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Personal Finance Advice and Education! (3 Viewers)

ConstruxBoy said:
Treasuries and other high-quality bonds may be less reliable diversifiers, particularly given how low their yields are in absolute terms.
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Some good points, but I disagree with this one.  Due to bond convexity and general negative or non-correlation an investor will be very glad for some bond allocation during a downturn.

BTW - a bit more :nerd:  look at diversification.  Lots to be learned there.  

 
rascal said:
What's the impact if cryptocurrency becomes more dominant and replaces the dollar?
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I change professions to hacker, for one.

Runkle said:
My HSA, unfortunately, is stuck with long-term buy-and-hold only because it's taxable and I don't want to have to withdraw money from it just to pay the taxes on winning trades. So more long-term holds go in here with an eye toward long-term growth, or, holding dividend funds if/when I retire to another state that doesn't tax the HSA.
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HSA is tax free in and tax free out (for medical expenses).

BigJim® said:
I’m sure it has been beaten like a dead horse in this mega thread, but can someone high level explain why ROTH is advantageous? Common sense says I would absorb taxes at my highest tax stage, reduce the funds going into high return investments, obtaining the ability to avoid taxes when my income is at a substantially lower bracket, possibly even below the standard deduction. It makes no sense to me.
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Some keys to think about:

- Given the same tax rate when contributing and withdrawing, the result is equivalent between the two.  So the ideal is to put in a Roth at low tax rates.  One's tax rates are likely to be lower than during working, so at the height of earning a traditional is usually better.

- One can shove more money into a Roth.  Because it goes in after taxes you can actually get in more money, since you're paying taxes up front.

- For your heirs a Roth is infinitely better with the new 10 year rule.

Personally, the things I'm doing include getting my kids' investment stuff into a Roth at essentially zero tax rate.  It will grow for 40 years and come out tax free.  Best thing I can do for them financially, I think.  I also plan to slowly convert traditional to Roth during low income years after retirement.  At the least it will be good for my heirs.

 
Sand said:
Save it up, cash in the house and move somewhere for retirement.  Withdraw the HSA after the move.   :P
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Haha exactly what I said in my post... that's the plan!

(Although, technically, California wants you to pay taxes on the unrealized gains in your accounts when you leave the state. They just don't yet have a method of enforcement)

 
Sand said:
Personally, the things I'm doing include getting my kids' investment stuff into a Roth at essentially zero tax rate.  It will grow for 40 years and come out tax free.  Best thing I can do for them financially, I think.  I also plan to slowly convert traditional to Roth during low income years after retirement.  At the least it will be good for my heirs.
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Totally agree!  When my first daughter started working I set up a Roth and told her she had to save at least 10%.  Went through the why’s and showed her projections.  Gave her a small match for incentive. Her Federal tax rate is 0% now.  She’s about to turn 17 and has $2,500 so far.  This summer she asked if she could buy individual stocks, so she’s learning about that.  I hope my other two kids go this well. 

 
Sand said:
Some keys to think about:

- One can shove more money into a Roth.  Because it goes in after taxes you can actually get in more money, since you're paying taxes up front.
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This one is overlooked a lot. You're getting more of your money into a tax advantaged position.

Also, personal finance is personal, not pure finance. So psychology matters. a Roth IRA has three more benefits I haven't seen delved into in this discussion:

1. Tax diversification. It's nice to be able to pull non-Roth money up to a certain income you target in retirement, then pull Roth money so you don't go over a target number

2. If you are going to prognosticate about future tax rates, these are the lowest marginal rate brackets in our history as a nation since income tax was implemented.

3. I like the idea of building a solid tax-free nest egg for my retirement, with money I won't have to worry about tax consequences on. That's part of the "personal" part.

 
Andrew74 said:
Totally agree!  When my first daughter started working I set up a Roth and told her she had to save at least 10%.  Went through the why’s and showed her projections.  Gave her a small match for incentive. Her Federal tax rate is 0% now.  She’s about to turn 17 and has $2,500 so far.  This summer she asked if she could buy individual stocks, so she’s learning about that.  I hope my other two kids go this well. 
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I need to do that for my sons. Is the main requirement for opening a Roth IRA to be working? Like you can’t open one for a new born baby and put money in for 16 years.

