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I'm 40 years old and have no plans to use any of my retirement money until I retire. Today was my last day with a company that had a 403b program with Fidelity and I have about $40K tied up in that. My new job starts April 1st and they have a Roth 401k, but I will not be eligible to participate until one year after my start date. I am really clueless here. Should I wait a year and then move the 403b money to the 401k? Should I just let the money sit in the 403b and then start contributing to the 401k when I become eligible? If I do need to transfer that money, do I need to talk to my former employer at all, or do I just call Fidelity directly? That money in my Fidelity 403b isn't just going to go poof since I am no longer working for my previous employer, is it? If the best answer is, "You have no loving idea what you are doing. Hire a financial advisor", then what would be the best way to find a good one?
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Mar 15, 2013 17:02
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Unless you feel like paying taxes on $40,000 of income, I'd suggest not rolling it into the roth 401k.
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Mar 15, 2013 17:48
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Are you sure your work doesn't have a regular 401k? Roth 401ks are less common than regular 401ks. Here is a guide to 403b rollovers: http://www.money-zine.com/Financial-Planning/Retirement/403b-Rollover/ From what they say, you probably want to do a Direct Rollover
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Mar 15, 2013 18:43
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Harry posted:Unless you feel like paying taxes on $40,000 of income, I'd suggest not rolling it into the roth 401k. I don't know poo poo about any of this outside of that link that willkill4food posted, but is says: Generally, it's possible to roll-over all or any part of a distribution from a 403b plan to a Traditional IRA or an eligible retirement plan without paying any taxes. This includes Roth IRAs, a 457 plan, and even another 403b account. willkill4food posted:Are you sure your work doesn't have a regular 401k? Roth 401ks are less common than regular 401ks. I don't know for sure. The HR person I talked to this morning touched on it a bit and did say the word "Roth". I knew that I wouldn't be eligible for another year, so I figured I'd have some time to research it. The retirement program they have was not a make or break issue, so I haven't really asked much about it so far. willkill4food posted:Here is a guide to 403b rollovers: My problem at the moment seems to be that I have nowhere to roll it to. I don't know if it makes any difference, but my previous company did not match any contributions, so every penny invested in that 403b came from my pocket. That link says: Normally, a 403b rollover needs to be completed by the 60th day following the day the accountholder received any distribution. If the money is rolled over into another account, then meeting the requirements of this 60-day rule shouldn't be problematic. Anyone inadvertently holding onto the money past the 60th day can be subjected to an very unpleasant tax penalty. What do they consider to be a distribution? I've just been putting money into it and have never withdrawn a cent or received any income. Any money that was made due to interest or stocks going up just stayed in the account. Would it be safe to just let it sit for a year until I'm eligible for the 401k through my new employer, or should I set up some sort of personal IRA to cover the gap?
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Mar 15, 2013 19:55
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SkunkDuster posted:Generally, it's possible to roll-over all or any part of a distribution from a 403b plan to a Traditional IRA or an eligible retirement plan without paying any taxes. This includes Roth IRAs, a 457 plan, and even another 403b account. Roth accounts are pay taxes now, traditional accounts are pay taxes later. If you are switching from a pay taxes later account (which 403b is), to any pay taxes now account (which anything with Roth in the name is), you will have to pay income tax on it. Xenoborg fucked around with this message at 21:02 on Mar 15, 2013 |
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Mar 15, 2013 20:58
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SkunkDuster posted:What to do with old 403b? My husband and I did a rollover of his 403b (at Fidelity) into a traditional IRA (at Vanguard) two years ago. We did it because we were locked into a limited number of investment options in the 403b--that's also why we chose an IRA instead of rolling it into his new 401K (that rollover is not always allowed so you have to check anyway). SkunkDuster posted:What do they consider to be a distribution? I've just been putting money into it and have never withdrawn a cent or received any income. Any money that was made due to interest or stocks going up just stayed in the account. Would it be safe to just let it sit for a year until I'm eligible for the 401k through my new employer, or should I set up some sort of personal IRA to cover the gap? Someone already mentioned direct and indirect rollovers; that's what the link is talking about regarding a distribution. You always want to do a direct rollover if possible; if you're sticking with the same financial institution that should be easy. For us, Fidelity refused to release the money to anyone but us, so we had to do an indirect rollover. They sent us a check for the value of the account--that's what they mean by a distribution. We had 60 days to get that money into a new retirement account (i.e. do the rollover) or else we'd owe income tax. There's nothing preventing you from letting the 403b sit there for a year as far as I know. If you're eligible to rollover into your new 401K, just check the investment options first to see if you like them enough to put your 403b money there too.
