Personal Finance Advice and Education! (3 Viewers)

[SFBayDuck]

Just don’t buy the same funds until February 27

I'm looking to harvest some tax losses in MFs and ETFs on this dip as well.  From what I've been reading it's not very well defined what "substantially similar" actually means when it comes to funds, but as long as it doesn't follow the same benchmark index it shouldn't hit the criteria for wash sale.  So if, for example, I own one that has a benchmark of the Russell 2000 I could sell it and buy one that has a benchmark of the CRSP Small Cap Index to meet my desired allocation to Small Cap Blend exposure.  And if, after 30 days, that segment of the market has gone down further but I want to keep that allocation, I could harvest again and switch back (although if audited in the future I could see switching back and forth as potentially being problematic).

Anybody else have a different take on that?

 

[-OZ-]

I'm looking to harvest some tax losses in MFs and ETFs on this dip as well.  From what I've been reading it's not very well defined what "substantially similar" actually means when it comes to funds, but as long as it doesn't follow the same benchmark index it shouldn't hit the criteria for wash sale.  So if, for example, I own one that has a benchmark of the Russell 2000 I could sell it and buy one that has a benchmark of the CRSP Small Cap Index to meet my desired allocation to Small Cap Blend exposure.  And if, after 30 days, that segment of the market has gone down further but I want to keep that allocation, I could harvest again and switch back (although if audited in the future I could see switching back and forth as potentially being problematic).

Anybody else have a different take on that?

I think that’s right but I’ve always gone with something completely different. Closest I’ve done is sell VTI, buy VOO and VT. then again, I’ve almost always LCH in regular and bought in the IRA, and to my knowledge the IRS isn’t really interested in my couple hundred bucks. 

 

[ConstruxBoy]

I'm looking to harvest some tax losses in MFs and ETFs on this dip as well.  From what I've been reading it's not very well defined what "substantially similar" actually means when it comes to funds, but as long as it doesn't follow the same benchmark index it shouldn't hit the criteria for wash sale.  So if, for example, I own one that has a benchmark of the Russell 2000 I could sell it and buy one that has a benchmark of the CRSP Small Cap Index to meet my desired allocation to Small Cap Blend exposure.  And if, after 30 days, that segment of the market has gone down further but I want to keep that allocation, I could harvest again and switch back (although if audited in the future I could see switching back and forth as potentially being problematic).

Anybody else have a different take on that?

I think you should be fine but they purposefully make it vague to stop people from pushing it. 

 

[Andrew74]

I'm looking to harvest some tax losses in MFs and ETFs on this dip as well.  From what I've been reading it's not very well defined what "substantially similar" actually means when it comes to funds, but as long as it doesn't follow the same benchmark index it shouldn't hit the criteria for wash sale.  So if, for example, I own one that has a benchmark of the Russell 2000 I could sell it and buy one that has a benchmark of the CRSP Small Cap Index to meet my desired allocation to Small Cap Blend exposure.  And if, after 30 days, that segment of the market has gone down further but I want to keep that allocation, I could harvest again and switch back (although if audited in the future I could see switching back and forth as potentially being problematic).

Anybody else have a different take on that?

That’s what I do.  Say cycle between IJR and VB.  I think you’re good as long as it’s not a total market index swap; that’s the only one I’ll avoid. 

 

[Andrew74]

If I didn't screw it up, I tax lost harvested for the first time today.  

We have a taxable account with about 10K in it.  It was down 600 something.  I figured given the size of the account, it was a good time to pull the trigger.  Waiting for it to process and hoping it shows up under capital losses on Vanguard.

Sounds like you did it right.  My only recommendation is don’t leave it in cash.  Buy something similar.  I’ve seen people too many times leave it in cash and miss a rebound.  

 

[jm192]

Sounds like you did it right.  My only recommendation is don’t leave it in cash.  Buy something similar.  I’ve seen people too many times leave it in cash and miss a rebound.  

Thanks!

