"100% of people who do not save money do not have any!"--Dave Ramsey

[JSH]

There are two basic difference between a traditional and Roth IRA.
1. With a traditional you pay no taxes on the money today and instead pay taxes when you take money out. With a Roth you pay taxes today and no taxes when you take the money out. Mathematically they are the same and you will pay the same taxes as long as your tax rate stays the same. The vast majority of people will see no benefit to a Roth IRA - on fact they will pay more in taxes as the vast majority of people are not in a higher tax bracket in retirement than when they are working.
2. With a Roth you can take out your contributions out (but not earnings) penalty free before the age of 59 1/2 as long as the account has been open for 5 years.


I churn cards and started a thread on it that got very little interest. Right now my wife and I are wrapping up a week long trip to Scotland paid for by churning two cards.

[Piotrsko]

Originally Posted by JSH

I churn cards and started a thread on it that got very little interest. Right now my wife and I are wrapping up a week long trip to Scotland paid for by churning two cards.

I churned houses to the same effect. Worst house in the better neighborhood.

Nice explanation of Roths and Iras. Thanks

Did they fix the ferry issues in Scotland?

[Isaac Zachary]

Since "ira" means "anger" in Spanish opening an IRA seems a bit intimidating.

But anywho, thanks for the explanation! So a traditional IRA makes sense since if a person is both working for a living and working to save up for retirement then they most likely are making more money than they will when retired, so getting a traditional IRA would make sense since it's a tax write off while a person is making more money in a higher tax bracket.

I guess people who make less than their deductions (standard and/or otherwise) so as to not owe any taxes would perhaps benefit from a ROTH IRA.

[Piotrsko]

Just so you know: being retired fo me the Roth has advantages with little to no tax liabilities that i can incur
Wife whines all the time that with income under the standard deduction i dont have enough income

[Xist]

Originally Posted by JSH

I churn cards and started a thread on it that got very little interest. Right now my wife and I are wrapping up a week long trip to Scotland paid for by churning two cards.

That doesn't sound familiar.

Originally Posted by Isaac Zachary

Since "ira" means "anger" in Spanish opening an IRA seems a bit intimidating.

But anywho, thanks for the explanation! So a traditional IRA makes sense since if a person is both working for a living and working to save up for retirement then they most likely are making more money than they will when retired, so getting a traditional IRA would make sense since it's a tax write off while a person is making more money in a higher tax bracket.

I guess people who make less than their deductions (standard and/or otherwise) so as to not owe any taxes would perhaps benefit from a ROTH IRA.

Argh?! Why do you keep talking about the Irish Republican Army?!

[Xist]

I just ran across this, which I have had open for months: SmartAsset: What Is an Average Roth Individual Retirement Account Return?

Roth Individual Retirement Accounts have historically delivered between 7% and 10% average annual returns.

As long as you don't leave it in one that only makes money for the employees, of course.

One day I hope to see a reasonable house for sale in Show Low for around $250,000, but there are two houses for sale for less than that, and they are 800 square feet.

They also don't necessarily have air conditioning, natural gas, or sewer connections.

There was a house or two around $300,000--around 1,000 square feet, without a garage.

However, once I went all of the way up to $350,000 there were two houses around 2,500 square feet with garages, but still not with all of the following: Air conditioning, natural gas, or sewer connections.

Dave says to not buy a house until you can afford 20% down and to pay it off in 15 years.

If there are ever decent family homes for $250,000 one would need $50,000 down, while I am 44, and my life savings is $9,000.

Then again, I own more cars than I should.

Bankrate says that monthly payments on a $200,000 loan would be $2,018, which sounds like most of my take-home pay, which is why I don't buy houses.

The 28% rule says you should keep your mortgage payment under 28% of your gross income (that's your income before taxes are taken out). For example, if you earn $7,000 per month before taxes, you could multiply $7,000 by . 28 to find that you should keep your mortgage payment under $1,960

PNC Bank: What Percentage of Your Gross Income Should Go Toward a Mortgage Payment?

[screams]

So, $7,000 monthly, and $84,000 annually--more than twice what I make--wouldn't be enough, you would need to earn $86,485.71 a year.

That seems like a good salary for a modest house.

However, if you take twice as long to pay, it is "only" $1,549 monthly, requiring an annual salary of $66,385.71.

I got the 71¢!

With current interest rates Dave's plan definitely has a Dave-kind of logic--you would pay a total of $363,240 over 15 years, but $557,640 over 30, but RedPoint, please remind the audience why you don't like the idea of paying down houses?

[freebeard]

One day I hope to see a reasonable house for sale in Show Low for around $250,000, but there are two houses for sale for less than that, and they are 800 square feet.

Buy a tear-down. If I put $250,00 in a house it should keep me warm, feed me and put spending money in my pocket.

[Isaac Zachary]

My thoughts on housing are these:

Don't pay more for buying (monthly) than you would on rent. If $2,000 per month is too much for renting, it's too much for buying. It doesn't matter if it's a 15 year loan or a 30 year loan.

Second, don't buy a house if you will probably move in a couple of years.

Don't forget taxes and HOA fees and such. I was tempted to buy a house in an area because it was dirt cheap until I found out that I'd have to set aside hundreds per month for taxes. In the end the house wasn't that much cheaper per month than in my area.

[freebeard]

My house cost $900 before upgrades. The 1952 Silver Streak I got in 1970 was $300. This one is bigger than I need and just fills up with stuff.

[Xist]

Don't buy a house with an HOA.

I never understand making payments on the house you own.

I have seen homes with inexpensive HOAs that cover water, sewage, etc., and that is fine--until they claim your house without warning.

HOAs don't necessarily have the manpower to snoop around looking for infractions, so they hire one company to ruin them all, and it uses satellite technology and drones to find violations in side and back yards, etc.

When I was looking at places in Mesa recently I found mobile homes that were surprisingly cheap, but they didn't come with the land, and HOA fees were crazy.

I wondered in what situations a tiny house would make sense and he just said not to buy mobile homes, they don't appreciate because there is limited demand for them.

https://www.youtube.com/watch?v=j1_RVcwREzc

He said he would rather see her renting while saving up for 20% down on a full-sized house to pay off in 15 years--or less--or save up to pay in cash.

I don't think he is in contact with reality.

I complained a few years ago about the difficulty of saving up for a down payment while homes continue to appreciate.

If you can save $10,000 annually and the inflation rate is 3% then it would take 5 years and 5 months to have the inflation-adjusted equivalent of $50,000 now.
With $8,000 in savings and 3% inflation it would take 7 years.

What if you save $50,000 down in 5-8 years, but don't have the $2,018 monthly?
What if you can only afford $1,549?

Mr. Bossy pants says to pay rent indefinitely until you can put down 41% and afford the payments to pay it off in 15 years?

If you can save $10,000 annually it would take just over 12 years, so it would still take you 27 years without further setbacks!

Ten thousand dollars would be 4% down, enough to qualify for many mortgages, you would just need mortgage insurance.

BankRate doesn't estimate that.

They show 6.91% for 15 and 30 years.

Zillow shows 5.708%, but I don't know if that is possible anymore.
I adjusted the other fees to total $1,549 for 30 years.

Zillow says that if you put 3.5% down you will have $197 in mortgage insurance and with the extra principal the payment is now up to $2,018.

Once you have 20% equity you can make the mortgage insurance go away, but the payments would still be $1,821.

So, a smaller down payment only works if you have a higher income.

If you have a higher income you won't have as much difficulty saving for a down payment.