Dow Jones Big Boom

[Rex7777 0]

So, if I have money in a 401K and retire, it's best to just roll that over into a Roth, bit by bit, and pay the marginal tax rate each year on the conversion and then I'm never again taxed on anything I withdraw from the Roth? What if I'm only 55? Is there a penalty for withdrawals prior to age 55?

 

Rex

[UncleSam 0]

So, if I have money in a 401K and retire, it's best to just roll that over into a Roth, bit by bit, and pay the marginal tax rate each year on the conversion and then I'm never again taxed on anything I withdraw from the Roth?  What if I'm only 55?  Is there a penalty for withdrawals prior to age 55? 

 

Rex

This is not the place you should get tax advise. You need to go to someone qualified to give you this type of advise.

 

Generally, you cannot avoid excise tax if you withdraw money before age 59 and 1/2. To me, I don't think it's practical to convert 401(k) to Roth IRA unless you are expecting to have much higher tax rate in the future. Why would you have much higher tax rate in the future? Most people have lower tax rate when they retire.

 

401(k) is much better retirement plan than IRA since the higher limits. You may want to make some after-tax contributions to your 401(k); it's not 401(k) since it's after-tax contribution but let's just say it's 401(k). I am too lazy to look up the code. I think 401(l) or something. There is some tax advantages for this after-tax contribution similar to ROTH IRA. You can withdraw prior to age 59 and 1/2 without paying penalty under certain conditions (buy a house or hardship withdrawal, etc). Your plan adminstrator can help you to answer all your questions.

[Rex7777 0]

One of the ways you can get the money out without penalty prior to 59 1/2 is by way of what is called "substantially equal periodic payments." That is, over your anticipated lifetime based on some table that the IRS has worked up which makes certain assumptions about inerest rates. The other is if the payments extend over a period of more than 10 years. I sort of figured I'd maybe do it that way. There's no sense dying with a bunch of money.

 

Rex

[Owen` 2]

Whoa, that hit a nerve.

 

 

Don't you have to pay regular income tax on the conversion? Where did "15%" come from? I don't know much about IRAs but, it's my understanding that the conversion has a cap if the income over $100,000.

 

 

This incremental Roth recharacterization technique is to be used post retirement. There is indeed a 100K income limit beyond which the government constrains recharacterizing, but I suspect most do not expect that level of taxable income post-retirement. If they do, then they may not see a lower marginal tax rate in retirement and a Roth conversion may not help them. (unless they think those rates are going even higher)

 

I doubt that is the norm. I would suspect the norm is that post retirement there is a sharp reduction in income. This technique is for those folks.

 

15% is the US federal marginal tax rate what I thought might be a typical retiree who is single in Pattaya (most expat retirees in Pattaya are probably single for US tax purposes) and who have income from 7K to 29ishK dollars a year after all (or standard) deductions. The idea in this maneuver is to pay 15% now rather than not convert, have tax rates go up and maybe pay 25% later. It is a maneuver to lock in a tax rate today. The next rate up is 25% for a single taxpayer for 30K - 70ishK and if someone is in that category and expects that 25% to become 35% in the future, then again, he can act to lock in the 25%.

 

No question if you're going to draw an Exxon magnitude retirement pension package, this is all silly. If you are single and have 100K+/yr COLAed coming in retirement pensions, you're in a different league.

 

So, if I have money in a 401K and retire, it's best to just roll that over into a Roth, bit by bit, and pay the marginal tax rate each year on the conversion and then I'm never again taxed on anything I withdraw from the Roth? What if I'm only 55? Is there a penalty for withdrawals prior to age 55?

 

You'll have to do your own research on this, but in general you have the right idea. You can move your 401K post retirement to a Traditional IRA and that's not a taxable event if done correctly. The age 55 question is a good one and I believe it works like this:

 

Recharacterizing seems not to have an age limit on it. There are a zillion Roth websites to look at for this (here's one: http://www.fool.com/news/commentary/2004/c...ry04120305.htm)

but I haven't seen an age limit on recharacterization. If someone finds such a thing it would be good to know it.

