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5 minutes ago, DallasDMac said:

Excuse the ignorance here, but what do you mean by the bolded? The money has to be placed in a mutual or some investment vehicle does it not? All of current contributions go to a target fund. I do an automated monthly contribution. When I recharacterize, I'll have to have a designated mutual for the Traditional IRA that I will need to have set up will I not?

When you contribute to an IRA, it can stay in cash until you actually purchase something.

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32 minutes ago, DallasDMac said:

I'm beginning to understand that I know just enough to get myself in trouble....

I'd do two things. 

1.  Go to that link I posted earlier and really work through that article about the backdoor roth.  

2.  Accountant. 

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Can't really talk about it with RL friends and most of it is pre-tax, but sat down with the wife and figured out that the household is officially in the two comma club. Ten years ago I was unemployed with 150K in law school debt after Cornell invited me to not go anymore and our household wealth was negative. 41/38 3 kids and my wife has been stay at home since July 4, 2019.

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9 hours ago, McBokonon said:

When you contribute to an IRA, it can stay in cash until you actually purchase something.

It's mildly amazing how many people "invest in a Roth IRA" and just leave it in cash.  Or in the case of my workforce, had left it in the G fund, which had been the default.

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On 4/4/2021 at 4:46 PM, DallasDMac said:

Thank you so much. One quick question, if you happen to know the answer. I contributed to a Roth, meaning post tax dollars. A traditional is pre-tax. I assume then that this will be handled by adjusting my AGI when I have to file an amended return?

If you were over the limit for a Roth you were over the limit for a traditional.  I don't think you can just recharacterize to a traditional because you qualify for neither.  There should be no AGI redo if you didn't make profits inside the Roth (and what you did will likely be pretty small, but you may need to redo your AGI there) - you just pull the money back out of the Roth and you're good.  It's post tax monies to begin with.

Now you may be able to do a backdoor Roth, which is a bit different of a thing.  And it gets complicated if you have money in a traditional IRA now due to the pro-rata rule (I'd regard it as a headache not worth dealing with, but that's me).

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18 hours ago, Gawain said:

Can't really talk about it with RL friends and most of it is pre-tax, but sat down with the wife and figured out that the household is officially in the two comma club. Ten years ago I was unemployed with 150K in law school debt after Cornell invited me to not go anymore and our household wealth was negative. 41/38 3 kids and my wife has been stay at home since July 4, 2019.

So, uhhh, you a throuple kind of guy?

 

10 hours ago, -OZ- said:

It's mildly amazing how many people "invest in a Roth IRA" and just leave it in cash.  Or in the case of my workforce, had left it in the G fund, which had been the default.

96% of HSAs are left as cash:sadbanana:

Man, best investment vehicle ever and most folks aren't using it.

 

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52 minutes ago, Sand said:

If you were over the limit for a Roth you were over the limit for a traditional.  I don't think you can just recharacterize to a traditional because you qualify for neither. 

I'm pretty sure this isn't true.

"Anyone 18 or over with earned income can contribute to a traditional IRA. However, there are specific income limits for how much might be tax-deductible."

It won't be tax deductible after a certain AGI but you can contribute. Someone correct me if I am wrong here but I don't think I am?.

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16 minutes ago, DallasDMac said:

I'm pretty sure this isn't true.

"Anyone 18 or over with earned income can contribute to a traditional IRA. However, there are specific income limits for how much might be tax-deductible."

It won't be tax deductible after a certain AGI but you can contribute. Someone correct me if I am wrong here but I don't think I am?.

Totally a comment from the peanut gallery, as I really don't know what you guys are specifically talking about, but it sounded like Sands was talking about contribution limits, and you might be talking about income limits on who can contribute. Traditional and Roth IRA's both have the same contribution limits (6K for younger folk) even though they have different income limits on who can contribute (without getting into backdoor stuff). 

