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Zero One posted:Yes in a taxable brokerage you owe tax on any gain from the sale of securities. It doesn't matter if you withdraw the cash or leave it there or even reinvest it. So to be clear, in my taxable account, as long as I don't touch the shares that I bought, I don't have to worry about it tax-wise? What about things like dividends? Is it considered either capital gains or ordinary income? I assume automatic reinvestment isn't relevant here.
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Jan 9, 2017 23:37
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totalnewbie posted:So to be clear, in my taxable account, as long as I don't touch the shares that I bought, I don't have to worry about it tax-wise? Dividends are taxed, if they are qualified dividends then they are taxed at lower rates. Your tax paperwork will say if they are qualified or not.
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Jan 9, 2017 23:45
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ETB posted:I've been charged to research and propose a retirement plan for my startup. The best option I've found for keeping costs low is a SIMPLE IRA through Schwab, given it has no maintenance fees and a great selection of low-ER funds and ETFs.
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Jan 10, 2017 01:09
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Star War Sex Parrot posted:Don't forget dividends. Considered writing about them but I was on my phone and it was just a basic explanation.  But since there are questions... totalnewbie posted:So to be clear, in my taxable account, as long as I don't touch the shares that I bought, I don't have to worry about it tax-wise? Yes in a taxable account you will need to report and possibly pay tax (consult a CPA) on Dividends and Interest payments made even if you don't do any trades. Your brokerage firm should send you some nice forms every tax season to tell you exactly what to plug into your tax software. This also applies even if your dividends are automatically reinvested. You still need to pay tax on the cash amount that was paid to you. And then pay more tax again if you sell those reinvested shares at a gain. Zero One fucked around with this message at 01:35 on Jan 10, 2017 |
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Jan 10, 2017 01:29
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ETB posted:I've been charged to research and propose a retirement plan for my startup. The best option I've found for keeping costs low is a SIMPLE IRA through Schwab, given it has no maintenance fees and a great selection of low-ER funds and ETFs.
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Jan 10, 2017 09:59
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Zero One posted:Considered writing about them but I was on my phone and it was just a basic explanation. monster on a stick posted:Dividends are taxed, if they are qualified dividends then they are taxed at lower rates. Your tax paperwork will say if they are qualified or not. Great, thanks. I did think I'd have to pay taxes, but then the earlier posts confused me a bit.
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Jan 10, 2017 17:07
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I've been contributing to a Roth IRA for years as a lowly paid PhD student. Now that I'm making a bit more, I'm still doing a Roth but should i consider contributing to a regular IRA instead? Is there a good rule of thumb of what level of income it becomes better to do a regular IRA? If it makes a difference, the IRA is the only tax advantaged space available to me. I keep the rest in a taxable brokerage. E: nevermind, think i answered my own question. I'll probably be in a higher bracket when I retire so I'll stick with Roth. alnilam fucked around with this message at 18:51 on Jan 10, 2017 |
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Jan 10, 2017 18:20
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I know this has been discussed the past few pages but I wanted to be sure I understood this correctly. A 401k that has the After-tax contribution feature, which then allows you to do a Roth In-plan conversion is basically allowing you to take your 401k after-tax contribution and just throw that into a Roth IRA (rather than Roth 401k), correct? So theoretically: $18k (max 401k contribution) + company match + $27k is the total savings opportunity presented here, with $27k essentially being allowed to grow tax free and withdrawable after 5 years? Now here's another thing I'm wondering. This company I'm working at also has an ESPP for 10% of the stock price. Would I then best be served by doing the following: Max 401k contribution (since they match the full contribution) Max non-deductible IRA ($5500) Any remaining money, use ESPP to buy stock, and then once the stock is purchased, take the 10% return and convert that to post-tax contributions into the 401k Convert post-tax contributions into the Roth? Apologies if that's long-winded. I've never been at a company with this specific feature in their 401k so I wanted to be sure I understood this at a high level.