 

There is one significant caveat, however. If you do an incremental Roth Conversion you do incur some tax liability. You need to pay that tax liability with dollars from outside the IRA accounts. If you try to take some extra out of the traditional IRA to pay the taxes, then that tax-paying money is a violation of the age 59 1/2 limit. But I don't think the conversion money itself is (unless someone finds something and speaks up).

 

If someone knows this technique is wrong, it would be good to hear why. Quite a few folks on various early retirement forums have analyzed it to death and are planning on it. Morningstar's Vanguard Diehards . . . or http://early-retirement.org are good places to scope out.

 

Okay, I'm bored now. Scope the websites. Incremental Roth conversion strategies for retirees are pretty common.

[UncleSam 0]

One of the ways you can get the money out without penalty prior to 59 1/2 is by way of what is called "substantially equal periodic payments."  That is, over your anticipated lifetime based on some table that the IRS has worked up which makes certain assumptions about inerest rates. The other is if the payments extend over a period of more than 10 years.  I sort of figured I'd maybe do it that way.  There's no sense dying with a bunch of money.

 

Rex

I never heard about this option. I will look up this opion when I have time. I audit large retirement plans to make sure they have enough money to pay retirement income to the retirees over their life time just like you described above. To warn you, the interest rates IRS use are very low, which means smaller payment. Who does the conversion? I assume your 401(k) administrator does. Do you know the basis they use such as mortality tables (probability to die; RP-2000, GAM83, etc) and interest rate (PBGC or GATT, etc)?

[UncleSam 0]

Whoa, that hit a nerve.

 

 

 

 

 

This incremental Roth recharacterization technique is to be used post retirement.  There is indeed a 100K income limit beyond which the government constrains recharacterizing, but I suspect most do not expect that level of taxable income post-retirement.  If they do, then they may not see a lower marginal tax rate in retirement and a Roth conversion may not help them.  (unless they think those rates are going even higher)

 

I doubt that is the norm.  I would suspect the norm is that post retirement there is a sharp reduction in income.  This technique is for those folks.

 

15% is the US federal marginal tax rate what I thought might be a typical retiree who is single in Pattaya (most expat retirees in Pattaya are probably single for US tax purposes) and who have income from 7K to 29ishK dollars a year after all (or standard) deductions.  The idea in this maneuver is to pay 15% now rather than not convert, have tax rates go up and maybe pay 25% later.  It is a maneuver to lock in a tax rate today.  The next rate up is 25% for a single taxpayer for 30K - 70ishK and if someone is in that category and expects that 25% to become 35% in the future, then again, he can act to lock in the 25%.

 

No question if you're going to draw an Exxon magnitude retirement pension package, this is all silly.  If you are single and have 100K+/yr COLAed coming in retirement pensions, you're in a different league.

 

 

 

You'll have to do your own research on this, but in general you have the right idea.  You can move your 401K post retirement to a Traditional IRA and that's not a taxable event if done correctly.  The age 55 question is a good one and I believe it works like this:

 

Recharacterizing seems not to have an age limit on it.  There are a zillion Roth websites to look at for this (here's one: http://www.fool.com/news/commentary/2004/c...ry04120305.htm)

but I haven't seen an age limit on recharacterization. If someone finds such a thing it would be good to know it. 

 

There is one significant caveat, however.  If you do an incremental Roth Conversion you do incur some tax liability.  You need to pay that tax liability with dollars from outside the IRA accounts.  If you try to take some extra out of the traditional IRA to pay the taxes, then that tax-paying money is a violation of the age 59 1/2 limit.  But I don't think the conversion money itself is (unless someone finds something and speaks up).

 

If someone knows this technique is wrong, it would be good to hear why.  Quite a few folks on various early retirement forums have analyzed it to death and are planning on it.  Morningstar's Vanguard Diehards . . . or http://early-retirement.org are good places to scope out.

 

Okay, I'm bored now.  Scope the websites.  Incremental Roth conversion strategies for retirees are pretty common.

