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[ { "docid": "152316", "title": "", "text": "GBP has already lost part of his value just because of the fear of Brexit. An actual Brexit may not change GBP as much as expected, but a no-Brexit could rise GBP really a lot." } ]

[ { "docid": "150543", "title": "", "text": "\"I think you can do it as long as those money don't come from illegal activities (money laundering, etc). The only taxes you should pay are on the interest generated by those money while sitting in the UK bank account. Since I suppose you already paid taxes on those money in Greece while you were earning those money. About being audited, in my own experience banks don't ask you much where your money are coming from when you bring money to them, they are very willing to help, and happy. (It's a differnte story when you ask to borrow money). When I opened a bank account in US I did not even have an SSN, but they didn't care much they just took my passport and used the passport number for registering the account. Obviously on the interest generated by the money in the US bank account I had to pay taxes, but it was easy because I simply let the IRS via the bank to withdarw the 27% on the interest generated (not on the capital deposited). I didn't put a huge amount of money there I had to live there for 1 year or some more. Maybe if i deposited a huge amount of money someone would have come to ask me how did I make all those money, but those money were legally generated by me working in Italy before so I didn't have anything to be afraid about. BTW: in Italy I was thinking to move money to a German bank in Germany. The risk of default is a nightmare, something of completly new now in UE compared to the past where each state had its own currency. According to Muro history says that in case of default it happened that some government prevented people from withdrawing money form bank accounts: \"\"Yes, historically governments have shut down banks to prevent people from withdrawing their money in times of crisis. See Argentina circa 2001 or US during Great Depression. The government prevented people from withdrawing their money and people could do nothing while their money rapidly lost value.\"\" but in case Greece prevents people from withdrwaing money, those money are still in EURO, so i'm wondering what would be the effect. I mean would it be fair that a Greek guy can not withdraw is EURO money whilest an Italian guy can withdraw the same currency money in Italy?!\"" }, { "docid": "15262", "title": "", "text": "\"Other responses have focused on getting you software to use, but I'd like to attempt your literal question: how are such transactions managed in systems that handle them? I will answer for \"\"double entry\"\" bookkeeping software such as Quicken or GnuCash (my choice). (Disclaimer: I Am Not An Accountant and accountants will probably find error in my terminology.) Your credit card is a liability to you, and is tracked using a liability account (as opposed to an asset account, such as your bank accounts or cash in your pocket). A liability account is just like an asset except that it is subtracted from rather than added to your total assets (or, from another perspective, its balance is normally negative; the mathematics works out identically). When you make a purchase using your credit card, the transaction you record transfers money from the liability account (increasing the liability) to the expense account for your classification of the expense. When you make a payment on your credit card, the transaction you record transfers money from your checking account (for example) to the credit card account, reducing the liability. Whatever software you choose for tracking your money, I strongly recommend choosing something that is sufficiently powerful to handle representing this as I have described (transfers between accounts as the normal mode of operation, not simply lone increases/decreases of asset accounts).\"" }, { "docid": "122491", "title": "", "text": "\"Great question. There are several reasons; I'm going to list the few that I can think of off the top of my head right now. First, even if institutional bank holdings in such a term account are covered by deposit insurance (this, as well as the amount covered, varies geographically), the amount covered is generally trivial when seen in the context of bank holdings. An individual might have on the order of $1,000 - $10,000 in such an account; for a bank, that's basically chump change, and you are looking more at numbers in the millions of dollars range. Sometimes a lot more than that. For a large bank, even hundreds of millions of dollars might be a relatively small portion of their holdings. The 2011 Goldman Sachs annual report (I just pulled a big bank out of thin air, here; no affiliation with them that I know of) states that as of December 2011, their excess liquidity was 171,581 million US dollars (over 170 billion dollars), with a bottom line total assets of $923,225 million (a shade under a trillion dollars) book value. Good luck finding a bank that will pay you 4% interest on even a fraction of such an amount. GS' income before tax in 2011 was a shade under 6.2 billion dollars; 4% on 170 billion dollars is 6.8 billion dollars. That is, the interest payments at such a rate on their excess liquidity alone would have cost more than they themselves made in the entire year, which is completely unsustainable. Government bonds are as guaranteed as deposit-insurance-covered bank accounts (it'll be the government that steps in and pays the guaranteed amount, quite possibly issuing bonds to cover the cost), but (assuming the country does not default on its debt, which happens from time to time) you will get back the entire amount plus interest. For a deposit-insured bank account of any kind, you are only guaranteed (to the extent that one can guarantee anything) the maximum amount in the country's bank deposit insurance; I believe in most countries, this is at best on the order of $100,000. If the bank where the money is kept goes bankrupt, for holdings on the order of what banks deal with, you would be extremely lucky to recover even a few percent of the principal. Government bonds are also generally accepted as collateral for the bank's own loans, which can make a difference when you need to raise more money in short order because a large customer decided to withdraw a big pile of cash from their account, maybe to buy stocks or bonds themselves. Government bonds are generally liquid. That is, they aren't just issued by the government, held to maturity while paying interest, and then returned (electronically, these days) in return for their face value in cash. Government bonds are bought and sold on the \"\"secondary market\"\" as well, where they are traded in very much the same way as public company stocks. If banks started simply depositing money with each other, all else aside, then what would happen? Keep in mind that the interest rate is basically the price of money. Supply-and-demand would dictate that if you get a huge inflow of capital, you can lower the interest rate paid on that capital. Banks don't pay high interest (and certainly wouldn't do so to each other) because of their intristic good will; they pay high interest because they cannot secure capital funding at lower rates. This is a large reason why the large banks will generally pay much lower interest rates than smaller niche banks; the larger banks are seen as more reliable in the bond market, so are able to get funding more cheaply by issuing bonds. Individuals will often buy bonds for the perceived safety. Depending on how much money you are dealing with (sold a large house recently?) it is quite possible even for individuals to hit the ceiling on deposit insurance, and for any of a number of reasons they might not feel comfortable putting the money in the stock market. Buying government bonds then becomes a relatively attractive option -- you get a slightly lower return than you might be able to get in a high-interest savings account, but you are virtually guaranteed return of the entire principal if the bond is held to maturity. On the other hand, it might not be the case that you will get the entire principal back if the bank paying the high interest gets into financial trouble or even bankruptcy. Some people have personal or systemic objections toward banks, limiting their willingness to deposit large amounts of money with them. And of course in some cases, such as for example retirement savings, it might not even be possible to simply stash the money in a savings account, in which case bonds of some kind is your only option if you want a purely interest-bearing investment.\"" }, { "docid": "185104", "title": "", "text": "The United States Federal Reserve has decided that interest rates should be low. (They think it may help the economy. The details matter little here though.) It will enforce this low rate by buying Treasury bonds at this very low interest rate. (Bonds are future money, so this means they pay a lot of money up front, for very little interest in the future. The Fed will pay more than anyone who offers less money up front, so they can set the price as long as they're willing to buy.) At the end of the day, Treasury bonds pay nearly no interest. Since there's little money to be made with Treasuries, people who want better-than-zero returns will bid up the current-price of any other bonds or similar loan-like instruments to get what whatever rate of return that they can. There's really no more than one price for money; you can think of the price of those bonds as basically (Treasury rate + some modifier based on the risk) percent. I realize thinking about bond prices is weird and different than other prices (you're measuring future-money using present-money and it's easy to be confused) and assure you it ultimately makes sense :) Anyway. Your savings account money has to compete with everyone else willing to lend money to banks. Everyone-else lends money for peanuts, so you get peanuts on your savings account too. Your banking is probably worth more to your bank on account of your check-card payment processing fees (collected from the merchant) than from the money they make lending out your savings (notice how many places have promotional rates if you make your direct deposits or use your check card to make a purchase N times a month). In Europe, it's similar, except you've got a different central bank. If Europe's bank operated radically differently for an extended period of time, you'd expect to see a difference in the exchange rates which would ultimately make the returns from investing in those currencies pretty similar as well. Such a change may show up domestically as inflation in the country with the loose-money policy, and internationally as weakness against other currencies. There's really only one price for money around the entire world. Any difference boils down to a difference in (perceived) risk." }, { "docid": "2981", "title": "", "text": "\"What is the best way that I can invest money so that I can always get returns? Would it be to set up an FD in a bank, to buy land, to buy a rental house, to buy a field, or maybe to purchase gold? Forever is a long time. Of the options you listed, the only one guaranteed to generate returns is a bank account. The returns may well be very small, but (absent an economy-wide financial failure) you will get the stated return. Land doesn't always retain its value, nor do rental houses or fields. Gold clearly fluctuates. But you would be better served to think about goals and how you can attain them. What do you want to do with the \"\"returns\"\"? If you are trying to set yourself up for purchasing a home, paying for college, or retirement, then the small returns on a bank account may be insufficient. And in that case you might be better served by worrying more about the size of the returns you need than the certainty of them. There may be many \"\"better investments\"\" if you more clearly define what you expect to achieve by your investment.\"" }, { "docid": "146761", "title": "", "text": "A bank needs to make sure they won't lose money by cashing a check. When you have an account with a bank and you cash a check, if the check ends up not getting paid, the bank will take the money back out of your account. This could happen for a number of reasons: the check could bounce (not enough money in the check writer's account), it could be a fraudulent (fake) check, or the payment could have been stopped on that check. Treasury checks are more problematic for banks than private checks; the government has given themselves more power to refuse to pay a check than the average person has. As a result, banks are already overly cautious about cashing treasury checks. The fact that you have a big check increases the risk for the bank. You'll have to ask around at different banks to see what they will do for you and what type of fee (if any) they will charge. Some banks might cash it for a fee; others might require that you open a savings account and wait a certain number of days after depositing the check before withdrawing your money." }, { "docid": "146632", "title": "", "text": "\"Yes. There are several downsides to this strategy: You aren't taking into account commissions. If you pay $5 each time you buy or sell a stock, you may greatly reduce or even eliminate any possible gains you would make from trading such small amounts. This next point sounds obvious, but remember that you pay a commission on every trade regardless of profit, so every trade you make that you make at a loss also costs you commissions. Even if you make trades that are profitable more often than not, if you make quite a few trades with small amounts like this, your commissions may eat away all of your profits. Commissions represent a fixed cost, so their effect on your gains decreases proportionally with the amount of money you place at risk in each trade. Since you're in the US, you're required to follow the SEC rules on pattern day trading. From that link, \"\"FINRA rules define a “pattern day trader” as any customer who executes four or more “day trades” within five business days, provided that the number of day trades represents more than six percent of the customer’s total trades in the margin account for that same five business day period.\"\" If you trip this rule, you'll be required to maintain $25,000 in a margin brokerage account. If you can't maintain the balance, your account will be locked. Don't forget about capital gains taxes. Since you're holding these securities for less than a year, your gains will be taxed at your ordinary income tax rates. You can deduct your capital losses too (assuming you don't repurchase the same security within 30 days, because in that case, the wash sale rule prevents you from deducting the loss), but it's important to think about gains and losses in real terms, not nominal terms. The story is different if you make these trades in a tax-sheltered account like an IRA, but the other problems still apply. You're implicitly assuming that the stock's prices are skewed in the positive direction. Remember that you have limit orders placed at the upper and lower bounds of the range, so if the stock price decreases before it increases, your limit order at the lower bound will be triggered and you'll trade at a loss. If you're hoping to make a profit through buying low and selling high, you want a stock that hits its upper bound before hitting the lower bound the majority of the time. Unless you have data analysis (not just your intuition or a pattern you've talked yourself into from looking at a chart) to back this up, you're essentially gambling that more often than not, the stock price will increase before it decreases. It's dangerous to use any strategy that you haven't backtested extensively. Find several months or years of historical data, either intra-day or daily data, depending on the time frame you're using to trade, and simulate your strategy exactly. This helps you determine the potential profitability of your strategy, and it also forces you to decide on a plan for precisely when you want to invest. Do you invest as soon as the stock trades in a range (which algorithms can determine far better than intuition)? It also helps you figure out how to manage your risk and how much loss you're willing to accept. For risk management, using limit orders is a start, but see my point above about positively skewed prices. Limit orders aren't enough. In general, if an active investment strategy seems like a \"\"no-brainer\"\" or too good to be true, it's probably not viable. In general, as a retail investor, it's foolish to assume that no one else has thought of your simple active strategy to make easy money. I can promise you that someone has thought of it. Trading firms have quantitative researchers that are paid to think of and implement trading strategies all the time. If it's viable at any scale, they'll probably already have utilized it and arbitraged away the potential for small traders to make significant gains. Trust me, you're not the first person who thought of using limit orders to make \"\"easy money\"\" off volatile stocks. The fact that you're asking here and doing research before implementing this strategy, however, means that you're on the right track. It's always wise to research a strategy extensively before deploying it in the wild. To answer the question in your title, since it could be interpreted a little differently than the body of the question: No, there's nothing wrong with investing in volatile stocks, indexes, etc. I certainly do, and I'm sure many others on this site do as well. It's not the investing that gets you into trouble and costs you a lot of money; it's the rapid buying and selling and attempting to time the market that proves costly, which is what you're doing when you implicitly bet that the distribution of the stock's prices is positively skewed. To address the commission fee problem, assuming a fee of $8 per trade ... and a minimum of $100 profit per sale Commissions aren't your only problem, and counting on $100 profit per sale is a significant assumption. Look at point #4 above. Through your use of limit orders, you're making the implicit assumption that, more often than not, the price will trigger your upper limit order before your lower limit order. Here's a simple example; let's assume you have limit orders placed at +2 and -2 of your purchase price, and that triggering the limit order at +2 earns you $100 profit, while triggering the limit order at -2 incurs a loss of $100. Assume your commission is $5 on each trade. If your upper limit order is triggered, you earn a profit of 100 - 10 = 90, then set up the same set of limit orders again. If your lower limit order is triggered this time, you incur a loss of 100 + 10 = 110, so your net gain is 90 - 110 = -20. This is a perfect example of why, when taking into account transaction costs, even strategies that at first glance seem profitable mathematically can actually fail. If you set up the same situation again and incur a loss again (100 + 10 = 110), you're now down -20 - 110 = -130. To make a profit, you need to make two profitable trades, without incurring further losses. This is why point #4 is so important. Whenever you trade, it's critical to completely understand the risk you're taking and the bet you're actually making, not just the bet you think you're making. Also, according to my \"\"algorithm\"\" a sale only takes place once the stock rises by 1 or 2 points; otherwise the stock is held until it does. Does this mean you've removed the lower limit order? If yes, then you expose yourself to downside risk. What if the stock has traded within a range, then suddenly starts declining because of bad earnings reports or systemic risks (to name a few)? If you haven't removed the lower limit order, then point #4 still stands. However, I never specified that the trades have to be done within the same day. Let the investor open up 5 brokerage accounts at 5 different firms (for safeguarding against being labeled a \"\"Pattern Day Trader\"\"). Each account may only hold 1 security at any time, for the span of 1 business week. How do you control how long the security is held? You're using limit orders, which will be triggered when the stock price hits a certain level, regardless of when that happens. Maybe that will happen within a week, or maybe it will happen within the same day. Once again, the bet you're actually making is different from the bet you think you're making. Can you provide some algorithms or methods that do work for generating some extra cash on the side, aside from purchasing S&P 500 type index funds and waiting? When I purchase index funds, it's not to generate extra liquid cash on the side. I don't invest nearly enough to be able to purchase an index fund and earn substantial dividends. I don't want to get into any specific strategies because I'm not in the business of making investment recommendations, and I don't want to start. Furthermore, I don't think explicit investment recommendations are welcome here (unless it's describing why something is a bad idea), and I agree with that policy. I will make a couple of points, however. Understand your goals. Are you investing for retirement or a shorter horizon, e.g. some side income? You seem to know this already, but I include it for future readers. If a strategy seems too good to be true, it probably is. Educate yourself before designing a strategy. Research fundamental analysis, different types of orders (e.g., so you fully understand that you don't have control over when limit orders are executed), different sectors of the market if that's where your interests lie, etc. Personally, I find some sectors fascinating, so researching them thoroughly allows me to make informed investment decisions as well as learn about something that interests me. Understand your limits. How much money are you willing to risk and possibly lose? Do you have a risk management strategy in place to prevent unexpected losses? What are the costs of the risk management itself? Backtest, backtest, backtest. Ideally your backtesting and simulating should be identical to actual market conditions and incorporate all transaction costs and a wide range of historical data. Get other opinions. Evaluate those opinions with the same critical eye as I and others have evaluated your proposed strategy.\"" }, { "docid": "530425", "title": "", "text": "\"You are overthinking it. Yes there is overlap between them, and you want to understand how much overlap there is so you don't end up with a concentration in one area when you were trying to avoid it. Pick two, put your money in those two; and then put your new money into those two until you want to expand into other funds. The advantage of having the money in an IRA held by a single fund family, is that moving some or all of the money from one Mutual fund/ETF to another is painless. The fact it is a retirement account means that selling a fund to move the money doesn't trigger taxes. The fact that you have about $10,000 for the IRA means that hopefully you have decades left before you need the money and that this $10,00 is just the start. You are not committed to these investment choices. With periodic re-balancing the allocations you make now will be adjusted over the decades. One potential issue. You said: \"\"I'm saving right not but haven't actually opened the account.\"\" I take it to mean that you have money in a Roth TRA account but it isn't invested into a stock fund, or that you have the money ready to go in a regular bank account and will be making a 2015 contribution into the actual IRA before tax day this year, and the 2016 contribution either at the same time or soon after. If it is the second case make sure you get the money for 2015 into the IRA before the deadline.\"" }, { "docid": "210511", "title": "", "text": "No, to follow up on your example First Direct won't care (and I suspect won't even know) how long you held the account you are switching to them so if you don't want to switch your main current account to them you can just open a new one and switch that. To get the bonus you just need to make sure you meet the requirements imposed which in First Direct's case seem to simply be: have not held a First Direct account before pay in at least £1000 within 3 months of opening the account Once the First Direct bonus is paid, which they say should be within 28 days of you meeting the criteria, it is yours to keep. You are then free to close the First Direct account or transfer it on to another bank (and potentially claim another switching bonus)." }, { "docid": "115890", "title": "", "text": "I don't believe there is such a process. My observation (i.e. my opinion) is that banks will have a level of security walls appropriate to the cost vs risk they experience. Since as Frazell says, your liability is limited for this type of fraud, you personally bear little if any risk. If this fraud were common enough that the cost of your proposal outweighed the expense, they would implement it. On a similar note. Credit card fraud can be reduced ten fold if a PIN were required for all purchases. The 3 digits on the back helps prove the card is there, and you just didn't steal the from 16 digits, but a 6-8 digit PIN required at point of sale would be tough for the thief to guess. How much software to do this would cost, I don't know, but the idea is brilliant, even if it's mine. 10 fold reduction, if not 100 fold. (Any bank guys reading?)" }, { "docid": "569145", "title": "", "text": "Depending on how much freelance work we're talking about you could set up a limited company, with you and your wife as directors. By invoicing all your work through the limited company (which could have many other benefits for you, an accountant/advisor would... well, advise...) it's the company earning the money, not you or her personally. You can then pay your wife up to £10,000 per year (as of writing this) without income tax kicking in. You would probably have to pay yourself a small amount to minimise exposure to HMRC's snooping, but possibly not... as far as I'm aware the rules do not state anything about working for free, for yourself - and I wouldn't worry about the ethics, you're already paying plenty into HMRC's bank account through your day job! Some good information here if you're interested: https://www.whitefieldtax.co.uk/web/psc-guide/pscguide-how-does-it-all-work-in-practice-salaries-and-dividends/" }, { "docid": "589859", "title": "", "text": "A central bank typically introduces new money into the system by printing new money to purchase items from member banks. The central bank can purchase whatever it chooses. It typically purchases government bonds but the Federal Reserve purchased mortgage-backed-securities (MBS) during the 2008 panic since the FED was the only one willing to pay full price for MBS after the crash of 2008. The bank, upon receipt of the new money, can loan the money out. A minimum reserve ratio specifies how much money the bank has to keep on hand. A reserve ratio of 10% means the bank must have $10 for every $100 in loans. As an example, let's say the FED prints up some new money to purchase some office desks from a member bank. It prints $10,000 to purchase some desks. The bank receives $10,000. It can create up to $100,000 in loans without exceeding the 10% minimum reserve ratio requirement. How would it do so? A customer would come to the bank asking for a $100,000 loan. The bank would create an account for the customer and credit $100,000 to the customer's account. There is a problem, however. The customer borrowed the money to buy a boat so the customer writes a check for $100,000 to the boat company. The boat company attempts to deposit the $100,000 check into the boat company's bank. The boat company's bank will ask the originating bank for $100,000 in cash. The originating bank only has $10,000 in cash on hand so this demand will immediately bankrupt the originating bank. So what actually happens? The originating bank actually only loans out reserves * (1 - minimum reserve ratio) so it can meet demands for the loans it originates. In our example the bank that received the initial $10,000 from the FED will only loan out $10,000 * (1-0.1) = $9,000. This allows the bank to cover checks written by the person who borrowed the $9,000. The reserve ratio for the bank is now $1,000/$9,000 which is 11% and is over the minimum reserve requirement. The borrower makes a purchase with the borrowed $9,000 and the seller deposits the $9,000 in his bank. The bank that receives that $9,000 now has an additional $9,000 in reserves which it will use to create loans of $9,000 * (1 - 0.1) = $8100. This continual fractional reserve money creation process will continue across the entire banking system resulting in $100,000 of new money created from $10,000. This process is explained very well here." }, { "docid": "476721", "title": "", "text": "There's some risk, but it's quite small: The only catastrophic case I can think of is if the brokerage firm defrauded you about purchasing the assets in the first place; e.g., when you ostensibly put money into a mutual fund, they just pocketed it and displayed a fictitious purchase on their web site. In that case, you'd have no real asset to legally recover. I think the more realistic risks you should be concerned with are: The only major brokerage firm that I'm aware of that accepts liability for theft is Charles Schwab: http://www.schwab.com/public/schwab/nn/legal_compliance/schwabsafe/security_guarantee.html If you're going to diversify for security reasons, be sure to use different passwords, email addresses, and secret question answers on the two accounts." }, { "docid": "406974", "title": "", "text": "\"TLDR: Why can't banks give me my money? We don't have your money. Who has my money? About half a dozen different people all over the world. And we need to coordinate with them and their banks to get you your money. I love how everyone seems to think that the securities industry has super powers. Believe me, even with T+3, you won't believe how many trades fail to settle properly. Yes, your trade is pretty simple. But Cash Equity trades in general can be very complicated (for the layman). Your sell order will have been pushed onto an algorithmic platform, aggregated with other sell order, and crossed with internal buy orders. The surplus would then be split out by the algo to try and get the best price based on \"\"orders\"\" on the market. Finally the \"\"fills\"\" are used in settlement, which could potentially have been filled in multiple trades against multiple counterparties. In order to guarantee that the money can be in your account, we need 3 days. Also remember, we aren't JUST looking at your transaction. Each bank is looking to square off all the different trades between all their counter parties over a single day. Thousands of transactions/fills may have to be processed just for a single name. Finally because, there a many many transactions that do not settle automatically, our settlements team needs to co-ordinate with the other bank to make sure that you get your money. Bear in mind, banks being banks, we are working with systems that are older than I am. *And all of the above is the \"\"simplest\"\" case, I haven't even factored in Dark Pools/Block trades, auctions, pre/post-market trading sessions, Foreign Exchange, Derivatives, KYC/AML.\"" }, { "docid": "217727", "title": "", "text": "\"The simplest, most convenient way I know of to \"\"move your savings to Canada\"\" is to purchase an exchange-traded fund like FXC, the CurrencyShares Canadian Dollar Trust, or a similar instrument. (I identify this fund because I know it exists, not because I particularly recommend it.) Your money will be in Canadian currency earning Canadian interest rates. You will pay a small portion of that interest in fees. Since US banks are already guaranteed by the FDIC up to $250,000 per account, I don't really think you avoid any risks associated with the failure of an individual bank, but you might fare better if the US currency is subject to inflation or unfavorable foreign-exchange movements - not that such a thing would be a direct risk of a bank failure, but it could happen as a result of actions taken by the Federal Reserve under the auspices of aiding the economy if the economy worsens in the wake of a financial crisis - or, for that matter, if it worsens as a result of something else, including legislative, regulatory, or executive policies. Read the prospectus to understand additional risks with this investment. One of them is foreign-exchange risk. If the US economy and currency strengthen relative to the Canadian economy and its currency, you may lose substantial amounts of purchasing power. Additionally, one of the possible results of a financial crisis is a \"\"flight to safety\"\"; the global financial markets still seem to think the US dollar is pretty safe, and they may bid it up as they have done in the past, resulting in losses to your position (at least in the short term). I do not personally recommend moving all your savings to Canada, especially if it deprives you of income from more profitable investments over the long term, but moving some of your savings to Canada at least isn't a stupid idea, and it may turn out to be somewhat profitable. Having some Canadian currency is also a good idea if you plan to spend the money that you are saving on Canadian goods in the intermediate future.\"" }, { "docid": "481683", "title": "", "text": "\"Here are my reasons as to why bonds are considered to be a reasonable investment. While it is true that, on average over a sufficiently long period of time, stocks do have a high expected return, it is important to realize that bonds are a different type of financial instrument that stocks, and have features that are attractive to certain types of investors. The purpose of buying bonds is to convert a lump sum of currency into a series of future cash flows. This is in and of itself valuable to the issuer because they would prefer to have the lump sum today, rather than at some point in the future. So we generally don't say that we've \"\"lost\"\" the money, we say that we are purchasing a series of future payments, and we would only do this if it were more valuable to us than having the money in hand. Unlike stocks, where you are compensated with dividends and equity to take on the risks and rewards of ownership, and unlike a savings account (which is much different that a bond), where you are only being paid interest for the time value of your money while the bank lends it out at their risk, when you buy a bond you are putting your money at risk in order to provide financing to the issuer. It is also important to realize that there is a much higher risk that stocks will lose value, and you have to compare the risk-adjusted return, and not the nominal return, for stocks to the risk-adjusted return for bonds, since with investment-grade bonds there is generally a very low risk of default. While the returns being offered may not seem attractive to you individually, it is not reasonable to say that the returns offered by the issuer are insufficient in general, because both when the bonds are issued and then subsequently traded on a secondary market (which is done fairly easily), they function as a market. That is to say that sellers always want a higher price (resulting in a lower return), and buyers always want to receive a higher return (requiring a lower price). So while some sellers and buyers will be able to agree on a mutually acceptable price (such that a transaction occurs), there will almost always be some buyers and sellers who also do not enter into transactions because they are demanding a lower/higher price. The fact that a market exists indicates that enough investors are willing to accept the returns that are being offered by sellers. Bonds can be helpful in that as a class of assets, they are less risky than stocks. Additionally, bonds are paid back to investors ahead of equity, so in the case of a failing company or public entity, bondholders may be paid even if stockholders lose all their money. As a result, bonds can be a preferred way to make money on a company or government entity that is able to pay its bills, but has trouble generating any profits. Some investors have specific reasons why they may prefer a lower risk over time to maximizing their returns. For example, a government or pension fund or a university may be aware of financial payments that they will be required to make in a particular year in the future, and may purchase bonds that mature in that year. They may not be willing to take the risk that in that year, the stock market will fall, which could force them to reduce their principal to make the payments. Other individual investors may be close to a significant life event that can be predicted, such as college or retirement, and may not want to take on the risk of stocks. In the case of very large investors such as national governments, they are often looking for capital preservation to hedge against inflation and forex risk, rather than to \"\"make money\"\". Additionally, it is important to remember that until relatively recently in the developed world, and still to this day in many developing countries, people have been willing to pay banks and financial institutions to hold their money, and in the context of the global bond market, there are many people around the world who are willing to buy bonds and receive a very low rate of return on T-Bills, for example, because they are considered a very safe investment due to the creditworthiness of the USA, as well as the stability of the dollar, especially if inflation is very high in the investor's home country. For example, I once lived in an African country where inflation was 60-80% per year. This means if I had $100 today, I could buy $100 worth of goods, but by next year, I might need $160 to buy the same goods I could buy for $100 today. So you can see why simply being able to preserve the value of my money in a bond denominated in USA currency would be valuable in that case, because the alternative is so bad. So not all bondholders want to be owners or make as much money as possible, some just want a safe place to put their money. Also, it is true for both stocks and bonds that you are trading a lump sum of money today for payments over time, although for stocks this is a different kind of payment (dividends), and you only get paid if the company makes money. This is not specific to bonds. In most other cases when a stock price appreciates, this is to reflect new information not previously known, or earnings retained by the company rather than paid out as dividends. Most of the financial instruments where you can \"\"make\"\" money immediately are speculative, where two people are betting against each other, and one has to lose money for the other to make money. Again, it's not reasonable to say that any type of financial instrument is the \"\"worst\"\". They function differently, serve different purposes, and have different features that may or may not fit your needs and preferences. You seem to be saying that you simply don't find bond returns high enough to be attractive to you. That may be true, since different people have different investment objectives, risk tolerance, and preference for having money now versus more money later. However, some of your statements don't seem to be supported by facts. For example, retail banks are not highly profitable as an industry, so they are not making thousands of times what they are paying you. They also need to pay all of their operating expenses, as well as account for default risk and inflation, out of the different between what they lend and what they pay to savings account holders. Also, it's not reasonable to say that bonds are worthless, as I've explained. The world disagrees with you. If they agreed with you, they would stop buying bonds, and the people who need financing would have to lower bond prices until people became interested again. That is part of how markets work. In fact, much of the reason that bond yields are so low right now is that there has been such high global demand for safe investments like bonds, especially from other nations, such that bond issues (especially the US government) have not needed to pay high yields in order to raise money.\"" }, { "docid": "525056", "title": "", "text": "Devaluation is a relative term, so if you want to protect yourself against devaluation of your currency against dollars - just buy dollars. Inflation is something you cannot protect yourself against because it is something that describes the purchasing power of the money. You will still need to purchase, and usually with money. A side effect of inflation is usually devaluation against other currencies. So one of the ways to deal with inflation is not to keep the money in your currency over time, and only convert from a more stable currency when you need to make purchases. Another way is to invest in something tangible that can easily be sold (for example, jewelery and precious metals, but it has other risks). Re whats legal and illegal in your country - we don't really know because you didn't tell what country that is to begin with, but the usual channels like travelers' checks or bank transfer should work. Carrying large amounts of cash are usually either illegal or strictly regulated." }, { "docid": "257495", "title": "", "text": "Banks in general will keep saving rates as low as possible especially if there is a surplus of funds or alternative access for funding as in the case of the Fed in the USA. Generally speaking, why would bank pay you a high interest rate when they cannot generate any income from your money? Usually we will expect to see a drop in the loan interest rate when their is a surplus of funds so as to encourage investment. But if the market is volatile then no banks will allow easy access to money through loans. The old traditional policy of lending money without proper security and no control from the central bank has created serious problems for savings account holders when some of these banks went into bankruptcy. It is for this reason most countries has modified their Financial Act to offer more protection to account holders. At the moment banks must follow rigid guidelines before a loan can be approved to a customer. In my country (Guyana) we have seen the collapse of a few banks which sent a shock wave across the county for those that have savings held at those bank. We have also seen unsecured loans having to be written off thus putting serious pressure of those banks. So government stepped in a few years ago and amended the act to make it mandatory to have commercial banks follow certain strict guidelines before approving a loan." }, { "docid": "142110", "title": "", "text": "\"He didn't sell in the \"\"normal\"\" way that most people think of when they hear the term \"\"sell.\"\" He engaged in a (perfectly legitimate) technique known as short selling, in which he borrows shares from his broker and sells them immediately. He's betting that the price of the stock will drop so he can buy them back at a lower price to return the borrowed shares back to his broker. He gets to pocket the difference. He had about $37,000 of cash in his account. Since he borrowed ~8400 shares and sold them immediately at $2/share, he got $16,800 in cash and owed his broker 8400 shares. So, his net purchasing power at the time of the short sale was $37,000 + $16,800 - 4800 shares * $2/share. As the price of the stock changes, his purchasing power will change according to this equation. He's allowed to continue to borrow these 8400 shares as long as his purchasing power remains above 0. That is, the broker requires him to have enough cash on hand to buy back all of his borrowed shares at any given moment. If his purchasing power ever goes negative, he'll be subject to a margin call: the broker will make him either deposit cash into his account or close his positions (sell long positions or buy back short positions) until it's positive again. The stock jumped up to $13.85 the next morning before the market opened (during \"\"before-hours\"\" trading). His purchasing power at that time was $37,000 + $16,800 - 8400 shares * $13.85/share = -$62,540. Since his purchasing power was negative, he was subject to a margin call. By the time he got out, he had to pay $17.50/share to buy back the 8400 shares that he borrowed, making his purchasing power -$101,600. This $101,600 was money that he borrowed from his broker to buy back the shares to fulfill his margin call. His huge loss was from borrowing shares from his broker. Note that his maximum potential loss is unlimited, since there is no limit to how much a stock can grow. Evidently, he failed to grasp the most important concept of short selling, which is that he's borrowing stock from his broker and he's obligated to give that stock back whenever his broker wants, no matter what it costs him to fulfill that obligation.\"" } ]

[ { "docid": "290930", "title": "", "text": "If you are really worried your best bet is to move all your cash from Sterling into a foreign currency that you think will be resilient should Brexit occur. I would avoid the Euro! You could look at the US Dollar perhaps, make sure you are aware of the charges for moving the money over and back again, as you will at some stage probably want to get back into Sterling once it settles down, if it does indeed fall. Based on my experience on the stock markets (I am not a currency trader) I would expect the pound to fall fairly sharply on a vote for Brexit and the Euro to do the same. Both would probably rebound quite quickly too as even if there is a Brexit vote it doesn't mean the UK Government will honour the outcome or take the steps quickly. ** I AM NOT A FINANCIAL ADVISOR AND HAVE NO QUALIFICATIONS AS SUCH **" } ]

[ { "docid": "277179", "title": "", "text": "This is the same as any case where income is variable. How do you deal with the months where expected cash flows are lower than projected? When I got married, my wife was in the habit of allocating money to be spent in the current month from income accrued during the previous month. This is slightly complicated because we account for taxes (and benefit expenses) withheld in the current months' paychecks as current expenses, but we allocate the gross income from that check to the following month for spending. The benefit of spending only money made during the previous month is that income shocks are less shocking. I was working for a start-up and they missed payroll that normally arrived on the first of the month. Most of my co-workers were calling the bank in a panic to avoid over-draft fees with their mortgage payments, but my mortgage payment was already covered. Similarly, when the same start-up had a reduction in force on the first day of a new quarter, I didn't have to pull any money from savings during the 3 weeks I was unemployed. In the end, you're going to have to allocate money to the budget based on the actual income--which is lower than your expectations. What part of the budget should fairly be reduced is a question you and your wife will have to figure out." }, { "docid": "566332", "title": "", "text": "\"Were you thinking of an annuity? They guarantee regular payments, usually after retirement. In any case, every investment has counterparty risk. Bonds guarantee payout, but the issuer could always default. This is why Treasury bonds have the lowest yields, the Treasury is the world's most trusted borrower. It's also why \"\"junk\"\" bonds have higher yields than investment grade and partially why longer duration bonds have higher yields. As mentioned, there's bank accounts, which gain interest and are insured by FDIC up to $250,000. If the bank folds, they'll be acquired by another and your account balance will simply transfer. Similar to bank accounts are money market funds. These are funds that purchase very short term \"\"paper\"\" (basically <90 day bonds). They maintain a share price of $1 and pay interest in the form of additional shares. These have the risk of \"\"breaking the buck\"\" where they need to sell assets at a loss to meet investor withdrawal demands and NAV drops below $1.00. Fortunately, that's a super rare occurance, but still definitely possible. Finally, there's one guy I've seen on TV pitching a no risk high yield investment. I can't remember the firm, but I am waiting to see them shut down for running a ponzi scheme.\"" }, { "docid": "527730", "title": "", "text": "\"This is the best tl;dr I could make, [original](http://www.dailymail.co.uk/news/article-4700008/City-London-accuses-France-plot-wreck-Britain.html) reduced by 94%. (I'm a bot) ***** &gt; France has boasted to City of London chiefs that it will use Brexit to sabotage the British economy, according to a bombshell leaked memo. &gt; The memo was written after the City of London&amp;#039;s Brexit envoy - former Home Office Minister Jeremy Browne - held talks in Paris earlier this month at the French finance ministry, state-owned Banque de France, the French Senate and the British Embassy. &gt; He became the City of London Corporation&amp;#039;s Brexit envoy on a six-figure salary after losing his Commons seat in 2015. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6nkhic/city_of_london_accuses_france_of_plot_to_wreck/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~167837 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **Brexit**^#1 **French**^#2 **City**^#3 **France**^#4 **Britain**^#5\"" }, { "docid": "12623", "title": "", "text": "I would say your decision making is reasonable. You are in the middle of Brexit and nobody knows what that means. Civil society in the United States is very strained at the moment. The one seeming source of stability in Europe, Germany, may end up with a very weakened government. The only country that is probably stable is China and it has weak protections for foreign investors. Law precedes economics, even though economics often ends up dictating the law in the long run. The only thing that may come to mind is doing two things differently. The first is mentally dropping the long-term versus short-term dichotomy and instead think in terms of the types of risks an investment is exposed to, such as currency risk, political risk, liquidity risk and so forth. Maturity risk is just one type of risk. The second is to consider taking some types of risks that are hedged either by put contracts to limit the downside loss, or consider buying longer-dated call contracts using a small percentage of your money. If the underlying price falls, then the call contracts will be a total loss, but if the price increases then you will receive most of the increase (minus the premium). If you are uncomfortable purchasing individual assets directly, then I would say you are probably doing everything that you reasonably can do." }, { "docid": "95246", "title": "", "text": "These products are real, but they aren't risk free: 1) The bank could go under in that time. (Are the investments FDIC insured?) 2) Your money is locked up for 5 years, probably with either no way to get it back out or a stiff penalty for early withdrawal, so you risk having a better investment opportunity come along and not having the liquidity to take advantage of it. 3) If the market does go down and you get 100% of your principal back, the endless ratchet of inflation practically guarantees that $10K will be worth less 5 years from now than it is today, so you risk losing purchasing power even if you're not losing any nominal quantity of money. It's still a fairly low-risk investment option, particularly if it's tied to something that you have reason to believe will increase in value significantly faster than inflation in the next 5 years." }, { "docid": "329270", "title": "", "text": "The Government doesn't borrow money. It in fact simply prints it. The bond market is used for an advanced way of controlling the demand for this printed money. Think about it logically. Take 2011 for example. The Govt spent $1.7 trillion more than it took in. This is real money that get's credited in to people's bank accounts to purchase real goods and services. Now who purchases the majority of treasuries? The Primary Dealers. What are the Primary Dealers? They are banks. Where do banks get their money? From us. So now put two and two together. When the Govt spends $1.7 trillion and credits our bank accounts, the banking system has $1.7 trillion more. Then that money flows in to pension funds, gets spent in to corporation who then send that money to China for cheap products... and eventually the money spent purchases up Govt securities for investments. We had to physically give China 1 trillion dollars for them to be able to purchase 1 trillion dollars in securities. So it makes sense if you think about how the math works in the real world." }, { "docid": "111871", "title": "", "text": "The reason I don't know of any banks who would offer this to you (even if you held the investment account with their bank) is that there is no upside to the bank. It is a good idea for you, but what would they have to gain from this arrangement? The reason banks require a down payment is underwriting quality. If you can afford a significant down payment, they know that there is a significantly lower chance that you will default. However, if you were to provide an investment account as collateral, you would receive all the upside, and any downside would reduce their collateral as a percent of the amount loaned. This sort of idea could potentially work along the lines of a margin call (ie you have to provide additional capital if your asset value drops), but this would have the effective of leveraging the bank's risk, when their objective is to lower their risk through requiring a down payment. I don't see a reason why the bank would take on the risk that you would need to provide additional capital down the road with no upside for them. Additionally, many banks have backed away from the kinds of zero-down-payment and negative-amortization-ARM loans that got them (or the people they sold them to) in trouble over the last few years in an effort to reduce how much risk they take on. I think that in theory, you'd have to offer a lot more benefit to the bank, and that in practice it's probably a non-starter right now." }, { "docid": "309387", "title": "", "text": "The risk-reward relation depends on what you are changing. In the most cases people ask about, it is not linear but I will give examples of both. Nonlinear case 1: As you diversify your portfolio, the firm-specific risks of various stocks cancel each other out without necessarily affecting the expected return of the portfolio. Reduction in risk without any loss in returns--very nonlinear. Nonlinear case 2: If you are changing the weights in your portfolio to move along the efficient frontier, then you the risk-reward relation is a hyperbola, which is nonlinear. Nonlinear case 3: If you are changing the weights in your portfolio to move away from the efficient frontier, then you increase risk without adding a fully compensatory amount of return. There could be many paths along the risk-reward plane, but generally it will not be linear in the sense that it will not be on the same line as your initial, efficient, portfolio and your savings account. Linear case 1: The most common sense in which we think of the risk-reward relation being linear is when the thing you are changing is the size of your investment. If you take money out of savings to put in your fully diversified portfolio without changing the relative weights, your expected returns will increase linearly. Linear case 2: If you believe the CAPM, then the expected return of an asset stock is linearly proportional to the market risk of the firm. If you could change the market risk of a single asset without changing anything else, then you would linearly change its expected return. The general rule about the risk/reward relation is this: If you are changing the size of your investment, the relation is linear. If you are changing its composition, the relation is nonlinear" }, { "docid": "15262", "title": "", "text": "\"Other responses have focused on getting you software to use, but I'd like to attempt your literal question: how are such transactions managed in systems that handle them? I will answer for \"\"double entry\"\" bookkeeping software such as Quicken or GnuCash (my choice). (Disclaimer: I Am Not An Accountant and accountants will probably find error in my terminology.) Your credit card is a liability to you, and is tracked using a liability account (as opposed to an asset account, such as your bank accounts or cash in your pocket). A liability account is just like an asset except that it is subtracted from rather than added to your total assets (or, from another perspective, its balance is normally negative; the mathematics works out identically). When you make a purchase using your credit card, the transaction you record transfers money from the liability account (increasing the liability) to the expense account for your classification of the expense. When you make a payment on your credit card, the transaction you record transfers money from your checking account (for example) to the credit card account, reducing the liability. Whatever software you choose for tracking your money, I strongly recommend choosing something that is sufficiently powerful to handle representing this as I have described (transfers between accounts as the normal mode of operation, not simply lone increases/decreases of asset accounts).\"" }, { "docid": "34810", "title": "", "text": "\"I'm going to look just at purchase price. Essentially, you can't always claim the whole of the purchase price (or 95% your case) in the year (the accounting period) of purchase, but you get a percentage of the value of the car each year, called writing down allowance, which is a capital allowance. It is similar to depreciation, but based on HRMC's own formula. In fact, it seems you probably can claim 95% of the purchase price, because the value is less than £1000. The logic is a bit involved, but I hope you can understand it. You could also claim simplified expenses instead, which is just based on a rate per mile, but you can't claim both. Note, by year I mean whatever your account period is. This could be the normal financial year, but you would probably have a better idea about this. See The HMRC webpage on this for more details. The big idea is that you record the value of any assets you are claiming writing down allowance on in one of a number of pools, that attract the same rate of writing down allowance, so you don't need to record the value of each asset separately. They are similar to accounts in accounting, so they have an opening balance, and closing balance. If you use an asset for personal use, it needs a pool to itself. HRMC call that a single asset pool. So, to start with, look at the Business Cars section, and look at the Rates for Cars section, to determine the rate you can claim. Each one links to a further article, which gives more detail if you need it. Your car is almost certainly in the special rate category. Special rate is 8% a year, main rate is 18%, and First year allowance is essentially 100%. Then, you look at the Work out what you can claim article. That talks you through the steps. I'll go through your example. You would have a pool for your car, which would end the account period before you bought the vehicle at zero (step 1). You then add the value of the car in the period you bought it (Step 2). You would reduce the value of the pool if you dispose of it in the same year (Step 3). Because the car is worth less than £1,000 (see the section on \"\"If you have £1,000 or less in your pool\"\"), you would normally be able to claim the whole value of the pool (the value of the car) in the first accounting period, and reduce the value of the pool to zero. As you use the car for personal use, you only claim 95% of the value, but still reduce the pool to zero. See the section on \"\"Items you use outside your business\"\". This £1000 is adjusted if your accounting period lasts more or less than 12 months. Once the pool is down to zero that it you don't need to think about it any more for tax purposes, apart from if you are claiming other motoring expenses, or if you sell it. It gets more complicated if the car is more expensive. I'll go through an example for a car worth £2,000. Then, after Step 3, on the year of purchase, you would reduce the value of the pool by 8%, and claim 95% of the reduction. This would be a 160 reduction, and 95%*160 = 152 claim, leaving the value of 1860 in the pool. You then follow the same steps for the next year, start with 1840 in the pool, reduce the value by 8%, then claim 95% of the reduction. This continues until you sell or dispose of the car (Step 3), or the value of the pool is 1000 or less, then you claim all of it in that year. Selling the car, or disposing of the car is discussed in the Capital allowances when you sell an asset article. The basic idea is that if you have already reduced the value of the pool to zero, the price you sell the car for is added you your profits for that year (See \"\"If you originally claimed 100% of the item\"\"), if you still have anything in the pool, you reduce the value of the pool by the sale value, and if it reduces to below zero (to -£200, say), you add that amount (£200, in this case), to your profits. If the value is above zero, you keep applying writing down allowances. In your case, that seems to just means if you sell the car in the same year you buy it, you claim the difference (or 95% of it) as writing down allowance, and if you do it later, you claim the purchase price in the year of purchase, and add 95% of the sale price to your profits in the year you sell it. I'm a bit unclear about starting \"\"to use it outside your business\"\", which doesn't seem to apply if you use it outside the business to start with. You can claim simplified expenses for vehicles, if you are a sole trader or partner, but not if you claim capital allowances (such as writing down allowances) on them, or you include a separate expense in your accounts for motoring expenses. It's a flat rate of 45p a mile for the first 10,000 miles, and 25p per mile after that, for cars, and 24p a mile for motorcycles. See the HRMC page on Simplifed Mileage expenses for details. For any vehicle you decide to either claim capital allowances claim running costs separately, or claim simplified mileage expenses, and \"\"Once you use the flat rates for a vehicle, you must continue to do so as long as you use that vehicle for your business.you have to stick with that decision for that vehicle\"\". In your case, it seems you can claim 95% of the purchase price in the accounting period you buy it, and if you sell it you add 95% of the sale price to your profits in that accounting period. It gets more complicated if you have a car worth more than £1000, adjusted for the length of the accounting period. Also, if you change how you use it, consult the page on selling selling an asset, as you may have disposed of it. You can also use simplified mileage expenses, but then you can't claim capital allowances, or claim running costs separately for that car. I hope that makes sense, please comment if not, and I'll try to adjust the explanation.\"" }, { "docid": "146761", "title": "", "text": "A bank needs to make sure they won't lose money by cashing a check. When you have an account with a bank and you cash a check, if the check ends up not getting paid, the bank will take the money back out of your account. This could happen for a number of reasons: the check could bounce (not enough money in the check writer's account), it could be a fraudulent (fake) check, or the payment could have been stopped on that check. Treasury checks are more problematic for banks than private checks; the government has given themselves more power to refuse to pay a check than the average person has. As a result, banks are already overly cautious about cashing treasury checks. The fact that you have a big check increases the risk for the bank. You'll have to ask around at different banks to see what they will do for you and what type of fee (if any) they will charge. Some banks might cash it for a fee; others might require that you open a savings account and wait a certain number of days after depositing the check before withdrawing your money." }, { "docid": "140830", "title": "", "text": "\"Depositum irregulare is a Latin phrase that simply means \"\"irregular deposit.\"\" It's a concept from ancient Roman contract law that has a very narrow scope and doesn't actually apply to your example. There are two distinct parts to this concept, one dealing with the notion of a deposit and the other with the notion of irregularity. I'll address them both in turn since they're both relevant to the tax issue. I also think that this is an example of the XY problem, since your proposed solution (\"\"give my money to a friend for safekeeping\"\") isn't the right solution to your actual problem (\"\"how can I keep my money safe\"\"). The currency issue is a complication, but it doesn't change the fact that what you're proposing probably isn't a good solution. The key word in my definition of depositum irregulare is \"\"contract\"\". You don't mention a legally binding contract between you and your friend; an oral contract doesn't qualify because in the event of a breach, it's difficult to enforce the agreement. Legally, there isn't any proof of an oral agreement, and emotionally, taking your friend to court might cost you your friendship. I'm not a lawyer, but I would guess that the absence of a contract implies that even though in the eyes of you and your friend, you're giving him the money for \"\"safekeeping,\"\" in the eyes of the law, you're simply giving it to him. In the US, you would owe gift taxes on these funds if they're higher than a certain amount. In other words, this isn't really a deposit. It's not like a security deposit, in which the money may be held as collateral in exchange for a service, e.g. not trashing your apartment, or a financial deposit, where the money is held in a regulated financial institution like a bank. This isn't a solution to the problem of keeping your money safe because the lack of a contract means you incur additional risk in the form of legal risk that isn't present in the context of actual deposits. Also, if you don't have an account in the right currency, but your friend does, how are you planning for him to store the money anyway? If you convert your money into his currency, you take on exchange rate risk (unless you hedge, which is another complication). If you don't convert it and simply leave it in his safe, house, car boot, etc. you're still taking on risk because the funds aren't insured in the event of loss. Furthermore, the money isn't necessarily \"\"safe\"\" with your friend even if you ignore all the risks above. Without a written contract, you have little recourse if a) your friend decides to spend the money and not return it, b) your friend runs into financial trouble and creditors make claim to his assets, or c) you get into financial trouble and creditors make claims to your assets. The idea of giving money to another individual for safekeeping during bankruptcy has been tested in US courts and ruled invalid. If you do decide to go ahead with a contract and you do want your money back from your friend eventually, you're in essence loaning him money, and this is a different situation with its own complications. Look at this question and this question before loaning money to a friend. Although this does apply to your situation, it's mostly irrelevant because the \"\"irregular\"\" part of the concept of \"\"irregular deposit\"\" is a standard feature of currencies and other legal tender. It's part of the fungibility of modern currencies and doesn't have anything to do with taxes if you're only giving your friend physical currency. If you're giving him property, other assets, etc. for \"\"safekeeping\"\" it's a different issue entirely, but it's still probably going to be considered a gift or a loan. You're basically correct about what depositum irregulare means, but I think you're overestimating its reach in modern law. In Roman times, it simply refers to a contract in which two parties made an agreement for the depositor to deposit money or goods with the depositee and \"\"withdraw\"\" equivalent money or goods sometime in the future. Although this is a feature of the modern deposit banking system, it's one small part alongside contract law, deposit insurance, etc. These other parts add complexity, but they also add security and risk mitigation. Your arrangement with your friend is much simpler, but also much riskier. And yes, there probably are taxes on what you're proposing because you're basically giving or loaning the money to your friend. Even if you say it's not a loan or a gift, the law may still see it that way. The absence of a contract makes this especially important, because you don't have anything speaking in your favor in the event of a legal dispute besides \"\"what you meant the money to be.\"\" Furthermore, the money isn't necessarily safe with your friend, and the absence of a contract exacerbates this issue. If you want to keep your money safe, keep it in an account that's covered by deposit insurance. If you don't have an account in that currency, either a) talk to a lawyer who specializes in situation like this and work out a contract, or b) open an account with that currency. As I've stated, I'm not a lawyer, so none of the above should be interpreted as legal advice. That being said, I'll reiterate again that the concept of depositum irregulare is a concept from ancient Roman law. Trying to apply it within a modern legal system without a contract is a potential recipe for disaster. If you need a legal solution to this problem (not that you do; I think what you're looking for is a bank), talk to a lawyer who understands modern law, since ancient Roman law isn't applicable to and won't pass muster in a modern-day court.\"" }, { "docid": "217727", "title": "", "text": "\"The simplest, most convenient way I know of to \"\"move your savings to Canada\"\" is to purchase an exchange-traded fund like FXC, the CurrencyShares Canadian Dollar Trust, or a similar instrument. (I identify this fund because I know it exists, not because I particularly recommend it.) Your money will be in Canadian currency earning Canadian interest rates. You will pay a small portion of that interest in fees. Since US banks are already guaranteed by the FDIC up to $250,000 per account, I don't really think you avoid any risks associated with the failure of an individual bank, but you might fare better if the US currency is subject to inflation or unfavorable foreign-exchange movements - not that such a thing would be a direct risk of a bank failure, but it could happen as a result of actions taken by the Federal Reserve under the auspices of aiding the economy if the economy worsens in the wake of a financial crisis - or, for that matter, if it worsens as a result of something else, including legislative, regulatory, or executive policies. Read the prospectus to understand additional risks with this investment. One of them is foreign-exchange risk. If the US economy and currency strengthen relative to the Canadian economy and its currency, you may lose substantial amounts of purchasing power. Additionally, one of the possible results of a financial crisis is a \"\"flight to safety\"\"; the global financial markets still seem to think the US dollar is pretty safe, and they may bid it up as they have done in the past, resulting in losses to your position (at least in the short term). I do not personally recommend moving all your savings to Canada, especially if it deprives you of income from more profitable investments over the long term, but moving some of your savings to Canada at least isn't a stupid idea, and it may turn out to be somewhat profitable. Having some Canadian currency is also a good idea if you plan to spend the money that you are saving on Canadian goods in the intermediate future.\"" }, { "docid": "495600", "title": "", "text": "\"Question 1: How do I start? or \"\"the broker\"\" problem Get an online broker. You can do a wire transfer to fund the account from your bank. Question 2: What criticism do you have for my plan? Dividend investing is smart. The only problem is that everyone's currently doing it. There is an insatiable demand for yield, not just individual investors but investment firms and pension funds that need to generate income to fund retirements for their clients. As more investors purchase the shares of dividend paying securities, the share price goes up. As the share price goes up, the dividend yield goes down. Same for bonds. For example, if a stock pays $1 per year in dividends, and you purchase the shares at $20/each, then your yearly return (not including share price fluctuations) would be 1/20 = 5%. But if you end up having to pay $30 per share, then your yearly return would be 1/30 or 3.3% yield. The more money you invest, the bigger this difference becomes; with $100K invested you'd make about $1.6K more at 5%. (BTW, don't put all your money in any small group of stocks, you want to diversify). ETFs work the same way, where new investors buying the shares cause the custodian to purchase more shares of the underlying securities, thus driving up the price up and yield down. Instead of ETFs, I'd have a look at something called closed end funds, or CEFs which also hold an underlying basket of securities but often trade at a discount to their net asset value, unlike ETFs. CEFs usually have higher yields than their ETF counterparts. I can't fully describe the ins and outs here in this space, but you'll definately want to do some research on them to better understand what you're buying, and HOW to successfully buy (ie make sure you're buying at a historically steep discount to NAV [https://seekingalpha.com/article/1116411-the-closed-end-fund-trifecta-how-to-analyze-a-cef] and where to screen [https://www.cefconnect.com/closed-end-funds-screener] Regardless of whether you decide to buy stocks, bonds, ETFs, CEFs, sell puts, or some mix, the best advice I can give is to a) diversify (personally, with a single RARE exception, I never let any one holding account for more than 2% of my total portfolio value), and b) space out your purchases over time. b) is important because we've been in a low interest rate environment since about 2009, and when the risk free rate of return is very low, investors purchase stocks and bonds which results in lower yields. As the risk free rate of return is expected to finally start slowly rising in 2017 and gradually over time, there should be gradual downward pressure (ie selling) on the prices of dividend stocks and especially bonds meaning you'll get better yields if you wait. Then again, we could hit a recession and the central banks actually lower rates which is why I say you want to space your purchases out.\"" }, { "docid": "336276", "title": "", "text": "\"Your first question has been answered quite well already. To answer your second question: \"\"If you pay extra, do you want the extra to go toward the interest or toward the principal?\"\" This gives the consumer some flexibility to decide how additional payments are applied. It might seem like a no-brainer to always apply extra payments towards principal - that way, the interest amounts on future payments will be lower and (if you're billed a fixed amount each month) more of each regular payment will then be applied to principal, shortening the term of the loan. However, while it would mean spending more over the life of the loan, there are certain advantages to applying extra payments towards interest†. The main advantage is that it pays your account ahead and means you don't have to make another payment as soon. You could use this strategy to give yourself a buffer of several months, so that if you should ever run into financial hardship you can stop making mortgage payments for a while without the risk of foreclosure. † Note, in most cases it's more likely that you are simply paying more without specifying to the lender that it should be used as principal curtailment. I haven't seen cases where you can explicitly ask the extra to be \"\"applied toward interest\"\". In this situation the funds would be held until you've provided enough to cover one or more monthly payments in full, at which point your \"\"next payment due\"\" date will simply be extended. Another advantage is that the funds that are being held (not due yet, not allocated toward any specific payment, maybe held in escrow) may be refundable to you, upon request. This would depend on the lender's policy. Some will permit refunds of credit balances that go beyond what is necessary to cover the current month's bill. Whether you apply extra payments towards principal or not, it makes little difference to the bank. Any additional payments received increase their immediate cash flow. The cash can be reinvested immediately by them into whatever they are currently focusing on.\"" }, { "docid": "25906", "title": "", "text": "\"To avoid nitpicks, i state up front that this answer is applicable to the US; Europeans, Asians, Canadians, etc may well have quite different systems and rules. You have nothing to worry about if you pay off your credit-card statement in full on the day it is due in timely fashion. On the other hand, if you routinely carry a balance from month to month or have taken out cash advances, then making whatever payment you want to make that month ASAP will save you more in finance charges than you could ever earn on the money in your savings account. But, if you pay off each month's balance in full, then read the fine print about when the payment is due very carefully: it might say that payments received before 5 pm will be posted the same day, or it might say before 3 pm, or before 7 pm EST, or noon PST, etc etc etc. As JoeTaxpayer says, if you can pay on-line with a guaranteed day for the transaction (and you do it before any deadline imposed by the credit-card company), you are fine. My bank allows me to write \"\"electronic\"\" checks on its website, but a paper check is mailed to the credit-card company. The bank claims that if I specify the due date, they will mail the check enough in advance that the credit-card company will get it by the due date, but do you really trust the USPS to deliver your check by noon, or whatever? Besides the bank will put a hold on that money the day that check is cut. (I haven't bothered to check if the money being held still earns interest or not). In any case, the bank disclaims all responsibility for the after-effects (late payment fees, finance charges on all purchases, etc) if that paper check is not received on time and so your credit-card account goes to \"\"late payment\"\" status. Oh, and my bank also wants a monthly fee for its BillPay service (any number of such \"\"electronic\"\" checks allowed each month). The BillPay service does include payment electronically to local merchants and utilities that have accounts at the bank and have signed up to receive payments electronically. All my credit-card companies allow me to use their website to authorize them to collect the payment that I specify from my bank account(s). I can choose the day, the amount, and which of my bank accounts they will collect the money from, but I must do this every month. Very conveniently, they show a calendar for choosing the date with the due date marked prominently, and as mhoran_psprep's comment points out, the payment can be scheduled well in advance of the date that the payment will actually be made, that is, I don't need to worry about being without Internet access because of travel and thus being unable to login to the credit-card website to make the payment on the date it is due. I can also sign up for AutoPay which takes afixed amount/minimum payment due/payment in full (whatever I choose) on the date due, and this will happen month after month after month with no further action necessary on my part. With either choice, it is up to the card company to collect money from my account on the day specified, and if they mess up, they cannot charge late payment fees or finance charge on new purchases etc. Also, unlike my bank, there are no fees for this service. It is also worth noting that many people do not like the idea of the credit-card company withdrawing money from their bank account, and so this option is not to everyone's taste.\"" }, { "docid": "364588", "title": "", "text": "\"Yes. I heard back from a couple brokerages that gave detailed responses. Specifically: In a Margin account, there are no SEC trade settlement rules, which means there is no risk of any free ride violations. The SEC has a FAQ page on free-riding, which states that it applies specifically to cash accounts. This led me to dig up the text on Regulation T which gives the \"\"free-riding\"\" rule in §220.8(c), which is titled \"\"90 day freeze\"\". §220.8 is the section on cash accounts. Nothing in the sections on margin accounts mentions such a settlement restriction. From the Wikipedia page on Free Riding, the margin agreement implicitly covers settlement. \"\"Buying Power\"\" doesn't seem to be a Regulation T thing, but it's something that the brokerages that I've seen use to state how much purchasing power a client has. Given the response from the brokerage, above, and my reading of Regulation T and the relevant Wikipedia page, proceeds from the sale of any security in a margin account are available immediately for reinvestment. Settlement is covered implicitly by margin; i.e. it doesn't detract from buying power. Additionally, I have personally been making these types of trades over the last year. In a sub-$25K margin account, proceeds are immediately available. The only thing I still have to look out for is running into the day-trading rules.\"" }, { "docid": "173088", "title": "", "text": "\"What is a stock? A share of stock represents ownership of a portion of a corporation. In olden times, you would get a physical stock certificate (looking something like this) with your name and the number of shares on it. That certificate was the document demonstrating your ownership. Today, physical stock certificates are quite uncommon (to the point that a number of companies don't issue them anymore). While a one-share certificate can be a neat memento, certificates are a pain for investors, as they have to be stored safely and you'd have to go through a whole annoying process to redeem them when you wanted to sell your investment. Now, you'll usually hold stock through a brokerage account, and your holdings will just be records in a database somewhere. You'll pick a broker (more on that in the next question), instruct them to buy something, and they'll keep track of it in your account. Where do I get a stock? You'll generally choose a broker and open an account. You can read reviews to compare different brokerages in your country, as they'll have different fees and pricing. You can also make sure the brokerage firm you choose is in good standing with the financial regulators in your country, though one from a major national bank won't be unsafe. You will be required to provide personal information, as you are opening a financial account. The information should be similar to that required to open a bank account. You'll also need to get your money in and out of the account, so you'll likely set up a bank transfer. It may be possible to request a paper stock certificate, but don't be surprised if you're told this is unavailable. If you do get a paper certificate, you'll have to deal with considerably more hassle and delay if you want to sell later. Brokers charge a commission, which is a fee per trade. Let's say the commission is $10/trade. If you buy 5 shares of Google at $739/share, you'd pay $739 * 5 + $10 = $3705 and wind up with $3695 worth of stock in your account. You'd pay the same commission when you sell the stock. Can anyone buy/own/use a stock? Pretty much. A brokerage is going to require that you be a legal adult to maintain an account with them. There are generally ways in which a parent can open an account on behalf of an underage child though. There can be different types of restrictions when it comes to investing in companies that are not publicly held, but that's not something you need to worry about. Stocks available on the public stock market are available to, well, the public. How are stocks taxed? Taxes differ from country to country, but as a general rule, you do have to provide the tax authorities with sufficient information to determine what you owe. This means figuring out how much you purchased the stock for and comparing that with how much you sold it for to determine your gain or loss. In the US (and I suspect in many other countries), your brokerage will produce an annual report with at least some of this information and send it to the tax authorities and you. You or someone you hire to do your taxes will use that report to compute the amount of tax owed. Your brokerage will generally keep track of your \"\"cost basis\"\" (how much you bought it for) for you, though it's a good idea to keep records. If you refuse to tell the government your cost basis, they can always assume it's $0, and then you'll pay more tax than you owe. Finding the cost basis for old investments can be difficult many years later if the records are lost. If you can determine when the stock was purchased, even approximately, it's possible to look back at historical price data to determine the cost. If your stock pays a dividend (a certain amount of money per-share that a company may pay out of its profits to its investors), you'll generally need to pay tax on that income. In the US, the tax rate on dividends may be the same or less than the tax rate on normal wage income depending on how long you've held the investment and other rules.\"" }, { "docid": "475539", "title": "", "text": "\"Nobody can give you a definitive answer. To those who suggest it's expensive at these prices, [I'd point to this chart](http://treo.typepad.com/.a/6a0120a6002285970c014e8c39f2c3970d-850wi) showing the price of gold versus the global money supply over the past decade or so. It's not conclusive, but it's evidence that gold tracks the money supply relatively well. There might be a bit of risk premium baked in that it would shed in a stable economy, but that premium is unknowable. It's also (imo) probably worth the protection it provides. In an inflationary scenario (Euro devaluation) gold will hold its buying power very well. It also fares well in a deflationary environment, just not quite as well as holding physical currency. Note that in such an environment, bank defaults are a big danger: that 50k might only be safe under your mattress (rather than in a fractionally reserved bank account). If you're buying gold, certificates aren't exactly a bad option, although there still exists the counterparty risk of the agent storing your gold, as well as political risk of the nation where it's being held. Buying physical bullion ameliorates these risks, but then you face the problem of protecting it. Safe deposit boxes, a home safe, or burying it in your backyard are all possible options. The merits of each, I'll leave as an exerice to the reader. Foreign currency might be a little bit better than the Euro, but as we've seen in the past year or so, the Swiss Franc has been devalued to match the Euro in the proverbial \"\"race to the bottom\"\". It's probably not much better than another fiat currency. I don't know anything about Norway. Edit: Depending on your time horizon, my personal opinion would be to put no less than 5-10% of your savings in a hard store of value (e.g. gold, silver, platinum). Depending on your risk appetite, you could probably stand to put a lot more into it, especially given the Eurozone turmoil. Of course, as with anything else, your mileage may vary, past performance does not guarantee future results, this is not investment advice, seek professional medical help if you experience an erection lasting longer than four hours.\"" } ]

[ { "docid": "57168", "title": "", "text": "You cannot have off-campus employment in your first year, but investments are considered passive income no matter how much time you put into that effort. Obviously you need to stay enrolled full-time and get good enough grades to stay in good standing academically, so you should be cautious about how much time you spend day trading. If the foreign market is also active in a separate time zone, that may help you not to miss class or otherwise divert your attention from your investment in your own education. I have no idea about your wealth, but it seems to me that completing your degree is more likely to build your wealth than your stock market trades, otherwise you would have stayed home and continued trading instead of attending school in another country." } ]

[ { "docid": "579512", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://bunky1787.wordpress.com/2017/06/04/jim-rickards-free-trade-a-barbarous-relic/) reduced by 98%. (I'm a bot) ***** &gt; What Rickards ignores is that as these dollars were being accumulated abroad(voluntarily as countries attempted to increase their reserve balances), the attempt to prevent the fall of the dollar&amp;#039;s value by the U.S. government through foreign investment disincentives, restrictions on foreign lending, efforts to stem the official outflow of dollars, and cooperation with other countries did not succeed(in addition to foreign trade restrictions). &gt; On the contrary, the depreciation of the Yuan improves the purchasing power of U.S. citizens in terms of Chinese imports and has little correlation with U.S. consumer prices. &gt; A foreigner needs dollars to purchase U.S. goods, and if exporters cannot acquire as many dollars from sales to the U.S., then they will be unable to effectively demand our goods and services in return. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6f5k71/jim_rickards_free_trade_a_barbarous_relica/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~135950 tl;drs so far.\"\") | [Theory](http://np.reddit.com/r/autotldr/comments/31bfht/theory_autotldr_concept/) | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **U.S**^#1 **price**^#2 **dollar**^#3 **Rickards**^#4 **foreign**^#5\"" }, { "docid": "475199", "title": "", "text": "Degree of Operating Leverage (DOL) measures the percent change in EBIT given a 1% change in Revenue. In other words, if DOL is 1.5, then increasing Revenue by 1% will increase EBIT by 1.5%. Degree of Financial Leverage (DFL) measures the percent change in NI given a 1% change in EBIT. Degree of Total Leverage (DTL) cuts EBIT out and measures the percent change in NI given a 1% change in Revenue. What all three of these numbers measure is “elasticity.” The elasticity between two variables is always the percentage change effect on one due to a 1% change in the other. Before we talk about why you would multiply elasticities, let’s first just look at absolute changes between a change of three variables, X Y and Z. Lets say X impacts Y (X-&gt;Y) and Y impacts Z (Y-&gt;Z). To make it even more concrete, let’s imagine a classroom where every student is required to have 2 books and every book has 100 pages. So X = # students, Y = # of books, and Z = # of pages. If we add one student to the class, we need to add 2 books. If we add 1 book to the class, we have added 100 pages. With absolute changes like this it is obvious that we don’t add, we multiply. In other words, to directly see the impact of a new student on the number of pages (X -&gt; Z), we would say 1 student -&gt; 2 books -&gt; 200 pages. To say 102 pages would obviously be silly. For percent changes, this looks pretty similar. To make it easy say the class has 100 students. So adding 1 student is a 1% change. Then we go from 200 books to 202 books, a 1% change. So the degree of Student to Book Leverage is 1 (which make sense there are no “fixed pages”). We go from 20,000 pages to 20,200 pages, also a 1% change so the degree of Book to Page leverage is also 1. Thus, the Student to Page leverage is also just a flat 1. Let’s add fixed amounts. The teacher has a single 2,000 page book on how to teach. We’ll assume the class has 20 students. So we start with 20*2 + 1 = 41 books and 40*100 + 2,000 = 6,000 pages. Let’s add a student. We have a 21/20 -1 = 4% increase in students. 43/41 -1 = 4.89% increase in books. 6,200/6,000 – 1 = 3.33% increase in pages. So the Degree of Student to Book Leverage is 4.00/4.89 = 0.818 and the Degree of Book to Page Leverage is 4.89/3.33 = 1.47. And the direct Student to Page Leverage is 4.00/3.33 = 1.20. Again, note that here it would be silly to add the degrees of leverage, and when we do multiply them we get 0.82*1.47 = 1.2, the right answer. From here the application to EBIT [= Sales - Fixed Cost - Variable Cost = (Gross Margin * Sales) - Fixed Cost] and the application to EPS [= EBIT - Interest – Taxes = (1 – tax rate)*(EBIT – Interest)] should be obvious. I can supply the full proof mathematically, however, if you would like." }, { "docid": "114520", "title": "", "text": "\"First, you don't state where you are and this is a rather global site. There are people from Canada, US, and many other countries here so \"\"mutual funds\"\" that mean one thing to you may be a bit different for someone in a foreign country for one point. Thanks for stating that point in a tag. Second, mutual funds are merely a type of investment vehicle, there is something to be said for what is in the fund which could be an investment company, trust or a few other possibilities. Within North America there are money market mutual funds, bond mutual funds, stock mutual funds, mutual funds of other mutual funds and funds that are a combination of any and all of the former choices. Thus, something like a money market mutual fund would be low risk but quite likely low return as well. Short-term bond funds would bring up the risk a tick though this depends on how you handle the volatility of the fund's NAV changing. There is also something to be said for open-end, ETF and closed-end funds that are a few types to consider as well. Third, taxes are something not even mentioned here which could impact which kinds of funds make sense as some funds may invest in instruments with favorable tax-treatment. Aside from funds, I'd look at CDs and Treasuries would be my suggestion. With a rather short time frame, stocks could be quite dangerous to my mind. I'd only suggest stocks if you are investing for at least 5 years. In 2 years there is a lot that can happen with stocks where if you look at history there was a record of stocks going down about 1 in every 4 years on average. Something to consider is what kind of downside would you accept here? Are you OK if what you save gets cut in half? This is what can happen with some growth funds in the short-term which is what a 2 year time horizon looks like. If you do with a stock mutual fund, it would be a gamble to my mind. Don't forget that if the fund goes down 10% and then comes up 10%, you're still down 1% since the down will take more.\"" }, { "docid": "366078", "title": "", "text": "Now that the labor market in China is near saturation and wages are rising, I think that the Western factories that rely heavily on unskilled labor will start to move from China to sub-Saharan Africa. Edit: I disagree with this line: &gt; tried-and-true strategies of delivering charity Those charities have come under a lot of fire recently, especially from African academics, for distorting the market economies in Africa. Massive supplies of free grain ruin the market for farmers. They inhibit the development of the agricultural sector in Africa and may be harming Africans in the long-term as much as they help in the short-term. Foreign direct investment, better governance, and foreign-built factories will probably help Africa more than food aid." }, { "docid": "137406", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.richmondfed.org/-/media/richmondfedorg/publications/research/working_papers/2017/pdf/wp17-12.pdf) reduced by 98%. (I'm a bot) ***** &gt; 7 3 Local Dynamics The local dynamics of the simple search and matching model have been studied by Krause and Lubik. &gt; In the previous literature, for example Mendes and Mendes and Bhattacharya and Bunzel, the backward dynamics are defined via the map g by rearranging to isolate &amp;theta;t : \u0010 \u00111/&amp;xi; &amp;theta;t = a&amp;theta;t+1 c&amp;theta;t+1 + d = g. 11 Under risk aversion, the dynamics depend on the time path of output yt. &gt; 4.2 Stability Properties We now study the dynamics of the backward map zt = f. We first establish the properties of the function f. We then study the stability properties of the steady state, where we distinguish between two broad areas of dynamics in the backward map, namely stable and unstable. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/788alk/fed_global_dynamics_in_a_search_and_matching/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~233564 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **dynamic**^#1 **model**^#2 **0.1**^#3 **1**^#4 **map**^#5\"" }, { "docid": "137378", "title": "", "text": "This is what helped me. - I did my own taxes - get your own job, not from your parents, or parents friends, but entirely by yourself. Complete independence will equate to financial independence - Wikipedia (for specifics and definitions) paired with finance genre movies - audiobook, or YouTube video, 'why an economy grows, and why it doesnt' That's a good start. Good luck! Don't be too gung ho to invest and all that crap, you got lots too learn. Rule 1: don't be too eager, that's how you lose all your money! My best financial investments to date were: 1) my education (engineering) 2) I didn't pay my student loan off, instead, I bought a property, and I made $70,000 in 8 months off of one, and $100,000 off of another one in 2 years, 3) still making minimum payments on my student loan, a dollar today is worth more than a dollar tomorrow 4) pack my own lunches every day, eating out every meal ends up costing more than most mortgage payments. This is in Vancouver BC, Canada." }, { "docid": "209826", "title": "", "text": "buying real estate is for people with sufficient financial resources to cover market downturns. Please read about the 2008 real estate market. Investing in real estate when you are a poor college student is a sure way to become a bankrupt college student. A single word answer to your question: No. Not reasonable. Your best investment is completing college with as little debt as possible and the most practical experience in the market area you are interested in entering." }, { "docid": "88539", "title": "", "text": "There are two significant drawbacks to this type of transfer. They were the reasons why I kept my American 401(k) as-is and started funding my Canadian RRSP from zero balance. 1. Taxes - a large chunk of your 401(k) will be lost to taxes. There is probably no way to transfer the funds without making a 401(k)/IRA withdrawal, which will incur the US federal tax and the 10% early-withdrawal penalty. When the money went into the 401(k), you got a tax deduction in the US and the tax break is supposed be repaid later when you make a withdrawal (that's basically how tax deferral works). It's unlikely that any country will let you take a deduction first and send the payback to a foreign country. The withdrawal amount may also be taxable in Canada (Canadians generally pay taxes on their global income and that includes pensions and distributions from foreign retirement plans). Foreign tax credit will apply of course, to eliminate double taxation, but it's of little help if your marginal Canadian tax rate is higher than your average US tax rate. 2. Expenses. Your RRSP will have to be invested in something and mutual fund management expenses are generally higher in Canada than in the US. For example, my employer-sponsored RRSP has a Standard & Poor's stock index fund that charges 1.5% and that is considered low-cost. It also offers a number of managed funds with expenses in excess of 2% that I simply ignore. You can probably invest your American 401(k)/IRA in mutual funds more efficiently." }, { "docid": "27484", "title": "", "text": "\"Two things you should consider about paying off student loans ahead of the 10 year amortization schedule: What interest rate are you paying on your loans? What are you earning on your investments in a balanced mutual fund? When you pay off your student loans you are essentially guaranteed a return of the interest rate on your loan (future interest you would have had to pay). However if you are investing well and getting a good return on your investments you will get a greater return. Ex. Half of my student loans are at 6.8%, thr other half are at 2.5%. I make the minimum payments on the loans at 2.5% and invest my money in tax sheltered retirement accounts. The return on these funds has been 8% and that is on per-tax dollars so really closer to 11%. Now there is also downside risk when you invest in the market, but 2.5% guaranteed I will forgoe for 11% in low risk return. However my loans at 6.8% I repay in excess of the minimums because 6.8% guaranteed return is pretty good! So this decision is based on your confidence in your investments and your own risk tolerance. Once you pay your bank on your student loans that money is gone, out of your control. If you need it in the future you may need to pay higher interest on an unsecured loan, or you may not be able to borrow it. When you want to make large purchases (a car, house) that money you per-paid on your loans isn't available to you as a down payment. Banks should want you to have some of your own \"\"skin in the game\"\" on these purchases and the lending standards keep getting tougher. You are better off if you have money saved in your name rather than against the balance on your loan. Yes you can't bankrupt these loans, but the money you repay on them doesn't go toward housing you or paying your bills on a rainy day. I went through the same feeling when I completed my MBA with $50k in debt, you want to pay it off as soon as possible. But you need to step away and realize that it was an investment in your future and your future is long, you need time to make a financial foundation for it. And you will feel a lot more empowered when you have money saved and you can make the decision for how you want to deploy it to work for you. (Ex. I could pay down my student loans with the balance I have in the bank, but I am going to use it to invest in myself and open my own business).\"" }, { "docid": "104480", "title": "", "text": "The exchange rate between two currencies is simply the price that the most recent market participants were able to agree on, when trading. ie: if the USDCAD is 1.36, it's because the last trade that happened where someone bought 1 USD cost 1.36 CAD. There is no one person/organization which 'decides' the rate between two currencies. The rate moves you see is just the reality of money changing hands as people in various situations trade currencies for various reasons. Just like with stocks or any other market product, foreign exchange rates can fluctuate wildly based on many things. It is very difficult to forecast where rates will go, because the biggest changes in rates can often be unpredictable news events. For example, when Brexit happened, the value of the GBP plummeted relative to other currencies, because the market traders had less faith in the UK economy, and therefore weren't willing to pay as much to buy GBP. See more here: https://money.stackexchange.com/a/76482/44232. There is a very high level of risk in the foreign exchange market; for your sake, don't get involved in any trading that you do not well understand, first." }, { "docid": "281329", "title": "", "text": "Perhaps there is no single formula that accounts for all the time intervals, but there is a method to get formulas for each compound interest period. You deposit money monthly but there is interest applied weekly. Let's assume the month has 4 weeks. So you added x in the end of the first month, when the new month starts, you have x money in your account. After one week, you have x + bx money. After the second week, you have x + b(x + bx) and so on. Always taking the previous ammount of money and multiplying it by the interest (b) you have. This gives you for the end of the second month: This looks complicated, but it's easy for computers. Call it f(0), that is: It is a function that gives you the ammount of money you would obtain by the end of the second month. Do you see that the future money inputs are given with relation to the previous ones? Then we can do the following, for n>1 (notice the x is the end of the formula, it's the deposit of money in the end of the month, I'm assuming it'll pass through the compound interest only in the first week of the next month): And then write: There is something in mathematics called recurrence relation in which we can use these two formulas to produce a simplified one for arbitrary b and n. Doing it by hand would be a bit complicated, but fortunately CASes are able to do it easily. I used Wolfram Mathematica commands: And it gave me the following formula: All the work you actually have to do is to figure out what will be f(0) and then write the f(n) for n>0 in terms of f(n-1). Notice that I used the command FullSimplify in my code, Mathematica comes with algorithms for simplyfing formulas so if it didn't find something simpler, you probably won't find it by yourself! If the code looks ugly, it's because of Mathematica clipboard formatting, in the software, it looks like this: Notice that I wrote the entire formula for f(0), but as it's also a recurrence relation, it can be written as: That is: f(0)=g(4). This should give you much simpler formulas to apply in this method." }, { "docid": "437614", "title": "", "text": "Yes - it's called the rate of inflation. The rate of return over the rate of inflation is called the real rate of return. So if a currency experiences a 2% rate of inflation, and your investment makes a 3% rate of return, your real rate of return is only 1%. One problem is that inflation is always backwards-looking, while investment returns are always forward-looking. There are ways to calculate an expected rate of inflation from foreign exchange futures and other market instruments, though. That said, when comparing investments, typically all investments are in the same currency, so the effect of inflation is the same, and inflation makes no difference in a comparative analysis. When comparing investments in different currencies, then the rate of inflation may become important." }, { "docid": "332278", "title": "", "text": "One of the often cited advantages of ETFs is that they have a higher liquidity and that they can be traded at any time during the trading hours. On the other hand they are often proposed as a simple way to invest private funds for people that do not want to always keep an eye on the market, hence the intraday trading is mostly irrelevant for them. I am pretty sure that this is a subjective idea. The fact is you may buy GOOG, AAPL, F or whatever you wish(ETF as well, such as QQQ, SPY etc.) and keep them for a long time. In both cases, if you do not want to keep an on the market it is ok. Because, if you keep them it is called investment(the idea is collecting dividends etc.), if you are day trading then is it called speculation, because you main goal is to earn by buying and selling, of course you may loose as well. So, you do not care about dividends or owning some percent of the company. As, ETFs are derived instruments, their volatility depends on the volatility of the related shares. I'm wondering whether there are secondary effects that make the liquidity argument interesting for private investors, despite not using it themselves. What would these effects be and how do they impact when compared, for example, to mutual funds? Liquidity(ability to turn cash) could create high volatility which means high risk and high reward. From this point of view mutual funds are more safe. Because, money managers know how to diversify the total portfolio and manage income under any market conditions." }, { "docid": "124909", "title": "", "text": "I mean it hasn't really worked anywhere. You don't create wealth with socialism. Incentives are gone for any sort value creation. You're already looking backwards at 'peak civilization' once you've gone down the socialism path. Everything ahead is fighting over what's left. &gt;An economics professor at Texas Tech said he had never failed a single student before but had, once, failed an entire class. The class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer. The professor then said ok, we will have an experiment in this class on socialism. All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A. &gt;After the first test the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. But, as the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too; so they studied little ... &gt;The second Test average was a D! No one was happy. When the 3rd test rolled around the average was an F. The scores never increased as bickering, blame, name calling all resulted in hard feelings and no one would study for anyone else. All failed to their great surprise and the professor told them that socialism would ultimately fail because the harder to succeed the greater the reward but when a government takes all the reward away; no one will try or succeed." }, { "docid": "418551", "title": "", "text": "\"Aggressiveness in a retirement portfolio is usually a function of your age and your risk tolerance. Your portfolio is usually a mix of the following asset classes: You can break down these asset classes further, but each one is a topic unto itself. If you are young, you want to invest in things that have a higher return, but are more volatile, because market fluctuations (like the current financial meltdown) will be long gone before you reach retirement age. This means that at a younger age, you should be investing more in stocks and foreign/developing countries. If you are older, you need to be into more conservative investments (bonds, money market, etc). If you were in your 50s-60s and still heavily invested in stock, something like the current financial crisis could have ruined your retirement plans. (A lot of baby boomers learned this the hard way.) For most of your life, you will probably be somewhere in between these two. Start aggressive, and gradually get more conservative as you get older. You will probably need to re-check your asset allocation once every 5 years or so. As for how much of each investment class, there are no hard and fast rules. The idea is to maximize return while accepting a certain amount of risk. There are two big unknowns in there: (1) how much return do you expect from the various investments, and (2) how much risk are you willing to accept. #1 is a big guess, and #2 is personal opinion. A general portfolio guideline is \"\"100 minus your age\"\". This means if you are 20, you should have 80% of your retirement portfolio in stocks. If you are 60, your retirement portfolio should be 40% stock. Over the years, the \"\"100\"\" number has varied. Some financial advisor types have suggested \"\"150\"\" or \"\"200\"\". Unfortunately, that's why a lot of baby boomers can't retire now. Above all, re-balance your portfolio regularly. At least once a year, perhaps quarterly if the market is going wild. Make sure you are still in-line with your desired asset allocation. If the stock market tanks and you are under-invested in stocks, buy more stock, selling off other funds if necessary. (I've read interviews with fund managers who say failure to rebalance in a down stock market is one of the big mistakes people make when managing a retirement portfolio.) As for specific mutual fund suggestions, I'm not going to do that, because it depends on what your 401k or IRA has available as investment options. I do suggest that your focus on selecting a \"\"passive\"\" index fund, not an actively managed fund with a high expense ratio. Personally, I like \"\"total market\"\" funds to give you the broadest allocation of small and big companies. (This makes your question about large/small cap stocks moot.) The next best choice would be an S&P 500 index fund. You should also be able to find a low-cost Bond Index Fund that will give you a healthy mix of different bond types. However, you need to look at expense ratios to make an informed decision. A better-performing fund is pointless if you lose it all to fees! Also, watch out for overlap between your fund choices. Investing in both a Total Market fund, and an S&P 500 fund undermines the idea of a diversified portfolio. An aggressive portfolio usually includes some Foreign/Developing Nation investments. There aren't many index fund options here, so you may have to go with an actively-managed fund (with a much higher expense ratio). However, this kind of investment can be worth it to take advantage of the economic growth in places like China. http://www.getrichslowly.org/blog/2009/04/27/how-to-create-your-own-target-date-mutual-fund/\"" }, { "docid": "261768", "title": "", "text": "At that rate, European schools will soon be overrun by American students. Here in Germany, foreign students pay the same fees as anyone else, which amount to anything between 100 € and 1500 € ($125 - $2000) annually at public universities, and there are already quite a few US students. Combine this low cost with a high availability of English-language courses and a fairly good employment situation (unemployment is currently at about 7% as measured by German measuring standards, which amounts to about 5% as measured in the US, and native English speakers are still rare enough that just about anyone can earn good money as a private English tutor), and coming here looks more attractive by the minute." }, { "docid": "524391", "title": "", "text": "Introducing the new Ai AccuTemp 1.9 cubic foot vacuum ovens, come standard with 5 aluminum shelves, stainless steel tubing &amp; compression fittings, stainless steel vacuum/vent valves, oil-filled vacuum gauge, 5 sided pad heating technology and two year warranty. The thermal-conductive aluminum shelves provide excellent temperature uniformity inside the chamber, while our 3rd gen LCD low proportional gain temperature controllers keep your oven temperature within +/- 1°F accuracy, in either °F or °C." }, { "docid": "502750", "title": "", "text": "\"I am currently running 12%. This is including IRA, 401k, HSA, and tax accounts. My LC is not a tax sheltered.The share used to be around 25% but i have been very aggressively putting away alot more into 401k/HSA. My current NAT returns on LC are 14.3%, but not a single loan has seasoned, i am nearing my first full year, and i have had 3 defaults in 150~ loans. My % across grades: A-0 B-6 C-30 D-31 E-20 F-12 G-1 Also to note, i use a very filter and only pick the \"\"best\"\" notes based on my own personally back testing. My 5 year average for stocks and such is around 11%, and YTD is 14%. Which is matching my LC rate. I am not sure which one will hurt more during the next bear markets, LC, or long term investments. Only time will tell. I suppose I plan on keeping my LC between 10-15% of my total investments. I will see how it goes as time goes on and my account gets more seasoned.\"" }, { "docid": "336618", "title": "", "text": "If I understand what you're asking, I think you're looking at the relationship wrong. Yes, when one currency has a higher interest rate relative to another, it's value should, theoretically, appreciate. For example, if the USD interest rate is 10% and the EUR is 5%, the USD should appreciate in value against the EUR. However, the parity relationship tells you the price at which an investor would be indifferent to the difference in interest rates. So using the formula for interest rate parity: (1+r(USD))/(1+r(EUR)) = F/S and plugging in the interest rates from above and a spot rate of $1.5/EUR: (1.1)/(1.05) = F/(1.5) The 1 year forward rate would have to be $1.5714/EUR in order for the investor to be INDIFFERENT between holding USD or EUR. All this assuming interest rate parity holds. I'm not big on Econ but this is how I understood it when studying for the CFA exam the past few months. So please, someone correct me if I'm wrong." } ]

[ { "docid": "113585", "title": "", "text": "The operating margin deals with the ability for a company to make a profit above the costs of running the company and generating sales. While ROE is how much money the company makes relative to the shareholders equity. I'd be willing to bet that if a company has a small ROE then it also has a quite large P/E (price to earnings) ratio. This would be caused by the company's stock being bid up in relation to its earnings and may not necessarily be a bad thing. People expect the high operating margin to help drive increased revenues in the future, and are willing to pay a higher price now for when that day comes." } ]

[ { "docid": "61853", "title": "", "text": "\"But what happen if the stock price went high and then go down near expiry date? When you hold a short (sold) call option position that has an underlying price that is increasing, what will happen (in general) is that your net margin requirements will increase day by day. Thus, you will be required to put up more money as margin to finance your position. Margin money is simply a \"\"good faith\"\" deposit held by your broker. It is not money that is debited as cash from the accounting ledger of your trading account, but is held by your broker to cover any potential losses that may arise when you finally settle you position. Conversely, when the underlying share price is decreasing, the net margin requirements will tend to decrease day by day. (Net margin is the net of \"\"Initial Margin\"\" and \"\"Variation Margin\"\".) As the expiry date approaches, the \"\"time value\"\" component of the option price will be decreasing.\"" }, { "docid": "308760", "title": "", "text": "&gt; Also, we're not talking about a car, albeit uber expensive, like Rolls Royce, we're talking about an airplane that costs hundreds of millions of dollars that needs to work within very small tolerances over thousands upon thousands of operating hours. Any school child can see the dangers in outsourcing too much of that. But Rolls Royce have the experience to build in those tolerances with their years of experience in building jet engines. This is the design experience that Boeing does not have in it's in-house capabilities. Because of the tolerances and knowledge these components need it is very hard for one company to have all the knowledge, resources, manufacturing ability and skill to produce all the parts. Even engineers as great as NASA delegate the design and build of components to other companies. For example, if they can outsource a lot of the spacecraft interior to other companies they can focus on what is important - getting that big and heavy tube of metal into space." }, { "docid": "495007", "title": "", "text": "I suspect that the times you are referring to are those times when there is relatively low volumes of foreign exchange trading. Lower volumes of trading make it possible for large orders to have a disproportionate effect on the market price. This implies that the times to avoid will be the times with the lowest relative volumes. This will occur on the cusp between the New York market winding down and the Asia/Tokyo market revving up. This will be in the hours preceding Tokyo's opening at 06:00 Tokyo time, so the time to avoid is about 04:00-06:00 Tokyo time, or about 20:00-22:00 GMT (if I've worked out the time difference correctly). Foreign exchange is a 24 hour, global market. Although each of the three main trading centres - London, New York, Asia - will operate 24 hours a day, they will maintain only a skeleton staff outside of normal working hours. The time difference between London and New York is only 5 hours, so there is no period of time when both centres are operating with a skeleton staff. The time difference between London and Tokyo is 8 hours, so again there is no period of time when both centres are operating with a skeleton staff. The time difference between New York and Tokyo is 13 hours. This does include a period where both centres are operating with a skeleton staff, as well as London operating on a skeleton staff. Thus, in the couple of hours immediately preceding Tokyo's opening for the regular trading day there is minimal coverage in each of the three main trading centres. As mentioned above, this is the time when large orders can have a disproportionate effect on fx rates and so this is the time to avoid." }, { "docid": "129540", "title": "", "text": "\"The first rule I follow is pretty simple: Get paid for what you do. Earn a return on what you own. If you are running your company prudently, you should earn a salary for the position and responsibilities you hold within the business. This salary should be competitive. You should be able to replace yourself in the business at this salary. If your title is \"\"President\"\" or \"\"CEO\"\" - look for market rate salaries for others in that position within your industry and company size. If you wear multiple hats in a small business, you will likely have to blend this salary based on those various positions. Based on how you run your business, the money left over at the end of the year after you and your team takes a competitive wage is your profit. If there isn't any profit, then you might want to do some work on your business model. But if their is a profit, then it's a clear return on what you own and not just a payment for work completed. The idea would be that you could exit the business as an operator, pay someone else to do exactly what you do, and you would continue to get that profit return at the end of the year. This is when a business acts like a true asset. Whether you take your money in salary or profit distributions (or dividends) depending on your structure, taxes are about the same. W2'd salaries get normal employee contributed taxes, but then of course the company matches these. It is identical if you take a guaranteed payment or distribution that gets hit with self employment taxes. Profits are also going to get hit with the same taxes. Follow ups: 1) A fair salary would be a competitive market wage for the position you hold within the business. What is left over would be considered true profits and not just fabricated profits by taking a lower than market wage to boost the appearance of profitability. 2) Shareholders requesting salary information would be covered in your Operating Agreement or Shareholder Agreement. This might be terms you set with your investors. Or you might simply set a term that you only need approval if a single salary exceeds a cap (like $250,000). Which would mean you would need to present why you deserve a higher salary and have your board approve (if you are governed by said board via your investors). Profitability is a different ballpark. Your investors most likely have a right to see a monthly, quarterly, and/or annual Profit & Loss statement which should clearly state profitability. I can't imagine running a completely closed book company to my investors. Actually... I can't really imagine ever investing in a company where I am not permitted to see the financials. Something to also consider here is the threat of trying to keep your profit numbers low in order to not pay taxes or to pay yourself a higher salary. If you ever plan to sell or exit the company, most widely accepted valuations of a business are done from profits (or EBIDTA). You might think you are saving yourself a couple points on taxes by avoiding profits in the short term, but if you exit the business and get a 3-5X (or even up to 12X in some cases) multiplier on your annual profits, you might be kicking yourself for trying to hide them through your accounting practices. Buyers will often sniff out an owner who created false profits by not paying themselves, but what's harder to do is figure out how much profits should have been when there were none on the books. By saving yourself $100,000 in taxes this year, could add up to close to $1,000,000 in an acquisition. Good luck.\"" }, { "docid": "389501", "title": "", "text": "If the underlying is currently moving as aggressively as stated, the broker would immediately forcibly close positions to maintain margin. What securities are in fact closed depends upon the internal algorithms. If the equity in the account remains negative after closing all positions if necessary, the owner of the account shall owe the broker the balance. The broker will close the account and commence collections if the owner of the account does not pay the balance quickly. Sometimes, brokers will impose higher margin requirements than mandated to prevent the above eventuality. Brokers frequently close positions that violate internal or external margin requirements as soon as they are breached." }, { "docid": "23387", "title": "", "text": "\"You need to have 3 things if you are considering short-term trading (which I absolutely do not recommend): The ability to completely disconnect your emotions from your gains and losses (yes, even your gains but especially your losses). The winning/losing on a daily basis will cause you to start taking unnecessary risk in order to win again. If you can't disconnect your emotions, then this isn't the game for you. The lowest possible trading costs to enter and exit a position. People will talk about 1% trading costs; that rule-of-thumb doesn't apply anymore. Personally, my trading costs are a total 13.9 basis points to enter and exit a $10,000 position and I think it's still too high (that's just a hair above one-eighth of 1% for you non-traders). The ability to \"\"gut-check\"\" and exit a losing position FAST. Don't hesitate and don't hope for it to go up. GTFO. If you are serious about short-term trading then you must close all positions on a daily basis. Don't do margin in today's market as many valuations are high and some industries are not trending as they have in the past. The leverage will kill you. It's not a question of \"\"if\"\", it's a when. You're new. Don't trade anything larger than a $5,000 position, no matter what. Don't hold more than 10% of your portfolio in the same industry. Don't be afraid to sit on 50% cash or more for months at a time. Use money market funds to park cash because they are T+1 settlement and most firms will let you trade the stock without cash as long as you effect the money market trade on the same day since stock settlement is T+3.\"" }, { "docid": "23116", "title": "", "text": "\"Between 1 and 2 G is actually pretty decent for a High School Student. Your best bet in my opinion is to wait the next (small) stock market crash, and then invest in an index fund. A fund that tracks the SP500 or the Russel 2000 would be a good choice. By stock market crash, I'm talking about a 20% to 30% drop from the highest point. The stock market is at an all time high, but nobody knows if it's going to keep going. I would avoid penny stocks, at least until you can read their annual report and understand most of what they're claiming, especially the cash flow statement. From the few that I've looked at, penny stock companies just keep issuing stock to raise money for their money loosing operations. I'd also avoid individual stocks for now. You can setup a practice account somewhere online, and try trading. Your classmates probably brag about how much they've made, but they won't tell you how much they lost. You are not misusing your money by \"\"not doing anything with it\"\". Your classmates are gambling with it, they might as well go to a casino. Echoing what others have said, investing in yourself is your best option at this point. Try to get into the best school that you can. Anything that gives you an edge over other people in terms of experience or education is good. So try to get some leadership and team experience. , and some online classes in a field that interests you.\"" }, { "docid": "534870", "title": "", "text": "Why do companies exist? Well, the corporate charter describes why the company exists. Usually the purpose is to enrich the shareholders. The owners of a company want to make money, in other words. There are a number of ways that a shareholder can make money off a stock: As such, maintaining the stock price and dividend payouts are generally the number one concern for any company in the long term. Most of the company's business is going to be directed towards making the company more valuable for a future buyout, or more valuable in terms of what it can pay its shareholders directly. Note that the company doesn't always need to be worried about the specifics of the day-to-day moves of the stock. If it keeps the finances in line - solid profits, margins, earnings growth and the like - and can credibly tell people that it's generally a valuable business, it can usually shrug off any medium-term blips as market craziness. Some companies are more explicitly long-term about things than others (e.g. Berkshire Hathaway basically tells people that it doesn't care all that much about what happens in the short term). Of course, companies are abstractions, and they're run by people. To make the people running the company worry about the stock price, you give them stock. Or stock options, or something like that. A major executive at a big company is likely to have a significant amount of stock. If the company does well, he does well; if it does poorly, he does poorly. Despite a few limitations, this is really a powerful incentive. If a company is losing a lot of money, or if its profits are falling so it's just losing a lot of its value as a business, the owners (stockholders) tend to get upset, and may vote in new management, or launch some sort of shareholder lawsuit. And, as previously noted, to raise funds, a company can also issue new shares to the market as a secondary offering as well (and they can issue fewer shares if the price is high - meaning that whatever the company is worth afterward, the existing owners own proportionally more of it)." }, { "docid": "539881", "title": "", "text": "\"The appropriate structure for an organization depends largely on the size of the firm. Smaller firms can employ some non-traditional hierarchies more easily (i.e., flat design), whereas the same structures are more difficult to use in mid-size and large companies. The most important pieces of any corporate structure are (1) clarity of roles, (2) accountability, and (3) ease of communication. Firstly, everyone in the organization must have clarity of their own role and how it fits into the bigger picture. That means a structure that is easy to understand, and a comprehension of how all the roles tie in to each other. Secondly, a good structure will enable and empower leadership to hold the team accountable, and be held accountable in turn. What is often misunderstood about accountability is that people often assume that it simply means punishing poor behavior when something breaks down. In reality, that's holding people responsible, not accountable. Accountability is something that is self-driven and is a product of sound relationships and transparency. As an example, one of the most common breakdowns in accountability is found in passive non-responsiveness. This is when you may reach out to a business partner for help or an update, but they simply do not reply (as in email, text, or voicemail). Thirdly, the structure should be such that it is easy for individuals to communicate across and up/down the chain. This doesn't mean that if you send an email, communication is easy. Rather, who do I reach out to for this problem? What are the best practices or agreed-upon methodologies for a certain practice, and how does the team know this? Some of this should be codified in the form of standard operating procedures (SOPs) which can be referenced at any time. Many companies use a \"\"playbook\"\" which is a high-level reference guide on how to operate the business (an example is found here: https://www.atlassian.com/team-playbook). A playbook can be anything from a PDF to an interactive website like the aforementioned link. It should always have the most up-to-date information. Most companies will change their structure over time as their environment (both internal and external) change and they need to adapt. For example, a small firm may not need an HR department, but as it employs more and more people, a need to have someone (or an entire team) focused on human capital management rises quickly -- an owner-operator can handle only so much before it is time to scale up. The most important thing to consider is who you hire. People are the largest expense to an organization, and having the right people in the right roles is the best way to avoid unnecessary incremental costs resulting from inefficiency, fraud, or risky behavior. Always look for the personality traits that make a good employee relative to the role (i.e., customer service: friendliness; finance: integrity; operations: teamwork). One of the most obvious parts of a business as it scales up is specialization. You want to find a balance, though. For example, HR handles all human relations issues, while Legal handles all internal claims, suits, and patents. There is an overlap that occurs here, as internal claims often start as human relations issues, which means you must have healthy communication and clear accountability for an appropriate hand-off so Legal takes a claim at the right point in time. While this example may be a little obvious, many times the edges are blurred, and clarity of role can be difficult. I hope that helps! Reach out with any follow-up questions.\"" }, { "docid": "330299", "title": "", "text": "I would say the most challenging fact for this assertion is that HFT firms operate with extremely limited capital bases. For a stock with say 10m shares ADV, even a very large and successful HFT strategy might use a position limit of no more than 5000 shares. That is to say if you sum up and net the buys and sells for a stock across the day the HFT firm will never exceed 10,000 shares (2x position limits assuming it completely flipped) on a stock that trades 10,000,000 shares on a given day. The high volumes are attained through high turnover, the strategy might trade up to 500,000 shares (or 5% of the volume) attaining a 50x turnover. But that brings me back to the original point. In the market microstructure literature market impact generally has been found to scale linearly or even sub-linearly for net volume executed. If I alternate between thousands of 1 lot buy and sell orders, it would be very difficult for me to move the market because the market impact of every one of my buy orders roughly cancels the market impact of my almost exactly equal number of sell orders. There might be a higher-order mechanism at work, but I'm genuinely curious what you think it might be. How could strategies that attain such small net positions have such out-sized impact on market direction?" }, { "docid": "62417", "title": "", "text": "I look at the following ratios and how these ratios developed over time, for instance how did valuation come down in a recession, what was the trough multiple during the Lehman crisis in 2008, how did a recession or good economy affect profitability of the company. Valuation metrics: Enterprise value / EBIT (EBIT = operating income) Enterprise value / sales (for fast growing companies as their operating profit is expected to be realized later in time) and P/E Profitability: Operating margin, which is EBIT / sales Cashflow / sales Business model stability and news flow" }, { "docid": "225466", "title": "", "text": "Good question. Your assumptions are a bit off-track though. I am sure you would agree that automation will occur gradually allowing a new workforce that is equiped with relevant skills to support automation tech and operations to bubble up. This workforce will drive up consumer spending offsetting your assumption of diminishing consumer spending. The extent to which this new workforce will offset diminishing consumer spending of the workfoce being laid off is a matter of debate but one thing is certain consumer spending albeit relatively weaker or stronger will exist and businesses will continue to thrive. Another possibility is that the workforce getting laid off might be reabsorbed in other sectors of the economy or better yet some companies might re-train some of it. The assumption that _most of the jobs will be automated_ doesn't necessarily imply that automation leads to job loss. Some automation will actually drive up productivity which will increase the margin of companies. In light of this logic we can assume that employees will be paid more increasing their disposable income. The bottom line is that consumer spending is unlikely to bottom out. It might weaken or strengthen for one or two reasons but people will continue consuming and businesses will thrive." }, { "docid": "372417", "title": "", "text": "\"Here are some things to consider if you want to employ a covered call strategy for consistent returns. The discussion also applies to written puts, as they're functionally equivalent. Write covered calls only on fairly valued stock. If the stock is distinctly undervalued, just buy it. By writing the call, you cap the gains that it will achieve as the stock price gravitates to intrinsic value. If the stock is overvalued, sell it, or just stay away. As the owner of a covered call position, you have full exposure to the downside of the stock. The premium received is normally way too small to protect against much of a drop in price. The ideal candidate doesn't change in price much over the life of the position. Yes, this is low volatility, which brings low option premiums. As a seller you want high premiums. But this can't be judged in a vacuum. No matter how high the volatility in absolute terms, as a seller you're betting the market has overpriced volatility. If volatility is high, so premiums are fat, but the market is correct, then the very real risk of the stock dropping over the life of the position offsets the premium received. One thing to look at is current implied volatility for the at-the-money (ATM), near-month call. Compare it to the two-year historical volatility (Morningstar has this conveniently displayed). Moving away from pure volatility, consider writing calls about three months out, just slightly out of the money. The premium is all time value, and the time value decay accelerates in the final few months. (In theory, a series of one-month options would be higher time value, but there are frictional costs, and no guarantee that today's \"\"good deal\"\" will be repeatable twelve time per year.) When comparing various strikes and expirations, compare time value per day. To compare the same statistic across multiple companies, use time value per day as a percent of capital at risk. CaR is the price of the stock less the premium received. If you already own the stock, track it as if you just bought it for this strategy, so use the price on the day you wrote the call. Along with time value per day, compare the simple annualized percent return, again, on capital at risk, measuring the return if a) the stock is called away, and b) the stock remains unchanged. I usually concentrate more on the second scenario, as we get the capital gain on the stock regardless, without the option strategy. Ideally, you can also calculate the probability (based on implied volatility) of the stock achieving these price points by expiration. Measuring returns at many possible stock prices, you can develop an overall expected return. I won't go into further detail, as it seems outside the scope here. Finally, I usually target a minimum of 25% annualized if the stock remains unchanged. You can, of course, adjust this up or down depending on your risk tolerance. I consider this to be conservative.\"" }, { "docid": "123263", "title": "", "text": "\"If you are looking for numerical metrics I think the following are popular: Price/Earnings (P/E) - You mentioned this very popular one in your question. There are different P/E ratios - forward (essentially an estimate of future earnings by management), trailing, etc.. I think of the P/E as a quick way to grade a company's income statement (i.e: How much does the stock cost verusus the amount of earnings being generated on a per share basis?). Some caution must be taken when looking at the P/E ratio. Earnings can be \"\"massaged\"\" by the company. Revenue can be moved between quarters, assets can be depreciated at different rates, residual value of assets can be adjusted, etc.. Knowing this, the P/E ratio alone doesn't help me determine whether or not a stock is cheap. In general, I think an affordable stock is one whose P/E is under 15. Price/Book - I look at the Price/Book as a quick way to grade a company's balance sheet. The book value of a company is the amount of cash that would be left if everything the company owned was sold and all debts paid (i.e. the company's net worth). The cash is then divided amoung the outstanding shares and the Price/Book can be computed. If a company had a price/book under 1.0 then theoretically you could purchase the stock, the company could be liquidated, and you would end up with more money then what you paid for the stock. This ratio attempts to answer: \"\"How much does the stock cost based on the net worth of the company?\"\" Again, this ratio can be \"\"massaged\"\" by the company. Asset values have to be estimated based on current market values (think about trying to determine how much a company's building is worth) unless, of course, mark-to-market is suspended. This involves some estimating. Again, I don't use this value alone in determing whether or not a stock is cheap. I consider a price/book value under 10 a good number. Cash - I look at growth in the cash balance of a company as a way to grade a company's cash flow statement. Is the cash account growing or not? As they say, \"\"Cash is King\"\". This is one measurement that can not be \"\"massaged\"\" which is why I like it. The P/E and Price/Book can be \"\"tuned\"\" but in the end the company cannot hide a shrinking cash balance. Return Ratios - Return on Equity is a measure of the amount of earnings being generated for a given amount of equity (ROE = earnings/(assets - liabilities)). This attempts to measure how effective the company is at generating earnings with a given amount of equity. There is also Return on Assets which measures earnings returns based on the company's assets. I tend to think an ROE over 15% is a good number. These measurements rely on a company accurately reporting its financial condition. Remember, in the US companies are allowed to falsify accounting reports if approved by the government so be careful. There are others who simply don't follow the rules and report whatever numbers they like without penalty. There are many others. These are just a few of the more popular ones. There are many other considerations to take into account as other posters have pointed out.\"" }, { "docid": "2966", "title": "", "text": "\"Right. The definition of \"\"made with 100% chicken\"\" changes depending on whether that particular company sources soy protein and chicken separately and mixes them, vs purchasing it already mixed. The consumer doesn't care if this particular company is putting the chicken and the soy together, all they care about is what's in the package. That's what I mean by the fact that at some level everything with chicken is made with 100% chicken. Legally they can't say that it's made with 100% chicken unless one of the items they purchase from a supplier is just chicken, but morally, biologically, nutritionally and logically it is the same whether they put the chicken into their mixing pot or an upstream supplier does. Lets take a concrete example. This [breakfast sandwich](https://www.jimmydean.com/products/sandwiches/delights/delights-applewood-smoke-chicken-sausage-egg-whites-and-cheese-muffin-sandwiches) is \"\"made with 100% chicken.\"\" Obviously the entire food product is not chicken, but I wouldn't be surprised if someone walking down the aisle and picking it up thought, subconsciously, that the patty on it was 100% chicken. Is it actually? No. It is &gt;98% chicken and water, and &lt;2% other stuff. But what we are actually supposed to infer from that language is that the company who makes this sandwich purchases \"\"100%\"\" chicken, whatever that is, and mixes it with the rest of the ingredients to made something which is mostly chicken. In legal land, that is all that can be inferred from the statement. It's not exactly deceptive, but it's definitely not the clearest terminology that could be employed, and it definitely implies something that simply \"\"made with chicken\"\" does not imply. I agree with you that the package almost always has all the information I would reasonably want on it, though, and in many cases it is obvious. That same sandwich lists all of the ingredients of the patty on the back, so the information is right there if you want to go to the small text.\"" }, { "docid": "261640", "title": "", "text": "\"The penny/pink sheet stocks you tend to see promoted are the ones a) with small public floats or, b) they are thinly traded. This means that any appreciable change in buy/sell volume will have an outsized effect on the stock's share price, even when the underlying fundamentals are not so great. Promoters are frequently paid based on how much they can move a stock's price, but such moves are not long-lasting. They peter out when the trading volumes return to more normal ranges for the stock because all of the hype has died out. There are some small-cap NASDAQ stocks which can be susceptible to promotion for the same reason -- they have small floats and/or are thinly traded. Once someone figures out the best targets, they'll accumulate a position and then start posting all kinds of \"\"news\"\" on the web in an effort to drum up interest so they can sell off their position into the buying that follows. The biggest problem with penny/pink sheet stocks is that they frequently fail to publish reliable financial statements, and their ownership is of a dubious nature. In the past, these types of stocks have been targeted by organized crime syndicates, which ran their own \"\"pump and dump\"\" operations as a way to make relatively easy money. This may still be true to some extent today. Be wary of investing in any publicly-traded firm that has to use promoters to drum up investor interest, because it can be a serious red flag. Even if it means missing out on a short-term opportunity, research the company before investing. Read its financials, understand how it has behaved through its trading history, learn about the products/services it is selling. Do your homework. Otherwise you are doing the investing equivalent of taking your money and lighting it on fire. Remember, there's a good reason these companies are trading as penny/pink sheet stocks, and it generally has nothing to do with the notion (the promoters will tell you) that somehow the \"\"market has missed out on this amazing opportunity.\"\" Pump and dump schemes, which lie at the heart of almost all stock promotion, rely on convincing you, the investor, that you're smart enough to see what others haven't. I hope this helps. Good luck!\"" }, { "docid": "552281", "title": "", "text": "\"P/E is a pretty poor way to value the company as it exists today. The company generates free cash flow yield of 2.5-3.3% which isn't remarkably high, but it's not nearly as bad as the earnings yield of 1.1%. But let's operate within the P/E ratio for right now. The company sells $40 billion of \"\"stuff\"\" each year with a net margin of 2%. If they increased prices on every product by 1% (which really wouldn't be _that_ noticeable) their profit would grow 50%. Thus, P/E drops from 90 to 60. SGA expenses equal ~20% of their operating costs. Cut 5% of SGA and you get the same 1% increase in net margin. This could come from cost-cutting today, or by greater economies of scale in the future while keeping prices the same. So, yes, it's priced as a growth firm, but it doesn't necessarily need customer growth in the traditional sense to be fairly-valued.\"" }, { "docid": "370161", "title": "", "text": "I agree with Mark. I was quite confuse about the short position at first but then I did a lot of learning and found out that as long as you have enough cash to cover your margin requirement you do not pay any interest since you do not have a debit on your margin balance. This is not true for a long position though, supposed you have 5k cash and 5k margin balance, if you buy 10K worth of stocks then you will need to pay interest on the 5k of the margin balance since it is a debit. Since shorting is done at a credit basis, you actually get interest from the transaction but you still may need to pay the borrowing fees for the stocks so they could simply balance each other out. I have shorted stocks twice through two different companies and neither time I noticed any interest charges. But make sure you have enough cash to cover your margin requirement, because once your margin balance is used to covered your position then interest would accrual. Learn." }, { "docid": "428017", "title": "", "text": "\"I think the first misconception to clear up is that you are implying the price of a stock is set by a specific person. It is not. The price of a stock is equal to the value that someone most recently traded at. If Apple last traded at $100/share, then Apple shares are worth $100. If good news about Apple hits the market and people holding the shares ask for more money, and the most recent trade becomes $105, then that is now what Apple shares are worth. Remember that generally speaking, the company itself does not sell you its shares - instead, some other investor sells you shares they already own. When a company sells you shares, it is called a 'public offering'. To get to your actual question, saying something is 'priced in' implies that the 'market' (that is, investors who are buying and selling shares in the company) has already considered the impacts of that something. For example, if you open up your newspaper and read an article about IBM inventing a new type of computer chip, you might want to invest in IBM. But, the rest of the market has also heard the news. So everyone else has already traded IBM assuming that this new chip would be made. That means when you buy, even if sales later go up because of the new chip, those sales were already considered by the person who chose the price to sell you the shares at. One principle of the stock market (not agreed to by all) is called market efficiency. Generally, if there were perfect market efficiency, then every piece of public information about a company would be perfectly integrated into its stock price. In such a scenario, the only way to get real value when buying a company would be to have secret information of some sort. It would mean that everyone's collective best-guess about what will happen to the company has been \"\"priced-in\"\" to the most recent share trade.\"" } ]

[ { "docid": "66858", "title": "", "text": "\"Long-term capital gains, which is often the main element of investment income for investors who are not high-frequency day traders, are taxed at a single rate that is often substantially below the marginal rate they would otherwise be taxed at, particularly for wealthy individuals. There are a few rationales behind this treatment; the two most common are that the government wants to encourage long-term investments (as opposed to short-term speculation), and that capital gains are a kind of double taxation (from one point of view) as they are coming from income that has already been taxed once before (as wage or ordinary income). The latter in particular is highly controversial, but this is one of the more divisive political issues in the taxation front - one party would eliminate the tax entirely, the other would eliminate the difference. For most individuals, the majority of their long-term capital gains are taxed at 15% up to almost half of a million dollars total AGI, which is a fairly low rate - it's equivalent to the rate a taxpayer would pay on up to $37,000 in wage income (after deductions/exemptions/etc.). You can see from this table in Wikipedia that it is much preferred to pay long-term capital gains rates when possible - at every point it's at least 10% lower than the tax rate for ordinary income. Ordinary income includes wages and many other sources of income - basically, anything that is not long term capital gains. Wage income is taxed at this rate, and also subject to some non-income-tax taxes (FICA and Medicare in particular); other sources of ordinary income are not subject to those taxes (including IRA income). Short term capital gains are generally included in this bucket. Qualified Dividends are treated similarly to long-term capital gains (as they are of a similar nature), and taxed accordingly. The \"\"Net Investment Tax\"\" is basically applying the Medicare tax to investment income for higher-income taxpayers ($125k single, $250k joint). It's on top of capital gains rates for them. It came about through the Affordable Care Act, and is one of the first provisions likely to be repealed by the new Congress (as it can be repealed through the budgeting provision). It seems likely that 2017 taxes will not contain this provision.\"" } ]

[ { "docid": "413438", "title": "", "text": "\"There are two different issues that you need to consider: and The answers to these two questions are not always the same. The answer to the first is described in some detail in Publication 17 available on the IRS website. In the absence of any details about your situation other than what is in your question (e.g. is either salary from self-employment wages that you or your spouse is paying you, are you or your spouse eligible to be claimed as a dependent by someone else, are you an alien, etc), which of the various rule(s) apply to you cannot be determined, and so I will not state a specific number or confirm that what you assert in your question is correct. Furthermore, even if you are not required to file an income-tax return, you might want to choose to file a tax return anyway. The most common reason for this is that if your employer withheld income tax from your salary (and sent it to the IRS on your behalf) but your tax liability for the year is zero, then, in the absence of a filed tax return, the IRS will not refund the tax withheld to you. Nor will your employer return the withheld money to you saying \"\"Oops, we made a mistake last year\"\". That money is gone: an unacknowledged (and non-tax-deductible) gift from you to the US government. So, while \"\"I am not required to file an income tax return and I refuse to do voluntarily what I am not required to do\"\" is a very principled stand to take, it can have monetary consequences. Another reason to file a tax return even when one is not required to do so is to claim the Earned Income Tax Credit (EITC) if you qualify for it. As Publication 17 says in Chapter 36, qualified persons must File a tax return, even if you: (a) Do not owe any tax, (b) Did not earn enough money to file a return, or (c) Did not have income taxes withheld from your pay. in order to claim the credit. In short, read Publication 17 for yourself, and decide whether you are required to file an income tax return, and if you are not, whether it is worth your while to file the tax return anyway. Note to readers preparing to down-vote: this answer is prolix and says things that are far too \"\"well-known to everybody\"\" (and especially to you), but please remember that they might not be quite so well-known to the OP.\"" }, { "docid": "273947", "title": "", "text": "\"Exactly what accounts are affected by any given transaction is not a fixed thing. Just for example, in a simple accounting system you might have one account for \"\"stock on hand\"\". In a more complex system you might have this broken out into many accounts for different types of stock, stock in different locations, etc. So I can only suggest example specific accounts. But account type -- asset, liability, capital (or \"\"equity\"\"), income, expense -- should be universal. Debit and credit rules should be universal. 1: Sold product on account: You say it cost you $500 to produce. You don't say the selling price, but let's say it's, oh, $700. Credit (decrease) Asset \"\"Stock on hand\"\" by $500. Debit (increase) Asset \"\"Accounts receivable\"\" by $700. Credit (increase) Income \"\"Sales\"\" by $700. Debit (increase) Expense \"\"Cost of goods sold\"\" by $500. 2: $1000 spent on wedding party by friend I'm not sure how your friend's expenses affect your accounts. Are you asking how he would record this expense? Did you pay it for him? Are you expecting him to pay you back? Did he pay with cash, check, a credit card, bought on credit? I just don't know what's happening here. But just for example, if you're asking how your friend would record this in his own records, and if he paid by check: Credit (decrease) Asset \"\"checking account\"\" by $1000. Debit (increase) Expense \"\"wedding expenses\"\" by $1000. If he paid with a credit card: Credit (increase) Liability \"\"credit card\"\" by $1000. Debit (increase) Expense \"\"wedding expenses\"\" by $1000. When he pays off the credit card: Debit (decrease) Liability \"\"credit card\"\" by $1000. Credit (decrease) Asset \"\"cash\"\" by $1000. (Or more realistically, there are other expenses on the credit card and the amount would be higher.) 3: Issue $3000 in stock to partner company I'm a little shakier on this, I haven't worked with the stock side of accounting. But here's my best stab: Well, did you get anything in return? Like did they pay you for the stock? I wouldn't think you would just give someone stock as a present. If they paid you cash for the stock: Debit (increase) Asset \"\"cash\"\". Credit (decrease) Capital \"\"shareholder equity\"\". Anyone else want to chime in on that one, I'm a little shaky there. Here, let me give you the general rules. My boss years ago described it to me this way: You only need to know three things to understand double-entry accounting: 1: There are five types of accounts: Assets: anything you have that has value, like cash, buildings, equipment, and merchandise. Includes things you may not actually have in your hands but that are rightly yours, like money people owe you but haven't yet paid. Liabilities: Anything you owe to someone else. Debts, merchandise paid for but not yet delivered, and taxes due. Capital (some call it \"\"capital\"\", others call it \"\"equity\"\"): The difference between Assets and Liabilities. The owners investment in the company, retained earnings, etc. Income: Money coming in, the biggest being sales. Expenses: Money going out, like salaries to employees, cost of purchasing merchandise for resale, rent, electric bill, taxes, etc. Okay, that's a big \"\"one thing\"\". 2: Every transaction must update two or more accounts. Each update is either a \"\"debit\"\" or a \"\"credit\"\". The total of the debits must equal the total of the credits. 3: A dollar bill in your pocket is a debit. With a little thought (okay, sometimes a lot of thought) you can figure out everything else from there.\"" }, { "docid": "421892", "title": "", "text": "As it stands equity contracts in startups are by default structured differently. The standard equity is shares or convertible notes. Having equity that's structured in the way you propose is a bad idea for both sides. VC don't like equity that's not done with standard equity contracts. If the lawyer of the VC has to review your equity document and understand how the exact terms work that makes it more complicated to invest money into the startup. On your end it might not be fair because a company doesn't need to make any income to be successful. Various companies manage to reduce their tax burden to next to nothing by clever accounting that results in having no taxable income. Uber brought the uber.com domain name with 2% equity at the beginning, so there are certainly deals that get made with equity. There are also other kinds of deals where domain names don't get sold for a one-time payment but with regular payment for 8 years where the domain names goes back to the seller if the company folds or otherwise doesn't want to pay anyone." }, { "docid": "287540", "title": "", "text": "I still have my bank account active in usa. Can my company legally deposit my salary in my bank account? Of course they can. Where they deposit is of no consequence (in the US, may be in India). It is who they deposit it for that matters. You need to file form W8 with the company, and they may end up withholding portion of that pay for IRS. You'll need to talk to a tax adviser in India about how to report the income back at home, and you may need to talk to a tax adviser in the US about what to do if the company does indeed remit withholding from your earnings." }, { "docid": "516548", "title": "", "text": "The IRS defines income quite specifically. On the topic What is Taxable and Nontaxable Income, they note: You can receive income in the form of money, property, or services. This section discusses many kinds of income that are taxable or nontaxable. It includes discussions on employee wages and fringe benefits, and income from bartering, partnerships, S corporations, and royalties. Bartering, or giving someone wages (or similar) in something other than currency (or some other specifically defined things, like fringe benefits), is taxed at fair market value: Bartering Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. For additional information, Refer to Tax Topic 420 - Bartering Income and Barter Exchanges. Bartering is more specifically covered in Topic 420 - Bartering Income: You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). If you failed to report this income, correct your return by filing a Form 1040X (PDF), Amended U.S. Individual Income Tax Return. Refer to Topic 308 for information on filing an amended return. More details about income in general beyond the above articles is available in Publication 525, Taxable and Nontaxable Income. It goes into great detail about different kinds of income. In your example, you'd have to calculate the fair market value of an avocado, and then determine how much cash-equivalent you were paid in. The IRS wouldn't necessarily tell you what that value was; you'd calculate it based on something you feel you could justify to them afterwards. The way I'd do it would be to write down the price of avocados at each pay period, and apply a dollar-cost-averaging type method to determine the total pay's fair value. While the avocado example is of course largely absurd, the advent of bitcoins has made this much more relevant. Publication 525 has this to say about virtual currency: Virtual Currency. If your employer gives you virtual currency (such as Bitcoin) as payment for your services, you must include the fair market value of the currency in your income. The fair market value of virtual currency (such as Bitcoin) paid as wages is subject to federal income tax withholding, Federal Insurance Contribution Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported on Form W-2, Wage and Tax Statement. Gold would be fundamentally similar - although I am not sure it's legal to pay someone in gold; assuming it were, though, its fair market value would be again the definition of income. Similarly, if you're paid in another country's currency, the US dollar equivalent of that is what you'll pay taxes on, at the fair market value of that currency in US dollars." }, { "docid": "197501", "title": "", "text": "There is no such thing as double taxation. If you pay tax in the US, you CAN claim tax credits from India tax authority. For example, if you pay 100 tax in USA and your tax liability in India is 200, then you will only pay 100 (200 India tax liability minus 100 tax credits on foreign tax paid in the USA). This is always true and not depending on any treaty. If there is a treaty, the tax rate in the United States is set on the treaty and you CAN claim that final tax rate based upon that treaty. If you operate an LLC, and the income is NOT derived from United States and you have no ties with the US and that LLC is register to a foreign person (not company but a real human) then you will not have to submit tax return in the US... I advice you to read this: http://www.irs.gov/businesses/small/article/0,,id=98277,00.html" }, { "docid": "20036", "title": "", "text": "That's really not something that can be answered based on the information provided. There are a lot of factors involved: type of income, your wife's tax bracket, the split between Federal and State (if you're in a high bracket in a high income-tax rate State - it may even be more than 50%), etc etc. The fact that your wife didn't withdraw the money is irrelevant. S-Corp is a pass-through entity, i.e.: owners are taxed on the profits based on their personal marginal tax rates, and it doesn't matter what they did with the money. In this case, your wife re-invested it into the corp (used it to pay off corp debts), which adds back to her basis. You really should talk to a tax adviser (EA/CPA licensed in your State) to learn how S-Corps work and how to use them properly. Your wife, actually, as she's the owner." }, { "docid": "521753", "title": "", "text": "I am on employment based visa in USA and want to send dollars from USA to India from my savings (after paying Tax). How much maximum dollars I can send in a day? month? or in a year regularly? There is no such limit. You can transfer as money you like to yourself anywhere. To pay the Bank Loan-student Loan how much maximum dollars I can send in a day, in a month or in a year? to pay that I have to pay directly to that Bank Account or in any account I can send money? You can transfer to your NRE account in India and move it further. You can also send it directly to the Loan Account [Check with the Bank, they may not be able to receive funds from outside for a Loan Account] My mother is having Green Card. She is not working. She has a NRE account in India. Can I send dollars from my USA Bank account to her NRE account in India? what are the rules for that? any Tax or limit for that? Or I have to get any permission before sending it? If you are sending money to your mother, it would come under Gift Tax act in US. There is no issue in India. Suggest you transfer to your own NRE account." }, { "docid": "158086", "title": "", "text": "I guess. I just think it's stupid to think there's no difference between a corporation and it's owners. Once an organization of any kind reaches a certain size it becomes bigger than any shareholders, and consumes different types of public goods than any individual would. Kleenex uses different public goods than if all the shareholders just owned paper mills and paper stores in local towns, so it has a different kind of public contribution obligation. I understand that principle that corporate income and dividends are theoretically the same thing, so shouldn't be taxed twice. I get the concept. But it just seems like another excuse to shift more income to people who own, rather than people who work. I support more money going to people who work for a living, not invest." }, { "docid": "374867", "title": "", "text": "Does this make sense? I'm concerned that by buying shares with post tax income, I'll have ended up being taxed twice or have increased my taxable income. ... The company will then re-reimburse me for the difference in stock price between the vesting and the purchase share price. Sure. Assuming you received a 100-share RSU for shares worth $10, and your marginal tax rate is 30% (all made up numbers), either: or So you're in the same spot either way. You paid $300 to get $1,000 worth of stock. Taxes are the same as well. The full value of the RSU will count as income either way, and you'll either pay tax on the gains of the 100 shares in your RSU our you'll pay tax on gains on the 70 shares in your RSU and the 30 shares you bought. Since they're reimbursing you for any difference the cost basis will be the same (although you might get taxed on the reimbursement, but that should be a relatively small amount). This first year I wanted to keep all of the shares, due to tax reasons and because believe the share price will go up. I don't see how this would make a difference from a tax standpoint. You're going to pay tax on the RSU either way - either in shares or in cash. how does the value of the shares going up make a difference in tax? Additionally I'm concerned that by doing this I'm going to be hit by my bank for GBP->USD exchange fees, foreign money transfer charges, broker purchase fees etc. That might be true - if that's the case then you need to decide whether to keep fighting or decide if it's worth the transaction costs." }, { "docid": "541682", "title": "", "text": "If you are paid by foreigners then it is quite possible they don't file anything with the IRS. All of this income you are required to report as business income on schedule C. There are opportunities on schedule C to deduct expenses like your health insurance, travel, telephone calls, capital expenses like a new computer, etc... You will be charged both the employees and employers share of social security/medicare, around ~17% or so, and that will be added onto your 1040. You may still need a local business license to do the work locally, and may require a home business permit in some cities. In some places, cities subscribe to data services based on your IRS tax return.... and will find out a year or two later that someone is running an unlicensed business. This could result in a fine, or perhaps just a nice letter from the city attorneys office that it would be a good time to get the right licenses. Generally, tax treaties exist to avoid or limit double taxation. For instance, if you travel to Norway to give a report and are paid during this time, the treaty would explain whether that is taxable in Norway. You can usually get a credit for taxes paid to foreign countries against your US taxes, which helps avoid paying double taxes in the USA. If you were to go live in Norway for more than a year, the first $80,000/year or so is completely wiped off your US income. This does NOT apply if you live in the USA and are paid from Norway. If you have a bank account overseas with more than $10,000 of value in it at any time during the year, you owe the US Government a FinCEN Form 114 (FBAR). This is pretty important, there are some large fines for not doing it. It could occur if you needed an account to get paid in Norway and then send the money here... If the Norwegian company wires the money to you from their account or sends a check in US$, and you don't have a foreign bank account, then this would not apply." }, { "docid": "506108", "title": "", "text": "\"LLC is, as far as I know, just a US thing, so I'm assuming that you are in the USA. Update for clarification: other countries do have similar concepts, but I'm not aware of any country that uses the term LLC, nor any other country that uses the single-member LLC that is disregarded for income tax purposes that I'm referring to here (and that I assume the recruiter also was talking about). Further, LLCs vary by state. I only have experience with California, so some things may not apply the same way elsewhere. Also, if you are located in one state but the client is elsewhere, things can get more complex. First, let's get one thing out of the way: do you want to be a contractor, or an employee? Both have advantage, and especially in the higher-income areas, contractor can be more beneficial for you. Make sure that if you are a contractor, your rate must be considerably higher than as employee, to make up for the benefits you give up, as well as the FICA taxes and your expense of maintaining an LLC (in California, it costs at least $800/year, plus legal advice, accounting, and various other fees etc.). On the other hand, oftentimes, the benefits as an employee aren't actually worth all that much when you are in high income brackets. Do pay attention to health insurance - that may be a valuable benefit, or it may have such high deductibles that you would be better off getting your own or paying the penalty for going uninsured. Instead of a 401(k), you can set up an IRA (update or various other options), and you can also replace all the other benefits. If you decide that being an employee is the way to go, stop here. If you decide that being a contractor is a better deal for you, then it is indeed a good idea to set up an LLC. You actually have three fundamental options: work as an individual (the legal term is \"\"sole proprietorship\"\"), form a single-member LLC disregarded for income tax purposes, or various other forms of incorporation. Of these, I would argue that the single-member LLC combines the best of both worlds: taxation is almost the same as for sole proprietorship, the paperwork is minimal (a lot less than any other form of incorporation), but it provides many of the main benefits of incorporating. There are several advantages. First, as others have already pointed out, the IRS and Department of Labor scrutinize contractor relationships carefully, because of companies that abused this status on a massive scale (Uber and now-defunct Homejoy, for instance, but also FedEx and other old-economy companies). One of the 20 criteria they use is whether you are incorporated or not. Basically, it adds to your legal credibility as a contractor. Another benefit is legal protection. If your client (or somebody else) sues \"\"you\"\", they can usually only sue the legal entity they are doing business with. Which is the LLC. Your personal assets are safe from judgments. That's why Donald Trump is still a billionaire despite his famous four bankruptcies (which I believe were corporate, not personal, bankrupcies). Update for clarification Some people argue that you are still liable for your personal actions. You should consult with a lawyer about the details, but most business liabilities don't arise from such acts. Another commenter suggested an E&O policy - a very good idea, but not a substitute for an LLC. An LLC does require some minimal paperwork - you need to set up a separate bank account, and you will need a professional accounting system (not an Excel spreadsheet). But if you are a single member LLC, the paperwork is really not a huge deal - you don't need to file a separate federal tax return. Your income will be treated as if it was personal income (the technical term is that the LLC is disregarded for IRS tax purposes). California still does require a separate tax return, but that's only two pages or so, and unless you make a large amount, the tax is always $800. That small amount of paperwork is probably why your recruiter recommended the LLC, rather than other forms of incorporation. So if you want to be a contractor, then it sounds like your recruiter gave you good advice. If you want to be an employee, don't do it. A couple more points, not directly related to the question, but hopefully generally helpful: If you are a contractor (whether as sole proprietor or through an LLC), in most cities you need a business license. Not only that, but you may even need a separate business license in every city you do business (for instance, in the city where your client is located, even if you don't live there). Business licenses can range from \"\"not needed\"\" to a few dollars to a few hundred dollars. In some cities, the business license fee may also depend on your income. And finally, one interesting drawback of a disregarded LLC vs. sole proprietorship as a contractor has to do with the W-9 form and your Social Security Number. Generally, when you work for somebody and receive more than $600/year, they need to ask you for your Social Security Number, using form W-9. That is always a bit of a concern because of identity theft. The IRS also recognizes a second number, the EIN (Employer Identification Number). This is basically like an SSN for corporations. You can also apply for one if you are a sole proprietor. This is a HUGE benefit because you can use the EIN in place of your SSN on the W-9. Instant identity theft protection. HOWEVER, if you have a disregarded LLC, the IRS says that you MUST use your SSN; you cannot use your EIN! Update: The source for that information is the W-9 instructions; it specifically only excludes LLCs.\"" }, { "docid": "559618", "title": "", "text": "\"Somehow I just stumbled onto this thread... &gt; You essentially robbed the person holding the debt (since you promised to pay it off). Depends on leverage, with fractional reserve lending. Banks are permitted to loan out 30x their actual assets, or more. If I have $1 but can loan out $30, and anything more than $1 gets paid back, I haven't lost any money. In addition, I can write off the amount defaulted, *and the government will pay me back* for certain types of loans. With student loans, since they are almost impossible to discharge, gov't will pursue the borrower for years and decades, and ultimately collect more interest. Here is an article on it: http://online.wsj.com/article/SB10001424052748704723104576061953842079760.html &gt; According to Kantrowitz, the government stands to earn $2,010.44 more in interest from a $10,000 loan that defaulted than if it had been paid in full over a 20-year term, and $6,522.00 more than if it had been paid back in 10 years. Alan Collinge, founder of borrowers' rights advocacy Student Loan Justice, said the high recovery rates provide a \"\"perverted incentive\"\" for the government to allow loans to go into default. Kantrowitz estimates the recovery rate would need to fall to below 50% in order for default prevention efforts to become more lucrative than defaults themselves. Not to mention: http://studentloanjustice.org/defaults-making-money.html &gt; So essentially, the Department is given a choice: Either do nothing and get nothing, or outlay cash with the knowledge that this outlay will realize a 22 percent return, ultimately (minus the governments cost of money and collection costs). From this perspective, it is clear that based solely on financial motivations, and without specific detailed knowledge of the loan (i.e. borrower characteristics, etc.), the chooser would clearly favor the default scenario, for not only the return, but perhaps the potential savings in subsidy payment as well, And don't forget the penalties accruing to the person defaulting; they will probably have to move out of the country in order to escape collection. And let's factor in the huge ROI the lender sees by creating an indentured servant class. Plus, the gov't will issue as much currency as it wants, to make *itself* whole. And how much of a loss IS the loss, when the whole of the loan amount went right back into the local economy, paying professors, janitors, landlords, grocery stores, etc.? And don't forget all THOSE taxes (income and sale) that the gov't collects. Government will collect ~30%-50% of the loan immediately as income and sales tax, plus a portion of it every time the money changes hands (I pay income tax, then use some of my after-tax money to pay you for a product or service, and you still have to pay tax on that money, and so on). So it's more complicated than having \"\"robbed the person holding the debt\"\". Banks at 30x leverage don't lose money as long as they get back 1/30th of the total amount lent out, including interest, fees, and penalties, before considering write-offs and government repayment. In fact, the point of over-leverage is so you CAN make loans that have risk attached. If you could only lend what you actually had, you would have to stay away from anything risky because it would be too easy to lose money. Having virtual $ to bet means you can serve market segments that have higher risk. This makes MORE money for the banks, that's why they do it. They are already playing with funny money, so they don't lose any even if you default and move to another country. And the money you \"\"spent\"\" has also made its way back to them in various amounts, such as your professor's mortgage payments, auto loan, etc. Your taking on debt already helped the bank get its OTHER loans repaid. So, roughly speaking, if you took out $90,000 and $3,000 of that made its way back to the bank through various means, they haven't lost any money, because it only cost them $3,000 actual dollars in the first place.\"" }, { "docid": "586026", "title": "", "text": "Forms 1099 and W2 are mutually exclusive. Employers file both, not the employees. 1099 is filed for contractors, W2 is filed for employees. These terms are defined in the tax code, and you may very well be employee, even though your employer pays you as a contractor and issues 1099. You may complain to the IRS if this is the case, and have them explain the difference to the employer (at the employer's expense, through fines and penalties). Employers usually do this to avoid providing benefits (and by the way also avoid paying payroll taxes). If you're working as a contractor, lets check your follow-up questions: where do i pay my taxes on my hourly that means does the IRS have a payment center for the tax i pay. If you're an independent contractor (1099), you're supposed to pay your own taxes on a quarterly basis using the form 1040-ES. Check this page for more information on your quarterly payments and follow the links. If you're a salaried employee elsewhere (i.e.: receive W2, from a different employer), then instead of doing the quarterly estimates you can adjust your salary withholding at that other place of work to cover for your additional income. To do that you submit an updated form W4 there, check with the payroll department on details. Is this a hobby tax No such thing, hobby income is taxed as ordinary income. The difference is that hobby cannot be at loss, while regular business activity can. If you're a contractor, it is likely that you're not working at loss, so it is irrelevant. what tax do i pay the city? does this require a sole proprietor license? This really depends on your local laws and the type of work you're doing and where you're doing it. Most likely, if you're working from your employer's office, you don't need any business license from the city (unless you have to be licensed to do the job). If you're working from home, you might need a license, check with the local government. These are very general answers to very general questions. You should seek a proper advice from a licensed tax adviser (EA/CPA licensed in your state) for your specific case." }, { "docid": "239780", "title": "", "text": "\"&gt;SS is not an investment. It is a Tax. Learn the difference. Thus you pay for it with the Federal Insurance Contributions Act tax (FICA). It is not an investment, you do not have an account with your money, it has always been a pay as you go plan, just like medicare, funds for schools, and all the other programs. SS is collected like a tax, but if it is infact a tax, why can I opt out of it? Come on, you really aren't trying to win an arguement about SS by saying its a \"\"tax\"\" and not a \"\"investment\"\". That's seriously the weakest bullshit, who the fuck cares the symantics of how its \"\"collected\"\".. The arguement is still the same, with no USA no SS. It is, therefore, a ponzi by definition. &gt;The US government wrote the laws that specify exactly who can opt out. Most people cannot just opt out because they don't meet the criteria. Again you're wrong. Joining and quitting Obtaining a Social Security number for a child is voluntary.[26] Further, there is no general legal requirement that individuals join the Social Security program (although, under normal circumstances, FICA taxes must be collected anyway). Although the Social Security Act itself does not require a person to have a Social Security Number (SSN) to live and work in the United States,[27] the Internal Revenue Code does generally require the use of the social security number by individuals for federal tax purposes: The social security account number issued to an individual for purposes of section 205(c)(2)(A) of the Social Security Act shall, except as shall otherwise be specified under regulations of the Secretary [of the Treasury or his delegate], be used as the identifying number for such individual for purposes of this title.[28] Importantly, most parents apply for Social Security numbers for their dependent children in order to[29] include them on their income tax returns as a dependent. Everyone filing a tax return, as taxpayer or spouse, must have a Social Security Number or Taxpayer Identification Number (TIN) since the IRS is unable to process returns or post payments for anyone without an SSN or TIN. The FICA taxes are imposed on all workers and self-employed persons. Employers are required[30] to report wages for covered employment to Social Security for processing Forms W-2 and W-3. There are some specific wages which are not a part of the Social Security program (discussed below). Internal Revenue Code provisions section 3101[31] imposes payroll taxes on individuals and employer matching taxes. Section 3102[32] mandates that employers deduct these payroll taxes from workers' wages before they are paid. Generally, the payroll tax is imposed on everyone in employment earning \"\"wages\"\" as defined in 3121[33] of the Internal Revenue Code.[34] and also taxes[35] net earnings from self-employment.[36] **Seriously, you need to learn how to use google asshole. Stop looking like an idiot and posting blatent lies.**\"" }, { "docid": "386869", "title": "", "text": "It doesn't make much difference in the end. Imagine you have $100 of revenue in your company. You can either pay it to yourself as salary, meaning that you don't pay corporate tax on it, or you can keep it in the company, pay corporate tax on it, then pay yourself a dividend of what is left. While that dividend will be treated better than salary, remember that the company already paid tax on it. You paying less on what's left doesn't equate to paying less overall. Go ahead and run the numbers using your actual corporate tax rate and your personal income tax rate. Try doing your whole salary as dividends - not dollar for dollar, but as how much the company would have as profit to give you a dividend if it didn't spend (and deduct) salary money on you. You are unlikely to see any difference at all. The net final money in your pocket, and the amount that went to the government, will probably be the same. If paying dividends keeps your earned income low, you may find that you can't use RRSP or childcare deductions. You are also not getting CPP credit. That's an argument for salary, or at least a certain minimum amount of salary. You have to deduct taxes at source on salary and send it along to the government, which is an argument for dividends if you feel you could invest that money and use it well before the taxes get around to being due. Possibly you may discover an edge case where you move a few thousand from one marginal tax rate to another and clear a few hundred extra as a result. I don't discourage you from doing the math, I just point out that the various percentages (tax rates, grossups, deductions etc) have all been carefully chosen so that it pretty much works out the same, or gives a small preference to salary. We give excess money to ourselves as bonus rather than dividend having run the numbers a few times. There's no secret trick here." }, { "docid": "583464", "title": "", "text": "The same can be done in the USA depending on what city and how richly someone wants to live. I went to a fine public school in suburban US and I walked to school just a few blocks, free, as are all public schools. As for medical bills and your best friends mother, it is also not expensive to die of cancer in the USA! But, you did not tell me how big of an apartment can be had in Lisbon for a minimum wage worker spending less than 30% of his income, nor how big is a 2 bedroom apartment there." }, { "docid": "536849", "title": "", "text": "\"I've done various side work over the years -- computer consulting, writing, and I briefly had a video game company -- so I've gone through most of this. Disclaimer: I have never been audited, which may mean that everything I put on my tax forms looked plausible to the IRS and so is probably at least generally right, but it also means that the IRS has never put their stamp of approval on my tax forms. So that said ... 1: You do not need to form an LLC to be able to claim business expenses. Whether you have any expenses or not, you will have to complete a schedule C. On this form are places for expenses in various categories. Note that the categories are the most common type of expenses, there's an \"\"other\"\" space if you have something different. If you have any property that is used both for the business and also for personal use, you must calculate a business use percentage. For example if you bought a new printer and 60% of the time you use it for the business and 40% of the time you use it for personal stuff, then 60% of the cost is tax deductible. In general the IRS expects you to calculate the percentage based on amount of time used for business versus personal, though you are allowed to use other allocation formulas. Like for a printer I think you'd get away with number of pages printed for each. But if the business use is not 100%, you must keep records to justify the percentage. You can't just say, \"\"Oh, I think business use must have been about 3/4 of the time.\"\" You have to have a log where you write down every time you use it and whether it was business or personal. Also, the IRS is very suspicious of business use of cars and computers, because these are things that are readily used for personal purposes. If you own a copper mine and you buy a mine-boring machine, odds are you aren't going to take that home to dig shafts in your backyard. But a computer can easily be used to play video games or send emails to friends and relatives and lots of things that have nothing to do with a business. So if you're going to claim a computer or a car, be prepared to justify it. You can claim office use of your home if you have one or more rooms or designated parts of a room that are used \"\"regularly and exclusively\"\" for business purposes. That is, if you turn the family room into an office, you can claim home office expenses. But if, like me, you sit on the couch to work but at other times you sit on the couch to watch TV, then the space is not used \"\"exclusively\"\" for business purposes. Also, the IRS is very suspicious of home office deductions. I've never tried to claim it. It's legal, just make sure you have all your ducks in a row if you claim it. Skip 2 for the moment. 3: Yes, you must pay taxes on your business income. If you have not created an LLC or a corporation, then your business income is added to your wage income to calculate your taxes. That is, if you made, say, $50,000 salary working for somebody else and $10,000 on your side business, then your total income is $60,000 and that's what you pay taxes on. The total amount you pay in income taxes will be the same regardless of whether 90% came from salary and 10% from the side business or the other way around. The rates are the same, it's just one total number. If the withholding on your regular paycheck is not enough to cover the total taxes that you will have to pay, then you are required by law to pay estimated taxes quarterly to make up the difference. If you don't, you will be required to pay penalties, so you don't want to skip on this. Basically you are supposed to be withholding from yourself and sending this in to the government. It's POSSIBLE that this won't be an issue. If you're used to getting a big refund, and the refund is more than what the tax on your side business will come to, then you might end up still getting a refund, just a smaller one. But you don't want to guess about this. Get the tax forms and figure out the numbers. I think -- and please don't rely on this, check on it -- that the law says that you don't pay a penalty if the total tax that was withheld from your paycheck plus the amount you paid in estimated payments is more than the tax you owed last year. So like lets say that this year -- just to make up some numbers -- your employer withheld $4,000 from your paychecks. At the end of the year you did your taxes and they came to $3,000, so you got a $1,000 refund. This year your employer again withholds $4,000 and you paid $0 in estimated payments. Your total tax on your salary plus your side business comes to $4,500. You owe $500, but you won't have to pay a penalty, because the $4,000 withheld is more than the $3,000 that you owed last year. But if next year you again don't make estimated payment, so you again have $4,000 withheld plus $0 estimated and then you owe $5,000 in taxes, you will have to pay a penalty, because your withholding was less than what you owed last year. To you had paid $500 in estimated payments, you'd be okay. You'd still owe $500, but you wouldn't owe a penalty, because your total payments were more than the previous year's liability. Clear as mud? Don't forget that you probably will also owe state income tax. If you have a local income tax, you'll owe that too. Scott-McP mentioned self-employment tax. You'll owe that, too. Note that self-employment tax is different from income tax. Self employment tax is just social security tax on self-employed people. You're probably used to seeing the 7-whatever-percent it is these days withheld from your paycheck. That's really only half your social security tax, the other half is not shown on your pay stub because it is not subtracted from your salary. If you're self-employed, you have to pay both halves, or about 15%. You file a form SE with your income taxes to declare it. 4: If you pay your quarterly estimated taxes, well the point of \"\"estimated\"\" taxes is that it's supposed to be close to the amount that you will actually owe next April 15. So if you get it at least close, then you shouldn't owe a lot of money in April. (I usually try to arrange my taxes so that I get a modest refund -- don't loan the government a lot of money, but don't owe anything April 15 either.) Once you take care of any business expenses and taxes, what you do with the rest of the money is up to you, right? Though if you're unsure of how to spend it, let me know and I'll send you the address of my kids' colleges and you can donate it to their tuition fund. I think this would be a very worthy and productive use of your money. :-) Back to #2. I just recently acquired a financial advisor. I can't say what a good process for finding one is. This guy is someone who goes to my church and who hijacked me after Bible study one day to make his sales pitch. But I did talk to him about his fees, and what he told me was this: If I have enough money in an investment account, then he gets a commission from the investment company for bringing the business to them, and that's the total compensation he gets from me. That commission comes out of the management fees they charge, and those management fees are in the same ballpark as the fees I was paying for private investment accounts, so basically he is not costing me anything. He's getting his money from the kickbacks. He said that if I had not had enough accumulated assets, he would have had to charge me an hourly fee. I didn't ask how much that was. Whew, hadn't meant to write such a long answer!\"" }, { "docid": "358286", "title": "", "text": "\"&gt;Source: I'm a state tax auditor, and my job is to make sure corporations pay what they are supposed to. Most of the American public believes that the bulk of taxes are federal income taxes. That's what they fixate on when evaluating the \"\"fairness\"\" of taxation. The fact remains that the very wealthy and very large corporations are structured so that they don't pay that particular type of tax. That's why Mitt Romney's tax returns are being squinted at. Mitt pays capital gains tax, not income tax and tripling the tax rate on the upper-most tax bracket wouldn't really affect him. You know this. I know this. But most people don't and few people are interested in learning how it works. If you want to \"\"tax the rich\"\" just create a progressive scale for capital gains instead of a flat 15%.\"" } ]

[ { "docid": "314342", "title": "", "text": "\"Many individual states, counties, and cities have their own income taxes, payroll taxes, sales taxes, property taxes, etc., you will need to consult your state and local government websites for information about additional taxes that apply based on your locale. Wages, Salaries, Tips, Cash bonuses and other taxable employee pay, Strike benefits, Long-term disability, Earnings from self employment Earned income is subject to payroll taxes such as: Earned income is also subject to income taxes which are progressively higher depending on the amount earned minus tax credits, exemptions, and/or deductions depending on how you file. There are 7 tax rates that get progressively larger as your income rises but only applies to the income in each bracket. 10% for the first 18,650 (2017) through 39.6% for any income above 470,700. The full list of rates is in the above linked article about payroll taxes. Earned income is required for contributions to an IRA. You cannot contribute more to an IRA than you have earned in a given year. Interest, Ordinary Dividends, Short-term Capital Gains, Retirement income (pensions, distributions from tax deferred accounts, social security), Unemployment benefits, Worker's Compensation, Alimony/Child support, Income earned while in prison, Non-taxable military pay, most rental income, and S-Corp passthrough income Ordinary income is taxed the same as earned income with the exception that social security taxes do not apply. This is the \"\"pure taxable income\"\" referred to in the other linked question. Dividends paid by US Corporations and qualified foreign corporations to stock-holders (that are held for a certain period of time before the dividend is paid) are taxed at the Long-term Capital Gains rate explained below. Ordinary dividends like the interest earned in your bank account are included with ordinary income. Stocks, Bonds, Real estate, Carried interest -- Held for more than a year Income from assets that increase in value while being held for over a year. Long term capital gains justified by the idea that they encourage people to hold stock and make long term investments rather than buying and then quickly reselling for a short-term profit. The lower tax rates also reflect the fact that many of these assets are already taxed as they are appreciating in value. Real-estate is usually taxed through local property taxes. Equity in US corporations realized by rising stock prices and dividends that are returned to stock holders reflect earnings from a corporation that are already taxed at the 35% Corporate tax rate. Taxing Capital gains as ordinary income would be a second tax on those same profits. Another problem with Long-term capital gains tax is that a big portion of the gains for assets held for multiple decades are not real gains. Inflation increases the price of assets held for longer periods, but you are still taxed on the full gain even if it would be a loss when inflation is calculated. Capital gains are also taxed differently depending on your income level. If you are in the 10% or 15% brackets then Long-term capital gains are assessed at 0%. If you are in the 25%, 28%, 33%, or 35% brackets, they are assessed at 15%. Only those in the 39.6% bracket pay 20%. Capital assets sold at a profit held for less than a year Income from buying and selling any assets such as real-estate, stock, bonds, etc., that you hold for less than a year before selling. After adding up all gains and losses during the year, the net gain is taxed as ordinary income. Collectibles held for more than a year are not considered capital assets and are still taxed at ordinary income rates.\"" } ]

[ { "docid": "35680", "title": "", "text": "Yes, you should be saving for retirement. There are a million ideas out there on how much is a reasonable amount, but I think most advisor would say at least 6 to 10% of your income, which in your case is around $15,000 per year. You give amounts in dollars. Are you in the U.S.? If so, there are at least two very good reasons to put money into a 401k or IRA rather than ordinary savings or investments: (a) Often your employer will make matching contributions. 50% up to 6% of your salary is pretty common, i.e. if you put in 6% they put in 3%. If either of your employers has such a plan, that's an instant 50% profit on your investment. (b) Any profits on money invested in an IRA or 401k are tax free. (Effectively, the mechanics differ depending on the type of account.) So if you put $100,000 into an IRA today and left it there until you retire 30 years later, it would likely earn something like $600,000 over that time (assuming 7% per year growth). So you'd pay takes on your initial $100,000 but none on the $600,000. With your income you are likely in a high tax bracket, that would make a huge difference. If you're saying that you just can't find a way to put money away for retirement, may I suggest that you cut back on your spending. I understand that the average American family makes about $45,000 per year and somehow manages to live on that. If you were to put 10% of your income toward retirement, then you would be living on the remaining $171,000, which is still almost 4 times what the average family has. Yeah, I make more than $45,000 a year too and there are times when I think, How could anyone possibly live on that? But then I think about what I spend my money on. Did I really need to buy two new computer printers the last couple of months? I certainly could do my own cleaning rather than hiring a cleaning lady to come in twice a month. Etc. A tough decision to make can be paying off debt versus putting money into an investment account. If the likely return on investment is less than the interest rate on the loan, you should certainly concentrate on paying off the loan. But if the reverse is true, then you need to decide between likely returns and risk." }, { "docid": "317552", "title": "", "text": "\"So I'm in Australia and we have our very own housing price/credit bubble right now (which is finally deflating) and I'll try explain it as I understand. I welcome anyone to chime in and correct me. The problem we faced (still face to a large degree) is the idea of rising asset prices and how this fuels a feedback loop into increasing personal debt, all based on the false assumption that house prices always go up. Now before I continue, house prices *do* always go up in the long run, but so does the cost of everything and we call that inflation, adjusting for this effect usually reveals that house prices are cyclical in the long term and never really 'grow'. So that aside we in Australia recently saw a long period of increasing house prices (as did the USA and Europe, and more recently China), the thing about house price is it is your 'equity', I'll try and explain: (all figures are made up to provide a simple example) if you borrow $200,000 to buy a house that costs $250,000 you owe the bank 80% of the equity (what your home is 'worth', and notionally this is value that you own) in your home and the bank will be happy, remembering that they make money on your interest payments, not your principal repayments. If your house then increases in value to $300,000 but you still owe $200,000 then you now owe only 66% of your equity. The bank sees you as a lower risk and encourages you to borrow more to get back up to that sweet spot they had before of 80% - this is a nice tradeoff between risk and reward for the bank. You, the consumer, have just been mailed a new credit card with a 50k limit (hypothetical) and theres a new iMac being released next week, and you really did want to trade in your 5yr old car (see where this is going yet?). Not only is this type of spending given a mighty boost but consumers feel like this house thing has done them very well and suddenly they have the ability to borrow lots more money, why not get a second house and do it all over again? The added demand for investment housing drives prices, throw in some generous government incentives (here and in the USA) and demand is pushed hard, prices grow more and the whole thing feeds back into itself. People feel richer, spend more from their credit cards, buy another house, etc. But what happens if your house 'value' then drops to $240k? The bank now sees you as a high risk, so do the bank's investors, you have negative equity, the bank demands the difference paid back to it or it might take your home. Somehow, nobody believed this would happen. Hopefully you start to see the picture? In Australia we are now facing a slow melt in housing prices which has not yet hurt en masse but it has dried up the credit cards, retails spending has collapsed and everyone is worried about the future. Now to realise where the USA got to you have to also understand that banks were not merely asking for a maximum of 80% owed on the asset, many of them let this figure go to 100%, since hey prices always go up, right? They then in some cases went further and neglected to look into your income and confirm you could even *repay* your loan. Sounds dodgey? This is just the setup. Remember I mentioned the bank's investors? Well banks/smart people basically figured out a clever way of 'dealing with' the risk of a few outliers with bad financial situations by collecting large numbers of home loans into a single entity and selling it on. Loans were graded according to risk and I believe they were even cut up into smaller pieces (10% of your high risk loan assigned to 10 different 'debt objects' with different risk profiles). These 'collateralised debt obligations' were traded from one bank/investment firm to another with everyone happily accepting the risk profiles until eventually nobody knew what risk was where. Think about it like \"\"I'll throw 10 high risk loans, 50 medium risk loans and 40 low risk loans into a pot, stir it up and sell the soup as 'pretty safe' \"\". This all seemed like a very good idea until it gradually became clear just how much of these loans were in the 'extremely stupid high risk' category. This is probably extremely confusing by now, but thats the point, investors could no longer judge how risky an investment in a bank or financial institute was, the market did not correct for any of this until it was all too late. The moral of the story is when people tell you an investment is guaranteed to make you money, you stay away from that investment. And to specifically answer your question you can't solely blame government incentives as you might be able to see, but they play a part in a giant orchestra, there are many factors that drive this sort of stupidity, stupidity being the primary one.\"" }, { "docid": "559618", "title": "", "text": "\"Somehow I just stumbled onto this thread... &gt; You essentially robbed the person holding the debt (since you promised to pay it off). Depends on leverage, with fractional reserve lending. Banks are permitted to loan out 30x their actual assets, or more. If I have $1 but can loan out $30, and anything more than $1 gets paid back, I haven't lost any money. In addition, I can write off the amount defaulted, *and the government will pay me back* for certain types of loans. With student loans, since they are almost impossible to discharge, gov't will pursue the borrower for years and decades, and ultimately collect more interest. Here is an article on it: http://online.wsj.com/article/SB10001424052748704723104576061953842079760.html &gt; According to Kantrowitz, the government stands to earn $2,010.44 more in interest from a $10,000 loan that defaulted than if it had been paid in full over a 20-year term, and $6,522.00 more than if it had been paid back in 10 years. Alan Collinge, founder of borrowers' rights advocacy Student Loan Justice, said the high recovery rates provide a \"\"perverted incentive\"\" for the government to allow loans to go into default. Kantrowitz estimates the recovery rate would need to fall to below 50% in order for default prevention efforts to become more lucrative than defaults themselves. Not to mention: http://studentloanjustice.org/defaults-making-money.html &gt; So essentially, the Department is given a choice: Either do nothing and get nothing, or outlay cash with the knowledge that this outlay will realize a 22 percent return, ultimately (minus the governments cost of money and collection costs). From this perspective, it is clear that based solely on financial motivations, and without specific detailed knowledge of the loan (i.e. borrower characteristics, etc.), the chooser would clearly favor the default scenario, for not only the return, but perhaps the potential savings in subsidy payment as well, And don't forget the penalties accruing to the person defaulting; they will probably have to move out of the country in order to escape collection. And let's factor in the huge ROI the lender sees by creating an indentured servant class. Plus, the gov't will issue as much currency as it wants, to make *itself* whole. And how much of a loss IS the loss, when the whole of the loan amount went right back into the local economy, paying professors, janitors, landlords, grocery stores, etc.? And don't forget all THOSE taxes (income and sale) that the gov't collects. Government will collect ~30%-50% of the loan immediately as income and sales tax, plus a portion of it every time the money changes hands (I pay income tax, then use some of my after-tax money to pay you for a product or service, and you still have to pay tax on that money, and so on). So it's more complicated than having \"\"robbed the person holding the debt\"\". Banks at 30x leverage don't lose money as long as they get back 1/30th of the total amount lent out, including interest, fees, and penalties, before considering write-offs and government repayment. In fact, the point of over-leverage is so you CAN make loans that have risk attached. If you could only lend what you actually had, you would have to stay away from anything risky because it would be too easy to lose money. Having virtual $ to bet means you can serve market segments that have higher risk. This makes MORE money for the banks, that's why they do it. They are already playing with funny money, so they don't lose any even if you default and move to another country. And the money you \"\"spent\"\" has also made its way back to them in various amounts, such as your professor's mortgage payments, auto loan, etc. Your taking on debt already helped the bank get its OTHER loans repaid. So, roughly speaking, if you took out $90,000 and $3,000 of that made its way back to the bank through various means, they haven't lost any money, because it only cost them $3,000 actual dollars in the first place.\"" }, { "docid": "460760", "title": "", "text": "This often occurs because of misrepresentation of the corporation income. Most of the income in the US is payed at or a little below the 35% rate... But when the figure is calculated non-US income is counted alongside US income. For some reason, in the US it makes sense for corporations to pay income taxes in the countries they actually made the income in AND the US. Mind you... Only USA and Eritrea have this sort of backwards thinking. So yeah... If they make $100 worldwide income, out of which $50 is US income, and the company reports $15 in US taxes, they get represented as paying 15% effective tax rate when in reality they payed 30% on US taxes for their US income." }, { "docid": "127263", "title": "", "text": "The article links to William Bernstein’s plan that he outlined for Business Insider, which says: Modelling this investment strategy Picking three funds from Google and running some numbers. The international stock index only goes back to April 29th 1996, so a run of 21 years was modelled. Based on 15% of a salary of $550 per month with various annual raises: Broadly speaking, this investment doubles the value of the contributions over two decades. Note: Rebalancing fees are not included in the simulation. Below is the code used to run the simulation. If you have Mathematica you can try with different funds. Notice above how the bond index (VBMFX) preserves value during the 2008 crash. This illustrates the rationale for diversifying across different fund types." }, { "docid": "239780", "title": "", "text": "\"&gt;SS is not an investment. It is a Tax. Learn the difference. Thus you pay for it with the Federal Insurance Contributions Act tax (FICA). It is not an investment, you do not have an account with your money, it has always been a pay as you go plan, just like medicare, funds for schools, and all the other programs. SS is collected like a tax, but if it is infact a tax, why can I opt out of it? Come on, you really aren't trying to win an arguement about SS by saying its a \"\"tax\"\" and not a \"\"investment\"\". That's seriously the weakest bullshit, who the fuck cares the symantics of how its \"\"collected\"\".. The arguement is still the same, with no USA no SS. It is, therefore, a ponzi by definition. &gt;The US government wrote the laws that specify exactly who can opt out. Most people cannot just opt out because they don't meet the criteria. Again you're wrong. Joining and quitting Obtaining a Social Security number for a child is voluntary.[26] Further, there is no general legal requirement that individuals join the Social Security program (although, under normal circumstances, FICA taxes must be collected anyway). Although the Social Security Act itself does not require a person to have a Social Security Number (SSN) to live and work in the United States,[27] the Internal Revenue Code does generally require the use of the social security number by individuals for federal tax purposes: The social security account number issued to an individual for purposes of section 205(c)(2)(A) of the Social Security Act shall, except as shall otherwise be specified under regulations of the Secretary [of the Treasury or his delegate], be used as the identifying number for such individual for purposes of this title.[28] Importantly, most parents apply for Social Security numbers for their dependent children in order to[29] include them on their income tax returns as a dependent. Everyone filing a tax return, as taxpayer or spouse, must have a Social Security Number or Taxpayer Identification Number (TIN) since the IRS is unable to process returns or post payments for anyone without an SSN or TIN. The FICA taxes are imposed on all workers and self-employed persons. Employers are required[30] to report wages for covered employment to Social Security for processing Forms W-2 and W-3. There are some specific wages which are not a part of the Social Security program (discussed below). Internal Revenue Code provisions section 3101[31] imposes payroll taxes on individuals and employer matching taxes. Section 3102[32] mandates that employers deduct these payroll taxes from workers' wages before they are paid. Generally, the payroll tax is imposed on everyone in employment earning \"\"wages\"\" as defined in 3121[33] of the Internal Revenue Code.[34] and also taxes[35] net earnings from self-employment.[36] **Seriously, you need to learn how to use google asshole. Stop looking like an idiot and posting blatent lies.**\"" }, { "docid": "139383", "title": "", "text": "As I understand it, capital gains from real estate sales in India can be shielded from income tax entirely if the proceeds of the sale are invested in certain specific types of bonds (Rural Highway Contruction Authority of India?) for a period of three years beginning no later than x months (6 months?) after completion of the sale. Perhaps this applies to sales of inherited real estate only and not to commercial property or residential property acquired by purchase since there is no step-up of basis on death as occurs in the US, and in all likelihood, records of the purchase price of the inherited property are lost in the mists of time, and so the basis of the investment is effectively zero (or treated as such by the revenue authorities) The interest paid by these bonds is included in taxable income. Perhaps @Dheer will be willing to correct any mistakes in the above. So, it may be necessary to check whether (a) the interest income from the bonds was declared on Form 1040 Schedule B for each year (b) whether the appropriate boxes (the ones that ask whether the taxpayer has signature authority over foreign accounts etc) were checked on Schedule B or not, (c) whether Form TD 90-22.1 was filed each year or not (this is the FBAR requirement) Note that if the total value of the accounts is less than US $10K during the entire year, then the taxpayer is supposed to check NO on Schedule B and need not file Form TD 90-22.1. Also, there is a separate requirement to file a Form 8938 for certain specific types of investments. There was a two-part article describing these rules in Forbes magazine some time ago, and this is available on-line (Part 1 and Part II) As @superjessi says, the IRS might be lenient if the only issue is not filing the forms in timely fashion, and the taxpayer is voluntarily coming into compliance even though the filing is late. They are likely to be less forgiving if the foreign income was not reported, and still remains unreported even after filing the various forms." }, { "docid": "273947", "title": "", "text": "\"Exactly what accounts are affected by any given transaction is not a fixed thing. Just for example, in a simple accounting system you might have one account for \"\"stock on hand\"\". In a more complex system you might have this broken out into many accounts for different types of stock, stock in different locations, etc. So I can only suggest example specific accounts. But account type -- asset, liability, capital (or \"\"equity\"\"), income, expense -- should be universal. Debit and credit rules should be universal. 1: Sold product on account: You say it cost you $500 to produce. You don't say the selling price, but let's say it's, oh, $700. Credit (decrease) Asset \"\"Stock on hand\"\" by $500. Debit (increase) Asset \"\"Accounts receivable\"\" by $700. Credit (increase) Income \"\"Sales\"\" by $700. Debit (increase) Expense \"\"Cost of goods sold\"\" by $500. 2: $1000 spent on wedding party by friend I'm not sure how your friend's expenses affect your accounts. Are you asking how he would record this expense? Did you pay it for him? Are you expecting him to pay you back? Did he pay with cash, check, a credit card, bought on credit? I just don't know what's happening here. But just for example, if you're asking how your friend would record this in his own records, and if he paid by check: Credit (decrease) Asset \"\"checking account\"\" by $1000. Debit (increase) Expense \"\"wedding expenses\"\" by $1000. If he paid with a credit card: Credit (increase) Liability \"\"credit card\"\" by $1000. Debit (increase) Expense \"\"wedding expenses\"\" by $1000. When he pays off the credit card: Debit (decrease) Liability \"\"credit card\"\" by $1000. Credit (decrease) Asset \"\"cash\"\" by $1000. (Or more realistically, there are other expenses on the credit card and the amount would be higher.) 3: Issue $3000 in stock to partner company I'm a little shakier on this, I haven't worked with the stock side of accounting. But here's my best stab: Well, did you get anything in return? Like did they pay you for the stock? I wouldn't think you would just give someone stock as a present. If they paid you cash for the stock: Debit (increase) Asset \"\"cash\"\". Credit (decrease) Capital \"\"shareholder equity\"\". Anyone else want to chime in on that one, I'm a little shaky there. Here, let me give you the general rules. My boss years ago described it to me this way: You only need to know three things to understand double-entry accounting: 1: There are five types of accounts: Assets: anything you have that has value, like cash, buildings, equipment, and merchandise. Includes things you may not actually have in your hands but that are rightly yours, like money people owe you but haven't yet paid. Liabilities: Anything you owe to someone else. Debts, merchandise paid for but not yet delivered, and taxes due. Capital (some call it \"\"capital\"\", others call it \"\"equity\"\"): The difference between Assets and Liabilities. The owners investment in the company, retained earnings, etc. Income: Money coming in, the biggest being sales. Expenses: Money going out, like salaries to employees, cost of purchasing merchandise for resale, rent, electric bill, taxes, etc. Okay, that's a big \"\"one thing\"\". 2: Every transaction must update two or more accounts. Each update is either a \"\"debit\"\" or a \"\"credit\"\". The total of the debits must equal the total of the credits. 3: A dollar bill in your pocket is a debit. With a little thought (okay, sometimes a lot of thought) you can figure out everything else from there.\"" }, { "docid": "578317", "title": "", "text": "It is important to remember that the tax brackets in the U.S. are marginal. This means that the first part of your income is taxed at 10%, the next part at 15%, next at 25%, etc. Therefore, if you find yourself just on the edge of a tax bracket, it really does not make any difference which side of that line you end up falling on. That having been said, of course, reducing your taxable income reduces your taxes. There are lots of deductions you can take, if you qualify. Depending on what type of health insurance coverage you have, a Health Savings Account (HSA) is a great way to shelter some income from taxes. Charitable contributions are also an easy way to reduce your taxes; you don't really personally benefit from them, but if you'd rather send your money to a good cause than to Uncle Sam, that's an easy way to do it." }, { "docid": "173088", "title": "", "text": "\"What is a stock? A share of stock represents ownership of a portion of a corporation. In olden times, you would get a physical stock certificate (looking something like this) with your name and the number of shares on it. That certificate was the document demonstrating your ownership. Today, physical stock certificates are quite uncommon (to the point that a number of companies don't issue them anymore). While a one-share certificate can be a neat memento, certificates are a pain for investors, as they have to be stored safely and you'd have to go through a whole annoying process to redeem them when you wanted to sell your investment. Now, you'll usually hold stock through a brokerage account, and your holdings will just be records in a database somewhere. You'll pick a broker (more on that in the next question), instruct them to buy something, and they'll keep track of it in your account. Where do I get a stock? You'll generally choose a broker and open an account. You can read reviews to compare different brokerages in your country, as they'll have different fees and pricing. You can also make sure the brokerage firm you choose is in good standing with the financial regulators in your country, though one from a major national bank won't be unsafe. You will be required to provide personal information, as you are opening a financial account. The information should be similar to that required to open a bank account. You'll also need to get your money in and out of the account, so you'll likely set up a bank transfer. It may be possible to request a paper stock certificate, but don't be surprised if you're told this is unavailable. If you do get a paper certificate, you'll have to deal with considerably more hassle and delay if you want to sell later. Brokers charge a commission, which is a fee per trade. Let's say the commission is $10/trade. If you buy 5 shares of Google at $739/share, you'd pay $739 * 5 + $10 = $3705 and wind up with $3695 worth of stock in your account. You'd pay the same commission when you sell the stock. Can anyone buy/own/use a stock? Pretty much. A brokerage is going to require that you be a legal adult to maintain an account with them. There are generally ways in which a parent can open an account on behalf of an underage child though. There can be different types of restrictions when it comes to investing in companies that are not publicly held, but that's not something you need to worry about. Stocks available on the public stock market are available to, well, the public. How are stocks taxed? Taxes differ from country to country, but as a general rule, you do have to provide the tax authorities with sufficient information to determine what you owe. This means figuring out how much you purchased the stock for and comparing that with how much you sold it for to determine your gain or loss. In the US (and I suspect in many other countries), your brokerage will produce an annual report with at least some of this information and send it to the tax authorities and you. You or someone you hire to do your taxes will use that report to compute the amount of tax owed. Your brokerage will generally keep track of your \"\"cost basis\"\" (how much you bought it for) for you, though it's a good idea to keep records. If you refuse to tell the government your cost basis, they can always assume it's $0, and then you'll pay more tax than you owe. Finding the cost basis for old investments can be difficult many years later if the records are lost. If you can determine when the stock was purchased, even approximately, it's possible to look back at historical price data to determine the cost. If your stock pays a dividend (a certain amount of money per-share that a company may pay out of its profits to its investors), you'll generally need to pay tax on that income. In the US, the tax rate on dividends may be the same or less than the tax rate on normal wage income depending on how long you've held the investment and other rules.\"" }, { "docid": "469993", "title": "", "text": "This is stupid. Change the US tax law, that will fix it. Apple is avoiding taxes by playing an overseas card, are you getting rid of your iPhone, too, if you are about to boycott Burger King? Microsoft, is doing it, all the multinationals are playing games like this. I am not blaming them, I am just saying. More and more of the largest companies are leaving because of our excessive tax laws, we end up with lower net tax income as a result (fewer and fewer companies to pay the large taxes). These taxes also make us less and less competitive. Articles like this aren't going to cut it, waving a flag won't either. Oh, and don't get me started on the total stupidity on taxing US citizens living overseas for overseas income, even if they haven't lived or worked in the US for years. They have to pay whatever taxes of the country they are in, plus have to file and declare income to the US government, to also pay US taxes. I think only USA is doing that, btw. Look up how many people are force to give up their US citizenship because of these laws. That, too, has to be changed. The sooner the better." }, { "docid": "471704", "title": "", "text": "There are classes of 'traders' who close their positions out every evening, not just on fridays. But their are other types of businesses who trade shortly before or nearly right at market close with both buys and sells There are lots of theories as to how the market behaves at various times of day, days of the week, months of the year. There are some few patterns that can emerge but in general they don't provide a lot of 'lift' above pure random chance, enough so that if you 'bet' on one of these your chances of being wrong are only very slightly different from being right, enough so that it's not really fair to call any of them a 'sure thing'. And since these events are often fairly widely spaced, it's difficult to play them often enough to get the 'law of large numbers' on your side (as opposed to say card-counting at a blackjack table) which basically makes betting on them not much different from gambling" }, { "docid": "284805", "title": "", "text": "\"Others have given a lot of advice about how to invest, but as a former expat I wanted to throw this in: US citizens living and investing overseas can VERY easily run afoul of the IRS. Laws and regulations designed to prevent offshore tax havens can also make it very difficult for expats to do effective investing and estate planning. Among other things, watch out for: US citizens owe US income tax on world income regardless of where they live or earn money FBAR reporting requirements affect foreign accounts valued over $10k The IRS penalizes (often heavily) certain types of financial accounts. Tax-sheltered accounts (for education, retirement, etc.) are in the crosshairs, and anything the IRS deems a \"\"foreign-controlled trust\"\" is especially bad. Heavy taxes on investment not purchased from a US stock exchange Some US states will demand income taxes from former residents (including expats) who cannot prove residency in a different US state. I believe California is neutral in that regard, at least. I am neither a lawyer nor an accountant nor a financial advisor, so please take the above only as a starting point so you know what sorts of questions to ask the relevant experts.\"" }, { "docid": "20036", "title": "", "text": "That's really not something that can be answered based on the information provided. There are a lot of factors involved: type of income, your wife's tax bracket, the split between Federal and State (if you're in a high bracket in a high income-tax rate State - it may even be more than 50%), etc etc. The fact that your wife didn't withdraw the money is irrelevant. S-Corp is a pass-through entity, i.e.: owners are taxed on the profits based on their personal marginal tax rates, and it doesn't matter what they did with the money. In this case, your wife re-invested it into the corp (used it to pay off corp debts), which adds back to her basis. You really should talk to a tax adviser (EA/CPA licensed in your State) to learn how S-Corps work and how to use them properly. Your wife, actually, as she's the owner." }, { "docid": "287540", "title": "", "text": "I still have my bank account active in usa. Can my company legally deposit my salary in my bank account? Of course they can. Where they deposit is of no consequence (in the US, may be in India). It is who they deposit it for that matters. You need to file form W8 with the company, and they may end up withholding portion of that pay for IRS. You'll need to talk to a tax adviser in India about how to report the income back at home, and you may need to talk to a tax adviser in the US about what to do if the company does indeed remit withholding from your earnings." }, { "docid": "516548", "title": "", "text": "The IRS defines income quite specifically. On the topic What is Taxable and Nontaxable Income, they note: You can receive income in the form of money, property, or services. This section discusses many kinds of income that are taxable or nontaxable. It includes discussions on employee wages and fringe benefits, and income from bartering, partnerships, S corporations, and royalties. Bartering, or giving someone wages (or similar) in something other than currency (or some other specifically defined things, like fringe benefits), is taxed at fair market value: Bartering Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. For additional information, Refer to Tax Topic 420 - Bartering Income and Barter Exchanges. Bartering is more specifically covered in Topic 420 - Bartering Income: You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). If you failed to report this income, correct your return by filing a Form 1040X (PDF), Amended U.S. Individual Income Tax Return. Refer to Topic 308 for information on filing an amended return. More details about income in general beyond the above articles is available in Publication 525, Taxable and Nontaxable Income. It goes into great detail about different kinds of income. In your example, you'd have to calculate the fair market value of an avocado, and then determine how much cash-equivalent you were paid in. The IRS wouldn't necessarily tell you what that value was; you'd calculate it based on something you feel you could justify to them afterwards. The way I'd do it would be to write down the price of avocados at each pay period, and apply a dollar-cost-averaging type method to determine the total pay's fair value. While the avocado example is of course largely absurd, the advent of bitcoins has made this much more relevant. Publication 525 has this to say about virtual currency: Virtual Currency. If your employer gives you virtual currency (such as Bitcoin) as payment for your services, you must include the fair market value of the currency in your income. The fair market value of virtual currency (such as Bitcoin) paid as wages is subject to federal income tax withholding, Federal Insurance Contribution Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported on Form W-2, Wage and Tax Statement. Gold would be fundamentally similar - although I am not sure it's legal to pay someone in gold; assuming it were, though, its fair market value would be again the definition of income. Similarly, if you're paid in another country's currency, the US dollar equivalent of that is what you'll pay taxes on, at the fair market value of that currency in US dollars." }, { "docid": "441300", "title": "", "text": "Pricing would just be another way to describe valuation. I guess if you want to get technical, pricing - is the act of getting somethings valuation. While valuation - is the estimate of somethings worth. Security analysis - An examination and evaluation of the various factors affecting the value of a security. Side Note: While pricing is valuation, price is not. Price is how much the stock, or security costs most commonly determined by a market. Add On: The meaning of two words might matter depending on what context it is being used in. For example if we were talking about a market where an individual actually sets a price at random without doing any type of evaluation then this->answer that AlexR provides would better highlight the differences." }, { "docid": "36606", "title": "", "text": "it just depends on your situation and sometimes accounting can't fix that. by mentor pays 35% even though he only goes back to the USA to visit. I go back less than 30 days a year so I can claim I'm a foreign resident but if all my income is in the USA I'm screwed. I can't even route my income through my wife who has never stepped foot in the USA because we must claim whatever she makes. US tax laws are so bad that it takes a lot just to get an account with HSBC in Hong Kong" }, { "docid": "277812", "title": "", "text": "There are many different types of 1099 forms. Since you are comparing it to a W-2, I'm assuming you are talking about a 1099-MISC form. Independent contractor income If you are a worker earning a salary or wage, your employer reports your annual earnings at year-end on Form W-2. However, if you are an independent contractor or self-employed you will receive a Form 1099-MISC from each client that pays you at least $600 during the tax year. For example, if you are a freelance writer, consultant or artist, you hire yourself out to individuals or companies on a contract basis. The income you receive from each job you take should be reported to you on Form 1099-MISC. When you prepare your tax return, the IRS requires you to report all of this income and pay income tax on it. So even if you receive a 1099-MISC form, you are required to pay taxes on it." } ]

[ { "docid": "380942", "title": "", "text": "\"Most online \"\"high yield\"\" savings accounts are paying just above 1%. That would be 1.05% for American Express personal savings, or 1.15% for Synchrony Bank‎ (currently). Depending on the length of the season, you might want to work in some CD's. Six months CDs can be had at 1.2%, and 9 month at 1.25%. So if you know you won't need some of your earnings for 9 months, you could earn 1.25% on your money. However, I would proceed with caution on anything other than the high yield savings account. With your one friend having such a low emergency fund, there is very little room for error. Perhaps until that amount is built up into something significant, it is just best to stick with the online savings. Of course, one solution would be to find a way to create income during the off season. That will go a long way into helping one build wealth.\"" } ]

