Search found 28954 matches

by grabiner
Sun Apr 11, 2021 10:20 pm
Forum: Investing - Theory, News & General
Topic: Tax equivalent yield munis vs. other bond funds
Replies: 6
Views: 468

Re: Muni bonds in taxable

Tax-equivalent yield is not based on total return, particularly for a fund which holds stocks; you don't pay tax at your full tax rate on the stocks every year. (Even on a bond fund, the tax cost is paid on the current yield, not the historical return which may include capital gains and losses.) Th...
by grabiner
Sun Apr 11, 2021 6:27 pm
Forum: Personal Investments
Topic: Effective tax rate 40%+ Sanity check on strategy for tax efficient investing
Replies: 55
Views: 3938

Re: Effective tax rate 40%+ Sanity check on strategy for tax efficient investing

I view a mortgage as a negative bond. If you have a bond portfolio which pays you $X every year, and a loan on which you pay $X every year, you can ignore both of them since the bond portfolio pays the loan. I spent a bunch of time today reading about the concept of a mortgage being a negative bond...
by grabiner
Sun Apr 11, 2021 6:00 pm
Forum: Personal Investments
Topic: Effective tax rate 40%+ Sanity check on strategy for tax efficient investing
Replies: 55
Views: 3938

Re: Effective tax rate 40%+ Sanity check on strategy for tax efficient investing

I view a mortgage as a negative bond. If you have a bond portfolio which pays you $X every year, and a loan on which you pay $X every year, you can ignore both of them since the bond portfolio pays the loan. Your interest rate is 2.75%, which is a pretty good risk-free rate for a long-term investme...
by grabiner
Sun Apr 11, 2021 5:31 pm
Forum: Investing - Theory, News & General
Topic: Can this be true? [CNBC: Investors put more money into stocks]
Replies: 18
Views: 2789

Re: Can this be true? [CNBC: Investors put more money into stocks]

This follows the historical pattern: many individual investors chase performance. This is what makes rebalancing so difficult; it goes against most investors' instincts to buy more stock when the market is falling. Balanced funds, such as target-date funds, avoid this behavioral issue; when the stoc...
by grabiner
Sun Apr 11, 2021 5:25 pm
Forum: Investing - Theory, News & General
Topic: TRF decumulation
Replies: 3
Views: 290

Re: TRF decumulation

I like to keep investing simple. The target retirement fund seems like the simplest investment option. My question...is it a good idea to have everything in the TRF during the decumulation phase (retirement)? During a market downturn, it seems like it would be better to sell only bonds to take a di...
by grabiner
Sun Apr 11, 2021 4:23 pm
Forum: Investing - Theory, News & General
Topic: Tax equivalent yield munis vs. other bond funds
Replies: 6
Views: 468

Re: Muni bonds in taxable

Can I defer to your obvious expertise in such matters and expand the question a little? I have a large sum that I want to invest in a taxable account and I prefer a "sleep well" kind of investment. Currently, I use the CA muni fund and Wellesley to sleep well. I have looked at both of the...
by grabiner
Sun Apr 11, 2021 11:34 am
Forum: Personal Investments
Topic: Financial health checkup
Replies: 9
Views: 943

Re: Financial health checkup

I often recommend paying down a mortgage for risk-free returns, but if you itemize deductions, your risk-free return on a prepayment is only 1.41% because you deduct at a 46.3% rate. This is a poor return on a long-term investment, so you should keep the mortgage. If you donate little to charity, y...
by grabiner
Sun Apr 11, 2021 11:33 am
Forum: Personal Investments
Topic: Effective tax rate 40%+ Sanity check on strategy for tax efficient investing
Replies: 55
Views: 3938

Re: Effective tax rate 40%+ Sanity check on strategy for tax efficient investing

Given your very high tax rate, I would recommend holding US stock in taxable where possible. You get the same foreign tax credit as everyone else, but you pay a higher tax cost on dividends, particularly on non-qualified dividends. Since international stock funds have higher dividend yields and mor...
by grabiner
Sun Apr 11, 2021 10:36 am
Forum: Investing - Theory, News & General
Topic: Buying a range of bond maturities?
Replies: 11
Views: 802

Re: Buying a range of bond maturities?

