Search found 63 matches
- Sat Mar 17, 2018 12:55 pm
- Forum: Personal Investments
- Topic: Splitting Vanguard Accounts?
- Replies: 1
- Views: 489
Splitting Vanguard Accounts?
I have a newborn. I'd like to "hive off" $200k of my current Vanguard account into a "college fund" account. This account would be invested precisely the same as the current account, i.e., I wouldn't be switching funds or anything--which is the key issue, I don't want to reduce this to cash, I just want to move X shares of my Vanguard S&P 500 Index Fund to a separate account. I want to do this because I think that hiving it off into a separate account will be mentally helpful. (Among other things, I am pretty firmly of the view that this $200k is no longer "my money" and, absent some kind of total personal finance catastrophe, I want it out of my asset list in terms of retirement planning, etc.) Anyone know...
- Fri Mar 03, 2017 11:20 am
- Forum: Personal Finance (Not Investing)
- Topic: Student loan debt - vanquished!
- Replies: 19
- Views: 2625
Re: Student loan debt - vanquished!
Congratulations! When I graduated in 2011/2012, I had about $150-$160k (I honestly can't remember now). I worked a lower-paid gig my first year out (and then got a significant pay bump for my second and subsequent years). Made the last payment using my 2014 bonus check. So, not as good as you. That's really impressive.
I've had greater moments in my life--like meeting my wife, my wedding day, and the day I got hired for the job that made the payoff possible--but making that payment is still really high on the list. It's impossible to overstate how much incremental freedom it buys you.
I've had greater moments in my life--like meeting my wife, my wedding day, and the day I got hired for the job that made the payoff possible--but making that payment is still really high on the list. It's impossible to overstate how much incremental freedom it buys you.
- Mon Feb 27, 2017 5:02 pm
- Forum: Personal Finance (Not Investing)
- Topic: Tracking progress to $1M portfolio and no mortgage by 40
- Replies: 121
- Views: 36208
Re: Tracking progress to $1M portfolio and no mortgage by 40
Similar goals to mine, though you're way ahead of me. 400k in investments (not including HSAs) and a $480k mortgage at 2.65%, only one income, early 30s. No kids yet, but we're "in the process," so hoping that changes. $1M/no mortgage is definitely a real, real stretch and it would take pretty impressive financial returns and no small amount of luck for it to happen, but it's in the realm of possibility.
- Sun Feb 26, 2017 12:54 pm
- Forum: Personal Finance (Not Investing)
- Topic: Student Debt
- Replies: 26
- Views: 3758
Re: Student Debt
When I was new to biglaw, I had about $150k of student loans, many of which are at the 8% grad plus level. I did the following: First, max out the tax-beneficial investment accounts: 401(k), HSA, Backdoor Roth IRA. Second, put 100% of every penny I could find into paying off my loans. Managed to get them all paid off during my third year of practice (if you count the third year bonus, which is what put me over the top). (I had a clerkship year, so I had one lower-income year in there, partially offset by the clerkship bonus.) I finally paid off my loans the year SOFI really went mainstream, so I never had the opportunity to refinance. That said, I think I would have followed the exact same path if SOFI had been available. You should definit...
- Sat Feb 25, 2017 4:19 pm
- Forum: Personal Finance (Not Investing)
- Topic: Windfall and Student Loan Pay-off/Pay-down Plan
- Replies: 42
- Views: 5623
Re: Windfall and Student Loan Pay-off/Pay-down Plan
Pay off the student loans. Risk-free 6.55% return, plus, freedom from student debt has a kind of psychic benefit that can't be underestimated. I lost a ton of money by paying off my $150k of student loans as quickly as I could in the 2011-2014 time period, and although I regret it in the abstract ("I could have had another $50-100k"), I have never actually actually regretted it.
- Sat Feb 25, 2017 3:38 pm
- Forum: Personal Finance (Not Investing)
- Topic: Purchasing a new house -- Are we being stupid to consider it?
- Replies: 35
- Views: 6087
Re: Purchasing a new house -- Are we being stupid to consider it?
Appreciate the OP has come around, but just to throw in, my spouse and I just bought a $640k house last year with a 20% downpayment. We don't like having such a huge mortgage, and I make over $300k a year, and we don't have a kid.
This? Yes, this would be a stupid, reckless purchase. I'm glad you have decided against it!
This? Yes, this would be a stupid, reckless purchase. I'm glad you have decided against it!
- Thu Feb 12, 2015 7:59 am
- Forum: Investing - Theory, News & General
- Topic: What is your "margin investing" threshold?
- Replies: 13
- Views: 2441
What is your "margin investing" threshold?