 

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1 hour ago, pollardsvision said:

Totally a comment from the peanut gallery, as I really don't know what you guys are specifically talking about, but it sounded like Sands was talking about contribution limits, and you might be talking about income limits on who can contribute. Traditional and Roth IRA's both have the same contribution limits (6K for younger folk) even though they have different income limits on who can contribute (without getting into backdoor stuff). 

This is indeed what I was talking about.  The income cutoff for a tax deductible contribution for a traditional IRA is lower than a Roth.  Not trying to muddle the waters.

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My fiancee got a new job. Once we get married later this year I'll add her to my insurance plan. Her work does offer a HSA. If heard it's a grest tax advantage account, but I've also read it's not so good in California? Thoughts?

Edited by Charlie Harper
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31 minutes ago, Charlie Harper said:

My fiancee got a new job. Once we get married later this year I'll add her to my insurance plan. Her work does offer a HSA. If heard it's a grest tax advantage account, but I've also read it's not so good in California? Thoughts?

Move.

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46 minutes ago, Charlie Harper said:

My fiancee got a new job. Once we get married later this year I'll add her to my insurance plan. Her work does offer a HSA. If heard it's a grest tax advantage account, but I've also read it's not so good in California? Thoughts?

I think CA counts it in your income still. But the FedGov does not, so it's still a huge win, just not as huge. 

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My daughter has a nice work ethic.  She’s had a part-time job since she was 14.  She’s 16 now and of her own volition works ~20 hours a week.  She has a Roth but recently asked me if she could open a brokerage account and fund it with a savings account I have had set up for her since she was a baby.  At this point it seems my options would be an UTMA/UTGA, or I open an account and invest the money for her (then gift it when she gets out of college).

I’m fine with an UTMA for tax reasons (we are talking a couple thousand max).  I know that counts heavily against her on FAFSA vs being my asset.  I’m too ignorant at this point on college funding to know how much.  With itemizing I’m in 24% marginal bracket.  
 

Any words of wisdom?

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I need some help, y'all.  

As a Non-Participating Royalty Interest owner in some oil and gas interests on some dryland farm property in West Texas, it looks like I'm going to start receiving monthly checks.  Not life-altering money, but I think my first check is supposed to weigh in at $2500. ... Mom got her's two weeks ago, and I'm still waiting for mail from Tulsa to arrive. Thanks a lot, somebody ...

Anyway, first things first, how to deal with prepayment of taxes to the IRS. I suffer from near-vertigo when reading IRS docs, so hopefully someone can explain this in real simple terms for me.  what do I need to do?  The last thing I want is to is to run afoul of the revenuers. I just wanna live clean.

Second thing: I'm 55 and the 401K is looking good, but I'd like to use a big chunk of this money to boost the ol' nest egg. Can someone help me with the arithmetic regarding 401k and Roth IRAs. I'm making max 401k contributions, but I understand there is a catchup option I can take advantage of.  The only problem is that I have to deduct the catchup contributions up front from my paycheck. Sure, the budget can offset that with the NPRI money rolling in, but I have no idea what to expect from one month to the next.  If it suddenly drops to zero, I'll be eating a lot of beans and rice (luckily I can slay a pot of B&R).  Should I eschew the catchup contribution and instead open a ROTH IRA on the side instead? Also, on the catchup option, can that even be adjusted mid-year, or do I have to wait until next January.

Lastly, are there any other reasonable investment options to offset taxes (I'm thinking I'm not the type to explore tax-free bonds and whatnot), or do I do what I can with retirement options and take my tax lumps on the rest?

A dozen pardons if this has been covered already in this thread, and thanks.

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17 hours ago, Andrew74 said:

My daughter has a nice work ethic.  She’s had a part-time job since she was 14.  She’s 16 now and of her own volition works ~20 hours a week.  She has a Roth but recently asked me if she could open a brokerage account and fund it with a savings account I have had set up for her since she was a baby.  At this point it seems my options would be an UTMA/UTGA, or I open an account and invest the money for her (then gift it when she gets out of college).

