Retirement

Help Support CattleToday:

D2Cat

Well-known member
Joined
Sep 12, 2012
Messages
2,020
Reaction score
1,776
Location
50 miles south of Kansas City
You are 100% correct.
On top of the penalty it is added to your yearly income before 59 1/2.
That can incur a whole nuther bunch of tax liabilities. After 591/2 it’s taxed as ordinary income.
On withdrawal at 72 it has to be 10% of the account.
The biggest mistake I see retirees make is forgetting there is no raises coming unless you give it to yourself. The SS raise isn’t going to keep up.

Here's a situation where one is required to take the 10% each year, however if the money is not needed it can be reinvested and available whenever it is needed (and only pay taxes then on the interest growth then).
 

Caustic Burno

Well-known member
Joined
Sep 26, 2004
Messages
27,328
Reaction score
2,293
Location
Big Thicket East Texas
Here's a situation where one is required to take the 10% each year, however if the money is not needed it can be reinvested and available whenever it is needed (and only pay taxes then on the interest growth then).
True but you’re still paying taxes and it goes against your annual income.
 

jschoolcraft86

Well-known member
Joined
Mar 30, 2017
Messages
201
Reaction score
92
Location
Seguin, Texas
I'm in a quandary about that myself. Do I leave the farm to my city step kids or sell it when I'm 70 and go sip umbrella drinks in the Caribbean the rest of my life. Selling it should be a no-brainer but then I won't have any cows!
For what it's worth, 6 years ago I was a city/suburb grandkid with zero experience farming or ranching. My grandfather passed away and no one else in the family had the willingness or ability to step up and take it all on. I jumped in feet first and it has completely changed my life and the plan I thought I had for the future (in a good way).
 

shaz

Well-known member
Joined
Jan 9, 2010
Messages
2,426
Reaction score
830
Location
Middle Tn
For what it's worth, 6 years ago I was a city/suburb grandkid with zero experience farming or ranching. My grandfather passed away and no one else in the family had the willingness or ability to step up and take it all on. I jumped in feet first and it has completely changed my life and the plan I thought I had for the future (in a good way).
Good to hear. So the rest of the family just stepped aside and you took over? Are you the sole owner now?
 

Caustic Burno

Well-known member
Joined
Sep 26, 2004
Messages
27,328
Reaction score
2,293
Location
Big Thicket East Texas
Pardon my ignorance but is 10% the minimum required distribution?
FYI - I have more ignorance where that came from!
Yes it’s the required minimum.
If I am not mistaken you can’t make IRA contributions after that birthday.
Government doesn’t want anymore nontaxable money.
Make more of your SS taxable you already paid taxes on.
 

504RP

Well-known member
Joined
Jun 15, 2020
Messages
850
Reaction score
583
I don't think so. Withdrawals from a regular 401k are taxed as ordinary income - same as wages. After you retire, you must start withdrawing it by age 70 1/2 years (recently changed to 72 years in the covid acts) and withdraw at least the minimum amount as established by the government rules. Minimum withdrawal rate is determined by life expectancy tables to try to get all the money withdrawn and taxed before you die. This is to ensure that the government gets to collect taxes on it instead it it growing for your heirs. If you mess up and don't take enough out during a year, there is a severe tax penalty for that year. Taking money out of a 401k early (before 59 1/2 years old) will result in a 10% penalty in addition to taxes except in a few situations (hardship withdrawal).
Ok i was thinking wrong about how taxes works on a 401k plan.

If I remember right you have two options as to how you want to pay the taxes on money going into a 401k.

You can pay the taxes on 401k deposits before it is deposited or when you start withdrawing it at retirement age.

If I am not mistaken the advantage to choosing to deposite it before taxes have been taken out. Your able to make money off the nontaxed money by investing it over the years . Money that you wouldn't have made had you not of had the nontaxed money to invest over 30 or 40 years you were in the 401k plan.

But you probably end up paying more taxes than you would have by just paying the taxes before the money was deposited ? Or another way of looking at it is you made more money by having that non taxed money to invest over the years too ?
 

shaz

Well-known member
Joined
Jan 9, 2010
Messages
2,426
Reaction score
830
Location
Middle Tn
Ok i was thinking wrong about how taxes works on a 401k plan.

If I remember right you have two options as to how you want to pay the taxes on money going into a 401k.

You can pay the taxes on 401k deposits before it is deposited or when you start withdrawing it at retirement age.

If I am not mistaken the advantage to choosing to deposite it before taxes have been taken out. Your able to make money off the nontaxed money by investing it over the years . Money that you wouldn't have made had you not of had the nontaxed money to invest over 30 or 40 years you were in the 401k plan.

But you probably end up paying more taxes than you would have by just paying the taxes before the money was deposited ? Or another way of looking at it is you made more money by having that non taxed money to invest over the years too ?
401K you're investing money that hasn't been taxed. You pay taxes as you withdraw presumably at a lower tax rate because you would be out of the workforce.

