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Saint Fu posted:Harvesting the tax losses could be smart but IIRC you can only offset gains. If you didn't have any capital gains (not sure if dividends count here as well) the tax loss would have to carried forward, right? You can use losses to offset up to 3k in normal income. Bogelhead wiki posted:The capital loss is valuable in several ways. Before you pay any capital gains taxes each year, you use your capital losses to offset any capital gains, and pay taxes only if you have more gains than losses. If you have more losses than gains, you can apply up to $3,000 of your remaining capital losses against your regular income. And whatever capital losses are still left over (in this case, $1,000, which is the $4,000 in losses minus the $3,000 deduction), can be carried forward indefinitely into future years. Each year, you get to first apply the carried forward losses against capital gains, and then use any remainder (up to $3,000) to reduce your ordinary income. This is huge. You're increasing your future taxes on investments which are currently taxed at 15% for long term and saving on your current taxes at the marginal rate (which for us is ~35%).
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Oct 1, 2015 16:32
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Rurutia posted:You can use losses to offset up to 3k in normal income. To confirm -- this applies even if you don't itemize, right? I don't see any reason why it wouldn't, but checking to be sure I understand just in case.
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Oct 1, 2015 16:43
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Cool thanks for correcting me. Glad to get it straight
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Oct 1, 2015 16:45
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onefish posted:To confirm -- this applies even if you don't itemize, right? I don't see any reason why it wouldn't, but checking to be sure I understand just in case. Yea. In pig slut lisa's case, he wants to sell at a loss now and wait until January. I wouldn't. I would Tax Loss Harvest NOW in the taxable account with similar but not substantially identical index fund. Get that loss and stay in the market. Wait until January, and if the new funds are at a loss, sell it and buy similar but not substantially identical shares of a different index fund in the Roth (even across accounts you have to worry about wash sales). If it is at a gain, forget about it and just found the Roths slowly throughout the year.
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Oct 1, 2015 16:48
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SiGmA_X posted:I'd wait to sell the taxable stocks until January. Forecasts still predict a 5% rise in the S&P from now through 12/31.
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Oct 1, 2015 21:11
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CombatInformatiker posted:lolwut. Are you serious? Did the SMA-200 cross your Fibonacci retracements, signaling a breakout to the MACD-something-something-divination? It's a double dog death cross, clear as day man.
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Oct 2, 2015 02:36
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Just to check - I'm finally opening a vanguard roth IRA (I'm 28) and there's an option to reinvest the dividends. I want to do that right? Also when/how do I select the stock:bonds ratio? I had been planning on just doing the 'age in bonds' strategy unless there's something clearly better now.
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Oct 2, 2015 03:00
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Neurostorm posted:Just to check - I'm finally opening a vanguard roth IRA (I'm 28) and there's an option to reinvest the dividends. I want to do that right?
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Oct 2, 2015 03:14
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moana posted:Yes to reinvesting. You will also be selecting funds, which will determine your stock/bond/other ratios. I'd recommend just picking a target retirement fund with the right stock/bond mix you want right now, as it will automatically rebalance for you. Read up more and change it later if you want to. Great, thanks!
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Oct 2, 2015 03:15
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Neurostorm posted:Just to check - I'm finally opening a vanguard roth IRA (I'm 28) and there's an option to reinvest the dividends. I want to do that right? There's no reason not to invest the dividends, at least inside a tax advantaged account like an IRA. You never select an explicit stock/bonds ratio, you just choose how much you buy of each fund. Since you're just starting this IRA you won't have enough to hit the 3k minimum on multiple Vanguard index funds, so you'd want to either go with ETFs or do what I did and just use a target retirement fund (only a 1k minimum) that has approximately the same mix as what you want. When you get more money into the IRA you can eventually sell the target fund and buy the index funds you want. Your age in bonds is a pretty conservative strategy, but it all depends on what you're comfortable with. Over the long term less bonds gives higher returns, but having bonds and rebalancing yearly/quarterly/whatever massively dampens short term volatility which can keep you from getting panicking and pulling out of the market when it goes down.
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Oct 2, 2015 03:18
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CombatInformatiker posted:lolwut. Are you serious? Did the SMA-200 cross your Fibonacci retracements, signaling a breakout to the MACD-something-something-divination?
