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more funds isnt better and your ERs are pretty tolerable even with your admin fees
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Aug 11, 2016 20:45
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Yeah those fees are a lot better than my 457b was. Even with the 8 bps a quarter, a few of those options are decently priced.
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Aug 11, 2016 20:47
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KYOON GRIFFEY JR posted:more funds isnt better and your ERs are pretty tolerable even with your admin fees Yeah, I know that more funds isn't necessarily better, but I currently have access to the same Vanguard Large Cap fund, a Fidelity Mid Cap fund that is slightly cheaper, and a small cap fund that is 2/3 the ER of the one being offered. Also, no admin fees. Feels like a small downgrade for no benefit to the employees, even though the entire transition is supposedly to save employees money on fees. Should I just be doing some combo of Large / Mid / Intl? 60/25/15 or something like that? I have a Vanguard Target fund for 100% of my Roth IRA.
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Aug 11, 2016 20:51
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Leon Trotsky 2012 posted:Yeah, I know that more funds isn't necessarily better, but I currently have access to the same Vanguard Large Cap fund, a Fidelity Mid Cap fund that is slightly cheaper, and a small cap fund that is 2/3 the ER of the one being offered. Also, no admin fees. "Extended Market" is all the funds that ARE in the Total Stock Market fund and NOT in the S&P 500 Index fund. It's not technically a midcap fund. Currently, an 80/20 ratio of SP500/Extended Market is about the same as holding Total Stock Market. Whatever you've allocated to domestic stocks, I recommend that 80/20 ratio. You've got a great bond fund available to you. Whatever your personal bond allocation is, the Vanguard Intermediate Fund is a good choice. Anyone who tells you that ~Now is a bad time to hold bonds~ has a crystal ball that you should ask to borrow. I personally hold 15% bonds because it's smack dab in the middle of two Common Knowledge pieces of advice - Hold 0% bonds, and hold your age in bonds (30% in my case). For international stocks, that's as personal an issue as stock vs bond. Many experts claim that your stocks should be NO MORE than 20% international. Other experts say you should have AT LEAST 20% international. I decided to go with 20% international for exactly that reason! Oh and "even though the entire transition is supposedly to save employees money on fees" - This is your employer saying "if we didn't do this, we would have started charging you a big fee. You're welcome".
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Aug 11, 2016 21:30
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I have a Roth and standard 401k ira Question. This might be a "consult a professional" question but I want to see if it's more simple than I realize. My workplace just started offering a Roth 401k to go with our standard 401k. How should I be allocating my contribution between the two? I also have a rollover IRA with vanguard from previous jobs and my Roth IRA. I understand i can do a conversion from traditional to Roth with a tax hit as it's considered income. What is the smart play here? I'm early 30s late twenties working white collar so I'm more likely to be in a hire tax bracket when i retire if life goes to plan. I can provide % and dollar details if it makes a difference.
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Aug 11, 2016 21:50
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Some people go with 50/50 Traditional/Roth just to have a balance in retirement, but I'll just be going with 100% Roth unless I become ineligible. If this is the least you will ever make, now is the time to convert those old Traditional IRAs to Roth. In your situation, I would: - First contribute to the Roth 401k up to the maximum company match, if any. (their match by law has to be Traditional though) - Then max your Roth IRA - Max HSA contributions, if eligible - Rest in Roth 401k until you max that space. If you somehow manage to put all that away, start a taxable account, but that is 18,500 for 401k, 5500 for IRA, and 3350 for HSA. $27,350 is a lot
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Aug 11, 2016 22:04
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The 401k limit is $18,000 in 2016.
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Aug 11, 2016 22:25
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turbohumblebrag: I've moved out of the Roth eligible income bracket and really can't be bothered to backdoor so that may also be a consideration for you if you plan to make more money at your white collar job. I wish I pushed a bit more money in to the Roth when I was eligible.
