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We're under that for the MFJ so Roth IRA it is! Thanks y'all.
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Feb 15, 2023 16:36
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| # ? May 27, 2024 07:57 |
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GhostofJohnMuir posted:Now, when you look empirically, like our value stock is riskier. When you look at the fundamentals, they tend to be companies that are under distress, have high financial leverage and face substantial uncertainty in their future earnings. They also tend to be riskier than growth stocks in bad economic times, and only slightly less risky in good times. While this probably does describe some value stocks, I dont think it holds true as a rule. Lets take a look at the largest holdings of Vanguard's Value Index: Berkshire Hathaway Inc. Exxon Mobil Corp UnitedHealth Group Inc Johnson & Johnson JPMorgan Chase & Co Procter & Gamble Co Chevron Corp Merck & Co. Inc AbbVie Inc Pfizer Inc Are these companies under duress, highly leveraged, or facing substantial uncertainty in their future earnings? If we look at Vanguard's Growth fund, it is 45% in tech and another 23% in consumer discretionary (vs 8% and 11% for Value Index). My current sense of the economy is that those sectors are more at risk in an economic downturn, not less.
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Feb 15, 2023 17:28
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drk posted:While this probably does describe some value stocks, I dont think it holds true as a rule. Lets take a look at the largest holdings of Vanguard's Value Index: yeah this is a real issue when people are generically discussing 'value' stocks or 'value' funds. index methodology varies wildly. look at VTV, VLUE, FVAL, AVUS, DSTL and SPYV. all index funds (except for AVUS), all value-centric funds. top 10 holdings of each will be generally pretty different. gotta read the index methods to know what you're buying.
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Feb 15, 2023 17:34
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drk posted:While this probably does describe some value stocks, I dont think it holds true as a rule. Lets take a look at the largest holdings of Vanguard's Value Index: I think "value" gets mixed up with "profitability" a lot of times which is another factor in the 5 factor model. The value factor just means cheap which usually there is a reason why something is cheap.
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Feb 15, 2023 17:58
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I think a bigger issue is that value style investing ala Benjamin Graham or Warren Buffet gets conflated with "value" as a type of investment that can be easily classified with simple formulas.
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Feb 15, 2023 18:18
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Yeah, the assignment into Value and Growth can actually be pretty complex. Vanguard's primary Value/Growth funds use the CRSP Indexes, which have the following factors: VALUE FACTORS USED IN THE MULTI-FACTOR MODEL 1. Book-to-Price Ratio (BP) 2. Future Earnings-to-Price Ratio (FEP) 3. Historical Earnings-to-Price Ratio (HEP) 4. Dividend-to-Price Ratio (DP) 5. Sales-to-Price Ratio (SP) GROWTH FACTORS USED IN THE MULTI-FACTOR MODEL 1. Future Long-term Growth in Earnings Per Share (FLGE) 2. Future Short-term Growth in Earnings Per Share (FSGE) 3. Three-year Historical Growth in Earnings Per Share (HGE) 4. Three-year Historical Growth in Sales Per Share (HGS) 5. Current Investment-to-Assets Ratio (INV) 6. Return on Assets (ROA) source: https://crsp.org/files/crsp-market-indexes-methodology-guide.pdf Interestingly, this methodology does not put all stocks exclusively into value or growth as one might expect - stocks with blended characteristics are put into both funds (sometimes, its complicated). Its currently about a 10% overlap.
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Feb 15, 2023 18:21
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The cash-position MMF for my Fidelity taxable account is now up to 4.2% yield. Feels weird to move money out of my HYSA to sit uninvested in my Fidelity account, but that seems to offer the best yield at the moment.
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Feb 16, 2023 17:59
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Subvisual Haze posted:The cash-position MMF for my Fidelity taxable account is now up to 4.2% yield. Feels weird to move money out of my HYSA to sit uninvested in my Fidelity account, but that seems to offer the best yield at the moment. I did the same with Ally to Vanguard. It felt silly not to spend the 5 seconds transferring the money for 1k/year. Honestly I may just keep it there long term, although I may get an itch to buy cd ladder or something.
