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Serious_Cyclone posted:Does anyone have experience with setting up a SIMPLE IRA for work done under sole proprietor or single-member LLC work? It looks like a tax-deferred 401k-like thing that I could set up for work I pay myself for through a single-member LLC (side-gig work) and increase my tax advantaged savings, since I am already maxing-out my 401k for my W2 job. I have a Simple IRA that was set up when the company was a sole prop. I'm not the owner but as far as I know it was very straightforward to set up? I am not 100% sure if the rules are different for the sole prop owner as opposed to an employee though. We later reorganized as a Corp and now the owner is also an employee. We use Vanguard but when I looked into it last year Fidelity looked like a very good, possibly better option .
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Mar 7, 2024 02:50
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Small White Dragon posted:It would. So I'd imagine this comes down to some kind of optimization strategy. The situation I find myself in is the following: My W2 job allows me to max out my 401k and Roth IRA My side-gig is currently lucrative but not a game-changer, and I will end my relationship with my major client in summer of 2025. However, the side-gig could explode pretty soon, if I take on a new client. Prospects look very good but it's not a done deal. With this new client my side-gig could potentially match or even eclipse my W2 income. The length of that client relationship is unknown, could be less than a year or several years depending on how things work out. Since I have no intention of a 100+% lifestyle creep, I find myself in a situation where I could have a lot of money to store, ideally in tax-advantaged accounts. At this point it might make sense to forgo Roth in favor of tax-deferred growth accounts? It seems like my tax liability now is far larger than it would likely be in the future, making Roth less appealing. And (assuming I understand this correctly), setting up a SIMPLE IRA would allow me to store $22k rather than the $7k offered by a Roth. The other option, it seems, would be to instead continue maxing out my existing tax-advantaged accounts and instead putting this money into a taxable brokerage.
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Mar 7, 2024 17:06
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I looked at this a little more and you are going to run into the 402(g) limit if you are maxing a 401(k): https://www.irs.gov/retirement-plans/consequences-to-a-participant-who-makes-excess-annual-salary-deferrals see also: https://www.irs.gov/retirement-plans/how-much-salary-can-you-defer-if-youre-eligible-for-more-than-one-retirement-plan
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Mar 7, 2024 18:21
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drk posted:I looked at this a little more and you are going to run into the 402(g) limit if you are maxing a 401(k): https://www.irs.gov/retirement-plans/consequences-to-a-participant-who-makes-excess-annual-salary-deferrals Gah, thanks for this - so booting up an IRA for this work wouldn't actually increase my limit. I thought these could stack with the 401k. Well, that certainly makes the decision easier.
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Mar 7, 2024 18:45
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You say you're maxing out your 401k, but I'm guessing you're only hitting the $23,000 limit from your own contributions. Your employer can make additional contributions, up to an aggregate total of $69,000 in 2024. It's been a few years since I looked into this, but you may be better off not contributing at your W2 job in favor of doing all your contributions through your self-employment so you can open your own solo 401k. You should research this a lot more, but you have a lot more room in the 401k annually than most people realize. You can also look at the mega backdoor 401k, which would let you fill the rest of your W2 (or solo I guess) 401k space with post-tax money that you would withdraw tax-free down the road (either at 59.5 or earlier through a SEPP (substantially equal periodic payments, another weird feature of the tax code)).
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Mar 8, 2024 03:20
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Serious_Cyclone posted:Gah, thanks for this - so booting up an IRA for this work wouldn't actually increase my limit. I thought these could stack with the 401k. Well, that certainly makes the decision easier. Here's a calculator to determine Employee & Employer contributions you can make to an Individual/Solo 401(k). https://obliviousinvestor.com/solo-401k-contribution-calculator/ Can also use the IRS Deduction Worksheet for Self-Employed https://www.irs.gov/publications/p560 if you want to double-check the math.
