Search found 478 matches

by muel87
Thu Feb 15, 2024 1:05 pm
Forum: Personal Finance (Not Investing)
Topic: Understanding VUSXX - how much state tax owed?
Replies: 10
Views: 1014

Re: Understanding VUSXX - how much state tax owed?

Geologist wrote: Thu Feb 15, 2024 12:48 pm As to the terminology in the 1099, you are overthinking the problem. Just go with 80.6% state tax exempt in filing your taxes and give no further thought to what might have been in the fund last year (and you don't know whether it had non-Treasury Bill USGO or not because the fund page is showing 2024).
86% is fine for tax filing, but for understanding the terms and how they use them, I care to know for the future. I checked the fund page several times throughout the year, not referring to right now.
by muel87
Thu Feb 15, 2024 12:30 pm
Forum: Personal Finance (Not Investing)
Topic: Understanding VUSXX - how much state tax owed?
Replies: 10
Views: 1014

Re: Understanding VUSXX - how much state tax owed?

1. 80.6% of VUSXX is from US Government Obligations is exempt from state tax, exactly as reported in the 1099 supplemental information. You needn't worry further about it. 2. Repurchase obligations are NOT US Government Obligations. 2. VUSXX is a money market mutual fund. It pays dividends and its income is reported on 1099-DIV. Therefore, none of its income is on 1099-INT and none of its income can be reported in Box 3 of 1099-INT. The supplemental doesnt report how much of VUSXX is exempt from state tax, and I need to worry about it until I know how much of the dividend income is state-tax exempt. Vanguard lists VUSXX as being made of 99% T-bills and 1% U.S. Govt. Obligations. The 1099 supp lists it as 80.06% US Treasuries. You're saying...
by muel87
Thu Feb 15, 2024 12:01 pm
Forum: Personal Finance (Not Investing)
Topic: Understanding VUSXX - how much state tax owed?
Replies: 10
Views: 1014

Re: Understanding VUSXX - how much state tax owed?

1. 80.6% of VUSXX is from US Government Obligations is exempt from state tax, exactly as reported in the 1099 supplemental information. You needn't worry further about it. 2. Repurchase obligations are NOT US Government Obligations. 2. VUSXX is a money market mutual fund. It pays dividends and its income is reported on 1099-DIV. Therefore, none of its income is on 1099-INT and none of its income can be reported in Box 3 of 1099-INT. The supplemental doesnt report how much of VUSXX is exempt from state tax, and I need to worry about it until I know how much of the dividend income is state-tax exempt. Are you saying I need to hand-calculate it based on that 80.6% number? Vanguard lists VUSXX as being made of 99% T-bills and 1% U.S. Govt. Obl...
by muel87
Thu Feb 15, 2024 10:32 am
Forum: Personal Finance (Not Investing)
Topic: Understanding VUSXX - how much state tax owed?
Replies: 10
Views: 1014

Understanding VUSXX - how much state tax owed?

So I had a Vanguard taxable account with a combo of VUSXX and TIPS. I received the 1099-consolidated today, and I'm having a hard time understanding why on the 1099-INT page, only the TIPS interest is listed on "Line 3- Interest on US Savings Bonds & Treasury obligations". Looking at the current makeup, VUSXX is 99% US Treasury Bills. The fund has a minimum of 80% treasuries and "repurchase agreements" (which are state taxable). On the 1099 supplemental info, under PERCENTAGE OF INCOME FROM US GOVERNMENT SECURITIES, it lists 80.6% as "U.S. Treasuries". But it doesnt break this down between actual treasuries (not state taxed) and treasury-backed repurchase agreements (which are state taxed). It doesnt say wh...
by muel87
Wed Feb 07, 2024 9:07 am
Forum: Personal Finance (Not Investing)
Topic: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA
Replies: 17
Views: 1432

Re: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA

placeholder wrote: Wed Feb 07, 2024 2:06 am
muel87 wrote: Tue Feb 06, 2024 8:04 pm Did you contribute and convert in the same (current) year? I didnt...
Just to clarify did you make the contribution for 2022 and do the conversion in 2023?
Yes. I made 2022 contributions in both 2022 and 2023, and did the conversion in 2023. But it turns out the numbers I was getting were correct all along... I would have owed a little tax on the conversion, but i had some basis remaining in my tIRA (even though I had $0 in the tIRA). So rather than have taxable conversion, my "8606" basis was reduced by that amount.
by muel87
Tue Feb 06, 2024 9:19 pm
Forum: Personal Finance (Not Investing)
Topic: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA
Replies: 17
Views: 1432

