Search found 34667 matches

by grabiner
Sun Feb 25, 2024 11:25 am
Forum: Personal Investments
Topic: 2-3 Time Horizon, 35% Marginal Tax Bracket?
Replies: 10
Views: 1749

Re: 2-3 Time Horizon, 35% Marginal Tax Bracket?

Muni money-market yields change over time much more than conventional yields do. In the 35% tax bracket, I would expect the muni money-market fund to outperform the Treasury fund in the long run, unless you pay high state tax.

I can't see whether this happens with VTES as well, because Vanguard doesn't publish historical SEC yields.
by grabiner
Sun Feb 25, 2024 11:13 am
Forum: Personal Investments
Topic: VSBIX and VGLT as income during retirement
Replies: 6
Views: 680

Re: VSBIX and VGLT as income during retirement

The risk of VGLT (Vanguard Long-Term Treasury ETF) is that while the bonds have stable dollar distributions, the dollars themselves are not stable; you don't know whether $1000 in twenty years will buy what $500 or $100 buys today. Thus, if you are holding long-term bonds for retirement income, it's better to use TIPS.

But for money that you will not touch for a long time, you are likely to get more income when you actually do need it by investing in stocks. Buying 20-year TIPS gives you a guaranteed amount of purchasing power in 20 years, while buying stocks and holding them for 20 years gives you an unknown but likely much greater amount. Shorter-term bonds are appropriate for shorter-term needs.
by grabiner
Sun Feb 25, 2024 11:06 am
Forum: Personal Investments
Topic: [Withdraw from high performing assets or dividends?] IRA distrubutions
Replies: 12
Views: 830

Re: [Withdraw from high performing assets or dividends?] IRA distrubutions

It's simpler not to think about what you sell, but about what you keep. If you want 60% of your money to be in stock, and you currently have 65%, then the withdrawal should come from stock. It doesn't matter whether you do this directly (reinvest all dividends, and then sell stock funds to get the money), or indirectly (spend stock dividends, and reinvest bond dividends in bond funds); you'll have the same investments either way.
by grabiner
Sat Feb 24, 2024 10:10 pm
Forum: Personal Investments
Topic: iShares iBonds 2033 Term TIPS ETF - advantages over TIPS
Replies: 31
Views: 3934

Re: iShares iBonds 2033 Term TIPS ETF - advantages over TIPS

If you buy an individual TIPS for $1000 with a 2% coupon and inflation is 3%, you will have $1050 next year. $20 is distributed to you in cash, and the TIPS is now worth $1030. (You still owe tax on the whole $50 if this is a taxable account.) If you buy an ETF holding this TIPS instead, you will also have $1050. You received the $30 inflation adjustment as a dividend, in addition to the $20 coupon. You can choose to reinvest the inflation adjustment in more shares of the ETF, so that you have $1030 in the ETF and $20 in cash now. Thanks for showing this example! It was very helpful!! I wanted to check my understanding of it: If you buy the ETF holding TIPS AND reinvest the inflation adjustment in more shares, you may be able to purchase m...
by grabiner
Sat Feb 24, 2024 3:38 pm
Forum: Personal Finance (Not Investing)
Topic: Business Debt Payment Strategy
Replies: 2
Views: 642

Re: Business Debt Payment Strategy

Any additional payment on the loan gives you a 6% return, reduced by the tax rate. Is that the best use of the business's money, or yours if you are personally responsible? It may be, considering the risk.
by grabiner
Wed Feb 21, 2024 9:53 pm
Forum: Personal Finance (Not Investing)
Topic: Tax exempt dividends on tax form?
Replies: 13
Views: 1498

Re: Tax exempt dividends on tax form?

Her social security income will be taxed at various levels depending on her income, and tax-exempt income is factored into that formula. The same thing happens when figuring out how much Medicare premiums are: tax-exempt income is factored into that too. You can look at the formula here: https://www.ssa.gov/benefits/retirement/planner/taxes.html There is not actually a formula on this page. The wording in both the SSA brochure and IRS Publication 915 often leads to an incorrect impression that going $1 over the limit causes 50% or 85% of your SS to become taxable. What actually happens is that every dollar over the lower limit causes 50 cents of SS to become taxable (up to a maximum of 50% of total SS if you are between the limits, which a...
by grabiner
Tue Feb 20, 2024 10:51 pm
Forum: Personal Finance (Not Investing)
Topic: payroll company, employer or my fault?
Replies: 47
Views: 2572

Re: payroll company, employer or my fault?

The new W4 is different. You need to account for all your income on both his/her W4. You needed to do that on the old W-4 as well. On both the new and the old W-4, if you report that you are married, make the default entries (3 allowances on the old W-4, $0 in adjustments on the new W-4), you will have the right amount of tax withheld if your salary is the only source of income for your family and you claim no tax credits and take the standard deduction. If both spouses work, there has always been a two-earner/two-job worksheet to adjust the withholding as appropriate. On the old W-4, you had to convert other sources of income or credit into allowances; now, you can just enter them in dollars. Thus, if you have $2000 in child tax credit, y...
by grabiner
Tue Feb 20, 2024 10:36 pm
Forum: Personal Finance (Not Investing)
Topic: Tax exempt dividends on tax form?
Replies: 13
Views: 1498

Re: Tax exempt dividends on tax form?

