. Six months in I came to Roth vs Traditional decision making. "Experts", tv and YouTube pundits all gave conflicting advice. I figured I do the math over a few weeks and get the right answer. That was a year ago and I'm finally wrapping up research on the Roth/Traditional question and I'm about ready to start writing about it. The subject turns out to be both complex and complicated. I'd need to know some things about your particular situation to run my model and give advice, but here some things to think about.

Higher future tax rates have an effect, but by far the #1 thing driving your future cumulative effective distribution tax rate is how much you save. If you don't save enough (most people) your future rate will be low regardless of tax policy. Say you're married in retirement, you'll have the equivalent of a 24,800 standard deduction. Did you know your deduction increases by $1300 per spouse once you turn 65? So, your deduction could be $27,400. You pay ZERO tax on this. Say you need your retirement income to last 30 years and you plan on distributing equal amount for those years. 30*27400 = $822,000. So, you'll be making $822,000 of distributions in the future that pay zero tax. So, a big chunk of your retirement distributions pay no tax. If married, you pay 10% on the first $19,750 of taxable income. 30*18750 = $592,500. 10% is $59,250. Combined you've distributed $1,414,500 and paid $59,250 tax. That's about 4.2% tax on your first $1.4 million of distributions. Every dollar you put in a Roth pays your marginal tax rate today (i.e. your highest marginal bracket). What's your marginal tax rate 15%, 22%, 24%, more?

Your double taxation in your example doesn't exist. The ONLY think that matters is your marginal tax rate on Roth conversions vs your total tax rate on distributions. If the two are equal, you are indifferent. Say your marginal rate is 24%, how much earned income do you need to make $200k of Roth contributions? .76x = 200. x=200/.76 = $263,158. You need to earn $268,158 to pay 24% tax and have $200,000 left to put in a Roth. The question is "are you better off investing $200,000 in a Roth or investing $263,158 in a Traditional account? You cannot compare a $200k Roth Contribution to a $200k Traditional contribution. The former costs you a lot more earned income. You could also compare a $200k Traditional contribution to a $152,000 (200*.76) Roth contribution. They are comparable because you have the same amount of dollars left in your pocket after either contribution. your example was 200 earns 400 (triple your $).
Let's assume our future total tax rate is also 24%. Income $200,000 - invest $200,000 in Traditional - grows to $600,000 - pay 24% tax - leaves $456,000 to spend. Alternative: earn $200,000 pay 24% tax now - leaves $152,000 - invest and triple your money - leaves $456,000, exactly the same as Traditional. There is nothing magic about paying tax now (Roth) vs paying tax later (Traditional). All that matters is your relative tax rates on contributions vs distributions.

Marital status is relatively important. If you are single today and think you'll be married in retirement, then that pushes you even more towards Traditional. When you do the math, given the average amount people save for retirement, most would be better off with Traditional only vs Roth only. It turns out that the best thing you can do is have a mix of Roth and Traditional which I call the Optimal mix. This optimal mix is different for every person given their salary, marital status and how much they plan to save. Some optimal mixes are 100% Traditional, but none are 100% Roth because of zero rate standard deduction buckets, etc.

I'd b happy to work with you in private chat to see if I could help with your particular situation. You said you put everything in a Roth. Not sure I understand that? I had/have quite a bit in Traditional accumulated when I had a big salary and high tax rate. I convert a chunk of this every year now while my income is minimal but I'm still several years away from minimum retirement age. Roth conversions are super powerful if done correctly over time. My marginal tax bracket was around 35% while working and all contributions were traditional. Now I'm converting at 5-10% the last few years. One huge advantage of Traditional is that if you have a period of low income where you're not really working, but you have not reached retirement years you can convert to Roth at low tax rates. With Roth, once you've paid the tax, there's no getting it back. Yes, I'm kind of obsessed with paying as little tax as possible which is what all red blooded Americans should do.

Well said, and a rarity for someone to back up claims to be an expert with actual expert advice that correlates.
Much respect.
I am a layman at investing, at best. I've done well with all of them except for Halliburton (sigh). Bought in at $49/share, it's currently at 14.76 as of right now. Just letting it sit there and do its thing for now.
I tend to pick higher yield stocks, albeit risky, but thus far have paid very good return percentages.
I left all existing 401k where it was in the traditional, began the new contributions at 8% Roth, 2% traditional, so it is a blend. Heavily on Roth going forward, but the existing amount left alone.
I did this about a year ago.
I plan on increasing the percentages as I can , target is another 1% annually as far as I can.
Plan is have minimum 1 mil in 401k free and clear after taxes figured, and we have my wife's 401k I picked the investments for in addition to that, also gaining roughly 26% return year after year.
So together, provided no market crash that doesn't recover for a decade, we should be fine. Not Robin Leach fine, but comfortable enough. She is in the same blend with 8% Roth, 2% traditional.

