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My gut is starting agree more and more with this thread. I just talked to a friend who's been in HR for Goldman Sachs and other firms and actually got her start in BFC. I'm tempted to call Vanguard when I get home tonight and ask them how we proceed. Given capital gains taxes would apply I'm very likely to sell off my oldest high-fee ETFs and use them for the $5500 towards IRA, and after that just sell the IRA stocks to go into 2045. The rest, I'll wait on after I finish Four Pillars and feel a little more confident on what to do with all the scattershot stocks/ETFs that remain in the brokerage. Is that a slightly better plan than "everything to VITVX and #yolo"?
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Mar 5, 2015 21:30
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KYOON GRIFFEY JR posted:If you have a decent sized pile of money, like most attorneys end up with, it's not hard to live off of your portfolio without issue, and optimal management of your money is less of an issue. You can reasonably expect returns of 3-5% per year after inflation in a balanced (at least 50% stock) portfolio. Having a financial adviser take 2% of that money per year is like... half of your money. It's pretty terrible with money whether you need to live off 4% or 0.5% of your nest egg.
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Mar 5, 2015 21:32
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MJP posted:My gut is starting agree more and more with this thread. I just talked to a friend who's been in HR for Goldman Sachs and other firms and actually got her start in BFC. I'm tempted to call Vanguard when I get home tonight and ask them how we proceed. If you answer these questions I can tell you how/what to do and the effect it will have on your taxes. 1. What is your tax filing status? I am guessing married filing jointly but just checking. 2. What is your 2015 taxable income likely to be? You can see what it was last year on form 1040 line 43. 3. How much money do you currently have in taxable/nontaxable accounts? 4. Of the money in taxable accounts, how much do you have in long-term unrealized capital gains? 5. Of the money in taxable accounts, how much do you have in short-term unrealized capital gains? 6. Over the next 10 years, what percentage of money do you think will be added in taxable vs retirement? (e.g. 100% retirement, or 50/50 with more gifts etc)
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Mar 5, 2015 21:40
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Droo posted:You can reasonably expect returns of 3-5% per year after inflation in a balanced (at least 50% stock) portfolio. Having a financial adviser take 2% of that money per year is like... half of your money. It's pretty terrible with money whether you need to live off 4% or 0.5% of your nest egg. I completely agree. Just saying that his parents might be "doing well" based on external appearances because they have a gently caress load of money in their portfolio and low living expenses due to paid off house, even if they are getting hosed on FA fees.
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Mar 5, 2015 21:52
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Droo posted:If you answer these questions I can tell you how/what to do and the effect it will have on your taxes. 1) Married filing jointly 2) I'm gonna say around $71-$75k, depending on how heavily a possible bonus would be taxed (if the bonus does happen, which it probably will) 3) Around $38k IRA, $74k brokerage, $8k savings account, $16k in cash from the windfall 4) and 5) I'm honestly not sure - I put in holdings and such into Google Finance but it doesn't track individual portfolio holdings if they're purchased separately. A low estimate for 4) I'm putting at $12000, high estimate $58000, and for 5) around $1000-$2000. 6) I'm honestly open to suggestions on that. Optimally I'd look at 80/20 retirement/brokerage given that right now the house and cars are in fine enough shape, we don't need to do anything major for the house, and very good chance that we'll either get another gift or my wife might be able to start part-time work very soon. MJP fucked around with this message at 02:25 on Mar 6, 2015 |
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Mar 6, 2015 02:15
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You're getting some great advice. Please fire your financial planner, who apparently hates you. He is not getting you good returns OR putting your money in minimal risk investments, yet those are your two expressed goals (which conflict, by the way, welcome to the world of high finance). A couple months of research into other investment options and the tax complications of changing over would be great. But don't dawdle for too long, because you are getting hosed with fees and taking unnecessary risk. This link from the retirement thread gives another good starting point for long term investments that is different from Target 2045: http://www.etf.com/docs/IfYouCan.pdf Regarding the $16,000, here is my opinion: shove it in a savings account for now. You outright said that your legal and medical situation is uncertain. That money can be a great buffer against the uncertainty if you just sit on it until things play out.
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Mar 6, 2015 02:45
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MJP posted:2) I'm gonna say around $71-$75k, depending on how heavily a possible bonus would be taxed (if the bonus does happen, which it probably will) I will answer in depth later (on my way out now) but because you are close to the cutoff between 0%/15% cap gains... What exactly is $71-75k? You talk about taxes on a bonus affecting it... is this your take home pay? Or is it your gross salary before deductions? I guess if you tell me your gross income before 401k/taxes/social security/etc, that would be the most useful thing for me when I answer.
