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What business should I start with $20k-$30k?
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2020-01-24 at 6:19 PM UTC
Originally posted by Ajax Throw it in an index fund and forget about it. 30 years later, at a 10% average annual rate of return (average of the S&P 500), you’ll have close to $600,000. Tack on another decade and you’ll have $1.6 million. That’s if you never add another dime to it.
First of all good luck finding a fund that reliably averages 10% a year for 30 years. Not that they don’t exist, some pay even more than that, but that itself would be a gamble. More likely it’ll be closer to 8% or less.
Even at 10% a year the total at the end would be closer to 500k than 600.
The taxes they take out will be close to the maximum rate so you’ll maybe walk away with a little over 300k.
Not to mention with inflation at an average of 2-3% a year, 300k would probably have about half the purchasing power in 30 years that it does today -
2020-01-24 at 6:42 PM UTC
Originally posted by Fox First of all good luck finding a fund that reliably averages 10% a year for 30 years. Not that they don’t exist, some pay even more than that, but that itself would be a gamble. More likely it’ll be closer to 8% or less.
Even at 10% a year the total at the end would be closer to 500k than 600.
The taxes they take out will be close to the maximum rate so you’ll maybe walk away with a little over 300k.
Not to mention with inflation at an average of 2-3% a year, 300k would probably have about half the purchasing power in 30 years that it does today
I use more conservative figures for my personal projections. I usually use 6-7% to help account for inflation. 10% is not unheard of though.
As far as your 500k vs. 600k argument, you are wrong. I take it you compounded annually? That’s the only way you’d be closer to 500k. Open up your financial calculator of choice, start with 30,000 initial contribution, 10% interest rate or rate of return, 30 years, compound monthly. You get $595,121.98. Compound daily and it’s $602,318.57.
As for taxes, dollar cost average it into a Roth IRA over 5 years. He has the money now so it has already been taxed. He won’t owe on his contributions and his distributions will be tax-free when he is 59.5.
Are you against investing or are you just being pedantic?The following users say it would be alright if the author of this post didn't die in a fire! -
2020-01-24 at 6:49 PM UTCFranchises
You already have a proven business model with marketing. You can learn the in and outs. Take that experience and move forward. -
2020-01-24 at 7:13 PM UTC
Originally posted by Ajax I use more conservative figures for my personal projections. I usually use 6-7% to help account for inflation. 10% is not unheard of though.
As far as your 500k vs. 600k argument, you are wrong. I take it you compounded annually? That’s the only way you’d be closer to 500k. Open up your financial calculator of choice, start with 30,000 initial contribution, 10% interest rate or rate of return, 30 years, compound monthly. You get $595,121.98. Compound daily and it’s $602,318.57.
As for taxes, dollar cost average it into a Roth IRA over 5 years. He has the money now so it has already been taxed. He won’t owe on his contributions and his distributions will be tax-free when he is 59.5.
Are you against investing or are you just being pedantic?
You’re right I compounded annually just using the calculator in my phone. Wasn’t thinking, it’s just how I usually do it when I go to calculate my yearly salary increases at my job (3%).
But I’m not against investing. I have several hundred k tied up in different assets including a 401(a), REIT, money market account, plus my home’s equity. I’m just saying you’re gonna make this idiot think he can retire on 30k.
Also doesn’t a Roth IRA have a max annual contribution of like 5k or something. 10k if you’re married? I don’t remember because it’s been a while since I looked into it. Or are you saying to take the 30k he has now and invest it in a Roth IRA over the next 5 years? That would significantly reduce the amount he’d have after that 30 years.
Either way, I’m by no means a tax expert, I’m sure there’s all kinds of ways around shit for the super rich, but I’m pretty sure there is no way you can earn 570k in interest and not have the majority of that amount be taxed at some point. Maybe at a lower rate, but I don’t think it’s that easy to avoid the tax man -
2020-01-24 at 8:37 PM UTC
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2020-01-24 at 8:42 PM UTC
Originally posted by stl1 Live as much as you can off of the gift cards while saving your salary and collecting interest until you have enough saved to put in a higher yielding investment. All completely legit, just not immediate. Good things come to those who wait.
This is likely what I will do. I have other funds and investiments that I will just put more into. I will transfer some over in certain ways though. I know of a few ways but I will have to keep it around $5k to avoid issues...that leaves the other $15k. I might just move it over, over the couse of two years. But I might do it again... -
2020-01-24 at 8:49 PM UTCBuy crypto and hodl for the next price bubble
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2020-01-25 at 12:03 AM UTC
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2020-01-25 at 12:38 AM UTC
Originally posted by Fox You’re right I compounded annually just using the calculator in my phone. Wasn’t thinking, it’s just how I usually do it when I go to calculate my yearly salary increases at my job (3%).
But I’m not against investing. I have several hundred k tied up in different assets including a 401(a), REIT, money market account, plus my home’s equity. I’m just saying you’re gonna make this idiot think he can retire on 30k.
Also doesn’t a Roth IRA have a max annual contribution of like 5k or something. 10k if you’re married? I don’t remember because it’s been a while since I looked into it. Or are you saying to take the 30k he has now and invest it in a Roth IRA over the next 5 years? That would significantly reduce the amount he’d have after that 30 years.
Either way, I’m by no means a tax expert, I’m sure there’s all kinds of ways around shit for the super rich, but I’m pretty sure there is no way you can earn 570k in interest and not have the majority of that amount be taxed at some point. Maybe at a lower rate, but I don’t think it’s that easy to avoid the tax man
IRAs have contribution limits of $6,000 per year per individual at the moment. That’s why I said dollar cost average the $30k over 5 years.
You’re right that it would significantly reduce the ending number. It would still be better than putting it in a taxable account.
Here is the scenario. Let’s keep the 10% rate of return compounded daily to keep it apples to apples. If he invests $500 per month ($6,000 per year) for 5 years ($30,000 total), he will have $38,916.50 after the 5 years. Leave that invested for another 25 years and you have $473,932. Yeah, it’s less than my original $600,000 figure, but still not bad. Add another decade and you have $1,288,103.31. Compound interest is awesome.
As far as being a tax expert, I’m not one, but I have invested a significant amount of my time in researching this stuff. A Roth IRA is a great way to minimize taxes. You use after-tax dollars for your contributions and then the growth or withdrawals are never taxed. There are reasons why you might use a tax-deferred account like a traditional IRA or 401(k) such as having more dollars available to deploy pre-tax and then using a Roth conversion ladder later in life, but tax-free accounts like a Roth IRA will generally let you come out on top if you have a long investing time horizon. -
2020-01-25 at 12:48 AM UTCVery informative, I may just go and open a Roth IRA
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2020-01-25 at 1:07 AM UTCI already have both roth IRA and 401k already, and a bunch of $500 Visa/Mastercard gift cards, and my other gift cards, and cash accounts, and precious metals, and stocks, and crytpos. No real estate though...
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2020-01-25 at 1:08 AM UTCHow much do you contribute per year to your Roth IRA
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2020-01-25 at 1:16 AM UTC
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2020-01-26 at 1 PM UTC
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2020-01-27 at 1:53 AM UTC
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2020-01-27 at 5:20 AM UTC
