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There is an overall maximum total, including employer contributions and non-differed contributions but it's 49k or 100% of Income. http://www.irs.gov/retirement/participant/article/0,,id=151786,00.html The employer's limit is 6% and if you make over $125k you fall out into a special little exception called highly compensated employees where you are limited to 125% of the average election of non-HCE personnel at your employer (if the pleebs all elect 3%, you're stuck with 3.75%). All of this is limited to the first 245k of salary also. I.E. the maximum theoretical amount you can get from your employer is $14,700. Throw in your own 16.5 and you would have to contribute 17.8k of post tax money to get to the actual overall limit.
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Sep 28, 2011 00:50
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I've got a 401k with my employer. 7 years ago I set my contributions to the 401k at "not well thought out" percentages across the different funds that my company offered back when I started working. Of course this is hindsight.. at the time I just wanted to be 'aggressive'. I call is not well thought out because I didn't really follow up and do any other re-balancing. I'm getting serious with optimizing now that I have the time and financial means to do so. I'm also concerned as I watch my portfolio drop every quarter. I want to be able to set this and check it maybe once or twice a year, knowing that my allocations match my risk. Here's my current portfolio: code:I can't help but feel I needs some bonds in my portfolio, probably because I don't have any, but I don't know if its a good time to do that. Please note I haven't funded a Roth before this but plan to fund 10k total (one for me one for the wife) this year, and open a separate account for the remainder of the money that is not in cash for an emergency fund (30k+) Can someone please recommend a decent mix based on the options available and my current %ages? I have the option of investing in a Bond fund which matches the Barclays Capital Aggregate Bond Index. In addition, given that same risk tolerance and current market exposure, whats the recommendation for what I should buy in the Roth? I will also accept links to good quality reading, but there's just so much out there I don't know what to trust. Thanks a bundle. dhrusis fucked around with this message at 02:31 on Sep 28, 2011 |
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Sep 28, 2011 02:23
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dhrusis posted:I've got a 401k with my employer. 7 years ago I set my contributions to the 401k at "not well thought out" percentages across the different funds that my company offered back when I started working. Of course this is hindsight.. at the time I just wanted to be 'aggressive'. I call is not well thought out because I didn't really follow up and do any other re-balancing. 17% cash in your retirement fund at your age is silly. It falls under -1 on the 0/10 risk scale. Especially for a long term passive investor. For a more active trader looking for opportunities might argue that having cash is a good idea, but given your facts, it's a poor idea. Today is the best day to open a Roth account. Get the money in there, you're young, start now. If you have the cash, you should put the money in as soon as possible. Timing the market is beyond difficult and for the purposes of this thread, is impossible. Just put it in and put another 10k on Jan 2. (Assuming you have $25k+ portfolio) You are seriously over-exposed to Exxon. Is there a reason that you have it? If it's an employee option program you should work to divest as soon as you can (without incurring penalties) but if you are just a general investor buying Exxon you may want to rethink hitching that much of your finances to one company. For rebalancing, just rebalance into whatever your new allocation is and then check it every 6 months or so and if it's off by more than 5%, readjust. Which is to say 5% off of where you want it, if you wanted 20% in bonds, only rebalance at 15/25 not 19/21 (5% of 20). You could do well with some combo of the Four indexes (even if just in equal parts). Age in bonds is the general rule of thumb around here. You could do less if you wanted to be a bit more aggressive, but if you are going to fret over your statement every month, I'd recommend considering more. code:code:KennyG fucked around with this message at 02:44 on Sep 28, 2011 |
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Sep 28, 2011 02:42
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The six new Vanguard Admiral funds announced three months ago became available yesterday -quote:Vanguard Developed Markets Index Fund Existing investments will be converted automatically later this year, but you can do it now by calling or logging into the website and clicking a convert link on the right side of your fund holdings. Source
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Sep 28, 2011 14:25
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var1ety posted:The six new Vanguard Admiral funds announced three months ago became available yesterday -
