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SpelledBackwards posted:5. DON'T TRY AND TIME THE MARKET. Length of time in the market is more valuable in the long run (i.e., 20-40 year time horizons that retirement entails) than trying to buy in at lows. As explained the OP, but also in a nice article just recently posted in the thread, sitting out of the market because you're trying to predict a high or catch a low will just cost you money in the long run. That assumes that you have the long-game in mind and do not panic sell on downturns, and hold your investments. As you get closer to retirement, you will be rebalancing your portfolio to gradually reduce the impact to you in the case of a huge stock market downturn (as in, your investments will be geared more toward assets which are resistant to the same downturn). That's why you don't just keep everything 100% in stocks, despite them being the performance leaders over the last 100+ years. From a while ago, but this is how i feel about investing in any stock-market exposed investment today. To give some perspective on debts: $3500 @ ~11% $24000 @ ~3.5 My employer offers 401k through Fidelity, but there are no matching funds available to me until the middle of next year due to time with the company. I have very few expenses, but here's a short rundown: Rent - $200/mo Food (incl restaurants and liquor) - $450/mo Entertainment - $100/mo Shopping - $150/mo Minimum payment on loans - $275/mo Those are all monthly averages (over the past 5 months) and not just pulled out of my rear end. There are additional (non-reoccurring) expenses not itemized here in the realm of ~$300/mo. Income: ~$2300/mo after taxes, insurance, and a 4% Roth 401k contribution. My net monthly money to play around with is $825 by these calculations, and I'm putting 100% of that into my high APR debt (which, accordingly, will be paid off in around 4 months). Which is all fine and dandy, and advice I'd expect to hear from you guys. Here's the harder -- and far more subjective -- part: Man, the stock market is going to crash in a substantial way within the next three years, guaranteed. The current valuation of the market, as a whole, is way out of line. We're sitting at an enormous peak! I don't have any money in the system as it stands, and the investments that are targeted towards me -- oh yeah, I'm 26 -- are focused on aggressive growth aka the same stocks that will lose 10-30% of their value in an overarching market correction. My finances are easy now: pay high % debt. In four months when all I have left is ~3.5% Student Loans, it gets murky. I'd like to be able to save in a Roth IRA using a stable, recession-proof vehicle (VANG TOT BD MKT INST being my current choice) and then flip those funds into a more aggressive growth vehicle once this poo poo is closer to bottoming out (which could be ~6 years from now). Why is being a Nostradamus, in this sense, a bad idea? I think anyone could look at historical trends and see we're due for a double dip. What's the point of investing into growth (I'm not against investing in principle!) when it's all gonna fall?
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Aug 4, 2014 15:59
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Okay, and where can I talk about potential sky-fallings with discussion on assets that are less prone to losing value during bear markets as an overall strategy for investing into a bull market in the future? It still seems like a long-term strategy (and long term investing), but if this isn't the thread for discussing investing based both on objective and subjective measures, then where is?
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Aug 4, 2014 16:20
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Ah! But I am very receptive to your head-slapping. I'm more or less looking to get assaulted for my lovely beliefs about financials as I know just enough to be dangerous to myself. Why are bonds due for a (relatively greater) correction than an aggressive growth stock-based fund? I figure one of those will tank harder than the other, but I'm not betting on a winner -- I'm betting on the one who will lose less. e: perhaps my use of "recession-proof" was very poorly worded. I don't care about not losing money. I merely would like to place my assets in a safer vehicle because of my feelings. DNK fucked around with this message at 16:30 on Aug 4, 2014 |
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Aug 4, 2014 16:28
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Hm. Isn't there any speculation on how the stock market has expanded ~30% this year while overall world GDP is sitting at like ~4%? Or looking at historical market "fits"? I'm not completely a nutter; I merely have a very cynical view of how the overall market is currently valued (a personal opinion, granted) and would like to invest based on that, for the time being.
