So I'd have to invest 28k to save 850? Ouch, lol.


What is the limit on the HSA contribution? I'll look into it. By no means am I trying to do anything unethical I'm just trying to optimize my tax strategy. I'm really concerned about it more as I get older.

As far as not wanting to max 401k, that is partly because we are house shopping and would rather have more cash on hand. We actually lost a bid on a house due to the other having more cash. I didn't realize that could happen. I'm still confused over that, actually. The reasoning was the chance of the deal falling through with the other family was less, so they took their offer over ours.

All of this is actually aggravating. Bleh.

You don't need to know a goddamn thing about a single company. Just do some sort of easy set it and forget it index funds and you'll be invested in the broader national/global economy. Maybe a target date or a 3 fund portfolio. You can learn more about these things itt and with Google.

Is it ever worth putting money into a taxable account instead of a tax sheltered account if I think there's a reasonable chance I'll want the money at some point before I'm 59.5?

I ask cause I'm having trouble evaluating the equity loss from the withdrawal penalty on early SEP / HSA distributions. Is there a calcultor that can solve for something like: "If there's an X% chance you'll need the money before 59.5 then put it in taxable"? (Obv would need to estimate tax bracket and expected returns)

Agreed.

Yeah, but that's upside if you would save for your kids' college anyway. For me, that's why I did it. The savings was similar in my state.


$6750 this year if you have family coverage.

Meh. Sounds bubble-ish and I definitely wouldn't be super happy at sitting on a pile of cash towards bubble housing behaviors vs. maxing my 401k. Obviously you know your cash flow and timing of getting this excess money. The key is obviously not to miss maxing it out for 2017.

It totally can make sense, especially if you are concerned you need access to the money. Long term taxable account investing is pretty awesome if you are buying indexes and holding for decades.

That being said, tax advantaged accounts, are still going to be better for most people, all things being equal. One advantage of a Roth is that you can withdraw your already taxed contributions without penalty (not earnings).

IMO, if you have the income to do it, creating three piles of retirement money is the ideal scenario. For example, I have:

1. 401k/HSA accounts (pre-tax contributions) - I'll pay taxes on all of this when I withdraw. 401k subject to mandatory withdrawals.
2. Roth IRA's (largely backdoor roth contributions) - No taxes, can withdraw contributions at any time, no mandatory withdrawals.
3. After tax account - Capital gains rates in the long run. Obviously I pay on dividends now. Can withdraw anytime, no mandatory.

The advantage of this pre-retirement is obviously you do have access to some money if you have a crisis. I'm obviously hoping to never do that.

In retirement, the advantage of multiple buckets is you can structure your income in a way to hopefully minimize or eliminate income taxes (depending on the income you need). If you keep your income in the 15% bracket (under current law), you don't owe ANY capital gains taxes.


In terms of order of retirement focused savings, my simplified ordering advice:

1. Take advantage of any employer match.
2. Maximize contribution to HSA, *IF* you can invest the money and *IF* you can fund medical expenses out of pocket, keeping this account fully invested. This is potentially 100% tax free investing if you save it for medical expenses in retirement. Even if you by some miracle don't have medical expenses in retirement, you can still withdraw like it's an IRA at retirement age.
3. Maximize tax-advantaged 401k/IRA contributions. Roth vs. Traditional would depend on income and projected income in retirement. It might make sense to split contributions if possible if you are borderline on which to do.
4. Backdoor Roth (if applicable to your situation)
5. 529 accounts if you want to save for kids college.
6. Taxable account.

Thanks for the response! Two kind of nit picky questions:

For the early withdrawal penalties on retirement accounts (apparently 10% for SEP / 20% for HSA), is the penalty applied on the total sum of the money which includes the initial investment or is the penalty just applied to the capital gains?