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Sep 28, 2011 15:32
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KennyG posted:17% cash in your retirement fund at your age is silly. It falls under -1 on the 0/10 risk scale. Especially for a long term passive investor. For a more active trader looking for opportunities might argue that having cash is a good idea, but given your facts, it's a poor idea. Kenny, thanks so much for the feedback. I will re-balance as soon as I can and go with the more aggressive mix, with the bonds (10%) taking place of what the cash was supposedly doing. I know hindsight is 20/20, but I'm a little disappointed that I had cash in the account for so long. Balance is upwards of 130k at the moment, and I'm maxing it out every year. One question about the bonds -- with them being so low at the moment, is it really a good idea to buy, or is that the exact reason to buy? I guess I'm wondering why we wouldn't split that last 10% into some of the other funds. Are there any tax or bad cost basis effects to re-balancing a portfolio? I've got it in my mind that you shouldn't sell for some reason, but perhaps that's a different situation. For the Roths, do you advise I go with the same mix? As for the overexposure - yes, its a employee purchase plan. I don't purchase it any more as an election -- its an artifact from previous purchases. You mention that I'm over exposed because that stock is held in the S&P as well as the Wilshire? dhrusis fucked around with this message at 01:03 on Sep 29, 2011 |
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Sep 29, 2011 00:58
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This makes me think. I know it's silly to try to time the market for long-term investments but is that still the case with fixed-interest investments like bonds? Given that the 10-year bond is hovering at or just below 2% right now (which is very low), would now be a silly time to buy those bonds? I know this also harkens into the past performance does not indicate future performance but this is a bond so I wonder if it can be treated somewhat differently from other types of investments?
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Sep 29, 2011 20:48
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totalnewbie posted:This makes me think. I know it's silly to try to time the market for long-term investments but is that still the case with fixed-interest investments like bonds? Given that the 10-year bond is hovering at or just below 2% right now (which is very low), would now be a silly time to buy those bonds? This is how I feel, but I know very little. I just don't see the point of buying bonds right now for long term hold if I'm comfortable with making a purchase in say... 1-2 years when they may offer a better return (when I'd be rebalancing again anyway).
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Sep 30, 2011 00:32
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I just thought about this some more and... I wonder if Japanese investors said the same thing to themselves 15 years ago.
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Sep 30, 2011 02:57
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Current bonds just don't seem like they make a worthwhile investment unless you have the capital to buy a lot of them.
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Sep 30, 2011 04:00
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mobn posted:Current bonds just don't seem like they make a worthwhile investment unless you have the capital to buy a lot of them. If you look at it like that then bonds will never look like a worthwhile investment. When their rates are higher, so is everything else. You aren't after bonds for raw yield, you are after it for lower variance. Also this is one of the reasons why individual bonds aren't comparable to bond funds. If you buy a 10 year individual bond you are locked in for that full time, where as if you are buying a bond fund with the same average duration, new bonds are being bought and old ones maturing all the time, so they are going to respond to change in rates. That can be good or bad depending. ^^Also Japan.
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Sep 30, 2011 14:52
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Chin Strap posted:^^Also Japan. But at that point the only thing you missed was not buying a 2% bond 5 years ago when you could buy the same 2% bond today. The bigger poo poo sandwich would have been if you were looking at a 4% bond and saying, "I'll buy when there's a better return" and the rate drops to 2%. Then you lose the price increase due to reduced yield. If you buy a 10yr@4% and rates goes up to 6% after 5 years, you lose 13% in price. If however rates go to 2%, price goes up 9.8%.