I'm trying to see if I understand capital gains taxes properly. Based on this and our joint filing income being about 90k, if we were to pull money from our mutual funds that specific income would be separately taxed at 15% while the rest of our regular income being taxed at the respective marginal rates, correct?
I'm trying to see if I understand capital gains taxes properly. Based on this and our joint filing income being about 90k, if we were to pull money from our mutual funds that specific income would be separately taxed at 15% while the rest of our regular income being taxed at the respective marginal rates, correct?
Yes, as long as you've held the fund for a year. When you sell shares purchased at multiple dates you'll have options about which specific shares to sell, which changes the cost basis. Can do some tax planning to minimize taxes now and in the future depending on your projections about future income.
Good to know. It's still years and years away and I'm just trying to work out how I'd best leverage the fund for our next home purchase. Looking to minimize our mortgage payments post military retirement.
You could take a loan against the TSP instead of just withdrawing, if you wanted. I know everyone has different circumstances but I hope you can find a way to not have to do that, since it impacts future earnings.
I'm trying to see if I understand capital gains taxes properly. Based on this and our joint filing income being about 90k, if we were to pull money from our mutual funds that specific income would be separately taxed at 15% while the rest of our regular income being taxed at the respective marginal rates, correct?
The gains would be taxed at 15%. Not the entire draw.
So, let's say you bought the fund share for $500. Two years later, you sell it for $650.
You are taxed on $150 (650 - 500) at 15%.
The detailed calculations are a little more complicated because you can include fees and commissions in the purchase price and subtract them from the sale price.
+4
firewaterwordSatchitanandaPais Vasco to San FranciscoRegistered Userregular
Anyone around here mess with crypto investing? I've avoided it so far since I barely understand it, but I've been watching XRP/Ripple a bit and am trying to do some due diligence on it. My (woefully limited) understanding is that it's a new way to process international banking transactions, which makes more sense than anything else I've read about the other coins out there.
Looks like Ripple/XRP has nothing to do with the international banking system that the same company has produced, aside maybe the XRP token uses that system for transferring itself.
At least according to this: https://bitcoinmagazine.com/guides/what-ripple/
As a technology, the Ripple platform may have real value and real history that validate the claims they make for its efficacy. The XRP token itself, however, seems to have negligible use cases. In fact, Ripple had planned to phase it out — at least, until fevered interest in cryptocurrencies began to take off in 2016.
Okay so, opened a 529 college fund through vanguard for the kid. She also has a CD and we started a savings account for her too, but would it be better to put money into a mutual fund for her instead?
Okay so, opened a 529 college fund through vanguard for the kid. She also has a CD and we started a savings account for her too, but would it be better to put money into a mutual fund for her instead?
529 statistically will have the best returns, barring a 15 year financial apocalypse
It's all personal preference. A 529 utilizes mutual funds already but has specific terms for withdrawal.
The CD and savings are nice for a starting account or her own emergency fund.
I personally think you're doing enough already. Would the mutual fund be started using the CD/savings money?
Also re: funds for kids outside of 529 - they legally get to do whatever they want with it at 18. And there may be some tax implications. Also I don't have the data but I believe they count against financial aid calculations for college/FAFSA.
I thought a 529 plan was a selection of mutual funds, similar to 401(k)s? Just through the State instead of my employer, dedicated to education spending instead of retirement, and with different tax treatment
It's all personal preference. A 529 utilizes mutual funds already but has specific terms for withdrawal.
The CD and savings are nice for a starting account or her own emergency fund.
I personally think you're doing enough already. Would the mutual fund be started using the CD/savings money?
Also re: funds for kids outside of 529 - they legally get to do whatever they want with it at 18. And there may be some tax implications. Also I don't have the data but I believe they count against financial aid calculations for college/FAFSA.
It wouldn't come out of anything else. Me and my wife are extremely fortunate to do what we do.
Basically we both put in an amount of money every month into her savings account. She has a maxed out 10k CD that's some like "kid to teen" thing locked at 5% from our credit union. We've paid off our student loans and have no credit card debt.
Basically I'm able to save about 5k a month that goes into my Long Term Savings (which is separate from my six month emergency fund) and I thought I should do something more with it.
ETFs are exchange traded funds, meaning they're very liquid. Mutual funds are less liquid. When you buy into a mutual fund you typically transact with the mutual fund itself. That fund will have daily ins and outs in terms of income and expenses. Of those expenses, there are are active advertising fees and management fees. These are paid out of fund assets. Some mutual funds are very active. These things will typically price at the end of the day when all the investments are valued and the books are closed for the day. That's also when investors buy in and get out, typically following the end of the market day. Thus your mutual fund can be exposed to market shocks and you won't be able to get out of those assets (if you were very risk adverse) until the next day.
