Personal Finance Advice and Education! (2 Viewers)

[-OZ-]

What is the current thinking on I Bonds? Anyone buying?

Although I bought in October. I might buy more before May.
It’s a very conservative play for a break in case of emergency / first few years of retirement if we hit a down cycle contingency plan.

 

[-OZ-]

So, we are mostly in VTSAX (total us market) and VBTLX (total bond) Index funds. I now see that Vangaurd allows auto ETF investments. I see that VTI is .03 ER compared to the .04 of VTSAX, but is there any benefit of us switching to ETF's from Index?

Is this taxable or tax deferred?

Tax deferred

No issue then. Sell and buy VTI.
If this were a regular brokerage, it sounds like you can call to convert without a tax hit.

VTSAX to VTI conversion in taxable account - Bogleheads.org

 

[Sand]

So, we are mostly in VTSAX (total us market) and VBTLX (total bond) Index funds. I now see that Vangaurd allows auto ETF investments. I see that VTI is .03 ER compared to the .04 of VTSAX, but is there any benefit of us switching to ETF's from Index?

Is this taxable or tax deferred?

Tax deferred

Not a huge gain, but as long as there are no transaction fees switching is good.

 

[Brunell4MVP]

Tax management as you get near retirement is a real PITA. This is the stuff they don't tell you at age 25. They just want your money in the system. And at 25 years old you think what you are pulling out in retirement is less than a salary. But it isn't. Fictitious numbers ... let's say you've been investing for 40 years and have like $3M. There's a lot of gains in those retirement and investment accounts. Let's say to live you pull 5% per year = $150k. So that's maybe $75K taxed as earnings and $75K taxed as long term gains. So you only see about $110k of what you pull out. unless I am doing our planning wrong. For you guys under 40 on here ... really think through if it might not be better to pay the tax now.

 

[NutterButter]

Tax management as you get near retirement is a real PITA. This is the stuff they don't tell you at age 25. They just want your money in the system. And at 25 years old you think what you are pulling out in retirement is less than a salary. But it isn't. Fictitious numbers ... let's say you've been investing for 40 years and have like $3M. There's a lot of gains in those retirement and investment accounts. Let's say to live you pull 5% per year = $150k. So that's maybe $75K taxed as earnings and $75K taxed as long term gains. So you only see about $110k of what you pull out. unless I am doing our planning wrong. For you guys under 40 on here ... really think through if it might not be better to pay the tax now.

Sounds high if you're filing as married. You're talking 15% for the 75k lt gains and 11-12% for the income. Long term gains don't affect your income tax bracket. And then there's state as well. And that's not counting the standard deduction.

 

[Sand]

Tax management as you get near retirement is a real PITA. This is the stuff they don't tell you at age 25. They just want your money in the system. And at 25 years old you think what you are pulling out in retirement is less than a salary. But it isn't. Fictitious numbers ... let's say you've been investing for 40 years and have like $3M. There's a lot of gains in those retirement and investment accounts. Let's say to live you pull 5% per year = $150k. So that's maybe $75K taxed as earnings and $75K taxed as long term gains. So you only see about $110k of what you pull out. unless I am doing our planning wrong. For you guys under 40 on here ... really think through if it might not be better to pay the tax now.

I think you're overstating taxes owed. You get substantial tax free space for LTCG. You do have to work with the system and manage your income location, though. Good start:

The Go Curry Cracker 2023 Taxes - Go Curry Cracker!

The Go Curry Cracker 2023 taxes - faring well on the quest to never pay taxes again, with high taxable income and minimal taxes.

www.gocurrycracker.com

 

[NutterButter]

Tax management as you get near retirement is a real PITA. This is the stuff they don't tell you at age 25. They just want your money in the system. And at 25 years old you think what you are pulling out in retirement is less than a salary. But it isn't. Fictitious numbers ... let's say you've been investing for 40 years and have like $3M. There's a lot of gains in those retirement and investment accounts. Let's say to live you pull 5% per year = $150k. So that's maybe $75K taxed as earnings and $75K taxed as long term gains. So you only see about $110k of what you pull out. unless I am doing our planning wrong. For you guys under 40 on here ... really think through if it might not be better to pay the tax now.

I think you're overstating taxes owed. You get substantial tax free space for LTCG. You do have to work with the system and manage your income location, though. Good start:

The Go Curry Cracker 2023 Taxes - Go Curry Cracker!

The Go Curry Cracker 2023 taxes - faring well on the quest to never pay taxes again, with high taxable income and minimal taxes.

www.gocurrycracker.com

I don't think he'll get the 0% rate though for his ltcg b/c his total income puts him in the 15% bracket. But like you said, you need to work the angles to take advantage of all the tax saving opportunities.

 

[Nugget]

Tax management as you get near retirement is a real PITA. This is the stuff they don't tell you at age 25. They just want your money in the system. And at 25 years old you think what you are pulling out in retirement is less than a salary. But it isn't. Fictitious numbers ... let's say you've been investing for 40 years and have like $3M. There's a lot of gains in those retirement and investment accounts. Let's say to live you pull 5% per year = $150k. So that's maybe $75K taxed as earnings and $75K taxed as long term gains. So you only see about $110k of what you pull out. unless I am doing our planning wrong. For you guys under 40 on here ... really think through if it might not be better to pay the tax now.

I think you're overstating taxes owed. You get substantial tax free space for LTCG. You do have to work with the system and manage your income location, though. Good start:

The Go Curry Cracker 2023 Taxes - Go Curry Cracker!

The Go Curry Cracker 2023 taxes - faring well on the quest to never pay taxes again, with high taxable income and minimal taxes.

www.gocurrycracker.com

I don't think he'll get the 0% rate though for his ltcg b/c his total income puts him in the 15% bracket.

Two pieces - not all of the sale will be gain if he has been investing in a brokerage account - may be 20% pricnicpal and 80% gain which would be taxed at 15% max. And standard decution of almost 30k for the traditional 401k/IRA money drops that to closer to 45K. Can be lower if you only need $110k to live on.

