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Leperflesh posted:Hmm. Your method seems good, although I do think that limiting yourself to only 12 month periods may be an issue. This is supposed to be a long-term strategy that you continue to pursue, which means longer sequences matter, right? The study above assumes that the investor has a single large lump sum, and they ease it into the market for 12 months, and then they're done. What if you have a sequence of, say, 20 large sums, that you will ease into the market for 20 years or invest on jan 1st for 20 years? Ohh, ya that's probably where the 1/3 vs 1/10 discrepancy comes from. One chunk invested vs one investor with multiple chunks. drk posted:, but one should probably reconsider their asset allocations if they are engaging in market timing to attempt to minimize losses. This is sound, however I think an underlying factor here is the investor in these scenarios is someone who is handling wealth beyond what they know. Maybe this is more about minimizing perceived losses than minimizing actual losses I guess what I mean is that sort of dry technical advice is going to be indistinguishable from sales pitches (which I find all these articles to be half sales pitches) to new investors Epitope fucked around with this message at 16:10 on Oct 4, 2023 |
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Oct 4, 2023 16:01
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Turbinosamente posted:Welp, Leperflesh answered my question, since I had planned on palm slamming my tax refund next year into my neglected IRA since I don't really have much to spare this year. I'll keep to that plan then! There's actually a reasonable case that in a decumulation portfolio (i.e. post-work, living off of your money) an allocation of up to about 15% in gold helps mitigate sequence of return risk and improves your sustainable withdrawal rate. https://earlyretirementnow.com/2020/01/08/gold-hedge-against-sequence-risk-swr-series-part-34/ See also "Risk Parity" portfolios.
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Oct 4, 2023 16:23
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Yeah, gold - held as a tradeable security, such as with GLD, not as physical metal - is a legit hedge investment. Unfortunately, discussion of gold as an investment online is so thoroughly dominated by goldbugs and the hyper-predatory physical (and sometimes online/securitized) companies that I hesitate to ever suggest it to someone without being 100% sure they understand they won't be able to talk about gold with people anywhere. They'll either be assaulted by the "gold enthusiasts" let's call them, or attract insane levels of advertising from ripoff companies, or at the least, give the false impression to colleagues and family etc. that they're falling into the goldbug mindset and might start talking about ancient aliens next. Investopedia has a good article that I think does a decent job at balance and avoiding the more unhinged arguments. It fails to mention one of the biggest disadvantages of buying & selling physical gold (enormous transaction costs, often hidden as large bid/ask spreads) but does mention that there are "storage and insurance costs" which at least hints at the fact that it's foolish to store part of your long-term savings as an untraceable, uninsured, universally fungible and portable stack of coins easily stolen from your home. I think it goes beyond just a decumulation portfolio. Gold is straight up a hedge and diversifier vs. most every other major investment category we talk about here, including stocks bonds and cash.
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Oct 4, 2023 16:56
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Subvisual Haze posted:Yeah I believe MMFs by design maintain a share price of $1 always and pay out their gains purely in monthly interest. So there shouldn't be any capital gains/losses possible and also the interest is treated as normal income (no qualified dividend rate possible). You might be able to deduct some of the MMF interest from your state income taxes if you have them and if the MMF makes a percentage of its gains from government securities (treasuries etc). Technically they accrue dividends daily, the dividends are just paid monthly. That's how they maintain a NAV of $1.00: At the close of business each day the fund manager runs the computer program and it goes "Hmmm we have a NAV of $1.00013711, we declare a dividend of $0.00013711 for all shareholders today. NAV is now $1.000000". If you have $0 in a MFF at the start of the month and buy $100,000 on the 5th, and then sell them all on the 25th to have $0 on the last day, you should still get a dividend payment for those $20. This is different from stocks and ETFs which only pay the dividend on shares you're holding on the ex-dividend date. This is why SGOV has that weird sawtooth pattern even though its portfolio will be substantiality similar to something like SPAXX or VUSXX. sorry that was a kinda obnoxious nerd snype I just couldn't resist
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Oct 4, 2023 19:08
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mrmcd posted:Technically they accrue dividends daily, the dividends are just paid monthly. That's how they maintain a NAV of $1.00: At the close of business each day the fund manager runs the computer program and it goes "Hmmm we have a NAV of $1.00013711, we declare a dividend of $0.00013711 for all shareholders today. NAV is now $1.000000". What happens on days the fund loses $0.00013711 NAV?
