lol do you hear yourself? You literally just said Roth lovers are bad at taxes and then espouse converting funds to Roth to avoid higher taxes! Wow. You also conveniently skipped a critical part that affects returns… the fee drag of traditional 401k. Most charge around 1% annual fee and that’s not including the expense ratios of the funds (likely target dated which is another 70bps to 200bps) as well as the one time fees to withdraw (few $100, EACH TIME). A Roth IRA at a deep discount brokerage avoids ALL OF THAT!

And it wasn’t clear to me how you’d not need ANY income when you retire early to perform the conversions, but I’m going to assume you’d take some distributions from Trad 401k which is subject to the ADDITIONAL 10% penalty on top of ordinary income tax! lol wow

It’s clear you don’t understand basic math and multiplication. For a given tax rate and rate of return, it doesn’t matter if you take the tax out first or later, which is what you are doing when you employ your simple “avoid RMDs by retiring early and doing Roth conversion.”

Situation 1: Roth contribution, 10% tax, 5% RoR

5,000 x .9=4,500 ➡️ 4,500 at 5% CAGR= $7,330.02 ending balance

Situation 2: Trad account and “just retire early and convert”, 10% tax, 5% RoR

5,000 at 5% CAGR= $8,144.47 ➡️ “convert to avoid RMD” ➡️ $8,144.47 x .9=$7,330.02 net

Last time I was in first grade $7,330.02 = $7,330.02

So it doesn’t matter whether Trad or Roth what does matter is THE TAX RATE (assumption is same rate of return because the assets will be exactly the same in both accounts.

It’s is impossible to know what tax rates will be decades later and incredibly difficult to know EXACTLY the income needed in the future. This is the exact reason a blend of Roth/Trad/Brokerage buckets is the superior strategy because it gives you the most flexibility and hedges against the uncertainty of the future!

Define uncivil because I’d argue giving WRONG advice that could lead to real harm if someone listened is the epitome of uncivil. You tried to hide by being verbose and pedantic so the average person would assume you know what you are talking about.

If you ACTUALLY READ AND COMPREHENDED my comment you’d understand my point; I literally quoted you where you state taxes can be avoided ENTIRELY via Trad contributions. This is categorically false and akin to recommending tax evasion which is INCREDIBLY harmful which is being uncivil on steroids.

The simple fact is the tax gets paid at some point. To tell someone that they can avoid the tax system all together is probably the most uncivil thing one could say because it’s harmful and inaccurate.

I was pin pointing that EAXCT FALSEHOOD which is the premise of your assertion that Trad account beat Roth by such a wide margin. That assertion alone would indicate one should focus on the Trad account and forego or minimize using a Roth. Why you are talking about RMDs as it relates to Roth and is clearly misdirection because you are advocating for not using a Roth anyway because “Trad can absolutely murder Roth.” So why bring it up when the whole point is you are saying Trad accounts to avoid taxes entirely.

You actually make my point about Roth not requiring RMDs and that’s why all three types of accounts should be in play.

And your last point about avoiding RMDs by taking distributions really highlights how clueless you are.

Yes and the FATAL flaw they also make is underestimating life expectancy. That matters because RMD enter the picture in mid 70s. So I’d argue is less uncertain and more certain that as you get older, your tax rate will go up! How one might ask? Well we are talking about FIRE, which espouses maximizing contributions as quickly and as earlier as possible, so starting Trad balances will more definitely be high enough that when you are required to take 1/25th, 1/20th, 1/15th and so on of your balance you will be receiving lots of taxable income. A 5M portfolio at 74 will be around 188,000 in taxable income!

You don’t want to run into this situation, so limiting your Trad balance and funding a Roth and brokerage with some of the total balance really is the best way.

Did you factor in RMDs though? Since this is FIRE, it’s more likely than not the balance will be substantially more than the typical 1-2M in normal wait until 65 to retire strategy. So you’ll be forced into paying more in taxes and/or much higher brackets. And what if you have state income tax too. Gets worse if you are married and your spouse passes away, as you’ll lose the MFJ benefits right when RMD denominators gets big enough to take 1/20th, 1/15th, 1/10th etc of your Trad balance. Unless everyone here in FIRE thinks they aren’t making it past 75?

Be very careful… a lot of people get into trouble listening to pretend experts and Dunning-Kruger Redditors.

The fact that this person said, TWICE, you can avoid paying any taxes with a Trad account clearly doesn’t understand or know that you ALWAYS PAY some tax. They mention a bunch of credits but the bottom line is all distributions from a Trad account counts as taxable income, and RMDs will force you to exceed any credits they are talking about given a high enough balance. The likely counter is the balance won’t be high enough, which I’d counter by saying it will be given this is FIRE so by default one needs a higher balance to reach life expectancy because withdrawal years exceed typical contribution years… that’s LITERALLY the point of retiring early!

