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ohgodwhat posted:Just so I don't screw things up: Only if your AGI is low enough to be eligible for the contributions to be considered tax deductible I believe. I think the limit is around 70k or so.
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Feb 17, 2015 05:54
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Yeah, if you don't have any long-term investments except your Roth IRA, then the stock/bond ratio doesn't affect your taxes and you don't need to worry about it. But if you are only contributing the $5500/year that you can contribute to a Roth, you really might want to save more and the tax picture might become relevant. Are you saving ~ 15% of your gross income for retirement? Read this if so: http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement
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Feb 17, 2015 05:54
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2014 was my first year out of school, so I've been building up an emergency fund more than anything.Henrik Zetterberg posted:Only if your AGI is low enough to be eligible for the contributions to be considered tax deductible I believe. You mean the retirement savings credit? Looks like it phases out at $30k for a single filer. http://www.irs.gov/Retirement-Plans...0%99s-Credit%29 ohgodwhat fucked around with this message at 06:23 on Feb 17, 2015 |
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Feb 17, 2015 06:20
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ohgodwhat posted:I've already filed my 2014 taxes, but would like to make a contribution to max out my Roth IRA for 2014. I'm pretty sure this doesn't affect my tax situation, being post tax and all, but am I forgetting something? Henrik Zetterberg posted:Only if your AGI is low enough to be eligible for the contributions to be considered tax deductible I believe.
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Feb 17, 2015 06:35
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Gisnep posted:Contributions to a Roth IRA aren't tax deductible anyway. He may be eligible for the Saver's Credit. Yeah the other advantage of the vanilla Roth is you do a get a tax break but the amount gets phased out the more you make. Redkist posted:Now, as a 25 year old, and remembering that the Bogelhead's Guide to Investing recommends putting your age into bonds, what do you think is my best course of action here? The LifeStrategy fund obviously has a smaller amount of bond allocation and it seems as if it is more difficult to adjust this allocation? And what do you think about the tax inefficiency of the LifeStrategy fund? I'm a little unclear on what they mean exactly and what the difference is between tax-advantaged and non-tax-advantaged accounts or even how to acquire either one or what exactly that means. I appreciate any clarification on my lengthy post. Tax advantaged means retirement accounts like a IRA or 401k. Because the government only taxes the distribution but not the investment growth over time you don't have to worry about tax efficiency aka getting qualified dividends. Taxable means a simple non-retirement brokerage account, basically any sort of dividend or bond income will get taxed on a yearly basis. For bonds there's not much you can do about tax efficiency besides buying muni/US Treasury bonds since they are exempt at least from federal taxation and state taxation if you reside in the state that issued the muni bond. etalian fucked around with this message at 07:13 on Feb 17, 2015 |
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Feb 17, 2015 07:06
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etalian posted:Yeah the other advantage of the vanilla Roth is you do a get a tax break but the amount gets phased out the more you make. Dammit, etalian... You mean traditional IRA, as opposed to Roth IRA. Traditional is paid with money before taxes are taken out, while the "Roth" designation means tax has already been paid on the contributions. Same holds true for traditional and Roth 401k accounts (where offered). I don't want to get into the details since many other places can explain it better, but you're severely muddling two distinct concepts by conflating them together as both being called Roth.
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Feb 17, 2015 09:04
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etalian posted:Yeah the other advantage of the vanilla Roth is you do a get a tax break but the amount gets phased out the more you make. Ok thank you. Sorry to be redudant but given the information I've posted in this thread, would you guys (slap me silly, etalian, anyone else qualified) still recommend the same 20% bonds/80% stocks LifeStrategy bond for me? Again, sorry, I've just heard so many different things and I guess I'm overwhelming myself.