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Oct 4, 2023 19:13
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Since they invest in mostly treasuries I assume that if that happens we probably have bigger problems. Although I understand that if the fund itself goes under then your shares are not guaranteed.
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Oct 4, 2023 19:49
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nelson posted:What happens on days the fund loses $0.00013711 NAV? This is known as breaking the buck and usually is a sign of impending national disaster.
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Oct 4, 2023 20:14
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I'm wondering if anyone here is familiar with or has experience with an ESOP as part of their retirement plan, and if there are any things to think about on how it affects retirement plans. My current job is rolling out an ESOP as supplemental to their (very modest) 401K matching program. The mechanics are a little mysterious to me, but for the most part I'm planning to treat it as separate and distinct from my own retirement funds and not rely on the program as part of my overall retirement strategy.
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Oct 4, 2023 22:30
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Serious_Cyclone posted:I'm wondering if anyone here is familiar with or has experience with an ESOP as part of their retirement plan, and if there are any things to think about on how it affects retirement plans. My current job is rolling out an ESOP as supplemental to their (very modest) 401K matching program. The mechanics are a little mysterious to me, but for the most part I'm planning to treat it as separate and distinct from my own retirement funds and not rely on the program as part of my overall retirement strategy. Is the company publicly traded or is it privately held? Generally speaking I'd probably lean towards discounting any value you receive from it (all the way to 0 if its private) for planning purposes. They should be contributing/allocating shares to your account without any tax implications or cost to you until after you separate from the company (whether through retirement or switching jobs). You should be able to roll the balance in to a 401k or IRA upon separation deferring those taxes even further.
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Oct 4, 2023 22:44
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tumblr hype man posted:Is the company publicly traded or is it privately held? It's a privately held company. I am planning to do as you say and treat the shares as if they were Monopoly money. I'm no business maven but it seems like a system ripe for rapid dissolution of a company. Hit a streak of lean business and retraction and you spook people into leaving so they can lock-in their share values, with the exodus further putting stress on the company to survive and feeding back into more exodus.
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Oct 4, 2023 22:52
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We have an ESOP that I treat as 0 for retirement planning purposes but plan to include in my comp assessment for future job negotiations since the company has averaged a 3% annual contribution since I’ve been around.
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Oct 4, 2023 23:23
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Leperflesh posted:Yeah, gold - held as a tradeable security, such as with GLD, not as physical metal - is a legit hedge investment. Unfortunately, discussion of gold as an investment online is so thoroughly dominated by goldbugs and the hyper-predatory physical (and sometimes online/securitized) companies that I hesitate to ever suggest it to someone without being 100% sure they understand they won't be able to talk about gold with people anywhere. They'll either be assaulted by the "gold enthusiasts" let's call them, or attract insane levels of advertising from ripoff companies, or at the least, give the false impression to colleagues and family etc. that they're falling into the goldbug mindset and might start talking about ancient aliens next. Ben Felix did a really good piece on investing in gold. I find his arguments compelling and well supported.
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Oct 4, 2023 23:24
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Serious_Cyclone posted:It's a privately held company. I am planning to do as you say and treat the shares as if they were Monopoly money. I'm no business maven but it seems like a system ripe for rapid dissolution of a company. Hit a streak of lean business and retraction and you spook people into leaving so they can lock-in their share values, with the exodus further putting stress on the company to survive and feeding back into more exodus. To be fair there is a requirement to revalue the shares annually. Now that’s significantly more of an art than a science but it does exist. You are definitely an equity holder rather than a debt holder so in a bankruptcy you’re the last paid. That having been said I really do think there is a value in them, and in employee ownership of companies generally. Some plans are better than others and some companies are better than others though so there can be a lot variance between them. Overall, it’s a happy additional savings program you have, and will give you some upside if you’re bought out or the company succeeds. I wouldn’t probably count on it excessively for your retirement (ie still contribute to your 401k and IRA if you can) but it is a nice additional pot of money.
