Personal Finance Advice and Education! (2 Viewers)

[Orange&Blue]

Question, should I stop doing roth 401(k) and just do traditional 401(k)?

I'm a fed employee and in the 24% tax bracket. I'm 43 years old and have the following investments:

-TSP target retirement (i.e. 401k)...$470k ($390k traditional and $80k roth)
-Roth IRAs...$100k
-Brokerage account... $240k
-I-bonds... $30k
-checking/emergency... $20k

So roth is ~21%. Fed only contributes to traditional 5% salary match, while my 9% is full Roth.

Not sure if it matters, but additional things:

house equity is about $250k. No debt besides mortgage which is at 3.25%.

At retirement I'll get about a 33% pension in addition to social security (if solvent).

 

[matttyl]

Question, should I stop doing roth 401(k) and just do traditional 401(k)?

I'm a fed employee and in the 24% tax bracket. I'm 43 years old and have the following investments:

-TSP target retirement (i.e. 401k)...$470k ($390k traditional and $80k roth)
-Roth IRAs...$100k
-Brokerage account... $240k
-I-bonds... $30k
-checking/emergency... $20k

So roth is ~21%

Not sure if it matters, but additional things:

house equity is about $250k. No debt besides mortgage which is at 3.25%.

At retirement I'll get about a 33% pension in addition to social security (if solvent).

Really depends more on your tax bracket situation than on your personal verbal portfolio. If you’re able to put in enough in traditional to get you in the next lower bracket, do that. If you’re unable to lower your bracket, it becomes a math problem - tax bracket now vs tax bracket later.

 

[Orange&Blue]

Question, should I stop doing roth 401(k) and just do traditional 401(k)?

I'm a fed employee and in the 24% tax bracket. I'm 43 years old and have the following investments:

-TSP target retirement (i.e. 401k)...$470k ($390k traditional and $80k roth)
-Roth IRAs...$100k
-Brokerage account... $240k
-I-bonds... $30k
-checking/emergency... $20k

So roth is ~21%

Not sure if it matters, but additional things:

house equity is about $250k. No debt besides mortgage which is at 3.25%.

At retirement I'll get about a 33% pension in addition to social security (if solvent).

Really depends more on your tax bracket situation than on your personal verbal portfolio. If you’re able to put in enough in traditional to get you in the next lower bracket, do that. If you’re unable to lower your bracket, it becomes a math problem - tax bracket now vs tax bracket later.

I'm not.

Right, but what is that equation

 

[Orange&Blue]

Yeah I'm gonna have them send a letter basically asking

1. State that the intention expressed in August was to move the stocks and cash, period.
2. Provide your notes of the instructions given in August timeline, and where they conflict.
3. Provide any direct contact (calls, texts, emails) which were not followed up on outside of auto-generated items.
4. Provide the source of the margin, need a way to describe the question (Why could they pull so much)
5. Provide a to-the-penny amount of interest charged
6. State that our intention is to seek compensation of the amount above
7. Note that we expect this figure to be in excess of $5000, and would expect a response from your compliance team rather than customer service. Ideally within the next working day.

Anything else?

take a dump on their front yard?

once resolved, leave some negative reviews warning others. Not sure if BBB review would help?

 

[Sand]

Question, should I stop doing roth 401(k) and just do traditional 401(k)?

I'm a fed employee and in the 24% tax bracket. I'm 43 years old and have the following investments:

-TSP target retirement (i.e. 401k)...$470k ($390k traditional and $80k roth)
-Roth IRAs...$100k
-Brokerage account... $240k
-I-bonds... $30k
-checking/emergency... $20k

So roth is ~21%. Fed only contributes to traditional 5% salary match, while my 9% is full Roth.

Not sure if it matters, but additional things:

house equity is about $250k. No debt besides mortgage which is at 3.25%.

At retirement I'll get about a 33% pension in addition to social security (if solvent).

The reason for a Roth and post tax monies is to be able to control your income for things like Obamacare subsidies, SS taxation, IRMAA, etc. Right now 55% of your monies are post-tax. Not knowing anything about you the biggest question is what do you expect to earn, not counting 401k distributions, after retirement? As noted the general rule for the Roth is you want to pay a lower (or at least equal) tax rate now as later. Right now the 24% threshold is 45k for singles and 89.5k for married. Many retirees will end up below that in the 22% or even 12% range. Assuming you don't end up with a super baller pension going traditional 401k is likely to be the right choice with the post tax kitty you have.