Still a good idea to model what additional Roth contributions will do, especially when SS and any inherited money may change the equation.

 

[matttyl]

What is the current thinking on I Bonds? Anyone buying?

Haven’t looked at the current rates in a bit, where are they now?

 

[-OZ-]

What is the current thinking on I Bonds? Anyone buying?

Haven’t looked at the current rates in a bit, where are they now?

• Fixed rate: 1.20%
• Inflation rate: 1.90%
  

So, probably less than you’re getting in HYSA. Wouldn’t do for money you want to use in the next few years.

 

[stbugs]

Tax management as you get near retirement is a real PITA. This is the stuff they don't tell you at age 25. They just want your money in the system. And at 25 years old you think what you are pulling out in retirement is less than a salary. But it isn't. Fictitious numbers ... let's say you've been investing for 40 years and have like $3M. There's a lot of gains in those retirement and investment accounts. Let's say to live you pull 5% per year = $150k. So that's maybe $75K taxed as earnings and $75K taxed as long term gains. So you only see about $110k of what you pull out. unless I am doing our planning wrong. For you guys under 40 on here ... really think through if it might not be better to pay the tax now.

Sounds high if you're filing as married. You're talking 15% for the 75k lt gains and 11-12% for the income. Long term gains don't affect your income tax bracket. And then there's state as well. And that's not counting the standard deduction.

Agreed. If I’m reading the tax tables correctly, married filing jointly doesn’t hit 22% until just about $97k and adding in the standard deduction of $30k and that’s 10-12% up to $127k. Even with some more income say $200k total with some capital gains and it’s somewhere in the 15-16% effective tax rate. Instead of paying $40k in taxes on $150k, it should be more like $32k on $200k.

I know I’ll have taxes in retirement but after spending $550 at Costco Wednesday night with my middle son back from college because we have nothing to eat, I’m so looking at getting the boys off the payroll. Youngest is graduating this spring so 6 more years of hopefully all in state tuition left. I will enjoy being able to go into Costco with a $100 bill and know my wife and I won’t be hungry. My oldest has been out of college for almost 2 years and the savings are real.

The only tricky thing in my mind for taxes is if I want to back door Roth for a few years, I may not take SS until 67 when you don’t lose $1 out of every $2 in SS income (limit is really low, 32k for married). I was always planning to do 62 but if you only get half, it’s not worth it. We’ll have to see where we are over the next 8-14 years.

 

[Sand]

Tax management as you get near retirement is a real PITA. This is the stuff they don't tell you at age 25. They just want your money in the system. And at 25 years old you think what you are pulling out in retirement is less than a salary. But it isn't. Fictitious numbers ... let's say you've been investing for 40 years and have like $3M. There's a lot of gains in those retirement and investment accounts. Let's say to live you pull 5% per year = $150k. So that's maybe $75K taxed as earnings and $75K taxed as long term gains. So you only see about $110k of what you pull out. unless I am doing our planning wrong. For you guys under 40 on here ... really think through if it might not be better to pay the tax now.

I think you're overstating taxes owed. You get substantial tax free space for LTCG. You do have to work with the system and manage your income location, though. Good start:

The Go Curry Cracker 2023 Taxes - Go Curry Cracker!

The Go Curry Cracker 2023 taxes - faring well on the quest to never pay taxes again, with high taxable income and minimal taxes.

www.gocurrycracker.com

I don't think he'll get the 0% rate though for his ltcg b/c his total income puts him in the 15% bracket. But like you said, you need to work the angles to take advantage of all the tax saving opportunities.

Oh, I agree. Just noting that he isn't going to be losing 40k on 150k in income. Even with state it's way, way lower. You do have to put some thought into what you sell from the taxable account to generate the right amount of LTCG and take from tax deferred, etc.

Good tax calculator: https://www.gocurrycracker.com/federal-income-tax-calculator/

If we take the example - say 75k regular income and 50k of LTCG (sold 75k of stock that had 50k of LTCG) for 125k of total taxable income, 150k of cash money. That's $6,400 federal tax, so 4%. Then add on whatever your state does. Mine is 5% flat, so another 6,250 there. So 8% effective tax rate. Not too bad.

In the current most optimized example (with 2023 tax laws in place) you can have 27,700 in regular income and 89,800 in LTCG for MFJ and come away with a $0 tax bill. 117k federal tax free.

 

[ConstruxBoy]

What is the current thinking on I Bonds? Anyone buying?

Haven’t looked at the current rates in a bit, where are they now?

• Fixed rate: 1.20%
• Inflation rate: 1.90%

So, probably less than you’re getting in HYSA. Wouldn’t do for money you want to use in the next few years.

True. Fixed rate is really nice though for the future, just in case.

 

[-OZ-]

What is the current thinking on I Bonds? Anyone buying?

Haven’t looked at the current rates in a bit, where are they now?

• Fixed rate: 1.20%
• Inflation rate: 1.90%

So, probably less than you’re getting in HYSA. Wouldn’t do for money you want to use in the next few years.

True. Fixed rate is really nice though for the future, just in case.

That’s exactly why we bought. At this point, to just have a couple years worth of funds guaranteed to beat inflation is helpful. And low maintenance.

 

[Polish Hammer]

Have an inherited IRA that I need to keep whittling down to have to zero by 2031. Don't have any "need" for the money in it this year, but selling off a chunk to convert out and still remain within my 2024 tax bracket. Looking to just reinvest at this point. Likely doing a Boglehead-esque fund at Vanguard (it's where the current inherited IRA is). Thinking 60% VTI, 20% VXUS, 20% BND. Any particular reason to consider anything different?

