Best type of investment

[Twisted2v]

Hey all,
I was thinking of investing in a Roth IRA. The holdbacks are that I wouldn't be able to withdraw on it to purchase my first house without the early withdrawal penalty (have to own a Roth for 5 years), or withdraw for other reasons and get the penalty.

I could invest in stocks outside of an IRA, but I'd be taxed 10 or 15 % (0% taxed on the IRA) on the dividends and gains. But also deduct losses.

Third is a rental home. I'm not sure this is a great investment until once it's paid in full. Managing tenants is a pain.

Any other investment options or suggestions?

 

[HillbillyHotRod]

You are only taxed on a regular IRA when funds are withdrawn. I have all three and they all work. I have converted almost all my IRA to Roth because you are not taxed on any gains, but then I have had them for decades. The safest investments are those with lowest return. T bill, CDs, etc. Depends on your goals and risk tolerance. I lost 100k with the housing bust, Thank you Dodd/Frank, but it has come back. Hopefully some financial advisors will chime in with some suggestion.

 

[SID297]

Spread it out. I have a good portion of my retirement in land.

 

[VenomousDSG]

If you know what you're doing, real estate...

 

[Logan2003Cobra]

Open a brokerage account with Fidelity and buy Mutual Funds ($2,500 minimum purchase); most will return between 10-14% on average. You will be taxed on any gains at your standard tax rate but if you need money for a down payment you can sell whatever you need and usually get the money in less than a week.

 

[Ohio Snake]

Conversion Roth IRA’s have the five year wait period for distributions. Non conversion Roth IRA do not have the five year wait period. You can take your cost basis ( contributions) out by distribution without penalty or taxes at any time however, you must leave the gain portion ( if any) alone until age 59.5.

If your intention is to utilize the cash for a home purchase in a short period of time ( a couple of years) just open a brokerage account ( not a Roth or traditional) and invest conservatively.


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[bigmoose]

You can withdraw from a Roth for a first time home purchase without a penalty (but you still pay tax). I did this two years ago when my Roth was only 3 years old. The five year limit is if you want to withdraw up to 10k tax and penalty free for first time home buyers. Also, you can always withdraw your contributions tax and penalty free at anytime.

 

[Ohio Snake]

Open a brokerage account with Fidelity and buy Mutual Funds ($2,500 minimum purchase); most will return between 10-14% on average. You will be taxed on any gains at your standard tax rate but if you need money for a down payment you can sell whatever you need and usually get the money in less than a week.

Many mutual funds in brokerage accounts have minimums at or below $1000.

Mutual funds average returns are dependent upon investment objective, risk and time frame. Most funds DO NOT return 10%-14% AVERAGE returns over 3-year, 5-year or 10-years time frames. You must read the fund prospectus for this information. An average return of 10%-14% would most likely be short term (3- years) AND Aggressive to Moderate Aggressive objective for the fund.

Your actually taxed at ordinary income tax rate on assets held for less than 12 months (short term capital gains). Assets held for longer than 12 months are taxed at (long term capital gains) which is typically 15% or less.


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[black4vcobra]

Check out Vanguard, very easy to navigate. I have a Roth IRA there and am investing in a target date fund. Fees are very low, like .18% if i recall correctly.

 

[MG0h3]

Diversify. I don’t max my 401k anymore because I’m working on real estate stuff at the same time.

Just sold two rentals I had; one for 14yrs and the other only 5. One of them I actually sold for less than I paid during the boom in CA. Pocketed @85k in the last two months. Even better, over the last decade I’ve been paying about 7-8k a year LESS in Fed income tax than coworkers with the same pay/marital status.


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[Twisted2v]

Spread it out. I have a good portion of my retirement in land.

Doesn't the real estate taxes offset the gains?

 

[Twisted2v]

Diversify. I don’t max my 401k anymore because I’m working on real estate stuff at the same time.

Just sold two rentals I had; one for 14yrs and the other only 5. One of them I actually sold for less than I paid during the boom in CA. Pocketed @85k in the last two months. Even better, over the last decade I’ve been paying about 7-8k a year LESS in Fed income tax than coworkers with the same pay/marital status.

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I'm interested in how you reduced taxes. The mom/pop passive loss deduction?
You may have depreciation recapture tax-that would hurt. May think about a like kind exchange.

 

[Ohio Snake]

I'm interested in how you reduced taxes. The mom/pop passive loss deduction?
You may have depreciation recapture tax-that would hurt. May think about a like kind exchange.

1031 exchange?


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[Twisted2v]

Many mutual funds in brokerage accounts have minimums at or below $1000.

Mutual funds average returns are dependent upon investment objective, risk and time frame. Most funds DO NOT return 10%-14% AVERAGE returns over 3-year, 5-year or 10-years time frames. You must read the fund prospectus for this information. An average return of 10%-14% would most likely be short term (3- years) AND Aggressive to Moderate Aggressive objective for the fund.

Your actually taxed at ordinary income tax rate on assets held for less than 12 months (short term capital gains). Assets held for longer than 12 months are taxed at (long term capital gains) which is typically 15% or less.


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If you own your IRA stocks longer than a year and opt for a distribution, is that taxed at the qualified or ordinary rate?

 

[Ohio Snake]

If you own your IRA stocks longer than a year and opt for a distribution, is that taxed at the qualified or ordinary rate?

IRA distributions are always ordinary tax rate regardless of time held.


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[Twisted2v]

1031 exchange?


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Yes, it will delay the tax owed.
Depreciation x 25%. Even if you don't write off the depreciation, they'll still make you pay it.

 

[MG0h3]

I'm interested in how you reduced taxes. The mom/pop passive loss deduction?
You may have depreciation recapture tax-that would hurt. May think about a like kind exchange.

I may have to pay a little but not much. The threshold for capital gains on long term is pretty high at 40k.

 

[MG0h3]

Yes, it will delay the tax owed.
Depreciation x 25%. Even if you don't write off the depreciation, they'll still make you pay it.

True but look at it this way. I could keep rolling it into other investments and then when I sell said investment lets say my capital gains is in the 100s of thousands. Better to just pay it off while the recapture is in smaller pieces.

 

[big dad]

Children. Truly an investment in the future.

 

[HillbillyHotRod]

1031 exchange?


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Will b dong this in the near future. Exchanging for a condo we will eventually move into.