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I feel like if your criticism of a financial instrument is "it's numbers fuckstein exploitative bullshit" then you're kind of missing the point of capitalism.
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Apr 16, 2019 01:39
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We're talking about it relative to other financial instruments, comrade.
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Apr 16, 2019 03:21
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I wish my parents bought an annuity. I am worried about their burn rate, especially once my dad is unable to be the labor for fixing things in the house. They are insurance products plain and simple.
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Apr 16, 2019 03:25
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H110Hawk posted:I wish my parents bought an annuity. I am worried about their burn rate, especially once my dad is unable to be the labor for fixing things in the house. They are insurance products plain and simple. 
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Apr 16, 2019 03:41
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totalnewbie posted:They are good for people who would otherwiwe gently caress up even worse with their money because they can't but try to time the market or something. Except couldn't they always go to the "it's my money and I want it now"-type places (RIP J. G. Wentworth) and double gently caress themselves over? If your doctor tells you that your blood pressure is too low, you can always raise it by reading this article about a vulnerable population (children exposed to lead) being tricked out of their settlement annuities: https://www.washingtonpost.com/loca...a8c6_story.html How companies make millions off lead-poisoned, poor blacks By Terrence McCoy August 25, 2015 Washington Post posted:People like Gray who have suffered lead poisoning as children are especially vulnerable to predatory transactions. Many are impulsive and mentally disabled, but not so much that the law regards them as incapable of acting on their own behalf, as long as they’re 18 or older. quote:Access Funding, located in Chevy Chase, isn’t the biggest player in the industry. But the company’s court documents nonetheless illuminate the mechanics of this trade, as well as how little scrutiny it receives. The firm has filed nearly 200 structured settlement purchases in Maryland since 2013. A review of two-thirds of those cases, which primarily funnel through one judge’s courtroom in Prince George’s County Circuit Court, shows nearly three-fourths involved victims of lead poisoning.
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Apr 16, 2019 04:02
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DaveSauce posted:What IS the scam with annuities anyhow? Gazpacho fucked around with this message at 05:08 on Apr 16, 2019 |
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Apr 16, 2019 05:04
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Life annuities still make sense, as long as you realize they're intended to work as the opposite of life insurance. Life insurance protects you against financial harm from dying too soon, and life annuities protect you against financial harm from living too long. In both cases, the insurance company depends on actuarial averages to make a profit across the insured population, and you're paying them to take on the risk that you might be way outside those averages. Neither one is an investment. Like life insurance, there are all kinds of ways to make annuities look kind of like an investment. Those "investments" are almost always a terrible idea with questionable tax benefits, and lots of moving parts to let the insurer soak you with a bunch of fees. Term life insurance and fixed life annuities, though, are simple, well-regulated products that make a lot of sense for a lot of people. Writing off life annuities because there are a bunch of terrible annuity investment products is as silly as writing off term life insurance because there are a whole bunch of terrible whole life insurance policies out there.
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Apr 16, 2019 05:27
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Annuities are not good or bad. Nearly all of the annuities sold by financial advisors are awful and are often called indexed annuities or variable annuities... I think all of the negative talk on this thread about annuities is exclusively about these types of products. The ones you may be interested in are called SPIA (single premium immediate annuity), and are a very useful tool for certain retirement situations. There are lots of reputable insurance companies that sell these and there is seriously nothing good or bad about them... just tools that can be right for your situation. Writing these off as scams is pretty silly, imo.
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Apr 16, 2019 05:35
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80k posted:Annuities are not good or bad. Nearly all of the annuities sold by financial advisors are awful and are often called indexed annuities or variable annuities... I think all of the negative talk on this thread about annuities is exclusively about these types of products. The ones you may be interested in are called SPIA (single premium immediate annuity), and are a very useful tool for certain retirement situations. Also in this analogy there are mushroom salesmen in the forest telling you you will starve to death unless you eat their mushrooms. Speaking of the exceptions, though, what's your take on the Kitces article about SPIAs? https://www.kitces.com/blog/understanding-the-true-impact-of-single-premium-immediate-annuities-on-retirement-income-sustainability/ If you really think you're going to live past 100, and if you don't have any heirs, then... maybe? I feel like it's such a narrow asset band to be in where you have enough money to set up an annuity that gives you sizeable income, but not enough money that you can live in perpetuity without worrying. And the payouts make tax planning less flexible than if you had, like, a small STRIP ladder plus equities. Am I missing a good scenario where SPIAs would make sense though?
