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Splinter posted:So if I have a Roth IRA with Vanguard, can I transfer this traditional IRA (with Fidelity) straight into my existing Vanguard Roth IRA? Or do I have to convert the Fidelity IRA to Roth before I can transfer it to the Vanguard Roth? Vanguard will open a new account for your rollover IRA if you don't want to convert it. It will just show up on your main screen as another account.
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Mar 10, 2015 01:29
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Inept posted:Vanguard will open a new account for your rollover IRA if you don't want to convert it. It will just show up on your main screen as another account. Yeah you don't have to do a Roth, it's really easy to do a IRA to IRA transfer.
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Mar 10, 2015 05:08
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Warning to any UK goons looking to open with iWeb, previously the cheapest of the low-cost online brokers, at any point - they're increasing that account opening charge from £25 to £200 on 16th March (6 days' time) on their regular and ISA trading accounts: http://www.iweb-sharedealing.co.uk/share-dealing-home.asp
El Grillo fucked around with this message at 15:45 on Mar 10, 2015 |
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Mar 10, 2015 15:40
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UK Goon here. I've previously only been depositing my excess cash in a Cash ISA but with the new ISA rules, I've decided to switch to a Cash and Shares ISA. The focus will be ETFs as I work for a financial institution and there's pretty strict compliance rules I have to adhere to (ETFs are one of the few products I can trade without consent). I'm going to transfer over about £6k from a previous cash ISA and I'll be depositing about £9k for this year's contribution (£15k total). Savings wise, I have about £15k left over as a rainy day fund. (I save about £2-2.5k/month after mortgage/utilities/personal expenses). Given my current earnings/savings/life situation (30, no kids, living with girlfriend), I'm willing to be fairly aggressive with my investment and looking to invest long-term. What kind of allocation would you guys recommend?
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Mar 10, 2015 16:41
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OP posted:Clickbait 
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Mar 10, 2015 16:57
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Filthee Fingas posted:UK Goon here. I've previously only been depositing my excess cash in a Cash ISA but with the new ISA rules, I've decided to switch to a Cash and Shares ISA. The focus will be ETFs as I work for a financial institution and there's pretty strict compliance rules I have to adhere to (ETFs are one of the few products I can trade without consent). You know that a transfer from another ISA doesn't count towards your annual limit, right?
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Mar 10, 2015 17:23
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tentish klown posted:You know that a transfer from another ISA doesn't count towards your annual limit, right? Yeah. I'll probably cap it at the end of the month when I get my next pay cheque.
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Mar 10, 2015 18:03
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Filthee Fingas posted:UK Goon here. I've previously only been depositing my excess cash in a Cash ISA but with the new ISA rules, I've decided to switch to a Cash and Shares ISA. The focus will be ETFs as I work for a financial institution and there's pretty strict compliance rules I have to adhere to (ETFs are one of the few products I can trade without consent). Fellow UK Goon here, I've been reading Smarter Investing: Simpler Decisions for Better Results by Tim Hale, and I'm nearing the end. Between that and http://monevator.com/ you should get a good idea what you want to do. Wish I earnt as much as you're saving each month!
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Mar 10, 2015 19:38
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Roid666 posted:Fellow UK Goon here, I've been reading Smarter Investing: Simpler Decisions for Better Results by Tim Hale, and I'm nearing the end. Between that and http://monevator.com/ you should get a good idea what you want to do. B Roid666 posted:Fellow UK Goon here, I've been reading Smarter Investing: Simpler Decisions for Better Results by Tim Hale, and I'm nearing the end. Between that and http://monevator.com/ you should get a good idea what you want to do. Thanks for the tips. I'll take a look at that website.
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Mar 11, 2015 01:05
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My girlfriend has a large amount of money invested in a taxable actively managed portfolio at a wealth management firm. The overall allocation between stocks/bonds looks good, but the stock portion is invested in a few dozen hand-chosen stocks. While the performance over the last few years has been fine, we're wondering if it's worth transferring over to Vanguard so that it can be passively invested in index funds? Presumably there will be a large tax charge from selling the stocks and transferring the money, and it's not clear if the extra diversity gained from investing in the index fund is worth it. To state the issue another way, we don't know how to price "better diversity from moving to an index fund" in a net-present value or retirement savings calculator.
