Search found 34667 matches

by grabiner
Wed Mar 27, 2024 8:33 pm
Forum: Personal Investments
Topic: HSA question
Replies: 7
Views: 685

Re: HSA question

Yes, you can contribute from your bank account to the Fidelity HSA. The only "downside" of doing it this way is that you will not get the FICA tax break that you do when contributing through the payroll. Then again, if your income is more than $160k (only the earner income, not the household), you are anyway contributing the maximum to the Social Security and Medicare (FICA taxes), so the contribution or non-contribution of the HSA through payroll isn't going to make any difference. Medicare doesn't max out; contributing to an HSA through payroll deduction saves you the 1.45% Medicare tax regardless of your salary. If you are not maxing out on SS, then you avoid the 6.2% SS tax as well, but this is a mixed blessing because it wil...
by grabiner
Wed Mar 27, 2024 8:05 pm
Forum: Personal Investments
Topic: HSA question
Replies: 7
Views: 685

Re: HSA question

Yes, you can contribute from your bank account to the Fidelity HSA. The only "downside" of doing it this way is that you will not get the FICA tax break that you do when contributing through the payroll. Then again, if your income is more than $160k (only the earner income, not the household), you are anyway contributing the maximum to the Social Security and Medicare (FICA taxes), so the contribution or non-contribution of the HSA through payroll isn't going to make any difference. Medicare doesn't max out; contributing to an HSA through payroll deduction saves you the 1.45% Medicare tax regardless of your salary. If you are not maxing out on SS, then you avoid the 6.2% SS tax as well, but this is a mixed blessing because it wil...
by grabiner
Wed Mar 27, 2024 8:02 pm
Forum: Personal Investments
Topic: Trading: Bid/Size Question
Replies: 2
Views: 238

Re: Trading: Bid/Size Question

Things like ARCX identify which exchange the order was placed on. This shouldn't matter to you as an investor, since the markets are coordinated; if your buy order accepts the current ask (either as a market order, or a limit order at an equal or higher price), you can accept that order. However, you can see the full book on some markets at https://www.cboe.com/us/equities/ even if your own broker does not give you full access to the book.
by grabiner
Wed Mar 27, 2024 12:24 pm
Forum: US Chapters
Topic: Master thread for Washington DC Area Bogleheads
Replies: 239
Views: 136423

Re: Master thread for Washington DC Area Bogleheads

The next meeting of the DC Bogleheads will be from 3:00-5:00 on Sunday, May 19, 2024, in meeting room #1 at the Brigadier General Charles E. McGee Library, 900 Wayne Ave, Silver Spring, MD. This is the same library we have used in the past, but it has been renamed. The location is a short walk from the Silver Spring station on the Metro Red Line. Take the "South side Colesville Road" exit from the Metro station, turn right, then right on Wayne Avenue (walking around the bus depot), and go five blocks to Fenton Street; the library is on the right. Parking garages in downtown Silver Spring are free on Sundays. The closest garage is at Wayne and Fenton, diagonally across from the library. We do not have a specific topic for this meet...
by grabiner
Wed Mar 27, 2024 12:10 pm
Forum: Personal Investments
Topic: Muni break-even tax rate
Replies: 13
Views: 1478

Re: Muni break-even tax rate

Besides break-even tax rate, munis keep your MAGI down. This is important if you're on Medicare as its rates have MAGI break points for higher premiums. Munis might keep your MAGI for certain things down. Unfortunately, the MAGI for IRMAA is not one of them. There are many different modified AGIs and each one is different. https://www.bogleheads.org/wiki/Modified_Adjusted_Gross_Income Another important case in which munis don't help is the taxation of Social Security. If you are in the 22% tax bracket and in the SS phase-in, your marginal tax rate is 40.7%. However, muni income is counted for the phase-in, so your marginal tax rate on munis is 18.7%, which makes them unattractive unless you have a low-cost fund for your high-tax state.
by grabiner
Wed Mar 27, 2024 12:09 pm
Forum: Personal Investments
Topic: Question about muni funds: Should I exchange Vanguard Limited Term for Vanguard NY Muni Fund?
Replies: 14
Views: 1293

Re: Question about muni funds: Should I exchange Vanguard Limited Term for Vanguard NY Muni Fund?

My point is that you are planning to move to NJ in less than a year, and it probably isn't worth taking a capital gain to optimize for such a short time. You would have more of the NY fund that you will have to sell in order to switch to a NJ fund, and if that fund has a capital gain, the gain will be short-term. In addition, if you do move to NJ, the capital-gains rate on Limited-Term Tax-Exempt will be lower. (One important exception: if you have capital loss carryovers, sell everything with a gain before you leave NY; NJ doesn't allow capital loss carryovers.) I see. I don't have any capital loss carryover. Used it all up with my 2023 taxes. So I'll leave this be until I determine if I'll move states. In the meantime, should I NOT buy a...
by grabiner
Wed Mar 27, 2024 10:17 am
Forum: Investing - Theory, News & General
Topic: Investment Policy Statement - BEST EXAMPLES
Replies: 16
Views: 2962

