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Everything posted by EdLaFave

  1. You’ve gotten some good advice so far. You can build a three fund portfolio (VTSAX, VTIAX, and VBTLX), buy a target date fund which gets progressively more bond heavy, or a LifeStrategy fund which maintains its stock/bond split. All are great options, which means your biggest decision is what your stock/bond split should be. You may want to read my Investing 101 page as well as the page I wrote about Vanguard’s 403b. I’m making the assumption you have a Vanguard 403b, which may not be the case since you can buy Vanguard funds through several vendors. If you provide more information about your circumstances (risk tolerance, other accounts/investments, pensions, available vendors and their fees, willingness to manage a simple portfolio, etc) then you may get more insightful feedback.
  2. Ah, the Roth vs Traditional discussion is a fun one. You’ll be fine either way, but I still enjoy the debate.
  3. I’ve got just enough curiosity to learn about parts of the tax code that might benefit me. Initially I’m always overwhelmed and think that I’ll just keep it simple and never use what I learned. Then time passes and as I get more comfortable, I just can’t resist. I felt that way about filing my own taxes without software, using tax advantaged accounts, tax loss harvesting, and now executing a Backdoor Roth. One topic I haven’t taken on yet is the Mega Backdoor Roth, which is very much different than the Backdoor Roth we’ve discussed in this thread, but it lets you sock away another roughly 40k in a Roth account as opposed to putting it in a taxable account. Who knows, maybe that’ll be on my list after I study paying 0% tax in retirement.
  4. Close. I’m performing two maneuvers that are independent, but related. Maneuver 1 My Traditional IRA has a bunch of pre-tax money because I rolled over a bunch of old 401ks and I may have even had normal Traditional IRA contributions before my income grew and prevented me from making Traditional IRA contributions. I’m taking all of this money and moving it into my current employer’s 401k. Manuever 2 I contributed $5,500 to my Roth IRA at the beginning of 2018. Since then it has grown. Collectively my wife and I earned more income than ever before and more than I expected. As a result we are in the phase out range for Roth IRA contributions, which means we weren’t allowed to contribute the full $5,500 so that has to be undone in one way or another. My approach is to recharacterize my Roth overcontribution, which will move that money (and its associated earnings) to my now empty Traditional IRA. However, because I make way too much money to contribute to a Traditional IRA in the normal way, this will be classified as a non-deductible contribution, which means I can’t deduct it from my taxable income, which of course is THE reason most people put money in a Traditional IRA. Then immediately after that money is recharacterized, I will convert it to a Roth. As a result I will have to pay ordinary income tax on the earnings, but the initial contribution amount I made back in 2018 (the basis) will not be taxed. So the money that went into the Roth in 2018, it’ll go into a Traditional and then right back to the Roth. Why two maneuvers? If I didn’t execute Maneuver 1 then when I went to convert the money back to a Roth, I’d have to pay income tax on more than just the earnings. I’d have to pay income tax on a percentage of the conversion as determined by the ratio of pre-tax to post-tax money in the account, something like: (Pre-tax money in Traditional)/(Total Value of Traditional) The Loophole The Traditional and Roth IRA has income restrictions on who can use them, the idea being that wealthy people like me don’t need another tax break. However, there are no income restrictions on making non-deductible contributions to a Traditional IRA and there aren’t any income restrictions on converting the Traditional IRA to a Roth IRA. As a result wealthy people can get money into a Roth IRA even when their income is too high to directly contribute to a Roth IRA. This is called a Backdoor Roth and I believe the loophole was introduced in 2006 (tax increase prevention and reconciliation act) and took effect in 2010. 2019 In 2019 this won’t be so complex. I’ll just make a $6,000 non-deductible contribution to my empty Traditional IRA and immediately convert it to a Roth. It’s only dramatic now because I hadn’t planned for this, my initial contribution was made to the Roth directly, it generated earnings, and I had a bunch of pre-tax money in my Traditional IRA.