I went there today and it showed the Capital Losses under cost basis.  Super pumped.  I've been figuring this stuff out over the past 2 years and feel like this is pretty advanced as far as personal finance goes--been kind of intimidated by the idea of trying to tax loss harvest.  Now it feels pretty easy/straight forward.

I took your advice and got VOO in place of my VTI.  Had ~200$ left, which wouldn't buy another VOO so I Got 3 shares of VXUS--I'm under on my INTL allocation at this point anyways and I figure getting some of that into Taxable for the Foreign Tax credit makes sense.

 

[GoBirds]

Thanks!

I went there today and it showed the Capital Losses under cost basis.  Super pumped.  I've been figuring this stuff out over the past 2 years and feel like this is pretty advanced as far as personal finance goes--been kind of intimidated by the idea of trying to tax loss harvest.  Now it feels pretty easy/straight forward.

I took your advice and got VOO in place of my VTI.  Had ~200$ left, which wouldn't buy another VOO so I Got 3 shares of VXUS--I'm under on my INTL allocation at this point anyways and I figure getting some of that into Taxable for the Foreign Tax credit makes sense.

Remind me what the thinking on the bolded is fellas? Just started to redirect funds from my target date fund to chunks of VTI as I can….am I doing it wrong?

 

[jm192]

Remind me what the thinking on the bolded is fellas? Just started to redirect funds from my target date fund to chunks of VTI as I can….am I doing it wrong?

In my case, I'm doing Tax Loss Harvesting.  I had VTI in the taxable account.  So I sold it at a loss and bought VOO, which was also down a substantial amount.  This lets me lock in the losses which I can use to wipe out any Capital gains for tax purposes.

Buy immediately re-investing in VOO, I keep my money invested in a similar-ish asset so that I haven't sold low and married myself to the loss.  The VOO will grow in the long haul.  (You have to purchase an asset that isn't too similar to avoid what's called a wash sale--so 500 Index vs Total Market index is different enough.  

I'm not a big fan of target date funds because they're usually pretty conservative.  VTI and VOO are both fantastic.  

 

[-OZ-]

Thanks!

I went there today and it showed the Capital Losses under cost basis.  Super pumped.  I've been figuring this stuff out over the past 2 years and feel like this is pretty advanced as far as personal finance goes--been kind of intimidated by the idea of trying to tax loss harvest.  Now it feels pretty easy/straight forward.

I took your advice and got VOO in place of my VTI.  Had ~200$ left, which wouldn't buy another VOO so I Got 3 shares of VXUS--I'm under on my INTL allocation at this point anyways and I figure getting some of that into Taxable for the Foreign Tax credit makes sense.

And this is why I refuse to use a brokerage which doesn’t do partial shares. Your purchases are fine, I’d probably have done the same.

Remind me what the thinking on the bolded is fellas? Just started to redirect funds from my target date fund to chunks of VTI as I can….am I doing it wrong?

VOO- vanguard’s S&P 500 ETF

VTI -vanguard’s total market. 

VTI is something like 75% VOO, 25% VB (small cap) because the 500 is so huge. 
fwiw, VOO is almost 25% Apple, Microsoft, FB, Google, Berkshire Hathaway and Tesla. 

 

[belljr]

I guess I'll post in here to see any responses.

So my daughter worked her first summer job last year.   As I understand it since she made over 1100 I should file her tax return.   She will not get back any social security or medicare payments.   She will get back the federal tax?

Does this sound correct?   

Its going to suck filing for her just for $50 lol.

TIA

 

[Tom Hagen]

I guess I'll post in here to see any responses.

So my daughter worked her first summer job last year.   As I understand it since she made over 1100 I should file her tax return.   She will not get back any social security or medicare payments.   She will get back the federal tax?

Does this sound correct?   

Its going to suck filing for her just for $50 lol.

TIA

That is correct. You should be able to use IRS free file for the federal but you may also need to file a state return.