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Oct 4, 2023 23:54
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Antillie posted:Ben Felix did a really good piece on investing in gold. I find his arguments compelling and well supported. I think Ben's analysis here is a bit too narrow, for a couple of reasons. First, he discounts the "safe haven" from the effects from the stock market by saying that the correlation was 0.085, which is not 0 or negative, but I think that misses the point. It is by far less correlated than bonds or housing (both are usually reported to be around 0.18ish AFAIK). So the question is "What should I use instead as an asset with low correlation to the stock market that can at least roughly keep up with inflation?" He seems to posit international stocks as the solution in the narrative without explicitly saying so, but the problem is that international stocks also have a higher correlation to US stocks than gold. Second, he talks about his narrow simulations with 90% stocks and 10% gold from 1988 to 2019, but doesn't really talk about the model. Was the portfolio actively withdrawn from in that time? If so, when did the withdrawal period start, and how large were withdrawals? He then compares to a 90% stock and 10% 1-5 year global government bond hedged to the Canadian dollar, and says that the latter is better. Which again, forces us to asks about the model. Because of course, over 40 years, we expect that stock and bonds to do better, that is a longer time frame, and bonds have better long term returns than gold. But if you are living off the money in retirement, and actively withdrawing, then it could be that you will run out of money in the 90% stock and 10% bond portfolio but not in the 90% stock and 10% gold one. It was linked earlier, but Karsten's analysis (via Early Retirement Now), has a more comprehensive simulation and comparison stuff with clear methodology that makes a more compelling case for gold based on the past century of data that at 60/25/15 stock/bond/gold ratio would have a higher failsafe withdrawal rate than a 75/25 ratio (and also separately has shown that a 75/25 stock/bond ratio has a higher failsafe withdrawal rate than the others). This isn't to say that one should use gold as part of their own personal retirement strategy, but I think its wrong to say that it doesn't have a place in anyone's portfolio.
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Oct 5, 2023 00:17
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tumblr hype man posted:To be fair there is a requirement to revalue the shares annually. Now that’s significantly more of an art than a science but it does exist. Yeah, I’m not changing my posture on 401k and Roth over it, but your assessment tracks with my initial thoughts about it.
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Oct 5, 2023 01:02
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MegaZeroX posted:So the question is "What should I use instead as an asset with low correlation to the stock market that can at least roughly keep up with inflation?" TIPS and I Bonds are guaranteed to return at least 0% real (and currently a decent amount more than 0%). Any discussion of gold as an inflation hedge that ignores that is flawed.
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Oct 5, 2023 02:08
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To follow up on the arguments against dollar cost averaging, does this mean it makes the most sense to put as much as possible into your 401k as early in the year as possible, rather than spreading it out evenly? Let's assume employer matches weren't a consideration.
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Oct 5, 2023 02:18
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drk posted:TIPS and I Bonds are guaranteed to return at least 0% real (and currently a decent amount more than 0%). Any discussion of gold as an inflation hedge that ignores that is flawed. Counterpoint: My paranoid worldview assumes the US government can dissolve in a matter of days rendering US treasuries worthless! At the same time, in the new world order the warlords will 100% respect my emails that show I own physical gold.
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Oct 5, 2023 02:28
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Hello thread, I have a super basic investment question. I'm about to sell the property I used to live in, which means I will have like 200k plus in cash all of a sudden. Given that I'm Australian and we already have superannuation so I don't need to organise a retirement fund, and that I absolutely don't want to invest in property, is the safest thing to do to just put it in ETFs? How much should I keep as in-case-I-need-it savings in a savings account? Is six months of expenses still the recommendation?
