Search found 46 matches

by Name=Random
Wed Dec 28, 2022 6:42 pm
Forum: Personal Finance (Not Investing)
Topic: Will Roth conversion trigger tax underpayment penalty?
Replies: 25
Views: 4295

Re: Will Roth conversion trigger tax underpayment penalty?

w5000 wrote: Wed Dec 28, 2022 3:48 pm So in January when things aren't as busy, I'll call and figure out how to complete the indirect rollover. (Or at least I assume there's no benefit for waiting on hold this week to get it done in 2022?)
Please let me know what you find out ... i'm going to need to repeat this exercise again next year.
by Name=Random
Wed Dec 28, 2022 3:06 pm
Forum: Personal Finance (Not Investing)
Topic: Will Roth conversion trigger tax underpayment penalty?
Replies: 25
Views: 4295

Re: Will Roth conversion trigger tax underpayment penalty?

I wanted to go with the withholding on the conversion route, but to do that at Vanguard one has to digitally fill out a form that's different from the normal conversion interface that I'm used to. I wasn't sure if that alternative process is some kind of semi-manual process at vanguard and if so when the actual conversion will be executed. I tried calling vanguard, but the wait time is over 1 hr. Since i wanted to be sure the conversion takes place in 2022, I ended up doing a a conversion without withholding and will now have to deal with form 2210 on her federal return and whatever the CA state equivalent is. TurboTax estimates that her CA tax due, even with the conversion, will be just under $1k so maybe I won't have to do anything to avo...
by Name=Random
Tue Dec 27, 2022 2:14 pm
Forum: Personal Finance (Not Investing)
Topic: Will Roth conversion trigger tax underpayment penalty?
Replies: 25
Views: 4295

Re: Will Roth conversion trigger tax underpayment penalty?

Thank you for all the input! Form 2210 is what you will need. To show that her taxable “income” (including Roth conversion) was not level all year (and therefore the taxes were not sent in every quarter), the Roth conversion will show up only in the 4th reporting period on that form. In other words, she will have her regular income for 3 of the reporting periods, but in the fourth, there will be her regular income PLUS the Roth conversion. As long as she mails in the Estimated Taxes by January 15, there will be no penalty. I believe the form can also help you see what the penalty would be if more taxes are not mailed in. Will TurboTax take care of this for me without much pain? Her income before the conversion is so low that she owes zero t...
by Name=Random
Tue Dec 27, 2022 2:42 am
Forum: Personal Finance (Not Investing)
Topic: Will Roth conversion trigger tax underpayment penalty?
Replies: 25
Views: 4295

Will Roth conversion trigger tax underpayment penalty?

I want to do a Roth conversion for my mom. Still figuring out how much it makes sense to covert before the end of the year (I'm thinking ~$30k). If I don't do the conversion she owes $0 tax this year, if I do the conversion she'll owe over 3.5k in federal taxes, plus ~$700 CA state taxes. She has paid 0 taxes this year so far.
What, if anything, can I do to make sure she doesn't have to pay underpayment penalties on her federal and CA taxes?
If there is nothing that can be done to avoid the penalties, how do I estimate the penalties before deciding to do the conversion?
by Name=Random
Mon Feb 10, 2020 1:19 am
Forum: Personal Finance (Not Investing)
Topic: Are property taxes fully deductible in CA?
Replies: 4
Views: 1246

Re: Are property taxes fully deductible in CA?

Thanks for the replies. I've also confirmed that property taxes are not capped by the 10k SALT deduction on the CA state return by playing with the number in TurboTax. While the 10k cap on federal return for SALT is unfortunately, at least one can still deduct at the state level.
by Name=Random
Mon Feb 03, 2020 2:49 am
Forum: Personal Finance (Not Investing)
Topic: Are property taxes fully deductible in CA?
Replies: 4
Views: 1246

Are property taxes fully deductible in CA?

Are property taxes on primary residence fully deductible on California state tax return? Some googling suggests that they may be, but I've found some contradictory info.
This link suggests that property taxes may be fully deductible as long as itemized deductions don't exceed 50% of CA adjusted gross income.
https://www.ftb.ca.gov/file/personal/de ... deductions

Anyone know if that's right?
by Name=Random
Sat Jun 08, 2019 12:20 am
Forum: Personal Investments
Topic: VITPX and VTSAX not the same?
Replies: 3
Views: 984

Re: VITPX and VTSAX not the same?