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Mar 11, 2015 14:23
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The answer to that depends on several things, the most important of which are the current fees, her age, and her risk tolerance. You will need to realize 17.6% in gains in order to make up for a 15% long-term capital gains loss. A portion of that will be covered by your reduced fees, but it's a bit of a hike back up to where you once were. It's up to your girlfriend whether or not significantly reducing her risk is worth taking an up-front loss like that. I believe that if you keep that money in the market for a very long time (15+ years), you will come out ahead by transferring the funds. While there is potential for large short term growth, keeping money in only a few stocks makes the portfolio extremely volatile. I'll put it this way: If a company in her holdings goes bankrupt tomorrow, it would likely have a hugely negative impact on her net worth. Not so if she's holding an index fund instead. You're essentially trading a low-odds shot at major wealth for a near guarantee of steady growth. By sticking with this company, she's essentially using her money to say that the investors there know something about the future of the market that others do not. If she truly believes that, she certainly should stick with them, but you should be aware that history isn't on her side on that one.
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Mar 11, 2015 14:49
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Not a Children posted:You will need to realize 17.6% in gains in order to make up for a 15% long-term capital gains loss. A portion of that will be covered by your reduced fees, but it's a bit of a hike back up to where you once were. It's up to your girlfriend whether or not significantly reducing her risk is worth taking an up-front loss like that. You only get taxed on the gains though, so it's highly unlikely to be that bad.
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Mar 11, 2015 16:50
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baquerd posted:You only get taxed on the gains though, so it's highly unlikely to be that bad. Hoo boy, that was a total brain fart on my part. No more posting right after I wake up! Baquerd is absolutely right, the move has far, far less of a loss risk than I made it out to.
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Mar 11, 2015 17:16
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Not a Children posted:Hoo boy, that was a total brain fart on my part. No more posting right after I wake up! Not only that, but you will eventually have to pay long-term gains on those stocks, whether it be now or when you eventually sell them in the future. Paying the tax now should reset your base. (New to this, not sure if that's the right terminology)
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Mar 11, 2015 17:37
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Nocturtle posted:My girlfriend has a large amount of money invested in a taxable actively managed portfolio at a wealth management firm. The overall allocation between stocks/bonds looks good, but the stock portion is invested in a few dozen hand-chosen stocks. While the performance over the last few years has been fine, we're wondering if it's worth transferring over to Vanguard so that it can be passively invested in index funds? Presumably there will be a large tax charge from selling the stocks and transferring the money, and it's not clear if the extra diversity gained from investing in the index fund is worth it. To state the issue another way, we don't know how to price "better diversity from moving to an index fund" in a net-present value or retirement savings calculator. You should be able to transfer the stock positions over without actually liquidating them if you want to. If I were you, I would call Vanguard and verify with them that it's possible to do so, and then start the paperwork. That leaves you the flexibility to sell the individual stocks whenever you want in the future (possibly spreading the gains out over time, depending on your exact tax situation) while still moving your mutual fund investments into Vanguard index funds. What is your girlfriend's gross income a year, and how much does she have in unrealized capital gains?
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Mar 11, 2015 17:52
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Don't forget to consider that moving from stocks to a stock fund will result in more fees. Holding just stocks wouldn't cost you anything assuming you moved them to a non-managed account. Even low cost funds and etfs have some management fee in them. As long as she is properly diversified she could hold them.
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Mar 11, 2015 18:56
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Zero One posted:Don't forget to consider that moving from stocks to a stock fund will result in more fees. Holding just stocks wouldn't cost you anything assuming you moved them to a non-managed account. Even low cost funds and etfs have some management fee in them. I am kind of accidentally stuck in this position (holding a chunk of individual stocks) so I wanted to give my input on the idea of holding individual stocks. 1. You can pick and choose which stocks to buy. This is good if you feel that you can pick intelligently but can also be bad for the same reason. However, it does afford you the option to invest in companies you think have better than average prospects, and filter out companies you don't like for various reason. 2. After a couple years, you will have a highly varied capital gains situation. On the one hand, this adds some flexibility to manage your taxes. On the other hand, you end up trapped in positions with large gains because you don't want to sell them and pay the capital gains tax (which is why I called myself "accidentally stuck"). 3. It can be stressful to buy and hold individual stocks. Some of them will end up with bad performance at some point and if you are the type of person to be annoyed by that, it will eat at you. It can also lead to you making poor decisions based on the performance. 4. Diversifying properly is very hard once you factor in the capital gains issues. Sectors tend to perform similarly, so you might end up with large profits in 3 consumer discretionary companies and you now have to choose between realizing capital gains and being improperly diversified. All in all, I am much happier owning diversified ETFs than I am with the individual stocks. You still get some of the tax flexibility because you will end up with different purchase prices over time, and if an ETF has a bad day I never get crabby about it and feel like I did something wrong because.. what the hell can you do. Also, trading individual stocks isn't free. The vanguard S&P 500 ETF has a 0.05% expense ratio. If you have $1,000,000 invested, that is $500 per year. If you have $1,000,000 spread across a couple dozen individual stocks, I imagine you will incur at least a couple hundred dollars in trading fees to rebalance/tax loss harvest/etc.
