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Personal Finance Advice and Education! (1 Viewer)

-OZ-

Footballguy
How soon is retirement?
Probably ten years or so.  Really could retire whenever we want. We won’t move from here until the youngest is in college, she’s in first grade now.
While we’re here I’d rather work, I enjoy my job, and have the extra cash to enjoy and give. It’s within reason that I’d decide I don’t like the job in 5 years (I don’t think so but 🤷 who knows), then find the new challenge. Right now I think that’s something along the lines of financial coaching or estate planning. Could be working with the adoption community.  

 

PlayaHata

Footballguy
I've got a nice chunk of change in a Fidelity 401K from an old employer.  I'm interested in moving a small portion of that into an IRA account so that I can dabble in buying/selling individual stocks.  I'm looking at Fidelity's IRA options and I see Traditional, Roth, and Rollover IRAs listed.  Which of these is the one I should pick?  The Rollover one?

 

stbugs

Footballguy
I've got a nice chunk of change in a Fidelity 401K from an old employer.  I'm interested in moving a small portion of that into an IRA account so that I can dabble in buying/selling individual stocks.  I'm looking at Fidelity's IRA options and I see Traditional, Roth, and Rollover IRAs listed.  Which of these is the one I should pick?  The Rollover one?
I think you have to do the rollover unless you want tax implications like the Roth.

Also, you can’t just move a small amount, pretty sure it has to be the whole thing. That said, the mutual fun options in the 401k are likely all available and probably all with no fees. Just leave the portion you want to trade in cash and thro the rest in mutual funds or ETFs that mimic what you had and you’re set. If you get more comfortable doing stocks then you can sell some of the funds to build up more cash. It’s easy and I have every account now in Fidelity as my wife’s and my current companies’ 401ks are Fidelity. Rolled over my old 401k. 

 

-OZ-

Footballguy
stbugs said:
I think you have to do the rollover unless you want tax implications like the Roth.

Also, you can’t just move a small amount, pretty sure it has to be the whole thing. That said, the mutual fun options in the 401k are likely all available and probably all with no fees. Just leave the portion you want to trade in cash and thro the rest in mutual funds or ETFs that mimic what you had and you’re set. If you get more comfortable doing stocks then you can sell some of the funds to build up more cash. It’s easy and I have every account now in Fidelity as my wife’s and my current companies’ 401ks are Fidelity. Rolled over my old 401k. 
This, or just transfer everything and make the moves while at fidelity. 
 

for the accounts I manage more actively (which account to about 10% of our total) about half of the funds remain in a total market like VTI, about 1/4 in small cap US, then I manage the remaining. Not day trading by any stretch now but deliberate decisions Vs automatic.  So I’m active with less than 3% total. I’d encourage keeping it less than 10%, preferably 5%. 

 
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Lion to myself

Footballguy
stbugs said:
Also, you can’t just move a small amount, pretty sure it has to be the whole thing.
Great suggestions from stbugs and Oz.  Regarding the section I quoted above, partial withdrawals are plan specific. Meaning it may or may not be allowed based on the rules the employer (former employer in this case) chose.  Fidelity can answer that question for you. Of course you can roll it all over to a rollover IRA as suggested.  

 

Sand

Footballguy
After the market action in the jar couple weeks my investments have hit a major milestone.  Kinda of stunned it happened so quick.  I'm sure it will be fine next week, but FI is calling!

Like Oz I plan on adding 25k of Bonds for years to come to provide a good bond cushion.  Current bond choices in the market are poor - gotta be creative.  Also moving a significant chunks to crypto stablecoin places to catch 9% interest they are giving.  

ETA- 401k maximum raised to 20.5k next year.  Every bit helps.

 
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jm192

Footballguy
We've got ~20% of our portfolio in bonds.  But I think I'm going to get out of all but the I-bonds.  

Bonds are crap right now.  And while the market may go down at any given time.  It's absurdly likely to go up in the next 30 years.  

It seems like everyone who advocates for "must have bonds" does for the psychology component of it.  Can't underestimate your risk tolerance and sell when things are low.  But--I'm confident I can stay the course when the market drops.  If anything, seems like a good time to buy in cheap.  

