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grabiner

How should an inflation adjusted pension equivalent to 30% of your highest 3 years of salary be factored into your asset allocation? Is it a positive bond that would potentially offset the mortgage as a negative bond? It isn't a positive bond, but as an annuity, it gives a similar risk reduction. S...

grabiner

On a related note, I refuse to give out my phone number when making a purchase. Why do they insist on this (especially you, Tractor Supply)?? I give out an old phone number that no longer is in service when businesses ask for it. It is for marketing purposes. Unfortunately that doesn't work with co...

grabiner

The international stock fund is a US asset, since it is a holding of a US investment firm. Thus, any capital gain or loss on its sale is US-source income. The other reason not to report this as foreign income is that it is not taxed by a foreign country. If you held the foreign stock directly, you m...

grabiner

Good morning - hope everyone is well. In looking at the Large, Mid and small cap make-up of the Total Stock Market Index Fund in the Portfolio Analysis section, I noticed that the market cap weightings of the Fund differ from its Market index - the CRSP total market index. Wondering how this could ...

grabiner

Someone correct me if I'm wrong, but I think this is essentially equivalent to contributing to a non-deductible traditional IRA. So you don't pay tax on the growth while it's in the account, but you pay tax at ordinary income tax rates on the growth when you withdraw. This avoids tax drag that you'...

grabiner

The correct allocation depends on your specific tax situation, but it's almost always close enough that you shouldn't sell for a capital gain to switch. In a moderate tax bracket with no state tax, it's close to break-even; the higher dividend yield of an international fund, and more non-qualified d...

grabiner

You'll have to estimate your own tax cost, but in your situation, total dividends are more important than qualified dividends, because of the moderate federal and high CA tax. You pay 24.3% tax on qualified dividends (28.1% if you are subject to NIIT), and 33.3% (or 37.1%) on non-qualified dividends...

grabiner

I have the equivalent of approximately 3 years’ worth of RMDs in BND. The idea here is that one is forced to take a RMD and hence I would have to sell in order to take my distribution. You never have to sell an asset when taking an RMD. You are only required to withdraw it and pay taxes on the valu...

grabiner

So, it seems like the takeaways from this thread are that if you have sufficient funds to pay off the mortgage in a taxable account, and those funds are in lower earning fixed income instrument, consider using the funds to pay off the mortgage. If you have fixed income funds in a tax deferred accou...

grabiner

Unexpected inflation is the best thing that can happen to a mortgage holder. Unexpected inflation is the worst thing that can happen to a bond holder. And if you hold a bond portfolio which makes payments each year equal to the mortgage payments, you don't care; the reduction in purchasing power of...

grabiner

For paying off the mortgage, consider the actual duration. If you pay off a 30-year mortgage, your investment has a duration of 12 years, not 30. So, would you buy a bond portfolio with a 12-year duration and a rate equal to the mortgage rate? Similarly, if you pay off a 15-year mortgage, your inve...

grabiner

In addition to the math that grabiner described above, you didn't calculate the tax. If your tax rate is 24% then your investment really need to make 4% before tax to match the 3% mortgage interest rate. Therefore, for taxable investments, I normally use a muni fund for comparison, since most inves...

grabiner

At what point does it make sense to pay OFF the mortgage? Let's say I have a 30 year mortgage at 3% and I plow money into 60/40 instead of paying down the mortgage. When is it prudent to pay it off? With 15 years remaining? Seems like over most 15 year periods, you're very likely to beat 3%. 10 yea...

grabiner

I guess I’m hung up on the term “negative”. If it’s a negative bond then you need to add more bonds to balance it out. The implication is the opposite, actually: you almost certainly should reduce the marketable bond holdings, using the capital to increase the equity holdings and/or reduce the mort...

grabiner

Not to harp on it, but specifically my question was what else should I consider given that I have an extra $5800 per month to spend on paying down a $640k 7/1 ARM that will adjust in May 2028. Just given those parameters, what would you consider? I put information about income, assets, and liabilit...

grabiner

I reviewed my annuity contract from Vanguard, and learned that at age 65, I could elect to receive a payment for life (‘Option 1’) of $5.87 per thousand per month, which is $70.4 per thousand per year, or 7.04%. This sounds like a pretty good deal! ...... Can anyone point out holes in my thinking? ...

grabiner

I'm just trying to see if I'm missing something with a Heath Savings Account (HSA); it seems to be very popular on this site....I just got out of 8 years of military service (therefore never had to worry about health care) and took a job with the government. It seems to me that I have a pretty good...

