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Not a Children posted:e: Of course, if you were dumb enough to buy into gold at $1500, you're probably dumb enough to sell out at $1000 But the talking heads on TV said it was only ever going to go up from there!
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Jul 21, 2015 16:01
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Bisty Q. posted:Noooo, run screaming from I-bonds right now. The fixed part is 0 and the inflation part is currently negative. I-bonds are worse than a savings account, because they are paying you nothing yet you have significantly limited access to the money in them. I bonds can't pay less than zero so deflation isn't a problem, they can grow tax-deferred, and they're callable at any time after a year. That lets you upgrade them to a higher interest rate after a year or more, subject to the purchase limits. My plan is to have I bonds make up about 2/3 of my emergency fund. I don't see much point in using them as part of your regular investments because of the limits and the fact that stocks will, largely, keep pace with inflation even if inflation accelerates, but telling people to run away from probably the most flexible and safe emergency fund vehicle seems short sighted. They're about maintaining the purchasing power of your emergency fund, or at alternately offering a very safe investment vehicle for people near our in retirement.
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Jul 21, 2015 16:07
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Desuwa posted:I bonds can't pay less than zero so deflation isn't a problem, they can grow tax-deferred, and they're callable at any time after a year. That lets you upgrade them to a higher interest rate after a year or more, subject to the purchase limits. My plan is to have I bonds make up about 2/3 of my emergency fund. What's the advantage of I bonds over one of those savings accounts paying .9% or 1% interest?
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Jul 21, 2015 16:48
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Twerk from Home posted:What's the advantage of I bonds over one of those savings accounts paying .9% or 1% interest? The current crop, not too much. If inflation goes back up they'll be better, and that's their main purpose; to maintain the buying power of your emergency fund, not to grow it. But the interest rate is locked in and they're callable at any time after only a year so you can upgrade them later. Locking in 3%or more plus inflation is close to ideal for an investment.
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Jul 21, 2015 16:57
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Twerk from Home posted:What's the advantage of I bonds over one of those savings accounts paying .9% or 1% interest? If you're over the insurance limit of 250k then its a pretty safe place to put anything extra. Otherwise just inflation protection.
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Jul 21, 2015 16:57
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Desuwa posted:The current crop, not too much. If inflation goes back up they'll be better, and that's their main purpose; to maintain the buying power of your emergency fund, not to grow it. Shouldn't a savings account also roughly keep pace with inflation? I know banks are loathe to ever raise rates, but you can always switch. What am I missing?
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Jul 21, 2015 17:42
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MickeyFinn posted:Shouldn't a savings account also roughly keep pace with inflation? I know banks are loathe to ever raise rates, but you can always switch. What am I missing? Savings accounts definitely don't match inflation. Inflation generally averages out to around 3% over a long period of time, but can go below that or far above that for long stretches too. Savings accounts are usually well under 1%. The theory is the bank is providing you a service by giving you somewhere safe to keep your money (and then they turn around and invest it in loans, etc. that make them a lot more than inflation). That's why it's usually a bad idea to park money you won't need for more than a few years in savings, unless it's your emergency fund.
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Jul 21, 2015 18:28
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MickeyFinn posted:Shouldn't a savings account also roughly keep pace with inflation? I know banks are loathe to ever raise rates, but you can always switch. What am I missing? Savings accounts, T-bills, or other short duration fixed income are returning pretty much zero or negative return after inflation. This is the sorry state of affairs. Relative to the rest of fixed income, I-bonds at 0% is pretty much priced correctly. Any higher and they would be a great deal. Along with its inflation tracking, the callability and the tax deferral are great features... these features make them better than savings accounts or other fixed income (you are not exposed to interest rate risk, but you also get to lock in at 30 years if you want), so even if they return less in the long run, the features can be considered worth the lower yield. Nothing has changed about their value as an alternative to savings accounts or fixed income. The more sensitive to inflation you are, the more attractive they are. Otherwise, at worse, they are still decent.
