Investing General Discussion

Rabkorik · Feb 7, 2021

I would agree with Blazin on the HSA part being the only consideration but I think I'm on the other side. It can potentially be a very powerful investing tool. I end up maxing mine every year and just keep enough in the non-invested side to cover the deductible if ever necessary.

For reference:

HSA - The Ultimate Retirement Account

A Health Savings Account (HSA) is the ultimate retirement account because it can provide completely tax-free savings for early retirement!

www.madfientist.com

Sanrith Descartes · Feb 7, 2021

Rajaah said:
What's going on with SAII? Unlike the other SPACs I have, it hasn't been moving. Got it about a week ago and it hasn't budged much from 11.00. Is the Otonomo merger too far away for people to be jumping onboard... or did I invest too late? It's concerning to see no activity around one SPAC while the others all seem to be gathering support by the day.

There had been a certain unrealistic expectation concerning SPACs lately. The ones that explode upwards are the exception and not the rule. This is one reason I only look to buy SPACs that either have a Founder team I like or a merger partner I like. If the stock stays flat but I like the company I am fine with it as a possible long term investment.

Aorin · Feb 7, 2021

The notes for that page say

"The only reason that the HSA is #4 on this list is because many people simply don't qualify for it. However, if you do qualify for it, I'd move it to #2 - right behind taking advantage of your employer's match."

It doesn't make much sense to max your 401k(Non-Roth) or a traditional IRA before your HSA. You can use your HSA exactly the same way as the 401k/IRA(After 65 vs 59.5) in retirement with the other bonuses that come with it. If you are contributing to a company HSA and the investments suck, roll it over once a year to Fidelity or somewhere(One 60 day rollover allowed per year).

It also doesn't list Mega Backdoor Roth, so check to see if your 401k allows it. This one allows me to max my Tax-Deferred 401k, plus roll another 10% of my income into my Roth IRA every year. This is a giant loophole that I can't believe exists.

Locnar · Feb 7, 2021

TJT said:
Question for you nerds.

My current job's 401k is moving to Fidelity where I have my 401k from back at General Motors. Can I roll them together at this point or is some other event required?

You could of always rolled them together.

Hateyou · Feb 7, 2021

Locnar said:
You could of always rolled them together.

Yep. I’ve rolled a couple of times. It’s pretty simple, call company A and request a rollover check made out to company B. Send to company B and authorize it, that’s it. I did it with my sons 529 this year and that was the same process except it required me to go to a bank to have some bank notary stamp it before I sent it. I’m guessing having both at the same brokerage will make the whole process extremely simple.

Fogel · Feb 7, 2021

Hateyou said:
Yep. I’ve rolled a couple of times. It’s pretty simple, call company A and request a rollover check made out to company B. Send to company B and authorize it, that’s it. I did it with my sons 529 this year and that was the same process except it required me to go to a bank to have some bank notary stamp it before I sent it. I’m guessing having both at the same brokerage will make the whole process extremely simple.

It's even easier than that in most cases. I just gave Fidelity the account number of the other 401k and they took it from there. Just go to the transfer funds section online

Locnar · Feb 7, 2021

Hateyou said:
Yep. I’ve rolled a couple of times. It’s pretty simple, call company A and request a rollover check made out to company B. Send to company B and authorize it, that’s it. I did it with my sons 529 this year and that was the same process except it required me to go to a bank to have some bank notary stamp it before I sent it. I’m guessing having both at the same brokerage will make the whole process extremely simple.

One more thing to add (which i've mentioned before) when it comes to this. Companies will pay you MONEY to roll it over. A friend rolled his IRA to Meryl and they a) paid ALL associated fees involved and b) deposited something like $1500ish into his account as a bonus. Only stipulation was he had to keep with them for like six months or something. We are talking about a 600ish or so K account.

edit: And this was a huge pain in the ass transfer (for him and them) too. He had all his shit in a mix of old IRA and for some unearthly reason a ton of random stocks in sharebuilders and computershare which charged outrageous fees to transfer each stock, and each stock required a seperate form to fill out. Was a huge pain in the ass but Myerril backpaid for all the individual transfer fees.

Sanrith Descartes · Feb 7, 2021

Hateyou said:
Yep. I’ve rolled a couple of times. It’s pretty simple, call company A and request a rollover check made out to company B. Send to company B and authorize it, that’s it. I did it with my sons 529 this year and that was the same process except it required me to go to a bank to have some bank notary stamp it before I sent it. I’m guessing having both at the same brokerage will make the whole process extremely simple.

