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Re: Porfolio guidance please

Salary: $103,000 combined plus another 10k or so from rental income and side jobs. 2. Since we are in the 25% tax bracket should I contribute to my pretax 401k instead of the Roth IRA? I started the Roth after finding this forum and now contribute to this instead of 401k due to John Hancocks high f...
by Bob's not my name
Tue Sep 02, 2014 5:20 am
 
Forum: Investing - Help with Personal Investments
Topic: Porfolio guidance please
Replies: 1
Views: 151

Re: Pay Off Student Loans or Invest?

The use-it-or-lose-it argument only applies in the saturated case, which we don't have here. The OP is not close to maxing his TSP. His high marginal tax rate makes TSP contributions compelling. 33.5% is compelling, but 37% is even more compelling. Looks like he's safely under the student loan inter...
by Bob's not my name
Mon Sep 01, 2014 5:03 pm
 
Forum: Personal Finance (Not Investing)
Topic: Pay Off Student Loans or Invest?
Replies: 10
Views: 742

Re: Pay Off Student Loans or Invest?

Many people have debt of some kind (a mortgage, for example) and sleep fine. My high marginal rate bothers me more than my debt, because I hate giving up more than 40% of my marginal income to taxes. Borrowing at 2% (mortgage after tax, and car loan) allows me to max my tax-deferred accounts. The OP...
by Bob's not my name
Mon Sep 01, 2014 3:02 pm
 
Forum: Personal Finance (Not Investing)
Topic: Pay Off Student Loans or Invest?
Replies: 10
Views: 742

Re: Pay Off Student Loans or Invest?

To be clear: I'm recommending TSP contributions over loan reduction. At a 37% marginal tax rate and with the loan rates at 2-3%, I think that makes sense.
by Bob's not my name
Mon Sep 01, 2014 12:31 pm
 
Forum: Personal Finance (Not Investing)
Topic: Pay Off Student Loans or Invest?
Replies: 10
Views: 742

Re: Pay Off Student Loans or Invest?

Unless you marry someone with student loan debt (thus already saturating the deduction, which has the same limit whether you're married or single) or a large enough income to put you over the MFJ phaseout for the deduction, your interest is deductible at the margin, since your total annual interest ...
by Bob's not my name
Mon Sep 01, 2014 5:03 am
 
Forum: Personal Finance (Not Investing)
Topic: Pay Off Student Loans or Invest?
Replies: 10
Views: 742

Re: Next phase of minimizing taxes for high-income household

Nobility Let me explain my thinking on the back door Roths. And I may be wrong. Let's say you have $50k in cash, to either invest or pay the taxes on your Roth conversion. You have already paid the taxes on that. You also have $36k in a 401k. If you convert 36k in the 401k to a Roth you will have t...
by Bob's not my name
Sun Aug 31, 2014 8:23 pm
 
Forum: Personal Finance (Not Investing)
Topic: Next phase of minimizing taxes for high-income household
Replies: 31
Views: 2866

Re: Pay off student debt with family inheritance "loan"?

You still can't deduct $10,000 of student loan interest annually.
by Bob's not my name
Sun Aug 31, 2014 8:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pay off student debt with family inheritance "loan"?
Replies: 23
Views: 1353

Re: Pay off student debt with family inheritance "loan"?

Elhorsehead wrote:I would lose a tax break down the road.
What tax break? You cannot deduct $10,000 of annual student loan interest.
by Bob's not my name
Sun Aug 31, 2014 8:13 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pay off student debt with family inheritance "loan"?
Replies: 23
Views: 1353

Re: Next phase of minimizing taxes for high-income household

My wife runs a simpliest business. I do the tax return.
by Bob's not my name
Sun Aug 31, 2014 3:35 pm
 
Forum: Personal Finance (Not Investing)
Topic: Next phase of minimizing taxes for high-income household
Replies: 31
Views: 2866

Re: Max Contribution 401K Traditional vs Roth

If you're looking backwards the parameters are different, since the dollar limits on all tax-advantaged vehicles used to be much lower, catch-up contributions didn't exist, Roth 401k's were rare, and the backdoor Roth IRA wasn't allowed. Today, upper middle-class taxpayers can typically save a third...
by Bob's not my name
Sun Aug 31, 2014 3:20 pm
 
Forum: Investing - Theory, News & General
Topic: Max Contribution 401K Traditional vs Roth
Replies: 5
Views: 527