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Jan 12, 2017 06:46
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Shadowhand00 posted:I know this has been discussed the past few pages but I wanted to be sure I understood this correctly. 1. Yes. Though a company doesn't have to let you contribute the full $27K to your after-tax; ours has limits because of safe harbor. 2. Depends on the ESPP. Assuming like many plans it lets you buy at a discount and sell soon after it vests (no holding period), then it's actually a very good deal, much better than it appears. But I don't think you can "convert it" into post-tax 401k contributions; those have to come out of salary. What I would do is (assuming you can make all these goals): - make sure ESPP is maxed out every paycheck; - max out HSA early in the year if you have one; - if you qualify for the backdoor Roth (no assets in traditional IRA to force the pro-rata rule), contribute to a traditional and non-deductible IRA as soon as you have the cash and immediately convert to Roth IRA - max out 401k traditional as soon as you can - max out 401k after-tax and roll that into a Roth IRA. You can also roll this over into a Roth 401k but there are restrictions on how often you can do this, I think it's once a quarter, that doesn't apply to rolling it over to a Roth IRA, and with the IRA you've probably got a better fund selection. Also I hate keeping track of 401ks that have mixed Traditional/Roth because I have an account which is part fully taxable and part tax free. - save in taxable
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Jan 12, 2017 08:03
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Also I believe after-tax contributions to a 401k are treated like a non-deductible traditional IRA. So they are taxed at ordinary income tax rates going and, and again at ordinary income tax rates on the full amount withdrawn going out. The only benefit is that the growth is tax free. However, a taxable account would likely result in less tax paid since you'd pay at long term capital gains rates on just the gains instead, even though there would be tax drag on the growth. So unless you're able to roll those contributions to a Roth IRA, it doesn't make sense to make after-tax 401k contributions that aren't actual Roth contributions.
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Jan 12, 2017 13:28
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What's the consensus on what to do with an HSA after leaving a job? I have around $7,000 parked in one, with $5,000 of that invested. I'm trying now to find out about fees and dividends, something a lot easier with the previous HSA company, and trying to decide whether or not to transfer it elsewhere. Worth seeking out the "best" HSA custodian for a few percentage points, or just leave it as is?
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Jan 12, 2017 16:23
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What's the general feeling on ESPP? My new company offers 15% discount, 1 year required hold before we can sell. Is there a rule of thumb for when this becomes worthwhile / how much to be putting into it (I believe our max is 10% of salary)?
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Jan 12, 2017 17:04
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I would personally take advantage of it and sell immediately at the one year mark as long as you already have some money saved up in more stable investments. Go into it with the understanding that you becoming unemployed and your stock becoming worthless at the same time is not an unlikely outcome. Side question, has anyone here tried several less broad funds in their taxable account for the purpose of loss harvesting? I figure I'd probably be way to lazy for it, but just curious.
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Jan 12, 2017 17:17
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monster on a stick posted:
Thanks for the great info. This particular one is a sticking point. For 2017, I have yet to contribute to my IRA. Should I open a new IRA at Vanguard for the specific purpose of rolling over? I've been contributing to an IRA I already had at Vanguard from rolling over a 401k a while ago but it seems like disentangling the money there would be a headache. I'm also going to assume this is separate from the Mega backdoor since this would be maximizing the $5500 traditional non-deductible IRA and then throwing that into my Roth?
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Jan 12, 2017 18:33
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Chu020 posted:Also I believe after-tax contributions to a 401k are treated like a non-deductible traditional IRA. So they are taxed at ordinary income tax rates going and, and again at ordinary income tax rates on the full amount withdrawn going out. The only benefit is that the growth is tax free. However, a taxable account would likely result in less tax paid since you'd pay at long term capital gains rates on just the gains instead, even though there would be tax drag on the growth. So unless you're able to roll those contributions to a Roth IRA, it doesn't make sense to make after-tax 401k contributions that aren't actual Roth contributions. Not quite. You don't pay tax on after tax contributions when they come out, but you'll pay tax on the pro-rated portion of any withdrawal that came from earnings. You'll never pay income tax on the same money twice. But yeah without backdooring into Roth accounts after-tax accounts aren't very useful for buy and hold investors. As long as long term capital gains are taxed at such a low rate it'll be worse than a taxable account as soon as you withdraw more than a tiny amount.
