Search found 3595 matches

by petulant
Wed Jan 24, 2024 5:10 pm
Forum: Personal Finance (Not Investing)
Topic: What to do with old but active whole life policy
Replies: 15
Views: 1620

Re: What to do with old but active whole life policy

It's small and your choice won't make or break family finances by a huge amount either way. Easier to surrender and move on if not inclined to learn how to manage the policy.
by petulant
Wed Jan 24, 2024 11:30 am
Forum: Personal Finance (Not Investing)
Topic: Charitable donation limit on taxes?
Replies: 23
Views: 1952

Re: Charitable donation limit on taxes?

Actually, I see the error in what I stated previously, and realize I can't move money from an IRA to a DAF without paying tax on the IRA withdrawal and then contributing to the DAF. Does not seem terribly tax-efficient to do that, compared to doing QCDs and avoiding tax altogether. My situation is that I will be selling a property this year and would like to avoid tax on the capital gain by putting some of the proceeds into a DAF and taking the deduction. I see that as separate from doing QCDs from my IRA this year. Is that correct, or am I still confused? You can donate real estate to a DAF and avoid the capital gains of selling the property. And you get a deduction for the current value of the property. But if you don’t want to donate th...
by petulant
Wed Jan 24, 2024 8:26 am
Forum: Personal Finance (Not Investing)
Topic: Northwestern Mutual Life Insurance - no in-force illustration available
Replies: 54
Views: 4470

Re: Northwestern Mutual Life Insurance - no in-force illustration available

OP here. After a second call to NWM, they agreed to send an in-force illustration. We have now received it. It indicates that the policy is a "paid up life" policy of $5850. I am guessing that is the basis should we cash it out? 1 2 3 4 5 6 7 8 9 10 11 75 2023-24 $63,419 $1,687 $57,902 -- $56,215 -- 76 2024-25 $65,320 $1,746 $- $2,136 $- $60,038 3.69% $56,592 0.67% 77 2025-26 $67,275 $1,809 $- $2,212 $- $62,250 3.68% $56,972 0.67% 78 2026-27 $69,280 $1,868 $- $2,304 $- $64,555 3.70% $57,371 0.70% 79 2027-28 $71,323 $1,918 $- $2,425 $- $66,980 3.76% $57,822 0.79% 80 2028-29 $73,364 $1,935 $- $2,593 $- $69,574 3.87% $58,390 0.98% 81 2029-30 $75,480 $2,029 $- $2,817 $- $72,391 4.05% $59,051 1.13% 82 2030-31 $77,798 $2,249 $- $3,095 ...
by petulant
Wed Jan 24, 2024 6:14 am
Forum: Personal Finance (Not Investing)
Topic: Charitable donation limit on taxes?
Replies: 23
Views: 1952

Re: Charitable donation limit on taxes?

Actually, I see the error in what I stated previously, and realize I can't move money from an IRA to a DAF without paying tax on the IRA withdrawal and then contributing to the DAF. Does not seem terribly tax-efficient to do that, compared to doing QCDs and avoiding tax altogether. My situation is that I will be selling a property this year and would like to avoid tax on the capital gain by putting some of the proceeds into a DAF and taking the deduction. I see that as separate from doing QCDs from my IRA this year. Is that correct, or am I still confused? I wonder if you wouldn't get better input if you started a new thread--"how do I maximize tax benefit from donating this property"--and share pertinent facts about the property.
by petulant
Tue Jan 23, 2024 8:54 pm
Forum: Personal Finance (Not Investing)
Topic: Charitable donation limit on taxes?
Replies: 23
Views: 1952

Re: Charitable donation limit on taxes?

My charitable donation is to a DAF. Is the limit 50% of AGI on that? The donation is coming from my IRA. You are selling shares from your IRA, paying the tax, and donating the cash? He edited his previous post to add the "coming from IRA" line after I started working on my reply. He needs to clarify what he's doing with the IRA. If he made QCDs from the IRA, then he is not entitled to a charitable deduction for the amount of the QCD. But, QCDs are not allowed to be sent to DAFs, so it is a confusing situation. Actually, what I was doing with HRBlock is trying to get a handle on my 2024 taxes. In 2024 I plan to transfer $50K in cash from IRA to a new DAF. As I was playing around with this using 2023 HRBlock the warning came up, so...
by petulant
Tue Jan 23, 2024 7:48 pm
Forum: Personal Finance (Not Investing)
Topic: Charitable donation limit on taxes?
Replies: 23
Views: 1952

Re: Charitable donation limit on taxes?

rkhusky wrote: Tue Jan 23, 2024 7:23 pm
RationalWalk wrote: Tue Jan 23, 2024 4:19 pm My charitable donation is to a DAF. Is the limit 50% of AGI on that? The donation is coming from my IRA.
You are selling shares from your IRA, paying the tax, and donating the cash?
He edited his previous post to add the "coming from IRA" line after I started working on my reply.