[ { "docid": "12590", "title": "", "text": "\"First thing I'd say is don't start with investing. The foundation of solid finances is cash flow. Making more than you spend, reliably; knowing where your money goes; having a system that works for you to make sure you make more than you spend. Until you have that, your focus may as well be on getting there, because you can't fix much else about your finances until you fix this. A number you want to know is your percentage of income saved, and a good goal for that is about 15%, with 10-12% going to retirement savings and the rest to shorter-term goals and emergency fund and so forth. (Of course the right percentage here depends on your goals and situation, but for most people this is a kind of minimum savings rate to be in good shape.) Focus on your savings rate. This is your profitability, if you view yourself as a business. If it's crappy or negative, your finances will be a mess. Two ways to improve it are to spend less or to improve your earnings power. Doing both is even better. The book Your Money or Your Life by Dominguez and Robin is good for showing how to obsessively focus on cash flow, even though you may not share their zeal for early retirement. A simpler exercise than what they recommend: take 3 months of your checking and credit card statements, go through each expenditure and put them in a spreadsheet column, SUM() that column. Then add up 3 months of after-tax paychecks. Divide both numbers by three and compare. (The 3 months is to average out your spending, which probably varies a lot by month.) After positive cash flow and savings rate, the next thing I'd go through is insurance. Risk management for what you have. This can include checking you have all the important insurance coverages (homeowner's/renter's, auto, potentially umbrella, term life, disability, and of course health insurance, are some highlights); and also adjusting all your policies to be most cost-effective, which usually means raising the deductible if you have a good emergency fund. Often you can raise the deductible on policies you have, and use the savings to add more catastrophe coverage (such as term life if you didn't have it, or boosting the liability protection on your homeowner's, or whatever). Remember, cover catastrophes as cheaply and comprehensively as possible, but don't worry about reimbursement for non-catastrophic expenses. I like this book, Smart and Simple Financial Strategies for Busy People by Jane Bryant Quinn, because it covers all the main personal finance topics, not just investing; and because it is smart and simple. All the main stuff to think about is in the one book and the advice is solid and uncomplicated. Investing can truly be dead easy; most people would be fine with this advice: Honestly, I do micro-optimize and undermine my investing, and I'm guessing most people on this forum do. But it's not something I could defend objectively as a good use of time. It probably is necessary to do some reading to feel financially literate and confident in an investment plan, but the reading isn't really because a good plan is complicated, it's more to understand all the complicated things that you don't need to do, since that's how you'll know not to do them. ;-) Especially when salespeople and publications and TV are telling you over and over and over that you need to know a bunch of crap and do a bunch of things. People who have a profitable \"\"business of me\"\" are the ones who end up with a lot of money. Not people who spend a lot of time screwing with investments. (People who get rich investing invest professionally - as their \"\"business of me\"\" - they don't goof around with their 401k after work.) Financial security is all about your savings rate, i.e. your personal profitability. No shortcuts, other than lotteries and rich uncles.\"" }, { "docid": "595427", "title": "", "text": "\"It sounds like the kinds of planners you're talking to might be a poor fit, because they are essentially salespersons selling investments for a commission. Some thoughts on finding a financial planner The good kind of financial planner is going to be able to do a comprehensive plan - look at your whole life, goals, and non-investment issues such as insurance. You should expect to get a document with a Monte Carlo simulation showing your odds of success if you stick to the plan; for investments, you should expect to see a recommended asset allocation and an emphasis on low-cost no-commission (commission is \"\"load\"\") funds. See some of the other questions from past posts, for example What exactly can a financial advisor do for me, and is it worth the money? A good place to start for a planner might be http://napfa.org ; there's also a franchise of planners providing hourly advice called the Garrett Planning Network, I helped my mom hire someone from them and she was very happy, though I do think your results would depend mostly on the individual rather than the franchise. Anyway see http://www.garrettplanningnetwork.com/map.html , they do require planners to be fee-only and working on their CFP credential. You should really look for the Certified Financial Planner (CFP) credential. There are a lot of credentials out there, but many of them mean very little, and others might be hard to get but not mean the right thing. Some other meaningful ones include Chartered Financial Analyst (CFA) which would be a solid investment expert, though not necessarily someone knowledgeable in financial planning generally; and IRS Enrolled Agent, which means someone who knows a lot about taxes. A CPA (accountant) would also be pretty meaningful. A law degree (and estate law know-how) is very relevant to many planning situations, too. Some not-very-meaningful certifications include Certified Mutual Fund Specialist (which isn't bogus, but it's much easier to get than CFP or CFA); Registered Investment Adviser (RIA) which mostly means the person is supposed to understand securities fraud laws, but doesn't mean they know a lot about financial planning. There are some pretty bogus certifications out there, many have \"\"retirement\"\" or \"\"senior\"\" in the name. A good question for any planner is \"\"Are you a fiduciary?\"\" which means are they legally required to act in your interests and not their own. Most sales-oriented advisors are not fiduciaries; they wouldn't charge you a big sales commission if they were, and they are not \"\"on your side\"\" legally speaking. It's a good idea to check with your state regulators or the SEC to confirm that your advisor is registered and ask if they have had any complaints. (Small advisors usually register with the state and larger ones with the federal SEC). If they are registered, they may still be a salesperson who isn't acting in your interests, but at least they are following the law. You can also see if they've been in trouble in the past. When looking for a planner, one firm I found had a professional looking web site and didn't seem sketchy at all, but the state said they were not properly registered and not in compliance. Other ideas A good book is: http://www.amazon.com/Smart-Simple-Financial-Strategies-People/dp/0743269942 it's very approachable and you'd feel more confident talking to someone maybe with more background information. For companies to work with, stick to the ones that are very consumer-friendly and sell no-load funds. Vanguard is probably the one you'll hear about most. But T. Rowe Price, Fidelity, USAA are some other good names. Fidelity is a bit of a mixture, with some cheap consumer-friendly investments and other products that are less so. Avoid companies that are all about charging commission: pretty much anyone selling an annuity is probably bad news. Annuities have some valid uses but mostly they are a bad deal. Not knowing your specific situation in any detail, it's very likely that 60k is not nearly enough, and that making the right investment choices will make only a small difference. You could invest poorly and maybe end up with 50K when you retire, or invest well and maybe end up with 80-90k. But your goal is probably more like a million dollars, or more, and most of that will come from future savings. This is what a planner can help you figure out in detail. It's virtually certain that any planner who is for real, and not a ripoff salesperson, will talk a lot about how much you need to save and so forth, not just about choosing investments. Don't be afraid to pay for a planner. It's well worth it to pay someone a thousand dollars for a really thorough, fiduciary plan with your interests foremost. The \"\"free\"\" planners who get a commission are going to get a whole lot more than a thousand dollars out of you, even though you won't write a check directly. Be sure to convert those mutual fund expense ratios and sales commissions into actual dollar amounts! To summarize: find someone you're paying, not someone getting a commission; look for that CFP credential showing they passed a demanding exam; maybe read a quick and easy book like the one I mentioned just so you know what the advisor is talking about; and don't rush into anything! And btw, I think you ought to be fine with a solid plan. You and your husband have time remaining to work with. Good luck.\"" }, { "docid": "44187", "title": "", "text": "You can't max out your retirement savings. There are vehicles that aren't tax-advantaged that you can fund after you've exhausted the tax-advantaged ones. Consider how much you want to put into these vehicles. There are disadvantages as well as advantages. The rules on these can change at any time and can make it harder for you to get your money out. How's your liquid (cash) emergency fund? It sounds like you're in a position to amass a good one. Don't miss this opportunity. Save like crazy while you can. Kids make this harder. Paying down your mortgage will save you interest, of course, but make sure you're not cash-poor as a result. If something happens to your income(s), the bank will still foreclose on you even if you only owe $15,000. A cash cushion buys you time." }, { "docid": "52441", "title": "", "text": "In banks and institutions where you could look at the money supply of M1 which is the physical currency in circulation compared to M2 which would be all the deposits that tend to be valued much more. http://www.federalreserve.gov/releases/h6/current/ would be the link where as of Nov. 2014 the figures are M1 - 2,849.8 M2 - 11,588.7 Footnotes from that: M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler's checks of nonbank issuers; (3) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (4) other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions. Seasonally adjusted M1 is constructed by summing currency, traveler's checks, demand deposits, and OCDs, each seasonally adjusted separately. M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000), less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market mutual funds, less IRA and Keogh balances at money market mutual funds. Seasonally adjusted M2 is constructed by summing savings deposits, small-denomination time deposits, and retail money funds, each seasonally adjusted separately, and adding this result to seasonally adjusted M1. Where M1 sounds like the physical money outside the banks and M2 is the money inside the banks. Did you mean something more specific here? http://en.wikipedia.org/wiki/Gross_domestic_product would be a link about GDP in terms of economic output that has more than a few pieces to it that I'm sure whole courses in college are devoted to understanding this measurement." }, { "docid": "95890", "title": "", "text": "\"The answer to your question depends on what you mean when you say \"\"growth\"\". If you mean a literal increase in the aggregate market capitalization of companies, across the entire market, then, no, this sort of growth is not possible without concomitant economic growth. The reason why is that the market capitalization of each company is proportional to its gross revenue, and the sum of all revenue from selling \"\"final goods\"\" (i.e., things purchased and used by consumers) is, apart from a few technicalities, the definition of GDP. The exact multiplier might fluctuate up or down depending on investors' expectations about how sales will grow or decline going forward, but in a zero-growth economy this multiplier should be stable over the long run. It might, however, still fluctuate over the short term, but more about that in a minute. Note that all of this applies to aggregate growth across all firms. Individual firms can still grow, of course, but as they must do this by gaining market share from other companies such growth would be balanced by a decline for some other firm. Also, I've assumed zero net exports (that's one of the \"\"technicalities\"\" I mentioned above) because obviously you could have export-driven growth even if the domestic economy were stationary. However, often when people talk about \"\"growth\"\" in the market, what they really mean is \"\"return\"\". That is, how much does your investment earn for you. This isn't really the same thing as growth, but people often think of it that way, particularly in the saving phase of their investing career, when they are reinvesting their returns, and therefore their account balances are growing. It is possible to have a positive return, averaged across the market, even in a stationary economy. The reason why is that there are really only two things a firm can do with its net profits. One possibility is that it could invest it in growing the business. However, there is not much point in doing that in a stationary economy because by assumption no increase in aggregate consumption (and therefore, in the long run, aggregate production) are possible. Therefore, firms are left with only the second option, which is to pay them out to investors as dividends. Those dividends provide a return that is independent of economic growth. Would the stock market still be a good investment in such an economy? Yes. Well, sort of. The rate of return from firms' dividend payouts will depend on investors' demand (in aggregate) for returns on their investments. Stock prices will rise or fall, causing returns to respectively fall or rise, to find that level. If your personal desire for returns is lower than the average across the investing public, then the stock market would look like a good investment. If your desired return is higher than the average, then it will look like a poor investment. The marginal investor will, of course be indifferent. The practical upshot of this is that the people who invest in the stock market in this scenario will be precisely the ones for whom the stock market is a good investment, given their personal propensity to save and desire for returns, and so forth. Finally, you mentioned that in your scenario the GDP stagnation is due to declining population. I am less certain what this means for investment, but my first thought is that you would have a large retired population selling its investments to fund late-life consumption, and you would have a comparatively small (relative to history) working population buying those assets. This would lead to low asset prices, and therefore high rates of return. However, that's assuming that retirees need to sell assets to fund their retirement consumption. If the absolute returns on retirees' assets are large enough to fund their retirement consumption then you would wind up with relatively few sellers, resulting in high prices and therefore relatively low rates of return. It's not obvious to me which effect would dominate, and so it's hard to say whether or not the resulting returns would look attractive to the working-age population.\"" }, { "docid": "224226", "title": "", "text": "\"What you want is called a \"\"car wrap.\"\" A designer can get a template for your truck, to have exact measurements of its dimensions. Then he creates a full color design in Adobe Illustrator or whatever. Then he prints them in waterproof, colorfast inks on a Mutoh inkjet printer onto shrinkable plastic with an adhesive backing. Then a guy carefully pastes them all over your truck. It's easy on flat sides, but they have techniques to seamlessly cover every surface of the truck, including the curved bits like around the headlights. It looks [something like this](http://www.capitalwraps.com/blog/bid/37088/Florist-Vehicle-Wraps-Bloom-In-The-Effectiveness-And-Visibility). But FFS please get a serious designer who does quality work, and not some amateur that produces an eyesore. Good graphics are good advertising, and costs good money to make.\"" }, { "docid": "77312", "title": "", "text": "\"I look ahead for sizes. I was at the thrift store and saw a good condition, good brand winter coat that will likely fit my daughter next year, so I bought it. I also bought a snowsuit my baby can wear when he's 6 months (~5 months pregnant now). When it starts getting cold next fall, I'll be set, rather than wasting time and money running around town trying to find winter gear. This applies for any regular stores you visit (Costco, thrift stores, kids resale stores, etc): look for clearance/discounted kids clothes in the next few sizes up, even off-season. This works especially well for basics you need lots of (PJs, socks, etc) and more expensive things where you don't want to be desperate when shopping for them. You're always \"\"buying low.\"\"\"" }, { "docid": "356515", "title": "", "text": "\"You don't state where you are, so any answers to this will by necessity be very general in nature. How many bank accounts should I have and what kinds You should have one transaction account and one savings account. You can get by with just a single transaction account, but I really don't recommend that. These are referred to with different names in different jurisdictions, but the basic idea is that you have one account where money is going in and out (the transaction account), and one where money goes in and stays (the savings account). You can then later on, as you discover various needs, build on top of that basic foundation. For example, I have separate accounts for each source of money that comes into my personal finances, which makes things much easier when I sit down to fill out the tax forms up to almost a year and a half later, but also adds a bit of complexity. For me, that simplicity at tax time is worth the additional complexity; for someone just starting out, it might not be. (And of course, it is completely unnecessary if you have only one source of taxable income and no other specific reason to separate income streams.) how much (percentage-wise) of my income should I put into each one? With a single transaction account, your entire income will be going into that account. Having a single account to pay money into will also make life easier for your employer. You will then have to work out a budget that says how much you plan to spend on food, shelter, savings, and so on. how do I portion them out into budgets and savings? If you have no idea where to start, but have an appropriate financial history (as opposed to just now moving into a household of your own), bring out some old account statements and categorize each line item in a way that makes sense to you. Don't be too specific; four or five categories will probably be plenty. These are categories like \"\"living expenses\"\" (rent, electricity, utilities, ...), \"\"food and eating out\"\" (everything you put in your mouth), \"\"savings\"\" (don't forget to subtract what you take out of savings), and so on. This will be your initial budget. If you have no financial history, you are probably quite young and just moving out from living with your parents. Ask them how much might be reasonable in your area to spend on basic food, a place to live, and so on. Use those numbers as a starting point for a budget of your own, but don't take them as absolute truths. Always have a \"\"miscellaneous expenses\"\" or \"\"other\"\" line in your budget. There will always be expenses that you didn't plan for, and/or which don't neatly fall into any other category. Allocate a reasonable sum of money to this category. This should be where you take money from during a normal month when you overshoot in some budget category; your savings should be a last resort, not something you tap into on a regular basis. (If you find yourself needing to tap into your savings on a regular basis, adjust your budget accordingly.) Figure out based on your projected expenses and income how much you can reasonably set aside and not touch. It's impossible for us to say exactly how much this will be. Some people have trouble setting aside 5% of their income on a regular basis without touching it; others easily manage to save over 50% of their income. Don't worry if this turns out a small amount at first. Get in touch with your bank and set up an automatic transfer from your transaction account to the savings account, set to recur each and every time you get paid (you may want to allow a day or two of margin to ensure that the money has arrived in your account before it gets taken out), of the amount you determined that you can save on a regular basis. Then, try to forget that this money ever makes it into your finances. This is often referred to as the \"\"pay yourself first\"\" principle. You won't hit your budget exactly every month. Nobody does. In fact, it's more likely that no month will have you hit the budget exactly. Try to stay under your budgeted expenses, and when you get your next pay, unless you have a large bill coming up soon, transfer whatever remains into your savings account. Spend some time at the end of each month looking back at how well you managed to match your budget, and make any necessary adjustments. If you do this regularly, it won't take very long, and it will greatly increase the value of the budget you have made. Should I use credit cards for spending to reap benefits? Only if you would have made those purchases anyway, and have the money on hand to pay the bill in full when it comes due. Using credit cards to pay for things is a great convenience in many cases. Using credit cards to pay for things that you couldn't pay for using cash instead, is a recipe for financial disaster. People have also mentioned investment accounts, brokerage accounts, etc. This is good to have in mind, but in my opinion, the exact \"\"savings vehicle\"\" (type of place where you put the money) is a lot less important than getting into the habit of saving regularly and not touching that money. That is why I recommend just a savings account: if you miscalculate, forgot a large bill coming up, or for any other (good!) reason need access to the money, it won't be at a time when the investment has dropped 15% in value and you face a large penalty for withdrawing from your retirement savings. Once you have a good understanding of how much you are able to save reliably, you can divert a portion of that into other savings vehicles, including retirement savings. In fact, at that point, you probably should. Also, I suggest making a list of every single bill you pay regularly, its amount, when you paid it last time, and when you expect the next one to be due. Some bills are easy to predict (\"\"$234 rent is due the 1st of every month\"\"), and some are more difficult (\"\"the electricity bill is due on the 15th of the month after I use the electricity, but the amount due varies greatly from month to month\"\"). This isn't to know exactly how much you will have to pay, but to ensure that you aren't surprised by a bill that you didn't expect.\"" }, { "docid": "402115", "title": "", "text": "\"I would definitely keep working because Social Security pays out for people with permanent disabilities, but it's dependant on working and paying into to Soc Security for a period of time. Here's a link to the info. http://www.ssa.gov/pubs/10029.html#part2 If your 401k has an employer match,then the no brainer answer is \"\"YES!', otherwise you are just leaving money on the table. Even if there isn't, I think they are good vehicles for saving money while deferring interest.\"" }, { "docid": "285812", "title": "", "text": "As others have noted, you can do better than a checking or savings account. If you're going to invest emergency money, the vehicle you put it into should be: Liquid - Wherever you put it, you should be able to quickly cash it out. Highly liquid exchange traded products are good for this. Low volatility/drawdowns - If you need at least 6 months of your paycheck to cover you in the event of an emergency, you don't want to park it in a portfolio that can potentially lose 30% value. Insured - Your investments should have SIPC coverage (protection against losses resulting from failure on part of broker). Moderate/Steady Growth - If the emergency fund doesn't grow, you'll need to continually pump money into it. My 'steady growth' portfolio is majorly allocated to fixed income. Within that, a major portion is allocated to high yielding instruments. Over the past 10 years, it's seen at least a 7% annualized return." }, { "docid": "391605", "title": "", "text": "\"Should I invest the money I don't need immediately and only withdraw it next year when I need it for living expenses or should I simply leave it in my current account? This might come as a bit of a surprise, but your money is already invested. We talk of investment vehicles. An investment vehicle is basically a place where you can put money and have it either earn a return, or be able to get it back later, or both. (The neither case is generally called \"\"spending\"\".) There are also investment classes which are things like cash, stocks, bonds, precious metals, etc.: different things that you can buy within an investment vehicle. You currently have the money in a bank account. Bank accounts currently earn very low interest rates, but they are also very liquid and very secure (in the sense of being certain that you will get the principal back). Now, when you talk about \"\"investing the money\"\", you are probably thinking of moving it from where it is currently sitting earning next to no return, to somewhere it can earn a somewhat higher return. And that's fine, but you should keep in mind that you aren't really investing it in that case, only moving it. The key to deciding about an asset allocation (how much of your money to put into what investment classes) is your investment horizon. The investment horizon is simply for how long you plan on letting the money remain where you put it. For money that you do not expect to touch for more than five years, common advice is to put it in the stock market. This is simply because in the long term, historically, the stock market has outperformed most other investment classes when looking at return versus risk (volatility). However, money that you expect to need sooner than that is often recommended against putting it in the stock market. The reason for this is that the stock market is volatile -- the value of your investment can fluctuate, and there's always the risk that it will be down when you need the money. If you don't need the money within several years, you can ride that out; but if you need the money within the next year, you might not have time to ride out the dip in the stock market! So, for money that you are going to need soon, you should be looking for less volatile investment classes. Bonds are generally less volatile than stocks, with government bonds generally being less volatile than corporate bonds. Bank accounts are even less volatile, coming in at practically zero volatility, but also have much lower expected rates of return. For the money that you need within a year, I would recommend against any volatile investment class. In other words, you might take whichever part you don't need within a year and put in bonds (except for what you don't foresee needing within the next half decade or more, which you can put in stocks), then put the remainder in a simple high-yield deposit-insured savings account. It won't earn much, but you will be basically guaranteed that the money will still be there when you want it in a year. For the money you put into bonds and stocks, find low-cost index mutual funds or exchange-traded funds to do so. You cannot predict the future rate of return of any investment, but you can predict the cost of the investment with a high degree of accuracy. Hence, for any given investment class, strive to minimize cost, as doing so is likely to lead to better return on investment over time. It's extremely rare to find higher-cost alternatives that are actually worth it in the long term.\"" }, { "docid": "222153", "title": "", "text": "You need the services of a hard-nosed financial planner. A good one will defend your interests against the legions of creeps trying to separate you from your money. How can you tell whether such a person is working in your best interest? Here are some ways. You'll be able to tell pretty quickly whether the planner lets you get through the same story you told us. The ability to listen carefully without interrupting is a good way to tell whether the planner is going to honor your needs. You're looking for a human service professional, not an investment or business guru. There are planners who specialize in helping people navigate big changes in their financial situation. Some of the best of those planners are women. (Many of their customers are people whose spouses recently died. But they also serve people in your situation. Ask if they work with other people like you.) Of course, you need to take the planner's advice, especially about spending and saving levels." }, { "docid": "587192", "title": "", "text": "If you're under age 55 and in good health generally you cannot withdraw your funds from super and your super fund cannot provide you with any financial assistance eg lend you money. However, for a very small percentage of people with unrestricted non preserved superannuation components ( check your statement most people's superannuation is 'preserved'which means they cannot access it until they meet a 'condition of release')they may withdraw their super benefits upto the unrestricted non preserved amount. For healthy (& able) persons aged 55 and over they may access their super under the following conditions: I can understand your frustration of having your money compulsory tied up in superannuation especially given the poor investment returns of the past 5 years. However, superannuation may be more flexible than you realize, I am an adviser at Grant Thornton and I am constantly telling clients that superannuation is not an invest but it the most tax effective long term savings vehicle available to Australians for their investment savings eg max 15% tax on income and capital gains if held for a year are taxed at 10%. If you're not happy with your investment returns you may like to seek some advice or,set up your own super fund - a self managed super fund where you can invest a wide variety of assets; shares, managed funds,cash, term deposits, property( your super fund can even borrow to help acquire the property) I hope this helps" }, { "docid": "130118", "title": "", "text": "I'm afraid you're mistaking 401k as an investment vehicle. It's not. It is a vehicle for retirement. Roth 401k/IRA has the benefit of tax free distributions at retirement, and as long as you're in the low tax bracket - it is for your benefit to take advantage of that. However, that is not the money you would be using to start a business or buy a home (except for maybe up to $10K you can withdraw without penalty for first time home buyers, but I wouldn't bother with $10k, if that's what will help you buying a house - maybe you shouldn't be buying at all). In addition, you should make sure you take advantage of the employer 401k match in full. That is free money added to your Traditional 401k retirement savings (taxed at distribution). Once you took the full advantage of the employer's match, and contributed as much as you consider necessary for your retirement above that (there are various retirement calculators on line that can help you in making that determination), everything else will probably go to taxable (regular) savings/investments." }, { "docid": "464297", "title": "", "text": "If you have money and may need to access it at any time, you should put it in a savings account. It won't return much interest, but it will return some and it is easily accessible. If you have all your emergency savings that you need (at least six months of income), buy index-based mutual funds. These should invest in a broad range of securities including both stocks and bonds (three dollars in stocks for every dollar in bonds) so as to be robust in the face of market shifts. You should not buy individual stocks unless you have enough money to buy a lot of them in different industries. Thirty different stocks is a minimum for a diversified portfolio, and you really should be looking at more like a hundred. There's also considerable research effort required to verify that the stocks are good buys. For most people, this is too much work. For most people, broad-based index funds are better purchases. You don't have as much upside, but you also are much less likely to find yourself holding worthless paper. If you do buy stocks, look for ones where you know something about them. For example, if you've been to a restaurant chain with a recent IPO that really wowed you with their food and service, consider investing. But do your research, so that you don't get caught buying after everyone else has already overbid the price. The time to buy is right before everyone else notices how great they are, not after. Some people benefit from joining investment clubs with others with similar incomes and goals. That way you can share some of the research duties. Also, you can get other opinions before buying, which can restrain risky impulse buys. Just to reiterate, I would recommend sticking to mutual funds and saving accounts for most investors. Only make the move into individual stocks if you're willing to be serious about it. There's considerable work involved. And don't forget diversification. You want to have stocks that benefit regardless of what the overall economy does. Some stocks should benefit from lower oil prices while others benefit from higher prices. You want to have both types so as not to be caught flat-footed when prices move. There are much more experienced people trying to guess market directions. If your strategy relies on outperforming them, it has a high chance of failure. Index-based mutual funds allow you to share the diversification burden with others. Since the market almost always goes up in the long term, a fund that mimics the market is much safer than any individual security can be. Maintaining a three to one balance in stocks to bonds also helps as they tend to move in opposite directions. I.e. stocks tend to be good when bonds are weak and vice versa." }, { "docid": "472739", "title": "", "text": "\"He's paying the interest and you're paying the principal. If you're making minimum monthly payments, you'll still be doing the same thing 25-30 years from now. I think Parker's advice was very, very good, but I'd like to add to it a little of my own. Whatever dollar amount your son is sending to you as payment, encourage him to continue doing that. Only instead of paying you, have him put that money into a savings plan of some kind. You mentioned that he's struggling now, yet able to come up with approximately (my best guess) $200/mo. I guarantee you that if he puts that $200/mo back into his pocket, he'll still be struggling every month yet have nothing to show for it. My suggestion changes nothing in his daily life, yet gives him $2400 at the end of every year. I was in a somewhat similiar situation as your son, only to the tune of $13,000. About 20 years ago, I got a loan and bought a new truck in which to use to go back and forth to work every day. The first 5 months the payments to the bank went as planned. Then my wife announces that \"\"we're\"\" pregnant. So my parents figured it would be best to just pay off my loan to the bank, avoiding any further interest charges, and take that truck payment and put it away for a rainy day. At 33 y/o, with my first child on the way, I finally started saving some of my money. It was good advice on their part because the rainy days came! They never asked me to pay them back, however I did offer. I've been tucking away $300-400/mo in the bank every month since then because I just got into the habit. Good thing I did too. In the past 10 years I've had to bury both of my parents, one sister and two wives and I'll tell ya, one thing that was comforting was the fact that I had the money. The little truck I bought 20 years ago is now my son's. It has around 260,000 miles on it now. When he trades it in for a newer vehicle, I will probably loan him the money and have him make payments to me rather than the bank. I, too, am not one to pay interest if I can help it. If he defaults, he's my son. I just won't buy him another vehicle! Or maybe he'll get into the same habit of saving money the same way I did. Like JohnFx said, money loaned to family should be regarded as a gift, otherwise you'll end up losing your money AND your family member! Hope some of this helps you make your decision.\"" }, { "docid": "61936", "title": "", "text": "Sure! Started working since I was 12, used that money to buy a car, and was working full time starting at 15 years old. By 17 had two full time jobs and banked all that money, besides buying a car. At 18 fulfilled my dream and was hired as a police officer. Did the academy for 6 months, saving all of that money to buy a trailer to live in for cheap. Max out pay for my department was 5 years, so by 23 years old I was making 68,000 a year. With overtime and details included( I basically worked anytime I could, 8 hour shift with either an 8 hour detail or double shift) usually kept one day off, working my other day off. My take home for the year after taxes was somewhere around 90k give or take, with my living expenses barely passing 25k a year. Banked all that money for years. When I hit 25ish I got together with my now wife, also an officer making the same amount. She also received about 300k from a settlement. So with both of our salaries plus money invested since I was about 14, annual take home was about 200k. Saved for 2 more years and at 28, used the 300k to buy a house and pay off any vehicles and credit card debt. Paid cash for the house so no mortgage, no car payments, just utilities and taxes for the year. With the budget set we were able to retire living just like we were. There is a lot more to it but that's the quick summary!" }, { "docid": "16606", "title": "", "text": "\"Given the state of the economy, and the potential of a rough near future for us recent grads (i.e. on/off work), I would recommend holding off on large purchases while your life is in flux. This includes both a NEW car and purchasing a house. My short answer is: you need a reliable vehicle, so purchase a used car, from a major dealer (yes this will add a fairly high premium, but easier financing), that is 4-5 years old, or more. Barring the major dealer purchase, be sure to get a mechanic to check out a vehicle, many will offer this service for a reasonable payment. As people point out, cars these days will run for another 100k miles. You will NOT have to pay anywhere near $27,000 for this vehicle. You may need to leverage your 10k for a loan if you choose to finance, but it should not be a problem, especially as you seem to imply an established credit history. In addition to this, start saving your money for the house you would like to eventually get. We have no idea where you live, but, picking rough numbers, assuming a 2 year buy period, 20% down, and a $250,000 home, the down payment alone will require you to save ~$2,000/month starting now. Barring either of these options, max out your money to tax sheltered accounts (your Roth IRA, work 401k, or a regular IRA) asap. Obviously, do not deplete your emergency fund, if anything, increase it. 10k can be burned through in a heartbeat. Long Answer: I purchased a brand new car, right out of school, at a reasonable interest rate. Like you, I can afford this vehicle, however, if someone were to come to me today (3.5 years later) and offer me the opportunity to take it back and purchase a 4-5 year used vehicle, at a 4-5 year used car price, albeit at a much higher interest rate (since I financed), it would be about a 0.02 second decision. I like my car, but, I'd like the differential cash savings between it and a reliable used car more. $27,000 is also fairly expensive for a new vehicle, there are many, very nice vehicles, for 21-23k. I still would not consider these priced appropriate to spend your money on them, but they exist. However, you do very much need a reliable vehicle, and I think you should get one. On the home front, your $400 all inclusive rent is insanely cheap. Many people spend more than that on property tax and PMI each year, so anyone who throws the \"\"You're throwing money away!\"\" line at you is blowing smoke to justify their own home purchase. Take the money you would have spent on a mortgage, and squirrel it away. Do your own due diligence and research the home market in your area and decide for yourself if you think home prices have bottomed and will stay there, have further to go, or are going to begin to rise. That is a decision only you can make for yourself. I'd add a section about getting expenses under control, but you said you could save 50% of your takehome pay. This is an order of magnitude above the average. Good job. Try doing 50% for 4 months, then calculate your actual amount. Then try to beat it.\"" }, { "docid": "407228", "title": "", "text": "\"Zephyr, Did you see something specific regarding a claim of money saved through observance of the Earth Hour event? The organisers maintain it is about raising awareness of climate change issues - I can't find anything from them regarding saving money/have never seen anything. You could take the claims regarding drops in national-level energy consumption and the decrease in use of various items/devices etc etc and work out a financial savings of a sort - ie. add together \"\"energy not used x average kilowatt cost\"\", \"\"fuel saved through non-use of vehicles x average price per litre\"\", etc etc and so on. But it would be wild wild guesses littered with assumptions - I seriously doubt you could work up a credible figure. Which is why I don't think the organisers make claims regarding money (please correct me if you saw something from them that stated otherwise) - they tend to stick to the \"\"awareness\"\" mantra. Regarding your second question, I think you'll find there is some consensus that large-scale downturns followed by large-scale upturns in electricity consumption is not environmentally friendly. The Telegraph is a good read on this: http://www.telegraph.co.uk/earth/environment/climatechange/7527469/Earth-Hour-will-not-cut-carbon-emissions.html (To be honest, the Telegraph's article is a good summary of the entire concept of Earth Day.)\"" } ]

[ { "docid": "270221", "title": "", "text": "\"There are no risk-free high-liquidity instruments that pay a significant amount of interest. There are some money-market accounts around that pay 1%-2%, but they often have minimum balance or transaction limits. Even if you could get 3%, on a $4K balance that would be $120 per year, or $10 per month. You can do much better than that by just going to $tarbucks two less times per month (or whatever you can cut from your expenses) and putting that into the savings account. Or work a few extra hours and increase your income. I appreciate the desire to \"\"maximize\"\" the return on your money, but in reality increasing income and reducing expenses have a much greater impact until you build up significant savings and are able to absorb more risk. Emergency funds should be highly liquid and risk-free, so traditional investments aren't appropriate vehicles for them.\"" } ]

[ { "docid": "165345", "title": "", "text": "Ally Bank is a good online only account. They reimburse any ATM Fees you may occur. I have both checking and savings, with both Ally and ING Direct. I don't know about having 25 total accounts - seems like overkill to me. I do something similar though - I get direct deposit into one account, then transfer the average bill amount each pay to a different account that I never touch other than for the allotted bills. It works well, especially for Utilities that are inflated seasonally. What do you use to mange the 25 accounts? I use Quicken, but I don't have 25 accounts...yet." }, { "docid": "241136", "title": "", "text": "To answer some parts of the question which are answerable as-is: Yes, mortgage interest is deductible. So is depreciation. See this question and others. It would be a good idea to put some money away for tax season, just as you should save some money to cover unexpected property expenses. But as @JoeTaxpayer says, this is a good problem to have, assuming you own the property, it's low-maintenance, your tenant is good, and your rent is at market levels." }, { "docid": "16606", "title": "", "text": "\"Given the state of the economy, and the potential of a rough near future for us recent grads (i.e. on/off work), I would recommend holding off on large purchases while your life is in flux. This includes both a NEW car and purchasing a house. My short answer is: you need a reliable vehicle, so purchase a used car, from a major dealer (yes this will add a fairly high premium, but easier financing), that is 4-5 years old, or more. Barring the major dealer purchase, be sure to get a mechanic to check out a vehicle, many will offer this service for a reasonable payment. As people point out, cars these days will run for another 100k miles. You will NOT have to pay anywhere near $27,000 for this vehicle. You may need to leverage your 10k for a loan if you choose to finance, but it should not be a problem, especially as you seem to imply an established credit history. In addition to this, start saving your money for the house you would like to eventually get. We have no idea where you live, but, picking rough numbers, assuming a 2 year buy period, 20% down, and a $250,000 home, the down payment alone will require you to save ~$2,000/month starting now. Barring either of these options, max out your money to tax sheltered accounts (your Roth IRA, work 401k, or a regular IRA) asap. Obviously, do not deplete your emergency fund, if anything, increase it. 10k can be burned through in a heartbeat. Long Answer: I purchased a brand new car, right out of school, at a reasonable interest rate. Like you, I can afford this vehicle, however, if someone were to come to me today (3.5 years later) and offer me the opportunity to take it back and purchase a 4-5 year used vehicle, at a 4-5 year used car price, albeit at a much higher interest rate (since I financed), it would be about a 0.02 second decision. I like my car, but, I'd like the differential cash savings between it and a reliable used car more. $27,000 is also fairly expensive for a new vehicle, there are many, very nice vehicles, for 21-23k. I still would not consider these priced appropriate to spend your money on them, but they exist. However, you do very much need a reliable vehicle, and I think you should get one. On the home front, your $400 all inclusive rent is insanely cheap. Many people spend more than that on property tax and PMI each year, so anyone who throws the \"\"You're throwing money away!\"\" line at you is blowing smoke to justify their own home purchase. Take the money you would have spent on a mortgage, and squirrel it away. Do your own due diligence and research the home market in your area and decide for yourself if you think home prices have bottomed and will stay there, have further to go, or are going to begin to rise. That is a decision only you can make for yourself. I'd add a section about getting expenses under control, but you said you could save 50% of your takehome pay. This is an order of magnitude above the average. Good job. Try doing 50% for 4 months, then calculate your actual amount. Then try to beat it.\"" }, { "docid": "587192", "title": "", "text": "If you're under age 55 and in good health generally you cannot withdraw your funds from super and your super fund cannot provide you with any financial assistance eg lend you money. However, for a very small percentage of people with unrestricted non preserved superannuation components ( check your statement most people's superannuation is 'preserved'which means they cannot access it until they meet a 'condition of release')they may withdraw their super benefits upto the unrestricted non preserved amount. For healthy (& able) persons aged 55 and over they may access their super under the following conditions: I can understand your frustration of having your money compulsory tied up in superannuation especially given the poor investment returns of the past 5 years. However, superannuation may be more flexible than you realize, I am an adviser at Grant Thornton and I am constantly telling clients that superannuation is not an invest but it the most tax effective long term savings vehicle available to Australians for their investment savings eg max 15% tax on income and capital gains if held for a year are taxed at 10%. If you're not happy with your investment returns you may like to seek some advice or,set up your own super fund - a self managed super fund where you can invest a wide variety of assets; shares, managed funds,cash, term deposits, property( your super fund can even borrow to help acquire the property) I hope this helps" }, { "docid": "73872", "title": "", "text": "Gonna take more than seasonality to break current momentum. Sentiment is not overly bullish from a retail or institutional aspect. If the year ended today this year would have the smallest drop on record (&lt;3%). The short run outlook of 3-6 months looks very positive from this perspective assuming no unforeseen catalyst occurs to break this trend. Longer term, were in for a correction...but that's normal and nobody knows when it will happen. Anyone investing in stocks should know this and if they don't they need a new advisor or should not be investing alone. Buy the fucking dip and diversify your shit." }, { "docid": "285033", "title": "", "text": "\"Here I thought I would not ever answer a question on this site and boom first ten minutes. First and foremost I am in the automotive industry, specifically one of our core competencies is finance department management consulting and the sales process both for the sale of the care as well as the financial transaction. First and foremost new vehicle gross profits are nowhere near 20% for the dealership. In an entry level vehicle like say a Toyota Corolla there is only a few hundreds of dollars in markup from invoice to M.S.R.P. There is also something called holdback that dealers get for achieving certain goals such as sales volume. These are usually pretty easy to hit. As a matter of fact I have never heard of a dealer not getting the hold back on a deal. This hold back is there to cover overhead for the car, the cost of getting it ready to sell, having a lot to park it on, making it ready for delivery, offset some of the cost of sales labor etc. Most dealerships consider the holdback portion of the invoice to not be part of the deal when it comes to negotiations. Certain brands such as KIA and Chrysler have something called \"\"Dealer Cash\"\" these payouts are usually stair stepped according to volume and vary by dealer, location, past history, how the guys at the factory feel that day and any number of combinations. Then there is CSI or Customer Service Index payments, these payments are usually made every 1/4 are on the Parts Statement not the Sales Doc and while they effect the dealers bottom line they almost never affect the sales managers or sales persons payroll so they are not considered a part of the cost of the car. They are however extremely important to the dealer and this is why after you have your new car they want you to bring in your survey for a free oil change or something. IF you are going to give a bad survey they want to throw it away and not send it in, if you are going to give a good survey they want to make sure you fill it out correctly. This is because lets say they ask you on a scale of 1-10 how was your sales person and you put a 9 that is a failing score. Dumb I know but that is how every factory CSI score system I have seen worked. According to NADA the average New Vehicle gross profit including hold back and dealer cash is around $1000.00. No where near 20%. Dealerships would love it if they made 20% on your new F250 Supercrew Diesel at around $50,000.00. One last thing there is something on the invoice called Wholesale Finance Reserve. This is the amount of money the factory forwards to the Dealership to offset the cost of financing vehicle on the floor plan so they can have it for you to look at before you buy. This is usually equal to around 3 months of interest and while you might buy a vehicle that has been on the lot for 2 days they have plenty that have been there much longer so this equals out in a fair to middling run store. General Mangers that know what they are doing can make this really pad their net profit to statement. On to incentives, there are basically 3 kinds. Cash to customer in the form of rebates, Dealer Cash in the form of incentives to dealerships based on volume or the undesirability of a vehicle, and incentive rates or Subvented leases. The rates are pretty self explanatory as they advertised as such (example 0% for 60 Months). Subvented Leased are harder to figure out and usually not disclosed as they are hard to explain and also a source of increased profit. Subvented leases are usually powered by lower cost of money called a money factor (think of it as an interest rate) that is discounted from the lease company or a subsidized residual. Subsidized residuals are virtually verboten on domestic vehicles due to their poor resell values. A subsidized residual works like this, you buy a Toyota Camry and the ALG (automotive lease guide) says it has a residual at 36 months of 48%. Well Toyota Motor Credit says we will give you a subvented residual of 60% basically subsidizing a 2% increase in residual. Since they do not expect to be able to sell the car at auction for that amount they have to set aside the 2% as a future expense. What does this mean to you, it means a lower payment. Also a good rule of thumb if you are told a money factor by your salesperson to figure out what the interest rate is just multiply it by 2400. So if a money factor is give of .00345 you know your actual interest rate is a little bit lower than 8.28% (illustration purposes only money factors are much lower than that right now). So how does this save you money well a lease is basically calculated by multiplying the MSRP by the residual and then subtracting that amount from the \"\"Capitalized Cost\"\" which is the Price paid for the car - trade in + payoff + TT&L-Rebate-Down Payment. That is the depreciation. Then you divide that number by the term of the loan and you have the depreciation amount. So if you have 20K CC and 10K R your D = 10K / 36 = 277 monthly payment. For the rest of the monthly payment you add (I think been a long time since I did this with out a computer) the Residual plus the CC for $30,000 * MF of .00345 = 107 for a total payment of 404 ish. This is not completely accurate but you can use it to make sure a salesperson/finance person is not trying to do one thing and say another as so often happens on leases. 0% how the heck do they make money at that, well its simple. First in 2008 the Fed made all the \"\"Captive\"\" lenders into actual banks instead of whatever they were before. So now they have access to the Fed's discounting window which with todays monetary policies make it almost free money. In the past these lenders had to go through all kinds of hoops to raise funds and securitize loans even for super prime credit. Those days are essentially over. Now they get their short term money just like Bank of America does. Eventually they still bundle these loans and sell them. So in the short term YOU pay for the 0% by giving up part or all of your rebate. This is really important DO NOT GIVE up your rebate for 0% unless it makes sense to do so. When you can get the money at 2.5% and get a $7000.00 rebate (customer cash) on that F250 or 0% take the cash. First of all make the finance guy/gal show you the the difference in total cost they can do do this using the federal truth in lending disclosures on a finance contract. Secondly how long will you keep the vehicle? If you come out ahead by say $1500 by taking the lower rate but you usually trade out every three years this is not going to work. Also and this is important if you are involved in a situation with a total loss like a stolen car or even worse a bad wreck before the breakeven point you lose that price break. Finally on judging what is right for you, just know that future value of the vehicle on for resell or trade-in will take into effect all of these past rebates and value the car accordingly. So if a vehicle depreciates 20% a year for the first 3 years the starting point will essentially be $7000.00 less than you actually paid, using rough numbers. How does this help the dealers and car companies? Well while a dealer struggles to make money on new cars the factory makes all of their money on the new cars and the new car financing. While your individual loan might lose money that money is offset by the loss of rebate and I think Ford does actually pay Ford Motor Credit Company the difference in the rate. The most important thing is what happens later FMCC now has 2500 loans with people with perfect credit. They can now use those loans to budle with people with not so perfect credit that they financed at 12%-18% and buy that money with interest rates in the 2%-3% range. Well that is a hell of a lot of profit. 'How does it help the dealership, well the more super prime credit they have in their portfolio the more subprime credit the banks will buy for them. This means they have more loans originated that are more profitable for them. Say you come in for the 0% but have 590 credit score, they get FMCC to buy the deal because they have a good portfolio and you win because the dealer gets to buy the money at say 9% and sell it to you at say 12% making the spread. You win there because you actually qualified for a rate of around 18% with a subprime company like Santander or Capital One (yes that capital one) so you save a ton on your overall cost of the car. Any dealership that is half way well run makes as much or money in the finance and insurance office than the rest of the dealership. When you factor in what a good F&I Director can do to get deals done with favorable terms that really goes up. Think about that the guys sitting a desk drinking coffee making more than the service department guys all put together. Well that was long winded but there I broke down the car business for whoever read this far.\"" }, { "docid": "472739", "title": "", "text": "\"He's paying the interest and you're paying the principal. If you're making minimum monthly payments, you'll still be doing the same thing 25-30 years from now. I think Parker's advice was very, very good, but I'd like to add to it a little of my own. Whatever dollar amount your son is sending to you as payment, encourage him to continue doing that. Only instead of paying you, have him put that money into a savings plan of some kind. You mentioned that he's struggling now, yet able to come up with approximately (my best guess) $200/mo. I guarantee you that if he puts that $200/mo back into his pocket, he'll still be struggling every month yet have nothing to show for it. My suggestion changes nothing in his daily life, yet gives him $2400 at the end of every year. I was in a somewhat similiar situation as your son, only to the tune of $13,000. About 20 years ago, I got a loan and bought a new truck in which to use to go back and forth to work every day. The first 5 months the payments to the bank went as planned. Then my wife announces that \"\"we're\"\" pregnant. So my parents figured it would be best to just pay off my loan to the bank, avoiding any further interest charges, and take that truck payment and put it away for a rainy day. At 33 y/o, with my first child on the way, I finally started saving some of my money. It was good advice on their part because the rainy days came! They never asked me to pay them back, however I did offer. I've been tucking away $300-400/mo in the bank every month since then because I just got into the habit. Good thing I did too. In the past 10 years I've had to bury both of my parents, one sister and two wives and I'll tell ya, one thing that was comforting was the fact that I had the money. The little truck I bought 20 years ago is now my son's. It has around 260,000 miles on it now. When he trades it in for a newer vehicle, I will probably loan him the money and have him make payments to me rather than the bank. I, too, am not one to pay interest if I can help it. If he defaults, he's my son. I just won't buy him another vehicle! Or maybe he'll get into the same habit of saving money the same way I did. Like JohnFx said, money loaned to family should be regarded as a gift, otherwise you'll end up losing your money AND your family member! Hope some of this helps you make your decision.\"" }, { "docid": "499766", "title": "", "text": "And how do hours vary as you work you way up in equity research? Is an MD looking at comparable hours during earnings season? I've worked for the finance and IR departments of a couple telecom companies and around earnings season you guys are always putting out your reports in the middle of the night, so I sort of assumed the worst." }, { "docid": "595427", "title": "", "text": "\"It sounds like the kinds of planners you're talking to might be a poor fit, because they are essentially salespersons selling investments for a commission. Some thoughts on finding a financial planner The good kind of financial planner is going to be able to do a comprehensive plan - look at your whole life, goals, and non-investment issues such as insurance. You should expect to get a document with a Monte Carlo simulation showing your odds of success if you stick to the plan; for investments, you should expect to see a recommended asset allocation and an emphasis on low-cost no-commission (commission is \"\"load\"\") funds. See some of the other questions from past posts, for example What exactly can a financial advisor do for me, and is it worth the money? A good place to start for a planner might be http://napfa.org ; there's also a franchise of planners providing hourly advice called the Garrett Planning Network, I helped my mom hire someone from them and she was very happy, though I do think your results would depend mostly on the individual rather than the franchise. Anyway see http://www.garrettplanningnetwork.com/map.html , they do require planners to be fee-only and working on their CFP credential. You should really look for the Certified Financial Planner (CFP) credential. There are a lot of credentials out there, but many of them mean very little, and others might be hard to get but not mean the right thing. Some other meaningful ones include Chartered Financial Analyst (CFA) which would be a solid investment expert, though not necessarily someone knowledgeable in financial planning generally; and IRS Enrolled Agent, which means someone who knows a lot about taxes. A CPA (accountant) would also be pretty meaningful. A law degree (and estate law know-how) is very relevant to many planning situations, too. Some not-very-meaningful certifications include Certified Mutual Fund Specialist (which isn't bogus, but it's much easier to get than CFP or CFA); Registered Investment Adviser (RIA) which mostly means the person is supposed to understand securities fraud laws, but doesn't mean they know a lot about financial planning. There are some pretty bogus certifications out there, many have \"\"retirement\"\" or \"\"senior\"\" in the name. A good question for any planner is \"\"Are you a fiduciary?\"\" which means are they legally required to act in your interests and not their own. Most sales-oriented advisors are not fiduciaries; they wouldn't charge you a big sales commission if they were, and they are not \"\"on your side\"\" legally speaking. It's a good idea to check with your state regulators or the SEC to confirm that your advisor is registered and ask if they have had any complaints. (Small advisors usually register with the state and larger ones with the federal SEC). If they are registered, they may still be a salesperson who isn't acting in your interests, but at least they are following the law. You can also see if they've been in trouble in the past. When looking for a planner, one firm I found had a professional looking web site and didn't seem sketchy at all, but the state said they were not properly registered and not in compliance. Other ideas A good book is: http://www.amazon.com/Smart-Simple-Financial-Strategies-People/dp/0743269942 it's very approachable and you'd feel more confident talking to someone maybe with more background information. For companies to work with, stick to the ones that are very consumer-friendly and sell no-load funds. Vanguard is probably the one you'll hear about most. But T. Rowe Price, Fidelity, USAA are some other good names. Fidelity is a bit of a mixture, with some cheap consumer-friendly investments and other products that are less so. Avoid companies that are all about charging commission: pretty much anyone selling an annuity is probably bad news. Annuities have some valid uses but mostly they are a bad deal. Not knowing your specific situation in any detail, it's very likely that 60k is not nearly enough, and that making the right investment choices will make only a small difference. You could invest poorly and maybe end up with 50K when you retire, or invest well and maybe end up with 80-90k. But your goal is probably more like a million dollars, or more, and most of that will come from future savings. This is what a planner can help you figure out in detail. It's virtually certain that any planner who is for real, and not a ripoff salesperson, will talk a lot about how much you need to save and so forth, not just about choosing investments. Don't be afraid to pay for a planner. It's well worth it to pay someone a thousand dollars for a really thorough, fiduciary plan with your interests foremost. The \"\"free\"\" planners who get a commission are going to get a whole lot more than a thousand dollars out of you, even though you won't write a check directly. Be sure to convert those mutual fund expense ratios and sales commissions into actual dollar amounts! To summarize: find someone you're paying, not someone getting a commission; look for that CFP credential showing they passed a demanding exam; maybe read a quick and easy book like the one I mentioned just so you know what the advisor is talking about; and don't rush into anything! And btw, I think you ought to be fine with a solid plan. You and your husband have time remaining to work with. Good luck.\"" }, { "docid": "273618", "title": "", "text": "\"This Stack Exchange site is a nice place to find answers and ask questions. Good start! Moving away from the recursive answer... Simply distilling personal finance down to \"\"I have money, I'll need money in the future, what do I do\"\", an easily digestible book with how-to, multi-step guidelines is \"\"I Will Teach You To Be Rich\"\". The author talks about setting up the accounts you should have, making sure all your bills are paid automatically, saving on the big things and tips to increase your take home pay. That link goes to a compilation page on the blog with many of the most fundamental articles. However, \"\"The World’s Easiest Guide To Understanding Retirement Accounts\"\" is a particularly key article. While all the information is on the free blog, the book is well organized and concise. The Simple Dollar is a nice blog with frugal living tips, lifestyle assessments, financial thoughts and reader questions. The author also reviews about a book a week. Investing - hoping to get better returns than savings can provide while minimizing risk. This thread is an excellent list of books to learn about investing. I highly recommend \"\"The Bogleheads' Guide to Investing\"\" and \"\"The Only Investment Guide You'll Ever Need\"\". The world of investment vehicles is huge but it doesn't have to be complicated once you ignore all the fads and risky stuff. Index mutual funds are the place to start (and maybe end). Asset allocation and diversification are themes to guide you. The books on that list will teach you.\"" }, { "docid": "195515", "title": "", "text": "Comparing retirement savings to ordinary investment is not an apples-to-apples comparison - retirement savings are savings for retirement - if you want to invest in things now and live off of (or reinvest) those earnings, then retirement accounts are not the right vehicle. That said, here are some benefits of the main types of retirement accounts: Benefits of a 401(k): Benefits of a tratitional IRA: Benefits of a ROTH 401(k): Benefits of a ROTH IRA: (the benefits above are not exhaustive, there are other benefits such as using a ROTH IRA for higher ed. expenses, etc. but those are the highlights) If you have a plan for how you hope to use the money now rather than later does it make sense to hold onto it? If your plan is meant to provide income at retirement, and earns returns higher than the returns plus matches and tax benefits you get from retirement accounts, then yes, it may make more sense, but those benefits are generally very hard to beat. Plus, having the money locked away in an account that is painful to tap can be a good thing - you're less tempted to use that money for foolish decisions (which everyone makes at some point)." }, { "docid": "472053", "title": "", "text": "As someone who's currently shopping for some winter wheels and has the raised blood pressure to go with that, I've got a few suggestions as to what would make me pick up the phone and call your or email you if you're advertising a vehicle. Keep in mind that if you're willing to deal with the additional hassle, you'll normally get the most money for a used car if you sell it privately. If it is worth the additional effort though is both a matter of judgement and if you're willing to put up with strange people like me :). Depending on the value of the vehicle and its rarity/desirability, you're looking at newspaper ads (probably won't get you much of a response these days), craigslist, Autotrader and similar, and last but not least, ebay. If you're trying to sell something that's easy to find because there are five at every street corner (think beige minivan), skip ebay. If it's worth below 5k-6k, I wouldn't bother with places where you have to pay to advertise, which leaves CL for the cheap stuff - that said, I'd still stick it on CL if it's advertised in other places. Heck, it's free after all. The figure out what sort of money you're asking for. Check the resources like KBB.com and have a look at your local CL for similar vehicles. Out here, certain types of vehicles (for example, Jeeps) sell quickly and often above even KBB.com. A little market research will help you come up with a good price. Just don't do things like asking a massively inflated price for a vehicle because you paid $x five years ago. All this shows that you have no idea what your vehicle is worth. Oh, and I'd always work out what the minimum I'd take is - leave yourself some haggle room but don't undersell the vehicle. Once you know where you advertise and for how much, pull together the basic facts for your vehicles and the points that would make it stand out. Basic facts about the car should include engine size, type of transmission, if it's AWD (where applicable), mileage. Color I can see on the pictures, but it's nice to include that, too. If you have service records, recently replaced a big ticket item (think transmission or similar) or had a very recent service, especially a big one where you had a timing belt and waterpump changed, mention it. Don't say the vehicle has a new engine if that was put in 100k miles ago, that's nice to mention but it's not new. If nobody's ever smoked in it, mention it. If it's got other outstanding features (super low mileage, summer only use etc) make sure to mention it that, too. Next, if it's got any faults that you know of - especially obvious ones - disclose them. People like me will most likely find the leaking shock absorber and the rust holes in the floor anyway, and it makes a much better impression if you do tell us about them beforehand. Trying to tell someone that your banana-shaped car that looks like the Blue Man Group used it for practise is actually pristine and accident-free isn't going to go down very well. Next, pull together the paperwork - make sure you've got the title (if there is a lien on the title, check with the lienholder before advertising the car so you know their procedure for releasing the title), any maintenance records you have, manuals, receipts etc. If the vehicle has a salvage title, try to find out why and mention it in the ad. I've just had a comedian phone me while I was driving to see his vehicle and leave a message that he didn't have a title and didn't seem to be willing to bother to get one, either. Obviously that put me in the right frame of mind, given that it was a 200 mile round trip. So don't do it - if you can't get a title, the schmuck you sold it to will have even less of a chance of getting one. And given that you are in California, a lot of people (including myself) react really badly to three years' worth of back registration, missing smog, expired registrations on something I'd expect to test drive etc. Essentially anything that would stop a potential cash buyer to drive it away on the spot. Next, clean the car - you know, the five years' of accumulated McD wrappers and inch thick layer of dirt (I'm only partially kidding, I've seem some pretty horrible stuff recently). Spend the two hours it takes to clean it or pay to have it valeted or detailed. Clean, shiny cars sell a lot better than a rolling recycling container. Oh, and last - make the effort take some decent photos. The more the merrier, shot in daylight (no photographing a black car after sunset) and if there is any damage, an additional photo or two showing the damage would be nice. Stick the on photobucket or similar and put the links in your craigslist ad so you don't restrict yourself to the microscopic photos that you normally get on there. As to payment, I'd either take cash, meet the buyer at his bank where he draws out a cashiers check in front of your eyes, or, well, cash. No Kauri shells, deeds on bridges in Brooklyn or anything else. Be prepared to take a deposit - a lot of buyers aren't willing to wander around with ten large ones in the back pocket to go look at a car - and spell out exactly how long the deposit is good for. I also tend to make them non-refundable (buyer doesn't pick up the car within the negotiated timeframe, you keep the deposit as 'damages' for not being able to sell it to another cash buyer). Check your DMV's website as to what exactly you need to do once you sold the car. Here in Nevada it's the buyer's problem on how to move it as you keep the plates, but I know in California the regular plates (not personal ones IIRC) stay with the vehicle and I think you need to inform the DMV that you sold the vehicle. I'd also keep a record of who I sold a vehicle to (name, address from his drivers license, license number etc) just in case they run a few red lights and accumulate a few grands' worth of parking tickets." }, { "docid": "12590", "title": "", "text": "\"First thing I'd say is don't start with investing. The foundation of solid finances is cash flow. Making more than you spend, reliably; knowing where your money goes; having a system that works for you to make sure you make more than you spend. Until you have that, your focus may as well be on getting there, because you can't fix much else about your finances until you fix this. A number you want to know is your percentage of income saved, and a good goal for that is about 15%, with 10-12% going to retirement savings and the rest to shorter-term goals and emergency fund and so forth. (Of course the right percentage here depends on your goals and situation, but for most people this is a kind of minimum savings rate to be in good shape.) Focus on your savings rate. This is your profitability, if you view yourself as a business. If it's crappy or negative, your finances will be a mess. Two ways to improve it are to spend less or to improve your earnings power. Doing both is even better. The book Your Money or Your Life by Dominguez and Robin is good for showing how to obsessively focus on cash flow, even though you may not share their zeal for early retirement. A simpler exercise than what they recommend: take 3 months of your checking and credit card statements, go through each expenditure and put them in a spreadsheet column, SUM() that column. Then add up 3 months of after-tax paychecks. Divide both numbers by three and compare. (The 3 months is to average out your spending, which probably varies a lot by month.) After positive cash flow and savings rate, the next thing I'd go through is insurance. Risk management for what you have. This can include checking you have all the important insurance coverages (homeowner's/renter's, auto, potentially umbrella, term life, disability, and of course health insurance, are some highlights); and also adjusting all your policies to be most cost-effective, which usually means raising the deductible if you have a good emergency fund. Often you can raise the deductible on policies you have, and use the savings to add more catastrophe coverage (such as term life if you didn't have it, or boosting the liability protection on your homeowner's, or whatever). Remember, cover catastrophes as cheaply and comprehensively as possible, but don't worry about reimbursement for non-catastrophic expenses. I like this book, Smart and Simple Financial Strategies for Busy People by Jane Bryant Quinn, because it covers all the main personal finance topics, not just investing; and because it is smart and simple. All the main stuff to think about is in the one book and the advice is solid and uncomplicated. Investing can truly be dead easy; most people would be fine with this advice: Honestly, I do micro-optimize and undermine my investing, and I'm guessing most people on this forum do. But it's not something I could defend objectively as a good use of time. It probably is necessary to do some reading to feel financially literate and confident in an investment plan, but the reading isn't really because a good plan is complicated, it's more to understand all the complicated things that you don't need to do, since that's how you'll know not to do them. ;-) Especially when salespeople and publications and TV are telling you over and over and over that you need to know a bunch of crap and do a bunch of things. People who have a profitable \"\"business of me\"\" are the ones who end up with a lot of money. Not people who spend a lot of time screwing with investments. (People who get rich investing invest professionally - as their \"\"business of me\"\" - they don't goof around with their 401k after work.) Financial security is all about your savings rate, i.e. your personal profitability. No shortcuts, other than lotteries and rich uncles.\"" }, { "docid": "278638", "title": "", "text": "I believe you're looking for some sort of formula that will determine how changes in savings, investing, and spending will affect economic growth. If such a formula existed (and worked) then central planning would work since a couple of people could pull some levers to encourage more savings, or more investing, or more spending - depending on what was needed at that particular time. Unfortunately, no magic formula exists and so no person has enough knowledge to determine what the proper amount of savings, investing, or spending should be at a given time. I found this resource particular helpful in describing the interactions between savings, consumption, and investing." }, { "docid": "88942", "title": "", "text": "\"It makes no sense to spend money unnecessarily, just for the purpose of improving your credit score. You have to stop and ask yourself the question \"\"Why do I need a good credit score?\"\" Most of the time, the answer will be \"\"so I can get a lower interest rate on (ABC loan) in the future.\"\" However, if you spend hundreds or even thousands of dollars in the present, just so that you can save a few points on a loan, you're not going to come out ahead. The car question should be considered strictly in the context of transportation expenses: \"\"It cost me $X to get around last year using Lyft. If instead I owned a car, it would have cost me $Y for gas, insurance, depreciation, parking, etc.\"\" If you come out ahead and Y < X, then buy the car. Don't jump into an expensive vehicle (which is never a good investment) or get trapped into an expensive lease which will costs you many times more than the depreciation value of a decent used car, just so that you can save a few points on a mortgage. Your best option moving forward would be to pay off your student loans first, getting rid of that interest expense. Place the remainder in savings, then start to look at a budget. Setting aside a 20% down payment on a home is considered the minimum to many people, and if that is out of reach you might need to consider other neighborhoods (less than 400K!). If you're still concerned about your credit score, a good way to build that up (once you have a budget and spending under control) is to get a credit card with no annual fees. Start putting all of your expenses on the credit card (groceries, etc), and paying off the balance IN FULL every month. By spending only what you need to within a reasonable budget, and making payments on time and in full, your credit rating will begin to gradually improve. If you have a difficult time tracking your expenses or sticking to a budget, then there is potential for danger here, as credit cards are notorious for high interest and penalties. But by keeping it under control and putting the rest toward savings, you can begin to build wealth and put yourself in a much better financial position moving into the future.\"" }, { "docid": "75270", "title": "", "text": "Risk. Volatility. Liquidity. Etc. All exist on a spectrum, these are all comparative measures. To the general question, is a mutual fund a good alternative to a savings account? No, but that doesn't mean it is a bad idea for your to allocate some of your assets in to one right now. Mutual funds, even low volatility stock/bond blended mutual funds with low fees still experience some volatility which is infinitely more volatility than a savings account. The point of a savings account is knowing for certain that your money will be there. Certainty lets you plan. Very simplistically, you want to set yourself up with a checking account, a savings account, then investments. This is really about near term planning. You need to buy lunch today, you need to pay your electricity bill today etc, that's checking account activity. You want to sock away money for a vacation, you have an unexpected car repair, these are savings account activities. This is your foundation. How much of a foundation you need will scale with your income and spending. Beyond your basic financial foundation you invest. What you invest in will depend on your willingness to pay attention and learn, and your general risk tolerance. Sure, in this day and age, it is easy to get money back out of an investment account, but you don't want to get in the habit of taping investments for every little thing. Checking: No volatility, completely liquid, no risk Savings: No volatility, very liquid, no principal risk Investments: (Pick your poison) The point is you carefully arrange your near term foundation so you can push up the risk and volatility in your investment endeavors. Your savings account might be spread between a vanilla savings account and some CDs or a money market fund, but never stock (including ETF/Mutual Funds and blended Stock/Bond funds). Should you move your savings account to this mutual fund, no. Should you maybe look at your finances and allocate some of your assets to this mutual fund, sure. Just look at where you stand once a year and adjust your checking and savings to your existing spending. Savings accounts aren't sexy and the yields are awful at the moment but that doesn't mean you go chasing yield. The idea is you want to insulate your investing from your day to day life so you can make unemotional deliberate investment decisions." }, { "docid": "498640", "title": "", "text": "\"You're right to seek passive income and since you're already looking for it, you probably already know some of the reasons to why it is important. Do you live in the United States? If so I'd strongly recommend purchasing your primary residence and then maybe investment properties if you like owning your own home. The US tax and banking structure is set up to favor this move in more ways than I can count. So, SAVE, SAVE, SAVE then beg, borrow and steal to get the down payment, rent rooms to friends or random people to afford the payments, buy a fixer upper in an up and coming neighborhood. The US is rife with these in all price ranges. If you're working 56 hrs a week, you've got the work ethic. So if you can't afford it it's probably because you're spending all your money on other stuff. If you want to do this, it will take some effort, smarts, and savings. You will have to trim back the mochas, vacations, dinners out, etc, etc etc. Let your friends do that stuff and rent from you. Your life will get continually easier. If you have already trimmed back all the discretionary spending and still can't make it then you need to earn more money. Doing either and both of these things will absolutely change your whole economic life and future. So in summary I'd offer these Ranked Priorities: 1) Learn to Save (unless you always want to have to work for someone else) 2) Increase your income capability (since your most valuable asset is YOU) 3) Buy and hold real estate (because the game is rigged to favor passive income) I'm 38, never earned a six figure salary, made some good purchases when I was 25-30 and work is \"\"optional\"\" for me now.\"" }, { "docid": "237189", "title": "", "text": "\"The advice to \"\"Only invest what you can afford to lose\"\" is good advice. Most people should have several pots of money: Checking to pay your bills; short term savings; emergency fund; college fund; retirement. When you think about investing that is the funds that have along lead time: college and retirement. It is never the money you need to pay your bills. Now when somebody is young, the money they have decided to invest can be in riskier investments. You have time to recover. Over time the transition is made to less risky investments because the recovery time is now limited. For example putting all your college savings for your recent high school graduate into the stock market could have devastating consequences. Your hear this advice \"\"Only invest what you can afford to lose\"\" because too many people ask about hove to maximize the return on the down payment for their house: Example A, Example B. They want to use vehicles designed for long term investing, for short term purposes. Imagine a 10% correction while you are waiting for closing.\"" }, { "docid": "61936", "title": "", "text": "Sure! Started working since I was 12, used that money to buy a car, and was working full time starting at 15 years old. By 17 had two full time jobs and banked all that money, besides buying a car. At 18 fulfilled my dream and was hired as a police officer. Did the academy for 6 months, saving all of that money to buy a trailer to live in for cheap. Max out pay for my department was 5 years, so by 23 years old I was making 68,000 a year. With overtime and details included( I basically worked anytime I could, 8 hour shift with either an 8 hour detail or double shift) usually kept one day off, working my other day off. My take home for the year after taxes was somewhere around 90k give or take, with my living expenses barely passing 25k a year. Banked all that money for years. When I hit 25ish I got together with my now wife, also an officer making the same amount. She also received about 300k from a settlement. So with both of our salaries plus money invested since I was about 14, annual take home was about 200k. Saved for 2 more years and at 28, used the 300k to buy a house and pay off any vehicles and credit card debt. Paid cash for the house so no mortgage, no car payments, just utilities and taxes for the year. With the budget set we were able to retire living just like we were. There is a lot more to it but that's the quick summary!" } ]

[ { "docid": "545712", "title": "", "text": "In the short-term, a savings account with an online bank can net you ~1% interest, while many banks/credit unions with local branches are 0.05%. Most of the online savings accounts allow 6 withdrawals per month (they'll let you do more, but charge a fee), if you pair it with a checking account, you can transfer your expected monthly need in one or two planned transfers to your checking account. Any other options that may result in a higher yield will either tie up your money for a set length of time, or expose you to risk of losing money. I wouldn't recommend gambling on short-term stock gains if you need the money during the off-season." } ]

[ { "docid": "247371", "title": "", "text": "\"I'm sorry to hear you've made a mistake. Having read the contract of sale we signed, I do not see any remedy to your current situation. However, I'm interested in making sure I do not take advantage of you. As such, I'll return the vehicle, you can return my money plus the bank fees I paid for the cashiers check, tax, title, and registration, and I will look at buying a vehicle from another dealership. This seems to be the most fair resolution. If I were to pay for your mistake at a price I did not agree to, it would not be fair to me. If you were to allow this vehicle to go to me at the price we agreed to, it wouldn't be fair to you. If I were to return the car and begin negotiations again, or find a different car in your lot, it would be difficult for us to know that you were not going to make a similar mistake again. At this point I consider the sale final, but if you'd prefer to have the vehicle back as-is, returning to us the money we gave you as well as the additional costs incurred by the sale, then we will do so in order to set things right. Chances are good you will see them back down. Perhaps they will just cut the additional payment in half, and say, \"\"Well, it's our mistake, so we will eat half the cost,\"\" or similar, but this is merely another way to get you to pay more money. Stand firm. \"\"I appreciate the thought, but I cannot accept that offer. When will you have payment ready so we can return the car?\"\" If you are firm that the only two solutions is to keep the car, or return it for a full refund plus associated costs, I'd guess they'd rather you keep the car - trust me, they still made a profit - but if they decide to have it returned, do so and make sure they pay you in full plus other costs. Bring all your receipts, etc and don't hand over the keys until you have the check in hand. Then go, gladly, to another dealership that doesn't abuse its customers so badly. If you do end up keeping the car, don't plan on going back to that dealership. Use another dealership for warranty work, and find a good mechanic for non-warranty work. Note that this solution isn't legally required in most jurisdictions. Read your contract and all documentation they provided at the time of sale to be sure, but it's unlikely that you are legally required to make another payment for a vehicle after the sale is finalized. Even if they haven't cashed the check, the sale has already been finalized. What this solution does, though, is put you back in the driver's seat in negotiating. Right now they are treating it as though you owe them something, and thus you might feel an obligation toward them. Re-asserting your relationship with them as a customer rather than a debtor is very important regardless of how you proceed. You aren't legally culpable, and so making sure they understand you aren't will ultimately help you. Further, dealerships operate on negotiation. The primary power the customer has in the dealership is the power to walk away from a deal. They've set the situation up as though you no longer have the power to walk away. They didn't threaten with re-possession because they can't - the sale is final. They presented as a one-path situation - you pay. Period. You do have many options, though, and they are very familiar with the \"\"walk away\"\" option. Present that as your chosen option - either they stick with the original deal, or you walk away - and they will have to look at getting another car off the lot (which is often more important than making a profit for a dealership) or selling a slightly used car. If they've correctly pushed the title transfer through (or you, if that's your task in your state) then your brief ownership will show up on carfax and similar reports, and instantly reduces the car's worth. Having the title transfer immediately back to the dealership doesn't look good to future buyers. So the dealership doesn't want the car back. They are just trying to extract more money, and probably illegally, depending on the laws in your jurisdiction. Reassert your position as customer, and decide now that you'll be fine if you have to return it and walk away. Then when you communicate that to them, chances are good they'll simply cave and let the sale stand as-is.\"" }, { "docid": "327240", "title": "", "text": "If you save money, invest in an education, start a business, refurbish your house, invest in technology by buying shares in a growing company, build something that can give you value long term, save money for your kids to inherit, postpone your spending, etc. it all accumulates and gives strong long term returns. These are the decisions we should encourage everyone to make, as it is these decisions that good countries are made from. You can rob the rich once, and then the richest and most productive people stop working and quickly all turns to shit, like every socialist experiment ever. I work hard and don't spend anything. At this rate I can likely retire in 10 years at 40 years old. Would be pretty pissed by then to have to share it with everyone who didn't work hard and didn't save and invest anything." }, { "docid": "273618", "title": "", "text": "\"This Stack Exchange site is a nice place to find answers and ask questions. Good start! Moving away from the recursive answer... Simply distilling personal finance down to \"\"I have money, I'll need money in the future, what do I do\"\", an easily digestible book with how-to, multi-step guidelines is \"\"I Will Teach You To Be Rich\"\". The author talks about setting up the accounts you should have, making sure all your bills are paid automatically, saving on the big things and tips to increase your take home pay. That link goes to a compilation page on the blog with many of the most fundamental articles. However, \"\"The World’s Easiest Guide To Understanding Retirement Accounts\"\" is a particularly key article. While all the information is on the free blog, the book is well organized and concise. The Simple Dollar is a nice blog with frugal living tips, lifestyle assessments, financial thoughts and reader questions. The author also reviews about a book a week. Investing - hoping to get better returns than savings can provide while minimizing risk. This thread is an excellent list of books to learn about investing. I highly recommend \"\"The Bogleheads' Guide to Investing\"\" and \"\"The Only Investment Guide You'll Ever Need\"\". The world of investment vehicles is huge but it doesn't have to be complicated once you ignore all the fads and risky stuff. Index mutual funds are the place to start (and maybe end). Asset allocation and diversification are themes to guide you. The books on that list will teach you.\"" }, { "docid": "444568", "title": "", "text": "There are some great answers on this site similar to what you asked, with either a non-jurisdictional or a US-centric focus. I would read those answers as well to give yourself more points of view on early investing. There are a few differences between Canada and the US from an investing perspective that you should also then consider, namely tax rules, healthcare, and education. I'll get Healthcare and Education out of the way quickly. Just note the difference in perspective in Canada of having government healthcare; putting money into health-savings plans or focusing on insurance as a workplace benefit is not a key motivating factor, but more a 'nice-to-have'. For education, it is more common in Canada for a student to either pay for school while working summer / part-time jobs, or at least taking on manageable levels of debt [because it is typically not quite as expensive as private colleges in the US]. There is still somewhat of a culture of saving for your child's education here, but it is not as much of a necessity as it may be in the US. From an investing perspective, I will quickly note some common [though not universal] general advice, before getting Canadian specific. I have blatantly stolen the meat of this section from Ben Miller's great answer here: Oversimplify it for me: the correct order of investing Once you have a solid financial footing, some peculiarities of Canadian investing are below. For all the tax-specific plans I'm about to mention, note that the banks do a very good job here of tricking you into believing they are complex, and that you need your hand to be held. I have gotten some criminally bad tax advice from banking reps, so at the risk of sounding prejudiced, I recommend that you learn everything you can beforehand, and only go into your bank when you already know the right answer. The 'account types' themselves just involve a few pages of paperwork to open, and the banks will often do that for free. They make up their fees in offering investment types that earn them management fees once the accounts are created. Be sure to separate the investments (stocks vs bonds etc.) vs the investment vehicles. Canada has 'Tax Free Savings Accounts', where you can contribute a certain amount of money every year, and invest in just about anything you want, from bonds to stocks to mutual funds. Any Income you earn in this account is completely tax free. You can withdraw these investments any time you want, but you can't re-contribute until January 1st of next year. ie: you invest $5k today in stocks held in a TFSA, and they grow to $6k. You withdraw $6k in July. No tax is involved. On January 1st next year, you can re-contribute a new $6K, and also any additional amounts added to your total limit annually. TFSA's are good for short-term liquid investments. If you don't know for sure when you'll need the money, putting it in a TFSA saves you some tax, but doesn't commit you to any specific plan of action. Registered Retirement Savings Plans allow you to contribute money based on your employment income accrued over your lifetime in Canada. The contributions are deducted from your taxable income in the year you make them. When you withdraw money from your RRSP, the amount you withdraw gets added as additional income in that year. ie: you invest $5k today in stocks held in an RRSP, and get a $5k deduction from your taxable income this year. The investments grow to $6k. You withdraw $6k next year. Your taxable income increases by $6k [note that if the investments were held 'normally' {outside of an RRSP}, you would have a taxable gain of only 50% of the total gain; but withdrawing the amount from your RRSP makes the gain 100% taxable]. On January 1st next year, you CANNOT recontribute this amount. Once withdrawn, it cannot be recontributed [except for below items]. RRSP's are good for long-term investing for retirement. There are a few factors at play here: (1) you get an immediate tax deduction, thus increasing the original size of investment by deferring tax to the withdrawal date; (2) your investments compound tax-free [you only pay tax at the end when you withdraw, not annually on earnings]; and (3) many people expect that they will have a lower tax-rate when they retire, than they do today. Some warnings about RRSP's: (1) They are less liquid than TFSA's; you can't put money in, take it out, and put it in again. In general, when you take it out, it's out, and therefore useless unless you leave it in for a long time; (2) Income gets re-characterized to be fully taxable [no dividend tax credits, no reduced capital gains tax rate]; and (3) There is no guarantee that your tax rate on retirement will be less than today. If you contribute only when your tax rate is in the top bracket, then this is a good bet, but even still, in 30 years, tax rates might rise by 20% [who knows?], meaning you could end up paying more tax on the back-end, than you saved in the short term. Home Buyer Plan RRSP withdrawals My single favourite piece of advice for young Canadians is this: if you contribute to an RRSP at least 3 months before you make a down payment on your first house, you can withdraw up to $25k from your RRSP without paying tax! to use for the down payment. Then over the next ~10 years, you need to recontribute money back to your RRSP, and you will ultimately be taxed when you finally take the money out at retirement. This means that contributing up to 25k to an RRSP can multiply your savings available for a down payment, by the amount of your tax rate. So if you make ~60k, you'll save ~35% on your 25k deposited, turning your down payment into $33,750. Getting immediate access to the tax savings while also having access to the cash for a downpayment, makes the Home Buyer Plan a solid way to make the most out of your RRSP, as long as one of your near-term goals is to own your own home. Registered Pension Plans are even less liquid than RRSPs. Tax-wise, they basically work the same: you get a deduction in the year you contribute, and are taxed when you withdraw. The big difference is that there are rules on when you are allowed to withdraw: only in retirement [barring specific circumstances]. Typically your employer's matching program (if you have one) will be inside of an RPP. Note that RPP's and RRSP's reduce your taxes on your employment paycheques immediately, if you contribute through a work program. That means you get the tax savings during the year, instead of all at once a year later on April 30th. *Note that I have attempted at all times to keep my advice current with applicable tax legislation, but I do not guarantee accuracy. Research these things yourself because I may have missed something relevant to your situation, I may be just plain wrong, and tax law may have changed since I wrote this to when you read it." }, { "docid": "16606", "title": "", "text": "\"Given the state of the economy, and the potential of a rough near future for us recent grads (i.e. on/off work), I would recommend holding off on large purchases while your life is in flux. This includes both a NEW car and purchasing a house. My short answer is: you need a reliable vehicle, so purchase a used car, from a major dealer (yes this will add a fairly high premium, but easier financing), that is 4-5 years old, or more. Barring the major dealer purchase, be sure to get a mechanic to check out a vehicle, many will offer this service for a reasonable payment. As people point out, cars these days will run for another 100k miles. You will NOT have to pay anywhere near $27,000 for this vehicle. You may need to leverage your 10k for a loan if you choose to finance, but it should not be a problem, especially as you seem to imply an established credit history. In addition to this, start saving your money for the house you would like to eventually get. We have no idea where you live, but, picking rough numbers, assuming a 2 year buy period, 20% down, and a $250,000 home, the down payment alone will require you to save ~$2,000/month starting now. Barring either of these options, max out your money to tax sheltered accounts (your Roth IRA, work 401k, or a regular IRA) asap. Obviously, do not deplete your emergency fund, if anything, increase it. 10k can be burned through in a heartbeat. Long Answer: I purchased a brand new car, right out of school, at a reasonable interest rate. Like you, I can afford this vehicle, however, if someone were to come to me today (3.5 years later) and offer me the opportunity to take it back and purchase a 4-5 year used vehicle, at a 4-5 year used car price, albeit at a much higher interest rate (since I financed), it would be about a 0.02 second decision. I like my car, but, I'd like the differential cash savings between it and a reliable used car more. $27,000 is also fairly expensive for a new vehicle, there are many, very nice vehicles, for 21-23k. I still would not consider these priced appropriate to spend your money on them, but they exist. However, you do very much need a reliable vehicle, and I think you should get one. On the home front, your $400 all inclusive rent is insanely cheap. Many people spend more than that on property tax and PMI each year, so anyone who throws the \"\"You're throwing money away!\"\" line at you is blowing smoke to justify their own home purchase. Take the money you would have spent on a mortgage, and squirrel it away. Do your own due diligence and research the home market in your area and decide for yourself if you think home prices have bottomed and will stay there, have further to go, or are going to begin to rise. That is a decision only you can make for yourself. I'd add a section about getting expenses under control, but you said you could save 50% of your takehome pay. This is an order of magnitude above the average. Good job. Try doing 50% for 4 months, then calculate your actual amount. Then try to beat it.\"" }, { "docid": "278638", "title": "", "text": "I believe you're looking for some sort of formula that will determine how changes in savings, investing, and spending will affect economic growth. If such a formula existed (and worked) then central planning would work since a couple of people could pull some levers to encourage more savings, or more investing, or more spending - depending on what was needed at that particular time. Unfortunately, no magic formula exists and so no person has enough knowledge to determine what the proper amount of savings, investing, or spending should be at a given time. I found this resource particular helpful in describing the interactions between savings, consumption, and investing." }, { "docid": "576736", "title": "", "text": "I agree that best is subjective and will not give investment advice. However, the tax deductible part can be dealt with quite swiftly. If you need tax deductibility right now, at the expense of later, put it into an RSP account. If you don't need tax deductibility right now, put it into a TFSA. Assuming you have room in either of these vehicles, I would suggest using just an RSP or TFSA cash savings account for now at ING Direct. Three reasons: You get the immediate benefit of having put it somewhere, and in the case of the RSP, an immediate tax deductibility. You don't have to worry about rushing into a specific investment and can give yourself time to figure out your goals and portfolio composition. (Read about the Couch Potato portfolio for a starting point.) You can transfer your money from them for free and still keep it registered in whichever plan it is in. The last point is the most important for my suggestion. The ability to quickly park the cash in a registered account and to move it for free using the appropriate form at a later date. Most places have a sneaky transfer-out fee. ING may not be the only place that doesn't, but I haven't looked into many other places about this. You might find something else that works the same way. And please, don't ever use GIC and high return in the same sentence." }, { "docid": "595427", "title": "", "text": "\"It sounds like the kinds of planners you're talking to might be a poor fit, because they are essentially salespersons selling investments for a commission. Some thoughts on finding a financial planner The good kind of financial planner is going to be able to do a comprehensive plan - look at your whole life, goals, and non-investment issues such as insurance. You should expect to get a document with a Monte Carlo simulation showing your odds of success if you stick to the plan; for investments, you should expect to see a recommended asset allocation and an emphasis on low-cost no-commission (commission is \"\"load\"\") funds. See some of the other questions from past posts, for example What exactly can a financial advisor do for me, and is it worth the money? A good place to start for a planner might be http://napfa.org ; there's also a franchise of planners providing hourly advice called the Garrett Planning Network, I helped my mom hire someone from them and she was very happy, though I do think your results would depend mostly on the individual rather than the franchise. Anyway see http://www.garrettplanningnetwork.com/map.html , they do require planners to be fee-only and working on their CFP credential. You should really look for the Certified Financial Planner (CFP) credential. There are a lot of credentials out there, but many of them mean very little, and others might be hard to get but not mean the right thing. Some other meaningful ones include Chartered Financial Analyst (CFA) which would be a solid investment expert, though not necessarily someone knowledgeable in financial planning generally; and IRS Enrolled Agent, which means someone who knows a lot about taxes. A CPA (accountant) would also be pretty meaningful. A law degree (and estate law know-how) is very relevant to many planning situations, too. Some not-very-meaningful certifications include Certified Mutual Fund Specialist (which isn't bogus, but it's much easier to get than CFP or CFA); Registered Investment Adviser (RIA) which mostly means the person is supposed to understand securities fraud laws, but doesn't mean they know a lot about financial planning. There are some pretty bogus certifications out there, many have \"\"retirement\"\" or \"\"senior\"\" in the name. A good question for any planner is \"\"Are you a fiduciary?\"\" which means are they legally required to act in your interests and not their own. Most sales-oriented advisors are not fiduciaries; they wouldn't charge you a big sales commission if they were, and they are not \"\"on your side\"\" legally speaking. It's a good idea to check with your state regulators or the SEC to confirm that your advisor is registered and ask if they have had any complaints. (Small advisors usually register with the state and larger ones with the federal SEC). If they are registered, they may still be a salesperson who isn't acting in your interests, but at least they are following the law. You can also see if they've been in trouble in the past. When looking for a planner, one firm I found had a professional looking web site and didn't seem sketchy at all, but the state said they were not properly registered and not in compliance. Other ideas A good book is: http://www.amazon.com/Smart-Simple-Financial-Strategies-People/dp/0743269942 it's very approachable and you'd feel more confident talking to someone maybe with more background information. For companies to work with, stick to the ones that are very consumer-friendly and sell no-load funds. Vanguard is probably the one you'll hear about most. But T. Rowe Price, Fidelity, USAA are some other good names. Fidelity is a bit of a mixture, with some cheap consumer-friendly investments and other products that are less so. Avoid companies that are all about charging commission: pretty much anyone selling an annuity is probably bad news. Annuities have some valid uses but mostly they are a bad deal. Not knowing your specific situation in any detail, it's very likely that 60k is not nearly enough, and that making the right investment choices will make only a small difference. You could invest poorly and maybe end up with 50K when you retire, or invest well and maybe end up with 80-90k. But your goal is probably more like a million dollars, or more, and most of that will come from future savings. This is what a planner can help you figure out in detail. It's virtually certain that any planner who is for real, and not a ripoff salesperson, will talk a lot about how much you need to save and so forth, not just about choosing investments. Don't be afraid to pay for a planner. It's well worth it to pay someone a thousand dollars for a really thorough, fiduciary plan with your interests foremost. The \"\"free\"\" planners who get a commission are going to get a whole lot more than a thousand dollars out of you, even though you won't write a check directly. Be sure to convert those mutual fund expense ratios and sales commissions into actual dollar amounts! To summarize: find someone you're paying, not someone getting a commission; look for that CFP credential showing they passed a demanding exam; maybe read a quick and easy book like the one I mentioned just so you know what the advisor is talking about; and don't rush into anything! And btw, I think you ought to be fine with a solid plan. You and your husband have time remaining to work with. Good luck.\"" }, { "docid": "415973", "title": "", "text": "Obviously, the best thing financially would be to continue using your present car, unless it impacts you financially on a regular basis. For example, maintenance or breakdowns impacting your ability to work. An unreliable car also impacts your freedom, for example preventing you from taking road-trips you might want to take or taking up free time with maintenance. Give thought to what it is about your present car that you dislike, both to determine the value you gain from a new car and what's most important to you. Anytime you buy a car, you generally lose thousands of dollars simply driving it off the lot. This is the profit which goes to dealers, salespeople, etc... and not part of the actual value of the car. Cars also depreciate over time, with most of the depreciation happening in the first few years of operation. Many of the newer model cars have additional expenses. (For example, replacement $200 keys or electronic systems that can only be repaired at special facilities.) In addition, if you have insurance (other than the minimum third-party required by law), consider the rate increases and add up the long-term impact of that. Imagine you had invested that money instead at 8% interest over the lifetime of the car. If you don't have insurance, consider what you would do in the unfortunate situation where you were at fault in a collision. Could you afford to lose your investment? Even with safe responsible driving, there is always the potential for road/weather conditions or mechanical failures. If you determine there is sufficient value to be gained from changing vehicles, I would recommend that you buy a vehicle with history from someone privately, doing appropriate background checks and consulting friends or family who know about vehicles and can provide feedback. Do research into the models which interest you ahead of time, read online reviews. Every vehicle generally has known advantages and disadvantages which can take years to discover, so buying an older vehicle gives you the advantage of knowing what to expect. I would say there is probably a reasonable middle ground between using a 1991 vehicle you don't like (that's as old as you are) and getting a relatively new model. Look at what you value in the vehicle, consider all the costs, and find the balance that works best for you. Vehicles from 2000-2005 years are quite affordable and still 10-15 years newer than your car." }, { "docid": "472739", "title": "", "text": "\"He's paying the interest and you're paying the principal. If you're making minimum monthly payments, you'll still be doing the same thing 25-30 years from now. I think Parker's advice was very, very good, but I'd like to add to it a little of my own. Whatever dollar amount your son is sending to you as payment, encourage him to continue doing that. Only instead of paying you, have him put that money into a savings plan of some kind. You mentioned that he's struggling now, yet able to come up with approximately (my best guess) $200/mo. I guarantee you that if he puts that $200/mo back into his pocket, he'll still be struggling every month yet have nothing to show for it. My suggestion changes nothing in his daily life, yet gives him $2400 at the end of every year. I was in a somewhat similiar situation as your son, only to the tune of $13,000. About 20 years ago, I got a loan and bought a new truck in which to use to go back and forth to work every day. The first 5 months the payments to the bank went as planned. Then my wife announces that \"\"we're\"\" pregnant. So my parents figured it would be best to just pay off my loan to the bank, avoiding any further interest charges, and take that truck payment and put it away for a rainy day. At 33 y/o, with my first child on the way, I finally started saving some of my money. It was good advice on their part because the rainy days came! They never asked me to pay them back, however I did offer. I've been tucking away $300-400/mo in the bank every month since then because I just got into the habit. Good thing I did too. In the past 10 years I've had to bury both of my parents, one sister and two wives and I'll tell ya, one thing that was comforting was the fact that I had the money. The little truck I bought 20 years ago is now my son's. It has around 260,000 miles on it now. When he trades it in for a newer vehicle, I will probably loan him the money and have him make payments to me rather than the bank. I, too, am not one to pay interest if I can help it. If he defaults, he's my son. I just won't buy him another vehicle! Or maybe he'll get into the same habit of saving money the same way I did. Like JohnFx said, money loaned to family should be regarded as a gift, otherwise you'll end up losing your money AND your family member! Hope some of this helps you make your decision.\"" }, { "docid": "241136", "title": "", "text": "To answer some parts of the question which are answerable as-is: Yes, mortgage interest is deductible. So is depreciation. See this question and others. It would be a good idea to put some money away for tax season, just as you should save some money to cover unexpected property expenses. But as @JoeTaxpayer says, this is a good problem to have, assuming you own the property, it's low-maintenance, your tenant is good, and your rent is at market levels." }, { "docid": "371886", "title": "", "text": "The matching funds are free money, so it is a very good idea to take that money off the table. Look at it as free 100% return: you deposit $1000, your employer matches that $1000, you now have $2000 in your 401(k). (Obviously, I'm keeping things simple. Vesting schedules mean that the employer match isn't yours to keep immediately, but rather after some time; usually in chunks.) Beyond the employer match, you need to consider what is available for investment in a 401(k). Typically, your options are more limited then in an IRA. The cost of the 401(k) should be considered, as it isn't trivial for most. (The specifics will of course vary, but in large IRA accounts are cheaper.) So, it's about the opportunity costs. Up to the employer match, it doesn't matter as much that your investment choices are more limited in a 401(k), because you're getting 100% return just on the matching funds. Once that is exhausted, you have more opportunity for returns, due to having more options available to you, by going with an account that provides more choices. The overall principle here is that you have to look at the whole picture. This is similar to the notion that you should pay-down your high interest debt before investing, because from the perspective of investing the interest you're paying represent a loss, or negative return on investment, since money is going out of your accounts. Specific to your question, you have to consider the various types of investment vehicles available to you. It is not just about 401(k) and IRA accounts. You may also consider a straight brokerage account, a savings account, CDs, etc. The costs and returns that you can typically expect are your guides through the available choices." }, { "docid": "587192", "title": "", "text": "If you're under age 55 and in good health generally you cannot withdraw your funds from super and your super fund cannot provide you with any financial assistance eg lend you money. However, for a very small percentage of people with unrestricted non preserved superannuation components ( check your statement most people's superannuation is 'preserved'which means they cannot access it until they meet a 'condition of release')they may withdraw their super benefits upto the unrestricted non preserved amount. For healthy (& able) persons aged 55 and over they may access their super under the following conditions: I can understand your frustration of having your money compulsory tied up in superannuation especially given the poor investment returns of the past 5 years. However, superannuation may be more flexible than you realize, I am an adviser at Grant Thornton and I am constantly telling clients that superannuation is not an invest but it the most tax effective long term savings vehicle available to Australians for their investment savings eg max 15% tax on income and capital gains if held for a year are taxed at 10%. If you're not happy with your investment returns you may like to seek some advice or,set up your own super fund - a self managed super fund where you can invest a wide variety of assets; shares, managed funds,cash, term deposits, property( your super fund can even borrow to help acquire the property) I hope this helps" }, { "docid": "222153", "title": "", "text": "You need the services of a hard-nosed financial planner. A good one will defend your interests against the legions of creeps trying to separate you from your money. How can you tell whether such a person is working in your best interest? Here are some ways. You'll be able to tell pretty quickly whether the planner lets you get through the same story you told us. The ability to listen carefully without interrupting is a good way to tell whether the planner is going to honor your needs. You're looking for a human service professional, not an investment or business guru. There are planners who specialize in helping people navigate big changes in their financial situation. Some of the best of those planners are women. (Many of their customers are people whose spouses recently died. But they also serve people in your situation. Ask if they work with other people like you.) Of course, you need to take the planner's advice, especially about spending and saving levels." }, { "docid": "44187", "title": "", "text": "You can't max out your retirement savings. There are vehicles that aren't tax-advantaged that you can fund after you've exhausted the tax-advantaged ones. Consider how much you want to put into these vehicles. There are disadvantages as well as advantages. The rules on these can change at any time and can make it harder for you to get your money out. How's your liquid (cash) emergency fund? It sounds like you're in a position to amass a good one. Don't miss this opportunity. Save like crazy while you can. Kids make this harder. Paying down your mortgage will save you interest, of course, but make sure you're not cash-poor as a result. If something happens to your income(s), the bank will still foreclose on you even if you only owe $15,000. A cash cushion buys you time." }, { "docid": "195515", "title": "", "text": "Comparing retirement savings to ordinary investment is not an apples-to-apples comparison - retirement savings are savings for retirement - if you want to invest in things now and live off of (or reinvest) those earnings, then retirement accounts are not the right vehicle. That said, here are some benefits of the main types of retirement accounts: Benefits of a 401(k): Benefits of a tratitional IRA: Benefits of a ROTH 401(k): Benefits of a ROTH IRA: (the benefits above are not exhaustive, there are other benefits such as using a ROTH IRA for higher ed. expenses, etc. but those are the highlights) If you have a plan for how you hope to use the money now rather than later does it make sense to hold onto it? If your plan is meant to provide income at retirement, and earns returns higher than the returns plus matches and tax benefits you get from retirement accounts, then yes, it may make more sense, but those benefits are generally very hard to beat. Plus, having the money locked away in an account that is painful to tap can be a good thing - you're less tempted to use that money for foolish decisions (which everyone makes at some point)." }, { "docid": "498378", "title": "", "text": "\"This depends strongly on what you mean by \"\"stock trading\"\". It isn't a single game, but a huge number of games grouped under a single name. You can invest in individual stocks. If you're willing to make the (large) effort needed to research the companies and their current position and potentialities, this can yield large returns at high risk, or moderate returns at moderate risk. You need to diversify across multiple stocks, and multiple kinds of stocks (and probably bonds and other investment vehicles as well) to manage that risk. Or you can invest in managed mutual funds, where someone picks and balances the stocks for you. They charge a fee for that service, which has to be subtracted from their stated returns. You need to decide how much you trust them. You will usually need to diversify across multiple funds to get the balance of risk you're looking for, with a few exceptions like Target Date funds. Or you can invest in index funds, which automate the stock-picking process to take a wide view of the market and count on the fact that, over time, the market as a whole moves upward. These may not produce the same returns on paper, but their fees are MUCH lower -- enough so that the actual returns to the investor can be as good as, or better than, managed funds. The same point about diversification remains true, with the same exceptions. Or you can invest in a mixture of these, plus bonds and other investment vehicles, to suit your own level of confidence in your abilities, confidence in the market as a whole, risk tolerance, and so on. Having said all that, there's also a huge difference between \"\"trading\"\" and \"\"investing\"\", at least as I use the terms. Stock trading on a short-term basis is much closer to pure gambling -- unless you do the work to deeply research the stocks in question so you know their value better than other people do, and you're playing against pros. You know the rule about poker: If you look around the table and don't see the sucker, he's sitting in your seat... well, that's true to some degree in short-term trading too. This isn't quite a zero-sum game, but it takes more work to play well than I consider worth the effort. Investing for the long term -- defining a balanced mixture of investments and maintaining that mixture for years, with purchases and sales chosen to keep things balanced -- is a positive sum game, since the market does drift upward over time at a long-term average of about 8%/year. If you're sufficiently diversified (which is one reason I like index funds), you're basically riding that rise. This puts you in the position of betting with the pros rather than against them, which is a lower-risk position. Of course the potential returns are reduced too, but I've found that \"\"market rate of return\"\" has been entirely adequate, though not exciting. Of course there's risk here too, if the market dips for some reason, such as the \"\"great recession\"\" we just went through -- but if you're planning for the long term you can usually ride out such dips, and perhaps even see them as opportunities to buy at a discount. Others can tell you more about the details of each of these, and may disagree with my characterizations ... but that's the approach I've taken, based on advice I trust. I could probably increase my returns if I was willing to invest more time and effort in doing so, but I don't especially like playing games for money, and I'm getting quite enough for my purposes and spending near-zero effort on it, which is exactly what I want.\"" }, { "docid": "498640", "title": "", "text": "\"You're right to seek passive income and since you're already looking for it, you probably already know some of the reasons to why it is important. Do you live in the United States? If so I'd strongly recommend purchasing your primary residence and then maybe investment properties if you like owning your own home. The US tax and banking structure is set up to favor this move in more ways than I can count. So, SAVE, SAVE, SAVE then beg, borrow and steal to get the down payment, rent rooms to friends or random people to afford the payments, buy a fixer upper in an up and coming neighborhood. The US is rife with these in all price ranges. If you're working 56 hrs a week, you've got the work ethic. So if you can't afford it it's probably because you're spending all your money on other stuff. If you want to do this, it will take some effort, smarts, and savings. You will have to trim back the mochas, vacations, dinners out, etc, etc etc. Let your friends do that stuff and rent from you. Your life will get continually easier. If you have already trimmed back all the discretionary spending and still can't make it then you need to earn more money. Doing either and both of these things will absolutely change your whole economic life and future. So in summary I'd offer these Ranked Priorities: 1) Learn to Save (unless you always want to have to work for someone else) 2) Increase your income capability (since your most valuable asset is YOU) 3) Buy and hold real estate (because the game is rigged to favor passive income) I'm 38, never earned a six figure salary, made some good purchases when I was 25-30 and work is \"\"optional\"\" for me now.\"" }, { "docid": "494283", "title": "", "text": "\"Congrats to your GF! \"\"How much\"\" depends a lot on how stable her income tends to be. If she has stable salary @ $20K plus $5K-$15K in contract work, then having a larger EF is important. If she has a consistent track record of pulling in $35K each year with contract work, then she may still need a somewhat higher emergency fund to tide her over between gigs. The rule of thumb is at least 3 months' expenses before you start investing for better returns. If she is reliant on contract work, then holding up to 6 months' expenses could be wise just in case she hits a slow patch with work. After that emergency fund is covered, she can look at investment opportunities with varying levels of risk & return: I would also recommend putting it down in writing \"\"why\"\" she's investing/saving. Is she saving up for an awesome vacation? Maybe that's why she really is so far above a normal EF. Does she want a new car? Maybe there's not really so much to spare. Bottom line: Assuming her monthly expenses are around $2K per month, she might have $4,000 to $5,000 that she could look to start investing \"\"safely\"\".\"" } ]

[ { "docid": "512984", "title": "", "text": "For margin, it is correct that these rules do not apply. The real problem becomes day trading funding when one is just starting out, broker specific minimums. Options settle in T+1. One thing to note: if Canada is anything like the US, US options may not be available within Canadian borders. Foreign derivatives are usually not traded in the US because of registration costs. However, there may be an exception for US-Canadian trade because one can trade Canadian equities directly within US borders." } ]

[ { "docid": "78584", "title": "", "text": "The income and recurring costs will be shown at the end of each year, however the initial cost is recorded at the time they are incurred meaning at t=0 (Jan 2014) The first net profits/loss of 658500 is recorded at the end of Dec 2014 (t=1) And the remaining four ones at the end of 2015 (t=2) 2016 (t=3) 2017 (t=4) 2018 (t=5) -8000000 658500 658500 658500 658500 6658500 t=0) -8000000 t=1) 658500 t=2) 658500 t=3) 658500 t=4) 658500 t=5) 6658500" }, { "docid": "115029", "title": "", "text": "Wearing different kind of shirts, especially T shirts has been in vogue from ages. These T shirts are made of super fine cotton and observe the heat and sweat and make the person feel comfortable in them. The T shirts have fan following across the globe and every day, we can see new kind of T shirts with different cuts, designs, slogans, styles as well as in shapes." }, { "docid": "291695", "title": "", "text": "Transfer of Millions of USD in and out is not possible for Individuals. There are limits on how much money an individual Indian Ordinary Citizen can send or receive. If an corporate wants to send money, depending on the services offered, they would have to initiate a SWIFT transaction. It typically takes 2-3 days for settlement of International wire." }, { "docid": "350748", "title": "", "text": "\"This is because volatility is cumulative and with less time there is less cumulative volatility. The time value and option value are tied to the value of the underlying. The value of the underlying (stock) is quite influenced by volatility, the possible price movement in a given span of time. Thirty days of volatility has a much broader spread of values than two days, since each day benefits from the possible price change of the prior days. So if a stock could move up to +/- 1% in a day, then compounded after 5 days it could be +5%, +0%, or -5%. In other words, this is compounded volatility. Less time means far less volatility, which is geometric and not linear. Less volatility lowers the value of the underlying. See Black-Scholes for more technical discussion of this concept. A shorter timeframe until option expiration means there are fewer days of compounded volatility. So the expected change in the underlying will decrease geometrically. The odds are good that the price at T-5 days will be close to the price at T-0, much more so than the prices at T-30 or T-90. Additionally, the time value of an American option is the implicit put value (or implicit call). While an \"\"American\"\" option lets you exercise prior to expiry (unlike a \"\"European\"\" option, exercised only at expiry), there's an implicit put option in a call (or an implicit call in a put option). If you have an American call option of 60 days and it goes into the money at 30 days, you could exercise early. By contract, that stock is yours if you pay for it (or, in a put, you can sell whenever you decide). In some cases, this may make sense (if you want an immediate payoff or you expect this is the best price situation), but you may prefer to watch the price. If the price moves further, your gain when you use the call may be even better. If the price goes back out of the money, then you benefited from an implicit put. It's as though you exercised the option when it went in the money, then sold the stock and got back your cash when the stock went out of the money, even though no actual transaction took place and this is all just implicit. So the time value of an American option includes the implicit option to not use it early. The value of the implicit option also decreases in a nonlinear fashion, since the value of the implicit option is subject to the same valuation principles. But the larger principle for both is the compounded volatility, which drops geometrically.\"" }, { "docid": "31565", "title": "", "text": "The days are long gone when offered mortgages were simply based on salary multiples. These days it's all about affordability, taking into account all incomes and all outgoings. Different lenders will have different rules about what they do and don't accept as incomes; these rules may even vary per-product within the same lender's product list. So for example a mortgage specifically offered as buy-to-let might accept rental income (with a suitable void-period multiplier) into consideration, but an owner-occupier mortgage product might not. Similarly, business rules will vary about acceptance of regular overtime, bonuses, and so on. Guessing at specific answers: #1 maybe, if it's a buy-to-let product, Note that these generally carry a higher interest rate than owner-occupier mortgages; expect about 2% more #2 in my opinion it's extremely unlikely that any lender would consider rental income from your cohabiting spouse #3 probably yes, if it's a buy-to-let product" }, { "docid": "315205", "title": "", "text": "\"Depends on your account. If you have a margin account, then you can \"\"withdraw\"\" the margin, and it will get paid off/settled on T+3. However if it's a cash account then you will most likely need to wait. Call your broker and ask, each broker has different rules.\"" }, { "docid": "439474", "title": "", "text": "\"You say your primary goal is to clean up your credit report, and you're willing to spend some cash to do it. OK. But beware: the law in this area is a funhouse mirror, everything works upside down and backwards. To start, let's be clear: Credit reports are not extortion to force you into paying. They are a historical record of your creditworthiness, and almost impossible to fix without altering history. Paying on this debt will affirm the old data was correct, and glue it to your report. Here's how credit reporting works for R-9 (sent to collections) amounts. The data is on your credit report for 7 years. The danger is in this clock being restarted. What will not restart the clock? Ignoring the debt, talking casusally to collectors, and the debt being sold from one collector to another. What will restart the clock? Acknowledging the debt formally, court judgment, paying the debt, or paying on the debt (obviously, paying acknowledges the debt.) Crazy! You could have a debt that's over 7 years old, pay it because you're a decent person, and BOOM! Clock restarts and 7 more years of bad luck. Even worse-- if they write-off or forgive any part of the debt, that's income and you'll need to pay income tax on it. Ugh! Like I say, the only way to remove a bad mark is to alter history. Simple fact: The collector doesn't care about your bad credit mark; he wants money. And it costs a lot of money, time and/or stress for both of you to demand they research it, negotiate, play phone-tag, and ultimately go to court. So this works very well (this is just the guts, you have to add all the who, what, where, signature block, formalities etc.): 1 Company and Customer absolutely disagree as to whether Customer owes Company this debt: (explicitly named debt with numbers and amount) 2 But Company and Customer both eagerly agree that the expense, time, and stress of research, negotiation, and litigation is burdensome for both of us. We both strongly desire a quick, final and no-fault solution. Therefore: 3 Parties agree Customer shall pay Company (acceptable fraction here). Payment within 30 days. To be acknowledged in writing by Company. 4 This shall be absolute and final resolution. 5 NO-FAULT. Parties agree this settlement resolves the matter in good faith. Parties agree this settlement is done for practical reasons, this bill has not been established as a valid debt, and any difference between billed and settled amount is not a canceled nor forgiven debt. 6 Neither party nor its assigns will make any adverse statements to third parties relating to this bill or agreement. Parties agree they have a continuous duty to remove adverse statements, and agree to do so within seven days of request. 7 Parties specifically agree no adverse mark nor any mark of any kind shall be placed on Customer's credit report; and in the event such a mark appears, Parties will disavow it continuously. Parties agree that a good credit report has a monetary value and specific impacts on a customer's life. 8 Jurisdiction of law shall be where the effects are felt, and that shall be (place of service) regarding the amounts of the bill proper. Severable, inseparable, counterparts, witness, signature lines blah blah. A collector is gonna sign this because it's free money and it's not tricky. What does this do? 1, 2 and 5 alter history to make the debt never have existed in the first place. To do this, it must formally answer the question of why the heck would you pay a debt that isn't real and you don't owe: out of sheer practicality; it's cheaper than Rogaine. This is your \"\"get out of jail free\"\" card both with the credit bureaus and the IRS. Of course, 3 gives the creditor motivation to go along with it. 6 says they can't burn your credit. 7 says it again and they're agreeing you can sue for cash money. 8 lets you pick the court. The collector won't get hung up on any of these since he can easily remove the bad mark. (don't be mad that they won't do it \"\"for free\"\", that's what 3 is for.) The key to getting them to take a settlement is to be reasonable and fair. Make sure the agreement works for them too. 6 says you can't badmouth them on social media. 4 and 5 says it can't be used against them. 8 throws them a bone by letting them sue in their home court for the bill they just settled (a right they already had). If it's medical, add \"\"HIPAA does not apply to this document\"\" to save them a ton of paperwork. Make it easy for them. You want the collector to take it to his boss and say \"\"this is pretty good. Do it.\"\" Don't send the money until their signed copy is in your hands. Then send promptly with an SASE for the receipt. Make it easy for them. This is on you. As far as \"\"getting them to send you an offer\"\", creditors are reluctant to mail things especially to people they don't think will pay, because it costs them money to write and send. So you may need to be proactive about running them down with your offer. Like I say, it's a funhouse mirror.\"" }, { "docid": "571472", "title": "", "text": "1) On QE 3. Karl Denninger has a good graphic to illustrate the potential. Looking to short long bond if it comes. http://market-ticker.org/akcs-www?get_gallerynr=3108 From his article: http://market-ticker.org/akcs-www?blog=Market-Ticker&amp;page=2 2) SP could bounce around 1250, if that doesnt hold look for 1200, then 1150 http://finviz.com/fut_chart.ashx?t=ES&amp;cot=138741,13874A&amp;p=d1 3)There could be a bounce in silver if $28 level holds http://finviz.com/fut_chart.ashx?t=SI&amp;cot=084691&amp;p=w1" }, { "docid": "156143", "title": "", "text": "It is also possible that the settlement company didn't tell the local government where to send the new tax bill. This would worry me because what else was missed regarding filing the proper documents with the lenders and the local government. It could also be a problem with the local government. Contact the settlement company or your attorney to get the issue resolved. If you owe the money you want to know; if the new owner owes the money they don't want to face a tax lien because the settlement company made a mistake. Generally this is split between the parties based on the number of days each will own the home. At settlement the money should move from one party to the other based on what has been deposited into escrow and when the actual bills are due. For example the payment for the first half of the year due July 1st may be sent in June. If the settlement was in June The new owner would give money to the old owner. But if settlement was in early July Money would move the other way." }, { "docid": "296475", "title": "", "text": "No, you cannot. The cash settlement period will lock up your cash depending on the product you trade. Three business days for stocks, 1 business day for options, and you would need waaaaaay more than $5,000 to trade futures." }, { "docid": "37110", "title": "", "text": "\"The Tax Court ruling Todd mentioned was that you can only do one roll-over in a 12-months period. I.e.: if you have already done a roll over (even if it is between different accounts) - you cannot do it again between any of your IRA accounts for 12 months. So for the \"\"60-days loan\"\" trick to work you must ensure that: You haven't done a roll-over within the last 12 months; and You're not going to do a roll-over within the next 12 months. Note, that the Tax Court took into the consideration that the IRS pub. 590 was explicitly saying that you can do multiple roll-overs as long as different accounts are involved. The Court ruled, that the IRS instructions are NOT a legal authority. I.e.: the IRS can write in the instructions whatever they want, but if it contradicts the law (as it did in this case) - the law always prevails. This is only for indirect rollovers (where you actually get the money and then re-deposit it within 60 days), trustee to trustee rollovers are not limited. This limitation is codified in 26 U.S. Code § 408(d)3(B).\"" }, { "docid": "132167", "title": "", "text": "\"This is not a problem. SWIFT does not need the Beneficiary Account Currency. The settlement account [or the Instruction amount] is of interest to the Banks. As I understand your agreement with client is they pay you \"\"X\"\" EUR. That is what would be specified on the SWIFT along with your details as beneficiary [Account Number etc]. Once the funds are received by your bank in Turkey, they will get EUR. When they apply these funds to your account in USD, they will convert using the standard rates. Unless you are a large customer and have special instructions [like do not credit if funds are received in NON-USD or give me a special rate or Call me and ask me what I want to do etc]. It typically takes 3-5 days for an international wire depending on the countries and currencies involved. Wait for few more days and then if not received, you have to ask your Client to mention to his Bank that Beneficiary is claiming non-receipt of funds. The Bank that initiated the transfer can track the wire not the your bank which is supposed to receive the funds.\"" }, { "docid": "593628", "title": "", "text": "\"This is the best tl;dr I could make, [original](http://cep.lse.ac.uk/pubs/download/dp1503.pdf) reduced by 99%. (I'm a bot) ***** &gt; Alternative risk outcomes All risk outcomes capture ex-post risk realizations rather than ex- ante risks. &gt; 4.8 1.2 1.6 Figure 2: Positive Correlation Tests - Dynamics t+1 t+2 t+3 t+4 t+5 t+6 Displacement Probability in Year t+k t+7 t+8 Notes: Risk realization in t + 1 may fail to fully capture the unemployment risk faced by an individual as she is making her coverage choice at time t, which justifies using risk realizations for that individual further into the future. &gt; 05 Individual-level model &amp;beta;OLS =.082 &amp;beta;2SLS =.245 0.05.1.15 Firm Displacement Risk in t.2 Notes: The Figure uses cross-sectional variation in displacement risk across firms as a risk shifter to estimate how UI coverage choices react to variation in risk that is not driven by individual moral hazard. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/76t73y/lse_riskbased_selection_in_unemployment_insurance/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~229382 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **risk**^#1 **coverage**^#2 **individual**^#3 **work**^#4 **selection**^#5\"" }, { "docid": "293389", "title": "", "text": "\"This is the sad state of US stock markets and Regulation T. Yes, while options have cleared & settled for t+1 (trade +1 day) for years and now actually clear \"\"instantly\"\" on some exchanges, stocks still clear & settle in t+3. There really is no excuse for it. If you are in a margin account, regulations permit the trading of unsettled funds without affecting margin requirements, so your funds in effect are available immediately after trading but aren't considered margin loans. Some strict brokers will even restrict the amount of uncleared margin funds you can trade with (Scottrade used to be hyper safe and was the only online discount broker that did this years ago); others will allow you to withdraw a large percentage of your funds immediately (I think E*Trade lets you withdraw up to 90% of unsettled funds immediately). If you are in a cash account, you are authorized to buy with unsettled funds, but you can't sell purchases made on unsettled funds until such funds clear, or you'll be barred for 90 days from trading as your letter threatened; besides, most brokers don't allow this. You certainly aren't allowed to withdraw unsettled funds (by your broker) in such an account as it would technically constitute a loan for which you aren't even liable since you've agreed to no loan contract, a margin agreement. I can't be sure if that actually violates Reg T, but when I am, I'll edit. While it is true that all marketable options are cleared through one central entity, the Options Clearing Corporation, with stocks, clearing & settling still occurs between brokers, netting their transactions between each other electronically. All financial products could clear & settle immediately imo, and I'd rather not start a firestorm by giving my opinion why not. Don't even get me started on the bond market... As to the actual process, it's called \"\"clearing & settling\"\". The general process (which can generally be applied to all financial instruments from cash deposits to derivatives trading) is: The reason why all of the old financial companies were grouped on Wall St. is because they'd have runners physically carting all of the certificates from building to building. Then, they discovered netting so slowed down the process to balance the accounts and only cart the net amounts of certificates they owed each other. This is how we get the term \"\"bankers hours\"\" where financial firms would close to the public early to account for the days trading. While this is all really done instantly behind your back at your broker, they've conveniently kept the short hours.\"" }, { "docid": "543312", "title": "", "text": "\"Option pricing models used by exchanges to calculate settlement prices (premiums) use a volatility measure usually describes as the current actual volatility. This is a historic volatility measure based on standard deviation across a given time period - usually 30 to 90 days. During a trading session, an investor can use the readily available information for a given option to infer the \"\"implied volatility\"\". Presumably you know the option pricing model (Black-Scholes). It is easy to calculate the other variables used in the pricing model - the time value, the strike price, the spot price, the \"\"risk free\"\" interest rate, and anything else I may have forgotten right now. Plug all of these into the model and solve for volatility. This give the \"\"implied volatility\"\", so named because it has been inferred from the current price (bid or offer). Of course, there is no guarantee that the calculated (implied) volatility will match the volatility used by the exchange in their calculation of fair price at settlement on the day (or on the previous day's settlement). Comparing the implied volatility from the previous day's settlement price to the implied volatility of the current price (bid or offer) may give you some measure of the fairness of the quoted price (if there is no perceived change in future volatility). What such a comparison will do is to give you a measure of the degree to which the current market's perception of future volatility has changed over the course of the trading day. So, specific to your question, you do not want to use an annualised measure. The best you can do is compare the implied volatility in the current price to the implied volatility of the previous day's settlement price while at the same time making a subjective judgement about how you see volatility changing in the future and how this has been reflected in the current price.\"" }, { "docid": "292159", "title": "", "text": "\"Scenario 1 - When you sell the shares in a margin account, you will see your buying power go up, but your \"\"amount available to withdraw\"\" stays the same until settlement. Yes, you can reallocate the same day, no need to wait until settlement. There is no margin interest for this scenario. Scenario 2 - If that stock is marginable to 50%, and all you have is $10,000 in that stock, you can buy another $10,000. Once done, you are at 50% margin, exactly.\"" }, { "docid": "271920", "title": "", "text": "\"In the United States, regulation of broker dealer credit is dictated by Regulation T, that for a non-margin account, 100% of a trade must be funded. FINRA has supplemented that regulation with an anti-\"\"free rider\"\" rule, Rule 4210(f)(9), which reads No member shall permit a customer (other than a broker-dealer or a “designated account”) to make a practice, directly or indirectly, of effecting transactions in a cash account where the cost of securities purchased is met by the sale of the same securities. No member shall permit a customer to make a practice of selling securities with them in a cash account which are to be received against payment from another broker-dealer where such securities were purchased and are not yet paid for. A member transferring an account which is subject to a Regulation T 90-day freeze to another member firm shall inform the receiving member of such 90-day freeze. It is only funds from uncleared sold equities that are prohibited from being used to purchase securities. This means that an equity in one's account that is settled can be sold and can be purchased only with settled funds. Once the amount required to purchase is in excess of the amount of settled funds, no more purchases can be made, so an equity sold by an account with settled funds can be repurchased immediately with the settled funds so long as the settled funds can fund the purchase. Margin A closed position is not considered a \"\"long\"\" or \"\"short\"\" since it is an account with one loan of security and one asset of security and one cash loan and one cash liability with the excess or deficit equity equal to any profit or loss, respectively, thus unexposed to the market, only to the creditworthiness of the clearing & settling chain. Only open positions are considered \"\"longs\"\" or \"\"shorts\"\", a \"\"long\"\" being a possession of a security, and a \"\"short\"\" being a liability, because they are exposed to the market. Since unsettled funds are not considered \"\"longs\"\" or \"\"shorts\"\", they are not encumbered by previous trades, thus only the Reg T rules apply to new and current positions. Cash vs Margin A cash account cannot purchase with unsettled funds. A margin account can. This means that a margin account could theoretically do an infinite amount of trades using unsettled funds. A cash account's daily purchases are restricted to the amount of settled funds, so once those are exhausted, no more purchases can be made. The opposite is true for cash accounts as well. Unsettled securities cannot be sold either. In summation, unsettled assets can not be traded in a cash account.\"" }, { "docid": "54638", "title": "", "text": "\"According to Wikipedia, Treasury bills mature in 1 year or less to a fixed face value: Treasury bills (or T-Bills) mature in one year or less. Regular weekly T-Bills are commonly issued with maturity dates of 28 days (or 4 weeks, about a month), 91 days (or 13 weeks, about 3 months), 182 days (or 26 weeks, about 6 months), and 364 days (or 52 weeks, about 1 year). Treasury bills are sold by single-price auctions held weekly. The T-bills (as Wikipedia says, like zero-coupon bonds) are actually sold at a discount to their face value and mature to their face value. They do not return any interest before the date of maturity. Because the amount earned is fixed at purchase, \"\"return\"\" is a more accurate term than \"\"rate\"\" when referring to a specific T-bill. The \"\"rate\"\" is the difference between this return and the discount value you purchased it at. So, yes, your rate of return is guaranteed. T-notes (1-10 year) and T-bonds (20-30 year) also have an interest rate guaranteed, but have coupon payments (usually every 6 months), paying out a fixed amount of interest on the principal. (See more info on the same Wikipedia page.) Because those bonds are not compounding the interest it pays out, but instead paying out every 6 months, you'd have to purchase new securities to create a compound return, changing your rate of return over time slightly as the rates for new treasury securities changes.\"" }, { "docid": "237161", "title": "", "text": "Here's another attempt at explanation: it's basically because parabolas are flat at the bottom. Let me explain. As you might know, the variance of the log stock price in Black Scholes is vol^2 * T, in other words, variance of the log stock price is linear in time to expiry. Now, that means that the standard deviation of your log stock price is square root in time. This is consequential. For normally distributed random variables, in 68% of cases we end up within one standard deviation. So, basically, we expect our log stock price to be within something something times square root of T. So, if your stock has a vol of 16%, it'll be plus/minus 32% in 4 years, plus/minus 16% for one year, plus/minus 8% for 3m, plus/minus 4% for 3-ish weeks, and plus/minus 1% for a business day. As you see, the decay is slow at first, but much more rapid as we get closer. How does the square root function look? It's a sideways parabola. As we come closer to zero, the slope of the square root function goes to infinity. (That is related to the fact that Brownian motion is almost surely no-where differentiable - it just shoots off with infinite slope, returning immediately, of course :-) Another way of looking at it is the old traders rule of thumb that an at-the-money option is worth approximately S * 0.4 * vol * sqrt(T). (Just do a Taylor expansion of Black Scholes). Again, you have the square root of time to expiry in there, and as outlined above, as we get closer to zero, the square root drops slowly at first, and then precipitously." } ]

[ { "docid": "77573", "title": "", "text": "The key word you forgot to include from Slide 29 is: Free-Riding Investopedia defines free-riding as: In the context of a brokerage firm, a free rider problem refers to a situation where a client has been allowed to purchase shares without actually paying for them, and then subsequently sells the shares (ideally for profit). The problem with this scenario is that the client, if allowed to free ride, can profit from a stock trade without actually using any of his or her own capital. This is illegal. I have not heard of any issues with this type of action being a problem with trading accounts in Australia, nor have I been able to find any such rules on the ASX website or any of by brokers websites. So I think this may be an issue in the USA but not Australia. You should check the rules in any other countries you wish to trade in." } ]

[ { "docid": "525527", "title": "", "text": "\"There is no unique identifier that exists to identify specific shares of a stock. Just like money in the bank, there is no real reason to identify which exact dollar bills belong to me or you, so long as there is a record that I own X bills and I can access them when I want. (Of course, unlike banks, there is still a 1:1 relationship between the amount I should own and the amount they actually hold). If I may reach a bit, the question that I assume you are asking is how are shared actually tracked, transferred, and recorded so that I know for certain that I traded you 20 Microsoft shares yesterday and they are now officially yours, given that it's all digital. While you can technically try and request a physical share certificate, it's very cumbersome to handle and transfer in that form. Ownership of shares themselves are tracked for brokerage firms (in the case of retail trading, which I assume is the context of this question as we're discussion personal finance). Your broker has a record of how many shares of X, Y, and Z you own, when you bought each share and for how much, and while you are the beneficial owner of record (you get dividends, voting rights, etc.) your brokerage is the one who is \"\"holding\"\" the shares. When you buy or sell a stock and you are matched with a counterparty (the process of which is beyond the scope of this question) then a process of settlement comes into play. In the US, settlement takes 3 working days to process, and technically ownership does not transfer until the 3rd day after the trade is made, though things like margin accounts will allow you to effectively act as if you own the shares immediately after a buy/sell order is filled. Settlement in the US is done by a sole source, the Depository Trust & Clearing Corporation (DTCC). This is where retail and institutional trade all go to be sorted, checked and confirmed, and ultimately returned to the safekeeping of their new owners' representatives (your brokerage). Interestingly, the DTCC is also the central custodian for shares both physical and virtual, and that is where the shares of stock ultimately reside.\"" }, { "docid": "593445", "title": "", "text": "\"Brokerages offer you the convenience of buying and selling financial products. They are usually not exchanges themselves, but they can be. Typically there is an exchange and the broker sends orders to that exchange. The main benefit that brokers offer is a simpler commission structure. Not all brokers have their own liquidity, but brokers can have their own allotment of shares of a stock, for example, that they will sell you when you make an order, so that you get what you want faster. Regarding accounts at the exchanges to track actual ownership and transfer of assets, it is not safe to assume thats how that works. There are a lot of shortcomings in how the actual exchange works, since the settlement time is 1 - 3 business days, depending on the product (so upwards of 5 to 6 actual days). In a fast market, the asset can change hands many many times making the accounting completely incorrect for extended time periods. Better to not worry about that part, but if you'd like to read more about how that is regulated look up \"\"Failure To Deliver\"\" regulations on short selling to get a better understanding of market microstructure. It is a very antiquated system.\"" }, { "docid": "420324", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://techcrunch.com/2017/07/19/techs-5-biggest-players-now-worth-3-trillion/) reduced by 86%. (I'm a bot) ***** &gt; After a long rally marked recently by sharp share price gains among the largest tech companies, the $3 trillion mark could stand up over time as a good thumb-sized measurement to vet future rallies against. &gt; In the era of platform players racing to control the digital lives of both consumers and enterprises, it&amp;#039;s perhaps not surprising that the biggest companies are worth so very much; if the tech industry changes, becoming more fractured, that could shift. &gt; In sum: It&amp;#039;s a big day for tech&amp;#039;s biggest players, even if it isn&amp;#039;t the most intriguing of them all or the simplest to explain. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6os46d/techs_5_biggest_players_now_worth_3_trillion/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~172685 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **tech**^#1 **company**^#2 **rally**^#3 **Big**^#4 **market**^#5\"" }, { "docid": "119161", "title": "", "text": "Brokerage firms must settle funds promptly, but there's no explicit definition for this in U.S. federal law. See for example, this article on settling trades in three days. Wikipedia also has a good write-up on T+3. It is common practice, however. It takes approximately three days for the funds to be available to me, in my Canadian brokerage account. That said, the software itself prevents me from using funds which are not available, and I'm rather surprised yours does not. You want to be careful not to be labelled a pattern day trader, if that is not your intention. Others can better fill you in on the consequences of this. I believe it will not apply to you unless you are using a margin account. All but certainly, the terms of service that you agreed to with this brokerage will specify the conditions under which they can lock you out of your account, and when they can charge interest. If they are selling your stock at times you have not authorised (via explicit instruction or via a stop-loss order), you should file a complaint with the S.E.C. and with sufficient documentation. You will need to ensure your cancel-stop-loss order actually went through, though, and the stock was sold anyway. It could simply be that it takes a full business day to cancel such an order." }, { "docid": "512984", "title": "", "text": "For margin, it is correct that these rules do not apply. The real problem becomes day trading funding when one is just starting out, broker specific minimums. Options settle in T+1. One thing to note: if Canada is anything like the US, US options may not be available within Canadian borders. Foreign derivatives are usually not traded in the US because of registration costs. However, there may be an exception for US-Canadian trade because one can trade Canadian equities directly within US borders." }, { "docid": "166792", "title": "", "text": "\"In most cases, if you are a member of the class the law-firm will contact you via postal mail to notify you of the class action and give you an opportunity to opt-in or opt-out of participating in any settlement that happens. More often than not, they take the opt-out approach, meaning that if you don't say you want out of the class it is assumed that you agree with the complaints as defined in the class action and would like to receive your portion of the money if there is a settlement. If you haven't gotten such a letter and you think you should have, it is a good idea to contact the law firm. How do you find the law firm? Usually some Googling on \"\"class action\"\" and the name of the defendant company will get you there. Also, check the legal section of the classifieds of the local newspaper, they sometimes advertise them there. Typically they aren't hard to find because it is in the law firm's best interest to have everyone sign on to their class action for a number of reasons including: If you have a lot of people who are supposedly aggrieved, it makes the defendant look more likely to be guilty, and more participants can equate to higher settlement amounts (for which the law firm gets a percentage). That is why you see non-stop ads on daytime TV for lawyers marketing class action cases and looking for people who took this drug, or had that hip implant. Once a settlement occurs and you are a member of that class, there are a number of ways you might get your piece including: - A credit to your account. - A check in the mail. - A coupon or some other consideration for your damages (lame) - A promise that they will stop doing the bad thing and maybe some changes (in your favor) on the terms of your account. A final note: Don't get your hopes up. The lawyers are usually the only ones who make any substantial money from these things, not the class members. I've been paid settlements from lots of these things and it is rare for it to be more than $25, but the time the spoils are divided. I've gotten NUMEROUS settlements where my share was less than a dollar. There are some decent resources on ClassAction.com, but beware that although the site has some good information, it is primarily just an ad for a lawfirm. Also, note that I am not affiliated with that site nor can I vouch for any information contained there. They are not an impartial source, so understand that when reading anything on there.\"" }, { "docid": "278369", "title": "", "text": "\"Everything you are doing is fine. Here are a few practical notes in performing this analysis: Find all the primary filing information on EDGAR. For NYSE:MEI, you can use https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000065270&type=10-K&dateb=&owner=exclude&count=40 This is the original 10-K. To evaluate earnings growth you need per share earnings for the past three years and 10,11,12 years ago. You do NOT need diluted earnings (because in the long term share dilution comes out anyway, just like \"\"normalized\"\" earnings). The formula is avg(Y_-1+Y_-2+Y_-3) / is avg(Y_-10+Y_-11+Y_-12) Be careful with the pricing rules you are using, the asset one gets complicated. I recommend NOT using the pricing rules #6 and #7 to select the stock. Instead you can use them to set a maximum price for the stock and then you can compare the current price to your maximum price. I am also working to understand these rules and have cited Graham's rules into a checklist and worksheet to find all companies that meet his criteria. Basically my goal is to bottom feed the deals that Warren Buffett is not interested in. If you are interested to invest time into this project, please see https://docs.google.com/document/d/1vuFmoJDktMYtS64od2HUTV9I351AxvhyjAaC0N3TXrA\"" }, { "docid": "445831", "title": "", "text": "Reading through the details makes it sound even worse. &gt;Iliad estimates it will be able to save about $2 billion annually by cutting out costs such as sending paper bills Come on, you can't seriously pretend to offer cell plans for $3 per month while citing cutting out paper bills as a cost savings measure. Where are you getting your infrastructure? Right now it's owned by the big players, so you either spend a fortune leasing bandwidth or spend an even larger fortune laying out your own infrastructure. Instead, this guy plans to buy T-Mobile, who already has contracts in place. Except they are already being acquired by Sprint, so good luck with that, Mr. No Experience in the US Market. This feels like the same sort of hubris that US companies have when they think they can expand overseas. It doesn't work for US companies because of a fundamental lack of understanding of the US market, and it looks like this guy suffers from the same knowledge deficit" }, { "docid": "105818", "title": "", "text": "\"This is the best tl;dr I could make, [original](http://www.france24.com/en/20170603-billions-spent-settlers-israel-captured-west-bank) reduced by 81%. (I'm a bot) ***** &gt; Successive Israeli governments have invested billions of dollars over the past 50 years on settlements in the occupied West Bank, making any withdrawal from the Palestinian territory a costly proposition. &gt; The total surface area of settlements construction in the West Bank has doubled in 18 years, according to the non-governmental organisation. &gt; Sher, a founder of Blue-White Future which advocates &amp;quot;The Jewish and democratic future of Israel&amp;quot;, was referring to the number of residents of isolated West Bank settlements which are considered the most likely to be evacuated under any two-state peace settlement with the Palestinians. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6f1zbb/the_israeli_government_has_spent_billions_of/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~135654 tl;drs so far.\"\") | [Theory](http://np.reddit.com/r/autotldr/comments/31bfht/theory_autotldr_concept/) | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **settlement**^#1 **Israel**^#2 **settler**^#3 **billion**^#4 **Palestinian**^#5\"" }, { "docid": "115029", "title": "", "text": "Wearing different kind of shirts, especially T shirts has been in vogue from ages. These T shirts are made of super fine cotton and observe the heat and sweat and make the person feel comfortable in them. The T shirts have fan following across the globe and every day, we can see new kind of T shirts with different cuts, designs, slogans, styles as well as in shapes." }, { "docid": "422218", "title": "", "text": "\"value slip below vs \"\"equal a bank savings account’s safety\"\" There is no conflict. The first author states that money market funds may lose value, precisely due to duration risk. The second author states that money market funds is as safe as a bank account. Safety (in the sense of a bond/loan/credit) mostly about default risk. For example, people can say that \"\"a 30-year U.S. Treasury Bond is safe\"\" because the United States \"\"cannot default\"\" (as said in the Constitution/Amendments) and the S&P/Moody's credit rating is the top/special. Safety is about whether it can default, ex. experience a -100% return. Safety does not directly imply Riskiness. In the example of T-Bond, it is ultra safe, but it is also ultra risky. The volatility of 30-year T-Bond could be higher than S&P 500. Back to Money Market Funds. A Money Market Fund could hold deposits with a dozen of banks, or hold short term investment grade debt. Those instruments are safe as in there is minimal risk of default. But they do carry duration risk, because the average duration of the instrument the fund holds is not 0. A money market fund must maintain a weighted average maturity (WAM) of 60 days or less and not invest more than 5% in any one issuer, except for government securities and repurchase agreements. If you have $10,000,000, a Money Market Fund is definitely safer than a savings account. 1 Savings Account at one institution with amount exceeding CDIC/FDIC terms is less safe than a Money Market Fund (which holds instruments issued by 20 different Banks). Duration Risk Your Savings account doesn't lose money as a result of interest rate change because the rate is set by the bank daily and accumulated daily (though paid monthly). The pricing of short term bond is based on market expectation of the interest rates in the future. The most likely cause of Money Market Funds losing money is unexpected change in expectation of future interest rates. The drawdown (max loss) is usually limited in terms of percentage and time through examining historical returns. The rule of thumb is that if your hold a fund for 6 months, and that fund has a weighted average time to maturity of 6 months, you might lose money during the 6 months, but you are unlikely to lose money at the end of 6 months. This is not a definitive fact. Using GSY, MINT, and SHV as an example or short duration funds, the maximum loss in the past 3 years is 0.4%, and they always recover to the previous peak within 3 months. GSY had 1.3% per year return, somewhat similar to Savings accounts in the US.\"" }, { "docid": "187908", "title": "", "text": "\"This is the best tl;dr I could make, [original](http://www.npr.org/2017/08/02/540975904/senate-republicans-dont-seem-too-worried-about-trumps-subsidy-threat) reduced by 90%. (I'm a bot) ***** &gt; Senate Republicans don&amp;#039;t appear to be too worried about President Trump&amp;#039;s latest round of threats. &gt; Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., announced the Senate Committee on Health, Education, Labor and Pensions would begin holding health care hearings in September. &gt; The Trump administration could order the Office of Personnel Management to reverse that ruling, and leave lawmakers and staffers to fully fund their health insurance costs themselves. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6r43zh/trump_threatens_congress_health_care/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~181295 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **Insurance**^#1 **Trump**^#2 **health**^#3 **Senate**^#4 **bailout**^#5\"" }, { "docid": "116420", "title": "", "text": "Short answer: the CD can be considered as part of the down payment calculations. they will want a plan to cash them in the last days or weeks before settlement. When approving you for a mortgage they will be looking at: They now know what you can afford to dedicate to this new property every month. They take into account principal, interest, taxes, insurance and the HOA fee. They will then look at how much money you will use as a down payment. They want this money to exist before applying, and they will check on its existence in the last days before settlement. The best is cash sitting in a bank. But it can also be money in savings bonds, or a CD, but they will want a plan for cashing that in just before settlement. They won't be comfortable with it being in a volatile account such as stocks especially if the current balance is exactly what you need for a mortgage that won't be closed for 3 more months. Because people use money they borrow from their 401K for a home purchase, it is possible to use money from volatile account. They will want to see a plan for getting money from these accounts just before settlement." }, { "docid": "350748", "title": "", "text": "\"This is because volatility is cumulative and with less time there is less cumulative volatility. The time value and option value are tied to the value of the underlying. The value of the underlying (stock) is quite influenced by volatility, the possible price movement in a given span of time. Thirty days of volatility has a much broader spread of values than two days, since each day benefits from the possible price change of the prior days. So if a stock could move up to +/- 1% in a day, then compounded after 5 days it could be +5%, +0%, or -5%. In other words, this is compounded volatility. Less time means far less volatility, which is geometric and not linear. Less volatility lowers the value of the underlying. See Black-Scholes for more technical discussion of this concept. A shorter timeframe until option expiration means there are fewer days of compounded volatility. So the expected change in the underlying will decrease geometrically. The odds are good that the price at T-5 days will be close to the price at T-0, much more so than the prices at T-30 or T-90. Additionally, the time value of an American option is the implicit put value (or implicit call). While an \"\"American\"\" option lets you exercise prior to expiry (unlike a \"\"European\"\" option, exercised only at expiry), there's an implicit put option in a call (or an implicit call in a put option). If you have an American call option of 60 days and it goes into the money at 30 days, you could exercise early. By contract, that stock is yours if you pay for it (or, in a put, you can sell whenever you decide). In some cases, this may make sense (if you want an immediate payoff or you expect this is the best price situation), but you may prefer to watch the price. If the price moves further, your gain when you use the call may be even better. If the price goes back out of the money, then you benefited from an implicit put. It's as though you exercised the option when it went in the money, then sold the stock and got back your cash when the stock went out of the money, even though no actual transaction took place and this is all just implicit. So the time value of an American option includes the implicit option to not use it early. The value of the implicit option also decreases in a nonlinear fashion, since the value of the implicit option is subject to the same valuation principles. But the larger principle for both is the compounded volatility, which drops geometrically.\"" }, { "docid": "342411", "title": "", "text": "If you buy foreign currency as an investment, then the gains are ordinary income. The gains are realized when you close the position, and whether you buy something else go back to the original form of investment is of no consequence. In case #1 you have $125 income. In case #2 you have $125 income. In case #3 you have $166 loss. You report all these items on your Schedule D. Make sure to calculate the tax correctly, since the tax is not capital gains tax but rather ordinary income at marginal rates. Changes in foreign exchange between a transaction and the conversion of the proceeds to USD are generally not considered as income (i.e.: You sold a property in Mexico, but since the money took a couple of days to clear, the exchange rate changed and you got $2K more/less than you would based on the exchange rate on the day of the transaction - this is not a taxable income/loss). This is covered by the IRC Sec. 988. There are additional rules for contracts on foreign currency, TTM rules, etc. Better talk to a licensed tax adviser (EA/CPA licensed in your State) for anything other than trivial." }, { "docid": "214852", "title": "", "text": "LOL 1) chart is # of approved rules, not $ 2) we're roughly 100 days into his administration in 2017 and so you're reporting a figure for a fraction of a year. 3) Which rules are which? Which are regulations? The Muslim ban counted here? This is pure drivel." }, { "docid": "291695", "title": "", "text": "Transfer of Millions of USD in and out is not possible for Individuals. There are limits on how much money an individual Indian Ordinary Citizen can send or receive. If an corporate wants to send money, depending on the services offered, they would have to initiate a SWIFT transaction. It typically takes 2-3 days for settlement of International wire." }, { "docid": "593628", "title": "", "text": "\"This is the best tl;dr I could make, [original](http://cep.lse.ac.uk/pubs/download/dp1503.pdf) reduced by 99%. (I'm a bot) ***** &gt; Alternative risk outcomes All risk outcomes capture ex-post risk realizations rather than ex- ante risks. &gt; 4.8 1.2 1.6 Figure 2: Positive Correlation Tests - Dynamics t+1 t+2 t+3 t+4 t+5 t+6 Displacement Probability in Year t+k t+7 t+8 Notes: Risk realization in t + 1 may fail to fully capture the unemployment risk faced by an individual as she is making her coverage choice at time t, which justifies using risk realizations for that individual further into the future. &gt; 05 Individual-level model &amp;beta;OLS =.082 &amp;beta;2SLS =.245 0.05.1.15 Firm Displacement Risk in t.2 Notes: The Figure uses cross-sectional variation in displacement risk across firms as a risk shifter to estimate how UI coverage choices react to variation in risk that is not driven by individual moral hazard. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/76t73y/lse_riskbased_selection_in_unemployment_insurance/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~229382 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **risk**^#1 **coverage**^#2 **individual**^#3 **work**^#4 **selection**^#5\"" }, { "docid": "105714", "title": "", "text": "A lot of questions, but all it boils down to is: . Banks usually perform T+1 net settlements, also called Global Netting, as opposed to real-time gross settlements. That means they promise the counterparty the money at some point in the future (within the next few business days, see delivery versus payment) and collect all transactions of that kind. For this example say, they will have a net outflow of 10M USD. The next day they will purchase 10M USD on the FX market and hand it over to the global netter. Note that this might be more than one transaction, especially because the sums are usually larger. Another Indian bank might have a 10M USD inflow, they too will use the FX market, selling 10M USD for INR, probably picking a different time to the first bank. So the rates will most likely differ (apart from the obvious bid/ask difference). The dollar rate they charge you is an average of their rate achieved when buying the USD, plus some commission for their forex brokerage, plus probably some fee for the service (accessing the global netting system isn't free). The fees should be clearly (and separately) stated on your bank statement, and so should be the FX rate. Back to the second example: Obviously since it's a different bank handing over INRs or USDs (or if it was your own bank, they would have internally netted the incoming USDs with the outgoing USDs) the rate will be different, but it's still a once a day transaction. From the INRs you get they will subtract the average FX achieved rate, the FX commissions and again the service fee for the global netting. The fees alone mean that the USD/INR sell rate is different from the buy rate." } ]

[ { "docid": "17652", "title": "", "text": "How would gold have protected you during the 2007/8 crisis? In no way, shape or form. The ways to protect yourself at any time are: Boring, huh?" } ]

[ { "docid": "507995", "title": "", "text": "\"Should be titled, \"\"Facebook IPO: Could Mark Zuckerberg _Be Worth_ $24 Billion?\"\" They are reportedly looking to float only 10% of shares, at $10 billion, valuing the company at $100 billion. That doesn't mean Zuckerberg gets a paycheck of $24B on that day. While I think it's crazy that all these companies are getting such high valuations, I really want to see Facebook's financials. I also wonder how much worse Facebook will get with unnecessary shit when their goal is to meet their next quarter earnings.\"" }, { "docid": "468047", "title": "", "text": "Don't let tax considerations be the main driver. That's generally a bad idea. You should keep tax in mind when making the decision, but don't let it be the main reason for an action. selling the higher priced shares (possibly at a loss even) - I think it's ok to do that, and it doesn't necessarily have to be FIFO? It is OK to do that, but consider also the term. Long term gain has much lower taxes than short term gain, and short term loss will be offsetting long term gain - means you can lose some of the potential tax benefit. any potential writeoffs related to buying a home that can offset capital gains? No, and anyway if you're buying a personal residence (a home for yourself) - there's nothing to write off (except for the mortgage interest and property taxes of course). selling other investments for a capital loss to offset this sale? Again - why sell at a loss? anything related to retirement accounts? e.g. I think I recall being able to take a loan from your retirement account in order to buy a home You can take a loan, and you can also withdraw up to 10K without a penalty (if conditions are met). Bottom line - be prepared to pay the tax on the gains, and check how much it is going to be roughly. You can apply previous year refund to the next year to mitigate the shock, you can put some money aside, and you can raise your salary withholding to make sure you're not hit with a high bill and penalties next April after you do that. As long as you keep in mind the tax bill and put aside an amount to pay it - you'll be fine. I see no reason to sell at loss or pay extra interest to someone just to reduce the nominal amount of the tax. If you're selling at loss - you're losing money. If you're selling at gain and paying tax - you're earning money, even if the earnings are reduced by the tax." }, { "docid": "305600", "title": "", "text": "With trillion dollar plus deficits, it's not like we're running an austerity program here. When you say sacrifice, compared to what? Two trillion dollar deficits? Your observation of constant predictions of imminent doom is valid. The timeline has been extended by a series of bubbles- market, housing, fiscal deficits... The shortcoming of doom prognosticators is that they underestimate the willingness of those in power to do whatever it takes to prolong the status quo, regardless of the long term consequences. The game is perpetuated by ever increasing debt, and government became the borrower of last resort once the rest of the economy was tapped out. The govt's ability to continue along this course in the open market is questionable as the Fed appears to be monetizing a large portion of newly issued debt. The end game is a currency crisis. It's nice to have a timeline accompanying a prediction, and critical for investing, but it is often very difficult to do, and in this case, it has been extremely difficult because the policy decisions have been rational from the perspective of elites maintaining their status, but not optimal from the standpoint of solving the problem. That doesn't mean the predictions are useless though. You could live in a flood zone and not be able to predict with accuracy when the next flood will occur, but that doesn't mean you shouldn't prepare. Given the uncertainty with timing this, it seems to me the best course of action is not to try to time it, especially with respect to investing based on market timing, but to prepare the best you can for what will inevitably eventually occur." }, { "docid": "11508", "title": "", "text": "\"My favorite Fed \"\"admission\"\" was from Alan Greenspan during his testimony in Congress about what caused the 2008 financial crisis. Senator Waxman basically asked Greenspan if he had fucked up. Greenspan's glib reply was; \"\"I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.\"\" In other words, his grand economic theory was fatally flawed. So to speak. Unbelievable. [YouTube link - 4:45 ](https://www.youtube.com/watch?v=R5lZPWNFizQ)\"" }, { "docid": "237043", "title": "", "text": "\"There are two ways that mortgages are sold: The loan is collateralized and sold to investors. This allows the bank to free up money for more loans. Of course sometime the loan may be treated like in the game of hot potato nobody want s to be holding a shaky loan when it goes into default. The second way that a loan is sold is through the servicing of the loan. This is the company or bank that collects your monthly payments, and handles the disbursement of escrow funds. Some banks lenders never sell servicing, others never do the servicing themselves. Once the servicing is sold the first time there is no telling how many times it will be sold. The servicing of the loan is separate from the collateralization of the loan. When you applied for the loan you should have been given a Servicing Disclosure Statement Servicing Disclosure Statement. RESPA requires the lender or mortgage broker to tell you in writing, when you apply for a loan or within the next three business days, whether it expects that someone else will be servicing your loan (collecting your payments). The language is set by the US government: [We may assign, sell, or transfer the servicing of your loan while the loan is outstanding.] [or] [We do not service mortgage loans of the type for which you applied. We intend to assign, sell, or transfer the servicing of your mortgage loan before the first payment is due.] [or] [The loan for which you have applied will be serviced at this financial institution and we do not intend to sell, transfer, or assign the servicing of the loan.] [INSTRUCTIONS TO PREPARER: Insert the date and select the appropriate language under \"\"Servicing Transfer Information.\"\" The model format may be annotated with further information that clarifies or enhances the model language.]\"" }, { "docid": "30340", "title": "", "text": "How do I get into Harvard Business School? I'm starting my first year in college next year and had to pass up Harvard (dream school) and two other ivies to go to my state school for financial reasons. I don't have to decide my major for two years. What should I do (classes, internships/work experience, major, etc.) to get into HBS? What tests do I need and what are the important parts of MBA application? Also, what jobs open up to someone with an MBA. I understand that this is a good way to get into Investment Banking? What level/salary would I start at and what other jobs/fields/companies do MBAs get hired for. What are other good business schools? How good is UVAs Darden?" }, { "docid": "429012", "title": "", "text": "\"The best answer to this is: Read the fine print on your credit card agreement. What is common, at least in the US, is that you can make any charges you want during a time window. When the date comes around that your statement balance is calculated, you will owe interest on any amount that is showing up as outstanding in your account. Example... To revise the example you gave, let's say Jan 1. your account balance was $0. Jan. 3rd you went out and spent $1,000. Your account statement will be prepared every XX days... usually 30. So if your last statement was Dec. 27th, you can expect your next statement to be prepared ~Jan.24 or Jan. 27. To be safe, (i.e. not accrue any interest charges) you will want to make sure that your balance shows $0 when your statement is next prepared. So back to the example you gave--if your balance showed $1,000... and you paid it off, but then charged $2,000 to it... so that there was now a new set of $2,000 charges in your account, then the bank would begin charging you interest when your next statement was prepared. Note that there are some cards that give you a certain number of days to pay off charges before accruing interest... it just goes back to my saying \"\"the best answer is read the fine print on your card agreement.\"\"\"" }, { "docid": "441893", "title": "", "text": "Not really my field but this is how I see the impact Disadvantages for banks : not being able to chose where they park assets/cash they have been trusted with which mean lower income from investing those disadvantage for banks shareholders : less earnings disadvantage for the economy : harder criteria to lend, lower loan growth advantage for the economy : (theoretically) less risks of liquidity crunch and financial crisis" }, { "docid": "577940", "title": "", "text": "\"Credit cards are a reasonable if relatively expensive tool to gain liquidity. If you have $50k in liquid cash, you don't have a liquidity problem for credit to help you solve. You have 100 months of expenses in cash. I suppose you could see a balance as a motivational tool, but it's all stick and no carrot. Take the next part half seriously in the spirit of \"\"what if\"\" talking therapy: If you feel you need to be motivated to get back to work by the true risk of running out of cash, and take such advice from strangers on the internet, the traditional midlife crisis purchase is a sports car. At least have some fun in a (depreciating but resellable) asset instead of paying a financier's bonus in evaporated interest! If there is a luxury car tariff in your country, you may even be able to exploit a personal exemption if you drove in from the U.S. I suppose this advice could possibly get you booted from the family house as it'll probably come across as a seriously \"\"ugly American\"\" move though...\"" }, { "docid": "446402", "title": "", "text": "\"Most of those countries had debt that was well beyond prudent levels (~70% of GDP) before the crisis, levels such that any crisis would put them over the safe limit and into trouble. The only exception was Spain whose debt levels were still marginally dangerous. Greece was off the charts, which is why they left off the graph for Greece. Second problem. On top of the high or marginal levels of government debt, the governments implicitly or explicitly guaranteed the banks, without limiting in any effective way their levels of leverage and risk (inb4 Basel II - a lot of paper that made no difference). Protip: if someone guarantees your debt, they should be able to oversee your level of risk, but the governments didn't. As a result these banks, and their CEOs in particular, have a bet that goes \"\"heads I win, tails I win (and you the taxpayer lose)\"\". If the loans are paid off the CEOs rake in millions. If the loans go bad the government bails them out and the CEOs and other top executives - you guessed it - rake in millions. Of course when faced with these incentives the banks will lend too much. This is not free market capitalism, it is crony capitalism. **Bailouts of private companies are not part of unfettered free market capitalism.** The third problem is that the same governments cannot print money like the US can because the Euro is not owned by the individual governments. The answer to excessive levels of government debt is for governments not to borrow too much and not to take on excessive unfunded liabilities such as pensions. This probably needs to be enforced by a constitutional amendment, so it can't be easily overruled. The answer to governments getting dragged into bailing out insolvent banks and then going under themselves, is to allow the banks to go under and to guarantee only small deposits. Let shareholders, bond holders and large (&gt;$500k) lenders to the banks to lose their money. Second, hold bank executives and shareholders liable for the bank's debts. Eg executive salaries and other remuneration need to be clawed back up to a 5 year window. Shareholders should be liable (as they used to be) for debts up to an additional 100% of the par value of the shares. I can assure you this would concentrate minds wonderfully - as it did in the old days when Wall St investment banks were partnerships with each partner liable for all the debts of the firm. Another alternative would be for governments to enforce limits on financial risk, but unfortunately they do not have the courage to do this, nor the morality to resist \"\"campaign contributions\"\" / bribes to look the other way. If these steps were taken the issue of the Euro currency would not be a problem. However printing money (which requires having your own currency) is a solution if it comes to that although it comes at the expense of people who have saved and invested prudently. Printing money (keeping interest rates excessively low for years on end) subsidizes borrowers - the ones who created the problem - at the expense of savers. Clearly this creates terribly perverse incentives the next time around. Anyone who thinks this problem is a result of unfettered free market capitalism is not paying attention.\"" }, { "docid": "175692", "title": "", "text": "Here would be the big two you don't mention: Time - How much of your own time are you prepared to commit to this? Are you going to find tenants, handle calls if something breaks down, and other possible miscellaneous issues that may arise with the property? Are you prepared to spend money on possible renovations and other maintenance on the property that may occur from time to time? Financial costs - You don't mention anything about insurance or taxes, as in property taxes since most municipalities need funds that would come from the owner of the home, that would be a couple of other costs to note in having real estate holdings as if something big happens are you expecting a government bailout automatically? If you chose to use a property management company for dealing with most issues then be aware of how much cash flow could be impacted here. Are you prepared to have an account to properly do the books for your company that will hold the property or would you be doing this as an individual without any corporate structure? Do you have lease agreements printed up or would you need someone to provide these for you?" }, { "docid": "18631", "title": "", "text": "As much as people on the internet and ZH-like blogs like to harp on auto deliquencies and other narrow metrics as broader statements about how life around us is all a sham, I feel this article does a good job at discussing the mitigants here. Notably: 1) that the sub-prime auto market is rather small, so while delinquencies may rise it won't represent a catalyst for a broader financial crisis. 2) The securitized products Santander and others are putting together are structured in a way to account for these defaults and loss rates, so while the relative uptick in default rates is interesting to note, it doesn't necessarily spell doom in absolute terms. 3) The fact that many auto dealers don't verify income isn't uncommon and in fact an industry standard practice due to point #2 above. The statement these dealers have been lying about incomes and/or is not verifying incomes certainly pulls at the heart strings of the 2008 Housing Crisis, but when discussed within the context of how the auto lending market works, it isn't nearly as scary as those statements would suggest in isolation." }, { "docid": "244079", "title": "", "text": "Weren't they one of the healthy banks during the financial crisis? I wonder what keeps them ahead of the pack or if the actual J. P. Morgan had any advise that they still adhere to today. I'm sure being part of a powerful organization that has shaped the financial industry has it perks in terms of having insider knowledge of how the innards of the industry work." }, { "docid": "83610", "title": "", "text": "\"I do a lot of my own legal work, even sued the IRS, and I always win**. I would not attempt to do this myself. I'd run straight to a tax professional***. But if I did attempt this myself... My position is that I did a 401K to IRA rollover in good faith. Such a rollover is perfectly common. eTrade saw the paperwork and knew I was rolling over a 401K, and knew or reasonably should have known this rollover would be to an IRA, since rolling over to a cash account is a completely insane act which no-one would ever do. I would gather and prepare to present every document that supports this notion in any way. I would then take a hard look at my documentation and see how well I can support that argument. Then I would research cases in tax court to see how the courts treated situations like yours. I would not roll over the money to another IRA account until I had done that. And I would move quickly. This is a hard problem and there are no pat answers. It depends a lot on the finer details. One last thing. Next time you do a move like this, start small. Move $2000 over. ** My real skill is swallowing my pride and knowing when I'm wrong. I settle those, and only fight the guaranteed winners. *** This is not the usual SE kneejerk of \"\"hire a professional\"\". I almost never do; but I would here. It's an arcane area. Also acting on a professional's advice is a \"\"get out of jail free\"\" card regarding penalties or punishments.\"" }, { "docid": "275410", "title": "", "text": "\"TARP was ~$475 billion of loans to institutions. Loans that are to be paid back, with interest (albeit very low interest). A significant percentage of the TARP loans have been (or will be) paid back. So, the final price tag of the TARP was only a few $billion (pretty low considering the scale of the program). There is ~$10 trillion in mortgage debt outstanding. That's a much higher price tag than TARP. Secondly, paying off the mortgages = no repayment to the government as there was with TARP. The initial price tag of your plan would be ~$10 trillion, instead of a few $billion. Furthermore how does a government with >$15 trillion in debt already come up with an extra ~$10 trillion to pay off people's mortgages? Should the government go deeper into debt? Print more money and trigger inflation? (Note: Some people like to talk about a \"\"secret bailout\"\" by the Fed, implying that the true cost of TARP was much higher than claimed by the government. The \"\"secret bailout\"\" was a series of short-term low/no interest loans to banks. Because they were loans, which were paid back, my point still stands.) Some other issues to consider: Remember that the principal balance of your mortgage is only a small portion of your payments to the bank. Over 30 years, you pay a lot of $$$ in interest to the bank (that's how banks make a profit). Banks are expecting that revenue, and it is factored into their financial projections. If those revenue streams suddenly disappeared, I expect it would majorly screw the up the financial industry. Many people bought houses during the real estate boom, when housing prices were inflated far beyond the \"\"real\"\" value of the house. Is it right to overpay for these houses? This rewards the banks for accepting the inflated value during the appraisal process. (Loan modification forces banks to accept the \"\"real\"\" value of the house.) The financial crisis was triggered by people buying houses they could not afford. Should they be rewarded with a free house for making poor financial decisions?\"" }, { "docid": "418551", "title": "", "text": "\"Aggressiveness in a retirement portfolio is usually a function of your age and your risk tolerance. Your portfolio is usually a mix of the following asset classes: You can break down these asset classes further, but each one is a topic unto itself. If you are young, you want to invest in things that have a higher return, but are more volatile, because market fluctuations (like the current financial meltdown) will be long gone before you reach retirement age. This means that at a younger age, you should be investing more in stocks and foreign/developing countries. If you are older, you need to be into more conservative investments (bonds, money market, etc). If you were in your 50s-60s and still heavily invested in stock, something like the current financial crisis could have ruined your retirement plans. (A lot of baby boomers learned this the hard way.) For most of your life, you will probably be somewhere in between these two. Start aggressive, and gradually get more conservative as you get older. You will probably need to re-check your asset allocation once every 5 years or so. As for how much of each investment class, there are no hard and fast rules. The idea is to maximize return while accepting a certain amount of risk. There are two big unknowns in there: (1) how much return do you expect from the various investments, and (2) how much risk are you willing to accept. #1 is a big guess, and #2 is personal opinion. A general portfolio guideline is \"\"100 minus your age\"\". This means if you are 20, you should have 80% of your retirement portfolio in stocks. If you are 60, your retirement portfolio should be 40% stock. Over the years, the \"\"100\"\" number has varied. Some financial advisor types have suggested \"\"150\"\" or \"\"200\"\". Unfortunately, that's why a lot of baby boomers can't retire now. Above all, re-balance your portfolio regularly. At least once a year, perhaps quarterly if the market is going wild. Make sure you are still in-line with your desired asset allocation. If the stock market tanks and you are under-invested in stocks, buy more stock, selling off other funds if necessary. (I've read interviews with fund managers who say failure to rebalance in a down stock market is one of the big mistakes people make when managing a retirement portfolio.) As for specific mutual fund suggestions, I'm not going to do that, because it depends on what your 401k or IRA has available as investment options. I do suggest that your focus on selecting a \"\"passive\"\" index fund, not an actively managed fund with a high expense ratio. Personally, I like \"\"total market\"\" funds to give you the broadest allocation of small and big companies. (This makes your question about large/small cap stocks moot.) The next best choice would be an S&P 500 index fund. You should also be able to find a low-cost Bond Index Fund that will give you a healthy mix of different bond types. However, you need to look at expense ratios to make an informed decision. A better-performing fund is pointless if you lose it all to fees! Also, watch out for overlap between your fund choices. Investing in both a Total Market fund, and an S&P 500 fund undermines the idea of a diversified portfolio. An aggressive portfolio usually includes some Foreign/Developing Nation investments. There aren't many index fund options here, so you may have to go with an actively-managed fund (with a much higher expense ratio). However, this kind of investment can be worth it to take advantage of the economic growth in places like China. http://www.getrichslowly.org/blog/2009/04/27/how-to-create-your-own-target-date-mutual-fund/\"" }, { "docid": "449367", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.theguardian.com/business/2017/jul/15/top-1-of-households-in-uk-fully-recovered-from-financial-crisis) reduced by 89%. (I'm a bot) ***** &gt; New research from the Resolution Foundation showed that households with incomes of &amp;pound;275,000 or more quickly recovered from the impact of the deep recession and have seen their share of national income return to the level seen before the global banking system froze up in the summer of 2007. &gt; &amp;quot;Adam Corlett, senior economic analyst at the Resolution Foundation, said:&amp;quot;The incomes of the top 1% took a short, sharp hit following the financial crisis. &gt; The share of national disposable income for the richest 1% of households rose steadily after Margaret Thatcher became prime minister in 1979 and reached a peak of 8.5% on the eve of the financial crisis. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6njstj/top_1_of_households_in_uk_fully_recovered_from/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~167774 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **income**^#1 **year**^#2 **election**^#3 **Foundation**^#4 **standards**^#5\"" }, { "docid": "124149", "title": "", "text": "&gt;Note from the Editor: Hyperinflation is becoming more visible every day—just notice the next time you shop for groceries. All signs say America’s economic recovery is expected to take a nose dive and before it gets any worse you should read The Uncensored Survivalist. This book contains sensible advice on how to avoid total financial devastation and how to survive on your own if necessary. Click here for your free copy If someone includes this kind of stuff on their website, I assume whatever they say is probably uninformed at best." }, { "docid": "354779", "title": "", "text": "Somalia, that's your trump card? I'm equally disgusted at both parties and the role they played during the financial crisis which affected the entire world, and because I won't play sheep and walk in lock-step to the polls for Obama (or Romney), your suggestion is that I move to Somalia? Can you not see how ridiculous you are?" } ]

[ { "docid": "457108", "title": "", "text": "Those ‘crises’ are only an issue if you need your savings during the time of crisis. If you have time to sit it out, you should just do that, and come out of the crisis with a gain. People that lose money during a crisis lose it because they sell their investments during the crisis, either because they had to or because they thought they should. If you look at historic values of investments, the market overall always recovers and goes over the orignal value some time after the crisis. Investing even more right in the crisisis the best way to make a lot of money." } ]

[ { "docid": "237353", "title": "", "text": "Where was it reported that it was six figures per month? It isn't clear from the article what Mandiant's scope was that they were brought in under. I'm not even sure the way it reads that Mandiant found the Apache Struts-based breach while investigating the breach they were brought in for. Also, companies with an emphasis on IT like Equifax vary greatly in how they handle out-of-budget projects, and so far as I've read, it wasn't revealed how Mandiant's project was procured. Equifax is going to be a case study in business schools on the handling of this incident, and what not getting in front of a crisis looks like (for comparison, see how the Tylenol tampering was handled). Equifax should have reached out to all affected and said they automatically put a freeze on their records, and all affected now have an account created if they didn't already have an account, 7 years of free 100 freeze/unfreeze requests per year, 52 free credit report requests per year, and credit monitoring. If I was on the board, I would have told the CEO to make a generous offer to buy out LifeLock and put all affected onto their most comprehensive plan while working behind the scenes to revamp IT and information security, as well as rethink the industry. It would have been expensive as hell to do, but this is starting to grow into a Wells Fargo-scale career ending and industry-defining incident, and whatever cost savings they thought they got by cutting so many corners that enabled this breach and the weak response might get wiped out for the next 100 years of potential savings as odds increase weekly they'll be forced to adopt more regulatory oversight in the future. If they quietly get LifeLock's most comprehensive plan for all US federal and state legislators though, then they probably will escape real reform and might skate by on the weak response." }, { "docid": "378110", "title": "", "text": "\"In general, scholarship income that you receive that is not used for tuition or books must be included in your gross income and reported as such on your tax return. Scholarship income you receive that is used for those kinds of expenses may be excludable from your gross income. See this IRS information and this related question. I believe that as represented on the 1098-T, this generally means that if Box 5 (Scholarships and Grants) is greater than Box 1 or 2 (only one of which will be used on your 1098-T), you received taxable scholarship income. If Box 5 is less than or equal to Box 1/2, you did not receive taxable scholarship income. This TaxSlayer page draws the same conclusion. However, you should realize that the 1098-T is not what makes you have to pay or not pay taxes. You incur the taxes by receiving scholarship money, and you may reduce your tax liability by paying tuition. The 1098-T is simply a record of payments that have already been made. For instance, if you received $10,000 in scholarship money --- that is, actually received checks for that amount or had that amount deposited into your bank account --- then your income went up by $10,000. If you yourself paid tuition, it is likely that you can exclude the amount of the tuition from your taxable income, reducing the tax you owe (see the IRS page linked above). However, if you received $10,000 in actual money and in addition your tuition was paid by the scholarship (with money you never actually had in your own bank account), then the entire $10,000 would be taxable. You do not give enough information in your question to be sure which of these situations is closer to your own. However, you should be able to decide by looking at your bank account: look at how much money you received and how much you spent on tuition. If you received more scholarship money than the tuition you paid out of pocket, you owe taxes on the remainder. (I emphasize that this is just a general rule of thumb and should not be taken as tax advice; you should review the IRS information and/or consult a tax professional to determine what part of your scholarship income is taxable.) In addition, as this (now rather old) article from the New York Society of CPAs notes, \"\"many colleges and universities prepare 1098-Ts incorrectly and report tuition and related expenses inconsistently\"\". This means you should be careful to reconcile the 1098-T with your own financial records of what money you actually received and paid. When I was in grad school there was a good deal of hand-wringing and hair-pulling each year among the students as we tried to determine what relationship (if any) the 1098-T bore to the financial facts.\"" }, { "docid": "137984", "title": "", "text": "\"We're in agreement, I just want retail investors to understand that in most of these types of discussions, the unspoken reality is the retail sector trading the market is *over*. This includes the mutual funds you mentioned, and even most index funds (most are so narrowly focused they lose their relevance for the retail investor). In the retail investment markets I'm familiar with, there are market makers of some sort or another for specified ranges. I'm perfectly fine with no market makers; but retail investors should be told the naked truth as well, and not sold a bunch of come-ons. What upsets me is seeing that just as computers really start to make an orderly market possible (you are right, the classic NYSE specialist structure was outrageously corrupt), regulators turned a blind eye to implementing better controls for retail investors. The financial services industry has to come to terms whether they want AUM from retail or not, and having heard messaging much like yours from other professionals, I've concluded that the industry does *not* want the constraints with accepting those funds, but neither do they want to disabuse retail investors of how tilted the game is against them. Luring them in with deceptively suggestive marketing and then taking money from those naturally ill-prepared for the rigors of the setting is like beating up the Downs' Syndrome kid on the short bus and boasting about it back on the campus about how clever and strong one is. If there was as stringent truth in marketing in financial services as cigarettes, like \"\"this service makes their profit by encouraging the churning of trades\"\", there would be a lot of kvetching from so-called \"\"pros\"\" as well. If all retail financial services were described like \"\"dead cold cow meat\"\" describes \"\"steak\"\", a lot of retail investors would be better off. As it stands today, you'd have to squint mighty hard to see the faintly-inscribed \"\"caveat emptor\"\" on financial services offerings to the retail sector. Note that depending upon the market setting, the definition of retail differs. I'm surprised the herd hasn't been spooked more by the MF Global disaster, for example, and yet there are some surprisingly large accounts detrimentally affected by that incident, which in a conventional equities setting would be considered \"\"pros\"\".\"" }, { "docid": "326398", "title": "", "text": "From what I can tell, the book talks about the current economic crisis is going to lead to a burst in the dollar market and government debt market. And how the current financial policies and the financial policies enacted by the previous administration, Ben Bernanke, and Alan Greenspan are going to lead to hyperinflation, devaluation of the dollar, and a massive spike in the national debt. And then it is supposed to provide financial strategies and ideas to weather the storm. That's all I can gather without buying the book. Link: http://www.amazon.com/Aftershock-Protect-Yourself-Financial-Meltdown/dp/0470918144/ref=sr_1_1?s=books&amp;ie=UTF8&amp;qid=1323897637&amp;sr=1-1" }, { "docid": "361442", "title": "", "text": "From my Capital Markets and Institutions assignment on 2007 - 2008 Financial Crisis The subprime financial crisis that emerged in the summer of 2007 is much too intricate and interwoven to place the blame solely on one organisation or group of individuals. Each actor involved is responsible for and party to—in varying degrees—the events that transpired. Mortgage brokers (individuals) • First line of contact between an originator and a borrower • Out to get theirs; greedy • Disregard for borrowers, only want to originate as many mortgages as possible • Engaged in controversial practices – confusing, pressuring, lying to borrowers in order to secure a mortgage • Took advantage of 2/28 mortgages in order to collect new origination fees • Offered piggyback mortgages requiring no money down Mortgage originators (organisations) • Began lending to subprime borrowers during the 1990s – done through brokers to whom they paid a commission • Largely supplanted loans made by the FHA through traditional lenders • Many originators acquired by large investment banks • Cashed in on and espoused the “American dream” of home ownership • Different interest rates charged to borrowers • Use of statistical software and credit scores to evaluate borrowers • Popularised 2/28 mortgages • Allowed borrowers to take out mortgages with little or no documentation • Rapidly increased $ amount of mortgages issued • In charge of servicing mortgages issued – making reasonable efforts to collect principal and interest, able to foreclose on properties when delinquent • Profited from massive fees (late and other) added when loans were delinquent • First firms to suffer from the increase in foreclosures Investment banks • Often acquired mortgage originators to gain yet another revenue stream • Responsible for creating CDO entities, often registered in tax havens • CDOs took on large positions in MBSs and created subordinate obligations, also CDOs • CDO entities held assets of other CDOs, creating a complex interwoven situation • CDOs were also involved with positions in other securities • IB-controlled hedge funds often hedged risks through buying highly-rated MBSs • CDOs holding long-term debt were funded through the short-term commercial paper market – high ratings secured through IB lines of credit • Also pioneered SIVs – relied on highly-rated CP market; lines of credit combined with investor equity allowed IBs to keep SIVs off B/S • IBs heavily invested in MBSs/CDOs began to run into liquidity problems • Required capital investment to remain operational – often found abroad (e.g. Abu Dhabi, Chinese, Singaporean governments) • Largely responsible for the monetary policy pursued by the Fed during 2007/2008 • Conduct raised questions as to the regulation of the entire financial industry • Contrast with their responsibility for much innovation and engineering in the financial services industry Credit ratings agencies • Party to major conflicts of interest • Overwhelmingly gave AAA ratings to MBSs • Agencies loosened their rating criteria and perhaps over-rated MBSs in an effort to gain more business from originators • Agencies also rated the debt of institutions that held positions in MBSs • CDOs holding MBSs obtained high ratings as well – statistical models used indicated them to be safe • Based high ratings in the commercial paper market on IB lines of credit – obliged the IBs in order to gain more business • Agency downgrades of MBSs/CDOs resulted in large IB losses, setting in motion further developments • Ratings became less useful as the MBS market froze up, with even AAA-rated MBSs struggling to find a market • Previously championed as an alternative to government intervention in the market • Role of ratings agencies heavily questioned in aftermath • Also questioned was how ratings in general should be used • RAs deflected claims that they acted irresponsibly during the subprime boom • Criticised for the large proportion of AAA-ratings given to MBSs o Argued that historical defaults on MBSs were lower than similar corporate bonds • Conflicts inherent in having issuers pay for ratings o Committees that assigned ratings were separate from negotiations regarding fees • Emphasized benefits of giving all investors free access to ratings rather than them paying for them • Wave of downgrades in 2nd half of 2007 a result of unexpectedly poor performance of subprime mortgages originated in 2006 o Attributed to: laxer underwriting standards, declines in housing prices, more restrictive borrowing standards that prevented borrowers from refinancing Investors • Backbone of many institutions – shareholders • Owned stock in IBs and GSEs, two major players in subprime crisis • Driving force behind institutions taking on riskier investments (e.g. MBSs) • Unwilling to inject more capital/equity into firms required them to turn elsewhere for aid • Worries that the crisis could spread to other markets (e.g. credit cards) added to worries • Grouped with IBs in being seen as responsible for the crisis o US government would not allow higher sale price for Bear Stearns to avoid appearance of bailing out investors" }, { "docid": "167895", "title": "", "text": "Based on Dalio's interviews, he seems to think it's kind of too little too late. He said the Fed did a great job maneuvering out of the crisis, but then coasted for too long when they should have been tightening. Now it's too late and trying to play catch up might destabilize things to the point where they would be the *cause* of the next recession." }, { "docid": "583666", "title": "", "text": "Wikipedia has a nice definition of financial literacy (emphasis below is mine): [...] refers to an individual's ability to make informed judgments and effective decisions about the use and management of their money. Raising interest in personal finance is now a focus of state-run programs in countries including Australia, Japan, the United States and the UK. [...] As for how you can become financially literate, here are some suggestions: Learn about how basic financial products works: bank accounts, mortgages, credit cards, investment accounts, insurance (home, car, life, disability, medical.) Free printed & online materials should be available from your existing financial service providers to help you with your existing products. In particular, learn about the fees, interest, or other charges you may incur with these products. Becoming fee-aware is a step towards financial literacy, since financially literate people compare costs. Seek out additional information on each type of product from unbiased sources (i.e. sources not trying to sell you something.) Get out of debt and stay out of debt. This may take a while. Focus on your highest-interest loans first. Learn the difference between good debt and bad debt. Learn about compound interest. Once you understand compound interest, you'll understand why being in debt is bad for your financial well-being. If you aren't already saving money for retirement, start now. Investigate whether your employer offers an advantageous matched 401(k) plan (or group RRSP/DC plan for Canadians) or a pension plan. If your employer offers a good plan, sign up. If you get to choose your own investments, keep it simple and favor low-cost balanced index funds until you understand the different types of investments. Read the material provided by the plan sponsor, try online tools provided, and seek out additional information from unbiased sources. If your employer doesn't offer an advantageous retirement plan, open an individual retirement account or IRA (or personal RRSP for Canadians.) If your employer does offer a plan, you can set one of these up to save even more. You could start with access to a family of low-cost mutual funds (examples: Vanguard for Americans, or TD eFunds for Canadians) or earn advanced credit by learning about discount brokers and self-directed accounts. Understand how income taxes and other taxes work. If you have an accountant prepare your taxes, ask questions. If you prepare your taxes yourself, understand what you're doing and don't file blind. Seek help if necessary. There are many good books on how income tax works. Software packages that help you self-file often have online help worth reading – read it. Learn about life insurance, medical insurance, disability insurance, wills, living wills & powers of attorney, and estate planning. Death and illness can derail your family's finances. Learn how these things can help. Seek out and read key books on personal finance topics. e.g. Your Money Or Your Life, Why Smart People Make Big Money Mistakes, The Four Pillars of Investing, The Random Walk Guide to Investing, and many more. Seek out and read good personal finance blogs. There's a wealth of information available for free on the Internet, but do check facts and assumptions. Here are some suggested blogs for American readers and some suggested blogs for Canadian readers. Subscribe to a personal finance periodical and read it. Good ones to start with are Kiplinger's Personal Finance Magazine in the U.S. and MoneySense Magazine in Canada. The business section in your local newspaper may sometimes have personal finance articles worth reading, too. Shameless plug: Ask more questions on this site. The Personal Finance & Money Stack Exchange is here to help you learn about money & finance, so you can make better financial decisions. We're all here to learn and help others learn about money. Keep learning!" }, { "docid": "293173", "title": "", "text": "\"This is the best tl;dr I could make, [original](http://www.reuters.com/article/us-usa-fed-yellen-idUSKBN19I2I5) reduced by 64%. (I'm a bot) ***** &gt; LONDON U.S. Federal Reserve Chair Janet Yellen said on Tuesday that she does not believe that there will be another financial crisis for at least as long as she lives, thanks largely to reforms of the banking system since the 2007-09 crash. &gt; Yellen said it would &amp;quot;Not be a good thing&amp;quot; if reforms of the financial services industry since the crisis were unwound, and urged those who had helped manage the fallout at the time to be vocal in preventing such a dilution. &gt; Yellen declined to comment when asked about her relationship with Trump but said she had a good working relationship with U.S. Treasury Secretary Steve Mnuchin. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6jys86/feds_yellen_expects_no_new_financial_crisis_in/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~154464 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **U.S.**^#1 **Yellen**^#2 **bank**^#3 **crisis**^#4 **financial**^#5\"" }, { "docid": "351285", "title": "", "text": "In the US, for most mortgages: The rules for how you compute LTV vary. Usually it's based with current value. With FHA loans, you cannot have the property re-assessed -- LTV is based on the original loan amortization. Note that in the wake of the housing crisis, assessors have suddenly become very conservative with valuations, so be prepared to fight over the valuation." }, { "docid": "305901", "title": "", "text": "\"It's a problem from hell because all solutions have drawbacks/unintended consequences and because they are all pretty complex to implement in practice. Breaking up the big banks so that no bank is enough to bring down the economy with it is the strongest move, but is riddled with problems when you start looking at it practically. How do you determine the \"\"maximum size\"\" a bank should have? Should it be based on assets? Systemic importance (i.e. interconnectedness with other banks)? How do you enforce it? Banks will find ways to offload assets, etc. into special purpose corporations to get around the laws somehow. How do you compensate for the fact that size does help financial efficiency in some ways? Imposing higher capital requirements is the next solution. But that too is not so easy to implement with full success in practice. What should be classified as a low-risk asset? How much capital do you require against a CDO vs a Mexican government bond? How often do you need to revise these standards? At what point does the cost of higher capital requirements start to strangle lending and financial flows? The weaker maneuvers are things like constant government-imposed stress tests, orderly resolution mechanisms, higher standards for internal risk management practices, etc. but those may not be adequate and also have their implementation problems.\"" }, { "docid": "62397", "title": "", "text": "\"how is the money the FDIC has collected Fees collected from the banks: The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. http://www.fdic.gov/about/learn/symbol/index.html They also use the proceeds from liquidating the assets of failed banks to make payouts. Are there country specific agencies with a similar mission? Canada Deposit Insurance Corporation Instituto para la Ptotección al Ahorro Bancario (Mexico) Financial Services Compensation Scheme (UK) not quite like the FDIC You'll have to search for others yourself. :) Most importantly, are there any examples of a similar system that has failed? As the Mythbusters say, \"\"failure is always an option.\"\" There is a statement on FDIC's website to the effect that they are backed by the \"\"full faith and credit\"\" of the U.S. government. That said, the FDIC maintains its own fund to make insurance payouts. Granted, in the shakiness of the 2008-2009 financial crisis they did start waving a red flag about their realistic ability to cover their obligation. Practically speaking, the government will likely step in if necessary. This 2008 article regarding a propsed revamp of the UK's FSCS should be of general interest to you on this topic, though it does not answer the question of failed systems. (Well, as far as I know. I have only skimmed the article.)\"" }, { "docid": "445072", "title": "", "text": "I've tried to argue this to some close friends who bought homes, pre/post-crisis, if the crisis ever ended, they thought it was ridiculous. There is a clear fulcrum where renting makes more sense than buying, when appropriate inputs of data are entered into the model. I think Khan Academy did a good 10-minute run down on the subject and used a relatively good model, as well. Further than that, I read the first few paragraphs and stopped reading, it was a commercial. I was shocked. The entire thing up till' 2 paragraphs in is literally a commercial. The supposed 'antagonist', explicitly implied by the title isn't actually an antagonist, it's a click-bait commercial -article posing as a real article, (imitation), that actually might have some real science below the commercial, as you've indicated, but that part also sounds like junk finance; to sell the idea to consumers that they should in fact buy homes (instead of rent), and get loans from banks (preferably this one), and do anything to achieve that, if need be, even move in with their parents. This financial institution appears to have a sophisticated public relations marketing team doing their commercials-posing-as-news campaign(s). Very interesting to see the marketing beast morph itself into something so sophisticated, as to contain such clear imitation, junk science, and click-bait. I wonder what kind of penetration they are getting with this model, and what percentage of those see it for what it is. I suppose that would be a big-data question, answerable through analytics." }, { "docid": "76107", "title": "", "text": "Is my financial status OK? You have money for emergencies in the bank, you spend less than you earn. Yes, your status is okay. You will have a good standard of living if nothing changes from your status quo. How can I improve it? You are probably paying more in taxes than you would if you made a few changes. If you max out tax advantaged retirement accounts that would reduce the up-front taxes you are paying on your savings. Is now a right time for me to see a financial advisor? The best time to see a financial advisor is any time that your situation changes. New job? Getting married? Having a child? Got a big promotion or raise? Suddenly thinking about buying a house? Is it worth the money? How would she/he help me? If you pick an advisor who has incentive to help you rather than just pad his/her own pockets with commissions, then the advice is usually worth the money. If there is someone whose time is already paid for, that may be better. For example, if you get an accountant to help you with your taxes and ask him/her how to best reduce your taxes the next year, the advice is already paid-for in the fee you for the tax help. An advisor should help you minimize the high taxes you are almost certainly paying as a single earner, and minimize the stealth taxes you are paying in inflation (on that $100k sitting in the bank)." }, { "docid": "237043", "title": "", "text": "\"There are two ways that mortgages are sold: The loan is collateralized and sold to investors. This allows the bank to free up money for more loans. Of course sometime the loan may be treated like in the game of hot potato nobody want s to be holding a shaky loan when it goes into default. The second way that a loan is sold is through the servicing of the loan. This is the company or bank that collects your monthly payments, and handles the disbursement of escrow funds. Some banks lenders never sell servicing, others never do the servicing themselves. Once the servicing is sold the first time there is no telling how many times it will be sold. The servicing of the loan is separate from the collateralization of the loan. When you applied for the loan you should have been given a Servicing Disclosure Statement Servicing Disclosure Statement. RESPA requires the lender or mortgage broker to tell you in writing, when you apply for a loan or within the next three business days, whether it expects that someone else will be servicing your loan (collecting your payments). The language is set by the US government: [We may assign, sell, or transfer the servicing of your loan while the loan is outstanding.] [or] [We do not service mortgage loans of the type for which you applied. We intend to assign, sell, or transfer the servicing of your mortgage loan before the first payment is due.] [or] [The loan for which you have applied will be serviced at this financial institution and we do not intend to sell, transfer, or assign the servicing of the loan.] [INSTRUCTIONS TO PREPARER: Insert the date and select the appropriate language under \"\"Servicing Transfer Information.\"\" The model format may be annotated with further information that clarifies or enhances the model language.]\"" }, { "docid": "247709", "title": "", "text": "\"Short answer: No. Longer answer: The only reason to move would be to get out of the condo and into a SFR of equal cost because condos can be quite difficult to sell and you don't really want that potential burden later on. Moving is expensive though and you can't afford to spend more when you are already living on the financial edge. Speaking of living on the edge, that's a recipe for disaster. I make, ratio-wise, a similar sort of income. Even accounting for the generous college tuition, you should be able to save at least $20K per year...at a bare minimum. And if you were careful, I figure you should be able to save $40K/year. You need to figure out where you are dumping all of your money and cut WAY back on spending and focus entirely on saving money. 1) Stop eating out. Make your own meals. I average about $2 per meal per person - no junk food. Eating out is 6 to 30 times as expensive as making meals at home. Do the math: $10 * 2 people * number of times you eat out per week * 52 ($1,040 per year for each time/week!) vs $2 * 2 people * 21 (3 meals per day) * 52 ($4,368 per year for both of you...maximum). Now I know some meals are more expensive to prepare, but the math is not unrealistic - I spend about $140 per month on groceries and make the bulk of my own food. Eating out is sticker shock for me. The food I prepare is nutritionally balanced and complete. Now I'm not a complete health-nut. I love the occasional deep-fried treat or hamburger, but those are \"\"once every couple of months\"\" sort of things, which makes them special. 2) Stop going to Starbucks or wherever you habitually go. It takes fuel to get there. It's also expensive when you get there. Bring your own drink if you are hanging out with friends. 3) Drop golf. Or whatever expensive sport you are sinking money into. Invest in some cheap running clothes and focus on cardio-based workouts. Heart health is more important than anything else. If you can't live without your sport, then find an alternate sport that is \"\"equal\"\"-ish in challenge but a ton cheaper to play. For example, if you like playing golf, play discgolf instead (most cities have courses) - there's no cost beyond a couple of discs and the challenge is still there. 4) Drop entertainment. Movies at the theater are expensive. Drop your cable subscription (you are getting financially raped for $1,500/year). Get a Netflix subscription and find shows via free online streaming services. Buy some dominoes, card games, and a couple of classic board games. Keep entertainment simple and cheap. 5) Drop your cell phone's data plan. Republic Wireless is the only decent cellular provider and even their $12/month plan is living a luxury lifestyle. If you spend more than $10/month/person for phone service, you are spending too much. 6) Stop driving everywhere. Gas is expensive. Cars are expensive. If you have more than two cars, sell the extras. If your car is worth more than $20,000, sell it and get something cheaper. 7) Stop drinking alcohol. Alcohol impairs mental functions, is addictive, smells terrible, and is ridiculously expensive. There's no actual need to consume it either. By the way, don't go and make major financial changes without the wife's sign-off. Finances are the #1 reason for divorce. So get her \"\"OK\"\" on this stuff. Hopefully you already knew that. The above are just some common financial pitfalls where people sink thousands and thousand of dollars and gain nothing. You can still have a full and complete life with just a minimum of the above. There is no excuse for living on the edge financially. Your story is one I'm going to share with those who give me the same excuse because they are \"\"poor\"\". You are \"\"I want to punch you in the face\"\" wealthy and you spend every last penny because you think that's how money works. You are wrong. One final piece of advice: Find a financial adviser. It is clear to me that you've been managing money wrong your whole life. A financial adviser will look at your situation and help you far more than someone on the Internet ever can. If you attend a church, many churches have the excellent Crown Financial Ministries program available which teaches sound financial management principles. The education system doesn't show people how to manage money, but that's not an excuse either. Once you dig yourself out of the financial hole you've dug for yourself, you can pass the knowledge on how to correctly manage money onto other people.\"" }, { "docid": "489898", "title": "", "text": "\"Whenever you do paid work for a company, you will need to fill out some sort of paperwork so that the company knows how to pay you, and also how to report how much they paid you to the appropriate government agencies. You should not think of this as a \"\"hurdle\"\" and you shouldn't worry that you haven't been employed for a long time. The two most common ways a company pays an individual are via employee wages, or \"\"independent contractor\"\" payments. When you start a relationship with a company, if you are going to become an employee, then you will out a W4 form, and at the end of the year you will receive a W2 form. If you are an independent contractor, (which you would be considered in this case), you will fill out form W9 and at the end of the year you will receive a 1099. This is completely normal and you have nothing to worry about. All it means is that if you make more than a certain amount (typically $600) in a year, you will receive a 1099 in the mail or electronically. The 1099 form basically means that they are reporting that amount to the IRS, and it also helps you file your tax return by showing you all the numbers you need on one form. Please remember that when you are paid as an independent contractor, no taxes are withheld on your behalf, so you may owe some tax on the money you make. It's best to set aside some of your income so you are prepared to pay it come tax time next year.\"" }, { "docid": "83610", "title": "", "text": "\"I do a lot of my own legal work, even sued the IRS, and I always win**. I would not attempt to do this myself. I'd run straight to a tax professional***. But if I did attempt this myself... My position is that I did a 401K to IRA rollover in good faith. Such a rollover is perfectly common. eTrade saw the paperwork and knew I was rolling over a 401K, and knew or reasonably should have known this rollover would be to an IRA, since rolling over to a cash account is a completely insane act which no-one would ever do. I would gather and prepare to present every document that supports this notion in any way. I would then take a hard look at my documentation and see how well I can support that argument. Then I would research cases in tax court to see how the courts treated situations like yours. I would not roll over the money to another IRA account until I had done that. And I would move quickly. This is a hard problem and there are no pat answers. It depends a lot on the finer details. One last thing. Next time you do a move like this, start small. Move $2000 over. ** My real skill is swallowing my pride and knowing when I'm wrong. I settle those, and only fight the guaranteed winners. *** This is not the usual SE kneejerk of \"\"hire a professional\"\". I almost never do; but I would here. It's an arcane area. Also acting on a professional's advice is a \"\"get out of jail free\"\" card regarding penalties or punishments.\"" }, { "docid": "393934", "title": "", "text": "\"In terms of how to make your decision, here are some considerations. Comprehensive insurance often covers other perils besides collision, including fire, theft, hail or other weather damage, additional liability coverage etc. It may be worth looking at your specific policy to see what is covered. No matter what you do, make sure you have some form of personal liability coverage in case you are sued (doesn't necessarily need to be through the auto policy). While it can make financial sense to drop comprehensive coverage once you can afford to self-insure against collision, this will only be the case if you are certain that you can set aside dedicated savings that you would only need to dip in to in the case of a collision or other major loss. For example, if you only have $5-$10,000 in the bank, and you happen to lose your job, and then the next month you happen to be hit in an accident and the car is totaled, could you afford to replace the car out of pocket? I would recommend looking at dropping comprehensive insurance as similar to a \"\"DNR\"\" (do not resuscitate) order for your car, i.e. under no circumstances would you choose repair the car were it totaled or damaged. For example, if your car's exterior were badly damaged in a hail storm (but still ran fine), would you pay $500 or more to repair it, or would you simply get a new car? Ultimately, this is going to be a judgement call based on how much financial risk you want to take on. Personally, I would continue to pay the extra $300 per year for now in order to insure a $6-8,000 asset (5% of the asset value) However, in the next few years the resale value of your car will continue to decline. If in a few years the car were worth $1,500, I would probably not pay the same $300 a year (or 20% of the asset's value). When you should make that choice depends on how many more years of service you expect to get from the car, which is a very localized question. Hope that helps!\"" }, { "docid": "14997", "title": "", "text": "I could be wrong, but I doubt that Bernie started out with any intention of defrauding anyone, really. I suspect it began the first time he hit a quarter when his returns were lower than everyone else's, or at least not as high as he'd promised his investors they'd be, so he fudged the numbers and lied to get past the moment, thinking he'd just make up for it the next quarter. Only that never happened, and so the lie carried forward and maybe grew as things didn't improve as he expected. It only turned into a ponzi because he wasn't as successful at investing as he was telling his investors he was, and telling the truth would have meant the probability that he would have lost most of his clients as they went elsewhere. Bernie couldn't admit the truth, so he had to keep up the fiction by actually paying out returns that didn't exist, which required constantly finding new money to cover what he was paying out. The source of that money turned out to be new investors who were lured in by people already investing with Bernie who told them how great he was as a financial wizard, and they had the checks to prove it. I think this got so far out of hand, and it gradually dragged more and more people in because such things turn into black holes, swallowing up everything that gets close. Had the 2008 financial crisis not hit then Bernie might still be at it. The rapid downturns in the markets hit many of Bernie's investors with margin calls in other investments they held, so they requested redemptions from him to cover their calls, expecting that all of the money he'd convinced to leave with him really existed. When he realized he couldn't meet the flood of redemptions, that was when he 'fessed up and the bubble burst. Could he have succeeded by simple investing in Berkshire? Probably. But then how many people say that in hindsight about them or Amazon or Google, or any number of other stocks that turned out similarly? (grin) Taking people's money and parking it all in one stock doesn't make you a genius, and that's how Bernie wanted to be viewed. To accomplish that, he needed to find the opportunities nobody else saw and be the one to get there first. Unfortunately his personal crystal ball was wrong, and rather than taking his lumps by admitting it to his investors, his pride and ego led him down a path of deception that I'm sure he had every intention of making right if he could. The problem was, that moment never came. Keep in mind one thing: The $64 billion figure everyone cites isn't money that really existed in the first place. That number is what Bernie claimed his fund was worth, and it is not the amount he actually defrauded people out of. His actual cash intake was probably somewhere in the $20 billion range over that time. Everything else beyond that was nothing more than the fictionalized returns he was claiming to get for his clients. It's what they thought they had in the bank with him, rather than what was really there." } ]