 

[steelerfan1]

Question about Traditional IRA and Employer 401K.

I see where people are maxing out their 401k and IRA's.

I saw that you may not get tax benefits on your Traditional if your AGI is at a certain amount, so what's the point of having a Traditional IRA?

Maybe I'm misunderstanding this? Any help appreciated.

Also, I don't see anything listed, but I can't seeing any dividends being paid in a 401k. Is that common?

 

[stbugs]

Question about Traditional IRA and Employer 401K.

I see where people are maxing out their 401k and IRA's.

I saw that you may not get tax benefits on your Traditional if your AGI is at a certain amount, so what's the point of having a Traditional IRA?

Maybe I'm misunderstanding this? Any help appreciated.

Also, I don't see anything listed, but I can't seeing any dividends being paid in a 401k. Is that common?

If your AGI is such that you can do a Roth IRA then I’d do that if you don’t get tax benefits from a traditional IRA. There are income limits on Roth’s as well. My wife and I are above those limits so we just max our 401ks. I’m a big believer in having a bigger taxable brokerage account as well so rather than add more into an IRA without tax benefits you can invest and hopefully pay only long term capital gains taxes which are typically lower than income tax rates. Heck I seem to recall a year or two when there were no capital gains taxes or 0%. Again, assuming you can’t do a Roth or get tax benefits in traditional.

As to dividends, I see those every year in 401ks, usually in December I think with capital gains as well, I think. Anyway, in 401ks they are immediately re-invested. That’s why, even in here, you’ll see end of the year questions about 401k funds large price drops. It’s typically and end of the year dividend and you end up with the exact same total $$$s just more shares at a lower price. 

 

[wilked]

I guess I'll post in here to see any responses.

So my daughter worked her first summer job last year.   As I understand it since she made over 1100 I should file her tax return.   She will not get back any social security or medicare payments.   She will get back the federal tax?

Does this sound correct?   

Its going to suck filing for her just for $50 lol.

TIA

Suggestion - have her do the taxes. The forms for her will be very easy, at least compared to you and me. Do them with her, but it’s a good learning opportunity not just about forms but about overall taxes

 

[steelerfan1]

If your AGI is such that you can do a Roth IRA then I’d do that if you don’t get tax benefits from a traditional IRA. There are income limits on Roth’s as well. My wife and I are above those limits so we just max our 401ks. I’m a big believer in having a bigger taxable brokerage account as well so rather than add more into an IRA without tax benefits you can invest and hopefully pay only long term capital gains taxes which are typically lower than income tax rates. Heck I seem to recall a year or two when there were no capital gains taxes or 0%. Again, assuming you can’t do a Roth or get tax benefits in traditional.

As to dividends, I see those every year in 401ks, usually in December I think with capital gains as well, I think. Anyway, in 401ks they are immediately re-invested. That’s why, even in here, you’ll see end of the year questions about 401k funds large price drops. It’s typically and end of the year dividend and you end up with the exact same total $$$s just more shares at a lower price. 

Thank you!. That's also a bummer as I just opened a Traditional and funded it when I already have a ROTH. I guess I'll just let it sit in there and focus on maxing the 401K.

I see you're from NC. You wouldn't have a Prudential 401 plan by any chance, would you? That's the plan I'm trying to see if I've been getting dividends on.

Thanks again.

 

[stbugs]

Thank you!. That's also a bummer as I just opened a Traditional and funded it when I already have a ROTH. I guess I'll just let it sit in there and focus on maxing the 401K.

I see you're from NC. You wouldn't have a Prudential 401 plan by any chance, would you? That's the plan I'm trying to see if I've been getting dividends on.

Thanks again.

No, all 401ks in Fidelity but with mutual funds you tend to get dividend/gains at the end of the year not each quarter. 

 

[jm192]

Question about Traditional IRA and Employer 401K.

I see where people are maxing out their 401k and IRA's.