This right here is the danger of Reddit… buried in the long post is the phrase “it’s often possible… to completely doge the tax system entirely on…Trad contribution basis” and “why pay tax at all on your retirement deposits…when you… never pay tax on those contributions…”

Commenter goes on to say things like tax credit and such, while may all be true, the fundamental principle is that at some point TAXES will be paid. So already I doubt everything this person said because of the claim that one can “doge the tax system.” Huge red flag.

I stopped reading because it’s already suspect everything this commenter said based on that. But the core first principle is the certainty that there WILL BE TAX PAID coupled with the UNCERTAINTY OF at what future rate. This is why it is correct that the best strategy is having a mix of trad, Roth, and brokerage. But this clown of a commenter saying Trad blows Roth out of the water because you can “doge the tax system” neglects Required Minimum Distribution. All the commenter’s verbose and ostentatious pedantics are neglecting the fact that at 73 (and for some at 75) you will be paying income tax. If your balance in a Trad account is high enough, it’s possible you’ll be paying at higher tax rates then vs now. For example, an employed 73 year old current taxpayer with taxable income of 100,000 would pay 22% on that, or 22,000 (remember I’m using taxable income to account for below the line maneuvers). If this same person was living FIRE and employing whatever the hell the commenter was talking about, if they had a Trad balance of 5M, their minimum distribution would be, based on the table and first year denominator of 26.5, 5,000,000/26.5=188,679.245 in TAXABLE income. That would put them in 24% bracket, even if you assume the greatest possible below the line deduction. Hopefully people can see this gets worse the higher your starting balance is, and since this is FIRE it’s not unreasonable to assume balance targets could be up to 10M, as well as you get older. By the time you are 80, the denominator is 20.2 so if you had a balance of 5,000,000/20.2=247,524.752.

So it’s a long way of saying this commenter HAS NO CLUE what they are talking about!

The only muppet is you it seems. Since you seem to be so knowledgeable because you listen to “advanced instructors,” please tell me what is the force, in Newtons, at which the human brain will herniate through the foramen magnum? And then tell me for a 25 yo male, 5’11 and 200 lbs, riding at 80mph, how much reaction time is needed to maneuver to avoid collision? Then tell me how many newtons of force would result in an impact at 80mph vs 50mph, since ya know you muppet it doesn’t matter!

And I’m confident you won’t use ChatGPT, because you are so knowledgeable.

Btw, don’t they still teach in BASIC DRIVING COURSES, let alone motorcycle courses, why you should follow more car lengths at greater speeds? It’s PRECISELY because speed DOES matter and it’s because of reaction speed, not relative speed between two moving objects. I think I owe Kermit an apology because you are dumber than a muppet.

The bottom line comes down to where you anticipate where your tax bracket will be 1) at the peak of your highest salary and 2) in retirement.

Then the second factor is what total dollar amount are you able and willing to contribute each year. So the biggest factor in determining that is A BUDGET!!! You need to know how much you need to live first which is very hard to do sometimes.

Then it is just different buckets of money at that point and there is a sequence once you know how much “water” you are going to use.

1. First decision is easy; Trad 401k up to

the employer max because that’s extra money you get. So 0.06 x 110,000=6,600

1. Second decision is predicated on understanding that in terms of total return, it doesn’t matter if you get taxed before or after the money goes in (so Roth vs tax-deferred) when your tax bracket is the same. So that’s why the general advice is Roth when you are young and starting out, because it assumes that when you get to your 40-50s your salary will be at its peak (and that’s when you focus on traditional/tax deferred).

So after getting your full employer match ($6,600), you want to max out your Roth IRA contributions. Assuming you file as single, the max amount is $7,500. While you could also contribute to your Roth 401k first, generally 401k plans have higher fees and limited investment options (I don’t even think they offer ETFs) which also usually have higher expense ratios. I’m assuming your Roth IRA is at a deep discount broker like Fidelity or Schwab (please dear God don’t be on Robinhood!)