I’m fine with an UTMA for tax reasons (we are talking a couple thousand max).  I know that counts heavily against her on FAFSA vs being my asset.  I’m too ignorant at this point on college funding to know how much.  With itemizing I’m in 24% marginal bracket.  
 

Any words of wisdom?

I wouldn't want her to do this unless / until the Roth is maxed out which I doubt is happening.  

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6 hours ago, pecorino said:

I wouldn't want her to do this unless / until the Roth is maxed out which I doubt is happening.  

She doesn’t want to put it in the Roth as she wants to keep access to it.  

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27 minutes ago, Andrew74 said:

She doesn’t want to put it in the Roth as she wants to keep access to it.  

Any deposits into a Roth can be withdrawn at any time without penalty. Only the gains are untouchable until later.

 

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1 hour ago, pecorino said:

Any deposits into a Roth can be withdrawn at any time without penalty. Only the gains are untouchable until later.

 

Had no idea that was the case, thanks for sharing that unlocks significant funds if needed. 

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A novice in stock market investing:

Have government 457(b) Traditional Deferred Compensation Plan through Nationwide. ($19500 limit)

Have own Roth IRA through Fidelity. ($6000 limit)

Am I able to max BOTH out (for total of $25500) or am I capped by the $19500 combined for both?? 

I do also have the Roth IRA option through Nationwide (doing through Fidelity instead)....but capped at the $19500 combined per Nationwide plan documents. Just wondering if that $19500 limit would apply to my Roth IRA through Fidelity as well (combined with my government 457(b) Traditional plan)

Thanks for any help. 

Edited by Craig_MiamiFL
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2 minutes ago, Craig_MiamiFL said:

A novice in stock market investing:

Have government 457(b) Traditional Deferred Compensation Plan through Nationwide. ($19500 limit)

Have own Roth IRA through Fidelity. ($6000 limit)

Am I able to max BOTH out (for total of $25500) or am I capped by the $19500 combined for both?? 

I do also have the Roth IRA option through Nationwide (doing through Fidelity instead)....but capped at the $19500 combined per Nationwide plan documents. Just wondering if that $19500 limit would apply to my Roth IRA through Fidelity as well (combined with my government 457(b) Traditional plan)

Thanks for any help. 

Max both. Plus a spousal IRA if applicable.

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20 hours ago, pecorino said:

I wouldn't want her to do this unless / until the Roth is maxed out which I doubt is happening.  

Have you opened a custodial IRA? 

My 16yo is earning okay money and doesn't spend much. He's been just putting money into the coverdell (I stopped contributing to his now that it's enough to pay 4 years in state tuition). But maybe the IRA makes more sense given that he has a really good chance to get scholarships. (4.3 gpa, 1300 on his SAT as a sophomore so he'll retake it)

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12 minutes ago, -OZ- said:

Max both. Plus a spousal IRA if applicable.

Thanks. 

Is it possible to max out a 401k with Company A ($19500), 457b government deferred comp Company B (an additional $19500), plus Roth IRA (additional $6000)? I have a mandatory contribution 401a with government employer Company B....I wouldn't think it would, but would that have any impact what I could contribute to 401K with Company A? From my understanding (not much), a 401a isn't same as 401K so wouldn't have a "combined" contribution limit of $19500.

Wish I was better with tax stuff and contribution limits. I've spent quite a bit of time looking into it but it never really sinks in. Thought about having someone handle it for me but think once get this initial understanding out of the way with limits, I should be ok.

Thanks again.

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47 minutes ago, Craig_MiamiFL said:

Thanks. 

Is it possible to max out a 401k with Company A ($19500), 457b government deferred comp Company B (an additional $19500), plus Roth IRA (additional $6000)? I have a mandatory contribution 401a with government employer Company B....I wouldn't think it would, but would that have any impact what I could contribute to 401K with Company A? From my understanding (not much), a 401a isn't same as 401K so wouldn't have a "combined" contribution limit of $19500.