Yes there will be a difference. Interest rates at various maturites do not go up by a fixed % or a fixed ratio at each maturity term. Sometimes the shorter stuff goes up a lot more than longer or just the reverserve. Could another way to think about this be that if the yield curve maintained a cons...
by grabiner
Sun Apr 11, 2021 10:25 am
Forum: Personal Investments
Topic: Financial health checkup
Replies: 9
Views: 943

Re: Financial health checkup

A few tax-related notes: Since you are in CA, your HSA is taxable for state tax. Thus it should be invested in Treasuries, which are exempt from CA tax. TIPS would likely be a good choice. And since you pay 35.1% tax (20% federal + 3.8% NIIT + 11.3% CA) on qualified dividends, but no more tax on CA ...
by grabiner
Sun Apr 11, 2021 10:18 am
Forum: Personal Investments
Topic: Investment Allocation: Unpredictable Income
Replies: 16
Views: 934

Re: Investment Allocation: Unpredictable Income

One problem with this strategy is the tax cost, which is relevant even when you are withdrawing from the portfolio. If you need to spend $30K and have $30K in dividends, you pay tax on the dividend (at 15% if qualified; the tax would be even higher on non-qualified dividends such as those in the rea...
by grabiner
Sun Apr 11, 2021 10:12 am
Forum: Personal Investments
Topic: Why the general advice to have treasuries in CA HSA?
Replies: 13
Views: 892

Re: Why the general advice to have treasuries in CA HSA?

The issue isn't the tax work, but the tax cost. No matter what you hold in your IRA or 401(k), the percentage lost to taxes is the same (zero for a Roth account, and your retirement tax rate for a traditional account). In an HSA in CA or NJ, you will pay a tax cost for dividends on a stock fund, and...
by grabiner
Sun Apr 11, 2021 10:05 am
Forum: Personal Investments
Topic: Analysis paralysis about International in Taxable Account
Replies: 26
Views: 1556

Re: Analysis paralysis about International in Taxable Account

One thing I just realized is that not all states seem to allow Foreign Tax Credit... My current state does not seem like it allows it, so I wonder if this tips things in favor of NOT putting international in taxable... This is a minor advantage for international in tax-deferred if your state does n...
by grabiner
Sun Apr 11, 2021 9:53 am
Forum: Personal Investments
Topic: my first Vanguard rebalance
Replies: 10
Views: 1209

Re: my first Vanguard rebalance

Since you are in the 10% federal tax bracket, you will pay no federal tax on your long-term capital gains. Thus, if you need to sell stock for a capital gain, it is better to sell for a long-term gain even if the gain on those shares is higher than on shares with short-term gains. (You will pay stat...
by grabiner
Sun Apr 11, 2021 9:51 am
Forum: Personal Investments
Topic: VWAHX
Replies: 7
Views: 614

Re: VWAHX

I prefer my bonds be investment grade or government bonds. Therefore, I would not use this fund. Just my prerogative, though. I prefer my bonds have a certain level of safety, albeit arbitrary, and this fund doesn't meet that arbitrary level. Despite the name, this fund is not a junk-bond fund; it ...
by grabiner
Sat Apr 10, 2021 10:40 pm
Forum: Personal Finance (Not Investing)
Topic: Theory: The Only Four Situations Justifying Debt
Replies: 103
Views: 6932

Re: Theory: The Only Four Situations Justifying Debt

If your theory works for you, then it works for you. I think it’s nonsense. I think you should borrow money only when you can generate a greater after tax return than your after tax cost of debt. This misses the issue of risk. Paying down a loan, or not taking one out, or buying a bond, all give a ...
by grabiner
Sat Apr 10, 2021 10:29 pm
Forum: Personal Investments
Topic: Effective tax rate 40%+ Sanity check on strategy for tax efficient investing
Replies: 55
Views: 3938

Re: Effective tax rate 40%+ Sanity check on strategy for tax efficient investing

Given your very high tax rate, I would recommend holding US stock in taxable where possible. You get the same foreign tax credit as everyone else, but you pay a higher tax cost on dividends, particularly on non-qualified dividends. Since international stock funds have higher dividend yields and more...
by grabiner
Sat Apr 10, 2021 3:59 pm
Forum: Personal Finance (Not Investing)
Topic: Theory: The Only Four Situations Justifying Debt
Replies: 103
Views: 6932