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Mar 8, 2024 06:09
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tumblr hype man posted:You say you're maxing out your 401k, but I'm guessing you're only hitting the $23,000 limit from your own contributions. Your employer can make additional contributions, up to an aggregate total of $69,000 in 2024. jfff posted:Here's a calculator to determine Employee & Employer contributions you can make to an Individual/Solo 401(k). This is very helpful, thank you. I hadn't considered the angle where I run my own self-employed 401k and contribute up to 20% of my net earnings from the side-gig as an employer contribution. That might substantially change the math again. In the case of running a W2-job 401k and a self-employed 401k, would I still have the option to backdoor Roth up to $7k? That would be ideal. e: in full disclosure, this is a conversation I will be having with a CPA in April, but this thread is excellent for cultivating topics to discuss Serious_Cyclone fucked around with this message at 16:58 on Mar 8, 2024 |
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Mar 8, 2024 16:55
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You should be able to do both yea.
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Mar 8, 2024 17:41
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tumblr hype man posted:You should be able to do both yea. That would be dope. Is there an advantage to considering a mega-backdoor technique for post-tax contributions to this self-employed 401k? My limited read of the situation is that post-tax vs tax-deferred is largely a question about your current vs anticipated future tax liabilities, and it seems like my current tax liabilities in this hypothetical scenario of a 100% income increase would be at their peak.
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Mar 8, 2024 18:14
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Not necessarily long-term, but what's a good option for an online bank that will simply be for collecting interest on an existing home down payment fund? Won't be buying until next year, won't need to pull from it most likely (the "most likely" is why I won't throw it into a CD or something).
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Mar 10, 2024 16:55
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GordonComstock posted:Not necessarily long-term, but what's a good option for an online bank that will simply be for collecting interest on an existing home down payment fund? Won't be buying until next year, won't need to pull from it most likely (the "most likely" is why I won't throw it into a CD or something). Ally bank has been good and fine for me.
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Mar 10, 2024 17:24
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GordonComstock posted:Not necessarily long-term, but what's a good option for an online bank that will simply be for collecting interest on an existing home down payment fund? Won't be buying until next year, won't need to pull from it most likely (the "most likely" is why I won't throw it into a CD or something). Depending on your state you could also do a t bill ladder through your broker to avoid paying state tax on the interest
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Mar 10, 2024 19:34
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Awkward Davies posted:Depending on your state you could also do a t bill ladder through your broker to avoid paying state tax on the interest The low effort version of this is SGOV or XHLF. Treasury money market is good too.
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Mar 10, 2024 20:31
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GordonComstock posted:Not necessarily long-term, but what's a good option for an online bank that will simply be for collecting interest on an existing home down payment fund? Won't be buying until next year, won't need to pull from it most likely (the "most likely" is why I won't throw it into a CD or something). Wealthfront has 5% interest.
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Mar 11, 2024 01:12
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My dad, an immigrant in his 60s who never quite figured out the retirement system in the US, told me he met with some "Retirement Advisor" at a local branch of Citizens Bank. Apparent highlights of the conversation: 1. The advisor comparing the performance of his target date fund from 2007 - present, versus the advisor's "recommended" portfolio. Guess which one won, even after fees? 2. The advisor suggesting he move his 401k/IRAs over to their management, all for the low fee of 1.25%, plus whatever load/etc fees I'm assuming they also have. I loving hate that this is legal, and part of me wants to scream at some lovely, low-life, retail investment advisor in Pennsylvania who preys on people that don't know any better. Is something like Vanguard Personal Advisor Services (at 0.30%) the way to go for someone like him? It looks like Schwab has a bunch of options as well, with widely varying fees.
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Mar 11, 2024 15:40
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Just leave him invested in the target date fund and help him set up an equivalent 3 fund portfolio in taxable if he has one, and don't pay an advisor any fees? Not sure how involved you want/he's comfortable with you to be in his finances. My mom was paying many thousands per year in ER and AUM fees to a vampire before I convinced her to let me set her up with an equivalent asset allocation in a self directed account. She's happy with how much she's not paying the advisor.
