Stock market on fire

[American123]

My 401k shows it has been increasing - good enough for me.

Yes… but the buying power of the dollar is also decreasing.

If your 401K goes up 10% but the purchasing power of the dollar drops 11%, your money is still worth 1% less than it was.

Safeway had eggs for about 36 cents a piece. Eggs used to be gotten at Safeway for 9 cents a piece…

 

[The Heretic]

Easy to make gains when you buy the dips.

I kind of did this; I kept an eye on the value of the market and my IRAs. When the market was down somewhat, I moved $ (sold shares) from the regular IRA to the Roth IRA (bought shares) - via a "backdoor rollover". Yes they were both down (to a point), but the intent was to move shares (kind of - not the same shares as the IRAs were invested in different funds) from an IRA I would need to pay taxes on to one where the growth/distributions were not taxable. That way when the market went back up (from the dip), the growth/appreciation in the Roth would not be taxed if/when I took a distribution.

I paid very little tax on the rollover the first time because that year I had very little taxable income and some deductions to cover the rollover, then I did it again and paid no taxes, and this year I did the same thing (plus took some actual cash out to pay some bills). When I do pay taxes on these rollovers it is just 10% - the lowest tax bracket - last year I only paid $200 in fed taxes and $0 in state taxes IIRC.

I will continue to do this as long as I can (at some point I need to take RMDs from the regular IRA, but those will be smaller because I moved $ out of the regular IRA - you don't need to take RMDs from a Roth IRA).

 

[sobo]

Smart move!

 

[American123]

I kind of did this; I kept an eye on the value of the market and my IRAs. When the market was down somewhat, I moved $ (sold shares) from the regular IRA to the Roth IRA (bought shares) - via a "backdoor rollover". Yes they were both down (to a point), but the intent was to move shares (kind of - not the same shares as the IRAs were invested in different funds) from an IRA I would need to pay taxes on to one where the growth/distributions were not taxable. That way when the market went back up (from the dip), the growth/appreciation in the Roth would not be taxed if/when I took a distribution.

I paid very little tax on the rollover the first time because that year I had very little taxable income and some deductions to cover the rollover, then I did it again and paid no taxes, and this year I did the same thing (plus took some actual cash out to pay some bills). When I do pay taxes on these rollovers it is just 10% - the lowest tax bracket - last year I only paid $200 in fed taxes and $0 in state taxes IIRC.

I will continue to do this as long as I can (at some point I need to take RMDs from the regular IRA, but those will be smaller because I moved $ out of the regular IRA - you don't need to take RMDs from a Roth IRA).

Yep, Roth can also be passed to kids and that income isn't taxed because tax was already paid.

Creating generational wealth isn't hard. 1.5 million dollars in a high dividend stock would yield about 180K a year in returns. Most people live on a lot less than 180K a year. The 'trick' is to build up the capital to begin with.

 

[JRuby]

Yes… but the buying power of the dollar is also decreasing.

If your 401K goes up 10% but the purchasing power of the dollar drops 11%, your money is still worth 1% less than it was.

Safeway had eggs for about 36 cents a piece. Eggs used to be gotten at Safeway for 9 cents a piece…

My first house in 1986 in Bremerton WA wad 57k. That ship has sailed. Everything costs more than it use to.

 

[American123]

My first house in 1986 in Bremerton WA wad 57k. That ship has sailed. Everything costs more than it use to.

True, but that difference is spread out over almost 50 years, and you've had 50 years of earning growth to mitigate that, it is manageable, theoretically.

In the last three years, prices on regular goods (staples) have gone up more than most people's pay, comparatively, so that's where the crunch is felt.

If eggs (just an example) are up 200% than a few years ago, and work pay grew about 6% in that same time frame. That's a big financial hurdle. It's the difference between being able to make it financially, and being in the red while literally buying the same things and living in the same manner.

The two groups that don't feel the crunch are the wealthy and the tax payer subsidized poor. The wealthy have enough money it's irrelevant. The poor live on welfare and regularly have their subsistence related bills covered by the tax layer anyway. It's the people in between that get crunched.

 

[sobo]

Everything costs more than it use to.

 

[The Heretic]

Yep, Roth can also be passed to kids and that income isn't taxed because tax was already paid.

Yes - the main purpose of my IRAs is to setup/maintain some retirement funding for my daughter. They are a two income family, but even between the two of them, their income was about half mine when I was working and they struggle to maintain their lifestyle and pay their bills, so they generally have very little saved for retirement. My daughter has MS, so she works at home, and at any time in the future she may not be able to work and may need home healthcare - in short she may have to retire early.

That said, in the 4 years I've been retired, my IRAs have not really earned much, and I barely pay my living expenses with SS benefits (not to mention unexpected expenses) - so I have to occasionally pull a little from the IRAs.

I have about as much equity in my property as I have in the IRAs, but I also need a place to live, so I have not sold the property - yet. Plan is to sell, buy land further out and build - but I've been holding off on that.

 

[JRuby]

True, but that difference is spread out over almost 50 years, and you've had 50 years of earning growth to mitigate that, it is manageable, theoretically.

In the last three years, prices on regular goods (staples) have gone up more than most people's pay, comparatively, so that's where the crunch is felt.

