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Here’s where I am with I Bonds and my emergency fund: Pre Covid I had $10k on the dot in our emergency fund. Post Covid we have been fortunate that we both found jobs where we make more. We were up to $20k emergency fund, and I def want to keep it at $15k for us. I waited a bit on it (because I contributed to our Roth in December and January….damnit), but last month I put $4k in I Bonds. So I am at $4k IBonds, $15k emergency fund at the moment. Post Covid, I am keeping a higher than probably needed emergency fund ($10k should be fine for us for instance). So I haven’t completely decided , but probably my goal is $10k in I Bonds, and $10k HYSA. Going forward after that, I’ll be contributing to Roth and such first (of course), and if I have extra money , I’ll either just add more I Bonds, start a taxable retirement account (we haven’t been quite there to do that yet), or maybe something else if it comes up as a better option. I agree I Bonds quite possibly can go back to 0%, which if so is mostly a good thing. I’ll probably leave my I Bonds there regardless just so they’re inflation protected , I just wouldn’t add as much to it is my end of the day analysis.
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May 30, 2022 01:12
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Jows posted:Very few govt things are indexed to inflation. Dependent care flex accounts have been stuck at $5k since the loving 80s. Social Security COLA is a pretty big one.
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May 30, 2022 01:35
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Re: I bonds going to zero - its not something that happens particularly often. If we look at this 0% fixed rate bond purchased 9 But, you do get a lot of periods with 1-3% rates, which is consistent with a real yield of 0%. Its not the best returning asset most of the time, but it is guaranteed to never lose value (both nominal and real). edit: apparently its not 2023, but I think the point stands drk fucked around with this message at 02:10 on May 30, 2022 |
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May 30, 2022 01:58
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Eyes Only posted:Compared to a HYSA, the only downside is it will probably take you a week to transfer your money out, you need to deal with the first 12mo issue, and your rate is reduced a bit if you withdraw before 5 years. That doesn't sound like too much work. I'm trying to think how I'd organize things... 60/40 or 80/20? 1. Checking Account - 2-3x Pay Checks 2. High Interesting Savings - 2 Months Savings 3. I-Bonds - 4 Months Savings
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May 30, 2022 02:05
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If you want to get slightly better interest you could ladder CDs so that one matures every month. Tbh the increase in yield is probably not worth the hassle but it's a thought. there's also yottabank, which runs a lottery based on savings: https://forums.somethingawful.com/showthread.php?threadid=3956106 I'm not sure the nominal yield is any better, but it's maybe more fun.
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May 30, 2022 02:11
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pseudanonymous posted:lottery based on savings 0.20% + 1.5% in "prizes" on average isnt even that high (its about what youd get for a 1 yr CD, and the "1.5%" is certainly brought up a bit by those who win large but uncommon prizes)
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May 30, 2022 03:00
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Alliant just raised their HYSA rate back up to 0.75%. 
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Jun 2, 2022 04:20
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withak posted:Alliant just raised their HYSA rate back up to 0.75%. Marcus is at .85 y’all
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Jun 2, 2022 05:13
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Smashing Link posted:I would think your credit limit would also affect how you plan your emergency fund. Mine is equal to about 6 months' living expenses so I would have no problem putting almost all my cash in I bonds. Your credit limit could crash at the same time as your income if you're laid off, or have a huge legal judgement against you, or something like that. I think it's unwise to rely entirely on one's unsecured credit line for the six-month emergency savings rule of thumb. Obviously, credit is available for a bunch of other types of emergencies, so you might decide to only hold 4 months cash on the assumption that you'd be able to run on credit for a couple of months before dipping into cash in many situations.
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Jun 3, 2022 00:04
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Or your card gets compromised and you’re without it. Also, some “cash” expenses you can’t put on a card, without a fat cash advance rate or some borderline retail fraud.
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Jun 3, 2022 05:18
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Inner Light posted:Marcus is at .85 y’all Ally just emailed saying they’re going to 0.8.
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Jun 3, 2022 12:40
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so i'm trying to see if a backdoor roth ira is worth it using a calculator. i set my estimated taxes for when i take the money out pretty high (assumption would be i'd make 50K as more of a hedge.. might be too high though). then i put in the current tax rates of those since i have no other idea how to calculate that. i'll put up the numbers if that's relevant.. anyways. i went and looked at two calculators for this and both say its not really worth it for me vs putting it into a traditional IRA with a nondeductible contribution... my question is... are there any significant issues i should be aware of putting in a nondeductible contribution? my understanding is i'll get taxed initially on the $6K i can put in but otherwise afterwards they can't tax retirement funds twice so whatever is left in there should be good. also can i just dump the $6K into my current TradIRA account or is it better to split it to keep better track?