3) So after the first two steps, you are at $14,100 out of your stated $110,000 salary which is a savings rate of ~13% (14.1/110=0.128). Bravo because most young people unfortunately do not achieve this. Now at this point this is where you have to crunch some numbers in order to figure out what to do next. Because your two options are to contribute to the respective buckets of your 401k, either Traditional or Roth. The limit for ALL contributions to 401k for someone filing as single is $24,500 and you already contributed $6,600 so that leaves $17,900. Unsure why you mentioned backdoor Roth when 1) you already are under the income threshold and have a Roth IRA and 2) your 401k already offers a Roth bucket. Backdoors are for people who can’t contribute to a Roth IRA because they make too much. Maybe you were referring to a Roth conversion but that’s more complicated and depends on the rules of your 401k or if you have another left over one from a different company. It’s a moot point because you have a Roth 401k bucket currently and $17,900 left to contribute.

Based on the above, most likely since you are starting your career and at a lower tax bracket, the common advice would be to contribute the rest of your $17,900 to the Roth bucket. But remember you’ll have to pay tax on that first and it’s locked away in your retirement account instead of available for you in your bank account. I AM NOT A TAX PROFESSIONAL so seek advice from a professional, but I believe you’ll be in the 22% bracket after you contribute the $6,600 to your 401k account (110-6.6=103.4 which is under the 105,701 limit of 24% bracket). So if you contribute all $17,900 to your Roth 401k you’ll still have to pay around ~4k in income tax (17.9 x .22=3.938). So now hopefully you see how number crunching is needed because you can divide up the remaining $17,900 between the Roth and traditional 401k buckets depending on how much tax you are willing to pay. I have no idea what other tax credits/deductions you’ll take but standard deduction for single filers is $16,100 so it might not matter if you put the whole $17,900 into the Roth 401k and make life easy!

Hope that helped even though it was a lot and remember this is not financial advice and you should talk to a financial professional 😆

If such was the case how can you say “25 being… assumes no growth…”

I guess you don’t understand the calculation then, bc “25 being…” which I’m guess you are using as a surrogate for what this really is, retirement funding calculation, already accounts for growth. So why are you saying that capital utilization method assumes no growth after 25 years, when literally the calculation uses real rates of return.

This is even confirmed that the 4% rule, which is how the 25 years came became a factor, states it has only been tested up to 30 years, so OP already used the wrong period and is short by 5 years (ie their calculated balance of $875k is likely too low if 25 years was used and the 4% rule assumes 30 years).

No it doesn’t because the same model that uses 25 years as N periods also accounts for the fact that each year withdrawal’s increase. Did you forget that OP stated 4% withdrawal, not a fixed dollar amount? If the withdrawal AMOUNT always constant, ie the 35k never increases, then you are correct. But OP said they would use the 4% rule, which literally states the rule allows for 30 years of runway

We also don’t know what OP used as their rate of return; we can infer OP used a rate of return from SP500’s history, but did OP use nominal or real (what inflation rate was used then) averages? Did OP use the long term average or a 10 year average? A lot of assumptions we don’t know so you can’t say you know.

Furthermore, just like you assumed I didn’t account for grow, you assumed the growth is a given when there could be negative growth, and if that occurs in the beginning it would potentiate, aka sequence risk.

If you don’t believe me look up “Capital Utilization Retirement Funding” calculation which is the most common method used and where the 25 years come from. In that calculation, growth is factored in as well as inflation so the final number, ie total dollar amount needed to retire, already accounts for the growth and still depletes the balance in 25 years.

What you are referencing is a different method, called the “Capital Preservation Retirement Funding” calculation where the goal is to have money leftover after the period. It is less commonly used and even harder to predict because the assumptions compound if incorrect.

This is why it is so important to UNDERSTAND HOW AND WHY things work. You mentioned a lot of financial literacy jargon but it is VERY obvious you don’t understand the how’s and why’s.

First, let’s start with why your total amount, withdrawn at 4%, is equal to your current income needs multiplied by 25.

25 is the NUMBER OF YEARS YOU CAN WITHDRAW FROM BEFORE THE BALANCE HITS ZERO. The reason it is the common factor used in determining net worth needed to retire is precisely because the equation starts from the assumption that retirement happens at 65 years old, take average life expectancy which is low 80s, and add a few more years as a buffer. So 65 years of age with 25 years of income assumes by age 90 you’ll most likely not be alive anymore.

So based on your target of 31, you need to change the multiple of 25 to match your life expectancy. Unless you think you aren’t going to live past 56 years old?

Second, the 4% rule is meaningless here because it matches your yearly spend, so you will run out of money in 25 years if you stick to it. This is both because 4% is a percentage of the balance as well as you didn’t factor in inflation so your 35k income needs are not reflective of future dollars. You need to adjust using Present Value calculator what that need is in the YEAR you actually retire. And you also need to adjust your rate of return to internal rate of return to account for inflation.