Ah, so the issue is with the Yahoo chart. Morningstar seems to match my expectation, VITPX does outperform by a small amount.
by Name=Random
Sat Jun 08, 2019 12:03 am
Forum: Personal Investments
Topic: VITPX and VTSAX not the same?
Replies: 3
Views: 984

VITPX and VTSAX not the same?

Why does this comparison make it seem like VITPX under-performs VTSAX? Shouldn't they perform identically with VITPX outperforming by a tinny bit due to lower expense ratio? Are they actually not an identical underlying investment?
by Name=Random
Fri Dec 28, 2018 1:48 pm
Forum: Personal Investments
Topic: Dividend question
Replies: 7
Views: 942

Re: Dividend question

Alright, think that makes sense. Thanks livesoft.
by Name=Random
Thu Dec 27, 2018 5:17 pm
Forum: Personal Investments
Topic: Dividend question
Replies: 7
Views: 942

Re: Dividend question

Name=Random wrote: Thu Dec 27, 2018 3:28 pm The rules are the essentially the same. If you buy on the ex-dividend date either a mutual fund or ETF share, you won't get the dividend. Unfortunately, Vanguard doesn't publish the ex-dividend date for its mutual funds.
So in the case of my mutual fund sale was the ex-dividend date 12/21? I sold on 12/20 and didn't get dividend so whoever purchased it on 12/20 got the dividend?
by Name=Random
Thu Dec 27, 2018 3:28 pm
Forum: Personal Investments
Topic: Dividend question
Replies: 7
Views: 942

Re: Dividend question

You sold on 12/20 at 4 pm, so you didn't own the shares at midnight on 12/20 which is when the records are looked at. No error has occurred. You are not owed the dividends. However, the price that you sold at includes the value of the dividends that were paid out to the people you sold your shares to, so you didn't come out behind by selling on 12/20 anyways. I was under the impression that the records take some time to update. Are you saying that the official rule is that one must not sell prior to 4 pm on the listed record date if one wants to get the dividend? If one is buying a mutual fund on the record date and puts in the order on the record date and after 4 pm, which means the actual purchase will execute on the following day (12/21...
by Name=Random
Thu Dec 27, 2018 2:12 pm
Forum: Personal Investments
Topic: Dividend question
Replies: 7
Views: 942

Dividend question

I sold my entire VTIAX position on 12/20/2018 with settlement date of 12/21/2018. Why didn't i get the dividend distribution on 12/24 for those shares. The "record date" for the dividend is 12/20/2018 as listed here https://investor.vanguard.com/mutual-fu ... ions/vtiax
I haven't learned the details of how dividends work. Did I have to hold the shares for an extra day to get the dividend or am I due the dividend and an error has occurred?

Random
by Name=Random
Mon Oct 15, 2018 1:38 am
Forum: Investing - Theory, News & General
Topic: Treasuries in higher tax state
Replies: 12
Views: 1698

Re: Treasuries in higher tax state

Thanks everyone for the advice. This looks like a pretty good option for me. The other thing i'm curious about is bond funds.

How does the return on treasuries compare to something like a total US bond market fund? Would i get a significantly higher return on the bond fund at a higher risk? My understanding is that bond fund prices drop as interest rates go up, so it sounds like there is a high chance of negative return in the coming years. At least with a CD or treasury my return would be always positive (if i ignore inflation). Am i missing something and bond funds are actually a good option for comparable or better returns?
by Name=Random
Sun Oct 14, 2018 9:47 pm
Forum: Personal Finance (Not Investing)
Topic: Joint Home Owners - Property Tax and Mortgage Deductions
Replies: 9
Views: 1234

Re: Joint Home Owners - Property Tax and Mortgage Deductions

Similarly, if you're the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Let each of the other borrowers know what his or her share is. Thanks for the reference HueyLD, very useful to get the information from an authoritative source like the IRS. :D In the above quote I think "payer of record" refers to anyone whose name is on the loan. When it says "deduct only your share" does it mean deduct whatever you paid (potentially 100% of the interest) or does it mean if you're 50/50 owners of the property deduct 50% only. What is the long term plan for the ho...
by Name=Random
Sun Oct 14, 2018 5:58 pm
Forum: Investing - Theory, News & General
Topic: Treasuries in higher tax state
Replies: 12
Views: 1698

Treasuries in higher tax state

Are treasuries a pretty good deal when compare to other risk free investments? I could put cash in an FDIC insured CD or it seems to me i could put it in a 1 year treasury. If my googling is right, then a 1 year treasury currently pays 2.66% return and is state tax free. If one is in a 9.3% state tax bracket than that's a 2.66/(1-0.093) = 2.93% return. I don't think there are 1 year CDs out there with 2.93% return. Is my logic sound?

