Low income earner seeking advice- need to move my money around but where and in what?

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ralphboy
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Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

You guys may remember me as the "poor Publix employee" from last year. I followed some of your advice and readjusted my 401k to be less heavy on publix stock and followed the lazy man 3 fund portfolio and have money out of my paycheck each week to invest: 33% in the S&P 500, 33% in RERGX, and 33% in Baird Aggregate Bond Fund.

I felt overwhelmed, uncertain, and afraid about leaving RJ so I stayed where I was but I know I must leave because of their fees. I was thinking about going to Vanguard and their website seems straight forward- https://personal1.vanguard.com/mmx-move-money/welcome

I'm unsure about the following and I would appreciate your advice:

1) I don't know if I should keep using my 401k at work or have that weekly amount go in my Vanguard account. I am investing $55 a week.

2) What type of account should I make with Vanguard? My goal is to leave the money alone until I get social security (I have awhile to go since I'm 35). I would like to use some of the money in the account to supplement my income so say I get $1,000 from social security a month and I have $108,000 in my vanguard account. I would like to keep the vanguard at a set amount of $100,000 and take $8,000 out and have it go in my checking account. Then repeat next year.

3) What should I do with my investments after they are moved over to Vanguard? This is what I have:

FIRST TRUST DORSEY WRIGHT FOCUS 5 ETF (FV)
Image

GLOBAL X SOCIAL MEDIA INDEX ETF (SOCL)
Image

INVESCO BUYBACK ACHIEVERS ETF (PKW)
Image

INVESCO NASDAQ INTERNET ETF (PNQI)
Image

NUVEEN HIGH YIELD MUNICIPAL BOND FUND CL I N/L (NHMRX)
Image

4) What should I buy in the Vanguard account?

5) Should I use an advisor?

6) What happens to the cash that I have in the "client interest program" at RJ? I assume it gets moved over as well. Should I move that money to my bank account before doing the in kind transfer?

Thanks
tashnewbie
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by tashnewbie »

I skimmed your post from last year.

In your tax bracket (12% marginal...is that still true?), I think you should:

1. Put enough into the 401k to get the full match from Publix. It's not clear to me if both Roth 401k and traditional/tax-deferred 401k are available in your 401k and which you're using. If you could be eligible for the Savers Credit, then it might make sense to do traditional 401k contributions.

See: https://www.bogleheads.org/wiki/Saver%27s_credit

2. Put any extra money you have to invest in a Roth IRA at your preferred brokerage (Vanguard, Schwab, and Fidelity are good low-cost options). At your age, you can invest up to $6k/year total in a Roth IRA, Traditional IRA, or a combination of the two. Again, traditional IRA may be better if it can help make you eligible for the Savers Credit.

You could invest in the IRA in things like VTSAX/VTI (Vanguard's Total US Stock Market index fund) and VTIAX/VXUS (Vanguard's Total International Stock Market index fund). I would use the ETF versions if you opt not to use Vanguard as your brokerage.

Others will be able to help regarding moving the RJ account. The good thing is it appears most of the holdings are ETFs, which should be very transferrable to whichever brokerage you want to use. You'll probably want to call that brokerage to confirm you can hold the ETFs and that bond mutual fund at the brokerage and whether there would be fees to sell the funds at the brokerage. You probably have a decent amount of space in the 0% long term capital gains tax bracket (up to $40,400 income in 2021 + $12,550 standard deduction = $52,950), so you could sell fund lots with long term capital gains (up to $52,950 - income from your job; I would leave some wiggle room) and not owe any tax.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by retired@50 »

ralphboy wrote: Thu Sep 02, 2021 8:29 am You guys may remember me as the "poor Publix employee" from last year. I followed some of your advice and readjusted my 401k to be less heavy on publix stock and followed the lazy man 3 fund portfolio and have money out of my paycheck each week to invest: 33% in the S&P 500, 33% in RERGX, and 33% in Baird Aggregate Bond Fund.

I felt overwhelmed, uncertain, and afraid about leaving RJ so I stayed where I was but I know I must leave because of their fees. I was thinking about going to Vanguard and their website seems straight forward- https://personal1.vanguard.com/mmx-move-money/welcome

I'm unsure about the following and I would appreciate your advice:

1) I don't know if I should keep using my 401k at work or have that weekly amount go in my Vanguard account. I am investing $55 a week.

2) What type of account should I make with Vanguard? My goal is to leave the money alone until I get social security (I have awhile to go since I'm 35). I would like to use some of the money in the account to supplement my income so say I get $1,000 from social security a month and I have $108,000 in my vanguard account. I would like to keep the vanguard at a set amount of $100,000 and take $8,000 out and have it go in my checking account. Then repeat next year.

3) What should I do with my investments after they are moved over to Vanguard?

4) What should I buy in the Vanguard account?

5) Should I use an advisor?

6) What happens to the cash that I have in the "client interest program" at RJ? I assume it gets moved over as well. Should I move that money to my bank account before doing the in kind transfer?

Thanks
I'll take a stab at some of the questions.

1. To evaluate which account you should use, 401k or Vanguard, we'll need to know more about the 401k plan, your tax bracket, etc. We also need to know what type of account you currently have at RJ. Is it a taxable brokerage account, or a Roth IRA, or a traditional IRA?
It's often best to use a workplace 401k plan, you typically get to defer taxes and you may also earn a company matching amount in your account.