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Oct 5, 2023 02:32
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Smashing Link posted:Counterpoint: My paranoid worldview assumes the US government can dissolve in a matter of days rendering US treasuries worthless! At the same time, in the new world order the warlords will 100% respect my emails that show I own physical gold. You’ll want guns and ammo, not gold. I mean you’ll probably want gold and a food source too. But if you can only pick one thing get the guns and ammo because with those you can acquire anything else you might need. If you don’t have them, others will acquire their gold and food from you. nelson fucked around with this message at 02:42 on Oct 5, 2023 |
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Oct 5, 2023 02:39
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nelson posted:You’ll want guns and ammo, not gold. I mean you’ll probably want gold and a food source too. But if you can only pick one thing get the guns and ammo because with those you can acquire anything else you might need. If you don’t have them, others will acquire their gold and food from you. When I was thinking about this a lot in 2020 I decided propane was also high on the list.
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Oct 5, 2023 02:49
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nelson posted:You’ll want guns and ammo, not gold. I mean you’ll probably want gold and a food source too. But if you can only pick one thing get the guns and ammo because with those you can acquire anything else you might need. If you don’t have them, others will acquire their gold and food from you. drk posted:TIPS and I Bonds are guaranteed to return at least 0% real (and currently a decent amount more than 0%). Any discussion of gold as an inflation hedge that ignores that is flawed.
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Oct 5, 2023 03:00
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Subvisual Haze posted:I recommend water purification chips too. And containers of gasoline to bribe Lord Humungous with. If you can't get hold of a water purification chip now, keeping some rope handy might help you find one later on.
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Oct 5, 2023 03:12
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nelson posted:You’ll want guns and ammo https://youtu.be/F2HH7J-Sx80?si=mLc0Bhpn-qRp-fle
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Oct 5, 2023 03:19
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Organza Quiz posted:Hello thread, I have a super basic investment question. There's not really a lot of information to work with here. If I had a windfall of $200k, exactly what I'd do with it would depend on things like how much other savings I have (emergency savings sufficient to cover my living expenses for 3-6 months?), what my short, medium, and long-term plans are (buying a house in the next couple years? Or ten? Or never? Gonna get married or have kids?), what my income is (is this like 1.5x my annual income, or 5x my annual income?), how old I am and how close to retirement I am and how much money I have already saved for retirement and whether I need to save all of this money for retirement? You mentioned you have supernanuation but that does not necessarily mean that you don't need to save more for retirement. It depends on how old you are, how much you have saved, and whether it projects to be enough by the time you retire, right? OK, then to move on to what you actually asked, what is the "safest thing to do"? ETFs (exchage-traded funds) are all over the map, there are super super risky ones (leveraged, managed funds for example), super safe ones (US treasury fund ETF for example), and everything in between. The "safest" thing is cash, but you lose money to inflation when you have cash. If you are willing to only take very low risk, you can invest in CDs (certificates of deposit), money market funds (many banks offer accounts that are MMs), high yield savings accounts, etc. which may or may not really keep up with inflation but will beat just leaving money in a checking account. Many folks in this thread feel buying a broad stock index fund like the total US stock market fund from Vanguard or Fidelity is reasonably safe, for their multi-decade investing horizon, but I expect most of us would say it's too risky if we were planning to withdraw the money in 2 years to buy a house. So risk is relative to time, needs, etc. Lastly, yes six months is a decent rule of thumb, but it actually depends. I'm married, my wife could pay our expenses by herself if I lost my job and vice-versa, so our risk is only at max if we both lost our jobs simultaneously, which is less likely. We also own a home built cheaply in the 1950s, though, and large cash expenses are more common when you own a home, especially an older one. But we also have no kids, so if we found ourselves in serious financial trouble we wouldn't be making children suffer. But my parents have some money, so if we suddenly needed $10k to get through a couple of months, we could probably borrow it from them. Etc. etc. etc. we keep well over 6 months expenses in cash right now but mostly because we know we'll need to pay for a new hvac, rewire the house, and likely replace the roof, within the next five years and maybe this winter if poo poo hits the fan all at once. Many people are quite comfortable with 3 months cash. tl;dr - ETFs is too broad and vague of a category, and, how much you need to save at what level of risk/return for how long depends a lot on all your other personal financial and life details. Leperflesh fucked around with this message at 04:13 on Oct 5, 2023 |