I saw that you may not get tax benefits on your Traditional if your AGI is at a certain amount, so what's the point of having a Traditional IRA?

Maybe I'm misunderstanding this? Any help appreciated.

Also, I don't see anything listed, but I can't seeing any dividends being paid in a 401k. Is that common?

Above a certain income,  you can’t deduct the IRA contributions on tour taxes.  
 

In this situation, you’re probably above the AGI to contribute to a Roth IRA.  
 

However, you can do a backdoor Roth.  
 

The roth grows tax free.

1.  Contribute money to Traditional

2.  Do Roth conversion

In most cases, you make a Traditional IRA and a Roth IRA on the same website.  Fund the Traditional, then transfer the funds to the Roth.

It will flag saying you owe taxes on the conversion, but if it’s post tax dollars, you’ve already paid the taxes you owe.  

You also owe tax on any gains made while in the traditional.  For this reason, I usually wait until it’s in the Roth account to invest it.

 

[jm192]

Thank you!. That's also a bummer as I just opened a Traditional and funded it when I already have a ROTH. I guess I'll just let it sit in there and focus on maxing the 401K.

I see you're from NC. You wouldn't have a Prudential 401 plan by any chance, would you? That's the plan I'm trying to see if I've been getting dividends on.

Thanks again.

You can do a roth conversion on your traditional IRA controbutions.

 

[belljr]

Suggestion - have her do the taxes. The forms for her will be very easy, at least compared to you and me. Do them with her, but it’s a good learning opportunity not just about forms but about overall taxes

I will at some point. She just turned 16 so maybe next year after she finishes her financial literacy class

 

[wilked]

I will at some point. She just turned 16 so maybe next year after she finishes her financial literacy class

Also, don’t forget, you can find her Roth up to her earnings…highly recommended! 

 

[steelerfan1]

Above a certain income,  you can’t deduct the IRA contributions on tour taxes.  
 

In this situation, you’re probably above the AGI to contribute to a Roth IRA.  
 

However, you can do a backdoor Roth.  
 

The roth grows tax free.

1.  Contribute money to Traditional

2.  Do Roth conversion

In most cases, you make a Traditional IRA and a Roth IRA on the same website.  Fund the Traditional, then transfer the funds to the Roth.

It will flag saying you owe taxes on the conversion, but if it’s post tax dollars, you’ve already paid the taxes you owe.  

You also owe tax on any gains made while in the traditional.  For this reason, I usually wait until it’s in the Roth account to invest it.

Thanks jm,

Wife and I each have a Roth and Traditional as well as a Taxable and she has a 401K as well. All are in Vanguard. I just set the Traditional up so the amount in there isn't even worth doing any conversion. I will just keep it in there and the plan was when I retire I was going to roll the 401K into that.

I'm just going to fund the 401K going forward as the plan is actually pretty decent, assuming I can find out if dividends are indeed paid. Waiting to hear back from rep now.

 

[steelerfan1]

So, rebalanced the 401k and noticed this option and wanted to see what the experts think?
Inflation responsive fund

I try  to stay out of managed funds with higher ER, but this one intrigued me a bit with some TIPS, REITS and Commodities. Was thinking it would add a little bit of diversity and possibly I could use it at a % that was that of half of my bond allocation.

All thoughts welcome. Thanks  

 

[Lion to myself]

So, rebalanced the 401k and noticed this option and wanted to see what the experts think?
Inflation responsive fund

I try  to stay out of managed funds with higher ER, but this one intrigued me a bit with some TIPS, REITS and Commodities. Was thinking it would add a little bit of diversity and possibly I could use it at a % that was that of half of my bond allocation.

All thoughts welcome. Thanks  

I like it. Unique option that you don’t always see in a retirement plan. It would be a good diversification tool as you said.    It’s not expensive and its has outperformed its benchmark (though the benchmark is from the company managing the fund plus its a unique fund so that might not hold as much weight).  

 

[Tom Hagen]

Above a certain income,  you can’t deduct the IRA contributions on tour taxes.  
 