If it matters, for background info: age 47, may use this money to pay for some of my kids' college. One kid in freshman year of college now, other is a HS junior. Have 529s set up to fund roughly 2 years for each. Have other assets (cash, investments, whole life policies) that can be used to pay for the rest if for some reason it doesn't need to come from here or isn't wise to. 401ks are plenty big for retirement already, and have other monies with American Funds. This is a bit of "found money" that is in Wellington/Wellesley funds.

Didn't know if there's better funds or allocations to consider, or if there's some tax implication (now or down the line) I should examine.

 

[matttyl]

Have an inherited IRA that I need to keep whittling down to have to zero by 2031. Don't have any "need" for the money in it this year, but selling off a chunk to convert out and still remain within my 2024 tax bracket. Looking to just reinvest at this point. Likely doing a Boglehead-esque fund at Vanguard (it's where the current inherited IRA is). Thinking 60% VTI, 20% VXUS, 20% BND. Any particular reason to consider anything different?

If it matters, for background info: age 47, may use this money to pay for some of my kids' college. One kid in freshman year of college now, other is a HS junior. Have 529s set up to fund roughly 2 years for each. Have other assets (cash, investments, whole life policies) that can be used to pay for the rest if for some reason it doesn't need to come from here or isn't wise to. 401ks are plenty big for retirement already, and have other monies with American Funds. This is a bit of "found money" that is in Wellington/Wellesley funds.

Didn't know if there's better funds or allocations to consider, or if there's some tax implication (now or down the line) I should examine.

Good math problem to have. Lots of variables (that you don’t need to share), but my thought would be to max out your own 401k contributions (even if large enough), and HSAs if available, as you’re keeping money growing tax free. Take out what you can without going over a tax bracket cliff (from 24% to 32%). Depends on how much is in that inherited IRA and how you’ll likely need to take out each year to reduce it to 0 in time.

Worst thing would be to not touch it, it grows to a huge number, and you have to take it all all in that final year and tax rates are higher then than now and 40+% goes to Uncle Sam.

 

[BeTheMatch]

Have an inherited IRA that I need to keep whittling down to have to zero by 2031. Don't have any "need" for the money in it this year, but selling off a chunk to convert out and still remain within my 2024 tax bracket. Looking to just reinvest at this point. Likely doing a Boglehead-esque fund at Vanguard (it's where the current inherited IRA is). Thinking 60% VTI, 20% VXUS, 20% BND. Any particular reason to consider anything different?

If it matters, for background info: age 47, may use this money to pay for some of my kids' college. One kid in freshman year of college now, other is a HS junior. Have 529s set up to fund roughly 2 years for each. Have other assets (cash, investments, whole life policies) that can be used to pay for the rest if for some reason it doesn't need to come from here or isn't wise to. 401ks are plenty big for retirement already, and have other monies with American Funds. This is a bit of "found money" that is in Wellington/Wellesley funds.

Didn't know if there's better funds or allocations to consider, or if there's some tax implication (now or down the line) I should examine.

Make sure you're taking out the RMDs each year if applicable

 

[Polish Hammer]

Have an inherited IRA that I need to keep whittling down to have to zero by 2031. Don't have any "need" for the money in it this year, but selling off a chunk to convert out and still remain within my 2024 tax bracket. Looking to just reinvest at this point. Likely doing a Boglehead-esque fund at Vanguard (it's where the current inherited IRA is). Thinking 60% VTI, 20% VXUS, 20% BND. Any particular reason to consider anything different?

If it matters, for background info: age 47, may use this money to pay for some of my kids' college. One kid in freshman year of college now, other is a HS junior. Have 529s set up to fund roughly 2 years for each. Have other assets (cash, investments, whole life policies) that can be used to pay for the rest if for some reason it doesn't need to come from here or isn't wise to. 401ks are plenty big for retirement already, and have other monies with American Funds. This is a bit of "found money" that is in Wellington/Wellesley funds.

Didn't know if there's better funds or allocations to consider, or if there's some tax implication (now or down the line) I should examine.

Good math problem to have. Lots of variables (that you don’t need to share), but my thought would be to max out your own 401k contributions (even if large enough), and HSAs if available, as you’re keeping money growing tax free. Take out what you can without going over a tax bracket cliff (from 24% to 32%). Depends on how much is in that inherited IRA and how you’ll likely need to take out each year to reduce it to 0 in time.

Worst thing would be to not touch it, it grows to a huge number, and you have to take it all all in that final year and tax rates are higher then than now and 40+% goes to Uncle Sam.

401k already getting maximized and taking advantage of the corporate match. Been funneling more into HSA over the last few years as I've learned about it. That tax bracket cliff is exactly the one I try to tiptoe up to each year with these withdrawals. Definitely trying to avoid that last scenario with taxation for sure. Figured by going into ETFs rather than mutual funds that helps reduce tax liability once the IRA funds are reinvested into just a regular taxable Vanguard account.

Have an inherited IRA that I need to keep whittling down to have to zero by 2031. Don't have any "need" for the money in it this year, but selling off a chunk to convert out and still remain within my 2024 tax bracket. Looking to just reinvest at this point. Likely doing a Boglehead-esque fund at Vanguard (it's where the current inherited IRA is). Thinking 60% VTI, 20% VXUS, 20% BND. Any particular reason to consider anything different?

If it matters, for background info: age 47, may use this money to pay for some of my kids' college. One kid in freshman year of college now, other is a HS junior. Have 529s set up to fund roughly 2 years for each. Have other assets (cash, investments, whole life policies) that can be used to pay for the rest if for some reason it doesn't need to come from here or isn't wise to. 401ks are plenty big for retirement already, and have other monies with American Funds. This is a bit of "found money" that is in Wellington/Wellesley funds.

Didn't know if there's better funds or allocations to consider, or if there's some tax implication (now or down the line) I should examine.

Make sure you're taking out the RMDs each year if applicable

Because of how this was inherited, I don't have a set amount each year. Just need to make sure I've taken it all out by the 10th year after the death. (That's what Vanguard told me, anyway.)

