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  1. I think what you are really looking for is an equivalent yield, which is an annualized interest rate. You would take the initial investment as the starting value, and the final value, including reinvestment of all dividends, and plug them into a yield function. You may be able to get one of the Excel YIELD functions to do it. I've done it in the past just for fun on the Dow Jones average (getting something like a 5.###### return over long periods, not including reinvestment of dividends) using PV or FV functions and iteratively plugging in interest rates until I got close to the right values. Obviously, this may not be extremely helpful for predicting future income (what is?), but it will let you compare results to other investments over the same time period, such as money market or bonds.
  2. I have a habit of doing my own calculations and haven't been able to figure out what is so superior about a Roth vs tax deferred option, but perhaps someone can tell me what I'm missing: 1. If you're in a particular tax bracket (say 28%), it doesn't matter whether you take the tax out up front or at the end, you wind up with the same amount of money. There'll be more money at the end with a Roth, but you'll proportionally pay the difference in taxes. Try this with the future value (FV) function in Excel if you want to check it out. 2. What does matter (besides employer matches, loans, early withdrawal and other features) is the difference between the tax bracket you're in when you contribute and the one you'll be in when you retire. If you think you'll be in a lower tax bracket when you retire, then the deferred tax plan is better. In practice, people early in their careers may do better to use a Roth (presumably they're earning less and in a lower bracket). People closer to retirement have to evaluate how much retirement income they're likely to have and make a choice based on that. You should be looking at your marginal tax rate, not your average one, as this is what will apply to any plan contributions. 3. The real wild card is guessing whether tax rates will go up or down over the long term. Note that the capital gains and qualified dividend taxes are very low right now, but they don't enter into this calculation. They are more likely to go up significantly than the earned income rates in my opinion, but who knows. I also ran a scenario of not investing in a qualified plan at all to see what effect compounding would have based on the 15% tax rate. I actually used 24.3%, because California's 9.3% tax is the same for earned income or capital gains. I'm not 100% confident of having set the model up right, but it did perform less well than the retirement plan options in my case. The reason is that the tax effectively reduces the compound interest rate as opposed to the amount of money. The results would be better for investments that didn't pay annual gains or dividends, but instead accrued a large capital gain that would be taken less frequently (real estate?). In any case, my bet is that the capital gains and qualified dividend taxes will go back to more historical levels in the future, so using a Roth or traditional plan is still a better bet than just investing the money. Anyway, I'd be interested in any comments.
  3. I this answer was posted in haste. Social Security/Medicare is only assessed against earned income, and that occurs when the money in a retirement account is earned -- it is not deferred as federal and state taxes are. Only straight income taxes are assessed when the money is withdrawn from the retirement account
  4. 1. Is the table used for Minimum Distribution Requirement calculations the same for 403(b), 457(b), and other plans? 2. Where is this table published other than buried in obscure locations on the IRS site? 3. If you have both a 403(b) and a 457(b), do the MDR withdrawals have to be proportional in each plan in any given year, or is it OK if the combined sum of the withdrawals meets the combined MDR? I.e., could you take all withdrawals from the 403 one year, and from the 457 the next (or other variations)? I believe this is true for IRAs, but haven't been able to find confirmation for these other plans. Thanks, Rich Kogut
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