Re: Theory: The Only Four Situations Justifying Debt

I'm fine with car loans. If you don't have a home mortgage, it provides a boost to your credit score. I think putting $10,000 or more down on the car and borrowing the rest can be good for credit scores without the problems caused by depreciation. Taking out a loan to build your credit score isn't ...
by grabiner
Sat Apr 10, 2021 3:52 pm
Forum: Personal Finance (Not Investing)
Topic: Theory: The Only Four Situations Justifying Debt
Replies: 103
Views: 6932

Re: Theory: The Only Four Situations Justifying Debt

Great question - thank you! Consider: Use low cost debt to build an inflation hedge. Do you remember the 9-13% inflation of the 1970-80's*? If that returns in the next decade, then setting up 5-10 year's of 1-2% debt is brilliant. Too bad we have an unpredictable future... Not a good idea; this is ...
by grabiner
Sat Apr 10, 2021 12:14 pm
Forum: Personal Finance (Not Investing)
Topic: HSA advice Jane Quinn How to Make Your Money Last
Replies: 40
Views: 3354

Re: HSA advice Jane Quinn How to Make Your Money Last

Part of the reason for spending down the HSA may be the relative drawbacks of its tax treatment if eventually inherited by a non spouse. Good point. I'm generally aware of this but not the specifics. Can you elaborate ? Is the entire balance immediately taxable to the non-spouse heir ? Unpaid medic...
by grabiner
Sat Apr 10, 2021 12:13 pm
Forum: Personal Finance (Not Investing)
Topic: HSA advice Jane Quinn How to Make Your Money Last
Replies: 40
Views: 3354

Re: HSA advice Jane Quinn How to Make Your Money Last

I believe this is a case in the book where she's referring to a health spending account as opposed to a health savings account. Unfortunately both have the same abbreviation. A Health Care Flexible Spending Account is always abbreviated FSA or HCFSA, not the HSA which is used for a Health Savings A...
by grabiner
Sat Apr 10, 2021 9:02 am
Forum: Personal Investments
Topic: Rebalance Tax Quandry
Replies: 10
Views: 790

Re: Rebalance Tax Quandry

If you are in a very low tax bracket, you might be able to sell some of the total stock and pay 0% on long term capital gains. In order to do this, your taxable income (not AGI) including the LTCG would need to be less than $80,800. However, if you are in the phase-in of Social Security taxation, y...
by grabiner
Fri Apr 09, 2021 11:13 pm
Forum: Personal Finance (Not Investing)
Topic: VTEAX dividends + HSA capital gains with partial-year California residency?
Replies: 4
Views: 321

Re: VTEAX dividends + HSA capital gains with partial-year California residency?

Even if you don't need to report your HSA (and muni?) capital gains as California income, they will increase your taxes a bit, because those are based on "the rate you would have paid, using California rules, if you had been a full-year resident." Thanks. Where are you quoting from? I've ...
by grabiner
Fri Apr 09, 2021 10:56 pm
Forum: Personal Finance (Not Investing)
Topic: HSA advice Jane Quinn How to Make Your Money Last
Replies: 40
Views: 3354

Re: HSA advice Jane Quinn How to Make Your Money Last

Whether it is better to pay medical expenses from the HSA depends on where you will invest the money that you aren't using to pay out of pocket. Once you made the contribution to the HSA, you already got the primary benefit: your investment was tax-deductible when made, and will be tax-free when wit...
by grabiner
Fri Apr 09, 2021 10:50 pm
Forum: Personal Finance (Not Investing)
Topic: HSA reimbursement
Replies: 10
Views: 795

Re: HSA reimbursement

2. I am in CA, so HSA is basically treated like a taxable account from what I understand. If I sell 6k to reimburse myself, would I be taxed on that even though it's a medical expense? I know in other states the answer is NO, not sure on CA You would be taxed only on the capital gain. If you invest...
by grabiner
Fri Apr 09, 2021 10:39 pm
Forum: Investing - Theory, News & General
Topic: Are international bonds worth it?
Replies: 6
Views: 925

Re: Are international bonds worth it?

