Long Term Investing & Retirement: The second best time is now

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Cranbe: Dec 9, 2012

INTJ Mastermind posted:

Admiral funds: No I don't think so. You have to have 10k in a single account.

Thanks. I sent the same question to Vanguard, so I'll confirm that and report back. Worst case scenario, I'll buy into ETFs or the Investor Shares and transition to the Admiral Shares when possible. It looks like in a couple cases, there are no mutual funds for what I want, and only ETFs are available. What are the downsides to buying/owning those ETFs as opposed to mutual funds? It looks like the expense ratios are identical between the ETF vs. the corresponding Admiral Shares mutual fund. Is it just a matter of brokerage fees for buying/selling them; and if so, is that going to be a significant issue?

INTJ Mastermind posted:

Target date: The ER is the weighted average of the underlying funds. No additional expense for the target fund itself.

Oh cool. Vanguard is an awesome company. In any case, I think I'm going to go with a more hands-on approach to take advantage of the Admiral funds.

So my allocation first draft... As mentioned, I currently have $57,400 between my three retirement accounts, about to contribute another $20,000 and change for this year, then another similar amount next year. I'm 26 years old, and I consider myself above average in risk-tolerance for the next 10 - 15 years. I haven't built in any bond exposure currently, but I plan to add some of that in later on. (I have cash reserves outside of my retirement accounts with which I might start laddering some bonds/t-bills at some point.)

Anybody have any thoughts on my proposed allocation below--good/bad/too conservative/too aggressive/other?

Mutual funds:

code:

SYMBOL       FUND (EXPENSE RATIO)                             ALLOCATION

VVIAX:   Value Index Admiral Shares  (0.10%)                  25.0%
VFIAX:   500 Index Admiral Shares  (0.05%)                    22.0%
VSIAX:   Small-Cap Value Index Admiral Shares  (0.10%)        15.0%
VDMAX:   Developed Markets Index Fund Admiral Shares (0.10%)  15.0%
VGSIX:   REIT Index Fund Investor Shares  (0.24%)             10.0%
   (plan to convert VGSIX to VGSLX for its superior expense ratio when I can afford the $10,000 fund minimum)

ETFs:

code:

VB:      Small-Cap ETF  (0.10%)                                5.0%
   (plan to convert to VSMAX when I can afford the $10,000 fund minimums)

VWO:     FTSE Emerging Markets ETF  (0.18%)                    8.0%
   (plan to convert to VEMAX when I can afford the $10,000 fund minimums)

The alternative to the above ETFs is to stick 13% into something like VTSAX, and just switch it out of there when I can afford the minimum investments for VSMAX and VEMAX, but that won't happen for some time, and it won't get me that exposure until then.

# ? Sep 22, 2013 20:51

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# ? May 27, 2024 12:35

antisocial86: Dec 8, 2003; yes sirs

baquerd posted:

http://www.investopedia.com/articles/retirement/08/convert-401k-roth.asp

I'm a complete idiot so could someone explain this to me? I'm going to be quitting my oilfield job soon and have 60k in a fidelity 401k that I was just gonna cash out since I'm an idiot but this sounds uhh better.

# ? Sep 23, 2013 02:12

baquerd: Jul 2, 2007; by FactsAreUseless

antisocial86 posted:

I'm a complete idiot so could someone explain this to me? I'm going to be quitting my oilfield job soon and have 60k in a fidelity 401k that I was just gonna cash out since I'm an idiot but this sounds uhh better.

In simplest terms, you can roll that over to a traditional IRA under your control and continue to manage it. Alternatively, you can roll it over to a Roth IRA and pay taxes on it. Most financial institutions will have easy ways to do this for you for free, all you need to do is mail in some forms.

# ? Sep 23, 2013 03:36

ntan1: Apr 29, 2009; sempai noticed me

Perhaps its time to update the OP again with more information. Most of the questions have similar answers which the op doesn't really deal with. Maybe I'll spend some time when I'm bored and write something

# ? Sep 23, 2013 05:27

Total Confusion: Oct 9, 2004

Speaking of converting to an IRA, if I have money in taxable funds, what's the easiest way to convert them to a Roth IRA? (I live abroad and had been taking the Foreign Earned Income Exclusion just because it was easier, but I think for this year, it should be just as easy to get a tax credit for the foreign taxes I've paid which would let me have earned income in the US).

Would I need to convert it first to a 401k and then rollover to a Roth IRA, could I directly convert it to a Roth IRA or can I only convert $5,500 of my taxable account to a Roth?