How do i go about purchasing treasuries with my vanguard brokerage account and are there costs that will eat into my returns that i'm not accounting for?
by Name=Random
Sun Oct 14, 2018 3:58 pm
Forum: Personal Finance (Not Investing)
Topic: Joint Home Owners - Property Tax and Mortgage Deductions
Replies: 9
Views: 1234

Re: Joint Home Owners - Property Tax and Mortgage Deductions

It sounds like you want to treat it as your second home so that's how you'd want to look at mortgage and property tax deductions. I live in this house, it wouldn't be a second home. you may not be able to deduct any of the property tax due to the new IRS $10,000 I'm aware of the 10k limit on state and local tax deduction. I've done the math and even with the 10k cap it's more beneficial for the family for me to deduct all the mortgage interest and property taxes. Mom's about to retire and i'm in a higher tax bracket than her even while she is working. I'm wondering about different options on titling the house and their implications. Do the various titling options impact my ability to claim all the mortgage interest and property taxes on my...
by Name=Random
Sun Oct 14, 2018 12:29 am
Forum: Personal Finance (Not Investing)
Topic: Joint Home Owners - Property Tax and Mortgage Deductions
Replies: 9
Views: 1234

Joint Home Owners - Property Tax and Mortgage Deductions

My mom needs to refinance our home and she's unlikely to qualify for the loan on her own. She is currently the only person on title to the house. I plan to become a co-borrower with her on the refi and put myself on title. I will be making payments for the mortgage and property taxes out of a bank account that's in my name. We life in California. I'd like to be able to deduct all of the property taxes and mortgage interest on my taxes. My brother, who will not be going on the mortgage, wants to make sure he retains the right to inherit half the property if anything was to happen to mom. 1. The way I see it, there are options with me and mom going on title or all 3 of us and we can either be joint tenants or tenants in common. If only me and...
by Name=Random
Sat Aug 11, 2018 11:25 am
Forum: Investing - Theory, News & General
Topic: Wash sale rules
Replies: 8
Views: 919

Re: Wash sale rules

I have no idea what TurboTax will do. Will all transactions will be done at Vanguard? Yes, all at Vanguard. I think if transactions happen in same brokerage account and for the same security, Vanguard will identify them as wash sales. Otherwise it may be up to me, if it's across multiple accounts or if it's a substantially similar security in same account. Can anyone confirm this? Scenario 3: I bought 100 shares of XYZ 200 days ago and then bought another 100 shares of XYZ yesterday. If I sell the 100 shares I purchased 200 days ago today at a loss do i get to claim the loss on my taxes or is it considered a wash sale because I purchased 100 shares yesterday? BUT THEN, I sell tomorrow the 100 shares of XYZ that I bought yesterday. What hap...
by Name=Random
Fri Aug 10, 2018 10:17 pm
Forum: Investing - Theory, News & General
Topic: Wash sale rules
Replies: 8
Views: 919

Re: Wash sale rules

Thanks, your response makes sense, it's what i suspected was the case, but laws aren't always rationale so i figured best to check. So as long as i sell all shares of the substantially identical security i purchased in the last 30 days and don't repurchase for the next 30 days i'm good to sell and claim all losses on taxes? If however, i violate this rule, then TurboTax will pull data from Vanguard and any losses that violate this rule will be marked as wash sales and disallowed?
by Name=Random
Fri Aug 10, 2018 9:35 pm
Forum: Investing - Theory, News & General
Topic: Wash sale rules
Replies: 8
Views: 919

Wash sale rules

Trying to understand a wash sale better. The part about purchases in the previous 30 days prior to the sale is confusing me.

Scenario 1:
I bought 100 shares of XYZ 200 days ago and then bought another 100 shares of XYZ yesterday. If I sell the 100 shares I purchased 200 days ago today at a loss do i get to claim the loss on my taxes or is it considered a wash sale because I purchased 100 shares yesterday?