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Aug 4, 2014 16:35
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Echo 3 posted:Keep in mind, if you say that you can predict price movements that allow you to get a better risk/reward than everybody else, you are saying that you know better than everybody else in the financial markets. If there was a way to get a better risk-reward than just owning stocks and bonds, people would be doing it. You clearly realize that you are not the world's biggest financial genius, you just have to take that to the next step and realize that it implies a buy-and-hold strategy. I don't have to be smarter than everyone in order to be smarter than somebody. This is a game where I'd say: "I've climbed this peak long enough, time to move to assets that will devalue less" during a bull season and vice versa during a bear season. I think that's the general idea of buy-low/sell-high. For me, right now, I'm entering with effectively zero dollars in the system. I'm "buying-high" as it were, as the stock market is at objectively all-time highs right now. It is a certainty that it will be lower in the future (how much lower is the debatable part). I do want in on the game, but it feels rear end-backwards at the moment, y'know?
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Aug 4, 2014 16:52
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The hypothetical I'm wrestling with is that I'm positive that I'll be able to invest into a weaker market in the future. I'm sure there will be a valley lower than today's mountain. And that is the Farseer-ish claim with which you are all in agreement is wrong in principle. Duly, it is a lovely long-term investment strategy to not invest. Got it. What are the (overarching; I'm sure the details are horrifying) penalties and fees associated with moving assets within a IRA/401k into different vehicles? There's a question with which I have a burning desire to know the answer to.
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Aug 4, 2014 17:22
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moana posted:It's weird you're so "sure" and "positive" given that you agree that your knowledge is lovely. Stop trying to time the loving market. I'm slowing comprehending this point, thank you.
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Aug 4, 2014 19:48
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To be glib, pessimistic is negative infinity %: World War 3 breaks out and Why Didn't You Spend Money On A Bomb Shelter. My pessimist 30 year outlook is 4% returns and optimistic would be 9%. DNK fucked around with this message at 20:05 on Aug 11, 2014 |
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Aug 11, 2014 19:59
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Keep in mind that you're taxed on your total income and not just the amount you withdraw. Even if the 20k you're taking out per year is below the taxable threshold, if you're supplementing that with 45k of other income your total taxable income is 65k, and you will pay accordingly. Roth is nice because it isn't counted as income. The money is yours, and if you take 20k in Roth funds and make 20k at some fun part-time work, you're taxed at 20k and NOT 40k.
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Aug 20, 2014 00:14
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e:  masturbatory fantasy ahead, read next two posts for why this is wrong.For the guy who's making bank and wants to continue to contribute to his Roth (instead of a traditional) IRA: I think it'd be pretty smart to contribute to a traditional IRA, especially if you have monster money already in your Roth. Consider: You're currently taxed at a high rate because you make so much money. This is a good thing, because it means you have a lot of money. The money you want to put into Roth will be taxed at this high rate and will probably be a drop in the bucket compared to your total Roth amount. Once you start getting distributions, it's tax free, which is rad, and why you're doing the whole Roth thing in the first place. However, if you've been smart with contributing to tax-free retirement investments (Roth IRA and Roth 401k) and have the majority of your assets in those vehicles, then your current retirement-age distribution taxable income is pretty close to zero (-- make sure this is the case; pensions? Social Security?). Pumping a traditional IRA would be a good idea because you'd be able to dodge currently high income tax rates for a future very low income tax rate. Even if you aggressively grow your pre-tax retirement funds to the point where you're withdrawing 50k/yr, it'll still be more efficient than being taxed at 120k today. ...maybe. Going off of http://en.m.wikipedia.org/wiki/Income_tax_in_the_United_States tax brackets, it looks like you'll want to stay underneath 36k (filing single or individually) taxable income to reap income tax rewards. If you're close to retirement and have little in the way of taxable income that's still a considerable ceiling. I mean, 10% pretax of 120k is 12k, 10% post-tax of 120k is 8.64k. ~4000 dollars of additional compounding is considerable. There's real calculus to be done here, but the principles of "Roth if you're young, relatively poor, and planning on investing into a huge retirement; Traditional if you're rich, closer to retirement, and have low taxable retirement income" hold true. Just something to consider. DNK fucked around with this message at 16:03 on Aug 22, 2014 |
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Aug 22, 2014 15:40
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SlightlyMadman posted:I thought traditional IRA income limits cut off even lower, like at 70k or something? I check this. You're wrong, technically, but still right in some sense... You made me write all those words for nothing  . Your IRA contribution limits for both Traditional and Roth are shared, and are set at 5500/6500http://www.irs.gov/Retirement-Plans...nt-Plan-at-Work However, the contributions to traditional aren't tax deductible past an AGI of 70k (which the example solidly passes). Whoops. Well, it was a fun thought, in theory. DNK fucked around with this message at 16:03 on Aug 22, 2014 |
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Aug 22, 2014 16:01
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This seems like a pertinent question to BFC folk in light of our recent conversations: How can one reduce their taxable income even when it starts pushing six digits? Does that reduction of taxable income "snowball" in any way? (Can you reduce your taxable income to a point where you can then, say, get further tax-deductions on your Traditional IRA deposits because other deductions brought you low enough?)
