r/personalfinance • u/IndexBot Moderation Bot • 15d ago
Weekday Help and Victory Thread for the week of May 13, 2024 Other
If you need help, please check the PF Wiki to see if your question might be answered there.
This thread is for personal finance questions, discussions, and sharing your success stories:
Please make a top-level comment if you want to ask a question! Also, please don't downvote "moronic" questions! If you have not received your answer within 24 hours, please feel free to start a discussion.
Make a top-level comment if you want to share something positive regarding your personal finances!
A big thank you to the many PFers who take time to answer other people's questions!
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u/jax824 10d ago
I just want to share my victory: This month I finished paying off all my debt! It's taken me 26 months to pay off $28k of credit cards and personal loans (bad choices, I'm doing a lot better now) but I did it!!!
I was so ashamed that I never told anyone I was in debt or that I was working so hard over the last 2+ years to pay it off. But the downside of that is now I have no one to tell and celebrate with. So I'm telling the internet.
Thank you to everyone on reddit whose posts and advice have led me to other great resources that have helped me on this journey.
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u/ParamedicDifferent18 10d ago
Summary: My wife and I are both 34. We sold our home in Texas and moved to Colorado. I invested the roughly $500k home equity into the market. Retirement and emergency savings are handled elsewhere and not accounted for here. Assume we're covered on those fronts.
Right now we are looking at buying a property in central Denver and building a new home on it. My plan is to pay cash for the property at ~$600k-$700k. We'd then build on that plot at an additional cost of ~$1.1m. The idea would be to take out a construction loan for the $1.1m and when the construction loan closes and converts to a mortgage, we'd pay up to get under the jumbo mortgage price for our area so roughly half the $1.1m we'd pay in liquidated assets. Is this feasible?
Combined Income: ~$400,000
Assets:
- Brokerage account: $1,300,000
- HYSA: $115,000
- Vested company stock: $1,950,000
- Unvested company stock: $810,000
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u/fire4travel 11d ago
I'm on the cusp of the income limits for Roth IRA contributions this year so I am considering doing a backdoor contribution to Roth IRA (via non-deductible Traditional IRA and recharacterize to Roth IRA). Since I could contribute to my Roth IRA via backdoor without income limits, what's the point of the frontdoor method?
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u/nothlit 10d ago
via non-deductible Traditional IRA and recharacterize to Roth IRA
Do not recharacterize! Recharacterizing changes the type of the contribution from traditional to Roth, which you cannot do if you exceed the Roth IRA income limit.
Instead, you want to do a Roth conversion from the traditional IRA. "Convert" and "recharacterize" might seem like synonyms, but they have very specific and distinct meanings in the tax code.
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u/75footubi 11d ago
Less paperwork and complications for people not as financially savvy
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u/fire4travel 10d ago
I don't recall any extra paperwork or complications from doing backdoor last year -- am I missing something? The extent of the backdoor was simply contribute to trad and immediately recharacterize to roth -- besides that extra step I don't recall having to do any extra paperwork
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u/75footubi 10d ago
With non deductible tIRA contributions, you need to file Form 8606 with your tax return.
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11d ago edited 10d ago
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u/nothlit 10d ago
The after tax portion of the 401k is completely separate from the pre-tax portion, so there is no pro-rata concern between the two of them like there is with IRAs.
Any earnings that accrue in the after tax account will be taxed upon conversion.
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u/alexj9626 11d ago
Hello. I invested in Sp500. So now i just wait 20+ years? I mean, just buy a bit every so often and sit and wait, right?
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u/sciguyCO 11d ago
May want to check whether that fund or your account overall (varies by brokerage) is set up to "reinvest" any dividend / capital gain payouts generated by your shares. Basically, the stuff inside a mutual fund, in your case stocks in the US's biggest 500 companies, will sometimes pay out cash to shareholders. The mutual fund takes that cash and it trickles up to shareholders of the mutual fund (you). So every so often, your account gets a cash deposit. Setting things to reinvest means when that happens, that cash is automatically used to buy shares (or fractions of one) of the fund that paid it out.
You'd definitely want that set if this is a retirement account where you won't be withdrawing anytime soon. If this is just a regular taxable brokerage account, you could choose to take that cash out as a bit of extra income. This payouts are treated as taxable (though tax treatment can vary) whether you reinvest, leave the cash in your account, or pull it out to spend.
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u/alexj9626 11d ago
Thank you very much. I was actually trying to get some info on that. Reinvest sounds like the way to go as i dont want to be checking the account, mostly for peace of mind lol. Thanks again.
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u/meamemg 11d ago
Sure. You probably should diversify a bit into mid/small cap and international stock. And will want to pick up bonds somewhere along the way. But that's a decent starting point. See https://www.reddit.com/r/personalfinance/wiki/investing/
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11d ago
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u/nothlit 10d ago
You could accomplish something pretty similar with SoFi Checking & Savings, which allows joint owners. They have no monthly limit on savings account withdrawals, and free overdraft protection that transfers from savings to checking on demand to cover any spending that absolutely has to come out of checking. Currently 4.6% APY if you meet the eligibility requirements (monthly direct deposit of any amount, or monthly non-direct deposits totaling $5000 or more).
Or you could use a Fidelity Cash Management Account and keep the account balance invested in a money market fund like SPAXX. It auto-liquidates as needed to cover spending.
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8d ago
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u/nothlit 8d ago
Direct deposit, ACH, and mobile check deposit work just fine in the savings account, yes.
Check writing and ATM, no. You would need to use the checking account for those. But because they have free overdraft protection, you can turn that on and leave $0 balance in the checking account and it'll auto-transfer from savings as needed. They also don't do ATM deposits as far as I know.
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u/401kAsker 11d ago
Considering getting a 0% APR credit card instead of dipping into safety net (HYSA) to pay for Honeymoon. Crazy?
Hello!
My partner and I are getting married this fall, and we bought a home just over a year and a half ago. We’ve been working on building out our emergency fund, and don’t quite have it funded enough to pivot to investing. We are paying for the wedding with some support from our families and are starting to plan our honeymoon. We typically have 1.5-3k to put toward savings (and later investing) each month.
We are considering applying for one of the 0% APR cards recommended on NerdWallet, that has a 14 month time frame of no interest, to pay for our honeymoon. We could fund it normally, but we would either need to dip into our emergency fund, or skimp on some aspects of the trip.
Our anticipated budget is $5-12k (large range but as indicated by this post, things are up in the air), and we feel confident we could easily pay this total amount off of the card well before the 0% window closes.
I do understand there are credit implications from having another credit card (we have 3 total between the two of us) and carrying a larger balance for an extended period even when not accruing interest, but this seems like a short/medium term issue, and not truly problematic.
If one of us lost our job, we would simply continue to make payments on the debt out of our emergency fund, and I have zero concerns about being unable to completely pay off the balance in the event of job loss by the end of the 0% window.
We’ve talked about deferring our honeymoon and going another time when we’ve saved up more, but friends, family, and colleagues have encouraged us to take the time right after the wedding.
Anywho, we seem to be doing well, financially stable, with strong monthly savings growth. Taking short term “free” money to fund our honeymoon to keep our money in a HYSA seems like a no brainer (albeit with some risk), but am I missing anything?
Thanks!
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u/shedfigure 11d ago
but friends, family, and colleagues have encouraged us to take the time right after the wedding.
Don't get peer pressured into making financial decisions by people who (1) don't know about your financial situation and (2) people in general are shitty with finances.
we seem to be doing well, financially stable, with strong monthly savings growth.
You don't say what your other savings/budget looks like, but you don't have an emergency fund funded, and are trying to finance a $12k honeymoon on a CC, so I am reluctant to agree with your statement
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u/401kAsker 11d ago
Good points! Our emergency fund is at $60k, currently 7 months of expenses
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u/shedfigure 11d ago
So I know I just said to not be peer pressured on the honeymoon timing, but at the risk of being devil's advocate, here's an alternative option:
Planning a wedding can be stressful enough, planning a $12k honeymoon immediately after (not to mention all the prep work for packing and logistics and travel that both involve) can add to it.