* There is less upside as rates go down. This is my current aversion to bonds, not that the rates aren't high enough, but really that the rates can't go down much more. Bonds won't go into negative interest so really, how much lower can they go? Personally, I have 0% allocation for bonds in my retirement accounts. I am 33 years away from being able to even withdraw the money and 39 years from when I want to retire so I am not concerned with the fact that my portfolio is down 15% for the year. I know my risk tolerance and I'm not about to  just because it's down this year or next. Time is my best ally.To Dhrusis: Do  NOT own bonds outside of your 401k or IRA. Bonds are terribly tax inefficient. Every time you get paid you take a tax event this can be nasty with a high turnover bond fund. If you have assets that are subject to tax, it is best to have low cost index based options as they have very low turnover and you will only pay the qualified dividends rate on dividend disbursements.You are EXCEEDINGLY over exposed to XOM. Think about it, Even as the second largest market cap company (@$360B), they are about .5% of the global market cap (somewhere around $50T). Your portfolio is 12% XOM, this means you are 24x times the market's holding in this one stock. It gets worse. If you are still an employee, you are ridiculously over exposed. This is because currently, your salary and all of your future income potential is linked to XOM. Hypothetically, if you earned $100k/yr and it took you the average 9 months it currently takes to find a job if you were to unexpectedly be terminated. You would be exposed to the tune of $75k in salary and 15k in stocks. Not pretty when you have $130k invested. Yes, XOM isn't going to go bankrupt tomorrow, but that's what people said about Enron. Diversify my good man, diversify. You said one other thing that makes me curious, again assuming you are still employed and eligible for the employee stock plan. Why aren't you participating any more. I know I just wrote two paragraphs about being over exposed to your employer, but many employee stock plans are still a good deal as long as the terms aren't egregious. You don't have to buy and hold every stock you ever buy until you hit 65. If it's financially beneficial for you to participate in the program, you should do so. Participate, let the shares vest, then liquidate. Assuming your period isn't too long and your options are priced right, it can be treated as extra income.
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Sep 30, 2011 17:03
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KennyG posted:This is my current aversion to bonds, not that the rates aren't high enough, but really that the rates can't go down much more. Bonds won't go into negative interest so really, how much lower can they go? This has been my view on it as well, and the more recent posts had me questioning it. Thank-you for affirming to me that I'm not crazy (or at least not the only one!).
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Sep 30, 2011 17:10
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KennyG posted:To Dhrusis: Now, now, let's not be too hasty on this. SOME bonds are tax inefficient, and most bond funds are (though there are funds out there that limit exposure significantly), but there are bonds out there that are tax free to varying degrees, and they should never be kept INSIDE a retirement account - if they are, you'll end up paying income tax on the gains, where you normally wouldn't pay ANY tax. I personally own some triple-tax-free (Fed, state, and local) bonds, and they're just sitting there spitting off money and I never have to worry about it. Especially if you're going to be buying bonds and not bond funds, it's a very good idea to consider keeping them in a regular brokerage account. I've never looked into bond funds, but a quick google search turned up a Fidelity fund that kept a minimum of 80% of assets in Fed tax free bonds, so depending on your state etc. that would likely dodge the majority of the tax impact.
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Sep 30, 2011 17:13
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Rurutia posted:This has been my view on it as well, and the more recent posts had me questioning it. Thank-you for affirming to me that I'm not crazy (or at least not the only one!). Count me as a third person in this boat. My retirement funds are 100% in equities and over 50% of that is international. I have extreme risk tolerance. When filling out a survey in 2007 to help determine asset allocation I was asked if the 'unthinkable' happens and your portfolio drops 50%, what would you do. I filled in the option to buy even more. Indeed when the market tanked in March 2009 I made good on my answer and made my full 2008 Roth IRA contribution and then my full 2009 one at the same time. You have to have iron resolve and cannot get concerned when the market drops. If you get your 401k statement and you're down 20%, you can't freak you out. In fact as a young person just starting to save up I am hoping for some more down years as it will benefit me in the long run. The article that helped cement my view was this one: http://www.law.yale.edu/news/1826.htm. The TL;DR is that early on in retirement you have few funds so even if you are invested entirely in stocks your weighted average overtime is too bond heavy because when as you shift to bonds in your later years you have many more funds. I am not totally crazy and don't buy on margin as is recommended in the article but instead will settle for 100% equity allocation and perhaps carry that a bit further than conventional wisdom.
