|
Handsome Ralph posted:I feel like a complete loving idiot for never realizing this but I just learned today that you can withdraw contributions from Roth IRA accounts without penalty. For awhile, I was operating under the assumption that your money was locked in till 59 1/2 or for a few other scenarios. So as a result, I ignored opening an IRA while continuing to put money into a Ally Savings account to build an 6 month emergency fund, while maxing out my employer's 401k contributions. So at least I was doing a few things right That would have been the best way to do it compared to what you are currently doing, but the "actual best" way to go about it is to max your Roth IRA every year, not touch it, and put the money for a house down payment in the savings account if you plan to take it out in less than 5 years. The value of a Roth is that it grows tax-free. And since you can only put in 5.5k a year, if you take money out then you can't replace that "space" in the account. The more you have in there, the more you can compound, and it adds up over the years.
|
#
?
Mar 2, 2017 02:57
|
|
|
|
| # ? May 16, 2024 13:49 |
|
|
If you have to make the choice between retirement savings and other (house, emergency fund, etc.) savings, then yeah it's a good bonus that your Roth IRA can be accessed early. Don't make the mistake of thinking that the money in there is pulling double / triple duty though. If you end up withdrawing it all to pay for a house, your Roth IRA money is gone. I know that sounds simple, but some people think "$1 in my Roth IRA is really $3 because it's retirement, house fund, and emergency fund". Big picture though, putting money in an IRA is always good. Leaving it there is even more good.
|
|
#
?
Mar 2, 2017 02:58
|
|
|
Thanks guys! I think my immediate goal right now is to max out my 2016 contribution and then start modestly splitting my savings between my 2017 contribution and a house fund. At this rate, I can max out my 2017 contribution well before next year's deadline and still put other money aside. Just one question for clarity's sake, if I withdraw my part of or the entirety of my contributions, I can't "pay it back". Paying it back would just go against my annual contribution limit at that point in time, correct?
|
|
#
?
Mar 2, 2017 03:18
|
|
|
Handsome Ralph posted:Thanks guys! Yes. That's why a dollar in a Roth IRA has more potential value than a dollar in your checking account. It grows tax-free and that includes dividends and capital gains. To break it down in a super basic and incredibly overly simplified way, if you have $100 in 10 shares in your Roth IRA: - At the end of the year it it pays out $10 in Dividends - This causes the shares to lose $10 in value, but pay you $10, which is reinvested. - Now you have 11 shares worth $100. - If those shares rise in value by $1, you have $111 instead of the $110 you would have had. - At the end of each year, your shares pay dividends and lose value, but that value is reinvested. So you have the same dollar amount, but more shares. - This makes each increase in price worth significantly more to you. - Allowing this to happen over and over again throughout the course of 30 years or so will result, on average, in a significant increase in money. - To maximize the compounding factor, you need as much in there as you can get. Gaining an extra 10% in value ($11 instead of $10 in the example) is not a ton of money if you are getting that percentage of a small base value. - Since you can only ever put in 5.5k per year, each dollar you take out loses that "space" in the account forever and can't compound. There's also a risk that if you use the Roth for a short-term savings account that you might need to withdraw during a down period in the market and not get as much money as you could have had if you were able to wait a year or so and time it out at high points.
|
|
#
?
Mar 2, 2017 03:37
|
|
|
To those who work for the US government and contribute to the TSP, I'm still a little confused regarding the Roth TSP vs the Roth IRA. I'm contributing to both of them but not maximizing either (Roth TSP and Roth IRA that's at Fidelity). If you had to choose, which should I maximize first?
|
|
#
?
Mar 2, 2017 08:19
|
|
|
Okay, this is the first year I'm doing a backdoor roth contribution. I have no other IRA accounts. It was a clean $5500 that I placed into a trad IRA with fidelity than converted to a Roth. I'm having a hard time figuring out how to report this in in my tax return. Currently using Taxact Online, but haven't paid for anything yet, so I'm open to switching software if I need to. All the tutorials I'm finding searching online are a few years old and doesn't match with the current software. How are other people in this thread doing this? Can I file a written 8606 separately from the rest of my return?
|
|
#
?