Hi - I'd like to hear your opinion about two investment strategies: - Option #1: 30% US equity, 20% International equity, 35% US Munis, 15% International bonds - Option #2: 30% US equity, 20% International equity, 50% US Munis Assume that scope is a taxable account and that the investor is in the h...
by grabiner
Fri Apr 09, 2021 10:29 pm
Forum: Personal Investments
Topic: How to structure my 401k alongside a new taxable account - VXUS in taxable or 401k?
Replies: 3
Views: 365

Re: How to structure my 401k alongside a new taxable account - VXUS in taxable or 401k?

1. Assuming I regularly rebalance and keep my target AA across all 3 accounts and I'm only investing in low cost index funds, does it matter whether I invest future funds in VTI or VXUS in my brokerage account? 2. If it matters, what's the risk if I go 100% VTSAX in my 401k and mixed in my taxable ...
by grabiner
Fri Apr 09, 2021 9:57 pm
Forum: Personal Investments
Topic: Rebalance Tax Quandry
Replies: 10
Views: 790

Re: Rebalance Tax Quandry

. When your stock holding gets too high for your risk tolerance, you do need to sell. While there is a tax cost, it isn't a total loss since these are shares you were planning to sell anyway; you just pay the tax earlier. (Selling for a gain, then buying back, would be more of a loss.) It would be r...
by grabiner
Thu Apr 08, 2021 10:05 pm
Forum: Personal Finance (Not Investing)
Topic: Amending medical record...best financial decision?
Replies: 17
Views: 1767

Re: Amending medical record...best financial decision?

Hi. I work in the field. There is a difference between the charge and the reimbursement for everything in medicine - doctor visits, labs, MRI, etc. The MRI facility will charge insurance say $1200 but expect to get about $300. Why? Once in a blue moon insurance will actually pay $1200 and that's mo...
by grabiner
Wed Apr 07, 2021 9:30 pm
Forum: Personal Finance (Not Investing)
Topic: Can I open a side HSA for rolling in employer HSA (and still keep contributing to employer HSA due to matching)?
Replies: 9
Views: 481

Re: Can I open a side HSA for rolling in employer HSA (and still keep contributing to employer HSA due to matching)?

you'd incur taxes if like me you live in a state (CA) that taxes gains in HSAs. Never thought some states can tax HSA gains, good to know. It's now only CA and NJ. In those states, you may want to invest your HSA in Treasury bonds to avoid the tax, as long as Treasury bonds (including TIPS) fit you...
by grabiner
Wed Apr 07, 2021 9:15 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Digital Advisor appears to be live
Replies: 14
Views: 2966

Re: Vanguard Digital Advisor appears to be live

I just tried to take a spin...and ran into the following conditions which made NONE OF MY CURRENT accounts eligible...(bold conditions) Assets within the brokerage account must be in your Settlement Fund, similar to being in cash. This is a serious problem with a taxable account. You would have to ...
by grabiner
Wed Apr 07, 2021 8:33 pm
Forum: Investing - Theory, News & General
Topic: How to reallocate without selling?
Replies: 19
Views: 2060

Re: How to reallocate without selling?

You made two mistakes, one explained by the post above. That first mistake is that you chose an asset allocation you don't understand based on vague information about a "good" fund. As mistakes go this is not a big deal. We live and learn, and, properly understood, it may not even be a mi...
by grabiner
Wed Apr 07, 2021 8:13 pm
Forum: Investing - Theory, News & General
Topic: Strategy for transferring capital gains from taxable to non-taxable account
Replies: 10
Views: 1067

Re: Strategy for transferring capital gains from taxable to non-taxable account

There are also three other tax costs: If your call is exercised, you have to sell the stock in the taxable account at the strike price, which will result in a capital gain. If you write a call against stock in the taxable account, you may make the dividends non-qualified. (Any time that you hold a c...
by grabiner
Wed Apr 07, 2021 7:59 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Portfolio Watch has a new look
Replies: 97
Views: 7367