IMO, you're in a great spot. You should have the ability to control taxable income for many years to finesse your tax burden, healthcare costs, etc.

 

[Chadstroma]

Googling around here, is FINRA not the right place for this to land?

Possibly... wouldn't hurt anything to file a complaint with all three. Though I am convinced the CFPB just ignores complaints with them and spends all their time making sure mortgage broker shops aren't advertising on radio stations that they deem to be discriminatory while ignoring all of the actual stuff that are violations of regulations.

 

[-OZ-]

Question, should I stop doing roth 401(k) and just do traditional 401(k)?

I'm a fed employee and in the 24% tax bracket. I'm 43 years old and have the following investments:

-TSP target retirement (i.e. 401k)...$470k ($390k traditional and $80k roth)
-Roth IRAs...$100k
-Brokerage account... $240k
-I-bonds... $30k
-checking/emergency... $20k

So roth is ~21%

Not sure if it matters, but additional things:

house equity is about $250k. No debt besides mortgage which is at 3.25%.

At retirement I'll get about a 33% pension in addition to social security (if solvent).

Really depends more on your tax bracket situation than on your personal verbal portfolio. If you’re able to put in enough in traditional to get you in the next lower bracket, do that. If you’re unable to lower your bracket, it becomes a math problem - tax bracket now vs tax bracket later.

Contributing enough to get the marginal dollars into 22% doesn’t matter except that I’d stop traditional in the 22%.

Honestly, it’s a bet on future taxes. You’re already heavy traditional so I’d side with more Roth.
Our portfolios are about 60% Roth, but I also have the military pension to deal with.

 

[Gawain]

My mother passed intestate in December and I'm winding down her estate. One of the last items on my to do list is 10K in I bonds in a Treasury Direct account with no POD designation. Per the treasury these do not have to be included in the estate and can be directly sent to decedents TD accounts. However, the US Treasury wants a Financial Institution Medallion stamp and no financial institution I use (BoA / Fidelity) are willing to stamp for assets that aren't coming to them. BoA sucks all the way around, but I'm very frustrated with Fidelity through the whole process.

Any thoughts on institutions that are willing to do a Signature Guarantee for Treasury Direct? I'm fed up enough with both of my current places to start transferring assets.

 

[Lion to myself]

My mother passed intestate in December and I'm winding down her estate. One of the last items on my to do list is 10K in I bonds in a Treasury Direct account with no POD designation. Per the treasury these do not have to be included in the estate and can be directly sent to decedents TD accounts. However, the US Treasury wants a Financial Institution Medallion stamp and no financial institution I use (BoA / Fidelity) are willing to stamp for assets that aren't coming to them. BoA sucks all the way around, but I'm very frustrated with Fidelity through the whole process.

Any thoughts on institutions that are willing to do a Signature Guarantee for Treasury Direct? I'm fed up enough with both of my current places to start transferring assets.

If you’re thinking about switching banks, I’d call a few of the ones you are considering to see if they will do a Signature Guarantee for customers regardless of where the assets are going.

 

[Juxtatarot]

My mother passed intestate in December and I'm winding down her estate. One of the last items on my to do list is 10K in I bonds in a Treasury Direct account with no POD designation. Per the treasury these do not have to be included in the estate and can be directly sent to decedents TD accounts. However, the US Treasury wants a Financial Institution Medallion stamp and no financial institution I use (BoA / Fidelity) are willing to stamp for assets that aren't coming to them. BoA sucks all the way around, but I'm very frustrated with Fidelity through the whole process.

Any thoughts on institutions that are willing to do a Signature Guarantee for Treasury Direct? I'm fed up enough with both of my current places to start transferring assets.

If you’re thinking about switching banks, I’d call a few of the ones you are considering to see if they will do a Signature Guarantee for customers regardless of where the assets are going.

Yep. I’m curious now which of the big institutions would do this. Would Chase, Wells Fargo, Citibank, etc.?