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Jun 3, 2022 21:49
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Wait, how is a nondeductible trad IRA contribution better than [backdoor] Roth in any way? In both scenarios you pay tax on the contribution at the time you make it, but with the trad IRA the gains are taxed as income when you withdraw them, and with the Roth you don't pay any tax on the gains when you withdraw them. No matter what tax bracket you're in at withdrawal time the Roth should be strictly better than nondeductible trad.
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Jun 3, 2022 22:41
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Strong Sauce posted:so i'm trying to see if a backdoor roth ira is worth it using a calculator. i set my estimated taxes for when i take the money out pretty high (assumption would be i'd make 50K as more of a hedge.. might be too high though). then i put in the current tax rates of those since i have no other idea how to calculate that. i'll put up the numbers if that's relevant.. Yeah... I don't understand what you're saying here. Not sure what you put in that calculator, but for most people, income and tax rates go down after they retire. Either way, there's practically no reason to make a nondeductible traditional IRA contribution if you're not converting to Roth. There are downsides with little upside, so might as well just put it in a taxable account instead. But backdoor Roth is almost always worth doing if you can afford it, unless your existing traditional IRA balance prevents you and it's not possible to move it.
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Jun 3, 2022 22:50
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I was tasked with adding all the employees at my work into this state mandated CalSavers program, and I gotta say Yikes: https://saver.calsavers.com/home/savers/program-details.html It is an automatic 5% gross pay deduction into a RothIRA with a minimum of .85% annual fee. I feel kind of lovely about this, and I'm wondering if any of you have had success finding some plan admin that would makes sense for a small business of 10-15 part time employees?
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Jun 3, 2022 23:16
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i'm just using something like this: https://www.schwab.com/ira/understand-iras/ira-calculators/roth-ira-conversion so i already have some money in a trad ira that i've had for a while which is already tax-deducted. so i put that in as the value of my non-Roth IRAs +$6000 for the amount i want to put into a backdoor roth. for the second question, i put "no" because i haven't made a nondeductible contribution yet. then i put in $6000 for the third question.. I just filled in the rest. I reduced my state tax rate in half for expected state tax at time of withdrawal. time horizon 30 years and my risk profile is moderate at 4.92%.. 
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Jun 3, 2022 23:17
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CopperHound posted:I was tasked with adding all the employees at my work into this state mandated CalSavers program, and I gotta say Yikes: https://saver.calsavers.com/home/savers/program-details.html Wait, California's answer to a workplace not offering retirement is to ...force the employees to use a retirement vehicle they already had access too, and charge them for the privilege? Googling, there are companies offering alternatives, but of course hard to know if any are worth it. I'm also interested in something like this. Maybe a PEO service, but of course that's an expense
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Jun 3, 2022 23:47
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Epitope posted:Wait, California's answer to a workplace not offering retirement is to ...force the employees to use a retirement vehicle they already had access too, and charge them for the privilege? It is a great way to accidentally over contribute if you already have a IRA. CopperHound fucked around with this message at 00:55 on Jun 4, 2022 |
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Jun 3, 2022 23:57
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CopperHound posted:I was tasked with adding all the employees at my work into this state mandated CalSavers program, and I gotta say Yikes: https://saver.calsavers.com/home/savers/program-details.html My wife runs a ceramic studio in SF and had exactly the same situation. CalSavers is absolute garbage. If you can't afford a full 401(k), look at already-existing small employer retirement savings plans like a SIMPLE or SEP IRA. These will provide a better benefit to the employees at a lower cost to the employer than CalSavers. Epitope posted:Wait, California's answer to a workplace not offering retirement is to ...force the employees to use a retirement vehicle they already had access too, and charge them for the privilege? No, California has mandated all employers have to offer a qualifying retirement plan. As part of that legislation, CA created a "state-run plan" so that an employer with no other options would still have an option, or something. CA then contracted out the "state-run plan" to a private entity that is ripping off everyone with absurdly high annual fees. It sucks total rear end. However, it's excellent that most employees in CA will finally have access to some kind of retirement plan, and it's likely that most small employers will figure out pretty quickly that it's better for them and their employees to use one of the other, pre-existing options, such as a SIMPLE IRA. Leperflesh fucked around with this message at 01:09 on Jun 4, 2022 |
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Jun 4, 2022 01:07
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Leperflesh posted:at a lower cost to the employer than CalSavers. It says it's no cost to the employer? https://edd.ca.gov/en/employers/calsavers
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Jun 4, 2022 01:23
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CopperHound posted:I was tasked with adding all the employees at my work into this state mandated CalSavers program, and I gotta say Yikes: https://saver.calsavers.com/home/savers/program-details.html So what happens if I already have my own Roth IRA that I max out in January? They still take the 5% gross pay?
