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First Time Caller posted:1) Should I open a traditional IRA and max it before adding funds to the taxable brokerage account? If so, what funds to select? Doesn't seem I can open one at Ally or TD Ameritrade, but I imagine I could once my TD account transfers to Schwab in May. Are you eligible to save on taxes? No Trad IRA deduction over $143k AGI if you are MFJ and have a 401k: https://www.irs.gov/publications/p590a#en_US_2023_publink100074297 edit: or a bit higher if one of you is covered by an employer retirement account and one isnt drk fucked around with this message at 02:26 on Mar 26, 2024 |
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Mar 26, 2024 02:15
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drk posted:Are you eligible to save on taxes? No Trad IRA deduction over $143k AGI if you are MFJ and have a 401k: https://www.irs.gov/publications/p590a#en_US_2023_publink100074297 MFJ w/ 401k and household agi >240k, spouse is not currently eligible for employer 401k.
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Mar 26, 2024 02:27
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Then, no. You can contribute to a traditional IRA but you will get no tax deduction, so dont do that.
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Mar 26, 2024 02:31
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You sound like a good candidate for a backdoor Roth IRA. The dollars have already been taxed, may as well have their gains never be taxed again. Assuming you have no existing traditional IRA balances.
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Mar 26, 2024 02:37
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First Time Caller posted:I'm 35 and married, taxed at 32%. I fund my employer 401k to $23k/yr with a 1to1 15% match. The only fund in the 401k is Vanguard Target Year 2050 and the balance is 260k. 1. Since you can't deduct traditional IRA contributions from your taxable income it doesn't make any sense to open one. I would stick to the 401k and the taxable account. 2. Nothing wrong with DRIP in a brokerage. The funds and split seem reasonable to me. You've got a bond allocation in your target date fund and none of your taxable account funds are super high yield so its reasonably tax efficient. Well, the yield on VXUS is a bit on the higher side but your allocation to it is fairly small. 3. Lump sum wins something like two thirds of the time depending on the time frame in question. The longer you draw out the DCA the more likely that lump sum will win out. But DCA can help people sleep at night. This is really up to you. I don't think there is a definitively correct answer here. (I am assuming you have an efund in place, no high interest debt, and no upcoming large expenses like kids college, new cars, ect...) Antillie fucked around with this message at 03:47 on Mar 26, 2024 |
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Mar 26, 2024 03:43
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I would advocate for automatic dividend reinvestment off in taxable accounts. Taking the dividends as cash into your settlement account allows you to rebalance without new contributions.
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Mar 26, 2024 03:50
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Yeah, also if you use SpecID cost basis all the reinvestments result in tons of tiny tax lots, which is annoying. They can trigger wash sales if you try to tax loss harvest, as well. Better to just manually direct accumulated dividends wherever they're most needed. And yeah, top priority, backdoor Roth if feasible. runawayturtles fucked around with this message at 04:37 on Mar 26, 2024 |
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Mar 26, 2024 04:34
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I am pro-DRIP for accumulation unless you are guaranteed to be reviewing your accounts monthly or something. Rebalancing needs are going to be minimal. Without auto-reinvesting, folks are liable to forget, and then just have "a bunch" of cash built up just sitting around doing nothing. Windfall - lump sum is mathematically best, but "sleep at night" trumps that as long as you're getting everything in within like a year or two. Note that you are "already" averaging into the market with your "normal" buys through 401k contributions, taxable brokerage contributions, etc. Also, with a ~25 year timeline, and this windfall is "substantial" for now but not like 80% of the total amount you have, then it really doesn't matter much. For the ~$100k, if you assume a 10% nominal return and you "average in" over a single year then you're basically spending an expected $5k to get some peace of mind. And after 25 years, that 5k now (~50k future on the high end) is probably not going to make a major difference in your overall quality of life if you're continuing at anything like your current financial trajectory.
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Mar 26, 2024 07:37
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I keep dividend reinvestment on in my brokerage account as well. The last time the market took a huge dump and I had the chance to TLH I was down tens of thousands of dollars, and the wash sale of a few dividend lots didn't really matter much.