Makefile wrote: Mon Feb 19, 2024 10:55 pm The computation of what extent of your Social Security income is taxable--up to 85%--is a means test by another name, with an addback of tax-exempt interest that goes into the calculation.
Therefore, municipal bonds are not attractive for investors in a low tax bracket, even if they are in the SS phase-in. Every $1 of municipal-bond income makes 85 cents of SS taxable at 12%, for a marginal tax rate of 10.2%, versus 22.2% on taxable bond income. With this small a difference in tax rates, she would be better off with taxable bonds; she will probably get more after-tax income from a bond fund of the same risk.
by grabiner
Tue Feb 20, 2024 10:33 pm
Forum: Personal Finance (Not Investing)
Topic: Tax exempt dividends on tax form?
Replies: 13
Views: 1498

Re: Tax exempt dividends on tax form?

lormor wrote: Tue Feb 20, 2024 10:30 pm Thank you all, I think I understand it now. However another wrinkle:

I was telling a friend about the situation today and he said, "Why not take out the max she can contribute from her brokerage account with the bond fund and move it to her IRA ($7500 at her age) which would knock down the amount she owes?" Any opinions?
You have to have earned income (wages or business) to contribute to an IRA, so she is probably not eligible.
by grabiner
Tue Feb 20, 2024 7:37 am
Forum: Personal Finance (Not Investing)
Topic: Tax questions (HSA, disallowed wash sale)
Replies: 6
Views: 722

Re: Tax questions (HSA, disallowed wash sale)

4. I had some disallowed wash sales in 2022. Do I just manually raise the cost basis on those stocks in TurboTax? If so, how do I find the wash sale amount? Did your custodian tell you that? No, I determined it myself & reported it on my 2022 tax return. I sold ESPPs & RSUs at a loss but I had ESPPs & RSUs vest within 30 days before or after the sale. In that case, your custodian did not make the adjustment. When you sell the replacement shares, the basis reported on your 1099-B will be incorrect, and you will need to make an adjustment on your Form 8949 to report this. The basis on each replacement share is increased by the amount of the disallowed loss. For example, if you sold 100 shares for a loss of $20 per share, and then...
by grabiner
Mon Feb 19, 2024 10:35 pm
Forum: Personal Finance (Not Investing)
Topic: Employer HSA contributions not included in W2
Replies: 13
Views: 1182

Re: Employer HSA contributions not included in W2

One of the most common examples of this situation is the US Government. The Government insurance plans all have the plan make a contribution to your HSA, or to a Health Reimbursement Agreement if you are not eligible for an HSA. Since this payment is made indirectly by the plan (which is an employer contribution since the insurance itself is paid by payroll deduction), the government payroll office does not officially know about it, and it thus does not get entered on a W-2. You can then make your own contributions by payroll deduction, which do appear on the W-2.
by grabiner
Mon Feb 19, 2024 10:26 pm
Forum: Personal Finance (Not Investing)
Topic: Tax questions (HSA, disallowed wash sale)
Replies: 6
Views: 722

Re: Tax questions (HSA, disallowed wash sale)

1. Do I need to report HSA interest income & div on my federal return? I know I need to for CA state return. No. Under the federal tax law, an HSA works the same way as an IRA; you pay no tax on anything which happens within the account. (Withdrawals from different tax-sheltered accounts are reported differently.) 2. I made an after-tax contribution to my HSA in 2023. Do I need to add that money back on my CA state return? Or will TurboTax know based on my W2? If you made an after-tax contribution (you deposited a check in the HSA), then you subtracted it as an adjustment to income on your federal tax form, and you do not get that adjustment in CA. If you made a contribution by payroll deduction (your employer made the contribution), t...
by grabiner
Mon Feb 19, 2024 4:04 pm
Forum: Personal Finance (Not Investing)
Topic: HSA reimbursement
Replies: 14
Views: 1828

Re: HSA reimbursement

Seems to me the best option is to pay the medical bill from a taxable account, if you have excess cash there. That way your HSA and Roth funds continue to earn tax-free. Right? :oops: This is the best strategy if you are maxing out your retirement accounts. However, if you aren't maxing out your retirement accounts, you should already have put the excess cash from your taxable account into a retirement account. (If it is not in a retirement account because it is being saved for a pre-retirement purpose such as a home down payment, then it isn't excess cash.) If you neglected to do this previously, you are still better off contributing the taxable money to your retirement account and withdrawing from the HSA, rather than using the taxable m...
by grabiner
Mon Feb 19, 2024 3:39 pm
Forum: Personal Finance (Not Investing)
Topic: HSA reimbursement
Replies: 14
Views: 1828