Re: Investment Policy Statement - BEST EXAMPLES

Rebalance our asset allocation every-quarter using the 5/25 rule, using new investment money as much as possible. This looks great. Thanks for sharing. How old are you now and what is "5/25" rule? The 5/25 rule is a common criterion for rebalancing. If allocation to an asset class is off by more than 5% of your total portfolio, or 25% of its own allocation, then you need to rebalance. For example, if you hold 60% US stock, 30% foreign stock, and 10% bonds, then you would rebalance out of US stock if your allocation exceeds 65%, and out of bonds if your allocation exceeds 12.5%. I have a large number of asset classes, so I use a variant of the rule myself. The 25% rule applies only to major asset classes (US stock, foreign stock, ...
by grabiner
Tue Mar 26, 2024 8:24 pm
Forum: Personal Finance (Not Investing)
Topic: TSP loans don't seem like that bad of an idea
Replies: 20
Views: 1622

Re: TSP loans don't seem like that bad of an idea

The fair comparison for a TSP loan is an ordinary loan at the TSP G fund rate. The loan rate is the rate on the G fund, and you can reallocate your TSP after the loan is disbursed so that the balance is withdrawn from the G fund.

For simplicity, consider a $10K loan when the G fund is yielding 4% and a single payment in one year. You will repay $10,400 to the TSP, and if you had left that money in the TSP G fund, it would have grown to $10,400. So you are in the same position as if you had taken out a loan from some other source (such as a HELOC) for $10,000, and paid back $10,400 (plus the $50 loan fee).

So whether this is a good deal depends on the cost of an alternative loan.
by grabiner
Tue Mar 26, 2024 8:11 pm
Forum: Investing - Theory, News & General
Topic: Investment Policy Statement - BEST EXAMPLES
Replies: 16
Views: 2962

Re: Investment Policy Statement - BEST EXAMPLES

An especially important part of my IPS is the last paragraph:

This statement will be reviewed whenever there is a substantial change in my financial situation, and annually when I rebalance. If there is no substantial change in my financial situation, I will wait at least three months between changing the asset allocation in my statement and changing the asset allocation of my investments, and review the change in the statement at that time.
by grabiner
Tue Mar 26, 2024 8:06 pm
Forum: Investing - Theory, News & General
Topic: FTC (1116) , AMT and schedule D
Replies: 2
Views: 464

Re: FTC (1116) , AMT and schedule D

What probably happened is that TurboTax picked up your previous year's Schedule D carryover loss, and not finding a separate Schedule D for AMT, it assumed that your AMT carryover loss was zero. If you ever do owe AMT, and you have any capital gain or loss treated differently under the AMT and regular rules (for example, incentive stock options, or depreciation figured differently under AMT), you will have to go back and compute your AMT carryover loss.
by grabiner
Tue Mar 26, 2024 7:58 pm
Forum: Investing - Theory, News & General
Topic: VSIGX and VSBSX's Capital Gains
Replies: 4
Views: 521

Re: VSIGX and VSBSX's Capital Gains

The reason that bond ETFs distribute capital gains is that falling rates cause all bond prices to rise. Thus, if an ETF needs to sell any of its bonds after rates have fallen, it can only sell bonds with losses. In contrast, even in a stock bull market, there will be some stocks with losses over various time periods, and a stock ETF can usually use the creation-redemption process to keep stocks with losses and get rid of those with gains. In addition, capital gains are not undesirable in a bond fund. If a bond is at a premium, and the fund sells it to buy a new bond at par with the same maturity, the fund will get the same total income as if it held the original bond to maturity. By switching bonds, the fund gets some of that income as taxa...
by grabiner
Tue Mar 26, 2024 7:51 pm
Forum: Investing - Theory, News & General
Topic: Can you do better than BND, Part 2: Test across bear and bull markets
Replies: 30
Views: 3739

Re: Can you do better than BND, Part 2: Test across bear and bull markets

I would expect that the poor diversification from long-term Treasuries is caused by the different risk profiles of investors. Long-term bonds are attractive to insurance companies and pension funds, which have long-term fixed-dollar future liabilities and are thus not sensitive to inflation risk; this increases demand for those bonds, and thus reduces the risk premium for other investors.
by grabiner
Tue Mar 26, 2024 7:44 pm
Forum: Personal Investments
Topic: Dividend warning when buying
Replies: 19
Views: 2347

Re: Dividend warning when buying

For these quarterly dividend payers, I wouldn’t wait more than a couple days to avoid buying the dividend in a taxable account. I might wait a week or more for an annual large dividend payer. During the quarter, the price is edging up due to the accumulated dividends. When the dividends are paid out, the fund drops in price. If you buy just before the dividend, you get the subsequent price drop, but you hadn’t received the build-up during the quarter, and you will pay tax on the dividend, so the net after the dividend is less than before the dividend. And this makes sense because of the cost of staying out of the market. If a fund has a 2% dividend yield, all qualified, and pays dividends quarterly, you will pay $8 in tax on a $10,000 inve...
by grabiner
Tue Mar 26, 2024 7:36 pm
Forum: Personal Investments
Topic: Munis -> Treasuries: now, or after retirement? (~18mo)
Replies: 3
Views: 578

Re: Munis -> Treasuries: now, or after retirement? (~18mo)

Timing the bond market doesn't work; if munis yield more after-tax than Treasuries, this is because investors are demanding a fair risk premium.

