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Unless something disastrous happens in those 1 month windows it's basically free money.
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Oct 17, 2014 23:38
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There's risk, but chances are you will make "free" money.
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Oct 17, 2014 23:57
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ETB posted:There's risk, but chances are you will make "free" money. Yeah it's a pretty good deal since unlike some other ESPPs, the way it works is all the payroll deductions are used to buy company stock at the end of the month. So there's no long waiting period like in some other companies to buy the stock with available funds.
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Oct 18, 2014 02:55
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etalian posted:So what's the opinion on employee stock purchase programs? I am trying to evaluate the risk of this plan by looking at the worst case scenario. Let us assume that the stock price is relatively constant on a month time scale. If, every month, you buy some fixed amount of stock you make an immediate return of 17.6% (1/0.85). Then, the next month, you transfer that money to some suitably diversified portfolio. Practically speaking, even if the stock were totally wiped out (for a one month period somehow) every 6 months, you'd still be making money. So, the worst case scenario is that the company goes bankrupt and you lose your job and one month of ESPP contributions. If this happens 6 months or more after you started making those contributions, it was worth it. I'm usually against buying in to ESPPs, but I'd participate in this one.
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Oct 18, 2014 16:27
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My ESPP is sweet. 15% off whatever is lower: the purchase date price or the price six months ago. This past cycle, I think I made about a 50% return on my money over 6 months. Too bad it was only a small portion of my income...
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Oct 18, 2014 17:25
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ETB posted:My ESPP is sweet. 15% off whatever is lower: the purchase date price or the price six months ago. This past cycle, I think I made about a 50% return on my money over 6 months. Too bad it was only a small portion of my income... Yeah the ESPP can make good money because often they take the lowest market rate during the buy-in period. So in addition to the discount you also get the shares at the downward spike in the price. \ Wealthfront had a nice blog post with some some sample outcomes: https://blog.wealthfront.com/good-espp-no-brainer/ 
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Oct 19, 2014 00:35
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ETB posted:My ESPP is sweet. 15% off whatever is lower: the purchase date price or the price six months ago. This past cycle, I think I made about a 50% return on my money over 6 months. Too bad it was only a small portion of my income... This is what mine is like too. Our stock shot up within the last 6 month period so everyone made about 70% return if they did a quick sale (buy at discounted price and sell at market price on the same day). It owned.
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Oct 19, 2014 07:28
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Henrik Zetterberg posted:This is what mine is like too. Our stock shot up within the last 6 month period so everyone made about 70% return if they did a quick sale (buy at discounted price and sell at market price on the same day). It owned. Yeah, it's pretty sweet! My company does the same, max 15% buy-in with a 15% discount on the lower of the start and end prices across each 3 month buying period. It's hard to turn down free money if you can float the difference in your paycheck during that time (I only know one close friend who contributes nothing at all, and I very much question his family's spending habits sometimes). I used to keep years worth of company stock lying around after purchase because I didn't do anything with it except for the occasional sale to fund a home improvement project. Dude our company stock trends to be somewhat cyclical (bounces around from mid-twenties to lower 30s regularly), I would only sell when we were on the upper end of that and it was convenient. *Don't time the market, past performance no guarantee of future value, etc. Then I read The Millionaire Teacher middle of last year and realized I need to invest and diversify into index funds instead. I liquidated all but a year's worth of it and reinvested it into a taxable account while also rebalancing my tax advantaged accounts. Last year's amount owed to the IRS was brutal. Looking back, I wish I had realized I should have contributed more to the 401k and Roth IRA in the years before that and used the ESPP gains to make up the paycheck difference, but what's done is done--I have healthy account balances for both now and do max out the advantaged accounts. I also don't hold a year's worth of ESPP lots anymore (four lots), since the reading I've found on the subject led me to the conclusion that the risk of holding so much company stock for a year outweighs the small tax benefit of long term vs. short term gains on the potential rise in price over that year, if any. And it's not a strong dividend stock; even it were, it's not enough stock to make a huge difference. Now I only hold one to two lots at a time and try to sell at local maxima in the price.