Wish I was better with tax stuff and contribution limits. I've spent quite a bit of time looking into it but it never really sinks in. Thought about having someone handle it for me but think once get this initial understanding out of the way with limits, I should be ok.

Thanks again.

I'm stumped on this one. My brief reading seems to indicate you're right, but I don't really know. In this case you're better off talking with a professional. Unless of course someone else knows the answer.

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If we sell our house, how long before we have to buy again to avoid capital gains, IIRC, it’s two years. Is that the case?

Do I have any other options? Can I invest it short term? Can I buy land and build later? 

We have 3 years left of HS so if we sold the plan would be:

Sell the house, rent for a few years and then buy the land/legacy house we’ve been saving/planning to do. 
 

Thanks in advance. 

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I still have until April 15 to contribute to a traditional IRA and reduce my MAGI, right?  But there are limits on the deduction based on whether I have an employer 401k / 403b and my MAGI?  What are those limits for single and for married filing jointly assuming I have an employer 401k?

Edited by The Z Machine
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2 hours ago, Sand said:

And an HSA if you have one.

Yeah yeah, keep rubbing dirt in that wound. 

;)

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2 hours ago, The Z Machine said:

I still have until April 15 to contribute to a traditional IRA and reduce my MAGI, right?  But there are limits on the deduction based on whether I have an employer 401k / 403b and my MAGI?  What are those limits for single and for married filing jointly assuming I have an employer 401k?

You now have until May 17 to make an IRA contribution for 2020. 
 

Income limits for deductible traditional if covered by employer plan are here 

https://www.irs.gov/retirement-plans/plan-participant-employee/2020-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-covered-by-a-retirement-plan-at-work

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3 hours ago, STEADYMOBBIN 22 said:

If we sell our house, how long before we have to buy again to avoid capital gains, IIRC, it’s two years. Is that the case?

Do I have any other options? Can I invest it short term? Can I buy land and build later? 

We have 3 years left of HS so if we sold the plan would be:

Sell the house, rent for a few years and then buy the land/legacy house we’ve been saving/planning to do. 
 

Thanks in advance. 

 The current rule is if you both own and use the home as your primary residence for any 2 of the last 5 years you can exclude up to $250,000 ($500,000 if filing jointly) of gain. There is no need to buy a replacement. 
 

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Kind of a weird question but figured I'd get a better response here than trying to ask current HSA company or gov't employee about HSA. Might reach out to Fidelity HSA as well.

I current have a HSA through Optum Health/Bank through my government employment (high deductible health plan). Don't have a lot in there right now ($6000). I'm able to invest $5000 of it through Optum. What I'm really wanting to do is transfer that $6000 into a Fidelity HSA and wondering if I can do that. My government employer does chip in a small employer contribution every pay period (~$28) that'd I'd like to just setup a recurring payment from Optum Health/Bank into a Fidelity HSA. Don't know if it makes a difference but $5000 of the $6000 are MY Post-Tax contributions.

With Fidelity HSA, I presume I'd be able to invest all $6k (instead of only $5k of $6 through Optum Health/Bank....you must have minimum $1k to invest with Optum). 

Would it be possible to "Reimburse Myself" from my Optum HSA and funnel this $6k to a Fidelity HSA? My other investment accounts are currently through Fidelity so I'd really like to just get my HSA over there as well for ease in future.

Thanks for assistance. 

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On 4/9/2021 at 8:20 PM, Tom Hagen said:

You now have until May 17 to make an IRA contribution for 2020. 
 

Income limits for deductible traditional if covered by employer plan are here 

https://www.irs.gov/retirement-plans/plan-participant-employee/2020-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-covered-by-a-retirement-plan-at-work

Yup, that's what I thought.  Those income limits are low... Just like the stimy, earn too much to get a break.  Not complaining, just noting.  I'd rather be in this situation than the inverse, where I am living month to month and NEED those breaks.