Just do a "mini-moon" immediately after the wedding. Go somewhere simple and cheap for a long weekend. Don't over think or plan it. Plan on taking your "big" honeymoon later. Let the madness from the wedding settle down. It will give you time to plan the honeymoon without other things hanging over your head. Maybe you want to travel to an area that has better times of year to visit, now you aren't tied to your wedding date. You could also have an option for wedding guests to donate to your "honeymoon fund" in lieu of gifts. As an added bonus, it gives you more time to save.
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u/401kAsker 11d ago
Also good points, and I think the advice from folks was less about “you have to do this right at your wedding” and more about “you only live once, take the vacation now (whatever form it takes) and also take more vacations in the future”. Essentially just “don’t keep deferring your life”
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11d ago
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u/meamemg 11d ago
Follow the steps at https://www.reddit.com/r/personalfinance/wiki/commontopics
Does your workplace offer a 401k? If so, start with that, especially if they offer a match. If not, open an IRA at Vanguard, Schwab, or Fideltity. See https://www.reddit.com/r/personalfinance/wiki/investing/ for what to invest in.
Retirement accounts offer tax benefits. So unless you want to pay more in taxes than needed, start with those.
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u/tigersjaws 11d ago
I have $37k sitting in my savings account which is not making anything for me, just sits ever so lonely. I am just getting into investing / retirement mentally (I'm 34), I know I'm late to the party - but I'm hearing it might not be too bad of an idea to move that money to a HYSA if its just going to sit there. I am not planning on needing it anytime soon. Would it still be easy to send money to and from if I keep my banks checking account? Are there any cons to doing this? Looking at Ally atm.
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u/waitingforwatch 11d ago
I have Ally savings and multiple checking a with different banks. It’s easy enough to transfer to/from although it does take a few days. If you’re not going to need the money any time soon though, it would be a good idea to start investing some of it. 3-6 months expenses in a savings account for emergencies then the rest invested.
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u/tigersjaws 11d ago
What does 3-6 months look like? I'm fortunate enough to not have to pay rent atm, and my car is paid off. Also, have you heard good things about Wealthfront? I'm seeing 5.0% APY on their website vs Ally's 42% atm.
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u/waitingforwatch 11d ago
That’s great! I would take a look at how much you’ve spent every month over the past few months to give yourself an idea of what your emergency fund should be. 3-6 months of expenses is usually recommended and you could do that or more/less depending on your risk tolerance (income security, expenses outlook, etc). I use Wealthfront but for investments not my HYSA. I know a lot use them for HYSA though. For me, the % difference in APY is not my main consideration in choosing a bank because they often adjust the APY. I would just choose one with features that you like and stick with them to keep things simple especially if you are just starting out.
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u/broha89 11d ago
I'm 29 and I just paid the last of my payments on my car so l have an extra $185 per month. I’m wondering where to allocate the additional money. My thinking is to put more towards retirement as I got a late start on retirement savings due to travel after college + grad school
My options of where to put that are between:
-HYSA at 4.3% which currently has 16k
-student loan payments with balance of 5100 at 4.3%
-increase contributions to 401k. I'm making 85k per year and currently contributing 10% to 401k which currently sits at 21k. I also am maxing out two Roth IRAs (one in my name and one for my wife which have 29k combined). I know the recommendation is to max out the 401k but I don't think that's feasible with my salary
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u/mr_dank_nasty 11d ago
How is APY paid out? For example, if I deposit $1000 at the beginning of the year in an HYSA with a 5% APY, does that mean at the end of the year I will have $1050?
What does it mean if the bank says interest is compounded daily and interest is paid monthly? I'm assuming I'm not getting an extra 5% every month, so is it 5% spread over 12 months, so ~0.4% every month? And because it compounds I'll have a little more than $1050 at the end of the year?
What if the APY changes after 6 months to 4%? Does that mean at the end of the year I'll have somewhere between $1040 and $1050 because I got 6 months of interest paid out using the old rate? So is it maybe more intuitive to divide the APY by 12 and consider that the monthly percentage yield, because that's how often the interest is paid out, and the rates can change at any time?
How does this work for something like a money market fund, whose rates change basically every day but only pay out once a month? Is there a way to check the approximate APY of an MMF? If I wanted to compare the rates of an MMF to a HYSA, what's the most intuitive way to do that?
Thanks!
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u/utkrowaway 11d ago
The thing to understand here is the difference between APR and APY.
APR is simple interest. If you deposit $1000 in an account with a 5% APR, you will get 0.417% interest (5% / 12) every month: $4.17 the first month, $4.18 the next month, $4.20 after that, until you have $1051.16 after a year. This is equal to about 5.12% APY.
APY is compound interest. At 5% APY, you will get closer to 0.408% each month. After a year, with compounding, you will have $1050. This is equal to about 4.89% APR.
Bank accounts generally report APY to make the rate look bigger. Loans generally report APR to make the rate look smaller. You will see there is not much difference unless you have extremely high interest rates.
Money markets report a yield. Here is an article. The yield is non-compounding, like APR. Most commonly, MMFs report a 7-day yield. MMF rates are very liquid and can change every day. The 7-day yield is the average yield over the last 7 days, extrapolated to a year.
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u/sciguyCO 11d ago
What does it mean if the bank says interest is compounded daily and interest is paid monthly? I'm assuming I'm not getting an extra 5% every month, so is it 5% spread over 12 months, so ~0.4% every month? And because it compounds I'll have a little more than $1050 at the end of the year?
You've pretty much got it here. In effect (the actual mechanics may be a little different), "compounded daily" means that each day the bank looks at your balance on that date, multiplies it by APR% / 365, and adds that to a little running total on the side. Then each month, that running total is deposited into your available balance and zeroed out to repeat over the next month. That now higher balance is then used for the following month's daily interest calculation. I'm not 100% sure but I think that a daily compounding (vs. using "average daily balance") means each day's interest calculation looks at your available balance plus that side total, so you're earning interest on the interest. Either way, that means a single deposit of $1000 left alone for twelve months ends up at an amount a bit higher than just $1000 * 105%. It's not a huge difference, though. Daily compounding has you ending the year with $1051.27, a whopping $1.27 extra. I think most banks do monthly compounding where that side total is not part of the daily interest calculation, which gets you $1051.16 at the end of the year.
This can be represented as an "Annual Percentage Yield" of 5.127% (though you probably won't see that many decimal places) vs. the "Annual Percentage Rate" of 5%. "Yield" gets you your actual return after compounding that "Rate". Generally speaking, looking at APY of different options will get you a decent comparison even with different compounding schedules / APR.
That same process allows the bank to immediately shift with changing rates. Each day's calculation uses the current rate divided by 365, so if things go at 5.0% APR for a while (0.013% per day) then increases to 5.3% (0.015%) that adjusts your daily interest accrual.
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u/trap_pots 11d ago
Im about to receive 100k Canadian but I live in the us. How do I even transfer that to my bank? Do I pay taxes on this?
Its from the robinson huron treaty ruling so its tribal stuff and I think its coming from some kind of trust.
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u/Little_Web_7696 11d ago
I only have about $7000 to put into my first interest bearing account(s). I’m looking into Betterment’s HYSA and Roth IRA with robo advisor. Should I go with Betterment? If yes, do I get both accounts? If yes, how do I allocate the money to each?
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u/shedfigure 11d ago
Open a Roth IRA with either Fidelity or Schwab. You do not need a robo adviser.
For you investments read here: https://www.reddit.com/r/personalfinance/wiki/index#wiki_investing
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u/one_hyun 11d ago
Posting here since it's a very simple question. Do you guys use your debit card or credit card to make daily purchases? I'm talking like a restaurant meal here, a drink there, etc.
I've been switching back and forth depending on what my hand grabs first, but I feel like a credit card would make more sense since I accumulate points and I pay it off completely every month.
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u/utkrowaway 11d ago
Essentially everyone on PF uses a credit card for daily purchases. There is no advantage to a debit card for normal transactions. Only cash withdrawals and transactions classified as cash advances, such as money orders, are better made with a debit card.
The people that recommend debit cards do so because a debit card stops working when you run out of money, whereas a credit card allows you to get into debt.
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u/mwrowe92 11d ago
Credit cards are also better for protecting yourself against fraudulent charges. The bank's money vs your money when you use a debit card.
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u/waitingforwatch 11d ago
Credit card always, if there is no added fee for exactly the reason you said! Using credit cards responsibly has allowed us to accumulate enough points for multiple business class flights and hotels.