Scenario 2:
I identical to Scenario 1, but I sell all 200 shares today and don't repurchase a substantially identical security for next 30 days. Do I get to claim a loss on my taxes without a wash sale?
by Name=Random
Mon Jul 02, 2018 1:48 am
Forum: Personal Finance (Not Investing)
Topic: Keeping or breaking a CD in favor of another with tax impact
Replies: 6
Views: 765

Re: Keeping or breaking a CD in favor of another with tax impact

I'm not sure i follow why the location of the CD in an IRA or taxable account would make any difference on the decision to break a CD in favor of another one and the break even period.

Called Ally up and their penalty can eat into principal if you break a CD early enough.
by Name=Random
Mon Jul 02, 2018 12:18 am
Forum: Personal Finance (Not Investing)
Topic: Keeping or breaking a CD in favor of another with tax impact
Replies: 6
Views: 765

Re: Keeping or breaking a CD in favor of another with tax impact

I've been doing a lot of reading since i posted and everything you say makes sense now. Thanks.
I went a little overboard and after getting a CD comparison implemented in Excel, implemented a class in MATLAB that represents a CD and allows comparisons.

Anyone know if Ally will reduce principal if one terminates a CD prior to the penalty duration period? I currently have their no penalty CD, but it looks like with the current rate of 2.5% the raise your rate CD will beat the no penalty CD after 7.7 months. Anyone have any thoughts on Ally's raise your rate 2 year vs. raise your rate 4 year CD? How does one go about analyzing what the option to raise your rate is worth?
by Name=Random
Sun Jul 01, 2018 5:38 pm
Forum: Personal Finance (Not Investing)
Topic: Keeping or breaking a CD in favor of another with tax impact
Replies: 6
Views: 765

Keeping or breaking a CD in favor of another with tax impact

Can anyone point me to a calculator or spreadsheet, or walk me through the calculation of figuring out the break-even point for breaking an existing CD and paying the early withdraw penalty in favor of a new CD? I'd like to be able to plot two curves that represent the value of the existing CD if i was to break it at any point vs. the value of the new CD over time. The point the two curves cross is the break even point. The way i see it, the break even point is when i can break the new CD and end up with the same amount of money as i would have had from the old CD. I put together a spreadsheet, but not so sure i did it right. Let me know if I'm thinking about this problem wrong. One of the things i'm unclear on is if the early withdraw pena...
by Name=Random
Sun Jul 01, 2018 1:46 am
Forum: Personal Finance (Not Investing)
Topic: Mega Backdoor Roth Reporting on Form 5498
Replies: 6
Views: 2920

Re: Mega Backdoor Roth Reporting on Form 5498

You're correct TurboTax refused to cooperate as long as i attempted to enter the information that showed up on a single 1099-R. If you enter the numbers as is into TurboTax, it appears to assume all of it went into a Roth IRA even though I split the after tax contribution into a Roth IRA and earnings on after-tax into traditional. This leads to a taxable event. To get around this bug in TurboTax I had to enter the information as two 1099-R forms one for the after-tax contributions and one for earnings on after-tax contributions and any company match rollover. This results in box 16a on the 1040 showing the total of my rollovers that matched box 1 on 1099-R and box 16b on the 1040 showing 0 that matched box 2a on the 1099-R, which i think wa...
by Name=Random
Sat Jun 30, 2018 12:15 am
Forum: Personal Finance (Not Investing)
Topic: Mega Backdoor Roth Reporting on Form 5498
Replies: 6
Views: 2920

Re: Mega Backdoor Roth Reporting on Form 5498

Thanks Alan for your detailed response. I'll work with Vangurad to get my Roth IRA 5498 corrected to list the after-tax contribution as a rollover rather than a conversion. For a qualified rollover contribution to your Roth IRA, the IRS will be looking at Box 2a of the 1099R for the taxable amount. The plan administrator must sync up 2a and Box 5, so while 2a should be 0, Box 5 should include the full amount which is 100% basis, so Box 1 and 5 should contain the same figure in this case. You should also have a 1099R for the direct rollover to your TIRA. Some plans try to combine the mega back door on single 1099R, but that is not technically right and can cause problems despite the G code applying to both. During 2017 I executed a few rollo...
by Name=Random
Fri Jun 29, 2018 8:13 pm
Forum: Personal Finance (Not Investing)
Topic: Mega Backdoor Roth Reporting on Form 5498
Replies: 6
Views: 2920

