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So I've capped my 401k and my Roth the past few years, and I've become ineligible for Roth contributions this. I have a small portfolio that I actively trade with in order to have money not just sit in a savings account beyond what my 6 month nest egg should be, but the recent months have pretty much tanked the prior year's gains and I'm realizing I don't have much stomach for short term fluctuations in the market. Retooling my budget a bit and I'm kind of at a loss for what to do next. Right now I'm thinking about just splitting the excess evenly between an Ally online savings account that will be a house downpayment/wedding fund and my existing brokerage account where I will move towards a more buy-and-hold strategy. I'm set for the short term, I'm in good shape for the long term, but I'm completely baffled by what to do with my money on the 3-10 year horizon.
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Sep 21, 2015 21:44
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The easiest thing to do would probably put your extra money into index funds in taxable accounts. For simplicity you could mimic the allocations you have in your 401k / IRA. Have you looked into backdoor Roth IRAs? Also can you max out your HSA? Does your company offer after-tax 401k contributions (different than Roth 401ks)?
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Sep 21, 2015 21:53
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Saint Fu posted:The easiest thing to do would probably put your extra money into index funds in taxable accounts. For simplicity you could mimic the allocations you have in your 401k / IRA. I was considering just setting up a taxable brokerage with Vanguard and using the lifestyle funds for their 3-5 year target and terminating my existing E*Trade brokerage. Also a big fan of keeping things as consolidated as possible accounts wise. Right now my payroll/401k is in one place. My checking, brokerage, and Roth IRA are with E*Trade. My old 401k was rolled over into my Vanguard account. My savings are with a PNC Saving account. Considering moving checking + savings to Ally, Brokerage to Vanguard and begin to move to Vanguard Lifestyle fund, Roth to Vanguard, and terminating my E*Trade account (keeping the PNC alive, its an account I've had since like 2nd grade and is the easiest way to exchange money with parents/siblings when necessary as well as provide an easy way to get Certified Checks that are difficult with E*trade or Ally). I have not. I don't have one, I'm also young and don't think it is particularly necessary, not sure if I even have the option. They do not.
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Sep 21, 2015 22:01
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I have some 30-year EE Savings Bonds that are at or nearing maturity. I'm going through the process of converting my paper bonds to electronic by way of the treasurydirect.gov site. During the conversion, any bonds at maturity are automatically redeemed and placed into into an account on the site. From there you can buy other securities or send the funds to your bank account. I'm trying to determine if there is any reason to not push the funds back to my bank account. Here's my current situation: - Maxing out Vanguard Roth IRA Target date fund - On target to max out 401k with excellent low-cost Index funds - 12 months emergency savings + small RDF in 'high-yield' savings (I'm pretty cautious with having liquid savings) - No HSA offered through work - Not planning on moving soon. - Car is still running strong but is nearly 14 years old. So there may be a need for buying a nice used car in the next ~5 years, but part of the large emergency savings can be used for that, if necessary. - No debt outside of mortgage So basically, is there any reason to put the redeemed funds back into bonds separate from the bond index funds in my retirement funds? I just want to make sure I'm not missing any opportunities with this process. Should I instead start a taxable account through Vanguard with the funds? It just might seem to hurt to pay taxes on redemption and then through the taxable account, but if that's the best option, that's where I will go! Thanks, thread. No joke, it inspired me to get my rear end in gear planning for retirement and handling my money in smarter ways.
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Sep 22, 2015 02:12
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Nephzinho posted:I have not. It's probably also worth it to look into if you're eligible to contribute to an HSA. It doesn't need to be through your employer, you just need to be enrolled in a high deductible health care plan. There are varying degrees of enthusiasm for HSAs in this thread but for someone like you who is already maxing out their other tax-advantaged accounts, it's a pretty smart move. Here's a link about why it's a smart way to save for either retirement or future expenses.
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Sep 22, 2015 09:22
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Saint Fu posted:It's probably also worth it to look into if you're eligible to contribute to an HSA. It doesn't need to be through your employer, you just need to be enrolled in a high deductible health care plan. Thanks for the link. I'm 24 and still under my parents' (good) health insurance and thus can't contribute, but in ~16 months i'll start contributing the max to HSA after this explanation.
