Personal Finance Advice and Education! (5 Viewers)

[shuke]

I have some money sitting in cash and decided to open a Roth IRA. I realized today that there is a contribution limit based on income. However, I am confused on whether I need to use my 2021 income to determine 2022 limits, or waiting until I file my taxes for 2022 to determine my AGI for 2022 and see if we are above the limit for 2022.

If I'm over the limit, I guess a traditional IRA is my next best option?

As a background, I have an active employer 401(k) that I max out in, an IRA that was a previous 401(k), and a 401(k) account from another previous employer. My wife, who is not working, has multiple traditional and Roth IRA accounts that we are not actively contributing to.

TIA will answer yours.

Not financial advice, etc, but you have until the tax filing deadline (not including extensions, so typically April 15th) to make your contribution, so any contribution now would be for 2022. You are allowed to make the contribution before you file your 2022 taxes (which will be in 2023), but if you end up making too much you'll have to correct it. FYI the AGI limit for 2022 is $204K for married filing jointly (can make a partial contribution up to $214K). All of those other plans have no bearing on your ability to contribute to a Roth (they can impact the deductibility of contributions to a traditional IRA).

So, long story short you can look at your 2021 AGI to use as a guide to see if you think you'll be below the limits but it ultimately will be based on 2022 AGI.

Thanks, but what do you mean "if you end up making too much you'll have to correct it"? How would it be corrected?

 

[humpback]

There are a few ways. It isn't super complicated but if you (the generic you) don't really know anything about this and/or you expect your AGI to be close to the limit it's probably best to just wait.

 

[OrganizedChaos]

I am 61.5 so nearing ability to get early Social Security (if we want it early) and my wife is 2.5 years younger. Both retired. We have some investments/savings outside of retirement plans but all of our 401k/IRAs are traditional vs. Roth. As I started trying to do some scenarios on different times to take SSI and trying to factor in Medicare a few years down the road, I have realized we are going to get hit pretty hard with RMDs as we turn 72. So I am trying to look at different Roth conversion scenarios to lessen what will be the impact later. Of course any income affects SSI taxes, Covered California plan prices now, and Medicare later. Currently in the 22% bracket and probably going to get kicked into the lower end of the 24% bracket if we do nothing when RMDs kick in for both of us.

To get to my question, are there any websites anyone has found you like where you can plug in different scenarios (Roth conversions, investment growth, withdrawals for living expenses) to try and gauge how approaching it differently (Roth conversions vs. traditional) will come out year by year? We aren't going to want to convert any in total. Just start siphoning some amount per year to spread it out and perhaps stay out of the higher bracket later. We do have a financial advisor I expect we'll meet with next month but I fear they will just want to focus on this year and perhaps next year and I want to look 10 to 15 years down the road.

 

[Tau837]

We do have a financial advisor I expect we'll meet with next month but I fear they will just want to focus on this year and perhaps next year and I want to look 10 to 15 years down the road.

If your financial advisor is unwilling or unable to be responsive to the questions/topics that are important to you, I respectfully suggest that you need a different financial advisor.

 

[OrganizedChaos]

We do have a financial advisor I expect we'll meet with next month but I fear they will just want to focus on this year and perhaps next year and I want to look 10 to 15 years down the road.

If your financial advisor is unwilling or unable to be responsive to the questions/topics that are important to you, I respectfully suggest that you need a different financial advisor.

I could be wrong and you are probably correct if that is the case. What I do see trying to look 10, 15, 20 years down the road there are countless scenarios that could play out and each affects our income and taxes. Before this year and taking a look at it I never worried about RMDs as I always considered we'll be in a cheaper tax bracket then but I did not realize how much they would pull each year. Lesson learned. Should have been looking at this years ago.

 

[Sand]

I am 61.5 so nearing ability to get early Social Security (if we want it early) and my wife is 2.5 years younger. Both retired. We have some investments/savings outside of retirement plans but all of our 401k/IRAs are traditional vs. Roth. As I started trying to do some scenarios on different times to take SSI and trying to factor in Medicare a few years down the road, I have realized we are going to get hit pretty hard with RMDs as we turn 72. So I am trying to look at different Roth conversion scenarios to lessen what will be the impact later. Of course any income affects SSI taxes, Covered California plan prices now, and Medicare later. Currently in the 22% bracket and probably going to get kicked into the lower end of the 24% bracket if we do nothing when RMDs kick in for both of us.

To get to my question, are there any websites anyone has found you like where you can plug in different scenarios (Roth conversions, investment growth, withdrawals for living expenses) to try and gauge how approaching it differently (Roth conversions vs. traditional) will come out year by year? We aren't going to want to convert any in total. Just start siphoning some amount per year to spread it out and perhaps stay out of the higher bracket later. We do have a financial advisor I expect we'll meet with next month but I fear they will just want to focus on this year and perhaps next year and I want to look 10 to 15 years down the road.

One thing that I can say here is that the two player game with regards to SS is definitely something to look at heavily, play with calculators, etc. In my circumstance I'm likely to claim at 70 and my wife at 62 due to age, lifetime earnings, etc. One player is very straight up - two player allows for more optimization.

As far as figuring out Roth conversions, etc. that's a tough go considering things are bound to change. I'd setup an excel and do it year by year. Try to hit the top of your chosen income bracket with Roth conversions and let it go. I'd be surprised if a long term plan will hold up.