This is so stupid now. Like you said, he has to pay income tax on the conversion plus 10% penalty if he wants to pay out his 401(K) or Traditional IRA!!!

[Owen` 2]

This is so stupid now. Like you said, he has to pay income tax on the conversion plus 10% penalty if he wants to pay out his 401(K) or Traditional IRA!!!

 

Okay, let's take the optimal case rather than typical.

 

You're 56 years old and kicking back on the beach in Jomtien or Phuket for a few years. In your portfolio you have $100K in completely taxable accounts. You also have 800K in a retirement-oriented, tax-advantaged acct. The proceeds on that 800K acct generates zero taxable income because it is, after all, an IRA. You don't spend it. It just grows there.

 

In year 1, you need $35K for housing, barfines, wimmen, food, and trips to the US or wherever. You take that from the taxable account of 100K. That 100K is sitting in CDs and earns 2%. That's 2000 in taxable income. That's all the taxable income you have that year.

 

Lets say the Federal standard deduction that year is 6K for singles (it's not yet, but someday). You can therefore have another 4000 dollars of income before you owe a penny in taxes. So hey, you didn't bother working to earn that 4000 dollars. Instead, you did a Roth conversion of 4000 out of your traditional IRA into a Roth.

 

There is zero tax on this maneuver because you don't make enough money. If you didn't do it. . . if you sat there and did nothing, then when the 100K is gone from your taxable assets and you start drawing on your Traditional IRA account for spending, you will be taxed on the withdrawl, at whatever age.

 

If 4K is not worth bothering about, remember that this was all about 15% to begin with, but note that the first 4K of conversion in this situation will always have 0 tax on it until your 100K is gone. Actually, in year 2 or 3 as the 100K diminishes, you have less and less CD income so you can convert 5K or 6K tax free because you lived on assets, not income. After 3 years when you run out of money in the taxable account, you shielded 15K in money from the IRS, forever. No penalties. No finding money outside the acct to pay the taxes. 15K shielded forever. If you have deductions from dependents such that your deductions are higher than the standard . . . hmmm, I don't know but I thnk this works too and you could shield more than 5K/yr.

 

Another aspect to this is there are RMDs on Traditional IRAs. You have to start yanking whether you like it or not as you get much older. Roths have no RMD until after you die, and then it's your heirs' problem.

 

All you guys in Pattaya. This thread is what not being there does to you.

[Hub 203]

Owen:

 

Interesting information. Thanks.

 

A buddy of mine is a financial advisor with all the bells for amex and does my Roth, but we are too busy talking about other things than retirement when we get together, so it's nice to consider it once in awhile.

 

Hub

[UncleSam 0]

Okay, let's take the optimal case rather than typical.

 

You're 56 years old and kicking back on the beach in Jomtien or Phuket for a few years.  In your portfolio you have $100K in completely taxable accounts.  You also have 800K in a retirement-oriented, tax-advantaged acct.  The proceeds on that 800K acct generates zero taxable income because it is, after all, an IRA.  You don't spend it.  It just grows there. 

 

In year 1, you need $35K for housing, barfines, wimmen, food, and trips to the US or wherever.  You take that from the taxable account of 100K.  That 100K is sitting in CDs and earns 2%. That's 2000 in taxable income.  That's all the taxable income you have that year.

 

Lets say the Federal standard deduction that year is 6K for singles (it's not yet, but someday).  You can therefore have another  4000 dollars of income before you owe a penny in taxes.  So hey, you didn't bother working to earn that 4000 dollars.  Instead, you did a Roth conversion of 4000 out of your traditional IRA into a Roth. 

 

There is zero tax on this maneuver because you don't make enough money.  If you didn't do it. . .  if you sat there and did nothing, then when the 100K is gone from your taxable assets and you start drawing on your Traditional IRA account for spending, you will be taxed on the withdrawl, at whatever age.