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Sep 22, 2015 17:02
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Saint Fu posted:Since you don't have an existing traditional IRA listed as one of your accounts, backdooring a Roth IRA is easy. Definitely worth looking into. The 401k rolled over into my Vanguard account is a traditional IRA, which was why i hadn't looked into doing a backdoor because I knew it complicated things. Sorry if that wasn't clear. I will look into this, but I think I would rather put the money into a medium term holding or a savings account for the house/wedding fund. Potentially start a 529 for future kids? Not sure how complicated it is to start one and change the name on it down the road. Really I'm just at a point where I have some excess money in the budget that is mostly going into restaurants and toys and I would like to get it back into an automated flow of saving.
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Sep 22, 2015 18:23
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Is rolling over a sizable chunk of your retirement savings (401K) balance into an annuity ever a good idea? My Dad is getting the hard sell from a financial adviser to convert, and it sounds good over the phone but I'm certainly not convinced. He's already retired, gets a small pension (tiny) and gets social security which just about covers the bills, but is worried about the next (hopefully) 30 years or so of retirement living. I'm not a fan of tying up a huge chunk of liquidity in an insurance contract just for the sake of "guaranteed results". It looks to me like their trying to soak him for about $300K in tax-deferred retirement savings, in return for what is probably a high fee low return policy. Any thoughts or suggestions? I'd like to come up with a plan to counter the financial planner's sales pitch.
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Sep 24, 2015 04:29
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Untagged posted:Is rolling over a sizable chunk of your retirement savings (401K) balance into an annuity ever a good idea? My Dad is getting the hard sell from a financial adviser to convert, and it sounds good over the phone but I'm certainly not convinced. He's already retired, gets a small pension (tiny) and gets social security which just about covers the bills, but is worried about the next (hopefully) 30 years or so of retirement living. I'm not a fan of tying up a huge chunk of liquidity in an insurance contract just for the sake of "guaranteed results". It looks to me like their trying to soak him for about $300K in tax-deferred retirement savings, in return for what is probably a high fee low return policy. Any thoughts or suggestions? I'd like to come up with a plan to counter the financial planner's sales pitch.
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Sep 24, 2015 05:30
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Untagged posted:Is rolling over a sizable chunk of your retirement savings (401K) balance into an annuity ever a good idea? My Dad is getting the hard sell from a financial adviser to convert, and it sounds good over the phone but I'm certainly not convinced. He's already retired, gets a small pension (tiny) and gets social security which just about covers the bills, but is worried about the next (hopefully) 30 years or so of retirement living. I'm not a fan of tying up a huge chunk of liquidity in an insurance contract just for the sake of "guaranteed results". It looks to me like their trying to soak him for about $300K in tax-deferred retirement savings, in return for what is probably a high fee low return policy. Any thoughts or suggestions? I'd like to come up with a plan to counter the financial planner's sales pitch. Purchasing an annuity can be okay if it's used for liability matching, i.e. specifically meeting expected monthly living expenses above what social security is covering. Beyond that need, I think they aren't as appropriate. The benefit is the guaranteed payments and longevity insurance they provide, the downsides include lack of inflation protection (unless you buy it) and some pretty complicated terms. I have a hard time believing anyone putting on a hard sell has your dad's best interests in mind. Keep in mind he can wait on this, its not a now or never thing. You can find some decent info searching the bogleheads.org forums for annuities or SPIA, an abbreviation for the most common annuity appropriate for a retiree. There are some online SPIA quote/calculator sites that could give you some ballpark numbers to see if the policy is BS. It's easy to see the salesman drooling over $300k in revenue... Be careful. Edit to clarify the situation is almost certainly a bad idea, but annuities have a specific situation where they can be beneficial.