 

[cudjoekey10]

Does anyone have any advice on long term care insurance? Wife and I are mid-50's and if I can buy insurance "cheaper" now than in say 10 years I'd like to do so. Problem is the insurance doesn't seem straightforward like most insurance. One hedge we should have is that I should be able to wait until 70 to take SS, so we'll max that benefit to help defray high monthly LTC costs, but I'd like to have some insurance to cover the rest.

 

[Terminalxylem]

Does anyone have any advice on long term care insurance? Wife and I are mid-50's and if I can buy insurance "cheaper" now than in say 10 years I'd like to do so. Problem is the insurance doesn't seem straightforward like most insurance. One hedge we should have is that I should be able to wait until 70 to take SS, so we'll max that benefit to help defray high monthly LTC costs, but I'd like to have some insurance to cover the rest.

Not a finance guy, but my understanding is it’s rarely worth it. By the time people need LTC, they’re usually unhealthy enough that they pass away shortly thereafter. While average lifespan in a nursing home is a couple years, the median is a lot shorter, around six months or so.

Full disclosure: my wife has LTC ins, mainly because of her financial advisor, but I don’t. The premiums have really been going up in the last few years. On the other hand, having watched my grandmother deplete her savings after being placed in a facility at age 97, nursing homes aren’t cheap (she lived 99 years, 364 days). Hopefully medicine and/or our societal safety net will be advanced enough in the future it becomes a moot point.

 

[OrganizedChaos]

I am 61.5 so nearing ability to get early Social Security (if we want it early) and my wife is 2.5 years younger. Both retired. We have some investments/savings outside of retirement plans but all of our 401k/IRAs are traditional vs. Roth. As I started trying to do some scenarios on different times to take SSI and trying to factor in Medicare a few years down the road, I have realized we are going to get hit pretty hard with RMDs as we turn 72. So I am trying to look at different Roth conversion scenarios to lessen what will be the impact later. Of course any income affects SSI taxes, Covered California plan prices now, and Medicare later. Currently in the 22% bracket and probably going to get kicked into the lower end of the 24% bracket if we do nothing when RMDs kick in for both of us.

To get to my question, are there any websites anyone has found you like where you can plug in different scenarios (Roth conversions, investment growth, withdrawals for living expenses) to try and gauge how approaching it differently (Roth conversions vs. traditional) will come out year by year? We aren't going to want to convert any in total. Just start siphoning some amount per year to spread it out and perhaps stay out of the higher bracket later. We do have a financial advisor I expect we'll meet with next month but I fear they will just want to focus on this year and perhaps next year and I want to look 10 to 15 years down the road.

One thing that I can say here is that the two player game with regards to SS is definitely something to look at heavily, play with calculators, etc. In my circumstance I'm likely to claim at 70 and my wife at 62 due to age, lifetime earnings, etc. One player is very straight up - two player allows for more optimization.

As far as figuring out Roth conversions, etc. that's a tough go considering things are bound to change. I'd setup an excel and do it year by year. Try to hit the top of your chosen income bracket with Roth conversions and let it go. I'd be surprised if a long term plan will hold up.

Thanks for the feedback. Making the SS determination for each of us definitely requires running some scenarios. We had been thinking I would start at 62 and wife delay until 70. She probably has the longer lifespan. It looks like if one of us delays until 70 the breakeven point is around 79 between taking it early or delayed. I like the advice on the Roth as well. Hate giving so much up for taxes but going to have to do it sooner or later.

 

[Sand]

I am 61.5 so nearing ability to get early Social Security (if we want it early) and my wife is 2.5 years younger. Both retired. We have some investments/savings outside of retirement plans but all of our 401k/IRAs are traditional vs. Roth. As I started trying to do some scenarios on different times to take SSI and trying to factor in Medicare a few years down the road, I have realized we are going to get hit pretty hard with RMDs as we turn 72. So I am trying to look at different Roth conversion scenarios to lessen what will be the impact later. Of course any income affects SSI taxes, Covered California plan prices now, and Medicare later. Currently in the 22% bracket and probably going to get kicked into the lower end of the 24% bracket if we do nothing when RMDs kick in for both of us.

To get to my question, are there any websites anyone has found you like where you can plug in different scenarios (Roth conversions, investment growth, withdrawals for living expenses) to try and gauge how approaching it differently (Roth conversions vs. traditional) will come out year by year? We aren't going to want to convert any in total. Just start siphoning some amount per year to spread it out and perhaps stay out of the higher bracket later. We do have a financial advisor I expect we'll meet with next month but I fear they will just want to focus on this year and perhaps next year and I want to look 10 to 15 years down the road.

One thing that I can say here is that the two player game with regards to SS is definitely something to look at heavily, play with calculators, etc. In my circumstance I'm likely to claim at 70 and my wife at 62 due to age, lifetime earnings, etc. One player is very straight up - two player allows for more optimization.

As far as figuring out Roth conversions, etc. that's a tough go considering things are bound to change. I'd setup an excel and do it year by year. Try to hit the top of your chosen income bracket with Roth conversions and let it go. I'd be surprised if a long term plan will hold up.

Thanks for the feedback. Making the SS determination for each of us definitely requires running some scenarios. We had been thinking I would start at 62 and wife delay until 70. She probably has the longer lifespan. It looks like if one of us delays until 70 the breakeven point is around 79 between taking it early or delayed. I like the advice on the Roth as well. Hate giving so much up for taxes but going to have to do it sooner or later.

Just FYI on our plans. My lifetime earnings are much higher than the wife and we plan the opposite. I'll take at 70 and she at 62. That way she (who will almost assuredly outlive me) will get the higher death payout from me holding out and gets the spouse supplement while we're both around. I'm treating it as longevity insurance for her, though the calculators say it's probably the best way to do it, anyway.