Re: Mega Backdoor Roth Reporting on Form 5498

I had my 401k company split out any earnings from the after-tax contribution and rolled them into a traditional IRA. The rollover into the Roth IRA is all basis (just my pre-tax contribution and no earnings). - It sounds like maybe this should be reported as a conversion on Form 5498 of the Roth IRA, it just happens to be a non-taxable conversion? - How does the IRS know what portion of it is taxable? Do they just go off what i claim on form 1040 and trust me when I claim it's all non-taxable? - I did these rollovers twice in 2017. The amount of the 1st after-tax rollover (again all basis) ended up in box 2 (rollover) of 5498, but the amount from the 2nd after-tax rollover ended up in box 3 (conversion). Seems like the reporting for one of ...
by Name=Random
Fri Jun 29, 2018 5:21 pm
Forum: Personal Finance (Not Investing)
Topic: Mega Backdoor Roth Reporting on Form 5498
Replies: 6
Views: 2920

Mega Backdoor Roth Reporting on Form 5498

I've been executing the Mega Backdoor Roth IRA strategy starting in 2017. With after-tax 401k contributions rolling over into a vanguard Roth IRA and any earnings on them being split off and rolled into a Vanguard Traditional IRA. I took a look at my 2017 Roth IRA 5498 Form and it looks like the roll-over of the after-tax dollars was reported in box 3 as a conversion. I don't know if its technically considered a non-taxable conversion or if vanguard made a mistake and incorrectly classified it. My Form 1099 from the 401k plan correctly coded the distribution as G (a direct rollover). Anyone versed in the Mega Backdoor Roth IRA that can comment on how it should have been reported on Form 5498? I'm concerned that it was incorrectly reported o...
by Name=Random
Fri Jun 08, 2018 10:51 pm
Forum: Personal Finance (Not Investing)
Topic: Optimal Social Security Claiming Strategy for Widow
Replies: 8
Views: 1348

Re: Optimal Social Security Claiming Strategy for Widow

I was wondering how the Social Security Administrations knows how much she is making and how much to reduce her monthly benefit by. Sounds like that may required constant communication with them. I don't think she will get anything for the current year because she'll make over 40k at her job. The earnings test changes for her next year, the year she reaches FRA. At that point her benefit will be reduced by $1 for every $3 she earns above 45k. I think it makes sense for her to start claiming right at the beginning of next year. So my plan is to set up an appointment with her at a Social Security office at most 4 months before January 2019, and set up her window benefit to start in January 2019.
by Name=Random
Fri Jun 08, 2018 6:22 pm
Forum: Personal Finance (Not Investing)
Topic: Optimal Social Security Claiming Strategy for Widow
Replies: 8
Views: 1348

Re: Optimal Social Security Claiming Strategy for Widow

Thanks Mike, that clears things up a lot! I dug up my dad's last social security statement from Aug 2010. It says that his surviving spouse at FRA would qualify for 750/month. He passed away in early 2011 and wasn't working toward the the end (8k of income in 2009). My guess is that the $750 benefit would have likely only gotten COLA adjustments since 2010. Is that roughly right? I estimate that 2010 to 2018 the total COLA adjustment amounts to about 11.3%. That makes my guesstimate of my mom's current survivor benefit at FRA of 750*1.113=$834/month. Assuming the math above is roughly right, then really as long as she is working and makes more than roughly 17,040 + 2*12*834 = 37,056 she will not get anything after the benefit is withheld du...
by Name=Random
Fri Jun 08, 2018 3:51 pm
Forum: Personal Finance (Not Investing)
Topic: Optimal Social Security Claiming Strategy for Widow
Replies: 8
Views: 1348

Re: Optimal Social Security Claiming Strategy for Widow

Thanks for the quick reply. Sounds like maybe we should have claimed her survivor benefit at 60. You didn't address the part of the my question that had to do with the reduction of the survivor benefit to 71.5% of the FRA benefit. Is that reduction temporary or permanent? If the reduction is permanent, given that she is less than a year from reaching full retirement age, does it still make sense for her to claim survivor now? Unless i'm missing something, she will get 100 - 71.5= 28.5% more if she waits till 66 years old. 28.5%*4 = 114%, so if waiting till 66 increases her survivor benefit it sounds like the increased payments over the 4 years till she reaches 70 (and switches to her own benefit) will make up for the money lost by claiming ...
by Name=Random
Fri Jun 08, 2018 3:11 pm
Forum: Personal Finance (Not Investing)
Topic: "Open Social Security" calculator: feature requests, bug reports, etc.
Replies: 641
Views: 88330