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Oct 2, 2015 03:44
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Neurostorm posted:Just to check - I'm finally opening a vanguard roth IRA (I'm 28) and there's an option to reinvest the dividends. I want to do that right? Most people recommend the Target Retirement funds, it's the best bet especially for new investors since it automatically includes more bond allocation as get closer to retirement and is well diversified across different stock categories. Link to the mutual fund: https://investor.vanguard.com/mutual-funds/target-retirement/#/ Main catch is you need at $1000 establish a position in the fund, you can add smaller contributions after that.
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Oct 2, 2015 04:05
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SiGmA_X posted:Selling now to tax loss harvest is a good idea, but pulling out of the market and putting it in cash when its substantially down seems silly. Especially when the poster has the means to pull cash together and not touch the investments. I realize this comes down to market timing, but why cause yourself losses when you literally do not need to? No one is saying he should hold it in cash. Everyone is making fun of your crystal ball.
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Oct 2, 2015 04:09
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Thanks to everyone who's responded so far. 80K, can you go into more detail on your recommendation? 80k posted:Yea. I get the logic of what you're saying, but what qualifies as a "similar but not substantially identical index fund"? The sale would be coming from my VTSMX holding.
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Oct 2, 2015 04:28
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pig slut lisa posted:Thanks to everyone who's responded so far. Out at the moment but this should get you started: https://www.bogleheads.org/forum/viewtopic.php?t=20389 It needs to cover the same basic sectors and be strongly correlated.
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Oct 2, 2015 04:41
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SiGmA_X posted:Selling now to tax loss harvest is a good idea, but pulling out of the market and putting it in cash when its substantially down seems silly. Especially when the poster has the means to pull cash together and not touch the investments. I realize this comes down to market timing, but why cause yourself losses when you literally do not need to? As Desuwa already said, I was refering to this: SiGmA_X posted:Forecasts still predict a 5% rise in the S&P from now through 12/31. Who made those "forecasts"? How did they arrive at this conclusion? At best it's some technical analysis bullshit, with zero predictive power, at worst it's some analyst feeling it in his/her urine (again, zero predictive power). No one can reliably predict stock market movements; the "5%" and the exact timeframe are sure tell signs that someone is making this up.
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Oct 2, 2015 05:00
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pig slut lisa posted:Thanks to everyone who's responded so far. You can, for instance, exchange from VTSMX to Vanguard's 500 index or large cap index, which would qualify as similar but not substantially identical. The Total Stock Market index differs in that it has small stocks as well, but because it is cap-weighted, the large stocks dominate. If you wanted to get anal about it, you could exchange it to 80% large cap index and 20% small cap index (which would also qualify as being not substantially identical)... also, you'd have to have enough to meet the minimums of both funds. So I would just exchange it for 100% large cap index and call it a day. When/if you sold it again in January, you use the proceeds to buy back VTSMX in your Roth, as long as it is not within 30 days of when you originally tax loss harvested. 80k fucked around with this message at 05:29 on Oct 2, 2015 |
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Oct 2, 2015 05:24
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Desuwa posted:No one is saying he should hold it in cash. Everyone is making fun of your crystal ball. CombatInformatiker posted:As Desuwa already said, I was refering to this: http://www.cnbc.com/2015/09/29/going-down-goldman-cuts-forecasts-for-sp-500.html I don't put much faith in it. But I DO put faith in NOT going into cash which is what PSL was going to do! pig slut lisa posted:Here are the options I've been able to come up with for funding the IRAs (all options include using the $3-4K in January):
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Oct 2, 2015 05:26
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Yeah the hold in cash part was stupid. I don't know why I thought that made sense. My wife is way less engaged with this stuff than I am and even she immediately said "why would you just let it sit in a money market for a month?" Chalk it up to early morning cobwebs I guess.
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Oct 2, 2015 05:44
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80k posted:You can, for instance, exchange from VTSMX to Vanguard's 500 index or large cap index, which would qualify as similar but not substantially identical. The Total Stock Market index differs in that it has small stocks as well, but because it is cap-weighted, the large stocks dominate. I'd just do this and call it a day. The difference between holding VTSMX vs VFINX over the last 22 years is exactly 0.04% CAGR (up to about .3% over shorter time frames). They are different enough to avoid the appearance of a wash sale but are so dominated by the same big companies to be pretty much the same thing over long periods of time.
