Why? HYSA’s are over 5 percent right now. What’s the lifetime return on S&P, 7 percent? Seems not worth the extra risk?
I actually do not want the kidnappers to have an easy time hilariously. Also if I travel somewhere that’s semi possible I’m getting kidnapping insurance lol.
Why do you differentiate investments between your regular retirement accounts (401k, IRA etc) and extra money you have available for investing/saving? Not questioning keeping emergency funds in cash but if you have say $500k just sitting in a couple HYSAs that seems odd to me. I shovel most extra money into the same stuff my tax advantaged retirement accounts are in and then have some real estate and crypto exposure.
Taxes on interest earned from savings accounts are nasty too if you’re in a high bracket and high tax state. Paying 45% on that interest earned makes the returns appear not so great. That’s where the boxx stuff seems interesting but I haven’t done anything more than read about it.
I guess I hadn’t really considered the “pay tax immediately” versus “pay tax when you realize your gains in a few decades” angle of it. I guess I may need to rethink what I’m doing.
I’ve moved everything to Fidelity where the core holding is SPAXX with a 4.95% yield (with ~25% exempt from state income tax). The Fidelity account has ACH, bill pay, check writing, ATM (with fee reimbursement), free wires. It’s essentially a checking account. It does not get any more immediate.
Is the implication here that you guys are absolutely maxing out every tax advantaged opportunity you have available?
If you are married and under 50, that’s typically at a minimum ($23.5k x 2 + $7k x 2 + $8.3k HSA = $69.3k). If you are not doing backdoor Roth, you should reengineer your accounts so that you can. Also check if your 401k plan allows after-tax contributions with either in-plan rollover or in-service distribution aka mega backdoor Roth. Some types of employees may have access to both a 403b and 457b for double tax advantaged limits.
If you are doing above and still have money left over for long term investing, then I’d certainly favor a high equity allocation because fixed income is tax inefficient, and you are probably in a high tax bracket.
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This is good info, thanks!
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You may find this article helpful.
So I get a 457(b) through my employment. I didn’t think I was eligible for some of the other things you discuss because 457(b)’s I thought were more limited than 401k’s but now I’m going to have to look into this further. I also thought an HSA doesn’t make sense if you have good health insurance through your employer, but am I missing something?
I also couldn’t do a Roth for the longest time because I had to do married filing separated for student loan reasons but now that we are filing jointly I’m going to have to look into doing a Roth again, so thanks for the reminder.
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There’s a high likelihood that your plan includes an HDHP option which makes you eligible to contribute to an HSA.
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Even married filing separately you can do a backdoor Roth IRA for you and spouse ($14k/yr)
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Unlikely that the 457 allows for the "mega backdoor* provisions. I’d make sure to check the spouse’s plan if it is a 401k.
Bottom line is that with the way our tax code is set up, there are very few people that should be wondering what asset allocation to use for all their long-term after-tax money. If you are doing things optimally, all your money falls under
- Tax-advantaged long term investments
- Some kind of 6 month liquidity fund in a savings account or equivalent
Category #3 would be some in-between of like saving for a big expense like a major renovation, where it might be difficult to figure out exactly how much risk you want to be exposed to.
We max our trad 401k and iras every year but do not do the backdoor roth stuff as it seemed complicated and didn’t seem like it gained us much but I could be wrong, will have to look into it more, but I’m lazy and would prefer strangers on the internet to tell me what to do.
If you are maxing a traditional deductible IRA, then a backdoor Roth IRA is irrelevant.
The income limits for a traditional deductible IRA ($116k household) are much lower than just making a normal Roth IRA contribution ($230k household). Also the contribution limits for trad IRA and Roth IRA are shared.
It’s not about sense, you can’t contribute to an HSA if you have “good” health insurance. You need to select a high deductible plan. Pretty much the only reason to select a HDHP is to become HSA eligible, but that’s a pretty good reason.
If you’re young and healthy this is almost certainly the way to go, as you can keep it forever, let it grow into your retirement years, and with a little bit of planning work it so that the contributions are never taxed.
You may even want to keep the HDHP with HSA contributions going in middle age or later and just accept the risk that you’ll be paying more out of pocket when the inevitable health issues arise. You can go pretty far before it stops making sense financially.
That being said, I’m early 40’s with no health issues and just recently switched to “good” health insurance because it was all my employer offered. It’s probably good I was forced off though because psychologically I’m not going to make good decisions about my health if I’m paying for it on a HDHP. I have a nice little HSA egg from ~10 years of contributions that I’ll continue to grow but now I’m also established with a PCP that I can see anytime and likely pay zero out of pocket. YMMV.
If you couldn’t do a roth then you could probably do a backdoor roth. That is the way to put money in an IRA when you are over the income limits. All you need is earned income and no traditional IRA balances.
On almost every HDHP/HMO/PPO chart that I have looked at, the HDHP has the same or lower OOP maximums. This is in addition to the fact that the premiums are lower, and that the employer typically kicks in some free HSA money. This means that the HDHP is typically optimal for both very healthy and very sick people. I would guess that the HDHP option is the best choice in 80%+ of situations.
The HMO/PPO plans are only optimal in those in-between situations or you rely on specific drugs or specialists where copays vs. coinsurance are a big difference.
In STONKS news, Matt Levine today is incredible on the return of RoaringKitty.
Huh, I never thought of it that way (from the “it’s also better if you need a ton of medical care” angle) but that makes sense.
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This is probably a lot of people though. Insurance companies aren’t profiting off people who blow through their OOP so that can’t be a high population. For everyone else I think the bar is pretty low before you should start considering plans that do more for you. Again, purely from a psychological perspective. I was not good at seeking health care for anything when I had a HDHP. The thought of spending a few hundred dollars for a consult with a doctor and maybe some prescription meds for an issue that would likely clear on its own was a proposition I always declined. I don’t think it’s smart to do so, and I realize I’m probably effectively paying more to make it all “free”, and the financially savvy play is to just spend money for a service that is 99% likely worthless but 1% priceless, but I wasn’t good at making those decisions and it’s well known that most people aren’t any better.
Stonks definitely confirmed efficient.
So this happened today.
And I wondered why
“ The man at the center of the pandemic meme stock craze appeared online for the first time in three years, sending the prices of the quirky and volatile shares sharply higher Monday.
Keith Gill, better known as “Roaring Kitty,” posted an image Sunday on the social platform X of a [man sitting forward in his chair] a meme used by gamers when things are getting serious.
Say you’re looking into opening a new line of business and maybe you don’t want your existing partners to provide the working capital for it… and you don’t especially want to liquidate your stock portfolio to fund receivables.
How would you go about shopping for an SBA lender in May 2024?. My S corporation has been around since 2017 and has a credit card. Very provably a real business. Have 800+ credit score, fine providing personal guarantee.
You’ve bootstrapped it to date, no existing bank relationship?
I would try to get a referral from someone in your industry. I would tend to avoid large banks as their regulatory burden will make your life miserable.