Re: "Open Social Security" calculator: feature requests, bug reports, etc

My feature request is to handle the widow case. If one selects "widow(er)" the calculator refers one to a blog post, but the blog post doesn't address all widow situations. I just posted on the particular situation i'm considering for my mom viewtopic.php?f=2&t=251266.
Am i missing something and no calculator is needed in this situation?
by Name=Random
Fri Jun 08, 2018 2:57 pm
Forum: Personal Finance (Not Investing)
Topic: Optimal Social Security Claiming Strategy for Widow
Replies: 8
Views: 1348

Optimal Social Security Claiming Strategy for Widow

Trying to help my mom with her retirement planning. Dad passed away many years ago, prior to reaching full retirement age or claiming SS. Her SS benefit is higher than his. She is currently working, but plans to retire in a year when she reaches 66. I've been reading all the rules governing this stuff, but they are a bit convoluted. I figured that her optimal strategy would be to claim her widow benefit at full retirement age (FRA) of 66, and then switch to her own benefit at 70, but now i'm not so sure. Mom's relative healthy so assume average or above average longevity. My understanding is that she can claim the widow benefit whenever after she is 62 years old, but that will reduce what she gets to 71.5% of what his benefit would have bee...
by Name=Random
Mon May 28, 2018 10:30 pm
Forum: Investing - Theory, News & General
Topic: Question on "Tax-adjusted asset allocation" wiki entry
Replies: 21
Views: 2099

Re: Question on "Tax-adjusted asset allocation" wiki entry

What Grabiner described above is a Roth conversion that leads to reduced tax drag (0 taxes going forward for money in the Roth). Unless i'm missing something, the benefit described in the wiki paragraph in question has nothing to do with tax-adjusted asset allocation. The benefit stems from having more money in a Roth account vs. leaving it in a taxable account over the long term. The paragraph from the wiki i'm talking about is this: In contrast, if you pay the taxes with taxable money, you have a net gain, and it may even be worth making the conversion if you are going to be in a slightly lower tax bracket at retirement. If you are in a 28% tax bracket but expect to retire in a 25% tax bracket, and have $11,200 in a taxable account and $4...
by Name=Random
Mon May 28, 2018 9:06 pm
Forum: Investing - Theory, News & General
Topic: Question on "Tax-adjusted asset allocation" wiki entry
Replies: 21
Views: 2099

Re: Question on "Tax-adjusted asset allocation" wiki entry

Thanks for the reply Kevin, i think you really followed what i was getting at. I took your advice and messaged Grabiner. The wiki entry piqued my interest because it seemed to suggest some bit of new financial magic that somehow allowed one to do a Roth conversion, while in a higher tax bracket than in retirement, and still benefit somehow. I'll accept that reduced tax drag may be a benefit of doing a conversion, but the way the wiki is worded makes it seem like there is something else going on and one immediately realizes some magic benefit. I'm beginning to think there is no magic here and the wording of the wiki entry is just misleading.
by Name=Random
Mon May 28, 2018 7:43 pm
Forum: Investing - Theory, News & General
Topic: Question on "Tax-adjusted asset allocation" wiki entry
Replies: 21
Views: 2099

Re: Question on "Tax-adjusted asset allocation" wiki entry

I'm still unclear how one is going to pay a 11,200 tax bill on the conversion by using money from a taxable account. I understand the taxable account has 11,200 in it, but the scenario set up in the wiki states that only 75% of it is owned by you, because the rest is owned by some other entity (I assume taxes to the government). My question in my previous post was why the analysis for the conversion assumed 100% of the 11,200 is available to pay taxes on the conversion, but assumed that, if one doesn't do the conversion, only 75% of the 11,200 taxable balance is available in retirement. To make things simple, lets say you retire tomorrow than the amount of the 11,200 taxable balance that is available to you to either pay for a Roth conversi...
by Name=Random
Mon May 28, 2018 3:07 pm
Forum: Investing - Theory, News & General
Topic: Question on "Tax-adjusted asset allocation" wiki entry
Replies: 21
Views: 2099