Re: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA

I answered everything appropriately. There's nothing in an 8606 that identifies nondeductible gains because it only looks at end of CY balances to determine pro-rata taxable amounts for conversions. Can you tell me what section of the software even asks about nondeductible gains? First part: Income -> Common Income -> Retirement Income (1099-R) Boxes 1/2a/16 all contain full conversion amount, including gains Answered "Yes" to follow-on question about it being a conversion, again entered full amount Second part: Deductions/Credits -> Common Deductions/Credits -> IRA Contributions "Yes" to whether I made traditional or Roth IRA contributions; entered contribution amount not including gains "No" to whether you w...
by muel87
Tue Feb 06, 2024 8:04 pm
Forum: Personal Finance (Not Investing)
Topic: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA
Replies: 17
Views: 1432

Re: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA

SwiftKey wrote: Tue Feb 06, 2024 5:06 pm It definitely works correctly in FreeTaxUSA. I suggest you remove your 1099-R and 8606 entries and try again from scratch, taking care to make sure you answer the follow on questions appropriately.

I’ve done this in FreeTaxUSA both last year and this year and it treated everything correctly; I had $1 of gains between tIRA contribution and conversion, and that’s how it shows up on my summary. My tax owed went up after adding 1099-R and didn’t drop again until getting to the deductions and filling in the 8606 stuff.
Did you contribute and convert in the same (current) year? I didnt...
by muel87
Tue Feb 06, 2024 8:02 pm
Forum: Personal Finance (Not Investing)
Topic: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA
Replies: 17
Views: 1432

Re: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA

Can confirm, follow the instructions in financebuff. Unfortunately 2 screens referenced are quite far apart and you are chasing ghosts with resulting high blood pressure expecting refund to come back to normal and it does not happen for a long time. To verify, that it worked, your 1040 form on TaxfreeUSA should show something like 7.5K distribution, and 0/empty taxable distribution. More likely you will have a few dollars to pay tax on as it earned interest for a few days while backdoor Roth process was going on. I follow the steps to a T... they dont address what happens when you convert prior year nondeductible contributions. In his example, he is converting nondeductible contributions made in the same year, which is how the "enter ...
by muel87
Tue Feb 06, 2024 7:50 pm
Forum: Personal Finance (Not Investing)
Topic: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA
Replies: 17
Views: 1432

Re: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA

FiveK wrote: Tue Feb 06, 2024 5:07 pm
muel87 wrote: Tue Feb 06, 2024 3:03 pm The 8606 stuff later in the program captures any basis that would be taxed in 2023 conversions (pro rata), and I didnt have any of that as I had no tIRA balances.
"Basis" is the amount that would not be taxed.
Yes, I meant that it identifies basis remaining and amounts of conversions taxed. But it doesnt identify nondeductible contribution gains when converting a prior year contribution.
by muel87
Tue Feb 06, 2024 7:50 pm
Forum: Personal Finance (Not Investing)
Topic: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA
Replies: 17
Views: 1432

Re: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA

FiveK wrote: Tue Feb 06, 2024 5:07 pm
muel87 wrote: Tue Feb 06, 2024 3:03 pm The 8606 stuff later in the program captures any basis that would be taxed in 2023 conversions (pro rata), and I didnt have any of that as I had no tIRA balances.
"Basis" is the amount that would not be taxed.
Yes, I meant that it identifies basis remaining and amounts of conversions taxed. But it doesnt identify nondeductible contribution gains...
by muel87
Tue Feb 06, 2024 7:49 pm
Forum: Personal Finance (Not Investing)
Topic: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA
Replies: 17
Views: 1432

Re: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA

It definitely works correctly in FreeTaxUSA. I suggest you remove your 1099-R and 8606 entries and try again from scratch, taking care to make sure you answer the follow on questions appropriately. I’ve done this in FreeTaxUSA both last year and this year and it treated everything correctly; I had $1 of gains between tIRA contribution and conversion, and that’s how it shows up on my summary. My tax owed went up after adding 1099-R and didn’t drop again until getting to the deductions and filling in the 8606 stuff. I answered everything appropriately. There's nothing in an 8606 that identifies nondeductible gains because it only looks at end of CY balances to determine pro-rata taxable amounts for conversions. Can you tell me what section o...
by muel87
Tue Feb 06, 2024 3:03 pm
Forum: Personal Finance (Not Investing)
Topic: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA
Replies: 17
Views: 1432

Re: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA

I have a 1099-R showing the entire amount of the distribution as taxable, and the "taxable amount not determined" box checked. I later indicated that all of it was a Roth conversion. None of it shows as taxable income. Problem is that a small amount was gains while in the tIRA before the conversion. How do I get the FreeTaxUSA software to show that amount as taxable? Can I uncheck Box 2b and put the correct taxable amount in Box 2a, or do I need to report the 1099-R exactly as issued? See Harry Sit's excellent write-up on how to enter this: https://thefinancebuff.com/how-to-backdoor-roth-freetaxusa.html Basically, you'll enter the 1099-R exactly as is, and later after you enter the Traditional IRA contribution things will adjust ...
by muel87
Tue Feb 06, 2024 10:59 am
Forum: Personal Finance (Not Investing)
Topic: Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA
Replies: 17
Views: 1432

Taxes on gains in backdoor Roth IRA conversion in FreeTaxUSA

I have a 1099-R showing the entire amount of the distribution as taxable, and the "taxable amount not determined" box checked. I later indicated that all of it was a Roth conversion. None of it shows as taxable income.