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Mar 26, 2024 16:23
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First Time Caller posted:MFJ w/ 401k and household agi >240k, spouse is not currently eligible for employer 401k. Repeating backdoor Roth, and investigate the mega-backdoor roth potential too. You'll want to talk to the plan administrator at your employer and ask if the plan allows "after tax contributions" and either "in-service distributions" or transfers between after-tax contributions and the Roth 401k account. quote:Here’s a quick summary of what you need to have in place for the ideal mega backdoor Roth strategy: If not, then do backdoor Roth at least. Leperflesh fucked around with this message at 17:32 on Mar 26, 2024 |
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Mar 26, 2024 17:30
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Leperflesh posted:Repeating backdoor Roth, and investigate the mega-backdoor roth potential too. You'll want to talk to the plan administrator at your employer and ask if the plan allows "after tax contributions" and either "in-service distributions" or transfers between after-tax contributions and the Roth 401k account. Thirding backdoor Roth - you can still do it for 2023 as well (although the paperwork is a bit uglier on your taxes if you don't make the contribution in the same year as the conversion).
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Mar 26, 2024 22:11
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While I was just whining about how Principal doesn’t separate pre-tax and post-tax 401k money, they do make a mega back door Roth very simple. You just pick an after-tax percentage and turn on “Super Roth” and that’s it.
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Mar 26, 2024 22:29
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smackfu posted:While I was just whining about how Principal doesn’t separate pre-tax and post-tax 401k money, they do make a mega back door Roth very simple. That's nice. I just need my company to add mega backdoor then. We got Roth this year, so maybe backdoor next year.
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Mar 27, 2024 00:11
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I finally got around to transferring money from my lovely employer sponsored HSA into a Fidelity HSA. I was going to invest it all into the S&P 500. Is there any reason not to go with FNILX? Portfolio Visualizer shows it's basically equal to VOO, so all else being equal 0% ER sounds better than 0.03% or whatever. I don't foresee needing to transfer HSA custodians unless Fidelity goes to poo poo for some reason.
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Mar 27, 2024 03:57
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FNILX is perfectly fine, enjoy the rock-bottom expense ratio for capturing S&P 500 market share.
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Mar 27, 2024 04:16
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I have Fidelity at work and previously was 100% in on SSDLX, the 2050 target retirement fund. I'd turn 63 that year. I'd like to switch to something a bit more aggressive and with lower expense ratios. Our work funds don't include the Fidelity equivalents for VTSAX, so I'm approximating the US total market fund. Here's my current proposed allocation:
Highest expense ratio on those is 0.035%, while before the target fund had 0.2%. Seem fairly reasonable?
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Mar 27, 2024 15:51
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If you can get FSMAX (extended market fund), that is a better pairing for FXAIX than holding a mid and small cap fund. Otherwise, looks good. Those are good funds to have access to in a workplace acct.
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Mar 27, 2024 16:15
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drk posted:If you can get FSMAX (extended market fund), that is a better pairing for FXAIX than holding a mid and small cap fund. No FSMAX sadly, but thanks for the second pair of eyes. My partner has New York Life Investments and the fund options seem a bit worse. I tried to compare comparable-ish funds to my Fidelity and Vanguard funds to see if she can get her company to switch: pre:Fund Company ER 2050 Target (SSDLX) Fidelity 0.200% 2050 Target (VFIFX) Vanguard 0.080% 2050 Target (XXXXX) NYLI N/A S&P 500 IDX (FXAIX) Fidelity 0.015% S&P 500 IDX (FVIAX) Vanguard 0.040% S&P 500 IDX (MSPIX) NYLI 0.270% US Large Cap (FSPGX) Fidelity 0.035% US Large Cap (VLCAX) Vanguard 0.050% US Large Cap (IQSU) NYLI 0.100% US Mid Cap (FXMDX) Fidelity 0.025% US Mid Cap (VIMAX) Vanguard 0.050% US Mid Cap (IQSM) NYLI 0.190% US Small Cap (FSSNX) Fidelity 0.025% US Small Cap (VSMAX) Vanguard 0.050% US Small Cap (CSML) NYLI 0.360% INTL (FSPSX) Fidelity 0.035% INTL (VTIAX) Vanguard 0.120% INTL (IQSI) NYLI 0.160% US Bond Index (FXNAX) Fidelity 0.025% US Bond Index (VBTLX) Vanguard 0.050% US Bond Index (MTMSX) NYLI 0.530% Also, this is for a SIMPLE IRA, rather than a 401k. Not sure how that changes things. I do believe there's some kind of match, but I'll double check. With these ERs, should she consider maxing it out (to reduce income)? Or just hit the match and put the rest in taxable funds? Edit: Forgot to add the Small Caps in there, and man NYLI's ER there is quite a bit worse than the others. Not sure what to do now tbh. defmacro fucked around with this message at 14:10 on Mar 28, 2024 |
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Mar 28, 2024 14:00
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I'd probably dump most of it into that large cap at 0.10% ER. International at 0.16% isnt bad either. Sure, you can do better elsewhere, but paying 5 or 10 basis points more than the cheapest funds in the industry isnt that much of a drag on returns.
