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Leperflesh posted:e. Also, bonds pay coupons and you should try to avoid holding bonds or bond funds in your taxable accounts unless they're the special, tax-free type (e.g. tax-free treasuries and, depending on your state, maybe tax-free munis). Also you should not shift from stocks to bonds randomly, your allocation to stocks vs. bonds should be set based on your long-term investing horizon and chosen asset allocation/risk profile. Are you saying I shouldn’t hold VBTLX as part of my three fund portfolio in my taxable accounts? Cuz that would be news to me.
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May 17, 2022 01:14
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hobbez posted:Are you saying I shouldn’t hold VBTLX as part of my three fund portfolio in my taxable accounts? Depends on your income level, asset allocation and available tax advantaged space I imagine. Have you considered the tax treatment of your portfolio? Dividends on VBTLX are not qualified dividends which means they are taxed at your income tax level, not long term capital gains.
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May 17, 2022 01:47
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Eyes Only posted:This is not usually an issue for vanguard because they have a special patented method to avoid issuing capital gains to mutual fund holders, but their method has limits and in certain scenarios they can be forced to issue cap gains. Probably the most likely one (but still pretty unlikely) is a mass exodus of investors from VTSAX causing them to have to sell a lot of the underlying shares. So like if vitsx lowered its minimum and everyone chased that 0.01 ER difference like happened last year with the target date funds? I guess that could happen, although maybe vanguard learned their lesson? acidx posted:A .01% difference in expense ratios. The mutual fund has a convenience fee. Hrm.
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May 17, 2022 01:55
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CubicalSucrose posted:Check out this bid-ask-spread payer. (Sarcasm of course, I very marginally regret not buying VTI in my Vanguard account). There are some benefits to VTSAX over VTI, like the aforementioned automation and instant buy/sell/exchange at the closing price, but if you really want to switch you can do it in Vanguard with a single button and without a taxable event. Just be aware that you can't switch back.
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May 17, 2022 03:04
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Residency Evil posted:So like if vitsx lowered its minimum and everyone chased that 0.01 ER difference like happened last year with the target date funds? I guess that could happen, although maybe vanguard learned their lesson? According to https://www.whitecoatinvestor.com/vanguard-target-retirement-distribution-disaster/, the cap gains debacle is not likely to happen to mutual funds that have ETF share classes. So VTSAX in taxable should still be ok.
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May 17, 2022 12:55
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Staying on TLH - I had some funbux in FREY, PAYO, RIVN, and SOFI. All of which dropped and taught me a valuable lesson that I'm totally not into short-term picking and fun stocks. Should I TLH those into something else (VBTLX since that's where my bonds are in post-tax)?
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May 17, 2022 13:49
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If this thread can't agree on the differences in benefits between VTI and VTSAX, how the hell is the average person supposed to know what the gently caress the differences are?
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May 17, 2022 17:47
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I linked to a resource, folks should read it: https://www.investopedia.com/articles/exchangetradedfunds/08/etf-mutual-fund-difference.asp#toc-etf-creation-and-redemption As a general principle, if you have an identical ETF to a mutual fund, you're safer holding the ETF in your taxable brokerage account, because you are less likely to be exposed to taxable events due to the fund managers' needs to buy or sell securities within the fund. To summarize the key bits from that article: Every fund has to buy securities and that's not a taxable event, but most funds also need to sell them from time to time. On any day in which net outflows of cash from the fund (due to fund share owners selling) exceeds the fund's cash balance, the fund manager has to sell some shares. Any time an index fund has to match a change in the underlying index (a company drops off the S&P500 and is replaced, for example), the fund has to sell any remaining shares of that stock. As compared to the total size of the fund, these sells may be very very tiny on a per-share basis and result in only a tiny amount of tax for fund shareholders. Over the course of a year it might only be a few bucks. But that's the normal course of business, and a big market event could prompt a much larger surprise taxable event. Basically there's little reason to expose yourself to that risk if you have an ETF with the same or lower expense ratio available instead. Per the article above, for technical reasons, these sales of securities within the fund are generally not taxable for ETF holders. So as a rule of thumb, own an ETF in your brokerage account if you have that option. If you don't, or if it'd be inconvenient or expensive to convert, it's not a really big deal. Leperflesh fucked around with this message at 18:31 on May 17, 2022 |
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May 17, 2022 18:29