[ { "docid": "424511", "title": "", "text": "Your asset mix should reflect your own risk tolerance. Whatever the ideal answer to your question, it requires you to have good timing, not once, but twice. Let me offer a personal example. In 2007, the S&P hit its short term peak at 1550 or so. As it tanked in the crisis, a coworker shared with me that he went to cash, on the way down, selling out at about 1100. At the bottom, 670 or so, I congratulated his brilliance (sarcasm here) and as it passed 1300 just 2 years later, again mentions how he must be thrilled he doubled his money. He admitted he was still in cash. Done with stocks. So he was worse off than had he held on to his pre-crash assets. For sake of disclosure, my own mix at the time was 100% stock. That's not a recommendation, just a reflection of how my wife and I were invested. We retired early, and after the 2013 excellent year, moved to a mix closer to 75/25. At any time, a crisis hits, and we have 5-6 years spending money to let the market recover. If a Japanesque long term decline occurs, Social Security kicks in for us in 8 years. If my intent wasn't 100% clear, I'm suggesting your long term investing should always reflect your own risk tolerance, not some short term gut feel that disaster is around the corner." } ]

[ { "docid": "83610", "title": "", "text": "\"I do a lot of my own legal work, even sued the IRS, and I always win**. I would not attempt to do this myself. I'd run straight to a tax professional***. But if I did attempt this myself... My position is that I did a 401K to IRA rollover in good faith. Such a rollover is perfectly common. eTrade saw the paperwork and knew I was rolling over a 401K, and knew or reasonably should have known this rollover would be to an IRA, since rolling over to a cash account is a completely insane act which no-one would ever do. I would gather and prepare to present every document that supports this notion in any way. I would then take a hard look at my documentation and see how well I can support that argument. Then I would research cases in tax court to see how the courts treated situations like yours. I would not roll over the money to another IRA account until I had done that. And I would move quickly. This is a hard problem and there are no pat answers. It depends a lot on the finer details. One last thing. Next time you do a move like this, start small. Move $2000 over. ** My real skill is swallowing my pride and knowing when I'm wrong. I settle those, and only fight the guaranteed winners. *** This is not the usual SE kneejerk of \"\"hire a professional\"\". I almost never do; but I would here. It's an arcane area. Also acting on a professional's advice is a \"\"get out of jail free\"\" card regarding penalties or punishments.\"" }, { "docid": "330379", "title": "", "text": "\"Oracle is the most prevalent software in the Banking and financial system, if not in the front end then on the back end. Oracle has made so much profit for the financial sector that they ended up acquiring SUN systems and now bundle their own hardware along with their software and databases. There is perhaps not a single bank in the world that does not use oracle in some form or another, be it AML, MIS, ERP or Core banking. It remains a mystery to me how the Heads of Banking and the Fed can sit in front of the senate banking committee and when asked \"\" What is your exposure?\"\" Their response was \"\"I don't know!!!\"\" Bankers are dumb by their very nature and cultivated to look the other way, but even for them and their corrupt single digit IQ, I think Oracle must really suck as a database if they could not run a simple sum query. Conclusion : Oracle colluded in the 2007 financial crisis and sucks as a database and financial system\"" }, { "docid": "393934", "title": "", "text": "\"In terms of how to make your decision, here are some considerations. Comprehensive insurance often covers other perils besides collision, including fire, theft, hail or other weather damage, additional liability coverage etc. It may be worth looking at your specific policy to see what is covered. No matter what you do, make sure you have some form of personal liability coverage in case you are sued (doesn't necessarily need to be through the auto policy). While it can make financial sense to drop comprehensive coverage once you can afford to self-insure against collision, this will only be the case if you are certain that you can set aside dedicated savings that you would only need to dip in to in the case of a collision or other major loss. For example, if you only have $5-$10,000 in the bank, and you happen to lose your job, and then the next month you happen to be hit in an accident and the car is totaled, could you afford to replace the car out of pocket? I would recommend looking at dropping comprehensive insurance as similar to a \"\"DNR\"\" (do not resuscitate) order for your car, i.e. under no circumstances would you choose repair the car were it totaled or damaged. For example, if your car's exterior were badly damaged in a hail storm (but still ran fine), would you pay $500 or more to repair it, or would you simply get a new car? Ultimately, this is going to be a judgement call based on how much financial risk you want to take on. Personally, I would continue to pay the extra $300 per year for now in order to insure a $6-8,000 asset (5% of the asset value) However, in the next few years the resale value of your car will continue to decline. If in a few years the car were worth $1,500, I would probably not pay the same $300 a year (or 20% of the asset's value). When you should make that choice depends on how many more years of service you expect to get from the car, which is a very localized question. Hope that helps!\"" }, { "docid": "244079", "title": "", "text": "Weren't they one of the healthy banks during the financial crisis? I wonder what keeps them ahead of the pack or if the actual J. P. Morgan had any advise that they still adhere to today. I'm sure being part of a powerful organization that has shaped the financial industry has it perks in terms of having insider knowledge of how the innards of the industry work." }, { "docid": "68980", "title": "", "text": "Anyone with a background in finance should have been well aware that the government would swoop in with a bailout of the major banks. Such a scenario was even discussed in money and banking textbooks pre financial crisis. Since I have no excess cash, and wad in senior year of college, I was unable to capitalize on that, but I did invest in the banks in market simulating games 😁" }, { "docid": "447502", "title": "", "text": "\"Chance presented me with the opportunities. Hard work enabled me to be prepared to take those opportunities when presented. Had the opportunities that I did take not presented themselves I was very prepared to move on to the next ones. I always say, \"\"I have backup plans for my backup plan's backup plan.\"\"\"" }, { "docid": "30382", "title": "", "text": "\"Well you're clearly misinformed. Read \"\"When the music stopped\"\" - so many factors went into the crisis. JPM did NOT need the bailout money. Regarding all banks failing, I think the financial system as a whole would've taken a massive hit with letting Lehman fail and not stepping in but to say that \"\"all banks\"\" would've failed is inaccurate. No one really knows how extreme the fallout would've been without the cash surge.\"" }, { "docid": "564007", "title": "", "text": "Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of FT.com T&amp;Cs and Copyright Policy. Email [email protected] to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour. https://www.ft.com/content/23ab8a02-5787-11e7-80b6-9bfa4c1f83d2?mhq5j=e1 By continuing to use this site you consent to the use of cookies on your device as described in our cookie policy unless you have disabled them. You can change your cookie settings at any time but parts of our site will not function correctly without them. Dismiss cookie message Accessibility helpSkip to navigationSkip to contentSkip to footer Financial Times MYFT HOME WORLD UK COMPANIES MARKETS OPINION WORK &amp; CAREERS LIFE &amp; ARTS Portfolio My Account HOME WORLD UK COMPANIES MARKETS OPINION WORK &amp; CAREERS LIFE &amp; ARTS MYFT Bank stress tests Add to myFT US banks pass first round of annual stress tests Clean bill of health from Federal Reserve opens door to increased shareholder payouts Read next Week in Review Week in Review, July 1 © AFP Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Email4 Save JUNE 22, 2017 by: Alistair Gray and Ben McLannahan in New York and Barney Jopson in Washington US banks have big enough capital buffers to keep trading through an economic meltdown, regulators said on Thursday, in a finding that improves their chances of boosting payouts to shareholders. In the first round of this year’s stress tests, the Federal Reserve probed how 34 banks would fare in a financial and economic slump in which the unemployment rate doubles and the stock market loses half its value. The central bank calculated that the banking sector would endure $493bn in losses in the simulated downturn. Yet officials concluded that the banks would emerge from the crash “well capitalised”, with cushions of shareholder funding still above the Fed’s minimum required levels. The largely upbeat results augur well for US banks as the Fed prepares to unveil the results of the tests’ second round next week, when investors will learn how much capital they can return through dividends and share buybacks. However, the figures released on Thursday do not foretell what the Fed will say about payouts, not least because regulators can approve or block US banks’ capital plans on qualitative as well as quantitative grounds. Lex Bank stress tests: chilled The once-vital check on the industry’s health is outliving its usefulness UBS analysts estimate that the four biggest by assets — JPMorgan, Bank of America, Citigroup and Wells Fargo — will be able to return a net $59.8bn this year, rising to $72.3bn in 2018. Citi and Morgan Stanley could be among about a dozen banks that will make requests to return more than 100 per cent of their annual earnings to shareholders, according to Goldman Sachs analysts. Despite the positive stress test results, not all investors would be comfortable with such a bonanza. Bill Hines, a fixed-income investment manager at Aberdeen Asset Management in Philadelphia, said the prospect of payouts in excess of profits “does scare us a little bit”. “If the safety blanket is pulled away . . . that may come to the detriment of capital and safety.” Across-the-board passes for the stress-test are “a good thing,” he said, as it shows that banks have rebuilt capital levels substantially since the crisis. “But from a creditor’s standpoint you don’t want to see all the profits go out the door.” While banks have already told the Fed what they propose to do on dividends and buybacks, they are now able to make more conservative payout plans if, based on the first-round results, they think it will reject them in the second round. Related article Regulators back Trump on looser financial rules Officials endorse Volcker rule revamp and bank relief from burden of ‘stress tests’ The regulator’s simulated downturn lasts for nine quarters. Banks’ overall loan losses and declines in capital under the worst crisis scenario were smaller than in last year’s stress tests, Fed officials said. Still, the test found that some banks would come close to breaching regulatory minimums during the meltdown on some metrics. For instance, Morgan Stanley’s “supplementary leverage ratio” — a new measure of financial strength that takes effect in 2018 — would drop as low as 3.8 per cent compared with a required level of 3 per cent. The results also drew attention to banks’ exposure to credit card lending. The Fed found banks would suffer the biggest losses in their card portfolios in the hypothetical crisis. Fed officials said that partly reflected a rapid expansion in the size of banks’ credit card assets and rising delinquency rates in the real world. Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web. Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Email4 Save Latest on Bank stress tests Week in Review Week in Review, July 1 Fed stress tests give $1.6bn boost to Buffett Fed gives nod to ‘payout party time’ for banks Lex US banks: feeling special Premium Stress tests clear big US banks for $100bn payout Read latest Week in Review Week in Review, July 1 Latest on Bank stress tests Add to myFT Week in Review Week in Review, July 1 US banks pass test; Google, Takata, Fox and M&amp;A also in the news Banks Fed stress tests give $1.6bn boost to Buffett Investor is one of the largest holders of US bank stocks and will reap big dividends Analysis Bank stress tests Fed gives nod to ‘payout party time’ for banks Buybacks and dividends set to soar after industry passes latest stress test Latest in Banks Add to myFT Central Banks BoE successfully tests new payment method ‘Interledger’ programme synchronises transactions between two central banks 3 HOURS AGO US banks US consumers set to be given power to sue banks Financial institutions express fury at CFPB proposal that could spur class actions UK banks BoE warns UK banks on accounting practices PRA chief Sam Woods says lenders should ‘expect questions’ on balance sheet trickery Follow the topics mentioned in this article JPMorgan Chase &amp; Co. Add to myFT Companies Add to myFT Banks Add to myFT Wells Fargo Add to myFT Citigroup, Inc. Add to myFT Follow the authors of this article Barney Jopson Add to myFT Alistair Gray Add to myFT Take a tour of myFT Support View Site Tips Feedback Help Centre About Us Accessibility Legal &amp; Privacy Terms &amp; Conditions Privacy Cookies Copyright Slavery Statement Services FT Live Share News Tips Securely Individual Subscriptions Group Subscriptions Republishing Contracts &amp; Tenders Analysts Research Executive Job Search Advertise with the FT Follow the FT on Twitter Ebooks UK Secondary Schools Tools Portfolio Today's Newspaper (ePaper) Alerts Hub Lexicon MBA Rankings Economic Calendar News feed Newsletters Currency Converter More from the FT Group Markets data delayed by at least 15 minutes. © THE FINANCIAL TIMES LTD 2017. FT and ‘Financial Times’ are trademarks of The Financial Times Ltd. The Financial Times and its journalism are subject to a self-regulation regime under the FT Editorial Code of Practice. CloseFinancial Times UK Edition Switch to International Edition Top sections Home World Show more World links UK Show more UK links Companies Show more Companies links Markets Show more Markets links Opinion Show more Opinion links Work &amp; Careers Show more Work &amp; Careers links Life &amp; Arts Show more Life &amp; Arts links Personal Finance Show more Personal Finance links Science Special Reports FT recommends Lex Alphaville EM Squared Lunch with the FT Video Podcasts Blogs News feed Newsletters myFT Portfolio Today's Newspaper (ePaper) Crossword Help Centre My Account Sign Out" }, { "docid": "468047", "title": "", "text": "Don't let tax considerations be the main driver. That's generally a bad idea. You should keep tax in mind when making the decision, but don't let it be the main reason for an action. selling the higher priced shares (possibly at a loss even) - I think it's ok to do that, and it doesn't necessarily have to be FIFO? It is OK to do that, but consider also the term. Long term gain has much lower taxes than short term gain, and short term loss will be offsetting long term gain - means you can lose some of the potential tax benefit. any potential writeoffs related to buying a home that can offset capital gains? No, and anyway if you're buying a personal residence (a home for yourself) - there's nothing to write off (except for the mortgage interest and property taxes of course). selling other investments for a capital loss to offset this sale? Again - why sell at a loss? anything related to retirement accounts? e.g. I think I recall being able to take a loan from your retirement account in order to buy a home You can take a loan, and you can also withdraw up to 10K without a penalty (if conditions are met). Bottom line - be prepared to pay the tax on the gains, and check how much it is going to be roughly. You can apply previous year refund to the next year to mitigate the shock, you can put some money aside, and you can raise your salary withholding to make sure you're not hit with a high bill and penalties next April after you do that. As long as you keep in mind the tax bill and put aside an amount to pay it - you'll be fine. I see no reason to sell at loss or pay extra interest to someone just to reduce the nominal amount of the tax. If you're selling at loss - you're losing money. If you're selling at gain and paying tax - you're earning money, even if the earnings are reduced by the tax." }, { "docid": "321944", "title": "", "text": "\"I don't understand how millenials could have gotten \"\"stuck\"\" in cities by the 2008 financial crisis. Cities are expensive AF and if your job goes away you do too after a short period. Back to mom and dad, typically, in the suburbs, typically.\"" }, { "docid": "382112", "title": "", "text": "Do some research on the Great Depression before you start spouting how insignificant the 2008 financial crisis was. I despise that the banks got the bailout, but you apparently have no idea how bad it would have gotten if they were permitted to fail in a cascade." }, { "docid": "129503", "title": "", "text": "\"You're conflating LLC with Corporation. They're different animals. LLC does not have \"\"S\"\" or \"\"C\"\" designations, those are just for corporations. I think what you're thinking about is electing pass through status with the IRS. This is the easiest way to go. The company can pay you at irregular intervals in irregular amounts. The IRS doesn't care about these payments. The company will show profit or loss at the end of the year (those payments to you aren't expenses and don't reduce your profit). You report this on your schedule C and pay tax on that amount. (Your state tax authority will have its own rules about how this works.) Alternatively you can elect to have the LLC taxed as a corporation. I don't know of a good reason why someone in your situation would do this, but I'm not an accountant so there may be reasons out there. My recommendation is to get an accountant to prepare your taxes. At least once -- if your situation is the same next year you can use the previous year's forms to figure out what you need to fill in. The investment of a couple hundred dollars is worthwhile. On the question of buying a home in the next couple of years... yes, it does affect things. (Pass through status? Probably doesn't affect much.) If all of your income is coming from self-employment, be prepared for hassles when you are shopping for a mortgage. You can ask around, maybe you have a friendly loan officer at your credit union who knows your history. But in general they will want to see at least two years of self-employment tax returns. You can plan for this in advance: talk to a couple of loan officers now to see what the requirements will be. That way you can plan to be ready when the time comes.\"" }, { "docid": "511139", "title": "", "text": "They'll never punish the people actually responsible. Because that would include people like current Treasury Secretary Jack Lew who was the Chief Operating Officer at Citigroup through the financial crisis. As much as I don't like the big banks, the current management, employees, and shareholders have very little to do with the fraud committed 7-10 years ago. If you put the previous generation of management in jail or if you bankrupt them with fines, then the current generation of management and employees will wise up and not do stupid/illegal shit. The settlement just shows the current generation that the next guy will pay for your crimes." }, { "docid": "237353", "title": "", "text": "Where was it reported that it was six figures per month? It isn't clear from the article what Mandiant's scope was that they were brought in under. I'm not even sure the way it reads that Mandiant found the Apache Struts-based breach while investigating the breach they were brought in for. Also, companies with an emphasis on IT like Equifax vary greatly in how they handle out-of-budget projects, and so far as I've read, it wasn't revealed how Mandiant's project was procured. Equifax is going to be a case study in business schools on the handling of this incident, and what not getting in front of a crisis looks like (for comparison, see how the Tylenol tampering was handled). Equifax should have reached out to all affected and said they automatically put a freeze on their records, and all affected now have an account created if they didn't already have an account, 7 years of free 100 freeze/unfreeze requests per year, 52 free credit report requests per year, and credit monitoring. If I was on the board, I would have told the CEO to make a generous offer to buy out LifeLock and put all affected onto their most comprehensive plan while working behind the scenes to revamp IT and information security, as well as rethink the industry. It would have been expensive as hell to do, but this is starting to grow into a Wells Fargo-scale career ending and industry-defining incident, and whatever cost savings they thought they got by cutting so many corners that enabled this breach and the weak response might get wiped out for the next 100 years of potential savings as odds increase weekly they'll be forced to adopt more regulatory oversight in the future. If they quietly get LifeLock's most comprehensive plan for all US federal and state legislators though, then they probably will escape real reform and might skate by on the weak response." }, { "docid": "429012", "title": "", "text": "\"The best answer to this is: Read the fine print on your credit card agreement. What is common, at least in the US, is that you can make any charges you want during a time window. When the date comes around that your statement balance is calculated, you will owe interest on any amount that is showing up as outstanding in your account. Example... To revise the example you gave, let's say Jan 1. your account balance was $0. Jan. 3rd you went out and spent $1,000. Your account statement will be prepared every XX days... usually 30. So if your last statement was Dec. 27th, you can expect your next statement to be prepared ~Jan.24 or Jan. 27. To be safe, (i.e. not accrue any interest charges) you will want to make sure that your balance shows $0 when your statement is next prepared. So back to the example you gave--if your balance showed $1,000... and you paid it off, but then charged $2,000 to it... so that there was now a new set of $2,000 charges in your account, then the bank would begin charging you interest when your next statement was prepared. Note that there are some cards that give you a certain number of days to pay off charges before accruing interest... it just goes back to my saying \"\"the best answer is read the fine print on your card agreement.\"\"\"" }, { "docid": "62047", "title": "", "text": "\"I think this question is perfectly on topic, and probably has been asked and answered many times. However, I cannot help myself. Here are some basics however: Personal Finance is not only about math. As a guy who \"\"took vector calculus just for fun\"\", I have learned that superior math skills do not translate into superior net worth. Personal finance is about 50% behavior. Take a look at the housing crisis, car loans, or payday lenders and you will understand that the desire to be accepted by others often trumps the math surrounding a transaction. Outline your goals What is it that you want in life? A pile of money or to retire early? What does your business look like? How much cash will you need? Do you want to own a ton of rental properties? How does all this happen (set intermediate goals). Then get on a budget A budget is a plan to spend your money in advance. Stick to it. From there you can see how much money you have to implement various goals. Are your goals to aggressive? This is really important as people have a tendency to spend more money then they have. Often times when people receive a bonus at work, they spend that one bonus on two or three times over. A budget will prevent this from happening. Get an Emergency Fund Without an emergency fund, you be subject to the financial whims of people involved in your own life and that of the broader marketplace. Once you have one, you are free to invest with impunity and have less stress in a world that deals out plenty. Bad things will happen to you financially, protect against them. The best first investments are simple: Invest in yourself. Find a way to make a very healthy income with upward mobility. Also get out and stay out of debt. These things are not sexy, but they pay off in the long run. The next best investment is also simple: Index funds. These become the bench mark for all other investments. If you do not stand a good chance of beating the S&P 500 index fund, why bother? Just dump the money in the fund and sleep well at night.\"" }, { "docid": "246191", "title": "", "text": "\"This is the best tl;dr I could make, [original](http://www.npr.org/2017/06/08/532036374/house-passes-bill-aimed-at-reversing-dodd-frank-financial-regulations) reduced by 89%. (I'm a bot) ***** &gt; In a near party-line vote, the House approved a bill, dubbed the Financial CHOICE Act, which scales back or eliminates many of the post-crisis banking rules. &gt; Financial reform advocates argue the CHOICE Act would leave the U.S. economy vulnerable to another financial crisis. &gt; &amp;quot;The Wrong Choice Act is a vehicle for Donald Trump&amp;#039;s agenda to get rid of financial regulation and help out Wall Street. It&amp;#039;s an invitation for another Great Recession, or worse,&amp;quot; said California Rep. Maxine Waters, currently the top Democrat on the House Financial Services Committee. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6g6pmq/pendant_ce_tempsla_la_maison_blanche_passe_une/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~139936 tl;drs so far.\"\") | [Theory](http://np.reddit.com/r/autotldr/comments/31bfht/theory_autotldr_concept/) | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **bank**^#1 **financial**^#2 **regulation**^#3 **Dodd-Frank**^#4 **bill**^#5\"" }, { "docid": "577940", "title": "", "text": "\"Credit cards are a reasonable if relatively expensive tool to gain liquidity. If you have $50k in liquid cash, you don't have a liquidity problem for credit to help you solve. You have 100 months of expenses in cash. I suppose you could see a balance as a motivational tool, but it's all stick and no carrot. Take the next part half seriously in the spirit of \"\"what if\"\" talking therapy: If you feel you need to be motivated to get back to work by the true risk of running out of cash, and take such advice from strangers on the internet, the traditional midlife crisis purchase is a sports car. At least have some fun in a (depreciating but resellable) asset instead of paying a financier's bonus in evaporated interest! If there is a luxury car tariff in your country, you may even be able to exploit a personal exemption if you drove in from the U.S. I suppose this advice could possibly get you booted from the family house as it'll probably come across as a seriously \"\"ugly American\"\" move though...\"" }, { "docid": "459906", "title": "", "text": "You're extremely fortunate to have $50k in CDs, no debt, and $3800 disposable after food and rent. Congrats. Here's how I would approach it. If you see yourself getting into a home in the next couple of years, stay safe and liquid. CDs (depending on the duration) fit that description. Because you have disposable income and you're young, you should be contributing to a Roth IRA. This will build in value and compound over your lifetime, so that when you're in your 70s you'll actually have a retirement. Financial planners love life insurance because that's how they make all their money. I have whole life insurance because its cash value will be part of my retirement. It may also cover my wife if I ever decide to get married. It may or may not make sense for you now depending on how soon you want to buy a home and home expensive they are in your zip code. Higher risk, higher reward- you can count on that. Keep the funds in the United States and don't try to get into any slick financial moves. If you have a school in town, see if you can take an Intro to Financial Planning class. It's extremely helpful for anyone with these kinds of questions." } ]

[ { "docid": "328556", "title": "", "text": "In the 2008 housing crash, cash was king. Cash can make your mortgage payment, buy groceries, utilities, etc. Great deals on bank owned properties were available for those with cash. Getting a mortgage in 2008-2011 was tough. If you are worried about stock market crashing, then diversification is key. Don't have all your investments in one mutual fund or sector. Gold and precious metals have a place in one's portfolio, say 5-10 percent as an insurance policy. The days of using a Gold Double Eagle to pay the property taxes are largely gone, although Utah does allow it. The biggest lesson I took from the crash is you cant have too much cash saved. Build up the rainy day fund." } ]

[ { "docid": "460398", "title": "", "text": "A somewhat provocative (but not unserious) proposal: Rent, don't buy a house to live in. In 2007/8, the thing that got many people in deep trouble is their mortgage. It's not a productive investment but a speculative bet on what was in fact a bubble and a class of assets that is notoriously slow to recover after a slump. Before thinking about your savings or buying into silly ideas about gold, you should realise that as a middle class worker, the biggest risk after a crisis is losing your job. Renting your accommodation means being able to downgrade or move very quickly and not being forced to sell a house at the worse possible time. If you really do need to liquidate some of your investments at a bad time, having a more diversified portfolio means that you are not losing everything to meet some short-term obligations. Assuming you're in the US, this means forgoing some nice tax advantages that might be too tempting to resist (I'm not so I am basing this on what I read on this site) but, bubbles aside, there is nothing that makes real estate a particularly good investment as such, especially if you also live in the house you're buying. You might very well come out on top but you expose yourself to several risks and are less prepared to face a crisis." }, { "docid": "445072", "title": "", "text": "I've tried to argue this to some close friends who bought homes, pre/post-crisis, if the crisis ever ended, they thought it was ridiculous. There is a clear fulcrum where renting makes more sense than buying, when appropriate inputs of data are entered into the model. I think Khan Academy did a good 10-minute run down on the subject and used a relatively good model, as well. Further than that, I read the first few paragraphs and stopped reading, it was a commercial. I was shocked. The entire thing up till' 2 paragraphs in is literally a commercial. The supposed 'antagonist', explicitly implied by the title isn't actually an antagonist, it's a click-bait commercial -article posing as a real article, (imitation), that actually might have some real science below the commercial, as you've indicated, but that part also sounds like junk finance; to sell the idea to consumers that they should in fact buy homes (instead of rent), and get loans from banks (preferably this one), and do anything to achieve that, if need be, even move in with their parents. This financial institution appears to have a sophisticated public relations marketing team doing their commercials-posing-as-news campaign(s). Very interesting to see the marketing beast morph itself into something so sophisticated, as to contain such clear imitation, junk science, and click-bait. I wonder what kind of penetration they are getting with this model, and what percentage of those see it for what it is. I suppose that would be a big-data question, answerable through analytics." }, { "docid": "167895", "title": "", "text": "Based on Dalio's interviews, he seems to think it's kind of too little too late. He said the Fed did a great job maneuvering out of the crisis, but then coasted for too long when they should have been tightening. Now it's too late and trying to play catch up might destabilize things to the point where they would be the *cause* of the next recession." }, { "docid": "449367", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.theguardian.com/business/2017/jul/15/top-1-of-households-in-uk-fully-recovered-from-financial-crisis) reduced by 89%. (I'm a bot) ***** &gt; New research from the Resolution Foundation showed that households with incomes of &amp;pound;275,000 or more quickly recovered from the impact of the deep recession and have seen their share of national income return to the level seen before the global banking system froze up in the summer of 2007. &gt; &amp;quot;Adam Corlett, senior economic analyst at the Resolution Foundation, said:&amp;quot;The incomes of the top 1% took a short, sharp hit following the financial crisis. &gt; The share of national disposable income for the richest 1% of households rose steadily after Margaret Thatcher became prime minister in 1979 and reached a peak of 8.5% on the eve of the financial crisis. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6njstj/top_1_of_households_in_uk_fully_recovered_from/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~167774 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **income**^#1 **year**^#2 **election**^#3 **Foundation**^#4 **standards**^#5\"" }, { "docid": "330379", "title": "", "text": "\"Oracle is the most prevalent software in the Banking and financial system, if not in the front end then on the back end. Oracle has made so much profit for the financial sector that they ended up acquiring SUN systems and now bundle their own hardware along with their software and databases. There is perhaps not a single bank in the world that does not use oracle in some form or another, be it AML, MIS, ERP or Core banking. It remains a mystery to me how the Heads of Banking and the Fed can sit in front of the senate banking committee and when asked \"\" What is your exposure?\"\" Their response was \"\"I don't know!!!\"\" Bankers are dumb by their very nature and cultivated to look the other way, but even for them and their corrupt single digit IQ, I think Oracle must really suck as a database if they could not run a simple sum query. Conclusion : Oracle colluded in the 2007 financial crisis and sucks as a database and financial system\"" }, { "docid": "446402", "title": "", "text": "\"Most of those countries had debt that was well beyond prudent levels (~70% of GDP) before the crisis, levels such that any crisis would put them over the safe limit and into trouble. The only exception was Spain whose debt levels were still marginally dangerous. Greece was off the charts, which is why they left off the graph for Greece. Second problem. On top of the high or marginal levels of government debt, the governments implicitly or explicitly guaranteed the banks, without limiting in any effective way their levels of leverage and risk (inb4 Basel II - a lot of paper that made no difference). Protip: if someone guarantees your debt, they should be able to oversee your level of risk, but the governments didn't. As a result these banks, and their CEOs in particular, have a bet that goes \"\"heads I win, tails I win (and you the taxpayer lose)\"\". If the loans are paid off the CEOs rake in millions. If the loans go bad the government bails them out and the CEOs and other top executives - you guessed it - rake in millions. Of course when faced with these incentives the banks will lend too much. This is not free market capitalism, it is crony capitalism. **Bailouts of private companies are not part of unfettered free market capitalism.** The third problem is that the same governments cannot print money like the US can because the Euro is not owned by the individual governments. The answer to excessive levels of government debt is for governments not to borrow too much and not to take on excessive unfunded liabilities such as pensions. This probably needs to be enforced by a constitutional amendment, so it can't be easily overruled. The answer to governments getting dragged into bailing out insolvent banks and then going under themselves, is to allow the banks to go under and to guarantee only small deposits. Let shareholders, bond holders and large (&gt;$500k) lenders to the banks to lose their money. Second, hold bank executives and shareholders liable for the bank's debts. Eg executive salaries and other remuneration need to be clawed back up to a 5 year window. Shareholders should be liable (as they used to be) for debts up to an additional 100% of the par value of the shares. I can assure you this would concentrate minds wonderfully - as it did in the old days when Wall St investment banks were partnerships with each partner liable for all the debts of the firm. Another alternative would be for governments to enforce limits on financial risk, but unfortunately they do not have the courage to do this, nor the morality to resist \"\"campaign contributions\"\" / bribes to look the other way. If these steps were taken the issue of the Euro currency would not be a problem. However printing money (which requires having your own currency) is a solution if it comes to that although it comes at the expense of people who have saved and invested prudently. Printing money (keeping interest rates excessively low for years on end) subsidizes borrowers - the ones who created the problem - at the expense of savers. Clearly this creates terribly perverse incentives the next time around. Anyone who thinks this problem is a result of unfettered free market capitalism is not paying attention.\"" }, { "docid": "271609", "title": "", "text": "I don't think there is a definite single answer for this. I think it largely depends on where you are on your financial journey. In the ideal world you'd have everything in bucket 2 built into your budget and be putting a little bit aside every paycheck to cover each of those things when they do come up but that takes a fair bit of discipline to do and experience (and data) to estimate reasonably. When you are just starting out in actually setting and keeping a budget or digging yourself out of CC debt/living paycheck to paycheck the odds are you aren't going to have the experience or disciple necessary to actually budget for those things in bucket 2 and even if you did the better option might well be to pay off that high interest debt you already have rather than saving up for an eventual expense. How ever as you start to improve your situation and pay off that debt, develop the disciple to set and follow a budget that is when you should start adding more of those things into your budget. How you track them doesn't really matter. A separate account at your bank. A total for a category in your budgeting software. An XLS file or even paper (ick). Ultimately it isn't about how you plan for and track things but more about actually doing that. So my question to the OP is where are you? If you already have a budget and do a good job of following it but don't have those items in it then consider that the next step in your financial journey." }, { "docid": "175692", "title": "", "text": "Here would be the big two you don't mention: Time - How much of your own time are you prepared to commit to this? Are you going to find tenants, handle calls if something breaks down, and other possible miscellaneous issues that may arise with the property? Are you prepared to spend money on possible renovations and other maintenance on the property that may occur from time to time? Financial costs - You don't mention anything about insurance or taxes, as in property taxes since most municipalities need funds that would come from the owner of the home, that would be a couple of other costs to note in having real estate holdings as if something big happens are you expecting a government bailout automatically? If you chose to use a property management company for dealing with most issues then be aware of how much cash flow could be impacted here. Are you prepared to have an account to properly do the books for your company that will hold the property or would you be doing this as an individual without any corporate structure? Do you have lease agreements printed up or would you need someone to provide these for you?" }, { "docid": "30340", "title": "", "text": "How do I get into Harvard Business School? I'm starting my first year in college next year and had to pass up Harvard (dream school) and two other ivies to go to my state school for financial reasons. I don't have to decide my major for two years. What should I do (classes, internships/work experience, major, etc.) to get into HBS? What tests do I need and what are the important parts of MBA application? Also, what jobs open up to someone with an MBA. I understand that this is a good way to get into Investment Banking? What level/salary would I start at and what other jobs/fields/companies do MBAs get hired for. What are other good business schools? How good is UVAs Darden?" }, { "docid": "588153", "title": "", "text": "A derivative is a financial instrument of a special kind, the kind “whose price depends on, or is derived from, another asset”. This definition is from John Hull, Options, Futures and Other Derivatives – a book definitely worth to own if you are curious about this, you can easily find old copies for a few dollars. The first point is that a derivative is a financial instrument, like credits, or insurances, the second point is that its price depends closely from the price of something else, the mentioned asset. In most cases derivatives can be understood as financial insurances against some risk bound to the asset. In the sequel I give a small list of derivatives and highlight the assets and the risk they can be bound to. And first, let me point out that the definition is (marginally) wrong because some derivatives depend on things which are not assets, nor do they have a price, like temperature, sunlight, or even your own life in the case of mortgages. But before going in this list, let me go through the remaining points of your question. What is the basic idea and concept behind a derivative? As already noted, in most cases, a derivative can be understood as a financial insurance compensating from a risk of some sort. In a classical insurance contract, one party of the contract is an insurance company, but in the broader case of a derivative, that counterparty can be pretty anything: an insurance, a bank, a government, a large company, and most probably market makers. How is it really used, and how does this deviate from the first point? Briefly, how does is it affecting people, and how is it causing problems? An important point with derivatives is that it can be arbitrarily complicated to compute their prices. Actually what is hidden in the attempt of giving a definition for derivatives, is that they are products whose price Y is a measurable function of one or several random variables X_1, X_2, … X_n on which we can use the theory of arbitrage pricing to get hints on the actual price Y of the asset – this is what the depends on means in technical terms. In the most favorable case, we obtain an easy formula linking Y to the X_is which tells us what is the price of our financial instrument. But in practice, it can be very difficult, if at all possible, to determine a price for derivatives. This has two implications: Persons possessing sophisticated techniques to compute the price of derivatives have a strategic advantage on derivatives market, in comparison to less advanced actors on the market. Organisation owning assets they cannot price cannot compute their bilan anymore, so that they cannot know for sure their financial situation. They are somehow playing roulette. But wait, if derivatives are insurances they should help to mitigate some financial risk, which precisely means that they should help their owners to more accurately see their financial situation! How is this not a contradiction? Some persons with sophisticated techniques to compute the price of derivatives are actually selling complicated derivatives to less knowledgeable persons. For instance, many communes in France and Germany have contracted credits whose reimbursements have a fixed interest part, like in a classical credit, and a variable interest part whose rate is computed against a complicated formula involving the value of the Swiss frank at each quarter starting from the inception of the credit. (So, for a 25 years running credit of theis type, the price Y of the credit at its inception depends on 100 Xs, which are the uncertain prices for the Swiss frank each quarter of the 25 next years.) Some of these communes can be quite small, with 5.000 inhabitants, and needless to say, do not have the required expertise to analyse the risks bound to such instruments, which in that special case led the court call the credit a swindling and to cancel the credit. But what chain of events leads a 5.000 inhabitants city in France to own a credit whose reimbursements depends on the Swiss frank? After the credit crunch in 2007 and the fall of Lehman Brothers in 2008, it has begun to be very hard to organise funding, which basically means to conclude credits running long in time on large amounts of money. So, the municipality needs a 25 years credit of 10.000.000 EUROS and goes to its communal bank. The communal bank has hundreds or thousands of municipalities looking for credits and needs itself a financing. So the communal bank goes to one of the five largest financial institutions in the world, which insists on selling a huge credit whose reimbursements have a variable part depending on hundred of values the Swiss frank will have in the 25 next years. Since the the big bank has better computation techniques than the small bank it makes a big profit. Since the small bank has no idea, how to compute the correct price of the credit it bought, it cuts this in pieces and sell it in the same form to the various communes it works with. If we were to attribute this kind of intentions to the largest five banks, we could ask about the possibility that they designed the credit to take advantage of the primitive evaluation methods of the small bank. We could also ask if they organised a cartel to force communal banks to buy their bermudean snowballs. And we could also ask, if they are so influent that they eventually can manipulate the Swiss frank to secure an even higher profit. But I will not go into this. To the best of my understanding, the subprime crisis is a play along the same plot, with different actors, but I know this latter subject only by what I could read in French newspapers. So much for the “How is it causing problems?” part. What is some of the terminology in relation to derivatives (and there meanings of course)? Answering this question is basically the purpose of the 7 first chapters of the book by Hull, along with deriving some important mathematical principles. And I will not copy these seven chapters here! How would someone get started dealing in derivatives (I'm playing a realistic stock market simulation, so it doesn't matter if your answer to this costs me money)? If you ask the question, I understand that you are not a professional, so that your are actually trying to become the one that has money and zero knowledge in the play I outlined above. I would recommand not doing this. That said, if you have a good mathematical background and can program well, once you are confindent with the books of Hull and Joshi, you can have fun implementing various market models and implementing trading strategies. Once you are confident with this, you can also read the articles on quantitative finance on arXiv.org. And once you are done with this, you can decide for yourself if you want to play the same market as the guys writing these articles. (And yes, even for the simplest options, they have better models than you have and will systematically outperform you in the long run, even if some random successes will give you the feeling that you do well and could do better.) (indeed, I've made it a personal goal to somehow lose every last cent of my money) You know your weapons! :) Two parties agree today on a price for one to deliver a commodity to the other at some future instant. This is a classical future contract, it can be modified in every imaginable way, usually by embedding options. For instance one party could have the option to choose between different delivery points or delivery days. Two parties write today a contract allowing the one party to buy at some future time a commodity to the the second party. The price is written today, as part of the contract. (There is the corresponding option entitling the owner to sell something.) Unlike the future contract, only one party can be obliged to do something, the other jas a right but no obligation. If you buy and option, your are buying some sort of insurance against a change of price on some asset. This is the most familiar to anybody. Credits can come in many different flavours, especially the formula to compute interests, or also embed options. Common options are early settlement options or restructuration options. While this is not completely inutitive, the credit works like an insurance. This is most easily understood from the side of the organisation lending the money, that speculates that the ratio of creanciers going bankrupt will be low enough for her to make profit, just like a fire insurance company speculates that the ratio of fire accidents will be low enough for her to make a profit. This is like a mortgage on a financial institution. Two parties agree that one will recive an upfront today and give a compensation to the second one if some third party defaults. Here this is an explicit insurance against the unfortuante event, where a creancier goes bankrupt. One finds here more or less standard options on electricity. But electricity have delicious particularities as it can practically not be stored, and fallout is also (usually) avoided. As for classical options, these are insurances against price moves. A swap is like two complementary credits on the same amount of money, so that it ends up in the two parties not actually exchanging the credit nominal and only paying interest one to the other — which makes only sense if these interests are computed with different formulas. Typical example are fixed rate vs. EURIBOR on some given maturity, which we interpret as an insurance against fluctuations of the EURIBOR, or a fixed rate vs. the exchange ratio between two currencies, which we interpret as an insurance against the two currencies decorrelating. Swaps are the richest and the most generic category of financial derivatives. The off-the-counter market features very imaginative, very customised insurance products. The most basic form is the insurance against drought, but you can image different dangers, and once you have it you can put it in options, in a swap, etc. For instance, a restaurant with a terrasse could enter in a weather insurance, paying each year a fixed amount of money and becoming in return an amount of money based on the amount of rainy day in a year. Actually, this list is virtually without limits!" }, { "docid": "305600", "title": "", "text": "With trillion dollar plus deficits, it's not like we're running an austerity program here. When you say sacrifice, compared to what? Two trillion dollar deficits? Your observation of constant predictions of imminent doom is valid. The timeline has been extended by a series of bubbles- market, housing, fiscal deficits... The shortcoming of doom prognosticators is that they underestimate the willingness of those in power to do whatever it takes to prolong the status quo, regardless of the long term consequences. The game is perpetuated by ever increasing debt, and government became the borrower of last resort once the rest of the economy was tapped out. The govt's ability to continue along this course in the open market is questionable as the Fed appears to be monetizing a large portion of newly issued debt. The end game is a currency crisis. It's nice to have a timeline accompanying a prediction, and critical for investing, but it is often very difficult to do, and in this case, it has been extremely difficult because the policy decisions have been rational from the perspective of elites maintaining their status, but not optimal from the standpoint of solving the problem. That doesn't mean the predictions are useless though. You could live in a flood zone and not be able to predict with accuracy when the next flood will occur, but that doesn't mean you shouldn't prepare. Given the uncertainty with timing this, it seems to me the best course of action is not to try to time it, especially with respect to investing based on market timing, but to prepare the best you can for what will inevitably eventually occur." }, { "docid": "76107", "title": "", "text": "Is my financial status OK? You have money for emergencies in the bank, you spend less than you earn. Yes, your status is okay. You will have a good standard of living if nothing changes from your status quo. How can I improve it? You are probably paying more in taxes than you would if you made a few changes. If you max out tax advantaged retirement accounts that would reduce the up-front taxes you are paying on your savings. Is now a right time for me to see a financial advisor? The best time to see a financial advisor is any time that your situation changes. New job? Getting married? Having a child? Got a big promotion or raise? Suddenly thinking about buying a house? Is it worth the money? How would she/he help me? If you pick an advisor who has incentive to help you rather than just pad his/her own pockets with commissions, then the advice is usually worth the money. If there is someone whose time is already paid for, that may be better. For example, if you get an accountant to help you with your taxes and ask him/her how to best reduce your taxes the next year, the advice is already paid-for in the fee you for the tax help. An advisor should help you minimize the high taxes you are almost certainly paying as a single earner, and minimize the stealth taxes you are paying in inflation (on that $100k sitting in the bank)." }, { "docid": "577940", "title": "", "text": "\"Credit cards are a reasonable if relatively expensive tool to gain liquidity. If you have $50k in liquid cash, you don't have a liquidity problem for credit to help you solve. You have 100 months of expenses in cash. I suppose you could see a balance as a motivational tool, but it's all stick and no carrot. Take the next part half seriously in the spirit of \"\"what if\"\" talking therapy: If you feel you need to be motivated to get back to work by the true risk of running out of cash, and take such advice from strangers on the internet, the traditional midlife crisis purchase is a sports car. At least have some fun in a (depreciating but resellable) asset instead of paying a financier's bonus in evaporated interest! If there is a luxury car tariff in your country, you may even be able to exploit a personal exemption if you drove in from the U.S. I suppose this advice could possibly get you booted from the family house as it'll probably come across as a seriously \"\"ugly American\"\" move though...\"" }, { "docid": "274945", "title": "", "text": "Investors hungry for returns are piling back into securities once tarnished by the financial crisis. Complex structured investments developed a bad reputation during the credit crunch. Ten years later, investors seeking yield are overcoming their skepticism and buying into securities that rely on financial engineering to juice returns. Volumes of CLOs, or collateralized loan obligations, hit a record $247 billion in the first nine months of the year, according to data from J.P. Morgan Chase JPM 1.59%▲ &amp; Co. Fueled by a wave of refinancings and nearly $100 billion in new deals, that far outpaces their recent full-year high of $151 billion in 2014 and the precrisis peak of $136 billion in 2006. The CLO boom is the latest sign of the ferocious hunt for yield permeating markets. Stellar performance over the past year has made CLOs increasingly hard to ignore for investors like insurance companies and pension funds. CLOs carve up a portfolio of bank loans to highly indebted companies into slices of securities with different levels of risk. The securities at the bottom of the CLO stack offer the highest potential source of returns, but they are also the first to absorb losses if there are defaults in the underlying loan portfolio. The more senior slices offer lower returns but are more insulated from losses. CLOs are often lumped together with other alphabet-soup acronyms of the financial crisis, such as more toxic CDOs, or collateralized debt obligations. But CLOs actually weathered the financial crisis well: Investors who bought at the top of the market in 2007 suffered paper losses, but there were no defaults at all for the highest-rated securities. That track record has helped boost CLOs’ appeal for investors with lingering concerns over scooping up more complex investments. . Taking off / Global CLO volumes “The demand for things like CLOs….is extraordinary,” said Rick Rieder, chief investment officer for global fixed income at BlackRock Inc. CLOs are one of the largest demand sources for the leveraged loan market, which has also been booming this year. Volumes of leveraged loans, often used by private-equity firms to fund buyouts, are on track to surpass their 2007 record, according to LCD, a unit of S&amp;P Global Market Intelligence. At the same time, investors have voiced concerns about companies’ rising leverage level, and weaker creditor protections. Within a CLO are different risk profiles: Investors in the most senior, AAA-rated piece of debt get paid first and are the most insulated from losses if defaults rise in the underlying loan portfolio. They also receive the skinniest returns. Slices of debt further down receive higher returns, but will suffer losses if defaults spike. At the bottom sits the equity tranche, the first loss-absorber and last to get paid, but the highest potential source of returns. A 2014 report from Standard &amp; Poor’s Ratings Services stated that AAA-rated and AA-rated CLO tranches incurred no losses at all between 1994 and 2013. Loss rates for lower-rated tranches, meanwhile, were low—just 1.1% for B-rated securities over that period. . Flying High / Market returns since J.P. Morgan recommended buying CLOs last July That doesn’t prevent some conservative investors from conflating the CLOs with the now-infamous CDOs, many of which were linked to subprime mortgages and spread and amplified losses in the U.S. housing market. One breed of CDOs are on a comeback path of their own, with more investors returning to them during an aging bull market. Many people were “burnt by these acronyms from the crisis,” said Zak Summerscale, head of credit fund management for Europe and Asia Pacific at Intermediate Capital Group . He is currently recommending that clients buy senior CLO tranches over investment-grade bonds. CLOs, like other types of securitizations, have been subject to greater regulation since the financial crisis. That includes forcing funds that manage a CLO to retain 5% of the securities, in an effort to align incentives with investors. That has “attracted additional capital into the market,” said Mike Rosenberg, a principal at alternative investment manager Tetragon. Assets under management in the “loan participation” sector—a proxy for funds that invest in CLOs—have grown 21% this year to $206 billion, according to Thomson Reuters Lipper. The pickup in CLOs has been a boon to banks weathering declines in trading revenues in the current low-volatility environment. Revenue from CLO-related activity at the top 12 global investment banks more than doubled over the first half of 2017 from a year earlier to almost $1 billion, according to financial consultancy Coalition. CLO investors have been handsomely rewarded in recent months. J.P. Morgan strategist Rishad Ahluwalia recommended clients buy CLOs last July as he thought they looked too cheap. Between then and the end of September, BB-rated CLO tranches returned 25.4%, compared with a 25.2% return for the technology-oriented Nasdaq stock index, according to his calculations. “CLOs have been an absolute home run,” said Mr. Ahluwalia, though he added such chunky returns aren’t repeatable. Analysts say CLOs got beaten down last year following a series of troubles in the underlying loan market, including distress in the energy sector. Some analysts think the strong rally in CLO tranches since then should give investors pause; others think the market has further to run. Renaud Champion, head of credit strategies at Paris-based hedge fund La Française Investment Solutions, likes AAA-rated CLO tranches but with a twist: leverage. Mr. Champion says he buys senior European CLO tranches and borrows money against them to increase the size of his position between five and 10 times. That can amplify gains—and losses—significantly. “The difference between now and a year ago is the availability of leverage,” he said. Bankers say only a small proportion of CLO buyers use leverage and emphasize that trades are subject to daily margin calls. That means investors have to post cash to cover mark-to-market losses on a position, which in turn limits how much they are willing to borrow. “The leverage in the system today is a fraction compared to precrisis,” said J.P. Morgan’s Mr. Ahluwalia. Write to Christopher Whittall at [email protected] Appeared in the October 23, 2017, print edition as 'Crisis-Era Securities Regain Investors’ Favor.'" }, { "docid": "137984", "title": "", "text": "\"We're in agreement, I just want retail investors to understand that in most of these types of discussions, the unspoken reality is the retail sector trading the market is *over*. This includes the mutual funds you mentioned, and even most index funds (most are so narrowly focused they lose their relevance for the retail investor). In the retail investment markets I'm familiar with, there are market makers of some sort or another for specified ranges. I'm perfectly fine with no market makers; but retail investors should be told the naked truth as well, and not sold a bunch of come-ons. What upsets me is seeing that just as computers really start to make an orderly market possible (you are right, the classic NYSE specialist structure was outrageously corrupt), regulators turned a blind eye to implementing better controls for retail investors. The financial services industry has to come to terms whether they want AUM from retail or not, and having heard messaging much like yours from other professionals, I've concluded that the industry does *not* want the constraints with accepting those funds, but neither do they want to disabuse retail investors of how tilted the game is against them. Luring them in with deceptively suggestive marketing and then taking money from those naturally ill-prepared for the rigors of the setting is like beating up the Downs' Syndrome kid on the short bus and boasting about it back on the campus about how clever and strong one is. If there was as stringent truth in marketing in financial services as cigarettes, like \"\"this service makes their profit by encouraging the churning of trades\"\", there would be a lot of kvetching from so-called \"\"pros\"\" as well. If all retail financial services were described like \"\"dead cold cow meat\"\" describes \"\"steak\"\", a lot of retail investors would be better off. As it stands today, you'd have to squint mighty hard to see the faintly-inscribed \"\"caveat emptor\"\" on financial services offerings to the retail sector. Note that depending upon the market setting, the definition of retail differs. I'm surprised the herd hasn't been spooked more by the MF Global disaster, for example, and yet there are some surprisingly large accounts detrimentally affected by that incident, which in a conventional equities setting would be considered \"\"pros\"\".\"" }, { "docid": "68980", "title": "", "text": "Anyone with a background in finance should have been well aware that the government would swoop in with a bailout of the major banks. Such a scenario was even discussed in money and banking textbooks pre financial crisis. Since I have no excess cash, and wad in senior year of college, I was unable to capitalize on that, but I did invest in the banks in market simulating games 😁" }, { "docid": "564007", "title": "", "text": "Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of FT.com T&amp;Cs and Copyright Policy. Email [email protected] to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour. https://www.ft.com/content/23ab8a02-5787-11e7-80b6-9bfa4c1f83d2?mhq5j=e1 By continuing to use this site you consent to the use of cookies on your device as described in our cookie policy unless you have disabled them. You can change your cookie settings at any time but parts of our site will not function correctly without them. Dismiss cookie message Accessibility helpSkip to navigationSkip to contentSkip to footer Financial Times MYFT HOME WORLD UK COMPANIES MARKETS OPINION WORK &amp; CAREERS LIFE &amp; ARTS Portfolio My Account HOME WORLD UK COMPANIES MARKETS OPINION WORK &amp; CAREERS LIFE &amp; ARTS MYFT Bank stress tests Add to myFT US banks pass first round of annual stress tests Clean bill of health from Federal Reserve opens door to increased shareholder payouts Read next Week in Review Week in Review, July 1 © AFP Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Email4 Save JUNE 22, 2017 by: Alistair Gray and Ben McLannahan in New York and Barney Jopson in Washington US banks have big enough capital buffers to keep trading through an economic meltdown, regulators said on Thursday, in a finding that improves their chances of boosting payouts to shareholders. In the first round of this year’s stress tests, the Federal Reserve probed how 34 banks would fare in a financial and economic slump in which the unemployment rate doubles and the stock market loses half its value. The central bank calculated that the banking sector would endure $493bn in losses in the simulated downturn. Yet officials concluded that the banks would emerge from the crash “well capitalised”, with cushions of shareholder funding still above the Fed’s minimum required levels. The largely upbeat results augur well for US banks as the Fed prepares to unveil the results of the tests’ second round next week, when investors will learn how much capital they can return through dividends and share buybacks. However, the figures released on Thursday do not foretell what the Fed will say about payouts, not least because regulators can approve or block US banks’ capital plans on qualitative as well as quantitative grounds. Lex Bank stress tests: chilled The once-vital check on the industry’s health is outliving its usefulness UBS analysts estimate that the four biggest by assets — JPMorgan, Bank of America, Citigroup and Wells Fargo — will be able to return a net $59.8bn this year, rising to $72.3bn in 2018. Citi and Morgan Stanley could be among about a dozen banks that will make requests to return more than 100 per cent of their annual earnings to shareholders, according to Goldman Sachs analysts. Despite the positive stress test results, not all investors would be comfortable with such a bonanza. Bill Hines, a fixed-income investment manager at Aberdeen Asset Management in Philadelphia, said the prospect of payouts in excess of profits “does scare us a little bit”. “If the safety blanket is pulled away . . . that may come to the detriment of capital and safety.” Across-the-board passes for the stress-test are “a good thing,” he said, as it shows that banks have rebuilt capital levels substantially since the crisis. “But from a creditor’s standpoint you don’t want to see all the profits go out the door.” While banks have already told the Fed what they propose to do on dividends and buybacks, they are now able to make more conservative payout plans if, based on the first-round results, they think it will reject them in the second round. Related article Regulators back Trump on looser financial rules Officials endorse Volcker rule revamp and bank relief from burden of ‘stress tests’ The regulator’s simulated downturn lasts for nine quarters. Banks’ overall loan losses and declines in capital under the worst crisis scenario were smaller than in last year’s stress tests, Fed officials said. Still, the test found that some banks would come close to breaching regulatory minimums during the meltdown on some metrics. For instance, Morgan Stanley’s “supplementary leverage ratio” — a new measure of financial strength that takes effect in 2018 — would drop as low as 3.8 per cent compared with a required level of 3 per cent. The results also drew attention to banks’ exposure to credit card lending. The Fed found banks would suffer the biggest losses in their card portfolios in the hypothetical crisis. Fed officials said that partly reflected a rapid expansion in the size of banks’ credit card assets and rising delinquency rates in the real world. Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web. Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Email4 Save Latest on Bank stress tests Week in Review Week in Review, July 1 Fed stress tests give $1.6bn boost to Buffett Fed gives nod to ‘payout party time’ for banks Lex US banks: feeling special Premium Stress tests clear big US banks for $100bn payout Read latest Week in Review Week in Review, July 1 Latest on Bank stress tests Add to myFT Week in Review Week in Review, July 1 US banks pass test; Google, Takata, Fox and M&amp;A also in the news Banks Fed stress tests give $1.6bn boost to Buffett Investor is one of the largest holders of US bank stocks and will reap big dividends Analysis Bank stress tests Fed gives nod to ‘payout party time’ for banks Buybacks and dividends set to soar after industry passes latest stress test Latest in Banks Add to myFT Central Banks BoE successfully tests new payment method ‘Interledger’ programme synchronises transactions between two central banks 3 HOURS AGO US banks US consumers set to be given power to sue banks Financial institutions express fury at CFPB proposal that could spur class actions UK banks BoE warns UK banks on accounting practices PRA chief Sam Woods says lenders should ‘expect questions’ on balance sheet trickery Follow the topics mentioned in this article JPMorgan Chase &amp; Co. Add to myFT Companies Add to myFT Banks Add to myFT Wells Fargo Add to myFT Citigroup, Inc. Add to myFT Follow the authors of this article Barney Jopson Add to myFT Alistair Gray Add to myFT Take a tour of myFT Support View Site Tips Feedback Help Centre About Us Accessibility Legal &amp; Privacy Terms &amp; Conditions Privacy Cookies Copyright Slavery Statement Services FT Live Share News Tips Securely Individual Subscriptions Group Subscriptions Republishing Contracts &amp; Tenders Analysts Research Executive Job Search Advertise with the FT Follow the FT on Twitter Ebooks UK Secondary Schools Tools Portfolio Today's Newspaper (ePaper) Alerts Hub Lexicon MBA Rankings Economic Calendar News feed Newsletters Currency Converter More from the FT Group Markets data delayed by at least 15 minutes. © THE FINANCIAL TIMES LTD 2017. FT and ‘Financial Times’ are trademarks of The Financial Times Ltd. The Financial Times and its journalism are subject to a self-regulation regime under the FT Editorial Code of Practice. CloseFinancial Times UK Edition Switch to International Edition Top sections Home World Show more World links UK Show more UK links Companies Show more Companies links Markets Show more Markets links Opinion Show more Opinion links Work &amp; Careers Show more Work &amp; Careers links Life &amp; Arts Show more Life &amp; Arts links Personal Finance Show more Personal Finance links Science Special Reports FT recommends Lex Alphaville EM Squared Lunch with the FT Video Podcasts Blogs News feed Newsletters myFT Portfolio Today's Newspaper (ePaper) Crossword Help Centre My Account Sign Out" }, { "docid": "588948", "title": "", "text": "Impossible to unwind. Its a monetary roach motel. They will try to raise rates and unwind their balance sheet until there is another financial crisis, to which there will be another round of QE that dwarfs the previous rounds. Unwinding has the real possibility of triggering another financial crisis. If the bond market turns bearish after a 30 year bull market I wouldnt want to be holding dollars." }, { "docid": "468047", "title": "", "text": "Don't let tax considerations be the main driver. That's generally a bad idea. You should keep tax in mind when making the decision, but don't let it be the main reason for an action. selling the higher priced shares (possibly at a loss even) - I think it's ok to do that, and it doesn't necessarily have to be FIFO? It is OK to do that, but consider also the term. Long term gain has much lower taxes than short term gain, and short term loss will be offsetting long term gain - means you can lose some of the potential tax benefit. any potential writeoffs related to buying a home that can offset capital gains? No, and anyway if you're buying a personal residence (a home for yourself) - there's nothing to write off (except for the mortgage interest and property taxes of course). selling other investments for a capital loss to offset this sale? Again - why sell at a loss? anything related to retirement accounts? e.g. I think I recall being able to take a loan from your retirement account in order to buy a home You can take a loan, and you can also withdraw up to 10K without a penalty (if conditions are met). Bottom line - be prepared to pay the tax on the gains, and check how much it is going to be roughly. You can apply previous year refund to the next year to mitigate the shock, you can put some money aside, and you can raise your salary withholding to make sure you're not hit with a high bill and penalties next April after you do that. As long as you keep in mind the tax bill and put aside an amount to pay it - you'll be fine. I see no reason to sell at loss or pay extra interest to someone just to reduce the nominal amount of the tax. If you're selling at loss - you're losing money. If you're selling at gain and paying tax - you're earning money, even if the earnings are reduced by the tax." } ]

[ { "docid": "460398", "title": "", "text": "A somewhat provocative (but not unserious) proposal: Rent, don't buy a house to live in. In 2007/8, the thing that got many people in deep trouble is their mortgage. It's not a productive investment but a speculative bet on what was in fact a bubble and a class of assets that is notoriously slow to recover after a slump. Before thinking about your savings or buying into silly ideas about gold, you should realise that as a middle class worker, the biggest risk after a crisis is losing your job. Renting your accommodation means being able to downgrade or move very quickly and not being forced to sell a house at the worse possible time. If you really do need to liquidate some of your investments at a bad time, having a more diversified portfolio means that you are not losing everything to meet some short-term obligations. Assuming you're in the US, this means forgoing some nice tax advantages that might be too tempting to resist (I'm not so I am basing this on what I read on this site) but, bubbles aside, there is nothing that makes real estate a particularly good investment as such, especially if you also live in the house you're buying. You might very well come out on top but you expose yourself to several risks and are less prepared to face a crisis." } ]

[ { "docid": "594226", "title": "", "text": "Edit: This is paywalled so I pasted it here. LONDON—The synthetic CDO, a villain of the global financial crisis, is back. A decade ago, investors’ bad bets on collateralized debt obligations helped fuel the crisis. Billed as safe, they turned out to be anything but. Now, more investors are returning to CDOs—and so are concerns that excess is seeping into the aging bull market. In the U.S., the CDO market sunk steadily in the years after the financial crisis but has been fairly flat since 2014. In Europe, the total size of market is now rising again—up 5.6% annually in the first quarter of the year and 14.4% in the last quarter of 2016, according to the Securities Industry and Financial Markets Association. Collateralized debt obligations package a bunch of assets, such as mortgage or corporate loans, into a security that is chopped up into pieces and sold to investors. The assets inside a synthetic CDO aren’t physical debt securities but rather derivatives, which in turn reference other investments such as loans or corporate debt. During the financial crisis, synthetic CDOs became a symbol of the financial excesses of the era. Labelled an “atomic bomb” in the movie “The Big Short,” they ultimately were the vehicle that spread the risks from the mortgage market throughout the financial system. Synthetic CDOs crammed with exposure to subprime mortgages—or even other CDOs—are long gone. The ones that remain contain credit-default swaps referencing a range of European and U.S. companies, effectively allowing investors to bet whether corporate defaults will pick up. Desperate for something that pays better than basic government bonds, insurance companies, asset managers and high-net worth investors are scooping up investments like synthetic CDOs, bankers say, which had largely become the preserve of hedge funds after 2008. Investment banks, which create and sell CDOs, are happy to oblige. Placid markets have made trading revenue weak this year, and such structured products are an increasingly important business line. Synthetic CDOs got “bad press,” says Renaud Champion, head of credit strategies at Paris-based hedge fund La Française Investment Solutions. But “that market has never ceased to fully function,” he added. These days, Mr. Champion still trades synthetic CDOs, receiving a stream of income for effectively insuring against a sharp rise in European corporate defaults. Many investors, though, still view the products as unnecessarily complex and are concerned they may be hard to offload when markets get choppy—as they did in the last crisis. From the DepthsThe amount outstanding of European collateralized debt obligations has been growing again after years of shrinking. “We don’t see that demand from our clients and we wouldn’t recommend it,” said Markus Stadlmann, chief investment officer at Lloyds Private Banking, citing concerns over the products’ lack of transparency and lack of liquidity, meaning it could be hard to offload a position when needed. The return of synthetic CDOs could present other risks. Even if banks are currently less willing to loan money to help clients juice returns, credit default swaps can be very leveraged, potentially allowing investors to make outsize bets. Structured products accounted for nearly all the $2.6 billion year-on-year growth in trading-division revenue at the top 12 global investment banks in the first quarter, according to Amrit Shahani, research director at financial consultancy Coalition. “There has been an uptick in interest in any kind of yield-enhancement structure,” said Kokou Agbo-Bloua, a managing director in Société Générale SA’s investment bank. The fastest growth this year has come in credit—the epicenter of the 2007-08 crisis. The top global 12 investment banks had around $1.5 billion in revenue in structured credit in the first quarter, according to Coalition, more than doubling since the first quarter of 2016. Structured equities are largest overall, a business dominated by sales of derivatives linked to moves in stock prices, with revenue of $5 billion in the first quarter. “The low-yield environment hurts,” said Lionel Pernias, a credit-fund manager at AXA Investment Managers. “So there are a lot of asset owners looking at structured credit.” These days, the typical synthetic CDO involves a portfolio of credit-default swaps on a range of companies. The portfolio is sliced into tranches, and investors receive payouts based on the performance of the swaps. Those investors owning lower tranches tend to get paid more but are subject to higher losses if the swaps sour. Structured GrowthBank revenues from structured products such as collateralized debt obligations are rising faster than conventionaltrading of stocks, bonds and currencies. For instance, an investor can sell insurance against a pick-up in defaults in the lowest—or “equity”—tranche of the iTraxx Europe index, a widely traded CDS benchmark that tracks European investment-grade companies. In return, the investor will receive regular payments, but those will shrink with every company default and stop altogether once 3% of the portfolio has been wiped out through defaults. During the financial crisis, synthetic CDOs based on standardized indexes like iTraxx Europe suffered losses as traders expected defaults to pick up. Investors who held on, though, have since done “great,” says Mr. Champion. Investors who agreed to insure against a rise in defaults for 10 years on the equity tranche of the iTraxx Europe index in March 2008 have made roughly 10% a year, according to an analysis of data from IHS Markit . That’s despite defaults from two companies in the index: Italian lender Monte dei Paschi di Siena and Portugal Telecom International Finance BV. In contrast, investors who sold insurance on tailored CDOs packed with riskier credits—such as Icelandic banks or monoline insurers—would have been on the hook for losses. Synthetic CDOs have evolved since the crisis, bankers say. For instance, most are shorter-dated, running up to around two to three years rather than seven to 10 years. Some banks will only slice and dice standardized CDS indexes that trade frequently in the market rather than craft tailored baskets of credits. There are also fewer banks involved in arranging these trades. Those active include BNP Paribas SA, Citigroup Inc., Goldman Sachs Group Inc., J.P. Morgan Chase &amp; Co. and Société Générale. Postcrisis regulations have forced banks to set aside more capital against these transactions and use less leverage. That has encouraged banks to parcel out the risk to clients rather than keeping it on their own books. “There is a lot more regulation and scrutiny and a lot less leverage,” said Mr. Agbo-Bloua. Mr. Champion says he only trades tranches based on standardized CDS indexes, which he says are easier to buy and sell than more tailored products. Currently, he sees value in selling default protection on super-senior tranches. Mr. Champion said he has to lay down only around $1 million in upfront margin costs on a $100 million trade of this kind. “The cost of leverage in the derivatives space is very low,” he said. Any expectations of default rates picking up could inflict losses on synthetic CDOs, though at the moment analysts forecast they should decline. Still, the memory of how the market behaved in the immediate aftermath of the financial crisis is likely to keep many investors on the sidelines. “If you’re the person responsible for buying the synthetic CDO that suddenly goes wrong, your career risk is bigger than if you’d bought a plain vanilla bond that goes wrong. It has a bad name,” said Ulf Erlandsson, a portfolio manager at start-up hedge fund Glacier Impact, who until recently oversaw credit for one of Sweden’s public pension funds." }, { "docid": "343457", "title": "", "text": "\"What could a small guy with $100 do to make himself not poor? The first priority is an emergency fund. One of the largest expenses of poor people are short-term loans for emergencies. Being able to avoid those will likely be more lucrative than an S&P investment. Remember, just like a loan, if you use your emergency fund, you'll need to refill it. Be smart, and pay yourself 10% interest when you do. It's still less than you'd pay for a payday loan, and yet it means that after every emergency you're better prepared for the next event. To get an idea for how much you'd need: you probably own a car. How much would you spend, if you suddenly had to replace it? That should be money you have available. If you think \"\"must\"\" buy a new car, better have that much available. If you can live with a clunker, you're still going to need a few K. Having said that, the next goal after the emergency fund should be savings for the infrequent large purchases. The emergency fund if for the case where your car unexpectedly gets totaled; the saving is for the regular replacement. Again, the point here is to avoid an expensive loan. Paying down a mortgage is not that important. Mortgage loans are cheaper than car loans, and much cheaper than payday loans. Still, it would be nice if your house is paid when you retire. But here chances are that stocks are a better investment than real estate, even if it's the real estate you live in.\"" }, { "docid": "305901", "title": "", "text": "\"It's a problem from hell because all solutions have drawbacks/unintended consequences and because they are all pretty complex to implement in practice. Breaking up the big banks so that no bank is enough to bring down the economy with it is the strongest move, but is riddled with problems when you start looking at it practically. How do you determine the \"\"maximum size\"\" a bank should have? Should it be based on assets? Systemic importance (i.e. interconnectedness with other banks)? How do you enforce it? Banks will find ways to offload assets, etc. into special purpose corporations to get around the laws somehow. How do you compensate for the fact that size does help financial efficiency in some ways? Imposing higher capital requirements is the next solution. But that too is not so easy to implement with full success in practice. What should be classified as a low-risk asset? How much capital do you require against a CDO vs a Mexican government bond? How often do you need to revise these standards? At what point does the cost of higher capital requirements start to strangle lending and financial flows? The weaker maneuvers are things like constant government-imposed stress tests, orderly resolution mechanisms, higher standards for internal risk management practices, etc. but those may not be adequate and also have their implementation problems.\"" }, { "docid": "173566", "title": "", "text": "I haven't read this article, but the most pressing question I have from the headline is the timeline. We all know that triple-a rated CDOs were horrific in the financial crisis. How about ones that have been created in the past couple of years?" }, { "docid": "588948", "title": "", "text": "Impossible to unwind. Its a monetary roach motel. They will try to raise rates and unwind their balance sheet until there is another financial crisis, to which there will be another round of QE that dwarfs the previous rounds. Unwinding has the real possibility of triggering another financial crisis. If the bond market turns bearish after a 30 year bull market I wouldnt want to be holding dollars." }, { "docid": "468047", "title": "", "text": "Don't let tax considerations be the main driver. That's generally a bad idea. You should keep tax in mind when making the decision, but don't let it be the main reason for an action. selling the higher priced shares (possibly at a loss even) - I think it's ok to do that, and it doesn't necessarily have to be FIFO? It is OK to do that, but consider also the term. Long term gain has much lower taxes than short term gain, and short term loss will be offsetting long term gain - means you can lose some of the potential tax benefit. any potential writeoffs related to buying a home that can offset capital gains? No, and anyway if you're buying a personal residence (a home for yourself) - there's nothing to write off (except for the mortgage interest and property taxes of course). selling other investments for a capital loss to offset this sale? Again - why sell at a loss? anything related to retirement accounts? e.g. I think I recall being able to take a loan from your retirement account in order to buy a home You can take a loan, and you can also withdraw up to 10K without a penalty (if conditions are met). Bottom line - be prepared to pay the tax on the gains, and check how much it is going to be roughly. You can apply previous year refund to the next year to mitigate the shock, you can put some money aside, and you can raise your salary withholding to make sure you're not hit with a high bill and penalties next April after you do that. As long as you keep in mind the tax bill and put aside an amount to pay it - you'll be fine. I see no reason to sell at loss or pay extra interest to someone just to reduce the nominal amount of the tax. If you're selling at loss - you're losing money. If you're selling at gain and paying tax - you're earning money, even if the earnings are reduced by the tax." }, { "docid": "441893", "title": "", "text": "Not really my field but this is how I see the impact Disadvantages for banks : not being able to chose where they park assets/cash they have been trusted with which mean lower income from investing those disadvantage for banks shareholders : less earnings disadvantage for the economy : harder criteria to lend, lower loan growth advantage for the economy : (theoretically) less risks of liquidity crunch and financial crisis" }, { "docid": "293173", "title": "", "text": "\"This is the best tl;dr I could make, [original](http://www.reuters.com/article/us-usa-fed-yellen-idUSKBN19I2I5) reduced by 64%. (I'm a bot) ***** &gt; LONDON U.S. Federal Reserve Chair Janet Yellen said on Tuesday that she does not believe that there will be another financial crisis for at least as long as she lives, thanks largely to reforms of the banking system since the 2007-09 crash. &gt; Yellen said it would &amp;quot;Not be a good thing&amp;quot; if reforms of the financial services industry since the crisis were unwound, and urged those who had helped manage the fallout at the time to be vocal in preventing such a dilution. &gt; Yellen declined to comment when asked about her relationship with Trump but said she had a good working relationship with U.S. Treasury Secretary Steve Mnuchin. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6jys86/feds_yellen_expects_no_new_financial_crisis_in/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~154464 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **U.S.**^#1 **Yellen**^#2 **bank**^#3 **crisis**^#4 **financial**^#5\"" }, { "docid": "480443", "title": "", "text": "Can someone who understands this part of the business explain what exactly happened and how they benefited? I have read a few articles, and I don't really understand. I work in a bank, and seeing how some other aspects of the financial crisis were portrayed in the news, I have a feeling the whole story isn't being told. How could this have possibly gone on undetected?" }, { "docid": "237043", "title": "", "text": "\"There are two ways that mortgages are sold: The loan is collateralized and sold to investors. This allows the bank to free up money for more loans. Of course sometime the loan may be treated like in the game of hot potato nobody want s to be holding a shaky loan when it goes into default. The second way that a loan is sold is through the servicing of the loan. This is the company or bank that collects your monthly payments, and handles the disbursement of escrow funds. Some banks lenders never sell servicing, others never do the servicing themselves. Once the servicing is sold the first time there is no telling how many times it will be sold. The servicing of the loan is separate from the collateralization of the loan. When you applied for the loan you should have been given a Servicing Disclosure Statement Servicing Disclosure Statement. RESPA requires the lender or mortgage broker to tell you in writing, when you apply for a loan or within the next three business days, whether it expects that someone else will be servicing your loan (collecting your payments). The language is set by the US government: [We may assign, sell, or transfer the servicing of your loan while the loan is outstanding.] [or] [We do not service mortgage loans of the type for which you applied. We intend to assign, sell, or transfer the servicing of your mortgage loan before the first payment is due.] [or] [The loan for which you have applied will be serviced at this financial institution and we do not intend to sell, transfer, or assign the servicing of the loan.] [INSTRUCTIONS TO PREPARER: Insert the date and select the appropriate language under \"\"Servicing Transfer Information.\"\" The model format may be annotated with further information that clarifies or enhances the model language.]\"" }, { "docid": "124149", "title": "", "text": "&gt;Note from the Editor: Hyperinflation is becoming more visible every day—just notice the next time you shop for groceries. All signs say America’s economic recovery is expected to take a nose dive and before it gets any worse you should read The Uncensored Survivalist. This book contains sensible advice on how to avoid total financial devastation and how to survive on your own if necessary. Click here for your free copy If someone includes this kind of stuff on their website, I assume whatever they say is probably uninformed at best." }, { "docid": "459906", "title": "", "text": "You're extremely fortunate to have $50k in CDs, no debt, and $3800 disposable after food and rent. Congrats. Here's how I would approach it. If you see yourself getting into a home in the next couple of years, stay safe and liquid. CDs (depending on the duration) fit that description. Because you have disposable income and you're young, you should be contributing to a Roth IRA. This will build in value and compound over your lifetime, so that when you're in your 70s you'll actually have a retirement. Financial planners love life insurance because that's how they make all their money. I have whole life insurance because its cash value will be part of my retirement. It may also cover my wife if I ever decide to get married. It may or may not make sense for you now depending on how soon you want to buy a home and home expensive they are in your zip code. Higher risk, higher reward- you can count on that. Keep the funds in the United States and don't try to get into any slick financial moves. If you have a school in town, see if you can take an Intro to Financial Planning class. It's extremely helpful for anyone with these kinds of questions." }, { "docid": "447385", "title": "", "text": "\"The United Nations is already working on stripping us of our world reserve currency status. So are the BRICs. People think we need to maintain the status quo and give a specific country the world reserve currency. There are serious discussions to create a \"\"neutral\"\" global currency so no country has an edge. I found a lot of posts on the topic, but am linking to a really interesting post from a well known publication http://www.nypost.com/p/news/opinion/opedcolumnists/how_us_debt_risks_dollar_doomsday_j8dxHSYWUa22QpSN7ttOIL: &gt;The US dollar is getting perilously close to losing its status as the world’s reserve currency. Should it cross the line, the 2008 financial crisis could look like a summer storm. Yes, worries about insolvency in Europe dominate the headlines. Last week, Standard &amp; Poor’s cut Spain’s bond rating to BBB+ — a clear sign that Europe’s financial crisis is far from over. But America’s escalating debt problem is far more likely to precipitate a truly global crisis, because the dollar has for decades played such a central role in the world economy. How bad is the US problem? Former Treasury official Lawrence Goodman recently pointed out that investors are shunning US bonds and notes; the lack of other buyers forced the Federal Reserve to buy “a stunning . . . 61 percent of the total net issuance of US government debt” last year. Like many others, he warns that ballooning debt puts the US economy at risk for a sharp correction. REUTERS The greenback’s losing to the yuan. But the even larger risk is the potential loss of the dollar’s “reserve currency” status — a key support of the world economy for the last four decades. It started with the 1973 Saudi commitment to accept only US dollars as payment for oil, followed by OPEC’s 1975 agreement to trade only in dollars. Trading of other commodities came to be priced in dollars, reinforcing the dollar’s “reserve” status. As a result, central banks worldwide have held onto large reserves of dollars to facilitate trade. That, in turn, has enabled the US to print much larger amounts of its currency, with seemingly little inflationary consequences. It’s also made it easier for Americans to import more than they export, to consume more than they produce, and to spend more than they earn. But all that is changing rapidly. A number of countries are abandoning the dollar for the Chinese yuan. Last December, Japan and China agreed to trade in yen and yuan. In January, the 10 nations of the Association of Southeast Asian Nations finalized a non-dollar credit agreement equivalent to $240 billion, strengthening their economies’ links with China, Japan and South Korea. That same month, Chinese Premier Wen Jiabao signed a currency-swap agreement with the United Arab Emirates, which holds 7 percent of the world’s oil reserves. Iran has agreed to accept rubles and yuan in trade with Russia and China, and now is trading oil with India in rupees and gold. In late March, the China Development Bank agreed with its counterparts in Brazil, Russia, India and South Africa to eschew dollar lending and extend credit to each other in their own respective currencies. With global demand for dollars falling, central banks around the world will inevitably reduce their dollar reserves. That selloff further weakens the dollar against other currencies and in turn drives up inflation. All this comes as US federal debt is soaring, adding to concerns about the future value of that debt and of the dollar. It’s suddenly much easier to imagine a dollar collapse — which would be a highly unexpected occurrence, known as a “black swan” event. This would precipitate unprecedented disruption, because the dollar remains the world’s most important currency. Let’s hope we can avert a global crisis triggered by reckless US government spending. What’s needed is new leadership in Washington with the courage to get our fiscal house in order and to defend the dollar against attack in a competitive global market. Here is another opinion on the topic http://seekingalpha.com/article/475381-reserve-currency-china-sun-rises-u-s-sun-sets. Edit: Let me add if we are constantly adding stimulus from the central banks, we are going to be seriously jeopardizing the faith the rest of the world has in us as well. The Fed was the buyer of what like 10% of our bonds before the crisis? Now they are buying 60%. We have using quantitative easing and stimulus for three years to fix the economy. If we were suddenly having a riproarding recovery that would be fine because people would know we would be ready to start paying down our debts. However, we have spent trillions and our GDP growth is about two thirds the average since 1947. That's a sign that there is something perilously wrong with our economy right now. Clearly not an argument to end stimulus, because without it we would be in a major depression. The problem is that once people realize that they will question how stable our economy really is. Your argument that we are the most stable economy in the world and deserve the reserve currency status is circular logic. We have had the reserve currency status since 1944. That has helped us maintain the stability the rest of the world hasn't enjoyed for a very long time. Without it we may never have become anything near the country we are today. It gave us access to tremendous capital which we were able to use to expand our nation incredibly. We have built an empire on our ability to take on massive amounts of debt. I am sure we would have been a superpower without it, but no one can say how much humbler or how harder other recessions would have been if we had never been granted that privilege.\"" }, { "docid": "18631", "title": "", "text": "As much as people on the internet and ZH-like blogs like to harp on auto deliquencies and other narrow metrics as broader statements about how life around us is all a sham, I feel this article does a good job at discussing the mitigants here. Notably: 1) that the sub-prime auto market is rather small, so while delinquencies may rise it won't represent a catalyst for a broader financial crisis. 2) The securitized products Santander and others are putting together are structured in a way to account for these defaults and loss rates, so while the relative uptick in default rates is interesting to note, it doesn't necessarily spell doom in absolute terms. 3) The fact that many auto dealers don't verify income isn't uncommon and in fact an industry standard practice due to point #2 above. The statement these dealers have been lying about incomes and/or is not verifying incomes certainly pulls at the heart strings of the 2008 Housing Crisis, but when discussed within the context of how the auto lending market works, it isn't nearly as scary as those statements would suggest in isolation." }, { "docid": "167895", "title": "", "text": "Based on Dalio's interviews, he seems to think it's kind of too little too late. He said the Fed did a great job maneuvering out of the crisis, but then coasted for too long when they should have been tightening. Now it's too late and trying to play catch up might destabilize things to the point where they would be the *cause* of the next recession." }, { "docid": "206683", "title": "", "text": "Here's a good link that can answer your question: How to take delivery of a futures contract The relevant part states: Prior to delivery day, they inform customers who have open long positions that they must either close out the position or prepare to take delivery and pay the full value of the underlying contract. By the same token traders with short positions are informed that they must close out their trades or prepare to deliver the underlying commodity. In this case, they must have the required quantity and quality of the deliverable commodity on hand. On the few occasions that a buyer accepts delivery against his futures contract, he is usually not given the underlying commodity itself (except in the case of financials), but rather a receipt entitling him to fetch the hogs, wheat, or corn from warehouses or distribution points. I hope this helps. Good luck!" }, { "docid": "321944", "title": "", "text": "\"I don't understand how millenials could have gotten \"\"stuck\"\" in cities by the 2008 financial crisis. Cities are expensive AF and if your job goes away you do too after a short period. Back to mom and dad, typically, in the suburbs, typically.\"" }, { "docid": "393934", "title": "", "text": "\"In terms of how to make your decision, here are some considerations. Comprehensive insurance often covers other perils besides collision, including fire, theft, hail or other weather damage, additional liability coverage etc. It may be worth looking at your specific policy to see what is covered. No matter what you do, make sure you have some form of personal liability coverage in case you are sued (doesn't necessarily need to be through the auto policy). While it can make financial sense to drop comprehensive coverage once you can afford to self-insure against collision, this will only be the case if you are certain that you can set aside dedicated savings that you would only need to dip in to in the case of a collision or other major loss. For example, if you only have $5-$10,000 in the bank, and you happen to lose your job, and then the next month you happen to be hit in an accident and the car is totaled, could you afford to replace the car out of pocket? I would recommend looking at dropping comprehensive insurance as similar to a \"\"DNR\"\" (do not resuscitate) order for your car, i.e. under no circumstances would you choose repair the car were it totaled or damaged. For example, if your car's exterior were badly damaged in a hail storm (but still ran fine), would you pay $500 or more to repair it, or would you simply get a new car? Ultimately, this is going to be a judgement call based on how much financial risk you want to take on. Personally, I would continue to pay the extra $300 per year for now in order to insure a $6-8,000 asset (5% of the asset value) However, in the next few years the resale value of your car will continue to decline. If in a few years the car were worth $1,500, I would probably not pay the same $300 a year (or 20% of the asset's value). When you should make that choice depends on how many more years of service you expect to get from the car, which is a very localized question. Hope that helps!\"" }, { "docid": "137984", "title": "", "text": "\"We're in agreement, I just want retail investors to understand that in most of these types of discussions, the unspoken reality is the retail sector trading the market is *over*. This includes the mutual funds you mentioned, and even most index funds (most are so narrowly focused they lose their relevance for the retail investor). In the retail investment markets I'm familiar with, there are market makers of some sort or another for specified ranges. I'm perfectly fine with no market makers; but retail investors should be told the naked truth as well, and not sold a bunch of come-ons. What upsets me is seeing that just as computers really start to make an orderly market possible (you are right, the classic NYSE specialist structure was outrageously corrupt), regulators turned a blind eye to implementing better controls for retail investors. The financial services industry has to come to terms whether they want AUM from retail or not, and having heard messaging much like yours from other professionals, I've concluded that the industry does *not* want the constraints with accepting those funds, but neither do they want to disabuse retail investors of how tilted the game is against them. Luring them in with deceptively suggestive marketing and then taking money from those naturally ill-prepared for the rigors of the setting is like beating up the Downs' Syndrome kid on the short bus and boasting about it back on the campus about how clever and strong one is. If there was as stringent truth in marketing in financial services as cigarettes, like \"\"this service makes their profit by encouraging the churning of trades\"\", there would be a lot of kvetching from so-called \"\"pros\"\" as well. If all retail financial services were described like \"\"dead cold cow meat\"\" describes \"\"steak\"\", a lot of retail investors would be better off. As it stands today, you'd have to squint mighty hard to see the faintly-inscribed \"\"caveat emptor\"\" on financial services offerings to the retail sector. Note that depending upon the market setting, the definition of retail differs. I'm surprised the herd hasn't been spooked more by the MF Global disaster, for example, and yet there are some surprisingly large accounts detrimentally affected by that incident, which in a conventional equities setting would be considered \"\"pros\"\".\"" } ]

[ { "docid": "79807", "title": "", "text": "The daily Volume is usually compared to the average daily volume over the past 50 days for a stock. High volume is usually considered to be 2 or more times the average daily volume over the last 50 days for that stock, however some traders might set the crireia to be 3x or 4x the ADV for confirmation of a particular pattern or event. The volume is compared to the ADV of the stock itself, as comparing it to the volume of other stocks would be like comparing apples with oranges, as difference companies would have different number of total stocks available, different levels of liquidity and different levels of volatility, which can all contribute to the volumes traded each day." } ]

[ { "docid": "160965", "title": "", "text": "Given your premise is correct: How do you cash in a large sum of YetAnotherCryptoCoin shortly after it´s ICO? The crypto-exchanges take some time to add a new currency, if they do at all. And even if they already have, trading volume is usually low. I think that´s what really makes it unattractive for Investors as opposed to tec-enthusiasts (aside from the high volatility). Total lack of any reliable trading capability." }, { "docid": "278607", "title": "", "text": "To optimize your return on investment, you need to buy low and sell high. If you knew that one stock had hit rock bottom, and the others had not, buying the low stock would be the best. However, unless you can predict the future, you don't know if any individual stock has hit the bottom, or if it will continue to drop. If you decide to spend the same amount of money each month on stock purchases, then when the price is low, you will automatically buy more shares, and when the price is high, you will buy fewer shares. This strategy is sometimes called dollar cost averaging. It eliminates the need to predict the future to optimize your buying. All that having been said, I agree with @Powers that at the investment amount that you are talking about and the per transaction fee you listed, a monthly investment in several stocks will cause you to lose quite a bit to transaction fees. It sounds like you need a different strategy." }, { "docid": "265846", "title": "", "text": "Is the parent company's common stock public? If not, then there will be absolutely no pressure from everyone liquidating at the same time. If so, consider the average daily volume of transactions in the parent company's stock. Is it much greater than the volume your 10k co-workers will have to liquidate? If so, I wouldn't expect much of an impact from all liquidating at once. Any other situation, you are probably right to be a bit worried about simultaneous liquidation. If this was my case, I'd probably submit a limit sell order so as to try and pick out a high for the timing of my liquidation, and lower my limit vs fair value as it got closer to the expiration of your ability to hold the parent company stock." }, { "docid": "127015", "title": "", "text": "There are several reasons why this may happen and I will update as I get more information from you. Volumes on that stock look low (supposing that they are either in a factor between 1s and 1000s) so it could well be that there was no volume on that day. If no trades occur then open, high and low are meaningless as they are statistics based on trades that occur that day and no trades occur. Remember that there has to be volume to get a price. The stock may have been frozen by either the exchange or the company for the day. This could be for various reasons including to prevent some illegal activity. In that case no trades were made because the market for that stock was closed. Another possibility is that all trades that day were cancelled by the exchange. The exchange may cancel all trades if there is unusual, potentially fraudulent or other illegal activity on the stock. In this case the last price for that day existed but was rolled back by the exchange and never occurred. This is a rare situation. Although I can't find any holidays on that date it is possible that this is how your data provider marks market holidays. It would be valid to ignore the data in that case as being from a non-market day. I cannot tell if this is possible without knowing exchange information. There is a possibility that some data providers don't receive data for a day or that it gets corrupted. It may be worth checking another source to ensure the integrity of the data that you are receiving. Whichever reason is true, the data provider has made the close equal to the previous day's close as no price movements occurred. Strictly the closing price is the price of the last trade made for that day and so should be null (and open, high and low should be null too and not 0 otherwise the price change on day is very large!). Therefore, to keep integrity, you have a few choices:" }, { "docid": "515095", "title": "", "text": "Extremely low volume and market cap is a big problem, especially when the information about the company is well hidden. Most penny stocks are shell corps with someone manipulating the prices. Although there are some big companies that sell different kind of shares on the otc market which might be worth looking into" }, { "docid": "333916", "title": "", "text": "Let me first give you my definitions of the words 'investor' and 'speculator'. To me, anyone looking to 'buy low, sell high' is a speculator. Only 'buy and hold' people are investors. The news agencies love to report on changes in the price of a stock. This gives them something to talk about. So speculation is encouraged by the news media. What investors care about is dividends. In my opinion whatwhat news agencies should report on are changes to the dividend provided by a security. I used to be a speculator, but now that I am retired I am an investor." }, { "docid": "307008", "title": "", "text": "\"I think you've got basics, but you may have the order / emphasis a bit wrong. I've changed the order of the things you've learned in to what I think is the most important to understand: Owning a stock is like owning a tiny chunk of the business Owning stock is owning a tiny chunk of the business, it's not just \"\"like\"\" it. The \"\"tiny chunks\"\" are called shares, because that is literally what they are, a share of the business. Sometimes shares are also called stocks. The words stock and share are mostly interchangeable, but a single stock normally means your holding of many shares in a business, so if you have 100 shares in 1 company, that's a stock in that company, if you then buy 100 shares in another company, you now own 2 stocks. An investor seeks to buy stocks at a low price, and sell when the price is high. Not necessarily. An investor will buy shares in a company that they believe will make them a profit. In general, a company will make a profit and distribute some or all of it to shareholders in the form of dividends. They will also keep back a portion of the profit to invest in growing the company. If the company does grow, it will grow in value and your shares will get more valuable. Price (of a stock) is affected by supply/demand, volume, and possibly company profits The price of a share that you see on a stock ticker is the price that people on the market have exchanged the share for recently, not the price you or I can buy a share for, although usually if people on the market are buying and selling at that price, someone will buy or sell from you at a similar sort of price. In theory, the price will be the companies total value, if you were to own the whole thing (it's market capitalisation) divided by the total number of shares that exist in that company. The problem is that it's very difficult to work out the total value of a company. You can start by counting the different things that it owns (including things like intellectual property and the knowledge and experience of people who work there), subtract all the money it owes in loans etc., and then make an allowance for how much profit you expect the company to make in the future. The problem is that these numbers are all going to be estimates, and different peoples estimates will disagree. Some people don't bother to estimate at all. The market makers will just follow supply and demand. They will hold a few shares in each of many companies that they are interested in. They will advertise a lower price that they are willing to buy at and a higher price that they will sell at all the time. When they hold a lot of a share, they will price it lower so that people buy it from them. When they start to run out, they will price it higher. You will never need to spend more than the market makers price to buy a share, or get less than the market makers price when you come to sell it (unless you want to buy or sell more shares than they are willing to). This is why stock price depends on supply and demand. The other category of people who don't care about the companies they are trading are the high speed traders. They just look at information like the past price, the volume (total amount of shares being exchanged on the market) and many other statistics both from the market and elsewhere and look for patterns. You cannot compete with these people - they do things like physically locate their servers nearer to the stock exchanges buildings to get a few milliseconds time advantage over their competitors to buy shares quicker than them.\"" }, { "docid": "39585", "title": "", "text": "\"Discussions around expected values and risk premiums are very useful, but there's another thing to consider: cash flow. Some individuals have high value assets that are vital to them, such as transportation or housing. The cost of replacing these assets is prohibitive to them: their cashflow means that their rate of saving is too low to accrue a fund large enough to cover the asset's loss. However, their cashflow is such that they can afford insurance. While it may be true that, over time, they would be \"\"better off\"\" saving that money in an asset replacement fund, until that fund reaches a certain level, they are unprotected. Thus, it's not just about being risk averse; there are some very pragmatic reasons why individuals with low disposable income might elect to pay for insurance when they would be financially better off without it.\"" }, { "docid": "396657", "title": "", "text": "The study of technical analysis is generally used (sometimes successfully) to time the markets. There are many aspects to technical analysis, but the simplest form is to look for uptrends and downtrends in the charts. Generally higher highs and higher lows is considered an uptrend. And lower lows and lower highs is considered a downtrend. A trend follower would go with the trend, for example see a dip to the trend-line and buy on the rebound. A simple strategy for this is shown in the chart below: I would be buying this stock when the price hits or gets very close to the trendline and then it bounces back above it. I would then have sold this stock once it has broken through below the trendline. This may also be an appropriate time if you were looking to short this stock. Other indicators could also be used in combination for additional confirmation of what is happening to the price. Another type of trader is called a bottom fisher. A bottom fisher would wait until a break above the downtrend line (second chart) and buy after confirmation of a higher high and possibly a higher low (as this could be the start of a new uptrend). There are many more strategies dealing with the study of technical analysis, and if you are interested you would need to find and learn about ones that suit your investment styles, whether you prefer short term trading or longer term investing, and your appetite for risk. You can develop strategies using various indicators and then paper trade or backtest these strategies. You can also manually backtest a strategy in most charting packages. You can go back in time on the chart so that the right side of the chart shows a date in the past (say one year ago or 10 years ago), then you can click forward one day at a time (or one week at a time if using weekly charts). With your indicators on the chart you can do virtual trades to buy or sell whenever a signal is given as you move forward in time. This way you may be able to check years of data in a day to see if your strategy works. Whatever you do, you need to document your strategies in writing in a written trading or investment plan together with a risk management strategy. You should always follow the rules in your written plan to avoid you making decisions based on emotions. By backtesting or paper trading your strategies it will give you confidence that they will work over the long term. There is a lot of work involved at the start, but once you have developed a documented strategy that has been thoroughly backtested, it will take you minimal time to successfully manage your investments. In my shorter term trading (positions held from a couple of days to a few weeks) I spend about half an hour per night to manage my trades and am up about 50% over the last 7 months. For my longer term investing (positions held from months to years) I spend about an hour per week and have been averaging over 25% over the last 4 years. Technical Analysis does work for those who have a documented plan, have approached it in a systematic way and use risk management to protect their existing and future capital. Most people who say that is doesn't work either have not used it themselves or have used it ad-hock without putting in the initial time and work to develop a documented and systematic approach to their trading or investing." }, { "docid": "175226", "title": "", "text": "\"As JoeTaxpayer notes in his comment, \"\"answers\"\" to this are really just opinions, so here's mine, for what it's worth. If your risk tolerance is 5 out of 5, you shouldn't have anything in Treasuries. Those are basically the most conservative of all investments. This would probably mean no TIPS as well. If you're more like 4.5 out of 5, you could have some, but just a little; a 30% allocation to government securities is quite conservative. If you want to diversify across different asset classes, you could consider a bond fund like (for instance VBMFX, the Vanguard total bond market index fund). Your portfolio doesn't currently contain any (non-government) bonds, which is something to consider. 20% seems like quite a large allocation to REITs. Most sample portfolios I've seen allocate no more than 10% to REITs, often no more than 5%. There are some that have more like the 20% you're envisioning, but you might want to ponder that a bit more especially in light of your concerns about REITs being at an all-time high. As for your question about all-time highs, it's reasonable to think about, but I think waiting for 30-50% off all-time highs is unrealistic. Looking at a chart of VFINX (essentially the S&P 500), I see that at the nadir of the recent downturn, in early 2009, the market was at about 50% of its pre-crash all-time high. At the nadir of the dot-com bust, the market was about 45% off its pre-crash high. If you're waiting for it to be 50% off it's all-time high, you're not just waiting for \"\"a good time to invest\"\", you're waiting for a major crash. It could certainly make sense not to immediately put everything into US stocks, but that doesn't mean you should put nothing in. As Trevor Wilson commented, you could put some of the money in and then gradually add the rest over time, reducing the risk of unluckily buying at the peak. (This can also reduce the psychological angst of worrying about whether you're doing the right thing, which is worth taking into account.) Also note that if you get rid of the treasuries, you eliminate a good chunk of the stuff that you thought was too close to the peak anyway. Your two basic points (asset allocation and low-cost funds) have a strong Boglehead flavor. You may already have looked at the Bogleheads wiki; if not you should take a look. If you are comfortable with that philosophy (and I think it's a sound one), you should remember that part of that philosophy is not worrying about \"\"timing the market\"\". You pursue a buy-and-hold strategy if you believe the market will go up in the long term and don't care much about what it does in the short term. That said, as mentioned above, you might want to ease in your investment over time, rather than buying all at once, if only to avoid tearing your hair out if the market goes down in the short term. Incidentally, your proposed portfolio is similar to this one that they mention, although as I said above I think this is too conservative if you are 30 years old and consider yourself a \"\"5 out of 5\"\" in terms of risk tolerance. I'm not sure if you already saw that in your research, but since that portfolio apparently has a name and is known, you might be able to find information about its risks and benefits by searching for discussion of it by name.\"" }, { "docid": "64456", "title": "", "text": "1) How does owning a home fit into my financial portfolio? Most seem to agree that at best it is a hedge against rent or dollar inflation, and at worst it should be viewed as a liability, and has no place alongside other real investments. Periods of high inflation are generally accompanied with high(er) interest rates. Any home is a liability, as has been pointed out in other answers; it costs money to live in, it costs money to keep in good shape, and it offers you no return unless you sell it for more than you have paid for it in total (in fact, as long as you have an outstanding mortgage, it actually costs you money to own, even when not considering things like property taxes, utilities etc.). The only way to make a home an investment is to rent it out for more than it costs you in total to own, but then you can't live in it instead. 2) How should one view payments on a home mortgage? How are they similar or different to investing in low-risk low-reward investments? Like JoeTaxpayer said in a comment, paying off your mortgage should be considered the same as putting money into a certificate of deposit with a term and return equivalent to your mortgage interest cost (adjusting for tax effects). What is important to remember about paying off a mortgage, besides the simple and not so unimportant fact that it lowers your financial risk over time, is that over time it improves your cash flow. If interest rates don't change (unlikely), then as long as you keep paying the interest vigilantly but don't pay down the principal (assuming that the bank is happy with such an arrangement), your monthly cost remains the same and will do so in perpetuity. You currently have a cash flow that enables you to pay down the principal on the loan, and are putting some fairly significant amount of money towards that end. Now, suppose that you were to lose your job, which means a significant cut in the household income. If this cut means that you can't afford paying down the mortgage at the same rate as before, you can always call the bank and tell them to stop the extra payments until you get your ducks back in the proverbial row. It's also possible, with a long history of paying on time and a loan significantly smaller than what the house would bring in in a sale, that you could renegotiate the loan with an extended term, which depending on the exact terms may lower your monthly cost further. If the size of the loan is largely the same as or perhaps even exceeds the market value of the house, the bank would be a lot more unlikely to cooperate in such a scenario. It's also a good idea to at the very least aim to be free of debt by the time you retire. Even if one assumes that the pension systems will be the same by then as they are now (some don't, but that's a completely different question), you are likely to see a significant cut in cash flow on retirement day. Any fixed expenses which cannot easily be cut if needed are going to become a lot more of a liability when you are actually at least in part living off your savings rather than contributing to them. The earlier you get the mortgage paid off, the earlier you will have the freedom to put into other forms of savings the money which is now going not just to principal but to interest as well. What is important to consider is that paying off a mortgage is a very illiquid form of savings; on the other hand, money in stocks, bonds, various mutual funds, and savings accounts, tends to be highly liquid. It is always a good idea to have some savings in easily accessible form, some of it in very low-risk investments such as a simple interest-bearing savings account or government bonds (despite their low rate of return) before you start to aggressively pay down loans, because (particularly when you own a home) you never know when something might come up that ends up costing a fair chunk of money." }, { "docid": "183999", "title": "", "text": "\"Be wary of pump and dump schemes. This scheme works like this: When you observe that \"\"From time to time the action explodes with 100 or 200% gains and volumes exceeding one million and it then back down to $ 0.02\"\", it appears that this scheme was performed repeatedly on this stock. When you see a company with a very, very low stock price which claims to have a very bright future, you should ask yourself why the stock is so low. There are professional stock brokers who have access to the same information you have, and much more. So why don't they buy that stock? Likely because they realize that the claims about the company are greatly exaggerated or even completely made up.\"" }, { "docid": "10017", "title": "", "text": "You should not look at volume in isolation but look at it together with other indicators and/or the release of news (good or bad). When there is lower than average volume this could be an indication that the stock is in a bit of a holding pattern, possibly waiting for some company or economic news to come out (especially when accompanied by small changes in price). It could also mean that trading in a certain direction is drying up and the trend is about to end (this could be accompanied with a large move in price). When there is higher than average volume (2 to 3 times more or higher), this could be due to the release of company results, company or economic news, or the start or end of a trend (especially if accompanied by a gap). A large increase in volume accompanied by a large fall in price (usually a gap down) may also be an indication the stock has gone ex-dividend. There could be a range of reasons for variations in volume to the average volume. That is why you need to look at other indicators, company reporting and news, and economic news in combination with the volume changes to get a grasp of what is really happening." }, { "docid": "224918", "title": "", "text": "TL/DR Yes, The David popularized the Debt Snowball. The method of paying low balance first. It's purely psychological. The reward or sense of accomplishment is a motivator to keep pushing to the next card. There's also the good feeling of following one you believe to be wise. The David is very charismatic, and speaks in a no-nonsense my way or the highway voice. History is riddled with religious leaders who offer advice which is followed without question. The good feeling, in theory, leads to a greater success rate. And really, it's easier to follow a plan that comes at a cost than to follow one that your guru takes issue with. In the end, when I produce a spreadsheet showing the cost difference, say $1000 over a 3 year period, the response is that it's worth the $1000 to actually succeed. My sole purpose is to simply point out the cost difference between the two methods. $100? Go with the one that makes you feel good. $2000? Just think about it first. If it's not clear, my issue is less with the fact that the low balance method is inferior and more with its proponents wishing to obfuscate the fact that the high interest method is not only valid but has some savings built in. When a woman called into The David's radio show and said her friend recommended the high rate first method, he dismissed it, and told her that low balance was the only way to go. The rest of this answer is tangent to the real issue, answered above. The battle reminds me of how people brag about getting a tax refund. With all due respect to the Tax Software people, the goal should be minimizing one's tax bill. Getting a high refund means you misplanned all year, and lent Uncle Sam money at zero interest(1). And yet you feel good about getting $3000 back in April. (Disclosure - when my father in law passed away, I took over my mother in law's finances. Her IRA RMD, and taxes. First year, I converted some money to Roth, and we had a $100 tax bill. Frowny face on mom. Since then, I have Schwab hold too much federal tax, and we always get about $100 back. This makes her happy, and I'll ignore the 27 cents lost interest.) (1) - I need to acknowledge that there are cases where the taxpayer has had zero dollars withheld, yet receives a 'tax refund.' The earned income tax credit (EITC) produces a refundable benefit, i.e. a payment that's not conditional on tax due. Obviously, those who benefit from this are not whom I am talking about. Also, in response to a comment below, the opportunity cost is not the sub-1% rate the bank would have paid you on the money had you held on to it. It's the 18% card you should be paying off. That $3000 refund likely cost over $400 in the interest paid over the prior year." }, { "docid": "506460", "title": "", "text": "First, I want to point out that your question contains an assumption. Does anyone make significant money trading low volume stocks? I'm not sure this is the case - I've never heard of a hedge fund trading in the pink sheets, for example. Second, if your assumption is valid, here are a few ideas how it might work: Accumulate slowly, exit slowly. This won't work for short-term swings, but if you feel like a low-volume stock will be a longer-term winner, you can accumulate a sizable portion in small enough chunks not to swing the price (and then slowly unwind your position when the price has increased sufficiently). Create additional buyers/sellers. Your frustration may be one of the reasons low-volume stock is so full of scammers pumping and dumping (read any investing message board to see examples of this). If you can scare holders of the stock into selling, you can buy significant portions without driving the stock price up. Similarly, if you can convince people to buy the stock, you can unload without destroying the price. This is (of course) morally and legally dubious, so I would not recommend this practice." }, { "docid": "468025", "title": "", "text": "Opening - is the price at which the first trade gets executed at the start of the trading day (or trading period). High - is the highest price the stock is traded at during the day (or trading period). Low - is the lowest price the stock is traded at during the day (or trading period). Closing - is the price at which the last trade gets executed at the end of the trading day (or trading period). Volume - is the amount of shares that get traded during the trading day (or trading period). For example, if you bought 1000 shares during the day and another 9 people also bought 1000 shares each, then the trading volume for the day would be 10 x 1000 = 10,000." }, { "docid": "109455", "title": "", "text": "\"You have heard the old adage \"\"Buy low, sell high\"\", right? That sounds so obvious that you'd have to wonder why they would ever bother coining such an expression. It should rank up there with \"\"Don't walk in front of a moving car\"\" on the Duh scale of advice. Well, your question demonstrates exactly why it isn't quite so obvious in the real world and that people need to be reminded of it. So, in your example, the stock prices are currently low (relative to what they have been). So per that adage, do you sell or buy when prices are low? Hint: It isn't sell. Yes. Your gut is going to tell you the exact opposite thanks to the fact that our brains are unfortunately wired to make us susceptible to the loss aversion fallacy. When the market has undergone a big drop is the WORST time to stop contributing (buying stocks). This example might help get your brain and gut to agree a little more easily: If you were talking about any other non-investment commodity, cars for instance. Your question equates to.. I really need a car, but the prices have been dropping like crazy lately. Maybe I should wait until the car dealers start raising their prices again before I buy one. Dollar Cost Averaging As littleadv suggested, if you have an automatic payroll deduction for your retirement account, you are getting the benefit of Dollar Cost Averaging. Because you are investing the same amount on a scheduled interval, you are buying more shares when they are cheap and fewer when they are expensive. It is like an automatic buy low strategy is built into the account. The alternative, which you are implying, is a market timing strategy. Under this strategy, instead of investing regularly you try to get in and out of investments right before they go up/drop. There are two MAJOR flaws with this approach: 1) Your brain will work against you (see above) and encourage you to do the exact opposite of what you should be doing. 2) Unless you are clairvoyant, this strategy isn't much better than gambling. If you are lucky it can work, but because of #1, the odds are stacked against you.\"" }, { "docid": "127268", "title": "", "text": "The prices seem very low even considering the risk? The prices are low because of the risk. Nothing happens to the banks if the sovereign defaults. However, the sovereign debt holders - lose some or all the money they lent to that sovereign. Incidentally, many banks invest in the treasury bonds of various countries, especially those they're located in. They also invest in other companies that rely on the government, or the currency. If that dependency is too high - the bank may fail. If the dependency is not high, or non-existent - the bank will survive. If the bank fails - yes, your shares will be wiped out, that's what happens with bankrupt companies. If you considering investing in banks in a country that you think may default - research them and see how much investments they have that will be affected by that default." }, { "docid": "429860", "title": "", "text": "\"&gt; I guess all those other experts in the ad industry and tech don't have any idea what they're talking about Dude, that's a really safe bet. Do you even remember the housing bubble? The dot com bubble? Those people were the ones inspiring confidence both times. You know what they were doing in the 1990s when the internet was being delivered to consumers? They were getting high and chasing girls. They were hanging out in the hallways at school, talking about cars or their abusive fathers or their college plans to become MBAs etc. None of them owned 486s, or used dial-up modems before AOL and Hollywood introduced them to \"\"You've got Mail\"\". Meanwhile I was ditching school to learn about how the internet worked. Computers have been a part of my daily life for more years than many of those \"\"experts\"\" have been alive. They masquerade as experts on the subject now because the internet is what's on everyone's minds these days, and talking about it is what those folks have to do to get a paycheck, but that doesn't mean they have any idea what they're talking about. You buy their bullshit because they're on TV and I'm just some guy on the internet, which is what I've been for the past 3 decades, on the internet.\"" } ]

[ { "docid": "303325", "title": "", "text": "\"Volume is really only valuable when compared to some other volume, either from a historical value, or from some other stock. The article you linked to doesn't provide specific numbers for you to evaluate whether volume is high or low. Many people simply look at the charts and use a gut feel for whether a day's volume is \"\"high\"\" or \"\"low\"\" in their estimation. Typically, if a day's volume is not significantly taller than the usual volume, you wouldn't call it high. The same goes for low volume. If you want a more quantitative approach, a simple approach would be to use the normal distribution statistics: Calculate the mean volume and the standard deviation. Anything outside of 1.5 to 2.0 standard deviations (either high or low) could be significant in your analysis. You'll need to pick your own numbers (1.5 or 2.0 are just numbers I pulled out of thin air.) It's hard to read anything specific into volume, since for every seller, there's a buyer, and each has their reasons for doing so. The article you link to has some good examples of using volume as a basis for strengthening conclusions drawn using other factors.\"" } ]

[ { "docid": "29886", "title": "", "text": "\"Actually that statistic (whether it is 9/10 or 95% or 99%) is often VERY misquoted AND it is both overstated AND extremely misleading. * First of all the ratio/percentage of even the \"\"urban myth\"\" that \"\"everyone knows\"\" is purportedly **over a 5 year period of time** not a single year. * Secondly, just because a business has closed down or ceased to exist sometime prior to the 5 year mark, does NOT necessarily mean that it was a \"\"failure\"\" (and definitely not necessarily a \"\"bankruptcy\"\"). * Third, it does not mean that all of the initial investment went \"\"poof\"\" -- **that may be true for high-tech startups** (especially the dot-com/dot-bomb con operations whose business \"\"plan\"\" resembles the [South Park Underpants Gnomes \"\"plan\"\"](http://upload.wikimedia.org/wikipedia/en/d/dd/Gnomes_plan.png) more than anything else) -- but that is NOT necessarily true of the rest of the business world. Consider by contrast how many EMPLOYEES are still in the same JOB five years later (per data [the *average* job tenure in the US is now 4.6 years](http://www.marketwatch.com/story/americans-less-likely-to-change-jobs-now-than-in-1980s-2014-01-10), which is actually UP from 3.7 years in 2002, and 3.5 years in circa 1983). The vast majority of small businesses (and the sheer volume\\* skews the totals) are essentially that: they are job *replacement* (or even job *supplement*) businesses, which chiefly consist of the owner/operator being \"\"self-employed\"\" (or part-time self-employed \"\"on the side\"\") for a year, two years, and possibly longer. Occasionally they will then (often temporarily) employ others as well; but the primary goal is to provide a simple \"\"income\"\" for the owner/operator. **And there is nothing WRONG with that.** Nor is there anything wrong with the person then ENDING that \"\"business\"\" and moving on... to another (different name, different field) business... or taking a job with some company (which they may have previously worked for on a contract basis with the \"\"business\"\", etc). The idea that ALL businesses somehow *should* \"\"endure forever\"\" and continue to grow forever (as if they were all destined to be Giant Sequoia trees) is actually *rather warped and delusional...* it ignores the real world, and the fact that most flora is NOT \"\"giant trees\"\" but rather small bushes and plants -- and for small businesses, being \"\"nimble\"\" (and profitable) often means the opposite: knowing when to get OUT of a market or business is just as important (indeed can be MORE important) than knowing when to get INTO it. \\*EDIT: As a further note on the \"\"volume\"\" you have to also add in the large number of *business \"\"ideas\"\" that spawn an LLC, but then went nowhere* companies (especially these days when starting an LLC in many states is simply filling out a form online and paying a filing fee) -- IOW the \"\"business\"\" may have had a temporary \"\"legal\"\" existence (name, probably a reserved domain name, maybe even a logo, etc.), but when it comes to reality -- actual investment in assets and conducting business operations (of any type) -- well, a lot of the \"\"horses\"\" never even make it past the gate... and that too skews the numbers in many studies. --- Note that here is another take on the point: http://www.washingtonpost.com/blogs/fact-checker/wp/2014/01/27/do-9-out-of-10-new-businesses-fail-as-rand-paul-claims/ &gt;As far as we can tell, **there is no statistical basis for the assertion that nine out of 10 businesses fail.** It appears to be one of those nonsense facts that people repeat without thinking too clearly about it. Here are some basic questions to ask when assessing such a factoid: &gt;1. What’s the time frame? Two years, five years, 10 years? That can make a big difference. &gt;2. Does “fail” mean that it goes out of business because it was not financially viable? Or does that also include data about successful enterprises that merge with another company? &gt;3. Wouldn’t failure rates be different for some industries than others? Does it make sense to lump all businesses together? &gt;There have been a number of studies that have looked at this issue. This chart, from Web site designer smallbusinessplanned.com, summarizes the results of three different studies. Basically, after four years, 50 percent of the businesses are open. As time goes on, the success rate decreases, but it never gets to a failure rate of “nine out of 10.” &gt;[...] &gt;Even this does not show the whole picture. As Brian Headd, an economist at the Small Business Administration, demonstrated in a 2002 study for Small Business Economics, **about one–third of closed business were actually successful when they “failed.”** &gt;“The significant proportion of businesses that closed while successful calls into question the use of ‘business closure’ as a meaningful measure of business outcome,” the study says. “It appears that **many owners may have executed a planned exit strategy,** closed a business without excess debt, sold a viable business, or retired from the work force.” Now that doesn't necessarily mean that Rand Paul's point is WRONG (he is chiefly talking about government investing in HIGHLY LEVERAGED, HIGH-RISK, HIGH-TECH businesses, which are a different story) -- but it does mean that the statistic he is citing (general business failure rate) is an urban-myth-falsehood, however commonly-believed, or commonly-restated.\"" }, { "docid": "66834", "title": "", "text": "\"It's impossibly difficult to time the market. Generally speaking, you should buy low and sell high. Picking 25% as an arbitrary ceiling on your gains seems incorrect to me because sometimes you'll want to hold a stock for longer or sell it sooner, and those decisions should be based on your research (or if you need the money), not an arbitrary number. To answer your questions: If the reasons you still bought a stock in the first place are still valid, then you should hold and/or buy more. If something has changed and you can't find a reason to buy more, then consider selling. Keep in mind you'll pay capital gains taxes on anything you sell that is not in a tax-deferred (e.g. retirement) account. No, it does not make sense to do a wash sale where you sell and buy the same stock. Capital gains taxes are one reason. I'm not sure why you would ever want to do this -- what reasons were you considering? You can always sell just some of the shares. See above (and link) regarding wash sales. Buying more of a stock you already own is called \"\"dollar cost averaging\"\". It's an effective method when the reasons are right. DCA minimizes variance due to buying or selling a large amount of shares at an arbitrary single-day price and instead spreads the cost or sale basis out over time. All that said, there's nothing wrong with locking in a gain by selling all or some shares of a winner. Buy low, sell high!\"" }, { "docid": "546932", "title": "", "text": "If you are looking at long-term investments then you can look to Dheer's answer and see that it doesn't matter whether the money is large or small, the return will be the same. When it comes to shorter-term investments, it can actually pay to be a smaller investor. Consider a stock that may not be trading in high volume. If I want to take a position for 2,000 shares, I can probably buy it quite quickly without moving the market considerably. If I was managing your hypothetical portfolio opening a position for 1,000,000 shares, it can cause the price to go up significantly because I have to execute the order very carefully in order to not tip my hand to the market that I want a million shares. Algorithmic traders will see the volume increasing on those shares and will raise their asking price. High speed traders and market makers will also cause a lot of purchasing overhead. Then later when it comes time to sell, I will lose a percentage to the price drop as I start flooding the market with available shares." }, { "docid": "122111", "title": "", "text": "If you can make enough ROI from the capital you retain by not paying off your mortgage, then why not? I do, I could pay off a significant chunk of mortgage if I wanted but whilst interest rates are low there's little incentive. As for another crash... Well, there's no reason to expect a crash would result in high interest rates, more the opposite, but you should consider what you would or could do if interest rates did jump to 15% for whatever reason. As long as your investments aren't too risky or difficult to liquidate, etc, you could always consider paying off a big chunk then, when it makes sense." }, { "docid": "320778", "title": "", "text": "Buy low, sell high - the problem, of course, finding a crystal ball that will tell you when the highs and lows are going to happen :-) You could, for instance, save your money in cash and wait for the occasional sharp drop, but then you've lost profits & dividends from having that cash under the mattress all those years you were waiting. About the closest I've ever gotten to market timing, and I think the closest anyone can get in real life, is that I cut personal spending to the bone from 2008 to 2011, and invested every spare cent. But such opportunities only come along a few times in a lifetime. The other thing is to avoid what a lot of people do, which you might call anti-timing. When the market is high, they jump on the bandwagon, then when it drops they panic-sell, and lose money." }, { "docid": "225818", "title": "", "text": "You need a source of delisted historical data. Such data is typically only available from paid sources. According to my records 20 Feb 2006 was not a trading day - it was Preisdent's Day and the US exchanges were closed. The prior trading date to this was 17 Feb 2006 where the stock had the following data: Open: 14.40 High 14.46 Low 14.16 Close 14.32 Volume 1339800 (consolidated volume) Source: Symbol NVE-201312 within Premium Data US delisted stocks historical data set available from http://www.premiumdata.net/products/premiumdata/ushistorical.php Disclosure: I am a co-owner of Norgate / Premium Data." }, { "docid": "265846", "title": "", "text": "Is the parent company's common stock public? If not, then there will be absolutely no pressure from everyone liquidating at the same time. If so, consider the average daily volume of transactions in the parent company's stock. Is it much greater than the volume your 10k co-workers will have to liquidate? If so, I wouldn't expect much of an impact from all liquidating at once. Any other situation, you are probably right to be a bit worried about simultaneous liquidation. If this was my case, I'd probably submit a limit sell order so as to try and pick out a high for the timing of my liquidation, and lower my limit vs fair value as it got closer to the expiration of your ability to hold the parent company stock." }, { "docid": "396657", "title": "", "text": "The study of technical analysis is generally used (sometimes successfully) to time the markets. There are many aspects to technical analysis, but the simplest form is to look for uptrends and downtrends in the charts. Generally higher highs and higher lows is considered an uptrend. And lower lows and lower highs is considered a downtrend. A trend follower would go with the trend, for example see a dip to the trend-line and buy on the rebound. A simple strategy for this is shown in the chart below: I would be buying this stock when the price hits or gets very close to the trendline and then it bounces back above it. I would then have sold this stock once it has broken through below the trendline. This may also be an appropriate time if you were looking to short this stock. Other indicators could also be used in combination for additional confirmation of what is happening to the price. Another type of trader is called a bottom fisher. A bottom fisher would wait until a break above the downtrend line (second chart) and buy after confirmation of a higher high and possibly a higher low (as this could be the start of a new uptrend). There are many more strategies dealing with the study of technical analysis, and if you are interested you would need to find and learn about ones that suit your investment styles, whether you prefer short term trading or longer term investing, and your appetite for risk. You can develop strategies using various indicators and then paper trade or backtest these strategies. You can also manually backtest a strategy in most charting packages. You can go back in time on the chart so that the right side of the chart shows a date in the past (say one year ago or 10 years ago), then you can click forward one day at a time (or one week at a time if using weekly charts). With your indicators on the chart you can do virtual trades to buy or sell whenever a signal is given as you move forward in time. This way you may be able to check years of data in a day to see if your strategy works. Whatever you do, you need to document your strategies in writing in a written trading or investment plan together with a risk management strategy. You should always follow the rules in your written plan to avoid you making decisions based on emotions. By backtesting or paper trading your strategies it will give you confidence that they will work over the long term. There is a lot of work involved at the start, but once you have developed a documented strategy that has been thoroughly backtested, it will take you minimal time to successfully manage your investments. In my shorter term trading (positions held from a couple of days to a few weeks) I spend about half an hour per night to manage my trades and am up about 50% over the last 7 months. For my longer term investing (positions held from months to years) I spend about an hour per week and have been averaging over 25% over the last 4 years. Technical Analysis does work for those who have a documented plan, have approached it in a systematic way and use risk management to protect their existing and future capital. Most people who say that is doesn't work either have not used it themselves or have used it ad-hock without putting in the initial time and work to develop a documented and systematic approach to their trading or investing." }, { "docid": "477017", "title": "", "text": "\"Let me make sure I understand the point of what Adam Smith is going on about. In discussion of relative poverty, he relates the idea that an individual can be considered in poverty if they do not meet the customary amount of goods considered by their society to be the minimum to be polite in public. You have thus transferred his meaning of what poor means to be what is considered \"\"basic living\"\". You have then taken this concept and tied the cost of \"\"basic living\"\", which you still haven't actually narrowed down, towards the tax rate on income for a citizen of a community. This is all in the context that you're concerned with the community level of price for \"\"basic living\"\" and whether its too high. However, you also haven't said what too high is nor why you're concerned with the literal price which is why I've said you can only control the price of a good through central authority. I never made the assertion you wanted to invoke a centrally planned economy, I simply stated that the only way to control prices across a community is through central authority. You've stated that we collect taxes on local, state, and federal levels. This is true, however it does not mean that they control the price. They simply modify the price set by the market, and only serve to increase the price from the base set by market participants. When I want to buy beer, I don't just pay for the cost of the beer. I pay the cost of the beer + the city tax + county tax + state tax + state sales tax on the beer, which raises the price. Also, these taxes are not income taxes which is what was being discussed. I still don't know what your point is because you cannot seem to define phrases you've used that I have stated I do not know. If you cannot define what you're talking about, how it relates to the actual discussion, and why its relevant then please stop as its simply a derailment.\"" }, { "docid": "127015", "title": "", "text": "There are several reasons why this may happen and I will update as I get more information from you. Volumes on that stock look low (supposing that they are either in a factor between 1s and 1000s) so it could well be that there was no volume on that day. If no trades occur then open, high and low are meaningless as they are statistics based on trades that occur that day and no trades occur. Remember that there has to be volume to get a price. The stock may have been frozen by either the exchange or the company for the day. This could be for various reasons including to prevent some illegal activity. In that case no trades were made because the market for that stock was closed. Another possibility is that all trades that day were cancelled by the exchange. The exchange may cancel all trades if there is unusual, potentially fraudulent or other illegal activity on the stock. In this case the last price for that day existed but was rolled back by the exchange and never occurred. This is a rare situation. Although I can't find any holidays on that date it is possible that this is how your data provider marks market holidays. It would be valid to ignore the data in that case as being from a non-market day. I cannot tell if this is possible without knowing exchange information. There is a possibility that some data providers don't receive data for a day or that it gets corrupted. It may be worth checking another source to ensure the integrity of the data that you are receiving. Whichever reason is true, the data provider has made the close equal to the previous day's close as no price movements occurred. Strictly the closing price is the price of the last trade made for that day and so should be null (and open, high and low should be null too and not 0 otherwise the price change on day is very large!). Therefore, to keep integrity, you have a few choices:" }, { "docid": "79807", "title": "", "text": "The daily Volume is usually compared to the average daily volume over the past 50 days for a stock. High volume is usually considered to be 2 or more times the average daily volume over the last 50 days for that stock, however some traders might set the crireia to be 3x or 4x the ADV for confirmation of a particular pattern or event. The volume is compared to the ADV of the stock itself, as comparing it to the volume of other stocks would be like comparing apples with oranges, as difference companies would have different number of total stocks available, different levels of liquidity and different levels of volatility, which can all contribute to the volumes traded each day." }, { "docid": "85484", "title": "", "text": "\"In the US, stocks are listed on one exchange but can be traded on multiple venues. You need to confirm exactly what your data is showing: a) trades on the primary-listed exchange; or b) trades made at any venue. Also, the trade condition codes are important. Only certain trade condition codes contribute towards the day's open/high/low/close and some others only contribute towards the volume data. The Consolidated Tape Association is very clear on which trades should contribute towards each value - but some vendors have their own interpretation (or just simply an erroneous interpretation of the specifications). It may surprise you to find that the majority of trading volume for many stocks is not on their primary-listed exchange. For example, on 2 Mar 2015, NASDAQ:AAPL traded a total volume across all venues was 48096663 shares but trading on NASDAQ itself was 12050277 shares. Trades can be cancelled. Some data vendors do not modify their data to reflect these busted trades. Some data vendors also \"\"snapshot\"\" their feed at a particular point in time of the data. Some exchanges can provide data (mainly corrections) 4-5 hours after the closing bell. By snapshotting the data too early and throwing away any subsequent data is a typical cause of data discrepancies. Some data vendors also round prices/volumes - but stocks don't just trade to two decimal places. So you may well be comparing two different sets of trades (with their own specific inclusion rules) against the same stock. You need to confirm with your data sources exactly how they do things. Disclosure: Premium Data is an end-of-day daily data vendor.\"" }, { "docid": "124038", "title": "", "text": "Some liquidity Since you're using IB, and you seem to be an investor not a trader, so you won't notice especially if you walk your orders, but you will suffer the bid/ask spread as everyone else albeit wider. If buying, the best strategy unless if one is time constrained is to walk the entire bid from the best bid to the best ask. It is highly likely that someone will hit your order before you hit the best ask. If they don't, as a long term investor, the few pennies won't make or break you, especially if the price per share is 100 USD equivalent, but it is an excellent habit to form and fun. Since you're buying ETFs, even though your orders are small, you would be adding liquidity to your market, helping it become more efficient because your orders could be used to arbitrage against all of the ETF's holdings, in turn providing liquidity for those holdings. No liquidity This could only be done with an extremely low cost broker like IB because the trading commissions would make it prohibitively expensive. There are huge risks when trading an illiquid security such as VEUR. EWL would be much less risky thus less expensive. Securities with no liquidity can be traded, but they must be traded very carefully. In the case of a security that can only attract about 20 shares per day in volume, only single shares should be bid. The market makers, suffering from a dearth in volume may not even be willing to haggle; therefore, the only recourse is a statistical arbitrageur, who will attempt to profit from the spread between other more liquid versions of the security. Considering the available alternative, VEUR is not recommended to trade." }, { "docid": "502247", "title": "", "text": "\"&gt; A good cashier is not someone who is better at sliding packages over a scanner. Good cashiers are friendly, engaging, fast, and have a sharp eye for shoplifting. They have good judgment and relate well to their colleagues. They care about the customer's experience. Those are nice qualities, but Wal-Mart feels they are getting enough of those qualities for the price, and let's not delude ourselves into thinking that they are high skill. Anyone could be trained in the basics of watching for theft in less than 2 weeks. &gt; Walmart has chosen to compete solely on price, not on service; therefore, they hire the cheapest cashiers and sacrifice all of the soft skills that make a cashier a pleasurable part of someone's shopping experience. Wal-Mart has realized that these qualities are nice, but not really worth that much extra money. Most people don't want to have a wonderful conversation with their checker, especially if this comes at a much higher cost at the counter. Most people have friends, and even the best shopping experience is taking away from their life. Few of us want to prolong the experience with artificial and feigned conversation with our checker, which feels like a social obligation on most days. We want an accurate total and a swift checkout. When people are trying to get out of the grocery store, they don't search for the line with the friendliest checker. They search for the one who is sliding packages across the scanner like lightning. &gt; are they missing out on an opportunity to build customer loyalty Customer loyalty is overrated. The most loyal customer isn't going to impoverish their family for a really great checker experience, and Wal-Mart knows that. I'm reminded of people complaining that Wal-Mart has manufacturers make a cheaper version of their drills for their customers. Supposedly, this was a dastardly plan to make items disposable, so people would have to buy more. In reality, Wal-Mart just realizes the average guy who buys a drill isn't seriously going to get into woodworking, like he's always saying. He's going to pull it out 2-3 times, after the initial enthusiasm wears off. I thin Wal-Mart pisses people off, because they know what we really are, as opposed to the people we pretend to be. &gt; they're creating a disenchanted workforce incentivized to get back at the company whenever possible Wal-Mart has a pretty good bead on their workforce. They're not losing money. This \"\"getting back\"\" is highly theoretical. In reality, they're going to gripe about their job and cycle through a lot of low wage jobs on their way back to Wal-Mart again. I don't know if you've worked with low skill workers before, but there's a reason they are where they are. They're not these noble creatures from Steinbeck novels. I worked at quite a few of these low wage jobs while putting myself through college. These are the people who show up hungover to work. These are the people who work for a few weeks and then suddenly flip out for seemingly no reason at all. These are the people who, when told to perform a task, say, \"\"No one tells me what to do.\"\" That's what the check is for dummy. That's what a job is. These are the same people who sat in the back of the classroom in school and talked shit about how the teacher was stupid; school was stupid; they didn't need that shit to be successful. They are mostly ignorant and filled with overweaning pride, which they've been told they should have not for accomplishments, but for simply existing. When you've actually been around the poor masses for a while—raised around them as I was as a child—you stop idealizing and objectifying them. They're not all bad workers, but most of them are *bad* at working. These are those soft skills that you were talking about. Wal-Mart raising wages won't make those people good workers. It'll put them out of a job. Wal-Mart only hires those people, because they're a bargain. If they're forced to raise wages tomorrow, most of those people are going to be cycled out and replaced with higher skill workers, like you would prefer. At the very least, Wal-Mart would start hiring higher skill workers to replace their lower skill workers. So what problem have you solved? Do the low skill workers now have magically more wages? No. They're low skill and wages are higher. They've been priced out of the market. &gt; But I must note that a good cashier enhances the shopping experience, rather than simply being a human scantron. You obviously come from a different place. I think you'd be shocked by how many of us would like exactly that. Don't be surprised when Wal-Mart moves to rfid tags and get's rid of cashiers altogether.\"" }, { "docid": "127268", "title": "", "text": "The prices seem very low even considering the risk? The prices are low because of the risk. Nothing happens to the banks if the sovereign defaults. However, the sovereign debt holders - lose some or all the money they lent to that sovereign. Incidentally, many banks invest in the treasury bonds of various countries, especially those they're located in. They also invest in other companies that rely on the government, or the currency. If that dependency is too high - the bank may fail. If the dependency is not high, or non-existent - the bank will survive. If the bank fails - yes, your shares will be wiped out, that's what happens with bankrupt companies. If you considering investing in banks in a country that you think may default - research them and see how much investments they have that will be affected by that default." }, { "docid": "81652", "title": "", "text": "In summary, you are correct that the goal of investing is to maximize returns, while paying low management fees. Index investing has become very popular because of the low fees. There are many actively traded mutual funds out there with very high management fees of 2.5% and up that do not beat the market. This begs the question of why you are paying high management fees and not just investing in index funds. Consider maxing out your tax sheltered accounts (401(k) and ROTH IRA) to avoid even more fees on your returns. Also consider having a growth component of your portfolio which is generally filled with equity, along with a secure component for assets such as bonds. Bonds may not have the exciting returns of equity, but they help to smooth out the volatility of your portfolio, which may help to keep peace of mind when the market dips." }, { "docid": "87548", "title": "", "text": "&gt; It seems like another way to have more artificial leverage in the future market, without having to borrow any money. Leverage is plentiful in the futures markets, and without borrowing. &gt; Why aren't future options talked about more? Because they don't as easily connect to predictions that people mean to make. Because they have worse pricing because people are paying more along the way. Because they lack volume. But they're talked about and used plenty. There's not much to them that there isn't to equity options at a low level. &gt; It seems like a safer way to play commodities compared to just futures. You mean hedging your futures contracts? Yes, the people who want to do that buy options." }, { "docid": "202829", "title": "", "text": "\"Pay to play? You mean they pay for beefier data feeds that other firms don't need, sure they do. But everyone can trade on the US exchanges now (NYSE, NASDAQ, BATS, etc) which was not true 20 years ago when NYSE had the specialist monopoly, so yes the markets are more democratic than they've ever been. Side note, the exchanges do directly profit from increased trading volume because they take a small % of every trade, so I'm not sure what you mean they don't directly profit from it. Also I get the feeling you don't understand the scope of HFT activity, HFT peak profits were on the order of 7 billion during the highest volume time of the last decade (2005-2010). They are now around 1B. Compared to the trillions of dollars that change hands in the exchange per year, this is chump change, hardly a \"\"free money faucet\"\". Also Katsayuma opened yet another dark pool that caters to high volume clients (your goldmans and merrils). The only difference in IEX is it got a free marketing campaign to entice clients. Seriously, IEX is nothing more than the existing fixed cross dark pools, which btw screws over retail investors more than the lit exchanges like NASDAQ. Katsayuma got steamrolled in his executions because he couldn't keep up with the time and then hit the lottery jackpot by getting Michael Lewis to paint him as a \"\"hero\"\", honestly I'm confounded at how lucky that dude got. BTW broker dealers get preferential treatment in IEX, meaning they get to cut in front of the line in front of retail investors. Why are you so opinionated about this, did you make a few bad trades on eTrade and need a scapegoat?\"" }, { "docid": "372834", "title": "", "text": "\"The real answer why the government is \"\"allowed\"\" to do something is because they are the government and they make the rules. There are lots of laws that I think make no sense. I ran into a similar situation to yours. I bought a house during a time when the market in my area was way down. The previous owner had paid $140,000 but I got it for only $80,000. The government appraised it for, I forget the exact number, but over $100,000. I appealed, and the argument I made to the appeal board was that the law says it is supposed to be appraised for \"\"fair market value\"\". The definition of \"\"fair market value\"\" is the amount that a willing buyer would pay to a willing seller, absent special conditions like a sweetheart sale to a relative. The house had been advertised for a higher price and the seller had to drop the price several times before getting an offer, and finally accepting mine. This is pretty much the definition of \"\"fair market value\"\". The appeals board replied that it was not FMV because the market was bad at this particular time and so I got a good deal. I said that that's the definition of market value: it goes up and down as market conditions change. If the market happened to be up when someone bought a house and they had to pay a high price, would the government assess the house at a lower value because that was an unusually high price? I doubt it. They ended up reducing the assessed value, but not to what I actually paid. All that said, arguably a foreclosure sale might be considered special conditions. Prices at a foreclosure sale tend to be lower than \"\"ordinary\"\" sales. In a foreclosure, the bank is usually trying to get rid of the property quickly because they don't want to be in the property-management business, they want to be in the money lending and management business. Of course you could say that sort of thing about conditions surrounding many sales. Maybe the price is low because the seller needed cash now to start a business. Maybe the price is high because the buyer was too lazy to shop around. Maybe the price is low because the buyer is a very skilled negotiator. Etc etc. My watch just broke and while I was shopping for a new one I found two listings for the exact same watch, I mean exact same manufacturer and model number, identical picture, on the same web site, one giving the price as $24 and the other as $99. What is the market value of that watch? I presume anyone who saw both listings would pick the $24 one, but I presume some number of people pay the higher price because they never see the lower price. In real life there isn't really one, exact, fair market value. That's an abstraction.\"" } ]

[ { "docid": "382236", "title": "", "text": "\"The most common use of non-deductible Traditional IRA contributions these days, as JoeTaxpayer mentioned, is as an intermediate step in a \"\"backdoor Roth IRA contribution\"\" -- contribute to a Traditional IRA and then immediately convert it to a Roth IRA, which, if you had no previous pre-tax money in Traditional or other IRAs, is a tax-free process that achieves the same result as a regular Roth IRA contribution except that there are no income limits. (This is something you should consider since you are unable to directly contribute to a Roth IRA due to income limits.) Also, I want to note that your comparison is only true assuming you are holding tax-efficient assets, ones where you get taxed once at the end when you take it out. If you are holding tax-inefficient assets, like an interest-bearing CD or bond or a stock that regularly produces dividends, in a taxable account you would be taxed many times on that earnings, and that would be much worse than with the non-deductible Traditional IRA, where you would only be taxed once at the end when you take it out.\"" } ]

[ { "docid": "567255", "title": "", "text": "It sounds like the two best options would be to roll it over into a traditional IRA or roll it over into your new 401(k). If there isn't much money in your SIMPLE IRA, it might make more sense to just roll it over into your 401(k) so you have fewer retirement accounts to keep track of. However, if you do have a significant amount of money in the SIMPLE IRA then you may wish to take advantage of the greater freedom in investment options that IRAs offer over most 401(k) plans. Keep in mind the 2-year rule for SIMPLE IRAs. You will face tax penalties if you roll it and it hasn't yet been 2 years since the SIMPLE IRA was opened." }, { "docid": "111350", "title": "", "text": "If you want to 'offset' current (2016) income, only deductible contribution to a traditional IRA does that. You can make nondeductible contributions to a trad IRA, and there are cases where that makes sense for the future and cases where it doesn't, but it doesn't give you a deduction now. Similarly a Roth IRA has possible advantages and disadvantages, but it does not have a deduction now. Currently he maximum is $5500 per person ($6500 if over age 50, but you aren't) which with two accounts (barely) covers your $10k. To be eligible to make this deductible traditional contribution, you must have earned income (employment or self-employment, but NOT the distribution from another IRA) at least the amount you want to contribute NOT have combined income (specifically MAGI, Modified Adjusted Gross Income) exceeding the phaseout limit (starts at $96,000 for married-joint) IF you were covered during the year (either you or your spouse) by an employer retirement plan (look at box 13 on your W-2's). With whom. Pretty much any bank, brokerage, or mutual fund family can handle IRAs. (To be technical, the bank's holding company will have an investment arm -- to you it will usually look like one operation with one name and logo, one office, one customer service department, one website etc, but the investment part must be legally separate from the insured banking part so you may notice a different name on your legal and tax forms.) If you are satisified with the custodian of the inherited IRA you already have, you might just stay with them -- they may not need as much paperwork, you don't need to meet and get comfortable with new people, you don't need to learn a new website. But if they sold you an annuity at your age -- as opposed to you inheriting an already annuitized IRA -- I'd want a lot of details before trusting they are acting in your best interests; most annuities sold to IRA holders are poor deals. In what. Since you want only moderate risk at least to start, and also since you are starting with a relatively small amount where minimum investments, expenses and fees can make more of an impact on your results, I would go with one or a few broad (= lower risk) index (= lower cost) fund(s). Every major fund familly also offers at least a few 'balanced' funds which give you a mixture of stocks and bonds, and sometimes some 'alternatives', in one fund. Remember this is not committing you forever; any reasonable custodian will allow you to move or spread to more-adventurous (but not wild and crazy) investments, which may be better for you in future years when you have some more money in the account and some more time to ponder your goals and options and comfort level." }, { "docid": "388021", "title": "", "text": "Post-86 After tax contributions to a 401k are after tax. The earnings on that money is taxable, but not the contributions. This means: You'll have $15,000 in the 401k and $10,000 is considered after-tax and $5,000 is considered pre-tax. The after-tax portion can be converted to a Roth IRA without paying taxes or penalties. New in September 2014 The IRS has made substantial changes that now enable this to happen. You can request a distribution from your 401k provider where they divide the money into pre-tax and after-tax funds. In my example, you'd get a check for $10,000 that you could send to a Roth IRA and a check for $5,000 you could add to a traditional Roll-over IRA. Neither of those would be taxable events and you'd end with a Roth IRA with $10K and a Traditional, Rollover IRA with $5K in it. Notes:" }, { "docid": "520924", "title": "", "text": "I would definitely recommend contributing to an IRA. You don't know for sure you'll get hired full-time and be eligible for the 401(k) with match, so you should save for retirement on your own. I would recommend Roth over Traditional IRA in your situation, because let's say you do get hired full-time. Since the company offers a retirement plan, your 2015 Traditional IRA contribution would no longer be deductible at your income level (assuming you're single), and non-deductible Traditional IRAs aren't a very good deal (see here and here). If there's a decent chance you would get hired, this factor would override the pre-tax versus post-tax debate for me. At your income level you could go either way on that anyway. A Solo 401(k) would be worth looking into if you wanted to increase your contribution limit beyond what IRAs offer, but given that it sounds like you're just starting out saving for retirement, and you may be eligible for a 401(k) soon, it's probably overkill at this point." }, { "docid": "363306", "title": "", "text": "\"People often have the wrong idea about how taxes apply to their money. There's not really any such thing as \"\"pre-tax\"\" or \"\"post-tax\"\" income, only pre-tax and post-tax **uses** of your income. This is somewhat hidden by the fact that we pay income tax based on our income for the year; but if you look a bit closer, you'll notice that come April 15th, (almost) every dollar you get to *subtract* from your gross income isn't defined by where it comes from, but rather, where it *went* (there are a few special cases there, like qualified dividends, that that's an entirely different issue). Perhaps the most clear example of this is a traditional IRA that you self-fund from your savings account on April 14th, for the prior tax year - You're putting dollars you've already taken home, into a pre-tax account, *after* the end of the calendar tax-year; and yet it all works out exactly the same (tax-liability wise - There's certainly an opportunity cost there) as if you had contributed those dollars via a weekly payroll deduction. So when you manually fund a Roth IRA, it has *no* effect on your tax liability (except insofar as you *don't* get to deduct it from your taxable income, which you wouldn't if you had left it in a savings account, etiher). In the year you earned that money, you paid taxes on it; when you take it out, you won't.\"" }, { "docid": "395840", "title": "", "text": "If you exceed the income limit for deducting a traditional IRA (which is very low if you are covered by a 401(k) ), then your IRA options are basically limited to a Roth IRA. The Cramer person probably meant to compare 401(k) and IRA from the same pre-/post-tax-ness, so i.e. Traditional 401(k) vs. Traditional IRA, or Roth 401(k) vs. Roth IRA. Comparing a Roth investment against a Traditional investment goes into a whole other topic that only confuses what is being discussed here. So if deducting a traditional IRA is ruled out, then I don't think Cramer's advice can be as simply applied regarding a Traditional 401(k). (However, by that logic, and since most people on 401(k) have Traditional 401(k), and if you are covered by a 401(k) then you cannot deduct a Traditional IRA unless you are super low income, that would mean Cramer's advice is not applicable in most situations. So I don't really know what to think here.)" }, { "docid": "76530", "title": "", "text": "\"All transactions within an IRA are irrelevant as far as the taxation of the distributions from the IRA are concerned. You can only take cash from an IRA, and a (cash) distribution from a Traditional IRA is taxable as ordinary income (same as interest from a bank, say) without the advantage of any of the special tax rates for long-term capital gains or qualified dividends even if that cash was generated within the IRA from sales of stock etc. In short, just as with what is alleged to occur with respect to Las Vegas, what happens within the IRA stays within the IRA. Note: some IRA custodians are willing to make a distribution of stock or mutual fund shares to you, so that ownership of the 100 shares of GE, say, that you hold within your IRA is transferred to you in your personal (non-IRA) brokerage account. But, as far as the IRS is concerned, your IRA custodian sold the stock as the closing price on the day of the distribution, gave you the cash, and you promptly bought the 100 shares (at the closing price) in your personal brokerage account with the cash that you received from the IRA. It is just that your custodian saved the transaction fees involved in selling 100 shares of GE stock inside the IRA and you saved the transaction fee for buying 100 shares of GE stock in your personal brokerage account. Your basis in the 100 shares of GE stock is the \"\"cash_ that you imputedly received as a distribution from the IRA, so that when you sell the shares at some future time, your capital gains (or losses) will be with respect to this basis. The capital gains that occurred within the IRA when the shares were imputedly sold by your IRA custodian remain within the IRA, and you don't get to pay taxes on that at capital gains rates. That being said, I would like to add to what NathanL told you in his answer. Your mother passed away in 2011 and you are now 60 years old (so 54 or 55 in 2011?). It is likely that your mother was over 70.5 years old when she passed away, and so she likely had started taking Required Minimum Distributions from her IRA before her death. So, You should have been taking RMDs from the Inherited IRA starting with Year 2012. (The RMD for 2011, if not taken already by your mother before she passed away, should have been taken by her estate, and distributed to her heirs in accordance with her will, or, if she died intestate, in accordance with state law and/or probate court directives). There would not have been any 10% penalty tax due on the RMDs taken by you on the grounds that you were not 59.5 years old as yet; that rule applies to owners (your mom in this case) and not to beneficiaries (you in this case). So, have you taken the RMDs for 2012-2016? Or were you waiting to turn 59.5 before taking distributions in the mistaken belief that you would have to pay a 10% penalty for early wthdrawal? The penalty for not taking a RMD is 50% of the amount not distributed; yes, 50%. If you didn't take RMDs from the Inherited IRA for years 2012-2016, I recommend that you consult a CPA with expertise in tax law. Ask the CPA if he/she is an Enrolled Agent with the IRS: Enrolled Agents have to pass an exam administered by the IRS to show that they really understand tax law and are not just blowing smoke, and can represent you in front of the IRS in cases of audit etc,\"" }, { "docid": "275581", "title": "", "text": "TL; DR version: What you propose to do might not save you taxes, and may well be illegal. Since you mention your wife, I assume that the Inherited IRA has been inherited from someone other than your spouse; your mother, maybe, who passed away in Fall 2015 as mentioned in your other question (cf. the comment by Ben Miller above)? If so, you must take (at least) the Required Minimum Distribution (RMD) from the Inherited IRA each year and pay taxes on the distribution. What the RMD is depends on how old the Owner of the IRA was when the Owner passed away, but in most cases, it works out to be the RMD for you, the Beneficiary, considered to be a Single Person (see Publication 590b, available on the IRS web site for details). So, Have you taken the (at least) the RMD amount for 2016 from this Inherited IRA? If not, you will owe a 50% penalty of the difference between the amount withdrawn and the RMD amount. No, it is not a typo; the penalty (it is called an excise tax) is indeed 50%. Assuming that the total amount that you have taken as a Distribution from the Inherited IRA during 2016 is the RMD for 2016 plus possibly some extra amount $X, then that amount is included in your taxable income for that year. You cannot rollover any part of the total amount distributed into your own IRA and thereby avoid taxation on the money. Note that it does not matter whether you will be rolling over the money into an existing IRA in your name or will be establishing a new rollover IRA account in your name with the money: the prohibition applies to both ways of handling the matter. If you wish, you can roll over up to $X (the amount over and above the RMD) into a new Inherited IRA account titled exactly the same as the existing Inherited IRA account with a different custodian. If you choose to do so, then the amount that you roll over into the new Inherited IRA account will not included in your taxable income for 2016. To my mind, there is no point to doing such a rollover unless you are unhappy with the current custodian of your Inherited IRA, but the option is included for completeness. Note that the RMD amount cannot be rolled over in this fashion; only the excess over the RMD. If you don't really need to spend the money distributed from your Inherited IRA for your household expenses (your opening statement that your income for 2016 is low might make this unlikely), and (i) you and/or your spouse received compensation (earned income such as wages, salary, self-employment income, commissions for sales, nontaxable combat pay for US Military Personnel, etc) in 2016, and (ii) you were not 70.5 years of age by December 2016, then you and your wife can make contributions to existing IRAs in your names or establish new IRAs in your names. The amount that can be contributed for each IRA is limited to the smaller of $5500 ($6500 for people over 50) and that person's compensation for 2016, but if a joint tax return is filed for 2016, then both can make contributions to their IRAs as long as the sum of the amounts contributed to the IRAs does not exceed the total compensation reported on the joint return. The deadline for making such IRA contributions is the due date for your 2016 Federal income tax return. Since your income for 2016 is less than $98K, you can deduct the entire IRA contribution even if you or your wife are covered by an employer plan such as a 401(k) plan. Thus, your taxable income will be reduced by the IRA contributions (up to a maximum of $11K (or $12 K or $13K depending on ages)) and this can offset the increase in taxable income due to the distribution from the Inherited IRA. Since money is fungible, isn't this last bullet point achieving the same result as rolling over the entire $9.6K (including the RMD) into an IRA in your name, the very thing that the first bullet point above says cannot be done? The answer is that it really isn't the same result and differs from what you wanted to do in several different ways. First, the $9.6K is being put into IRAs for two different people (you and your wife) and not just you alone. Should there, God forbid, be an end to the marriage, that part of your inheritance is gone. Second, you might not even be entitled to make contributions to IRAs (no compensation, or over 70.5 years old in 2016) which would make the whole thing moot. Third, the amount that can be contributed to an IRA is limited to $5500/$6500 for each person. While this does not affect the present case, if the distribution had been $15K instead of $9.6K, not all of that money could be contributed to IRAs for you and your wife. Finally, the contribution to a Traditional IRA might be non-deductible for income tax purposes because the Adjusted Gross Income is too high; once again, not an issue for you for 2016 but something to keep in mind for future years. In contrast, rollovers from one IRA into another IRA (both titled the same) can be in any amount, and they can be done at any time regardless of whether there is compensation for that year or not or what the Adjusted Gross Income is or whether there is coverage by a 401(k) plan. There are no tax consequences to rollovers unless the rollover is from a Traditional IRA to a Roth IRA in which case, the distribution is included in taxable income for that year. What is prohibited is taking the entire amount of the $9.6K distribution from an Inherited IRA and rolling it over into your existing IRA (or establishing a Rollover IRA in your name with that $9.6K); ditto for some money going into your IRA and some into your wife's IRA. I expect that any IRA custodian will likely refuse to allow you to carry out such a rollover transaction but will be glad to accept 2016 contributions (in amounts of up to $5500/$6500) from you into existing IRAs or open a new IRA for you. The custodian will not ask whether you have compensation for 2016 or not (but will check your age!); it is your responsibility to ensure that you do not contribute more than the compensation etc. Incidentally, subject to the $5500/6500 maximum limit, you can (if you choose to do so) contribute the entire amount of your compensation to an IRA, not just the take-home pay amount (which will be smaller than your compensation because of withholding for Social Security and Medicare tax, State and Federal income tax, etc)." }, { "docid": "358371", "title": "", "text": "\"Welcome to the 'what should otherwise be a simple choice turns into a huge analysis' debate. If the choice were actually simple, we've have one 'golden answer' here and close others as duplicate. But, new questions continue to bring up different scenarios that impact the choice. 4 years ago, I wrote an article in which I discussed The Density of Your IRA. In that article, I acknowledge that, with no other tax favored savings, you can pack more value into the Roth. In hindsight, I failed to add some key points. First, let's go back to what I'd describe as my main thesis: A retired couple hits the top of the 15% bracket with an income of $96,700. (I include just the standard deduction and exemptions.) The tax on this gross sum is $10,452.50 for an 'average' rate of 10.8%. The tax, paid or avoided, upon deposit, is one's marginal rate. But, at retirement, the withdrawals first go through the zero bracket (i.e. the STD deduction and exemptions), then 10%, then 15%. The above is the simplest snapshot. I am retired, and our return this year included Sch A, itemized deductions. Property tax, mort interest, insurance, donations added up fast, and from a gross income (IRA withdrawal) well into the 25% bracket, the effective/average rate was reported as 7.3%. If we had saved in Roth accounts, it would have been subject to 25%. I'd suggest that it's this phenomenon, the \"\"save at marginal 25%, but withdraw at average sub-11%\"\" effect that account for much of the resulting tax savings that the IRA provides. The way you are asking this, you've been focusing on one aspect, I believe. The 'density' issue. That assumes the investor has no 401(k) option. If I were building a spreadsheet to address this, I'd be sure to consider the fact that in a taxable account, long term gains are taxed at 15% for higher earners (I take the liberty to ignore that wealthier taxpayers will pay a maximum 20% tax on long-term capital gains. This higher rate applies when your adjusted gross income falls into the top 39.6% tax bracket.) And those in the 10 or 15% bracket pay 0%. With median household income at $56K in 2016, and the 15% bracket top at $76K, this suggests that most people (gov data shows $75K is 80th percentile) have an effective unlimited Roth. So long as they invest in a way that avoids short term gains, they can rebalance often enough to realize LT gains and pay zero tax. It's likely the $80K+ earner does have access to a 401(k) or other higher deposit account. If they don't, I'd still favor pretax IRAs, with $11K for the couple still 10% or so of their earnings. It would be a shame to lose that zero bracket of that first $20K withdrawal at retirement. Again working backwards, the $78K withdrawal would take nearly $2M in pretax savings to generate. All in today's dollars.\"" }, { "docid": "127664", "title": "", "text": "\"Your employment status is not 100% clear from the question. Normally, consultants are sole-proprietors or LLC's and are paid with 1099's. They take care of their own taxes, often with schedule C, and they sometimes can but generally do not use \"\"employer\"\" company 401(k). If this is your situation, you can contact any provider you want and set up your own solo 401(k), which will have great investment options and no fees. I do this, through Fidelity. If you are paid with a W2, you are not a consultant. You are an employee and must use your employer's 401(k). Figure out what you are. If you are a consultant, open a solo 401(k) at the provider of your choice. Make sure beforehand that they allow incoming rollovers. Roll all of your previous 401(k)s and IRA's into it. When you have moved your 401(k) to a better provider, you won't be paying any extra fees, but you will not recoup any fees your original provider charged. I'm not sure why you mention a Roth IRA. If you try to roll your 401(k) into a Roth instead of a traditional IRA or 401(k), be aware that you will be taxed on everything you roll. ---- Edit: a little info about IRA's in response to your comment ---- Tax advantaged retirement accounts come in two flavors: one is managed by your company and the money is taken out of your paycheck. This is usually a 401(k) or 403(b). You can contribute up to $18K per year and your company can also contribute to it. The other flavor is an IRA. You can contribute $5,500 per year to this for you and $5,500 for your spouse. These are outside of your company and you make the deposits yourself. You choose your own provider, so competition has driven prices way down. You can have both a 401(k) and an IRA and contribute the max to both (though at high incomes you lose the ability to deduct IRA contributions). These accounts are tax advantaged because you only pay taxes once. With a regular brokerage account, you pay income tax in the year in which you earn money, then you pay tax every year on dividends and any capital gains that have been realized by selling. There are two types of tax-advantaged accounts: Traditional IRA or Traditional 401(k). You do not pay income tax on this money in the year you earn it, nor do you pay capital gains tax. Instead you pay tax only in the year in which you take the money out (in retirement). Roth IRA or Roth 401(k). You do pay income tax on money on this money in the year in which you earn it. But then you don't pay tax on any gains or withdrawals ever again. When you leave your job (and sometimes at other times) you can move your money out of a 401(k) into your IRA, where you can do a better job managing it. You can also move money from your IRA into a 401(k) if your 401(k) provider will allow you to. Whether traditional or Roth is better depends on your tax rate now and your tax rate at retirement. However, if you choose to move money from a traditional account into a Roth account, you must pay tax on it in that year as if it was income because traditional and Roth accounts are taxed at different times. For that reason, if you are just trying to move money out of your 401(k) to save on fees, the logical place to put it is in a traditional IRA. Moving money from a traditional to a Roth may make sense, for example, if your tax rate is temporarily low this year, but that would be a separate decision from the one you are looking at. You can always roll your traditional IRA into a Roth later if that does become the case. Otherwise, there's no reason to think your traditional 401(k) should be rolled into a Roth IRA according to what you have described.\"" }, { "docid": "67393", "title": "", "text": "\"He will receive it just like any other non-spouse beneficiary you could have named. The money can stay in your 401K account if he wants to keep it there. For simplicity, your nephew will want to roll the money over to another qualified account, such as an IRA. The account must be titled in your name, for the benefit of him as beneficiary (aka, \"\"beneficiary IRA\"\"). Regardless of where the money is kept, he will be required to start withdrawing the funds a little bit each year, known as the Required Minimum Distribution (RMD) and it will appear as taxable income to him each year. There is no early withdrawal penalty in this case. Optionally, he can stretch out his RMDs over his own life expectancy. He would do this to lower his potential tax obligation, and to keep the money in his account longer, hopefully growing over time. See Publication 590-B , Distributions from IRA.\"" }, { "docid": "384564", "title": "", "text": "tl;dr: Please please please do the conversion first. JoeTaxpayer's answer is correct, but I am of the opposite opinion. First, there's just about no reason to have post-tax dollars in a Traditional IRA. You'll eventually have to pay tax on the earnings those dollars generate, so it's essentially the same as having that money in a regular taxable account. Meanwhile, if you roll those dollars into a Roth IRA, you get to earn tax-free money on them for the rest of your life (and even after your death)! Second, even if you did have some reason for keeping those post-tax dollars where they are, the last thing you ever want to do is mix them with pre-tax dollars (from, say, your 401k). As soon as you mix them, all the dollars become subject to pro-rata taxation (as Joe mentioned), so any future decision you were planning to make about what to do with just your post-tax dollars is moot -- you have given away your right to think separately about your pre- and post-tax dollars. As an example, let's say the accounts you want to combine look like this: In the future you decide you want to move $2,000 from the above account into a Roth. Because you mixed the money, the IRS insists that your rollover consists of: So now you owe tax (and it's regular income tax, I believe, not even capital gains tax) on $1,500. That was money that you socked away specifically to avoid taxes, and now you've gone and paid taxes on it! Now, there are valid arguments for intentionally moving pre-tax dollars from a Traditional to a Roth like this, but the point is that you shouldn't even have to be having that argument -- you have post-tax dollars in your Traditional IRA that almost certainly belong in a Roth. By mixing your 401k into your Traditional IRA, you can no longer do anything with just the post-tax dollars. The IRS will forever insist that you do these pro-rated calculations. Say in the future you suddenly realize that a Roth is much better for your financial situation than a Traditional IRA. (Or you might still prefer a Traditional IRA, but as explained in the next sentence it's not available to you.) Unfortunately, because you're covered by a (new) 401k -- or maybe because you earn too much money to contribute pre-tax dollars to either a Traditional or Roth IRA -- you're out of luck. You're simply not allowed to contribute to a Roth. Most people in this situation can make use of what's called a back-door Roth. They contribute up to the maximum amount per year ($5,500 or whatever it is now) post-tax to a Traditional IRA and then immediately roll it over to their Roth. You can still try this, but guess what? Yep, because you're mixing these new post-tax dollars with pre-tax money in your Traditional IRA, every year your rollover will be tainted with that pre-tax money, diluting the whole point of the back-door Roth. You'll be paying taxes on money you never wanted to pay taxes on, and you'll be leaving post-tax money behind in your traditional IRA. (If it sounds like I'm annoyed about this situation from personal experience, it's because I am. :) By doing the conversion first, you never mix pre- and post-tax money, and your money goes where you want it. Of course, assuming you eventually do roll over your 401(k) into a Traditional IRA, the Really Annoying Consequence above will still plague you, but at least you'll have cleanly converted that first post-tax amount." }, { "docid": "187571", "title": "", "text": "I think you may be drawing the wrong conclusion about why you put what type of investment in a taxable vs. tax-advantaged account. It is not so much about risk, but type of return. If you're investing both tax-advantaged and taxable accounts, you can benefit by putting more tax-inefficient investments inside your tax-advantaged accounts. Some aggressive asset types, like real estate, can throw off a lot of taxable income. If your asset allocation calls for investing in real estate, holding it in a 401k or IRA can allow more of your money to remain invested, rather than having to use it to pay for taxes. And if you're holding in a Roth IRA, you get that tax free. But bonds, a decidedly non-aggressive asset, also throw off a lot of taxable income. You're able to hold them in a tax-advantaged account and not pay taxes on the income until you withdraw it from the account (or tax free in the case of a Roth account.) An aggressive stock fund that is primarily expected to provide returns via price appreciation would do well in a taxable account because there's likely little tax consequence to you until it is sold." }, { "docid": "538462", "title": "", "text": "Assuming that the conversion was completely non-taxable (i.e. your Traditional IRA was 100% basis), then the converted money can be taken out at any time whatsoever (no 5 year or age stuff), without tax or penalty, similar to directly contributed money. For withdrawing conversions and rollovers within 5 years of the conversion or rollover, the penalty only applies to the part of the conversion or rollover that was taxable. Since in this case the conversion was completely non-taxable, there is no penalty on the withdrawal. However, note that the ordering of the conversion money is not the same as for contribution money, and this may be significant in some cases. When you take money out of Roth IRA, it goes 1) contributions, 2) rollovers and conversions, and 3) earnings. However, money within (2) is then further divided by year, with rollovers and contributions for earlier years ordered before rollovers and contributions for later years, and then within each year, the taxable rollover and conversion money are ordered first, before the non-taxable money. So what does that mean? Well, suppose you made a Roth IRA conversion that was taxable one year, and then the next year you make a contribution. If you withdraw a little bit, it comes from the contribution which is ordered first, which means no penalty. Now suppose in that second year you had a backdoor Roth IRA contribution instead of a regular contribution. If you withdraw, the first year's conversion is ordered first, and since it's within 5 years, there's a penalty. It's still true that withdrawing the backdoor Roth IRA has no penalty; but, you don't get to that money until you finish the other one. If you've never made a taxable conversion before, then this issue doesn't exist." }, { "docid": "27495", "title": "", "text": "There are a couple reasons for having a Traditional or Roth IRA in addition to a 401(k) program in general, starting with the Traditional IRA: With regards to the Roth IRA: Also, both the Traditional and Roth IRA allow you to make a $10,000 withdraw as a first time home buyer for the purposes of buying a home. This is much more difficult with the 401(k) and generally you end up having to take a loan against the 401(k) instead. So even if you can't take advantage of the tax deductions from contributions to a Traditional IRA, there are still good reasons to have one around. Unless you plan on staying with the same company for your entire career (and even if you do, they may have other plans) the Traditional IRA tends to be a much better place to park the funds from the 401(k) than just rolling them over to a new employer. Also, don't forget that just because you can't take deductions for the income doesn't mean that you might not need the income that savings now will bring you in retirement. If you use a retirement savings calculator is it saying that you need to be saving more than your current monthly 401(k) contributions? Then odds are pretty good that you also need to be adding additional savings and an IRA is a good location to put those assets because of the other benefits that they confer. Also, some people don't have the fiscal discipline to not use the money when it isn't hard to get to (i.e. regular savings or investment account) and as such it also helps to ensure you aren't going to go and spend the money unless you really need it." }, { "docid": "452592", "title": "", "text": "You are already doing everything you can. If your employer does not have a 401(k) you are limited to investing in a Roth or a traditional IRA (Roth is post tax money, traditional IRA gives you a deduction so it is essentially pre tax money). The contribution limits are the same for both and contributing to either adds to the limit (so you can't duplicate). CNN wrote an article on some other ways to save: One thing you may want to bring up with your employer is that they could set up a SEP-IRA. This allows them to set a % (up to 25%) that they contribute pre-tax to an IRA for everyone at the company that has worked there at least 3 years. If you are at a small company, maybe everyone with that kind of seniority would take an equivalent pay cut to get the automatic retirement contribution? (Note that a SEP-IRA has to apply to everyone equally percentage wise that has worked there for 3 years, and the employer makes the contribution, not you)." }, { "docid": "511096", "title": "", "text": "You have two questions - first - no, if you are above the deduction limit, then you still have a traditional IRA deposit but with post tax money, tracked via form 8606. Second - If I read this right, if you cannot take the deduction, but can do the Roth, by all means, this is the 'no-brainer' decision. Makes no sense to deposit non-deducted to a traditional IRA if you can do Roth. But - for sake of the full picture - if above the Roth limit, you still should make the post tax deposit (to the traditional.) If you have no pretax IRA at all, you can convert immediately. If you have a mix, you have the option to convert piecemeal paying the tax on the pro-rated amount the pretax represents." }, { "docid": "48203", "title": "", "text": "You have many options, and there is no one-size-fits-all recommendation. You can contribute to your IRA in addition to your 401(k), but because you have that 401(k), it is not tax-deductable. So there is little advantage in putting money in the IRA compared to saving it in a personal investment account, where you keep full control over it. It does, however, open the option to do a backdoor-rollover from that IRA to a Roth IRA, which is a good idea to have; you will not pay any taxes if you do that conversion, if the money in the IRA was not tax deducted (which it isn't as you have the 401(k)). You can also contribute to a Roth IRA directly, if you are under the income limits for that (193k$ for married, I think, not sure for single). If this is the case, you don't need to take the detour through the IRA with the backdoor-rollover. Main advantage for Roth is that gains are tax free. There are many other answers here that give details on where to save if you have more money to save. In a nutshell, In between is 'pay off all high-interest debt', I think right after 1. - if you have any. 'High-Interest' means anything that costs more interest than you can expect when investing." }, { "docid": "424427", "title": "", "text": "Edited in response to JoeTaxpayer's comment and OP Tim's additional question. To add to and clarify a little what littleadv has said, and to answer OP Tim's next question: As far as the IRS is concerned, you have at most one Individual Retirement Account of each type (Traditional, Roth) though the money in each IRA can be invested with as many different custodians (brokerages, banks, etc.) and different investments as you like. Thus, the maximum $5000 ($6000 for older folks) that you can contribute each year can be split up and invested any which way you like, and when in later years you take a Required Minimum Distribution (RMD) from a Traditional IRA, you can get the money by selling just one of the investments, or from several investments; all that the IRS cares is that the total amount that is distributed to you is at least as large as the RMD. An important corollary is that the balance in your IRA is the sum total of the value of all the investments that various custodians are holding for you in IRA accounts. There is no loss in an IRA until every penny has been withdrawn from every investment in your IRA and distributed to you, thus making your IRA balance zero. As long as you have a positive balance, there is no loss: everything has to come out. After the last distribution from your Roth IRA (the one that empties your entire Roth IRA, no matter where it is invested and reduces your Roth IRA balance (see definition above) to zero), total up all the amounts that you have received as distributions from your Roth IRA. If this is less than the total amount of money you contributed to your Roth IRA (this includes rollovers from a Traditional IRA or Roth 401k etc., but not the earnings within the Roth IRA that you re-invested inside the Roth IRA), you have a loss that can be deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI limit. This 2% is not a cap (in the sense that no more than 2% of your AGI can be deducted in this category) but rather a threshold: you can only deduct whatever part of your total Miscellaneous Deductions exceeds 2% of your AGI. Not many people have Miscellaneous Deductions whose total exceeds 2% of their AGI, and so they end up not being able to deduct anything in this category. If you ever made nondeductible contributions to your Traditional IRA because you were ineligible to make a deductible contribution (income too high, pension plan coverage at work etc), then the sum of all these contributions is your basis in your Traditional IRA. Note that your deductible contributions, if any, are not part of the basis. The above rules apply to your basis in your Traditional IRA as well. After the last distribution from your Traditional IRA (the one that empties all your Traditional IRA accounts and reduces your Traditional IRA balance to zero), total up all the distributions that you received (don't forget to include the nontaxable part of each distribution that represents a return of the basis). If the sum total is less than your basis, you have a loss that can be deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI threshold. You can only deposit cash into an IRA and take a distribution in cash from an IRA. Now, as JoeTaxpayer points out, if your IRA owns stock, you can take a distribution by having the shares transferred from your IRA account in your brokerage to your personal account in the brokerage. However, the amount of the distribution, as reported by the brokerage to the IRS, is the value of the shares transferred as of the time of the transfer, (more generally the fair market value of the property that is transferred out of the IRA) and this is the amount you report on your income tax return. Any capital gain or loss on those shares remains inside the IRA because your basis (in your personal account) in the shares that came out of the IRA is the amount of the distribution. If you sell these shares at a later date, you will have a (taxable) gain or loss depending on whether you sold the shares for more or less than your basis. In effect, the share transfer transaction is as if you sold the shares in the IRA, took the proceeds as a cash distribution and immediately bought the same shares in your personal account, but you saved the transaction fees for the sale and the purchase and avoided paying the difference between the buying and selling price of the shares as well as any changes in these in the microseconds that would have elapsed between the execution of the sell-shares-in-Tim's-IRA-account, distribute-cash-to-Tim, and buy-shares-in-Tim's-personal account transactions. Of course, your broker will likely charge a fee for transferring ownership of the shares from your IRA to you. But the important point is that any capital gain or loss within the IRA cannot be used to offset a gain or loss in your taxable accounts. What happens inside the IRA stays inside the IRA." } ]

[ { "docid": "152096", "title": "", "text": "The simplest answer is that you can convert the IRA to a Roth, and since it was already taxed, pay no tax on conversion. If, in your hypothetical situation, you happen to have an IRA already in place, you are subject to pro-rata rules on conversions, e.g. your balance is total $40K, $10K 'not deducted', a conversion is 75% taxed, convert $20K and the tax is on $15K of that money. But, there also might be a time when you are able to transfer IRA money into a 401(k), effectively removing the pretax deposits, and leaving just post tax money for a free conversion." } ]

[ { "docid": "257274", "title": "", "text": "\"There are ways to mitigate, but since you're not protected by a tax-deferred/advantaged account, the realized income will be taxed. But you can do any of the followings to reduce the burden: Prefer selling either short positions that are at loss or long positions that are at gain. Do not invest in stocks, but rather in index funds that do the rebalancing for you without (significant) tax impact on you. If you are rebalancing portfolio that includes assets that are not stocks (real-estate, mainly) consider performing 1031 exchanges instead of plain sale and re-purchase. Maximize your IRA contributions, even if non-deductible, and convert them to Roth IRA. Hold your more volatile investments and individual stocks there - you will not be taxed when rebalancing. Maximize your 401K, HSA, SEP-IRA and any other tax-advantaged account you may be eligible for. On some accounts you'll pay taxes when withdrawing, on others - you won't. For example - Roth IRA/401k accounts are not taxed at all when withdrawing qualified distributions, while traditional IRA/401k are taxed as ordinary income. During the \"\"low income\"\" years, consider converting portions of traditional accounts to Roth.\"" }, { "docid": "567255", "title": "", "text": "It sounds like the two best options would be to roll it over into a traditional IRA or roll it over into your new 401(k). If there isn't much money in your SIMPLE IRA, it might make more sense to just roll it over into your 401(k) so you have fewer retirement accounts to keep track of. However, if you do have a significant amount of money in the SIMPLE IRA then you may wish to take advantage of the greater freedom in investment options that IRAs offer over most 401(k) plans. Keep in mind the 2-year rule for SIMPLE IRAs. You will face tax penalties if you roll it and it hasn't yet been 2 years since the SIMPLE IRA was opened." }, { "docid": "59600", "title": "", "text": "It is really hard to tell where you should withdraw money from. So instead, I'll give you some pointers to make it easier for you to make the decision for yourself, while keeping the answer useful to others as well. I have 3 401ks, ... and some has post tax, non Roth money Why keeping 3 401ks? You can roll them over into an IRA or the one 401k which is still active (I assume here you're not currently employed with 3 different employers). This will also help you avoiding fees for too low balances on your IRAs. However, for the 401k with after tax (not Roth) balance - read the next part carefully. Post tax amounts are your basis. Generally, it is not a good idea to keep post-tax amounts in 401k/IRA, you usually do post-tax contributions to convert them to Roth ASAP. Withdrawing from 401k with basis may become a mess since you'll have to account for the basis portion of each withdrawal. Especially if you pool it with IRAs, so that one - don't rollover, keep it separately to make that accounting easier. I also have several smaller IRAs and Roth IRAs, Keep in mind the RMD requirements. Roth IRAs don't have those, and are non-taxable income, so you would probably want to keep them as long as possible. This is relevant for 401k as well. Again, consolidating will help you with the fees. I'm concerned about having easily accessible cash for emergencies. I suggest keeping Roth amounts for this purpose as they're easily accessible and bear no taxable consequence. Other than emergencies don't touch them for as long as you can. I do have some other money in taxable investments For those, consider re-balancing to a more conservative style, but beware of the capital gains taxes if you have a lot of gains accumulated. You may want consider loss-harvesting (selling the positions in the red) to liquidate investments without adverse tax consequences while getting some of your cash back into the checking account. In any case, depending on your tax bracket, capital gains taxes are generally lower (down to 0%) than ordinary income taxes (which is what you pay for IRA/401k withdrawals), so you would probably want to start with these, after careful planning and taking the RMD and the Social Security (if you're getting any) into account." }, { "docid": "329497", "title": "", "text": "You are right; Rollover is a process, and not an account type; the result is a Traditional IRA. There is no such thing as a 'Rollover IRA Account'. Rolling a 401(k) over to a Traditional IRA makes sense if a) you have to, because you leave the employer the 401(k) is with; b) because you Traditional IRA is cheaper or more flexible or in other ways 'better' for you, or c) if your next step is a backdoor rollover to a Roth IRA. Most of the time, it doesn't make sense, because employer 401(k) are often better and cheaper. Of course, for the investment company where you roll it too, it makes a lot of sense, because they get your money, so they recommend it. But that's only good for them, not for you. Of course you can roll into an existing account, if you want to roll. Making a new account has no advantage. I cannot imagine any IRA custodian wouldn't take rollovers; they would shoot themselves in the foot by that. What can happen - and you should consider this - that your IRA only accepts cash, and does not allow to transfer the shares you have in the 401(k). That means you have to sell and then re-buy, and you might lose a lot in fees there." }, { "docid": "48203", "title": "", "text": "You have many options, and there is no one-size-fits-all recommendation. You can contribute to your IRA in addition to your 401(k), but because you have that 401(k), it is not tax-deductable. So there is little advantage in putting money in the IRA compared to saving it in a personal investment account, where you keep full control over it. It does, however, open the option to do a backdoor-rollover from that IRA to a Roth IRA, which is a good idea to have; you will not pay any taxes if you do that conversion, if the money in the IRA was not tax deducted (which it isn't as you have the 401(k)). You can also contribute to a Roth IRA directly, if you are under the income limits for that (193k$ for married, I think, not sure for single). If this is the case, you don't need to take the detour through the IRA with the backdoor-rollover. Main advantage for Roth is that gains are tax free. There are many other answers here that give details on where to save if you have more money to save. In a nutshell, In between is 'pay off all high-interest debt', I think right after 1. - if you have any. 'High-Interest' means anything that costs more interest than you can expect when investing." }, { "docid": "511096", "title": "", "text": "You have two questions - first - no, if you are above the deduction limit, then you still have a traditional IRA deposit but with post tax money, tracked via form 8606. Second - If I read this right, if you cannot take the deduction, but can do the Roth, by all means, this is the 'no-brainer' decision. Makes no sense to deposit non-deducted to a traditional IRA if you can do Roth. But - for sake of the full picture - if above the Roth limit, you still should make the post tax deposit (to the traditional.) If you have no pretax IRA at all, you can convert immediately. If you have a mix, you have the option to convert piecemeal paying the tax on the pro-rated amount the pretax represents." }, { "docid": "527010", "title": "", "text": "\"the deadline for roth conversions is december 31st. more precisely, roth conversions are considered to have happened in the tax year the distribution was taken. this creates a kind of loop hole for people who do an ira rollover (not a trustee-to-trustee transfer). technically, you can take money out of your traditional ira on december 31st and hold it for 60 days before deciding to roll it over into either another traditional ira or a roth ira. if you decide to put it in another traditional account, it is not a taxable event. but if you decide to put it in a roth account, the \"\"conversion\"\" is considered to have happened in december. unfortunately non-trustee rollovers are tricky. for one, the source trustee will probably take withholding that you will have to make up with non-ira funds. and rollovers are limitted to a certain number per year. also, if you miss the 60-day deadline, you will have to pay an early-withdrawal penalty (with some exceptions). if you really want to push the envelope, you could try to do this with a 60-day-rule extension, but i wouldn't try it. source: https://www.irs.gov/publications/p590a/ch01.html oddly, recharacterizations (basically reverse roth conversions) have a deadline of october 15th of the year after the original roth conversion it is reversing. so, you could do the conversion in december, then you have up to 10 months to change your mind and \"\"undo\"\" the conversion with a \"\"recharacterization\"\". again, this is tricky business. at the very least, you should be aware that the tax calculations for recharacterization are different if you convert the funds into a new empty roth account vs an existing roth account with a previous balance. honestly, if you want to get into the recharacterization business, you can probably save more on taxes by converting in january before 20-month stock market climb rather than simply converting in the year your tax brackets are low. that is the typical recharacterization strategy. source: https://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-IRAs-Recharacterization-of-Roth-Rollovers-and-Conversions\"" }, { "docid": "475397", "title": "", "text": "There is no advantage to using one type of account or the other if you are in the same tax bracket at retirement that you are in during your working years. However, for tax planning reasons, it is good to have some money in both a Roth and a traditional IRA plan. JoeTaxpayer has often advocated a good rule of thumb to use a Roth when your tax bracket is 15% or lower, and use a traditional account when in the 25% bracket or above. The reason for this rule of thumb is that you are less likely to be in the higher tax bracket when you are living off retirement savings unless you put away an awful lot of money between now and then. If you are making enough money to be paying a 25% marginal rate on some of the money you would be putting away for retirement, then by all means, put all of that money in a traditional 401k. If after contributing that portion of your savings taxed at the higher rate, you still have money to put away for retirement, put the rest in a Roth and pay the 15% taxes on it. When you are younger, it is likely that you are making less than you will a few years hence, and it is also likely that a larger portion of your income will be paying tax deductible interest on a mortgage. If those are true for you, then by all means, use the Roth. That was true of me when I was single and just getting started. When you do finally retire, it is possible that the tax brackets will be increased to match inflation, and if so, then there is no benefit to having tax free money at retirement vs. paying taxes on deferred accounts, but there is also usually more flexibility in when to spend money. You may find that you have a year where you have to spend a lot, so it is good to be able to pull money out without it increasing your marginal rate for that year, and other years where you spend relatively smaller amounts, and you can withdraw taxable money and pay a lower rate on that money. No one knows what the tax code will look like in 40 years, but having some money in each type of account will give you flexibility to minimize your tax bill at retirement." }, { "docid": "110114", "title": "", "text": "All data for a single adult in tax year 2010. Roth IRA 401K Roth 401k Traditional IRA and your employer offers a 401k Traditional IRA and your employer does NOT offer a 401k So, here are your options. If you have a 401k at work, you could max that out. If you make close to $120K, you could reduce your AGI enough to contribute to a Roth IRA. If you do not have a 401k at work, you could contribute to a Traditional IRA and deduct the $5K from your AGI similar to how a 401k works. Other than that, I think you are looking at investing outside of a retirement plan which means more flexibility, but no tax advantage." }, { "docid": "225282", "title": "", "text": "\"If you have already maxed your TSP contributions, the \"\"401k\"\" for military folks, you could consider a Traditional IRA contribution. They are tax-deductible, based on some limits, so it may reduce your tax liability. Many online services (Vanguard, Fidelity, etc.) offer quick and free setup of Traditional IRA accounts. If you have already maxed the Traditional IRA as well, you could look at making taxable investments through an online service. Like homer150mw, I would recommend low-cost funds. For reasons why, see this article by John Bogle.\"" }, { "docid": "587727", "title": "", "text": "\"IRAs have huge tax-advantages. You'll pay taxes when you liquidate gold and silver. While volatile, \"\"the stock market has never produced a loss during any rolling 15-year period (1926-2009)\"\" [PDF]. This is perhaps the most convincing article for retirement accounts over at I Will Teach You To Be Rich. An IRA is just a container for your money and you may invest the money however you like (cash, stocks, funds, etc). A typical investment is the purchase of stocks, bonds, and/or funds containing either or both. Stocks may pay dividends and bonds pay yields. Transactions of these things trigger capital gains (or losses). This happens if you sell or if the fund manager sells pieces of the fund to buy something in its place (i.e. transactions happen without your decision and high turnover can result in huge capital gains). In a taxable account you will pay taxes on dividends and capital gains. In an IRA you don't ever pay taxes on dividends and capital gains. Over the life of the IRA (30+ years) this can be a huge ton of savings. A traditional IRA is funded with pre-tax money and you only pay tax on the withdrawal. Therefore you get more money upfront to invest and more money compounds into greater amounts faster. A Roth IRA you fund with after-tax dollars, but your withdrawals are tax free. Traditional versus Roth comparison calculator. Here are a bunch more IRA and 401k calculators. Take a look at the IRA tax savings for various amounts compared to the same money in a taxable account. Compounding over time will make you rich and there's your reason for starting young. Increases in the value of gold and silver will never touch compounded gains. So tax savings are a huge reason to stash your money in an IRA. You trade liquidity (having to wait until age 59.5) for a heck of a lot more money. Though isn't it nice to be assured that you will have money when you retire? If you aren't going to earn it then, you'll have to earn it now. If you are going to earn it now, you may as well put it in a place that earns you even more. A traditional IRA has penalties for withdrawing before retirement age. With a Roth you can withdraw the principal at anytime without penalty as long as the account has been open 5 years. A traditional IRA requires you take out a certain amount once you reach retirement. A Roth doesn't, which means you can leave money in the account to grow even more. A Roth can be passed on to a spouse after death, and after the spouse's death onto another beneficiary. more on IRA Required Minimum Distributions.\"" }, { "docid": "424427", "title": "", "text": "Edited in response to JoeTaxpayer's comment and OP Tim's additional question. To add to and clarify a little what littleadv has said, and to answer OP Tim's next question: As far as the IRS is concerned, you have at most one Individual Retirement Account of each type (Traditional, Roth) though the money in each IRA can be invested with as many different custodians (brokerages, banks, etc.) and different investments as you like. Thus, the maximum $5000 ($6000 for older folks) that you can contribute each year can be split up and invested any which way you like, and when in later years you take a Required Minimum Distribution (RMD) from a Traditional IRA, you can get the money by selling just one of the investments, or from several investments; all that the IRS cares is that the total amount that is distributed to you is at least as large as the RMD. An important corollary is that the balance in your IRA is the sum total of the value of all the investments that various custodians are holding for you in IRA accounts. There is no loss in an IRA until every penny has been withdrawn from every investment in your IRA and distributed to you, thus making your IRA balance zero. As long as you have a positive balance, there is no loss: everything has to come out. After the last distribution from your Roth IRA (the one that empties your entire Roth IRA, no matter where it is invested and reduces your Roth IRA balance (see definition above) to zero), total up all the amounts that you have received as distributions from your Roth IRA. If this is less than the total amount of money you contributed to your Roth IRA (this includes rollovers from a Traditional IRA or Roth 401k etc., but not the earnings within the Roth IRA that you re-invested inside the Roth IRA), you have a loss that can be deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI limit. This 2% is not a cap (in the sense that no more than 2% of your AGI can be deducted in this category) but rather a threshold: you can only deduct whatever part of your total Miscellaneous Deductions exceeds 2% of your AGI. Not many people have Miscellaneous Deductions whose total exceeds 2% of their AGI, and so they end up not being able to deduct anything in this category. If you ever made nondeductible contributions to your Traditional IRA because you were ineligible to make a deductible contribution (income too high, pension plan coverage at work etc), then the sum of all these contributions is your basis in your Traditional IRA. Note that your deductible contributions, if any, are not part of the basis. The above rules apply to your basis in your Traditional IRA as well. After the last distribution from your Traditional IRA (the one that empties all your Traditional IRA accounts and reduces your Traditional IRA balance to zero), total up all the distributions that you received (don't forget to include the nontaxable part of each distribution that represents a return of the basis). If the sum total is less than your basis, you have a loss that can be deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI threshold. You can only deposit cash into an IRA and take a distribution in cash from an IRA. Now, as JoeTaxpayer points out, if your IRA owns stock, you can take a distribution by having the shares transferred from your IRA account in your brokerage to your personal account in the brokerage. However, the amount of the distribution, as reported by the brokerage to the IRS, is the value of the shares transferred as of the time of the transfer, (more generally the fair market value of the property that is transferred out of the IRA) and this is the amount you report on your income tax return. Any capital gain or loss on those shares remains inside the IRA because your basis (in your personal account) in the shares that came out of the IRA is the amount of the distribution. If you sell these shares at a later date, you will have a (taxable) gain or loss depending on whether you sold the shares for more or less than your basis. In effect, the share transfer transaction is as if you sold the shares in the IRA, took the proceeds as a cash distribution and immediately bought the same shares in your personal account, but you saved the transaction fees for the sale and the purchase and avoided paying the difference between the buying and selling price of the shares as well as any changes in these in the microseconds that would have elapsed between the execution of the sell-shares-in-Tim's-IRA-account, distribute-cash-to-Tim, and buy-shares-in-Tim's-personal account transactions. Of course, your broker will likely charge a fee for transferring ownership of the shares from your IRA to you. But the important point is that any capital gain or loss within the IRA cannot be used to offset a gain or loss in your taxable accounts. What happens inside the IRA stays inside the IRA." }, { "docid": "418864", "title": "", "text": "\"Keep in mind, there are too many variables to address in a single post. I could (and might) write a full book on the topic. One simple way to comprehend your perceived observation. In the 25% bracket, you have $1000 of income and two choices. Net out $750, and deposit to Roth, or deposit the full $1000 to the traditional IRA or 401(k). Sufficient time passes for the investment to grow 10 fold. For what it's worth, 8% at 30 years will do that. The Roth is now worth $7500 tax free. The traditional 401(k) is worth $10000 but subject to tax. At 25%, we're at the same $7500. For those looking to invest more than a gross $18,000, the Roth flavor is an effective $24,000, as post tax, this is $18,000. I wrote a bit more on this in the whimsically titled The Density of Your IRA. This is really a top 10%er issue, as it takes quite a bit of income for the $23,000 combined IRA and 401(k) limits to be a problem. In my writing, the larger case to be made is for taking advantage of the tax rate difference between the time of deposit and withdrawal. A look at the 2016 tax rates is in order. Let's stick with 25% while working. Now, at retirement, but before social security, as that's another story, the couple has $20,600 in standard deduction and exemption, and both the 10 and 15% brackets to enjoy. Ignoring any other deductions, potential credits, etc, let's look at a gross $80,000 withdrawal. The numbers happen to work out to an average 10%, with the couple being in a marginal 15% bracket. A full 25% or $20,000 tax would be the break-even to the \"\"same bracket in/out\"\" analysis, so this produces a $12,000 benefit. This issue is often treated as if there were 2 points in time, the deposit, and the withdrawal. For most people, that may be the case. Keep in mind, current law allows a conversion to Roth any time in between. This gives an opportunity to make a deposit while in the 25% bracket, and convert in any year the marginal rate drops back to 15% for whatever reason. Last - I can't ignore the Social Security problem. Simply put, when half of your Social Security benefits plus other income exceed $25,000 ($32,000 if married filing joint) your benefits start to become taxable, until 85% of your benefits are fully taxed. This issue is worthy of multiple posts by itself. It's not a deal killer, just another point to consider. A very high income earner might be beyond these levels already, in which case the point is moot. A low income earner, not impacted at all. It's those who are in the range to navigate this that would benefit to take advantage of the scenario I presented above and spend down pre-tax accounts, while planning to use the Roths when Social Security starts. This should make it clear - it's not all or none. Those retiring with $2M in 100% pretax, or $1.5M 100% in Roth have both missed the chance to have the optimal mix.\"" }, { "docid": "403103", "title": "", "text": "The primary advantage of an IRA or 401k is you get taxed effectively one time on the money (when you contribute for Roth, or when you withdraw for Traditional), whereas you get taxed effectively multiple times on some of the money in a taxable account (on all the money when you contribute, plus on the earnings part when you withdraw). Of course, you have to be able to withdraw without penalty for it to be optimally advantageous. And you said you want to retire decades early, so that is probably not retirement age. However, withdrawing early does not necessarily mean you have a penalty. For example: you can withdraw contributions to a Roth IRA at any time without tax or penalty; Roth 401k can be rolled over into Roth IRA; other types of accounts can be converted to Roth IRA and the principal of the conversion can be withdrawn after 5 years without penalty." }, { "docid": "446226", "title": "", "text": "\"First off, high five on the paycheck. There are a few retirement issues to deal with. 401k issues - At that income level, you will probably fall into the \"\"Highly Compensated Employee\"\" category, which means things get a little more complicated, both for you and your employer. (Wikipedia link) IRA issues - As you already realized, you make too much to directly open and contribute to a Roth IRA. You can open a Traditional IRA, however. Your income is already over the limit for Traditional IRA deduction (bummer), so it would seem there is little point to opening an IRA at all. However, there is a way to take advantage of a Roth IRA, even at your income level. It is possible to convert a Traditional IRA into a Roth IRA. There used to be income limits on the ability to do the conversion, which would have normally made this off limits to you. Starting in 2010, the income limit is removed, so you can do this. Basically, you open a Traditional IRA, max it out, then convert it to a Roth. Since there was no income deduction, you shouldn't have to pay any more taxes. (link) Disclaimer: I've never tried this, nor do I know anyone who has, so you might want to research it a bit more before you try it yourself.\"" }, { "docid": "27495", "title": "", "text": "There are a couple reasons for having a Traditional or Roth IRA in addition to a 401(k) program in general, starting with the Traditional IRA: With regards to the Roth IRA: Also, both the Traditional and Roth IRA allow you to make a $10,000 withdraw as a first time home buyer for the purposes of buying a home. This is much more difficult with the 401(k) and generally you end up having to take a loan against the 401(k) instead. So even if you can't take advantage of the tax deductions from contributions to a Traditional IRA, there are still good reasons to have one around. Unless you plan on staying with the same company for your entire career (and even if you do, they may have other plans) the Traditional IRA tends to be a much better place to park the funds from the 401(k) than just rolling them over to a new employer. Also, don't forget that just because you can't take deductions for the income doesn't mean that you might not need the income that savings now will bring you in retirement. If you use a retirement savings calculator is it saying that you need to be saving more than your current monthly 401(k) contributions? Then odds are pretty good that you also need to be adding additional savings and an IRA is a good location to put those assets because of the other benefits that they confer. Also, some people don't have the fiscal discipline to not use the money when it isn't hard to get to (i.e. regular savings or investment account) and as such it also helps to ensure you aren't going to go and spend the money unless you really need it." }, { "docid": "452592", "title": "", "text": "You are already doing everything you can. If your employer does not have a 401(k) you are limited to investing in a Roth or a traditional IRA (Roth is post tax money, traditional IRA gives you a deduction so it is essentially pre tax money). The contribution limits are the same for both and contributing to either adds to the limit (so you can't duplicate). CNN wrote an article on some other ways to save: One thing you may want to bring up with your employer is that they could set up a SEP-IRA. This allows them to set a % (up to 25%) that they contribute pre-tax to an IRA for everyone at the company that has worked there at least 3 years. If you are at a small company, maybe everyone with that kind of seniority would take an equivalent pay cut to get the automatic retirement contribution? (Note that a SEP-IRA has to apply to everyone equally percentage wise that has worked there for 3 years, and the employer makes the contribution, not you)." }, { "docid": "187571", "title": "", "text": "I think you may be drawing the wrong conclusion about why you put what type of investment in a taxable vs. tax-advantaged account. It is not so much about risk, but type of return. If you're investing both tax-advantaged and taxable accounts, you can benefit by putting more tax-inefficient investments inside your tax-advantaged accounts. Some aggressive asset types, like real estate, can throw off a lot of taxable income. If your asset allocation calls for investing in real estate, holding it in a 401k or IRA can allow more of your money to remain invested, rather than having to use it to pay for taxes. And if you're holding in a Roth IRA, you get that tax free. But bonds, a decidedly non-aggressive asset, also throw off a lot of taxable income. You're able to hold them in a tax-advantaged account and not pay taxes on the income until you withdraw it from the account (or tax free in the case of a Roth account.) An aggressive stock fund that is primarily expected to provide returns via price appreciation would do well in a taxable account because there's likely little tax consequence to you until it is sold." }, { "docid": "358371", "title": "", "text": "\"Welcome to the 'what should otherwise be a simple choice turns into a huge analysis' debate. If the choice were actually simple, we've have one 'golden answer' here and close others as duplicate. But, new questions continue to bring up different scenarios that impact the choice. 4 years ago, I wrote an article in which I discussed The Density of Your IRA. In that article, I acknowledge that, with no other tax favored savings, you can pack more value into the Roth. In hindsight, I failed to add some key points. First, let's go back to what I'd describe as my main thesis: A retired couple hits the top of the 15% bracket with an income of $96,700. (I include just the standard deduction and exemptions.) The tax on this gross sum is $10,452.50 for an 'average' rate of 10.8%. The tax, paid or avoided, upon deposit, is one's marginal rate. But, at retirement, the withdrawals first go through the zero bracket (i.e. the STD deduction and exemptions), then 10%, then 15%. The above is the simplest snapshot. I am retired, and our return this year included Sch A, itemized deductions. Property tax, mort interest, insurance, donations added up fast, and from a gross income (IRA withdrawal) well into the 25% bracket, the effective/average rate was reported as 7.3%. If we had saved in Roth accounts, it would have been subject to 25%. I'd suggest that it's this phenomenon, the \"\"save at marginal 25%, but withdraw at average sub-11%\"\" effect that account for much of the resulting tax savings that the IRA provides. The way you are asking this, you've been focusing on one aspect, I believe. The 'density' issue. That assumes the investor has no 401(k) option. If I were building a spreadsheet to address this, I'd be sure to consider the fact that in a taxable account, long term gains are taxed at 15% for higher earners (I take the liberty to ignore that wealthier taxpayers will pay a maximum 20% tax on long-term capital gains. This higher rate applies when your adjusted gross income falls into the top 39.6% tax bracket.) And those in the 10 or 15% bracket pay 0%. With median household income at $56K in 2016, and the 15% bracket top at $76K, this suggests that most people (gov data shows $75K is 80th percentile) have an effective unlimited Roth. So long as they invest in a way that avoids short term gains, they can rebalance often enough to realize LT gains and pay zero tax. It's likely the $80K+ earner does have access to a 401(k) or other higher deposit account. If they don't, I'd still favor pretax IRAs, with $11K for the couple still 10% or so of their earnings. It would be a shame to lose that zero bracket of that first $20K withdrawal at retirement. Again working backwards, the $78K withdrawal would take nearly $2M in pretax savings to generate. All in today's dollars.\"" } ]