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Jan 12, 2017 18:51
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Shadowhand00 posted:Thanks for the great info. This particular one is a sticking point. For 2017, I have yet to contribute to my IRA. Should I open a new IRA at Vanguard for the specific purpose of rolling over? I've been contributing to an IRA I already had at Vanguard from rolling over a 401k a while ago but it seems like disentangling the money there would be a headache. Yes, that's what I did. I have a Traditional IRA account at Vanguard whose only purpose is to get a $5500 contribution, and once that settles, immediately gets converted into a Roth (and so moved into a different account.) The rest of the year it just sits there empty. But it sounds like you have a regular traditional pre-tax IRA from rolling over a 401k - the problem is the pro-rata rule (google this) means that part of the money you are rolling over is considered taxable (and google results will show you why and the math behind it.) This is why sites that talk about the backdoor Roth talk about getting rid of any and all traditional, pre-tax IRA money first, for instance by rolling it over into your current workplace 401k plan. That's what I did. Honestly if you have pre-tax money in a traditional IRA, I would not bother with the backdoor Roth. Either roll your traditional IRA over into a 401k or just do a regular Roth. The pro-rata rule doesn't really apply to the mega backdoor, but one reason you want to do the conversion from after-tax 401k to Roth IRA ASAP is so there aren't any earnings that make tax calculations fun. I literally call the next day and say "send me a check that I can send to Vanguard." Desuwa posted:Not quite. You don't pay tax on after tax contributions when they come out, but you'll pay tax on the pro-rated portion of any withdrawal that came from earnings. You'll never pay income tax on the same money twice. The only exception I've heard would be if the after-tax IRA held something like REITs which throw off a lot of income taxed at ordinary rates, you expected a lower tax bracket in retirement, and there is literally no other option. Then it behaves kind of like a taxable account but with tax-deferred earnings, only you get to keep track of cost basis (your contributions.) Even then it was like "meh I'm not sure why you'd want to go through the hassle but you could?" monster on a stick fucked around with this message at 19:47 on Jan 12, 2017 |
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Jan 12, 2017 19:44
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Lamont Cranston posted:What's the general feeling on ESPP? My new company offers 15% discount, 1 year required hold before we can sell. Is there a rule of thumb for when this becomes worthwhile / how much to be putting into it (I believe our max is 10% of salary)? Lots of ESPP chat recently. It's a good deal as long as you can survive with the reduced income until you are able to sell. For your plan the 1 year hold does mean that you will not be subject to the higher short term sale tax rates. Of course there is the risk of the price crashing before you sell too.
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Jan 12, 2017 20:15
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Zero One posted:Lots of ESPP chat recently. It's a good deal as long as you can survive with the reduced income until you are able to sell. For your plan the 1 year hold does mean that you will not be subject to the higher short term sale tax rates. You can use options to protect against a price crash. It's additional money you need to spend to buy the put, but I think I would do it if 15% of my salary was effectively at risk.
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Jan 12, 2017 20:39
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Why is Edward Jones a ripoff?
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Jan 12, 2017 21:55
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An excellent question that is discussed in some detail in this link from the OP: http://www.etf.com/docs/IfYouCan.pdf In short, they operate with a huge conflict of interest that causes them to charge you more money for shittier services. It's the case for a very large number of financial services providers, not just EJ.
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Jan 12, 2017 22:01
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I didn't even realize that I made the thread title. Here's my original post when someone was asking about Edward Jones. quote:What accounts and institutions? Some of them may not be able to be moved. IRAs and 401ks from an employer you no longer work for will be the easiest to move. Edward Jones has funds that are basically actively managed Total Stock Market Funds with ER of 1.7% and they encourage you to buy their products. It's crazy. Leon Trotsky 2012 fucked around with this message at 22:04 on Jan 12, 2017 |
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Jan 12, 2017 22:02
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Did anyone ever write a dang letter to Jack Bogle?
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Jan 12, 2017 22:04
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Just the one:pig slut lisa posted:Fun fact: If you send a handwritten note to Jack Bogle he will send a handwritten reply back to you
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Jan 12, 2017 22:09
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Aw 
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Jan 12, 2017 22:10
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That's an awesome letter, thanks for sharing.
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Jan 12, 2017 23:33
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Woof Blitzer posted:Why is Edward Jones a ripoff? Before they basically charge you more money for worse performance vs. low cost passive index investments like VTI/VEA.
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Jan 12, 2017 23:33
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I'm looking for a place to put extra cash I don't have a specific goal for. I've got a very healthy emergency fund, maxing IRA, and 401k. I was keeping everything in savings with the thought of maybe using it as a down payment, but I think that due to a number of factors home ownership isn't for me. I've been looking at the Vanguard LifeStrategy funds, specifically the Moderate Growth Fund (VSMGX) as a potential option. I've been doing some research and it seems some people love it, while some think it isn't tax efficient so I'm pretty confused. I'm mainly looking for a "set it and forget it" type fund. Anyone else in this situation? or anyone have an opinion of VSMGX?
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Jan 13, 2017 04:10
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Yes. This is an impossible problem because a critical factor is "When will you need it?" and you don't know. I currently have some money split between a money market and a short term bond fund because I think I might want it some time in the next 5ish years. If I were sure I was willing to sit on it for maybe 15 years, I would look at something like VSMGX (which is an excellent fund if you like the risk profile). There are definitely tax consequences for using anything that spits out dividends, bonds are maybe the worst in that regard, but if there's a clever way of avoiding that other than tax loss harvesting I don't know what it is.
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Jan 13, 2017 04:32
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I saw this thing called HomeUnion that looks cool: http://www.cnbc.com/2017/01/13/becoming-a-landlord-is-just-a-click-away.html Am I an idiot or does this seem like a good way for me to buy a fourplex in a decent city somewhere in the Midwest or something?
