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Talking stocks, trading, and investing in general - Page 541

post #8101 of 11418
Quote:
Originally Posted by lawyerdad View Post


We all have our own approaches, but it seems like you're getting overly hung up on labels. I mean, if you're under-funding your retirement accounts because you're concerned about having the flexibility to deploy capital opportunistically, the ability to borrow against the retirement account (assuming it's an account where this is an option) largely undercuts that rationale. You have X dollars in earned income that you can either pay taxes on now and then deploy as you see fit, or that you can direct into a tax-deferred account and (again, assuming your plan allows this) borrow against if you want to invest it in something that can't be held in the retirement account. I'm not suggesting there's a "right" approach, but whatever decisions you're making are better made with an accurate understanding of which trade-offs are real and which are illusory.

Borrowing from your 401k is a bitch.​ I believe the IRS also limits it to 50k max. Wasn't so much of an issue for older people, but that is pretty limiting now given housing prices. Honestly what is 50k going to do for me when an apartment I actually want to live in NYC is $1.5M and requires a 300k down payment at minimum.

 

A 401k isn't a very efficient investment vehicle. Better to be creative in your tax planning after getting your maximum match.

 

That said, I sit near the top of an bottom of the next income bracket because I switched jobs this year. I try and push the money that will be in the higher bracket into my 401k to avoid a ~30% tax hit I will take on it.

post #8102 of 11418
Quote:
Originally Posted by GreenFrog View Post

I've noticed that you are fairly conservative in your risk appetite. Is there any reason you aren't more aggressive given you're only, what, like 28?

I dunno that I am that conservative. My wise banyan risk profile is set to 9.4 out of 10...and while I hold large positions in things like S&P500 ETFs/Index funds, I also own a bundle of individual stocks (which all of the rational advice tells you not to do), most of which are not exactly stable.

But it is true that I have done very little trading this year. Fully funded the Roth IRA (via a backdoor IRA conversion) in January, and my taxable contributions this year have been to wisebanyan which is automated. Since I haven't felt a desire to sell many things this year, that means I have no cash for purchases.

My trading activity this year has been approximately this (and all happened in Q1 except for reinvesting some dividends):
- Sold VZ, which I had received as a stock dividend from something else and never really wanted to own
- Sold some TRREX to rebalance
- Bought more SMLP, some TSLA, and some RDS.A
- Sold a shitty penny stock that had collapsed to being barely worth the trading commission to sell it.
post #8103 of 11418
Avoiding taxation is an instant what, 30% return? Something to think about.
post #8104 of 11418
Quote:
Originally Posted by Piobaire View Post

Avoiding taxation is an instant what, 30% return? Something to think about.

Effective tax rate of 30%? Better hear your financial planner or accountant talk.

p.s., always better to take tax hit when tax rate is low, and it's pretty damn low right now still from the Bush era.
post #8105 of 11418
Quote:
Originally Posted by Piobaire View Post

Avoiding taxation is an instant what, 30% return? Something to think about.

Delayed taxation. We don't know what the future rate will be. ​

 

I have the option of a Roth 401k and a traditional 401k. I firmly believe the future tax rate will go up in the future due to the current spending pattern of the US. Based on how I feel about the market I will switch which the bulk of my contribution goes to. If we are in a volatile and high valuation market as we are now I do traditional 401k because I am only taxed at the end. If I feel the market is offering greater value I am okay putting after tax money at risk (not to mention you can draw out of a 401k roth too).

 

Quote:
Originally Posted by chogall View Post


Effective tax rate of 30%? Better hear your financial planner or accountant talk.

p.s., always better to take tax hit when tax rate is low, and it's pretty damn low right now still from the Bush era.

You have anyone you recommend? ​

post #8106 of 11418
Quote:
Originally Posted by chogall View Post

Effective tax rate of 30%? Better hear your financial planner or accountant talk.

p.s., always better to take tax hit when tax rate is low, and it's pretty damn low right now still from the Bush era.

It's low right now but I have a hard time thinking GF's plan will outperform the tax deferred route. I mean, all that money out of play, let alone the compounding?
post #8107 of 11418
You guys are forgetting about 40 years of untaxed churn.

I don't much care if you pull the taxes now or at retirement. I am saving the capital gains taxes on dividends and long term trades and the income taxes on short term holdings for the next 40 years.