 

If 4K is not worth bothering about, remember that this was all about 15% to begin with, but note that the first 4K of conversion in this situation will always have 0 tax on it until your 100K is gone.  Actually, in year 2 or 3 as the 100K diminishes, you have less and less CD income so you can convert 5K or 6K tax free because you lived on assets, not income.  After 3 years when you run out of money in the taxable account, you shielded 15K in money from the IRS, forever.  No penalties.  No finding money outside the acct to pay the taxes.  15K shielded forever.  If you have deductions from dependents such that your deductions are higher than the standard . . . hmmm, I don't know but I thnk this works too and you could shield more than 5K/yr.

 

Another aspect to this is there are RMDs on Traditional IRAs.  You have to start yanking whether you like it or not as you get much older.  Roths have no RMD until after you die, and then it's your heirs' problem.

 

All you guys in Pattaya.  This thread is what not being there does to you.

You are making an example who is age 56 and has no income??? Of course you don't pay tax on $4,000 conversion if your entire income $4,000 for the year. I hope you guys are making more than $4,000 a year. The conversion is treated as any other income, so if you are making $80,000 a year ($80,000 seems to be an average on this board based on the average income survey), you need to pay income tax on the $4,000 conversion at $84,000 income tax bracket. If your income is over $100,000 a year, you can't even convert any amount.

 

Yes, RMD is one of the good aspect of Roth IRA, but RMD starts at age 70 and 1/2. Are you planning to not start taking your money until over age 70 and 1/2? You got to be joking.

 

Good luck to anyone here listeing to Owen.

 

I only consult large pension plans so I don't know much about IRAs but I took the course in college. I believe I have a lot more related knowledge on this topic than you have. What is your background, Owen? My point that there is no right answer on personal finance since it's very different by individual, but you are acting like you know the answer.

[Eneukman 1]

I've invested a fair amount of money in the UK stock market. What concerns me more is not so much the fact that the market has risen, giving me a nice profit on some of my holdings, but rather that the market has, in my viwe, risen too quickly in too short a space of time.

 

Then, when the next stock market craxh comes, it will over-react in the opposite direction and fall by far more than necessary.

 

Alan

[Hub 203]

Unclesam:

 

I don't know Owen from a hole in the wall, but it seems you have a problem with him.

 

My take is that he was just throwing out a potential option, and not saying it was the end-all solution for everyone, for which at least I appreciate as positive input on the board.

 

Before I did anything major, I would consult my financial advisor. I did a cursory web search after Owens posting and saw mention of the benefit of rolling traditional IRAs into Roths also.

 

You are making an example who is age 56 and has no income??? Of course you don't pay tax on $4,000 conversion if your entire income $4,000 for the year. I hope you guys are making more than $4,000 a year.

 

Owen's scenario of a guy that retires a few years early and is living off stock investments for a few years, while waiting to 59.5, seems entirely feasible to me.

 

The conversion is treated as any other income, so if you are making $80,000 a year ($80,000 seems to be an average on this board based on the average income survey),

 

That survey was for everyone, not those retired, and I would bet my house that it does not come close to reflecting the average retirement income of a Pattaya resident. If anything, retirees prolly didn't even participate, as I read it as active workforce people.

 

Good luck to anyone here listeing to Owen.

 

I only consult large pension plans so I don't know much about IRAs but I took the course in college. I believe I have a lot more related knowledge on this topic than you have. What is your background, Owen?

 

It sounds like Owen has looked into this a little more than you and is just offering a tip potentially helpful for some. I don't think there is a need to start whipping out resumes.

 

I think you could pick faults with any investment tip, as one shoe doesn't fit all.

 

Hub

[Owen` 2]

Gentlemen, I got no desire to fight about this. Do whatever you want. No one rational was going to do anything without double checking the concept anyway.

 

Eneukman returns from Vietnam, I see. I kind of knew this thread was on its way to boring the UK guys. They probably have IRAs and Roths, but named something different with different rules.

 

Eneukman, how goes the retirement so far and are you on budget and has the FTSE mirrored the Dow to date?

[UncleSam 0]

Unclesam:

 

I don't know Owen from a hole in the wall, but it seems you have a problem with him.