2. The type of account to make with Vanguard will likely be the same type of account you hold at RJ. Which account type do you have at RJ?

3. The investments you have at RJ can probably be transferred in-kind to Vanguard, then depending on the account type and the potential tax consequences, you should probably work on selling off these ETFs that the RJ adviser has purchased for you. Mostly they are stock ETFs, but they have high expense ratios and they typically favor one part of the market or another. You would probably do better swapping all of the stock ETFs for VTI at Vanguard.

4. The base case, or beginning point for a Vanguard / Boglehead investor would be the three fund portfolio. It's got its own wiki page in the Boglehead wiki. https://www.bogleheads.org/wiki/Three-fund_portfolio

5. Maybe. It depends on your level of interest in investing and whether or not you can control your emotions and behavior enough to avoid common mistakes. If you have no interest, or cannot control your behavior, then an adviser can be a decent solution.

6. This can also be transferred to Vanguard and put into a money market fund if desired. If you intend to invest the money, then you should probably transfer it to Vanguard. If you intend to spend the money relatively soon, then you could put it in your savings account.

Regards,
This is one person's opinion. Nothing more.
Silas1067
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by Silas1067 »

The portfolio is heavily weighted in the tech sector and volatile Internet firms, etc.

There is also the municipal bond component, which seems strange considering your tax bracket and age. While munis have done very well in the last few years, I don't typically see 35 year olds investing in them.

You have a long time horizon, so you can be pretty aggressive, but remember that we went through a "lost decade" between 2000 - 2010 in which the indexes actually lost value over 10 years (although reinvested dividends and total return would have put you in the positive). Tech stocks got absolutely crushed between 2000 - 2005. So be careful.

Some international exposure would be good for sure. VTIAX is a good option.
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FiveK
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by FiveK »

The Prioritizing investments wiki article may be helpful.

After reading that, how do those suggestions seem to you?
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ralphboy
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

To answer some of the questions:

Yes, I still am in the 12% bracket and yes, I still qualify for a saver's credit. MY RJ account is a "regular account" not an IRA (That is what RJ told me when I asked them last year). My 401k at work is pre-tax contribution to a deferred tax account.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by retired@50 »

ralphboy wrote: Thu Sep 02, 2021 10:08 am To answer some of the questions:

Yes, I still am in the 12% bracket and yes, I still qualify for a saver's credit. I have a "regular account" not an IRA (That is what RJ told me when I asked them last year). My 401k is pre-tax contribution to a deferred tax account.
With the "regular account" description provided, then this would lead you to create a taxable (non-retirement) account at Vanguard so you'd have some place to transfer the RJ assets.

Once you create the account at Vanguard, then you can call Vanguard and let them know you have an RJ account that you'd like to transfer in-kind. It would probably be helpful if you had an RJ account statement in your hand while speaking to Vanguard.

The general idea is to work with the destination firm (Vanguard in this case) when transferring assets. RJ won't really want to see these assets leave their custody, so they are less likely to be cooperative, and may even try to talk you out of such a move. Be prepared for a call from your RJ salesperson.

Regards,
This is one person's opinion. Nothing more.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ruralavalon »

ralphboy wrote: Thu Sep 02, 2021 8:29 am You guys may remember me as the "poor Publix employee" from last year. I followed some of your advice and readjusted my 401k to be less heavy on publix stock and followed the lazy man 3 fund portfolio and have money out of my paycheck each week to invest: 33% in the S&P 500, 33% in RERGX, and 33% in Baird Aggregate Bond Fund.

I felt overwhelmed, uncertain, and afraid about leaving RJ so I stayed where I was but I know I must leave because of their fees. I was thinking about going to Vanguard and their website seems straight forward- https://personal1.vanguard.com/mmx-move-money/welcome

I'm unsure about the following and I would appreciate your advice:

1) I don't know if I should keep using my 401k at work or have that weekly amount go in my Vanguard account. I am investing $55 a week.
Continue contributions to your 401k account, increase those contributions as much as practical. Your employer's 401k plan offers good diversified funds with low expense ratios.


ralphboy wrote: Thu Sep 02, 2021 8:29 am2) What type of account should I make with Vanguard? My goal is to leave the money alone until I get social security (I have awhile to go since I'm 35). I would like to use some of the money in the account to supplement my income so say I get $1,000 from social security a month and I have $108,000 in my vanguard account. I would like to keep the vanguard at a set amount of $100,000 and take $8,000 out and have it go in my checking account. Then repeat next year.
ralphboy wrote: Thu Sep 02, 2021 10:08 am To answer some of the questions:

Yes, I still am in the 12% bracket and yes, I still qualify for a saver's credit. MY RJ account is a "regular account" not an IRA (That is what RJ told me when I asked them last year). My 401k at work is pre-tax contribution to a deferred tax account.
ralphboy wrote: Mon Apr 27, 2020 2:07 pmThe RJ account is a regular account and not an IRA.
. . . . .
Open two accounts at Vanguard, a taxable brokerage account and an IRA. A Roth IRA might be better.

Open a taxable brokerage at Vanguard to transfer the RJ funds into. Sell the RJ funds. How much in total is that currently?

Contribute $12k of the cash from those sales to an IRA at Vanguard. A Roth IRA might be better. At age 34 the annual contribution limit for an IRA is $6k. Contribute $6k as soon as you sell the RJ funds, and another $6k in January, 2022.