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Apr 17, 2019 00:06
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Sometimes I see people mention that you shouldn't fund X with "pre-tax" money, or fund Y with "post-tax" money. I don't understand the difference between the two. Isn't the whole point of money that it's fungible?
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Apr 17, 2019 16:44
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Ur Getting Fatter posted:Sometimes I see people mention that you shouldn't fund X with "pre-tax" money, or fund Y with "post-tax" money.
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Apr 17, 2019 16:45
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H110Hawk posted:
I just tried to open a Vanguard account and they wouldn't let me do it online. Guess I'll try Fidelity.
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Apr 17, 2019 16:50
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Addamere posted:I just tried to open a Vanguard account and they wouldn't let me do it online. Guess I'll try Fidelity.
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Apr 17, 2019 16:52
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Hoodwinker posted:If it's your first account with them you usually have to snail mail something in. After that, online works fine. It's just part of their KYC process I think. oh, so it'd be that way anywhere then? I *guess* I'll jump through the minor hoop of visiting my bank for a voided check.
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Apr 17, 2019 16:55
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Hoodwinker posted:I don't know if I've ever heard that, but I have heard people mention not to buy certain funds with non-tax-advantaged space because it's less tax-efficient. Bonds, for instance, or less tax-efficient than equities. Here's a couple of examples from this thread. H110Hawk posted:ESPP is a great way to gamble money and concentrate risk. Remember that it only makes you money if you the stock stays above your discounted purchase price for the 6 month period. During this time you are taking post tax money and locking it up for 1 year interest free. If your company hits hard times, like say the analysts decide you should have made a few more cents per share, you are just up poo poo creek for another quarter, year, or more. Further your income is tied to that same risk. It is literally doubling down on your company. High risk, high potential reward. single-mode fiber posted:I'd invest it as long as you're honest with yourself about your overall health and risk profile (e.g., even if you're physically fit, do you play a lot of contact sports where you might break a bone or tear a ligament?). The first couple years I was employed, I didn't go with the HSA, because I was in the process of building up my general 'emergency fund'/cash buffer, and I didn't want to risk getting caught with a 2k deductible/3k out of pocket. Overall, though, in the last 8 years, I've been to urgent care once, to the tune of like $250 for everything involved in that trip. So, in retrospect, it was definitely the right decision to pay out of pocket with post-tax dollars and just treat the HSA like another investment vehicle, but this is with the caveat that I'm relatively young, in good shape, and have no chronic illnesses or any elevated risks of disease.
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Apr 17, 2019 17:28
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Hoodwinker posted:If it's your first account with them you usually have to snail mail something in. After that, online works fine. It's just part of their KYC process I think. Odd, they had no issues with me opening an account and doing EBTs.
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Apr 17, 2019 17:41
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Ur Getting Fatter posted:Here's a couple of examples from this thread. For the second, it's not so much about it being significant that the dollars are post-tax so much as avoiding using money that's in the HSA because it's presently tax-advantaged and in a position to grow tax-advantaged. You could effectively remove the "post-tax" in that post and the message stays the same. The post-tax there is not the significant part, the out-of-pocket is. Most stuff relating to pre/post-tax is ultimately about tax-rate hedging. Also I misread your initial post as "contributing to Fund X" instead of "funding X."
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Apr 17, 2019 17:43
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Hoodwinker posted:For the first, I imagine it has to do with locking in the tax rate that you're paying for the stock on. Ok, thanks. I thought it might have been a term of art that I just didn't know.
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Apr 17, 2019 17:48
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Addamere posted:oh, so it'd be that way anywhere then? I *guess* I'll jump through the minor hoop of visiting my bank for a voided check. I had Bank of America when I did this and they let you generate a voided check online. You should always always look for ways to do this dumb crap online before going somewhere physically, at least that's my position. If you have a smaller bank you could call them and ask if they can mail or email you a voided check with your details. I don't think individual banks have a way of printing checks anymore, they all get sent off to a fulfillment center and mailed in packs. I haven't used a paper check at this point for probably nearing a decade. I also hate when things can only be done via US Mail, as you can imagine. I wonder if there are a bunch of processes that will STILL require US Mail in like 10 years. If there was a job that was dedicated to ridding the world of those types of processes and making them digital I'd like to have that job. (Voting is another tangentially related process, states will continue to be a patchwork for that) Something Offal fucked around with this message at 18:27 on Apr 17, 2019 |
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Apr 17, 2019 18:23
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Something Offal posted:I don't think individual banks have a way of printing checks anymore I'd be shocked if any bank branch DIDN'T have this ability. It's nothing but a laser printer (slightly modified, different toner) and paper stock. They may not offer printing a check for YOUR account, but having that setup is far more flexible for internal use (certified checks, settlement things, etc) than having pre-printed checks for the various accounts they need to draw on.