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Mar 11, 2015 19:29
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You Mega Backdoor Roth people are lucky. I just asked our 401k provider (an actual financial advisory company, not just the HR Lady) and he said "We don't offer a Roth 401k" and had no clue what I meant by "After tax contribution". EDIT: I explained it and he said "even if we allowed an after tax contribution, there would be nowhere to put it because we don't have a Roth 401k option to place your after-tax dollars." Sigh GoGoGadgetChris fucked around with this message at 20:44 on Mar 11, 2015 |
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Mar 11, 2015 20:41
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Is there a place that explains the backdoor Roth process in language that a neophyte would understand? I read the Mad Fientist's posts and they're way over my head.
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Mar 11, 2015 22:56
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GoGoGadgetChris posted:You Mega Backdoor Roth people are lucky. I just asked our 401k provider (an actual financial advisory company, not just the HR Lady) and he said "We don't offer a Roth 401k" and had no clue what I meant by "After tax contribution". You could always try the ole hang up, try again method.
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Mar 11, 2015 23:28
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You can contribute to a Roth IRA until you make too much money. You can contribute to a pre-tax Traditional IRA until you make too much money. You can always contribute to a post-tax Traditional IRA. You can always Rollover funds from a Traditional into a Roth. The key ingredient here is that you're always able to "roll" Traditional IRA into Roth IRA. The benefit being that it isn't taxed on withdrawl and the drawback being you need to pay taxes on it at the time of rollover. The "backdoor" part happens because -- if you did it right****** -- you've already paid taxes on the money you're rolling over. You don't need to pay them again. It's as easy as these three steps:
*****: the money you roll over is technically from your entire basket of IRA funds, so if you hold more than a single years rollover in your Traditional you will contribute a proportional amount of pre-/post- tax funds and will have to pay the taxes on the pre- because it's going to a post-tax Roth. The perfect scenario is that you have ZERO Traditional funds and do a 100% post-tax Traditional rollover into Roth. If you have anything more complicated than that, consult a tax professional. e: clarity DNK fucked around with this message at 23:37 on Mar 11, 2015 |
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Mar 11, 2015 23:33
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Correct me if I'm wrong, but rolling over a (substantial) 401k into a traditional IRA would basically gently caress up your ability to do a backdoor Roth IRA conversion, yeah? I'm not quite into backdoor Roth territory, but possibly in the near future I will be. It'd be good info to know.
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Mar 11, 2015 23:41
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DNK posted:You can contribute to a Roth IRA until you make too much money. About that. I feel like I've made a huge mistake. I'm contributing after-tax dollars (from my paycheck) into my Traditional IRA (through vanguard) I was under the impression you could deduct the taxes and get that money back when you filed at the end of year. Is this not so?