 

My take is that he was just throwing out a potential option, and not saying it was the end-all solution for everyone, for which at least I appreciate as positive input on the board. 

 

Before I did anything major, I would consult my financial advisor.  I did a cursory web search after Owens posting and saw mention of the benefit of rolling traditional IRAs into Roths also.

 

You are making an example who is age 56 and has no income??? Of course you don't pay tax on $4,000 conversion if your entire income $4,000 for the year.  I hope you guys are making more than $4,000 a year. 

 

Owen's scenario of a guy that retires a few years early and is living off stock investments for a few years, while waiting to 59.5, seems entirely feasible to me.

 

The conversion is treated as any other income, so if you are making $80,000 a year ($80,000 seems to be an average on this board based on the average income survey),

 

That survey was for everyone, not those retired, and I would bet my house that it does not come close to reflecting the average retirement income of a Pattaya resident.  If anything, retirees prolly didn't even participate, as I read it as active workforce people.

 

Good luck to anyone here listeing to Owen.

 

I only consult large pension plans so I don't know much about IRAs but I took the course in college.  I believe I have a lot more related knowledge on this topic than you have.  What is your background, Owen? 

 

It sounds like Owen has looked into this a little more than you and is just offering a tip potentially helpful for some.  I don't think there is a need to start whipping out resumes.

 

I think you could pick faults with any investment tip, as one shoe doesn't fit all.

 

Hub

I agree that Owen does his home works. It's good for him but it's so obvious that he has no educational background on finance. I am only trying to warn people here that converting Traditional IRA to Roth IRA is not good for everyone. Since you have your financial advisor, you will find that out soon.

[torrenova 644]

I was in the market as a risk analyst for years and I've seen more come and go that most. That includes paper fortunes.

 

In any bull market, everyone is an expert. There is even a story about the original JP MOrgan selling out prior to the 1929 crash when he heard his shoeshine boy giving him share tips. Now people believe the shit they read on their computer.

 

Desperation drives the greedy, they come, they go, we remain.

[Hub 203]

I was in the market as a risk analyst for years and I've seen more come and go that most. That includes paper fortunes.

 

In any bull market, everyone is an expert. There is even a story about the original JP MOrgan selling out prior to the 1929 crash when he heard his shoeshine boy giving him share tips. Now people believe the shit they read on their computer.

 

Desperation drives the greedy, they come, they go, we remain.

Now that's a constructive post!

 

Hub

[Owen` 2]

I don't want to fight or do credentials. Anyone can list lots and lie.

 

I could claim an MBA from the Wharton School and be lying. I could claim an MBA from Northwestern and be lying. Or Stanford. Or Harvard. So I will list nothing.

 

I take no offense at US's posts. I don't care who says what about my text. I don't seek a following. I'd be a nutcase if I did -- and chose a Pattaya board as the place to start. No one should believe anything without checking things a lot of places. Hell, no one would. It's a posting board. Maybe it can give you ideas to investigate, but who believes any one post on here about anything to do with Pattaya, let alone investing? If someone says barfines are now a standard 75 baht, he won't be believed until we read about 20 posts saying that. (And then we'd check to see if it is April Fools).

 

The market goes in all 3 directions, up, down and sideways. Nobody knows which direction is coming next. People say the long term trend has always been up and always will be. Maybe. There is a growing subculture out there pointing loudly at the oil depletion of the planet and what it will mean (theoildrum.com, lifeaftertheoilcrash.net) and saying the long term reality of the market climbing is no longer reliable -- and maybe they are right. But . . . in the 1970s there was a Doomsday group who asserted the same thing -- that the long term uptrend of the market could not continue, and their mechanism was the inevitability of nuclear weapon use and the erasure of the US as a world power by 1985.

 

The long term uptrend may end. If it does and you're heavy into equities, you're going to be hurt. OTOH, if that trend ends a whole lot more in society will probably be destroyed beyond just your retirement.