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Oct 5, 2023 04:11
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My wife and I have maxed out our Roth IRAs. Her employer matches 5% of any 401k contributions, so that's what she contributes. My employer does not match so I haven't been contributing there. We're starting late in our retirement journey (we're both 37 with around 100k saved) so I'm trying to convince her that we should be more aggressive in putting money to our 401ks, even if we don't get a match. She would rather we buy index funds in our brokerage accounts, I think she just doesn't like the idea of "locking up" the money in a 401k. My understanding is that money that goes into 401ks can be removed, you just can't withdraw the gains. Are there any particular pitfalls of investing money into a 401k if you expect to withdraw it down the line, as long as you're careful of not withdrawing gains? I'd like to encourage her for us to put in the money there rather in a brokerage, and I think she'd have an easier time of it if she felt we could get it back, even if we don't ever actually do it.
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Oct 5, 2023 14:05
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drk posted:TIPS and I Bonds are guaranteed to return at least 0% real (and currently a decent amount more than 0%). Any discussion of gold as an inflation hedge that ignores that is flawed. First of all, yes, I agree, but that wasn't brought up in the video, which is why I didn't mention it. I Bonds aren't really comparable because they can't be sold in the short term (strictly so for 1 year, and penalty-free for 5 years). TIPS can be sold, but are susceptible to losses in the short term (ironically, particularly when inflation is high because of rising yields). If you hold them until maturity, you don't have to deal with this, but then, it can have issues with sequence of returns (forcing you to sell off more of your stock when stocks are down), and in particular it is annoying to fit into a post-retirement glidepath back to equities. Basically, I think gold has a niche use for those with "long" retirement horizons (as in, time until they believe they won't count on having money anymore) to hold on to for the first few years of retirement before moving it back to equities afterword as a hedge against the risky first few years of retirement. MegaZeroX fucked around with this message at 14:34 on Oct 5, 2023 |
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Oct 5, 2023 14:27
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dpkg chopra posted:My wife and I have maxed out our Roth IRAs. Her employer matches 5% of any 401k contributions, so that's what she contributes. My employer does not match so I haven't been contributing there. Any early withdrawal from a 401k carries a 10% tax on whatever you withdraw, unconditionally. If it is from a Roth 401k, then, on top of the 10% you only have to count the gains for that year's income taxes, but you can't just choose to only withdraw the principal. Its prorated, so in other words, you have to imagine that you are withdrawing equally from both the principal and the gains corresponding to the fraction of your account that occupied by both. So if you have invested a principal of $100,000, and there are $50,000 in gains, and you want to withdraw $30,000, then you have to withdraw $20,000 from the principal and $10,000 from the gains. You would have to pay a $3,000 fee for the withdrawal, and would have to pay income taxes on the $10,000. If it was a traditional tax-deferred account, then everything would be the same, except you would have to pay income taxes on all of the $30,000. Because of both of those factors, withdrawing from a 401k early is basically never worth it, and you'd be better off having put that money in a taxable account instead if you knew ahead of time you wanted to withdraw before 59.5. So, if you plan on retiring before the age of 59.5 (or planning on major expenses before then), then you definitely should be contributing to a normal brokerage account. If not, you should just put in the 401k. Some quick (non-risk adjusted, basically napkin) math about retiring at exactly 59.5. Assuming a 5% real return, assuming you are putting 35k combined in the accounts each year with the 5% match on 23k of it accounting for the current 100k balance, you can expect around 1.35 million or so in today's dollars at age 59.5. Assuming you have very low risk tolerance in your withdrawal rates, you can withdraw around 44k a year (in today's dollars) indefinitely from that account (even if you get unlucky and retired on the equivalent to 1929). Does that seem acceptable to you? If so, then you can put money in the taxable account to either retire early or spend it on random stuff. Otherwise, you should probably put more into your other 401k. MegaZeroX fucked around with this message at 15:36 on Oct 5, 2023 |