Re: HSA reimbursement

4 You should be using the HSA as an investment account, not as a flow through, since it can work as a taxable brokerage and a emergency fund. 5 Just save only the big medical expenses receipts for later reimbursement to self, not every single small one. Rules 4 and 5 are only correct if you are maxing out your retirement accounts. Otherwise, it's better to use the HSA for medical expenses, because you have already gotten the main tax benefit when you got a tax deduction on the contribution and can withdraw it tax-free. For example, if you have a $1000 medical bill, $1000 in the bank, and you are not maxing out your Roth IRA, you can pay $1000 from your HSA and contribute $1000 to your Roth IRA. You can still spend the $1000 on anything at ...
by grabiner
Mon Feb 19, 2024 11:52 am
Forum: Personal Finance (Not Investing)
Topic: Comparing interest rates between loans and savings
Replies: 8
Views: 861

Re: Comparing interest rates between loans and savings

aerosurfer wrote: Mon Feb 19, 2024 11:30 am If you are making enough to be in the 33% bracket, what’s your take home pay and other monthly expenses. In other words, why plan to carry a debt load that far exceeds your savings rate, even more so if you are in a higher tax bracket?
My guess is that the 33% is combined federal and state, probably 24% federal and 9% state.

And given the rates on these debts, the current strategy makes sense: max out all tax-advantaged savings (a benefit you will lose if you don't max out every year), keep an emergency fund in a savings account, and pay down the higher-rate loans in preference to taxable investing.
by grabiner
Mon Feb 19, 2024 11:35 am
Forum: Personal Consumer Issues
Topic: Paying for A Car Boglehead Style
Replies: 64
Views: 7182

Re: Paying for A Car Boglehead Style

With a car purchase looming I don't have any cash available to make the purchase. Shopping for cars in the $20k range. Do I go ahead and take a loan out for the $20k or liquidate some shares of VTI. I've never sold a share these past 5 years so its not a habit I feel great about, however, signing for a loan at 6-9% seems insane. However, I should be able to pay the car off quickly and save some on the interest. Typically I have between 1000-2000 left after expenses each month. Compare the costs of the two options. I have done it both ways. In 2001, I took out a loan on a car rather than selling stock with a capital gain of 20% of the share price I then paid off the loan aggressively, so that I paid less loan interest than I would have paid...
by grabiner
Mon Feb 19, 2024 11:16 am
Forum: Personal Finance (Not Investing)
Topic: Comparing interest rates between loans and savings
Replies: 8
Views: 861

Re: Comparing interest rates between loans and savings

Even if the student loan interest is not deductible, you might want to pay down the auto loan first, for several reasons. Cash flow: once the auto loan is paid off, you will eliminate a monthly payment and need a smaller emergency fund. Optionality: the auto loan has a shorter term. If you pay off the auto loan, you can use the money that was going to auto loan payments to pay down the student loan, or choose not to use it that way if you decide not to pay down the student loan (for example, if you can refinance it). Insurance: once the auto loan is paid off, you can save money by increasing your collision and comprehensive insurance deductibles. At these rates, I would prefer paying down either loan over making a taxable investment, other ...
by grabiner
Mon Feb 19, 2024 11:02 am
Forum: Personal Consumer Issues
Topic: Allocating 1099-DIV/INT to multiple states
Replies: 9
Views: 945

Re: Allocating 1099-DIV/INT to multiple states

This doesn't apply to the OP, who is paying only nonresident tax, but I am posting this because it answers the original question and may be relevant to others. One additional issue comes up if you have foreign stock funds. The foreign tax withheld is not paid to you, but it is taxed to you (and then you usually get it back as a foreign tax credit). Thus, as a part-year resident, you must prorate the foreign tax withheld. For example, suppose you have $300 of dividends paid to you by a fund while you are a NY resident, $500 while you are an IL resident, and the 1099-DIV reports $880 in dividend income including $80 foreign tax withheld. You would report $330 on your NY part-year form, and $550 on your IL part-year form. (For nonresidents in ...
by grabiner
Mon Feb 19, 2024 10:31 am
Forum: Personal Investments
Topic: should I make additional principal payments
Replies: 22
Views: 2838

Re: should I make additional principal payments

placeholder wrote: Sun Feb 18, 2024 10:23 pm I wouldn't because I think there's a good chance the fed will get it's inflation target in the coming years so rates will go down and you'll have a chance to refinance.
Mortgage rates track long-term yields, not the short-term rates that the Fed targets. While long-term yields might also fall, there is no expectation that they will fall significantly.