Re: Question on "Tax-adjusted asset allocation" wiki entry

What everyone is saying mostly makes sense. I was just having trouble following the examples in the wiki. Here is the issue I see with LadyGeek's math: In conversion scenario, if you're paying the taxes on the conversion using the money from the taxable account and the assumption is that you only own 75% of the money in the taxable account, then you don't actually have enough money to pay the taxes on the conversion and extra money is being created. Tax on conversion = 28% of 40,000 = 11,200 Money available in taxable account to pay for conversion = 75% of 11,200 = 8400 Extra money needed from outside source to pay for taxes on conversion = 11,200 - 8,400 = 2,800 I think the example in the wiki is assuming that you own 100% of the taxable b...
by Name=Random
Mon May 28, 2018 11:46 am
Forum: Investing - Theory, News & General
Topic: Question on "Tax-adjusted asset allocation" wiki entry
Replies: 21
Views: 2099

Re: Question on "Tax-adjusted asset allocation" wiki entry

If you're right and the below quote from the wiki means that an advantage is obtained by paying an extra 3% in taxes now in the hope that over the life of the investment you make up those 3% in reduced tax drag than the wiki entry should state it. The way it's written now seems to claim that an immediate benefit is obtained. Do people agree with FiveK's interpretation or are we missing something and the wiki is referring to something else? In contrast, if you pay the taxes with taxable money, you have a net gain, and it may even be worth making the conversion if you are going to be in a slightly lower tax bracket at retirement. If you are in a 28% tax bracket but expect to retire in a 25% tax bracket, and have $11,200 in a taxable account a...
by Name=Random
Mon May 28, 2018 12:24 am
Forum: Investing - Theory, News & General
Topic: Question on "Tax-adjusted asset allocation" wiki entry
Replies: 21
Views: 2099

Question on "Tax-adjusted asset allocation" wiki entry

The wiki entry Tax-adjusted_asset_allocation claims the following: Roth conversions You can evaluate a conversion of a traditional IRA to a Roth by its effect on your after-tax asset allocation. If you are in the same tax bracket now that you expect to be in at retirement, and you pay taxes on the conversion with IRA money (or with money you would have otherwise contributed to a 401(k) or IRA), the conversion is break-even. For example, if you are in a 25% tax bracket and convert a $40,000 IRA, you will have $30,000 in the Roth after paying taxes. Previously, you owned $30,000 of the IRA and the IRS owned the other $10,000; after conversion, you own the entire $30,000 in the Roth. In contrast, if you pay the taxes with taxable money, you ha...
by Name=Random
Tue Jan 02, 2018 9:50 pm
Forum: Personal Investments
Topic: Value of Mega Backdoor Roth IRA
Replies: 5
Views: 1411

Re: Value of Mega Backdoor Roth IRA

ved, your response helped me organize my thoughts about the problem. If i'm following your example correctly, then the discount rate (DR) should equal the rate of return (R). I'm trying to figure out how much more company B needs to pay than company A to make up for the loss of the mega backdoor Roth. Also, i think the value you calculated is in after tax dollars so i need to factor in my marginal tax rate (tax_rate = 22% fed + 9.3% state = 31.3%). So if we incorporate these updates into your example we have: PV of the loss = Loss/(1+DR)^N = Loss/(1+R)^N = 16474/(1+0.08)^20 = $3534.46 In after-tax dollars. So company B would have to pay pre_tax_pay_delta = (PV of the loss)/(1-tax_rate) = 3534.46/(1-.313) = 5144.77 more than than company A i...
by Name=Random
Tue Jan 02, 2018 7:01 pm
Forum: Personal Investments
Topic: Value of Mega Backdoor Roth IRA
Replies: 5
Views: 1411

Value of Mega Backdoor Roth IRA

What's the right way to evaluate the benefit of the Mega Backdoor Roth IRA? I realize there are lots of tax related variables involved, but how does one start?

Here is the scenario i would like to evaluate:
Company A - offers Mega Backdoor Roth IRA option and i take advantage of it to contribute an extra 30k to Roth IRA
Company B - doesn't offer Mega Backdoor Roth IRA so invest my 30k in a taxable brokerage account
How much more would I have to make at company B with no Mega Backdoor Roth to match the benefit of having a Mega Backdoor Roth at company A?
by Name=Random
Sat Jun 24, 2017 6:28 pm
Forum: Investing - Theory, News & General
Topic: Cost Basis Calculation
Replies: 8
Views: 1114

Re: Cost Basis Calculation

@jimb_fromATL - i never took money out of the account.
Thesaints wrote:Concerning management fees, your cost basis is reduced by the cost basis of the shares sold to cover the fees. You may be hit (or enjoy) cg as well.
Can someone confirm for me that Thesaints is right? In my formula, i think I assumed management fees directly reduce the overall cost basis of my portfolio. If they reduce the overall cost basis only by the cost basis of the shares sold to pay the management fee then maybe that would explain it.
by Name=Random
Sat Jun 24, 2017 4:17 pm
Forum: Investing - Theory, News & General
Topic: Cost Basis Calculation
Replies: 8
Views: 1114