He needs to clarify what he's doing with the IRA.

If he made QCDs from the IRA, then he is not entitled to a charitable deduction for the amount of the QCD.

But, QCDs are not allowed to be sent to DAFs, so it is a confusing situation.
by petulant
Tue Jan 23, 2024 7:47 pm
Forum: Personal Finance (Not Investing)
Topic: Charitable donation limit on taxes?
Replies: 23
Views: 1952

Re: Charitable donation limit on taxes?

My charitable donation is to a DAF. Is the limit 50% of AGI on that? DAFs are 50% organizations. If you're donating cash, that means it's 60% through 2025. After that it will be 50%. If you're donating appreciated securities at fair market value, it's 30%. If you're donating a mix of a stock and cash, the securities can be up to 30%, and cash can fill up the remainder to 50%. What do you mean that DAFs are 50% organizations? Different charitable organizations are subject to two sets of limits: the 50/30 limits and then 30/20 limits. 50% organizations can have cash and other property donations up to 50% of AGI except appreciated property only up to 30% of AGI. They are also eligible to receive 60% of AGI in cash only under TCJA until 2025. ...
by petulant
Tue Jan 23, 2024 4:21 pm
Forum: Personal Finance (Not Investing)
Topic: Charitable donation limit on taxes?
Replies: 23
Views: 1952

Re: Charitable donation limit on taxes?

RationalWalk wrote: Tue Jan 23, 2024 4:19 pm My charitable donation is to a DAF. Is the limit 50% of AGI on that?
DAFs are 50% organizations.

If you're donating cash, that means it's 60% through 2025. After that it will be 50%.

If you're donating appreciated securities at fair market value, it's 30%.

If you're donating a mix of a stock and cash, the securities can be up to 30%, and cash can fill up the remainder to 50%.
by petulant
Tue Jan 23, 2024 3:38 pm
Forum: Personal Finance (Not Investing)
Topic: Charitable donation limit on taxes?
Replies: 23
Views: 1952

Re: Charitable donation limit on taxes?

Doing my taxes using HR Block and I get this warning re: charitable donations. Your total donations are more than 30% of your AGI. So, your 2023 charitable deduction might be limited. Tell us more about your donated property on our forms. That will help us accurately figure your donation. After you complete the forms, return to this screen. Are you limited to 30% of your AGI for charitable donations? That doesn't seem correct to me. The key limits for most BH to understand are 50% and 30%. 50% is your total to public charities (most nonprofits, churches, and DAFs), but 30% is the cap for appreciated property. If you give 31% of AGI in appreciated stock, your deduction will be limited to 30% of AGI. If you give 15% of AGI in cash and 20% in...
by petulant
Tue Jan 23, 2024 3:33 pm
Forum: Personal Finance (Not Investing)
Topic: The Charitable Payraise
Replies: 44
Views: 4629

Re: The Charitable Payraise

For the spectators at home, the idea here is that OP would put his business or shares of it inside the LLC, then gift 99% of the LLC shares to a charity. He gets a charitable deduction for the value of the LLC shares, which should be similar to the value of the business (before sale) minus discounts for marketability/control (if the advisors tell OP to include them). OP then sells the business, resulting in a large capital gain. However, since the LLC will be taxed as a partnership, most of the tax gain is reported up to the charity, so OP avoids the taxes. OP as manager has no obligation to push out distributions to the charity. So, OP manages the assets with some minimal distribution rate to the charity but with a primary goal of growing ...
by petulant
Tue Jan 23, 2024 3:21 pm
Forum: Personal Finance (Not Investing)
Topic: The Charitable Payraise
Replies: 44
Views: 4629

Re: The Charitable Payraise

Wanted to reach out to the Boglehead community to seek guidance on tax-reduction/charitable strategy that I was recently made aware of called the Charitable Payraise (https://charitablepayraise.com/). Anticipating a large windfall this year from a business sale with expected 6-figure LTCG tax hit. This was brought to my attention as a possible strategy to significantly minimize tax impact while improving retirement cashflow. Charitable giving is also an important part of our financial planning and I do not plan on retirement for at least another 15-20 years. I had an opportunity to visit with the founder, Bill Lloyd, who explained how the process worked. The basic premise of this strategy is creating a charitable LLC with 99% of funds that...
by petulant
Tue Jan 23, 2024 2:13 pm
Forum: Personal Finance (Not Investing)
Topic: Max Tax Benefit for Charitable Donation
Replies: 26
Views: 2813

