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Yes hello Divorce Court we were "married" but the money was in my personal checking account (I don't think the IRS cares about house down payments and my post is not remotely intended to be income tax-related)
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Apr 14, 2019 21:26
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Thus, being legally married made a difference for financial reasons. Wasn’t that your point? The OPs concern was about tax on interest for a joint account.
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Apr 14, 2019 21:27
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eddiewalker posted:Thus, being legally married made a difference for financial reasons. Wasn’t that your point? You can buy a house with anyone you want, married or not. It's extremely different from filing your taxes... Before you waste your time digging through IRS tax code, let me reiterate that the context here is "don't mingle your house savings and or buy a house with someone unless it's a Forever Thing" which in the context of buying a house is not affected by marital status. eddiewalker posted:
Yep, but I'm responding to the 'don't do it, it's a bad idea before marriage' dogpile GoGoGadgetChris fucked around with this message at 21:37 on Apr 14, 2019 |
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Apr 14, 2019 21:31
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Guinness posted:buy a house together until you’re married, for so many reasons. Save separately until then. My GF and I have basically a prenup on our property. Complete with the words "no intention to ever marry". Lays out exactly who owns what and how it would be split of we broke up. Also have to break up in writing for the document. It is pretty cool.
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Apr 15, 2019 00:39
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The title of the thread used to be "don't combine finances until you're married" I think it might have had cousin in there too, but anyway don't do it
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Apr 15, 2019 00:56
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Simpsons Reference posted:The title of the thread used to be "don't combine finances until you're married" Something like "Don't combine finances with your cousin until you're married" or such. Good title.
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Apr 15, 2019 00:57
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I guess no response means it looked reasonable since things that aren't get lots of responses. Cool.
Sub Rosa fucked around with this message at 19:36 on Apr 17, 2019 |
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Apr 15, 2019 01:19
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What are you supposed to do with stock options? My wife works for a public, fortune 100 company and as part of her yearly bonus, she was awarded some stock options. Nothing huge, but it was on the order of 6% of her salary, so not trivial. We have literally no idea how to handle this scenario. All we really know is she has to accept them (I guess they're optional?), but other than that what do we do with them? I'm assuming "accepting" is not the same as exercising them. I know exercising them is when they turn in to money, but that's really about it...
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Apr 16, 2019 13:44
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DaveSauce posted:What are you supposed to do with stock options? You sell them. And it doesn't sound like they are options if you have to accept them (and that this is a public company). They're probably RSUs. If they are options, "exercising" them does not turn them into money. It turns the option (to buy a share of stock at a specific price) into stock. You sell that to turn it into money. Most places have a way to "sell on exercise" so you won't have to come up with cash first. Figure out specifically what kind of equity this is. Options are WAY different from a tax perspective (and how one would handle them) than RSUs.
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Apr 16, 2019 16:19
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As a general rule, sell any stock you have in the company you work for, unless you like gambling. You're already heavily-invested in the welfare of the company, through dint of them employing you; no sense in stacking that risk even higher by also being literally invested in them.
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Apr 16, 2019 16:22
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GoGoGadgetChris posted:Eh, depends on your generation or religion I suppose. I know plenty of once/twice/thrice divorced people and just as many unmarried-but-together-for-life! Come on GGGC you're a smart guy, the point he's making is obviously that common law marriages aren't recognized by the feds or many states. You need the certificate for a lot of the legal advantages. I can't vouch for that but it's what I've heard.
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Apr 16, 2019 17:02
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Something Offal posted:Come on GGGC you're a smart guy, the point he's making is obviously that common law marriages aren't recognized by the feds or many states. You need the certificate for a lot of the legal advantages. I can't vouch for that but it's what I've heard. Was he/she/they saying that? I certainly didn't mean to disagree with that claim and was only saying that property ownership is different from health insurance or income taxes in that you don't need to be married to someone to do it with them. You and I can't file our taxes jointly, but we could buy a duplex today and have our lovely lawyers draft up an ownership and succession agreement that mirrors any state's default plans for spouses!