In this situation, you’re probably above the AGI to contribute to a Roth IRA.  
 

However, you can do a backdoor Roth.  
 

The roth grows tax free.

1.  Contribute money to Traditional

2.  Do Roth conversion

In most cases, you make a Traditional IRA and a Roth IRA on the same website.  Fund the Traditional, then transfer the funds to the Roth.

It will flag saying you owe taxes on the conversion, but if it’s post tax dollars, you’ve already paid the taxes you owe.  

You also owe tax on any gains made while in the traditional.  For this reason, I usually wait until it’s in the Roth account to invest it.

To be clear the Roth conversion will only be tax free if you do not have any Traditional, SEP or SIMPLE accounts with pre tax dollars. 

 

[Andrew74]

Suggestion - have her do the taxes. The forms for her will be very easy, at least compared to you and me. Do them with her, but it’s a good learning opportunity not just about forms but about overall taxes

This is good advice.  I’ve made my daughter do her taxes the last few years.  I think it has really helped her. 

 

[jm192]

To be clear the Roth conversion will only be tax free if you do not have any Traditional, SEP or SIMPLE accounts with pre tax dollars. 

You're 100% correct.  I always struggle with how much detail to give on the backdoor roth when telling someone about it on here.  I figure too long of a post and you turn someone off from it all together haha.  

 

[jm192]

Something small but I'm excited for:

Signed the Final paperwork on Disability insurance yesterday.  Started working on the process in November.  Feels good.  

 

[Marvelous]

Did some digging about tax brackets over time and it was pretty eye opening.  Taxfoundation.org was a great resource. Just in my lifetime (41 years, which could conceivably be the length of a retirement) tax bracket rules have been set, and changed, by the revenue act of 1978, economic recovery tax act of 1981, tax equity and fiscal responsibility act of 1982, tax reform act of 1984, tax reform act of 1986, omnibus budget reconciliation act of 1990, OBRA of 1993,  economic growth and tax relief reconciliation act of 2001, jobs and growth tax relief act of 2003, American taxpayer relief act of 2012, and the tax cuts and jobs act of 2017.

As an example a married couple filing jointly with a taxable income of $50k would today be in a 12% top bracket.  5 years ago they would have been in a 15%.  20 years ago would have been in 27%, and the year before that 27.5%, and the year before that 28%.  35 years ago that would have been a 35% bracket, and the year before that 38%.  39 years ago would have been a whopping 40%, and the year prior even higher at 44%, and the year before even higher at 49%!  I understand that most of why that is is inflation ($50k 40 years ago was much more than $50k today).  

There is a very clear pattern over the past 40 years.  Republicans administrations cut taxes for everyone.  Then the Democrats increase taxes on the wealthy.  The net effect:  the  middle and lower class pay less and less taxes over time.  The high earners see their taxes bounce around, but decreasing over time.   I don't see this changing any time soon since middle class tax increases are political suicide.

 

[Random]

If your AGI is such that you can do a Roth IRA then I’d do that if you don’t get tax benefits from a traditional IRA. There are income limits on Roth’s as well. My wife and I are above those limits so we just max our 401ks. I’m a big believer in having a bigger taxable brokerage account as well so rather than add more into an IRA without tax benefits you can invest and hopefully pay only long term capital gains taxes which are typically lower than income tax rates. Heck I seem to recall a year or two when there were no capital gains taxes or 0%. Again, assuming you can’t do a Roth or get tax benefits in traditional.

As to dividends, I see those every year in 401ks, usually in December I think with capital gains as well, I think. Anyway, in 401ks they are immediately re-invested. That’s why, even in here, you’ll see end of the year questions about 401k funds large price drops. It’s typically and end of the year dividend and you end up with the exact same total $$$s just more shares at a lower price. 

So if you're over the income limits for a Roth, what benefits does the Traditional IRA have?  I've never really thought of this until this post.  Certainly sounds like a taxable account is better than a Traditional IRA for non-traders.  What am I missing?

