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$SGOV is a great and simple buy and forget option for t-bills. It's an ETF that just continuously buys 3 month or less maturity t-bills and pays out small dividends each month.
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Sep 14, 2023 23:34
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Subvisual Haze posted:$SGOV is a great and simple buy and forget option for t-bills. It's an ETF that just continuously buys 3 month or less maturity t-bills and pays out small dividends each month. My impression was that most bonds are considered tax inefficient, due to dividends being taxed at the top marginal tax rate, and that they should be held in a tax advantaged account as opposed to a brokerage account. SGOV is fine for an emergency fund or w/e though. Looks like Vanguard has VIPSX for TIPS and VFITX for intermediate treasury bonds though.
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Sep 15, 2023 03:32
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Can you transfer roth 401k funds into a Roth IRA and ignore the $6k contribution limit? My wife’s old employer sent notice they are winding down their 401k plans and we’d like to get the funds into our Fidelity account for consolidation purposes.
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Sep 15, 2023 03:37
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Democratic Pirate posted:Can you transfer roth 401k funds into a Roth IRA and ignore the $6k contribution limit? My wife’s old employer sent notice they are winding down their 401k plans and we’d like to get the funds into our Fidelity account for consolidation purposes. Yes that's a rollover and not a contribution
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Sep 15, 2023 05:35
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Residency Evil posted:My impression was that most bonds are considered tax inefficient, due to dividends being taxed at the top marginal tax rate, and that they should be held in a tax advantaged account as opposed to a brokerage account. Its a bit complicated for two reasons I can think of: 1) State taxes. Treasury bonds are state tax exempt. Combined with the fact that there is no special capital gains / qualified dividend tax rate in some states (  ), the effective tax rate on treasury fund dividends versus stock fund dividends can be surprisingly close in some cases. (edit: I looked up my rates and qualified dividends are taxed at 24.3% fed+state, treasury bonds at 24% fed-only)2) Growth rates of bonds vs stocks. If you have a Roth account, there is a strong argument to be made to put the highest returning funds in the Roth, since all gains are non-taxable. Stock funds will very likely continue to outperform bond funds over the next 20+ years, so even point #1 above is not relevant to you, it may still be a good idea to keep bonds out of your Roth accounts (I dont take my own advice here, but I should do something about that sooner or later). drk fucked around with this message at 12:50 on Sep 15, 2023 |
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Sep 15, 2023 09:26
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caluki posted:Yeah unfortunately it looks like I have to deal with a check, which seems odd since both providers are huge (Fidelity->ADP). And I have to receive it directly and then mail it on... I'm now at the phase where Fidelity has cut the check and I have a zero balance Fidelity rollover IRA. The main impetus for this was clearing the IRA in advance of making a backdoor Roth contribution. Can I use that existing IRA account to do a backdoor Roth, or should I just close the account and create a new one specifically for that purpose?
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Sep 15, 2023 12:02
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Democratic Pirate posted:Can you transfer roth 401k funds into a Roth IRA and ignore the $6k contribution limit? My wife’s old employer sent notice they are winding down their 401k plans and we’d like to get the funds into our Fidelity account for consolidation purposes. Yep, I changed jobs last year and did this. I moved my Roth 401k money into my Roth IRA and moved my traditional 401k money into my new job's 401k. No taxes, just a rollover of like to like.
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Sep 15, 2023 14:04
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Democratic Pirate posted:Can you transfer roth 401k funds into a Roth IRA and ignore the $6k contribution limit? My wife’s old employer sent notice they are winding down their 401k plans and we’d like to get the funds into our Fidelity account for consolidation purposes. Wouldn't it make more sense to rollover the 401k into a traditional IRA? I guess maybe it doesn't matter since you're funding the roth with pre-taxed 401k dollars, so the outcome is the same. Either way, I'd recommend calling fidelity and checking. There might be some requirement of 401k -> traditional IRA rollovers. fakeedit: I just realized you said roth 401k first. Is it a roth 401k or a regular 401k?