Re: Max Contribution 401K Traditional vs Roth

Sure. For example, a family in the 25% federal bracket and the child tax credit phaseout with an 8% state tax has a marginal tax rate of 36%. So a $17,500 Roth 401k contribution consumes $27,344 of gross income, of which $9,844 is thrown away to taxes. On the other hand, a $17,500 traditional 401k c...
by Bob's not my name
Sun Aug 31, 2014 3:03 pm
 
Forum: Investing - Theory, News & General
Topic: Max Contribution 401K Traditional vs Roth
Replies: 5
Views: 527

Re: Investments for Kids

That's another good example.
by Bob's not my name
Sun Aug 31, 2014 8:27 am
 
Forum: Investing - Help with Personal Investments
Topic: Investments for Kids
Replies: 15
Views: 965

Re: Next phase of minimizing taxes for high-income household

I've typically found that it's as much work to prepare the tax preparer's form as it is to just do the return directly. Furthermore, preparing the return myself is highly educational. I notice things like this: http://www.bogleheads.org/forum/viewtopic.php?f=2&t=143115 and this: http://www.bogle...
by Bob's not my name
Sun Aug 31, 2014 8:19 am
 
Forum: Personal Finance (Not Investing)
Topic: Next phase of minimizing taxes for high-income household
Replies: 31
Views: 2866

Re: Highly Appreciated Stock

Realizing long term gains at the 0% federal rate is attractive. How much room there is in the 0% LTCG bracket depends on what other income there is. There might be a lot of headroom. The 0% bracket gets huge when the taxpayer requires assisted living or nursing care. Depending on the state, the stat...
by Bob's not my name
Sun Aug 31, 2014 8:15 am
 
Forum: Investing - Help with Personal Investments
Topic: Highly Appreciated Stock
Replies: 8
Views: 944

Re: Next phase of minimizing taxes for high-income household

Yes, they might do it for free.

The guy who does our tax returns does them all for free. It takes me less than an hour to do a kid's return. The $600 of tax savings is net, so equivalent to over $1,000 gross income at my marginal rate. So I'm making $1,000/hour, which is better than my real job.
by Bob's not my name
Sun Aug 31, 2014 7:53 am
 
Forum: Personal Finance (Not Investing)
Topic: Next phase of minimizing taxes for high-income household
Replies: 31
Views: 2866

Re: Investments for Kids

We funded UTMA's for all our kids. If you have a high federal+state marginal tax rate a UTMA might save you $1,000 per child per year in taxes, so for example 3 kids x 10 years x $1,000 = $30,000. Even if you exceed the kiddie tax limit so the surplus is taxed at the parent's marginal rate, if the p...
by Bob's not my name
Sun Aug 31, 2014 7:50 am
 
Forum: Investing - Help with Personal Investments
Topic: Investments for Kids
Replies: 15
Views: 965

Re: Next phase of minimizing taxes for high-income household

The kid can have $2,000 of income before it is taxed at the parents' rate. It's not clear to me you need any life insurance, since you are planning to retire so soon. Is there a big difference between these scenarios? ⋅ Couple with 10-year-old paying for college and a half century of retir...
by Bob's not my name
Sun Aug 31, 2014 7:00 am
 
Forum: Personal Finance (Not Investing)
Topic: Next phase of minimizing taxes for high-income household
Replies: 31
Views: 2866

Re: Need help in allocating monthly income

I think your math is wrong. If you have $6,000 of available post-tax cash each month that's about $8,800 of gross income before you pay $2,800 of income taxes on it at your federal and state marginal rates (and assuming you itemize deductions so the state is deductible against federal). The 2015 401...
by Bob's not my name
Sun Aug 31, 2014 4:52 am
 
Forum: Investing - Help with Personal Investments
Topic: Need help in allocating monthly income
Replies: 11
Views: 1183

Re: 401K for school

You should read the LLC rules carefully yourself in Pub 970, since I'm just going from memory. (But bear in mind that the numbers will be out of date in the pub, so check the IRS website for 2014 income limits etc.). Yes, if you pay tuition in 2014 for an academic period beginning in the first 3 mon...
by Bob's not my name
Sun Aug 31, 2014 4:27 am
 
Forum: Personal Finance (Not Investing)
Topic: 401K for school
Replies: 10
Views: 538

Re: Stocks and capital gains

Stocks that pay dividends create taxable events every year. Stocks that don't pay dividends defer taxes by letting the stock value grow instead of distributing some of it every year. As for taxes, I was asking a leading question. First, nothing "raises your bracket". Income of all types is...
by Bob's not my name
Sat Aug 30, 2014 9:01 pm
 