# ? Sep 23, 2013 09:58

baquerd: Jul 2, 2007; by FactsAreUseless

Gold and a Pager posted:

Speaking of converting to an IRA, if I have money in taxable funds, what's the easiest way to convert them to a Roth IRA? (I live abroad and had been taking the Foreign Earned Income Exclusion just because it was easier, but I think for this year, it should be just as easy to get a tax credit for the foreign taxes I've paid which would let me have earned income in the US).

Would I need to convert it first to a 401k and then rollover to a Roth IRA, could I directly convert it to a Roth IRA or can I only convert $5,500 of my taxable account to a Roth?

You can't really take taxable funds and re-characterize them as an IRA, Roth IRA, or 401k - that's just a normal contribution, which is limited in amount by year. So, you would open a new IRA account and put your money in there directly, probably cashing out the needed amount from your taxable account first. As you noted, you need to have earned income in the US tax system in order to be able to contribute.

# ? Sep 23, 2013 13:51

surf rock: Aug 12, 2007; We need more women in STEM, and by that, I mean skateboarding, television, esports, and magic.

I've tried reading this thread for the advice I need, and I'm just sort of dumbfounded, so I guess I'll ask. Apologies if these are repeat questions!

I'm 22 and I just started my first job in June, earning $32,000 pre-tax. I got past the probation period, and my benefits kick in on October 1, 401k included. My employer offers a flat $6,000 for benefits annually, and since I'm still covered in terms of health/dental insurance elsewhere, I'm going to put the whole thing toward retirement savings. Unfortunately, they don't offer matching contributions.

So, looking at the sign-up website, they're offering two different ways to let me invest, "before-tax contributions" and "after-tax Roth contributions." From what I understand looking at this thread, the Roth contributions are for a Roth IRA, and the before-tax contributions are for a traditional 401k? And, it would make sense for me to max the Roth option out with $5,500, and then to put the last $500 in the 401k? I don't think I'll ever be making six figures (non-profit work doesn't pay very well), but I'm sure I'll be making more than I'm making now when I'm retiring, and I (baselessly) suspect that tax rates will be higher across-the-board, too.

After that, I need to decide what to actually invest in. I have a pretty normal risk tolerance, not super high or low. Vanguard seems really popular around here, but there are a ton of options. Here's what they're offering:

Fund - (Asset class)
Transamerica Stable Value Account - (Cash Equivalents)
PIMCO Total Return Ret Acct - (Bond - Intermediate Term)
SSgA U.S. Bond Index Ret Acct - (Bond - Intermediate Term)
Vanguard Target Retirement 2010 Ret Acct - (Hybrid - Target Maturity Series)
Vanguard Target Retirement 2015 Ret Acct - (Hybrid - Target Maturity Series)
Vanguard Target Retirement 2020 Ret Acct - (Hybrid - Target Maturity Series)
Vanguard Target Retirement 2025 Ret Acct - (Hybrid - Target Maturity Series)
Vanguard Target Retirement 2030 Ret Acct - (Hybrid - Target Maturity Series)
Vanguard Target Retirement 2035 Ret Acct - (Hybrid - Target Maturity Series)
Vanguard Target Retirement 2040 Ret Acct - (Hybrid - Target Maturity Series)
Vanguard Target Retirement 2045 Ret Acct - (Hybrid - Target Maturity Series)
Vanguard Target Retirement 2050 Ret Acct - (Hybrid - Target Maturity Series)
Vanguard Target Retirement 2055 Ret Acct - (Hybrid - Target Maturity Series)
Vanguard Target Retirement Income Ret Acct - (Hybrid - Target Maturity Series)
RidgeWorth Large Cap Value Equity Ret Acct - (Large/Mid Value Equity - Large Cap)
American Century Mid Cap Value Ret Acct - (Large/Mid Value Equity - Mid Cap)
Transamerica Partners Stock Index Ret Acct - (Large/Mid Blend Equity - Large Cap)
SSgA S&P Mid Cap Index Ret Acct - (Large/Mid Blend Equity - Mid Cap)
Morgan Stanley Growth Ret Acct - (Large/Mid Growth Equity - Large Cap)
Goldman Sachs Mid-Cap Opportunities Ret Acct - (Large/Mid Growth Equity - Mid Cap)
Franklin Small Cap Value Ret Acct - (Small Company Equity - Value)
SSgA Russell Small Cap Index Ret Acct - (Small Company Equity - Blend)
Janus Triton Ret Acct - (Small Company Equity- Growth)
American Funds New Perspective Ret Acct - (Global Equity)
Invesco International Growth Ret Acct - (International Equity)
SSgA International Index Ret Acct - (International Equity)
Thornburg International Value Ret Acct - (International Equity)
Vanguard REIT Index Ret Acct - (Specialty)