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Sep 15, 2023 14:06
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downout posted:Wouldn't it make more sense to rollover the 401k into a traditional IRA? I guess maybe it doesn't matter since you're funding the roth with pre-taxed 401k dollars, so the outcome is the same. Rolling a traditional 401k into a traditional IRA can be suboptimal because traditional IRA balances need to be converted (and have taxes paid on the conversion) before you can do a backdoor Roth IRA.
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Sep 15, 2023 14:42
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Things you can do on rollover: Roth 401(k) -> Roth IRA - no issues Trad 401(k) -> trad IRA - no issues Not really possible: Roth 401(k) -> trad IRA - I don't think you can do this and I don't know why you would want to Trad 401(k) -> Roth IRA - You can't do this directly in most cases. You will typically have to roll over in to a trad IRA, then convert and pay taxes. Can be worth it if you don't want a trad IRA balance for backdoor purposes.
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Sep 15, 2023 14:52
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I was just speaking to my financial advisor about Roth rollovers and it left me more confused. I have a traditional IRA. I have contributed to the limit to the IRA for at least the last five years. I also rolled over two 401ks from old jobs into that traditional IRA. I am over the income limit for deducting anything. My contributions have been correctly reported as non-deductible to the IRS. I anticipate being over the income limit to contribute to a Roth IRA this year due to proceeds from the sale of a business. In following years I should be back under the income limit for contributions. However, in a recent email my financial advisor is recommended I convert my contributions from this year to a Roth. Maybe he forgot about the income limits?
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Sep 15, 2023 15:52
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downout posted:Wouldn't it make more sense to rollover the 401k into a traditional IRA? I guess maybe it doesn't matter since you're funding the roth with pre-taxed 401k dollars, so the outcome is the same. She contributed to a Roth 401k at her last job, but I need to see the characterization of the rollover 401k funds she had from prior employers. My guess is we’ll have a split of traditional and Roth 401k funds to sort through. Tedious but nothing Fidelity hasn’t seen before.
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Sep 15, 2023 16:00
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Awkward Davies posted:I was just speaking to my financial advisor about Roth rollovers and it left me more confused. Conversion is a technical term for moving dollars from your traditional IRA to your Roth IRA. You still contributed to your money to a traditional IRA, but you can move it to the Roth. There is special tax treatment of this. If you have a mix of deductible and non-deductible contributions in there, the tax situation gets a little complicated, as you can't only convert a single contribution, you have to do it all pro-rata. There is no income limit to convert funds from a traditional IRA to a Roth IRA. People of high income can contribute non-deductible contributions to a traditional IRA and then convert them to Roth, which avoids the income limits. This is a loophole known as the backdoor Roth. esquilax fucked around with this message at 16:09 on Sep 15, 2023 |
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Sep 15, 2023 16:06
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esquilax posted:Conversion is a technical term for moving dollars from your traditional IRA to your Roth IRA. You still contributed to your money to a traditional IRA, but you can move it to the Roth. There is special tax treatment of this. If you have a mix of deductible and non-deductible contributions in there, the tax situation gets a little complicated, as you can't only convert a single contribution, you have to do it all pro-rata. So I could sell $6500 worth of whatever ETF I have in the traditional IRA and then convert it to the Roth IRA. I have an old Roth from converting another 401k over 10 years ago that had a mix of before and after tax dollars in it. I recall being told I could never contribute anything to that account, but I don't remember why. Is that even possible? This was in my 20s before I started taking saving and retirement seriously so I didn't pay attention enough to understand it.
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Sep 15, 2023 16:46
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Awkward Davies posted:I have an old Roth from converting another 401k over 10 years ago that had a mix of before and after tax dollars in it. That shouldnt be possible.
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Sep 15, 2023 17:02
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Awkward Davies posted:I was just speaking to my financial advisor about Roth rollovers and it left me more confused. The amount of tax the conversion generates varies based on the mix of taxable funds in the trad IRA and the amount you convert. The IRS won't let you convert just the untaxable amounts unfortunately. In your case the non-taxable portion of your Trad IRA should equal just the amounts you contributed previously without taking a deduction. Everything else would be taxable to convert. So: [(Total value of the Trad IRA)-(contributions you previously made without taking a deduction)]/(Total Value of Trad IRA) = taxable percent (taxable percent)*amount converted=amount that will be treated as income for tax purposes.