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Jun 4, 2022 03:38
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You get to deal with an excess contribution penalty unless you opt out in time.
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Jun 4, 2022 03:39
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CopperHound posted:I was tasked with adding all the employees at my work into this state mandated CalSavers program, and I gotta say Yikes: https://saver.calsavers.com/home/savers/program-details.html We use Employee Fiduciary. Costs are low. Service is decent, but it’s a no frills and limited handholding once everything is set up. The onboarding process/ plan design went well. We are just finishing our third year with them, and we are not leaving. I can recommend them as a 40 employee place (25 when we started with EF). Vanguard funds with no mark up on expense ratios. Our company pays any and all costs up front, instead of passing along to the employees. Their employee portal is more than dated, but is clean enough. My personal gripe is that my Roth 401k has to have the same allocation as my Traditional 401k, but that is small in the grand scheme of things. https://www.employeefiduciary.com/401k-plan-pricing
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Jun 4, 2022 05:14
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Vanguard itself has an affordable 401k plan that I think just charges a flat fee based on the number of participants, which can be covered in full or in part by the employer. Would have to double check the document they sent for details, but it was the best deal when we switched last year. And of course the funds are the same cheap ones we all invest in anyway. The only thing I don't like about it is it's serviced through Ascensus instead of Vanguard's own platform, which is kind of dumb.
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Jun 4, 2022 06:58
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Epitope posted:It says it's no cost to the employer? There's always at least a labor cost. In my wife's case, because CalSavers has no automated deduction system in ADT, she'd have had to make manual monthly transactions directly with CalSavers for each participating employee. That's absurd and stupid.
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Jun 4, 2022 07:16
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runawayturtles posted:Vanguard itself has an affordable 401k plan that I think just charges a flat fee based on the number of participants, which can be covered in full or in part by the employer. Would have to double check the document they sent for details, but it was the best deal when we switched last year. And of course the funds are the same cheap ones we all invest in anyway. I set up a Vanguard 401k plan through Ascensus at the last startup I worked for when we had 4 people. There is quite a bit of paperwork, but it’s relatively inexpensive and straightforward to use once you get it going. You would get to pick from a list of all the prominent Vanguard funds (I think we had maybe 10-15 on top of the target date ones)
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Jun 4, 2022 15:19
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Strong Sauce posted:i'm just using something like this: https://www.schwab.com/ira/understand-iras/ira-calculators/roth-ira-conversion yo someone yell at me about what i'm getting wrong about this.
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Jun 5, 2022 09:59
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Your original question was is a backdoor Roth ira worth it. Please help me understand how this screenshot is pro or con either way. What is your assertion? Edit: This investopedia page goes into why the backdoor is good Happiness Commando fucked around with this message at 14:37 on Jun 5, 2022 |
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Jun 5, 2022 14:34
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Strong Sauce posted:yo someone yell at me about what i'm getting wrong about this. I have no idea where you got those assumptions or what you're seeing with results but If you assume that your marginal tax rate when you retire will only be 5%+2% state, then the benefits of a roth are going to be limited, since saving those tax dollars are the main benefit. Most people considering the backdoor roth would probably be guessing they will fall into at least the federal 22% bracket or a future equivalent, if only from social security + 401k income. Also, for your situation a backdoor roth would look better than if you consider your contributions for the next few decades rather than just for one single year. The cost for converting your current pre-tax trad IRA contributions is a one-time thing that won't reoccur if you move entirely to backdoor roth for the future.
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Jun 5, 2022 16:14
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esquilax posted:I have no idea where you got those assumptions or what you're seeing with results but If you assume that your marginal tax rate when you retire will only be 5%+2% state, then the benefits of a roth are going to be limited, since saving those tax dollars are the main benefit. When the question is "non deductible trad IRA contribution" vs. "backdoor roth" none of this even matters. It's always backdoor roth. The only reason this question could be asked is because of a fundamental lack o understanding of both types of IRA, how taxes work, etc. I'm just not quite sure exactly what/where the misunderstanding lies with this particular OP.
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Jun 5, 2022 16:43
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It does matter when (like OP) you have a pre-tax IRA balance which would have to be either fully converted or pro-rata'd to access the backdoor roth in the first place
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Jun 5, 2022 16:54
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esquilax posted:It does matter when (like OP) you have a pre-tax IRA balance which would have to be either fully converted or pro-rata'd to access the backdoor roth in the first place Why? The non-deductible contribution already causes just as much accounting chaos whether you leave it in the traditional IRA or roll it to the Roth. Whether to roll the entire balance and not just this contribution into the Roth is a different question.