Re: Vanguard Portfolio Watch has a new look

There are improvements- Wellington now shows international component Domestic bond funds show international bond component REIT breakdown shows mid and small, not just small This is a big improvement. Vanguard funds are now allocated according to their proper style percentages, rather than their st...
by grabiner
Wed Apr 07, 2021 7:06 pm
Forum: Personal Investments
Topic: Muni bonds in taxable
Replies: 27
Views: 4500

Re: Muni bonds in taxable

My normal recommendation for CA investors with a lot in munis is to split 50/50 between Vanguard CA Long-Term Tax-Exempt and Vanguard Limited-Term Tax-Exempt. This gives an overall intermediate-term duration, with only half the bonds in CA, but more than half the bond interest exempt from CA tax. T...
by grabiner
Wed Apr 07, 2021 7:00 pm
Forum: Personal Finance (Not Investing)
Topic: Foreign Tax Credit (1116) - H&R Block vs TurboTax
Replies: 8
Views: 1065

Re: Foreign Tax Credit (1116) - H&R Block vs TurboTax

Only if your credit is limited on Form 1116, which is not that common for investors. Is there any data to support the assertion that it isn't common for investors? Just the tax rates. If your foreign tax is less than $600, you aren't forced to adjust your qualified dividends (unless you are in the ...
by grabiner
Tue Apr 06, 2021 10:48 pm
Forum: Personal Investments
Topic: Large roth conversion -tax hit timing/strategies
Replies: 10
Views: 1363

Re: Large roth conversion -tax hit timing/strategies

I was hoping for a reply from you David. Thanks for the time. By converting this to Roth, you are increasing the risk. If you retire at a 30% marginal tax rate, $X in any investment in a traditional IRA has 30% less value and 30% less risk than in a Roth IRA, since the IRS and state will take 30% o...
by grabiner
Tue Apr 06, 2021 10:39 pm
Forum: Personal Investments
Topic: Should I use a Roth 401k instead of a regular 401k?
Replies: 23
Views: 2147

Re: Should I use a Roth 401k instead of a regular 401k?

Recharacterize those Traditional IRA contributions to Roth IRA contributions if your income allows for direct Roth IRA contributions. I'm new to all this. What is the benefit of this? Recharacterization of the Traditional IRA contribution to Roth IRA contribution will make it as though you had cont...
by grabiner
Tue Apr 06, 2021 8:22 pm
Forum: Personal Finance (Not Investing)
Topic: Foreign Tax Credit (1116) - H&R Block vs TurboTax
Replies: 8
Views: 1065

Re: Foreign Tax Credit (1116) - H&R Block vs TurboTax

If you try to include 1116 and it's not required I believe you will get less of a credit than just using the proper line on 1040 Only if your credit is limited on Form 1116, which is not that common for investors. (However, if your tax software incorrectly adjusts qualified dividends, you might fin...
by grabiner
Tue Apr 06, 2021 8:19 pm
Forum: Personal Finance (Not Investing)
Topic: Another Mortgage payoff question
Replies: 20
Views: 1307

Re: Another Mortgage payoff question

Not maxing out the 401k yet, figure could do that after. My mortgage doesn't necessarily bother me, and if it would take me 10-15 years to pay it off I wouldn't even worry about it, but it just seems like its right there with a couple years of discipline that it seems appealing. Max out the 401(k) ...
by grabiner
Tue Apr 06, 2021 8:15 pm
Forum: Personal Finance (Not Investing)
Topic: Old employer closed my 401K and withheld taxes
Replies: 16
Views: 1697

Re: Old employer closed my 401K and withheld taxes

Regardless, doing a 60-day rollover to an IRA is likely what you want to do now. That's the process for getting your money into the IRA and your taxes back (when you next file, unless you reduce your withholding in other ways). I am perhaps reading between the lines here, but I think the issue migh...
by grabiner
Tue Apr 06, 2021 8:03 pm
Forum: Personal Investments
Topic: Maxing HSA question
Replies: 10
Views: 1097

Re: Maxing HSA question

Hello I qualify FOR HDSP Plan just didn’t know if it’s still worth contributing to my HsA for 2020 if I can’t do it via payroll. Looks like I won’t be getting the FICA tax savings but I will get the FED and State tax deduction. I’m below the FICA cutoff This is definitely worth doing. Money going i...
by grabiner
Tue Apr 06, 2021 7:57 pm
Forum: Personal Investments
Topic: Re-balancing tutorial
Replies: 14
Views: 1201