 

[BeTheMatch]

Have an inherited IRA that I need to keep whittling down to have to zero by 2031. Don't have any "need" for the money in it this year, but selling off a chunk to convert out and still remain within my 2024 tax bracket. Looking to just reinvest at this point. Likely doing a Boglehead-esque fund at Vanguard (it's where the current inherited IRA is). Thinking 60% VTI, 20% VXUS, 20% BND. Any particular reason to consider anything different?

If it matters, for background info: age 47, may use this money to pay for some of my kids' college. One kid in freshman year of college now, other is a HS junior. Have 529s set up to fund roughly 2 years for each. Have other assets (cash, investments, whole life policies) that can be used to pay for the rest if for some reason it doesn't need to come from here or isn't wise to. 401ks are plenty big for retirement already, and have other monies with American Funds. This is a bit of "found money" that is in Wellington/Wellesley funds.

Didn't know if there's better funds or allocations to consider, or if there's some tax implication (now or down the line) I should examine.

Good math problem to have. Lots of variables (that you don’t need to share), but my thought would be to max out your own 401k contributions (even if large enough), and HSAs if available, as you’re keeping money growing tax free. Take out what you can without going over a tax bracket cliff (from 24% to 32%). Depends on how much is in that inherited IRA and how you’ll likely need to take out each year to reduce it to 0 in time.

Worst thing would be to not touch it, it grows to a huge number, and you have to take it all all in that final year and tax rates are higher then than now and 40+% goes to Uncle Sam.

401k already getting maximized and taking advantage of the corporate match. Been funneling more into HSA over the last few years as I've learned about it. That tax bracket cliff is exactly the one I try to tiptoe up to each year with these withdrawals. Definitely trying to avoid that last scenario with taxation for sure. Figured by going into ETFs rather than mutual funds that helps reduce tax liability once the IRA funds are reinvested into just a regular taxable Vanguard account.

Have an inherited IRA that I need to keep whittling down to have to zero by 2031. Don't have any "need" for the money in it this year, but selling off a chunk to convert out and still remain within my 2024 tax bracket. Looking to just reinvest at this point. Likely doing a Boglehead-esque fund at Vanguard (it's where the current inherited IRA is). Thinking 60% VTI, 20% VXUS, 20% BND. Any particular reason to consider anything different?

If it matters, for background info: age 47, may use this money to pay for some of my kids' college. One kid in freshman year of college now, other is a HS junior. Have 529s set up to fund roughly 2 years for each. Have other assets (cash, investments, whole life policies) that can be used to pay for the rest if for some reason it doesn't need to come from here or isn't wise to. 401ks are plenty big for retirement already, and have other monies with American Funds. This is a bit of "found money" that is in Wellington/Wellesley funds.

Didn't know if there's better funds or allocations to consider, or if there's some tax implication (now or down the line) I should examine.

Make sure you're taking out the RMDs each year if applicable

Because of how this was inherited, I don't have a set amount each year. Just need to make sure I've taken it all out by the 10th year after the death. (That's what Vanguard told me, anyway.)

Ok, as long as you're sure. Because that would be a big issue. Is it a traditional IRA? How old was the person you inherited it from?

If it's traditional and they were already having to take RMDs each year when they died, then you would too.

 

[matttyl]

Have an inherited IRA that I need to keep whittling down to have to zero by 2031. Don't have any "need" for the money in it this year, but selling off a chunk to convert out and still remain within my 2024 tax bracket. Looking to just reinvest at this point. Likely doing a Boglehead-esque fund at Vanguard (it's where the current inherited IRA is). Thinking 60% VTI, 20% VXUS, 20% BND. Any particular reason to consider anything different?

If it matters, for background info: age 47, may use this money to pay for some of my kids' college. One kid in freshman year of college now, other is a HS junior. Have 529s set up to fund roughly 2 years for each. Have other assets (cash, investments, whole life policies) that can be used to pay for the rest if for some reason it doesn't need to come from here or isn't wise to. 401ks are plenty big for retirement already, and have other monies with American Funds. This is a bit of "found money" that is in Wellington/Wellesley funds.

Didn't know if there's better funds or allocations to consider, or if there's some tax implication (now or down the line) I should examine.

Good math problem to have. Lots of variables (that you don’t need to share), but my thought would be to max out your own 401k contributions (even if large enough), and HSAs if available, as you’re keeping money growing tax free. Take out what you can without going over a tax bracket cliff (from 24% to 32%). Depends on how much is in that inherited IRA and how you’ll likely need to take out each year to reduce it to 0 in time.

Worst thing would be to not touch it, it grows to a huge number, and you have to take it all all in that final year and tax rates are higher then than now and 40+% goes to Uncle Sam.

401k already getting maximized and taking advantage of the corporate match. Been funneling more into HSA over the last few years as I've learned about it. That tax bracket cliff is exactly the one I try to tiptoe up to each year with these withdrawals. Definitely trying to avoid that last scenario with taxation for sure. Figured by going into ETFs rather than mutual funds that helps reduce tax liability once the IRA funds are reinvested into just a regular taxable Vanguard account.

Have an inherited IRA that I need to keep whittling down to have to zero by 2031. Don't have any "need" for the money in it this year, but selling off a chunk to convert out and still remain within my 2024 tax bracket. Looking to just reinvest at this point. Likely doing a Boglehead-esque fund at Vanguard (it's where the current inherited IRA is). Thinking 60% VTI, 20% VXUS, 20% BND. Any particular reason to consider anything different?

If it matters, for background info: age 47, may use this money to pay for some of my kids' college. One kid in freshman year of college now, other is a HS junior. Have 529s set up to fund roughly 2 years for each. Have other assets (cash, investments, whole life policies) that can be used to pay for the rest if for some reason it doesn't need to come from here or isn't wise to. 401ks are plenty big for retirement already, and have other monies with American Funds. This is a bit of "found money" that is in Wellington/Wellesley funds.

