Search found 29008 matches

by grabiner
Sun Apr 18, 2021 3:54 pm
Forum: Investing - Theory, News & General
Topic: When can you put bonds in a taxable account?
Replies: 15
Views: 1726

Re: When can you put bonds in a taxable account?

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...
by grabiner
Sun Apr 18, 2021 3:36 pm
Forum: Personal Finance (Not Investing)
Topic: Property Appraisal Question - obscure situation
Replies: 13
Views: 1352

Re: Property Appraisal Question - obscure situation

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...
by grabiner
Sun Apr 18, 2021 3:26 pm
Forum: Personal Finance (Not Investing)
Topic: Prepay Mortgage as EF
Replies: 9
Views: 577

Re: Prepay Mortgage as EF

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 ...
by grabiner
Sun Apr 18, 2021 3:24 pm
Forum: Personal Finance (Not Investing)
Topic: "Nobody's ever regretted paying off the mortgage."
Replies: 321
Views: 21634

Re: "Nobody's ever regretted paying off the mortgage."

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...
by grabiner
Sun Apr 18, 2021 3:15 pm
Forum: Investing - Theory, News & General
Topic: When can you put bonds in a taxable account?
Replies: 15
Views: 1726

Re: When can you put bonds in a taxable account?

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,...
by grabiner
Sun Apr 18, 2021 3:12 pm
Forum: Investing - Theory, News & General
Topic: When can you put bonds in a taxable account?
Replies: 15
Views: 1726

Re: When can you put bonds in a taxable account?

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...
by grabiner
Sun Apr 18, 2021 3:08 pm
Forum: Investing - Theory, News & General
Topic: Long Term Gains vs. Adjusting portfolio
Replies: 6
Views: 507

Re: Long Term Gains vs. Adjusting portfolio

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...
by grabiner
Sun Apr 18, 2021 3:01 pm
Forum: Investing - Theory, News & General
Topic: VIGI tax efficiency?
Replies: 3
Views: 277

Re: VIGI tax efficiency?

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...
by grabiner
Sun Apr 18, 2021 2:59 pm
Forum: Investing - Theory, News & General
Topic: Confused on Interest Rates and Bond Returns
Replies: 6
Views: 672

Re: Confused on Interest Rates and Bond Returns

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...
by grabiner
Sun Apr 18, 2021 2:56 pm
Forum: Investing - Theory, News & General
Topic: Schwab trying to dissuade me from Vanguard bond funds
Replies: 23
Views: 2885

Re: Schwab trying to dissuade me from Vanguard bond funds

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...
by grabiner
Sun Apr 18, 2021 2:45 pm
Forum: Investing - Theory, News & General
Topic: VIGI tax efficiency?
Replies: 3
Views: 277

Re: VIGI tax efficiency?

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-...
by grabiner
Sun Apr 18, 2021 2:35 pm
Forum: Investing - Theory, News & General
Topic: Roth v. Traditional - Does effective tax rate matter?
Replies: 19
Views: 1781

Re: Roth v. Traditional - Does effective tax rate matter?

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...
by grabiner
Sun Apr 18, 2021 2:30 pm
Forum: Investing - Theory, News & General
Topic: How to see the Vanguard funds classified by risk
Replies: 5
Views: 479

Re: How to see the Vanguard funds classified by risk

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...
by grabiner
Sun Apr 18, 2021 2:27 pm
Forum: Personal Investments
Topic: What to do with excess down payment funds
Replies: 7
Views: 519

Re: What to do with excess down payment funds

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...
by grabiner
Sun Apr 18, 2021 2:20 pm
Forum: Investing - Theory, News & General
Topic: "Mortage is a negative bond" - please help me understand
Replies: 182
Views: 9306

Re: "Mortage is a negative bond" - please help me understand

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...
by grabiner
Sun Apr 18, 2021 2:16 pm
Forum: Investing - Theory, News & General
Topic: VWAHX (high yield muni) vs. VCITX (LT CA muni)
Replies: 2
Views: 208

Re: VWAHX (high yield muni) vs. VCITX (LT CA muni)

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...
by grabiner
Sun Apr 18, 2021 2:13 pm
Forum: Investing - Theory, News & General
Topic: Maybe a stupid question but why invest in bonds instead of paying down mortgage?
Replies: 47
Views: 3201

Re: Maybe a stupid question but why invest in bonds instead of paying down mortgage?