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Aug 22, 2014 19:25
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Background: I'm going to start pumping a Roth IRA. I don't currently have an IRA, and I'm paying down high-impact debt until December. I have a company 401k that's sitting at the match% (currently 4%) and is something like 60/25/15 domestic/bonds/international. I'd like to open a Vanguard Roth, and it looks like I'll need a lump sum of $1000 to begin. I'd like to just throw it in their STAR fund while I build up my reserves. My question is one of account transfers: once I hit $4000 in STAR, could I take $3000 of those funds and move it to another (index) fund penalty free? And, furthermore, does this sound like a good idea?
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Sep 4, 2014 18:28
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How does that work with regards to contribution limits? Can you roll $50k of 401k into an IRA in a single year?
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Sep 10, 2014 16:47
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Hm. Wouldn't rolling most of your 401k into an IRA be a better choice purely because of fund choices? For example: I have a couple institutional vanguard index funds in my 401k that I wouldn't be able to access in an IRA, but I'd have better large cap funds within an IRA. Convoluted, but maybe a good once/year thing. That is, if I can access those funds without leaving my company. No idea about the regulations on that.
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Sep 10, 2014 17:24
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What are the common fee structures for rebalancing? Is it entirely free? There seems like there has to be a catch.
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Oct 28, 2014 19:22
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Isn't the end goal to have your Traditional funds be in the 10% bracket and your Roth funds to be beyond that? The goal, or whatever, would be to take your Traditional + taxable income to ~30k/yr and for your Roth to be everything beyond that. Lifestyle-wise, it's better to put your already-taxed dollars in when you're paying low taxes anyways. My understanding from a pure numbers perspective: if you're planning on a retirement income greater than your current income, go Roth. Now, Roth has other benefits. The greatest being that the contributions to a Roth are able to be withdrawn without penalty or tax for any reason. This makes it a "safe" investment if you're just starting because it means your money isn't firewalled if you need it. For argument's sake, if you put it in a Traditional, you could still withdraw it, but at a 10% penalty after it gets taxed. Pre-Tax contributions for IRAs are phased out at some moderately high income level (71k in 2015). This means if you want pre-tax funds available in an IRA, you need to do it before you hit that point OR couple it with a 401k which does not have an income restriction. Coupling is the easiest, with up to 18k (in 2015) of pre-tax capable of being contributed. So your profile mid/late in your career, making -- say -- 71k exactly, could look like 5.5k into Roth IRA 18k into Traditional 401k Additionally, you can contribute to a Roth 401k which has the same contribution limits as the normal 401k. The goal of mine, with this schedule, is the same as everyone else's: 1) get employer match on 401k 2) life goal planning (aka liquid savings) 3) max Roth IRA ("safe" semi-liquid savings + retirement) 4) max 401k ("hard" retirement savings) The #4 part is where fiddling with traditional vs Roth really comes into play for maximizing retirement-age take-home. Roth IRA is a no-brainer because of the laws surrounding it. Mostly, traditional 401k is superior to Roth 401k because you need something like 800k of traditional funds* in order to break out of the (future) 10% tax bracket @ 6% disbursement. The benefit to Roth funds is that you can... spice your retirement income with large influxes of cash without incurring a steeper tax burden. So their use-cases: in short, Traditional funds are used for steady-state disbursement and Roth funds are used for anything above that steady-state. Now, leveraging your current tax burden vs future tax burden is also a consideration, but it's mostly a wash unless you're going to be making six figures for a decent time of your life. *: ...with Traditional 401k being your only taxable income. Social Security payments are considered taxable income. Are you going to be working/getting paid (for fun, maybe) in retirement? That's also taxable income. The picture gets complicated. Regardless, you need to have a rather large Traditional 401k balance AND be making BANK in retirement to be kicking yourself about not doing Roth conversions earlier. e2: There are also limitations on 401k's that require them to be transferred to an IRA -- traditional IRAs have minimum required distributions once you get older. Roth IRAs don't. Why's this important? You're taking the money out of tax-advantaged space. Rolling Traditional into Roth is an income event which incurs tax penalties. If you have an extremely large Traditional balance, are nearing the MRD age, and want to keep your investments in tax-advantaged space, you should space end-of-year IRA rollovers out so that you eat as little tax as possible. This is mostly important for estate planning: Roth IRAs have far less legal bullshit attached to them with regards to how to distribute them after you die. E t c. The easy, in-your-youth answer to Traditional vs Roth is Roth IRA first, Traditional 401k next, and when you're clipping $500k in Traditional 401k start contemplating Roth 401k and 401k-to-IRA-to-RothIRA rollovers. DNK fucked around with this message at 20:52 on Nov 14, 2014 |