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Sep 24, 2015 05:42
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Untagged posted:Is rolling over a sizable chunk of your retirement savings (401K) balance into an annuity ever a good idea? My Dad is getting the hard sell from a financial adviser to convert, and it sounds good over the phone but I'm certainly not convinced. He's already retired, gets a small pension (tiny) and gets social security which just about covers the bills, but is worried about the next (hopefully) 30 years or so of retirement living. I'm not a fan of tying up a huge chunk of liquidity in an insurance contract just for the sake of "guaranteed results". It looks to me like their trying to soak him for about $300K in tax-deferred retirement savings, in return for what is probably a high fee low return policy. Any thoughts or suggestions? I'd like to come up with a plan to counter the financial planner's sales pitch. Read this: http://www.bankrate.com/finance/insurance/immediate-annuities-do-it-yourself-pensions-1.aspx And use their calculator and tools to see what an equivalent immediate annuity should actually cost. There ain't no such thing as a free lunch. An immediate annuity is just you selling some risk for which the annuity provider is expecting to make a tidy profit. e: The biggest drawback of an annuity is of course that if you don't live very long then they keep all your monies. e2: Also read all the annuity pages here: https://www.bogleheads.org/wiki/Immediate_fixed_annuity e3: Here (http://www.immediateannuities.com/) is the site with the real time quotes from vendors. Murgos fucked around with this message at 20:13 on Sep 24, 2015 |
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Sep 24, 2015 20:04
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Murgos posted:Read this: http://www.bankrate.com/finance/insurance/immediate-annuities-do-it-yourself-pensions-1.aspx Not to mention annuities are already using conventional investments such as stocks and bonds. The catch is you get changed a hefty commission in signing up for the plan and the yearly management fees are really high as well being in the 2%-3% of total AUM. Also if decide to cash of the plan you get charged a 7% to 20% surrender fee off the total of AUM. There's nothing you couldn't do with your own lower cost passive index investment plan.
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Sep 24, 2015 22:49
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I think you're grossly underpricing risk but I also mostly agree with you.
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Sep 25, 2015 00:51
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It should at least be stated that annuities are very useful for those that want to spend more than the usual advised SWR, and either have no heirs to receive their terminal wealth or do not care to pass any on. Annuitizing gives you a chance for a higher standard of living in retirement, so saying there is nothing it does that you can't do with a low cost investment plan is plain false. Annuities are often a much needed solution for retirees who have smaller assets and worried about drawing them down too fast. That said, you should almost never buy an annuity that is being sold to you, since most are awful products of the variable annuity. You should shop around yourself for a single premium annuity and carefully consider whether it is the right choice. For most people, a low cost investment plan is a better idea, and annuitizing is often unneeded insurance. All that said, in general, I think annuities are used more often than are needed. 80k fucked around with this message at 01:41 on Sep 25, 2015 |
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Sep 25, 2015 01:38
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Thanks for all the help guys. Think I've got a pretty good foundation with which to convince him to not do it.
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Sep 25, 2015 10:15
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Murgos posted:I think you're grossly underpricing risk but I also mostly agree with you. well there's so no such thing as a free lunch. The risk reduction of annuity concept gets counter-balanced by how they tend to have piles of different fees and pretty high expense ratios.
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Sep 25, 2015 18:07
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Does the IRS wash sale rule apply to ETFs that are essentially trading the same thing? For example, if I sell my Vanguard Emerging Market fund (VWO) and buy the Charles Schwab Emerging Market fund (SCHE), will that count as a wash?
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Sep 25, 2015 19:00
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District Selectman posted:Does the IRS wash sale rule apply to ETFs that are essentially trading the same thing? For example, if I sell my Vanguard Emerging Market fund (VWO) and buy the Charles Schwab Emerging Market fund (SCHE), will that count as a wash? No a wash sale only applies to the same stock. It's why robo-advisors get away with using correlated ETFs for their tax loss harvesting gimmick.
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Sep 25, 2015 19:56
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etalian posted:No a wash sale only applies to the same stock. Technically the IRS has issued no opinion on whether or not passive ETFs tracking the same index count as a wash sale or not. Effectively the software your broker uses to flag wash sales and calculate cost basis likely doesn't count it as a wash. It's up to you to decide whether or not you think you're likely to be audited and if you're likely to be the test case for unsettled tax and security law.
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Sep 25, 2015 20:15
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mrmcd posted:Technically the IRS has issued no opinion on whether or not passive ETFs tracking the same index count as a wash sale or not. As far as I'm aware, this is not true. If the ETF tracks the same index, then they're counted as sufficiently equivalent. If they track the same sort of index but the indices are different (for example S&P 500 vs DOW) then it's not a wash sale. But the IRS hasn't issued an official statement on the latter and they've intentionally kept it vague.