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Feb 17, 2015 10:08
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Redkist posted:Ok thank you. Sorry to be redudant but given the information I've posted in this thread, would you guys (slap me silly, etalian, anyone else qualified) still recommend the same 20% bonds/80% stocks LifeStrategy bond for me? Again, sorry, I've just heard so many different things and I guess I'm overwhelming myself. Really you should be focusing on saving as much as you can and investing it into something. Ideally you'll be putting that something into tax advantaged accounts such as a Roth IRA or traditional IRA (which you open on your own) or a Roth 401(k) or traditional 401(k) (which is opened by your employer). There's still time to contribute the maximum $5,500 to a Roth IRA for 2014 and then you can add $5,500 to your Roth IRA for 2015 as well. Once you reach the contribution limits for the year on your Roth IRA, you can contribute additional money to a taxable account (the term for non-tax advantaged accounts) until you find a job that offers a 401(k). Any dividends or cash returns you get from investments in that taxable account will be taxed at the end of the year. If those cash returns are qualified dividends, the tax rate isn't too bad but if they are unqualified dividends, like interest received from bonds, those are taxed at your highest bracket. This is why people recommend only holding bonds in tax advantaged accounts.
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Feb 17, 2015 12:45
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Until you have over a 100,000 your contributions are more important than your rate of return. Once your monthly return starts to approach your monthly contribution then being tax advantaged, having a low MER and being in the right vehicles makes a lot more impact.
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Feb 17, 2015 13:12
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cowofwar posted:being in the right vehicles makes a lot more impact. I knew truck equity would pay off!
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Feb 17, 2015 13:41
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Redkist posted:Ok thank you. Sorry to be redudant but given the information I've posted in this thread, would you guys (slap me silly, etalian, anyone else qualified) still recommend the same 20% bonds/80% stocks LifeStrategy bond for me? Again, sorry, I've just heard so many different things and I guess I'm overwhelming myself. I'm not qualified for anything  I don't know a whole lot about your situation, but in my opinion you should max out your Roth IRA every year (currently $5500 max total contribution for the year, and you can still contribute for 2014). For someone your age, Vanguard's 80% stock / 20% bond Life Strategy fund is a reasonable place to park all of your retirement savings.
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Feb 17, 2015 18:36
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edit
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Feb 17, 2015 21:15
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I'm feeling a bit stupid/confused right now about this whole process. I called Vanguard and told them I wanted to open a LifeStrategy Growth Fund. They asked if I wanted to put it within my Roth IRA account. Now, I thought that your three fund portfolio (or the equivalent of it, the LifeStrategy Growth Fund) was separate from your Roth IRA but I guess I have a critical misunderstanding of investing. What if I wanted to contribute more than 5500? I'm just pretty confused about how I should set up my Roth IRA and my LifeStrategy Growth Fund and if anyone can break it down like I'm loving 5 years old I'd be so so grateful.
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Feb 17, 2015 23:07
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Redkist posted:I'm feeling a bit stupid/confused right now about this whole process. I called Vanguard and told them I wanted to open a LifeStrategy Growth Fund. They asked if I wanted to put it within my Roth IRA account. Now, I thought that your three fund portfolio (or the equivalent of it, the LifeStrategy Growth Fund) was separate from your Roth IRA but I guess I have a critical misunderstanding of investing. What if I wanted to contribute more than 5500? I'm just pretty confused about how I should set up my Roth IRA and my LifeStrategy Growth Fund and if anyone can break it down like I'm loving 5 years old I'd be so so grateful. LifeStrategy is a fund. The fund has to go into an ACCOUNT. It sounds like your ACCOUNT is the Roth IRA, which has a max per year of $5500. If you want to invest more, you'd need to do something like open up a brokerage account. Not sure you'd want to do that if you have other tax-advantaged options available to you, like a 401k or HSA that you could use.
