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tumblr hype man posted:You can also buy real estate via an IRA. Just can’t live in it or rent it to yourself, but if you wanna be a landlord it’s fine to own the property via IRA. I don’t know why you’d want to put it in an IRA considering the $500k exclusion on real estate gains.
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# ? Jun 25, 2021 01:29 |
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# ? May 30, 2024 18:18 |
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Somewhere some rich failson is buying a house from his grandparents for $6k with a Roth IRA contribution
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# ? Jun 25, 2021 03:54 |
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jokes posted:I don’t know why you’d want to put it in an IRA considering the $500k exclusion on real estate gains. That's only a primary residence and only if you're married though (if you're single its $250K). If you bought an 8 unit apartment building via IRA you can shield it from cap gains tax on the sale, although you'd still pay real estate excise taxes.
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# ? Jun 25, 2021 04:06 |
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They could also just like cap the max size an IRA is allowed to be and all additional money gets taxed, or just cap how rich you can be and still get to take advantage of tax-advantaged retirement accounts, because the whole purpose of the tax advantages was just to encourage people to save so they wouldn't become dependents of the state in their old age and if you have i dunno let's say, ten million bucks in your ira i think you're probably gonna be able to avoid eating cat food when you're 70 but hell that's absurd thinking that rich people don't need tax breaks lol
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# ? Jun 25, 2021 04:18 |
How do I get a house into my Roth IRA?
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# ? Jun 25, 2021 06:15 |
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literally this big posted:How do I get a house into my Roth IRA?
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# ? Jun 25, 2021 07:48 |
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literally this big posted:How do I get a house into my Roth IRA? big door
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# ? Jun 25, 2021 09:40 |
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pokeyman posted:You totally can, but keep in mind that it's exactly the same (modulo costs and taxes) as selling after capital appreciation. There's not usually a reason to prefer (reinvesting) dividends over an equivalently growing investment. You don't need dividends, growth of all kinds will do. I can see dividend funds (e.g. SCHD, VYM, whatever) being more attractive to retired people who need steady income and want to avoid some sequence-of-returns risk on their principal. For example, if they had bills due last March, it would've sucked to had to have sold stocks at the low to pay the bills. While many companies did cut or suspend dividends last year, dividend funds managed to soften that blow and a retiree would've been able to keep paying the bills. From SCHD's homepage: https://www.schwabassetmanagement.com/products/schd Distributions Ex-Date Record Date Payable Date Income Short Term Capital Gain Long Term Capital Gain Return of Capital Total Distribution 06/23/2021 06/24/2021 06/28/2021 0.5396 0.0000 0.0000 -- 0.539600000 03/24/2021 03/25/2021 03/29/2021 0.5026 0.0000 0.0000 -- 0.502600000 12/10/2020 12/11/2020 12/15/2020 0.6015 0.0000 0.0000 -- 0.601500000 09/23/2020 09/24/2020 09/28/2020 0.5430 0.0000 0.0000 -- 0.543000000 06/24/2020 06/25/2020 06/29/2020 0.4420 0.0000 0.0000 -- 0.442000000 03/25/2020 03/26/2020 03/30/2020 0.4419 0.0000 0.0000 -- 0.441900000 12/12/2019 12/13/2019 12/17/2019 0.4658 -- -- -- 0.465800000 Didn't drop that much in the march/july distributions, really!
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# ? Jun 25, 2021 12:30 |
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literally this big posted:How do I get a house into my Roth IRA? You roll over your current IRA into a self directed IRA that would allow real estate purchases. From there you find a suitable property and pay for it with that cash. If you don’t have enough cash you can get a loan. Although it won’t be a traditional home mortgage (conventional or a GSE backed loan). You’ll probably need closer to 50% down in order to get it through a commercial lending group because you can’t personally guarantee the debt. If you’ve done either of those things, congrats, you own real estate in your IRA.
