Search found 1587 matches

by FinancialDave
Sat Dec 08, 2018 2:56 pm
Forum: Personal Finance (Not Investing)
Topic: Roth Conversions
Replies: 12
Views: 812

Re: Roth Conversions

Hello BHs - I am about 1 year from retiring (at age 58) and I am starting to plan how I will tap my various assets so as to maximize my after tax cash flow consistent with my cash flow needs and I have a question around Roth Conversions. My RMD would be about $75,000 at age 70 1/2 with my current r...
by FinancialDave
Thu Dec 06, 2018 12:25 pm
Forum: Personal Finance (Not Investing)
Topic: Reuqesting Help With Managing of Winnings
Replies: 37
Views: 3654

Re: Reuqesting Help With Managing of Winnings

You may have checked this info, but if not, this may be helpful: https://fantasyfootballers.org/law/tax-considerations-for-fantasy-sports-players/ BE CAREFUL with what is said on this page which is NOT IRS advice. It is in fact advice from the fox as to where the chickens should live! This is just ...
by FinancialDave
Wed Dec 05, 2018 1:49 pm
Forum: Personal Finance (Not Investing)
Topic: Reuqesting Help With Managing of Winnings
Replies: 37
Views: 3654

Re: Reuqesting Help With Managing of Winnings

I have to back peddle a bit since it appears these fantasy sites don't exactly report like a casino. In this case it appears to be Net Winnings on a 1099-MISC that will end up on line 21. If that is true then I don't see any itemized deductions showing up for losses as they have already been account...
by FinancialDave
Wed Dec 05, 2018 1:05 pm
Forum: Personal Finance (Not Investing)
Topic: Reuqesting Help With Managing of Winnings
Replies: 37
Views: 3654

Re: Reuqesting Help With Managing of Winnings

From what I gather from online searches including a few links posted in this forum, it is Winnings = All Winnings - Total Entry Fees which would be a significant tax difference compared to All Winnings. All winnings doesn't make sense as no one would play because nearly every person that plays woul...
by FinancialDave
Wed Dec 05, 2018 11:59 am
Forum: Personal Finance (Not Investing)
Topic: Reuqesting Help With Managing of Winnings
Replies: 37
Views: 3654

Re: Reuqesting Help With Managing of Winnings

One other question. I just had an accountant tell me that since I would be making such a large payment to the IRS now for 2018, that they may charge me interest because I did not make those payments through the course of the year. I obviously did not know I would need to make those payments until r...
by FinancialDave
Wed Dec 05, 2018 11:53 am
Forum: Personal Finance (Not Investing)
Topic: Reuqesting Help With Managing of Winnings
Replies: 37
Views: 3654

Re: Reuqesting Help With Managing of Winnings

One other question. I just had an accountant tell me that since I would be making such a large payment to the IRS now for 2018, that they may charge me interest because I did not make those payments through the course of the year. I obviously did not know I would need to make those payments until r...
by FinancialDave
Tue Dec 04, 2018 5:31 pm
Forum: Personal Finance (Not Investing)
Topic: IRMAA Avoidance Strategies
Replies: 20
Views: 1668

Re: IRMAA Avoidance Strategies

Repositioning to low dividend stock funds doesn't seem very practical. Most people by the time they are 2 yrs from Medicare, in the recent period of good stock market, have big capital gains in existing funds in taxable that would make it prohibitive to sell stock funds just to reduce current incom...
by FinancialDave
Tue Dec 04, 2018 2:13 pm
Forum: Personal Finance (Not Investing)
Topic: IRMAA Avoidance Strategies
Replies: 20
Views: 1668

Re: IRMAA Avoidance Strategies

As a number of posters have mentioned there is a range of possibilities that you should be able to see where you should avoid worrying about the IRMAA and just save the thousands in taxes, but the point of this excercise is to show if you focus on just "living off the income" you won't likely do ei...
by FinancialDave
Tue Dec 04, 2018 12:20 pm
Forum: Personal Finance (Not Investing)
Topic: IRMAA Avoidance Strategies
Replies: 20
Views: 1668