After setting aside $12k to contribute to the IRA, how much remains?

Increase your contributions to the 401k. At age 34 the maximum annual employee contribution limit is $19.5k. You can draw from the remaining cash in the taxable brokerage account to fund living expenses you would ordinarily have covered from your paycheck. This has the effect of transferring money from the RJ funds into your 401k account.


ralphboy wrote: Thu Sep 02, 2021 8:29 am3) What should I do with my investments after they are moved over to Vanguard? This is what I have:

FIRST TRUST DORSEY WRIGHT FOCUS 5 ETF (FV)
Image

GLOBAL X SOCIAL MEDIA INDEX ETF (SOCL)
Image

INVESCO BUYBACK ACHIEVERS ETF (PKW)
Image

INVESCO NASDAQ INTERNET ETF (PNQI)
Image

NUVEEN HIGH YIELD MUNICIPAL BOND FUND CL I N/L (NHMRX)
Image
Sell those funds, but only enough in any year so that you stay in the 00% rate for long-term capital gains.

You might want to ask your tax preparer about this.

ralphboy wrote: Thu Sep 02, 2021 8:29 am4) What should I buy in the Vanguard account?
A combination of:
1) Vanguard Total Stock Market Index Fund (VTSAX);
2) Vanguard Total International Stock Index Fund (VTIAX); and possibly
3) Vanguard Total Bond Market Index Fund (VBTLX).

ralphboy wrote: Thu Sep 02, 2021 8:29 am5) Should I use an advisor?
No, except maybe a tax preparer as mentioned in # 3 above.


ralphboy wrote: Thu Sep 02, 2021 8:29 am6) What happens to the cash that I have in the "client interest program" at RJ? I assume it gets moved over as well. Should I move that money to my bank account before doing the in kind transfer?
How much is that currently?

You can just move that to your new Vanguard account or to your checking account, and use that as I described in # 2 above.
Last edited by ruralavalon on Thu Sep 02, 2021 10:46 am, edited 1 time in total.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

@ruralavalon
Open a taxable brokerage at Vanguard to transfer the RJ funds into. Sell the RJ funds. How much in total is that currently?
60,904.45
After setting aside $12k to contribute to the IRA, how much remains?
48,904.45

I currently have 2,194.700 in the client interest program at RJ.

For my 401k it says, "If you elect to contribute a specific dollar amount that exceeds 30%, your specific dollar amount will be reduced automatically to 30% for each applicable pay period."
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FiveK
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by FiveK »

ralphboy wrote: Thu Sep 02, 2021 10:44 am For my 401k it says, "If you elect to contribute a specific dollar amount that exceeds 30%, your specific dollar amount will be reduced automatically to 30% for each applicable pay period."
There is no good reason for that 30% limit in your situation. Might be worth asking your company why that limit exists.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ruralavalon »

ralphboy wrote: Thu Sep 02, 2021 10:44 am @ruralavalon
Open a taxable brokerage at Vanguard to transfer the RJ funds into. Sell the RJ funds. How much in total is that currently?
60,904.45
After setting aside $12k to contribute to the IRA, how much remains?
48,904.45

I currently have 2,194.700 in the client interest program at RJ.
So that's about $51k remaining after contributing the $12k to your new Vanguard IRA.

That allows you to fully fund your 401k account for perhaps 3 years, living off the money from RJ to pay living expenses you would ordinarily have covered from your paycheck.

I wouldn't want $51k sitting idle uninvested for 3 years. So I suggest in the interim investing in very tax-efficient stock index funds in your new taxable account at Vanguard. That could be a combination of:
1) Vanguard Total Stock Market Index Fund (VTSAX); and
2) Vanguard Total International Stock Index Fund (VTIAX).

Sell some of those funds yearly to add another $6k each year to your IRA at Vanguard, and to cover living expenses so you can continue to make maximum annual employee contributions to your 401k account. Gradually that reduces your taxable account to zero.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

When I put $6,000 a year in my IRA does it just sit there as cash? Or do I need to pick an investment like I did with the taxable account?
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ruralavalon »

ralphboy wrote: Thu Sep 02, 2021 11:33 am When I put $6,000 a year in my IRA does it just sit there as cash? Or do I need to pick an investment like I did with the taxable account?
It will either sit there as cash in a money market fund or you can choose funds to use such as a combination of:
1) Vanguard Total Stock Market Index Fund (VTSAX);
2) Vanguard Total International Stock Index Fund (VTIAX); and possibly
3) Vanguard Total Bond Market Index Fund (VBTLX).
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

This is probably a dumb question but what should I with my taxable account once I withdraw all of my money out of it?
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ruralavalon »

ralphboy wrote: Thu Sep 02, 2021 11:46 am This is probably a dumb question but what should I with my taxable account once I withdraw all of my money out of it?
You could just close the account, or there may come a time when you want a taxable investing account in addition to the 401k and the IRA.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by Charon »

While others have suggested good funds, I would recommend you look at Vanguard's Target Retirement or LifeStrategy funds. Particularly in your case, where you're uncertain about what to do and thinking about using a financial advisor, it could be well worth the very slightly higher expense ratios to get a much simpler, set-and-forget investment, where you never need to worry about rebalancing.

A simple, 3-fund portfolio is completely fine, and is the most efficient approach. So keep it up if you like it, and won't mind rebalancing during crazy down markets (which you've probably never experienced, given your age, apart from blink-and-you-missed-it March 2020).