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Sep 30, 2011 17:43
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T0MSERV0 posted:Now, now, let's not be too hasty on this. SOME bonds are tax inefficient, and most bond funds are (though there are funds out there that limit exposure significantly), but there are bonds out there that are tax free to varying degrees, and they should never be kept INSIDE a retirement account - if they are, you'll end up paying income tax on the gains, where you normally wouldn't pay ANY tax. I personally own some triple-tax-free (Fed, state, and local) bonds, and they're just sitting there spitting off money and I never have to worry about it. Fair enough. Point taken. I was thinking about that particular bond index fund that he was talking about which is not going to enjoy the same tax status. Your point is absolutely correct however. If you invest in tax advantaged vehicles, like municipal bonds, inside a tax deferred account (Traditional IRA or 401(k)) you will actually end up paying income tax on it upon withdrawl (as the fund's tax treatment supersedes the vehicle treatment) when you wouldn't have paid any tax if it was just held in a brokerage account.
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Sep 30, 2011 17:49
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Dolla dolla cost averaging y'all. Our 401k has some vanguard funds on it, and I've been tempted lately to pick up some VWESX (https://personal.vanguard.com/us/funds/snapshot?FundId=0028&FundIntExt=INT#hist=tab%3A4) It's been giving out monthly dividends with a yield of about 5.5% on average for awhile now. Looks like a pretty solid fund.
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Sep 30, 2011 18:05
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Looking at this chart of historical prices there was a rapid climb from '44 to '64 which then stalled for twenty years until the historical slope was achieved. There was then a rapid climb from '82-'00 which has stalled until present. It will take another ten years of no growth to re-achieve the historical slope. Bullshit? Obviously everything is different but I think a lot of our investment expectations are a result of the last boom generation. I personally agree with the expectation that there wont be much growth for the next ten years as all the poo poo unwinds.
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Sep 30, 2011 18:06
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Man, seeing that giant dip in '29-'32 really puts into perspective how bad things were.
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Sep 30, 2011 18:22
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cowofwar posted:I personally agree with the expectation that there wont be much growth for the next ten years as all the poo poo unwinds. Which means it's the perfect time to get money in retirement vehicles if you've got the time horizon on the back end! Yay!
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Sep 30, 2011 18:27
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I've got 20% of our non-advantaged brokerage account in VBTLX (Vanguard Total Bonds), I never considered the tax implications. That's not to say I didn't pay them, I get the forms from Vanguard and pay appropriately. Should I consider moving it to VWLUX (Vanguard Long-Term Tax Exempt Bonds) instead? I guess it's a riskier asset so I'd bump up the allocation to 25% or 30%.
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Sep 30, 2011 19:25
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How old are you ulf? That's a rather large portion to be in bonds if you're the average age of an SA user.
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Sep 30, 2011 20:00
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Ulf posted:I've got 20% of our non-advantaged brokerage account in VBTLX (Vanguard Total Bonds), I never considered the tax implications. That's not to say I didn't pay them, I get the forms from Vanguard and pay appropriately. And I disagree that 20% is large.
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Sep 30, 2011 20:17
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KennyG posted:Personally, I have 0% allocation for bonds in my retirement accounts. I am 33 years away from being able to even withdraw the money and 39 years from when I want to retire so I am not concerned with the fact that my portfolio is down 15% for the year. I know my risk tolerance and I'm not about to KennyG - Thanks for the insight. I am still employed with them. They offer 6% match when you invest atleast 6%. It used to be that they offered a 1% rate bump (7%) if you put that 6% in XOM stock. They no longer do that, and the stock in my portfolio is an artifact from that prior plan. I realize I'm way overexposed, its just hard to get rid of it for some reason. It's psychological because I work for them, I guess. I'm kind of torn between liquidating it and putting it into other equities or just "not counting" it in my current portfolio (I KNOW this is a dumb idea and is just burying my head in the sand.. I need to be convinced) In addition, I don't want to deal with any tax issues around selling a low cost basis stock (I have some @ 35$ for instance...) I participate fully in the 401k, and fully fund 2 Roths as well. I decided to not put any cash in bonds in my current 401k, so I'm contributing 40% S&P, 30% Wilshire 4500 and 30% MSEAFE. My next move is to open a regular brokerage account and dump as much cash as I can in it. What is the going recommendation for investing in a standard, non tax advantaged account? No bonds that pay dividends, unless they are tax free (munis, etc), I get that. Is there a problem with putting in the same 40%S&P, 30% Wilshire 4500, 30% MSEAFE, or would that just exacerbate my overexposure issues since now my 401k and external accounts are all invested in the same place?? VWESX looks pretty tasty compared to the S&P!