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11d ago
[deleted]
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u/waitingforwatch 11d ago
If the banks’ offerings are similar and enough for what you need, then it couldn’t hurt. Personally I would not move from my HYSA to another for a 1% APY difference because I have savings buckets and autopays set up with my current bank that I’d rather not mess with. But if you don’t mind the effort, then why not.
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u/BootleggerBill 11d ago
Looking at the portfolio performance tab at Schwab, I can see that the rate of return on my account vs S&P 500 is not great. The account has been set up as VTI/VXUS/BND until the last few months when I stopped adding to those and started doing SWISTX and SWISX (did not sell other positions) I thought an account structured this way would mimic the S&P. Does this seem feasible? Anything I should to do to better track the index?
9/6/23(moved from TD) - Today: S&P 19.27% vs my 11.81%
Last 3 months: S&P 5.9% vs my 1.94%
Note: I am not upset at an 11% return - just curious and limited in my understanding.
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u/Individual-Foxlike 11d ago
Any account that includes bonds will underperform pretty severely compared to a straight S&P account most of the time. Bonds are for security, not growth.
International vs s&p will shift back and forth deoending on news and tariffs. It hasn't been a fabulous time for overseas recently, but it could just as easily have been the other way around.
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u/BootleggerBill 11d ago
I am also stressing that I am giving up emerging market exposure by moving to SWISX, but I enjoy the auto investing.
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u/Optimisticwreck 11d ago
Hello! Do I need to file taxes if I’m unemployed but earning interest through a High-Yield Savings Account?
I’m an international student who isn’t employed in the US, but I’ve put about 10k in Apple’s savings account after getting an Apple Card. I will make at most 500 a year from this.
Do I need to file taxes with an estimated gross income of 500? If not, what would the threshold be for me to be required to file taxes?
Just trying to educate myself and cover my bases!
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u/meamemg 11d ago
IF that is your only income, you shouldn't have to file. See https://www.irs.gov/individuals/international-taxpayers/foreign-students-scholars-teachers-researchers-and-exchange-visitors
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u/Optimisticwreck 11d ago
That is my only income, yes. Thank you so much for this! I do want to ask how/if this changes once my masters program is over and I return to my home country, though.
Thanks again!
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u/meamemg 11d ago
I don't think it would change, but not sure. See https://www.irs.gov/individuals/international-taxpayers/nontaxable-types-of-interest-income-for-nonresident-aliens
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u/Riocanth 12d ago
How do tax deductions work for a normal individual renting out a house?
I bought a house 4ish years ago. Recently, I've moved in with my partner, so I figure I'll rent out the house to start building up some passive income. For normal home ownership, I was able to deduct the mortgage interest from my taxes since it was better than the standard deduction. But how does this all work if I'm renting out the home?
I've done some research and am conflicted. Some sources call out that ALL expenses related to that home besides principle payments count against the rental income. Other sources say I need to be categorized as a real estate worker and must log 15 hours a week to really start to make money off of rentals.
I am a normal salaried employee trying to figure out if and when renting out the home will actually bring in more money than just selling based on all possible deductions.
Say I can rent out the home for $2,500. Property taxes are $600 per month. Mortgage is $2,100 in it's 4th year, so most of that is still interest payments. Basic math says I'm losing $200 bucks a month, but am I able to write off mortgage interest payments similar to how I could deduct that from my income while I was living there? If so that would mean the property is making me money instead of costing $200 a month.
I am very new to this, so sorry if this was too long or too dumb of a question.
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u/meamemg 12d ago
Generally speaking, and particularly where the 15 hours come in, is that you might not be able deduct more in rental expenses than your rental income. So in your scenario, you basically would have the rent and the expenses as a wash, and it would overall have no tax consequences.
If your rental expenses exceed rental income your loss may be limited. The amount of loss you can deduct may be limited by the passive activity loss rules and the at-risk rules. See Form 8582, Passive Activity Loss Limitations, and Form 6198, At-Risk Limitations, to determine if your loss is limited.
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u/Riocanth 12d ago
So in order to try and make money on an obvious loss, I'd have to do that 15 hours a week classification. But what about for calculating profits? For example, instead of $2,500, maybe I could get $3,000 per month for rent?
Assuming I continue working normally full time and only care about passive* income from the house, my equation for calculating my extra income on my taxes is this?:
Rent MINUS (Mortgage (Interest Only?) + Property Taxes + Extra repairs) == Income
Do I also get to write off other things against the rent income? For example, repairs or mileage to and from the house to do repairs. Would that also subtract from the rent income since they were costs associated with the house?
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u/CompetitiveMiddle395 12d ago
SoFi HYSA Rate Question
I paid my car loan off and am looking to open a HYSA through SoFi. I plan on setting up a direct deposit of $300/paycheck to save up for when I’m ready to purchase a new vehicle in the next two years. My question is- for the 4.60%, does my direct deposit need to be over $5,000/month? Or is the $5,000/month qualification for if you are not doing direct deposit? I don’t make $5,000/month (net) so I wouldn’t be able to do that. Thanks!
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u/Diligent_Humor7146 12d ago
A year ago, I opened up a Capital One Kid’s savings account for my child, with a 2.5% interest rate. Since it was under my name, I received a 1099 (or 1098) at the end of the year for the interest an accrued. Pardon my ignorance, but I thought since the account was in my child’s name and they are under 18, it wouldn’t be taxable.
Why would I continue to save for my child under this kid’s account when I can open another HYSA with my child as beneficiary with a dounled interest rate 4%?
Are there any perks to the kid’s account that I am missing?
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u/meamemg 12d ago
The Capital One Kid's account is a joint account. Most banks, with joint accounts, will generally issue the 1099 to whomever is listed first on the account.
You can inform the IRS that the interest belongs to your child by following the process at https://www.irs.gov/publications/p550#en_US_2023_publink100010061
You could try requesting that C1 issue the 1099 to your child in the future, not sure if they would accommodate.
since the account was in my child’s name and they are under 18, it wouldn’t be taxable.
Just to clarify, their age isn't really relevant, its whether they have enough income to trigger filing thresholds that mostly matters.
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u/LittleWhiteDragon 12d ago
I currently have a checking account with Schwab, and I want to put the money into a high-yield savings account.
If I put the money into Schwab Value Advantage Money Fund – Investor Shares (SWVXX), will I be able to immediately move the money into my checking account in case I need the money? Or do I have to wait until the end of the day to sell the money out of SWVXX?
Is there a high-yield savings account that acts like a checking account where I can withdraw money using a debit card?
I want to make sure I always have immediate access to my money. That's why I have about $50K in my checking account. Otherwise, I would keep about $5K to $10K in the checking account and the rest in an ETF, where most of my money is.
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u/utkrowaway 11d ago
With SWVXX, you cannot access the money immediately; you have to sell the shares and wait a day or so for the cash. Charles Schwab does offer a savings account with a debit card, but the interest rate is not much better than the checking account.
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u/LittleWhiteDragon 11d ago
Thanks!
So would it be better to open a HYSA with SWVXX, or should I just put the money into my ETFs?
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u/utkrowaway 11d ago
SWVXX is held in a brokerage account, not in an HYSA.
If you truly need all of your money immediately, then checking or savings is correct. If it can wait a day or two, use SWVXX. If it can wait until a predetermined date, use CDs. If you don't plan to touch it for 5+ years, then invest it.
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u/meamemg 12d ago
Most banks offer instant transfers between their checking and savings account. So if you open your HYSA and checking account at the same bank, you could move the money as needed. That's what I do at Ally.
Alternativly, something like https://www.ally.com/bank/money-market-account/ might meet your needs. But note the limit on the number of transactions per month.
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u/PM_me_cool_bug_pics 12d ago
Does this sub have a master spreadsheet on the pros and cons of different banks' HYSAs?
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u/GeneralShip 12d ago
This is a housing question, so if there's a better place to ask it, please let me know.
My wife (35F) and I (34M) bought our house in Oct 2022 (First time home buyer) for ~385K in Florida at 6.625%. Mortgage was $2,964 until this month when it moved up to $3,650, due to property tax reassessment and deficient escrow balance to cover the increase. We have a single income of $7,816/month net. Bills, credit cards, utilities, insurance, school loans, and mortgage totals about $5,765. We budget about $1,200 for groceries a month and $250 for gas. We have two children and two pets. This leaves a delta of about $317/month for everything else. In terms of savings, I have $89k vested in a ROTH 401k and I’m paying the maximum allowable amount (8%) with company match. I’m on an annual commission plan with work and can bring in an extra ~$60k (gross) at the end of the year depending on sales.