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Jul 21, 2015 19:03
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Hadlock posted:I'm not interested in buying gold, ever, Gold is 2spooky4me personally to invest in (other than as part of a market index fund) but I found this WSJ article kind of interesting: http://blogs.wsj.com/moneybeat/2015/07/17/lets-be-honest-about-gold-its-a-pet-rock/
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Jul 21, 2015 19:09
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mrmcd posted:If you're over the insurance limit of 250k then its a pretty safe place to put anything extra. When I worked in a bank we were told that the FDIC guarantee limit is based on the titling of the accounts. So I get 250K for accounts titled to me alone. Then another 250K for accounts with both me and my wife names. Then another 250K for my wife's individual accounts. Then another 250K for me and a kid. Then another 250K for wife and the same kid, etc. That's how it was explained to us and what we told customers, although I never bothered to verify it. In essence the coverage was almost limitless if you titled your accounts correctly.
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Jul 21, 2015 19:12
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tesilential posted:When I worked in a bank we were told that the FDIC guarantee limit is based on the titling of the accounts. This is incorrect and is why it is important to verify and not trust an employee at the bank. All of your joint accounts are co-owned at 50% and are combined, only qualifying for $250k total to be insured. So you have $250k for accounts titled individually, and another $250k for your co-ownership of all joint accounts, even if they are with different parties.
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Jul 21, 2015 19:53
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Yes absolutely never trust bankers, most have $0.00 in their personal accounts yet are very eager to "help" you with your finances So a husband and wife could have 750K insured between them?
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Jul 21, 2015 20:08
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tesilential posted:Yes absolutely never trust bankers, most have $0.00 in their personal accounts yet are very eager to "help" you with your finances Actually $1M. $250k for each individual account and $500k joint ($250k for each owner's share). Any additional joint accounts with other parties would start putting them over the limit.
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Jul 21, 2015 20:19
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Xenoborg's question on the last page got me wondering about my 401k situation as well, so I suppose I'll ask my question: what's the practical difference between "Roth 401k" and regular "after-tax contributions" for my situation? My plan allows both, and I'm wondering if I should be taking advantage of them. Should I be doing something different here:
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Jul 21, 2015 23:24
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Hadlock posted:I'm not interested in buying gold, ever, There seems to be no strategy or trading. Gold bugs and silver stackers are all crazy. Have a look at the silver stacking videos on youtube and you'll discover a world of people that collect silver. They blurt out random stuff that makes no sense in relation to investment or trading. After the 1987 stock market crash there were still people holding gold when the price dropped a lot and I'm sure they died before they could sell.
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Jul 21, 2015 23:27
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Devian666 posted:There seems to be no strategy or trading. Gold bugs and silver stackers are all crazy. Have a look at the silver stacking videos on youtube and you'll discover a world of people that collect silver. They blurt out random stuff that makes no sense in relation to investment or trading. Commodities are also a dubious investment IMO given the challengeof investing and also how they tend to be even more volatile/speculative than the standard boring stock market.
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Jul 21, 2015 23:33
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Star War Sex Parrot posted:Xenoborg's question on the last page got me wondering about my 401k situation as well, so I suppose I'll ask my question: what's the practical difference between "Roth 401k" and regular "after-tax contributions" for my situation? My plan allows both, and I'm wondering if I should be taking advantage of them. After tax 401k contributions only ever make sense if you're going to move them into a Roth IRA or 401k. Either when you leave your job or, if you're allowed to by your plan, as you make the contributions. Roth accounts are strictly better. As for Roth vs traditional now, it depends whether you think your income will increase or decrease in retirement. The Roth account effectively gives you more contribution room because one dollar after tax is worth more than one dollar pre-tax.
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Jul 21, 2015 23:47
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80k posted:Savings accounts, T-bills, or other short duration fixed income are returning pretty much zero or negative return after inflation. This is the sorry state of affairs. Relative to the rest of fixed income, I-bonds at 0% is pretty much priced correctly. Any higher and they would be a great deal. Along with its inflation tracking, the callability and the tax deferral are great features... these features make them better than savings accounts or other fixed income (you are not exposed to interest rate risk, but you also get to lock in at 30 years if you want), so even if they return less in the long run, the features can be considered worth the lower yield. Nothing has changed about their value as an alternative to savings accounts or fixed income. The more sensitive to inflation you are, the more attractive they are. Otherwise, at worse, they are still decent. Tax deferred income doesn't matter if there's no income. Putting money into a vehicle that is guaranteed to pay you nothing for at least 6 months when you can put it into a .95% savings account today and start earning that pittance is bad with money. Right now buying I bonds is a stupid idea. In 6 months, maybe it won't be.