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Mar 11, 2024 15:54
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SamDabbers posted:Just leave him invested in the target date fund and help him set up an equivalent 3 fund portfolio in taxable if he has one, and don't pay an advisor any fees? Not sure how involved you want/he's comfortable with you to be in his finances. DIFD (do it for dad) is not the first option: I don't think my dad wants me as his financial advisor, nor should I be.
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Mar 11, 2024 16:31
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Residency Evil posted:DIFD (do it for dad) is not the first option: I don't think my dad wants me as his financial advisor, nor should I be. Is the standard rec of a fee-based fiduciary not applicable here for some reason?
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Mar 11, 2024 16:40
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I see that recommendation all the time, but has anyone ITT who is not themselves a financial professional actually had a good experience searching for, finding, and using a financial advisor? I tried to go through that process and was very unimpressed with the quality of who I found, as well as the fees charged which tended to be 1% of AUM. To the point that I personally would not recommend it.
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Mar 11, 2024 16:47
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KYOON GRIFFEY JR posted:Is the standard rec of a fee-based fiduciary not applicable here for some reason? I'm not sure my dad is savvy enough to vet a fee-based fiduciary tbqh. Also, "find a flat fee-based fiduciary" is the standard answer, but if you actually try finding one it's surprisingly challenging. When you add geography in to the mix, it's not that easy to find a "good" fiduciary who will work strictly by the hour. edit: looks like I was beaten
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Mar 11, 2024 16:51
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Residency Evil posted:I'm not sure my dad is savvy enough to vet a fee-based fiduciary tbqh. XY Planning Network or the WCI recos are where I would look. If not, and if you can't DIY or convince them to DIY, and they'd follow the Vanguard recos, then sure Vanguard recos for 0.3% seem probably not awful.
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Mar 11, 2024 16:56
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Things that a financial advisor is maybe useful for: tax advice, estate planning, keeping you from selling during market downturns or fomo'ing into meme stocks Things that a financial advisor is not useful for: putting your money in a target date fund or three fund portfolio So, OP: does your dad need the first kind of advice or the second? The second kind you can get for free here, because it is so simple. What to invest in is not something you need to pay for even once, and you definitely should not pay for it as a percentage of assets every year.
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Mar 11, 2024 17:00
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CubicalSucrose posted:XY Planning Network or the WCI recos are where I would look. If not, and if you can't DIY or convince them to DIY, and they'd follow the Vanguard recos, then sure Vanguard recos for 0.3% seem probably not awful. Funny enough, if you go through the WCI recommendations many (most?) are not actually flat-fee advisors. drk posted:So, OP: does your dad need the first kind of advice or the second? The second kind you can get for free here, because it is so simple. What to invest in is not something you need to pay for even once, and you definitely should not pay for it as a percentage of assets every year. Nah my dad's not going to post here. But yes I agree the Long Term Investing Thread posters are generally very well equipped to give advice to people who are interested and motivated enough in personal finance to post on a forum all about personal finance.
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Mar 11, 2024 17:13
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Residency Evil posted:Funny enough, if you go through the WCI recommendations many (most?) are not actually flat-fee advisors. Yeah the WCI recommendations do require some sifting through to find one. But if your dad is like my dad, he'll believe any schmuck with a shiny watch over his kids no matter how many post-graduate degrees they have. 
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Mar 11, 2024 17:23
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drk posted:Things that a financial advisor is maybe useful for: tax advice, estate planning, keeping you from selling during market downturns or fomo'ing into meme stocks I know you say it is "so simple" but have you ever tried to explain all the ins and outs of 401k, IRA, taxable, Funds, ERs, etc? I have done this with a ton of "smart" people and have wildly different results. People have very bad financial literacy and really struggle to understand at times. I think we forget how deep into this stuff we are vs even an above average investor. Throw in an aging adult who never learned any of this stuff, just gets harder.
