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Leperflesh posted:Your brokerage account, even after accounting for taxes, is likely to beat the returns of paying down your mortgage at 2.75%, even if you invest pretty conservatively. Over the long run. Probably. I've been thinking about this too. I have a giant student loan and enough money to pay it now, but it's 3.5% interest which seems to be pretty low. I'm very tempted to just be rid of it, but also tempted to be putting that money into something paying 7%+ returns. I'm thinking I'm going to see if they'll settle for a lesser lump sum payment. If they'll let me off with 50-60% right now then gently caress it, let's get it gone. In the likely event they refuse to do that, that loan is actually multiple separate loans, one for each year. The monthly payment is crushing, it's eaten ~50% of my income my entire working life, so I'm thinking I'll pay off the largest one, see how that affects the payment, probably pay off a second. If I can drop the payment to something much more reasonable that way then I'd likely be better off just keeping the rest in funds and paying down over time. Plus I can liquidate investments and get rid of it any time if circumstances changed. Does this make sense to other people? I don't know if I'm missing something. The biggest debate is just that the return on investments is theoretical while the paying it off right now is a sure thing.
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May 21, 2021 20:43
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Student loans are special in that they are non-dischargable in a bankruptcy: in my opinion this makes them a really bad form of debt, much worse than a secured mortgage, and I would be eager to pay it off as fast as possible regardless of interest rates. You may be able to consolidate those loans and lock in a lower rate (although beware the drawbacks of closing a federal subsidized or unsubsidized loan into a private loan) but you will not get a dime off the principal unless we're talking special loan forgiveness programs such as the ones for doctors, or for people who are disabled for 10+ years. Because bankruptcy is no protection, student loan lenders have no incentive to forgive that debt, they'll only do it if forced. It's true that in theory your investment income might counterbalance the interest on your payments, though you need to consider the time frame too. A 30-year mortgage can be compared to a 30-year investment horizon in a brokerage account: but if your loans are on a 10-year plan, well, the risk is substantially higher that you could suffer a net loss on investments in the market over a 10-year period vs. that 30-year period. If you feel very confident that you'll never suffer a hardship that puts you in default, won't run afoul of the aggressively evil tactics of companies like Nelnet, are investing for the very long term anyway, and can psychologically handle the pressing downward weight of student loans, go for it. For me and my wife, the answer was to pay off her student loans as fast as possible, at the expense of not even being able to max out our tax-advantaged space, and I still feel that was worth it.
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May 21, 2021 20:53
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Psychologically I think I'm going to feel great about them. If I pay off a couple of the individual loans and finish off the bit of federal loan I have outstanding, my guess is my monthly payment is going to drop from ~$1,000 to ~$350. I'm going to feel like I'm made of money after spending so much of my life living on $500 a month.
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May 21, 2021 21:01
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MockingQuantum posted:I know nothing about I Bonds, I'd have to do some reading. Are we talking just standard Treasury I Series bonds, or something else? Correct. They are an ideal inflation hedge. They are savings bond where the interest rate is reset every six months or so based on predicted inflation. The downsides is that they are somewhat illiquid (so not great for your efund), there are some lost gains if you sell before five years, you have to buy them through the Treasury's janky website TreasuryDirect, and you are limited to $10K/year in purchases.
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May 21, 2021 23:32
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Leperflesh posted:A 30-year mortgage can be compared to a 30-year investment horizon in a brokerage account Kind of, but the fact that you start paying back the mortgage immediately makes its effective duration substantially shorter than 30 years (unless you have an interest-only 30-year loan with a balloon payment at the end).
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May 22, 2021 02:03
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ChineseBuffet posted:Kind of, but the fact that you start paying back the mortgage immediately makes its effective duration substantially shorter than 30 years (unless you have an interest-only 30-year loan with a balloon payment at the end). What I mean is, compare the money you'd be paying into the loan (and the return on it - calculate how much interest you save by doing so) to putting that same amount of money into the brokerage account and it gets some conservatively realistic rate of return, after taxes. The "return" on paying the loan will probably be less than the real return on even just a broad market bond fund and almost definitely less than on an S&P500 fund, for example.
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May 22, 2021 02:16
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Gotta also factor in the potential tax deductions on your mortgage interest (directionally better to not pay it off early).
