These links may be of some assistance:
https://www.opm.gov/healthcare-insur...ked-questions/

https://money.stackexchange.com/ques...-living-abroad

Thanks, its a bit ambiguous but looks like from the IRS perspective even if I move back I can continue using the HSA and accumulating returns tax-free (although no additional contributions of course).

What's much less clear is how the CRA would look at this account. They may not be ok with me generating tax free returns.

Have talked a little about this before but seeing it come up again I must ask something. If I can afford to pay out of pocket (swipe a credit card(would be paid in full) or cash) on any medical bills, should I do so instead of using HSA? Is the general rule of thumb to simply let the HSA continuously build for biggest tax incentives? If that is the case, it is always there for emergency spending, that's a positive I guess.

FWIW, married, in OH, two kids under the age of 5(all healthy)

Yes you should generally let the HSA grow. The only exception is if you think you may withdraw the funds before age 65 for non-medical expenses - such as my example above, been trying to call the CRA about it.

I've been offered a % share of a business as an incentive to stick around, and I have a few questions about the value of the share. It's an aviation business split into an asset holding company and a operating company.

The CEO owns the aircraft and other productive assets under a Holding Company (HC) that leases the aircraft to the Operating Company (OC). HC does not make a significant profit or loss, and owns 2MM worth of assets (aircraft) which are necessary to the function of OC.

Assume that OC has cash flows/discount rate that give it a net present value of 2.5MM, and that OC has no assets.

I will be getting a % share in OC as an incentive deal to stick around. Am I right in thinking that since the entire business (HC+OC) is worth 2.5MM based on cash flows, and HC owns 2MM in assets, that implies that OC is worth 500k?

Any help please?

No, but it depends on what sort of pricing model you'd like to use. Assuming that the OC and HC are not and will not be made available for sale in the near future, you can ignore the value of the assets of the HC. Just calculate the NPV of the expected future dividends you will receive from your ownership stake. If the OC hasn't paid stable or increasing dividends over time to a multitude of owners, then discount the ever-living **** out of those expected dividends.

The basic questions you must ask when presented with such a deal are, "is the CEO kind of a prick?" and "why isn't he just increasing my salary?"

YMMV if you are attempting to pass a class on asset valuation.

Thanks very much for the response!

The CEO is not a prick, however he is loose when it comes to accounting. He is looking to take a step back from the business. It's his intention to sell if he gets a good offer, hopefully within the next 5 years, which would be good for me as well as long as OC sold for a good amount.

I was happy to be on board with that, but he has altered the deal for tax reasons so that I would have to pay tax on the share. Basically I'd be paying 30 cents on the dollar for these shares, with the value determined by a third party.

There hasn't been a valuation yet. CEO and his wife have been telling me that the business is worth a whole lot because of the great cash flow, but I am skeptical because A) OC relies on the assets owned by HC to operate and B) there are significant risks in the business.

My concern as well, is that if the cash flows decreased while the assets were still worth 2MM, such that the NPV of the cashflows was something like 1.7MM, then OC would suddenly be worthless.

You answered your own question.

Brian, why do you say no? If the only cashflow is coming from the OC, and HC assets are unchanged over this period, then OC should be worth $500k.

Hero, why don't you ask the CEO?

And interestingly, my company has a similar management division. We have a HC which holds investments and OC that manages the HC.

Aren't the lease costs included in the cash flow calculations? If they are, then OC is worth 2.5M. If not, figure out the market rate to lease the aircraft and other assets, and adjust cash flow down by that amount.

Because hero won't have a controlling interest in the HC (and the OC).

If the dividends are unchanged AND the HC is required by the nature of a leasing contract to maintain an asset value of $2m AND the leasing contract is uncancelable and in perpetuity, then it is a fine way of valuing the OC.

It is a great way to protect the assets of the HC.

Lease rates are included, but the rates are way below market rates. It's also a funny market because there are none available to lease here (or even purchase worldwide, used versions).

Both parties have an incentive to maintain the leasing contract, at least currently. Of course once I have shares, HC will then have an incentive to increase the lease rates to market value...

Asset value shouldn't drop much unless there is another global financial crisis. The aircraft we have are in high demand and there are zero used versions on the global market right now.

Ask him for the valuation you mean? They will get around to that eventually. At this point I am planning on leaving and taking a job with a much higher salary. There just seem to be too many potential fishhooks in this deal.

We in the SSLHE forum have been having a detailed discussion regarding credit/auto purchasing, and maybe some 'etc' in our LC thread. It got so contentious that the mod finally broke it into it's own thread and I wanted to link it to BFI's LC thread but, guess what, there isn't one. So I'm putting it here in case you folks want to have some fun:

https://forumserver.twoplustwo.com/1...bound-1712633/

Opinions....

I have a large emergency fund in Vanguard's money market in a taxable account that earns around 1.7%. I'm about to get a decent chunk from an inheritance. My emergency fund is already bigger than needed. I'm 100% invested in equities, me and wife my max out our 401ks, Roth IRAs and contribute monthly to a taxable account. It's all index/ETFs in total stock market, Small cap value, REITs and a dividend paying ETF. Pretty basic. We invest over 50% of our pre tax income.

I'm thinking of taking the current money in the money market and putting it in a high yield corporate bond fund(VWEHX) that would pay me close to 500.00 a month. I already re-invest my dividends and this would just add more for that purpose. I could lose it all and be fine, it's 1/20th of investments and the inheritance will replace my emergency fund

I know interest rates are rising but this fund is pretty solid, it only lost 21% in the 08 crash.