If you pay down your mortgage, you do give up the option of refinancing that amount, but right now, that option is not worth much since even the after-tax rate on deductible interest is significantly above the low-risk return you can get.
by grabiner
Sun Feb 18, 2024 9:01 pm
Forum: Personal Finance (Not Investing)
Topic: HSA reimbursement
Replies: 14
Views: 1828

Re: HSA reimbursement

4 You should be using the HSA as an investment account, not as a flow through, since it can work as a taxable brokerage and a emergency fund. 5 Just save only the big medical expenses receipts for later reimbursement to self, not every single small one. Rules 4 and 5 are only correct if you are maxing out your retirement accounts. Otherwise, it's better to use the HSA for medical expenses, because you have already gotten the main tax benefit when you got a tax deduction on the contribution and can withdraw it tax-free. For example, if you have a $1000 medical bill, $1000 in the bank, and you are not maxing out your Roth IRA, you can pay $1000 from your HSA and contribute $1000 to your Roth IRA. You can still spend the $1000 on anything at ...
by grabiner
Sun Feb 18, 2024 8:56 pm
Forum: Personal Finance (Not Investing)
Topic: FreeTaxUSA: entering two W-2s from same employer, each for different states
Replies: 7
Views: 818

Re: FreeTaxUSA: entering two W-2s from same employer, each for different states

fabdog wrote: Sat Feb 17, 2024 12:48 pm Most states have credits for taxes paid to another state, but varies depending on state pair. Also make sure you have the right income allocated to each state.
This won't usually apply if you move, because there won't be double taxation. (It might apply if you move from State A to State B, then go back to your State A office to do some work there after you have become a State B resident.)
by grabiner
Sun Feb 18, 2024 8:40 pm
Forum: Investing - Theory, News & General
Topic: Money Market v. Bond Fund Distribution Yields
Replies: 14
Views: 2998

Re: Money Market v. Bond Fund Distribution Yields

Along the same vein of this conversation - For the past two years, my FXNAX fund (please forgive me for not having a Vanguard fund) has dropped from $11.5 to $10.2 or ~ (-11.3%). The story is similar for Vanguard BND fund 81.5 to $72 or ~ (-11.5%). Maybe this is short-sighted on my part, but why don’t I just put the money into a money market fund at ~5% return? And it will be liquid to boot. Because you don't know whether bond yields will rise or fall. In the last few years, they rose. If bond yields fall, bond funds will outperform money-market funds, as they will have price appreciation in addition to the current yield. And this is still relevant even though money-market yields are currently higher. Bonds are riskier than money-market fu...
by grabiner
Sun Feb 18, 2024 8:34 pm
Forum: Personal Investments
Topic: SGOV state tax and selling each month before ex-div date?
Replies: 32
Views: 2567

Re: Using up large accumulated capital loss with treasury ETFs - am I overlooking something?

my assumption is that if you trade an ETF with 100% treasuries, any realized cap gains on it will be state free NJ is the only state I know in which this is the case. In NJ, capital gains on bonds which are exempt from NJ taxes, or on "qualified investment funds" which hold them, are exempt from state tax. In a few other states, capital gains on Treasury bonds are exempt, but capital gains on Treasury funds are taxable. In most states, all capital gains are taxable. But treasury futures are exempt in most states? Does tax software actually pick up on all these small nuances between states? Jeeze, need a curated yearly playbook saved! I don't know how Treasury futures are taxed, but I would expect that most states would tax them b...
by grabiner
Sun Feb 18, 2024 8:23 pm
Forum: Personal Investments
Topic: SGOV state tax and selling each month before ex-div date?
Replies: 32
Views: 2567

Re: Using up large accumulated capital loss with treasury ETFs - am I overlooking something?

hiddenpower wrote: Sun Feb 18, 2024 10:50 am my assumption is that if you trade an ETF with 100% treasuries, any realized cap gains on it will be state free
NJ is the only state I know in which this is the case. In NJ, capital gains on bonds which are exempt from NJ taxes, or on "qualified investment funds" which hold them, are exempt from state tax. In a few other states, capital gains on Treasury bonds are exempt, but capital gains on Treasury funds are taxable. In most states, all capital gains are taxable.
by grabiner
Sun Feb 18, 2024 8:18 pm
Forum: Personal Investments
Topic: Which tax exempt bonds for CA
Replies: 37
Views: 4084

Re: Which tax exempt bonds for CA

Do you plan to remain in CA? If so, I'd go with CA Intermediate Term Tax Exempt (VCAIX) up to 10% of your total asset allocation. Even if you might leave CA, you should hold CA munis while you remain in CA. If you move out of CA, you can sell a CA muni fund to buy a national muni fund or one for your new state with little or no capital gain, and keep your bond market exposure. In the top CA tax bracket, I recommend bonds in taxable and stocks in tax-deferred, rather than the usual preference for bonds in tax-deferred. The reason is that you pay 20% federal + 3.8% NIIT + 12.3% CA = 36.1% tax on qualified dividends and long-term gains, more than double the usual rate, while your tax cost for CA munis is the same as everyone else's (not zero,...
by grabiner
Sun Feb 18, 2024 6:56 pm
Forum: Personal Investments
Topic: Question for Grabiner re: bond placement in high tax states
Replies: 26
Views: 4085

Re: Question for Grabiner re: bond placement in high tax states

Indeterminacy wrote: Sun Feb 18, 2024 11:29 am Grabiner, I have one follow-up question. As I would be holding this for approximately 2 years, what are your thoughts on a New York Municipal Money Market Fund - Fidelity Premium Class (FSNXX) vs. a New York Long-Term Tax-Exempt Fund - Vanguard Investor Shares (VNYTX, which has a lower ER and better yield than the Fido version FTFMX). Less volatility with a similar yield?
You are planning to hold the specific fund for only two years, but you are planning to leave the money invested in bonds for a longer time period, so it makes sense to invest in longer-term bonds. If bond yields rise in the next two years and you then switch to a different bond fund, you will still get the benefit of the higher yields on your new fund.
by grabiner
Sat Feb 17, 2024 11:03 pm
Forum: Personal Investments
Topic: 403b contributions taxed by New Jersey
Replies: 8
Views: 1335