Exchange traded funds are different. These are bought and sold on an exchange where you bid/ask for these on a highly liquid market. Your bids/asks get filled typically immediately, so you transact very quickly. Additionally, they are very passive. Most are actively tracking/benchmarking an index or a combination of indexes. ETFs also don't carry the same fees. You typically have a transaction fee associated with an ETF when you transact through a broker. ETFs also do not have the same annual fees that mutual funds do.
They are different and one is not better than the other. If you're trying to play around with investments to get access to illiquid markets, your ETF bid/ask spread will be wider and it'll be harder to get a reasonable price than something where the NAV is published clearly. ETFs could also have higher fees than a mutual fund (unlikely but the devil's in the details). If you want automatic distributions / contributions, an ETF is harder to do this because of the bid/ask shit while it's very easy in a mutual fund.
For long term savings, I recommend setting up a Roth IRA (Vanguard is great) and just dumping money there. You can withdraw your principle penalty-free at any time so you can use that money at a later date for your child if you so desire
For long term savings, I recommend setting up a Roth IRA (Vanguard is great) and just dumping money there. You can withdraw your principle penalty-free at any time so you can use that money at a later date for your child if you so desire
If you aren't sure whether your child will use this money for college or whether you might need it in an emergency, the Roth IRA gives the best combination of tax advantage and flexibility.
If it's definitely being used for college, the 529 offers the better tax advantage.
Both 529 savings and Roth IRA withdrawals (including non taxed contribution) go into financial aid calculations.
Tyrannus has way more info, but the TLDR is less fees for the same or better performance. ETFs are generally just a bundle of stocks, so there's no people behind the scenes making picks to pay.
Another thing to consider is transaction fees. At least up here in Canada mutual funds can typically be bought into without fees, so if I wanted to buy $100 of a fund every paycheque that's fine, but ETFs are market traded so paying a $9.99 fee each time would lose a lot of money, so I typically only do ETF trades at higher dollar amounts
One major gotcha with mutual funds is capital gains distributions. These don't matter if you're investing in a tax free or tax deferred account (any ira, 529, etc) but if you're investing through a regular brokerage account, hooboy. Index-based ETFs should not have capital gains distributions.
Thank you all for the help. I think I will do the Roth IRA and a 529 on the side, but focus on the Roth because who knows if she's going to want to go to school.
Another thing to consider is transaction fees. At least up here in Canada mutual funds can typically be bought into without fees, so if I wanted to buy $100 of a fund every paycheque that's fine, but ETFs are market traded so paying a $9.99 fee each time would lose a lot of money, so I typically only do ETF trades at higher dollar amounts
Check with your broker too. Often they have a list of commission-free ETF options but might come with a couple restrictions.
Also just for my own clarity, I think ETFs can be both actively managed and passive, but passive is more common.
Yes, that is correct. That's why I said index-based ETFs should not have capital gains distributions. (I was using index-based as a synonym for passive.) Passive mutual funds often generate capital gains distributions, on the other hand.
Marty81 on
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firewaterwordSatchitanandaPais Vasco to San FranciscoRegistered Userregular
For anyone else chasing that high APY dragon, a new fintech firm called Wealthfront is offering 2.51% on their cash accounts. Looks like they partner with multiple banks which allows cash held there to be FDIC insured up to one million as well, which is kind of interesting.
Wealthfront has been around for a while as an alternative to Betterment/Personal Capital.
Something about this doesn't smell right. They're basically touting FDIC insurance because you're essentially putting your money in their "omnibus" savings accounts at the banks to receive the protection. Which, to me, is like asking your friend to put some of your money in their bank account to receive protection. There's nothing inherently wrong with it, but you're basically using a roundabout way to get a traditional savings account.
Also, according to Magnify Money, there are multiple banks offering 2.4+%; with three of them offering 2.50%.
WF says they make money by holding a portion of the interest the accounts accrue; which makes me curious whether these "omnibus" accounts are actually traditional savings accounts or some other investment device at each of the participating banks (even though WF advertise the FDIC protection).
Wealthfront eventually settles your money in a FDIC insured account. The key here is eventually and when I directly asked them they said it should happen quickly but we're unable to give a definite time. It's probably ok, but personally if I'm putting my money in a savings type account I want to know it's FDIC insured immediately.
It's also worth noting that the Savings component is lumped with their "Cash Sweep" system, which also utilizes Money Market accounts (correct me if I'm wrong, but I don't believe MM accounts are protected by FDIC).
+1
firewaterwordSatchitanandaPais Vasco to San FranciscoRegistered Userregular
edited May 2019
Ah ha, thanks. That's more info than I was able to find with a few minutes of googling.