Problem is that a small amount was gains while in the tIRA before the conversion. How do I get the FreeTaxUSA software to show that amount as taxable? Can I uncheck Box 2b and put the correct taxable amount in Box 2a, or do I need to report the 1099-R exactly as issued?
by muel87
Wed Jan 24, 2024 8:22 am
Forum: Personal Finance (Not Investing)
Topic: What exactly are the tax implications of excess Roth 401k contributions?
Replies: 2
Views: 496

Re: What exactly are the tax implications of excess Roth 401k contributions?

So googling has given me contradictory and non-precise articles about excess contributions. I have an employer 401k and I contribute 100% Roth. I also contribute to a TSP (also Roth), and since I cant make precise contributions (only to the nearest %), in order to max out deferral contributions I have to make a slight excess contribution. I contacted my 401k admin in early Nov with the exact amount, and they annoyingly didnt send a check until Jan 4 of this year. My questions are: 1. When do I pay tax on this earnings, 2023 or 2024? Assuming I wont get the 1099-R till next year, so will have to be 2024. 2. Will this be a 1099-R Code P? 2. If I wont report the excess distribution until next tax year, then do I report the excess contribution...
by muel87
Tue Jan 23, 2024 10:01 am
Forum: Personal Finance (Not Investing)
Topic: What exactly are the tax implications of excess Roth 401k contributions?
Replies: 2
Views: 496

What exactly are the tax implications of excess Roth 401k contributions?

So googling has given me contradictory and non-precise articles about excess contributions. I have an employer 401k and I contribute 100% Roth. I also contribute to a TSP (also Roth), and since I cant make precise contributions (only to the nearest %), in order to max out deferral contributions I have to make a slight excess contribution. I contacted my 401k admin in early Nov with the exact amount, and they annoyingly didnt send a check until Jan 4 of this year. My questions are: 1. When do I pay tax on this earnings, 2023 or 2024? Assuming I wont get the 1099-R till next year, so will have to be 2024. 2. Will this be a 1099-R Code P? 2. If I wont report the excess distribution until next tax year, then do I report the excess contribution ...
by muel87
Thu Dec 14, 2023 11:59 am
Forum: Investing - Theory, News & General
Topic: Compare performance of TIPS and Nominals
Replies: 1
Views: 310

Compare performance of TIPS and Nominals

So recently I purchased some TIPS and nominals on the secondary market, which both mature about 2 weeks apart this summer. Is there any way to do a quick comparison of how each one is performing compared to the other? They're on Vanguard, and there's a % gain/loss, and I guess that is the apples to apples comparison? For reference, here's the details for each purchase at the time I bought them. What numbers are relevant in determining the winner and what doesnt matter?

TIPS (10-yr)
Date acquired: 6/29/23
Maturity date: 7/15/24
Par value: $21,000
Yield: 2.998%
Coupon: 0.125%
Price: $25,998.61

T-Bills (52-wk)
Date acquired: 6/14/23
Maturity date: 6/30/24
Par value: $26,000
Yield: 5.434%
Coupon: 0.125%
Price: $25,711.83

Thank you!
by muel87
Wed Nov 01, 2023 11:28 am
Forum: Personal Finance (Not Investing)
Topic: How much is my HSA tax savings?
Replies: 2
Views: 597

How much is my HSA tax savings?

Hi,

I'm trying to calculate the value of the tax savings of my HSA contributions to pick a health plan - both my contributions and my employers.

Background:
I'm over the SS income cap, so payroll deductions of HSA will only provide Medicare savings, and I pay the extra Medicare tax.
Fed Tax: 24%
State Tax: 8.45%
Medicare: 2.35%
Total Tax relevant to HSA: 34.8%
Employer contribution: $300

For this year, the family max is $8,300. So if I contribute $8,000, does that create a tax savings of $8,300 * .348 = $2,784? And is my employer's contribution worth $300 / (1-.348) = $460?

Thank you
by muel87
Tue Oct 03, 2023 1:46 pm
Forum: Personal Investments
Topic: Tax loss harvest (TLH) partner for VXUS, IXUS, VEU
Replies: 12
Views: 990

Tax loss harvest (TLH) merry-go-round

Went with VEA/VWO 75/25. International still falling, time to shuffle yet again. Willing to combine now, obviously.