I second all the advice about putting money into an IRA. Probably not a whole lot of difference between Roth and Traditional for you, but might be good to get some in Roth.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

For my 401k, do you all think a 34%/33%/33% allocation is too conservative for my age (35)? When looking for the Vanguard's Target Retirement or LifeStrategy funds, do I enter a certain ticker symbol? I'll be setting up my Vanguard account on my day off of work, so I'm not sure how to do things on their site yet.
A simple, 3-fund portfolio is completely fine, and is the most efficient approach. So keep it up if you like it, and won't mind rebalancing during crazy down markets (which you've probably never experienced, given your age, apart from blink-and-you-missed-it March 2020).
With my 401k, I was going to make it a habit of rebalancing in January each time. Is that the wrong time to rebalance?
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ruralavalon »

ralphboy wrote: Fri Sep 03, 2021 5:21 am For my 401k, do you all think a 34%/33%/33% allocation is too conservative for my age (35)? When looking for the Vanguard's Target Retirement or LifeStrategy funds, do I enter a certain ticker symbol? I'll be setting up my Vanguard account on my day off of work, so I'm not sure how to do things on their site yet.
A simple, 3-fund portfolio is completely fine, and is the most efficient approach. So keep it up if you like it, and won't mind rebalancing during crazy down markets (which you've probably never experienced, given your age, apart from blink-and-you-missed-it March 2020).
With my 401k, I was going to make it a habit of rebalancing in January each time. Is that the wrong time to rebalance?
Your asset allocation of 33/33/33 in your 401k account is within the range of what is reasonable in my opinion, but is fairly conservative.

My suggestion for age 35 is 60% U.S. stocks, 20% international stocks, and 20% bonds.

You could use the same asset allocation in both your 401k account, and also in your new IRA at Vanguard but using the Vanguard Funds I suggested earlier.

Rebalancing in January is a reasonable approach in my opinion.
Last edited by ruralavalon on Fri Sep 03, 2021 9:04 am, edited 1 time in total.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by Sandtrap »

Concurrently to the great suggestions already given.

Proactively. Can you increase your gross income stream and “net” income?

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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

I like the idea of a set it and forget it investment. However, if I decide to invest in multiple things; is rebalancing straightforward? With my 401k, I simply just enter the %s I want my investments to be and click submit.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ruralavalon »

ralphboy wrote: Fri Sep 03, 2021 10:03 am I like the idea of a set it and forget it investment. However, if I decide to invest in multiple things; is rebalancing straightforward? With my 401k, I simply just enter the %s I want my investments to be and click submit.
Rebalancing is straightforward, it is simple and takes little time. In a Vanguard IRA using their mutual funds you just exchange between funds inside the IRA.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by JonL »

ralphboy wrote: Thu Sep 02, 2021 8:29 am 1) I don't know if I should keep using my 401k at work or have that weekly amount go in my Vanguard account.
Since I know just a little about your personal details, I'm only able to share broad rules of thumb, and not advice specific to you. Consider the below for entertainment purposes only.

The rule of thumb suggests contributing enough to any employer retirement plan to get any employer match. If you’ve already maxed out an HSA (if applicable) and an IRA, it usually only makes sense to contribute more to your 401(k) if the fees are reasonable: 0.5% or less.
ralphboy wrote: Thu Sep 02, 2021 8:29 am 2) What type of account should I make with Vanguard?
The rule of thumb suggests a Roth IRA for low-income earners or those earlier in their careers.
Learn more here: https://www.bogleheads.org/wiki/Traditional_versus_Roth
ralphboy wrote: Thu Sep 02, 2021 8:29 am 3) What should I do with my investments after they are moved over to Vanguard?
Your 401(k) may transfer cash to your new rollover IRA at Vanguard. Even if the positions from your 401(k) are transferred, you can sell all your investments, re-investing them in a simple, low-cost, three-fund portfolio.
Learn more here: https://www.bogleheads.org/wiki/Three-fund_portfolio
A Vanguard target date fund can also be a very appropriate option. Learn more here: https://investor.vanguard.com/mutual-fu ... irement/#/

Since the money is in an IRA, there will be no tax consequences for selling your positions.
ralphboy wrote: Thu Sep 02, 2021 8:29 am 5) Should I use an advisor?
Here's a couple things to consider:

There are many venues for pro-bono financial planning. (For example, I volunteer with the San Diego Financial Literacy Center: https://www.sdflc.org/programs/projects/swym-ffp/)

If you decide that paying for professional help is right for you, consider limiting your search to advice-only financial planners. When you work with an advice-only professional, you eliminate the conflicts of interest when working with commissioned, or fee-only (AUM) advisors.
Learn more here: https://adviceonlyfinancial.com/why-advice-only
Disclosure: I'm very biased in this last respect - as I am an advice-only financial planner. However, I chose this path because I feel that advice-only is the best way to help the most people.

I hope that helps. :happy

Good luck!

Edits: I messed up the quote feature. :oops:
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by pkcrafter »

ralphboy wrote: Thu Sep 02, 2021 8:29 am You guys may remember me as the "poor Publix employee" from last year. I followed some of your advice and readjusted my 401k to be less heavy on publix stock and followed the lazy man 3 fund portfolio and have money out of my paycheck each week to invest: 33% in the S&P 500, 33% in RERGX, and 33% in Baird Aggregate Bond Fund.

