Baby Boomers and their assets

[Coronita]

[quote=sdgrrl]W2 salaries are the worst way to accumulate wealth BTW…[/quote]

[quote]
Would you expand on that?

Sincerely,

[/quote]

Sure. If I was to do it over again, I would have invested much much earlier in things like real estate where it could produce income without actually slaving away at a job…

Also, if I were to do it again, I would probably have focused more time on running my own company longer instead of converting over to a w2 when I got older….

W2 is taxed to the max….

[joec]

Yeah, W2 earned income for very high income people is taxed massively so high income jobs get killed with taxes upwards of 60+% (near 40% federal, 13%+ state (CA special), 6.2% social security/medicaid)…

When you start making more money, you’ll see very little of it when you get raises/etc that it’s almost discouraging.

Now, add in another 10% for sales tax and pretty much 70% of your earned income is gone when you buy anything.

If you study the tax code, it’s totally against the average income worker.

My suggestion is to start a business. Not only can profits (unlike income) be taxed AFTER all your business expenses (valid of course), but you can also do things like setup defined benefit plans like those fancy pensions, put a ton more in retirement accounts, etc…

Of course, starting and running a company is very hard generally and not for everyone. If you look at the ultra wealthy, nearly everyone was a business entrepreneur though so it’s one of the few ways to get extreme wealth.

Biz people make magnitudes more than entertainers, sports athletes, etc…

[flyer]

As a BB, one thing I would encourage all younger people to do is enjoy life along the way, as you acquire wealth–rather than waiting until you retire. I know that’s easier said than done, but it’s always been our philosophy, and we have no regrets.

Many people run out of time (or health, or?) before they run out of money. Some might say that’s good, but, IMO, it’s sad–especially if you didn’t have a chance to live the life of your dreams.

[Jazzman]

^^^Yep, it doesn’t do to get overly obsessed with retirement planning. Making do with less is good for the soul. As long as you have a roof over your head and remain healthy, you can still live the dream.

[FlyerInHi]

ah, dreams… easier said than done.

I’v been fairly lucky compared to most people. So I’m thankful. But lots of people more talented than me don’t have what I have.

Sometimes dreams should stay dreams — something unattainable. It’s not really helpful to tell people to live their dreams. It’s oftentimes destructive.

Look at the people in LA trying to become actors, screenwriters, etc… most of them will end up, old, poor, and rejected, perhaps addicts who will die early in bad health. I know such a person.

It’s easy for the few who make it to say they lived the lives of their dreams.

People should understand their own limitations and live within their means. Or at least, through family or personal perseverance, to setup a nest egg to guarantee a baseline standard of living before, or while pursuing their dreams.

Telling people to live their dreams, no matter what, is a recipe for disappointment.

[UCGal]

[quote=sdgrrl]

Flash forward to my hubbie- he invest in his 401k to the max, but the numbers still don’t make us feel comfortable. My income goes to savings as well, but it will take a great great deal of work to have the retirement my GF and FIL have had.[/quote]

As someone who’s a boomer by the definition above, but not by other definitions… (I’m 52 – my parents were born AFTER the greatest generation, dad served in the Korean conflict, not WWII, etc… )
I can offer this hindsight on retirement savings.

Saving early and maximizing doesn’t make big impacts in the early years… but once you reach a certain point, the compounding really kicks into gear. It took a REALLY long time to save my first $100k in my 401k. It was quicker to double it to 200k. Then it doubled again… etc. At some point the gains are bigger than the contributions, and your money is making money for you, not just increasing by the savings.

All that is a way of saying, don’t give up on maxing out the retirement savings. You’ll get there. I’m so glad I didn’t give up… I’m hoping to retire no later than 55…

[sdgrrl]

[quote=UCGal][quote=sdgrrl]

Flash forward to my hubbie- he invest in his 401k to the max, but the numbers still don’t make us feel comfortable. My income goes to savings as well, but it will take a great great deal of work to have the retirement my GF and FIL have had.[/quote]

As someone who’s a boomer by the definition above, but not by other definitions… (I’m 52 – my parents were born AFTER the greatest generation, dad served in the Korean conflict, not WWII, etc… )
I can offer this hindsight on retirement savings.

Saving early and maximizing doesn’t make big impacts in the early years… but once you reach a certain point, the compounding really kicks into gear. It took a REALLY long time to save my first $100k in my 401k. It was quicker to double it to 200k. Then it doubled again… etc. At some point the gains are bigger than the contributions, and your money is making money for you, not just increasing by the savings.

All that is a way of saying, don’t give up on maxing out the retirement savings. You’ll get there. I’m so glad I didn’t give up… I’m hoping to retire no later than 55…[/quote]

Glad to see you are still on here. Thank you for the advice. My generation- myself personally can be impatient. Thanks for the words to relax, keep contributing and watch it grow.

[sdgrrl]

[quote=FlyerInHi]ah, dreams… easier said than done.

I’v been fairly lucky compared to most people. So I’m thankful. But lots of people more talented than me don’t have what I have.

Sometimes dreams should stay dreams — something unattainable. It’s not really helpful to tell people to live their dreams. It’s oftentimes destructive.

Look at the people in LA trying to become actors, screenwriters, etc… most of them will end up, old, poor, and rejected, perhaps addicts who will die early in bad health. I know such a person.

It’s easy for the few who make it to say they lived the lives of their dreams.

People should understand their own limitations and live within their means. Or at least, through family or personal perseverance, to setup a nest egg to guarantee a baseline standard of living before, or while pursuing their dreams.

Telling people to live their dreams, no matter what, is a recipe for disappointment.[/quote]

I think much of this depends on the person. Some people for good or bad- just are not phased by…what is the word? Upward mobility, security, leaving a legacy.