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Mar 6, 2015 03:38
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Droo posted:I will answer in depth later (on my way out now) but because you are close to the cutoff between 0%/15% cap gains... That $71-75 range is total taxable income, after all 401k, HSA, and anything else that's pretax. Gross is presently $80k, I'm hoping that goes up but I have no clue by how much given that annual reviews are upon us. Edit: I slept on it. I'm going to call Vanguard and get everything transferred over, shift the IRA funds into 2045, get out of the high-ratio funds in the brokerage account, and continue through the Four Pillars to figure out what to do with any overage. $5500 from the brokerage sales will make the IRA contribution for 2015. I'll probably go for Vanguard funds that bracket the four major corners of the Morningstar quadrant evenly, set aside some proceeds to cover the capital gains taxes, donate a few grand to charity, and continue making monthly contributions. Once I've given Four Pillars its due course I'll hopefully either be in a better position to make my own decisions or ask better informed questions. So did the goon get out of the well, or at least grab onto the rope? MJP fucked around with this message at 15:42 on Mar 6, 2015 |
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Mar 6, 2015 04:04
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Yeah, in your situation I wouldn't worry too much about asset allocation for tax purposes, since the relative benefits would be small and you should be able to ultimately shift everything into your retirement accounts over time. 1. For 2015 you want to get your taxable income as low as possible so that you pay 0% on all the long term gains instead of 15%. You should easily be able to do this by contributing to a traditional IRA for 2015 and maxing out your 401k contribution ($18000). I would change your contribution immediately to the 401k so that you achieve that, and use your windfall to supplement your expenses this year if you need to. 2. You said you're already doing it, but move all of your money to Vanguard. Figure out exactly how much you realized in capital gains after you liquidate so you aren't surprised in 2016 when you get a form, but your tax rate is relatively low so it shouldn't really be a big deal either way. It looks like you are going to pay about 3% in additional tax on the gains to NJ which actually isn't too bad. 3. Post your 401k fund choices and current allocation to the thread in order to receive feedback. 4. Max out your HSA contribution for 2015, in case that's something you don't normally do. That also lowers your taxable income. In 2016 and beyond: 5. Unless your 401k fund options are terrible, I would personally leave the $18,000 contribution maxed out in order to basically shift your $74k brokerage money into a tax-advantaged account over time. So I would continue maxing out the 401k and spend money out of the brokerage account to supplement my income if necessary. There are relatively significant lifetime benefits to doing this that I have posted about before (http://www.kynimagine.com/taxable.xls). 6. Your federal tax bracket is 15%, so I would definitely max out a Roth IRA contribution each year (except in 2015, where I would do the traditional IRA for the deduction). One of the nice benefits of the Roth is that you can take your principal contributions out at any time tax free, so it provides a tax-advantaged investment account with some of the flexibility of the normal brokerage account you have now. 7. I would get very familiar with your tax situation, so in 2016 and beyond you can strategically roll some of your IRA money into a Roth IRA while you are still in the 15% federal tax bracket. I would also factor state tax in to this consideration though. It looks like your NJ tax rate is at most 3.5% up to $80,000 in taxable income but I'm not sure exactly what they include in that number (i.e. I dunno if 401k/hsa counts as a deduction). So to summarize the things you can do right now: A. Call Vanguard and open an account/start the transfer process. Putting everything into the 2045 fund is fine. B. Change your employer 401k contribution to 25% or whatever the right percentage is to max out this year C. Change your HSA contribution if necessary to max it out this year as well (should be $6650 if you and wife are both covered by it) D. Transfer some of the $16,000 into your checking/savings account to compensate for the income reduction from B and C this year E. After your account is set up at Vanguard, contribute $5,500 to a traditional IRA for 2015 F. Post your 401k options
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Mar 6, 2015 16:59
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The fun part of a spouse getting over one chronic medical condition and coming down with another: a maxed HSA is super beneficial. We blew through the max $2500 for ours by May 2015. Less likely to happen this year but given that the Rx meds she needs have to come from Canada, and we both probably need new glasses, it's better to have than not use. If I can't directly contribute a chunk to the 401k then I'll adjust to make the annual contribution and supplement from savings accordingly. That puts my 401k opt-in at a whopping 22% O_O Might just keep a few thousand in a savings account to backfill as needed, because that's a big hit going up from my current 6%.
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Mar 6, 2015 17:06
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MJP posted:The fun part of a spouse getting over one chronic medical condition and coming down with another: a maxed HSA is super beneficial. We blew through the max $2500 for ours by May 2015. Less likely to happen this year but given that the Rx meds she needs have to come from Canada, and we both probably need new glasses, it's better to have than not use. Everything Droo said is spot on and I second his opinion. He's really good at this stuff.
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Mar 6, 2015 22:22
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