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Sep 15, 2023 17:13
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Awkward Davies posted:So I could sell $6500 worth of whatever ETF I have in the traditional IRA and then convert it to the Roth IRA. I'm not quite understanding the situation you're describing, so you should probably go through and make that sure you understand. Work backwards. - What accounts do you have money in today? - Is each one a 401k or is it an IRA? - Is each one Traditional or Roth? - What is the history behind each account? Is your MAGI income above the Roth IRA contribution limit? In 2023 this is $153,000 for a single filer.
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Sep 15, 2023 17:23
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Subvisual Haze posted:No income limit on doing conversions. Also no yearly limit. The $6500 yearly limit is for contributions only to all IRAs. Rollovers and conversions aren't contributions. I've got a trad IRA that's rolled over from a previous job's 401k. It's got about 1.5x my current salary in it. If I tried to roll it over now, I'd have to do it all at once, right? And I'd be paying taxes at my highest marginal rate to do so... So short of more than doubling my tax bill for the year, there's not really anything to do except keep it as a trad IRA, right?
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Sep 15, 2023 17:44
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Pham Nuwen posted:I've got a trad IRA that's rolled over from a previous job's 401k. It's got about 1.5x my current salary in it. Rollover is just moving funds between accounts without changing its nature. Trad money moving to a different Trad account (401k to IRA, IRA to IRA, IRA to 401k) or Roth money doing similar. Trad stays trad, Roth stays Roth, no taxes. In your case if you did want to convert trad IRA to roth IRA you wouldn't need to do it all at once. But whatever amount you did convert would be treated as income on your taxes for the year and taxed at the top rate.
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Sep 15, 2023 18:10
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Subvisual Haze posted:Guessing you mean convert. Conversion is going from Trad to Roth and generates taxes. You're essentially paying taxes now to avoid paying taxes later. Pre-tax/trad money becomes Roth/post-tax money. Sorry, yeah, I meant convert. I was under the impression you had to convert the entire account all at once which would be pretty rough from a tax POV. If I can do it incrementally, that makes things more feasible.
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Sep 15, 2023 18:24
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If you have a current 401(k) doing an in-service rollover is almost always preferable. Check to see if your plan will allow that.
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Sep 15, 2023 18:27
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Pham Nuwen posted:Sorry, yeah, I meant convert. I was under the impression you had to convert the entire account all at once which would be pretty rough from a tax POV. If I can do it incrementally, that makes things more feasible. Income taxes are progressive after all. The first $13,850 of income you make (as a single filer) in 2023 is taxed at zero because it would be negated by the standard deduction. Then the next $11,000 would be taxed at only 10%, then the next $33,000 at only 12%. Only after those incomes are "filled" do the more common 22-24% tax rates kick in on additional income. So if you time the conversions for years when you have little to no other income, the effective tax you would pay on conversion could be much less than currently. The retire early crowd calls this "the roth conversion ladder".
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Sep 15, 2023 18:40
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Pham Nuwen posted:Sorry, yeah, I meant convert. I was under the impression you had to convert the entire account all at once which would be pretty rough from a tax POV. If I can do it incrementally, that makes things more feasible. You don't have to do it all. You have to pay taxes in money you convert when you do it if you never have paid the taxes. It is subject to pro-rata so you can't pick and choose what you convert. A common strategy is to convert a portion up to the next tax bucket. So if you had $30K in taxable income you might convert $14,725 to fill up the 12% bucket but not push into the 22% bucket.