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hobbez posted:Are you saying I shouldn’t hold VBTLX as part of my three fund portfolio in my taxable accounts? If you have both taxable and tax-advantaged accounts, it's more tax efficient to spread your allocation such that your bonds are in your tax-advantaged accounts. That's because bonds pay out coupons (think of it like dividends) and that's taxable income, even if the fund manager re-invests. You pay taxes on that at your top marginal income tax rate because it is considered income, not capital gains. As with the previous discussion, this could be a matter of just a few dollars of tax annually, depending on the size of your holdings and also depending on what bond yields are this year, and what the average maturity of bonds held by the fund are, etc. etc. For example, here's the recent distributions history for VBTLX: pre:Dividend History Dividend History Additional Information Date Per Share Amount Reinvestment Price 4/29/22 $0.018529 $10.04 3/31/22 $0.018688 $10.46 2/28/22 $0.016915 $10.79 1/31/22 $0.017812 $10.93 Figure it's around 20 cents or so per share per year? If you only hold a hundred shares, it's twenty bucks, who cares. If you hold two thousand shares, that's $400 of income, maybe a hundred or so bucks in income tax? Maybe you still don't care? But that's right now. This number could climb if yields of bonds in the fund climb. Leperflesh fucked around with this message at 18:43 on May 17, 2022 |
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May 17, 2022 18:39
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I’m selling both my primary and rental property and moving to a new city. We’re going to be renting for a year then getting back into a house; in the meantime we’re going to have significant cash assets sitting around that will ultimately go into a down payment. My main concern is inflation risk for obvious reasons, but I don’t know what the best vehicle would be for this timeframe. Vanguard has VIPSX but I expect that any bond fund is going to have sensitivity to the upcoming interest rate increases. My impression was that TIPS were treasury auction only so if that’s inaccurate or if it’s still a good Avenue I can look into it.
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May 18, 2022 15:38
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Velius posted:I’m selling both my primary and rental property and moving to a new city. We’re going to be renting for a year then getting back into a house; in the meantime we’re going to have significant cash assets sitting around that will ultimately go into a down payment. My main concern is inflation risk for obvious reasons, but I don’t know what the best vehicle would be for this timeframe. Vanguard has VIPSX but I expect that any bond fund is going to have sensitivity to the upcoming interest rate increases. My impression was that TIPS were treasury auction only so if that’s inaccurate or if it’s still a good Avenue I can look into it. If you’re gonna need it in under 3-5 years any market funds are too high risk. You can put $10k per person in I Bonds (technically $15k if you do an extra step with your taxes?), and it’s only locked for a year, so that’s probably not a large part of your cash if you just sold your houses, but still something. I would def do I Bonds for this year and then Jan 1 of 2023. Sucks, but really the only thing to do is mostly keep it in a HYSA , which most are at 0.6% (although probably going slightly up soon). That’s the point of liquid versus not liquid.
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May 18, 2022 15:41
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Velius posted:I’m selling both my primary and rental property and moving to a new city. We’re going to be renting for a year then getting back into a house; in the meantime we’re going to have significant cash assets sitting around that will ultimately go into a down payment. My main concern is inflation risk for obvious reasons, but I don’t know what the best vehicle would be for this timeframe. Vanguard has VIPSX but I expect that any bond fund is going to have sensitivity to the upcoming interest rate increases. My impression was that TIPS were treasury auction only so if that’s inaccurate or if it’s still a good Avenue I can look into it. At the very least put it into a Marcus or Synchrony HYS account. They seem to lead with interest rate increases. I believe you can put an additional 10k/person into I bonds if you go to the trouble of setting up an LLC. T-bill are a great tax advantaged option that paying well compared to CDs and HYS. I buy mine through Fidelity and set them to autoroll (mine are 3 month t-bills): https://www.treasurydirect.gov/instit/annceresult/annceresult.htm I don't know enough about TIPs to invest in them.
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May 18, 2022 16:18
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Velius posted:I’m selling both my primary and rental property and moving to a new city. We’re going to be renting for a year then getting back into a house; in the meantime we’re going to have significant cash assets sitting around that will ultimately go into a down payment. My main concern is inflation risk for obvious reasons, but I don’t know what the best vehicle would be for this timeframe. Vanguard has VIPSX but I expect that any bond fund is going to have sensitivity to the upcoming interest rate increases. My impression was that TIPS were treasury auction only so if that’s inaccurate or if it’s still a good Avenue I can look into it. I think there’s serious tax implications to what you are planning that make it so you need to put the money into a house within a year, or pay tax on the gains. I’m not that kind of accountant though, you should consult a cpa or an ea or someone.
