New To Investing Thread

[yoga-like_abana]

I like it cryptodave

[Phil Titola]

ibond rate comes out Nov 1 but I like those estimates!  I didn't know there was a maximum on those.

[catastrophe]

Boy the explanation on that site sounds confusing AF but it seems like the best rate you could actually bank on is still shy of 5% annualized over 14 months since you’re locked in for at least a year. Did I read that right?

[Purple Derpathy]

if you want some ying to the cryptocurrency yang there are probably a lot of you that could benefit from getting yourself some i bonds right now. the CPI just blew up the rates and you can get an annualized 7%+ guaranteed for a 6 month term on up to $10k right now. Per person so you and a spouse can get $20k total at 7%+ annualized for 6 months.

https://www.depositaccounts.com/blog/inflation-treasury-series-i-savings-bonds/#:~:text=Based%20on%20today's%20release%2C%20September,life%20of%20the%20I%20Bond.

Worth looking into if you are 55+ and want to edge out inflation.

[steve dave]

I don’t know that this is a good entry point tbh

you are all welcome to this non-financial-advice free of charge

[steve dave]

lmao, the moron topped it

https://twitter.com/congresstrading/status/1453352692441489412

https://twitter.com/RampCapitalLLC/status/1453364458974294020

[steve dave]

30 year treasury yield fell below the 20 year

 

[Phil Titola]

if you want some ying to the cryptocurrency yang there are probably a lot of you that could benefit from getting yourself some i bonds right now. the CPI just blew up the rates and you can get an annualized 7%+ guaranteed for a 6 month term on up to $10k right now. Per person so you and a spouse can get $20k total at 7%+ annualized for 6 months.

https://www.depositaccounts.com/blog/inflation-treasury-series-i-savings-bonds/#:~:text=Based%20on%20today's%20release%2C%20September,life%20of%20the%20I%20Bond.

ibond fixed rate is still zero but....

The composite rate for I bonds issued from November 2021 through April 2022 is 7.12 percent. This rate applies for the first six months you own the bond.

[Stupid Fitz]

backdoor question (att. SD).

Say my friend from Alaska has some S and P index fund money sitting directly at Vanguard. Would it be a PITA to just open/convert 6k of that to a traditional IRA and then transition to a Roth? or is that a terrible idea due to capital gains in the taxable account and he should probably just open a traditional with cash and convert? TIA

[steve dave]

backdoor question (att. SD).

Say my friend from Alaska has some S and P index fund money sitting directly at Vanguard. Would it be a PITA to just open/convert 6k of that to a traditional IRA and then transition to a Roth? or is that a terrible idea due to capital gains in the taxable account and he should probably just open a traditional with cash and convert? TIA

vanguard makes it very easy to open an trad ira and then convert that to a roth ira. but, I don't know about converting the existing etf into that ira. I have an ira at vanguard (zero balance currently) that I add $6k to and immediately convert that over to my roth ira at vanguard. rinse/repeat every year.

[Stupid Fitz]

backdoor question (att. SD).

Say my friend from Alaska has some S and P index fund money sitting directly at Vanguard. Would it be a PITA to just open/convert 6k of that to a traditional IRA and then transition to a Roth? or is that a terrible idea due to capital gains in the taxable account and he should probably just open a traditional with cash and convert? TIA

vanguard makes it very easy to open an trad ira and then convert that to a roth ira. but, I don't know about converting the existing etf into that ira. I have an ira at vanguard (zero balance currently) that I add $6k to and immediately convert that over to my roth ira at vanguard. rinse/repeat every year.

thanks. maybe i'll reach out and ask. since I already have funds there, it seems easy to open an IRA, transfer some of the funds to it, then convert, but what the hell do i know?

[catastrophe]

I don’t think there is such a thing as “converting” taxable investments into a retirement account, so I’m pretty sure your bud would have to sell what he has in Vanguard first, in which case just funding with cash is the better option. That said, paying some capital gains isn’t the end of the world and could still be a net benefit if your retirement horizon isn’t super close.

Along those lines, note that you have until like April 2022 or something to pay in your 2021 IRA amounts. So for example if you haven’t put in anything yet for 2021, you could put (I think) $12k in an IRA on March 2022 to cover both years and then immediately roll that into a Roth.