I think a lot of credit unions will do this for their members but this isn’t something I’ve asked around about.

 

[NutterButter]

Not sure if its the same thing, but a few years ago, I had to do something similar to get access back to my TD account. Went into my pnc branch (I'm a client) with some paperwork, they watched me sign it, looked at my license and did some fancy stamp thing.

 

[Juxtatarot]

Not sure if its the same thing, but a few years ago, I had to do something similar to get access back to my TD account. Went into my pnc branch (I'm a client) with some paperwork, they watched me sign it, looked at my license and did some fancy stamp thing.

Sounds like it is.

 

[matttyl]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

 

[Sand]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

 

[matttyl]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Thanks. Like I said the numbers are all estimates with me being commission based. Doing a mid year check now to see how things are looking. If I’m well under that I may do some Roth conversions. If I’m well over it, well then I’ve had a good year.

 

[Desert_Power]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Buy a rental property that "loses" money

 

[-OZ-]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Buy a rental property that "loses" money

I need to understand how this works better.

 

[-OZ-]

Not that it matters much, but I get a monthly housing report from Redfin, this month is the first time I can recall it actually dropping. By 0.92%, still almost double our remaining mortgage.

 

[Sand]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Buy a rental property that "loses" money

I need to understand how this works better.

Buy a property. Depreciate over 27.5 years and any repairs immediately. Charge rent. Show a loss while actually being cash flow positive. Deduct from your taxes. Die. Leave property to your kids. They get stepped up basis, so depreciation recapture is never paid. Profit.

 

[BeTheMatch]

Quick question to make sure I don't do something dumb here. Just sold out house and probably won't buy for several months, maybe even 6-9 months.

So we've got six figures to park somewhere in the meantime. We have several different accounts at vanguard, including a non-retirement brokerage account. So do I just put it in their money market account, or can I get a bigger return in a CD?

The return on 6- to 9-month CDs is 5.35 percent paid at maturity.

Question is how the money market works? What would return be, and when is that paid?

 

[Desert_Power]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Buy a rental property that "loses" money

I need to understand how this works better.

Buy a property. Depreciate over 27.5 years and any repairs immediately. Charge rent. Show a loss while actually being cash flow positive. Deduct from your taxes. Die. Leave property to your kids. They get stepped up basis, so depreciation recapture is never paid. Profit.

Even more fun, do a cost segregation study in year 1 to depreciate even more in that period (less over the remaining 26.5)

 

[stbugs]

Quick question to make sure I don't do something dumb here. Just sold out house and probably won't buy for several months, maybe even 6-9 months.

So we've got six figures to park somewhere in the meantime. We have several different accounts at vanguard, including a non-retirement brokerage account. So do I just put it in their money market account, or can I get a bigger return in a CD?

The return on 6- to 9-month CDs is 5.35 percent paid at maturity.

Question is how the money market works? What would return be, and when is that paid?

My Fidelity accounts pay 4.7% on cash so I wouldn’t bother with a CD. Sure you’d get a few hundred more but you’d have zero timing issues. What if you need to buy before the CD has matured? Knowing my wife, if we were looking and found the right place, not having the money ready and losing the place would suck way more than losing out on a few hundred. Money markets are almost 90% of CDs but with 100% flexibility.

 

[NutterButter]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Buy a rental property that "loses" money

I need to understand how this works better.

Buy a property. Depreciate over 27.5 years and any repairs immediately. Charge rent. Show a loss while actually being cash flow positive. Deduct from your taxes. Die. Leave property to your kids. They get stepped up basis, so depreciation recapture is never paid. Profit.

This is fascinating. Not that I'd ever do it. So a significant element to this is leaving the property to your kids when you die. To avoid having to pay back those taxes on the depreciation, you can never sell this property when you're alive, correct? Not to say it still doesn't have the benefit of it being a free loan from the government.

 

[-OZ-]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Buy a rental property that "loses" money

I need to understand how this works better.

Buy a property. Depreciate over 27.5 years and any repairs immediately. Charge rent. Show a loss while actually being cash flow positive. Deduct from your taxes. Die. Leave property to your kids. They get stepped up basis, so depreciation recapture is never paid. Profit.

We’re planning to basically do this in a few years. I get the impression that I’ll mildly regret not having done it earlier as we’re too Risk averse.