So maybe it isn't a free 30% gain since you always pay taxes on one end or the other... But it is at least an automatic 15% gain (and you are kidding yourself if you think capital gains taxes are going down).

Also, changes in future tax rates aside, Roth and traditional IRAs have the same 5500 contribution limit. But because the traditional will be taxed at withdrawal, your 5500 is really worth about 30% less than 5500 in a Roth.
post #8108 of 11418

You don't pay taxes if you put it in a Roth 401k.

post #8109 of 11418
Yes you do. It stops showing up in your paycheck as a pre-tax line item, thus you do pay taxes on it.
post #8110 of 11418

Roth 401k is a post tax contribution.  

 

As for savings, we keep 6 months expenses spread across multiple savings accounts to get this 1% bonus from our bank.  If it ever differs we will consolidate into one but a 1% bonus is fine by me.  Some people ladder different vehicles and such but I am not try to squeak out another ~$100 on our savings account for a marginal increase in interest income.

 

Someone mentioned 401k not being efficient, it is the cheapest way for us to get access to an S&P fund at .06 expense ratio.  Other asset classes though are super expensive other than maybe a mid-cap and a small-cap fund if I am remembering expenses correctly.

 

As for performance this year, we have just been adding funds and staying in a general pattern of flat to slightly up or down based on our new additions.  We have really only started investing since 2011 so we are a little behind for our age in my opinion but our strategy should help out in the long run.  We are about to hit a "milestone" number but retirement savings but the better number has been our home equity in terms of our net worth.  

post #8111 of 11418
I need to start bumping up my retirement contributions. I'm getting the 5% company match, and I contribute to my roth, but I should be maxing it (and getting the wife to max hers but her student loans have 7-8% interest so that's the priority).

If my wife stays at her employer for a full year, they contribute 7% of her pay to a 401k which is damn good.
post #8112 of 11418
Quote:
Originally Posted by MSchapiro View Post

You don't pay taxes if you put it in a Roth 401k.

Exactly.

IMO, there's absolutely no reason to fund anything in traditional retirement plans or fund 401k beyond contribution. Exercise control and put your savings into your bank or brokerage account. Money on hand gives you financial freedom and protection.

Tax deferred? Pfft. That spread is what people pay for tax avoidance.
post #8113 of 11418
Quote:
Originally Posted by jbarwick View Post

Roth 401k is a post tax contribution.  

As for savings, we keep 6 months expenses spread across multiple savings accounts to get this 1% bonus from our bank.  If it ever differs we will consolidate into one but a 1% bonus is fine by me.  Some people ladder different vehicles and such but I am not try to squeak out another ~$100 on our savings account for a marginal increase in interest income.

Someone mentioned 401k not being efficient, it is the cheapest way for us to get access to an S&P fund at .06 expense ratio.  Other asset classes though are super expensive other than maybe a mid-cap and a small-cap fund if I am remembering expenses correctly.

As for performance this year, we have just been adding funds and staying in a general pattern of flat to slightly up or down based on our new additions.  We have really only started investing since 2011 so we are a little behind for our age in my opinion but our strategy should help out in the long run.  We are about to hit a "milestone" number but retirement savings but the better number has been our home equity in terms of our net worth.  

In house ETF at Schwab is zero fee.

Also, for those without mortgages and with steady paycheck, try to save 50% of after tax income.
post #8114 of 11418
Quote:
Originally Posted by otc View Post

Yes you do. It stops showing up in your paycheck as a pre-tax line item, thus you do pay taxes on it.

To clarify I mean the returns are untaxed, not that it is a pre tax contribution.

 

On top of that you can withdraw contributions after having the plan for 5 years, which is a huge advantage.

 

Sure you can get S&P 500 exposure for cheap, but honestly I think beta is really over rated, which is what low cost funds are there to take advantage of. I think we will be re-entering periods where decent alpha exists. 401ks just have such limited flexibility.

post #8115 of 11418
Quote:
Originally Posted by MSchapiro View Post

To clarify I mean the returns are untaxed, not that it is a pre tax contribution.

On top of that you can withdraw contributions after having the plan for 5 years, which is a huge advantage.

Sure you can get S&P 500 exposure for cheap, but honestly I think beta is really over rated, which is what low cost funds are there to take advantage of. I think we will be re-entering periods where decent alpha exists. 401ks just have such limited flexibility.

Doesn't it really depend on your 401k? Some firms offer 20 options some offer 3.
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