Re: Max Tax Benefit for Charitable Donation

4. You can donate cash to the DAF in addition to the limitation of the 30% appreciated asset. But can't deduct. If there is a mix of cash and appreciated assets, the 30% limit changes (downward). I don't think this is correct. In 2023, we donated appreciated assets up to 30% to our DAF and then more in cash. We've completed the preliminary entries into Turbo Tax and there was no problem combining the two modes of contributions on Schedule A to get the full deduction. Turbo Tax shows two separate calculation worksheets for cash and then for donated assets. We did not contribute up to the cash limit though so perhaps we're saying the same thing. Maybe it changes toward the top end (60%). I remember looking at it a while ago. I was debating w...
by petulant
Tue Jan 23, 2024 11:44 am
Forum: Personal Finance (Not Investing)
Topic: Max Tax Benefit for Charitable Donation
Replies: 26
Views: 2813

Re: Max Tax Benefit for Charitable Donation

Plot gets thicker: • Want to donate 500K in appreciated stock to charity, irrespective of tax considerations • On track to maximize QCD, since 2023, for next several years • Per Fido, DAF can accept any donation from anybody in any amount Plan-B: through trust/estate plan, at dob, ..THEN!! - 250K to each kid, at stepped-up (no ltcg) - they transfer to DAF or better still to qualified public charity (capped at 50%) Question: Plan B tax benefits (about 50-75 each) vs, ..NOW!! , on our tax return (max around 50K)?? Thanks a ton for all your wisdom, insights, and words of caution!! -- money can’t buy!! Have you actually spoken with your children? Do they share your charitable inclinations? Do they already make regular charitable gifts? Also, i...
by petulant
Tue Jan 23, 2024 11:08 am
Forum: Investing - Theory, News & General
Topic: Blow Up Risk of a Money Market Fund
Replies: 37
Views: 3911

Re: Blow Up Risk of a Money Market Fund

whodidntante wrote: Tue Jan 23, 2024 12:19 am For serious money invested over 50 years, I think these risks are apparent and apply to both money market funds and bank accounts.

1) the asset could be temporarily frozen and liquidated at less than full principal and full interest.
2) the risk of overthinking this.
3) failure of the asset to protect against inflation, leading to a loss of spending power.
4) We face a nuclear war, and Harrison Ford is too old to stop it.
5) We get negative real returns after taxes.

Cash is a poor investment for a 50 year timeframe.
Based on your evaluation I think you'll agree with me that the U.S. government should carbon-freeze Harrison Ford until further notice.
by petulant
Tue Jan 23, 2024 9:20 am
Forum: Personal Investments
Topic: Taylor's Post on Tontines
Replies: 28
Views: 5228

Re: Taylor's Post on Tontines

Thank you for the very interesting information Petulant. There has been some recent discussion: https://www.bogleheads.org/forum/viewtopic.php?t=406312 It doesn't seem much has changed as far as product introductions: https://www.thinkadvisor.com/2022/07/21/tontines-are-alive-and-they-could-compete-with-annuities-in-the-u-s/ https://www.investmentnews.com/retirement/news/tontines-are-making-a-comeback-and-no-its-not-a-movie-230183 There is a product that says it's a real tontine inside IRAs, fueled entirely by bank deposits. I can't find any news or reviews about it. No idea if it's legitimate. https://tontine.com There are also a small number of participating annuity offerings, which would presumably pay out more to surviving annuitants i...
by petulant
Mon Jan 22, 2024 5:05 pm
Forum: Personal Investments
Topic: Taylor's Post on Tontines
Replies: 28
Views: 5228

Re: Taylor's Post on Tontines

StevieG72 wrote: Mon Jan 22, 2024 4:25 pm I am ready for the Boglehead tontine!
I don't think I want to be in a tontine with Taylor Larimore
by petulant
Mon Jan 22, 2024 3:29 pm
Forum: Personal Investments
Topic: Taylor's Post on Tontines
Replies: 28
Views: 5228

Re: Taylor's Post on Tontines

There has been some recent discussion: https://www.bogleheads.org/forum/viewtopic.php?t=406312 It doesn't seem much has changed as far as product introductions: https://www.thinkadvisor.com/2022/07/21/tontines-are-alive-and-they-could-compete-with-annuities-in-the-u-s/ https://www.investmentnews.com/retirement/news/tontines-are-making-a-comeback-and-no-its-not-a-movie-230183 There is a product that says it's a real tontine inside IRAs, fueled entirely by bank deposits. I can't find any news or reviews about it. No idea if it's legitimate. https://tontine.com There are also a small number of participating annuity offerings, which would presumably pay out more to surviving annuitants if early mortality for other annuitants was high: https://w...
by petulant
Mon Jan 22, 2024 2:51 pm
Forum: Personal Finance (Not Investing)
Topic: Max Tax Benefit for Charitable Donation
Replies: 26
Views: 2813

Re: Max Tax Benefit for Charitable Donation

It's codified at I.R.C. § 408(d)(8)(G).
by petulant
Mon Jan 22, 2024 8:24 am
Forum: Personal Finance (Not Investing)
Topic: Tax Management
Replies: 11
Views: 926