TL;DR your calculations are WAY off because you don’t understand or ignored the assumptions that are made BEFORE using the equations. And don’t even touch the fact that it is very very likely, given your youth, your life expectancy will be much higher than current expectations given technology advances. In short, it is highly probable you will run out of money if you retire at 875k if you are using capital utilization approach which is implied by the details you gave in figuring out your number.

If you really want to know how much you need, there is a 3 step process to accurately calculate IF certain assumptions are true, namely inflation and rate of return.

“The fact that Treasury yields are rising is actually a signal that people’s inflation estimates for the future are also rising…”

At best that remains to be seen as inflation is down and GDP estimates are growing (Atlanta has 3rd quarter at 5.8%). Long term treasury yields go up for two reasons, the inflation you mentioned or the necessary term premium to hit the investor’s internal rate of return.

Yields go up in both bad times (inflation) and good times (growth) because investors sell the bonds. It’s hard to justify a 4% return when SP500 is YTD around 12% depending on an investor’s risk adjusted return requirements.

You also did not factor in geopolitical reasons. Japan is one of the top 3 or 4 holders of US treasuries and they are selling theirs to buy their own currency.

Do you actually read past the first sentence of anything you comment on?? Serious question.

>”Canada seems to be doing fine with less animosity from its citizens…”

The housing affordability crisis in the US is bad — but America's neighbors to the north may have it worse.

Not sure if you understand how “proving” a theory works but usually if someone is saying a theory or place is doing better than another… they actually have to be better

🤷‍♂️

Maybe you are not sure because you don’t know how to critically think and use facts instead of feelings and bias.

::Savings rate and opportunity cost have entered the chat::

You would think you’d know there are other options to spending, and also know based on the fact that your stated “paycheck to paycheck” individual is more likely to do several other things with that extra money based on experience. What’s more likely for someone who experienced an emergency and had to borrow to pay for it with high interest debt as a result of being paycheck to paycheck: buy more stuff at Walmart or pay down their debt?

What’s also more likely, if someone who lives paycheck to paycheck gets a boost in income AFTER experiencing paycheck to paycheck hardships: spend more right away or save it for an emergency. Hmmm if only there was a common idiom that expressed this… rainy day.

You don’t need to be an economics guru to know paying down debt and saving for an emergency are the more likely options.

Don’t believe common sense and lived experience? … look at the research then

”Growing emergency savings is positively correlated with higher incomes”

You seem to be the only one… Pew research is well respected and found most people see WAPO as liberal. So does AllSides. Where AI came from is beyond me I never once mentioned AI so that’s just a lazy response to get karma points it seems, not even mentioned or relevant 🤡

https://preview.redd.it/fa7fxtkndo4h1.jpeg?width=750&format=pjpg&auto=webp&s=fb5a3e8d235a610b85ceb5ab9a6717a88c91667a

https://www.allsides.com/news-source/washington-post-media-bias

Where are you getting your Sharpe numbers? What’s the source of your data?

It’s called rational relativity. So many people think with their hearts not their minds. So they look at a scenario as isolated and compare it to a single outcome. For example, your comment clearly indicates you are looking at it from an emotional standpoint: dislike of a President and the outcome you want as a result, i.e. weak dollar as punishment? for the emotional instability.

But the rational world looks at every scenario and compares them to each other to find the best option. They don’t care about an individual or a particular scenario bc the focus is on the best outcome and the best choice to achieve it. So the dollar is still strong bc what other option is there that’s BETTER. You clearly think the orange man is “emotionally unstable” and a terrible choice bc you compare it to one scenario: a President who isn’t. But the real world knows that the other options (Russia/China, Europe, etc.) are less “emotionally stable” than the USD. Europe has no consistency and does not have the pricing power even if you could are more “emotionally stable.”

So it comes down to relative risk. Whatever your politics, the USD may have went from a 10 to a 5 on a “emotionally stable” scale but the rest of the world is still 2-3. That’s why it’s all about relative risk not how an individual feels about another individual.

Y’all crazy loons thinking politics affects markets as much as you attribute them too…

2008 GFC 2016 Crazy Orange Man 2020 World Shutdown 2021 Dementia President 2022 9% inflation 2025 Crazy Man Returns

📈📈📈📈 up and to the right long term trend continues

Peak to troughs shallower, recessions shorter, 94 years since the last Depression. Last recession recovery <6 months compared to GFC.

I mean so many doomsayers you’d think y’all be tried of predicting the last 10 out of 2 recessions already 🤷‍♂️

Lol that’s funny admitting you don’t know anything but dying on the hill that your conclusion is still true bc of math while admitting you can’t do math correctly….you really are dumb it’s hilarious

You should learn to read before telling other people they googled something without actually knowing what they talked about.