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Mar 15, 2013 21:50
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Baja Mofufu posted:My husband and I did a rollover of his 403b (at Fidelity) into a traditional IRA (at Vanguard) two years ago. We did it because we were locked into a limited number of investment options in the 403b--that's also why we chose an IRA instead of rolling it into his new 401K (that rollover is not always allowed so you have to check anyway). Agreed, an IRA will have a number of advantages:
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Mar 15, 2013 22:05
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Baja Mofufu posted:My husband and I did a rollover of his 403b (at Fidelity) into a traditional IRA (at Vanguard) two years ago. We did it because we were locked into a limited number of investment options in the 403b--that's also why we chose an IRA instead of rolling it into his new 401K (that rollover is not always allowed so you have to check anyway). I understand what you are saying, but have no idea how to go about doing any of this. I'm in over my head and will probably gently caress it up if I try to do it on my own. I guess my only question now is how do I find somebody that I can hire that will figure all of this out for me?
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Mar 17, 2013 01:29
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SkunkDuster posted:I understand what you are saying, but have no idea how to go about doing any of this. I'm in over my head and will probably gently caress it up if I try to do it on my own. I guess my only question now is how do I find somebody that I can hire that will figure all of this out for me? If you need help doing the rollover, you should call the institution where you're planning to put the new account. You really don't need to hire anyone to help; that's what the customer service department is there to do (they will mail you all of the forms and answer questions about filling them out, etc.). If you don't know whether to do the rollover, I guess the decision to hire someone depends on how much you feel like learning about investing. How did you choose investments previously for your 403b? I only ask because if you understand the options available the decision will probably be pretty clear (it seems like everyone here pretty much agrees starting a Traditional IRA is best). Also if your last day was yesterday, you may not be able to do anything for a few weeks anyway. Your old job has to update Fidelity that you're no longer employed with them before you can start the rollover.
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Mar 17, 2013 02:13
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Canada chat. Questrade has no commission purchase of ETFs and lets you hold a mix of CAD and USD in your RRSP. I am currently transferring my RRSP from CIBC to them because it is sad to watch the distributions eaten by management fees. Taking advantage of the current conversion rate the plan is to buy American Vanguard ETFs like VTI and VOO instead of their Canadian Vanguard wrapper analogues. Canadian variants have higher MERs to boot. Due to tax treaties with US the American stocks income in RRSP is tax free. For diversity, add some developed, emerging, Canadian equities, and Canadian bonds ETFs. Distributions from USD traded funds will be kept is USD saving conversion fees and reinvested. Is there anything wrong with this scheme?
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Mar 17, 2013 07:56
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tofes posted:My employer just started offering me a 401k plan but none of the mutual funds offered seem particularly great and most of the expense rations seem obscenely high. What's my best bet for determining how to distribute my portfolio? Go with the lowest expense ratios? Curious about this question, because I'm in the same position. New job with 401k...but none of the funds look overly great to my untrained eye. Not a single fund under 1%, which seems outrageous compared to the funds I have in my Vanguard account. Should I just make a list of the funds that have my desired asset balance and then flip a coin?
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Mar 19, 2013 03:01
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polyfractal posted:Curious about this question, because I'm in the same position. New job with 401k...but none of the funds look overly great to my untrained eye. Not a single fund under 1%, which seems outrageous compared to the funds I have in my Vanguard account. You could use your 401k for whatever portion of your allocation that is the most tax-inefficient, like bonds/REITs.