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# ? Jun 25, 2021 12:58 |
CubicalSucrose posted:I did this recently since I had been looking at buying a consult with a real person to pressure-test some of my plans anyway. First call was like 40 minutes where they got an overview of my assets, liabilities, expenses, cash flow, goals, current investments and preferences. I came away feeling pretty good. Had my two meetings. It was the exact same as yours - the advisor/sales guy had a slide that broke out all the Morningstar squares and where my stocks live within them, along with percentages I hold in the ten major economic sectors. He made a lot of emphasis on how all the funds I hold might have a lot of the same stocks, and that I was pretty heavy into technology. The theme around that was "these fund managers don't work with you - but we do!", spiced in with "you say that you want to diversify using index funds and ETFs, but it's actually not diversifying at all!!!" Here's where I'm at, which was the first time I've actually seen all this laid out. And here's what they want to do via Smart Weighting, whatever the heck that is. Made a big deal that I wasn't exposed enough to alternative investments. I've held off on real estate/REITs mostly because sticking to the plan has meant just that, keeping it at the funds I've got and not futzing. Here's the real kicker: they ran data that says if you were Smart Weighted through the tech bubble (which they put as 1999-2004, completely setting aside the post-9/11 economic weirdness) and the 2008 financial crisis, you would have outperformed the S&P 500 by 11% and 14% respectively. This smacks to me of trying to impart FOMO. As to costs, he did mention the 0.89% fee for AUM. He pointed out tax ratios and how they could totally save me on those, etc. I can probably dive really more into it if people want to. They want you to link accounts for them to manage, I might just link my savings account, collect my $200, and move on. I'm about 20% willing to let them manage maybe $20k-$30k for the four free months to see what happens, but it is very much a Sales Pitch. They do not want you to be a Boglehead, they want your money for their Smart Weighting roboadvisor. Glad I did it during work hours and didn't sacrifice my own free time to do it. Happy to answer questions if people wanna go into the $200 deal informed of what they try to go under. Also the advisor guy looks like Kenneth from 30 Rock, which I can't get over. Pollyanna posted:I would be so much worse off if I hadn’t joined SA. Big same. I was feeling a bit put off by the financial advisor my parents recommended after he got my grandparents out of a predatorily sold annuity. He had me in a sorta scattershot setup of socially-responsible mutual funds and some other single stocks. I forget the exact details now that Google Finance sucks, which is where my records were. Then I found this thread, saw that expense ratios were a thing, and realized how much he was getting off of me. Read the pamphlet version of Four Pillars, went Boglehead, and have done well enough solo. I've saved a lot and earned a lot thanks to this thread, let alone all the knowledge and stuff that came from goon communication. MJP fucked around with this message at 15:00 on Jun 25, 2021 |
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# ? Jun 25, 2021 14:54 |
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MJP posted:
This is Personal Capital from Empower, right? That company was founded in 2009. Pretty easy to predict the past. What kills me is that they will tell you this with a straight face all while saying "past performance does not indicate future results".
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# ? Jun 25, 2021 16:28 |
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tumblr hype man posted:If you’ve done either of those things, congrats, you own real estate in your IRA. Gazpacho fucked around with this message at 16:40 on Jun 25, 2021 |
# ? Jun 25, 2021 16:35 |
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Tldr, just buy REITs
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# ? Jun 25, 2021 17:40 |
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This question is premature, but I'm wondering now anyway. In 2022, I will be making 130k salary + bonuses, and I dont know what to do about my Roth IRA. The amount of the bonus is indeterminate until it's actually awarded, and even on top of that, there's figuring out my MAGI to determine if I'm somewhere in the income limit phase down. What is the smart and lazy way of contributing to an IRA - backdoor or not - when one's income is right around the limit? Is it just waiting until the following year (for pay stub sums and/or tax prep) and then contributing for the prior year?
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# ? Jun 26, 2021 14:14 |
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Happiness Commando posted:This question is premature, but I'm wondering now anyway. In 2022, I will be making 130k salary + bonuses, and I dont know what to do about my Roth IRA. The amount of the bonus is indeterminate until it's actually awarded, and even on top of that, there's figuring out my MAGI to determine if I'm somewhere in the income limit phase down. Just backdoor regardless if you’re close to the phase out, there’s no downside other than a little extra time and tax hassle and you won’t risk overcontributing.
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# ? Jun 26, 2021 14:25 |
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I just wait until Jan-Feb 2023 when i know my 2022 MAGI. Edit: I forget about backdoor Roth contributions because I have this comically large rollover IRA. The above post is the way to go. Ulf fucked around with this message at 15:07 on Jun 26, 2021 |
# ? Jun 26, 2021 15:04 |
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Eldred posted:Just backdoor regardless if you’re close to the phase out, there’s no downside other than a little extra time and tax hassle and you won’t risk overcontributing. This is the way. Ideally you start doing this early, before you get to the limit. Otherwise you have to figure out how to recharacterize contributions/etc. Not a huge deal either way, just one of those things you do once and never again.