 
Instinctive said:
2. If you are going to prognosticate about future tax rates, these are the lowest marginal rate brackets in our history as a nation since income tax was implemented.
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This one is posted a lot, but it seems like just as much of an assumption that the US is going to reverse its trend of taxing the "rich" more lightly. I also don't think most people will care about the top marginal tax rates in withdrawal phase of retirement.

As you said, it's all personal though.

 
Desert_Power said:
This one is posted a lot, but it seems like just as much of an assumption that the US is going to reverse its trend of taxing the "rich" more lightly. I also don't think most people will care about the top marginal tax rates in withdrawal phase of retirement.

As you said, it's all personal though.
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Agreed. One thing I’ve got going for my portfolio is my taxable accounts being about 1/3 of my total. I do think that taxing the rich or wealthy may go up but I do think I’ll be able to manage taxes to minimize taxes. I mean, I hope my IRAs grow so much that my RMDs bump me into the 30% brackets!

I’ll definitely be diving into Roths for my boys (maybe back door too) as they start making money but we are maxing out our 401ks first and my after tax income is mainly going to college (10 more years worth) so I don’t have to touch the investments. The ROI on the investments over the next 10-20-30 years likely has the most impact out of anything.

 
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Sand said:
Personally, the things I'm doing include getting my kids' investment stuff into a Roth at essentially zero tax rate.  It will grow for 40 years and come out tax free.  Best thing I can do for them financially, I think.  I also plan to slowly convert traditional to Roth during low income years after retirement.  At the least it will be good for my heirs.
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My 18yo is contributing, will probably get between $3,000 - $3500 in this year unless I decide to kick some in for him.

 I'm reluctant to suggest he puts all his income in now as he's in community college / trade school and may have some expenses coming up he'll need to cover. We pay for school, insurance, gas for school and work, etc. But he wants to either be an electrician or aero-mechanic. While I think he'll work for someone who will cover equipment, I think it makes sense for him to keep some money on hand. I guess I could always convince him to max his IRA and we help with startup costs if there are any.  He just bought a car with no loan in May, and has a could thousand in savings. I think I'm convincing myself to suggest he increase his contributions...

Debating with my 16yo right now. He works but not as much, with more emphasis on school and volunteering. We pay for his stuff too but he wants to use his income to contribute to his coverdell. I'm thinking a custodial Roth IRA is worthwhile, just haven't done it yet. And it won't be much - $50 or $100 a month. That's still something. 

 
-OZ- said:
But he wants to either be an electrician or aero-mechanic. While I think he'll work for someone who will cover equipment, I think it makes sense for him to keep some money on hand.
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It's very typical for these folks to have their own cache of tools that they own to use on the job.   

 
-OZ- said:
My 18yo is contributing, will probably get between $3,000 - $3500 in this year unless I decide to kick some in for him.

 I'm reluctant to suggest he puts all his income in now as he's in community college / trade school and may have some expenses coming up he'll need to cover. We pay for school, insurance, gas for school and work, etc. But he wants to either be an electrician or aero-mechanic. While I think he'll work for someone who will cover equipment, I think it makes sense for him to keep some money on hand. I guess I could always convince him to max his IRA and we help with startup costs if there are any.  He just bought a car with no loan in May, and has a could thousand in savings. I think I'm convincing myself to suggest he increase his contributions...

Debating with my 16yo right now. He works but not as much, with more emphasis on school and volunteering. We pay for his stuff too but he wants to use his income to contribute to his coverdell. I'm thinking a custodial Roth IRA is worthwhile, just haven't done it yet. And it won't be much - $50 or $100 a month. That's still something. 
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He can always take out the contributions penalty free if he needs to later. 

 
Desert_Power said:
This one is posted a lot, but it seems like just as much of an assumption that the US is going to reverse its trend of taxing the "rich" more lightly. I also don't think most people will care about the top marginal tax rates in withdrawal phase of retirement.

As you said, it's all personal though.
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Sure, but anytime that anything is at it's lowest level in history, there is a decent chance it will reverse trend/revert to mean in the future. Doesn't have to mean the rich get taxed a lot more, IMO. Could see all brackets go up several percentage points. 

 
Sand said:
It's very typical for these folks to have their own cache of tools that they own to use on the job.   
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Yep. 