Some would rather be a waiter at 45 and acting the occasional extra role than be tied to a desk.

For the dreamers, those that think they will make it. Have the Oscar speech all ready- yes, at some point if it doesn’t happen it’s time to move on. Those are the people who crack, burn and fade.

I blame Disney.

[flyer]

I completely understand everyone’s concerns about the concept of living your dreams, but, I still think it is possible to have security, wealth AND to live your dreams.

We have, and I personally know many others who have in many different fields of endeavor–even some who have risen to great heights from ground zero (one of my wife’s best friends was a stay-at-home wife and mother, who became a world famous author after writing some books, then movies, about vampires a few years ago–and that’s how we started investing in films)–so I know it’s possible.

However, as was mentioned, embarking upon a quest to live your dreams should not be taken lightly. I agree that the realities of one’s abilities and individual circumstances should be evaluated, and realistic decisions should be made accordingly.

[EconProf]

Here is a shameless plug for owning real estate as a means of planning for retirement. Whether a SFR or two, condos, or, for ease of management, commercial properties, the multitude of advantages are just about unbeatable.
We all know about the tax advantages: depreciation allowances permit you to lower your tax bracket from your regular income. Inflation allows you to use the lower capital gains tax rate when you decide to sell, which you can conveniently time to happen in your retirement years.
Your equity buildup over the years of ownership can be profound–both from paying down the loan and the (presumed) appreciation in property values. Together they may enable you to sell a free and clear property upon retiring or during retirement.
Yes, there are hassles to being a landlord. In the early years there is little cash flow and it is sometimes negative. There is a learning curve to both maintenance headaches and minimizing tenant hassles. But as you learn more the cash flow gets better. Most of all, beneath the surface, forced saving is occurring on your personal balance sheet. You learn to be frugal because your job income and property income demand it. Meanwhile you are quietly getting rich.

[joec]

[quote=EconProf]Here is a shameless plug for owning real estate as a means of planning for retirement. Whether a SFR or two, condos, or, for ease of management, commercial properties, the multitude of advantages are just about unbeatable.
We all know about the tax advantages: depreciation allowances permit you to lower your tax bracket from your regular income. Inflation allows you to use the lower capital gains tax rate when you decide to sell, which you can conveniently time to happen in your retirement years.
Your equity buildup over the years of ownership can be profound–both from paying down the loan and the (presumed) appreciation in property values. Together they may enable you to sell a free and clear property upon retiring or during retirement.
Yes, there are hassles to being a landlord. In the early years there is little cash flow and it is sometimes negative. There is a learning curve to both maintenance headaches and minimizing tenant hassles. But as you learn more the cash flow gets better. Most of all, beneath the surface, forced saving is occurring on your personal balance sheet. You learn to be frugal because your job income and property income demand it. Meanwhile you are quietly getting rich.[/quote]

+1 agreed…

I think the income equation for a rental isn’t that good, but if you factor in the depreciation, that tends to make it better since any higher wage taxable income is at your marginal (highest) rate and anything to lower that helps a ton.

Not for everyone, but I think the tax benefits could be pretty huge…All expenses are also business expenses. I know a lot of family friends moving into all their rentals for 2 years and selling them for the tax free profit.

In our tax code, there’s very little “tax free” options.

[EconProf]

Right, Joec. I believe the (legal) tax dodge you describe involves buying a house needing serious rehab, living in it while fixing it up, then selling it for a big tax-free gain (since you lived in it for the necessary period of time). Rinse, repeat. This lets you avoid any tax on the “profit” ordinary house flippers have to pay.

[flyer]

[quote=EconProf]Here is a shameless plug for owning real estate as a means of planning for retirement. Whether a SFR or two, condos, or, for ease of management, commercial properties, the multitude of advantages are just about unbeatable.
We all know about the tax advantages: depreciation allowances permit you to lower your tax bracket from your regular income. Inflation allows you to use the lower capital gains tax rate when you decide to sell, which you can conveniently time to happen in your retirement years.
Your equity buildup over the years of ownership can be profound–both from paying down the loan and the (presumed) appreciation in property values. Together they may enable you to sell a free and clear property upon retiring or during retirement.
Yes, there are hassles to being a landlord. In the early years there is little cash flow and it is sometimes negative. There is a learning curve to both maintenance headaches and minimizing tenant hassles. But as you learn more the cash flow gets better. Most of all, beneath the surface, forced saving is occurring on your personal balance sheet. You learn to be frugal because your job income and property income demand it. Meanwhile you are quietly getting rich.[/quote]

+2 EP. Have been “quietly” doing this for years, as has most of our family. Of course, we’re all benefiting from this in our lifetimes, but we’re also glad to know our rentals, (unless we decide to sell them) are something we can leave our kids, which will enhance their lives as well.

[FlyerInHi]

I agree.

Real estate takes more work and more planning than just saving money and investing it in financial markets. Timing makes a big difference because real estate goes in cycles.

You need cash at the ready. During this last bottom, to get the good deals in the depressed markets (which btw recovered fastest) you needed cash.

In about a decade or two, there will be another good buying opportunity. Be prepared with good credit and cash for the best deals.

Learn about putting properties in trust, as well as ways to maximize the number of mortgages you can take out. But that’s not saving money, that’s getting into debt, hahaha. But leverage can maximize returns and, of course, loses too! (The self made multi-millionaires would not have made it without leverage. But then again if their loans were called at the inopportune time, they would have gone bankrupt)

[skerzz]

The majority of W-2 workers that own rental property in California generally will not benefit from depreciation deductions (losses on rental properties). I won’t go into all the specifics, but unless you are a full time real estate professional you won’t be able to offset ordinary income with passive rental losses. There is an exception to this rule based on income limitations — however, those that own rentals in SoCal or the Bay Area are likely making too much money to realize the benefit.

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