The Z Machine
Footballguy
I don't think I'm ever going to get there...until my investments are 5x my annual income
I don't think I'm ever going to get there...until my investments are 5x my annual income
Some of us have small incomes.I don't think I'm ever going to get there...
If I remember right when I heard it explained, if you went with a typical 3-fund portfolio, for example (1 domestic equity mutual fund, 1 international equity mutual fund, and 1 bond fund), and did all the work and allocations, you'd track a basic Target-Date fund pretty closely and it wouldn't really matter which one you owned when you're under $250k. But above that limit, asset location, putting the highest-returning funds into the best tax-advantaged account, will have a measurable impact on returns.Just curious, what's significant about $250k? Or are you just using that to mean a somewhat significant amount?
Personally, if you want to keep it easy I'd just go with 100% equities, broad market like VTSAX until my investments are 5x my annual income. Then consider going slightly more conservative but probably not make much of a move until I'm closer to 20x annual expenses.
You really should focus on investments vs spending (or projected spending if you expect it to be significantly different). Once you have 25x that projected spending number you're basically good to withdrawing 4% a year. I just find that framing much more helpful and it focuses on variables more in your control. Plus, incomes tend to rise through most working years so basing it on that variable makes it feel like a moving target. YMMVI don't think I'm ever going to get there...until my investments are 5x my annual income
Money market account is where I have mine at a very low, hardly anything, interest. Interested to hear if I'm wrong.So a question for the finance experts here. If one was able to save the usually recommended six months expenses in reserve cash (say 30-50k for the sake of the discussion), where is the best place to park said cash where you are maximizing any returns that money could earn but it was safe and relatively accessible if needed ( remember this is your emergency cash reserve not retirement). Thanks.
High yield saving accounts are only yielding about 50bps at most these days. You can probably squeeze some yield out of bank bonuses or other churning strategies. You can put up to $10k a person into aforementioned I-bonds, but you would have to leave them for just over 11 months at minimum.So a question for the finance experts here. If one was able to save the usually recommended six months expenses in reserve cash (say 30-50k for the sake of the discussion), where is the best place to park said cash where you are maximizing any returns that money could earn but it was safe and relatively accessible if needed ( remember this is your emergency cash reserve not retirement). Thanks.
I don't think you want any risk with it. High yield savings or money market. You don't want it in CD's where you may have to wait to get it out or take some penalty to get it out. Having this piece of mind allows you to take a lot of risk with the rest of your money.So a question for the finance experts here.
If one was able to save the usually recommended six months expenses in reserve cash (say 30-50k for the sake of the discussion), where is the best place to park said cash where you are maximizing any returns that money could earn but it was safe and relatively accessible if needed ( remember this is your emergency cash reserve not retirement). Thanks.
What kind of immediate $50k emergency am I facing that CDs or ibonds aren't liquid enough?I don't think you want any risk with it. High yield savings or money market. You don't want it in CD's where you may have to wait to get it out or take some penalty to get it out. Having this piece of mind allows you to take a lot of risk with the rest of your money.
This was my initial thought but while the risk is low-ish it might still be too much.(?)Do it in an index like SPY and at least it will be easy to sell it.
I’ve never looked into ibonds. What’s their deal?What kind of immediate $50k emergency am I facing that CDs or ibonds aren't liquid enough?
And if it's that emergent, am I going to care that I have to sacrifice a couple of months of interest?
Not that CDs are worth it right now. Just curious the thoughts that lead down that path.
I’ve never looked into ibonds. What’s their deal?
I get what you're saying, tax matters.If I remember right when I heard it explained, if you went with a typical 3-fund portfolio, for example (1 domestic equity mutual fund, 1 international equity mutual fund, and 1 bond fund), and did all the work and allocations, you'd track a basic Target-Date fund pretty closely and it wouldn't really matter which one you owned when you're under $250k. But above that limit, asset location, putting the highest-returning funds into the best tax-advantaged account, will have a measurable impact on returns.
If someone's retirement fund options were a 401k and a Roth, and they evenly split $200K into the 401k and $200k into the Roth and completely invest both fully into a 2050 Target Date fund, for example, they would under-perform an allocation that split up the same amounts into optimizing bonds into the 401k and the higher-returning equities as much as possible in the Roth.
I think the $250k demarcation is the flex point at which it actually starts to matter, albeit only slightly. Once you're well above that number, then the impact is greater. Like, at $250k, re-allocating might return only ~1% more over 30 years(?), let's say, but at $500k it could mean 2-3%? At a million, 4-5% better return once you start making withdrawals?