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Mar 11, 2024 17:44
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adnam posted:Yeah the WCI recommendations do require some sifting through to find one. Yup. I think it's only recently that my dad has any respect for my knowledge wrt "financial stuff." And why should he? I'm a dumb doctor. spwrozek posted:I know you say it is "so simple" but have you ever tried to explain all the ins and outs of 401k, IRA, taxable, Funds, ERs, etc? I have done this with a ton of "smart" people and have wildly different results. People have very bad financial literacy and really struggle to understand at times. I think we forget how deep into this stuff we are vs even an above average investor. Throw in an aging adult who never learned any of this stuff, just gets harder. The "advisor" my dad talked to was wrong/misleading on the limitations of a SEP IRA vs a solo 401k, and recommended the wrong solution for his needs. My wife has relatively poor financial literacy and doesn't really care that much. She was however, impressed recently that our investment approach (ie, index investing) was something mentioned on one of her mommy doctor facebook groups.  Most people don't care 10% of the level of this thread.
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Mar 11, 2024 17:56
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spwrozek posted:I know you say it is "so simple" but have you ever tried to explain all the ins and outs of 401k, IRA, taxable, Funds, ERs, etc? I have done this with a ton of "smart" people and have wildly different results. People have very bad financial literacy and really struggle to understand at times. I think we forget how deep into this stuff we are vs even an above average investor. Throw in an aging adult who never learned any of this stuff, just gets harder. I think that is a fair point, but realistically these people probably just want to be told what to do and aren't going to understand the details in the half an hour a financial It doesnt need to be complicated. I consider myself far better informed than the average public and my retirement investments are 100% in a single target date fund. If that is too hard to understand, a financial advisor isnt going to be a ton of help, but will happily charge thousands of dollars a year or more for a hour or two of their time. I do understand many if not most people have a hard time understanding investing. I manage my mom's retirement account, which takes less than an hour a year. This has, conservatively, saved her about $100k over the past decade compared to the advisor she was using before (and liked!). This is a very smart woman with an engineering degree from Stanford, she just dislikes dealing with investments.
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Mar 11, 2024 18:04
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I think your last point is pretty much the situation for so many. You could tell your mom to open X account, buy TD 2040, and be done. If you didn't do it for her though...she was sticking with that "advisor".
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Mar 11, 2024 18:16
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Residency Evil posted:Also, "find a flat fee-based fiduciary" is the standard answer, but if you actually try finding one it's surprisingly challenging. When you add geography in to the mix, it's not that easy to find a "good" fiduciary who will work strictly by the hour. Does your dad need to go into an office, or is talking to someone on the phone enough? Because yeah, if he wants someone within 20 minutes of his house, it might be tough.
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Mar 11, 2024 18:37
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spwrozek posted:I think your last point is pretty much the situation for so many. You could tell your mom to open X account, buy TD 2040, and be done. If you didn't do it for her though...she was sticking with that "advisor".
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Mar 11, 2024 18:49
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Subvisual Haze posted:It's more than just simplicity and not needing to deal with things, although that is a big part. Most people want the feeling of confidence and the appearance of professionalism that a nice man in a suit at an institution can provide, but which is extremely difficult for a child to provide for their parents. The advisor who roped in my mom knocked on her door like a loving vacuum salesman and had a nice suit, slicked back hair, fancy watch, and luxury car parked on the curb. I pointed this out to her and it made her pause and consider just how she got sold.
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Mar 11, 2024 19:59
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Inept posted:Does your dad need to go into an office, or is talking to someone on the phone enough? Because yeah, if he wants someone within 20 minutes of his house, it might be tough. Yup, for stuff like this he's an in-person guy. Subvisual Haze posted:It's more than just simplicity and not needing to deal with things, although that is a big part. Most people want the feeling of confidence and the appearance of professionalism that a nice man in a suit at an institution can provide, but which is extremely difficult for a child to provide for their parents. This is a good way of looking at it, and I'm sure it plays a part. There's psychology wrapped up in this as well, and it's tough for parents to take the advice of their kids. Years ago I bought my dad the Bogleheads book. AFAIK he never even opened it. Also, he's an engineer with a PhD, so, you know. Residency Evil fucked around with this message at 20:23 on Mar 11, 2024 |
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Mar 11, 2024 20:18
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This is just making me glad my father told me to open a Roth IRA and gave me a link to the Bogleheads forum along with a copy of The Four Pillars of Investing when I was in my mid 20s. Shame it took me 6 years to follow up on it.