Re: 403b contributions taxed by New Jersey

When you move to another state, your new state determines your tax as if you had always been a resident; it doesn't care whether money has been taxed already by another state, or exempted from tax by another state. Thus, if you retire outside NJ, you will pay tax on your full 403(b) withdrawal, even though NJ has taxed part of it already. This can work to your benefit as well. I contributed to 403(b) plans before moving to NJ, rolled them to a traditional IRA, converted to a Roth, and paid tax on the Roth conversion while a NJ resident in 2011-2012. I thus paid no state tax on my contributions on either end; the state where I worked allowed a deduction, and NJ taxed only the gains and employer match, not my own contribution. The NJ tax rul...
by grabiner
Sat Feb 17, 2024 11:00 pm
Forum: Personal Investments
Topic: HSA in New Jersey Question
Replies: 33
Views: 3460

Re: HSA in New Jersey Question

If Treasury bonds don't fit your needs (say, because you have an unusually good fixed-income option in your retirement plan such as TIAA Traditional Annuity or TSP G fund), then it's probably best to buy and hold a stock index fund for the investment part of your HSA. One thing I've really never been able to wrap my head around regarding the "Treasury bonds in HSA for NJ residents advice" - how do you make the determination that not having to pay state taxes on dividends outweighs the benefit of growing tax-free space with a higher expected value investment like VTI, even if that "tax-free" space is only tax-free from a federal perspective? Once you tax-adjust, this makes very little difference. If your marginal tax rat...
by grabiner
Sat Feb 17, 2024 6:50 am
Forum: Personal Investments
Topic: should I make additional principal payments
Replies: 22
Views: 2838

Re: should I make additional principal payments

toddthebod wrote: Fri Feb 16, 2024 10:17 pm I look at your mortgage and your investments in T-bills and wonder why you would borrow money at 6% and invest it earning less than 4%.
The T-Bills are intended as an emergency fund, for liquidity.

However, with all the stock in the taxable account, it makes more sense to use the strategy of Placing cash needs in a tax-advantaged account. If you sell enough of the T-Bills to pay down the mortgage to $750K, and you then need more money than you have available in T-Bills, you can sell some of your stock and move an equal amount from bonds to stock in the 401(k).
by grabiner
Fri Feb 16, 2024 9:57 pm
Forum: Personal Investments
Topic: should I make additional principal payments
Replies: 22
Views: 2838

Re: should I make additional principal payments

You may even want to pay down the mortgage beyond $750K. Once you get down to deductible interest, your after-tax return on a mortgage paydown in your 24% federal and 9.3% CA tax bracket is 3.94%; you can earn only 3.43% on Admiral shares of Vanguard CA Long-Term Tax-Exempt, which is the most fair comparison. (If you move up to the 32% federal bracket, it wouldn't be worth paying down deductible interest given current bond yields.) In particular, if you decide to liquidate that $750K single-stock position, you will have a lot of cash available, and you might decide to make a big mortgage paydown. Ask your lender whether they will "recast" the mortgage, so that you keep the original term of the mortgage and have lower payments ever...
by grabiner
Fri Feb 16, 2024 9:31 pm
Forum: Personal Investments
Topic: Help from those who tilt to SCV requested
Replies: 5
Views: 766

Re: Help from those who tilt to SCV requested

My preferred allocation within each region is 1/8 LG, 1/8 SG, 3/8 LV, 3/8 SV. I keep track of this separately for US, developed, and emerging markets, although it isn't possible for emerging markets small-cap value because there is no fund there. This would normally require four funds in each region, although I have only three in the US because Vanguard's VFVA has exactly the LV/SV split I want. I hold large-cap developed hlend in my employer plan, VSS for small-cap blend, AVIV and AVDV for large-cap and small-cap value. I haven't added AVEE yet because I haven't yet reached my target in EM value, which I consider more important. I hold VWO (actually the mutual fund class VEMAX) for EM blend, and as much AVES as I have room for in my HSA fo...
by grabiner
Thu Feb 15, 2024 8:58 pm
Forum: Investing - Theory, News & General
Topic: Caz Investments via Tony Robbins
Replies: 45
Views: 5756

Re: Caz Investments via Tony Robbins

A hint to get you started: https://i0.wp.com/blogs.cfainstitute.org/investor/files/2018/11/Replicating-Private-Equity-with-Small-Cap-Stocks.png?w=602&ssl=1 This chart actually shows an advantage for private equity over publicly traded stocks, but the advantage is misleading. The returns of the two lines are similar, but the public stocks are more volatile; private equity reports lower losses when the stock market crashes. If that were really the case, then private equity would be the better investment; a portfolio of 100% private equity might have the same risk as 60% stocks and 40% bonds, with less risk. (This ignores the cost of investing; private equity managers charge much higher fees than small-cap index fund managers, so you can'...
by grabiner
Thu Feb 15, 2024 8:47 pm
Forum: Personal Investments
Topic: Holding 100% VTSAX
Replies: 29
Views: 9966