OTOH, if you only have one type of account, either a roth or a 401k, then it doesn't really matter because you can't tax-optimize.
Churn bank bonuses or ladder CDs.So a question for the finance experts here.
If one was able to save the usually recommended six months expenses in reserve cash (say 30-50k for the sake of the discussion), where is the best place to park said cash where you are maximizing any returns that money could earn but it was safe and relatively accessible if needed ( remember this is your emergency cash reserve not retirement). Thanks.
Personally, I ladder my EF:High yield saving accounts are only yielding about 50bps at most these days. You can probably squeeze some yield out of bank bonuses or other churning strategies. You can put up to $10k a person into aforementioned I-bonds, but you would have to leave them for just over 11 months at minimum.
A somewhat riskier strategy would be to sell OTM cash secured puts. The risk there of course is that the underlying falls so low you have to buy it. Do it in an index like SPY and at least it will be easy to sell it.
I didn't do my taxes until May 10th as I usually owe. Due to my wife quitting her job last February we actually received money back this year. State had it to me on the 18th and Feds had it deposited on the 19th. I was pleasantly surprised how fast they sent it as I heard there were backlogs on getting the refunds.Damn if those Feds didn’t deposit that tax check quickly. I dropped it off at my post office on Monday and it’s already out of my account. They “drop” for the Southeast is now in Charlotte (used to be Louisville or Lexington) but damn, the ink was barely dry. At least NC isn’t as on the ball. They sure didn’t deposit my son’s money yet.
I always owe. Probably could make W-4 changes but oh well, I just wait until the deadline to mail the check.I didn't do my taxes until May 10th as I usually owe. Due to my wife quitting her job last February we actually received money back this year. State had it to me on the 18th and Feds had it deposited on the 19th. I was pleasantly surprised how fast they sent it as I heard there were backlogs on getting the refunds.
I always think of the emergency fund like I just broke my back in a car accident and I'm going to be laid up for the forseeable future. I don't really want to have to do anything to access the money.What kind of immediate $50k emergency am I facing that CDs or ibonds aren't liquid enough?
And if it's that emergent, am I going to care that I have to sacrifice a couple of months of interest?
Not that CDs are worth it right now. Just curious the thoughts that lead down that path.
If I were laid up in bed for a significant amount of time I think I’d like to move money around just to have something to do.I always think of the emergency fund like I just broke my back in a car accident and I'm going to be laid up for the forseeable future. I don't really want to have to do anything to access the money.
I think the limited upside isn't worth any degree of penalty/work to get the money out. I think in some instances, you can lose part of your principal if you withdraw too early. But moreso: 50,000$ at 0.05% I can get on Chase right now is ~25$ a year. Then you add in tax. I guess there are some that are closer to 1%, but I don't want to put my money at a different financial institution, go through the process of getting out of the CD and then getting the money back to my checking.
More hassle than I want. And maybe some don't see it as a huge hassle. But If I'm at the point I'm needing to break into that part of my finances--I've probably had something go wrong. And I don't want any added stress.
I think ibonds are pretty interesting right now as an investment. I'm not sure it's where I want my emergency fund. But interesting for sure.
As long as you're not paying an underpayment penalty, I'd rather owe. This year was almost perfect, owing $300.I always owe. Probably could make W-4 changes but oh well, I just wait until the deadline to mail the check.
I do pay that each year. It’s not a lot TBH so I haven’t worried much about it. I just calculated and it’s 0.4% so probably not worth it to pay more throughout the year.As long as you're not paying an underpayment penalty, I'd rather owe. This year was almost perfect, owing $300.
Yeah. We've had difficulty matching these up since the Trump tax cuts, but finally got it down to about $300 for last year. One of those situations where our taxes went down but our withholds had one WAY downAs long as you're not paying an underpayment penalty, I'd rather owe. This year was almost perfect, owing $300.
BassNTraction?If I were laid up in bed for a significant amount of time I think I’d like to move money around just to have something to do.
I assumed the penalty was more than that. Yeah, I wouldn't worry about it at all if it's that low.I do pay that each year. It’s not a lot TBH so I haven’t worried much about it. I just calculated and it’s 0.4% so probably not worth it to pay more throughout the year.
It’s less the penalty wasn’t much and more that I owed way too much. There were a bunch of capital gains that was most of the taxes owed and I don’t believe those actually count, but still it’s usually still a little less than a percent. I’m a bit lazy on it but just like this year’s taxes my guesses at the start of 2020 would have been way off.I assumed the penalty was more than that. Yeah, I wouldn't worry about it at all if it's that low.
