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Getting ready to ride this train. I've got an old IRA with a few thousand I am completely fine with if it disappeared - likely will close that out and purchase as many $25 notes I can. edit: grammar nicky_glasses fucked around with this message at 23:38 on Nov 25, 2013 |
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Nov 25, 2013 23:15
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| # ¿ May 1, 2024 14:09 |
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I dumped a couple thousand into LC last December.. I have 3 loans fully paid and a couple notes get late but caught up again. I've been really lucky. I like to think that my criteria had something to do with it, though. That being said. I've been reading a lot of financial boards and decided from now on I will continue to re-invest proceeds but I have realized it is foolish to invest out of pocket, post-tax income into LC. Knowing what I know now I wouldn't have gotten into the game and here is why: You can contribute $17.5k/yr into a 401k, tax free. You can contribute $5.5k/yr into an IRA/Roth IRA. That is $23k/yr I should be saving before I even think about making investments post tax. Each dollar I put into the above retirement accounts does not take a tax hit. If I put $10k a year into LC, and was saving $13k/yr for retirement, I'd still have $10k of income I'm going to have to pay taxes on at the end of the year! Shift that $10k to maximize tax advantaged retirement accounts, the IRS now sees that I made $10k less.. and of course when you pull any out, taxed again. I'm getting close to being able to save that much, but not quite there. I expect to be in a higher tax bracket by the time I retire and looking at my MAGI I went with a Roth IRA, a little off topic but here is what I did: 1. paid off all debts 2. 6 month emergency fund in higher yield savings account 3. max 401k match 4. contribute FSA amount that I feel I will use and not lose 5. maxed Roth IRA contributions 6. working on contributing rest of 401k allowed amount Any HSA if eligible or 529 if applicable I would even do those before investing into LC or any taxable brokerage account. I'm slowly adjusting my lifestyle and balance it so I can still have fun but hopefully retire 10-15 years early with a very very comfortable income but without working for the man. EDIT: TL; DR; If you aren't saving the maximum amount allowed for tax free contributions (IRA/401k/529/HSA/FSA,etc) first before investing money into LC, etc, know that you are losing out on a lot of money due to tax implications (with the help of the power of interest). nicky_glasses fucked around with this message at 20:56 on May 14, 2014 |
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May 14, 2014 20:53
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emocrat posted:
You're right. If you have excellent credit, you're still going to get lowest interest rates north of 6%. No one with excellent credit in their right mind would pay that rate for a car or a house and if you have unsecured credit card debt you don't have excellent credit. This leaves those people with excellent credit wanting an unsecured loan for something I wouldn't dare put my money into; business startups, vacations, or other oddball things. I don't see these because I filter those out. I gladly invest C or D grade loans to people swimming in credit card debt (with a few restrictions) knowing that if they actually use that money to payoff their cc debt, they'll be saving money each month and only have to make one payment.
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May 14, 2014 21:07
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Barry posted:You're not really condemning LC as much as you are any non tax advantaged investment. Correct. I had realized that I would end up with more money down the road maxing out the tax advantaged investments first. Barry posted:e: Also, as to taxes, you're going to be taxed on a 401k/Roth on either the front or the back end, so you're really just saving taxes on your gains. Which I'm not sure how it's treated, but if it's "just" capital, that's 15%. Not a huge price to pay for some liquidity. The idea is that all debts are paid down first. Then a good chunk in a high-interest high-yield savings account that is liquid (3, 6, 12 months depending). The tops are like .80% to .90% APY. This is the liquidity you need for emergencies, assuming you have access to prime credit and steady income this should be all you need - unless you constantly buy junk and can't save anything. Also with a Roth I plan on being in a higher tax bracket later, so I pay taxes on it now and at withdrawl, 30 years from now, I'll have saved a boatload from not withdrawing at the higher rate.
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May 21, 2014 20:30
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A year ago I dropped a few grand in, and a few months ago I started selling off notes, just now my account is zero. Earlier in this thread I explained why this not a tax advantaged option and not an ideal/efficient means of investing for the majority of us, hence the reason I pulled out. Just wanted to share my final experience with LC. I ended up with a 7% return which isn't bad. I likely would have gotten a slightly higher return as I sold off some notes at discount for the borrowers that would go 30 days late every other month but get back to current, I just wanted to get off the p2p lending hype train. I had about 10 notes that paid off early, which as a lender you don't want this to happen, but would take it over a default of course. I had a few notes default right around the 6 month mark. The majority of the defaults were people at Grade B btw, even an A grade borrower defaulted with no prior delinquencies. In short, this is nothing different than a bond fund. It's just you are the fund manager and are setting your criteria. In a few weeks I'll be getting my various 1099s and will be paying taxes on that income. My index fund investments are getting at or above this, but are tax advantaged (IRA, HSA, 401k) and until I max those out I would not consider doing this again. And even then, it would be about 5% to 10% of my total investments, depending on my bond allocation at that time. A lot of people on Prosper got burned at the economic downturn and it wasn't entirely because Prosper was lax in vetting the borrowers. A lot of excellent credit borrowers defaulted then too, and this "bond fund" investing strategy is absolutely insane if a significant portion of your nest egg is in here (anything more than 10%). I will say LC is superior to Prosper, and it as a company is smooth, just for the reasons stated above and previously in this thread it makes zero sense to go near it until certain criteria are satisfied. Best of luck to everyone.
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Jan 3, 2015 22:55
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| # ¿ May 1, 2024 14:09 |
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ohgodwhat posted:Hmm, isn't poor performance here kind of a bellwether for the wider economy as well? Nope. Ya'll are just speculating at a very inefficient (tax, expenses) and random way. I explained before in this thread why p2p investing is bad for about 98% of us. But to answer your question, just look at the S&P 500 as a gauge for the economy. And if you want to increase your net wealth through investments tax efficient or not, invest in an index fund that mirrors it (VFINX for example).
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May 8, 2017 17:59
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