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Mar 28, 2024 15:19
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Makes sense, thanks!
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Mar 28, 2024 15:42
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drk posted:I'd probably dump most of it into that large cap at 0.10% ER. International at 0.16% isnt bad either. International at 0.16% jumped out to me as pretty cheap. Just a reminder that you're not obligated to achieve your desired allocation between asset classes within your 401(k) - you should be balancing across total 401(k), IRA, etc to chase cheap funds if you are spending the time to commit to an approach beyond TDF in tax advantaged retirement funds IMO.
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Mar 28, 2024 16:09
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Is it still generally recommended to set a 401k to a US Total Stock Index Fund, an International, and a US Bond Market fund as in Bernstein's booklet? I've had my stuff on TRIP2050 and i'm interested in taking a more active approach. My stuff is via Fidelity so it'd something like: 34% FXAIX, FPADX (at 80:20) 33% FSPSX 33% FXNAX I am maxing out my contributions, as a note. Deviant fucked around with this message at 16:12 on Mar 28, 2024 |
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Mar 28, 2024 16:10
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Deviant posted:Is it still generally recommended to set a 401k to a US Total Stock Index Fund, an International, and a US Bond Market fund as in Bernstein's booklet? A three fund portfolio is still a very good default for long term investors. Your proposed portfolio is overweight international, and I'd personally drop the emerging markets fund.
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Mar 28, 2024 16:35
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drk posted:A three fund portfolio is still a very good default for long term investors. How would you balance it out, then? I had included the emerging markets fund because my understanding was that FXAIX and FPADX would provide equivalent exposure to say, VTSAX which i know is popular but unavailable to me. Though I see I may be conflating FPADX and FSMAX (Emerging vs Extended) Edit: Here's what I have the choices of: quote:Short Bonds/Stable/MMkt Deviant fucked around with this message at 16:47 on Mar 28, 2024 |
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Mar 28, 2024 16:37
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What are you actually trying to achieve in terms of objectives for portfolio construction? It sounds like you believe actively managing fund selection is better per se, not because you have any real issue with the way a TDF is allocated. Unless you have specific goals you are trying to achieve there isn't much point, other than maybe reducing expense ratios.
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Mar 28, 2024 16:45
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KYOON GRIFFEY JR posted:What are you actually trying to achieve in terms of objectives for portfolio construction? It sounds like you believe actively managing fund selection is better per se, not because you have any real issue with the way a TDF is allocated. Unless you have specific goals you are trying to achieve there isn't much point, other than maybe reducing expense ratios. My specific goal was that I read the booklet in the OP (which is probably somewhat out of date) which recommends this sort of allocation, and I was wondering if that's still a good thing to do vs just letting my money sit in TRIP2050 (VFIFX) where it is now.
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Mar 28, 2024 16:47
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my advice to you is to keep your money in VFIFX since you don't seem to have any clear objectives. at minimum you gotta post expense ratios on all this stuff. moving off of TDFs is done for basically 2 reasons: 1) TDFs have administrative overhead and a convenience fee; expense ratios are in many cases ~10bps higher than rolling a TDF approximation using some kind of equities index fund, some kind of international index fund, and some kind of fixed income fund. the goal here is to make the TDF, but cheaper, with a little bit more manual administration. 2) You don't like the allocation priorities of the TDF. Typically this is because you want more/less international exposure; if you want more/less fixed income you can just buy a different target date in most cases. In this case you disagree with the investment strategy of the TDF and prefer to do something different.
