patrick.net

mmmarvel says

CL says

If you hate a 1099 Div. from the dough: Vanguard Tax managed balanced.

I pay a guy to do my return, so isn't that HIS problem? :) (Thanks)

No (as I'm sure you know) the return is ALWAYS your problem because it's YOUR name on it. I've found companies that will pay the penalty if the IRS doesn't like something. But I haven't found one that will pay the extra tax money and interest. Too many people get in trouble because they they pay to have the return done, see it long enough to sign it and think everything is okay from that point on ... and I don't really get the impression that you're one of those people.

No, I'm not. But I figure the biggest issue I've ever had with 1099-DIV is that there are lots of entries and it complicates things for my lizard brain. CPAs don't seem to mind doing them. But I hear ya, and I know they're my responsibility.

They seem pretty straightforward for accountants though. Am I missing something?bob2356 says

If you want to get more diversified beyond equities with your IRA's you can roll them into self directed. That gives you the freedom to invest in any valid financial instrument. Real estate, private loans, tax liens, whatever. I've done this for years, it's a great option.

I don't really have any IRAs. Should I get one or some? What kind? I remember being ineligible for a Roth due to income limits then I just kind of quit looking at IRAs in general.

Thanks all.

CL says

I don't really have any IRAs. Should I get one or some

Depends on what you want to do. If you're happy invested in 401k ( I meant 401 not IRA) then why bother. If you want to diversify out of securities with a self directed then bother. Your goals and risk management are up to you. Just thought you might like to know some of the options.

CL says

I don't really have any IRAs. Should I get one or some? What kind? I remember being ineligible for a Roth due to income limits then I just kind of quit looking at IRAs in general.

open a non-deductible IRA and then do a ROTH conversion. Voila, you have a ROTH IRA, income limits be damned. (this tells me Congress are idiots as it seems like rules are written by completely different people. IRA rule #1 and IRA rule 2, then put it together and it is moronic)

Once it rolls into the ROTH the backdoor way, you have a tax free account where gains/dividends are tax free. You want to make sure this is the winner account.

So my preference for ROTH (backdoor) is investing in REITS's. Normally with REITS, there is no tax for the "entity" and the dividends are treated as ordinary income. In a ROTH, there is no tax for the 'Corporation" and no tax at the ROTH account. That is investing with a brain. The government gets nothing no matter how much cash the REITS generate (from the corporation or from the shareholder, zero taxation)

Buy an RV, tour the USA, it is very beautiful. Enjoy the money and spend it on what you enjoy doing most in life. If its fishing travel then travel where to can go fishing or buy your own boat. Since it sounds like extra money, laying around, enjoy it over time; i don't think you will regret doing that as long as its what you really like doing !

CL says

That seems interesting to me. Just getting started with the IRA might start me on the path to understanding everything else you said!!! Or at least familiar enough to trust what I'd be doing.

Go to wells Fargo, tell him/her my income is too high for a ROTH so I want to do a backdoor Roth. That's all you need to do. In fact, open one for your spouse too so you can double up.

CL says

Same old goals, really. Make the pie higher! I've maxed out for a couple decades on my 401k contribution. I have plenty for me and the wife, (no kids). I'm not a big consumer of things and have most of what I want--never bought into consumerism.

High income, no debt. 20 Years or so until I retire, but retiring sounds nice. I'm not opposed to retiring early! ;)

I would look into options for putting more money into tax-protected space. For example, at some employers, you can stuff up to $52K/year tax-protected savings into your 401(k).

SFace already mentioned the Backdoor Roth -- even if you don't qualify through the normal method for a Roth because you make too much money, you can put $5500 into a non-deductible IRA (i.e. traditional IRA, but after you pay taxes on the money), then immediately convert that into a Roth. You can do this at any brokerage or IRA provider (Schwab, Fidelity, Etrade, whatever). Because you already paid taxes on the principal, and there are no gains yet, you pay zero in tax to get a Roth. You can do this for you + wife, so $11,000 this year (the amount changes yearly based on inflation.

If you or your wife have any consulting income, you can open retirement accounts based on that too.