grabiner

Not to harp on it, but specifically my question was what else should I consider given that I have an extra $5800 per month to spend on paying down a $640k 7/1 ARM that will adjust in May 2028. Just given those parameters, what would you consider? I put information about income, assets, and liabilit...

grabiner

What is a decent ER for such funds. For mutual funds, I tend to invest in find with ERs less than 0.10. It's about the same for munis, as long as you have a large investment. Admiral shares of Vanguard's muni funds have 0.09% expenses. If you don't have $50K, Vanguard's expenses are 0.17%, although...

grabiner

I have never needed to sell for a capital gain to rebalance, although I came close in 2007. Here is what I do: Make use of my rebalancing tolerance bands. I will only rebalance for a capital gain if a major asset class (bonds, US stocks) is off by 25% of its own target allocation, or if any asset cl...

grabiner

My husband and I both retired in the last couple of years. We got out of the market to some extent about 2 months before the crash in March 2021 and now have about half of an IRA in cash. We also have substantial cash in a savings account with virtually no return. We are debt free and can be comfor...

grabiner

+1, and consider delaying SS because it is the best annuity you can buy. It increases by about 8% for each year you delay and is inflation adjusted. SS is supposed to be neutral meaning the average person with a normal life life expectancy gets the same payout whether it is delayed or taken at 62. ...

grabiner

Hi, Please help me work through this. We owe about $125K on our home worth $700K. Interest rate is about 3% so it costs us about $375 a month in interest charges. Our monthly payment is $1100 which puts us on schedule to pay off the mortgage in 11 more years. A quick back of an envelope calculation...

grabiner

After sleeping on it, I think I understand my issue with framing a mortgage as a negative bond. The obligations and income don’t match up for me. If I held a 30 year fixed mortgage and a single 30 year individual Treasury bond - then obviously the mortgage is a negative bond. I’m pretty sure most p...

grabiner

Does the high turnover mean this is not ideal to hold in taxable? Diversified stock ETFs rarely distribute capital gains, so this shouldn't be an issue. (When they do distribute capital gains, it tends to be just after they get started, because they don't have stock bought at a wide range of prices...

grabiner

I'll just post this again so we don't lose sight of the non-emotional side of the equation. Anyone paying cash for a house today with the 30 year fixed rate @ 2.75% is going to lose money over 30 years. A lot of money. https://www.forestriverforums.com/forums/members/140841-albums3520-picture21486....

grabiner

So theoretically, on the long run, VTMSX/VIOO/IJR should perform better than VB? The smaller cap range means that the S&P small-cap index is likely to outperform the CRSP index when small-caps outperform mid-caps. If small-caps should have higher expected returns as a premium for the additional...

grabiner

Alternatively, you could use Vanguard Small-Cap Index; the ETF class VB is even less expensive, although the stocks aren't quite as small. (The CRSP Index that Vanguard uses tracks the bottom 15% of the market; S&P's index is about the bottom 10%.) Isn't the additional difference between CRSP I...

grabiner

Her taxable income was around 90K and her tax was $14K, so she paid 15% in taxes. However, when I looked at what the "tax rates" are for her level of income I see that it is 24% (a bit confusing). Are you familiar with how tax brackets work? It appears that she is in the 24% bracket, whic...

grabiner

The issue is that banks don't hire appraisers directly; this created conflicts of interest, and contributed to the 2008 real estate crisis. Instead, they contract with third-party appraisal referral services, and may get appraisers of varying quality. I had a similar issue when I bought my home in 2...

grabiner

Prepaying principal doesn't work as an emergency fund. However, if you make a large prepayment of principal, your lender may be willing to recast your mortgage, so that you pay the reduced principal in smaller monthly payments for the original mortgage term. This will decrease your required monthly ...

grabiner

if you are selling a higher yielding asset (bonds) to pay off a liability with lower financial cost then aren't you worse off? If the after-tax mortgage rate was higher than the after-tax bond yield then I understand that it would make sense to pay off the mortgage liability. Do the asset and liabi...

grabiner

If you have the choice, it is normally better to hold stocks in a taxable account and bonds in a tax-deferred account in the 12% federal bracket. The reason is that the tax cost on stocks is zero in that bracket, with no tax on qualified dividends, nor on long-term gains when you sell them. However,...