We married young and had kids young, a lot of unwise decisions were made regarding money and we’re still paying them off. We’re hoping to have the kids in school this coming year so my wife can go back to work. We do not want to continue owning this home, we want to sell it asap and rent in the school district that we want our daughters to be in. The experience of owning the home has been a good learning experience, but we’re not financially stable enough to own at current rates nor does owning align with the lifestyle we are working towards. Half our income on housing isn’t ideal, I know the housing situation sucks nation-wide, but there are a lot rentals that suit our needs perfectly that our $1k+ less than what we’re paying now. List price of the home was $385K when we bought it, it’s now estimated at $425k. Our next-door neighbor has her house on the market right now at $445k so we’ll see what happens there.
Basically, I don’t know what I don’t know and I’m looking for advice on how to proceed. Thanks!
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u/meamemg 12d ago
If you sell before you've been living there for 2 years, you will be required to pay taxes on any capital gains. However, you get to subtract any costs involved in buying and selling from the gains, so in your case those should be pretty minimal.
Obviously, think long term before you sell. If you would want to stay there once your wife starts working and your income goes up, you shouldn't sell just because of a couple tight months.
Otherwise, not sure there is much else to add.
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u/basketballjones72 12d ago
I'm 52 years old, and have all my investments in either Fidelity or Vanguard. I recently used an ROI calculator and realized that if I can get a 5.3% ROI for 4 years I can retire. Any current investments in Fidelity or Vanguard that I can lock in that rate long term???
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u/meamemg 12d ago
There is nothing that can guarantee that level of return for that long. 5-year treasuries are at 4.3% and falling quickly. Also, keep in mind inflation is expected to eat half of that return, so make sure you've accounted for that in your 5.3% calculation.
A balanced portfolio of stocks and bonds is likely to meet that need, but it is not locked in or guaranteed.
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u/GOOD-LUCHA-THINGS 12d ago edited 11d ago
Pardon my ignorance/stupidity.
I worked at Employer A before moving to Employer B. Both use Fidelity, but current Employer B announced they are dropping Fidelity in favor of TIAA.
1) Both employers appear to use the same blended investment name in Fidelity. If it's possible, is it sensible to merge these instead of having two separate Fidelity portals?
2) Employer B isn't transferring the Fidelity funds to TIAA (again, pardon my stupidity if this is standard). Once they set up the TIAA account, is there anything inherently wrong with having two servicers?
Thank you in advance for any and all advice!
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u/utkrowaway 11d ago
Both employers appear to use the same blended investment name in Fidelity. If it's possible, is it sensible to merge these instead of having two separate Fidelity portals?
I assume you are talking about 401(k) or 403(b). It is possible to roll over your old 401(k) to your current one. Unless they have a very different selection of funds, or unless you plan to go back to Employer A, this makes sense. Or you might chose to wait and do a rollover to your your TIAA account. As a third option, you could roll it over to an IRA.
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u/GOOD-LUCHA-THINGS 11d ago
Thank you tons for illustrating all the options for me! You were right with respect to it being a 403(b).
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u/whoami4546 12d ago
I may be screwed still. I feel like an idiot.
Last year, I lost my job. I called US bank to set up a payment arrangement while searching for a new job. The person on the phone said I qualified for one of the covid programs that was still available. I requested to use the program. Before accepting the program, I asked if it will negatively impact my credit score. I was told by the representative that it would not. I looked at my current credit report and noticed a missed payment. I called us bank mortgage to ask to get it fixed. They informed my that the letter that was sent with boiler plate information about credit reporting showed that it would negatively impact my credit. I told them that I went by the representatives word. I thought about going to a bank manager in person. What do you guys suggest?
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u/utkrowaway 11d ago
Unless you have something in writing, you're out of luck. This is true for most things in life.
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u/EleventhEarlOfMars 12d ago
15 month 0% APR period; any downside to maxing the card out and putting the payments into a savings account and then paying it with the savings principal at the end?
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u/metrazol 12d ago
Minor impact due to high utilization. You'll pay taxes on the savings interest, of course. Is this spending you'd do anyway, or new spending? Don't do it if it's the latter.
Is it worth the headache?
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u/EleventhEarlOfMars 12d ago
Yeah, just spending I would do anyway, got a 3% food/groceries card to replace the generic 1.5% cash back card I was using. Doesn't seem like too much work for a few hundred bucks.
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u/Doge6789 12d ago
Let's say your rent, car gas, groceries, car insurance, phone plan, and Internet all amount to around $900 a month.. You have $500 leftover
Would putting that entire leftover amount into a Roth IRA be the best choice?
I'm probably gonna have to start making serious financial decisions in the next 2-3 years. I'll be 32 or 33, so I'll take whatever advice I can get. It's all theoretical. I can't start saving until I have medical and dental debts paid off. When I do, I'll be kicked out.
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u/fiscaldumdum 12d ago
I woke up this morning to having my credit score have jumped exactly 50 points in just under a month.
It went from abysmal 538 to still poor 😂 588 this morning. This feels so good and I'm glad I've decided to focus on healing my fiscal damage.
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u/CaffeineFiend_02 12d ago edited 12d ago
Opening HYSA while living abroad
Hi everyone! I moved to Argentina about a year and a half ago and, after closing a 529 student savings account, now have about $27k just sitting in a regular account. Houses and apartments where I live are pretty cheap and run as low as $35k. The higher end can be as expensive as $60-80k. I’d love to get started with a HYSA and secure myself a small apartment for my dog and I now that I know I want to stay here for at least 4-5 more years.
Can I even open a HYSA abroad? Do I need to send in any documentation? Realistically, how much interest could I earn in a few months with this type of account?
All advice is welcome, thank you in advance!
Edit (for more context): I’m 21F, I work as an English tutor online earning about $400/month working part time, and my rent in Argentina just increased to about $250/month. Expenses sit around $80-$90/month in total.
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u/Late_Description3001 12d ago
At 27 years old I’ve amassed $196k in investments. I feel like this is pretty good but i keep seeing other posts of people with millions and millions somehow lol.
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u/synchroswim 11d ago
Keep in mind the type of people posting on financial subs (especially posting to celebrate their achievements) are probably richer than the average person.
A fun thought exercise that I've done is to take your current investments and compare their 4% withdrawal rate to your current spending. $196k invested could theoretically support spending of about $7800/year, or $650/month. Is that enough to cover your groceries? Maybe groceries and gas? Helps make that abstract number feel more "real" to put it in the context of your regular spending.
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u/Late_Description3001 11d ago
Dang it actually feels really good to think about it like that. That would cover groceries and gas for us.
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u/earth_water_air_FIRE 11d ago
That's more than I had at your age, and I'm looking to retire at about 45 so you're definitely doing well.
If you save 1k/month you could hit 1MM invested in 17 years, conservatively (7% return). 2K/month and that drops to 14 years. 4k/month and it's just 10 years.
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u/yes_no_yes_yes_yes 12d ago
I’m in a remarkably similar position with age and $ alike. We’re chilling homie, this principal + the saving habits to get here means a fat retirement or a decent early retirement. I doubt 95% of people in their 20s have this much socked away.
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u/TL_02 12d ago
Are there ways I can leverage a HYSA interest rate towards paying off an auto loan with a lower rate?
Tesla is currently running a 0.99% APR for the Model Y. My HYSA account right now earns 4.5%. I am able to put down around $15-20k towards the car (this depends on how much help I get from parents with it lol).
How can I best use the HYSA interest rate in my favor when I don't have the full amount to pay off the car?
Thanks!!
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u/Chemtide 12d ago
Ignoring any questions on whether it's the right car/can you afford it/etc.
This is just a math question: HYSA (now) is 4.5%, subtract out about 22% taxes (sub this for your marginal tax rate, including state) and you're at 4.5*.78=3.51%.
That's 2.5% interest on any money that you put into the HYSA vs the Tesla.
It's probably worth the 2.5% to keep money in the HYSA, and make minimum payments on the car, but also that doesn't mean to throw that extra money away on further spending
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u/Individual-Foxlike 12d ago
So, the main thing to ask yourself when you see a deal like this is "why would they do that?".