 

[stbugs]

So if you're over the income limits for a Roth, what benefits does the Traditional IRA have?  I've never really thought of this until this post.  Certainly sounds like a taxable account is better than a Traditional IRA for non-traders.  What am I missing?

Good question because while the money grows tax free, you pay income taxes on whatever you take out. I would think long term gains would be more advantageous as well as potential step up in basis on inherited stock would make a taxable account better. Plus, if you needed the money, there is no chance for a penalty. Roth makes sense but traditional if you aren’t getting a tax benefit on, doesn’t make sense to me. Traditional (or 401k) make sense if you get the up front tax benefit and believe your taxes will be lower in retirement. I do still think that people seem to forget about the advantages of stocks/ETFs/Funds in brokerage accounts. If you don’t need it and can get to long term gains, you have instant access with no penalties or worry about limits/potential tax hits and long term gains are lower than income tax rates.

 

[NutterButter]

So if you're over the income limits for a Roth, what benefits does the Traditional IRA have?  I've never really thought of this until this post.  Certainly sounds like a taxable account is better than a Traditional IRA for non-traders.  What am I missing?

If you're talking about a non-tax deferred traditional, might be good for things where you'd take a tax hit every year if it was a taxable account like dividends and target date funds where there's yearly if not more regular rebalancing for instance.   

 

[stbugs]

If you're talking about a non-tax deferred traditional, might be good for things where you'd take a tax hit every year if it was a taxable account like dividends and target date funds where there's yearly if not more regular rebalancing for instance.   

Note that qualified dividends are taxed at capital gains rates. Qualified dividends are the ones paid out on shares of company stock. Ordinary dividend from REITs and money market funds are taxed as income. That said even in a traditional IRA, it’s all going to get taxed as income taxes in the end, so potential penalties and limits on availability of money do make it seem like a bad idea if we can’t get any tax benefit up front.

 

[Sand]

Good question because while the money grows tax free, you pay income taxes on whatever you take out. I would think long term gains would be more advantageous as well as potential step up in basis on inherited stock would make a taxable account better. 

Over the long term the non-taxable nature of a tax deferred account allows for a lot more growth than in taxable.  It takes a while, but it does add up.  Good article.

On inheritance it makes a lot of sense with the new 10 year rule to try to move tax deferred monies over to a Roth or taxable.  But that doesn't mean it isn't a good vehicle for accumulation - it's a great one.

 

[Sand]

Finally started digging into taxes and ran up last year.  Ended up last year at 35x expenses.  Savings rate at 78%.  Crazy - that's what happens when you sell a property during a white hot sellers market.

Hanging in for the next year at work. I have some legacy items I want to see through.  Kid graduates HS in a year and a half.  After that, who knows?

 

[Random]

Finally started digging into taxes and ran up last year.  Ended up last year at 35x expenses.  Savings rate at 78%.  Crazy - that's what happens when you sell a property during a white hot sellers market.

Hanging in for the next year at work. I have some legacy items I want to see through.  Kid graduates HS in a year and a half.  After that, who knows?

Those are cool stats.  How are they calculated? 

Net worth or retirement savings is 35x expenses? 

Savings contributions were 78% of household income?

 

[Sand]

Those are cool stats.  How are they calculated? 

Net worth or retirement savings is 35x expenses? 

Savings contributions were 78% of household income?

35x is taking liquid net worth (i.e. not the house or car) and dividing that by yearly expenses.  The general thought is 30x is a point where you can cut the cord on employment.  I'm not quite there as I have a kid going to college ( ) and if I do cut the cord we're gonna blow some dough on travel.  Right now at work I average about -2 weeks of time off per year, so not much travel these days.

I saved 78% of after tax income this year, which is stupidly high.  It will never be anywhere close to that ever again.  One time RE deal is the cause there.