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Feb 16, 2023 18:12
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drat, I didn't realize that the portion of the interest I made from my core position fund which came from government obligations could have been deducted from my state income tax. Probably a very small difference in the end, but I'll have to remember that for next year. Still, another point in favor of moving money into the investment account from a savings account.
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Feb 16, 2023 19:04
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I've currently got my IRAs invested in FNILX (80%) and FZILX (20%) (Zero expense index funds for US and International markets). I'm considering switching it all over to one of Fidelity's index target date funds which has a bit higher of an expense ratio (.12) but is a little more diverse. They would invest a bit in bonds and other things, and will shift its allocation as I age. I also wouldn't have to tweak the investment ratios as one fund outperforms the other. Any thoughts on this being a bad/good idea? I basically only think about my IRA like once a year when I dump the max allowed into it on January 1st and put it out of my mind for the rest of the year. Having to fiddle with it to keep my risk ratios acceptable to avoid a tiny bit of expense ratio seems like maybe not the best approach for my style?
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Feb 16, 2023 19:14
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We often recommend target date funds like those, for goons who prefer not to have to tweak their asset allocation/rebalance annually, make decisions about that balance, etc.
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Feb 16, 2023 19:17
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Subvisual Haze posted:The cash-position MMF for my Fidelity taxable account is now up to 4.2% yield. Feels weird to move money out of my HYSA to sit uninvested in my Fidelity account, but that seems to offer the best yield at the moment. Which MMF are you putting your cash in? And the yield can fluctuate at any time, right?
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Feb 16, 2023 19:20
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Busy Bee posted:Which MMF are you putting your cash in? And the yield can fluctuate at any time, right? SPAXX is my current core position. And yes, it'll fluctuate, but I would expect it to pretty closely follow interest/treasury rates since that's mostly what it's holding.
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Feb 16, 2023 19:34
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Nitrousoxide posted:I've currently got my IRAs invested in FNILX (80%) and FZILX (20%) (Zero expense index funds for US and International markets). I'm considering switching it all over to one of Fidelity's index target date funds which has a bit higher of an expense ratio (.12) but is a little more diverse. They would invest a bit in bonds and other things, and will shift its allocation as I age. I also wouldn't have to tweak the investment ratios as one fund outperforms the other. Any thoughts on this being a bad/good idea? I basically only think about my IRA like once a year when I dump the max allowed into it on January 1st and put it out of my mind for the rest of the year. Having to fiddle with it to keep my risk ratios acceptable to avoid a tiny bit of expense ratio seems like maybe not the best approach for my style? If you want to stay 100% equities you might consider VT, gets you the world for .07 although the international exposure is about double your current setup. If you want bonds to automatically, gradually slide in as you age, then yeah, an indexed target date fund is good.
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Feb 16, 2023 19:52
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KYOON GRIFFEY JR posted:Congrats. If you aren't getting a match, start with a Roth IRA assuming you are under the Roth IRA contribution limits (MAGI under 153K for single, 228K for MFJ). If you're over that, you get to do the Trad IRA to Roth IRA backdoor, which is not so complex but is less trivially easy. Backdoor Roths appear so popular I feel like I am missing something mathematically, because I don't see why you would backdoor before maxing out 401k contributions (assuming choices in the plan are good). It seems like you'd eat way more tax.
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Feb 16, 2023 20:22
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BRAKE FOR MOOSE posted:Backdoor Roths appear so popular I feel like I am missing something mathematically, because I don't see why you would backdoor before maxing out 401k contributions (assuming choices in the plan are good). It seems like you'd eat way more tax. Expectations about retirement income. If your marginal tax rate in retirement is lower than today 401k is better. If it’s higher roth is better. Also with Roth you only pay tax now on the contribution. With 401k you also pay tax on the growth when you withdraw.