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Apr 16, 2019 17:26
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DaveSauce posted:What are you supposed to do with stock options? I get options through work and I always need to accept them within ETrade, otherwise they are forfeit, I guess. If these are truly options then they have a strike price, which is usually the price of company stock on the day they are given to you. So that means that on day 1 they have no value. They will only have value if the price of the company's stock goes up above the strike price ("in the money"), otherwise they are worthless ("underwater"). Their value is the difference between the strike price and the price of company stock on the day that you sell. Is there any vesting associated with them, or are they all yours immediately?
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Apr 16, 2019 18:18
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Motronic posted:If they are options, "exercising" them does not turn them into money. It turns the option (to buy a share of stock at a specific price) into stock. Yes, sorry I think I knew that, but for some reason my mind was elsewhere. TooMuchAbstraction posted:As a general rule, sell any stock you have in the company you work for, unless you like gambling. You're already heavily-invested in the welfare of the company, through dint of them employing you; no sense in stacking that risk even higher by also being literally invested in them. That's one of the places we're waffling a little bit. Once we do figure out how to use them, the other question is when to sell them. The reason I mentioned that she is at a fortune 100 company is because it's a stable company (so not GE), so the only risk I see in them dropping in value is if the entire economy dropped at the same time. Of course they're all stable companies until they're not... The other question is, I presume there is no exception to insider trading rules with regards to stock options? Obviously this on a wildly different scale than some executive's annual stock compensation, but my wife is of course privy to sensitive, non-public information about her division. How do we navigate that to make sure she doesn't get thrown in trouble by accidentally selling at just the right time? Hutzpah posted:I get options through work and I always need to accept them within ETrade, otherwise they are forfeit, I guess. If these are truly options then they have a strike price, which is usually the price of company stock on the day they are given to you. So that means that on day 1 they have no value. They will only have value if the price of the company's stock goes up above the strike price ("in the money"), otherwise they are worthless ("underwater"). Their value is the difference between the strike price and the price of company stock on the day that you sell. Good question, and I have no idea. I think she mentioned vesting, but I'll have to check. So I would presume if they are subject to vesting then we would accept the stock options, and then sell them as soon as they vest?
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Apr 16, 2019 19:36
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DaveSauce posted:so the only risk I see in them dropping in value is if the entire economy dropped at the same time. Of course they're all stable companies until they're not... YES. This is the entire concentrated risk thing that you are being told. We're assuming it's concentrated risk. If you come back and tell us this option or stock grant constitutes less than 5% of your investment portfolio then do whatever you want whin the bound of your risk tolerance. But from context we know this isn't the case. DaveSauce posted:The other question is, I presume there is no exception to insider trading rules with regards to stock options? Obviously this on a wildly different scale than some executive's annual stock compensation, but my wife is of course privy to sensitive, non-public information about her division. How do we navigate that to make sure she doesn't get thrown in trouble by accidentally selling at just the right time? You need to read the equity agreement where this is written in specific and excruciating detail. DaveSauce posted:Good question, and I have no idea. I think she mentioned vesting, but I'll have to check. You need to read the equity agreement where this is written in specific and excruciating detail. DaveSauce posted:So I would presume if they are subject to vesting then we would accept the stock options, and then sell them as soon as they vest? Yes.