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May 18, 2022 16:19
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MJP posted:Staying on TLH - I had some funbux in FREY, PAYO, RIVN, and SOFI. All of which dropped and taught me a valuable lesson that I'm totally not into short-term picking and fun stocks. Should I TLH those into something else (VBTLX since that's where my bonds are in post-tax)? Bumping this, what should I do with my dumb stock picks once I sell them at a loss? (All short term cap gains, and fortunately I only lost what I was going in willing to lose)
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May 18, 2022 16:35
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MJP posted:Bumping this, what should I do with my dumb stock picks once I sell them at a loss? (All short term cap gains, and fortunately I only lost what I was going in willing to lose) What's your target asset allocation and what's your current asset allocation? Make them match.
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May 18, 2022 16:53
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pseudanonymous posted:I think there’s serious tax implications to what you are planning that make it so you need to put the money into a house within a year, or pay tax on the gains. I’m not that kind of accountant though, you should consult a cpa or an ea or someone. There is a capital gains tax on the sale of primary residence (the difference between what you paid and what you sold it for), but you get to raise your cost basis by any (documented!) improvements and repairs you made, and, the first $250k of profit is excluded. https://www.irs.gov/taxtopics/tc701 There's no exclusion for your not-primary-residence, but there is a 1031 exchange that could let you avoid tax, and you can do that for both primary and investment properties, with some restrictions, basically bridging the buy/sell gap if it's less than a year. https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips Ask your tax professional, exclusions, state taxes, etc. may apply. Anyway, I agree with: $10k per person in I-bonds to protect from inflation, then the rest in either high-yield savings (maximum liquidity), or a CD ladder (tiny amount more interest than the HYS, maybe?) or at the most, US government treasuries (pays slightly better than those other two, but carries some volatility risk). None of those last three actually keeps up with current inflation, but anything more risky carries increasingly serious risk of having to sell at a significant loss when it's time to buy a house. Leperflesh fucked around with this message at 17:05 on May 18, 2022 |
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May 18, 2022 17:00
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MJP posted:Bumping this, what should I do with my dumb stock picks once I sell them at a loss? (All short term cap gains, and fortunately I only lost what I was going in willing to lose) I think you're asking several questions here, but it comes down to: CubicalSucrose posted:What's your target asset allocation and what's your current asset allocation? Make them match. Specifically, VBTLX is usually less tax efficient than a total market stock fund, so it should probably go in to some tax free/tax deferred space.
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May 18, 2022 17:10
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This is my first time reading about T-bills, and I have a question: Do they have interest rate risk if you stay off the secondary market? From what I’m reading they mature into a set value at a set time, which sounds to me like you could only lose (notional) money if you resell them before maturity at a price less than you bought them at. Do I have that right?
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May 18, 2022 17:25
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Thanks for the information, guys. I’m talking with my tax preparer this week about everything capital gains-related, but I appreciate the reminder of its importance.
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May 18, 2022 17:52
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raminasi posted:This is my first time reading about T-bills, and I have a question: Do they have interest rate risk if you stay off the secondary market? From what I’m reading they mature into a set value at a set time, which sounds to me like you could only lose (notional) money if you resell them before maturity at a price less than you bought them at. Do I have that right? If you know exactly when you are going to need the money, and you buy bonds of that duration, then no type of bond has interest rate risk. The catch here is that short duration bonds typically have pitiful yields (because they are always in high demand for precisely this purpose) and realistically it is pretty rare to truly know exactly when you need the money.
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May 18, 2022 18:02
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Eyes Only posted:If you know exactly when you are going to need the money, and you buy bonds of that duration, then no type of bond has interest rate risk. Sure, but a bond can never have negative (nominal) yield, so unless the issuer goes insolvent, it's impossible to literally lose money (outside of not beating inflation, anyways), right?
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May 18, 2022 19:48
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KillHour posted:Sure, but a bond can never have negative (nominal) yield, so unless the issuer goes insolvent, it's impossible to literally lose money (outside of not beating inflation, anyways), right? Yes, if the bond pays out, and you hold it to maturity, you get more numbers of dollars out than you put in. Currently inflation eats all of those dollars and then some on most (all?) investment-grade bonds and definitely all US government bonds other than i-bonds, but that hasn't always been the case historically. Generally when this thread talks about one's asset allocation in bonds, it is referring to a broad bond index fund, not buying actual bonds directly (lately the exception has been i-bonds). Bond indexes are subject to both market and interest rate risks. An index fund like BND holds high-rated bonds in all three of US treasuries, municipal bonds, and corporate bonds, earning much better returns than treasuries alone, but at significantly higher risk.