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Feb 16, 2023 20:35
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BRAKE FOR MOOSE posted:Backdoor Roths appear so popular I feel like I am missing something mathematically, because I don't see why you would backdoor before maxing out 401k contributions (assuming choices in the plan are good). It seems like you'd eat way more tax. Also the parenthetical "assuming choices in the plan are good" is not a safe assumption. With our IRAs we can choose basically any investment vehicle there is; with the 401k, we're stuck with what the plan offers, and the ERs and fees that plan is burdened with. And those can change over time, potentially for the worse.
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Feb 16, 2023 20:39
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If you're anxious about locking money away in retirement accounts, Roth IRAs have an additional benefit: contributions can be withdrawn before retirement age tax and penalty free (I believe the same is true for backdoor conversions just with a 5 year waiting period). From the other extreme, Roth IRAs have an added benefit in that they never require minimum distributions at any age. So whichever side of early/late withdrawals you're on, Roth IRAs have maximum flexibility. A lot of the current saving meta seems to revolve around maximizing the amount you can stuff into a Roth IRA just because they're so flexible and future tax free.
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Feb 16, 2023 20:52
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pseudanonymous posted:Expectations about retirement income. If your marginal tax rate in retirement is lower than today 401k is better. If it’s higher roth is better. Also with Roth you only pay tax now on the contribution. With 401k you also pay tax on the growth when you withdraw. I fully understand the mechanism, what I may not understand is the tax situation of a retired person. It is not simple to be pulling down >$228k annually in retirement without having maximized your tax-advantaged space, every dollar around the Roth limit is taxed at 24%+ now, and I'm wondering if I'm just not thinking of something. Leperflesh posted:Also the parenthetical "assuming choices in the plan are good" is not a safe assumption. With our IRAs we can choose basically any investment vehicle there is; with the 401k, we're stuck with what the plan offers, and the ERs and fees that plan is burdened with. And those can change over time, potentially for the worse. That is fair; mine has plenty of low ER index funds.
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Feb 16, 2023 21:03
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Aren't we in a pretty historically low marginal tax rate? It's not unreasonable to think that even if your income level doesn't change for retirement, or even goes down, you could have a higher marginal rate in 20-30 years.
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Feb 16, 2023 21:06
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Does the 5 year rule apply to rollovers that are from another Roth account? Such as: 1) I rollover a Roth IRA from one institution to another 2) I rollover a Roth 401k into a Roth IRA
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Feb 16, 2023 21:07
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BRAKE FOR MOOSE posted:I fully understand the mechanism, what I may not understand is the tax situation of a retired person. It is not simple to be pulling down >$228k annually in retirement without having maximized your tax-advantaged space, every dollar around the Roth limit is taxed at 24%+ now, and I'm wondering if I'm just not thinking of something. Yeah I'm confident some people are doing the backdoor Roth thing that probably shouldn't be. I use the term expectations judiciously. I'm sure there's some FOMO going around, and frankly retirement planning is really confusing and a lot of the resources about it are outright lying to you.
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Feb 16, 2023 21:11
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BRAKE FOR MOOSE posted:I fully understand the mechanism, what I may not understand is the tax situation of a retired person. It is not simple to be pulling down >$228k annually in retirement without having maximized your tax-advantaged space, every dollar around the Roth limit is taxed at 24%+ now, and I'm wondering if I'm just not thinking of something. Aren't you ignoring the fact that traditional 401(k) gains are taxed as income in the end and Roth IRA gains are untaxed? So you pay higher taxes on a small number now, but you pay zero taxes on a larger number in the future, versus paying no taxes now, but paying a lower tax rate on a large number in the future.