But you do know something that the bond market doesn't know: you can get a higher after-tax yield on munis than on Treasuries of comparable risk now, and a lower yield after you stop working. So you should sell at the start of your low-income year. (If you have capital gains, you should wait to sell until after January 1, so that the capital gains will be taxed at a lower rate. If you have capital losses, you may want to sell just before the end of the year so that you can use the losses one year earlier.)
by grabiner
Tue Mar 26, 2024 7:31 pm
Forum: Personal Investments
Topic: Muni break-even tax rate
Replies: 13
Views: 1478

Re: Muni break-even tax rate

retiredjg wrote: Tue Mar 26, 2024 8:53 am This is a question probably best answered by David Grabiner. But I believe his usual reply is the breakeven point for him is about 25% federal marginal rate.
It is also important to recognize that this is a rule of thumb, and I am not an expert here; I post it because the number seems reasonable and should be close to right. If someone cites an academic study which says that the break-even should be 28%, I can defer to that.

An important example is that Bogleheads often recommend Vanguard Intermediate-Term Tax-Exempt as a muni fund fulfilling the same role as Total Bond Market Index. With yields of 3.29% and 4.52% on Admiral shares, the yields would be equal at a 27% tax rate, which suggests comparable risk.
by grabiner
Tue Mar 26, 2024 7:23 pm
Forum: Personal Investments
Topic: Muni break-even tax rate
Replies: 13
Views: 1478

Re: Muni break-even tax rate

The 45% break-even rate at the top of the article is not a fair comparison, as it compares the average muni and corporate bond, but the average corporate bond is much more likely to default. Later in the article, there is a comparison of muni and corporate bonds of the same grade, this suggests corporate bonds in the 24% bracket and munis in the 32% bracket. (Even this may not be fair because A-rated munis have historically defaulted less than A-rated corporates. And working the other way, 30-year munis look unusually attractive, but that is misleading because most long-term munis are callable while many corporate bonds are not.) Are you familiar with the @grabiner muni-modeler (my term, not his because that's not really what it is) describ...
by grabiner
Tue Mar 26, 2024 7:08 pm
Forum: Personal Investments
Topic: buying mutual funds seems easier than buying ETFs
Replies: 64
Views: 4893

Re: buying mutual funds seems easier than buying ETFs

When I buy (or try to buy) ETF shares in my brokerage account, I usually use the "Limit" method and put a price that I am willing to pay, usually a few cents higher than the closing price that day. I am usually doing this at night; too busy during the day. Sometimes I get the shares and sometimes I don't. Mutual funds are easier: "invest this many dollars". You get however many shares that buys. Should I be doing something differently? For example, the "Market" method? I'm worried I'll end up buying shares at much higher price than I intended. Maybe that's a silly worry, and prices don't change that dramatically during one day? When it comes to ETFs, trading volume is key. Compare Friday's trading volume for t...
by grabiner
Tue Mar 26, 2024 7:00 pm
Forum: Personal Investments
Topic: withdrawing $300 K for property purchase
Replies: 5
Views: 821

Re: withdrawing $300 K for property purchase

Selling from taxable is probably best, even if you have to pay capital-gains tax. The reason is that the fraction of your taxable account that is lost to taxes increases over time, while the fraction of your retirement accounts that are lost to taxes does not change unless your marginal tax rate changes. The IRS will take 22% of your traditional IRA withdrawals, and 0% of your Roth IRA withdrawals, whether you take them now or in ten years. But if you sell $300K of stock with a $200K basis, the IRS takes only 5%; if you wait until the stock is worth $400K, the IRS will have already taken some tax the dividends and will take another 7.5% of the capital gain. Note that the decision of what to sell is independent of your asset allocation. If y...
by grabiner
Tue Mar 26, 2024 6:55 pm
Forum: Personal Finance (Not Investing)
Topic: Social Security Break-Even Calculator That Includes Opportunity Cost of Waiting?
Replies: 21
Views: 1771

Re: Social Security Break-Even Calculator That Includes Opportunity Cost of Waiting?