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Oct 19, 2014 14:40
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Yeah the Wealthfront blog pretty much advised to sell company stock ASAP instead of waiting long enough to meet the qualified stock requirement for tax benefit reasons. It's basically free fun money due to how in most scenarios except a big share price crash you at least make 15%-17% per tax, for comparison the long term return for large cap equities is 5.8%. 
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Oct 19, 2014 17:06
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etalian posted:Yeah the Wealthfront blog pretty much advised to sell company stock ASAP instead of waiting long enough to meet the qualified stock requirement for tax benefit reasons. Great post, and a very solidly concise justification. Thanks! Through BFC and the book I mentioned, I've basically settled on a new philosophy of taking any new raises and applying 50% of my after-tax increases to savings/debt reduction (in order of stuff listed in the OP) and 50% as disposable fun money. It keeps the long term horizon goals on track without sacrificing too much short term satisfaction from an earnings increase. I only say that because I thankfully lack any debt outside of my mortgage. If I had significant consumer or student loan debt, it would probably swing 90/10 instead. Since my taxable account is reasonably well funded and my 401k is maxed, I am going to try and mentally assign my quarterly ESPP lots roughly the following way starting this year: 1 & 2: max Roth IRA 3: cover additional tax burden on ESPP sales throughout the year, as well as my 2008 federal homebuyers credit repayment ($500/yr for 15 years interest free) 4: 1-2 extra full mortgage payments equal to my normal P&I monthly cost (applied as principal-only) . Only do this toward the end of the year when I can safely say it's ok to do based on how the rest of the year went. Anything else leftover in that ESPP category I can choose to put into taxable investments, home improvement, travel, savings, or disposable spending on food/toys. Usually the first 3 take the lion's share 
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Oct 19, 2014 17:59
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Does anyone have a link to a good article about how small investors shouldn't be paying people to manage their money? My mother is currently paying some guy (at Wachovia Securities, or whatever they are now) $450 a year to be stuffed into weird-rear end illiquid REITs and high fee mutual funds. Her portfolio isn't particularly big (~$150k) so this adds up. I recommended that she just put it all into a couple of Vanguard funds but because I came out of her vagina I'm apparently a big ol' fuckin' idiot. So although I can think of some books that would make the point clearly, she won't read a book. About 3-4 printed pages is the most I can put in front of her. Any ideas? I hate to see my family members paying good money for bad advice.
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Oct 19, 2014 18:03
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Agronox posted:Does anyone have a link to a good article about how small investors shouldn't be paying people to manage their money? Morningstar had a good article look at high expense ratio funds: http://news.morningstar.com/articlenet/article.aspx?id=311379 Vanguard has nice tool here showing the long term cost of high expense ratio funds: https://investor.vanguard.com/mutual-funds/low-cost SpelledBackwards posted:Great post, and a very solidly concise justification. Thanks! Yeah the blog post was pretty great since the main point was not to be greedy and always sell the discounted shares to make a nice profit. etalian fucked around with this message at 18:38 on Oct 19, 2014 |
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Oct 19, 2014 18:34
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I don't "get" backdoor Roth IRAs. I have 10k in a traditional IRA from a 401k rollover. All my additional savings goes into a Roth IRA, 401k, and HSA, which are all maxed. Next year I expect to be ineligible to contribute to a Roth IRA. Therefore I intend to max out a traditional IRA and backdoor this into a Roth. I am going to do this because that seems to be what people do, not because I understand it. Should I backdoor my 10k in my traditional IRA this year so that I save taxes on my backdoor Roth IRA next year? Next year when I am contributing to a traditional IRA and then backdooring it to a Roth, don't I get taxed twice? I don't get how this is helpful at all. Also how do the mechanics of this work? Do I have to keep track of this poo poo or does it just show up on my 1099 at the end of the year? Is it typically enough of a difference to bump like a $1500 tax return to actually owing taxes at the end of the year? I hate owing taxes. Celot fucked around with this message at 00:00 on Oct 20, 2014 |
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Oct 19, 2014 23:56
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Basically for the Roth IRA backdoor trick to be tax advantageous you need to have a low overall IRA balance. From equation here: http://www.bogleheads.org/wiki/Backdoor_Roth_IRA Tax= 100*(10000/(10000+10000), which equals 50% would get taxed for the conversion Another note is for traditional IRAs you have to be joint filing or lower income (<69,000 single) to get the full deduction. If you make more money the traditional IRA doesn't have tax advantage aka no full or partial deduction.