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Apr 17, 2019 18:29
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Ur Getting Fatter posted:Ok, thanks. I thought it might have been a term of art that I just didn't know. I think the easy confusion to make is funding source (pre/post tax) and treatment of said funds in the account. Please treat my examples below as extremely generalized, as there are ways for them to swing in all directions and as with all things taxes: it depends. You can fund an IRA with Pre ("Traditional IRA") or Post ("Roth IRA") tax dollars. Those funds are then treated in an advantageous way for taxes - You don't have any liability until you withdraw them. For a traditional account you owe ordinary income on the withdrawn amounts, for Roth you owe nothing. This differs from a "Taxable Brokerage Account" in that you can only fund a taxable brokerage account with post-tax dollars, you owe taxes immediately on all events, but you are generally talking about Capital Gains/Losses. Comparing a Traditional IRA to a Brokerage you are paying extra taxes on the IRA, but you have gained a bargain of not having to do anything until withdrawal. The Brokerage account you have to deal with the ups and downs right now but at a potentially much lower tax rate. This is why people like well capitalized low turn over mutual funds like VTSAX - they have very few taxable events happen. This above leads into where you might see people saying "buy X in Y account" - If you have a holistic chunk of money that you have allocated in various ways (say, 33% equity, 34% cash, 33% tax-free bonds) and it's in a variety of accounts (IRA/401k, FDIC insured savings, and taxable brokerage for example) then you would be smart to put your first 33% into the IRA to make the tax issues go away, the second 33% into an FDIC insured savings account, and the third 33% into a taxable brokerage account because you're not going to owe taxes on it regardless of what you do. If you swap the first and third things, then you would owe all the complications of taxes on your equity and get no bargain from your tax-free bonds. For my ESPP example, it is most closely related to a taxable brokerage account, but with a very specific bargain element attached to it which makes its taxes different. I can only contribute with post tax dollars (source), which are put in a bucket and stored in a broom closet until I buy the company stock at a set price, a 15% discount on the market price at the start or end of the offering period. (For My Plan They Are All Different and Congress Should Be Ashamed of Themselves.) Then some period of time later, I can sell the stock. This is all taxable (treatment), but I have a basis. For Example. Stock is worth $115 when bought, so I buy one share for $100 and sell it in two years for $215. I've paid taxes on the $100 already, so I just get that money back ("basis"), and then I owe ordinary income on the $15 (my "bargain", $115 - $100), and then owe long term capital gains on $100 ($215-$115). HSA's are like IRA's where you trade present day pre-tax dollars for future-dollars that can be withdrawn tax-free (never pay taxes on it) if you use it for health expenses. If you are smart about it, you can generally beat inflation in your investments there and have increased spending power in the future. Everyone will have medical bills in the future. There is risk that the cost of healthcare will outpace the growth of your account, that congress will unfuck the basically zero oversight (you can use a receipt in todays dollars a decade from now to get the money out), or that we will completely overhaul our health system to the point you would never be able to withdraw the money tax-free. Once you turn 65 you can withdraw it as ordinary income making it into yet-another-Traditional-IRA should you somehow not have any medical bills between now and then. Ordinary Income is just like W-2/1099-MISC income, it flows into your usual tax brackets: https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/ Long Term Capital Gains are different and always better: https://www.nerdwallet.com/blog/taxes/capital-gains-tax-rates/
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Apr 17, 2019 18:29
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Ur Getting Fatter posted:
So this may help you in terms of how you think about pre-tax and post-tax money. Yes, money is money, but it's all going to get taxed eventually (outside of a Health Savings Account, where you can pay no taxes on the money as long as it's spent on healthcare). But for most investing (retirement or otherwise) you've got to pay the taxes. Think of post-tax money as concentrated money (it's already had the taxes removed) and pre-tax money as dilute money (because you'll have to pay taxes on it when you draw it out). So $100,000 in a Roth IRA (funded with money that has already been taxed) or in a taxable investment account is worth more than $100,000 in a traditional IRA or 401k account, since those will eventually be taxed. Now, this is not to say that you should try to make all your investments Roth (if you have the choice between a traditional and a Roth 401k, for example), because often times you can anticipate paying a lower tax rate when you're withdrawing from the account in retirement than you would be if you had to pay the taxes out of your salary right now. Hopefully this is somewhat helpful.