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Mar 28, 2024 17:00
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For what its worth I have 100% of my retirement funds in VFIFX (Vanguard Target 2050). The ER is low and I like that I literally never have to think about it. I think the most compelling reason to not use target date fund is if you strongly disagree with their allocation (for example, if you dont want any exposure to international). Or, if you want a fixed allocation indefinitely instead of a glidepath.
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Mar 28, 2024 17:01
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drk posted:For what its worth I have 100% of my retirement funds in VFIFX (Vanguard Target 2050). The ER is low and I like that I literally never have to think about it. Same for my Roth, it's just really nice not having to think about reallocation.
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Mar 28, 2024 17:25
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i won't sweat it, then. i've gotten this far.
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Mar 28, 2024 17:38
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100% of my Roth is in VTI (all USA stocks). I’ll revisit that allocation when I’m 55 or something. I’m not trying to be radical or edgy; I don’t care about the volatility of my Roth IRA and only care about total expected returns. Part of my comfort of doing this is my other assets (both retirement and non-) are often very stable in value. I can afford to be “risky” with this.
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Mar 28, 2024 19:30
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My work's student loan repayment program got suspended this year because of Congress' budget shenanigans (I work for a federal agency). I have $4k remaining at 6.55% interest and could pay it off, but I wonder if I should wait and hope they reinstate it next year, especially since I don't have any payments due until November 2025 and I'll likely get a better return on the S&P 500.
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Mar 28, 2024 21:11
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Josh Lyman posted:My work's student loan repayment program got suspended this year because of Congress' budget shenanigans (I work for a federal agency). Predicting congress is basically impossible so personally I wouldn't count on them doing anything useful. When trying to arbitrage debt by investing instead of paying down the debt I feel that you need to match the duration of the debt/loan with an investment that makes sense over that same time horizon. So, for example, on a 3 year loan you should find an investment that can be reasonably expected to return more than the interest rate on the debt over that same 3 year time period. Equities need at least 10 years to really make sense IMO so unless your student loan has at least 10 years remaining I don't think you are going to get better than 6.55% on investments without taking a possibly unreasonable amount of risk. For me the only type of debt that it can really make sense to arbitrage is a home mortgage as they tend to have very low rates compared to other types of debt and have 15 or 30 year durations, long enough for equites to make sense. 6.55% is pretty darn good as far as zero risk rates of return go. I would just pay off the student loan and move on with your life. I suppose you could make an argument for putting your monthly payments into a HYSA until November 2025 and then paying off the loan then. Assuming no interest is accruing in the mean time. Antillie fucked around with this message at 22:07 on Mar 28, 2024 |
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Mar 28, 2024 21:53
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drk posted:For what its worth I have 100% of my retirement funds in VFIFX (Vanguard Target 2050). The ER is low and I like that I literally never have to think about it. I moved my 401k out of a target date fund to a 3 fund portfolio a while back and I was going to argue with this, but then I thought "hm, haven't checked in on how that's going in a while." It just...bought more target date fund. So now I have a 3 fund portfolio AND a target date fund and it seems like it's just funding the target date fund? I thought I had set it up to correctly fund the 3 fund portfolio, but, gently caress.
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Mar 28, 2024 22:58
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Josh Lyman posted:My work's student loan repayment program got suspended this year because of Congress' budget shenanigans (I work for a federal agency). it's $262 of interest each year that you're trying to micromanage. That's such a small amount of money to bother trying to beat interest rates on.
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Mar 28, 2024 22:59
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Awkward Davies posted:I moved my 401k out of a target date fund to a 3 fund portfolio a while back and I was going to argue with this, but then I thought "hm, haven't checked in on how that's going in a while." Fortunately there are no tax consequences to sorting this out and the returns probably arent much different anyways.
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Mar 28, 2024 23:09
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So Robinhood is offering a 3% match on transferred IRAs until the end of April (for Gold members @ $50/year, otherwise a 1% match). Like probably everyone in this thread, I'm not particularly fond of the company, but I'm having a hard time convincing myself not to transfer my Roth IRA from Vanguard... it's a pretty sizable amount of money to earn an instant 3% on. It has to remain there for 5 years and not be withdrawn below the amount transferred, but I'm not exactly planning to touch it for decades anyway. Plus, it gives access to their new 3% cash back on everything credit card, which is also quite good for however long it lasts. I wonder how they're going to afford giving all this money away, it's not like they're a venture-backed startup anymore.