Re: Holding 100% VTSAX

...Here’s the question: I read about keeping all your money on VTSAX (J.L. Collins) or using a 3 fund allocation fund (VTSAX, VTIAX and Bonds). I know past performance does not guarantee future performance, but it seems solid to keep all the assets in VTSAX. What am I missing? Is there a secret sauce I’m not seeing about this allocation vs diversifying on a 3-4 fund allocation? My horizon is at least 15 years on letting this moment ride =) Thanks in advance! What you might be missing is the experience of living through 2000-2003 and 2008-2009 with important investment money. Money patiently saved over many years of working. Money saved by foregoing a certain amount of "nice things." That is, the experience of seeing your five yea...
by grabiner
Wed Feb 14, 2024 7:28 pm
Forum: Personal Investments
Topic: Please critique my strategy for a simple, tax-efficient hands-off portfolio
Replies: 19
Views: 3491

Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

The Wiki topic on Tax-Efficient Fund Placement says "If all else is equal, international funds have a small tax advantage over US funds, because they are eligible for the foreign tax credit." . That's not an either or proposition, since the figure in Step 2 Placing Least Efficient Funds shows that both US & Int'l stocks should go to a taxable account. And all else is no longer equal. International funds have had higher yields than US funds since 2008, so they are now often less tax-efficient, particularly if you pay high state tax. They are still fine in taxable, but if you have some room for stock in tax-deferred, you might prefer to hold the international funds there. (As usual, this depends on your options, many 401(k) pla...
by grabiner
Wed Feb 14, 2024 7:24 pm
Forum: Personal Investments
Topic: Younger spouse's FERS: 25% survivor benefit?
Replies: 9
Views: 937

Re: Younger spouse's FERS: 25% survivor benefit?

moglehead wrote: Wed Feb 14, 2024 6:04 pm
delamer wrote: Wed Feb 14, 2024 5:06 pm Assuming the 25% survivor benefit, have you actually run the numbers as to what your total income would be if you survive your wife?

You’ll lose not just the larger pension amount but also the smaller of your two Social Security benefits.
Lose the smaller SS benefit? This is news to me. Can you provide a reference for this?
While you are both alive, you each receive your own SS benefit. When either one of you dies, the survivor gets either their own benefit or a widow/er's benefit equal to the deceased spouse's benefit. Thus, whichever one dies first, the survivor gets the higher of the two benefits.
by grabiner
Wed Feb 14, 2024 7:21 pm
Forum: Personal Investments
Topic: Custodial accounts, realizing a capital gain
Replies: 12
Views: 861

Re: Custodial accounts, realizing a capital gain

What you are doing is known as tax gain harvesting: take a capital gain taxed at 0% now, then reinvest at a higher basis, to avoid having to pay 15% tax on the gain in a future year. A minor subject to the kiddie tax can have up to $1300 in any type of income, and another $1300 in qualified dividends and long-term gains, without owing any federal tax. Anything above that level would be taxed at the parents' rate, likely 15%. (You will also have to check the state tax situation.) Thus, if the account pays $600 in dividends, you can harvest $2000 in gains free of federal tax; this will save them $300 in capital-gains tax if they sell the account while in a higher bracket. A possible alternative way to handle the gifts would be to fund a 529, ...
by grabiner
Tue Feb 13, 2024 8:18 pm
Forum: Personal Finance (Not Investing)
Topic: Tax question: California taxes and out-of-state second home
Replies: 2
Views: 696

Re: Tax question: California taxes and out-of-state second home

I believe CA does not conform to federal law with the $10,000 limit for state and local tax deduction. But does that include (non-income) taxes paid to other states? Would I be able to deduct it from CA income tax? Yes, for your CA return, you can deduct real estate taxes paid to any state. That goes in Schedule CA (540), Part II, line 5b, column A. On the flip side, unlike for federal, you cannot deduct income taxes paid to any state. However, you can file Schedule S to take a credit for any tax paid to the other state on income sourced in that state. The credit is the lesser of the tax paid to that state, or a prorated share of your CA tax. For a few states, the credit goes the other way and you take a credit on the non-resident return f...
by grabiner
Tue Feb 13, 2024 8:03 pm
Forum: Personal Finance (Not Investing)
Topic: First time owing federal taxes
Replies: 45
Views: 4459