[ { "docid": "300721", "title": "", "text": "This is ideal placement for your allocation to income investments or those with nonqualified dividends: bonds, REITS, MLPS, other partnerships, and so forth. These are all taxed at income rate, generally throw off more income than capital gains, so you get the deferment without losing the cap gains rate." } ]

[ { "docid": "402523", "title": "", "text": "HSAs are very similar to IRAs. Any investment returns grow tax-deferred and once you reach age 59 1/2 65, you can withdraw the funds for any purpose (subject to ordinary income tax), just like a traditional IRA. If you can afford to do so, I would recommend you to pay medical expenses out-of-pocket and let the funds in your HSA accumulate and grow. In general, the best way to allocate your funds is in the following order: Contribute to a 401(k) if your employer matches funds at a substantial rate Pay off high-interest debt (8% of more in current environment in 2011) Contribute to an IRA (traditional or Roth) Contribute to an HSA Contribute to a 401(k) without the benefit of employer matching One advantage of HSAs versus IRAs is that you don't have to have earned income (salary or self-employment income) in order to contribute. If you derive income solely from rents, interest or dividends, you can contribute the maximum amount ($3,050 for individuals in 2011) and get a full deduction from your income (Of course, you will need to maintain a high-deductible health plan in order to qualify). One downside of HSAs is the lack of competitively priced providers. Wells Fargo offers HSAs for free, but only allows you to keep your funds in cash, earning a very measly interest rate, or invest them in rather mediocre and expensive Wells Fargo mutual funds. Vanguard, known for its low-fee investment options, provides HSAs through a partner company, but the account maintenance charges are still quite high. Overall, HSAs are a worthwhile option as part of your investment plan." }, { "docid": "395840", "title": "", "text": "If you exceed the income limit for deducting a traditional IRA (which is very low if you are covered by a 401(k) ), then your IRA options are basically limited to a Roth IRA. The Cramer person probably meant to compare 401(k) and IRA from the same pre-/post-tax-ness, so i.e. Traditional 401(k) vs. Traditional IRA, or Roth 401(k) vs. Roth IRA. Comparing a Roth investment against a Traditional investment goes into a whole other topic that only confuses what is being discussed here. So if deducting a traditional IRA is ruled out, then I don't think Cramer's advice can be as simply applied regarding a Traditional 401(k). (However, by that logic, and since most people on 401(k) have Traditional 401(k), and if you are covered by a 401(k) then you cannot deduct a Traditional IRA unless you are super low income, that would mean Cramer's advice is not applicable in most situations. So I don't really know what to think here.)" }, { "docid": "237457", "title": "", "text": "\"One difference is in the ability to split the pre-tax and after-tax portions of the Traditional account. (Note that earnings in a Traditional IRA or Traditional 401(k) are always pre-tax, even if it was earned from after-tax money, so if you left the money for some amount of time after an after-tax contribution, chances are it's a mix of pre-tax and after-tax money.) When you take money out of a Traditional IRA, including for conversion to a Roth IRA, you are generally subject to the \"\"pro-rata rule\"\", which means that your withdrawal will consist of pre-tax and after-tax amounts in the same proportion as in your whole Traditional IRA. This means that a conversion of a Traditional IRA with any mix of pre-tax and after-tax amounts, will always be taxed on a portion of the withdrawal (the pre-tax portion), and it will leave some after-tax amounts in the Traditional IRA unless you take everything out. The only way to separate the pre-tax and after-tax amounts is to roll over to a Traditional 401(k) (if you have a 401(k) plan that allows this); rules say that only pre-tax amounts can be rolled over into a 401(k), so only pre-tax amounts are rolled over, and if you roll over all the pre-tax amounts, only after-tax amounts will remain. On the other hand, when you rollover your entire Traditional 401(k) to IRAs, you can choose to have the pre-tax portion rolled over to a Traditional IRA and the after-tax portion rolled over to a Roth IRA, separating them, due to IRS Notice 2014-54.\"" }, { "docid": "462481", "title": "", "text": "\"I'll add 2 observations regarding current answers. Jack nailed it - a 401(k) match beats all. But choose the right flavor account. You are currently in the 15% bracket (i.e. your marginal tax rate, the rate paid on the last taxed $100, and next taxed $100.) You should focus on Roth. Roth 401(k) (and if any company match, that goes into a traditional pretax 401(k). But if they permit conversions to the Roth side, do it) You have a long time before retirement to earn your way into the next tax bracket, 25%. As your income rises, use the deductible IRA/ 401(k) to take out money pretax that would otherwise be taxed at 25%. One day, you'll be so far into the 25% bracket, you'll benefit by 100% traditional. But why waste the opportunity to deposit to Roth money that's taxed at just 15%? To clarify the above, this is the single rate table for 2015: For this discussion, I am talking taxable income, the line on the tax return designating this number. If that line is $37,450 or less, you are in the 15% bracket and I recommend Roth. Say it's $40,000. In hindsight on should put $2,550 in a pretax account (Traditional 401(k) or IRA) to bring it down to the $37,450. In other words, try to keep the 15% bracket full, but not push into 25%. Last, after enough raises, say you at $60,000 taxable. That, to me is \"\"far into the 25% bracket.\"\" $20,000 or 1/3 of income into the 401(k) and IRA and you're still in the 25% bracket. One can plan to a point, and then use the IRA flavors to get it dead on in April of the following year. To Ben's point regarding paying off the Student Loan faster - A $33K income for a single person, about to have the new expense of rent, is not a huge income. I'll concede that there's a sleep factor, the long tern benefit of being debt free, and won't argue the long term market return vs the rate on the loan. But here we have the probability that OP is not investing at all. It may take $2000/yr to his 401(k) capture the match (my 401 had a dollar for dollar match up to first 6% of income). This $45K, after killing the card, may be his only source for the extra money to replace what he deposits to his 401(k). And also serve as his emergency fund along the way.\"" }, { "docid": "508219", "title": "", "text": "\"Basically, the idea of an IRA is that the money is earned by you and would normally be taxed at the individual rate, but the government is allowing you to avoid paying the taxes on it now by instead putting it in the account. This \"\"tax deferral\"\" encourages retirement savings by reducing your current taxable income (providing a short-term \"\"carrot\"\"). However, the government will want their cut; specifically, when you begin withdrawing from that account, the principal which wasn't taxed when you put it in will be taxed at the current individual rate when you take it out. When you think about it, that's only fair; you didn't pay taxes on it when it came out of your paycheck, so you should pay that tax once you're withdrawing it to live on. Here's the rub; the interest is also taxed at the individual rate. At the time, that was a good thing; the capital gains rate in 1976 (when the Regular IRA was established) was 35%, the highest it's ever been. Now, that's not looking so good because the current cap gains rate is only 15%. However, these rates rise and fall, cap gains more than individual rates, and so by contributing to a Traditional IRA you simplify your tax bill; the principal and interest is taxed at the individual rate as if you were still making a paycheck. A Roth IRA is basically the government trying to get money now by giving up money later. You pay the marginal individual rate on the contributions as you earn them (it becomes a \"\"post-tax deduction\"\") but then that money is completely yours, and the kicker is that the government won't tax the interest on it if you don't withdraw it before retirement age. This makes Roths very attractive to retirement investors as a hedge against higher overall tax rates later in life. If you think that, for any reason, you'll be paying more taxes in 30 years than you would be paying for the same money now, you should be investing in a Roth. A normal (non-IRA) investment account, at first, seems to be the worst of both worlds; you pay individual tax on all earned wages that you invest, then capital gains on the money your investment earns (stock gains and dividends, bond interest, etc) whenever you cash out. However, a traditional account has the most flexibility; you can keep your money in and take your money out on a timeline you choose. This means you can react both to market moves AND to tax changes; when a conservative administration slashes tax rates on capital gains, you can cash out, pay that low rate on the money you made from your account, and then the money's yours to spend or to reinvest. You can, if you're market- and tax-savvy, use all three of these instruments to your overall advantage. When tax rates are high now, contribute to a traditional IRA, and then withdraw the money during your retirement in times where individual tax rates are low. When tax rates are low (like right now), max out your Roth contributions, and use that money after retirement when tax rates are high. Use a regular investment account as an overage to Roth contributions when taxes are low; contribute when the individual rate is low, then capitalize and reinvest during times when capital gains taxes are low (perhaps replacing a paycheck deduction in annual contributions to a Roth, or you can simply fold it back into the investment account). This isn't as good as a Roth but is better than a Traditional; by capitalizing at an advantageous time, you turn interest earned into principal invested and pay a low tax on it at that time to avoid a higher tax later. However, the market and the tax structure have to coincide to make ordinary investing pay off; you may have bought in in the early 90s, taking advantage of the lowest individual rates since the Great Depression. While now, capital gains taxes are the lowest they've ever been, if you cash out you may not be realizing much of a gain in the first place.\"" }, { "docid": "264023", "title": "", "text": "\"when you contribute to a 401k, you get to invest pre-tax money. that means part of it (e.g. 25%) is money you would otherwise have to pay in taxes (deferred money) and the rest (e.g. 75%) is money you could otherwise invest (base money). growth in the 401k is essentially tax free because the taxes on the growth of the base money are paid for by the growth in the deferred portion. that is of course assuming the same marginal tax rate both now and when you withdraw the money. if your marginal tax rate is lower in retirement than it is now, you would save even more money using a traditional 401k or ira. an alternative is to invest in a roth account (401k or ira). in which case the money goes in after tax and the growth is untaxed. this would be advantageous if you expect to have a higher marginal tax rate during retirement. moreover, it reduces tax risk, which could give you peace of mind considering u.s. marginal tax rates were over 90% in the 1940's. a roth could also be advantageous if you hit the contribution limits since the contributions are after-tax and therefore more valuable. lastly, contributions to a roth account can be withdrawn at any time tax and penalty free. however, the growth in a roth account is basically stuck there until you turn 60. unlike a traditional ira/401k where you can take early retirement with a SEPP plan. another alternative is to invest the money in a normal taxed account. the advantage of this approach is that the money is available to you whenever you need it rather than waiting until you retire. also, investment losses can be deducted from earned income (e.g. 15-25%), while gains can be taxed at the long term capital gains rate (e.g. 0-15%). the upshot being that even if you make money over the course of several years, you can actually realize negative taxes by taking gains and losses in different tax years. finally, when you decide to retire you might end up paying 0% taxes on your long term capital gains if your income is low enough (currently ~50k$/yr for a single person). the biggest limitation of this strategy is that losses are limited to 3k$ per year. also, this strategy works best when you invest in individual stocks rather than mutual funds, increasing volatility (aka risk). lastly, this makes filing your taxes more complicated since you need to report every purchase and sale and watch out for the \"\"wash sale\"\" rules. side note: you should contribute enough to get all the 401k matching your employer offers. even if you cash out the whole account when you want the money, the matching (typically 50%-200%) should exceed the 10% early withdrawal penalty.\"" }, { "docid": "382894", "title": "", "text": "I'll add this to others: Having non-deductible portion in your IRA requires additional tax forms to be attached to your tax return, and tracking. If you plan to have long-term investments in your non-deductible IRA (such as, say, target funds or long-term stock positions that you expect to hold till retirement) it may be better to keep them in a non-IRA account. This is because the income tax on the withdrawals from the IRA is at ordinary rates, and from the regular investment account is at capital gains rate. While the rates can definitely change, traditionally capital gains rates are significantly lower than the ordinary income bracket rates. So generally I think that having non-deductible IRA deposits is only useful if you're planning a ROTH conversion in a near future." }, { "docid": "316501", "title": "", "text": "\"Like JoeTaxpayer said, I don't know of any difference between the backdoor and a regular Roth IRA contribution besides the issue with existing pre-tax IRA money. So if it is your practice to contribute at the beginning of the year (good for you, most people wait until the last minute), then doing a backdoor seems like the safe choice. Some people have speculated that, hypothetically, the IRS could use the \"\"step transaction doctrine\"\" to treat it as a single direct contribution to a Roth IRA (which then would be disallowed and cause you a penalty until you take it out), but I have never heard of this happening to anyone. As for the paperwork, you just need to fill out one extra form at tax time, Form 8606 (you need to complete two parts of it, one for the non-deductible contribution, and one for the conversion). It is pretty straightforward. (Although I've found that it is a pain to do it in tax software.) Another option would be for you to contribute to a Roth IRA now, but when you discover that you're over the limit at the end of the year, re-characterize it as a Traditional contribution and then convert it back to Roth. But this way is not good because then there is a long time between the Traditional contribution and the Roth conversion, and earnings during this time will be taxed at conversion.\"" }, { "docid": "384564", "title": "", "text": "tl;dr: Please please please do the conversion first. JoeTaxpayer's answer is correct, but I am of the opposite opinion. First, there's just about no reason to have post-tax dollars in a Traditional IRA. You'll eventually have to pay tax on the earnings those dollars generate, so it's essentially the same as having that money in a regular taxable account. Meanwhile, if you roll those dollars into a Roth IRA, you get to earn tax-free money on them for the rest of your life (and even after your death)! Second, even if you did have some reason for keeping those post-tax dollars where they are, the last thing you ever want to do is mix them with pre-tax dollars (from, say, your 401k). As soon as you mix them, all the dollars become subject to pro-rata taxation (as Joe mentioned), so any future decision you were planning to make about what to do with just your post-tax dollars is moot -- you have given away your right to think separately about your pre- and post-tax dollars. As an example, let's say the accounts you want to combine look like this: In the future you decide you want to move $2,000 from the above account into a Roth. Because you mixed the money, the IRS insists that your rollover consists of: So now you owe tax (and it's regular income tax, I believe, not even capital gains tax) on $1,500. That was money that you socked away specifically to avoid taxes, and now you've gone and paid taxes on it! Now, there are valid arguments for intentionally moving pre-tax dollars from a Traditional to a Roth like this, but the point is that you shouldn't even have to be having that argument -- you have post-tax dollars in your Traditional IRA that almost certainly belong in a Roth. By mixing your 401k into your Traditional IRA, you can no longer do anything with just the post-tax dollars. The IRS will forever insist that you do these pro-rated calculations. Say in the future you suddenly realize that a Roth is much better for your financial situation than a Traditional IRA. (Or you might still prefer a Traditional IRA, but as explained in the next sentence it's not available to you.) Unfortunately, because you're covered by a (new) 401k -- or maybe because you earn too much money to contribute pre-tax dollars to either a Traditional or Roth IRA -- you're out of luck. You're simply not allowed to contribute to a Roth. Most people in this situation can make use of what's called a back-door Roth. They contribute up to the maximum amount per year ($5,500 or whatever it is now) post-tax to a Traditional IRA and then immediately roll it over to their Roth. You can still try this, but guess what? Yep, because you're mixing these new post-tax dollars with pre-tax money in your Traditional IRA, every year your rollover will be tainted with that pre-tax money, diluting the whole point of the back-door Roth. You'll be paying taxes on money you never wanted to pay taxes on, and you'll be leaving post-tax money behind in your traditional IRA. (If it sounds like I'm annoyed about this situation from personal experience, it's because I am. :) By doing the conversion first, you never mix pre- and post-tax money, and your money goes where you want it. Of course, assuming you eventually do roll over your 401(k) into a Traditional IRA, the Really Annoying Consequence above will still plague you, but at least you'll have cleanly converted that first post-tax amount." }, { "docid": "396097", "title": "", "text": "You might be confusing two different things. An advantage of investing over a long term is the compounding of returns. Those returns can be interest, dividends, or capital gains. The mix between them depends on what you invest it and how you invest in it. This advantage applies whether your investment is in a taxable brokerage account or in a tax-advantaged 401K or IRA. So, start investing early so that you have longer for this compounding of returns to happen. The second thing is the tax deferral you get from 401(k) or IRAs. If you invest in a ordinary taxable account, then you have to pay taxes on your interest and dividends for the year in which they occur. You also have to pay taxes on any capital gains which you realize during the year. These yearly tax payments are then money that you don't get the benefit of compounding on. With 401(k) and IRAs, you don't have to pay taxes during these intermediate years." }, { "docid": "527010", "title": "", "text": "\"the deadline for roth conversions is december 31st. more precisely, roth conversions are considered to have happened in the tax year the distribution was taken. this creates a kind of loop hole for people who do an ira rollover (not a trustee-to-trustee transfer). technically, you can take money out of your traditional ira on december 31st and hold it for 60 days before deciding to roll it over into either another traditional ira or a roth ira. if you decide to put it in another traditional account, it is not a taxable event. but if you decide to put it in a roth account, the \"\"conversion\"\" is considered to have happened in december. unfortunately non-trustee rollovers are tricky. for one, the source trustee will probably take withholding that you will have to make up with non-ira funds. and rollovers are limitted to a certain number per year. also, if you miss the 60-day deadline, you will have to pay an early-withdrawal penalty (with some exceptions). if you really want to push the envelope, you could try to do this with a 60-day-rule extension, but i wouldn't try it. source: https://www.irs.gov/publications/p590a/ch01.html oddly, recharacterizations (basically reverse roth conversions) have a deadline of october 15th of the year after the original roth conversion it is reversing. so, you could do the conversion in december, then you have up to 10 months to change your mind and \"\"undo\"\" the conversion with a \"\"recharacterization\"\". again, this is tricky business. at the very least, you should be aware that the tax calculations for recharacterization are different if you convert the funds into a new empty roth account vs an existing roth account with a previous balance. honestly, if you want to get into the recharacterization business, you can probably save more on taxes by converting in january before 20-month stock market climb rather than simply converting in the year your tax brackets are low. that is the typical recharacterization strategy. source: https://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-IRAs-Recharacterization-of-Roth-Rollovers-and-Conversions\"" }, { "docid": "308150", "title": "", "text": "\"If I understand correctly, the Traditional IRA, if you have 401k with an employer already, has the following features: Actually, #1 and #2 are characteristics of Roth IRAs, not Traditional IRAs. Only #3 is a characteristic of a Traditional IRA. Whether you have a 401(k) with your employer or not makes absolutely no difference in how your IRAs are taxed for the vast majority of people. (The rules for IRAs are different if you have a very high income, though). You're allowed to have and contribute to both kinds of accounts. (In fact, I personally have both). Traditional IRAs are tax deferred (not tax-free as people sometimes mistakenly call them - they're very different), meaning that you don't have to pay taxes on the contributions or profits you make inside the account (e.g. from dividends, interest, profits from stock you sell, etc.). Rather, you pay taxes on any money you withdraw. For Roth IRAs, the contributions are taxed, but you never have to pay taxes on the money inside the account again. That means that any money you get over and above the contributions (e.g. through interest, trading profits, dividends, etc.) are genuinely tax-free. Also, if you leave any of the money to people, they don't have to pay any taxes, either. Important point: There are no tax-free retirement accounts in the U.S. The distinction between different kinds of IRAs basically boils down to \"\"pay now or pay later.\"\" Many people make expensive mistakes in their retirement strategy by not understanding that point. Please note that this applies equally to Traditional and Roth 401(k)s as well. You can have Roth 401(k)s and Traditional 401(k)s just like you can have Roth IRAs and Traditional IRAs. The same terminology and logic applies to both kinds of accounts. As far as I know, there aren't major differences tax-wise between them, with two exceptions - you're allowed to contribute more money to a 401(k) per year, and you're allowed to have a 401(k) even if you have a high income. (By way of contrast, people with very high incomes generally aren't allowed to open IRAs). A primary advantage of a Traditional IRA is that you can (in theory, at least) afford to contribute more money to it due to the tax break you're getting. Also, you can defer taxes on any profits you make (e.g. through dividends or selling stock at a profit), so you can grow your money faster.\"" }, { "docid": "62281", "title": "", "text": "\"Click on the ? icon next to \"\"Employer Plan\"\". This is used to determine if you can deduct your annual contributions from your taxes. For more information on how an employer plan can affect your IRA tax deduction, see the definition for non-deductible contributions. So, we look there: The total of your Traditional IRA contributions that were deposited without a tax deduction. Traditional IRA contributions are normally tax deductible. However, if you have an employer-sponsored retirement plan, such as a 401(k), your tax deduction may be limited. The $20K difference between $272K and $252K just happens to be $15% of $132,500 which is the amount of your non-deductible contributions.\"" }, { "docid": "110114", "title": "", "text": "All data for a single adult in tax year 2010. Roth IRA 401K Roth 401k Traditional IRA and your employer offers a 401k Traditional IRA and your employer does NOT offer a 401k So, here are your options. If you have a 401k at work, you could max that out. If you make close to $120K, you could reduce your AGI enough to contribute to a Roth IRA. If you do not have a 401k at work, you could contribute to a Traditional IRA and deduct the $5K from your AGI similar to how a 401k works. Other than that, I think you are looking at investing outside of a retirement plan which means more flexibility, but no tax advantage." }, { "docid": "48203", "title": "", "text": "You have many options, and there is no one-size-fits-all recommendation. You can contribute to your IRA in addition to your 401(k), but because you have that 401(k), it is not tax-deductable. So there is little advantage in putting money in the IRA compared to saving it in a personal investment account, where you keep full control over it. It does, however, open the option to do a backdoor-rollover from that IRA to a Roth IRA, which is a good idea to have; you will not pay any taxes if you do that conversion, if the money in the IRA was not tax deducted (which it isn't as you have the 401(k)). You can also contribute to a Roth IRA directly, if you are under the income limits for that (193k$ for married, I think, not sure for single). If this is the case, you don't need to take the detour through the IRA with the backdoor-rollover. Main advantage for Roth is that gains are tax free. There are many other answers here that give details on where to save if you have more money to save. In a nutshell, In between is 'pay off all high-interest debt', I think right after 1. - if you have any. 'High-Interest' means anything that costs more interest than you can expect when investing." }, { "docid": "76530", "title": "", "text": "\"All transactions within an IRA are irrelevant as far as the taxation of the distributions from the IRA are concerned. You can only take cash from an IRA, and a (cash) distribution from a Traditional IRA is taxable as ordinary income (same as interest from a bank, say) without the advantage of any of the special tax rates for long-term capital gains or qualified dividends even if that cash was generated within the IRA from sales of stock etc. In short, just as with what is alleged to occur with respect to Las Vegas, what happens within the IRA stays within the IRA. Note: some IRA custodians are willing to make a distribution of stock or mutual fund shares to you, so that ownership of the 100 shares of GE, say, that you hold within your IRA is transferred to you in your personal (non-IRA) brokerage account. But, as far as the IRS is concerned, your IRA custodian sold the stock as the closing price on the day of the distribution, gave you the cash, and you promptly bought the 100 shares (at the closing price) in your personal brokerage account with the cash that you received from the IRA. It is just that your custodian saved the transaction fees involved in selling 100 shares of GE stock inside the IRA and you saved the transaction fee for buying 100 shares of GE stock in your personal brokerage account. Your basis in the 100 shares of GE stock is the \"\"cash_ that you imputedly received as a distribution from the IRA, so that when you sell the shares at some future time, your capital gains (or losses) will be with respect to this basis. The capital gains that occurred within the IRA when the shares were imputedly sold by your IRA custodian remain within the IRA, and you don't get to pay taxes on that at capital gains rates. That being said, I would like to add to what NathanL told you in his answer. Your mother passed away in 2011 and you are now 60 years old (so 54 or 55 in 2011?). It is likely that your mother was over 70.5 years old when she passed away, and so she likely had started taking Required Minimum Distributions from her IRA before her death. So, You should have been taking RMDs from the Inherited IRA starting with Year 2012. (The RMD for 2011, if not taken already by your mother before she passed away, should have been taken by her estate, and distributed to her heirs in accordance with her will, or, if she died intestate, in accordance with state law and/or probate court directives). There would not have been any 10% penalty tax due on the RMDs taken by you on the grounds that you were not 59.5 years old as yet; that rule applies to owners (your mom in this case) and not to beneficiaries (you in this case). So, have you taken the RMDs for 2012-2016? Or were you waiting to turn 59.5 before taking distributions in the mistaken belief that you would have to pay a 10% penalty for early wthdrawal? The penalty for not taking a RMD is 50% of the amount not distributed; yes, 50%. If you didn't take RMDs from the Inherited IRA for years 2012-2016, I recommend that you consult a CPA with expertise in tax law. Ask the CPA if he/she is an Enrolled Agent with the IRS: Enrolled Agents have to pass an exam administered by the IRS to show that they really understand tax law and are not just blowing smoke, and can represent you in front of the IRS in cases of audit etc,\"" }, { "docid": "311884", "title": "", "text": "\"Yes, you can withdraw the excess contribution (or actually any amount you contributed for 2015, not necessarily an excess), plus earnings from that withdrawn contribution, by April 15, and not incur a penalty for the excess contribution. It would count as if you did not contribute that amount at all. The earnings would be taxed as regular income, and the earnings may incur a penalty. Yes, you can \"\"recharacterize\"\" (all or part of) your Roth IRA contribution as a Traditional IRA contribution (or vice versa) by April 15. Recharacterization means you pretend the contribution was originally made as a Traditional IRA contribution, and did not involve Roth IRA at all. (\"\"Conversion\"\" is something very different and can only go from Traditional to Roth, not the other way around.) You are likely not eligible to deduct that Traditional IRA contribution, so you will have to report it as a non-deductible Traditional IRA contribution on a 2015 Form 8606 Part 1. Note that after you've recharacterized it as a Traditional IRA contribution, you can also then \"\"convert\"\" that Traditional IRA money to a Roth IRA if you want, achieving the same state as what you have now. Contributing to a Traditional IRA and then converting to a Roth IRA is called a \"\"backdoor Roth IRA contribution\"\"; if you don't have any existing pre-tax money in Traditional IRA or other IRAs, then this achieves the same as a regular Roth IRA contribution except with no income limits. When you convert, the earnings you have made since contributing will be taxed as income. If you had done the backdoor originally to begin with (convert right after contributing), you would have had no earnings in between and no tax to pay, but since if you do the conversion now you have waited so long, you are disadvantaged by having to pay tax on the earnings in between. If you convert, you will have to fill out Form 8606 Part 2 for the year you convert (2016).\"" }, { "docid": "257274", "title": "", "text": "\"There are ways to mitigate, but since you're not protected by a tax-deferred/advantaged account, the realized income will be taxed. But you can do any of the followings to reduce the burden: Prefer selling either short positions that are at loss or long positions that are at gain. Do not invest in stocks, but rather in index funds that do the rebalancing for you without (significant) tax impact on you. If you are rebalancing portfolio that includes assets that are not stocks (real-estate, mainly) consider performing 1031 exchanges instead of plain sale and re-purchase. Maximize your IRA contributions, even if non-deductible, and convert them to Roth IRA. Hold your more volatile investments and individual stocks there - you will not be taxed when rebalancing. Maximize your 401K, HSA, SEP-IRA and any other tax-advantaged account you may be eligible for. On some accounts you'll pay taxes when withdrawing, on others - you won't. For example - Roth IRA/401k accounts are not taxed at all when withdrawing qualified distributions, while traditional IRA/401k are taxed as ordinary income. During the \"\"low income\"\" years, consider converting portions of traditional accounts to Roth.\"" }, { "docid": "567255", "title": "", "text": "It sounds like the two best options would be to roll it over into a traditional IRA or roll it over into your new 401(k). If there isn't much money in your SIMPLE IRA, it might make more sense to just roll it over into your 401(k) so you have fewer retirement accounts to keep track of. However, if you do have a significant amount of money in the SIMPLE IRA then you may wish to take advantage of the greater freedom in investment options that IRAs offer over most 401(k) plans. Keep in mind the 2-year rule for SIMPLE IRAs. You will face tax penalties if you roll it and it hasn't yet been 2 years since the SIMPLE IRA was opened." } ]

[ { "docid": "8266", "title": "", "text": "You aren't in trouble yet, but you are certainly on a trajectory to be later. The longer you wait the more painful it will be because you won't have the benefit of time for your money to grow. You may think you will have more disposable income at some point later when things are paid off, but trust me you wont. When college tuition kicks in for that kid, you are going to LAUGH at those student loan amounts as paltry. The wording of your question was confusing because you say in one place that you have no savings, but in another you claim to be putting away around $5k/year. The important point is how much you have saved at this point and how much you are putting in going forward. Some rules of thumb from Fidelity: (Based on your scenario) Take a look at your retirement account. Are you on track for that? It doesn't sound like it. Can you get away with your current plan? Sure, lots of people do, but unless you die young, hit the jackpot in the stock market or lottery, you are probably going to have to live WELL below your current standard of living to make that happen." } ]

[ { "docid": "519856", "title": "", "text": "One opinion related to savings is to save 30% of your take home salary every month, split the amount into two parts depending on your age (29) one part would be 30% of 30% and another 70% of 30%. Take the 70% and buy blue chip stock and take the 30% and buy govt. bonds. Each 10 years adjust the percentages at 40, 40% on bonds and 60% on stock. Only cash out on the day you retire, otherwise ignore all market/economic movements. With this and the statutory savings (employment retirement) you should be ok." }, { "docid": "332373", "title": "", "text": "As others have shown, if you assume that you can get 6% and you invest 15% of a reasonable US salary then you can hit 1 million by the time you retire. If you invest in property in a market like the UK (where I come from...) then insane house price inflation will do it for you as well. In 1968 my parents bought a house for £8000. They had a mortgage on it for about 75% of the value. They don't live there but that house is now valued at about £750,000. Okay, that's close to 60 years, but with a 55 year working life that's not so unreasonable. If you assume the property market (or the shares market) can go on rising forever... then invest in as much property as you can with your 15% as mortgage payments... and watch the million roll in. Of course, you've also got rent on your property portfolio as well in the intervening years. However, take the long view. Inflation will hit what a million is worth. In 1968, a million was a ridiculously huge amount of money. Now it's 'Pah, so what, real rich people have billions'. You'll get your million and it will not be enough to retire comfortably on! In 1968 my parents salaries as skilled people were about £2000 a year... equivalent jobs now pay closer to £50,000... 25x salary inflation in the time. Do that again, skilled professional salary in 60 years of £125000 a year... so your million is actually 4 years salary. Not being relentlessly negative... just suggesting that a financial target like 'own a million (dollars)' isn't a good strategy. 'Own something that yields a decent amount of money' is a better one." }, { "docid": "169007", "title": "", "text": "&gt; Why are you against making sure their pensions are funded? Pension actuarial analyst here: Pensions can give employee's benefits for time worked long before the plan came into existence. Those 'liabilities' are paid off over 30-40 years. It's absolutely normal. In addition, pension plans may also pay off increases in benefits, such as an early retirement window, over that same 30-40 years. Pension funds use assumptions on future investment earnings to 'guess' their contribution. Sometimes, they don't earn as much as they expect the plan to earn. Sometimes, they try to keep contributions low *as an alternative to scrapping the plan entirely*. So putting this all together: if pension plans are instantly and always 100% funded? You don't get pension plans, with defined and guaranteed retirement benefits. You get plans where the employee defers their own money into accounts, with no particular guarantees at all. And that's why we are fine with unfunded pensions. Oh, by the way, the PBGC charges higher fees to covered pension plans that have more unfunded liability! So if a company doesn't want to pay contributions, they have to pay more elsewhere. It all evens out." }, { "docid": "479213", "title": "", "text": "\"Concise answers to your questions: Depends on the loan and the bank; when you \"\"accelerate\"\" repayment of a loan by applying a pre-payment balance to the principal, your monthly payment may be reduced. However, standard practice for most loan types is that the repayment schedule will be accelerated; you'll pay no less each month, but you'll pay it off sooner. I can neither confirm nor deny that an internship counts as job experience in the field for the purpose of mortgage lending. It sounds logical, especially if it were a paid internship (in which case you'd just call it a \"\"job\"\"), but I can't be sure as I don't know of anyone who got a mortgage without accruing the necessary job experience post-graduation. A loan officer will be happy to talk to you and answer specific questions, but if you go in today, with no credit history (the student loan probably hasn't even entered repayment) and a lot of unknowns (an offer can be rescinded, for instance), you are virtually certain to be denied a mortgage. The bank is going to want evidence that you will make good on the debt you have over time. One $10,000 payment on the loan, though significant, is just one payment as far as your credit history (and credit score) is concerned. Now, a few more reality checks: $70k/yr is not what you'll be bringing home. As a single person without dependents, you'll be taxed at the highest possible withholdings rate. Your effective tax rate on $70k, depending on the state in which you live, can be as high as 30% (including all payroll/SS taxes, for a 1099 earner and/or an employee in a state with an income tax), so you're actually only bringing home 42k/yr, or about $1,600/paycheck if you're paid biweekly. To that, add a decent chunk for your group healthcare plan (which, as of 2014, you will be required to buy, or else pay another $2500 - effectively another 3% of gross earnings - in taxes). And even now with your first job, you should be at least trying to save up a decent chunk o' change in a 401k or IRA as a retirement nest egg. That student loan, beginning about 6 months after you leave school, will cost you about $555/mo in monthly payments for the next 10 years (if it's all Stafford loans with a 50/50 split between sub/unsub; that could be as much as $600/mo for all-unsub Stafford, or $700 or more for private loans). If you were going to pay all that back in two years, you're looking at paying a ballpark of $2500/mo leaving just $700 to pay all your bills and expenses each month. With a 3-year payoff plan, you're turning around one of your two paychecks every month to the student loan servicer, which for a bachelor is doable but still rather tight. Your mortgage payment isn't the only payment you will make on your house. If you get an FHA loan with 3.5% down, the lender will demand PMI. The city/county will likely levy a property tax on the assessed value of land and building. The lender may require that you purchase home insurance with minimum acceptable coverage limits and deductibles. All of these will be paid into escrow accounts, managed by your lending bank, from a single check you send them monthly. I pay all of these, in a state (Texas) that gets its primary income from sales and property tax instead of income, and my monthly payment isn't quite double the simple P&I. Once you have the house, you'll want to fill the house. Nice bed: probably $1500 between mattress and frame for a nice big queen you can stretch out on (and have lady friends over). Nice couch: $1000. TV: call it $500. That's probably the bare minimum you'll want to buy to replace what you lived through college with (you'll have somewhere to eat and sleep other than the floor of your new home), and we're already talking almost a month's salary, or payments of up to 10% of your monthly take-home pay over a year on a couple of store credit cards. Plates, cookware, etc just keeps bumping this up. Yes, they're (theoretically) all one-time costs, but they're things you need, and things you may not have if you've been living in dorms and eating in dining halls all through college. The house you buy now is likely to be a \"\"starter\"\", maybe 3bed/2bath and 1600 sqft at the upper end (they sell em as small as 2bd/1bt 1100sqft). It will support a spouse and 2 kids, but by that point you'll be bursting at the seams. What happens if your future spouse had the same idea of buying a house early while rates were low? The cost of buying a house may be as little as 3.5% down and a few hundred more in advance escrow and a couple other fees the seller can't pay for you. The cost of selling the same house is likely to include all the costs you made the seller pay when you bought it, because you'll be selling to someone in the same position you're in now. I didn't know it at the time I bought my house, but I paid about $5,000 to get into it (3.5% down and 6 months' escrow up front), while the sellers paid over $10,000 to get out (the owner got married to another homeowner, and they ended up selling both houses to move out of town; I don't even know what kind of bath they took on the house we weren't involved with). I graduated in 2005. I didn't buy my first house until I was married and pretty much well-settled, in 2011 (and yes, we were looking because mortgage rates were at rock bottom). We really lucked out in terms of a home that, if we want to or have to, we can live in for the rest of our lives (only 1700sqft, but it's officially a 4/2 with a spare room, and a downstairs master suite and nursery/office, so when we're old and decrepit we can pretty much live downstairs). I would seriously recommend that you do the same, even if by doing so you miss out on the absolute best interest rates. Last example: let's say, hypothetically, that you bite at current interest rates, and lock in a rate just above prime at 4%, 3.5% down, seller pays closing, but then in two years you get married, change jobs and have to move. Let's further suppose an alternate reality in which, after two years of living in an apartment, all the same life changes happen and you are now shopping for your first house having been pre-approved at 5%. That one percentage point savings by buying now, on a house in the $200k range, is worth about $120/mo or about $1440/yr off of your P&I payment ($921.42 on a $200,000 home with a 30-year term). Not chump change (over 30 years if you had been that lucky, it's $43000), but it's less than 5% of your take-home pay (month-to-month or annually). However, when you move in two years, the buyer's probably going to want the same deal you got - seller pays closing - because that's the market level you bought in to (low-priced starters for first-time homebuyers). That's a 3% commission for both agents, 1% origination, 0.5%-1% guarantor, and various fixed fees (title etc). Assuming the value of the house hasn't changed, let's call total selling costs 8% of the house value of $200k (which is probably low); that's $16,000 in seller's costs. Again, assuming home value didn't change and that you got an FHA loan requiring only 3.5% down, your down payment ($7k) plus principal paid (about another $7k; 6936.27 to be exact) only covers $14k of those costs. You're now in the hole $2,000, and you still have to come up with your next home's down payment. With all other things being equal, in order to get back to where you were in net worth terms before you bought the house (meaning $7,000 cash in the bank after selling it), you would need to stay in the house for 4 and a half years to accumulate the $16,000 in equity through principal payments. That leaves you with your original $7,000 down payment returned to you in cash, and you're even in accounting terms (which means in finance terms you're behind; that $7,000 invested at 3% historical average rate of inflation would have earned you about $800 in those four years, meaning you need to stick around about 5.5 years before you \"\"break even\"\" in TVM terms). For this reason, I would say that you should be very cautious when buying your first home; it may very well be the last one you'll ever buy. Whether that's because you made good choices or bad is up to you.\"" }, { "docid": "591705", "title": "", "text": "I would focus first on maxing out your RRSPs (or 401k) each year, and once you've done that, try to put another 10% of your income away into unregistered long term growth savings. Let's say you're 30 and you've been doing that since you graduated 7 years ago, and maybe you averaged 8% p.a. return and an average of $50k per year salary (as a round number). I would say you should have 60k to 120k in straight up investments around age 30. If that's the case, you're probably well on your way to a very comfortable retirement." }, { "docid": "405212", "title": "", "text": "\"In a comment you say, if the market crashes, doesn't \"\"regress to the mean\"\" mean that I should still expect 7% over the long run? That being the case, wouldn't I benefit from intentionally unbalancing my portfolio and going all in on equities? I can can still rebalance using new savings. No. Regress to the mean just tells you that the future rate is likely to average 7%. The past rate and the future rate are entirely unconnected. Consider a series: The running average is That running average is (slowly) regressing to the long term mean without ever a member of the series being above 7%. Real markets actually go farther than this though. Real value may be increasing by 7% per year, but prices may move differently. Then market prices may revert to the real value. This happened to the S&P 500 in 2000-2002. Then the market started climbing again in 2003. In your system, you would have bought into the falling markets of 2001 and 2002. And you would have missed the positive bond returns in those years. That's about a -25% annual shift in returns on that portion of your portfolio. Since that's a third of your portfolio, you'd have lost 8% more than with the balanced strategy each of those two years. Note that in that case, the market was in an over-valued bubble. The bubble spent three years popping and overshot the actual value. So 2003 was a good year for stocks. But the three year return was still -11%. In retrospect, investors should have gone all in on bonds before 2000 and switched back to stocks for 2003. But no one knew that in 2000. People in the know actually started backing off in 1998 rather than 2000 and missed out on the tail end of the bubble. The rebalancing strategy automatically helps with your regression to the mean. It sells expensive bonds and buys cheaper stocks on average. Occasionally it sells modest priced bonds and buys over-priced stocks. But rarely enough that it is a better strategy overall. Incidentally, I would consider a 33% share high for bonds. 30% is better. And that shouldn't increase as you age (less than 30% bonds may be practical when you are young enough). Once you get close to retirement (five to ten years), start converting some of your savings to cash equivalents. The cash equivalents are guaranteed not to lose value (but might not gain much). This gives you predictable returns for your immediate expenses. Once retired, try to keep about five years of expenses in cash equivalents. Then you don't have to worry about short term market fluctuations. Spend down your buffer until the market catches back up. It's true that bonds are less volatile than stocks, but they can still have bad years. A 70%/30% mix of stocks/bonds is safer than either alone and gives almost as good of a return as stocks alone. Adding more bonds actually increases your risk unless you carefully balance them with the right stocks. And if you're doing that, you don't need simplistic rules like a 70%/30% balance.\"" }, { "docid": "496752", "title": "", "text": "As mentioned, the main advantage of a 15-year loan compared to a 30-year loan is that the 15-year loan should come at a discounted rate. All things equal, the main advantage of the 30-year loan is that the payment is lower. A completely different argument from what you are hearing is that if you can get a low interest rate, you should get the longest loan possible. It seem unlikely that interest rates are going to get much lower than they are and it's far more likely that they will get higher. In 15 years, if interest rates are back up around 6% or more (where they were when I bought my first home) and you are 15 years into a 30 year mortgage, you'll being enjoying an interest rate that no one can get. You need to keep in mind that as the loan is paid off, you will earn exactly 0% on the principal you've paid. If for some reason the value of the home drops, you lose that portion of the principal. The only way you can get access to that capital is to sell the house. You (generally) can't sell part of the house to send a kid to college. You can take out another mortgage but it is going to be at the current going rate which is likely higher than current rates. Another thing to consider that over the course of 30 years, inflation is going to make a fixed payment cheaper over time. Let's say you make $60K and you have a monthly payment of $1000 or 20% of your annual income. In 15 years at a 1% annualized wage growth rate, it will be 17% of your income. If you get a few raises or inflation jumps up, it will be a lot more than that. For example, at a 2% annualized growth rate, it's only 15% of your income after 15 years. In places where long-term fixed rates are not available, shorter mortgages are common because of the risk of higher rates later. It's also more common to pay them off early for the same reason. Taking on a higher payment to pay off the loan early only really only helps you if you can get through the entire payment and 15 years is still a long way off. Then if you lose your job then, you only have to worry about taxes and upkeep but that means you can still lose the home. If you instead take the extra money and keep a rainy day fund, you'll have access to that money if you hit a rough patch. If you put all of your extra cash in the house, you'll be forced to sell if you need that capital and it may not be at the best time. You might not even be able to pay off the loan at the current market value. My father took out a 30 year loan and followed the advice of an older coworker to 'buy as much house as possible because inflation will pay for it'. By the end of the loan, he was paying something like $250 a month and the house was worth upwards of $200K. That is, his mortgage payment was less than the payment on a cheap car. It was an insignificant cost compared to his income and he had been able to invest enough to retire in comfort. Of course when he bought it, inflation was above 10% so it's bit different today but the same concepts still apply, just different numbers. I personally would not take anything less than a 30 year loan at current rates unless I planned to retire in 15 years." }, { "docid": "7323", "title": "", "text": "You want to take the hit now. There are tons of calculators out there, but the rule of 70 should be enough to help convince you: Assume you can put an extra $10k in a 401k now, or keep it. If you pay ~30% in taxes, you can have either: A) $7k now, or: B) What $10K will grow to in your 40 years till retirement less taxes at the end. The rule of 70 is a quick, dirty way to calculate compounded returns. It says that if you divide 70 by your assumed return, you get the approximate number of years it will take to double your money. So let's say you assume a 5% rate of return (you can replace that with whatever you want): 1) 70/5 is 14, so you'll double your $10k every 14 years. 2) In 40 years, you'll double your money almost 3 times (2.86) 3) That means you'll end up with almost $80k before taxes 4) Even if we assume the same tax rate at retirement of 30% (odds are decent it's lower, since you'll have less income, presumably), you still have $56k. Whatever you think inflation will be, $56k later is a LOT better than $7k now." }, { "docid": "202459", "title": "", "text": "I don't use a rule of thumb for this. Instead, I use a budget. Throwing money into a savings account for the purpose of building a savings account is okay, but I only put money into a savings account that I have a purpose for. For example, there are bills that come up once a year, such as insurance premiums, property tax, annual subscriptions and memberships, etc. I plan for these in my budget each month, and the money goes into my savings. I also have an emergency fund, which is used in the event that a large, one-time, unexpected expense comes up that I hadn't planned for. I have a goal for how large I want this fund to be, so I put money in savings until it is built up to the level I want it at. There are other long range saving goals I have: my next car, vacation, furniture replacement, technology replacement, etc. Each of these gets some money each month, which goes into savings. I also have retirement savings in the budget, but that doesn't go into the savings account; it gets invested in my retirement account. My point is that instead of arbitrarily choosing a percentage of your income to put into a savings account, think about the purpose of that money. That will help you determine how much needs to be saved, and it will also help motivate you to do so." }, { "docid": "55407", "title": "", "text": "According to pages 6 & 7 of the instructions for form 1040 in 2009 AMT was only temporarily patched for the year. Congress can't politically afford to drastically cut AMT exemptions by 30 to 40%, and may even retroactively change it, if it isn't passed by the end of the year (despite the constitution forbidding ex post facto laws) : What’s New for 2009 ... Alternative minimum tax (AMT) exemption amount increased. The AMT exemption amount has increased to $46,700 ($70,950 if married filing jointly or a qualifying widow(er); $35,475 if married filing separately)... What’s New for 2010 ... Alternative minimum tax (AMT) exemption amount. The AMT exemption amount is scheduled to decrease to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately). So, if you are married, and several regular tax deductions push your income below the AMT exemption amount of $45,000, it's quite possible you would be required to pay AMT, even if you didn't last year. There is a work sheet for AMT in the instructions for line 43, but the IRS also provides an AMT calculator. According to page 146 (E-8) of the instructions for form 1040 AMT is paid as: the smallest amount you are allowed to report as your taxable income (Form 1040, line 43). It is also the smallest amount you are allowed to report as your alternative minimum taxable income (AMTI) on Form 6251, line 29. If the [AMT calculation] is larger than your taxable income would otherwise be, enter the amount from column (c) on Form 1040, line 43 [or ...] Form 6251, line 29. As always, congress finds ways to further complicate things by making a few credits and losses deductible against the absolute minimum you're expected to pay taxes on, making the AMT a misnomer." }, { "docid": "579584", "title": "", "text": "There IS an amount of money you can pay to make people deal with very unpleasant situations. Offer me my old pay + 50% to go back into the workplace daily and deal with my last boss? Yeah, I'll tell you to go fuck yourself. Offer me 3M+ a year to do it? Okay. I'll take that and do JUST ENOUGH to keep the job for a year or two, and then I'll never fucking work again. Or I'll get fired and laugh all the way to the bank anyway." }, { "docid": "569539", "title": "", "text": "Yes your basic math is correct. If your tax bracket never changes, then either type of retirement account will end up in the same place. Assuming that there are no income restrictions that will limit your ability to contribute to the type of account you want. Now your job is to guess what your tax bracket will be each and every year for the next 3 or 4 decades. Events that will influence your bracket: getting married; having children; buying a house; selling a house; paying for college; the cost of medical care; moving to a state with a different state tax structure. Of course that assumes that you don't get a big bonus one year or that congress changes the tax brackets. That is why many people have both types of retirement accounts: Roth and non-Roth." }, { "docid": "338703", "title": "", "text": "\"So you're making $150,000 per year and you have $245,000 in debts. You're in your late 30s and have $41,000, or less than 1/3 of a year's pay, put away for retirement. That's a bad situation, but not disastrous. Lots of people have recovered from far worse. But like the old joke goes, when you realize that you're deep in a hole, STOP DIGGING. The worst thing you could do right now is liquidate the few assets you have and go deeper into debt. I don't know where you live or what the housing market is there. But the easy answer is: find a cheaper house. I'm not sure what you mean about \"\"affect the resale value\"\". Yes, if you buy a cheaper house it will have a lower resale value. So what? The days when a house was an investment that would skyrocket in value are over. (And even in those days, it didn't help most people. So when you move, you get a big profit on the sale of your house. But the house you're moving to probably went up by a similar percentage, so you really didn't gain anything.) Even if your house did increase in value, unless you sell it, that doesn't help you make the mortgage payments. It's a paper profit. Get yourself out of debt. Step 1 is to stop taking on new debts. And if at all possible, you should be putting bare minimum 6% into your retirement plan. I don't know where you work, but most employers match some percentage of the first 6% you put in. If you don't take advantage of that, you're giving up free money.\"" }, { "docid": "237923", "title": "", "text": "Since cashiers, and everyone else, should have to suffer for the failures of our upper classes over the past 30 years, I propose we include the upper classes in this roster of those who should suffer. Would that be okay, or should they continue to do better and better while the rest of us do worse?" }, { "docid": "402852", "title": "", "text": "Term life insurance for a healthy 30 year old is a heck of a lot cheaper than for a 40 year old who's starting to break down (and who needs the coverage since he's got a spouse and kids). So, get a long term policy now while it's cheap." }, { "docid": "107780", "title": "", "text": "Investing is good. Insurance when you have something to insure is good. But using a single account for investing and insurance is not so good. You need to determine how much you need to invest for retirement. You also need to determine if you need life insurance. As a single person you might determine that you don't have a great need for life insurance. If you get married, or have kids, your needs may grow. So you will want to revisit your decisions every so often. You may need to save for retirement, or setup a college fund. You may need to protect your spouse or children in case you die. It doesn't seem to make sense to invest and insure in a plan with complicated rules, fees and schedules. What happens if in 3 years you need to blow it up and start over? What surrender charges will they hit you with?" }, { "docid": "374266", "title": "", "text": "It's important to have both long term goals and milestones along the way. In an article I wrote about saving 15% of one's income, I offered the following table: This table shows savings starting at age 20 (young, I know, so shift 2 years out) and ending at 60 with 18-1/2 year's of income saved due to investment returns. The 18-1/2 results in 74% of one's income replaced at retirement if we follow the 4% rule. One can adjust this number, assuming Social Security will replace 30%, and that spending will go down in retirement, you might need to save less than this shows. What's important is that as a starting point, it shows 2X income saved by age 30. Perhaps 1X is more reasonable. You are at just over .5X and proposing to spend nearly half of that on a single purchase. Financial independence means to somehow create an income you can live on without the need to work. There are many ways to do it, but it usually starts with a high saving rate. Your numbers suggest a good income now, but maybe this is only recently, else you'd have over $200K in the bank. I suggest you read all you can about investments and the types of retirement accounts, including 401(k) (if you have that available to you), IRA, and Roth IRA. The details you offer don't allow me to get much more specific than this." }, { "docid": "282379", "title": "", "text": "\"I think there's value in charging family members/friends interest if it will make them take the loan seriously. The problem is that if you're thinking about charging interest because the person seems to be borrowing from you too cavalierly, it may be too late to make them take it seriously. In the situation you describe, if you're concerned about the loans being paid back, I think you need to have a serious conversation with the kids and make it clear you expect them to pay the loans back on whatever schedule you agreed to. If, based on your knowledge of your kids, you think charging interest would help motivate them to do this, great. If not, charging interest is unlikely to accomplish anything that the conversation itself won't accomplish. If you haven't previously outlined a specific schedule or set of expectations for how you want to be paid back, just doing that (in writing) may be enough to make them realize it's not a joke. The conventional wisdom is that you shouldn't lend money to anyone unless you're either a) okay with never being paid back; or b) willing to pursue legal remedies to ensure you're paid back. Most people aren't willing to sue their own family members over small loans, which means in most cases it's not a good idea to loan money to family unless you're \"\"okay with\"\" never being repaid (whatever level of \"\"okay with\"\" makes sense for you). I should note that I don't have kids; my advice here is just how I would handle it if I were considering loaning money to my brother or a close friend or the like. This means I don't really know anything about \"\"teaching the kids about the real world\"\", but I have to say my hunch is that if your kids are 25+ and married, it's too late to radically change their views on how \"\"the real world\"\" works; unless they had a very sheltered early adulthood, they've been living in the real world for too long and will have their own ideas of how it works.\"" }, { "docid": "589986", "title": "", "text": "\"First of all, congratulations on being in an incredible financial position. you have done well. So let's look at the investment side first. If you put 400,000 in a decent index fund at an average 8% growth, and add 75,000 every year, in 10 years you'll have about $1.95 Million, $800k of which is capital gain (more or less due to market risk, of course) - or $560k after 30% tax. If you instead put it in the whole life policy at 1.7% you'll have about $1.3 Million, $133k of which is tax-free capital gain. So the insurance is costing you $430K in opportunity cost, since you could have done something different with the money for more return. The fund you mentioned (Vanguard Wellington) has a 10-year annualized growth of 7.13%. At that growth rate, the opportunity cost is $350k. Even with a portfolio with a more conservative 5% growth rate, the opportunity cost is $178k Now the life insurance. Life insurance is a highly personal product, but I ran a quick quote for a 65-year old male in good health and got a premium of $11,000 per year for a $2M 10-year term policy. So the same amount of term life insurance costs only $110,000. Much less than the $430k in opportunity cost that the whole life would cost you. In addition, you have a mortgage that's costing you about $28K per year now (3.5% of 800,000). Why would you \"\"invest\"\" in a 1.7% insurance policy when you are paying a \"\"low\"\" 3.5% mortgage? I would take as much cash as you are comfortable with and pay down the mortgage as much as possible, and get it paid off quickly. Then you don't need life insurance. Then you can do whatever you want. Retire early, invest and give like crazy, travel the world, whatever. I see no compelling reason to have life insurance at all, let alone life insurance wrapped in a bad investment vehicle.\"" } ]

[ { "docid": "11378", "title": "", "text": "You are making close to 200 K a year which is great. The aggressive payments on loans takes out around 30K which is good. The fact that you are not able to save is bad. Rather than pushing off your savings to later, scale down the lifestyle and push the upgrade to lifestyle for later" } ]

[ { "docid": "386053", "title": "", "text": "I work in marketing - there's always spillover. We love hypertargeting people but it's still effective to target a broad audience so overall awareness of your brand is higher than your competitors. Seems like a waste to serve a 20 year old a Rocket Mortage ad. But 20 year olds become 30 year olds eventually." }, { "docid": "247132", "title": "", "text": "So don't retire. But plan like you will retire. I am sure that some billionaire put some money away into a pension, 401K, or IRA for their retirement when they were young. It turns out they never had to worry about outliving their money. The next few paragraphs use United States examples. What happens if you have to retire, but you never saved. All the matching funds you could have collected in a 401K are gone, they disappeared with every paycheck you didn't contribute. Every year you didn't contribute to an IRA can never be replayed. You gave up the magic of compounding, because you thought you would never want to retire. If you save but don't need it, you will have more money to play with as you cut back your hours to part time. If you skip all the plans that make it hard to spend the money until you are 59 1/2, you can still save, but it takes even more discipline to not spend it before you are old." }, { "docid": "453639", "title": "", "text": "(All for US.) Yes you (will) have a realized long-term capital gain, which is taxable. Long-term gains (including those distributed by a mutual fund or other RIC, and also 'qualified' dividends, both not relevant here) are taxed at lower rates than 'ordinary' income but are still bracketed almost (not quite) like ordinary income, not always 15%. Specifically if your ordinary taxable income (after deductions and exemptions, equivalent to line 43 minus LTCG/QD) 'ends' in the 25% to 33% brackets, your LTCG/QD income is taxed at 15% unless the total of ordinary+preferred reaches the top of those brackets, then any remainder at 20%. These brackets depend on your filing status and are adjusted yearly for inflation, for 2016 they are: * single 37,650 to 413,350 * married-joint or widow(er) 75,300 to 413,350 * head-of-household 50,400 to 441,000 (special) * married-separate 37,650 to 206,675 which I'd guess covers at least the middle three quintiles of the earning/taxpaying population. OTOH if your ordinary income ends below the 25% bracket, your LTCG/QD income that 'fits' in the lower bracket(s) is taxed at 0% (not at all) and only the portion that would be in the ordinary 25%-and-up brackets is taxed at 15%. IF your ordinary taxable income this year was below those brackets, or you expect next year it will be (possibly due to status/exemption/deduction changes as well as income change), then if all else is equal you are better off realizing the stock gain in the year(s) where some (or more) of it fits in the 0% bracket. If you're over about $400k a similar calculation applies, but you can afford more reliable advice than potential dogs on the Internet. (update) Near dupe found: see also How are long-term capital gains taxed if the gain pushes income into a new tax bracket? Also, a warning on estimated payments: in general you are required to pay most of your income tax liability during the year (not wait until April 15); if you underpay by more than 10% or $1000 (whichever is larger) you usually owe a penalty, computed on Form 2210 whose name(?) is frequently and roundly cursed. For most people, whose income is (mostly) from a job, this is handled by payroll withholding which normally comes out close enough to your liability. If you have other income, like investments (as here) or self-employment or pension/retirement/disability/etc, you are supposed to either make estimated payments each 'quarter' (the IRS' quarters are shifted slightly from everyone else's), or increase your withholding, or a combination. For a large income 'lump' in December that wasn't planned in advance, it won't be practical to adjust withholding. However, if this is the only year increased, there is a safe harbor: if your withholding this year (2016) is enough to pay last year's tax (2015) -- which for most people it is, unless you got a pay cut this year, or a (filed) status change like marrying or having a child -- you get until next April 15 (or next business day -- in 2017 it is actually April 18) to pay the additional amount of this year's tax (2016) without underpayment penalty. However, if you split the gain so that both 2016 and 2017 have income and (thus) taxes higher than normal for you, you will need to make estimated payment(s) and/or increase withholding for 2017. PS: congratulations on your gain -- and on the patience to hold anything for 10 years!" }, { "docid": "558800", "title": "", "text": "Make sure that you have the smallest house in the neighborhood. Then hopefully anyone with nefarious intent ill go elsewhere. Don't have anything visible from the street that is expensive. This includes cars (park the BMW in the windowless garage), fancy grills, pools, bikes, etc. For maximum effect, put a broken down car in front of the house. Preferably something 20-30 years old and up on blocks, like an old pickup truck. A couch on the front porch and a old tub in the yard (unmowed) will complete the effect." }, { "docid": "519856", "title": "", "text": "One opinion related to savings is to save 30% of your take home salary every month, split the amount into two parts depending on your age (29) one part would be 30% of 30% and another 70% of 30%. Take the 70% and buy blue chip stock and take the 30% and buy govt. bonds. Each 10 years adjust the percentages at 40, 40% on bonds and 60% on stock. Only cash out on the day you retire, otherwise ignore all market/economic movements. With this and the statutory savings (employment retirement) you should be ok." }, { "docid": "274962", "title": "", "text": "\"I think you're really underestimating the degree of ageism that occurs in hiring and just how much youth is favoured in the job markets. Experience costs more and it depreciates quickly. In most case employers will prefer someone less experienced who comes across as mature and less expensive than someone who is more experienced but has been our of the industry for a year or more. The attitude of \"\"you can't teach an old job new tricks\"\" rules. Your 30s represent the ideal sweet spot: you are still young and you have some experience. If you're not in full preparing for retirement mode by 40 or 45, you're going to have a bad time. GenXers have lost most of their sweet spot and if the recovery doesn't happen, they will have lost all of it. Yes, Millenials have it pretty bad too -- no one is disputing that -- but GenX was screwed from the start. We have larger generations on either side of us. We are a transitional generation that started out before computers went mainstream but ended after, so we have a hard time competing with Millenials who have lived with technology all their life. The whole structure of the world changed right under us, i.e., the end of the cold war. And this change significantly increased available labour. Even before 2008 the talk was all about how screwed the GenXers where because of the power of Boomers and the dominance of the Millenials. We already had our backs up against the wall then 2008 struck. Also, I'd much rather be 28 and looking for a job than 40+ and looking for one. It's so much easier to jump industries or cites or countries when younger and you don't have children to look after. The 28 year old is not locked a career path and has lost a ton of political capital and credibility for having lost their job. The 40+ year old will always have to face questions: why wasn't he/she one of the one the company kept during the layoffs? will he/she be able to learn and adapt to the new job? will he/she be comfortable reporting to someone younger? will he/she be will to sacrifice time away from kids to work longer hours to compete with younger employees?\"" }, { "docid": "509266", "title": "", "text": "I just graduated from college and I am already planning my retirement. ... in terms of money sitting in my bank account post retirement, assuming Ii have $250,000 what is the highest interest that I can earn with it? Assuming you are 22, and will retire in 45 years at age 67. There is no way to predict interest rates. When I was 22 and just out of college I started putting money into a bank account to save for a down payment. The rate for a savings account was 6%. That means that every month I made 1/2 of one percent. Today that same credit union offers a money maker account with a minimum balance of $100,000 that pays 0.25% for the year. What I made in a month would take two years to make today. Keep in mind we also can't estimate your pay in the last year before retirement, or the inflation rate for the next 45 years, or the mortgage rate, or the availability of Social Security, or the returns of the S&P for 45 years. It is great you are starting to think about this today. But you will have to keep adjusting parts of your plan as the years go by: You may have to factor in children, your medical situation... Even if the interest rates recover you may not want to put all your post retirement money in the bank. Most people can't sustain the required flow of money for their 30 years of retirement from savings accounts. As for today. FDIC (or similar accounts from credit unions) will not have rates approaching 3%. It can't even approach that 3% rate via multi-year CDs. My credit union has a 6 year CD for almost 2%. If the goal of the money is safety then don't expect to find those high rates now. Some institutions may offer high rates without that FDIC protection, but that is risky." }, { "docid": "171741", "title": "", "text": "\"The thing you appear to neglect is that: Many people don't have a choice of when they retire. Another issue is that \"\"work 'til I die\"\" people are often 20-50 years old. If they changed their minds or were forced to retire (see above) or came to a realization later in life that they would like to retire, they've missed their chance. They've lost decades of compounding interest because they thought they knew everything in the world when they were 23. Forced retire savings hedges this 'common' mistake.\"" }, { "docid": "81343", "title": "", "text": "\"I disagree with the selected answer. There's no one rule of thumb and certainly not simple ones like \"\"20 cents of every dollar if you're 35\"\". You've made a good start by making a budget of your expected expenses. If you read the Mr. Money Mustache blogpost titled The Shockingly Simple Math Behind Early Retirement, you will understand that it is usually a mistake to think of your expenses as a fixed percentage of your income. In most cases, it makes more sense to keep your expenses as low as possible, regardless of your actual income. In the financial independence community, it is a common principle that one typically needs 25-30 times one's annual spending to have enough money to sustain oneself forever off the investment returns that those savings generate (this is based on the assumption of a 7% average annual return, 4% after inflation). So the real answer to your question is this: UPDATE Keats brought to my attention that this formula doesn't work that well when the savings rates are low (20% range). This is because it assumes that money you save earns no returns for the entire period that you are saving. This is obviously not true; investment returns should also count toward your 25-times annual spending goal. For that reason, it's probably better to refer to the blog post that I linked to in the answer above for precise calculations. That's where I got the \"\"37 years at 20% savings rate\"\" figure from. Depending on how large and small x and y are, you could have enough saved up to retire in 7 years (at a 75% savings rate), 17 years (at a 50% savings rate), or 37 years! (at the suggested 20% savings rate for 35-year olds). As you go through life, your expenses may increase (eg. starting a family, starting a new business, unexpected health event etc) or decrease (kid wins full scholarship to college). So could your income. However, in general, you should negotiate the highest salary possible (if you are salaried), use the 25x rule, and consider your life and career goals to decide how much you want to save. And stop thinking of expenses as a percentage of income.\"" }, { "docid": "273501", "title": "", "text": "\"Why would anyone ever get a 15 year instead of just paying off a 30 year in 15 years? Because the rate is not the same. Never that I've seen in my 30 years of following rates. I've seen the rate difference range from .25% to .75%. (In March '15, the average rate in my area is 30yr 3.75% / 15yr 3.00%) For a $150K loan, this puts the 15yr payment at $1036, with the 30 (at higher rate) paid in 15 years at $1091. This $55 difference can be considered a flexibility premium,\"\" as it offers the option to pay the actual $695 in any period the money is needed elsewhere. If the rate were the same, I'd grab the 30, and since I can't say \"\"invest the difference,\"\" I'd say to pay at a pace to go 15, unless you had a cash flow situation. A spouse out of work. An emergency that you funded with a high interest rate loan, etc. The advice to have an emergency fund is great until for whatever reason, there's just not enough. On a personal note, I did go with the 15 year mortgage for our last refinance. I was nearing 50 at the time, and it seemed prudent to aim for a mortgage free retirement.\"" }, { "docid": "234846", "title": "", "text": "&gt;But on the bright side, the most common decade for people to start saving is in their 20s. Twice as many 30 to 49 year olds said they started saving in their 20s instead of their 30s, while the 50 to 64 age group was “only slightly more likely” to have started saving in their 20s over their 30s, according to the report, which surveyed 1,003 adults living in the continental U.S. So they are basing their analysis of how early people start saving purely by studying people in their 30s and 40s with those in their 50s and 60s. They don't compare either of those age groups with those in their 20s and 30s to see how things have changed?" }, { "docid": "361509", "title": "", "text": "\"if you have 401k with an employer already, has the following features: Your contributions are taxed That's only true if you're a high income earner. https://www.irs.gov/retirement-plans/2017-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work For example, married filing jointly allows full deduction up to $99,000 even if you have a 401(k). \"\"the timing is just different\"\" And that's a good thing, since if your retirement tax rate is less than your current tax rate, you'll pay less tax on that money.\"" }, { "docid": "351658", "title": "", "text": "Yes, it is normal. I'm single & pay 32% in North Carolina. Single men & married people ask me all the time why it's so high and it gets frustrating having to explain to average people. I assume it's because I have no kids, live alone, don't own a house, am not in school, am not self employed etc. I've been at this job for 10 years and it's been over 30% since I can remember." }, { "docid": "107780", "title": "", "text": "Investing is good. Insurance when you have something to insure is good. But using a single account for investing and insurance is not so good. You need to determine how much you need to invest for retirement. You also need to determine if you need life insurance. As a single person you might determine that you don't have a great need for life insurance. If you get married, or have kids, your needs may grow. So you will want to revisit your decisions every so often. You may need to save for retirement, or setup a college fund. You may need to protect your spouse or children in case you die. It doesn't seem to make sense to invest and insure in a plan with complicated rules, fees and schedules. What happens if in 3 years you need to blow it up and start over? What surrender charges will they hit you with?" }, { "docid": "569539", "title": "", "text": "Yes your basic math is correct. If your tax bracket never changes, then either type of retirement account will end up in the same place. Assuming that there are no income restrictions that will limit your ability to contribute to the type of account you want. Now your job is to guess what your tax bracket will be each and every year for the next 3 or 4 decades. Events that will influence your bracket: getting married; having children; buying a house; selling a house; paying for college; the cost of medical care; moving to a state with a different state tax structure. Of course that assumes that you don't get a big bonus one year or that congress changes the tax brackets. That is why many people have both types of retirement accounts: Roth and non-Roth." }, { "docid": "228488", "title": "", "text": "You say you have 90% in stocks. I'll assume that you have the other 10% in bonds. For the sake of simplicity, I'll assume that your investments in stocks are in nice, passive indexed mutual funds and ETFs, rather than in individual stocks. A 90% allocation in stocks is considered aggressive. The problem is that if the stock market crashes, you may lose 40% or more of your investment in a single year. As you point out, you are investing for the long term. That's great, it means you can rest easy if the stock market crashes, safe in the hope that you have many years for it to recover. So long as you have the emotional willpower to stick with it. Would you be better off with a 100% allocation in stocks? You'd think so, wouldn't you. After all, the stock market as a whole gives better expected returns than the bond market. But keep in mind, the stock market and the bond market are (somewhat) negatively correlated. That means when the stock market goes down, the bond market often goes up, and vice versa. Investing some of your money in bonds will slightly reduce your expected return but will also reduce your standard deviation and your maximum annual loss. Canadian Couch Potato has an interesting write-up on how to estimate stock and bond returns. It's based on your stocks being invested equally in the Canadian, U.S., and international markets. As you live in the U.S., that likely doesn't directly apply to you; you probably ignore the Canadian stock market, but your returns will be fairly similar. I've reproduced part of that table here: As you can see, your expected return is highest with a 100% allocation in stocks. With a 20 year window, you likely can recover from any crash. If you have the stomach for it, it's the allocation with the highest expected return. Once you get closer to retirement, though, you have less time to wait for the stock market to recover. If you still have 90% or 100% of your investment in stocks and the market crashes by 44%, it might well take you more than 6 years to recover. Canadian Couch Potato has another article, Does a 60/40 Portfolio Still Make Sense? A 60/40 portfolio is a fairly common split for regular investors. Typically considered not too aggressive, not too conservative. The article references an AP article that suggests, in the current financial climate, 60/40 isn't enough. Even they aren't recommending a 90/10 or a 100/0 split, though. Personally, I think 60/40 is too conservative. However, I don't have the stomach for a 100/0 split or even a 90/10 split. Okay, to get back to your question. So long as your time horizon is far enough out, the expected return is highest with a 100% allocation in stocks. Be sure that you can tolerate the risk, though. A 30% or 40% hit to your investments is enough to make anyone jittery. Investing a portion of your money in bonds slightly lowers your expected return but can measurably reduce your risk. As you get closer to retirement and your time horizon narrows, you have less time to recover from a stock market crash and do need to be more conservative. 6 years is probably too short to keep all your money in stocks. Is your stated approach reasonable? Well, only you can answer that. :)" }, { "docid": "67276", "title": "", "text": "\"Your real question, \"\"why is this not discussed more?\"\" is intriguing. I think the media are doing a better job bringing these things into the topics they like to ponder, just not enough, yet. You actually produced the answer to How are long-term capital gains taxed if the gain pushes income into a new tax bracket? so you understand how it works. I am a fan of bracket topping. e.g. A young couple should try to top off their 15% bracket by staying with Roth but then using pretax IRA/401(k) to not creep into 25% bracket. For this discussion, 2013 numbers, a blank return (i.e. no schedule A, no other income) shows a couple with a gross $92,500 being at the 15%/25% line. It happens that $20K is exactly the sum of their standard deduction, and 2 exemptions. The last clean Distribution of Income Data is from 2006, but since wages haven't exploded and inflation has been low, it's fair to say that from the $92,000 representing the top 20% of earners, it won't have many more than top 25% today. So, yes, this is a great opportunity for most people. Any married couple with under that $92,500 figure can use this strategy to exploit your observation, and step up their basis each year. To littleadv objection - I imagine an older couple grossing $75K, by selling stock with $10K in LT gains just getting rid of the potential 15% bill at retirement. No trading cost if a mutual fund, just $20 or so if stocks. The more important point, not yet mentioned - even in a low cost 401(k), a lifetime of savings results in all gains being turned in ordinary income. And the case is strong for 'deposit to the match but no no more' as this strategy would let 2/3 of us pay zero on those gains. (To try to address the rest of your questions a bit - the strategy applies to a small sliver of people. 25% have income too high, the bottom 50% or so, have virtually no savings. Much of the 25% that remain have savings in tax sheltered accounts. With the 2013 401(k) limit of $17,500, a 40 year old couple can save $35,000. This easily suck in most of one's long term retirement savings. We can discuss demographics all day, but I think this addresses your question.) If you add any comments, I'll probably address them via edits, avoiding a long dialog below.\"" }, { "docid": "253545", "title": "", "text": "If your SIMPLE IRA is over two years old then you can roll your money to another qualified account such as a rollover IRA. The usual rollover rules apply. You have 60 days to deposit the funds in another qualified account and you are only allowed one such rollover in a 12 month window. If you are still within two years of opening your SIMPLE IRA, you can roll your funds to a SIMPLE IRA with another vendor, but you would then have to wait until that account is two years old before rolling it elsewhere. If you roll the money another type of IRA before your SIMPLE IRA account is two-years old, and under 59 1/2 years old, you will be subject to a 25% penalty (which is much higher than for other types of accounts). Many of the early distribution exceptions apply such as disability, etc. Edit: The first document linked above covers rules for running a SIMPLE IRA. All the specific regulations linked in the second document apply to all IRAs of all types. There is no specific prohibition from rolling only a portion of the money to another qualified account. There are prohibitions against rolling money more than one time in a 12 month period. The usual obstacle to rolling money from a retirement account--like a 401(k)--is that the 401(k) plan is written to prohibit withdrawals while the employee is still employed at the company." }, { "docid": "581635", "title": "", "text": "\"Okay. Savings-in-a-nutshell. So, take at least year's worth of rent - $30k or so, maybe more for additional expenses. That's your core emergency fund for when you lose your job or total a few cars or something. Keep it in a good savings account, maybe a CD ladder - but the point is it's liquid, and you can get it when you need it in case of emergency. Replenish it immediately after using it. You may lose a little cash to inflation, but you need liquidity to protect you from risk. It is worth it. The rest is long-term savings, probably for retirement, or possibly for a down payment on a home. A blended set of stocks and bonds is appropriate, with stocks storing most of it. If saving for retirement, you may want to put the stocks in a tax-deferred account (if only for the reduced paperwork! egads, stocks generate so much!). Having some money (especially bonds) in something like a Roth IRA or a non-tax-advantaged account is also useful as a backup emergency fund, because you can withdraw it without penalties. Take the money out of stocks gradually when you are approaching the time when you use the money. If it's closer than five years, don't use stocks; your money should be mostly-bonds when you're about to use it. (And not 30-year bonds or anything like that either. Those are sensitive to interest rates in the short term. You should have bonds that mature approximately the same time you're going to use them. Keep an eye on that if you're using bond funds, which continually roll over.) That's basically how any savings goal should work. Retirement is a little special because it's sort of like 20 years' worth of savings goals (so you don't want all your savings in bonds at the beginning), and because you can get fancy tax-deferred accounts, but otherwise it's about the same thing. College savings? Likewise. There are tools available to help you with this. An asset allocation calculator can be found from a variety of sources, including most investment firms. You can use a target-date fund for something this if you'd like automation. There are also a couple things like, say, \"\"Vanguard LifeStrategy funds\"\" (from Vanguard) which target other savings goals. You may be able to understand the way these sorts of instruments function more easily than you could other investments. You could do a decent job for yourself by just opening up an account at Vanguard, using their online tool, and pouring your money into the stuff they recommend.\"" } ]

[ { "docid": "35680", "title": "", "text": "Yes, you should be saving for retirement. There are a million ideas out there on how much is a reasonable amount, but I think most advisor would say at least 6 to 10% of your income, which in your case is around $15,000 per year. You give amounts in dollars. Are you in the U.S.? If so, there are at least two very good reasons to put money into a 401k or IRA rather than ordinary savings or investments: (a) Often your employer will make matching contributions. 50% up to 6% of your salary is pretty common, i.e. if you put in 6% they put in 3%. If either of your employers has such a plan, that's an instant 50% profit on your investment. (b) Any profits on money invested in an IRA or 401k are tax free. (Effectively, the mechanics differ depending on the type of account.) So if you put $100,000 into an IRA today and left it there until you retire 30 years later, it would likely earn something like $600,000 over that time (assuming 7% per year growth). So you'd pay takes on your initial $100,000 but none on the $600,000. With your income you are likely in a high tax bracket, that would make a huge difference. If you're saying that you just can't find a way to put money away for retirement, may I suggest that you cut back on your spending. I understand that the average American family makes about $45,000 per year and somehow manages to live on that. If you were to put 10% of your income toward retirement, then you would be living on the remaining $171,000, which is still almost 4 times what the average family has. Yeah, I make more than $45,000 a year too and there are times when I think, How could anyone possibly live on that? But then I think about what I spend my money on. Did I really need to buy two new computer printers the last couple of months? I certainly could do my own cleaning rather than hiring a cleaning lady to come in twice a month. Etc. A tough decision to make can be paying off debt versus putting money into an investment account. If the likely return on investment is less than the interest rate on the loan, you should certainly concentrate on paying off the loan. But if the reverse is true, then you need to decide between likely returns and risk." } ]

[ { "docid": "434869", "title": "", "text": "\"It is difficult to become a millionaire in the short term (a few years) working at a 9-to-5 job, unless you get lucky (win the lottery, inheritance, gambling at a casino, etc). However, if you max out your employer's Retirement Plan (401k, 403b) for the next 30 years, and you average a 5% rate of return on your investment, you will reach millionaire status. Many people would consider this \"\"easy\"\" and \"\"automatic\"\". Of course, this assumes you are able to max our your retirement savings at the start of your career, and keep it going. The idea is that if you get in the habit of saving early in your career and live modestly, it becomes an automatic thing. Unfortunately, the value of $1 million after 30 years of inflation will be eroded somewhat. (Sorry.) If you don't want to wait 30 years, then you need to look at a different strategy. Work harder or take risks. Some options:\"" }, { "docid": "332113", "title": "", "text": "You are in the perfect window for making an IRA contribution. The IRS allows you to make IRA contributions for last year until tax day. So you know that for 2014 you didn't have access to a 401K at work. You want to avoid making a deductible IRA contribution for this year (2015) until you are sure that you wont have a 401K at work this year. Take your time and decide if the detectible IRA or the Roth works best for your situation. Having a IRA now will be good becasue you have many years for it to grow. Keep in mind that it is not unusual to have multiple retirement accounts: Current 401K; rolled over into a IRA; Roth IRA... Each has different rules, limits, and benefits. There is no reason to pick one way of investing for retirement becasue you never know if the next employer will have the type of plan you like. I am assuming that your spouse, if you are married, doesn't have access to a 401K; otherwise you would have to consider the applicable limits." }, { "docid": "459906", "title": "", "text": "You're extremely fortunate to have $50k in CDs, no debt, and $3800 disposable after food and rent. Congrats. Here's how I would approach it. If you see yourself getting into a home in the next couple of years, stay safe and liquid. CDs (depending on the duration) fit that description. Because you have disposable income and you're young, you should be contributing to a Roth IRA. This will build in value and compound over your lifetime, so that when you're in your 70s you'll actually have a retirement. Financial planners love life insurance because that's how they make all their money. I have whole life insurance because its cash value will be part of my retirement. It may also cover my wife if I ever decide to get married. It may or may not make sense for you now depending on how soon you want to buy a home and home expensive they are in your zip code. Higher risk, higher reward- you can count on that. Keep the funds in the United States and don't try to get into any slick financial moves. If you have a school in town, see if you can take an Intro to Financial Planning class. It's extremely helpful for anyone with these kinds of questions." }, { "docid": "479213", "title": "", "text": "\"Concise answers to your questions: Depends on the loan and the bank; when you \"\"accelerate\"\" repayment of a loan by applying a pre-payment balance to the principal, your monthly payment may be reduced. However, standard practice for most loan types is that the repayment schedule will be accelerated; you'll pay no less each month, but you'll pay it off sooner. I can neither confirm nor deny that an internship counts as job experience in the field for the purpose of mortgage lending. It sounds logical, especially if it were a paid internship (in which case you'd just call it a \"\"job\"\"), but I can't be sure as I don't know of anyone who got a mortgage without accruing the necessary job experience post-graduation. A loan officer will be happy to talk to you and answer specific questions, but if you go in today, with no credit history (the student loan probably hasn't even entered repayment) and a lot of unknowns (an offer can be rescinded, for instance), you are virtually certain to be denied a mortgage. The bank is going to want evidence that you will make good on the debt you have over time. One $10,000 payment on the loan, though significant, is just one payment as far as your credit history (and credit score) is concerned. Now, a few more reality checks: $70k/yr is not what you'll be bringing home. As a single person without dependents, you'll be taxed at the highest possible withholdings rate. Your effective tax rate on $70k, depending on the state in which you live, can be as high as 30% (including all payroll/SS taxes, for a 1099 earner and/or an employee in a state with an income tax), so you're actually only bringing home 42k/yr, or about $1,600/paycheck if you're paid biweekly. To that, add a decent chunk for your group healthcare plan (which, as of 2014, you will be required to buy, or else pay another $2500 - effectively another 3% of gross earnings - in taxes). And even now with your first job, you should be at least trying to save up a decent chunk o' change in a 401k or IRA as a retirement nest egg. That student loan, beginning about 6 months after you leave school, will cost you about $555/mo in monthly payments for the next 10 years (if it's all Stafford loans with a 50/50 split between sub/unsub; that could be as much as $600/mo for all-unsub Stafford, or $700 or more for private loans). If you were going to pay all that back in two years, you're looking at paying a ballpark of $2500/mo leaving just $700 to pay all your bills and expenses each month. With a 3-year payoff plan, you're turning around one of your two paychecks every month to the student loan servicer, which for a bachelor is doable but still rather tight. Your mortgage payment isn't the only payment you will make on your house. If you get an FHA loan with 3.5% down, the lender will demand PMI. The city/county will likely levy a property tax on the assessed value of land and building. The lender may require that you purchase home insurance with minimum acceptable coverage limits and deductibles. All of these will be paid into escrow accounts, managed by your lending bank, from a single check you send them monthly. I pay all of these, in a state (Texas) that gets its primary income from sales and property tax instead of income, and my monthly payment isn't quite double the simple P&I. Once you have the house, you'll want to fill the house. Nice bed: probably $1500 between mattress and frame for a nice big queen you can stretch out on (and have lady friends over). Nice couch: $1000. TV: call it $500. That's probably the bare minimum you'll want to buy to replace what you lived through college with (you'll have somewhere to eat and sleep other than the floor of your new home), and we're already talking almost a month's salary, or payments of up to 10% of your monthly take-home pay over a year on a couple of store credit cards. Plates, cookware, etc just keeps bumping this up. Yes, they're (theoretically) all one-time costs, but they're things you need, and things you may not have if you've been living in dorms and eating in dining halls all through college. The house you buy now is likely to be a \"\"starter\"\", maybe 3bed/2bath and 1600 sqft at the upper end (they sell em as small as 2bd/1bt 1100sqft). It will support a spouse and 2 kids, but by that point you'll be bursting at the seams. What happens if your future spouse had the same idea of buying a house early while rates were low? The cost of buying a house may be as little as 3.5% down and a few hundred more in advance escrow and a couple other fees the seller can't pay for you. The cost of selling the same house is likely to include all the costs you made the seller pay when you bought it, because you'll be selling to someone in the same position you're in now. I didn't know it at the time I bought my house, but I paid about $5,000 to get into it (3.5% down and 6 months' escrow up front), while the sellers paid over $10,000 to get out (the owner got married to another homeowner, and they ended up selling both houses to move out of town; I don't even know what kind of bath they took on the house we weren't involved with). I graduated in 2005. I didn't buy my first house until I was married and pretty much well-settled, in 2011 (and yes, we were looking because mortgage rates were at rock bottom). We really lucked out in terms of a home that, if we want to or have to, we can live in for the rest of our lives (only 1700sqft, but it's officially a 4/2 with a spare room, and a downstairs master suite and nursery/office, so when we're old and decrepit we can pretty much live downstairs). I would seriously recommend that you do the same, even if by doing so you miss out on the absolute best interest rates. Last example: let's say, hypothetically, that you bite at current interest rates, and lock in a rate just above prime at 4%, 3.5% down, seller pays closing, but then in two years you get married, change jobs and have to move. Let's further suppose an alternate reality in which, after two years of living in an apartment, all the same life changes happen and you are now shopping for your first house having been pre-approved at 5%. That one percentage point savings by buying now, on a house in the $200k range, is worth about $120/mo or about $1440/yr off of your P&I payment ($921.42 on a $200,000 home with a 30-year term). Not chump change (over 30 years if you had been that lucky, it's $43000), but it's less than 5% of your take-home pay (month-to-month or annually). However, when you move in two years, the buyer's probably going to want the same deal you got - seller pays closing - because that's the market level you bought in to (low-priced starters for first-time homebuyers). That's a 3% commission for both agents, 1% origination, 0.5%-1% guarantor, and various fixed fees (title etc). Assuming the value of the house hasn't changed, let's call total selling costs 8% of the house value of $200k (which is probably low); that's $16,000 in seller's costs. Again, assuming home value didn't change and that you got an FHA loan requiring only 3.5% down, your down payment ($7k) plus principal paid (about another $7k; 6936.27 to be exact) only covers $14k of those costs. You're now in the hole $2,000, and you still have to come up with your next home's down payment. With all other things being equal, in order to get back to where you were in net worth terms before you bought the house (meaning $7,000 cash in the bank after selling it), you would need to stay in the house for 4 and a half years to accumulate the $16,000 in equity through principal payments. That leaves you with your original $7,000 down payment returned to you in cash, and you're even in accounting terms (which means in finance terms you're behind; that $7,000 invested at 3% historical average rate of inflation would have earned you about $800 in those four years, meaning you need to stick around about 5.5 years before you \"\"break even\"\" in TVM terms). For this reason, I would say that you should be very cautious when buying your first home; it may very well be the last one you'll ever buy. Whether that's because you made good choices or bad is up to you.\"" }, { "docid": "253545", "title": "", "text": "If your SIMPLE IRA is over two years old then you can roll your money to another qualified account such as a rollover IRA. The usual rollover rules apply. You have 60 days to deposit the funds in another qualified account and you are only allowed one such rollover in a 12 month window. If you are still within two years of opening your SIMPLE IRA, you can roll your funds to a SIMPLE IRA with another vendor, but you would then have to wait until that account is two years old before rolling it elsewhere. If you roll the money another type of IRA before your SIMPLE IRA account is two-years old, and under 59 1/2 years old, you will be subject to a 25% penalty (which is much higher than for other types of accounts). Many of the early distribution exceptions apply such as disability, etc. Edit: The first document linked above covers rules for running a SIMPLE IRA. All the specific regulations linked in the second document apply to all IRAs of all types. There is no specific prohibition from rolling only a portion of the money to another qualified account. There are prohibitions against rolling money more than one time in a 12 month period. The usual obstacle to rolling money from a retirement account--like a 401(k)--is that the 401(k) plan is written to prohibit withdrawals while the employee is still employed at the company." }, { "docid": "519856", "title": "", "text": "One opinion related to savings is to save 30% of your take home salary every month, split the amount into two parts depending on your age (29) one part would be 30% of 30% and another 70% of 30%. Take the 70% and buy blue chip stock and take the 30% and buy govt. bonds. Each 10 years adjust the percentages at 40, 40% on bonds and 60% on stock. Only cash out on the day you retire, otherwise ignore all market/economic movements. With this and the statutory savings (employment retirement) you should be ok." }, { "docid": "152985", "title": "", "text": "It is normally a bad idea to cash in retirement accounts to buy a house, in your case it is a horrible idea because you are way behind on saving for retirement. Other fallacies in your reasoning: My advice, increase the amount you are saving for retirement considerably, and also put some money aside to save for a down payment on a house. Buy the house when you have enough non-retirement money to afford the down payment. If you can't wait that long, buy a house you can afford. It may help to think of it this way: Visualize yourself as a 65 year old retired person with very little income, and living on your retirement account. Would you as a 39 year old ask that person to give you $175,966 (the amount you are talking about withdrawing compounded annually at 6% interest for 25 years with no additional contributions) so that you could put a down payment on a house? Because that is what you would be doing. When you hit retirement age would you kick yourself for making such a decision? Because unless you die young, that person is sitting out there in your future needing that money to live off of. Don't take this the wrong way, but the tone of your question seems like you are looking for support to make what you already know is a bad financial decision." }, { "docid": "418864", "title": "", "text": "\"Keep in mind, there are too many variables to address in a single post. I could (and might) write a full book on the topic. One simple way to comprehend your perceived observation. In the 25% bracket, you have $1000 of income and two choices. Net out $750, and deposit to Roth, or deposit the full $1000 to the traditional IRA or 401(k). Sufficient time passes for the investment to grow 10 fold. For what it's worth, 8% at 30 years will do that. The Roth is now worth $7500 tax free. The traditional 401(k) is worth $10000 but subject to tax. At 25%, we're at the same $7500. For those looking to invest more than a gross $18,000, the Roth flavor is an effective $24,000, as post tax, this is $18,000. I wrote a bit more on this in the whimsically titled The Density of Your IRA. This is really a top 10%er issue, as it takes quite a bit of income for the $23,000 combined IRA and 401(k) limits to be a problem. In my writing, the larger case to be made is for taking advantage of the tax rate difference between the time of deposit and withdrawal. A look at the 2016 tax rates is in order. Let's stick with 25% while working. Now, at retirement, but before social security, as that's another story, the couple has $20,600 in standard deduction and exemption, and both the 10 and 15% brackets to enjoy. Ignoring any other deductions, potential credits, etc, let's look at a gross $80,000 withdrawal. The numbers happen to work out to an average 10%, with the couple being in a marginal 15% bracket. A full 25% or $20,000 tax would be the break-even to the \"\"same bracket in/out\"\" analysis, so this produces a $12,000 benefit. This issue is often treated as if there were 2 points in time, the deposit, and the withdrawal. For most people, that may be the case. Keep in mind, current law allows a conversion to Roth any time in between. This gives an opportunity to make a deposit while in the 25% bracket, and convert in any year the marginal rate drops back to 15% for whatever reason. Last - I can't ignore the Social Security problem. Simply put, when half of your Social Security benefits plus other income exceed $25,000 ($32,000 if married filing joint) your benefits start to become taxable, until 85% of your benefits are fully taxed. This issue is worthy of multiple posts by itself. It's not a deal killer, just another point to consider. A very high income earner might be beyond these levels already, in which case the point is moot. A low income earner, not impacted at all. It's those who are in the range to navigate this that would benefit to take advantage of the scenario I presented above and spend down pre-tax accounts, while planning to use the Roths when Social Security starts. This should make it clear - it's not all or none. Those retiring with $2M in 100% pretax, or $1.5M 100% in Roth have both missed the chance to have the optimal mix.\"" }, { "docid": "248536", "title": "", "text": "According to the IRS, you can still put money in your IRA. Here (https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits) they say: Can I contribute to an IRA if I participate in a retirement plan at work? You can contribute to a traditional or Roth IRA whether or not you participate in another retirement plan through your employer or business. However, you might not be able to deduct all of your traditional IRA contributions if you or your spouse participates in another retirement plan at work. Roth IRA contributions might be limited if your income exceeds a certain level. In addition, in this link (https://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits), the IRS says: Retirement plan at work: Your deduction may be limited if you (or your spouse, if you are married) are covered by a retirement plan at work and your income exceeds certain levels. The word 'covered' should clarify that - you are not covered anymore in that year, you just got a contribution in that year which was triggered by work done in a previous year. You cannot legally be covered in a plan at an employer where you did not work in that year." }, { "docid": "509266", "title": "", "text": "I just graduated from college and I am already planning my retirement. ... in terms of money sitting in my bank account post retirement, assuming Ii have $250,000 what is the highest interest that I can earn with it? Assuming you are 22, and will retire in 45 years at age 67. There is no way to predict interest rates. When I was 22 and just out of college I started putting money into a bank account to save for a down payment. The rate for a savings account was 6%. That means that every month I made 1/2 of one percent. Today that same credit union offers a money maker account with a minimum balance of $100,000 that pays 0.25% for the year. What I made in a month would take two years to make today. Keep in mind we also can't estimate your pay in the last year before retirement, or the inflation rate for the next 45 years, or the mortgage rate, or the availability of Social Security, or the returns of the S&P for 45 years. It is great you are starting to think about this today. But you will have to keep adjusting parts of your plan as the years go by: You may have to factor in children, your medical situation... Even if the interest rates recover you may not want to put all your post retirement money in the bank. Most people can't sustain the required flow of money for their 30 years of retirement from savings accounts. As for today. FDIC (or similar accounts from credit unions) will not have rates approaching 3%. It can't even approach that 3% rate via multi-year CDs. My credit union has a 6 year CD for almost 2%. If the goal of the money is safety then don't expect to find those high rates now. Some institutions may offer high rates without that FDIC protection, but that is risky." }, { "docid": "338703", "title": "", "text": "\"So you're making $150,000 per year and you have $245,000 in debts. You're in your late 30s and have $41,000, or less than 1/3 of a year's pay, put away for retirement. That's a bad situation, but not disastrous. Lots of people have recovered from far worse. But like the old joke goes, when you realize that you're deep in a hole, STOP DIGGING. The worst thing you could do right now is liquidate the few assets you have and go deeper into debt. I don't know where you live or what the housing market is there. But the easy answer is: find a cheaper house. I'm not sure what you mean about \"\"affect the resale value\"\". Yes, if you buy a cheaper house it will have a lower resale value. So what? The days when a house was an investment that would skyrocket in value are over. (And even in those days, it didn't help most people. So when you move, you get a big profit on the sale of your house. But the house you're moving to probably went up by a similar percentage, so you really didn't gain anything.) Even if your house did increase in value, unless you sell it, that doesn't help you make the mortgage payments. It's a paper profit. Get yourself out of debt. Step 1 is to stop taking on new debts. And if at all possible, you should be putting bare minimum 6% into your retirement plan. I don't know where you work, but most employers match some percentage of the first 6% you put in. If you don't take advantage of that, you're giving up free money.\"" }, { "docid": "386053", "title": "", "text": "I work in marketing - there's always spillover. We love hypertargeting people but it's still effective to target a broad audience so overall awareness of your brand is higher than your competitors. Seems like a waste to serve a 20 year old a Rocket Mortage ad. But 20 year olds become 30 year olds eventually." }, { "docid": "273501", "title": "", "text": "\"Why would anyone ever get a 15 year instead of just paying off a 30 year in 15 years? Because the rate is not the same. Never that I've seen in my 30 years of following rates. I've seen the rate difference range from .25% to .75%. (In March '15, the average rate in my area is 30yr 3.75% / 15yr 3.00%) For a $150K loan, this puts the 15yr payment at $1036, with the 30 (at higher rate) paid in 15 years at $1091. This $55 difference can be considered a flexibility premium,\"\" as it offers the option to pay the actual $695 in any period the money is needed elsewhere. If the rate were the same, I'd grab the 30, and since I can't say \"\"invest the difference,\"\" I'd say to pay at a pace to go 15, unless you had a cash flow situation. A spouse out of work. An emergency that you funded with a high interest rate loan, etc. The advice to have an emergency fund is great until for whatever reason, there's just not enough. On a personal note, I did go with the 15 year mortgage for our last refinance. I was nearing 50 at the time, and it seemed prudent to aim for a mortgage free retirement.\"" }, { "docid": "496752", "title": "", "text": "As mentioned, the main advantage of a 15-year loan compared to a 30-year loan is that the 15-year loan should come at a discounted rate. All things equal, the main advantage of the 30-year loan is that the payment is lower. A completely different argument from what you are hearing is that if you can get a low interest rate, you should get the longest loan possible. It seem unlikely that interest rates are going to get much lower than they are and it's far more likely that they will get higher. In 15 years, if interest rates are back up around 6% or more (where they were when I bought my first home) and you are 15 years into a 30 year mortgage, you'll being enjoying an interest rate that no one can get. You need to keep in mind that as the loan is paid off, you will earn exactly 0% on the principal you've paid. If for some reason the value of the home drops, you lose that portion of the principal. The only way you can get access to that capital is to sell the house. You (generally) can't sell part of the house to send a kid to college. You can take out another mortgage but it is going to be at the current going rate which is likely higher than current rates. Another thing to consider that over the course of 30 years, inflation is going to make a fixed payment cheaper over time. Let's say you make $60K and you have a monthly payment of $1000 or 20% of your annual income. In 15 years at a 1% annualized wage growth rate, it will be 17% of your income. If you get a few raises or inflation jumps up, it will be a lot more than that. For example, at a 2% annualized growth rate, it's only 15% of your income after 15 years. In places where long-term fixed rates are not available, shorter mortgages are common because of the risk of higher rates later. It's also more common to pay them off early for the same reason. Taking on a higher payment to pay off the loan early only really only helps you if you can get through the entire payment and 15 years is still a long way off. Then if you lose your job then, you only have to worry about taxes and upkeep but that means you can still lose the home. If you instead take the extra money and keep a rainy day fund, you'll have access to that money if you hit a rough patch. If you put all of your extra cash in the house, you'll be forced to sell if you need that capital and it may not be at the best time. You might not even be able to pay off the loan at the current market value. My father took out a 30 year loan and followed the advice of an older coworker to 'buy as much house as possible because inflation will pay for it'. By the end of the loan, he was paying something like $250 a month and the house was worth upwards of $200K. That is, his mortgage payment was less than the payment on a cheap car. It was an insignificant cost compared to his income and he had been able to invest enough to retire in comfort. Of course when he bought it, inflation was above 10% so it's bit different today but the same concepts still apply, just different numbers. I personally would not take anything less than a 30 year loan at current rates unless I planned to retire in 15 years." }, { "docid": "202459", "title": "", "text": "I don't use a rule of thumb for this. Instead, I use a budget. Throwing money into a savings account for the purpose of building a savings account is okay, but I only put money into a savings account that I have a purpose for. For example, there are bills that come up once a year, such as insurance premiums, property tax, annual subscriptions and memberships, etc. I plan for these in my budget each month, and the money goes into my savings. I also have an emergency fund, which is used in the event that a large, one-time, unexpected expense comes up that I hadn't planned for. I have a goal for how large I want this fund to be, so I put money in savings until it is built up to the level I want it at. There are other long range saving goals I have: my next car, vacation, furniture replacement, technology replacement, etc. Each of these gets some money each month, which goes into savings. I also have retirement savings in the budget, but that doesn't go into the savings account; it gets invested in my retirement account. My point is that instead of arbitrarily choosing a percentage of your income to put into a savings account, think about the purpose of that money. That will help you determine how much needs to be saved, and it will also help motivate you to do so." }, { "docid": "403226", "title": "", "text": "The OP invests a large amount of money each year (30-40k), and has significant amount already invested. Some in the United States that face this situation may want to look at using the bonus to fund two years worth of IRA or Roth IRA. During the period between January 1st and tax day they can put money into a IRA or Roth IRA for the previous year, and for the current year. The two deposits might have to be made separately, because the tax year for each deposit must be specified. If the individual is married, they can also fund their spouses IRA or Roth IRA. If this bonus is this large every year, the double deposit can only be done the first time, but if the windfall was unexpected getting the previous years deposit done before tax day could be useful. The deposits for the current year could still be spread out over the next 12 months. EDIT: Having thought about the issue a little more I have realized there are other timing issues that need to be considered." }, { "docid": "282379", "title": "", "text": "\"I think there's value in charging family members/friends interest if it will make them take the loan seriously. The problem is that if you're thinking about charging interest because the person seems to be borrowing from you too cavalierly, it may be too late to make them take it seriously. In the situation you describe, if you're concerned about the loans being paid back, I think you need to have a serious conversation with the kids and make it clear you expect them to pay the loans back on whatever schedule you agreed to. If, based on your knowledge of your kids, you think charging interest would help motivate them to do this, great. If not, charging interest is unlikely to accomplish anything that the conversation itself won't accomplish. If you haven't previously outlined a specific schedule or set of expectations for how you want to be paid back, just doing that (in writing) may be enough to make them realize it's not a joke. The conventional wisdom is that you shouldn't lend money to anyone unless you're either a) okay with never being paid back; or b) willing to pursue legal remedies to ensure you're paid back. Most people aren't willing to sue their own family members over small loans, which means in most cases it's not a good idea to loan money to family unless you're \"\"okay with\"\" never being repaid (whatever level of \"\"okay with\"\" makes sense for you). I should note that I don't have kids; my advice here is just how I would handle it if I were considering loaning money to my brother or a close friend or the like. This means I don't really know anything about \"\"teaching the kids about the real world\"\", but I have to say my hunch is that if your kids are 25+ and married, it's too late to radically change their views on how \"\"the real world\"\" works; unless they had a very sheltered early adulthood, they've been living in the real world for too long and will have their own ideas of how it works.\"" }, { "docid": "169007", "title": "", "text": "&gt; Why are you against making sure their pensions are funded? Pension actuarial analyst here: Pensions can give employee's benefits for time worked long before the plan came into existence. Those 'liabilities' are paid off over 30-40 years. It's absolutely normal. In addition, pension plans may also pay off increases in benefits, such as an early retirement window, over that same 30-40 years. Pension funds use assumptions on future investment earnings to 'guess' their contribution. Sometimes, they don't earn as much as they expect the plan to earn. Sometimes, they try to keep contributions low *as an alternative to scrapping the plan entirely*. So putting this all together: if pension plans are instantly and always 100% funded? You don't get pension plans, with defined and guaranteed retirement benefits. You get plans where the employee defers their own money into accounts, with no particular guarantees at all. And that's why we are fine with unfunded pensions. Oh, by the way, the PBGC charges higher fees to covered pension plans that have more unfunded liability! So if a company doesn't want to pay contributions, they have to pay more elsewhere. It all evens out." }, { "docid": "374266", "title": "", "text": "It's important to have both long term goals and milestones along the way. In an article I wrote about saving 15% of one's income, I offered the following table: This table shows savings starting at age 20 (young, I know, so shift 2 years out) and ending at 60 with 18-1/2 year's of income saved due to investment returns. The 18-1/2 results in 74% of one's income replaced at retirement if we follow the 4% rule. One can adjust this number, assuming Social Security will replace 30%, and that spending will go down in retirement, you might need to save less than this shows. What's important is that as a starting point, it shows 2X income saved by age 30. Perhaps 1X is more reasonable. You are at just over .5X and proposing to spend nearly half of that on a single purchase. Financial independence means to somehow create an income you can live on without the need to work. There are many ways to do it, but it usually starts with a high saving rate. Your numbers suggest a good income now, but maybe this is only recently, else you'd have over $200K in the bank. I suggest you read all you can about investments and the types of retirement accounts, including 401(k) (if you have that available to you), IRA, and Roth IRA. The details you offer don't allow me to get much more specific than this." } ]

[ { "docid": "437879", "title": "", "text": "\"First, I would recommend getting rid of this ridiculous debt, or remember this day and this answer, \"\"you will be living this way for many years to come and maybe worse, no/not enough retirement\"\". Hold off on any retirement savings right now so that the money can be used to crush this debt. Without knowing all of your specifics (health insurance deductions, etc.) and without any retirement contribution, given $190,000 you should probably be taking home around $12,000 per month total. Assuming a $2,000 mortgage payment (30 year term), that is $10,000 left per month. If you were serious about paying this off, you could easily live off of $3,000 per month (probably less) and have $7,000 left to throw at the student loan debt. This assumes that you haven't financed automobiles, especially expensive ones or have other significant debt payments. That's around 3 years until the entire $300,000 is paid! I have personally used and endorse the snowball method (pay off smallest to largest regardless of interest rate), though I did adjust it slightly to pay off some debts first that had a very high monthly payment so that I would then have this large payment to throw at the next debt. After the debt is gone, you now have the extra $7,000 per month (probably more if you get raises, bonuses etc.) to enjoy and start saving for retirement and kid's college. You may have 20-25 years to save for retirement; at $4,000 per month that's $1 million in just savings, not including the growth (with moderate growth this could easily double or more). You'll also have about 14 years to save for college for this one kid; at $1,500 per month that's $250,000 (not including investment growth). This is probably overkill for one kid, so adjust accordingly. Then there's at least $1,500 per month left to pay off the mortgage in less than half the time of the original term! So in this scenario, conservatively you might have: Obviously I don't know your financials or circumstances, so build a good budget and play with the numbers. If you sacrifice for a short time you'll be way better off, trust me from experience. As a side note: Assuming the loan debt is 50/50 you and your husband, you made a good investment and he made a poor one. Unless he is a public defender or charity attorney, why is he making $60,000 when you are both attorneys and both have huge student loan debt? If it were me, I would consider a job change. At least until the debt was cleaned up. If he can make $100,000 to $130,000 or more, then your debt may be gone in under 2 years! Then he can go back to the charity gig.\"" } ]

[ { "docid": "332113", "title": "", "text": "You are in the perfect window for making an IRA contribution. The IRS allows you to make IRA contributions for last year until tax day. So you know that for 2014 you didn't have access to a 401K at work. You want to avoid making a deductible IRA contribution for this year (2015) until you are sure that you wont have a 401K at work this year. Take your time and decide if the detectible IRA or the Roth works best for your situation. Having a IRA now will be good becasue you have many years for it to grow. Keep in mind that it is not unusual to have multiple retirement accounts: Current 401K; rolled over into a IRA; Roth IRA... Each has different rules, limits, and benefits. There is no reason to pick one way of investing for retirement becasue you never know if the next employer will have the type of plan you like. I am assuming that your spouse, if you are married, doesn't have access to a 401K; otherwise you would have to consider the applicable limits." }, { "docid": "558800", "title": "", "text": "Make sure that you have the smallest house in the neighborhood. Then hopefully anyone with nefarious intent ill go elsewhere. Don't have anything visible from the street that is expensive. This includes cars (park the BMW in the windowless garage), fancy grills, pools, bikes, etc. For maximum effect, put a broken down car in front of the house. Preferably something 20-30 years old and up on blocks, like an old pickup truck. A couch on the front porch and a old tub in the yard (unmowed) will complete the effect." }, { "docid": "55407", "title": "", "text": "According to pages 6 & 7 of the instructions for form 1040 in 2009 AMT was only temporarily patched for the year. Congress can't politically afford to drastically cut AMT exemptions by 30 to 40%, and may even retroactively change it, if it isn't passed by the end of the year (despite the constitution forbidding ex post facto laws) : What’s New for 2009 ... Alternative minimum tax (AMT) exemption amount increased. The AMT exemption amount has increased to $46,700 ($70,950 if married filing jointly or a qualifying widow(er); $35,475 if married filing separately)... What’s New for 2010 ... Alternative minimum tax (AMT) exemption amount. The AMT exemption amount is scheduled to decrease to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately). So, if you are married, and several regular tax deductions push your income below the AMT exemption amount of $45,000, it's quite possible you would be required to pay AMT, even if you didn't last year. There is a work sheet for AMT in the instructions for line 43, but the IRS also provides an AMT calculator. According to page 146 (E-8) of the instructions for form 1040 AMT is paid as: the smallest amount you are allowed to report as your taxable income (Form 1040, line 43). It is also the smallest amount you are allowed to report as your alternative minimum taxable income (AMTI) on Form 6251, line 29. If the [AMT calculation] is larger than your taxable income would otherwise be, enter the amount from column (c) on Form 1040, line 43 [or ...] Form 6251, line 29. As always, congress finds ways to further complicate things by making a few credits and losses deductible against the absolute minimum you're expected to pay taxes on, making the AMT a misnomer." }, { "docid": "374266", "title": "", "text": "It's important to have both long term goals and milestones along the way. In an article I wrote about saving 15% of one's income, I offered the following table: This table shows savings starting at age 20 (young, I know, so shift 2 years out) and ending at 60 with 18-1/2 year's of income saved due to investment returns. The 18-1/2 results in 74% of one's income replaced at retirement if we follow the 4% rule. One can adjust this number, assuming Social Security will replace 30%, and that spending will go down in retirement, you might need to save less than this shows. What's important is that as a starting point, it shows 2X income saved by age 30. Perhaps 1X is more reasonable. You are at just over .5X and proposing to spend nearly half of that on a single purchase. Financial independence means to somehow create an income you can live on without the need to work. There are many ways to do it, but it usually starts with a high saving rate. Your numbers suggest a good income now, but maybe this is only recently, else you'd have over $200K in the bank. I suggest you read all you can about investments and the types of retirement accounts, including 401(k) (if you have that available to you), IRA, and Roth IRA. The details you offer don't allow me to get much more specific than this." }, { "docid": "496752", "title": "", "text": "As mentioned, the main advantage of a 15-year loan compared to a 30-year loan is that the 15-year loan should come at a discounted rate. All things equal, the main advantage of the 30-year loan is that the payment is lower. A completely different argument from what you are hearing is that if you can get a low interest rate, you should get the longest loan possible. It seem unlikely that interest rates are going to get much lower than they are and it's far more likely that they will get higher. In 15 years, if interest rates are back up around 6% or more (where they were when I bought my first home) and you are 15 years into a 30 year mortgage, you'll being enjoying an interest rate that no one can get. You need to keep in mind that as the loan is paid off, you will earn exactly 0% on the principal you've paid. If for some reason the value of the home drops, you lose that portion of the principal. The only way you can get access to that capital is to sell the house. You (generally) can't sell part of the house to send a kid to college. You can take out another mortgage but it is going to be at the current going rate which is likely higher than current rates. Another thing to consider that over the course of 30 years, inflation is going to make a fixed payment cheaper over time. Let's say you make $60K and you have a monthly payment of $1000 or 20% of your annual income. In 15 years at a 1% annualized wage growth rate, it will be 17% of your income. If you get a few raises or inflation jumps up, it will be a lot more than that. For example, at a 2% annualized growth rate, it's only 15% of your income after 15 years. In places where long-term fixed rates are not available, shorter mortgages are common because of the risk of higher rates later. It's also more common to pay them off early for the same reason. Taking on a higher payment to pay off the loan early only really only helps you if you can get through the entire payment and 15 years is still a long way off. Then if you lose your job then, you only have to worry about taxes and upkeep but that means you can still lose the home. If you instead take the extra money and keep a rainy day fund, you'll have access to that money if you hit a rough patch. If you put all of your extra cash in the house, you'll be forced to sell if you need that capital and it may not be at the best time. You might not even be able to pay off the loan at the current market value. My father took out a 30 year loan and followed the advice of an older coworker to 'buy as much house as possible because inflation will pay for it'. By the end of the loan, he was paying something like $250 a month and the house was worth upwards of $200K. That is, his mortgage payment was less than the payment on a cheap car. It was an insignificant cost compared to his income and he had been able to invest enough to retire in comfort. Of course when he bought it, inflation was above 10% so it's bit different today but the same concepts still apply, just different numbers. I personally would not take anything less than a 30 year loan at current rates unless I planned to retire in 15 years." }, { "docid": "202459", "title": "", "text": "I don't use a rule of thumb for this. Instead, I use a budget. Throwing money into a savings account for the purpose of building a savings account is okay, but I only put money into a savings account that I have a purpose for. For example, there are bills that come up once a year, such as insurance premiums, property tax, annual subscriptions and memberships, etc. I plan for these in my budget each month, and the money goes into my savings. I also have an emergency fund, which is used in the event that a large, one-time, unexpected expense comes up that I hadn't planned for. I have a goal for how large I want this fund to be, so I put money in savings until it is built up to the level I want it at. There are other long range saving goals I have: my next car, vacation, furniture replacement, technology replacement, etc. Each of these gets some money each month, which goes into savings. I also have retirement savings in the budget, but that doesn't go into the savings account; it gets invested in my retirement account. My point is that instead of arbitrarily choosing a percentage of your income to put into a savings account, think about the purpose of that money. That will help you determine how much needs to be saved, and it will also help motivate you to do so." }, { "docid": "42430", "title": "", "text": "Imagine a married couple without a mortgage, but live in a house fully paid for. They pay state income taxes, and property tax, and make charitable deductions that together total $12,599. That is $1 below the standard deduction for 2015, therefore they don't itemize. Now they decide to get a mortgage: $100,000 for 30 years at 4%. That first year they pay about $4,000 in interest. Now it makes sense to itemize. That $4,000 in interest plus their other deductions means that if they are in the 25% bracket they cut their tax bill by $1,000. These numbers will decrease each year. If they have a use for that pile of cash: such as a new roof, or a 100% sure investment that is guaranteed make more money for them then they are losing in interest it makes sense. But spending $4,000 to save $1,000 doesn't. Using the pile of cash to pay off the new mortgage means that the bank is collecting $4,000 a year so you can send $1,000 less to Uncle Sam." }, { "docid": "67276", "title": "", "text": "\"Your real question, \"\"why is this not discussed more?\"\" is intriguing. I think the media are doing a better job bringing these things into the topics they like to ponder, just not enough, yet. You actually produced the answer to How are long-term capital gains taxed if the gain pushes income into a new tax bracket? so you understand how it works. I am a fan of bracket topping. e.g. A young couple should try to top off their 15% bracket by staying with Roth but then using pretax IRA/401(k) to not creep into 25% bracket. For this discussion, 2013 numbers, a blank return (i.e. no schedule A, no other income) shows a couple with a gross $92,500 being at the 15%/25% line. It happens that $20K is exactly the sum of their standard deduction, and 2 exemptions. The last clean Distribution of Income Data is from 2006, but since wages haven't exploded and inflation has been low, it's fair to say that from the $92,000 representing the top 20% of earners, it won't have many more than top 25% today. So, yes, this is a great opportunity for most people. Any married couple with under that $92,500 figure can use this strategy to exploit your observation, and step up their basis each year. To littleadv objection - I imagine an older couple grossing $75K, by selling stock with $10K in LT gains just getting rid of the potential 15% bill at retirement. No trading cost if a mutual fund, just $20 or so if stocks. The more important point, not yet mentioned - even in a low cost 401(k), a lifetime of savings results in all gains being turned in ordinary income. And the case is strong for 'deposit to the match but no no more' as this strategy would let 2/3 of us pay zero on those gains. (To try to address the rest of your questions a bit - the strategy applies to a small sliver of people. 25% have income too high, the bottom 50% or so, have virtually no savings. Much of the 25% that remain have savings in tax sheltered accounts. With the 2013 401(k) limit of $17,500, a 40 year old couple can save $35,000. This easily suck in most of one's long term retirement savings. We can discuss demographics all day, but I think this addresses your question.) If you add any comments, I'll probably address them via edits, avoiding a long dialog below.\"" }, { "docid": "140135", "title": "", "text": "\"&gt;&gt;Have enough funds to run the business and pay yourself the first year, plus 30% &gt;This is going to vary wildly depending on the particular business. So much so that a rule of thumb would be impossible to define. Absolutely. One of the things that varies \"\"widely\"\" is what amount constitutes the **\"\"pay yourself the first year\"\"** -- which will fall anywhere on a wide spectrum from the low end that is essentially below poverty level (someone young, used to living as we used\\* to say \"\"like a college student\"\" -- needing only enough to cover a minimal \"\"survival\"\") to someone who has ridiculously extravagant needs (married with a family, McMansion mortgage and multiple \"\"new\"\" status vehicles, etc) that they expect to maintain -- and then the additional 30% grows in proportion *on top* of that subjective base figure. \\* I wrote \"\"used to say\"\" because we are talking about *back in the day* when \"\"living like a college student\"\" meant minimalist \"\"bare-bones\"\" needs, akin to a monastic/ascetic life: a shared small dorm/boarding house room with minimal furniture, NO partying, ZERO \"\"amenities\"\" (certainly no water parks with \"\"lazy rivers\"\", no \"\"food courts\"\", etc -- nothing like most US colleges and universities have today).\"" }, { "docid": "107780", "title": "", "text": "Investing is good. Insurance when you have something to insure is good. But using a single account for investing and insurance is not so good. You need to determine how much you need to invest for retirement. You also need to determine if you need life insurance. As a single person you might determine that you don't have a great need for life insurance. If you get married, or have kids, your needs may grow. So you will want to revisit your decisions every so often. You may need to save for retirement, or setup a college fund. You may need to protect your spouse or children in case you die. It doesn't seem to make sense to invest and insure in a plan with complicated rules, fees and schedules. What happens if in 3 years you need to blow it up and start over? What surrender charges will they hit you with?" }, { "docid": "328101", "title": "", "text": "\"my taxable income was roughly $230,000 in 2012. Indeed it is relevant. The highest AGI limit for deductible IRA contributions is 112K. So no, IRA contribution will not help you reducing your tax bill this year. The deduction phases out starting from AGI limits of $10K in certain cases (for married filing separately), and phases out entirely for anyone at AGI of 112K (for 2012). The table linked describes the various deduction phase-out parameters depending on your filing status, and will probably be updated yearly by the IRS. However this is only relevant if your company provides a retirement plan, as Joe mentioned. If your company doesn't provide a retirement plan but your spouse's does - then the AGI phase-out limit is $178K. If neither you nor your spouse (if you have one) is covered - then there's no AGI limit, and you can indeed make an IRA contribution before April 15th that would be attributed to the previous year and reduce your tax bill. Note that \"\"provides\"\" means the plan is available, even if you don't participate in it, any time during the year.\"" }, { "docid": "589986", "title": "", "text": "\"First of all, congratulations on being in an incredible financial position. you have done well. So let's look at the investment side first. If you put 400,000 in a decent index fund at an average 8% growth, and add 75,000 every year, in 10 years you'll have about $1.95 Million, $800k of which is capital gain (more or less due to market risk, of course) - or $560k after 30% tax. If you instead put it in the whole life policy at 1.7% you'll have about $1.3 Million, $133k of which is tax-free capital gain. So the insurance is costing you $430K in opportunity cost, since you could have done something different with the money for more return. The fund you mentioned (Vanguard Wellington) has a 10-year annualized growth of 7.13%. At that growth rate, the opportunity cost is $350k. Even with a portfolio with a more conservative 5% growth rate, the opportunity cost is $178k Now the life insurance. Life insurance is a highly personal product, but I ran a quick quote for a 65-year old male in good health and got a premium of $11,000 per year for a $2M 10-year term policy. So the same amount of term life insurance costs only $110,000. Much less than the $430k in opportunity cost that the whole life would cost you. In addition, you have a mortgage that's costing you about $28K per year now (3.5% of 800,000). Why would you \"\"invest\"\" in a 1.7% insurance policy when you are paying a \"\"low\"\" 3.5% mortgage? I would take as much cash as you are comfortable with and pay down the mortgage as much as possible, and get it paid off quickly. Then you don't need life insurance. Then you can do whatever you want. Retire early, invest and give like crazy, travel the world, whatever. I see no compelling reason to have life insurance at all, let alone life insurance wrapped in a bad investment vehicle.\"" }, { "docid": "351658", "title": "", "text": "Yes, it is normal. I'm single & pay 32% in North Carolina. Single men & married people ask me all the time why it's so high and it gets frustrating having to explain to average people. I assume it's because I have no kids, live alone, don't own a house, am not in school, am not self employed etc. I've been at this job for 10 years and it's been over 30% since I can remember." }, { "docid": "597595", "title": "", "text": "\"**Q: \"\"Why aren't you giving your grandmother children before she dies?\"\"** A: Stop being selfish, it's my life and I decide what I want to do, whenever I want to. **Q: \"\"I bought a house at 23. Why are you still renting?\"\"** A: I want to be very wealthy, and not have my own house owned by a bank for 3/4ths of my life. Worry about your own life. **Q: \"\"Who is going to take care of your parents when we they get old?\"\"** A: I'm going to be doing that, and my parent's retirement will help. I'm going to be able to do that because I decided to be financially intelligent rather than indulge in selfish personal pride and temporary happiness. **Q: \"\"If you don't have X by age Y, then there's something wrong with you\"\"** A: Fuck you, I'm rich. Have fun with your wife and kids while you slave away hoping for a raise someday and pray for the weekends to come. ----------------------------------------------------------------------- I've used all of these except the parents getting old situation. Stop letting other people dictate what's important in your life. If your parents are mad that you won't have kids or get married, fuck them. You got a nice loft, an AMG Mercedes, a Lexus, saving for a Lamborghini, and enough money in the bank to make people feel inferior just by looking at your account balance. Not to mention that's it's completely possible to have casual, safe sex with many women nowadays. But hey man, make your family happy and appease society. Lol, hope it works out for you.\"" }, { "docid": "198045", "title": "", "text": "&gt; The point was the 30% threshold is too low... Okay, my bad. Although [the average household spends closer to 15% on housing](https://www.valuepenguin.com/average-household-budget). &gt; ...as you in fact get 100% takehome to work with. No, these people still pay FICA, state, and sales taxes. Regardless, 70% of minimum wage isn't enough to cover a car, a child, a good vacation, a serious health care problem, an aging parent, or a modest retirement. Basically you are fine provided live throws you no curve balls." }, { "docid": "248536", "title": "", "text": "According to the IRS, you can still put money in your IRA. Here (https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits) they say: Can I contribute to an IRA if I participate in a retirement plan at work? You can contribute to a traditional or Roth IRA whether or not you participate in another retirement plan through your employer or business. However, you might not be able to deduct all of your traditional IRA contributions if you or your spouse participates in another retirement plan at work. Roth IRA contributions might be limited if your income exceeds a certain level. In addition, in this link (https://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits), the IRS says: Retirement plan at work: Your deduction may be limited if you (or your spouse, if you are married) are covered by a retirement plan at work and your income exceeds certain levels. The word 'covered' should clarify that - you are not covered anymore in that year, you just got a contribution in that year which was triggered by work done in a previous year. You cannot legally be covered in a plan at an employer where you did not work in that year." }, { "docid": "532787", "title": "", "text": "\"If you want to be really \"\"financially smart,\"\" buy a used good condition Corolla with cash (if you want to talk about a car that holds re-sale value), quit renting and buy a detached house close to the city a for about $4,000/month (to build equity. It's NYC the house will appreciate in value). Last but not the least, DO NOT get married. Retire at 50, sell the house (now paid after 25-years). Or LEASE a nice brand new car every year and have a good time! You're 25 and single!\"" }, { "docid": "470173", "title": "", "text": "\"This is a great question! The IRS is not 100% clear on this. IRS publications do however very strongly suggest that assuming your wife has a plan providing family coverage, you can contribute up to your family maximum. If she does NOT have a family coverage plan then the answer is definitively no, you may only contribute the individual limit. Note if you have children covered by her plan then she is considered to have \"\"family coverage\"\" even if you are not covered by her plan (see here, question 12). From the 2012 IRS publication, bottom of Page 4. For 2012, if you have self-only HDHP coverage, you can contribute up to $3,100. If you have family HDHP coverage, you can contribute up to $6,250. This is presumably the referencing the definition which is introduced and discussed for married couples on Page 6: Rules for married people. If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2012 is $6,250. You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouse's Archer MSAs. After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division. Example. For 2012, Mr. Auburn and his wife are both eligible individuals. They each have family coverage under separate HDHPs. Mr. Auburn is 58 years old and Mrs. Auburn is 53. Mr. and Mrs. Auburn can split the family contribution limit ($6,250) equally or they can agree on a different division. If they split it equally, Mr. Auburn can contribute $4,125 to an HSA (one-half the maximum contribution for family coverage ($3,125) + $1,000 additional contribution) and Mrs. Auburn can contribute $3,125 to an HSA. The last example is nearly the exact situation you are in assuming your wife's plan is family coverage. The only assumption beyond what is explicitly written you need to make is that you are considered to have family coverage in the example as per the \"\"Rules for married people\"\" section, even though your plan only is a single-coverage plan. This conclusion seems to logically follow from information in the FAQs here (see Q32), as well as this document. Neither the above example nor any IRS documents referenced in this answer cover your situation completely.\"" }, { "docid": "273501", "title": "", "text": "\"Why would anyone ever get a 15 year instead of just paying off a 30 year in 15 years? Because the rate is not the same. Never that I've seen in my 30 years of following rates. I've seen the rate difference range from .25% to .75%. (In March '15, the average rate in my area is 30yr 3.75% / 15yr 3.00%) For a $150K loan, this puts the 15yr payment at $1036, with the 30 (at higher rate) paid in 15 years at $1091. This $55 difference can be considered a flexibility premium,\"\" as it offers the option to pay the actual $695 in any period the money is needed elsewhere. If the rate were the same, I'd grab the 30, and since I can't say \"\"invest the difference,\"\" I'd say to pay at a pace to go 15, unless you had a cash flow situation. A spouse out of work. An emergency that you funded with a high interest rate loan, etc. The advice to have an emergency fund is great until for whatever reason, there's just not enough. On a personal note, I did go with the 15 year mortgage for our last refinance. I was nearing 50 at the time, and it seemed prudent to aim for a mortgage free retirement.\"" } ]

[ { "docid": "204035", "title": "", "text": "As a rule, one should have a retirement. HOWEVER, you also have over a half a million dollars of debt. Paying down debt is another way to prepare for retirement. I would say throwing your excess money at your debts is a fine strategy right now. Especially the student loan (the mortgage probably has a lower rate and brings tax savings, so paying it off is less urgent). If I were you I'd probably put SOMETHING into tax deferred retirement accounts because in your tax bracket, the savings from doing so are significant. The max you can put in tax deferred is $5,500 per year (each) in IRA's and up to $17,000 to your 401(k) each. The tax-saving contribution opportunities will not come up again...you can't make up for it later. Any retirement saving beyond the tax advantaged part makes no sense while you have outstanding debt." } ]

[ { "docid": "113660", "title": "", "text": "I love how this probably won't get many replies because your in the trenches doing it, keep up the hard work. I graduated high school with 1k in savings and dropped out of college to help support my depressed and unemployed mother with some help from my Father. I am now a married new construction homeowner and we take home enough money to have new cars, save for retirement, and enjoy life with no college degrees. I went from 8 an hour to over 35 now in 4-5 years. We both had to get off social media because of all our old high school friends who went to college for garbage degrees, never tried to get entry level jobs in their industry while in school or network, and now cry all day about how Bernie sanders didn't win the election and why school should be free so they don't have to pay off debt for a worthless degree as they wait tables. No sympathy" }, { "docid": "309840", "title": "", "text": "\"I don't know about the technicalities of retirement accounts, but I would advise you to please please please do not use retirement money to buy a home. The reason for not ever wanting to spend your retirement is.. when can you make it up? When you retire, you are by definition no longer earning money, so all your expenses can only come from the money you have saved. If you are willing to borrow from your retirement, it is not hard to imagine you are willing are willing to get a new car, or a new barbecue, or a new fishing boat before you repay yourself. So the question to ask yourself is, \"\"can I deal with renting for a few years knowing that I can retire comfortably, or am I willing to risk retirement to have a house now.\"\" Part of the will power it takes to pay yourself first is not taking from your own savings. You cannot count on anybody but yourself to take care of you when you are old. It is just opinion, but risking a comfortable retirement for a home now is not a risk anybody should take.\"" }, { "docid": "273501", "title": "", "text": "\"Why would anyone ever get a 15 year instead of just paying off a 30 year in 15 years? Because the rate is not the same. Never that I've seen in my 30 years of following rates. I've seen the rate difference range from .25% to .75%. (In March '15, the average rate in my area is 30yr 3.75% / 15yr 3.00%) For a $150K loan, this puts the 15yr payment at $1036, with the 30 (at higher rate) paid in 15 years at $1091. This $55 difference can be considered a flexibility premium,\"\" as it offers the option to pay the actual $695 in any period the money is needed elsewhere. If the rate were the same, I'd grab the 30, and since I can't say \"\"invest the difference,\"\" I'd say to pay at a pace to go 15, unless you had a cash flow situation. A spouse out of work. An emergency that you funded with a high interest rate loan, etc. The advice to have an emergency fund is great until for whatever reason, there's just not enough. On a personal note, I did go with the 15 year mortgage for our last refinance. I was nearing 50 at the time, and it seemed prudent to aim for a mortgage free retirement.\"" }, { "docid": "152985", "title": "", "text": "It is normally a bad idea to cash in retirement accounts to buy a house, in your case it is a horrible idea because you are way behind on saving for retirement. Other fallacies in your reasoning: My advice, increase the amount you are saving for retirement considerably, and also put some money aside to save for a down payment on a house. Buy the house when you have enough non-retirement money to afford the down payment. If you can't wait that long, buy a house you can afford. It may help to think of it this way: Visualize yourself as a 65 year old retired person with very little income, and living on your retirement account. Would you as a 39 year old ask that person to give you $175,966 (the amount you are talking about withdrawing compounded annually at 6% interest for 25 years with no additional contributions) so that you could put a down payment on a house? Because that is what you would be doing. When you hit retirement age would you kick yourself for making such a decision? Because unless you die young, that person is sitting out there in your future needing that money to live off of. Don't take this the wrong way, but the tone of your question seems like you are looking for support to make what you already know is a bad financial decision." }, { "docid": "351181", "title": "", "text": "\"&gt;Of course; the generation Xers are those in the age range where many were approaching the time when they would, but had not yet, transferred the bulk of their retirement savings to lower risk investments. **Your analysis is WAY off-base.** Gen X was more than a DECADE AWAY from even *thinking* of switching to \"\"lower risk investments\"\". The OLDEST Gen X'ers were born in 1964 and have (just now) turned 48 -- they were (at most) 44 years old in 2008 when the market crashed. The YOUNGEST Gen X'ers were born circa 1981-82, and (just now) have reached age 30 -- they were just getting started in their careers (around age 26) in 2008 when the market crashed. The MAJORITY of Gen X'ers were -- in 2008 -- in their mid 30's. NO ONE switches to \"\"low risk investments\"\" in their mid 30's. --- No, the only Gen X'ers who DIDN'T get \"\"screwed\"\" by the market crash were either: 1. Savvy enough to have SEEN the bubble &amp; crash coming and so got OUT of the stock market and/or housing; or... 2. Waited out the storm &amp; sat tight -- and allowed their market holdings to both crash and then rebound (though they would still largely be \"\"down\"\" from where they were at peak 2008, they wouldn't have suffered huge losses).\"" }, { "docid": "198045", "title": "", "text": "&gt; The point was the 30% threshold is too low... Okay, my bad. Although [the average household spends closer to 15% on housing](https://www.valuepenguin.com/average-household-budget). &gt; ...as you in fact get 100% takehome to work with. No, these people still pay FICA, state, and sales taxes. Regardless, 70% of minimum wage isn't enough to cover a car, a child, a good vacation, a serious health care problem, an aging parent, or a modest retirement. Basically you are fine provided live throws you no curve balls." }, { "docid": "294676", "title": "", "text": "If you are earning a salary, go for Roth IRA. You can contribute $5500 (2013 limits) every year . Once you open a account , let say Fidelity or Vanguard, you should invest based on risk appetite into some funds. the advantage is that your money grows tax free and when you are 25- 30 years old and need money for down payment of house, you can pull the money out with out any penalty. The gains you have made will continue to be in that account till the time your retire, growing every year." }, { "docid": "434869", "title": "", "text": "\"It is difficult to become a millionaire in the short term (a few years) working at a 9-to-5 job, unless you get lucky (win the lottery, inheritance, gambling at a casino, etc). However, if you max out your employer's Retirement Plan (401k, 403b) for the next 30 years, and you average a 5% rate of return on your investment, you will reach millionaire status. Many people would consider this \"\"easy\"\" and \"\"automatic\"\". Of course, this assumes you are able to max our your retirement savings at the start of your career, and keep it going. The idea is that if you get in the habit of saving early in your career and live modestly, it becomes an automatic thing. Unfortunately, the value of $1 million after 30 years of inflation will be eroded somewhat. (Sorry.) If you don't want to wait 30 years, then you need to look at a different strategy. Work harder or take risks. Some options:\"" }, { "docid": "248536", "title": "", "text": "According to the IRS, you can still put money in your IRA. Here (https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits) they say: Can I contribute to an IRA if I participate in a retirement plan at work? You can contribute to a traditional or Roth IRA whether or not you participate in another retirement plan through your employer or business. However, you might not be able to deduct all of your traditional IRA contributions if you or your spouse participates in another retirement plan at work. Roth IRA contributions might be limited if your income exceeds a certain level. In addition, in this link (https://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits), the IRS says: Retirement plan at work: Your deduction may be limited if you (or your spouse, if you are married) are covered by a retirement plan at work and your income exceeds certain levels. The word 'covered' should clarify that - you are not covered anymore in that year, you just got a contribution in that year which was triggered by work done in a previous year. You cannot legally be covered in a plan at an employer where you did not work in that year." }, { "docid": "106145", "title": "", "text": "If you're looking for some formula, I don't think one exists. People talk about this all the time and give conflicting advice. If there was a proven-accurate formula, they wouldn't be debating it. There are basically 3 reasons to do a home improvement project: (a) Correct a problem so that you prevent on-going damage to your home. For example, have a leaking roof patched or replaced, or exterminate termites. Such a job is worthwhile if the cost of fixing the problem is less than the cost of future damage. In the case of my termite and leaking roof examples, this is almost always worth doing. Lesser maintenance problems might be more debatable. Similarly, some improvements may reduce expenses. Like replacing an old furnace with a newer model may cut your heating bills. Here the question is: how long does it take to repay the investment, compared to other things you might invest your money in. Just to make up numbers: Suppose you find that a new furnace will save you $500 per year. If the new furnace costs $2000, then it will take 4 years to pay for itself. I'd consider that a good investment. If that same $2000 furnace will only cut your heating bills by $100 per year, then it will take 20 years to pay for itself. You'd probably be better off putting the $2000 into the stock market and using the gains to help pay your heating bill. (b) Increase the resale value of your home. If you are paying someone else to do the work, the harsh reality here is: Almost no job will increase the resale value by more than the cost of getting the job done. I've seen many articles over the years citing studies on this. I think most conclude that kitchen remodeling comes closet to paying for itself, and bathrooms come next. New windows are also up there. I don't have studies to prove this, but my guesses would be: Replacing something that is basically nice with a different style will rarely pay for itself. Like, replacing oak cabinets with cherry cabinets. Replacing something that is in terrible shape with something decent is more likely to pay back than replacing something decent with something beautiful. Like if you have an old iron bathtub that's rusting and falling apart, replacing it may pay off. If you have a 5-year-old bathtub that's in good shape but is not premium, top of the line, replacing it with a premium bathtub will probably do very little for resale value. If you can do a lot of the work yourself, the story changes. Many home improvement jobs don't require a lot of materials, but do require a lot of work. If you do the labor, you can often get the job done very cheaply, and it's likely that the increase in resale value will be more than what you spend. For example, most of my house has hardwood floors. Lots of people like pretty hardwood floors. I just restained the floors in two rooms. It cost me, I don't know, maybe $20 or $30 for stain and some brushes. I'm sure if I tried to sell the house tomorrow I'd get my twenty bucks back in higher sale value. Realtors often advise sellers to paint. Again, if you do it yourself, the cost of paint may be a hundred dollars, and it can increase the sale price of the house by thousands. Of course if you do the work yourself, you have to consider the value of your time. (c) To make your home more pleasant to live in. This is totally subjective. You have to make the decision on the same basis that you decide whether anything that is not essential to survival is worth buying. To some people, a bottle of fancy imported wine is worth thousands, even millions, of dollars. Others can't tell the difference between a $10,000 wine and a $15 wine. The thing to ask yourself is, How important is this home improvement to me, compared to other things I could do with the money? Like, suppose you're considering spending $20,000 remodeling your kitchen. What else could you do with $20,000? You could buy a car, go on an elaborate vacation, eat out several times a week for years, retire a little earlier, etc. No one can tell you how much something is worth to you. Any given home improvement may involve a combination of these factors. Like say you're considering that $20,000 kitchen remodeling. Say you somehow find out that this will increase the resale value by $15,000. If the only reason you were considering it was to increase resale value, then it's not worth it -- you'd lose $5,000. But if you also want the nicer kitchen, then it is fair to say, Okay, it will cost me $20,000, but ultimately I'll get $15,000 of that back. So in the long run it will only cost me $5,000. Is having a nicer kitchen worth $5,000 to me? Note, by the way, that resale value only matters if and when you sell the house. If you expect to stay in this house for 20 years, any improvements done are VERY long-term investments. If you live in it until you die, the resale value may matter to your heirs." }, { "docid": "107780", "title": "", "text": "Investing is good. Insurance when you have something to insure is good. But using a single account for investing and insurance is not so good. You need to determine how much you need to invest for retirement. You also need to determine if you need life insurance. As a single person you might determine that you don't have a great need for life insurance. If you get married, or have kids, your needs may grow. So you will want to revisit your decisions every so often. You may need to save for retirement, or setup a college fund. You may need to protect your spouse or children in case you die. It doesn't seem to make sense to invest and insure in a plan with complicated rules, fees and schedules. What happens if in 3 years you need to blow it up and start over? What surrender charges will they hit you with?" }, { "docid": "42430", "title": "", "text": "Imagine a married couple without a mortgage, but live in a house fully paid for. They pay state income taxes, and property tax, and make charitable deductions that together total $12,599. That is $1 below the standard deduction for 2015, therefore they don't itemize. Now they decide to get a mortgage: $100,000 for 30 years at 4%. That first year they pay about $4,000 in interest. Now it makes sense to itemize. That $4,000 in interest plus their other deductions means that if they are in the 25% bracket they cut their tax bill by $1,000. These numbers will decrease each year. If they have a use for that pile of cash: such as a new roof, or a 100% sure investment that is guaranteed make more money for them then they are losing in interest it makes sense. But spending $4,000 to save $1,000 doesn't. Using the pile of cash to pay off the new mortgage means that the bank is collecting $4,000 a year so you can send $1,000 less to Uncle Sam." }, { "docid": "7323", "title": "", "text": "You want to take the hit now. There are tons of calculators out there, but the rule of 70 should be enough to help convince you: Assume you can put an extra $10k in a 401k now, or keep it. If you pay ~30% in taxes, you can have either: A) $7k now, or: B) What $10K will grow to in your 40 years till retirement less taxes at the end. The rule of 70 is a quick, dirty way to calculate compounded returns. It says that if you divide 70 by your assumed return, you get the approximate number of years it will take to double your money. So let's say you assume a 5% rate of return (you can replace that with whatever you want): 1) 70/5 is 14, so you'll double your $10k every 14 years. 2) In 40 years, you'll double your money almost 3 times (2.86) 3) That means you'll end up with almost $80k before taxes 4) Even if we assume the same tax rate at retirement of 30% (odds are decent it's lower, since you'll have less income, presumably), you still have $56k. Whatever you think inflation will be, $56k later is a LOT better than $7k now." }, { "docid": "591705", "title": "", "text": "I would focus first on maxing out your RRSPs (or 401k) each year, and once you've done that, try to put another 10% of your income away into unregistered long term growth savings. Let's say you're 30 and you've been doing that since you graduated 7 years ago, and maybe you averaged 8% p.a. return and an average of $50k per year salary (as a round number). I would say you should have 60k to 120k in straight up investments around age 30. If that's the case, you're probably well on your way to a very comfortable retirement." }, { "docid": "99987", "title": "", "text": "\"The suggestions towards retirement and emergency savings outlined by the other posters are absolute must-dos. The donations towards charitable causes are also extremely valuable considerations. If you are concerned about your savings, consider making some goals. If you plan on staying in an area long term (at least five years), consider beginning to save for a down payment to own a home. A rent-versus-buy calculator can help you figure out how long you'd need to stay in an area to make owning a home cost effective, but five years is usually a minimum to cover closing costs and such compared to rending. Other goals that might be worthwhile are a fully funded new car fund for when you need new wheels, the ability to take a longer or nicer vacation, a future wedding if you'd like to get married some day, and so on. Think of your savings not as a slush fund of money sitting around doing nothing, but as the seed of something worthwhile. Yes, you will only be young once. However being young does not mean you have to be Carrie from Sex in the City buying extremely expensive designer shoes or live like a rapper on Cribs. Dave Ramsey is attributed as saying something like, \"\"Live like no one else so that you can live like no one else.\"\" Many people in their 30s and 40s are struggling under mortgages, perhaps long-left-over student loan debt, credit card debt, auto loans, and not enough retirement savings because they had \"\"fun\"\" while they were young. Do you have any remaining debt? Pay it off early instead of saving so much. Perhaps you'll find that you prefer to hit that age with a fully paid off home and car, savings for your future goals (kids' college tuitions, early retirement, etc.). Maybe you want to be able to afford some land or a place in a very high cost of living city. In other words - now is the time to set your dreams and allocate your spare cash towards them. Life's only going to get more expensive if you choose to have a family, so save what you can as early as possible.\"" }, { "docid": "247132", "title": "", "text": "So don't retire. But plan like you will retire. I am sure that some billionaire put some money away into a pension, 401K, or IRA for their retirement when they were young. It turns out they never had to worry about outliving their money. The next few paragraphs use United States examples. What happens if you have to retire, but you never saved. All the matching funds you could have collected in a 401K are gone, they disappeared with every paycheck you didn't contribute. Every year you didn't contribute to an IRA can never be replayed. You gave up the magic of compounding, because you thought you would never want to retire. If you save but don't need it, you will have more money to play with as you cut back your hours to part time. If you skip all the plans that make it hard to spend the money until you are 59 1/2, you can still save, but it takes even more discipline to not spend it before you are old." }, { "docid": "405212", "title": "", "text": "\"In a comment you say, if the market crashes, doesn't \"\"regress to the mean\"\" mean that I should still expect 7% over the long run? That being the case, wouldn't I benefit from intentionally unbalancing my portfolio and going all in on equities? I can can still rebalance using new savings. No. Regress to the mean just tells you that the future rate is likely to average 7%. The past rate and the future rate are entirely unconnected. Consider a series: The running average is That running average is (slowly) regressing to the long term mean without ever a member of the series being above 7%. Real markets actually go farther than this though. Real value may be increasing by 7% per year, but prices may move differently. Then market prices may revert to the real value. This happened to the S&P 500 in 2000-2002. Then the market started climbing again in 2003. In your system, you would have bought into the falling markets of 2001 and 2002. And you would have missed the positive bond returns in those years. That's about a -25% annual shift in returns on that portion of your portfolio. Since that's a third of your portfolio, you'd have lost 8% more than with the balanced strategy each of those two years. Note that in that case, the market was in an over-valued bubble. The bubble spent three years popping and overshot the actual value. So 2003 was a good year for stocks. But the three year return was still -11%. In retrospect, investors should have gone all in on bonds before 2000 and switched back to stocks for 2003. But no one knew that in 2000. People in the know actually started backing off in 1998 rather than 2000 and missed out on the tail end of the bubble. The rebalancing strategy automatically helps with your regression to the mean. It sells expensive bonds and buys cheaper stocks on average. Occasionally it sells modest priced bonds and buys over-priced stocks. But rarely enough that it is a better strategy overall. Incidentally, I would consider a 33% share high for bonds. 30% is better. And that shouldn't increase as you age (less than 30% bonds may be practical when you are young enough). Once you get close to retirement (five to ten years), start converting some of your savings to cash equivalents. The cash equivalents are guaranteed not to lose value (but might not gain much). This gives you predictable returns for your immediate expenses. Once retired, try to keep about five years of expenses in cash equivalents. Then you don't have to worry about short term market fluctuations. Spend down your buffer until the market catches back up. It's true that bonds are less volatile than stocks, but they can still have bad years. A 70%/30% mix of stocks/bonds is safer than either alone and gives almost as good of a return as stocks alone. Adding more bonds actually increases your risk unless you carefully balance them with the right stocks. And if you're doing that, you don't need simplistic rules like a 70%/30% balance.\"" }, { "docid": "169007", "title": "", "text": "&gt; Why are you against making sure their pensions are funded? Pension actuarial analyst here: Pensions can give employee's benefits for time worked long before the plan came into existence. Those 'liabilities' are paid off over 30-40 years. It's absolutely normal. In addition, pension plans may also pay off increases in benefits, such as an early retirement window, over that same 30-40 years. Pension funds use assumptions on future investment earnings to 'guess' their contribution. Sometimes, they don't earn as much as they expect the plan to earn. Sometimes, they try to keep contributions low *as an alternative to scrapping the plan entirely*. So putting this all together: if pension plans are instantly and always 100% funded? You don't get pension plans, with defined and guaranteed retirement benefits. You get plans where the employee defers their own money into accounts, with no particular guarantees at all. And that's why we are fine with unfunded pensions. Oh, by the way, the PBGC charges higher fees to covered pension plans that have more unfunded liability! So if a company doesn't want to pay contributions, they have to pay more elsewhere. It all evens out." }, { "docid": "202459", "title": "", "text": "I don't use a rule of thumb for this. Instead, I use a budget. Throwing money into a savings account for the purpose of building a savings account is okay, but I only put money into a savings account that I have a purpose for. For example, there are bills that come up once a year, such as insurance premiums, property tax, annual subscriptions and memberships, etc. I plan for these in my budget each month, and the money goes into my savings. I also have an emergency fund, which is used in the event that a large, one-time, unexpected expense comes up that I hadn't planned for. I have a goal for how large I want this fund to be, so I put money in savings until it is built up to the level I want it at. There are other long range saving goals I have: my next car, vacation, furniture replacement, technology replacement, etc. Each of these gets some money each month, which goes into savings. I also have retirement savings in the budget, but that doesn't go into the savings account; it gets invested in my retirement account. My point is that instead of arbitrarily choosing a percentage of your income to put into a savings account, think about the purpose of that money. That will help you determine how much needs to be saved, and it will also help motivate you to do so." } ]

[ { "docid": "581204", "title": "", "text": "The question regarding your snapshot is fine, but the real question is what are you doing to improve your situation? As John offered, one bit of guidance suggests you have a full year's gross earnings as a saving target. In my opinion, that's on the low side, and 2X should be the goal by 35. I suggest you look back, and see if you can account for every dollar for the prior 6-12 months. This exercise isn't for the purpose of criticizing your restaurant spending, or cost of clothes, but to just bring it to light. Often, there's some low hanging fruit in this type of budgeting exercise, spending that you didn't realize was so high. I'd also look carefully at your debt. What rate is the mortgage and the student loans? By understanding the loans' rates, terms, and tax status (e.g. whether any is a deduction) you can best choose the way to pay it off. If the rates are low enough you might consider funding your 401(k) accounts a bit more and slow down the loan payments. It seems that in your 30's you have a negative net worth, but your true asset is your education and future earning potential. From a high level view, you make $180K. Taking $50K off the top (which after taxes gives you $30K) to pay your student loan, you are still earning $130K, putting you at or near top 10% of families in this country. This should be enough to afford that mortgage, and still live a nice life. In the end there are three paths, earn more (why does hubby earn half what you do, in the same field?), spend less, or reallocate current budget by changing how you are handling that debt." } ]

[ { "docid": "140135", "title": "", "text": "\"&gt;&gt;Have enough funds to run the business and pay yourself the first year, plus 30% &gt;This is going to vary wildly depending on the particular business. So much so that a rule of thumb would be impossible to define. Absolutely. One of the things that varies \"\"widely\"\" is what amount constitutes the **\"\"pay yourself the first year\"\"** -- which will fall anywhere on a wide spectrum from the low end that is essentially below poverty level (someone young, used to living as we used\\* to say \"\"like a college student\"\" -- needing only enough to cover a minimal \"\"survival\"\") to someone who has ridiculously extravagant needs (married with a family, McMansion mortgage and multiple \"\"new\"\" status vehicles, etc) that they expect to maintain -- and then the additional 30% grows in proportion *on top* of that subjective base figure. \\* I wrote \"\"used to say\"\" because we are talking about *back in the day* when \"\"living like a college student\"\" meant minimalist \"\"bare-bones\"\" needs, akin to a monastic/ascetic life: a shared small dorm/boarding house room with minimal furniture, NO partying, ZERO \"\"amenities\"\" (certainly no water parks with \"\"lazy rivers\"\", no \"\"food courts\"\", etc -- nothing like most US colleges and universities have today).\"" }, { "docid": "108672", "title": "", "text": "You can withdraw from CPP as early as 60. However, by doing so, you will permanently reduce the payments. The reduction is calculated based on average life expectancies. If you live for an average amount of time, that means you'll receive approximately the same total amount (after inflation adjustments) whether you start pulling from CPP at 60, 65, or even delay your pension later. People may have pensions through systems other than CPP. This is often true for big business or government work. They may work differently. People who retire at 55 with a pension are not getting their pension through CPP. A person retiring at 55 would need to wait at least five years to draw from the CPP, and ten years before he or she was eligible for a full pension through CPP. Canada also offers Old Age Security (OAS). This is only available once you are 65 years old or older, though this is changing. Starting in 2023, this will gradually change to 67 years or older. See this page for more details. As always, it's worth pointing out that the CPP and OAS will almost certainly not cover your full retirement expenses and you will need supplementary funds." }, { "docid": "338703", "title": "", "text": "\"So you're making $150,000 per year and you have $245,000 in debts. You're in your late 30s and have $41,000, or less than 1/3 of a year's pay, put away for retirement. That's a bad situation, but not disastrous. Lots of people have recovered from far worse. But like the old joke goes, when you realize that you're deep in a hole, STOP DIGGING. The worst thing you could do right now is liquidate the few assets you have and go deeper into debt. I don't know where you live or what the housing market is there. But the easy answer is: find a cheaper house. I'm not sure what you mean about \"\"affect the resale value\"\". Yes, if you buy a cheaper house it will have a lower resale value. So what? The days when a house was an investment that would skyrocket in value are over. (And even in those days, it didn't help most people. So when you move, you get a big profit on the sale of your house. But the house you're moving to probably went up by a similar percentage, so you really didn't gain anything.) Even if your house did increase in value, unless you sell it, that doesn't help you make the mortgage payments. It's a paper profit. Get yourself out of debt. Step 1 is to stop taking on new debts. And if at all possible, you should be putting bare minimum 6% into your retirement plan. I don't know where you work, but most employers match some percentage of the first 6% you put in. If you don't take advantage of that, you're giving up free money.\"" }, { "docid": "377223", "title": "", "text": "If you were going to pay off an 18% credit card and had no hope otherwise, I might agree you should do this. 5.5% student loan, I wouldn't do it. You have multiple issues going on. I would find a bank or broker that will keep the IRA with no fee. Zero. If you buy stocks, there might be a commission, but I'd stick with a low cost index mutual fund. At 10%, the account might double every 7 years, even 35 years till retirement offers 5 doubles or 32X your money. Literally, $100K more for retirement. As a semi-retired old guy, I thank my younger self for putting aside the $3000, so we have over $100K more now. Your student loan is manageable. Save, enjoy yourself, but don't let $7500 at 5.5% keep you up at night." }, { "docid": "361126", "title": "", "text": "Here is something that should help your decision: Currently you are 57, suppose that means that you will still work for 10 years, and then be retired for another 20 before you sell the house. Your retirement account is nearly flat, so you will have to support yourself with your own income. If there are no surprises, you and your wife could expect to earn 1.16 million over the next 10 years. There will be interest on your savings, but also inflation, so to simplify I will ignore both. That means you will have an average of 40k (gross?) per year available to live from during the next 30 years. If you get a mortgage where you only pay nett 3% interest (no payback of the loan), that would cost you 6k per year on interest (based on 350k-150k), if you also want to pay back the 200k difference within 30 years, it would totally be close to 13k in annual interest+payback. Now consider whether you would rather live on 40k per year in your current place, or on a lower amount in a bigger place. Personally I would not choose to make a 200k investment at this point, perhaps after trying to live on a budget for a while. (This has the additional benefit that you can even build some cash reserve before buying anything.)" }, { "docid": "67276", "title": "", "text": "\"Your real question, \"\"why is this not discussed more?\"\" is intriguing. I think the media are doing a better job bringing these things into the topics they like to ponder, just not enough, yet. You actually produced the answer to How are long-term capital gains taxed if the gain pushes income into a new tax bracket? so you understand how it works. I am a fan of bracket topping. e.g. A young couple should try to top off their 15% bracket by staying with Roth but then using pretax IRA/401(k) to not creep into 25% bracket. For this discussion, 2013 numbers, a blank return (i.e. no schedule A, no other income) shows a couple with a gross $92,500 being at the 15%/25% line. It happens that $20K is exactly the sum of their standard deduction, and 2 exemptions. The last clean Distribution of Income Data is from 2006, but since wages haven't exploded and inflation has been low, it's fair to say that from the $92,000 representing the top 20% of earners, it won't have many more than top 25% today. So, yes, this is a great opportunity for most people. Any married couple with under that $92,500 figure can use this strategy to exploit your observation, and step up their basis each year. To littleadv objection - I imagine an older couple grossing $75K, by selling stock with $10K in LT gains just getting rid of the potential 15% bill at retirement. No trading cost if a mutual fund, just $20 or so if stocks. The more important point, not yet mentioned - even in a low cost 401(k), a lifetime of savings results in all gains being turned in ordinary income. And the case is strong for 'deposit to the match but no no more' as this strategy would let 2/3 of us pay zero on those gains. (To try to address the rest of your questions a bit - the strategy applies to a small sliver of people. 25% have income too high, the bottom 50% or so, have virtually no savings. Much of the 25% that remain have savings in tax sheltered accounts. With the 2013 401(k) limit of $17,500, a 40 year old couple can save $35,000. This easily suck in most of one's long term retirement savings. We can discuss demographics all day, but I think this addresses your question.) If you add any comments, I'll probably address them via edits, avoiding a long dialog below.\"" }, { "docid": "509266", "title": "", "text": "I just graduated from college and I am already planning my retirement. ... in terms of money sitting in my bank account post retirement, assuming Ii have $250,000 what is the highest interest that I can earn with it? Assuming you are 22, and will retire in 45 years at age 67. There is no way to predict interest rates. When I was 22 and just out of college I started putting money into a bank account to save for a down payment. The rate for a savings account was 6%. That means that every month I made 1/2 of one percent. Today that same credit union offers a money maker account with a minimum balance of $100,000 that pays 0.25% for the year. What I made in a month would take two years to make today. Keep in mind we also can't estimate your pay in the last year before retirement, or the inflation rate for the next 45 years, or the mortgage rate, or the availability of Social Security, or the returns of the S&P for 45 years. It is great you are starting to think about this today. But you will have to keep adjusting parts of your plan as the years go by: You may have to factor in children, your medical situation... Even if the interest rates recover you may not want to put all your post retirement money in the bank. Most people can't sustain the required flow of money for their 30 years of retirement from savings accounts. As for today. FDIC (or similar accounts from credit unions) will not have rates approaching 3%. It can't even approach that 3% rate via multi-year CDs. My credit union has a 6 year CD for almost 2%. If the goal of the money is safety then don't expect to find those high rates now. Some institutions may offer high rates without that FDIC protection, but that is risky." }, { "docid": "247132", "title": "", "text": "So don't retire. But plan like you will retire. I am sure that some billionaire put some money away into a pension, 401K, or IRA for their retirement when they were young. It turns out they never had to worry about outliving their money. The next few paragraphs use United States examples. What happens if you have to retire, but you never saved. All the matching funds you could have collected in a 401K are gone, they disappeared with every paycheck you didn't contribute. Every year you didn't contribute to an IRA can never be replayed. You gave up the magic of compounding, because you thought you would never want to retire. If you save but don't need it, you will have more money to play with as you cut back your hours to part time. If you skip all the plans that make it hard to spend the money until you are 59 1/2, you can still save, but it takes even more discipline to not spend it before you are old." }, { "docid": "332113", "title": "", "text": "You are in the perfect window for making an IRA contribution. The IRS allows you to make IRA contributions for last year until tax day. So you know that for 2014 you didn't have access to a 401K at work. You want to avoid making a deductible IRA contribution for this year (2015) until you are sure that you wont have a 401K at work this year. Take your time and decide if the detectible IRA or the Roth works best for your situation. Having a IRA now will be good becasue you have many years for it to grow. Keep in mind that it is not unusual to have multiple retirement accounts: Current 401K; rolled over into a IRA; Roth IRA... Each has different rules, limits, and benefits. There is no reason to pick one way of investing for retirement becasue you never know if the next employer will have the type of plan you like. I am assuming that your spouse, if you are married, doesn't have access to a 401K; otherwise you would have to consider the applicable limits." }, { "docid": "502150", "title": "", "text": "\"The biggest and primary question is how much money you want to live on within retirement. The lower this is, the more options you have available. You will find that while initially complex, it doesn't take much planning to take complete advantage of the tax system if you are intending to retire early. Are there any other investment accounts that are geared towards retirement or long term investing and have some perk associated with them (tax deferred, tax exempt) but do not have an age restriction when money can be withdrawn? I'm going to answer this with some potential alternatives. The US tax system currently is great for people wanting to early retire. If you can save significant money you can optimize your taxes so much over your lifetime! If you retire early and have money invested in a Roth IRA or a traditional 401k, that money can't be touched without penalty until you're 55/59. (Let's ignore Roth contributions that can technically be withdrawn) Ok, the 401k myth. The \"\"I'm hosed if I put money into it since it's stuck\"\" perspective isn't true for a variety of reasons. If you retire early you get a long amount of time to take advantage of retirement accounts. One way is to primarily contribute to pretax 401k during working years. After retiring, begin converting this at a very low tax rate. You can convert money in a traditional IRA whenever you want to be Roth. You just pay your marginal tax rate which.... for an early retiree might be 0%. Then after 5 years - you now have a chunk of principle that has become Roth principle - and can be withdrawn whenever. Let's imagine you retire at 40 with 100k in your 401k (pretax). For 5 years, you convert $20k (assuming married). Because we get $20k between exemptions/deduction it means you pay $0 taxes every year while converting $20k of your pretax IRA to Roth. Or if you have kids, even more. After 5 years you now can withdraw that 20k/year 100% tax free since it has become principle. This is only a good idea when you are retired early because you are able to fill up all your \"\"free\"\" income for tax conversions. When you are working you would be paying your marginal rate. But your marginal rate in retirement is... 0%. Related thread on a forum you might enjoy. This is sometimes called a Roth pipeline. Basically: assuming you have no income while retired early you can fairly simply convert traditional IRA money into Roth principle. This is then accessible to you well before the 55/59 age but you get the full benefit of the pretax money. But let's pretend you don't want to do that. You need the money (and tax benefit!) now! How beneficial is it to do traditional 401ks? Imagine you live in a state/city where you are paying 25% marginal tax rate. If your expected marginal rate in your early retirement is 10-15% you are still better off putting money into your 401k and just paying the 10% penalty on an early withdrawal. In many cases, for high earners, this can actually still be a tax benefit overall. The point is this: just because you have to \"\"work\"\" to get money out of a 401k early does NOT mean you lose the tax benefits of it. In fact, current tax code really does let an early retiree have their cake and eat it too when it comes to the Roth/traditional 401k/IRA question. Are you limited to a generic taxable brokerage account? Currently, a huge perk for those with small incomes is that long term capital gains are taxed based on your current federal tax bracket. If your federal marginal rate is 15% or less you will pay nothing for long term capital gains, until this income pushes you into the 25% federal bracket. This might change, but right now means you can capture many capital gains without paying taxes on them. This is huge for early retirees who can manipulate income. You can have significant \"\"income\"\" and not pay taxes on it. You can also stack this with before mentioned Roth conversions. Convert traditional IRA money until you would begin owing any federal taxes, then capture long term capital gains until you would pay tax on those. Combined this can represent a huge amount of money per year. So littleadv mentioned HSAs but.. for an early retiree they can be ridiculously good. What this means is you can invest the maximum into your HSA for 10 years, let it grow 100% tax free, and save all your medical receipts/etc. Then in 10 years start withdrawing that money. While it sucks healthcare costs so much in America, you might as well take advantage of the tax opportunities to make it suck slightly less. There are many online communities dedicated to learning and optimizing their lives in order to achieve early retirement. The question you are asking can be answered superficially in the above, but for a comprehensive plan you might want other resources. Some you might enjoy:\"" }, { "docid": "108845", "title": "", "text": "IMHO your thinking is spot on. More than likely, you are years away from retirement, like 22 if you retire somewhat early. Until you get close keep it in aggressive growth. Contribute as much as you can and you probably end up with 3 million in today's dollars. Okay so what if you were retiring in a year or two from now, and you have 3M, and have managed your debt well. You have no loans including no mortgage and an nice emergency fund. How much would you need to live? 60 or 70K year would provide roughly the equivalent of 100K salary (no social security tax, no commute, and no need to save for retirement) and you would not have a mortgage. So what you decide to do is move 250K and move it to bonds so you have enough to live off of for the next 3.5 years or so. That is less than 10% of your nest egg. You have 3.5 years to go through some roller coaster time of the market and you can always cherry pick when to replenish the bond fund. Having a 50% allocation for bonds is not very wise. The 80% probably good for people who have little or no savings like less than 250k and retired. I think you are a very bright individual and have some really good money sense." }, { "docid": "368504", "title": "", "text": "Have you looked at conventional financing rather than VA? VA loans are not a great deal. Conventional tends to be the best, and FHA being better than VA. While your rate looks very competitive, it looks like there will be a .5% fee for a refinance on top of other closing costs. If I have the numbers correct, you are looking to finance about 120K, and the house is worth about 140K. Given your salary and equity, you should have no problem getting a conventional loan assuming good enough credit. While the 30 year is tempting, the thing I hate about it is that you will be 78 when the home is paid off. Are you intending on working that long? Also you are restarting the clock on your mortgage. Presumably you have paid on it for a number of years, and now you will start that long journey over. If you were to take the 15 year how much would go to retirement? You claim that the $320 in savings will go toward retirement if you take the 30 year, but could you save any if you took the 15 year? All in all I would rate your plan a B-. It is a plan that will allow you to retire with dignity, and is not based on crazy assumptions. Your success comes in the execution. Will you actually put the $320 into retirement, or will the needs of the kids come before that? A strict budget is really a key component with a stay at home spouse. The A+ plan would be to get the 15 year, and put about $650 toward retirement each month. Its tough to do, but what sacrifices can you make to get there? Can you move your plan a bit closer to the ideal plan? One thing you have not addressed is how you will handle college for the kids. While in the process of long term planning, you might want to get on the same page with your wife on what you will offer the kids for help with college. A viable plan is to pay their room and board, have them work, and for them to pay their own tuition to community college. They are responsible for their own spending money and transportation. Thank you for your service." }, { "docid": "597595", "title": "", "text": "\"**Q: \"\"Why aren't you giving your grandmother children before she dies?\"\"** A: Stop being selfish, it's my life and I decide what I want to do, whenever I want to. **Q: \"\"I bought a house at 23. Why are you still renting?\"\"** A: I want to be very wealthy, and not have my own house owned by a bank for 3/4ths of my life. Worry about your own life. **Q: \"\"Who is going to take care of your parents when we they get old?\"\"** A: I'm going to be doing that, and my parent's retirement will help. I'm going to be able to do that because I decided to be financially intelligent rather than indulge in selfish personal pride and temporary happiness. **Q: \"\"If you don't have X by age Y, then there's something wrong with you\"\"** A: Fuck you, I'm rich. Have fun with your wife and kids while you slave away hoping for a raise someday and pray for the weekends to come. ----------------------------------------------------------------------- I've used all of these except the parents getting old situation. Stop letting other people dictate what's important in your life. If your parents are mad that you won't have kids or get married, fuck them. You got a nice loft, an AMG Mercedes, a Lexus, saving for a Lamborghini, and enough money in the bank to make people feel inferior just by looking at your account balance. Not to mention that's it's completely possible to have casual, safe sex with many women nowadays. But hey man, make your family happy and appease society. Lol, hope it works out for you.\"" }, { "docid": "351658", "title": "", "text": "Yes, it is normal. I'm single & pay 32% in North Carolina. Single men & married people ask me all the time why it's so high and it gets frustrating having to explain to average people. I assume it's because I have no kids, live alone, don't own a house, am not in school, am not self employed etc. I've been at this job for 10 years and it's been over 30% since I can remember." }, { "docid": "228488", "title": "", "text": "You say you have 90% in stocks. I'll assume that you have the other 10% in bonds. For the sake of simplicity, I'll assume that your investments in stocks are in nice, passive indexed mutual funds and ETFs, rather than in individual stocks. A 90% allocation in stocks is considered aggressive. The problem is that if the stock market crashes, you may lose 40% or more of your investment in a single year. As you point out, you are investing for the long term. That's great, it means you can rest easy if the stock market crashes, safe in the hope that you have many years for it to recover. So long as you have the emotional willpower to stick with it. Would you be better off with a 100% allocation in stocks? You'd think so, wouldn't you. After all, the stock market as a whole gives better expected returns than the bond market. But keep in mind, the stock market and the bond market are (somewhat) negatively correlated. That means when the stock market goes down, the bond market often goes up, and vice versa. Investing some of your money in bonds will slightly reduce your expected return but will also reduce your standard deviation and your maximum annual loss. Canadian Couch Potato has an interesting write-up on how to estimate stock and bond returns. It's based on your stocks being invested equally in the Canadian, U.S., and international markets. As you live in the U.S., that likely doesn't directly apply to you; you probably ignore the Canadian stock market, but your returns will be fairly similar. I've reproduced part of that table here: As you can see, your expected return is highest with a 100% allocation in stocks. With a 20 year window, you likely can recover from any crash. If you have the stomach for it, it's the allocation with the highest expected return. Once you get closer to retirement, though, you have less time to wait for the stock market to recover. If you still have 90% or 100% of your investment in stocks and the market crashes by 44%, it might well take you more than 6 years to recover. Canadian Couch Potato has another article, Does a 60/40 Portfolio Still Make Sense? A 60/40 portfolio is a fairly common split for regular investors. Typically considered not too aggressive, not too conservative. The article references an AP article that suggests, in the current financial climate, 60/40 isn't enough. Even they aren't recommending a 90/10 or a 100/0 split, though. Personally, I think 60/40 is too conservative. However, I don't have the stomach for a 100/0 split or even a 90/10 split. Okay, to get back to your question. So long as your time horizon is far enough out, the expected return is highest with a 100% allocation in stocks. Be sure that you can tolerate the risk, though. A 30% or 40% hit to your investments is enough to make anyone jittery. Investing a portion of your money in bonds slightly lowers your expected return but can measurably reduce your risk. As you get closer to retirement and your time horizon narrows, you have less time to recover from a stock market crash and do need to be more conservative. 6 years is probably too short to keep all your money in stocks. Is your stated approach reasonable? Well, only you can answer that. :)" }, { "docid": "237923", "title": "", "text": "Since cashiers, and everyone else, should have to suffer for the failures of our upper classes over the past 30 years, I propose we include the upper classes in this roster of those who should suffer. Would that be okay, or should they continue to do better and better while the rest of us do worse?" }, { "docid": "124009", "title": "", "text": "Graduating from college is probably one of the most fulfilling triumphs you’ll ever achieve in your entire life. However, that joy also brings bigger responsibilities in life that could affect tax time too. This specific time in your life will have a lot to offer and before the winds of change take you to wherever you dream of, here are some advices from [Southbourne Tax Group](http://www.thesouthbournegroup.com/) to make your taxes easier where you can get a refund during filing time and save money as well. If your modified adjusted gross income is below $80,000 and you’re single, up to $2,500 of the interest portion of your student loan payments can be tax deductible, and below $160,000 for married person filing jointly. Job hunting expenses can be tax deductible too but there are exceptions such as expenses involved in your search for a new job in a new career field and working full-time for the first time. Major tax breaks are expected in case you are moving to a new and different city for your first job. Get a jump start on retirement savings with your company’s 401(k). Each year, you can secure up to $18,000 from your income taxes by contributing on one. If you have a family coverage, you could secure $6,750 from contributing to a health savings account in case you are enrolled in a high-deductible health plan. And if you are single, you can secure up to $3,400. Placing your money into a flexible spending account could keep an added $2,600 out of your taxable income. Getting big deductions for business expenses is possible if you are planning to be a freelancer or to be your own boss as a new college graduate. Southbourne Group also advises saving at least 25% of what you’re earning for the IRS. Research more about lifetime learning credit and understand its importance. You can claim up to $2,000 of a tax credit for post-secondary work at eligible educational institutions. This is possible if your adjusted gross income is below $65,000 as a single filer, or below $131,000 as a married person filing jointly. Saving money has a lot of benefits and one of which is cutting your tax bill. If you’re a married person filing jointly and have an adjusted gross income of less than $62,000, you may qualify for the saver’s credit, while for a single filer, it should be below $31,000. That can reduce your tax bill by up to 50% of the first $2,000 if you’re a single filer, or $4,000 if you’re a married person filing jointly you contribute to an eligible retirement plan. Southbourne Tax Group doesn’t want you to overspend on tax software and getting professional help in this regard. The firm suggests using the free packages from trusted tax software companies if your tax situation is quite simple. Get that professional help at Volunteer Income Tax Assistance program, which can help you meet with a pro at little or no cost." }, { "docid": "328101", "title": "", "text": "\"my taxable income was roughly $230,000 in 2012. Indeed it is relevant. The highest AGI limit for deductible IRA contributions is 112K. So no, IRA contribution will not help you reducing your tax bill this year. The deduction phases out starting from AGI limits of $10K in certain cases (for married filing separately), and phases out entirely for anyone at AGI of 112K (for 2012). The table linked describes the various deduction phase-out parameters depending on your filing status, and will probably be updated yearly by the IRS. However this is only relevant if your company provides a retirement plan, as Joe mentioned. If your company doesn't provide a retirement plan but your spouse's does - then the AGI phase-out limit is $178K. If neither you nor your spouse (if you have one) is covered - then there's no AGI limit, and you can indeed make an IRA contribution before April 15th that would be attributed to the previous year and reduce your tax bill. Note that \"\"provides\"\" means the plan is available, even if you don't participate in it, any time during the year.\"" }, { "docid": "274962", "title": "", "text": "\"I think you're really underestimating the degree of ageism that occurs in hiring and just how much youth is favoured in the job markets. Experience costs more and it depreciates quickly. In most case employers will prefer someone less experienced who comes across as mature and less expensive than someone who is more experienced but has been our of the industry for a year or more. The attitude of \"\"you can't teach an old job new tricks\"\" rules. Your 30s represent the ideal sweet spot: you are still young and you have some experience. If you're not in full preparing for retirement mode by 40 or 45, you're going to have a bad time. GenXers have lost most of their sweet spot and if the recovery doesn't happen, they will have lost all of it. Yes, Millenials have it pretty bad too -- no one is disputing that -- but GenX was screwed from the start. We have larger generations on either side of us. We are a transitional generation that started out before computers went mainstream but ended after, so we have a hard time competing with Millenials who have lived with technology all their life. The whole structure of the world changed right under us, i.e., the end of the cold war. And this change significantly increased available labour. Even before 2008 the talk was all about how screwed the GenXers where because of the power of Boomers and the dominance of the Millenials. We already had our backs up against the wall then 2008 struck. Also, I'd much rather be 28 and looking for a job than 40+ and looking for one. It's so much easier to jump industries or cites or countries when younger and you don't have children to look after. The 28 year old is not locked a career path and has lost a ton of political capital and credibility for having lost their job. The 40+ year old will always have to face questions: why wasn't he/she one of the one the company kept during the layoffs? will he/she be able to learn and adapt to the new job? will he/she be comfortable reporting to someone younger? will he/she be will to sacrifice time away from kids to work longer hours to compete with younger employees?\"" } ]

[ { "docid": "549072", "title": "", "text": "Many would recommend lump sum investing because of the interest gains, and general upward historical trend of the market. After introducing DCA in A Random Walk Down Wall Street, Malkiel says the following: But remember, because there is a long-term uptrend in common-stock prices, this technique is not necessarily appropriate if you need to invest a lump sum such as a bequest. If possible, keep a small reserve (in a money fund) to take advantage of market declines and buy a few extra shares if the market is down sharply. I’m not suggesting for a minute that you try to forecast the market. However, it’s usually a good time to buy after the market has fallen out of bed. Just as hope and greed can sometimes feed on themselves to produce speculative bubbles, so do pessimism and despair react to produce market panics. - A Random Walk Down Wall Street, Burton G. Malkiel He goes on from there to recommend a rebalancing strategy." } ]