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Mar 11, 2015 23:43
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UndyingShadow posted:About that. I feel like I've made a huge mistake. I'm contributing after-tax dollars (from my paycheck) into my Traditional IRA (through vanguard) In general, you can only deduct the full contribution to a traditional IRA from your taxes if your AGI is less than $60k (single). The deduction begins to phase out at $60k, reducing to zero by $70k. Which is why if you aren't eligible for a traditional IRA deduction, a Roth IRA is a no-brainer. Then once you exceed the Roth IRA income limit for contributions ($116k AGI), you become interested in backdoor Roth contributions. There's a few more rules and nuances around it than that, see: http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits
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Mar 11, 2015 23:47
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UndyingShadow posted:About that. I feel like I've made a huge mistake. I'm contributing after-tax dollars (from my paycheck) into my Traditional IRA (through vanguard) You only get a deduction if you have a certain low income for the year, high income earners get no deduction for a standard IRA. Note the income range is relaxed if you don't a workplace retirement plan as part as the benefits package:  
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Mar 11, 2015 23:47
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UndyingShadow posted:About that. I feel like I've made a huge mistake. I'm contributing after-tax dollars (from my paycheck) into my Traditional IRA (through vanguard) I don't think it is, no. You should probably be either contributing to a Roth IRA (so your post-tax contributions grow and disperse tax-free) or a 401(k) if you have one available (if you'd prefer to contribute pre-tax - but it's pre-tax on your paycheck, not a deduction/credit at the end of the year).
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Mar 11, 2015 23:48
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Guinness posted:In general, you can only deduct the full contribution to a traditional IRA from your taxes if you made less than $60k (single). The deduction begins to phase out at $60k, reducing to zero by $70k. Well poo poo. Guess I'm opening a Roth then. Gotta scrounge up some cash from somewhere.
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Mar 11, 2015 23:48
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UndyingShadow posted:About that. I feel like I've made a huge mistake. I'm contributing after-tax dollars (from my paycheck) into my Traditional IRA (through vanguard) Assuming you're below the income threshold, you reduce your income by the amount you put into your traditional IRA when you file your taxes, effectively lowering your tax. You "get that money back" if doing so means you overpaid on your paycheck tax withdrawals or quarterly tax payments. There's no way to pay into an IRA using the pre-tax dollars in your paycheck, because your employer can't do that for you. You put money from your bank account into the IRA, and then that affects your taxable income. Again, assuming your income is below the allowed threshhold, and assuming you have earned income, and assuming you only contribute up to the annual limit. UndyingShadow posted:Well poo poo. Guess I'm opening a Roth then. Gotta scrounge up some cash from somewhere. Are you saying your income is over the $70k allowed limit, after accounting for the money you put into the IRA, and any other things that lower your "Modified Adjusted Gross Income" (MAGI)?
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Mar 11, 2015 23:55
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Leperflesh posted:Are you saying your income is over the $70k allowed limit, after accounting for the money you put into the IRA, and any other things that lower your "Modified Adjusted Gross Income" (MAGI)? Yes. I went ahead and started a Roth with Vanguard. I already had a rolled over 401k, so it was easy. I'll just fund the Roth now.
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Mar 12, 2015 00:04
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I appreciate the responses as to whether to move my girlfriend's saving from the professional manager to Vanguard funds. The manager's selection does seem diverse (in my uninformed opinion) so we have time to properly consider the total cost of moving or spread out the capital gains. I was a little surprised that the professional investment manager chose to invest in individual stocks/bonds vs index funds. I assume he's trying to play some of the tax games other posters mentioned, or just justifying his fee. This is a very informative thread!
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Mar 12, 2015 01:13
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Nocturtle posted:I appreciate the responses as to whether to move my girlfriend's saving from the professional manager to Vanguard funds. The manager's selection does seem diverse (in my uninformed opinion) so we have time to properly consider the total cost of moving or spread out the capital gains. I was a little surprised that the professional investment manager chose to invest in individual stocks/bonds vs index funds. I assume he's trying to play some of the tax games other posters mentioned, or just justifying his fee. Justifying his fee, mostly. He possibly charges trading fees on top of a management fee too.
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Mar 12, 2015 02:00
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Nocturtle posted:I appreciate the responses as to whether to move my girlfriend's saving from the professional manager to Vanguard funds. The manager's selection does seem diverse (in my uninformed opinion) so we have time to properly consider the total cost of moving or spread out the capital gains. I was a little surprised that the professional investment manager chose to invest in individual stocks/bonds vs index funds. I assume he's trying to play some of the tax games other posters mentioned, or just justifying his fee. Most expensive manager stock picking portfolios more often than will underperform the market and also managers tend to charge high fees on top of everything, usually 1-2% of the total money under management in addition to charge extras such as buy/sell commissions. Not to mention a stock picking portfolio will have less holdings than a index fund, for example Vanguard's VXUS ETF which cover stocks outside the US has 5808 companies.