Roth IRA comes from money you paid taxes on already but no capital gains tax as you withdraw.

Somebody correct me of I'm wrong but that's how I understand it.
 

jschoolcraft86

Well-known member
Joined
Mar 30, 2017
Messages
201
Reaction score
92
Location
Seguin, Texas
Good to hear. So the rest of the family just stepped aside and you took over? Are you the sole owner now?

My Dad is the sole owner of the LLC which legally owns the ranch but he is hands off of the management. When all this first came about he was mildly interested and went to a pecan short course at Texas A&M with me but his interest quickly faded. He let me know it is coming to me after he passes and I was present for the signing of the Will so at some point I will be the sole owner.

I have a younger sister who is not agriculturally inclined and my two cousins were never in serious consideration (lack of interest and an unwillingness to relocate) so it was up to me or the ranch would be gone. Considering what I've seen from the other properties in the area that came up for sale it would be subdivided into as many little ranchette lots as whatever developer could make.
 

shaz

Well-known member
Joined
Jan 9, 2010
Messages
2,426
Reaction score
830
Location
Middle Tn
My Dad is the sole owner of the LLC which legally owns the ranch but he is hands off of the management. When all this first came about he was mildly interested and went to a pecan short course at Texas A&M with me but his interest quickly faded. He let me know it is coming to me after he passes and I was present for the signing of the Will so at some point I will be the sole owner.

I have a younger sister who is not agriculturally inclined and my two cousins were never in serious consideration (lack of interest and an unwillingness to relocate) so it was up to me or the ranch would be gone. Considering what I've seen from the other properties in the area that came up for sale it would be subdivided into as many little ranchette lots as whatever developer could make.
True, I sold my 32 acre "farm" in Huntsville Al because it was too small to make any money off of. It is 3 farms now!
 

jschoolcraft86

Well-known member
Joined
Mar 30, 2017
Messages
201
Reaction score
92
Location
Seguin, Texas
100 acres almost backing up to me came up for sale 3 years ago. It would have been a real game changer but there was no way I could swing it. The ranch was a money pit when I first took it over and it just now started breaking even (without factoring in wages for me or anything) but I gave it my best shot. That 100 acres is now 5 separate lots. I'm doing my best to make sure I'm in a position to strike next time I have an opportunity.
 

acefire

CT Supporter
CT Supporter
Joined
Jan 15, 2020
Messages
30
Reaction score
36
Location
Caldwell County,TX
S&P 500 has been doing it since its inception. People will debate modern returns and all this stuff but its 8-12% no matter how you cut it so that's where 10% comes from. That is why it is the standard for all other investments. Places like Goldman Sachs will admit they only avg 9ish%.

Here is a great chart on it that shows why you have to stay in through the ups and down. It also shows with a little time investment you could increase your returns buy not buying more in high times and then jumping in in lows. It's no different than what people do on here with cattle. View attachment 6079
I agree on the return of investment. I was referring to 10 % interest where there is no risk to your capital. 😊
Like CDs
 

Son of Butch

Well-known member
Joined
Aug 30, 2010
Messages
7,951
Reaction score
1,834
Location
Frost Bite Falls, Minnesota
Monday August 16 2021
S&P 500 49 record high closes year-to-date.

77 is the all time record for r.h. closes for the S&P set in 1995
1995 gain of 34.11% is also the record gain for any calendar year.

Biggest 1 day drop -20.47% Oct 19 1987 finished 1987 up 2.03% for the year
March 2020 dropped -20% in 16 days, and was a followed a few days later with a 14% drop in 14 days yet finished 2020 up 16.26%

Historic Bottom Line:
Every one of the 38 market decline "corrections" of 10% or more for the S&P 500 has always been followed by a new record high on average in 11 months, with the longest gap between highs being 5 years 7 months.
 

Brute 23

Brute 23
CT Supporter
Joined
Apr 19, 2007
Messages
10,628
Reaction score
2,600
Location
Gulf Coast of South Texas
I had my auto buy deal set to buy S&P at 2000 during the big covid fall. It only got to 2100 or 2200. I'm kicking myself for not just grabbing it. Long term it's where I would have preferred to be.
 

shaz

Well-known member
Joined
Jan 9, 2010
Messages
2,426
Reaction score
830
Location
Middle Tn
The real problem with betting against the market or waiting for new lows is that there really nowhere else to go with your money right now assuming you have all the cows and land you want.
 

Brute 23

Brute 23
CT Supporter
Joined
Apr 19, 2007
Messages
10,628
Reaction score
2,600
Location
Gulf Coast of South Texas
The real problem with betting against the market or waiting for new lows is that there really nowhere else to go with your money right now assuming you have all the cows and land you want.
I agree. That is why I do not like investing lump sums. I prefer just to buy in a little every month for years and years. I'm a dollar cost average person.
 

Latest posts

Top