[ { "docid": "550083", "title": "", "text": "\"I would create a \"\"Rollover IRA\"\". These IRAs are designed to take funds from a 401k and allow you to invest them without incurring a cash out penalty nor a tax due. You will have more choices than if you leave it at your old 401k. If you cash out the 401k, you'll have much less to invest ($1500 - penalty - taxes) vs. doing a rollover 401k where you'll still have $1500 to invest. Then, once the money is inside the new Rollover IRA you can invest in whatever you please. If you want to invest in Vanguard funds, I recommend opening the Rollover IRA at Vanguard. Here is Vanguard's information page about rollovers from 401ks: https://investor.vanguard.com/what-we-offer/401k-rollovers/401k-403b-to-ira-rollover-benefits When you next change jobs and have another 401k with funds in it, you can roll it into the same Rollover IRA.\"" }, { "docid": "208224", "title": "", "text": "\"I don't like buying individual bonds for my own portfolio. I actually used to buy long-term government strip bonds (Canadas or provincial bonds) but I stopped. Here are some reasons why: My broker allows me to purchase bonds via their web application. However, to sell a bond, I had to call in to the fixed-income trading desk. That was inconvenient. (But your broker may be different.) Bonds don't typically trade on a formal exchange. So, there's no cheap & easy way (as far as I know) to get an independent quote for a bond's value – I had to trust what my broker said my bond was worth when assessing my portfolio performance. I asked my broker once how they arrive at the \"\"market value\"\" shown – i.e. whether it was last bid, ask, or actual trade – and I was told they use a third party bond quotation / valuation information provider for the data, and that quotes are an estimate of what the bond would be worth, based on similar bonds. I quickly learned that wasn't the value I could actually get when selling it: When you're dealing with your broker to buy and sell bonds, you're likely dealing with theirs or a related investment bank which makes a market for specific issues of bonds. While I wasn't being charged an explicit commission to buy or sell bonds, it was evident the broker makes money off the spread: That is, the difference between what they would be willing to sell a bond for and what they would be willing to buy that same bond for. They will buy your bond back from you cheaper than what they could turn around and sell it to somebody else for. That's why they don't charge an explicit commission... it's built in and hidden! Anyway, when I finally discovered my broker would seldom actually offer me the \"\"market value\"\" quoted for my bonds (typically, it would be bought back for a few percent less than it were theoretically worth), I gave up. I don't think bonds simply are liquid enough, nor the costs transparent enough for retail investors. (Or maybe it's just me :-) However, I do think bonds remain an important part of a diversified portfolio: Bonds ought to be represented in a diversified portfolio using low-cost bond index mutual funds or exchange-traded funds. Since these funds buy & sell bonds in large quantities, they get a better deal on the spreads. So, while you do pay an explicit management fee for a fund, you are probably saving since you're not getting shafted on the spreads.\"" }, { "docid": "545760", "title": "", "text": "Fire your fund manager. There are several passive funds that seek to duplicate the S&P 500 Index returns. They have lower management fees, which will make returns lower than S&P, and they have less risk by following a broadly diversified strategy (versus midcap growing stocks). There's also ETFs, but evidence is growing that they're not as safe as hoped. But here's the deal: the S&P has been on a tear lately. It could be overvalued and what looks like a good investment could start falling again. A possible alternative would be one of the Lifetime funds that seek to perform portfolio adjustment with a retirement decade target; they're fairly new which mostly means nobody knows how they screw you over yet. In theory, this decade structure means the brokerage can execute trading cash for stocks, stocks for bonds, and bonds for cash in house." }, { "docid": "201391", "title": "", "text": "\"I can't find a decent duplicate, so here are some general guidelines: First of all by \"\"stocks\"\" the answers generally mean \"\"equities\"\" which could be either single stocks or mutual funds that consist of stocks. Unless you have lots of experience that can help you discern good stocks from bad, investing in mutual funds reduces the risk considerably. If you want to fine-tune the plan, you can weigh certain categories higher to change your risk/return profile (e.g. equity funds will have higher returns and risk than fixed income (bond) funds, so if you want to take a little more risk you can put more in equity funds and less in fixed income funds). Lastly, don't stress too much over the individual investments. The most important thing is that you get as much company match as you can. You cannot beat the 100% return that comes from a company match. The allocation is mostly insignificant compared to that. Plus you can probably change your allocation later easily and cheaply if you don't like it. Disclaimer: these are _general_ guidelines for 401(k) investing in general and not personal advice.\"" }, { "docid": "554739", "title": "", "text": "\"There are certain allowable reasons to withdraw money from a 401K. The desire to free your money from a \"\"bad\"\" plan is not one of them. A rollover is a special type of withdrawal that is only available after one leaves their current employer. So as long as you stay with your current company, you cannot rollover. [Exception: if you are over age 59.5] One option is to talk to HR, see if they can get a expansion of offerings. You might have some suggestions for mutual funds that you would like to see. The smaller the company the more likely you will have success here. That being said, there is some research to support having few choices. Too many choices intimidates people. It's quite popular to have \"\"target funds\"\" That is funds that target a certain retirement year. Being that I will be 50 in 2016, I should invest in either a 2030 or 2035 fund. These are a collection of funds that rebalances the investment as they age. The closer one gets to retirement the more goes into bonds and less into stocks. However, I think such rebalancing is not as smart as the experts say. IMHO is almost always better off heavily invested in equity funds. So this becomes a second option. Invest in a Target fund that is meant for younger people. In my case I would put into a 2060 or even 2065 target. As JoeTaxpayer pointed out, even in a plan that has high fees and poor choices one is often better off contributing up to the match. Then one would go outside and contribute to an individual ROTH or IRA (income restrictions may apply), then back into the 401K until the desired amount is invested. You could always move on to a different employer and ask some really good questions about their 401K. Which leads me back to talking with HR. With the current technology shortage, making a few tweaks to the 401K, is a very cheap way to make their employees happy. If you can score a 1099 contracting gig, you can do a SEP which allows up to a whopping 53K per year. No match but with typically higher pay, sometimes overtime, and a high contribution limit you can easily make up for it.\"" }, { "docid": "4181", "title": "", "text": "\"As other responders said, you can certainly roll over multiple 401(k) into a single account. An added benefit of such rollover (besides the ease of tracking) is that you can shop around for your Rollover IRA provider and find the one that gives you the specific mutual funds that you want to invest in, the lowest expenses, etc. - in short, find the best fit to your priorities. There are also \"\"lemon\"\" 401(k) plans and if you are in one of them, get out! And rollover is the way out. There is also one possibility to keep an eye on as it happens rarely, but it does happen - rolling a 401(k) over into another 401(k). I've done it once when I started a job at a company that had a great 401(k) with a good selection of low-cost mutual funds. I rolled the 401(k) from one previous job in to this 401(k) to take advantage of it. At the same time I kept a Rollover IRA, combining the 401(k) from all other jobs; it had more investment options and provided some flexibility.\"" }, { "docid": "168890", "title": "", "text": "Companies usually have a minimum account balance required to keep a 401k for former employees. You will have to check whether $10k is sufficient to keep your funds in your former employer's 401k. If you are below their threshold, you will have to move your money. One option is to rollover into the new employer's 401k. You can rollover a 401k into a traditional IRA account that is independent of your employer. A traditional IRA has the same tax benefits as a 401k; it grows tax-free until you withdraw money from the account. Companies that offer IRAs include Vanguard, Fidelity, TIAA. Many companies have significant overhead costs in the their 401k management. It may be better for you to rollover your money into an IRA to save on these costs. I am not knowledgeable about loaning from retirement accounts, so I cannot help with that." }, { "docid": "74287", "title": "", "text": "\"If you buy a long term bond with long term fixed interest rate, and then the interest rates increase, your bond is worth less. That's not a problem, because over the years the value of the bond will go back to its nominal value. If you have a bond that doesn't pay out annually but increases its value every year, you will get exactly the amount of cash when it pays out that you expected. The problem is that if for 20 years interest rates were 8% while your bond only paid 4%, then you will have such an amount of inflation that the cash you get is worth much less than you hoped. You may have hoped that your bond would be worth \"\"one year average salary\"\", but it may be only worth \"\"six months of average salary\"\", even if the dollar amount is exactly what you expected.\"" }, { "docid": "372657", "title": "", "text": "\"Let's talk interest rates on your junk bonds. Even after all that the US has been through (and is still going through), the United States dollar is widely regarded as one of the safest safe havens for your money. As such it serves as a de facto baseline against which all other investments can be measured, the bar everyone has to pass: if you could earn 4% on a 5-year US Treasury bond, or earn 4% on anything else over the next 5 years, you pick the Treasury bond. In many ways this means that the interest rate on a Treasury bond is the closest single measure we have to the price of money all by itself. If someone is loaning you money, they could be loaning it to the Treasury instead; they are losing out by making this loan to you, and must charge you at least this rate just to break even. But most people/governments/countries aren't as credit-worthy as the US Treasury. A few are (the US treasury isn't magical, after all, just really good at what it does), but generally they are not. There is a possibility when loaning money to these entities that you will not get your money back. That is risk. All entities have some risk (even the US treasury!), and some have more than others; \"\"junk bonds\"\" have a somewhat elevated level of this risk. Now, you don't just take a risk on for free (unless you're being charitable or something, but I hope you can find better beneficiaries of charity than the average junk bond). You need to be compensated for that risk. Lenders will demand compensation commensurate with that risk - or they will just walk away without making any loans or buying any bonds because it's not worth it. The difference between the interest rate on a US Treasury bond and the interest rate on another bond, such as a junk bond, is the risk premium - the cost of carrying that risk. Therefore you can see that the interest rate on a junk bond is the price of money plus the risk premium. Now, the Federal Reserve adjusts the price of money from time to time, by buying and selling US Treasury bonds until the price is something they like. This means that one component of interest rate on a junk bond is the interest rate on the US Treasury bond, and it is effectively controlled by the Federal Reserve (through that layer of indirection). The other component of the interest rate on a junk bond is the risk premium. It's not generally possible to know in advance whether or not some company will actually default. People have to guess, and decide how comfortable they are taking that risk. This means that risk is more expensive (and interest rates are higher) when they think the companies in question are going through some hard times, and risk will also be more expensive when people decide that they can't take as many risks (perhaps they've already lost some money and need to take additional steps to protect the rest). It's definitely very hard for an individual to decide what the risk on a particular bond is. The good news is that you generally don't have to. There are a bunch of rich jerks, hedge funds, retirement funds, insurance companies, and other investment entities out there who spend all day looking at things like bonds, trying to estimate the risk. Their willingness to exploit minuscule differences between the interest rate on a bond and the real risk means that the average bond on the market will be fairly priced, according to what all those people think. Plenty of them can still be wrong, mind you (cf. mortgage-backed securities) but in the general case the price of any security reflects all the information everyone in the world has on it on average, so if you're wrong you're in good company. When you buy a nice diversified bond fund, you have access to a bunch of bonds at a pretty-standard price. So that's interest rates for you. But you asked about prices. As it turns out, they're the same thing! - just expressed slightly differently. One way or another a bond is essentially meant to be a stream of payments worth a certain amount in the end - this is why you'll hear them referred to sometimes as a \"\"fixed-income security\"\". The interest rate is essentially the difference between the price you pay now, and the value you receive later, except expressed as a rate. Technically, you could structure the bonds differently (e.g. does the bond pay little bits of interest as you go along, or just pay one big lump sum in the end?) but you can use Math to convert between these two situations, and figure out how much money is worth which when, so it doesn't really matter. Anyway. This means that rising interest rates means lower bond prices on bonds you already own (and falling interest rates means higher bond prices). So if the Federal Reserve increases interest rates, the face value of your bond funds will fall. Also, if people think that the companies issuing the bonds are too risky, the face value of those bonds will also fall. (You were probably expecting the latter effect, though.) Mind you, you will still get the same amount of future money out of them as you would otherwise: that's why they're fixed-income securities. However, a higher interest rate means \"\"I can get more money in the future for less money now\"\", and so people will be willing to pay you less for your bond in the present. This is known as interest rate risk. It is higher on longer term bonds, because those have more time to earn interest.\"" }, { "docid": "145458", "title": "", "text": "If you are investing for 10 years, then you just keep buying at whatever price the fund is at. This is called dollar-cost averaging. If the fund is declining in value from when you first bought it, then when you buy more, the AVERAGE price you bought in at is now lower. So therefore your losses are lower AND when it goes back up you will make more. Even if it continues to decline in value then you keep adding more money in periodically, eventually your position will be so large that on the first uptick you will have a huge percent gain. Anyway this is only suggested because you are in it for 10 years. Other people's investment goals vary." }, { "docid": "163590", "title": "", "text": "\"So, I've read the article in question, \"\"Basically, It's Over\"\". Here's my opinion: I respect Charlie Munger but I think his parable misses the mark. If he's trying to convince the average person (or at least the average Slate-reading person) that America is overspending and headed for trouble, the parable could have been told better. I wasn't sure how to follow some of the analogies he was making, and didn't experience the clear \"\"aha\"\" I was hoping for. Nevertheless, I agree with his point of view, which I see as: In the long run, the United States is going to have serious difficulty in supporting its debt habit, energy consumption habit, and its currency. In terms of an investment strategy to protect oneself, here are some thoughts. These don't constitute a complete strategy, but are some points to consider as part of an overall strategy: If the U.S. is going to continue amassing debt fast, it would stand to reason it will become a worse credit risk, requiring it to pay higher interest rates on its debt. Long-term treasury bonds would decline as rates increase, and so wouldn't be a great place to be invested today. In order to pay the mounting debt and debt servicing costs, the U.S. will continue to run the printing presses, to inflate itself out of debt. This increase in the money supply will put downward pressure on the U.S. dollar relative to the currencies of better-run economies. U.S. cash and short-term treasuries might not be a great place to be invested today. Hedge with inflation-indexed bonds (e.g. TIPS) or the bonds of stronger major economies – but diversify; don't just pick one. If you agree that energy prices are headed higher, especially relative to U.S. dollars, then a good sector to invest a portion of one's portfolio would be world energy producing companies. (Send some of your money over to Canada, we have lots of oil and we're right next door :-) Anybody who has already been practicing broad, global diversification is already reasonably protected. Clearly, \"\"diversification\"\" across just U.S. stocks and bonds is not enough. Finally: I don't underestimate the ability of the U.S. to get out of this rut. U.S. history has impressed upon me (as a Canadian) two things in particular: it is highly capable of both innovating and of overcoming challenges. I'm keeping a small part of my portfolio invested in strong U.S. companies that are proven innovators – not of the \"\"financial\"\"-innovation variety – and with global reach.\"" }, { "docid": "374225", "title": "", "text": "\"First of all, it's great you're now taking full advantage of your employer match – i.e. free money. Next, on the question of the use of a life cycle / target date fund as a \"\"hedge\"\": Life cycle funds were introduced for hands-off, one-stop-shopping investors who don't like a hassle or don't understand. Such funds are gaining in popularity: employers can use them as a default choice for automatic enrollment, which results in more participation in retirement savings plans than if employees had to opt-in. I think life cycle funds are a good innovation for that reason. But, the added service and convenience typically comes with higher fees. If you are going to be hands-off, make sure you're cost-conscious: Fees can devastate a portfolio's performance. In your case, it sounds like you are willing to do some work for your portfolio. If you are confident that you've chosen a good equity glide path – that is, the initial and final stock/bond allocations and the rebalancing plan to get from one to the other – then you're not going to benefit much by having a life cycle fund in your portfolio duplicating your own effort with inferior components. (I assume you are selecting great low-cost, liquid index funds for your own strategy!) Life cycle are neat, but replicating them isn't rocket science. However, I see a few cases in which life cycle funds may still be useful even if one has made a decision to be more involved in portfolio construction: Similar to your case: You have a company savings plan that you're taking advantage of because of a matching contribution. Chances are your company plan doesn't offer a wide variety of funds. Since a life cycle fund is available, it can be a good choice for that account. But make sure fees aren't out of hand. If much lower-cost equity and bond funds are available, consider them instead. Let's say you had another smaller account that you were unable to consolidate into your main account. (e.g. a Traditional IRA vs. your Roth, and you didn't necessarily want to convert it.) Even if that account had access to a wide variety of funds, it still might not be worth the added hassle or trading costs of owning and rebalancing multiple funds inside the smaller account. There, perhaps, the life cycle fund can help you out, while you use your own strategy in your main account. Finally, let's assume you had a single main account and you buy partially into the idea of a life cycle fund and you find a great one with low fees. Except: you want a bit of something else in your portfolio not provided by the life cycle fund, e.g. some more emerging markets, international, or commodity stock exposure. (Is this one reason you're doing it yourself?) In that case, where the life cycle fund doesn't quite have everything you want, you could still use it for the bulk of the portfolio (e.g. 85-95%) and then select one or two specific additional ETFs to complement it. Just make sure you factor in those additional components into the overall equity weighting and adjust your life cycle fund choice accordingly (e.g. perhaps go more conservative in the life cycle, to compensate.) I hope that helps! Additional References:\"" }, { "docid": "39115", "title": "", "text": "\"Do you recall where you read that 25% is considered very good? I graduated college in 1984 so that's when my own 'investing life' really began. Of the 29 years, 9 of them showed 25% to be not quite so good. 2013 32.42, 2009 27.11, 2003 28.72, 1998 28.73, 1997 33.67, 1995 38.02, 1991 30.95, 1989 32.00, 1985 32.24. Of course this is only in hindsight, and the returns I list are for the S&P index. Even with these great 9 years, the CAGR (compound annual growth) of the S&P from 1985 till the end of 2013 was 11.32% Most managed funds (i.e. mutual funds) do not match the S&P over time. Much has been written on how an individual investor's best approach is to simply find the lowest cost index and use a mix with bonds (government) to match their risk tolerance. \"\"my long term return is about S&P less .05%\"\" sounds like I'm announcing that I'm doing worse than average. Yes, and proud of it. Most investors (85-95% depending on survey) lag by far more than this, many percent in fact)\"" }, { "docid": "599436", "title": "", "text": "\"1. Interest rates What you should know is that the longer the \"\"term\"\" of a bond fund, the more it will be affected by interest rates. So a short-term bond fund will not be subject to large gains or losses due to rate changes, an intermediate-term bond fund will be subject to moderate gains or losses, and a long-term bond fund will be subject to the largest gains or losses. When a book or financial planner says to buy \"\"bonds\"\" with no other qualification, they almost always mean investment-grade intermediate-term bond funds (or for individual bonds, the equivalent would be a bond ladder averaging an intermediate term). If you want technical details, look at the \"\"average duration\"\" or \"\"average maturity\"\" of the bond fund; as a rough guide, if the duration is 10, then a 1% change in interest rates would be a 10% gain or loss on the fund. Another thing you can do is look at long-term (10 years or ideally longer) performance history on some short, intermediate, and long term bond index funds, and you can see how the long term funds bounced around more. Non-investment-grade bonds (aka junk bonds or high yield bonds) are more affected by factors other than interest rates, including some of the same factors (economic booms or recessions) that affect stocks. As a result, they aren't as good for diversifying a portfolio that otherwise consists of stocks. (Having stocks, investment grade bonds, and also a little bit in high-yield bonds can add diversification, though. Just don't replace your bond allocation with high-yield bonds.) A variety of \"\"complicated\"\" bonds exist (convertible bonds are an example) and these are tough to analyze. There are also \"\"floating rate\"\" bonds (bank loan funds), these have minimal interest rate sensitivity because the rate goes up to offset rate rises. These funds still have credit risks, in the credit crisis some of them lost a lot of money. 2. Diversification The purpose of diversification is risk control. Your non-bond funds will outperform in many years, but in other years (say the -37% S&P 500 drop in 2008) they may not. You will not know in advance which year you'll get. You get risk control in at least a few ways. There's also an academic Modern Portfolio Theory explanation for why you should diversify among risky assets (aka stocks), something like: for a given desired risk/return ratio, it's better to leverage up a diverse portfolio than to use a non-diverse portfolio, because risk that can be eliminated through diversification is not compensated by increased returns. The theory also goes that you should choose your diversification between risk assets and the risk-free asset according to your risk tolerance (i.e. select the highest return with tolerable risk). See http://en.wikipedia.org/wiki/Modern_portfolio_theory for excruciating detail. The translation of the MPT stuff to practical steps is typically, put as much in stock index funds as you can tolerate over your time horizon, and put the rest in (intermediate-term investment-grade) bond index funds. That's probably what your planner is asking you to do. My personal view, which is not the standard view, is that you should take as much risk as you need to take, not as much as you think you can tolerate: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ But almost everyone else will say to do the 80/20 if you have decades to retirement and feel you can tolerate the risk, so my view that 60/40 is the max desirable allocation to stocks is not mainstream. Your planner's 80/20 advice is the standard advice. Before doing 100% stocks I'd give you at least a couple cautions: See also:\"" }, { "docid": "146181", "title": "", "text": "\"For US stocks it's a bit of a gamble. Many actively managed funds underperform the market indexes, but some of them outperform in many years. With an index you will get average results. With an active manager you \"\"might\"\" do better than average. So you can view active management as a higher risk, potentially higher reward investment approach. On the other hand, if you want to diversify some of your investments into international stocks, bonds, junk bonds, and real estate (REITs) active management is highly likely to be better than indexing. For these specialized areas specialized knowledge and research is needed.\"" }, { "docid": "341699", "title": "", "text": "If we knew for sure that euros are only going to be more expensive in the future, then the answer would be easy: Buy them all at one time, so that we are getting them at the best price. Of course, we can't assume that to be the case, they could get cheaper, so the answer gets more complicated. Focusing strictly on monetary considerations, there are two factors to examine: Using answers to this Travel Stack Exchange question as a reference, you see that the cost of currency conversion can be as low as 1%-2% if you make the transaction with a debit card, but can be as high as 15%. So, buying 1000 euros a month would cost between 20 and 150 euros. Examining a two year chart of the Euro-Canadian Dollar exchange rate gives us an idea of how much the currency fluctuates. Over the past two years, a euro has cost has much as $1.54 CAD and as little as $1.26 CAD, a 22% spread. Looking at it on a month-to month basis, we see that monthly changes have been as high as .05 to .07 (4-5%). As such, buying 1000 euros a month could cost 50 CAD more (or less) on a monthly basis due to variance in the exchange rate. If we anticipate our overhead cost of currency conversion to be more than 5%, it doesn't make sense to do multiple transactions; the costs are likely to outweigh the benefits. If we can keep them under that amount, then multiple transactions are advantageous when the euro is cheaper. The problem is somewhat analagous to that of someone who wants to make an annual investment in a mutual fund and is unsure of whether to make the purchase all at once, or to divide it over multiple purchases. One can't know for sure which way the mutual fund price is going to move over the time period Dollar cost averaging, spreading the purchase over regular intervals, is the generally accepted solution to this problem. As such, so long as we can keep the overhead cost of currency transactions low (<5%), doing transactions on a regular basis positions ourselves to take advantage of possible drops in the price of euros and reduces the risk of buying euros when they are most expensive. If we can't keep the cost low, then currency fees would be greater than potential price drops and we would be better off doing a single transaction." }, { "docid": "18436", "title": "", "text": "Dollar cost averaging is an great way to diversify your investment risk. There's mainly 2 things you want to achieve when you're saving for retirement: 1) Keep your principal investment; 2) Grow it. The best methods recommended by most financial institutions are as follows: 1) Diversification; 2) Re-balance. There are a lot of additional recommendations, but these are my main take away. When you dollar cost average, you're essentially diversifying your exchange risk between the value of the funds you're investing. Including the ups and downs of the value of the underlying asset, may actually be re-balancing. Picking your asset portfolio: 1) You generally want to include within your 401k or any other invest, classes of investments that do not always move in total correlation as this allows you to diversify risk; 2) I'm making a lot of assumptions here - since you may have already picked your asset classes. Consider utilizing the following to tell you when to buy or sell your underlying investment: 1) Google re-balance excel sheet to find several examples of re-balance tools to help you always buy low and sell high; 2) Enter your portfolio investment; 3) Utilize the movement to invest in the underlying assets based on market movement; and 4) Execute in an emotionless way and stick to your plan. Example - Facts 1) I have 1 CAD and 1 USD in my 401k. Plan I will invest 1 dollar in the ratio of 50/50 - forever. Let's start in 2011 since we were closer to par: 2010 - 1 CAD (value 1 USD) and 1 USD (value 1 USD) = 50/50 ratio 2011 start - 1 CAD ( value .8 USD) and 1 USD (value 1 USD) = 40/60 ratio 2011 - rebalance - invest 1 USD as follows purchase .75 CAD (.60 USD) and purchase .40 USD = total of 1 USD reinvested 2011 end - 1.75 CAD (value 1.4USD) and 1.4 USD (value 1.4 USD) - 50/50 ratio As long as the fundamentals of your underlying assets (i.e. you're not expecting hyperinflation or your asset to approach 0), this approach will always build value over time since you're always buying low and selling high while dollar averaging. Keep in mind it does reduce your potential gains - but if you're looking to max gain, it may mean you're also max potential loss - unless you're able to find A symmetrical investments. I hope this helps." }, { "docid": "518379", "title": "", "text": "I would check to see what the fee schedule is on your previous employer's 401k. Depending on how it was setup, the quarterly/annual maintenance fee may be lower/higher than your current employer. Another reason to rollover/not-rollover is that selection of funds available is better than the other plan. And of course always consider rolling over your old plan into a standard custodial rollover IRA where the management company gives you a selection of investment options. At least look at the fees and expense ratios of your prior employer's plan and see if anything reaches a threshold of what you consider actionable and worth your time. Note: removed reference to self directed IRA as vehicle is more complicated account type allowing for more than just stocks, bonds, and mutual funds. Not for your typical retail investor." }, { "docid": "335857", "title": "", "text": "\"You probably want to think about pools of money separately if they have separate time horizons or are otherwise not interchangeable. A classic example is your emergency fund (which has a potentially-immediate time horizon) vs. your retirement savings. The emergency fund would be all in cash or very short-term bonds, and would not count in your retirement asset allocation. Since the emergency fund usually has a capped value (a certain amount of money you want to have for emergencies) rather than a percentage of net worth value, this especially makes sense; you have to treat the emergency fund separately or you'd have to keep changing your asset allocation percentages as your net worth rises (hopefully) with respect to the capped emergency amount. Similarly, say you are saving for a car in 3 years; you'd probably invest that money very conservatively. Also, it could not go in tax-deferred retirement accounts, and when you buy the car the account will go to zero. So probably worth treating this separately. On the other hand, say you have some savings in tax-deferred retirement accounts and some in taxable accounts, but in both cases you're expecting to use the money for retirement. In that case, you have the same time horizon and goals, and it can pay to think about the taxable and nontaxable accounts as a whole. In particular you can use \"\"asset location\"\" (put less-tax-efficient assets in tax-deferred accounts). In this case maybe you would end up with mostly bonds in the tax-deferred accounts and mostly equities in the taxable accounts, for tax reasons; the asset allocation would only make sense considering all the accounts, since the taxable account would be too equity-heavy and the tax-deferred one too bond-heavy. There can be practical reasons to treat each account separately, too, though. For example if your broker has a convenient automatic rebalancing tool on their website, it probably only works within an account. Treating each account by itself would let you use the automatic rebalancing feature on the website, while a more complicated asset location strategy where you rebalance across multiple accounts might be too hard and in practice you wouldn't get around to it. Getting around to rebalancing could be more important than tax-motivated asset location. You could also take a keep-it-simple attitude: as long as your asset allocation is pretty balanced (say 40% bonds) and includes a cash allocation that would cover emergencies, you could just put all your money in one big portfolio, and think of it as a whole. If you have an emergency, withdraw from the cash allocation and then rebuild it over time; if you have a major purchase, you could redeem some bonds and then rebuild the bond portion over time. (When I say \"\"over time\"\" I'm thinking you might start putting new contributions into the now-underallocated assets, or you might dollar-cost-average back into them by selling bits of the now-overallocated assets.) Anyway there's no absolute rule, it depends on what's simple enough to be manageable for you in practice, and what separate shorter-horizon investing goals you have in addition to retirement. You can always make things complex but remember that a simple plan that happens in real life is better than a complex plan you don't keep up with in practice (or a complex plan that takes away from activities you'd enjoy more).\"" } ]

[ { "docid": "304284", "title": "", "text": "Aside from the fear that you or a loved one will spend it frivolously, I'm hard pressed to come up with another reason. If you'll owe money in the next tax year, you have the rest of the year to adjust your withholdings and/or make quarterly payments. As both my fellow PFers state, you're better off getting your money back. Better still, use it to pay off a high interest debt." } ]

[ { "docid": "261989", "title": "", "text": "Bank products have been pretty common with tax refunds as well, and they are also being heavily scrutinized for the same reasons. Refund Anticipation Loans (RALs) have been outlawed for future tax seasons due to lack of consumer protection. What is a bank product, you might ask? Rather than waiting 7-14 days for the a direct deposit from the IRS, a lot of places like H+R Block and Jackson Hewitt would offer a bank product to get you money quicker. For this service, they charge a fee (usually $99-$149) which is grossly overpriced for how little work it takes, but if your refund is several thousand dollars, you may not care. A Refund Anticipation Loan was the most predatory bank product, as it was an advance on your loan for the amount your expected refund. However, if there were any errors in your return and the IRS decided your refund was less than what your tax preparer calculated it to be, you were stuck with paying back the advance amount, leaving you to foot the bill for whatever errors your preparer may have made. These loans also had very high interest rates, since usually the people that wanted RALs were also the same people that rely upon cash advances. There are also Electronic Refund Checks (which ironically are paper checks for the consumer, not electronic deposits), direct deposits, and prepaid debit cards. Despite the fact that these same methods of refund payments are offered by the IRS themselves, preparers and banks alike sold these to collect fees for essentially no work. I'm not sure how similar these bank products for student loans are, but I wanted to shed some light on them anyways. Regardless of how badly you need money, **do not ever accept money through a bank product.** If it benefited you more, banks and preparers would not offer these. (Source: telemarketing at a tax preparation software company)" }, { "docid": "488777", "title": "", "text": "\"I think we'd need to look at actual numbers to see where you're running into trouble. I'm also a little confused by your use of the term \"\"unexpected expenses\"\". You seem to be using that to describe expenses that are quite regular, that occur every X months, and so are totally expected. But assuming this is just some clumsy wording ... Here's the thing: Start out by taking the amount of each expense, divided by the number of months between occurrences. This is the monthly cost of each expense. Add all these up. This is the amount that you should be setting aside every month for these expenses, once you get a \"\"base amount\"\" set up. So to take a simple example: Say you have to pay property taxes of $1200 twice a year. So that's $1200 every 6 months = $200 per month. Also say you have to pay a water bill once every 3 months that's typically $90. So $90 divided by 3 = $30. Assuming that was it, in the long term you'd need to put aside $230 per month to stay even. I say \"\"in the long term\"\" because when you're just starting, you need to put aside an amount sufficient that your balance won't fall below zero. The easiest way to do this is to just set up a chart where you start from zero and add (in this example) $230 each month, and then subtract the amount of the bills when they will hit. Do this for some reasonable time in the future, say one year. Find the biggest negative balance. If you can add this amount to get started, you'll be safe. If not, add this amount divided by the number of months from now until it occurs and make that a temporary addition to your deposits. Check if you now are safely always positive. If not, repeat the process for the next biggest negative. For example, let's say the property tax bills are April and October and the water bills are February, May, August, and November. Then your chart would look like this: The biggest negative is -370 in April. So you have to add $370 in the first 4 months, or $92.50 per month. Let's say $93. That would give: Now you stay at least barely above water for the whole year. You could extend the chart our further, but odds are the exact numbers will change next year and you'll have to recalculate anyway. The more irregular the expenses, the more you will build up just before the big expense hits. But that's the whole point of saving for these, right? If a $1200 bill is coming next week and you don't have close to $1200 saved up in the account, where is the money coming from? If you have enough spare cash that you can just take the $1200 out of what you would have spent on lunch tomorrow, then you don't need this sort of account.\"" }, { "docid": "458494", "title": "", "text": "\"I find those \"\"government checks\"\" arguments to be more appealing in theory than in reality. Ultimately, it comes down to deciding who gets what... and who gets to be the decider. Capitalism is far from perfect, but it decides who gets what through the individual, decentralized choices of everyone. Again, it's not perfect by any means, but it is dispersed - and everyone makes decisions for themselves, not for other people. Government action decides who gets what through a highly indirect process of electing politicians, and decisions are made by a small group of people, who are under, practically speaking, very little oversight or control. A few people make decisions for everyone else. Government action is, despite all our desire and efforts to avoid this, necessarily subject to the same disparities in influence/control as the market ... It may come in different forms, and the consequences may manifest differently (often less readily apparent), but there is no avoiding the \"\"a few people have a lot more control than everyone else\"\" problem. Governments are more prone to corruption because they trade the intangible currency of \"\"power\"\" in addition to money. No matter how you go about doing so, it's always easier to counteract a private actor than a government (given roughly equivalent levels of influence, obviously). I understand the desire for intervention, but I think we have a scary tendency to place far too much weight on good intentions, and far too little weight on consequences. It's so easy to think things through in your head (I do often) and come up with a plan that could obviously work exactly as intended for everyone's benefit. In doing so, we forget that people aren't pawns to be guided through life for someone else's vision (or pursuit of utopia or anything else) . ... they have lives, desires, interests, plans of their own, and theirs are just as valid as yours or mine. The reality is that you and I are probably far more similar than either of us would guess. But there are still huge differences - what we value, what we want to do next year, whether we want that promotion or want to get laid off so we can finally start our dream business, whether we want money for family vacations or medical bills.... so many differences that I couldn't ever fairly and accurately represent your interests without you actually telling me what they are. That's just the 2 of us. There are 300 million people in the US - we can't comprehend even really knowing a thousand well enough to genuinely speak on their behalf. In theory, big plans make everything better. In practice, they run into the reality that humans truly aren't pawns, and controlling 300 million people and predicting their responses/actions is way more difficult than it seems. Big plans often end up with real people - people who are just as deserving of opportunities and rights as everyone else - getting really hurt because some guy he doesn't know (and who doesn't know him) had an idea and the power to enforce it on everyone. I'm not saying that all government interference is bad, of course, and I'm not saying it shouldn't happen. Government interventions that are straightforward wealth transfers are probably less harmful to people ... like a tax on the rich to give hefty tax refunds to the poor, is more direct and less prone to causing unintentional harm then things like wage manipulations.\"" }, { "docid": "465905", "title": "", "text": "When you got your original HUD backed mortgage there were three options: monthly, annual and upfront payments. The plan is designed to insure the lender of the mortgage against your default. The plan is not expected to cover the mortgage for 30 years. If you are in the early years of the mortgage, you may be owed a refund for the unused years. HUD has a Fact sheet discussing this, and a page to help you determine if they owe you a refund. If you are refinancing back into a HUD/FHA mortgage they will not give you a refund, but will roll the refund back into your new loan. FHA to FHA Refinances: When an FHA loan is refinanced, the refund from the old premium may be applied toward the up-front premium required for the new loan. Note: Depending on the year of the original loan the government has different lengths they used for coverage and refunds. I suggest you use the webpage to determine if you are due a refund, or a roll over." }, { "docid": "191704", "title": "", "text": "The short answer is no - the CGT discount is only applied against your net capital gain. So your net capital gain would be: $25,000 - $5,000 = $20,000 Your CGT discount is $10,000 You will then pay CGT on $10,000 Of course you could sell ABC in this financial year and sell DEF next financial year. If you had no other share activities next financial year than that net capital loss can be carried forward to a future year. In that case your net capital gain this year would be $25,000 Your CGT discount is $12,500 You will then pay CGT on $12,500 Next year if oyu sell DEF, you'll have a $5000 net capital loss which you can carry forward to a future year as an offset against capital gains. Reference: https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-loss/Working-out-your-net-capital-gain-or-loss/" }, { "docid": "107136", "title": "", "text": "Look at your options with a 529 program. If the money is used for education expenses: that currently includes tuition, room & board (even if living off campus), books, transportation; it grows tax free. Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board. Contributions to a 529 plan, however, are not deductible. If it is a 529 associated with your state you can also save on state taxes. You can make contributions on a regular basis, or ad hoc. Accounts can even be setup by other relatives. I have used a 529 to fund two kids education. It takes care of most of your education expenses. 529 programs are available from most states, and even some of the big mutual fund companies. Many have the option of shifting the risk level of the investments to be more conservative as the kids hit high school. Some states have an option to have you pay a large sum when the child is small to buy semesters of college. The deal is worth considering if you know they will be going to a state school, the deal is less good if they will go out of state or to a private college. The IRS does limit the maximum amount that you can contribute in a year an amount that exceeds the 14,000 annual gift limit: If in 2014, you contributed more than $14,000 to a Qualified Tuition Plan (QTP) on behalf of any one person, you may elect to treat up to $70,000 of the contribution for that person as if you had made it ratably over a 5-year period. The election allows you to apply the annual exclusion to a portion of the contribution in each of the 5 years, beginning in 2014. You can make this election for as many separate people as you made QTP contributions One option at the end is to take any extra money at graduation and give it to the child so that it can be used for graduate school, or if the taxes and penalties are paid it can be used for that first car. It can even be rolled over to another relative." }, { "docid": "267466", "title": "", "text": "In general, you are expected to pay all the money you owe in taxes by the end of the tax year, or you may have to pay a penalty. But you don't have to pay a penalty if: The amount you owe (i.e. total tax due minus what you paid in withholding and estimated taxes) is less than $1000. You paid at least 90% of your total tax bill. You paid at least 100% of last year's tax bill. https://www.irs.gov/taxtopics/tc306.html I think point #3 may work for you here. Suppose that last year your total tax liability was, say, $5,000. This year your tax on your regular income would be $5,500, but you have this additional capital gain that brings your total tax to $6,500. If your withholding was $5,000 -- the amount you owed last year -- than you'll owe the difference, $1,500, but you won't have to pay any penalties. If you normally get a refund every year, even a small one, then you should be fine. I'd check the numbers to be sure, of course. If you normally have to pay something every April 15, or if your income and therefore your withholding went down this year for whatever reason, then you should make an estimated payment. The IRS has a page explaining the rules in more detail: https://www.irs.gov/help-resources/tools-faqs/faqs-for-individuals/frequently-asked-tax-questions-answers/estimated-tax/large-gains-lump-sum-distributions-etc/large-gains-lump-sum-distributions-etc" }, { "docid": "595121", "title": "", "text": "There are penalties for failure to file and penalties for failure to pay tax. The penalties for both are based on the amount of tax due. So you would owe % penalties of zero, otherwise meaning no penalties at all. The IRS on late 1040 penalties: Here are eight important points about penalties for filing or paying late. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time. If the IRS owes you a refund, April 15 isn't much of a deadline. I suppose the real deadline is April 15, three years later - that's when the IRS keeps your refund and it becomes property of the Treasury. Of course, there's little reason to wait that long. Don't let the Treasury get all your interest." }, { "docid": "535705", "title": "", "text": "The money in the checking account was already taxed. It was income this year or last, or a gift from somebody, or earned interest that will be taxed. If it was a deductible IRA you would declare it next April and get a refund from the government." }, { "docid": "532629", "title": "", "text": "A simplistic answer would be that it's a multiplier on how much money per paycheck to subtract from your tax withholding (taxes per paycheck), then at the end of the year you will have paid taxes on your income minus the amount of your withholding allowances. If you get a decent (roughly 3% or more of your gross annual salary) refund you are letting the government withhold too much (and should increase your allowances), if you have to pay a decent amount of taxes at the end of the year then the amount withheld is not high enough (and should decrease your allowances). I definitely recommend using the calculator that Stephen Cleary mentions, but I think it's just as easy to adjust it up or down by 1 or 2 each year based on whether you got a large refund, no refund, or paid taxes. If you are disciplined with your money many experts advise to increase withholding allowances, save the extra in a safe short term interest account so that you earn money on your money and not the government." }, { "docid": "252237", "title": "", "text": "\"You don't \"\"need\"\" your refund to be as small as possible, but you usually would want it to be as small as possible. The reason people say you should aim for a small refund is that getting a big refund means you paid more in taxes than you had to. This means you gave away money that you could have done something else with. You get the money back later as a tax refund, but you lost the ability to use it during the time the government had it. For instance, if as you say you are getting a $1000 tax refund, that's $1000 that you are giving to the government over the course of the year. At the end of the year, you get it back, so you end the year with $1000. If you instead kept the money, (by paying only exactly as much tax as you owe throughout the year) you could invest it somehow, so that by the end of the year it could potentially have grown to, say, $1050. Thus at the end of the year you would have $1050 instead of $1000. Ideally you would have zero refund and owe zero extra at the end of the year. However, since it is often difficult to make things work out so exactly, people often say you should aim for a small refund. Assuming you are in the USA, if your income is only $9000 you will likely not owe any federal income tax at all, so you could claim exemption from withholding and avoid paying any tax ahead of time. You could check this when you file your taxes by seeing if the refund you get is equal to the total of taxes withheld from your paychecks over the course of last year.\"" }, { "docid": "276411", "title": "", "text": "This is a complicated question that relies on the US-India Tax Treaty to determine whether the income is taxable to the US or to India. The relevant provision is likely Article 15 on Personal Services. http://www.irs.gov/pub/irs-trty/india.pdf It seems plausible that your business is personal services, but that's a fact-driven question based on your business model. If the online training is 'personal services' provided by you from India, then it is likely foreign source income under the treaty. The 'fixed base' and '90 days' provisions in Article 15 would not apply to an India resident working solely outside the US. The question is whether your US LLC was a US taxpayer. If the LLC was a taxpayer, then it has an obligation to pay US tax on any worldwide income and it also arguably disqualifies you from Article 15 (which applies to individuals and firms of individuals, but not companies). If you were the sole owner of the US LLC, and you did not make a Form 8832 election to be treated as subject to entity taxation, then the LLC was a disregarded entity. If you had other owners, and did not make an election, then you are a partnership and I suspect but cannot conclude that the treaty analysis is still valid. So this is fact-dependent, but you may be exempt from US tax under the tax treaty. However, you may have still had an obligation to file Forms 1099 for your worker. You can also late-file Forms 1099 reporting the nonemployee compensation paid to your worker. Note that this may have tax consequences on the worker if the worker failed to report the income in those years." }, { "docid": "187695", "title": "", "text": "The IRS can direct your refund towards repayment of your unpaid taxes either on Federal or State/Local level. Whether it will depends on whether the State of New York will ask for it. Generally, if you owe taxes to New York for this year only, you would expect them to wait for you to file your State tax return and pay the taxes owed. If you don't - I'm pretty sure that the next year refund from the IRS will go directly to them." }, { "docid": "533589", "title": "", "text": "Suppose you have been paying interest on previous charges in the past. Your monthly statement is issued on April 12, and (since you just received your income tax refund), you pay it off in full on April 30. You don't charge anything to the card at all after April 12. Thus, on April 30, your credit card balance shows as zero since you just paid it off. But your April 12 statement billed you for interest only till April 12. So, on May 12, your next monthly bill will be for the interest for your nonzero balance from April 13 through April 30. Assuming that you still are not making any new charges on your card and pay off the May 12 bill in timely fashion, you will finally have a zero bill on June 12. What if you charge new items to your credit card after April 12? Well, your balance stopped revolving on April 30, and that's when interest is no longer charged on the new charges. But you do owe interest for a charge on April 13 (say) until April 30 when your balance is no longer revolving, and this will be added to your bill on May 12. Purchases made after April 30 will not be charged interest unless you fall off the wagon again and don't pay your May 12 bill in full by the due date of the bill (some time in early June)." }, { "docid": "193717", "title": "", "text": "\"You mention \"\"early exercise\"\" in your title, but you seem to misunderstand what early exercise really means. Some companies offer stock options that vest over a number of years, but which can be exercised before they are vested. That is early exercise. You have vested stock options, so early exercise is not relevant. (It may or may not be the case that your stock options could have been early exercised before they vested, but regardless, you didn't exercise them, so the point is moot.) As littleadv said, 83(b) election is for restricted stocks, often from exercising unvested stock options. Your options are already vested, so they won't be restricted stock. So 83(b) election is not relevant for you. A taxable event happen when you exercise. The point of the 83(b) election is that exercising unvested stock options is not a taxable event, so 83(b) election allows you to force it to be a taxable event. But for you, with vested stock options, there is no need to do this. You mention that you want it not to be taxable upon exercise. But that's what Incentive Stock Options (ISOs) are for. ISOs were designed for the purpose of not being taxable for regular income tax purposes when you exercise (although it is still taxable upon exercise for AMT purposes), and it is only taxed when you sell. However, you have Non-qualified Stock Options. Were you given the option to get ISOs at the beginning? Why did your company give you NQSOs? I don't know the specifics of your situation, but since you mentioned \"\"early exercise\"\" and 83(b) elections, I have a hypothesis as to what might have happened. For people who early-exercise (for plans that allow early-exercise), there is a slight advantage to having NQSOs compared to ISOs. This is because if you early exercise immediately upon grant and do 83(b) election, you pay no taxes upon exercise (because the difference between strike price and FMV is 0), and there are no taxes upon vesting (for regular or AMT), and if you hold it for at least 1 year, upon sale it will be long-term capital gains. On the other hand, for ISOs, it's the same except that for long-term capital gains, you have to hold it 2 years after grant and 1 year after exercise, so the period for long-term capital gains is longer. So companies that allow early exercise will often offer employees either NQSOs or ISOs, where you would choose NQSO if you intend to early-exercise, or ISO otherwise. If (hypothetically) that's what happened, then you chose wrong because you got NQSOs and didn't early exercise.\"" }, { "docid": "28172", "title": "", "text": "You have made a good start because you are looking at your options. Because you know that if you do nothing you will have a big tax bill in April 2017, you want to make sure that you avoid the underpayment penalty. One way to avoid it is to make estimated payments. But even if you do that you could still make a mistake and overpay or underpay. I think the easiest way to handle it is to reach the safe harbor. If your withholding from your regular jobs and any estimated taxes you pay in 2016 equal or exceed your total taxes for 2015, then even if you owe a lot in April 2017 you can avoid the underpayment penalty. If you AGI is over 150K you have to make sure your withholding is 110% of your 2015 taxes. Then set aside what you think you will owe in your bank account until you have to pay your taxes in April 2017. You only have to adjust your withholding to make the safe harbor. You can make sure easily enough once your file this years taxes. You only have to make sure that you reach the 100% or 110% threshold. From IRS PUB 17 Who Must Pay Estimated Tax If you owe additional tax for 2015, you may have to pay estimated tax for 2016. You can use the following general rule as a guide during the year to see if you will have enough withholding, or if you should increase your withholding or make estimated tax payments. General rule. In most cases, you must pay estimated tax for 2016 if both of the following apply. You expect to owe at least $1,000 in tax for 2016, after subtracting your withholding and refundable credits. You expect your withholding plus your refundable credits to be less than the smaller of: a. 90% of the tax to be shown on your 2016 tax return, or b. 100% of the tax shown on your 2015 tax return (but see Special rules for farmers, fishermen, and higher income taxpayers , later). Your 2015 tax return must cover all 12 months. Reminders Estimated tax safe harbor for higher income taxpayers. If your 2015 adjusted gross income was more than $150,000 ($75,000 if you are married filing a separate return), you must pay the smaller of 90% of your expected tax for 2016 or 110% of the tax shown on your 2015 return to avoid an estimated tax penalty." }, { "docid": "235825", "title": "", "text": "You have multiple things going on some of which will work in opposite directions. This is a second job for the family so that their income will be added onto of the main income. This generally means that the 2nd income has too little tax withheld. The tax tables used by employers have no way of handling this situation. This 2nd job is being started part way though the tax year, so too much in taxes is withheld. If they make 2,000 a month for 4 months that would mean 8,000 in income; but the tax tables used by the employer withhold at the $24,000 per year rate. The third issue is the great variation in the number of hours per pay period. This means that too much is withheld in checks with the most hours, and too little in the ones with the least hours. For this year you have a reprieve. As long as you make the safe-harbor levels for federal withholding, you can avoid penalties when you file next spring. To do so just make sure that the withholding of all the jobs in the family equal or exceed the total income tax for the family last year. Note this isn't equal to last years withholding, or equal to the refund last year, but the total tax you should have paid. The general advice is to set the smaller income to have 0 exemptions, and use the W-4 for the larger income to make adjustments. In the past I have done this to make sure that we make the safe-harbor level. You can make adjustments in the new year once you know what the safe harbor goal is for the rest of the year." }, { "docid": "110081", "title": "", "text": "\"It really depends on the answers to two questions: 1) How tight is your budget going to be if you have to make that $530 payment every month? Obviously, you'd still be better off than you are now, since that's still $30 cheaper. But, if you're living essentially paycheck to paycheck, then the extra flexibility of the $400/month option can make the difference if something unforeseen happens. 2) How disciplined (financially) have you proven you can be? The \"\"I'll make extra payments every month\"\" sounds real nice, but many people end up not doing it. I should know, I'm one of them. I'm still paying on my student loans because of it. If you know (by having done it before), that you can make that extra $130 go out each and every month and not talk yourself into using it on all sorts of \"\"more important needs\"\", then hey, go for it. Financial flexibility is a great thing, and having that monthly nut (all your minimum living expenses combined) as low as possible contributes greatly to that flexibility. Update: Another thing to consider Another thing to consider is what they do with your extra payment. Will they apply it to the principal, or will they treat it as a prepayment? If they apply it to principal, it'll be just like if you had that shorter term. Your principal goes down additionally by that extra amount, and the next month, you owe another $400. On the other hand, if they treat it as a prepayment, then that extra $130 will be applied to the next month's bill. Principal stays the same, and the next month you'll be billed $270. There are two practical differences for you: 1) With prepayment, you'll pay slightly more interest over that 60 months paying it off. Because it's not amortized into the loan, the principal balance doesn't go down faster while the loan exists. And since interest is calculated on the remaining principal balance, end result is more interest than you otherwise would have paid. That sucks, but: 2) with the prepayment, consider that at the end of year 2, you'd have over 7 months of payments prepaid. So, if some emergency does come up, you don't have to send them any money at all for 7 months. There's that flexibility again. :-) Honestly, while this is something you should find out about the loan, it's really still a wash. I haven't done the math, but with the interest rate, amount of the loan and time frame, I think the extra interest would be pretty minor.\"" }, { "docid": "176742", "title": "", "text": "\"Personally, I would just dispute this one with your CC. I had a situation where a subscription I had cancelled the prior year was billed to me. I called up to have a refund issued, they couldn't find me in their system under three phone numbers and two addresses. The solution they proposed was \"\"send us your credit card statement with the charge circled,\"\" to which I responded \"\"there's no way in hell I'm sending you my CC statement.\"\" Then I disputed the charge with the CC bank and it was gone about two days later. I partially expect to have the same charge appear next year when they try to renew my non-existent subscription again. Now, whether or not this is a normal practice for the company, or just a call center person making a good-faith but insecure attempt to solve your problem is irrelevant. Fact of the matter is, you tried to resolve this with the merchant and the merchant asked for something that's likely outside the bounds of your CC Terms and Conditions; sending your entire number via email. Dispute it and move on. The dispute process exists for a reason.\"" } ]

[ { "docid": "147765", "title": "", "text": "There actually are legitimate reasons, but they don't apply to most people. Here are a few that I know of: You're self-employed and have to pay quarterly estimated taxes. Rather than wait for the refund when you already have to pay 1/4 of next year's taxes at the same time, you just have the IRS apply to refund forward. (so you're not out the money you owe while waiting for your refund). You're filing an amended or late return, and so you're already into the next year, and have a similar situation as #1, where your next year's taxes have already come due. You're planning on declaring bankruptcy, and you're under the Tenth Circuit, those credits might be safe from creditors For almost any other situation, you're better off taking the money, and using it to pay down debt, or put it somewhere to make interest (although, at the current rates, that might not be very much)." } ]

[ { "docid": "111531", "title": "", "text": "\"From what you've described, your spouse is a non-resident alien for US tax purposes. You have two choices: Use the Nonresident Spouse Treated As Resident election and file as Married Filing Jointly. Since your spouse doesn't have, and doesn't currently qualify for, an SSN, he/she will need to apply for an ITIN together with the tax filing. Note that by becoming a resident alien, your spouse's worldwide income the whole year would be subject to US taxes, and would need to be reported on your joint tax filing, though he/she will be able to use the Foreign Earned Income Exclusion to exclude $100k of her foreign earned income, since he/she will have been out of the US for 330 days in a 12-month period. Or, file as Married Filing Separately. You write \"\"NRA\"\" for your spouse's SSN on your tax return. As a nonresident alien, if your spouse doesn't have any US income, he/she doesn't have to file a US tax return, and doesn't need to apply for an ITIN. Which one is better is up to you to figure out.\"" }, { "docid": "191473", "title": "", "text": "LLC is not a federal tax designation. It's a state-level organization. Your LLC can elect to be treated as a partnership, a disregarded entity (i.e., just report the taxes in your individual income tax), or as an S-Corp for federal tax purposes. If you have elected S-Corp, I expect that all the S-Corp rules will apply, as well as any state-level LLC rules that may apply. Disclaimer: I'm not 100% familiar with S-corp rules, so I can't evaluate whether the statements you made about proportional payouts are correct." }, { "docid": "193717", "title": "", "text": "\"You mention \"\"early exercise\"\" in your title, but you seem to misunderstand what early exercise really means. Some companies offer stock options that vest over a number of years, but which can be exercised before they are vested. That is early exercise. You have vested stock options, so early exercise is not relevant. (It may or may not be the case that your stock options could have been early exercised before they vested, but regardless, you didn't exercise them, so the point is moot.) As littleadv said, 83(b) election is for restricted stocks, often from exercising unvested stock options. Your options are already vested, so they won't be restricted stock. So 83(b) election is not relevant for you. A taxable event happen when you exercise. The point of the 83(b) election is that exercising unvested stock options is not a taxable event, so 83(b) election allows you to force it to be a taxable event. But for you, with vested stock options, there is no need to do this. You mention that you want it not to be taxable upon exercise. But that's what Incentive Stock Options (ISOs) are for. ISOs were designed for the purpose of not being taxable for regular income tax purposes when you exercise (although it is still taxable upon exercise for AMT purposes), and it is only taxed when you sell. However, you have Non-qualified Stock Options. Were you given the option to get ISOs at the beginning? Why did your company give you NQSOs? I don't know the specifics of your situation, but since you mentioned \"\"early exercise\"\" and 83(b) elections, I have a hypothesis as to what might have happened. For people who early-exercise (for plans that allow early-exercise), there is a slight advantage to having NQSOs compared to ISOs. This is because if you early exercise immediately upon grant and do 83(b) election, you pay no taxes upon exercise (because the difference between strike price and FMV is 0), and there are no taxes upon vesting (for regular or AMT), and if you hold it for at least 1 year, upon sale it will be long-term capital gains. On the other hand, for ISOs, it's the same except that for long-term capital gains, you have to hold it 2 years after grant and 1 year after exercise, so the period for long-term capital gains is longer. So companies that allow early exercise will often offer employees either NQSOs or ISOs, where you would choose NQSO if you intend to early-exercise, or ISO otherwise. If (hypothetically) that's what happened, then you chose wrong because you got NQSOs and didn't early exercise.\"" }, { "docid": "595121", "title": "", "text": "There are penalties for failure to file and penalties for failure to pay tax. The penalties for both are based on the amount of tax due. So you would owe % penalties of zero, otherwise meaning no penalties at all. The IRS on late 1040 penalties: Here are eight important points about penalties for filing or paying late. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time. If the IRS owes you a refund, April 15 isn't much of a deadline. I suppose the real deadline is April 15, three years later - that's when the IRS keeps your refund and it becomes property of the Treasury. Of course, there's little reason to wait that long. Don't let the Treasury get all your interest." }, { "docid": "276411", "title": "", "text": "This is a complicated question that relies on the US-India Tax Treaty to determine whether the income is taxable to the US or to India. The relevant provision is likely Article 15 on Personal Services. http://www.irs.gov/pub/irs-trty/india.pdf It seems plausible that your business is personal services, but that's a fact-driven question based on your business model. If the online training is 'personal services' provided by you from India, then it is likely foreign source income under the treaty. The 'fixed base' and '90 days' provisions in Article 15 would not apply to an India resident working solely outside the US. The question is whether your US LLC was a US taxpayer. If the LLC was a taxpayer, then it has an obligation to pay US tax on any worldwide income and it also arguably disqualifies you from Article 15 (which applies to individuals and firms of individuals, but not companies). If you were the sole owner of the US LLC, and you did not make a Form 8832 election to be treated as subject to entity taxation, then the LLC was a disregarded entity. If you had other owners, and did not make an election, then you are a partnership and I suspect but cannot conclude that the treaty analysis is still valid. So this is fact-dependent, but you may be exempt from US tax under the tax treaty. However, you may have still had an obligation to file Forms 1099 for your worker. You can also late-file Forms 1099 reporting the nonemployee compensation paid to your worker. Note that this may have tax consequences on the worker if the worker failed to report the income in those years." }, { "docid": "488777", "title": "", "text": "\"I think we'd need to look at actual numbers to see where you're running into trouble. I'm also a little confused by your use of the term \"\"unexpected expenses\"\". You seem to be using that to describe expenses that are quite regular, that occur every X months, and so are totally expected. But assuming this is just some clumsy wording ... Here's the thing: Start out by taking the amount of each expense, divided by the number of months between occurrences. This is the monthly cost of each expense. Add all these up. This is the amount that you should be setting aside every month for these expenses, once you get a \"\"base amount\"\" set up. So to take a simple example: Say you have to pay property taxes of $1200 twice a year. So that's $1200 every 6 months = $200 per month. Also say you have to pay a water bill once every 3 months that's typically $90. So $90 divided by 3 = $30. Assuming that was it, in the long term you'd need to put aside $230 per month to stay even. I say \"\"in the long term\"\" because when you're just starting, you need to put aside an amount sufficient that your balance won't fall below zero. The easiest way to do this is to just set up a chart where you start from zero and add (in this example) $230 each month, and then subtract the amount of the bills when they will hit. Do this for some reasonable time in the future, say one year. Find the biggest negative balance. If you can add this amount to get started, you'll be safe. If not, add this amount divided by the number of months from now until it occurs and make that a temporary addition to your deposits. Check if you now are safely always positive. If not, repeat the process for the next biggest negative. For example, let's say the property tax bills are April and October and the water bills are February, May, August, and November. Then your chart would look like this: The biggest negative is -370 in April. So you have to add $370 in the first 4 months, or $92.50 per month. Let's say $93. That would give: Now you stay at least barely above water for the whole year. You could extend the chart our further, but odds are the exact numbers will change next year and you'll have to recalculate anyway. The more irregular the expenses, the more you will build up just before the big expense hits. But that's the whole point of saving for these, right? If a $1200 bill is coming next week and you don't have close to $1200 saved up in the account, where is the money coming from? If you have enough spare cash that you can just take the $1200 out of what you would have spent on lunch tomorrow, then you don't need this sort of account.\"" }, { "docid": "164301", "title": "", "text": "Something I've not heard mentioned in any of the answers is that (at least for me) owing some tax money is better than having a refund from a ID theft/fraud/security aspect. The US IRS has been hacked several times recently and there have been cases of fraudulent tax refunds being filed and tax refund checks being cashed by ID thieves. Well, if you owe a bit of tax then you're less of a target for fraudulent tax refunds being filed in your name. Even in the case that you were unlucky enough to have had your identity stolen, at least you don't have to deal with the IRS trying to sort a mess like that up. Thus, (IMO) it's better to owe a bit of tax, than to have a small refund, or any refund for that matter. Ideally, you want to get to zero dollars owed like you suggested, but that's often pretty hard to do. So, the next best thing is to owe a bit. One should try to calculate tax liability quartely or if income changes, adjust your withholding, so that you get closer to zero tax." }, { "docid": "464593", "title": "", "text": "\"The pure numbers answer says you want the refund to be close to $0. You can even argue, as some answers have, that you want to try to maximize the payment without receiving any sanctions for underpaying during the year. If you trace the money, it's easy to see why. Let's say you get a paycheck. Tag some of the dollars for Uncle Sam. These are the dollars that, eventually, will be given to the IRS. Now consider the following scenarios: From the raw numbers like this, its clear that you lose utility by setting yourself up for a large refund check. The money was yours the entire time, but you chose to give it to Uncle Sam instead. However, the raw numbers are only part of the puzzle. If you're a cold steely-gazed numbers person, they're the part that matters. When the billionares are playing their tax evasion games, this is the only thing they are paying attention to. However, real humans have a few psychological reasons they may choose to lose utility in terms of raw dollars in exchange for psychological assistance: These attitudes exist, and may be ideal for any one person. Obviously the financially savvy answer of \"\"minimize your refund\"\" is the ideal answer from a dollars and cents perspective, but its up to you to see whether that attitude is right when you account for all of the non-measurable things, like stress. In general, I would lead anyone to \"\"minimize your refund,\"\" but I would be remiss if I didn't include the very real psychological reasons people choose to deviate from it.\"" }, { "docid": "134026", "title": "", "text": "Looking at the numbers quickly, if he makes this amount for the entire year, single, no kids, no investment income, standard deduction only, his taxable income will be about $110,000.* That puts him in the 28% tax bracket. His federal tax would be: $18,481.25 plus 28% of the amount over $90,750 Which comes out to about $23,800 in tax liability. His federal withholding is $26,047 for the year, so with absolutely no deductions whatsoever, he will be getting a tax refund of about $2200. I'm not very familiar with the California tax return, but it is entirely possible that he would get a decent sized refund from the state as well. This means that his tax refund could be about the size of an extra paycheck. He may want to consider increasing his allowances, which would make his paychecks bigger and his tax refund smaller. That having been said, taxes are high, no doubt about it. Remember that when you are in the voting booth. :) * Here is how I got the taxable income number for the year:" }, { "docid": "349847", "title": "", "text": "Your total salary deferral cannot exceed $18K (as of 2016). You can split it between your different jobs as you want, to maximize the matching. You can contribute non-elective contribution on top of that, which means that your self-proprietorship will commit to paying you that portion regardless of your deferral. That would be on top of the $18K. You cannot contribute more than 20% of your earnings, though. So if you earn $2K, you can add $400 on top of the $18K limit (ignoring the SE tax for a second here). Keep in mind that if you ever have employees, the non-elective contribution will apply to them as well. Also, the total contribution limit from all sources (deferral, matching, non-elective) cannot exceed $53K (for 2016)." }, { "docid": "388713", "title": "", "text": "As a new (very!) small business, the IRS has lots of advice and information for you. Start at https://www.irs.gov/businesses/small-businesses-self-employed and be sure you have several pots of coffee or other appropriate aid against somnolence. By default a single-member LLC is 'disregarded' for tax purposes (at least for Federal, and generally states follow Federal although I don't know Mass. specifically), although it does have other effects. If you go this route you simply include the business income and expenses on Schedule C as part of your individual return on 1040, and the net SE income is included along with your other income (if any) in computing your tax. TurboTax or similar software should handle this for you, although you may need a premium version that costs a little more. You can 'elect' to have the LLC taxed as a corporation by filing form 8832, see https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc . In principle you are supposed to do this when the entity is 'formed', but in practice AIUI if you do it by the end of the year they won't care at all, and if you do it after the end of the year but before or with your first affected return you qualify for automatic 'relief'. However, deciding how to divide the business income/profits into 'reasonable pay' to yourself versus 'dividends' is more complicated, and filling out corporation tax returns in addition to your individual return (which is still required) is more work, in addition to the work and cost of filing and reporting the LLC itself to your state of choice. Unless/until you make something like $50k-100k a year this probably isn't worth it. 1099 Reporting. Stripe qualifies as a 'payment network' and under a recent law payment networks must annually report to IRS (and copy to you) on form 1099-K if your account exceeds certain thresholds; see https://support.stripe.com/questions/will-i-receive-a-1099-k-and-what-do-i-do-with-it . Note you are still legally required to report and pay tax on your SE income even if you aren't covered by 1099-K (or other) reporting. Self-employment tax. As a self-employed person (if the LLC is disregarded) you have to pay 'SE' tax that is effectively equivalent to the 'FICA' taxes that would be paid by your employer and you as an employee combined. This is 12.4% for Social Security unless/until your total earned income exceeds a cap (for 2017 $127,200, adjusted yearly for inflation), and 2.9% for Medicare with no limit (plus 'Additional Medicare' tax if you exceed a higher threshold and it isn't 'repealed and replaced'). If the LLC elects corporation status it has to pay you reasonable wages for your services, and withhold+pay FICA on those wages like any other employer. Estimated payments. You are required to pay most of your individual income tax, and SE tax if applicable, during the year (generally 90% of your tax or your tax minus $1,000 whichever is less). Most wage-earners don't notice this because it happens automatically through payroll withholding, but as self-employed you are responsible for making sufficient and timely estimated payments, and will owe a penalty if you don't. However, since this is your first year you may have a 'safe harbor'; if you also have income from an employer (reported on W-2, with withholding) and that withholding is sufficent to pay last year's tax, then you are exempt from the 'underpayment' penalty for this year. If you elect corporation status then the corporation (which is really just you) must always make timely payments of withheld amounts, according to one of several different schedules that may apply depending on the amounts; I believe it also must make estimated payments for its own liability, if any, but I'm not familiar with that part." }, { "docid": "368938", "title": "", "text": "\"Answers: 1: No, Sections 1291-1298 of the IRC were passed in the Reagan adminstration. 2: Not only can a foreign company like a chocolate company fall afoul of the definition of PFIC because of the \"\"asset test\"\", which you cite, but it can also be called a PFIC because of the \"\"income test\"\". For example, I have shares in a development-stage Canadian biotech which is considered a PFIC because it has no income at all, except for a minor amount of bank interest on its working capital. This company is by no means \"\"passive\"\" (it has run 31 clinical trials in over 1100 human research subjects, burning $250M of investor's money in the process) nor is it an \"\"investment company\"\", but the stupid IRS considers it to be a \"\"passive foreign investment company\"\"! The IRS looks at it and sees only the bank account, and assumes it is a foreign shell corporation set up to shield the bank interest from them. 3: Yes, a foreign mutual fund is EXACTLY what congress intended to be a PFIC when passed IRC 1291-1298. (Biotechs, candy factories, ect got nailed as innocent bystanders.) Note that if you hold a US mutual fund then every year you'll get a form 1099 in the mail. The 1099 will report your share of the mutual fund's own income and capital gains, which you must report on your taxes. (You can also have capital gains from selling your shares of the mutual fund, but that's a different thing.) Now suppose that there was no PFIC law. Then the US investors in the mutual fund would do better if the mutual fund were in a foreign country, for two reasons: a) The fund would no longer distribute 1099's. That means the shareholders wouldn't have to pay tax every year on their proportions of the fund's own income/gains. The money that would have sooner gone to the IRS can sit around for years earning interest. b) The fund could return profits to shareholders exclusively through capital gains rather than dividends, thus ensuring that all of the investors' income on the fund would be taxed at <15%-20% rather than up to 39%. The fund could do this by returning cash to shareholders exclusively through buybacks. However, the US mutual fund industry doesn't want to move the industry to Canada, and it only takes a few newspaper articles about a foreign loophole to make congress spring to action. 4) It depends. If you have a PEDIGREED QEF election in place (as I do for my biotech shares) then form 8621 takes a few minutes by hand. However, this requires both the company and the investor to fully cooperate with congress's vision for PFICs. The company cooperates by providing a so-called \"\"PFIC annual information sheet\"\", which replaces the 1099 form for a US mutual fund. The investor cooperates by having a \"\"QEF election\"\" in place for EACH AND EVERY TAX YEAR in which he held the stock and by reporting the numbers from the PFIC annual information sheet on his return. (Note that the QEF election persists once made, until revoked. There are subtleties here that I am glossing over, since \"\"deemed sale\"\" elections and other means may be used to modify a share's holding period to come into compliance.) Note that there is software coming out to handle PFICs, and that the software makers will already run their software to make your form 8621 for $75 or so. I should also warn you that the blogs of tax accountants and tax lawyers all contradict each other on the basic issue of whether you can take capital losses on PFICs for which you have no form 8621 elections. (See section 2.3 of my notes http://tinyurl.com/mh9vlnr for commentary on this mess.) I do not know if the software people will tell you which elections are best made on form 8621, though, or advise you if it's time to simply dump your investment. The professional software is at 8621.com, and the individual 8621 preparation is at http://expattaxtools.com/?page_id=242. BTW, in case you're interested, I wrote up a very careful analysis of how to deal with the PFIC situation for the small biotech I invested in in certain cases. It is posted http://tinyurl.com/mh9vlnr. (For tax reasons it was quite fortunate that the share price dipped to near an all-time low on Jan 1, 2015, making the (next) 2015 tax year ripe for a so-called \"\"deemed sale\"\" election. This was only possible because the company provides the necessary \"\"PFIC annual information statements\"\", which your chocolate factory may or may not do.)\"" }, { "docid": "535705", "title": "", "text": "The money in the checking account was already taxed. It was income this year or last, or a gift from somebody, or earned interest that will be taxed. If it was a deductible IRA you would declare it next April and get a refund from the government." }, { "docid": "362060", "title": "", "text": "I am not an accountant, but I have a light accounting background, despite being primarily an engineer. I also have a tiny schedule C business which has both better and worse years. I am also in the United States and pay US taxes. I assume you are referring to the US Form 1040 tax return, with the attached Schedule C. However little I know about US taxes, I know nothing about foreign taxes. You are a cash-basis taxpayer, so the transactions that happen in each tax year are based on the cash paid and cash received in that year. You were paid last year, you computed your schedule C based on last year's actual transactions, and you paid taxes on that income. You can not recompute last years schedule C based on the warranty claim. You might want to switch to an accrual accounting method, where you can book allowances for warranty claims. It is more complex, and if your business is spotty and low volume, it may be more trouble than it is worth. At this point, you have two months to look for ways to shift expenses into next year or being income into this year, both of which help offset this loss. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on. This article on LegalZoom (link here) discusses how to apply a significant net operating loss (NOL) in this year to the previous two years, and potentially carry it forward to the next two years. This does involve filing amended returns for the prior two years, showing this year's NOL. For this to be relevant, your schedule C loss this year must exceed your other W2 and self-employment income this year, with other tests also applied. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on." }, { "docid": "585454", "title": "", "text": "Assuming you are being charged sales tax, it all depends on where you take possession of the shipment. Are your suppliers shipping to a US address, say your freight forwarder, from where you handle the ongoing shipment, or directly to you in South America? If the latter, per Michael Pryor's answer, you should not be charged sales tax. If the former, if the address is in a state in which your supplier has a physical location they will have to charge sales tax. That said, your freight forwarder should be able to furnish your supplier with a letter stating that the goods have been exported (with a copy of the relevant Bill of Lading) which will allow your supplier to refund you the taxes (a company I was at before would allow refunds up to two years past the date of sale per various tax regulations). Alternatively, you could see if just a letter of intent from your freight forwarder is enough to not charge you in the first place, but that's technically not proof of exportation. You might be able to get a refund or an exception from the state's tax department directly, but I would recommend going through your supplier - much less hassle." }, { "docid": "371094", "title": "", "text": "This is a common occurrence, I know people who moved and then only remember the next spring during tax season that they never filed a new state version of a W-4. Which means for 3 or 4 months in the new year money is sent to the wrong state capital, and way too much was sent the previous year. In the spring of 2016 you should have filed a non-resident tax form with Michigan. On that form you would specify your total income numbers, your Michigan income numbers, and your other-state income numbers; with Michigan + other equal to total. That should have resulted in getting all the state taxes that were sent to Michigan returned. It is possible that the online software is unable to complete the non-resident tax form. Not all forms and situations can be addressed by the software. So you may need to fill out paper forms. You should be able to find what you need on the state of Michigan website for 2015 Taxes. A quick read shows that you will probably need the Michigan 1040, schedule 1 and Schedule NR You may run into an issue if your license, car registration, voter registration, and other documentation point to you being a resident for the part of the year you earned that income. That means you will have to submit Form 3799 Statement to Determine State of Domicile You want to do this soon because there are deadlines that limit how far back you can files taxes. The state may also get tax information from the IRS and could decide that all your income from 2015 should have applied to them, so they will be sending you a tax bill plus penalties for failure to file." }, { "docid": "110081", "title": "", "text": "\"It really depends on the answers to two questions: 1) How tight is your budget going to be if you have to make that $530 payment every month? Obviously, you'd still be better off than you are now, since that's still $30 cheaper. But, if you're living essentially paycheck to paycheck, then the extra flexibility of the $400/month option can make the difference if something unforeseen happens. 2) How disciplined (financially) have you proven you can be? The \"\"I'll make extra payments every month\"\" sounds real nice, but many people end up not doing it. I should know, I'm one of them. I'm still paying on my student loans because of it. If you know (by having done it before), that you can make that extra $130 go out each and every month and not talk yourself into using it on all sorts of \"\"more important needs\"\", then hey, go for it. Financial flexibility is a great thing, and having that monthly nut (all your minimum living expenses combined) as low as possible contributes greatly to that flexibility. Update: Another thing to consider Another thing to consider is what they do with your extra payment. Will they apply it to the principal, or will they treat it as a prepayment? If they apply it to principal, it'll be just like if you had that shorter term. Your principal goes down additionally by that extra amount, and the next month, you owe another $400. On the other hand, if they treat it as a prepayment, then that extra $130 will be applied to the next month's bill. Principal stays the same, and the next month you'll be billed $270. There are two practical differences for you: 1) With prepayment, you'll pay slightly more interest over that 60 months paying it off. Because it's not amortized into the loan, the principal balance doesn't go down faster while the loan exists. And since interest is calculated on the remaining principal balance, end result is more interest than you otherwise would have paid. That sucks, but: 2) with the prepayment, consider that at the end of year 2, you'd have over 7 months of payments prepaid. So, if some emergency does come up, you don't have to send them any money at all for 7 months. There's that flexibility again. :-) Honestly, while this is something you should find out about the loan, it's really still a wash. I haven't done the math, but with the interest rate, amount of the loan and time frame, I think the extra interest would be pretty minor.\"" }, { "docid": "532629", "title": "", "text": "A simplistic answer would be that it's a multiplier on how much money per paycheck to subtract from your tax withholding (taxes per paycheck), then at the end of the year you will have paid taxes on your income minus the amount of your withholding allowances. If you get a decent (roughly 3% or more of your gross annual salary) refund you are letting the government withhold too much (and should increase your allowances), if you have to pay a decent amount of taxes at the end of the year then the amount withheld is not high enough (and should decrease your allowances). I definitely recommend using the calculator that Stephen Cleary mentions, but I think it's just as easy to adjust it up or down by 1 or 2 each year based on whether you got a large refund, no refund, or paid taxes. If you are disciplined with your money many experts advise to increase withholding allowances, save the extra in a safe short term interest account so that you earn money on your money and not the government." }, { "docid": "458494", "title": "", "text": "\"I find those \"\"government checks\"\" arguments to be more appealing in theory than in reality. Ultimately, it comes down to deciding who gets what... and who gets to be the decider. Capitalism is far from perfect, but it decides who gets what through the individual, decentralized choices of everyone. Again, it's not perfect by any means, but it is dispersed - and everyone makes decisions for themselves, not for other people. Government action decides who gets what through a highly indirect process of electing politicians, and decisions are made by a small group of people, who are under, practically speaking, very little oversight or control. A few people make decisions for everyone else. Government action is, despite all our desire and efforts to avoid this, necessarily subject to the same disparities in influence/control as the market ... It may come in different forms, and the consequences may manifest differently (often less readily apparent), but there is no avoiding the \"\"a few people have a lot more control than everyone else\"\" problem. Governments are more prone to corruption because they trade the intangible currency of \"\"power\"\" in addition to money. No matter how you go about doing so, it's always easier to counteract a private actor than a government (given roughly equivalent levels of influence, obviously). I understand the desire for intervention, but I think we have a scary tendency to place far too much weight on good intentions, and far too little weight on consequences. It's so easy to think things through in your head (I do often) and come up with a plan that could obviously work exactly as intended for everyone's benefit. In doing so, we forget that people aren't pawns to be guided through life for someone else's vision (or pursuit of utopia or anything else) . ... they have lives, desires, interests, plans of their own, and theirs are just as valid as yours or mine. The reality is that you and I are probably far more similar than either of us would guess. But there are still huge differences - what we value, what we want to do next year, whether we want that promotion or want to get laid off so we can finally start our dream business, whether we want money for family vacations or medical bills.... so many differences that I couldn't ever fairly and accurately represent your interests without you actually telling me what they are. That's just the 2 of us. There are 300 million people in the US - we can't comprehend even really knowing a thousand well enough to genuinely speak on their behalf. In theory, big plans make everything better. In practice, they run into the reality that humans truly aren't pawns, and controlling 300 million people and predicting their responses/actions is way more difficult than it seems. Big plans often end up with real people - people who are just as deserving of opportunities and rights as everyone else - getting really hurt because some guy he doesn't know (and who doesn't know him) had an idea and the power to enforce it on everyone. I'm not saying that all government interference is bad, of course, and I'm not saying it shouldn't happen. Government interventions that are straightforward wealth transfers are probably less harmful to people ... like a tax on the rich to give hefty tax refunds to the poor, is more direct and less prone to causing unintentional harm then things like wage manipulations.\"" } ]

[ { "docid": "34913", "title": "", "text": "It is a bad deal. It saves the government from processing your refund as a check or an ACH deposit, and lets them keep your money -- money that they overwithheld! -- interest-free for another year. Get it back. :)" } ]

[ { "docid": "261989", "title": "", "text": "Bank products have been pretty common with tax refunds as well, and they are also being heavily scrutinized for the same reasons. Refund Anticipation Loans (RALs) have been outlawed for future tax seasons due to lack of consumer protection. What is a bank product, you might ask? Rather than waiting 7-14 days for the a direct deposit from the IRS, a lot of places like H+R Block and Jackson Hewitt would offer a bank product to get you money quicker. For this service, they charge a fee (usually $99-$149) which is grossly overpriced for how little work it takes, but if your refund is several thousand dollars, you may not care. A Refund Anticipation Loan was the most predatory bank product, as it was an advance on your loan for the amount your expected refund. However, if there were any errors in your return and the IRS decided your refund was less than what your tax preparer calculated it to be, you were stuck with paying back the advance amount, leaving you to foot the bill for whatever errors your preparer may have made. These loans also had very high interest rates, since usually the people that wanted RALs were also the same people that rely upon cash advances. There are also Electronic Refund Checks (which ironically are paper checks for the consumer, not electronic deposits), direct deposits, and prepaid debit cards. Despite the fact that these same methods of refund payments are offered by the IRS themselves, preparers and banks alike sold these to collect fees for essentially no work. I'm not sure how similar these bank products for student loans are, but I wanted to shed some light on them anyways. Regardless of how badly you need money, **do not ever accept money through a bank product.** If it benefited you more, banks and preparers would not offer these. (Source: telemarketing at a tax preparation software company)" }, { "docid": "235825", "title": "", "text": "You have multiple things going on some of which will work in opposite directions. This is a second job for the family so that their income will be added onto of the main income. This generally means that the 2nd income has too little tax withheld. The tax tables used by employers have no way of handling this situation. This 2nd job is being started part way though the tax year, so too much in taxes is withheld. If they make 2,000 a month for 4 months that would mean 8,000 in income; but the tax tables used by the employer withhold at the $24,000 per year rate. The third issue is the great variation in the number of hours per pay period. This means that too much is withheld in checks with the most hours, and too little in the ones with the least hours. For this year you have a reprieve. As long as you make the safe-harbor levels for federal withholding, you can avoid penalties when you file next spring. To do so just make sure that the withholding of all the jobs in the family equal or exceed the total income tax for the family last year. Note this isn't equal to last years withholding, or equal to the refund last year, but the total tax you should have paid. The general advice is to set the smaller income to have 0 exemptions, and use the W-4 for the larger income to make adjustments. In the past I have done this to make sure that we make the safe-harbor level. You can make adjustments in the new year once you know what the safe harbor goal is for the rest of the year." }, { "docid": "29024", "title": "", "text": "\"As with many questions here, while littleadv is correct, the real answer is \"\"each bank may handle this differently.\"\" In my case, I was experimenting with my balance to see the impact of utilization, and I overpaid the current bill before the bill was issued. The prior balance was paid, but then I sent a payment to bring my account to a credit balance. Further down the statement appears the line - Your account has a credit balance. We can hold and apply this balance against future purchases and cash advances, or refund it. If you would like a check mailed to you in the amount of the credit balance, simply call us and speak to a representative. You can also see that the \"\"revolving credit available\"\" is above the line of credit, implying that someone with a $5000 credit line wanting to charge a $6000 engagement ring can send a higher payment to the account and then make that charge.\"" }, { "docid": "573523", "title": "", "text": "\"I'll assume United States as the country; the answer may (probably does) vary somewhat if this is not correct. Also, I preface this with the caveat that I am neither a lawyer nor an accountant. However, this is my understanding: You must recognize the revenue at the time the credits are purchased (when money changes hands), and charge sales tax on the full amount at that time. This is because the customer has pre-paid and purchased a service (i.e. the \"\"credits\"\", which are units of time available in the application). This is clearly a complete transaction. The use of the credits is irrelevant. This is equivalent to a customer purchasing a box of widgets for future delivery; the payment is made and the widgets are available but have simply not been shipped (and therefore used). This mirrors many online service providers (say, NetFlix) in business model. This is different from the case in which a customer purchases a \"\"gift card\"\" or \"\"reloadable debit card\"\". In this case, sales tax is NOT collected (because this is technically not a purchase). Revenue is also not booked at this time. Instead, the revenue is booked when the gift card's balance is used to pay for a good or service, and at that time the tax is collected (usually from the funds on the card). To do otherwise would greatly complicate the tax basis (suppose the gift card is used in a different state or county, where sales tax is charged differently? Suppose the gift card is used to purchase a tax-exempt item?) For justification, see bankruptcy consideration of the two cases. In the former, the customer has \"\"ownership\"\" of an asset (the credits), which cannot be taken from him (although it might be unusable). In the latter, the holder of the debit card is technically an unsecured creditor of the company - and is last in line if the company's assets are liquidated for repayment. Consider also the case where the cost of the \"\"credits\"\" is increased part-way through the year (say, from $10 per credit to $20 per credit) or if a discount promotion is applied (buy 5 credits, get one free). The customer has a \"\"tangible\"\" item (one credit) which gets the same functionality regardless of price. This would be different if instead of \"\"credits\"\" you instead maintain an \"\"account\"\" where the user deposited $1000 and was billed for usage; in this case you fall back to the \"\"gift card\"\" scenario (but usage is charged at the current rate) and revenue is booked when the usage is purchased; similarly, tax is collected on the purchase of the service. For this model to work, the \"\"credit\"\" would likely have to be refundable, and could not expire (see gift cards, above), and must be usable on a variety of \"\"services\"\". You may have particular responsibility in the handling of this \"\"deposit\"\" as well.\"" }, { "docid": "419768", "title": "", "text": "If you get 1099-G for state tax refund, you need to declare it as income only if you took deduction on state taxes in the prior year. I.e.: if you took standard deductions - you don't need to declare the refund as income. If you did itemize, you have to declare the refund as income, and deduct the taxes paid last year on your schedule A. If this year you're not itemizing - you lost the tax benefit. If it was not clear from my answer - the taxes paid and the refund received are unrelated. The fact that you paid tax and received refund in the same year doesn't make them in any way related, even if both refer to the same taxable year." }, { "docid": "532629", "title": "", "text": "A simplistic answer would be that it's a multiplier on how much money per paycheck to subtract from your tax withholding (taxes per paycheck), then at the end of the year you will have paid taxes on your income minus the amount of your withholding allowances. If you get a decent (roughly 3% or more of your gross annual salary) refund you are letting the government withhold too much (and should increase your allowances), if you have to pay a decent amount of taxes at the end of the year then the amount withheld is not high enough (and should decrease your allowances). I definitely recommend using the calculator that Stephen Cleary mentions, but I think it's just as easy to adjust it up or down by 1 or 2 each year based on whether you got a large refund, no refund, or paid taxes. If you are disciplined with your money many experts advise to increase withholding allowances, save the extra in a safe short term interest account so that you earn money on your money and not the government." }, { "docid": "312493", "title": "", "text": "When you itemize your deductions, you get to deduct all the state income tax that was taken out of your paycheck last year (not how much was owed, but how much was withheld). If you deducted this last year, then you need to add in any amount that you received in state income tax refunds last year to your taxes this year, to make up for the fact that you ended up deducting more state income tax than was really due to the state. If you took the standard deduction last year instead of itemizing, then you didn't deduct your state income tax withholding last year and you don't need to claim your refund as income this year. Also, if you itemized, but chose to take the state sales tax deduction instead of the state income tax deduction, you also don't need to add in the refund as income. For whatever reason, Illinois decided that you don't get a 1099-G. It might be that the amount of the refund was too small to warrant the paperwork. It might be that they screwed up. But if you deducted your state income tax withholding on last year's tax return, then you need to add the state tax refund you got last year on line 10 of this year's 1040, whether or not the state issued you a form or not. Take a look at the Line 10 instructions starting on page 22 of the 1040 instructions to see if you have any unusual situations covered there that you didn't mention here. (For example, if you received a refund check for multiple years last year.) Then check your tax return from last year to verify that you deducted your state income tax withholding on Schedule A. If you did, then this year add the refund you got from the state to line 10 of this year's 1040." }, { "docid": "111531", "title": "", "text": "\"From what you've described, your spouse is a non-resident alien for US tax purposes. You have two choices: Use the Nonresident Spouse Treated As Resident election and file as Married Filing Jointly. Since your spouse doesn't have, and doesn't currently qualify for, an SSN, he/she will need to apply for an ITIN together with the tax filing. Note that by becoming a resident alien, your spouse's worldwide income the whole year would be subject to US taxes, and would need to be reported on your joint tax filing, though he/she will be able to use the Foreign Earned Income Exclusion to exclude $100k of her foreign earned income, since he/she will have been out of the US for 330 days in a 12-month period. Or, file as Married Filing Separately. You write \"\"NRA\"\" for your spouse's SSN on your tax return. As a nonresident alien, if your spouse doesn't have any US income, he/she doesn't have to file a US tax return, and doesn't need to apply for an ITIN. Which one is better is up to you to figure out.\"" }, { "docid": "481283", "title": "", "text": "Eric is right regarding the tax, i.e. ordinary income on discount, cap gain treatment on profit whether long term or short. I would not let the tax tail wag the investing dog. If you would be a holder of the stock, hold on, if not, sell. You are considering a 10-15% delta on the profit to make the decision. Now. I hear you say your wife hasn't worked which potentially puts you in a lower bracket this year. I wrote Topping off your bracket with a Roth Conversion which would help your tax situation long term. Simply put, you convert enough Traditional IRA (or 401(k) money) to use up some of the current bracket you are in, but not hit the next. This may not apply to you, depending on whether you have retirement funds to do this. Note - The cited article offers numbers for a single person, but illustrates the concept. See the tax table for the marginal rates that would apply to you." }, { "docid": "546634", "title": "", "text": "\"I was in the health insurance game for 10 years and never heard of this until the Affordable Care Act came about. To my knowledge, there is no rule or regulation prohibiting it, however trying to get an insurer underwrite that risk is extremely unlikely. It's the same reason why you don't see AAA offering health insurance. There isn't a contractual relationship between the church and their constituents, so no underwriter worth their salt would put a reasonable price on that risk. Members can easily come and go, and since insurance through your employer is still the dominant distribution channel for health insurance, it would be seen as an adverse risk, meaning that people who couldn't get it through \"\"normal\"\" channels must be getting it through the church, which it would then be assumed that this person applying for coverage is an \"\"adverse risk\"\" or someone who is abnormally unhealthy. There are faith-based healthcare reimbursement programs that are NOT health insurance and do not satisfy the ACA required minimum coverages. From what I've seen and read, it's basically members of the religion or faith that pay money into the system (like paying an insurance premium) and they elect a board that basically evaluates each claim and pays or doesn't pay it, either partially or in full. While this is a nice way to get your bills paid, odds are it won't cover your $300,000 cancer treatment or your $50,000 cesarean section birth.\"" }, { "docid": "533589", "title": "", "text": "Suppose you have been paying interest on previous charges in the past. Your monthly statement is issued on April 12, and (since you just received your income tax refund), you pay it off in full on April 30. You don't charge anything to the card at all after April 12. Thus, on April 30, your credit card balance shows as zero since you just paid it off. But your April 12 statement billed you for interest only till April 12. So, on May 12, your next monthly bill will be for the interest for your nonzero balance from April 13 through April 30. Assuming that you still are not making any new charges on your card and pay off the May 12 bill in timely fashion, you will finally have a zero bill on June 12. What if you charge new items to your credit card after April 12? Well, your balance stopped revolving on April 30, and that's when interest is no longer charged on the new charges. But you do owe interest for a charge on April 13 (say) until April 30 when your balance is no longer revolving, and this will be added to your bill on May 12. Purchases made after April 30 will not be charged interest unless you fall off the wagon again and don't pay your May 12 bill in full by the due date of the bill (some time in early June)." }, { "docid": "517748", "title": "", "text": "\"Federal tax refund is taxes you've overpaid. What you're saying is that this year you overpaid less than before. I don't understand why you see this is as a bad thing. Optimal situation is when you have no refunds and no taxes due on tax day, but it is really hard to get there. But the closer you can get - the better, which means that reducing your refund should be your goal. In any case, \"\"Federal Tax Refund\"\" is meaningless, what you need to look at is your actual taxes due. This is the number you should be working to reduce. Is it possible to shift the amounts on a W-2 (with correct adjustments) to tax all of your wages, instead of leaving some of it deducted pre-tax? Why would you want to pay more tax? If your goal is to have a refund (I.e.: it is your way of forcing yourself to save), then you need to recalculate the numbers and adjust your W4 taking the (pre-tax) FSA into account. If it is not the goal, then you should be looking at the total taxes owed, not the refund, and adjust your W4 so that your withholding would cover the taxes owed as closely as possible. And to answer your question, after all this - of course it is possible. But it is wrong, and will indeed likely to trigger an audit. You can write whatever you want on your tax return, but in the end of it, you sign under the penalty of perjury that what you filled is the correct information. Perjury is a Federal felony, and knowingly filing incorrect tax return is fraud (especially since your motive is to gain, even though you're not actually gaining anything). Fraudulent tax returns can be audited any time (no statute of limitations).\"" }, { "docid": "99233", "title": "", "text": "\"This has to do with the type of plan offered: is it a 401(k) plan or a profit-sharing plan, or both? If it's 401(k) I believe the IRS will see this distribution as elective and count towards the employee's annual elective contribution limit. If it's profit sharing the distribution would be counted toward the employer's portion of the limit. However -- profit sharing plans have a formula that's standard across the board and applied to all employees. i.e. 3% of company profits given equally to all employees. One of the benefits of the profit sharing plans is also that you can use a vesting schedule. I'd consult your accountant to see how this specifically impacts your business - but in the case you describe this sounds like an elective deferral choice by an employee and I don't see how (or why) you'd make this decision for them. Give them the bonus and let them choose how it's paid out. Edit: in re-reading your question it actually sounds like you're wanting to setup a profit sharing type situation - but again, heed what I said above. You decide the amount of \"\"profit\"\" - but you also have to set an equation that applies across the board. There is more complication to it than this brief explanation and I'd consult your accountant to see how it applies in your situation.\"" }, { "docid": "193717", "title": "", "text": "\"You mention \"\"early exercise\"\" in your title, but you seem to misunderstand what early exercise really means. Some companies offer stock options that vest over a number of years, but which can be exercised before they are vested. That is early exercise. You have vested stock options, so early exercise is not relevant. (It may or may not be the case that your stock options could have been early exercised before they vested, but regardless, you didn't exercise them, so the point is moot.) As littleadv said, 83(b) election is for restricted stocks, often from exercising unvested stock options. Your options are already vested, so they won't be restricted stock. So 83(b) election is not relevant for you. A taxable event happen when you exercise. The point of the 83(b) election is that exercising unvested stock options is not a taxable event, so 83(b) election allows you to force it to be a taxable event. But for you, with vested stock options, there is no need to do this. You mention that you want it not to be taxable upon exercise. But that's what Incentive Stock Options (ISOs) are for. ISOs were designed for the purpose of not being taxable for regular income tax purposes when you exercise (although it is still taxable upon exercise for AMT purposes), and it is only taxed when you sell. However, you have Non-qualified Stock Options. Were you given the option to get ISOs at the beginning? Why did your company give you NQSOs? I don't know the specifics of your situation, but since you mentioned \"\"early exercise\"\" and 83(b) elections, I have a hypothesis as to what might have happened. For people who early-exercise (for plans that allow early-exercise), there is a slight advantage to having NQSOs compared to ISOs. This is because if you early exercise immediately upon grant and do 83(b) election, you pay no taxes upon exercise (because the difference between strike price and FMV is 0), and there are no taxes upon vesting (for regular or AMT), and if you hold it for at least 1 year, upon sale it will be long-term capital gains. On the other hand, for ISOs, it's the same except that for long-term capital gains, you have to hold it 2 years after grant and 1 year after exercise, so the period for long-term capital gains is longer. So companies that allow early exercise will often offer employees either NQSOs or ISOs, where you would choose NQSO if you intend to early-exercise, or ISO otherwise. If (hypothetically) that's what happened, then you chose wrong because you got NQSOs and didn't early exercise.\"" }, { "docid": "481339", "title": "", "text": "There's an odd anomaly that often occurs with shares acquired through company plans via ESPP or option purchase. The general situation is that the share value above strike price or grant price may become ordinary income, but a sale below the price at day the shares are valued is a capital loss. e.g. in an ESPP offering, I have a $10 purchase price, but at the end of the offering, the shares are valued at $100. Unless I hold the shares for an additional year, the sale price contains ordinary W2 income. So, if I see the shares falling and sell for $50, I have a tax bill for $90 of W2 income, but a $50 capital loss. Tax is due on $90 (and for 1K shares, $90,000 which can be a $30K hit) but that $50K loss can only be applied to cap gains, or $3K/yr of income. In the dotcom bubble, there were many people who had million dollar tax bills and the value of the money netted from the sale couldn't even cover the taxes. And $1M in losses would take 300 years at $3K/yr. The above is one reason the lockup date expiration is why shares get sold. And one can probably profit on the bigger companies stock. Edit - see Yelp down 3% following expiration of 180 day IPO lock-up period, for similar situation." }, { "docid": "306059", "title": "", "text": "It sounds like the postage amount was paid to you rather than returned. If it had been returned and the payment originated on the card, they would have to return it to the card. If it was processed as a payment, it looks like someone is giving you money. PayPal can't credit it to the card, as the sender could request a refund. If PayPal put the money on the card against a previous payment, then they wouldn't be able to refund. If they add money to your bank account, then they can withdraw it if a refund is required. One reason that you might get a payment is if you were being reimbursed for spending money outside of PayPal. If the amount is more than you originally paid, they can't put it on your card. They can only refund to the card. They can't deposit to it. If you don't want to give them your bank account information, you can just wait until the next time you use PayPal and use your balance to pay. Then you can bill the remainder to your credit card. If you don't normally use PayPal and just want your money back, you can process a chargeback through your credit card. Note that this would probably annoy PayPal, as it costs them aggravation and potentially money. To do this, you must have paid the postage with your credit card originally. If you spent money outside PayPal and were reimbursed through PayPal, then there's nothing to chargeback. In that circumstance, you'd have to accept one of their options: pay with balance or deposit to bank account." }, { "docid": "585454", "title": "", "text": "Assuming you are being charged sales tax, it all depends on where you take possession of the shipment. Are your suppliers shipping to a US address, say your freight forwarder, from where you handle the ongoing shipment, or directly to you in South America? If the latter, per Michael Pryor's answer, you should not be charged sales tax. If the former, if the address is in a state in which your supplier has a physical location they will have to charge sales tax. That said, your freight forwarder should be able to furnish your supplier with a letter stating that the goods have been exported (with a copy of the relevant Bill of Lading) which will allow your supplier to refund you the taxes (a company I was at before would allow refunds up to two years past the date of sale per various tax regulations). Alternatively, you could see if just a letter of intent from your freight forwarder is enough to not charge you in the first place, but that's technically not proof of exportation. You might be able to get a refund or an exception from the state's tax department directly, but I would recommend going through your supplier - much less hassle." }, { "docid": "438778", "title": "", "text": "Craig touched on it, but let me expand on the point. Deposits, by definition, are withheld at your marginal rate. And since you can choose Roth vs Traditional right till filing time, you know with certainty the rate you are at each year. Absent any other retirement income, i.e. no pension, and absent an incredibly major change to our tax code, I know your starting rate, zero. The first $10K or so per person is part of their standard deduction and exemption. For a couple, the next $18k is taxed at 10%, and so on. Let me stop here to expand this important point. This is $38,000 for the couple, and the tax on it is less than $1900. 5%. There is no 5% bracket of course. It's the first $20K with zero tax, and that first $18,000 taxed at 10%. That $38,000 takes nearly $1M in pretax accounts to offer as an annual withdrawal. The 15% bracket starts after this, and applies to the next $57K of withdrawals each year. Over $95K in gross withdrawals of pretax money, and you still aren't in the 25% bracket. This is why 100% in traditional, or 100% in Roth aren't either ideal. I continue to offer the example I consider more optimizing - using Roth for income that would otherwise be taxed at 15%, but going pretax when you hit 25%. Then at retirement, you withdraw enough traditional to just stay at 10 or 15% and Roth for the rest. It would be a shame to retire 100% Roth and realize you paid 25% but now have no income to use up those lower brackets. Oddly, time value of money isn't part of my analysis. It makes no difference. And note, the exact numbers do change a bit each year for inflation. There's a also a good chance the exemptions goes away in favor of a huge increased standard deduction." }, { "docid": "191704", "title": "", "text": "The short answer is no - the CGT discount is only applied against your net capital gain. So your net capital gain would be: $25,000 - $5,000 = $20,000 Your CGT discount is $10,000 You will then pay CGT on $10,000 Of course you could sell ABC in this financial year and sell DEF next financial year. If you had no other share activities next financial year than that net capital loss can be carried forward to a future year. In that case your net capital gain this year would be $25,000 Your CGT discount is $12,500 You will then pay CGT on $12,500 Next year if oyu sell DEF, you'll have a $5000 net capital loss which you can carry forward to a future year as an offset against capital gains. Reference: https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-loss/Working-out-your-net-capital-gain-or-loss/" } ]

[ { "docid": "398622", "title": "", "text": "If you expect your taxes to be higher next year, it saves you the trouble of sending estimates or changing the withholding levels. But yes, its basically a free loan you're giving to the government." } ]

[ { "docid": "175951", "title": "", "text": "Unfortunately, the tax system in the U.S. is probably more complicated than it looks to you right now. First, you need to understand that there will be taxes withheld from your paycheck, but the amount that they withhold is simply a guess. You might pay too much or too little tax during the year. After the year is over, you'll send in a tax return form that calculates the correct tax amount. If you have paid too little over the year, you'll have to send in the rest, but if you've paid too much, you'll get a refund. There are complicated formulas on how much tax the employer withholds from your paycheck, but in general, if you don't have extra income elsewhere that you need to pay tax on, you'll probably be close to breaking even at tax time. When you get your paycheck, the first thing that will be taken off is FICA, also called Social Security, Medicare, or the Payroll tax. This is a fixed 7.65% that is taken off the gross salary. It is not refundable and is not affected by any allowances or deductions, and does not come in to play at all on your tax return form. There are optional employee benefits that you might need to pay a portion of if you are going to take advantage of them, such as health insurance or retirement savings. Some of these deductions are paid with before-tax money, and some are paid with after tax money. The employer will calculate how much money they are supposed to withhold for federal and state taxes (yes, California has an income tax), and the rest is yours. At tax time, the employer will give you a form W-2, which shows you the amount of your gross income after all the before-tax deductions are taken out (which is what you use to calculate your tax). The form also shows you how much tax you have paid during the year. Form 1040 is the tax return that you use to calculate your correct tax for the year. You start with the gross income amount from the W-2, and the first thing you do is add in any income that you didn't get a W-2 for (such as interest or investment income) and subtract any deductions that you might have that are not taxable, but were not paid through your paycheck (such as moving expenses, student loan interest, tuition, etc.) The result is called your adjusted gross income. Next, you take off the deductions not covered in the above section (property tax, home mortgage interest, charitable giving, etc.). You can either take the standard deduction ($6,300 if you are single), or if you have more deductions in this category than that, you can itemize your deductions and declare the correct amount. After that, you subtract more for exemptions. You can claim yourself as an exemption unless you are considered a dependent of someone else and they are claiming you as a dependent. If you claim yourself, you take off another $4,000 from your income. What you are left with is your taxable income for the year. This is the amount you would use to calculate your tax based on the bracket table you found. California has an income tax, and just like the federal tax, some state taxes will be deducted from your paycheck, and you'll need to fill out a state tax return form after the year is over to calculate the correct state tax and either request a refund or pay the remainder of the tax. I don't have any experience with the California income tax, but there are details on the rates on this page from the State of California." }, { "docid": "113876", "title": "", "text": "\"I think the £35K band applies to the \"\"dividend income\"\" not the \"\"dividend paid to you\"\", and so you would only actually get £31.5K (90% of £35K) in your pocket before the next tax band kicked in. If your company will only supplying large VAT registered entities, then register for VAT yourself and elect the Flat Rate scheme - depending on your area of business, given that you have no expenses, your company will get an extra 7% - 14% on its income for free. Your clients won't care that you charge them VAT because they'll claim it back. Finally, depending on what your company is for, beware of the dreaded IR35\"" }, { "docid": "438778", "title": "", "text": "Craig touched on it, but let me expand on the point. Deposits, by definition, are withheld at your marginal rate. And since you can choose Roth vs Traditional right till filing time, you know with certainty the rate you are at each year. Absent any other retirement income, i.e. no pension, and absent an incredibly major change to our tax code, I know your starting rate, zero. The first $10K or so per person is part of their standard deduction and exemption. For a couple, the next $18k is taxed at 10%, and so on. Let me stop here to expand this important point. This is $38,000 for the couple, and the tax on it is less than $1900. 5%. There is no 5% bracket of course. It's the first $20K with zero tax, and that first $18,000 taxed at 10%. That $38,000 takes nearly $1M in pretax accounts to offer as an annual withdrawal. The 15% bracket starts after this, and applies to the next $57K of withdrawals each year. Over $95K in gross withdrawals of pretax money, and you still aren't in the 25% bracket. This is why 100% in traditional, or 100% in Roth aren't either ideal. I continue to offer the example I consider more optimizing - using Roth for income that would otherwise be taxed at 15%, but going pretax when you hit 25%. Then at retirement, you withdraw enough traditional to just stay at 10 or 15% and Roth for the rest. It would be a shame to retire 100% Roth and realize you paid 25% but now have no income to use up those lower brackets. Oddly, time value of money isn't part of my analysis. It makes no difference. And note, the exact numbers do change a bit each year for inflation. There's a also a good chance the exemptions goes away in favor of a huge increased standard deduction." }, { "docid": "52438", "title": "", "text": "\"Highly Compensated Employee Rules Aim to Make 401k's Fair would be the piece that I suspect you are missing here. I remember hearing of this rule when I worked in the US and can understand why it exists. A key quote from the article: You wouldn't think the prospect of getting money from an employer would be nerve-wracking. But those jittery co-workers are highly compensated employees (HCEs) concerned that they will receive a refund of excess 401k contributions because their plan failed its discrimination test. A refund means they will owe more income tax for the current tax year. Geersk (a pseudonym), who is also an HCE, is in information services and manages the computers that process his firm's 401k plan. 401(k) - Wikipedia reference on this: To help ensure that companies extend their 401(k) plans to low-paid employees, an IRS rule limits the maximum deferral by the company's \"\"highly compensated\"\" employees, based on the average deferral by the company's non-highly compensated employees. If the less compensated employees are allowed to save more for retirement, then the executives are allowed to save more for retirement. This provision is enforced via \"\"non-discrimination testing\"\". Non-discrimination testing takes the deferral rates of \"\"highly compensated employees\"\" (HCEs) and compares them to non-highly compensated employees (NHCEs). An HCE in 2008 is defined as an employee with compensation of greater than $100,000 in 2007 or an employee that owned more than 5% of the business at any time during the year or the preceding year.[13] In addition to the $100,000 limit for determining HCEs, employers can elect to limit the top-paid group of employees to the top 20% of employees ranked by compensation.[13] That is for plans whose first day of the plan year is in calendar year 2007, we look to each employee's prior year gross compensation (also known as 'Medicare wages') and those who earned more than $100,000 are HCEs. Most testing done now in 2009 will be for the 2008 plan year and compare employees' 2007 plan year gross compensation to the $100,000 threshold for 2007 to determine who is HCE and who is a NHCE. The threshold was $110,000 in 2010 and it did not change for 2011. The average deferral percentage (ADP) of all HCEs, as a group, can be no more than 2 percentage points greater (or 125% of, whichever is more) than the NHCEs, as a group. This is known as the ADP test. When a plan fails the ADP test, it essentially has two options to come into compliance. It can have a return of excess done to the HCEs to bring their ADP to a lower, passing, level. Or it can process a \"\"qualified non-elective contribution\"\" (QNEC) to some or all of the NHCEs to raise their ADP to a passing level. The return of excess requires the plan to send a taxable distribution to the HCEs (or reclassify regular contributions as catch-up contributions subject to the annual catch-up limit for those HCEs over 50) by March 15 of the year following the failed test. A QNEC must be an immediately vested contribution. The annual contribution percentage (ACP) test is similarly performed but also includes employer matching and employee after-tax contributions. ACPs do not use the simple 2% threshold, and include other provisions which can allow the plan to \"\"shift\"\" excess passing rates from the ADP over to the ACP. A failed ACP test is likewise addressed through return of excess, or a QNEC or qualified match (QMAC). There are a number of \"\"safe harbor\"\" provisions that can allow a company to be exempted from the ADP test. This includes making a \"\"safe harbor\"\" employer contribution to employees' accounts. Safe harbor contributions can take the form of a match (generally totaling 4% of pay) or a non-elective profit sharing (totaling 3% of pay). Safe harbor 401(k) contributions must be 100% vested at all times with immediate eligibility for employees. There are other administrative requirements within the safe harbor, such as requiring the employer to notify all eligible employees of the opportunity to participate in the plan, and restricting the employer from suspending participants for any reason other than due to a hardship withdrawal.\"" }, { "docid": "427997", "title": "", "text": "\"typically, your employer will automatically stop making contributions once you hit the 18k$ limit. it is worth noting that employer contributions (e.g. \"\"matching\"\") do not count towards the 18k$ employee pre-tax contribution limit. however, if you have 2 employers during the year their combined payroll deductions might exceed the limit if you do not inform your later employer of the contributions you made at your former employer (or they ignore the info). in which case, you must request a refund of \"\"excess contributions\"\" from one of the plans (your choice). you must report the refund as taxable income on your taxes. if you do not make this request by the time you file your taxes, the tax man will reject your filing and \"\"adjust\"\" your return with more taxes and penalties. sometimes requesting a refund of excess contributions might cause your employer to remove \"\"matching\"\" funds, but i am not clear on the rules behind that. there are some 401k plans that allow \"\"supplemental after-tax contributions\"\" up to the combined employee/employer limit (53k$ in 2015 and 2016). it is a rare feature, and if your company offers it, you probably already know. however, generally it is governed by a separate contribution election that only take effect once you hit the employee pre-tax contribution limit (18k$ in 2015 and 2016). you could ask your hr department to be sure. 401k plans can be changed if there is enough employee demand for a rule change. especially in a small company, simply asking for them to allow dollar based contributions instead of percent based contributions can cause them to change the plan to allow it. similarly, you could request they allow \"\"supplemental after-tax contributions\"\", but that might be a harder change to get.\"" }, { "docid": "481283", "title": "", "text": "Eric is right regarding the tax, i.e. ordinary income on discount, cap gain treatment on profit whether long term or short. I would not let the tax tail wag the investing dog. If you would be a holder of the stock, hold on, if not, sell. You are considering a 10-15% delta on the profit to make the decision. Now. I hear you say your wife hasn't worked which potentially puts you in a lower bracket this year. I wrote Topping off your bracket with a Roth Conversion which would help your tax situation long term. Simply put, you convert enough Traditional IRA (or 401(k) money) to use up some of the current bracket you are in, but not hit the next. This may not apply to you, depending on whether you have retirement funds to do this. Note - The cited article offers numbers for a single person, but illustrates the concept. See the tax table for the marginal rates that would apply to you." }, { "docid": "464593", "title": "", "text": "\"The pure numbers answer says you want the refund to be close to $0. You can even argue, as some answers have, that you want to try to maximize the payment without receiving any sanctions for underpaying during the year. If you trace the money, it's easy to see why. Let's say you get a paycheck. Tag some of the dollars for Uncle Sam. These are the dollars that, eventually, will be given to the IRS. Now consider the following scenarios: From the raw numbers like this, its clear that you lose utility by setting yourself up for a large refund check. The money was yours the entire time, but you chose to give it to Uncle Sam instead. However, the raw numbers are only part of the puzzle. If you're a cold steely-gazed numbers person, they're the part that matters. When the billionares are playing their tax evasion games, this is the only thing they are paying attention to. However, real humans have a few psychological reasons they may choose to lose utility in terms of raw dollars in exchange for psychological assistance: These attitudes exist, and may be ideal for any one person. Obviously the financially savvy answer of \"\"minimize your refund\"\" is the ideal answer from a dollars and cents perspective, but its up to you to see whether that attitude is right when you account for all of the non-measurable things, like stress. In general, I would lead anyone to \"\"minimize your refund,\"\" but I would be remiss if I didn't include the very real psychological reasons people choose to deviate from it.\"" }, { "docid": "535705", "title": "", "text": "The money in the checking account was already taxed. It was income this year or last, or a gift from somebody, or earned interest that will be taxed. If it was a deductible IRA you would declare it next April and get a refund from the government." }, { "docid": "362060", "title": "", "text": "I am not an accountant, but I have a light accounting background, despite being primarily an engineer. I also have a tiny schedule C business which has both better and worse years. I am also in the United States and pay US taxes. I assume you are referring to the US Form 1040 tax return, with the attached Schedule C. However little I know about US taxes, I know nothing about foreign taxes. You are a cash-basis taxpayer, so the transactions that happen in each tax year are based on the cash paid and cash received in that year. You were paid last year, you computed your schedule C based on last year's actual transactions, and you paid taxes on that income. You can not recompute last years schedule C based on the warranty claim. You might want to switch to an accrual accounting method, where you can book allowances for warranty claims. It is more complex, and if your business is spotty and low volume, it may be more trouble than it is worth. At this point, you have two months to look for ways to shift expenses into next year or being income into this year, both of which help offset this loss. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on. This article on LegalZoom (link here) discusses how to apply a significant net operating loss (NOL) in this year to the previous two years, and potentially carry it forward to the next two years. This does involve filing amended returns for the prior two years, showing this year's NOL. For this to be relevant, your schedule C loss this year must exceed your other W2 and self-employment income this year, with other tests also applied. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on." }, { "docid": "29024", "title": "", "text": "\"As with many questions here, while littleadv is correct, the real answer is \"\"each bank may handle this differently.\"\" In my case, I was experimenting with my balance to see the impact of utilization, and I overpaid the current bill before the bill was issued. The prior balance was paid, but then I sent a payment to bring my account to a credit balance. Further down the statement appears the line - Your account has a credit balance. We can hold and apply this balance against future purchases and cash advances, or refund it. If you would like a check mailed to you in the amount of the credit balance, simply call us and speak to a representative. You can also see that the \"\"revolving credit available\"\" is above the line of credit, implying that someone with a $5000 credit line wanting to charge a $6000 engagement ring can send a higher payment to the account and then make that charge.\"" }, { "docid": "371094", "title": "", "text": "This is a common occurrence, I know people who moved and then only remember the next spring during tax season that they never filed a new state version of a W-4. Which means for 3 or 4 months in the new year money is sent to the wrong state capital, and way too much was sent the previous year. In the spring of 2016 you should have filed a non-resident tax form with Michigan. On that form you would specify your total income numbers, your Michigan income numbers, and your other-state income numbers; with Michigan + other equal to total. That should have resulted in getting all the state taxes that were sent to Michigan returned. It is possible that the online software is unable to complete the non-resident tax form. Not all forms and situations can be addressed by the software. So you may need to fill out paper forms. You should be able to find what you need on the state of Michigan website for 2015 Taxes. A quick read shows that you will probably need the Michigan 1040, schedule 1 and Schedule NR You may run into an issue if your license, car registration, voter registration, and other documentation point to you being a resident for the part of the year you earned that income. That means you will have to submit Form 3799 Statement to Determine State of Domicile You want to do this soon because there are deadlines that limit how far back you can files taxes. The state may also get tax information from the IRS and could decide that all your income from 2015 should have applied to them, so they will be sending you a tax bill plus penalties for failure to file." }, { "docid": "235825", "title": "", "text": "You have multiple things going on some of which will work in opposite directions. This is a second job for the family so that their income will be added onto of the main income. This generally means that the 2nd income has too little tax withheld. The tax tables used by employers have no way of handling this situation. This 2nd job is being started part way though the tax year, so too much in taxes is withheld. If they make 2,000 a month for 4 months that would mean 8,000 in income; but the tax tables used by the employer withhold at the $24,000 per year rate. The third issue is the great variation in the number of hours per pay period. This means that too much is withheld in checks with the most hours, and too little in the ones with the least hours. For this year you have a reprieve. As long as you make the safe-harbor levels for federal withholding, you can avoid penalties when you file next spring. To do so just make sure that the withholding of all the jobs in the family equal or exceed the total income tax for the family last year. Note this isn't equal to last years withholding, or equal to the refund last year, but the total tax you should have paid. The general advice is to set the smaller income to have 0 exemptions, and use the W-4 for the larger income to make adjustments. In the past I have done this to make sure that we make the safe-harbor level. You can make adjustments in the new year once you know what the safe harbor goal is for the rest of the year." }, { "docid": "190497", "title": "", "text": "\"Sales tax and luxury tax is what you will have to pay tax wise, and they are non-refundable (in most cases but the rules vary area to area). This really tripped up some friends of mine I had come from England. The rules are complicated and regional. Sales tax is anywhere from 0% to 10.25% and are not usually applied to raw foods. Luxury taxes are usually state level and only apply to things most people consider a large purchase. Jewelry, cars, houses, etc. Not things your likely to buy. (Small, \"\"normal\"\" jewelry usually doesn't count. Diamond covered flava-flav clock ... probably has a luxury tax.) For sales tax, it can change a lot. Don't be afraid to ask. People ask all the time. It's normal. I personally add 10% to what I buy. Sales tax in my city is 7%, county is 6.5%, state is 6%. So you can get different rates depending on what side of the street you shop on some times. Under normal circumstances you do not get a refund on these taxes. Some states do give refunds. Usually however the trouble of getting that refund isn't worth it unless making a large purchase. You are not exempt from paying sales tax. (Depending on where you go you may get asked). Business are exempt if they are purchasing things to re-sell. Only the end customer pays sales tax. Depending on where you go, online purchases may not be subject to sales tax. Though they might. That, again, depends on city, county, and state laws. Normally, you will have to pay sales tax at the register. It will be calculated into your total, and show as a line item on your receipt. http://3.bp.blogspot.com/-yAvAm2BQ3xs/TudY-lfLDzI/AAAAAAAAAGs/gYG8wJeaohw/s1600/great%2Boutdoors%2Breceipt%2BQR-%2Bbefore%2Band%2Bafter.jpg Also some products have other non-refundable taxes. Rental car taxes, fuel taxes and road taxes are all likely taxes you will have to pay. Areas that have a lot of tourists, usually (but not always) have more of these kinds of taxes. Friendly note. DON'T BUY DVDs HERE! They won't work when you get home. I know you didn't ask but this catches a lot of people. Same for electronics (in many cases, specially optical drives and wireless).\"" }, { "docid": "546634", "title": "", "text": "\"I was in the health insurance game for 10 years and never heard of this until the Affordable Care Act came about. To my knowledge, there is no rule or regulation prohibiting it, however trying to get an insurer underwrite that risk is extremely unlikely. It's the same reason why you don't see AAA offering health insurance. There isn't a contractual relationship between the church and their constituents, so no underwriter worth their salt would put a reasonable price on that risk. Members can easily come and go, and since insurance through your employer is still the dominant distribution channel for health insurance, it would be seen as an adverse risk, meaning that people who couldn't get it through \"\"normal\"\" channels must be getting it through the church, which it would then be assumed that this person applying for coverage is an \"\"adverse risk\"\" or someone who is abnormally unhealthy. There are faith-based healthcare reimbursement programs that are NOT health insurance and do not satisfy the ACA required minimum coverages. From what I've seen and read, it's basically members of the religion or faith that pay money into the system (like paying an insurance premium) and they elect a board that basically evaluates each claim and pays or doesn't pay it, either partially or in full. While this is a nice way to get your bills paid, odds are it won't cover your $300,000 cancer treatment or your $50,000 cesarean section birth.\"" }, { "docid": "107136", "title": "", "text": "Look at your options with a 529 program. If the money is used for education expenses: that currently includes tuition, room & board (even if living off campus), books, transportation; it grows tax free. Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board. Contributions to a 529 plan, however, are not deductible. If it is a 529 associated with your state you can also save on state taxes. You can make contributions on a regular basis, or ad hoc. Accounts can even be setup by other relatives. I have used a 529 to fund two kids education. It takes care of most of your education expenses. 529 programs are available from most states, and even some of the big mutual fund companies. Many have the option of shifting the risk level of the investments to be more conservative as the kids hit high school. Some states have an option to have you pay a large sum when the child is small to buy semesters of college. The deal is worth considering if you know they will be going to a state school, the deal is less good if they will go out of state or to a private college. The IRS does limit the maximum amount that you can contribute in a year an amount that exceeds the 14,000 annual gift limit: If in 2014, you contributed more than $14,000 to a Qualified Tuition Plan (QTP) on behalf of any one person, you may elect to treat up to $70,000 of the contribution for that person as if you had made it ratably over a 5-year period. The election allows you to apply the annual exclusion to a portion of the contribution in each of the 5 years, beginning in 2014. You can make this election for as many separate people as you made QTP contributions One option at the end is to take any extra money at graduation and give it to the child so that it can be used for graduate school, or if the taxes and penalties are paid it can be used for that first car. It can even be rolled over to another relative." }, { "docid": "456436", "title": "", "text": "The 'same day rule' in the UK is a rule for matching purposes only. It says that sales on any day are matched firstly with purchases made on the same day for the purposes of ascertaining any gain/loss. Hence the phrase 'bed-and-breakfast' ('b&b') when you wish to crystalise a gain (that is within the exempt amount) and re-establish a purchase price at a higher level. You do the sale on one day, just before the market closes, which gets matched with your original purchase, and then you buy the shares back the next day, just after the market opens. This is standard tax-planning. Whenever you have a paper gain, and you wish to lock that gain out of being taxed, you do a bed-and-breakfast transaction, the idea being to use up your annual exemption each and every year. Of course, if your dealing costs are high, then they may outweigh any tax saved, and so it would be pointless. For the purpose of an example, let's assume that the UK tax year is the same as the calendar year. Scenario 1. Suppose I bought some shares in 2016, for a total price of Stg.50,000. Suppose by the end of 2016, the holding is worth Stg.54,000, resulting in a paper gain of Stg.4,000. Question. Should I do a b&b transaction to make use of my Stg.11,100 annual exemption ? Answer. Well, with transaction costs at 1.5% for a round-trip trade, suppose, and stamp duty on the purchase of 0.5%, your total costs for a b&b will be Stg1,080, and your tax saved (upon some future sale date) assuming you are a 20% tax-payer is 20%x(4,000-1,080) = Stg584 (the transaction costs are deductible, we assume). This does not make sense. Scenario 2. The same as scenario 1., but the shares are worth Stg60,000 by end-2016. Answer. The total transaction costs are 2%x60,000 = 1,200 and so the taxable gain of 10,000-1,200 = 8,800 would result in a tax bill of 20%x8,800 = 1,760 and so the transaction costs are lower than the tax to be saved (a strict analysis would take into account only the present value of the tax to be saved), it makes sense to crystalise the gain. We sell some day before the tax year-end, and re-invest the very next day. Scenario 3. The same as scenario 1., but the shares are worth Stg70,000 by end-2016. Answer. The gain of 20,000 less costs would result in a tax bill for 1,500 (this is: 20%x(20,000 - 2%x70,000 - 11,100) ). This tax bill will be on top of the dealing costs of 1,400. But the gain is in excess of the annual exemption. The strategy is to sell just enough of the holding to crystallise a taxable gain of just 11,100. The fraction, f%, is given by: f%x(70,000-50,000) - 2%xf%x70,000 = 11,100 ... which simplifies to: f% = 11,100/18,600 = 59.68%. The tax saved is 20%x11,100 = 2,220, versus costs of 2%x59.58%x70,000 = 835.52. This strategy of partial b&b is adopted because it never makes sense to pay tax early ! End." }, { "docid": "488777", "title": "", "text": "\"I think we'd need to look at actual numbers to see where you're running into trouble. I'm also a little confused by your use of the term \"\"unexpected expenses\"\". You seem to be using that to describe expenses that are quite regular, that occur every X months, and so are totally expected. But assuming this is just some clumsy wording ... Here's the thing: Start out by taking the amount of each expense, divided by the number of months between occurrences. This is the monthly cost of each expense. Add all these up. This is the amount that you should be setting aside every month for these expenses, once you get a \"\"base amount\"\" set up. So to take a simple example: Say you have to pay property taxes of $1200 twice a year. So that's $1200 every 6 months = $200 per month. Also say you have to pay a water bill once every 3 months that's typically $90. So $90 divided by 3 = $30. Assuming that was it, in the long term you'd need to put aside $230 per month to stay even. I say \"\"in the long term\"\" because when you're just starting, you need to put aside an amount sufficient that your balance won't fall below zero. The easiest way to do this is to just set up a chart where you start from zero and add (in this example) $230 each month, and then subtract the amount of the bills when they will hit. Do this for some reasonable time in the future, say one year. Find the biggest negative balance. If you can add this amount to get started, you'll be safe. If not, add this amount divided by the number of months from now until it occurs and make that a temporary addition to your deposits. Check if you now are safely always positive. If not, repeat the process for the next biggest negative. For example, let's say the property tax bills are April and October and the water bills are February, May, August, and November. Then your chart would look like this: The biggest negative is -370 in April. So you have to add $370 in the first 4 months, or $92.50 per month. Let's say $93. That would give: Now you stay at least barely above water for the whole year. You could extend the chart our further, but odds are the exact numbers will change next year and you'll have to recalculate anyway. The more irregular the expenses, the more you will build up just before the big expense hits. But that's the whole point of saving for these, right? If a $1200 bill is coming next week and you don't have close to $1200 saved up in the account, where is the money coming from? If you have enough spare cash that you can just take the $1200 out of what you would have spent on lunch tomorrow, then you don't need this sort of account.\"" }, { "docid": "97852", "title": "", "text": "Legally, do I have anything to worry about from having an incorrectly filed W-4? What you did wasn't criminal. When you submitted the form it was correct. Unfortunately as your situation changed you didn't adjust the form, that mistake does have consequences. Is there anything within my rights I can do to get the company to take responsibility for their role in this situation, or is it basically my fault? It is basically your fault. The company needs a w-4 for each employee. They will use that W-4 for every paycheck until the government changes the regulation, or your employment ends, or you submit a new form. Topic 753 - Form W-4 – Employee's Withholding Allowance Certificate If an employee qualifies, he or she can also use Form W-4 (PDF) to tell you not to deduct any federal income tax from his or her wages. To qualify for this exempt status, the employee must have had no tax liability for the previous year and must expect to have no tax liability for the current year. However, if the employee can be claimed as a dependent on a parent's or another person's tax return, additional limitations may apply; refer to the instructions for Form W-4. A Form W-4 claiming exemption from withholding is valid for only the calendar year in which it is filed with the employer. To continue to be exempt from withholding in the next year, an employee must give you a new Form W-4 claiming exempt status by February 15 of that year. If the employee does not give you a new Form W-4, withhold tax as if he or she is single, with no withholding allowances. However, if you have an earlier Form W-4 (not claiming exempt status) for this employee that is valid, withhold as you did before. (I highlighted the key part) Because you were claiming exempt they should have required you to update that form each year. In your case that may not have applied because of the timing of the events. When do you submit a new form? Anytime your situation changes. Sometimes the change is done to adjust withholding to modify the amount of a refund. Other times failure to update the form can lead to bigger complication: when your marital status changes, or the number of dependents changes. In these situations you could have a significant amount of under-withheld, which could lead to a fine later on. As a side note this is even more true for the state version of a W-4. Having a whole years worth of income tax withholding done for the wrong state will at a minimum require you to file in multiple states, it could also result in a big surprise if the forgotten state has higher tax rate. Will my (now former) employee be responsible for paying their portion of the taxes that were not withheld during the 9 months I was full-time, tax Exempt? For federal and state income taxes they are just a conduit. They take the money from your paycheck, and periodically send it to the IRS and the state capital. Unless you could show that the pay stubs said taxes were being withheld, but the w-2 said otherwise; they have no role in judging the appropriateness of your W-4 with one exception. Finally, and I am not too hopeful on this one, but is there anything I can do to ease this tax burden? I understand that the IRS is owed no matter what. You have one way it might workout. For many taxpayers who have a large increase in pay from one year to the next, they can take advantage of a safe-harbor in the tax law. If they had withheld as much money in 2015 as they paid in 2014, they have reached the safe-harbor. They avoid the penalty for under withholding. Note that 2014 number is not what you paid on tax day or what was refunded, but all your income taxes for the entire year. Because in your case your taxes for the year 2014 were ZERO, that might mean that you automatically reach the safe-harbor for 2015. That makes sense because one of the key requirements of claiming exempt is that you had no liability the year before. It won't save you from paying what you owe but it can help avoid a penalty. Lessons" }, { "docid": "444899", "title": "", "text": "With a $40,000 payment there is a 100% chance that the owner will be claiming this as a business expense on their taxes. The IRS and the state will definitely know about it, and the risk of interest and penalties if it is not claimed as income make the best course of action to see a tax adviser. Because taxes will not be taken out by the property owner, the tax payer should also make sure that the estimated $10,000 in federal taxes, if they are in the 25% tax bracket, doesn't trigger other tax issues that could result in penalties, or the need to file quarterly taxes next year. This kind of extra income could also result in a change or an elimination of a health care subsidy. A unexpected mid-year change could trigger the need to refund the subsidy received this year via the tax form next April." } ]

[ { "docid": "575729", "title": "", "text": "If your refunds are subject to seizure because of certain debt arrears, it makes sense to let the IRS hold onto them until next year." } ]

[ { "docid": "388713", "title": "", "text": "As a new (very!) small business, the IRS has lots of advice and information for you. Start at https://www.irs.gov/businesses/small-businesses-self-employed and be sure you have several pots of coffee or other appropriate aid against somnolence. By default a single-member LLC is 'disregarded' for tax purposes (at least for Federal, and generally states follow Federal although I don't know Mass. specifically), although it does have other effects. If you go this route you simply include the business income and expenses on Schedule C as part of your individual return on 1040, and the net SE income is included along with your other income (if any) in computing your tax. TurboTax or similar software should handle this for you, although you may need a premium version that costs a little more. You can 'elect' to have the LLC taxed as a corporation by filing form 8832, see https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc . In principle you are supposed to do this when the entity is 'formed', but in practice AIUI if you do it by the end of the year they won't care at all, and if you do it after the end of the year but before or with your first affected return you qualify for automatic 'relief'. However, deciding how to divide the business income/profits into 'reasonable pay' to yourself versus 'dividends' is more complicated, and filling out corporation tax returns in addition to your individual return (which is still required) is more work, in addition to the work and cost of filing and reporting the LLC itself to your state of choice. Unless/until you make something like $50k-100k a year this probably isn't worth it. 1099 Reporting. Stripe qualifies as a 'payment network' and under a recent law payment networks must annually report to IRS (and copy to you) on form 1099-K if your account exceeds certain thresholds; see https://support.stripe.com/questions/will-i-receive-a-1099-k-and-what-do-i-do-with-it . Note you are still legally required to report and pay tax on your SE income even if you aren't covered by 1099-K (or other) reporting. Self-employment tax. As a self-employed person (if the LLC is disregarded) you have to pay 'SE' tax that is effectively equivalent to the 'FICA' taxes that would be paid by your employer and you as an employee combined. This is 12.4% for Social Security unless/until your total earned income exceeds a cap (for 2017 $127,200, adjusted yearly for inflation), and 2.9% for Medicare with no limit (plus 'Additional Medicare' tax if you exceed a higher threshold and it isn't 'repealed and replaced'). If the LLC elects corporation status it has to pay you reasonable wages for your services, and withhold+pay FICA on those wages like any other employer. Estimated payments. You are required to pay most of your individual income tax, and SE tax if applicable, during the year (generally 90% of your tax or your tax minus $1,000 whichever is less). Most wage-earners don't notice this because it happens automatically through payroll withholding, but as self-employed you are responsible for making sufficient and timely estimated payments, and will owe a penalty if you don't. However, since this is your first year you may have a 'safe harbor'; if you also have income from an employer (reported on W-2, with withholding) and that withholding is sufficent to pay last year's tax, then you are exempt from the 'underpayment' penalty for this year. If you elect corporation status then the corporation (which is really just you) must always make timely payments of withheld amounts, according to one of several different schedules that may apply depending on the amounts; I believe it also must make estimated payments for its own liability, if any, but I'm not familiar with that part." }, { "docid": "191704", "title": "", "text": "The short answer is no - the CGT discount is only applied against your net capital gain. So your net capital gain would be: $25,000 - $5,000 = $20,000 Your CGT discount is $10,000 You will then pay CGT on $10,000 Of course you could sell ABC in this financial year and sell DEF next financial year. If you had no other share activities next financial year than that net capital loss can be carried forward to a future year. In that case your net capital gain this year would be $25,000 Your CGT discount is $12,500 You will then pay CGT on $12,500 Next year if oyu sell DEF, you'll have a $5000 net capital loss which you can carry forward to a future year as an offset against capital gains. Reference: https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-loss/Working-out-your-net-capital-gain-or-loss/" }, { "docid": "445230", "title": "", "text": "sometimes we advise very old or incapacitated people to apply the refund to the next year as check writing from time to time & mailing may be a hassle for them." }, { "docid": "362060", "title": "", "text": "I am not an accountant, but I have a light accounting background, despite being primarily an engineer. I also have a tiny schedule C business which has both better and worse years. I am also in the United States and pay US taxes. I assume you are referring to the US Form 1040 tax return, with the attached Schedule C. However little I know about US taxes, I know nothing about foreign taxes. You are a cash-basis taxpayer, so the transactions that happen in each tax year are based on the cash paid and cash received in that year. You were paid last year, you computed your schedule C based on last year's actual transactions, and you paid taxes on that income. You can not recompute last years schedule C based on the warranty claim. You might want to switch to an accrual accounting method, where you can book allowances for warranty claims. It is more complex, and if your business is spotty and low volume, it may be more trouble than it is worth. At this point, you have two months to look for ways to shift expenses into next year or being income into this year, both of which help offset this loss. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on. This article on LegalZoom (link here) discusses how to apply a significant net operating loss (NOL) in this year to the previous two years, and potentially carry it forward to the next two years. This does involve filing amended returns for the prior two years, showing this year's NOL. For this to be relevant, your schedule C loss this year must exceed your other W2 and self-employment income this year, with other tests also applied. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on." }, { "docid": "94088", "title": "", "text": "\"It depends on when you can get the money, not when you know that you won or when you choose to take the ticket in. If you can present your ticket this year and get paid this year, the taxes are due this year, whether or not you actually choose to claim the prize this year. If you cannot receive payment until next year, then taxes will be due next year. This is \"\"constructive receipt,\"\" which applies to most individual tax situations. This assumes that you chose to receive a lump sum. If you get installments, then your taxes would be due as the installments are available, but the constructive receipt still applies.\"" }, { "docid": "396066", "title": "", "text": "Yes, if you can split your income up over multiple years it will be to your advantage over earning it all in one year. The reasons are as you mentioned, you get to apply multiple deductions/credits/exemptions to the same income. Rather than just 1 standard deduction, you get to deduct 2 standard deductions, you can double the max saved in an IRA, you benefit more from any non-refundable credits etc. This is partly due to the fact that when you are filing your taxes in Year 1, you can't include anything from Year 2 since it hasn't happened yet. It doesn't make sense for the Government to take into account actions that may or may not happen when calculating your tax bill. There are factors where other year profit/loss can affect your tax liability, however as far as I know these are limited to businesses. Look into Loss Carry Forwarded/Back if you want to know more. Regarding the '30% simple rate', I think you are confusing something that is simple to say with something that is simple to implement. Are we going to go change the rules on people who expected their mortgage deduction to continue? There are few ways I can think of that are more sure to cause home prices to plummet than to eliminate the Mortgage Interest Deduction. What about removing Student Loan Interest? Under a 30% 'simple' rate, what tools would the government use to encourage trade in specific areas? Will state income tax deduction also be removed? This is going to punish those in a state with a high income tax more than those in states without income tax. Those are all just 'common' deductions that affect a lot of people, you could easily say 'no' to all of them and just piss off a bunch of people, but what about selling stock though? I paid $100 for the stock and I sold it for $120, do I need to pay $36 tax on that because it is a 'simple' 30% tax rate or are we allowing the cost of goods sold deduction (it's called something else I believe when talking about stocks but it's the same idea?) What about if I travel for work to tutor individuals, can I deduct my mileage expenses? Do I need to pay 30% income tax on my earnings and principal from a Roth IRA? A lot of people have contributed to a Roth with the understanding that withdrawals will be tax free, changing those rules are punishing people for using vehicles intentionally created by the government. Are we going to go around and dismantle all non-profits that subsist entirely on tax-deductible donations? Do I need to pay taxes on the employer's cost of my health insurance? What about 401k's and IRA's? Being true to a 'simple' 30% tax will eliminate all 'benefits' from every job as you would need to pay taxes on the value of the benefits. I should mention that this isn't exactly too crazy, there was a relatively recent IRS publication about businesses needing to withhold taxes from their employees for the cost of company supplied food but I don't know if it was ultimately accepted. At the end of the day, the concept of simplifying the tax law isn't without merit, but realize that the complexities of tax law are there due to the complexities of life. The vast majority of tax laws were written for a reason other than to benefit special interests, and for that reason they cannot easily be ignored." }, { "docid": "546634", "title": "", "text": "\"I was in the health insurance game for 10 years and never heard of this until the Affordable Care Act came about. To my knowledge, there is no rule or regulation prohibiting it, however trying to get an insurer underwrite that risk is extremely unlikely. It's the same reason why you don't see AAA offering health insurance. There isn't a contractual relationship between the church and their constituents, so no underwriter worth their salt would put a reasonable price on that risk. Members can easily come and go, and since insurance through your employer is still the dominant distribution channel for health insurance, it would be seen as an adverse risk, meaning that people who couldn't get it through \"\"normal\"\" channels must be getting it through the church, which it would then be assumed that this person applying for coverage is an \"\"adverse risk\"\" or someone who is abnormally unhealthy. There are faith-based healthcare reimbursement programs that are NOT health insurance and do not satisfy the ACA required minimum coverages. From what I've seen and read, it's basically members of the religion or faith that pay money into the system (like paying an insurance premium) and they elect a board that basically evaluates each claim and pays or doesn't pay it, either partially or in full. While this is a nice way to get your bills paid, odds are it won't cover your $300,000 cancer treatment or your $50,000 cesarean section birth.\"" }, { "docid": "113960", "title": "", "text": "\"It depends on when you're setting the goal. 1) When you have finished the year and you are filling out tax forms, your goal is to get as large of a refund as possible. 2) When the year begins afresh and you are earning money and paying taxes, your goal should be roughly to pay exactly the amount of tax owed so that at the end of the year you don't have any refund or tax owed - it's the same as getting your tax refund right away rather than waiting until after you file taxes. So you want your W4 set up appropriately (assuming you're talking about the US). I think (1) is obvious. For (2), imagine you start the year with the goal to get the largest possible tax refund at the end. Well that's simple - fill out the W4 and on line 6 (\"\"Additional amount, if any, you want withheld from each paycheck\"\") tell them to withhold everything. Then at the end of the year you'll get a huge refund. Of course in the meantime, you've made an interest-free loan to the government, and you've probably had to take out a high-interest rate loan from your bank or credit card. Obviously this is bad. An argument could be made that it would be even better to slightly underpay your taxes (but not enough to owe a penalty). Ignoring human weakness, this is correct. If you have the discipline to set that money aside in a safe place, that's okay. If this would cause you to spend that money (or even save less of your other money), then this is a bad idea. So I'd really want to highlight some of this depends on your own financial discipline - is it better for you to have the money right away so that you can make good choices with how to use it now, or is it better for you to put the money somewhere out of reach so that you won't spend it on impulse purchases? (and recognize that there are ways to put it out of reach and earn interest on it rather than spending it - one good choice for you would be a Roth IRA)\"" }, { "docid": "274937", "title": "", "text": "1040ES uses the smaller number because that's what triggers the penalties. (That is, you are penalized if what you prepay is less than your total 2013 liability and less than 90% of your 2014 liability.) However, estimated taxes are just estimates. If you pay too little, you could face a penalty, but there's no penalty for paying too much -- you'll just get a refund as usual. It seems that your concern stems from the fact that this is the first year you're in this tax situation and so you're unsure if your estimates are accurate. In your comment to Pete Belford's answer, you also indicated you aren't worried about being unable to pay, but only about accidentally underpaying. In this case, you could just err on the side of caution and pay more than 1040ES says you owe. (You don't actually file the 1040ES, the calculations are just for your own use.) For instance, you could prepay based on the higher of your two estimates, if you can afford it; or, if you can't afford that much, hedge the estimate payments up a bit to an amount you can afford that is closer to the higher estimate. At the end of the year if you paid too much you can get a refund as usual. After this year, you will presumably have a better sense of your income and your tax liability, and can make more accurate estimates for next year." }, { "docid": "573523", "title": "", "text": "\"I'll assume United States as the country; the answer may (probably does) vary somewhat if this is not correct. Also, I preface this with the caveat that I am neither a lawyer nor an accountant. However, this is my understanding: You must recognize the revenue at the time the credits are purchased (when money changes hands), and charge sales tax on the full amount at that time. This is because the customer has pre-paid and purchased a service (i.e. the \"\"credits\"\", which are units of time available in the application). This is clearly a complete transaction. The use of the credits is irrelevant. This is equivalent to a customer purchasing a box of widgets for future delivery; the payment is made and the widgets are available but have simply not been shipped (and therefore used). This mirrors many online service providers (say, NetFlix) in business model. This is different from the case in which a customer purchases a \"\"gift card\"\" or \"\"reloadable debit card\"\". In this case, sales tax is NOT collected (because this is technically not a purchase). Revenue is also not booked at this time. Instead, the revenue is booked when the gift card's balance is used to pay for a good or service, and at that time the tax is collected (usually from the funds on the card). To do otherwise would greatly complicate the tax basis (suppose the gift card is used in a different state or county, where sales tax is charged differently? Suppose the gift card is used to purchase a tax-exempt item?) For justification, see bankruptcy consideration of the two cases. In the former, the customer has \"\"ownership\"\" of an asset (the credits), which cannot be taken from him (although it might be unusable). In the latter, the holder of the debit card is technically an unsecured creditor of the company - and is last in line if the company's assets are liquidated for repayment. Consider also the case where the cost of the \"\"credits\"\" is increased part-way through the year (say, from $10 per credit to $20 per credit) or if a discount promotion is applied (buy 5 credits, get one free). The customer has a \"\"tangible\"\" item (one credit) which gets the same functionality regardless of price. This would be different if instead of \"\"credits\"\" you instead maintain an \"\"account\"\" where the user deposited $1000 and was billed for usage; in this case you fall back to the \"\"gift card\"\" scenario (but usage is charged at the current rate) and revenue is booked when the usage is purchased; similarly, tax is collected on the purchase of the service. For this model to work, the \"\"credit\"\" would likely have to be refundable, and could not expire (see gift cards, above), and must be usable on a variety of \"\"services\"\". You may have particular responsibility in the handling of this \"\"deposit\"\" as well.\"" }, { "docid": "28172", "title": "", "text": "You have made a good start because you are looking at your options. Because you know that if you do nothing you will have a big tax bill in April 2017, you want to make sure that you avoid the underpayment penalty. One way to avoid it is to make estimated payments. But even if you do that you could still make a mistake and overpay or underpay. I think the easiest way to handle it is to reach the safe harbor. If your withholding from your regular jobs and any estimated taxes you pay in 2016 equal or exceed your total taxes for 2015, then even if you owe a lot in April 2017 you can avoid the underpayment penalty. If you AGI is over 150K you have to make sure your withholding is 110% of your 2015 taxes. Then set aside what you think you will owe in your bank account until you have to pay your taxes in April 2017. You only have to adjust your withholding to make the safe harbor. You can make sure easily enough once your file this years taxes. You only have to make sure that you reach the 100% or 110% threshold. From IRS PUB 17 Who Must Pay Estimated Tax If you owe additional tax for 2015, you may have to pay estimated tax for 2016. You can use the following general rule as a guide during the year to see if you will have enough withholding, or if you should increase your withholding or make estimated tax payments. General rule. In most cases, you must pay estimated tax for 2016 if both of the following apply. You expect to owe at least $1,000 in tax for 2016, after subtracting your withholding and refundable credits. You expect your withholding plus your refundable credits to be less than the smaller of: a. 90% of the tax to be shown on your 2016 tax return, or b. 100% of the tax shown on your 2015 tax return (but see Special rules for farmers, fishermen, and higher income taxpayers , later). Your 2015 tax return must cover all 12 months. Reminders Estimated tax safe harbor for higher income taxpayers. If your 2015 adjusted gross income was more than $150,000 ($75,000 if you are married filing a separate return), you must pay the smaller of 90% of your expected tax for 2016 or 110% of the tax shown on your 2015 return to avoid an estimated tax penalty." }, { "docid": "406561", "title": "", "text": "\"The limit on SEP IRA is 25%, not 20%. If you're self-employed (filing on Schedule C), then it's taken on net earning, which in your example would be 25% of $90,000. (https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people) JoeTaxpayer is correct as regards the 401(k) limits. The elective deferrals are per person - That's a cap in sum across multiple plans and across both traditional and Roth if you have those. In general, it's actually across other retirement plan types too - See below. If you're self-employed and set-up a 401(k) for your own business, the elective deferral is still aggregated with any other 401(k) plans in which you participate that year, but you can still make the employer contribution on your own plan. This IRS page is current a pretty good one on this topic: https://www.irs.gov/retirement-plans/one-participant-401k-plans Key quotes that are relevant: The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both: •Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit: ◦$18,000 in 2015 and 2016, or $24,000 in 2015 and 2016 if age 50 or over; plus •Employer nonelective contributions up to: ◦25% of compensation as defined by the plan, or ◦for self-employed individuals, see discussion below It continues with this example: The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $18,000 in 2015 and 2016. Although a plan's terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans. EXAMPLE Ben, age 51, earned $50,000 in W-2 wages from his S Corporation in 2015. He deferred $18,000 in regular elective deferrals plus $6,000 in catch-up contributions to the 401(k) plan. His business contributed 25% of his compensation to the plan, $12,500. Total contributions to the plan for 2015 were $36,500. This is the maximum that can be contributed to the plan for Ben for 2015. A business owner who is also employed by a second company and participating in its 401(k) plan should bear in mind that his limits on elective deferrals are by person, not by plan. He must consider the limit for all elective deferrals he makes during a year. Notice in the example that Ben contributed more that than his elective limit in total (his was $24,000 in the example because he was old enough for the $6,000 catch-up in addition to the $18,000 that applies to everyone else). He did this by declaring an employer contribution of $12,500, which was limited by his compensation but not by any of his elective contributions. Beyond the 401(k), keep in mind that elective contributions are capped across different types of retirement plans as well, so if you have a SEP IRA and a solo 401(k), your total contributions across those plans are also capped. That's also mentioned in the example. Now to the extent that you're considering different types of plans, that's a whole question in itself - One that might be worth consulting a dedicated tax advisor. A few things to consider (not extensive list): As for payroll / self-employment tax: Looks like you will end up paying Medicare, including the new \"\"Additional Medicare\"\" tax that came with the ACA, but not SS: If you have wages, as well as self-employment earnings, the tax on your wages is paid first. But this rule only applies if your total earnings are more than $118,500. For example, if you will have $30,000 in wages and $40,000 in selfemployment income in 2016, you will pay the appropriate Social Security taxes on both your wages and business earnings. In 2016, however, if your wages are $78,000, and you have $40,700 in net earnings from a business, you don’t pay dual Social Security taxes on earnings more than $118,500. Your employer will withhold 7.65 percent in Social Security and Medicare taxes on your $78,000 in earnings. You must pay 15.3 percent in Social Security and Medicare taxes on your first $40,500 in self-employment earnings and 2.9 percent in Medicare tax on the remaining $200 in net earnings. https://www.ssa.gov/pubs/EN-05-10022.pdf Other good IRS resources:\"" }, { "docid": "176742", "title": "", "text": "\"Personally, I would just dispute this one with your CC. I had a situation where a subscription I had cancelled the prior year was billed to me. I called up to have a refund issued, they couldn't find me in their system under three phone numbers and two addresses. The solution they proposed was \"\"send us your credit card statement with the charge circled,\"\" to which I responded \"\"there's no way in hell I'm sending you my CC statement.\"\" Then I disputed the charge with the CC bank and it was gone about two days later. I partially expect to have the same charge appear next year when they try to renew my non-existent subscription again. Now, whether or not this is a normal practice for the company, or just a call center person making a good-faith but insecure attempt to solve your problem is irrelevant. Fact of the matter is, you tried to resolve this with the merchant and the merchant asked for something that's likely outside the bounds of your CC Terms and Conditions; sending your entire number via email. Dispute it and move on. The dispute process exists for a reason.\"" }, { "docid": "187695", "title": "", "text": "The IRS can direct your refund towards repayment of your unpaid taxes either on Federal or State/Local level. Whether it will depends on whether the State of New York will ask for it. Generally, if you owe taxes to New York for this year only, you would expect them to wait for you to file your State tax return and pay the taxes owed. If you don't - I'm pretty sure that the next year refund from the IRS will go directly to them." }, { "docid": "488777", "title": "", "text": "\"I think we'd need to look at actual numbers to see where you're running into trouble. I'm also a little confused by your use of the term \"\"unexpected expenses\"\". You seem to be using that to describe expenses that are quite regular, that occur every X months, and so are totally expected. But assuming this is just some clumsy wording ... Here's the thing: Start out by taking the amount of each expense, divided by the number of months between occurrences. This is the monthly cost of each expense. Add all these up. This is the amount that you should be setting aside every month for these expenses, once you get a \"\"base amount\"\" set up. So to take a simple example: Say you have to pay property taxes of $1200 twice a year. So that's $1200 every 6 months = $200 per month. Also say you have to pay a water bill once every 3 months that's typically $90. So $90 divided by 3 = $30. Assuming that was it, in the long term you'd need to put aside $230 per month to stay even. I say \"\"in the long term\"\" because when you're just starting, you need to put aside an amount sufficient that your balance won't fall below zero. The easiest way to do this is to just set up a chart where you start from zero and add (in this example) $230 each month, and then subtract the amount of the bills when they will hit. Do this for some reasonable time in the future, say one year. Find the biggest negative balance. If you can add this amount to get started, you'll be safe. If not, add this amount divided by the number of months from now until it occurs and make that a temporary addition to your deposits. Check if you now are safely always positive. If not, repeat the process for the next biggest negative. For example, let's say the property tax bills are April and October and the water bills are February, May, August, and November. Then your chart would look like this: The biggest negative is -370 in April. So you have to add $370 in the first 4 months, or $92.50 per month. Let's say $93. That would give: Now you stay at least barely above water for the whole year. You could extend the chart our further, but odds are the exact numbers will change next year and you'll have to recalculate anyway. The more irregular the expenses, the more you will build up just before the big expense hits. But that's the whole point of saving for these, right? If a $1200 bill is coming next week and you don't have close to $1200 saved up in the account, where is the money coming from? If you have enough spare cash that you can just take the $1200 out of what you would have spent on lunch tomorrow, then you don't need this sort of account.\"" }, { "docid": "164301", "title": "", "text": "Something I've not heard mentioned in any of the answers is that (at least for me) owing some tax money is better than having a refund from a ID theft/fraud/security aspect. The US IRS has been hacked several times recently and there have been cases of fraudulent tax refunds being filed and tax refund checks being cashed by ID thieves. Well, if you owe a bit of tax then you're less of a target for fraudulent tax refunds being filed in your name. Even in the case that you were unlucky enough to have had your identity stolen, at least you don't have to deal with the IRS trying to sort a mess like that up. Thus, (IMO) it's better to owe a bit of tax, than to have a small refund, or any refund for that matter. Ideally, you want to get to zero dollars owed like you suggested, but that's often pretty hard to do. So, the next best thing is to owe a bit. One should try to calculate tax liability quartely or if income changes, adjust your withholding, so that you get closer to zero tax." }, { "docid": "190497", "title": "", "text": "\"Sales tax and luxury tax is what you will have to pay tax wise, and they are non-refundable (in most cases but the rules vary area to area). This really tripped up some friends of mine I had come from England. The rules are complicated and regional. Sales tax is anywhere from 0% to 10.25% and are not usually applied to raw foods. Luxury taxes are usually state level and only apply to things most people consider a large purchase. Jewelry, cars, houses, etc. Not things your likely to buy. (Small, \"\"normal\"\" jewelry usually doesn't count. Diamond covered flava-flav clock ... probably has a luxury tax.) For sales tax, it can change a lot. Don't be afraid to ask. People ask all the time. It's normal. I personally add 10% to what I buy. Sales tax in my city is 7%, county is 6.5%, state is 6%. So you can get different rates depending on what side of the street you shop on some times. Under normal circumstances you do not get a refund on these taxes. Some states do give refunds. Usually however the trouble of getting that refund isn't worth it unless making a large purchase. You are not exempt from paying sales tax. (Depending on where you go you may get asked). Business are exempt if they are purchasing things to re-sell. Only the end customer pays sales tax. Depending on where you go, online purchases may not be subject to sales tax. Though they might. That, again, depends on city, county, and state laws. Normally, you will have to pay sales tax at the register. It will be calculated into your total, and show as a line item on your receipt. http://3.bp.blogspot.com/-yAvAm2BQ3xs/TudY-lfLDzI/AAAAAAAAAGs/gYG8wJeaohw/s1600/great%2Boutdoors%2Breceipt%2BQR-%2Bbefore%2Band%2Bafter.jpg Also some products have other non-refundable taxes. Rental car taxes, fuel taxes and road taxes are all likely taxes you will have to pay. Areas that have a lot of tourists, usually (but not always) have more of these kinds of taxes. Friendly note. DON'T BUY DVDs HERE! They won't work when you get home. I know you didn't ask but this catches a lot of people. Same for electronics (in many cases, specially optical drives and wireless).\"" }, { "docid": "99233", "title": "", "text": "\"This has to do with the type of plan offered: is it a 401(k) plan or a profit-sharing plan, or both? If it's 401(k) I believe the IRS will see this distribution as elective and count towards the employee's annual elective contribution limit. If it's profit sharing the distribution would be counted toward the employer's portion of the limit. However -- profit sharing plans have a formula that's standard across the board and applied to all employees. i.e. 3% of company profits given equally to all employees. One of the benefits of the profit sharing plans is also that you can use a vesting schedule. I'd consult your accountant to see how this specifically impacts your business - but in the case you describe this sounds like an elective deferral choice by an employee and I don't see how (or why) you'd make this decision for them. Give them the bonus and let them choose how it's paid out. Edit: in re-reading your question it actually sounds like you're wanting to setup a profit sharing type situation - but again, heed what I said above. You decide the amount of \"\"profit\"\" - but you also have to set an equation that applies across the board. There is more complication to it than this brief explanation and I'd consult your accountant to see how it applies in your situation.\"" }, { "docid": "151810", "title": "", "text": "\"It's not quite as bad as the comments indicate. Form 1040ES has been available since January (and IME has been similarly for all past years). It mostly uses the prior year (currently 2016) as the basis, but it does have the updated (2017) figures for items that are automatically adjusted for inflation: bracket points (and thus filing threshhold), standard deductions, Social Security cap, and maybe another one or two I missed. The forms making up the actual return cannot be prepared very far in advance because, as commented, Congress frequently makes changes to tax law well after the year begins, and in some cases right up to Dec. 31. The IRS must start preparing forms and pubs -- and equally important, setting the specifications for software providers like Intuit (TurboTax) and H&RBlock -- several months ahead in order to not seriously delay filing season, and with it refunds, which nearly everyone in the country considers (at least publicly) to be worse than World War Three and the destruction of the Earth by rogue asteroids. I have 1040 series from the last 4 years still on my computer, and the download dates mostly range from late September to mid January. Although one outlier shows the range of possibility: 2013 form 1040 and Schedule A were tweaked in April 2014 because Congress passed a law allowing charitable contributions for Typhoon Haiyan to be deducted in the prior year. Substantive, but relatively minor, changes happen every year, including many that keep recurring like the special (pre-AGI) teacher supplies deduction (\"\"will they or won't they?\"\"), section 179 expensing (changes slightly almost every year), and formerly the IRA-direct-to-charity option (finally made permanent last year). As commented, the current Congress and President were elected on a platform with tax reform as an important element, and they are talking even more intensely than before about doing it, although whether they will actually do anything this year is still uncertain. However, if major reform is done it will almost certainly apply to future years only, and likely only start after a lag of some months to a year. They know it causes chaos for businesses and households alike to upend without advance warning the assumptions built in to current budgets and plans -- and IME as a political matter something that is enacted now and effective fairly soon but not now is just as good (but I think that part is offtopic).\"" } ]

[ { "docid": "31483", "title": "", "text": "If you have non-salary income, you might be required to file 1040ES estimated tax for the next year on a quarterly basis. You can instead pay some or all in advance from your previous year's refund. In theory, you lose the interest you might have made by holding that money for a few months. In practice it might be worth it to avoid needing to send forms and checks every quarter. For instance if you had a $1000 estimated tax requirement and the alternative was to get 1% taxable savings account interest for six months, you'd make about $3 from holding it for the year. I would choose to just pay in advance. If you had a very large estimation, or you could pay off a high-rate debt and get a different effective rate of return, the tradeoff may be different." } ]

[ { "docid": "349348", "title": "", "text": "\"I'm assuming that when you say \"\"convert to S-Corp tax treatment\"\" you're not talking about actually changing your LLC to a Corporation. There are two distinct pieces of the puzzle here. First, there's your organizational form. Your state, which is where the business is legally formed and recognized, creates the LLC or Corporation. \"\"S-Corp\"\" doesn't come into play here: your company is either an LLC or a Corporation. (There are a handful of other organizational types your state might have, e.g. PLLC, Limited Partnership, etc.; none of these are immediately relevant to this discussion). Second, there's the tax treatment you receive by the IRS. If your company was created by the state as an LLC, note that the IRS doesn't recognize LLCs as a distinct organizational type: you elect to be taxed as an individual (for single member LLCs), a partnership (for multiple member LLCs), or as a corporation. The former two elections are \"\"pass through\"\" -- there's no additional level of taxation on corporate profits, everything just passes through to the owners. The latter election introduces a tax on corporate profits. When you elect pass-through treatment, a single-member LLC files on Schedule C; a multiple-member LLC will prepare a form K-1 which you will include on your 1040. If your company was created by the state as a Corporation (not an LLC), you could still elect pass-through taxation if your company qualifies under the rules in Subchapter S (i.e. \"\"an S-Corp\"\"). States do not recognize \"\"S-Corp\"\" as part of the organizational process -- that's just a tax distinction used by the IRS (and possibly your state's tax authorities). In your case, if you are a single-member LLC (and assuming there are no other reasons to organize as a corporation), talking about \"\"S-Corp tax treatment\"\" doesn't make any sense. You'll just file your schedule C; in my experience it's fairly simple. (Note that this is based on my experience of single- and multiple-member LLCs in just two states. Your state may have different rules that affect state-level taxation; and the rules may change from year to year. I've found that hiring a good CPA to prepare the forms saves a good bit of stress and time that can be better applied to the business.)\"" }, { "docid": "349847", "title": "", "text": "Your total salary deferral cannot exceed $18K (as of 2016). You can split it between your different jobs as you want, to maximize the matching. You can contribute non-elective contribution on top of that, which means that your self-proprietorship will commit to paying you that portion regardless of your deferral. That would be on top of the $18K. You cannot contribute more than 20% of your earnings, though. So if you earn $2K, you can add $400 on top of the $18K limit (ignoring the SE tax for a second here). Keep in mind that if you ever have employees, the non-elective contribution will apply to them as well. Also, the total contribution limit from all sources (deferral, matching, non-elective) cannot exceed $53K (for 2016)." }, { "docid": "395726", "title": "", "text": "Do you have a regular job, where you work for somebody else and they pay you a salary? If so, they should be deducting estimated taxes from your paychecks and sending them in to the government. How much they deduct depends on your salary and what you put down on your W-4. Assuming you filled that out accurately, they will withhold an amount that should closely match the taxes you would owe if you took the standard deduction, have no income besides this job, and no unusual deductions. If that's the case, come next April 15 you will probably get a small refund. If you own a small business or are an independent contractor, then you have to estimate the taxes you will owe and make quarterly payments. If you're worried that the amount they're withholding doesn't sound right, then as GradeEhBacon says, get a copy of last year's tax forms (or this year's if they're out by now) -- paper or electronic -- fill them out by estimating what your total income will be for the year, etc, and see what the tax comes out to be." }, { "docid": "438778", "title": "", "text": "Craig touched on it, but let me expand on the point. Deposits, by definition, are withheld at your marginal rate. And since you can choose Roth vs Traditional right till filing time, you know with certainty the rate you are at each year. Absent any other retirement income, i.e. no pension, and absent an incredibly major change to our tax code, I know your starting rate, zero. The first $10K or so per person is part of their standard deduction and exemption. For a couple, the next $18k is taxed at 10%, and so on. Let me stop here to expand this important point. This is $38,000 for the couple, and the tax on it is less than $1900. 5%. There is no 5% bracket of course. It's the first $20K with zero tax, and that first $18,000 taxed at 10%. That $38,000 takes nearly $1M in pretax accounts to offer as an annual withdrawal. The 15% bracket starts after this, and applies to the next $57K of withdrawals each year. Over $95K in gross withdrawals of pretax money, and you still aren't in the 25% bracket. This is why 100% in traditional, or 100% in Roth aren't either ideal. I continue to offer the example I consider more optimizing - using Roth for income that would otherwise be taxed at 15%, but going pretax when you hit 25%. Then at retirement, you withdraw enough traditional to just stay at 10 or 15% and Roth for the rest. It would be a shame to retire 100% Roth and realize you paid 25% but now have no income to use up those lower brackets. Oddly, time value of money isn't part of my analysis. It makes no difference. And note, the exact numbers do change a bit each year for inflation. There's a also a good chance the exemptions goes away in favor of a huge increased standard deduction." }, { "docid": "585454", "title": "", "text": "Assuming you are being charged sales tax, it all depends on where you take possession of the shipment. Are your suppliers shipping to a US address, say your freight forwarder, from where you handle the ongoing shipment, or directly to you in South America? If the latter, per Michael Pryor's answer, you should not be charged sales tax. If the former, if the address is in a state in which your supplier has a physical location they will have to charge sales tax. That said, your freight forwarder should be able to furnish your supplier with a letter stating that the goods have been exported (with a copy of the relevant Bill of Lading) which will allow your supplier to refund you the taxes (a company I was at before would allow refunds up to two years past the date of sale per various tax regulations). Alternatively, you could see if just a letter of intent from your freight forwarder is enough to not charge you in the first place, but that's technically not proof of exportation. You might be able to get a refund or an exception from the state's tax department directly, but I would recommend going through your supplier - much less hassle." }, { "docid": "187695", "title": "", "text": "The IRS can direct your refund towards repayment of your unpaid taxes either on Federal or State/Local level. Whether it will depends on whether the State of New York will ask for it. Generally, if you owe taxes to New York for this year only, you would expect them to wait for you to file your State tax return and pay the taxes owed. If you don't - I'm pretty sure that the next year refund from the IRS will go directly to them." }, { "docid": "190497", "title": "", "text": "\"Sales tax and luxury tax is what you will have to pay tax wise, and they are non-refundable (in most cases but the rules vary area to area). This really tripped up some friends of mine I had come from England. The rules are complicated and regional. Sales tax is anywhere from 0% to 10.25% and are not usually applied to raw foods. Luxury taxes are usually state level and only apply to things most people consider a large purchase. Jewelry, cars, houses, etc. Not things your likely to buy. (Small, \"\"normal\"\" jewelry usually doesn't count. Diamond covered flava-flav clock ... probably has a luxury tax.) For sales tax, it can change a lot. Don't be afraid to ask. People ask all the time. It's normal. I personally add 10% to what I buy. Sales tax in my city is 7%, county is 6.5%, state is 6%. So you can get different rates depending on what side of the street you shop on some times. Under normal circumstances you do not get a refund on these taxes. Some states do give refunds. Usually however the trouble of getting that refund isn't worth it unless making a large purchase. You are not exempt from paying sales tax. (Depending on where you go you may get asked). Business are exempt if they are purchasing things to re-sell. Only the end customer pays sales tax. Depending on where you go, online purchases may not be subject to sales tax. Though they might. That, again, depends on city, county, and state laws. Normally, you will have to pay sales tax at the register. It will be calculated into your total, and show as a line item on your receipt. http://3.bp.blogspot.com/-yAvAm2BQ3xs/TudY-lfLDzI/AAAAAAAAAGs/gYG8wJeaohw/s1600/great%2Boutdoors%2Breceipt%2BQR-%2Bbefore%2Band%2Bafter.jpg Also some products have other non-refundable taxes. Rental car taxes, fuel taxes and road taxes are all likely taxes you will have to pay. Areas that have a lot of tourists, usually (but not always) have more of these kinds of taxes. Friendly note. DON'T BUY DVDs HERE! They won't work when you get home. I know you didn't ask but this catches a lot of people. Same for electronics (in many cases, specially optical drives and wireless).\"" }, { "docid": "190844", "title": "", "text": "Unfortunately you can't use your HSA to pay for expenses in year A. Qualified medical expenses for an HSA must occur after the date the HSA account was established. (Established typically means the date the account was opened in your name.) The other answers already mostly answered your other questions, but I want to really hit home some particular points that many people may not realize: The most important thing to do when you are eligible to have an HSA account, is to open an HSA account ASAP. This is true even if you don't put any money in it and you leave it empty for years. The reason is that once the account is established, all qualified medical expenses that occur after that date are eligible for distributions, even if you wait years before you fund your HSA account. The second most important thing to do is to keep track of all out of pocket medical expenses you incur after you open the HSA account. All you need is a simple spreadsheet and a place to store your receipts. Once you have the account and are tracking expenses, now you can put money into your HSA and take it out whenever you'd like. (With limits- you can't put in more than the contribution limit for a single tax year, and you can't take out more than your eligible expenses to date.) Helpful Tip: Many people don't fund their HSA because they can't afford to set aside extra money to do so. Fortunately, you don't have to. For example, suppose you have some dental work and it costs you $500. Once you get the bill, before you pay it, put the $500 into your HSA account. The next day, take the $500 back out and pay your dental bill with it. Most HSA accounts will give you a debit card to make this even easier to pay the bill. By putting the money into your HSA for 1 day you just received a $500 tax deduction. Alternatively you can always pay out of pocket like you normally would, track your receipts, and wait until the end of the year (or up until April 15 of the next year). I like this option because I can pay all of my medical bills with a credit card and get cash back. Then at the end of the year, I add up the expenses, deposit that much into my HSA, and if I'd rather put that money somewhere else I just pull it out the next day. If you decide you don't need the money right away that's even better since you can leave it in the HSA account and invest it. Like a Roth account, you don't pay tax on the growth you achieve inside of an HSA. Another Tip: if your employer offers the service of automatically making deposits into your HSA by reducing your paycheck, you should definitely try to do that if you can afford it, rather than manually making contributions as I described in the previous tip. When your employer makes the contributions for you, your wages are reduced by that amount on your W2, so you end up saving an additional 7% in FICA taxes." }, { "docid": "445230", "title": "", "text": "sometimes we advise very old or incapacitated people to apply the refund to the next year as check writing from time to time & mailing may be a hassle for them." }, { "docid": "488777", "title": "", "text": "\"I think we'd need to look at actual numbers to see where you're running into trouble. I'm also a little confused by your use of the term \"\"unexpected expenses\"\". You seem to be using that to describe expenses that are quite regular, that occur every X months, and so are totally expected. But assuming this is just some clumsy wording ... Here's the thing: Start out by taking the amount of each expense, divided by the number of months between occurrences. This is the monthly cost of each expense. Add all these up. This is the amount that you should be setting aside every month for these expenses, once you get a \"\"base amount\"\" set up. So to take a simple example: Say you have to pay property taxes of $1200 twice a year. So that's $1200 every 6 months = $200 per month. Also say you have to pay a water bill once every 3 months that's typically $90. So $90 divided by 3 = $30. Assuming that was it, in the long term you'd need to put aside $230 per month to stay even. I say \"\"in the long term\"\" because when you're just starting, you need to put aside an amount sufficient that your balance won't fall below zero. The easiest way to do this is to just set up a chart where you start from zero and add (in this example) $230 each month, and then subtract the amount of the bills when they will hit. Do this for some reasonable time in the future, say one year. Find the biggest negative balance. If you can add this amount to get started, you'll be safe. If not, add this amount divided by the number of months from now until it occurs and make that a temporary addition to your deposits. Check if you now are safely always positive. If not, repeat the process for the next biggest negative. For example, let's say the property tax bills are April and October and the water bills are February, May, August, and November. Then your chart would look like this: The biggest negative is -370 in April. So you have to add $370 in the first 4 months, or $92.50 per month. Let's say $93. That would give: Now you stay at least barely above water for the whole year. You could extend the chart our further, but odds are the exact numbers will change next year and you'll have to recalculate anyway. The more irregular the expenses, the more you will build up just before the big expense hits. But that's the whole point of saving for these, right? If a $1200 bill is coming next week and you don't have close to $1200 saved up in the account, where is the money coming from? If you have enough spare cash that you can just take the $1200 out of what you would have spent on lunch tomorrow, then you don't need this sort of account.\"" }, { "docid": "362060", "title": "", "text": "I am not an accountant, but I have a light accounting background, despite being primarily an engineer. I also have a tiny schedule C business which has both better and worse years. I am also in the United States and pay US taxes. I assume you are referring to the US Form 1040 tax return, with the attached Schedule C. However little I know about US taxes, I know nothing about foreign taxes. You are a cash-basis taxpayer, so the transactions that happen in each tax year are based on the cash paid and cash received in that year. You were paid last year, you computed your schedule C based on last year's actual transactions, and you paid taxes on that income. You can not recompute last years schedule C based on the warranty claim. You might want to switch to an accrual accounting method, where you can book allowances for warranty claims. It is more complex, and if your business is spotty and low volume, it may be more trouble than it is worth. At this point, you have two months to look for ways to shift expenses into next year or being income into this year, both of which help offset this loss. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on. This article on LegalZoom (link here) discusses how to apply a significant net operating loss (NOL) in this year to the previous two years, and potentially carry it forward to the next two years. This does involve filing amended returns for the prior two years, showing this year's NOL. For this to be relevant, your schedule C loss this year must exceed your other W2 and self-employment income this year, with other tests also applied. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on." }, { "docid": "252237", "title": "", "text": "\"You don't \"\"need\"\" your refund to be as small as possible, but you usually would want it to be as small as possible. The reason people say you should aim for a small refund is that getting a big refund means you paid more in taxes than you had to. This means you gave away money that you could have done something else with. You get the money back later as a tax refund, but you lost the ability to use it during the time the government had it. For instance, if as you say you are getting a $1000 tax refund, that's $1000 that you are giving to the government over the course of the year. At the end of the year, you get it back, so you end the year with $1000. If you instead kept the money, (by paying only exactly as much tax as you owe throughout the year) you could invest it somehow, so that by the end of the year it could potentially have grown to, say, $1050. Thus at the end of the year you would have $1050 instead of $1000. Ideally you would have zero refund and owe zero extra at the end of the year. However, since it is often difficult to make things work out so exactly, people often say you should aim for a small refund. Assuming you are in the USA, if your income is only $9000 you will likely not owe any federal income tax at all, so you could claim exemption from withholding and avoid paying any tax ahead of time. You could check this when you file your taxes by seeing if the refund you get is equal to the total of taxes withheld from your paychecks over the course of last year.\"" }, { "docid": "533589", "title": "", "text": "Suppose you have been paying interest on previous charges in the past. Your monthly statement is issued on April 12, and (since you just received your income tax refund), you pay it off in full on April 30. You don't charge anything to the card at all after April 12. Thus, on April 30, your credit card balance shows as zero since you just paid it off. But your April 12 statement billed you for interest only till April 12. So, on May 12, your next monthly bill will be for the interest for your nonzero balance from April 13 through April 30. Assuming that you still are not making any new charges on your card and pay off the May 12 bill in timely fashion, you will finally have a zero bill on June 12. What if you charge new items to your credit card after April 12? Well, your balance stopped revolving on April 30, and that's when interest is no longer charged on the new charges. But you do owe interest for a charge on April 13 (say) until April 30 when your balance is no longer revolving, and this will be added to your bill on May 12. Purchases made after April 30 will not be charged interest unless you fall off the wagon again and don't pay your May 12 bill in full by the due date of the bill (some time in early June)." }, { "docid": "151810", "title": "", "text": "\"It's not quite as bad as the comments indicate. Form 1040ES has been available since January (and IME has been similarly for all past years). It mostly uses the prior year (currently 2016) as the basis, but it does have the updated (2017) figures for items that are automatically adjusted for inflation: bracket points (and thus filing threshhold), standard deductions, Social Security cap, and maybe another one or two I missed. The forms making up the actual return cannot be prepared very far in advance because, as commented, Congress frequently makes changes to tax law well after the year begins, and in some cases right up to Dec. 31. The IRS must start preparing forms and pubs -- and equally important, setting the specifications for software providers like Intuit (TurboTax) and H&RBlock -- several months ahead in order to not seriously delay filing season, and with it refunds, which nearly everyone in the country considers (at least publicly) to be worse than World War Three and the destruction of the Earth by rogue asteroids. I have 1040 series from the last 4 years still on my computer, and the download dates mostly range from late September to mid January. Although one outlier shows the range of possibility: 2013 form 1040 and Schedule A were tweaked in April 2014 because Congress passed a law allowing charitable contributions for Typhoon Haiyan to be deducted in the prior year. Substantive, but relatively minor, changes happen every year, including many that keep recurring like the special (pre-AGI) teacher supplies deduction (\"\"will they or won't they?\"\"), section 179 expensing (changes slightly almost every year), and formerly the IRA-direct-to-charity option (finally made permanent last year). As commented, the current Congress and President were elected on a platform with tax reform as an important element, and they are talking even more intensely than before about doing it, although whether they will actually do anything this year is still uncertain. However, if major reform is done it will almost certainly apply to future years only, and likely only start after a lag of some months to a year. They know it causes chaos for businesses and households alike to upend without advance warning the assumptions built in to current budgets and plans -- and IME as a political matter something that is enacted now and effective fairly soon but not now is just as good (but I think that part is offtopic).\"" }, { "docid": "97852", "title": "", "text": "Legally, do I have anything to worry about from having an incorrectly filed W-4? What you did wasn't criminal. When you submitted the form it was correct. Unfortunately as your situation changed you didn't adjust the form, that mistake does have consequences. Is there anything within my rights I can do to get the company to take responsibility for their role in this situation, or is it basically my fault? It is basically your fault. The company needs a w-4 for each employee. They will use that W-4 for every paycheck until the government changes the regulation, or your employment ends, or you submit a new form. Topic 753 - Form W-4 – Employee's Withholding Allowance Certificate If an employee qualifies, he or she can also use Form W-4 (PDF) to tell you not to deduct any federal income tax from his or her wages. To qualify for this exempt status, the employee must have had no tax liability for the previous year and must expect to have no tax liability for the current year. However, if the employee can be claimed as a dependent on a parent's or another person's tax return, additional limitations may apply; refer to the instructions for Form W-4. A Form W-4 claiming exemption from withholding is valid for only the calendar year in which it is filed with the employer. To continue to be exempt from withholding in the next year, an employee must give you a new Form W-4 claiming exempt status by February 15 of that year. If the employee does not give you a new Form W-4, withhold tax as if he or she is single, with no withholding allowances. However, if you have an earlier Form W-4 (not claiming exempt status) for this employee that is valid, withhold as you did before. (I highlighted the key part) Because you were claiming exempt they should have required you to update that form each year. In your case that may not have applied because of the timing of the events. When do you submit a new form? Anytime your situation changes. Sometimes the change is done to adjust withholding to modify the amount of a refund. Other times failure to update the form can lead to bigger complication: when your marital status changes, or the number of dependents changes. In these situations you could have a significant amount of under-withheld, which could lead to a fine later on. As a side note this is even more true for the state version of a W-4. Having a whole years worth of income tax withholding done for the wrong state will at a minimum require you to file in multiple states, it could also result in a big surprise if the forgotten state has higher tax rate. Will my (now former) employee be responsible for paying their portion of the taxes that were not withheld during the 9 months I was full-time, tax Exempt? For federal and state income taxes they are just a conduit. They take the money from your paycheck, and periodically send it to the IRS and the state capital. Unless you could show that the pay stubs said taxes were being withheld, but the w-2 said otherwise; they have no role in judging the appropriateness of your W-4 with one exception. Finally, and I am not too hopeful on this one, but is there anything I can do to ease this tax burden? I understand that the IRS is owed no matter what. You have one way it might workout. For many taxpayers who have a large increase in pay from one year to the next, they can take advantage of a safe-harbor in the tax law. If they had withheld as much money in 2015 as they paid in 2014, they have reached the safe-harbor. They avoid the penalty for under withholding. Note that 2014 number is not what you paid on tax day or what was refunded, but all your income taxes for the entire year. Because in your case your taxes for the year 2014 were ZERO, that might mean that you automatically reach the safe-harbor for 2015. That makes sense because one of the key requirements of claiming exempt is that you had no liability the year before. It won't save you from paying what you owe but it can help avoid a penalty. Lessons" }, { "docid": "193717", "title": "", "text": "\"You mention \"\"early exercise\"\" in your title, but you seem to misunderstand what early exercise really means. Some companies offer stock options that vest over a number of years, but which can be exercised before they are vested. That is early exercise. You have vested stock options, so early exercise is not relevant. (It may or may not be the case that your stock options could have been early exercised before they vested, but regardless, you didn't exercise them, so the point is moot.) As littleadv said, 83(b) election is for restricted stocks, often from exercising unvested stock options. Your options are already vested, so they won't be restricted stock. So 83(b) election is not relevant for you. A taxable event happen when you exercise. The point of the 83(b) election is that exercising unvested stock options is not a taxable event, so 83(b) election allows you to force it to be a taxable event. But for you, with vested stock options, there is no need to do this. You mention that you want it not to be taxable upon exercise. But that's what Incentive Stock Options (ISOs) are for. ISOs were designed for the purpose of not being taxable for regular income tax purposes when you exercise (although it is still taxable upon exercise for AMT purposes), and it is only taxed when you sell. However, you have Non-qualified Stock Options. Were you given the option to get ISOs at the beginning? Why did your company give you NQSOs? I don't know the specifics of your situation, but since you mentioned \"\"early exercise\"\" and 83(b) elections, I have a hypothesis as to what might have happened. For people who early-exercise (for plans that allow early-exercise), there is a slight advantage to having NQSOs compared to ISOs. This is because if you early exercise immediately upon grant and do 83(b) election, you pay no taxes upon exercise (because the difference between strike price and FMV is 0), and there are no taxes upon vesting (for regular or AMT), and if you hold it for at least 1 year, upon sale it will be long-term capital gains. On the other hand, for ISOs, it's the same except that for long-term capital gains, you have to hold it 2 years after grant and 1 year after exercise, so the period for long-term capital gains is longer. So companies that allow early exercise will often offer employees either NQSOs or ISOs, where you would choose NQSO if you intend to early-exercise, or ISO otherwise. If (hypothetically) that's what happened, then you chose wrong because you got NQSOs and didn't early exercise.\"" }, { "docid": "419768", "title": "", "text": "If you get 1099-G for state tax refund, you need to declare it as income only if you took deduction on state taxes in the prior year. I.e.: if you took standard deductions - you don't need to declare the refund as income. If you did itemize, you have to declare the refund as income, and deduct the taxes paid last year on your schedule A. If this year you're not itemizing - you lost the tax benefit. If it was not clear from my answer - the taxes paid and the refund received are unrelated. The fact that you paid tax and received refund in the same year doesn't make them in any way related, even if both refer to the same taxable year." }, { "docid": "597574", "title": "", "text": "The amount you contribute will reduce the taxable income for each paycheck, but it won't impact the level of your social security and medicare taxes. A 401(k) plan is a qualified deferred compensation plan in which an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pretax basis. Generally, these deferred wages (commonly referred to as elective contributions) are not subject to income tax withholding at the time of deferral, and they are not reflected on your Form 1040 (PDF) since they were not included in the taxable wages on your Form W-2 (PDF). However, they are included as wages subject to withholding for social security and Medicare taxes. In addition, employers must report the elective contributions as wages subject to federal unemployment taxes. You might be able to keep this up for more than 7 weeks if the company offers health, dental and vision insurance. Your contributions for these policies would need to be paid for before you contribute to the 401K. Of course these items are also pre-tax so they will keep the taxable amount at zero. If there was a non-pretax deduction on your pay check that would keep the check at zero, but there would be taxes owed. This might be union dues, but it can also be some life and disability insurance polices. Most stubs specify which deductions are pre-tax, and which are post-tax. Warning. If you get the company match some companies give you the maximum match for those 7 weeks, then zero for the rest of the year. Others will still credit you with a match at the end of the year saying if you should get the benefit. It is not required that they do this. Check the company documents. You could also contribute post-tax money, which is different than Roth 401K, for the rest of the year to keep the match going. Note: If you are turning 50 this year, or are already 50, then you can contribute an additional $5,500" }, { "docid": "164301", "title": "", "text": "Something I've not heard mentioned in any of the answers is that (at least for me) owing some tax money is better than having a refund from a ID theft/fraud/security aspect. The US IRS has been hacked several times recently and there have been cases of fraudulent tax refunds being filed and tax refund checks being cashed by ID thieves. Well, if you owe a bit of tax then you're less of a target for fraudulent tax refunds being filed in your name. Even in the case that you were unlucky enough to have had your identity stolen, at least you don't have to deal with the IRS trying to sort a mess like that up. Thus, (IMO) it's better to owe a bit of tax, than to have a small refund, or any refund for that matter. Ideally, you want to get to zero dollars owed like you suggested, but that's often pretty hard to do. So, the next best thing is to owe a bit. One should try to calculate tax liability quartely or if income changes, adjust your withholding, so that you get closer to zero tax." } ]

[ { "docid": "159880", "title": "", "text": "\"The refund may offset your liability for the next year, especially if you are a Schedule \"\"C\"\" filer. By having your refund applied to the coming year's taxes you are building a 'protection' against a potentially high liability if you were planning to sell a building that was a commercial building and would have Capital Gains. Or you sold stock at a profit that would also put you in the Capital Gain area. You won a large sum in a lottery, the refund could cushion a bit of the tax. In short, if you think you will have a tax liability in the current year then on the tax return you are filing for the year that just past, it may be to your benefit to apply the refund. If you owe money from a prior year, the refund will not be sent to you so you will not be able to roll it forward. One specific example is you did qualify in the prior year for the ACA. If in the year you are currently in- before you file your taxes-- you realize that you will have to pay at the end of the current year, then assigning your refund will pay part or all of the liability. Keep in mind that the 'tax' imposed due to ACA is only collected from your refunds. If you keep having a liability to pay or have no refunds due to you, the liability is not collected from you.\"" } ]