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Apr 17, 2019 18:46
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Something Offal posted:I had Bank of America when I did this and they let you generate a voided check online. You should always always look for ways to do this dumb crap online before going somewhere physically, at least that's my position. If you have a smaller bank you could call them and ask if they can mail or email you a voided check with your details. My bank prints cashiers checks, so I imagine they'll print a voided check without hassle. I happen to live in the city where my bank is headquartered, too, so it shouldn't be an issue but for the fact that I have to actually go physically do it. Sadbrains and people aversion makes that hard, but is not relevant to this thread.
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Apr 17, 2019 18:47
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I decided to make a handy chart. Because I am a lazy rear end in a top hat, I did it in MS Paint instead of using my work computer, which is right there, to do it in Visio or something. Please post if I forgot anything and I'll expertly edit it in. e., looks like I forgot term life insurance. I think it's probably tax-deferred? I don't really know. e2; deprecated, see below posts Leperflesh fucked around with this message at 20:00 on Apr 17, 2019 |
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Apr 17, 2019 19:02
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Leperflesh posted:I decided to make a handy chart. Because I am a lazy rear end in a top hat, I did it in MS Paint instead of using my work computer, which is right there, to do it in Visio or something. Please post if I forgot anything and I'll expertly edit it in.
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Apr 17, 2019 19:03
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Do you like how I kept forgetting which sans serif font I'd used for the black text as I went along, and of course in paint you can't click on text already in the image to figure it out? I'm also thinking maybe I should take out the capital gains tax on sale of home thing, because that's kinda leaning into a different category of things: what kinds of capital gains are or are not taxed, and short/long-term capital games, etc. I put it in though because of our recent discussion about people possibly treating their homes as part of their retirement savings/investments. e. Pensions are also a confusing ball of wax that I didn't feel I had room to really dive into. Leperflesh fucked around with this message at 19:11 on Apr 17, 2019 |
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Apr 17, 2019 19:08
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I wouldn't fret too much about it. I think it serves as a handy reference into the variety of different options that fall under each tax treatment. I only started going down the finance rabbit hole myself about 5 years ago because I grew up seeing my dad's bar graph of my parents' IRA/401k values on his office wall, which meant I knew there were options for me to explore. Knowing there are choices is the first step to making them.
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Apr 17, 2019 19:13
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Leperflesh posted:I decided to make a handy chart. Because I am a lazy rear end in a top hat, I did it in MS Paint instead of using my work computer, which is right there, to do it in Visio or something. Please post if I forgot anything and I'll expertly edit it in. Pre-tax needs the words "until withdrawal" - you owe taxes on the money you withdraw from those accounts.
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Apr 17, 2019 19:16
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I also have an after-tax option for my 401(k), but there's distinct from the traditional and Roth contribution options: https://www.bogleheads.org/wiki/After-tax_401(k)
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Apr 17, 2019 19:20
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Leperflesh posted:I decided to make a handy chart. Because I am a lazy rear end in a top hat, I did it in MS Paint instead of using my work computer, which is right there, to do it in Visio or something. Please post if I forgot anything and I'll expertly edit it in. - the description of "pre-tax" probably needs some changing for accuracy sake - I'm actually now kinda confused as to what differentiates "pre-tax" and "tax-deferred" because I've always considered traditional 401k as being "tax-deffered", as you're deferring both your income taxes and capital gains to a later date - HSA being in the same category as things like traditional 401k seems a bit confusing since it's both pre-tax and also tax-free withdrawal, not sure if any other things you list here are included in that
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Apr 17, 2019 19:30
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SpelledBackwards posted:I also have an after-tax option for my 401(k), but there's distinct from the traditional and Roth contribution options: https://www.bogleheads.org/wiki/After-tax_401(k) If you can afford to fund this, do it. Do tax-deferred traditional contributions until you hit the 19,000bux limit, then aim for the 56,000 mark with after tax 
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Apr 17, 2019 19:36
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Leperflesh posted:I decided to make a handy chart. Because I am a lazy rear end in a top hat, I did it in MS Paint instead of using my work computer, which is right there, to do it in Visio or something. Please post if I forgot anything and I'll expertly edit it in. I thought 401(k)s and IRAs are traditionally considered "tax deferred" because you put money in pre-tax, but you are taxed on withdrawals (both principal and returns). Also isn't social security taxed as income? edit: Blinky2099 posted:- HSA being in the same category as things like traditional 401k seems a bit confusing since it's both pre-tax and also tax-free withdrawal, not sure if any other things you list here are included in that HSA and 529s are the only things in there that I know to be truly tax-free on both deposit and withdrawal, as long as they are used for qualified expenses. Not that other things I know to be wrong, just saying that HSA and 529 are the only ones I know for sure. edit again: ok 529s are post-tax on deposit and completely tax-free when used for qualified expenses, otherwise the gains are taxed (plus 10% penalty). DaveSauce fucked around with this message at 19:51 on Apr 17, 2019 |
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Apr 17, 2019 19:46
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Good suggestions, guys. Here's an updated version: e. deprecated, see a later post for the final version Better? I think HSAs are the only case where pre-tax money, accrued earnings, and withdrawals are all tax-free, under certain circumstances. Also, the tax-deferred category is intended to include only investments using post-tax dollars, for which you must also pay for cap gains/accrued earnings, but there is a tax advantage in that you can (sometimes electivesly) defer payment of tax on accrued earnings until maturity/cashout. That's too much to spell out on the chart, though, and I'm not sure how to shorten it without making the distinction even more confusing? Leperflesh fucked around with this message at 20:22 on Apr 17, 2019 |
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Apr 17, 2019 19:47
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DaveSauce posted:Also isn't social security taxed as income?