 

[Buckna]

I have 500,000 chase points that I know I won't use for at least a year or more. Is there any reason not to cash them out and buy I bonds or max out a Roth IRA?

Do you have a Sapphire Reserve card? Since Chase rolled out Pay Yourself Back, you can get $0.015 per point on certain categories of spend like restaurants on the Reserve card (can also use it to cover the Reserve’s annual fee at that same rate.) I’ve been cashing out via this method if there isn’t travel you want to use your points on. PYB is one of the best values going right now of any points program.

 

[matttyl]

Does anyone have any advice on long term care insurance? Wife and I are mid-50's and if I can buy insurance "cheaper" now than in say 10 years I'd like to do so. Problem is the insurance doesn't seem straightforward like most insurance. One hedge we should have is that I should be able to wait until 70 to take SS, so we'll max that benefit to help defray high monthly LTC costs, but I'd like to have some insurance to cover the rest.

Disclosure - I sell LTC insurance. That’s much harder to do these days.

There are (generally) two types of LTC insurance these days.

1 - Stand alone plans that just provide LTC $ if you qualify (your inability to perform 2 of 5/6 activities of daily living without substantial assistance). You pay premiums monthly/annually for as long as you’d like to have coverage, typically for life - and you aren’t building any cash value. The premiums aren’t guaranteed and can change drastically over time.

2 - a permanent life insurance policy (typically whole life) with an LTC rider that allows you to use the death benefit to pay for LTC before you pass away if needed. Only really makes sense if you also have a life insurance need otherwise (to maximize a pension, estate taxes, wealth transfer to kids, income replacement). The LTC rider is very cheap, the life policy generally isn’t.

Keep in mind this “rule of thumb”. In America, if 65 today you have a 50/50 shot of ever needing LTC benefits in your remaining life. If you do, you have a 50/50 shot of that need lasting longer than 90 days. If you do, you have a 50/50 shot of it lasting longer than 2 years. Means you have roughly a 12.5% chance (if 65 today) of having an LTC need longer than 2 years.

 

[Tau837]

Does anyone have any advice on long term care insurance? Wife and I are mid-50's and if I can buy insurance "cheaper" now than in say 10 years I'd like to do so. Problem is the insurance doesn't seem straightforward like most insurance. One hedge we should have is that I should be able to wait until 70 to take SS, so we'll max that benefit to help defray high monthly LTC costs, but I'd like to have some insurance to cover the rest.

Not a finance guy, but my understanding is it’s rarely worth it. By the time people need LTC, they’re usually unhealthy enough that they pass away shortly thereafter. While average lifespan in a nursing home is a couple years, the median is a lot shorter, around six months or so.

Full disclosure: my wife has LTC ins, mainly because of her financial advisor, but I don’t. The premiums have really been going up in the last few years. On the other hand, having watched my grandmother deplete her savings after being placed in a facility at age 97, nursing homes aren’t cheap (she lived 99 years, 364 days). Hopefully medicine and/or our societal safety net will be advanced enough in the future it becomes a moot point.

I am no expert, but I have a similar view that it is rarely worth it. Premiums are expensive. I believe benefits usually have a max monthly and max total payout. If you are mid-50s, a question to evaluate is whether or not you could put the premium amount into an investment account and accumulate as much or more dollars as you would receive from a LTI payout. Or at least close enough that you can cover the delta from your other income/savings.

 

[matttyl]

Does anyone have any advice on long term care insurance? Wife and I are mid-50's and if I can buy insurance "cheaper" now than in say 10 years I'd like to do so. Problem is the insurance doesn't seem straightforward like most insurance. One hedge we should have is that I should be able to wait until 70 to take SS, so we'll max that benefit to help defray high monthly LTC costs, but I'd like to have some insurance to cover the rest.

Not a finance guy, but my understanding is it’s rarely worth it. By the time people need LTC, they’re usually unhealthy enough that they pass away shortly thereafter. While average lifespan in a nursing home is a couple years, the median is a lot shorter, around six months or so.

Full disclosure: my wife has LTC ins, mainly because of her financial advisor, but I don’t. The premiums have really been going up in the last few years. On the other hand, having watched my grandmother deplete her savings after being placed in a facility at age 97, nursing homes aren’t cheap (she lived 99 years, 364 days). Hopefully medicine and/or our societal safety net will be advanced enough in the future it becomes a moot point.

I am no expert, but I have a similar view that it is rarely worth it. Premiums are expensive. I believe benefits usually have a max monthly and max total payout. If you are mid-50s, a question to evaluate is whether or not you could put the premium amount into an investment account and accumulate as much or more dollars as you would receive from a LTI payout. Or at least close enough that you can cover the delta from your other income/savings.

Policies can have huge payouts, though. I have one on claim right now where they have paid out well over $1m, and no end in sight (lifetime benefit - not an option anymore). If you have a policy now at age 65 with a $150 per day benefit with 5% compound inflation and a 2 year benefit period - that’s $400 per day at age 85, and a total pool of $292k.

 

[Chadstroma]

Does anyone have any advice on long term care insurance? Wife and I are mid-50's and if I can buy insurance "cheaper" now than in say 10 years I'd like to do so. Problem is the insurance doesn't seem straightforward like most insurance. One hedge we should have is that I should be able to wait until 70 to take SS, so we'll max that benefit to help defray high monthly LTC costs, but I'd like to have some insurance to cover the rest.