Didn't know if there's better funds or allocations to consider, or if there's some tax implication (now or down the line) I should examine.

Make sure you're taking out the RMDs each year if applicable

Because of how this was inherited, I don't have a set amount each year. Just need to make sure I've taken it all out by the 10th year after the death. (That's what Vanguard told me, anyway.)

401k getting maxed for you and spouse (if applicable)? Yeah, do that and max out the HSA, to keep your earned income as low as possible (which the IRA distribution amount gets stacked on top of). Depending on the size of the inherited Ira, doing that each year for 10 following date of death could be enough to deplete it down (depending on returns inside that Ira). If that won’t be enough, best to bite the bullet and start filling up next bracket as that dead line approaches.

 

[matttyl]

Have an inherited IRA that I need to keep whittling down to have to zero by 2031. Don't have any "need" for the money in it this year, but selling off a chunk to convert out and still remain within my 2024 tax bracket. Looking to just reinvest at this point. Likely doing a Boglehead-esque fund at Vanguard (it's where the current inherited IRA is). Thinking 60% VTI, 20% VXUS, 20% BND. Any particular reason to consider anything different?

If it matters, for background info: age 47, may use this money to pay for some of my kids' college. One kid in freshman year of college now, other is a HS junior. Have 529s set up to fund roughly 2 years for each. Have other assets (cash, investments, whole life policies) that can be used to pay for the rest if for some reason it doesn't need to come from here or isn't wise to. 401ks are plenty big for retirement already, and have other monies with American Funds. This is a bit of "found money" that is in Wellington/Wellesley funds.

Didn't know if there's better funds or allocations to consider, or if there's some tax implication (now or down the line) I should examine.

Good math problem to have. Lots of variables (that you don’t need to share), but my thought would be to max out your own 401k contributions (even if large enough), and HSAs if available, as you’re keeping money growing tax free. Take out what you can without going over a tax bracket cliff (from 24% to 32%). Depends on how much is in that inherited IRA and how you’ll likely need to take out each year to reduce it to 0 in time.

Worst thing would be to not touch it, it grows to a huge number, and you have to take it all all in that final year and tax rates are higher then than now and 40+% goes to Uncle Sam.

401k already getting maximized and taking advantage of the corporate match. Been funneling more into HSA over the last few years as I've learned about it. That tax bracket cliff is exactly the one I try to tiptoe up to each year with these withdrawals. Definitely trying to avoid that last scenario with taxation for sure. Figured by going into ETFs rather than mutual funds that helps reduce tax liability once the IRA funds are reinvested into just a regular taxable Vanguard account.

Have an inherited IRA that I need to keep whittling down to have to zero by 2031. Don't have any "need" for the money in it this year, but selling off a chunk to convert out and still remain within my 2024 tax bracket. Looking to just reinvest at this point. Likely doing a Boglehead-esque fund at Vanguard (it's where the current inherited IRA is). Thinking 60% VTI, 20% VXUS, 20% BND. Any particular reason to consider anything different?

If it matters, for background info: age 47, may use this money to pay for some of my kids' college. One kid in freshman year of college now, other is a HS junior. Have 529s set up to fund roughly 2 years for each. Have other assets (cash, investments, whole life policies) that can be used to pay for the rest if for some reason it doesn't need to come from here or isn't wise to. 401ks are plenty big for retirement already, and have other monies with American Funds. This is a bit of "found money" that is in Wellington/Wellesley funds.

Didn't know if there's better funds or allocations to consider, or if there's some tax implication (now or down the line) I should examine.

Make sure you're taking out the RMDs each year if applicable

Because of how this was inherited, I don't have a set amount each year. Just need to make sure I've taken it all out by the 10th year after the death. (That's what Vanguard told me, anyway.)

One other thing to note, you’re only a few years away from an increased amount you’d be eligible to contribute into your 401k - $7,500 more of a catch up contribution at age 50. If married, and spouse the same age, double that - $31k each next year, which will only get larger with inflation. Setting aside more of your income, which will be replaced with the withdrawals from the inherited IRA just keeps those dollars growing tax free longer.

 

[Yo Mama]

In 2025, I’m planning on selling a couple mutual funds to help go towards my kids’ student loans. I have a couple tax questions for our local experts (I’ll talk to my tax guy too, but was just curious about some general info).

1) If I pay annual taxes on distributions, how do I know how much of capital gains I’m also on the hook for? One of my mutual funds is nice and quotes an unrealized amount on the statement - I’m assuming that’s what I’ll need to pay taxes on. Another fund quotes a cost basis - do I just take current value minus cost basis for the gains?

B) Will I need to pay some of the expected tax for these capital gains when I sell the funds to avoid any penalties, or can I just wait until April 2026?

Thanks in advance.

 

[Orange&Blue]

thinking of moving roth IRAs to a more aggressive ETF. i can do that without penalty, right?

 

[Sand]

thinking of moving roth IRAs to a more aggressive ETF. i can do that without penalty, right?

You don't move the Roth, you'd trade inside the Roth to invest in what you want. As long as you don't withdraw you're good.

If you do have to move to a new company to be able to invest the way you want make sure to do a transfer that keeps the money inside the Roth IRA umbrella.

 

[-OZ-]

thinking of moving roth IRAs to a more aggressive ETF. i can do that without penalty, right?

What do you have in mind?
Think of the Roth IRA as a building. You enter the building with up to the maximum each year ($7000 if you’re under 50), but once you’re inside you can go from room to room (stocks, ETFs, etc) without tax, penalties, etc. If you stay in the hallway (don’t buy ETFs, stocks or funds) you just have the cash.

 

[IvanKaramazov]

In 2025, I’m planning on selling a couple mutual funds to help go towards my kids’ student loans. I have a couple tax questions for our local experts (I’ll talk to my tax guy too, but was just curious about some general info).

