Search found 28967 matches

by grabiner
Tue Apr 13, 2021 8:33 pm
Forum: Personal Finance (Not Investing)
Topic: Gross Income Definition
Replies: 22
Views: 1745

Re: Gross Income Definition

These follow-up questions are with respect to CA state tax only: Still a bit confused, for non-resident 23 y.o. student, that has ZERO CA sourced earned income, would the CA Kiddie tax apply even with $1M in unearned income? Could unearned income be considered CA sourced? ie suppose you had capital...
by grabiner
Tue Apr 13, 2021 8:43 am
Forum: Personal Investments
Topic: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?
Replies: 36
Views: 2816

Re: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?

Everyone is different but if I was in your situation I would just pay it off and then invest the freed up mortgage payment each month. I am not sure this example is apples to apples. OP will not use the investment account to pay his mortgage. He will continue paying his mortgage from wherever he is...
by grabiner
Tue Apr 13, 2021 8:28 am
Forum: Personal Finance (Not Investing)
Topic: HSA advice Jane Quinn How to Make Your Money Last
Replies: 57
Views: 5085

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

One other thing to be aware of: There is a “once per lifetime” annual funding option [“Qualified HSA funding distribution” in IRS-speak, see Publication 969] from a tIRA which moves money directly from tax-deferred to tax-free. I did that in 2020. The once per lifetime is a technicality. All this r...
by grabiner
Tue Apr 13, 2021 12:15 am
Forum: Personal Finance (Not Investing)
Topic: Gross Income Definition
Replies: 22
Views: 1745

Re: Gross Income Definition

now thinking it may make sense to file federal, like in previous years, but NOT CA...as he has never filed there before (or had ANY reason to consider it)… though a general question here. He is a student, and his permanent residency is a different state. If his only income is unearned (capital gain...
by grabiner
Mon Apr 12, 2021 11:14 pm
Forum: Personal Finance (Not Investing)
Topic: Gross Income Definition
Replies: 22
Views: 1745

Re: Gross Income Definition

now thinking it may make sense to file federal, like in previous years, but NOT CA...as he has never filed there before (or had ANY reason to consider it)… though a general question here. He is a student, and his permanent residency is a different state. If his only income is unearned (capital gain...
by grabiner
Mon Apr 12, 2021 11:02 pm
Forum: Personal Finance (Not Investing)
Topic: How can estimated 2020 tax refund be applied to 2021 estimated tax?
Replies: 11
Views: 943

Re: How can estimated 2020 tax refund be applied to 2021 estimated tax?

Have not yet been able to find any IRS guidance on this issue. The best I could find was some suggestions from the CPA organization and from Forbes magazine that the full amount for 1st qtr estimated tax due should be paid by 4/15/21 and that there is no guarantee that the IRS will consider a refun...
by grabiner
Mon Apr 12, 2021 10:58 pm
Forum: Personal Investments
Topic: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?
Replies: 36
Views: 2816

Re: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?

If you can refinance to a much lower rate, and the interest will be all tax-deductible, that would reduce the risk-free return on a mortgage prepayment by enough that it might not be worthwhile I don't have a whole lot of deductions. We barely went over the 24K standard deduction with both properti...
by grabiner
Mon Apr 12, 2021 10:50 pm
Forum: Investing - Theory, News & General
Topic: Rebalancing while avoiding paying Capital Gains tax, am I missing anything?
Replies: 6
Views: 1104

Re: Rebalancing while avoiding paying Capital Gains tax, am I missing anything?

Sell calls against stocks that are up in value that you don't mind losing. This has its own tax cost. Dividends on stocks for which you have an outstanding call become non-qualified. (You must hold the stock for 61 days of the 121 around the dividend date, and any time you have a protective call do...
by grabiner
Mon Apr 12, 2021 10:41 pm
Forum: Personal Investments
Topic: Index ETF or Index Mutual fund for brokerage acct
Replies: 8
Views: 684

Re: Index ETF or Index Mutual fund for brokerage acct

What is better for a brokerage acct? An index mutual fund or index ETF? Tracks the same index, same expense ratio, same turnover. Is there any advantage to one or the other? If it is a taxable account, a stock ETF is better than a non-Vanguard mutual fund tracking the same index. The ETF structure ...
by grabiner
Mon Apr 12, 2021 10:33 pm
Forum: Personal Investments
Topic: Tax efficient placement help - need a second set eyes
Replies: 8
Views: 833

Re: Tax efficient placement help - need a second set eyes

Assets Tax-Free - Roth IRA Vanguard Intermediate-Term Treasury Fund Investor Shares Treasuries are the most tax-efficient bonds, because they have low yields and are exempt from state income tax. Thus, if you want a separate Treasury fund, you should hold it in your taxable account, and hold more o...
by grabiner
Mon Apr 12, 2021 10:18 pm
Forum: Personal Investments
Topic: Required minimum distributions: All to QCDs vs. ROTH conversions
Replies: 7
Views: 684

Re: Required minimum distributions: All to QCDs vs. ROTH conversions

We will be starting RMDs in about 8 years. Our current plan is to do QCDs ( qualified charitable donations) with our entire RMD. If we are planning to do just QCDs is there any reason to do any ROTH conversions? QCD is a great use of tIRA assets, but If your taxable income is less than about $18,00...
by grabiner
Mon Apr 12, 2021 10:14 pm
Forum: Personal Investments
Topic: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?
Replies: 36
Views: 2816

Re: Which would you do with a small windfall? Pay remaining mortgage or 3-fund it?

It makes more sense to split the question in two: How much do you want to have in stock? Do you want the money not in stock to be in bonds, or use it to pay off the mortgage? The first question is the harder one to answer. The second question has a relatively easy answer; given that you don't need a...
by grabiner
Mon Apr 12, 2021 9:39 pm
Forum: Personal Investments
Topic: Why the general advice to have treasuries in CA HSA?
Replies: 17
Views: 1260

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

People seem to worry about this too much. Don't let the tax tail wag the dog. A HSA in California is still a tax advantaged account at the Federal level, and thus is still advantageous. And that is the reason for the advice to hold Treasuries in the HSA only if Treasuries are appropriate for your i...
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: 510

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: 4218

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: 4218

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: 24
Views: 3706

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: 301

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: 510

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: 985

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: 4218

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: 812

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: 985

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: 942

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: 17
Views: 1260

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: 1565

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: 1236

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: 623

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: 7001

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: 4218

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: 7001

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: 7001

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: 57
Views: 5085

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: 57
Views: 5085

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: 796

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: 322

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: 57
Views: 5085

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: 797

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: 931

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: 796

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: 1771

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: 482

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: 2973

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: 2069

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: 1072

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: 98
Views: 7668

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: 4508

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: 1067

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: 1366

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...