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Feb 17, 2015 23:16
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An IRA is just a classification of a brokerage account that gives it tax-advantaged status as a retirement account. An IRA can be either Traditional (tax-deferred) or Roth (post-tax with tax-free growth). You can invest in whatever you want within an IRA -- for example, a mutual fund. You use an IRA for retirement savings, i.e. money you don't intend to touch until you're 55+. You can only contribute up to $5500 per year as an individual into an IRA. Other types of tax-advantaged/retirement accounts include 401k, 403b, HSA, 529, etc., each with their own restrictions. They are just a classification of an account, they are not an investment in and of themselves. Otherwise, a normal taxable brokerage account gives you relatively unfettered access to your money that allows you to buy mutual funds (and ETFs, stocks, and other things), but the dividends and realized gains are subject to tax each year. You can put as much money as you want into a taxable brokerage account. Guinness fucked around with this message at 23:20 on Feb 17, 2015 |
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Feb 17, 2015 23:17
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A portfolio is usually thought of as everything you have. This can include: -Your home(if you have equity in it) -Cash savings -IRAs (Roth or traditional) -401ks (Roth or traditional) (if your employer has one) -HSAs (if your health plan lets you use one) -Taxable investment accounts (any non-retirement investment accounts) Typically if you can save a lot of money you're going to be putting as much money as you can into tax-advantaged investment accounts. 401k with employer match is the best one, IRA is the next best, etc. (see the OP). If you want to save more than 5500, you probably want as much as you can put into an IRA each year (Roth vs traditional is a different argument) and then you should open up a taxable savings account for the remainder. Of course when you're starting out, fund minimums make it so that if you're spread between different vehicles, it could be tough to get the exact asset allocation you want. This should go away over time if you keep saving in all your vehicles. i.e., when you have 30k in your taxable account and 50k in your IRA, you can have a lot of options on what to do within each account, and have the asset allocation match what you want the whole portfolio to be. edit: beaten.
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Feb 17, 2015 23:21
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A Roth IRA is a container for your investments. The LifeStrategy Growth Fund is an investment that goes inside a container. You can only contribute $5500 a year into a Roth IRA, but until April 15th you can contribute for both 2014 and 2015, so you could invest $11,000 today if you wanted.
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Feb 17, 2015 23:21
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Doesn't the money that goes into an IRA have to be earned income? I'd have to go back and read but I'm not sure all of the money he's eyeballing counts.
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Feb 18, 2015 03:57
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You have to have earned at least as much income in the tax year as you contribute for that year - a subtle but important difference. It's a good point though.
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Feb 18, 2015 04:44
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Redkist posted:I'll repost: Quoted the original question for posterity. As long as the job generates $5500/year of adjusted gross income then it should be fine.
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Feb 18, 2015 04:48
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Also always go with Vanguard mainly because of the low cost well run investment options and also many of the better known ETFs like VTI have such big assets under management/big daily volume you don't pay extra premium when you purchase the shares.
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Feb 18, 2015 04:59
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this might be the wrong thread for this, but if I make an IRA contribution today for 2014 and backdoor it into a roth tomorrow, is the conversion taxable in 2014 or 2015? hopefully the gain/loss will be close to nil but i'd rather not have to wait for yet more tax forms before i can file my return for 2014.
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Feb 18, 2015 05:27
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Mr. Glass posted:this might be the wrong thread for this, but if I make an IRA contribution today for 2014 and backdoor it into a roth tomorrow, is the conversion taxable in 2014 or 2015? hopefully the gain/loss will be close to nil but i'd rather not have to wait for yet more tax forms before i can file my return for 2014. Well, if you were truly doing it backdoor, it would hopefully not be taxable. However, if you categorize the original IRA contribution as being for 2014 (assuming you haven't met your contribution limit for 2014), and then when you convert it you will end up having to file a form (8606) with your 2014 taxes (since the contribution was for 2014) and 2015 taxes (since the conversion was done in 2015). flowinprose fucked around with this message at 06:34 on Feb 18, 2015 |
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Feb 18, 2015 06:31
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Opened and transferred money into an HSA account with JP Morgan yesterday. It wasn't as convoluted as I had feared, but getting information from the site is a challenge. So my question is there any reason to leave more than a thousand dollars of cash in the HSA account?
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Feb 18, 2015 13:17
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Ropes4u posted:So my question is there any reason to leave more than a thousand dollars of cash in the HSA account? Yes, because your out of pocket maximum is definitely well over $1k. That being said, that reason doesn't necessarily override the much more likely scenario of you getting more out of money in index funds.
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Feb 18, 2015 15:29
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flowinprose posted:Well, if you were truly doing it backdoor, it would hopefully not be taxable. However, if you categorize the original IRA contribution as being for 2014 (assuming you haven't met your contribution limit for 2014), and then when you convert it you will end up having to file a form (8606) with your 2014 taxes (since the contribution was for 2014) and 2015 taxes (since the conversion was done in 2015). great, thanks!