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# ? Jun 26, 2021 15:23 |
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Dumb question. If I choose to automatically reinvest dividends for ETFs in my taxable account, will it avoid creating a taxable event on them? Which is the better option?
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# ? Jun 26, 2021 22:55 |
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Valicious posted:Dumb question. If I choose to automatically reinvest dividends for ETFs in my taxable account, will it avoid creating a taxable event on them? Which is the better option? In a taxable account, the issuing of dividends is the taxable event. It makes no difference what you do with it after that, whether it is reinvested or taken as cash. For long term buy and hold it's usually best to reinvest them.
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# ? Jun 26, 2021 23:02 |
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Valicious posted:Dumb question. If I choose to automatically reinvest dividends for ETFs in my taxable account, will it avoid creating a taxable event on them? Which is the better option? Auto reinvest has annoying wash sale implications for tax loss harvesting if you plan to do that, so I turned it off for that reason, but it seems similarly annoying to have to manually reinvest.
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# ? Jun 26, 2021 23:28 |
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Valicious posted:Dumb question. If I choose to automatically reinvest dividends for ETFs in my taxable account, will it avoid creating a taxable event on them? Which is the better option? Yeah you pay taxes on that. But if it helps, reinvesting dividends (slightly) increases your average cost basis so that’s cool. If the stock is going up at least.
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# ? Jun 26, 2021 23:45 |
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Equally dumb question: If I choose to automatically reinvest dividends for ETFs in my nontaxable account, is it economically equivalent to the ETF performing a buyback (or the individual ETF components performing buybacks)?
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# ? Jun 27, 2021 12:07 |
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nightbae smokewheat posted:Equally dumb question: If I choose to automatically reinvest dividends for ETFs in my nontaxable account, is it economically equivalent to the ETF performing a buyback (or the individual ETF components performing buybacks)? The only practical difference between a buyback and a dividend is in how taxation works, so yes in that example they're economically equivalent. This is not a dumb question as it seems like very few people acknowledge this fact.
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# ? Jun 27, 2021 14:02 |
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General advice question: I make 158k USD base salary plus quarterly bonuses (usually no more than a couple k). I live in NJ which is a high tax state. I am currently contributing 12% to my company 401k with a 4% match. This roughly works out to the $19.5k limit for individuals. I have 90k in my money market account which I consider the “I lost my job and need to live on ramen” fund. Depending on the month I can save maybe $1000-1500. Recently I’ve been tapering off my money market saving and instead putting most of that into a taxable E*TRADE account buying shares of mostly VOO and SPY to track the s&p 500. My company’s 401k advisor was saying I should consider splitting some of the 12% into a Roth IRA which seems reasonable but my wife also makes 100k+ so I think it makes more sense for the 401k given that it will reduce my taxable income for the year. As an example last year we would have owed 7k in taxes but I bought an electric car for the 7500 tax credit which made it a wash. I’ve since updated my dependents so hopefully I shouldn’t get as big of a tax hit next year. My basic question is, am I doing anything incredibly stupid? Does the taxable account with the s&p500 etfs make sense in my case? Are there any other avenues I should be exploring?
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# ? Jun 27, 2021 17:39 |
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nightbae smokewheat posted:Equally dumb question: If I choose to automatically reinvest dividends for ETFs in my nontaxable account, is it economically equivalent to the ETF performing a buyback (or the individual ETF components performing buybacks)? Yeah, most people prefer buybacks over dividends because dividends are considered forced taxable events but otherwise they’re the same. Company cash going directly into shareholders’ hands, but stock buybacks make that money be in the form of share value instead of cash. For taxable accounts: on a deeper level rich people prefer buybacks because they like to pick and choose when to pay taxes to minimize their tax bill, whereas dividends don’t give you that flexibility. But for people who like and want cash, dividends are preferable. Rich people do not like cash. In an IRA they’re functionally identical if you reinvest dividends.
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# ? Jun 27, 2021 17:46 |
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SnatchRabbit posted:Are there any other avenues I should be exploring? you probably want this flowchart: https://www.reddit.com/r/financialindependence/comments/ecn2hk/fire_flow_chart_version_42/
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# ? Jun 27, 2021 17:51 |
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pmchem posted:you probably want this flowchart: Thanks, I to the end of that and I think I’m mostly doing it by the book. I don’t have any student or cc debt, and I have a 529 for my son. It sounds like I don’t have too many options besides the the 401k and a back door Roth? I’m not quite certain what that means but it I’m pretty sure that my wife and I make too much money for ira contributions to make sense. I guess the only other option is to throw more money at the principle on my mortgage every month.