Mar 2, 2017 14:37
|
|
|
monster on a stick posted:Yes, that's what I did. I have a Traditional IRA account at Vanguard whose only purpose is to get a $5500 contribution, and once that settles, immediately gets converted into a Roth (and so moved into a different account.) The rest of the year it just sits there empty. This is going back, but I have a question regarding getting the check to send to Vanguard - since I can only do this once a quarter, the taxes would be calculated based on the earnings for that quarter, correct? Do I have to do any paperwork on the Vanguard end or is this simply a phone call that I make to my 401k provider and they take care of the details?
|
|
#
?
Mar 2, 2017 18:42
|
|
|
fenixwb posted:Okay, this is the first year I'm doing a backdoor roth contribution. I have no other IRA accounts. It was a clean $5500 that I placed into a trad IRA with fidelity than converted to a Roth. To answer my own question, just in case any one else runs into the same issue, I was able to use H&R block's software and this tutorial: https://thefinancebuff.com/how-to-backdoor-roth-hr-block-software.html successfully.
|
|
#
?
Mar 2, 2017 19:05
|
|
|
halokiller posted:To those who work for the US government and contribute to the TSP, I'm still a little confused regarding the Roth TSP vs the Roth IRA. I'm contributing to both of them but not maximizing either (Roth TSP and Roth IRA that's at Fidelity). If you had to choose, which should I maximize first? It probably doesn't matter much, but it is situational. TSP has good funds with unbeatably low ERs. The downside is that your conventional and Roth contributions are mixed into the same account, and even if all of your contributions are Roth, your agency matching contributions are always conventional. Presently, TSP forces you to take distributions in proportion to your Roth and Conventional balances, so you don't have the flexibility to play tax games that you could with totally separate Roth and pre-tax retirement accounts. No law forces TSP to do this, so it may well change by the time you retire. A separate Roth IRA will get you more flexibility for tax planning once you retire, but the funds available are going to be more expensive than TSP, although maybe not by enough to really matter if you're going through Fidelity or Vanguard. Also, no one offers the G fund outside of government, which is a great place to hold low risk money once you retire. But there are periodic rumblings that Congress will force Treasury to stop issuing the special bonds TSP uses.
|
|
#
?
Mar 2, 2017 19:29
|
|
|
Shadowhand00 posted:This is going back, but I have a question regarding getting the check to send to Vanguard - since I can only do this once a quarter, the taxes would be calculated based on the earnings for that quarter, correct? I assume you are talking about the mega backdoor (after tax 401k to Roth IRA)? Taxes would be based off the difference between what you put into the after tax 401k and the check being sent to Vanguard. So if you put $5000 away in your after tax 401k and invested it in the stock market that's going gangbusters right now and by the time you roll it over it's $5500 then you have to report the $500. You may want to double check once a quarter, I've heard of companies that had rules put in place around rolling it over from AT 401k to Roth 401k but no limits on rolling it over to an IRA, in which case you should just do it as soon as possible. Here are the steps I follow which may differ depending on your 401k provider: - I call them up and say I want "an in-service withdrawal of both contributions and gains of the after-tax part of my 401k." (You should literally use these words.) - They'll ask who it's going to, I tell them Vanguard and so the check has to be made to "VFTC fbo monster-on-a-stick" (VFTC = Vanguard Fiduciary Trust Company.) If you are sending the money to Fidelity or Schwab or Edward Jones  then call them up and ask how to make out the check first.- A week later or so, I get a check in the mail. - I send this check off to Vanguard with a letter that says "Please deposit this into my Roth IRA account #blahblah, oh btw this is a rollover from an after-tax 401k." This means a few weeks out of the market because of the mail system. I don't remember much about your 401k plan but if you have a good plan/brokerage or something like BrokerageLink, you may be able to make this a lot faster by either: - rolling over the after-tax 401k to your Roth 401k (meaning you have access to your 401k plan funds/BrokerageLink.) Don't do this if your 401k plan sucks. - rolling over the after-tax 401k to a Roth IRA that your provider runs. This is good if your 401k is at Schwab or something since you can buy cheap Schwab ETFs/mutual funds without waiting for the postal workers to bring a check to you and then sending it to Jack Bogle.
|
|
#
?