1) If I pay annual taxes on distributions, how do I know how much of capital gains I’m also on the hook for? One of my mutual funds is nice and quotes an unrealized amount on the statement - I’m assuming that’s what I’ll need to pay taxes on. Another fund quotes a cost basis - do I just take current value minus cost basis for the gains?

B) Will I need to pay some of the expected tax for these capital gains when I sell the funds to avoid any penalties, or can I just wait until April 2026?

Thanks in advance.

Not an expert, and others will be able to explain the details, but I just had to start dealing with this myself.

1) I'm at Fidelity. Their monthly statement includes a section entitled "Realized Gains and Losses from Sales."

2) Yes, you have to pre-pay, unfortunately. But it's actually pretty easy. According to my accountant, there is a safe harbor provision such that you are fine as long as you've pre-paid or withheld 110% of whatever your total tax bill was last year. You'd still owe any leftover taxes in April, but at least there wouldn't be a penalty, and it removes the guesswork from figuring out exactly what your capital gains tax bill is.

 

[Orange&Blue]

thinking of moving roth IRAs to a more aggressive ETF. i can do that without penalty, right?

What do you have in mind?
Think of the Roth IRA as a building. You enter the building with up to the maximum each year ($7000 if you’re under 50), but once you’re inside you can go from room to room (stocks, ETFs, etc) without tax, penalties, etc. If you stay in the hallway (don’t buy ETFs, stocks or funds) you just have the cash.

ditching the 2045 target retirement for vti and some other stuff. I'm retiring in 2040, but it's going into more conservative investments than i want.

 

[-OZ-]

thinking of moving roth IRAs to a more aggressive ETF. i can do that without penalty, right?

What do you have in mind?
Think of the Roth IRA as a building. You enter the building with up to the maximum each year ($7000 if you’re under 50), but once you’re inside you can go from room to room (stocks, ETFs, etc) without tax, penalties, etc. If you stay in the hallway (don’t buy ETFs, stocks or funds) you just have the cash.

ditching the 2045 target retirement for vti and some other stuff. I'm retiring in 2040, but it's going into more conservative investments than i want.

15 years out, you might not want to go fully equities but you have time if you’re willing to be patient through any drawback.

 

[Yo Mama]

In 2025, I’m planning on selling a couple mutual funds to help go towards my kids’ student loans. I have a couple tax questions for our local experts (I’ll talk to my tax guy too, but was just curious about some general info).

1) If I pay annual taxes on distributions, how do I know how much of capital gains I’m also on the hook for? One of my mutual funds is nice and quotes an unrealized amount on the statement - I’m assuming that’s what I’ll need to pay taxes on. Another fund quotes a cost basis - do I just take current value minus cost basis for the gains?

B) Will I need to pay some of the expected tax for these capital gains when I sell the funds to avoid any penalties, or can I just wait until April 2026?

Thanks in advance.

Not an expert, and others will be able to explain the details, but I just had to start dealing with this myself.

1) I'm at Fidelity. Their monthly statement includes a section entitled "Realized Gains and Losses from Sales."

2) Yes, you have to pre-pay, unfortunately. But it's actually pretty easy. According to my accountant, there is a safe harbor provision such that you are fine as long as you've pre-paid or withheld 110% of whatever your total tax bill was last year. You'd still owe any leftover taxes in April, but at least there wouldn't be a penalty, and it removes the guesswork from figuring out exactly what your capital gains tax bill is.

Thanks - makes sense!

 

[SFBayDuck]

thinking of moving roth IRAs to a more aggressive ETF. i can do that without penalty, right?

What do you have in mind?
Think of the Roth IRA as a building. You enter the building with up to the maximum each year ($7000 if you’re under 50), but once you’re inside you can go from room to room (stocks, ETFs, etc) without tax, penalties, etc. If you stay in the hallway (don’t buy ETFs, stocks or funds) you just have the cash.

Don’t forget the crypto down in the basement.

 

[Sand]

thinking of moving roth IRAs to a more aggressive ETF. i can do that without penalty, right?

What do you have in mind?
Think of the Roth IRA as a building. You enter the building with up to the maximum each year ($7000 if you’re under 50), but once you’re inside you can go from room to room (stocks, ETFs, etc) without tax, penalties, etc. If you stay in the hallway (don’t buy ETFs, stocks or funds) you just have the cash.

Yep - just don't leave the building. The IRS goon is waiting outside for you if you take the money out before you're allowed.

 

[-OZ-]

thinking of moving roth IRAs to a more aggressive ETF. i can do that without penalty, right?

What do you have in mind?
Think of the Roth IRA as a building. You enter the building with up to the maximum each year ($7000 if you’re under 50), but once you’re inside you can go from room to room (stocks, ETFs, etc) without tax, penalties, etc. If you stay in the hallway (don’t buy ETFs, stocks or funds) you just have the cash.

Don’t forget the crypto down in the basement.

My basement is super small.

 

[Orange&Blue]

thinking of moving roth IRAs to a more aggressive ETF. i can do that without penalty, right?

What do you have in mind?
Think of the Roth IRA as a building. You enter the building with up to the maximum each year ($7000 if you’re under 50), but once you’re inside you can go from room to room (stocks, ETFs, etc) without tax, penalties, etc. If you stay in the hallway (don’t buy ETFs, stocks or funds) you just have the cash.

ditching the 2045 target retirement for vti and some other stuff. I'm retiring in 2040, but it's going into more conservative investments than i want.

15 years out, you might not want to go fully equities but you have time if you’re willing to be patient through any drawback.

I won't be touching it till then

 

[Sand]

Tallied up this year. 21.5% up in total (including the house) - super sweet year. Sitting at 46x 2024 expenses.

My boss wants me to hire people and expand my business - I'm thinking the exact opposite. Thinking more like 30hrs/week, which right now is a ~40% drop. Darn hard struggle to give up control, though.