 

[pecorino]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Buy a rental property that "loses" money

I need to understand how this works better.

Buy a property. Depreciate over 27.5 years and any repairs immediately. Charge rent. Show a loss while actually being cash flow positive. Deduct from your taxes. Die. Leave property to your kids. They get stepped up basis, so depreciation recapture is never paid. Profit.

This is fascinating. Not that I'd ever do it. So a significant element to this is leaving the property to your kids when you die. To avoid having to pay back those taxes on the depreciation, you can never sell this property when you're alive, correct? Not to say it still doesn't have the benefit of it being a free loan from the government.

I’ve had a nagging question about this. Our rental house is about a dozen years into its depreciation and we plan to keep renting it another ten or so. At some point, we want to declare it as our primary residence (but still rent it for three months seasonally). Question: can we avoid depreciation recapture if we sell it after a few years as our primary residence? I’d rather not need to die to avoid that tax headache.

 

[Desert_Power]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Buy a rental property that "loses" money

I need to understand how this works better.

Buy a property. Depreciate over 27.5 years and any repairs immediately. Charge rent. Show a loss while actually being cash flow positive. Deduct from your taxes. Die. Leave property to your kids. They get stepped up basis, so depreciation recapture is never paid. Profit.

This is fascinating. Not that I'd ever do it. So a significant element to this is leaving the property to your kids when you die. To avoid having to pay back those taxes on the depreciation, you can never sell this property when you're alive, correct? Not to say it still doesn't have the benefit of it being a free loan from the government.

I’ve had a nagging question about this. Our rental house is about a dozen years into its depreciation and we plan to keep renting it another ten or so. At some point, we want to declare it as our primary residence (but still rent it for three months seasonally). Question: can we avoid depreciation recapture if we sell it after a few years as our primary residence? I’d rather not need to die to avoid that tax headache.

Ask your accountant or just do a 1031 exchange.

 

[pecorino]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Buy a rental property that "loses" money

I need to understand how this works better.

Buy a property. Depreciate over 27.5 years and any repairs immediately. Charge rent. Show a loss while actually being cash flow positive. Deduct from your taxes. Die. Leave property to your kids. They get stepped up basis, so depreciation recapture is never paid. Profit.

This is fascinating. Not that I'd ever do it. So a significant element to this is leaving the property to your kids when you die. To avoid having to pay back those taxes on the depreciation, you can never sell this property when you're alive, correct? Not to say it still doesn't have the benefit of it being a free loan from the government.

I’ve had a nagging question about this. Our rental house is about a dozen years into its depreciation and we plan to keep renting it another ten or so. At some point, we want to declare it as our primary residence (but still rent it for three months seasonally). Question: can we avoid depreciation recapture if we sell it after a few years as our primary residence? I’d rather not need to die to avoid that tax headache.

Ask your accountant or just do a 1031 exchange.

Thanks for the reply but I am my own accountant and I do not plan on buying another rental property. I'm small potatoes. Nowhere online have I been able to find an answer to my depreciation question. I'll give it some more time on FFA.

 

[Tom Hagen]

I’ve had a nagging question about this. Our rental house is about a dozen years into its depreciation and we plan to keep renting it another ten or so. At some point, we want to declare it as our primary residence (but still rent it for three months seasonally). Question: can we avoid depreciation recapture if we sell it after a few years as our primary residence? I’d rather not need to die to avoid that tax headache.

The exclusion of gain on the sale of a primary residence only applies to the gain from appreciation. Any depreciation taken would need to be recaptured.

Fun fact, technically you need to recapture any depreciation that would have been allowed even if you didn’t claim it (allowed or allowable).

 

[Sand]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Buy a rental property that "loses" money

I need to understand how this works better.

Buy a property. Depreciate over 27.5 years and any repairs immediately. Charge rent. Show a loss while actually being cash flow positive. Deduct from your taxes. Die. Leave property to your kids. They get stepped up basis, so depreciation recapture is never paid. Profit.

This is fascinating. Not that I'd ever do it. So a significant element to this is leaving the property to your kids when you die. To avoid having to pay back those taxes on the depreciation, you can never sell this property when you're alive, correct? Not to say it still doesn't have the benefit of it being a free loan from the government.