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Nov 14, 2014 17:14
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Risk seems like a catch-all term though. It's easy enough to push money into a growth-style ETF and comfortably expect your 30-year outcome to be better than a value-style ETF. Where's the risk? I guess you're risking not being alive in 30 years and other intangible things related to time/instability (global nuclear warfare, climate change, etc). Now, a portfolio that uses safer assets to mitigate seasons of loss for that growth-based portfolio will outperform the pure growth fund. Luckily, there are ETFs for that! Mostly, they're the "retirement age 2055" things. Basically this entire post has been an exercise showing how "risk" is a semantic term that's really talking about short-term valuation. In my opinion, it would be "risky" to not put considerable weight in "risky" funds in a long-term portfolio. There's not a whole lot of intrinsic risk to risky stocks when you're betting on a long horizon. Extrinsic factors like a complete collapse of the economy would indeed point towards safer assets like guns and ammo. But you don't invest with firearms.
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Nov 18, 2014 21:44
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I think having a loan at 0.75% is sweet. Free credit history of on-time payments while you spend your money on far more worthwhile things. If I could, I'd take a 0.75%/5yrs loan for $50,000, blow up all my student loans and live off of the loaned money while I crank my IRA/401k.
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Nov 26, 2014 00:28
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ETB posted:So I've been maxing out my HSA and 401k every year, while also maintaining a ~12 month emergency fund. I was thinking of shifting some of the emergency fund (down to no lower than 6 months) to a Roth IRA as both a savings vessel and a super-emergency fund/potential-future-house fund (contributions only). Any thoughts on whether this is a good or bad idea? Are you warm and fuzzy with your life, work, and take reasonable precautions in all areas of your life (auto, home insurance, wear helmets and seatbelts, safe driving record, don't do high-impact contact sports, etc)? Sure. Roth IRAs have penalty free withdrawal of your principal, anyways.
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Dec 3, 2014 18:50
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Dead Pressed posted:But what I make now vs. later shouldn't matter. It should just be "what tax bracket am I in now" vs "what tax bracket am I projected to be within when I withdraw the money". Right? As I won't need the $130k/yr we're making now, and will most likely live on the $60k/yr estimate or less---my tax bracket would theoretically be lower at my retirement date---thus making traditional the way to go. Unless I'm looking at this wrong...at which point please correct me! I'm with you. Take the pre-tax out for your 401k. The biggest benefit, in my opinion, is that your contributions now are coming "off the top" of your income -- the money you contribute would be 100% taxed from your highest income bracket if you did Roth instead of traditional. When traditional funds are disbursed, they're taxed at every income bracket. Even if you're going to be extracting the funds at the same income level -- 130k -- the money you'd had contributed would have all come from the (whatever) 25% tax bracket but the money you're receiving is effectively being taxed at (whatever) 19.64% percent due to progressive tax brackets. That's cool poo poo AND you get to chop 35k off of your income taxes. Roth 401k is really only useful if you're in some weird place where you have shitloads of money in traditional accounts and have a low current income. Maybe something like you're 45 and acting as a tour guide after a life in oil production and contributed max to your traditional 401k since you were 18. Roth makes sense for young workers who expect their retirement income to be greater than their current income AND are currently in a low enough income bracket to have the "off the top" effect be low... but that money should be going to a Roth IRA, not 401k. If you're past maxing Roth IRA and are still in low bracket, then by all means, but I'm of the opinion that if you can max Roth IRA and meet other life goals then your income is probably high enough that the "off the top" effect is pointing towards traditional. DNK fucked around with this message at 06:14 on Dec 4, 2014 |
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Dec 4, 2014 06:11
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The "loophole" is that at a certain income point you can no longer contribute pre-tax or to a Roth. But..! You can still contribute to a traditional IRA. So you contribute post-tax money to a traditional IRA. Then you do the standard Traditional --> Roth rollover, except since you've already paid taxes it's basically just moving money into a different account. Please note that this only works exactly like this if you have $0 in traditional (across ALL traditional accounts) before you start this process.