Edit:
And the "double tax" happened to me in 05. I lost my job, cleaned out the 401, paid the taxes, paid the 10% penalty. Come March I filed and my tax bracket was considerably higher due to the new AGI, I walked out owing over 6k federal and 2500 state extra. Bad year. Had I not needed the money to pay debt and survive on (and had just purchased land I paid off with the disbursement), I definitely would have rolled it into an IRA at the time.

 

[Moparguy]

I bought a Corvette last weekend, probably will pass on the Bronco.
2SS payment is high too, unless you have old F150 and old 2SS your payment won't be low.

 

[Hamhands]

Base 4 door bone stock is what I have had in mind from the beginning. Sales tax just went up in my state and added $450 to the total price, that combined with very low consumer confidence at the moment has dampened my spirits.

 

[motman243]

I bought a Corvette last weekend, probably will pass on the Bronco.
2SS payment is high too, unless you have old F150 and old 2SS your payment won't be low.

2012 F150 ecoboost, 2011 2SS.

With insurance I am paying $600 a month. Having a twin turbo truck and a 6.2L pony car is pretty sweet for the same price most people will be paying for their Bronco.

With that said, I am working on refinancing the Camaro. The F150 is no good for me for a future family since it's the Supercrew. I need a 4 door. So I have decided to get a Badlands Bronco Sport. I think it will be a good middle of the road choice. I just won't settle for basic Bronco with less options. I would rather have the luxuries of a new car and less off-road capability. Just trying to be somewhat realistic. Obviously I could make it work, but I am comfortable enough that I have some wiggle room.

Let's see your Corvette!

 

[Moparguy]

2012 F150 ecoboost, 2011 2SS.

With insurance I am paying $600 a month. Having a twin turbo truck and a 6.2L pony car is pretty sweet for the same price most people will be paying for their Bronco.

With that said, I am working on refinancing the Camaro. The F150 is no good for me for a future family since it's the Supercrew. I need a 4 door. So I have decided to get a Badlands Bronco Sport. I think it will be a good middle of the road choice. I just won't settle for basic Bronco with less options. I would rather have the luxuries of a new car and less off-road capability. Just trying to be somewhat realistic. Obviously I could make it work, but I am comfortable enough that I have some wiggle room.

Let's see your Corvette!

Do what you are comfortable with, don't push yourself too much. The Bronco sport is a decent option, If you are not in a hurry, wait, I sold my RT Charger back in Feb. and been itching ever since, the Bronco will take a long time to be delivered, I still didn't decide 100% to skip but mostly I will for now.
I used to have a 2011 2SS, was a beast, didn't like the ride back when I had it but was fast, Challengers are more comfortable.
This is my 2013 Grand Sport, all the bells and whistles.
Little less than $37k OTD

 

[igotnoclevername]

I realized that all the books on the topic are useless, fluffy garbage and the advice of so called experts was abysmal, so I started writing a book on the subject.

Dude, normally I'd make a joke here about how interesting this sounds and ask if you have a newsletter I could subscribe to. In this case though it does sound interesting and I would be interested in that book.

 

[bronc'o]

Had a Black Diamon reserved. Was thinking it would be around $600/month tops.

I realized the build and price calculator automatically factors in 10% downpayment and slowly realized this is not going to happen for me.

I am young and make pretty good money. I have two cars, an F150 ecoboost and a 2SS Camaro. I was going to sell both to pay for the Bronco if needed. But $700/month for a car is outrageous. Even the base model with any extras puts you over $600 a month with no down payment and excellent credit for a 60 or 72 month loan. Seeing as I don't even have a family yet, there is no way I would ever be able or willing to swing this.

Anyone else coming to this realization too? It kinda sucks. If 4x4 is your thing and that's what you want to spend all your money on, then this is probably a pretty decent option. But I am worried a lot of people might spread themselves a little thin with this one. I am going to keep my older cars and enjoy the best of both worlds. To all of you who are committed and/or have the luxury of affording such a beautiful piece of machinery, I wish you the best! Enjoy it for me.

If you have solid credit, go through a bank that has a lower apr. For example, Bank of America usually has a rate that's about half what Ford offers through their finance options. This will help lower your monthly payment.

Additionally, you can opt for a 72month, vs 60 month option.

Hope this helps.

 

[motman243]

If you have solid credit, go through a bank that has a lower apr. For example, Bank of America usually has a rate that's about half what Ford offers through their finance options. This will help lower your monthly payment. Hope this helps.

I'm pretty set through Navy Federal. Thanks though!!

 

[FLSTFI Dave]

I'm pretty set through Navy Federal. Thanks though!!

I saw this morning NFCU rate is 1.79%

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