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4/1/2020 6:58:51 AM
Posted: 11/18/2008 4:05:40 PM EDT
OK, so I've been doing some thinking.  I used to put in 25% of my income towards retirement - IRAs (Roth), 401k, etc.  Needless to say, I've been MURDERED over the last two years and honestly, I just don't know if there is much to be said for the future prospects of the market.  Given the possible nationalization of 401ks, getting rid of the tax-free status of Roth IRAs, etc. as well as means-testing for Social Security Benefits, I'm starting to wonder:

1 - I am back to 10% for my 401ks and not investing anymore in IRAs

2 - I'm using the saved money to pay off all debts - I will be debt free (other than mortgage) in 11 months.

3 - After that, I'll have about $2000-$2500 extra per month to play with.  I'm seriously considering using that money to pay off my mortgage.  I could have it paid off in 3 years doing that.

So, after that, I'm at a loss - I'll have about $3000 per month extra to do something with.  I could invest it, but as I said above, I think people like me are going to get more and more screwed over if we have investments, plus the markets may continue to tank.  

I was thinking - acreage?  To me I guess the pros/cons would be this:

PROS:

I can use it, hunt on it, build on it, visit it, use it to grow food, have a nice buffer between me and neighbors, my own range, etc.  I'm thinking somewhere in the central part of the country (OK, AR, MO) - acreage is pretty cheap out there.  If I live on it, I suppose my taxes eventually will go up, but that's local stuff, not federal.  $200,000 land value isn't the same as $200,000 in mutual funds that can be taxed by the feds, redistributed, or used as a means-test for reduced Social Security benes.

CONS:

Well, it costs money, and upkeep.  I suppose it could be considered an asset if they started using that as a means-test.  Plus unless I produce income from it, owning land doesn't pay the bills or buy me anything, like a mutual fund could.



What do you all think?  Is buying a bunch of land instead of investing the money, or even putting it under a mattress or buying gold sound like a decent idea?



Link Posted: 11/18/2008 4:13:27 PM EDT
As the saying goes, they aren't makling anymore land. That being said I wouldn't recommend buying land willy-nilly.  Lots of research, buying property that has the potential to increase in value over and above a simple bank account rate of return, etc., etc.

Buying unimproved land has a lot of issues attached, foremost among them are the cost of access, power, water, etc.

If this was a binary decision I'd go with yes, but only you know what other factors you need to consider.
Link Posted: 11/18/2008 4:17:09 PM EDT
I was talking to a friend the other day....seems there may be a way to buy land via a LLC holding company and get 401K/IRA type breaks.

No details yet.

Imagine, using pre tax dollars to buy land.  
Link Posted: 11/18/2008 4:17:27 PM EDT
Both.
Link Posted: 11/18/2008 4:18:11 PM EDT
All the big rollers I know are moving to buying land, it's an investment that you can use!
Link Posted: 11/18/2008 4:18:51 PM EDT
[Last Edit: 11/18/2008 4:19:18 PM EDT by capnrob97]
I just bought some acres of land by pulling money out of Roth IRA in July (what you put in is able to pull out tax free).

I recon I saved myself from another 20k in losses in the market by doing so.
Link Posted: 11/18/2008 4:19:35 PM EDT
Originally Posted By DavidC:
As the saying goes, they aren't makling anymore land. That being said I wouldn't recommend buying land willy-nilly.  Lots of research, buying property that has the potential to increase in value over and above a simple bank account rate of return, etc., etc.

Buying unimproved land has a lot of issues attached, foremost among them are the cost of access, power, water, etc.

If this was a binary decision I'd go with yes, but only you know what other factors you need to consider.


Well, here's the thing - it is just me and the wife.  We're 42.  We honestly don't care what our net worth is when we die.  So if by the time we are ready to live in a retirement home, or closer to services, I'm sure that even if the land didn't appreciate more than 5% a year, we'd still be doing good selling the land and using the money for living expenses.  Plus, we love challenges, and the idea of building up a little mini-farm, a small house, our own range, some ponds (stocked) and having lots of wild game coming through would be really neat.  Plus, if god forbid the proverbial shit hits the fan, we'd be in a better position than holding worthless stock certificates.


Link Posted: 11/18/2008 4:22:31 PM EDT
Originally Posted By capnrob97:
I just bought some acres of land by pulling money out of Roth IRA in July (what you put in is able to pull out tax free).

I recon I saved myself from another 20k in losses in the market by doing so.