[ { "docid": "312493", "title": "", "text": "When you itemize your deductions, you get to deduct all the state income tax that was taken out of your paycheck last year (not how much was owed, but how much was withheld). If you deducted this last year, then you need to add in any amount that you received in state income tax refunds last year to your taxes this year, to make up for the fact that you ended up deducting more state income tax than was really due to the state. If you took the standard deduction last year instead of itemizing, then you didn't deduct your state income tax withholding last year and you don't need to claim your refund as income this year. Also, if you itemized, but chose to take the state sales tax deduction instead of the state income tax deduction, you also don't need to add in the refund as income. For whatever reason, Illinois decided that you don't get a 1099-G. It might be that the amount of the refund was too small to warrant the paperwork. It might be that they screwed up. But if you deducted your state income tax withholding on last year's tax return, then you need to add the state tax refund you got last year on line 10 of this year's 1040, whether or not the state issued you a form or not. Take a look at the Line 10 instructions starting on page 22 of the 1040 instructions to see if you have any unusual situations covered there that you didn't mention here. (For example, if you received a refund check for multiple years last year.) Then check your tax return from last year to verify that you deducted your state income tax withholding on Schedule A. If you did, then this year add the refund you got from the state to line 10 of this year's 1040." }, { "docid": "185077", "title": "", "text": "This is a topic you need to sit down and discuss with your parents. Income taxes probably aren't going to be a big issue, and will be refunded in April. Social Security and Medicare will not be refunded, but start you on the road to qualifying for them in the future. How much of you expenses you will now cover will be a family decision; how much of your college expenses you will be responsible for will also need to be discussed. These topics need to be understood before it is time to apply to schools in the fall of your senior year of high school. It is nice to know that you are at least thinking about saving money for your future and for emergencies." }, { "docid": "113876", "title": "", "text": "\"I think the £35K band applies to the \"\"dividend income\"\" not the \"\"dividend paid to you\"\", and so you would only actually get £31.5K (90% of £35K) in your pocket before the next tax band kicked in. If your company will only supplying large VAT registered entities, then register for VAT yourself and elect the Flat Rate scheme - depending on your area of business, given that you have no expenses, your company will get an extra 7% - 14% on its income for free. Your clients won't care that you charge them VAT because they'll claim it back. Finally, depending on what your company is for, beware of the dreaded IR35\"" }, { "docid": "456436", "title": "", "text": "The 'same day rule' in the UK is a rule for matching purposes only. It says that sales on any day are matched firstly with purchases made on the same day for the purposes of ascertaining any gain/loss. Hence the phrase 'bed-and-breakfast' ('b&b') when you wish to crystalise a gain (that is within the exempt amount) and re-establish a purchase price at a higher level. You do the sale on one day, just before the market closes, which gets matched with your original purchase, and then you buy the shares back the next day, just after the market opens. This is standard tax-planning. Whenever you have a paper gain, and you wish to lock that gain out of being taxed, you do a bed-and-breakfast transaction, the idea being to use up your annual exemption each and every year. Of course, if your dealing costs are high, then they may outweigh any tax saved, and so it would be pointless. For the purpose of an example, let's assume that the UK tax year is the same as the calendar year. Scenario 1. Suppose I bought some shares in 2016, for a total price of Stg.50,000. Suppose by the end of 2016, the holding is worth Stg.54,000, resulting in a paper gain of Stg.4,000. Question. Should I do a b&b transaction to make use of my Stg.11,100 annual exemption ? Answer. Well, with transaction costs at 1.5% for a round-trip trade, suppose, and stamp duty on the purchase of 0.5%, your total costs for a b&b will be Stg1,080, and your tax saved (upon some future sale date) assuming you are a 20% tax-payer is 20%x(4,000-1,080) = Stg584 (the transaction costs are deductible, we assume). This does not make sense. Scenario 2. The same as scenario 1., but the shares are worth Stg60,000 by end-2016. Answer. The total transaction costs are 2%x60,000 = 1,200 and so the taxable gain of 10,000-1,200 = 8,800 would result in a tax bill of 20%x8,800 = 1,760 and so the transaction costs are lower than the tax to be saved (a strict analysis would take into account only the present value of the tax to be saved), it makes sense to crystalise the gain. We sell some day before the tax year-end, and re-invest the very next day. Scenario 3. The same as scenario 1., but the shares are worth Stg70,000 by end-2016. Answer. The gain of 20,000 less costs would result in a tax bill for 1,500 (this is: 20%x(20,000 - 2%x70,000 - 11,100) ). This tax bill will be on top of the dealing costs of 1,400. But the gain is in excess of the annual exemption. The strategy is to sell just enough of the holding to crystallise a taxable gain of just 11,100. The fraction, f%, is given by: f%x(70,000-50,000) - 2%xf%x70,000 = 11,100 ... which simplifies to: f% = 11,100/18,600 = 59.68%. The tax saved is 20%x11,100 = 2,220, versus costs of 2%x59.58%x70,000 = 835.52. This strategy of partial b&b is adopted because it never makes sense to pay tax early ! End." }, { "docid": "332447", "title": "", "text": "\"Everything is fine. If line 77 from last year is empty, you should leave this question blank. You made estimated tax payments in 2015. But line 77 relates to a different way to pay the IRS. When you filed your 2014 taxes, if you were owed a refund, and you expected to owe the IRS money for 2015, line 77 lets you say \"\"Hey IRS, instead of sending me a refund for 2014, just keep the money and apply it to my 2015 taxes.\"\" You can also ask them to keep a specified amount and refund the rest. Either way this is completely optional. It sounds like you didn't do that, so you don't fill in anything here. The software should ask you in a different question about your estimated tax payments.\"" }, { "docid": "349847", "title": "", "text": "Your total salary deferral cannot exceed $18K (as of 2016). You can split it between your different jobs as you want, to maximize the matching. You can contribute non-elective contribution on top of that, which means that your self-proprietorship will commit to paying you that portion regardless of your deferral. That would be on top of the $18K. You cannot contribute more than 20% of your earnings, though. So if you earn $2K, you can add $400 on top of the $18K limit (ignoring the SE tax for a second here). Keep in mind that if you ever have employees, the non-elective contribution will apply to them as well. Also, the total contribution limit from all sources (deferral, matching, non-elective) cannot exceed $53K (for 2016)." }, { "docid": "444899", "title": "", "text": "With a $40,000 payment there is a 100% chance that the owner will be claiming this as a business expense on their taxes. The IRS and the state will definitely know about it, and the risk of interest and penalties if it is not claimed as income make the best course of action to see a tax adviser. Because taxes will not be taken out by the property owner, the tax payer should also make sure that the estimated $10,000 in federal taxes, if they are in the 25% tax bracket, doesn't trigger other tax issues that could result in penalties, or the need to file quarterly taxes next year. This kind of extra income could also result in a change or an elimination of a health care subsidy. A unexpected mid-year change could trigger the need to refund the subsidy received this year via the tax form next April." }, { "docid": "164301", "title": "", "text": "Something I've not heard mentioned in any of the answers is that (at least for me) owing some tax money is better than having a refund from a ID theft/fraud/security aspect. The US IRS has been hacked several times recently and there have been cases of fraudulent tax refunds being filed and tax refund checks being cashed by ID thieves. Well, if you owe a bit of tax then you're less of a target for fraudulent tax refunds being filed in your name. Even in the case that you were unlucky enough to have had your identity stolen, at least you don't have to deal with the IRS trying to sort a mess like that up. Thus, (IMO) it's better to owe a bit of tax, than to have a small refund, or any refund for that matter. Ideally, you want to get to zero dollars owed like you suggested, but that's often pretty hard to do. So, the next best thing is to owe a bit. One should try to calculate tax liability quartely or if income changes, adjust your withholding, so that you get closer to zero tax." }, { "docid": "488777", "title": "", "text": "\"I think we'd need to look at actual numbers to see where you're running into trouble. I'm also a little confused by your use of the term \"\"unexpected expenses\"\". You seem to be using that to describe expenses that are quite regular, that occur every X months, and so are totally expected. But assuming this is just some clumsy wording ... Here's the thing: Start out by taking the amount of each expense, divided by the number of months between occurrences. This is the monthly cost of each expense. Add all these up. This is the amount that you should be setting aside every month for these expenses, once you get a \"\"base amount\"\" set up. So to take a simple example: Say you have to pay property taxes of $1200 twice a year. So that's $1200 every 6 months = $200 per month. Also say you have to pay a water bill once every 3 months that's typically $90. So $90 divided by 3 = $30. Assuming that was it, in the long term you'd need to put aside $230 per month to stay even. I say \"\"in the long term\"\" because when you're just starting, you need to put aside an amount sufficient that your balance won't fall below zero. The easiest way to do this is to just set up a chart where you start from zero and add (in this example) $230 each month, and then subtract the amount of the bills when they will hit. Do this for some reasonable time in the future, say one year. Find the biggest negative balance. If you can add this amount to get started, you'll be safe. If not, add this amount divided by the number of months from now until it occurs and make that a temporary addition to your deposits. Check if you now are safely always positive. If not, repeat the process for the next biggest negative. For example, let's say the property tax bills are April and October and the water bills are February, May, August, and November. Then your chart would look like this: The biggest negative is -370 in April. So you have to add $370 in the first 4 months, or $92.50 per month. Let's say $93. That would give: Now you stay at least barely above water for the whole year. You could extend the chart our further, but odds are the exact numbers will change next year and you'll have to recalculate anyway. The more irregular the expenses, the more you will build up just before the big expense hits. But that's the whole point of saving for these, right? If a $1200 bill is coming next week and you don't have close to $1200 saved up in the account, where is the money coming from? If you have enough spare cash that you can just take the $1200 out of what you would have spent on lunch tomorrow, then you don't need this sort of account.\"" }, { "docid": "103842", "title": "", "text": "Does the 5 year rule apply on the After-tax 401k -> Roth 401k -> Roth IRA conversion of the 20000 (including 10000 earnings that was originally pre-tax)? No. The after-tax amounts are not subject to the 5 years rule. The earnings are. How does this affect Roth IRA withdrawal ordering rules with respect to the taxable portion of a single conversion being withdrawn before the non-taxable portion? Taxable portion first until exhausted. To better understand how it works, you need to understand the rationale behind the 5-year rule. Consider you have $100K in your IRA (traditional) and you want to take it out. Just withdrawing it would trigger a 10K statutory penalty, on top of the taxes due. But, you can use the backdoor Roth IRA, right? So convert the 100K, and then it becomes after-tax contribution to Roth IRA, and can be withdrawn with no penalty. One form filled ad 10K saved. To block this loophole, here comes the 5 years rule: you cannot withdraw after-tax amounts for at least 5 years without penalty, if the source was taxable conversion. Thus, in order to avoid the 10K penalty in the above situation, you have a 5-year cooling period, which makes the loophole useless for most cases. However amounts that are after tax can be withdrawn without penalty already, even from the traditional IRA, so there's no need in the 5 years cooling period. The withdrawal attribution is in this order: Roth IRA rollovers are sourced to the origin. E.g.: if you converted $100 to the Roth IRA at firm X and then a year later rolled it over to firm Y - it doesn't affect anything and the clock is ticking from the original date of the conversion at firm X. 5-year period applies to each conversion/rollover from a qualified retirement plan (see here). Distributions are applied to the conversions in FIFO order, so in one distribution, depending on the amounts, you may hit several different incoming conversions. The 5 years should be check on each of them, and the penalty applied on the amounts attributable to those that don't have enough time. 5-year period for contributions applies starting from the beginning of the first year of the first contribution that established your Roth IRA plan. The penalty applies to the amounts that were included in your gross income when conversion occurred, i.e.: doesn't apply on the amounts converted from after-tax sources. Note the difference from the traditional IRA - distributions from pre-tax sources are prorated between the non-deductible (basis) amounts and the deductible/earnings amounts (taxable). That is why the taxable amounts are first in the ordering of the distributions." }, { "docid": "29024", "title": "", "text": "\"As with many questions here, while littleadv is correct, the real answer is \"\"each bank may handle this differently.\"\" In my case, I was experimenting with my balance to see the impact of utilization, and I overpaid the current bill before the bill was issued. The prior balance was paid, but then I sent a payment to bring my account to a credit balance. Further down the statement appears the line - Your account has a credit balance. We can hold and apply this balance against future purchases and cash advances, or refund it. If you would like a check mailed to you in the amount of the credit balance, simply call us and speak to a representative. You can also see that the \"\"revolving credit available\"\" is above the line of credit, implying that someone with a $5000 credit line wanting to charge a $6000 engagement ring can send a higher payment to the account and then make that charge.\"" }, { "docid": "187695", "title": "", "text": "The IRS can direct your refund towards repayment of your unpaid taxes either on Federal or State/Local level. Whether it will depends on whether the State of New York will ask for it. Generally, if you owe taxes to New York for this year only, you would expect them to wait for you to file your State tax return and pay the taxes owed. If you don't - I'm pretty sure that the next year refund from the IRS will go directly to them." }, { "docid": "517748", "title": "", "text": "\"Federal tax refund is taxes you've overpaid. What you're saying is that this year you overpaid less than before. I don't understand why you see this is as a bad thing. Optimal situation is when you have no refunds and no taxes due on tax day, but it is really hard to get there. But the closer you can get - the better, which means that reducing your refund should be your goal. In any case, \"\"Federal Tax Refund\"\" is meaningless, what you need to look at is your actual taxes due. This is the number you should be working to reduce. Is it possible to shift the amounts on a W-2 (with correct adjustments) to tax all of your wages, instead of leaving some of it deducted pre-tax? Why would you want to pay more tax? If your goal is to have a refund (I.e.: it is your way of forcing yourself to save), then you need to recalculate the numbers and adjust your W4 taking the (pre-tax) FSA into account. If it is not the goal, then you should be looking at the total taxes owed, not the refund, and adjust your W4 so that your withholding would cover the taxes owed as closely as possible. And to answer your question, after all this - of course it is possible. But it is wrong, and will indeed likely to trigger an audit. You can write whatever you want on your tax return, but in the end of it, you sign under the penalty of perjury that what you filled is the correct information. Perjury is a Federal felony, and knowingly filing incorrect tax return is fraud (especially since your motive is to gain, even though you're not actually gaining anything). Fraudulent tax returns can be audited any time (no statute of limitations).\"" }, { "docid": "546634", "title": "", "text": "\"I was in the health insurance game for 10 years and never heard of this until the Affordable Care Act came about. To my knowledge, there is no rule or regulation prohibiting it, however trying to get an insurer underwrite that risk is extremely unlikely. It's the same reason why you don't see AAA offering health insurance. There isn't a contractual relationship between the church and their constituents, so no underwriter worth their salt would put a reasonable price on that risk. Members can easily come and go, and since insurance through your employer is still the dominant distribution channel for health insurance, it would be seen as an adverse risk, meaning that people who couldn't get it through \"\"normal\"\" channels must be getting it through the church, which it would then be assumed that this person applying for coverage is an \"\"adverse risk\"\" or someone who is abnormally unhealthy. There are faith-based healthcare reimbursement programs that are NOT health insurance and do not satisfy the ACA required minimum coverages. From what I've seen and read, it's basically members of the religion or faith that pay money into the system (like paying an insurance premium) and they elect a board that basically evaluates each claim and pays or doesn't pay it, either partially or in full. While this is a nice way to get your bills paid, odds are it won't cover your $300,000 cancer treatment or your $50,000 cesarean section birth.\"" }, { "docid": "156499", "title": "", "text": "There are a few methods you can use to estimate your taxes. On the results screen, the app will show you your estimated tax burden, your estimated withholding for the year, and your estimated overpayment/refund or shortfall/tax due. It may also have recommendations for you on how to adjust your W-4 (although, this late in the year, I think it only tells you to come back next year to reevaluate). Your state might also have income tax, and if you are curious about that, you can find the state tax form and estimate your state income tax as well. My guess is that you will be getting a refund this year, as you have only worked half of the year. But that is only a guess." }, { "docid": "193717", "title": "", "text": "\"You mention \"\"early exercise\"\" in your title, but you seem to misunderstand what early exercise really means. Some companies offer stock options that vest over a number of years, but which can be exercised before they are vested. That is early exercise. You have vested stock options, so early exercise is not relevant. (It may or may not be the case that your stock options could have been early exercised before they vested, but regardless, you didn't exercise them, so the point is moot.) As littleadv said, 83(b) election is for restricted stocks, often from exercising unvested stock options. Your options are already vested, so they won't be restricted stock. So 83(b) election is not relevant for you. A taxable event happen when you exercise. The point of the 83(b) election is that exercising unvested stock options is not a taxable event, so 83(b) election allows you to force it to be a taxable event. But for you, with vested stock options, there is no need to do this. You mention that you want it not to be taxable upon exercise. But that's what Incentive Stock Options (ISOs) are for. ISOs were designed for the purpose of not being taxable for regular income tax purposes when you exercise (although it is still taxable upon exercise for AMT purposes), and it is only taxed when you sell. However, you have Non-qualified Stock Options. Were you given the option to get ISOs at the beginning? Why did your company give you NQSOs? I don't know the specifics of your situation, but since you mentioned \"\"early exercise\"\" and 83(b) elections, I have a hypothesis as to what might have happened. For people who early-exercise (for plans that allow early-exercise), there is a slight advantage to having NQSOs compared to ISOs. This is because if you early exercise immediately upon grant and do 83(b) election, you pay no taxes upon exercise (because the difference between strike price and FMV is 0), and there are no taxes upon vesting (for regular or AMT), and if you hold it for at least 1 year, upon sale it will be long-term capital gains. On the other hand, for ISOs, it's the same except that for long-term capital gains, you have to hold it 2 years after grant and 1 year after exercise, so the period for long-term capital gains is longer. So companies that allow early exercise will often offer employees either NQSOs or ISOs, where you would choose NQSO if you intend to early-exercise, or ISO otherwise. If (hypothetically) that's what happened, then you chose wrong because you got NQSOs and didn't early exercise.\"" }, { "docid": "532629", "title": "", "text": "A simplistic answer would be that it's a multiplier on how much money per paycheck to subtract from your tax withholding (taxes per paycheck), then at the end of the year you will have paid taxes on your income minus the amount of your withholding allowances. If you get a decent (roughly 3% or more of your gross annual salary) refund you are letting the government withhold too much (and should increase your allowances), if you have to pay a decent amount of taxes at the end of the year then the amount withheld is not high enough (and should decrease your allowances). I definitely recommend using the calculator that Stephen Cleary mentions, but I think it's just as easy to adjust it up or down by 1 or 2 each year based on whether you got a large refund, no refund, or paid taxes. If you are disciplined with your money many experts advise to increase withholding allowances, save the extra in a safe short term interest account so that you earn money on your money and not the government." }, { "docid": "73252", "title": "", "text": "The FSA can only pay for expenses incurred after it was open. This also applies in case of a mid-year change in election (such as due to marriage, divorce, child birth, etc.) For example, according to this page: You can only be reimbursed for qualifying expenses, from the election that was in place at the time the expense was incurred. So, say you had $500 available from January to June, then on July 1 had a qualifying event, you then elected $2000. You can be reimbursed for up to $500 in expenses incurred prior to July 1, and then an additional $1500 in expenses incurred after (up to $2000 if you didn't use your full $500). More specifically, from the IRS Publication: Generally, distributions from a health FSA must be paid only to reimburse you for qualified medical expenses you incurred during the period of coverage. -- The HSA question is more complicated. I would talk to a tax accountant, or at minimum your benefits coordinator. Also read the publication I linked above, the first part is about HSAs. The short answer to your specific question: stop contributing to the HSA, unless you were contributing well under the limit of the HSA. If you know your limit, and you know you're under it, you can continue contributing until April 15 of next year: If you fail to be an eligible individual during 2013, you can still make contributions, up until April 15, 2014, for the months you were an eligible individual. The general rule is you can contribute up to (1/12)*(your limit)*(number of months you were eligible). So, if you changed jobs Oct 1, and you're single, then you could contribute (3250)*(1/12)*(9), or just over $2400 in total for the year. If you've contributed less than that to date, you may continue contributing up to that amount - but again, contact your benefits coordinator or preferably a tax accountant, as the rules can be complicated. You definitely cannot deduct any expenses from the account that you incur after you are no longer eligible, and the rules on distributions are pretty complicated - and if you get it wrong, you may owe a 10% penalty on top of the tax you would normally owe, so there is significant incentive not to get it wrong." }, { "docid": "481339", "title": "", "text": "There's an odd anomaly that often occurs with shares acquired through company plans via ESPP or option purchase. The general situation is that the share value above strike price or grant price may become ordinary income, but a sale below the price at day the shares are valued is a capital loss. e.g. in an ESPP offering, I have a $10 purchase price, but at the end of the offering, the shares are valued at $100. Unless I hold the shares for an additional year, the sale price contains ordinary W2 income. So, if I see the shares falling and sell for $50, I have a tax bill for $90 of W2 income, but a $50 capital loss. Tax is due on $90 (and for 1K shares, $90,000 which can be a $30K hit) but that $50K loss can only be applied to cap gains, or $3K/yr of income. In the dotcom bubble, there were many people who had million dollar tax bills and the value of the money netted from the sale couldn't even cover the taxes. And $1M in losses would take 300 years at $3K/yr. The above is one reason the lockup date expiration is why shares get sold. And one can probably profit on the bigger companies stock. Edit - see Yelp down 3% following expiration of 180 day IPO lock-up period, for similar situation." } ]

[ { "docid": "71898", "title": "", "text": "If your refund is so small (like $20 - $25), and it's not worth receiving, it can be put towards next years just to give you a slight edge." } ]

[ { "docid": "419768", "title": "", "text": "If you get 1099-G for state tax refund, you need to declare it as income only if you took deduction on state taxes in the prior year. I.e.: if you took standard deductions - you don't need to declare the refund as income. If you did itemize, you have to declare the refund as income, and deduct the taxes paid last year on your schedule A. If this year you're not itemizing - you lost the tax benefit. If it was not clear from my answer - the taxes paid and the refund received are unrelated. The fact that you paid tax and received refund in the same year doesn't make them in any way related, even if both refer to the same taxable year." }, { "docid": "573523", "title": "", "text": "\"I'll assume United States as the country; the answer may (probably does) vary somewhat if this is not correct. Also, I preface this with the caveat that I am neither a lawyer nor an accountant. However, this is my understanding: You must recognize the revenue at the time the credits are purchased (when money changes hands), and charge sales tax on the full amount at that time. This is because the customer has pre-paid and purchased a service (i.e. the \"\"credits\"\", which are units of time available in the application). This is clearly a complete transaction. The use of the credits is irrelevant. This is equivalent to a customer purchasing a box of widgets for future delivery; the payment is made and the widgets are available but have simply not been shipped (and therefore used). This mirrors many online service providers (say, NetFlix) in business model. This is different from the case in which a customer purchases a \"\"gift card\"\" or \"\"reloadable debit card\"\". In this case, sales tax is NOT collected (because this is technically not a purchase). Revenue is also not booked at this time. Instead, the revenue is booked when the gift card's balance is used to pay for a good or service, and at that time the tax is collected (usually from the funds on the card). To do otherwise would greatly complicate the tax basis (suppose the gift card is used in a different state or county, where sales tax is charged differently? Suppose the gift card is used to purchase a tax-exempt item?) For justification, see bankruptcy consideration of the two cases. In the former, the customer has \"\"ownership\"\" of an asset (the credits), which cannot be taken from him (although it might be unusable). In the latter, the holder of the debit card is technically an unsecured creditor of the company - and is last in line if the company's assets are liquidated for repayment. Consider also the case where the cost of the \"\"credits\"\" is increased part-way through the year (say, from $10 per credit to $20 per credit) or if a discount promotion is applied (buy 5 credits, get one free). The customer has a \"\"tangible\"\" item (one credit) which gets the same functionality regardless of price. This would be different if instead of \"\"credits\"\" you instead maintain an \"\"account\"\" where the user deposited $1000 and was billed for usage; in this case you fall back to the \"\"gift card\"\" scenario (but usage is charged at the current rate) and revenue is booked when the usage is purchased; similarly, tax is collected on the purchase of the service. For this model to work, the \"\"credit\"\" would likely have to be refundable, and could not expire (see gift cards, above), and must be usable on a variety of \"\"services\"\". You may have particular responsibility in the handling of this \"\"deposit\"\" as well.\"" }, { "docid": "481283", "title": "", "text": "Eric is right regarding the tax, i.e. ordinary income on discount, cap gain treatment on profit whether long term or short. I would not let the tax tail wag the investing dog. If you would be a holder of the stock, hold on, if not, sell. You are considering a 10-15% delta on the profit to make the decision. Now. I hear you say your wife hasn't worked which potentially puts you in a lower bracket this year. I wrote Topping off your bracket with a Roth Conversion which would help your tax situation long term. Simply put, you convert enough Traditional IRA (or 401(k) money) to use up some of the current bracket you are in, but not hit the next. This may not apply to you, depending on whether you have retirement funds to do this. Note - The cited article offers numbers for a single person, but illustrates the concept. See the tax table for the marginal rates that would apply to you." }, { "docid": "535705", "title": "", "text": "The money in the checking account was already taxed. It was income this year or last, or a gift from somebody, or earned interest that will be taxed. If it was a deductible IRA you would declare it next April and get a refund from the government." }, { "docid": "276411", "title": "", "text": "This is a complicated question that relies on the US-India Tax Treaty to determine whether the income is taxable to the US or to India. The relevant provision is likely Article 15 on Personal Services. http://www.irs.gov/pub/irs-trty/india.pdf It seems plausible that your business is personal services, but that's a fact-driven question based on your business model. If the online training is 'personal services' provided by you from India, then it is likely foreign source income under the treaty. The 'fixed base' and '90 days' provisions in Article 15 would not apply to an India resident working solely outside the US. The question is whether your US LLC was a US taxpayer. If the LLC was a taxpayer, then it has an obligation to pay US tax on any worldwide income and it also arguably disqualifies you from Article 15 (which applies to individuals and firms of individuals, but not companies). If you were the sole owner of the US LLC, and you did not make a Form 8832 election to be treated as subject to entity taxation, then the LLC was a disregarded entity. If you had other owners, and did not make an election, then you are a partnership and I suspect but cannot conclude that the treaty analysis is still valid. So this is fact-dependent, but you may be exempt from US tax under the tax treaty. However, you may have still had an obligation to file Forms 1099 for your worker. You can also late-file Forms 1099 reporting the nonemployee compensation paid to your worker. Note that this may have tax consequences on the worker if the worker failed to report the income in those years." }, { "docid": "368938", "title": "", "text": "\"Answers: 1: No, Sections 1291-1298 of the IRC were passed in the Reagan adminstration. 2: Not only can a foreign company like a chocolate company fall afoul of the definition of PFIC because of the \"\"asset test\"\", which you cite, but it can also be called a PFIC because of the \"\"income test\"\". For example, I have shares in a development-stage Canadian biotech which is considered a PFIC because it has no income at all, except for a minor amount of bank interest on its working capital. This company is by no means \"\"passive\"\" (it has run 31 clinical trials in over 1100 human research subjects, burning $250M of investor's money in the process) nor is it an \"\"investment company\"\", but the stupid IRS considers it to be a \"\"passive foreign investment company\"\"! The IRS looks at it and sees only the bank account, and assumes it is a foreign shell corporation set up to shield the bank interest from them. 3: Yes, a foreign mutual fund is EXACTLY what congress intended to be a PFIC when passed IRC 1291-1298. (Biotechs, candy factories, ect got nailed as innocent bystanders.) Note that if you hold a US mutual fund then every year you'll get a form 1099 in the mail. The 1099 will report your share of the mutual fund's own income and capital gains, which you must report on your taxes. (You can also have capital gains from selling your shares of the mutual fund, but that's a different thing.) Now suppose that there was no PFIC law. Then the US investors in the mutual fund would do better if the mutual fund were in a foreign country, for two reasons: a) The fund would no longer distribute 1099's. That means the shareholders wouldn't have to pay tax every year on their proportions of the fund's own income/gains. The money that would have sooner gone to the IRS can sit around for years earning interest. b) The fund could return profits to shareholders exclusively through capital gains rather than dividends, thus ensuring that all of the investors' income on the fund would be taxed at <15%-20% rather than up to 39%. The fund could do this by returning cash to shareholders exclusively through buybacks. However, the US mutual fund industry doesn't want to move the industry to Canada, and it only takes a few newspaper articles about a foreign loophole to make congress spring to action. 4) It depends. If you have a PEDIGREED QEF election in place (as I do for my biotech shares) then form 8621 takes a few minutes by hand. However, this requires both the company and the investor to fully cooperate with congress's vision for PFICs. The company cooperates by providing a so-called \"\"PFIC annual information sheet\"\", which replaces the 1099 form for a US mutual fund. The investor cooperates by having a \"\"QEF election\"\" in place for EACH AND EVERY TAX YEAR in which he held the stock and by reporting the numbers from the PFIC annual information sheet on his return. (Note that the QEF election persists once made, until revoked. There are subtleties here that I am glossing over, since \"\"deemed sale\"\" elections and other means may be used to modify a share's holding period to come into compliance.) Note that there is software coming out to handle PFICs, and that the software makers will already run their software to make your form 8621 for $75 or so. I should also warn you that the blogs of tax accountants and tax lawyers all contradict each other on the basic issue of whether you can take capital losses on PFICs for which you have no form 8621 elections. (See section 2.3 of my notes http://tinyurl.com/mh9vlnr for commentary on this mess.) I do not know if the software people will tell you which elections are best made on form 8621, though, or advise you if it's time to simply dump your investment. The professional software is at 8621.com, and the individual 8621 preparation is at http://expattaxtools.com/?page_id=242. BTW, in case you're interested, I wrote up a very careful analysis of how to deal with the PFIC situation for the small biotech I invested in in certain cases. It is posted http://tinyurl.com/mh9vlnr. (For tax reasons it was quite fortunate that the share price dipped to near an all-time low on Jan 1, 2015, making the (next) 2015 tax year ripe for a so-called \"\"deemed sale\"\" election. This was only possible because the company provides the necessary \"\"PFIC annual information statements\"\", which your chocolate factory may or may not do.)\"" }, { "docid": "597574", "title": "", "text": "The amount you contribute will reduce the taxable income for each paycheck, but it won't impact the level of your social security and medicare taxes. A 401(k) plan is a qualified deferred compensation plan in which an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pretax basis. Generally, these deferred wages (commonly referred to as elective contributions) are not subject to income tax withholding at the time of deferral, and they are not reflected on your Form 1040 (PDF) since they were not included in the taxable wages on your Form W-2 (PDF). However, they are included as wages subject to withholding for social security and Medicare taxes. In addition, employers must report the elective contributions as wages subject to federal unemployment taxes. You might be able to keep this up for more than 7 weeks if the company offers health, dental and vision insurance. Your contributions for these policies would need to be paid for before you contribute to the 401K. Of course these items are also pre-tax so they will keep the taxable amount at zero. If there was a non-pretax deduction on your pay check that would keep the check at zero, but there would be taxes owed. This might be union dues, but it can also be some life and disability insurance polices. Most stubs specify which deductions are pre-tax, and which are post-tax. Warning. If you get the company match some companies give you the maximum match for those 7 weeks, then zero for the rest of the year. Others will still credit you with a match at the end of the year saying if you should get the benefit. It is not required that they do this. Check the company documents. You could also contribute post-tax money, which is different than Roth 401K, for the rest of the year to keep the match going. Note: If you are turning 50 this year, or are already 50, then you can contribute an additional $5,500" }, { "docid": "456436", "title": "", "text": "The 'same day rule' in the UK is a rule for matching purposes only. It says that sales on any day are matched firstly with purchases made on the same day for the purposes of ascertaining any gain/loss. Hence the phrase 'bed-and-breakfast' ('b&b') when you wish to crystalise a gain (that is within the exempt amount) and re-establish a purchase price at a higher level. You do the sale on one day, just before the market closes, which gets matched with your original purchase, and then you buy the shares back the next day, just after the market opens. This is standard tax-planning. Whenever you have a paper gain, and you wish to lock that gain out of being taxed, you do a bed-and-breakfast transaction, the idea being to use up your annual exemption each and every year. Of course, if your dealing costs are high, then they may outweigh any tax saved, and so it would be pointless. For the purpose of an example, let's assume that the UK tax year is the same as the calendar year. Scenario 1. Suppose I bought some shares in 2016, for a total price of Stg.50,000. Suppose by the end of 2016, the holding is worth Stg.54,000, resulting in a paper gain of Stg.4,000. Question. Should I do a b&b transaction to make use of my Stg.11,100 annual exemption ? Answer. Well, with transaction costs at 1.5% for a round-trip trade, suppose, and stamp duty on the purchase of 0.5%, your total costs for a b&b will be Stg1,080, and your tax saved (upon some future sale date) assuming you are a 20% tax-payer is 20%x(4,000-1,080) = Stg584 (the transaction costs are deductible, we assume). This does not make sense. Scenario 2. The same as scenario 1., but the shares are worth Stg60,000 by end-2016. Answer. The total transaction costs are 2%x60,000 = 1,200 and so the taxable gain of 10,000-1,200 = 8,800 would result in a tax bill of 20%x8,800 = 1,760 and so the transaction costs are lower than the tax to be saved (a strict analysis would take into account only the present value of the tax to be saved), it makes sense to crystalise the gain. We sell some day before the tax year-end, and re-invest the very next day. Scenario 3. The same as scenario 1., but the shares are worth Stg70,000 by end-2016. Answer. The gain of 20,000 less costs would result in a tax bill for 1,500 (this is: 20%x(20,000 - 2%x70,000 - 11,100) ). This tax bill will be on top of the dealing costs of 1,400. But the gain is in excess of the annual exemption. The strategy is to sell just enough of the holding to crystallise a taxable gain of just 11,100. The fraction, f%, is given by: f%x(70,000-50,000) - 2%xf%x70,000 = 11,100 ... which simplifies to: f% = 11,100/18,600 = 59.68%. The tax saved is 20%x11,100 = 2,220, versus costs of 2%x59.58%x70,000 = 835.52. This strategy of partial b&b is adopted because it never makes sense to pay tax early ! End." }, { "docid": "475607", "title": "", "text": "The plumber will apply for and receive a refund of the amount of VAT he paid on the purchase amount. That's the cornerstone of how VAT works, as opposed to a sales tax. So for example: (Rounded approximate amounts for simplicity) Now, at each point, the amount between (original cost VAT) and (new VAT) is refunded. So by the end, a total of £3 VAT is paid on the pipe (not £6.2); and at each point the business 'adding value' at that stage pays that much. The material company adds £1 value; the producer adds £4 value; the supplier adds £5 value; the plumber adds £5 value. Each pays some amount of VAT on that amount, typically 20% unless it's zero/reduced rated. So the pipe supplier pays £1 but gets a £0.2 refund, so truly pays £0.8. The plumber pays £3 (from your payment) but gets a £2 refund. So at each level somebody paid a bit, and then that bit is then refunded to the next person up the ladder, with the final person in the chain paying the full amount. The £0.2 is refunded to the producer, the £1 is refunded to the supplier, the £2 is refunded to the plumber." }, { "docid": "444899", "title": "", "text": "With a $40,000 payment there is a 100% chance that the owner will be claiming this as a business expense on their taxes. The IRS and the state will definitely know about it, and the risk of interest and penalties if it is not claimed as income make the best course of action to see a tax adviser. Because taxes will not be taken out by the property owner, the tax payer should also make sure that the estimated $10,000 in federal taxes, if they are in the 25% tax bracket, doesn't trigger other tax issues that could result in penalties, or the need to file quarterly taxes next year. This kind of extra income could also result in a change or an elimination of a health care subsidy. A unexpected mid-year change could trigger the need to refund the subsidy received this year via the tax form next April." }, { "docid": "134026", "title": "", "text": "Looking at the numbers quickly, if he makes this amount for the entire year, single, no kids, no investment income, standard deduction only, his taxable income will be about $110,000.* That puts him in the 28% tax bracket. His federal tax would be: $18,481.25 plus 28% of the amount over $90,750 Which comes out to about $23,800 in tax liability. His federal withholding is $26,047 for the year, so with absolutely no deductions whatsoever, he will be getting a tax refund of about $2200. I'm not very familiar with the California tax return, but it is entirely possible that he would get a decent sized refund from the state as well. This means that his tax refund could be about the size of an extra paycheck. He may want to consider increasing his allowances, which would make his paychecks bigger and his tax refund smaller. That having been said, taxes are high, no doubt about it. Remember that when you are in the voting booth. :) * Here is how I got the taxable income number for the year:" }, { "docid": "267466", "title": "", "text": "In general, you are expected to pay all the money you owe in taxes by the end of the tax year, or you may have to pay a penalty. But you don't have to pay a penalty if: The amount you owe (i.e. total tax due minus what you paid in withholding and estimated taxes) is less than $1000. You paid at least 90% of your total tax bill. You paid at least 100% of last year's tax bill. https://www.irs.gov/taxtopics/tc306.html I think point #3 may work for you here. Suppose that last year your total tax liability was, say, $5,000. This year your tax on your regular income would be $5,500, but you have this additional capital gain that brings your total tax to $6,500. If your withholding was $5,000 -- the amount you owed last year -- than you'll owe the difference, $1,500, but you won't have to pay any penalties. If you normally get a refund every year, even a small one, then you should be fine. I'd check the numbers to be sure, of course. If you normally have to pay something every April 15, or if your income and therefore your withholding went down this year for whatever reason, then you should make an estimated payment. The IRS has a page explaining the rules in more detail: https://www.irs.gov/help-resources/tools-faqs/faqs-for-individuals/frequently-asked-tax-questions-answers/estimated-tax/large-gains-lump-sum-distributions-etc/large-gains-lump-sum-distributions-etc" }, { "docid": "31483", "title": "", "text": "If you have non-salary income, you might be required to file 1040ES estimated tax for the next year on a quarterly basis. You can instead pay some or all in advance from your previous year's refund. In theory, you lose the interest you might have made by holding that money for a few months. In practice it might be worth it to avoid needing to send forms and checks every quarter. For instance if you had a $1000 estimated tax requirement and the alternative was to get 1% taxable savings account interest for six months, you'd make about $3 from holding it for the year. I would choose to just pay in advance. If you had a very large estimation, or you could pay off a high-rate debt and get a different effective rate of return, the tradeoff may be different." }, { "docid": "533589", "title": "", "text": "Suppose you have been paying interest on previous charges in the past. Your monthly statement is issued on April 12, and (since you just received your income tax refund), you pay it off in full on April 30. You don't charge anything to the card at all after April 12. Thus, on April 30, your credit card balance shows as zero since you just paid it off. But your April 12 statement billed you for interest only till April 12. So, on May 12, your next monthly bill will be for the interest for your nonzero balance from April 13 through April 30. Assuming that you still are not making any new charges on your card and pay off the May 12 bill in timely fashion, you will finally have a zero bill on June 12. What if you charge new items to your credit card after April 12? Well, your balance stopped revolving on April 30, and that's when interest is no longer charged on the new charges. But you do owe interest for a charge on April 13 (say) until April 30 when your balance is no longer revolving, and this will be added to your bill on May 12. Purchases made after April 30 will not be charged interest unless you fall off the wagon again and don't pay your May 12 bill in full by the due date of the bill (some time in early June)." }, { "docid": "465905", "title": "", "text": "When you got your original HUD backed mortgage there were three options: monthly, annual and upfront payments. The plan is designed to insure the lender of the mortgage against your default. The plan is not expected to cover the mortgage for 30 years. If you are in the early years of the mortgage, you may be owed a refund for the unused years. HUD has a Fact sheet discussing this, and a page to help you determine if they owe you a refund. If you are refinancing back into a HUD/FHA mortgage they will not give you a refund, but will roll the refund back into your new loan. FHA to FHA Refinances: When an FHA loan is refinanced, the refund from the old premium may be applied toward the up-front premium required for the new loan. Note: Depending on the year of the original loan the government has different lengths they used for coverage and refunds. I suggest you use the webpage to determine if you are due a refund, or a roll over." }, { "docid": "457338", "title": "", "text": "Based on these dates in your question: Going back over my records, I was able to recall the following: Maryland realized recently that on the 2009 Federal 1040 Form you stated that on December 31 2009 you liven in Maryland. They are wondering where the state tax form is. DC, MD and VA due to reciprocity collect income tax based on where you live not where you work. So when you moved in August 2009 and again in August 2010 you needed to file new state versions of the W4. The fact you did or didn't submit to your employer a correct state W-4 is not directly related, because you would owe the tax regardless. The W-4 just makes sure that something close to the correct amounts are withheld and sent to the appropriate state capital. I seem to remember something about not having to pay Maryland state taxes since I not only lived in the state for less than 6 months but also did not work in the state. The reciprocity between DC, MD and VA says that Maryland gets the money because that is where you lived. The last time I had to do a part year the law was that they would forgive a half a month. In other words if you move in late December or early January you could ignore that small time period and avoid having to file in two states. In some cases people argue that some short term moves were never meant to be permanent. You might be able to claim that except the fact that your 2009 federal tax form you most likely claimed you lived in Maryland. The next issue is time and money. If Maryland says you owe them money for that time period, and if they still have the ability to force you to pay it; This is where the issue of correct state W-4 comes in. If the money during the period you lived in Maryland was sent to Virginia, you should have had that money refunded by Richmond in the spring of 2010. But if there was no W-4 filed with your employer that would mean that Maryland didn't get any money for 2009. If you didn't tell Richmond you moved in 2009 they may not have refunded everything because they thought you lived there all year. Because of the time that has passed it may be too late to fix your Virginia filing, so they may not refund you excess payment to them. Maryland is interested in calculating how much you should have paid them in 2009. They are only looking at what you told the feds you made, and they may be assuming that you lived there the whole year. But until you file correctly that have no ability to calculate what you really owe. You need professional advice. You need to know what they can and can't collect. You also need to know what you can and can't get back from Richmond. And since it also may impact your filings for 2010 you will want to get that resolved at the same time." }, { "docid": "499864", "title": "", "text": "\"I have a related issue, since I have some income which is large enough to matter and hard to predict. Start with a best guess. Check what tax bracket you were in last year and withhold that percentage of the expected non-withheld income. Adjust upward a bit, if desired, to reflect the fact that you're getting paid more at the new job. Adjust again, either up or down, to reflect whether you were over-withheld or under-withheld last year (whether the IRS owed you a refund or you had to send a check with your return). Repeat that process next year after next tax season, when you see how well your guess worked out. (You could try pre-calculating the entire tax return based on your expected income and then divide any underpayment into per-paycheck additional withholding... but I don't think it's worth the effort.) I don't worry about trying to get this exactly correct. I don't stress about lost interest if I've over-withheld a bit, and as long as your withholding was reasonably close and you have the cash float available to send them a check for the rest when it comes due, the IRS generally doesn't grumble if your withholding was a bit low. (It would be really nice if the IRS paid us interest on over-withholding, to mirror the fact that they charge us interest if we're late in returning our forms. Oh well.) Despite all the stories, the IRS really is fairly reasonable; if you aren't deliberately trying to get away with something, the process is annoying but shouldn't be scary. The one time they mail-audited me, it was several thousand dollars in my favor; I'd forgotten to claim some investment losses, and their computers noticed the error. Though I still say the motto of the next revolution will be \"\"No taxation without proper instructions!\"\"\"" }, { "docid": "94088", "title": "", "text": "\"It depends on when you can get the money, not when you know that you won or when you choose to take the ticket in. If you can present your ticket this year and get paid this year, the taxes are due this year, whether or not you actually choose to claim the prize this year. If you cannot receive payment until next year, then taxes will be due next year. This is \"\"constructive receipt,\"\" which applies to most individual tax situations. This assumes that you chose to receive a lump sum. If you get installments, then your taxes would be due as the installments are available, but the constructive receipt still applies.\"" }, { "docid": "497946", "title": "", "text": "As you're working, you and your spouse were probably born after 1935, so I'll assume that Marriage Allowance is relevant to you rather than Married Couple's Allowance. The allowance applies if your husband or wife earns less than the personal allowance in salary (£10,600/year), and less than £5,000/year in savings interest. For example it's likely this will apply if he or she's not working. Also, you need to be only a basic rate taxpayer, earning less than £42,385/year. In that case they can register online to transfer £1,060 of their personal allowance to you, which will reduce your tax bill by £212/year if you yourself earn more than £1,060 above the personal allowance. This will usually work by HMRC issuing a new tax code to your employer who will then automatically withhold less of your salary. You can't get your employer to do this directly, you have to go via HMRC. The allowance change will be effective as if from the start of the curren tax year in April 2015, so you will probably end up getting the proportion of the £212 that you could have had up till now (from April to August) back all at once in your next pay cheque, or possibly spread out over the rest of the tax year. Apart from that you'll get it spread out evenly over the year - i.e. about £17/month." } ]

[ { "docid": "196423", "title": "", "text": "Not a financially sound decision in my humble opinion. Basically, you are prepaying your taxes and the only reason you want to do that is if you don't have the discipine to save that money for when it is time to pay next year (assuming you will have to)." } ]

[ { "docid": "332447", "title": "", "text": "\"Everything is fine. If line 77 from last year is empty, you should leave this question blank. You made estimated tax payments in 2015. But line 77 relates to a different way to pay the IRS. When you filed your 2014 taxes, if you were owed a refund, and you expected to owe the IRS money for 2015, line 77 lets you say \"\"Hey IRS, instead of sending me a refund for 2014, just keep the money and apply it to my 2015 taxes.\"\" You can also ask them to keep a specified amount and refund the rest. Either way this is completely optional. It sounds like you didn't do that, so you don't fill in anything here. The software should ask you in a different question about your estimated tax payments.\"" }, { "docid": "190497", "title": "", "text": "\"Sales tax and luxury tax is what you will have to pay tax wise, and they are non-refundable (in most cases but the rules vary area to area). This really tripped up some friends of mine I had come from England. The rules are complicated and regional. Sales tax is anywhere from 0% to 10.25% and are not usually applied to raw foods. Luxury taxes are usually state level and only apply to things most people consider a large purchase. Jewelry, cars, houses, etc. Not things your likely to buy. (Small, \"\"normal\"\" jewelry usually doesn't count. Diamond covered flava-flav clock ... probably has a luxury tax.) For sales tax, it can change a lot. Don't be afraid to ask. People ask all the time. It's normal. I personally add 10% to what I buy. Sales tax in my city is 7%, county is 6.5%, state is 6%. So you can get different rates depending on what side of the street you shop on some times. Under normal circumstances you do not get a refund on these taxes. Some states do give refunds. Usually however the trouble of getting that refund isn't worth it unless making a large purchase. You are not exempt from paying sales tax. (Depending on where you go you may get asked). Business are exempt if they are purchasing things to re-sell. Only the end customer pays sales tax. Depending on where you go, online purchases may not be subject to sales tax. Though they might. That, again, depends on city, county, and state laws. Normally, you will have to pay sales tax at the register. It will be calculated into your total, and show as a line item on your receipt. http://3.bp.blogspot.com/-yAvAm2BQ3xs/TudY-lfLDzI/AAAAAAAAAGs/gYG8wJeaohw/s1600/great%2Boutdoors%2Breceipt%2BQR-%2Bbefore%2Band%2Bafter.jpg Also some products have other non-refundable taxes. Rental car taxes, fuel taxes and road taxes are all likely taxes you will have to pay. Areas that have a lot of tourists, usually (but not always) have more of these kinds of taxes. Friendly note. DON'T BUY DVDs HERE! They won't work when you get home. I know you didn't ask but this catches a lot of people. Same for electronics (in many cases, specially optical drives and wireless).\"" }, { "docid": "312493", "title": "", "text": "When you itemize your deductions, you get to deduct all the state income tax that was taken out of your paycheck last year (not how much was owed, but how much was withheld). If you deducted this last year, then you need to add in any amount that you received in state income tax refunds last year to your taxes this year, to make up for the fact that you ended up deducting more state income tax than was really due to the state. If you took the standard deduction last year instead of itemizing, then you didn't deduct your state income tax withholding last year and you don't need to claim your refund as income this year. Also, if you itemized, but chose to take the state sales tax deduction instead of the state income tax deduction, you also don't need to add in the refund as income. For whatever reason, Illinois decided that you don't get a 1099-G. It might be that the amount of the refund was too small to warrant the paperwork. It might be that they screwed up. But if you deducted your state income tax withholding on last year's tax return, then you need to add the state tax refund you got last year on line 10 of this year's 1040, whether or not the state issued you a form or not. Take a look at the Line 10 instructions starting on page 22 of the 1040 instructions to see if you have any unusual situations covered there that you didn't mention here. (For example, if you received a refund check for multiple years last year.) Then check your tax return from last year to verify that you deducted your state income tax withholding on Schedule A. If you did, then this year add the refund you got from the state to line 10 of this year's 1040." }, { "docid": "490176", "title": "", "text": "\"Individuals most definitely can have NOL. This is covered in the IRS publication 536. What is the difference between NOL and capital loss? NOL is Net Operating Loss. I.e.: a situation where your (allowable) expenses and deductions exceed your gross income. Basically it means that you have negative income for that year, for tax purposes. Capital loss occurs when the total amount of your capital gains reported on Schedule D is negative. What are their relations then? Not all expenses and deductions that you usually put on your tax return are allowed for NOL calculation. For example, capital loss is not allowed. I.e.: if you earned $2000 and you lost in stocks $3000 - you do not get a $1K NOL. Capital losses are excluded from NOL calculation and in this scenario you still have non-negative income for NOL purposes even though it is offset in full by capital loss deduction and your \"\"taxable income\"\" line is negative. The $1K that was not allowed - gets carried forward to the next year using the Capital Loss Carryover Worksheet in the instructions to Schedule D. You calculate your NOL using form 1045 schedule A. You can use the form 1045 to apply the NOL to prior 2 years, or you can elect to apply it only to future years (up to 20 years). In what cases, capital loss can be NOL? Never.\"" }, { "docid": "191473", "title": "", "text": "LLC is not a federal tax designation. It's a state-level organization. Your LLC can elect to be treated as a partnership, a disregarded entity (i.e., just report the taxes in your individual income tax), or as an S-Corp for federal tax purposes. If you have elected S-Corp, I expect that all the S-Corp rules will apply, as well as any state-level LLC rules that may apply. Disclaimer: I'm not 100% familiar with S-corp rules, so I can't evaluate whether the statements you made about proportional payouts are correct." }, { "docid": "103590", "title": "", "text": "Having a large state return also means that there is a potential income tax liability created at the federal level for the following year, as the situation resulted from the deduction of more on one's federal return than should have been deducted. The state refund is treated as federal income in the year it is refunded. http://blog.turbotax.intuit.com/tax-tips/is-my-state-tax-refund-taxable-and-why-90/" }, { "docid": "235825", "title": "", "text": "You have multiple things going on some of which will work in opposite directions. This is a second job for the family so that their income will be added onto of the main income. This generally means that the 2nd income has too little tax withheld. The tax tables used by employers have no way of handling this situation. This 2nd job is being started part way though the tax year, so too much in taxes is withheld. If they make 2,000 a month for 4 months that would mean 8,000 in income; but the tax tables used by the employer withhold at the $24,000 per year rate. The third issue is the great variation in the number of hours per pay period. This means that too much is withheld in checks with the most hours, and too little in the ones with the least hours. For this year you have a reprieve. As long as you make the safe-harbor levels for federal withholding, you can avoid penalties when you file next spring. To do so just make sure that the withholding of all the jobs in the family equal or exceed the total income tax for the family last year. Note this isn't equal to last years withholding, or equal to the refund last year, but the total tax you should have paid. The general advice is to set the smaller income to have 0 exemptions, and use the W-4 for the larger income to make adjustments. In the past I have done this to make sure that we make the safe-harbor level. You can make adjustments in the new year once you know what the safe harbor goal is for the rest of the year." }, { "docid": "419768", "title": "", "text": "If you get 1099-G for state tax refund, you need to declare it as income only if you took deduction on state taxes in the prior year. I.e.: if you took standard deductions - you don't need to declare the refund as income. If you did itemize, you have to declare the refund as income, and deduct the taxes paid last year on your schedule A. If this year you're not itemizing - you lost the tax benefit. If it was not clear from my answer - the taxes paid and the refund received are unrelated. The fact that you paid tax and received refund in the same year doesn't make them in any way related, even if both refer to the same taxable year." }, { "docid": "475607", "title": "", "text": "The plumber will apply for and receive a refund of the amount of VAT he paid on the purchase amount. That's the cornerstone of how VAT works, as opposed to a sales tax. So for example: (Rounded approximate amounts for simplicity) Now, at each point, the amount between (original cost VAT) and (new VAT) is refunded. So by the end, a total of £3 VAT is paid on the pipe (not £6.2); and at each point the business 'adding value' at that stage pays that much. The material company adds £1 value; the producer adds £4 value; the supplier adds £5 value; the plumber adds £5 value. Each pays some amount of VAT on that amount, typically 20% unless it's zero/reduced rated. So the pipe supplier pays £1 but gets a £0.2 refund, so truly pays £0.8. The plumber pays £3 (from your payment) but gets a £2 refund. So at each level somebody paid a bit, and then that bit is then refunded to the next person up the ladder, with the final person in the chain paying the full amount. The £0.2 is refunded to the producer, the £1 is refunded to the supplier, the £2 is refunded to the plumber." }, { "docid": "97852", "title": "", "text": "Legally, do I have anything to worry about from having an incorrectly filed W-4? What you did wasn't criminal. When you submitted the form it was correct. Unfortunately as your situation changed you didn't adjust the form, that mistake does have consequences. Is there anything within my rights I can do to get the company to take responsibility for their role in this situation, or is it basically my fault? It is basically your fault. The company needs a w-4 for each employee. They will use that W-4 for every paycheck until the government changes the regulation, or your employment ends, or you submit a new form. Topic 753 - Form W-4 – Employee's Withholding Allowance Certificate If an employee qualifies, he or she can also use Form W-4 (PDF) to tell you not to deduct any federal income tax from his or her wages. To qualify for this exempt status, the employee must have had no tax liability for the previous year and must expect to have no tax liability for the current year. However, if the employee can be claimed as a dependent on a parent's or another person's tax return, additional limitations may apply; refer to the instructions for Form W-4. A Form W-4 claiming exemption from withholding is valid for only the calendar year in which it is filed with the employer. To continue to be exempt from withholding in the next year, an employee must give you a new Form W-4 claiming exempt status by February 15 of that year. If the employee does not give you a new Form W-4, withhold tax as if he or she is single, with no withholding allowances. However, if you have an earlier Form W-4 (not claiming exempt status) for this employee that is valid, withhold as you did before. (I highlighted the key part) Because you were claiming exempt they should have required you to update that form each year. In your case that may not have applied because of the timing of the events. When do you submit a new form? Anytime your situation changes. Sometimes the change is done to adjust withholding to modify the amount of a refund. Other times failure to update the form can lead to bigger complication: when your marital status changes, or the number of dependents changes. In these situations you could have a significant amount of under-withheld, which could lead to a fine later on. As a side note this is even more true for the state version of a W-4. Having a whole years worth of income tax withholding done for the wrong state will at a minimum require you to file in multiple states, it could also result in a big surprise if the forgotten state has higher tax rate. Will my (now former) employee be responsible for paying their portion of the taxes that were not withheld during the 9 months I was full-time, tax Exempt? For federal and state income taxes they are just a conduit. They take the money from your paycheck, and periodically send it to the IRS and the state capital. Unless you could show that the pay stubs said taxes were being withheld, but the w-2 said otherwise; they have no role in judging the appropriateness of your W-4 with one exception. Finally, and I am not too hopeful on this one, but is there anything I can do to ease this tax burden? I understand that the IRS is owed no matter what. You have one way it might workout. For many taxpayers who have a large increase in pay from one year to the next, they can take advantage of a safe-harbor in the tax law. If they had withheld as much money in 2015 as they paid in 2014, they have reached the safe-harbor. They avoid the penalty for under withholding. Note that 2014 number is not what you paid on tax day or what was refunded, but all your income taxes for the entire year. Because in your case your taxes for the year 2014 were ZERO, that might mean that you automatically reach the safe-harbor for 2015. That makes sense because one of the key requirements of claiming exempt is that you had no liability the year before. It won't save you from paying what you owe but it can help avoid a penalty. Lessons" }, { "docid": "193717", "title": "", "text": "\"You mention \"\"early exercise\"\" in your title, but you seem to misunderstand what early exercise really means. Some companies offer stock options that vest over a number of years, but which can be exercised before they are vested. That is early exercise. You have vested stock options, so early exercise is not relevant. (It may or may not be the case that your stock options could have been early exercised before they vested, but regardless, you didn't exercise them, so the point is moot.) As littleadv said, 83(b) election is for restricted stocks, often from exercising unvested stock options. Your options are already vested, so they won't be restricted stock. So 83(b) election is not relevant for you. A taxable event happen when you exercise. The point of the 83(b) election is that exercising unvested stock options is not a taxable event, so 83(b) election allows you to force it to be a taxable event. But for you, with vested stock options, there is no need to do this. You mention that you want it not to be taxable upon exercise. But that's what Incentive Stock Options (ISOs) are for. ISOs were designed for the purpose of not being taxable for regular income tax purposes when you exercise (although it is still taxable upon exercise for AMT purposes), and it is only taxed when you sell. However, you have Non-qualified Stock Options. Were you given the option to get ISOs at the beginning? Why did your company give you NQSOs? I don't know the specifics of your situation, but since you mentioned \"\"early exercise\"\" and 83(b) elections, I have a hypothesis as to what might have happened. For people who early-exercise (for plans that allow early-exercise), there is a slight advantage to having NQSOs compared to ISOs. This is because if you early exercise immediately upon grant and do 83(b) election, you pay no taxes upon exercise (because the difference between strike price and FMV is 0), and there are no taxes upon vesting (for regular or AMT), and if you hold it for at least 1 year, upon sale it will be long-term capital gains. On the other hand, for ISOs, it's the same except that for long-term capital gains, you have to hold it 2 years after grant and 1 year after exercise, so the period for long-term capital gains is longer. So companies that allow early exercise will often offer employees either NQSOs or ISOs, where you would choose NQSO if you intend to early-exercise, or ISO otherwise. If (hypothetically) that's what happened, then you chose wrong because you got NQSOs and didn't early exercise.\"" }, { "docid": "156499", "title": "", "text": "There are a few methods you can use to estimate your taxes. On the results screen, the app will show you your estimated tax burden, your estimated withholding for the year, and your estimated overpayment/refund or shortfall/tax due. It may also have recommendations for you on how to adjust your W-4 (although, this late in the year, I think it only tells you to come back next year to reevaluate). Your state might also have income tax, and if you are curious about that, you can find the state tax form and estimate your state income tax as well. My guess is that you will be getting a refund this year, as you have only worked half of the year. But that is only a guess." }, { "docid": "406561", "title": "", "text": "\"The limit on SEP IRA is 25%, not 20%. If you're self-employed (filing on Schedule C), then it's taken on net earning, which in your example would be 25% of $90,000. (https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people) JoeTaxpayer is correct as regards the 401(k) limits. The elective deferrals are per person - That's a cap in sum across multiple plans and across both traditional and Roth if you have those. In general, it's actually across other retirement plan types too - See below. If you're self-employed and set-up a 401(k) for your own business, the elective deferral is still aggregated with any other 401(k) plans in which you participate that year, but you can still make the employer contribution on your own plan. This IRS page is current a pretty good one on this topic: https://www.irs.gov/retirement-plans/one-participant-401k-plans Key quotes that are relevant: The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both: •Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit: ◦$18,000 in 2015 and 2016, or $24,000 in 2015 and 2016 if age 50 or over; plus •Employer nonelective contributions up to: ◦25% of compensation as defined by the plan, or ◦for self-employed individuals, see discussion below It continues with this example: The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $18,000 in 2015 and 2016. Although a plan's terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans. EXAMPLE Ben, age 51, earned $50,000 in W-2 wages from his S Corporation in 2015. He deferred $18,000 in regular elective deferrals plus $6,000 in catch-up contributions to the 401(k) plan. His business contributed 25% of his compensation to the plan, $12,500. Total contributions to the plan for 2015 were $36,500. This is the maximum that can be contributed to the plan for Ben for 2015. A business owner who is also employed by a second company and participating in its 401(k) plan should bear in mind that his limits on elective deferrals are by person, not by plan. He must consider the limit for all elective deferrals he makes during a year. Notice in the example that Ben contributed more that than his elective limit in total (his was $24,000 in the example because he was old enough for the $6,000 catch-up in addition to the $18,000 that applies to everyone else). He did this by declaring an employer contribution of $12,500, which was limited by his compensation but not by any of his elective contributions. Beyond the 401(k), keep in mind that elective contributions are capped across different types of retirement plans as well, so if you have a SEP IRA and a solo 401(k), your total contributions across those plans are also capped. That's also mentioned in the example. Now to the extent that you're considering different types of plans, that's a whole question in itself - One that might be worth consulting a dedicated tax advisor. A few things to consider (not extensive list): As for payroll / self-employment tax: Looks like you will end up paying Medicare, including the new \"\"Additional Medicare\"\" tax that came with the ACA, but not SS: If you have wages, as well as self-employment earnings, the tax on your wages is paid first. But this rule only applies if your total earnings are more than $118,500. For example, if you will have $30,000 in wages and $40,000 in selfemployment income in 2016, you will pay the appropriate Social Security taxes on both your wages and business earnings. In 2016, however, if your wages are $78,000, and you have $40,700 in net earnings from a business, you don’t pay dual Social Security taxes on earnings more than $118,500. Your employer will withhold 7.65 percent in Social Security and Medicare taxes on your $78,000 in earnings. You must pay 15.3 percent in Social Security and Medicare taxes on your first $40,500 in self-employment earnings and 2.9 percent in Medicare tax on the remaining $200 in net earnings. https://www.ssa.gov/pubs/EN-05-10022.pdf Other good IRS resources:\"" }, { "docid": "395726", "title": "", "text": "Do you have a regular job, where you work for somebody else and they pay you a salary? If so, they should be deducting estimated taxes from your paychecks and sending them in to the government. How much they deduct depends on your salary and what you put down on your W-4. Assuming you filled that out accurately, they will withhold an amount that should closely match the taxes you would owe if you took the standard deduction, have no income besides this job, and no unusual deductions. If that's the case, come next April 15 you will probably get a small refund. If you own a small business or are an independent contractor, then you have to estimate the taxes you will owe and make quarterly payments. If you're worried that the amount they're withholding doesn't sound right, then as GradeEhBacon says, get a copy of last year's tax forms (or this year's if they're out by now) -- paper or electronic -- fill them out by estimating what your total income will be for the year, etc, and see what the tax comes out to be." }, { "docid": "497946", "title": "", "text": "As you're working, you and your spouse were probably born after 1935, so I'll assume that Marriage Allowance is relevant to you rather than Married Couple's Allowance. The allowance applies if your husband or wife earns less than the personal allowance in salary (£10,600/year), and less than £5,000/year in savings interest. For example it's likely this will apply if he or she's not working. Also, you need to be only a basic rate taxpayer, earning less than £42,385/year. In that case they can register online to transfer £1,060 of their personal allowance to you, which will reduce your tax bill by £212/year if you yourself earn more than £1,060 above the personal allowance. This will usually work by HMRC issuing a new tax code to your employer who will then automatically withhold less of your salary. You can't get your employer to do this directly, you have to go via HMRC. The allowance change will be effective as if from the start of the curren tax year in April 2015, so you will probably end up getting the proportion of the £212 that you could have had up till now (from April to August) back all at once in your next pay cheque, or possibly spread out over the rest of the tax year. Apart from that you'll get it spread out evenly over the year - i.e. about £17/month." }, { "docid": "176742", "title": "", "text": "\"Personally, I would just dispute this one with your CC. I had a situation where a subscription I had cancelled the prior year was billed to me. I called up to have a refund issued, they couldn't find me in their system under three phone numbers and two addresses. The solution they proposed was \"\"send us your credit card statement with the charge circled,\"\" to which I responded \"\"there's no way in hell I'm sending you my CC statement.\"\" Then I disputed the charge with the CC bank and it was gone about two days later. I partially expect to have the same charge appear next year when they try to renew my non-existent subscription again. Now, whether or not this is a normal practice for the company, or just a call center person making a good-faith but insecure attempt to solve your problem is irrelevant. Fact of the matter is, you tried to resolve this with the merchant and the merchant asked for something that's likely outside the bounds of your CC Terms and Conditions; sending your entire number via email. Dispute it and move on. The dispute process exists for a reason.\"" }, { "docid": "388713", "title": "", "text": "As a new (very!) small business, the IRS has lots of advice and information for you. Start at https://www.irs.gov/businesses/small-businesses-self-employed and be sure you have several pots of coffee or other appropriate aid against somnolence. By default a single-member LLC is 'disregarded' for tax purposes (at least for Federal, and generally states follow Federal although I don't know Mass. specifically), although it does have other effects. If you go this route you simply include the business income and expenses on Schedule C as part of your individual return on 1040, and the net SE income is included along with your other income (if any) in computing your tax. TurboTax or similar software should handle this for you, although you may need a premium version that costs a little more. You can 'elect' to have the LLC taxed as a corporation by filing form 8832, see https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc . In principle you are supposed to do this when the entity is 'formed', but in practice AIUI if you do it by the end of the year they won't care at all, and if you do it after the end of the year but before or with your first affected return you qualify for automatic 'relief'. However, deciding how to divide the business income/profits into 'reasonable pay' to yourself versus 'dividends' is more complicated, and filling out corporation tax returns in addition to your individual return (which is still required) is more work, in addition to the work and cost of filing and reporting the LLC itself to your state of choice. Unless/until you make something like $50k-100k a year this probably isn't worth it. 1099 Reporting. Stripe qualifies as a 'payment network' and under a recent law payment networks must annually report to IRS (and copy to you) on form 1099-K if your account exceeds certain thresholds; see https://support.stripe.com/questions/will-i-receive-a-1099-k-and-what-do-i-do-with-it . Note you are still legally required to report and pay tax on your SE income even if you aren't covered by 1099-K (or other) reporting. Self-employment tax. As a self-employed person (if the LLC is disregarded) you have to pay 'SE' tax that is effectively equivalent to the 'FICA' taxes that would be paid by your employer and you as an employee combined. This is 12.4% for Social Security unless/until your total earned income exceeds a cap (for 2017 $127,200, adjusted yearly for inflation), and 2.9% for Medicare with no limit (plus 'Additional Medicare' tax if you exceed a higher threshold and it isn't 'repealed and replaced'). If the LLC elects corporation status it has to pay you reasonable wages for your services, and withhold+pay FICA on those wages like any other employer. Estimated payments. You are required to pay most of your individual income tax, and SE tax if applicable, during the year (generally 90% of your tax or your tax minus $1,000 whichever is less). Most wage-earners don't notice this because it happens automatically through payroll withholding, but as self-employed you are responsible for making sufficient and timely estimated payments, and will owe a penalty if you don't. However, since this is your first year you may have a 'safe harbor'; if you also have income from an employer (reported on W-2, with withholding) and that withholding is sufficent to pay last year's tax, then you are exempt from the 'underpayment' penalty for this year. If you elect corporation status then the corporation (which is really just you) must always make timely payments of withheld amounts, according to one of several different schedules that may apply depending on the amounts; I believe it also must make estimated payments for its own liability, if any, but I'm not familiar with that part." }, { "docid": "533589", "title": "", "text": "Suppose you have been paying interest on previous charges in the past. Your monthly statement is issued on April 12, and (since you just received your income tax refund), you pay it off in full on April 30. You don't charge anything to the card at all after April 12. Thus, on April 30, your credit card balance shows as zero since you just paid it off. But your April 12 statement billed you for interest only till April 12. So, on May 12, your next monthly bill will be for the interest for your nonzero balance from April 13 through April 30. Assuming that you still are not making any new charges on your card and pay off the May 12 bill in timely fashion, you will finally have a zero bill on June 12. What if you charge new items to your credit card after April 12? Well, your balance stopped revolving on April 30, and that's when interest is no longer charged on the new charges. But you do owe interest for a charge on April 13 (say) until April 30 when your balance is no longer revolving, and this will be added to your bill on May 12. Purchases made after April 30 will not be charged interest unless you fall off the wagon again and don't pay your May 12 bill in full by the due date of the bill (some time in early June)." }, { "docid": "458494", "title": "", "text": "\"I find those \"\"government checks\"\" arguments to be more appealing in theory than in reality. Ultimately, it comes down to deciding who gets what... and who gets to be the decider. Capitalism is far from perfect, but it decides who gets what through the individual, decentralized choices of everyone. Again, it's not perfect by any means, but it is dispersed - and everyone makes decisions for themselves, not for other people. Government action decides who gets what through a highly indirect process of electing politicians, and decisions are made by a small group of people, who are under, practically speaking, very little oversight or control. A few people make decisions for everyone else. Government action is, despite all our desire and efforts to avoid this, necessarily subject to the same disparities in influence/control as the market ... It may come in different forms, and the consequences may manifest differently (often less readily apparent), but there is no avoiding the \"\"a few people have a lot more control than everyone else\"\" problem. Governments are more prone to corruption because they trade the intangible currency of \"\"power\"\" in addition to money. No matter how you go about doing so, it's always easier to counteract a private actor than a government (given roughly equivalent levels of influence, obviously). I understand the desire for intervention, but I think we have a scary tendency to place far too much weight on good intentions, and far too little weight on consequences. It's so easy to think things through in your head (I do often) and come up with a plan that could obviously work exactly as intended for everyone's benefit. In doing so, we forget that people aren't pawns to be guided through life for someone else's vision (or pursuit of utopia or anything else) . ... they have lives, desires, interests, plans of their own, and theirs are just as valid as yours or mine. The reality is that you and I are probably far more similar than either of us would guess. But there are still huge differences - what we value, what we want to do next year, whether we want that promotion or want to get laid off so we can finally start our dream business, whether we want money for family vacations or medical bills.... so many differences that I couldn't ever fairly and accurately represent your interests without you actually telling me what they are. That's just the 2 of us. There are 300 million people in the US - we can't comprehend even really knowing a thousand well enough to genuinely speak on their behalf. In theory, big plans make everything better. In practice, they run into the reality that humans truly aren't pawns, and controlling 300 million people and predicting their responses/actions is way more difficult than it seems. Big plans often end up with real people - people who are just as deserving of opportunities and rights as everyone else - getting really hurt because some guy he doesn't know (and who doesn't know him) had an idea and the power to enforce it on everyone. I'm not saying that all government interference is bad, of course, and I'm not saying it shouldn't happen. Government interventions that are straightforward wealth transfers are probably less harmful to people ... like a tax on the rich to give hefty tax refunds to the poor, is more direct and less prone to causing unintentional harm then things like wage manipulations.\"" } ]

[ { "docid": "445230", "title": "", "text": "sometimes we advise very old or incapacitated people to apply the refund to the next year as check writing from time to time & mailing may be a hassle for them." } ]

[ { "docid": "261989", "title": "", "text": "Bank products have been pretty common with tax refunds as well, and they are also being heavily scrutinized for the same reasons. Refund Anticipation Loans (RALs) have been outlawed for future tax seasons due to lack of consumer protection. What is a bank product, you might ask? Rather than waiting 7-14 days for the a direct deposit from the IRS, a lot of places like H+R Block and Jackson Hewitt would offer a bank product to get you money quicker. For this service, they charge a fee (usually $99-$149) which is grossly overpriced for how little work it takes, but if your refund is several thousand dollars, you may not care. A Refund Anticipation Loan was the most predatory bank product, as it was an advance on your loan for the amount your expected refund. However, if there were any errors in your return and the IRS decided your refund was less than what your tax preparer calculated it to be, you were stuck with paying back the advance amount, leaving you to foot the bill for whatever errors your preparer may have made. These loans also had very high interest rates, since usually the people that wanted RALs were also the same people that rely upon cash advances. There are also Electronic Refund Checks (which ironically are paper checks for the consumer, not electronic deposits), direct deposits, and prepaid debit cards. Despite the fact that these same methods of refund payments are offered by the IRS themselves, preparers and banks alike sold these to collect fees for essentially no work. I'm not sure how similar these bank products for student loans are, but I wanted to shed some light on them anyways. Regardless of how badly you need money, **do not ever accept money through a bank product.** If it benefited you more, banks and preparers would not offer these. (Source: telemarketing at a tax preparation software company)" }, { "docid": "533589", "title": "", "text": "Suppose you have been paying interest on previous charges in the past. Your monthly statement is issued on April 12, and (since you just received your income tax refund), you pay it off in full on April 30. You don't charge anything to the card at all after April 12. Thus, on April 30, your credit card balance shows as zero since you just paid it off. But your April 12 statement billed you for interest only till April 12. So, on May 12, your next monthly bill will be for the interest for your nonzero balance from April 13 through April 30. Assuming that you still are not making any new charges on your card and pay off the May 12 bill in timely fashion, you will finally have a zero bill on June 12. What if you charge new items to your credit card after April 12? Well, your balance stopped revolving on April 30, and that's when interest is no longer charged on the new charges. But you do owe interest for a charge on April 13 (say) until April 30 when your balance is no longer revolving, and this will be added to your bill on May 12. Purchases made after April 30 will not be charged interest unless you fall off the wagon again and don't pay your May 12 bill in full by the due date of the bill (some time in early June)." }, { "docid": "362060", "title": "", "text": "I am not an accountant, but I have a light accounting background, despite being primarily an engineer. I also have a tiny schedule C business which has both better and worse years. I am also in the United States and pay US taxes. I assume you are referring to the US Form 1040 tax return, with the attached Schedule C. However little I know about US taxes, I know nothing about foreign taxes. You are a cash-basis taxpayer, so the transactions that happen in each tax year are based on the cash paid and cash received in that year. You were paid last year, you computed your schedule C based on last year's actual transactions, and you paid taxes on that income. You can not recompute last years schedule C based on the warranty claim. You might want to switch to an accrual accounting method, where you can book allowances for warranty claims. It is more complex, and if your business is spotty and low volume, it may be more trouble than it is worth. At this point, you have two months to look for ways to shift expenses into next year or being income into this year, both of which help offset this loss. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on. This article on LegalZoom (link here) discusses how to apply a significant net operating loss (NOL) in this year to the previous two years, and potentially carry it forward to the next two years. This does involve filing amended returns for the prior two years, showing this year's NOL. For this to be relevant, your schedule C loss this year must exceed your other W2 and self-employment income this year, with other tests also applied. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on." }, { "docid": "111531", "title": "", "text": "\"From what you've described, your spouse is a non-resident alien for US tax purposes. You have two choices: Use the Nonresident Spouse Treated As Resident election and file as Married Filing Jointly. Since your spouse doesn't have, and doesn't currently qualify for, an SSN, he/she will need to apply for an ITIN together with the tax filing. Note that by becoming a resident alien, your spouse's worldwide income the whole year would be subject to US taxes, and would need to be reported on your joint tax filing, though he/she will be able to use the Foreign Earned Income Exclusion to exclude $100k of her foreign earned income, since he/she will have been out of the US for 330 days in a 12-month period. Or, file as Married Filing Separately. You write \"\"NRA\"\" for your spouse's SSN on your tax return. As a nonresident alien, if your spouse doesn't have any US income, he/she doesn't have to file a US tax return, and doesn't need to apply for an ITIN. Which one is better is up to you to figure out.\"" }, { "docid": "235825", "title": "", "text": "You have multiple things going on some of which will work in opposite directions. This is a second job for the family so that their income will be added onto of the main income. This generally means that the 2nd income has too little tax withheld. The tax tables used by employers have no way of handling this situation. This 2nd job is being started part way though the tax year, so too much in taxes is withheld. If they make 2,000 a month for 4 months that would mean 8,000 in income; but the tax tables used by the employer withhold at the $24,000 per year rate. The third issue is the great variation in the number of hours per pay period. This means that too much is withheld in checks with the most hours, and too little in the ones with the least hours. For this year you have a reprieve. As long as you make the safe-harbor levels for federal withholding, you can avoid penalties when you file next spring. To do so just make sure that the withholding of all the jobs in the family equal or exceed the total income tax for the family last year. Note this isn't equal to last years withholding, or equal to the refund last year, but the total tax you should have paid. The general advice is to set the smaller income to have 0 exemptions, and use the W-4 for the larger income to make adjustments. In the past I have done this to make sure that we make the safe-harbor level. You can make adjustments in the new year once you know what the safe harbor goal is for the rest of the year." }, { "docid": "271772", "title": "", "text": "Since you both are members of the LLC - it is not a single-member LLC, thus you have to file the tax return on behalf of the LLC (I'm guessing you didn't elect corporate treatment, so you would be filing 1065, which is the default). You need to file form 4868 on behalf of yourselves as individuals, and form 7004 on behalf of the LLC as the partnership. Since the LLC is disregarded (unless you explicitly chose it not to be, which seems not to be the case) the taxes will in fact flow to your individual return(s), but the LLC will have to file the informational return on form 1065 and distribute K-1 forms to each of you. So you wouldn't pay additional estimated taxes with the extension, as you don't pay any taxes with the form 1065 itself. If you need a help understanding all that and filling the forms - do talk to a professional (EA or CPA licensed in your state). Also, reconsider not sending any payment. I suggest sending $1 with the extension form even if you expect a refund." }, { "docid": "349847", "title": "", "text": "Your total salary deferral cannot exceed $18K (as of 2016). You can split it between your different jobs as you want, to maximize the matching. You can contribute non-elective contribution on top of that, which means that your self-proprietorship will commit to paying you that portion regardless of your deferral. That would be on top of the $18K. You cannot contribute more than 20% of your earnings, though. So if you earn $2K, you can add $400 on top of the $18K limit (ignoring the SE tax for a second here). Keep in mind that if you ever have employees, the non-elective contribution will apply to them as well. Also, the total contribution limit from all sources (deferral, matching, non-elective) cannot exceed $53K (for 2016)." }, { "docid": "517748", "title": "", "text": "\"Federal tax refund is taxes you've overpaid. What you're saying is that this year you overpaid less than before. I don't understand why you see this is as a bad thing. Optimal situation is when you have no refunds and no taxes due on tax day, but it is really hard to get there. But the closer you can get - the better, which means that reducing your refund should be your goal. In any case, \"\"Federal Tax Refund\"\" is meaningless, what you need to look at is your actual taxes due. This is the number you should be working to reduce. Is it possible to shift the amounts on a W-2 (with correct adjustments) to tax all of your wages, instead of leaving some of it deducted pre-tax? Why would you want to pay more tax? If your goal is to have a refund (I.e.: it is your way of forcing yourself to save), then you need to recalculate the numbers and adjust your W4 taking the (pre-tax) FSA into account. If it is not the goal, then you should be looking at the total taxes owed, not the refund, and adjust your W4 so that your withholding would cover the taxes owed as closely as possible. And to answer your question, after all this - of course it is possible. But it is wrong, and will indeed likely to trigger an audit. You can write whatever you want on your tax return, but in the end of it, you sign under the penalty of perjury that what you filled is the correct information. Perjury is a Federal felony, and knowingly filing incorrect tax return is fraud (especially since your motive is to gain, even though you're not actually gaining anything). Fraudulent tax returns can be audited any time (no statute of limitations).\"" }, { "docid": "52438", "title": "", "text": "\"Highly Compensated Employee Rules Aim to Make 401k's Fair would be the piece that I suspect you are missing here. I remember hearing of this rule when I worked in the US and can understand why it exists. A key quote from the article: You wouldn't think the prospect of getting money from an employer would be nerve-wracking. But those jittery co-workers are highly compensated employees (HCEs) concerned that they will receive a refund of excess 401k contributions because their plan failed its discrimination test. A refund means they will owe more income tax for the current tax year. Geersk (a pseudonym), who is also an HCE, is in information services and manages the computers that process his firm's 401k plan. 401(k) - Wikipedia reference on this: To help ensure that companies extend their 401(k) plans to low-paid employees, an IRS rule limits the maximum deferral by the company's \"\"highly compensated\"\" employees, based on the average deferral by the company's non-highly compensated employees. If the less compensated employees are allowed to save more for retirement, then the executives are allowed to save more for retirement. This provision is enforced via \"\"non-discrimination testing\"\". Non-discrimination testing takes the deferral rates of \"\"highly compensated employees\"\" (HCEs) and compares them to non-highly compensated employees (NHCEs). An HCE in 2008 is defined as an employee with compensation of greater than $100,000 in 2007 or an employee that owned more than 5% of the business at any time during the year or the preceding year.[13] In addition to the $100,000 limit for determining HCEs, employers can elect to limit the top-paid group of employees to the top 20% of employees ranked by compensation.[13] That is for plans whose first day of the plan year is in calendar year 2007, we look to each employee's prior year gross compensation (also known as 'Medicare wages') and those who earned more than $100,000 are HCEs. Most testing done now in 2009 will be for the 2008 plan year and compare employees' 2007 plan year gross compensation to the $100,000 threshold for 2007 to determine who is HCE and who is a NHCE. The threshold was $110,000 in 2010 and it did not change for 2011. The average deferral percentage (ADP) of all HCEs, as a group, can be no more than 2 percentage points greater (or 125% of, whichever is more) than the NHCEs, as a group. This is known as the ADP test. When a plan fails the ADP test, it essentially has two options to come into compliance. It can have a return of excess done to the HCEs to bring their ADP to a lower, passing, level. Or it can process a \"\"qualified non-elective contribution\"\" (QNEC) to some or all of the NHCEs to raise their ADP to a passing level. The return of excess requires the plan to send a taxable distribution to the HCEs (or reclassify regular contributions as catch-up contributions subject to the annual catch-up limit for those HCEs over 50) by March 15 of the year following the failed test. A QNEC must be an immediately vested contribution. The annual contribution percentage (ACP) test is similarly performed but also includes employer matching and employee after-tax contributions. ACPs do not use the simple 2% threshold, and include other provisions which can allow the plan to \"\"shift\"\" excess passing rates from the ADP over to the ACP. A failed ACP test is likewise addressed through return of excess, or a QNEC or qualified match (QMAC). There are a number of \"\"safe harbor\"\" provisions that can allow a company to be exempted from the ADP test. This includes making a \"\"safe harbor\"\" employer contribution to employees' accounts. Safe harbor contributions can take the form of a match (generally totaling 4% of pay) or a non-elective profit sharing (totaling 3% of pay). Safe harbor 401(k) contributions must be 100% vested at all times with immediate eligibility for employees. There are other administrative requirements within the safe harbor, such as requiring the employer to notify all eligible employees of the opportunity to participate in the plan, and restricting the employer from suspending participants for any reason other than due to a hardship withdrawal.\"" }, { "docid": "190844", "title": "", "text": "Unfortunately you can't use your HSA to pay for expenses in year A. Qualified medical expenses for an HSA must occur after the date the HSA account was established. (Established typically means the date the account was opened in your name.) The other answers already mostly answered your other questions, but I want to really hit home some particular points that many people may not realize: The most important thing to do when you are eligible to have an HSA account, is to open an HSA account ASAP. This is true even if you don't put any money in it and you leave it empty for years. The reason is that once the account is established, all qualified medical expenses that occur after that date are eligible for distributions, even if you wait years before you fund your HSA account. The second most important thing to do is to keep track of all out of pocket medical expenses you incur after you open the HSA account. All you need is a simple spreadsheet and a place to store your receipts. Once you have the account and are tracking expenses, now you can put money into your HSA and take it out whenever you'd like. (With limits- you can't put in more than the contribution limit for a single tax year, and you can't take out more than your eligible expenses to date.) Helpful Tip: Many people don't fund their HSA because they can't afford to set aside extra money to do so. Fortunately, you don't have to. For example, suppose you have some dental work and it costs you $500. Once you get the bill, before you pay it, put the $500 into your HSA account. The next day, take the $500 back out and pay your dental bill with it. Most HSA accounts will give you a debit card to make this even easier to pay the bill. By putting the money into your HSA for 1 day you just received a $500 tax deduction. Alternatively you can always pay out of pocket like you normally would, track your receipts, and wait until the end of the year (or up until April 15 of the next year). I like this option because I can pay all of my medical bills with a credit card and get cash back. Then at the end of the year, I add up the expenses, deposit that much into my HSA, and if I'd rather put that money somewhere else I just pull it out the next day. If you decide you don't need the money right away that's even better since you can leave it in the HSA account and invest it. Like a Roth account, you don't pay tax on the growth you achieve inside of an HSA. Another Tip: if your employer offers the service of automatically making deposits into your HSA by reducing your paycheck, you should definitely try to do that if you can afford it, rather than manually making contributions as I described in the previous tip. When your employer makes the contributions for you, your wages are reduced by that amount on your W2, so you end up saving an additional 7% in FICA taxes." }, { "docid": "573523", "title": "", "text": "\"I'll assume United States as the country; the answer may (probably does) vary somewhat if this is not correct. Also, I preface this with the caveat that I am neither a lawyer nor an accountant. However, this is my understanding: You must recognize the revenue at the time the credits are purchased (when money changes hands), and charge sales tax on the full amount at that time. This is because the customer has pre-paid and purchased a service (i.e. the \"\"credits\"\", which are units of time available in the application). This is clearly a complete transaction. The use of the credits is irrelevant. This is equivalent to a customer purchasing a box of widgets for future delivery; the payment is made and the widgets are available but have simply not been shipped (and therefore used). This mirrors many online service providers (say, NetFlix) in business model. This is different from the case in which a customer purchases a \"\"gift card\"\" or \"\"reloadable debit card\"\". In this case, sales tax is NOT collected (because this is technically not a purchase). Revenue is also not booked at this time. Instead, the revenue is booked when the gift card's balance is used to pay for a good or service, and at that time the tax is collected (usually from the funds on the card). To do otherwise would greatly complicate the tax basis (suppose the gift card is used in a different state or county, where sales tax is charged differently? Suppose the gift card is used to purchase a tax-exempt item?) For justification, see bankruptcy consideration of the two cases. In the former, the customer has \"\"ownership\"\" of an asset (the credits), which cannot be taken from him (although it might be unusable). In the latter, the holder of the debit card is technically an unsecured creditor of the company - and is last in line if the company's assets are liquidated for repayment. Consider also the case where the cost of the \"\"credits\"\" is increased part-way through the year (say, from $10 per credit to $20 per credit) or if a discount promotion is applied (buy 5 credits, get one free). The customer has a \"\"tangible\"\" item (one credit) which gets the same functionality regardless of price. This would be different if instead of \"\"credits\"\" you instead maintain an \"\"account\"\" where the user deposited $1000 and was billed for usage; in this case you fall back to the \"\"gift card\"\" scenario (but usage is charged at the current rate) and revenue is booked when the usage is purchased; similarly, tax is collected on the purchase of the service. For this model to work, the \"\"credit\"\" would likely have to be refundable, and could not expire (see gift cards, above), and must be usable on a variety of \"\"services\"\". You may have particular responsibility in the handling of this \"\"deposit\"\" as well.\"" }, { "docid": "456436", "title": "", "text": "The 'same day rule' in the UK is a rule for matching purposes only. It says that sales on any day are matched firstly with purchases made on the same day for the purposes of ascertaining any gain/loss. Hence the phrase 'bed-and-breakfast' ('b&b') when you wish to crystalise a gain (that is within the exempt amount) and re-establish a purchase price at a higher level. You do the sale on one day, just before the market closes, which gets matched with your original purchase, and then you buy the shares back the next day, just after the market opens. This is standard tax-planning. Whenever you have a paper gain, and you wish to lock that gain out of being taxed, you do a bed-and-breakfast transaction, the idea being to use up your annual exemption each and every year. Of course, if your dealing costs are high, then they may outweigh any tax saved, and so it would be pointless. For the purpose of an example, let's assume that the UK tax year is the same as the calendar year. Scenario 1. Suppose I bought some shares in 2016, for a total price of Stg.50,000. Suppose by the end of 2016, the holding is worth Stg.54,000, resulting in a paper gain of Stg.4,000. Question. Should I do a b&b transaction to make use of my Stg.11,100 annual exemption ? Answer. Well, with transaction costs at 1.5% for a round-trip trade, suppose, and stamp duty on the purchase of 0.5%, your total costs for a b&b will be Stg1,080, and your tax saved (upon some future sale date) assuming you are a 20% tax-payer is 20%x(4,000-1,080) = Stg584 (the transaction costs are deductible, we assume). This does not make sense. Scenario 2. The same as scenario 1., but the shares are worth Stg60,000 by end-2016. Answer. The total transaction costs are 2%x60,000 = 1,200 and so the taxable gain of 10,000-1,200 = 8,800 would result in a tax bill of 20%x8,800 = 1,760 and so the transaction costs are lower than the tax to be saved (a strict analysis would take into account only the present value of the tax to be saved), it makes sense to crystalise the gain. We sell some day before the tax year-end, and re-invest the very next day. Scenario 3. The same as scenario 1., but the shares are worth Stg70,000 by end-2016. Answer. The gain of 20,000 less costs would result in a tax bill for 1,500 (this is: 20%x(20,000 - 2%x70,000 - 11,100) ). This tax bill will be on top of the dealing costs of 1,400. But the gain is in excess of the annual exemption. The strategy is to sell just enough of the holding to crystallise a taxable gain of just 11,100. The fraction, f%, is given by: f%x(70,000-50,000) - 2%xf%x70,000 = 11,100 ... which simplifies to: f% = 11,100/18,600 = 59.68%. The tax saved is 20%x11,100 = 2,220, versus costs of 2%x59.58%x70,000 = 835.52. This strategy of partial b&b is adopted because it never makes sense to pay tax early ! End." }, { "docid": "176742", "title": "", "text": "\"Personally, I would just dispute this one with your CC. I had a situation where a subscription I had cancelled the prior year was billed to me. I called up to have a refund issued, they couldn't find me in their system under three phone numbers and two addresses. The solution they proposed was \"\"send us your credit card statement with the charge circled,\"\" to which I responded \"\"there's no way in hell I'm sending you my CC statement.\"\" Then I disputed the charge with the CC bank and it was gone about two days later. I partially expect to have the same charge appear next year when they try to renew my non-existent subscription again. Now, whether or not this is a normal practice for the company, or just a call center person making a good-faith but insecure attempt to solve your problem is irrelevant. Fact of the matter is, you tried to resolve this with the merchant and the merchant asked for something that's likely outside the bounds of your CC Terms and Conditions; sending your entire number via email. Dispute it and move on. The dispute process exists for a reason.\"" }, { "docid": "458494", "title": "", "text": "\"I find those \"\"government checks\"\" arguments to be more appealing in theory than in reality. Ultimately, it comes down to deciding who gets what... and who gets to be the decider. Capitalism is far from perfect, but it decides who gets what through the individual, decentralized choices of everyone. Again, it's not perfect by any means, but it is dispersed - and everyone makes decisions for themselves, not for other people. Government action decides who gets what through a highly indirect process of electing politicians, and decisions are made by a small group of people, who are under, practically speaking, very little oversight or control. A few people make decisions for everyone else. Government action is, despite all our desire and efforts to avoid this, necessarily subject to the same disparities in influence/control as the market ... It may come in different forms, and the consequences may manifest differently (often less readily apparent), but there is no avoiding the \"\"a few people have a lot more control than everyone else\"\" problem. Governments are more prone to corruption because they trade the intangible currency of \"\"power\"\" in addition to money. No matter how you go about doing so, it's always easier to counteract a private actor than a government (given roughly equivalent levels of influence, obviously). I understand the desire for intervention, but I think we have a scary tendency to place far too much weight on good intentions, and far too little weight on consequences. It's so easy to think things through in your head (I do often) and come up with a plan that could obviously work exactly as intended for everyone's benefit. In doing so, we forget that people aren't pawns to be guided through life for someone else's vision (or pursuit of utopia or anything else) . ... they have lives, desires, interests, plans of their own, and theirs are just as valid as yours or mine. The reality is that you and I are probably far more similar than either of us would guess. But there are still huge differences - what we value, what we want to do next year, whether we want that promotion or want to get laid off so we can finally start our dream business, whether we want money for family vacations or medical bills.... so many differences that I couldn't ever fairly and accurately represent your interests without you actually telling me what they are. That's just the 2 of us. There are 300 million people in the US - we can't comprehend even really knowing a thousand well enough to genuinely speak on their behalf. In theory, big plans make everything better. In practice, they run into the reality that humans truly aren't pawns, and controlling 300 million people and predicting their responses/actions is way more difficult than it seems. Big plans often end up with real people - people who are just as deserving of opportunities and rights as everyone else - getting really hurt because some guy he doesn't know (and who doesn't know him) had an idea and the power to enforce it on everyone. I'm not saying that all government interference is bad, of course, and I'm not saying it shouldn't happen. Government interventions that are straightforward wealth transfers are probably less harmful to people ... like a tax on the rich to give hefty tax refunds to the poor, is more direct and less prone to causing unintentional harm then things like wage manipulations.\"" }, { "docid": "103842", "title": "", "text": "Does the 5 year rule apply on the After-tax 401k -> Roth 401k -> Roth IRA conversion of the 20000 (including 10000 earnings that was originally pre-tax)? No. The after-tax amounts are not subject to the 5 years rule. The earnings are. How does this affect Roth IRA withdrawal ordering rules with respect to the taxable portion of a single conversion being withdrawn before the non-taxable portion? Taxable portion first until exhausted. To better understand how it works, you need to understand the rationale behind the 5-year rule. Consider you have $100K in your IRA (traditional) and you want to take it out. Just withdrawing it would trigger a 10K statutory penalty, on top of the taxes due. But, you can use the backdoor Roth IRA, right? So convert the 100K, and then it becomes after-tax contribution to Roth IRA, and can be withdrawn with no penalty. One form filled ad 10K saved. To block this loophole, here comes the 5 years rule: you cannot withdraw after-tax amounts for at least 5 years without penalty, if the source was taxable conversion. Thus, in order to avoid the 10K penalty in the above situation, you have a 5-year cooling period, which makes the loophole useless for most cases. However amounts that are after tax can be withdrawn without penalty already, even from the traditional IRA, so there's no need in the 5 years cooling period. The withdrawal attribution is in this order: Roth IRA rollovers are sourced to the origin. E.g.: if you converted $100 to the Roth IRA at firm X and then a year later rolled it over to firm Y - it doesn't affect anything and the clock is ticking from the original date of the conversion at firm X. 5-year period applies to each conversion/rollover from a qualified retirement plan (see here). Distributions are applied to the conversions in FIFO order, so in one distribution, depending on the amounts, you may hit several different incoming conversions. The 5 years should be check on each of them, and the penalty applied on the amounts attributable to those that don't have enough time. 5-year period for contributions applies starting from the beginning of the first year of the first contribution that established your Roth IRA plan. The penalty applies to the amounts that were included in your gross income when conversion occurred, i.e.: doesn't apply on the amounts converted from after-tax sources. Note the difference from the traditional IRA - distributions from pre-tax sources are prorated between the non-deductible (basis) amounts and the deductible/earnings amounts (taxable). That is why the taxable amounts are first in the ordering of the distributions." }, { "docid": "94088", "title": "", "text": "\"It depends on when you can get the money, not when you know that you won or when you choose to take the ticket in. If you can present your ticket this year and get paid this year, the taxes are due this year, whether or not you actually choose to claim the prize this year. If you cannot receive payment until next year, then taxes will be due next year. This is \"\"constructive receipt,\"\" which applies to most individual tax situations. This assumes that you chose to receive a lump sum. If you get installments, then your taxes would be due as the installments are available, but the constructive receipt still applies.\"" }, { "docid": "107136", "title": "", "text": "Look at your options with a 529 program. If the money is used for education expenses: that currently includes tuition, room & board (even if living off campus), books, transportation; it grows tax free. Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board. Contributions to a 529 plan, however, are not deductible. If it is a 529 associated with your state you can also save on state taxes. You can make contributions on a regular basis, or ad hoc. Accounts can even be setup by other relatives. I have used a 529 to fund two kids education. It takes care of most of your education expenses. 529 programs are available from most states, and even some of the big mutual fund companies. Many have the option of shifting the risk level of the investments to be more conservative as the kids hit high school. Some states have an option to have you pay a large sum when the child is small to buy semesters of college. The deal is worth considering if you know they will be going to a state school, the deal is less good if they will go out of state or to a private college. The IRS does limit the maximum amount that you can contribute in a year an amount that exceeds the 14,000 annual gift limit: If in 2014, you contributed more than $14,000 to a Qualified Tuition Plan (QTP) on behalf of any one person, you may elect to treat up to $70,000 of the contribution for that person as if you had made it ratably over a 5-year period. The election allows you to apply the annual exclusion to a portion of the contribution in each of the 5 years, beginning in 2014. You can make this election for as many separate people as you made QTP contributions One option at the end is to take any extra money at graduation and give it to the child so that it can be used for graduate school, or if the taxes and penalties are paid it can be used for that first car. It can even be rolled over to another relative." }, { "docid": "457338", "title": "", "text": "Based on these dates in your question: Going back over my records, I was able to recall the following: Maryland realized recently that on the 2009 Federal 1040 Form you stated that on December 31 2009 you liven in Maryland. They are wondering where the state tax form is. DC, MD and VA due to reciprocity collect income tax based on where you live not where you work. So when you moved in August 2009 and again in August 2010 you needed to file new state versions of the W4. The fact you did or didn't submit to your employer a correct state W-4 is not directly related, because you would owe the tax regardless. The W-4 just makes sure that something close to the correct amounts are withheld and sent to the appropriate state capital. I seem to remember something about not having to pay Maryland state taxes since I not only lived in the state for less than 6 months but also did not work in the state. The reciprocity between DC, MD and VA says that Maryland gets the money because that is where you lived. The last time I had to do a part year the law was that they would forgive a half a month. In other words if you move in late December or early January you could ignore that small time period and avoid having to file in two states. In some cases people argue that some short term moves were never meant to be permanent. You might be able to claim that except the fact that your 2009 federal tax form you most likely claimed you lived in Maryland. The next issue is time and money. If Maryland says you owe them money for that time period, and if they still have the ability to force you to pay it; This is where the issue of correct state W-4 comes in. If the money during the period you lived in Maryland was sent to Virginia, you should have had that money refunded by Richmond in the spring of 2010. But if there was no W-4 filed with your employer that would mean that Maryland didn't get any money for 2009. If you didn't tell Richmond you moved in 2009 they may not have refunded everything because they thought you lived there all year. Because of the time that has passed it may be too late to fix your Virginia filing, so they may not refund you excess payment to them. Maryland is interested in calculating how much you should have paid them in 2009. They are only looking at what you told the feds you made, and they may be assuming that you lived there the whole year. But until you file correctly that have no ability to calculate what you really owe. You need professional advice. You need to know what they can and can't collect. You also need to know what you can and can't get back from Richmond. And since it also may impact your filings for 2010 you will want to get that resolved at the same time." }, { "docid": "490176", "title": "", "text": "\"Individuals most definitely can have NOL. This is covered in the IRS publication 536. What is the difference between NOL and capital loss? NOL is Net Operating Loss. I.e.: a situation where your (allowable) expenses and deductions exceed your gross income. Basically it means that you have negative income for that year, for tax purposes. Capital loss occurs when the total amount of your capital gains reported on Schedule D is negative. What are their relations then? Not all expenses and deductions that you usually put on your tax return are allowed for NOL calculation. For example, capital loss is not allowed. I.e.: if you earned $2000 and you lost in stocks $3000 - you do not get a $1K NOL. Capital losses are excluded from NOL calculation and in this scenario you still have non-negative income for NOL purposes even though it is offset in full by capital loss deduction and your \"\"taxable income\"\" line is negative. The $1K that was not allowed - gets carried forward to the next year using the Capital Loss Carryover Worksheet in the instructions to Schedule D. You calculate your NOL using form 1045 schedule A. You can use the form 1045 to apply the NOL to prior 2 years, or you can elect to apply it only to future years (up to 20 years). In what cases, capital loss can be NOL? Never.\"" } ]

[ { "docid": "39185", "title": "", "text": "The Level 2 data is simply showing the depth of the market. If I am trading shares with my broker I have the option of viewing only the top 10 bid/ask prices in the depth or all of the data (which sometimes can be a very long list). With another broker I get the top ten bid and ask prices and how many orders are available for each price level, or I have the option of listing each order separately for each price level (in order of when the order was placed). I get the same kind of data if trading options. I do not know about futures because I don't trade them. Simply this data may be important to a trader because it may give an indication of whether there are more buyers or sellers in the market, which in turn may (but not always) give an indication of which way the market may be moving. As an example the price depth below shows WBC before market open with sellers outweighing the buyers in both numbers and volume. This gives an indication that prices may drop when the market opens. Of course there could be some good news coming out prior to market open or just after, causing a flood of buyers into the market and sellers to cancel their orders. This would change everything around with more buyers than sellers and indicate that prices may now be going up. The market depth is an important aspect to look at before putting an order in, as it can give an indication of which way the market is moving, especially in a very liquid security or market." } ]

[ { "docid": "22304", "title": "", "text": "This is rather simple if you understand a trailing limit order but to be sure I am going to explain a limit, trailing limit, and trailing LIT order. I am going to use an example assuming that you already own a stock and want to sell it. Limit Order I place an order to sell 100 PG @ 65.00. This order will only be executed if the bid price of PG is at $65.0000 or greater. Trailing Limit Order I place an order to sell 100 CAT @ 85.25 with a trailing 5%. This order will be executed when CAT drops 5% below the highest point it reaches after you place this order. So if you place this order at 85.25 and the stock drops 5% to $80.9875, your order will be executed. However, if the stock jumps to $98, the order will not be executed until the stock falls to $93.10. The sell point will go up with the stock and will always remain at the specified % or $ amount behind the high point. Trailing Limit If Touched Order I place an order to sell 100 INTC @ 24.75 with a trailing 5% if the stock touches $25.00. Essentially, this is the same as the trailing limit except that it doesn't take effect until the stock first gets $25.00. I think the page they provide to explain this is confusing because I think they are explaining it from the shorting a stock perspective instead of the selling a stock you want to profit from. I could also be wrong in how I understand it. My advice would be to either call their customer support and ask for a better explanation or what I do in my finances, avoid things I don't understand." }, { "docid": "51715", "title": "", "text": "\"Theory of Levered Investing Borrowing in order to increase investment exposure is a time-honored and legitimate activity. It's the optimal way to increase your exposure, according to finance theory (which assumes you get a good interest rate...more on this later). In your case it may or may not be a good idea. Based on the information in your post, I believe that in your case it is not a good idea. Consider the following concerns. Risk In finance, reward comes with risk and in no other way. Investing borrowed money means there is a good (not small) chance that you will lose enough money that you will need to pull significant wealth from your own savings in order to make up the difference. If you are in a position to do this and OK with that possibility, then proceed to to the next concern. If losing a lot of money means financial calamity for you, then this is a bad idea. You haven't described your financial situation so I don't know in which camp you fall. If the idea of losing, say, $100K means complete financial failure for you, then the strategy you have described simply has too much risk. Make no mistake, just because the market makes money on average does not mean it will make money, or as much money as you expect, over your horizon. It may lose money, perhaps a lot of money. Make sure this idea is very clear in your mind before taking action. Rewards Your post implies that you think you can reliably get 10%-12% on an investment. This is not the case. There are many years in which a reasonable portfolio makes this much or more, but on average you will earn less. No ones knows the true long-term market risk premium, but it is definitely less than 10%. A better guess would be 6.5% plus whatever the risk-free rate is (currently about 0%). Buying \"\"riskier\"\" investments means deviating from the optimal portfolio, meaning you took on more risk than is justified by how much extra money you expect to make. I never encourage people to invest based on optimistic or unrealistic goals. If anything, you should be conservative about how you expect things to go. And remember, these are averages. Any portfolio that earns 10%-12% also has a very good chance of losing 25% or more. People who sell or give advice on investments frequently get you charged up by pointing at times and investments that have done very well. Unfortunately, we never know whether the investments and time period in which we are investing will be a good one, a bad one, or an unexciting one. The reality of investing is...well, more realistic than what you have described. Costs I can't imagine how you could borrow that much money and only have an annual payment of $2000 as you imply--that must be a mistake. No individual borrows at a rate significantly below 1%. It sounds like it's not a collateralized loan of any kind, so unless you are some kind of prime-loan customer, your interest rate will be significant. Subtract whatever rate you actually pay from 6.5% to get a rough idea of how much you will make if things go as well as they do on average. You will pay the interest whether times are good or bad. If your rate is typical of noncollateralized personal loans, there's a good chance you will lose money on average using the strategy you have described. If you are OK with taking risk with a negative expected return, consider a trip to Las Vegas. It's more exciting. Ethics I'm not one to make people feel guilty for doing things that are legal but of questionable morality. If that's the case and you are OK with it, more power to you. I'm not sure under what pretense you expect to obtain the money, but it sounds like you might be crossing legal lines and committing actual crimes (like fraud). Make sure to check on whether what you intend is a white lie or something that can get you thrown in prison. For example, if you are proposing obtaining a subsidized education loan and using it for speculation, I could easily see you spending serious time in prison and permanently ruining your life, even if your plan works out. A judge and 12 of your peers are not going to think welfare fraud is a harmless twist of the truth. Summary I've said a lot of negative things here. This is because I have to guess about your financial situation and it sounds like you may have unrealistic expectations of the safety and generosity of investing. Quite frankly, people for whom borrowing $250K is no big deal don't normally come and ask about it on StackExchange and they definitely don't tend to lie in order to get loans. Also $18K a year doesn't change their quality of life. However, I don't know. If $250K is small relative to your wealth and you need a good way to increase your exposure to the market risk premium, then borrowing and investing may well be a good idea.\"" }, { "docid": "494727", "title": "", "text": "\"Re: A trader when buying needs to buy at the ask price and when selling needs to sell at the bid price. So how can a trade happen 'in between' the bid and ask? Saying the trade can happen \"\"in between\"\" the bid & ask is simplistic. There is a time dimension to the market. It's more accurate to say that an order can be placed \"\"in between\"\" the current best bid & ask (observed at time T=0), thus establishing a new level for one or the other of those quoted prices (observed at time T>0). If you enter a market order to buy (or sell), then yes, you'll generally be accepting the current best ask (or best bid) with your order, because that's what a market order says to do: Accept the current best market price being offered for your kind of transaction. Of course, prices may move much faster than your observation of the price and the time it takes to process your order – you're far from being the only participant. Market orders aside, you are free to name your own price above or below the current best bid & ask, respectively. ... then one could say that you are placing an order \"\"in between\"\" the bid and ask at the time your order is placed. However – and this is key – you are also moving one or the other of those quoted prices in the process of placing your above-bid buy order or your below-ask sell order. Then, only if somebody else in the market chooses to accept your new ask (or bid) does your intended transaction take place. And that transaction takes place at the new ask (or bid) price, not the old one that was current when you entered your order. Read more about bid & ask prices at this other question: (p.s. FWIW, I don't necessarily agree with the assertion from the article you quoted, i.e.: \"\"By looking for trades that take place in between the bid and ask, you can tell when a strong trend is about to come to an end.\"\" I would say: Maybe, perhaps, but maybe not.)\"" }, { "docid": "118712", "title": "", "text": "In general a stock can open at absolutely any price with no regard for the closing price or after hours price the previous day. The opening price will be determined by the best bid and offer made by people who decide to trade the next day. Some of the those people may have put orders in on a prior day that are still on the books and matter, but there's a lot of time overnight for people to cancel orders and enter new ones, which is especially likely to happen if there was substantive news overnight. As for what you can do in your case, you have the same options that you always had: Sell or hold. If you're selling, you can sell after hours, in the pre-open hours, or during the trading day. There's nothing we can say about this case that's really any different than we can say about any other stock on any other day." }, { "docid": "283008", "title": "", "text": "My broker collates the order book by price and marketplace, displaying the number of shares available at each level, sorted as in Victor's screencap. You can glean information from not just a snapshot of the order book but also by watching how it changes over time. Although it's not always a complete picture -- many brokers hold limit orders internally until the market is close, at which point they'll route to an exchange or trade internally. And of course skilled market participants know that there's people out there looking to glean information from the order book and will act to confuse the picture. The order book can show you: Combined with a list of trades (price & size, and whether it was a buy or sell), you can get a much more complete picture of what's going on with a stock than by looking at charts alone." }, { "docid": "339716", "title": "", "text": "\"You need to track all of your expenses first, inventarize all of your assets and liabilities, and set financial goals. For example, you need to know your average monthly expenses and exactly what percentages interest each loan charges, and you need to know what to save for (your children, retirement, large purchases, etc). Then you create an emergency fund: keep between 4 to 6 months worth of your monthly expenses in a savings account that you can readily access. Base the size of your emergency fund on your expenses rather than your salary. This also means its size changes over time, for example, it must increase once you have children. You then pay off your loans, starting with the loan charging the highest interest. You do this because e.g. paying off $X of a 7% loan is equivalent to investing $X and getting a guaranteed 7% return. The stock market does generally does not provide guarantees. Starting with the highest interest first is mathematically the most rewarding strategy in the long run. It is not a priori clear whether you should pay off all loans as fast as possible, particularly those with low interest rates, and the mortgage. You need to read up on the subject in order to make an informed decision, this would be too personal advice for us to give. After you've created that emergency fund, and paid of all high interest loans, you can consider investing in vessels that achieve your set financial goals. For example, since you are thinking of having children within five years, you might wish to save for college education. That implies immediately that you should pick an investment vessels that is available after 20 year or so and does not carry too much risk (e.g. perhaps bonds or deposits). These are a few basic advices, and I would recommend to look further on the internet and perhaps read a book on the topic of \"\"personal finance\"\".\"" }, { "docid": "307155", "title": "", "text": "This is copying my own answer to another question, but this is definitely relevant for you: A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). Going long, as you may have guessed, is the opposite of going short. Instead of betting that the price will go down, you buy shares in the hope that the price will go up. So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Similarly, the same is true in the reverse if you are going long. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible." }, { "docid": "78138", "title": "", "text": "\"It depends on many factors, but generally, the bid/ask spread will give you an idea. There are typically two ways to buy (or sell) a security: With a limit order, you would place a buy for 100 shares at $30-. Then it's easy, in the worst case you will get your 100 shares at $30 each exactly. You may get lucky and have the price fall, then you will pay less than $30. Of course if the price immediately goes up to say $35, nobody will sell at the $30 you want, so your broker will happily sit on his hands and rake in the commission while waiting on what is now a hail Mary ask. With a market order, you have the problem you mention: The ticker says $30, but say after you buy the first 5 shares at $30 the price shoots up and the rest are $32 each - you have now paid on average $31.9 per share. This could happen because there is a limit order for 5 at $30 and 200 at $32 (you would have filled only part of that 200). You would be able to see these in the order book (sometimes shown as bid/ask spread or market depth). However, the order book is not law. Just because there's an ask for 10k shares at $35 each for your $30 X stock, doesn't mean that by the time the price comes up to $35, the offer will still be up. The guy (or algorithm) who put it up may see the price going up and decide he now wants $40 each for his 10k shares. Also, people aren't obligated to put in their order: Maybe there's a trader who intends to trade a large volume when the price hits a certain level, like a limit order, but he elected to not put in a limit order and instead watch the ticker and react in real time. Then you will see a huge order suddenly come in out of nowhere. So while the order book is informative, what you are asking is actually fundamentally impossible to know fully, unless you can read the minds of every interested trader. As others said, in \"\"normal\"\" securities (meaning traded at a major exchange, especially those in the S&P500) you simply can't move the price, the market is too deep. You would need millions of dollars to budge the price, and if you had that much money, you wouldn't be asking here on a QA site, you would have a professional financial advisor (or even a team) that specializes in distributing your large transaction over a longer time to minimize the effect on the market. With crazier stocks, such as OTC and especially worthless penny stocks with market caps of $1 mil or less, what you say is a real problem (you can end up paying multiples of the last ticker if not careful) and you do have to be careful about it. Which is why you shouldn't trade penny stocks unless you know what you're doing (and if you're asking this question here, you don't).\"" }, { "docid": "178446", "title": "", "text": "\"Correcting Keith's answer (you should have read about these details in the terms and conditions of your bank/broker): Entrustment orders are like a \"\"soft\"\" limit order and meaningless without a validity (which is typically between 1 and 5 days). If you buy silver at an entrustment price above market price, say x when the market offer is m, then parts of your order will likely be filled at the market price. For the remaining quantity there is now a limit, the bank/broker might fill your order over the next 5 days (or however long the validity is) at various prices, such that the overall average price does not exceed x. This is different to a limit order, as it allows the bank/broker to (partially) buy silver at higher prices than x as long as the overall averages is x or less. In a limit set-up you might be (partially) filled at market prices first, but if the market moves above x the bank/broker will not fill any remaining quantities of your order, so you might end up (after a day or 5 days) with a partially filled order. Also note that an entrustment price below the market price and with a short enough validity behaves like a limit price. The 4th order type is sort of an opposite-side limit price: A stop-buy means buy when the market offer quote goes above a certain price, a stop-sell means sell when the market bid quote goes below a certain price. Paired with the entrusment principle, this might mean that you buy/sell on average above/below the price you give. I don't know how big your orders are or will be but always keep in mind that not all of your order might be filled immediately, a so-called partial fill. This is particularly noteworthy when you're in a pro-rata market.\"" }, { "docid": "447562", "title": "", "text": "\"Realize this is almost a year old, but I just wanted to comment on something in Dynas' answer above... \"\"Whenever you trade always think about what the other guys is thinking. Sometimes we forget their is someone else on the other side of my trade that thinks essentially the exact opposite of me. Its a zero sum game.\"\" From a market maker's perspective, their primary goal is not necessarily to make money by you being wrong, it is to make money on the bid-offer spread and hedging their book (and potentially interalize). That being said, the market maker would likely be quoting one side of the market away from top of the book if they don't want to take exposure in that direction (i.e. their bid will be lower than the highest bid available or their offer higher than the lowest offer available). This isn't really going to change anything if you're trading on an exchange, but important to consider if you can only see the prices your broker/dealer provides to you and they are your counterparty in the trade.\"" }, { "docid": "69197", "title": "", "text": "Quote driven markets are the predecessors to the modern securities market. Before electronic trading and HFTs specifically, trading was thin and onerous. Today, the average investor can open up a web page, type in a security, and buy at the narrowest spread permitted by regulators with anyone else who wants to take the other side. Before the lines between market maker and speculator became blurred to indistinction, a market maker was one who was contractually obligated to an exchange to provide a bid and ask for a given security on said exchange even though at heart a market maker is still simply a trader despite the obligation. A market maker would simultaneously buy a large amount of securities privately and short the same amount to have no directional bias, exposure to the direction of the security, and commence to making the market. The market maker would estimate its cost basis for the security based upon those initial trades and provide a bid and ask appropriate for the given level of volume. If volumes were high, the spread would be low and vice versa. Market makers who survived crashes and spikes would forgo the potential profit in always providing a steady price and spread, ie increased volume otherwise known as revenue, to maintain no directional bias. In other words, if there were suddenly many buyers and no sellers, hitting the market maker's ask, the MM would raise the ask rapidly in proportion to the increased exposure while leaving the bid somewhere below the cost basis. Eventually, a seller would arise and hit the MM's bid, bringing the market maker's inventory back into balance, and narrowing the spread that particular MM could provide since a responsible MM's ask could rise very high very quickly if a lack of its volume relative to its inventory made inventory too costly. This was temporarily extremely costly to the trader if there were few market makers on the security the trader was trading or already exposed to. Market makers prefer to profit from the spread, bidding below some predetermined price, based upon the cost basis of the market maker's inventory, while asking above that same predetermined cost basis. Traders profit from taking exposure to a security's direction or lack thereof in the case of some options traders. Because of electronic trading, liquidity rebates offered by exchanges not only to contractually obligated official market makers but also to any trader who posts a limit order that another trader hits, and algorithms that become better by the day, market making HFTs have supplanted the traditional market maker, and there are many HFTs where there previously were few official market makers. This speed and diversification of risk across many many algorithmically market making HFTs have kept spreads to the minimum on large equities and have reduced the same for the smallest equities on major exchanges. Orders and quotes are essentially identical. Both are double sided auction markets with impermenant bids and asks. The difference lies in that non-market makers, specialists, etc. orders are not shown to the rest of the market, providing an informational advantage to MMs and an informational disadvantage to the trader. Before electronic trading, this construct was of no consequence since trader orders were infrequent. With the prevalence of HFTs, the informational disadvantage has become more costly, so order driven markets now prevail with much lower spreads and accelerated volumes even though market share for the major exchanges has dropped rapidly and hyperaccelerated number of trades even though the size of individual trades have fallen. The worst aspect of the quote driven market was that traders could not directly trade with each other, so all trades had to go between a market maker, specialist, etc. While this may seem to have increased cost to a trader who could only trade with another trader by being arbitraged by a MM et al, paying more than what another trader was willing to sell, these costs were dwarfed by the potential absence of those market makers. Without a bid or ask at any given time, there could be no trade, so the costs were momentarily infinite. In essence, a quote driven market protects market makers from the competition of traders. While necessary in the days where paper receipts were carted from brokerage to brokerage, and the trader did not dedicate itself to round the clock trading, it has no place in a computerized market. It is more costly to the trader to use such a market, explaining quote driven markets' rapid exit." }, { "docid": "112714", "title": "", "text": "\"Market makers (shortened MM) in an exchange are generally required to list both a bid and ask price to allow both buyers and sellers to trade and keep the market moving. However, a more general idea of a MM may includes companies off an exchange (say large banks acting as broker/dealers in an over-the-counter market) are not required to give a simultaneous bid/ask, but often will on request. So, it might depend on where you are getting this data but likely the bid/ask was quoted simultaneously. An exchange, like the NASDAQ for instance, may have multiple MMs for a given market. The \"\"market\"\" spread will be from the highest bid to the lowest ask over all the MMs. The highest bid and lowest ask may come from different MMs and any particular MM often will have a larger spread. The size of the spread gives a rough idea of how much a MM is trying to make off of a \"\"round trip\"\" trade (buying than immediately selling to someone else or selling than immediately buying from someone else). Of course, immediate round-trip trades are not always possible and there are many other complications. However, half the spread is a rough indicator of how much they hope to make off of a single trade.\"" }, { "docid": "155151", "title": "", "text": "Obvious answer but the limit order should be set at the price that you are willing to pay :). More usefully, if you want a decent chance of the order filling in short notice you should place the order one price tick above the current highest buyer (bid price). As long as high frequency trading remains alive I would advise against ever using market orders, these algorithmic trades can occasionally severely distort the price of a security in a fraction of a second. So if your market order happens to fill in during such a distortion you might end up massively overpaying/underselling." }, { "docid": "507357", "title": "", "text": "Many of the Bitcoin exchanges mimic stock exchanges, though they're much more rudimentary offering only simple buy/sell/cancel orders. It's fairly normal for retail stock brokerage accounts to allow other sorts of more complex orders, where once a certain criteria is met, (the price falls below some $ threshold, or has a movement greater than some %) then your order is executed. The space between the current buy order and the current sell order is the bid/ask spread, it's not really about timing. Person X will buy at $100, person Y will sell at $102. If both had a price set at $101, they would just transact. Both parties think they can do a little bit better than the current offer. The width of the bid/ask spread is not universal by any means. The current highest buy order and the current lowest sell order, are both the current price. The current quoted market price is generally the price of the last transaction, whether it's buy or sell." }, { "docid": "284235", "title": "", "text": "\"EVERYONE buys at the ask price and sells at the bid price (no matter who you are). There are a few important things you need to understand. Example: EVE bid: 16.00 EVE ask: 16.25 So if your selling EVE at \"\"market price\"\" you are entering an ask equal to the highest bid ($16.00). If you buy EVE at \"\"market price\"\" you are entering a bid equal to the lowest ask price ($16.25). Its key to understand this rule: \"\"An order executes ONLY when both bid and ask meet. (bid = ask).\"\" So a market maker puts in a bid when he wants to buy but the trade only executes when an ASK price meets his BID price. When you see a quote for a stock it is the price of the last trade. So it is possible to have a quote higher or lower then both the bid and the ask.\"" }, { "docid": "599159", "title": "", "text": "\"If history is any guide, Page’s idealistic impulses could result in a vaster, more sprawling company. The following is an example of one of Page’s idealistic impulses (wanting people to share spectrum) which could result in a vaster, more sprawling company (if they hadn't been outbid, Google would have expanded by buying a business asset i.e. spectrum which they didn't need). I've no experience with bidding. I don't understand what's happening at all An 'auction' is a way to sell something. Instead of offering it for sale at a fixed price, you offer it 'to the highest bidder'. Someone (e.g. Google) says, \"\"I'll offer you [some amount: e.g. a million dollars] for it.\"\" If no-one else exceeds that bid, then you say 'sold' and Google has bought it. Alternatively someone else comes along with a higher bid, \"\"I'll offer you two million dollars for it,\"\" in which case they're the new high bidder, and you'll sell it to them unless the process repeats itself with anyone counter-offering an even higher bid. See also http://en.wikipedia.org/wiki/Auction and http://en.wikipedia.org/wiki/Spectrum_auction The \"\"Disadvantages\"\" section of this article alleges (currently without a citation) that: Despite the apparent success of spectrum auctions, an important disadvantage limiting both efficiency and revenues is demand reduction and collusive bidding. The information and flexibility in the process of auction can be used to reduce auction prices by tacit collusion. When bidder competition is weak and one bidder holds an apparent advantage to win the auction for specific licenses, other bidders will often choose not to the bid for higher prices, hence reducing the final revenue generated by the auction.[citation needed] In this case, the auction is best thought of as a negotiation among the bidders, who agree on who should win the auction for each discrete bit of spectrum. Google's bid made that impossible (or, at least, ensured that the winning bid would be at least as high as the minimum which was set by Google's bid).\"" }, { "docid": "466707", "title": "", "text": "Strictly from a fastest payback standpoint, the rule is to make all minimum payments and send any extra funds to the highest interest loan next. This will result in the lowest interest paid each year. The decision to consolidate depends on the impact it will have to both your payment and overall payoff schedule. It sounds like your priority might need to be cash flow and not overall savings. e.g. taking a 4% loan that has a high payment, but stretching it over more time can lower the payment, even at a bit higher rate. You just need to be aware of the cost and decide based on what you can live with. I hope you are in a good field that would see improvements to your income over these next few years." }, { "docid": "402482", "title": "", "text": "You can always trade at bid or ask price (depending if you are selling or buying). Market price is the price the last transaction was executed at so you may not be able to get that. If your order is large then you may not even be able to get bid/ask but should look at the depth of the order book (ie what prices are other market participants asking for and what is the size of their order). Usually only fast traders will trade at bid/ask, those who believe the price move is imminent. If you are a long term trader you can often get better than bid or ask by placing a limit order and waiting until a market participant takes your offer." }, { "docid": "144208", "title": "", "text": "The idea of a stockmarket is multiple people betting on the value of an asset and then getting paid the difference between their bet and the real value of the asset. The goal being to keep the value of the stock as accurate as possible so capital is allocated to companies that will use it most efficiently. The reward for people making these bets is a portion of that capital. What you are suggesting is just a graph of the average happiness. The difficult part of turning this into a market, is being able to assign value to happiness, value that you can gain or lose by choice. Ironically, money is a indicator of happiness. When apple came out with the iPhone, people saw it and decided it would make them happier if they owned it creating demand. Investors noticed that people believed owning an iphone would make them happier so they bid up the price of AAPL stock. People are happier with their iPhones and investors benefitted from this happiness and got cash allowing them to spend money on things to increase their happiness. In order to extract happiness from the stock market a lot of other things come into play. A biotech company curing cancer would be a solution to something that drastically decreases happiness. Increasing alcohol sales might be a result of people trying to offset the sadness in the short term but in the long term it is a depressant and doesn't make you happy. An individual might be happier with an extra $10B but overall 1 million people getting $10k each would increase average happiness much more. But somebody like buffet can invest in companies that can generate way more happiness than just handing out cash. The happiness report is an annual report of happiness. Looking at these results next to the Gini coefficient (income inequality), and industry growth by country might start to give you an idea of what affects happiness. For instance in Africa income inequality could sky rocket while the stock market plummets and happiness could still increase because of public health investments made years ago, causing the infant mortality rate to plummet. If you want to think about this topic I recommend reading the great escape by Angus Deaton." } ]

[ { "docid": "283008", "title": "", "text": "My broker collates the order book by price and marketplace, displaying the number of shares available at each level, sorted as in Victor's screencap. You can glean information from not just a snapshot of the order book but also by watching how it changes over time. Although it's not always a complete picture -- many brokers hold limit orders internally until the market is close, at which point they'll route to an exchange or trade internally. And of course skilled market participants know that there's people out there looking to glean information from the order book and will act to confuse the picture. The order book can show you: Combined with a list of trades (price & size, and whether it was a buy or sell), you can get a much more complete picture of what's going on with a stock than by looking at charts alone." } ]

[ { "docid": "394244", "title": "", "text": "Bid and ask prices are the reigning highest buy price and lowest sell price in the market which doesn't mean one must only buy/sell at thise prices. That said one can buy/sell at whatever price they so wish although doing it at any other price than the bid/ask is usually harder as other market participants will gravitate to the reigning bid/ask price. So in theory you can buy at ask and sell at bid, whether or not your order will be filled is another matter altogether." }, { "docid": "125230", "title": "", "text": "It will depend largely on your broker what type of stop and trailing stop orders they provide. Saying that, I have not come across any brokers yet that offer limit orders with trailing stop orders. Unlike a standard stop order where you can either make it a market stop order or a limit stop order, usually most brokers have trailing stop orders as market orders only, where you can either set the trailing stop to be a dollar value or percentage from the most recent high. Remember also, that trailing stop orders will be based on the intra-day highs and not the highest closing price. That means that if the share price spikes up during the day your trailing stop will move up, and if the price then spikes down you may be stopped out prematurely, after which the price might rally again. For this reason I try to base my trailing stops on the highest closing price by using standard stop loss orders and moving it up manually after the close of trade if the share price has closed at a new high. This takes a few minutes each evening (depending on how many stocks you have to check and adjust the stops for) but gives you more control. Using this method will also enable you to set limit orders attached to your stop loss triggers, and you won't have to keep your trailing too close to the last high price thus potentially causing you to get stopped out prematurely. Slightly off track but may be handy if you set profit targets, my broker has recently introduced Trailing Take Profit Orders. The way it works is, say you have a profit target of 50%, so you buy at $2 and want to take profits if the price reaches $3, you could set your Trailing Take Profit Trigger at say $3.10 or above and set a Trail by Amount of say $0.10. So if the price after hitting $3.10 falls to $3.00 you will be stopped out and collect your profits. If the price moves up to $3.30 and then falls to $3.20, you will be stopped out at $3.20 and make some extra profits. If the price continues going up the Trailing Take Profit will continue to move up always $0.10 below the highest price reached. I think this would be a very useful order if you were range trading where you could set the Trailing Take Profit trigger near recent resistance so you can get out if prices start reversing at or around the resistance, but continue profiting if the price breaks through the resistance." }, { "docid": "599523", "title": "", "text": "\"I'm not sure the term actually has a clear meaning. We can think of \"\"what does this mean\"\" in two ways: its broad semantic/metaphorical meaning, and its mechanical \"\"what actual variables in the market represent this quantity\"\". Net buying/selling have a clear meaning in the former sense by analogy to the basic concept of supply and demand in equilibrium markets. It's not as clear what their meaning should be in the latter sense. Roughly, as the top comment notes, you could say that a price decrease is because of net selling at the previous price level, while a price rise is driven by net buying at the previous price level. But in terms of actual market mechanics, the only way prices move is by matching of a buyer and a seller, so every market transaction inherently represents an instantaneous balance across the bid/ask spread. So then we could think about the notion of orders. Actual transactions only occur in balance, but there is a whole book of standing orders at various prices. So maybe we could use some measure of the volume at various price levels in each of the bid/ask books to decide some notion of net buying/selling. But again, actual transactions occur only when matched across the spread. If a significant order volume is added on one side or the other, but at a price far away from the bid/offer - far enough that an actual trade at that price is unlikely to occur - should that be included in the notion of net buying/selling? Presumably there is some price distance from the bid/offer where the orders don't matter for net buying/selling. I'm sure you'd find a lot of buyers for BRK.A at $1, but that's completely irrelevant to the notion of net buying/selling in BRK.A. Maybe the closest thing I can think of in terms of actual market mechanics is the comparative total volumes during the period that would still have been executed if forced to execute at the end of period price. Assuming that traders' valuations are fixed through the period in question, and trading occurs on the basis of fundamentals (which I know isn't a good assumption in practice, but the impact of price history upon future price is too complex for this analysis), we have two cases. If price falls, we can assume all buyers who executed above the last price in the period would have happily bought at the last price (saving money), while all sellers who executed below the last price in the period would also be happy to sell for more. The former will be larger than the latter. If the price rises, the reverse is true.\"" }, { "docid": "412223", "title": "", "text": "A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible." }, { "docid": "284235", "title": "", "text": "\"EVERYONE buys at the ask price and sells at the bid price (no matter who you are). There are a few important things you need to understand. Example: EVE bid: 16.00 EVE ask: 16.25 So if your selling EVE at \"\"market price\"\" you are entering an ask equal to the highest bid ($16.00). If you buy EVE at \"\"market price\"\" you are entering a bid equal to the lowest ask price ($16.25). Its key to understand this rule: \"\"An order executes ONLY when both bid and ask meet. (bid = ask).\"\" So a market maker puts in a bid when he wants to buy but the trade only executes when an ASK price meets his BID price. When you see a quote for a stock it is the price of the last trade. So it is possible to have a quote higher or lower then both the bid and the ask.\"" }, { "docid": "231098", "title": "", "text": "* In the 70's, 80's and early 90's there were pinstriped brokers who took orders over the phone from people who wanted to buy and sell. They had a huge competitive advantage over the rest of the market due to the lack of transparency in the market's order book. Therefore you got screwed every time you wanted to trade, ie the markets were less efficient because transaction cost was high. Transaction cost is = bid-ask spread + how much you get screwed by the market insiders. * In the 90's and early 00's there were automated trading systems that allowed people to conduct trades directly with computers, aka Algorithmic Trading. The markets were more efficient, because spreads became tighter as more people were able to enter the market on this platform (e.g. [Lightspeed](http://lightspeed.com)). The ability for market insiders to screw the general market was lessened because the exclusive access to the market's order book was eroded. Of course some Algorithmic Trading operations had a huge competitive advantage because they had great systems and great people. However it wasn't talked about because those who new about it were making a killing and keeping their mouths shut. * Then in the mid to late 00's there was co-located algorithmic trading on very fast systems, aka HFT, a natural evolution of Algorithmic Trading. Now market insiders (= people with enough resources to field co-located machines and the the engineer/traders to manage them) expanded their competitive advantage by discovering the market's order book (as they are able to see orders in a fraction of a second and then act on those orders). However to retract this natural efficiency in the markets you would need to create some kind of set of rules to even out the playing field. How can that be done? ** Option 1) Transaction tax would just make the markets less efficient by increasing the cost of buying and selling. A generally bad thing because it discourages traders (to put money into stocks), which is of course how the capital markets are supported. ** Option 2) Create rules to ensure everyone sees the same information at the same time and then permit anyone to use whatever technology they want to act on that information, so that the most efficient trading operations win. ** Option 3) Create some artificial environment where no-one is allowed to have an advantage: ensure everyone sees the same information at the same time, ensure everyone has the same technology, and ensure that the people who manage the systems have the exact same experience and intelligence etc... Of course #2 is how it works, and it is the meritocratic basis which underpins Capitalism. I don't see why people have a problem with it." }, { "docid": "443804", "title": "", "text": "If the stock has low liquidity, yes there could be times when there are no buyers or sellers at a specific price, so if you put a limit order to buy or sell at a price with no other corresponding sellers or buyers, then your order may take a while to get executed or it may not be executed at all. You can usually tell if a stock has low liquidity by the small size of the average daily volume, the lack of order depth and the large size of the gap between bids and offers. So if a stock for example has last sale price of $0.50, has a highest bid price of $0.40 and a lowest offer price of $0.60, and an average daily volume of 10000 share, it is likely to be very illiquid. So if you try to buy or sell at around the $0.50 mark it might take you a long time to buy or sell this stock at this price." }, { "docid": "151132", "title": "", "text": "\"First, keep in mind that there are generally 2 ways to buy a corporation's shares: You can buy a share directly from the corporation. This does not happen often; it usually happens at the Initial Public Offering [the first time the company becomes \"\"public\"\" where anyone with access to the stock exchange can become a part-owner], plus maybe a few more times during the corporations existence. In this case, the corporation is offering new ownership in exchange for a price set the corporation (or a broker hired by the corporation). The price used for a public offering is the highest amount that the company believes it can get - this is a very complicated field, and involves many different methods of evaluating what the company should be worth. If the company sets the price too low, then they have missed out on possible value which would be earned by the previous, private shareholders (they would have gotten the same share % of a corporation which would now have more cash to spend, because of increased money paid by new shareholders). If the company sets the price too high, then the share subscription might only be partially filled, so there might not be enough cash to do what the company wanted. You can buy a share from another shareholder. This is more common - when you see the company's share price on the stock exchange, it is this type of transaction - buying out other current shareholders. The price here is simply set based on what current owners are willing to sell at. The \"\"Bid Price\"\" listed by an exchange is the current highest bid that a purchaser is offering for a single share. The \"\"Ask Price\"\" is the current lowest offer that a seller is offering to sell a single share they currently own. When the bid price = the ask price, a share transaction happens, and the most recent stock price changes.\"" }, { "docid": "109345", "title": "", "text": "Traders sometimes look at the depth of the book (number of outstanding limit orders) to try and gauge the sentiment of the market or otherwise use this information to formulate their strategy. If there was a large outstanding buy order at $49.50, there's a decent chance this could increase the price by influencing other traders. However, a limit order at $2 is like an amazon.com price of $200,000 for a book. It's so far away from realistic that it is ignored. People would think it is an error. Submitting this type of order is perfectly legal. If the stock is extremely thinly traded, it might even be encouraged because if someone wanted to sell a bunch and did a really bad job of it, the price could conceivably fall that far and the limit order would be adding liquidity. I guess. Your example is pretty extreme. It is not uncommon for there to be limit orders on the book that are not very close to the trading price. They just sit around. The majority of trades are done by algorithmic traders and institutional traders and they don't tend to do this, but a retail investor may choose to submit an order like that, just hoping against hope. Also, buy orders are not likely to push prices down, no matter what their price is. A sell order, yes (even if it isn't executed)." }, { "docid": "7796", "title": "", "text": "\"Okay, so... &gt; Lifting* the offer (hit bids, lift offers). And I suppose that's a stategy, albeit a somewhat simple one. Passive routing strategies differ from firm to firm and algo to algo. What is your customer going to think if you bid up a new price level only for the stock to rally completely away from it? I mean if you have an open order for more than 10 times the amount currently offered with a limit above the offer, and you havent gotten filled on the bid, what can you do but lift the offer and try to be first at the next price level up? At least you would have gotten some at the price they quoted, or are they fill or kill? &gt; \"\"Bidding it up to attract sellers\"\" sounds an awful lot like spoofing, just a heads up. Sure though, if you want to tighten a spread or create new levels with aggressive passive liquidity, that is a strategy. The same caveats as I mentioned above apply. Just to be clear, 'aggressively adding passive liquidity' is the more apt way to put it - I'm talking about when you actually want to get filled on those bids but you're having trouble finding sellers. Could you give me an example of what you might consider passive or aggressive, just for scale - would a mkt impact of .10% raise any eyebrows? How do you gauge fair value or does that matter less to you than just accumulating/selling what you can for what you were asked to? &gt; Anyway, if market impact isn't an issue for the customer, sure, take liquidity until you're filled. Don't forget about getting good size done in the opening and closing auctions (MOO/MOC). If you're too passive you risk the market moving away from you and pissing off the customer. If you're too aggressive you risk moving the market too much and pissing off the customer. So then is the question more 'how motivated is the buyer or seller?' I'm glad you bring up the MOO/MOC, are there certain securities that don't have much of a market in those auctions? Trying to suss out how a large firm can hold a position in some of the less popular names with next to no liquidity and little in the way of dark pool, auction, block sales, etc.\"" }, { "docid": "481401", "title": "", "text": "Personal finance is a fairly broad area. Which part might you be starting with? From the very basics, make sure you understand your current cashflow: are you bank balances going up or down? Next, make a budget. There's plenty of information to get started here, and it doesn't require a fancy piece of software. This will make sure you have a deeper understanding of where your money is going, and what is it being saved for. Is it just piling up, or is it allocated for specific purchases (i.e. that new car, house, college tuition, retirement, or even a vacation or a rainy day)? As part of the budgeting/cashflow exercise, make sure you have any outstanding debts covered. Are your credit card balances under control? Do you have other outstanding loans (education, auto, mortgage, other)? Normally, you'd address these in order from highest to lowest interest rate. Your budget should address any immediate mandatory expenses (rent, utilities, food) and long term existing debts. Then comes discretionary spending and savings (especially until you have a decent emergency fund). How much can you afford to spend on discretionary purchases? How much do you want to be able to spend? If the want is greater than the can, what steps can you take to rememdy that? With savings you can have a whole new set of planning to consider. How much do you leave in the bank? Do you keep some amount in a CD ladder? How much goes into retirement savings accounts (401k, Roth vs. Traditional IRA), college savings accounts, or a plain brokerage account? How do you balance your overall portfolio (there is a wealth of information on portfolio management)? What level of risk are you comfortable with? What level of risk should you consider, given your age and goals? How involved do you want to be with your portfolio, or do you want someone else to manage it? Silver Dragon's answer contains some good starting points for portfolio management and investing. Definitely spend some time learning the basics of investing and portfolio management even if you decide to solicit professional expertise; understanding what they're doing can help to determine earlier whether your interests are being treated as a priority." }, { "docid": "208907", "title": "", "text": "That is mostly true, in most situations when there are more buy orders than sell orders (higher buy volume orders than sell volume orders), the price will generally move upwards and vice versa, when there are more sell orders than buy orders (higher sell volume orders than buy volume orders), the price will generally move downwards. Note that this does not always happen, but usually it does. You are also correct that for a trade to take place a buyer has to be matched with a seller (or the buy volume matched with the sell volume). But not all orders get executed as trades. Say there are 50 buy orders in the order book with a total volume of 100,000 shares and the highest buy order is currently at $10.00. On the other side there are only 10 sell orders in the order book with total volume of 10,000 shares and the lowest sell order is currently $10.05. At the moment there won't be a trade unless a new buyer or seller enters the market to match the opposing side, or an existing order gets amended upper or lower to match the opposing side. With more demand than supply in the order books what will be the most likely direction that this stock moves in? Most likely the price will move upwards. If a new buyer sees the price moving higher and then looks at the market depth, they would most likely place an order closer to the lowest sell order than the current highest buy order, say $10.01, to be first in line in case a market sell order is placed on the market. As new buy orders enter the market it drives the price higher and higher until the buy orders dry up." }, { "docid": "78138", "title": "", "text": "\"It depends on many factors, but generally, the bid/ask spread will give you an idea. There are typically two ways to buy (or sell) a security: With a limit order, you would place a buy for 100 shares at $30-. Then it's easy, in the worst case you will get your 100 shares at $30 each exactly. You may get lucky and have the price fall, then you will pay less than $30. Of course if the price immediately goes up to say $35, nobody will sell at the $30 you want, so your broker will happily sit on his hands and rake in the commission while waiting on what is now a hail Mary ask. With a market order, you have the problem you mention: The ticker says $30, but say after you buy the first 5 shares at $30 the price shoots up and the rest are $32 each - you have now paid on average $31.9 per share. This could happen because there is a limit order for 5 at $30 and 200 at $32 (you would have filled only part of that 200). You would be able to see these in the order book (sometimes shown as bid/ask spread or market depth). However, the order book is not law. Just because there's an ask for 10k shares at $35 each for your $30 X stock, doesn't mean that by the time the price comes up to $35, the offer will still be up. The guy (or algorithm) who put it up may see the price going up and decide he now wants $40 each for his 10k shares. Also, people aren't obligated to put in their order: Maybe there's a trader who intends to trade a large volume when the price hits a certain level, like a limit order, but he elected to not put in a limit order and instead watch the ticker and react in real time. Then you will see a huge order suddenly come in out of nowhere. So while the order book is informative, what you are asking is actually fundamentally impossible to know fully, unless you can read the minds of every interested trader. As others said, in \"\"normal\"\" securities (meaning traded at a major exchange, especially those in the S&P500) you simply can't move the price, the market is too deep. You would need millions of dollars to budge the price, and if you had that much money, you wouldn't be asking here on a QA site, you would have a professional financial advisor (or even a team) that specializes in distributing your large transaction over a longer time to minimize the effect on the market. With crazier stocks, such as OTC and especially worthless penny stocks with market caps of $1 mil or less, what you say is a real problem (you can end up paying multiples of the last ticker if not careful) and you do have to be careful about it. Which is why you shouldn't trade penny stocks unless you know what you're doing (and if you're asking this question here, you don't).\"" }, { "docid": "295498", "title": "", "text": "It is unlikely that buying 100 shares will have any effect on a stock's price, unless the stock's average trading volume is incredibly low. That being said, no matter how many share you buy, there's no way to know what the impact on the price will be, because that's only one factor in how shares are priced. If anyone could figure out the answer to your question then they'd be extremely rich, because they'd simply watch for big share trades and then buy those stocks on the way up. The market makers who actually execute the trades are the ones who set the prices, and most stocks have multiple market makers trading the stock, so the bid/ask you see is the highest bid and lowest ask. The market makers set the price based on what the trend of the stock is. If, for instance, there's a large number of sell orders against a stock, the market makers will start dropping the bid prices as they fill execution orders, and as they see buy orders increase, they'll raise ask prices as they fill execution orders. The market makers earn the difference between what they paid to buy someone's stock who was selling and what they get from someone else who buys it. This is a simplified explanation, so pro traders, don't beat me up! (grin) So, basically, it takes quite a bit of share volume in one direction or another to affect a stock's price. I can guarantee a 100-share trade wouldn't even be noticed by market makers. I hope this helps. Good luck!" }, { "docid": "594531", "title": "", "text": "\"I am co-owner of a business, and we incorporated federally. (Mostly to limit liability.) There is some excellent information above, and most of my wisdom I got from a trusted lawyer and accountant (find experts you trust in these two areas, they will prove invaluable in so many areas.) The one point I would add is that if you decide to incorporate, you can do so federally or provincially. We were all set to go provincially, when our lawyer asked \"\"Is there any chance you might move the business? Any chance you might want to do work in other provinces? What about next year? Five years?\"\" If you are going through the expenses to set up a corporation, consider doing so federally, the extra costs were insignificant, but someday you might be glad you don't have to start from scratch. In this day and age, many people end up moving out of province for work, family concerns, etc.\"" }, { "docid": "466707", "title": "", "text": "Strictly from a fastest payback standpoint, the rule is to make all minimum payments and send any extra funds to the highest interest loan next. This will result in the lowest interest paid each year. The decision to consolidate depends on the impact it will have to both your payment and overall payoff schedule. It sounds like your priority might need to be cash flow and not overall savings. e.g. taking a 4% loan that has a high payment, but stretching it over more time can lower the payment, even at a bit higher rate. You just need to be aware of the cost and decide based on what you can live with. I hope you are in a good field that would see improvements to your income over these next few years." }, { "docid": "525603", "title": "", "text": "\"When you place a limit sell order of $10.00 (for a stock on an option) you are adding your order to the book. Anyone who places a buy at-the-market or with a limit price over $10.00 will have that order immediately fulfilled through the offer you have placed on the book. On the other hand, if that other person places a buy for $8.00, then the spread will now be \"\"$8.00 bid, $10.00 ask\"\". Priority is based on first the price (all $9.99 asks will clear before $10.00) and within each bucket this is based on the time your order was submitted. This is why in bidding markets (including eBay) buying at $x.01 is way better than $x.00 and selling at $x.99 is better than $(x+1).00. Source: https://en.wikipedia.org/wiki/Order_(exchange) under \"\"first-come-first-served\"\"\"" }, { "docid": "560928", "title": "", "text": "Is there anything here I should be deathly concerned about? A concern I see is the variable rate loans. Do you understand the maximum rate they can get to? At this time those rates are low, but if you are going to put funds against the highest rate loan, make sure the order doesn't change without you noticing it. What is a good mode of attack here? The best mode of attack is to pay off the one with the highest rate first by paying more than the minimum. When that is done roll over the money you were paying for that loan to the next highest. Note if a loan balance get to be very low, you can put extra funds against this low balance loan to be done with it. Investigate loan forgiveness programs. The federal government has loan forgiveness programs for certain job positions, if you work for them for a number of years. Some employers also have these programs. What are the payoff dates for the other loans? My inexact calculations put a bunch in about 2020 but some as late as 2030. You may need to talk to your lender. They might have a calculator on their website. Why do my Citi loans have a higher balance than the original payoff amounts? Some loans are subsidized by the federal government. This covers the interest while the student is still in school. Non-subsidized federal loans and private loans don't have this feature, so their balance can grow while the student is in school." }, { "docid": "177926", "title": "", "text": "In the stock market many participants enter orders that are not necessarily set at the current market price of the stock (i.e. they are not market orders, they are limit orders). They can be lower than the market price (if they want to buy) or they can be higher than the market price (if they want to sell). The set of orders at each point of time for a security is called the order book. The lowest selling price of the order book is the offer or ask, the higher buying price is the bid. The more liquid is a security, the more orders will be in the order book, and the narrower will be the bid-ask spread. The depth of the order book is the number of units that the order book can absorb in any direction (buy or sell). As an example: imagine I want to buy 100 units at the lowest offer, but the size of the lowest offer is only 50 units, and there is not any further order, that means the stock has little depth." } ]

[ { "docid": "571306", "title": "", "text": "There is no one answer to this question, but there are some generalities. Most exchanges make a distinction between the passive and the aggressive sides of a trade. The passive participant is the order that was resting on the market at the time of the trade. It is an order that based on its price was not executable at the time, and therefore goes into the order book. For example, I'm willing to sell 100 shares of a stock at $9.98 but nobody wants to buy that right now, so it remains as an open order on the exchange. Then somebody comes along and is willing to meet my price (I am glossing over lots of details here). So they aggressively take out my order by either posting a market-buy, or specifically that they want to buy 100 shares at either $9.98, or at some higher price. Most exchanges will actually give me, as the passive (i.e. liquidity making) investor a small rebate, while the other person is charged a few fractions of a cent. Google found NYSEArca details, and most other exchanges make their fees public as well. As of this writing the generic price charged/credited: But they provide volume discounts, and many of the larger deals do fall into another tier of volume, which provides a different price structure." } ]

[ { "docid": "412226", "title": "", "text": "There are no legal reasons preventing you from trading as a F-1 visa holder, as noted in this Money.SE answer. Per this article, here are the things you need to set up an account: What do I need to have for doing Stock trading as F1 student ? Typically, most of the stock brokerage firms require Social Security Number (SSN) for stock trading. The reason is that, for your capital gains, it is required by IRS for tax purposes. If you work on campus, then you would already get SSN as part of the job application process…Typically, once you get the on-campus job or work authorization using CPT or OPT , you use that offer letter and take all your current documents like Passport, I-20, I-94 and apply for SSN at Social Security Administration(SSA) Office, check full details at SSA Website . SSN is typically used to report job wages by employer for tax purposes or check eligibility of benefits to IRS/Government. I do NOT have SSN, Can I still do stock trading as F1 student ? While many stock brokerage firms require SSN, you are not out of luck, if you do not have one…you will have to apply for an ITIN Number ( Individual Taxpayer Identification Number ) and can use the same when applying for stock brokerage account. While some of the firms accept ITIN number, it totally depends on the stock brokering firm and you need to check with the one that you are interested in. The key thing is that you'll need either a SSN or ITIN to open a US-based brokerage account." }, { "docid": "61864", "title": "", "text": "\"What is being described in Longson's answer, though helpful, is perhaps more similar to a financial spread bet. Exactly like a bookmaker, the provider of a spread bet takes the other side of the bet, and is counter party to your \"\"trade\"\". A CFD is also a bet between two parties. Now, if the CFD provider uses a market maker model, then this is exactly the same as with a spread bet and the provider is the counter party. However, if the provider uses a direct market access model then the counter party to your contract is another CFD trader, and the provider is just acting as an intermediary to bring you together (basically doing the job of both a brokerage and an exchange). A CFD entered into through a direct market access provider is in many ways similar to a Futures contract. Critically though, the contract is traded 'over-the-counter' and not on any centralized and regulated exchange. This is the reason that CFDs are not permitted in the US - the providers are not authorized as exchanges. Whichever model your CFD provider uses, it is best to think of the contract as a 'bet' on the future price movements of the underlying stock or commodity, in much the same way as with any other derivative instrument such as futures, forwards, swaps, or options. Finally, note that because you don't actually own the underlying stock (just as Longson has highlighted) you won't be entitled to any of the additional benefits that can come with ownership of a stock, such as dividend payments or the right to attend shareholder meetings. RESPONSE TO QUESTION So if I understand correctly, the money gained through a direct market access model comes from other investors in the same CFD who happened to have invested in the \"\"wrong\"\" direction the asset was presumed to take. What happens then, if no one is betting in the opposite direction of my investment. Your understanding is correct. If literally nobody is betting in the opposite direction to you, then you will not be able to trade. This is true for any derivative market; if suddenly every single buyer were to remove their bids from the S&P futures, then no seller would be able to sell. This is a very extreme scenario, as the S&P futures market is incredibly liquid (loads of buyers and sellers at all times). However, if something like this does happen (the flash crash of 2010, for example), then the centralized futures exchanges such as the CME have safeguards in place - the market become locked-limit so that it can only fall so far, there may be no buyers below the lock limit price, but the market cannot fall through it. CFD providers are not obliged to provide such safeguards, which is why regulators in the US don't permit them to operate. It may be the case that if you're trying to buy a CFD for a thinly traded and ill-liquid stock there will be no seller available. One possibility is that the provider will offer a 'hybrid' model, and in the absence of an independent counter party they will take the opposite side of your bet, and then offset their risk by taking an opposing position in the underlying stock.\"" }, { "docid": "393083", "title": "", "text": "Some ADRs have standardized options that trade on US exchanges. If your stock/ADR is one of those, then you find the put option through most brokerages that deal with stock options and trade the option like you would on a regular stock. If your ADR does not have standardized options, then your options will depend on where the ADR trades. If it's OTC, you might not even be able to short it. If it trades on a major exchange, the shorting the ADR may be a viable choice." }, { "docid": "259371", "title": "", "text": "\"Am I wrong? Yes. The exchanges are most definitely not \"\"good ole boys clubs\"\". They provide a service (a huge, liquid and very fast market), and they want to be paid for it. Additionally, since direct participants in their system can cause serious and expensive disruptions, they allow only organizations that know what they're doing and can pay for any damages the cause. Is there a way to invest without an intermediary? Certainly, but if you have to ask this question, it's the last thing you should do. Typically such offers are only superior to people who have large investments sums and know what they're doing - as an inexperienced investor, chances are that you'll end up losing everything to some fraudster. Honestly, large exchanges have become so cheap (e.g. XETRA costs 2.52 EUR + 0.0504% per trade) that if you're actually investing, then exchange fees are completely irrelevant. The only exception may be if you want to use a dollar-cost averaging strategy and don't have a lot of cash every month - fixed fees can be significant then. Many banks offer investments plans that cover this case.\"" }, { "docid": "261082", "title": "", "text": "\"That article, like almost any article written by a non-expert and quoting only \"\"research\"\" from lobbying groups, hugely misses the point. The vast majority of orders that end up being cancelled are cancelled as a standard part of exchanges' official market-maker programs. Each exchange wants you and me to know that it has liquidity -- that when we go to buy or sell some stock, there will be someone waiting on the other side of the trade. So the exchange pays (via lowered fees or even rebates) hundreds of registered market makers to constantly have orders resting in each product's order book within a few ticks of the current NBBO or the last trade price. That way, if everyone else should suddenly disappear from the market, you and I will still be able to trade our shares for a price somewhat close to the last trade price. But market makers who are simply acting in this \"\"backstop\"\" role don't actually want to have their orders filled, because those orders will almost always lose them money. So as prices rise and fall (as much as tens of times per second), the market makers need to cancel their resting orders (so they don't get filled) and add new ones at new prices (so they meet their obligations to the exchange). And because the number of orders resting in any given product's order book is vastly larger than the number of actual trades that take place in any given time period, naturally the number of cancellations is also going to hugely outweigh the number of actual trades. As much as 97% to 3% (or even more). But that's completely fine! You and I don't have to care about any of that. We almost never need the market makers to be there to trade with us. They're only there as a backstop. There's almost always plenty of organic liquidity for us to trade against. Only in the rare case where liquidity completely dries up do we really care that the registered market makers are there. And in those cases (ideally) the market makers can't cancel their orders (depending on how well the exchange has set up its market maker program). So, to answer your question, the effect of standard order cancellation on a stock is essentially none. If you were to visualize the resting orders in a product's book as prices moved up and down, you would essentially see a Gaussian distribution with mean at the last trade price, and it would move up and down with the price. That \"\"movement\"\" is accomplished by cancellations followed by new orders. P.S. As always, keep in mind that your and my orders almost never actually make it to a real stock exchange anymore. Nowadays they are almost always sent to brokers' and big banks' internal dark pools. And in there you and I have no idea what shenanigans are going on. As just one example, dark pools allow their operators and (for a fee) other institutional participants access to a feature called last look that allows them to cancel their resting order as late as after your order has been matched against it! :( Regarding the question in your comment ... If Alice is sending only bona fide orders (that is, only placing an order at time T if, given all the information she has at time T, she truly wants and intends for it to be filled) then her cancellation at a later time actually adds to the effectiveness of and public perception of the market as a tool for price discovery (which is its ultimate purpose). [In the following example imagine that there are no such things as trading fees or commissions or taxes.] Let's say Alice offers to buy AAPL at $99.99 when the rest of the market is trading it for $100.00. By doing so she is casting her vote that the \"\"fair value\"\" of a share of AAPL is between $99.99 and $100.00. After all, if she thought the fair value of a share of AAPL was higher -- say, between $100.00 and $100.01 -- then she should be willing to pay $100.00 (because that's below fair value) and she should expect that other people in the market will not soon decide to sell to her at $99.99. If some time later Alice does decide that the fair value of AAPL is between $100.00 and $100.01 then she should definitely cancel her order at $99.99, for exactly the reason discussed above. She probably won't get filled at $99.99, and by sitting there stubbornly she's missing out (potentially forever) on the possibility to make a profit. Through the simple act of cancelling her $99.99 order, Alice is once again casting a vote that she no longer thinks that's AAPL's fair value. She is (very slightly) altering the collective opinion of the entire market as to what a share of AAPL is worth. And if her cancellation then frees her up to place another order closer to her perceived fair value (say, at $100.00), then that's another vote for her honest optinion about AAPL's price. Since the whole goal of the market is to get a bunch of particpants to figure out the fair value of some financial instrument (or commodity, or smart phone, or advertising time, etc.), cancellations of honest votes from the past in order to replace them with new, better-informed honest votes in the present can only be a good thing for the market's effectiveness and perceived effectiveness. It's only when participants start sending non-honest votes (non bona fide orders) that things start to go off the rails. That's what @DumbCoder was referring to in his comment on your original question.\"" }, { "docid": "525527", "title": "", "text": "\"There is no unique identifier that exists to identify specific shares of a stock. Just like money in the bank, there is no real reason to identify which exact dollar bills belong to me or you, so long as there is a record that I own X bills and I can access them when I want. (Of course, unlike banks, there is still a 1:1 relationship between the amount I should own and the amount they actually hold). If I may reach a bit, the question that I assume you are asking is how are shared actually tracked, transferred, and recorded so that I know for certain that I traded you 20 Microsoft shares yesterday and they are now officially yours, given that it's all digital. While you can technically try and request a physical share certificate, it's very cumbersome to handle and transfer in that form. Ownership of shares themselves are tracked for brokerage firms (in the case of retail trading, which I assume is the context of this question as we're discussion personal finance). Your broker has a record of how many shares of X, Y, and Z you own, when you bought each share and for how much, and while you are the beneficial owner of record (you get dividends, voting rights, etc.) your brokerage is the one who is \"\"holding\"\" the shares. When you buy or sell a stock and you are matched with a counterparty (the process of which is beyond the scope of this question) then a process of settlement comes into play. In the US, settlement takes 3 working days to process, and technically ownership does not transfer until the 3rd day after the trade is made, though things like margin accounts will allow you to effectively act as if you own the shares immediately after a buy/sell order is filled. Settlement in the US is done by a sole source, the Depository Trust & Clearing Corporation (DTCC). This is where retail and institutional trade all go to be sorted, checked and confirmed, and ultimately returned to the safekeeping of their new owners' representatives (your brokerage). Interestingly, the DTCC is also the central custodian for shares both physical and virtual, and that is where the shares of stock ultimately reside.\"" }, { "docid": "78586", "title": "", "text": "\"Question 2 Some financial institutions can provide a way to invest small amounts with low or no cost fees over a period of time (like monthly, weekly, etc). For instance, a few brokerages have a way to buy specific ETFs for no cost (outside of the total expense ratio). Question 3 When someone says that investing is like buying a lottery ticket, they are comparing an event that almost always has at least a 99.9% of no return (large winnings) to an event that has much better odds. Even if I randomly pick a stock in the S&P 500 and solely invest in it, over the course of a given year, I do not face a 99.9% chance of losing everything. So comparing the stock market to a lottery, unless a specific lottery has much better odds (keep in mind that some of these jackpots have a 99.9999999% of no return) is not the same. Unfortunately, nothing truly safe exists - risk may mutate, but it's always present; instead, the probability of something being safe and (or) generating a return may be true for a given period of time, while in another given period of time, may become untrue. One may argue that holding cash is safer than buying an index fund (or stock, ETF, mutual fund, etc), and financially that may be true over a given period of time (for instance, the USD beat the SPY for the year of 2008). Benjamin Franklin, per a biography I'm reading, argued that the stock market was superior to gold (from the context, it sounds like the cash of his day) because of what the stock market represents: essentially you're betting on the economic output of workers. It's like saying, in an example using oil, that I believe that even though oil becomes a rare resource in the long run, human workers will find an alternative to oil and will lead to better living standards for all of us. Do civilizations like the Mongolian, Roman, and Ottoman empires collapse? Yes, and would holding the market in those days fail? Yes. But cash and gold might be useless too because we would still need someone to exchange goods with and we would need to have the correct resources to do so (if everyone in a city owns gold, gold has little value). The only \"\"safe bet\"\" in those days would be farming skill, land, crops and (or) livestock because even without trading, one could still provide some basic necessities.\"" }, { "docid": "153660", "title": "", "text": "\"For a non-ETF mutual fund, you can only buy shares of the mutual fund from the mutual fund itself (at a price that the mutual fund will reveal only at the end of the day) and can only shares back to the mutual fund (again at a price that the mutual fund will reveal only at the end of the day). There is no open market in the sense that you cannot put in a bid to buy, say, 100 shares of VFINX at $217 per share through a brokerage, and if there is a seller willing to sell 100 shares of VFINX to you at $217, then the sale is consummated and you are now the proud owner of 100 shares of VFINX. The only buyer or seller of VFINX is the mutual find itself, and you tell it that you \"\"want to buy 100 shares of VFINX and please take the money out of my checking account\"\". If this order is entered before the markets close at 4 pm, the mutual fund determines its share price as of the end of the day, opens a new account for you and puts 100 shares of VFINX in it (or adds 100 shares of VFINX to your already existing pile of shares) and takes the purchase price out of your checking account via an ACH transfer. Similarly for redeeming/selling shares of VFINX that you own (and these are held in an account at the mutual fund itself, not by your brokerage): you tell the mutual fund to that you \"\"wish to redeem 100 shares and please send the proceeds to my bank account\"\" and the mutual fund does this at the end of the day, and the money appears in your bank account via ACH transfer two or three days later. Generally, these transactions do not need to be for round lots of multiples of 100 shares for efficiency; most mutual fund will gladly sell you fractional shares down to a thousandth of a share. In contrast, shares of an exchange-traded fund (ETF) are just like stock shares in that they can be bought and sold on the open market and your broker will charge you fees for buying and selling them. Selling fractional shares on the open market is generally not possible, and trading in round lots is less expensive. Also, trades occur at all times of the stock exchange day, not just at the end of the day as with non-ETF funds, and the price can fluctuate during the day too. Many non-ETF mutual funds have an ETF equivalent: VOO is the symbol for Vanguard's S&P 500 Index ETF while VFINX is the non-ETF version of the same index fund. Read more about the differences between ETFs and mutual funds, for example, here.\"" }, { "docid": "500473", "title": "", "text": "HFT firms are spending millions or billions on network infrastructure and colocation for a reason. It's arbitrage. I'll take your word for it that transaction costs are lower today than they were years ago, but HFT front running is happening. HFT firms are paying for a privileged position in the exchanges that is unavailable to others. That's not ok. I don't care how much liquidity they supply or how small the spreads get. At any rate, *someone* must believe in what IEX is doing because otherwise there would be no volume there. They're approaching 1% of the market volume after opening a few months ago. People aren't trading there out of the kindness of their hearts, they are trading there because they believe they are getting ripped off in the other dark pools/exchanges." }, { "docid": "397897", "title": "", "text": "\"I've done exactly what you say at one of my brokers. With the restriction that I have to deposit the money in the \"\"right\"\" way, and I don't do it too often. The broker is meant to be a trading firm and not a currency exchange house after all. I usually do the exchange the opposite of you, so I do USD -> GBP, but that shouldn't make any difference. I put \"\"right\"\" in quotes not to indicate there is anything illegal going on, but to indicate the broker does put restrictions on transferring out for some forms of deposits. So the key is to not ACH the money in, nor send a check, nor bill pay it, but rather to wire it in. A wire deposit with them has no holds and no time limits on withdrawal locations. My US bank originates a wire, I trade at spot in the opposite direction of you (USD -> GBP), wait 2 days for the trade to settle, then wire the money out to my UK bank. Commissions and fees for this process are low. All told, I pay about $20 USD per xfer and get spot rates, though it does take approx 3 trading days for the whole process (assuming you don't try to wait for a target rate but rather take market rate.)\"" }, { "docid": "345851", "title": "", "text": "\"Cart's answer describes well one aspects of puts: protective puts; which means using puts as insurance against a decline in the price of shares that you own. That's a popular use of puts. But I think the wording of your question is angling for another strategy: Writing puts. Consider: Cart's strategy refers to the buyer of a put. But, on the transaction's other side is a seller of the put – and ultimately somebody created or wrote that put contract in the first place! That first seller of the put – that is, the seller that isn't just selling one they themselves bought – is the put writer. When you write a put, you are taking on the obligation to buy the other side's stock at the put exercise price if the stock price falls below that exercise price by the expiry date. For taking on the obligation, you receive a premium, like how an insurance company charges a premium to insure against a loss. Example: Imagine ABC Co. stock is trading at $25.00. You write a put contract agreeing to buy 100 shares of ABC at $20.00 per share (the exercise price) by a given expiration date. Say you receive $2.00/share premium from the put buyer. You now have the obligation to purchase the shares from the put buyer in the event they are below $20.00 per share when the option expires – or, technically any time before then, if the buyer chooses to exercise the option early. Assuming no early assignment, one of two things will happen at the option expiration date: ABC trades at or above $20.00 per share. In this case, the put option will expire worthless in the hands of the put buyer. You will have pocketed the $200 and be absolved from your obligation. This case, where ABC trades above the exercise price, is the maximum profit potential. ABC trades below $20.00 per share. In this case, the put option will be assigned and you'll need to fork over $2000 to the put buyer in exchange for his 100 ABC shares. If those shares are worth less than $18.00 in the market, then you've suffered a loss to the extent they are below that price (times 100), because remember – you pocketed $200 premium in the first place. If the shares are between $18.00 to $20.00, you're still profitable, but not to the full extent of the premium received. You can see that by having written a put it's possible to acquire ABC stock at a price lower than the market price – because you received some premium in the process of writing your put. If you don't \"\"succeed\"\" in acquiring shares on your first write (because the shares didn't get below the exercise price), you can continue to write puts and collect premium until you do get assigned. I have read the book \"\"Money for Nothing (And Your Stocks for FREE!)\"\" by Canadian author Derek Foster. Despite the flashy title, the book essentially describes Derek's strategy for writing puts against dividend-paying value stocks he would love to own. Derek picks quality companies that pay a dividend, and uses put writing to get in at lower-than-market prices. Four Pillars reviewed the book and interviewed Derek Foster: Money for Nothing: Book Review and Interview with Derek Foster. Writing puts entails risk. If the stock price drops to zero then you'll end up paying the put exercise price to acquire worthless shares! So your down-side can easily be multiples of the premium collected. Don't do this until and unless you understand exactly how this works. It's advanced. Note also that your broker isn't likely to permit you to write puts without having sufficient cash or margin in your account to cover the case where you are forced to buy the stock. You're better off having cash to secure your put buys, otherwise you may be forced into leverage (borrowing) when assigned. Additional Resources: The Montreal Exchange options guide (PDF) that Cart already linked to is an excellent free resource for learning about options. Refer to page 39, \"\"Writing secured put options\"\", for the strategy above. Other major options exchanges and organizations also provide high-quality free learning material:\"" }, { "docid": "406872", "title": "", "text": "\"I'm posting this because I think I can do a better job of explaining and detailing everything from start to stop. :) A \"\"broker\"\" is just someone who connect buyers and sellers - a middleman of sorts who is easy to deal with. There are many kinds of brokers; the ones you'll most commonly hear about these days are \"\"mortgage broker\"\" (for arranging home loans) and \"\"stockbroker\"\". The stockbroker helps you buy and sell stock. The stockbroker has a connection to one or more stock exchanges (e.g. Nasdaq, NYSE) and will submit your orders to them in order to fulfill it. This way Nasdaq and NYSE don't have to be in the business of managing millions of customer accounts (and submitting tax information about those accounts to the government and what-not) - they just manage relationships with brokerages, which is much easier for them. To invest in a stock, you will need to: In this day and age, most brokers that you care about will be easily accessed via the Internet, the applications will be available on the Internet, and the trading interface will be over the Internet. There may also be paper and/or telephone interfaces to the brokerage, but the Internet interface will work better. Be aware that post-IPO social media stock is risky; don't invest any money if you're not prepared for the possibility of losing every penny of it. Also, don't forget that a variety of alternative things exist that you can buy from a broker, such as an S&P 500 index fund or exchange-traded corporate bond fund; these will earn you some reward over time with significantly less risk. If you do not already have similar holdings through a retirement plan, you should consider purchasing some of these sooner or later.\"" }, { "docid": "35340", "title": "", "text": "Investopedia has a section in their article about currency trading that states: The FX market does not have commissions. Unlike exchange-based markets, FX is a principals-only market. FX firms are dealers, not brokers. This is a critical distinction that all investors must understand. Unlike brokers, dealers assume market risk by serving as a counterparty to the investor's trade. They do not charge commission; instead, they make their money through the bid-ask spread. Principals-only means that the only parties to a transaction are agents who actively bear risk by taking one side of the transaction. There are forex brokers who charge what's called a commission, based on the spread. Investopedia has another article about the commission structure in the forex market that states: There are three forms of commission used by brokers in forex. Some firms offer a fixed spread, others offer a variable spread and still others charge a commission based on a percentage of the spread. So yes, there are forex brokers who charge a commission, but this paragraph is saying mostly the same thing as the first paragraph. The brokers make their money through the bid-ask spread; how they do so varies, and sometimes they call this charge a commission, sometimes they don't. All of the information above differs from the stock markets, however, in which The broker takes the order to an exchange and attempts to execute it as per the customer's instructions. For providing this service, the broker is paid a commission when the customer buys and sells the tradable instrument. The broker isn't taking a side in the trade, so he's not making money on the spread. He's performing the service of taking the order to an exchange an attempting to execute it, and for that, he charges a commission." }, { "docid": "349668", "title": "", "text": "This is more than likely a thing about your financial institution and the exchanges where they trade shares. Some exchanges cannot/will not handle odd lot transactions. Most established brokerages have software and accounting systems that will deal in round lots with the exchanges, but can track your shares individually. Sometimes specific stocks cannot be purchased in odd lots due to circumstances specific to that stock (trading only on a specific exchange, for example). Most brokerages offer dollar-cost averaging programs, but may limit which stocks are eligible, due to odd lot and partial share purchases. Check with your brokerage to see if they can support odd lot and/or DCA purchases. You may find another similar ETF with similar holdings that has better trading conditions, or might consider an open-end mutual fund with similar objectives. Mutual funds allow partial share purchases (you have $100 to invest today, and they issue you 35.2 shares, for example)." }, { "docid": "389268", "title": "", "text": "\"An order is your command to the broker to, say, \"\"sell 100 shares of AAPL\"\". An executed order (or partially executed order) is when all (or some) of that command is successfully completed. A transaction is an actual exchange of shares for money, and there may be one or more transactions per executed order. For example, the broker might perform all of the following 5 transactions in order to do what you asked: On the other hand, if the broker cannot execute your order, then 0 transactions have taken place. The fee schedule you quote is saying that no matter how many transactions the broker has to perform in order to fill your order -- and no matter what the share prices are -- they're only going to charge you $0.005 per share ($0.50 in this example of 100 shares), subject to certain limits. However, as it says at the top of the page you linked, Our Fixed pricing for stocks, ETFs (Exchange Traded Products, or ETPs) and warrants charges a fixed amount per share or a set percent of trade value, and includes all IB commissions, exchange and most regulatory fees with the exception of the transaction fees, which are passed through on all stock sales. certain transaction fees are passed through to the client. The transaction fee you included above is the SEC fee on sales. Many (but not all) transaction fees DO depend on the prices of the shares involved; as a result they cannot be called \"\"fixed\"\" fees. For example, if you sell 100 shares of AAPL at $150 each, But if you sell 100 shares of AMZN at $940 each, So the broker will charge you the same $0.50 on either of those orders, but the SEC will charge you more for the expensive AMZN shares than for the cheaper AAPL shares. The reason this specific SEC fee mentions aggregate sales rather than trade value is because this particular SEC fee applies only to the seller and not to the buyer. So they could have written aggregate trade value, but they probably wanted to highlight to the reader that the fee is only charged on sells.\"" }, { "docid": "291903", "title": "", "text": "\"Pink Sheets is not a stock exchange per se, and securities traded through it are not as \"\"safe\"\" as the ones on a stock exchange regulated by SEC. Many companies are traded there because they failed to comply with the SEC regulations, or are bankrupt or don't want the level of reporting to the public that the SEC regulations require. Since you're talking about an ADR of a company traded on LSE, it might be much safer that other, \"\"regular\"\", securities, but still it means that you're buying an unregulated security (even if it is of a company regulated elsewhere). Notice the volume of trades: mere thousands of dollars per day (in a good day, in some days there are no trades at all). It makes it harder to sell the security when needed. Why not buying at LSE?\"" }, { "docid": "550992", "title": "", "text": "\"I can address what it means to \"\"pick off\"\" all those trades... As quantycuenta & littleadv have said, it is absolutely true that professionals \"\"prey\"\" on less-sophisticated market participants. They aren't in the market for charity's sake. If you're not familiar with the definition of the word \"\"arbitrage\"\", look it up. One possible strategy that can be employed with HFT machinery in order to arbitrage successfully in the stock market is to 'intercept' orders that are placed on various exchanges. In order to do this, an HFT organization watches all the transactions at once to find opportunities to buy low and sell high. A good explanation of it is described here in this NY Times article; I'll paraphrase what that article lays out. Stocks are traded through multiple exchanges The first key point to understand is that stocks listed on one exchange (i.e. the NYSE) can be sold on multiple exchanges. That's where the actual \"\"I would like to sell 100 shares of Ford stock\"\" is matched with \"\"I would like to buy 100 shares of Ford stock.\"\" There are multiple clearinghouses on the various exchanges. Your order gets presented to one exchange at a Time An ideal market maker would like to look at the order books for a given stock, say Ford, and see that in exchange A there's a sell order for 100 shares of F at $15.85, and in exchange B there's a buy order for 100 shares of F at $15.90. Arbitrage Market maker buys from A, sells in B, and pockets $0.05 * 100... $5. It's not much, but it was relatively risk free. Also, scale this up to the scale of the US' multiple stock exchanges, and there are lots of opportunities to make $5 every second. Computers are (of course) faster than people To tie it in completely with your question about 'picking off trades', HFT rigs can be set up and programmed to go faster than an average retail investor's order. Let's say you execute the trade to buy 100 shares @ $15.85 as a retail investor. The HFT rigs see your order starting to make the rounds of the different exchanges that your brokerage works through, and go out in front in a matter of milliseconds, finding the orders that are less than $15.85 and less than or equal to 100 shares. They execute a transaction, buy them up, sell to you, and pocket the difference. You have been \"\"picked off\"\". It's admittedly not the only way to use HFT equipment to make money, but it's definitely one way to do it.\"" }, { "docid": "265267", "title": "", "text": "\"Perhaps buying some internationally exchanged stock of China real-estate companies? It's never too late to enter a bubble or profit from a bubble after it bursts. As a native Chinese, my observations suggest that the bubble may exist in a few of the most populated cities of China such as Beijing, Shanghai and Shenzhen, the price doesn't seem to be much higher than expected in cities further within the mainland, such as Xi'an and Chengdu. I myself is living in Xi'an. I did a post about the urban housing cost of Xi'an at the end of last year: http://www.xianhotels.info/urban-housing-cost-of-xian-china~15 It may give you a rough idea of the pricing level. The average of 5,500 CNY per square meter (condo) hasn't fluctuated much since the posting of the entry. But you need to pay about 1,000 to 3,000 higher to get something desirable. For location, just search \"\"Xi'an, China\"\" in Google Maps. =========== I actually have no idea how you, a foreigner can safely and easily profit from this. I'll just share what I know. It's really hard to financially enter China. To prevent oversea speculative funds from freely entering and leaving China, the Admin of Forex (safe.gov.cn) has laid down a range of rigid policies regarding currency exchange. By law, any native individual, such as me, is imposed of a maximum of $50,000 that can be converted from USD to CNY or the other way around per year AND a maximum of $10,000 per day. Larger chunks of exchange must get the written consent of the Admin of Forex or it will simply not be cleared by any of the banks in China, even HSBC that's not owned by China. However, you can circumvent this limit by using the social ID of your immediate relatives when submitting exchange requests. It takes extra time and effort but viable. However, things may change drastically should China be in a forex crisis or simply war. You may not be able to withdraw USD at all from the banks in China, even with a positive balance that's your own money. My whole income stream are USD which is wired monthly from US to Bank of China. I purchased a property in the middle of last year that's worth 275,000 CNY using the funds I exchanged from USD I had earned. It's a 43.7% down payment on a mortgage loan of 20 years: http://www.mlcalc.com/#mortgage-275000-43.7-20-4.284-0-0-0.52-7-2009-year (in CNY, not USD) The current household loan rate is 6.12% across the entire China. However, because this is my first property, it is discounted by 30% to 4.284% to encourage the first house purchase. There will be no more discounts of loan rate for the 2nd property and so forth to discourage speculative stocking that drives the price high. The apartment I bought in July of 2009 can easily be sold at 300,000 now. Some of the earlier buyers have enjoyed much more appreciation than I do. To give you a rough idea, a house bought in 2006 is now evaluated 100% more, one bought in 2008 now 50% more and one bought in the beginning of 2009 now 25% more.\"" }, { "docid": "65663", "title": "", "text": "\"@sdg's answer is spot-on with the advice to avoid repeated conversions, but I'd like to provide some specifics on the fees involved: Each time you round-trip Canadian dollars (CAD) through a U.S.-dollar (USD) priced security at TD Waterhouse and leave your proceeds in CAD, you're paying a total foreign exchange fee – implied in their rate spread – of about 3%, give or take. That's ~3% per buy & sell combination, or ~1.5% on each end. You can imagine if you trade back & forth frequently, you can quickly lose a lot of money. Do it back and forth ten times in a year and you're out ~30% on the fees alone! The TD U.S. Money Market Fund (TDB166) that TD Waterhouse is referring to has no direct commission to buy or sell, but it does have a Management Expense Ratio (MER) of 0.20% per year – basically a fee which is deducted from the fund's returns (which, today, are also close to zero.) Practically speaking, that's a very slim fee to hold some USD in your Canadian dollar TFSA. While 0.20% is cheap, a point to keep in mind is if you maintain a significant USD balance, you are maintaining currency risk: You can lose money in CAD terms if the CAD appreciates vs. USD. Additional references: Canadian Capitalist describes TD Waterhouse and the use of TDB166 and \"\"wash trades\"\" at How to \"\"Wash\"\" Your Trade? He's referring to RRSPs, but the same applies to TFSAs, which came out after the post was written. Canadian Couch Potato has two relevant articles: Are US-listed ETFs Really Cheaper? and Lowering Your Currency Exchange Fees.\"" } ]

[ { "docid": "222485", "title": "", "text": "You will be rolling over the proceeds, since you can only deposit cash into an IRA. However, this should probably not affect your considerations much since the pre-rollover sale is non-taxable within the 401k and the period of roll-over itself (when the cash is uninvested) is relatively short. So, whatever investments you choose in your 401k, you'll just sell them and then buy them (or similar investments) back after the rollover to the IRA. If you're worrying about a flash crash right on the day when you want to cash out - that can definitely happen, but it is not really something you can prepare for. You can consider moving to money market several weeks before the potential date of your withdrawal, if you think it will make you feel safer, otherwise I don't think it really matters." } ]

[ { "docid": "547218", "title": "", "text": "The general advise is to contribute to the 401K up to the match limit. Then put money into a Roth IRA. Then put the rest into the 401K above the match. Yes you can have an IRA and a 401K. You can even have Roth and non-Roth versions. You do have to watch the limits, and exclusions, but there is nothing stopping you from contributing to multiple types in one year. Over a long career you may find your self with all the possible types of accounts. When you re-qualify for the company 401K, there is no need to roll over the IRA money into the 401K. Just keep the IRA." }, { "docid": "140349", "title": "", "text": "Are you obligated to do what they ask? Probably not, with one big caveat discussed below. Your employer sent your money and their money after every paycheck to the 401K management company. Then after a while the 401K management company followed your instructions to roll it over into an IRA. Now the IRA management company has it. Pulling it out of the IRA would be very hard, and the IRA company would be required to report it to the IRS as a withdraw. Here is the caveat. If the extra funds you put in allowed you to exceed the annual contribution amount set by the law, or if it allowed you to put more than 100% of your income into the fund, then this would be an excess contribution, and you and your employer would have to resolve or face the excess contribution penalties. Though if the 401K company and HR allowed you to exceed the annual limit they have a much more complex problem with their payroll system. The bigger concern is why they want you to pull out your $27.50 and their $27.50. Unless you were hitting the maximum limit, your $27.50 could have been invested by adjusting the percentage taken out of each check. You could have picked a percentage to reach a goal. That money is yours because you contributed it and unless you exceed the IRS set limits it is still pre-tax retirement money. The return of matching funds may be harder to calculate. The returns for 2013 were very good. Each $1.06 of matching funds each paycheck purchased a fraction of some investment. That investment went up and down, ok mostly up, if it was invested in the broad market. I guess you should be glad they aren't asking for more due to the increase in value. It would be very hard to calculate what happened if you have moved it around since then. Which of course you did when you moved it into an IRA. If the average employee was also given a $55 gift last year, then the suggestion to the employer is that the tax complexity you and your fellow employees face would exceed the cost of the extra funds. They should chalk it up to an expensive lesson and move on." }, { "docid": "500562", "title": "", "text": "If you withdraw the money, regardless of how small the balance is, the IRS will still insist you pay a 10% penalty when you file your taxes (assuming you're under 59 1/2). Your 401K plan provider might have a policy that allows you to avoid the usual automatic withholding. You should check with them. $600 in additional income isn't likely to move your tax bill much, unless you're really close to a boundary in the tax brackets. Rather than withdrawing the money, you can transfer the 401K to your next 401K, or roll it over to an IRA (plenty of no-fee options around). Once in a traditional IRA, you can convert the money to a Roth IRA. You pay the taxes on the amount, but no 10% penalty. Converting to a Roth has eligibility rules. You should double check with your financial institution before doing it. Edit: You can withdraw without the 10% penalty if you leave your job after age 55 (credit to @JoeTaxpayer for the correction). This IRS Page lists the conditions under which the penalty can be avoided. Edit: The original question has been edited to add more background details. Due to OP's investment preferences, I would also recommend that he simply withdraw the funds, pay the taxes and the $60 penalty and put the $500 or so dollars somewhere else." }, { "docid": "421586", "title": "", "text": "Don't steal from the 401k. If you take the money out, you'll pay 28% in taxes and 10% in penalties -- only getting $12,960 out. Before you do anything, consult an online refi calculator to make sure you'll be in the house beyond the break-even point. With the numbers you've given and some reasonable guesses I made, it looks like you'll break even within a year. If your new employer's plan allows for loans, roll it into the new plan. Based on what you say you're putting in, you should be able to take a loan out of about $15-20k, which would get you to your LTV goal. Before you do this, calculate: and make sure you will comfortably be able to handle all of the payments. Make sure you're aware of the loan terms on your 401k loan. Understand the penalties associated with failing to make timely payments. Finally, beware of sinking all of your liquid cash into this -- how will you handle an emergency that comes up soon after closing on the new loan before you have a chance to rebuild your emergency fund?" }, { "docid": "539263", "title": "", "text": "There are times when investing in an ETF is more convenient than a mutual fund. When you invest in a mutual fund, you often have an account directly with the mutual fund company, or you have an account with a mutual fund broker. Mutual funds often have either a front end or back end load, which essentially gives you a penalty for jumping in and out of funds. ETFs are traded exactly like stocks, so there is inherently no load when buying or selling. If you have a brokerage account and you want to move funds from a stock to a mutual fund, an ETF might be more convenient. With some accounts, an ETF allows you to invest in a fund that you would not be able to invest in otherwise. For example, you might have a 401k account through your employer. You might want to invest in a Vanguard mutual fund, but Vanguard funds are not available with your 401k. If you have access to a brokerage account inside your 401k, you can invest in the Vanguard fund through the associated ETF. Another reason that you might choose an ETF over a mutual fund is if you want to try to short the fund." }, { "docid": "194030", "title": "", "text": "\"Why do people keep talking about 401K's at work? That is NOT dollar cost averaging. DCA refers to when you have a large sum of money. Do you invest it all at once or spread it out over several smaller purchases over a period of time? There really isn't a \"\"when\"\" should I use it. It is simply a matter of where your preferences lie on the risk/reward scpectrum. DCA has lower risk and lower reward than lump sum investing. In my opinion, I don't like it. DCA only works better than lump sum investing if the price drops. But if you think the price is going to drop, why are you buying the stock in the first place? Example: Your uncle wins the lottery and gives you $50,000. Do you buy $50,000 worth of Apple now, or do you buy $10,000 now and $10,000 a quarter for the next four quarters? If the stock goes up, you will make more with lump-sum(LS) than you will with DCA. If the stock goes down, you will lose more with LS than you will with DCA. If the stock goes up then down, you will lose more with DCA than you will with LS. If the stock goes down then up, you will make more with DCA than you will with LS. So it's a tradeoff. But, like I said, the whole point of you buying the stock is that you think it's going to go up! So why pick the strategy that performs worse in that scenario?\"" }, { "docid": "464264", "title": "", "text": "Dollar cost averaging is a great strategy to use for investment vehicles where you can't invest it in a lump sum. A 401K is perfect for this. You take a specific amount out of each paycheck and invest it either in a single fund, or multiple funds, or some programs let you invest it in a brokerage account so you can invest in virtually any mutual fund or stock. With annual or semi-annual re-balancing of your investments dollar cost averaging is the way to invest in these programs. If you have a lump sum to invest, then dollar cost averaging is not the best way to invest. Imagine you want to invest 10K and you want to be 50% bonds and 50% stocks. Under dollar cost averaging you would take months to move the money from 100% cash to 50/50 bonds/stocks. While you are slowly moving towards the allocation you want, you will spend months not in the allocation you want. You will spend way too long in the heavy cash position you were trying to change. The problem works the other way also. Somebody trying to switch from stocks to gold a few years ago, would not have wanted to stay in limbo for months. Obviously day traders don't use dollar cost averaging. If you will will be a frequent trader, DCA is not the way to go. No particular stock type is better for DCA. It is dependent on how long you plan on keeping the investment, and if you will be working with a lump sum or not. EDIT: There have be comments regarding DCA and 401Ks. When experts discuss why people should invest via a 401K, they mention DCA as a plus along with the company match. Many participants walk away with the belief that DCA is the BEST strategy. Many articles have been written about how to invest an inheritance or tax refund, many people want to use DCA because they believe that it is good. In fact in the last few years the experts have begun to discourage ever using DCA unless there is no other way." }, { "docid": "509837", "title": "", "text": "You need to look at all your investment as a whole. The 401K, IRA, and any taxable account need to be a part of the diversification and re-balancing. The fact you have regular deposits into the 401K needs to also be a part of your strategy. Regardless of how much specific investments have gone up this year, you need to first determine how you want to be invested in large cap stock, small cap stock, bond, international, emerging markets... Then you need to see where you are today compared to those investment percentages. You then move the money in the retirement accounts to get to your desired percentage. And set the 401K deposits to be consistent with your goals. Many times the deposits are allocated the same way the balances are, but that is more complex if one of the sectors you are investing in exists completely outside the 401K. When you re-balance in the future you will be selling sectors that grew the most and buying those that grew the least compared to their planned percentages. If all the moves are within the 401K and IRA then capital gains are not a concern. Don't think of the different accounts as separate baskets, but think of them as a whole investment strategy." }, { "docid": "60093", "title": "", "text": "What you put that money into is quite relevant. It depends on how soon you will need some, or all, of that money. It has been very useful to me to divide my savings into three areas... 1) very short term 'oops' funds. This is for when you forget to put something in your budget or when a monthly bill is very high this month. Put this money into passbook savings. 2) Emergency funds that are needed quite infrequently. Used for such things as when you go to the hospital or an appliance breaks down. Put this money in higher yeald savings, but where it can be accessed. 3) Retirement savings. Put this money into a 401-K. Never draw on it till you retire. Make no loans against it. When you change jobs roll over into a self-directed IRA and invest in an ETF that pays dividends. Reinvest the dividend each month. So, like I said, where you put that money depends on how soon you will need it." }, { "docid": "469311", "title": "", "text": "Just the amount contributed to the Roth 401k that you rolled over, not the conversions from regular 401k/traditional IRA (for those there are holding period limitation of 5 year from conversion), the earning on it or the employer's match (neither of these can be withdrawn without penalty as a non-qualified withdrawal). However, I'd suggest not to withdraw from Roth IRA unless you're sleeping on a bench in a park and beg strangers for a piece of bread. This is the best retirement investment you can make while you're in the lower tax brackets, and withdrawing it would reduce dramatically your tax-free retirement income." }, { "docid": "128451", "title": "", "text": "\"Yes you can do the withdraw if you turned 55 during the year you separated from service. http://www.401khelpcenter.com/401k_education/Early_Dist_Options.html#.VdMrqPlVhBc Leaving Your Job On or After Age 55 The age 59½ distribution rule says any 401k participant may begin to withdraw money from his or her plan after reaching the age of 59½ without having to pay a 10 percent early withdrawal penalty. There is an exception to that rule, however, which allows an employee who retires, quits or is fired at age 55 to withdraw without penalty from their 401k (the \"\"rule of 55\"\"). There are three key points early retirees need to know. First, this exception applies if you leave your job at any time during the calendar year in which you turn 55, or later, according to IRS Publication 575. Second, if you still have money in the plan of a former employer and assuming you weren't at least age 55 when you left that employer, you'll have to wait until age 59½ to start taking withdrawals without penalty. Better yet, get any old 401k's rolled into your current 401k before you retire from your current job so that you will have access to these funds penalty free. Third, this exception only applies to funds withdrawn from a 401k. IRAs operate until different rules, so if you retire and roll money into an IRA from your 401k before age 59½, you will lose this exception on those dollars.\"" }, { "docid": "134005", "title": "", "text": "\"Vanguard released an analysis paper in 2013 titled \"\"Dollar-cost averaging just means taking risk later.\"\" This paper explores the performance difference(s) between a dollar-cost averaging strategy and a lump sum strategy when you already possess the funds. This paper is an excellent read but the conclusion from the executive summary is: We conclude that if an investor expects such trends to continue, is satisfied with his or her target asset allocation, and is comfortable with the risk/return characteristics of each strategy, the prudent action is investing the lump sum immediately to gain exposure to the markets as soon as possible. The caveat to the conclusion is weighing your emotions. If you are primarily concerned with minimizing the possibility of a loss then you should use a dollar cost averaging strategy with the understanding that, on a purely mathematical basis, the dollar cost averaging strategy is likely to under-perform a lump sum investment of the funds. The paper explores a 10 year holding period with either: The analysis includes various portfolio blends and is backtested against the United States, United Kingdom and Australian markets. Based on this, as far as I'm concerned, the rule of thumb is invest the lump sum if you're going to invest at all.\"" }, { "docid": "469519", "title": "", "text": "Consistently beating the market by picking stocks is hard. Professional fund managers can't really do it -- and they get paid big bucks to try! You can spend a lot of time researching and picking stocks, and you may find that you do a decent job. I found that, given the amount of money I had invested, even if I beat the market by a couple of points, I could earn more money by picking up some moonlighting gigs instead of spending all that time researching stocks. And I knew the odds were against me beating the market very often. Different people will tell you that they have a sure-fire strategy that gets returns. The thing I wonder is: why are you selling the information to me rather than simply making money by executing on your strategy? If they're promising to beat the market by selling you their strategy, they've probably figured out that they're better off selling subscriptions than putting their own capital on the line. I've found that it is easier to follow an asset allocation strategy. I have a target allocation that gives me fairly broad diversification. Nearly all of it is in ETFs. I rebalance a couple times a year if something is too far off the target. I check my portfolio when I get my quarterly statements. Lastly, I have to echo JohnFx's statement about keeping some of your portfolio in cash. I was almost fully invested going into early 2001 and wished I had more cash to invest when everything tanked -- lesson learned. In early 2003 when the DJIA dropped to around 8000 and everybody I talked to was saying how they had sold off chunks of their 401k in a panic and were staying out of stocks, I was able to push some of my uninvested cash into the market and gained ~25% in about a year. I try to avoid market timing, but when there's obvious panic or euphoria I might under- or over-allocate my cash position, respectively." }, { "docid": "110649", "title": "", "text": "I want to take a loan out against an old 401k to use as the down payment on a house. The problem that I've found is that in order to borrow against the 401k it has to be considered current. I'd like to avoid rolling it over to my current job because then if I quit the entire load has to be repaid within 60 days. I'm specifically wondering if me plan of starting a company with a 401k will work. From what I can tell, there's no limit on the number of current 401ks you can have. Since I'm obviously never going to fire myself, having to suddenly repay the entire loan won't be a problem. I'd like to keep my job and money related to investments separate." }, { "docid": "136270", "title": "", "text": "The vanilla advice is investing your age in bonds and the rest in stocks (index funds, of course). So if you're 25, have 75% in stock index fund and 25% in bond index. Of course, your 401k is tax sheltered, so you want keep bonds there, assuming you have taxable investments. When comparing specific funds, you need to pay attention to expense ratios. For example, Vanguard's SP 500 index has an expense ratio of .17%. Many mutual funds charge around 1.5%. That means every year, 1.5% of the fund total goes to the fund manager(s). And that is regardless of up or down market. Since you're young, I would start studying up on personal finance as much as possible. Everyone has their favorite books and websites. For sane, no-nonsense investment advise I would start at bogleheads.org. I also recommend two books - This is assuming you want to set up a strategy and not fuss with it daily/weekly/monthly. The problem with so many financial strategies is they 1) don't work, i.e. try to time the market or 2) are so overly complex the gains are not worth the effort. I've gotten a LOT of help at the boglehead forums in terms of asset allocation and investment strategy. Good luck!" }, { "docid": "543619", "title": "", "text": "I've had the same thoughts recently and after reading Investing at Level 3 by James Cloonan I believe his thesis that for the passive investor you're giving up too much if you're not 100% in equities. He is clear to point out that you need to be well aware of your withdrawal horizons and has specific tactics for shifting the portfolio when you know you must have the money in the next five years and wouldn't want to pull money out when you're at a market low. The kicker for me was shifting your thought to a plotting a straight line of reasonable expectations on your return. Then you don't worry about how far down you are from your high (or up from your low) but you measure yourself against the expected return and you'll find some real grounding. You're investing for the long term so you're going to see 2-3 bear markets. That isn't the the time to get cold feet and react. Stay put and it will come back. The market gets back to the reasonable expectations very quickly as he confirms in all the bear markets and recessions of any note. He gives guidelines for a passive investing strategy to leverage this mentality and talks about venturing into an active strategy but doesn't go into great depth. So if you're looking to invest more passively this book may be enough to get you rolling with thinking differently than the traditional 70/30 split." }, { "docid": "72402", "title": "", "text": "No, the situation is not different, the roll-over rules are the same. It won't be taxable (as opposed to traditional to Roth roll-over), but other than that it's the same. Whether the 401k allows rolling over or not while you're still employed - you have to check with the plan administrator (ask your payroll/HR for details). Usually, the deferred compensation cannot be rolled over out of the 401k while you're still employed." }, { "docid": "111603", "title": "", "text": "Does the 457(b) plan allow for the rollover of other retirement funds into it? And do you have very specific reasons for wanting to roll over your SEP-IRA into the 457(b) plan instead of into some other IRA plan with a different custodian? For example, if you already have a Traditional IRA, is there any reason why your SEP-IRA should not be rolled over into the Traditional IRA? With regard to the question about separate accounts, once upon a time, rolling over money from an employment retirement plan (e.g. 401k) into a Traditional IRA required establishing a separate account called a Rollover Traditional IRA so that the rolled-over money (and the earnings thereon) were not commingled with standard traditional IRA money resulting from personal contributions). This was so that the account owner had the option of rolling over the separately kept money into a new employer's retirement plan (if such a rollover was permitted by the new 401k plan). If one did not want to ever roll over money into a new employer plan, one had to write a letter to the custodian telling them that commingling was OK; you never wanted to put that money into another 401k plan. The law changed some time later and the concept of Rollover IRAs holding non-commingled funds has disappeared. With that as prologue, my answer to your question is that perhaps the law did not change with respect to 457(b) plans, and so the money that you want to rollover into the 457(b) plan needs to be kept separate and not commingled with your contributions via payroll deduction to the 457(b) plan (in case you want to ever roll over the SEP-IRA money into another SEP-IRA). Hence, separate accounts are needed: one to hold your SEP-IRA money and one to hold your contributions via payroll deductions." }, { "docid": "332113", "title": "", "text": "You are in the perfect window for making an IRA contribution. The IRS allows you to make IRA contributions for last year until tax day. So you know that for 2014 you didn't have access to a 401K at work. You want to avoid making a deductible IRA contribution for this year (2015) until you are sure that you wont have a 401K at work this year. Take your time and decide if the detectible IRA or the Roth works best for your situation. Having a IRA now will be good becasue you have many years for it to grow. Keep in mind that it is not unusual to have multiple retirement accounts: Current 401K; rolled over into a IRA; Roth IRA... Each has different rules, limits, and benefits. There is no reason to pick one way of investing for retirement becasue you never know if the next employer will have the type of plan you like. I am assuming that your spouse, if you are married, doesn't have access to a 401K; otherwise you would have to consider the applicable limits." } ]

