IRA Help for a Professional Poker Player

[TheMetetron]

Got an appointment to talk to a professional this week. I'll report back.

[LearnedfromTV]

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I make between 150-250k per year.

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I'm 21 and worked for near minimum wage until about March of this year when I went pro. From march to about June, I was a low limit donk. From July to November I made $120,000.

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I made 10K in a week once, I guess my yearly is ~500K.

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Yeah but I make an easy 20k a month now, with 10k of that being income that is fixed and won't go away for at least a year, if not longer. So my $150k a year estimate for next year is conservative. The reason I've only made $150k or so this year is because the vast bulk of that earn was the last 6 months when I've actually been playing 10/20 and 20/40 short.

It's not like a ran good for a week and extrapolated from that. I've extended my earn for the last 6 months to one year and gone with the low end. Try not to be a dick from now on.

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Clearly I was exaggerating to make a point. But as a 21 year-old who hasn't done any financial planning and has only *actually* made 150K+ in a year once, you should probably consider the possibility that extrapolating four months into a yearly salary that you'll draw indefinitely isn't the best way to handle your finances. Four months may be enough time to be sure you are a winner in current game conditions. It's a bit of a stretch to assume things will be the same for five or ten years.

In other words, for as long as you continue winning at this pace, save. A lot.

And congrats. Seriously.

[schuckmer]

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New question:

What about indivial 401k's?

Seems like another viable alternative that I could borrow against.

I need to make an appointment to see an accountant.

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Definately check into this. I did some of this research myself recently and came across the same thing. My situation was I had a 401k with money in it from a previous employer. My choices were to move that money into an IRA or an Individual 401k. I finally settled on the 401k because it has quite a number of advantages. I ended up working with a lawyer on the west coast (I live on the east coast) who specializes in this and is very helpful with any questions.

PM me if you want any specific links or info. I wasn't sure about putting links to a company in the forum.

Definately, definately research this possibility before putting your money in an IRA because once it's in there, it's in there.

[AceHigh]

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Also, why wouldn't I want to just take the money and invest it on my own. Then I don't have to worry about some stupid 10% early withdrawal fee in case I need the money?

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Cuz IRA profits are protected from taxes until you withdraw the money. So you can make tons of money in stocks, money you have no intention of touching and watch it grow, safe from Uncle Sam greedy IRS people. If you really are going to be making 250k, how likely is it you will need to grab some of your IRA money? Hopefully it is very unlikely.

[TheMetetron]

The reason to grab it is to buy a house. Or if this whole thing goes bust in 10 years and I have to get a real job or start a new business.

[AceHigh]

The question is, do you want to avoiding paying taxes on some of your investment money in return for not having convienent access to it or not? The higher the tax bracket, the better that deal is.

But it's still up to you. Realize if you don't pay social security taxes you won't get much/any social security benefits.

[schuckmer]

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The reason to grab it is to buy a house. Or if this whole thing goes bust in 10 years and I have to get a real job or start a new business.

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This is exactly why I went with the Individual 401k. Because it allows you to take out a loan from your own 401k. And then you pay the loan back to yourself with interest. This way you get the benefit of putting the money in to begin with tax free (same as an IRA), have access to your money and pay the interest on the loan back to yourself. Of course, you aren't earning any interest in the market on those funds that you withdraw, but at least you aren't paying the interest to someone else. There are limits to the amount you can loan yourself, and how many loans you can have outstanding, but there are no requirements as to what you can do with the money once you take the loan. I did this myself and am paying interest of prime plus 1% (fixed not variable) for the life of the loan.

[TheMetetron]

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But it's still up to you. Realize if you don't pay social security taxes you won't get much/any social security benefits.

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You do realize social security tax caps at 90k in AGI?

I pay the full social security tax every year and still won't see any of it. Life is a bitch.

[MrBlue]

If we all keep saying we'll never see any SS benefits, it'll become a self fullfilling prophecy! It gives the impression to the politicians that since we're not expecting any money anyway, why bother saving SS?

[AceHigh]

I wasn't sure how pro players paid taxes and the SS tax. I thought you guys might not have to contribute.