Simple warning. Under no circumstances take possession of the funds. Best option is always to have the broker handle the transaction. Take possession means have the funds issued to you (ie.. check made out to you). IRS can flag this as a disbursement.

Furry · Feb 7, 2021

Aorin said:
The notes for that page say

"The only reason that the HSA is #4 on this list is because many people simply don't qualify for it. However, if you do qualify for it, I'd move it to #2 - right behind taking advantage of your employer's match."

It doesn't make much sense to max your 401k(Non-Roth) or a traditional IRA before your HSA. You can use your HSA exactly the same way as the 401k/IRA(After 65 vs 59.5) in retirement with the other bonuses that come with it. If you are contributing to a company HSA and the investments suck, roll it over once a year to Fidelity or somewhere(One 60 day rollover allowed per year).

It also doesn't list Mega Backdoor Roth, so check to see if your 401k allows it. This one allows me to max my Tax-Deferred 401k, plus roll another 10% of my income into my Roth IRA every year. This is a giant loophole that I can't believe exists.

401K->Roth Rollover is taxed as income. My job lets me roll 100% of my 401k into my roth ever year, but with the tax implications it doesn't make much sense. I've mentioned before my plan to have a few years with 0 income early in retirement, and using those years to roll over chunks of my 401k into roth in the low tax brackets. It's a strategy to be aware of, but plenty of times it doesn't make sense.

If you're a high earner, rollovers to roth IRAs ignore the typical roth income restrictions, though.

Aorin · Feb 7, 2021

Furry said:
401K->Roth Rollover is taxed as income. My job lets me roll 100% of my 401k into my roth ever year, but with the tax implications it doesn't make much sense. I've mentioned before my plan to have a few years with 0 income early in retirement, and using those years to roll over chunks of my 401k into roth in the low tax brackets. It's a strategy to be aware of, but plenty of times it doesn't make sense.

If you're a high earner, rollovers to roth IRAs ignore the typical roth income restrictions, though.

I am talking about 401k After Tax -> Roth IRA Rollover. Mega Backdoor Roth

Depending on how your 401k works, you may be able to roll the gains into a regular IRA and the contributions to your Roth IRA and pay no taxes - two checks. Mine only sends me one check so I have to pay taxes on the gains. They show up on my 1099-R. I do the rollover 6-7 times a year to minimize the amount of gains I have in the after tax portion of my 401k.

Heres how you enter it in TurboTax:

How To Enter 2023 Mega Backdoor Roth in TurboTax (Updated)

Follow these easy step-by-step explanation with screenshots when you enter the 1099-R form for your mega backdoor Roth into TurboTax.

thefinancebuff.com

Hateyou · Feb 7, 2021

Sanrith Descartes said:
Simple warning. Under no circumstances take possession of the funds. Best option is always to have the broker handle the transaction. Take possession means have the funds issued to you (ie.. check made out to you). IRS can flag this as a disbursement.

I know, they made it out to the other company. There were sections for what you wanted to do, spelled out pretty plainly. Fill out this section if rolling over, with instructions. Fill out this section if issuing to yourself as a distribution, etc. The paperwork had big tax warnings about issuing it to yourself too.

Kiroy · Feb 7, 2021

Araysar said:
I know some folks here also mentioned HSAs so what would be the the best order of operations in which to min/max various pretax accounts (401K, IRA, HSA, etc.)?

The order below makes sense but wanted to get a separate opinion.

The Best Order of Operations For Saving For Retirement

Here's the best order of operations of how to save for retirement, with which accounts to fund in the right financial order.

thecollegeinvestor.com

View attachment 333528

man I need to look into a sep ira to max more. We have a simple IRA set up for us and our employees, but it looks like we'd be able to put so much more into a sep ira.

Any accountant know if draws count as compensation when it comes to the sep? We're an llc filing as an s-corp so a lot of our income is in the form of draws.

Tmac · Feb 7, 2021

Blazin said:
I think depends on age and what kind of savings level. If someone is making a lot of money and is young and follows that list they will find themselves very retirement account rich and unable to retire early without penalty. For anyone who has a long way to go but over 40yrs old looks pretty spot on. HSA is the only part that I think is subjective in that people with Cadillac plans it’s complete unnecessary .

I would normally recommend skipping 5 and going to 6 to give you more financial flexibility with what happens with that wealth

Did I miss the list you’re referring to somewhere? I looked back a few pages and couldn’t find a list anywhere.

[edit] NM, was hidden behind ignored user, lol.

B_Mizzle · Feb 7, 2021

Sanrith Descartes said:
I knew it was coming.