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Feb 18, 2015 15:31
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I asked a page or two ago but didn't get a response. The small company I work for (10~ employees) doesn't have any sort of 401k but I would like to research and present my boss with the pros/cons of setting one up. Where should I start?
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Feb 18, 2015 21:39
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Thanks everyone, got everything worked out.
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Feb 18, 2015 22:07
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khysanth posted:I asked a page or two ago but didn't get a response. The small company I work for (10~ employees) doesn't have any sort of 401k but I would like to research and present my boss with the pros/cons of setting one up. Where should I start?
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Feb 18, 2015 23:13
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I'm a 24-year-old just graduating from school. I have various income from internships, self-employment, etc. It has been generally quite low (~$20k/yr), with this year hitting ~$37,000 income from 7 months of interning, plus maybe $5k or $10k more from self-employment. Starting January next year, I am lined up to be making ~$60-$70k depending on location from a job. I'm a big dumb idiot and have been throwing spare money into individual stocks rather than 401K and Roth IRA. Because I have been taking many paid internships, these companies do not match 401k. From my understanding, that means I should be jumping right to maxing a Roth IRA, and then any excess income should go into a non-matched 401k, correct? I have ~$23,000 in individual stocks right now, and a bit more (~$3,000 after emergency fund) floating around in savings. I don't plan on buying a car at least for the next few years. I do plan on saving up for a down-payment for a house as early in life as possible. (Which I believe is more reason to start maxing my Roth IRA early, so that I can withdraw $10,000 towards the payment without the 10% early withdrawal tax -- must have funds in my IRA for 5 years minimum for this.) Yes, I know I need to save for a down-payment AND retirement -- ideally I'll do the math on whether withdrawing 0 or $10k or something between for a down payment makes sense from an interest rate/future Roth IRA compounded interest perspective. Questions: 1) My understanding is that I have until April 15th of this year to submit Roth IRA funds for 2014. Does it makes sense to put in $5,500 into a Roth IRA for 2014 before April 15th, and then after that date (or can I even do it now?) also put in the maximum of $5,500 more for 2015? 2) Does it make sense to sell off and withdraw some of my individual stocks so that I can plan to put $11,000 into maxing 2014 and 2015 Roth IRAs? I'm unclear on how hard I'll get smashed with taxes from withdrawing stocks now. I've put a lot of money into them recently and have not shown significant profit... not sure if that helps avoiding tax or not. 3) Anything else I'm missing? Thanks. Blinky2099 fucked around with this message at 22:44 on Feb 19, 2015 |
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Feb 19, 2015 22:35
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Blinky2099 posted:Questions: 1) It makes sense to do the 2014 contribution first since the clock is ticking on that. You don't have to wait until 4/15 for the 2015 one, so you can do both now if you want. At Vanguard when you deposit into the Roth IRA it will ask which year you want to designate it as. 2) When you sell you'll only be taxed on the capital gains, ie any profit you've made between when you bought them and now. If this isn't very much then you absolutely should sell them off, deposit the proceeds into the Roth IRA and park it in an index fund. If it's a lot of profit and a relatively diverse array of stocks you might want to hold off. 3) It's probably not a good idea to use the Roth IRA as a savings account to be withdrawn for a home purchase. It may be the mathematically correct decision, but you will be encouraging future you to be in the habit of raiding your retirement accounts. As someone who is a mere 5yrs older than you, I can tell you that FutureYou is a completely different person that you shouldn't trust. Stick with good habits.
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Feb 19, 2015 23:29
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Blinky2099 posted:3) Anything else I'm missing? Thanks.
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Feb 19, 2015 23:47
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Blinky2099 posted:I do plan on saving up for a down-payment for a house as early in life as possible. (Which I believe is more reason to start maxing my Roth IRA early, so that I can withdraw $10,000 towards the payment without the 10% early withdrawal tax -- must have funds in my IRA for 5 years minimum for this.) Yes, I know I need to save for a down-payment AND retirement -- ideally I'll do the math on whether withdrawing 0 or $10k or something between for a down payment makes sense from an interest rate/future Roth IRA compounded interest perspective. You can withdraw $10k (this may includes gains) for a first time home purchase penalty free but if you had contributed for at least two years prior to the withdrawal, you'd have over $10k in contributions so you wouldn't have to wait the required 5 years since the $10k you withdraw would have been contributions.