  5. Thanks for the link. I gave it a quick read. Unfortunately, I’ve been side tracked because I realized our taxable income for 2018 caused the allowable Roth IRA contribution to partially phase out. So after lots of reading I’m in the process of rolling my Traditional IRA into my employer 401k, recharacterizing the overcontribution to be a nondeductible Traditional IRA contribution, filling out the IRS form for that, and the converting the nondeductible Traditional IRA back to a Roth IRA. I’m happy I have the choices to pull this off, but I wasn’t pumped to learn all of this right now, especially with the tax deadline looming.
  6. I think of the future as being quite difficult to predict so I’m not assuming anything about my wife or her job in the future. I’m just wondering out loud in terms of a generic married couple, or a single individual for that matter. You are right though, married joint filers have to include their income together and if my wife kept working then we’d certainly be paying taxes because her income exceeds the standard deduction by a lot Are you sure the capital gains rate is applied like that? I always thought that whatever bracket you were in determined the rate for all of your capital gains? Obviously that isn’t how ordinary income is treated for federal income tax, where you get to fill up the lower brackets taking advantage of the lower rates on your way to the higher rate. ...I’m looking into this more it seems like if your ordinary income is in the 0% bracket and adding in your capital gains takes you into the 15% bracket then the 0% rate will be applied to the portion of your capital gains that takes you up to the 15% bracket and the 15% will be applied to the rest of the capital gains. Is that how it works? Am I wrong in concluding that it is pretty easy for normal people (i.e. people who don’t need a lot of money per year to live) to avoid taxes entirely in retirement? It seems too good to be true so I’m wondering if I’m missing something.
  7. I’ve only casually looked into this, but I’m curious what you guys think. The standard deduction for a married couple is 24k so every year you could convert 24k from a Traditional IRA to a Roth IRA. This will result in $0 of federal income tax The upper income limit on the 0% capital gains rate for a married couple is just shy of 80k (presumably the profits from a taxable sale count towards this limit). So you could cash out roughly 56k of profit from your taxable account without paying any tax. I don’t need anywhere near that much money per year to live. Thats to say nothing about money that is already in a Roth account. I understand that at a certain age social security or teacher pensions will likely play a roll in increasing taxable income. I always assumed I’d be paying taxes in retirement, but all of this just occurred to me (research to come) and I think I might have a 0% tax rate during retirement. What do you guys think?
  8. It would be nice if the non-institutional shares were 0.09%. As things stand now I can’t justify paying almost 3x the price relative to a 3 fund Vanguard portfolio. Then when I start looking at Fidelity’s ZERO fee funds...paying 0.15% begins to feel absurd. ...honestly I don’t understand why their all in one funds cost more than the individual funds contained within them.
  9. Are you 100% sure you don’t have access to any 457b plans? I know the state of New York sponsors an excellent 457. To answer your question, the best plan available to you is Security Benefit’s NEA DirectInvest, which is an elite 403b. I documented the plan here. Again are you 100% sure you don’t have access to Roth accounts? If not, then yes when you eventually rollover your employer plan to an IRA, you can convert that IRA to a Roth IRA. The con of doing so is that each dollar you convert will be taxed as ordinary income (at your highest marginal tax rate) in the year the Roth conversion is performed. But that’s the con of Roths in general I view the Traditional va Roth debate as an optimization that cannot be definitely answered because it requires knowledge you’ll only have in the future. Still, I think most people will be better off with a Traditional. We can discuss in more detail if you’d like, but my case is made pretty well here.
  10. As is documented, I had a terrible time finding anybody at Security Benefit who could speak knowledgeably about NEA DirectInvest. According to a boglehead user, 800-747-3942 is their direct number and the folks who answer that line are helpful and knowledgeable. https://www.bogleheads.org/forum/viewtopic.php?t=260609
  11. Perhaps I have an incomplete picture. What exactly were their problems with the fiduciary rule and didn’t they withhold support because they had problems with the regulations? I don’t find these to be compelling reasons to speak out against the rule: https://www.etf.com/sections/features-and-news/vanguard-why-proposed-fiduciary-rule-unfit/page/0/1 ...then you’ve got Vanguard changing the language that was talked about earlier on this forum. They’re making me feel uncomfortable.