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# ? Jun 27, 2021 18:02 |
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Eyes Only posted:The only practical difference between a buyback and a dividend is in how taxation works, so yes in that example they're economically equivalent. jokes posted:Yeah, most people prefer buybacks over dividends because dividends are considered forced taxable events but otherwise they’re the same. Company cash going directly into shareholders’ hands, but stock buybacks make that money be in the form of share value instead of cash.
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# ? Jun 27, 2021 18:26 |
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SnatchRabbit posted:I am currently contributing 12% to my company 401k with a 4% match. This roughly works out to the $19.5k limit for individuals. Your wording is a little ambiguous. To be clear, the company match doesn't count toward the 19.5k limit.
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# ? Jun 27, 2021 18:32 |
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OGDanDogg posted:Your wording is a little ambiguous. To be clear, the company match doesn't count toward the 19.5k limit.
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# ? Jun 27, 2021 18:35 |
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OGDanDogg posted:Your wording is a little ambiguous. To be clear, the company match doesn't count toward the 19.5k limit. Right sorry. By so my math 12% of 158k is around 19k. Which is pretty much where I want to be yeah? The 4% match is just a bonus?
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# ? Jun 27, 2021 18:36 |
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SnatchRabbit posted:Right sorry. By so my math 12% of 158k is around 19k. Which is pretty much where I want to be yeah? The 4% match is just a bonus?
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# ? Jun 27, 2021 18:47 |
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SnatchRabbit posted:General advice question: I make 158k USD base salary plus quarterly bonuses (usually no more than a couple k). I live in NJ which is a high tax state. I am currently contributing 12% to my company 401k with a 4% match. This roughly works out to the $19.5k limit for individuals. I have 90k in my money market account which I consider the “I lost my job and need to live on ramen” fund. Depending on the month I can save maybe $1000-1500. Recently I’ve been tapering off my money market saving and instead putting most of that into a taxable E*TRADE account buying shares of mostly VOO and SPY to track the s&p 500. My company’s 401k advisor was saying I should consider splitting some of the 12% into a Roth IRA which seems reasonable but my wife also makes 100k+ so I think it makes more sense for the 401k given that it will reduce my taxable income for the year. As an example last year we would have owed 7k in taxes but I bought an electric car for the 7500 tax credit which made it a wash. I’ve since updated my dependents so hopefully I shouldn’t get as big of a tax hit next year. My basic question is, am I doing anything incredibly stupid? Does the taxable account with the s&p500 etfs make sense in my case? Are there any other avenues I should be exploring? So, first of all, it makes sense to move the monthly emergency-fund contributions to other savings, now that you're well established there. It'd be a good idea to make sure it's sitting somewhere FDIC insured - if it's a money market account through a bank, it probably is, and if it's a money market account through a mutual fund company like Vanguard or Fidelity, it probably isn't. Either way, though, double-check that. Generally speaking, don't go for taxable accounts if you've got a tax-advantaged place to stash the same money. If the money you're putting into Etrade is earmarked for retirement, and you've already maxed out your 401k, then those taxable contributions should definitely go into a Roth IRA instead. SnatchRabbit posted:Thanks, I to the end of that and I think I’m mostly doing it by the book. I don’t have any student or cc debt, and I have a 529 for my son. It sounds like I don’t have too many options besides the the 401k and a back door Roth? I’m not quite certain what that means but it I’m pretty sure that my wife and I make too much money for ira contributions to make sense. I guess the only other option is to throw more money at the principle on my mortgage every month. IRA contributions make sense at any income level where you can spare the cash in the first place. The backdoor Roth is a simple loophole, which was probably unintended in the legislation, but is perfectly legal. You can only directly contribute to a Roth IRA if your MAGI is under $125k as a single filer or $198k MFJ (there are some rapid phase-outs slightly over these numbers, but we want to max that sucker). You can contribute to a traditional IRA with any income, but it's only tax deductible if your MAGI is under $66k single or $105k married filing jointly. And, you can convert from a traditional to a Roth IRA at any time, as long as you pay tax on any money that hasn't already been taxed. So, to do the backdoor strategy, you put money into a traditional IRA - no MAGI limit on that contribution. Then, you immediately convert it. Same deal, no limit to worry about. Since you're over the limit, you never took the tax deduction; the money's already been taxed, just like it would be with an ordinary Roth IRA contribution. If you had any gains sitting around, you'd