[Stupid Fitz]

I don’t think there is such a thing as “converting” taxable investments into a retirement account, so I’m pretty sure your bud would have to sell what he has in Vanguard first, in which case just funding with cash is the better option. That said, paying some capital gains isn’t the end of the world and could still be a net benefit if your retirement horizon isn’t super close.

Along those lines, note that you have until like April 2022 or something to pay in your 2021 IRA amounts. So for example if you haven’t put in anything yet for 2021, you could put (I think) $12k in an IRA on March 2022 to cover both years and then immediately roll that into a Roth.

yeah, its something to think about for sure. Fun fact. My friend in Alaska had been auto contributing to a Roth forever only to find out a few years ago that he was over the income limits. He stopped the contributions once he realized, but sometimes wonders why he just doesn't keep contributing. 

[Stupid Fitz]

backdoor question (att. SD).

Say my friend from Alaska has some S and P index fund money sitting directly at Vanguard. Would it be a PITA to just open/convert 6k of that to a traditional IRA and then transition to a Roth? or is that a terrible idea due to capital gains in the taxable account and he should probably just open a traditional with cash and convert? TIA

vanguard makes it very easy to open an trad ira and then convert that to a roth ira. but, I don't know about converting the existing etf into that ira. I have an ira at vanguard (zero balance currently) that I add $6k to and immediately convert that over to my roth ira at vanguard. rinse/repeat every year.

Last question...probably not...When you say "convert" does that mean you make the traditional a Roth and therefore have a bunch of Roth IRAs with 6k in them or can you "convert" and roll into an existing? My current Roth that I can't contribute to anymore is at a different place so it would make sense to open a traditional, fund, convert, then send the funds to my existing Roth if possible. If I can't do that, i'll prob just open two accounts at vanguard.

[Phil Titola]

I don’t think there is such a thing as “converting” taxable investments into a retirement account, so I’m pretty sure your bud would have to sell what he has in Vanguard first, in which case just funding with cash is the better option. That said, paying some capital gains isn’t the end of the world and could still be a net benefit if your retirement horizon isn’t super close.

Along those lines, note that you have until like April 2022 or something to pay in your 2021 IRA amounts. So for example if you haven’t put in anything yet for 2021, you could put (I think) $12k in an IRA on March 2022 to cover both years and then immediately roll that into a Roth.

yeah, its something to think about for sure. Fun fact. My friend in Alaska had been auto contributing to a Roth forever only to find out a few years ago that he was over the income limits. He stopped the contributions once he realized, but sometimes wonders why he just doesn't keep contributing. 

Well the IRS will eventually figure it out. Maybe. Probably.

[steve dave]

backdoor question (att. SD).

Say my friend from Alaska has some S and P index fund money sitting directly at Vanguard. Would it be a PITA to just open/convert 6k of that to a traditional IRA and then transition to a Roth? or is that a terrible idea due to capital gains in the taxable account and he should probably just open a traditional with cash and convert? TIA

vanguard makes it very easy to open an trad ira and then convert that to a roth ira. but, I don't know about converting the existing etf into that ira. I have an ira at vanguard (zero balance currently) that I add $6k to and immediately convert that over to my roth ira at vanguard. rinse/repeat every year.

Last question...probably not...When you say "convert" does that mean you make the traditional a Roth and therefore have a bunch of Roth IRAs with 6k in them or can you "convert" and roll into an existing? My current Roth that I can't contribute to anymore is at a different place so it would make sense to open a traditional, fund, convert, then send the funds to my existing Roth if possible. If I can't do that, i'll prob just open two accounts at vanguard.

just one of each. the old IRA doesn't become a roth. you just fund the roth with after tax contributions to the trad ira. vanguard makes it very easy. you just select the funding account and convert it. I do it immediately after adding the money to the trad ira so I don't have any gains to worry about come tax time.  these are both vanguard products and I would imagine it would be a PITA to use an outside funding source even if it was possible and I'd not pursue that if I were you but maybe someone knows more here.

[Stupid Fitz]

backdoor question (att. SD).