 

-OZ-

Footballguy
After the market action in the jar couple weeks my investments have hit a major milestone.  Kinda of stunned it happened so quick.  I'm sure it will be fine next week, but FI is calling!

Like Oz I plan on adding 25k of Bonds for years to come to provide a good bond cushion.  Current bond choices in the market are poor - gotta be creative.  Also moving a significant chunks to crypto stablecoin places to catch 9% interest they are giving.  

ETA- 401k maximum raised to 20.5k next year.  Every bit helps.
i keep thinking about stable Coins but I’m just reluctant as it seems there must be more risk and frankly I don’t fully understand how they’re paying that high. 
 

The mental challenge of investing as much as possible Vs being more free with expenses is real. But we’re getting better about it. For 2022, I’ll max the TSP and our Roth IRAs, put $20k into I bonds and continue to “pay” extra on the mortgage (the extra goes into the regular brokerage). Just trying to give ourselves permission to spend / give the rest instead of investing more. 

 

-OZ-

Footballguy
We've got ~20% of our portfolio in bonds.  But I think I'm going to get out of all but the I-bonds.  

Bonds are crap right now.  And while the market may go down at any given time.  It's absurdly likely to go up in the next 30 years.  

It seems like everyone who advocates for "must have bonds" does for the psychology component of it.  Can't underestimate your risk tolerance and sell when things are low.  But--I'm confident I can stay the course when the market drops.  If anything, seems like a good time to buy in cheap.  
Agreed with just about all of this. Unless you’re spending your investments, the only reasons to have bonds are due to a lack of confidence in the market over the long haul. I have concerns about the US and our long term prospects, I don’t think we stay as THE world’s power throughout my lifetime. But I’ll hedge my bets by having more international equities and REITs instead of bonds. 

 

Orange&Blue

Footballguy
Probably ten years or so.  Really could retire whenever we want. We won’t move from here until the youngest is in college, she’s in first grade now.
While we’re here I’d rather work, I enjoy my job, and have the extra cash to enjoy and give. It’s within reason that I’d decide I don’t like the job in 5 years (I don’t think so but 🤷 who knows), then find the new challenge. Right now I think that’s something along the lines of financial coaching or estate planning. Could be working with the adoption community.  


How you doing this as a government employee?

 

ConstruxBoy

Kate's Daddy
We've got ~20% of our portfolio in bonds.  But I think I'm going to get out of all but the I-bonds.  

Bonds are crap right now.  And while the market may go down at any given time.  It's absurdly likely to go up in the next 30 years.  

It seems like everyone who advocates for "must have bonds" does for the psychology component of it.  Can't underestimate your risk tolerance and sell when things are low.  But--I'm confident I can stay the course when the market drops.  If anything, seems like a good time to buy in cheap.  
Bonds should be entirely used as short term holdings to earn a little more money than cash. A retired person keeping a couple of years of expenses in cash and a couple in bonds makes a lot of sense as a hedge against a falling or static 3-5 year stock market. Anyone who doesn't need the cash for 5 years or more should not be in bonds. 

 

SFBayDuck

Footballguy
After the market action in the jar couple weeks my investments have hit a major milestone.  Kinda of stunned it happened so quick.  I'm sure it will be fine next week, but FI is calling!

Like Oz I plan on adding 25k of Bonds for years to come to provide a good bond cushion.  Current bond choices in the market are poor - gotta be creative.  Also moving a significant chunks to crypto stablecoin places to catch 9% interest they are giving.  

ETA- 401k maximum raised to 20.5k next year.  Every bit helps.


I've been doing this a bit as well, and just set up automatic monthly investment in BlockFi.  But like @-OZ- I'm kind of concerned about the risk there.  Otherwise I'd put in much more than I have been.

 

Random

Footballguy
What is the best thing to do when you're not sure which side of the Roth income limit you will be on?  Haven't made any contributions yet for this year and it looks like our AGI will be very close to the limit.  Same for next year.  

Contribute to Roth and convert if over?

Contribute to traditional and convert if under?

Continue waiting until my taxes are done to contribute?