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Mar 19, 2013 03:18
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SInce I'm about to turn 30 soon I thought I would post for any advice about my 401k and retirement. 30 years old, current Roth 401k balance around 30,000. I contribute 15% and company has 2.5% match in stock. I make around 30k per year, I have a pension with the company which should pay between 1-2k inflation adjusted when I turn 60 based on my current salary which may double in the next few years, but would take s 15% hit if I retire at 55. ING is the plan administrator, most of the funds I want to say are Blackrock? Balances Bright Horizon 2045 fund 9.54% S&P 500 equity index fund 9.74% S&P 400 Midcap index fund 10.35% Russell 2000 index fund 15% Int'l developed country index 20.49% MSCI Emerging markets fund 31.17% company stock fund 3.71% Any tips or suggestions? The funds all have relatively low fees. I don't have an IRA.
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Mar 19, 2013 06:35
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* Get rid of the Bright Horizon fund. This is just overlap of all your other stuff. * I would get rid of the mid cap index and just use the S&P 500 along with the Russell to simplify * Get rid of the company stock as soon as possible * Add a total bond fund of some sort. What do you have available? So if I were you I would end up with: * S&P 500: 20% * Russell 2000: 20% * Intl Developed: 20% * MSCI Emerging Market: 20% * Bonds: 20% Make sure to re-balance the portfolio at least quarterly. Over your lifetime, reduce the 4 stock investments equally and increase the bond investment. Personally I would never go higher than 60% bonds though. 30 years old: 20/20/20/20/20 40 years old: 17/17/17/17/32 50 years old: 14/14/14/14/44 60 years old: 10/10/10/10/60
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Mar 19, 2013 14:17
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Dumb person questions in a long post here, but: My current job offers a 457(b)(government) plan. It doesn't seem especially great--limited fund options, 0.1 percent fee on top of the funds' ER plus $60/yr., no match--but I plan to participate for a few reasons: 1.) The funds are all Vanguard, so even with the added fees the cost is not high. 2.) Better to save now than save later. Since my income is low (<$15,000/yr.), this plan seems the best way to access Vanguard's funds and start saving without having to wait the ~2 years it would take to save up a $3000 up-front minimum. I like the idea of a Roth IRA as well, but I personally don't have the scratch to start one right away, and my tax bracket is higher than one might think because I file jointly with a wife who makes about double what I do. ~~Question 1: My current intention is to contribute 6 percent to the plan as that's the most I feel I can afford at the moment. Since there's no match, though, does it make more sense to reduce that and set the difference aside to save for a Roth? ~~Question 2: Among the limited options in this 457 are VBTSX, VTTSX, VTSGX, Target Retirement 2045, VGSTX (that STAR fund), and something called the Vanguard Retirement Savings Trust. VBTSX, VTTSX, and VTSGX with the same balance (90% equity, 10% bonds) as the Target fund is less expensive by 0.08 percent, so it's an obvious choice. But ought I even out domestic and international equity more than the 60-30 split in the Target fund? ~~Question 3: Am I correct in thinking that there isn't much to gain by adding VGSTX (STAR) in a small percentage just to touch its component funds, and that VBTSX is a sufficiently conservative component that I can ignore the Retirement Savings Trust (description below)? Fund details posted:Investment objective: ...seeks to provide current and stable income, while maintaining a share value of $1. ~~Finally, I have ~$2,000 in a 403(b) with TIAA-CREF from my previous employer sitting idle. I plan to roll it over into either this 457 or a trad. IRA because ERs are high (around 1 percent) and I can't contribute to it anyway. However, a portion of that account is in the TIAA real estate offering. Would it be worth keeping some money there just to have access to a real estate investment that I would not be able to have otherwise? Thanks.
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Mar 19, 2013 16:35
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You and your wife make basically nothing, do a Roth IRA.