I felt overwhelmed, uncertain, and afraid about leaving RJ so I stayed where I was but I know I must leave because of their fees. I was thinking about going to Vanguard and their website seems straight forward- https://personal1.vanguard.com/mmx-move-money/welcome

Ralphboy, you are considering a lot of major moves, but you have to be sure all your ducks are in a row before you start doing anything. The above 3 funds (S&P 500, RERGX, and Baird) are currently in your 401k, correct?

I'm unsure about the following and I would appreciate your advice:

1) I don't know if I should keep using my 401k at work or have that weekly amount go in my Vanguard account. I am investing $55 a week.

Yes, you should be using the 401k because you are getting a match (right?) and the 401k is tax-deferred.

2) What type of account should I make with Vanguard? My goal is to leave the money alone until I get social security (I have awhile to go since I'm 35).

You can open an IRA or a Roth IRA at Vanguard and contribute up to $6,000/year. You can also open a taxable account if you wish.


I would like to use some of the money in the account to supplement my income so say I get $1,000 from social security a month and I have $108,000 in my vanguard account. I would like to keep the vanguard at a set amount of $100,000 and take $8,000 out and have it go in my checking account. Then repeat next year.

I assume you mean when you retire. :happy

3) What should I do with my investments after they are moved over to Vanguard?

First off, where did you get the funds listed below? Secondly, you have to make sure Vanguard carries the funds you want to transfer. When you are ready to transfer, you want to contact the receiving company and they will initiate the transfer. You want a custodian to custodian direct transfer.

This is what I have:

FIRST TRUST DORSEY WRIGHT FOCUS 5 ETF (FV)
Image

GLOBAL X SOCIAL MEDIA INDEX ETF (SOCL)
Image

INVESCO BUYBACK ACHIEVERS ETF (PKW)
Image

INVESCO NASDAQ INTERNET ETF (PNQI)
Image

NUVEEN HIGH YIELD MUNICIPAL BOND FUND CL I N/L (NHMRX)
Image

4) What should I buy in the Vanguard account?

Total stock market, total bond, and total international (optional).


5) Should I use an advisor?

No

6) What happens to the cash that I have in the "client interest program" at RJ? I assume it gets moved over as well. Should I move that money to my bank account before doing the in kind transfer?

No, the bank account isn't necessary unless you just want to hold on to the cash, but if you are going to invest it, then transfer, but make sure Vanguard, or wherever you transfer, will accept the cash/funds as is.

Paul


Last edited by pkcrafter on Fri Sep 03, 2021 5:15 pm, edited 1 time in total.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by Dottie57 »

ruralavalon wrote: Fri Sep 03, 2021 8:48 am
ralphboy wrote: Fri Sep 03, 2021 5:21 am For my 401k, do you all think a 34%/33%/33% allocation is too conservative for my age (35)? When looking for the Vanguard's Target Retirement or LifeStrategy funds, do I enter a certain ticker symbol? I'll be setting up my Vanguard account on my day off of work, so I'm not sure how to do things on their site yet.
A simple, 3-fund portfolio is completely fine, and is the most efficient approach. So keep it up if you like it, and won't mind rebalancing during crazy down markets (which you've probably never experienced, given your age, apart from blink-and-you-missed-it March 2020).
With my 401k, I was going to make it a habit of rebalancing in January each time. Is that the wrong time to rebalance?
Your asset allocation of 33/33/33 in your 401k account is within the range of what is reasonable in my opinion, but is fairly conservative.

My suggestion for age 35 is 60% U.S. stocks, 20% international stocks, and 20% bonds.

You could use the same asset allocation in both your 401k account, and also in your new IRA at Vanguard but using the Vanguard Funds I suggested earlier.

Rebalancing in January is a reasonable approach in my opinion.
The allocation here is very good and reasonable.

I do question using Vanguard. I think both Fidelity and Schwab are easier to work with. Is there a fidelity or schwab office near you?
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by arcticpineapplecorp. »

If in retirement you only have $108,000 saved and take out $8000 a year that's a 7.4% withdrawal rate.

You could draw down assets before you draw your last breath.

4% withdrawals are more reasonable if you intend to have an average retirement length.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

You could draw down assets before you draw your last breath.
Can you explain this, I'm not exactly sure what you mean.
Is there a fidelity or schwab office near you?
Both are near me
The above 3 funds (S&P 500, RERGX, and Baird) are currently in your 401k, correct?
Yes
you should be using the 401k because you are getting a match (right?)
Yes, I think they max up to 3% or $750. I am also given 8% of my income each year in Publix stock.
where did you get the funds listed below?
FV, SOCL, PNQI, PKW, NHMRX were all investments that my advisor chose for me.
When you are ready to transfer, you want to contact the receiving company and they will initiate the transfer. You want a custodian to custodian direct transfer.
Do I need to call or can this be done on Vanguard's site?
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by pkcrafter »

ralphboy wrote: Sat Sep 04, 2021 7:35 am
You could draw down assets before you draw your last breath.
Can you explain this, I'm not exactly sure what you mean.

What arcticpineapplecorp means is a withdrawal rate of 7.4% will drain your portfolio pretty quickly. The so called "safe" withdrawal rate is 4%.