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May 22, 2021 02:31
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spf3million posted:Gotta also factor in the potential tax deductions on your mortgage interest (directionally better to not pay it off early). It's worth considering, but it's probably not a huge factor, if at all. The mortgage interest deduction is way oversold as a benefit. After 2019 with the doubled standard deduction and harsh SALT deduction caps, most taxpayers are not itemizing anymore so it's moot. And with rates so low, even in the first couple years of a mortgage where the amortization is interest-heavy you probably aren't paying a crazy amount in interest. On a 500k mortgage at 2.75% in year 1 you're paying about 15k in interest, which if you're MFJ and you max out the 10k SALT deduction you basically match the MFJ standard deduction of 24.8k. So effectively no tax benefit. If you're 10 years in to that same mortgage you're under 10k in annual interest paid, so without a lot of other deductions you're better of taking the SD. Plus the interest deduction maxes out at 750k mortgage principal so even if you have a $2m Bay Area house with a 7 figure mortgage you can't deduct it all. Even if you do itemize, the only benefit is deductions in excess of the SD, and it's only at your marginal rate not dollar-for-dollar like a tax credit. Sure it might save you a few hundred dollars, maybe even a few thousand if you have an expensive house and a lot of other deductions. But that's chump change in these sorts of equations, especially if you have the sort of property and income/assets to be in that situation. Guinness fucked around with this message at 06:00 on May 22, 2021 |
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May 22, 2021 05:48
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Yeah if it's not a very expensive house, you'd need to be in a circumstance where you're already taking enough deductions to make itemizing worth it or nearly worth it. Which might well be the case, but doesn't apply to most lower to middle class taxpayers.
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May 22, 2021 06:19
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I'm in my mid 30s and don't have much in long term retirement. Probably more than most but probably not as much as I should. I have a ROTH IRA that I can no longer contribute to because I exceed the MAGI and no longer eligibile. I also have a TRAD IRA account that I (correct me if I'm wrong) cannot contribute to without getting taxed because I currently also have a 401K account with my company. I have about 35K in the roth ira, trad ira and rollover ira. I need to merge the rollover into my traditional ira. Parts of my IRAs are still in money market funds since when I put the money in I wasn't sure what to invest in so I just let it sit in the account without it doing anything. I'm going to eventually put that into some additional Fidelity Retirement accounts. My initial plan was to buy a house within the year back in early 2020. Obviously with the housing boom I'm probably going to have to reconsider buying for a while. All that money that's just sitting in my savings account is now doing nothing and I would like parts of it to do something. I'm still trying to buy the books mentioned in the OP.. but in the meantime, since it seems my avenues for putting in money in funds into IRAs are closed. What's the best way to use my previous HOUSE FUND money for long term retirement funds?
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May 23, 2021 05:23
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You don’t get taxed for putting money in a trad IRA. You just don’t get to deduct the contributions if you make too much money, which is the good kind of problem to have.
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May 23, 2021 05:27
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Yeah, you can still contribute, and you still get tax deferral on earnings, but you can't deduct and you have to file (and retain) Form 8606. As for the house funds, that’s up to your risk preference and whether you want to keep some of the money “dry” for a shift in the housing market. Retirement funds targeting your age are around 90% stock and you can compare your mix to that. Gazpacho fucked around with this message at 08:16 on May 23, 2021 |
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May 23, 2021 06:33
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Thanks everyone, the negative interest savings better.com showed me threw me for a loop. I know it's because I'm extending the existing loan that has like 18 years left on it due to early principle payments back into a 30 year loan. Tricky Ed posted:There are two major ways to look at a refinance. Yeah, I don't really need this money, I guess I'm trying to figure out what makes sense given how much of the loan we've already paid off early. The $800/month reduced payment is nice, and I guess so long as I stuff it into the market then I will statistically come out ahead. It seems almost like I should extract money from the house up to the current $lol valuation and invest it but I know that's a dangerous game. (I think an extra $140k extracted would get me to 60/40 LTV.) We aren't sure how long we will be in this house, originally it was going to be "forever" but the pandemic has made it feel very small. GoGoGadgetChris posted:You're severely overthinking it to the point where I think maybe you're misunderstanding something, but if you post your amortization schedule for the loan I can calculate the present value of your potential beneficial financing! That calculation is what I was hoping someone would point me towards I guess. Either way, I have 4 lenders on the hook now, one of whom I am 1 email from cutting loose for refusing to give me a loan estimate. Holy christ I'm glad I put a google voice number into lendingtree.com. Never put your real number into there.
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May 23, 2021 15:47
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KYOON GRIFFEY JR posted:Correct. They are an ideal inflation hedge. They are savings bond where the interest rate is reset every six months or so based on predicted inflation. Okay I've done some research on I bonds and they seem like a good fit for how lazy/inattentive I tend to be about long-term investing. So say I wanted to hold a 90% stocks/10% bonds allocation in my taxable holdings, is there any reason I wouldn't want that 10% to be just I bonds?