Mar 2, 2017 19:34
|
|
|
This is probably pretty basic but I wanted to double check my logic on this.. The background is that I have two 401Ks from previous employers and a TSP that I'm currently putting 5% into to get my match. I also have a HSA that I'm fully funding but isn't particularly relevant to this question. One of the accounts is with Fidelity, the other is Vanguard. I'm pretty happy with how the Vanguard plan has been performing but it's essentially dormant because I'm not doing anything with it. The Fidelity account has been essentially ignored for a significant period of time and is more or less not doing anything either, it has an expense ratio of .76 which is not great by my understanding. I don't anticipate being able to fully fund a traditional IRA this year after rebuilding my liquid savings, home ownership is a bitch, but I'm sure I could get there by the end of next year. Should I look into rolling them both into my TSP and just shoving extra money into it as my income permits or both into a traditional IRA with Vanguard? I don't think a Roth would be a reasonable choice due to the tax implications. I'm leaning towards consolidating them all into the TSP (assuming that's possible) because it's simple and there's plenty of plan choices to spread my money around a bit if I choose to do that. If these are all bad options for some inconceivable reason I can always cash it all out and buy a bunch of lap dances  !!!
|
|
#
?
Mar 2, 2017 19:49
|
|
|
monster on a stick posted:I assume you are talking about the mega backdoor (after tax 401k to Roth IRA)? Taxes would be based off the difference between what you put into the after tax 401k and the check being sent to Vanguard. So if you put $5000 away in your after tax 401k and invested it in the stock market that's going gangbusters right now and by the time you roll it over it's $5500 then you have to report the $500. You may want to double check once a quarter, I've heard of companies that had rules put in place around rolling it over from AT 401k to Roth 401k but no limits on rolling it over to an IRA, in which case you should just do it as soon as possible. Thanks, that's exactly what I was curious about  Now I'm wondering whether I should open a Fidelity Roth IRA or continue to use the Vanguard Roth.
|
|
#
?
Mar 2, 2017 20:22
|
|
|
Shadowhand00 posted:Thanks, that's exactly what I was curious about If your 401k plan is at Fidelity, then the rollover should be faster and there's nothing wrong with Fidelity index funds or the iShares ETFs that don't have a trading fee if you prefer ETFs for reasons.
|
|
#
?
Mar 2, 2017 20:34
|
|
|
How would anyone notice if you contribute to a Roth IRA but are over the income limit? It's not part of your tax return or anything.
|
|
#
?
Mar 3, 2017 13:55
|
|
|
smackfu posted:How would anyone notice if you contribute to a Roth IRA but are over the income limit? It's not part of your tax return or anything. Form 5498 is filed by your IRA trustee/issuer.
|
|
#
?
Mar 3, 2017 14:38
|
|
|
Sorry to be that guy, but I just want to make sure I'm understanding this correctly: I have no additional tax documents I need to file for my Roth IRA because it's tax-free (the tradeoff is that I can't deduct it from my taxes now compared to a traditional IRA). Vanguard files form 5498 for me that proves to Uncle Sam I'm not cheating the system. Is that correct?
|
|
#
?
Mar 3, 2017 21:39
|
|
|
Yes. You don't report anything about Roth IRA contributions. ...Unless you're doing backdoor Roth IRA.
|
|
#
?
Mar 3, 2017 22:00
|
|
|
DNK posted:Yes. You don't report anything about Roth IRA contributions. Yeah, I'm not, just regular contributions. Thanks!
|
|
#
?