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Jul 22, 2015 00:39
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I think I bring this up like every 30 pages, but Traditional 401k is more now and later as long as... You're planning on SEPP-style distributions for it. The combined income from your taxable assets is below the marginal tax bracket you're contributing from. The idea here is that retirement contributions come "off the top" of your income. Your last dollar earned, so to speak, goes into savings while the first goes toward food (and so on). That means that the dollar is taxed wholly at your marginal bracket: 25%+ now vs <15% later. Even if you think taxes will raise in the future, they probably won't increase for your first ~$40k of income. Roth is handy for burst purchases, increasing your effective tax-advantaged space, and tax hedging. In the case of IRAs, it has more lenient pre-retirement distribution policies. It is not, however, always the most efficient vehicle for investments. My goal is to get enough money in traditional so that a 4 to 6% distribution would be 36k/yr in 2015 dollars and then put everything else in Roth. That's around $900k in current dollars which is (much) more than I have, so I don't need to think very hard on my 401k contributions at the moment. I also contribute to a Roth IRA and will max out this year, so I am not disregarding the Roth option. I may explore the Roth 401k option if/when my projected Traditional balance at retirement starts clipping 1M.
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Jul 22, 2015 14:09
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DNK posted:Even if you think taxes will raise in the future, they probably won't increase for your first ~$40k of income. This is a bolder prediction than you might think. At the 1960-1970 equivalents of $40k in 2015, you'd be toeing the line between a 25% and 30% federal tax bracket. If you think we'll never go up to that (or higher) then fine, but it's still just a guess that we've already seen the highest tax rates that we'll ever see - not a guarantee. Nail Rat fucked around with this message at 15:33 on Jul 22, 2015 |
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Jul 22, 2015 15:27
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Star War Sex Parrot posted:Xenoborg's question on the last page got me wondering about my 401k situation as well, so I suppose I'll ask my question: what's the practical difference between "Roth 401k" and regular "after-tax contributions" for my situation? My plan allows both, and I'm wondering if I should be taking advantage of them. The only reason to ever even consider after-tax (non-Roth) contributions to a 401(k) are if you want to contribute more than the elective deferral limit ($18,000 for 2015), and have already maxed out your IRA(s). An employee's traditional+Roth contributions to a 401(k) cannot exceed $18,000, but after-tax contributions can go above and beyond $18,000 (up to a total limit on all types of employer and employee contributions of $53,000 for 2015).
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Jul 22, 2015 18:12
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Okay thanks, both of those posts help. I just wasn't sure where to slot Roth 401k or after-tax contributions into my retirement saving waterfall. So basically I'm looking at: Traditional 401k pre-tax up to match -> Roth IRA up to max -> HSA up to max -> Roth 401k up to max (hypothetically, I don't think I could) -> Traditional 401k after-tax (assuming I wanted to pump any more in there, but I'd probably look elsewhere like taxable investments) Thanks again!
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Jul 22, 2015 18:20
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I opened a roth IRA through tdameritrade. Should I just purcahse some of the ETFs mentioned earlier? My plan is to put $200/mo into it and purchase the TD ameritrade commission free ETFs. I wanted to invest long term in indexes that cover things like renewable energy and robotics. I also don't know what I am doing but I bought some books to learn.
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Jul 22, 2015 18:23
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Star War Sex Parrot posted:Okay thanks, both of those posts help. I just wasn't sure where to slot Roth 401k or after-tax contributions into my retirement saving waterfall. So basically I'm looking at: Strategy looks good overall. The only thing I'd add is the actual reason anyone would ever care about after-tax 401(k) contributions. The IRS will let you separate out your 401(k) contributions by type upon rollover into one or more IRAs. So you can take your traditional 401(k) contributions and designate that they all roll into your t-IRA, and your Roth and after-tax 401(k) contributions and designate that they all roll into your Roth IRA. This basically lets you completely avoid all capital gains taxes, which you'd otherwise potentially have to pay if you used a taxable account instead of after-tax 401(k) contributions. Some more details are here.
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Jul 22, 2015 18:43
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I am sure I will probably need the help of a tax professional for this, but... I got married this year and my wife has lot of student load debt that she is paying back based on income (she works in public interest and it will likely all be discharged after 10 years). If we file jointly, it would greatly effect the payment amount . However, if we file separately, we are unable to contribute to Roth IRA's. However all is not lost, I just read that it is still possible to contribute to a Traditional IRA with after tax dollars, then convert it to a Roth (I guess you guys have been calling it the backdoor Roth conversion). I had read it a few times and assumed it was nothing I would need to worry about anytime soon because I was not close to the earning limit, but here I am. Has anyone had any experience with the above situation? Is there a limit on the amount that can be converted through a backdoor conversion? It sounds like you could contribute as much as you want. The details of it make it sound really... wrong. Why even have the limits at all. Just seems to screw people over who have their own Traditional IRA from a 401k rollover.