Unavailable:
VXUS (till 10/23)
IXUS
VEU

What's next in low ER international? I see IShares Core MSCI EAFE ETF (IEFA) at only .07%, but is there a complement that brings in developed markets at a low ER?

I noticed FZILX (Fidelity ZERO® International Index Fund) shows a 0.0% ER on the fidelity site. And it tracks the "Fidelity Global ex U.S. Index Net Return" index. Fidelity has their own indexes? Is this a sub for VEU? Does it really track a different index and why havent I heard of it?
by muel87
Tue Sep 26, 2023 8:30 pm
Forum: Personal Investments
Topic: Tax loss harvest (TLH) partner for VXUS, IXUS, VEU
Replies: 12
Views: 990

Re: Tax loss harvest (TLH) partner for VXUS, IXUS, VEU

the_wiki wrote: Tue Sep 26, 2023 8:25 pm I would probably go SPDW.

It has a slightly different developed markets index that has a little overlap into emerging markets. PV says it’s about 8% emerging market vs 2% for VEA)

It’s the cheapest international fund so fees are not a problem.

You’ve exhausted all the low cost total international funds.
Thanks! It tracks the S&P Developed Ex-U.S. BMI Index. There's no S&P All World index and associated funds?
by muel87
Tue Sep 26, 2023 4:11 pm
Forum: Personal Investments
Topic: Tax loss harvest (TLH) partner for VXUS, IXUS, VEU
Replies: 12
Views: 990

Tax loss harvest (TLH) partner for VXUS, IXUS, VEU

I'm in VEU and cant go back to VXUS or IXUS right now. I was going to go w/ ACWX as it seems the iShares VEU equivalent (emerging markets, but no small cap) but then i saw ER... .32%! Dont want to be stuck w/ that. Any other suggestions for single funds? Would rather not combine, but will.
by muel87
Tue Sep 26, 2023 4:04 pm
Forum: Personal Investments
Topic: Confirming best TLH partners for VOO and IXUS (now ITOT and VXUS)
Replies: 10
Views: 1176

Re: Confirming best TLH partners for VOO and IXUS

Follow up question on this. I TLH'd on Wednesday and sold some of my IXUS and bought VXUS. Also sold some of my VOO and bought ITOT. With the latest drop, I'm down another $1500, so I would like to TLH ITOT and VXUS. Based on the posts above, I think my best options are VV (Large Cap) for ITOT, and VEU for VXUS. Anyone disagree or anything I'm missing? Thanks! You can't TLH something you just recently bought you have to wait to avoid wash sales. If you did still end up needing a third partner (not sure you will), SCHB should be closer to ITOT and VTI if you go by the different index rule. VEU seems like the best option to me for VXUS given you already used IXUS. Yes you can, you just have to sell everything you just bought. You can switch ...
by muel87
Thu Sep 07, 2023 11:25 am
Forum: Investing - Theory, News & General
Topic: wash sale refresh
Replies: 2
Views: 431

wash sale refresh

Im a little rusty on my wash sale knowledge (and have never actually created one). I accidentally bought some shares of VTI today, and I realized I have some other shares that I could sell to harvest a nice loss.

In order to claim the whole loss, I just need to sell all the shares, including the ones I bought today, right? This will technically create an irrelevant wash sale, since the loss on the old share will be disallowed, but then the cost basis will be added to the new shares, and I'll get to take the loss on those. Is there additional tax reporting steps to take in this type of situation?
by muel87
Thu Jun 29, 2023 12:58 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

I'd love to have that formula to drop into my spreadsheet. Why? I bought the bill below by auction...settlement day June 29. I'm looking for the yield to maturity. I think the yield to maturity was quoted as 5.28%. I don't know if I got that at auction. I think the bill runs for 3 months or 13 weeks or 93 days. 912796CS6 U S TREASURY BILL 0% 09/28/23 03/30/23 You can look up the auction results: https://www.treasurydirect.gov/auctions/announcements-data-results/ (I think the "investment rate" is the YTM) For secondary purchases it should be on the confirmation. Yeah, I found that, but some were secondary purchases... and for Vanguard, it does not show on the confirmation page/email. On Vanguard, give these a try: 1. Transact -> O...
by muel87
Thu Jun 29, 2023 7:06 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

It's easy enough to calculate. What are you going to do with the information? I'd love to have that formula to drop into my spreadsheet. Why? I bought the bill below by auction...settlement day June 29. I'm looking for the yield to maturity. I think the yield to maturity was quoted as 5.28%. I don't know if I got that at auction. I think the bill runs for 3 months or 13 weeks or 93 days. 912796CS6 U S TREASURY BILL 0% 09/28/23 03/30/23 You can look up the auction results: https://www.treasurydirect.gov/auctions/announcements-data-results/ (I think the "investment rate" is the YTM) For secondary purchases it should be on the confirmation. Yeah, I found that, but some were secondary purchases... and for Vanguard, it does not show o...
by muel87
Wed Jun 28, 2023 5:39 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