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May 18, 2022 20:07
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At what point should I start thinking about tax loss harvesting in my taxable brokerage account? Looking at my taxable account on Vanguard, I've taken about ~$1800 in short term capital loss on VTSAX shares . Should I be selling some off and buying VFIAX (which I think is the only other fund I have that is close in purpose but wouldn't trigger a wash sale)? I know very little about the tax implications because I've always sort of planned to only contribute to my taxable brokerage for the foreseeable future, it was always intended as just another place to stick whatever money I could for retirement since I have limited tax-advantaged space (basically just IRA and HSA).
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May 18, 2022 22:04
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Tax loss harvesting is at its most valuable when you have taxable capital gains you can offset with realized losses. If you don't, you can still tax loss harvest, but what you're doing is assigning yourself a loss that you can carry forward into future years, within certain restrictions, to offset future gains that you anticipate having. Exactly how and when it's best to realize a capital loss can be complicated, because other details of your personal and family financial/tax situation matter. IMO the best thing to do is consult a good tax attorney/accountant for advise that takes your exact situation into account. All that said, an $1800 loss is pretty tiny in the grand scheme of things and it may not be worth the added cost of a professional just to be able to reduce your total tax bill by some percentage of that, this year or in a future year.
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May 18, 2022 22:12
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If there are no gains, up to $3k per year can offset ordinary income, which is likely at a higher marginal tax rate, so you're looking at, I dunno, $400-$500 of tax savings potentially. For a handful of clicks and maybe an extra little bit of future paperwork? Up to you if that's worth it.
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May 18, 2022 22:15
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Leperflesh posted:Tax loss harvesting is at its most valuable when you have taxable capital gains you can offset with realized losses. Cool, that's sort of what I assumed. I do have some realized capital gains but it's almost all from dividends, and doesn't add up to much in any given year. I just wasn't sure at what point I needed to start caring about TLH, but since I'm not actually selling shares anytime soon, it sounds like I probably don't need to think much about it for a while. I only have about $30k in my taxable account and it's basically all in VTSAX or VFIAX so all my gains are unrealized or dividends.
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May 18, 2022 22:17
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CubicalSucrose posted:If there are no gains, up to $3k per year can offset ordinary income, which is likely at a higher marginal tax rate, so you're looking at, I dunno, $400-$500 of tax savings potentially. For a handful of clicks and maybe an extra little bit of future paperwork? Up to you if that's worth it. Ah yeah there's also this little ordinary income offset. If you're already using a tax preparer, might be worth calling them up to see if you can do this.
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May 18, 2022 22:20
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Leperflesh posted:Ah yeah there's also this little ordinary income offset. If you're already using a tax preparer, might be worth calling them up to see if you can do this. You can, it's all part of the worksheet, and it's pretty awesome. The 2008-2009 financial crisis gave me a decade where I had an annual $3K deduction I could take on my taxes. I got so used to it that I couldn't believe it when I used it up. A small silver lining to having taken devastating losses during the GFC.
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May 18, 2022 22:38
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Offsetting ordinary income is pretty useful if you make over $43k/$86k single/jointly because you sell now and write off 24% in taxes and when you sell in the future you'll pay 15% assuming ltcg. It just gets better the higher your tax bracket is, so I try to write off as much as possible. Since you can only write off $3k per year against income or can get weird with high losses and not much capital gains in the harvesting year. $100k loss harvest could cap you on losses for the next 30some years.
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May 18, 2022 22:45
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80k posted:You can, it's all part of the worksheet, and it's pretty awesome. The 2008-2009 financial crisis gave me a decade where I had an annual $3K deduction I could take on my taxes. I got so used to it that I couldn't believe it when I used it up. A small silver lining to having taken devastating losses during the GFC. Just in time for the next crisis! I could have a few years of deductions just from my bonds right now.
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May 18, 2022 22:53
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If I’m contributing 7% of my salary to a pension, should I target putting 8% into a 401k or 15%?
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May 19, 2022 18:18
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Woodchip posted:If I’m contributing 7% of my salary to a pension, should I target putting 8% into a 401k or 15%? I'd target 93% if it's possible. If not, then the highest number you can.