 

[Random]

35x is taking liquid net worth (i.e. not the house or car) and dividing that by yearly expenses.  The general thought is 30x is a point where you can cut the cord on employment.  I'm not quite there as I have a kid going to college ( ) and if I do cut the cord we're gonna blow some dough on travel.  Right now at work I average about -2 weeks of time off per year, so not much travel these days.

I saved 78% of after tax income this year, which is stupidly high.  It will never be anywhere close to that ever again.  One time RE deal is the cause there.

Mine are similar to yours.  45-50x expenses (have a bunch of paid off rental properties and dont spend much) 74% savings, also sold a property last year.  Hoping to continue to sell 1-2/yr.  I just have a few side gigs in addition to the rentals.  Wife still works, has maybe 10 years left to get her pension (teacher).  Our youngest is in 3rd grade.

 

[-OZ-]

35x is taking liquid net worth (i.e. not the house or car) and dividing that by yearly expenses.  The general thought is 30x is a point where you can cut the cord on employment.  I'm not quite there as I have a kid going to college ( ) and if I do cut the cord we're gonna blow some dough on travel.  Right now at work I average about -2 weeks of time off per year, so not much travel these days.

I saved 78% of after tax income this year, which is stupidly high.  It will never be anywhere close to that ever again.  One time RE deal is the cause there.

Mine are similar to yours.  45-50x expenses (have a bunch of paid off rental properties and dont spend much) 74% savings, also sold a property last year.  Hoping to continue to sell 1-2/yr.  I just have a few side gigs in addition to the rentals.  Wife still works, has maybe 10 years left to get her pension (teacher).  Our youngest is in 3rd grade.

Couple of ballers here. Nice work. 
 

Maybe I’m nuts but I have no desire to get close to that savings rate. (Not counting a one time RE sale). I’m content with 25-30% every year.

We won’t go blow money just to do it but when we get near 30x, we’ll be traveling internationally and buy a boat. But then I view our SWR much higher than 3.3% (I’ll aim for 6% with flexibility) and have no real desire to stop working for another decade. 

 

[Sand]

Maybe I’m nuts but I have no desire to get close to that savings rate. (Not counting a one time RE sale). I’m content with 25-30% every year.

I had no idea that's what it would be - I was as surprised as anyone that it was that high.  I have my eye on a gravel bike, so maybe I can drag it down the right way!

No worries, the markets are taking care of my savings excess right now.

 

[Random]

Couple of ballers here. Nice work. 
 

Maybe I’m nuts but I have no desire to get close to that savings rate. (Not counting a one time RE sale). I’m content with 25-30% every year.

We won’t go blow money just to do it but when we get near 30x, we’ll be traveling internationally and buy a boat. But then I view our SWR much higher than 3.3% (I’ll aim for 6% with flexibility) and have no real desire to stop working for another decade. 

Prior to covid we were traveling 3-4x per year with one of those being international (a few times with kids).  Travel is our only real hobby we spend money on, but the time we can spend traveling is limited with kids in school and the wife teaching. 

Trying to talk the wife into getting a new car (she drives a 15 Odyssey with 190K on it), but she really just doesn't care much.  Neither of us are big spenders.  No car or house payments help keep our expenses really low.

 

[-OZ-]

Prior to covid we were traveling 3-4x per year with one of those being international (a few times with kids).  Travel is our only real hobby we spend money on, but the time we can spend traveling is limited with kids in school and the wife teaching. 

Trying to talk the wife into getting a new car (she drives a 15 Odyssey with 190K on it), but she really just doesn't care much.  Neither of us are big spenders.  No car or house payments help keep our expenses really low.

have her talk to my wife!  She wants to replace our 11 odyssey with 150k miles. We barely drive it now as she uses the RAV4 and I’ve been WFH for the past two years. It’s in fine shape. She seems to be on board with waiting until our junior heads to college. 