Is there a fidelity or schwab office near you?
Both are near me

OK, what is being suggested by Dottie and others is consider using Schwab or Fidelity instead of Vanguard. Having an office nearby can be very helpful. Vanguard seems to be having trouble handling all the new business they have been getting.

The above 3 funds (S&P 500, RERGX, and Baird) are currently in your 401k, correct?
Yes
you should be using the 401k because you are getting a match (right?)
Yes, I think they max up to 3% or $750. I am also given 8% of my income each year in Publix stock.
where did you get the funds listed below?
FV, SOCL, PNQI, PKW, NHMRX were all investments that my advisor chose for me.

Are you still with this advisor?
When you are ready to transfer, you want to contact the receiving company and they will initiate the transfer. You want a custodian to custodian direct transfer.
Do I need to call or can this be done on Vanguard's site?
Calls to Vanguard have resulted in many members here having to wait for 2 hours or more just to get through. Not good. Again I'll say that transfers have to be done correctly to avoid big problems. You need custodian to custodian direct transfer and you have to make sure the new company carries the funds you intend to move. You can get low cost index funds at Fidelity and Schwab and being able to walk in to an office to get all the ducks lined up could make things much smoother. The only thing I will mention about Fidelity is they do have more costly options and they might suggest those to new customers. Schwab may give you a bonus for signing up--check it out.


Paul
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

I read on here that some people were having technical problems when trying to make a vanguard account and phone calls with them were unhelpful. That is sort of the fear that I have, doing it all alone and not having an actual person to visit. I think it would be best for me to invest in a 2050 retirement fund (Set it and forget it). If I can set it and forget it and avoid having to pay $600-1,000 a year in fees; that would be great. I wanted to compare the retirement accounts for schwab and fidelity but I'm not sure what I should be looking at. A google search for "fidelity 2050 retirement fund" came up with a chart for "Fidelity Freedom® 2050 Fund," which I don't know is good because of the expense ratio.

Image


When I google schwab 2050 retirement account, I get results for Schwab Target 2050 Fund (Symbol: SWNRX, Net Expense Ratio: 0.700%) and Schwab Target 2050 Index Fund (Symbol: SWYMX, Net Expense Ratio: 0.080%)
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by retired@50 »

ralphboy wrote: Sat Sep 04, 2021 10:58 am When I google schwab 2050 retirement account, I get results for Schwab Target 2050 Fund (Symbol: SWNRX, Net Expense Ratio: 0.700%) and Schwab Target 2050 Index Fund (Symbol: SWYMX, Net Expense Ratio: 0.080%)
Fidelity also has a 2050 Index fund, but it can be hard to find. The ER is .12%.

So, in this case, Schwab has the lowest fee for a 2050 index fund.

See link for Fidelity fund: https://fundresearch.fidelity.com/mutua ... /315793869

Regards,
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

I kind of get the vibe that fidelity doesn't want to help me because I'm poor. They don't want to show me the select a location link because of the amount of money that I can invest with them. That is kind of demoralizing.

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vs

Image
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ruralavalon »

At Fidelity there is Fidelity Freedom® Index 2050 Fund - Investor Class (FIFPX) ER 0.12%.

At Schwab there is Schwab Target 2050 Index Fund (SWYMX) ER 0.08%.

It's discouraging that they make it hard to find their low expense target date index funds.

The similar Vanguard fund is Vanguard Target Retirement 2050 Fund (VFIFX) ER 0.15%. That is an index fund.

Vanguard does not have any high expense ratio funds.

The Bogleheads' wiki contains lists of low expense index funds available from both Fidelity and Schwab.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

I may go with opening my accounts at fidelity online and if I run in to trouble; see if I can talk to someone in an office near me.

Edit: Wouldn't it be easier just to tell my advisor that I want to take over my account and then follow your all's instructions and keep my money at RJ?
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Will I not have to pay taxes if I sell all of my investments?

Post by ralphboy »

[Thread merged into here --admin LadyGeek]

I live in Florida and my total income is $30,000. I have 5 long term investments that have a total investment gain of $37,000. If I sell all of them in my brokerage account will I owe any taxes?
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Re: Will I not have to pay taxes if I sell all of my investments?

Post by JoMoney »

Do you have other income?
Do your "long term investments" qualify for the special long term capital gains rate?
Do you have losses with which to offset some of your gains?

You will have to claim your gains on your taxes when you sell them. Whether or not you have to pay anything depends on a lot of other individual factors.
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Re: Will I not have to pay taxes if I sell all of my investments?

Post by jeff1949 »

Are your investments inside an TIRA or a Roth IRA? 401-k or 403-b?
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Re: Will I not have to pay taxes if I sell all of my investments?

Post by Affable at 50 »

ralphboy wrote: Sun Sep 05, 2021 11:08 am I live in Florida and my total income is $30,000. I have 5 long term investments that have a total investment gain of $37,000. If I sell all of them in my brokerage account will I owe any taxes?
You will likely owe some tax if you recognize the full gain in a single year. How much tax will depend on a few factors. In 2021, individual filers won't pay any long term capital gains tax if their total taxable income is $40,400 or less.

What is your filing status? The threshold is higher for tax payers MFJ and taxable income is impacted by your standard deduction.

Are your investment gains LTCG? Any short gains are taxed as ordinary income.
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Re: Will I not have to pay taxes if I sell all of my investments?