We'll probably just make it a graduation gift but if significant he'll need to buy some. And he will almost certainly want a truck then (I'll buy his Civic)

Runkle said:
He can always take out the contributions penalty free if he needs to later. 
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That's definitely a way to go, probably the right way instead of just keeping it in savings 

 
ConstruxBoy said:
Sure, but anytime that anything is at it's lowest level in history, there is a decent chance it will reverse trend/revert to mean in the future. Doesn't have to mean the rich get taxed a lot more, IMO. Could see all brackets go up several percentage points. 
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Right, but the jumps are big now. My wife and I in most realistic scenarios won’t need withdrawals to make what we make now. If you earn $172k, your effective tax rate is around 17%. It goes down with lower income than that. Right now, any penny I invested in non-pretax would be taxed at our personal highest rate which is well above that. I’ll take a chance that the lower rates don’t double. I think rates will go up a bit, but I’d put money on SS income limits (taken out if paychecks) ratcheting up to save SS and I’d put my next bet on wealth type taxes and higher top brackets. I’d put those odds better than lower brackets going up.

All this discussion is too tough to do without knowing everything because it’s so personal. Heck, even SS is taxed differently based on how much you make and what state you live in while retired.

 
stbugs said:
Right, but the jumps are big now. My wife and I in most realistic scenarios won’t need withdrawals to make what we make now. If you earn $172k, your effective tax rate is around 17%. It goes down with lower income than that. Right now, any penny I invested in non-pretax would be taxed at our personal highest rate which is well above that. I’ll take a chance that the lower rates don’t double. I think rates will go up a bit, but I’d put money on SS income limits (taken out if paychecks) ratcheting up to save SS and I’d put my next bet on wealth type taxes and higher top brackets. I’d put those odds better than lower brackets going up.

All this discussion is too tough to do without knowing everything because it’s so personal. Heck, even SS is taxed differently based on how much you make and what state you live in while retired.
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Yes, we're likely to spend close to what we do now, just on travel and leisure instead of kids and mortgage, at least for the beginning of retirement. So it's a closer call for us. 

 
Runkle said:
Haha exactly what I said in my post... that's the plan!

(Although, technically, California wants you to pay taxes on the unrealized gains in your accounts when you leave the state. They just don't yet have a method of enforcement)
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Hmmmm, just moved out of CA this year. Guess I’ll have to look into this a bit come tax time. 

 
ConstruxBoy said:
Yes, we're likely to spend close to what we do now, just on travel and leisure instead of kids and mortgage, at least for the beginning of retirement. So it's a closer call for us. 
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I can’t imagine even with travel (we spend a good amount on that now) that we’d spend close to what we do now. Travel sports, college tuition (yes, should have saved more in 529, but single income for many years) and in general kids are a lot and that’s not in the retirement plan. For instance, I really enjoy cooking but I know we still spend a lot on eating out. I can absolutely imagine saving a car payment or more each month just on cooking at home and only having 2 mouths to feed. Anyway, enjoy all the info in here. I think I know a lot but it’s awesome to get opinions and info I don’t know anything about.

 
ConstruxBoy said:
We like to travel alot, may buy some more real estate and have gotten into expensive wine. 🙂

Anyway, here is a nice calculator I found to help other folks:

Trad v Roth
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Expensive wine is definitely not in my cards! Real estate will be interesting. We will have a pretty damn good nut in our current home equity wise, but likely looking at a more expensive property to retire at but I’d also likely go 30 year instead of 15. I don’t see us having more than one place unless investing does well. We’ll see what happens, have a bunch more years before we’ll truly be settled in on a target.

 
The traditional vs Roth is always a good discussion but like most things on the internet, we're being too absolute with it. I think most people should have 20-30% of their retirement assets in a Roth as a minimal hedge against being wrong about future tax rates. I suppose someone with a ton of conviction in lower rates/spending could argue for 10% Roth or someone with strong conviction in higher future rates could aim for 50% Roth. But 20-30% seems optimal for most. 

We're currently at 18% right now, so doing all Roth in my 401k and hope to do another Roth conversion in the future. 

 
stbugs said:
Expensive wine is definitely not in my cards! Real estate will be interesting. We will have a pretty damn good nut in our current home equity wise, but likely looking at a more expensive property to retire at but I’d also likely go 30 year instead of 15. I don’t see us having more than one place unless investing does well. We’ll see what happens, have a bunch more years before we’ll truly be settled in on a target.
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Yeah, we'd love to have a place in the mountains and at the beach. Would likely rent out both, but that's still some more cash outlay than we make just having one home. 

