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Moneyball posted:I need to rebalance my portfolio because the only good offerings in my work 401k/HSA accounts are US total market or S&P 500 index funds. I decided against contributing to my IRA for 2015 so I can pay down debt, so that balance won't be changing. Still contributing to the HSA though. "Rebalance" implies you have a specific long term allocation that you want to maintain. What is it? You could try to time your rebalancing in light of changes in P/E or something but I personally don't bother with that, it's too much trouble. I don't like to watch things, so I don't really notice when they crater anyway. I rebalance on the schedule of "when I happen to be looking at my account records" or "when I need to finish my 2015 IRA contribution".
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# ? Jan 11, 2016 15:23 |
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# ? May 30, 2024 03:50 |
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Currently at about 56/22/22 US/Foreign/bonds in my IRA itself, but all of my 401k is and will continue to be US, so it's more like 80/10/10. I thought that it was a common practice to once a year/quarter/whenever adjust the makeup of one's portfolio. That's incorrect? I'd like to have it somewhere around 70/20/10. I can afford some risk at this point.
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# ? Jan 11, 2016 15:32 |
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No, you're right, that's common practice and is more or less what I do. In your situation, I would probably just rebalance now and forget about it until next year (or whenever). Trying to align it with market movements is too much mental effort for me to bother with.
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# ? Jan 11, 2016 15:36 |
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Just sent in the $5500 contribution for my Vanguard target retirement 2060 fund. Would it make sense to contribute more to my employer's 401k? The reason I ask is because the expense ratios are relatively high (Fidelity), and I'm already getting my free money by putting in 6% to get company match of 4.5%. I think it might make more sense to contribute more automatically each month towards my individual Vanguard funds instead. Right now I have Wellington and Wellesley.
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# ? Jan 11, 2016 17:18 |
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It could definitely makes sense to max out the tax-advantaged space first. Do you not have one or two index fund options in the 401k that are <0.5% ?
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# ? Jan 11, 2016 17:26 |
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Yeah my 401k is at Fidelity and the ERs on the Spartan funds are almost as low as Vanguard.
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# ? Jan 11, 2016 17:28 |
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ADolan posted:Just sent in the $5500 contribution for my Vanguard target retirement 2060 fund. Would it make sense to contribute more to my employer's 401k? The reason I ask is because the expense ratios are relatively high (Fidelity), and I'm already getting my free money by putting in 6% to get company match of 4.5%. I think it might make more sense to contribute more automatically each month towards my individual Vanguard funds instead. Right now I have Wellington and Wellesley. As for some specific Fidelity funds you should look for, here's what I contribute to through my employer: SPTN 500 INDEX ADV (FUSVX), net expense ratio 0.05% SPTN INTL INDEX ADV (FSIVX), net expense ratio 0.12% SPTN EXT MKT IDX ADV (FSEVX). net expense ratio 0.07% SPTN US BOND IDX ADV (FSITX), net expense ratio 0.07%
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# ? Jan 11, 2016 18:02 |
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Moneyball posted:Currently at about 56/22/22 US/Foreign/bonds in my IRA itself, but all of my 401k is and will continue to be US, so it's more like 80/10/10. Unless you're investing a miniscule amount relative to what you already have in, the best way to 'rebalance' is to buy whatever you're most underweight in every pay period. But if that doesn't apply to you, yeah, you can. If you're only buying US in your 401k it might make the most sense to just sell the US from your IRA.
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# ? Jan 11, 2016 21:01 |
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SiGmA_X posted:This is how I feel. Eventually I plan to hold a single digit precent of net worth in well researched single stocks, doing a research/analyze, buy and hold strategy. I just don't have time for it now, so I go to mutual funds. You (the general you) should probably never have time for this unless you're an actual stock-picking professional or *really* love stock picking as a very time-intensive hobby. In reality, you should just be investing any extra time in those amounts that you have in your actual profession/interests and investing those proceeds in the broad market.
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# ? Jan 11, 2016 21:11 |
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Unormal posted:You (the general you) should probably never have time for this unless you're an actual stock-picking professional or *really* love stock picking as a very time-intensive hobby. In reality, you should just be investing any extra time in those amounts that you have in your actual profession/interests and investing those proceeds in the broad market.