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Oct 1, 2011 01:36
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Secret Sweater posted:How old are you ulf? That's a rather large portion to be in bonds if you're the average age of an SA user. As an aside - I'm 30 and have about a 30% allocation in bonds. There is pretty solid evidence out there that holding at least a 20% bond allocation does little to cap your potential equities upside, BUT does a significant amount to reduce your volatility. I forgot the exact number and breakdown so don't take these numbers at heart, but the logic is something akin to holding a small portion of bonds will reduce potential gains by X%, but reduce volatility by 2X. Again, I'll have to recheck to get the exact numbers, but at small allocations (between 10-30%) holding that bond allocation does very little to alter your long-term potential gains, but has a huge outsized influence on reducing your portfolio's volatility. So yes, while going 100% equities has greater potential upside, it essentially leaves money on the table by not trading a small portion of potential upside for significantly reduced risk Happydayz fucked around with this message at 23:29 on Oct 1, 2011 |
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Oct 1, 2011 03:26
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gvibes posted:Do you have tax-advantaged accounts? You just have a total asset allocation in mind, and dump the bonds in the tax-advantaged accounts. Doesn't sound like anyone is saying "yes, tax exempt bond fund is the way to go for you".
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Oct 1, 2011 04:56
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dhrusis posted:I need to be convinced I can do that. If you do awesome (and I mean loving rockstar awesome) at work, what do you think is a more likely result? You get a 10% raise or XOM stock goes up 10%? Exactly, despite your thoughts, a company of that size has virtually no correlation between your performance and it's stock price. Unless you are at the very least a Senior Vice President, your compensation for your performance is going to come in the form of bonus and salary and not better stock performance. Is it in a taxable account or 401k? If it's in 401k, there is no such thing as basis. Sell when ever you want, buy what ever you want. If it's taxable (stupid) you would want to sell it as low as possible, but do so soon after Jan 2 of next year. This will give you 16 months before you have to pay the CG tax. Selling on Dec 30 means that it's due April 15, 2012 instead of April 2013. If you're going to sell it, you need to do it before the LTCG tax resets after 2012. The only thing that matters for Modern Portfolio theory is total allocation. You could do identical contributions in all accounts and be just fine. The only thing to consider is the tax implications of the assets. Some assets are better inside and outside of tax advantaged funds. As to your last statement. All bonds pay 'dividends.' That's how you make your money. Some are not taxed, depending on who issues them like state and local governments. VWESX is going to look great over the last 10 years, because long term interest rates have fallen precipitously over the last 10 years. If the interest rate goes up, the price of the bond falls. This is extra important when the bond fund is LONG TERM. The longer the term, more extreme the price change. It doesn't matter if you plan on holding that to maturity, but a long term bond fund will not hold to maturity, it wants long term assets. A bond maturing in 3 years is no longer long term. Ask your self, what happens when this multi-decade run of falling interest rates goes the other way? That's right. You can flip that chart upside down and start crying. It is a worse idea to look at past performance in bonds than in stocks. At least with stocks, a company could be well run and simply have some sort of inherent advantage over the long term. On bonds, debt is debt. As growth and risk apatite changes so do the prices. The only thing that matters is what type of debt. Debt that performs well in one market will perform proportionally poorly in the opposite. Edit:For more on why VWESX may not be the best investment for a long term investor. Read This KennyG fucked around with this message at 22:43 on Oct 1, 2011 |
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Oct 1, 2011 22:38
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A question for 80k: I purchased "Expected Returns: An Investor's Guide to Harvesting Market Rewards" (per your recommendation). It is a great read, though I would like to know your thoughts on something: What do you think of the author's suggested strategy of leveraging low-risk, low-return assets to achieve a better risk/reward profile than going long a risky asset (e.g. leveraging bonds to an equity-like level of risk)? Would this even be a practical strategy for a retail investor? Wouldn't the cost of financing this leverage nullify the additional return?