This article made me think through my thoughts on margin investing/whether, in hindsight, I actually regret having paid off my ~$170k of student loans at ~6% interest from 2011 - 2013. http://money.cnn.com/2014/12/11/investing/dont-pay-off-your-student-loans/index.html?iid=obinsite As for the original article: There is nothing earth shattering there. He essentially invested on leverage, but rather than borrowing new money to invest with, he chose to forgo repaying a loan. It's the exact same thing anyone does when they invest rather than pay off a house more quickly. It's an incredibly easy calculation: cost of leverage vs. your investing returns and your risk tolerance. Obviously every single person who has paid a penny on non-CC debt over...
- Thu Jan 08, 2015 10:23 am
- Forum: Personal Investments
- Topic: Is Roth 401k better even if future tax bracket is lower?
- Replies: 35
- Views: 5999
Re: Is Roth 401k better even if future tax bracket is lower?
That's why people say that if you can max out the Roth 401(k), then you are effectively saving more money in the account: you're saving the full $18k vs. a tax-adjusted ($18k x tax rate at retirement). But there is also the money saved by deferring taxes, which can be invested in an IRA or in a taxable account. This results in only a slight advantage to the Roth when maxing out contributions, perhaps a few percent. Therefore, if the average tax on contributions is more than a few percent more than the average tax on withdrawals, it is still better to use the Traditional account. Yes, with the added benefit of potential tax loss harvesting in the investment account which, arguably, could tilt things more in favor toward traditional 401(k). ...
- Thu Jan 08, 2015 9:49 am
- Forum: Personal Investments
- Topic: Is Roth 401k better even if future tax bracket is lower?
- Replies: 35
- Views: 5999
Re: Is Roth 401k better even if future tax bracket is lower?
Unless you have access to the "mega backdoor Roth IRA" concept, you cannot contribute past a single 18k (+ catchup, if applicable) "max" per year. This doesn't account for employer contributions and the like. That's why people say that if you can max out the Roth 401(k), then you are effectively saving more money in the account: you're saving the full $18k vs. a tax-adjusted ($18k x tax rate at retirement).KlangFool wrote:Folks,
I contribute to the max 24K on the Traditional 401K. And, 2 X Roth IRA of 6.5K each. Does that mean I cannot contribute to Roth 401K?? Or, I can contribute another 24K to the Roth 401K??
Thanks.
KlangFool
- Thu Jan 08, 2015 9:19 am
- Forum: Personal Investments
- Topic: Is Roth 401k better even if future tax bracket is lower?
- Replies: 35
- Views: 5999
Re: Is Roth 401k better even if future tax bracket is lower?
I struggle with this. 33% rate today (38% once you include state, but state is flat tax). Would max out the 401(k) either way. I have a reasonably strong belief that tax rates in general are going to be higher in the future--in the absolute best case scenario, they may stay around the same as they are today. My own income will be significantly lower than it is today (indeed, I likely have the highest paying job today that I will ever have, and expect to take a significant hit within 2-3 years, though there are scenarios in which that won't happen). These considerations have led me to stay the course on a traditional 401(k). My tax position is hedged somewhat by doing max backdoor Roth IRAs every year. A big driver is short/medium-term consu...
- Sun Jan 04, 2015 9:42 pm
- Forum: Personal Finance (Not Investing)
- Topic: Financ[ing] My Son's Law School
- Replies: 65
- Views: 7274
Re: Finance My Son's Law School
A couple of clarifying points for discussion / ideas: 1. This is not a ROI calculation. When he graduates, if he makes a million or if he does pro-bono work in east LA helping undocumented immigrants I will be equally proud. What is most important is that he does what he has a passion for and loves. This is what he has chosen and loves. If it were purely a ROI calculation I would have advised him to skip college altogether and become a skilled tradesman - electrician or plumber come to mind. 2. For those who talk of the "big" law schools - a lot of that is from the Northeast perspective. Law school seems very regional and the vast majority of lawyers employed in a state like Ohio, Wisconsin, Michigan went to schools in those stat...
- Sun Jan 04, 2015 6:18 pm
- Forum: Personal Finance (Not Investing)
- Topic: Almost made it! From $ -530k net worth to $-9k this yr
- Replies: 36
- Views: 8660
Re: Almost made it! From $ -530k net worth to $-9k this yr
That it is. I read the MMM blog and have determined that I'm just not cut out for it. At all. This is that on steroids.GenXer wrote:This is every bit as impressive as the growth in net worth.Our family of six has lived in a 500 square foot dry cabin with total expenses of ~$500 per month. But then, we were paid more than that by the state.