Mr diamond hands is the real deal. He spent 6 months making videos analyzing gme. I guess he made about 20 mil on the thing also. Wallstreetbets however is not the real deal.

Gravel · Feb 7, 2021

Blazin said:
I think depends on age and what kind of savings level. If someone is making a lot of money and is young and follows that list they will find themselves very retirement account rich and unable to retire early without penalty. For anyone who has a long way to go but over 40yrs old looks pretty spot on. HSA is the only part that I think is subjective in that people with Cadillac plans it’s complete unnecessary .

I would normally recommend skipping 5 and going to 6 to give you more financial flexibility with what happens with that wealth

This is our situation. But you can do a Roth conversion ladder to kind of "fix" it. It requires that your expenses aren't too high though, because you only have about $95k as a married filing jointly in income you can draw (which means actual expenses plus the conversion, which should also be an entire year of expenses).

So we're going into it with hopefully 4+ years in our taxable account, and about a year in cash. Since a Roth conversion takes 5 years to mature, it then becomes a never ending effort to convert enough money to live off of 5 years in the future.

Captain Suave · Feb 7, 2021

Blazin said:
If someone is making a lot of money and is young and follows that list they will find themselves very retirement account rich and unable to retire early without penalty.

This is an interesting thought, as I've been prioritizing tax-advantaged savings since an early age. I just checked and about 30% of my investment assets are in retirement accounts. I'm assuming that's not a high enough fraction to cause problems if we should decide to retire before 65. (Fortunately for us, we're in a financial position to do so whenever we can shift our housing situation to an area not inflated by school districts. In ~12 years when our youngest is out of high school and we know exactly what the family secondary education costs will be, we'll give it serious thought. #firstworldproblems, I know.)

AladainAF · Feb 7, 2021

Rabkorik said:
I would agree with Blazin on the HSA part being the only consideration but I think I'm on the other side. It can potentially be a very powerful investing tool. I end up maxing mine every year and just keep enough in the non-invested side to cover the deductible if ever necessary.

For reference:

HSA - The Ultimate Retirement Account

A Health Savings Account (HSA) is the ultimate retirement account because it can provide completely tax-free savings for early retirement!

www.madfientist.com

Another overlooked is a 529. But HSAs are amazing as well.

Blazin · Feb 7, 2021

Captain Suave said:
This is an interesting thought, as I've been prioritizing tax-advantaged savings since an early age. I just checked and about 30% of my investment assets are in retirement accounts. I'm assuming that's not a high enough fraction to cause problems if we should decide to retire before 65. (Fortunately for us, we're in a financial position to do so whenever we can shift our housing situation to an area not inflated by school districts. In ~12 years when our youngest is out of high school and we know exactly what the family secondary education costs will be, we'll give it serious thought. #firstworldproblems, I know.)

30% is fine, at one point I was near 80%. I have worked that down to almost 50/50 now which gives me some freedom. Wife wants to work a bit more so we aren't yet having to live on investment income alone. I always max our retirement accounts but have definitely saved a large junk outside over the last 6 yrs or so. Most financial advice is given from the perspective of not expecting people to actually achieve it, knowing that most American's saving rate is abysmal. Just will suck for people wanting to retire at 45 and find they are millions with nothing but their house outside of protected accounts they are another 15yrs from being able to draw on.

Khane · Feb 7, 2021

The way I think about it is this.

I will likely be able to retire at 45, but as mentioned previously drawing from my retirement accounts would be counterproductive. Instead, I plan to "semi-retire". Meaning I will probably try to find a job as a ranger or starter at a golf course that also includes membership or heavy discounts at said golf course.

I am already debt free, including owning my house outright, have secondary income in the form of rent since the house is a multi-family and could potentially semi-retire right now at 38. However, I'd like to enjoy my current lifestyle without having to pinch my belt so to speak here and there.

So that's basically it. Remove all debt, have enough money in savings you could work a menial job you enjoy, perhaps with fringe benefits, and just live that way as "retirement" until I can actually draw on my retirement without penalty.

Gravel · Feb 7, 2021

I should also point out that people focus way too much on the penalty for early withdrawal. Like, yes, it sucks writing a check to the government, but the penalty is just 10%.

If it means working an extra 5 years because you're afraid of the penalty, you're essentially sacrificing years of your life you never get back for a 10% tax. 10% is a pretty low tax all things considered. You're essentially talking about the lowest marginal rate.

I'm all for reducing your taxes as much as possible (I plan to pay 0% in retirement, hence why I'm moving to FL), but I also hate working enough that it's not worth killing myself over. Shit, I could also just work another couple months and probably cover that 10% in perpetuity.

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