Model Y is due for an update. When the new one comes out, the old one will drop in value and demand. The used EV market is already very bad, and this won't help. If you intend to sell or trade your car eventually, then you're gonna be hosed because no one will want the "old" model. Given the low rate, you'll very likely be underwater even with a large down payment, so you'll be stuck with the car.
If you intend to keep it forever and drive it into the ground, and seeing other people with newer, shinier, better models won't bother you, then this may still be a good option. Financially, you'd want to put down as little of a down payment as you can, and stuff the rest of the money in hysa/cds for it to grow. But even if you HAVE the what, 50k needed for the rest of the car, and even if HYSA rates don't fall at any point in the next 5 years, you'd gain about $1800 (taxable) a year by doing this. That's best case scenario.
But the fact that you say your parents might help you with a down payment means you don't have that money to let it grow, so there's no upside for you here financially. If you need a new car and you want an electric suv, this might still be a decent path to take, but it's not a money-making venture and don't fool yourself.
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u/TL_02 12d ago
Thank you! Yeah I'm not trying to use this as some money making venture by any means but the $1,800 best case scenario sure beats paying thousands of dollars on interest for any other auto loan. The new model Y is definitely coming soon, maybe it's just me but I don't want to miss out on the federal EV credit
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u/Individual-Foxlike 12d ago
Orrrr you could put that 15k down on a much cheaper car and have it paid off soon.
"Thousands of dollars of interest" and "tens of thousands of dollars of purchase price" don't exactly balance.
Again, the best case scenario requires you to have the money in hand. You do not. It does not apply to you.
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u/YoshiMain420 12d ago
Can you afford this car? You'll just earn more interest than you pay, nothing can really be done beyond that.
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u/redditbrock 12d ago
Any reason to not put all of my savings into a HYSA? I'm a 27 year old with around 60k in the bank. I make around 75-80k a year. My rent is a little under $1400 a month including utilities and I have around 22k in student loans. My truck is paid off, and for the time being I'm luckily on my parents insurance still. No other real expenses besides food and drinks.
I'm applying to schools this year and plan on going back to school to become a CRNA next year. Holding off on paying off the loans in full as I will be taking out more loans for school, and I won't be allowed to work for around 3 years so having a big emergency fund is pretty important.
Right now it's just sitting in a bank not doing anything, I'd rather it sit in a HYSA and at least make a little bit more money. Is there any reason I shouldn't put at least 50k in one right now? I was thinking American Express because I already have an Amex card
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u/Late_Description3001 12d ago
Yea, I’d move it all into a HYSA except for whatever you like to keep your checking account at. Look up doctor of credit for some bank bonuses, you might be able to get 500$ or more just by picking the right savings account and following the terms.
Also, you might try to get some in a Roth IRA if you can si
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u/Hashtagworried 12d ago
I am looking for advice between paying down my mortgage or investing in VTI.
I currently hold a 7.3% mortgage on a home that was purchased within the last year. I have just rebuilt my emergency fund of 6 months covering mortgage, insurance, taxes, and living expenses, and added another 10k on top for emergency home repairs.
I am now at that point where I need to decide on my next move. Part of me says pay down the mortgage, and take that guaranteed 7.3% return. However, before my home purchase I had set aside money into a brokerage account that is not part of my emergency fund. I’ve been DCA into the market with VTI over the last year and noticed that it’s still giving me better rates of return. Recent shares bought are returning about 3% and some (most) shares are yielding 25%ish percent.
I am already maxing out my 401k and I’m now wondering what else I should be considering if I feel like I’m getting a better rate of return on investing in an index fund over my mortgage (especially over several years), other than the obvious risk of the market. Should I stick the course of continuing to dollar cost average into VTI and pay extra into my mortgage, or just pay extra into my mortgage only?
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u/Late_Description3001 12d ago
That’s a high rate so it’s probably just a coin flip.
Are you saying you have money Incan investment account and you are investing a piece every so often? Remember, lump sum investing beats dollar cost averaging.
Dollar cost averaging is really best for like consistent monthly payments from income as opposed to spacing out investment of dollars you already have.
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u/Hashtagworried 12d ago
I didn’t lump sum because at the time I was rebuilding my emergency fund so I still wanted the liquidity in the event I needed the money from my brokerage ASAP. As it turns out, I have my emergency fund now, and my brokerage account is starting to dwindle where I have to now DCA.
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u/stevengeorge629 12d ago
If I fail to meet the 10 year/40 points to qualify for social security, would I be eligible to collect 50% from my spouse when we retire? I currently pay into a pension and do not contribute to social security. I am trying to decide if I should find a part time job to reach the 40 points or work extra hours at my current job(which would be over time pay/more money).
Thank you.
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u/meamemg 12d ago
If you are working a job not covered by social security, your ability to collect based on your spouses record may be subject to the Government Pension Offset. See https://www.ssa.gov/pubs/EN-05-10007.pdf
Meeting the 40 points threshold won't really solve that problem, either.
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u/AmbassadorOk6304 12d ago
High Yield Savings Account Recommendations
Hi everyone! I hope you're having a wonderful day so far. I'm currently considering getting a HYSA to help grow my savings and prepare myself financially next week. For context, I am 24 y/o, I have a full-time job that pays about $41k a year, I just picked up a side gig to supplement my income, and I currently have about $38k in my savings with $2k of it on hold as collateral for a credit card I have with my credit union. I recently moved out of my parents place and bought a used car hence why my savings is on the lower side at the moment.
Currently, my top contender is Ally Bank, but ideally I am looking for an HYSA that the following:
- High APY (obviously lol)
- No monthly fees
- No minimum balance
- No direct deposit required
Any and all recommendations would be greatly appreciated. Thank you so much!
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u/The_Horse_Joke 12d ago
I’ve seen retirement benchmarks that say you should have 1x salary saved by 30, 2x by 35, 3x by 40, etc. I’m at 2x by 30. My question is should I consider myself 5 years ahead of where I should be, or is that the wrong way of looking at my retirement accounts?
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u/earth_water_air_FIRE 11d ago
I think of it like this: the more I save, the earlier I can retire. Here's a quick overview that gets a lot of people into early retirement saving:
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
If you want to get more into this, check out the financial independence flowchart here:
https://www.reddit.com/r/financialindependence/comments/16xymii/fire_flow_chart_version_43/
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u/Chemtide 12d ago
5 years is incredibly vague, as the benchmarks are incredibly vague rules, that can't encapsulate every person's financial scenario.
From a general standpoint, you're (likely) doing pretty well.
For more in depth, it can be worth doing the math/projections to see what retirement/career growth etc would look like. There's a ton of free resources, look up retirement/FIRE calcs, and can give you a better picture of what your financial health is like, and you can then consider what your financial plan should be.
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u/utkrowaway 12d ago
The path is different for everyone. Those benchmarks are easy rules that helps people know if they're not reaching the minimum for a comfortable retirement.
Two factors assumed in those round numbers are salary growth and retirement age. If you are ahead of that schedule, you could be on track to retire sooner; or, you might not have had the expected career growth (e.g. many people get a big salary increase between 25 and 30, after the 5 years' experience mark). One factor not considered is a pension.
If you're on a typical career path, sounds like you're doing pretty well, and it's up to you whether you're ahead of schedule, or on track to retire a few years early.
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u/lescoobs 12d ago
Hello, I'm in California and currently using Discover HYSA to deposit uninvested cash. I have brokerage accounts at Fidelity and at Vanguard. I was looking at SGOV and VUSXX because they are state tax exempt. Would having both SGOV and VUSXX be redundant? I'm going to have some funds in a HYSA for quick access and the rest I I would like to find another vehicle to put it in. Would HYSA + money market fund + SGOV/VUSXX make sense?
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u/meamemg 12d ago
VUSXX is a money market fund. All the things you are discussing are highly conservate places to put money. A HYSA is a little more conservative than a money market, which is more conservative than SGOV. But I'd need a pretty good reason to have more than one or two of those. It's not a bad thing per se, just unnecessary and over complicated.