 

[BeTheMatch]

Tallied up this year. 21.5% up in total (including the house). Sitting at 46x 2024 expenses. My boss wants me to hire people and expand my business - I'm thinking the exact opposite. Thinking more like 30hrs/week, which right now is a ~40% drop. Darn hard struggle to give up control, though.

Life is short

 

[GoBirds]

Tallied up this year. 21.5% up in total (including the house) - super sweet year. Sitting at 46x 2024 expenses.

My boss wants me to hire people and expand my business - I'm thinking the exact opposite. Thinking more like 30hrs/week, which right now is a ~40% drop. Darn hard struggle to give up control, though.

You are doing well, like your plan better and more time with the family and doing what you want.

 

[Orange&Blue]

Been playing the credit card game and going to splurge as oldest is a sophomore in highschool. Want to do more things before he leaves the house. got round trip tickets to Paris for the entire family form spring break.

Then going to Yellowstone and Hawaii this summer.

Then ending the year going to universal for the new areas.

It will probably cost me $50k all told, but yolo. Need stock market to cooperate though so I don't have to liquidate as much of my brokerage accounts (non-retirement).

 

[-OZ-]

Sitting at 46x 2024 expenses.

Current or planned in retirement?
At an almost 2% WR, I’d be increasing spending and giving for sure.

We were at ~7%, including the SUV purchase.

 

[Sand]

Sitting at 46x 2024 expenses.

Current or planned in retirement?
At an almost 2% WR, I’d be increasing spending and giving for sure.

We were at ~7%, including the SUV purchase.

I tried to spend more money. Biggest expense this year was home maintenance (new roof) and an Alaska cruise, so it wasn't a massively cheap year. We give a bunch, so that is already in the pot. We just don't spend a ton on other stuff.

 

[-OZ-]

Sitting at 46x 2024 expenses.

Current or planned in retirement?
At an almost 2% WR, I’d be increasing spending and giving for sure.

We were at ~7%, including the SUV purchase.

I tried to spend more money. Biggest expense this year was home maintenance (new roof) and an Alaska cruise, so it wasn't a massively cheap year. We give a bunch, so that is already in the pot. We just don't spend a ton on other stuff.

Adopt a few of my kids?

 

[kupcho1]

I know there's a bunch of tax threads, but I figured you finance nerds (I can say that as I'm one too) would be on a new post to this thread like @Capella on an opportunity to incorporate the SEC into an NCAA football thread title.

Anyway, I'll be doing my own taxes this year (it's gotten so simple I no longer need to pay for a professional to do it) and want to make it as simple as possible. I've been told I can link up TurboTax to my Schwab account to facilitate input. There are several versions of TurboTax (e.g., premium, deluxe, extra crispy).

Question: which versions allow linking to Schwab? Are there any benefits to paying more for the "enhanced" versions? If so, what do you get?

Lastly, it was also recommended that I sign up for TaxAudit (not, as far as I know, affiliated with any tax prep services) to protect against potential IRS queries down the line. It's prepaid audit defense, and in my opinon well worth the cost. A few years ago, I got a letter from the IRS stating that I'd underpaid by 5 figures the year before. My tax preparer handled it (I owed nothing) that time, but going forward, it's well worth the peace of mind to me. The additional cost + cost of whichever TurboTax I go with will be well below my tax prep cost previously incurred.

TIA

 

[Peggy]

I know there's a bunch of tax threads, but I figured you finance nerds (I can say that as I'm one too) would be on a new post to this thread like @Capella on an opportunity to incorporate the SEC into an NCAA football thread title.

Anyway, I'll be doing my own taxes this year (it's gotten so simple I no longer need to pay for a professional to do it) and want to make it as simple as possible. I've been told I can link up TurboTax to my Schwab account to facilitate input. There are several versions of TurboTax (e.g., premium, deluxe, extra crispy).

Question: which versions allow linking to Schwab? Are there any benefits to paying more for the "enhanced" versions? If so, what do you get?

Lastly, it was also recommended that I sign up for TaxAudit (not, as far as I know, affiliated with any tax prep services) to protect against potential IRS queries down the line. It's prepaid audit defense, and in my opinon well worth the cost. A few years ago, I got a letter from the IRS stating that I'd underpaid by 5 figures the year before. My tax preparer handled it (I owed nothing) that time, but going forward, it's well worth the peace of mind to me. The additional cost + cost of whichever TurboTax I go with will be well below my tax prep cost previously incurred.

TIA

I think all versions will import cvs files and/or download directly from websites. I prefer to upload cvs files myself so I'm not giving out my login info to financial institutions where I keep my money. Sometimes i just punch in the numbers old school. Which version will depend on what you need, small business, multiple states etc.

 

[Peggy]

Sitting at 46x 2024 expenses.

Current or planned in retirement?
At an almost 2% WR, I’d be increasing spending and giving for sure.

We were at ~7%, including the SUV purchase.

I tried to spend more money. Biggest expense this year was home maintenance (new roof) and an Alaska cruise, so it wasn't a massively cheap year. We give a bunch, so that is already in the pot. We just don't spend a ton on other stuff.

Maybe up it to two or three vacations a year. You want to work less anyways. Stay in more upscale hotels, hire a driver, go to more exotic places. Life experiences.

I've always wanted to do Bora Bora but it's just too expensive compared to the Caribbean.

 

[Peggy]

Just half watched a show with the wife about Martha Stewart. When she got popped for insider trading, completely innocent according to her. But you're worth a billion dollars, wtf are you messing around with some sketchy pharmacedical companies? Seems like the easiest thing in the world to invest in index funds and bonds and stay away individual companies other than your own. Probably rich people friends and stuff.

 

[Sand]

Just half watched a show with the wife about Martha Stewart. When she got popped for insider trading, completely innocent according to her. But you're worth a billion dollars, wtf are you messing around with some sketchy pharmacedical companies? Seems like the easiest thing in the world to invest in index funds and bonds and stay away individual companies other than your own. Probably rich people friends and stuff.