- Sun Jan 04, 2015 6:08 pm
- Forum: Personal Finance (Not Investing)
- Topic: Financ[ing] My Son's Law School
- Replies: 65
- Views: 7274
Re: Finance My Son's Law School
nothing wrong with paying for a child's education. I plan on paying for my children's. However, i do feel that one loses very little by asking them to take out some loans, and then being a benevolent person after school and helping them to pay it off. You lose a few % points on interest, but you gain a huge benefit of them being more adjusted to their peers - who are probably taking out loans. And they gain the lesson of being a player in the game with responsibility. And you can still pay it off afterwards. Whatever you do, there are far worse things you can spend on, besides a child's education, so nothing wrong with going for it. I expect to leave my kids some inheritance, so whether one spends the money on graduate school up front, or ...
- Sun Jan 04, 2015 6:01 pm
- Forum: Personal Finance (Not Investing)
- Topic: Financ[ing] My Son's Law School
- Replies: 65
- Views: 7274
Re: Finance My Son's Law School
And here I am, posting without reading. My apologies (and I've edited the previous post).livesoft wrote:Note to readers: My daughter does not work for BigLaw. She is an engineer with a decent salary.
- Sun Jan 04, 2015 5:50 pm
- Forum: Personal Finance (Not Investing)
- Topic: Financ[ing] My Son's Law School
- Replies: 65
- Views: 7274
Re: Finance My Son's Law School
Just curious: What happens if she defaults on her repayment to livesoft corp? Will the repercussions be the same as if she had private or governmental loans? This is a sore point. There is a penalty of $50 a day for late payments. The first payment is due in February. Right now she has $2.06 in ALL her bank accounts, no credit card, and her first paycheck is about 2 weeks away. I had given her money to put in her emergency fund and suggested that she make sure it stayed above the level of the first loan payment. But she spent it at a local bar over the next few weeks. So it will be interesting to see what happens. Does she beg enough that her parents cave in? Does she dumpster-dive for food? Do her friends loan her money? We shall see. Fol...
- Sun Jan 04, 2015 5:39 pm
- Forum: Personal Finance (Not Investing)
- Topic: Financ[ing] My Son's Law School
- Replies: 65
- Views: 7274
Re: Finance My Son's Law School
^^^^^ Very mature. You can not be a financing arm for your ADULT children's activities. Can I ask you how much she is making as a starting associate in NYC? Starting pay at the large lockstep NYC firms (and certain other large markets) is $160k for the "stub year" and first full year, plus a bonus (sometimes with a stub year bonus, sometimes not). Standard bonus for a first year this year in these large firms was $15k, which was 2x the standard for recent years. Raises are lockstep after that: $170k + bonus (standard was $25k this year), $185k plus bonus (standard was $50k this year), $210k plus bonus (standard was 65k this year), etc. "Up or out" model: if you're not good enough for the raise, you're fired. Some firms ...
- Sun Jan 04, 2015 5:12 pm
- Forum: Personal Finance (Not Investing)
- Topic: Financ[ing] My Son's Law School
- Replies: 65
- Views: 7274
Re: Finance My Son's Law School
Folks: Student loans are not interest-free until graduation. Only subsidized staffords are interest-free until you enter repayment. Everything else--which will compose the substantial majority (or potentially all) of the loans here, will accumulate interest. It will not be capitalized until you enter repayment, but it will still be owed. That dramatically changes the calculus between HELOC and student loans. Given the poster's follow-up post (wants son to be debt-free out of the box, so 10-year forgiveness is out, and decision to finance for son has been made), and taking those points as they are, there is absolutely no debate here. The HELOC is the better choice if the OP doesn't want to pay cash. Thank you, that was the point I was looki...
- Sun Jan 04, 2015 2:35 pm
- Forum: Personal Finance (Not Investing)
- Topic: Financ[ing] My Son's Law School
- Replies: 65
- Views: 7274
Re: Finance My Son's Law School
Folks: Student loans are not interest-free until graduation. Only subsidized staffords are interest-free until you enter repayment. Everything else--which will compose the substantial majority (or potentially all) of the loans here, will accumulate interest. It will not be capitalized until you enter repayment, but it will still be owed. That dramatically changes the calculus between HELOC and student loans. Given the poster's follow-up post (wants son to be debt-free out of the box, so 10-year forgiveness is out, and decision to finance for son has been made), and taking those points as they are, there is absolutely no debate here. The HELOC is the better choice if the OP doesn't want to pay cash.
- Sun Jan 04, 2015 9:38 am
- Forum: Personal Finance (Not Investing)
- Topic: Financ[ing] My Son's Law School
- Replies: 65
- Views: 7274
Re: Finance My Son's Law School
TS, 1) You take out 30 years mortgage to finance you son's law degree. 2) After your son graduated, he decided not to be a lawyer or take a low paying job from a non-profit. 3) Will you be okay with that?? He needs the MOTIVATION and RESPONSIBILITY that come with the student loan. I am sorry to tell you that we had seen so many cases where the parents financed the student education fully with their retirement money and the student turned out badly. KlangFool I forgot to mention this point before: a big advantage to student loans instead of the HELOC is the 10-year forgiveness for certain non-profit/public interest/government jobs. It does provide some freedom in job selection, though once you start on that path, you're basically locked in ...