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Apr 16, 2019 19:42
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Motronic posted:YES. This is the entire concentrated risk thing that you are being told. This option or stock grant constitutes about 3% of our investment portfolio. quote:But from context we know this isn't the case. I have no idea where you gleaned enough context to KNOW that information, because it's not the case and I gave almost zero context to draw any conclusion aside from "this is not the bulk of our income." So... sorry, I guess? But as you can see this is a drop in the bucket. To add context, as I said the value was listed as approximately 6% of my wife's base salary (for clarity, this is a bonus in addition to her base salary, not in replacement of), and this is by no means the only investment we have. Most of our investments are in our 401(k)s (which at least this year we will be maxing out), and we have a some mature EE bonds and a couple 529 accounts with a handful in them. It's not perfect I know, but we're in pretty good shape. So if we were to immediately cash out this award (option or grant or whatever the gently caress it actually is), it'd be enough money to be a nice windfall, but not one that we need for anything. The assumption is that this will be a recurring thing so long as she sticks with this company, so we want to learn more so we can develop a strategy to deal with this going forward. quote:You need to read the equity agreement where this is written in specific and excruciating detail. OK that's good information, my impression was that Stock Options Are A Thing that all work the same. This implies that there are variations in how they work, which is good to know.
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Apr 16, 2019 21:08
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There are stock options, which are the option to buy the stock at a particular price. These can be worthless if the stock value decreases. Then there's stock grants, where they just up and give you the stock directly. Either way, as an employee of the company you have very limited means (as described in the agreement your wife signed) to sell those stocks without falling afoul of insider trading regulations. You may be able to set up autosale, so that they automatically get exercised when they vest; otherwise, there may be a trading window during which you're allowed to exercise them. Read the agreement, and/or ask HR/Payroll.
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Apr 16, 2019 21:27
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DaveSauce posted:I have no idea where you gleaned enough context to KNOW that information, because it's not the case and I gave almost zero context to draw any conclusion aside from "this is not the bulk of our income." So... sorry, I guess? But as you can see this is a drop in the bucket. I'm evaluating exactly what you posted - even more what you didn't post. That's the context. Don't be surprised when people who have answered this same question over and over again on various forums make a logical assumption based on your confusion around equity types and how they work along with (and this is important) not mentioning anything that could be identified as the context in which someone would evaluate a decision like this as an informed investor with any kind of portfolio or goals. People with portfolios where 6% of an annual salary would be "a drop in the bucket" are a minority to begin with. And it changes the advice you'll receive. As well as the questions you'll be asked. Like: what is your target asset allocation and how does this amount of equity fit into it? And what if your total income? Because exercising the options(if they are even options) and holding them so they are treated as long term cap gains could be on the table here. But again, if they are options, there are other questions. Like the strike price vs. the current stock price to begin with. Options in a company with a stable stock price issued with a strike of current market value are basically useless. You can forget about them unless the stock price greatly increases (or if you're leaving the company), then you figure out how many are vested and what they are worth. If these are RSUs the advice is wildly different, because the tax implications are wildly different. Motronic fucked around with this message at 01:30 on Apr 17, 2019 |
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Apr 17, 2019 01:25
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My work now has a Roth 401k option as well as a regular 401k option. I'm going to max my 401k contribution for the year. Any thoughts on how I should balance the two? My thought is that I should mostly stick with the the traditional 401k: the tax break is helpful today. But I wonder if there's some benefit in putting a portion (a third?) in the Roth, both for flexibility and for future tax concerns.
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Apr 17, 2019 16:26
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Bushido Brown posted:My work now has a Roth 401k option as well as a regular 401k option. I'm going to max my 401k contribution for the year.
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Apr 17, 2019 16:27
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Got it. So rather than splitting the 401k space, I put the max contribution to a traditional 401k, and then contribute additionally (up to the max) to a traditional IRA and roll that over to a Roth annually? Makes sense. Just want to make sure I follow.
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Apr 17, 2019 16:39
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Bushido Brown posted:Got it. So rather than splitting the 401k space, I put the max contribution to a traditional 401k, and then contribute additionally (up to the max) to a traditional IRA and roll that over to a Roth annually?
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Apr 17, 2019 16:44
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Hoodwinker posted:If you're over the Roth IRA contribution limit, that is exactly what you'll do. To be more explicit: contribute directly to a Roth IRA if you're able to. If not because you're over the Roth income limit, then perform the backdoor Roth as mentioned.
