Q: Traditional, Roth, or Taxable? A: Yes!

What's your take on autumn leaves??Are you more "bag 'em up and get 'em out of here" or do you like to use them as mulch? My approach is the latter: those dead?leaves came from the earth (since that's where plants get nutrients), so returning them to the earth makes sense to me. Plus they literally turn into dirt if you just pile them up over the winter, so why not? But different strokes for different folks, etc.

Today we'll look at the advantages of saving for retirement in different account types, a post-consumer recycling platform that aims to keep more consumer goods out of landfills, some guitar tone myth busting, and a fun Thanksgiving flowchart.

I hope you enjoy your weekend!

Money - Why would you use different kinds of?accounts to save for retirement?

We continue this month's look?at retirement accounts by asking a totally?valid question: why would you want to use different account types when you save for retirement? Why not just max out that IRA?or 401(k) and call it good enough?

First things first: if your current retirement contributions are truly all that you can manage, then don't sweat it. I would make the argument that pretty much anyone could save?a little?more (seriously, even like $10 more each year), but don't feel bad if you're already doing your best. Right??Your best is all that you can do.

BUT if you have some extra cash and?want to get serious about saving for retirement (you can call it financial independence, if that feels better), there are good reasons for saving into different types of accounts – including plain old taxable brokerage accounts.

• Traditional?–?The "normal" retirement accounts – the ones where contributions reduce current year taxes – are called Traditional accounts. The upside is that you save on taxes when you contribute, and everyone loves to save on taxes. The downside is that you need to pay taxes on all distributions in retirement. And, because the IRS wants their slice, you are required to begin taking distributions (called?Required Minimum Distributions?or RMDs) above a certain age. If you're lucky enough to have saved & invested a lot of money in Traditional accounts, you can see how compounding growth?might create a snowballing tax burden once RMDs kick in?– exactly when it's hardest to handle a lot of extra taxes.
• Roth?– Which brings us to Roth accounts. Unlike Traditional accounts, Roth accounts offer no current year tax incentive. Instead, they let your money grow tax-deferred while you're still working and then tax-free distributions during retirement. And, since the IRS doesn't get a cut of the money in your Roth accounts (unless you violate the?distribution rules, watch out!), they don't have?any RMD requirement. That means your Roth investments can continue to grow & compound for potentially an extra 5, 10, or 20 years beyond your RMD age, which can mean a lot of extra tax-free money late in life.?
• Brokerage accounts?– Non-retirement investment accounts don't offer any tax incentives when you save, which means that you'll be stuck paying taxes each year on any dividends received or realized capital gains. Sounds like a bad deal, right? But taxable brokerage accounts have a big upside over retirement accounts: you can access your money whenever you want. So if you're below age 59 1/2?(when you can take retirement money penalty-free) and you need to free up some cash, you can pull money out of your taxable accounts without the 10% penalty that retirement accounts charge for early distributions. Even though they're not actually retirement accounts, taxable brokerage accounts can play an important role in saving for retirement.

So which option is best? The one that has a current year tax break, the one that allows for tax-free growth & retirement distributions, or the one with no tax breaks but easy access?

Quick answer:?all of the above.

In my opinion, you should aim to save a little into all three types of accounts whenever possible. Traditional retirement accounts give you that tax break now (which everyone loves), Roth accounts give you a tax break later, and taxable accounts give you much more freedom to access your money. People are usually most able to deal with tax consequences just after retirement, so a good rule of thumb is to take money from taxable accounts first, then tax-deferred accounts (i.e., Traditional), then pull from your tax-free accounts for later in life.

Frequent readers might remember that I said something a few weeks ago about how?higher-income earners can't contribute to Roth accounts. So what are they supposed to do??I'll discuss that in a few weeks after the Thanksgiving holiday. (Keep scrolling to access that Thanksgiving flowchart.)

Have?questions about how you can save more for retirement??Sign up for weekly Office Hours?–?I'm always happy to have a conversation.

Improve the Dang World?-?Trashie?consumer recycling service?

With free delivery and no-questions-asked returns for most retailers, the temptation to buy something now and then decide if you?actually?want it is huge. But most of the stuff that gets returned – or even donated to thrift stores – ends up in landfills.?About 85% of all clothing in the U.S. ends up in landfills, and even Goodwill can only resell about 27% of the donations they receive.

I just learned about Trashie in this?podcast interview with founder & CEO Kristy Caylor(jump to 49:30 to listen, a little further if listening with ads) and am really fascinated. Trashie is a platform focused on keeping unwanted consumer merchandise out of landfills by sorting?and then reusing,?recycling, downcycling, or even reducing to component parts (like the raw fibers)?and recycling those. They will send you a Take Back Bag, you fill it with any clothes in any condition, and after they sort it you will receive credit to spend with?a bunch of different retailers.

Trashie started with consumer textile recycling, but has been moving into electronics recycling as well. Have a drawer full of old charger cables? Now you can get them out of the house without throwing them in the garbage (or donating them to a thrift store, who will then throw them in the garbage). I am very excited to try out this platform! I'll follow up in a few months to?let you know how it goes.

Guitar Tone Baloney -?I Destroyed a Car to Explore Some Music Myths?in Scientific American

My friend?Casey Rice?said a funny thing once when the drummer in the band they were recording?asked them to make the drums sound like John Bonham. Where most recording engineers (myself included, if I'm being honest) would have set to work placing room mics to get that big Led Zeppelin drum sound, perhaps moving the drummer to?a stairwell or grabbing the obscure?Binson Echorec,?etc., Casey stopped the conversation cold. "I can't make you sound like John Bonham, because only John Bonham plays like John Bonham.?You think you love the technology, but you really love the music." (Italics mine.)

I've been a both a guitar & recording gear?collector for much of?my life and, as far as I can tell, Casey had it bang on.?I've seen great drummers sit down at very average drum kits and somehow – voila – the kit sounds great. I've also seen mediocre drummers sit down at great sounding kits and sound pretty ... mediocre. You can record a whole band using only SM57s (a common & inexpensive microphone) or all of the best, most expensive vintage German tube mics, and the quality of the recording mostly comes down to whether the musicians know their craft and showed up ready to play.

So I was super fascinated to learn about Jim Lill's experiments to figure out which parts of a recorded electric guitar actually make a difference when it comes to "good tone" (an opaque and subjective term if ever there was one). Is it the wood the guitar is made from? Or some kind of finish used on guitars in the 1960s that they can't use any more because it's actually toxic? Is it the tubes in the amp, the wood in the speaker cabinet, the type of microphone used to record it? C'mon, where's that good tone???

This article from Scientific American is kind of a greatest hits (but you can skip the song at the end)?for Lill's findings, but if you want to dive deeper you can also check out?his YouTube channel?for all sorts of these tests. Really eye opening stuff if you're into gear and gear lore.

Holiday Cheer - Grab your "Am I Ready for Thanksgiving"?flowchart

Planning a big meal next week??Click here?to grab a fun flowchart to help you navigate the day. Listen, newsletters shouldn't be all money and numbers, right?

Quote -?"History is mostly guessing, the rest is prejudice." – Will Durant

Thanks!

Timothy Iseler, CFP?

Founder & Lead Advisor

Iseler Financial, LLC

Registered Investment Advisor | Durham NC

iselerfinancial.com