- Sun Jan 04, 2015 9:19 am
- Forum: Personal Finance (Not Investing)
- Topic: Financ[ing] My Son's Law School
- Replies: 65
- Views: 7274
Re: Finance My Son's Law School
Slightly off topic, but I feel compelled to throw this in as a reasonably recent law school graduate: Your son needs to take a really long, critical look at whether that is an investment that will pay off in the end. Apparently Ohio is one of those schools where you can obtain in-state tuition for years 2 and 3. But, as someone posted above, even in-state is almost $30k a year (given standard tuition increases, it probably will be $30k a year or more by the time your son is in years 2/3), just for tuition, with the first year being $43k or more. Plus living expenses (working while in law school, particularly during the first year, is an absolutely horrible idea given the dynamics of the grading curve). He obviously seems to be in something ...
- Sun Jan 04, 2015 7:32 am
- Forum: Personal Finance (Not Investing)
- Topic: PenFed CD rates up. 2% max.
- Replies: 29
- Views: 5877
Re: PenFed CD rates up. 2% max.
Ally has a 5-year 2% CD with 150 days' withdrawal penalty. As long as you keep the money in there for about 11 months, that works out to be a better rate than their savings account. Beats IBonds, too--at least at current pricing--unless you have a really high state income tax rate. The differences are, of course, marginal.
I promised SO that I would keep $65k in 100% safe investments/emergency fund. Already had $20k in IBonds from last year. Rather than putting another $20k in IBonds this year, I'm putting it into Ally's 5% CD, and keeping $20k in cash in Ally Savings (along with $5k in checking accounts).
I promised SO that I would keep $65k in 100% safe investments/emergency fund. Already had $20k in IBonds from last year. Rather than putting another $20k in IBonds this year, I'm putting it into Ally's 5% CD, and keeping $20k in cash in Ally Savings (along with $5k in checking accounts).
- Wed Dec 31, 2014 11:12 am
- Forum: Personal Finance (Not Investing)
- Topic: What are your Financial New Year's Resolutions?
- Replies: 44
- Views: 5155
Re: What are your Financial New Year's Resolutions?
Going to try very hard to cut back on discretionary spending. Overall, we spent about $48k last year, all-in, plus another ~$1.5k of our hotel points. Of that amount, ~$19k was housing costs and utilities (including phone) that we won't be able to reduce (and will go up some next year), $6k (plus the hotel points) was travel (a $5k vacation and the rest was holiday travel). The rest, so about $24k, was "everything else." We could obviously cut $5k easily by not taking a vacation (or taking a much cheaper one), but that is one indulgence I'm not going to eliminate ($2k is already out the door on that for a spouse-only trip). Not bad on ~$250k of gross income, but we need to do better, especially since I expect gross income to eithe...
- Mon Dec 29, 2014 4:57 pm
- Forum: Personal Finance (Not Investing)
- Topic: Engaged - marriage penalty & other practical concerns
- Replies: 50
- Views: 7163
Re: Engaged - marriage penalty & other practical concerns
I just ran some numbers on my income numbers and my fiance's. It looks like we are on the otherside, we will actually get a marriage "bonus". This is the standard situation. Almost all married couples get a "marriage bonus". The so-called "marriage penalty" is an extreme rarity . Probably not so rare among Bogleheads where annual earnings tend to be much higher than the average American. Put two such people together and you end up with a marriage penalty situation. I'm pleased that so far no responses have attacked the OP or said his relationship is doomed. OP, I have never heard of anybody going through the marriage ceremony but not officially getting married according to the State, but it's an interesting id...
- Mon Dec 29, 2014 4:53 pm
- Forum: Personal Finance (Not Investing)
- Topic: Engaged - marriage penalty & other practical concerns
- Replies: 50
- Views: 7163
Re: Engaged - marriage penalty & other practical concerns
My SO and I receive a significant marriage bonus now (I am high income, SO is a student). Once SO graduates, we will be into penalty territory if I don't downgrade jobs (very uncertain). Note that the marriage penalty is NOT simply an old artifact. E.g., ACA-related taxes, which kick in at $200k for individuals and $ 250k for couples. Price to pay. The divorce that would probably result from suggesting a tax divorce would be more expensive (half-joking)! Some ruthlessly-money-oriented folks do the math and decide not to marry (or to 'tax divorce'). I think of this similarly as I think of prenups, though prenups are far, far more accepted in the mainstream. My SO and I will (and did) pass on both. Til death do we part and all of that. But th...