What was the literal next sentence after “all businesses…” that OP said? Because you need help reading it was literally

”What businesses exactly?”

Go back to 1st grade and learn how reading comprehension works. Stop inferring things when they were never explicitly stated. Again you are trying to force a viewpoint because you can’t admit you jumped the gun and sounded like an idiot.

As I said before, my comment was only directed to OP’s question

”What businesses exactly?”

Never mind how you are completely clueless that in the next 10 years BTC adoption is going to accelerate as the major payment companies and wealth managers are getting the rails up. But you can’t even read and use basic logic so that’s too much for you. The only thing that’s jack shit is your biased and bruised online ego 🤷‍♂️

Can you provide the URL for the source of this chart?

As a reminder bc clearly you forgot… this was your comment. One person selling one coin isn’t the 5% of supply you idiotically tried to use as proof. Second, someone bought that coin at that price so it didn’t cause the price to fall. If there were no buyers willing to accept that price then LOWERING the price to find a buyer would contribute to the fall. But that’s a function of the order book not the actual sale.

But even then that’s not possible in an exchange WITH MANY PARTICIPANTS. In other words, you are applying an outcome that’s consistent with a two person market to a market with many many people which you can’t because it’s not the same thing!

You don’t seem to grasp the concept of emergent properties either; it’s the collective group, not an individual action, that caused the move which is what the original person said that you foolishly responded to thinking you know what you are talking about.

Again, SIT DOWN 🪑

Yes you highlighted it… the MOST RECENT PRICE. You saying OP selling caused it to drop would be true if THAT WAS THE LAST SALE EVER OF BTC. But it isn’t the most recent price you moron because there were OTHER TRANSACTIONS AFTER OP SOLD!

“The market price of a good or service is subject to reevaluations due to fluctuations or shocks in the demand and supply factors.”

JP Morgan to accept Bitcoin and Ethereum as loan collateral

Delaware Life Insurance Company has become the first U.S. insurer to offer a fixed index annuity tied to a BlackRock index blending 74% S&P 500, 25% Bitcoin

Why Newmarket Capital CEO Andrew Hohns is fusing loans with bitcoin

Your question is reasonable and I believe others are wrong to say it doesn’t matter as a paint with broad stroke approach. Any decision, since ultimately that’s really why anyone asks a question about taking action, comes down to what factors influence making that decision. Those factors are part fixed (ie time constraints, access, etc) and variable/fluid/dynamic. Also some factors are weighted more so than others depending on the person. For those saying not to worry about it, the long term conviction of long term hold is the prevailing fixed factor that holds a large weight in decision making process. The investment analogy is like NVDA making up about 5% of every SP500 index vehicle.

For others, even if the strategy of long term doesn’t change, discovering, processing and analyzing information may be a factor that holds some weight and therefore shouldn’t be dismissed.

In order to answer the question of “can some explain the dip,” the first step is to identify if the answer is even knowable. Given how many elements influence price and the general public does not have access to ALL relevant information, it really isn’t worth the time and energy to investigate because by definition you can’t know. The best thing you can do is find information that is knowable and true and estimate how much that information impacts the “answer.”

Using previous history as some but not all indicators of price movement, trends and patterns can be identified that at least show some correlation (cannot say for certain there’s CAUSATION) with price movement.

Two or three historical trends/patterns that have relevance is the 4-year cycle, global liquidity (M2 supply) and risk on appetite based on business cycle. At least two of those three show a similar trend/pattern as the past when BTC price was bearish: 4-year cycle and global liquidity (relatively low). The fact of the matter is until there’s a consistent, repeatable trend of BTC having a negative correlation with global liquidity, it will move lower when there is no liquidity to absorb. Coupled with the 4-year cycle, this could explain at least some of the factors depressing the price. While currently risk on appears to be present, there are alternatives that are diminishing the use of available liquidity (ie AI, nuclear, robotics, etc) that were not a persistent theme the last time risk on was present.

I do think though that global liquidity is starting to turn up (M2 supply increasing as governments issue more bonds and stimulate their economies (look at Germany and Japan!)) and if AI productivity can actually be realized you will see risk on appetite be maintained. However, the US political atmosphere is a headwind to risk on if anything significant and catastrophic occurs, like a war.

Whats incredibly difficult to ascertain is the effect of institutions that now have access and have demonstrated desire to be BTC buyers (Blackrock, Bitmine, JPM, GS, MS, and looks like even Vanguard!). It also may be that BTC is maturing as an asset class so the volatility, ie the 60-80% price swings either way, will decrease which shows signs of a maturing asset.