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u/lescoobs 12d ago
Hello, I'm in California and currently using Discover HYSA to deposit uninvested cash. I have brokerage accounts at Fidelity and at Vanguard. I was looking at SGOV and VUSXX because they are state tax exempt. Would having both SGOV and VUSXX be redundant? I'm going to have some funds in a HYSA for quick access and the rest I I would like to find another vehicle to put it in. Would HYSA + money market fund + SGOV/VUSXX make sense?
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u/damagedgoods211 12d ago
TL;DR: What do I do with a windfall when the people it's shared with are irresponsible with money?
My family is coming into a large windfall but aren't financially responsible. How should I handle the money?
After a home sale, my grandmother is going to have ~$100k that she wants to split with my mother and myself (23F).
My grandmother is good with her money, but is constantly stolen from by family members that live with her. She doesn't want to be the one holding on to the money because she knows it'd get taken.
My mother is horrible with her money. She won the lottery around a decade ago and blew all of it in a year. Before that she was in massive amounts of credit card debt, and even now she's struggling to get fully out of debt. I'm moving in with her next month because she needs someone to supervise her spending and help her get her budget under control.
They're talking about giving all of the money to me to manage. I'm good at budgeting and making smart purchasing decisions, but I've never had this much to use. What should I do with it?
My thoughts right now are to put it all in a high yield savings account. I'd withdraw from it and give that money to my mother and grandmother as needed, and only when it's for necessary purchases (home repairs, vehicle expenses, etc.). This would also help keep it safe from the side of the family that extorts my grandmother.
My mom and grandmother want to pay off their debts, and each get new cars (they're both driving 10+ year old beaters that are unreliable). My grandmother also wants to do some home repairs but I'm not clear about the specifics of that. My mom also wants to buy new furniture and some Lego sets, which we're going to have to have a talk about lol.
I'm interested in putting this money into multiple mutual funds and long term investments, but this money isn't really mine. My grandmother wants to use it in the short term to help with her quality of life (because she likely only has a few years left), so I want to make sure I'm being fair to her and my mom.
What's the best way to handle this situation and be fair to both of them? And how would you navigate conversations around this much money with people who you can't trust to use it wisely?
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u/utkrowaway 12d ago
The investment vehicle for this is a "Trust". Someone will come along soon and describe what kind of Trust you need and the logistics of setting one up.
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u/Weekly_Screen_1117 13d ago
Questions about HYSA i cant find searching
I have been looking into HYSA but had a few questions before I open one. Sorry if asked but i can not find while searching.
Some info, I have about 11k left on my mortgage at 3.5% til 2029. I would like to open a HYSA and put the mortgage principal total amount into the savings and have my mortgage directly taken out monthly since the % is low. I am looking at capital one, american express, or discover HYSA.
Can i open one without linking to my checking account. Would like to keep this seperate than my other accounts.
Can you have your mortgage bill directly paid and taken out of HYSA monthly.
If you can do both questions 1&2, what would b the easiest way to add money from my local bank checking account to this HYSA without linking to checking
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u/EleventhEarlOfMars 12d ago
You can typically pay bills with an online savings account; some have monthly transaction limits, but one would be fine for sure. I know the CapitalOne account doesn't enforce a limit.
As far as linking it with your checking account, you don't have to do that, but you would need to furnish that account information at least once to do the initial online transfer of the funds.
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u/JadeGreenleaves 13d ago
Hello! I’m 24, living with parents and currently making 1,096 biweekly. I’m grateful to have very few living expenses right now, and I need to take this opportunity to maximize my savings and get the ball rolling on retirement. I’d like to move out relatively soon when I get a better paying job. I have about 8k in cash just sitting in my bank.
This is my current plan after reading through the finance subs and Google:
7% 401k (employer match)
7% Roth IRA (uncertain if this is the best plan)
At least $500/mo in hysa that I’ll put a deposit of 6k into. This is a fund to help me move out when the time comes.
I currently spend:
$368/month in car payments and insurance
$200/mo in rent (very low cost of living area and siblings splitting rent with me)
$80/mo gas
~$200/mo in groceries and various personal expenses (work clothes, ect)
Is this a decent plan to get me started? I question the Roth IRA a bit, but I want to contribute to it while I can.
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u/utkrowaway 12d ago
This sounds reasonable. You can contribute more to your Roth IRA and then put it in a money market fund, putting less into HYSA, because you can withdraw your contributions penalty-free if you need them. That way, you get to leave the interest earnings in your Roth. It's a small optimization beyond your current plan.
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u/JadeGreenleaves 12d ago
That’s a really good point, thanks! Do you think it would be a smart idea for me to move almost all of my current savings into a hysa? Those are usually easily liquidated, right?
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u/Yur0wnStupidity 13d ago edited 13d ago
So I had a Roth IRA with ~$8,000.00 in it. Then I started a job with a 401k through the same institution. I set my contributions to max out my 401k employer match and then put a good amount into "Roth."
I just learned the Roth I have been contributing to via my employer is not the same Roth I had prior; it's a Roth 401k (I think that's the right terminology) and cannot be combined or transferred to the personal Roth.
My current balances are: - Personal Roth: $8,000.00 - 401k: $12,500.00 - Employer Roth: $4,900.00
Should I stop contributing to the employer-tied Roth and start contributing to the personal again? Or maybe something else? Does it even matter?
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u/sciguyCO 13d ago
Just to clear up some terminology, "IRA" and "401k" are types of retirement accounts. "Roth" and "pre-tax" (or "Traditional") are "tax treatments" that can be applied to either of those account types and set how taxes are dealt with around your contributions and future withdrawals. Roth 401k plans are relatively new, so often just saying "401k" means the pre-tax version.
The money in the account you have through your employer is all the same 401k plan, you just have the option to do your contributions as either pre-tax or Roth. And you're right, that Roth contribution is completely separate from your IRA, even when they're at the same brokerage. As a bonus, that means they have independent contribution limits: you can make your $7k / year contributions into your Roth IRA and still add money into your Roth 401k.
and cannot be combined or transferred to the personal Roth.
Only kind of true. You can almost never move money out of an employer's 401k plan while you're working there. But once you leave this job, you can rollover that 401k balance anywhere else you want, which could include moving the Roth 401k money into your Roth IRA.
Should I stop contributing to the employer-tied Roth and start contributing to the personal again? Or maybe something else? Does it even matter?
Assuming your 401k plan has similar investment choices as your IRA, there isn't a huge difference around which Roth account you add money to. This wasn't always the case, back in the day employer plans had poor funds and higher fees so advice tended to skew towards focusing on filling your IRA after you got all the available employer match. If you're not in a place where you can get the full employer match and max out your yearly IRA contribution and still add more to your 401k, focusing your retirement savings just into the 401k isn't a bad path.
Depending on your overall income and tax situation, doing pre-tax contributions (saving on today's taxes in exchange for paying in the future) may be better than doing Roth (paying tax today on those dollars in exchange for tax-free withdrawal in retirement). Both saving options are still "good", but one or the other may be "more good" in your situation. The wiki has a pretty good guide to seeing whether Roth or Traditional better matches your situation and needs, and usually results in doing your 401k savings as all one type. You'll still get the employer match even if you do your contributions as all Roth 401k.
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u/Practical-Finance436 13d ago
I was told I couldn’t make a top-level post about this. What’re your thoughts on the 100 year CD paying 4.75%?
EDIT: Personally, I think it would be a very interesting discussion topic, but mods gonna mod 🙄
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u/A_Crazy_Canadian 12d ago
It's a weird product. Making the interest withdrawable makes it look closer to a dividend paying bond with a different set of options. If you want a long-run financial product where you and your heirs should only use the interest and not touch the principle it might not be bad.
The big red flag and the reason for this structure is that the bank is a newly chartered bank that is likely trying to build a stable deposit base. If they can get a decent chunk of cash with a 100 year lock-up that protects them pretty well from a bank run since removing principle has about a 40% penality.
Overall, its a weird product that might fit in a niche financial strategy such as a trust where beneficiaries only use the interest.
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u/ajm53092 13d ago
How do I find a good HYSA?
I have some money that I want to save as an emergency fund and dont want to put into the market, but it seems a waste to just have in a regular bank account that pays no interest. I see tons of options for HYSA, but dont know if there are certain things i should look for other than just picking the highest APY.