- Sun Dec 14, 2014 11:14 am
- Forum: Personal Investments
- Topic: Help with uninvested cash with large looming expenses
- Replies: 2
- Views: 548
Help with uninvested cash with large looming expenses
I've posted before about a similar topic, but some changed factual circumstances and higher-than-expected cash flow has me sitting on cash that isn't being put to work. Trying to determine if there's a useful way to fix that situation given my overall circumstances. Age: Early 30s. Income: ~$200k Marginal Tax Rate: ~40% (federal + 5% state) Cash on hand (projected as of Jan 1): ~$47k (anticipating about $7k in taxes, so this is really about ~$40k) Currently rent an apartment. No debt. Invested Assets (projected as of Jan 1): Total: ~$140k Overall allocation including IBonds: ~32% Bonds, ~12% International Stock, ~56% US Stock (This is too conservative for my taste, but the IBonds, in my mind, are essentially uninvested cash once the one-yea...
- Sat Dec 13, 2014 1:53 pm
- Forum: Personal Finance (Not Investing)
- Topic: Debt payoff scheme
- Replies: 11
- Views: 1581
Re: Debt payoff scheme
I have a 3% fixed loan that I once told myself I would never pay off early, given the low rate. The other day I considered again buying some EE bonds for the 20-year feature where they double in value, earning an effective PRE-tax 3.5%, which I get ONLY if I wait 20 year. Wait, what? Why wouldn't I just pay down my loan, which is a much better deal?!? [To be fair, I am trying to slowing increase my liquid investments, so the EE bonds or other safe investments are still being considered vs paying down the loan.] An EE bond should not be treated as liquid; yes, you can cash it in after one year, but you'll lose the 3.5% interest accrued, which is a huge cost. I bonds (three-month penalty after one year, no penalty after five years), TIPS, or...
- Fri Dec 05, 2014 9:04 am
- Forum: Personal Finance (Not Investing)
- Topic: Share your net worth progression
- Replies: 4288
- Views: 1082026
Re: Share your networth progression
early 2000s (life ins policy from deceased parent while I was in HS): $100k mid-2000s (finished ug): -$10k (that's what happens when you give a poor kid a pile of money and no guidance--I went to a state school, that's not what drained the cash) 2011: -$200k (finished professional school after working for a bit over a year inbetween) now: ~$160k, depending on how this year's bonus shakes out and with a 40% downward tax adjustment on the traditional 401k, about $70k in retirement accounts and $90k in cash/Ibonds. I got terrified around 2009 when I realized (1) just how much debt I was going to have when I finished school and (2) how awful the job market was, as a general matter, particularly in my area. I got lucky and beat the job odds, and...
- Tue Dec 02, 2014 7:25 pm
- Forum: Personal Finance (Not Investing)
- Topic: Do you celebrate financial milestones?
- Replies: 124
- Views: 20788
Re: Do you celebrate financial milestones?
My parents were rather poor, though I received life insurance proceeds of $100k when my mother passed when I was still in high school. That money, of course, was all spent by the time I finished undergrad--along with about $10k of loans, at a state school no less!--because I was a teenager who grew up poor and suddenly had $100k sitting in a bank account with no one to guide the spending. By the time I finished all of my post-undergrad schooling, I was sitting at $200k in debt. I celebrated getting a job, which was no small break; I celebrated paying off my student loan debt within 3 years of finishing school; and I did quite a double-take when I realized that my cash + tax-adjusted retirement assets had finally pushed over the $100k mark t...
- Sat Nov 15, 2014 12:16 pm
- Forum: Personal Finance (Not Investing)
- Topic: Landlord wants us to sign an entirely new contract!
- Replies: 51
- Views: 12262
Re: Landlord wants us to sign an entirely new contract!
As others have said: You almost certainly can hold them to it. And they can hold you to it by refusing to renew your lease when it comes up and by going after every penny of the security deposit, looking for any technical violation of the lease, exercising every right they have to use your unit as a showroom within X months of moving out, etc. That comes with its own calculation for them--how long will it take them to relet, potential reputation damages, etc--but you don't know how that will go. I'd probably try to meet them halfway with a discount to the rent worth 50% of the cost of this stuff you're going to have to provide (would of course start those negotiations at a higher %) rather than trying to hold them to the contract outright, ...