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Apr 17, 2019 18:41
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How much of a difference does the backdoor Roth thing make, anyway? Is this "reduce your tax burden by the amount you backdoor"? I've yet to read an explanation of backdoor Roth that I understood, let alone see a sequence of steps to perform it that made sense to me.
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Apr 17, 2019 18:55
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TooMuchAbstraction posted:How much of a difference does the backdoor Roth thing make, anyway? Is this "reduce your tax burden by the amount you backdoor"? There is no difference besides an extra step. It is just 1 button on vanguard after your funds settle. Put money into trad IRA Wait for money to settle Click button to took over to Roth Done
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Apr 17, 2019 18:58
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TooMuchAbstraction posted:How much of a difference does the backdoor Roth thing make, anyway? Is this "reduce your tax burden by the amount you backdoor"? The steps to do it are real simple: 0. Have no money in any Traditional IRAs. 1. Contribute money to a Traditional IRA as a non-deductible contribution. 2. Through a conversion, roll that money over into a Roth IRA. You do this because there is an income limit for contributing to a Roth IRA, but an income limit for deducting contributions to a Traditional IRA. Since non-deductible Traditional IRA contributions are effectively identical to Roth contributions as far as taxes are concerned (both are post-tax), you can make a conversion from one to the other without issue. You want to have no existing money in Traditional IRAs beforehand because you can't pick and choose which parts of your conversion are taxed: it's always relative to the amount of pre/post-tax money you have in Traditional accounts. If 10% of your Traditional IRA money is pre-tax and 90% is post-tax, when you convert, you'll pay taxes on 10% of your conversion. You want to do this because from a tax standpoint, having money in tax-advantaged accounts is better than not, and not contributing to an IRA is therefore worse than contributing to one (however odd the steps are to get it in there).
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Apr 17, 2019 19:00
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Hoodwinker posted:It's the difference between having money an an IRA and not having money in an IRA - so whatever the tax differences are between a Roth IRA and a taxable brokerage account. Over 20-30 years it ends up being about 10-20% more total money at the end, assuming in the taxable account you just stick it in a fund and leave it alone.
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Apr 17, 2019 19:05
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Droo posted:Over 20-30 years it ends up being about 10-20% more total money at the end, assuming in the taxable account you just stick it in a fund and leave it alone.
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Apr 17, 2019 19:09
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Motronic posted:I'm evaluating exactly what you posted - even more what you didn't post. That's the context. Perhaps I should have phrased my question as, "How do stock options work" rather than, "what do I do with them." I expect I need to know more about the different types of awards and how they work before I can go in to depth on how they fit in our portfolio. Basically my wife was given a summary piece of paper showing her raise, her bonus, and also that she is eligible for $X in stock options (without saying any other details and her boss not knowing how they work either). quote:But again, if they are options, there are other questions. Like the strike price vs. the current stock price to begin with. Options in a company with a stable stock price issued with a strike of current market value are basically useless. You can forget about them unless the stock price greatly increases (or if you're leaving the company), then you figure out how many are vested and what they are worth. So in talking to my wife I found out that at least part of the award is RSUs with a 3 year vesting, the other part being something I don't remember but we'll have to read more about it because it sounded weird. Something about dividends... We didn't have much time to dig deep in to the paperwork, but enough to know that the paperwork exists and has some terms in it that looked familiar. Currently I don't know any more detail then there are RSUs with a 3 year vesting schedule, and I think it's a cliff schedule.
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Apr 17, 2019 19:40
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DaveSauce posted:Currently I don't know any more detail then there are RSUs with a 3 year vesting schedule, and I think it's a cliff schedule. Accept the grant, set it to "sell to cover" taxes, set a calendar reminder for each time the grant vests ("cliff schedule" doesn't mean much - "vesting quarterly over 3 years with a 1 year cliff" does). Evaluate existing portfolio. Option 1: "This is a stock and an amount of it that I would have bought with my own money to invest" - Transfer the shares to your brokerage and hold them. Option 2: "This is not a stock or amount I would have purchased as an investment at this time, but it appears to be relatively low risk. I've earned so much this year that my marginal tax rate is high." - Hold for one year and one day, then sell. Option 3: Just sell them and put the cash in your brokerage account to apply to your existing investments and investment strategy.