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Oct 20, 2014 02:16
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etalian posted:Basically for the Roth IRA backdoor trick to be tax advantageous you need to have a low overall IRA balance. so it adds 5000 to my AGI to do this conversion then when I do the backdoor next year, it adds 2750 to my AGI. So...it's better than just putting it in a taxable account because 50% is not taxed. Ok.
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Oct 20, 2014 04:10
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Going off of that link, lets say you have everything in a Roth IRA, and contribute 5,000 to a traditional IRA then backdoor it. By that calc, isn't that 100 * (5000 / (5000 + 5000)), which would be 50% tax free. I'm assuming I'm misunderstanding this, right? If that was the case why would you ever contribute strait to a roth, rather than just backdooring everything.
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Oct 20, 2014 04:53
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Bob Mundon posted:Going off of that link, lets say you have everything in a Roth IRA, and contribute 5,000 to a traditional IRA then backdoor it. By that calc, isn't that 100 * (5000 / (5000 + 5000)), which would be 50% tax free. I'm assuming I'm misunderstanding this, right? If that was the case why would you ever contribute strait to a roth, rather than just backdooring everything. Right, the divisor is the total balance of your existing traditional IRA plus the additional amount you are now wanting to contribute and convert. If you start with zero in a traditional IRA and backdoor 5000, the divisor is just 5000 and you owe taxes on 5000 of earned income.
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Oct 20, 2014 04:58
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So... just keep a balance in your traditional IRA and offset your backdooring by a year, and save 50% on taxes?
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Oct 20, 2014 06:35
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Celot posted:So... just keep a balance in your traditional IRA and offset your backdooring by a year, and save 50% on taxes? No. With an IRA, you can make some non-deductible contributions. When converting a traditional to a Roth, your conversion is tax-free in the ratio of your after-tax contributions to the value of your IRAs. Let's say you have $45k in your IRA with no non-deductible contributions. You then make a $5k non-deductible contribution, so your IRA is now at $50k. Let's say you want to convert $20k to a Roth. Your tax-free amount is 10% ($5k/$50k) or $2k, so you pay taxes on $18k. Incidentally, you have "used up" the $2k in non-deductible contributions, leaving you with $3k for future conversions or withdrawals. The way backdooring works is if you earn too much to directly contribute to a Roth IRA, you make a non-deductible contriution to a traditional IRA and then immediately convert it to a Roth. Because of the rule of non-deductible contributions above, it doesn't work if you have a balance in IRAs. If you have no IRA balance, make a non-deductible contribution to your IRA and convert it. It's not deductible, the conversion is not taxable, and you have effectively engineered a Roth contribution. That is a backdoor contribution.
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Oct 20, 2014 13:24
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Sorry if this has been posted here before, but I figured people here would be interested to know that 401k limits are going up to 18k next year(and additional catch up is going up to 6k . However IRA limits are staying the same.
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Oct 20, 2014 13:32
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Saw that in one of these threads... are HSA limits changing, do you know?
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Oct 20, 2014 13:42
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SpelledBackwards posted:Saw that in one of these threads... are HSA limits changing, do you know? Looks like they're going up 50/100 to 3350 and 6650.
