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Personal Finance Advice and Education! (9 Viewers)
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NutterButter
Footballguy
I live in a 3 bedroom 2 bath ranch on an acre of property. I'm always kicking around ideas of what type of house I'd want to live in during retirement. If I were to stay in this house, I always wanted to add a large detached space like a pole barn to have a wood shop, golf simulator, etc. Told my kids that if one of them wanted to live in the house, then I could easily just outfit the barn with a loft for a bedroom and everything else I'd need as a single guy and just live in there. Another idea that just came to me was doing the same thing, but renting out my house if the kids didn't want it. Looking at the rental prices in the area, I could probably bring in 30k/yr (and that's probably on the low side) which would open up a whole possibility of retirement options. I intend on spending my winters somewhere warm so it would also be nice to have someone looking after my house while I'm not there. Anybody aware of any zoning restrictions or something else that would prevent me from doing something like this? Would the rental income just be taxed as ordinary income? Any other financial considerations beyond just normal repairs and maybe hiring someone when I'm not there during the winter to handle anything that comes up?
And feel free to tell me why this is a terrible idea.
And feel free to tell me why this is a terrible idea.
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urbanhack
Fight The Power!
Question:
I started a roll-over process last month, transitioning my old 401K over to a new rollover IRA at Fidelity. Got all the paperwork processed, medallion stamp etc. I saw that my original institution indicated the check was cut and sent to Fidelity. Was expecting those funds to be available already so I called them because I had a few other things to clean up with my accounts.
They said they received the check on 2/3 but it was "on hold" because some type of action needed to be taken. I called on 2/5 which means they had already been sitting on my cash for 48 hours and hadn't done anything. The reason behind the hold was that supposedly the IRA account that opened had been closed, which is not correct, I've never done anything with it. While on the call she said the hold had been cleared and that I should expect the funds to be deposited today or tomorrow.
My question is will I or should I be getting the interest that has been accumulating since 2/3 sitting in Fidelity's own account? It's my notion that this whole delay is costing me money because it would already be invested.
I started a roll-over process last month, transitioning my old 401K over to a new rollover IRA at Fidelity. Got all the paperwork processed, medallion stamp etc. I saw that my original institution indicated the check was cut and sent to Fidelity. Was expecting those funds to be available already so I called them because I had a few other things to clean up with my accounts.
They said they received the check on 2/3 but it was "on hold" because some type of action needed to be taken. I called on 2/5 which means they had already been sitting on my cash for 48 hours and hadn't done anything. The reason behind the hold was that supposedly the IRA account that opened had been closed, which is not correct, I've never done anything with it. While on the call she said the hold had been cleared and that I should expect the funds to be deposited today or tomorrow.
My question is will I or should I be getting the interest that has been accumulating since 2/3 sitting in Fidelity's own account? It's my notion that this whole delay is costing me money because it would already be invested.
Sand
Footballguy
Makes much sense to cashflow it if you can. Of course, no telling with the markets - might be a tax loss by then.
Lion to myself
Footballguy
If they don’t then I think you can make an argument that they should. But it would only be the interest earned on the cash reserve account which is going to be very minimal.
EYLive
Footballguy
General investing for retirement question.
I'm on track to retire in 25-30 years. Is it too early to invest in bonds? I recently decided to diversify a bit by adding a U.S. bond fund into my portfolio (it'll be about 2% of total assets) but it's not doing anything for me. I'm not withdrawing from my accounts for a few decades so I'm patient. But that money could be earning me much more in tech or medical product industrial funds.
I'm on track to retire in 25-30 years. Is it too early to invest in bonds? I recently decided to diversify a bit by adding a U.S. bond fund into my portfolio (it'll be about 2% of total assets) but it's not doing anything for me. I'm not withdrawing from my accounts for a few decades so I'm patient. But that money could be earning me much more in tech or medical product industrial funds.
SFBayDuck
Footballguy
I get that people don't want to take on debt to purchase a depreciating asset, but with rates this low I just don't see how it doesn't make sense to do so.
IIRC, in the last ~10 years bonds have returned well below the historical average you see a lot of old investment advice was using to base their info on. I've heard some people say that while you used to want to have an allocation along the lines of 80% bonds, 20% stocks or 50% bonds, 50% stocks in retirement, given how things are with bonds now, even retirees should consider flipping it to 60% stocks and no more than 40% bonds in retirement or even the first few years of retirement.
If you're 30 years out... I'd say keep bonds to 5% or less.