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Aug 12, 2016 00:52
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KYOON GRIFFEY JR posted:turbohumblebrag: I've moved out of the Roth eligible income bracket and really can't be bothered to backdoor so that may also be a consideration for you if you plan to make more money at your white collar job. I wish I pushed a bit more money in to the Roth when I was eligible. -  Jealous, is all
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Aug 12, 2016 00:55
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KYOON GRIFFEY JR posted:turbohumblebrag: I've moved out of the Roth eligible income bracket and really can't be bothered to backdoor so that may also be a consideration for you if you plan to make more money at your white collar job. I wish I pushed a bit more money in to the Roth when I was eligible. You can't be bothered to take 10 minutes a year to save 5k in a tax sheltered account? Leon: I would just approximate the Vangaurd target fund that you are holding in your Roth in your 401k as that's the simplest option. The other option is to look the funds in your Roth versus your 401k and see if you can get a lower overall expense ratio.
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Aug 12, 2016 01:12
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Backdoor is a huge pain in the rear end to set up if you have actual trad ira savings.
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Aug 12, 2016 01:49
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Xguard86 posted:I'm early 30s late twenties working white collar so I'm more likely to be in a hire tax bracket when i retire if life goes to plan. Can someone explain the reasoning here to me? I've never understood it. I get the expectation that you'd be in a higher tax bracket *immediately before* retiring. But after retiring? Don't follow. While you're working and saving for retirement, your taxable income should be roughly equal to your expenses plus your taxable savings. After retirement, it should be roughly equal to your expenses minus your tax free savings disbursements, right? Why the confidence that the latter would be higher than the former? In my mind, if you're a highish earner now, the reason to go Roth is not a matter of future tax bracket, but simply that if you would max out traditional, then Roth has an effectively higher limit.
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Aug 12, 2016 04:20
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If you're a highish earner now then you don't even qualify for the tax deduction for a Trad IRA since the phaseout starts at like only 65k (individual). The choice of Roth IRA is already effectively made for you.
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Aug 12, 2016 04:25
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But Roth 401k is an option no matter what your income. I'm with you Steve French, I go trad as I expect to make less in retirement following the same logic you outlined.
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Aug 12, 2016 04:46
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Guinness posted:If you're a highish earner now then you don't even qualify for the tax deduction for a Trad IRA since the phaseout starts at like only 65k (individual). The choice of Roth IRA is already effectively made for you. Not necessarily. Yes, if you are not eligible for a tax deduction on your traditional IRA contributions, the choice is obvious, but there are plenty of circumstances where Roth vs traditional *is* a non trivial decision. For one, the trad IRA limit is only as low as ~65k if you have a retirement plan provided by your employer. For two, the question also applies to traditional vs Roth 401k, where that income limit does not exist. And, in fact, was the specific case that I was responding to.
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Aug 12, 2016 04:50
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Traditional 401k/Roth IRA does a good job of hedging the tax question, anyway. It's too hard to predict your tax bracket in 30 years. The definition of taxable income could change, brackets and rates will probably change, and of course who knows what kind of passive income you'll even have!
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Aug 12, 2016 04:51
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Rurutia posted:Backdoor is a huge pain in the rear end to set up if you have actual trad ira savings. Not if your 401k plan accepts rollovers (and you have a good 401k plan.)
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Aug 12, 2016 05:22
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GoGoGadgetChris posted:Traditional 401k/Roth IRA does a good job of hedging the tax question, anyway.
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Aug 12, 2016 07:39
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I am getting my full company match in the 401k with half in traditional and half in Roth. I'm also maxing my personal Roth IRA contribution. It sounds like I'm ok with this setup? And maybe I should split my 5500 between Roth and traditional next year? Xguard86 fucked around with this message at 12:47 on Aug 12, 2016 |
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Aug 12, 2016 12:24
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Rurutia posted:Backdoor is a huge pain in the rear end to set up if you have actual trad ira savings. exactly
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Aug 12, 2016 12:53
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Traditional for 401k and Roth for IRA here. I look at it as another form of diversification based on the uncertainty of future tax code.
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Aug 12, 2016 13:19
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Rurutia posted:Backdoor is a huge pain in the rear end to set up if you have actual trad ira savings. So annoying this issue isn't brought up in the forefront of issues when comparing trad vs ira, and i didn't read deep enough until it was too late.
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Aug 12, 2016 13:30
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monster on a stick posted:Not if your 401k plan accepts rollovers (and you have a good 401k plan.) I personally considered that a huge pain in the rear end to do. If your 401k doesn't accept rollovers and and isn't good, the backdoor is largely impractical. Rather than not doing it, just because you're lazy af.