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Apr 17, 2019 20:08
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Hoodwinker posted:It's the difference between having money an an IRA and not having money in an IRA - so whatever the tax differences are between a Roth IRA and a taxable brokerage account. Thanks for the explanation, both you and spwrozek. If I understand correctly, the difference is basically that a trad IRA can take As you may have guessed, I've only recently started dealing with IRAs. I have a healthy 401(k) account, but up until recently my money beyond that was going into expenses or sitting in an index fund.
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Apr 17, 2019 20:15
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TooMuchAbstraction posted:Thanks for the explanation, both you and spwrozek. If I understand correctly, the difference is basically that a trad IRA can take - Traditional IRA takes pre-tax funds, but you pay taxes on withdrawal. - Roth IRA takes post-tax funds, but you don't pay taxes on withdrawal. - If you make too much money to contribute to the Roth directly, you can put post-tax money in a Traditional IRA and convert it. That's all the backdoor is. The point about clearing out your Traditional IRAs of pre-tax money isn't strictly necessary to perform a backdoor, it just ensures that you don't pay taxes on things you may not wish to pay taxes on yet.
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Apr 17, 2019 20:19
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One more dumb question on this: if I want to do the backdoor shuffle, I should wait until I have the full 6k to put in, and do it all at once, right? I'm budgeting for it monthly, but assume I should have that money just chill in savings until I put it in the IRA, yeah?
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Apr 17, 2019 22:47
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DaveSauce posted:Perhaps I should have phrased my question as, "How do stock options work" rather than, "what do I do with them." I expect I need to know more about the different types of awards and how they work before I can go in to depth on how they fit in our portfolio. Basically my wife was given a summary piece of paper showing her raise, her bonus, and also that she is eligible for $X in stock options (without saying any other details and her boss not knowing how they work either). I'm late to the Option Chat, but I want to chime in because I disagree with some of Motronic's advice. Options aka Non-Qualified Stock Options aka NQSOs: This is almost certainly the kind of options your wife was offered as a non-exec employee. They give you the right to buy a predetermined number of shares of the stock at a predetermined price ("strike price") for a predetermined period of time. You already got the part about profiting from the difference between the stock's current price and your strike price. The strike price will almost certainly be the stock's market price on the day of the grant. You will also need to know the vesting schedule and the expiration date. The expiration is typically 10 years from the grand date, but it might be something else, and it's very important to know this date. Once vested, you can exercise at any time until the expiration date. NQSOs usually can't be sold or transferred, so your only choices are to exercise or let them expire. That combined with the inherent time value of the option means you generally want to exercise as close to the expiration date as possible. Be sure not to gently caress it up because options worth a boatload of money on expiration date are worth zilch the day after. There are hedging strategies you can pursue to guard against the stock crashing right as you're up against the hard deadline of the expiration date, but they're beyond the scope of this post. NQSOs get decent tax treatment in that you don't pay until you exercise, so there's no tax bill on the vesting. The difference between FMV and your strike price on the day of exercise is taxed as ordinary income. Restricted Stock Units aka RSUs: For these, the company just gives you some stock, and then you can do with it what you want. Here I agree with Motronic - you wan to sell as soon as these vest and move the money to your diversified investment portfolio instead. RSUs are taxed at vesting and the full FMV of the stock on the day of vest is taxed as ordinary income. Any gains or losses after vesting are capital gains, but since that doesn't apply to the value at vesting, that is one more reason to go ahead and sell. The company will also typically pay you a "dividend equivalent" before the RSUs vest. They will pay you the dividends on your unvested shares. Because you don't actually own the shares yet this is still ordinary income. Insider Trading: There are no exceptions to insider trading laws for any of these stock incentives. If she has material non-public information she can't trade on that, but not all "sensitive" non-public information is considered material for the purposes of insider trading. Big companies usually have procedures around this in place for employees, where they identify the employees who have MNPI and have defined go/no-go trading periods for them. I.e. if her company thinks she has MNPI, they should train her on the system they use to regulate when she can and can't trade. She can always call her ethics office and get the scoop from them.
