Smitty447,
Again, a few good points. However, look at posts 98 and 99 that take the more conservative approach, which I could argue for.
Also, I could argue to NEVER make an investment decision because of a tax benefit... make decisions to profit. And, even worse would be a retirement toy because of a tax break. Sure, I can understand it, but I'd bet not for most of us.
Had some friends that went thru some of the things that Ted mentioned in post 98..... real estate during the 2008 drop, lost of pensions that were significant in the 2000 to 2010 range. They were smart enough to be prepared.
It DOES happen, so I could argue to be conservative and prepared.
No leverage on boats is not a bad idea .....
"Also, I could argue to NEVER make an investment decision because of a tax benefit... make decisions to profit. And, even worse would be a retirement toy because of a tax break. Sure, I can understand it, but I'd bet not for most of us."
This is not at all what I am posting about, its not about a tax break at all....
When we were considering another boat at the start of this year we looked into the tax affects of drawing existing money out of accounts to pay for it.
While we did not decide to get the boat we did learn that there are sometimes very clear advantages to getting a boat loan especfially in cases where this occurs at or after retirement. In my posts I have mentioned a few things that would be needed to make the math comparison and some of them were: no prepayment penalty, length of loan required, tax consequences of drawing the funds, % interest on propective loan.
In an example case you have the funds to purchase a boat , in the year of the purchase your taxes are high and any additional marginal income will incurr higher taxes, you could 'smooth' out the taxes by pulling funds over 2-3 years and incurr much smaller tax.
So if you would need an additional $300K for a boat transaction and this year the taxes would amount to 30%.
But if that same $300K was to be pulled from the accounts over 2 or 3 years and incurr 15% tax the difference would be:
300K need at 30% = $428K draw
300K need at 15% = $352K draw
$76K difference
The amount of time you would require the loan, the rate on the loan and any earnings on the amount left in funds untill payment on the loan would also be needed. In our case we would have used the loan for 11 months but I could see cases where 1-2 years would be best for 'smoothing' taxes on draws.
There are a number of calculator/software packages that can model transactions similar to this in an entire portfolio. Some of the better ones are sold for reasonable prices but there are also a few that are free if anyone would ever want to compare things like 401K to Roth conversions, fund placements, fund draws etc.
One that is free is IORP retirement calculator (use extended version) which is a linear calculator that can compare most of these failry quickly after some diligent set up and comprehension time. After set up we have used this to get failry quick comparisons on various scenarios.
Another good free calculator/spreadsheet is the RPM retirement calculator - this one requires a longer set up time and time to understand the variables
but gives great details, is fantatstic for Roth conversion and lumpy draws, and is easily used on subsequent runs after setup.
"Again, a few good points. However, look at posts 98 and 99 that take the more conservative approach, which I could argue for."
Again its not about leverage - the money is already there , it exists in total.
"No leverage on boats is not a bad idea ..."
Its not about leverage , its about the best draw strategy to optimize taxes on whatever draw you want.