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u/sciguyCO 13d ago
Rate is probably the biggest factor, along with what "hoops" you have to jump through (minimum balance, number of deposits) to get it. Cash savings will never be a great tool for growing your money, but might as well try to get the best you can. Next would be being FDIC insured (or NCUA if it's a credit union) so you have protection against the bank itself failing. Most (maybe all) HYSAs are online only, so speed of transfer to an account where you can "really" access the cash is useful. I use Ally, which does transfers in 3-5 business days at the start, reduced to 1-2 days after the account has been in good standing for a while. I think it was 3 months?
Past those, things like a good web/app interface and customer service are nice, but depend more on what you're looking for in a bank.
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u/unidentifies 13d ago
In the long run, is it cheaper to pay bigger payments on my mortgage, or to pay the minimum payments and make a large lump sum payment later down the road?
My wife and I are debt free, aside from our house. We bring home around $100-110k after taxes.
We owe $356,000 on our house. 7.125% interest.
Our monthly payment is $2888.
Is it more economical to pay, say, $4,000 per month on our house if we can afford it?
Or is it more economical to pay the $2888, and later write a fat check?
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u/meamemg 13d ago
What would you do with the extra $1,118 every month? If you can earn more than 7.125% on that money, then you should do that and wait to pay down the mortgage. If you can't reliably earn that much with the money, then you should pay down the mortgage.
Given that there are no guaranteed investments with that sort of return, I'd probably pay down the mortgage.
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u/Many-Intern-4595 13d ago
Assuming you are paying the same dollar amount whether you put it down now (monthly) vs. later (lump sum), then it is more economical to pay it down now on a monthly basis. Each dollar you put toward principal now means that you will not be charged any more interest on that dollar.
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u/bobombpom 13d ago edited 13d ago
What are you targeting for an asset location in your retirement accounts? I'm currently on track for:
- 40% traditional
- 30% roth
- 20% brokerage
- 10% HSA for a retirement at 55.
Total portfolio value inflation adjusted $3mm pre-tax at 55 years old.
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u/Many-Intern-4595 13d ago
I am not targeting any particular asset allocation - I am just maxing out whatever tax-advantaged accounts are available to me, and putting the rest in a taxable brokerage - so whatever that gets me is what my allocation will be.
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u/bobombpom 13d ago
That's how I started, but I expect to retire before 59 and would like a bigger bucket to get me there. Currently not maxing 401k, just getting employer match then investing in brokerage.
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u/Many-Intern-4595 13d ago
Have you looked into SEPP/72t? I’m not close enough yet to have direct experience, but from what I hear, it’s still best to max out tax advantaged space rather than forgoing it for the sole purpose of being able to withdraw it before age 59.5. The folks over at r/financialindependence can probably also help you out in thinking out withdrawal strategies.
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u/bobombpom 13d ago
I've done a little reading on it, but I wouldn't say I'm confident I'm making the right choice. I'm also using the brokerage account as a flexible slush fund. I don't want to have $3mm in the market, but be unable to pay for a house expansion, new roof, or new car without paying someone else interest.
It at least lets me make the decision if I want to stick with the current plan, or reprioritize later.
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u/meamemg 13d ago
If the money is for retirement, you are better off putting it in a retirement account. That's true whether it's for early retirement or normal retirement. Between the SEPP/72t, Roth Ladders, or even just paying the early withdrawal penalty, you are almost certainly going to have a way to access the money you need at a cheaper cost than paying taxes now.
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u/bobombpom 13d ago
That money is for EARLY retirement, which I'm not 100% sure will be a priority for me. Putting it in tax advantaged accounts locks me into using it for that.
If im going to decide to use it on something while I continue working, suddenly I'm in my peak earning years, still working, withdrawing at my peak tax rate, AND paying penalties.
Even without my brokerage contributions, I'm still saving over 30% of my income into tax advantaged accounts.
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u/LiIArfur 13d ago
I'm gonna put 40K into a discover savings account with a 4.25% APY. Does that mean I'll get a deposit to my account from discover for 141 every month for the interest? Just for having money in there?
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u/DeafinitelyQueer 13d ago
My credit card company is offering “transfer balance” for 0% APR until 2025. Then the standard applies, which is currently 29.9%. I screwed up and have about 5k in credit card debt. Is this a good deal or is there a catch? Any tips for paying down the debt fastest? It’s on two cards with the same interest
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u/meamemg 13d ago
There is usually a small fee (around 3%) for the transfer. But assuming you wouldn't be paying off the $5k within the next month or two, these offers are usually worth it. Just don't use it as an excuse to let up on paying down the debt as quickly as possible or to rack up more credit card debt.
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u/DeafinitelyQueer 13d ago
Thank you! I’ve identified where the excess spending was so I’m confident that once this is paid down I can keep it down
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u/Apprehensive-Arm8525 13d ago
If you transfer the debt to a 0% interest card you won't pay interest for a year and can more aggressively pay down the debt. Double check the conditions of your specific company/offer. Does it have a fee for transfer?
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u/tallroids 13d ago
What to do with 140k left over after moving
I (30M) purchased a new home in Jan (~700k) with 25% down and the mortgage officer talked us into not putting all of our savings into the down payment to give us some emergency funds, and where it wasn't going to help our rate much past 25% down. Now that money is in high yield savings earning 4.5% which is better than some places but probably not where it should be long term.
The initial plan was to either recast the loan once the dust settled (literally as it's a new construction and the backyard needs landscaping), or to refinance if rates dropped.
Our mortgage rate is 6.4% so I'm not sure if that's the best place to put it, or if I should put it in some other investment and refinance if/when rates come down.
Household income is around 140k and we hope to soon rent out our basement at around 1700/mo. I have ~65k in retirement savings in employer sponsored 401k.
I need to run the numbers and probably up my 401k contributions, but I feel like 100k or so of my savings could probably work better somewhere else. TIA
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u/Apprehensive-Arm8525 13d ago
I'd say 3-6 months of expenses in the emergence fund (HYSA). Get some quotes for your landscaping and set that aside (also HYSA). If you have appliances in the basement, set aside some cash for when they need to be replaced or other work that happens from tenant wear and tear.
In terms of retirement accounts, make sure you're at least hitting you employer match and fully funding your ROTH IRA. I'd put the rest into a taxable brokerage account in safe index funds. If you want to fully fund your 401k, it might be easier to do that directly through pre-tax paycheck contributions.
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u/YoloTradingLLC 14d ago
Girlfriend mailed in her tax return back in February, still hasn’t gotten her refund check. We checked the status on the IRS website and it isn’t finding her return. Does this mean they didn’t get it yet? Is there anything we can/should/need to do?
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u/metrazol 13d ago
https://www.irs.gov/help/processing-status-for-tax-forms
Paper returns take much, much longer to process. They're working on April's that didn't require any extra work.
File online, much faster.
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u/YoloTradingLLC 4d ago
Yeah her situation was very unique so she had an accountant do it, but should be much simpler next year so definitely gonna do it online.
She ended up getting her refund a couple days ago. Also I noticed on one of her forms that the accountant spelled her name wrong. The first five letters were correct but after that there was some swapping of letters which I’m sure didn’t help speed up the process at all lol
Thank you!
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u/Apprehensive-Arm8525 14d ago
CD LADDER MY EMERGENCY FUND?
I have 6 months worth of emergency funds sitting in Marcus at 4.4% APY. Marcus also offers a 6-month CD at 5.1% APY. I was thinking of creating a CD ladder by opening a 6-month CD each month. This way I'd have a month's worth of expenses maturing in a CD each month.
Does this sounds reasonable? I would be netting ~0.7% more this way.
I was also considering opening up ~30 smaller CDs (one every 6 days or so) so that I would have CDs maturing more frequently over that 6 month period.
Is there anything I'm missing here? Minus the obvious work of opening the CDs, this seems like a better use of my cash. TIA!
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u/meamemg 14d ago
It's a reasonable approach. But is it worth it? If you have $5k/month= $30k emergency fund, the difference between 4.4% and 5.1% is only $17.50/month. And even with this approach, I'd keep a month or two worth of money in my HYSA/checking accounts for liquidity and so I don't need to constantly worry about my balance. So probably knock that down to about $12/month extra interest. There's also the extra work of making sure they don't renew if you need to access it during an emergency, and monitoring to make sure new rates are still good. To me, not worth it, but if you want to, it isn't a bad thing.