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# ? Jan 11, 2016 21:52 |
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e: sorry, reread first post.
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# ? Jan 12, 2016 05:10 |
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I must be missing something. I've just read here: http://www.getrichslowly.org/blog/2012/03/27/what-is-a-roth-ira-a-short-and-simple-guide/ that I can withdraw my contributions (just not earnings in those contributions) at any time without penalty. Why wouldn't I keep my emergency fund in Roth IRA then? I'm thinking about starting a Roth IRA but also desperately need to get my emergency fund up to par. If I can keep my emergency fund in here to earn me tax advantaged interest why wouldn't I?
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# ? Jan 12, 2016 05:25 |
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To be honest, I feel the same way as you, but the BFC approved answer is that you need something more liquid for it to be a true emergency fund. Like a simple savings account. It takes more than "right now" to get those funds transferred. That, and you have to have the IRA open for at least five years before you're able to withdraw without penalties.
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# ? Jan 12, 2016 05:30 |
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Moneyball posted:To be honest, I feel the same way as you, but the BFC approved answer is that you need something more liquid for it to be a true emergency fund. Like a simple savings account. It takes more than "right now" to get those funds transferred. The BFC approved answer is that if it's either or (you can't afford to do both), a Roth IRA to hold your emergency fund is perfectly valid. Just don't put it in stocks. The Roth IRA is just a container for your method, liquidity can be chosen by what form you hold the money in. There is no requirement of time for withdrawing contributions.
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# ? Jan 12, 2016 05:37 |
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Moneyball posted:
Roth IRA contributions can be withdrawn at any time. You're thinking of the 5 year rule, which states that 59.5 year olds can withdraw their earnings tax free as long as the Roth IRA has been open for 5+ years. With regard to "Roth IRA as Emergency Fund", it's a bad idea because retirement (a certainty) and your appendix exploding (an emergency) are different things. Both of which you should be prepared for. If you use your Roth IRA as an emergency fund, it's easy to tell yourself "I maxed out my Roth, accomplishing both my retirement savings and emergency fund goals" when in reality you've only done one thing. Also, if you withdraw money from your emergency fund, you can put money back in later. Once you've taken money out of your IRA, it's gone. You'll need to wait until a new year to contribute more.
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# ? Jan 12, 2016 06:02 |
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Moneyball posted:That, and you have to have the IRA open for at least five years before you're able to withdraw without penalties. GoGoGadgetChris posted:Roth IRA contributions can be withdrawn at any time. You're thinking of the 5 year rule, which states that 59.5 year olds can withdraw their earnings tax free as long as the Roth IRA has been open for 5+ years. Roth IRA rules are annoyingly complicated. There are two five year rules and there are four different "sources" (contributions, taxable conversions, non-taxable conversions, and earnings) of money, just to confuse everyone. The first five year rule is the simpler one, you need to be older than 59.5 and you need to have opened your first Roth IRA five or more years ago to withdraw earnings without paying income tax. The second five year rule is more complicated. If you withdraw money from a taxable conversion that you made in the last five years you will pay a penalty tax. This does not apply to non-taxable conversions or contributions. A non-taxable conversion is where you've already paid tax on the money you are converting. When going from a traditional post-tax IRA (backdoor Roth) or traditional, post-tax 401(k) (mega backdoor) the basis is non-taxable. You can withdraw this at any time just like conversions without a penalty. A taxable conversion is a conversion where you pay the tax at the time of the conversion. Going from a traditional, pre-tax IRA or a traditional, pre-tax 401(k) to a Roth IRA is a taxable conversion. The earnings in a traditional post-tax IRA or 401(k) are also taxable, though that usually comes up in the context of a backdoor and it's usually small enough that it's not worth worrying about.
