|
My mother just passed away, and she had a pension with the state that it looks like will pay out to her heirs (my brother and I). I won't get any real information until I have the death certificates and all the paperwork processed, but I'm estimating there will be more than $50,000 (possibly as much as 80) of inheritance. Her wishes were for my brother and I to split it, but I'm much better off financially than he is, and he has a daughter to support. I'm looking into putting my portion into a college fund or trust fund for his daughter, so that he can use his as needed (although I'll be encouraging him to put some into an IRA, since he's 36 and has no retirement funds). First, is there anything I should be aware of for setting up something like that for my neice, since I'm not her guardian? I don't necessarily feel the need to keep it from my brother or anything, but he's not great with money so I'd rather handle it all for him. Second, what are our best options for avoiding taxes on the money as much as possible? I've spent a lot of money on air fare and funeral expenses that I'm wondering if can be somehow deducted, and she has a number of outstanding medical bills that I'd hate to have to pay out of money that's already been taxed as inheritance.
|
#
?
Jul 26, 2013 17:55
|
|
|
|
| # ? Jun 11, 2024 21:25 |
|
|
SlightlyMadman posted:Second, what are our best options for avoiding taxes on the money as much as possible? Unless your mom had another five million laying around you're not aware of, it's a non-issue. The only exception would be if you inherited any pre-tax accounts, those would be counted as income. edit: I guess this kind of explains why estate taxes are unpopular despite practically no one being liable for any. AreWeDrunkYet fucked around with this message at 18:23 on Jul 26, 2013 |
|
#
?
Jul 26, 2013 18:20
|
|
|
You can set up a 529 fund for her.
|
|
#
?
Jul 26, 2013 18:28
|
|
|
AreWeDrunkYet posted:Unless your mom had another five million laying around you're not aware of, it's a non-issue. I wasn't worried about estate tax, but I assumed I'd have to pay normal income tax on the money; is that not the case? gvibes posted:You can set up a 529 fund for her. This is definitely the main option I'm considering. The only problem with it, is what if she decides not to go to college? I don't necessarily want to lock her into that if it's not what she wants, especially since I wouldn't be putting in enough to pay for it entirely. Another thing I'm reading about is called a "Kiss Fund" which sounds like a trust fund for smaller amounts of money. Does any know anything about these? I can't find much information about them.
|
|
#
?
Jul 26, 2013 19:02
|
|
|
SlightlyMadman posted:This is definitely the main option I'm considering. The only problem with it, is what if she decides not to go to college? I don't necessarily want to lock her into that if it's not what she wants, especially since I wouldn't be putting in enough to pay for it entirely.
|
|
#
?
Jul 26, 2013 19:19
|
|
|
gvibes posted:You can always change the beneficiary, so if some other family member had a kid you wanted to help out, you could do that. In addition, I think the funds can be used for trade/occupational schools as well. And worst case scenario, you can always withdraw with, I think, a ten percent penalty. Ah awesome, that sounds ideal then. I see Vanguard even has them, so I should be set.
|
|
#
?
Jul 26, 2013 19:50
|
|
|
SlightlyMadman posted:I wasn't worried about estate tax, but I assumed I'd have to pay normal income tax on the money; is that not the case? You're right, pensions are paid into with pre-tax money so you would owe income tax. Any other sort of inheritance would however not be subject to income tax. Funeral costs are not deductible, but I do believe you could have the estate pay them (leaving you to inherit the remainder and pay income taxes on that). You can deduct any medical expenses you paid for your mom, but again, it may be more straightforward to just pay them out of the estate and distribute the remainder. This is a case where spending an hour with a tax accountant would be worthwhile.
|
|
#
?
Jul 26, 2013 20:38
|
|
|
AreWeDrunkYet posted:You're right, pensions are paid into with pre-tax money so you would owe income tax. Any other sort of inheritance would however not be subject to income tax. Ah ok so basically I only have to pay income tax on anything she'd have been paying income tax on? She did also have a very small amount in bank accounts and a 401k so at least we won't be paying taxes on those. AreWeDrunkYet posted:Funeral costs are not deductible, but I do believe you could have the estate pay them (leaving you to inherit the remainder and pay income taxes on that). You can deduct any medical expenses you paid for your mom, but again, it may be more straightforward to just pay them out of the estate and distribute the remainder. Yeah, I need to get an accountant anyways because she didn't file her taxes this year, so I'll have to do that as well as this year and next. Thanks everyone for your advice!
|
|
#
?