You take what you can get at the desired maturity, or you don't buy it. If you get the yield offered when you bought, which you can see before you place the order, then you know it already (if you remember). I download the transactions from Fido or VG, and import them into a spreadsheet that calculates the yields for me. Damn, I was hoping that wasnt the case - I didnt write it down or remember. I assumed that given this is the single most important metric, surely it would show you somewhere on the list of things the do tell you about your treasury! Why on earth do they leave that out of all things? It's easy enough to calculate. What are you going to do with the information? Just looking at all the treasury purchases I've made over the la...
by muel87
Wed Jun 28, 2023 5:03 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

Kevin M wrote: Wed Jun 28, 2023 3:24 pm You take what you can get at the desired maturity, or you don't buy it.

If you get the yield offered when you bought, which you can see before you place the order, then you know it already (if you remember). I download the transactions from Fido or VG, and import them into a spreadsheet that calculates the yields for me.
Damn, I was hoping that wasnt the case - I didnt write it down or remember. I assumed that given this is the single most important metric, surely it would show you somewhere on the list of things the do tell you about your treasury! Why on earth do they leave that out of all things?
by muel87
Wed Jun 28, 2023 3:11 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

I share this partly to let folks who struggle over these decisions know that I didn't pause at any point in the purchase decision process to worry about coupons, auctions, CD yields, whether or not yields would be higher tomorrow, later in the week, or after the next fed meeting, or anything else. Kevin So, hypothetically, if you wanted TIPS maturing in 2029 (you didn't care about month), and you had to choose between: 1. 1/15/29, coupon 2.500, yield 1.812 2. 1/15/29, coupon 0.875, yield 1.792 3. 4/15/29, coupon 3.875, yield 1.837 If SA was not a factor (and ignoring the book), you would choose #3? And if just choosing between #1 or #2 you would choose #1? The difference in yield between the two is only $20/year/$10K invested. That's a clo...
by muel87
Wed Jun 28, 2023 11:27 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

Is there any place to see what my YTM was after purchasing a treasury on Vanguard w/ out doing the math myself? I can see the high yield on the auction results for the treasuries I bought at auction, but I cant see it anywhere - not on my account, not the order execution email, where a yield is indicated.
by muel87
Tue Jun 27, 2023 9:45 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

When comparing yields of these treasuries on the secondary market, in order to make an apples to apples comparison you need to adjust for maturity dates, right? Or no? Yes, I was referring to comparing yields for TIPS that mature on the same date. For treasuries, I would look at same or similar dates, e.g. I don't much care if something matures on April 15 or April 17. For TIPS there are no similar dates like that, as they only mature on Jan 15, April 15, July 15, or Oct 15. And as noted only a few Jan. and one April dates even have 2 and no July or Oct ones have more than 1. Also, I like a note maturing on 4/30/28, w/ yield to worst of 4.025. Coupon is 1.25%. There is an auction deadline for a 5-year note coming up in 20 minute and the ac...
by muel87
Tue Jun 27, 2023 8:13 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

So the upshot to my earlier question about buying a nominal 5 year note w/ higher or lower coupon rates is that if I think interest rates are going to go up more than they'll go down over the next 5 years, I should buy something with a bigger coupon, and if I think they'll go down more, I should buy something with a lower coupon and bigger discount - assuming very similar YTMs. Accurate? That'd be one way to make the choice. My choice has been to just take the one with a slightly higher YTM, since I don't care about coupons one way or the other. Some will pick the lower index ratio or will have a preference for smaller or larger coupons for the cash flow (or lack of it). It looks like there are currently only 6 maturities with 2 TIPS: Jan ...
by muel87
Fri Jun 23, 2023 7:19 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

So the upshot to my earlier question about buying a nominal 5 year note w/ higher or lower coupon rates is that if I think interest rates are going to go up more than they'll go down over the next 5 years, I should buy something with a bigger coupon, and if I think they'll go down more, I should buy something with a lower coupon and bigger discount - assuming very similar YTMs. Accurate? That'd be one way to make the choice. My choice has been to just take the one with a slightly higher YTM, since I don't care about coupons one way or the other. Some will pick the lower index ratio or will have a preference for smaller or larger coupons for the cash flow (or lack of it). It looks like there are currently only 6 maturities with 2 TIPS: Jan ...
by muel87
Thu Jun 22, 2023 8:35 pm
Forum: Investing - Theory, News & General
Topic: Okay if tips etf in taxable ?
Replies: 22
Views: 2944

Re: Okay if tips etf in taxable ?