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Oct 20, 2014 13:47
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Nail Rat posted:Sorry if this has been posted here before, but I figured people here would be interested to know that 401k limits are going up to 18k next year(and additional catch up is going up to 6k . However IRA limits are staying the same. SIMPLE IRA limits are going up by $500 (to $12.5k total) too.
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Oct 20, 2014 16:05
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So my wife (finally) found a job, which means that we will be able to start investing - I'm 42, so good lord, I have to do as much as possible as quickly as possible. The only real debt we have are my wife's student loans and two mortgages (80/20). The smaller of the two mortgages will be eliminated due to a generous life insurance payment gifted to us, so (not to sound callous) I don't see that second mortgage as being a long term issue. I know her new job offers a 401(k) (not sure what the contributions are) so I'll definitely be contributing to that. My question on the 401(k) is how do I max it out for the year (assuming we can afford to do so?) Do I just take the maximum allowed and divide by pay periods and use that? Or do I sock away some money that I can transfer to the account come the end of the year? In addition to the above, a Roth, and rebuilding our savings, I plan on paying off the student loan as quickly as possible just to get that fucker out of our hair as quickly as possible. As for the primary mortgage, what is the preferred course of action? I refinanced a couple of years back, so the interest rate is like 2.75%. In addition, the house is so far underwater (we bought right before the market crashed) that I don't know if it is even worth trying to pay the principle down at an accelerated rate. I'm guessing that in this case, if we've got any money that can't be invested for a higher rate of return than 2.75%, we should use it to pay additional principle? EDIT: Oh - my wife is going to continue to retain her part time job for the time being. Can we do two 401(k)'s or are you limited to a max total contribution? Or is that just being crazy? berzerkmonkey fucked around with this message at 21:13 on Oct 20, 2014 |
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Oct 20, 2014 21:10
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berzerkmonkey posted:My question on the 401(k) is how do I max it out for the year (assuming we can afford to do so?) Do I just take the maximum allowed and divide by pay periods and use that? Or do I sock away some money that I can transfer to the account come the end of the year? 401k contributions come out of your paycheck, you can't just save up money and put it in any time. So yes, divide the maximum by the number of pay periods to figure out how much you need to contribute. Contributions are a yearly maximum per person, not by job. Your wife can contribute to both at the same time, but she can't go over $17500 between the two of them. Probably easier to just pick the one with the better options and contribute solely to that. A note though, for the part time job, she may not earn enough money at that job to max that one out. You can't contribute over 100% of your earnings anywhere, and there are some workplaces that are more restrictive, depending on the plan. Inept fucked around with this message at 23:01 on Oct 20, 2014 |
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Oct 20, 2014 22:59
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Inept posted:401k contributions come out of your paycheck, you can't just save up money and put it in any time. So yes, divide the maximum by the number of pay periods to figure out how much you need to contribute. The 17.5 limit is on elective deferrals (pre-tax). It is my understanding that you can contribute a lot more post-tax if you wish to. http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-401k-and-Profit-Sharing-Plan-Contribution-Limits Choice quotes that I can't claim to fully understand: "Greg can make a nonelective contribution of $51,000 to his solo 401(k) plan. This limit is not reduced by the elective deferrals under his employer’s plan because the limit on annual additions applies to each plan separately." "Remember that annual contributions to all of your accounts - this includes elective deferrals, employee contributions, employer matching and discretionary contributions and allocations of forfeitures to your accounts - may not exceed the lesser of 100% of your compensation or $51,000 for 2013 and $52,000 for 2014. In addition, the amount of your compensation that can be taken into account when determining employer and employee contributions is limited. The compensation limitation is $255,000 for 2013 and $260,000 for 2014."