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Sep 15, 2023 19:11
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The easiest answer is move your Trad IRA to your 401k, if a) your 401k doesn't suck and b) your 401k allows it 401k to 401k is nearly always allowed, but IRA to 401k isn't always for reasons Moving 401ks to Trad IRAs sounds good at first blush but is a huge trap for higher earners for exactly this backdoor pro rata rule reason Guinness fucked around with this message at 19:29 on Sep 15, 2023 |
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Sep 15, 2023 19:26
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Instead of working I spent a decent chunk of my afternoon trying to calculate if it was worth it to use the i-bond I'll be selling next month to help pay down my mortgage principal enough to eliminate PMI. I thought it was a slam dunk but I was persuaded that while the short term ROI is pretty attractive, over a longer horizon the drag of my low mortgage rate brings the ROI down below just dumping it in an index fund or t-bills. Paying off my car also didn't make sense because of the low interest rate. Financial prudence is often less emotionally satisfying, I think I am finding. (I know, woe is me with low interest rates. I hate me too.)
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Sep 15, 2023 20:38
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Guinness posted:The easiest answer is move your Trad IRA to your 401k, if a) your 401k doesn't suck and b) your 401k allows it Wait, when you move trad IRA to your 401k, is that a taxable event?
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Sep 15, 2023 20:41
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esquilax posted:I'm not quite understanding the situation you're describing, so you should probably go through and make that sure you understand. I'm working this out with my financial advisor, but: - Traditional IRA: contains regular contributions and two 401k rollovers. The 401k rollovers make up about 81% of the contributions into the IRA. - Rollover Roth IRA: No idea what's going on with this, but it's only $2k so I might just let it languish, and open another Roth if I need to - Various other investment accounts (managed, individual, robo) - 401k with my current employer (different brokerage - seems like it might allow IRA > 401k rollover) My MAGI is above the Roth IRA contribution this year. Next year I expect it will be under.
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Sep 15, 2023 20:45
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Awkward Davies posted:Wait, when you move trad IRA to your 401k, is that a taxable event? no. You're moving (via rollover) pre-tax money into a pre-tax account. It's an excellent way to empty your trad IRA space in prep for doing backdoor Roth, because it's not a taxed event, and it keeps the money in tax-advantaged space. Unfortunately many 401k plans do not offer this as an option. It could conceivably be a bad option if your 401k is super high fees/really lovely investment options, because keep in mind the taxes you pay today on converting a traditional account balance to a roth balance is instead of the taxes you would pay when you retire and take distributions from your traditional account. But potentially at a higher (or lower!) marginal tax rate. If the difference in tax rate is less than the difference in burdensome fees/lovely options, maybe you'd be better off doing a conversion. I think that's usually unlikely for most long-term savers, who usually should do the rollover from trad IRA to 401k if they are earning enough to do a backdoor Roth, because high-earners are paying high top marginal tax rates on converting balanced from trad to Roth. As a general rule of thumb, usually it's better to defer taxes rather than pay them now. But not absolutely always, and if you are very sure your tax rate will be significantly higher in retirement than it is today, converting trad balances to Roth could make sense even for some people who aren't trying to set up to do backdoor Roth contributions. Leperflesh fucked around with this message at 20:54 on Sep 15, 2023 |
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Sep 15, 2023 20:51
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Duckman2008 posted:Dave Ramsey is a piece of poo poo and sucks for multiple reasons. It's amazing how far he's gotten as a financial guru. https://x.com/CBSNews/status/1665897546890330112?s=20 He's a conservative religious anti-vaxx nutjob who's literally fired his own staff for pre-material sex.
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Sep 16, 2023 09:45
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Chad Sexington posted:(I know, woe is me with low interest rates. I hate me too.) Don't feel too bad. I've got 28 years left on a 2.9% 30 year fixed rate mortgage.