Re: IRMAA Avoidance Strategies

Total return is the yardstick of really what will happen to your portfolio, but total return comes in all forms of "income" + "capital appreciation" and LTCG affects your AGI differently than income (in the form of interest or dividends). Dave I guess I get what you are saying, but let me try to re...
by FinancialDave
Tue Dec 04, 2018 11:05 am
Forum: Personal Finance (Not Investing)
Topic: IRMAA Avoidance Strategies
Replies: 20
Views: 1668

Re: IRMAA Avoidance Strategies

andypanda wrote:
Mon Dec 03, 2018 6:23 pm
I made a lot of money in 2017. I just received my notice that my Medicare premium will be $428-whatever per month during 2019.

I did the only thing I could do... I got married last month. :sharebeer
Congrats on that!

:sharebeer
by FinancialDave
Mon Dec 03, 2018 4:58 pm
Forum: Personal Finance (Not Investing)
Topic: IRMAA Avoidance Strategies
Replies: 20
Views: 1668

Re: IRMAA Avoidance Strategies

strategies that possibly produce less taxable income in retirement for the same investment risk. Let me take the second question first as it's easier. And I didn't get the comment about those who "live off dividends". Are you saying that instead of VTI they probably would be invested in dividend fo...
by FinancialDave
Mon Dec 03, 2018 1:24 pm
Forum: Personal Finance (Not Investing)
Topic: Rent v. buy in NYC
Replies: 34
Views: 3510

Re: Rent v. buy in NYC

I agree. Rent is not "throwing money away" completely. Buying is not either "saving and investing money for long term" always. You can use this calculator to decide what works best for you: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html Keep in mind that these calculators ...
by FinancialDave
Mon Dec 03, 2018 12:55 pm
Forum: Personal Finance (Not Investing)
Topic: IRMAA Avoidance Strategies
Replies: 20
Views: 1668

IRMAA Avoidance Strategies

I see a number of articles such as this one for people trying to avoid the IRMAA cliff in any particular year: https://www.bogleheads.org/forum/viewtopic.php?t=252912 I see little on strategies that would reduce the IRMAA permanently. Now I'm not talking about buying "losers" in a portfolio just to ...
by FinancialDave
Mon Nov 05, 2018 11:40 am
Forum: Investing - Theory, News & General
Topic: Do people calculate savings rate on gross income?
Replies: 118
Views: 7475

Re: Do people calculate savings rate on gross income?

gross makes more sense. too many variables that change you to net. Agree, biggest variable being 401k tax-deferred deductions wouldn't even show up on the radar. Also when you make a 401k deduction selection it is usually expressed in a percentage of your GROSS salary. Pretty simple math. Dave
by FinancialDave
Sat Nov 03, 2018 2:44 pm
Forum: Investing - Theory, News & General
Topic: Dangers of VTSAX? (Unrealized Appreciation)
Replies: 26
Views: 4726

Re: Dangers of VTSAX? (Unrealized Appreciation)

Going from a hazy memory here..I think it was around the year 2000 when Fidelity Magellan had huge capital gains distributions. Seems like it was around $25/shr or perhaps 25%/ shr. So I poked around with google and was unable to substantiate this but found something more shocking...94% for another...
by FinancialDave
Fri Nov 02, 2018 2:11 pm
Forum: Investing - Theory, News & General
Topic: Dangers of VTSAX? (Unrealized Appreciation)
Replies: 26
Views: 4726

Re: Dangers of VTSAX? (Unrealized Appreciation)

Silverado, What if I (little individual investor) come and buy $50,000 worth at the same time. I am buy and hold. Wouldn't those realized gains caused by the big investors selling then also have to be distributed to me? I don't understand why they would as all the "realized gains" have been distribu...
by FinancialDave
Fri Nov 02, 2018 2:48 am
Forum: Investing - Theory, News & General
Topic: Dangers of VTSAX? (Unrealized Appreciation)
Replies: 26
Views: 4726