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Feb 19, 2015 23:48
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Thank you. I'll deposit the $5,500 for 2014 and then hold off on depositing 2015 since I have plenty of time for that.moana posted:If you're going to continue doing self-employment stuff as side income, look into a solo 401k to save some of that money. SEP or SIMPLE plans will also allow you to save more than a Roth IRA would. Saint Fu posted:You can withdraw 100% of your contributions (this does not include gains) from a Roth IRA at any point penalty free. And one last question: my girlfriend says her company does not match 401k but matches her "simple IRA". Isn't this really unusual? That doesn't allow you to contribute more than the yearly $5,500 maximum does it? Thanks for all of the good advice guys. Blinky2099 fucked around with this message at 00:16 on Feb 20, 2015 |
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Feb 20, 2015 00:01
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Blinky2099 posted:And one last question: my girlfriend says her company does not match 401k but matches her "simple IRA". Isn't this really unusual? That doesn't allow you to contribute more than the yearly $5,500 maximum does it? Simple Ira and your typical "traditional" / "Roth" Ira are completely separate entities, as the simple Ira is employer guided. You can contribute the full 5.5k to the traditional or Roth, and contribute to the full limits of the simple Ira. I'm surprised they have a simple Ira and 401k set up. I thought the simple Ira was more or less a convent option for small business to do retirement accounts without the headaches of 401k [note: limited by company size and contribution requirements]
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Feb 20, 2015 00:11
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Blinky2099 posted:I see. So I can withdraw 100% of my contributions, no matter how little or how much they are, tax free at any time. Does that mean I can withdraw $50k contributed + up to $10k of pure gains from the account penalty/tax free, (assuming that 10k is going towards a house & my history is over 5 tax ears old?)
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Feb 20, 2015 00:13
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Saint Fu posted:That's how I understand it. Those gains would probably have to be at least 5 years old. So you could withdraw your gains from 2015 in 2020, your gains from 2016 in 2021, etc. I don't think you could start contributing in 2015, contribute every year, then in 2020 withdraw your contributions plus up to $10k unless you saw at least $10k in gains that first year (which would be ridiculous). The only catch is yes can cash tax fee after the IRA is "vested" by the government but obviously you can't put your withdrawals back in, aka taking out 10,000 then wanting to put back in 10,000. Also unless you need the money because you got a disability or need money to make a home downpayment, the withdrawal will basically be taxed as ordinary income: http://www.rothira.com/taking-early-withdrawals-your-roth-ira  (Pretty much avoid raiding your retirement accounts if possible, the main cost is the lost opportunity cost of the money not growing over time)
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Feb 20, 2015 00:29
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Blinky2099 posted:You're saying after the $5,500 maximum Roth IRA deposit? Or can I receive a benefit that pushes 401k contributions as more valuable than Roth IRA for self-employed funds? 1) Contribute to 401(k) up to employer match. Always get the free money! 2) Max out Roth IRA ($5,500 limit in 2015). You can skip this if your 401k options are good and you don't need the extra tax-advantaged space. 3) Max out 401(k) ($18,000 limit for 2015) If you have a company 401k, get that sweet match, then Roth, then probably your self-employed SEP, SIMPLE, or solo 401k: http://www.obliviousinvestor.com/sep-vs-simple-vs-solo-401k/ If your company has a GREAT 401k with super low expense ratios, it would make sense to max that before maxing your own SEP/SIMPLE/solo, otherwise max yours before the company's.
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Feb 20, 2015 01:45
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moana posted:If you have a company 401k, get that sweet match, then Roth, then probably your self-employed SEP, SIMPLE, or solo 401k: http://www.obliviousinvestor.com/sep-vs-simple-vs-solo-401k/
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Feb 20, 2015 02:01
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etalian posted:
You mean the gains would be taxed, which no one here is talking about since the conversation is about allowable gain withdrawals.
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Feb 20, 2015 02:54
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