If eggs (just an example) are up 200% than a few years ago, and work pay grew about 6% in that same time frame. That's a big financial hurdle. It's the difference between being able to make it financially, and being in the red while literally buying the same things and living in the same manner.

The two groups that don't feel the crunch are the wealthy and the tax payer subsidized poor. The wealthy have enough money it's irrelevant. The poor live on welfare and regularly have their subsistence related bills covered by the tax layer anyway. It's the people in between that get crunched.

I understand and exactly as an individual what should i do to fix or overcome this issue. The simple fact is you can't. I choose not to put my energy into something I have no control over and put it into areas I can control or have impact. Prices will continue to rise as workers want more perks and higher incomes. This will not change.

 

[Certaindeaf]

Easy to make gains when you buy the dips..

It's also easy to win pistol competitions if you shoot the best score.
Genius!

 

[American123]

I understand and exactly as an individual what should i do to fix or overcome this issue. The simple fact is you can't. I choose not to put my energy into something I have no control over and put it into areas I can control or have impact. Prices will continue to rise as workers want more perks and higher incomes. This will not change.

Workers wanting more perks and higher incomes isn't the primary reason why prices have risen though.

 

[American123]

It's also easy to win pistol competitions if you shoot the best score.
Genius!

So you grab literally the leading sentence to a bigger point?

The point being, that making gains in the stock market can be relatively easily done due to the fluctuations in the market over the last several years, but the buying power of the dollar has dwindled significantly in a short time period due to decisions of bureaucrats.

 

[Certaindeaf]

So you grab literally the leading sentence to a bigger point?

The point being, that making gains in the stock market can be relatively easily done due to the fluctuations in the market over the last several years, but the buying power of the dollar has dwindled significantly in a short time period due to decisions of bureaucrats.

You're right. There's nothing easier than buying low and selling high.
If you have a crystal ball.

 

[JRuby]

So you grab literally the leading sentence to a bigger point?

The point being, that making gains in the stock market can be relatively easily done due to the fluctuations in the market over the last several years, but the buying power of the dollar has dwindled significantly in a short time period due to decisions of bureaucrats.

The dollar doesnt go as far as it used to - so yes there is inflation. Inflation can override the gains in the markets. The next thing your going to tell me is if we had a republican as the POTUS this would not have happened - that part I dont buy. I dont think either side has much control over the markets.

This is what I do know is that personally speaking my life is better and I am finacially sound this year than I was last year .

 

[USMC1911]

Meanwhile my investments are making gains

Gains? The vast majority of stocks and every major index fund haven't seen a gain in the last couple of years. More like they are making up for losses and are almost even again.

 

[JRuby]

Gains? The vast majority of stocks and every major index fund haven't seen a gain in the last couple of years. More like they are making up for losses and are almost even again.

I just closed out a family members estate earlier this year as a last sign of repsect. I did not inherit anything. In 12 years the stocks almost doubled with no funds being added into the account. I will take that kind of interest anyday. This was at UBS.

 

[Barefootdog]

The dollar doesnt go as far as it used to - so yes there is inflation. Inflation can override the gains in the markets. The next thing your going to tell me is if we had a republican as the POTUS this would not have happened - that part I dont buy. I dont think either side has much control over the markets.

This is what I do know is that personally speaking my life is better and I am finacially sound this year than I was last year .

Compounded inflation since 01/2021 totals just under 20%.
Todays' dollar is worth only 80% of the 01/2021 dollar.
Seems as though unless you made an after tax return of 20% you've lost money.
If you wanted a 5% annual net return your accounts would have to be 35% higher than they were on 01/2021. If your target was the historical 8% market return your current balances would have to be 44% higher than they were in 01/2021. Very happy for you if you accomplished those results.

Go back to post #1541 and re-read that article.

There is a clear choice in governments and how they go about staying in power........run the economy on borrowed/printed money/back room manipulations ........or........run the economy on wealth earned by investing in the factors of production and on shore production of goods and services.

One approach appropriates/dissipates what prior generations have created and mortgages your childrens' economic future while the other creates new wealth.

One approach turns the stock market and the economy into a ponzi scheme and the other creates economic stability, new wealth throughout the economy and finances the American Dream.

I do believe there are choices and adverse consequences for poor choices.

But what do I know?....other than my dog is infinitely more pleasant to be around than the ex-wife.....carry on...

 

[Mikej]

Gains? The vast majority of stocks and every major index fund haven't seen a gain in the last couple of years. More like they are making up for losses and are almost even again.

Well, our savings/portfolio is just a hair over 5% down from what it was three years ago. But the new normal of everything costing 20%-80% more than it did before the senile in chief took over is, STILL, disturbing.

 

[American123]

The dollar doesnt go as far as it used to - so yes there is inflation. Inflation can override the gains in the markets. The next thing your going to tell me is if we had a republican as the POTUS this would not have happened - that part I dont buy. I dont think either side has much control over the markets.

This is what I do know is that personally speaking my life is better and I am finacially sound this year than I was last year .

When you assume, you know what happens?

 

[American123]

You're right. There's nothing easier than buying low and selling high.
If you have a crystal ball.

I don't. I just saw that in 2020 things dipped. I wish I had more money then and knew more then and I would have made a lot more money.