 

wilked

Footballguy
What is the best thing to do when you're not sure which side of the Roth income limit you will be on?  Haven't made any contributions yet for this year and it looks like our AGI will be very close to the limit.  Same for next year.  

Contribute to Roth and convert if over?

Contribute to traditional and convert if under?

Continue waiting until my taxes are done to contribute?
Wait, do backdoor Roth if you’re over 

 

Desert_Power

Footballguy
On 11/6/2021 at 11:53 AM, Sand said:
After the market action in the jar couple weeks my investments have hit a major milestone.  Kinda of stunned it happened so quick.  I'm sure it will be fine next week, but FI is calling!

Like Oz I plan on adding 25k of Bonds for years to come to provide a good bond cushion.  Current bond choices in the market are poor - gotta be creative.  Also moving a significant chunks to crypto stablecoin places to catch 9% interest they are giving.  

ETA- 401k maximum raised to 20.5k next year.  Every bit helps.
Expand  


I've been doing this a bit as well, and just set up automatic monthly investment in BlockFi.  But like @-OZ- I'm kind of concerned about the risk there.  Otherwise I'd put in much more than I have been.


I'd be interested in hearing thoughts on this. It seems clear to me that more regulation is coming to stablecoins, but I think some have already been adapting. I think USDC is more trustworthy than USDT, but this is still all about the creditworthiness of the issuer right? Basically crypto's version of money market funds.

Still, we don't see sustained returns above a risk free rate for long if there is really no risk.

 

Sand

Footballguy
I'd be interested in hearing thoughts on this. It seems clear to me that more regulation is coming to stablecoins, but I think some have already been adapting. I think USDC is more trustworthy than USDT, but this is still all about the creditworthiness of the issuer right? Basically crypto's version of money market funds.

Still, we don't see sustained returns above a risk free rate for long if there is really no risk.
I have everything in USDC.  I'm looking at the AUM of the places I'm putting some money into (Blockfi, Celsius, Voyager) and as long as business is growing I'm reasonably comfortable.  I realize this isn't a full time thing, but it's exploitable and stable for now.

 

Desert_Power

Footballguy
I have everything in USDC.  I'm looking at the AUM of the places I'm putting some money into (Blockfi, Celsius, Voyager) and as long as business is growing I'm reasonably comfortable.  I realize this isn't a full time thing, but it's exploitable and stable for now.
Why do you think these firms can offer such a high yield on what is essentially a dollar though? My thought is that it is essentially VC type of money using it as a loss leader.

 

Orange&Blue

Footballguy
Doing what? I’d leave federal service before going into private practice. 
I quoted wrong post....how are you doing all this as a federal employee?

"For 2022, I’ll max the TSP and our Roth IRAs, put $20k into I bonds and continue to “pay” extra on the mortgage (the extra goes into the regular brokerage)"

That's $51.5k before extra on the mortgage. 

 
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-OZ-

Footballguy
I quoted wrong post....how are you doing all this as a federal employee?

"For 2022, I’ll max the TSP and our Roth IRAs, put $20k into I bonds and continue to “pay” extra on the mortgage (the extra goes into the regular brokerage)"

That's $51.5k before extra on the mortgage. 
Retired Army 4 years ago. The pension and disability pay for the investments, or our basic living expenses depending on your perspective. 

 
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gianmarco

Footballguy
So for those of us that bought the i-bonds at the end of October, when does the interest show up?  I thought it was done monthly and even if bought at the end of October would get credit for the month.  Not seeing any change yet.

 

zoobird

Footballguy
Might be too specific for this thread, but I'm trying to figure out how to easily identify either single country ETFs or single country mutual funds that are NOT currency hedged.  Seems like most of them nowadays are currency hedged, which makes the process of trying to decipher the prospectus for each fund really time consuming.

 

gianmarco

Footballguy
I believe it is paid semi-annually like most treasuries
Here's what it says:

Interest is earned on the bond every month. The interest is compounded semiannually:  twice a year, the interest the bond earned in the previous six months is added to the bond's principal value; then, interest for the next six months is calculated using this adjusted principal.

So does that mean even though it's earned every month, you only see it added every 6?