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Aug 12, 2016 13:32
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Nail Rat posted:Traditional for 401k and Roth for IRA here. I look at it as another form of diversification based on the uncertainty of future tax code. Same here
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Aug 12, 2016 13:46
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Bhodi posted:Seriously, if anyone has a way around this without job hopping to a place that allows post tax 401k i'd really like to hear it! You can check to see if your work's traditional 401k accepts "incoming" rollovers. Then you can roll your traditional IRA into your work 401k, and voila, no Traditional IRA balance. Although I think you have to do this one tax year in advance of any Roth conversions? Maybe I'm wrong about that latter part?
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Aug 12, 2016 15:16
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kaishek posted:You can check to see if your work's traditional 401k accepts "incoming" rollovers. Then you can roll your traditional IRA into your work 401k, and voila, no Traditional IRA balance. Although I think you have to do this one tax year in advance of any Roth conversions? Maybe I'm wrong about that latter part? You can do it same year. I did this exact thing last year and had no problems in turbotax. Processing the incoming rollover was no big deal compared to the tax savings I will get for the next few decades provided the backside loophole is never closed.
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Aug 12, 2016 16:04
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So, I opted into my company’s stock purchase program last year, and the stocks were purchased relatively recently, at a discount since I’m an employee. I was contributing 5% of my income towards the program, and then 10% towards my 401k (Vanguard Target 2045). I’m tempted to sell the stocks and then invest the money straight into my 401k, but would it be smarter of me to keep the stocks as they are? The company is a gambling establishment that’s been around for over 130 years, so I don’t necessarily think they’re going anywhere anytime soon, but I guess anything’s possible. Is it mostly just how willing I am to risk the stock value? Is it even possible to send money straight from my bank account into a 401k?
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Aug 12, 2016 21:59
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CodfishCartographer posted:Is it even possible to send money straight from my bank account into a 401k? No, contributions must be payroll deductions.
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Aug 12, 2016 22:00
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CodfishCartographer posted:Is it mostly just how willing I am to risk the stock value? CodfishCartographer posted:Is it even possible to send money straight from my bank account into a 401k? Blinky2099 fucked around with this message at 22:03 on Aug 12, 2016 |
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Aug 12, 2016 22:01
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^^^ That makes sense! and yeah I suppose I could mess around with contributions like that in order to balance it out, but I think I'll keep them in stocks anyways. At the very least for a year, so I get to pay less taxes on the money.Guinness posted:No, contributions must be payroll deductions. Well, guess that makes my decision for me! I'll just sit on it, for a rainy day / down payment, then. CodfishCartographer fucked around with this message at 22:03 on Aug 12, 2016 |
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Aug 12, 2016 22:01
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CodfishCartographer posted:So, I opted into my company’s stock purchase program last year, and the stocks were purchased relatively recently, at a discount since I’m an employee. I was contributing 5% of my income towards the program, and then 10% towards my 401k (Vanguard Target 2045). I’m tempted to sell the stocks and then invest the money straight into my 401k, but would it be smarter of me to keep the stocks as they are? The company is a gambling establishment that’s been around for over 130 years, so I don’t necessarily think they’re going anywhere anytime soon, but I guess anything’s possible. Is it mostly just how willing I am to risk the stock value? Is it even possible to send money straight from my bank account into a 401k? Are you getting stock at a discount? You can always sell it as soon as it vests.
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Aug 12, 2016 22:03
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monster on a stick posted:Are you getting stock at a discount? You can always sell it as soon as it vests. I am getting the stock at a discount (85%), which is why I was considering selling it now since it just got purchased and thus would be the most immediate profit. And pardon my ignorance but when is a cost qualified as being vested?
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Aug 12, 2016 22:05
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monster on a stick posted:Are you getting stock at a discount? You can always sell it as soon as it vests.
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Aug 12, 2016 22:05
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I wouldn't have thought of the tax difference as being that significant, but granted I don't know how waiting the year effects the taxes all that much. I currently have 15 shares, I'd be more worried about the stock dropping 10-20 dollars (it recently raised $15 over the past month or so due to some good press) losing me money than the tax reductions losing me money. But then again, I don't really know a whole lot about stock stuff.