It's good to have some money in bonds, but, not for long-term returns. Instead, consider it as your cash position and feel free to go to 0% bonds when the market has a major correction so you can use the money you were putting aside in bonds to buy stocks when they're cheaper. Basically, it's cash that earns slightly better than actual cash, but it's your dry powder for when things go "on sale".
-OZ-
Footballguy
Yeah, I think as a general concept "make sure you can really afford the thing you buy" makes sense.
But after you know you can afford it, could pay cash, you can reasonably choose to finance.
I had thought I would pay off our house once the house fund was sufficient to cover the payoff plus tax. (We have a specific account we contribute the difference between the 15 and 30 year mortgage). But that doesn't make a lot of logical (mathematical) sense until we retire. Then maybe, essentially buying a bond at that interest rate.
Desert_Power
Footballguy
ConstruxBoy
Kate's Daddy
Short answer: Yes. Diversification is good but 25-30 years out you need very little. More like .5-1%, in my opinion depending on your risk tolerance and risk capability.
yak651
Footballguy
If you are in the country there shouldn't be zoning to prevent you from putting up a building but all areas are different. Also are there any convenients when you purchased your property to prevent you from putting up a "plain" pole shed? When we were looking at properties, some areas required that the 2nd building "match" the house or have "X" amount of brick/stone. This kept us from buying properties as my wife didn't want a 2nd garage to match the house and look like two houses next to each other. We eventually found property that allowed us to do what we wanted to do. Although zoning might not prevent you from putting up a 2nd building, it may prevent that 2nd building from being a livable area. To get around this just pipe it for the bathroom/water and then finish it off later. Not desirable, but don't get a permit for this...If it's a good or bad idea, guess you need to determine if you want someone to rent "your home". I don't think I could trust someone, but guess it all depends on if you're able to get the right tenant.
-OZ-
Footballguy
With that time span you're probably better off fully stock. Maybe add 5 - 10% REIT for some diversification.
I have a small amount in bonds now (like 5%), we're ~10 years from retirement. (I should caveat this by saying I have a federal pension now and will have another later)
Just my
but I go 80% broad market, 15% long term individual companies and sector funds, 5% play money. This has worked fairly well.
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Desert_Power
Footballguy
Yeah, I'm sure you have plenty of a fixed come allocation with two federal pensions.With that time span you're probably better off fully stock. Maybe add 5 - 10% REIT for some diversification.
I have a small amount in bonds now (like 5%), we're ~10 years from retirement. (I should caveat this by saying I have a federal pension now and will have another later)
Just my
-OZ-
Footballguy
Right.
I still wouldn't have more than maybe 20% a decade away from retirement. And that's only if we're firmly on track with forecasting low returns. With 25-30 years, there's not much need for any unless you're risk averse.
NutterButter
Footballguy
I'm not what I would consider in the country, but just a part of town that's very woodsy where people have larger pieces of property. A neighbor a few doors down has a big structure to store his class A rv, but that may be considered non-permanent so perhaps under different rules. I'll definitely check with the township when/if the time comes. Having a large workspace is something I've always desired so it will come in handy regardless of whether I decide to see this plan through. I could see myself spending most of my time out there especially during the 3 nicer seasons. The idea of having someone living in my house does seem so foreign to me at the moment but I imagine there's going to be a lot of changes we all go through during retirement (at least for those of us that want to break out of comfort zones and expand our horizons) so going through with renting out my house might just be one of them. Being away from my house for 3 months to snowbird somewhere warm is another one, but that almost seems like a no brainer so its just a matter of following through on these things. It does make a lot of financial sense at face value and having another 20-30k of disposable income gives me a lot of options. Getting the right tenant would certainly be key; this is money I wouldn't necessarily need so hopefully I can be very selective.
I have a lot of whacky ideas like full time rving so this is probably just another one of them that will never see the light of day. Or maybe, just maybe, this is all a part of some grand plan that just hasn't come together yet.
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ConstruxBoy
Kate's Daddy
Agree with all this and of course, a pension is great.With that time span you're probably better off fully stock. Maybe add 5 - 10% REIT for some diversification.
I have a small amount in bonds now (like 5%), we're ~10 years from retirement. (I should caveat this by saying I have a federal pension now and will have another later)
Just my
Best advice I ever got about bonds was that you should consider your career/salary like a bond. You get small increases most years with some promotion or bonus bumps on occasion. Depending on your occupation and how hard you work, your "career bond" can be assessed for yield and risk.