 

Juxtatarot

Infidel
Here's what it says:

Interest is earned on the bond every month. The interest is compounded semiannually:  twice a year, the interest the bond earned in the previous six months is added to the bond's principal value; then, interest for the next six months is calculated using this adjusted principal.

So does that mean even though it's earned every month, you only see it added every 6?
Are you looking at “amount” or “current value”. I forget if “current value” changes monthly or semiannually.  “Amount” does not change.

Edit: It must not change monthly. If it does, they are cheating me on my purchase from May! 😉

 
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Desert_Power

Footballguy
Here's what it says:

Interest is earned on the bond every month. The interest is compounded semiannually:  twice a year, the interest the bond earned in the previous six months is added to the bond's principal value; then, interest for the next six months is calculated using this adjusted principal.

So does that mean even though it's earned every month, you only see it added every 6?


Right. So it is only paid to you (added to the principal) every six month when the rates are reset. The interest accrues each month so you are still owed it if you withdraw between the semiannual compounding dates (unless it is less than 5 years and you get penalized the last three months)

 

-OZ-

Footballguy
My inner :nerd:  is showing 

figured I’d try out the smart transfer option in M1. So now when my savings is greater than X, the extra gets moved to the brokerage account. 

X is $26.2k. 🏃‍♂️

 

NutterButter

Footballguy
When's the next IBond rate announced?   Treasury site said the last rate announcement was 11/1, but people were talking about that here in October so does it get leaked earlier than the announcement date?   

 

Mene

Footballguy
My wife just had a relative pass, and my mother-in-law was responsible for the estate.  The mother-in-law would like to give her $20,000 from the estate to invest for retirement.

Now, I'm an investment novice, so I'm trying to read up on how best to do this, but I'm finding myself getting a bit confused.  I decided to tap into the FBG knowledge base and see if I'm on the right track.  My thought was put 6k into a Roth IRA now (Fidelity), then invest the remaining 14k into a brokerage account, selling enough each year to get 6k to put into the Roth until I've moved it all into the Roth.  We are below the income threshold for Roth contributions, and neither of us currently have any IRA's.  We both just invest in the 401k's offered by our employers.  Our current retirement timeframe is 15 years for me, 17 years for her.

I understand that selling from the brokerage each year will initially subject me to short term capital gains taxes, but I guess I'm not sure what else to do.  We would like to invest the 20k in the most tax friendly way.

Any suggestions or information will be greatly appreciated.

 

McBokonon

YOI!!!
My wife just had a relative pass, and my mother-in-law was responsible for the estate.  The mother-in-law would like to give her $20,000 from the estate to invest for retirement.

Now, I'm an investment novice, so I'm trying to read up on how best to do this, but I'm finding myself getting a bit confused.  I decided to tap into the FBG knowledge base and see if I'm on the right track.  My thought was put 6k into a Roth IRA now (Fidelity), then invest the remaining 14k into a brokerage account, selling enough each year to get 6k to put into the Roth until I've moved it all into the Roth.  We are below the income threshold for Roth contributions, and neither of us currently have any IRA's.  We both just invest in the 401k's offered by our employers.  Our current retirement timeframe is 15 years for me, 17 years for her.

I understand that selling from the brokerage each year will initially subject me to short term capital gains taxes, but I guess I'm not sure what else to do.  We would like to invest the 20k in the most tax friendly way.

Any suggestions or information will be greatly appreciated.
It’s easy enough to fund the IRA directly from a regular bank account so you can skip the brokerage account if you don’t plan on buying stocks/funds with the money. So one option is just leave it in savings until the following year when you can make another ROTH contribution. Also, if you just leave the money in the taxable brokerage don’t trade with it, you can just transfer the funds each year without issue. You won’t make any money on the money in the meantime but it’s easy. If you did plan on investing the money in the brokerage, then yeah, you’d have to consider taxes.

 

Mene

Footballguy
It’s easy enough to fund the IRA directly from a regular bank account so you can skip the brokerage account if you don’t plan on buying stocks/funds with the money. So one option is just leave it in savings until the following year when you can make another ROTH contribution. Also, if you just leave the money in the taxable brokerage don’t trade with it, you can just transfer the funds each year without issue. You won’t make any money on the money in the meantime but it’s easy. If you did plan on investing the money in the brokerage, then yeah, you’d have to consider taxes.