Jul 26, 2013 21:05
|
|
|
Briantist posted:403b is pre-tax money, Roth IRA is post-tax, so you'd have to pay all the tax at once (more specifically, the amount you rolled over would be included in your income for that year). Might not be the best idea unless you happen to be in an unusually low tax bracket, like if you've been out of work the entire year, but in that case the tax bill is probably difficult to pay. Yes, I'm currently employed there. My 403b used to be a 401k from another company that I had rolled over into the 403b. Right now there's probably close to $30k in it. My current employer has a pension plan, but I'm curious to know what my options are for keeping the 403b going and making money. My current employer doesn't make any contributions so I'm practically pissing that money away if I can't find a way to make it earn more money.
|
|
#
?
Jul 26, 2013 21:24
|
|
|
SlightlyMadman posted:Ah ok so basically I only have to pay income tax on anything she'd have been paying income tax on? She did also have a very small amount in bank accounts and a 401k so at least we won't be paying taxes on those. A 401(k) or Traditional IRA would be in the same category as a pension, funded with pre-tax dollars and triggering income taxes. A taxable account (like a bank account) would be exempt. I am not sure about a Roth IRA, hopefully someone here can shed some light on that.
|
|
#
?
Jul 26, 2013 21:34
|
|
|
AreWeDrunkYet posted:A 401(k) or Traditional IRA would be in the same category as a pension, funded with pre-tax dollars and triggering income taxes. A taxable account (like a bank account) would be exempt. I am not sure about a Roth IRA, hopefully someone here can shed some light on that. Oh right, I don't know what I was thinking. Almost all of the assets will be coming from the pension anyways, I'm not even sure what she was doing with that 401k since there's only a couple thousand in it. Either way, I've just contacted an accountant so I'll let her figure it all out for me.
|
|
#
?
Jul 26, 2013 23:08
|
|
|
Roth IRAs are tax free through inheritance except for the 5 year rule where the person who started the Roth must have put money for five years before you can qualify. Also, minimum distributions apply.
|
|
#
?
Jul 27, 2013 07:39
|
|
|
I haven't heard much about the high dividend/dividend growers ETFs from Vanguard and other sources. Are those primarily for older folks who want some exposure to stocks with consistent dividends/income, and a young person should probably opt for a standard market index funds?
|
|
#
?
Jul 28, 2013 02:17
|
|
|
rhazes posted:I haven't heard much about the high dividend/dividend growers ETFs from Vanguard and other sources. Are those primarily for older folks who want some exposure to stocks with consistent dividends/income, and a young person should probably opt for a standard market index funds? Dividend growers would be equivalent to something like GMO's definition of quality... The yield is actually lower than the broad market but is more stable and has a history of increasing dividends. Less risk, less return. The high dividend would be a different method of accessing large value... Theoretically higher risk and higher reward. Generally, neither really makes any more sense for older folks any moreso than young other than an emotional attachment to spending dividends vs selling shares. Going for size/value loadings will offer better tax efficiency and lower costs though a dividend focused plan is not the worst thing you can do.
|
|
#
?
Jul 28, 2013 02:23
|
|
|
80k posted:Dividend growers would be equivalent to something like GMO's definition of quality... The yield is actually lower than the broad market but is more stable and has a history of increasing dividends. Less risk, less return. The high dividend would be a different method of accessing large value... Theoretically higher risk and higher reward. Generally, neither really makes any more sense for older folks any moreso than young other than an emotional attachment to spending dividends vs selling shares. Going for size/value loadings will offer better tax efficiency and lower costs though a dividend focused plan is not the worst thing you can do. Well, I think one advantage to dividends is that they aren't affected by the insanity of the market, versus selling you could theoretically get a lovely return during a market low.
|
|
#
?
Jul 28, 2013 09:25
|
|
|
Keisari posted:Well, I think one advantage to dividends is that they aren't affected by the insanity of the market, versus selling you could theoretically get a lovely return during a market low. I can see why you would think so, but there is essentially zero difference between a total return and a dividend focused approach, other than psychological. All returns, risks, drawdown, downside risk etc, is related to risk factors provided you are well diversified and are comparing portfolios with similar risk profiles.
|
|
#
?
Jul 28, 2013 17:21
|
|
|
I'm starting graduate school in the fall and I have a question that (I hope) someone will be able to answer. I want to open a Roth IRA, but apparently they require "earned income." I will be a TA being paid by the university. From what I've read, a fellowship would not count as earned income, but a TAship should I would think. I'll also be tutoring on the side and should make enough doing that to contribute, but that's kind of variable on my schedule. Universities really give graduate students the shaft. We get paid nothing and can't even open 401k or IRAs. The price of education, I guess. That being said, if I can't open an IRA what are my best choices? I would probably just invest in Vanguard index funds (bonds/stock/etc) and just leave them be, but taking into account taxes and expense ratios, it would still be very worth it, right? I imagine I should avoid their funds that undergo rebalancing (those retirement funds) to avoid the taxes. To be clear, I already have an emergency fund saved up. I just don't want my money sitting in terrible band accounts any longer.
|
|
#
?