And yeah Mugsley, I think you're right about MM accounts - mostly because I'll never forget all that talk way back when about "breaking the buck" when a MM account went under a dollar.
firewaterword on
Lokah Samastah Sukhino Bhavantu
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SixCaches Tweets in the mainframe cyberhexRegistered Userregular
PSA: got an email last night from Chase noting that the freedom credit card's terms are changing to require binding arbitration UNLESS you mail them a physical letter denying that change by early August.
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Yes, as long as you've held the fund for a year. When you sell shares purchased at multiple dates you'll have options about which specific shares to sell, which changes the cost basis. Can do some tax planning to minimize taxes now and in the future depending on your projections about future income.
edit: mutual fund not stocks duh...
https://www.investopedia.com/articles/05/taxlots.asp
The gains would be taxed at 15%. Not the entire draw.
So, let's say you bought the fund share for $500. Two years later, you sell it for $650.
You are taxed on $150 (650 - 500) at 15%.
The detailed calculations are a little more complicated because you can include fees and commissions in the purchase price and subtract them from the sale price.
At least according to this:
https://bitcoinmagazine.com/guides/what-ripple/
Unless you're the Russian Mob, Crypto is a S C A M.
At which point may as well just buy some penny stocks or something.
That's not entirely true. Sometimes it's a joke.
There's always selling naked puts on margin if you want something a little riskier.
529 statistically will have the best returns, barring a 15 year financial apocalypse
The CD and savings are nice for a starting account or her own emergency fund.
I personally think you're doing enough already. Would the mutual fund be started using the CD/savings money?
Also re: funds for kids outside of 529 - they legally get to do whatever they want with it at 18. And there may be some tax implications. Also I don't have the data but I believe they count against financial aid calculations for college/FAFSA.
It wouldn't come out of anything else. Me and my wife are extremely fortunate to do what we do.
Basically we both put in an amount of money every month into her savings account. She has a maxed out 10k CD that's some like "kid to teen" thing locked at 5% from our credit union. We've paid off our student loans and have no credit card debt.
Basically I'm able to save about 5k a month that goes into my Long Term Savings (which is separate from my six month emergency fund) and I thought I should do something more with it.
Could you elaborate? I saw vanguard has both.
Exchange traded funds are different. These are bought and sold on an exchange where you bid/ask for these on a highly liquid market. Your bids/asks get filled typically immediately, so you transact very quickly. Additionally, they are very passive. Most are actively tracking/benchmarking an index or a combination of indexes. ETFs also don't carry the same fees. You typically have a transaction fee associated with an ETF when you transact through a broker. ETFs also do not have the same annual fees that mutual funds do.
They are different and one is not better than the other. If you're trying to play around with investments to get access to illiquid markets, your ETF bid/ask spread will be wider and it'll be harder to get a reasonable price than something where the NAV is published clearly. ETFs could also have higher fees than a mutual fund (unlikely but the devil's in the details). If you want automatic distributions / contributions, an ETF is harder to do this because of the bid/ask shit while it's very easy in a mutual fund.
Yes, both me and my wife max contribute to our 403b accounts and structure it to maximize the employee match.
That long term savings so far was used to pay off our student loans and buy a new car.
If you aren't sure whether your child will use this money for college or whether you might need it in an emergency, the Roth IRA gives the best combination of tax advantage and flexibility.
If it's definitely being used for college, the 529 offers the better tax advantage.
Both 529 savings and Roth IRA withdrawals (including non taxed contribution) go into financial aid calculations.
Tyrannus has way more info, but the TLDR is less fees for the same or better performance. ETFs are generally just a bundle of stocks, so there's no people behind the scenes making picks to pay.
Check with your broker too. Often they have a list of commission-free ETF options but might come with a couple restrictions.
Selling Board Games for Medical Bills
Yes, that is correct. That's why I said index-based ETFs should not have capital gains distributions. (I was using index-based as a synonym for passive.) Passive mutual funds often generate capital gains distributions, on the other hand.
Something about this doesn't smell right. They're basically touting FDIC insurance because you're essentially putting your money in their "omnibus" savings accounts at the banks to receive the protection. Which, to me, is like asking your friend to put some of your money in their bank account to receive protection. There's nothing inherently wrong with it, but you're basically using a roundabout way to get a traditional savings account.
Also, according to Magnify Money, there are multiple banks offering 2.4+%; with three of them offering 2.50%.
WF says they make money by holding a portion of the interest the accounts accrue; which makes me curious whether these "omnibus" accounts are actually traditional savings accounts or some other investment device at each of the participating banks (even though WF advertise the FDIC protection).
And yeah Mugsley, I think you're right about MM accounts - mostly because I'll never forget all that talk way back when about "breaking the buck" when a MM account went under a dollar.