Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[Buehler445]

Originally Posted by ThaVirus

That reminds me, say you had some money tied up in stocks and ETFs in a brokerage account. Realistically, how long would it take for you to sell those holdings and have the money moved to your primary bank account?

Depends on the brokerage. Most have it spelled out in the FAQ, but most are a day to close 2 days to transfer unless you pay for a wire.

Best to read the website of your broker.

[Rain Man]

Originally Posted by ThaVirus

That reminds me, say you had some money tied up in stocks and ETFs in a brokerage account. Realistically, how long would it take for you to sell those holdings and have the money moved to your primary bank account?

I've never closed an account completely, but when I've moved money to a brokerage from my bank, it's typically taken two days to complete.

[lewdog]

Originally Posted by ThaVirus

That reminds me, say you had some money tied up in stocks and ETFs in a brokerage account. Realistically, how long would it take for you to sell those holdings and have the money moved to your primary bank account?

2-3 days depending on if your cash is settling from recent trades.

[ThaVirus]

Ok, cool, I figured. So the whole “don’t invest money you’re saving for something” in regards to a brokerage account is advised more so because it’s risky and a portion of the investment could be lost?

[Rain Man]

Originally Posted by ThaVirus

Ok, cool, I figured. So the whole “don’t invest money you’re saving for something” in regards to a brokerage account is advised more so because it’s risky and a portion of the investment could be lost?

Yeah, completely. It's about not losing your BMW money because the market happened to dip 15 percent while you were test-driving.

[493rd]

Originally Posted by Rain Man

Hey, request for free advice here.

Does a Roth conversion count as income in MAGI for the purposes of assigning Medicare costs? In other words, could a big Roth conversion throw one's income up enough to incur the extra Medicare income-based surcharges?

I think it does, but I can't find a definitive answer on the world wide web.

Yes, it does so be careful. It’s called IRMAA

[Rain Man]

Originally Posted by 493rd

Yes, it does so be careful. It’s called IRMAA

Dang it. I'm walking a tightrope trying to do Roth conversions without tilting into the next higher tax bracket, and now there's another tax hellhound nipping at my heels.

[DaFace]

Originally Posted by ThaVirus

Ok, cool, I figured. So the whole “don’t invest money you’re saving for something” in regards to a brokerage account is advised more so because it’s risky and a portion of the investment could be lost?

Correct. I personally think of stocks and bonds through a broker as being liquid with some caveats. There are rarely situations where you'd need to be pulling out 10s of thousands of dollars on the spot, so you could sell what you have and transfer it when you need it. That said:

1. This doesn't apply to retirement accounts - just taxable brokerage accounts. Unless you want to deal with pretty large penalties, those are a one-way street until you are truly nearing retirement.
2. There's no guarantee that you'd get the price you want at the time you are forced to sell. And often times emergencies come up when the stock market sucks, like getting laid off or having your home value tank when you need expensive repairs.
3. Short-term capital gains taxes are pretty high, so it's not a good strategy to invest everything you have with a plan of pulling it out in a few months. Ideally, you shouldn't be selling anything that's been invested less than a year.
4. This all assumes that we're talking about publicly-traded stocks. I have a situation where I can buy stock in my own company, but we're still privately held. If I wanted to sell those stocks, I'd have to find a buyer, which would definitely not be a 2-3-day process.

[UteChief]

Originally Posted by Buehler445

Well sure. But he threw it on a football message board.

But let’s walk through it.

He said he had nothing invested. That rules out a 401K. Doesn’t necessarily rule out a pension but if all he has is a pension he still needs a Roth.

He wouldn’t forego a workplace match. He said he HAS 3000 (not could forego contributions to a qualified plan to get 3000). And the contributions to an IRA wouldn’t count against his contributions to a qualified plan, which from what he said he doesn’t have anyway.

An emergency fund shouldn’t be “invested”.

If the money is saved for something upcoming it shouldn’t be “invested”.

He didn’t ask for a financial plan, he asked what we would do for a first investment so I told him.