Jul 29, 2013 19:22
|
|
|
dudemanbudguy posted:I'm starting graduate school in the fall and I have a question that (I hope) someone will be able to answer. There isn’t that much rebalancing in a standard index fund. You would pay taxes on the dividends and whatever minimal rebalancing there is, but overall it would be a pretty efficient option taxwise.
|
|
#
?
Jul 29, 2013 21:37
|
|
|
What are the go-to low expense index funds I should be hitting on fidelity? I have FSTVX, but want to branch out with some additional funds. I see DSEVX and FUSVX. Are there any others I should be keeping an eye on? EDIT: or would something like SPY be better?
|
|
#
?
Jul 29, 2013 22:48
|
|
|
Index Funds for now are slightly better than ETFs (this could change in the future). For Fidelity, your Spartan index funds are what you're looking at. DSEVX as an example is active, not index.
|
|
#
?
Jul 30, 2013 02:41
|
|
|
I have a 401k from my old job with about 3K in it, and I want to roll it over into a Vanguard IRA. I already have a Fidelity Roth IRA; so would moving that 3K count towards my contribution limit for the year?
|
|
#
?
Jul 30, 2013 14:11
|
|
|
KERNOD WEL posted:I have a 401k from my old job with about 3K in it, and I want to roll it over into a Vanguard IRA. I already have a Fidelity Roth IRA; so would moving that 3K count towards my contribution limit for the year? No, rollovers do not count as contributions with regard to the limits.
|
|
#
?
Jul 30, 2013 14:30
|
|
|
Cool. My old 401k is invested in a target fund that supposedly only has a .09% expense ratio, but looking closely at my balances I noticed that every three months they ding me with a 5 dollar fee from the principal. Also, it looks like the fund doesn't pay dividends either. I figure VFIFX is a better place for that money, and I can dump any future 401ks into that when I change jobs.
|
|
#
?
Jul 30, 2013 14:42
|
|
|
So here are the options I have available to me from my 401k through Fidelity. I went with a blended investment to be safe since I don't really know what I'm doing. Also, going off recent chat, should I possibly be splitting my money among a couple of these options?  e: also, what are people looking at when determining which option to choose? I'm looking at the long term ROI, so 10 years if they have it, 5 years if they don't. enthe0s fucked around with this message at 16:16 on Jul 30, 2013 |
|
#
?
Jul 30, 2013 16:09
|
|
|
Cheapest/Best option for you is to go with the Spartan Total Bond Fund, Spartan International Stock, Spartan 500 Index, and Spartan Extended Market Index at an asset allocation targeted for you. When we look at funds, what were looking for are (1. Funds with low expense ratios, 2. Funds that capture the entire market and are diverse, 3) Funds that are Index). The last 10 year algorithm is generally very bad, as things that did well the last 10 years tend to do poorly in the future.
|
|
#
?
Jul 30, 2013 17:51
|
|
|
ntan1 posted:Cheapest/Best option for you is to go with the Spartan Total Bond Fund, Spartan International Stock, Spartan 500 Index, and Spartan Extended Market Index at an asset allocation targeted for you. How can I determine what the best asset allocation targeted for me is? Is there some resource you can direct me to?
|
|
#
?
Jul 30, 2013 17:58
|
|
|
https://personal.vanguard.com/us/funds/tools/recommendation You're looking for the Stock/Bond/Money split For Stocks, you want 45% in the 500 Index, 25% in the Extended Market Index, and 30% in the International Index. Re-balance every other year. ntan1 fucked around with this message at 18:14 on Jul 30, 2013 |
|
#
?
Jul 30, 2013 18:11
|
|
|
ntan1 posted:https://personal.vanguard.com/us/funds/tools/recommendation Well, the calculator recommends a 70/30 split between Vanguard Total Stock Market Index Fund Investor Shares and Vanguard (VTSMX) and Total International Stock Index Fund Investor Shares (VGTSX), which means no bonds... I've heard of the 100-age rule for splitting between stocks and bonds however. Would I be better off adhering to that instead? At 22, I *could* put all my money into stocks but I think I would rather be a little on the safe side.
|
|
#
?