So adding too many other fixed income/securities like bonds really deadens your growth potential more than just a securities view might show.
The Z Machine
Footballguy
I have enough equity in my current home for a 20% down payment on the new home. A few reasons that I wouldn't want to make a "contingent" offer. 1) I don't want to deal with the stress of listing my home while I still live in the house. 2) I'd like to get the best possible mortgage rate, and I thought that 20% down on a 30 year was the best way to do that. Are you saying I could put 7% down and get an identical rate?
Pulling the $ out of the 401k would be short term, 3-4 months max. Market returns are good and all, but even if the market grows at 8% a year, I'm looking at missing out on a 2-3% annualized growth on that $100k, or about $2-3k before the money goes back in and the 401k is repaid. Sure the $2-3k would grow y.o.y. at market returns, but that's still not huge compared to the total value of the 401k in 20 years.
CR69
Footballguy
I may be wrong but I think it's an increase on the child tax credit which is currently $2k per kid.
BigJohn
Footballguy
I believe it replaces it. Will not be additional.
ETA: The difference is this is going to be cash money sent to you each month. Not a tax credit.
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CR69
Footballguy
Gawain
Footballguy
300 a kid under 6 and 250 under 18 every month if I read it correctly.
Married cap is 150K. Between income and taxable gains, we're fairly close to the cap. Wife is stay at home. Doesn't make any sense for her to go back to work between cost of daycare and going over the cap. We have a 4, 3 and 1 year old at home.
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This is one way to deal with the declining population. We've become a nation of whores!!! I'm okay with that
BigJohn
Footballguy
ConstruxBoy
Kate's Daddy
Just like the beginning of Idiocracy!This is one way to deal with the declining population. We've become a nation of whores!!! I'm okay with that
This will give women less incentive to join the workforce and will also give the families already on government programs incentive to have more children.
-OZ-
Footballguy
We're really close to the cap ourselves, if I go fully traditional TSP we stay under. My wife just started back this year at a preschool making roughly $600/month (2 days a week but they still get paid horribly). This would convince me to suggest she not work.
I mean it's $250 x 4 for us, so $1,000 monthly for her to just take care of the house and volunteer at the schools or elsewhere seems an easy decision.
-OZ-
Footballguy
Is anyone else waiting to file taxes not because much changed but just in case you get another form?
We finally received our last brokerage form (fidelity) and completed taxes on HR block (free, ours is fairly simple other than having 2 regular brokerage accounts, and a few others that give dividends).
Total income decreased by $4k but that's due to tax loss harvesting in the spring. Credits went down a bit thanks to our oldest aging out.
We owe $400 federal, will get a return of $700 for state. So there's no real rush. We're eligible for the stimulus either way. (If it passes as is)
We finally received our last brokerage form (fidelity) and completed taxes on HR block (free, ours is fairly simple other than having 2 regular brokerage accounts, and a few others that give dividends).
Total income decreased by $4k but that's due to tax loss harvesting in the spring. Credits went down a bit thanks to our oldest aging out.
We owe $400 federal, will get a return of $700 for state. So there's no real rush. We're eligible for the stimulus either way. (If it passes as is)
I’m waiting, but only because The IRS is going to bend me over with no mercy. I don’t even want to guess how much my bill will be. CYDY short term gains and ZM/TTD long term gains. I know I’m only paying a portion of what I made but you get so used to the money in the account that it’s going to really hurt. I’ll submit my taxes on the 14th and then mail the check on the 15th. Not even going to do the electronic payment. F em, I hope it takes 5 months to process it.Is anyone else waiting to file taxes not because much changed but just in case you get another form?
We finally received our last brokerage form (fidelity) and completed taxes on HR block (free, ours is fairly simple other than having 2 regular brokerage accounts, and a few others that give dividends).
Total income decreased by $4k but that's due to tax loss harvesting in the spring. Credits went down a bit thanks to our oldest aging out.
We owe $400 federal, will get a return of $700 for state. So there's no real rush. We're eligible for the stimulus either way. (If it passes as is)
-OZ-
Footballguy
my heart bleeds for you? Kidding, I made out pretty well this year too (not as well as you or some others but I can't complain) but mostly in tax advantaged accounts.
Honestly, my one piece of advice for traders who have kids is open coverdell IRAs for them. And then use those accounts for trading. It might get you if they don't attend college but at least you don't need to worry about it every year. $2k might be too low for big trading, but with 5 kids it works for us.