[ { "docid": "483268", "title": "", "text": "The time horizon for your 401K/IRA is essentially the same, and it doesn't stop at the day you retire. On the day you do the rollover you will be transferring your funds into similar investments. S&P500 index to S&P 500 index; 20xx retirement date to 20xx retirement date; small cap to small cap... If your vested portion is worth X $'s when the funds are sold, that is the amount that will be transferred to the IRA custodian or the custodian for the new employer. Use the transfer to make any rebalancing adjustments that you want to make. But with as much as a year before you leave the company if you need to rebalance now, then do that irrespective of your leaving. Cash is what is transferred, not the individual stock or mutual fund shares. Only move your funds into a money market account with your current 401K if that makes the most sense for your retirement plan. Also keep in mind unless the amount in the 401K is very small you don't have to do this on your last day of work. Even if you are putting the funds in a IRA wait until you have started with the new company and so can define all your buckets based on the options in the new company." } ]

[ { "docid": "403103", "title": "", "text": "The primary advantage of an IRA or 401k is you get taxed effectively one time on the money (when you contribute for Roth, or when you withdraw for Traditional), whereas you get taxed effectively multiple times on some of the money in a taxable account (on all the money when you contribute, plus on the earnings part when you withdraw). Of course, you have to be able to withdraw without penalty for it to be optimally advantageous. And you said you want to retire decades early, so that is probably not retirement age. However, withdrawing early does not necessarily mean you have a penalty. For example: you can withdraw contributions to a Roth IRA at any time without tax or penalty; Roth 401k can be rolled over into Roth IRA; other types of accounts can be converted to Roth IRA and the principal of the conversion can be withdrawn after 5 years without penalty." }, { "docid": "60093", "title": "", "text": "What you put that money into is quite relevant. It depends on how soon you will need some, or all, of that money. It has been very useful to me to divide my savings into three areas... 1) very short term 'oops' funds. This is for when you forget to put something in your budget or when a monthly bill is very high this month. Put this money into passbook savings. 2) Emergency funds that are needed quite infrequently. Used for such things as when you go to the hospital or an appliance breaks down. Put this money in higher yeald savings, but where it can be accessed. 3) Retirement savings. Put this money into a 401-K. Never draw on it till you retire. Make no loans against it. When you change jobs roll over into a self-directed IRA and invest in an ETF that pays dividends. Reinvest the dividend each month. So, like I said, where you put that money depends on how soon you will need it." }, { "docid": "278073", "title": "", "text": "The 401K match has limits, but it is not taxable until you withdraw the money from the account. You can think of it as an initial lump of interest or gain. When you leave the company you are allowed to keep it, if you are vested. You can then roll it over into a IRA, or another 401K. When you withdraw money in retirement you will pay taxes on the match and all the gains from the match. Taxes on what you contribute will depend on if it was pre-tax or post-tax, or if it was deposited into a Roth IRA. The amount you deposit pretax is noted on the W-2, which you attach to the 1040 form. The company match does not appear anywhere on the w-2 or 1040. It should show on your 401-K statements. Those statements should also tell you how much of the match has been vested." }, { "docid": "66206", "title": "", "text": "Don't think it would happen - at least not for the next 4-5 years - they just put a pretty significant investment into BAMTech to invest in building out stronger online offerings, and are presumably working on an ESPN ott (over-the-top) platform that's gonna roll out later this year (although we know how flimsy timelines are with major networks). If the strategy doesn't work, or if Iger is hesitant to bet on switching to a more progressive technology (the future for cord-nevers, for sure) for the sake of appeasing shareholders, really the only turnaround strategy they have is the one they're pursuing currently - keep increasing carriage fees to cable/telecom providers so that they can continue to afford the rights they're stuck with for the next decade. If subscriber loss accelerates, or even continues at the current level they're at currently, ESPN won't be able to afford the cumulative rights fees by 2021, in which case we'll see what happens." }, { "docid": "539263", "title": "", "text": "There are times when investing in an ETF is more convenient than a mutual fund. When you invest in a mutual fund, you often have an account directly with the mutual fund company, or you have an account with a mutual fund broker. Mutual funds often have either a front end or back end load, which essentially gives you a penalty for jumping in and out of funds. ETFs are traded exactly like stocks, so there is inherently no load when buying or selling. If you have a brokerage account and you want to move funds from a stock to a mutual fund, an ETF might be more convenient. With some accounts, an ETF allows you to invest in a fund that you would not be able to invest in otherwise. For example, you might have a 401k account through your employer. You might want to invest in a Vanguard mutual fund, but Vanguard funds are not available with your 401k. If you have access to a brokerage account inside your 401k, you can invest in the Vanguard fund through the associated ETF. Another reason that you might choose an ETF over a mutual fund is if you want to try to short the fund." }, { "docid": "221238", "title": "", "text": "So far the answer is: observe the general direction of the market, using special tools if needed or you have them available (.e.g. Bollinger bands to help you understand the current trend) at the right time per above, do the roll with stop loss in place (meaning roll at a pre-determined max loss), and also a trailing stop loss if the roll works in your favor, to capture the profits on the roll. This trade was a learning experience. I sold the option at $20 thinking I'd get back in later in the day with the further out option at a good price, as the market goes back and forth. The underlying went up and never came back. I finally gritted my teeth and bought the new option at 23.10 (when it would have cost me about 20.20 before), i.e. a miss/loss of $3 on $20. The underlying continued to rise, from that point (hasn't been back), and now the option price is $29. Of course one needs to make sure the Implied Volatility of the option being left and the option going to is good/fair, and if not, either roll further out in time, nearer in time, our up / down the strike prices, to find the right target option. After doing that, one might do the strategy above, i.e. any good trade mgmt type strategy: seek to make a good decision, acknowledge when you were wrong (with stop loss), and act. Or, if you're right, cash in smartly (i.e. trailing stops)." }, { "docid": "411910", "title": "", "text": "\"Unfortunately, I missed most of segment and I didn't get to understand the Why? To begin with, Cramer is an entertainer and his business is pushing stocks. If you put money into mutual funds (which most 401k plans limit your investments to), then you are not purchasing his product. Also, many 401k plans have limited selections of funds, and many of those funds are not good performers. While his stock-picking track record is much better than mine, his isn't that great. He does point out that there are a lot of fees (mostly hidden) in 401k accounts. If you read your company's 5500 filing (especialy Schedule A), you can determine just how much your plan administrators are paying themselves. If paying excessive fees is your concern, then you should be rolling over your 401k into your IRA when you quit (or the employer-match vests, which ever is later). Finally, Cramer thinks that most of his audience will max out their IRA contributions and have only a little bit left for their 401k. I'm most definately \"\"not most people\"\" as I'm maxing out both my 401k and IRA contributions.\"" }, { "docid": "392894", "title": "", "text": "You can probably roll it over into the new company's 401k too, so just talk to your HR rep there. I set up a separate Vangard IRA so when I changejobs or anything, I just dump my investments into that account and don't have to worry about keep track of them all over the place." }, { "docid": "552887", "title": "", "text": "My observations is that this seems like hardly enough to kill inflation. Is he right? Or are there better ways to invest? The tax deferral part of the equation isn't what dominates regarding whether your 401k beats 30 years of inflation; it is the return on investment. If your 401k account tanks due to a prolonged market crash just as you retire, then you might have been better off stashing the money in the bank. Remember, 401k money at now + 30 years is not a guaranteed return (though many speak as though it were). There is also the question as to whether fees will eat up some of your return and whether the funds your 401k invests in are good ones. I'm uneasy with the autopilot nature of the typical 401k non-strategy; it's too much the standard thing to do in the U.S., it's too unconscious, and strikes me as Ponzi-like. It has been a winning strategy for some already, sure, and maybe it will work for the next 30-100 years or more. I just don't know. There are also changes in policy or other unknowns that 30 years will bring, so it takes faith I don't have to lock away a large chunk of my savings in something I can't touch without hassle and penalty until then. For that reason, I have contributed very little to my 403b previously, contribute nothing now (though employer does, automatically. I have no match.) and have built up a sizable cash savings, some of which may be used to start a business or buy a house with a small or no mortgage (thereby guaranteeing at least not paying mortgage interest). I am open to changing my mind about all this, but am glad I've been able to at least save a chunk to give me some options that I can exercise in the next 5-10 years if I want, instead of having to wait 25 or more." }, { "docid": "568322", "title": "", "text": "There is little advantage to waiting or combining accounts. If it makes sense to put money into a Roth now (which I can easily believe because your current tax rate is crazy low) go ahead and do so. Your later opportunities for investment in a 401(k) do not affect your optimal decision today. There's nothing wrong with having multiple types of retirement accounts and many people do. Over time the best place to put money can change. After retirement you can roll all your Roth style investments into a single Roth IRA and your traditional investments (IRA and 401k) into a single traditional IRA." }, { "docid": "142320", "title": "", "text": "\"Most articles on investing recommend that investors that are just starting out to invest in index stock or bonds funds. This is the easiest way to get rolling and limit risk by investing in bonds and stocks, and not either one of the asset classes alone. When you start to look deeper into investing there are so many options: Small Cap, Large Cap, technical analysis, fundamental analysis, option strategies, and on and on. This can end up being a full time job or chewing into a lot of personal time. It is a great challenge to learn various investment strategies frankly for the average person that works full time it is a huge effort. I would recommend also reading \"\"The Intelligent Asset Allocator\"\" to get a wider perspective on how asset allocation can help grow a portfolio and reduce risk. This book covers a simple process.\"" }, { "docid": "134005", "title": "", "text": "\"Vanguard released an analysis paper in 2013 titled \"\"Dollar-cost averaging just means taking risk later.\"\" This paper explores the performance difference(s) between a dollar-cost averaging strategy and a lump sum strategy when you already possess the funds. This paper is an excellent read but the conclusion from the executive summary is: We conclude that if an investor expects such trends to continue, is satisfied with his or her target asset allocation, and is comfortable with the risk/return characteristics of each strategy, the prudent action is investing the lump sum immediately to gain exposure to the markets as soon as possible. The caveat to the conclusion is weighing your emotions. If you are primarily concerned with minimizing the possibility of a loss then you should use a dollar cost averaging strategy with the understanding that, on a purely mathematical basis, the dollar cost averaging strategy is likely to under-perform a lump sum investment of the funds. The paper explores a 10 year holding period with either: The analysis includes various portfolio blends and is backtested against the United States, United Kingdom and Australian markets. Based on this, as far as I'm concerned, the rule of thumb is invest the lump sum if you're going to invest at all.\"" }, { "docid": "495062", "title": "", "text": "As others mentioned, I am not sure what you mean by stating that your 401K was rolled over to a money market account. Assuming that it was rolled over to an IRA account, you can roll it over to another IRA account with a financial institution of your choice (either a brokerage or a bank.) Alternatively, you can withdraw these funds, but since you are under 59.5 years old, you would have to cough up 10% penalty to IRS for this unqualified withdrawal. Therefore, I would strongly recommend for you to wait till you reach this eligible age. Other qualified (penalty-free) withdrawals are: purchase of the first home, college tuition, medical insurance premiums for unemployed individuals, disability, and medical expenses exceeding 7.5% of your Adjusted Gross Income. I would assume that your 401K was a Traditional 401K account (before tax contributions), and not ROTH 401K, so yo would also have to pay taxes upon withdrawing funds whether you do it now or after you are 59.5 y.o." }, { "docid": "367355", "title": "", "text": "Which strategy makes more sense: Check your new Fidelity 401k plan. Make sure it has a good group of funds available at very low fees. If it does, roll over your Principal 401k to your new 401k. Call Principal and have them transfer the funds directly to Fidelity. Do not have them send you a check. If the new plan doesn't have a good fund lineup, or has high fees, create a rollover IRA and roll your old 401k plan into it. Again, have Principal transfer the funds directly. Consider using Vanguard or other very-low-cost funds in your IRA. Taking the money out of your old 401k to pay toward your mortgage has several disadvantages. You will pay taxes and a penalty. Your mortgage rate is very good, and since you are probably in a high tax bracket and perhaps itemize deductions, the effective rate is even less. And you lose liquidity that might come in handy down the road. You can always change your mind later, but for now don't pay down your mortgage using your 401k money. As a result of being under 20%, I am paying mortgage insurance of about $300/mo. This is wasted money. Save aggressively and get your mortgage down to 80% so that you can get rid of that PMI. If you are earning a high salary, you should be able to get there in reasonably short order. If you are maxing out your 401k ($18,000 per year), you might be better off putting it on pause and instead using that money to get rid of the PMI. I have no 'retirement' plans because I enjoy working and have plans to start a company, and essentially will be happy working until I die You are young. Your life will change over time. Everyone young seems to choose one of two extremes: In the end, very few choose either of these paths. For now, just plan on retiring somewhere close to normal retirement age. You can always change your plans later." }, { "docid": "192627", "title": "", "text": "You can't roll it over to a Roth IRA without tax penalties. The best thing to do is roll it to an IRA that isn't tied to work at all. Second best is to roll it into your new employer's 401k. The reason that an IRA makes sense is that it gives you the same tax savings as a 401k, but it allows you to remain in control of the money regardless of your employment status." }, { "docid": "421586", "title": "", "text": "Don't steal from the 401k. If you take the money out, you'll pay 28% in taxes and 10% in penalties -- only getting $12,960 out. Before you do anything, consult an online refi calculator to make sure you'll be in the house beyond the break-even point. With the numbers you've given and some reasonable guesses I made, it looks like you'll break even within a year. If your new employer's plan allows for loans, roll it into the new plan. Based on what you say you're putting in, you should be able to take a loan out of about $15-20k, which would get you to your LTV goal. Before you do this, calculate: and make sure you will comfortably be able to handle all of the payments. Make sure you're aware of the loan terms on your 401k loan. Understand the penalties associated with failing to make timely payments. Finally, beware of sinking all of your liquid cash into this -- how will you handle an emergency that comes up soon after closing on the new loan before you have a chance to rebuild your emergency fund?" }, { "docid": "543619", "title": "", "text": "I've had the same thoughts recently and after reading Investing at Level 3 by James Cloonan I believe his thesis that for the passive investor you're giving up too much if you're not 100% in equities. He is clear to point out that you need to be well aware of your withdrawal horizons and has specific tactics for shifting the portfolio when you know you must have the money in the next five years and wouldn't want to pull money out when you're at a market low. The kicker for me was shifting your thought to a plotting a straight line of reasonable expectations on your return. Then you don't worry about how far down you are from your high (or up from your low) but you measure yourself against the expected return and you'll find some real grounding. You're investing for the long term so you're going to see 2-3 bear markets. That isn't the the time to get cold feet and react. Stay put and it will come back. The market gets back to the reasonable expectations very quickly as he confirms in all the bear markets and recessions of any note. He gives guidelines for a passive investing strategy to leverage this mentality and talks about venturing into an active strategy but doesn't go into great depth. So if you're looking to invest more passively this book may be enough to get you rolling with thinking differently than the traditional 70/30 split." }, { "docid": "186538", "title": "", "text": "\"How often should one use dollar-cost averaging? Trivially, a dollar cost averaging (DCA) strategy must be used at least twice! More seriously, DCA is a discipline that people (typically investors with relatively small amounts of money to invest each month or each quarter) use to avoid succumbing to the temptation to \"\"time the market\"\". As mhoran_psprep points out, it is well-suited to 401k plans and the like (e.g. 403b plans for educational and non-profit institutions, 457 plans for State employees, etc), and indeed is actually the default option in such plans, since a fixed amount of money gets invested each week, or every two weeks, or every month depending on the payroll schedule. Many plans offer just a few mutual funds in which to invest, though far too many people, having little knowledge or understanding of investments, simply opt for the money-market fund or guaranteed annuity fund in their 4xx plans. In any case, all your money goes to work immediately since all mutual funds let you invest in thousandths of a share. Some 401k/403b/457 plans allow investments in stocks through a brokerage, but I think that using DCA to buy individual stocks in a retirement plan is not a good idea at all. The reasons for this are that not only must shares must be bought in whole numbers (integers) but it is generally cheaper to buy stocks in round lots of 100 (or multiples of 100) shares rather than in odd lots of, say, 37 shares. So buying stocks weekly, or biweekly or monthly in a 401k plan means paying more or having the money sit idle until enough is accumulated to buy 100 shares of a stock at which point the brokerage executes the order to buy the stock; and this is really not DCA at all. Worse yet, if you let the money accumulate but you are the one calling the shots \"\"Buy 100 shares of APPL today\"\" instead of letting the brokerage execute the order when there is enough money, you are likely to be timing the market instead of doing DCA. So, are brokerages useless in retirement fund accounts? No, they can be useful but they are not suitable for DCA strategies involving buying stocks. Stick to mutual funds for DCA. Do people use it across the board on all stock investments? As indicated above, using DCA to buy individual stocks is not the best idea, regardless of whether it is done inside a retirement plan or outside. DCA outside a retirement plan works best if you not trust yourself to stick with the strategy (\"\"Ooops, I forgot to mail the check yesterday; oh, well, I will do it next week\"\") but rather, arrange for your mutual fund company to take the money out of your checking account each week/month/quarter etc, and invest it in whatever fund(s) you have chosen. Most companies have such programs under names such as Automatic Investment Program (AIP) etc. Why not have your bank send the money to the mutual fund company instead? Well, that works too, but my bank charges me for sending the money whereas my mutual fund company does AIP for free. But YMMV. Dollar-cost averaging generally means investing a fixed amount of money on a periodic basis. An alternative strategy, if one has decided that owning 1200 shares of FlyByKnight Co is a good investment to have, is to buy round lots of 100 shares of FBKCO each month. The amount of money invested each month varies, but at the end of the year, the average cost of the 1200 shares is the average of the prices on the 12 days on which the investments were made. Of course, by the end of the year, you might not think FBKCO is worth holding any more. This technique worked best in the \"\"good old days\"\" when blue-chip stocks paid what was for all practical purposes a guaranteed dividend each year, and people bought these stocks with the intention of passing them on to their widows and children.\"" }, { "docid": "79375", "title": "", "text": "The presence of the 401K option means that your ability to contribute to an IRA will be limited, it doesn't matter if you contribute to the 401K or not. Unless your company allows you to roll over 401K money into an IRA while you are still an employee, your money in the 401K will remain there. Many 401K programs offer not just stock mutual funds, but bond mutual funds, and international funds. Many also have target date funds. You will have to look at the paperwork for the funds to determine if any of them meet your definition of low expense. Because any money you have in those 401K funds is going to remain in the 401K, you still need to look at your options and make the best choice. Very few companies allow employees to invest in individual stocks, but some do. You can ask your employer to research other options for the 401K. The are contracting with a investment company to make the plan. They may be able to switch to a different package from the same company or may need to switch companies. How much it will cost them is unknown. You will have to understand when their current contract is up for renewal. If you feel their current plan is poor, it may be making hiring new employees difficult, or ti may lead to some employees to leave in search of better options. It may also be a factor in the number of employees contributing and how much they contribute." } ]

[ { "docid": "284235", "title": "", "text": "\"EVERYONE buys at the ask price and sells at the bid price (no matter who you are). There are a few important things you need to understand. Example: EVE bid: 16.00 EVE ask: 16.25 So if your selling EVE at \"\"market price\"\" you are entering an ask equal to the highest bid ($16.00). If you buy EVE at \"\"market price\"\" you are entering a bid equal to the lowest ask price ($16.25). Its key to understand this rule: \"\"An order executes ONLY when both bid and ask meet. (bid = ask).\"\" So a market maker puts in a bid when he wants to buy but the trade only executes when an ASK price meets his BID price. When you see a quote for a stock it is the price of the last trade. So it is possible to have a quote higher or lower then both the bid and the ask.\"" } ]

[ { "docid": "458933", "title": "", "text": "\"Yes, almost always. I trade some of the most illiquid single stock options, and I would be absolutely murdered if I didn't try to work orders between the bid/ask. When I say illiquid, I mean almost non-existent: ~50 monthly contracts on ALL contracts for a given underlying. Spreads of 30% or more. The only time you shouldn't try to work an order, in my opinion, is when you think you need to trade immediately (rare), if implied volatility (IV) has moved to such a degree that the market makers (MM) won't hit your order while they're offering fair IV (they'll sometimes come down to meet you at their \"\"real\"\" price to get the exchange's liquidity rebate), or if the bid/ask spread is a penny. For illiquid single stock options, you need to be extremely mindful of implied and statistical volatility. You can't just try to always put your order in the middle. The MMs will play with the middle to get you to buy at higher IVs and sell at lower. The only way you can hope that an order working below the bid / above the ask will get filled is if a big player overwhelms the MMs' (who are lined up on the bid and ask) current orders and hits yours with one large order. I've never seen this happen. The only other way is like you said: if the market moves against you, the orders in front of yours disappear, and someone hits your order, but I think that defeats the intent of your question.\"" }, { "docid": "525231", "title": "", "text": "\"There are two distinct questions that may be of interest to you. Both questions are relevant for funds that need to buy or sell large orders that you are talking about. The answer depends on your order type and the current market state such as the level 2 order book. Suppose there are no iceberg or hidden orders and the order book (image courtesy of this question) currently is: An unlimited (\"\"at market\"\") buy order for 12,000 shares gets filled immediately: it gets 1,100 shares at 180.03 (1,[email protected]), 9,700 at 180.04 and 1,200 at 180.05. After this order, the lowest ask price becomes 180.05 and the highest bid is obviously still 180.02 (because the previous order was a 'market order'). A limited buy order for 12,000 shares with a price limit of 180.04 gets the first two fills just like the market order: 1,100 shares at 180.03 and 9,700 at 180.04. However, the remainder of the order will establish a new bid price level for 1,200 shares at 180.04. It is possible to enter an unlimited buy order that exhausts the book. However, such a trade would often be considered a mis-trade and either (i) be cancelled by the broker, (ii) be cancelled or undone by the exchange, or (iii) hit the maximum price move a stock is allowed per day (\"\"limit up\"\"). Funds and banks often have to buy or sell large quantities, just like you have described. However they usually do not punch through order book levels as I described before. Instead they would spread out the order over time and buy a smaller quantity several times throughout the day. Simple algorithms attempt to get a price close to the time-weighted average price (TWAP) or volume-weighted average price (VWAP) and would buy a smaller amount every N minutes. Despite splitting the order into smaller pieces the price usually moves against the trader for many reasons. There are many models to estimate the market impact of an order before executing it and many brokers have their own model, for example Deutsche Bank. There is considerable research on \"\"market impact\"\" if you are interested. I understand the general principal that when significant buy orders comes in relative to the sell orders price goes up and when a significant sell order comes in relative to buy orders it goes down. I consider this statement wrong or at least misleading. First, stocks can jump in price without or with very little volume. Consider a company that releases a negative earnings surprise over night. On the next day the stock may open 20% lower without any orders having matched for any price in between. The price moved because the perception of the stocks value changed, not because of buy or sell pressure. Second, buy and sell pressure have an effect on the price because of the underlying reason, and not necessarily/only because of the mechanics of the market. Assume you were prepared to sell HyperNanoTech stock, but suddenly there's a lot of buzz and your colleagues are talking about buying it. Would you still sell it for the same price? I wouldn't. I would try to find out how much they are prepared to buy it for. In other words, buy pressure can be the consequence of successful marketing of the stock and the marketing buzz is what changes the price.\"" }, { "docid": "92109", "title": "", "text": "When a stock is ask for 15.2 and bid for 14.5, and the last market price was 14.5, what does it mean? It means that the seller wants to sell for a higher price than the last sale while the buyer does not want to buy for more than the last sale price. Or what if the last price is 15.2? The seller is offering to sell for the last sale price, but the buyer wants to buy for less." }, { "docid": "427747", "title": "", "text": "Market price simply depends on your order side. If you are placing a buy order the market price is the lowest ask, if you are placing a sell order the market price is the highest bid. If your order is larger than the volume then you'd need to also consider the next lowest ask or next highest bid until you've fulfilled your order volume." }, { "docid": "272929", "title": "", "text": "I don't know why a financial investor or a retail trader would do this. But I can guess why a market maker in options would do this. Let us say you buy an option from an option market maker and the market maker sold the option to you. He made a small profit in the bid-ask spread but now he is holding a short position in the option with unlimited risk exposure. So to protect himself, he will take an offsetting position in the underlying and become delta neutral, so that his position is not affected by the moves in the underlying. In the end, he can do this because he is not in the market to make money by betting on direction, unlike the rest of us poor mortals. He is making money from the bid-ask spread. So to ensure that his profits are not eroded by an adverse move in the underlying, he will continuously seek to be delta neutral. But once again, this is for a market maker. For market takers like us, I still don't understand why we would need to delta hedge." }, { "docid": "260085", "title": "", "text": "\"Some technical indicators (e.g. Williams %R) indicate whether the market is overbought or oversold. ... Every time a stock or commodity is bought, it is also sold. And vice versa. So how can anything ever be over-bought or over-sold? But I'm sure I'm missing something. What is it? You're thinking of this as a normal purchase, but that's not really how equity markets operate. First, just because there are shares of stock purchased, it doesn't mean that there was real investor buyer and seller demand for that instrument (at that point in time). Markets have dedicated middlemen called Market Makers, who are responsible to make sure that there is always someone to buy or sell; this ensures that all instruments have sufficient liquidity. Market Makers may decide to lower their bid on a stock based on a high number of sellers, or raise their ask for a high number of buyers. During an investor rush to buy or sell an instrument (perhaps in response to a news release), it's possible for Market Makers to accumulate a large number of shares, without end-investors being involved on both sides of the transaction. This is one example of how instruments can be over-bought or over-sold. Since Williams %R creates over-bought and over-sold signals based on historical averages of open / close prices, perhaps it's better to think of these terms as \"\"over-valued\"\" and \"\"under-valued\"\". Of course, there could be good reason for instruments to open or close outside their expected ranges, so Williams %R is just a tool to give you clues... not a real evaluation of the instrument's true value.\"" }, { "docid": "118389", "title": "", "text": "One broker told me that I have to simply read the ask size and the bid size, seeing what the market makers are offering. This implies that my order would have to match that price exactly, which is unfortunate because options contract spreads can be WIDE. Also, if my planned position size is larger than the best bid/best ask, then I should break up the order, which is also unfortunate because most brokers charge a lot for options orders." }, { "docid": "186392", "title": "", "text": "This is too lengthy for a comment. The following quoted passages are excerpted from this Money SE post. Before electronic trading and HFTs specifically, trading was thin and onerous. No. The NYSE and AMEX were deep, liquid and transparent for nearly 75 years prior to high frequency trading (HFT), in 2000 or so. The same is true for NASDAQ, but not for as many years, as NASDAQ is newer, being an electronic market. The point is that it existed, and thrived, prior to HFT. The NASDAQ can be active and functional, WITH or WITHOUT high frequency trading. This is not historically true, nor is it true now: Without a bid or ask at any given time, there could be no trade... Market makers, also known as specialists, were responsible for hitting the bid and taking the offer on whatever security they covered. They had a responsibility assigned to them by the exchange. Yes, it was lucrative! There was risk, and they were rewarded for bearing it. There is a trade-off though. Specialists provided greater stability on a systemic level, although other market participants paid for that cost. Prior to HFT, traders who were not market makers were often bounded by, boxed in, by the toll paid to market makers. Market makers had different, much higher capital and solvency requirements than other traders. Most specialists/market makers had seats, or shared a seat on the NYSE or AMEX. Remember that market makers/specialists are specific to stock markets, whereas HFT is not. If this is true, then we are in trouble: HFTs have supplanted the traditional market maker Why? Because trading volume is LOWER now than it was in the 1990's! EDIT In the comments, I noticed that OP was asking about the difference between I suggest reading this very accurate, well-written answer to a related question, The spread goes to the market maker, is the market maker the exchange? That explains the difference between" }, { "docid": "525603", "title": "", "text": "\"When you place a limit sell order of $10.00 (for a stock on an option) you are adding your order to the book. Anyone who places a buy at-the-market or with a limit price over $10.00 will have that order immediately fulfilled through the offer you have placed on the book. On the other hand, if that other person places a buy for $8.00, then the spread will now be \"\"$8.00 bid, $10.00 ask\"\". Priority is based on first the price (all $9.99 asks will clear before $10.00) and within each bucket this is based on the time your order was submitted. This is why in bidding markets (including eBay) buying at $x.01 is way better than $x.00 and selling at $x.99 is better than $(x+1).00. Source: https://en.wikipedia.org/wiki/Order_(exchange) under \"\"first-come-first-served\"\"\"" }, { "docid": "177926", "title": "", "text": "In the stock market many participants enter orders that are not necessarily set at the current market price of the stock (i.e. they are not market orders, they are limit orders). They can be lower than the market price (if they want to buy) or they can be higher than the market price (if they want to sell). The set of orders at each point of time for a security is called the order book. The lowest selling price of the order book is the offer or ask, the higher buying price is the bid. The more liquid is a security, the more orders will be in the order book, and the narrower will be the bid-ask spread. The depth of the order book is the number of units that the order book can absorb in any direction (buy or sell). As an example: imagine I want to buy 100 units at the lowest offer, but the size of the lowest offer is only 50 units, and there is not any further order, that means the stock has little depth." }, { "docid": "41468", "title": "", "text": "The obvious thing would happen. 10 shares change owner at the price of $100. A partially still open selling order would remain. Market orders without limits means to buy or sell at the best possible or current price. However, this is not very realistic. Usually there is a spread between the bid and the ask price and the reason is that market makers are acting in between. They would immediately exploit this situation, for example, by placing appropriately limited orders. Orders without limits are not advisable for stocks with low trading activity. Would you buy or sell stuff without caring for the price?" }, { "docid": "138703", "title": "", "text": "This can be done, you can be prosecuted for some forms of it, in any case there are more riskless ways of doing what you suggested. First, buying call options from market makers results in market makers buying shares at the same delta as the call option. (100 SHARES X DELTA = How many shares MM's bought). You can time this with the volume and depth of the shares market to get a bigger resulting move caused by your options purchase to get bigger quote changes in your option. So on expiration day you can be trade near at the money options back and forth between being out the money and in the money. You would exit the position into liquidity at a profit. The risk here is that you can be sitting on a big options position, where the commissions costs get really big, but you can spread this out amongst several options contracts. Second, you can again take advantage of market maker inefficiencies by getting your primary position (whether in the share market or options market) placed, and then your other position being a very large buy order a few levels below the best bid. Many market makers and algorithms will jump in front of your, they think they are being smart, but it will raise the best bid and likely make a few higher prints for the mark, raising the price of your call option. And eventually remove your large buy order. Again, you exit into liquidity. This is called spoofing. There have been some regulatory actions against people in doing this in the last few years. As for consequences, you need to put things into perspective. US capital market regulators have the most nuanced regulations and enforcement actions of worldwide capital market regulators, and even then they get criticized for being unable or unwilling to curb these practices. With that perspective American laws are basically a blueprint on what to do in 100 other country's stock exchanges, where the legislature has never gotten around to defining the same laws, the securities regulator is even more underfunded and toothless, and the markets more inefficient. Not advice, just reality." }, { "docid": "322798", "title": "", "text": "\"I think for this a picture is worth a thousand words. This is a \"\"depth chart\"\" that I pulled from google images, specifically because it doesn't name any security. On the left you have all of the \"\"bids\"\" to buy this security, on the right you have the \"\"asks\"\" to sell the security. In the middle you have the bid/ask spread, this is the space between the highest bid and the lowest ask. As you can see you are free to place you order to the market to buy for 232, and someone else is free to place their order to the market to sell for 234. When the bid and the ask match there's a transaction for the maximum number of available shares. Alternatively, someone can place a market order to buy or sell and they'll just take the current market price. Retail investors don't really get access to this kind of chart from their brokers because for the most part the information isn't terribly relevant at the retail level.\"" }, { "docid": "159822", "title": "", "text": "\"ETFs are well suited to day trading, but you should be mindful of the bid-ask spread. See article: Commission-free ETFs are a great way to save money, but watch the bid-ask spread too. Bid-ask spread is largely a function of liquidity, or the volume of buyers and sellers for an asset during a particular moment in time. ... It may be more difficult to trade certain assets that are less liquid, where bid-ask spreads can be higher. Think some penny stocks. If you have the choice, compare the spreads of the ETF and the target stock. Longer-term \"\"keep & hold\"\" trading on ETFs tracking futures can be somewhat disadvantageous. Futures contracts roll-over every month. Exchange traders have to sell and buy in on the next contract. ETFs don't reflect the price differential between the futures contract. See here for more detail on that: Positioning For An Oil ETF Rebound? Watch For Contango Contango occurs when the price on a futures contract is higher than the expected future spot price, which creates the upward sloping curve on future commodity prices over time. Essentially, the phenomenon reflects a current spot price that is lower than the futures price. ... While this phenomena is a normal occurrence in the futures market, contango can have a negative effect on ETFs.\"" }, { "docid": "402482", "title": "", "text": "You can always trade at bid or ask price (depending if you are selling or buying). Market price is the price the last transaction was executed at so you may not be able to get that. If your order is large then you may not even be able to get bid/ask but should look at the depth of the order book (ie what prices are other market participants asking for and what is the size of their order). Usually only fast traders will trade at bid/ask, those who believe the price move is imminent. If you are a long term trader you can often get better than bid or ask by placing a limit order and waiting until a market participant takes your offer." }, { "docid": "278450", "title": "", "text": "The strategy has intrinsic value, which may or may not be obstructed in practice by details mentioned in other answers (tax and other overheads, regulation, risk). John Bensin says that as a general principle, if a simple technical analysis is good then someone will have implemented it before you. That's fair, but we can do better than an existence proof for this particular case, we can point to who is doing approximately this. Market makers are already doing this with different numbers. They quote a buy price and a sell price on the same stock, so they are already buying low and selling high with a small margin. If your strategy works in practice, that means you can make low-risk money from short-term volatility that they're missing out on, by setting your margin at approximately the daily price variation instead of the current bid-offer spread. But market makers choose their own bid-offer spread, and they choose it because they think it's the best margin to make low-risk money in the long run. So you'd be relying that:" }, { "docid": "414036", "title": "", "text": "\"During market hours, there are a lot of dealers offering to buy and sell all exchange traded stocks. Dealers don't actually care about the company's fundamentals and they set their prices purely based on order flow. If more people start to buy than sell, the dealer notices his inventory going down and starts upping the price (both his bid and ask). There are also traders who may not be \"\"dealers\"\", but are willing to sell if the price goes high enough or buy if the price goes low enough. This keeps the prices humming along smoothly. During normal trading hours, if you buy something and turn around and sell it two minutes later, you'll probably be losing a couple cents per share. Outside normal market hours, the dealers who continue to have a bid and ask listed know that they don't have access to good price information -- there isn't a liquid market of continuous buying and selling for the dealer to set prices he considers safe. So what does he do? He widens the spread. He doesn't know what the market will open tomorrow at and doesn't know if he'll be able to react quickly to news. So instead of bidding $34.48 and offering at $34.52, he'll move that out to $33 and $36. The dealer still makes money sometimes off this because maybe some trader realized that he has options expiring tomorrow, or a short position that he's going to get a margin call on, or some kind of event that pretty much forces him to trade. Or maybe he's just panicking and overreacting to some news. So why not trade after hours? Because there's no liquidity, and trading when there's no liquidity costs you a lot.\"" }, { "docid": "169062", "title": "", "text": "\"It's good to ask this question, because this is one of the fundamental dichotomies in market microstructure. At any time T for each product on a (typical) exchange there are two well-defined prices: At time T there is literally no person in the market who wants to sell below the ask, so all the people who are waiting to buy at the bid (or below) could very well be waiting there forever. There's simply no guarantee that any seller will ever want to part with their product for a lesser price than they think it's worth. So if you want to buy the product at time T you have a tough choice to make: you get in line at the bid price, where there's no guarantee that your request will ever be filled, and you might never get your hands on the product you decide that owning the product right now is more valuable to you than (ask - bid) * quantity, so you tell the exchange that you're willing to buy at the ask price, and the exchange matches you with whichever seller is first in line Now, if you're in the market for the long term, the above choice is completely immaterial to you. Who cares if you pay $10.00 * 1000 shares or $10.01 * 1000 shares when you plan to sell 30 years from now at $200 (or $200.01)? But if you're a day trader or anyone else with a very short time horizon, then this choice is extremely important: if the price is about to go up several cents and you got in line at the bid (and never got filled) then you missed out on some profit if you \"\"cross the spread\"\" to buy at the ask and then the price doesn't go up (or worse, goes down), you're screwed. In order to get out of the position you'll have to cross the spread again and sell at at most the bid, meaning you've now paid the spread twice (plus transaction fees and regulatory fees) for nothing. (All of the above also applies in reverse for selling at the ask versus selling at the bid, but most people like to learn in terms of buying rather than selling.)\"" }, { "docid": "560558", "title": "", "text": "As others have stated, the current price is simply the last price at which the security traded. For any given tick, however, there are many bid-ask prices because securities can trade on multiple exchanges and between many agents on a single exchange. This is true for both types of exchanges that Chris mentioned in his answer. Chris' answer is pretty thorough in explaining how the two types of exchanges work, so I'll just add some minor details. In exchanges like NASDAQ, there are multiple market makers for most relatively liquid securities, which theoretically introduces competition between them and therefore lowers the bid-ask spreads that traders face. Although this results in the market makers earning less compensation for their risk, they hope to make up the difference by making the market for highly liquid securities. This could also result in your order filling, in pieces, at several different prices if your brokerage firm fills it through multiple market makers. Of course, if you place your order on an exchange where an electronic system fills it (the other type of exchange that Chris mentioned), this could happen anyway. In short, if you place a market order for 1000 shares, it could be filled at several different prices, depending on volume, multiple bid-ask prices, etc. If you place a sizable order, your broker may fill it in pieces regardless to prevent you from moving the market. This is rarely a problem for small-time investors trading securities with high volumes, but for investors with higher capital like institutional investors, mutual funds, etc. who place large orders relative to the average volume, this could conceivably be a burden, both in the price difference across time as the order is placed and the increased bookkeeping it demands. This is tangentially related, so I'll add it anyway. In cases like the one described above, all-or-none (AON) orders are one solution; these are orders that instruct the broker to only execute the order if it can be filled in a single transaction. Most brokers offer these, but there are some caveats that apply to them specifically. (I haven't been able to find some of this information, so some of this is from memory). All-or-none orders are only an option if the order is for more than a certain numbers of shares. I think the minimum size is 300 or 400 shares. Your order won't be placed until your broker places all other orders ahead of it that don't have special conditions attached to them. I believe all-or-none orders are day orders, which means that if there wasn't enough supply to fill the order during the day, the order is cancelled at market close. AON orders only apply to limit orders. If you want to replicate the behavior of a market order with AON characteristics, you can try setting a limit buy/sell order a few cents above/below the current market price." } ]

[ { "docid": "316838", "title": "", "text": "\"The answer posted by Kirill Fuchs is incorrect according to my series 65 text book and practice question answers. The everyday investor buys at the ask and sells at the bid but the market maker does the opposite. THE MARKET MAKER \"\"BUYS AT THE BID AND SELLS AT THE ASK\"\", he makes a profit form the spread. I have posted a quiz question and the answer created by the Financial Industry Regulatory Authority (FINRA). To fill a customer buy order for 800 WXYZ shares, your firm requests a quote from a market maker. The response is \"\"bid 15, ask 15.25.\"\" If the order is placed, the market maker must sell: A) 800 shares at $15.25 per share. B) 800 shares at $15 per share. C) 100 shares at $15.25 per share. D) 800 shares at no more than $15 per share. Your answer, sell 800 shares at $15.25 per share., was correct!. A market maker is responsible for honoring a firm quote. If no size is requested by the inquiring trader, a quote is firm for 100 shares. In this example, the trader requested an 800-share quote, so the market maker is responsible for selling 8 round lots of 100 shares at the ask price of $15.25 per share.\"" } ]

[ { "docid": "307155", "title": "", "text": "This is copying my own answer to another question, but this is definitely relevant for you: A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). Going long, as you may have guessed, is the opposite of going short. Instead of betting that the price will go down, you buy shares in the hope that the price will go up. So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Similarly, the same is true in the reverse if you are going long. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible." }, { "docid": "343558", "title": "", "text": "In practice, it would not work. If you put a bid in that was really out of line, even if it got filled, the exchange would reverse it. Other than that it really depends on what the current bid/ask spread it, and what volume its trading, as well as how the market feels. Say the current bid is 11 and you put an order in with bid 11.5, it would soak up all the orders on the market up to the volume your buying. But once your order is filled the market will be determined by what the next order's bid/ask is. It might stay where you moved it too if others feels thats a fair price. But if every other order on the market is still at 11, then the price isnt gonna move. tl;dl unless your a market maker, you could not realistically affect the price." }, { "docid": "427747", "title": "", "text": "Market price simply depends on your order side. If you are placing a buy order the market price is the lowest ask, if you are placing a sell order the market price is the highest bid. If your order is larger than the volume then you'd need to also consider the next lowest ask or next highest bid until you've fulfilled your order volume." }, { "docid": "340607", "title": "", "text": "\"The \"\"price\"\" is the price of the last transaction that actually took place. According to Motley Fool wiki: A stock price is determined by what was last paid for it. During market hours (usually weekdays from 9:30AM-4:00PM eastern), a heavily traded issue will see its price change several times per second. A stock's price is, for many purposes, considered unchanged outside of market hours. Roughly speaking, a transaction is executed when an offer to buy matches an offer to sell. These offers are listed in the Order Book for a stock (Example: GOOG at Yahoo Finance). This is actively updated during trading hours. This lists all the currently active buy (\"\"bid\"\") and sell (\"\"ask\"\") orders for a stock, and looks like this: You'll notice that the stock price (again, the last sale price) will (usually*) be between the highest bid and the lowest ask price. * Exception: When all the buy or sell prices have moved down or up, but no trades have executed yet.\"" }, { "docid": "472537", "title": "", "text": "The price of a share has two components: Bid: The highest price that someone who wants to buy shares is willing to pay for them. Ask: The lowest price that someone who has a share is willing to sell it for. The ask is always higher than the bid, since if they were equal the buyer and seller would have a deal, make a transaction, and that repeats until they are not equal. For stock with high volume, there is usually a very small difference between the bid and ask, but a stock with lower volume could have a major difference. When you say that the share price is $100, that could mean different things. You could be talking about the price that the shares sold for in the most recent transaction (and that might not even be between the current bid and ask), or you could be talking about any of the bid, the ask, or some value in between them. If you have shares that you are interested in selling, then the bid is what you could immediately sell a share for. If you sell a share for $100, that means someone was willing to pay you $100 for it. If after buying it, they still want to buy more for $100 each, or someone else does, then the bid is still $100, and you haven't changed the price. If no one else is willing to pay more than $90 for a share, then the price would drop to $90 next time a transaction takes place and thats what you would be able to immediately sell the next share for." }, { "docid": "554207", "title": "", "text": "When there is a difference between the two ... no trading occurs. Let's look at an example: Investor A, B, C, and D all buy/sell shares of company X. Investor A wants to sell 10 shares at $20 a share (Ask price $20 x10). Investor B wants to buy 15 shares at $10 a share (Bid price $10 x15). Since the bid price and ask price are different, no sale is made. Next Investor C comes along and wants to sell 5 shares at $14 (Ask price $14 x5). Still no sale. Investor D comes along and wants to buy 5 shares for $14 each. So a sale is finally made. At this point, the stock quote moves to $14. The ask price is $20 x10 and the bid price is $10 x15. No further trading will occur until another investor is willing to buy at $20 or sell at $10. Another discussion of this topic is shown on this post." }, { "docid": "118360", "title": "", "text": "First, it depends on your broker. Full service firms will tear you a new one, discount brokers may charge ~nothing. You'll have to check with your broker on assignment fees. Theoretically, this is the case of the opposite of my answer in this question: Are underlying assets supposed to be sold/bought immediately after being bought/sold in call/put option? Your trading strategy/reasoning for your covered call notwithstanding, in your case, as an option writer covering in the money calls, you want to hold and pray that your option expires worthless. As I said in the other answer, there is always a theoretical premium of option price + exercise price to underlying prices, no matter how slight, right up until expiration, so on that basis, it doesn't pay to close out the option. However, there's a reality that I didn't mention in the other answer: if it's a deep in the money option, you can actually put a bid < stock price - exercise price - trade fee and hope for the best since the market makers rarely bid above stock price - exercise price for illiquid options, but it's unlikely that you'll beat the market makers + hft. They're systems are too fast. I know the philly exchange allows you to put in implied volatility orders, but they're expensive, and I couldn't tell you if a broker/exchange allows for dynamic orders with the equation I specified above, but it may be worth a shot to check out; however, it's unlikely that such a low order would ever be filled since you'll at best be lined up with the market makers, and it would require a big player dumping all its' holdings at once to get to your order. If you're doing a traditional, true-blue covered call, there's absolutely nothing wrong being assigned except for the tax implications. When your counterparty calls away your underlyings, it is a sell for tax purposes. If you're not covering with the underlying but with a more complex spread, things could get hairy for you real quick if someone were to exercise on you, but that's always a risk. If your broker is extremely strict, they may close the rest of your spread for you at the offer. In illiquid markets, that would be a huge percentage loss considering the wide bid/ask spreads." }, { "docid": "272929", "title": "", "text": "I don't know why a financial investor or a retail trader would do this. But I can guess why a market maker in options would do this. Let us say you buy an option from an option market maker and the market maker sold the option to you. He made a small profit in the bid-ask spread but now he is holding a short position in the option with unlimited risk exposure. So to protect himself, he will take an offsetting position in the underlying and become delta neutral, so that his position is not affected by the moves in the underlying. In the end, he can do this because he is not in the market to make money by betting on direction, unlike the rest of us poor mortals. He is making money from the bid-ask spread. So to ensure that his profits are not eroded by an adverse move in the underlying, he will continuously seek to be delta neutral. But once again, this is for a market maker. For market takers like us, I still don't understand why we would need to delta hedge." }, { "docid": "177926", "title": "", "text": "In the stock market many participants enter orders that are not necessarily set at the current market price of the stock (i.e. they are not market orders, they are limit orders). They can be lower than the market price (if they want to buy) or they can be higher than the market price (if they want to sell). The set of orders at each point of time for a security is called the order book. The lowest selling price of the order book is the offer or ask, the higher buying price is the bid. The more liquid is a security, the more orders will be in the order book, and the narrower will be the bid-ask spread. The depth of the order book is the number of units that the order book can absorb in any direction (buy or sell). As an example: imagine I want to buy 100 units at the lowest offer, but the size of the lowest offer is only 50 units, and there is not any further order, that means the stock has little depth." }, { "docid": "9274", "title": "", "text": "\"Futures are an agreement to buy or sell something in the future. The futures \"\"price\"\" is the price at which you agree to make the trade. This price does not indicate what will happen in the future so much as it indicates the cost of buying the item today and holding it until the future date. Hence, for very liquid products such as stock index futures, the futures price is a very simple function of today's stock index value and current short-term interest rates. If the stock exchange is closed but the futures exchange is open, then using the futures price and interest rates one can back out an implied \"\"fair value\"\" for the index, which is in essence the market's estimate of what the stock index value would be right now if the stock market were open. Of course, as soon as the stock exchange opens, the futures price trades to within a narrow band of the actual index value, where the size of the band depends on transaction costs (bid-ask spread, commissions, etc.).\"" }, { "docid": "122323", "title": "", "text": "The equation you show is correct, you've simply pointed out that you understand that you buy at the 'ask' price, and later sell at the 'bid.' There is no bid/ask on the S&P, as you can't trade it directly. You have a few alternatives, however - you can trade SPY, the (most well known) S&P ETF whose price reflects 1/10 the value or VOO (Vanguard's offering) as well as others. Each of these ETFs gives you a bid/ask during market hours. They trade like a stock, have shares that are reasonably priced, and are optionable. To trade the index itself, you need to trade the futures. S&P 500 Futures and Options is the CME Group's brief info guide on standard and mini contracts. Welcome to SE." }, { "docid": "137175", "title": "", "text": "If you are buying your order will be placed in Bid list. If you are selling your order will be placed in the Ask list. The highest Bid price will be placed at the top of the Bid list and the lowest Ask price will be placed at the top of the Ask list. When a Bid and Ask price are matched a transaction will take place and it will the last traded price. If you are looking to buy at a lower price, say $155.01, your Bid price will be placed 3rd in the Bid list, and unless the Ask prices fall to that level, your order will remain in the list until it trades, it expires or you cancel it. If prices don't fall to you Bid price you will not get a trade. If you wanted your trade to go through you could either place a limit buy order closer to the lowest Ask price (however this is still not a certainty), or to be certain place a market buy order which will trade at the lowest Ask price." }, { "docid": "118389", "title": "", "text": "One broker told me that I have to simply read the ask size and the bid size, seeing what the market makers are offering. This implies that my order would have to match that price exactly, which is unfortunate because options contract spreads can be WIDE. Also, if my planned position size is larger than the best bid/best ask, then I should break up the order, which is also unfortunate because most brokers charge a lot for options orders." }, { "docid": "450489", "title": "", "text": "The market maker will always compare the highest bid and the lowest ask. A trade will happen if the highest bid is at least as high as the lowest ask. Adding one share (or a million shares) at a higher asking price, here: $210 instead of $200, will not have any effect at all. Nobody will buy the share. Adding a bid for one share (or a million shares) at a higher bid price will trigger a sale. If you bid $210 for one share, you will pay $210 for one of the shares that were offered at $200. If you have $210 million in cash and add a bid for 1,000,000 AAPL at $210, you will pay $210 for all shares with an ask of $200.00, then $200.01, then $200.02 until you either bought all shares with an ask up to $210, or until you bought a million shares. With AAPL, you probably bid the price up to $201 with a million shares, so you made lots of people very happy while losing about 10 million dollars. So let's say this is a much smaller company. You have driven the share price up to $210, but there is nobody else bidding above $200. So nobody is going to buy your shares. Until some people think there is something going on and enter higher bids, but then some people will take advantage of this and ask lower than your $210. And there will be more people trying to make cash by selling their shares at a good price than people tricked into bidding over $200, so it is most likely that you lose out. (This completely ignores legality; attempting to do this would be market manipulation and in many countries illegal. I don't know if losing money in the process would protect you from criminal charges)." }, { "docid": "72024", "title": "", "text": "\"Not all call options that have value at expiration, exercise by purchasing the security (or attempting to, with funds in your account). On ETNs, they often (always?) settle in cash. As an example of an option I'm currently looking at, AVSPY, it settles in cash (please confirm by reading the documentation on this set of options at http://www.nasdaqomxtrader.com/Micro.aspx?id=Alpha, but it is an example of this). There's nothing it can settle into (as you can't purchase the AVSPY index, only options on it). You may quickly look (wikipedia) at the difference between \"\"American Style\"\" options and \"\"European Style\"\" options, for more understanding here. Interestingly I just spoke to my broker about this subject for a trade execution. Before I go into that, let me also quickly refer to Joe's answer: what you buy, you can sell. That's one of the jobs of a market maker, to provide liquidity in a market. So, when you buy a stock, you can sell it. When you buy an option, you can sell it. That's at any time before expiration (although how close you do it before the closing bell on expiration Friday/Saturday is your discretion). When a market maker lists an option price, they list a bid and an ask. If you are willing to sell at the bid price, they need to purchase it (generally speaking). That's why they put a spread between the bid and ask price, but that's another topic not related to your question -- just note the point of them buying at the bid price, and selling at the ask price -- that's what they're saying they'll do. Now, one major difference with options vs. stocks is that options are contracts. So, therefore, we can note just as easily that YOU can sell the option on something (particularly if you own either the underlying, or an option deeper in the money). If you own the underlying instrument/stock, and you sell a CALL option on it, this is a strategy typically referred to as a covered call, considered a \"\"risk reduction\"\" strategy. You forfeit (potential) gains on the upside, for money you receive in selling the option. The point of this discussion is, is simply: what one buys one can sell; what one sells one can buy -- that's how a \"\"market\"\" is supposed to work. And also, not to think that making money in options is buying first, then selling. It may be selling, and either buying back or ideally that option expiring worthless. -- Now, a final example. Let's say you buy a deep in the money call on a stock trading at $150, and you own the $100 calls. At expiration, these have a value of $50. But let's say, you don't have any money in your account, to take ownership of the underlying security (you have to come up with the additional $100 per share you are missing). In that case, need to call your broker and see how they handle it, and it will depend on the type of account you have (e.g. margin or not, IRA, etc). Generally speaking though, the \"\"margin department\"\" makes these decisions, and they look through folks that have options on things that have value, and are expiring, and whether they have the funds in their account to absorb the security they are going to need to own. Exchange-wise, options that have value at expiration, are exercised. But what if the person who has the option, doesn't have the funds to own the whole stock? Well, ideally on Monday they'll buy all the shares with the options you have at the current price, and immediately liquidate the amount you can't afford to own, but they don't have to. I'm mentioning this detail so that it helps you see what's going or needs to go on with exchanges and brokerages and individuals, so you have a broader picture.\"" }, { "docid": "184051", "title": "", "text": "The point is that the bid and ask prices dictate what you can buy and sell at (at market, at least), and the difference between the two, or spread, contributes implicitly to your gains or losses. For example, say your $1 stock actually had a bid of $0.90 and an ask of $1.10; i.e. say that $1 was the last price. You would have to buy the stock at the ask price of $1.10, but now you can only sell that stock at the bid price of $0.90. Thus, you would need to make at least that $0.20 spread before you can make a profit." }, { "docid": "414036", "title": "", "text": "\"During market hours, there are a lot of dealers offering to buy and sell all exchange traded stocks. Dealers don't actually care about the company's fundamentals and they set their prices purely based on order flow. If more people start to buy than sell, the dealer notices his inventory going down and starts upping the price (both his bid and ask). There are also traders who may not be \"\"dealers\"\", but are willing to sell if the price goes high enough or buy if the price goes low enough. This keeps the prices humming along smoothly. During normal trading hours, if you buy something and turn around and sell it two minutes later, you'll probably be losing a couple cents per share. Outside normal market hours, the dealers who continue to have a bid and ask listed know that they don't have access to good price information -- there isn't a liquid market of continuous buying and selling for the dealer to set prices he considers safe. So what does he do? He widens the spread. He doesn't know what the market will open tomorrow at and doesn't know if he'll be able to react quickly to news. So instead of bidding $34.48 and offering at $34.52, he'll move that out to $33 and $36. The dealer still makes money sometimes off this because maybe some trader realized that he has options expiring tomorrow, or a short position that he's going to get a margin call on, or some kind of event that pretty much forces him to trade. Or maybe he's just panicking and overreacting to some news. So why not trade after hours? Because there's no liquidity, and trading when there's no liquidity costs you a lot.\"" }, { "docid": "599523", "title": "", "text": "\"I'm not sure the term actually has a clear meaning. We can think of \"\"what does this mean\"\" in two ways: its broad semantic/metaphorical meaning, and its mechanical \"\"what actual variables in the market represent this quantity\"\". Net buying/selling have a clear meaning in the former sense by analogy to the basic concept of supply and demand in equilibrium markets. It's not as clear what their meaning should be in the latter sense. Roughly, as the top comment notes, you could say that a price decrease is because of net selling at the previous price level, while a price rise is driven by net buying at the previous price level. But in terms of actual market mechanics, the only way prices move is by matching of a buyer and a seller, so every market transaction inherently represents an instantaneous balance across the bid/ask spread. So then we could think about the notion of orders. Actual transactions only occur in balance, but there is a whole book of standing orders at various prices. So maybe we could use some measure of the volume at various price levels in each of the bid/ask books to decide some notion of net buying/selling. But again, actual transactions occur only when matched across the spread. If a significant order volume is added on one side or the other, but at a price far away from the bid/offer - far enough that an actual trade at that price is unlikely to occur - should that be included in the notion of net buying/selling? Presumably there is some price distance from the bid/offer where the orders don't matter for net buying/selling. I'm sure you'd find a lot of buyers for BRK.A at $1, but that's completely irrelevant to the notion of net buying/selling in BRK.A. Maybe the closest thing I can think of in terms of actual market mechanics is the comparative total volumes during the period that would still have been executed if forced to execute at the end of period price. Assuming that traders' valuations are fixed through the period in question, and trading occurs on the basis of fundamentals (which I know isn't a good assumption in practice, but the impact of price history upon future price is too complex for this analysis), we have two cases. If price falls, we can assume all buyers who executed above the last price in the period would have happily bought at the last price (saving money), while all sellers who executed below the last price in the period would also be happy to sell for more. The former will be larger than the latter. If the price rises, the reverse is true.\"" }, { "docid": "550643", "title": "", "text": "If you can afford the cost and risk of 100 shares of stock, then just sell a put option. If you can only afford a few shares, you can still use the information the options market is trying to give you -- see below. A standing limit order to buy a stock is essentially a synthetic short put option position. [1] So deciding on a stock limit order price is the same as valuing an option on that stock. Options (and standing limit orders) are hard to value, and the generally accepted math for doing so -- the Black-Scholes-Merton framework -- is also generally accepted to be wrong, because of black swans. So rather than calculate a stock buy limit price yourself, it's simpler to just sell a put at the put's own midpoint price, accepting the market's best estimate. Options market makers' whole job (and the purpose of the open market) is price discovery, so it's easier to let them fight it out over what price options should really be trading at. The result of that fight is valuable information -- use it. Sell a 1-month ATM put option every month until you get exercised, after which time you'll own 100 shares of stock, purchased at: This will typically give you a much better cost basis (several dollars better) versus buying the stock at spot, and it offloads the valuation math onto the options market. Meanwhile you get to keep the cash from the options premiums as well. Disclaimer: Markets do make mistakes. You will lose money when the stock drops more than the option market's own estimate. If you can't afford 100 shares, or for some reason still want to be in the business of creating synthetic options from pure stock limit orders, then you could maybe play around with setting your stock purchase bid price to (approximately): See your statistics book for how to set ndev -- 1 standard deviation gives you a 30% chance of a fill, 2 gives you a 5% chance, etc. Disclaimer: The above math probably has mistakes; do your own work. It's somewhat invalid anyway, because stock prices don't follow a normal curve, so standard deviations don't really mean a whole lot. This is where market makers earn their keep (or not). If you still want to create synthetic options using stock limit orders, you might be able to get the options market to do more of the math for you. Try setting your stock limit order bid equal to something like this: Where put_strike is the strike price of a put option for the equity you're trading. Which option expiration and strike you use for put_strike depends on your desired time horizon and desired fill probability. To get probability, you can look at the delta for a given option. The relationship between option delta and equity limit order probability of fill is approximately: Disclaimer: There may be math errors here. Again, do your own work. Also, while this method assumes option markets provide good estimates, see above disclaimer about the markets making mistakes." } ]

[ { "docid": "208070", "title": "", "text": "I think your confusion has arisen because in every transaction there is a buyer and a seller, so the market maker buys you're selling, and when you're buying the market maker is selling. Meaning they do in fact buy at the ask price and sell at the bid price (as the quote said)." } ]

[ { "docid": "177926", "title": "", "text": "In the stock market many participants enter orders that are not necessarily set at the current market price of the stock (i.e. they are not market orders, they are limit orders). They can be lower than the market price (if they want to buy) or they can be higher than the market price (if they want to sell). The set of orders at each point of time for a security is called the order book. The lowest selling price of the order book is the offer or ask, the higher buying price is the bid. The more liquid is a security, the more orders will be in the order book, and the narrower will be the bid-ask spread. The depth of the order book is the number of units that the order book can absorb in any direction (buy or sell). As an example: imagine I want to buy 100 units at the lowest offer, but the size of the lowest offer is only 50 units, and there is not any further order, that means the stock has little depth." }, { "docid": "360059", "title": "", "text": "\"There are people (well, companies) who make money doing roughly what you describe, but not exactly. They're called \"\"market makers\"\". Their value for X% is somewhere on the scale of 1% (that is to say: a scale at which almost everything is \"\"volatile\"\"), but they use leverage, shorting and hedging to complicate things to the point where it's nothing like a simple as making a 1% profit every time they trade. Their actions tend to reduce volatility and increase liquidity. The reason you can't do this is that you don't have enough capital to do what market makers do, and you don't receive any advantages that the exchange might offer to official market makers in return for them contracting to always make both buy bids and sell offers (at different prices, hence the \"\"bid-offer spread\"\"). They have to be able to cover large short-term losses on individual stocks, but when the stock doesn't move too much they do make profits from the spread. The reason you can't just buy a lot of volatile stocks \"\"assuming I don't make too many poor choices\"\", is that the reason the stocks are volatile is that nobody knows which ones are the good choices and which ones are the poor choices. So if you buy volatile stocks then you will buy a bunch of losers, so what's your strategy for ensuring there aren't \"\"too many\"\"? Supposing that you're going to hold 10 stocks, with 10% of your money in each, what do you do the first time all 10 of them fall the day after you bought them? Or maybe not all 10, but suppose 75% of your holdings give no impression that they're going to hit your target any time soon. Do you just sit tight and stop trading until one of them hits your X% target (in which case you start to look a little bit more like a long-term investor after all), or are you tempted to change your strategy as the months and years roll by? If you will eventually sell things at a loss to make cash available for new trades, then you cannot assess your strategy \"\"as if\"\" you always make an X% gain, since that isn't true. If you don't ever sell at a loss, then you'll inevitably sometimes have no cash to trade with through picking losers. The big practical question then is when that state of affairs persists, for how long, and whether it's in force when you want to spend the money on something other than investing. So sure, if you used a short-term time machine to know in advance which volatile stocks are the good ones today, then it would be more profitable to day-trade those than it would be to invest for the long term. Investing on the assumption that you'll only pick short-term winners is basically the same as assuming you have that time machine ;-) There are various strategies for analysing the market and trying to find ways to more modestly do what market makers do, which is to take profit from the inherent volatility of the market. The simple strategy you describe isn't complete and cannot be assessed since you don't say how to decide what to buy, but the selling strategy \"\"sell as soon as I've made X% but not otherwise\"\" can certainly be improved. If you're keen you can test a give strategy for yourself using historical share price data (or current share price data: run an imaginary account and see how you're doing in 12 months). When using historical data you have to be realistic about how you'd choose what stocks to buy each day, or else you're just cheating at solitaire. When using current data you have to beware that there might not be a major market slump in the next 12 months, in which case you won't know how your strategy performs under conditions that it inevitably will meet eventually if you run it for real. You also have to be sure in either case to factor in the transaction costs you'd be paying, and the fact that you're buying at the offer price and selling at the bid price, you can't trade at the headline mid-market price. Finally, you have to consider that to do pure technical analysis as an individual, you are in effect competing against a bank that's camped on top of the exchange to get fastest possible access to trade, it has a supercomputer and a team of whizz-kids, and it's trying to find and extract the same opportunities you are. This is not to say the plucky underdog can't do well, but there are systematic reasons not to just assume you will. So folks investing for their retirement generally prefer a low-risk strategy that plays the averages and settles for taking long-term trends.\"" }, { "docid": "538915", "title": "", "text": "\"Market price is just the bid or offer price of the last sell or buy order in the market. The price that you actually receive or pay will be the price that the person buying the stock off you or selling it to you will accept. If there are no other participants in the market to make up the other side of your order (i.e. to buy off you if you are selling or to sell to you if you are buying) the exchange pays large banks to be \"\"market makers\"\"; they fulfil your order using stocks that they don't want to either buy or sell just so that you get your order filled. When you place an order outside of market hours the order is kept on the broker's order books until the market reopens and then, at market opening time there is an opening \"\"auction\"\" at which orders are matched to opposing orders (i.e. each buy order will be matched with a sell) at a price determined by auction. You will not know what price the order was filled at until it has been filled. If you want to guarantee a price you can do so by placing a limit order that says not to pay more than a certain price for any unit of the stock.\"" }, { "docid": "307155", "title": "", "text": "This is copying my own answer to another question, but this is definitely relevant for you: A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). Going long, as you may have guessed, is the opposite of going short. Instead of betting that the price will go down, you buy shares in the hope that the price will go up. So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Similarly, the same is true in the reverse if you are going long. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible." }, { "docid": "412223", "title": "", "text": "A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible." }, { "docid": "373862", "title": "", "text": "Sounds to me like you're describing just how it should work. Ask is at 30, Bid is at 20; you offer a new bid at 25. Either: Depending on liquidity, one or the other may be more likely. This Investorplace article on the subject describes what you're seeing, and recommends the strategy you're describing precisely. Instead of a market order, take advantage of the fact that the options world truly is a marketplace — one where you can possibly get a better price just by asking. How does that work? If you use a limit order (instead of a market order) when opening a position, you can tell your broker how much you are willing to pay to enter a trade. For example, if you enter a limit price of $1.15, you can see whether the market-maker will bite. You will be surprised at how many times you will get your price (i.e., $1.15) instead of the ask price of $1.30. If your order at $1.15 is not filled after a few minutes, you can modify your order and pay the ask price by entering a market order or limit order at the ask price (that is, you can tell your broker to pay no more than $1.30)." }, { "docid": "507357", "title": "", "text": "Many of the Bitcoin exchanges mimic stock exchanges, though they're much more rudimentary offering only simple buy/sell/cancel orders. It's fairly normal for retail stock brokerage accounts to allow other sorts of more complex orders, where once a certain criteria is met, (the price falls below some $ threshold, or has a movement greater than some %) then your order is executed. The space between the current buy order and the current sell order is the bid/ask spread, it's not really about timing. Person X will buy at $100, person Y will sell at $102. If both had a price set at $101, they would just transact. Both parties think they can do a little bit better than the current offer. The width of the bid/ask spread is not universal by any means. The current highest buy order and the current lowest sell order, are both the current price. The current quoted market price is generally the price of the last transaction, whether it's buy or sell." }, { "docid": "307008", "title": "", "text": "\"I think you've got basics, but you may have the order / emphasis a bit wrong. I've changed the order of the things you've learned in to what I think is the most important to understand: Owning a stock is like owning a tiny chunk of the business Owning stock is owning a tiny chunk of the business, it's not just \"\"like\"\" it. The \"\"tiny chunks\"\" are called shares, because that is literally what they are, a share of the business. Sometimes shares are also called stocks. The words stock and share are mostly interchangeable, but a single stock normally means your holding of many shares in a business, so if you have 100 shares in 1 company, that's a stock in that company, if you then buy 100 shares in another company, you now own 2 stocks. An investor seeks to buy stocks at a low price, and sell when the price is high. Not necessarily. An investor will buy shares in a company that they believe will make them a profit. In general, a company will make a profit and distribute some or all of it to shareholders in the form of dividends. They will also keep back a portion of the profit to invest in growing the company. If the company does grow, it will grow in value and your shares will get more valuable. Price (of a stock) is affected by supply/demand, volume, and possibly company profits The price of a share that you see on a stock ticker is the price that people on the market have exchanged the share for recently, not the price you or I can buy a share for, although usually if people on the market are buying and selling at that price, someone will buy or sell from you at a similar sort of price. In theory, the price will be the companies total value, if you were to own the whole thing (it's market capitalisation) divided by the total number of shares that exist in that company. The problem is that it's very difficult to work out the total value of a company. You can start by counting the different things that it owns (including things like intellectual property and the knowledge and experience of people who work there), subtract all the money it owes in loans etc., and then make an allowance for how much profit you expect the company to make in the future. The problem is that these numbers are all going to be estimates, and different peoples estimates will disagree. Some people don't bother to estimate at all. The market makers will just follow supply and demand. They will hold a few shares in each of many companies that they are interested in. They will advertise a lower price that they are willing to buy at and a higher price that they will sell at all the time. When they hold a lot of a share, they will price it lower so that people buy it from them. When they start to run out, they will price it higher. You will never need to spend more than the market makers price to buy a share, or get less than the market makers price when you come to sell it (unless you want to buy or sell more shares than they are willing to). This is why stock price depends on supply and demand. The other category of people who don't care about the companies they are trading are the high speed traders. They just look at information like the past price, the volume (total amount of shares being exchanged on the market) and many other statistics both from the market and elsewhere and look for patterns. You cannot compete with these people - they do things like physically locate their servers nearer to the stock exchanges buildings to get a few milliseconds time advantage over their competitors to buy shares quicker than them.\"" }, { "docid": "427747", "title": "", "text": "Market price simply depends on your order side. If you are placing a buy order the market price is the lowest ask, if you are placing a sell order the market price is the highest bid. If your order is larger than the volume then you'd need to also consider the next lowest ask or next highest bid until you've fulfilled your order volume." }, { "docid": "151987", "title": "", "text": "I don't think user4358's explanation is correct. A trailing LIT Sell Order adjusts downwards, i.e. if you place the order with an Aux price (in TWS it's trigger price) of 105.00 and a trailing amount of 6.00 then, assuming the ask is 100.00, TWS will add the trailing amount to the ask price and if it's less than the trigger price it will adjust. So in my example, if the market (ask) goes straight up to 105.00, nothing will be adjusted, the trigger is touched and the limit order will be placed (see below). If on the the other hand the market goes down to 99.00 then trlng amt + ask is 105.00, if it goes further down to 98.00 then the trigger price will be adjusted to 104.00 (because it's less than the current trigger), and so on. For the LIT part you have either an absolute limit price you can enter, or you have an offset limit which will be subtracted from the trigger price, in which case it is adjusted as well. So back to my example, the trigger is now 104.00 and the limit offset is say 1.00, so my limit order would be placed at 103.00 if the ask ever touches 104.00, and that in turn is only visible if the bid touches 103.00 (because it's limit-if-touched). For a buy just use the same explanation with some swapped roles, the trigger price adjust upwards when the trailing amount plus bid is larger than the current trigger, and the limit offset will be added to the trigger price. Edit Also quite succinct and worth having a look at: http://www.interactivebrokers.com/en/trading/orders/trailingLimitTouched.php Guesswork, highly subjective As for why this might be good, well, you have to believe in momentum strategies, i.e. a market that goes down, will continue to go down, if you believe that and you believe in mean reversion as well, then a trailing limit order can assist you in not buying/selling impulsively, but closer to the mean. I've never used it that way though. What I have done, even just now to get the explanation right, is to place trailing buy and sell orders simultaneously. You will find that you can just go in with coarse estimates and because the adjustments will go towards each other, you will end up with a narrowing band of trigger prices (as opposed to trailing stop orders which will give you a widening band of trigger prices). If you believe in overshooting and equilibria then this can be one easy way to profit from it. I've just sold EURUSD for 1.26420 and bought it back at 1.26380 with a trailing amount of 5pips and a limit offset of 2pips within the time of writing this." }, { "docid": "322798", "title": "", "text": "\"I think for this a picture is worth a thousand words. This is a \"\"depth chart\"\" that I pulled from google images, specifically because it doesn't name any security. On the left you have all of the \"\"bids\"\" to buy this security, on the right you have the \"\"asks\"\" to sell the security. In the middle you have the bid/ask spread, this is the space between the highest bid and the lowest ask. As you can see you are free to place you order to the market to buy for 232, and someone else is free to place their order to the market to sell for 234. When the bid and the ask match there's a transaction for the maximum number of available shares. Alternatively, someone can place a market order to buy or sell and they'll just take the current market price. Retail investors don't really get access to this kind of chart from their brokers because for the most part the information isn't terribly relevant at the retail level.\"" }, { "docid": "310636", "title": "", "text": "You can*, if the market is open, in a normal trading phase (no auction phase), works, and there is an existing bid or offer on the product you want to trade, at the time the market learns of your order. Keep in mind there are 2 prices: bid and offer. If the current bid and current offer were the same, it would immediately result in a trade, and thus the bid and offer are no longer the same. Market Makers are paid / given lower fees in order to maintain buy and sell prices (called quotes) at most times. These conditions are usually all true, but commonly fail for these reasons: Most markets have an order type of market order that says buy/sell at any price. There are still sanity checks put in place on the price, with the exact rules for valid prices depending on the stock, so unless it's a penny stock you won't suddenly pay ten times a stock's value. *The amount you can buy sell is limited by the quantity that exists on the bid and offer. If there is a bid or offer, the quantity is always at least 1." }, { "docid": "272929", "title": "", "text": "I don't know why a financial investor or a retail trader would do this. But I can guess why a market maker in options would do this. Let us say you buy an option from an option market maker and the market maker sold the option to you. He made a small profit in the bid-ask spread but now he is holding a short position in the option with unlimited risk exposure. So to protect himself, he will take an offsetting position in the underlying and become delta neutral, so that his position is not affected by the moves in the underlying. In the end, he can do this because he is not in the market to make money by betting on direction, unlike the rest of us poor mortals. He is making money from the bid-ask spread. So to ensure that his profits are not eroded by an adverse move in the underlying, he will continuously seek to be delta neutral. But once again, this is for a market maker. For market takers like us, I still don't understand why we would need to delta hedge." }, { "docid": "181158", "title": "", "text": "\"You will almost certainly be able to sell 10,000 shares at once. The question is a matter of price. If you sell \"\"at market\"\" then you may get a lower price for each \"\"batch\"\" of the stock sold (one person buys 50, another buys 200, another buys 1000 etc) at varying prices. Will you be able to execute a single order to sell them all at the same price at the same time? Nobody can say, and it's not really a function of the company size. The exchange has what's called \"\"open interest\"\" which roughly correlates to how many people have active orders in at a given price. This number is constantly changing alongside the bid and ask (particularly for active stocks). So let's say you have 10,000 shares and you want to sell them for $100 each. What you need is at least 10,000 in open interest at $100 bid to execute. By contrast let's say you issue a limit order at $100 for 10,000 shares. Your ask will stay outstanding at that price and you'll be filled at that price if there are enough buyers. I you have a limit sell order at $100 for 10,000 shares the strike price of the stock cannot go to $100.01 until all of your sell orders are filled.\"" }, { "docid": "151132", "title": "", "text": "\"First, keep in mind that there are generally 2 ways to buy a corporation's shares: You can buy a share directly from the corporation. This does not happen often; it usually happens at the Initial Public Offering [the first time the company becomes \"\"public\"\" where anyone with access to the stock exchange can become a part-owner], plus maybe a few more times during the corporations existence. In this case, the corporation is offering new ownership in exchange for a price set the corporation (or a broker hired by the corporation). The price used for a public offering is the highest amount that the company believes it can get - this is a very complicated field, and involves many different methods of evaluating what the company should be worth. If the company sets the price too low, then they have missed out on possible value which would be earned by the previous, private shareholders (they would have gotten the same share % of a corporation which would now have more cash to spend, because of increased money paid by new shareholders). If the company sets the price too high, then the share subscription might only be partially filled, so there might not be enough cash to do what the company wanted. You can buy a share from another shareholder. This is more common - when you see the company's share price on the stock exchange, it is this type of transaction - buying out other current shareholders. The price here is simply set based on what current owners are willing to sell at. The \"\"Bid Price\"\" listed by an exchange is the current highest bid that a purchaser is offering for a single share. The \"\"Ask Price\"\" is the current lowest offer that a seller is offering to sell a single share they currently own. When the bid price = the ask price, a share transaction happens, and the most recent stock price changes.\"" }, { "docid": "16531", "title": "", "text": "Looking at the SPY option chain you posted, all of the call options with a strike price of 199.50 or higher have a bid of N/A. That's because the ask price for all of those options is 0.01, and the bid price has to be less than the ask price, but buyers are not allowed to bid 0.00. It's not accurate to say that no one wants to buy those calls - anyone who wanted to buy one of those calls would just buy it at the ask price of 0.01. So why are people selling those calls for just 0.01? The further out of the money you go as you get closer to expiration, the less likely the underlying stock or ETF (SPY in this case) will go over the strike price, and the less you can sell it for. SPY closed yesterday at about 195, and it would have to go up almost 2.5% today for the 199.50 calls to be in the money, and a 2.5% move in one day is extremely unlikely." }, { "docid": "351518", "title": "", "text": "Bid and ask prices of stocks change not just daily, but continuously. They are, as the names suggest, what price people are asking for to be willing to sell their stock, and how much people are bidding to be willing to buy it at that moment. Your equation is accurate in theory, but doesn't actually apply. The bid and ask prices are indicators of the value of the stock, but the only think you care about as a trader are what you actually pay and sell it for. So regardless of the bid/ask the equation is: Since you cannot buy an index directly (index, like indicator) it doesn't make sense to discuss how much people are bidding or asking for it. Like JoeTaxpayer said, you can buy (and therefore bid/ask) for ETFs and funds that attempt to track the value of the S&P 500." }, { "docid": "414036", "title": "", "text": "\"During market hours, there are a lot of dealers offering to buy and sell all exchange traded stocks. Dealers don't actually care about the company's fundamentals and they set their prices purely based on order flow. If more people start to buy than sell, the dealer notices his inventory going down and starts upping the price (both his bid and ask). There are also traders who may not be \"\"dealers\"\", but are willing to sell if the price goes high enough or buy if the price goes low enough. This keeps the prices humming along smoothly. During normal trading hours, if you buy something and turn around and sell it two minutes later, you'll probably be losing a couple cents per share. Outside normal market hours, the dealers who continue to have a bid and ask listed know that they don't have access to good price information -- there isn't a liquid market of continuous buying and selling for the dealer to set prices he considers safe. So what does he do? He widens the spread. He doesn't know what the market will open tomorrow at and doesn't know if he'll be able to react quickly to news. So instead of bidding $34.48 and offering at $34.52, he'll move that out to $33 and $36. The dealer still makes money sometimes off this because maybe some trader realized that he has options expiring tomorrow, or a short position that he's going to get a margin call on, or some kind of event that pretty much forces him to trade. Or maybe he's just panicking and overreacting to some news. So why not trade after hours? Because there's no liquidity, and trading when there's no liquidity costs you a lot.\"" }, { "docid": "212685", "title": "", "text": "At any point of time, buyer wants to purchase a stock at lesser price and seller wants to sell the stock at a higher price. Let's consider this scenario Company XYZ is trading at 100$, as stated above buyer wants to purchase at lower price and seller at higher price, this information will be available in Market depth, let's consider there are 5 buyers and 5 sellers, below are the details of their orders Buyers List Sellers List Highest order in buyers list will contain the bid price and bid quantity, Lowest order in Sellers list will contain the offer price and offer quantity. Now, if I want to buy 50 Stocks of company XYZ, need to place an order first, it can be either limit or Market. Limit Order : In this order, I will mention the price(buy price) at which I wish to buy, if there is any seller selling the stock less than or equal to price I have mentioned, then the order will be executed else it will be added to buyers list Market Order : In this order, I will not mention the price, if I wish to purchase 50 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 101. if I wish to purchase 200 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 2 transactions, since entire request cannot be accommodated in single order Usually the volume(Ask Volume and Offer Volume) being displayed are all Limit orders and not Market orders, Market orders are executed immediately. This is just an example, However several transactions are executed within a second, hence we will get to know the exact value only after the order is completed(executed)" } ]

[ { "docid": "164008", "title": "", "text": "The everyday investor buys at the ask and sells at the bid but the market maker does the opposite This is misleading; it has nothing to do with being either an investor or a market maker. It is dependent on the type of order that is submitted. When a market trades at the ask, this means that a buy market order has interacted with a sell limit order at the limit price. When a market trades at the bid, this means that a sell market order has interacted with a buy limit order at the limit price. An ordinary investor can do exactly the same as a market maker and submit limit orders. Furthermore, they can sit on both sides of the bid and ask exactly as a market maker does. In the days before high frequency trading this was quite common (an example being Daytek, whose traders were notorious for stepping in front of the designated market maker's bid/ask on the Island ECN). An order executes ONLY when both bid and ask meet. (bid = ask) This is completely incorrect. A transaction occurs when an active (marketable) order is matched with a passive (limit book) order. If the passive order is a sell limit then the trade has occurred at the ask, and if it is a buy limit the trade has occurred at the bid. The active orders are not bids and asks. The only exception to this would be if the bid and ask have become crossed. When a seller steps in, he does so with an ask that's lower than the stock's current ask Almost correct; he does so with an order that's lower than the stock's current ask. If it's a marketable order it will fill the front queued best bid, and if it's a limit order his becomes the new ask price. A trade does not need to occur at this price for it to become the ask. This is wrong, market makers are the opposite party to you so the prices are the other way around for them. This is wrong. There is no distinction between the market maker and yourself or any other member of the public (beside the fact that designated market makers on some exchanges are obliged to post both a bid and ask at all times). You can open an account with any broker and do exactly the same as a market maker does (although with nothing like the speed that a high frequency market-making firm can, hence likely making you uncompetitive in this arena). The prices a market maker sees and the types of orders that they are able to use to realize them are exactly the same as for any other trader." } ]

[ { "docid": "236504", "title": "", "text": "What you have to remember is that Options are derivatives of another asset like stocks for example. The price of the Option is derived from the price of the underlying. If the underlying is a stock for example, as the price of the stock moves up and down during the trading day, so will the Market Maker's fair value for the Option. As Options are usually less liquid than the underlying stock, Market Makers are usually more active in 'Providing a Market' with Options. Thus if you place a limit order half way between the current Bid and Ask and the underlying stock price moves towards your limit order, the Market Maker will do their job and 'Provide a Market' at that price, thus executing your order." }, { "docid": "322798", "title": "", "text": "\"I think for this a picture is worth a thousand words. This is a \"\"depth chart\"\" that I pulled from google images, specifically because it doesn't name any security. On the left you have all of the \"\"bids\"\" to buy this security, on the right you have the \"\"asks\"\" to sell the security. In the middle you have the bid/ask spread, this is the space between the highest bid and the lowest ask. As you can see you are free to place you order to the market to buy for 232, and someone else is free to place their order to the market to sell for 234. When the bid and the ask match there's a transaction for the maximum number of available shares. Alternatively, someone can place a market order to buy or sell and they'll just take the current market price. Retail investors don't really get access to this kind of chart from their brokers because for the most part the information isn't terribly relevant at the retail level.\"" }, { "docid": "585552", "title": "", "text": "\"When I first started working in finance I was given a rule of thumb to decide which price you will get in the market: \"\"You will always get the worst price for your deal, so when buying you get the higher ask price and when selling you get the lower bid price.\"\" I like to think of it in terms of the market as a participant who always buys at the lowest price they can (i.e. buys from you) and sells at the highest price they can. If that weren't true there would be an arbitrage opportunity and free money never exists for long.\"" }, { "docid": "525231", "title": "", "text": "\"There are two distinct questions that may be of interest to you. Both questions are relevant for funds that need to buy or sell large orders that you are talking about. The answer depends on your order type and the current market state such as the level 2 order book. Suppose there are no iceberg or hidden orders and the order book (image courtesy of this question) currently is: An unlimited (\"\"at market\"\") buy order for 12,000 shares gets filled immediately: it gets 1,100 shares at 180.03 (1,[email protected]), 9,700 at 180.04 and 1,200 at 180.05. After this order, the lowest ask price becomes 180.05 and the highest bid is obviously still 180.02 (because the previous order was a 'market order'). A limited buy order for 12,000 shares with a price limit of 180.04 gets the first two fills just like the market order: 1,100 shares at 180.03 and 9,700 at 180.04. However, the remainder of the order will establish a new bid price level for 1,200 shares at 180.04. It is possible to enter an unlimited buy order that exhausts the book. However, such a trade would often be considered a mis-trade and either (i) be cancelled by the broker, (ii) be cancelled or undone by the exchange, or (iii) hit the maximum price move a stock is allowed per day (\"\"limit up\"\"). Funds and banks often have to buy or sell large quantities, just like you have described. However they usually do not punch through order book levels as I described before. Instead they would spread out the order over time and buy a smaller quantity several times throughout the day. Simple algorithms attempt to get a price close to the time-weighted average price (TWAP) or volume-weighted average price (VWAP) and would buy a smaller amount every N minutes. Despite splitting the order into smaller pieces the price usually moves against the trader for many reasons. There are many models to estimate the market impact of an order before executing it and many brokers have their own model, for example Deutsche Bank. There is considerable research on \"\"market impact\"\" if you are interested. I understand the general principal that when significant buy orders comes in relative to the sell orders price goes up and when a significant sell order comes in relative to buy orders it goes down. I consider this statement wrong or at least misleading. First, stocks can jump in price without or with very little volume. Consider a company that releases a negative earnings surprise over night. On the next day the stock may open 20% lower without any orders having matched for any price in between. The price moved because the perception of the stocks value changed, not because of buy or sell pressure. Second, buy and sell pressure have an effect on the price because of the underlying reason, and not necessarily/only because of the mechanics of the market. Assume you were prepared to sell HyperNanoTech stock, but suddenly there's a lot of buzz and your colleagues are talking about buying it. Would you still sell it for the same price? I wouldn't. I would try to find out how much they are prepared to buy it for. In other words, buy pressure can be the consequence of successful marketing of the stock and the marketing buzz is what changes the price.\"" }, { "docid": "107227", "title": "", "text": "popularity that you are referring to is just known as liquidity when discussing markets. More liquid securities tend to trade more shares per day and have very tight bid/ask spreads as many investors are buying and selling the shares at one time. Some larger securities, especially on exchanges, further enhance liquidity by providing market makers. These are individuals on the NYSE, for example, that will make the market in large securities by handling large orders and providing liquidity through their own book of capital. The individuals on the floor on the NYSE you often see on TV are those market makers. However, as trading becomes more electronic, market markers are becoming less and less required. A previous comment suggested pink sheets are risky companies. This is not entirely factual. While the majority of pink sheets are very highly risky companies, many very solid international companies trade their ADRs (American Depository Receipt) on the pink sheets to avoid the high cost of setting up a large exchange at the NYSE and register and report through the SEC. As a TD Ameritrade user, I would be willing to help you out if you have any other questions." }, { "docid": "169062", "title": "", "text": "\"It's good to ask this question, because this is one of the fundamental dichotomies in market microstructure. At any time T for each product on a (typical) exchange there are two well-defined prices: At time T there is literally no person in the market who wants to sell below the ask, so all the people who are waiting to buy at the bid (or below) could very well be waiting there forever. There's simply no guarantee that any seller will ever want to part with their product for a lesser price than they think it's worth. So if you want to buy the product at time T you have a tough choice to make: you get in line at the bid price, where there's no guarantee that your request will ever be filled, and you might never get your hands on the product you decide that owning the product right now is more valuable to you than (ask - bid) * quantity, so you tell the exchange that you're willing to buy at the ask price, and the exchange matches you with whichever seller is first in line Now, if you're in the market for the long term, the above choice is completely immaterial to you. Who cares if you pay $10.00 * 1000 shares or $10.01 * 1000 shares when you plan to sell 30 years from now at $200 (or $200.01)? But if you're a day trader or anyone else with a very short time horizon, then this choice is extremely important: if the price is about to go up several cents and you got in line at the bid (and never got filled) then you missed out on some profit if you \"\"cross the spread\"\" to buy at the ask and then the price doesn't go up (or worse, goes down), you're screwed. In order to get out of the position you'll have to cross the spread again and sell at at most the bid, meaning you've now paid the spread twice (plus transaction fees and regulatory fees) for nothing. (All of the above also applies in reverse for selling at the ask versus selling at the bid, but most people like to learn in terms of buying rather than selling.)\"" }, { "docid": "414036", "title": "", "text": "\"During market hours, there are a lot of dealers offering to buy and sell all exchange traded stocks. Dealers don't actually care about the company's fundamentals and they set their prices purely based on order flow. If more people start to buy than sell, the dealer notices his inventory going down and starts upping the price (both his bid and ask). There are also traders who may not be \"\"dealers\"\", but are willing to sell if the price goes high enough or buy if the price goes low enough. This keeps the prices humming along smoothly. During normal trading hours, if you buy something and turn around and sell it two minutes later, you'll probably be losing a couple cents per share. Outside normal market hours, the dealers who continue to have a bid and ask listed know that they don't have access to good price information -- there isn't a liquid market of continuous buying and selling for the dealer to set prices he considers safe. So what does he do? He widens the spread. He doesn't know what the market will open tomorrow at and doesn't know if he'll be able to react quickly to news. So instead of bidding $34.48 and offering at $34.52, he'll move that out to $33 and $36. The dealer still makes money sometimes off this because maybe some trader realized that he has options expiring tomorrow, or a short position that he's going to get a margin call on, or some kind of event that pretty much forces him to trade. Or maybe he's just panicking and overreacting to some news. So why not trade after hours? Because there's no liquidity, and trading when there's no liquidity costs you a lot.\"" }, { "docid": "538915", "title": "", "text": "\"Market price is just the bid or offer price of the last sell or buy order in the market. The price that you actually receive or pay will be the price that the person buying the stock off you or selling it to you will accept. If there are no other participants in the market to make up the other side of your order (i.e. to buy off you if you are selling or to sell to you if you are buying) the exchange pays large banks to be \"\"market makers\"\"; they fulfil your order using stocks that they don't want to either buy or sell just so that you get your order filled. When you place an order outside of market hours the order is kept on the broker's order books until the market reopens and then, at market opening time there is an opening \"\"auction\"\" at which orders are matched to opposing orders (i.e. each buy order will be matched with a sell) at a price determined by auction. You will not know what price the order was filled at until it has been filled. If you want to guarantee a price you can do so by placing a limit order that says not to pay more than a certain price for any unit of the stock.\"" }, { "docid": "218842", "title": "", "text": "Prices quoted are primarily the offer prices quoted by the numerous market makers on the stock exchange(s) willing to sell you the stock. There is another price which generally isn't seen on these websites, the bid prices, which are lower prices quoted by buyers and market makers willing to buy your shares from you. You wouldn't see those prices, unless you login to your trade terminal. How meaningful are they to you depends on what you want to do buy or sell. If you want to buy then yes they are relevant. But if you want to sell, then no. And remember some websites delay market information by 15 minutes, in case of Google you might have seen that the volume is delayed by 15 minutes. So you need to consider that also while trading, but mayn't be a concern unless you are trying to buy out the company." }, { "docid": "92109", "title": "", "text": "When a stock is ask for 15.2 and bid for 14.5, and the last market price was 14.5, what does it mean? It means that the seller wants to sell for a higher price than the last sale while the buyer does not want to buy for more than the last sale price. Or what if the last price is 15.2? The seller is offering to sell for the last sale price, but the buyer wants to buy for less." }, { "docid": "402482", "title": "", "text": "You can always trade at bid or ask price (depending if you are selling or buying). Market price is the price the last transaction was executed at so you may not be able to get that. If your order is large then you may not even be able to get bid/ask but should look at the depth of the order book (ie what prices are other market participants asking for and what is the size of their order). Usually only fast traders will trade at bid/ask, those who believe the price move is imminent. If you are a long term trader you can often get better than bid or ask by placing a limit order and waiting until a market participant takes your offer." }, { "docid": "560558", "title": "", "text": "As others have stated, the current price is simply the last price at which the security traded. For any given tick, however, there are many bid-ask prices because securities can trade on multiple exchanges and between many agents on a single exchange. This is true for both types of exchanges that Chris mentioned in his answer. Chris' answer is pretty thorough in explaining how the two types of exchanges work, so I'll just add some minor details. In exchanges like NASDAQ, there are multiple market makers for most relatively liquid securities, which theoretically introduces competition between them and therefore lowers the bid-ask spreads that traders face. Although this results in the market makers earning less compensation for their risk, they hope to make up the difference by making the market for highly liquid securities. This could also result in your order filling, in pieces, at several different prices if your brokerage firm fills it through multiple market makers. Of course, if you place your order on an exchange where an electronic system fills it (the other type of exchange that Chris mentioned), this could happen anyway. In short, if you place a market order for 1000 shares, it could be filled at several different prices, depending on volume, multiple bid-ask prices, etc. If you place a sizable order, your broker may fill it in pieces regardless to prevent you from moving the market. This is rarely a problem for small-time investors trading securities with high volumes, but for investors with higher capital like institutional investors, mutual funds, etc. who place large orders relative to the average volume, this could conceivably be a burden, both in the price difference across time as the order is placed and the increased bookkeeping it demands. This is tangentially related, so I'll add it anyway. In cases like the one described above, all-or-none (AON) orders are one solution; these are orders that instruct the broker to only execute the order if it can be filled in a single transaction. Most brokers offer these, but there are some caveats that apply to them specifically. (I haven't been able to find some of this information, so some of this is from memory). All-or-none orders are only an option if the order is for more than a certain numbers of shares. I think the minimum size is 300 or 400 shares. Your order won't be placed until your broker places all other orders ahead of it that don't have special conditions attached to them. I believe all-or-none orders are day orders, which means that if there wasn't enough supply to fill the order during the day, the order is cancelled at market close. AON orders only apply to limit orders. If you want to replicate the behavior of a market order with AON characteristics, you can try setting a limit buy/sell order a few cents above/below the current market price." }, { "docid": "317365", "title": "", "text": "\"Most of the time* you're selling to other investors, not back to the company. The stock market is a collection of bid (buy offers) and asks (sell offers). When you sell your stock as a retail investor at the \"\"market\"\" price you're essentially just meeting whatever standing bid offers are on the market. For very liquid stocks (e.g. Apple), you can pretty much always get the displayed price because so many stocks are being traded. However during periods of very high volatility or for low-volume stocks, the quoted price may not be indicative of what you actually pay. As an example, let's say you have 5 stocks you're trying to sell and the bid-side order book is 2 stocks for $105, 2 for $100, and 5 for $95. In this scenario the quoted price will be $105 (the best bid price), but if you accept market price you'll settle 2 for 105, 2 for 100, and 1 for 95. After your sell order goes through, the new quoted price will be $95. For high volume stocks, there will usually be so many orders near the midpoint price ($105, in this case) that you won't see any price slippage for small orders. You can also post limit orders, which are essentially open orders waiting to be filled like in the above example. They ensure you get the price you want, but you have no way to guarantee they'll be filled or not. Edit: as a cool example, check out the bitcoin GDAX on coinbase for a live example of what the order book looks like for stocks. You'll see that the price of bitcoin will drift towards whichever direction has the less dense order book (e.g. price drifts upwards when there are far more bids than asks.)\"" }, { "docid": "360059", "title": "", "text": "\"There are people (well, companies) who make money doing roughly what you describe, but not exactly. They're called \"\"market makers\"\". Their value for X% is somewhere on the scale of 1% (that is to say: a scale at which almost everything is \"\"volatile\"\"), but they use leverage, shorting and hedging to complicate things to the point where it's nothing like a simple as making a 1% profit every time they trade. Their actions tend to reduce volatility and increase liquidity. The reason you can't do this is that you don't have enough capital to do what market makers do, and you don't receive any advantages that the exchange might offer to official market makers in return for them contracting to always make both buy bids and sell offers (at different prices, hence the \"\"bid-offer spread\"\"). They have to be able to cover large short-term losses on individual stocks, but when the stock doesn't move too much they do make profits from the spread. The reason you can't just buy a lot of volatile stocks \"\"assuming I don't make too many poor choices\"\", is that the reason the stocks are volatile is that nobody knows which ones are the good choices and which ones are the poor choices. So if you buy volatile stocks then you will buy a bunch of losers, so what's your strategy for ensuring there aren't \"\"too many\"\"? Supposing that you're going to hold 10 stocks, with 10% of your money in each, what do you do the first time all 10 of them fall the day after you bought them? Or maybe not all 10, but suppose 75% of your holdings give no impression that they're going to hit your target any time soon. Do you just sit tight and stop trading until one of them hits your X% target (in which case you start to look a little bit more like a long-term investor after all), or are you tempted to change your strategy as the months and years roll by? If you will eventually sell things at a loss to make cash available for new trades, then you cannot assess your strategy \"\"as if\"\" you always make an X% gain, since that isn't true. If you don't ever sell at a loss, then you'll inevitably sometimes have no cash to trade with through picking losers. The big practical question then is when that state of affairs persists, for how long, and whether it's in force when you want to spend the money on something other than investing. So sure, if you used a short-term time machine to know in advance which volatile stocks are the good ones today, then it would be more profitable to day-trade those than it would be to invest for the long term. Investing on the assumption that you'll only pick short-term winners is basically the same as assuming you have that time machine ;-) There are various strategies for analysing the market and trying to find ways to more modestly do what market makers do, which is to take profit from the inherent volatility of the market. The simple strategy you describe isn't complete and cannot be assessed since you don't say how to decide what to buy, but the selling strategy \"\"sell as soon as I've made X% but not otherwise\"\" can certainly be improved. If you're keen you can test a give strategy for yourself using historical share price data (or current share price data: run an imaginary account and see how you're doing in 12 months). When using historical data you have to be realistic about how you'd choose what stocks to buy each day, or else you're just cheating at solitaire. When using current data you have to beware that there might not be a major market slump in the next 12 months, in which case you won't know how your strategy performs under conditions that it inevitably will meet eventually if you run it for real. You also have to be sure in either case to factor in the transaction costs you'd be paying, and the fact that you're buying at the offer price and selling at the bid price, you can't trade at the headline mid-market price. Finally, you have to consider that to do pure technical analysis as an individual, you are in effect competing against a bank that's camped on top of the exchange to get fastest possible access to trade, it has a supercomputer and a team of whizz-kids, and it's trying to find and extract the same opportunities you are. This is not to say the plucky underdog can't do well, but there are systematic reasons not to just assume you will. So folks investing for their retirement generally prefer a low-risk strategy that plays the averages and settles for taking long-term trends.\"" }, { "docid": "177926", "title": "", "text": "In the stock market many participants enter orders that are not necessarily set at the current market price of the stock (i.e. they are not market orders, they are limit orders). They can be lower than the market price (if they want to buy) or they can be higher than the market price (if they want to sell). The set of orders at each point of time for a security is called the order book. The lowest selling price of the order book is the offer or ask, the higher buying price is the bid. The more liquid is a security, the more orders will be in the order book, and the narrower will be the bid-ask spread. The depth of the order book is the number of units that the order book can absorb in any direction (buy or sell). As an example: imagine I want to buy 100 units at the lowest offer, but the size of the lowest offer is only 50 units, and there is not any further order, that means the stock has little depth." }, { "docid": "260153", "title": "", "text": "\"You can choose to place successively lower buy limit orders, but whether they get filled or not is not a given; it depends on whether sellers care to accept your bid. In your example of a 49.98 / 50.01 spread, if you place a buy with limit of 49.99, it won't get filled (if the order reaches the market while still at 49.98 / 50.01) immediately, but will be added to the order book. By being added to the order book, the markets bid and ask become 49.99 / 50.01. Your order won't get filled until some seller places a market order or a sell limit order of 49.99 or less. No guarantee that that will happen, and even if it does, there's nothing to say that your follow-up buy at 49.98 will ever be filled. In fact, your 49.98 buy order queues up at the \"\"end of the line\"\" behind all previously pending 49.98 bids, since your order arrived after those other bids. Since the initial conditions you supposed had a 49.98 bid, such an order exists (or at least did exist; it might have been cancelled in the intervening moment. Basically, your first buy at 49.99, if it happens, has essentially no influence on whether your second buy at 49.98 will happen. You can't expect to move the market lower by making a bid that is higher (49.99) than the existing best bid (49.98). Whatever influence your 49.99 order has is to raise the market's price, not lower it.\"" }, { "docid": "376518", "title": "", "text": "\"You are right, if by \"\"a lot of time\"\" you mean a lot of occasions lasting a few milliseconds each. This is one of the oldest arbitrages in the book, and there's plenty of people constantly on the lookout for such situations, hence they are rare and don't last very long. Most of the time the relationship is satisfied to within the accuracy set by the bid-ask spread. What you write as an equality should actually be a set of inequalities. Continuing with your example, suppose 1 GBP ~ 2 USD, where the market price to buy GBP (the offer) is $2.01 and to sell GBP (the bid) is $1.99. Suppose further that 1 USD ~ 2 EUR, and the market price to buy USD is EUR2.01 and to sell USD is EUR1.99. Then converting your GBP to EUR in this way requires selling for USD (receive $1.99), then sell the USD for EUR (receive EUR3.9601). Going the other way, converting EUR to GBP, it will cost you EUR4.0401 to buy 1 GBP. Hence, so long as the posted prices for direct conversion are within these bounds, there is no arbitrage.\"" }, { "docid": "343558", "title": "", "text": "In practice, it would not work. If you put a bid in that was really out of line, even if it got filled, the exchange would reverse it. Other than that it really depends on what the current bid/ask spread it, and what volume its trading, as well as how the market feels. Say the current bid is 11 and you put an order in with bid 11.5, it would soak up all the orders on the market up to the volume your buying. But once your order is filled the market will be determined by what the next order's bid/ask is. It might stay where you moved it too if others feels thats a fair price. But if every other order on the market is still at 11, then the price isnt gonna move. tl;dl unless your a market maker, you could not realistically affect the price." }, { "docid": "434596", "title": "", "text": "In general stock markets are very similar to that, however, you can also put in limit orders to say that you will only buy or sell at a given price. These sit in the market for a specified length of time and will be executed when an order arrives that matches the price (or better). Traders who set limit orders are called liquidity (or price) makers as they provide liquidity (i.e. volume to be traded) to be filled later. If there is no counterparty (i.e. buyer to your seller) in the market, a market maker; a large bank or brokerage who is licensed and regulated to do so, will fill your order at some price. That price is based on how much volume (i.e. trading) there is in that stock on average. This is called average daily volume (ADV) and is calculated over varying periods of time; we use ADV30 which is the 30 day average. You can always sell stocks for whatever price you like privately but a market order does not allow you to set your price (you are a price taker) therefore that kind of order will always fill at a market price. As mentioned above limit orders will not fill until the price is hit but will stay on book as long as they aren't filled, expired or cancelled." } ]

[ { "docid": "413041", "title": "", "text": "Market Makers are essentially just there to process the buys and sells of traders, so just like you and I buy and sell at the ask and bid prices they do to. They are just completing the process of making our orders a reality. Market makers are just representative of brokers, meaning that when you place your order at ask or bid, you are placing that particular brokers order at ask or bid. People often say that certain brokers have too many shares and claim that they are games when really that just means that there happen to be a lot of people using a particular broker all at once, or more troubling, perhaps even company execs using a broker, to sell a large amount of shares." } ]

[ { "docid": "585552", "title": "", "text": "\"When I first started working in finance I was given a rule of thumb to decide which price you will get in the market: \"\"You will always get the worst price for your deal, so when buying you get the higher ask price and when selling you get the lower bid price.\"\" I like to think of it in terms of the market as a participant who always buys at the lowest price they can (i.e. buys from you) and sells at the highest price they can. If that weren't true there would be an arbitrage opportunity and free money never exists for long.\"" }, { "docid": "466143", "title": "", "text": "Will there be a scenario in which I want to sell, but nobody wants to buy from me and I'm stuck at the brokerage website? Similarly, if nobody wants to sell their stocks, I will not be able to buy at all? You're thinking of this as a normal purchase, but that's not really how US stock markets operate. First, just because there are shares of stock purchased, it doesn't mean that there was real investor buyer and seller demand for that instrument (at that point in time). Markets have dedicated middlemen called Market Makers (NASDAQ) or Specialists (NYSE), who are responsible to make sure that there is always someone to buy or sell; this ensures that all instruments have sufficient liquidity. Market Makers and specialists may decide to lower their bid on a stock based on a high number of sellers, or raise their ask for a high number of buyers. During an investor rush to buy or sell an instrument (perhaps in response to a news release), it's possible for the Market Maker / specialist to accumulate or distribute a large number of shares, without end-investors like you or I being involved on both sides of the same transaction." }, { "docid": "501748", "title": "", "text": "To add a bit to Daniel Anderson's great answer, if you want to 'peek' at what a the set of bid and ask spreads looks like, the otc market page could be interesting (NOTE: I'm NOT recommending that you trade Over The Counter. Many of these stocks are amusingly scary): http://www.otcmarkets.com/stock/ACBFF/quote You can see market makers essentially offering to buy or sell blocks of stock at a variety of prices." }, { "docid": "353396", "title": "", "text": "\"Say we have stock XYZ that costs $50 this second. It doesn't cost XYZ this second. The market price only reflects the last price at which the security traded. It doesn't mean that if you'll get that price when you place an order. The price you get if/when your order is filled is determined by the bid/ask spreads. Why would people sell below the current price, and not within the range of the bid/ask? Someone may be willing to sell at an ask price of $47 simply because that's the best price they think they can sell the security for. Keep in mind that the \"\"someone\"\" may be a computer that determined that $47 is a reasonable ask price. Remember that bid/ask spreads aren't fixed, and there can be multiple bid/ask prices in a market at any given time. Your buy order was filled because at the time, someone else in the market was willing to sell you the security for the same price as your bid price. Your respective buy/sell orders were matched based on their price (and volume, conditional orders, etc). These questions may be helpful to you as well: Can someone explain a stock's \"\"bid\"\" vs. \"\"ask\"\" price relative to \"\"current\"\" price? Bids and asks in case of market order Can a trade happen \"\"in between\"\" the bid and ask price? Also, you say you're a day trader. If that's so, I strongly recommend getting a better grasp on the basics of market mechanics before committing any more capital. Trading without understanding how markets work at the most fundamental levels is a recipe for disaster.\"" }, { "docid": "218842", "title": "", "text": "Prices quoted are primarily the offer prices quoted by the numerous market makers on the stock exchange(s) willing to sell you the stock. There is another price which generally isn't seen on these websites, the bid prices, which are lower prices quoted by buyers and market makers willing to buy your shares from you. You wouldn't see those prices, unless you login to your trade terminal. How meaningful are they to you depends on what you want to do buy or sell. If you want to buy then yes they are relevant. But if you want to sell, then no. And remember some websites delay market information by 15 minutes, in case of Google you might have seen that the volume is delayed by 15 minutes. So you need to consider that also while trading, but mayn't be a concern unless you are trying to buy out the company." }, { "docid": "212685", "title": "", "text": "At any point of time, buyer wants to purchase a stock at lesser price and seller wants to sell the stock at a higher price. Let's consider this scenario Company XYZ is trading at 100$, as stated above buyer wants to purchase at lower price and seller at higher price, this information will be available in Market depth, let's consider there are 5 buyers and 5 sellers, below are the details of their orders Buyers List Sellers List Highest order in buyers list will contain the bid price and bid quantity, Lowest order in Sellers list will contain the offer price and offer quantity. Now, if I want to buy 50 Stocks of company XYZ, need to place an order first, it can be either limit or Market. Limit Order : In this order, I will mention the price(buy price) at which I wish to buy, if there is any seller selling the stock less than or equal to price I have mentioned, then the order will be executed else it will be added to buyers list Market Order : In this order, I will not mention the price, if I wish to purchase 50 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 101. if I wish to purchase 200 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 2 transactions, since entire request cannot be accommodated in single order Usually the volume(Ask Volume and Offer Volume) being displayed are all Limit orders and not Market orders, Market orders are executed immediately. This is just an example, However several transactions are executed within a second, hence we will get to know the exact value only after the order is completed(executed)" }, { "docid": "118360", "title": "", "text": "First, it depends on your broker. Full service firms will tear you a new one, discount brokers may charge ~nothing. You'll have to check with your broker on assignment fees. Theoretically, this is the case of the opposite of my answer in this question: Are underlying assets supposed to be sold/bought immediately after being bought/sold in call/put option? Your trading strategy/reasoning for your covered call notwithstanding, in your case, as an option writer covering in the money calls, you want to hold and pray that your option expires worthless. As I said in the other answer, there is always a theoretical premium of option price + exercise price to underlying prices, no matter how slight, right up until expiration, so on that basis, it doesn't pay to close out the option. However, there's a reality that I didn't mention in the other answer: if it's a deep in the money option, you can actually put a bid < stock price - exercise price - trade fee and hope for the best since the market makers rarely bid above stock price - exercise price for illiquid options, but it's unlikely that you'll beat the market makers + hft. They're systems are too fast. I know the philly exchange allows you to put in implied volatility orders, but they're expensive, and I couldn't tell you if a broker/exchange allows for dynamic orders with the equation I specified above, but it may be worth a shot to check out; however, it's unlikely that such a low order would ever be filled since you'll at best be lined up with the market makers, and it would require a big player dumping all its' holdings at once to get to your order. If you're doing a traditional, true-blue covered call, there's absolutely nothing wrong being assigned except for the tax implications. When your counterparty calls away your underlyings, it is a sell for tax purposes. If you're not covering with the underlying but with a more complex spread, things could get hairy for you real quick if someone were to exercise on you, but that's always a risk. If your broker is extremely strict, they may close the rest of your spread for you at the offer. In illiquid markets, that would be a huge percentage loss considering the wide bid/ask spreads." }, { "docid": "307155", "title": "", "text": "This is copying my own answer to another question, but this is definitely relevant for you: A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). Going long, as you may have guessed, is the opposite of going short. Instead of betting that the price will go down, you buy shares in the hope that the price will go up. So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Similarly, the same is true in the reverse if you are going long. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible." }, { "docid": "66210", "title": "", "text": "\"Mathematically it's arbitrary - you could just as easily use the bid or the midpoint as the denominator, so long as you're consistent when comparing securities. So there's not a fundamental reason to use the ask. The best argument I can come up with is that most analysis is done from the buy side, so looking at liquidity costs (meaning how much does the value drop instantaneously purely because of the bid-ask spread) when you buy a security would be more relevant by using the ask (purchase price) as the basis. Meaning, if a stock has a bid-ask range of $95-$100, if you buy the stock at $100 (the ask), you immediately \"\"lose\"\" 5% (5/100) of its value since you can only sell it for $95.\"" }, { "docid": "434596", "title": "", "text": "In general stock markets are very similar to that, however, you can also put in limit orders to say that you will only buy or sell at a given price. These sit in the market for a specified length of time and will be executed when an order arrives that matches the price (or better). Traders who set limit orders are called liquidity (or price) makers as they provide liquidity (i.e. volume to be traded) to be filled later. If there is no counterparty (i.e. buyer to your seller) in the market, a market maker; a large bank or brokerage who is licensed and regulated to do so, will fill your order at some price. That price is based on how much volume (i.e. trading) there is in that stock on average. This is called average daily volume (ADV) and is calculated over varying periods of time; we use ADV30 which is the 30 day average. You can always sell stocks for whatever price you like privately but a market order does not allow you to set your price (you are a price taker) therefore that kind of order will always fill at a market price. As mentioned above limit orders will not fill until the price is hit but will stay on book as long as they aren't filled, expired or cancelled." }, { "docid": "525231", "title": "", "text": "\"There are two distinct questions that may be of interest to you. Both questions are relevant for funds that need to buy or sell large orders that you are talking about. The answer depends on your order type and the current market state such as the level 2 order book. Suppose there are no iceberg or hidden orders and the order book (image courtesy of this question) currently is: An unlimited (\"\"at market\"\") buy order for 12,000 shares gets filled immediately: it gets 1,100 shares at 180.03 (1,[email protected]), 9,700 at 180.04 and 1,200 at 180.05. After this order, the lowest ask price becomes 180.05 and the highest bid is obviously still 180.02 (because the previous order was a 'market order'). A limited buy order for 12,000 shares with a price limit of 180.04 gets the first two fills just like the market order: 1,100 shares at 180.03 and 9,700 at 180.04. However, the remainder of the order will establish a new bid price level for 1,200 shares at 180.04. It is possible to enter an unlimited buy order that exhausts the book. However, such a trade would often be considered a mis-trade and either (i) be cancelled by the broker, (ii) be cancelled or undone by the exchange, or (iii) hit the maximum price move a stock is allowed per day (\"\"limit up\"\"). Funds and banks often have to buy or sell large quantities, just like you have described. However they usually do not punch through order book levels as I described before. Instead they would spread out the order over time and buy a smaller quantity several times throughout the day. Simple algorithms attempt to get a price close to the time-weighted average price (TWAP) or volume-weighted average price (VWAP) and would buy a smaller amount every N minutes. Despite splitting the order into smaller pieces the price usually moves against the trader for many reasons. There are many models to estimate the market impact of an order before executing it and many brokers have their own model, for example Deutsche Bank. There is considerable research on \"\"market impact\"\" if you are interested. I understand the general principal that when significant buy orders comes in relative to the sell orders price goes up and when a significant sell order comes in relative to buy orders it goes down. I consider this statement wrong or at least misleading. First, stocks can jump in price without or with very little volume. Consider a company that releases a negative earnings surprise over night. On the next day the stock may open 20% lower without any orders having matched for any price in between. The price moved because the perception of the stocks value changed, not because of buy or sell pressure. Second, buy and sell pressure have an effect on the price because of the underlying reason, and not necessarily/only because of the mechanics of the market. Assume you were prepared to sell HyperNanoTech stock, but suddenly there's a lot of buzz and your colleagues are talking about buying it. Would you still sell it for the same price? I wouldn't. I would try to find out how much they are prepared to buy it for. In other words, buy pressure can be the consequence of successful marketing of the stock and the marketing buzz is what changes the price.\"" }, { "docid": "482517", "title": "", "text": "\"If we can agree that 2010 was closer to the low of 2009 than 2007 then the rich did all the buying while the super-rich did all the selling. http://www2.ucsc.edu/whorulesamerica/power/wealth.html Looks like the rich cleaned up during the Tech Crash too, but it looks like the poor lost faith. That limited data makes it look like the best investors are the rich. Market makers are only required by the exchanges to provide liquidity, bids & asks. They aren't required to buy endlessly. In fact, market makers (at least the ones who survive the busts) try to never have a stake in direction. They do this by holding equal inventories of long and shorts. They are actually the only people legally allowed to naked short stock: sell without securing shares to borrow. All us peons must secure borrowed shares before selling short. Also, firms involved in the actual workings of the market like bookies but unlike us peons who make the bets play by different margin rules. They're allowed to lever through the roof because they take on low risk or near riskless trades and \"\"positions\"\" (your broker, clearing agent, etc actually directly \"\"own\"\" your financial assets and borrow & lend them like a bank). http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p004001.pdf This is why market makers can be assumed not to load up on shares during a decline; they simply drop the bids & asks as their bids are hit.\"" }, { "docid": "169062", "title": "", "text": "\"It's good to ask this question, because this is one of the fundamental dichotomies in market microstructure. At any time T for each product on a (typical) exchange there are two well-defined prices: At time T there is literally no person in the market who wants to sell below the ask, so all the people who are waiting to buy at the bid (or below) could very well be waiting there forever. There's simply no guarantee that any seller will ever want to part with their product for a lesser price than they think it's worth. So if you want to buy the product at time T you have a tough choice to make: you get in line at the bid price, where there's no guarantee that your request will ever be filled, and you might never get your hands on the product you decide that owning the product right now is more valuable to you than (ask - bid) * quantity, so you tell the exchange that you're willing to buy at the ask price, and the exchange matches you with whichever seller is first in line Now, if you're in the market for the long term, the above choice is completely immaterial to you. Who cares if you pay $10.00 * 1000 shares or $10.01 * 1000 shares when you plan to sell 30 years from now at $200 (or $200.01)? But if you're a day trader or anyone else with a very short time horizon, then this choice is extremely important: if the price is about to go up several cents and you got in line at the bid (and never got filled) then you missed out on some profit if you \"\"cross the spread\"\" to buy at the ask and then the price doesn't go up (or worse, goes down), you're screwed. In order to get out of the position you'll have to cross the spread again and sell at at most the bid, meaning you've now paid the spread twice (plus transaction fees and regulatory fees) for nothing. (All of the above also applies in reverse for selling at the ask versus selling at the bid, but most people like to learn in terms of buying rather than selling.)\"" }, { "docid": "584295", "title": "", "text": "There are two terms that are related, but separate here: Broker and Market Maker. The former is who goes and finds a buyer/seller to buy/sell shares from/to you. The latter (Market Maker) is a company which will agree to partner with you to complete the sale at a set price (typically the market price, often by definition as the market maker often is the one who determines the market price in a relatively low volumne listing). A market maker will have as you say a 'pool' of relatively common stock (and even relatively uncommon, up to a point) for this purpose. A broker can be a market maker (or work for one), also, in which case he would sell you directly the shares from the market maker reservoir. This may be a bad idea for you - the broker (while obligated to act in your interest, in theory) may push you towards stocks that the brokerage acts as a market maker for." }, { "docid": "260153", "title": "", "text": "\"You can choose to place successively lower buy limit orders, but whether they get filled or not is not a given; it depends on whether sellers care to accept your bid. In your example of a 49.98 / 50.01 spread, if you place a buy with limit of 49.99, it won't get filled (if the order reaches the market while still at 49.98 / 50.01) immediately, but will be added to the order book. By being added to the order book, the markets bid and ask become 49.99 / 50.01. Your order won't get filled until some seller places a market order or a sell limit order of 49.99 or less. No guarantee that that will happen, and even if it does, there's nothing to say that your follow-up buy at 49.98 will ever be filled. In fact, your 49.98 buy order queues up at the \"\"end of the line\"\" behind all previously pending 49.98 bids, since your order arrived after those other bids. Since the initial conditions you supposed had a 49.98 bid, such an order exists (or at least did exist; it might have been cancelled in the intervening moment. Basically, your first buy at 49.99, if it happens, has essentially no influence on whether your second buy at 49.98 will happen. You can't expect to move the market lower by making a bid that is higher (49.99) than the existing best bid (49.98). Whatever influence your 49.99 order has is to raise the market's price, not lower it.\"" }, { "docid": "373862", "title": "", "text": "Sounds to me like you're describing just how it should work. Ask is at 30, Bid is at 20; you offer a new bid at 25. Either: Depending on liquidity, one or the other may be more likely. This Investorplace article on the subject describes what you're seeing, and recommends the strategy you're describing precisely. Instead of a market order, take advantage of the fact that the options world truly is a marketplace — one where you can possibly get a better price just by asking. How does that work? If you use a limit order (instead of a market order) when opening a position, you can tell your broker how much you are willing to pay to enter a trade. For example, if you enter a limit price of $1.15, you can see whether the market-maker will bite. You will be surprised at how many times you will get your price (i.e., $1.15) instead of the ask price of $1.30. If your order at $1.15 is not filled after a few minutes, you can modify your order and pay the ask price by entering a market order or limit order at the ask price (that is, you can tell your broker to pay no more than $1.30)." }, { "docid": "285126", "title": "", "text": "\"I may be underestimating your knowledge of how exchanges work; if so, I apologize. If not, then I believe the answer is relatively straightforward. Lets say price of a stock at time t1 is 15$ . There are many types of price that an exchange reports to the public (as discussed below); let's say that you're referring to the most recent trade price. That is, the last time a trade executed between a willing buyer and a willing seller was at $15.00. Lets say a significant buy order of 1M shares came in to the market. Here I believe might be a misunderstanding on your part. I think you're assuming that the buy order must necessarily be requesting a price of $15.00 because that was the last published price at time t1. In fact, orders can request any price they want. It's totally okay for someone to request to buy at $10.00. Presumably nobody will want to sell to him, but it's still a perfectly valid buy order. But let's continue under the assumptions that at t1: This makes the bid $14.99 and the ask $15.00. (NYSE also publishes these prices.) There aren't enough people selling that stock. It's quite rare (in major US equities) for anyone to place a buy order that exceeds the total available shares listed for sale at all prices. What I think you mean is that 1M is larger than the amount of currently-listed sell requests at the ask of $15.00. So say of the 1M only 100,000 had a matching sell order and others are waiting. So this means that there were exactly 100,000 shares waiting to be sold at the ask of $15.00, and that all other sellers currently in the market told NYSE they were only willing to sell for a price of $15.01 or higher. If there had been more shares available at $15.00, then NYSE would have matched them. This would be a trigger to the automated system to start increasing the price. Here is another point of misunderstanding, I think. NYSE's automated system does not invent a new, higher price to publish at this point. Instead it simply reports the last trade price (still $15.00), and now that all of the willing sellers at $15.00 have been matched, NYSE also publishes the new ask price of $15.01. It's not that NYSE has decided $15.01 is the new price for the stock; it's that $15.01 is now the lowest price at which anyone (known to NYSE) is willing to sell. If nobody happened to be interested in selling at $15.01 at t1, but there were people interested in selling at $15.02, then the new published ask would be $15.02 instead of $15.01 -- not because NYSE decided it, but just because those happened to be the facts at the time. Similarly, the new bid is most likely now $15.00, assuming the person who placed the order for 1M shares did not cancel the remaining unmatched 900,000 shares of his/her order. That is, $15.00 is now the highest price at which anyone (known to NYSE) is willing to buy. How much time does the automated system wait to increment the price, the frequency of the price change and by what percentage to increment etc. So I think the answer to all these questions is that the automated system does none of these things. It merely publishes information about (a) the last trade price, (b) the price that is currently the lowest price at which anyone has expressed a willingness to sell, and (c) the price that is currently the highest price at which anyone has expressed a willingness to buy. ::edit:: Oh, I forgot to answer your primary question. Can we estimate the impact of a large buy order on the share price? Not only can we estimate the impact, but we can know it explicitly. Because the exchange publishes information on all the orders it knows about, anyone tracking that information can deduce that (in this example) there were exactly 100,000 shares waiting to be purchased at $15.00. So if a \"\"large buy order\"\" of 1M shares comes in at $15.00, then we know that all of the people waiting to sell at $15.00 will be matched, and the new lowest ask price will be $15.01 (or whatever was the next lowest sell price that the exchange had previously published).\"" }, { "docid": "251100", "title": "", "text": "In order to see whether you can buy or sell some given quantity of a stock at the current bid price, you need a counterparty (a buyer) who is willing to buy the number of stocks you are wishing to offload. To see whether such a counterparty exists, you can look at the stock's order book, or level two feed. The order book shows all the people who have placed buy or sell orders, the price they are willing to pay, and the quantity they demand at that price. Here is the order book from earlier this morning for the British pharmaceutical company, GlaxoSmithKline PLC. Let's start by looking at the left-hand blue part of the book, beneath the yellow strip. This is called the Buy side. The book is sorted with the highest price at the top, because this is the best price that a seller can presently obtain. If several buyers bid at the same price, then the oldest entry on the book takes precedence. You can see we have five buyers each willing to pay 1543.0 p (that's 1543 British pence, or £15.43) per share. Therefore the current bid price for this instrument is 1543.0. The first buyer wants 175 shares, the next, 300, and so on. The total volume that is demanded at 1543.0p is 2435 shares. This information is summarized on the yellow strip: 5 buyers, total volume of 2435, at 1543.0. These are all buyers who want to buy right now and the exchange will make the trade happen immediately if you put in a sell order for 1543.0 p or less. If you want to sell 2435 shares or fewer, you are good to go. The important thing to note is that once you sell these bidders a total of 2435 shares, then their orders are fulfilled and they will be removed from the order book. At this point, the next bidder is promoted up the book; but his price is 1542.5, 0.5 p lower than before. Absent any further changes to the order book, the bid price will decrease to 1542.5 p. This makes sense because you are selling a lot of shares so you'd expect the market price to be depressed. This information will be disseminated to the level one feed and the level one graph of the stock price will be updated. Thus if you have more than 2435 shares to sell, you cannot expect to execute your order at the bid price in one go. Of course, the more shares you are trying to get rid of, the further down the buy side you will have to go. In reality for a highly liquid stock as this, the order book receives many amendments per second and it is unlikely that your trade would make much difference. On the right hand side of the display you can see the recent trades: these are the times the trades were done (or notified to the exchange), the price of the trade, the volume and the trade type (AT means automatic trade). GlaxoSmithKline is a highly liquid stock with many willing buyers and sellers. But some stocks are less liquid. In order to enable traders to find a counterparty at short notice, exchanges often require less liquid stocks to have market makers. A market maker places buy and sell orders simultaneously, with a spread between the two prices so that they can profit from each transaction. For instance Diurnal Group PLC has had no trades today and no quotes. It has a more complicated order book, enabling both ordinary buyers and sellers to list if they wish, but market makers are separated out at the top. Here you can see that three market makers are providing liquidity on this stock, Peel Hunt (PEEL), Numis (NUMS) and Winterflood (WINS). They have a very unpalatable spread of over 5% between their bid and offer prices. Further in each case the sum total that they are willing to trade is 3000 shares. If you have more than three thousand Dirunal Group shares to sell, you would have to wait for the market makers to come back with a new quote after you'd sold the first 3000." }, { "docid": "307008", "title": "", "text": "\"I think you've got basics, but you may have the order / emphasis a bit wrong. I've changed the order of the things you've learned in to what I think is the most important to understand: Owning a stock is like owning a tiny chunk of the business Owning stock is owning a tiny chunk of the business, it's not just \"\"like\"\" it. The \"\"tiny chunks\"\" are called shares, because that is literally what they are, a share of the business. Sometimes shares are also called stocks. The words stock and share are mostly interchangeable, but a single stock normally means your holding of many shares in a business, so if you have 100 shares in 1 company, that's a stock in that company, if you then buy 100 shares in another company, you now own 2 stocks. An investor seeks to buy stocks at a low price, and sell when the price is high. Not necessarily. An investor will buy shares in a company that they believe will make them a profit. In general, a company will make a profit and distribute some or all of it to shareholders in the form of dividends. They will also keep back a portion of the profit to invest in growing the company. If the company does grow, it will grow in value and your shares will get more valuable. Price (of a stock) is affected by supply/demand, volume, and possibly company profits The price of a share that you see on a stock ticker is the price that people on the market have exchanged the share for recently, not the price you or I can buy a share for, although usually if people on the market are buying and selling at that price, someone will buy or sell from you at a similar sort of price. In theory, the price will be the companies total value, if you were to own the whole thing (it's market capitalisation) divided by the total number of shares that exist in that company. The problem is that it's very difficult to work out the total value of a company. You can start by counting the different things that it owns (including things like intellectual property and the knowledge and experience of people who work there), subtract all the money it owes in loans etc., and then make an allowance for how much profit you expect the company to make in the future. The problem is that these numbers are all going to be estimates, and different peoples estimates will disagree. Some people don't bother to estimate at all. The market makers will just follow supply and demand. They will hold a few shares in each of many companies that they are interested in. They will advertise a lower price that they are willing to buy at and a higher price that they will sell at all the time. When they hold a lot of a share, they will price it lower so that people buy it from them. When they start to run out, they will price it higher. You will never need to spend more than the market makers price to buy a share, or get less than the market makers price when you come to sell it (unless you want to buy or sell more shares than they are willing to). This is why stock price depends on supply and demand. The other category of people who don't care about the companies they are trading are the high speed traders. They just look at information like the past price, the volume (total amount of shares being exchanged on the market) and many other statistics both from the market and elsewhere and look for patterns. You cannot compete with these people - they do things like physically locate their servers nearer to the stock exchanges buildings to get a few milliseconds time advantage over their competitors to buy shares quicker than them.\"" } ]

[ { "docid": "568064", "title": "", "text": "\"As long as the IRS treats bitcoin as property, then whenever you use bitcoin to buy anything you are supposed to consider the capital gain or capital loss. There is no \"\"until it's converted to fiat\"\". You are paying local sales tax and capital gains, or paying local sales tax and reporting capital loss. As long as you are consistent, you can use either the total cost basis, or individual lot purchases. The same as other property like stocks (except without stock specific regulations like wash-sale rules :D ). There are a lot of perks or unintentional loopholes for speculators, with the property designation. There are a lot of disadvantages for consumers trying to use it like a currency. Someone mixing investment and spending funds across addresses is going to have complicated tax issues, but fortunately the exchanges have records of purchase times and prices, which you can compare with the addresses you control. Do note, after that IRS guideline, another federal agency designated Bitcoin as a commodity, which is a subset of \"\"property\"\" with its own more favorable but different tax guidelines.\"" } ]

[ { "docid": "71307", "title": "", "text": "Reducing supply doesn't cause demand. It may shift the equilibrium price, or supply can fall even faster than demand. Certain goods are pretty inelastic, such as food - people will still pay for it even if the price goes up because the alternative is starving to death. In that case you have a point that cost of production puts a price floor there. For completely elastic goods such as bitcoin which have no intrinsic use or demand beyond people that think it is a speculative investment, it's a totally different situation. Why is it that I find in any discussion about bitcoin the pro bitcoin side has not even a high school level understanding of basic economics?" }, { "docid": "543264", "title": "", "text": "No, Walmart does not rely on government support of workers. That is a very child like view of the matter. Let's not make these people out to be victims. If those workers are not earning enough at Walmart, they should be searching for work elsewhere, or other jobs to supplement their incomes. Nobody is forcing them to work there. This type of job is really best suited for a student, or a retired person, who aren't trying to support a family, etc. Also, Walmart is only one of a million businesses who operate as a low-cost leader, and I guarantee you that you enjoy the low prices that these companies charge on a regular basis. And this makes you a hypocrite, really, because your purchases are supporting their way of doing business, which in turn leads to the low wages. So if you really want to go down the blaming road, we can blame you as well. Now, having said that, I believe a living wage is a good thing, and I support legislation in favor of this as a solution to the problem, rather than trying to stifle the natural flow of business by singling out one company and blaming them. And doing this won't harm companies like Walmart; they will still operate just as usual, only *all the prices, at every low cost store* will increase as a result of the higher wages." }, { "docid": "213659", "title": "", "text": "What people fail to realize about bitcoin is its cost to acquire a coin.. I'm not exactly familiar on pricing nowadays but back when it was $100 a coin it took you ~$95+ in power/equipment to get that coin. Meaning bitcoin can not go below $95. Bitcoin is at $5800.. And if its as it were before, it's costing ~$5700ish to obtain, miners are not going to sell their coin for $5600 that cost $5700 to get." }, { "docid": "216557", "title": "", "text": "\"The BitCoin section is just hilarious and highlights how rediculous some of the Crytocurrency market has become (not counting BitCoin and ETH). This quote in particular from the start-ups press-release had my cracking: &gt;\"\"In order to purchase and support WEED anyone that sends 1 President Johnson coin ($GARY) to the Company’s Omni Layer Bitcoin Wallet will receive 1 WEED coin into their Omni Wallet\"\"\"" }, { "docid": "9114", "title": "", "text": "Reporting costs on a fully-loaded basis means that the business should report costs directly and indirectly associated with its product and the relevant indirect costs, e.g. overhead, indirect charges, etc. If you're looking at a company in general, the fully-loaded cost basis of the firm is essentially all costs related to the product(s) it offers. In economics/accounting 101 terms, reporting costs on a fully-loaded basis means reporting both the fixed and variable costs associated with production. Fixed costs are costs that remain constant regardless of how much the firm produces, e.g. general overhead like rent, managers' salaries, etc. while variable costs are per-unit costs that may change as the firm increases or decreases production, e.g. the cost of materials, hourly wages, etc." }, { "docid": "258439", "title": "", "text": "My experience (two purchases, Ontario, Canada) is that the property taxes are paid by whomever is the owner on the date the tax bill comes due. The bill might be due before the owners even decide to sell. However: A part of the closing process is a Statement of Adjustments, in which various costs that span the tenure of two owners are split on a per-diem basis. In your case, there would have been a charge against you of 2/365 of the tax bill on this statement at the time of closing (if you hadn't paid any 2014 taxes) The statement also includes things like flat-rate water bills, monthly cable bills, security system monitoring... All paid by one owner or the other, but split fairly on a per diem basis at the time of closing..." }, { "docid": "296732", "title": "", "text": "The comparison with tulip mania shows a wilful ignorance of what bitcoin is. Scarcity is one of the things that makes bitcoin good, sure, but it's not the only thing. Could you have transfered millions of dollars worth of tulips around the world in minutes, securely and for pennies on the dollar? &gt;In bitcoin’s case, Dimon said he’s skeptical authorities will allow a currency to exist without state oversight *Allow* Bitcoin to exist? Authorities don't get say whether Bitcoin is *allowed* to exist or not. You'd think the CEO of one of the largest banks in the world would know that. &gt;“If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that Bitcoin is outperforming a lot of currencies, not just in Venezuela, Ecuador or North Korea. &gt; if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than U.S. dollars,” Why would Bitcoin be better for *only* those things? He's trying to smear Bitcoin as being only used for illegal activities and that is simply not the case. Besides, the reason that people *do* use it for those things is due to the inherent privacy aspects of Bitcoin (though not perfectly private, they're still useful)." }, { "docid": "458915", "title": "", "text": "Its only a matter of time before Governments worldwide crack down on Bitcoin. Apart from using it for illicit purchases, money laundering or speculation based on its hard limited supply, what use does it have? The transaction fees are much greater than other methods for small transactions, and its store of wealth is questionable given the vulnerability to hacking and volatility." }, { "docid": "449124", "title": "", "text": "In addition to all the good information that JoeTaxpayer has provided, be aware of this. When you sell mutual fund shares, you can, if you choose to do so, tell the mutual fund company which shares you want to sell (e.g. all shares purchased on xx/yy/2010 plus 10 shares out of 23.147 shares purchased on ss/tt/2011 plus...) and pay taxes on the gains/losses on those specific shares. If you do not specify which shares you want sold, the mutual fund company will tell you the gains/losses based on the average cost basis and you can use this information if you like. Note that some of your gains/losses will be short-term gains or losses if you use the average cost basis. Or, you can use the FIFO method (usually resulting in the largest gain) in which the shares are sold in the order in which they were purchased. This usually results in no short-term gains/losses. Just so that you know, most mutual fund companies will link your checking account in your bank to your account with them (a one-time paperwork deal is necessary in which your bank manager's signature is required on the authorization to be sent to the fund company). After that, the connection is nearly as seamless as with your current system. Tell the fund company you want to invest money in a certain mutual fund and to take the money from your linked checking account, and they will take care of it. Sell some shares and they will deposit the money into your linked bank account, and so on. The mutual fund company will not accept instructions from you (or someone purporting to be you) to sell shares and to send the money to Joe Blow (or to Joe Taxpayer for that matter): the proceeds of redemptions go to your checking account or are used to buy shares in other mutual funds offered by the company (called an exchange and not a redemption). Oh, and most fund companies offer automatic investments (as well as automatic redemptions) at fixed time intervals, just as with your bank." }, { "docid": "219398", "title": "", "text": "Bitcoin can facilitate this, despite the risks associated with using bitcoin exchanges and the price volatility at any given time. The speed of bitcoin can limit your exposure to the bitcoin network to one hour. Cyprus has a more advanced infrastructure than most countries to support bitcoin transactions, with Neo & Bee opening as a regulated bank/financial entity in Cyprus just two months ago, and ATM/Vending Machines existing for that asset. Anyway, you acquire bitcoin from an individual locally (in exchange for cash) or an exchange that does not require the same level of reporting as a bank account in Cyprus or Russia. No matter how you acquire the bitcoin, you transfer it to the exchange, sell bitcoin on the exchange for your desired currency (USD, EURO, etc), you instruct the exchange to wire the EURO to your cyprus bank account using your cyprus account's SWIFT code. The end. Depending on the combination of countries involved, the exchange may still encounter similar withdrawal limitations until certain regulatory requirements are resolved. Also, I'm unsure of the attitude toward bitcoin related answers on this site, so I tried to add a disclaimer about bitcoin's risks at the top, but that doesn't make this answer incorrect." }, { "docid": "452298", "title": "", "text": "Money and wealth are two different things. Money is an item that can be used as a store of wealth and as a convenient medium of exchange, but it's not the same thing as wealth. If you have a lot of money, then you have a lot of wealth. But you can have a lot of wealth (in the form of, for example, real estate, company ownership, financial assets and loans, and physical capital) and not have a lot of money. There is a very, very large amount of money in the world, so bitcoin would have to appreciate in an extreme way in order to replace the other forms of money. In that case someone owning a lot of bitcoin will be pretty rich. But having half the world's money is a much smaller thing than having half the world's wealth. Your inflation question isn't real clear to me. Because bitcoin is not kept in banks and lent out, a bitcoin user in your proposed world creates inflation when they spend their bitcoins, increasing demand for goods and services. This increased demand drives up the price of those goods and services. Prices react pretty quickly, so it seems like the effect of an increase in the effective money supply (the bitcoins actually being used, rather than hoarded) would have a similar effect when spent quickly as slowly. Think of it this way: if you are buying 1,000,000,000 toasters the first few thousand could be had cheaply at Walmart and Amazon. Then you would have to go to more and more expensive sources to get them. Eventually you would run out of sources and have to have them special made at yet higher expense. It's not the time that raised the prices but the actual purchasing behavior. Same thing is true of houses, yachts, islands, or whatever else a very rich hypothetical person might buy." }, { "docid": "447366", "title": "", "text": "It seems to me to be a pyramid scheme, where the holder will reach a point where they decide to sell for more traditional currency or throw it into the traditional economy through mass purchasing. The sudden increase in supply of bitcoin will help the eventual plummet in value and leave a lot of people in the cold with billions in real dollars lost by those who are still holding bitcoin to those who dumped it all before the crash. Why? It's unregulated. The one characteristic that might draw people to it will be the cause of it's demise." }, { "docid": "302691", "title": "", "text": "This are my opinions on the subject: -People are tired of the corrupt system of bankers who poorly manage money, Bitcoin is built on trust, and more people are starting to trust it. Can you trust a banker? NO. Can you trust computer systems built on strict code that will always do what you tell them too? YES. To understand why Bitcoin is safe, one must first understand the block-chain technology. MORE INFO -More companies are starting to accept Bitcoin as payment, which creates more trust in the system, which brings more people interest. LIST OF COMPANIES -Bitcoin is a worldwide coin, you can pay your friend in Japan with Bitcoin and the transaction is done in 10 minutes, as opposed to 5-7 business day if done through a bank. The banker fee is huge, the Bitcoin miner fee is minimal. -Bitcoin is like Gold but better, Bitcoin is not built for everyday transactions just like gold, its not built for buying coffee either, its built to retain value which is why there is a finite amount (21 million). -A huge benefit of bitcoin is anyone with a smartphone or a computer can download an App and start accepting Bitcoins as payments. Gold is not easily trade-able. Bitcoins is as simple as sending a picture message. (NOTE: More than 2 billion smartphone users around the world around 3.7 billion internet users around the world all capable of one day trading using bitcoin) LIVE INTERNET USERS -Keep in mind, there is more than one crypto currency, all built on different ideas and systems, all performing with incredible gains. MORE INFO" }, { "docid": "241297", "title": "", "text": "&gt;Could you have transfered millions of dollars worth of tulips around the world in minutes, securely and for pennies on the dollar? The only reason that is more complicated with dollars has to do with our underlying financial infrastructure. It has little to do with any real technological problems. &gt;Authorities don't get say whether Bitcoin is *allowed* to exist or not. Why not? Criminal court cases have already found Bitcoin as something akin to a commodity. There is no reason someone in government can't regulate or outright ban it the way China did. And as the head of a major bank Dimon is in an excellent position to manipulate the value of Bitcoin and destroy it if he chose to do so. &gt;Why would Bitcoin be better for *only* those things? Bitcoin has not done anything other than be a commodity people purchase as an investment. It's ballooned too high on value to be useful for cash transctions for any normal person." }, { "docid": "246335", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://news.bitcoin.com/britain-largest-broker-exchange-traded-bitcoin-investments/) reduced by 86%. (I'm a bot) ***** &gt; On Thursday, June 1, two bitcoin investments were added to Hargreaves Lansdown&amp;#039;s platform; Bitcoin Tracker One and Bitcoin Tracker Eur. &gt; The foreign exchange rate risk for Bitcoin Tracker One is USD/SEK whereas it is USD/EUR for Bitcoin Tracker Eur. &gt; While the certificates are denominated in SEK and EUR, they track the price of bitcoin in USD. &amp;quot;As the BTC/USD market is the most liquid bitcoin market widely available for trading, we regard it as the most suitable underlying asset in a bitcoin product,&amp;quot; the company explained. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6ewbj3/britains_largest_broker_offers_exchangetraded/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~135054 tl;drs so far.\"\") | [Theory](http://np.reddit.com/r/autotldr/comments/31bfht/theory_autotldr_concept/) | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **bitcoin**^#1 **accounts**^#2 **Hargreaves**^#3 **Lansdown**^#4 **track**^#5\"" }, { "docid": "249687", "title": "", "text": "You wouldn't fill out a 1099, your employer would or possibly whoever manages the stock account. The 1099-B imported from E-Trade says I had a transaction with sell price ~$4,500. Yes. You sold ~$4500 of stock to pay income taxes. Both the cost basis and the sale price would probably be ~$4500, so no capital gain. This is because you received and sold the stock at the same time. If they waited a little, you could have had a small gain or loss. The remainder of the stock has a cost basis of ~$5500. There are at least two transactions here. In the future you may sell the remaining stock. It has a cost basis of ~$5500. Sale price of course unknown until then. You may break that into different pieces. So you might sell $500 of cost basis for $1000 with a ~$500 capital gain. Then later sell the remainder for $15,000 for a capital gain of ~$10,000." }, { "docid": "222320", "title": "", "text": "\"In the USA there are two ways this situation can be treated. First, if your short position was held less than 45 days. You have to (when preparing the taxes) add the amount of dividend back to the purchase price of the stock. That's called adjusting the basis. Example: short at $10, covered at $8, but during this time stock paid a $1 dividend. It is beneficial for you to add that $1 back to $8 so your stock purchase basis is $9 and your profit is also $1. Inside software (depending what you use) there are options to click on \"\"adjust the basis\"\" or if not, than do it manually specifically for those shares and add a note for tax reviewer. Second option is to have that \"\"dividednd payment in lieu paid\"\" deducted as investment expence. But that option is only available if you hold the shorts for more than 45 days and itemize your deductions. Hope that helps!\"" }, { "docid": "207316", "title": "", "text": "Just a thought because this is a really good question: Would the buying and selling of blockchain based digital currency, using other blockchain based digital currencies, be subject to like kind treatment and exempt from capital gains until exchanged for a non-blockchain based good or service (or national currency) Suppose someone sells 1 bitcoin to buy 100 monero. Monero's price and bitcoin's price then change to where the 100 monero are 3 bitcoins. The person gets their bitcoin back and has 66.67 monero remaining. This scenario could be: Suppose someone sells 1 bitcoin at $1000 to buy 100 monero at $10. Bitcoin crashes 80% to $200 while monero crashes to only $6 per monero. $6 times 100 is $600 and if the person gets their bitcoin back (at $200 per bitcoi), they still lost money when measured in US Dollars if they move that bitcoin back to US dollars. In reading the IRS on bitcoin, they only care about the US dollar value of bitcoin or monero and in this example, the US dollar value is less. The person may have more bitcoins, but they still lost money if they sell." }, { "docid": "15452", "title": "", "text": "I'd take a look at some graphs and chart the price of bitcoins and its value. You'll be surprised that it follows basically any other vehicle for money. There were several times where the price of bitcoin dropped drastically and ontop of that, there is a wide margin of error that could cost you your entire wallet with no equivalent to a FDIC insurance or possibility of government/federal intervention in the event of theft." } ]

[ { "docid": "588116", "title": "", "text": "Unless I am missing something subtle, nothing happens to the buyer. Suppose Alice wants to sell short 1000 shares of XYZ at $5. She borrows the shares from Bob and sells them to Charlie. Now Charlie actually owns the shares; they are in his account. If the stock later goes up to $10, Charlie is happy; he could sell the shares he now owns, and make a $5000 profit. Alice still has the $5000 she received from her short sale, and she owes 1000 shares to Bob. So she's effectively $5000 in debt. If Bob calls in the loan, she'll have to try to come up with another $5000 to buy 1000 shares at $10 on the open market. If she can't, well, that's between her and Bob. Maybe she goes bankrupt and Bob has to write off a loss. But none of this has any effect on Charlie! He got the shares he paid for, and nobody's going to take them away from him. He has no reason to care where they came from, or what sort of complicated transactions brought them into Alice's possession. She had them, and she sold them to him, and that's the end of the story as far as he's concerned." } ]

[ { "docid": "583626", "title": "", "text": "I don't see a tag for United States, so I'm having to assume this is US taxes. It doesn't matter what app you use, IRS trades are all calculated the same. First, you have to report each trade on a 8949 and from that the totals go into a schedule D. Short term trades are stocks that you've kept exactly one year or less, long term trades are for 1 year + 1 day or more. Trades where you sold a stock for a loss, then bought that stock back again under 30 days don't get to count as a loss. This only affects realized capital gains and losses, you don't count fees. First, take all of your short term gains then offset them by all of your short term losses. Do the same for long term gains and losses. Short and long term gains are taxed at different rates. You can deduct losses from short term to your long term and vice versa. Then you can deduct the total losses up to $3000 (household, $1500 married, filing separately) per year on your regular income taxes or other dividend taxes. If you have over $3000 in losses, then you need to carry that over to subsequent years. Edited per Dave's comments: thanks Dave" }, { "docid": "458907", "title": "", "text": "\"If you can't find anyone to lend you the shares, then you can't short. You can attempt to raise the interest rate at which you will borrow at, in order to entice others to lend you their shares. In practice, broadcasting this information is pretty convoluted. If there aren't any stocks for you to buy back, then you have to buy back at a higher price. As in, place a limit buy order higher and higher until someone decides to sell to you. This affects your profit. Regarding the public ledger: This functions different in different markets. United States stock markets have an evolving body of regulations to alleviate the exact concerns you detailed, but Canada's or Dubai's stock markets would have different provisions. You make the assumption that it is an efficient process, but it is not and it is indeed ripe for abuse. In US stocks, the public ledger has a 3 business day delay between showing change of ownership. Many times brokers and clearing firms and other market participants allow a customer to go short with fake shares, with the idea that they will find real shares within the 3 business day time period to cover the position. During the time period that there is no real shares hitting the market, this is called a \"\"naked short\"\". The only legal system that attempts to deter this practice is the \"\"fail to deliver\"\" (FTD) list. If someone fails to deliver, that means there is a short position active with fake shares for which no real shares have been borrowed against. Too many FTD's allow for a short selling restriction to be placed, meaning nobody else can be short, and existing short sellers may be forced to cover.\"" }, { "docid": "19196", "title": "", "text": "The principle of demand-supply law will not work if spoofing (or layering, fake order) is implemented. However, spoofing stocks is an illegal criminal practice monitored by SEC. In stock market, aggressive buyer are willing to pay for a higher ask price pushing the price higher even if ask size is considerably larger than bid size, especially when high growth potential with time is expected. Larger bids may attract more buyers, further perpetuating a price increase (positive pile-on effect). Aggressive sellers are willing to accept a lower bid price pushing the price lower even if ask size is considerably smaller than bid size, when a negative situation is expected. Larger asks may attract more sellers, further perpetuating a price fall (negative pile-on effect). Moreover, seller and buyers considers not only price but also size of shares in their decision-making process, along with marker order and/or limit order. Unlike limit order, market order is not recorded in bid/ask size. Market order, but not limit order, immediately affects the price direction. Thus, ask/bid sizes alone do not give enough information on price direction. If stocks are being sold continuously at the bid price, this could be the beginning of a downward trend; if stocks are being sold continuously at the ask price, this could be the beginning of a upward trend. This is because ask price is always higher than bid price. In all the cases, both buyers and sellers hope to make a profit in a long-term and short-term view" }, { "docid": "24856", "title": "", "text": "\"In general, there should be a \"\"liquidity premium\"\" which means that less-liquid stocks should be cheaper. That's because to buy such a stock, you should demand a higher rate of return to compensate for the liquidity risk (the possibility that you won't be able to sell easily). Lower initial price = higher eventual rate of return. That's what's meant when Investopedia says the security would be cheaper (on average). Is liquidity good? It depends. Here's what illiquidity is. Imagine you own a rare piece of art. Say there are 10 people in the world who collect this type of art, and would appreciate what you own. That's an illiquid asset, because when you want to sell, maybe those 10 people aren't buying - maybe they don't want your particular piece, or they all happen to be short on funds. Or maybe worse, only one of them is buying, so they have all the negotiating leverage. You'll have to lower your price if you're really in a hurry to sell. Maybe if you lower your price enough, you can get one of the 10 buyers interested, even if none were initially. An illiquid asset is bad for sellers. Illiquid means there aren't enough buyers for you to get a bidding war going at the time of your choosing. You'll potentially have to wait around for buyers to turn up, or for a stock, maybe you'd have to sell a little bit at a time as buyers want the shares. Illiquid can be bad for buyers, too, if the buyer is for some reason in a hurry; maybe nobody is selling at any given time. But, usually buyers don't have to be in a hurry. An exception may be if you short sell something illiquid (brokers often won't let you do this, btw). In that case you could be a forced buyer and this could be very bad on an illiquid security. If there are only one or two sellers out there, they now have the negotiating leverage and they can ask whatever price they want. Illiquidity is very bad when mixed with margin or short sales because of the potential for forced trades at inopportune times. There are plenty of obscure penny stocks where there might be only one or two trades per day, or fewer. The spread is going to be high on these because the bids at a given time will just be lowball offers from buyers who aren't really all that interested, unless you want to give your stock away, in which case they'll take it. And the asks are going to be from sellers who want to get a decent price, but maybe there aren't really any buyers willing to pay, so the ask is just sitting there with no takers. The bids and asks may be limit orders that have been sitting open for 3 weeks and forgotten about. Contrast with a liquid asset. For example, a popular-model used car in good condition would be a lot more liquid than a rare piece of art, though not nearly as liquid as most stocks. You can probably find several people that want to buy it living nearby, and you're not going to have to drop the price to get a buyer to show up. You might even get those buyers in a bidding war. From illiquid penny stocks, there's a continuum all the way up to the most heavily-traded stocks such as those in the S&P500. With these at a given moment there will be thousands of buyers and sellers, so the spread is going to close down to nearly zero. If you think about it, just statistically, if there are thousands of bids and thousands of asks, then the closest bid-ask pair is going to be close together. That's a narrow spread. While if there are 3 bids and 2 asks on some illiquid penny stock, they might be dollars away from each other, and the number of shares desired might not match up. You can see how liquidity is good in some situations and not in others. An illiquid asset gives you more opportunity to get a good deal because there aren't a lot of other buyers and sellers around and there's some opportunity to \"\"negotiate\"\" within the wide spread. For some assets maybe you can literally negotiate by talking to the other party, though obviously not when trading stocks on an exchange. But an illiquid asset also means you might get a bad deal, especially if you need to sell quickly and the only buyers around are making lowball offers. So the time to buy illiquid assets is when you can take your time on both buying and selling, and will have no reason for a forced trade on a particular timeline. This usually means no debt is involved, since creditors (including your margin broker) can force you to trade. It also means you don't need to spend the money anytime soon, since if you suddenly needed the money you'd have a forced trade on your hands. If you have the time, then you put a price out there that's very good for you, and you wait for someone to show up and give you that price - this is how you get a good deal. One more note, another use of the term liquid is to refer to assets with low or zero volatility, such as money market funds. An asset with a lot of volatility around its intrinsic or true value is effectively illiquid even if there's high trade volume, in that any given point in time might not be a good time to sell, because the price isn't at the right level. Anyway, the general definition of a liquid investment is one that you'd be comfortable cashing out of at a moment's notice. In this sense, most stocks are not all that liquid, despite high trading volume. In different contexts people may use \"\"liquid\"\" in this sense or to mean a low bid-ask spread.\"" }, { "docid": "357324", "title": "", "text": "Cart's answer is basically correct, but I'd like to elaborate: A futures contract obligates both the buyer of a contract and the seller of a contract to conduct the underlying transaction (settle) at the agreed-upon future date and price written into the contract. Aside from settlement, the only other way either party can get out of the transaction is to initiate a closing transaction, which means: The party that sold the contract buys back another similar contract to close his position. The party that bought the contract can sell the contract on to somebody else. Whereas, an option contract provides the buyer of the option with the choice of completing the transaction. Because it's a choice, the buyer can choose to walk away from the transaction if the option exercise price is not attractive relative to the underlying stock price at the date written into the contract. When an option buyer walks away, the option is said to have expired. However – and this is the part I think needs elaboration – the original seller (writer) of the option contract doesn't have a choice. If a buyer chooses to exercise the option contract the seller wrote, the seller is obligated to conduct the transaction. In such a case, the seller's option contract is said to have been assigned. Only if the buyer chooses not to exercise does the seller's obligation go away. Before the option expires, the option seller can close their position by initiating a closing transaction. But, the seller can't simply walk away like the option buyer can." }, { "docid": "190928", "title": "", "text": "\"All margin is marked to market. Option longs do not post margin because long margin trading is forbidden. Equity longs must post margin if cash is borrowed to fund the purchase. Shorts of all kinds must post margin, and the rates are generally the same: a few standard deviations away from the mean daily change of the underlying. A currency futures trader, because of the involatility of most major monies, can get away with a few percentage points. Commodities can get to around 10%. Single equities are frequently around 20%, while indices can get back down to 10%. A future is a special case because both sides are technically short and long at the same time. The easiest example to perceive is a currency future. Which one is the buyer and which is the seller? Both and neither. Contracts may be denominated for one side as the seller and the other the buyer, but contractually, legally, and effectively, both are liable to the other, and both must take delivery. For non-currency assets, it only appears as if the cash seller is the buyer because cash is not considered an asset in the same way all other assets are, but the \"\"long\"\" is obligated to sell cash and buy the \"\"asset\"\".\"" }, { "docid": "42438", "title": "", "text": "Options are an indication what a particular segment of the market (those who deal a lot in options) think will happen. (and just because people think that, doesn't mean it will) Bearing in mind however that people writing covered-calls may due so simply as part of a strategy to mitigate downside risk at the expense of limiting upside potential. The presence of more people offering up options is to a degree an indication they are thinking the price will fall or hold steady, since that is in effect the 'bet' they are making. OTOH the people buying those options are making the opposite bet.. so who is to say which will be right. The balance between the two and how it affects the price of the options could be taken as an indication of market sentiment (within the options market) as to the future direction the stock is likely to take. (I just noticed that Blackjack posted the forumula that can be used to model all of this) To address the last part of your question 'does that mean it will go lower' I would say this. The degree to which any of this puts actual pressure on the stock of the underlying instrument is highly debatable, since many (likely most) people trading in a stock never look at what the options for that stock are doing, but base their decision on other factors such as price history, momentum, fundamentals and recent news about the company. To presume that actions in the options market would put pressure on a stock price, you would need to believe that a signficant fraction of the buyers and sellers were paying attention to the options market. Which might be the case for some Quants, but likely not for a lot of other buyers. And it could be argued even then that both groups, those trading options, and those trading stocks, are both looking at the same information to make their predictions of the likely future for the stock, and thus even if there is a correlation between what the stock price does in relation to options, there is no real causality that can be established. We would in fact predict that given access to the same information, both groups would by and large be taking similar parallel actions due to coming to similar conclusions regarding the future price of the stock. What is far MORE likely to pressure the price would be just the shear number of buyers or sellers, and also (especially since repeal of the uptick rule) someone who is trying to actively drive down the price via a lot of shorting at progressively lower prices. (something that is alleged to have been carried out by some hedge fund managers in the course of 'bear raids' on particular companies)" }, { "docid": "518967", "title": "", "text": "There is some element of truth to what your realtor said. The seller takes the house off the market after the offer is accepted but the contract is contingent upon, among other things, buyer securing the financing. A lower down payment can mean a higher chance of failing that. The buyer might be going through FHA, VA or other programs that have additional restrictions. If the buyer fails to secure a financing, that's weeks and months lost to the seller. In a seller's market, this can be an important factor in how your bid is perceived by the seller. Sometimes it even helps to disclose your credit score, for the same reason. Of course for your situation you will have to assess whether this is the case. Certainly do not let your realtor push you around to do things you are not comfortable with. Edit: A higher down payment also helps in the situation where the house appraisal does not fare well. As @Dilip Sarwate has pointed out, the particular area you are interested in is probably a seller's market, thus giving sellers more leverage in picking bids. All else equal, if you are the seller with multiple offers coming in at similar price level, would you pick the one with 20% down or 5% down? While it is true that realtors have their own motives to push through a deal as quickly as possible, the sellers can also be in the same boat. One less mortgage payment is not trivial to many. It's a complicated issue, as every party involved have different interests. Again, do your own due diligence, be educated, and make informed decisions." }, { "docid": "336053", "title": "", "text": "\"There are a few of ways to do this: Ask the seller if they will hold a Vendor Take-Back Mortgage or VTB. They essentially hold a second mortgage on the property for a shorter amortization (1 - 5 years) with a higher interest rate than the bank-held mortgage. The upside for the seller is he makes a little money on the second mortgage. The downsides for the seller are that he doesn't get the entire purchase price of the property up-front, and that if the buyer goes bankrupt, the vendor will be second in line behind the bank to get any money from the property when it's sold for amounts owing. Look for a seller that is willing to put together a lease-to-own deal. The buyer and seller agree to a purchase price set 5 years in the future. A monthly rent is calculated such that paying it for 5 years equals a 20% down payment. At the 5 year mark you decide if you want to buy or not. If you do not, the deal is nulled. If you do, the rent you paid is counted as the down payment for the property and the sale moves forward. Find a private lender for the down payment. This is known as a \"\"hard money\"\" lender for a reason: they know you can't get it anywhere else. Expect to pay higher rates than a VTB. Ask your mortgage broker and your real estate agent about these options.\"" }, { "docid": "540816", "title": "", "text": "\"Price is decided by what shares are offered at what prices and who blinks first. The buyer and seller are both trying to find the best offer, for their definition of best, within the constraints then have set on their bid or ask. The seller will sell to the highest bid they can get that they consider acceptable. The buyer will buy from the lowest offer they can get that they consider acceptable. The price -- and whether a sale/purchase happens at all -- depends on what other trades are still available and how long you're willing to wait for one you're happy with, and may be different on one share than another \"\"at the same time\"\" if the purchase couldn't be completed with the single best offer and had to buy from multiple offers. This may have been easier to understand in the days of open outcry pit trading, when you could see just how chaotic the process is... but it all boils down to a high-speed version of seeking the best deal in an old-fashioned marketplace where no prices are fixed and every sale requires (or at least offers the opportunity for) negotiation. \"\"Fred sells it five cents cheaper!\"\" \"\"Then why aren't you buying from him?\"\" \"\"He's out of stock.\"\" \"\"Well, when I don't have any, my price is ten cents cheaper.\"\" \"\"Maybe I won't buy today, or I'll buy elsewhere. \"\"Maybe I won't sell today. Or maybe someone else will pay my price. Sam looks interested...\"\" \"\"Ok, ok. I can offer two cents more.\"\" \"\"Three. Sam looks really interested.\"\" \"\"Two and a half, and throw in an apple for Susie.\"\" \"\"Done.\"\" And the next buyer or seller starts the whole process over again. Open outcry really is just a way of trying to shop around very, very, very fast, and electronic reconciliation speeds it up even more, but it's conceptually the same process -- either seller gets what they're asking, or they adjust and/or the buyer adjusts until they meet, or everyone agrees that there's no agreement and goes home.\"" }, { "docid": "366484", "title": "", "text": "For every seller, there's a buyer. Buyers may have any reason for wanting to buy (bargain shopping, foolish belief in a crazy business, etc). The party (brokerage, market maker, individual) owning the stock at the time the company goes out of business is the loser . But in a general panic, not every company is going to go out of business. So the party owning those stocks can expect to recover some, or all, of the value at some point in the future. Brokerages all reserve the right to limit margin trading (required for short selling), and during a panic would likely not allow you to short a stock they feel is a high risk for them." }, { "docid": "384015", "title": "", "text": "http://www.investopedia.com/university/shortselling/shortselling1.asp 'Therein lies the major risk of short selling, the fear of infinite losses. While the maximum loss for a long investor is the amount invested in a security, the maximum loss for a short seller is theoretically infinite, since there is no upper limit to a stock’s price appreciation. This risk is compounded by the fact that during a short squeeze or buy-in...' Never have shorted a stock. Too intimidated by that!" }, { "docid": "248013", "title": "", "text": "When looking at buying and selling, you really need to look at the overall picture for the short term. What would the closing cost be? Would you pay a buyers agent, or use the sellers? Loan generation fees? All of these would add up, and would affect you timeline adversely. You are currently comparing you rent, versus your plain mortgage and taxes. You're missing the losses you could possibly incur, if you do not stay int he home for the long term. You also have to rememberer the possibility of the property not renting long term, can you swing two mortgages? Or a mortgage and a rent check?" }, { "docid": "214003", "title": "", "text": "\"For personal investing, and speculative/ highly risky securities (\"\"wasting assets\"\", which is exactly what options are), it is better to think in terms of sunk costs. Don't chase this trade, trying to make your money back. You should minimize your loss. Unwind the position now, while there is still some remaining value in those call options, and take a short-term loss. Or, you could try this. Let's say you own an exchange traded call option on a listed stock (very general case). I don't know how much time remains before the option's expiration date. Be that as it may, I could suggest this to effect a \"\"recovery\"\". You'll be long the call and short the stock. This is called a delta hedge, as you would be delta trading the stock. Delta refers to short-term price volatility. In other words, you'll short a single large block of the stock, then buy shares, in small increments, whenever the market drops slightly, on an intra-day basis. When the market price of the stock rises incrementally, you'll sell a few shares. Back and forth, in response to short-term market price moves, while maintaining a static \"\"hedge ratio\"\". As your original call option gets closer to maturity, roll it over into the next available contract, either one-month, or preferably three-month, time to expiration. If you don't want to, or can't, borrow the underlying stock to short, you could do a synthetic short. A synthetic short is a combination of a long put and a short call, whose pay-off replicates the short stock payoff. I personally would never purchase an unhedged option or warrant. But since that is what you own right now, you have two choices: Get out, or dig in deeper, with the realization that you are doing a lot of work just to trade your way back to a net zero P&L. *While you can make a profit using this sort of strategy, I'm not certain if that is within the scope of the money.stachexchange.com website.\"" }, { "docid": "330041", "title": "", "text": "\"First, you are not exactly \"\"giving\"\" the brokerage $2000. That money is the margin requirement to protect them in the case the stock price rises. If you short 200 shares as in your example and they are holding $6000 from you then they are protected in the event of the stock price increasing to $30/share. Sometime before it gets there the brokerage will require you to deposit more money or they will cover your position by repurchasing the shares for your account. The way you make money on the short sale is if the stock price declines. It is a buy low sell high idea but in reverse. If you believe that prices are going to drop then you could sell now when it is high and buy back later when it is lower. In your example, you are selling 200 shares at $20 and later, buying those at $19. Thus, your profit is $200, not counting any interest or fees you have paid. It's a bit confusing because you are selling something you'll buy in the future. Selling short is usually considered quite risky as your gain is limited to the amount that you sold at initially (if I sell at $20/share the most I can make is if the stock declines to $0). Your potential to lose is unlimited in theory. There is no limit to how high the stock could go in theory so I could end up buying it back at an infinitely high price. Neither of these extremes are likely but they do show the limits of your potential gain and loss. I used $20/share for simplicity assuming you are shorting with a market order vs a limit order. If you are shorting it would be better for you to sell at 20 instead of 19 anyway. If someone says I would like to give you $20 for that item you are selling you aren't likely to tell them \"\"no, I'd really only like $19 for it\"\"\"" }, { "docid": "69395", "title": "", "text": "\"Your plan already answers your own question in the best possible way: If you want to be able to make the most possible profit from a large downward move in a stock (in this case, a stock that tracks gold), with a limited, defined risk if there is an upward move, the optimal strategy is to buy a put option. There are a few Exchange Traded Funds (ETFs) that track the price of gold. think of them as stocks that behave like gold, essentially. Two good examples that have options are GLD and IAU. (When you talk about gold, you'll hear a lot about futures. Forget them, for now. They do the same essential thing for your purposes, but introduce more complexity than you need.) The way to profit from a downward move without protection against an upward move is by shorting the stock. Shorting stock is like the opposite of buying it. You make the amount of money the stock goes down by, or lose the amount it goes up by. But, since stocks can go up by an infinite amount, your possible loss is unlimited. If you want to profit on a large downward move without an unlimited loss if you're wrong and it goes up, you need something that makes money as the stock drops, but can only lose so much if it goes up. (If you want to be guaranteed to lose nothing, your best investment option is buying US Treasuries, and you're technically still exposed to the risk that US defaults on its debt, although if you're a US resident, you'll likely have bigger problems than your portfolio in that situation.) Buying a put option has the exact asymmetrical exposure you want. You pay a limited premium to buy it, and at expiration you essentially make the full amount that the stock has declined below the strike price, less what you paid for the option. That last part is important - because you pay a premium for the option, if it's down just a little, you might still lose some or all of what you paid for it, which is what you give up in exchange for it limiting your maximum loss. But wait, you might say. When I buy an option, I can lose all of my money, cant I? Yes, you can. Here's the key to understanding the way options limit risk as compared to the corresponding way to get \"\"normal\"\" exposure through getting long, or in your case, short, the stock: If you use the number of options that represent the number of shares you would have bought, you will have much, much less total money at risk. If you spend the same \"\"bag 'o cash\"\" on options as you would have spent on stock, you will have exposure to way more shares, and have the same amount of money at risk as if you bought the stock, but will be much more likely to lose it. The first way limits the total money at risk for a similar level of exposure; the second way gets you exposure to a much larger amount of the stock for the same money, increasing your risk. So the best answer to your described need is already in the question: Buy a put. I'd probably look at GLD to buy it on, simply because it's generally a little more liquid than IAU. And if you're new to options, consider the following: \"\"Paper trade\"\" first. Either just keep track of fake buys and sells on a spreadsheet, or use one of the many online services where you can track investments - they don't know or care if they're real or not. Check out www.888options.com. They are an excellent learning resource that isn't trying to sell you anything - their only reason to exist is to promote options education. If you do put on a trade, don't forget that the most frustrating pitfall with buying options is this: You can be basically right, and still lose some or all of what you invest. This happens two ways, so think about them both before you trade: If the stock goes in the direction you think, but not enough to make back your premium, you can still lose. So you need to make sure you know how far down the stock has to be to make back your premium. At expiration, it's simple: You need it to be below the strike price by more than what you paid for the option. With options, timing is everything. If the stock goes down a ton, or even to zero - free gold! - but only after your option expires, you were essentially right, but lose all your money. So, while you don't want to buy an option that's longer than you need, since the premium is higher, if you're not sure if an expiration is long enough out, it isn't - you need the next one. EDIT to address update: (I'm not sure \"\"not long enough\"\" was the problem here, but...) If the question is just how to ensure there is a limited, defined amount you can lose (even if you want the possible loss to be much less than you can potentially make, the put strategy described already does that - if the stock you use is at $100, and you buy a put with a 100 strike for $5, you can make up to $95. (This occurs if the stock goes to zero, meaning you could buy it for nothing, and sell it for $100, netting $95 after the $5 you paid). But you can only lose $5. So the put strategy covers you. If the goal is to have no real risk of loss, there's no way to have any real gain above what's sometimes called the \"\"risk-free-rate\"\". For simplicity's sake, think of that as what you'd get from US treasuries, as mentioned above. If the goal is to make money whether the stock (or gold) goes either up or down, that's possible, but note that you still have (a fairly high) risk of loss, which occurs if it fails to move either up or down by enough. That strategy, in its most common form, is called a straddle, which basically means you buy a call and a put with the same strike price. Using the same $100 example, you could buy the 100-strike calls for $5, and the 100-strike puts for $5. Now you've spent $10 total, and you make money if the stock is up or down by more than $10 at expiration (over 110, or under 90). But if it's between 90 and 100, you lose money, as one of your options will be worthless, and the other is worth less than the $10 total you paid for them both.\"" }, { "docid": "118633", "title": "", "text": "\"There are three ways to do this. So far the answers posted have only mentioned two. The three ways are: Selling short means that you borrow stock from your broker and sell it with the intent of buying it back later to repay the loan. As others have noted, this has unlimited potential losses and limited potential gains. Your profit or loss will go $1:$1 with the movement of the price of the stock. Buying a put option gives you the right to sell the stock at a later date on a price that you choose now. You pay a premium to have this right, and if the stock moves against you, you won't exercise your option and will lose the premium. Options move non-linearly with the price of the stock, especially when the expiration is far in the future. They probably are not for a beginner, although they can be powerful if used properly. The third option is a synthetic short position. You form this by simultaneously buying a put option and selling short a call option, both at the same strike price. This has a risk profile that is very much like the selling the stock short, but you can accomplish it entirely with stock options. Because you're both buying an selling, in theory you might even collect a small net premium when you open. You might ask why you'd do this given that you could just sell the stock short, which certainly seems simpler. One reason is that it is not always possible to sell the stock short. Recall that you have to borrow shares from your broker to sell short. When many people want to short the stock, brokers will run out of shares to loan. The stock is then said to be \"\"hard to borrow,\"\" which effectively prevents further short selling of the stock. In this case the synthetic short is still potentially possible.\"" }, { "docid": "393134", "title": "", "text": "\"Consider the futures market. Traders buy and sell gold futures, but very few contracts, relatively speaking, result in delivery. The contracts are sold, and \"\"Open interest\"\" dwindles to near zero most months as the final date approaches. The seller buys back his short position, the buyer sells off his longs. When I own a call, and am 'winning,' say the option that cost me $1 is now worth $2, I'd rather sell that option for even $1.95 than to buy 100 shares of a $148 stock. The punchline is that very few option buyers actually hope to own the stock in the end. Just like the futures, open interest falls as expiration approaches.\"" }, { "docid": "125659", "title": "", "text": "\"Lending of shares happens in the background. Those who have lent them out are not aware that they have been lent out, nor when they are returned. The borrowers have to pay any dividends to the lenders and in the end the borrowers get their stock back. If you read the fine print on the account agreement for a margin account, you will see that you have given the brokerage the permission to silently loan your stocks out. Since the lending has no financial impact on your portfolio, there's no particular reason to know and no particular protection required. Actually, brokers typically don't bother going through the work of finding an actual stock to borrow. As long as lots of their customers have stocks to lend and not that many people have sold short, they just assume there is no problem and keep track of how many are long and short without designating which stocks are borrowed from whom. When a stock becomes hard to borrow because of liquidity issues or because many people are shorting it, the brokerage will actually start locating individual shares to borrow, which is a more time-consuming and costly procedure. Usually this involves the short seller actually talking to the broker on the phone rather than just clicking \"\"sell.\"\"\"" } ]

[ { "docid": "431799", "title": "", "text": "\"Safe short term and \"\"pay almost nothing\"\" go hand in hand. Anything that is safe for the short term will not pay much in interest/appreciation. If you don't know what to do, putting it in a savings account is the safest thing. The purpose of that isn't to earn money, it's just to store the money while you figure out where to move it to earn money.\"" } ]