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May 26, 2021 22:40
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Pulling the trigger on better.com (again). 2.75% for $1150ish? After a $350ish credit. Everyone else is just a bit more expensive and painfully manual. Thankfully Google voice means ice never heard a single humans voice.
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May 26, 2021 23:46
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MockingQuantum posted:Okay I've done some research on I bonds and they seem like a good fit for how lazy/inattentive I tend to be about long-term investing. So say I wanted to hold a 90% stocks/10% bonds allocation in my taxable holdings, is there any reason I wouldn't want that 10% to be just I bonds? You can buy a maximum of $15,000 in I-bonds annually: 10k via TreasuryDirect and 5k in paper bonds using your income tax refund(!), so if your total allocation to bonds is higher than that (annually, since these are 30-year bonds) that could set a limit. You might also want a better return than I-bonds. I bonds may return as little as 0%, such as when interest rates are low; and usually a total bond market fund is outperforming I-bonds. It doesn't have to be an either/or situation, though. You could buy a few thousand a year in I-bonds (which is a nice hedge against inflation) while also putting some money into a total bond market ETF, for example.
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May 27, 2021 00:22
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To further complicate things, gains on an I-bond are taxed when you sell the bond, compared to gains from a bond fund which are taxed annually based on distributions 
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May 27, 2021 00:58
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Kylaer posted:To further complicate things, gains on an I-bond are taxed when you sell the bond, compared to gains from a bond fund which are taxed annually based on distributions But while filing your taxes you can always choose to opt into the 'accrual method', where you choose to track and pay taxes on the gains you make each year.
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May 27, 2021 01:11
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I need to know how bad I'm going to be screwed. I left my previous job without being prepared to move the 401k I had through them. Just literally forgot about it, I'm a dumbass, I know, I'd never had one before that job and I barely even thought about it when I was there, sadbrains bullshit that's too e/n for this thread. I think I was putting in like $10 per paycheck for about 8 years. Fast forward to now and I discover a bunch of mail didn't get delivered correctly because of my move and there's a notice about my 401k in there. The deadline for a payout was on April 18th, so by now I believe I'm going to be taxed if I move it anywhere. I'm not eligible for my new employer's plan yet and it's not guaranteed (contract-to-hire, I may yet gently caress this up). Come to think of it, I also had a stock purchase plan with them too that I've heard nothing about. What can I do?
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May 27, 2021 15:49
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Yak Shaves Dot Com posted:
What exactly did the notice say? Because if you haven't had your 401k closed there then you are fine. Did they move administrators? Did they cut you a check? Where is that check? Call them up and ask about your espp as well. Or go try to login to the most recent brokerage you can remember.
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May 27, 2021 16:08
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What's the general feeling on ESPPs? Investopedia explains the tax handling but I'm not sure where it falls on the "good idea/bad idea" spectrum. Is there any real advantage to ESPP vs taxable index investing after tax advantaged spaces are filled?
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May 27, 2021 17:23
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If the ESPP offers a discount and little to no holding length requirement, take the free money. If not, do never buy employer stock.
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May 27, 2021 17:25
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EBB posted:What's the general feeling on ESPPs? Investopedia explains the tax handling but I'm not sure where it falls on the "good idea/bad idea" spectrum. Is there any real advantage to ESPP vs taxable index investing after tax advantaged spaces are filled? If your plan is mediocre it's a little bit of extra cash for a little bit of risk. If your plan is amazing it can mean huge returns if your stock goes up ("buy at $10 from 2 years ago, sell at $100 today. Congrats on 10x'ing your $21,500.") If your plan is terrible it's pointless to bother. Describe the rules of your plan.
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May 27, 2021 17:32
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Yeah, every ESPP is different. If you can buy at a discount then sell right away then it is free money with pretty low risk. If you have to hold that stock for a while then risk goes up.
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May 27, 2021 17:41
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Enrollment in Q1 and Q3 of each year, "Minimum discount of 15%", I have to ask about holding. I generally cash out RSUs for better investments so I figure ESPP is a bad deal if I have to hold for long term as a condition.
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May 27, 2021 18:15
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EBB posted:Enrollment in Q1 and Q3 of each year, "Minimum discount of 15%", I have to ask about holding. I generally cash out RSUs for better investments so I figure ESPP is a bad deal if I have to hold for long term as a condition. What is the lookback period as well, can you roll over limit, and the max you can invest.