In percentage terms, where should I be investing? More broadly speaking, is $6,000 not enough per year for, say, the next five years? Obviously, I plan to save more when I have a larger income. I don't have expensive tastes in anything and I don't like to travel, so I imagine that my eventual retirement expenses won't be enormous, especially since I'll almost certainly be living in the low cost-of-living rural Midwest, as well.

Any and all help is tremendously appreciated, thank you!

surf rock fucked around with this message at 02:07 on Sep 24, 2013

# ? Sep 24, 2013 02:04

SmuglyDismissed: Nov 27, 2007; IGNORE ME!!!

surf rock posted:

I've tried reading this thread for the advice I need, and I'm just sort of dumbfounded, so I guess I'll ask. Apologies if these are repeat questions!

I'm 22 and I just started my first job in June, earning $32,000 pre-tax. I got past the probation period, and my benefits kick in on October 1, 401k included. My employer offers a flat $6,000 for benefits annually, and since I'm still covered in terms of health/dental insurance elsewhere, I'm going to put the whole thing toward retirement savings. Unfortunately, they don't offer matching contributions.

So, looking at the sign-up website, they're offering two different ways to let me invest, "before-tax contributions" and "after-tax Roth contributions." From what I understand looking at this thread, the Roth contributions are for a Roth IRA, and the before-tax contributions are for a traditional 401k? And, it would make sense for me to max the Roth option out with $5,500, and then to put the last $500 in the 401k? I don't think I'll ever be making six figures (non-profit work doesn't pay very well), but I'm sure I'll be making more than I'm making now when I'm retiring, and I (baselessly) suspect that tax rates will be higher across-the-board, too.

After that, I need to decide what to actually invest in. I have a pretty normal risk tolerance, not super high or low. Vanguard seems really popular around here, but there are a ton of options. Here's what they're offering:

...

In percentage terms, where should I be investing? More broadly speaking, is $6,000 not enough per year for, say, the next five years? Obviously, I plan to save more when I have a larger income. I don't have expensive tastes in anything and I don't like to travel, so I imagine that my eventual retirement expenses won't be enormous, especially since I'll almost certainly be living in the low cost-of-living rural Midwest, as well.

Any and all help is tremendously appreciated, thank you!

Your 401(k)m Roth or Traditional, will be separate from your contributions to an IRA. You can contribute up to $17500 to a 401k personally and an additional $5500 to an IRA (again Roth or Traditional). Since the $6000 is from your employer, it will not count to either of these limits. You are in such a low tax bracket that the Roth probably makes sense.

As far as a target percentage for your own contributions, I would say put in as much as you can spare and live comfortably. Get used to putting some of every raise into additional contributions as your income increases. It is very easy to "grow into" new income spending-wise.

# ? Sep 24, 2013 02:17

ntan1: Apr 29, 2009; sempai noticed me

surf rock posted:

Any and all help is tremendously appreciated, thank you!

The before tax option is the traditional pre-tax 401k. The after tax Roth option is the Roth 401k, which is different than a Roth IRA.

Basically, a 401k plan is one that is with your company. An IRA is a tax advantaged account for retirement that you open up with a financial institution of your choice. For both, there is a pre-tax/traditional option or a Roth option. The sum of the amount you contribute pre-tax and Roth to your 401k cannot exceed 17500, and the sum of the amount you contribute to an IRA cannot exceed 5500.

For your purposes, I actually do recommend the Vanguard Target Retirement funds. Consider what year you want to retire, and that Target Retirement fund is likely the one you want. However, here are some questions that I have:

What are the expense ratios that you have on your Vanguard Retirement Accounts in your 401k? Also, are you restricted to putting that 6,000 into your 401k, or can they give you that money as a check?

The answers to these questions essentially will dictate the order in which you should invest.

# ? Sep 24, 2013 02:22

surf rock: Aug 12, 2007; We need more women in STEM, and by that, I mean skateboarding, television, esports, and magic.

SmuglyDismissed posted:

Your 401(k)m Roth or Traditional, will be separate from your contributions to an IRA. You can contribute up to $17500 to a 401k personally and an additional $5500 to an IRA (again Roth or Traditional). Since the $6000 is from your employer, it will not count to either of these limits. You are in such a low tax bracket that the Roth probably makes sense.