Post by dbr »

You need to look up your cost basis and determine the gain you would realize. Then you need to go through a tax return for the income and situation you would have this year and find out. You aren't telling us almost all the information that is needed to answer this question and you need to work through it yourself anyway. The numbers you posted could result in some taxes due or could not result in some taxes due. The best starting point would be to use this year's tax return form and go through and input all the items you might have for this year including the sale. You will have to fill out Schedule D and associated forms and worksheets and see what happens.
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Re: Will I not have to pay taxes if I sell all of my investments?

Post by WhiteMaxima »

You can borrow against your investment w/o selling them.
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Re: Will I not have to pay taxes if I sell all of my investments?

Post by WhiteMaxima »

You can borrow against your investment w/o selling them.
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Re: Will I not have to pay taxes if I sell all of my investments?

Post by retiredjg »

ralphboy wrote: Sun Sep 05, 2021 11:08 am I live in Florida and my total income is $30,000. I have 5 long term investments that have a total investment gain of $37,000. If I sell all of them in my brokerage account will I owe any taxes?
If you are married filing jointly and your total income including those gains is $67k, there should be no tax unless some of the shares were short term gains. That could happen from recent purchases or reinvestment of dividends (less than a year ago) to buy more shares.

If you are single, some of the gains will be taxed at 0% and some (about $14k) will be taxed at 15%.

This assumes the investments are in a taxable account (not an IRA or work plan) and that you use the standard deduction.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by LadyGeek »

ralphboy - In order to provide appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread. If you have any questions, ask them here.

(Thanks to the member who reported the post and provided a link to this thread.)
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by arcticpineapplecorp. »

ralphboy wrote: Sat Sep 04, 2021 7:35 am
You could draw down assets before you draw your last breath.
Can you explain this, I'm not exactly sure what you mean.
if you take $8000 a year from an account starting out with $108,000 how many years (if we don't account for any growth) would it take to get the account to $0?

13 1/2 (108,000 / 8000 = 13.5)

So if you plan on only living a 13.5 year long retirement, you'd be alright taking $8000 a year out of $108,000.

if you plan to live longer than 13.5 years in retirement, you'd be taking out too much per year.

you may be thinking, "But what about the growth on the $108,000?"

If you're taking out 7.4% per year (8000/108000 = 0.074) you'd have to make MORE than 7.4% per year to have ANY growth.

A 7.4% withdrawal in retirement is not sustainable for a 30 year long retirement. Your withdrawals will overcome any growth the portfolio produces. Worse still is a series of bad outcomes/years will have you drawing down the portfolio even faster (less than 13.5 years total).

read more here:
https://www.bogleheads.org/wiki/Safe_withdrawal_rates
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

Do you have other income?
I just have my job, RJ brokerage account (Where the investments that I want to sell are), and my 401k and stock from work
Do your "long term investments" qualify for the special long term capital gains rate?
My investments are the ones pictured in the top of the thread, they are all at least 5 years old. So, yes?
Do you have losses with which to offset some of your gains?
All of my investments have made me money
Are your investments inside an TIRA or a Roth IRA? 401-k or 403-b?
They are in a brokerage account at Raymond James
What is your filing status? The threshold is higher for tax payers MFJ and taxable income is impacted by your standard deduction.
Single
In 2021, individual filers won't pay any long term capital gains tax if their total taxable income is $40,400 or less.
I wasn't sure if it was no taxes as long as my income from my job was under $40,400 or if it was no taxes from my job PLUS the sale of my invesments as long as it totaled $40,400 or less.
If you are single, some of the gains will be taxed at 0% and some (about $14k) will be taxed at 15%.
Can you show the math for this?
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Re: Will I not have to pay taxes if I sell all of my investments?

Post by retiredjg »

ralphboy wrote: Sun Sep 05, 2021 11:08 am [Thread merged into here --admin LadyGeek]

I live in Florida and my total income is $30,000. I have 5 long term investments that have a total investment gain of $37,000. If I sell all of them in my brokerage account will I owe any taxes?
You want to see the math.

Unless you are over 65, your standard deduction for 2021 is $12,550.

Subtract $12,550 from your total income of $30,000. That leaves $17,450 in ordinary income. Some of that will be taxed at 10% and some at 12%.

The long term capital gains are taxed at a different rate from ordinary income. Up to a TOTAL income of $40,400, long term capital gains are taxed at 0%. The part over that is taxed at 15%.

So, $17,450 ordinary income plus $37,000 long term capital gains is $54,450 total taxable income.

Subtract $40,440 from $54,450 to give you $14,050 that will be taxed at 15% (about $2,107 in tax).

I wasn't sure if it was no taxes as long as my income from my job was under $40,400 or if it was no taxes from my job PLUS the sale of my invesments as long as it totaled $40,400 or less.
It's the total of both.

My calculations did not take into account any contribution to a plan at work such as a 401k. If you are contributing to a plan at work, the $30,000 will go down a little bit.

I also didn't take into account what you might be paying for an employer sponsored health plan. That will also reduce the $30,000.

There could also be some short term capital gains involved if you have made any purchases in the last year or if dividends have been reinvested in the last year. Short term capital gains would all be taxed at 12% (the tax rate for your ordinary income).

If you are getting the saver's credit on your taxes, this extra income could eliminate that (for just the high income year).