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May 27, 2021 18:20
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Yak Shaves Dot Com posted:I need to know how bad I'm going to be screwed. I left my previous job without being prepared to move the 401k I had through them. Just literally forgot about it, I'm a dumbass, I know, I'd never had one before that job and I barely even thought about it when I was there, sadbrains bullshit that's too e/n for this thread. I think I was putting in like $10 per paycheck for about 8 years. I guess the other question is do you want a payout ? You can transfer to vanguard or fidelity in your own name and it won’t charge tax. We don’t know your money scenario, but if you can it’s always good to leave retirement funds in a retirement account.
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May 27, 2021 19:34
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H110Hawk posted:What exactly did the notice say? Because if you haven't had your 401k closed there then you are fine. Did they move administrators? Did they cut you a check? Where is that check? Duckman2008 posted:I guess the other question is do you want a payout ? You can transfer to vanguard or fidelity in your own name and it won’t charge tax. We don’t know your money scenario, but if you can it’s always good to leave retirement funds in a retirement account. It was a packet that stated that I've left my employer but my fund is still with Merrill. If I take no action they'll charge me a fee to keep managing it. There's a whole bunch of stuff about how the payout and rollover works. I for sure missed the deadline for a payout (April 18), and I think the deadline for a tax free rollover is 30 days after that (60 days after the notice was supposed to arrive). That just passed. Basically, I never established contact with these people (it's Merrill) since was all just handled by work with my lazy consent, now I'm being bombarded with a bunch of decisions and descriptions of edge cases, and no real means to get in touch (no account number with which to make an online login, or maybe just a phone number). I'm having to try and read this thing on lunch breaks on long shifts, maybe I'm being dumber than I really am. If my goal is to move the money to my own IRA or appropriate retirement fund, do I just make a login to the Merrill site and start digging? Is the espp probably also handled by them? How do they identify me now that I've changed employers? Is my understanding of the deadline correct? Are the taxes as bad as I'm thinking they'll be? I kinda want to go back to socking money away without thinking, but I also feel a little ashamed for giving up my agency like that. And also a bit worried that I'll get funneled into some least-resistance option that will turn out really subpar.
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May 28, 2021 03:58
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Yak Shaves Dot Com posted:It was a packet that stated that I've left my employer but my fund is still with Merrill. If I take no action they'll charge me a fee to keep managing it. There's a whole bunch of stuff about how the payout and rollover works. I for sure missed the deadline for a payout (April 18), and I think the deadline for a tax free rollover is 30 days after that (60 days after the notice was supposed to arrive). That just passed. Great. The money is likely still there less whatever fees have been charged if they haven't actually cashed you out. Call them and figure out how to get access to the account online. Find out what's there. Next, assuming there is money there, go to Vanguard or fidelity and open a "rollover ira" if your 401k is traditional/regular or a "roth ira" if you see the word roth anywhere. Once you get that setup, call up your ira account people and ask for help rolling over your Merrill 401k into your shiny new ira. They will walk you through the rest. No taxes will come out anywhere, that warning is just if they cut you a check - you have some number of days to deposit it in your ira/401k before it becomes income and penalties magically. Until the check is cut the timer doesn't start. Good job taking control of your finances.  Once you have access let us know what you find and we can help you go from there. We're big on low fee index funds and mindlessly shoveling money in. It's the ideal thing. It sounds silly but so far so good. H110Hawk fucked around with this message at 04:09 on May 28, 2021 |
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May 28, 2021 04:06
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Yak Shaves Dot Com posted:It was a packet that stated that I've left my employer but my fund is still with Merrill. If I take no action they'll charge me a fee to keep managing it. There's a whole bunch of stuff about how the payout and rollover works. I for sure missed the deadline for a payout (April 18), and I think the deadline for a tax free rollover is 30 days after that (60 days after the notice was supposed to arrive). That just passed. Don’t beat yourself up for taking your time, it’s stressful for a lot of people. That said, the other plus side, as the other person is saying , is you aren’t out anything but whatever fees. So positive encouragement , you still have plenty of time to get this set. Put it in VTSAX Vangaurd funds, or buy a lot of cocaine. Either is a acceptable.
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May 28, 2021 04:19
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H110Hawk posted:Yes I understand the basic / naive formulas, what I'm wondering is how to calculate the expected value here and why it saves me money: The cost of money has changed since you got your first loan. Banks charge you interest based on what they can collect/loan out at, so a 3.75% loan is worth a lot more now because they can borrow money for a much lower rate than that. They're going to borrow money at something like 1% to immediately payoff your 3.75% loan, and then charge you 2.75%. When you originally got your loan those numbers were different, they probably had to borrow at 2%. None of this matters though. You can sell points to get a free refi for way less than 3.75% if you're on the fence for some reason. I refinanced my old 3.8% loan down to 2.9% and was paid $1k after closing costs for the privilege. I don't see a reason to think about it if your breakeven point is immediately.