Good idea, land where ours is keeps going up EVERY year regardless of home prices or stock market.  We bought our land 17 years ago for $1100 an acre, its now in the 4-5000 range all day longe.
Link Posted: 11/18/2008 4:28:52 PM EDT
It depends, do you want to retire there or use it for hunting till your to old to hunt,  then yeah. Otherwise just for a investment, nope.  Property taxes are another thing to consider, you would probably want some type of ag/Timber exemption, or you might get ass raped with taxes. If you got some property where there is any cattle industry, you could lease the land, might want to lease it cheap, in exchange for the upkeep of the place, fences ect. Plus the tax benefit.
Link Posted: 11/18/2008 4:28:58 PM EDT
[Last Edit: 11/18/2008 4:29:35 PM EDT by DavidC]
Originally Posted By JohnCrighton:
Originally Posted By DavidC:
As the saying goes, they aren't makling anymore land. That being said I wouldn't recommend buying land willy-nilly.  Lots of research, buying property that has the potential to increase in value over and above a simple bank account rate of return, etc., etc.

Buying unimproved land has a lot of issues attached, foremost among them are the cost of access, power, water, etc.

If this was a binary decision I'd go with yes, but only you know what other factors you need to consider.


Well, here's the thing - it is just me and the wife.  We're 42.  We honestly don't care what our net worth is when we die.  So if by the time we are ready to live in a retirement home, or closer to services, I'm sure that even if the land didn't appreciate more than 5% a year, we'd still be doing good selling the land and using the money for living expenses.  Plus, we love challenges, and the idea of building up a little mini-farm, a small house, our own range, some ponds (stocked) and having lots of wild game coming through would be really neat.  Plus, if god forbid the proverbial shit hits the fan, we'd be in a better position than holding worthless stock certificates.





I know exactly what you mean; we're in basically the same situation, but 9 years older than you.  Three years ago we decided to take a bunch of cash we had available and rather than put it back into investments, buy a place in the mountains that we could use now and improve on and retire to later.  

We got very lucky, found a good deal on 40+ acres and a home about 160 miles from where we live full time, in a very rural area, that has already gone up in value 50%.  On top of that, we recently signed a very short term gas lease for a significant upfront payment (basically 300% of what we have invested so far), so the property has done far better than any investment would have over the last three years.

And I'm up there now, enjoying some serenity (I can work from anywhere with a net connection) while my fiancee is in Seattle on business for a week.

Link Posted: 11/18/2008 4:38:15 PM EDT
I thought you ended up paying taxes on any distrbution from a Roth unless you were 59 years old or older?  Plus the 10% early withdrawal penalty.
Link Posted: 11/18/2008 4:42:53 PM EDT
Buy land, it is bombproof.  Check on the carrying costs.  I buy and sell rural CO real estate it is solid.  Ag taxes are almost nothing and no home owners assoc means no dues.  Plus, on a large enough parcel, you can sell what you don't want  and keep the rest for hunting or to build your dream house.  If you want PM me and I'll show you some of my stuff.
Link Posted: 11/18/2008 4:47:10 PM EDT
if you've been saving at such a high rate for years, it sounds like you can afford to leave the stuff in the market alone, and once the debts and mortgage are done, land would be a very prudent form of diversification. It is illiquid, but...like DavidC said, if it was binary I'd vote yes.
Link Posted: 11/18/2008 4:50:14 PM EDT
Set up your IRA to own Real Estate.

/thread
Link Posted: 11/18/2008 4:50:44 PM EDT
Commercial R/E would offer you the best returns IMHO.
Link Posted: 11/18/2008 4:53:39 PM EDT
Originally Posted By huck:
Buy land, it is bombproof.


Really? you don't say!



Link Posted: 11/18/2008 5:02:28 PM EDT
[Last Edit: 11/18/2008 5:06:53 PM EDT by BillofRights]
Originally Posted By IshootARs:
I was talking to a friend the other day....seems there may be a way to buy land via a LLC holding company and get 401K/IRA type breaks.

No details yet.

Imagine, using pre tax dollars to buy land.  



This is called a "Self Directed IRA"  Basically, you have to hire somebody to set up a trust which will hold your money.  Then you can invest it into pretty much anything you want.

The biggest catch is that cannot use the investment for your own personal enjoyment.

You can google the term and call around like I did.  From what I found out, it seems that the trust companies charge a lot for the service.  I'm sure there is a way to set the trust up yourself and avoid a lot of the management fees.

If anybody knows how to do this, please let me know.
Link Posted: 11/18/2008 5:04:59 PM EDT
Originally Posted By DavidC:
As the saying goes, they aren't makling anymore land. That being said I wouldn't recommend buying land willy-nilly.  Lots of research, buying property that has the potential to increase in value over and above a simple bank account rate of return, etc., etc.