Cost Basis Calculation

I have a cost basis report for all my assets at Betermenent and i was trying to check the math against what i think the cost basis should be and it isn't working out. The report gives me cost basis and shares purchased for all assets in my portfolio. I multiplied shares by corresponding cost basis and summed to get the total cost basis for everything in my portfolio. Betterment never generated any capital gains for me and harvests losses. Dividends are automatically reinvested. I've never made any withdrawals from the account. I figured i could calculate what the total cost basis should be by doing the following: cost basis = (total amount invested from checking account) + (dividends) - (management fees) - (harvested losses) When i compare ...
by Name=Random
Mon May 22, 2017 2:01 am
Forum: Personal Investments
Topic: Convert a Betterment taxable portfolio to a 3-fund portfolio
Replies: 5
Views: 1738

Re: Convert a Betterment taxable portfolio to a 3-fund portfolio

I know the whole purpose is to simplify this down to three funds, but if you really want to take advantage of the tax loss harvesting and saving taxes, then could you just keep what you have from Betterment for now. Then you could pick the three ETFs/mutual funds you want to use to make up your three fund portfolio (or four). Maybe pick VTI, VEA, VWO, and BND or if you want to go the mutual fund route, pick the equivalent of those four ETFs. Then only buy those going forward. I was thinking of potentially just mimicking Vanguard Target Retirement 2050 Fund (ETFs: VTI, VXUS, BND, BNDX). Your suggestion of using VTI and BND makes sense in that context. I don't know if VEA together with VWO are good alternative to VXUS. I accept your point th...
by Name=Random
Sun May 21, 2017 9:49 pm
Forum: Personal Investments
Topic: Convert a Betterment taxable portfolio to a 3-fund portfolio
Replies: 5
Views: 1738

Convert a Betterment taxable portfolio to a 3-fund portfolio

I'd like to take my taxable portfolio, which is currently at Betterment, and go the do it yourself route to eliminate Betterment's 0.25% fee. My plan is to transfer my portfolio to a brokerage without selling anything. That brokerage may be Vanguard, because constructing a portfolio out of Vanguard ETFs or Admiral funds seems like a good way to go and I can get those commission free at Vanguard. I'm open to arguments for other brokerages and non-Vanguard funds. Once I select a brokerage and roll over the portfolio, the next challenge is converting it into a 3-fund portfolio and i'm looking for advice on how to do that . For any new cash contributions, I can start contributing to the 3 funds I've chosen for my new portfolio. Below is a summa...
by Name=Random
Sun May 21, 2017 7:41 pm
Forum: Personal Investments
Topic: Seeking Advice on Transferring out of Betterment
Replies: 9
Views: 3284

Re: Seeking Advice on Transferring out of Betterment

If I was going to get out of Betterment and I was going to sell all the investments, then I would sell before leaving Betterment and transfer cash. I am not planning to sell everything and turn it into cash right now, because I would incur capital gains. My plan is to transfer the securities over to the new brokerage without selling them. I'll have to figure out a longer term plan to turn my portfolio into a 3 or 4 fund portfolio. I created a separate post to ask for advice on that plan here https://www.bogleheads.org/forum/viewtopic.php?f=1&t=219435 I'd also like to use the Specific Identification method for any future sales for tax loss harvesting, so I want that information to transfer properly to the new brokerage, not to mention a...
by Name=Random
Sun May 21, 2017 3:33 pm
Forum: Personal Investments
Topic: Seeking Advice on Transferring out of Betterment
Replies: 9
Views: 3284

Seeking Advice on Transferring out of Betterment

I've decided to get my taxable portfolio out of Betterment and to a brokerage where I can manage it myself. I'm considering Vanguard for the brokerage, but am open to other suggestions. I've never transferred accounts between brokerages (if you want to call Betterment a brokerage). I'm looking for any general advice on what I should watch out for, especially from anyone who has experience with transferring out of Betterment. Once transferred to a new brokerage I plan to go the route of a simple 3 or 4 fund portfolio. In particular, I'm concerned with the cost basis information getting transferred properly. Since I first started investing 2 years ago, I've been rolling in cash into Betterment at a rate of once a week which has led to a lot o...