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Dec 16, 2014 15:33
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I've written a couple posts about it in this thread (click the '?' below my username to view them), and the gist of Roth vs Traditional is that Roth is almost always a worse long-term investment option if you're aiming for steady disbursement. Roth is more expensive in the current term (no income tax deduction and paid from your highest marginal income bracket) for more flexibility post retirement. For example, you could withdraw $3,000,000 dollars of Roth funds in a single year and blow it all on a yacht without suffering any taxation. This is an unusual scenario. IRAs are highly suggested to be Roth, if possible, due to the legal benefits that Roth IRAs confer. The most notable of which is that you can withdraw the principle at any time for whatever reason without penalty. This allows you to be much more flexible in other areas (having a more moderate emergency fund, for example). Pre-tax 401k is unequivocally better than Roth 401k for steady disbursement in retirement until ~5% of your total Traditional 401k value is more than your current income. Which is probably never going to happen.
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Dec 17, 2014 16:23
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First of all, I didn't run any numbers because I think it's pretty self explanatory at the most basic conceptual level. Assumptions: 1) you disburse your retirement income in SEPPs 2) you are of a qualifying age 3) you don't have other retirement income sources other than IRA, 401k, and social security Okay, so you make money today and can either invest it pre-tax or post-tax. Without considering long-term outcome, pre-tax wins because it costs less for you (less taxable income). The taxation you avoid is at your highest marginal tax bracket. The long term outcomes of both differ from a total money perspective. Roth has less because it starts with less, but it isn't taxed when you disburse. Traditional has quite a bit more, but is taxed when you disburse. If you wanted one lump sum as soon as you're eligible, the outcome is Roth favored. You get taxed like a hellion on your six/seven figure traditional disbursement, but it's coming from a larger pile so it gets pared down to approximately the size of the Roth funds -- assuming your Roth contributions came from an income of at least $36,900, the difference is absolutely less than 15% (regardless of the size of your account) and for accounts under $406k would be absolutely less than 10%. Still, 10% of 400k is 40k and that's a lot of dollars, m'right? But that example isn't quite comparing apples to apples: the money that went into the Roth account was taxed at your highest marginal rate (for incomes $36k to $90k this means 25%) and the money that's coming out of your traditional is being taxed across ALL brackets, so that $406k disbursement is an effective 28.9%. Roth just beat Traditional 3.9% at the cost of having the investor pay a considerable amount more income taxes during the principal build-up (a cost/benefit not represented in these calculations). But even ~4% of 400k is 16k, and that's still a lot of dollars, m'right? Yup! But what kind of idiot disburses their entire 401k as soon as they're eligible? With a more modest $16k disbursement (4% of 400k...) combined with an expected Social Security payout of ~10,000 your effective AGI is like $21,000 or however voodoo SS income factors into AGI. Regardless, your effective tax rate is sub-15% until $45,000 taxable income. Even taking $90k/yr (from a correspondingly large 401k) has an effective tax rate of 20.42%. So the performance benefit is now knocking up to 10% in favor of Traditional and the benefit doesn't bump to Roth favored until your Taxable Income goes over $200,000 per year. These effects only get more pronounced when your highest marginal tax bracket is higher, and I'd like to reiterate that these performance benefits are seen with an income as low as $36k (and are still significant with sub-36k incomes if you can manage to save for retirement on that low of an income). Let's remember -- for the third time, now -- that you're also saving money during contributing years by not paying more in income taxes. More now AND more later, gently caress yeah! Roth is for stupidly big disbursements and not much else. If you have HUUUUGE taxable accounts because you're a trust fund kid who's also a stock wizard then Roth might be cool, idk. e: Roth IRA is still cool cuz of IRS rules (principal withdrawal) and having some Roth funds in Retirement is nice for flexibility, but seriously Roth 401k is a joke. DNK fucked around with this message at 01:03 on Dec 18, 2014 |
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Dec 18, 2014 00:50