Not a finance guy, but my understanding is it’s rarely worth it. By the time people need LTC, they’re usually unhealthy enough that they pass away shortly thereafter. While average lifespan in a nursing home is a couple years, the median is a lot shorter, around six months or so.

Full disclosure: my wife has LTC ins, mainly because of her financial advisor, but I don’t. The premiums have really been going up in the last few years. On the other hand, having watched my grandmother deplete her savings after being placed in a facility at age 97, nursing homes aren’t cheap (she lived 99 years, 364 days). Hopefully medicine and/or our societal safety net will be advanced enough in the future it becomes a moot point.

I am no expert, but I have a similar view that it is rarely worth it. Premiums are expensive. I believe benefits usually have a max monthly and max total payout. If you are mid-50s, a question to evaluate is whether or not you could put the premium amount into an investment account and accumulate as much or more dollars as you would receive from a LTI payout. Or at least close enough that you can cover the delta from your other income/savings.

Policies can have huge payouts, though. I have one on claim right now where they have paid out well over $1m, and no end in sight (lifetime benefit - not an option anymore). If you have a policy now at age 65 with a $150 per day benefit with 5% compound inflation and a 2 year benefit period - that’s $400 per day at age 85, and a total pool of $292k.

I wonder why

 

[stbugs]

I am 61.5 so nearing ability to get early Social Security (if we want it early) and my wife is 2.5 years younger. Both retired. We have some investments/savings outside of retirement plans but all of our 401k/IRAs are traditional vs. Roth. As I started trying to do some scenarios on different times to take SSI and trying to factor in Medicare a few years down the road, I have realized we are going to get hit pretty hard with RMDs as we turn 72. So I am trying to look at different Roth conversion scenarios to lessen what will be the impact later. Of course any income affects SSI taxes, Covered California plan prices now, and Medicare later. Currently in the 22% bracket and probably going to get kicked into the lower end of the 24% bracket if we do nothing when RMDs kick in for both of us.

To get to my question, are there any websites anyone has found you like where you can plug in different scenarios (Roth conversions, investment growth, withdrawals for living expenses) to try and gauge how approaching it differently (Roth conversions vs. traditional) will come out year by year? We aren't going to want to convert any in total. Just start siphoning some amount per year to spread it out and perhaps stay out of the higher bracket later. We do have a financial advisor I expect we'll meet with next month but I fear they will just want to focus on this year and perhaps next year and I want to look 10 to 15 years down the road.

One thing that I can say here is that the two player game with regards to SS is definitely something to look at heavily, play with calculators, etc. In my circumstance I'm likely to claim at 70 and my wife at 62 due to age, lifetime earnings, etc. One player is very straight up - two player allows for more optimization.

As far as figuring out Roth conversions, etc. that's a tough go considering things are bound to change. I'd setup an excel and do it year by year. Try to hit the top of your chosen income bracket with Roth conversions and let it go. I'd be surprised if a long term plan will hold up.

Thanks for the feedback. Making the SS determination for each of us definitely requires running some scenarios. We had been thinking I would start at 62 and wife delay until 70. She probably has the longer lifespan. It looks like if one of us delays until 70 the breakeven point is around 79 between taking it early or delayed. I like the advice on the Roth as well. Hate giving so much up for taxes but going to have to do it sooner or later.

Just FYI on our plans. My lifetime earnings are much higher than the wife and we plan the opposite. I'll take at 70 and she at 62. That way she (who will almost assuredly outlive me) will get the higher death payout from me holding out and gets the spouse supplement while we're both around. I'm treating it as longevity insurance for her, though the calculators say it's probably the best way to do it, anyway.

My wife and I will both be at the max and I plan to start collecting at 62. We should have a nice amount in taxable accounts so we can push off RMDs for a while and while the straight calculations give you a break even around 79, that ignores making interest/dividends/capital gains on the nest egg you build up in 8 years. If you earn a decent rate, the breakeven is way later and if you earn enough, the gains each month make up for taking later. You also have that nest egg in your own account to pass on to your kids.

Note that everyone’s situation is different. I don’t expect to be working at 62 and those taxable accounts are needed to keep income down to not reduce benefits. There’s way more factors to consider.

Real quick example. My wife and I will get around $5k a month and using 6%ish, in 8 years you’d have $600k. The monthly difference is $1800 or $21,600. At 6%, your making $36k a year gains ignoring taxes. Let’s say you earn a little less or you take out 0.9-1.2% in capital gains taxes, you are still ahead a little. Even if you are making the exact same $21,600 on your early earnings, you own the $600k. If you die, it stays in the family whereas you have no nest egg the other way. Again, everyone’s different and most people that take out early do it because they have to, but I like having that money in hand. One other thing is that if you are worried about insolvency or higher SS taxes/income taxes, it might be better only getting $5k a month down the road instead of $8k a month.

 

[matttyl]

Does anyone have any advice on long term care insurance? Wife and I are mid-50's and if I can buy insurance "cheaper" now than in say 10 years I'd like to do so. Problem is the insurance doesn't seem straightforward like most insurance. One hedge we should have is that I should be able to wait until 70 to take SS, so we'll max that benefit to help defray high monthly LTC costs, but I'd like to have some insurance to cover the rest.

Not a finance guy, but my understanding is it’s rarely worth it. By the time people need LTC, they’re usually unhealthy enough that they pass away shortly thereafter. While average lifespan in a nursing home is a couple years, the median is a lot shorter, around six months or so.