Sorry if you’re offended. If he wanted an in-depth discussion we’ve been through it all. In 4 lines he asked what investment we’d put the first dollar in.

That’s fair. Not offended at all.

[UteChief]

Originally Posted by Rain Man

Dang it. I'm walking a tightrope trying to do Roth conversions without tilting into the next higher tax bracket, and now there's another tax hellhound nipping at my heels.

Curious what people think of ROTH conversions, I’m not sure it’s advisable in most situations, but would like to be “convinced” just for discussion.

[Rain Man]

Originally Posted by UteChief

Curious what people think of ROTH conversions, I’m not sure it’s advisable in most situations, but would like to be “convinced” just for discussion.

I've built a big financial projection model for retirement and it's been very informative. As part of that process, I realized that I'll have a big income drop after my working years (Age 61) through when Social Security and Required Minimum Distributions start (Age 67 when my wife turns 70 and starts getting Social Security). Over the next years after that, my taxable income and tax rate will rise quite a bit as my own SS kicks in and then RMDs start.

That means that I have a six to ten year window when my tax rate will be low, and then it'll rise back to (roughly) the pre-retirement rate. Roth conversions work great in that case, because I can do conversions and pay taxes in these upcoming lower income years at a low rate instead of paying the higher rate when they're RMDs. Plus, then they grow tax-free. As an added bonus, taking the conversions now also lowers the amount of the RMDs in future years, which can also help my tax bill at those later dates.

The tightrope I'm walking is that I want to do conversions that take me up to, but not over certain tax brackets, to maximize the tax benefits. Now I'm learning that I also need to watch the MAGI amount for Medicare payments too, to be sure I don't get a surcharge.

[UteChief]

Thanks Rainman, that makes a lot of sense for your situation. I’d love to hear others. An advisor started doing this for my SIL and I can’t figure out why!

[Ming the Merciless]

Originally Posted by UteChief

Curious what people think of ROTH conversions, I’m not sure it’s advisable in most situations, but would like to be “convinced” just for discussion.

i think it makes a lot of sense in certain situations.


it makes sense to convert when the market is down, to me anyway.


You can also do partial conversions over time...



I think if you have X years remaining BEFORE you retire, then we can take a look at X and see if it makes sense.


The higher X is, the more it would probably make sense.



The other thing you can do is just stop contributing to your traditional IRA and let it ride, and then ONLY contribute to a ROTH from here on out. (you CAN have both and its not all or nothing) You have until April 15 to contribute to 2023, and then you can still contribute to 2024 till next april. So if you haven't maxed it out yet, you can still put two years worth in right now.


For whatever it is worth, I did a conversion.. So I literally put my money where my mouth is on this one. Ive probably got 15-20 years left (hopefully) of max contributions so I just decided to do it and not look back.

[Ming the Merciless]

Originally Posted by UteChief

My only point was the need to ask more questions and not jump into an IRA. I work in finance, have a BS in Finance, previously was a trader with series 7 and 63. I read the posts here a lot, I just don’t comment much.

I dont have the credentials you have but I think everyone's first 6500 - 7500 worth of savings every year should be in a ROTH or maybe trad. ira. (Unless they are broke)


you dont?


It just seems like a no brainer to get that ROTH tax free growth for retirement...

[493rd]

Originally Posted by UteChief

Curious what people think of ROTH conversions, I’m not sure it’s advisable in most situations, but would like to be “convinced” just for discussion.

Not sure how old you are but think of it this way…it seems more likely than not that tax rates will be higher in the future so paying presumably lower taxes today will benefit you in the long run. As it currently stands the existing TCJA tax cuts are sunsetting in 2025 so keep that in mind. In addition, there are other factors to take into consideration like reducing future RMDs, building a legacy pool for kids, having greater tax flexibility in retirement planning, etc. Lots of potential benefits that most people would agree on. Does this mean you should convert a massive chunk of pretax dollars to your Roth? No of course not; it’s best done incrementally and when you have some tax flexibility. Most clients I work with like having different buckets of money in retirement.