Forum: Investing - Help with Personal Investments
Topic: Stocks and capital gains
Replies: 8
Views: 661

Re: 401K for school

She shouldn't need any money to pay the tax bill provided she keeps her conversions (if any) within the 0% bracket. For a single person eligible for the LLC that's a pretty fat bracket. It's about $10,500 ($10,150 in 2014 but it's inflation-adjusted so that'll keep going up) due to the standard dedu...
by Bob's not my name
Sat Aug 30, 2014 8:44 pm
 
Forum: Personal Finance (Not Investing)
Topic: 401K for school
Replies: 10
Views: 538

Re: 401K for school

Yes, you're exactly right. She should't be throwing away a quarter of her money needlessly. Also, she should look into the timing of her tuition payments with respect to calendar years. If she can pay tuition in 2014 she should, so that she can get the $2,000 Lifetime Learning Credit for 2014. Likew...
by Bob's not my name
Sat Aug 30, 2014 8:31 pm
 
Forum: Personal Finance (Not Investing)
Topic: 401K for school
Replies: 10
Views: 538

Re: Stocks and capital gains

the tax hit (25% federal bracket, 10% state) because some have substantial gains. And, like a previous poster, some are blue chip stocks that pay nice dividends. How are you getting a 25% federal rate on LTCG? Are you married and in the LLC phaseout? If so, just wait until January to sell at the 15...
by Bob's not my name
Sat Aug 30, 2014 5:47 pm
 
Forum: Investing - Help with Personal Investments
Topic: Stocks and capital gains
Replies: 8
Views: 661

Re: Father died. How to handle his company stock?

"Raising your tax bracket" is not a relevant consideration. Realizing a gain might move you from the 0% bracket to the 10% bracket, but the long term gain could all be taxed at 0%. Realizing a gain might move you from the 10% bracket to the 15% bracket, but the long term gain could all be ...
by Bob's not my name
Sat Aug 30, 2014 9:48 am
 
Forum: Personal Finance (Not Investing)
Topic: Father died. How to handle his company stock?
Replies: 27
Views: 2082

Re: Trying to understand the 1040 Tax Table

Effective tax rate has no meaning or value. It is merely a red herring that politicians of all stripes use to deceive the voting public. All financial decisions are based on marginal rate. If you have zero income, your marginal rate on a first bloc of income is less than or equal to 0%, and you make...
by Bob's not my name
Sat Aug 30, 2014 8:08 am
 
Forum: Personal Finance (Not Investing)
Topic: Trying to understand the 1040 Tax Table
Replies: 36
Views: 2284

Re: Need help in allocating monthly income

My rule of thumb is that if the product of the expenses and the years you will be in the plan exceeds 30%, then a taxable stock investment may be better. In other posts grabiner has clarified that "expenses" means the differential vs. what you can get at Vanguard. So for you the expense i...
by Bob's not my name
Sat Aug 30, 2014 4:16 am
 
Forum: Investing - Help with Personal Investments
Topic: Need help in allocating monthly income
Replies: 11
Views: 1183

Re: Please Help - Personal Investments / AA

Yes, you can contribute only a total of $5,500 (each) to Roth and traditional. You can reverse the Roth contribution, but I don't think it's worth the trouble if a TIRA contribution won't get you some LLC. The deductible spousal TIRA income limit is the same as the Roth limit (MAGI $181,000 - $191,0...
by Bob's not my name
Fri Aug 29, 2014 4:49 pm
 
Forum: Investing - Help with Personal Investments
Topic: Need help in allocating monthly income
Replies: 11
Views: 1183

Re: Are assets split in kind or liquidated on death?

An executor is supposed to first and foremost preserve the value of the estate. This usually calls for selling all risky assets and putting everything in a MM fund or bank account pending disbursement to the beneficiaries. In other words, what Not Bob said. If you do not and the risky assets lose v...
by Bob's not my name
Fri Aug 29, 2014 4:44 pm
 
Forum: Investing - Help with Personal Investments
Topic: Are assets split in kind or liquidated on death?
Replies: 12
Views: 608

Re: Father died. How to handle his company stock?

livesoft wrote:Step-up of joint assets depends on the rules of the state of residency.
Yes. I'm not an expert, but I believe runner9 is referring to a community property state.
by Bob's not my name
Fri Aug 29, 2014 2:12 pm
 
Forum: Personal Finance (Not Investing)
Topic: Father died. How to handle his company stock?
Replies: 27
Views: 2082

Re: Father died. How to handle his company stock?