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Mar 19, 2013 16:47
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Keep in mind that Vanguard's minimums for the Target Retirement accounts are only $1000 instead of $3000: https://personal.vanguard.com/us/funds/vanguard/TargetRetirementList#targetAnchor Select the fund that applies to you, then choose the "Fees and Minimums" tab. Go for the Roth while your tax bracket is still nice and low. If you can scrape up $1k, start it on a target account and then once it is $3000, you could put it in something else (or leave it there as you don't tend to get a lower ER until you buy Admiral shares with a $10k minimum). Edit: Couldn't you rollover your old 403(b) into a Roth IRA with Vanguard? That would get you by the minimums to open the account, it would be treated as taxable income now (while you still are in the low tax brackets), and then you can start contributing to the account immediately w/o having to come up with the $1k seed money to continue to take advantage of your brackets. Edit2: Of course if you do that, you would have to pay the taxes on the $2k... Fancy_Lad fucked around with this message at 18:27 on Mar 19, 2013 |
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Mar 19, 2013 18:09
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Reposting this cause I didn't get any replies the first time: I'm looking to build a Schwab ETF based portfolio and was wondering what you guys thought of this allocation. (Age 27, moderate risk tolerance, long term outlook.) 35% U.S. Stock Market - 35% SCHB, Schwab U.S. Broad Equity ETF (Large Blend), .04% expense ratio 30% International Stock Market - 18% SCHF, Schwab International Equity ETF (Foreign Large Blend), .09% expense ratio - 6% SCHE, Schwab U.S. Emerging Markets Equity ETF (Diversified Emerging Markets), .15% expense ratio - 6% SCHC, Schwab International Small-Cap Equity ETF (Foreign Small/Mid Blend), .20% expense ratio 30% Fixed Income - 20% SCHZ, Schwab U.S. Aggregate Bond ETF (Intermediate-Term Bond), .05% expense ratio - 10% SCHP, Schwab U.S. TIPS ETF (Inflation-Protected Bond), .07% expense ratio 5% Real Estate - 5% SCHH, Schwab U.S. REIT ETF (Real Estate), .07% expense ratio Does this look reasonable? Should I split domestic into more specific categories? The 18%/6%/6% international split is based on trying to emulate the Vanguard Total International Stock ETF based on this thread. I was thinking of adding a gold ETF but not sure where to allocate it.
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Mar 19, 2013 23:25
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Somewhat heavy in bonds and international, but nothing terrible. Is this tax advantaged, or brokerage?
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Mar 19, 2013 23:48
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Harry posted:Somewhat heavy in bonds and international, but nothing terrible. Is this tax advantaged, or brokerage?
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Mar 20, 2013 00:10
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In order to diversify my otherwise rather "dull" portfolio, I bought some raw gold and silver the other day. Risky? Perhaps, but it's diversification and I'm in it for the long haul, 30-50 years maybe. It's also pretty cool to own, and notably it's unregistered and a tax-free profit. Where I live (Denmark), the retirement funds are getting more and more restricted by the state. First, the amount of money that you can contribute and get tax exemption for it getting lowered by the year, the tax on the unrealized gains on the fund is rising, and I have no confidence that the system is going anywhere but towards more restriction. You want to hear some bullshit? I cannot even buy SPY on a retirement fund because it's not approved by the EU (UCITS approval) for retirement fund investment. Apparently the American funds such as iShares or SPDR can't be buggered to get the funds approved in Europe. On the other hand, I'm free to buy small-cap companies or REITs, or any basic company stock, which are 100 times more risky. I've decided to drop it and just invest for money that's paid tax on. Anyway, not relevant to you Americans I assume. Here's a picture of the stuff. I bought it in Germany where the VAT on silver is low. The coins are 20 Wiener Philharmoniker, a few other random ones, a 1kg Cook Islands silver coin bar (legal tender), and a 1 ounce gold bar. The coins have a really nice sound and feel. 