Mar 4, 2017 01:43
|
|
|
KYOON GRIFFEY JR posted:Form 5498 is filed by your IRA trustee/issuer. Fair enough, so I should actually pay attention to that. I have a weird situation. I put $5500 into my Roth IRA as normal. But due to getting a new job and being married now, we likely are over the income limit. (Not a bad thing.) So I have to recharacterize to a traditional IRA but I don't have one yet. And Vanguard won't let me open a new one without initial funding. But if I fund the traditional IRA, I'll be over the annual limit. So not sure how to deal with it. I asked Vanguard a few days ago but they haven't responded yet so maybe I just need to call.
|
|
#
?
Mar 4, 2017 19:13
|
|
|
smackfu posted:How would anyone notice if you contribute to a Roth IRA but are over the income limit? It's not part of your tax return or anything. I'm not advocating tax cheating, but no one is going to know. I've done it before, and my accountant basically just said, don't do that again if you can help it. But he flat out told me no one will ever know or care.
|
|
#
?
Mar 4, 2017 20:36
|
|
|
Unless you get audited
|
|
#
?
Mar 4, 2017 20:53
|
|
|
paternity suitor posted:I'm not advocating tax cheating, but no one is going to know. I've done it before, and my accountant basically just said, don't do that again if you can help it. But he flat out told me no one will ever know or care. The IRS will know, because Roth IRA contributions are reported by the trustee of the Roth IRA. You can get a Wage & Income Transcript from the Get Transcript service which will show all the information returns the IRS received about you for past tax years. If you made Roth IRA contributions in the past, look at your Wage & Income Transcript for that year and you'll see the contributions reported. 
cowtown fucked around with this message at 21:01 on Mar 4, 2017 |
|
#
?
Mar 4, 2017 20:55
|
|
|
I have a question about the best way to go about investing in my taxable account. Currently in retirement accounts I have (all with Vanguard): 401K 11.3% Vanguard Developed Markets Index Fund Institutional Plus Shares (VDIPX) - .06 ER 40.4% Vanguard Institutional Index Fund Institutional Plus Shares (VIIIX) - .02 ER 28.8% Vanguard Mid-Cap Index Fund Institutional Plus Shares (VMCPX) - .05 ER 8.6% Vanguard Small-Cap Index Fund Institutional Plus Shares (VSCPX) - .05 ER 10.9% Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX) - .04 ER Rollover IRA (from a poo poo 401K with 1+ER's...) 100% Vanguard Target Retirement 2060 Fund Investor Shares (VTTSX) - .16 ER Roth IRA 100% Vanguard Target Retirement 2060 Fund Investor Shares (VTTSX) - .16 ER Taxable account (about $1500 in it) 100% Vanguard Target Retirement 2060 Fund Investor Shares (VTTSX) - .16 ER I have been reading that it is pretty tax inefficient to have bonds in my taxable account (which the 2060 target date fund has). I am figuring that I can cover my bond needs in my tax-advantaged accounts. So I think I should look into investing into something different in the taxable account. My basic thought is that I should be invested in total US and total international stock. Can/Should I just make a 2 fund portfolio in the taxable account of: 80% Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) - .16 ER (.05 ER admiral status) 20% Vanguard Total International Stock Index Fund Investor Shares (VGTSX) - .18 ER (.11 ER admiral status) I was looking to just put $500 a month in the taxable but I can use the bonus I am getting this month to just bump it up and get to the $3000 min in VTSMX. Once I get that up to 10K I can purchase VGTSX (again with a $3K min). I also don't have a problem transferring the existing ~1500 out of VTTSX as the $55 of gains are not a big concern. I just finished reading https://www.bogleheads.org/wiki/Tax-efficient_fund_placement which was helpful but I want to make sure I am on the right track here. Any and all advice welcome, thanks. About me: 30 year old, single, rent, engineer, max 401k, HSA, and RothIRA, $20K emergency account with Ally, for some reason ~13K in my checking. E: My taxable is just my early retirement account at this point.
|
|
#
?