You get an 8% guaranteed return on deferring your SS payments. Would you get a greater guaranteed return on your other investments if you took SS and kept those invested? What return are you assuming? You do not get an 8% guaranteed return, rather, what you get is an inflation-linked annuity with an 8% payout rate, which is still very good but nowhere near as good as an 8% return. If your FRA benefit is $20,000 and you delay one year, you give up the $20,000 and get $1600 per year for the rest of your life but your heirs (except a surviving spouse with a lower benefit) get nothing. In contrast, if you invested $20,000 with an 8% guaranteed return, you would get $1600 per year for the rest of your life, and still have the $20,000. And even ...
by grabiner
Tue Mar 26, 2024 6:43 pm
Forum: Personal Investments
Topic: I-bonds, "tax bomb"; & ACA APTCs for age 58 retiree
Replies: 10
Views: 1425

Re: I-bonds, "tax bomb"; & ACA APTCs for age 58 retiree

If you are not already using one, you might want to consider going for a High Deductible ACA plan, then contributing the full amount ($8,300 this year, for a married couple/family plan) to a Health Savings Account. This often helps in managing income to maximize premium credits and/or managing around the “cliff”, if it reappears in the future. sadly, I've never really understood HSAs. I sort of assumed it was for folks with employment income. I have always had the Silver type plans via the ACA, and that is what I currently have. 1) what about in 2025 if I signed up for a Bronze ACA plan for just 2025 , and then ?? (sorry I don't understand) sorry, I don't understand , either, what you mean by "manage around the cliff" via an HSA....
by grabiner
Tue Mar 26, 2024 6:35 pm
Forum: Personal Finance (Not Investing)
Topic: HCOL in retirement - mortgage vs. paid off vs. rent?
Replies: 25
Views: 2074

Re: HCOL in retirement - mortgage vs. paid off vs. rent?

3) Having a paid off house reduces our sequence of risk since we do not have to pay rent or a mortgage payment each month. Here is a very simplistic example of that which I have posted before. You may want to play with your actual numbers looking at it this way. This effect can be eliminated by viewing the mortgage as a negative bond, and offsetting it with a bond portfolio. For a perfect offset, you could take out a mortgage and buy a bond ladder that pays exactly enough each year to make that year's mortgage payments. You would have the same amount to spend on non-mortgage expenses with both the bonds and the mortgage as you would with neither. And this also gives a guide for whether you should pay cash or take out a mortgage. If the aft...
by grabiner
Tue Mar 26, 2024 6:24 pm
Forum: Personal Investments
Topic: Question about muni funds: Should I exchange Vanguard Limited Term for Vanguard NY Muni Fund?
Replies: 14
Views: 1293

Re: Question about muni funds: Should I exchange Vanguard Limited Term for Vanguard NY Muni Fund?

Given where I'm at now, do you recommend I sell all my Limited Term and buy NY munis? My estimate is that taxes on the cap gains would be: $375 fed (all long term cap gains) $250 in NY and NYC taxes (cap gains are taxed at marginal income tax rate in NY, which I'm assuming will be 10%) Total: $625 The cap gains would also increase my Net Investment Income Tax. Including NIIT, the tax of $710 is 0.9% of the investment you would be selling. Since you are likely to be holding this investment for less than a year, this probably isn't worth doing now unless you have capital losses to offset the gains. When you have moved to NJ, or decided that you won't, it probably makes sense to sell the Limited-Term Tax-Exempt for the long-term fund for whic...
by grabiner
Mon Mar 25, 2024 9:00 pm
Forum: Personal Investments
Topic: Question about muni funds: Should I exchange Vanguard Limited Term for Vanguard NY Muni Fund?
Replies: 14
Views: 1293

Re: Question about muni funds: Should I exchange Vanguard Limited Term for Vanguard NY Muni Fund?

Given where I'm at now, do you recommend I sell all my Limited Term and buy NY munis? My estimate is that taxes on the cap gains would be: $375 fed (all long term cap gains) $250 in NY and NYC taxes (cap gains are taxed at marginal income tax rate in NY, which I'm assuming will be 10%) Total: $625 The cap gains would also increase my Net Investment Income Tax. Including NIIT, the tax of $710 is 0.9% of the investment you would be selling. Since you are likely to be holding this investment for less than a year, this probably isn't worth doing now unless you have capital losses to offset the gains. When you have moved to NJ, or decided that you won't, it probably makes sense to sell the Limited-Term Tax-Exempt for the long-term fund for whic...
by grabiner
Sun Mar 24, 2024 8:54 pm
Forum: Personal Finance (Not Investing)
Topic: HCOL in retirement - mortgage vs. paid off vs. rent?
Replies: 25
Views: 2074

Re: HCOL in retirement - mortgage vs. paid off vs. rent?

3) Having a paid off house reduces our sequence of risk since we do not have to pay rent or a mortgage payment each month. Here is a very simplistic example of that which I have posted before. You may want to play with your actual numbers looking at it this way. This effect can be eliminated by viewing the mortgage as a negative bond, and offsetting it with a bond portfolio. For a perfect offset, you could take out a mortgage and buy a bond ladder that pays exactly enough each year to make that year's mortgage payments. You would have the same amount to spend on non-mortgage expenses with both the bonds and the mortgage as you would with neither. And this also gives a guide for whether you should pay cash or take out a mortgage. If the aft...
by grabiner
Sun Mar 24, 2024 8:41 pm
Forum: Personal Finance (Not Investing)
Topic: IRA Distributions of US Govt Interest are State Tax Free in WI and OR
Replies: 15
Views: 975

Re: IRA Distributions of US Govt Interest are State Tax Free in WI and OR

IRA distributions from Treasury income are also exempt from state tax in NJ. In addition, NJ doesn't tax capital gains on Treasuries, nor on "qualified investment funds" which hold NJ-tax-exempt securities.
by grabiner
Sun Mar 24, 2024 8:35 pm
Forum: Personal Finance (Not Investing)
Topic: What are your "hidden" tax tips?
Replies: 56
Views: 4795

Re: What are your "hidden" tax tips?