I have not read this entire thread, mostly just the part quoted at the top of my message...so there might be other things involved. If you are just wanting to get out of the Raymond James situation without tax, I think you could do it selling over two tax years (some now and the rest in January). However, that might mean you would give up the saver's credit for two years instead of one.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by retiredjg »

Here is a basic tax calculator that you might find helpful.

https://engaging-data.com/tax-brackets/
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by goingup »

Just wanted to say that you have acquired a nice nest-egg with a modest income. You also seem to have a good understanding of your portfolio and your employer benefits. You are way ahead of most people so no need to have fear about self-managing.

Fidelity seems like a good fit for your taxable account. Choose one Target Date index fund or one or 2 broad market index funds.

A 401K is usually the easiest place for someone of modest means to accrue wealth. Stick with it and contribute more as your salary increases. :beer
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

Thanks for the detailed reply retiredjg.

I was thinking it would take me 4 years to sell my investments ($30,000 income + $10,000 gain) to avoid taxes. Then from that put $6,000 in my IRA and split the $4,000 in the "3 fund portfolio" recommendations.

I do pay $27 a week for health insurance and put in $30-55 a week for my 401k. I have Publix stock in it and the dividends automatically get reinvested. I did receive a saver's credit on my 2020 taxes.

Does this sound like a good plan?

1) Open a roth IRA and a brokerage account [I was thinking about going to Fidelity after seeing the "Vanguard hold time 4 hours to open an account - any ideas?" and ""We've encountered a technical issue" -opening brokerage account" threads. I think I would replace my Bank of America credit card with the Fidelity Rewards Visa -Earn 2% Cash Back for Your Nest Egg]

2) Transfer all of my assets

3) Sell FV, SOCL, PKW, and NHMRX (Investment gain 18,397.96)

4) Put $6,000 in Roth IRA and put it in the Fidelity Freedom® Index 2055 Fund

5) In my brokerage account use the remaining 12,397.96 to buy Fidelity Total Market Index Fund (FSKAX), Fidelity Total International Index Fund (FTIHX), and Fidelity U. S. Bond Index Fund (FXNAX). I was thinking about following ruralavalon's advice of 60/20/20

6) Change my 401k contribution at work to 30% of my paycheck each week (It is the max they will allow me to do). I am currently doing 60/20/20 in the S&P 500, RERGX, and Baird Aggregate Bond Fund.

January 2022

1) Sell PNQI and put $6,000 of the gains in my Roth IRA and put it in the Fidelity Freedom® Index 2055 Fund

2) Buy Fidelity Total Market Index Fund (FSKAX), Fidelity Total International Index Fund (FTIHX), and Fidelity U. S. Bond Index Fund (FXNAX) with the remaining gains

3) Rebalance my 401k so my investments are 60/20/20

January 2023

1) Sell $6,000 worth of Fidelity Total Market Index Fund (FSKAX), Fidelity Total International Index Fund (FTIHX), and Fidelity U. S. Bond Index Fund (FXNAX)

2) Put the $6,000 in Roth IRA and put it in the Fidelity Freedom® Index 2055 Fund

3) Rebalance my 401k so my investments are 60/20/20

Then for 2024 and onward

Keep selling $6,000 of my investments from my brokerage and move to the IRA over time getting the brokerage down to $0
Last edited by ralphboy on Mon Sep 06, 2021 9:56 am, edited 1 time in total.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by retiredjg »

ralphboy wrote: Mon Sep 06, 2021 9:07 am Does this sound like a good plan?
Don't know yet - I have not read the entire thread yet, just the last part where the two threads were joined together.

One thing - do not use the Fidelity Freedom Funds because they have high ERs. Use Fidelity Freedom Index Funds which are much lower cost.

How much was the saver's credit last year?

What income do you need to stay under to get it again?
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by retiredjg »

Also, there is no way to avoid taxes on your salary. It is possible to avoid taxes on the long term capital gains if you spread this over two years or more.
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Re: Low income earner seeking advice- need to move my money around but where and in what?

Post by ralphboy »

goingup wrote: Mon Sep 06, 2021 8:23 am Just wanted to say that you have acquired a nice nest-egg with a modest income. You also seem to have a good understanding of your portfolio and your employer benefits. You are way ahead of most people so no need to have fear about self-managing.
Thanks, but I didn't do it on my own. My grandma has been a big help to me. She has always spoiled me. When I was in elementary school she would pay me for my grades. So better grades equaled more money. Then as she got older and quit driving, she would give me taxi money or money just because she wanted to. Currently she gives me $125 a month to help me out. She would rather give me money now instead of when she isn't around. I too have lucked out on finding a cheap place to rent. I found it on craigslist and only have had 1 rent increase in 7 years. I also save money by shopping at Save-a-lot, buying used from ebay, and allowing my clothes to become rags before replacing them LOL. I am holding off on my next big purchase of a car until 2026. I drive a 2000 Toyota Avalon with 125,000 miles on it. I have been doing research on what my next car should be and I think I'll be getting a Camry (Same nice ride as my Avalon with better gas mileage).

So far I have roughly saved $48,000 from work (Money I put in my 401k, stock that was given to me by my company, and stock that I purchased on my own), $63,000 from Raymond James (Initial investment of $25,000 + gains, opened the account 7 years ago; I think), $27,000 in my checking account, and $4,600 (I spent $3,000 of my stimulus money on a cryptocurrency and the price has gone up a little) = $142,600
Last edited by ralphboy on Mon Sep 06, 2021 10:11 am, edited 1 time in total.
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