Opinions on why this would be a good or bad idea

SJCX,

I don't get the obsession with dividends. Dividends are a form of value increase; price appreciation is a form of value increase. But dividends are tax inefficient and price appreciation is tax efficient. So if anything dividends are worse and something to be avoided. Am I thinking about something wrong?

Unless as a part of your general portfolio you want exposure to the bond market via the bond fund (which, along with your REIT, should be in a tax advantaged account), why not just put the extra money in VTI and if you want to get a "dividend" just cash out a few shares of VTI from time to time?

Well 70% of my portfolio is not dividend paying. I was thinking more of the cash going to the yield bond fund to get the monthly cash to invest in VTI, rather than just sit in the money market

I guess that makes sense, but you might want to run some numbers on how the tax inefficiency of the yield bond fund will affect your strategy. Might make more sense to go 20-30% cash and 70-80% equities with the money in question.

ETA: I've always assumed it's just best to have your asset allocation planned out. If you then receive a windfall, use the new money to rebalance / augment your positions while being sensitive to tax implications (bonds and REITs in tax sheltered places). Is there a particular reason you don't want to do this?

If they called by its more common name, a junk bond fund, would it change your mind?

I wouldn't try to talk you out of it, but you should be aware it is a bond fund that will act more like a stock fund as far as its risk profile.

Do you have international equities? They might be as good or better for portfolio diversity than this fund. If you can hold it in a tax advantaged space I like it better.

Putting money into municipal bond funds in a taxable account makes more sense than a high yield corporate bond fund. Right now PML* yields 6% tax-free. Tax free is good.

If you are feeling the need to have some junk bonds, you should have them in a tax-advantaged account.

You should also be doing everything you can to not have your dividend yielding assets in a taxable account.

*not suggesting this particular CEF, it is just an example

Do you guys think of individual stock purchasing as essentially gambling? I always sort of have, but I also figure the market isn't a tilted zero-sum game, so it's not really. I kinda want to dip my toe in the water without being an idiot about it. Index funds are dope and all, but you're never gonna kill it with the next Netflix, Apple, or Amazon buying indexes. I kinda want to buy individual stocks in a way that's not super risky, but also has the distant possibility of killing it. Where should I start? Do I put my entire liferoll on that Chinese Netflix?

That in itself wouldn't, I know that's what the fund is but this fund has been pretty solid.

poppunk,

I think that this thread is a good place to obtain advice and discussion about how to maximise your EV and reduce your variance.

If your goal is to increase your variance, then I imagine you'll get better advice elsewhere.

Hey All! Was hoping to receive some general advice, as I am helping my parents with their finances/investments. They are in a bit of a unique situation, but I’ll try to briefly lay it out. Thank you very much in advance.

Both are 60 years old. They will receive $130k for the next 5 years, untaxed (disability insurance), but will only have social security to rely on past then. Annual expenses are approximately $70k (there is a large disability health insurance policy that will handle additional medical costs associated with that).

Assets: $1.6mm in traditional IRA. $500k house. $250k in cash.
IRA: $450k in QQQ, $450k in FSTVX, and $170k in FAGIX. The breakdown is ~87% domestic, 4% foreign, and 9% bonds (bonds are due to the FAGIX position).

My objectives are to:
1) Diversify in funds with very low fees (20% foreign? 5% of total assets in each fund?);
2) Take a slightly more conservative approach (20% bond? any recommendations for bond funds?) (their local bank is pushing 2-3% 18 month CDs for the cash--this is no good, right?);
3) Begin taking small distributions now ($20-30k), since their taxable income is zero at this point. This money can always be invested separately, since the new long-term capital gain tax is pretty favorable.

Fidelity, of course, would like to actively manage the IRA account, at a roughly 1% annual fee (plus the additional layer of expense when they invest it in funds with fees). They claim that there is no commitment involved. Is it a bad idea to have them actively manage the account for a couple months before taking back control, since the account would then theoretically be balanced in a reasonable way for my parents’ situation? Obviously a very large portion of their net worth is in that IRA account which will need to sustain them for the rest of their lives, so although I have a finance degree and am an attorney, I am fairly nervous about handling this on my own.

Your numbers don't add up for the IRA - $450k+$450k+$170k doesn't make $1.6mm. But assuming the $1.6mm is right, they're in a pretty good spot, since the IRA plus the $250k cash is just enough to cover their $70k expenses with a 4% annual withdrawal.

I would just put everything in a Vanguard LifeStrategy fund - probably the 60/40 "moderate growth" one if they don't have a strong preference. 80/20 is generally considered too aggressive in retirement. The moderate growth fund is ~36% domestic stocks, 24% international, and 40% bonds. No need to pay Fidelity to do the same thing for you.

They should also look into doing Roth IRA conversions to take advantage of their lower tax bracket for the next 5 years. Roth conversions are better than just taking straight distributions, since the money will continue to grow tax free in the Roth account. At minimum they should convert $24k a year - since it's tax-free with the standard deduction - but I'm guessing they should do even more, filling up the 10% and maybe the 12% bracket too (so converting a total of ~$43k or ~$101k each year). There's probably a spreadsheet out there somewhere to figure out the optimal amount to convert, or a financial planner could help.