Re: Tax Management

For 2024, the standard deduction for a married couple is $29,200. If you are itemizing deductions, you need to discount the tax advantage by that amount. Hence, your charitable contributions, mortage interest and local taxes may not be reducing your tax burden very much. As Livesoft mentioned, consider bunching your deductions. For example, look at your etf shares in your taxable account and find those that are at least a year old and have the most appreciation since purchase. Donate 100k of those to a donor advised fund. You have now wiped out future capital gains taxes on those shares and can take 100k in income deduction this year, plus other itemized deductions. You can then direct 20k/year to your chosen charities for the next 5 years...
by petulant
Mon Jan 22, 2024 6:46 am
Forum: Personal Finance (Not Investing)
Topic: Max Tax Benefit for Charitable Donation
Replies: 26
Views: 2813

Re: Max Tax Benefit for Charitable Donation

If the goal is to give something, anything, to charity, then gifting to kids and asking them to choose donation if they want might be acceptable. It gets more suspect if OP is having them donate to OP's DAF. And it seems like OP has some specific goals for the DAF that just giving money to kids to be charitable might not match.
by petulant
Sun Jan 21, 2024 9:13 pm
Forum: Personal Finance (Not Investing)
Topic: Max Tax Benefit for Charitable Donation
Replies: 26
Views: 2813

Re: Max Tax Benefit for Charitable Donation

Do you have a traditional IRA or similar tax-deferred balance? One problem with donating these shares for a charitable deduction is that you lose the standard deduction. As an older married couple, your standard deduction together is pushing $30K (yes, seniors get a better standard deduction than the rest of us!). So depending on the size of other itemized deductions, you've already got a drag. Here's why I ask about the traditional IRA. The best way for people aged 70 1/2 or older to make charitable contributions is to make a qualified charitable distribution (QCD) from an IRA. A QCD can be made up to $100,000 per year, separately for each spouse. The QCD can satisfy the RMD requirement on IRAs and, the nice thing, you don't have to itemiz...
by petulant
Fri Jan 19, 2024 2:17 pm
Forum: Personal Investments
Topic: Yet Another Variable Annuity Question
Replies: 4
Views: 419

Re: Yet Another Variable Annuity Question

That means the rider fees are for a guaranteed lifetime withdrawal benefit rider where the benefit base + income amount might be more favorable than annuitizing with account value or surrendering. The problem is that the income is very low either way, and the uncle probably has a relatively lower life expectancy than would be useful for the rider. So, it's still probably a surrender situation.
by petulant
Fri Jan 19, 2024 9:58 am
Forum: Investing - Theory, News & General
Topic: "Infinite Banking" Section 162?
Replies: 9
Views: 983

Re: "Infinite Banking" Section 162?

Hi All, I had lunch with a friend the other day and he was explaining to me about a way to lower your taxable income through something called Infinite banking and using Section 162. Basically, it sounds like you setup a perpetual amount you contribute into this Section 162 account which grows at a guaranteed amount and you're able to let that money grow tax free and you are able to use that money tax free because it is considered a "loan" on your death benefit. Furthermore, anything you contribute into this account you get to write off through establishing an S Corp. Seems like there has to be a catch and just wanted to see if the broader group here has heard of this approach and get some input if it is worthwhile. Your friend is...
by petulant
Thu Jan 18, 2024 9:22 pm
Forum: Personal Finance (Not Investing)
Topic: Please review my edits to Wiki on Life Insurance
Replies: 26
Views: 2302

Re: Please review my edits to Wiki on Life Insurance

Honestly I'm worried about the complexity of it already. I think the point fairly implied by fyre4ce is that the income tax treatment is favorable but the estate tax treatment is nothing special, and that deserves to be clarified. (In the words of one estate tax professor/practitioner at NYU, life insurance is "tax free wealth" for income tax purposes but still requires estate tax planning.) The death benefit is an asset included in the estate, but sure there are ways around it. So something like this: For US federal estate and gift tax purposes[link to Estate and inheritance tax Wiki article], which as of 2023 affect estates of single individuals in excess of $12.92 million, death benefit proceeds from life insurance policies are...
by petulant
Thu Jan 18, 2024 8:00 pm
Forum: Investing - Theory, News & General
Topic: [TSP I Fund changes to MSCI ex US ex China & Hong Kong index]
Replies: 48
Views: 6542

Re: MSCI ACWI IMI ex USA ex China ex Hong Kong Index (USD)

Wish they would just do a modern developed market index or even leave EAFE alone as the index instead of trying to fit Saudi Arabia and Brazil while excluding China.
by petulant
Thu Jan 18, 2024 7:15 pm
Forum: Personal Finance (Not Investing)
Topic: It Does not Seem to Make Sense for Me to Ever Pay Home off Early
Replies: 51
Views: 5598