I’ve had a nagging question about this. Our rental house is about a dozen years into its depreciation and we plan to keep renting it another ten or so. At some point, we want to declare it as our primary residence (but still rent it for three months seasonally). Question: can we avoid depreciation recapture if we sell it after a few years as our primary residence? I’d rather not need to die to avoid that tax headache.

Ask your accountant or just do a 1031 exchange.

Thanks for the reply but I am my own accountant and I do not plan on buying another rental property. I'm small potatoes. Nowhere online have I been able to find an answer to my depreciation question. I'll give it some more time on FFA.

Ask on biggerpockets.

 

[Ilov80s]

Quick question:

So I have a family friend and they have hit some hard times (mostly brought on by truly awful decisions on their part). We are pretty close to their 14 year old daughter and really feel bad for her. She is lucky that her grandmother has money set aside for college so she will probably be ok there with minimum debt (she's likely a community college kid). However,, I worry about money for car, getting her own place (I don't think living at home for too long after high school is a good idea, it's not a healthy environment right now) and just general money to get started in life. She doesn't really have anyone else in way of family to help. I would like to put aside some money for her to help with those things. It won't be much, was thinking like $40-50 a month. Give her the money at the right time, 3-5 years probably.

What would be the right kind of investment for this? Obviously, I want low risk but it would be nice for the money to grow a little. I know it's a short time and not a lot of cash, but it's the best I can do at this point. It's something I would not give her now and wouldn't tell her about now because I still do worry if she ends up making some of the same bad decisions as her parents, then no way I am giving her money because she would use it for self destructive purposes. Thanks in advance.

 

[Lion to myself]

Quick question:

So I have a family friend and they have hit some hard times (mostly brought on by truly awful decisions on their part). We are pretty close to their 14 year old daughter and really feel bad for her. She is lucky that her grandmother has money set aside for college so she will probably be ok there with minimum debt (she's likely a community college kid). However,, I worry about money for car, getting her own place (I don't think living at home for too long after high school is a good idea, it's not a healthy environment right now) and just general money to get started in life. She doesn't really have anyone else in way of family to help. I would like to put aside some money for her to help with those things. It won't be much, was thinking like $40-50 a month. Give her the money at the right time, 3-5 years probably.

What would be the right kind of investment for this? Obviously, I want low risk but it would be nice for the money to grow a little. I know it's a short time and not a lot of cash, but it's the best I can do at this point. It's something I would not give her now and wouldn't tell her about now because I still do worry if she ends up making some of the same bad decisions as her parents, then no way I am giving her money because she would use it for self destructive purposes. Thanks in advance.

Possibly a short term bond fund however there would be risk to the principal. Savings account at a local credit union or online bank would be my suggestion given the dollar amounts and timeframe (no risk to principal).

 

[Ilov80s]

Quick question:

So I have a family friend and they have hit some hard times (mostly brought on by truly awful decisions on their part). We are pretty close to their 14 year old daughter and really feel bad for her. She is lucky that her grandmother has money set aside for college so she will probably be ok there with minimum debt (she's likely a community college kid). However,, I worry about money for car, getting her own place (I don't think living at home for too long after high school is a good idea, it's not a healthy environment right now) and just general money to get started in life. She doesn't really have anyone else in way of family to help. I would like to put aside some money for her to help with those things. It won't be much, was thinking like $40-50 a month. Give her the money at the right time, 3-5 years probably.

What would be the right kind of investment for this? Obviously, I want low risk but it would be nice for the money to grow a little. I know it's a short time and not a lot of cash, but it's the best I can do at this point. It's something I would not give her now and wouldn't tell her about now because I still do worry if she ends up making some of the same bad decisions as her parents, then no way I am giving her money because she would use it for self destructive purposes. Thanks in advance.

Possibly a short term bond fund however there would be risk to the principal. Savings account at a local credit union or online bank would be my suggestion given the dollar amounts and timeframe (no risk to principal).

Thanks, that was kind of my thought but I don't know jack about investing so figured it wouldn't hurt to ask. I mean I have all the retirement stuff set up that people have advised me on nut it's all over my head. How much risk would the bond run?