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Mar 20, 2013 10:05
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Pilsner posted:In order to diversify my otherwise rather "dull" portfolio, I bought some raw gold and silver the other day. Risky? Perhaps, but it's diversification and I'm in it for the long haul, 30-50 years maybe. Warren Buffett posted:Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it With that being said I own some random gold and silver too.. but I certainly have no expectation of it increasing in value (notice I didn't say "returning".. since gold doesn't return anything it just sits there) anywhere near what a stock investment would over multiple decades. Over the very long term I expect gold, silver, houses, gems, etc to basically keep pace with inflation and be volatile along the way.
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Mar 20, 2013 13:29
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No one can tell of course. There's been a huge increase in value over the past years, and who knows what the future holds. Anyway, the stuff is around 4% of my total retirement savings right now, and I don't plan on buying more in the near future. I admit it was also partly bought for the aesthetics value.
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Mar 20, 2013 21:31
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I opened a Roth this morning and purchased $10,500 of VTSAX. How does the pricing work out on that? Is it based on the closing value of the day prior ($39.04 was the closing value yesterday and the most current value when I opened the Roth), the closing value of the day I purchase it ($39.32 today) or the value when the funds clear?
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Mar 20, 2013 23:27
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Pilsner posted:In order to diversify my otherwise rather "dull" portfolio, I bought some raw gold and silver the other day. I think it's generally considered a better idea to buy metals in the form of securities rather than actual pieces of metal (Gold ETFs, for example). For one, it's harder to have your securities get stolen from your house. But more importantly, the transaction costs of online securities are usually pretty tiny, compared to the much larger transaction costs of buying/selling physical metal through a retailer, who takes a cut and sells maybe to a wholesaler, who also takes a cut and sells to another retailer, who takes a cut before selling back to the public, etc. Of course this may all be different for your strange, foreign rules and laws and such, I don't know. Personally, I'd prefer buying a mutual fund containing a basket of mining companies, if I wanted to generally track the price of metals without facing all the weird taxes and regulations and whatnot related to the actual metals themselves. Although apparently they're not as solidly linked as I would have thought. Hmm. Leperflesh fucked around with this message at 00:14 on Mar 21, 2013 |
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Mar 21, 2013 00:07
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Unormal posted:You could use your 401k for whatever portion of your allocation that is the most tax-inefficient, like bonds/REITs. Yeah, that's a good idea. I'll do that. I also just noticed that my plan has a 6 year vesting plan. 0% first year, 20% second year, 40% third year, etc. Is this normal? The only other 401k that I've had was 100% invested from the beginning. Between the high expense ratios and the minimum two-year vesting, I'm pretty unenthused about the whole thing. I guess it's an extra place to stash money to avoid taxes, but still 
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Mar 25, 2013 14:11
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I wouldn't make it a priority over a Roth or HSA. Or anything really.
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Mar 25, 2013 14:59
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polyfractal posted:Yeah, that's a good idea. I'll do that. The vesting would only apply to company contributions. Your payroll deductions should be 100% vested from the first day.
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Mar 25, 2013 22:52
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Posted this in the US Income Tax thread, but realized this might be a better thread for it. Anybody have any insight to my questions below?quote:I'm self-employed with no subcontractors or employees.
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Mar 26, 2013 06:30
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Apologies if this is the wrong place for this question... I'm a Canadian with about $60k just hanging out in my bank account, which I'm trying to figure out how to invest. I definitely don't want to babysit my money, I'm looking for more of a 'buy-and-forget' product, which I guess means mutual funds? The catch is that I have strong reservations against having a financial interest in certain companies and industries. Specifically, I want to stay out of natural resources, weapons, alcohol, tobacco, and some big pharmaceutical companies (Pfizer, Merck, Glaxo). I've heard that there are 'ethical' mutual funds (marketed as such), does anyone have any recommendations? Are there "mainstream" investment products that would meet my criteria? I'm really a newbie here, I've pretty much only heard of bonds and mutual funds, so I don't really have a sense of what's out there.