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Sep 25, 2015 20:51
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Rurutia posted:As far as I'm aware, this is not true. If the ETF tracks the same index, then they're counted as sufficiently equivalent. If they track the same sort of index but the indices are different (for example S&P 500 vs DOW) then it's not a wash sale. But the IRS hasn't issued an official statement on the latter and they've intentionally kept it vague. Well, you would be on thin ice, but the IRS has not made a ruling on it. For tax loss harvesting, I would say: - TLH between funds that track different indexes is totally fine: i.e. S&P500 (VOO) and CSRP US Large Cap Index (VV) (Vanguard's 500 index and Large cap index, respectively) - You are on thin ice: Two S&P500 indexes from different providers: SPY and VOO. - Definitely a wash: Share classes of the same fund: VOO and VFINX (Vanguard's S&P 500 ETF and its index fund) etalian posted:No a wash sale only applies to the same stock. Not exactly. The Robo-advisors follow the first guideline I outlined above and choose pairs that follow similar indices... like the RAFI and the Russell Fundamental are often TLH pairs for their value tilted offerings. They would not, for instance, TLH between SPY and VOO. But they would TLH between VOO and VV, which nearly every tax expert agrees is fine.
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Sep 25, 2015 23:00
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Hmm ok, that makes sense and I know you know your stuff 80k. The other trade that I made for TLH purposes was to sell VT and buy VTI and VXUS in essentially the same proportion as VT. I can maybe do something similar with VWO.
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Sep 26, 2015 01:37
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District Selectman posted:Hmm ok, that makes sense and I know you know your stuff 80k. IEMG would be a good TLH option for VWO.
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Sep 26, 2015 02:57
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As a result of recent market volatility, I am considering doing some tax loss harvesting before the year end. Would the below proposed set of transactions likely trigger wash sale rules? -Sell shares in Vanguard's developed markets index fund and emerging markets index fund, realizing a loss -Buy shares in Vanguard's total international stock index fund
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Sep 26, 2015 16:37
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80k posted:IEMG would be a good TLH option for VWO. Oh nice, IEMG has a sexy expense ratio too. Actually looking further into it, I may even prefer IEMG because it holds some more small cap options. Thanks!
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Sep 26, 2015 16:41
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Swingline posted:As a result of recent market volatility, I am considering doing some tax loss harvesting before the year end. Would the below proposed set of transactions likely trigger wash sale rules? I wouldn't sell anything, it's best to stay the course right now than trying gimmicks like tax loss harvesting.
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Sep 26, 2015 17:01
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TLH is legit and now would be the time to do it. Deducting a few grand every year from your tax bill helps and being able to offset some future sale is also useful.
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Sep 26, 2015 17:13
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etalian posted:I wouldn't sell anything, it's best to stay the course right now than trying gimmicks like tax loss harvesting. What's the basis for this advice? He is staying the course, because his money is only leaving the market for approximately 15 seconds, or however long it takes him to execute the trade. His fundamental holdings are going to be essentially the same. It's not a gimmick, it works out mathematically.
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Sep 26, 2015 17:21
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I have an RSU and ESPP question, if anyone cared to give an opinion. This is the first time I'm dealing with these kind of investments as part of compensation, so I'm trying to sort it all out. I work at a company that gives out Restricted Stock Units with a 3 year vest every year in lieu of raises beyond cost of living. So, I'm exposed to company stock there. They also have an Employee Stock Purchase Program. On this end, you can contribute 3%-20% of salary; there is no discount in price or average quarter guarantee, purchase is at date of the company's choosing; and the stock is given a 70% units match (  ) if you hold for 3 years ( ) as long as I am still with the company. I can sell the units at any time after the purchase, but would lose the match if sold early. So, in looking up information on the ESPP the setup seems not to fit the normal mold; advice seems to be participate and sell immediately, but seems to be based around assuming you get a discount or lowest average price in a quarter or something, and sell way before 3 years of holding. My current thinking is that, given the match providing a large buffer for loss risk, to at least participate in the ESPP and hold the stocks for the vest (knowing it's a bit of a gamble, it's in addition to funding a Roth IRA and over 10% 401K contributions, and knowing this money could be lost along with my job Enron style in the worst case). However, the long vesting period for the match and the combination of already having the exposure with the RSU's gives me concern; I would plan on selling off the stocks as they vest, but it's a fair amount to be tied up in company stock for years.