Re: It Does not Seem to Make Sense for Me to Ever Pay Home off Early

BizarroJerry wrote: Thu Jan 18, 2024 7:07 pm we have 55% equity in the house (346k purchase price, but honestly worth closer to 400k now) and owe 156k on it. We do not make enough to max out all our retirement accounts. I max my roth tsp and my roth ira and then my wife puts in about 11k a year into her traditional 401k (inclusive of match). She does not have a roth ira either. It adds up to about 25% of gross being invested each year. As such, we have never had an excess to put into taxable.
Instead of paying down the mortgage early for now, I think you should make sure you have a sufficient emergency fund and save the rest in retirement accounts.
by petulant
Thu Jan 18, 2024 6:29 pm
Forum: Personal Finance (Not Investing)
Topic: It Does not Seem to Make Sense for Me to Ever Pay Home off Early
Replies: 51
Views: 5598

Re: It Does not Seem to Make Sense for Me to Ever Pay Home off Early

BizarroJerry wrote: Thu Jan 18, 2024 6:19 pm Thank you for all the insight. To add some info, we are both 30 and have roughly 155k invested in retirement accounts and then keep 6-7 months (30k or so) of expenses in T bills as an emergency fund. Nothing in taxable. No debt other than mortgage.
Are you making maximum retirement account contributions? What about Roth IRA / backdoor Roth IRA?
by petulant
Thu Jan 18, 2024 3:07 pm
Forum: Personal Finance (Not Investing)
Topic: Please review my edits to Wiki on Life Insurance
Replies: 26
Views: 2302

Re: Please review my edits to Wiki on Life Insurance

It looks good. In the section about tax treatment, there is an extra asterisk that I imagine is a typo. Also, I recommend removing the parenthetical about partial surrenders being available in UL policies. They are also available in whole life policies with respect to the PUA cash value.
by petulant
Thu Jan 18, 2024 10:22 am
Forum: Personal Investments
Topic: Question on permanent insurance illustration
Replies: 34
Views: 1813

Re: Question on permanent insurance illustration

I received an illustration for a permanent life insurance policy. I did the math and it looks like the cost of insurance is pretty high - almost 15% of the annual contribution. But it has lower tax drag and saves long-term capital gains. In addition to that, the death benefit continues to grow indefinitely after the policy is paid up in full. Would like to know your thoughts on something like this. From what you’ve posted below, it’s not clear to me why you’re looking at a permanent life insurance policy compared to other alternatives. Do you have a need for life insurance protection for your whole life? Are you an extremely high earner in a high tax state who has maxed out all other tax sheltered options? Or something else? Let’s just loo...
by petulant
Thu Jan 18, 2024 7:18 am
Forum: Personal Investments
Topic: Question on permanent insurance illustration
Replies: 34
Views: 1813

Re: Question on permanent insurance illustration

https://i.postimg.cc/2qhZgnW9/Illustration.png Are you doing this solely to avoid capital gains taxes? You do realize that when you go to withdraw the cash value, it will be ordinary income at your marginal rate? The illustration is probably wildly optimistic. At the end of the day, your returns won't be much better than bonds. What do the numbers look like after 59? Your 60s is usually when the premiums start to blow up. (You're more likely to die.) Note that after 5 years, you will have paid $150,000 in premiums and only have $155,000 in cash value. That's the effect of the fees. You could earn $12,000 in interest on only $30,000 after 5 years right now -- $7,000 more than what this policy will do. Also note that the cash value after sur...
by petulant
Thu Jan 18, 2024 6:39 am
Forum: Personal Investments
Topic: Question on permanent insurance illustration
Replies: 34
Views: 1813

Re: Question on permanent insurance illustration

https://i.postimg.cc/2qhZgnW9/Illustration.png This is the only image that has come through. It's not complete. It doesn't have the name of the product--and there should be additional columns (perhaps in another set of pages) for cost of insurance charges and other fees. There's a reason I suggested that you just take the PDF, redact it on a computer, and post a link to that. From the presence of a 7.x gross rate at the top and the surrender charge noted in the right column, this is likely to be indexed universal life (IUL) or variable universal life (VUL). The problem with these products is that agents can basically illustrate very unrealistic outcomes because they're predicting certain future behavior of the S&P 500. While the premiu...
by petulant
Thu Jan 18, 2024 6:06 am
Forum: Personal Investments
Topic: Question on permanent insurance illustration
Replies: 34
Views: 1813