Re: First time owing federal taxes

Sorry, I meant that the issue wasn't with my tax withholding from any W2-income. It was merely 1099-INTs (primarily from my HYSA) that were responsible. It doesn't seem like a W4 adjustment would account for that (unless I'm really understanding that wrong). There is a line on your W-4 for reporting other income in order to adjust your withholding. If you are in a 24% tax bracket and have $3000 of interest, you will owe $720 tax on it. If you report on the W-4 that you have $3000 of income other than your salary, then $720 additional will be withheld from your paycheck, which is $60 each month if you are paid monthly. This is a common issue for Bogleheads. I have a large portfolio which pays a lot of dividends, so I have to increase my wit...
by grabiner
Tue Feb 13, 2024 7:44 pm
Forum: Personal Investments
Topic: Should We Realize Gains at Once or Slowly?
Replies: 14
Views: 1603

Re: Should We Realize Gains at Once or Slowly?

delamer wrote: Tue Feb 13, 2024 12:44 pm If you hold off selling, there’s a high likelihood that stock prices will increase and you’ll make more money. But, of course, they could decline.
You'll make more money if the stock market rises whether you realize the gains now or later, as long as you reinvest in stock funds.

The advantage of selling now is that you will reduce the taxable gain if the stock market rises next year. And if the stock market falls, you can harvest the loss in your replacement stock, so you won't be worse off.
by grabiner
Tue Feb 13, 2024 7:41 pm
Forum: Personal Investments
Topic: should i pay off a car at 1.9% or invest in a cd at 5.5%
Replies: 67
Views: 6387

Re: should i pay off a car at 1.9% or invest in a cd at 5.5%

Do you get any other benefit from paying off the loan? For example, would you like to increase your collision deductible? If so, paying off the car will allow you to do that, and thus the gain from paying off the loan may be more than just the interest saved.
by grabiner
Mon Feb 12, 2024 8:22 pm
Forum: Personal Finance (Not Investing)
Topic: TSP and New Jersey Taxes
Replies: 2
Views: 411

Re: TSP and New Jersey Taxes

NJ prorates withdrawals, just as the IRS does for non-deductible IRAs. If your account has $100K in previously taxed contributions, and $100K in gains, then any withdrawal is half taxable. I don't know how NJ treats government interest from the TSP G fund. Withdrawals from IRAs and 401(k)s that are attributed to Treasury interest are not taxed in NJ, so it would be logical that the G fund gains should also be a non-taxable part of the withdrawal. However, the G fund doesn't pay out the withdrawals as interest. I did encounter a similar situation. I lived in NJ in 2010-2013. I had an old 403(b), which I rolled over to a traditional IRA and converted to a Roth IRA, paying NJ tax on the conversion in 2011 and 2012. I needed to find my 1997 W-2...
by grabiner
Mon Feb 12, 2024 8:16 pm
Forum: Personal Finance (Not Investing)
Topic: Home Buying: Mortgage or Realize Cap Gains?
Replies: 15
Views: 1198

Re: Home Buying: Mortgage or Realize Cap Gains?

Do you pay state income tax? How much is that? $8,000 in state taxes. Now add property taxes on the house, and anything you donate to charity, and you are already close to the standard deduction if not over it. Thus, if you are single, most of the mortgage interest will be tax deductible. This reduces the return from 7% to 5.32% on taking out a smaller mortgage, or even less if your state also allows an income tax deduction. Even then, taking out a smaller mortgage is a risk-free return after tax which is significantly higher than the return you can otherwise get with low risk. So you need to weigh the cost against the benefit. The return on Admiral shares of Vanguard Long-Term Tax-Exempt is 3.49%. (You don't hold exactly that bond fund, b...
by grabiner
Mon Feb 12, 2024 7:26 pm
Forum: Personal Investments
Topic: New HSA options
Replies: 5
Views: 1227

Re: New HSA options

SwiftKey wrote: Sun Feb 11, 2024 4:41 pm I'm starting a new job in a month or so, and will have HSA with HealthEquity. My plan is to do periodic partial transfers out to Fidelity, where I have access to all the ETFs and most of the MMs I could want. I'm in CA, so I'm still trying to figure out exactly what I'll hold in it.
If Treasury bonds or TIPS meet your investment needs, those are the best investments for an HSA in CA because of the state tax exemptions. Fidelity has very-low-cost Treasury and TIPS index mutual funds, or you can use ETFs. (If you don't want all your bonds to be Treasuries, you could hold Treasuries in your HSA and corporate bonds in your IRA/401(k).)
by grabiner
Mon Feb 12, 2024 7:17 pm
Forum: Personal Investments
Topic: Help needed with Asset Location
Replies: 6
Views: 823

Re: Help needed with Asset Location

You'll pay ordinary income tax rates on the gains in your solo 401(k). Ordinary income tax rates are higher than long term capital gains income tax rates, so keeping lower expected return investments in the 401(k) makes sense since it minimizes the income that will be taxed at the higher rate. If you were asking about keeping bonds in the Roth where you'll pay no tax on gains vs keeping them in taxable where you'll have to pay tax on the interest then I would be less certain about the right thing to do. Again, this goes away if you tax-adjust. Suppose you have two accounts, one with $300K that you own alone, and one with $400K in which your uncle owns 25%. You don't particularly care about your uncle, so you manage both in your own interes...
by grabiner
Mon Feb 12, 2024 7:09 pm
Forum: Personal Investments
Topic: Vanguard’s VO and/or VOO for new 401k
Replies: 13
Views: 1064