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Mar 26, 2013 09:36
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Droo posted:With that being said I own some random gold and silver too.. but I certainly have no expectation of it increasing in value (notice I didn't say "returning".. since gold doesn't return anything it just sits there) anywhere near what a stock investment would over multiple decades. Over the very long term I expect gold, silver, houses, gems, etc to basically keep pace with inflation and be volatile along the way. Warren, very early on in the gold and silver bull market, owned physical silver and sold it too early. Even he has said he regrets selling it. When I read comments like that from him I know he is just trying to talk himself out of the trade and justify missing the gains. From an article published a year ago: http://www.mining.com/warren-buffett-trashes-gold-but-what-about-silver/ Beginning in 1997, the legendary value investor reportedly purchased a whopping 130 million ounces of silver between approximately $4.50 and $6 per ounce. According to Silver Monthly, from 1997 to 2006, Buffett’s investment fund-Berkshire Hathaway-accumulated over 37 percent of the world’s known silver supply. At Berkshire’s annual shareholder meeting, Buffett was asked about the fund’s silver investment. He said, “We had a lot of silver once, but we don’t have it now, and we didn’t make much on our prior holdings. I bought early and sold early.” Although silver trades near $30 an ounce today, Buffett sold his position near $7.50 an ounce. evilwaldo fucked around with this message at 13:39 on Mar 26, 2013 |
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Mar 26, 2013 12:53
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EstefanHarpero posted:Apologies if this is the wrong place for this question... I'm a Canadian with about $60k just hanging out in my bank account, which I'm trying to figure out how to invest. I definitely don't want to babysit my money, I'm looking for more of a 'buy-and-forget' product, which I guess means mutual funds? In this thread ETFs are the "buy and forget" vehicle of choice because their management fees are significantly lower compared to mutual funds. They are so cheap in part because they simply track some well established index. I'm not aware of any commercial index that tracks ethical vs nonethical companies. That means fund managers have to pick and choose and their fees go up. That said you can own global stock funds like VT where the percentage of any individual company is incredibly tiny. You can buy government bond funds. You buy only funds that are narrowly specialized like information technology and avoid buying natural resources and healthcare funds.
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Mar 26, 2013 14:24
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I'm trying to figure out the best way to start saving up funds for a house down payment off somewhere in the future. I was considering opening up a bond fund with and sending money that way. I know bond returns are low but I'm not aiming for returns but just a semi-stable place to park money for 5-10 years. Currently I am 28 and my investments look like this: TSP (401(k) equivalent): 8% + 5% match - $60k Roth IRA: Yearly max - $41k TSP-Roth*: 8% - $7k Basically I have around 27% of my pre-tax income going into retirement accounts and I'm starting to hit contribution limits. I think I may be overdoing it, especially because I also have a small pension in my retirement plan as well. I also have a sizable 6-8 month emergency fund in a savings account. I was considering halting the automatic savings account transfers I have set up to instead occasionally dump funds into an investment account. Is that a prudent idea? Is there any problem with using Vanguard for both the Roth IRA and the down payment savings fund? The TSP is awesome despite only having broad funds... 0.027% expense ratio  But I wonder... should I reconfigure my contributions to be 5% to the 401(k) style (preserving the full match) and as much as possible into the Roth-style? The $17500 contribution limit applies to the balance of both contributions, but the roth ones are obviously post-tax.*a new roth-like part of the TSP, which is the federal government employee version of the 401(k), contribution limits are not shared with the Roth-IRA
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Mar 27, 2013 03:51
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Shifty Pony posted:I'm trying to figure out the best way to start saving up funds for a house down payment off somewhere in the future. I was considering opening up a bond fund with and sending money that way. I know bond returns are low but I'm not aiming for returns but just a semi-stable place to park money for 5-10 years. 5-10 years is getting a bit long for just a savings account but it wouldn't be ridiculous if you're actually thinking closer to 5 years. Do you know about I-bonds? They protect against inflation, unlike a savings account, but they are less liquid. Sort of like an inflation-protected CD. A bond fund is riskier than that because its value will go up and down with the market. If I were going to risk principal in a bond fund, I'd add some stocks in there to moderate it a bit, maybe that's just me though. I still waffle about the Roth/non-Roth percentages myself so I won't offer any suggestions there 
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Mar 27, 2013 04:58
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I have 1000 fully-vested stock options that are trading for about 70$/share over my price. Aside from my 401k, this represents my only investment, and is more "money" at one time than I've ever had, and probably more my parents ever had, so I'm pretty clueless. I don't really have any plans for this money in the short-term, although I guess we'll probably need to replace one or two cars in the next five years. I've been thinking about selling off about half my options over the next few months, putting aside money for taxes, starting an IRA, and putting the rest in to some index funds. Does this seem right? I only put about 13,000 in to my 401k last year, but I plan to max it out this year.