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Jan 14, 2017 03:35
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oliveoil posted:I saw this thing called HomeUnion that looks cool: http://www.cnbc.com/2017/01/13/becoming-a-landlord-is-just-a-click-away.html It looks loving awful. It took way to much effort to find their fees, but they are sky high. They charge 3.5% on the sale which is double what a realtor would make and presumably the seller is still paying at least one realtor. They also charge 10.5% of the monthly rent which I believe is on the high end of property management fees. I'm highly skeptical that you can make a decent return through this. I'd also be concerned that one of the main benefits they list is the information they provide to select investment properties, but there is a massive conflict of interest here as they make money when you buy a house regardless of its long term profitability. It also removes both liquidity and diversity when compared to a REIT. If you want to add real estate to your portfolio with a hands off approach then I'd just buy a REIT. If you want the hands on approach then either buy your own home or become a landlord without this service. asur fucked around with this message at 04:09 on Jan 14, 2017 |
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Jan 14, 2017 04:06
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Since when is 3.5% twice what a realtor will make? In Illinois 3% each for the selling and listing agent is standard. I'm pretty sure it's that way in both Indiana and Ohio as well. I agree it doesn't sound like a good deal but I think the real estate market must be very unique where you are. Nail Rat fucked around with this message at 22:01 on Jan 14, 2017 |
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Jan 14, 2017 21:30
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Real estate is illiquid with lots of information asymmetry. Any academic text on real estate finance will ride this hard, Peter Linneman's textbook is a good one if you want to understand more of real estate investing instead of a flipper book. It is very much a commercial book, but is relevant to the actual investment side of things. At the same time, depreciation rules and 1031 exchanges mean that the tax code was written for real estate investing, you can get a lot of non-cash losses in addition to your cash income, then do a like kind exchange to defer capital gains until you die and your heirs pay the estate tax.
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Jan 14, 2017 23:01
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I have a Roth IRA through t. rowe price with the balance invested in one of their target-date funds. My 401k at my job is invested in exact the same target date fund (through a 3rd party). Is there any reason not to roll my Roth IRA into the 401k? Is this possible?
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Jan 15, 2017 04:25
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Spring Heeled Jack posted:I have a Roth IRA through t. rowe price with the balance invested in one of their target-date funds. My 401k at my job is invested in exact the same target date fund (through a 3rd party). Why would you want to roll a Tax free roth into a 401k?
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Jan 15, 2017 14:38
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Spring Heeled Jack posted:I have a Roth IRA through t. rowe price with the balance invested in one of their target-date funds. My 401k at my job is invested in exact the same target date fund (through a 3rd party). As etalian says, the question is why you would want to. First, you need to have a Roth 401k for this to even have edge cases where it might be reasonable. Do you have that offered as a choice for your 401k?
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Jan 15, 2017 15:14
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Even if it weren't a bad idea, I would bet those funds have different expense ratios despite having the same name.
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Jan 15, 2017 17:02
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I thought the general consensus is to have the tax advantaged accounts use both different types of advantage. 1 account uses pre-tax income and is then taxed at withdrawal, the other uses post-tax income and then the growth is not taxed at withdrawal. That way in 20-30-40 years when someone retires they will have some money in whatever way is best for whatever the tax situation is at the time. Since most 401Ks use pre-tax income, it's best to have a Roth IRA to use post-tax income and hedge bets that way.
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Jan 15, 2017 18:09
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I'm thinking of switching my Roth IRA Vanguard Target Retirement Fund to admiral shares and also taking on some more risk by eliminating the bonds. My thinking here is that I'm very risk tolerant partially because I also have a state pension fund I contribute to. I have $50,000 in the Roth now and I'm 30, is there anything I'm missing? Is the process just to hit "Exchange" on the website and add VTSAX, Total Stock Market Index Admiral Shares, and VTIAX, Total International Stock Index Admiral Shares, and update my automatic transactions accordingly? I was thinking 65% US and 35% international and do a rebalancing annually.
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Jan 15, 2017 22:34
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Were you invested in 2007/2008? If not, how confident can you be in your risk tolerance?
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Jan 15, 2017 23:21
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pokeyman posted:Were you invested in 2007/2008? If not, how confident can you be in your risk tolerance? I wasn't in the market then, no. I'm probably about as confident as someone could be without having gone through the experience of losing 30-50% of my investments that I have a high risk tolerance . I would never sell an investment because it dropped in price. I'm comfortable that I have 30-35 years until I withdraw this money, so what it does over a 3-5 year period isn't a huge deal. When stocks go down, I think about buying more, not selling.
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Jan 16, 2017 02:12
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