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4 hours ago, D'OHtis said:

Kind of a weird question but figured I'd get a better response here than trying to ask current HSA company or gov't employee about HSA. Might reach out to Fidelity HSA as well.

I current have a HSA through Optum Health/Bank through my government employment (high deductible health plan). Don't have a lot in there right now ($6000). I'm able to invest $5000 of it through Optum. What I'm really wanting to do is transfer that $6000 into a Fidelity HSA and wondering if I can do that. My government employer does chip in a small employer contribution every pay period (~$28) that'd I'd like to just setup a recurring payment from Optum Health/Bank into a Fidelity HSA. Don't know if it makes a difference but $5000 of the $6000 are MY Post-Tax contributions.

With Fidelity HSA, I presume I'd be able to invest all $6k (instead of only $5k of $6 through Optum Health/Bank....you must have minimum $1k to invest with Optum). 

Would it be possible to "Reimburse Myself" from my Optum HSA and funnel this $6k to a Fidelity HSA? My other investment accounts are currently through Fidelity so I'd really like to just get my HSA over there as well for ease in future.

Thanks for assistance. 

I don’t think you can reimburse yourself unless you’ve incurred medical costs.  You’d pay taxes on it otherwise.

You should be able to transfer it to Fidelity but it’s often 25-50$/transfer.  
 

Your insurance plan will still be through Optum so the contributions will still go through that account.

So you’d have to repeat this process periodically and the fees will eat into your gains.

 

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Rate on I-Bonds is expected to be 3.54% starting May 1. I’ll buy another $10,000 (max you can buy is $10,000 per year).

Incrementally over a decade ago I started transitioning my emergency fund to I-Bonds. They have performed much better than online savings accounts. Interest is tax deferred too which is nice since I never have “emergencies”.

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10 minutes ago, Juxtatarot said:

Rate on I-Bonds is expected to be 3.54% starting May 1. I’ll buy another $10,000 (max you can buy is $10,000 per year).

Incrementally over a decade ago I started transitioning my emergency fund to I-Bonds. They have performed much better than online savings accounts. Interest is tax deferred too which is nice since I never have “emergencies”.

How liquid are these and how do you get them? 

I don't know if I would buy any, but maybe. And that's a decent rate. 

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Just now, -OZ- said:

How liquid are these and how do you get them? 

I don't know if I would buy any, but maybe. And that's a decent rate. 

You have to keep them for at least a year and there is a 3-month interest penalty if you withdraw within the first 5 years. The interest penalty isn’t a big deal since you’ll make so much more so quickly.

You can buy them from http://treasurydirect.gov. I’ve never withdrawn but my understanding is funds would settle through ACH in a few days.

 

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1 hour ago, Juxtatarot said:

You have to keep them for at least a year and there is a 3-month interest penalty if you withdraw within the first 5 years. The interest penalty isn’t a big deal since you’ll make so much more so quickly.

You can buy them from http://treasurydirect.gov. I’ve never withdrawn but my understanding is funds would settle through ACH in a few days.

 

Thanks. 

I could see using these instead of paying down the mortgage if one were concerned about safety. Figure it's 1.29% higher than my mortgage, so if we bought the maximum of $10,000 that's an extra $129 annual return? Not a lot to get excited about but better than nothing. 

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28 minutes ago, -OZ- said:

Thanks. 

I could see using these instead of paying down the mortgage if one were concerned about safety. Figure it's 1.29% higher than my mortgage, so if we bought the maximum of $10,000 that's an extra $129 annual return? Not a lot to get excited about but better than nothing. 

Your spouse could also buy an additional $10K.