This could be it's own thread. There was waaaaay more to it than she said in the doc.

 

[Orange&Blue]

Thinking of ditching my local credit union that we've used for checking and emergency savings.

I direct deposit my pay there and then payoff all credit cards with the occasional ATM withdraw and written check. Also have some recurring bills that don't accept credit cards (mortgage, etc). We have been switching to credit cards more as there is little benefit in using debit card.

Last month only got 2.6% interest on a 25k balance.

Any recommendations?

 

[Runkle]

My cost for umbrella insurance really shot up this year. Inflation hits again I guess. Insurance really high all over since replacing anything is so damned expensive.

 

[Tau837]

Spent some time this weekend assessing investments and wanted some perspective.

Up until July 2022, I never had any financial adviser, I just handled my own investments. At that time, I had a 3 Fidelity brokerage accounts, one for after tax investments, one rollover IRA, and one Roth IRA. I'm sure I made plenty of mistakes over the years, but by that point I had arrived at almost all investments being in low fee mutual funds, mostly index funds. The only stock I had at that point was a small investment in my own company's stock.

Most of it was in S&P 500 and NASDAQ index funds, so my portfolio generally followed market performance. We have a lot of cash in a high yield savings account (I'm sure most financial advisers would say too much), plus my work 401k and equity in our home, but the majority of our net worth was in these 3 accounts.

I knew that according to prevailing wisdom, I was too heavy in stocks, and almost exclusively US based stocks at that. I had made no attempt to achieve a portfolio that was properly balanced between stocks and bonds, and I had made no attempt to ensure I was properly weighted across the different sectors. I was turning 54 later that year and decided I should look into having someone else manage our portfolio to make sure I didn't screw up our financial future.

So I chose to turn over all assets except my small stake in company stock (my position is senior enough that I can only buy/sell in specific windows with pre-approval) to Personal Capital, now called Empower.

There is no doubt that they have constructed a portfolio that is more appropriately diversified than the one I had created myself. But today I looked at comparing what my performance would have been in comparison to theirs had I just continued my own methodology. I assumed I left everything as it was at the time I turned it over to them, except that I assumed I would have reinvested cash that I had recently generated at the time from selling a couple funds back into the primary S&P 500 and NASDAQ index funds I had in my portfolio.

In the 2.5 years or so that Empower has managed my portfolio, its value has increased about 30%. Following my method;, it would have increased about 50%. That 20% delta is a lot of money.

I'm interested in perspective on this. I anticipate some criticism of my choice of Empower, and that's fine, I'm interested in thoughts on how to choose the right service/manager if I continue to not do this myself. I'm also interested in whether or not this is the kind of performance tradeoff one should expect with a portfolio constructed for diversification and balance rather than for growth, which is essentially what I had before. Also interested in time horizon perspective, i.e., the right timeline to foresake some upside for security.

From a personal perspective, my wife is disabled and in hospice care (separate thread about this), and we do not have kids, in case that factors into anyone's comments. Our only debt is our mortgage, which is at 2.75%.

Thoughts?

 

[Desert_Power]

In the 2.5 years or so that Empower has managed my portfolio, its value has increased about 30%. Following my method;, it would have increased about 50%. That 20% delta is a lot of money.

Curious if you can share a more specific date to see what other benchmarks did over that period.

 

[-OZ-]

Spent some time this weekend assessing investments and wanted some perspective.

Up until July 2022, I never had any financial adviser, I just handled my own investments. At that time, I had a 3 Fidelity brokerage accounts, one for after tax investments, one rollover IRA, and one Roth IRA. I'm sure I made plenty of mistakes over the years, but by that point I had arrived at almost all investments being in low fee mutual funds, mostly index funds. The only stock I had at that point was a small investment in my own company's stock.

Most of it was in S&P 500 and NASDAQ index funds, so my portfolio generally followed market performance. We have a lot of cash in a high yield savings account (I'm sure most financial advisers would say too much), plus my work 401k and equity in our home, but the majority of our net worth was in these 3 accounts.

I knew that according to prevailing wisdom, I was too heavy in stocks, and almost exclusively US based stocks at that. I had made no attempt to achieve a portfolio that was properly balanced between stocks and bonds, and I had made no attempt to ensure I was properly weighted across the different sectors. I was turning 54 later that year and decided I should look into having someone else manage our portfolio to make sure I didn't screw up our financial future.

So I chose to turn over all assets except my small stake in company stock (my position is senior enough that I can only buy/sell in specific windows with pre-approval) to Personal Capital, now called Empower.

There is no doubt that they have constructed a portfolio that is more appropriately diversified than the one I had created myself. But today I looked at comparing what my performance would have been in comparison to theirs had I just continued my own methodology. I assumed I left everything as it was at the time I turned it over to them, except that I assumed I would have reinvested cash that I had recently generated at the time from selling a couple funds back into the primary S&P 500 and NASDAQ index funds I had in my portfolio.

In the 2.5 years or so that Empower has managed my portfolio, its value has increased about 30%. Following my method;, it would have increased about 50%. That 20% delta is a lot of money.

I'm interested in perspective on this. I anticipate some criticism of my choice of Empower, and that's fine, I'm interested in thoughts on how to choose the right service/manager if I continue to not do this myself. I'm also interested in whether or not this is the kind of performance tradeoff one should expect with a portfolio constructed for diversification and balance rather than for growth, which is essentially what I had before. Also interested in time horizon perspective, i.e., the right timeline to foresake some upside for security.

From a personal perspective, my wife is disabled and in hospice care (separate thread about this), and we do not have kids, in case that factors into anyone's comments. Our only debt is our mortgage, which is at 2.75%.

Thoughts?

IF your FA is competent, they have you properly diversified based on the risk profile discussed. Are you on track for your goals?
If your FA is below the proper benchmark comparators set when you discussed the plan, that’s a problem.