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# ? Jan 12, 2016 06:56 |
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Tots posted:I must be missing something. I've just read here: GoGoGadgetChris posted:Also, if you withdraw money from your emergency fund, you can put money back in later. Once you've taken money out of your IRA, it's gone. You'll need to wait until a new year to contribute more. Withdrawal time on a ROTH IRA at Vanguard to a linked checking account is a couple of days. If an emergency might require cash faster than that then you can of course keep some cash not in there, though it's hard to imagine what sort of emergency that might be (ransom payment?)
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# ? Jan 12, 2016 10:03 |
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ShadowHawk posted:This is why my advice is "if it's almost tax day 2016 and you haven't funded your 2015 IRA you should probably put your emergency fund money in a ROTH IRA for 2015". At worst you just withdraw it again and it's as though you never did anything. So maybe a good approach is to leave all my emergency money completely liquid in a normal savings account then deposit into the Roth at the end of the tax year every year? Tots fucked around with this message at 16:56 on Jan 12, 2016 |
# ? Jan 12, 2016 16:51 |
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Tots posted:So maybe a good approach is to leave all my emergency money completely liquid in a normal savings account then deposit into the Roth at the end of the tax year every year? The idea is you would only ever want to use the Roth IRA as your emergency savings if your choices are to either do that or lose the ability to contribute to the Roth for that tax year. Your strategy only really makes sense if the absolute most money you can save in a year is the Roth IRA contribution cap (or less), you really should work towards having a separate emergency fund so emergencies don't necessarily deplete your Roth.
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# ? Jan 12, 2016 20:20 |
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The obvious solution is to have enough income to both max your Roth IRA and save towards a reasonable amount of liquid savings. If you can't do the AND part above... 1) just doing the Roth IRA part is okay (imo), but 2) make sure your Roth holdings are sufficiently conservative to act as a proxy for a savings account (the direct comparison would be cash holdings / money market). It's risky to do 1 and not 2. Eyes wide open.
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# ? Jan 12, 2016 21:26 |
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DNK posted:The obvious solution is to have enough income to both max your Roth IRA and save towards a reasonable amount of liquid savings. If you're going to keep it all I cash or something cash-like what have you actually gotten from the whole ordeal other than and extra 1% - .1% earnings of that money and potentially a huge tax headache and lots of extra paperwork? This idea makes no sense. Just put your emergency fund in an insured savings account and then when you have ~6 months of expenses in there start contributing to retirement accounts. Don't make your life complicated and miserable for an extra tax free$50 a year.
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# ? Jan 12, 2016 21:44 |
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An $11,000 savings goal (between Roth and Emergency Savings) seems really really lofty to me at this point unless I just pay the minimum on my student loans, about $13,000 of which carries a 6.8% interest rate. Even if I do just pay the minimum, it's still really lofty. I know the best solution to this is just to make more money, but I don't expect any salary increases for about a year.
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# ? Jan 12, 2016 21:47 |
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mrmcd posted:If you're going to keep it all I cash or something cash-like what have you actually gotten from the whole ordeal other than and extra 1% - .1% earnings of that money and potentially a huge tax headache and lots of extra paperwork? This idea makes no sense. This seems like it will probably be my answer. E: \/ Maybe it's not my answer who the hell knows. Going to let other people flesh this out a little more then decide I guess. Wheeee Tots fucked around with this message at 21:57 on Jan 12, 2016 |
# ? Jan 12, 2016 21:48 |
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mrmcd posted:If you're going to keep it all I cash or something cash-like what have you actually gotten from the whole ordeal other than and extra 1% - .1% earnings of that money and potentially a huge tax headache and lots of extra paperwork? This idea makes no sense. You get $5500 in a tax advantaged account. After 25+ years of growth you'd end up with that $5500 generating $15000 or more in gains and avoid a tax bill of $5000 or more. It's not the biggest amount and is probably not life changing, but going through some paperwork for that amount of money seems worth it to me. The big point here is that tax advantaged space is limited, and you should take advantage of that if possible. However if you have tax advantaged space that won't be used in the coming year(s) then any advantage is largely lost. asur fucked around with this message at 22:02 on Jan 12, 2016 |
# ? Jan 12, 2016 21:54 |
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I'm not gonna be defensive about criticism of the overall Roth-IRA-as-EFund idea as it is worthy of criticism, but calling Roth IRA contributions "a huge tax headache" is a severe overstatement. Come tax time, there would be zero additional paperwork. In the event that you needed to withdraw the principle you would indeed need to fill out three line items on IRS Form 8606. As for the benefit? Well, once you eventually establish your full EFund in an appropriate place, you'll have more principle in your Roth IRA to grow. Yearly contributions end, and you don't get to make up for lost years. Buy in now or lose that tax-advantaged space.