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19 hours ago, Juxtatarot said:

Rate on I-Bonds is expected to be 3.54% starting May 1. I’ll buy another $10,000 (max you can buy is $10,000 per year).

Incrementally over a decade ago I started transitioning my emergency fund to I-Bonds. They have performed much better than online savings accounts. Interest is tax deferred too which is nice since I never have “emergencies”.

I find this really exciting.  My gripe with bonds has been the crap rates.  

But can you explain the rates to me like I'm 10 years old?  I researched it.  It sounds like there's a fixed rate--which is low.  And the I/Inflation rate--which is high this period, but will change again in 6 months?  

So do I get 3.54% for 6 months, and then potentially a lot less for 6 months? 

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19 hours ago, Juxtatarot said:

Rate on I-Bonds is expected to be 3.54% starting May 1. I’ll buy another $10,000 (max you can buy is $10,000 per year).

Incrementally over a decade ago I started transitioning my emergency fund to I-Bonds. They have performed much better than online savings accounts. Interest is tax deferred too which is nice since I never have “emergencies”.

Where do you see this? Pretty appealing rate.

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35 minutes ago, jm192 said:

I find this really exciting.  My gripe with bonds has been the crap rates.  

But can you explain the rates to me like I'm 10 years old?  I researched it.  It sounds like there's a fixed rate--which is low.  And the I/Inflation rate--which is high this period, but will change again in 6 months?  

So do I get 3.54% for 6 months, and then potentially a lot less for 6 months? 

 

The fixed rate portion has mostly been zero in recent years and would be zero this time.  

The 3.54% is annualized so you'd get half that in 6 months.  The blog article I posted here discusses how you could get 1.68% locked in for six months and then the 3.54% for the next 6 months if you buy before May 1.  Otherwise, after May 1, it would be 3.54% for the first 6 months and then a currently unknown rate for the next 6 months period.  I expect we'll see some inflation here coming out of the pandemic so I expect it will continue to be a good rate.  I'll wait until after May 1 to buy.

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I have also been accumulating I bonds and will plan to buy at the end of May. These beat any HYSA, CD, or short term bond fund by a mile. I bonds are great for any funds where your goal is reasonable liquidity and capital preservation. Here's an article in which one financial writer presents how to use them as an 11 month CD.

A few more details on them:

1. You get credited interest for the entire month, regardless of purchase date, so buying at the end of the month is preferred

2. Interest earned is state and local income tax exempt

3. Interest earned is also federal income tax free if used for 'qualified higher education expenses', though income limits apply

All that said, your money is probably better off in dogecoin.

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49 minutes ago, Chadstroma said:

Buying used is always the way to go.... er, nevermind... 

https://www.motor1.com/news/501056/used-cars-cost-more-new-cars/

So glad I don't need a new car or a new house right now. We got my wife a new Jeep in early December and got what a friend who manages a dealership in another state called a really good price. Just looked up the same model at Carvana without a bunch of features (around 8-10k at Jeep.com) and it was selling for just a little bit less than I paid minus taxes. The used Jeep also had 14k miles, so basically a year older with far less features for a few thousand more than I paid 4 months ago. My 16 year old son didn't need our old car until this summer, so glad my wife fell in love and we decided to buy it earlier.

Inflation baby!

Edited by stbugs
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13 hours ago, Chadstroma said:

Buying used is always the way to go.... er, nevermind... 

https://www.motor1.com/news/501056/used-cars-cost-more-new-cars/

I have a dealer buddy who told me a few weeks ago that if anyone needs a new car to get it now. They were projecting that the microchip shortage is going to cause dealerships to basically run nearly completely out of inventory by end of the summer.

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52 minutes ago, Buckna said:

I have a dealer buddy who told me a few weeks ago that if anyone needs a new car to get it now. They were projecting that the microchip shortage is going to cause dealerships to basically run nearly completely out of inventory by end of the summer.

Interesting. I don't need a new car but I kinda want something more recent than 2013 Altima...

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