- Fri Nov 14, 2014 5:17 pm
- Forum: Personal Finance (Not Investing)
- Topic: HDHP and Low Deductible Health Plan Coordination of Benefits
- Replies: 19
- Views: 9967
Re: HDHP and Low Deductible Health Plan Coordination of Bene
Not maxing out a HSA if you're on a HDHP is almost, but not quite, as demonstrably wrong as not contributing up to an employer match unless you are absolutely in a position where you cannot do the savings--which you shouldn't be, if you're above the 0% effective bracket for federal tax purposes.Jim_Holm wrote:Isn't $816 pretax equal to $530.4 post tax (816 *(1-0.35)) in the simple case? Also, you are are assuming that my wife would max out her HSA contributions for the year, which isn't necessarily true.
- Mon Oct 20, 2014 5:35 pm
- Forum: Personal Finance (Not Investing)
- Topic: Overpaying student loan
- Replies: 31
- Views: 6683
Re: Overpaying student loan
What you described is how my student loans work because the "extra" payment I make each month I do a few days after my automatic minimum payment. A few dollars of interest collect from the days between my automatic payment and when I make my manual extra payment . When I make my manual extra payment for say $300. The first $5 or so goes to those few 2 to 3 days of interest and the remaining $295 goes to the principal loan balance. If I set up my automatic payment to be more then the minimum due, I would not have this gap in time and all the "extra" would go to principal and all interest would just be in the next automatic payment. I prefer to make the extra payment manually so i can adjust it month to month based on my ...
- Mon Oct 20, 2014 5:09 pm
- Forum: Personal Finance (Not Investing)
- Topic: Overpaying student loan
- Replies: 31
- Views: 6683
Re: Overpaying student loan
You should be able to specify which of your multiple loans the payment goes to. So, if you have loans A, B, and C, with 100 principal and 50 interest outstanding on each, and want to make a 100 payment, you should be able to take out the 50 of interest and 50 of principal on one of the loans. I don't think you can direct that the full 100 be applied to the principal of any of the loans while interest is outstanding, though.
- Fri Sep 19, 2014 8:26 am
- Forum: Personal Finance (Not Investing)
- Topic: The Mega Backdoor Roth IRA
- Replies: 549
- Views: 245171
Re: The Mega Backdoor Roth IRA
No. See the paragraph "Annuity vs Separation from Service" in the link. Separate sub account distributions only apply to distributions NOT received as an annuity. "Received as an annuity" has its own definition as explained in the link. But if you are actually receiving these funds as an annuity, they are not even eligible for rollover and could not be rolled into a Roth IRA. What is the statutory authority for a separate after-tax shbaccount being excepted from the pro rata rules? I know that the statute provides that a designated Roth is treated as a separate contract/sub account. Is there somewhere that does a step by step walk through/explanation of the mega back door Roth that includes statutory/rule references? I ...
- Thu Sep 18, 2014 4:34 pm
- Forum: Personal Finance (Not Investing)
- Topic: IRS Relents! Notice 2014-54 permits Basis Isolation
- Replies: 116
- Views: 27445
Re: IRS Relents! Notice 2014-54 permits Basis Isolation
Does this actually prevent pro rata issues if you're not pulling the entire amount out of the account?
- Thu Sep 18, 2014 3:57 pm
- Forum: Personal Finance (Not Investing)
- Topic: The Mega Backdoor Roth IRA
- Replies: 549
- Views: 245171
Re: The Mega Backdoor Roth IRA
Tax attorney Kaye Thomas explains the separate sub account here: http://fairmark.com/retirement/roth-accounts/roth-conversions/isolating-basis-for-roth-conversion/separate-subaccount-treatment/ When the participant requests such a distribution, they should clearly ask that the distribution come from the sub account only and not be pro rated with the rest of the plan. This may or may not be automatic, so you need to be sure about the separate account treatment before you are blindsided with a 1099R showing a sizeable taxable amount. There is also an example in Pub 575, p 17 of this concept where the IRS acknowledges that the sub account distribution is not pro rated with the rest of the plan balance. Isn't this entire section speaking to an...
- Wed Sep 03, 2014 9:40 pm
- Forum: Personal Investments
- Topic: Saving for Down Payment
- Replies: 11
- Views: 2040
Re: Saving for Down Payment
This advice is painful to follow. I asked a similar question on these boards a month or two ago. At this point I have about $30k in cash just.. sitting around.. for a house I may or may not buy in 1-3 years (ignoring my ability to raid $20k of principal in a Roth IRA, if necessary). By the end of the year, I'll have $55-65k, and by the earliest possible time I'll need to buy a house--next summer--I'll have about $70k (after maxing Backdoor Roth IRA and Roth 401(k) contributions for the year). By the end of next year, I'll have over $100k in cash sitting around--ignoring my ability to redeem $10k of ibonds--unless one of the unquantifiable expenses rolls around. I'm in a weird place because I have unquantifiable expenses on two fronts: a lik...