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Apr 17, 2019 19:50
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DaveSauce posted:I thought 401(k)s and IRAs are traditionally considered "tax deferred" because you put money in pre-tax, but you are taxed on withdrawals (both principal and returns). Essentially the first category is a special form of tax deferral; it's money you got to invest without paying income tax, but you will pay tax on the total amount in various ways when you withdraw. There are distinctions between them in how they treat accrued earnings, but again, this is supposed to be a simple category chart so I don't want to get too into the weeds on the details. I think social security contributions are taken out of your paycheck before calculating your income tax on the remainder? Did I remember that wrong? And then most people pay some income tax on the "net earnings" when you retire? I put SS into the first category because I felt it was the closest fit, but I could make a separate category just for it I guess, since it is significantly different. Also, low income folks pay an adjusted percentage of income tax on social security payments, down to 0% for those receiving less than $25k a year in total income including SS payments. And of course, SS is only making "earnings" in the sense that the government is defining a benefit based on your lifetime payments into it, but IIRC there's some fuzzy math there so it's not really the same. Honestly I throw it into the same confusing bucket as pensions: there's a lot of fiddly details, most people have little control over which details will apply to them, you just pay or receive the benefit as you work and then you get what you get.
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Apr 17, 2019 19:56
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Kylaer posted:If you can afford to fund this, do it. Do tax-deferred traditional contributions until you hit the 19,000bux limit, then aim for the 56,000 mark with after tax Danger! Don't forget to leave room for your employer matching or profit sharing if applicable! All of that money exists inside the $56k limit!
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Apr 17, 2019 19:56
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OK one more shot, I've improved the description for the rightmost category, hopefully to make it clearer e. deprecated, see a later post for the final version Leperflesh fucked around with this message at 20:22 on Apr 17, 2019 |
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Apr 17, 2019 20:00
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I thought "After-tax 401k" was the same as non-deductible Traditional IRA contributions. Funded with post-tax, tax-free growth, and you pay for gains on the way out. Is it not? That being the case, both of those things should probably be under Tax-Deferred.
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Apr 17, 2019 20:03
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Hoodwinker posted:I thought "After-tax 401k" was the same as non-deductible Traditional IRA contributions. Funded with post-tax, tax-free growth, and you pay for gains on the way out. Is it not? That being the case, both of those things should probably be under Tax-Deferred. Hmm, I think you're right; they're mostly vehicles used for the back-door or mega back-door roth, but if you never actually do the backdoor, then they're just tax deferral on the earnings?
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Apr 17, 2019 20:05
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Leperflesh posted:Essentially the first category is a special form of tax deferral; it's money you got to invest without paying income tax, but you will pay tax on the total amount in various ways when you withdraw. There are distinctions between them in how they treat accrued earnings, but again, this is supposed to be a simple category chart so I don't want to get too into the weeds on the details. Ah gotcha, the first version was confusing in its wording as to the intent.... made it sound like all the money was tax-free (both deposit and withdrawal), but I see you changed that so I think it's fine. quote:
I'm pretty sure FICA tax is on gross income minus a very select few things... as far as my paycheck is concerned, FICA is calculated after FSA money is taken out, but before anything else is taken out... even before 401(k) contributions, health care premiums, etc. Also I don't believe FICA taxes reduce your taxable income... so it's not really pre- or post-tax, it's just there.
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Apr 17, 2019 20:14
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