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Oct 20, 2014 23:39
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Just have to share this because my wife didn't seem to understand why this is such a big deal, my company announced an increase in 401k from "100% on first 3, 50% on next 2" to "full match through 6%, plus profit sharing (1% give or take on EBITDA performance)" for all salaried employees. Wow! I was giving roughly 7% anyways, but this is certainly a great bump. My only hope is they don't kill the bonus program in lieu of the profit sharing. EDIT FOR BELOW. 1 for 1 matching if I contribute anywhere from 0-6% of salary. Dead Pressed fucked around with this message at 01:26 on Oct 21, 2014 |
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Oct 21, 2014 00:47
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Dead Pressed posted:Just have to share this because my wife didn't seem to understand why this is such a big deal, my company announced an increase in 401k from "100% on first 3, 50% on next 2" to "full match through 6%, plus profit sharing (1% give or take on EBITDA performance)" for all salaried employees. Wow! I was giving roughly 7% anyways, but this is certainly a great bump. Does "full match through 6%" mean they go back to matching 100% for the last percentage or that they match 100% of everything if you put in 6%? Or does it mean something else?
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Oct 21, 2014 01:07
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Peanut3141 posted:The 17.5 limit is on elective deferrals (pre-tax). It is my understanding that you can contribute a lot more post-tax if you wish to. You're definitely misunderstanding this. If you're just a regular employee with a 401k, 17.5k (18 next year) is the limit for employee contributions. A Solo 401k as mentioned in the example is only available if you have your own business or are self-employed (in the example, Greg is both an employee and a contractor on the side). Greg is putting his contracting income into his Solo 401k pre-tax, in essence giving himself, as his own employer, a free "match." What would be the point of putting post tax money into a 401k?
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Oct 21, 2014 01:29
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Oscar Statue posted:What would be the point of putting post tax money into a 401k? It is called a Roth 401k and you would use it for all the same reasons you would use a Roth IRA. There is a total limit of $17.5k for the 401k regardless of type.
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Oct 21, 2014 01:47
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slap me silly posted:It is called a Roth 401k and you would use it for all the same reasons you would use a Roth IRA. There is a total limit of $17.5k for the 401k regardless of type. I'm aware of the Roth 401k, but the poster I was responding to was talking about putting post-tax money into a 401k AFTER the 17.5k limit. Edit: And apparently you can do a Roth Solo 401k if you're self-employed, which seems like a pretty sweet deal if you have that option. http://www.irafinancialgroup.com/the-roth-solo-401k-secret.php Oscar Statue fucked around with this message at 02:03 on Oct 21, 2014 |
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Oct 21, 2014 01:58
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Oscar Statue posted:I'm aware of the Roth 401k, but the poster I was responding to was talking about putting post-tax money into a 401k AFTER the 17.5k limit. But what if you have two jobs, which is berzerkmonkey wife's situation. That page I linked seemed to imply that the limits were applied to each plan separately. From Wikipedia: "There is a maximum limit on the total yearly employee pre-tax or Roth salary deferral into the plan. This limit, known as the "402(g) limit", was $15,500 for the year 2008, $16,500 for 2009–2011, $17,000 for 2012, and $17,500 for 2013-2014. [19][20][21][22] ... This limit does not apply to post-tax non-Roth elections." http://en.wikipedia.org/wiki/401(k)#Contribution_deferral_limits Peanut3141 fucked around with this message at 02:14 on Oct 21, 2014 |
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Oct 21, 2014 02:08
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Peanut3141 posted:But what if you have two jobs, which is berzerkmonkey wife's situation. That page I linked seemed to imply that the limits were applied to each plan separately. http://www.irs.gov/Retirement-Plans/How-Much-Salary-Can-You-Defer-if-You%E2%80%99re-Eligible-for-More-than-One-Retirement-Plan%3F "The amount of salary deferrals you can contribute to retirement plans is your individual limit each calendar year no matter how many plans you're in. This limit must be aggregated for these plan types: 401(k) 403(b) SIMPLE plans (SIMPLE IRA and SIMPLE 401(k) plans) SARSEP"
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Oct 21, 2014 02:29