Re: Question on permanent insurance illustration

I would like to post my illustration but don’t know how to do so from an iPhone - please advise. Everyone keeps saying the cost of insurance will eat up my cash value, but this is a 15-pay contract, after 15 years I have no more costs. Please help I would encourage you to use a computer to make sure you redact your PII correctly. There is a large vocabulary to permanent insurance that you haven't learned. People don't know how to interpret your language. A universal life policy can show no more premiums after 15 years, but there are still costs inside the policy that escalate sharply in later years. A whole life policy can be truly paid up in 15 years, though sometimes they can be designed with term riders where there are still internal co...
by petulant
Thu Jan 18, 2024 5:58 am
Forum: Personal Investments
Topic: Question on permanent insurance illustration
Replies: 34
Views: 1813

Re: Question on permanent insurance illustration

I received an illustration for a permanent life insurance policy. I did the math and it looks like the cost of insurance is pretty high - almost 15% of the annual contribution. But it has lower tax drag and saves long-term capital gains. In addition to that, the death benefit continues to grow indefinitely after the policy is paid up in full. Would like to know your thoughts on something like this. The illustration would help. If you need to, you can post from a computer after you redact your name and any other PII. What you're looking at could be a lot of different things. For example, if the cash value is 85% of the first year's premium, that's not technically something we call cost of insurance, but if the product is whole life it's a s...
by petulant
Wed Jan 17, 2024 9:21 pm
Forum: Personal Finance (Not Investing)
Topic: Social Security Bend Point vs. $0 earning years
Replies: 38
Views: 5838

Re: Social Security Bend Point vs. $0 earning years

Below the first bend point, you get more in expected lifetime benefits than you pay in Social Security taxes. Between the first and second bend points, it's close to breakeven. Since Social Security is paying more than its sustained payout rate, people who are already getting benefits in this bracket are being subsidized by future generations. After the second bend point, you get less in expected lifetime benefits than you pay in Social Security taxes. You're subsidizing all the people below the first bend point. What you actually end up getting depends on how long you live. If you live long enough, even taxes past the second bend point will have a positive return. This is how the system is designed based on the average life expectancy. Th...
by petulant
Wed Jan 17, 2024 9:00 pm
Forum: Personal Finance (Not Investing)
Topic: Social Security Bend Point vs. $0 earning years
Replies: 38
Views: 5838

Re: Social Security Bend Point vs. $0 earning years

The way it works is that SS takes the top 35 years and adds the total income. They then divide by the number of years (actually, quarters, I think - but not sure). That is what is used... that average. RM This an old thread, but it accidentally answered an unrelated, nagging question I had about the bend points. Using neurosphere's SSB Estimator, I see that the actual formula may be: Sum of 35 highest year indexed earnings / 35 = Average indexed annual earnings Average indexed annual earnings / 4 quarters per year = Average indexed quarterly earnings Average indexed quarterly earnings / 10 unknown widgets = PIA inflation adjusted What are those 10 widgets? I believe you've got it through the average indexed annual earnings. You then divide...
by petulant
Wed Jan 17, 2024 8:05 pm
Forum: Personal Investments
Topic: Tax deferred funds for [taxable] personal accounts
Replies: 6
Views: 745

Re: Tax deferred funds for [taxable] personal accounts

I am not aware of a mutual fund/ETF that doesn't pay any dividends, which I find odd- since it would have lots of people like yourself looking to buy! It is not so odd. Investment companies (this means both mutual funds and ETF's) are required by law to pay out virtually all of their net investment income (dividends and capital gains, if any). Edit: Supplementary information If investment companies do not distribute basically 98% of their net income to shareholders, they fail to qualify as “regulated investment companies” under Regulation (or Subchapter) M of the Internal Revenue Code. They would then be subject to corporate taxation (such as corporate income taxes), and they would be subject to a 4% excise tax on all income between the 98...
by petulant
Wed Jan 17, 2024 2:32 pm
Forum: Personal Finance (Not Investing)
Topic: Which loan should I put extra money toward?
Replies: 17
Views: 1450

Re: Which loan should I put extra money toward?

Even if it drops 500 bps, it will still be higher than the other mortgages. If rates drop 500 bps and you still have the HELOC, you can evaluate whether to stop paying extra and invest at that time.
by petulant
Wed Jan 17, 2024 9:33 am
Forum: Personal Finance (Not Investing)
Topic: Which loan should I put extra money toward?
Replies: 17
Views: 1450

Re: Which loan should I put extra money toward?