 
ConstruxBoy said:
Yeah, we'd love to have a place in the mountains and at the beach. Would likely rent out both, but that's still some more cash outlay than we make just having one home. 
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We've decided (subject to change) to rent different beach places and buy on a lake near mountains. Today I could buy an adequate lake house for about the same as we could sell this house, a dream place would be like $800k while this house could sell for around $500k. 

Beach houses are just too expensive and frankly, hurricanes scare me a bit.

 
ConstruxBoy said:
Yeah, we'd love to have a place in the mountains and at the beach. Would likely rent out both, but that's still some more cash outlay than we make just having one home. 
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Just let me know where at the beach and we’ll meet you there! I don’t think I’d buy a rental property right now as you are at the crest of real estate prices jumping. If there’s another dip like after the last big surge in prices, buying a rental property might be a nice way to have a place near the beach for a lot less.

-OZ- said:
We've decided (subject to change) to rent different beach places and buy on a lake near mountains. Today I could buy an adequate lake house for about the same as we could sell this house, a dream place would be like $800k while this house could sell for around $500k. 

Beach houses are just too expensive and frankly, hurricanes scare me a bit.
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We are leaning towards a lake house and we rent a place at the beach every year so we might do that at times.

 
-OZ- said:
We've decided (subject to change) to rent different beach places and buy on a lake near mountains. Today I could buy an adequate lake house for about the same as we could sell this house, a dream place would be like $800k while this house could sell for around $500k. 

Beach houses are just too expensive and frankly, hurricanes scare me a bit.
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Which lake are you looking at for this? I always like looking at houses I'm not buying online. :lol:  

Agree with renting the beach. I love the beach, but just a lot of headaches from hurricanes/sea levels.

 
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-OZ- said:
We've decided (subject to change) to rent different beach places and buy on a lake near mountains. Today I could buy an adequate lake house for about the same as we could sell this house, a dream place would be like $800k while this house could sell for around $500k. 

Beach houses are just too expensive and frankly, hurricanes scare me a bit.
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Yeah, truth be told my MIL owns a beach house but we're not sure we want it when she's gone, for all the reasons you mention. We like the mountains and have come to enjoy lakes. But buying a townhome right near the beach would be nice without so many of the hassles. 

 
ConstruxBoy said:
Yeah, truth be told my MIL owns a beach house but we're not sure we want it when she's gone, for all the reasons you mention. We like the mountains and have come to enjoy lakes. But buying a townhome right near the beach would be nice without so many of the hassles. 
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We've considered a condo or villa. 2 bedroom, maybe 3. We have little use for it while the kids are still young and any house we could use with the family is far beyond our price range.

 
Personal Finance adjacent - any of you used an online site/service for a will or trust?  Now that I'm a homeowner and have some actual after-tax accounts with balances it's probably past time I get this set up.

 
stbugs said:
I can’t imagine even with travel (we spend a good amount on that now) that we’d spend close to what we do now. Travel sports, college tuition (yes, should have saved more in 529, but single income for many years) and in general kids are a lot and that’s not in the retirement plan. For instance, I really enjoy cooking but I know we still spend a lot on eating out. I can absolutely imagine saving a car payment or more each month just on cooking at home and only having 2 mouths to feed. Anyway, enjoy all the info in here. I think I know a lot but it’s awesome to get opinions and info I don’t know anything about.
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As long as you're factoring in long term care at some point.  $8-$10-$12K a month adds up fast.  Seen it happen way too many times with friends and family.  And it's not just when you're 80 or 90.  Our good friend/neighbor passed away yesterday.  It was 8 years of progressively worse early onset dementia starting at 52 I think.  Has been in a facility the last 4 years. Really expensive.  Like wife thinking she had to sell the house to pay for it expensive.

 
SFBayDuck said:
Personal Finance adjacent - any of you used an online site/service for a will or trust?  Now that I'm a homeowner and have some actual after-tax accounts with balances it's probably past time I get this set up.
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I've done LegalZoom. Pretty quick and cheap for a basic will ($150, I think). For a lot of people, I think online would work just fine. 