If you use tax software, check the forms yourself before filing. You may encounter your own errors in data entry, bugs in the software, or things that the software did not ask you about and should. I have found several examples of all three. My classic example of a bug: if you moved to NJ on November 16, how many days in November were you a NJ resident? TaxAct 2010 said 14, but the correct answer is 15, and this matters because you get one month's personal exemption in NJ if you were a resident for 15 days during that month. And my best example of not asking something important is a current issue in TurboTax for CA nonresidents who have HSAs. If your salary is $X on your federal W-2, and you contribute $Y to your HSA by payroll deduction, C...
by grabiner
Sat Mar 23, 2024 9:43 pm
Forum: Personal Investments
Topic: Question about muni funds: Should I exchange Vanguard Limited Term for Vanguard NY Muni Fund?
Replies: 14
Views: 1293

Re: Question about muni funds: Should I exchange Vanguard Limited Term for Vanguard NY Muni Fund?

In the 24% tax bracket, I wouldn't even use Limited-Term Tax-Exempt; you'll probably get a better return for comparable risk from a Treasury fund which is also exempt from NY state and city tax. The mix of LImited-Term and NY Long-Term is my usual recommendation for NY investors in the 32% bracket. However, since your munis are only half your bond portfolio, it would be reasonable to hold all your taxable bonds in the NY muni fund. Note that your proposed switch will increase your interest-rate risk slightly; you could shorten the bond duration in your 401(k) to compensate if you wish. If you move to NJ, you can switch the NY Long-Term Tax-Exempt for NJ Long-Term Tax-Exempt, likely for only a small capital gain or loss. I started investing...
by grabiner
Sat Mar 23, 2024 7:17 pm
Forum: Investing - Theory, News & General
Topic: VTMSX vs VIOO?
Replies: 19
Views: 2644

Re: VTMSX vs VIOO?

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 ETF IJR which tracks the same index may be better. 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%.) (edited to fix typo) Is VIOO an ETF class of VTMSX? if not, why not? as you said, it seems that VTMSX isn't managed for a lower dividend yield. ...
by grabiner
Fri Mar 22, 2024 8:36 pm
Forum: Personal Finance (Not Investing)
Topic: Capital gains loss carryover if you sell no stocks
Replies: 16
Views: 1260

Re: Capital gains loss carryover if you sell no stocks

J295 wrote: Fri Mar 22, 2024 7:21 pm I believe your ability to deduct from ordinary income will be negatively impacted if you are in an AMT situation.
You still get the deduction on your AMT, although you might have a different carryover for the AMT. In particular, if you sell stock that you purchased with ISOs, your AMT capital gain will be less than your regular capital gain.
by grabiner
Thu Mar 21, 2024 7:29 pm
Forum: Investing - Theory, News & General
Topic: Anyone holds VTMFX (Vanguard Tax-Managed Balanced Fund)
Replies: 16
Views: 2379

Re: Anyone holds VTMFX (Vanguard Tax-Managed Balanced Fund)

The fund is 49% invested in the same stocks as Vanguard Tax-Managed Capital Appreciation, and 51% in munis, so its taxable stock dividends should be 49% of those from Tax-Managed Capital Appreciation. i dont think the breakdown of the dividend will be similar to its portfolio breakdown because stock component and muni component have different yields. If you have $10,000 in the fund, you have $4900 in stock and $5100 in bonds, so your stock dividend is the dividend on $4900 in stock. Thus your stock yield will be the same as the dollar yield on $4900 in Tax-Managed Capital Appreciation, and since your total investment is $10,000, it will be 49% of the yield on Tax-Managed Capital Appreciation as a percentage. The breakdown issue means that ...
by grabiner
Thu Mar 21, 2024 7:22 pm
Forum: Personal Investments
Topic: Can TIPS in a taxable account make sense?
Replies: 22
Views: 2686

Re: Can TIPS in a taxable account make sense?

Before you do that however,, make sure that you understand the tax consequences. If you don't fully understand how TIPS work, don't do it. If you don't understand OID and phantom income, don't do it. You can avoid this issue by holding TIPS funds, which will handle the tax situation for you. However, the only option for a long-term TIPS investment is PIMCO's LTPZ, with 0.20% expenses. Intermediate-term and short-term funds are available for lower expenses. How do the new Blackrock iShares iBonds TIPS ETF offerings fit into the TIPS fund puzzle? It looks like the current offerings can go out to 2033 initially so not super long-term but might work to get closer to age 70 in 2035, to start my social security benefit. We are looking for someth...
by grabiner
Wed Mar 20, 2024 8:53 pm
Forum: Personal Finance (Not Investing)
Topic: TurboTax enters California adjustment for Treasury interest on wrong line.
Replies: 20
Views: 1942

Re: TurboTax enters California adjustment for Treasury interest on wrong line.