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If you made $1 more today, how much would it be taxed? If you made $1 less today, how much wouldn't it be taxed? If you invest $1000 into Roth, where are those dollars coming from? (Hint: most people invest with money after core expense, i.e. the last dollars they earned. Even if you're investing with money immediately after core expenses, the beginning of 25% marginal rate is $36k -- it's not that high.) If you invest $1000 into Pre-tax, where aren't those dollars coming from? (Hint: it's unequivocally the last dollars) DNK fucked around with this message at 18:23 on Dec 18, 2014 |
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Dec 18, 2014 18:20
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asur posted:There is also another risk that something catastrophic happens that doesn't mimic the past, larger than 50% drop in the market for example. I think this is rather unlikely and if looked at in depth I wouldn't be surprised if an event like this also had an effect on cash. ...and that's why you diversify into truck equity! When cash is tanking, bullets 'n trucks are booming. How useful do you think paper is to Mad Max? Exactly. Buy bullets and trucks, today!
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Dec 24, 2014 01:21
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Money market funds are investment equivalent of cash, so just count it as a low-risk/low-return asset. Or dump $60 in the fund so that you can hit the $100 minimum incremental amount.
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Jan 13, 2015 19:30
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I've seen it posted in this thread before that you can choose whichever HSA provider you want. Maybe your work recommended one, but shop around, I guess?
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Feb 1, 2015 17:38
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While $150/yr per 100k isn't a lot, it is important to note that that $150 is a compounding loss. Like, year 10 you won't have been charged $1500 for management, it'll be $150*(10 years of interest) + $150*(9 years of interest) + $150*(8 years of interest), etc. With 6% annualized returns that's actually $2,095. Something to think about, I guess. Go Vanguard!
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Feb 14, 2015 00:26
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Personally, once a month is overkill unless some really insane market shenanigans are afoot. Quarterly, bi-annually, or annually are all easier and just as effective.
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Feb 24, 2015 21:39
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You can contribute to a Roth IRA until you make too much money. You can contribute to a pre-tax Traditional IRA until you make too much money. You can always contribute to a post-tax Traditional IRA. You can always Rollover funds from a Traditional into a Roth. The key ingredient here is that you're always able to "roll" Traditional IRA into Roth IRA. The benefit being that it isn't taxed on withdrawl and the drawback being you need to pay taxes on it at the time of rollover. The "backdoor" part happens because -- if you did it right****** -- you've already paid taxes on the money you're rolling over. You don't need to pay them again. It's as easy as these three steps:
*****: the money you roll over is technically from your entire basket of IRA funds, so if you hold more than a single years rollover in your Traditional you will contribute a proportional amount of pre-/post- tax funds and will have to pay the taxes on the pre- because it's going to a post-tax Roth. The perfect scenario is that you have ZERO Traditional funds and do a 100% post-tax Traditional rollover into Roth. If you have anything more complicated than that, consult a tax professional. e: clarity DNK fucked around with this message at 23:37 on Mar 11, 2015 |
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Mar 11, 2015 23:33
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1.49% interest isn't a big deal. Just pay the minimums and truck along. Don't take on more debt than you have savings if you can at all help it. That being said, if I had 30k of savings and someone offered me 30k at 1.49% you bet your rear end I'd take that loan instead of blowing my savings. If someone offered me $1m at 1.49% I'd have to think about it but I'd probably still say yes -- put 250k into savings to pay for its own minimums while I ladder some poo poo into investments (like, hell, a 10-year CD). Roth IRA is definitely a priority over taxable. If your company doesn't offer a 401k I think you have expanded contribution limits to an IRA-type vehicle. Solo IRA? I'm unsure of the name.