Thanks all! Im going to keep them in the tax-deferred. I dont think it'd be lower than TSM anyway and dont want to deal with filing taxes on my TIPS.
by muel87
Thu Jun 22, 2023 8:28 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

When coupons pay out, they will go to a settlement fund, right? What are my options then - look for the same TIPS or one with similar maturity date in the secondary market? Isn't the yield to maturity inclusive of the coupon payments? If I cant reinvest them, or even if I do, it will be at a different price that I can get on the secondary market, so do I need to manually add them back to see how much I really made when the original TIPS matures? It's money, you can do whatever you want with the coupon payments after they are paid to your settlement account. The YTM is not dependent on what you do with coupons. But as they are paid out, you may think of each one as a forced withdrawal from the investment: https://www.bogleheads.org/forum/vi...
by muel87
Thu Jun 22, 2023 3:38 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

Thanks again. Adding this question in case it was missed. When coupons pay out, they will go to a settlement fund, right? What are my options then - look for the same TIPS or one with similar maturity date in the secondary market? Isn't the yield to maturity inclusive of the coupon payments? If I cant reinvest them, or even if I do, it will be at a different price that I can get on the secondary market, so do I need to manually add them back to see how much I really made when the original TIPS matures? Also, do I have this right? A note, 91282CCE9, maturing 5/31/28 with a yield to worst of 4.079 selling for 87.464. A 5-yr note coming up for auction, maturing 6/30/28 - lets assume it ends up w/ yield of 4.047. I'd have to adjust by the exta ...
by muel87
Thu Jun 22, 2023 2:35 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

evelynmanley wrote: Thu Jun 22, 2023 2:05 pm
Thank you for the detailed reply. So if I understand correctly, my takeaway is that it's best to have a rolling ladder of short-term Treasuries and catch rising rates as they occur, rather than purchase a six-month Treasury bill during this period of high interest rates.
Unless of course, they fall. Then you'd have been better off with the 6 mo.
by muel87
Thu Jun 22, 2023 2:00 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

Thanks all. I see from vanguard the price I paid was $97.34 - less than what was listed on the auction results. Why is that? Am I looking at the unadjusted price when I should be looking at the adjusted or vice versa?

Also, when these coupons pay out, they will go to a settlement fund, right? What would I do with these, but more of the same TIPS in the secondary market? Because isn't the yield to maturity inclusive of the coupon payments?
by muel87
Thu Jun 22, 2023 12:21 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

There's a good example of an advantage of buying at auction at Fidelity today. As usual, I only pay attention to my Treasuries when I see proceeds of maturing Treasuries in my account. I saw this today in my Fidelity Roth IRA, in which I'm holding bills waiting for market timing buy opportunities in stocks (this is essentially a play account, as it's relatively small. I just had a bill auto roll into an 8-week bill, so am interested in a 4w, since I turned auto roll off for my 4w when the yields were low because of the debt ceiling crisis. The 4w, which matures 7/25, auctioned today at 5.113%, with a 6/27 settlement date, so next Tuesday. The only offering for this at Fido on secondary is for min qty 100 at 5.026%--there is no depth of boo...
by muel87
Thu Jun 22, 2023 12:17 pm
Forum: Personal Investments
Topic: How would you allocate and where would you locate a home down payment 5 yrs away?
Replies: 30
Views: 2010

Re: How would you allocate and where would you locate a home down payment 5 yrs away?

I see sense in the distinction between having a portion of money in my port intended for a specific purchase at a specific point in time, and considering the already-purchased house part of the port. If I wasnt planning a house purchase, I'd have a lower bond allocation. So, when I buy the house I'll re-evaluated my total bond allocation, but it will be more than it would be today even if I had no plans to buy the home. What you are saying "should be" is not wrong, but it's not better either, just a different application of mental accounting.n. I could just as easily look at what I've done, and say the house money isnt part of my port, but my port is more aggressive than 85/15. Either way the reality is the same. Sure, I'm not do...
by muel87
Thu Jun 22, 2023 11:40 am
Forum: Investing - Theory, News & General
Topic: Okay if tips etf in taxable ?
Replies: 22
Views: 2944

Re: Okay if tips etf in taxable ?

The Bogleheads wiki article Tax-efficient fund placement may be of help. It has a section on Assigning asset classes to different accounts that says to "Fill your tax-advantaged accounts with your least efficient funds. Exhaust these accounts before putting these funds into your taxable account...". Income from TIPS & bonds are tax at a higher rate that stock dividends from a broad-market passive stock index fund like TSM, so place as much of your TIPS & Treasuries in a tax-deferred account. (Assuming you have enough room for them.) Yes I've read it many times, but the devil is in the details. I have specific numbers for the efficiency of my funds, based on their recent dividend yield, qualified div %, and FTC, but I have...
by muel87
Thu Jun 22, 2023 11:31 am
Forum: Personal Investments
Topic: How would you allocate and where would you locate a home down payment 5 yrs away?
Replies: 30
Views: 2010

Re: How would you allocate and where would you locate a home down payment 5 yrs away?