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Oct 2, 2011 02:25
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I happen to have about 10-15% in bonds, but then again I also happen to be 40% international with my equities. I don't know, my time horizon is the same as everyone else's, but I just disagree with the 100% STOCKS WHOOOO LET IT RIDE philosophy. Diversification and all that, I guess. I like the idea of having multiple vehicles making money at different rates, but with the volatility skewed to suit the time horizon.
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Oct 2, 2011 17:41
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Hi guys, today after a year of temping at a Fortune 500 company they've made me a permanent, benefited employee. I'm 28 and make about $48000 a year. They give 50% 401k matching on the first 10% salary (so I'd max at $5000 a year), vesting in 4 years. They give a 10% discount on their corporate stocks, up to $12,000 a year. I finish paying off my small condo in a month, and from then on my expenditures are about $500 a month for everything (condo fees, shopping, all insurance). No debt, $10k emergency funds. Let's say I'm mostly interested in... "medium-term" investing. Is there any reason I can't max out both 401k and stocks then withdraw everything in four years (or eight or ten, whenever I'm ready) to help follow my dreams and start a business? Mathematically it looks like even with the 10% tax penalty on the 401k, I can still profit well from the match vesting. I'm not wondering if it's smart, I'm wondering if it's doable. I live so far beneath my means that I figure I can afford to make a gambit for midlife entrepreneurship and still have a free-and-clear house and more nest egg to fall back on if I gently caress it up. If the 401k four-year-bonus $10,000 is taxed at about 40% including penalty, that's still $6000 in "free money" over versus not participating in 401k at all, correct?
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Oct 3, 2011 21:33
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I posted this in the newbie thread and didn't get an answer. Maybe better suited for this one. I currently carry all my investments at Fidelity. I have an ING savings account and checking account elsewhere, but investment wise, I'm at Fidelity. This includes a Roth IRA that is in one of their target funds, and an investment account with an index fund and some other funds. Now my question is whether this is safe or not. Now I understand I'm buying funds and it's not technically sitting in some Fidelity bank account somewhere, but should I be splitting up my investments between Fidelity and Vanguard? Is there even a remote chance that my money could go away if Fidelity had some kind of massive financial problems? I had planned to move my IRA to Vanguard because of the fees, but wondering if I should leave the other stuff at Fidelity so that I do have a split. Or am I just being paranoid?
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Oct 4, 2011 00:03
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Niward, the type of risk you are talking about is basically covered SIPC insurance. Other people can fill in on the details or you can read up on it, but in general they protect against outright fraud on behalf of your brokerage. Example if you own a stock and it tanks because of fraud by that company you are NOT protected. If Fidelity turns out to be a ponzi scheme and they don't actually hold the assets they say they do, that would be a covered event and the SIPC works to replace your missing shared.
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Oct 4, 2011 02:39
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Zero VGS posted:Hi guys, today after a year of temping at a Fortune 500 company they've made me a permanent, benefited employee. I'm 28 and make about $48000 a year. I would say yes, this is a decent plan, especially if there's a chance you'll wind up just keeping your 401(k) for retirement. Your company is offering you free money and regardless of your intentions for that money, you don't want to just pass it up. At 28 you really should be getting money into retirement savings anyway - these are the years where you pile in the cash so that in your 30s and 40s and (especially) 50s, compound interest has something significant to do its magic to. If you do anticipate an upcoming expense a few years down the line, I'd encourage you to also save cash/liquid assets for that, on top of your retirement savings. Since there's an annual limit to how much you can sock into tax-advantaged accounts, taking money out that can't be put back in means permanently reducing the total tax-advantaged retirement savings you will accumulate over your lifetime. But: for that stock purchase plan, I'd encourage you to sell your shares as soon as you're allowed to. Your exposure to your employer is already high (since they're your employer), you don't want to double-down that exposure by also holding a large amount of your money in their stock.
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Oct 4, 2011 18:20
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Secret Sweater posted:How old are you ulf? That's a rather large portion to be in bonds if you're the average age of an SA user. I'm like 80% short term bonds right now. I'm increasing my retirement savings by moonlighting rather than increasing my risk with stocks. I've been very wary due to the European debt crisis. Not sure when I'll get back in. I'm planning on getting back in either if things settle or the DJI is <9000.
