Announcement

Collapse
No announcement yet.

Investment Plan

Collapse
X
Collapse
First Prev Next Last
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Investment Plan

    With over 30 years left until retirement, I currently have two investment accounts:
    1- A taxable Etrade account that holds:
    VXUS, VTI, VSTAX, SPY, VFIAX, VTSAX, VNQI, SPHD, VYM, DIA, BND, DIS, AAPL, DAL, BA, ALGN [Yes, I went overboard]

    2- A Fidelity SEP IRA account ($10K) that holds:
    SPGI, VTI, BNDX, DIA
    (Never any automatic reinvestments of gains/dividends; opened this November 2019 when I was self-employed – I am no longer 1099, and now W2)

    -I would also like to open a Backdoor Roth IRA now

    -My employer will most likely offer me a 401k account in October 2020, up to $19,500, without a match (so only tax benefits)


    My plan is to:
    Tax Loss Harvest my stocks (SPY, VFIAX, SPHD, VYM, DIA, DAL, DIS, AAPL, VTSAX) in my taxable Etrade account now, which are all currently at a total loss of between -$200 to -$2000 each, into VTI ($5000+ TLH total),
    Keep VTI, VTSAX, VXUS, BND, VNQI and maybe some individual stocks for now,
    Eventually only keeping and maintaining VTI 60%, BND 5%, VXUS 30%, and perhaps some of the individual stocks (such as ALGN, which has no dividends)

    In my SEP IRA (Fidelity), sell all SPGI, VTI, BNDX, DIA (at a small total gain) and instead buy
    FXNAX (bond) 10%,
    VNQ (REIT) 20%, and
    FKAX (Total US) 70%
    What steps should I take for this SEP IRA? Rollover? Adopt a one-participant 401k? (A CPA informed to keep it the way it is even though I am opening backdoor Roth)

    I will now open a traditional IRA and then backdoor ROTH with Fidelity and buy
    FXAIX (SP500) 100% in this IRA

    When I open the 401k in October 2020, I will buy
    VTSAX (Total US) 70%,
    FXNAX (bond) 10%, and
    FREL (REIT) 20%

    This would roughly yield a total asset allocation of:
    US Stocks: 60%
    International Stocks: 20%
    Bond/Cash: 10%
    REIT/Individuals: 10%


    I would greatly appreciate any feedback please... Recommendations? Thoughts? Criticisms please?
    Anything I should be aware of or change? Thank you!

  • #2
    You will need to make a decision on how to manage the SEP-IRA prior to performing a backdoor roth IRA. I think your choice would be:
    1. Convert existing SEP-IRA to roth IRA (may not be a good idea depending on size and your tax bracket).
    2. Roll over the SEP-IRA to a 401k that will accept rollovers (will the 401k you're starting in October accept rollovers?).

    Comment


    • #3
      Originally posted by SmallBusinessPhysician View Post
      You will need to make a decision on how to manage the SEP-IRA prior to performing a backdoor roth IRA. I think your choice would be:
      1. Convert existing SEP-IRA to roth IRA (may not be a good idea depending on size and your tax bracket).
      2. Roll over the SEP-IRA to a 401k that will accept rollovers (will the 401k you're starting in October accept rollovers?).
      A 3rd option is to just pay the pro-Rata taxes. I personally think pro-Rata taxes are wrongly demonized b/c those doing bd Roth’s believe they are paying an extra tax and make mistakes, such as converting a high-balance pre-tax TIRA to a Roth to open the door. Most ppl giving advice totally overlook this option. In reality, all you are doing is paying tax early on what you will eventually convert and avoiding tax on the growth but on a gradual basis, not a huge lump sum at a high tax rate. Really not a huge mistake in my book and seems to always be overlooked.
      Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

      Comment


      • #4
        Originally posted by Gamyr View Post
        With over 30 years left until retirement, I currently have two investment accounts:
        1- A taxable Etrade account that holds:
        VXUS, VTI, VSTAX, SPY, VFIAX, VTSAX, VNQI, SPHD, VYM, DIA, BND, DIS, AAPL, DAL, BA, ALGN [Yes, I went overboard]
        -- yes an unnecessary hodge podge. also tax inefficient choices.
        -- in taxable you only need to start with 2: total US, total INTL.