Re: Vanguard’s VO and/or VOO for new 401k

VO and VOO have about 266 overlapping holdings, which is 80% of VO that's also in VOO. Because VO doesn't have the megacaps, the weight of overlap is only 15%. But you aren't getting as much diversity as you expected given the number of overlapping entities. The cause of the overlap is that they track different index series, with different cap ranges. VOO is about the top 80% of the market (it covers 78% but the omitted stocks are not the smallest), while VO is 70%-85%. If you want to add mid-caps to the S&P 500, you should use IVOO, which is the S&P 400, and for small-caps use VIOO, which is the S&P 600; there would be no overlap. Or a better solution if you are trying to approximate the total market: Do you have access to VXF...
by grabiner
Mon Feb 12, 2024 7:04 pm
Forum: Investing - Theory, News & General
Topic: NJ State taxes: Dividend and capital gains in HSA not taxable until withdrawal?
Replies: 19
Views: 4719

Re: NJ State taxes: Dividend and capital gains in HSA not taxable until withdrawal?

Any idea on how to report capital gains only on NJ tax return but not on federal return. I believe one would use Schedule NJ-DOP https://www.nj.gov/treasury/taxation/pdf/current/schedulenjdop-wcc.pdf The problem is, it expects us to report the data matched to what is reported on federal Schedule D. so hrblock software is not allowing to add new entries here even manually. I am trying to offset for some tax losses, so don't want to use Line 26 (other Income) https://www.nj.gov/treasury/taxation/pdf/current/1040.pdf I don't use H&R Block, but I encountered a similar issue with TaxAct back in 2013-2014. Does your software allow you to override a calculated value? If so, you can override, although that may prevent you from filing electroni...
by grabiner
Sun Feb 11, 2024 11:17 pm
Forum: Personal Finance (Not Investing)
Topic: Vanguard’s confusing 1099-DIVs
Replies: 40
Views: 6176

Re: Vanguard’s confusing 1099-DIVs

secondcor521 wrote: Sun Feb 11, 2024 10:17 pm
grabiner wrote: Sun Feb 11, 2024 11:12 am There is no penalty for IRA withdrawals in the year you turn 59.5, whether you do this before or after your birthday.
I don't believe that's accurate. An IRA distribution prior to 59.5 is subject to the early withdrawal penalty (unless it meets one of the exceptions).
I checked with Publication 590-B, which agrees with this; you have to actually be 59.5 to withdraw penalty-free. I edited my post above. (Some IRS rules do apply to the whole year; you can make catch-up contributions to an IRA in the year you turn 50, even if you do this before your birthday.)
by grabiner
Sun Feb 11, 2024 10:16 pm
Forum: Personal Investments
Topic: Should my 21-year old nephew fire his financial advisor?
Replies: 99
Views: 10832

Re: Should my 21-year old nephew fire his financial advisor?

He certainly needs to get his money out from the advisor. But he should proceed carefully with selling anything until he knows the tax implications. As far as his asset allocation is concerned, the best decision will depends on how he wants to use the money. A new car next year is different than graduate school in 3 years is different than a house downpayment in 10 years is different than retirement in 40 years. I'm guessing at age 21 he is in a low tax bracket sontax implications are likely minimal. The investment implications of getting stuck in a poor fund with 60 years of expected growth are by far the bigger consideration. Of course, I agree the youngster should understand the situation and make a plan before selling everything all at...
by grabiner
Sun Feb 11, 2024 11:36 am
Forum: Personal Investments
Topic: Liquidate my individual stocks now?
Replies: 20
Views: 2727

Re: Liquidate my individual stocks now?

Besides, gains in a DAF don't get a tax benefit, while gains in one's taxable account do get a benefit. I feel like I just had an "ah-ha" moment....but could you please explain this for me so I'm certain I understand? I'm interested in a DAF but just starting to think about it. Thank you, in advance. If you have a stock worth $100K, and it rises in value to $120K, you can get a $120K deduction for donating it to charity. If you donate the stock to a DAF before the market rises, you can donate $120K to charity but you only deducted $100K. However, if you donate earlier, you get the tax deduction earlier, and thus you have the opportunity to invest the tax savings (unless you are over the 30%-of-AGI deduction limit). In addition, w...
by grabiner
Sun Feb 11, 2024 11:31 am
Forum: Personal Investments
Topic: Reallocating Assets -- affect prices?
Replies: 5
Views: 498

Re: Reallocating Assets -- affect prices?

Don't place a market order for a large ETF trade; you might match multiple limit orders to buy at different prices. It's fine to use a marketable limit order; that is, if the ask is $50, place an order to sell at $50. This will sell all the shares someone is willing to buy at $50, but won't carry over to the next buyer who is willing to pay only $49. If your order isn't accepted in full, you can likely withdraw it and get a fair price a few minutes later once other traders have placed new orders.

If you are selling a large amount of a low-volume ETF, contact your brokerage. I don't think this is necessary for $250K of DISV, which trades $7.5M daily, but you should still watch the spread when trading.