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Sep 26, 2015 17:39
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Yeah I don't understand how TLH is a gimmick. It wasn't invented by robo-advisors. It's apart of the index fund portfolio strategy. There's even a boglehead wiki page on it.
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Sep 26, 2015 17:46
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District Selectman posted:Oh nice, IEMG has a sexy expense ratio too. Actually looking further into it, I may even prefer IEMG because it holds some more small cap options. Thanks! Yea it is a great EM core holding. I should note that VWO will eventually add small caps: source Also, not sure what your mix is, but if you were to say mix VEA (FTSE developed market) and VWO (FTSE emerging market), which is a common mix, and then you TLH VWO to IEMG (and MSCI emerging index), you would end up doublecounting Korea. This is because FTSE and MSCI index providers disagree on whether Korea is emerging or not. This is not a big matter, but something to be aware of. After TLH'ing for about 10 years, I have a mix of ETF's that are not ideal but it all does the job just fine and the tax savings have been very beneficial.
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Sep 26, 2015 19:01
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Swingline posted:As a result of recent market volatility, I am considering doing some tax loss harvesting before the year end. Would the below proposed set of transactions likely trigger wash sale rules? Not a wash, this is fine.
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Sep 26, 2015 19:13
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My spouse earns a small amount of money as a side job and gets paid as a 1099. We each contribute the max to our Roth IRAs through a back-door. I'm considering trying to set up a solo 401(k) to shelter some of that extra income. Would we have to first set her up as an LLC in order to contribute to a solo 401k? Or can we just choose a broker for a solo 401k now and contribute up to the allowable "earned income" limit for her side business? And a followup question- Does the income need to be earned after we set up the 401k or could we contribute some/all of her income earned this year, even income earned prior to starting the 401k?
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Sep 29, 2015 18:02
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Saint Fu posted:My spouse earns a small amount of money as a side job and gets paid as a 1099. We each contribute the max to our Roth IRAs through a back-door.
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Sep 30, 2015 02:51
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moana posted:I think all you need is an EIN to set up the solo, you can get that online. You definitely can contribute income earned before setting it up, but make sure you set it up this year. If it's a small amount of income, would a SEP or SIMPLE IRA be better? Look into it.
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Sep 30, 2015 09:27
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Question about Roth IRA planning: I like to max my and my wife's IRAs as early in the year as possible. However, this year we will not have the $11,000 on hand in January to max them both. Here's our situation:
Here are the options I've been able to come up with for funding the IRAs (all options include using the $3-4K in January):
#2 seems better to me, but I've never sold from the brokerage account so I don't know if I can sell those particular shares, if I'll trigger some weird tax thing, etc. #1 is more straighforward but the money makes it in the Roth IRAs much later, plus there's the uncertainty of not knowing exactly what we'll be able to contribute once she starts her job. And are there other strategies I may be missing? e: I guess the question boils down to "If I have taxable assets that I can convert to tax-advantaged assets with no tax on the transaction, is there any reason not to?" pig slut lisa fucked around with this message at 14:30 on Oct 1, 2015 |
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Oct 1, 2015 13:51
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) and begin a full time job. We should then be able to chuck some unknown but higher number at the IRAs every month
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pig slut lisa posted:Question about Roth IRA planning: well most of it is due to how you take a tax hit by selling the taxable account assets to fund the retirement account, for most people the federal rate for this 15%.
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Oct 1, 2015 15:59
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etalian posted:well most of it is due to how you take a tax hit by selling the taxable account assets to fund the retirement account, for most people the federal rate for this 15%. I'd wait to sell the taxable stocks until January. Forecasts still predict a 5% rise in the S&P from now through 12/31.
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Oct 1, 2015 16:20
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Harvesting the tax losses could be smart but IIRC you can only offset gains. If you didn't have any capital gains (not sure if dividends count here as well) the tax loss would have to carried forward, right?
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Oct 1, 2015 16:23
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Saint Fu posted:Harvesting the tax losses could be smart but IIRC you can only offset gains. If you didn't have any capital gains (not sure if dividends count here as well) the tax loss would have to carried forward, right? http://www.irs.gov/uac/Ten-Important-Facts-About-Capital-Gains-and-Losses quote:If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately
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Oct 1, 2015 16:30
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