Also, if you have an HSA option with a high-deductible health plan, that can be used as a stealth IRA.

Some of these get rich quick ideas posted by people are likely to have you lose your ass when the market turns. Some of them might also be somewhat illiquid.

Someone also mentioned annuities. Most annuities suck, but there are a few exceptions. One of the best types is a Single Payment Immediate Annuity. This has one of the lowest fees and has some of the best returns as a result. A lot of the various variable annuities suck.

Financial planners will also try to get people to buy life insurance products, promising tax benefits, but without saying what those tax benefits are. People with high income are so afraid of taxes that they buy these POS products that have high fees and high commissions and low returns. What these products often do that further kills you is that they often turn income that would get capital gains rates into ordinary income, which is a double-whammy. If you can't understand the product, and if the financial advisor can't explain the fees/commissions and return in a succinct fashion, don't buy this crap. There are very few people for whom these products (e.g. whole life, universal life, variable universal life, etc.) are good ideas.

CL says

corntrollio says

For example, at some employers, you can stuff up to $52K/year tax-protected savings into your 401(k).

Is that through catch-up contributions or what? How does that work

52K limit is the SEP IRA. or self employed which has nothing to do with a 401K. You need to make 208K in your business to contribute 52K. Since you already max out your 401k, you'll need a backdoor ROTH IRA. this way, you have taxable distribution mixed with non-taxable distribution (to play around with) during your retirement years to minimize your tax rate.

How wonderful if you can withdraw 50K from IRA/SS, 30K from ROTH and get taxed like 50K, or next to nothing (like 10%-15% bracket for seniors)

I will also be in this situation later this year when a 3.5% 5 year CD expires, and will invest it into dividend paying stocks. No way am I going to let that thing roll over into a new CD paying so little now (I think 1.95% APY is the current rate on a 5 year CD at Discover).

CL says

if it's money you can afford to lose, try loaning the money out:


https://www.prosper.com/invest

...and let us know what happened.

Interesting. Do you know anyone who has done it

I have dipped my big toe into Lending Club, which is a competitor to Prosper (same basic idea).

On my low(er) risk portfolio I'm earning 9.5% returns (net of fees and charge offs), and my high(er) risk portfolio is around 12% net. You can invest IRA funds in LC if you use a 3rd party firm to set up a self directed IRA. Lending Club helps coordinate this to make it easy to set up, and they pay the annual self directed IRA fee ($200 annually) if you invest $10k or more.

There is an option (for a fee - 1%?) to automatically invest for you based on a range of criteria (not just credit risk/interest rate, but a lot of parameters)...I have managed it myself so far, and I probably eke out a bit better returns by being more selective...You know, when someone says they are borrowing $20k for credit card refinancing, but their credit report only shows $4k in revolving debt, I take note that their "story" doesn't add up and I'm less likely to lend...I don't know how much of an edge that actually gives me, though, and it is time consuming. Probably worth it if I had $100k in there and was making bigger "bets" on each loan, not so sure it is worth it with $25 bets and $10k invested. At some point it's just a numbers game.

It is also harder to unwind an investment in LC than in IBM...secondary market is there, but it's not a liquid investment...

I'm happy to have it as part of my portfolio, but I don't think I will be going crazy with it.

CL says

corntrollio says

For example, at some employers, you can stuff up to $52K/year tax-protected savings into your 401(k).

Is that through catch-up contributions or what? How does that work?

If your workplace allows you to a) make after-tax contributions and b) either do an in-service withdrawal or an in-service Roth conversion of those after-tax contributions, you can exceed the $17,500/23,000 limits. The in-service Roth conversion change is recent, but many plans allowed in-service withdrawals of after-tax contributions before that.

SFace says

52K limit is the SEP IRA. or self employed which has nothing to do with a 401

Your 401(k) can still have 52K/year if your plan allows it. The 52K limit is for all defined contribution plans, SEP, Individual 401(k), and employer 401(k), but your employer's plan has to allow it. In some cases, you might need an extra step of withdrawing the after-tax amounts, rolling over to an IRA, and then doing the Roth conversion.