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Sep 16, 2023 14:48
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I think this is an ok thread for portfolio checks? I am almost 40, single, no dependents. My current plan is to work full time for another 5 years or so, then figure out if I can pivot to half time to coast for another 5 years before pulling the FIRE trigger. I might buy a house in the next 5 years, which would almost certainly change that plan, but I'm open to it. I am perennially worried that I have too much cash. Every time I move some to a brokerage account, I get worried that I have too little cash. Poverty brain sucks, I just need to make peace with it and stop worrying. I hopped on the I bond train when everyone else did a few years ago - interest rates are about evenly split between 3.38%, 4.3%, and 6.48%. I probably could switch to SGOV or whatever, but I haven't put energy into looking into it. VFIAX is for loss harvesting. Should I get out of VFIFX and switch to 100% stocks? Something else? code:Happiness Commando fucked around with this message at 18:43 on Sep 16, 2023 |
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Sep 16, 2023 15:25
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I hope you’re gonna make a ton of money in the next five years because 600k seems lean even if you are planning to transition to part time. I don’t fully understand your VFIFX comment on TLH. You are holding that in IRA and 401(k) where you can’t TLH. What am I missing? I think most of the FIRE hardos are very in to equities heavy portfolios.
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Sep 16, 2023 15:34
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$50k/8% cash doesnt seem wildly high or low assuming that is your emergency fund. If its also your maybe ill buy a house soon fund, its maybe a bit low depending on how expensive houses are where you live. As to whether or not you can retire with 5 more years of full time and 5 years of half time, that is going to heavily depend on your income and expenses.
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Sep 16, 2023 16:54
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$600k is $24k/year using the 4% rule. That seems like not very much money.
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Sep 16, 2023 17:21
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$600k + 10 years of growth and at least 5 more years of savings is a lot more though. If it's enough is kinda unknowable at this point, especially without knowing OPs expenses
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Sep 16, 2023 18:40
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Typo edited in my original my original post - VFIAX is for loss harvesting. $600k + 5 years of savings puts me pretty close to $1MM. Projected market growth (not a certainty) should put me on the other side of a cool million. Then 5 years of coasting should get me close enough to where I can draw it down safely enough. I'm also not committed to the timeline, since buying a house changes everything, or deciding to get into a career shift that takes some money to get started, life can come at you fast. But playing with variously parametrized firecalc simulations puts the predicted timeframe well into plausible territory
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Sep 16, 2023 18:47
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I'm new to investing but getting more serious about it because both my fiance and I got into significantly higher paying jobs this year. I have a Roth IRA at Fidelity that I'm tossing small amounts at, but I'm mostly looking at money market funds since we're focused on paying off a modest credit card debt and establishing an emergency fund before anything else. My main question so far is what kind of math I need to determine when tax exempt funds become worth considering over just sticking with SPAXX. For intance, I just learned that FDLXX is state tax exempt and only yields about 0.05% less, so it seems like a no brainer to switch over. But apparently there are municipal funds that only yield half as much but are totally tax exempt; is it even worth worrying about that at my current (22%) tax bracket?
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Sep 18, 2023 16:47
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The only reason to be in muni funds is if you are in the very top tax federal bracket, per my recollection. If you have high state taxes, it can be worth investing in mostly or entirely Treasury bonds as your fixed income allocation. But that depends on the state tax bracket you are in and the yields on Treasury vs corporate for the funds you are interested in. If you are trying to avoid state tax, it can be very useful to avoid mixed bond funds like BND as they make taking the state tax exemption more difficult or even impossible in some states.
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Sep 18, 2023 16:59
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Jabarto posted:I'm new to investing but getting more serious about it because both my fiance and I got into significantly higher paying jobs this year. I have a Roth IRA at Fidelity that I'm tossing small amounts at, but I'm mostly looking at money market funds since we're focused on paying off a modest credit card debt and establishing an emergency fund before anything else. Paying off just about any credit card debt is going to be much, much better than any minor bond fund decision. Follow the flowchart. Also, sounds like you're squarely in accumulation mod, so any bonds at all might not be the right thing (assuming you can stomach the volatility).
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Sep 18, 2023 17:03
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Just to be clear, you're talking about doing short-term, tax-free investments in your cash emergency fund, not in your Roth IRA, right? Because your Roth IRA is tax-advantaged, there is no taxes on the earnings from the stuff you buy in your IRA.
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Sep 18, 2023 17:03
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