Jul 30, 2013 18:50
|
|
|
That sometimes happens. If your goal is to save the money for retirement after you are 55, then the 100% into stock is a possible option. There's a lot of theory that says that you still want to have 10% in bonds for the purpose of diversification. The 100-age rule is a very vague rule-of-thumb strategy, but it's perfectly reasonable to deviate from this depending on your goals. If you are extremely aggressive, go for the all stock strategy. Otherwise, put some more into bonds. Since you have access to Spartan Institutional Funds, just note that investing in 65% 500 Index, 35% Extended Market Index is about the same as investing 100% in the Total Stock Market Index Fund. Hence, the percentages I recommended earlier.
|
|
#
?
Jul 30, 2013 20:06
|
|
|
Ok, so who wants to do me? Here are my retirement accounts for me and my spouse. I can't transfer between the non-Vanguard funds (wife's work), the TSP and Vanguard funds as they are in different IRA accounts. Let's say, 15 years until I need it. Here's what I have: Sorry, I'm not good at posting tables  pre:Cash: 7% Bonds: 7% Large Cap Stocks: 54% Mid/Small Cap Stocks: 20% International Stocks: 12% pre:TSP C Fund (S&P 500) 35.2% Vanguard Health Care 23.0% (Yeah, I love this fund) TSP L Income 5.1% TSP S Fund 5.0% (This is DJ Broad index of US market minus S&P 500) VGD Strategic Equity 4.7% Vanguard Growth Idx 4.2% VGD FTSE All Wrld ExUS 4.2% VGD Energy Fund 3.2% Vanguard REIT Index 3.2% Invesco Real Estate 0.8% TSP I Fund 2.5% (Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index) VGD Sml Cap Growth Idx 2.5% Vanguard Mid Cap 1.5% TSP L 2030 Fund 1.5% VGD European Stck Index 1.2% TSP L 2020 Fund 1.0% Lazard Emerging Mkt 0.8%
|
|
#
?
Jul 31, 2013 04:43
|
|
|
Evil SpongeBob posted:Ok, so who wants to do me? Here are my retirement accounts for me and my spouse. I can't transfer between the non-Vanguard funds (wife's work), the TSP and Vanguard funds as they are in different IRA accounts. Let's say, 15 years until I need it. Same advice most other people are going to give you: 1) 23% into a single fund sector is a bad idea, because it's extremely risky. It's actively managed, and funds that have done really well the last 10 years historically have a high chance of failure. 2) TSP is extremely good, but you should consolidate your investments. Either use just L, or all of F C S I at your asset allocation. 3) Why Vanguard European Stock? Why Small Cap Growth? Strategic Equity Fund? 4) REIT does make sense in a diverse portfolio, but what's up with Invesco? It has a high expense ratio. 5) For a retirement in 15 years, your current assets seem a bit unbalanced. First, you probably want more internationally as you're vested mostly in the US. Second, you probably want a bit more in bonds/cash.
|
|
#
?
Jul 31, 2013 07:19
|
|
|
Is there any traditional advice on how much one should balance between Domestic and International stocks?
|
|
#
?
Jul 31, 2013 14:30
|
|
|
Vanguard, and many index profile constructors recommend between 20 to 40% (their portfolio is 30%). There are a few people who recommend 50%, because that's approximately the GDP of the US versus the entire world. However, a lot of people say this is bad due to currency risk and sovereign risk.
|
|
#
?
Jul 31, 2013 18:15
|
|
|
Zeta Taskforce posted:There isn’t that much rebalancing in a standard index fund. You would pay taxes on the dividends and whatever minimal rebalancing there is, but overall it would be a pretty efficient option taxwise. Okay, that is what I figured. Thanks.
|
|
#
?
Jul 31, 2013 19:26
|
|
|
ntan1 posted:Same advice most other people are going to give you: There are a few things I've left out because I'm a bit  but these are spread between different Traditional IRA, Roth IRA, Traditional 403 and Roth 403 accounts (hence the crazy overall # of funds). I will have a Federal pension, so I can be a bit more aggressive. Also, anything not Vanguard or TSP will be rolled over to Vanguard if my spouse leaves the job.1 - Yeah, I've been with this fund since 1995. I stopped putting money into it a while ago, but it does so well that it keeps creeping up percentage wise. I was shocked when I ran the numbers that it took up so much of my portfolio. That and almost 30% of my portfolio are sector funds. So now I'm dumping money into L funds and Midcap. 2 - Yup, agree. 3 - An attempt to increase my small cap and international. Strategic equity is my one actively managed non-sector fund. Been happy with its performance as I've been with it since inception. 4 - Will rollover to Vanguard REIT, but the expense ratio is 0.86%. Not terribly high, but unacceptable for a Boglehead. 5 - Yup, agree. Thanks. Overall, I realize I'm scattered and should consolidate similar funds. Once everything is in Vanguard or TSP, I plan on doing that. Ran the numbers through Vanguard's free Financial Engine service (look it up for those of you who have access). If you input non-Vanguard account logins and passwords, it will import your account balances and update them automatically. It will also give forecasts and recommendations. It will also automatically readjust your Vanguard accounts if you agree with their recommendations. I appreciate the input. Thanks.
|
|
#
?