Is there some train of thought or extra circumstance that OP needs to share? It is rather obvious that paying the HELOC down first is optimal given the information provided, so I wonder if there is some other facto/concern not being mentioned.
by petulant
Wed Jan 17, 2024 7:16 am
Forum: Personal Investments
Topic: Asset location and tax planning
Replies: 9
Views: 1146

Re: Asset location and tax planning

student wrote: Wed Jan 17, 2024 7:12 am
petulant wrote: Wed Jan 17, 2024 6:48 am 3. Then yes, if it's drawing down cash and future dividends, then it makes sense to supplement budget with the taxable assets and increase Roth contributions.
Thanks for the reply.
Congratulations on your great success saving for retirement. Post again if you have any questions.
by petulant
Wed Jan 17, 2024 6:48 am
Forum: Personal Investments
Topic: Asset location and tax planning
Replies: 9
Views: 1146

Re: Asset location and tax planning

My employer is finally introducing Roth 403b, and perhaps even Roth 457b later in the year. So I want to take advantage of it. Age: 57 Salary: 120k over 9 months, "unemployed" in the summer. Extra pay in the summer: Depending on the extra work that I pick up, $10k-$30k. I would likely not have any paid work in the summer starting 2025. Planned Retirement Age: 65 Portfolio size: For retirement planning, I use 2.5 millions as I take the conservative approach by using a discount. For the question of asset location and tax planning, I probably should not use a discount. Here are the numbers. 403b/457b (tax-deferred): $2.1 millions Roth IRA: $180k Taxable: 1.1 millions, including about $150k in T-bills and MM/HYSA. So I do not have mu...
by petulant
Tue Jan 16, 2024 8:51 pm
Forum: Investing - Theory, News & General
Topic: Tax deferred vs taxable vs Roth conversion
Replies: 12
Views: 1021

Re: Tax deferred vs taxable vs Roth conversion

We not forbidden to speak about taxes, just speculating on where rates will go. I think you understand things correctly, and why people tell you that tax deferred and Roth is better than taxable. One little detail is taxable usually also gets a slight haircut each year through taxes on dividends. But these tax deferred accounts have limits, so if you want to save more, taxable is probably where it has to go. There is one more calculation for the tax deferred and that is RMDs. If, when you contributed to the tIRA or 401K you were in the 20% tax bracket, but when you take it out (maybe forced to by RMDs) you are in the 40% bracket, that isn't as advantageous and maybe taxable or Roth would have been better. So yes, you need to speculate some...
by petulant
Tue Jan 16, 2024 7:37 pm
Forum: Personal Finance (Not Investing)
Topic: Please review my edits to Wiki on Life Insurance
Replies: 26
Views: 2302

Re: Please review my edits to Wiki on Life Insurance

I think Stinky has developed a very fair approach for the wiki article that makes it clear the majority opinion is against permanent insurance without getting into debatable subpoints. Here, there are basic factual inaccuracies in fyre4ce's post, and some other items that are irrelevant/debatable. For example, the portfolios of large mutual life insurers include bespoke commercial mortgage securities and Section 144A private placements that are not generally available to the public and for which they receive institutional pricing. They also invest directly in commercial real estate and private equity affiliate operations like MassMutual's Oppenheimer funds (sold to Invesco) and NYL's Mainstay operation (ongoing). Thanks for correcting me. ...
by petulant
Tue Jan 16, 2024 5:41 pm
Forum: Personal Finance (Not Investing)
Topic: Please review my edits to Wiki on Life Insurance
Replies: 26
Views: 2302

Re: Please review my edits to Wiki on Life Insurance

I think Stinky has developed a very fair approach for the wiki article that makes it clear the majority opinion is against permanent insurance without getting into debatable subpoints. Here, there are basic factual inaccuracies in fyre4ce's post, and some other items that are irrelevant/debatable. For example, the portfolios of large mutual life insurers include bespoke commercial mortgage securities and Section 144A private placements that are not generally available to the public and for which they receive institutional pricing. They also invest directly in commercial real estate and private equity affiliate operations like MassMutual's Oppenheimer funds (sold to Invesco) and NYL's Mainstay operation (ongoing). However, I think the point ...
by petulant
Tue Jan 16, 2024 4:38 pm
Forum: Investing - Theory, News & General
Topic: Tax advantaged options strategy
Replies: 4
Views: 795

Re: Tax advantaged options strategy

LTCM wrote: Tue Jan 16, 2024 4:35 pm
petulant wrote: Tue Jan 16, 2024 4:19 pm All along the way, if a year's $3000 purchase lost money, you could sell it for the loss
But I need the full $3000 Wipeout to maximize the advantage. If lose 20% or 50% then that's only $600 or $1500 of ordinary income untaxed.

The $3000 call means I win or wipeout the full $3000.

Thanks for the feedback though! Im onky just learning about non tax deferred investments.
Yes, but you can increase the size of my example to make it more likely that you generate a $3,000 loss, i.e. $10,000, or $20,000 per year. The relative outcomes would be the same.
by petulant
Tue Jan 16, 2024 4:37 pm
Forum: Investing - Theory, News & General
Topic: Tax deferred vs taxable vs Roth conversion
Replies: 12
Views: 1021