        2- A Fidelity SEP IRA account ($10K) that holds:
        SPGI, VTI, BNDX, DIA
        (Never any automatic reinvestments of gains/dividends; opened this November 2019 when I was self-employed – I am no longer 1099, and now W2)

        -I would also like to open a Backdoor Roth IRA now
        -- not with the SEP....
        -My employer will most likely offer me a 401k account in October 2020, up to $19,500, without a match (so only tax benefits)

        My plan is to:
        Tax Loss Harvest my stocks (SPY, VFIAX, SPHD, VYM, DIA, DAL, DIS, AAPL, VTSAX) in my taxable Etrade account now, which are all currently at a total loss of between -$200 to -$2000 each, into VTI ($5000+ TLH total),
        -- yes
        Keep VTI, VTSAX, VXUS, BND, VNQI and maybe some individual stocks for now,
        -- depending on tax bracket BND and VNQI are tax inefficient and should be held in tax advantaged accounts first.
        Eventually only keeping and maintaining VTI 60%, BND 5%, VXUS 30%, and perhaps some of the individual stocks (such as ALGN, which has no dividends)
        -- again, see tax efficiency first

        In my SEP IRA (Fidelity), sell all SPGI, VTI, BNDX, DIA (at a small total gain) and instead buy
        FXNAX (bond) 10%,
        VNQ (REIT) 20%, and
        FKAX (Total US) 70%
        What steps should I take for this SEP IRA? Rollover? Adopt a one-participant 401k? (A CPA informed to keep it the way it is even though I am opening backdoor Roth)
        -- you need to move it to a solo 401k, which you should be able to open with past 1099 income but others will confirm. or move to your new employer 401k if it accepts roll overs. or convert the entire thing pending tax bracket.
        -- you otherwise should not keep it with your plans for bdrIRA


        I will now open a traditional IRA and then backdoor ROTH with Fidelity and buy
        FXAIX (SP500) 100% in this IRA
        -- not in the next 31 days given your TLH

        When I open the 401k in October 2020, I will buy
        VTSAX (Total US) 70%,
        FXNAX (bond) 10%, and
        FREL (REIT) 20%
        -- fine

        This would roughly yield a total asset allocation of:
        US Stocks: 60%
        International Stocks: 20%
        Bond/Cash: 10%
        REIT/Individuals: 10%

        -- fine
        I would greatly appreciate any feedback please... Recommendations? Thoughts? Criticisms please?
        Anything I should be aware of or change? Thank you!
        see above.

        Comment


        • #5
          Originally posted by Peds View Post

          In my SEP IRA (Fidelity), sell all SPGI, VTI, BNDX, DIA (at a small total gain) and instead buy
          FXNAX (bond) 10%,
          VNQ (REIT) 20%, and
          FKAX (Total US) 70%
          What steps should I take for this SEP IRA? Rollover? Adopt a one-participant 401k? (A CPA informed to keep it the way it is even though I am opening backdoor Roth)
          -- you need to move it to a solo 401k, which you should be able to open with past 1099 income but others will confirm. or move to your new employer 401k if it accepts roll overs. or convert the entire thing pending tax bracket.
          -- you otherwise should not keep it with your plans for bdrIRA
          This is a better option than paying taxes pro-rata?

          Comment


          • #6
            Originally posted by Gamyr View Post

            This is a better option than paying taxes pro-rata?
            Peds and I have a gentlemen’s (I can be flexible with locution at times) agreement to disagree on this one.
            Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

            Comment


            • #7
              keep in mind if you're trying to TLH, you're going to run into the wash sale rule. you say you're planning on trying to TLH some total market funds into other total market funds. also you're trying to TLH S&P 500 into another S&P 500 fund in a different account.

              I'd probably just pay the pro-rata taxes to open up roth contributions for the rest of your life or until tax law changes.

              if you have 30+years to retirement these losses are probably going to be relatively small in the grand scheme of things to greatly simplify your investing plan.

              Comment


              • #8
                Originally posted by Nysoz View Post
                I'd probably just pay the pro-rata taxes to open up roth contributions for the rest of your life or until tax law changes.

                if you have 30+years to retirement these losses are probably going to be relatively small in the grand scheme of things to greatly simplify your investing plan.
                Why just pay the pro-rata taxes?
                I prefer no losses if it's do able

                Comment


                • #9
                  Originally posted by Nysoz View Post
                  keep in mind if you're trying to TLH, you're going to run into the wash sale rule. you say you're planning on trying to TLH some total market funds into other total market funds. also you're trying to TLH S&P 500 into another S&P 500 fund in a different account.
                  Can you be more specific which ones you are referring to?
                  Which ones?