As far as a target percentage for your own contributions, I would say put in as much as you can spare and live comfortably. Get used to putting some of every raise into additional contributions as your income increases. It is very easy to "grow into" new income spending-wise.

ntan1 posted:

The before tax option is the traditional pre-tax 401k. The after tax Roth option is the Roth 401k, which is different than a Roth IRA.

Basically, a 401k plan is one that is with your company. An IRA is a tax advantaged account for retirement that you open up with a financial institution of your choice. For both, there is a pre-tax/traditional option or a Roth option. The sum of the amount you contribute pre-tax and Roth to your 401k cannot exceed 17500, and the sum of the amount you contribute to an IRA cannot exceed 5500.

For your purposes, I actually do recommend the Vanguard Target Retirement funds. Consider what year you want to retire, and that Target Retirement fund is likely the one you want. However, here are some questions that I have:

What are the expense ratios that you have on your Vanguard Retirement Accounts in your 401k? Also, are you restricted to putting that 6,000 into your 401k, or can they give you that money as a check?

The answers to these questions essentially will dictate the order in which you should invest.

Thank you both for the quick responses! I had no idea that there was such a thing as a Roth 401k, too.

I can actually just receive the $6k as an addition to my check ($250 per pay period). So, yes, I can receive a cash equivalent, just not as a lump sum.

I would be about 64 in 2055, so I guess that's the retirement year I'd be shooting for. I don't know what this means, but the expense ratio given for the Vanguard Target Retirement 2055 one is "0.43% of fund assets."

# ? Sep 24, 2013 03:28

Kilty Monroe: Dec 27, 2006; Upon the frozen fields of arctic Strana Mechty, the Ghost Dads lie in wait, preparing to ambush their prey with their zippin' and zoppin' and ziggy-zoop-boppin'.

surf rock posted:

Thank you both for the quick responses! I had no idea that there was such a thing as a Roth 401k, too.

I can actually just receive the $6k as an addition to my check ($250 per pay period). So, yes, I can receive a cash equivalent, just not as a lump sum.

I would be about 64 in 2055, so I guess that's the retirement year I'd be shooting for. I don't know what this means, but the expense ratio given for the Vanguard Target Retirement 2055 one is "0.43% of fund assets."

The expense ratio is the percentage of your investment in that fund that is taken annually to pay for management fees, etc. It's important to look for low ERs, because compounding works just as well for fund managers as it does for you and a high ER will eat considerably into your total returns over time.

Vanguard funds are recommended because they offer very low ERs. Incidentally, that ER looks like it's had an extra 0.25% fee tacked on by your plan itself, but it's still almost certainly your best choice of the options in your plan. Since you're not tied down to that 401k though, I'd do it in a Roth IRA you open yourself with Vanguard. Put it in the same fund, but it'll only cost 0.18% there.

# ? Sep 24, 2013 04:06

moana: Jun 18, 2005; one of the more intellectual satire communities on the web

Yep, take the checks and open up a vanguard account yourself, buy a target retirement 20XX fund for a Roth IRA and fund it up to $5500 each year. Then read some of the recommended books and see if you want to change things around after you're more informed.

# ? Sep 24, 2013 04:47

SpelledBackwards: Jan 7, 2001; I found this image on the Internet, perhaps you've heard of it? It's been around for a while I hear.

surf rock posted:

Thank you both for the quick responses! I had no idea that there was such a thing as a Roth 401k, too.

I can actually just receive the $6k as an addition to my check ($250 per pay period). So, yes, I can receive a cash equivalent, just not as a lump sum.

I would be about 64 in 2055, so I guess that's the retirement year I'd be shooting for. I don't know what this means, but the expense ratio given for the Vanguard Target Retirement 2055 one is "0.43% of fund assets."

Sure, you could retire when you're 64... but wouldn't retiring even earlier be nice?

# ? Sep 24, 2013 04:56

surf rock: Aug 12, 2007; We need more women in STEM, and by that, I mean skateboarding, television, esports, and magic.

Kilty Monroe posted:

The expense ratio is the percentage of your investment in that fund that is taken annually to pay for management fees, etc. It's important to look for low ERs, because compounding works just as well for fund managers as it does for you and a high ER will eat considerably into your total returns over time.