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Oct 4, 2011 20:57
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Earlier this year I opened up an account at Vanguard. I rolled over a SIMPLE I had from a previous employer to a Traditional IRA, and I rolled over a Roth I had with sharebulder to a Roth with Vanguard. Both are in a target retirement fund. The Traditional has around $8,000 and the Roth has around $3,000. This year I've been putting in $100 to the Traditional and $200 to the Roth every month. For next year I planned to keep doing $100 to the Traditional and the maximum possible after that to the Roth. After reading here some more, I thought maybe I should just stop contributing to the Traditional and put it all in Roth. Then I read here about Vanguard's admiral shares, so I thought maybe I should keep contributing to the Traditional until I have enough in there to qualify for admiral shares. THEN I realized the target retirement funds don't have admiral shares. So I'm basically wondering what I should do. Does it make sense to pick funds so that I can get admiral shares? If not, should I stick with funding the Traditional a little bit, or should I just go whole hog to the Roth and let the Traditional stick with what it's got? Thanks.
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Oct 5, 2011 15:04
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Ulf posted:Mid 30s. We have access to several 401ks, one active (now being contributed into as a Roth 401k) but the annual cap isn't high enough to shelter it all. I was hoping to avoid the confusion of splitting assets like this but it's probably worth it to shelter what I can.
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Oct 5, 2011 16:02
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gvibes posted:I do not have an authoritative answer, but it does not seem like too many boglehead-types use tax exempt bonds. I haven't been reading the forum at bogleheads much these days, but there were several biggish threads on bonds and tax-efficiency. If I remember right the tax-exempt bonds were not very efficient and not suggested unless you had no tax-efficient place to buy bonds.
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Oct 5, 2011 17:02
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taqueso posted:I haven't been reading the forum at bogleheads much these days, but there were several biggish threads on bonds and tax-efficiency. If I remember right the tax-exempt bonds were not very efficient and not suggested unless you had no tax-efficient place to buy bonds.
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Oct 5, 2011 17:15
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Zero VGS posted:Let's say I'm mostly interested in... "medium-term" investing. Is there any reason I can't max out both 401k and stocks then withdraw everything in four years (or eight or ten, whenever I'm ready) to help follow my dreams and start a business? Mathematically it looks like even with the 10% tax penalty on the 401k, I can still profit well from the match vesting. I'm not wondering if it's smart, I'm wondering if it's doable. I live so far beneath my means that I figure I can afford to make a gambit for midlife entrepreneurship and still have a free-and-clear house and more nest egg to fall back on if I gently caress it up. If the 401k four-year-bonus $10,000 is taxed at about 40% including penalty, that's still $6000 in "free money" over versus not participating in 401k at all, correct? It's not just the 10% penalty. It's 10% plus the general income tax burden. Lets say you happen to get 100,000 in there by the time you're 35. If you wanted to withdraw it (even if you could, more on that in a minute) you'd show 100k in income. Let's say, best case scenario, you quit your old job December 31 and then took the distribution Jan 1. As a single person income tax will hit you for 28% of ~90k or ~$25k and then $10k on top. That means you will keep about 65k of your 100k. Now all of this assumes that you are even allowed to withdraw. The IRS generally limits your withdrawl to medical bills, down payment on a house, preventing foreclosure or to pay for college for a child or a spouse. Starting a business is not listed in there. You could sell the stock, but investing enough to start a business in one company's stock (especially your employer's) with only a 10% price break is not a wise investment.
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Oct 5, 2011 20:28
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KennyG posted:It's not just the 10% penalty. It's 10% plus the general income tax burden. Lets say you happen to get 100,000 in there by the time you're 35. If you wanted to withdraw it (even if you could, more on that in a minute) you'd show 100k in income. Let's say, best case scenario, you quit your old job December 31 and then took the distribution Jan 1. As a single person income tax will hit you for 28% of ~90k or ~$25k and then $10k on top. That means you will keep about 65k of your 100k.
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Oct 6, 2011 18:17
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