Interested in investing in retirement accounts but have some general concerns. Haven't found much online searching about this, so feeling like I'm missing something big. Hoping to get your thoughts.
- Everything I read says something along the lines of 'take any 30y period of the stock market and it will always go up ~7%', so basically ignore market crashes and ride it out. Great! I'm on board with that, is it really fair to say the trends of the past 100 years apply to the next 30? Population growth from 100 million to 300 million. Cities were born and expanded - many to near max capacity. Women entered the workforce. Personal transportation. Internet and Globalism. Tons of expansion and growth. What's next - I don't know, but probably there is LESS room for growth than the past 100 years, no? Then again, maybe we'll ignore climate change, we will continue consumption at current rates and the population will boom to 500 million in 30 years as predicted and growth will continue?
- Also, I am wondering about potential future tax brackets. Right now I am at or near the top tax bracket. Historically I would have paid much more in taxes. Average for top tax bracket of past 100 years is >60%. https://www.google.com/url?sa=i&rct...aw3y-ThfA21nmdnbbeybKzU7&ust=1574700684992508
I realize anything can happen, so tax diversification is important with mix of retirement accounts, but historically I should be jumping on these low rates and doing backdoor Roth as much as possible right now, right? If I take out $200k/year from retirement accounts in the future, historically I would pay more in taxes on that 200k than I do currently at a much higher income, so I would imagine that it would be safest to pay those taxes now.
- After maxing out Roth, what about traditional retirement accounts vs just a HYSB. So right now say I have 'X' money and since I have it now, I can use it now for 'X' purchasing power. Put that in a high yield savings bank at 1.5-2% interest which offsets inflation and next year I have the same X purchasing power. This is money I can take out anytime I want, is insured, and can't decrease in value. CDs would be similar, except I can access it "almost" anytime.
say instead I put that money in a traditional retirement account pre-tax at 'presumed' 7% growth-2% inflation so I get 5%, compounded = 2.65X purchasing power in 20 years, take that out at historical average taxation on 200k/yr of 60% = 1.06X purchasing power. 6% purchasing power increase on my money... that I can't access any time I want, that can decrease in value, market can crash and delay my retirement, etc. That sounds like a terrible deal.
EDIT: I guess I'm reading that I should expect 7% return, and therefore putting my money in retirement accounts is a no brainer and that if I don't - I'm an idiot. I am no to sure, and wondering if my thoughts are off base - are my numbers off, am I missing some piece of information, should I be wrong to worry about the past 100 years not being applicable to the next 30? Nobody I know talks about this stuff so thought this group might have some opinions. Thanks for your time
- Everything I read says something along the lines of 'take any 30y period of the stock market and it will always go up ~7%', so basically ignore market crashes and ride it out. Great! I'm on board with that, is it really fair to say the trends of the past 100 years apply to the next 30? Population growth from 100 million to 300 million. Cities were born and expanded - many to near max capacity. Women entered the workforce. Personal transportation. Internet and Globalism. Tons of expansion and growth. What's next - I don't know, but probably there is LESS room for growth than the past 100 years, no? Then again, maybe we'll ignore climate change, we will continue consumption at current rates and the population will boom to 500 million in 30 years as predicted and growth will continue?
- Also, I am wondering about potential future tax brackets. Right now I am at or near the top tax bracket. Historically I would have paid much more in taxes. Average for top tax bracket of past 100 years is >60%. https://www.google.com/url?sa=i&rct...aw3y-ThfA21nmdnbbeybKzU7&ust=1574700684992508
I realize anything can happen, so tax diversification is important with mix of retirement accounts, but historically I should be jumping on these low rates and doing backdoor Roth as much as possible right now, right? If I take out $200k/year from retirement accounts in the future, historically I would pay more in taxes on that 200k than I do currently at a much higher income, so I would imagine that it would be safest to pay those taxes now.
- After maxing out Roth, what about traditional retirement accounts vs just a HYSB. So right now say I have 'X' money and since I have it now, I can use it now for 'X' purchasing power. Put that in a high yield savings bank at 1.5-2% interest which offsets inflation and next year I have the same X purchasing power. This is money I can take out anytime I want, is insured, and can't decrease in value. CDs would be similar, except I can access it "almost" anytime.
say instead I put that money in a traditional retirement account pre-tax at 'presumed' 7% growth-2% inflation so I get 5%, compounded = 2.65X purchasing power in 20 years, take that out at historical average taxation on 200k/yr of 60% = 1.06X purchasing power. 6% purchasing power increase on my money... that I can't access any time I want, that can decrease in value, market can crash and delay my retirement, etc. That sounds like a terrible deal.
EDIT: I guess I'm reading that I should expect 7% return, and therefore putting my money in retirement accounts is a no brainer and that if I don't - I'm an idiot. I am no to sure, and wondering if my thoughts are off base - are my numbers off, am I missing some piece of information, should I be wrong to worry about the past 100 years not being applicable to the next 30? Nobody I know talks about this stuff so thought this group might have some opinions. Thanks for your time