Full disclosure: my wife has LTC ins, mainly because of her financial advisor, but I don’t. The premiums have really been going up in the last few years. On the other hand, having watched my grandmother deplete her savings after being placed in a facility at age 97, nursing homes aren’t cheap (she lived 99 years, 364 days). Hopefully medicine and/or our societal safety net will be advanced enough in the future it becomes a moot point.

I am no expert, but I have a similar view that it is rarely worth it. Premiums are expensive. I believe benefits usually have a max monthly and max total payout. If you are mid-50s, a question to evaluate is whether or not you could put the premium amount into an investment account and accumulate as much or more dollars as you would receive from a LTI payout. Or at least close enough that you can cover the delta from your other income/savings.

Policies can have huge payouts, though. I have one on claim right now where they have paid out well over $1m, and no end in sight (lifetime benefit - not an option anymore). If you have a policy now at age 65 with a $150 per day benefit with 5% compound inflation and a 2 year benefit period - that’s $400 per day at age 85, and a total pool of $292k.

I wonder why

Well, partly the obvious. But also because of the amount of reserves the insurance company would have to have on hand. Years ago carriers were allowed to assume pretty decent ROR on their reserves, and they have to have so much set aside in reserves to pay future expected claims. When they could no longer assume those high ROR on reserves, and since by definition a lifetime benefit has no set determined max liability, they had to keep huge sums in reserve to the point it made no sense, no matter what they charged in premiums.

 

[Sand]

Note that everyone’s situation is different. I don’t expect to be working at 62 and those taxable accounts are needed to keep income down to not reduce benefits. There’s way more factors to consider.

Absolutely. Personally I'm most worried about cash flow for my wife rather than total payouts and breakevens, etc. I'm coming at it a bit differently than many. That's why when there is a two player game involved in here I always talk about diving into this as it's got a bit of complexity and the answer isn't always obvious relative to your goals.

 

[cudjoekey10]

Very helpful guys. I too am worried about my wife. Another question, I have some genetic stuff going on that makes me, or did make me, uninsurable via private life insurance. So I buy up my employers coverage to the limit just before they demand medical records.

When I stop working, this insurance goes away. For those of us with a genetic predisposition to cancer, are there any insurance companies that either don't check or you can pay a higher premium? I'd like to have my life insured up until early 70's at least since there's no doubt my wife will live into her 90's and spend the years without me hooking up with dudes left and right. Or at least that's what she tells me.

 

[matttyl]

Very helpful guys. I too am worried about my wife. Another question, I have some genetic stuff going on that makes me, or did make me, uninsurable via private life insurance. So I buy up my employers coverage to the limit just before they demand medical records.

When I stop working, this insurance goes away. For those of us with a genetic predisposition to cancer, are there any insurance companies that either don't check or you can pay a higher premium? I'd like to have my life insured up until early 70's at least since there's no doubt my wife will live into her 90's and spend the years without me hooking up with dudes left and right. Or at least that's what she tells me.

Yes, but not for large policies. I mean you could find some “guaranteed issue” carrier that will do maybe $25-50k on you, but anything over that (especially when you’re 50+), they’re going to want to underwrite you.

 

[stbugs]

Note that everyone’s situation is different. I don’t expect to be working at 62 and those taxable accounts are needed to keep income down to not reduce benefits. There’s way more factors to consider.

Absolutely. Personally I'm most worried about cash flow for my wife rather than total payouts and breakevens, etc. I'm coming at it a bit differently than many. That's why when there is a two player game involved in here I always talk about diving into this as it's got a bit of complexity and the answer isn't always obvious relative to your goals.

I think I know, but a question on survivors benefit. If my wife is at the max, she can’t make any more than that regardless if I go first, correct?

 

[Sand]

Note that everyone’s situation is different. I don’t expect to be working at 62 and those taxable accounts are needed to keep income down to not reduce benefits. There’s way more factors to consider.

Absolutely. Personally I'm most worried about cash flow for my wife rather than total payouts and breakevens, etc. I'm coming at it a bit differently than many. That's why when there is a two player game involved in here I always talk about diving into this as it's got a bit of complexity and the answer isn't always obvious relative to your goals.

I think I know, but a question on survivors benefit. If my wife is at the max, she can’t make any more than that regardless if I go first, correct?

There is a supplement given to spouses who earn less when the other dies based on the relative SS payouts. The surviving spouse gets the greater of yours or hers, so unless she claims early and you claim late (then croak soon after) I believe she wouldn't get extra.

Good for you for getting to the pinnacle - that should have the two of you in good shape down the road. I should hit the second bend point in a year and after that my motivation to increase SS is gone - it just goes up incredibly slowly from there.

 

[Chadstroma]

Big announcement for credit changes that impact mortgage lending.

The FHFA, the government agency that oversees the companies that make up conventional mortgage loans, is now allowing them to use FICO 10T and Vantagscore 4.0 replacing the older classic FICO versions of 2,4 and 5. Along with this is that lenders will no longer be required to perform a trimerge (pulling all three credit bureaus) but only a bimerge (picking two of the three).
THIS WILL NOT HAPPEN OVERNIGHT. It is likely to take a couple of years before this change becomes the standard. This will also most likely mean that government backed mortgages will follow and adopt the same FICO 10T and Vantagescore 4.0 as well they have followed in the past.

There are some major differences with FICO 10T to the older FICO versions. The first major difference is that what the T stands for which is “trending”. I use to explain a credit inquiry as a screen shot of your credit movie. With FICO 10T, credit will be looked at as more like a clip of your movie taking a whole scene and using it to compile the score. The scene will be 24 months worth of your credit and will look at the trends of how you used credit over that period of time. It will also now have a memory of your credit utilization as well over that period.