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...
by grabiner
Sun Apr 18, 2021 2:08 pm
Forum: Investing - Theory, News & General
Topic: VTMSX vs VIOO?
Replies: 3
Views: 245

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...
by grabiner
Sun Apr 18, 2021 2:04 pm
Forum: Personal Investments
Topic: When to take Social Security when a pension is linked to it
Replies: 16
Views: 1422

Re: When to take Social Security when a pension is linked to it

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...
by grabiner
Sun Apr 18, 2021 1:58 pm
Forum: Personal Investments
Topic: placement for VIOO (Vanguard S&P Small-Cap 600 Index Fund ETF)
Replies: 3
Views: 244

Re: placement for VIOO (Vanguard S&P Small-Cap 600 Index Fund ETF)

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,...
by grabiner
Sun Apr 18, 2021 1:52 pm
Forum: Personal Investments
Topic: Ideal balance between tax deferred, Roth and taxable accounts
Replies: 15
Views: 1450

Re: Ideal balance between tax deferred, Roth and taxable accounts

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 ...
by grabiner
Sun Apr 18, 2021 1:49 pm
Forum: Personal Investments
Topic: Dividend stocks or index in Roth IRA?
Replies: 8
Views: 729

Re: Dividend stocks or index in Roth IRA?

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...
by grabiner
Sun Apr 18, 2021 1:43 pm
Forum: Personal Investments
Topic: What is meant by "Get Out of Bonds" ??
Replies: 15
Views: 1406

Re: What is meant by "Get Out of Bonds" ??

Here is my Q: What does "hold to maturity" mean in the case of a bond fund? In theory, you can get the equivalent of "hold to maturity" in a bond fund by shortening your duration by one year every year. If you buy a bond fund with a 10-year duration, and yields rise by 1% in the...
by grabiner
Sun Apr 18, 2021 1:35 pm
Forum: Personal Investments
Topic: What to do with excess down payment funds
Replies: 7
Views: 519

Re: What to do with excess down payment funds

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 ...
by grabiner
Sun Apr 18, 2021 1:25 pm
Forum: Personal Finance (Not Investing)
Topic: "Nobody's ever regretted paying off the mortgage."
Replies: 321
Views: 21634

Re: "Nobody's ever regretted paying off the mortgage."

Thus my own advice, if liquidity is not an issue, is to pay down a mortgage if the after-tax mortgage rate is significantly lower than the rate on low-risk bonds of the same duration; it becomes clearer at 1%. The gap was 0.64% when I paid mine off, and I paid it off by selling bonds, so I got the ...
by grabiner
Sat Apr 17, 2021 10:33 pm
Forum: Personal Investments
Topic: Inheritance Advice: Mortgage or Investing
Replies: 12
Views: 1143

Re: Inheritance Advice: Mortgage or Investing

I don't have a dedicated emergency fund. I always planned on withdrawing from taxable if necessary. The potential problem is that if the market is in a correction/bear territory and you're forced to sell, you're doing real long-term damage to your investment horizon. Unless you can sell bonds (poss...
by grabiner
Sat Apr 17, 2021 3:36 pm
Forum: Personal Investments
Topic: Short similar ETF in taxable instead to rebalance equities
Replies: 10
Views: 429

Re: Short similar ETF in taxable instead to rebalance equities

Purchase a muni bond fund with new money. Common here are Vanguard Int. Term Tax Exempt and Vanguard Limited Term Tax Exempt. I would recommend using the fund for your state if it has one. In fact, in that high a tax bracket, I normally recommend in-state munis in taxable in preference to stock, be...
by grabiner
Sat Apr 17, 2021 3:31 pm
Forum: Investing - Theory, News & General
Topic: Contrafund versus Contrafund K
Replies: 7
Views: 794

Re: Contrafund versus Contrafund K

So just got moved from K to K6. Even better, with much lower expense ratio and some dividends. But, looking at Morningstar statistics, performance lags K. How is this possible? If these are actually share classes of the same fund, there is something wrong with Morningstar's data. The fund returns f...
by grabiner
Fri Apr 16, 2021 11:01 pm
Forum: Investing - Theory, News & General
Topic: Tax equivalent yield munis vs. other bond funds
Replies: 10
Views: 1030

Re: Tax equivalent yield munis vs. other bond funds

Thanks Grabiner. That was extremely useful. If I am understanding your point correctly, the combo that you selected had a CAGR that was .72% less than Wellesley, but Wellesley would have lost at least 2%/yr to taxes whereas the combo lost only 0.7%/yr (due to the stock index.) The combo is only 35%...
by grabiner
Fri Apr 16, 2021 6:22 pm
Forum: Personal Finance (Not Investing)
Topic: "Nobody's ever regretted paying off the mortgage."
Replies: 321
Views: 21634

Re: "Nobody's ever regretted paying off the mortgage."

* I also think mortgage and bonds play different roles in my overall finances. I struggle with some of the arguments in regard to having both. Very often I see analysis based upon current conditions (mortgage rate today vs bond rate today to support paying off the mortgage). For the proper equivale...
by grabiner
Fri Apr 16, 2021 6:16 pm
Forum: Personal Investments
Topic: Why Buy TIPS Bonds Now?
Replies: 36
Views: 3776

Re: Why Buy TIPS Bonds Now?