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Feb 16, 2023 21:42
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KYOON GRIFFEY JR posted:Aren't you ignoring the fact that traditional 401(k) gains are taxed as income in the end and Roth IRA gains are untaxed? So you pay higher taxes on a small number now, but you pay zero taxes on a larger number in the future, versus paying no taxes now, but paying a lower tax rate on a large number in the future. That portion of the calculation is irrelevant, because you need to compare a higher starting amount in the Traditional vs Roth to begin with. Pretend you are unable to max out your 401k, so you contribute $10k Traditional. Under the same constraints, you would only be able to contribute, say $7k Roth. At retirement, the Traditional is a larger balance than the Roth and after taking the taxes on that higher value later, you'd be back down to the value of the Roth. But if you do max out your 401k ($22,000 or whatever), then you are effectively contributing more by doing Roth vs Traditional, so the end of balance calculation is unfair, because you have to take into account that you had more money to spend on the year you contributed and that is worth something. In the end of the day, it really is tax rate now vs tax rate later.
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Feb 16, 2023 21:55
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Yes, don’t overthink it. If your tax rate doesn’t change it's (a*b)*c vs. a*(b*c). Well, technically (a*b)*c vs. (a*c)*b. Still the same number. WithoutTheFezOn fucked around with this message at 22:16 on Feb 16, 2023 |
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Feb 16, 2023 22:12
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80k posted:In the end of the day, it really is tax rate now vs tax rate later. I think the growth rate matters and the timing of the cashflows at retirement(you're probably not withdrawing everything at retirement, but a bit each year). It's been a while since I hacked together a good NPV calculation by hand but assuming constant growth and taxation actually looks like it slightly favors the 401k under most reasonable scenarios. I think it will favor the 401k the most where the growth is front loaded and least when it's backloaded. I do think the current tax rates are low compared to historical times, one thing about the Roth is you lock in the current tax rate. There may also be an element of behavioral economics - security knowing your withdrawls will be untaxed (the premium people pay for fixed annuities is absurd, implying that that people value those certain cash flows overly [though the retirement advice field is so corrupt and complex it could also just be perverse incentives for financial advisors])
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Feb 17, 2023 00:08
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This weekend's Treasury auction is looking pretty tempting. As always, investment rates wont be known until the auctions close, but yields this month have increased across the board. Auctions I am looking at and today's yields: 6 mo bill: 4.98% (up from 4.79% Feb 1) 12 mo bill: 4.99% (up from 4.66% Feb 1) 2 year note: 4.62% (up from 4.09% Feb 1) I had been using the PDF to follow upcoming Treasury auctions, but this site is pretty useful: https://treasurydirect.gov/auctions/upcoming/ (note that despite saying upcoming, it also has a nice table of the most recent auction results)
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Feb 17, 2023 00:09
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So, since I was laid off I no longer have access to a 401k, so I'll probably max out my tax advantaged space next month. I've been lucky enough to immediately find temporary work that is keeping me earning ~90% of what I was before. Since my work is just as an hourly employee on temp jobs, I can't really utilize a solo 401k. With bond yields being so high right now and the state tax benefits being what they are, I was thinking of making them my primary non-tax advantaged investment this year, hopefully in shorter duration notes in case the temp work dries up. Does that seem reasonable? Also, to get the state tax benefits of treasury bonds, do I need to specifically buy them manually? Or can I use a secondary market or ETFs which hold them and still gain the benefits?