Another major difference is that self-reported tradelines, such as rent and utilities, will be a factor to the credit scoring while they were excluded with the classic FICO 2, 4 and 5 versions currently used for mortgage applications.

FICO 10T also reduced the negative hit for medical collections versus non-medical collections and does not penalize for paid off collections.

Areas where FICO 10T will be tougher with are late payments and delinquencies. Also using a consolidation loan to pay off credit card balances may actually negatively affect credit while previously it would be beneficial if the credit utilization was high.

With authorized user accounts, the newer FICO scoring models have minimized or eliminated the benefits of ‘creditpiggybacking’ so these may not be as impactful with the new scoring.
As mentioned, this will take some time for changes to be made but if you are expecting to buy in the a time frame of a year or more you will want to keep this in mind and start working your credit towards the new models.

 

[jm192]

Bought my I-bond allotment for the year on my account.

Trying to buy my wife's. Treasury direct is down.

They're recommending you purchase prior to the end of October 28th to get them issued in October. Hope this is sorted out sometime tomorrow.

 

[Sleestak]

Bought my I-bond allotment for the year on my account.

Trying to buy my wife's. Treasury direct is down.

They're recommending you purchase prior to the end of October 28th to get them issued in October. Hope this is sorted out sometime tomorrow.

Created a TD account on Monday, and bought a $10k I-bond. My first bond purchase. Doesn't really move the bubble, but I figure it will be a useful learning experience.

Will be interesting to see what happens to the bond rate going forward.

 

[cudjoekey10]

Bought my I-bond allotment for the year on my account.

Trying to buy my wife's. Treasury direct is down.

They're recommending you purchase prior to the end of October 28th to get them issued in October. Hope this is sorted out sometime tomorrow.

Created a TD account on Monday, and bought a $10k I-bond. My first bond purchase. Doesn't really move the bubble, but I figure it will be a useful learning experience.

Will be interesting to see what happens to the bond rate going forward.

What rate did you get and what's the term? How long are you locked into the ibond before you can withdrawal without penalty?

edit: never mind, I went on Treasury Direct and found the answers. The only thing I didn't find was what's the impact of not getting the issue before October 31.

 

[jm192]

Bought my I-bond allotment for the year on my account.

Trying to buy my wife's. Treasury direct is down.

They're recommending you purchase prior to the end of October 28th to get them issued in October. Hope this is sorted out sometime tomorrow.

Created a TD account on Monday, and bought a $10k I-bond. My first bond purchase. Doesn't really move the bubble, but I figure it will be a useful learning experience.

Will be interesting to see what happens to the bond rate going forward.

It's a fairly short term play, but it's one of the best investments right now.

Certainly you can argue you're better off buying the market during the dip. But if your stocks get you 8% over the next year, you're happy. I-Bonds average out to 8.xx% over the next 12 months.

We've got about 300K invested between 401K/IRA/HSA/Taxable and I-bonds. Our 40K in I-bonds is about 15% of the total. So for now it's worth it.

US Treasury bills have been sneaking up to 4.5%+ and some of the larger banks are offering CD rates in that range. I *think* the I-bond utilization is about to fall off a cliff this time next year.

 

[jm192]

Bought my I-bond allotment for the year on my account.

Trying to buy my wife's. Treasury direct is down.

They're recommending you purchase prior to the end of October 28th to get them issued in October. Hope this is sorted out sometime tomorrow.

Created a TD account on Monday, and bought a $10k I-bond. My first bond purchase. Doesn't really move the bubble, but I figure it will be a useful learning experience.

Will be interesting to see what happens to the bond rate going forward.

What rate did you get and what's the term? How long are you locked into the ibond before you can withdrawal without penalty?

edit: never mind, I went on Treasury Direct and found the answers. The only thing I didn't find was what's the impact of not getting the issue before October 31.

5 years to avoid the penalty.

They have a post/warning that if you want the 9.62% rate--you need to purchase by midnight on 10/28--otherwise they won't be processed until 11/1 and you'll miss out on 6 months at the old rate. As long as you buy before then--you get 6 months at 9.62 % and 6 months at 6.xx%.

 

[jm192]

I WAS thinking I'd buy another allotment come January, but thinking maybe I-Bonds are running near the end of their hot streak.

Already down to 6.xx%. US treasury bills up to 4.5%+, and they're more liquid. I'll wait until April and see what the next rate's gonna be.

 

[pollardsvision]

Do you guys generally use I-bonds for money earmarked for specific use in the next 1 to 3 years?

I've thought about them, but that seems to be about the only situation I would personally want them for.

 

[jm192]

Do you guys generally use I-bonds for money earmarked for specific use in the next 1 to 3 years?

I've thought about them, but that seems to be about the only situation I would personally want them for.

I'm of the mindset don't put in money you may need.

My 1st 20K is now liquid. So I feel fine putting more into the machine. Letting the first 20K ride and collect more interest. But now if the roof needs replacing or something, I can yank that out.

Fixed income at 8-9% is the dream. The goal is to have enough to retire on in 20-30 years. 8-9% returns will get you there.

Also we’re fairly young in our investing game. Our I bonds are about 15% of our portfolio.

As you get further into it and accumulate more, 10,000 or 20,000 doesn’t move the needle as much. 10 years from now I may say it’s not worth the hassle.

 

[Runkle]

Bought my I-bond allotment for the year on my account.

Trying to buy my wife's. Treasury direct is down.