Gambler wrote:what would the cost basis be if she kept it? $0???
No, $100,000.
by Bob's not my name
Fri Aug 29, 2014 12:45 pm
 
Forum: Personal Finance (Not Investing)
Topic: Father died. How to handle his company stock?
Replies: 27
Views: 2082

Re: Father died. How to handle his company stock?

Any lawyer, accountant, or broker knows this stuff. Therefore, there's a larger concern here: the mother appears to be administering an estate without advice from an accountant or attorney, and under the guidance of a broker who has not explained the options to her. Therefore the broker should be du...
by Bob's not my name
Fri Aug 29, 2014 8:29 am
 
Forum: Personal Finance (Not Investing)
Topic: Father died. How to handle his company stock?
Replies: 27
Views: 2082

Re: Father died. How to handle his company stock?

Gambler wrote:he had

Mom's filling out the paperwork to get it transferred to her.
The OP says the stock was held by the father.
by Bob's not my name
Fri Aug 29, 2014 7:28 am
 
Forum: Personal Finance (Not Investing)
Topic: Father died. How to handle his company stock?
Replies: 27
Views: 2082

Re: Please Help - Personal Investments / AA

Income: combined income of 150-160K. wife’s tuition bill, paying with cash. Once she’s done (4 yrs), it’ll free up roughly 1.5K cash per month and will add roughly 30-40K to her annual income. The $2,000 Lifetime Learning Credit phases out for AGI $108,000 - $128,000. Assuming you have, say, $3,500...
by Bob's not my name
Fri Aug 29, 2014 7:20 am
 
Forum: Investing - Help with Personal Investments
Topic: Need help in allocating monthly income
Replies: 11
Views: 1183

Re: Father died. How to handle his company stock?

You don't need any records. There is a basis step-up on death. Sell the stock immediately.
by Bob's not my name
Fri Aug 29, 2014 7:04 am
 
Forum: Personal Finance (Not Investing)
Topic: Father died. How to handle his company stock?
Replies: 27
Views: 2082

Re: Are assets split in kind or liquidated on death?

Probably too late to undertake at this time, but nursing care often places the elderly person in a 0% bracket, an ideal time to convert to Roth. In any case, the assets in the IRA should also be liquidated immediately (which in this case means selling the bond fund so everything's in the MM). Since ...
by Bob's not my name
Fri Aug 29, 2014 6:32 am
 
Forum: Investing - Help with Personal Investments
Topic: Are assets split in kind or liquidated on death?
Replies: 12
Views: 608

Re: Are assets split in kind or liquidated on death?

The assets are all liquidated immediately. It makes no sense to do otherwise because there is a basis step-up at death that eliminates capital gains (if you sell everything on the date of death the gains are precisely zero). The trustee incurs risk if she chooses to make or keep investments. Further...
by Bob's not my name
Fri Aug 29, 2014 5:17 am
 
Forum: Investing - Help with Personal Investments
Topic: Are assets split in kind or liquidated on death?
Replies: 12
Views: 608

Re: Taxes on Roth conversion at retirement

PA treats a TIRA like a Roth -- taxes the contribution but not the withdrawal.
by Bob's not my name
Tue Aug 26, 2014 11:12 am
 
Forum: Personal Finance (Not Investing)
Topic: Taxes on Roth conversion at retirement
Replies: 15
Views: 688

Re: Taxes on Roth conversion at retirement

Many states do not tax Social Security and pension income but most tax Roth conversions. Many states exempt Roth conversions from taxation, although many of the many apply age and dollar limits to the exemption. In a quick review, I counted 26 states that have no income tax or that have an income t...
by Bob's not my name
Tue Aug 26, 2014 10:37 am
 
Forum: Personal Finance (Not Investing)
Topic: Taxes on Roth conversion at retirement
Replies: 15
Views: 688

Re: Taxes on Roth conversion at retirement

OP is 35 years from RMDs so if we're talking nominal dollars a $113,000 RMD likely won't put him in the 25% bracket. I'm just pointing this out because sometimes we get hysterical about projected RMDs because we don't take inflation adjustment of the brackets, personal exemptions, and deductions int...
by Bob's not my name
Tue Aug 26, 2014 9:29 am
 
Forum: Personal Finance (Not Investing)
Topic: Taxes on Roth conversion at retirement
Replies: 15
Views: 688