Mar 5, 2017 01:57
|
|
|
Your target fund will have only a small amount in bonds and most in stocks, so most of the dividends will be qualified.
|
|
#
?
Mar 5, 2017 16:12
|
|
|
Yeah that is true. I am hoping to have a lot of money in there at some point though. Eventually it will start re-balancing though towards more bonds.
spwrozek fucked around with this message at 02:11 on Mar 6, 2017 |
|
#
?
Mar 6, 2017 02:09
|
|
|
paternity suitor posted:I'm not advocating tax cheating, but no one is going to know. I've done it before, and my accountant basically just said, don't do that again if you can help it. But he flat out told me no one will ever know or care.
|
|
#
?
Mar 6, 2017 14:52
|
|
|
For part time driving Uber my mileage log is less than perfect. I make far less than $200k a year so I think my chances of an audit are pretty minimal. That said, I estimate on the conservative side of things and I'm definitely not taking advantage; it's burdensome to have records that keep up to their requirements. That's not an excuse though and if I do get audited I would expect to lose those deductions.
|
|
#
?
Mar 6, 2017 22:03
|
|
|
I'm sorry if this is a dumb question: I'm invested in a few mutual & index funds across a Schwab and Vanguard account. Is there any reason why I shouldn't just roll everything over into my Vanguard account? I'm definitely a set-it-and-forget-it type of investor, so I don't see myself really getting into the stock trading tools that Schwab offers. Also, I've been reading through the jlcollins blog that was posted here, should I be running my IRAs through Betterment? I'm in my 30's and saving for retirement, so I'm just looking for a place to allocate my Vanguard target and Index funds.
|
|
#
?
Mar 6, 2017 23:03
|
|
|
Michael Scott posted:For part time driving Uber my mileage log is less than perfect. I make far less than $200k a year so I think my chances of an audit are pretty minimal. That said, I estimate on the conservative side of things and I'm definitely not taking advantage; it's burdensome to have records that keep up to their requirements. That's not an excuse though and if I do get audited I would expect to lose those deductions. Uber doesn't give you some automatic tracking of the rides it has recorded? Or do you mean when you're "working" but not actively transporting?
|
|
#
?
Mar 6, 2017 23:06
|
|
|
baquerd posted:Uber doesn't give you some automatic tracking of the rides it has recorded? Or do you mean when you're "working" but not actively transporting? The latter, sorry. They have a count of 'on trip' miles but miles traveling to the rider to pick them up are not counted, nor is driving to other areas if you drop off in an area with no riders.
|
|
#
?
Mar 6, 2017 23:35
|
|
|
Michael Scott posted:The latter, sorry. They have a count of 'on trip' miles but miles traveling to the rider to pick them up are not counted, nor is driving to other areas if you drop off in an area with no riders. I wonder if you could write a script using a maps api to do a shortest distance algorithm between recorded trips. It would be conservative, but automated. Technically, if you have lat/long for start and end of all rides or address, this is pretty simple, but not sure about the tax man.
|
|
#
?
Mar 6, 2017 23:59
|
|
|
Power Walrus posted:I'm sorry if this is a dumb question: I'm invested in a few mutual & index funds across a Schwab and Vanguard account. Is there any reason why I shouldn't just roll everything over into my Vanguard account? I'm definitely a set-it-and-forget-it type of investor, so I don't see myself really getting into the stock trading tools that Schwab offers. Don't run IRAs through betterment, you can't tax harvest there and without that, betterment is just an expensive target date fund. Just use vanguard in the first place.
|
|
#
?
Mar 7, 2017 00:31
|
|
|
baquerd posted:Don't run IRAs through betterment, you can't tax harvest there and without that, betterment is just an expensive target date fund. Just use vanguard in the first place. Is it a wash sale if i sell in my taxable betterment account but also have a transaction for the same fund in my IRA or 401k or whatever else?
|
|
#
?