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May 19, 2022 18:38
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Woodchip posted:If I’m contributing 7% of my salary to a pension, should I target putting 8% into a 401k or 15%? There's a "rule of thumb" that you should save 15% of your income. This is a very, very loose idea that is an OK place to start. But what you really need to do is project out to your retirement at your current savings rate, expected future increases in income, taking account of inflation, average market returns, etc. and see if you're on target or not. If you're not on target, increase your savings rate if you can. There are tools that can help with doing this sort of projection. Leaving that aside: if your employer is offering a match in your 401(k), get that match for sure, it's the best "return" on savings you could hope for. Secondly, any tax-advantaged space you're not taking advantage of now, you might regret later if you have to increase your savings rate beyond your tax advantaged options, if that makes any sense?
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May 19, 2022 20:02
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Anyone who choses to do a backdoor Roth contribution, make sure that your tax preparer correctly enters the 1099-R for a conversion. It will show the full amount of the conversion as taxable (because the IRA custodian lacks the information to determine otherwise) and I had two preparers from the same firm tell me that I owed tax on the full amount notwithstanding the calculation on Form 8606. Their system required them to enter further details to indicate that it was a conversion.
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May 20, 2022 16:46
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nb a 93% 401(k) deferral is hyperbole and not something that anyone should literally do. Outside of very specific circumstances it would leave you broke and possibly interrupt your benefits, or put you in a tax bind. Deferral percentages are normally quoted relative to your gross pay, not relative to your limit.
Gazpacho fucked around with this message at 17:46 on May 20, 2022 |
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May 20, 2022 17:42
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Gazpacho posted:nb a 93% 401(k) deferral is hyperbole and not something that anyone should literally do. Outside of very specific circumstances it would leave you broke and possibly interrupt your benefits, or put you in a tax bind. Deferral percentages are normally quoted relative to your gross pay, not relative to your limit. That's not how it works out in practice. I'm on team "max deferral" - my 401(k) for 2022 has long since been funded. What happens is that healthcare and other deductions (including HSA) come out first. If what is left over is less than the percentage you've set welp - that's how it is. The rest goes into your 401(k) and you get a $0 paycheck. It in no way leaves me broke, nor would it leave the bulk of other people in this thread broke because by definition we're not living paycheck to paycheck.
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May 20, 2022 18:09
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I do something similar although I am not maxed yet, pretty close though. You just have to make sure your employer trues up (I get one match a year so fine for me) and that you have a budget.
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May 20, 2022 18:20
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If you are able to defer your entire remaining income then you are in special circumstances among people who save for retirement. I don't want anyone to misunderstand what it means when they set their deferral percentage. ps: even for part of the year Gazpacho fucked around with this message at 18:26 on May 20, 2022 |
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May 20, 2022 18:23
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Gazpacho posted:Anyone who choses to do a backdoor Roth contribution, make sure that your tax preparer correctly enters the 1099-R for a conversion. It will show the full amount of the conversion as taxable (because the IRA custodian lacks the information to determine otherwise) and I had two preparers from the same firm tell me that I owed tax on the full amount notwithstanding the calculation on Form 8606. Their system required them to enter further details to indicate that it was a conversion. I posted about this experience with my own tax preparer a few pages ago. I should say "ex-tax preparer" because he insisted that the full amount of the two conversions were taxable and also that we shouldn't have made any contributions at all because both my spouse and I have employer-provided retirement plans and the contribution limits are linked in some weird way he couldn't articulate or provide any IRS documentation to support. When I told him they were nondeductible contributions followed by total conversions and asked for the 8606 he flipped out and terminated the relationship.  Moral is tread carefully with tax preparers I guess. I'm doing my own taxes for the foreseeable future. This dude was even an Enrolled Agent, so I had hoped that he'd be competent.
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May 20, 2022 19:58
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Loucks posted:I posted about this experience with my own tax preparer a few pages ago. I should say "ex-tax preparer" because he insisted that the full amount of the two conversions were taxable and also that we shouldn't have made any contributions at all because both my spouse and I have employer-provided retirement plans and the contribution limits are linked in some weird way he couldn't articulate or provide any IRS documentation to support. When I told him they were nondeductible contributions followed by total conversions and asked for the 8606 he flipped out and terminated the relationship.  Jesus Christ even TurboTax knows how to do a backdoor Roth.
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May 20, 2022 20:15
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