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It is a tax gray area, but you can convert after tax (not Roth) 401k into a Roth 401k. It depends on the plan. Some 401k plans allow after tax Roth conversions while in service. Others only allow Roth conversions when you leave the job. In either case there is a 51k total limit between employee+employer traditional/roth/after tax contributions. Up until this year I would max my ira (5.5) and 401k (17.5) and then invest the rest in taxable (around 20k). Since I learned about this mega Roth option I now simply max the ira and then contribute 37.5 (+employer contribution) to my 401k and skip the taxable. I wind up 'maxing' (17.5) my 401k half way through the year and then I start contributing after tax money. Every month I have to call my brokerage and request a conversation of the after tax money to Roth 401k. I have to pay short term capital gains tax for the month that the money lived in the account pre conversion. Yes, I literally make 12+ Roth conversions a year. Yes, keeping track of the (brief) capital gains/losses can be a pain. The rear end pain is worth it for the massive increase in tax advantaged space. This is absolutely a tax loophole. The general consensus among the cpa community is it perfectly legal. The IRS will likely close this loophole eventually, but may as well use it while we can! Google mega Roth ira for details Ref http://www.bogleheads.org/wiki/After-tax_401(k) Velochis fucked around with this message at 03:28 on Oct 21, 2014 |
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Oct 21, 2014 03:23
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Velochis posted:It is a tax gray area, but you can convert after tax (not Roth) 401k into a Roth 401k. You lucky bastard, those plans don't come up very often. I can do after-tax contributions, but I can't do in-service rollovers.
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Oct 21, 2014 04:55
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I am looking to transfer my old 401(k) over to Vanguard. I am in the 15% tax bracket and don't expect to be out of it for at least 3-4 years so I am assuming I should transfer this into a Roth IRA as long as I can pay the taxes. Is that a correct assumption? The new company I work for offers a 401(k) or Roth 401(k) with 100% up to 3% and then 50% for 4-6%. Should I be picking Roth 401(k) here as well or is there some reason to have both a pre-tax and post-tax account? The employer match is all in company stock but I don't know the vesting rules as of yet. I am pretty sure I know what to do but I just want verification before I go through with anything. Thanks~
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Oct 21, 2014 10:44
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If you plan on retiring at a normal age of 60+, contributing to the Roth 401(k) is the way to go while you're in the low 15% tax bracket. If you plan on retiring early with a small retirement income generated from your investments (small enough that it would put you in the 0% tax bracket), you might be better off going with a traditional 401(k). Some people like to split their retirement savings roughly evenly into pretax (traditional) and post tax (roth) since they don't really know how much income they'll have during retirement.
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Oct 21, 2014 11:37
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berzerkmonkey posted:stuff I really feel like for anyone to give really good advice, we need to know: -Your savings -Your income -Your wife's part-time income -Your wife's new job income -How big the mortgages are -How big the student loans are -Any other debt -Whether she gets a 401k match -Whether you have access to a 401k and whether it has a match
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Oct 21, 2014 14:19
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Is there a good site to calculated estimated AGI for the year? Due to stock sales earlier in the year, I'm going to be dangerously close to being at the phase-out limit for Roth IRA contributions. I directly contributed $1k toward the beginning of the year, then backdoored the remaining $4.5k in anticipation of this problem. I just want to figure out if I'm going to have to go through the bullshit of withdrawing a contribution. That said, my 401k contribution is currently at 6% of my paycheck. If I am near the phase-out level of Roth contributions, I can jack my 401k contribution up to something silly like 15% for the rest of the year if I need to. I just need some sort of calculator to help me crunch the numbers.
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Oct 21, 2014 17:00
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Velochis posted:It is a tax gray area, but you can convert after tax (not Roth) 401k into a Roth 401k. Thanks for this, I'm going to investigate it!
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Oct 21, 2014 17:11
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