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Mar 27, 2013 18:43
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Brain Curry posted:I have 1000 fully-vested stock options that are trading for about 70$/share over my price. Aside from my 401k, this represents my only investment, and is more "money" at one time than I've ever had, and probably more my parents ever had, so I'm pretty clueless. I don't really have any plans for this money in the short-term, although I guess we'll probably need to replace one or two cars in the next five years. I've been thinking about selling off about half my options over the next few months, putting aside money for taxes, starting an IRA, and putting the rest in to some index funds. Does this seem right? I only put about 13,000 in to my 401k last year, but I plan to max it out this year.
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Mar 27, 2013 20:07
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You might want to see what the tax implications are for them before you cash them out.
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Mar 27, 2013 20:18
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Harry posted:You might want to see what the tax implications are for them before you cash them out. My understanding is they'll be taxed as income so I'll need to put some profit aside for that.
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Mar 27, 2013 21:20
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Brain Curry posted:My understanding is they'll be taxed as income so I'll need to put some profit aside for that. Find out for absolutely sure. Horror story: back in the late 1990s, a friend of mine was working at a small startup. The company got bought and suddenly her options were worth a ton of money. She vested and exercised, but then didn't sell them right away. A little less than two years after vesting, in the midst of the dotcom bust, they'd lost 90% of their value. She was upset that she'd left most of her net worth in a single company's stock, and had hoped for a long time the share price would recover, but finally she decided to just dump them and take what little was left. The following April, she found out from her tax preparer that she owed income tax on the value the shares had when she exercised them compared to their value when she'd been granted the options (which had been miniscule, as pre-IPO options often are), even though she'd sold them at a huge loss compared to that high water mark. And worst, if she'd waited until a full 2 years had passed, their tax status would have changed and suddenly she'd not have owed that tax at all. So for want of like 3 months' delay, she was ruined. She felt horrible for making the wrong decision and losing a small fortune by not selling her stocks when they vested, or a little later when they peaked in value. But she felt even more horrible when she suddenly owed the IRS in excess of $100,000. Her personal savings were wiped out and she was left virtually penniless (although, as a talented software engineer, she's back in fine shape now.) I think the law that allowed that particular situation to take place was finally changed a few years ago. But the moral of the story is, find out exactly what the tax implications will be of exercising options and selling stock, before you do so. And don't go based on what some guy at work tells you or whatever: get a tax professional to review your personal circumstances and give you exact numbers. Leperflesh fucked around with this message at 00:22 on Mar 28, 2013 |
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Mar 28, 2013 00:17
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slap me silly posted:5-10 years is getting a bit long for just a savings account but it wouldn't be ridiculous if you're actually thinking closer to 5 years. Do you know about I-bonds? They protect against inflation, unlike a savings account, but they are less liquid. Sort of like an inflation-protected CD. A bond fund is riskier than that because its value will go up and down with the market. If I were going to risk principal in a bond fund, I'd add some stocks in there to moderate it a bit, maybe that's just me though. I think you are right. I-bonds might be the best way to go, even if they are fairly low return (1.76% now).
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Mar 28, 2013 01:53
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