The reason I was thinking brokerage was so that I could invest it until I can get it into the Roth.  It's basically found money, so any gains we can realize will be a bonus, and should the market turn, the losses would be something I could live with.  I figured that short term capital gains taxes on the gains (assuming there were gains) from the brokerage would be acceptable, considering if I'm paying taxes on it, it means I made more than had I left it in a savings account.

*Edited to say Thank you for the reply

 
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McBokonon

YOI!!!
The reason I was thinking brokerage was so that I could invest it until I can get it into the Roth.  It's basically found money, so any gains we can realize will be a bonus, and should the market turn, the losses would be something I could live with.  I figured that short term capital gains taxes on the gains (assuming there were gains) from the brokerage would be acceptable, considering if I'm paying taxes on it, it means I made more than had I left it in a savings account.
You seem to have a handle on it. Now all you have to do is pick the right investments! 

I’m not a tax guy so hopefully someone else will chime in with other ideas. Some smart people in this thread.

 

Tom Hagen

Footballguy
My wife just had a relative pass, and my mother-in-law was responsible for the estate.  The mother-in-law would like to give her $20,000 from the estate to invest for retirement.

Now, I'm an investment novice, so I'm trying to read up on how best to do this, but I'm finding myself getting a bit confused.  I decided to tap into the FBG knowledge base and see if I'm on the right track.  My thought was put 6k into a Roth IRA now (Fidelity), then invest the remaining 14k into a brokerage account, selling enough each year to get 6k to put into the Roth until I've moved it all into the Roth.  We are below the income threshold for Roth contributions, and neither of us currently have any IRA's.  We both just invest in the 401k's offered by our employers.  Our current retirement timeframe is 15 years for me, 17 years for her.

I understand that selling from the brokerage each year will initially subject me to short term capital gains taxes, but I guess I'm not sure what else to do.  We would like to invest the 20k in the most tax friendly way.

Any suggestions or information will be greatly appreciated.
Depending on the timing of when you receive the money, it sounds like you could each contribute $6,000 to a Roth IRA for 2021 and then in January contribute another $4,000 each for 2022.  That gets you to $20,000 in Roth accounts within the next 2 months. 

That assumes your wife is OK with half the money going to an account in your name.

 

Mene

Footballguy
Depending on the timing of when you receive the money, it sounds like you could each contribute $6,000 to a Roth IRA for 2021 and then in January contribute another $4,000 each for 2022.  That gets you to $20,000 in Roth accounts within the next 2 months. 

That assumes your wife is OK with half the money going to an account in your name.


My wife would be fine with that, but her mother wouldn't.  My wife and I hit a rough spot a few years ago, and there was talk of a separation at the time.  We wound up working it all out, and our relationship is better now than before due to it.  It allowed us to address some issues we had with each other that we both just kind of quietly (and sometimes not so quietly) tolerated.  However, it did put fear in her mother that I might some day leave her daughter "high and dry", so a stipulation of this gift was that it be in my wife's name.

 

-OZ-

Footballguy
My wife would be fine with that, but her mother wouldn't.  My wife and I hit a rough spot a few years ago, and there was talk of a separation at the time.  We wound up working it all out, and our relationship is better now than before due to it.  It allowed us to address some issues we had with each other that we both just kind of quietly (and sometimes not so quietly) tolerated.  However, it did put fear in her mother that I might some day leave her daughter "high and dry", so a stipulation of this gift was that it be in my wife's name.
Glad to see you worked it out. I dare say all marriages, all relationships, go through challenging times. 
 

for the money, it’s probably best to do the Roth IRA now, and $14k into a regular brokerage at the same brokerage (what places are you considering or using?) then sell in December if there are any losses. Just be sure to not buy the same asset even in the IRA if you have a loss. With a gain it wouldn’t matter. you might go fully into VT or VTI (or another total market fund) in your IRA while you put the $14,000 into something like VOO (S&P 500 index) in case there’s a loss to be harvested. Or just keep the 2022 contribution in cash until January 2nd while investing the remaining $8,000. 

 

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