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May 28, 2021 04:46
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Duckman2008 posted:Don’t beat yourself up for taking your time, it’s stressful for a lot of people. That said, the other plus side, as the other person is saying , is you aren’t out anything but whatever fees. Or invest in plywood, according to all the wood memes I've been seeing lately.
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May 28, 2021 22:06
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A friend of mine has just started managing her long term investments herself. I sent her my asset allocation spreadsheet (based on Canadian couch potato’s from like 8 years ago) but she hates it. Can anyone recommend their favourite asset allocation calculation tool?
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May 28, 2021 23:03
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tuyop posted:A friend of mine has just started managing her long term investments herself. I sent her my asset allocation spreadsheet (based on Canadian couch potato’s from like 8 years ago) but she hates it. Can anyone recommend their favourite asset allocation calculation tool? Consider a one-stop-shop fund such as XBAL/XGRO/XEQT (Or one the the similar offerings from Vanguard or BMO) for ultimate couch potato investing. Passiv basically makes balancing/asset allocation spreadsheets obsolete, and is in active development with a very responsive team of devs. e. Comedy answer buy her an account and send her to the Canadian investing thread.
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May 29, 2021 00:11
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Nofeed posted:Consider a one-stop-shop fund such as XBAL/XGRO/XEQT (Or one the the similar offerings from Vanguard or BMO) for ultimate couch potato investing. Holy poo poo look at this passiv thing. This is really impressive and I feel like so much time has been wasted!
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May 29, 2021 01:39
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tuyop posted:Holy poo poo look at this passiv thing. This is really impressive and I feel like so much time has been wasted! It's neat. If you have unregistered accounts, Adjusted Cost Base Dot See Eh is another cool spreadsheet eliminating tool, in case you weren't aware!
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May 29, 2021 02:53
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How important is regular rebalancing really? Do I care much if a lazy invested low-fee 70/20/10 allocation slides to 71/19/9 over time?
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May 29, 2021 04:17
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EmmaDilemma posted:How important is regular rebalancing really? Do I care much if a lazy invested low-fee 70/20/10 allocation slides to 71/19/9 over time? Here's a Vanguard Paper. Vanguard Boffins' Conclusion posted:Although a strong case exists for regularly rebalancing your portfolio to improve its risk-adjusted return, no specific rebalancing frequency and/or threshold is optimal for all investors. Generally, more frequent rebalancing will limit the risk in a portfolio to a level suitable for the investment goal, but this potentially comes at the cost of lower returns, increased turnover, and a heavier tax burden in the current period. Just as when investors determine a target asset allocation, they must balance their willingness to accept risk against their expected returns. Investors may also be able to improve portfolio performance, without sacrificing risk control, by practicing tax-efficient rebalancing through the use of tax-advantaged accounts, rebalancing with portfolio income, incorporating tax- and cost-sensitivity awareness into their rebalancing decision, and gifting overweighted and highly appreciated securities. Many people (Citation needed) rebalance solely with new contributions and distributions, to avoid selling anything off - especially important in non-tax advantaged spaces (It's worked for me so far, at least) None of this is required at all if you're in a asset allocation fund or target date fund, where all this happens automagically.
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May 29, 2021 04:31
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This quote from the paper lays it out:quote:What’s remarkable is that starkly different strategies were equally successful in controlling risk. At one extreme is a monthly 0% threshold strategy. If portfolio allocations differ at all from their target at month-end, the portfolio is rebalanced. Over the past 92 years, this strategy would have rebalanced a portfolio more than 1,100 times to produce an annualized return of 8.20%. At the other extreme is an annual 10% threshold strategy. The portfolio is evaluated yearly and rebalanced only if allocations differ from their target by more than 10 percentage points. This strategy led to only 14 rebalancing events, also producing an annualized return of 8.20%. We see that most rebalancing strategies have historically produced similar returns and Sharpe ratios on an after-tax basis.… It's worth doing, but you can be pretty lax about it. The important parts are to do it at all, and to do it methodically (as opposed to emotionally). You probably do not care if you're one percentage point out of whack. (If you want the opposite end of "pretty lax", set up a spreadsheet to implement the formula in this paper and have it email you when you should rebalance.)
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May 29, 2021 05:25
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I always thought rebalancing was more for your psychological benefit so that you don't freak out and sell immediately when there's a recession. If you just do it once a year like a normie it should be fine.
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May 29, 2021 08:18
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