Vanguard funds are recommended because they offer very low ERs. Incidentally, that ER looks like it's had an extra 0.25% fee tacked on by your plan itself, but it's still almost certainly your best choice of the options in your plan. Since you're not tied down to that 401k though, I'd do it in a Roth IRA you open yourself with Vanguard. Put it in the same fund, but it'll only cost 0.18% there.

moana posted:

Yep, take the checks and open up a vanguard account yourself, buy a target retirement 20XX fund for a Roth IRA and fund it up to $5500 each year. Then read some of the recommended books and see if you want to change things around after you're more informed.

Great, thanks, and thank you for explaining expense ratios.

Just to be clear, I'm going here to open up this Vanguard account? They seem to have several sites, so I just want to make sure I'm looking at the right one.

What should I do with the other $500? Just toss it in the employer-offered Roth 401(k) Vanguard plan, and when I can save more, increase my contributions to that account (barring a change I want to make because of something I read in those books)?

SpelledBackwards posted:

Sure, you could retire when you're 64... but wouldn't retiring even earlier be nice?

Sure would, but that doesn't seem too likely. I'm going to follow the advice here and in those books, and if that allows me to retire earlier, I certainly will. I'm not going to expect miracles on my income and in my field, though.

As a complete sidenote, purchasing an SA forums account was probably the best $10 I've ever spent. Seems like there are experts on here for just about everything, and I've learned a ton over the last six years.

# ? Sep 24, 2013 05:15

ntan1: Apr 29, 2009; sempai noticed me

Toss the 500 into your 401k, either pretax or Roth. You can go for a target fund, but note the expense ratio.

I'd recommend that if you leave the company, however, that you immediately roll over your 401k into an IRA, though

https://investor.vanguard.com/what-we-offer/401k-rollovers/401k-403b-to-ira-rollover-benefits

# ? Sep 24, 2013 05:41

moana: Jun 18, 2005; one of the more intellectual satire communities on the web

surf rock posted:

Just to be clear, I'm going here to open up this Vanguard account? They seem to have several sites, so I just want to make sure I'm looking at the right one.

Yep, specifically here: https://investor.vanguard.com/what-we-offer/iras/steps-to-open-an-ira

Make sure you register for online statements to avoid the $20 annual fee.

# ? Sep 24, 2013 07:42

SouthShoreSamurai: Apr 28, 2009; It is a tale,
Told by an idiot, full of sound and fury,
Signifying nothing.; Fun Shoe

My company switched over to a new 401k provider. I'm hoping someone here may be familiar with the funds they are now offering, and can give me a little direction/synopsis on which funds are better to choose.

I'm 36, fully vested and don't mind some risk if that helps.

# ? Sep 24, 2013 20:39

ntan1: Apr 29, 2009; sempai noticed me

What are your expense ratios on the following?

iShares MSCI EAFE Index
SPDR S&P Midcap 400
Vanguard 500 Index

# ? Sep 24, 2013 22:23

Wicaeed: Feb 8, 2005

What's the general consensus after you reach your maximum of the employee match in a 401k? Continue bumping up the % of paycheck you are contributing to the existing employer 401k, or open an individual investment portfolio?

In this case my employer matches a fairly small amount (3%).

# ? Sep 25, 2013 06:35

ntan1: Apr 29, 2009; sempai noticed me

Max out a Roth IRA first, unless your 401k has better fund choice than an IRA would. After the Roth IRA is maxed, max your 401k. Things change if you expect to spend money that you're saving sometime soon

# ? Sep 25, 2013 07:05

Madbullogna: Jul 23, 2009

Welp, finally took the time to call Vanguard to start up a Roth account and transfer my pathetic balance that's sitting in my State Farm Roth. The process couldn't have been easier. Once my Checking account completes the verification deal, then I can figure out how much I can stash away into my brand spanking new VTTHX each pay-period.

Now the dilema comes in deciding whether to divert all of my future deposits I've been making in my 457b and putting them in this Roth instead, (allowing me to max it), or split 50/50 between the Roth and the 457b. I don't get any matching on the 457b, only have ~12k in the account, and it has a horrid .78% E/R. I don't see being in a financial position to retire early and take advantage of the pre-59 withdrawals on my 457, which is the only benefit it has over the Roth right now.

I'm leaning towards fully funding my Roth, and just ignoring my 457 letting the existing balance just sit there. Thoughts?

Note - I have a separate pension that gets 2.25 matching, so the 457 (and now the Roth), are simply an additional cushion for my retirement. I wish I could fund more than the 5500/year so I could contribute to both, but it's either 50/50 or all Roth.