Re: Tax deferred vs taxable vs Roth conversion

This topic comes up all the time. I’m just driving in my car on the way to work when I made a thought experiment. It’s really not deep but I just wanted to think my way through the problem. I live in California. Let’s say overall marginal tax rate is about 50%. Let’s talk about a lump of $100,000. Let’s say you have all of the options above. If you take the money through payroll as a lump you end up with $50,000. let’s assume whatever the time we are talking about and return on investment doubles the money. you have $100,000 in your account of which $50,000 undergoes long-term capital gains so you end up with at 20% $90,000. If instead that same $100,000 goes into tax afford you have $100,000 in your account. The money doubles so now you h...
by petulant
Tue Jan 16, 2024 4:19 pm
Forum: Investing - Theory, News & General
Topic: Tax advantaged options strategy
Replies: 4
Views: 795

Re: Tax advantaged options strategy

Imagine you could save $3000 per year for the next 10 years in a taxable brokerage account, buying SPY or VTI. For the sake of argument, assume the stock market gave 7% per year each year. At the end of 10 years, you'd have stock worth $43789, a basis of $32595, and an aftertax value (assuming 15% LTCG) of $42110. All along the way, if a year's $3000 purchase lost money, you could sell it for the loss and reinvest the proceeds in something similar but not substantially identical. Plus, if you can somehow to get to the 0% LTCG bracket before spending, donate the lowest-gain tax lots, or leave the stocks as an inheritance with a step-up in basis, then taxes may never be owed, resulting in the pretax $43789 being applicable. Next compare that ...
by petulant
Tue Jan 16, 2024 3:43 pm
Forum: Personal Investments
Topic: Asset location and tax planning
Replies: 9
Views: 1146

Re: Asset location and tax planning

My employer is finally introducing Roth 403b, and perhaps even Roth 457b later in the year. So I want to take advantage of it. Age: 57 Salary: 120k over 9 months, "unemployed" in the summer. Extra pay in the summer: Depending on the extra work that I pick up, $10k-$30k. I would likely not have any paid work in the summer starting 2025. Planned Retirement Age: 65 Portfolio size: For retirement planning, I use 2.5 millions as I take the conservative approach by using a discount. For the question of asset location and tax planning, I probably should not use a discount. Here are the numbers. 403b/457b (tax-deferred): $2.1 millions Roth IRA: $180k Taxable: 1.1 millions, including about $150k in T-bills and MM/HYSA. So I do not have mu...
by petulant
Tue Jan 16, 2024 3:06 pm
Forum: Personal Finance (Not Investing)
Topic: Please review my edits to Wiki on Life Insurance
Replies: 26
Views: 2302

Re: Please review my edits to Wiki on Life Insurance

I would propose the following, lengthier section on tax treatment: Under US tax law, death benefits from all types of life insurance are generally not taxable income to the beneficiary. Also, life insurance premiums are generally not a deductible expense. For permanent life insurance policies, the growth in policy cash value is excluded from income, even though such growth may represent an increase in the policyholder's wealth. Cash surrenders from a permanent life insurance policy are ordinary taxable income to the extent that the cash surrender amount is in excess of the "basis" of the policy (generally the cumulative premiums paid). In the case of partial surrenders, amounts received are treated first as a return of basis, with...
by petulant
Tue Jan 16, 2024 2:24 pm
Forum: Personal Investments
Topic: Asset location and tax planning
Replies: 9
Views: 1146

Re: Asset location and tax planning

My employer is finally introducing Roth 403b, and perhaps even Roth 457b later in the year. So I want to take advantage of it. Age: 57 Salary: 120k over 9 months, "unemployed" in the summer. Extra pay in the summer: Depending on the extra work that I pick up, $10k-$30k. I would likely not have any paid work in the summer starting 2025. Planned Retirement Age: 65 Portfolio size: For retirement planning, I use 2.5 millions as I take the conservative approach by using a discount. For the question of asset location and tax planning, I probably should not use a discount. Here are the numbers. 403b/457b (tax-deferred): $2.1 millions Roth IRA: $180k Taxable: 1.1 millions, including about $150k in T-bills and MM/HYSA. So I do not have mu...
by petulant
Mon Jan 15, 2024 5:41 pm
Forum: Investing - Theory, News & General
Topic: Marcus Invest -- pulled the plug
Replies: 12
Views: 2067

Re: Marcus Invest -- pulled the plug

Finally pulled the plug on Marcus invest closing acct, not a good return overall. I had been in since 02/2021. The final straw was a 01/24 purchase of SHM (SPDR SERIES TRUST SPDR NUVEEN BLOOMBERG SHORT TERM MUNICIPAL BOND ETF). That yields 1.15% They had the allocation of SHM to 17% total and a small loss overall on that holding. You are looking at the distribution yield for SHM. That is not the same thing as the real expected return of the fund. That doesn't even make sense because if the yield was that low, investors would all dump it, making the yield go up. The SEC yield on the fund is 2.35%, with a pretax comparison yield of 3.93% in the highest federal income tax bracket. https://www.bogleheads.org/forum/viewtopic.php?t=382848 https:...