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Feb 17, 2023 00:39
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You can get the state tax benefits of treasury bonds from ETFs but you need to know what percentage of the earnings are from treasuries -it doesn't automatically give you that information. Ultimately you can use something like this to determine what percent was from treasuries. https://www.ishares.com/us/literature/tax-information/2022-ishares-us-government-source-income-information-stamped.pdf Retrieved from here: https://www.ishares.com/us/library/tax
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Feb 17, 2023 00:47
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Nitrousoxide posted:So, since I was laid off I no longer have access to a 401k, so I'll probably max out my tax advantaged space next month. I've been lucky enough to immediately find temporary work that is keeping me earning ~90% of what I was before. Since my work is just as an hourly employee on temp jobs, I can't really utilize a solo 401k. With bond yields being so high right now and the state tax benefits being what they are, I was thinking of making them my primary non-tax advantaged investment this year, hopefully in shorter duration notes in case the temp work dries up. Does that seem reasonable? Also, to get the state tax benefits of treasury bonds, do I need to specifically buy them manually? Or can I use a secondary market or ETFs which hold them and still gain the benefits? As evidenced by my above post, I really like Treasuries this year and yes, I think they are very suitable for short term investments. Re: tax benefits - this one is annoying because in my experience there is nowhere on your tax forms that will indicate "hey by the way, $X amount was state tax exempt". So, expect to have to calculate this yourself and put it into the appropriate place on your state tax return. I am in California, and for my investments last year this was Form 540, Line 2 (Taxable Interest, Subtractions). ETFs are more complicated than holding treasuries directly, because you need to determine the amount that was invested in government obligations. For Vanguard, the info is here: https://investor.vanguard.com/investor-resources-education/taxes/funds-tax-information Additionally, if you live in CA or a few other states, you can only take this deduction if 50% or more of the fund is government obligations. If you do live in one of these states and want to make it a little easier, you can invest in gov-only and corp-only bond funds. For example, in my taxable account I moved from BND to a mix of VGIT and VCIT in order to make these state tax exemptions easier.
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Feb 17, 2023 00:55
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Actually, could I just make a company with just me in it, do a solo 401(k) and contribute post-tax dollars to it?
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Feb 17, 2023 00:56
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Nitrousoxide posted:Actually, could I just make a company with just me in it, do a solo 401(k) and contribute post-tax dollars to it?
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Feb 17, 2023 01:56
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moana posted:If you get paid through a 1099 and are already filling out a schedule C for your business income, sure. If you're only getting employee income, though, you can't just transfer it to your "business". It's a mix of 1099 and W-2 work. Eh I'll think about it for my 1099 work. I dunno if I want to deal with the extra bookkeeping keeping that money seperate.
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Feb 17, 2023 02:09
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BonoMan posted:I'm about to have my student loan paid off after a couple of decades of paying on it. Yay. Congratulations! Those last few paydowns are the best feeling. 
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Feb 17, 2023 02:10
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Bought a 6-month treasury bill at 4.9%. I'm actually excited about buying this poo poo.
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Feb 17, 2023 08:11
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Morningstar: How Closely Do Index Funds Track Their Benchmarks? "Today’s column addresses three questions. First, to what extent do the portfolios of index funds behave differently from benchmarks that they emulate? That is, before expenses are considered, how accurately do those funds mimic their underlying indexes? Second, do those tracking errors have a pattern? Does the pre-expense performance of index funds trail, match, or lag their benchmarks? Third, how do the outcomes look after expenses?" Good reading!
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Feb 17, 2023 15:24
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Vanguard's Municipal MMF (VMSXX) is now up to a 3.63% 7-day yield. That's crazy good for federal tax-exempt earnings. I think I'm going to finally open a Vanguard account just to use that as my "savings" position (can't buy that fund from my Fidelity account and Fidelity's muni funds are nowhere close to that yield).
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Feb 17, 2023 23:46
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First treasury rates officially at 5% in... a long time I'm in for the auction this weekend.
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Feb 18, 2023 02:42
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Hmmm the 2 month tbills I bought in December are about to mature next week. Maybe I'll just roll them over and go again.
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Feb 18, 2023 03:25
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| # ? May 27, 2024 07:57 |
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So if I understand treasury bill rates correctly, if I buy the one month rate of 4.64 at $10,000, in one month I'll have a return that is not $10,464 (not accounting for taxes) but whatever 4.64% based on a yearly pay-out?
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Feb 18, 2023 16:36
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