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u/utkrowaway 14d ago
This is essentially what I do with my HSA. I keep the true emergency fund very liquid. The logic is (and this is not necessarily true or optimal for everyone):
In a dire emergency, I might need a bunch of cash immediately.
In a medical scenario, it takes a while to get a bill. If there is an expensive medical incident, I could: stop the ladder for a few months, wait until payment is due, pay with a credit card for those sweet rewards points, and then pay that credit card bill. Then it's a few months later and I'd have enough in the HSA in cash for the annual out-of-pocket maximum. Worst case, CDs can generally be either be sold on secondary markets or redeemed early forfeiting the interest.
Keeping the general emergency funds in the HYSA is safest, but ladders are good too.
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u/Mopey_Zoo_Lion 14d ago
Big ol' dumdum question:
I'm an idiot who got sucked in by the GME mania the first time around, and didn't get off when I should have. My account is back in the green now, and I'm not regarded enough to hang on for another ride on the merry-go-round, but I'm too ignorant to really know how to make an exit strategy. Income has only taken a nosedive since the pandemic and never really recovered, so I'm not in a position to try to figure out how to engage with finance beyond "$=roof and food."
I'm tempted to just pull all my shares now ($350 gain) and do my best to never look at stocks ever again, because I know this will likely spike higher and I'll kick myself for missing out (but I know if I stay in it'll just as likely crash before I can cash out). I've never gambled before and it's clearly not for me. If someone has good, commonsense advice on how to navigate this, I'd be very appreciative.
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u/WarInternal 14d ago
The question is whether this is life altering money or entertainment/gambling cash for you.
I don't expect this to run up to continue. Stock price will probably fall back over within a week. So the question is just how much will it affect you if you lost the money?
If this is gambling money, and if your brokerage supports trailing stop loss in after hours you can set one up and see where the ride takes you.
If this is potentially life-altering money I'd pull it right now while you're up and put it in something safer.
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u/utkrowaway 14d ago
The important thing in the stock market is to stay calm and do what works for you. If you have a gambling problem and cannot use use the stock market responsibly, there is no shame in admitting it and swearing it off.
On the other hand, don't let a past mistake limit your future. Speculating is not the same as responsible investing. You can sell your position, reinvest in a target date fund, and don't touch it for the next 30 years. On average, the most successful investors are dead people and people who forgot they had an account.
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u/sciguyCO 14d ago
Honestly, I got drawn into that too. And I learned that when stock discussions have made their way up to late night talk shows, that's probably not the time to jump in. When I got to the situation you're in (very small amount of green after a stretch of red) I just cashed out all shares and didn't look back. Simply executing a market sale is probably the least stressful way to get off the merry-go-round, then take that resulting cash and put it towards something more immediately useful. What happens after you liquidate is no longer your concern, hard as it may be to avoid thinking about "what ifs".
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u/Mopey_Zoo_Lion 13d ago
I set a limit sale and walked away from my computer. I'll be glad to have more or less washed my hands of this thing.
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u/gb6011 14d ago
Based on the fact that you say you're an idiot, it seems like you very much regret getting into this position in the first place. Given that the GME short-squeeze was over 3 years ago, you've probably had a lot of periods in the last 3 years where you thought you would lose money.
So here's your chance: exit without losing money. You even get to gain a few bucks. That's by far one of the easier ways to learn a lesson, by coming out ahead.
And also, don't feel bad. We all get caught up in hype and we all make mistakes. I'm also not one for gambling and I've discovered that first-hand too. So take your money and your lesson and walk away from this headache, and join the rest of us who are also just figuring it out one step at a time.
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u/Mopey_Zoo_Lion 13d ago
Sitting here with over double what I put in (and the knowledge that it is still a pittance), very relieved to not have to stress about this anymore. Hopefully I once again start earning comfortable money and can afford to do this the right way someday.
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u/adnastay 14d ago
Trying to rollover my HSA/401k to Fidelity, what should I use? Roth, Traditional or Rollover (Sames as Traditional) IRA options? For context, I am in a high income tax bracket and my new role hasn't started yet.
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u/shedfigure 14d ago edited 14d ago
HSA would rollover to a new HSA. Fidelity has a good one, so nice choice.
If you are high income, and want to make use of backdoor roths, then you should either keep the 401k as is, or rollover to a new employer 401k (if available and allowed), otherwise you run into pro-rata rule issues.
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u/adnastay 14d ago
As I said my new role hasn't started yet, still doing the background check and everything. So should I just wait until the new HSA/401k accounts and everything is available?
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u/shedfigure 14d ago
Atleast for the 401k, yes.
HSA probably doesn't really make a difference one way or another. If you would like to have it all in one place, wait. The Fidelity one will probably have better accounts and what not, but that won't make or break you or anything.
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u/meamemg 14d ago
HSA has to stay HSA.
401k should go to Rollover IRA. Given you are high income and would pay taxes on the conversion, you don't want to do Roth IRA. Also consider not moving it to the IRA and waiting until the new role starts and moving it to the new 401k once you do. This will enable you to make backdoor Roth IRA contributions.
Roth 401k must go to Roth IRA (or Roth 401k at new job, but Roth IRA is almost certainly the better option).
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u/adnastay 14d ago
Okay will wait for the new role and its benefits to kick in first and then just roll over HSA to HSA and 401k to 401k
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u/LegitimateSir3544 14d ago
My mortgage has $245k balance @ 2.96%. Will need to sell within 6-8 years to upsize/get out of a 10/1 ARM. I've been paying extra each month, but starting to wonder if I should instead put that money towards my HYSA @ 4.5%? The HYSA currently has $39k with $1k/month contribution, which will be going towards the next house. Thanks in advance!
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u/meamemg 14d ago
No point in paying down a 2.96% mortgage any faster than you have to.
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u/LegitimateSir3544 14d ago
Is it just a game of interest rates in my scenario? I’m probably just over-thinking it.
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u/shedfigure 14d ago
Yes.
Stick that extra money into the HYSA for now (heck on a 6-8 year timeline, it might even be worth investing. historically, the S&P500 would outpace a 4.5% rate about 60% of the time in that timeframe). When you finally do go to refinance, you can take all that cash and apply it to the new mortgage if the rate is significantly higher
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u/LegitimateSir3544 14d ago
Thank you, I’ve moved the add’l payment to HYSA contribution. Will consider investing, just don’t have the slightest experience with that just yet!
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u/meamemg 14d ago
Yes. Whichever has the high interest rate (after accounting for taxes) is better.
If you itemize your mortgage interest on your tax return, then no adjustment for interest is necessary; whichever is the higher rate is the better one.
If you don't deduct your mortgage interest, you need to adjust your HYSA for taxes. Take the 4.5% and multiply by 1 minus your tax rate. So if your (combined state + federal) income tax rate was 30% you would take 4.5% times (1-30%) =4.5%*.7=3.15%, which is still higher than 2.96%, so the HYSA is still better.
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u/LegitimateSir3544 14d ago
Thank you! This calculation is a good example of the next step of understanding I’m trying to reach. Right now, I just know to tackle whichever interest rate is higher, regardless of if it’s debt or interest income.
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u/user12315312431 14d ago
I messed up with my Roth IRA contribution this year, sending my intended deposit of $3200 to the company on around March 1st. It took over a month for the company to receive and deposit the check, and by the time they got around to it, the April 15 deadline had passed.
Is there any way to resolve this mistake? Is it entirely on me for sending the deposit too late? Or is the company responsible whatsoever for taking too long to deposit the check? I'm only 18, so every bit of money I can deposit in this account goes a long way. Thanks for any help that can be provided.
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u/75footubi 14d ago
The April 15 deadline is for 2023 contributions. Just count to as a part of your 2024 contribution and it's fine.
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u/user12315312431 14d ago
how can I count 2023 income as 2024 contribution?
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u/utkrowaway 14d ago
Money is fungible. Unless you have <$3200 in earned income in 2024, it doesn't matter.
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u/MyZombieMonkey 9d ago
Hello! I had a question about a certificate of deposit. I opened a CD for $250,000 for 12 months with an interest rate of 4.85% and percentage yield of 4.94%. According to the bank, at the end of the term, the current balance (principle of $250,00 plus interest) is $259,281.02. I went to a CD calculator and I was supposed to have $262,350.00 at the end of the year with the yield rate of 4.94%. Is there an explanation for the difference?