Kudos for your attention to detail. I did federal and two states this year in TurboTax. California was the worst part of the whole process. ever done a Maryland return? :beer I live in MD, and find MD returns easy to do with software. MD doesn't have a lot of adjustments. The main difference between MD tax and tax in most states is automatically handled by the software: MD counties have an income tax, but since the tax is on exactly the same income, all that the software needs to do is to add the county percentage of your MD taxable income to your state tax. CA is harder, with or without software, because the HSA requires keeping an extra set of records. I sold an ETF in my HSA in a previous year, so my CA capital loss carryover is less th...
by grabiner
Wed Mar 20, 2024 8:48 pm
Forum: Investing - Theory, News & General
Topic: Vanguard research: Asset location for equity - October 2023
Replies: 6
Views: 1301

Re: Vanguard research: Asset location for equity - October 2023

I commented on this paper a few months ago: Vanguard article on tax-efficiency of US versus foreign in taxable.

The article assumes an unusually high foreign tax withholding amount (15% versus a more typical 8%); correcting for that eliminates the advantage of foreign stock in a taxable account. It is also inconsistent in accounting for the Net Investment Income Tax.
by grabiner
Wed Mar 20, 2024 8:43 pm
Forum: Investing - Theory, News & General
Topic: Anyone holds VTMFX (Vanguard Tax-Managed Balanced Fund)
Replies: 16
Views: 2379

Re: Anyone holds VTMFX (Vanguard Tax-Managed Balanced Fund)

The fund is 49% invested in the same stocks as Vanguard Tax-Managed Capital Appreciation, and 51% in munis, so its taxable stock dividends should be 49% of those from Tax-Managed Capital Appreciation.

However, I don't like the fund, because you cannot sell bonds and stocks separately. If you want to hold fewer bonds, or bonds in a different account, or a different type of bonds (as if you move to NY), and you hold your bonds in a balanced fund, you have to sell the whole fund and pay capital-gains tax on the stock. If you hold separate bond and stock funds, you can just sell a bond fund for little or no capital gain.
by grabiner
Wed Mar 20, 2024 8:37 pm
Forum: Investing - Theory, News & General
Topic: Are TIPS funds useless?
Replies: 25
Views: 4233

Re: Are TIPS funds useless?

camper95 wrote: Tue Mar 19, 2024 6:32 pm Looking back at most TIPS etfs, they all experienced negative downturns due to rising interest rates, albeit far less than total bond funds like BND, but it got me thinking, if there ever is rising inflation again, the feds will most likely raise rates again like this time, perhaps not as fast or high, but this will still cause negative affects on bond funds.
The rate that the Fed targets is not the same rate that is relevant to your bond funds. The Fed targets a very-short-term rate. It may happen than long-term rates or TIPS rates rise at the same time, particularly if expectations change, but this is not a reaction to the Fed.
by grabiner
Wed Mar 20, 2024 8:34 pm
Forum: Investing - Theory, News & General
Topic: Is active mutual fund’s capital gain always a bad thing?
Replies: 28
Views: 2329

Re: Is active mutual fund’s capital gain always a bad thing?

Active mutual funds tend to generate capital gains due to redemption needs or fund managers’ investment decisions. Many people loathe the capital gains because of taxes which ensue. What if the capital gains are a sign to rebalance? For example, many active stock funds distributed huge capital gains in the end of 2021. As we know, 2022 was a terrible year for the stock market. If those capital gains had not been reinvested, they could have been used to buy the dip in 2022. You can do that on your own, and it's less expensive than using the distributed capital gains. Suppose that you need to rebalance and move $50K out of US stock into bonds. The lowest-cost way to do that would be to sell stock to buy bonds in your 401(k) or IRA, with no t...
by grabiner
Wed Mar 20, 2024 8:23 pm
Forum: Personal Investments
Topic: Placement of VYM for Retirement Income
Replies: 6
Views: 864

Re: Placement of VYM for Retirement Income

It's better to hold the higher-dividend fund (VYM in your case) in tax-deferred, because the total tax cost of getting the same amount of income is lower.

For example, suppose you have $1M in stock in your taxable account, and you intend to withdraw $30K from it. If your taxable account has a 3% dividend yield, you get $30K from dividends alone, all taxable income (likely at the 15% qualified dividend rate). If your taxable account has a 2% dividend yield, you get $20K from dividends and must sell $10K of stock. If that stock has a basis of $5K, you have $30K in case but owe tax on only $25K.
by grabiner
Wed Mar 20, 2024 8:17 pm
Forum: Personal Investments
Topic: Can TIPS in a taxable account make sense?
Replies: 22
Views: 2686

Re: Can TIPS in a taxable account make sense?