  12. I really only care about two things: 1) Am I well diversified. 2) Am I keeping as much profit as possible. That’s it. That’s all I care about. The end. Sure I think Vanguard’s corporate structure is more likely to deliver those two outcomes, but I have to live in reality, not just theory. The reality is that Fidelity has produced well diversified index funds with ZERO fees. I’m waiting a year or so to fully evaluate it, but I’ll be very surprised if I don’t switch. Thanks to Vanguard, index funds are a commodity, not a product. It doesn’t matter where I buy it, it only matters what I pay for it. Also I’m not impressed with Vanguard’s shift in culture. Opposition to the fiduciary rule was a clear signal to me that they aren’t on the investor’s side. Sure, I don’t think Fidelity is either. That’s fine, now that we have index funds and a price war over them, the only force we need on our side is an insatiable consumer desire for NO fees...or better yet, interest earned on the money I invest in a fund!
  13. Bogle was a saint. I interpreted “at the top” to mean who is best rather than who has the most assets.
  14. Just my two cents, but Vanguard isn’t alone at the top because they’ve already been beaten. ...all of my money is still in Vanguard, for now.
  15. ...and if I didn’t already provide the link, this is a quick read that’ll give you the foundational knowledge you need: https://educatorsfightingforfairness.wordpress.com/investing-101/
  16. I believe I’ve already linked you to everything you need to know (including fund choice): https://educatorsfightingforfairness.wordpress.com/security-benefits-nea-directinvest/
  17. Enroll in Security Benefit’s NEA DirectInvest, transfer your AXA stuff into it, and be done with it. Ask questions as needed. Once you get that sorted out then ask yourself if you’ll ever max out the 403b (19k) and if you will then you can work on getting Fidelity added because they offer the best 457b.
  18. If one were to invest in a target date fund then picking the date based on your expected retirement is fine. However, it is better to pick the fund based on its current bond/stock split and its future glidepath (i.e. how quickly and to what degree it adds more bonds in the future). Your portfolio needs to match your risk tolerance.
  19. I've been in and out on your thread(s) TonyZ so I may have missed something, but I still think you should take the time to enumerate every 403b and 457b vendor (include state sponsored plans) that your district has approved. To answer your question about Aspire, I've already done the leg work for you here.
  20. The US stock market dropped 37% in 2008 so I don’t think you’ve provided enough information (a 26% loss in 2008) to support the notion that they really screwed up. I have no idea how they run things, but that figure isn’t enough to make me think they’re doing it poorly.
  21. Your district determines which 403b and 457b plans you’re allowed to use (which is the source of a lot of pain for people). If Security Benefit is on your approved vendor list then you could use the NEA DirectInvest 403b plan all on your own.
  22. Apparently proponents (whoever they are, maybe people on her staff, maybe people working with her) distributed an overview of the Green New Deal that contained the language in question, which you can read here. It still isn’t clear to me, in the context of that document, what it means to provide economic security to those unwilling to work. Major outlets have discussed this: https://www.cnbc.com/2019/02/07/ocasio-cortezs-green-new-deal-offers-economic-security-for-those-unwilling-to-work.html https://www.businessinsider.com/ocasio-cortez-aoc-green-new-deal-controversy-unwilling-to-work-line-faq-2019-2
  23. There may or may not be some level of truth in the “unwilling to work” thing (perhaps in an early draft), I don’t know. What I do know is that the right has an obsession with AOC and love to criticize her without engaging in the substance of her policies. It’s actually interesting to listen to them refer to her as fringe because many of her policies have majority support among the population.
  24. It wasn’t clear if he knew who I was or if he just stumbled into me because we do have mutual connections on LinkedIn. I was hoping he’d have more to say.
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