They're recommending you purchase prior to the end of October 28th to get them issued in October. Hope this is sorted out sometime tomorrow.

Created a TD account on Monday, and bought a $10k I-bond. My first bond purchase. Doesn't really move the bubble, but I figure it will be a useful learning experience.

Will be interesting to see what happens to the bond rate going forward.

What rate did you get and what's the term? How long are you locked into the ibond before you can withdrawal without penalty?

edit: never mind, I went on Treasury Direct and found the answers. The only thing I didn't find was what's the impact of not getting the issue before October 31.

If you buy in the calendar month of October, the first six months of your bond pay the May-October rate (9%ish), then after six months, you get the next rate for six months (6%ish).

If you buy 11/1, you start off at 6% through April then in May of '23 you start earning the new rate, whatever that is.

(Note if you buy late in October, even today, tomorrow, or 10/31 (assuming they can process the transaction same day, which is a gamble) you accrue interest for the whole month as if you bought on 10/1.)

 

[jm192]

Bought my I-bond allotment for the year on my account.

Trying to buy my wife's. Treasury direct is down.

They're recommending you purchase prior to the end of October 28th to get them issued in October. Hope this is sorted out sometime tomorrow.

Created a TD account on Monday, and bought a $10k I-bond. My first bond purchase. Doesn't really move the bubble, but I figure it will be a useful learning experience.

Will be interesting to see what happens to the bond rate going forward.

What rate did you get and what's the term? How long are you locked into the ibond before you can withdrawal without penalty?

edit: never mind, I went on Treasury Direct and found the answers. The only thing I didn't find was what's the impact of not getting the issue before October 31.

If you buy in the calendar month of October, the first six months of your bond pay the May-October rate (9%ish), then after six months, you get the next rate for six months (6%ish).

If you buy 11/1, you start off at 6% through April then in May of '23 you start earning the new rate, whatever that is.

(Note if you buy late in October, even today, tomorrow, or 10/31 (assuming they can process the transaction same day, which is a gamble) you accrue interest for the whole month as if you bought on 10/1.)

You’re right on principle. Treasury Direct themselves are saying orders placed after Midnight on the 28th won’t process in October.

 

[thecatch]

Do you guys generally use I-bonds for money earmarked for specific use in the next 1 to 3 years?

I've thought about them, but that seems to be about the only situation I would personally want them for.

I've been putting some of my emergency reserve funds into the iBonds rather than let them just sit there collecting 0% at the bank. I've been staggering purchases this year so that, after the first-year mark passes on my initial purchase, at least some of my bonds are always liquid (sort of like laddering certificates of deposit). In doing so I'm obviously gambling that I won't desperately need whatever funds are locked up on the initial 1-year commitment at any given time, but the risks are low in my personal situation. More importantly, having a significant sum in the bank doing nothing has really been irritating me for a long time. This hasn't been a substitute for my stock market investing.

 

[SFBayDuck]

Have done some googling but still struggling to find the answer. Anybody invest in MLPs, or more specifically in this case an ETF of MLPs like AMLP? I know with MLPs there is a potential issue of having to pay taxes on UBTI if it exceeds $1000 in a year, so you wouldn't want to have those in a tax-advantaged account. But with the ETF that's not the case, but I've read that you lose the tax-benefits that are inherent in them by holding in a tax-advantaged account. Basically they provide tax-deferred income, but there is an impact on the cost basis so you end up paying higher taxes when you sell them. I think I have that right.

So wouldn't a Roth or HSA be a good fit, since there is no tax impact upfront or upon sale? That's the question I can't find the answer to with ETFs that own MLPs.

 

[Tom Hagen]

Have done some googling but still struggling to find the answer. Anybody invest in MLPs, or more specifically in this case an ETF of MLPs like AMLP? I know with MLPs there is a potential issue of having to pay taxes on UBTI if it exceeds $1000 in a year, so you wouldn't want to have those in a tax-advantaged account. But with the ETF that's not the case, but I've read that you lose the tax-benefits that are inherent in them by holding in a tax-advantaged account. Basically they provide tax-deferred income, but there is an impact on the cost basis so you end up paying higher taxes when you sell them. I think I have that right.

So wouldn't a Roth or HSA be a good fit, since there is no tax impact upfront or upon sale? That's the question I can't find the answer to with ETFs that own MLPs.

I'm not all that familiar with partnerships owned through an ETF but you seem to have it correct. The advantage of owning an MLP is that the cash distributions are not currently taxable but are a return of capital that reduces your tax basis. This normally results in a gain upon sale, some of which could be subject to recapture as ordinary income and not capital gain rates. Any losses generated by the partnership are generally suspended passive losses that free up in the year of sale which can mitigate some of the tax on disposition.

The ETF is a C corp which means any income or loss passed through by the underlying partnerships is taxed at the ETF level and not passed through to the ETF shareholders. This would eliminate the concern with UBTI if the ETF owner is a retirement account. My only concern would be that the ETF would need to pay 21% federal C corp taxes on any net income which could reduce the investment return to the ETF shareholder.

 

[Sand]

Have done some googling but still struggling to find the answer. Anybody invest in MLPs, or more specifically in this case an ETF of MLPs like AMLP? I know with MLPs there is a potential issue of having to pay taxes on UBTI if it exceeds $1000 in a year, so you wouldn't want to have those in a tax-advantaged account. But with the ETF that's not the case, but I've read that you lose the tax-benefits that are inherent in them by holding in a tax-advantaged account. Basically they provide tax-deferred income, but there is an impact on the cost basis so you end up paying higher taxes when you sell them. I think I have that right.