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# ? Jan 12, 2016 21:58 |
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DNK posted:I'm not gonna be defensive about criticism of the overall Roth-IRA-as-EFund idea as it is worthy of criticism, but calling Roth IRA contributions "a huge tax headache" is a severe overstatement. quote:As for the benefit? Well, once you eventually establish your full EFund in an appropriate place, you'll have more principle in your Roth IRA to grow. Yearly contributions end, and you don't get to make up for lost years. Buy in now or lose that tax-advantaged space.
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# ? Jan 12, 2016 22:06 |
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ADolan posted:Just sent in the $5500 contribution for my Vanguard target retirement 2060 fund. Would it make sense to contribute more to my employer's 401k? The reason I ask is because the expense ratios are relatively high (Fidelity), and I'm already getting my free money by putting in 6% to get company match of 4.5%. I think it might make more sense to contribute more automatically each month towards my individual Vanguard funds instead. Right now I have Wellington and Wellesley. Just do a sort by ER, hopefully you have some basic Fidelity Spartan funds to pick.
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# ? Jan 12, 2016 22:12 |
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Gold and a Pager posted:I've read that Germany respects tax advantaged accounts from other countries (e.g. - you don't have to pay taxes on any gains in a Roth IRA or 401(k)), especially if it was opened before you moved to Germany. I think it is less clear how it will all work if you open the account after you move there. For more info, go to this link and look at Article IX. In any case, you can contribute to a Roth IRA using German earned income if you use foreign tax credits instead of the foreign earned income exclusion (should not be a problem with German tax rates). It's not great because you would have to pay income tax on the distributions if you're still living in Germany at retirement, but as far as I know, it's the only way to invest for retirement with out paying a bunch of extra taxes/penalties or investing in single stocks. Thanks for the advice! I would definitely look into it. What I ended up doing about Vanguard is saying I was unemployed (which technically, I am not employed [in the US]).
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# ? Jan 13, 2016 19:18 |
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Is it a dumb idea to use HSA for health expenses that I could afford to pay for out of pocket, because I'm essentially removing money from a tax-advantaged space that could have growth via mutual funds?Some Website posted:Any funds you withdraw for non-qualified medical expenses will be taxed at your income-tax rate, plus 20% if you're Blinky2099 fucked around with this message at 23:55 on Jan 13, 2016 |
# ? Jan 13, 2016 23:52 |
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Blinky2099 posted:Is it a dumb idea to use HSA for health expenses that I could afford to pay for out of pocket, because I'm essentially removing money from a growth tax-advantaged space? Yes, the money is put in pre-tax so when you withdraw it even after 65 you will have to pay income taxes on it. Spending it on health expenses means that you won't even ever have to pay income taxes on it, so yes you should probably do that.
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# ? Jan 13, 2016 23:54 |
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flowinprose posted:Yes, the money is put in pre-tax so when you withdraw it even after 65 you will have to pay income taxes on it. Spending it on health expenses means that you won't even ever have to pay income taxes on it, so yes you should probably do that. I thought when it's withdrawn after age 65, it is not taxed.
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# ? Jan 13, 2016 23:56 |
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Moneyball posted:I thought when it's withdrawn after age 65, it is not taxed. It works like a trad IRA when withdrawn after age 65 where capital gains are not taxed.