Although, I'm getting ready to go to a human lawyer for a trust (my sister is a lawyer in a different state and she always gave me hell for going the online route). . I don't have kids, but I have a "wife" with a traumatic brain injury and a number of disabilities.  We aren't married, and she will need a lot of help when I'm gone (financially and otherwise).  She's the beneficiary on all the accounts, but I know she's at more risk with us not being married. 

And I'm finally turning a corner and starting to build some assets that can help and want to make sure things are done optimally. For me I think it's time for a lawyer.

I'm pretty ignorant, and I know that's not helpful, but for simple stuff, an online service seems fine. A lawyer seems like a good idea if/ when things start to get a little complicate. 

 
pollardsvision said:
I've done LegalZoom. Pretty quick and cheap for a basic will ($150, I think). For a lot of people, I think online would work just fine. 

Although, I'm getting ready to go to a human lawyer for a trust (my sister is a lawyer in a different state and she always gave me hell for going the online route). . I don't have kids, but I have a "wife" with a traumatic brain injury and a number of disabilities.  We aren't married, and she will need a lot of help when I'm gone (financially and otherwise).  She's the beneficiary on all the accounts, but I know she's at more risk with us not being married. 

And I'm finally turning a corner and starting to build some assets that can help and want to make sure things are done optimally. For me I think it's time for a lawyer.

I'm pretty ignorant, and I know that's not helpful, but for simple stuff, an online service seems fine. A lawyer seems like a good idea if/ when things start to get a little complicate. 
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You pretty much nailed it. 

I'll give many people #### for using an online form. But if it's basically an "I love you" will, it's okay. I won't use one but we get our wills done free. (vet, retiree plus being a lawyer helps)

 
Since we're talking estate planning...

If I do go to a lawyer, what should I already have done, what do I need to bring, and what questions should I be prepared to answer at a consultation so that I can make productive use of the time?

Also,  how do I pick an estate lawyer?

 
Bob Sacamano said:
Tell me more about this expensive wine.
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Eh, nothing too crazy. Friends got us into Howell Mtn Cabs, so lots of Cade, Odette, Trefethen, Foley, Craig. Then after 9 years on the waiting list, got into Sine Qua Non allocations several years back. All great stuff, but we should probably start cutting back. 

 
D_House said:
Since we're talking estate planning...

If I do go to a lawyer, what should I already have done, what do I need to bring, and what questions should I be prepared to answer at a consultation so that I can make productive use of the time?

Also,  how do I pick an estate lawyer?
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If you have friends or colleagues who have used a local estate attorney, that's a good way to start. Ask for recommendations. Depending on the state you may be able to check for bar complaints. 

Bring or have available your accounts and anything you want to include in your plan - deeds, etc. Be sure you know who you want to list for custody, and TALK TO THEM first. 

 
Has anyone used a Vestory financial planner? We're using a free consult (listeners of talking real money will recognize) Wednesday. I don't intend to go long term with him but will definitely listen. 

 
Just paid son #1's semester tuition and fees. Not horrible for community college - $2600. But now I get to decide when to withdraw the money from his coverdell ESA. or if I do. We're going to roll the leftover funds to his sister, who starts 1st grade tomorrow. 

I assume I'll have until December 31 to withdraw for this year. But it feels weird to actually use this money. 

 
Bob Sacamano said:
:X
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:lmao:  trust me, I get it but at least she was planned.  We have gaps of 2 years, 3 years, 3 years, and 4 years. 

It's nice though, the oldest two are built in babysitters and actually really good kids. I'm actually sort of glad #1 will stay here this year and probably next year before figuring out the next thing. 

 
Transferring my TSP to IRAs (both traditional and Roth), even though I know it’s processing it’s a bit disconcerting to see more money than I make in a few years disappear overnight 👻

 
Lol, so I get a letter from the IRS that is like you owe us 35k for a severe underpay in 2019.  I was like WTF.  Called my CPA, he was shuked, didn't understand wtf was up.  Kicked around ideas for a couple weeks pointing to a stock option that got a withholding out of my employer.  Still couldn't square it.

Call the IRS, they say, oops our bad no worries.  closed.  

So yeah. 

 
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