 

[matttyl]

My uncle passed last year.  He left me and my 6 year old part of (shares of) a variable annuity. I’m taking my share ($28k with $20k basis) as lump sum.  I understand $8k is taxable as income, will pay tax out of pocket.  
Question concerns 6 year old.  We’re setting up bank account for them as a place for funds to be deposited.  From there, would they have to file a tax return of their own for their “gain”?  Or is that just tacked into my return as he’s my dependent?

Secondly, what can be done with those funds?  He’s 6, and with no earned income can’t have an IRA.  Hate to just have it sitting in a savings account.  

 

[Sand]

Secondly, what can be done with those funds?  He’s 6

I'm sure 6 year olds like Vegas.

 

[Lion to myself]

Secondly, what can be done with those funds?  He’s 6, and with no earned income can’t have an IRA.  Hate to just have it sitting in a savings account.  

You can open an UTMA/UGMA account and invest the funds however you like (growth oriented index fund or ETF would be my suggestion).  Here is a good article from Fidelity discussing UTMA/UGMAs:

https://www.fidelity.com/learning-center/personal-finance/custodial-account-for-kids

 

[-OZ-]

My uncle passed last year.  He left me and my 6 year old part of (shares of) a variable annuity. I’m taking my share ($28k with $20k basis) as lump sum.  I understand $8k is taxable as income, will pay tax out of pocket.  
Question concerns 6 year old.  We’re setting up bank account for them as a place for funds to be deposited.  From there, would they have to file a tax return of their own for their “gain”?  Or is that just tacked into my return as he’s my dependent?

Secondly, what can be done with those funds?  He’s 6, and with no earned income can’t have an IRA.  Hate to just have it sitting in a savings account.  

529? Coverdell (small amount), I bonds. Regular brokerage, UGMA/UTMA makes sense. 

 

[matttyl]

So no one knows the tax question?

 

[DallasDMac]

Quick tax preparation software question. My investments are all index funds, including IRAs, 401ks and a few plain ol' investments. The IRAs and 401k are all monthly (IRA) or bi-weekly (401k) cost-sharing type buys. I don't sell funds at all. Do I need to use the Premier version of TurboTax, or is the Deluxe version good enough since I am not buying/selling individual stocks or selling funds?

 

[Tom Hagen]

So no one knows the tax question?

If the child was a listed beneficiary, they would receive a separate 1099-R in their own name and SSN.  They would receive a standard deduction of $1,100 (assuming they don't have other earned income) and the balance of the taxable distribution would be taxable on their return at ordinary income tax rates.  There most likely would be no step in basis or capital gain treatment because it was an annuity as opposed to a regular brokerage account. In addition, I believe the child would be subject to the Kiddie Tax. 

If you were the only named beneficiary, it would be taxable to you and then subsequently gifted to the child but that does sound like what is going on here.

 

[Marvelous]

35x is taking liquid net worth (i.e. not the house or car) and dividing that by yearly expenses.  The general thought is 30x is a point where you can cut the cord on employment.  I'm not quite there as I have a kid going to college ( ) and if I do cut the cord we're gonna blow some dough on travel.  Right now at work I average about -2 weeks of time off per year, so not much travel these days.

I saved 78% of after tax income this year, which is stupidly high.  It will never be anywhere close to that ever again.  One time RE deal is the cause there.

Unless I am missing something, 35x or 30x seems like a really high figure.  If you use the 4% rule (flawed as it is), that gets you to 25x.

I am looking at retirement now at 20x, a really small pension, and social security in 10 years.  And Fidelity's model thinks I am in pretty good shape.

 

[Desert_Power]

Unless I am missing something, 35x or 30x seems like a really high figure.  If you use the 4% rule (flawed as it is), that gets you to 25x.

I am looking at retirement now at 20x, a really small pension, and social security in 10 years.  And Fidelity's model thinks I am in pretty good shape.

A lot of people will recommend lower withdrawal percentages if you are younger as the famous Trinity study is really for 30 years. I'm with you in that I would rather go earlier.