Buying unimproved land has a lot of issues attached, foremost among them are the cost of access, power, water, etc.

If this was a binary decision I'd go with yes, but only you know what other factors you need to consider.



The #1 biggie is the local planning commission
Link Posted: 11/18/2008 5:07:15 PM EDT
Link Posted: 11/18/2008 5:22:35 PM EDT
Look and see how many acres Ted Turner has purchased recently.

Link Posted: 11/18/2008 5:24:06 PM EDT
I do realize that we are currently in a deflationary period, however, I still believe that inflation is inevitable over the long term.  If that is true, then yes, land will be one of the few things that will maintain it's value, or even possibly outpace inflation.

If you buy a 100 acre parcel, you aren't going to wake up one day and discover that it has dwindled down to 50 acres.  

Here's the big thing though, make sure it is assessed as Agricultural, and you can keep it that way,  otherwise the taxes might eat you alive.
Link Posted: 11/18/2008 5:31:09 PM EDT
You've gotta "get both".

Assuming you aren't going to die of cancer or in a robbery or something, when you're 80 you're going to need to live, pay the bills, see the doctor, get pills, etc.  Land isn't going to buy that for you unless you sell it, and land that's waaaay out in the sticks isn't going to cut the mustard.  Sure, 401(k)s and IRAs might be penalized or confiscated... but if they are, there are worse things happening, too.  And if you don't save for yourself, you're guaranteeing that your "golden years" will be spent in penury, voting for whichever Socialist will give you the biggest check because you need it to live.
Link Posted: 11/18/2008 8:18:22 PM EDT
Originally Posted By jnojr:
You've gotta "get both".

Assuming you aren't going to die of cancer or in a robbery or something, when you're 80 you're going to need to live, pay the bills, see the doctor, get pills, etc.  Land isn't going to buy that for you unless you sell it, and land that's waaaay out in the sticks isn't going to cut the mustard.  Sure, 401(k)s and IRAs might be penalized or confiscated... but if they are, there are worse things happening, too.  And if you don't save for yourself, you're guaranteeing that your "golden years" will be spent in penury, voting for whichever Socialist will give you the biggest check because you need it to live.



I guess I'm just having a hard time trying to figure out whether to buy something real, solid, and useable, or to potentially put my investments in mutual funds, bonds, stocks at risk for future confiscation or to be leveraged against me with regards to means testing.  I am "getting both" in some ways (10% into 401ks, matching and what I already have in IRAs).  But I'm thinking I might enjoy now and into the future the land, and can foresee it having more use regardless of what happens in the future.

Link Posted: 11/18/2008 8:28:08 PM EDT
Land is only worthwhile, if it is land that you can do something with, or if people have money to buy it from you.

There is a lot of land trading in my neck of the woods.  Mostly amongst sawmiller types such as myself or just usual pinhookers. For the first time, I had a real estate investor call me up today, begging me to buy his land, I mean he was near tears, no one in our area is willing to part with the cash to do it.

Link Posted: 11/18/2008 8:31:32 PM EDT
I am putting all my money into buying Tax Lien certificates.  Very safe, pays 11% to 16% a year.  Downside is there is only one day a year the county auctions them....  But I'm within easy driving distance to 4 other counties  :-)
Link Posted: 11/19/2008 9:39:57 AM EDT
Originally Posted By JohnCrighton:
I thought you ended up paying taxes on any distrbution from a Roth unless you were 59 years old or older?  Plus the 10% early withdrawal penalty.


A Roth is funded by dollars you've already paid tax on. If you withdraw before age 59.5 you're only penalized on earnings, not your original investment. Say you've put in $20k, and it's grown to $25k, you can take out your original $20k before age 59.5 without any penalty. At least that's how I understand it!

Mine's 30% down right now.
Link Posted: 11/19/2008 3:05:01 PM EDT
Originally Posted By psytechguy:
Originally Posted By JohnCrighton:
I thought you ended up paying taxes on any distrbution from a Roth unless you were 59 years old or older?  Plus the 10% early withdrawal penalty.


A Roth is funded by dollars you've already paid tax on. If you withdraw before age 59.5 you're only penalized on earnings, not your original investment. Say you've put in $20k, and it's grown to $25k, you can take out your original $20k before age 59.5 without any penalty. At least that's how I understand it!

Mine's 30% down right now.



Ah, that makes sense.  I think you still pay the 10% early withdrawal penalty, though.  
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