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Oct 5, 2023 15:02
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dpkg chopra posted:My wife and I have maxed out our Roth IRAs. Her employer matches 5% of any 401k contributions, so that's what she contributes. My employer does not match so I haven't been contributing there. Early withdrawals from 401k accounts are usually subject to penalties https://www.irs.gov/retirement-plans/hardships-early-withdrawals-and-loans. You are probably thinking of IRA accounts, where you can withdraw the principal penalty free at any point. Is your wife ambiguously anxious about some unknown emergency happening, or do you have specific and known expenses coming up? You should be following the r/personalfinance flowchart. You are currently at this place: 
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Oct 5, 2023 15:09
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dpkg chopra posted:My wife and I have maxed out our Roth IRAs. Her employer matches 5% of any 401k contributions, so that's what she contributes. My employer does not match so I haven't been contributing there. Does your wife have a specific reason for why she might want to be able to access the money? It may be more effective to identify those reasons and budget/plan for them. You may also want to look at your current tax situation. 401ks lower your adjusted gross income, leading to you possibly paying less in taxes. Awkward Davies fucked around with this message at 15:30 on Oct 5, 2023 |
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Oct 5, 2023 15:21
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Organza Quiz posted:Hello thread, I have a super basic investment question. This is pretty much exactly the scenario we've just been debating about how to invest. If you've already got an emergency fund and no near/mid term expenses, the optimal strat is invest the whole shebang asap. Assuming by ETF you mean broad based low fee funds then ya that's still the favorite. Maybe put a portion in bonds and whatever the Australian equivalent of TIPS/I bonds is. I dont have the stomach to do that, nor the confidence that plans wont change and we'll be spending some in the near/mid term, but I am weak Also, superannuity thing, maybe with this 200k you can increase what you put in there and save on taxes? Worth checking
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Oct 5, 2023 15:50
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dpkg chopra posted:My wife and I have maxed out our Roth IRAs. Her employer matches 5% of any 401k contributions, so that's what she contributes. My employer does not match so I haven't been contributing there. Roth IRA contributions can be removed early with no penalty or taxes, and Roth 401k money can be rolled into Roth IRAs. So consider adding Roth contributions to your wife's 401k if that is an option because there is that pathway to get the money out penalty free if needed. It would generally be recommended not to pull money out of a Roth early, but it is nice to know that its an option in case of emergency.
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Oct 5, 2023 15:53
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Thanks all, this is super helpful. I was clearly confusing the Roth IRA rules with the Trad 401k rules. I don’t think either of us have access to a Roth 401k, so I’m going to sit down with her and reevaluate our next steps.
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Oct 5, 2023 18:08
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Possibly dumb question — my company doesn't offer a 401k, so I've just been maintaining an investment account where I just dump my long-term savings into a Vanguard index fund. Haven't touched it in ten years, just letting it ride. Would there a big advantage to also setting up a Roth IRA in addition?
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Oct 5, 2023 18:18
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morestuff posted:Possibly dumb question — my company doesn't offer a 401k, so I've just been maintaining an investment account where I just dump my long-term savings into a Vanguard index fund. Haven't touched it in ten years, just letting it ride. Would there a big advantage to also setting up a Roth IRA in addition? Yes.
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Oct 5, 2023 18:23
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morestuff posted:Possibly dumb question — my company doesn't offer a 401k, so I've just been maintaining an investment account where I just dump my long-term savings into a Vanguard index fund. Haven't touched it in ten years, just letting it ride. Would there a big advantage to also setting up a Roth IRA in addition? When you say "investment account" do you mean a taxable account? Are you contributing anything to a tax advantaged account? If not, you should absolutely open an IRA
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Oct 5, 2023 18:29
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drk posted:When you say "investment account" do you mean a taxable account? Are you contributing anything to a tax advantaged account? I would normally agree, but he needs to make sure he's eligible under the income limits and so forth.