Re: Dangers of VTSAX? (Unrealized Appreciation)

David, This is not correct. The fund must sell $1B in stocks, causing some of the gain to be realized; the remaining investor would pay tax on the realized gain. It probably wouldn't be half the value since stocks had been bought at different prices. I'm not sure we are communicating. Let me make th...
by FinancialDave
Thu Nov 01, 2018 12:50 pm
Forum: Investing - Theory, News & General
Topic: Dangers of VTSAX? (Unrealized Appreciation)
Replies: 26
Views: 4726

Re: Dangers of VTSAX? (Unrealized Appreciation)

Another puzzliing comment comes from the WSJ article you link in which they claim that mutual fund companies are forced by law to distribute the majority of any capital gains following directly the year in which they were generated. So once again where does this 40% number come from. Certainly the ...
by FinancialDave
Wed Oct 31, 2018 8:04 pm
Forum: Investing - Theory, News & General
Topic: Dangers of VTSAX? (Unrealized Appreciation)
Replies: 26
Views: 4726

Re: Dangers of VTSAX? (Unrealized Appreciation)

(Disclaimer: I am not attacking VTSAX. It is a wonderful fund that I personally own. I am simply seeking to understand.) Does anyone else think about the possibility of a major capital gains distribution from the unrealized appreciation in VTSAX (or other Vanguard index funds)? According Vanguard's...
by FinancialDave
Tue Jul 31, 2018 1:15 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

My intention in that example was to illustrate the potential benefits for a current-year withdrawal need, no more. In that case, flexibility and tax bracket have a very limited context -- and historical tax brackets don't apply anymore. Extremely rough numbers, with the classic $40K withdrawal from...
by FinancialDave
Tue Jul 31, 2018 11:30 am
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

The problem is you aren't comparing apples to apples. My assumption was you wanted to compare leaving the money in the IRA to converting it to a Roth and letting it grow there. If your only solution is you have to pull it out vs convert it to Roth then yes, taxable will tie or be slightly less than...
by FinancialDave
Mon Jul 30, 2018 6:26 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

I think I must be missing something here, because unless you are assuming some different tax rates for conversion vs withdrawal, you will not gain a nickel or lose a nickel on your idea. This is the most basic of concepts -- "flat tax" with no deductions makes a Roth completely useless except as an...
by FinancialDave
Mon Jul 30, 2018 12:45 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

Any TIRA withdrawal could also be done as a Roth Conversion, followed by a Roth withdrawal. Unless you're withdrawing an entire year's worth of money at one shot (i.e., immediately putting it in a taxable cash account), the conversion will allow tax-free growth, but the TIRA withdrawal will generat...
by FinancialDave
Mon Jul 30, 2018 12:29 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

There's an important insight here, but I think Dave is wrong about the past tax cost being relevant. What's important here is analyzing the effect of a withdrawal strategy on the entire tax life cycle of the investor. I totally agree with what you are saying in regard with the aspect that the more ...
by FinancialDave
Sun Jul 29, 2018 2:08 am
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

Fivek, I think a lot of people's heads are hurting with all the back and forth and I don't seem to be making much progress as a good communicator. I will say the way I learn most is by doing and as much as you think i-orp some how is going to fail you it may be your next best bet to some hands on le...
by FinancialDave
Sat Jul 28, 2018 4:01 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

The independent variables...are...: 1. Roth balance (tax-free dollars) 2. IRA Balance (pre-tax dollars) If those are truly independent variables, what model constraints prevent one from choosing - 100% Roth - as large a balance as one desires? For a pure retirement calculation - "nothing at all." Y...
by FinancialDave
Sat Jul 28, 2018 3:23 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