[Gary 4,118]

I have posted this before but maybe it would be of interest here. I did very well in the stock market in 2005. In February of this year I got a strange feeling of gloom and doom so I completely sold out of the market. At 61 years old a bird in the hand looks better than two in the bush.

 

I have put about 70 percent of that money in ETF, closed end funds. My return averages over 9 percent a year and the dividends are paid monthly. The Beta is quite low (volatility) but even at that I have a stop loss set at 15% below purchase price. Since they are in my 401K I pay no taxes. I sleep well, don't worry about the stock market and look forward to getting my dividends direct deposited into my US bank account every month.

[Alfred 26]

Thought i would chip in with my 2 cents worth

 

Depending on your Capital and risk tolerance, the futures and Options markets can offer far better returns than the stock market, property or bonds , plus you can make good profits in both rising and falling markets.

 

These markets can be traded via managed funds or by using the services of a registered CTA, not a good idea to give them a go on your own unless you are highly experienced in the financial markets.

 

Good CTA,s can average 20 to 50% returns each year and will take a percentage of the profits, usually performance based, only drawback for your average guy is most CTA,s wont entertain you as a client without at least US$250,000 to invest.

 

Managed futures funds are becoming more popular and run along the same lines as hedge funds, returns are not usually as good as the CTA, but good ones can still average 15 to 30% a year, they also charge fees as well as taking performance based fee’s, they will however take smaller amounts usually a min of $5000 to invest.

 

IMO, having some funds invested in managed futures is a good way to diversify your savings with returns not linked to traditional investments or to relying on making money in rising markets only.

 

Cheers

 

Alf

Edited April 22, 2006 by Alfred

[Hub 203]

I have posted this before but maybe it would be of interest here. I did very well in the stock market in 2005. In February of this year I got a strange feeling of gloom and doom so I completely sold out of the market. At 61 years old a bird in the hand looks better than two in the bush.

 

I have put about 70 percent of that money in ETF, closed end funds. My return averages over 9 percent a year and the dividends are paid monthly. The Beta is quite low (volatility) but even at that I have a stop loss set at 15% below purchase price. Since they are in my 401K I pay no taxes. I sleep well, don't worry about the stock market and look forward to getting my dividends direct deposited into my US bank account every month.

Gary:

 

9% is a pretty nice return. So you just use the dividends for income and don't need to dip into the 401K? Sweet. How is the concrete addition to the house working out?

 

Personally, I am going to try and continue to max my sarsep and pick up the roth again, but really focus on real estate from now on. I read some shit on the internet that real estate is a good way to go (or wait, it might have been a shoeshine boy, I can't remember now).

 

Hub

[Hub 203]

Thought i would chip in with my 2 cents worth

 

Depending on your Capital and risk tolerance, the futures and Options markets can offer far better returns than the stock market, property or bonds , plus you can make good profits in both rising and falling markets.

 

These markets can be traded via managed funds or by using the services of a registered CTA, not a good idea to give them a go on your own unless you are highly experienced in the financial markets.

 

Good CTA,s can average 20 to 50% returns each year and will take a percentage of the profits, usually performance based, only drawback for your average guy is most CTA,s wont entertain you as a client without at least US$250,000 to invest.

 

Managed futures funds are becoming more popular and run along the same lines as hedge funds, returns are not usually as good as the CTA, but good ones can still average 15 to 30% a year, they also charge fees as well as taking performance based fee’s, they will however take smaller amounts usually a min of $5000 to invest.

 

IMO, having some funds invested in managed futures is a good way to diversify your savings with returns not linked to traditional investments or to relying on making money in rising markets only.

 

Cheers

 

Alf

Shit,

 

Now I have something else to look into.

 

Alfred,

 

are those managed futures funds typically available through a sarsep or ira accounts via places like amex or merryl, or do you have to go off the reservation to buy them?

 

Thanks,

 

Hub

[Alfred 26]

Hub and anyone else interested, here is a link to the type of fund im talking about, this one is aimed at Australian investors, but the same products are available in the US and UK.