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Oct 5, 2023 18:31
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MegaZeroX posted:Any early withdrawal from a 401k carries a 10% tax on whatever you withdraw, unconditionally. If it is from a Roth 401k, then, on top of the 10% you only have to count the gains for that year's income taxes, but you can't just choose to only withdraw the principal. Its prorated, so in other words, you have to imagine that you are withdrawing equally from both the principal and the gains corresponding to the fraction of your account that occupied by both. So if you have invested a principal of $100,000, and there are $50,000 in gains, and you want to withdraw $30,000, then you have to withdraw $20,000 from the principal and $10,000 from the gains. You would have to pay a $3,000 fee for the withdrawal, and would have to pay income taxes on the $10,000. If it was a traditional tax-deferred account, then everything would be the same, except you would have to pay income taxes on all of the $30,000. Adding to this: your plan provider might make withdrawing more of a pain in the rear end than you've imagined. There will be more phone calls and paperwork than simply pressing a "cash out" button, and it will take time. On top of that, some workplace plans will perform their own withholding for your taxes' sake, as a matter of policy. (I wish there was an "I know not to spend this down to 0, please just give me my money" checkbox.) As opposed to a Roth IRA, where (at most brokerages, anyway) you control the account and give permission. But that's more of a general comparison point.
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Oct 5, 2023 18:38
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It's best to think of tax-advantaged retirement savings account as a tradeoff. The government is offering you a tax break in exchange for you committing to saving money for your retirement, because if you save for your retirement you are less likely to wind up broke and dependent on the state when you're old. If you have inadequate cash savings or have short or medium-term spending plans, that money doesn't belong in your tax-advantaged retirement accounts. Yes, there are account types that allow you to borrow against or withdraw part of the money without hefty penalties, but those are mostly not ideal for various reasons. One consideration though is that you have a certain amount of tax-advantaged "space" you can fill with money each year, your contribution limits. Every year that you don't use up all that space is a permanent, irrevocable loss of possible tax savings. If you couldn't have afforded to put money into that tax advantaged space anyway, then you've lost nothing... but if you could have put $6500 into an IRA this year and just kept that money as cash, then you may find ten years from now that you really wish you had put that money in back then and seen it grow tax-free with tax advantaged withdrawals (roth) or deposits (trad). If you are going to be earning enough for a lot of your career to be maxxing out your contribution limits, then each year you don't do that is a tax expense you could have saved. Weigh that against the flexibility of use of your money that you gain by keeping the money in a non-tax-advantaged account. This weighting is personal and depends on all your own needs and plans so folks in this thread can't really make this decision for anyone.
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Oct 5, 2023 18:58
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| # ? May 31, 2024 13:22 |
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A Roth account is strictly superior to a brokerage account though except for some very edge cases involving the taxable cost basis of who inherits your shares after you die and how rapidly they need to cash those shares out. Contributions to Roth IRAs can be withdrawn tax/penalty free before retirement and even conversions can be withdrawn tax free if you let them settle for 5 years after the conversion. Meanwhile all your dividends, interest and capital gains grow untaxed, while they absolutely would be taxed in a brokerage account. The current "meta" of investing is finding ways to funnel as much money as possible into Roth IRAs for good reason. morestuff posted:Possibly dumb question — my company doesn't offer a 401k, so I've just been maintaining an investment account where I just dump my long-term savings into a Vanguard index fund. Haven't touched it in ten years, just letting it ride. Would there a big advantage to also setting up a Roth IRA in addition? Don't dump your investment account shares though if possible as that would likely make a tax bill. Just start funneling new money up to the current $6500/year contribution limit into the Roth IRA.
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Oct 5, 2023 21:00
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