My AA is 85/15, and I constantly question if at age 41 w/ an investment horizon 25+ years out, even that is too many bonds. So now about 2/3 of that, or 10% of the port is designated for the house, but another way to look at it is that 2/3 of my bonds are a LMP for a house, 1/3 of them are part of a LMP for retirement. After the house, I'll likely keep the same 15% fixed income, but all of it will be towards the retirement LMP. I may be unnecessarily complicating things but I dont see any other downside, plus I get some experience with TIPS, and the yields for it are historically quite high. DP should be outside of your port, especially when you question if your port is too conservative because of DP being inside. As mentioned, if you don'...
by muel87
Thu Jun 22, 2023 10:53 am
Forum: Personal Investments
Topic: How would you allocate and where would you locate a home down payment 5 yrs away?
Replies: 30
Views: 2010

Re: How would you allocate and where would you locate a home down payment 5 yrs away?

Similar boat as you, somewhat "casually" saving for a home purchase in "about 5 years." I have 75% in the market, and 25% in cash. I will adjust this as I get closer and more sure of the purchase, kind of like a mini "target date" fund. It's riskier, but I'm comfortable with the risk. Like you, I'm fine to delay the purchase if market conditions go the other way. My AA is 85/15, and I constantly question if at age 41 w/ an investment horizon 25+ years out, even that is too many bonds. So now about 2/3 of that, or 10% of the port is designated for the house, but another way to look at it is that 2/3 of my bonds are a LMP for a house, 1/3 of them are part of a LMP for retirement. After the house, I'll likely kee...
by muel87
Thu Jun 22, 2023 10:39 am
Forum: Personal Investments
Topic: How would you allocate and where would you locate a home down payment 5 yrs away?
Replies: 30
Views: 2010

Re: How would you allocate and where would you locate a home down payment 5 yrs away?

Real estate is regional. By me real estate prices have historically gone up inflation plus two percent. It never made any sense for me to save more than 5% plus fees. Five year TIPS won’t keep up after taxes. And there is no guarantee you’ll make a return with equites after only five years. For down payments I’ve always moved my money into t bills when I’m within a year of buying. No reason to risk principal once you get that close. I would look at your real estate region and figure out how fast prices have been historically rising pre pandemic to figure out how much you really want to put down. Then, between paying down the mortgage and appreciation, I’d grow into a PMI free mortgage. With rates going down in the future, you’ll have the a...
by muel87
Thu Jun 22, 2023 10:35 am
Forum: Investing - Theory, News & General
Topic: Okay if tips etf in taxable ?
Replies: 22
Views: 2944

Re: Okay if tips etf in taxable ?

Anything is "okay" in taxable. Agreed. Tax efficiency is relative; you want to hold the investments with the lowest tax costs in a taxable account. The reason I often recommend Treasuries or TIPS in a taxable account is that they have lower tax costs than most other bonds. Thus, if you hold bonds in both taxable and tax-deferred (for example, because your tax-deferred account isn't big enough for all your bonds), you can save in taxes by holding Treasuries in taxable and corporate bonds in tax-deferred. How would you compare tax-efficiency of TSM and TIPS or treasuries? I just bought $200k of TIPS in my tax-deferred account, with plans to sell stock and rebalance into tax-deferred when I need that money. I also have plans to buy....
by muel87
Thu Jun 22, 2023 10:15 am
Forum: Investing - Theory, News & General
Topic: FRNs superior to t-bills?
Replies: 5
Views: 785

Re: FRNs superior to t-bills?

I like FRN. But they do have several downsides: 1. The investor receives the 13w rate (plus the premium) but you have to hold the principle for 2 years. 2. They are not heavily traded in the secondary market, so bid/ask spreads are larger than other treasuries. 3. They are a good deal now compared to the 2y note, but that can change rapidly. The 13w note may be 1.5% next summer. Gotcha. With the poor liquidity of FRNs, they essentially seem like a 2y commitment. If you must commit for 2 years, then a 2y note gives a more consistent, fixed return. If rates go down, the 2y note goes up in value and can be sold early for a profit, but the FRN has to be held on to at the new lower yield. If rates go up, that's great for the FRN, but it's a gam...
by muel87
Thu Jun 22, 2023 8:04 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

hudson wrote: Thu Jun 22, 2023 7:20 am
Kevin M wrote: Wed Jun 21, 2023 12:03 pm
I would put half into TIPS and half into nominals if I wanted to minimize regret. I would put all into TIPS if I wanted to maintain purchasing power based on the CPI. Housing prices are a component of the CPI, but housing inflation can be quite different than CPI, and of course can vary widely depending on location.