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Apr 24, 2019 15:16
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Bushido Brown posted:One more dumb question on this: if I want to do the backdoor shuffle, I should wait until I have the full 6k to put in, and do it all at once, right? It's what I'd do. It simplifies the accounting at the expense of some potential gains.
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Apr 24, 2019 15:24
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I have a bit of an interesting question regarding my stock in a startup. I've been working here for almost 4 years (I was employee #2), and all my stock will be vested by September of this year (it is grants, not options, so I dont have to outlay any cash to 'own' it). I own a pretty significant chunk of the company at the moment. We are surprisingly successful so far, but likely will not be publicly traded for another 3-5 years, which is a long time for things to potentially go wrong in and also a long time to have debts accruing interest if I could sell some sooner. The company finished the Series A funding last fall and is raising Series B and we do have recurring revenue, so our chances of success are quite high in my opinion but I want to de-risk myself somewhat and I have a significant chunk of stock that I can sell privately and I'm trying to weigh my options for selling some of it off now to private parties vs waiting to IPO or if the company gets bought. For context we currently have a mortgage and are paying off student loans, but if we continue the way we are spending we can pay off the student loans in the next 18 months and the mortgage within another 6 years after that and we currently have an emergency fund of ~8 months living expenses + next years property taxes in savings. We are only contributing to retirement funds up to the matching percentage that my wife's company has until we finish the student loan payments (our mortgage is at 4%, the student loans are between 4 and 5%). Before I go talking to places that either invest in private stock, or facilitate the sale of private stocks (like SharesPost and EquityZen) and I am trying to figure out if its worth selling it at all now to pay off a chunk of debt to get to saving sooner, or if I should just continue to treat it like it's worthless and be surprised in a few years if it turns out to have value when the IPO happens. Does anyone have any experience with selling pre-IPO private stocks?
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May 5, 2019 07:28
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I wouldn't sell my stake in a startup that has been through multiple successful equity funding rounds in order to pay off 4-5% debt, but diversifying is a reasonable goal IMO if your net worth is like 95% shares in this startup based on the most recent valuation. I have no knowledge whatsoever of these equity sale platforms but I can only assume they charge a pretty hefty fee to broker the sale and it's mostly a bunch of vultures hoping to scoop shares up at a bargain
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May 5, 2019 15:02
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Most of them seem to charge between 3 and 8% of the transaction with the majority being under 5% it seems. The main reason I'm looking into it now is that based on the series A valuation if I managed to find someone to buy at 2/3 that share price I could sell half of my stake and go completely debt free after tax and then hold the rest until the IPO. I will have to find out though if im being naive about the potential money I can extract from it at the moment.
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May 5, 2019 16:39
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L0cke17 posted:I could sell half of my stake Before you spend any more time looking into whether you should, you should pull out that equity agreement to see if you even can.
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May 5, 2019 17:10
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Motronic posted:Before you spend any more time looking into whether you should, you should pull out that equity agreement to see if you even can. I can. The only restrictions I have at the moment is before I can sell I must tell the CEO and CFO in writing how many shares I plan to offer for sale and for what price I intend to sell them and then they have 1 week to notify the other shareholders all of whom can buy the shares at that price if they want, and if noone wants to buy them who's on that list I can then sell them for that price or higher, but if I intend to sell for less I have to start the process over.
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May 5, 2019 17:34
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