@ trueblue, The above is actually a more thorough discussion of the inputs and outputs taken from my article, but the article tabulates the results for the 9 cases that I mentioned here. Though I haven't tested all 9 cases with i-orp, the few that I have seem to confirm a similar story, but i-orp (o...
by FinancialDave
Sat Jul 28, 2018 12:06 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

FiveK, I can assure you no "properties of math" are violated in my spreadsheet. The independent variables to " just " the retirement simulation are the following, just so there is no confusion: 1. Roth balance (tax-free dollars) 2. IRA Balance (pre-tax dollars) 3. Retirement Funds Growth Rate (the s...
by FinancialDave
Fri Jul 27, 2018 2:26 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

But not if, for example, instead of "for $1 million saved pre-tax is 97.5% in the tIRA" there is only 50% in the tIRA. In the three cases I studied - 12%, 18%, & 25%, the only one where the Roth wins is when the average tax cost of the Roth was 12% and thus they can survive by going 100% Roth from ...
by FinancialDave
Fri Jul 27, 2018 1:50 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

I-orp does not handle SS benefit taxation correctly, if the SS benefits are taxed at less than 85%. Probably not a good idea to use i-orp as justification in areas where it has known deficiencies. It's a "don't care" in all the examples I suggested because the SS will be taxed fully at 85% of its v...
by FinancialDave
Fri Jul 27, 2018 11:37 am
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

I-orp does not handle SS benefit taxation correctly, if the SS benefits are taxed at less than 85%. Probably not a good idea to use i-orp as justification in areas where it has known deficiencies. It's a "don't care" in all the examples I suggested because the SS will be taxed fully at 85% of its v...
by FinancialDave
Thu Jul 26, 2018 3:24 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

Great discussion by all. I have been going through this analysis for my situation and this has been helpful, however, I still don't know if it makes sense for me our not. I will be able to convert up to $50,000 within the 22% bracket and because of the 20% pass through deduction I will only have to...
by FinancialDave
Thu Jul 26, 2018 3:00 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

In other words consider the person who saved $1 million at a "saved marginal" rate of 25%, vs the person who saved a $1 million at a "saved marginal" rate of 33%. Say they have no Roth funds. If their income need in retirement is exactly the same - let's call it $100k a year with $40k SS filling pa...
by FinancialDave
Thu Jul 26, 2018 1:45 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

Difficult to estimate though it may be, it is the actual marginal rate paid at withdrawal vs. the marginal rate saved at contribution that determines whether a given traditional contribution was "correct". And sometimes one needs to be suboptimal on some contributions to reach a global optimum. E.g...
by FinancialDave
Thu Jul 26, 2018 1:28 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

Seems we still haven't nailed down whether we are talking about "ever" or "from this time forward". Because one can't change the past, decisions one can make "from this time forward" (based at least in part on the current situation that past decisions have influenced) is the useful discussion - agr...
by FinancialDave
Thu Jul 26, 2018 1:04 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

jalbert wrote:
Thu Jul 26, 2018 10:49 am


A Warren Buffett quote: "The longer you can defer paying a tax, the greater the chance you may never have to pay it."

This suggests erring on the side of less Roth funds, not more, when there is significant uncertainty about the decision.
Amen to that!

Dave
by FinancialDave
Thu Jul 26, 2018 11:29 am
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

...if you just believe the Wiki and you thought your tax rate would be higher in retirement you would put ALL your retirement money in the Roth - absolutely the wrong thing to do.... If one thought incorrectly, then yes it would be the wrong thing to do. But if one is correct, then it is the right ...
by FinancialDave
Wed Jul 25, 2018 8:27 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

Many tax items are indexed to inflation, but taxation on SS is not. This is an important consideration for many in retirement. In the cases we are talking about here (higher income) 85% of SS will be taxed as ordinary income. The tax brackets they are taxed in have absolutely been indexed to inflat...
by FinancialDave
Wed Jul 25, 2018 8:22 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