have to pay taxes on them, but since you converted immediately you don't have to worry about that either. The end result is that you have a perfectly legal, maxed-out Roth IRA contribution regardless of your income. If you have any traditional IRA balances kicking around, this gets a whole lot more difficult, because you can't pick and choose which contributions get converted for tax purposes. But, if you're trad-IRA-free, or if you can just throw money at converting the whole thing before you start the backdoor strategy, then it's a very nice way to carve out some additional tax-advantaged space. e: dexter6 posted:Correct. There’s probably no harm in going to 13% because your company should stop contributions once you hit the max, just to be safe. Careful with this, though - at some places this can mess with your match. Some companies will do an end-of-year true-up (if you're still employed there), but some will just say "oh, you didn't make your last few contributions for the year (after we cut you off), no match." The best approach at your income level is usually to just calculate [current year 401k limit] / [number of paychecks] and then plug that into your company's 401k settings as the specific dollar amount. Space Gopher fucked around with this message at 19:06 on Jun 27, 2021 |
# ? Jun 27, 2021 18:52 |
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there are 401(k) programs that do not allow you to specify a dollar amount (source, mine) but if you are able to it is definitely the best way to do it
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# ? Jun 27, 2021 20:00 |
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KYOON GRIFFEY JR posted:there are 401(k) programs that do not allow you to specify a dollar amount (source, mine) but if you are able to it is definitely the best way to do it Yea every 401k I've ever had has been strictly percentage-based, in whole integers. I just napkin math whatever percent puts me just over the cap since payroll will stop me from going over. If I get too far out of whack too early I can readjust.
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# ? Jun 27, 2021 20:08 |
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SnatchRabbit posted:Thanks, I to the end of that and I think I’m mostly doing it by the book. I don’t have any student or cc debt, and I have a 529 for my son. It sounds like I don’t have too many options besides the the 401k and a back door Roth? I’m not quite certain what that means but it I’m pretty sure that my wife and I make too much money for ira contributions to make sense. I guess the only other option is to throw more money at the principle on my mortgage every month. Do the hot new thing. Buy I Bonds. You can buy up to $10-15k a person per year.
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# ? Jun 27, 2021 21:06 |
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Duckman2008 posted:Do the hot new thing. Buy I Bonds. You can buy up to $10-15k a person per year. before that poster buys I Bonds they should really be contributing to a backdoor Roth IRA for both themselves and their spouse
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# ? Jun 27, 2021 22:04 |
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Can someone give me a summary of the logic behind I Bonds? Is it just that interest rates are so low on savings accounts right now that I can be guaranteed the I Bond rate for up to $10,000 and after a year it's as liquid as savings would be? Is there something I'm missing?
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# ? Jun 28, 2021 13:59 |
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I think it's because they're legally a very different thing than standard government bonds. They're a product with no secondary market (they can't be traded between people, only purchased and redeemed directly from the government), the amount purchasable per year is limited, and they're purportedly designed to pay out interest that will beat inflation with a premium on top. Who knows if that will actually hold true as inflation rises, but they're paying far better than anything FDIC-insured at the moment. I only recently learned about them and I view them as an extended emergency fund, one that is protected against inflation unlike FDIC-insured cash. I keep a larger emergency fund than most people so inflation nibbling away at it is a definite concern of mine, and as I can shift into I-bonds over the next few years that will let me reduce my cash holdings.
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# ? Jun 28, 2021 14:12 |
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# ? May 30, 2024 18:18 |
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That's not a complete understanding of I-Bonds. I-Bonds are designed to match inflation, not beat it, so they're a very safe store of value. Non-fixed interest rates are set based on changes in CPI-U. These interest rates are set and compounded every six months. If we see late 70s/early 80s inflation rates again, I-Bonds will pay 15%. There's no question about whether I-Bond rates are adjusted to match projected inflation, the question is mostly whether CPI-U is accurate. I don't advocate moving significant portions of a liquid emergency fund to I-Bonds, which seems to be a big fad. The point of an E-fund is "I need cash now" and liquidating an I-Bond is more involved than doing a bank transfer from your HYSA to a checking account.
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# ? Jun 28, 2021 14:36 |