grabiner

Like your mother, I have only taxable accounts, no retirement accounts, and I hold bonds in those accounts. It's not the end of the world. As long as she is in the 20% tax bracket, she's fine with her present holdings. If she somehow ends up in the 24% tax bracket, she may want to consider municipa...

grabiner

See Paying a tax cost to switch funds on the wiki. Your two funds are probably tax-inefficient enough that they are worth selling; the capital-gains tax you pay for selling them now will be less than the tax on the capital gains they distribute if you continue to hold them. As a side question, for f...

grabiner

The fund doesn't have an unusually high dividend yield (for that, you would use VYMI); instead, it targets companies which have a history of increasing dividends. And unlike Vanguard's other international ETFs, it has 100% qualified dividends, so it is likely to be more tax-efficient than the broad...

grabiner

Falling rates increase the price of existing bonds, thus decreasing the future returns. If you buy a bond with a 3% yield, you will get a 3% return for holding that bond to maturity. But if you have bought this bond and then yields on similar bonds fall to 2%, your bond price will rise so that it al...

grabiner

Morningstar rates the two Vanguard CA Muni Funds as Gold and Silver. Morningstar rates the one Schwab CA Muni Fund as Neutral. That is a meaningful difference! You can't always trust Morningstar's ratings, but there is a good reason for this difference. Schwab's fund has 0.49% expenses, while Vangu...

grabiner

The fund doesn't have an unusually high dividend yield (for that, you would use VYMI); instead, it targets companies which have a history of increasing dividends. And unlike Vanguard's other international ETFs, it has 100% qualified dividends, so it is likely to be more tax-efficient than the broad-...

grabiner

Hello, I've been a reader for a couple years, but this is my first time posting. I am familiar with the Traditional vs. Roth article in the wiki and I do not understand why the Child Tax Credit is not relevant to deciding between Traditional and/or Roth. I am in a similar situation as the OP (I act...

grabiner

To be more precise: Am interested in parking money that I will not be needing for emergencies into a taxable account. I prefer to keep a risk level of 2-3. Bear in mind that the risk level classification scheme used by Vanguard is arbitrary, vague, and nonsensical. Worse, it presumes that risk is a...

grabiner

Making a larger down payment, even at the same rate, is more attractive than paying down the mortgage later. If you make an extra payment on a 15-year mortgage, that has a 15-year duration (unless you refinance or recast). If you make a larger down payment, that reduces your payment every month, so...

grabiner

Analyze the volatility of two portfolios: 600k stocks + 400k bonds 600k stocks + 400k bonds + 400k mortgage + 400k home . If one subscribes to the notion that a mortgage is a "negative bond", which I assume is trying to say that it is like being short on bonds, the volatility of the secon...

grabiner

It is reasonable to assume that the bond market is efficient; bonds with higher yields have higher risk. Thus, if you live in CA, you have an advantage in using CA munis, as you pay less tax on CA munis than on non-CA munis of the same risk, while investors outside CA pay the same tax on both and sh...

grabiner

The housing market is local. The price of your home could be steady or volatile, and can drop more than bonds. However, the price of your home isn't relevant in deciding whether to pay down the mortgage (unless you default). If your net worth is $500K and your home is worth $250K but declines to $2...

grabiner

The tax-managed fund is likely to be slightly more tax-efficient, because it has more qualified dividends. (Unlike Tax-Managed Capital Appreciation, it isn't managed for a lower dividend yield). But if you aren't in a high tax bracket, saving three basis points over VTMSX by investing in the iShares...

grabiner

I will be receiving railroad retirement later in life. Railroad retirement consists or two tiers: tier 1 is basically Social Security and tier 2 is a pension. It's more complicated than that but for this evaluation that would be the gist of it. You must take both together at the same time. I want t...

grabiner

What would you put in the taxable or tax advantaged accounts instead? You need to compare VIOO to your other investments to decide which to put in each location. But I'll back up a step and ask why you want to buy a S&P Small Cap Index ETF in the first place? Once I was sure I wanted to buy it,...

grabiner

The ideal amount of retirement savings in a taxable account is zero. A Roth is always better than a taxable account, as long as you can wait until age 59-1/2 to withdraw from it. This doesn't mean that you should always minimize your taxable account, though. If you max out a Roth 401(k) rather than ...

grabiner

It isn't necessary to overweight dividend stocks. It's fine to hold total-market index funds in taxable and IRA accounts, and it is simpler to manage such a portfolio. But if you do hold stock funds with high and low dividends, and have both an IRA and a taxable account, it is better to have the hig...

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