So wouldn't a Roth or HSA be a good fit, since there is no tax impact upfront or upon sale? That's the question I can't find the answer to with ETFs that own MLPs.

I don't know this answer but I can say the MLPs I had way back when had negative UBTI for the most part.

 

[Tom Hagen]

I don't know this answer but I can say the MLPs I had way back when had negative UBTI for the most part.

For the most part you are correct but all it takes is for them to run out of depreciation or depletion and it can change quickly. Energy Transfer and Crossamerica are 2 of the more popular MLP and both had positive UBTI for 2021.

 

[NutterButter]

Do you guys generally use I-bonds for money earmarked for specific use in the next 1 to 3 years?

I've thought about them, but that seems to be about the only situation I would personally want them for.

Gonna be using it for college. I'd also consider using it as my cash reserve during retirement to cover a few years of expenses thus avoiding tapping into retirement accounts during a downturn such as the one we're in.

 

[Judge Smails]

Supposed to get an email from Treasury Direct after I opened the account. Nothing in 3 days. Won't take phone calls. No replies when I emailed them. Typical government level of service.

 

[jm192]

Supposed to get an email from Treasury Direct after I opened the account. Nothing in 3 days. Won't take phone calls. No replies when I emailed them. Typical government level of service.

The next positive thing I hear about Treasury direct will be the first.

 

[Sand]

Supposed to get an email from Treasury Direct after I opened the account. Nothing in 3 days. Won't take phone calls. No replies when I emailed them. Typical government level of service.

The next positive thing I hear about Treasury direct will be the first.

No worries, they're revamping the site.

 

[ConstruxBoy]

Supposed to get an email from Treasury Direct after I opened the account. Nothing in 3 days. Won't take phone calls. No replies when I emailed them. Typical government level of service.

The next positive thing I hear about Treasury direct will be the first.

No worries, they're revamping the site.

If it's anything like their road construction operations it will be about 3 years before the site is updated.

 

[Sand]

Supposed to get an email from Treasury Direct after I opened the account. Nothing in 3 days. Won't take phone calls. No replies when I emailed them. Typical government level of service.

The next positive thing I hear about Treasury direct will be the first.

No worries, they're revamping the site.

If it's anything like their road construction operations it will be about 3 years before the site is updated.

It was tongue in cheek. They are supposedly doing something, but I certainly have no confidence.

 

[Andrew74]

I have some money sitting in cash and decided to open a Roth IRA. I realized today that there is a contribution limit based on income. However, I am confused on whether I need to use my 2021 income to determine 2022 limits, or waiting until I file my taxes for 2022 to determine my AGI for 2022 and see if we are above the limit for 2022.

If I'm over the limit, I guess a traditional IRA is my next best option?

As a background, I have an active employer 401(k) that I max out in, an IRA that was a previous 401(k), and a 401(k) account from another previous employer. My wife, who is not working, has multiple traditional and Roth IRA accounts that we are not actively contributing to.

TIA will answer yours.

There are also limits on tax-deductible contributions on Traditional IRAs.

2022 IRA Contribution and Deduction Limits Effect of Modified AGI on Deductible Contributions If You ARE Covered by a Retirement Plan at Work | Internal Revenue Service

Review a table to determine if your modified adjusted gross income (AGI) affects the amount of your deduction from your IRA.

www.irs.gov

If you want to do a Roth, see if you can roll your IRA into your 401(k). Then you can use your empty IRA to do a backdoor Roth. Otherwise you will have tax issues.

 

[-OZ-]

Supposed to get an email from Treasury Direct after I opened the account. Nothing in 3 days. Won't take phone calls. No replies when I emailed them. Typical government level of service.

The next positive thing I hear about Treasury direct will be the first.

No worries, they're revamping the site.

Which always works so well in the federal government. AMHIK

 

[-OZ-]

Do you guys generally use I-bonds for money earmarked for specific use in the next 1 to 3 years?

I've thought about them, but that seems to be about the only situation I would personally want them for.

Basically. Money we deposited in 2021 is earmarked for our senior’s first year in college and part of a bathroom remodel. But if the rate stays above M1’s Borrow or other source of financing we’ll keep them.
I thought about just keeping the I bonds and adding until retirement, that would be enough to cover expenses the first couple years. But being ten years away that doesn’t really seem to make sense unless inflation stays above 5%.

 

[shuke]

So after I opened the Roth and realized I couldn't contribute, I opened a traditional IRA and was planning on doing backdoor later. So I made a deposit but I guess I accidentally put it in the Roth account. I can withdraw that now without tax repercussions right, since I deposited more than my limit, which is zero?

 

[Sand]

So after I opened the Roth and realized I couldn't contribute, I opened a traditional IRA and was planning on doing backdoor later. So I made a deposit but I guess I accidentally put it in the Roth account. I can withdraw that now without tax repercussions right, since I deposited more than my limit, which is zero?

In a Roth your contributions are extractable; your earnings are not. Contributions are post tax, so there are no consequences - it's just post tax monies.

 

[shuke]

So after I opened the Roth and realized I couldn't contribute, I opened a traditional IRA and was planning on doing backdoor later. So I made a deposit but I guess I accidentally put it in the Roth account. I can withdraw that now without tax repercussions right, since I deposited more than my limit, which is zero?

In a Roth your contributions are extractable; your earnings are not. Contributions are post tax, so there are no consequences - it's just post tax monies.

Thanks. Looks like it was just incorrect over the weekend and it's currently in my traditional.