Not sure why folks would buy TIPS with their current negative yields when the current I Bonds have a 0% fixed rate. If you aren't maxing out your tax-deferred space, the returns on long-term TIPS will likely be higher than the after-tax returns on I-Bonds. And CA and NJ residents are likely to want...
by grabiner
Fri Apr 16, 2021 6:10 pm
Forum: Investing - Theory, News & General
Topic: Tax equivalent yield munis vs. other bond funds
Replies: 10
Views: 1030

Re: Tax equivalent yield munis vs. other bond funds

Thanks Grabiner. That was extremely useful. If I am understanding your point correctly, the combo that you selected had a CAGR that was .72% less than Wellesley, but Wellesley would have lost at least 2%/yr to taxes whereas the combo lost only 0.7%/yr (due to the stock index.) The combo is only 35%...
by grabiner
Thu Apr 15, 2021 11:38 pm
Forum: Personal Finance (Not Investing)
Topic: Before Medicare begins: Use your HSA tax free funding distribution
Replies: 13
Views: 1234

Re: Before Medicare begins: Use your HSA tax free funding distribution

My understanding is that the IRA->HSA rollover takes the place of your contribution. There is nothing fancy about this. You could just withdrawal from the IRA and make an HSA contribution.. and the net on your taxes should be the same (in most cases) Note the bold, above. " The distribution [i...
by grabiner
Thu Apr 15, 2021 11:27 pm
Forum: Personal Finance (Not Investing)
Topic: State Foreign Tax Credit
Replies: 1
Views: 252

Re: State Foreign Tax Credit

Yes, this is how it works, just as for the federal credit. (You may have to see how various deductions apply against US or foreign income; it varies by state.) The net effect is that you usually pay almost no state tax on foreign income if your state has a flat tax and a foreign tax credit, and much...
by grabiner
Thu Apr 15, 2021 11:19 pm
Forum: Personal Finance (Not Investing)
Topic: W-4 error, had single filing status not married
Replies: 7
Views: 623

Re: W-4 error, had single filing status not married

Just to re-iterate what has already been said, I would double-check that withholding for "married filing jointly" is appropriate for you. If you and your spouse make a similar amount of money, you'll probably end up under-withholding (and possibly owing a penalty on top of that). The with...
by grabiner
Thu Apr 15, 2021 11:11 pm
Forum: Personal Finance (Not Investing)
Topic: Unknown phone numbers on credit reports?
Replies: 13
Views: 1238

Re: Unknown phone numbers on credit reports?

Information of this type usually comes from whoever reports it, or by the credit bureau taking the wrong piece of information from a document. I once had a credit card, and had the bank's address reported as my home address. When moving out of state, I applied for insurance, faxing the application f...
by grabiner
Thu Apr 15, 2021 11:03 pm
Forum: Personal Finance (Not Investing)
Topic: Vanguard poor service vs actual errors
Replies: 20
Views: 1929

Re: Vanguard poor service vs actual errors

I have had several problems, but they have been quickly corrected. I converted a traditional IRA to a Roth IRA, and state tax was withheld on the conversion, which I did not request. They redid the conversion a few days later with no withholding. I donated 112 shares of an ETF to charity, and only 1...
by grabiner
Thu Apr 15, 2021 10:56 pm
Forum: Personal Finance (Not Investing)
Topic: Does it make sense that a car dealer needs to do a hard pull if you pay in full by check (cash)?
Replies: 79
Views: 7169

Re: Does it make sense that a car dealer needs to do a hard pull if you pay in full by check (cash)?

Just an observation, if you're paying for a car with cash, the minor/temporary effect of a hard pull on your credit report is fairly meaningless as you obviously don't need much credit. In some states, that hard pull can significantly increase the cost of auto insurance. Credit-based insurance scor...
by grabiner
Thu Apr 15, 2021 10:39 pm
Forum: Personal Finance (Not Investing)
Topic: "Nobody's ever regretted paying off the mortgage."
Replies: 321
Views: 21634

Re: "Nobody's ever regretted paying off the mortgage."

Every so often, when I look at my mortgage balance, I get tempted to direct some new money there instead of to taxable investments. However, I know that I am seeing one side of the balance sheet, the mortgage liability, and taking for granted the larger opposite side, the assets I've built up in my...
by grabiner
Thu Apr 15, 2021 10:22 pm
Forum: Personal Finance (Not Investing)
Topic: When to take Social Security
Replies: 13
Views: 1313

Re: When to take Social Security

The SSA has an army of highly-paid actuaries who actively try to set things up so it doesn't matter (on average) when you take your withdrawals. This is not the case, for several reasons. The formula has not changed in years, so it was based on shorter life expectancies. And because the benefit for...
by grabiner
Thu Apr 15, 2021 9:10 pm
Forum: Personal Investments
Topic: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?
Replies: 48
Views: 4057

Re: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?