 

[The Z Machine]

What's the go to high yield savings account these days? I'm at My Savings Direct at like 4.25%. Gotta be FDIC insured that's better than that.

 

[Lion to myself]

Quick question:

So I have a family friend and they have hit some hard times (mostly brought on by truly awful decisions on their part). We are pretty close to their 14 year old daughter and really feel bad for her. She is lucky that her grandmother has money set aside for college so she will probably be ok there with minimum debt (she's likely a community college kid). However,, I worry about money for car, getting her own place (I don't think living at home for too long after high school is a good idea, it's not a healthy environment right now) and just general money to get started in life. She doesn't really have anyone else in way of family to help. I would like to put aside some money for her to help with those things. It won't be much, was thinking like $40-50 a month. Give her the money at the right time, 3-5 years probably.

What would be the right kind of investment for this? Obviously, I want low risk but it would be nice for the money to grow a little. I know it's a short time and not a lot of cash, but it's the best I can do at this point. It's something I would not give her now and wouldn't tell her about now because I still do worry if she ends up making some of the same bad decisions as her parents, then no way I am giving her money because she would use it for self destructive purposes. Thanks in advance.

Possibly a short term bond fund however there would be risk to the principal. Savings account at a local credit union or online bank would be my suggestion given the dollar amounts and timeframe (no risk to principal).

Thanks, that was kind of my thought but I don't know jack about investing so figured it wouldn't hurt to ask. I mean I have all the retirement stuff set up for me that people have advised me on it's all over my head. How much risk would the bond run?

There isn’t a ton of risk if you go with a short term bond but rising interest rates is the biggest risk. When rates go up, bond prices go down. Going with a short term fund would help reduce that risk but not eliminate it. Given that short term bond rates are not much better than FDIC savings account rates I’m not sure I’d take that risk.

 

[Lion to myself]

What's the go to high yield savings account these days? I'm at My Savings Direct at like 4.25%. Gotta be FDIC insured that's better than that.

4.25% is towards the top end of liquid savings right now. Of course you can find a little higher if you search around. High balance money markets might approach 5%.

 

[The Z Machine]

What's the go to high yield savings account these days? I'm at My Savings Direct at like 4.25%. Gotta be FDIC insured that's better than that.

4.25% is towards the top end of liquid savings right now. Of course you can find a little higher if you search around. High balance money markets might approach 5%

I'd rather not risk non-FDIC insured and paying management fees is lame.

 

[New Binky the Doormat]

What's the go to high yield savings account these days? I'm at My Savings Direct at like 4.25%. Gotta be FDIC insured that's better than that.

4.25% is towards the top end of liquid savings right now. Of course you can find a little higher if you search around. High balance money markets might approach 5%

I'd rather not risk non-FDIC insured and paying management fees is lame.

we just moved some stuff into 5% 12 month CDs - and that's Regions - which has been supremely AWFUL at compensating anything ...

US Bank was a bit more - innerweb stuff is a little higher if you want to go that way

 

[-OZ-]

What's the go to high yield savings account these days? I'm at My Savings Direct at like 4.25%. Gotta be FDIC insured that's better than that.

4.25% is towards the top end of liquid savings right now. Of course you can find a little higher if you search around. High balance money markets might approach 5%

I'd rather not risk non-FDIC insured and paying management fees is lame.

I’m paying $50 this year for M1+ and it’s 5% savings account but it’s $95 I think now and I probably wouldn’t pay more.

Check https://wallethacks.com/best-online-high-yield-savings-account-banks/

 

[Judge Smails]

Bit of a long winded tax question, so I apologize up front, but want to be sure I’m understanding what I can and can’t do. The following are all rough numbers, which due to being a commission based salesman I won’t even know till year end.

Assume married filing jointly. I want to do all I can to keep $ out of 22% bracket (why such a big jump from 12 to 22%?). Assuming gross household income of $170k. Assume both spouses contribute the maximum allowed into 401k/403b, which totals $45k. That lowers taxable income to $125k. Assume max of $7,750 put in HSA, but since 2,250 of it was employer contributions, only $5k is deductible to us - further lowers taxable income (technically AGI) to $120k. So far so good.

Standard deduction is 27,700. Lowers taxable income to $92.3k.