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Oct 2, 2015 12:30
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Mr. Glass posted:before jumping to taxable accounts, see if your 401k plan has an after-tax option, which will allow you to contribute up to the total $52k cap. it's also convertible to roth. My wife is changing jobs and her new employer's 401k company (Vanguard) allows her the choice of Traditional 401k or Roth 401k. She'd nearly hit the maximum contributions for the 401k at her previous job so what considerations are there when we're making choices here for the new one? When rolling over can you change from one kind to the other? Under what circumstances would we want to, or want to avoid changing?
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Oct 4, 2015 18:52
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The very basic premise is: What will your future tax rate be compared to your current tax rate? If it will be higher, you'll want to go with the roth. If it will be lower, you'll want to go with the traditional. However, it's hard to judge whether it will be higher or lower 30 or 40 years from now, because not only will your earnings be a factor but also the tax laws. Generally, people have a traditional 401k to decrease their current tax burden and then use a Roth IRA to hedge.
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Oct 5, 2015 03:43
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I just realized I didn't know how timing and price of vanguard index funds worked. Today's S&P 500 index is down vs yesterday. The current price listed for the Vanguard S&P500 index fund is for yesterday's ending snapshot, if I buy the shares today am I getting the price from yesterday's ending snapshot or the one from closing today?
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Oct 6, 2015 18:27
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Closing today.
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Oct 6, 2015 18:34
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There is actually this whole amazing thing that happens for about an hour after the market closes where bills are settled and transactions completed and guesses made about things and then, voila, you get the mutual fund prices. It's kind of crazy.
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Oct 6, 2015 20:24
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E: Asked this question a few months ago and forgot to check the answers, never mind!
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Oct 7, 2015 04:16
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 This money has been in for roughly 1 year. (Not all of it, some was added later) Awesome results! Super pumped!
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Oct 8, 2015 19:57
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My Rhythmic Crotch posted:
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Oct 9, 2015 04:18
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VBTLX 23k, VTIAX 18k, VTSAX 60k
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Oct 9, 2015 05:21
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I'm changing employers soon, trying to decide what to do with the pension I've accumulated at my current employer. I've already decided taking the lump sum is the way to go, but I don't want to roll it to a traditional IRA because I don't want to mess up my backdoor Roth-ability for the future. Is it possible to roll it into my new employers 401k? I can't seem to find much online about that avenue. The other option would be to roll to a tIRA then convert to a Roth. I'd have to eat the taxes on it and I'd rather do any traditional to Roth conversions when I retire and am in a lower bracket.
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Oct 9, 2015 10:52
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My Rhythmic Crotch posted:VBTLX 23k, VTIAX 18k, VTSAX 60k Huh, Portfolio Vizualizer shows that if you had invested all the money on Oct 1 last year you would be down 1.67%. So, spreading out your deposits helped you a lot. From Oct last year I'm down almost 3% but over the last 3 years I'm substantially up. The market goes up, the market goes down.
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Oct 9, 2015 12:11
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Saint Fu posted:I'm changing employers soon, trying to decide what to do with the pension I've accumulated at my current employer. I've already decided taking the lump sum is the way to go, but I don't want to roll it to a traditional IRA because I don't want to mess up my backdoor Roth-ability for the future. Is it possible to roll it into my new employers 401k? I can't seem to find much online about that avenue. I will likely be in a similar situation soon. Care to share how much/when your pension payments would be, and how much they offered for the buyout?
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Oct 9, 2015 17:19
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Lump sum is just south of $40k. If I started taking monthly payments now, it'd be $161/mo single-life annuity (as long as I'm alive) or $130/mo for joint-survivor (as long as either my wife or I am alive). Actually now that I calculate it using the company's projection calculator thingy, if I "retire" tomorrow and wait until I'm 65 to start taking withdrawals, it'd be $1,430/$1,160 per month single/joint or a lump sum of $232k. I'd need around 5.5% annual growth for the next 34 years for that $40k to end up at $232k. Maybe I should rethink cashing it out now...
