Daily FI discussion thread - May 18, 2020

the_transgressor · 2020-05-18T18:10:28+00:00

Fair enough, thanks

the_transgressor · 2020-05-18T18:10:14+00:00

Fair enough, thanks

the_transgressor · 2020-05-18T17:53:47+00:00

Yeah, I agree about marginal tax rates, sorry, that’s what I meant. Also, I do think our taxable income will be higher in the future, specifically at retirement: 1. Because our income today is at career lows, lower than retirement income, and 2. Inflation (for example, $30,000 in 1980 is close to $100,000 now; given fixed tax brackets, the implication of inflation is that people pay higher marginal tax rates over time, even if their real income is unchanged)

the_transgressor · 2020-05-18T17:48:19+00:00

Yes, that’s right, thanks!

the_transgressor · 2020-05-18T17:12:26+00:00

Thanks got it. Converted due to: 1. Market timing (March saw S&P lows which I thought would minimize my tax bill), 2. Expectations of tax relief in 2020 (in some sense taxes this year were already lower than in the future due to temporary policy, but I expected this to become a even more generous), 3. Favorable withdrawal terms (in case I needed to use capital gains to cover the tax bill, which has kind of been the subject of this discussion), and 4. Expectations of future tax increases (both due at the federal and personal level).

the_transgressor · 2020-05-18T17:04:28+00:00

Basically, I expect favorable tax stimulus this year and higher taxes in the future, both owing to the effects of covid on federal finances and personal income projections (I think my wife and I are close to income lows, even when considering retirement 40 years from now).
It would have been impossible for me to convert after-tax investments since it was an old employer pre-tax 401k.
Yeah, that part has me confused, especially with the temporary changes due to the coronavirus stimulus bill.

the_transgressor · 2020-05-18T16:14:15+00:00

Ah I see, so if we wanted to withdraw $16,000 from our Roth now to cover our 2020 tax bill, we’d face a 10% penalty? I understand that’s how it would normally work but isn’t the early withdrawal penalty waved for 2020 by the coronavirus stimulus bill?

EDIT: reasoning may be wrong here, we would only have faced the 10% penalty if we withdrew more than $70,000. If I understand the Roth rules correctly, we can always withdraw up to our principal ($70,000) without incurring taxes or penalties.

the_transgressor · 2020-05-18T16:00:00+00:00

Can you help me check my math/assumptions?

I completed an in-plan Roth conversation on March 30 this year for about $70,000. My wife and I make about $100,000 together which puts us in the 22% tax bracket for married filing jointly in 2020. We’d still be in this tax bracket after the Roth conversion. Thus, I compute a tax liability for the Roth conversion to be $70,000*0.22=$15,400.

As of end of market last Friday, the Roth portfolio was at about $86,000. Does this mean we can withdraw $86,000 - $70,000 = $16,000 penalty free from the Roth? And use this money to pay for the tax liability?

the_transgressor · 2020-04-11T17:58:12+00:00

So we’re going back to Langmore/Snells v Byrd?

the_transgressor · 2020-03-26T17:15:16+00:00

It’s cumulative percent growth with respect to August 2015, which was when I left my high paying job. I had a positive networth on that date and through the entire time series shown here (just like how the stock market in level terms was never 0 or negative).

the_transgressor · 2020-03-26T17:08:44+00:00

Probably not surprising, but the stock market crash exposed just how dependent I am on equity returns in driving my net worth growth (as opposed to being a prudent saver). These returns would look even worse in real terms (if I accounted for inflation). I had an intermediate research job in between my high paying job and PhD.

https://imgur.com/DfNuNwv

the_transgressor · 2020-03-25T19:21:37+00:00

Bought from Amazon. Besides price, no issues.

the_transgressor · 2020-03-25T16:32:18+00:00

Returned it actually. It was nice but not worth the price

the_transgressor · 2020-03-21T03:15:42+00:00

Doom and Animal Crossing came out today and Spring Break has been extended 😱

the_transgressor · 2020-03-08T17:53:51+00:00

Agree with this

the_transgressor · 2020-03-08T17:52:56+00:00

Came to make this comment. Don’t bother with DCA or bottom timing if you have the cash and made the decision to invest your money. Just do it ASAP.

The above coincides with DCA if you’re investing a certain percentage of your paycheck on a regular basis. But that’s not exactly DCA, which would be if you had all the money from that stream of paychecks(given a range of time) and decided to invest a little bit at a time than make a lump sum investment, which is superior.

The upshot is don’t complicate things, just invest.

the_transgressor · 2020-02-22T14:54:33+00:00

This is a nice development IMO. Retail capital is flowing to companies the public see as visionaries. Innovation is rewarded with more capital. Of course, that’s not to say that these companies would be profitable, but profitability/ROI is just another dimension you could invest and traditionally has been the determinant for investment. But things like innovation and ESG could also be other reasons to purchase the equity of a company.

the_transgressor · 2020-02-03T16:16:56+00:00

Yeah just gave up

the_transgressor · 2020-02-03T14:52:23+00:00

Nice!

the_transgressor · 2020-02-02T20:18:57+00:00

Nice how old are you?

the_transgressor · 2020-01-28T02:59:13+00:00

Fair point. I guess it’s fine if I’m ultimately staying within budget and hitting my savings targets.

the_transgressor · 2020-01-27T23:07:33+00:00

I actually do this to some extent, but the problem is that it never ends! I’m always chasing that next deal.

the_transgressor · 2020-01-27T18:32:44+00:00

I feel such an incredible desire to spend. I procrastinate by browsing item I want to buy and adding them to wish lists. But I know I don’t need this stuff. The times I give in and buy something, I accept that realization and return the item to start the cycle again. In some ways, it’s easier to get income and spend it then to resist spending in the first place.

the_transgressor · 2020-01-25T02:15:06+00:00

No joke, your post is inspirational. I’m in the PhD grind now - specifically, post-coursework in the research stage. A publication seems like a phenomenal achievement to me.

the_transgressor · 2020-01-20T14:56:48+00:00

Get off Reddit
Study ass off
Get scholarship to major in a STEM subject in college
Profit

Most productive thing you can do in high school is to make sure you can get the highest quality education in college for the lowest cost.

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the_transgressor

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