Monthly Archive: March 2015

Disclaimer: First thing’s first, I’m the realest. I’m also not a financial adviser, so anything I say here is just my opinion, and you’re responsible for your own money and returns.

With that out of the way, My goals for this year have changed recently. Some back story: My wife has student loans that are small enough that they could be paid off within a year. In the past, I had been of the opinion that the interest rates on the loans were low enough, that we would do better by making the minimum payments and continuing to invest in dividend stocks. Over time, the growth of the stocks and dividends would offset the expense of these minimum payments on the loans.

However, these loans are becoming a bigger burden than the money they represent. In the past few years, my wife has changed her name, and we’ve moved across the country. These changes, are causing the debt collector to start pestering my wife and her family for information on a regular basis. She makes her payments on time and consistently every month, so this behavior is completely unwarranted. As a result, this small amount of debt is creating a disproportionate amount of stress to her and her family.

So, we’ve decided that instead of trying to reach our goal of saving $18,000 this year, we will make an effort to 1) pay off her student loans, and 2) contribute $5,500 to my Roth IRA.

I traditionally make all of my investments in a taxable brokerage account, so this may sound a bit surprising that I would be making this change. I decided that there might come a day that I regret not taking advantage of the yearly contribution limits. Or so I thought…

My retirement strategy is to live off of dividend income from my investments. Dividends have favorable tax treatment, if your income puts you in the 10% or 15% income tax brackets, qualified dividends are taxed at 0%. Non-qualified dividends are taxed at the same rate as your income.

“What’s a qualified dividend?”
A qualified dividend is a dividend received for a stock you’ve owned 60 days before and 60 days after (without selling) the ex-dividend date. So, if I buy JNJ today, and it’s ex-dividend date is in 60 days, if I don’t sell those shares for another 121 days, that dividend will be taxed as a qualified dividend.

This is important because it means whether I put my money in a taxable brokerage account or a Roth IRA, they will both be taxed at 0%. Since I don’t plan on selling, I don’t care about the difference in capital gains tax. (This is all on the assumption that my income in retirement is under the cut off between 15% and 25% income tax rates, and that these rules are maintained)

I’ve already made 1 contribution to my Roth IRA, and now I regret it, because I’ve put limits on the usefulness of that money, with no benefit.

Instead, I will be putting the rest of my contributions in a traditional IRA, because I’m currently in a higher tax bracket than I would be in retirement.

What about you? Are you maxing out your Roth IRA, IRA, or avoiding them all together?

Most gamers recognize the words “pwn,” “pwning,” and “pwned” or any such variations. The origin comes from a misspelling of the word “own” back when warcraft was a strategy game. Over time, pwning has started to mean much more than simple ownership.

When you pwn someone in a game, you have completely dominated them. You had control of the whole match as a result of your skill and strength of will. The difference between owning and pwning is a matter of control and confidence.

There’s an old saying “the things you own end up owning you.” This is not the case with pwning. When you own shares of a company, they start owning you when you emotionally react to price fluctuation. When you have the strength and confidence to keep your cool during price swings, then you start pwning that stock.

Pwning a stock means you won’t be the newb that gives up on some solid dividends because you sold at a low price in a panic right before the price recovered.

You should strive to pwn everything in your life.

Pwn your Job – Take responsibility and base your actions on what will be best for the company, even if that conflicts with what your boss thinks.
Pwn your Relationship – Put in the work and communication to keep your companionship working. This doesn’t mean winning arguments, it means finding solutions.
Pwn your Health – Master the art of healthy eating, and find the workout plan you’ll stick to.

So, don’t just own it, PWN it!