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Mar 29, 2024 03:38
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runawayturtles posted:So Robinhood is offering a 3% match on transferred IRAs until the end of April (for Gold members @ $50/year, otherwise a 1% match). Like probably everyone in this thread, I'm not particularly fond of the company, but I'm having a hard time convincing myself not to transfer my Roth IRA from Vanguard... it's a pretty sizable amount of money to earn an instant 3% on. They lend out your securities to short sellers by default and keep 90% of the profit from doing so. No other brokerage does this. This isn't necessarily terrible but its risk not everyone wants to take. You can do securities lending at places like Fidelity and capture a larger share of the gains if that's something you want to do. It also converts qualified dividends to ordinary income and strips the special tax status from muni and treasury bond interest in a taxable account if the dividend or interest is paid while the securities are lent out. Not an issue inside an IRA but something to be aware of. What really bothers me about it is the fact that while they don't technically hide the fact that they do this they do bury it in the terms of service that they know nobody really reads. They also make the opt out process a bit of a pain. Rob Berger also pointed out that they don't allow you to name a trust as a beneficiary of your IRA or specify contingent beneficiaries. This can be a big deal for estate planning. Antillie fucked around with this message at 14:49 on Mar 29, 2024 |
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Mar 29, 2024 13:20
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runawayturtles posted:I wonder how they're going to afford giving all this money away, it's not like they're a venture-backed startup anymore. Antillie posted:They lend out your securities to short sellers by default and keep 90% of the profit from doing so. No other brokerage does this. check out hood's q4 earnings slides: https://s28.q4cdn.com/948876185/files/doc_financials/2023/q4/Q4-2023-Earnings-Presentation.pdf their revenue from securities lending is pretty minimal, see slides 12-14 (esp. slide 14). their stock is priced like they're a high growth company. their management challenge is that they did not have high user growth in 2023: see slide 3 chart 1, or slide 29. but they have access to cash, see slide 20. thus, they need to restart user growth to justify the stock price, increase net interest revenues (via cash sweep and other stuff on slide 14), and perhaps increase their odds of being acquired by say, schwab. how to do that? how about an aggressive new customer IRA transfer program? since you gotta keep it there 5 years to earn the 3%, they'll probably make that initial 3% back in net interest and however else they monetize you over those 5 years. it's an IRA -- so you can trade in it tax-free, and many of their customers will -- and RH sells customer order flow, so it'll also increase their transaction revenues (slide 13). they don't seem desperate for new deposits to cover a lack of regulatory required capital? maybe someone else can chime in on this. but note 8 (page 135) in their latest quarterly filing: https://s28.q4cdn.com/948876185/files/doc_financials/2023/q4/78bc4a0f-d3b2-452e-8ac1-27f366e46bd4.pdf shows that the maximum maturity of their (small) held-to-maturity assets is 2 years, no real issues with interest-rate risk hidden there which has troubled other banks (edit: or "shadow" banks) pmchem fucked around with this message at 13:53 on Mar 29, 2024 |
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Mar 29, 2024 13:50
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I posted in the CC thread about this but in Robinhood's announcement page for the gold card they also mentioned that starting in May they will offer an uncapped 1% bonus on deposits. There's no other info on this other than that the bonus will be paid out over 24 months and that you forfeit the remainder of the bonus if you cancel gold. I'm gonna need to wait for the fine print to come out but this suggests to me that every deposits are aggregated by month (perhaps) and then every month thereafter you get 1/24 of your 1% bonus. If you're getting direct deposit from your job, then essentially in 24 months you'll be getting a 1% bonus indefinitely until they pull the plug on the bonus. At a modest 3000/month it'll pay for the gold subscription relatively soon. Anyway this all hinges on what the fine print says and whether or not you need to keep the money in the account. If it's just changing direct deposits and I can transfer money out as I see fit then I can't really see any downsides here. quote:beginning in early May, Gold members will receive a 1% unlimited deposit boost on all incoming brokerage deposits, with no cap6. Boris Galerkin fucked around with this message at 14:32 on Mar 29, 2024 |
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Mar 29, 2024 14:24
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