- Tue Sep 02, 2014 9:26 am
- Forum: Personal Finance (Not Investing)
- Topic: The Mega Backdoor Roth IRA
- Replies: 549
- Views: 245171
Re: The Mega Backdoor Roth IRA
If you contribution to a traditional 401(k) rather than a Roth 401(k), how do the pro-rata rules work here (if at all)?
E.g., I have about $60k in my pre-tax 401(k). If I was able to convince my employer to add after-tax sub-account deposits, and I try to roll those into an IRA, would the same pro rata rules that ding Backdoor Roth IRAs ding the after-tax 401(k) rollover attempt?
E.g., I have about $60k in my pre-tax 401(k). If I was able to convince my employer to add after-tax sub-account deposits, and I try to roll those into an IRA, would the same pro rata rules that ding Backdoor Roth IRAs ding the after-tax 401(k) rollover attempt?
- Sat Aug 30, 2014 3:42 pm
- Forum: Personal Investments
- Topic: Should I bite the bullet and pay 50k in fees?
- Replies: 39
- Views: 6334
Re: Should I bite the bullet and pay 50k in fees?
Look at it this way: At least you were taken for a ride on a windfall rather than your own earnings over a long period of time, which is how many people learn the same lesson you're learning at the beginning of your financial life. Sucks, but the lesson was essentially "free" and will save you far more over the long haul!
- Fri Aug 29, 2014 4:30 pm
- Forum: Personal Finance (Not Investing)
- Topic: Does Your 401k Allow (Non-Roth) AFTER-TAX Contributions?
- Replies: 44
- Views: 13522
Re: Does Your 401k Allow (Non-Roth) AFTER-TAX Contributions?
Option not offered, sadly.
Edit: Not surprising, either. Law firm benefits are... not good. No match, either. And the monthly premiums for my $5,500 out of pocket per year HDHP, which doesn't cover my wife, is $200/month. Blech all around.
Edit: Not surprising, either. Law firm benefits are... not good. No match, either. And the monthly premiums for my $5,500 out of pocket per year HDHP, which doesn't cover my wife, is $200/month. Blech all around.
- Wed Aug 06, 2014 9:10 am
- Forum: Personal Finance (Not Investing)
- Topic: Marriage: Is it tax-friendly?
- Replies: 50
- Views: 5305
Re: Marriage: Is it tax-friendly?
Eh, all of the economics can be captured without getting married. Vast majority of people live together for at least some period of time before marrying anyway.The Wizard wrote:There may be economies for two well-paid working people living together even with the marriage tax penalty.
Both partners would need to be bogleheads to take advantage of this situation...
- Wed Aug 06, 2014 9:06 am
- Forum: Personal Finance (Not Investing)
- Topic: Marriage: Is it tax-friendly?
- Replies: 50
- Views: 5305
Re: Marriage: Is it tax-friendly?
I know at least one couple that jokes about getting divorced and remarried every year because of the marriage tax penalty. It's a significant issue when both people have higher incomes. I don't know of anyone who has allowed it to dissuade them from getting married, but then again, marriage is pretty rarely made through the lense of rational economic choices (see: not getting married by a justice of the peace in a courthouse, not signing a prenup where one makes sense, getting remarried when it costs people survivors' benefits or spousal/child support, yadda yadda yadda), and I'm sure there are, in fact, couples out there who have decided not to get married because of the tax hit.
- Tue Aug 05, 2014 8:59 am
- Forum: Personal Investments
- Topic: Advice for investing $2922/6mo in subsidized student loans?
- Replies: 10
- Views: 1046
Re: Advice for investing $2922/6mo in subsidized student loa
I would hold onto it to reduce loans in future semesters because of the loan origination fees that others have mentioned.
Edit: Note that it's technically illegal to use student loans for things other than education expenses and associated COL stuff. Impossible to trace, really, but still something to think about.
Edit: Note that it's technically illegal to use student loans for things other than education expenses and associated COL stuff. Impossible to trace, really, but still something to think about.
- Tue Aug 05, 2014 8:57 am
- Forum: Personal Investments
- Topic: HSA Strategy for high income earners
- Replies: 82
- Views: 13901
Re: HSA Strategy for high income earners
My wife: "Why on earth would we spend it now when we both know full well that you're going to be decrepit in 20 or 30 years?" Astute as always, and I think I'll listen!
- Sun Aug 03, 2014 2:42 pm
- Forum: Personal Investments
- Topic: Starting AA from Scratch: 24-years-old
- Replies: 8
- Views: 1107
Re: Starting AA from Scratch: 24-years-old
You are very fortunate to have such a running start!
Keep in mind that new loans aren't just about the interest rate--they have origination fees, too. Makes no sense to take out new loans for grad school, and there's no investment out there that justifies not repaying the loans you already have.