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Jul 22, 2015 19:14
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Gripen5 posted:I am sure I will probably need the help of a tax professional for this, but... I am in the exact same situation and would appreciate answers to your questions as well. My wife just graduated medical school and is doing income based repayment, and every one of her friends and colleagues recommended to file separately so that the repayment amounts are smaller. I made a Roth IRA contribution for $5500 in February, then got married in March. Does it matter that the contribution was a month before I got married, or am I still not allowed to contribute to a Roth IRA at any point during the tax year if filing married but separate for that same year?
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Jul 22, 2015 19:51
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I would be willing to bet that you would both be better off in the long term by filing married/joint and paying more on the loans (and paying less in tax) but you would have to post more details and actually figure it out for sure. You would need at least: Income of each person Total student loan amounts/interest rates Current minimum Payment New Payment if filing married Debt forgiveness date if one exists
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Jul 22, 2015 20:01
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Droo posted:I would be willing to bet that you would both be better off in the long term by filing married/joint and paying more on the loans (and paying less in tax) but you would have to post more details and actually figure it out for sure. You would need at least: Income Me: 90k Wife: 53K (going to ~70k in Oct/Nov) Current Payment It is currently approximately $300, but I think that is based off a year where she worked at a retail job until June or so. She is mailing in paperwork required by the student loan company any day now which will likely raise that to closer to $500-1000. But we will have a better handle on what this amount is in a month. New Payment I am not entirely sure, but from what I read it would be somewhere between $1500 and $2000 at a minimum (I am pretty sure it would be $3200 if we don't use IBR) The estimated forgiveness date would be Summer of 2024. So approximately 9 more years. Forgot to include the student load amounts/rates The total is about $250,000, not sure the exact rate but I seem to remember it being around 7%. Gripen5 fucked around with this message at 20:43 on Jul 22, 2015 |
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Jul 22, 2015 20:29
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Droo posted:I would be willing to bet that you would both be better off in the long term by filing married/joint and paying more on the loans (and paying less in tax) but you would have to post more details and actually figure it out for sure. You would need at least: 1. She makes ~$50,000, I make $86,000 2. ~$230,000 total student loan debt, interest rate is about 5.5% on average (a couple different loans with different rates) 3. She hasn't started repayment yet (starts in 2016), but based on her salary the estimate is about $350 a month 4. If filing jointly, the estimated repayment amount is $1,400 5. 25 years
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Jul 22, 2015 20:33
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Mind_Taker posted:1. She makes ~$50,000, I make $86,000 I assumed you would max out the $2500 student loan interest deduction but didn't include anything else. If you file separately, you will pay a total of $20,440 compared to $19,812 if you file joint. If you don't count the student loan interest, your total net tax looks almost identical to me. In addition, you might be using and lose College tuition deduction/American Opportunity Credit for higher education Traditional IRA deductions (no backdoor either) Roth IRA contributions It seems to me like she would end up paying off all the loans eventually (presumably will have high income eventually and won't make it the full 25 years before they are paid off). So if you file separately, you would basically be paying $600 per year extra in tax and giving up your IRA contributions in order to defer a big chunk of your payments until later. That might be worth it or not depending on your budgets, but it seems like with you making $86k, money shouldn't really be too much of a problem, so if I were you I don't think I would file separately.
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Jul 22, 2015 21:11
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Mind_Taker posted:I made a Roth IRA contribution for $5500 in February, then got married in March. Does it matter that the contribution was a month before I got married, or am I still not allowed to contribute to a Roth IRA at any point during the tax year if filing married but separate for that same year? It doesn't matter what day you got married, the IRS only cares what you were on Dec 31st. If you file separately, the roth IRA contribution wouldn't be allowed.
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Jul 22, 2015 21:12
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Gripen5 posted:Income You have similar numbers to the other poster, but the 9 year horizon makes it much more likely that a big chunk of your debt might be forgiven. In your case, it seems very worth it to file separately and keep the payments as low as possible in order to maximize the chance that some/most of that debt ends up being entirely forgiven. I'm surprised that one of you has a 9 year horizon and the other one has a 25 year horizon... are you both sure those dates are accurate? Is this something that is entirely state-based or something?