# ? Sep 25, 2013 22:31

Guinness: Sep 15, 2004

Wicaeed posted:

What's the general consensus after you reach your maximum of the employee match in a 401k? Continue bumping up the % of paycheck you are contributing to the existing employer 401k, or open an individual investment portfolio?

In this case my employer matches a fairly small amount (3%).

1. Max employer 401k match
2. Max IRA/RIRA ($5.5k/yr)
3. Max HSA (if applicable) ($3.25k/yr)
4. Max 401k ($17.5k/yr)

Though once you get to step 4, there are sometimes other better ways to save/invest/spend your money than maxing your 401k depending on your situation, 401k investment choices, etc. I don't quite max my 401k (I do 15% which ends up being about 14k/yr rather than the full 17.5k) but I have a taxable brokerage account that I use and I'm also trying to save up for a 20% downpayment on a house in an expensive area.

Guinness fucked around with this message at 22:37 on Sep 25, 2013

# ? Sep 25, 2013 22:33

Nail Rat: Dec 29, 2000; You maniacs! You blew it up! God damn you! God damn you all to hell!!

I've seen a couple references to putting a lot in an HSA - is there a particular reason for that? I know you want to have money available to cover out-of-pocket medical expenses, but assuming you don't somehow end up with hundreds of thousands in medical bills that are solely your responsibility(i.e. in my situation my insurance still covers a lot of what I would otherwise pay, and I'm pretty much fully covered after the 3k deductible), isn't ending up with a half-million-plus in the HSA a little overkill?

Can you eventually withdraw HSA contributions for non-medical purposes without incurring a penalty? Or is this advice mostly to hedge against a medical disaster or potential loss of insurance?

# ? Sep 26, 2013 13:58

asur: Dec 28, 2012

Nail Rat posted:

I've seen a couple references to putting a lot in an HSA - is there a particular reason for that? I know you want to have money available to cover out-of-pocket medical expenses, but assuming you don't somehow end up with hundreds of thousands in medical bills that are solely your responsibility(i.e. in my situation my insurance still covers a lot of what I would otherwise pay, and I'm pretty much fully covered after the 3k deductible), isn't ending up with a half-million-plus in the HSA a little overkill?

Can you eventually withdraw HSA contributions for non-medical purposes without incurring a penalty? Or is this advice mostly to hedge against a medical disaster or potential loss of insurance?

The penalty is waived either at 65 or if you are disabled at the time of the withdrawal.

# ? Sep 26, 2013 14:21

Harry: Jun 13, 2003; I do solemnly swear that in the year 2015 I will theorycraft my wallet as well as my WoW

Nail Rat posted:

I've seen a couple references to putting a lot in an HSA - is there a particular reason for that? I know you want to have money available to cover out-of-pocket medical expenses, but assuming you don't somehow end up with hundreds of thousands in medical bills that are solely your responsibility(i.e. in my situation my insurance still covers a lot of what I would otherwise pay, and I'm pretty much fully covered after the 3k deductible), isn't ending up with a half-million-plus in the HSA a little overkill?

Can you eventually withdraw HSA contributions for non-medical purposes without incurring a penalty? Or is this advice mostly to hedge against a medical disaster or potential loss of insurance?

1) It's basically impossible to get that much in your HSA. It's $3,000 a year.
2) Depending on the plan, medical expense is very generous.

# ? Sep 26, 2013 14:28

Nail Rat: Dec 29, 2000; You maniacs! You blew it up! God damn you! God damn you all to hell!!

asur posted:

The penalty is waived either at 65 or if you are disabled at the time of the withdrawal.

Yeah, came here to edit my post that I had decided to actually use google and answer the question. Looks like HSA contributions to the max(if applicable) are an important step not in the OP.

Starting in January, when I can change my HSA contribution, I can(and will) max 401k match, IRA, and HSA.

# ? Sep 26, 2013 14:29

asur: Dec 28, 2012

For people that have a HSA, do you invest the entire amount of then sell off portions when a distribution is needed? I'm assuming that it is correct to always take any distribution you can since in that case it's entirely tax free.

# ? Sep 26, 2013 14:35

Xenoborg: Mar 10, 2007

asur posted:

For people that have a HSA, do you invest the entire amount of then sell off portions when a distribution is needed? I'm assuming that it is correct to always take any distribution you can since in that case it's entirely tax free.

Yes, roughly. Mine requires you to hold at least 2k in cash before you can invest any more. So small stuff like copays don't need sell off, the money from my paycheck just fill that 2k back up first.