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johnnycakes
Footballguy
Hah, I know, I shouldn’t complain but it’s still going to be hard to write a large check to them. It’s no 6/7 figure check like the Bitcoin dude, but it’ll be a new car type of check. I think 2/3rds of my investments are in IRAs/401ks and I now have only long term stuff in taxable. I am trying to be smart and only put the short term stuff in IRAs. Short term gains are like a 20% higher bite, not worth the trouble in a taxable account. I’ve built up enough long term gains that I haven’t sold so if there was ever a cash need I should be good without forcing a short term sell.-OZ- said:
Kidding, I made out pretty well this year too (not as well as you or some others but I can't complain) but mostly in tax advantaged accounts.
Honestly, my one piece of advice for traders who have kids is open coverdell IRAs for them. And then use those accounts for trading. It might get you if they don't attend college but at least you don't need to worry about it every year. $2k might be too low for big trading, but with 5 kids it works for us.
Sand
Footballguy
-OZ- said:
Fidelity isn't getting me either of the ones I need until March.
Yes, but the bar for student loans is quite high. You can search for "discharging student loans in bankruptcy".wazoo11 said:
I'll be interested to see how mine turn out. I had a good bit of CYDY profits and a ton of tax loss selling (which I now have some big gains in similar funds that I bought back). I'll have to see how they offset.stbugs said:
At least for my state they true everything up every year, so I should make out pretty good there, I think.
-OZ-
Footballguy
-OZ-
Footballguy
It doesn't really matter unless you're getting a large return. Now that I think of it, I probably need to adjust my 2021 taxes as I was expecting to owe more and acted to decrease that amount.
Fidelity isn't getting me either of the ones I need until March.
One wouldn't think tax planning is quite this difficult. But with CG/CL, it can be.
Sand
Footballguy
Oh, I know. One of them is delayed because of GBTC reporting (though I haven't sold it, so no idea why it's being held). The other doesn't even specify why the delay.
I will be holding my breath when I import those to see which way the dial turns.
Andrew74
Footballguy
You probably know this so maybe it will be helpful for others. If you do any charitable giving, you can gift the securities with LT gains and rebuy with cash. You get the charitable deduction and gains go bye-bye.
pollardsvision
Footballguy
No. Otherwise lenders wouldn't make these loans, which are often terrible.wazoo11 said:
Would you give a random 18 year old $80,000 to spend however they like if the loan were bankruptible?
Sand
Footballguy
This is not correct. Student loans are (occasionally) able to be discharged in bankruptcy. It's much, much harder than other types of debt, though.
https://www.studentloanborrowerassistance.org/bankruptcy/
Sand
Footballguy
Tax loss harvesting wins! Even overcame the gains on CYDY. Gonna be a much bigger return than expected, methinks.
Sand
Footballguy
Under the heading of "watch what you are paying for", folks in Texas are finding out the hard way that direct exposure to raw commodity prices isn't necessarily a good thing. They contracted their gas through Griddy, a company that sells wholesale priced gas for a flat monthly fee.
And they got whacked with insane gas prices when this cold hit - like $2,000 per day to heat a house. Commodity prices tend to have very unpredictable periods of intense volatility - 4 and 5 sigma events. The optionsellers.com guys found that out (hedge fund that got crushed by commodity price spikes) and now consumers are finding out. Picking up pennies in front of a steamroller isn't a good idea and sometimes a regulated utility at somewhat higher prices is a great idea. Let the utilities take the risk on the commodity market side.
General FYI here for those with access to these deregulated type joints.
And they got whacked with insane gas prices when this cold hit - like $2,000 per day to heat a house. Commodity prices tend to have very unpredictable periods of intense volatility - 4 and 5 sigma events. The optionsellers.com guys found that out (hedge fund that got crushed by commodity price spikes) and now consumers are finding out. Picking up pennies in front of a steamroller isn't a good idea and sometimes a regulated utility at somewhat higher prices is a great idea. Let the utilities take the risk on the commodity market side.
General FYI here for those with access to these deregulated type joints.
I hate to laugh, but the one guy who got the warning to switch and just ignored it shouldn’t be shocked. A company doesn’t tell you to switch unless it’s real bad.
Chadstroma
Footballguy
Student loans are generally exempt from BK forgiveness. However, there is a lot of talk of some being forgiven soon. $10K in student loan forgiveness looks like a lock amd maybe as much as $50K if Congress acts as the absent minded Uncle Joe says he has the authority to forgive $10K but not $50K... which I am still trying to figure out.
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