 

http://www.maninvestments.com.au/index.cfm...FTOKEN=26707965

 

This link is to a smaller fund, again its Australian but im told this guy has returned nearly 60% the past year !!, again im sure there is similar in the US and UK.

 

http://www.camelotderivatives.com/

 

In the USA im told these guys are quite good and helpful.

 

http://www.attainaccess.com/

 

SHOULD ADD, I HAVE NO FINANCIAL OR ANY OTHER INTREST IN ANY OF THE ABOVE LINKS.

 

For CTA,s try phoning around futures brokers in the area you live, speak with an Accountant who is up to speed with alternative investments or contact 1 of the big exchanges like Chicago Mercantile Exchange or The Chicago Board of Trade in the US, for Aussies it would be The Sydney Futures Exchange, for the English, London International Financial Futures Exchange, who may point you in the right direction.

 

Cheers

 

Alf

Edited April 22, 2006 by Alfred

[Gary 4,118]

Hub, I'm certainly not wealthy by any means and since I can't afford to lose much, a fairly safe nearly ten percent return feels pretty good. I am hesitant to take anything other than the dividends out of my 401K. It's comforting having a decent nest egg.

 

The house upcountry is now westernized to suit me and there are no capital expenditures in the near future that I can see.

 

I'll always remain a cynic and my philosophy is not to spend more money in Thailand than I can afford to lose. If worse comes to worse, which i doubt, I can always load my truck and head back to my Jomtien condo. My financial lifestyle would not be affected. Life is good.

[cnkbud 0]

Hi Guys, this has certainly been an interesting subj, and while I'm far from being a financial expert by any means, I did post here that for all of you who have sizeable capital gains, from the little I know have read that they can be protected from a sudden downturn in the market by buying "puts"(the right for x period of time to sell a stock at a certain strike price), would like to know if anyone here has experience with this method of "insuring" their capitol gains. Have a good one and enjoy. You know the old sayng"sometimes you got to hold them and sometimes you got to fold them". Have a good and enjoy. Old Bud

[Owen` 2]

SHOULD ADD, I HAVE NO FINANCIAL OR ANY OTHER INTREST IN ANY OF THE ABOVE LINKS.

 

A helpful addition, Alf.

 

The whole Commodity Trading Advisor world has always had a taint to it in that the statistics of success, at least in the US, are so poor. My recall on this is vague but I seem to remember something like "80% of all commodities traders lose money" or something like that.

 

Now, I understand that 80% are not within the professionally advised category so it may not apply, but that is the source of the taint. I do think, and this can be important outside IRAs, that commodities trading still has favorable tax treatment on profits. My recall is 60% of commodities trading gains get long term capital gains tax treatment regardless of how long the position is held.

 

But there is a recent study out . . . and I mean really recent within the last year or three . . . that seems to conclude that a broadbased commodity asset allocation niche does do the magic deed of reduction of portfolio performance standard deviation without a reduction in return. Hard to argue with lower volatility and no decrease in return.

 

So a position in commodities futures is not quite the insanity it might have once been viewed to be and maybe the taint has diminished -- especially for conservative retiree investors.

 

Here is a link to a breakdown of the work. I am pretty sure this link is to a guy's derivative work and his emphasis is on Safe Withdrawl Rates for retirees. It's not the original work, but that shouldn't matter.

 

http://raddr-pages.com/research/CommodityFutures.htm

[kdc1899 1]

Hi Guys, this has certainly been an interesting subj, and while I'm far from being a financial expert by any means, I did post here that for all of you who have sizeable capital gains, from the little I know have read that they can be protected from a sudden downturn in the market by buying "puts"(the right for x period of time to sell a stock at a certain strike price), would like to know if anyone here has experience with this method of "insuring" their capitol gains. Have a good one and enjoy. You know the old sayng"sometimes you got to hold them and sometimes you got to fold them". Have a good and enjoy. Old Bud

I think you are talking bout a stop loss.

A put is an option where the bet is that an equity (etc) will go down in price. Options are a short term bet. Part of their value is time value. The more time you hold an option (B4 it expires worthless) the less that option is worth intinsically.