Jul 31, 2013 22:41
|
|
|
My fiancée's father just let her know that she has $4500 in stocks in her name that she should put into a Roth IRA because he thinks the stock is about to triple and wants to avoid capital gains taxes. Let's get the first observations out of the way: - the money was left to her from her grandmother, he's been playing the stock market with her money, and is only just now letting her know - of course there's a significant chance the stock could tank as well (drug trial results about to be announced) and we don't like playing individual stocks Other background: - she does weekly contributions to a Vanguard Roth IRA to ultimately hit the $5500 max, about halfway through at this point - the money is in eTrade - although she made good money this year self-employed, she also will be paying a ton for tution as she's about to start nursing school. When I filled out the tax worksheets for her in order to pay estimated taxes it turns out that with the tuition deductions there are very little taxes to pay. So the taxes may not be a major concern. We decided, to split it three ways: max out the Roth IRA so she can stop the weekly contributions, leave some in this stock (so it won't be such a big deal if it crashes, and we also won't be chastised for the rest of our lives for not taking the father's advice if it soars), and take some out as spending money since we're about to go on an expensive vacation. Since this announcement is happening sooner than a transfer to Vanguard would take, we opened an eTrade account and got her shares transferred from her father's login to her own. All we've done so far is sell a little over half the stock in order to move it into a Roth IRA, since you can roll over cash but not shares into a Roth IRA, according to eTrade. Whether or not we use some of this to buy back this stock, or just put it all in the 2050 or whatever target retirement fund, we haven't decided. The plan is to move everything to Vanguard once we have the short-term allocation we want. We had this all under control - if the above reasoning makes any sense - and were about to transfer the cash into an empty eTrade Roth IRA when we got another call from her father. He says we can ignore the contribution limits by first making a traditional IRA then rolling that over into a Roth IRA. However, my understanding is that this allows you to ignore income limits for the Roth IRA, but not the $5500 contribution limit. Who's right here? Can we do a backdoor contribution and get it all into the Roth IRA? Also, more generally, how does our plan sound to split the money?
|
|
#
?
Aug 1, 2013 00:13
|
|
|
You are right, the IRA and Roth-IRA share a annual contribution limit. The "backdoor" only applies to the income limit.
|
|
#
?
Aug 1, 2013 00:20
|
|
|
SurgicalOntologist posted:My fiancée's father just let her know that she has $4500 in stocks in her name that she should put into a Roth IRA because he thinks the stock is about to triple and wants to avoid capital gains taxes If he thinks the stock is about to triple, tell him to sell his house, his car, his dog, everything last thing he owns, and borrow every cent he can and dump it all into that stock. He's about to hit the jackpot! He can buy it all back later and still be on top. Your future father-in-law is a financial moron, don't let him drag you down with him. To be serious, the fact that you're even asking us about $4500 is that it represents a significant sum of money for you both right now. So I'm guessing her portfolio isn't big enough where the $4500 just represents a small fraction. It makes no sense to hold such a large percentage of your portfolio in a single stock. The risk is just not worth it, so you should sell the stock. Now what to do with the $4500? If she's on track to max out her tax-deductable investment instruments this year, then she should continue her regular contributions to take full advantage of dollar cost averaging. If not, put it into a tax-deferred account, or use it to pay off debt. I'm hoping you already have significant liquid assets to fund that "expensive vacation" you already planned btw.
|
|
#
?
Aug 1, 2013 00:42
|
|
|
Evil SpongeBob posted:4 - Will rollover to Vanguard REIT, but the expense ratio is 0.86%. Not terribly high, but unacceptable for a Boglehead. Really? Vanguard lists this as .24% below  https://personal.vanguard.com/us/funds/snapshot?FundId=0123&FundIntExt=INT
|
|
#
?
Aug 1, 2013 00:50
|
|
|
|
| # ? Jun 11, 2024 21:25 |
|
|
I meant the Invesco expense ratio.
|
|
#
?
Aug 1, 2013 02:02
|
|