# ? Sep 26, 2013 16:40

Rurutia: Jun 11, 2009

We personally treat the HSA like a tax sheltered retirement account and pay for everything out of pocket. If you hold onto your receipts, you can reimburse from your HSA at any time if you hit an emergency that's not medically related (and depletes your emergency fund as well).

# ? Sep 26, 2013 16:45

MickeyFinn: May 8, 2007; Biggie Smalls and Junior Mafia some mark ass bitches

I thought I would look into an HSA because I visit the doctor a fair bit. $30 x 20 visits a year x 0.25 (marginal bracket) = $150 and it is probably only going to get worse, and that doesn't include meds. It appears that you must have a high deductible plan and I guess I don't. drat.

# ? Sep 26, 2013 16:53

SlightlyMadman: Jan 14, 2005

MickeyFinn posted:

I thought I would look into an HSA because I visit the doctor a fair bit. $30 x 20 visits a year x 0.25 (marginal bracket) = $150 and it is probably only going to get worse, and that doesn't include meds. It appears that you must have a high deductible plan and I guess I don't. drat.

Yeah, a HDHP and HSA are only realistic if you're in good health and have no prescriptions. Any regular medical expenses will quickly turn it into a bad deal if you have access to a better plan through work.

# ? Sep 26, 2013 17:16

Nail Rat: Dec 29, 2000; You maniacs! You blew it up! God damn you! God damn you all to hell!!

Harry posted:

1) It's basically impossible to get that much in your HSA. It's $3,000 a year.

Won't that depend on whether and how you invest? Mine only requires you keep $500 cash in the account, you can invest anything beyond that.

I'd only been paying into it what I needed to stay ahead of my out-of-pocket medical costs($80 a month had been more than adequate so far), but given that, I'll probably keep enough cash to cover an annual out-of-pocket max (deductible is $1500, out-of-pocket max is $3k) and invest everything else. If I need to pull anything out of investments because I go through that money, I'll have time to do it before I get to a new year.

Nail Rat fucked around with this message at 18:06 on Sep 26, 2013

# ? Sep 26, 2013 17:54

Folly: May 26, 2010

Rurutia posted:

We personally treat the HSA like a tax sheltered retirement account and pay for everything out of pocket. If you hold onto your receipts, you can reimburse from your HSA at any time if you hit an emergency that's not medically related (and depletes your emergency fund as well).

I like this idea. I was already switching to a HDP and setup the HSA, but I've never had one before so I am still learning the tricks to them.

Also, I have a taxable investment account where I want to put the least tax exposed parts of my portfolio. Is this the right place to ask about it or should I go to the US Tax thread? (I also want advice on the asset class ratios.)

# ? Sep 26, 2013 18:11

Rurutia: Jun 11, 2009

Folly posted:

I like this idea. I was already switching to a HDP and setup the HSA, but I've never had one before so I am still learning the tricks to them.

Also, I have a taxable investment account where I want to put the least tax exposed parts of my portfolio. Is this the right place to ask about it or should I go to the US Tax thread? (I also want advice on the asset class ratios.)

I think this is the right thread for it.

Just a note about our HSA method is that obviously most of this is for if you're maxing out all of your other tax-sheltered accounts, which is when the interesting decisions come into play.

# ? Sep 26, 2013 18:28

Folly: May 26, 2010

Rurutia posted:

I think this is the right thread for it.

Just a note about our HSA method is that obviously most of this is for if you're maxing out all of your other tax-sheltered accounts, which is when the interesting decisions come into play.

I should be in that situation starting this January.

Now for my question. The Financial Independence thread popped up this super low-fee ETF portfolio: http://www.indexuniverse.com/sections/blog/14635-the-cheapest-etf-portfolio-.html

I have a taxable Schwab account where I just deposited the part of the proceeds from the sale of my old house that I didn't put into my new house. I have enough tax-deferred accounts that I can use to balance out my portfolio overall, so the goal in the Schwab account is to minimize taxes and fees. (I don't know anything about municipal bonds yet, so I'm not buying them.) Also in the concern is the fact that my new employer's best 401k option is a straight S&P index fund.

ETFs should be taxed like their underlying assets. So as I understand it, I want to avoid REITs and Dividend focused funds, because the proceeds are taxed as ordinary income. Also, my state has income tax, so I guess I want more of my federal bond exposure in the account? The taxation of the foreign stocks is still a little complicated to me, made doubly so because of the ETF layer. So I've not emphasized them in this account.