So I *think* in this example AGI is 120k and taxable income is 92.3k. Does this mean we can no longer fully deduct any traditional IRA contributions we make (I think the 2023 limit is $116k of MAGI), but also that only a few grand would be in the 22% bracket, which starts at $89.5k?

This all seems right. You are in the phase out range for IRA, so most(?) should be deductible. Items that may help - sell losing stocks to get the -3k to income. Contribute a crapload to charity to be able to itemize. I think that's about it.

Buy a rental property that "loses" money

Man I need to do this. I’m terrible at minimizing taxes

 

[Orange&Blue]

I bought $10k of i-bonds in November of 2021. it's now valued at $11.1k with an interest rate of 3.38%. when is the best time to sell?

 

[-OZ-]

I bought $10k of i-bonds in November of 2021. it's now valued at $11.1k with an interest rate of 3.38%. when is the best time to sell?

I think you can sell in august. Unless I’m mistaken you started getting the 3.38% in May. So May, June, July’s penalty would be the lower rate. Actually I know if you buy in a month you get that month counted, I only assume you’d need to keep it through the end of the month to get that month’s counted.

 

[Desert_Power]

I bought $10k of i-bonds in November of 2021. it's now valued at $11.1k with an interest rate of 3.38%. when is the best time to sell?

I think you can sell in august. Unless I’m mistaken you started getting the 3.38% in May. So May, June, July’s penalty would be the lower rate. Actually I know if you buy in a month you get that month counted, I only assume you’d need to keep it through the end of the month to get that month’s counted.

I've got some May 2021 vintage bonds that I am planning to redeem in August after their three months at 3.38%

 

[Nugget]

Ally just bumped their No Penalty CD to 4.55%. It is an 11 month CD, but you can withdraw funds after 6 days. I moved the majority of my HYSA over this morning into 5 separate CDs.

 

[-OZ-]

Ally just bumped their No Penalty CD to 4.55%. It is an 11 month CD, but you can withdraw funds after 6 days. I moved the majority of my HYSA over this morning into 5 separate CDs.

Not bad. If M1+ wasn’t giving 5% I’d strongly consider it.

 

[Nugget]

Ally just bumped their No Penalty CD to 4.55%. It is an 11 month CD, but you can withdraw funds after 6 days. I moved the majority of my HYSA over this morning into 5 separate CDs.

Not bad. If M1+ wasn’t giving 5% I’d strongly consider it.

What other benefits does M1+offer besides the bump in rate? I don’t think I keep enough money in my EF and sinking funds to justify. I was going to build a T-bill ladder again, but my laziness won out.

 

[-OZ-]

Ally just bumped their No Penalty CD to 4.55%. It is an 11 month CD, but you can withdraw funds after 6 days. I moved the majority of my HYSA over this morning into 5 separate CDs.

Not bad. If M1+ wasn’t giving 5% I’d strongly consider it.

What other benefits does M1+offer besides the bump in rate? I don’t think I keep enough money in my EF and sinking funds to justify. I was going to build a T-bill ladder again, but my laziness won out.

A second trading window in the afternoon but that’s not the biggest selling point. The credit card is pretty decent: https://m1.com/owners-rewards/
And the higher yield savings. When I first signed up, the loan rate was 2.25% so that was an extra nice benefit.

 

[gianmarco]

What's the go to high yield savings account these days? I'm at My Savings Direct at like 4.25%. Gotta be FDIC insured that's better than that.

I've posted here about it, I think, but look at CIT bank. Been there a few years now. 4.95%, no fees, super easy. FDIC insured.

Here you go.

 

[SoylentGreen]

I know most in here are in the "all non-mortgage debt is bad" camp and are buying cars with cash and never put anything on a credit card they can't pay off the next day. But it's a fact that the wealthy responsibly use debt all the time to their advantage to finance their lives and make investments. Is there anything us normal FBGers can take from that? As background I was a poster child for the 2008-09 financial crisis - I took on an interest-only ARM on a condo I couldn't really afford, took out a bunch of equity to pay off cc and medical debt and to make improvements as the place continued to soar in "value". Then when everything crashed I was screwed. I walked away from the condo and ended up in foreclosure and bankruptcy. Throw in a divorce a couple years later, it was all pretty financially devastating. As a result I'm so debt-averse because of what I went through put myself through that I'm wondering if I'm missing out on potential opportunities

Flash forward to today and I've purchased a home (with a 30-year mortgage I can afford), my credit score is back up to 800, and I responsibly use cc's by charging everything I can to get cash back/travel points while paying off the statement balance every month. .