Artsdoctor wrote: Mon Mar 18, 2024 6:08 pm Before you do that however,, make sure that you understand the tax consequences. If you don't fully understand how TIPS work, don't do it. If you don't understand OID and phantom income, don't do it.
You can avoid this issue by holding TIPS funds, which will handle the tax situation for you. However, the only option for a long-term TIPS investment is PIMCO's LTPZ, with 0.20% expenses. Intermediate-term and short-term funds are available for lower expenses.
by grabiner
Wed Mar 20, 2024 8:06 pm
Forum: Personal Investments
Topic: Dividend shock: Help me reduce dividends
Replies: 30
Views: 4032

Re: Dividend shock: Help me reduce dividends

Money Mkt, CDs, IBonds 7% VSIGX (Int Treas Index) 14% FUMBX (ST Treas) 9% Do you have a tax-deferred account where you can hold your bonds instead? If not, you might use munis, which are likely to yield a bit more than taxable bonds of the same risk if your marginal tax rate is 27.8%. VTIAX (Total Intl Stock) 17% FTIHX (Total Intl Stock) 2% IVLU (Int’l Value) 7% VXUS (Total Intl Stock) 2% The high dividend yields on international stock are also a reason to prefer holding international stock in tax-advantaged accounts, but that isn't always possible because many 401(k) plans don't have a low-cost international fund. IVLU used to be very tax-efficient, but it had an unusually high dividend yield in 2023. It is also probably no longer the bes...
by grabiner
Wed Mar 20, 2024 7:55 pm
Forum: Personal Investments
Topic: Question about muni funds: Should I exchange Vanguard Limited Term for Vanguard NY Muni Fund?
Replies: 14
Views: 1293

Re: Question about muni funds: Should I exchange Vanguard Limited Term for Vanguard NY Muni Fund?

In the 24% tax bracket, I wouldn't even use Limited-Term Tax-Exempt; you'll probably get a better return for comparable risk from a Treasury fund which is also exempt from NY state and city tax. The mix of LImited-Term and NY Long-Term is my usual recommendation for NY investors in the 32% bracket.

However, since your munis are only half your bond portfolio, it would be reasonable to hold all your taxable bonds in the NY muni fund. Note that your proposed switch will increase your interest-rate risk slightly; you could shorten the bond duration in your 401(k) to compensate if you wish.

If you move to NJ, you can switch the NY Long-Term Tax-Exempt for NJ Long-Term Tax-Exempt, likely for only a small capital gain or loss.
by grabiner
Mon Mar 18, 2024 7:39 pm
Forum: Personal Investments
Topic: DCA with sell to open puts
Replies: 6
Views: 1072

Re: DCA with sell to open puts

Resurrecting this thread since I'm considering this as well. https://www.bogleheads.org/forum/viewtopic.php?t=97682 ^ This thread posits that options sellers have a slight premium as the "insurance" company, taking on the risk. https://www.cboe.com/us/indices/dashboard/put/ ^ The performance of the put/write index from CBOE would seem to support this (~6.5% CAGR). (Note, this must be reduced by the 1-3 month t-bill index; however, over the above period of time, that index returned only ~1.08% https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-bloomberg-1-3-month-t-bill-etf-bil This makes sense, but it is not a benefit because you are taking a non-diversifiable risk. If you write a put on a stock, you take all of the downside...
by grabiner
Mon Mar 18, 2024 7:23 pm
Forum: Personal Finance (Not Investing)
Topic: Reevaluating social security
Replies: 49
Views: 4603

Re: Reevaluating social security

I just used the opensecurity.com site and I'm confused about the advice that it is given. It states it would be best for me to take my social security at age 64 5 months which is next month and for my husband to wait until age 70. I understand the waiting until age 70 which is what we planned but trying to understand why they are recommending that I take my social security at age 64 5 months instead of waiting until FRA. If I took it at 64 5 months, I would get approx. $1743 vs. $2077 at FRA. I'm thinking it has to do with the investing a dollar received now is worth more than one received in the future as mentioned on the website. Claiming SS is a trade-off between the amount earned and the number of years you get that amount. The optimal...
by grabiner
Sun Mar 17, 2024 8:01 pm
Forum: Personal Finance (Not Investing)
Topic: Reevaluating social security
Replies: 49
Views: 4603

Re: Reevaluating social security

I just used the opensecurity.com site and I'm confused about the advice that it is given. It states it would be best for me to take my social security at age 64 5 months which is next month and for my husband to wait until age 70. I understand the waiting until age 70 which is what we planned but trying to understand why they are recommending that I take my social security at age 64 5 months instead of waiting until FRA. If I took it at 64 5 months, I would get approx. $1743 vs. $2077 at FRA. I'm thinking it has to do with the investing a dollar received now is worth more than one received in the future as mentioned on the website. Claiming SS is a trade-off between the amount earned and the number of years you get that amount. The optimal...
by grabiner
Sun Mar 17, 2024 7:54 pm
Forum: Investing - Theory, News & General
Topic: VTIAX and VFWAX are only 90% international, VSS only 85%
Replies: 5
Views: 1150

Re: VTIAX and VTWAX are only 90% international, VSS only 85%

The funds may hold futures or options for liquidity, or they may lend out stocks to short-sellers and receive US-source income.