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Jun 5, 2022 16:58
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Motronic posted:Why? The non-deductible contribution already causes just as much accounting chaos whether you leave it in the traditional IRA or roll it to the Roth. I'm not understanding what you mean by rolling "just this contribution into the roth", as you can't do that because of the pro-rata rule. Can you clarify? To illustrate the concept by using fake numbers - if the retirement marginal rate 0% and your current marginal rate is 22% then pre-tax and post-tax trad IRA distributions are the same as roth IRA distributions. But if you converted your current pre-tax trad IRA to Roth you would have to pay 22% tax on the current pre-tax balance to convert it. So under this false scenario it's a total tax burden of "Something" under backdoor roth versus "Zero" under traditional - and the comparison still holds if you assume a very low marginal rate in retirement the way OP has for some reason. To be clear I don't ever recommend using post-tax traditional IRA contributions over backdoor Roth IRA. Most of the time I'd rather use a normal taxable account over post-tax trad IRA. esquilax fucked around with this message at 17:09 on Jun 5, 2022 |
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Jun 5, 2022 17:07
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esquilax posted:I'm not understanding what you mean by rolling "just this contribution into the roth", as you can't do that because of the pro-rata rule. Can you clarify? Since when can't one convert partial traditional IRA balances? The pro-rata rule has nothing to do with the ability to do this. Only how things are calculated after the fact.
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Jun 5, 2022 17:19
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Motronic posted:Since when can't one convert partial traditional IRA balances? TBH I have no idea what you're trying to say here. You think changing $6,000 cash + $6,000 pre-tax trad IRA into $3,000 pre-tax trad IRA, $3,000 post-tax trad IRA, and $6,000 roth IRA is a worthwhile scenario to discuss?
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Jun 5, 2022 17:31
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I think(?) the argument is that dealing with the pro-rata rule is similarly as annoying as dealing with mixed pre-tax and post-tax contributions in a traditional IRA. In any case, the recommendation to OP should simply be to either deal with the traditional IRA balance by converting it or rolling it (and doing the backdoor Roth), or to forget all that and just use taxable.
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Jun 5, 2022 19:44
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Why would anyone ever have a post-tax traditional IRA? Is there some minuscule advantage to it or is it just where the money goes if you exceed your yearly limits?
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Jun 5, 2022 20:19
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If you aren't converting to Roth I really cannot think of any reason to make non-deductible Traditional IRA contributions. That's the downsides of both taxable and Roth without any benefit. Either do whatever you need to clean things up to do the backdoor or just invest in taxable. Thinking about tax rates is overthinking this particular situation IMO. For people even looking at the backdoor maneuver, there is no choosing whether to do trad or Roth, the decision is made for you. The income limits are way too low for claiming the trad IRA deduction, so the decision is between backdoor Roth or nothing. Without the deduction a trad IRA offers nothing except extra complications with tracking non-deductible basis. Re: taxes, high earners should arguably not be choosing to pay taxes now (Roth) at a high marginal rate, but the Roth tax treatment is still advantageous over a regular taxable brokerage so it's still worth it for many, because the trad IRA option basically doesn't exist. Guinness fucked around with this message at 20:29 on Jun 5, 2022 |
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Jun 5, 2022 20:25
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i remember reading an article that made the case that the tax-sheltered growth can eventually make a post-tax ira contribution on its own superior to just putting the money in a taxable account, but you would so much time for the compounding to catch up that it will exceed pretty much anyone's investing lifetime
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Jun 5, 2022 20:33
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Baby Proof posted:Why would anyone ever have a post-tax traditional IRA? Is there some minuscule advantage to it or is it just where the money goes if you exceed your yearly limits? The main benefit compared to a taxable account is that there is no tax drag on it. The main disadvantage compared to taxable is that earnings are subject to normal income tax instead of capital gains tax, and it's harder to pull money out before retirement. It has no advantages (AFAIK) compared to a Roth IRA. However to use a backdoor Roth easily you have to convert your pre-tax trad IRA balance which can result in an immediate tax impact. If you have a high pre-tax trad IRA balance, and want to take advantage of a backdoor roth, and have free income every year, and can't pay the taxes all at once: it might make sense to make post-tax IRA contributions for a few years as you gradually convert the pre-tax trad IRA dollars to Roth IRA over several years. So it can make sense, but only rarely, and likely only within the context of eventually converting to Roth. esquilax fucked around with this message at 20:41 on Jun 5, 2022 |
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Jun 5, 2022 20:34
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