Keep in mind that new loans aren't just about the interest rate--they have origination fees, too. Makes no sense to take out new loans for grad school, and there's no investment out there that justifies not repaying the loans you already have.
- Sun Aug 03, 2014 8:41 am
- Forum: Personal Investments
- Topic: Investing with uncertain 1-3 year window
- Replies: 4
- Views: 854
Re: Investing with uncertain 1-3 year window
Thanks for the responses, everyone. Looks like a pillowcase is really where it's at.
kazper, appreciate your insights. We're having to be strategic about child timing because of my wife's career path. Academia in her field is still unfortunately--and very oddly--a realm where women can take a really serious ding on tenure review if they have a kid in the middle of the process. So, we're trying to have ours before she starts that track.
Plus, we're getting to the point that age does start to become an issue for her (she's the older of us). Not too comfortable pushing until 35/36, especially with the potential medical issues overlay and especially if we go nuts and decide to have a second.
kazper, appreciate your insights. We're having to be strategic about child timing because of my wife's career path. Academia in her field is still unfortunately--and very oddly--a realm where women can take a really serious ding on tenure review if they have a kid in the middle of the process. So, we're trying to have ours before she starts that track.
Plus, we're getting to the point that age does start to become an issue for her (she's the older of us). Not too comfortable pushing until 35/36, especially with the potential medical issues overlay and especially if we go nuts and decide to have a second.
- Sat Aug 02, 2014 10:58 pm
- Forum: Personal Investments
- Topic: Investing with uncertain 1-3 year window
- Replies: 4
- Views: 854
Investing with uncertain 1-3 year window
Hoping to hash out how to move forward with my investments given very uncertain capital needs/living situation over the next 1-3 years. Any thoughts are welcome. My overriding question is really whether there is anything we can do to put our money to work given our odd/uncertain nearish-term cash needs. Emergency funds: Three months Debt: None Tax Filing Status: Married filing jointly Tax Rate: 28-33% Federal (will depend on year-end bonus), 5% State State of Residence: IL Age: 33/30 Desired Asset allocation: 90% stocks / 10% bonds Desired International allocation: 33% of stocks We generally have $6,500-$7,500/month to invest after the 401(k), HSA, and IRAs are maxed for the year, which is where I stand now for the rest of 2014. We will als...
- Sun Feb 02, 2014 2:30 pm
- Forum: Personal Investments
- Topic: Help for teen with 5-figures to invest
- Replies: 16
- Views: 1848
Re: Help for teen with 5-figures to invest
Use it to pay for school. Keep in mind that student loans have origination fees, so you'll lose a significant portion off the top.
- Sun Feb 02, 2014 10:25 am
- Forum: Personal Investments
- Topic: Does size affect Lump Sum vs. DCA choice?
- Replies: 61
- Views: 4152
Re: Does size affect Lump Sum vs. DCA choice?
I lump-summed in at the beginning of January with about $30,000 (repaid a 401k loan, made 2013 IRA contributions for me and my spouse, and made 2014 IRA contributions for me), plus another $2,500 for 2014 401(k) contribs. I have lost something like 5% in that lump sum. It stings pretty badly, but it is what it is--won't be pulling the money for 28-30 years, so the blip shouldn't matter much. But do I wish I had waited 2 weeks? Of course. What happened to your already invested assets? Did they not also take a 5% hit, and assuming these were much larger in accumulated magnitude, if 5% on $30K was a sting, then 5% on much more than that should have been devastating. Did you know the DAILY standard deviation of stock market returns is about 1%...
- Sun Feb 02, 2014 9:22 am
- Forum: Personal Investments
- Topic: Does size affect Lump Sum vs. DCA choice?
- Replies: 61
- Views: 4152
Re: Does size affect Lump Sum vs. DCA choice?
I lump-summed in at the beginning of January with about $30,000 (repaid a 401k loan, made 2013 IRA contributions for me and my spouse, and made 2014 IRA contributions for me), plus another $2,500 for 2014 401(k) contribs. I have lost something like 5% in that lump sum. It stings pretty badly, but it is what it is--won't be pulling the money for 28-30 years, so the blip shouldn't matter much. But do I wish I had waited 2 weeks? Of course. For that matter, I wish I hadn't taken the 401(k) loan last year to pay my loans off earlier. Miserable outcome in hindsight. But if the markets had declined, it would have been a great decision. Takes a lot of zen, but the lump sum vs. DCA choice pales in comparison to picking your plan, sticking to it, an...
- Sun Jan 26, 2014 1:27 pm
- Forum: Personal Investments
- Topic: Asset Allocation for Short/Medium Term
- Replies: 6
- Views: 1404
Re: Asset Allocation for Short/Medium Term
Take the 3.xx% 5-year CD at PenFed and don't look back.