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# ? Jan 13, 2016 23:59 |
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Moneyball posted:I thought when it's withdrawn after age 65, it is not taxed. After 65 you can withdraw from your HSA as cash as if it were a traditional IRA. But if you withdraw from it backed with medical expenses then it is tax-free. If you can afford small medical expenses out of pocket now and leave your HSA money invested for a couple decades for when you're old and more than likely have much more significant medical bills then there's a decent chance you'll see some good gains. If you save all of your medical expense receipts (I just throw them in the same binder as my taxes, etc.), you can reimburse yourself from your HSA at any time. There's no limit on when you claim that reimbursement. You could claim medical expenses 10+ years after they happened and be 100% in the clear. Between medical/vision/dental that can add up to a hefty stack of money that you could potentially withdraw tax-free at any time, or just leave it invested if you don't "need" it yet.
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# ? Jan 14, 2016 00:00 |
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Moneyball posted:I thought when it's withdrawn after age 65, it is not taxed. Guinness posted:If you save all of your medical expense receipts, you can reimburse yourself from your HSA at any time. There's no limit on when you claim that reimbursement. You could claim medical expenses 10+ years after they happened and be 100% in the clear. Between medical/vision/dental that can add up to a hefty stack of money that you could potentially withdraw tax-free at any time, or just leave it invested if you don't "need" it yet.
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# ? Jan 14, 2016 00:00 |
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Guinness posted:If you save all of your medical expense receipts (I just throw them in the same binder as my taxes, etc.), you can reimburse yourself from your HSA at any time. Guinness posted:If you can afford small medical expenses out of pocket now and leave your HSA money invested for a couple decades for when you're old and more than likely have much more significant medical bills then there's a decent chance you'll see some good gains. I think with these two points in mind, I'll pay out of pocket. I'm basically trading 20-30% income tax (at the time of withdrawal, 40 years from now) for untaxed gains over 40 years. Plus, if it really is the case that I can use my health expense receipts to withdraw money decades down the road, that'll be the most profitable option, albeit risky/slightly sketchy/the law might change or something.
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# ? Jan 14, 2016 00:04 |
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Star War Sex Parrot posted:What are the odds this gets tactic gets shut down? I have a pile of receipts I could reimburse myself with from my HSA, and can't decide if I really want to set them aside for decades. Eh, probably not that likely, and if the IRS were to put a time limit on reimbursements there'd likely be plenty of advance warning. Plus as you age your medical expenses are virtually guaranteed to increase so it's not like you're going to run out of medical expenses to pay. If you somehow live to be 100 with no medical/vision/dental ailments whatsoever then congratulations you won the genetic lottery and I'd pay far more than 50 years of HSA contributions to have that. The other alternative would be a revolutionary move to single-payer universal healthcare, in which case all the rules change but for the better. But I bet there'd still be plenty of ways to cash out that HSA tax-free. Even "worst" case in a world where medical expenses go away (the horror), under the current structure your HSA would just effectively turn into a traditional IRA at retirement age -- in that case you effectively raised your annual IRA contribution limits by $3350/yr (at 2016 rates). At the end of the day, just using your HSA money for current medical expenses is still a fantastic use of an HSA and still gets you most of the benefits. Using your HSA as another tax-sheltered investment vehicle is more of a personal finance max/min strategy for financially-secure people looking to eek out every bit of advantage possible. Guinness fucked around with this message at 00:10 on Jan 14, 2016 |
# ? Jan 14, 2016 00:04 |
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drat. Guess I'll take some out and pay off some higher interest debt. Like, $300 or so out of over $3,000 (and climbing) Moneyball fucked around with this message at 00:08 on Jan 14, 2016 |
# ? Jan 14, 2016 00:05 |
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Moneyball posted:drat. Guess I'll take some out and pay off some higher interest debt.
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# ? Jan 14, 2016 00:08 |
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Blinky2099 posted:... except you have to pay income tax now AND an additional 20% hit. That doesn't seem worth it, unless your debt interest rate is high, and it's going to take you a long time to pay it off. Probably pretty simple to run the numbers of expected value of each option. I meant to say get reimbursed for some dental expenses I paid cash (well, credit) for.
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# ? Jan 14, 2016 00:09 |
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# ? May 30, 2024 03:50 |
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Moneyball posted:I meant to say get reimbursed for some dental expenses I paid cash (well, credit) for. This would be an excellent strategy IMO. Paying off high interest debt is almost always the best thing you can do.
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# ? Jan 14, 2016 00:11 |