The penalty is laughable. I owed like 6k this year and it was 60 bucks and its been that way for years. Its probably minor the gains I make on not paying those taxes sooner, but its mostly that I'm just lazy.I assumed the penalty was more than that. Yeah, I wouldn't worry about it at all if it's that low.
Good point. With the way that equities have gone over the last decade, it would be better to take that $6k, invest it along the course of the year, then take the profits and pay the penalty with that. Likely coming out way ahead.The penalty is laughable. I owed like 6k this year and it was 60 bucks and its been that way for years. Its probably minor the gains I make on not paying those taxes sooner, but its mostly that I'm just lazy.
You have to sign up for a treasury direct account: https://www.treasurydirect.govQuestion for those of you on i Bonds: Where are they held?
I've seen people say you buy it from the treasury. Is their like a US treasury account where you log in and manage them?? Or do they send it to Fidelity etc.? Do they send me paper bonds?
You can also open them in your kids names, I believe.You have to sign up for a treasury direct account: https://www.treasurydirect.gov
Not sure if it’s been mentioned but the annual $10k I bond limit is per SSN. So for a married couple you can buy $20k in I bonds yearly.
The only way to get paper I bonds is by requesting as your tax refund or for overpayment. And it’s a $5k limit.
Just do it by the end of the month for full month's interest. I've also been slowly working towards it with the wife.You can also open them in your kids names, I believe.
I should be able to say for certain next week.
I opened mine. Will open one for daughter by end of month. Wife's probably won't be until later in the year.Just do it by the end of the month for full month's interest. I've also been slowly working towards it with the wife.
Alright. You inspired me to figure out how to do my $10k tonight. Just sent it inI opened mine. Will open one for daughter by end of month. Wife's probably won't be until later in the year.
Is there a maturity (i.e. have to own for x years)?You have to sign up for a treasury direct account: https://www.treasurydirect.gov
Not sure if it’s been mentioned but the annual $10k I bond limit is per SSN. So for a married couple you can buy $20k in I bonds yearly.
The only way to get paper I bonds is by requesting as your tax refund or for overpayment. And it’s a $5k limit.
Can’t withdrawal for one year. 3-month interest penalty for withdrawing before five years. They mature in 20 years but can be extended for an additional 10 years.Is there a maturity (i.e. have to own for x years)?
I think, technically, it is a little less than a year. So if you do it before month-end you can withdraw on 6/1/22.Can’t withdrawal for one year. 3-month interest penalty for withdrawing before five years. They mature in 20 years but can be extended for an additional 10 years.
Would it be safe to assume inflation is going up and perhaps it is better to wait a few months or does the rate adjust?Just do it by the end of the month for full month's interest. I've also been slowly working towards it with the wife.
Inflation rateWould it be safe to assume inflation is going up and perhaps it is better to wait a few months or does the rate adjust?
I have my emergency fund in a short term treasury ETF in a brokerage account, I use SCHO, VGSH is similar. Current yields are just under 1%, and under normal conditions they seem to fluctuate between 1-2%. I can sell the shares and transfer to my bank within 5 days. I use a separate account for my taxable investments.So a question for the finance experts here.
If one was able to save the usually recommended six months expenses in reserve cash (say 30-50k for the sake of the discussion), where is the best place to park said cash where you are maximizing any returns that money could earn but it was safe and relatively accessible if needed ( remember this is your emergency cash reserve not retirement). Thanks.
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”.
When you buy the bond, you get the initial rate for 6 months. So, if you buy today, you’d get it through October, if you bought in July, you’d get it through December, etc. When that six month period is over, you’ll get the rate published on November 1 for the next six months. Rate changes continue on that schedule every six months based on rates declared May1 and November 1.
I've been looking into this. So this 3.54 rate is good though Oct (I believe). At which point thereafter rate changes for the 6-ish month period.
I've never understood how bonds work. So it's $10000/yr max investing (that's a calendar year and not based on date of initial investment, correct?). If I were to put $10000 down let's say today on I-bond, I'd get that 3.54 rate for the duration of 30 years or would that rate change for that 10k invested in November?
I've been looking into this. So this 3.54 rate is good though Oct (I believe). At which point thereafter rate changes for the 6-ish month period.
I've never understood how bonds work. So it's $10000/yr max investing (that's a calendar year and not based on date of initial investment, correct?). If I were to put $10000 down let's say today on I-bond, I'd get that 3.54 rate for the duration of 30 years or would that rate change (for this 10k invested) in November?