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Oct 9, 2015 17:51
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We're in a similar boat value wise. I calculated my pension to be worth $58k in today dollars. It would be $1100 a month, assuming I collect in 30 years at 62, and collect for a total of 23 years (using IRS death tables). Cheerful calculation! I used a 4.2% discount rate. So I got $200k in future value, for $58k in today value. Looks like your pension is worth slightly more than mine though, so I'm a little let down the discount on the buyout is so steep. On the other hand, I feel like there's risk in leaving money in a fixed income vehicle for that long. If we do hit an inflationary period, it's hosed. Plus, 6% real return is historically possible with stocks, and that would push even an "unfair" cash payout above the expected value the pension. So, even though you're not getting the "fair" value for the pension, achieving historical stock market returns on your $40k is still worth more, plus you are theoretically more protected from inflation. Man, I hope my company just offers me like $60k so I don't have to think about this.
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Oct 9, 2015 19:21
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I'll probably go ahead and take the lump sum as soon as I quit. I'd rather have the money in my control than have to worry about following up with a former employer 30+ years from now. My company has a page on the HR benefits site that'll calculate the lump sum or monthly payout after you enter in any date you want for retirement and start of distribution. Are you going to have to wait for them to give you the lump sum number?
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Oct 9, 2015 19:39
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Yeah, lump sums aren't normally offered, but it's a poorly kept secret that they've been making offers to buy out pensions to the people leaving the company. There's no official policy on it though.
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Oct 9, 2015 19:54
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So I think the OP needs to be updated:quote:There are 3 main types of tax-advantaged savings accounts -- Roth IRA, Traditional IRA, and 401(k) (or equivalent). I could explain all of these in detail, but the Motley Fool has already done a pretty good job right here. In general, most people would want to follow these rules: These can be 1) rolled into a Roth IRA when you change jobs and you'll only be taxed then on the earnings made, or 2) immediately (without quitting) rolled into a Roth 401k or Roth IRA if your plan offers "in-plan distributions". My current job uses Vanguard for 401k and it has this amazing feature, which lets me put an extra 26k per year into this tax free vehicle. This applies even if you make so much money you can no longer invest in an IRA.
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Oct 10, 2015 08:57
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With our annual salary review I just realized that my wife and I tripped the Roth IRA limits a year earlier than I was expecting. I wanted to check on what the best option would be given our situation. We just got married a couple weeks ago, so this is the first year we'll be filing jointly. I'm not 100% sure of our MAGI but my best guess based on our new salaries and the IRS worksheets are that we'll have an combined 192.5k. This leaves us only allowed to contribute ~250 each to Roth IRAs, problem is I already put in $2750 and my wife put in $4k at this point. Seems like our options are take the money out of the RIRS, or transfer to traditional IRAs. I was hoping to backdoor money into RIRAs next year, but seems like we need to do it this year as well if we want to keep contributing to them rather than traditional IRAs. Am I going to set off red flags by taking money out of RIRAs (either directly or by transferring to traditional), then backdooring it in this year? Should I just put in into traditional IRAs (our other retirement is in traditional 403bs) going forward, since we'll be above the Roth limit in the future?
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Oct 10, 2015 18:14
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ShadowHawk posted:So I think the OP needs to be updated: Shoving another $30K into a Roth when you make enough money to completely max out all your tax-advantaged accounts and your IRA is almost certainly a bad idea unless you plan on having an extremely extravagant lifestyle in retirement (and you plan on your tax rate being the same or increasing). You're paying taxes on the money now at your current marginal rate, so it's only worthwhile putting money in the Roth if you think there will be a point in the future where your tax rate will be the same or higher. Since most people need to spend less in retirement, this is quite possibly wrong.
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Oct 11, 2015 15:49
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The Vikings posted:With our annual salary review I just realized that my wife and I tripped the Roth IRA limits a year earlier than I was expecting. I wanted to check on what the best option would be given our situation. Since the year isn't over, you can just re-characterize all your contributions as Traditional and then backdoor them back into a Roth. You will have to pay tax on any gains that were made over the year from this year's contributions though. If you expect to be over the limit each year, putting it into Traditional to begin with means you can backdoor your contribution right away before they have a chance to make any significant earnings that need to be taxed on the conversion.
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Oct 11, 2015 15:50
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