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Mar 18, 2015 18:23
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This is a tangential point to the above: the value of the stock market is worth what someone will pay you for it. Crashes don't happen because the world's companies suddenly become profitless. They crash because no one is buying. Likewise, markets can raise in the absence of increasing profits if demand for stock is increasing. I got a pet theory that the current sustained market ballooning is (in part) supported by increased retirement savings by baby boomers. Not really here nor there; it's always a good time to invest for 10+ years from now!
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Mar 26, 2015 05:38
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LifeStrategy __________. Choose your risk profile based on their offerings. They have a flavor for every kind of investor.
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Apr 7, 2015 00:49
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Aren't bond mutual fund stock prices rather uncorrelated with their return? Bonds pay out much like dividends and are then reinvested, and this means your share count increases as you hold. Even if the price is trending negative, you can have an overall gain. That VFICX fund might have price drops but the fund's return is not the same as its ticker gain.
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Apr 15, 2015 15:24
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Just do a backdoor roth and don't worry about it. If you have massive traditional IRA holdings then maybe don't, but if it's small or nothing, go for the backdoor.
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Apr 16, 2015 16:10
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Roth v Trad: Assuming you take steady distributions of income... I.e. In retirement you comfortably live off of 60k/yr. Note: this requires a monster retirement portfolio to be sustainable (like $1.5m) ...and that current-day tax assumptions are applicable to the future... Then traditional will outperform Roth in both current-day income (tax deductible) and future-state income (withdrawing the money at a lower tax bracket then it would have been paid in if it was Roth). That last bit is because any money contributed to a Roth is paid out of your highest marginal tax bracket and money taken out of traditional is taxed across all brackets. Now, if you plan on taking large sums out in blocs (like 200k one year) then that whole tax poo poo goes out the window and you better be pulling it from Roth. But for general income and living expenses, traditional is the winner. e: this is for most people. Reading this thread probably contains a higher amount of the complementary set (not most people...) a most person: Doesn't have enough income to max tax-advantaged space (IRA and 401k, ~22.5k) Doesn't have taxable investments Plans on living off of steady income in retirement Doesn't have significant sources of taxable income in retirement (consulting, etc) If you're not a most person, Roth can be advantageous for other reasons. DNK fucked around with this message at 20:05 on May 26, 2015 |
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May 26, 2015 19:41
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Rebalancing with your future contributions is totally legit. Go for it.
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Jun 26, 2015 19:08
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I'd agree with the "not a slam-dunk" comment, but a ~3.75% after-tax alpha on a Very Large Cap stock is still pretty attractive if you're venturing into taxable investments. I'd definitely contribute to it in some amount inside a taxable portfolio after all the tax-advantaged space I had was used up... but not before that point.
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Jul 20, 2015 13:47
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I think I bring this up like every 30 pages, but Traditional 401k is more now and later as long as... You're planning on SEPP-style distributions for it. The combined income from your taxable assets is below the marginal tax bracket you're contributing from. The idea here is that retirement contributions come "off the top" of your income. Your last dollar earned, so to speak, goes into savings while the first goes toward food (and so on). That means that the dollar is taxed wholly at your marginal bracket: 25%+ now vs <15% later. Even if you think taxes will raise in the future, they probably won't increase for your first ~$40k of income. Roth is handy for burst purchases, increasing your effective tax-advantaged space, and tax hedging. In the case of IRAs, it has more lenient pre-retirement distribution policies. It is not, however, always the most efficient vehicle for investments. My goal is to get enough money in traditional so that a 4 to 6% distribution would be 36k/yr in 2015 dollars and then put everything else in Roth. That's around $900k in current dollars which is (much) more than I have, so I don't need to think very hard on my 401k contributions at the moment. I also contribute to a Roth IRA and will max out this year, so I am not disregarding the Roth option. I may explore the Roth 401k option if/when my projected Traditional balance at retirement starts clipping 1M.
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Jul 22, 2015 14:09
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