In retirement if I have 0 income and want to withdraw large amounts from a retirement fund, do those withdrawals count toward my taxable income bracket? Like if I withdraw 100k in a year from a SEP IRA but make $0 from a job does that technically mean I'm in the <15% bracket and don't owe any taxes on the 100k withdrawl?

Penalties are most likely on the entire withdrawal amount. Plus you would owe taxes on any pre-tax contributions & gains.

It depends on where you withdraw from. If it's from a Roth, no it's not taxable. If it's from a Traditional/401k, it's income. If it's from a taxable account, any gains would be taxed as income, based on capital gains rates. So for instance if you are married and your only income is $50k in long term capital gains from a taxable account = no taxes.

n00b questions...

my company doesnt offer 401k. i currently have investments in a mutual fund and a roth ira that i max every year. i would like to know if i should be doing anything else such as trading individual stocks. i keep looking into crypto currency and i just..dont..get it.

id like to do something short term. i have thought about a CD but literally clueless.

Keep maxing Roth. What mutual funds do you have?

Don't do individual stocks/crypto. Open a taxable account with Vanguard and buy a Target Date fund with excess funds over the IRA contribution. Once you get into a job with an investment option, then this advice would change.

Company I work for is offering a 5% employee discount on buying company stock. I know it's bad to own stock in the company you work for, but does the discount make it worth it if it's only a small part of my portfolio?

Also, why does the company even offer these kinds of promotions?

To increase the demand for the stock and increase the price.

How long do you have to own it before you can sell it?

If your company doesn't offer 401k, max out your own IRA or Roth IRA. Put the money in a vanguard low cost index fund. Total stock market index or Target retirements are fine.

Look at the rules of how long you must hold on to it. My old company did that too. We could sell it after 60 or 90 days, from what I remember. Almost everyone I knew who worked there bought into the program and sold the shares the day they were eligible to make a small profit. So 4 times a year (it was a quarterly program) we would all log in and sell our shares.

Companies do it to promote ownership in the company by employees. They think it adds loyalty to the company internally, too.

Owning the stock of the company you work at is not bad in many situations. Not sure where you got that.

Concentrating rather than diversifying risk is generally thought to be unwise.

It's been considered "bad" due to previously awful situations like bear Stearns, Lehman, worldcom and Enron. Essentially the idea was you didn't want to take a double hit, company goes down AND you lose your investment money. So you don't lose everything in one swell foop.

Or, in enrons case go-to jail.

I guess 5% or so would be ok.

Could someone explain the math behind this statement?

I understood the argument. I just disagree with it. There are of course examples of companies that have done really bad and if an employee worked there then they got screwed by losing their job plus having there net worth go down.

I am talking a small percent of ones liquid net worth (10% or less).

I believe we were talking about the difference between a .11% expense ratio and .04% expense ratio, or a difference in return of .07% a year. I used this calculator:
http://www.calculator.net/future-value-calculator.html

and figured out the difference between a 7% return compounded over 40 years and a 6.93% return. It was ~ $40,000. The higher the return, the bigger the difference, ie the difference at 12% and 11.93% is ~ $300,000. But if you can compound a $100,000 investment at 12% for 40 years you may not care, since you would have $9 mill.

If I remember correctly the two expense ratios were talking about two totally different investments. The argument against this was based off of not making an investment decision on saving .07% a year.

This is similar to the way many poor business owners make a decision to save a few bucks by decreasing the quality of their product/service and forgetting that maximizing profits is what they should be focused on and not just minimizing costs.

That may have been the larger discussion but my comment that was quoted related only to the 7 basis point difference being somewhat meaningful given a long enough time frame.

You should probably wait to buy a house until mortgage rates are higher so you can claim a higher mortgage interest deduction

Yeah fees can add up, but if we are looking at the original questions the difference in fees would have absolutely zero bearing on how I'd invest.

BP has a yield of 6.6%. Isn't that extremely high? I feel like it's too good to be true.

Isn't this going to be disbanded with the new administration's tax overhaul?