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Aug 12, 2016 22:11
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CodfishCartographer posted:I am getting the stock at a discount (85%), which is why I was considering selling it now since it just got purchased and thus would be the most immediate profit. And pardon my ignorance but when is a cost qualified as being vested? This is a decent article that should help you calculate your true rate of return (it's probably more than 15%, since some of your money is kept only for a few days before buying stock): http://thefinancebuff.com/employee-stock-purchase-plan-espp-is.html I think that also answers your question about qualified - you're talking about turning them into long-term gains? monster on a stick fucked around with this message at 22:39 on Aug 12, 2016 |
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Aug 12, 2016 22:13
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Short term capital gains are taxed as ordinary income, so the effective tax rate is between 10-39.6% (depends on how much money you make, etc). Long term capital gains are taxed at varying rates, but yours are likely 0% or 15%. If you make up to $37,000, your tax rate for holding a year goes from 15% to 0% on sale of stock. If you make between $37,000 and $91,000, your effective tax rate goes from 25% to 15% on sale of stock. Dollar changes in value are pointless without knowing percentage changes. Is dropping $10 25%? Is it 5%?
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Aug 12, 2016 22:17
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KYOON GRIFFEY JR posted:Short term capital gains are taxed as ordinary income, so the effective tax rate is between 10-39.6% (depends on how much money you make, etc). Long term capital gains are taxed at varying rates, but yours are likely 0% or 15%. Fair, I should have considered it as a percentage! The stock is at 145ish now, this time last year it was at around 130 and hovered around there until recently when it's gone up- the lowest it's gone in the past year has been 118, but it wasn't around there long. It sounds like holding onto it for the year is gunna be the best bet, as looking at the stock history it rarely has gone under 123, but then the link that monster on a stick posted seems to suggest the opposite, so WHO KNOWS. monster on a stick posted:This is a decent article that should help you calculate your true "discount" (it's probably more than 15%, since some of your money is kept only for a few days before buying stock): http://thefinancebuff.com/employee-stock-purchase-plan-espp-is.html I think I'm a little confused as to how he reaches the true value there. quote:On average your money is only tied up for 3 months. So, earning 17.65% risk free for tying up your money for 3 months is equivalent to earning (1 + 17.65%) ^ 4 – 1 = 91.6% a year. How exactly does this formula apply to finding the "true" discount? CodfishCartographer fucked around with this message at 22:38 on Aug 12, 2016 |
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Aug 12, 2016 22:32
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If you hold for a year your gains are: Initial discount + tax discount +/- gains or losses from initial purchase price If you sell immediately / in the short term your gains are: Initial discount +/- gains or losses from initial purchase price + gains from alternative investments in which you place your money (opportunity cost) If you strongly believe that the stock will lose more than your tax discount minus the opportunity cost over the year you will hold the stock, you should sell it immediately. Otherwise, with a fairly stable stock, I'd be inclined to hold. Does the stock pay dividends?
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Aug 12, 2016 22:46
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CodfishCartographer posted:I think I'm a little confused as to how he reaches the true value there. Basically, since your money is held for 6 months, but you're depositing into it during those 6 months, the total average of [length of which your money is locked up] = 3 months (since some is 6 months and some is 0 months). Then, your return on these "average 3 months" can be multiplied by 4 to get a total annual return, i.e. 15% return over 3 months = 15*4=60% true return (before tax), which basically means ESPPs kick rear end super hard.
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Aug 12, 2016 23:00
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^^^Ahh, okay, that does make sense. Thanks for helping spell it out for me! Since my ESPP is over a year period, instead of a 6 month one, wouldn't logically that mean that the average return is in 6 month increments instead of 3 month ones, so then it'd only be 15%*2 = 30%? still kick-rear end, but doesn't seem like the COULD BE OVER 180% like it claimed - but I guess that's why it's important for me to do my own math  KYOON GRIFFEY JR posted:If you hold for a year your gains are: Alright, thanks for making it clear. Sounds like the best thing for me to do is hold onto it until at least next year, then. Mostly the link above threw me for a loop, since it sounded like selling ASAP is the way to go, even if I couldn't exactly follow that logic. CodfishCartographer fucked around with this message at 23:05 on Aug 12, 2016 |
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Aug 12, 2016 23:01
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