Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[Rain Man]

I was thinking about something the other day involving tax rates, and I think the government is running a little IRA grift on us. It's still better to put money into an IRA than to not do it, but this is something I'd never thought about.

If you put money into a stock in an IRA and the price grows, then yay, you make money. When you eventually take it out, you pay regular income tax on the gains, which is going to vary, but it's almost certain to be 22% to 35% for most people.

If you bought that same stock in a regular investment account, you're going to pay capital gains tax when you sell it, which is probably going to be 15% for most people.

So by holding it in an IRA, you end up paying a higher tax on the gains.

Now, it's still better to put it in an IRA because it's pre-tax money going in, which gives you a bigger investment, and the taxes are deferred for many years, but I'd never thought about the fact that you take a bigger bite coming out.

Am I thinking about this right? Do I have any wrong assumptions?

[Buehler445]

Originally Posted by Rain Man

I was thinking about something the other day involving tax rates, and I think the government is running a little IRA grift on us. It's still better to put money into an IRA than to not do it, but this is something I'd never thought about.

If you put money into a stock in an IRA and the price grows, then yay, you make money. When you eventually take it out, you pay regular income tax on the gains, which is going to vary, but it's almost certain to be 22% to 35% for most people.

If you bought that same stock in a regular investment account, you're going to pay capital gains tax when you sell it, which is probably going to be 15% for most people.

So by holding it in an IRA, you end up paying a higher tax on the gains.

Now, it's still better to put it in an IRA because it's pre-tax money going in, which gives you a bigger investment, and the taxes are deferred for many years, but I'd never thought about the fact that you take a bigger bite coming out.

Am I thinking about this right? Do I have any wrong assumptions?

Depends on what you have coming in for income in Retirement. If you're at 35% at age 40, and 22% in retirement, that is almost a wash. But if all you have is SSA (not all of which is taxable) and a RMD and (more, some of those are ROTH), it's pretty easy for a taxpayer and spouse to get under 83K, putting them in the 12% bracket, so the gains would actually be CHEAPER than at any time in history.

Plus the time value of the tax dollars you didn't have to pay, presuming you're getting a return on that.

[Jenson71]

Originally Posted by Rain Man

So by holding it in an IRA, you end up paying a higher tax on the gains.

Now, it's still better to put it in an IRA because it's pre-tax money going in, which gives you a bigger investment, and the taxes are deferred for many years, but I'd never thought about the fact that you take a bigger bite coming out.

Am I thinking about this right? Do I have any wrong assumptions?

I would consider the state tax implications for those of us living in states that have state income tax. A lot of states will limit or exempt retirement income entirely, and IRA distributions are included in that, whereas no such limitation/exemption exists for capital gains taxed by the state.

[ChiliConCarnage]

Originally Posted by Rain Man

So by holding it in an IRA, you end up paying a higher tax on the gains.

Now, it's still better to put it in an IRA because it's pre-tax money going in, which gives you a bigger investment, and the taxes are deferred for many years, but I'd never thought about the fact that you take a bigger bite coming out.

Am I thinking about this right? Do I have any wrong assumptions?

Leaves out all the years of dividend tax drag though.

On the other hand, if you retire early or only have social security, you might be able to use 0% LTCG rate. I believe It goes up to 100k for a couple with standard deduction

[BigBeauford]

Silicon Valley Bank just went tits up. I have a friend in the start up aerospace industry. Their company may have just lost almost all their cash and have about 4 months of money left on hand.

[seamonster]

Originally Posted by BigBeauford

Silicon Valley Bank just went tits up. I have a friend in the start up aerospace industry. Their company may have just lost almost all their cash and have about 4 months of money left on hand.

Very dark situation. Never thought I'd see a bank-run at this scale. The bottom line is SVB bought up too many assets with zero percent interest rates and when the fed raised the rates couldn't survive their CEO giving some dumbass "hey don't panic guys" speech. Disaster.

[Buehler445]

Originally Posted by BigBeauford

Silicon Valley Bank just went tits up. I have a friend in the start up aerospace industry. Their company may have just lost almost all their cash and have about 4 months of money left on hand.

FDIC coverage on any of it?

I have a little bit of capital outside of FDIC coverage. Perhaps I should check on the fiscal health of my bank.

[BigBeauford]

Originally Posted by Buehler445

FDIC coverage on any of it?

I have a little bit of capital outside of FDIC coverage. Perhaps I should check on the fiscal health of my bank.

They will cover $250k, but only about $20B of their $170B is insured/protected. The company was scrambling to pull their money out, but $50M might be just gone.

[Buehler445]

Originally Posted by BigBeauford

They will cover $250k, but only about $20B of their $170B is insured/protected. The company was scrambling to pull their money out, but $50B might be just gone.

Holy ****.


That is MUCH more than I have uncovered.

That makes me want to puke just thinking about it. And I can’t wrap my head around 50B.

****.

[ghak99]

This was the 16th largest bank in the country?

Is that right? Holy shit.

[KCUnited]

Originally Posted by BigBeauford

They will cover $250k, but only about $20B of their $170B is insured/protected. The company was scrambling to pull their money out, but $50B might be just gone.

They fund startups or are a startup with $170B?

Either way huge yikes.

[DaFace]

Originally Posted by BigBeauford

They will cover $250k, but only about $20B of their $170B is insured/protected. The company was scrambling to pull their money out, but $50B might be just gone.

I'm a little confused here - are you talking about the bank or your friend's company? The bank itself only had about $175B in deposits.

Regardless, HOPEFULLY they didn't tank so quickly that their assets are dramatically lower than deposits. That article says they had about $209B in assets vs. $175B in deposits as of December, so presumably people won't lose their asses TOO badly once everything gets liquidated and distributed. Could be messy during that process, though.

[Buehler445]

Originally Posted by DaFace

I'm a little confused here - are you talking about the bank or your friend's company? The bank itself only had about $175B in deposits.

Regardless, HOPEFULLY they didn't tank so quickly that their assets are dramatically lower than deposits. That article says they had about $209B in assets vs. $175B in deposits as of December, so presumably people won't lose their asses TOO badly once everything gets liquidated and distributed. Could be messy during that process, though.

Ultimately, hopefully another bank can take over the assets and liabilities with minimal exposure to clients. But that does very little in terms of meeting cash flow requirements for a business

[BigBeauford]

Originally Posted by DaFace

I'm a little confused here - are you talking about the bank or your friend's company? The bank itself only had about $175B in deposits.

Regardless, HOPEFULLY they didn't tank so quickly that their assets are dramatically lower than deposits. That article says they had about $209B in assets vs. $175B in deposits as of December, so presumably people won't lose their asses TOO badly once everything gets liquidated and distributed. Could be messy during that process, though.

No, talking about the friend's company. Their CFO was there at the 11th hour trying to pull all their money out.

[VAGOMO 4 LIFE!]

SVB is the second biggest collapse in US History with 203 Billion in assets gone.