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Mar 11, 2024 20:43
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Jabarto posted:This is just making me glad my father told me to open a Roth IRA and gave me a link to the Bogleheads forum along with a copy of The Four Pillars of Investing when I was in my mid 20s. Shame it took me 6 years to follow up on it. what's his SA account
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Mar 12, 2024 00:17
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pmchem posted:what's his SA account Motronic.
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Mar 12, 2024 01:47
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As far as short introductions to investing, I am reminded that If You Can is a good read, and only 14 pages: http://efficientfrontier.com/ef/0adhoc/ifyoucan.pdf Written by William J Bernstein for millennials in 2014, its still a pretty relevant introduction to some financial topics and simple portfolios. That being said, I am fairly sure there are many, many people of six, seven or more figure net worth that absolutely can not be bothered to read fourteen pages about investing.
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Mar 12, 2024 01:50
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My father recently passed and I am receiving a large chuck of money that I need to figure out where to put. I’m hoping someone can point me in the right direction to educate myself on tax efficient investing, as up to now I’ve only had to learn about operating in tax sheltered accounts. For some background, I’m looking to retire in my mid 50s. My wife and I have been pretty frugal to maximize retirement savings to be able to achieve this. We are not maxing all of our available retirement space each year, however, we should be able to hit our goal at our current savings rate. We recently decided to pause any increase to our retirement savings rate to help balance our quality of life now. My goal for the inheritance is to enrich my family’s life, starting today, for the rest of our years on this planet. First plan is roll a third of the money into retirement accounts over some years (max out contributions and use cash to offset the reduction in paychecks). Eventually, our annual cost of living pay increases will have us maxing our retirement space (which we are on board with now that we have extra assets). This should really solidify our retirement plan. Another third I’m planning to put into total US stock market in a taxable brokerage account. This is where I could really use some education on managing taxable gains. No specific goal for this money, but expecting it to be a 10+ year time line, which then starts getting close to retirement anyways. The rest will go towards short term goals and enjoyment. Like increasing our emergency fund from 8 to 12 months of expenses. Paying off car loans (low rates but only owe $12,000 and would rather be debt free outside our mortgage), some home maintenance needs, big vacation to celebrate my dad (travel was his life), and just overall padding our budget over the next several years. A lot of this I’ll want to spread across some or all of bonds, treasuries, MMF, HYSA. These are areas I’m educated on but I’ve never bought bonds or treasuries outside of mutual funds in retirement accounts or ibonds recently. I am interested in setting up ladders that would cover 1-2 years with eventual rolling maturities every 1-6 months that can be automated to rebuy. Does anyone have any resources or advice on where and how to best accomplish this while maximizing my returns (managing taxable gains)? Generally will be in the 22% federal income bracket, possibly 12% the next couple years. State income tax is 6%.
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Mar 12, 2024 18:24
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What form did the inheritance come in? Inherited IRA? Inherited taxable investments? Property? Cash in the bank? Also it might be useful having some numbers on where your net worth is now, including this new inheritance. If you dont feel comfortable posting the dollar amounts, percentages are perfectly fine.
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Mar 12, 2024 18:34
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edit: nvm
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Mar 12, 2024 19:49
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I have an HDCP + HSA through my employer. My dental coverage is provided by my wife's employer as her plan is better. Her plan is the typical FSA only mid-level deductible plan. Can I still reimburse myself from the HSA for any amounts not covered by her dental plan?
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Mar 12, 2024 20:19
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