Mortgages are only tax-deductible when used to purchase a home or fund improvements to same. So if you take out a mortgage to invest, it's not deductible. True, but with the standard deduction as high as it is these days, and interest rates as low as they are, you'd have to pull a pretty massive am...
by grabiner
Tue Apr 13, 2021 8:33 pm
Forum: Personal Finance (Not Investing)
Topic: Gross Income Definition
Replies: 22
Views: 1784

Re: Gross Income Definition

These follow-up questions are with respect to CA state tax only: Still a bit confused, for non-resident 23 y.o. student, that has ZERO CA sourced earned income, would the CA Kiddie tax apply even with $1M in unearned income? Could unearned income be considered CA sourced? ie suppose you had capital...
by grabiner
Tue Apr 13, 2021 8:43 am
Forum: Personal Investments
Topic: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?
Replies: 48
Views: 4057

Re: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?

Everyone is different but if I was in your situation I would just pay it off and then invest the freed up mortgage payment each month. I am not sure this example is apples to apples. OP will not use the investment account to pay his mortgage. He will continue paying his mortgage from wherever he is...
by grabiner
Tue Apr 13, 2021 8:28 am
Forum: Personal Finance (Not Investing)
Topic: HSA advice Jane Quinn How to Make Your Money Last
Replies: 62
Views: 5722

Re: HSA advice Jane Quinn How to Make Your Money Last

One other thing to be aware of: There is a “once per lifetime” annual funding option [“Qualified HSA funding distribution” in IRS-speak, see Publication 969] from a tIRA which moves money directly from tax-deferred to tax-free. I did that in 2020. The once per lifetime is a technicality. All this r...
by grabiner
Tue Apr 13, 2021 12:15 am
Forum: Personal Finance (Not Investing)
Topic: Gross Income Definition
Replies: 22
Views: 1784

Re: Gross Income Definition

now thinking it may make sense to file federal, like in previous years, but NOT CA...as he has never filed there before (or had ANY reason to consider it)… though a general question here. He is a student, and his permanent residency is a different state. If his only income is unearned (capital gain...
by grabiner
Mon Apr 12, 2021 11:14 pm
Forum: Personal Finance (Not Investing)
Topic: Gross Income Definition
Replies: 22
Views: 1784

Re: Gross Income Definition

now thinking it may make sense to file federal, like in previous years, but NOT CA...as he has never filed there before (or had ANY reason to consider it)… though a general question here. He is a student, and his permanent residency is a different state. If his only income is unearned (capital gain...
by grabiner
Mon Apr 12, 2021 11:02 pm
Forum: Personal Finance (Not Investing)
Topic: How can estimated 2020 tax refund be applied to 2021 estimated tax?
Replies: 11
Views: 976

Re: How can estimated 2020 tax refund be applied to 2021 estimated tax?

Have not yet been able to find any IRS guidance on this issue. The best I could find was some suggestions from the CPA organization and from Forbes magazine that the full amount for 1st qtr estimated tax due should be paid by 4/15/21 and that there is no guarantee that the IRS will consider a refun...
by grabiner
Mon Apr 12, 2021 10:58 pm
Forum: Personal Investments
Topic: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?
Replies: 48
Views: 4057

Re: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?

If you can refinance to a much lower rate, and the interest will be all tax-deductible, that would reduce the risk-free return on a mortgage prepayment by enough that it might not be worthwhile I don't have a whole lot of deductions. We barely went over the 24K standard deduction with both properti...
by grabiner
Mon Apr 12, 2021 10:50 pm
Forum: Investing - Theory, News & General
Topic: Rebalancing while avoiding paying Capital Gains tax, am I missing anything?
Replies: 6
Views: 1145

Re: Rebalancing while avoiding paying Capital Gains tax, am I missing anything?

Sell calls against stocks that are up in value that you don't mind losing. This has its own tax cost. Dividends on stocks for which you have an outstanding call become non-qualified. (You must hold the stock for 61 days of the 121 around the dividend date, and any time you have a protective call do...
by grabiner
Mon Apr 12, 2021 10:41 pm
Forum: Personal Investments
Topic: Index ETF or Index Mutual fund for brokerage acct
Replies: 8
Views: 721

Re: Index ETF or Index Mutual fund for brokerage acct

What is better for a brokerage acct? An index mutual fund or index ETF? Tracks the same index, same expense ratio, same turnover. Is there any advantage to one or the other? If it is a taxable account, a stock ETF is better than a non-Vanguard mutual fund tracking the same index. The ETF structure ...