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Mar 12, 2015 02:51
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Remember that when comparing performance (such as when deciding whether a given investment or collection of investments "underperformed" or "outperformed"), you should compare to a baseline with an identical risk profile. E.g., even if seven handpicked stocks collectively "beat" the S&P 500, they're far riskier, so that doesn't actually tell you much. The reason we promote index funds in this thread is because they have comparatively low risk profiles while still performing well. Ten handpicked stocks just can't possibly be as diversified as a mutual fund, and they'll very likely be riskier.
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Mar 12, 2015 02:57
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Leperflesh posted:Remember that when comparing performance (such as when deciding whether a given investment or collection of investments "underperformed" or "outperformed"), you should compare to a baseline with an identical risk profile. Yeah, if you pick the right wonder stocks you can beat the index return, problem is doing this consistently over a long period of time is basically impossible unless your last name is Buffet or Lynch. Also such active management is always more expensive due to the advisor fee and also all the extra commissions/mutual fund load that go with a stock picking focused strategy.
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Mar 12, 2015 03:10
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So I'm in a spot where I'm not sure if I'll have to do a backdoor Roth this year, but I'd like to make a $5500 contribution soon. I'm pretty sure the answer is no, but is there any harm to just contributing to the traditional IRA and backdooring it into my Roth now? Also, how painful/painless is doing this across brokers, from vanguard to fidelity in my case? For annoying reasons I don't have my IRAs in one place, and I don't feel like dealing with the hassle of opening new accounts (407 letters, yay!).
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Mar 12, 2015 05:43
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ohgodwhat posted:So I'm in a spot where I'm not sure if I'll have to do a backdoor Roth this year, but I'd like to make a $5500 contribution soon. I'm pretty sure the answer is no, but is there any harm to just contributing to the traditional IRA and backdooring it into my Roth now? Also, how painful/painless is doing this across brokers, from vanguard to fidelity in my case? For annoying reasons I don't have my IRAs in one place, and I don't feel like dealing with the hassle of opening new accounts (407 letters, yay!). Vanguard has a guide here how to easily do it online assuming you know conversion is right for you: https://investor.vanguard.com/ira/roth-conversion Basically you sell your IRA funds and select your Roth IRA account to receive the net proceeds.
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Mar 12, 2015 06:51
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etalian posted:Yeah, if you pick the right wonder stocks you can beat the index return, problem is doing this consistently over a long period of time is basically impossible unless your last name is Buffet or Lynch.
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Mar 12, 2015 16:20
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What's the difference between Vanguard Total and Vanguard Small Cap? I'm working on setting up a 401k through my job and a lot of the recommended portfolios are suggesting the Total but my workplace only offers Small Cap for 2 of them. tickers offered are VSMAX VSIAX and VTSAX baram. fucked around with this message at 19:28 on Mar 12, 2015 |
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Mar 12, 2015 19:21
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baram. posted:What's the difference between Vanguard Total and Vanguard Small Cap? I'm working on setting up a 401k through my job and a lot of the recommended portfolios are suggesting the Total but my workplace only offers Small Cap for 2 of them. VTSAX is the entire US Stock market - every single publicly traded USA company. VSMAX is every single small-cap stock in the US stock market (including the two major groups of value and growth stocks) VSIAX is all of the small-cap stocks in the US Stock market that are also considered "value" stocks rather than "Growth" stocks. "Value stocks are those that may be temporarily undervalued by investors"
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Mar 12, 2015 19:35
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baram. posted:What's the difference between Vanguard Total and Vanguard Small Cap? I'm working on setting up a 401k through my job and a lot of the recommended portfolios are suggesting the Total but my workplace only offers Small Cap for 2 of them. The Total Stock Market fund (VTSAX) captures the entire stock market (large, mid, and small cap companies). The Small Cap Index fund (VSMAX) only capture the smallest 10% of the market (by market capitalization). Since these companies have smaller value they have more room for growth than larger companies but they also are more volatile. The Small Cap Value fund (VSIAX) captures an even smaller portion of the total small cap market, specifically "value" stocks which the Vanguard prospectus describes as "those [stocks] that may be temporarily undervalued by investors." What other stock funds are available in your 401k? If you have a reasonably-priced S&P 500 index fund that should probably be the majority of your US stock holdings complemented by mid cap and small cap funds (or an extended market fund, which is basically mid+small in the same fund) in proper proportion.
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