Re: Re-balancing tutorial

Rebalancing a 3-fund portfolio is quite simple. Multiply the total portfolio balance by the desired allocation in each fund. Compare this to the amount you actually hold in each fund. The difference is the amount you need to buy or sell. Say that you have a $100K portfolio, with a target allocation ...
by grabiner
Tue Apr 06, 2021 7:51 pm
Forum: Personal Investments
Topic: Large roth conversion -tax hit timing/strategies
Replies: 10
Views: 1363

Re: Large roth conversion -tax hit timing/strategies

Thinking strongly about taking a large tax hit on a large roth conversion even though we are somewhat high earners because my self directed IRA is made up of company shares of a co-investment. This came to be from ESOP funds when our company sold to private equity and some of us were able to co-inv...
by grabiner
Tue Apr 06, 2021 7:40 pm
Forum: Personal Investments
Topic: Should I use a Roth 401k instead of a regular 401k?
Replies: 23
Views: 2147

Re: Should I use a Roth 401k instead of a regular 401k?

I am 29 and I make about 140k a year. My retirement plan is currently set aside 15% 1. Get employer 401k match 2. Max Traditional IRA 3. Fund 401k more 4. If needed, fund HSA Funding the HSA (if eligible) should be preferred to unmatched contributions to either traditional or Roth accounts. Traditi...
by grabiner
Tue Apr 06, 2021 7:07 pm
Forum: Personal Investments
Topic: Another Roth or TIRA for 2021
Replies: 7
Views: 640

Re: Another Roth or TIRA for 2021

...with 0% tax rate Roth seems like a no brainer It would be if your marginal tax rate were 0%, but it isn't. ;) You are so close to various credit income limits that your exact income and other deductions matter. E.g., what drops your gross income from $60-$65K to an AGI of $51-$55K? Also, IRA con...
by grabiner
Mon Apr 05, 2021 11:21 pm
Forum: Personal Finance (Not Investing)
Topic: Payoff New Mortgage Aggressively or Invest?
Replies: 37
Views: 3704

Re: Payoff New Mortgage Aggressively or Invest?

I’m in a similar boat. I just closed on March 15. My first mortgage payment isn’t due until May 1 and I’m trying to figure out what to do. I’m firmly in the invest camp, but also HATE debt. Income about $400k (physician), single filer. Mortgage: $436k at 2.625% 30-yr fixed, conventional. At your 35...
by grabiner
Mon Apr 05, 2021 9:07 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Intl. Bond style change? Why?
Replies: 14
Views: 1640

Re: Vanguard Intl. Bond style change? Why?

Interesting. Vanguard includes VTABX in all its Fund-of-Funds, which are put forth as an appropriate default choice in thousands of 401k/403b/457 retirement plans across the country. Vanguard has thus openly stated that this fund is an appropriate investment instrument for John Q Public to rely on ...
by grabiner
Mon Apr 05, 2021 9:00 pm
Forum: Personal Finance (Not Investing)
Topic: Payoff New Mortgage Aggressively or Invest?
Replies: 37
Views: 3704

Re: Payoff New Mortgage Aggressively or Invest?

I’m in a similar boat. I just closed on March 15. My first mortgage payment isn’t due until May 1 and I’m trying to figure out what to do. I’m firmly in the invest camp, but also HATE debt. Income about $400k (physician), single filer. Mortgage: $436k at 2.625% 30-yr fixed, conventional. At your 35...
by grabiner
Mon Apr 05, 2021 8:48 pm
Forum: Investing - Theory, News & General
Topic: Factorheads Opinions Please VFMF/VSS
Replies: 19
Views: 1548

Re: Factorheads Opinions Please VFMF/VSS

I use VFVA (Vanguard Factor Value ETF) rather than VFMF; I have more faith in the value factor, and don't want to give up the deep-value exposure to hold other factors. I do use VSS for international small-cap blend, but I also hold value factors in international stock: IVLU (iShares EAFE Factor Val...