Kevin
The bolded part is what I was thinking.
There may be some good methods; the right answers are only available later.
I think I'm going with the advanced strategy of splitting the difference between your recommendations and what I was going to do (all TIPS). So 2/3 TIPS, 1/3 nominals.
by muel87
Thu Jun 22, 2023 8:03 am
Forum: Personal Investments
Topic: How would you allocate and where would you locate a home down payment 5 yrs away?
Replies: 30
Views: 2010

Re: How would you allocate and where would you locate a home down payment 5 yrs away?

Jags4186 wrote: Thu Jun 22, 2023 7:44 am Your LTTs are in a tax deferred account. How do you propose using that money to pay for a down payment without rebalancing fixed income into taxable accounts?
Following this process: https://www.bogleheads.org/wiki/Placing ... ed_account
I will trade in the TIPS in the tax deferred once I need the money and they mature for LTTs and TSM. I will sell an equal amount of TSM in taxable for the cash. If TSM is down when I sell, I havent locked in losses because I'll TLH. This provides the benefit of keeping less tax-efficient TIPS in a tax deferred while still keeping that money safe.
by muel87
Wed Jun 21, 2023 9:20 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466494

Re: Trading Treasuries (nominal and TIPS)

I hope there are really NO dumb questions. So how does the interest rates compare between TIPS and Tbills. Tbills are paying 5.2% and this tips Saying 1.7% if you buy 50 of each one over the 5 years which one is going to be the winner. Having trouble seeing what he big deal with sometihing just paying 1.7% over 5.2%. BUT i did flunk General math in school. Thanks, Bruno The TIPS number is real, meaning after inflation. So if inflation is 4% over that period, it would pay 5.7% nominal, meaning before inflation. T-bills/notes/bonds are quoted in nominal terms. You wont know which will be the winner, since you dont know how inflation will be, but currently the break-even inflation rate is like 2.17% - meaning if inflation is below that, Tbill...
by muel87
Wed Jun 21, 2023 9:18 pm
Forum: Personal Investments
Topic: How would you allocate and where would you locate a home down payment 5 yrs away?
Replies: 30
Views: 2010

Re: How would you allocate and where would you locate a home down payment 5 yrs away?

If you can accumulate the down payment via salary over the next 5 years, I'd simply start piling up money outside of AA. If you can't, slash whatever you think makes sense - most likely LTT, and set the proceeds outside of AA. I say outside of AA because I do not count home equity in my AA. Then, it only makes sense not to count what would be home equity, which a down payment is. Even if it's outside my AA, I would want to then reduce my LTTs, so in reality I'd still be making it part of my AA even if I said it wasnt. And regardless it would be in that tax-deferred account where the LTTs currently reside. How would you go about locating the funds for it, regardless of whether you considered it part of your AA or not? You’re not locking in ...
by muel87
Wed Jun 21, 2023 7:56 pm
Forum: Personal Investments
Topic: How to invest house down payment
Replies: 5
Views: 998

Re: How to invest house down payment

We sold our house (moved to a different city) and is currently renting but we haven’t found anything we like at reasonable price. So 20% of our net worth is sitting in CD waiting to be converted to a house. Question. I guess they are both related to inflation news making me anxious. 1. Should I include these 20% in my asset allocation? They would make my portfolio appear a lot more conservative 2. I see CD has been recommended for down payment, is that still true in high inflation environments? It depends how long it will be there. Im in a similar situation, leaning towards making it part of my AA since my purchase is 5 years out. I dont want to be more conservative than I want to be for that long. Putting mine in a 5-year TIPS. Where to p...
by muel87
Wed Jun 21, 2023 7:49 pm
Forum: Personal Investments
Topic: How would you allocate and where would you locate a home down payment 5 yrs away?
Replies: 30
Views: 2010

Re: How would you allocate and where would you locate a home down payment 5 yrs away?

Marseille07 wrote: Wed Jun 21, 2023 7:41 pm
muel87 wrote: Wed Jun 21, 2023 6:17 pm Even if it's outside my AA, I would want to then reduce my LTTs, so in reality I'd still be making it part of my AA even if I said it wasnt. And regardless it would be in that tax-deferred account where the LTTs currently reside. How would you go about locating the funds for it, regardless of whether you considered it part of your AA or not?
See if this trick would help: https://www.bogleheads.org/wiki/Placing ... ed_account

Granted, I don't hold bonds in pretax and I haven't vetted the process inside out. I just know some posters mentioned this in the past.
Yep, that was where I got the idea. Im looking for a way to avoid adding TSM to that account later though.