Say my friend from Alaska has some S and P index fund money sitting directly at Vanguard. Would it be a PITA to just open/convert 6k of that to a traditional IRA and then transition to a Roth? or is that a terrible idea due to capital gains in the taxable account and he should probably just open a traditional with cash and convert? TIA

vanguard makes it very easy to open an trad ira and then convert that to a roth ira. but, I don't know about converting the existing etf into that ira. I have an ira at vanguard (zero balance currently) that I add $6k to and immediately convert that over to my roth ira at vanguard. rinse/repeat every year.

Last question...probably not...When you say "convert" does that mean you make the traditional a Roth and therefore have a bunch of Roth IRAs with 6k in them or can you "convert" and roll into an existing? My current Roth that I can't contribute to anymore is at a different place so it would make sense to open a traditional, fund, convert, then send the funds to my existing Roth if possible. If I can't do that, i'll prob just open two accounts at vanguard.

just one of each. the old IRA doesn't become a roth. you just fund the roth with after tax contributions to the trad ira. vanguard makes it very easy. you just select the funding account and convert it. I do it immediately after adding the money to the trad ira so I don't have any gains to worry about come tax time.  these are both vanguard products and I would imagine it would be a PITA to use an outside funding source even if it was possible and I'd not pursue that if I were you but maybe someone knows more here.

This makes sense. I'll check with the BD that has my current roth. It would make sense to do it there since I already a roth open. Thanks

[Phil Titola]

Make sure to understand if you have any current traditional IRA balances. If you do and they are significant, you will be paying a lot of tax doing a backdoor.

[Stupid Fitz]

Make sure to understand if you have any current traditional IRA balances. If you do and they are significant, you will be paying a lot of tax doing a backdoor.

yeah, i need to figure this out too. My friend has an IRA with less than 10k in it. Its his/her fun trading account that she/he can rationalize terrible ideas by saying "its in an IRA so I can ride out the losses". Need to do some maths to make sure a backdoor is a good idea. good tip

[steve dave]

yeah, if you have any traditional (pre-tax) IRA balances you aren't backdooring anything. you are converting and will pay a ton of taxes to do so. may make sense, may not depending on your current and future tax bracket, income, etc.

a backdoor roth is done with purely after tax money so you aren't hit with anything and then it grows tax free.

[Stupid Fitz]

yeah, if you have any traditional (pre-tax) IRA balances you aren't backdooring anything. you are converting and will pay a ton of taxes to do so. may make sense, may not depending on your current and future tax bracket, income, etc.

a backdoor roth is done with purely after tax money so you aren't hit with anything and then it grows tax free.

plus it all seems like a PITA if you have a current IRA. The solution here is for my friend's wife/husband to just do it since he/she doesn't have another IRA.

[Phil Titola]

That's why I haven't done this move.

[catastrophe]

A few things:

1. It is a pain to transfer funds between retirement accounts held at different brokers. I think the last time I did it, Vanguard signed and mailed an actual check to Betterment. Maybe not a huge PITA but more complicated than you think it should be.

2. You can have more than one Roth and more than one IRA. The only real rule is you cannot contribute more than the yearly max in total across all of them.

3. Most people that do backdoor Roth are doing it because they aren’t getting any pretax benefit from their IRA contributions, so there is rarely a concern about having to retroactively pay income taxes on the funds that get rolled over. That said, even if you only contributed post-tax funds to your IRA, you will get taxed on any appreciation in the investments when they get rolled over. So if you put $5k post tax into an IRA and then roll into a Roth when it’s worth $6k, you’ll need to pay taxes on $1k.

4. Depending on who you use for the IRA/Roth, taxes can be tricky. I think just this year TurboTax finally figured out how to ask questions that catch when you’re doing a backdoor rollover, but before that I had to be very careful in how I described it or else TurboTax just assumed I was rolling over pretax dollars instead of post tax.

[steve dave]

3. Most people that do backdoor Roth are doing it because they aren’t getting any pretax benefit from their IRA contributions, so there is rarely a concern about having to retroactively pay income taxes on the funds that get rolled over. That said, even if you only contributed post-tax funds to your IRA, you will get taxed on any appreciation in the investments when they get rolled over. So if you put $5k post tax into an IRA and then roll into a Roth when it’s worth $6k, you’ll need to pay taxes on $1k.

yeah, that's why I do it all in one gulp.

['taterblast]

someone tell me how to choose a 529. just do the state plan where i live? do it through Fidelity since my retirement is there? seems to be a lot of options at first glance, admittedly have done about 5 minutes of research.