How does this modification look:

code:

Asset Class			Symbol	ER	My Investment Ratio
US Large Stock Value		SCHV	0.07%	25%
US Small Stock Diversified	SCHA	0.08%	10%
US Mid Stock Diversified	SCHM	0.07%	5%
Foreign Diversified Stock 	SCHF	0.09%	15%
International Small Cap Stock	SCHC	0.20%	5%
Diversified Emerging Markets	SCHE	0.15%	5%
US Aggregate Bond		SCHZ	0.05%	10%
US Intermediate Treasury 	SCHR	0.10%	25%

Total ER: 0.090%

I'm still learning about investing, so really I just want a reasonable place to put the money so it isn't just sitting around. And I want the option to undo my changes with little cost as learn more. Buying the Schwab ETFs is a commission-free trade.

# ? Sep 26, 2013 18:35

Guinness: Sep 15, 2004

Rurutia posted:

We personally treat the HSA like a tax sheltered retirement account and pay for everything out of pocket. If you hold onto your receipts, you can reimburse from your HSA at any time if you hit an emergency that's not medically related (and depletes your emergency fund as well).

This is what I do, too.

Either I eventually end up using the HSA to pay for significant medical costs or I make it to retirement age in good health and can draw upon the money penalty free. Either way, I'm just maxing it and investing it in the meantime.

I also save all my medical receipts in case I ever need/want to draw from my HSA for a non-medical emergency, however unlikely that may be.

Also you should be able to contribute to your HSA at any time, doesn't have to be a paycheck deduction. No need to wait until January if you already have the HDHP/HSA accounts. You also get a nice above-the-line tax deduction by doing so. Last year I saved like $800-some in taxes by maxing my HSA.

Guinness fucked around with this message at 18:42 on Sep 26, 2013

# ? Sep 26, 2013 18:36

Nail Rat: Dec 29, 2000; You maniacs! You blew it up! God damn you! God damn you all to hell!!

Guinness posted:

Also you should be able to contribute to your HSA at any time, doesn't have to be a paycheck deduction. No need to wait until January if you already have the HDHP/HSA accounts. You also get a nice tax deduction by doing so. Last year I saved like $800-some in taxes by maxing my HSA.

Well the funds I'd be allocating to it are by and large coming from my traditional 401k(I'm contributing a ton to my 401k right now, in Jan that's going to go down and get ramped back up again through raises and dialing back principle curtailment on the mortgage in the future) - so no tax difference. I *could* reduce my 401k contribution down right now and then make manual contributions to the HSA and get money back in February, but :effort:

# ? Sep 26, 2013 18:42

Guinness: Sep 15, 2004

Nail Rat posted:

Well the funds I'd be allocating to it are by and large coming from my traditional 401k(I'm contributing a ton to my 401k right now, in Jan that's going to go down and get ramped back up again through raises and dialing back principle curtailment on the mortgage in the future) - so no tax difference. I *could* reduce my 401k contribution down right now and then make manual contributions to the HSA and get money back in February, but

Well the good news is, much like an IRA, you can contribute for tax year 2013 until April 15th.

# ? Sep 26, 2013 19:17

ntan1: Apr 29, 2009; sempai noticed me

I max out my HSA as well. I don't really have amazing investment options for my HSA, but the tax advantaged status is useful. Because my employer pays for a good portion of the deductible in the high deductible plan, my insurance over the past two years has effectively costed me -$700 per year.

Folly posted:

I'm still learning about investing, so really I just want a reasonable place to put the money so it isn't just sitting around. And I want the option to undo my changes with little cost as learn more. Buying the Schwab ETFs is a commission-free trade.

What's your age? You have a high proportion of bonds, and your international/domestic ratio seems to be heavily weighted toward international.

# ? Sep 26, 2013 20:53

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# ? May 27, 2024 12:35

Harry: Jun 13, 2003; I do solemnly swear that in the year 2015 I will theorycraft my wallet as well as my WoW

Nail Rat posted:

Won't that depend on whether and how you invest? Mine only requires you keep $500 cash in the account, you can invest anything beyond that.

True. I was saying that under a couple of assumptions. Mainly, you generally don't start one of these early and it's not guaranteed you qualify for one every year as well.

Edit: Also, there's no idea how long these will last. There were some rumored changes to HSAs with Obamacare but nothing concrete I think.

Harry fucked around with this message at 21:16 on Sep 26, 2013

# ? Sep 26, 2013 21:13

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