Top of mind is I have to do about $20K in home improvements this year. I've set aside most of that (earning 4.75%) and will have the rest by the time I need it. But should I consider borrowing for that and paying it off over a handful of months? My understanding is the interest payments would be deductible. And not writing a check for that $20K would provide additional financial flexibility for unforeseen circumstances or (potentially) to keep more money invested. We're also considering a more major remodel project in the next couple of years that would be more like $75-100K.

Or is this just a game the ultra-wealthy can play since the bulk of what they're dealing with isn't income but investments? Any books/podcasts/blogs with viewpoints on maximizing the responsible use of debt for normal people trying to optimize around the edges? I'm really just looking for a framework to think through this.

TIA

 

[Sand]

I know most in here are in the "all non-mortgage debt is bad" camp

This is definitely not true, but it should be "manageable relatively low interest rate debt in moderation". CC debt is the devil, though.

Top of mind is I have to do about $20K in home improvements this year. I've set aside most of that (earning 4.75%) and will have the rest by the time I need it. But should I consider borrowing for that and paying it off over a handful of months? My understanding is the interest payments would be deductible. And not writing a check for that $20K would provide additional financial flexibility for unforeseen circumstances or (potentially) to keep more money invested. We're also considering a more major remodel project in the next couple of years that would be more like $75-100K.

So you have a HELOC open and are debating whether to draw from it? Financial flexibility is worth something - I wouldn't hesitate to borrow if costs were low and limited in duration.

 

[-OZ-]

I know most in here are in the "all non-mortgage debt is bad" camp and are buying cars with cash and never put anything on a credit card they can't pay off the next day. But it's a fact that the wealthy responsibly use debt all the time to their advantage to finance their lives and make investments. Is there anything us normal FBGers can take from that? As background I was a poster child for the 2008-09 financial crisis - I took on an interest-only ARM on a condo I couldn't really afford, took out a bunch of equity to pay off cc and medical debt and to make improvements as the place continued to soar in "value". Then when everything crashed I was screwed. I walked away from the condo and ended up in foreclosure and bankruptcy. Throw in a divorce a couple years later, it was all pretty financially devastating. As a result I'm so debt-averse because of what I went through put myself through that I'm wondering if I'm missing out on potential opportunities

Flash forward to today and I've purchased a home (with a 30-year mortgage I can afford), my credit score is back up to 800, and I responsibly use cc's by charging everything I can to get cash back/travel points while paying off the statement balance every month. .

Top of mind is I have to do about $20K in home improvements this year. I've set aside most of that (earning 4.75%) and will have the rest by the time I need it. But should I consider borrowing for that and paying it off over a handful of months? My understanding is the interest payments would be deductible. And not writing a check for that $20K would provide additional financial flexibility for unforeseen circumstances or (potentially) to keep more money invested. We're also considering a more major remodel project in the next couple of years that would be more like $75-100K.

Or is this just a game the ultra-wealthy can play since the bulk of what they're dealing with isn't income but investments? Any books/podcasts/blogs with viewpoints on maximizing the responsible use of debt for normal people trying to optimize around the edges? I'm really just looking for a framework to think through this.

TIA

Debt isn’t all bad. I look at it as opportunity cost. . Taking a loan to obtain something you reasonably expect to have more positive gains often makes sense - Mortgages make sense because rates are low and the asset usually rises. Taking a loan on a nice car can make sense if image matters like a high priced attorney, agent, financial advisor, etc (Not saying it’s always right with those jobs but it can be). College can make sense for the same reasons.
acknowledge the risk while assessing the reward.
Most debt other than the mortgage doesn’t make much sense for us, but I borrowed on a line of credit to renovate our bathroom while I bonds paid a higher rate. Paid that off as soon as the bonds paid less than the loan cost. That was a fairly easy decision imo. Borrowing to buy stock is tougher when interest rates are above 6%