Re: convince me not to use traditional IRA for house downpay

Exactly. If the government decides to provide you with a tax-deferred account for saving up a downpayment, why not take advantage of that? Most people withdraw from their retirement accounts when they buy a house, but it's not as obvious: they reduce their contributions in the early years of the mor...
by Bob's not my name
Tue Aug 26, 2014 7:52 am
 
Forum: Personal Finance (Not Investing)
Topic: convince me not to use traditional IRA for house downpayment
Replies: 23
Views: 2300

Re: Taxes on Roth conversion at retirement

Your 401k would have to be pretty small to convert it at a low tax rate in a single year. A 401k worth goggling at would take many years to convert.
by Bob's not my name
Tue Aug 26, 2014 6:22 am
 
Forum: Personal Finance (Not Investing)
Topic: Taxes on Roth conversion at retirement
Replies: 15
Views: 688

Re: MAGI too high for Roth after contributions

I'm surprised you know your MAGI so precisely when you have a large taxable account and year end distributions aren't known yet and a market decline could give you more losses to harvest. In your prior post you said you were $2,000 under the phaseout, and now a pay frequency change is putting you in...
by Bob's not my name
Tue Aug 26, 2014 4:48 am
 
Forum: Investing - Help with Personal Investments
Topic: MAGI too high for Roth after contributions
Replies: 4
Views: 574

Re: Portfolio help please

Something about your numbers doesn't make sense to me. I'm asking about this because maybe you're not as close to the direct Roth phaseout as you think. To put you in the 28% bracket with that mortgage I think your gross income would have to be >$110,000 ... but that means 15% would be pretty close ...
by Bob's not my name
Mon Aug 25, 2014 7:52 pm
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio help please
Replies: 5
Views: 451

Re: Trying to understand the 1040 Tax Table

Certain deductions PHASE OUT through a range of income, so your true marginal rate could be higher (never lower?) than the Table. Besides deduction phaseouts, there are also taxes, tax credits, and exemptions that phase out. Furthermore, these are not based on taxable income, but on other income de...
by Bob's not my name
Mon Aug 25, 2014 3:48 pm
 
Forum: Personal Finance (Not Investing)
Topic: Trying to understand the 1040 Tax Table
Replies: 36
Views: 2284

Re: using the 15% tax bracket

Also consider possible state tax ramifications. ... If you're in the 15% federal bracket your state tax burden can easily be more than a third of your marginal rate on conversions and 100% of your marginal rate on LTCG. State tax treatment of LTCG and IRA conversions varies, with most (but not all)...
by Bob's not my name
Mon Aug 25, 2014 8:00 am
 
Forum: Personal Finance (Not Investing)
Topic: using the 15% tax bracket
Replies: 42
Views: 4309

Re: convince me not to use traditional IRA for house downpay

Try a house today, just for fun, just because everybody's doing it, and before you know it you're mainlining four houses a day. Where does it stop?
by Bob's not my name
Sun Aug 24, 2014 1:40 pm
 
Forum: Personal Finance (Not Investing)
Topic: convince me not to use traditional IRA for house downpayment
Replies: 23
Views: 2300

Re: Need Help: State-Specific Bond Funds and Moving ?

Since the OH fund, Admiral shares of the CA fund of equal duration, and Admiral shares of the nationally diversified fund of equal duration are all yielding the same after adjusting for California taxes, I don't see any urgency in unloading the OH fund. There's no Mann Act for municipal bonds. If th...
by Bob's not my name
Sun Aug 24, 2014 4:47 am
 
Forum: Investing - Help with Personal Investments
Topic: Need Help: State-Specific Bond Funds and Moving ?
Replies: 6
Views: 580

Re: Advice on 401k - Traditional vs Roth

You need to run the math on that. It is not less. The commutative property of multiplication is involved. Also, you may not pay any tax on traditional, at least in some years, and in particular in some of the events you mention. Many states exempt TIRA withdrawals from taxation. As for federal, assi...
by Bob's not my name
Sat Aug 23, 2014 4:09 pm
 
Forum: Investing - Help with Personal Investments
Topic: Advice on 401k - Traditional vs Roth
Replies: 17
Views: 1287

Re: Advice on 401k - Traditional vs Roth

This is a hard question to answer since the ideal choice would be to have a mixture of account types so you will have more options when you are retired. If you are in the 25% or higher federal tax bracket it would take some compelling reasons, which is very possible, to choose a Roth when you could...
by Bob's not my name
Sat Aug 23, 2014 3:57 pm
 
Forum: Investing - Help with Personal Investments
Topic: Advice on 401k - Traditional vs Roth
Replies: 17
Views: 1287
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