In either case, the loss of foreign income is not reducing the foreign tax credit, since the US-source income is not taxed by the foreign countries.
by grabiner
Sun Mar 17, 2024 7:48 pm
Forum: Personal Investments
Topic: HSA Fund selection
Replies: 5
Views: 722

Re: HSA Fund selection

Since your HSA and Roth IRA are both growing tax-free for expenses in retirement, they can be invested as if they were a single account. Thus, for simplicity, you might invest in just one fund in the HSA. Total International Institutional Plus might be a good choice for simplicity, as you can then balance it out with Total Stock Market in another account to get your desired international allocation.

(I do this with my own HSA. I hold a single ETF in the HSA, and since this doesn't cover my desired allocation to that ETF, I also hold the ETF in another account.)
by grabiner
Sun Mar 17, 2024 7:39 pm
Forum: Personal Investments
Topic: TSP F fund question
Replies: 16
Views: 2168

Re: TSP F fund question

It is also important to understand that there is more than one interest rate. If the bonds in a fund have their yields decrease by 1%, the fund value will increase by a percentage equal to its duration, which would be 6% for the F fund since it has a 6-year duration. But If the Fed cuts rates, that will not directly affect the F fund, because the Fed targets very-short-term rates, not the rates on the longer-term bonds in the F fund.

If the 10-year Treasury rate (a rate often discussed in the financial news) falls, then the F fund should gain value, as it holds a lot of intermediate-term and long-term Treasury bonds, and also corporate bonds whose rates usually track the Treasury rates.
by grabiner
Sun Mar 17, 2024 7:34 pm
Forum: Personal Investments
Topic: Thoughts on GQRPX? [GQG Partners Global Quality Equity Fund]
Replies: 4
Views: 310

Re: Thoughts on GQRPX? [GQG Partners Global Quality Equity Fund]

Welcome to the forum! It may be a good idea to diversify globally, but you give up a lot of the potential benefit if your fund charges high management fees. You may be looking at funds which performed well in the past, but funds are required to tell you that past performance is not a good indication of future peformance. However, high investment fees are a good indication of inferior future performance, because they are a guaranteed cost. If you use VOO (most on this forum would prefer the broader-market VTI), you can pair that with Vanguard Total International ETF (VXUS) to cover the world. With both funds, you don't care whether US or foreign stocks do better, only how well the stock market does as a whole. And there is no way to avoid st...
by grabiner
Sun Mar 17, 2024 7:28 pm
Forum: Personal Investments
Topic: Newbie - Municipal Bonds vs MF / ETF Muni Tax Free
Replies: 7
Views: 736

Re: Newbie - Municipal Bonds vs MF / ETF Muni Tax Free

You will have the same gains or losses on a managed account or a mutual fund. If bond yields rise, bonds lose value. Your total investment may still gain value, because bonds make coupon payments. If you hold a bond to maturity (or until it is called), gains and losses along the way will cancel out; the bond must pay its par value at maturity, or its call price if it is called. In either a managed account or a mutual fund, you also have the extra loss to the management fees and trading costs. For a mutual fund or ETF, the trading costs tend to be very low; individual investors pay a large spread on munis unless they buy at initial offering and hold to maturity. If you buy something like VTEB (Vanguard Tax-Exempt Bond ETF), the fee is very l...
by grabiner
Sat Mar 16, 2024 7:33 am
Forum: Personal Investments
Topic: Bonds in taxable versus tax deferred - revisiting the topic
Replies: 9
Views: 1467

Re: Bonds in taxable versus tax deferred - revisiting the topic

Thanks very much for the reply. I am curious to know how you arrived at the below? This seems like an important point and the conclusion isn't so obvious to me. And you can adjust similarly for stocks in taxable versus tax-deferred, although the tax cost isn't usually that different. All of the tax-deferred account will get taxed at your full rate eventually (or at your heirs' rate), while stocks in a taxable account will be taxed at a lower nominal rate, but the taxation of dividends every year compounds to produce a similar tax cost. It seems to me that to fully explore this, one would have to model the two possibilities for stock placement: 1. Put stocks in taxable -- in this case, they compound subject to a tax drag (say 45 bps) and ar...
by grabiner
Fri Mar 15, 2024 10:23 pm
Forum: Investing - Theory, News & General
Topic: Model and spreadsheet for asset location
Replies: 24
Views: 3125

Re: Model and spreadsheet for asset location

I'm still working through this spreadsheet and trying to remain more objective than I was last night; I'm amazed at @grabiner's silent patience with me. I'm starting to understand better having read this thread backwards from the bottom. Regarding your modification, is it not true that E2 should only be 0%, 15%, or 20% which are the fixed LTC and QD tax rates? Plus state tax and NIIT. If you don't pay state tax, E2 could be 0%, 15%, 18.8% (adding NIIT), and 23.8% (top rate plus NIIT), with a few other values possible if you are in some phase-out in the tax code. Values to use If you are in a high tax bracket and there is no low-cost muni fund for your state, D2 should be 25% plus your state tax, based on the assumption that munis have 75% ...