Mar 7, 2017 00:44
|
|
|
waloo posted:Is it a wash sale if i sell in my taxable betterment account but also have a transaction for the same fund in my IRA or 401k or whatever else? Yep
|
|
#
?
Mar 7, 2017 00:48
|
|
|
Ok that's what I thought; so it seems like you either have to go all in to a robo harvester so you dont wash sale by accident or just avoid entirely to avoid the headache (i am in the latter camp due to present understanding).
|
|
#
?
Mar 7, 2017 02:36
|
|
|
GOP just came out with their Obamacare replacement plan: https://www.nytimes.com/interactive/2017/03/06/us/politics/republican-obamacare-replacement.html?pagewanted=all quote:Health savings account I'll take it
|
|
#
?
Mar 7, 2017 04:45
|
|
|
this might be a little long winded, but need a bit of advice. my wife and I recently purchased a house so I can FINALLY stop just plunking all my cash into a 1% Ally account (the previous advice i got from goons). So now I'm wondering what I should do next with my savings. Our debts are as follows (I'll go from highest to lowest interest rate): - USA Loan $20,000 @ 5.50% - USA Mortgage $700,000 @ 4.50% - Canada Mortgage $260,000 @ 2.00% Our net savings per year are approx $50k-$75k from being extremely cheap and both having excellent stable jobs. This yearly savings number is made up of monthly savings as well as a couple of bonuses I get a year from work. So question is, where do I start socking away money? I was thinking of doing the following: 1) Take all savings, aggressively pay down USA loan 2) Once #1 is done, pay my mortgage down but not with ALL my savings (maybe send an extra $25k/yr into the principal). Use the rest of the savings to put into 401(k), Roth IRA, etc. The background on my thinking is that once I get under $636,000 on my mortgage I get much better rates (since I won't have a jumbo loan anymore). I am interested in getting that paid down, while also not sinking ALL my savings into real estate. What's your thoughts on this? Thanks all.
|
|
#
?
Mar 7, 2017 17:51
|
|
|
Rocks posted:this might be a little long winded, but need a bit of advice. my wife and I recently purchased a house so I can FINALLY stop just plunking all my cash into a 1% Ally account (the previous advice i got from goons). So now I'm wondering what I should do next with my savings. Firstly congratulations and well done. The trick will be to keep up the high rate of savings and not to let consumption creep settle in as you are renovating/furnishing this new home. I agree with 1. Am I to understand that once your 2nd and 3rd loans are less than 636 you can refinance? The problem with aggressively pursuing that is that it may be rendered moot by interest rates floating upward more generally. There is no way to be certain about whether that's the best strategy, or whether investing that savings will pay off at better than ~4%. Would you be in a position to take advantage of higher mortgage interest deduction paying more slowly or more quickly?
|
|
#
?
Mar 7, 2017 17:57
|
|
|
EAT FASTER!!!!!! posted:Firstly congratulations and well done. The trick will be to keep up the high rate of savings and not to let consumption creep settle in as you are renovating/furnishing this new home. i hear what you're saying about high interest rates, but then yeah, also will the market be able to sustain > 4% long term. That's kind of why I was thinking of doing a "healthy blend" between the two. There was a strategy I read in Tony Robbin's Money Master the Game that was to pay off the next month's principal every month, thereby being able to pay off your mortgage in half the time (roughly). I was going to use that plan, and then any savings on top of that I would just invest in the market. Thanks for the "consumption creep" reminder. no doubt it will be difficult, especially in the first 3-6 months as we get settled in.
|
|
#
?
Mar 7, 2017 18:11
|
|
|
|
| # ? May 16, 2024 13:49 |
|
|
Any thoughts on Vanguard LifeStrategy Growth Fund (VASGX)? Seems like an ok option for my excess / non emergency taxable money at this point.
|
|
#
?
Mar 7, 2017 18:26
|
|