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Jul 22, 2015 21:16
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good heavens, i thought i had it bad with ~70k in spousal student loans. 
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Jul 22, 2015 21:18
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Droo posted:I'm surprised that one of you has a 9 year horizon and the other one has a 25 year horizon... are you both sure those dates are accurate? Is this something that is entirely state-based or something? The earlier poster mentioned that his wife is working in the public sector, which allows for a 10 year forgiveness. My wife will be working in the private sector most likely, which only allows for a 25 year forgiveness.
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Jul 22, 2015 21:22
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Droo posted:It seems to me like she would end up paying off all the loans eventually (presumably will have high income eventually and won't make it the full 25 years before they are paid off). So if you file separately, you would basically be paying $600 per year extra in tax and giving up your IRA contributions in order to defer a big chunk of your payments until later. That might be worth it or not depending on your budgets, but it seems like with you making $86k, money shouldn't really be too much of a problem, so if I were you I don't think I would file separately. What do you mean I would be giving up IRA contributions? I understand I cannot directly contribute to a Roth IRA if filing separately, but as I understand it I can still contribute to a Traditional IRA (and I was wondering if I could still do a backdoor).
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Jul 22, 2015 21:29
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Mind_Taker posted:The earlier poster mentioned that his wife is working in the public sector, which allows for a 10 year forgiveness. My wife will be working in the private sector most likely, which only allows for a 25 year forgiveness. That is correct. A second advantage of public sector forgiveness is that the forgiven amount is not taxable like they are at the end of 25 years. Mr. Glass posted:good heavens, i thought i had it bad with ~70k in spousal student loans. Welcome to marrying someone who went to either Law School or Med School.  Droo posted:You have similar numbers to the other poster, but the 9 year horizon makes it much more likely that a big chunk of your debt might be forgiven. In your case, it seems very worth it to file separately and keep the payments as low as possible in order to maximize the chance that some/most of that debt ends up being entirely forgiven. Thanks for the response. It always seemed like the best course of action would be to file separate. However, something I forgot to mention, which might change this slightly, if you file separately, you can not take the student load interest deduction. Gripen5 fucked around with this message at 22:03 on Jul 22, 2015 |
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Jul 22, 2015 21:31
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Mind_Taker posted:What do you mean I would be giving up IRA contributions? I understand I cannot directly contribute to a Roth IRA if filing separately, but as I understand it I can still contribute to a Traditional IRA (and I was wondering if I could still do a backdoor). You lose your traditional IRA tax deduction, but you could still do a backdoor Roth. Gripen5 posted:However, something I forgot to mention, which might change this slightly, if you file separately, you can not take the student load interest deduction. That deduction is limited to $2500 so it's only worth about $600 per year in actual tax.
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Jul 22, 2015 21:57
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Droo posted:That deduction is limited to $2500 so it's only worth about $600 per year in actual tax. Well, at least I am not missing out on much there. Between that and the backdoor Roth it really doesn't seem to make much sense to file jointly at the moment. Guess its something I would probably need to revisit as our situation changes.
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Jul 22, 2015 22:11
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Stealthgerbil posted:I opened a roth IRA through tdameritrade. Should I just purcahse some of the ETFs mentioned earlier? My plan is to put $200/mo into it and purchase the TD ameritrade commission free ETFs. I wanted to invest long term in indexes that cover things like renewable energy and robotics. I also don't know what I am doing but I bought some books to learn. Don't make sector investments, focus on broad market funds and ETFs instead.
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Jul 23, 2015 00:31
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I finally have a real career with a 401k at 33 years old, and I'm finally starting to save for my retirement. I have a lot of catching up to do, so I'm maxing out my 401k and I will be maxing a Roth IRA (I don't qualify but I can do the whole set up a traditional one and convert it thing). My company has their 401k plan set up through T Rowe Price, and there are not a lot of options, and the expense ratios kind of suck. Right now my plan is in the default "2045 retirement" option, and I'm not sure that's the best use of my money. Here's the data sheet on the plan I'm currently in: https://www3.troweprice.com/rws/rps/public/assets/ffs/TRRKX.pdf And attached is a list of the available options. Is there a better choice out there, like the two index funds they offer at .10%, or should I just stay put for now? Thanks in advance for the advice!
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Jul 23, 2015 01:41
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