It doesn’t seem too difficult to get your retirement tax bracket above that once RMDs start. Especially after the first spouse dies and the second is forced into the single tax brackets... Yeah, that single tax bracket is a killer. That's why we are converting into the 22% bracket. Survivor will de...
by FinancialDave
Wed Jul 25, 2018 8:06 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

Let me state it a different way. When all is said and done the optimal Roth / tIRA choice.... ... Your marginal rate tells you if you need any Roth at all, your effective tax from these accounts tells you how much. ... The current size of your Roth / traditional funds is technically what determines...
by FinancialDave
Wed Jul 25, 2018 7:03 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

I think you missed my point - if you have at least 5% of your savings going toward the Roth (95% IRA / 5% Roth) then your retirement tax bracket never goes above 12%, because you spend down the Roth money only when necessary. I’m missing something here when you say “never” goes above 12%. It doesn’...
by FinancialDave
Wed Jul 25, 2018 6:08 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

I think you missed my point - if you have at least 5% of your savings going toward the Roth (95% IRA / 5% Roth) then your retirement tax bracket never goes above 12%, because you spend down the Roth money only when necessary. I’m missing something here when you say “never” goes above 12%. It doesn’...
by FinancialDave
Wed Jul 25, 2018 4:38 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

Perhaps you have another constraint in mind? For example, someone with $1.9 million in traditional and $100K in Roth is definitely in the 22% bracket with a 4% withdrawal rate. Unless of course the withdrawal is $80K from the Roth, but that merely postpones the inevitable. ;) The relevance question...
by FinancialDave
Wed Jul 25, 2018 2:52 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

FinancialDave - I have done much reading and running numbers in i-orp and other calculators regarding Roth conversions. I think my conclusion jives with what you are saying. My conclusion was that for the individual considering the conversions, Roth conversions don't really have a significant impac...
by FinancialDave
Wed Jul 25, 2018 2:36 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

4. Finally, as alluded to above, during your working years the measuring stick is your marginal tax rate but during retirement that measuring stick is the "effective tax rate" of the income need that is being pulled from the tax-deferred funds. Let's say someone can save 12% marginal now and expect...
by FinancialDave
Wed Jul 25, 2018 2:22 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

Also note, as the tax law is currently written, we go back to the old brackets in 2025. The 22% bracket today becomes 25% in 7 years -- making conversions up to the top of the 24% bracket potentially of value. The same concept applies for the other brackets. Ya, there were a lot of really smart peo...
by FinancialDave
Wed Jul 25, 2018 2:18 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

I am not exactly sure what you are saying as your Federal marginal tax rates have little to do with the Washington State Estate tax rates. I didn't say they did. If you own a TIRA, a portion of that TIRA is effectively owned by the IRS -- they will get their money when you withdraw it, or when your...
by FinancialDave
Wed Jul 25, 2018 11:34 am
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

The discussion around marginal rates assumes that there are no other taxes potentially due. In a state like the one I live in, there are also estate taxes to consider. If I convert to below the threshold, my heirs pay no estate taxes -- and those taxes would apply for both my death and my wife's de...
by FinancialDave
Wed Jul 25, 2018 10:54 am
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

Paying taxes for conversions was the only way I would have done a conversion. I recognized and have written about how there is a small advantage of decreasing ongoing tax drag on my taxable account which is lowered slightly by paying the taxes at the time of conversion. I don't think my taxable acc...
by FinancialDave
Wed Jul 25, 2018 10:35 am
Forum: Investing - Theory, News & General
Topic: Vanguard Paper on Roth Conversion Analysis
Replies: 123
Views: 9847

Re: Vanguard Paper on Roth Conversion Analysis

4. Finally, as alluded to above, during your working years the measuring stick is your marginal tax rate but during retirement that measuring stick is the "effective tax rate" of the income need that is being pulled from the tax-deferred funds. Let's say someone can save 12% marginal now and expect...