                  Comment


                  • #10
                    if you convert it to a roth IRA now and pay the pro rata taxes on it, it'll be converted and done. future growth is tax free. simple

                    if you're able roll it over into a 401k then no taxes now but you'll have to pay taxes upon withdrawal at retirement as well as any growth.

                    the caveat is if you'll somehow qualify for a mega backdoor roth to get it all tax free but I'm not too familiar with that

                    if you have 30 years until retirement, the taxes you pay on this will be a minimal drop in the bucket
                    ---
                    "Tax Loss Harvest my stocks (SPY, VFIAX, SPHD, VYM, DIA, DAL, DIS, AAPL, VTSAX) in my taxable Etrade account now, which are all currently at a total loss of between -$200 to -$2000 each, into VTI ($5000+ TLH total),"

                    you're selling spy and vfiax which are S&P index funds. you're also selling vtsax which is a total US market fund.

                    you plan on putting that into VTI which is the exact same thing as vtsax. just etf vs. mutual fund.

                    "I will now open a traditional IRA and then backdoor ROTH with Fidelity and buy
                    FXAIX (SP500) 100% in this IRA"

                    you sold S&P 500 index funds from spdr and vanguard and buying S&P 500 index fund from fidelity. you'd have to argue that the company is managing their S&P 500 fund is different enough than the other companies. wash sale goes across all accounts you have from what I understand.
                    Last edited by Nysoz; 04-23-2020, 10:51 AM.

                    Comment


                    • #11
                      Originally posted by Nysoz View Post
                      ---
                      "Tax Loss Harvest my stocks (SPY, VFIAX, SPHD, VYM, DIA, DAL, DIS, AAPL, VTSAX) in my taxable Etrade account now, which are all currently at a total loss of between -$200 to -$2000 each, into VTI ($5000+ TLH total),"

                      you're selling spy and vfiax which are S&P index funds. you're also selling vtsax which is a total US market fund.

                      you plan on putting that into VTI which is the exact same thing as vtsax. just etf vs. mutual fund.

                      "I will now open a traditional IRA and then backdoor ROTH with Fidelity and buy
                      FXAIX (SP500) 100% in this IRA"

                      you sold S&P 500 index funds from spdr and vanguard and buying S&P 500 index fund from fidelity. you'd have to argue that the company is managing their S&P 500 fund is different enough than the other companies. wash sale goes across all accounts you have from what I understand.
                      Sorry for the misunderstanding, I had said:
                      Keep VTI, VTSAX, VXUS, BND, VNQI and maybe some individual stocks for now,
                      Eventually only keeping and maintaining VTI 60%, BND 5%, VXUS 30%, and perhaps some of the individual stocks (such as ALGN, which has no dividends)

                      I will keep VTSAX for now, and eventually sell VTSAX later and then will not buy VTI during that time period for 30 days
                      I can and will wait 30 days to open the Fidelity funds; I already sold SPY and VFIAX and will open the Fidelity IRA in about 20 days

                      Comment


                      • #12
                        Originally posted by Peds View Post

                        see above.
                        Can I open the Traditional IRA for now at least and then the backdoor Roth IRA later? Open the Traditional IRA for now while keeping my SEP IRA?
                        Can I combine my SEP IRA and Traditional IRA? Rather than combine the SEP and 401k?
                        Why can I not buy FXAIX (SP500) given my TLH? FXAIX (Fidelity) is different from the other SP500 stocks I owned...
                        Thank you

                        Comment


                        • #13
                          Originally posted by Gamyr View Post

                          Can I open the Traditional IRA for now at least and then the backdoor Roth IRA later? Open the Traditional IRA for now while keeping my SEP IRA?
                          Can I combine my SEP IRA and Traditional IRA? Rather than combine the SEP and 401k?
                          Why can I not buy FXAIX (SP500) given my TLH? FXAIX (Fidelity) is different from the other SP500 stocks I owned...
                          Thank you
                          yes you can open the accounts any time and not fund them.
                          you wouldnt want to because youll have to convert it and owe taxes.
                          s&p 500 is an s&p 500, no matter what brokerage you buy it at.

                          Comment


                          • #14
                            In the SEP IRA, can I just sell all SPGI, BNDX, DIA (keep VTI) and instead buy
                            FXNAX (bond) 10%,
                            VNQ (REIT) 20%, and
                            FKAX (Total US) 70% or perhaps more VTI (Total US) 70%?

                            It's better to have a different Total US stock?
                            Last edited by Gamyr; 05-26-2020, 09:48 AM.

                            Comment

                            Working...
                            X