[ { "docid": "206298", "title": "", "text": "Your question is actually quite broad, so will try to split it into it's key parts: Yes, standard bank ISAs pay very poor rates of interest at the moment. They are however basically risk free and should track inflation. Any investment in the 6-7% return range at the moment will be linked to stock. Stock always carries large risks (~50% swings in capital are pretty standard in the short run. In the long run it generally beats every other asset class by miles). If you can’t handle those types of short terms swings, you shouldn’t get involved. If you do want to invest in stock, there is a hefty ignorance tax waiting at every corner in terms of how brokers construct their fees. In a nutshell, there is a different best value broker in the UK for virtually every band of capital, and they make their money through people signing up when they are in range x, and not moving their money when they reach band y; or just having a large marketing budget and screwing you from the start (Nutmeg at ~1% a year is def in this category). There isn't much of an obvious way around this if you are adamant you don't want to learn about it - the way the market is constructed is just a total predatory minefield for the complete novice. There are middle ground style investments between the two extremes you are looking at: bonds, bond funds and mixes of bonds and small amounts of stock (such as the Vanguard income or Conservative Growth funds outlined here), can return more than savings accounts with less risk than stocks, but again its a very diverse field that's hard to give specific advice about without knowing more about what your risk tolerance, timelines and aims are. If you do go down this (or the pure stock fund) route, it will need to be purchased via a broker in an ISA wrapper. The broker charges a platform fee, the fund charges a fund fee. In both cases you want these as low as possible. The Telegraph has a good heat map for the best value ISA platform providers by capital range here. Fund fees are always in the key investor document (KIID), under 'ongoing charges'." }, { "docid": "350933", "title": "", "text": "A CD is guaranteed to pay its return on maturation. So if you need a certain amount of money at a specific time in the future, the CD is a more reliable way of getting it. The stock market might give you more money or less. More is obviously OK. Less is not if you're planning to pay basic expenses with it, e.g. food, rent, etc. Most retirement portfolios will have a mix of investments. Some securities (stocks and bonds), some guaranteed returns (CDs, treasuries), and some cash equivalents (money market, savings, and checking accounts). Cash equivalents are good for short term expenses and an emergency fund. Guaranteed returns are good for medium term expenses. Securities are good for the long term. Once retired, the general system is to maintain enough cash equivalents for the next few months of expenses and emergencies. Then schedule CDs for the next few years so that you have a predictable amount. Finally, keep the bulk of your wealth in securities. As you get older, your potential emergencies increase and your need for savings decreases, so the mix shifts more and more to the cash equivalents and guaranteed returns and away from securities. CDs have limited use prior to retirement (and the couple years right before retirement), mainly saving up for a large purchase like a house, car, or major appliance. Even there if you have the option of delaying the purchase, that might allow you to use securities instead. Perhaps some of your emergency fund in a short term CD that you keep rolling over. Note that the problem isn't so much that securities will fall. It's that they'll fall right when you need the money. So rather than sell 1% of your securities to meet your needs, you have to sell 2%. That's a dead weight loss of 1% that you have to deduct from your returns. That roughly matches the drop from the height of 2007 to the trough of 2009 of the S&P 500. And it was 2012 before it recovered. If in 2007, you had put the 1% of your portfolio in a two-year CD, you'd be ahead even at zero interest in 2009." }, { "docid": "148270", "title": "", "text": "The Art of Short Selling by Kathryn Stanley providers for many case studies about what kind of opportunities to look for from a fundamental analysis perspective. Typically things you can look for are financing terms that are not very favorable (expensive interest payments) as well as other constrictions on cash flow, arbitrary decisions by management (poor management), and dilution that doesn't make sense (usually another product of poor management). From a quantitative analysis perspective, you can gain insight by looking at the credit default swap rate history, if the company is listed in that market. The things that affect a CDS spread are different than what immediately affects share prices. Some market participants trade DOOMs over Credit Default Swaps, when they are betting on a company's insolvency. But looking at large trades in the options market isn't indicative of anything on its own, but you can use that information to help confirm your opinion. You can certainly jump on a trend using bad headlines, but typically by the time it is headline news, the majority of the downward move in the share price has already happened, or the stock opened lower because the news came outside of market hours. You have to factor in the short interest of the company, if the short interest is high then it will be very easy to squeeze the shorts resulting in a rally of share prices, the opposite of what you want. A short squeeze doesn't change the fundamental or quantitative reasons you wanted to short. The technical analysis should only be used to help you decide your entry and exit price ranges amongst an otherwise random walk. The technical rules you created sound like something a very basic program or stock screener might be able to follow, but it doesn't tell you anything, you will have to do research in the company's public filings yourself." }, { "docid": "264029", "title": "", "text": "Don't pay it, see a lawyer. Given your comment, it will depend on the jurisdiction on the passing of the house and the presence of a will or lack thereof. In some states all the assets will be inherited by your mom. Debts cannot be inherited; however, assets can be made to stand for debts. This is a tricky situation that is state dependent. In the end, with few assets and large credit card debt, the credit card companies are often left without payment. I would not pay the debt unless your lawyer specifically told you to do so. Sorry for your loss." }, { "docid": "66644", "title": "", "text": "As far as Driving Schools in Roxburgh Park are concerned, we at HOGGS Driving School are one of the best out there, not to mention the fact that we have a very large list of varied services in store for you. Do give us a call at the very earliest. Address: 112 Royal Terrace, Craigieburn, Victoria 3064, Ph.no: 0416 243 024" }, { "docid": "392056", "title": "", "text": "I am glad they are going away. Malls are an environmental tragedy. 1)They are the product (or maybe even part of the cause) of suburban sprawl. They encourage car usage and, by virtue of their need for large open areas to be constructed, are often far from where most people work and live. As a result, patrons have to drive large distances from their houses/jobs to the shopping centers. 2) The [parking lots are tremendous waste of space and hugely damage the environment.](https://journalistsresource.org/studies/environment/transportation/parking-environmental-impacts-development-policies-research-roundup) 3) Online shopping is much better for the environment as the product can be shipped directly to the consumer. 4) Once they are built and then closed, the space where the centers sat is basically abandoned and turns into blight. Depending on the businesses that were housed in the mall and the businesses that were supported by the mail (especially gas stations), these sites could be toxic. I am sure there are more reasons why malls are environmentally harmful, but those are a few off the top of my head." }, { "docid": "444405", "title": "", "text": "Here's how capital gains are totaled: Long and Short Term. Capital gains and losses are either long-term or short-term. It depends on how long the taxpayer holds the property. If the taxpayer holds it for one year or less, the gain or loss is short-term. Net Capital Gain. If a taxpayer’s long-term gains are more than their long-term losses, the difference between the two is a net long-term capital gain. If the net long-term capital gain is more than the net short-term capital loss, the taxpayer has a net capital gain. So your net long-term gains (from all investments, through all brokers) are offset by any net short-term loss. Short term gains are taxed separately at a higher rate. I'm trying to avoid realizing a long term capital gain, but at the same time trade the stock. If you close in the next year, one of two things will happen - either the stock will go down, and you'll have short-term gains on the short, or the stock will go up, and you'll have short-term losses on the short that will offset the gains on the stock. So I don;t see how it reduces your tax liability. At best it defers it." }, { "docid": "21288", "title": "", "text": "A gift between spouses has no tax implications. If one spouse dies the inheritance tax is always zero no matter how much of the estate passes to the surviving spouse. Gift taxes are actually related to estate taxes, so a gift no matter how large never requires filing any tax forms or paying any taxes." }, { "docid": "554734", "title": "", "text": "A good way to measure the performance of your investments is over the long term. 25-30% returns are easy to get! It's not going to be 25-30% in a single year, though. You shouldn't expect more than about 4% real (inflation-adjusted) return per year, on average, over the long term, unless you have reason to believe that you're doing a better job of predicting the market than the intellectual and investment might of Wall Street - which is possible, but hard. (Pro tip: It's actually quite easy to outdo the market at large over the short term just by getting lucky or investing in risky askets in a good year. Earning this sort of return consistently over many years, though, is stupidly hard. Usually you'll wipe out your gains several years into the process, instead.) The stock market fluctuates like crazy, which is why they tell you not to invest any money you're likely to need sooner than about 5 years out and you switch your portfolio from stocks to bonds as you approach and enter retirement. The traditional benchmark for comparison, as others have mentioned, is the rate of return (including dividends) from the Standard and Poors 500 Index. These are large stable companies which make up the core of larger United States business. (Most people supplement these with some smaller companies and overseas companies as a part of the portfolio.)" }, { "docid": "397455", "title": "", "text": "Mortgages with a prepayment penalty usually do not charge points as a condition of issue. The points, usually in the range 1%-3% of the amount borrowed, are paid from the buyer's funds at the settlement, and are effectively the prepayment penalty. Once upon a time (e.g. 30 years ago), in some areas, buyers had a choice of This last option usually had a higher interest rate than the first two. It was advantageous for a buyer to accept this option if the buyer was sure that the mortgage would indeed be paid off in a short time, e.g. because a windfall of some kind (huge bonus, big inheritance, a killing in the stock market, a successful IPO) was anticipated, where the higher interest charged for only a few years did not make much of a difference. Taking this third option and hanging on to the mortgage over the full 15 or 20 or 25 or 30 year term would have been a very poor choice. I do not know if all three options are still available in the current mortgage market. The IRS treats points for original morttgages and points for re-financed mortgages differently for the purposes of Schedule A deductions. Points paid on an original mortgage are deductible as mortgage interest in the year paid, whereas points paid on a refinance must be amortized over the life of the loan so that the mortgage interest deduction is the sum of the interest paid in the monthly payments plus a fraction of the points paid for the refinance. The undeducted part of the points get deducted in the year that the mortgage is paid off early (or refinanced again). Prepayment penalties are, of course, deductible as mortgage interest in the year of the prepayment." }, { "docid": "176061", "title": "", "text": "\"Yeah the credit union near me sucks too. Short hours, long lines and impossible parking to go with the subpar online banking and lack of ATMs. Just because the sign reads \"\"credit union\"\" doesn't mean it's a good business. Not all credit unions are created equally.\"" }, { "docid": "220276", "title": "", "text": "Right now interest rates are pretty low and as such you won't see blockbuster interest rates in anything highly liquid. That being said you're motivation is liquidity over rate of return anyway so I don't think that is a concern. Money Market funds should give you a similar return to AMEX Personal Savings. Due to their lack of a rate guarantee I wouldn't be surprised if that is simply a branded Money Market account. Your best bet is to look at what rates you can get on any short term security and park your money in the one that best suites your needs and offers the greatest return. Money Markets are simply a great way for you to keep your cash liquid while investing you in a broad range of liquid assets (diversification is key)." }, { "docid": "192900", "title": "", "text": "This is the bird's eye view of how shorting works: When you place an order to sell a stock short, your broker attempts to grab the desired number of shares from any accounts of its other customers and makes them available for you to sell. If no other customers own shares of this stock, then generally you are out of luck (It is more complicated like that in practice, but this is just an overview). Your odds are better if the particular stock has a large float (i.e. a large number of shares that are actually available for trading) and its short ratio is low (which means relatively few shares are currently being sold short). Also, a large brokerage may be more likely to have access to the shares than a small niche-market broker. The example you've given, Angie's List (ANGI) is a $600M small-cap with a comparatively low float, and though I haven't been able to glean the short ratio, it appears that a lot of investors are bearish on this stock and probably already had the same idea to short it. There is really no way to find out if a specific broker has shares in inventory available for shorting, short of (forgive the pun) checking directly with the broker." }, { "docid": "327901", "title": "", "text": "\"They always use the term \"\"spike\"\" - making the assumption they will go down. An large eruption in Iceland, if one occurs, (less likely than not) would cause major increases in food prices globally, just like a limited nuclear war would. In even a small nuclear war the food cost increase subsequent to a short \"\"nuclear winter\"\" is projected to kill two billion people, mostly children, worldwide.\"" }, { "docid": "366560", "title": "", "text": "Your question is missing too much to be answered directly. Instead - here are some points to consider. Short term gains taxed at your marginal rates, whereas long term gains have preferable capital gains rates (up to 20% tax rate, instead of your marginal rate). So if you're selling at gain, you might want to consider to sell FIFO and pay lower capital gains tax rate instead of the short term marginal rate. If you're selling at loss and have other short term gains, you would probably be better selling LIFO, so that the loss could offset other short term gains that you might have. If you're selling at loss and don't have short term gains to offset, you can still offset your long term gains with short term losses, but the tax benefit will be lower. In this case - FIFO might be a better choice again. If you're selling at loss, beware of the wash sale rules, as you might not be able to deduct the loss if you buy/sell within too short a window." }, { "docid": "277827", "title": "", "text": "This is largely dependent on your overall investment goals. GIC's provide protection of the invested capital and a guaranteed return at the end of the term. However, in real terms, 1.4% over 18 months results in a loss of capital in real terms. This is because inflation in Canada is just about at or higher than 1.4% per year. In other words, at best, you are equalling inflation and gaining nothing in those 18 months. If their typical rate is 1.2% over 12 months, you are only gaining an additional 0.2% for the additional 6 months. You know as well as I do, 0.2% for 6 months is abysmal. If you have no use for the money in the medium to long term, you should look in to an index fund that is balanced, and diversified and more likely to get you a higher real return over the time period of a few years. Look in to: If you want to preserve the capital over the short term because you might need it after the 18 months period, the GIC is the safer and recommended option." }, { "docid": "576154", "title": "", "text": "I lived and worked in my college town for 7 years before I found out we had a Sears. It was a huge store on a main road with a parking lot so large that the store was too far back to be noticed...and they didnt have a sign." }, { "docid": "182055", "title": "", "text": "This directly relates to the ideas behind the yield curve. For a detailed explanation of the yield curve, see the linked answer that Joe and I wrote; in short, the yield curve is a plot of the yield on Treasury securities against their maturities. If short-term Treasuries are paying higher yields than long-term debt, the yield curve has a negative slope. There are a lot of factors that could cause the yield curve to become negatively sloped, or at least less steep, but in this case, oil prices and the effective federal funds rate may have played a significant role. I'll quote from the section of the linked answer that describes the effect of oil prices first: a rise in oil prices may increase expectations of short-term inflation, so investors demand higher interest rates on short-term debt. Because long-term inflation expectations are governed more by fundamental macroeconomic factors than short-term swings in commodity prices, long-term expectations may not rise nearly as much as short term expectations, which leads to a yield curve that is becoming less steep or even negatively sloped. As the graph shows, oil prices increased dramatically, so this increase may have increased expectations of short-term inflation expectations substantially. The other answer describes an easing of monetary policy, e.g. a decrease in the effective federal funds rate (FFR), as a factor that could increase the slope of the yield curve. However, a tightening of monetary policy, e.g. an increase in the FFR, could decrease the slope of the yield curve because a higher FFR leads investors to demand a higher rate of return on shorter-term securities. Longer-term Treasuries aren't as affected by short-term monetary policy, so when short-term yields increase more than long-term yields, the yield curve becomes less steep and/or negatively sloped. The second graph shows the effective federal funds rate for the period in question, and once again, the increase is significant. Finally, look at a graph of inflation for the relevant period. Intuitively, the steady increase in inflation from 1975 onward may have increased investors expectations of short-term inflation, therefore increasing short-term yields more than long-term yields (as described above and in the other answer). These reasons aren't set in stone, and just looking at graphs isn't a substitute for an actual analysis of the data, but logically, it seems plausible that the positive shock to oil prices, increases in the effective federal funds rate, and increases in inflation and expectations of inflation contributed at least partially to the inversion of the yield curve. Keep in mind that these factors are all interconnected as well, so the situation is certainly more complex. If you approve of this answer, be sure to vote up the other answer about the yield curve too." }, { "docid": "163197", "title": "", "text": "If you want to invest in stocks, bonds and mutual funds I would suggest you take a portion of your inheritance and use it to learn how to invest in this asset class wisely. Take courses on investing and trading (two different things) in paper assets and start trading on a fantasy exchange to test and hone your investment skills before risking any of your money. Personally I don't find bonds to have a meaningful rate of return and I prefer stocks that have a dividend over those that don't. Parking some of your money in an IRA is a good strategy for when you do not see opportunities to purchase cashflow-positive assets right away; this allows you to wait and deploy your capital when the opportunity presents itself and to educate yourself on what a good opportunity looks like." } ]

[ { "docid": "495774", "title": "", "text": "I am sorry for your loss, this person blessed you greatly. For now I would put it in a savings account. I'd use a high yield account like EverBank or Personal Savings from Amex. There are others it is pretty easy to do your own research. Expect to earn around 2200 if you keep it there a year. As you grieve, I'd ask myself what this person would want me to do with the money. I'd arrive at a plan that involved me investing some, giving some, and spending some. I have a feeling, knowing that you have done pretty well for yourself financially, that this person would want you to spend some money on yourself. It is important to honor their memory. Giving is an important part of building wealth, and so is investing. Perhaps you can give/purchase a bench or part of a walkway at one of your favorite locations like a zoo. This will help you remember this person fondly. For the investing part, I would recommend contacting a company like Fidelity or Vanguard. The can guide you into mutual funds that suit your needs and will help you understand the workings of them. As far as Fidelity, they will tend to guide you toward their company funds, but they are no load. Once you learn how to use the website, it is pretty easy to pick your own funds. And always, you can come back here with more questions." } ]

[ { "docid": "266898", "title": "", "text": "Capital losses do mirror capital gains within their holding periods. An asset or investment this is certainly held for a year into the day or less, and sold at a loss, will create a short-term capital loss. A sale of any asset held for over a year to your day, and sold at a loss, will create a loss that is long-term. When capital gains and losses are reported from the tax return, the taxpayer must first categorize all gains and losses between long and short term, and then aggregate the sum total amounts for every single regarding the four categories. Then the gains that are long-term losses are netted against each other, therefore the same is done for short-term gains and losses. Then your net gain that is long-term loss is netted against the net short-term gain or loss. This final net number is then reported on Form 1040. Example Frank has the following gains and losses from his stock trading for the year: Short-term gains - $6,000 Long-term gains - $4,000 Short-term losses - $2,000 Long-term losses - $5,000 Net short-term gain/loss - $4,000 ST gain ($6,000 ST gain - $2,000 ST loss) Net long-term gain/loss - $1,000 LT loss ($4,000 LT gain - $5,000 LT loss) Final net gain/loss - $3,000 short-term gain ($4,000 ST gain - $1,000 LT loss) Again, Frank can only deduct $3,000 of final net short- or long-term losses against other types of income for that year and must carry forward any remaining balance." }, { "docid": "434869", "title": "", "text": "\"It is difficult to become a millionaire in the short term (a few years) working at a 9-to-5 job, unless you get lucky (win the lottery, inheritance, gambling at a casino, etc). However, if you max out your employer's Retirement Plan (401k, 403b) for the next 30 years, and you average a 5% rate of return on your investment, you will reach millionaire status. Many people would consider this \"\"easy\"\" and \"\"automatic\"\". Of course, this assumes you are able to max our your retirement savings at the start of your career, and keep it going. The idea is that if you get in the habit of saving early in your career and live modestly, it becomes an automatic thing. Unfortunately, the value of $1 million after 30 years of inflation will be eroded somewhat. (Sorry.) If you don't want to wait 30 years, then you need to look at a different strategy. Work harder or take risks. Some options:\"" }, { "docid": "406926", "title": "", "text": "For safety. If something catastrophic happens to your bank and your money is in there you will lose any not covered by FDIC. So if you have a very large amount of money you will store it in bonds as its much less likely that the US treasury will go bankrupt than your bank. I also literally just posted this in another thread: Certain rules and regulations penalize companies or institutions for holding cash, so they are shifting to bonds and bills. Fidelity, for example, is completely converting its $100 billion dollar cash fund to short term bills. Its estimated that over $2 trillion that is now in cash may be converted to bills, and that will obviously put upward preasure on the price of them. The treasury is trying to issue more short term debt to balance out the demand. read more here: http://www.wsj.com/articles/money-funds-clamor-for-short-term-treasurys-1445300813" }, { "docid": "23387", "title": "", "text": "\"You need to have 3 things if you are considering short-term trading (which I absolutely do not recommend): The ability to completely disconnect your emotions from your gains and losses (yes, even your gains but especially your losses). The winning/losing on a daily basis will cause you to start taking unnecessary risk in order to win again. If you can't disconnect your emotions, then this isn't the game for you. The lowest possible trading costs to enter and exit a position. People will talk about 1% trading costs; that rule-of-thumb doesn't apply anymore. Personally, my trading costs are a total 13.9 basis points to enter and exit a $10,000 position and I think it's still too high (that's just a hair above one-eighth of 1% for you non-traders). The ability to \"\"gut-check\"\" and exit a losing position FAST. Don't hesitate and don't hope for it to go up. GTFO. If you are serious about short-term trading then you must close all positions on a daily basis. Don't do margin in today's market as many valuations are high and some industries are not trending as they have in the past. The leverage will kill you. It's not a question of \"\"if\"\", it's a when. You're new. Don't trade anything larger than a $5,000 position, no matter what. Don't hold more than 10% of your portfolio in the same industry. Don't be afraid to sit on 50% cash or more for months at a time. Use money market funds to park cash because they are T+1 settlement and most firms will let you trade the stock without cash as long as you effect the money market trade on the same day since stock settlement is T+3.\"" }, { "docid": "175819", "title": "", "text": "Your question asked about a specific time the yield curve flattened or inverted. There are other times when the yield curve inverted or flattened. You also imply in your question that investors were flocking to long term bonds which lowered their yields. I don't believe this is the case. I believe investors were fleeing from short term bonds causing the yields on short term bonds to rise to meet those of long term bonds. The chart below shows the history of yields on US bonds over time. The shaded areas are where the yield curve flattened or inverted. Notice that after 1982 it is the short term yields that rise sharply to meet or cross the yields on longer term bonds. The yields on longer term bonds move little compared to the movement in yields on the short term bonds. Thus it is investors moving out of short term bonds that cause the yield curve to flatten or invert. These investors are not moving into longer term bonds since the yields on the longer term bonds do not move much at all at these times. In fact, in 2006 the longer term bond market was only 25% of the total US public debt while short term bonds made up 75%. It would take less money to move the yields on longer term bonds than it would on short term bonds yet the longer term yields did not move near as much as short term yields. So why are investors or banks moving out of short term bonds causing their yields to rise? I believe this happens for one of two reasons: they are moving into higher yielding investments or they need to raise cash to cover bad investments. Charts and more information here." }, { "docid": "192900", "title": "", "text": "This is the bird's eye view of how shorting works: When you place an order to sell a stock short, your broker attempts to grab the desired number of shares from any accounts of its other customers and makes them available for you to sell. If no other customers own shares of this stock, then generally you are out of luck (It is more complicated like that in practice, but this is just an overview). Your odds are better if the particular stock has a large float (i.e. a large number of shares that are actually available for trading) and its short ratio is low (which means relatively few shares are currently being sold short). Also, a large brokerage may be more likely to have access to the shares than a small niche-market broker. The example you've given, Angie's List (ANGI) is a $600M small-cap with a comparatively low float, and though I haven't been able to glean the short ratio, it appears that a lot of investors are bearish on this stock and probably already had the same idea to short it. There is really no way to find out if a specific broker has shares in inventory available for shorting, short of (forgive the pun) checking directly with the broker." }, { "docid": "322806", "title": "", "text": "\"Diversification is the only real free lunch in finance (reduction in risk without any reduction in expected returns), so clearly every good answer to your question will be \"\"yes.\"\" Diversification is good.\"\" Let's talk about many details your question solicits. Many funds are already pretty diversified. If you buy a mutual fund, you are generally already getting a large portion of the gains from diversification. There is a very large difference between the unnecessary risk in your portfolio if you only hold a couple of stocks and if you hold a mutual fund. Should you be diversified across mutual funds as well? It depends on what your funds are. Many funds, such as target-date funds, are intended to be your sole investment. If you have funds covering every major asset class, then there may not be any additional benefit to buying other funds. You probably could not have picked your \"\"favorite fund\"\" early on. As humans, we have cognitive biases that make us think we knew things early on that we did not. I'm sure at some point at the very beginning you had a positive feeling toward that fund. Today you regret not acting on it and putting all your money there. But the number of such feelings is very large and if you acted on all those, you would do a lot of crazy and harmful things. You didn't know early on which fund would do well. You could just as well have had a good feeling about a fund that subsequently did much worse than your diversified portfolio did. The advice you have had about your portfolio probably isn't based on sound finance theory. You say you have always kept your investments in line with your age. This implies that you believe the guidelines given you by your broker or financial advisor are based in finance theory. Generally speaking, they are not. They are rules of thumb that seemed good to someone but are not rigorously proven either in theory or empirics. For example the notion that you should slowly shift your investments from speculative to conservative as you age is not based on sound finance theory. It just seems good to the people who give advice on such things. Nothing particularly wrong with it, I guess, but it's not remotely on par with the general concept of being well-diversified. The latter is extremely well established and verified, both in theory and in practice. Don't confuse the concept of diversification with the specific advice you have received from your advisor. A fund averaging very good returns is not an anomaly--at least going forward it will not be. There are many thousand funds and a large distribution in their historical performance. Just by random chance, some funds will have a truly outstanding track record. Perhaps the manager really was skilled. However, very careful empirical testing has shown the following: (1) You, me, and people whose profession it is to select outperforming mutual funds are unable to reliably detect which ones will outperform, except in hindsight (2) A fund that has outperformed, even over a long horizon, is not more likely to outperform in the future. No one is stopping you from putting all your money in that fund. Depending on its investment objective, you may even have decent diversification if you do so. However, please be aware that if you move your money based on historical outperformance, you will be acting on the same cognitive bias that makes gamblers believe they are on a \"\"hot streak\"\" and \"\"can't lose.\"\" They can, and so can you. ======== Edit to answer a more specific line of questions =========== One of your questions is whether it makes sense to buy a number of mutual funds as part of your diversification strategy. This is a slightly more subtle question and I will indicate where there is uncertainty in my answer. Diversifying across asset classes. Most of the gains from diversification are available in a single fund. There is a lot of idiosyncratic risk in one or two stocks and much less in a collection of hundreds of stocks, which is what any mutual fund will hold. Still,you will probably want at least a couple of funds in your portfolio. I will list them from most important to least and I will assume the bulk of your portfolio is in a total US equity fund (or S&P500-style fund) so that you are almost completely diversified already. Risky Bonds. These are corporate, municipal, sovereign debt, and long-term treasury debt funds. There is almost certainly a good deal to be gained by having a portion of your portfolio in bonds, and normally a total market fund will not include bond exposure. Bonds fund returns are closely related to interest rate and inflation changes. They are also exposed to some market risk but it's more efficient to get that from equity. The bond market is very large, so if you did market weights you would have more in bonds than in equity. Normally people do not do this, though. Instead you can get the exposure to interest rates by holding a lesser amount in longer-term bonds, rather than more in shorter-term bonds. I don't believe in shifting your weights toward nor away from this type of bond (as opposed to equity) as you age so if you are getting that advice, know that it is not well-founded in theory. Whatever your relative weight in risky bonds when you are young is should also be your weight when you are older. International. There are probably some gains from having some exposure to international markets, although these have decreased over time as economies have become more integrated. If we followed market weights, you would actually put half your equity weight in an international fund. Because international funds are taxed differently (gains are always taxed at the short-term capital gains rate) and because they have higher management fees, most people make only a small investment to international funds, if any at all. Emerging markets International funds often ignore emerging markets in order to maintain liquidity and low fees. You can get some exposure to these markets through emerging markets funds. However, the value of public equity in emerging markets is small when compared with that of developed markets, so according to finance theory, your investment in them should be small as well. That's a theoretical, not an empirical result. Emerging market funds charge high fees as well, so this one is kind of up to your taste. I can't say whether it will work out in the future. Real estate. You may want to get exposure to real estate by buying a real-estate fund (REIT). Though, if you own a house you are already exposed to the real estate market, perhaps more than you want to be. REITs often invest in commercial real estate, which is a little different from the residential market. Small Cap. Although total market funds invest in all capitalization levels, the market is so skewed toward large firms that many total market funds don't have any significant small cap exposure. It's common for individuals to hold a small cap fund to compensate for this, but it's not actually required by investment theory. In principle, the most diversified portfolio should be market-cap weighted, so small cap should have negligible weight in your portfolio. Many people hold small cap because historically it has outperformed large cap firms of equal risk, but this trend is uncertain. Many researchers feel that the small cap \"\"premium\"\" may have been a short-term artifact in the data. Given these facts and the fact that small-cap funds charge higher fees, it may make sense to pass on this asset class. Depends on your opinion and beliefs. Value (or Growth) Funds. Half the market can be classed as \"\"value\"\", while the other half is \"\"growth.\"\" Your total market fund should have equal representation in both so there is no diversification reason to buy a special value or growth fund. Historically, value funds have outperformed over long horizons and many researchers think this will continue, but it's not exactly mandated by the theory. If you choose to skew your portfolio by buying one of these, it should be a value fund. Sector funds. There is, in general, no diversification reason to buy funds that invest in a particular sector. If you are trying to hedge your income (like trying to avoid investing in the tech sector because you work in that sector) or your costs (buying energy because you buy use a disproportionate amount of energy) I could imagine you buying one of these funds. Risk-free bonds. Funds specializing in short-term treasuries or short-term high-quality bonds of other types are basically a substitute for a savings account, CD, money market fund, or other cash equivalent. Use as appropriate but there is little diversification here per se. In short, there is some value in diversifying across asset classes, and it is open to opinion how much you should do. Less well-justified is diversifying across managers within the same asset class. There's very little if any advantage to doing that.\"" }, { "docid": "35002", "title": "", "text": "15 years ago I bought a beach condo in Miami for $400,000 and two extra parking spaces for $3000 each. Today the condo is worth 600,000 but the rent barely covers mortgage repairs and property taxes. Most of The old people in the building have since died and are now replaced with families with at least two cars and spots are in short supply. I turned down offers of 25,000 for each parking space. I have the spaces rented out for $200 per month no maintenance for an 80% annual return on my purchase price and the value went has gone up over $700%. And no realtors commissions if i decide to sell the spaces." }, { "docid": "321270", "title": "", "text": "\"&gt;Goods that are exchanged for financial value, which you can use to increase your own standard of living at the expense of the people importing your goods. If you're doing that, you're running balanced trade, not a surplus. To run a surplus, you have to accumulate the financial claims. That's why you see Japan and China for example holding large balances of US dollars which they just park in treasuries. If you pursue trade surpluses as a policy, you're stuck holding the money. &gt;I've been \"\"emphasizing\"\" a bottom line this entire time! It's the wrong line though. A *voluntary* financial constraint that forces real output capacity into idleness leaving a country poorer in real terms.\"" }, { "docid": "94040", "title": "", "text": "Short-term to intermediate-term corporate bond funds are available. The bond fund vehicle helps manage the credit risk, while the short terms help manage inflation and interest rate risk. Corporate bond funds will have fewer Treasuries bonds than a general-purpose short-term bond fund: it sounds like you're interested in things further out along the risk curve than a 0.48% return on a 5-year bond, and thus don't care for the Treasuries. Corporate bonds are generally safer than stocks because, in bankruptcy, all your bondholders have to be paid in full before any equity-holders get a penny. Stocks are much more volatile, since they're essentially worth the value of their profits after paying all their debt, taxes, and other expenses. As far as stocks are concerned, they're not very good for the short term at all. One of the stabler stock funds would be something like the Vanguard Equity Income Fund, and it cautions: This fund is designed to provide investors with an above-average level of current income while offering exposure to the stock market. Since the fund typically invests in companies that are dedicated to consistently paying dividends, it may have a higher yield than other Vanguard stock mutual funds. The fund’s emphasis on slower-growing, higher-yielding companies can also mean that its total return may not be as strong in a significant bull market. This income-focused fund may be appropriate for investors who have a long-term investment goal and a tolerance for stock market volatility. Even the large-cap stable companies can have their value fall dramatically in the short term. Look at its price chart; 2008 was brutal. Avoid stocks if you need to spend your money within a couple of years. Whatever you choose, read the prospectus to understand the risks." }, { "docid": "30425", "title": "", "text": "\"The emphasis of \"\"stop loss\"\" is \"\"stop\"\", not \"\"loss\"\". Stop and long term are contradictory. After you stop, what are you going to do with your cash? Since it's long term, you still have 5+ years to before you use the money, do you simply park everything in 0.5% savings account? On the other hand, if your investment holds N stocks and one has dropped a lot, you are free to switch to another one. This is just an investment strategy and you are still in the market.\"" }, { "docid": "128990", "title": "", "text": "For two reasons primarily: For one, it is very simply because China is at a different stage in its economic development than the USA. That is just a fact. Secondly and more verbosely, the nation of China is experiencing predictable short-term gains that are primarily the result of modernization in best practices, technical skills, and equipment. The reality of the Chinese economy is that it is mostly fueled by a global need for cheap labor and a lot of it. This is thrusting many of China's still 3rd world citizens into modern era industry and production through the many nationalized development and relocation projects taken on by the government. These base realities of Chinas 'economic development', when set against any relevant metric, are in no way indicative of economic success. If anything, the growth China is experiencing underscores the ever-present reality and impact of capitalistically driven market-based economies. In the short term, the nation will have increasing challenges appeasing and suppressing the nation's workforce as workers fight for improved workers rights/conditions. In the long-term, the nation/government will struggle with managing and planning the nation's inevitable transition into a market-based consumer economy as all those workers, in turn, spend their newly acquired wealth. In all truth, the Chinese government is almost singularly driving growth by sacrificing untold amounts of money and Chinese lives to advance an agenda that increases domestic production and attempts to modernize the largely 3rd world population into the 21st century. *As a final note. The nations concerning disregard in the pursuit of modernizing its workforce and domestic production can best be classified as a series of human rights violations. Especially when considering the impacts and conditions for many in Chinas workforce.*" }, { "docid": "182055", "title": "", "text": "This directly relates to the ideas behind the yield curve. For a detailed explanation of the yield curve, see the linked answer that Joe and I wrote; in short, the yield curve is a plot of the yield on Treasury securities against their maturities. If short-term Treasuries are paying higher yields than long-term debt, the yield curve has a negative slope. There are a lot of factors that could cause the yield curve to become negatively sloped, or at least less steep, but in this case, oil prices and the effective federal funds rate may have played a significant role. I'll quote from the section of the linked answer that describes the effect of oil prices first: a rise in oil prices may increase expectations of short-term inflation, so investors demand higher interest rates on short-term debt. Because long-term inflation expectations are governed more by fundamental macroeconomic factors than short-term swings in commodity prices, long-term expectations may not rise nearly as much as short term expectations, which leads to a yield curve that is becoming less steep or even negatively sloped. As the graph shows, oil prices increased dramatically, so this increase may have increased expectations of short-term inflation expectations substantially. The other answer describes an easing of monetary policy, e.g. a decrease in the effective federal funds rate (FFR), as a factor that could increase the slope of the yield curve. However, a tightening of monetary policy, e.g. an increase in the FFR, could decrease the slope of the yield curve because a higher FFR leads investors to demand a higher rate of return on shorter-term securities. Longer-term Treasuries aren't as affected by short-term monetary policy, so when short-term yields increase more than long-term yields, the yield curve becomes less steep and/or negatively sloped. The second graph shows the effective federal funds rate for the period in question, and once again, the increase is significant. Finally, look at a graph of inflation for the relevant period. Intuitively, the steady increase in inflation from 1975 onward may have increased investors expectations of short-term inflation, therefore increasing short-term yields more than long-term yields (as described above and in the other answer). These reasons aren't set in stone, and just looking at graphs isn't a substitute for an actual analysis of the data, but logically, it seems plausible that the positive shock to oil prices, increases in the effective federal funds rate, and increases in inflation and expectations of inflation contributed at least partially to the inversion of the yield curve. Keep in mind that these factors are all interconnected as well, so the situation is certainly more complex. If you approve of this answer, be sure to vote up the other answer about the yield curve too." }, { "docid": "457122", "title": "", "text": "\"For a two year time frame, a good insured savings account or a low-cost short-term government bond fund is most likely the way I would go. Depending on the specific amount, it may also be reasonable to look into directly buying government bonds. The reason for this is simply that in such a short time period, the stock market can be extremely volatile. Imagine if you had gone all in with the money on the stock market in, say, 2007, intending to withdraw the money after two years. Take a broad stock market index of your choice and see how much you'd have got back, and consider if you'd have felt comfortable sticking to your plan for the duration. Since you would likely be focused more on preservation of capital than returns during such a relatively short period, the risk of the stock market making a major (or even relatively minor) downturn in the interim would (should) be a bigger consideration than the possibility of a higher return. The \"\"return of capital, not return on capital\"\" rule. If the stock market falls by 10%, it must go up by 11% to break even. If it falls by 25%, it must go up by 33% to break even. If you are looking at a slightly longer time period, such as the example five years, then you might want to add some stocks to the mix for the possibility of a higher return. Still, however, since you have a specific goal in mind that is still reasonably close in time, I would likely keep a large fraction of the money in interest-bearing holdings (bank account, bonds, bond funds) rather than in the stock market. A good compromise may be medium-to-high-yield corporate bonds. It shouldn't be too difficult to find such bond funds that can return a few percentage points above risk-free interest, if you can live with the price volatility. Over time and as you get closer to actually needing the money, shift the holdings to lower-risk holdings to secure the capital amount. Yes, short-term government bonds tend to have dismal returns, particularly currently. (It's pretty much either that, or the country is just about bankrupt already, which means that the risk of default is quite high which is reflected in the interest premiums demanded by investors.) But the risk in most countries' short-term government bonds is also very much limited. And generally, when you are looking at using the money for a specific purpose within a defined (and relatively short) time frame, you want to reduce risk, even if that comes with the price tag of a slightly lower return. And, as always, never put all your eggs in one basket. A combination of government bonds from various countries may be appropriate, just as you should diversify between different stocks in a well-balanced portfolio. Make sure to check the limits on how much money is insured in a single account, for a single individual, in a single institution and for a household - you don't want to chase high interest bank accounts only to be burned by something like that if the institution goes bankrupt. Generally, the sooner you expect to need the money, the less risk you should take, even if that means a lower return on capital. And the risk progression (ignoring currency effects, which affects all of these equally) is roughly short-term government bonds, long-term government bonds or regular corporate bonds, high-yield corporate bonds, stock market large cap, stock market mid and low cap. Yes, there are exceptions, but that's a resonable rule of thumb.\"" }, { "docid": "444405", "title": "", "text": "Here's how capital gains are totaled: Long and Short Term. Capital gains and losses are either long-term or short-term. It depends on how long the taxpayer holds the property. If the taxpayer holds it for one year or less, the gain or loss is short-term. Net Capital Gain. If a taxpayer’s long-term gains are more than their long-term losses, the difference between the two is a net long-term capital gain. If the net long-term capital gain is more than the net short-term capital loss, the taxpayer has a net capital gain. So your net long-term gains (from all investments, through all brokers) are offset by any net short-term loss. Short term gains are taxed separately at a higher rate. I'm trying to avoid realizing a long term capital gain, but at the same time trade the stock. If you close in the next year, one of two things will happen - either the stock will go down, and you'll have short-term gains on the short, or the stock will go up, and you'll have short-term losses on the short that will offset the gains on the stock. So I don;t see how it reduces your tax liability. At best it defers it." }, { "docid": "370290", "title": "", "text": "\"Both explanations are partly true. There are many investors who do not want to sell an asset at a loss. This causes \"\"resistance\"\" at prices where large amounts of the asset were previously traded by such investors. It also explains why a \"\"break-through\"\" of such a \"\"resistance\"\" is often associated with a substantial \"\"move\"\" in price. There are also many investors who have \"\"stop-loss\"\" or \"\"trailing stop-loss\"\" \"\"limit orders\"\" in effect. These investors will automatically sell out of a long position (or buy out of a short position) if the price drops (or rises) by a certain percentage (typically 8% - 10%). There are periods of time when money is flowing into an asset or asset class. This could be due to a large investor trying to quietly purchase the asset in a way that avoids raising the price earlier than necessary. Or perhaps a large investor is dollar-cost-averaging. Or perhaps a legal mandate for a category of investors has changed, and they need to rebalance their portfolios. This rebalancing is likely to take place over time. Or perhaps there is a fad where many small investors (at various times) decide to increase (or decrease) their stake in an asset class. Or perhaps (for demographic reasons) the number of investors in a particular situation is increasing, so there are more investors who want to make particular investments. All of these phenomena can be summarized by the word \"\"momentum\"\". Traders who use technical analysis (including most day traders and algorithmic speculators) are aware of these phenomena. They are therefore more likely to purchase (or sell, or short) an asset shortly after one of their \"\"buy signals\"\" or \"\"sell signals\"\" is triggered. This reinforces the phenomena. There are also poorly-understood long-term cycles that affect business fundamentals and/or the politics that constrain business activity. For example: Note that even if the markets really were a random walk, it would still be profitable (and risk-reducing) to perform dollar-cost-averaging when buying into a position, and also perform averaging when selling out of a position. But this means that recent investor behavior can be used to predict the near-future behavior of investors, which justifies technical analysis.\"" }, { "docid": "487929", "title": "", "text": "You admire people who inherited large sums of money, hasn't even beaten inflation with it, and has a record of starting projects with investor money then declaring bankruptcy? You should probably realign your priorities. Anyone could be worth as much as Donald Trump with the same headstart." }, { "docid": "327901", "title": "", "text": "\"They always use the term \"\"spike\"\" - making the assumption they will go down. An large eruption in Iceland, if one occurs, (less likely than not) would cause major increases in food prices globally, just like a limited nuclear war would. In even a small nuclear war the food cost increase subsequent to a short \"\"nuclear winter\"\" is projected to kill two billion people, mostly children, worldwide.\"" }, { "docid": "176061", "title": "", "text": "\"Yeah the credit union near me sucks too. Short hours, long lines and impossible parking to go with the subpar online banking and lack of ATMs. Just because the sign reads \"\"credit union\"\" doesn't mean it's a good business. Not all credit unions are created equally.\"" } ]

[ { "docid": "278453", "title": "", "text": "\"Here's what I suggest... A few years ago, I got a chunk of change. Not from an inheritance, but stock options in a company that was taken private. We'd already been investing by that point. But what I did: 1. I took my time. 2. I set aside a chunk of it (maybe a quarter) for taxes. you shouldn't have this problem. 3. I set aside a chunk for home renovations. 4. I set aside a chunk for kids college fund 5. I set aside a chunk for paying off the house 6. I set aside a chunk to spend later 7. I invested a chunk. A small chunk directly in single stocks, a small chunk in muni bonds, but most just in Mutual Funds. I'm still spending that \"\"spend later\"\" chunk. It's about 10 years later, and this summer it's home maintenance and a new car... all, I figure it, coming out of some of that money I'd set aside for \"\"future spending.\"\"\"" } ]

[ { "docid": "436536", "title": "", "text": "Whenever a large number of shares to be sold hit the market at the same time the expectation is that the price for each share will drop. The employees in a normal market would be expected to sell some of their shares at the first opportunity. Because during the dot com boom some companies employees were able to become millionaires, every employee at a tech IPO hopes to be richly rewarded. If the long term prospects of the stock price are viewed by the employees as a continuous path up, then the percentage of shares that will hit the market is low. They do want some instant cash, but want the bulk of the shares to capture future growth. The more dismal the long term price lookout is, the greater the percentage of shares that will hit the market. The general consensus is that as each of the Lock Ups expires a significant percentage of shares will be sold, and the price will suffer a short term drop." }, { "docid": "220276", "title": "", "text": "Right now interest rates are pretty low and as such you won't see blockbuster interest rates in anything highly liquid. That being said you're motivation is liquidity over rate of return anyway so I don't think that is a concern. Money Market funds should give you a similar return to AMEX Personal Savings. Due to their lack of a rate guarantee I wouldn't be surprised if that is simply a branded Money Market account. Your best bet is to look at what rates you can get on any short term security and park your money in the one that best suites your needs and offers the greatest return. Money Markets are simply a great way for you to keep your cash liquid while investing you in a broad range of liquid assets (diversification is key)." }, { "docid": "225395", "title": "", "text": "\"Yep, most 401k options suck. You'll have access to a couple dozen funds that have been blessed by the organization that manages your account. I recently rolled my 401k over into a self-directed IRA at Fidelity, and I have access to the entire mutual fund market, and can trade stocks/bonds if I wish. As for a practical solution for your situation: the options you've given us are worryingly vague -- hopefully you're able to do research on what positions these funds hold and make your own determination. Quick overview: Energy / Utilities: Doing good right now because they are low-risk, generally high dividends. These will underperform in the short-term as the market recovers. Health Care: riskier, and many firms are facing a sizable patent cliff. I am avoiding this sector. Emerging Markets: I'm also avoiding this due to the volatility and accounting issues, but it's up to you. Most large US companies have \"\"emerging markets\"\" exposure, so not necessary for to invest in a dedicated fund in my unprofessional opinion. Bonds: Avoid. Bonds are at their highest levels in decades. Short-term they might be ok; but medium-term, the only place to go is down. All of this depends on your age, and your own particular investment objectives. Don't listen to me or anyone else without doing your own research.\"" }, { "docid": "75372", "title": "", "text": "Bond MF/ETF comes in many flavour, one way to look at them is corporate, govt. (gilt/sovreign), money market (short term, overnight lending etc.), govt. backed bonds. The ETF/MFs that invest money in these are also different types. One way to evaluate an ETF/MF is to see where they invest your money. Corporate debts are by the highest coupon paying bonds, however, the chance of default is also greater, if you wish to invest in these, it is preferable to look at the ETF/MF's debt portfolio financial ratings (Moodies etc.). Govt. bonds are more stable and unless the govt. defaults (which happens more often than we would like to think), here also look for higher rating bonds portfolio that the fund/scheme carries. The govt. backed bonds are somewhat similar to sovreign bonds, however, these are issuesd by institutions which are backed by govt. (e.g. national railways, municipal bodies etc.), any fund/scheme that invests in these bonds could also be considered and similarly measured. The last are the short term money market related, which provides the least return but are very liquid. It is very difficult to answer how you should invest large sum on ETF/MFs that are bond oriented. However, from any investment perspective, it is better to spread your money. If I take your hypthetical case of 1M$, I would divide it into 100K$ pieces and invest in 10 different ETF/MF schemes of different flavour: Hope this helps." }, { "docid": "379307", "title": "", "text": "\"Finally some good examples! So clearly this is an issue, and many large companies do similar shenanigans. But the divisions being cut are massively unprofitable anyhow, even with these crappy tricks. I agree that a company like GE should be looking long term, but I'm not sure what % they do in technology R&amp;D so I'm not prepared to be too harsh on that front. I absolutely agree that having non software engineers write software is a long term failure. Even smart engineers who can pump out software often do so without having learned the lessons that software companies learn. Resulting in short term results followed by long term pain. Anyhow. Thanks for a real response. I wonder if the divisions being cut need to be cut or sold off regardless. But I think every large org should look at examples like this and not try to play the \"\"this quarter is good\"\" game.\"" }, { "docid": "279303", "title": "", "text": "Over the long run, yeah I agree that that the technology consumers have and their real incomes have gone up. However, people don’t live their lives in the long run, their experiences are firmly centered in the short run. People marry, have children, move, start work, lose work, suffer health problems, divorce, homelessness all in the short run. When you zoom in from the long run view, life and individual fortunes seem a bit more dependent on luck and relative positioning than long run technological or economic trends. This is exacerbated by our political system where money seems to positively correlate with the ability to wield political power. Folks with political power can engineer changes that can improve their bottom line through zero sum political games (think taxes, regulation, etc) and maybe even turn a short run advantage (starting a successful business, generating wealth) into a longer run advantage (eliminating taxes on inheritance, potentially cementing family wealth for generations)." }, { "docid": "452837", "title": "", "text": "\"My grandma left a 50K inheritance You don't make clear where in the inheritance process you are. I actually know of one case where the executor (a family member, not a professional) distributed the inheritance before paying the estate taxes. Long story short, the heirs had to pay back part of the inheritance. So the first thing that I would do is verify that the estate is closed and all the taxes paid. If the executor is a professional, just call and ask. If a family member, you may want to approach it more obliquely. Or not. The important thing is not to start spending that money until you're sure that you have it. One good thing is that my husband is in grad school and will be done in 2019 and will then make about 75K/yr with his degree profession. Be a bit careful about relying on this. Outside the student loans, you should build other expenses around the assumption that he won't find a job immediately after grad school. For example, we could be in a recession in 2019. We'll be about due by then. Paying off the $5k \"\"other debt\"\" is probably a no brainer. Chances are that you're paying double-digit interest. Just kill it. Unless the car loan is zero-interest, you probably want to get rid of that loan too. I would tend to agree that the car seems expensive for your income, but I'm not sure that the amount that you could recover by selling it justifies the loss of value. Hopefully it's in good shape and will last for years without significant maintenance. Consider putting $2k (your monthly income) in your checking account. Instead of paying for things paycheck-to-paycheck, this should allow you to buy things on schedule, without having to wait for the money to appear in your account. Put the remainder into an emergency account. Set aside $12k (50% of your annual income/expenses) for real emergencies like a medical emergency or job loss. The other $16k you can use the same way you use the $5k other debt borrowing now, for small emergencies. E.g. a car repair. Make a budget and stick to it. The elimination of the car loan should free up enough monthly income to support a reasonable budget. If it seems like it isn't, then you are spending too much money for your income. Don't forget to explicitly budget for entertainment and vacations. It's easy to overspend there. If you don't make a budget, you'll just find yourself back to your paycheck-to-paycheck existence. That sounds like it is frustrating for you. Budget so that you know how much money you really need to live.\"" }, { "docid": "340125", "title": "", "text": "\"Sorry but you already provided the answer to your own question. The simple answer is to 'not day trade' but hold things for a longer period and don't trade a large number of different stocks every week. Seriously, have a look at the rules and see what it implies.. an average of 20 buys and sells of longer term positions PER DAY is a pretty fair bit of trading, that's really churning through the positions compared to someone who might establish positions with say 25 well picked stocks and might change even 5 of those a week to a different stock. Or even a larger number of stocks but seeking to hold them for over a year so you get taxed at the long term cap gains rate. If you want to day trade, be prepared to be labeled as such and deal with your broker on that basis. Not like they will hate you given all the fees you are likely to rack up. And the government will love you also, since you'll be paying short term gains taxes. (and trust me, us bogelheads appreciate the liquidity the speculative and short term folks bring to the market.) In terms of how it would impact you, Expect to be required to have a fairly substantial balance ($25K) if you are maintaining a margin account. I'd suggest reading this thread My account's been labeled as \"\"day trader\"\" and I got a big margin call. What should I do? What trades can I place in the blocked period?\"" }, { "docid": "520026", "title": "", "text": "You could do a voluntary repossession. While a repossession never looks good on your credit a voluntary repossession is slightly better. A good friend of mine had a situation like this about 11 years ago. She was in an accident didn't have replacement coverage insurance and was left with a large chunk of debt on a wrecked vehicle that she then rolled into a new car. In the end it came down to the simple fact that she could not afford a car loan on a vehicle that never was worth as much as she owed. Since the car was worth less than the loan she really couldn't sell it to fix the problem. She called and arranged a voluntary repossession. She stopped making payments, and parked the car till they came and picked it up. (Took about 4 months and 20 phone calls from her for them to come get it.) In the mean time, I purchased her a much older used but decent car for a couple thousand and she paid me back over the next year. The total she paid me back was less than the money she would have paid in the 4 months it took them to come get the car. In fact by the time they picked up the car she had paid back over half on the car I bought her. Yes the repossession did stay on her credit for seven years but during that time she was approved for a mortgage, cellphone plans, and credit cards etc. Therefore I don't know that it did that much damage to her credit. When her car was sold at auction by the repo company it sold for much less than the loan amount. Technically she was on the hook for the remaining amount. The outstanding balance on the loan was then sold several times to several different collection agencies. Over the years since then she has gotten letters every now and then demanding she pay the amount off, she ignores these. Most of these letters even included very favorable terms (full forgiveness for 20% of the amount) At this point the statute time has run out on the debt so there is no recourse for anyone to collect from her. The statute time limit varies from state to state. Some states it is as long as 10 years in others it is as short as 3 years. What this means is that counting from the date of the repossession, incurrance of debt, last payment, or agreement to pay whichever is later if the statute period has elapsed and the lender/collector has not filed a suit against you by the end of the period then they have effectively abandoned the debt and cannot collect. Find out what that period of time is in your state. If you can avoid the collection agencies till that period runs out you are scott free. You just have to make sure that you do not ever send them any money, or agree to pay them anything as this resets the calendar. If you do not want to wait for the calendar to run out if you wait long enough you will probably be offered favorable terms to pay only a fraction of the remaining amount, you just have to wait it out. Note, I normally would not endorse anyone not paying off their debts. However sometimes it is necessary and it is for this type of situation that we have things like this and bankruptcy." }, { "docid": "192900", "title": "", "text": "This is the bird's eye view of how shorting works: When you place an order to sell a stock short, your broker attempts to grab the desired number of shares from any accounts of its other customers and makes them available for you to sell. If no other customers own shares of this stock, then generally you are out of luck (It is more complicated like that in practice, but this is just an overview). Your odds are better if the particular stock has a large float (i.e. a large number of shares that are actually available for trading) and its short ratio is low (which means relatively few shares are currently being sold short). Also, a large brokerage may be more likely to have access to the shares than a small niche-market broker. The example you've given, Angie's List (ANGI) is a $600M small-cap with a comparatively low float, and though I haven't been able to glean the short ratio, it appears that a lot of investors are bearish on this stock and probably already had the same idea to short it. There is really no way to find out if a specific broker has shares in inventory available for shorting, short of (forgive the pun) checking directly with the broker." }, { "docid": "340723", "title": "", "text": "ParkAir Meet and Greet collects your vehicle at the London Heathrow Terminal 2 Short Stay Car Park Level 2 Zone A and B (Off airport parking bays are marked in black and white board). After handing in your vehicle to our Valet all you have to do is to make the less than 2 mins walk straight into the Depature Terminal to Check In." }, { "docid": "175819", "title": "", "text": "Your question asked about a specific time the yield curve flattened or inverted. There are other times when the yield curve inverted or flattened. You also imply in your question that investors were flocking to long term bonds which lowered their yields. I don't believe this is the case. I believe investors were fleeing from short term bonds causing the yields on short term bonds to rise to meet those of long term bonds. The chart below shows the history of yields on US bonds over time. The shaded areas are where the yield curve flattened or inverted. Notice that after 1982 it is the short term yields that rise sharply to meet or cross the yields on longer term bonds. The yields on longer term bonds move little compared to the movement in yields on the short term bonds. Thus it is investors moving out of short term bonds that cause the yield curve to flatten or invert. These investors are not moving into longer term bonds since the yields on the longer term bonds do not move much at all at these times. In fact, in 2006 the longer term bond market was only 25% of the total US public debt while short term bonds made up 75%. It would take less money to move the yields on longer term bonds than it would on short term bonds yet the longer term yields did not move near as much as short term yields. So why are investors or banks moving out of short term bonds causing their yields to rise? I believe this happens for one of two reasons: they are moving into higher yielding investments or they need to raise cash to cover bad investments. Charts and more information here." }, { "docid": "322806", "title": "", "text": "\"Diversification is the only real free lunch in finance (reduction in risk without any reduction in expected returns), so clearly every good answer to your question will be \"\"yes.\"\" Diversification is good.\"\" Let's talk about many details your question solicits. Many funds are already pretty diversified. If you buy a mutual fund, you are generally already getting a large portion of the gains from diversification. There is a very large difference between the unnecessary risk in your portfolio if you only hold a couple of stocks and if you hold a mutual fund. Should you be diversified across mutual funds as well? It depends on what your funds are. Many funds, such as target-date funds, are intended to be your sole investment. If you have funds covering every major asset class, then there may not be any additional benefit to buying other funds. You probably could not have picked your \"\"favorite fund\"\" early on. As humans, we have cognitive biases that make us think we knew things early on that we did not. I'm sure at some point at the very beginning you had a positive feeling toward that fund. Today you regret not acting on it and putting all your money there. But the number of such feelings is very large and if you acted on all those, you would do a lot of crazy and harmful things. You didn't know early on which fund would do well. You could just as well have had a good feeling about a fund that subsequently did much worse than your diversified portfolio did. The advice you have had about your portfolio probably isn't based on sound finance theory. You say you have always kept your investments in line with your age. This implies that you believe the guidelines given you by your broker or financial advisor are based in finance theory. Generally speaking, they are not. They are rules of thumb that seemed good to someone but are not rigorously proven either in theory or empirics. For example the notion that you should slowly shift your investments from speculative to conservative as you age is not based on sound finance theory. It just seems good to the people who give advice on such things. Nothing particularly wrong with it, I guess, but it's not remotely on par with the general concept of being well-diversified. The latter is extremely well established and verified, both in theory and in practice. Don't confuse the concept of diversification with the specific advice you have received from your advisor. A fund averaging very good returns is not an anomaly--at least going forward it will not be. There are many thousand funds and a large distribution in their historical performance. Just by random chance, some funds will have a truly outstanding track record. Perhaps the manager really was skilled. However, very careful empirical testing has shown the following: (1) You, me, and people whose profession it is to select outperforming mutual funds are unable to reliably detect which ones will outperform, except in hindsight (2) A fund that has outperformed, even over a long horizon, is not more likely to outperform in the future. No one is stopping you from putting all your money in that fund. Depending on its investment objective, you may even have decent diversification if you do so. However, please be aware that if you move your money based on historical outperformance, you will be acting on the same cognitive bias that makes gamblers believe they are on a \"\"hot streak\"\" and \"\"can't lose.\"\" They can, and so can you. ======== Edit to answer a more specific line of questions =========== One of your questions is whether it makes sense to buy a number of mutual funds as part of your diversification strategy. This is a slightly more subtle question and I will indicate where there is uncertainty in my answer. Diversifying across asset classes. Most of the gains from diversification are available in a single fund. There is a lot of idiosyncratic risk in one or two stocks and much less in a collection of hundreds of stocks, which is what any mutual fund will hold. Still,you will probably want at least a couple of funds in your portfolio. I will list them from most important to least and I will assume the bulk of your portfolio is in a total US equity fund (or S&P500-style fund) so that you are almost completely diversified already. Risky Bonds. These are corporate, municipal, sovereign debt, and long-term treasury debt funds. There is almost certainly a good deal to be gained by having a portion of your portfolio in bonds, and normally a total market fund will not include bond exposure. Bonds fund returns are closely related to interest rate and inflation changes. They are also exposed to some market risk but it's more efficient to get that from equity. The bond market is very large, so if you did market weights you would have more in bonds than in equity. Normally people do not do this, though. Instead you can get the exposure to interest rates by holding a lesser amount in longer-term bonds, rather than more in shorter-term bonds. I don't believe in shifting your weights toward nor away from this type of bond (as opposed to equity) as you age so if you are getting that advice, know that it is not well-founded in theory. Whatever your relative weight in risky bonds when you are young is should also be your weight when you are older. International. There are probably some gains from having some exposure to international markets, although these have decreased over time as economies have become more integrated. If we followed market weights, you would actually put half your equity weight in an international fund. Because international funds are taxed differently (gains are always taxed at the short-term capital gains rate) and because they have higher management fees, most people make only a small investment to international funds, if any at all. Emerging markets International funds often ignore emerging markets in order to maintain liquidity and low fees. You can get some exposure to these markets through emerging markets funds. However, the value of public equity in emerging markets is small when compared with that of developed markets, so according to finance theory, your investment in them should be small as well. That's a theoretical, not an empirical result. Emerging market funds charge high fees as well, so this one is kind of up to your taste. I can't say whether it will work out in the future. Real estate. You may want to get exposure to real estate by buying a real-estate fund (REIT). Though, if you own a house you are already exposed to the real estate market, perhaps more than you want to be. REITs often invest in commercial real estate, which is a little different from the residential market. Small Cap. Although total market funds invest in all capitalization levels, the market is so skewed toward large firms that many total market funds don't have any significant small cap exposure. It's common for individuals to hold a small cap fund to compensate for this, but it's not actually required by investment theory. In principle, the most diversified portfolio should be market-cap weighted, so small cap should have negligible weight in your portfolio. Many people hold small cap because historically it has outperformed large cap firms of equal risk, but this trend is uncertain. Many researchers feel that the small cap \"\"premium\"\" may have been a short-term artifact in the data. Given these facts and the fact that small-cap funds charge higher fees, it may make sense to pass on this asset class. Depends on your opinion and beliefs. Value (or Growth) Funds. Half the market can be classed as \"\"value\"\", while the other half is \"\"growth.\"\" Your total market fund should have equal representation in both so there is no diversification reason to buy a special value or growth fund. Historically, value funds have outperformed over long horizons and many researchers think this will continue, but it's not exactly mandated by the theory. If you choose to skew your portfolio by buying one of these, it should be a value fund. Sector funds. There is, in general, no diversification reason to buy funds that invest in a particular sector. If you are trying to hedge your income (like trying to avoid investing in the tech sector because you work in that sector) or your costs (buying energy because you buy use a disproportionate amount of energy) I could imagine you buying one of these funds. Risk-free bonds. Funds specializing in short-term treasuries or short-term high-quality bonds of other types are basically a substitute for a savings account, CD, money market fund, or other cash equivalent. Use as appropriate but there is little diversification here per se. In short, there is some value in diversifying across asset classes, and it is open to opinion how much you should do. Less well-justified is diversifying across managers within the same asset class. There's very little if any advantage to doing that.\"" }, { "docid": "222030", "title": "", "text": "Maryland is one of only two states (as of the writing of that article) that collects both inheritance tax and estate tax. These are two different issues, and it's important to differentiate between them sufficiently. I can't provide you a definitive answer, so consult a tax professional in Maryland for specific details to make sure you don't run afoul of tax authorities. This blog has a nice summary of the differences, as of 2012: The estate tax is assessable if more than one million dollars passes at death. The total dollar value of the property determines whether there is an estate tax. The inheritance tax is not dependent upon the value of the estate, as even very small estates can have inheritance tax imposed. Inheritance tax is assessed on property given to a person who is further removed in relationship than a sibling. Thus, for example, a 10% tax will be assessed on property passing to a cousin, niece, nephew or friend. Another section of the page states, as an example: If you give someone $10,000 in cash, the inheritance tax will simply reduce the amount inherited – in this case to $9,000. There are several other exemptions to the inheritance tax in addition to the immediate family exception discussed above: Property that passes from a decedent to or for the use of a grandparent, parent, spouse, child or other lineal descendant, spouse of a child or other lineal descendant, stepparent, stepchild, brother or sister of the decedent, or a corporation if all of its stockholders consist of the surviving spouse, parents, stepparents, stepchildren, brothers, sisters, and lineal descendants of the decedent and spouses of the lineal descendants. Putting this information together makes me think that the inheritance wouldn't be taxable in your case because it's a cash inheritance from an immediate family member, so it qualifies for one of the exemptions. Since I'm not a tax professional, however, I can't say that for sure. Hopefully these pages will give you enough of a foundation for when you talk to a professional." }, { "docid": "505351", "title": "", "text": "Very wealthy people usually have an investment manager who is constantly moving money between investments and accounts. They hold cash (or cash equivalent) accounts for use in a near-term buying opportunity, for example if they believe certain stocks will go down in price soon. This amount can vary from under 1% (for a money manager with no intention of any short-term trading) to over 20% (for a market pessimist who expects a huge price reduction shortly). In rare cases they will also hold significant cash because of a planned large purchase, but there's almost never a reason for that to exceed 1% of their net worth." }, { "docid": "169178", "title": "", "text": "A normal FSA also gives you a short term loan: money earmarked is available in entirety immediately, while you repay it every paycheck. This is interest free, and if you time your large planned medical expenses for January, can be a nice cheap loan." }, { "docid": "443926", "title": "", "text": "If there are no traded options in a company you can get your broker to write OTC options but this may not be possible given some restrictions on accounts. Going short on futures may also be an option. You can also open a downside CFD (contract for difference) on the stock but will have to have margin posted against it so will have to hold cash (or possibly liquid assets if your AUM is large enough) to cover the margin which is unutilized cash in the portfolio that needs to be factored into any portfolio calculations as a cost. Diversifying into uncorrelated stock or shorting correlated (but low div yield) stock would also have the same effect. stop loss orders would probably not be appropriate as it is not the price of the stock that you are concerned with but mitigating all price changes and just receiving the dividend on the stock. warning: in a crash (almost) all stocks become suddenly correlated so be aware that might cause you a short term loss. CFDs are complex and require a degree of sophistication before you can trade them well but as you seem to understand options they should not be too hard to understand." }, { "docid": "487929", "title": "", "text": "You admire people who inherited large sums of money, hasn't even beaten inflation with it, and has a record of starting projects with investor money then declaring bankruptcy? You should probably realign your priorities. Anyone could be worth as much as Donald Trump with the same headstart." }, { "docid": "21288", "title": "", "text": "A gift between spouses has no tax implications. If one spouse dies the inheritance tax is always zero no matter how much of the estate passes to the surviving spouse. Gift taxes are actually related to estate taxes, so a gift no matter how large never requires filing any tax forms or paying any taxes." } ]

[ { "docid": "163353", "title": "", "text": "\"What are the options available for safe, short-term parking of funds? Savings accounts are the go-to option for safely depositing funds in a way that they remain accessible in the short-term. There are many options available, and any recommendations on a specific account from a specific institution depend greatly on the current state of banks. As you're in the US, If you choose to save funds in a savings account, it's important that you verify that the account (or accounts) you use are FDIC insured. Also be aware that the insurance limit is $250,000, so for larger volumes of money you may need to either break up your savings into multiple accounts, or consult a Accredited Investment Fiduciary (AIF) rather than random strangers on the internet. I received an inheritance check... Money is a token we exchange for favors from other people. As their last act, someone decided to give you a portion of their unused favors. You should feel honored that they held you in such esteem. I have no debt at all and aside from a few deferred expenses You're wise to bring up debt. As a general answer not geared toward your specific circumstances: Paying down debt is a good choice, if you have any. Investment accounts have an unknown interest rate, whereas reducing debt is guaranteed to earn you the interest rate that you would have otherwise paid. Creating new debt is a bad choice. It's common for people who receive large windfalls to spend so much that they put themselves in financial trouble. Lottery winners tend to go bankrupt. The best way to double your money is to fold it in half and put it back in your pocket. I am not at all savvy about finances... The vast majority of people are not savvy about finances. It's a good sign that you acknowledge your inability and are willing to defer to others. ...and have had a few bad experiences when trying to hire someone to help me Find an AIF, preferably one from a largish investment firm. You don't want to be their most important client. You just want them to treat you with courtesy and give you simple, and sound investment advice. Don't be afraid to shop around a bit. I am interested in options for safe, short \"\"parking\"\" of these funds until I figure out what I want to do. Apart from savings accounts, some money market accounts and mutual funds may be appropriate for parking funds before investing elsewhere. They come with their own tradeoffs and are quite likely higher risk than you're willing to take while you're just deciding what to do with the funds. My personal recommendation* for your specific circumstances at this specific time is to put your money in an Aspiration Summit Account purely because it has 1% APY (which is the highest interest rate I'm currently aware of) and is FDIC insured. I am not affiliated with Aspiration. I would then suggest talking to someone at Vanguard or Fidelity about your investment options. Be clear about your expectations and don't be afraid to simply walk away if you don't like the advice you receive. I am not affiliated with Vanguard or Fidelity. * I am not a lawyer, fiduciary, or even a person with a degree in finances. For all you know I'm a dog on the internet.\"" } ]

[ { "docid": "379307", "title": "", "text": "\"Finally some good examples! So clearly this is an issue, and many large companies do similar shenanigans. But the divisions being cut are massively unprofitable anyhow, even with these crappy tricks. I agree that a company like GE should be looking long term, but I'm not sure what % they do in technology R&amp;D so I'm not prepared to be too harsh on that front. I absolutely agree that having non software engineers write software is a long term failure. Even smart engineers who can pump out software often do so without having learned the lessons that software companies learn. Resulting in short term results followed by long term pain. Anyhow. Thanks for a real response. I wonder if the divisions being cut need to be cut or sold off regardless. But I think every large org should look at examples like this and not try to play the \"\"this quarter is good\"\" game.\"" }, { "docid": "424220", "title": "", "text": "\"short answer: any long term financial planning (~10yrs+). e.g. mortgage and retirement planning. long answer: inflation doesn't really matter in short time frames. on any given day, you might get a rent hike, or a raise, or the grocery store might have a sale. inflation is really only relevant over the long term. annual inflation is tiny (2~4%) compared to large unexpected expenses(5-10%). however, over 10 years, even your \"\"large unexpected expenses\"\" will still average out to a small fraction of your spending (5~10%) compared to the impact of compounded inflation (30~40%). inflation is really critical when you are trying to plan for retirement, which you should start doing when you get your first job. when making long-term projections, you need to consider not only your expected nominal rate of investment return (e.g. 7%) but also subtract the expected rate of inflation (e.g. 3%). alternatively, you can add the inflation rate to your projected spending (being sure to compound year-over-year). when projecting your income 10+ years out, you can use inflation to estimate your annual raises. up to age 30, people tend to get raises that exceed inflation. thereafter, they tend to track inflation. if you ever decide to buy a house, you need to consider the impact of inflation when calculating the total cost over a 30-yr mortgage. generally, you can expect your house to appreciate over 30 years in line with inflation (possibly more in an urban area). so a simple mortgage projection needs to account for interest, inflation, maintenance, insurance and closing costs. you could also consider inflation for things like rent and income, but only over several years. generally, rent and income are such large amounts of money it is worth your time to research specific alternatives rather than just guessing what market rates are this year based on average inflation. while it is true that rent and wages go up in line with inflation in the long run, you can make a lot of money in the short run if you keep an eye on market rates every year. over 10-20 years your personal rate of inflation should be very close to the average rate when you consider all your spending (housing, food, energy, clothing, etc.).\"" }, { "docid": "225395", "title": "", "text": "\"Yep, most 401k options suck. You'll have access to a couple dozen funds that have been blessed by the organization that manages your account. I recently rolled my 401k over into a self-directed IRA at Fidelity, and I have access to the entire mutual fund market, and can trade stocks/bonds if I wish. As for a practical solution for your situation: the options you've given us are worryingly vague -- hopefully you're able to do research on what positions these funds hold and make your own determination. Quick overview: Energy / Utilities: Doing good right now because they are low-risk, generally high dividends. These will underperform in the short-term as the market recovers. Health Care: riskier, and many firms are facing a sizable patent cliff. I am avoiding this sector. Emerging Markets: I'm also avoiding this due to the volatility and accounting issues, but it's up to you. Most large US companies have \"\"emerging markets\"\" exposure, so not necessary for to invest in a dedicated fund in my unprofessional opinion. Bonds: Avoid. Bonds are at their highest levels in decades. Short-term they might be ok; but medium-term, the only place to go is down. All of this depends on your age, and your own particular investment objectives. Don't listen to me or anyone else without doing your own research.\"" }, { "docid": "256663", "title": "", "text": "Bonds can increase in price, if the demand is high and offer solid yield if the demand is low. For instance, Russian bond prices a year ago contracted big in price (ie: fell), but were paying 18% and made a solid buy. Now that the demand has risen, the price is up with the yield for those early investors the same, though newer investors are receiving less yield (about 9ish percent) and paying higher prices. I've rarely seen banks pay more variable interest than short term treasuries and the same holds true for long term CDs and long term treasuries. This isn't to say it's impossible, just rare. Also variable is different than a set term; if you buy a 10 year treasury at 18%, that means you get 18% for 10 years, even if interest rates fall four years later. Think about the people buying 30 year US treasuries during 1980-1985. Yowza. So if you have a very large amount of money you will store it in bonds as its much less likely that the US treasury will go bankrupt than your bank. Less likely? I don't know about your bank, but my bank doesn't owe $19 trillion." }, { "docid": "438874", "title": "", "text": "A more recent article on inheritance taxes than the one cited by @JohnBensin says that Maryland does not charge inheritance tax on inheritances received from parents (and other close relatives as well). Thus, there is no inheritance tax due to Maryland on your inheritance, and of course, estate tax (both Federal and State) is imposed on the estate and payable by the estate, and thus should have been taken into account by the executor before determining the amount to be divided among the children. If the executor screwed up on this point, some of the inheritance may have to be returned to the estate so that the estate can pay the taxes due, or be paid directly to the Federal Government and/or the State of Maryland on behalf of the estate. Some part of the inheritance might be taxable income to you if it came in the form of an Inherited IRA on which Federal (and possibly State) taxes have to paid on the (taxable part of) any distribution from the IRA including the Required Minimum Distribution that must be made from the IRA each year. (There is also a 50% penalty for not taking at least the RMD each year). Note that the value of the IRA is not taxable income in the year of inheritance, just the money taken as a distribution. Some people liquidate the IRA within 5 years, as used to be required for non-spouse inheritors under earlier tax law, and thus end up paying a lot more income tax than they would have to pay if they went the RMD route. If your uncle took the help of a lawyer in winding up your father's estate, you are probably OK in that all the rules were likely followed, but if it was a do-it-yourself job (or you don't trust your uncle not to screw it up anyway!), then, as John Bensin has already told you, you should certainly consult a tax professional in Maryland to make sure you don't run afoul of tax authorities." }, { "docid": "505351", "title": "", "text": "Very wealthy people usually have an investment manager who is constantly moving money between investments and accounts. They hold cash (or cash equivalent) accounts for use in a near-term buying opportunity, for example if they believe certain stocks will go down in price soon. This amount can vary from under 1% (for a money manager with no intention of any short-term trading) to over 20% (for a market pessimist who expects a huge price reduction shortly). In rare cases they will also hold significant cash because of a planned large purchase, but there's almost never a reason for that to exceed 1% of their net worth." }, { "docid": "175819", "title": "", "text": "Your question asked about a specific time the yield curve flattened or inverted. There are other times when the yield curve inverted or flattened. You also imply in your question that investors were flocking to long term bonds which lowered their yields. I don't believe this is the case. I believe investors were fleeing from short term bonds causing the yields on short term bonds to rise to meet those of long term bonds. The chart below shows the history of yields on US bonds over time. The shaded areas are where the yield curve flattened or inverted. Notice that after 1982 it is the short term yields that rise sharply to meet or cross the yields on longer term bonds. The yields on longer term bonds move little compared to the movement in yields on the short term bonds. Thus it is investors moving out of short term bonds that cause the yield curve to flatten or invert. These investors are not moving into longer term bonds since the yields on the longer term bonds do not move much at all at these times. In fact, in 2006 the longer term bond market was only 25% of the total US public debt while short term bonds made up 75%. It would take less money to move the yields on longer term bonds than it would on short term bonds yet the longer term yields did not move near as much as short term yields. So why are investors or banks moving out of short term bonds causing their yields to rise? I believe this happens for one of two reasons: they are moving into higher yielding investments or they need to raise cash to cover bad investments. Charts and more information here." }, { "docid": "487929", "title": "", "text": "You admire people who inherited large sums of money, hasn't even beaten inflation with it, and has a record of starting projects with investor money then declaring bankruptcy? You should probably realign your priorities. Anyone could be worth as much as Donald Trump with the same headstart." }, { "docid": "327901", "title": "", "text": "\"They always use the term \"\"spike\"\" - making the assumption they will go down. An large eruption in Iceland, if one occurs, (less likely than not) would cause major increases in food prices globally, just like a limited nuclear war would. In even a small nuclear war the food cost increase subsequent to a short \"\"nuclear winter\"\" is projected to kill two billion people, mostly children, worldwide.\"" }, { "docid": "370290", "title": "", "text": "\"Both explanations are partly true. There are many investors who do not want to sell an asset at a loss. This causes \"\"resistance\"\" at prices where large amounts of the asset were previously traded by such investors. It also explains why a \"\"break-through\"\" of such a \"\"resistance\"\" is often associated with a substantial \"\"move\"\" in price. There are also many investors who have \"\"stop-loss\"\" or \"\"trailing stop-loss\"\" \"\"limit orders\"\" in effect. These investors will automatically sell out of a long position (or buy out of a short position) if the price drops (or rises) by a certain percentage (typically 8% - 10%). There are periods of time when money is flowing into an asset or asset class. This could be due to a large investor trying to quietly purchase the asset in a way that avoids raising the price earlier than necessary. Or perhaps a large investor is dollar-cost-averaging. Or perhaps a legal mandate for a category of investors has changed, and they need to rebalance their portfolios. This rebalancing is likely to take place over time. Or perhaps there is a fad where many small investors (at various times) decide to increase (or decrease) their stake in an asset class. Or perhaps (for demographic reasons) the number of investors in a particular situation is increasing, so there are more investors who want to make particular investments. All of these phenomena can be summarized by the word \"\"momentum\"\". Traders who use technical analysis (including most day traders and algorithmic speculators) are aware of these phenomena. They are therefore more likely to purchase (or sell, or short) an asset shortly after one of their \"\"buy signals\"\" or \"\"sell signals\"\" is triggered. This reinforces the phenomena. There are also poorly-understood long-term cycles that affect business fundamentals and/or the politics that constrain business activity. For example: Note that even if the markets really were a random walk, it would still be profitable (and risk-reducing) to perform dollar-cost-averaging when buying into a position, and also perform averaging when selling out of a position. But this means that recent investor behavior can be used to predict the near-future behavior of investors, which justifies technical analysis.\"" }, { "docid": "75372", "title": "", "text": "Bond MF/ETF comes in many flavour, one way to look at them is corporate, govt. (gilt/sovreign), money market (short term, overnight lending etc.), govt. backed bonds. The ETF/MFs that invest money in these are also different types. One way to evaluate an ETF/MF is to see where they invest your money. Corporate debts are by the highest coupon paying bonds, however, the chance of default is also greater, if you wish to invest in these, it is preferable to look at the ETF/MF's debt portfolio financial ratings (Moodies etc.). Govt. bonds are more stable and unless the govt. defaults (which happens more often than we would like to think), here also look for higher rating bonds portfolio that the fund/scheme carries. The govt. backed bonds are somewhat similar to sovreign bonds, however, these are issuesd by institutions which are backed by govt. (e.g. national railways, municipal bodies etc.), any fund/scheme that invests in these bonds could also be considered and similarly measured. The last are the short term money market related, which provides the least return but are very liquid. It is very difficult to answer how you should invest large sum on ETF/MFs that are bond oriented. However, from any investment perspective, it is better to spread your money. If I take your hypthetical case of 1M$, I would divide it into 100K$ pieces and invest in 10 different ETF/MF schemes of different flavour: Hope this helps." }, { "docid": "176061", "title": "", "text": "\"Yeah the credit union near me sucks too. Short hours, long lines and impossible parking to go with the subpar online banking and lack of ATMs. Just because the sign reads \"\"credit union\"\" doesn't mean it's a good business. Not all credit unions are created equally.\"" }, { "docid": "244111", "title": "", "text": "Laser hair removal isn't permanent, you have to have several sessions to get all of the hair, each session costing hundreds. And then it may only last a few years before you have hair growing back again. It's not worth the money unless you have such a large amount that you can throw away several thousand. As others have said, either buy blades in bulk or get a straight razor. They will be much more economical in both the short term and long term." }, { "docid": "350933", "title": "", "text": "A CD is guaranteed to pay its return on maturation. So if you need a certain amount of money at a specific time in the future, the CD is a more reliable way of getting it. The stock market might give you more money or less. More is obviously OK. Less is not if you're planning to pay basic expenses with it, e.g. food, rent, etc. Most retirement portfolios will have a mix of investments. Some securities (stocks and bonds), some guaranteed returns (CDs, treasuries), and some cash equivalents (money market, savings, and checking accounts). Cash equivalents are good for short term expenses and an emergency fund. Guaranteed returns are good for medium term expenses. Securities are good for the long term. Once retired, the general system is to maintain enough cash equivalents for the next few months of expenses and emergencies. Then schedule CDs for the next few years so that you have a predictable amount. Finally, keep the bulk of your wealth in securities. As you get older, your potential emergencies increase and your need for savings decreases, so the mix shifts more and more to the cash equivalents and guaranteed returns and away from securities. CDs have limited use prior to retirement (and the couple years right before retirement), mainly saving up for a large purchase like a house, car, or major appliance. Even there if you have the option of delaying the purchase, that might allow you to use securities instead. Perhaps some of your emergency fund in a short term CD that you keep rolling over. Note that the problem isn't so much that securities will fall. It's that they'll fall right when you need the money. So rather than sell 1% of your securities to meet your needs, you have to sell 2%. That's a dead weight loss of 1% that you have to deduct from your returns. That roughly matches the drop from the height of 2007 to the trough of 2009 of the S&P 500. And it was 2012 before it recovered. If in 2007, you had put the 1% of your portfolio in a two-year CD, you'd be ahead even at zero interest in 2009." }, { "docid": "452837", "title": "", "text": "\"My grandma left a 50K inheritance You don't make clear where in the inheritance process you are. I actually know of one case where the executor (a family member, not a professional) distributed the inheritance before paying the estate taxes. Long story short, the heirs had to pay back part of the inheritance. So the first thing that I would do is verify that the estate is closed and all the taxes paid. If the executor is a professional, just call and ask. If a family member, you may want to approach it more obliquely. Or not. The important thing is not to start spending that money until you're sure that you have it. One good thing is that my husband is in grad school and will be done in 2019 and will then make about 75K/yr with his degree profession. Be a bit careful about relying on this. Outside the student loans, you should build other expenses around the assumption that he won't find a job immediately after grad school. For example, we could be in a recession in 2019. We'll be about due by then. Paying off the $5k \"\"other debt\"\" is probably a no brainer. Chances are that you're paying double-digit interest. Just kill it. Unless the car loan is zero-interest, you probably want to get rid of that loan too. I would tend to agree that the car seems expensive for your income, but I'm not sure that the amount that you could recover by selling it justifies the loss of value. Hopefully it's in good shape and will last for years without significant maintenance. Consider putting $2k (your monthly income) in your checking account. Instead of paying for things paycheck-to-paycheck, this should allow you to buy things on schedule, without having to wait for the money to appear in your account. Put the remainder into an emergency account. Set aside $12k (50% of your annual income/expenses) for real emergencies like a medical emergency or job loss. The other $16k you can use the same way you use the $5k other debt borrowing now, for small emergencies. E.g. a car repair. Make a budget and stick to it. The elimination of the car loan should free up enough monthly income to support a reasonable budget. If it seems like it isn't, then you are spending too much money for your income. Don't forget to explicitly budget for entertainment and vacations. It's easy to overspend there. If you don't make a budget, you'll just find yourself back to your paycheck-to-paycheck existence. That sounds like it is frustrating for you. Budget so that you know how much money you really need to live.\"" }, { "docid": "22026", "title": "", "text": "\"Plenty of good answers here, but probably the best answer is that The Market relies on suckers...er...investors like you. The money has to come from somewhere, it might as well be you. So-called \"\"day traders\"\" or \"\"short-term investors\"\" are a huge part of the market, and they perform a vital function: they provide capital that flows to the large, well-equipped, institutional investors. Thing is, you can never be big enough, smart enough, well-informed enough, or quick enough to beat the big guys. You may have a run of good fortune, but over the long term aggregate, you're a PAYOR into the market, not a DIVIDEND reaper.\"" }, { "docid": "66644", "title": "", "text": "As far as Driving Schools in Roxburgh Park are concerned, we at HOGGS Driving School are one of the best out there, not to mention the fact that we have a very large list of varied services in store for you. Do give us a call at the very earliest. Address: 112 Royal Terrace, Craigieburn, Victoria 3064, Ph.no: 0416 243 024" }, { "docid": "276333", "title": "", "text": "Indeed, there's no short term/long term issue trading inside the IRA, and in fact, no reporting. If you have a large IRA balance and trade 100 (for example) times per year, there's no reporting at all. As you note, long term gains outside the IRA are treated favorably in the tax code (as of now, 2012) but that's subject to change. Also to consider, The worst thing I did was to buy Apple in my IRA. A huge gain that will be taxed as ordinary income when I withdraw it. Had this been in my regular account, I could sell and pay the long term cap gain rate this year. Last, there's no concept of Wash sale in one's IRA, as there's no taking a loss for shares sold below cost. (To clarify, trading solely within an IRA won't trigger wash sale rules. A realized loss in a taxable account, combined with a purchase inside an IRA can trigger the wash sale rule if the stock is purchased inside the IRA 30 days before or after the sale at a loss. Thank you, Dilip, for the comment.) Aside from the warnings of trading too much or running afoul of frequency restrictions, your observation is correct." }, { "docid": "8012", "title": "", "text": "It is worth noting first that interest and short-term dividends/capital gains are all taxed at the same rate. So all the investments below I mention (even savings accounts) will be taxed at the same rate. Also, even short-term capital losses can often be harvested to reduce your tax rate in many countries. While it is worth paying attention to the taxes when investing in the short term the more important factor is how much risk that you can take or want to take with the money. Most equity portfolios like the S&P index give a much higher risk that there will be much less in the account when you need to buy. You generally have a higher expected return with equity but as you mention that return is very random over such a short period. Over such a short variable period many people will invest in short term bond-index funds or just keep the fund in a high-yielding savings account. With the savings account your money is guaranteed. Short term bond funds will have generally higher yields but a small chance you may lose money in the short term. Some people can trade short-term bond indices for free with their broker but if you can't be sure to include the trading costs when thinking about which investment to use as with how low yields are currently the fees may eat up any advantage you gain." } ]

[ { "docid": "187039", "title": "", "text": "\"The person who told you \"\"no-load funds\"\" had the right idea. Since you are risk-averse, you tend to want a \"\"value\"\" fund; that is, it's not likely to grow in value (that would be a \"\"growth\"\" fund), but it isn't like to fall either. To pick an example more-or-less at random, Fidelity Blue Chip Value Fund \"\"usually\"\" returns around 8% a year, which in your case would have meant about $20,000 every year -- but it's lost 4.35% in the last year. I like Fidelity, as a brokerage as well as a fund-manager. Their brokers are salaried, so they have no incentive to push load funds or other things that make them, but not you, money. For intermediate investors like you and me, they seem like a good choice. Be careful of \"\"short term\"\". Most funds have some small penalty if you sell within 90 days. Carve off whatever amount you think you might need and keep that in your cash account. And a piece of personal advice: don't be too risk-averse. You don't need this money. For you, the cost of losing it completely is exactly equal as the benefit of doubling it. You can afford to be aggressive. Think of it this way: the expected return of a no-load fund is around 5%-7%. For a savings account, the return is within rounding error of zero. Do you spend that much, $15,000, on anything in your life right now? Any recreation or hobby or activity. Maybe your rent or your tuition. Why spend it for a vague sense of \"\"safety\"\", when you are in no danger of losing anything that you need?\"" } ]

[ { "docid": "429704", "title": "", "text": "\"First it is worth noting the two sided nature of the contracts (long one currency/short a second) make leverage in currencies over a diverse set of clients generally less of a problem. In equities, since most margin investors are long \"\"equities\"\" making it more likely that large margin calls will all be made at the same time. Also, it's worth noting that high-frequency traders often highly levered make up a large portion of all volume in all liquid markets ~70% in equity markets for instance. Would you call that grossly artificial? What is that volume number really telling us anyway in that case? The major players holding long-term positions in the FX markets are large banks (non-investment arm), central banks and corporations and unlike equity markets which can nearly slow to a trickle currency markets need to keep trading just for many of those corporations/banks to do business. This kind of depth allows these brokers to even consider offering 400-to-1 leverage. I'm not suggesting that it is a good idea for these brokers, but the liquidity in currency markets is much deeper than their costumers.\"" }, { "docid": "22026", "title": "", "text": "\"Plenty of good answers here, but probably the best answer is that The Market relies on suckers...er...investors like you. The money has to come from somewhere, it might as well be you. So-called \"\"day traders\"\" or \"\"short-term investors\"\" are a huge part of the market, and they perform a vital function: they provide capital that flows to the large, well-equipped, institutional investors. Thing is, you can never be big enough, smart enough, well-informed enough, or quick enough to beat the big guys. You may have a run of good fortune, but over the long term aggregate, you're a PAYOR into the market, not a DIVIDEND reaper.\"" }, { "docid": "163197", "title": "", "text": "If you want to invest in stocks, bonds and mutual funds I would suggest you take a portion of your inheritance and use it to learn how to invest in this asset class wisely. Take courses on investing and trading (two different things) in paper assets and start trading on a fantasy exchange to test and hone your investment skills before risking any of your money. Personally I don't find bonds to have a meaningful rate of return and I prefer stocks that have a dividend over those that don't. Parking some of your money in an IRA is a good strategy for when you do not see opportunities to purchase cashflow-positive assets right away; this allows you to wait and deploy your capital when the opportunity presents itself and to educate yourself on what a good opportunity looks like." }, { "docid": "159725", "title": "", "text": "This all depends on your timeline and net worth. If you're short on time before you plan to start spending it or have a large net worth, parking some of your money in CDs is a good idea. If you have lots of time or not much net worth, then index funds are a better bet. Equity or dividend index funds are the way to go when you have 10+ years before you reach your goal. CDs major downside is that they don't beat inflation 1 - 3% a year. This is why you only use them when it's absolutely critical you hold onto every penny of the principal. The reason is because with CDs your 10k is actually losing its value (not the principal) the longer you leave it in CDs. I generally wouldn't recommend CDs unless you are in or approaching your 60s or have assets over 500k. Even still I would limit the use of CDs to no more than 20%. I would view them as catastrophic loss protection." }, { "docid": "244115", "title": "", "text": "The safest investment in the United States is Treasures. The Federal Reserve just increased the short term rate for the first time in about seven years. But the banks are under no obligation to increase the rate they pay. So you (or rather they) can loan money directly to the United States Government by buying Bills, Notes, or Bonds. To do this you set up an account with Treasury Direct. You print off a form (available at the website) and take the filled out form to the bank. At the bank their identity and citizenship will be verified and the bank will complete the form. The form is then mailed into Treasury Direct. There are at least two investments you can make at Treasury Direct that guarantee a rate of return better than the inflation rate. They are I-series bonds and Treasury Inflation Protected Securities (TIPS). Personally, I prefer the I-series bonds to TIPS. Here is a link to the Treasury Direct website for information on I-series bonds. this link takes you to information on TIPS. Edit: To the best of my understanding, the Federal Reserve has no ability to set the rate for notes and bonds. It is my understanding that they can only directly control the overnight rate. Which is the rate the banks get for parking their money with the Fed overnight. I believe that the rates for longer term instruments are set by the market and are not mandated by the Fed (or anyone else in government). It is only by indirect influence that the Fed tries to change long term rates." }, { "docid": "279303", "title": "", "text": "Over the long run, yeah I agree that that the technology consumers have and their real incomes have gone up. However, people don’t live their lives in the long run, their experiences are firmly centered in the short run. People marry, have children, move, start work, lose work, suffer health problems, divorce, homelessness all in the short run. When you zoom in from the long run view, life and individual fortunes seem a bit more dependent on luck and relative positioning than long run technological or economic trends. This is exacerbated by our political system where money seems to positively correlate with the ability to wield political power. Folks with political power can engineer changes that can improve their bottom line through zero sum political games (think taxes, regulation, etc) and maybe even turn a short run advantage (starting a successful business, generating wealth) into a longer run advantage (eliminating taxes on inheritance, potentially cementing family wealth for generations)." }, { "docid": "392056", "title": "", "text": "I am glad they are going away. Malls are an environmental tragedy. 1)They are the product (or maybe even part of the cause) of suburban sprawl. They encourage car usage and, by virtue of their need for large open areas to be constructed, are often far from where most people work and live. As a result, patrons have to drive large distances from their houses/jobs to the shopping centers. 2) The [parking lots are tremendous waste of space and hugely damage the environment.](https://journalistsresource.org/studies/environment/transportation/parking-environmental-impacts-development-policies-research-roundup) 3) Online shopping is much better for the environment as the product can be shipped directly to the consumer. 4) Once they are built and then closed, the space where the centers sat is basically abandoned and turns into blight. Depending on the businesses that were housed in the mall and the businesses that were supported by the mail (especially gas stations), these sites could be toxic. I am sure there are more reasons why malls are environmentally harmful, but those are a few off the top of my head." }, { "docid": "35002", "title": "", "text": "15 years ago I bought a beach condo in Miami for $400,000 and two extra parking spaces for $3000 each. Today the condo is worth 600,000 but the rent barely covers mortgage repairs and property taxes. Most of The old people in the building have since died and are now replaced with families with at least two cars and spots are in short supply. I turned down offers of 25,000 for each parking space. I have the spaces rented out for $200 per month no maintenance for an 80% annual return on my purchase price and the value went has gone up over $700%. And no realtors commissions if i decide to sell the spaces." }, { "docid": "436536", "title": "", "text": "Whenever a large number of shares to be sold hit the market at the same time the expectation is that the price for each share will drop. The employees in a normal market would be expected to sell some of their shares at the first opportunity. Because during the dot com boom some companies employees were able to become millionaires, every employee at a tech IPO hopes to be richly rewarded. If the long term prospects of the stock price are viewed by the employees as a continuous path up, then the percentage of shares that will hit the market is low. They do want some instant cash, but want the bulk of the shares to capture future growth. The more dismal the long term price lookout is, the greater the percentage of shares that will hit the market. The general consensus is that as each of the Lock Ups expires a significant percentage of shares will be sold, and the price will suffer a short term drop." }, { "docid": "576154", "title": "", "text": "I lived and worked in my college town for 7 years before I found out we had a Sears. It was a huge store on a main road with a parking lot so large that the store was too far back to be noticed...and they didnt have a sign." }, { "docid": "94040", "title": "", "text": "Short-term to intermediate-term corporate bond funds are available. The bond fund vehicle helps manage the credit risk, while the short terms help manage inflation and interest rate risk. Corporate bond funds will have fewer Treasuries bonds than a general-purpose short-term bond fund: it sounds like you're interested in things further out along the risk curve than a 0.48% return on a 5-year bond, and thus don't care for the Treasuries. Corporate bonds are generally safer than stocks because, in bankruptcy, all your bondholders have to be paid in full before any equity-holders get a penny. Stocks are much more volatile, since they're essentially worth the value of their profits after paying all their debt, taxes, and other expenses. As far as stocks are concerned, they're not very good for the short term at all. One of the stabler stock funds would be something like the Vanguard Equity Income Fund, and it cautions: This fund is designed to provide investors with an above-average level of current income while offering exposure to the stock market. Since the fund typically invests in companies that are dedicated to consistently paying dividends, it may have a higher yield than other Vanguard stock mutual funds. The fund’s emphasis on slower-growing, higher-yielding companies can also mean that its total return may not be as strong in a significant bull market. This income-focused fund may be appropriate for investors who have a long-term investment goal and a tolerance for stock market volatility. Even the large-cap stable companies can have their value fall dramatically in the short term. Look at its price chart; 2008 was brutal. Avoid stocks if you need to spend your money within a couple of years. Whatever you choose, read the prospectus to understand the risks." }, { "docid": "75372", "title": "", "text": "Bond MF/ETF comes in many flavour, one way to look at them is corporate, govt. (gilt/sovreign), money market (short term, overnight lending etc.), govt. backed bonds. The ETF/MFs that invest money in these are also different types. One way to evaluate an ETF/MF is to see where they invest your money. Corporate debts are by the highest coupon paying bonds, however, the chance of default is also greater, if you wish to invest in these, it is preferable to look at the ETF/MF's debt portfolio financial ratings (Moodies etc.). Govt. bonds are more stable and unless the govt. defaults (which happens more often than we would like to think), here also look for higher rating bonds portfolio that the fund/scheme carries. The govt. backed bonds are somewhat similar to sovreign bonds, however, these are issuesd by institutions which are backed by govt. (e.g. national railways, municipal bodies etc.), any fund/scheme that invests in these bonds could also be considered and similarly measured. The last are the short term money market related, which provides the least return but are very liquid. It is very difficult to answer how you should invest large sum on ETF/MFs that are bond oriented. However, from any investment perspective, it is better to spread your money. If I take your hypthetical case of 1M$, I would divide it into 100K$ pieces and invest in 10 different ETF/MF schemes of different flavour: Hope this helps." }, { "docid": "110624", "title": "", "text": "\"If you live and work in the euro-zone, then even after a \"\"crash\"\" all of your income and most of your expenses will still be in euros. The only portion of your worth you need to worry about protecting is the portion you intend to spend on goods from outside the euro-zone (i.e. imports). In that case, you may want to consider parking some of your money in short-term government bonds issued by other countries, such as the UK, Switzerland, and USA (or wherever else your favorite goods tend to come from). If the euro actually \"\"massively devalues\"\" (an extremely unlikely scenario), then you can expect foreign goods to cost a lot more than they do now. Inflation might also pick up, so you might also want to purchase some OATis.\"" }, { "docid": "91076", "title": "", "text": "Not charging taxes on a money losing investment or business is much more than humanitarian it is common sense. In general money that is used to invest has already been taxed as income or inheritance to the person making the investment so taxing that money again not just the profit would provide a disincentive for people to invest. Which would be bad for economic growth over the medium and long term. As far as taxing a money losing businesses goes, most businesses don't make money in their couple of years and adding further tax burdens would be counter productive because it would provide a major hurdle for people wanting to start a business. Other have already mentioned that the money losing operation likely paid indirect taxes as well. Small businesses provide a majority of the economic growth and innovation. So in short additional taxes on money losing investments and businesses would be both foolish and shortsighted." }, { "docid": "457122", "title": "", "text": "\"For a two year time frame, a good insured savings account or a low-cost short-term government bond fund is most likely the way I would go. Depending on the specific amount, it may also be reasonable to look into directly buying government bonds. The reason for this is simply that in such a short time period, the stock market can be extremely volatile. Imagine if you had gone all in with the money on the stock market in, say, 2007, intending to withdraw the money after two years. Take a broad stock market index of your choice and see how much you'd have got back, and consider if you'd have felt comfortable sticking to your plan for the duration. Since you would likely be focused more on preservation of capital than returns during such a relatively short period, the risk of the stock market making a major (or even relatively minor) downturn in the interim would (should) be a bigger consideration than the possibility of a higher return. The \"\"return of capital, not return on capital\"\" rule. If the stock market falls by 10%, it must go up by 11% to break even. If it falls by 25%, it must go up by 33% to break even. If you are looking at a slightly longer time period, such as the example five years, then you might want to add some stocks to the mix for the possibility of a higher return. Still, however, since you have a specific goal in mind that is still reasonably close in time, I would likely keep a large fraction of the money in interest-bearing holdings (bank account, bonds, bond funds) rather than in the stock market. A good compromise may be medium-to-high-yield corporate bonds. It shouldn't be too difficult to find such bond funds that can return a few percentage points above risk-free interest, if you can live with the price volatility. Over time and as you get closer to actually needing the money, shift the holdings to lower-risk holdings to secure the capital amount. Yes, short-term government bonds tend to have dismal returns, particularly currently. (It's pretty much either that, or the country is just about bankrupt already, which means that the risk of default is quite high which is reflected in the interest premiums demanded by investors.) But the risk in most countries' short-term government bonds is also very much limited. And generally, when you are looking at using the money for a specific purpose within a defined (and relatively short) time frame, you want to reduce risk, even if that comes with the price tag of a slightly lower return. And, as always, never put all your eggs in one basket. A combination of government bonds from various countries may be appropriate, just as you should diversify between different stocks in a well-balanced portfolio. Make sure to check the limits on how much money is insured in a single account, for a single individual, in a single institution and for a household - you don't want to chase high interest bank accounts only to be burned by something like that if the institution goes bankrupt. Generally, the sooner you expect to need the money, the less risk you should take, even if that means a lower return on capital. And the risk progression (ignoring currency effects, which affects all of these equally) is roughly short-term government bonds, long-term government bonds or regular corporate bonds, high-yield corporate bonds, stock market large cap, stock market mid and low cap. Yes, there are exceptions, but that's a resonable rule of thumb.\"" }, { "docid": "220276", "title": "", "text": "Right now interest rates are pretty low and as such you won't see blockbuster interest rates in anything highly liquid. That being said you're motivation is liquidity over rate of return anyway so I don't think that is a concern. Money Market funds should give you a similar return to AMEX Personal Savings. Due to their lack of a rate guarantee I wouldn't be surprised if that is simply a branded Money Market account. Your best bet is to look at what rates you can get on any short term security and park your money in the one that best suites your needs and offers the greatest return. Money Markets are simply a great way for you to keep your cash liquid while investing you in a broad range of liquid assets (diversification is key)." }, { "docid": "322806", "title": "", "text": "\"Diversification is the only real free lunch in finance (reduction in risk without any reduction in expected returns), so clearly every good answer to your question will be \"\"yes.\"\" Diversification is good.\"\" Let's talk about many details your question solicits. Many funds are already pretty diversified. If you buy a mutual fund, you are generally already getting a large portion of the gains from diversification. There is a very large difference between the unnecessary risk in your portfolio if you only hold a couple of stocks and if you hold a mutual fund. Should you be diversified across mutual funds as well? It depends on what your funds are. Many funds, such as target-date funds, are intended to be your sole investment. If you have funds covering every major asset class, then there may not be any additional benefit to buying other funds. You probably could not have picked your \"\"favorite fund\"\" early on. As humans, we have cognitive biases that make us think we knew things early on that we did not. I'm sure at some point at the very beginning you had a positive feeling toward that fund. Today you regret not acting on it and putting all your money there. But the number of such feelings is very large and if you acted on all those, you would do a lot of crazy and harmful things. You didn't know early on which fund would do well. You could just as well have had a good feeling about a fund that subsequently did much worse than your diversified portfolio did. The advice you have had about your portfolio probably isn't based on sound finance theory. You say you have always kept your investments in line with your age. This implies that you believe the guidelines given you by your broker or financial advisor are based in finance theory. Generally speaking, they are not. They are rules of thumb that seemed good to someone but are not rigorously proven either in theory or empirics. For example the notion that you should slowly shift your investments from speculative to conservative as you age is not based on sound finance theory. It just seems good to the people who give advice on such things. Nothing particularly wrong with it, I guess, but it's not remotely on par with the general concept of being well-diversified. The latter is extremely well established and verified, both in theory and in practice. Don't confuse the concept of diversification with the specific advice you have received from your advisor. A fund averaging very good returns is not an anomaly--at least going forward it will not be. There are many thousand funds and a large distribution in their historical performance. Just by random chance, some funds will have a truly outstanding track record. Perhaps the manager really was skilled. However, very careful empirical testing has shown the following: (1) You, me, and people whose profession it is to select outperforming mutual funds are unable to reliably detect which ones will outperform, except in hindsight (2) A fund that has outperformed, even over a long horizon, is not more likely to outperform in the future. No one is stopping you from putting all your money in that fund. Depending on its investment objective, you may even have decent diversification if you do so. However, please be aware that if you move your money based on historical outperformance, you will be acting on the same cognitive bias that makes gamblers believe they are on a \"\"hot streak\"\" and \"\"can't lose.\"\" They can, and so can you. ======== Edit to answer a more specific line of questions =========== One of your questions is whether it makes sense to buy a number of mutual funds as part of your diversification strategy. This is a slightly more subtle question and I will indicate where there is uncertainty in my answer. Diversifying across asset classes. Most of the gains from diversification are available in a single fund. There is a lot of idiosyncratic risk in one or two stocks and much less in a collection of hundreds of stocks, which is what any mutual fund will hold. Still,you will probably want at least a couple of funds in your portfolio. I will list them from most important to least and I will assume the bulk of your portfolio is in a total US equity fund (or S&P500-style fund) so that you are almost completely diversified already. Risky Bonds. These are corporate, municipal, sovereign debt, and long-term treasury debt funds. There is almost certainly a good deal to be gained by having a portion of your portfolio in bonds, and normally a total market fund will not include bond exposure. Bonds fund returns are closely related to interest rate and inflation changes. They are also exposed to some market risk but it's more efficient to get that from equity. The bond market is very large, so if you did market weights you would have more in bonds than in equity. Normally people do not do this, though. Instead you can get the exposure to interest rates by holding a lesser amount in longer-term bonds, rather than more in shorter-term bonds. I don't believe in shifting your weights toward nor away from this type of bond (as opposed to equity) as you age so if you are getting that advice, know that it is not well-founded in theory. Whatever your relative weight in risky bonds when you are young is should also be your weight when you are older. International. There are probably some gains from having some exposure to international markets, although these have decreased over time as economies have become more integrated. If we followed market weights, you would actually put half your equity weight in an international fund. Because international funds are taxed differently (gains are always taxed at the short-term capital gains rate) and because they have higher management fees, most people make only a small investment to international funds, if any at all. Emerging markets International funds often ignore emerging markets in order to maintain liquidity and low fees. You can get some exposure to these markets through emerging markets funds. However, the value of public equity in emerging markets is small when compared with that of developed markets, so according to finance theory, your investment in them should be small as well. That's a theoretical, not an empirical result. Emerging market funds charge high fees as well, so this one is kind of up to your taste. I can't say whether it will work out in the future. Real estate. You may want to get exposure to real estate by buying a real-estate fund (REIT). Though, if you own a house you are already exposed to the real estate market, perhaps more than you want to be. REITs often invest in commercial real estate, which is a little different from the residential market. Small Cap. Although total market funds invest in all capitalization levels, the market is so skewed toward large firms that many total market funds don't have any significant small cap exposure. It's common for individuals to hold a small cap fund to compensate for this, but it's not actually required by investment theory. In principle, the most diversified portfolio should be market-cap weighted, so small cap should have negligible weight in your portfolio. Many people hold small cap because historically it has outperformed large cap firms of equal risk, but this trend is uncertain. Many researchers feel that the small cap \"\"premium\"\" may have been a short-term artifact in the data. Given these facts and the fact that small-cap funds charge higher fees, it may make sense to pass on this asset class. Depends on your opinion and beliefs. Value (or Growth) Funds. Half the market can be classed as \"\"value\"\", while the other half is \"\"growth.\"\" Your total market fund should have equal representation in both so there is no diversification reason to buy a special value or growth fund. Historically, value funds have outperformed over long horizons and many researchers think this will continue, but it's not exactly mandated by the theory. If you choose to skew your portfolio by buying one of these, it should be a value fund. Sector funds. There is, in general, no diversification reason to buy funds that invest in a particular sector. If you are trying to hedge your income (like trying to avoid investing in the tech sector because you work in that sector) or your costs (buying energy because you buy use a disproportionate amount of energy) I could imagine you buying one of these funds. Risk-free bonds. Funds specializing in short-term treasuries or short-term high-quality bonds of other types are basically a substitute for a savings account, CD, money market fund, or other cash equivalent. Use as appropriate but there is little diversification here per se. In short, there is some value in diversifying across asset classes, and it is open to opinion how much you should do. Less well-justified is diversifying across managers within the same asset class. There's very little if any advantage to doing that.\"" }, { "docid": "488615", "title": "", "text": "Since the bondholders have voted to reject the emergency manager's plan, which would have paid them pennies on the dollar, the city is now attempting to discharge its short-term and long-term debt. If they get what they want in court, it is likely these bonds will become worthless. Even if they are only able to restructure the debt, its likely that bondholders will need to accept large concessions. However, this may not be immediately reflected in bond prices as it's very possible that the market for these bonds will be very limited in terms of who they could sell them to. If you were to buy them now , that would be a bet on some outcome other than bankruptcy and the discharge of the city's long-term obligations. President Obama has already stated that he monitoring the situation, and it seems unlikely to me that after all of the support given to the auto industry in the last several years that the federal government will do nothing, if only to avert job losses. However, I think it's likely that state aid will be limited at best, as Michigan's economy has been struggling for a number of years. There aren't many large precedents to look at for guidance. One of the largest public entities to declare bankruptcy, Orange County, was a very different situation because this was due to malfeasance on the part of its investment manager, whereas Detroit's situation is a much larger structural problem with its declining economy and tax base. I think the key question will be whether the Federal Government will consider a Detroit bankruptcy to be a large enough embarassment/failure to take significant action." }, { "docid": "21288", "title": "", "text": "A gift between spouses has no tax implications. If one spouse dies the inheritance tax is always zero no matter how much of the estate passes to the surviving spouse. Gift taxes are actually related to estate taxes, so a gift no matter how large never requires filing any tax forms or paying any taxes." } ]

[ { "docid": "588607", "title": "", "text": "\"Rebalancing a portfolio helps you reduce risk, sell high, and buy low. I'll use international stocks and large cap US stocks. They both have ups and downs, and they don't always track with each other (international might be up while large cap US stocks are down and vice-versa) If you started with 50% international and 50% large cap stocks and 1 year later you have 75% international and 25% large cap stocks that means that international stocks are doing (relatively) well to large cap stocks. Comparing only those two categories, large cap stocks are \"\"on sale\"\" relative to international stocks. Now move so you have 50% in each category and you've realized some of the gains from your international investment (sell high) and added to your large cap stocks (buy low). The reason to rebalance is to lower risk. You are spreading your investments across multiple categories to manage risk. If you don't rebalance, you could end up with 95% in one category and 5% in another which means 95% of your portfolio is tied to the performance of a single asset category. I try to rebalance every 12 months and usually get it done by every 18 months. I like being a hands-off long term investor and this has proven often enough to beat the S&P500.\"" } ]

[ { "docid": "269169", "title": "", "text": "\"An asset allocation formula is useful because it provides a way to manage risk. Rebalancing preserves your asset allocation. The investment risk of a well-diversified portfolio (with a few ETFs or mutual funds in there to get a wide range of stocks, bonds, and international exposure) is mostly proportional to the asset class distribution. If you started out with half-stocks and half-bonds, and stocks surged 100% over the past few years while bonds have stayed flat, then you may be left with (say) 66% stocks and 33% bonds. Your portfolio is now more vulnerable to future stock market drops (the risk associated with stocks). (Most asset allocation recommendations are a little more specific than a stock/bond split, but I'm sure you can get the idea.) Rebalancing can be profitable because it's a formulaic way to enforce you to \"\"buy low, sell high\"\". Massive recessions notwithstanding, usually not everything in your portfolio will rise and fall at the same time, and some are actually negatively correlated (that's one idea behind diversification, anyway). If your stocks have surged, chances are that bonds are cheaper. This doesn't always work (repeatedly transferring money from bonds into stocks while the market was falling in 2008-2009 could have lost you even more money). Also, if you rebalance frequently, you might incur expenses from the trading (depending on what sort of financial instrument you're holding). It may be more effective to simply channel new money into the sector that you're light on, and limit the major rebalancing of the portfolio so that it's just an occasional thing. Talk to your financial adviser. :)\"" }, { "docid": "247671", "title": "", "text": "Time to look at a tax table. A retired couple hits the top of the 15% bracket with an income of $96,700. (I include just the standard deduction and exemptions.) The tax on this gross sum is $10,452.50 for an 'average' rate of 10.8%. This is what 2 answers here seem to miss, and the 3rd touches, but doesn't keep going. The tax, paid or avoided, upon deposit, is one's marginal rate. But, at retirement, the withdrawals first go through the zero bracket (i.e. the STD deduction and exemptions), then 10%, then 15%. The Roth benefit is maximized In the end, to choose between Traditional or Roth, one would have to have far more details regarding the person's financial situation. The right choice is rarely 100% known except in hindsight." }, { "docid": "238500", "title": "", "text": "What is the best option to start with? and I am not sure about my goals right now but I do want to have a major retirement account without changing it for a long time That is a loaded question. Your goals should be set up first, else what is stopping you from playing the mega millions lottery to earn the retirement amount instantly. If you have the time and resources, you should try doing it yourself. It helps you learn and at a latter stage if you don't have the time to manage it yourself, you can find an adviser who does it for you. To find a good adviser or find a fund who/which can help you achieve your monetary goals you will need to understand the details, how it works and other stuff, behind it. When you are thrown terms at your face by somebody, you should be able to join the dots and get a picture for yourself. Many a rich men have lost their money to unscrupulous people i.e. Bernie Madoff. So knowing helps a lot and then you can ask questions or find for yourself to calm yourself i.e. ditch the fund or adviser, when you see red flags. It also makes you not to be too greedy, when somebody paints you a picture of great returns, because then your well oiled mind would start questioning the rationale behind such investments. Have a look at Warren Buffet. He is an investor and you can follow how he does his investing. It is simple but very difficult to follow. Investing through my bank I would prefer to stay away from them, because their main service is banking and not allowing people to trade. I would first compare the services provided by a bank to TD Ameritrade, or any firm providing trading services. The thing is, as you mentioned in the question, you have to go through a specific process of calling him to change your portfolio, which shouldn't be a condition. What might happen is, if he is getting some benefits out of the arrangement(get it clarified in the first place if you intend to go through them), from the side of the fund, he might try to dissuade you from doing so to protect his stream of income. And what if he is on a holiday or you cannot get hold of him. Secondly from your question, it seems you aren't that investing literate. So it is very easy to get you confused by jargon and making you do what he gets the maximum benefit out of it, rather than which benefits you more. I ain't saying he is doing so but that could be a possibility too, so you have consider that angle too. The pro is that setting up an account through them might be much easier than directly going to a provider. But the best point doing it yourself is, you will learn and there is nothing which tops that. You don't want somebody else managing your money, however knowledgeable they maybe i.e. Anthony Bolton." }, { "docid": "549402", "title": "", "text": "This answer will assume you know more math than most. An ideal case: For the point of argument, first consider the following admittedly incorrect assumptions: 1) The prices of all assets in your investment universe are continuously differentiable functions of time. 2) Investor R (for rebalance) continuously buys and sells in order to maintain a constant proportion of each of several investments in his portfolio. 3) Investor P (for passive) starts with the same portfolio as R, but neither buys nor sells Then under the assumptions of no taxes or trading costs, it is a mathematical theorem that investor P's portfolio return fraction will be the weighted arithmetic mean of the return fractions of all the individual investments, whereas investor R will obtain the weighted geometric mean of the return fractions of the individual investments. It's also a theorem that the weighted arithmetic mean is ALWAYS greater than or equal to the weighted geometric mean, so regardless of what happens in the market (given the above assumptions) the passive investor P does at least as well as the rebalancing investor R. P will do even better if taxes and trading costs are factored in. The real world: Of course prices aren't continuously differentiable or even continuous, nor can you continuously trade. (Indeed, under such assumptions the optimal investing strategy would be to sample the prices sufficiently rapidly to capture the derivatives and then to move all your assets to the stock increasing at the highest relative rate. This crazy momentum trading would explosively destabilize the market and cause the assumptions to break.) The point of this is not to argue for or against rebalancing, but to point out that any argument for rebalancing which continues to hold under the above ideal assumptions is bogus. (Many such arguments do.) If a stockbroker standing to profit from commission pushes rebalancing on you with an argument that still holds under the above assumptions then he is profiting off of BS." }, { "docid": "478291", "title": "", "text": "\"In the US, dividends are presently taxed at the same rates as capital gains, however selling stock could lead to less tax owed for the same amount of cash raised, because you are getting a return of basis or can elect to engage in a \"\"loss harvesting\"\" strategy. So to reply to the title question specifically, there are more tax \"\"benefits\"\" to selling stock to raise income versus receiving dividends. You have precise control of the realization of gains. However, the reason dividends (or dividend funds) are used for retirement income is for matching cash flow to expenses and preventing a liquidity crunch. One feature of retirement is that you're not working to earn a salary, yet you still have daily living expenses. Dividends are stable and more predictable than capital gains, and generate cash generally quarterly. While companies can reduce or suspend their dividend, you can generally budget for your portfolio to put a reliable amount of cash in your pocket on schedule. If you rely on selling shares quarterly for retirement living expenses, what would you have done (or how much of the total position would you have needed to sell) in order to eat during a decline in the market such as in 2007-2008?\"" }, { "docid": "198764", "title": "", "text": "While the Vanguard paper is good, it doesn't do a very good job of explaining precisely why each level of stocks or bonds was optimal. If you'd like to read a transparent and quantitative explanation of when and why a a glide path is optimal, I'd suggest the following paper: https://www.betterment.com/resources/how-we-construct-portfolio-allocation-advice/ (Full disclosure - I'm the author). The answer is that the optimal risk level for any given holding period depends upon a combination of: Using these two factors, you construct a risk-averse decision model which chooses the risk level with the best expected average outcome, where it looks only at the median and lower percentile outcomes. This produces an average which is specifically robust to downside risk. The result will look something like this: The exact results will depend on the expected risk and return of the portfolio, and the degree of risk aversion specified. The result is specifically valid for the case where you liquidate all of the portfolio at a specific point in time. For retirement, the glide path needs to be extended to take into account the fact that the portfolio will be liquidated gradually over time, and dynamically take into account the longevity risk of the individual. I can't say precisely why Vanguard's path is how it is." }, { "docid": "310218", "title": "", "text": "\"If the stock market dropped 30%-40% next month, providing you with a rare opportunity to buy stocks at a deep discount, wouldn't you want to have some of your assets in investments other than stocks? If you don't otherwise have piles of new cash to throw into the market when it significantly tanks, then having some of your portfolio invested elsewhere will enable you to back up the proverbial truck and load up on more stocks while they are on sale. I'm not advocating active market timing. Rather, the way that long-term investors capitalize on such opportunities is by choosing a portfolio asset allocation that includes some percentage of safer assets (e.g. cash, short term bonds, etc.), permitting the investor to rebalance the portfolio periodically back to target allocations (e.g. 80% stocks, 20% bonds.) When rebalancing would have you buy stocks, it's usually because they are on sale. Similarly, when rebalancing would have you sell stocks, it's usually because they are overpriced. So, don't consider \"\"safer investments\"\" strictly as a way to reduce your risk. Rather, they can give you the means to take advantage of market drops, rather than just riding it out when you are already 100% invested in stocks. I could say a lot more about diversification and risk reduction, but there are plenty of other great questions on the site that you can look through instead.\"" }, { "docid": "186575", "title": "", "text": "You're missing the concept of systemic risk, which is the risk of the entire market or an entire asset class. Diversification is about achieving a balance between risk and return that's appropriate for you. Your investment in Vanguard's fund, although diversified between many public companies, is still restricted to one asset class in one country. Yes, you lower your risk by investing in all of these companies, but you don't erase it entirely. Clearly, there is still risk, despite your diversification. You may decide that you want other investments or a different asset allocation that reduce the overall risk of your portfolio. Over the long run, you may earn a high level of return, but never forget that there is still risk involved. bonds seem pretty worthless, at least until I retire According to your profile, you're about my age. Our cohort will probably begin retiring sometime around 2050 or later, and no one knows what the bond market will look like over the next 40 years. We may have forecasts for the next few years, but not for almost four decades. Writing off an entire asset class for almost four decades doesn't seem like a good idea. Also, bonds are like equity, and all other asset classes, in that there are different levels of risk within the asset class too. When calculating the overall risk/return profile of my portfolio, I certainly don't consider Treasuries as the same risk level as corporate bonds or high-yield (or junk) bonds from abroad. Depending on your risk preferences, you may find that an asset allocation that includes US and/or international bonds/fixed-income, international equities, real-estate, and cash (to make rebalancing your asset allocation easier) reduces your risk to levels you're willing to tolerate, while still allowing you to achieve returns during periods where one asset class, e.g. equities, is losing value or performing below your expectations." }, { "docid": "12351", "title": "", "text": "I wrote a detailed article on Tax Loss Harvesting to show the impact on returns. For my example, I showed a person in the 15% bracket. In years with no loss, they trade to capture gains at 0% long term rate, thus bumping their basis up. In years with losses, they tax harvest for a 15% effective 'rebate' on that loss. I showed how for the lost decade 2000-2009, a buy and hold would have returned -1% CAGR, but the tax loss harvester would have gained 1% (just 1% for the decade, not CAGR), ending the decade with no loss. As one's portfolio grows, the math changes. You can only take $3000 capital loss against ordinary income, and my example relies on the difference between taking a gain for free but using a loss to offset income. Note, the higher earner would take gains at 15%, but losses at 25%, but only for the relatively small portfolio. The benefit for them is to use loss harvesting to offset gains, less so for ordinary income. As the other answer state, Wealthfront can aid you to do this with no math on your part." }, { "docid": "30825", "title": "", "text": "First of all, make sure you have all your credit cards paid in full -the compounding interests on those can zero out returns on any of your private investments. Fundamentally, there are 2 major parts of personal finance: optimizing the savings output (see frugal blogs for getting costs down, and entrepreneur sites for upping revenues), and matching investment vehicles to your particular taste of risk/reward. For the later, Fool's 13 steps to invest provides a sound foundation, by explaining the basics of stocks, indexes, long-holding strategy, etc. A full list Financial instruments can be found on Wikipedia; however, you will find most of these to be irrelevant to your goals listed above. For a more detailed guide to long-term strategies on portfolio composition, I'd recommend A Random Walk Down Wall Street: The Time-tested Strategy for Successful Investing. One of the most handy charts can be found in the second half of this book, which basically outlines for a given age a recommended asset allocation for wealth creation. Good luck!" }, { "docid": "410461", "title": "", "text": "\"If you want to make a profit from long term trading (whatever \"\"long term\"\" means for you), the best strategy is to let the good performers in your portfolio run, and cull the bad ones. Of course that strategy is hard to follow, unless you have the perfect foresight to know exactly how long your best performing investments will continue to outperform the market, but markets don't always follow the assumption that perfect information is available to all participants, and hence \"\"momentum\"\" has a real-world effect on prices, whether or not some theorists have chosen to ignore it. But a fixed strategy of \"\"daily rebalancing\"\" does exactly the opposite of the above - it continuously reduces the holdings of good performers and increases the holdings of bad. If this type of rebalancing is done more frequently than the constituents of benchmark index are adjusted, it is very likely to underperform the index in the long term. Other issues in a \"\"real world\"\" market are the impact of increased dealing costs on smaller parcels of securities, and the buy/sell spreads incurred in the daily rebalancing trades. If the market is up and down 1% on alternate days with no long tern trend, quite likely the fund will be repeatedly buying and selling small parcels of the same stocks to do its daily balancing.\"" }, { "docid": "507468", "title": "", "text": "Personally I'm not a huge fan of rebalancing within an asset class. I would vote for leaving the HD shares alone and buying other assets until you get to the portfolio you want. Frequent buying and selling incurs costs and possible tax consequences that can really hurt your returns." }, { "docid": "216365", "title": "", "text": "At 22 years old, you can afford to be invested 100% in the stock market. Like many others, I recommend that you consider low cost index funds if those are available in your 401(k) plan. Since your 401(k) contributions are usually made with each paycheck this gives you the added benefit of dollar cost averaging throughout your career. There used to be a common rule that you should put 100 minus your age as the percentage invested in the stock market and the rest in bonds, but with interest rates being so low, bonds have underperformed, so many experts now recommend 110 or even 120 minus your age for stocks percentage. My recommendation is that you wait until you are 40 and then move 25% into bonds, then increase it to 40% at 55 years old. At 65 I would jump to a 50-50 stock/bonds mix and when you start taking distributions I would move to a stable-value income portfolio. I also recommend that you roll your funds into a Vanguard IRA when you change jobs so that you take advantage of their low management fee index mutual funds (that have no fees for trading). You can pick whatever mix feels best for you, but at your age I would suggest a 50-50 mix between the S&P 500 (large cap) and the Russell 2000 (small cap). Those with quarterly rebalancing will put you a little ahead of the market with very little effort." }, { "docid": "340131", "title": "", "text": "You may want to move money between your investments within the plan, rebalancing money to maintain your diversification. You don't have to deal with the details if selling and buying, just tell them how much to move where. Many plans offer investments that automatically rebalance for you such as Target Date accounts. You may be able to select one of those and just ignore the 401k until retirement, or at most rebalance even less often. Look at what's offered, look at what it costs as fees, run the numbers and decide whether you can do better." }, { "docid": "480590", "title": "", "text": "People that argue for an FTT, whether they know it or not, are directly advocating for savers to have reduced stock market returns, making it even harder to save for retirement. Make no mistake - a financial transactions tax would disproportionately hurt middle class savers the most. In almost every article I see advocating an FTT, the authors have a profound misunderstanding about how financial markets work. They focus on jealousy politics (target the rich!) and dismiss the hugely detrimental effects on the market as obscure academic objections. FFTs impose a DIRECT cost on ALL investors in four major ways: (1) larger bid/ask spreads, (2) higher volatility, (3) reduced capital mobility, and obviously (4) the tax itself. All of these things are BAD for any investor. Advocates for FFT essentially want the stock market to be less efficient. Even investors that make NO trades during the year will see the returns drop on their ETFs, mutual funds, index funds, that they are accumulating for retirement. Why? Institutional funds (Vanguard, Fidelity, etc) churn billions of dollars during the normal course of business handling buy/sell orders, portfolio rebalancing, unit creation/elimination. Increased bid/ask spreads make these transactions more expensive, higher volatility makes them more risky, reduced capital mobility reduces volumes available to trade, and the tax adds to the cost. All of these effects show up as reduced returns on a typical fund. Vanguard put the reduced returns on the order of 1% depending on fund style - in other words, hundreds of thousands of dollars in lost savings compounded over a middle class working career. For a middle class saver, that could mean the difference between retiring at a reasonable age or never being able to retire! But don't take my word on it. [There are an extensive number of studies and statements from both academia and industry on this subject, all saying the same thing.](https://modernmarketsinitiative.org/topics/ftt/) When Vanguard says an FTT will hurt investors, people should listen. Vanguard is perhaps the most consumer friendly investment firm in history, single-handedly responsible for bringing investing costs down near zero. They have done more for middle class investors than virtually any other firm." }, { "docid": "178438", "title": "", "text": "Look into the asset allocations of lifecycle funds offered by a company like Vanguard. This page allows you to select your current age and find a fund based on that. You could pick a fund, like the Target Retirement 2055 Fund (ages 21-25), and examine its allocation in the Portfolio & Management tab. For this fund, the breakdown is: Then, look at the allocation of the underlying funds that comprise the lifecycle fund, in the same tab. Look at each of those funds and see what asset allocation they use, and that should give you a rough idea for an age-based allocation. For example, the Total Stock Market Index Fund page has a sector breakdown, so if you wanted to get very fine-grained with your allocation, you could. (You're probably much better off investing in the index fund, low-cost ETFs, or the lifecycle fund itself, however; it'll be much cheaper). Doing this for several lifecycle funds should be a good start. Keep in mind, however, that these funds are rebalanced as the target date approaches, so if you're following the allocation of some particular funds, you'll have to rebalance as well. If you really want an age-based allocation that you don't have to think about, invest in a lifecycle fund directly. You'll probably pay a lower expense ratio than if you invested in a whole slew of funds directory, and it's less work for someone who isn't comfortable managing their portfolio themselves. Furthermore, with Vanguard, the expense ratios are already fairly low. This is only one example of an allocation, however; your tolerance of risk, age, etc. may affect what allocation you're willing to accept. Full disclosure: Part of my Roth IRA is invested in the Target 2055 fund I used as an example above, and another part uses a similar rebalancing strategy to the one I used above, but with Admiral Share funds, which have higher minimum investments but lower expense ratios." }, { "docid": "542795", "title": "", "text": "So I did some queries on Google Scholar, and the term of art academics seem to use is target date fund. I notice divided opinions among academics on the matter. W. Pfau gave a nice set of citations of papers with which he disagrees, so I'll start with them. In 1969, Paul Sameulson published the paper Lifetime Portfolio Selection By Dynamic Stochaistic Programming, which found that there's no mathematical foundation for an age based risk tolerance. There seems to be a fundamental quibble relating to present value of future wages; if they are stable and uncorrelated with the market, one analysis suggests the optimal lifecycle investment should start at roughly 300 percent of your portfolio in stocks (via crazy borrowing). Other people point out that if your wages are correlated with stock returns, allocations to stock as low as 20 percent might be optimal. So theory isn't helping much. Perhaps with the advent of computers we can find some kind of empirical data. Robert Shiller authored a study on lifecycle funds when they were proposed for personal Social Security accounts. Lifecycle strategies fare poorly in his historical simulation: Moreover, with these life cycle portfolios, relatively little is contributed when the allocation to stocks is high, since earnings are relatively low in the younger years. Workers contribute only a little to stocks, and do not enjoy a strong effect of compounding, since the proceeds of the early investments are taken out of the stock market as time goes on. Basu and Drew follow up on that assertion with a set of lifecycle strategies and their contrarian counterparts: whereas a the lifecycle plan starts high stock exposure and trails off near retirement, the contrarian ones will invest in bonds and cash early in life and move to stocks after a few years. They show that contrarian strategies have higher average returns, even at the low 25th percentile of returns. It's only at the bottom 5 or 10 percent where this is reversed. One problem with these empirical studies is isolating the effect of the glide path from rebalancing. It could be that a simple fixed allocation works plenty fine, and that selling winners and doubling down on losers is the fundamental driver of returns. Schleef and Eisinger compare lifecycle strategy with a number of fixed asset allocation schemes in Monte Carlo simulations and conclude that a 70% equity, 30% long term corp bonds does as well as all of the lifecycle funds. Finally, the earlier W Pfau paper offers a Monte Carlo simulation similar to Schleef and Eisinger, and runs final portfolio values through a utility function designed to calculate diminishing returns to more money. This seems like a good point, as the risk of your portfolio isn't all or nothing, but your first dollar is more valuable than your millionth. Pfau finds that for some risk-aversion coefficients, lifecycles offer greater utility than portfolios with fixed allocations. And Pfau does note that applying their strategies to the historical record makes a strong recommendation for 100 percent stocks in all but 5 years from 1940-2011. So maybe the best retirement allocation is good old low cost S&P index funds!" }, { "docid": "117965", "title": "", "text": "\"The Roth/Traditional decision is complex, but can be broken down into a set of simple rules. Ideally, you want to choose to tax your money at the lowest possible rate. This specifically refers to your marginal rate, the rate you last $100 was taxed or next $100 of income with be taxed. That, in itself, is another issue, answered with questions here discussing marginal rates. My suggestion has been that if you are in the 15% bracket, use Roth. And continue to do so until you hit 25%. At that point, begin to shift to the traditional, pre-tax 401(k) or IRA. (My article The 15% solution, goes into detail on this, although it references the 2013 tax rates. I need to re-edit). If you are already in the 25% bracket, I'd suggest just going pre-tax. Given the ability to convert, it's not as if there are 2 points in time (deposit and withdrawal) but you can decide every year if your situation changes. It's not uncommon to get married, have a baby, buy a house, and find you just dropped back down to 15% marginal rate when you were solidly 25% prior. Let me explain why you should go 100% pretax if already at 25%. A single person hits the top of the 15% bracket (in 2017) at $37,950 taxable. Add the standard deduction and exemption, and you are at $48,350. The tax on this is $5226, less than 10% average, despite the next $100 being taxed at 25%. It would take over $1M to have an account large enough to withdraw $40K/yr. If you blow through that number, you hit 25%, I agree, but why pay 25% now, for sure, to avoid 'maybe' hitting 25% later? You have decades of opportunities for conversion, and even more when the funds are transferred to IRAs if you have a job change. (And the conversion discussion has multiple layers when the IRA is involved) Say you are 'too' successful. You are hitting $2M before age 55. If you retire post-55, you can withdraw from the 401(k) penalty free. But, you have 15 years before you'd start to take SS benefits. 15 years to use conversions, even if pushing into 25%, to reduce the impact of SS taxation. My advice is not a set-and-forget solution. It's an annual evaluation of the plan for the coming year. Further notes on my choice of \"\"15% Solution\"\" - This is the 2017 tax table for singles - I note that median individual income is ~$30K which puts that median single at ~20K taxable. This is where the analysis begins. This earner might have upward mobility, to reach the 25% bracket and begin to save pre-tax. The goal would be to have a mix of pre/post tax money, so that over the course of their life, the 25% bracket was avoided, perhaps completely. In general, my writing tend towards the second highest quintile, the 60-80% slice of the population. The numbers might appear arbitrary, but, in the end, the discussion has to start someplace. The concept I described here is best implemented by the single or couple who is still at 15%, but soon pushing higher than the 15/25 line. This enables them to start by saving in the Roth, and slowly shifting towards pre-tax. The final mix at retirement depends on that timing as well as their opportunities for conversions along the way. Part of my focus on that line is that the differential is greatest in bracket shifts between 15 and 25%. Much of the benefit in the whole IRA/401 discussion is in that shift, depositing at 25%, yet withdrawing at 15%. The 28% couple might wish to avoid the 33% bracket at retirement, but that level of income impacts far fewer people, and fewer still that are either reading these boards or my other writing.\"" }, { "docid": "301877", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.nytimes.com/2017/10/20/us/politics/republicans-tax-401-k.html) reduced by 71%. (I'm a bot) ***** &gt; Republicans drafting the tax bill have kept its details closely held, and they would not comment on Friday about whether 401(k) changes were under discussion. &gt; Republicans on the House Ways and Means Committee &amp;quot;Are developing pro-growth tax reform policies that will encourage and support retirement savings for all Americans,&amp;quot; a committee spokeswoman said. &gt; The tax framework that President Trump and congressional Republican leaders released last month promised to retain &amp;quot;Tax benefits that encourage work, higher education and retirement security.&amp;quot; It left the door open to changes in the current system, saying that &amp;quot;The committees are encouraged to simplify these benefits to improve their efficiency and effectiveness.\"\" ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/788pfk/republicans_consider_sharp_cut_in_401k/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~233609 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **tax**^#1 **save**^#2 **Republican**^#3 **retirement**^#4 **Committee**^#5\"" } ]

[ { "docid": "22221", "title": "", "text": "Rebalancing your portfolio doesn't have to include selling. You could simply adjust your buying to keep your portfolio in balance. If you portfolio has shifted from 50% stocks and 50% bonds to 75% stocks and 25% bonds, you can just only use new savings to buy bonds, until you are back at 50-50. Remember to take into account taxes if you are thinking of selling to rebalance in taxable accounts. The goal of rebalancing is to keep your exposures the way that you want them. Assuming that you had a good reason to have a portfolio of 50% stocks and 50% bonds, you probably want to keep your portfolio similar in the future. If you end up with a portfolio of 75% stocks and 25% bonds due to stock market fluctuations, the exposure and the risk / return profile of your portfolio will have changed, and it's probably not something that you want. You don't want to rebalance just for the sake of rebalancing either. There can be costs to rebalancing (taxes, transaction fees, etc...) and these aren't always worth the effort. That's why you don't need to rebalance every month or if your portfolio has shifted from 50/50 to 51/49. I take a look at my portfolio once a year, and adjust my automated investments so that by the end of the next year I'm back to the ratio I want." } ]

[ { "docid": "10089", "title": "", "text": "Congratulations on deciding to save for retirement. Since you cite Dave Ramsey as the source of your 15% number, what does he have to say about where to invest the money? If you want to have instantaneous penalty-free access to your retirement money, all you need to do is set up one or more ordinary accounts that you think of as your retirement money. Just be careful not to put the money into CDs since Federal law requires a penalty of three months interest if you cash in the CD before its maturity date (penalty!) or put the money into those pesky mutual funds that charge a redemption fee (penalty!) if you take the money out within x months of investing it where x can be anywhere from 3 to 24 or more. In Federal tax law (and in most state tax laws as well) a retirement account has special privileges accorded to it in that the interest, dividends, capital gains, etc earned on the money in your retirement account are not taxed in the year earned (as they would be in a non-retirement account), but the tax is either deferred till you withdraw money from the account (Traditional IRAs, 401ks etc) or is waived completely (Roth IRAs, Roth 401ks etc). In return for this special treatment, penalties are imposed (in addition to tax) if you withdraw money from your retirement account before age 59.5 which presumably is on the distant horizon for you. (There are some exceptions (including first-time home buying and extraordinary medical expenses) to this rule that I won't bother going into). But You are not required to invest your retirement money into such a specially privileged retirement account. It is perfectly legal to keep your retirement money in an ordinary savings account if you wish, and pay taxes on the interest each year. You can invest your retirement money into municipal bonds whose interest is free of Federal tax (and usually free of state tax as well if the municipality is located in your state of residence) if you like. You can keep your retirement money in a sock under your mattress if you like, or buy a collectible item (e.g. a painting) with it (this is not permitted in an IRA), etc. In short, if you are concerned about the penalties imposed by retirement accounts on early withdrawals, forgo the benefits of these accounts and put your retirement money elsewhere where there is no penalty for instant access. If you use a money management program such as Mint or Quicken, all you need to do is name one or more accounts or a portfolio as MyRetirementMoney and voila, it is done. But those accounts/portfolios don't have to be retirement accounts in the sense of tax law; they can be anything at all." }, { "docid": "469141", "title": "", "text": "When you are starting out using a balanced fund can be quite advantageous. A balanced fund is represents a diversified portfolio in single fund. The primary advantage of using a balanced fund is that with it being a single fund it is easier to meet the initial investment minimum. Later once you have enough to transition to a portfolio of diversified funds you would sell the fund and buy the portfolio. With a custom portfolio, you will be better able to target your risk level and you might also be able to use lower cost funds. The other item to check is do any of the funds that you might be interested in for the diversified portfolio have lower initial investment option if you can commit to adding money on a specified basis (assuming that you are able to). Also there might be an ETF version of a mutual fund and for those the initial investment amount is just the share price. The one thing to be aware of is make sure that you can buy enough shares that you can rebalance (holding a single share makes it hard to sell some gain when rebalancing). I would stay away from individual stocks until you have a much larger portfolio, assuming that you want to invest with a diversified portfolio. The reason being that it takes a lot more money to create a diversified portfolio out of individual stocks since you have to buy whole shares. With a mutual fund or ETF, your underlying ownership of can be fractional with no issue as each fund share is going to map into a fraction of the various companies held and with mutual funds you can buy fractional shares of the fund itself." }, { "docid": "549188", "title": "", "text": "\"If you read Joel Greenblatt's The Little Book That Beats the Market, he says: Owning two stocks eliminates 46% of the non market risk of owning just one stock. This risk is reduced by 72% with 4 stocks, by 81% with 8 stocks, by 93% with 16 stocks, by 96% with 32 stocks, and by 99% with 500 stocks. Conclusion: After purchasing 6-8 stocks, benefits of adding stocks to decrease risk are small. Overall market risk won't be eliminated merely by adding more stocks. And that's just specific stocks. So you're very right that allocating a 1% share to a specific type of fund is not going to offset your other funds by much. You are correct that you can emulate the lifecycle fund by simply buying all the underlying funds, but there are two caveats: Generally, these funds are supposed to be cheaper than buying the separate funds individually. Check over your math and make sure everything is in order. Call the fund manager and tell him about your findings and see what they have to say. If you are going to emulate the lifecycle fund, be sure to stay on top of rebalancing. One advantage of buying the actual fund is that the portfolio distributions are managed for you, so if you're going to buy separate ETFs, make sure you're rebalancing. As for whether you need all those funds, my answer is a definite no. Consider Mark Cuban's blog post Wall Street's new lie to Main Street - Asset Allocation. Although there are some highly questionable points in the article, one portion is indisputably clear: Let me translate this all for you. “I want you to invest 5pct in cash and the rest in 10 different funds about which you know absolutely nothing. I want you to make this investment knowing that even if there were 128 hours in a day and you had a year long vacation, you could not possibly begin to understand all of these products. In fact, I don’t understand them either, but because I know it sounds good and everyone is making the same kind of recommendations, we all can pretend we are smart and going to make a lot of money. Until we don’t\"\" Standard theory says that you want to invest in low-cost funds (like those provided by Vanguard), and you want to have enough variety to protect against risk. Although I can't give a specific allocation recommendation because I don't know your personal circumstances, you should ideally have some in US Equities, US Fixed Income, International Equities, Commodities, of varying sizes to have adequate diversification \"\"as defined by theory.\"\" You can either do your own research to establish a distribution, or speak to an investment advisor to get help on what your target allocation should be.\"" }, { "docid": "105468", "title": "", "text": "\"One reason is that you can trade in the IRA without incurring incremental taxes along the way. This may be especially important if you intend to shift your portfolio allocation as you approach retirement. For instance, gradually selling stocks and buying bonds can incur taxes if you do it in a taxable account (if you do it while you have other income and thus may face capital gains taxes). Also, if you have mutual funds in a taxable account, they may distribute capital gains to you that you'll owe taxes on, but holding the funds in an IRA will shield you from that. There are also some other side benefits to IRAs because they are considered to \"\"not count\"\" for certain purposes when determining what you're worth. For instance, if you go bankrupt, you could be forced to sell assets in taxable accounts to pay your creditors, whereas IRAs are protected in many cases. Likewise, if you try to get financial aid to pay for college for your kids, money in an IRA won't be counted among your assets in determining your aid eligibility, potentially giving your kids access to more aid money. Finally, an especially prominent benefit is, paradoxically, the early withdrawal penalty. For many people, part of the purpose of an IRA is to \"\"lock away\"\" their money and prevent themselves from accessing it until retirement. Early withdrawal penalties provide a concrete consequence that psychologically deters them from raiding their retirement savings willy-nilly.\"" }, { "docid": "247671", "title": "", "text": "Time to look at a tax table. A retired couple hits the top of the 15% bracket with an income of $96,700. (I include just the standard deduction and exemptions.) The tax on this gross sum is $10,452.50 for an 'average' rate of 10.8%. This is what 2 answers here seem to miss, and the 3rd touches, but doesn't keep going. The tax, paid or avoided, upon deposit, is one's marginal rate. But, at retirement, the withdrawals first go through the zero bracket (i.e. the STD deduction and exemptions), then 10%, then 15%. The Roth benefit is maximized In the end, to choose between Traditional or Roth, one would have to have far more details regarding the person's financial situation. The right choice is rarely 100% known except in hindsight." }, { "docid": "314056", "title": "", "text": "This question is indeed rather complicated. Let's simplify it a little bit. Paying down your mortgage makes sense if your expected return in the rest of your portfolio is less than the cost of the mortgage. In many cases, people may also decide to pay down their mortgage because they are risk-averse and do not like carrying debt. There's no tax benefit to doing so, though; Canada doesn't generally allow you to write off mortgage interest, unlike the U.S. As to keeping money in the corporation or not, I'm not going to address that. I don't have a firm enough understanding of corporate taxation. Canadian Couch Potato advises treating all of your investment assets as one large portfolio. That is what you are trying to do here. However, let's consider a different approach. If you do not have enough money to max out your RRSP or TFSA, you may choose to keep your TFSA for an emergency fund, where the money is kept highly liquid. Keep your cash in an interest-bearing TFSA, or perhaps invest it in the money market, inside your TFSA. Then, use your RRSP for the rest of your investment money, split according to your investment goals. This is not the most tax-efficient approach, but it is nice and simple. But you are looking for the most tax-efficient approach. So, let's assume you have enough to more than max out your TFSA and RRSP contributions, and all of your investments are going toward your retirement, which is at least a decade away. Because you are not taxed on your investment income from RRSPs (until you withdraw the money) or TFSA, it makes sense to hold the least tax-efficient investments there. Tax-advantaged investments such as Canadian equities should be held in your investment accounts outside of TFSA and RRSPs. Again, the Canadian Couch Potato has a great article on where to put your investment assets. That article covers interest, dividends, foreign dividends, and capital gains, as well as RRSPs, RESPs, and TFSAs. That article recommends holding Canadian equities in a taxable account, REITs in a tax-sheltered account (TFSA or RRSP), bonds, GICs, and money-market funds in a tax-sheltered account (as these count as interest). The article goes into rather more detail than this, and is worth checking out. It mentions the 15% withholding tax on US-listed ETFs, for example. In addition to that website, I recommend the following three books: The above three resources strongly advocate passive indexed investments, which I like but not everyone agrees with. All three specifically discuss tax implications, which is why I include them here." }, { "docid": "161295", "title": "", "text": "You're right, of course - But that's not something you would ever want to do *accidentally*. Five years from now, the OP may well decide to convert some of his traditional funds to Roth; for now, even though Roth was his original intent, that would mean a tax bloodbath come next April. As an aside, the biggest reason (for most people) to have Roth funds **isn't** because you expect to make more (inflation - or more importantly, tax-code - adjusted) in retirement than now. If that were the case, the entire concept would be almost worthless - Who the heck makes more *after* retiring than *before*? The best reason to have substantial Roth funds in your retirement portfolio is the way that Social Security is taxed. If you can keep your AGI under $25k (note that includes half of your SS benefits, but since the standard deduction is roughly $10k, those more-or-less cancel each other out), you don't pay a dime in taxes on your SSI. So, if you have a solid budget, take your yearly expenses, subtract out $25k, and that's what you should (sustainably) have in Roth funds. The remaining $25k is what you should have in traditional funds." }, { "docid": "293679", "title": "", "text": "Googling vanguard target asset allocation led me to this page on the Bogleheads wiki which has detailed breakdowns of the Target Retirement funds; that page in turn has a link to this Vanguard PDF which goes into a good level of detail on the construction of these funds' portfolios. I excerpt: (To the question of why so much weight in equities:) In our view, two important considerations justify an expectation of an equity risk premium. The first is the historical record: In the past, and in many countries, stock market investors have been rewarded with such a premium. ... Historically, bond returns have lagged equity returns by about 5–6 percentage points, annualized—amounting to an enormous return differential in most circumstances over longer time periods. Consequently, retirement savers investing only in “safe” assets must dramatically increase their savings rates to compensate for the lower expected returns those investments offer. ... The second strategic principle underlying our glidepath construction—that younger investors are better able to withstand risk—recognizes that an individual’s total net worth consists of both their current financial holdings and their future work earnings. For younger individuals, the majority of their ultimate retirement wealth is in the form of what they will earn in the future, or their “human capital.” Therefore, a large commitment to stocks in a younger person’s portfolio may be appropriate to balance and diversify risk exposure to work-related earnings (To the question of how the exact allocations were decided:) As part of the process of evaluating and identifying an appropriate glide path given this theoretical framework, we ran various financial simulations using the Vanguard Capital Markets Model. We examined different risk-reward scenarios and the potential implications of different glide paths and TDF approaches. The PDF is highly readable, I would say, and includes references to quant articles, for those that like that sort of thing." }, { "docid": "190772", "title": "", "text": "I think most financial planners or advisors would allocate zero to a gold-only fund. That's probably the mainstream view. Metals investments have a lot of issues, more elaboration here: What would be the signs of a bubble in silver? Also consider that metals (and commodities, despite a recent drop) are on a big run-up and lots of random people are saying they're the thing to get in on. Usually this is a sign that you might want to wait a bit or at least buy gradually. The more mainstream way to go might be a commodities fund or all-asset fund. Some funds you could look at (just examples, not recommendations) might include several PIMCO funds including their commodity real return and all-asset; Hussman Strategic Total Return; diversified commodities index ETFs; stuff like that has a lot of the theoretical benefits of gold but isn't as dependent on gold specifically. Another idea for you might be international bonds (or stocks), if you feel US currency in particular is at risk. Oh, and REITs often come up as an inflation-resistant asset class. I personally use diversified funds rather than gold specifically, fwiw, mostly for the same reason I'd buy a fund instead of individual stocks. 10%-ish is probably about right to put into this kind of stuff, depending on your overall portfolio and goals. Pure commodities should probably be less than funds with some bonds, stocks, or REITs, because in principle commodities only track inflation over time, they don't make money. The only way you make money on them is rebalancing out of them some when there's a run up and back in when they're down. So a portfolio with mostly commodities would suck long term. Some people feel gold's virtue is tangibility rather than being a piece of paper, in an apocalypse-ish scenario, but if making that argument I think you need physical gold in your basement, not an ETF. Plus I'd argue for guns, ammo, and food over gold in that scenario. :-)" }, { "docid": "337941", "title": "", "text": "\"Some people have this notion that withdrawing dividends from savings is somehow okay but withdrawing principal is not. Note, this notion. Would someone please explain the \"\"mistake\"\" on P214 and why it's a mistake? Because there may be times where withdrawing principal may be a good idea as one could sell off something that has gained enough that in re-balancing the portfolio there are capital gains that could be used for withdrawing in retirement. How and why does the sale of financial instrument equate to the receipt of dividends? In either case, one has cash equivalents that could be withdrawn. If you take the dividends in cash or sell a security to raise cash, you have cash. Thus, it doesn't matter what origin it has. If I sell a financial instrument that later appreciates in value, then this profit opportunity is lost. In the case of a dividend, I'd still possess the financial security and benefit from the stock's appreciation? One could argue that the in the case of a dividend, by not buying more of the instrument you are missing out on a profit opportunity as well. Thus, are you out to make the maximum profit overall or do you have reason for taking the cash instead of increasing your holding?\"" }, { "docid": "455698", "title": "", "text": "\"Your are mixing multiple questions with assertions which may or may not be true. So I'll take a stab at this, comment if it doesn't make sense to you. To answer the question in the title, you invest in an IRA because you want to save money to allow you to retire. The government provides you with tax incentives that make an IRA an excellent vehicle to do this. The rules regarding IRA tax treatment provide disincentives, through tax penalties, for withdrawing money before retirement. This topic is covered dozens of times, so search around for more detail. Regarding your desire to invest in items with high \"\"intrinsic\"\" value, I would argue that gold and silver are not good vehicles for doing this. Intrinsic value doesn't mean what you want it to mean in this context -- gold and silver are commodities, whose prices fluctuate dramatically. If you want to grow money for retirement over a long period, of time, you should be invested in diversified collection of investments, and precious metals should be a relatively small part of your portfolio.\"" }, { "docid": "436904", "title": "", "text": "This is Ellie Lan, investment analyst at Betterment. To answer your question, American investors are drawn to use the S&P 500 (SPY) as a benchmark to measure the performance of Betterment portfolios, particularly because it’s familiar and it’s the index always reported in the news. However, going all in to invest in SPY is not a good investment strategy—and even using it to compare your own diversified investments is misleading. We outline some of the pitfalls of this approach in this article: Why the S&P 500 Is a Bad Benchmark. An “algo-advisor” service like Betterment is a preferable approach and provides a number of advantages over simply investing in ETFs (SPY or others like VOO or IVV) that track the S&P 500. So, why invest with Betterment rather than in the S&P 500? Let’s first look at the issue of diversification. SPY only exposes investors to stocks in the U.S. large cap market. This may feel acceptable because of home bias, which is the tendency to invest disproportionately in domestic equities relative to foreign equities, regardless of their home country. However, investing in one geography and one asset class is riskier than global diversification because inflation risk, exchange-rate risk, and interest-rate risk will likely affect all U.S. stocks to a similar degree in the event of a U.S. downturn. In contrast, a well-diversified portfolio invests in a balance between bonds and stocks, and the ratio of bonds to stocks is dependent upon the investment horizon as well as the individual's goals. By constructing a portfolio from stock and bond ETFs across the world, Betterment reduces your portfolio’s sensitivity to swings. And the diversification goes beyond mere asset class and geography. For example, Betterment’s basket of bond ETFs have varying durations (e.g., short-term Treasuries have an effective duration of less than six months vs. U.S. corporate bonds, which have an effective duration of just more than 8 years) and credit quality. The level of diversification further helps you manage risk. Dan Egan, Betterment’s Director of Behavioral Finance and Investing, examined the increase in returns by moving from a U.S.-only portfolio to a globally diversified portfolio. On a risk-adjusted basis, the Betterment portfolio has historically outperformed a simple DIY investor portfolio by as much as 1.8% per year, attributed solely to diversification. Now, let’s assume that the investor at hand (Investor A) is a sophisticated investor who understands the importance of diversification. Additionally, let’s assume that he understands the optimal allocation for his age, risk appetite, and investment horizon. Investor A will still benefit from investing with Betterment. Automating his portfolio management with Betterment helps to insulate Investor A from the ’behavior gap,’ or the tendency for investors to sacrifice returns due to bad timing. Studies show that individual investors lose, on average, anywhere between 1.2% to 4.3% due to the behavior gap, and this gap can be as high as 6.5% for the most active investors. Compared to the average investor, Betterment customers have a behavior gap that is 1.25% lower. How? Betterment has implemented smart design to discourage market timing and short-sighted decision making. For example, Betterment’s Tax Impact Preview feature allows users to view the tax hit of a withdrawal or allocation change before a decision is made. Currently, Betterment is the only automated investment service to offer this capability. This function allows you to see a detailed estimate of the expected gains or losses broken down by short- and long-term, making it possible for investors to make better decisions about whether short-term gains should be deferred to the long-term. Now, for the sake of comparison, let’s assume that we have an even more sophisticated investor (Investor B), who understands the pitfalls of the behavior gap and is somehow able to avoid it. Betterment is still a better tool for Investor B because it offers a suite of tax-efficient features, including tax loss harvesting, smarter cost-basis accounting, municipal bonds, smart dividend reinvesting, and more. Each of these strategies can be automatically deployed inside the portfolio—Investor B need not do a thing. Each of these strategies can boost returns by lowering tax exposure. To return to your initial question—why not simply invest in the S&P 500? Investing is a long-term proposition, particularly when saving for retirement or other goals with a time horizon of several decades. To be a successful long-term investor means employing the core principles of diversification, tax management, and behavior management. While the S&P might look like a ‘hot’ investment one year, there are always reversals of fortune. The goal with long-term passive investing—the kind of investing that Betterment offers—is to help you reach your investing goals as efficiently as possible. Lastly, Betterment offers best-in-industry advice about where to save and how much to save for no fee." }, { "docid": "117965", "title": "", "text": "\"The Roth/Traditional decision is complex, but can be broken down into a set of simple rules. Ideally, you want to choose to tax your money at the lowest possible rate. This specifically refers to your marginal rate, the rate you last $100 was taxed or next $100 of income with be taxed. That, in itself, is another issue, answered with questions here discussing marginal rates. My suggestion has been that if you are in the 15% bracket, use Roth. And continue to do so until you hit 25%. At that point, begin to shift to the traditional, pre-tax 401(k) or IRA. (My article The 15% solution, goes into detail on this, although it references the 2013 tax rates. I need to re-edit). If you are already in the 25% bracket, I'd suggest just going pre-tax. Given the ability to convert, it's not as if there are 2 points in time (deposit and withdrawal) but you can decide every year if your situation changes. It's not uncommon to get married, have a baby, buy a house, and find you just dropped back down to 15% marginal rate when you were solidly 25% prior. Let me explain why you should go 100% pretax if already at 25%. A single person hits the top of the 15% bracket (in 2017) at $37,950 taxable. Add the standard deduction and exemption, and you are at $48,350. The tax on this is $5226, less than 10% average, despite the next $100 being taxed at 25%. It would take over $1M to have an account large enough to withdraw $40K/yr. If you blow through that number, you hit 25%, I agree, but why pay 25% now, for sure, to avoid 'maybe' hitting 25% later? You have decades of opportunities for conversion, and even more when the funds are transferred to IRAs if you have a job change. (And the conversion discussion has multiple layers when the IRA is involved) Say you are 'too' successful. You are hitting $2M before age 55. If you retire post-55, you can withdraw from the 401(k) penalty free. But, you have 15 years before you'd start to take SS benefits. 15 years to use conversions, even if pushing into 25%, to reduce the impact of SS taxation. My advice is not a set-and-forget solution. It's an annual evaluation of the plan for the coming year. Further notes on my choice of \"\"15% Solution\"\" - This is the 2017 tax table for singles - I note that median individual income is ~$30K which puts that median single at ~20K taxable. This is where the analysis begins. This earner might have upward mobility, to reach the 25% bracket and begin to save pre-tax. The goal would be to have a mix of pre/post tax money, so that over the course of their life, the 25% bracket was avoided, perhaps completely. In general, my writing tend towards the second highest quintile, the 60-80% slice of the population. The numbers might appear arbitrary, but, in the end, the discussion has to start someplace. The concept I described here is best implemented by the single or couple who is still at 15%, but soon pushing higher than the 15/25 line. This enables them to start by saving in the Roth, and slowly shifting towards pre-tax. The final mix at retirement depends on that timing as well as their opportunities for conversions along the way. Part of my focus on that line is that the differential is greatest in bracket shifts between 15 and 25%. Much of the benefit in the whole IRA/401 discussion is in that shift, depositing at 25%, yet withdrawing at 15%. The 28% couple might wish to avoid the 33% bracket at retirement, but that level of income impacts far fewer people, and fewer still that are either reading these boards or my other writing.\"" }, { "docid": "370290", "title": "", "text": "\"Both explanations are partly true. There are many investors who do not want to sell an asset at a loss. This causes \"\"resistance\"\" at prices where large amounts of the asset were previously traded by such investors. It also explains why a \"\"break-through\"\" of such a \"\"resistance\"\" is often associated with a substantial \"\"move\"\" in price. There are also many investors who have \"\"stop-loss\"\" or \"\"trailing stop-loss\"\" \"\"limit orders\"\" in effect. These investors will automatically sell out of a long position (or buy out of a short position) if the price drops (or rises) by a certain percentage (typically 8% - 10%). There are periods of time when money is flowing into an asset or asset class. This could be due to a large investor trying to quietly purchase the asset in a way that avoids raising the price earlier than necessary. Or perhaps a large investor is dollar-cost-averaging. Or perhaps a legal mandate for a category of investors has changed, and they need to rebalance their portfolios. This rebalancing is likely to take place over time. Or perhaps there is a fad where many small investors (at various times) decide to increase (or decrease) their stake in an asset class. Or perhaps (for demographic reasons) the number of investors in a particular situation is increasing, so there are more investors who want to make particular investments. All of these phenomena can be summarized by the word \"\"momentum\"\". Traders who use technical analysis (including most day traders and algorithmic speculators) are aware of these phenomena. They are therefore more likely to purchase (or sell, or short) an asset shortly after one of their \"\"buy signals\"\" or \"\"sell signals\"\" is triggered. This reinforces the phenomena. There are also poorly-understood long-term cycles that affect business fundamentals and/or the politics that constrain business activity. For example: Note that even if the markets really were a random walk, it would still be profitable (and risk-reducing) to perform dollar-cost-averaging when buying into a position, and also perform averaging when selling out of a position. But this means that recent investor behavior can be used to predict the near-future behavior of investors, which justifies technical analysis.\"" }, { "docid": "441176", "title": "", "text": "If you are making regular periodic investments (e.g. each pay period into a 401(k) plan) or via automatic investment scheme in a non-tax-deferred portfolio (e.g. every month, $200 goes automatically from your checking account to your broker or mutual fund house), then one way of rebalancing (over a period of time) is to direct your investment differently into the various accounts you have, with more going into the pile that needs bringing up, and less into the pile that is too high. That way, you can avoid capital gains or losses etc in doing the selling-off of assets. You do, of course, take longer to achieve the balance that you seek, but you do get some of the benefits of dollar-cost averaging." }, { "docid": "83079", "title": "", "text": "Check out some common portfolios compared: Note that all these portfolios are loosely based on Modern Portfolio Theory, a theory of how to maximize reward given a risk tolerance introduced by Harry Markowitz. The theory behind the Gone Fishin' Portfolio and the Couch Potato Portfolio (more info) is that you can make money by rebalancing once a year or less. You can take a look at 8 Lazy ETF Portfolios to see other lazy allocation percentages. One big thing to remember - the expense ratio of the funds you invest in is a major contributor to the return you get. If they're taking 1% of all of your gains, you're not. If they're only taking .2%, that's an automatic .8% you get. The reason Vanguard is so often used in these model portfolios is that they have the lowest expense ratios around. If you are talking about an IRA or a mutual fund account where you get to choose who you go with (as opposed to a 401K with company match), conventional wisdom says go with Vanguard for the lowest expense ratios." }, { "docid": "31581", "title": "", "text": "When interest rates rise, the price of bonds fall because bonds have a fixed coupon rate, and since the interest rate has risen, the bond's rate is now lower than what you can get on the market, so it's price falls because it's now less valuable. Bonds diversify your portfolio as they are considered safer than stocks and less volatile. However, they also provide less potential for gains. Although diversification is a good idea, for the individual investor it is far too complicated and incurs too much transaction costs, not to mention that rebalancing would have to be done on a regular basis. In your case where you have mutual funds already, it is probably a good idea to keep investing in mutual funds with a theme which you understand the industry's role in the economy today rather than investing in some special bonds which you cannot relate to. The benefit of having a mutual fund is to have a professional manage your money, and that includes diversification as well so that you don't have to do that." }, { "docid": "252918", "title": "", "text": "\"Target Date Funds automatically change their diversification balance over time, rebalancing and reassigning new contributions to become progressively more protective of what you've already earned. (As opposed to other funds which continue to maintain the same balance of investments until you explicitly move the money around.) You can certainly make that same evolution manually; we all used to do that before target funds were made available, and many of us still do so. I'm still handling the relative allocations by hand. But I'm also close to my retirement target, so a target fund wouldn't be changing that much more anyway, and since I'm already tracking the curve... Note that if you feel a bit braver, or a bit more cautious, than the \"\"average investor\"\" the target fund was designed for, you can tweak the risk/benefit curve of a Target Date Fund by selecting a fund with a target date a bit later or earlier, respectively, than the date at which you intend to start pulling money back out of the fund.\"" }, { "docid": "430398", "title": "", "text": "Exactly. Regardless of just the volatility, to weight an asset or two with a majority of your portfolio is poor investment strategy. Ron is a smart guy and obviously understands the benefits of diversification. As others have suggested, I think he is doing it more to make a statement. When he retires, I hope it doesn't come back to bite him." } ]

[ { "docid": "99857", "title": "", "text": "\"Assuming you are referring to macro corrections and crashes (as opposed to technical crashes like the \"\"flash crash\"\") -- It is certainly possible to sell stocks during a market drop -- by definition, the market is dropping not only because there are a larger number of sellers, but more importantly because there are a large number of transactions that are driving prices down. In fact, volumes are strongly correlated with volatility, so volumes are actually higher when the market is going down dramatically -- you can verify this on Yahoo or Google Finance (pick a liquid stock like SPY and look at 2008 vs recent years). That doesn't say anything about the kind of selling that occurs though. With respect to your question \"\"Whats the best strategy for selling stocks during a drop?\"\", it really depends on your objective. You can generally always sell at some price. That price will be worse during market crashes. Beyond the obvious fact that prices are declining, spreads in the market will be wider due to heightened volatility. Many people are forced to sell during crashes due to external and / or psychological pressures -- and sometimes selling is the right thing to do -- but the best strategy for long-term investors is often to just hold on.\"" } ]

[ { "docid": "137073", "title": "", "text": "Trying to make money on something going down is inherently more complicated, risky and speculative than making money on it going up. Selling short allows for unlimited losses. Put options expire and have to be rebought if you want to keep playing that game. If you are that confident that the European market will completely crash (I'm not, but then again, I tend to be fairly contrarian) I'd recommend just sitting it out in cash (possibly something other than the Euro) and waiting until it gets so ridiculously cheap due to panic selling that it defies all common sense. For example, when companies that aren't completely falling apart are selling for less than book value and/or less than five times prior peak earnings that's a good sign. Another indicator is when you hear absolutely nothing other than doom-and-gloom and people swearing they'll never buy another stock as long as they live. Then buy at these depressed prices and when all the panic sellers realize that the world didn't end, it will go back up." }, { "docid": "14989", "title": "", "text": "I know this is heresy but if you have funds for significantly more than 6 months of expenses (let's say 12 months), how risky would it be to put it all into stock index funds? Quite risky as if you do need to dip into it, how fast could you get the cash? Also, do you realize the tax implications when you do sell the shares should you have an emergency? In the worst-case scenario, let's say you have a financial emergency at the same time the stock market crashes and loses half its value. You could still liquidate the rest and have sufficient funds for 6 months. Am I underestimating the risks of this strategy? That's not worst case scenario though. Worst case scenario would be another 9/11 where the markets are closed for nearly a week and you need the money but can't get the funds converted to cash in the bank that you can use. This is in addition to the potential wait for a settlement in the case of using ETFs if you choose to go that way. In the case of money market funds, CDs and other near cash equivalents these can be accessed relatively easily which is part of the point. A staggered approach where some cash is kept in house, some in accounts that can easily accessed and some in other investments may make sense though the breakdown would differ depending on how much risk people are willing to take. If it truly is an emergency fund then the odds of needing it should be very slim, so why live with near zero return on that money? Something to consider is what is called an emergency here? For some people a sudden $1,000 bill to fix their car that just broke down is an emergency. For others, there could be emergency trips to visit family that may have gotten into accidents or gotten a diagnosis that they may pass away soon. Consider what do you want to call an emergency here as chances are you may not be considering all that people would think is an emergency. There is the question of what other sources of money do you have to cover should issues arise." }, { "docid": "105343", "title": "", "text": "\"This is a complicated subject, because professional traders don't rely on brokers for stock quotes. They have access to market data using Level II terminals, which show them all of the prices (buy and sell) for a given stock. Every publicly traded stock (at least in the U.S.) relies on firms called \"\"market makers\"\". Market makers are the ones who ultimately actually buy and sell the shares of companies, making their money on the difference between what they bought the stock at and what they can sell it for. Sometimes those margins can be in hundreds of a cent per share, but if you trade enough shares...well, it adds up. The most widely traded stocks (Apple, Microsoft, BP, etc) may have hundreds of market makers who are willing to handle share trades. Each market maker sets their own price on what they'll pay (the \"\"bid\"\") to buy someone's stock who wants to sell and what they'll sell (the \"\"ask\"\") that share for to someone who wants to buy it. When a market maker wants to be competitive, he may price his bid/ask pretty aggressively, because automated trading systems are designed to seek out the best bid/ask prices for their trade executions. As such, you might get a huge chunk of market makers in a popular stock to all set their prices almost identically to one another. Other market makers who aren't as enthusiastic will set less competitive prices, so they don't get much (maybe no) business. In any case, what you see when you pull up a stock quote is called the \"\"best bid/ask\"\" price. In other words, you're seeing the highest price a market maker will pay to buy that stock, and the lowest price that a market maker will sell that stock. You may get a best bid from one market maker and a best ask from a different one. In any case, consumers must be given best bid/ask prices. Market makers actually control the prices of shares. They can see what's out there in terms of what people want to buy or sell, and they modify their prices accordingly. If they see a bunch of sell orders coming into the system, they'll start dropping prices, and if people are in a buying mood then they'll raise prices. Market makers can actually ignore requests for trades (whether buy or sell) if they choose to, and sometimes they do, which is why a limit order (a request to buy/sell a stock at a specific price, regardless of its current actual price) that someone places may go unfilled and die at the end of the trading session. No market maker is willing to fill the order. Nowadays, these systems are largely automated, so they operate according to complex rules defined by their owners. Very few trades actually involve human intervention, because people can't digest the information at a fast enough pace to keep up with automated platforms. So that's the basics of how share prices work. I hope this answered your question without being too confusing! Good luck!\"" }, { "docid": "96228", "title": "", "text": "\"&gt; the president has little to nothing to do with the stock market. Absolutely not! Nonsense! The president can easily kill the economy and cause a crash in the stock market in few day. The current improvement in the economy, employment, stock market, etc is directly because of Trump stance against the TPP, Immigration, over-regulation, etc. &gt; What I do is listen to the idiotic words that your leader says. He's your president! He's much smarter than Hillary who can't even handle debate questions unless she cheat with another fake-News, CNN. For God sake, never ever any candidate did such a thing and if my son cheated on a test like this, he would be expelled from school. In any case, Trump must be smart because he's very successful business person, and Hillary is just \"\"the wife of\"\". How can anyone vote for Hillary or Democrats in the last elections is beyond me. And for your information, I am a democrat who voted for Obama twice, for Al Gore (idiot!) and Kerry (a bigger idiot!). The DNC is totally corrupt, evil, untrustworthy and dysfunctioning. I hope that by next election they will fix the issues and have a descent candidate. Most likely not.\"" }, { "docid": "62360", "title": "", "text": "\"Market makers, traders, and value investors would be who I'd suspect for buying the stock that is declining. Some companies stocks can come down considerably which could make some speculators buy the stock at the lower price thinking it may bounce back soon. \"\"Short sellers\"\" are out to sell borrowed stocks that if the stock is in free fall, unless the person that shorted wants to close the position, they would let it ride. Worthless stocks are a bit of a special case and quite different than the crash of 1929 where various blue chip stocks like those of the Dow Jones Industrials had severe declines. Thus, the companies going down would be like Apple, Coca-Cola and other large companies that people would be shocked to see come down so much yet there are some examples in recent history if one remembers Enron or Worldcom. Stocks getting delisted tend to cause some selling and there are some speculators may buy the stock believing that the shares may be worth something only to lose the money possibly as one could look at the bankrupt cases of airlines and car companies to study some recent cases here. Circuit breakers are worth noting as these are cases when trading may be halted because of a big swing in prices that it is believed stopping the market may cause things to settle down.\"" }, { "docid": "225522", "title": "", "text": "The biggest concern is how you get $250,000 in unsecured credit. It's unlikely that you will be loaned that amount at a percentage lower than what you expect to earn. Unsecured credit lines are rarely lower than 10% and usually approach 20%. On top of that, for a bank to approve you for that credit line, you have to have a high credit score and an income to support the payments on that credit line. But lets suspend disbelief and assume that you can get the money you want on loan. You would then be expected to pay back that 10%, but investments don't go up uniformly. Some years they go up 15-20% and other years they go down 10%. What do you do if you have to sell some of your investments in a down year? That money is no longer invested, and you can't recover it with the following up year because you had to take too much out to cover the loan payments. You'll be out of money long before the loan is repaid because you can expect there will be bad years in the stock market that will eat away at your investment. There were a lot of people who took their money out of the market after the crash of 2008. If they had left their money in through 2009, they would have made all that money back, but if you have a loan to pay you have to pull money out in the bad years as well as the good years. Unless you have a lucky streak of all good years, you're doomed." }, { "docid": "279782", "title": "", "text": "\"Usually insiders are in a better position than you to understand their business, but that doesn't mean they will know the future with perfect accuracy. Sometimes they are wrong, sometimes life events force them to liquidate an otherwise promising investment, sometimes their minds change. So while it is indeed valuable information, as everything in fundamental analysis it must be taken with a grain of salt. Automatic Sell I think these refer to how the sell occurred. Often the employees don't get actual shares but options or warrants that can be converted to shares. Or there may be special predetermined arrangements regarding when and how the shares may be traded. Since the decision to sell here has nothing to do with the prospects of the business, but has to do with the personal situation of the employee, it's not quite the same as outright selling due to market concerns. Some people, for instance, are not interested in holding stock. Part of their compensation is given in stock, so they immediately sell the stock to avoid the headache of watching an investment. This obviously doesn't indicate that they expect the company will go south. I think automatic sell refers to these sorts of situations, but your broker should provide a more detailed definition. Disposition (Non Open Market) These days people trade through a broker, but there's nothing stopping you from taking the physical shares and giving them to someone in exchange for say a stack of cash. With a broker, you only \"\"sell\"\" without considering who is buying. The broker then finds buyers for you according to their own system. If selling without a broker you can also be choosy with who is buying, and it's not like anybody can just call up the CEO and ask to buy some stock, so it's a non-open market. Ultimately though it's still the insider selling. Just on a different exchange. So I would treat this as any insider sell - if they are selling, they may be expecting the stock to become less valuable. indirect ownership I think this refers to owning an entity that in turn owns the asset. For instance CEO of XYZ owns stock in ACME, but ACME holds shares of XYZ. This is a somewhat complicated situation, it comes down to whether you think they sold ACME because of the exposure to XYZ or because of some other risk that applies only to ACME and not XYZ. Generally speaking, I don't think you would find a rule like \"\"if insider transactions of so and so kinds > X then buy\"\" that provides guaranteed success. If such a rule was possible it would have been exploited already by the professionals. The more sensible option is to consider all data available to you and try to make a holistic evaluation. All of these insider activities can be bullish or bearish depending on many other factors.\"" }, { "docid": "440805", "title": "", "text": "\"Who are the losers going to be? If you can tell me for certain which firms will do worst in a bear market and can time it so that this information is not already priced into the market then you can make money. If not don't try. In a bull market stocks tend to act \"\"normally\"\" with established patterns such as correlations acting as expected and stocks more or less pricing to their fundamentals. In a bear market fear tends to overrule all of those things. You get large drops on relatively minor bad news and modest rallies on even the best news which results in stocks being undervalued against their fundamentals. In the crash itself it is quite easy to make money shorting. In an environment where stocks are undervalued, such as a bear market, you run the risk that your short, no matter how sure you are that the stock will fall, is seen as being undervalued and will rise. In fact your selling of a \"\"losing\"\" stock might cause it to hit levels where value investors already have limits set. This could bring a LOT of buyers into the market. Due to the fact that correlations break down creating portfolios with the correct risk level, which is what funds are required to do not only by their contracts but also by law to an extent, is extremely difficult. Risk management (keeping all kinds to within certain bounds) is one of the most difficult parts of a manager's job and is even difficult in abnormal market conditions. In the long run (definitions may vary) stock prices in general go up (for those companies who aren't bankrupted at least) so shorting in a bear market is not a long term strategy either and will not produce long term returns on capital. In addition to this risk you run the risk that your counterparty (such as Lehman brothers?) will file for bankruptcy and you won't be able to cover the position before the lender wants you to repay their stock to them landing you in even more problems.\"" }, { "docid": "138096", "title": "", "text": "\"If you're asking this question, you probably aren't ready to be buying individual stock shares, and may not be ready to be investing in the market at all. Short-term in the stock market is GAMBLING, pure and simple, and gambling against professionals at that. You can reduce your risk if you spend the amount of time and effort the pros do on it, but if you aren't ready to accept losses you shouldn't be playing and if you aren't willing to bet it all on a single throw of the dice you should diversify and accept lower potential gain in exchange for lower risk. (Standard advice: Index funds.) The way an investor, as opposed to a gambler, deals with a stock price dropping -- or surging upward, or not doing anything! -- is to say \"\"That's interesting. Given where it is NOW, do I expect it to go up or down from here, and do I think I have someplace to put the money that will do better?\"\" If you believe the stock will gain value from here, holding it may make more sense than taking your losses. Specific example: the mortgage-crisis market crash of a few years ago. People who sold because stock prices were dropping and they were scared -- or whose finances forced them to sell during the down period -- were hurt badly. Those of us who were invested for the long term and could afford to leave the money in the market -- or who were brave/contrarian enough to see it as an opportunity to buy at a better price -- came out relatively unscathed; all I have \"\"lost\"\" was two years of growth. So: You made your bet. Now you have to decide: Do you really want to \"\"buy high, sell low\"\" and take the loss as a learning experience, or do you want to wait and see whether you can sell not-so-low. If you don't know enough about the company to make a fairly rational decision on that front, you probably shouldn't have bought its stock.\"" }, { "docid": "57907", "title": "", "text": "I don't even think that much is true, in a downturned market we see deflation. Things go on sale, prices drop, that's deflation. But the elephant in the room is that the gov't can't let deflation happen or their debt becomes harder to pay off. So after/during a downturn the government goes into hyperinflation mode. To me, gold/silver aren't a hedge against the dollar they are a hedge against the inevitable decline of the dollar which isn't going to stop until we change monetary policy. Graph the dollar's value in the past 100 years, it's the biggest crash in history. Now ask yourself if the dollar was a stock, would you want to own it with that record? 100 years of declination. Sell your dollars, find a real currency." }, { "docid": "471870", "title": "", "text": "That's not why they crashed. They crashed because the only reason people were buying them is because they would go up in value and then they could sell them for profit later. Sounds exactly like Bitcoin in my opinion. The only difference is Bitcoin is useful in the sense that criminals can use it and not get in trouble. How many people do you know using Bitcoin as a currency? They aren't, they are only buying it to sell it for a profit later. That isn't sustainable. It isn't backed by a government or military and it is too volatile to actually use as a currency. When it crashes and criminals are the only ones using it, then what is it worth? Maybe $100 a coin? $10? Who knows, it sure as hell isn't $5,000 a coin though." }, { "docid": "351181", "title": "", "text": "\"&gt;Of course; the generation Xers are those in the age range where many were approaching the time when they would, but had not yet, transferred the bulk of their retirement savings to lower risk investments. **Your analysis is WAY off-base.** Gen X was more than a DECADE AWAY from even *thinking* of switching to \"\"lower risk investments\"\". The OLDEST Gen X'ers were born in 1964 and have (just now) turned 48 -- they were (at most) 44 years old in 2008 when the market crashed. The YOUNGEST Gen X'ers were born circa 1981-82, and (just now) have reached age 30 -- they were just getting started in their careers (around age 26) in 2008 when the market crashed. The MAJORITY of Gen X'ers were -- in 2008 -- in their mid 30's. NO ONE switches to \"\"low risk investments\"\" in their mid 30's. --- No, the only Gen X'ers who DIDN'T get \"\"screwed\"\" by the market crash were either: 1. Savvy enough to have SEEN the bubble &amp; crash coming and so got OUT of the stock market and/or housing; or... 2. Waited out the storm &amp; sat tight -- and allowed their market holdings to both crash and then rebound (though they would still largely be \"\"down\"\" from where they were at peak 2008, they wouldn't have suffered huge losses).\"" }, { "docid": "583708", "title": "", "text": "It might seem like the PE ratio is very useful, but it's actually pretty useless as a measure used to make buy or sell decisions, and taken largely on its own, pretty useless becomes utterly and completely useless. Stocks trade at prices based on future expectations and speculation, so that means if traders expect a company to double its profits next year, the share price could easily double (there are reasons it might not increase so much, and there are reasons it could increase even more than that, but that's not the point). The Price is now double, but the Earnings is still the same, so the PE ratio is double, and this doubling is based on something some traders know, or think they know, but other traders might not know or not believe! Once you understand that, what use is a PE ratio really? The PE ratio of a company might be low because it is in a death spiral, with many traders believing it will report lower and lower profits in years to come, and the lower the PE ratio of a given company gets probably, relatively, the more likely it is to go bust! If you buy a stock with a low PE ratio you must do so because you feel you understand the company, understand why the market is viewing it negatively, believe that the negativity is wrong or over done, and believe that it will turn around. Equally a PE ratio might be high, but be an excellent buy still because it has excellent growth prospects and potential even beyond what is priced in already! Lets face it, SOMEONE has been buying at the price that's put that PE ratio where is is, right? They might be wrong of course, or not! Or they might be justified now but circumstances might change before earnings ever reach the current priced in expectation. You'll know next year probably! To answer your actual question... first you should now understand there is no such thing as a stock that is on sale, just stocks that are priced broadly according to the markets consensus on its value in years to come, the closest thing being a stock that is 'over sold' (but one man's 'over sold' is another man's train crash remember)... so what to actually look for? The only way to (on average) make good buy and sell decisions is to know about investing and trading (buy some books, I have 12), understand the businesses you propose to invest in and understand their market(s) (which may also mean understanding national and international economics somewhat)." }, { "docid": "501984", "title": "", "text": "To short a stock you actually borrow shares and sell them. The shorter gets the money from selling immediately, and pays interest for the share he borrows until he covers the short. The amount of interest varies depending on the stock. It's typically under 1% a year for large cap stocks, but can be 20% or more for small, illiquid, or heavily shorted stocks. In this scam only a few people own the shares that are lent to shorters, so they essentially have a monopoly and can set really high borrow costs. The shorter probably assumes that a pump-and-dump will crash quickly, so wouldn't mind paying a high borrow cost." }, { "docid": "350366", "title": "", "text": "If you want to make money while European equities markets are crashing and the Euro itself is devaluing: None of these strategies are to be taken lightly. All involve risk. There are probably numerous ways that you can lose even though it seems like you should win. Transaction fees could eat your profits, especially if you have only a small amount of capital to invest with. The worst part is that they all involve timing. If you think the crash is coming next week, you could, say, buy a bunch of puts. But if the crash doesn't come for another 6 months, all of your puts are going to expire worthless and you've lost all of your capital. Even worse, if you sell short an index ETF this week in advance of next week's impending crash, and some rescue package arrives over the weekend, equity prices could spike at the beginning of the week and you'd be screwed." }, { "docid": "190891", "title": "", "text": "\"The price of real estate reacts to both demand for property and the rate of inflation and rate of income growth. Mortgage rates generally move as treasury rates move. See this paragraph: As we mentioned, intermediate term bonds and long-term mortgages (more properly, Mortgage-Backed Securities, or MBS) compete for the same fixed-income investor dollar. Treasury issues are 100% guaranteed to be repaid, but mortgages are not; therefore mortgages carry more risk of default or early repayment, which could potentially disturb the return on the investment. Therefore, mortgage rates must be priced higher to compensate for that risk. But how much higher are mortgages priced? In a normal market, the average \"\"spread\"\" or markup above the 100% secured Treasury is about 170 basis points, or 1.7%. That markup -- the spread relationship -- widens and contracts with a range of market conditions, investor appetites and supply of available product -- as well as the presence of competing investment opportunities, like corporate bonds or domestic (or foreign) equity markets Source: What Moves Mortgage Rates? And when the stock market crashes, investors tend to run to bonds and treasuries, which causes prices to go up and treasury yields to drop. Theoretically, this would also cause mortgage rates to drop, although most mortgage rates have a base price below which they cannot fall. How easy is it to profit from recent stock market drops and at what frequency? Incredibly difficult. The issue with your strategy is that you cannot predict the bottom of the market (at least us mortals can't). Just take the month of August for example. Stocks fell something like 15%? After the first 5-10% drop, people felt that the bottom was there, so they rushed in, only to have the market fall even more. How will you know when to invest? Even if the market falls by 50%, and there's a huge buying opportunity, and you increase the mortgage on your house, odds are your rates will increase because of the equity you take out. What if the market stays low for a very long time? Will you be able to maintain mortgage payments? Japan's stock bubble popped in the early 90's, and they've had two lost decade's now. Furthermore, there are issues of liquidity. What if you need more capital? Can you just sell a property or can you buy now property to draw equity against? What if the market is moving too fast for you to take advantage of. Don't ignore transaction costs and taxes either. Overall, there are a lot of ways that your idea can go wrong, and not many ways it can go right.\"" }, { "docid": "546125", "title": "", "text": "If your purchases are done at year end, but the money withheld over that 12 month period, the 17% return is for an average time of 6 months, and the return annualizes to 38% or so. All due respect to Alex B, the return would be 100/85 as he states, if the investment were funded in January and sold in December. But this isn't the case on ESPP, the average time you are out that money is 6 months. I will warn you. Don't let the tax tail wag your investing dog. It's easy to wait for long term gains to kick in and then ignore the stock. You then find yourself overloaded on one stock and risk some bad losses. I enjoyed my 15% discount all the way to the stock crashing by 60%+. If you must wait and hold some, be religious about selling the long term shares like clockwork. The 15% is virtually risk free (unless the shares crash between purchase and hitting your account.)" }, { "docid": "114092", "title": "", "text": "I would also be getting out of the stock market if I noticed prices starting to fall and a crash possibly on the way. There are some good and quite simple techniques I would use to time the markets over the medium to long term. I have described some of them in the answer to this question of mine: What are some simple techniques used for Timing the Stock Market over the long term? You could use similar techniques in your investing. And in regards to back-testing DCA to Timing The Markets, I have done that too in my answer to the following question: Investing in low cost index fund — does the timing matter? Timing the Markets wins hand down. In regards to back-testing and the concerns Kent Anderson has brought up, when I back-test a trading strategy, if that strategy is successful, I then forward test it over a year or two to confirm the results. As with back-testing you can sometimes curve fit your criteria too much. By forward testing you are confirming that the strategy is robust over different market conditions. One strategy you can take when the market does start to fall is short selling, as mentioned by some already. I am now short selling using CFDs over the short to medium term as one of my more aggressive strategies. I have a longer term strategy where I do not short, but tighten my stop losses when the market starts to tank. Sometimes my positions will keep going up even though the market as a whole is heading down, and I can make an extra 5% to 10% on these positions before I get taken out. The rare position even continues going up during the whole downturn and when the market starts to recover. So I let the market decide when I get out and when I stay in, I leave my emotions out of it. The best thing you can do is have a written trading plan with all your criteria for getting into the market, your criteria for getting out of the market and your position sizing and risk management incorporated in the plan." }, { "docid": "89947", "title": "", "text": "\"I would add to the other excellent answers that another factor besides just high unemployment numbers is the fear people have regarding the \"\"financial\"\" aspects of the country, that is the value of stocks and the value of the dollar. When the economy is sluggish it means people aren't buying enough, therefore companies aren't making enough, therefore their profits are too low and people start to divest from them, and stock prices drop. Or even the fear of this happening can induce people to sell off shares. The point is, people are worried \"\"in this economy\"\" because if--due to unemployment, low spending/consumer confidence--the stock market crashes again as it did in 2008/09, that represents a lot of savings lost, e.g. 40-50% of what one was counting on to retire with, particularly if you panic sell at the bottom. Now suddenly it's as if you had a huge robbery, and you will have to work longer into your retirement years than you'd planned. Similarly, if, due to monetary policy, the U.S. inflates the dollar, what one saved for retirement may not be sufficient. (These arguments are true for shorter periods than just one's retirement, but just taking that as an example). So it's not just unemployment that is worrisome \"\"in this economy\"\". This said, I agree with George Marian that one ought to be careful and plan well regardless of the winds of the economy. I guess for most people (and companies), though, \"\"in this economy\"\" means they can't get away with the kind of carelessness they might have during a boom.\"" } ]

[ { "docid": "257241", "title": "", "text": "It is typically possible to sell during a crash, because there are enough people that understand the mechanics behind a crash. Generally, you need to understand that you don't lose money from the crash, but from selling. Every single crash in history more than recovered, and by staying invested, you wouldn't have lost anything (this assumes you have enough time to sit it out; it could take several years to recover). On the other side of those deals are people that understand that, and make money by buying during a crash. They simply sit the crash out, and some time later they made a killing from what you panic-sold, when it recovers its value." } ]

[ { "docid": "315573", "title": "", "text": "\"The diversification offered by the advisor can easily be duplicated at Vanguard with something like the Ivy Portfolio. Simplify it or complicate it to your liking, with Vanguard index REITs, index stock funds, international, bond, etc. Set up automatic contributions and don't watch your money like a hawk. Set it and forget it, or maybe rebalance your holdings once a year. The main thing advisors are good for (at your level of assets) is persuading investors to stay in the market during a crash. Most investors will sell after a crash, and completely miss out on the rebound. It's human nature to be a terrible market timer. But if you can really promise yourself never to sell in a panic, then you don't need an advisor at your asset level. Fees like \"\"1.25%\"\" sound like a okay deal but should be viewed in context. With an average annual return of, say, 7%, a 1.25% fee represents nearly 18% of your gain for the year. And 1.25% may be the least of your fees - what about fees when you get out of the funds? (Neat trick, huh, calling a fee \"\"1.25%\"\" instead of \"\"~18%\"\"..). Is active management worth 18% of your yearly gain? Your advisor's fee and the active funds' fees compound year after year, because they take the fees out of your account every year (or month).\"" }, { "docid": "230666", "title": "", "text": "There are several ways to protect against (or even profit from) a market correction. Hedge funds do this by hedging, that is, buying a stock that they think is strong and selling short a paired stock that is weak. If you hold, say, a strong retail company in your portfolio, you might sell short an equal weight of a weak retail company. These are like buying insurance on your portfolio. If you own 300 shares of XYZ, currently trading at $68, you buy puts at a level at a strike price that lets you sleep at night. For example, you might buy 3 XYZ 6-month puts with a strike price of $60. A disadvantage is that the puts are wasting assets, that is, their time premium (which you paid for at the outset) becomes zero at expiration. (This is why it is like insurance. You wouldn't complain that your insurance premium was lost when you purchase insurance on your house and the house doesn't burn down, would you? Of course not. The purpose of the insurance is to protect your investment.) Note that as these puts are married, they only protect your portfolio. Instead of profiting from a correction, you would merely protect your portfolio during a correction. (No small feat!) If your portfolio is similar to the market, you can buy S&P index puts. If your market reflects a lot of technology, you can buy technology sector puts. Say you have a portfolio of $80K that reflects the market. You could buy out-of-the-market puts (again reflecting your tolerance for loss). Any losses in your portfolio after the puts go in-the-money would be (more or less) offset by gains in the puts. An advantage is that the bid/ask spread is smaller for the S&P. You would pay less for the protection. Also, the S&P puts are cash settled (meaning you get money put in your account on the business day after expiration day). A disadvantage is that the puts do not linearly go up as the market drops. (Delta hedging is a big deal in and of itself.) Another disadvantage is that they are wasting assets (see the Married puts section, previous). While the S&P puts can be used to maintain your market portfolio in the midst of a correction, you could purchase more puts than needed. If you had correctly timed the market, then your portfolio with puts would increase. (Your mileage may vary; some have predicted an imminent market crash way too often.) Collars involve selling out-of-the-money calls and using the premiums to buy out-of-the-money puts. There are many varieties of collars, but the most straightforward is to sell 1 call and buy 1 put for every 100 shares. (This can also be done for index puts and calls.) This has the effect of simultaneously: You get your insurance for almost free. But again, it is protecting your portfolio. As the name implies, you make money when the market goes bearish. Bear put spreads involve buying puts at a close strike price and selling an equal number of puts at a lower strike price than the first. You have a defined maximum loss (the premium you paid for the higher put minus the premium you received for the lower put). You have a defined maximum gain (the difference between strikes minus the defined maximum loss). Buy S&P 500 index puts. If you buy deep out-of-the-money puts, it won't cost much, but you have little probability of it paying off. But if they go in-the-money, there could be a sizable payoff. This is similar to putting one chip on red 18 on the roulette wheel. But rather than paying off 35:1, it is a variable payoff. If you're $1 in the money, you just get $100. If you're $12 in the money, you have a $1200 payoff. If you buy at-the-money puts, it will cost a lot, and your probability will be about 1 in 2 that you will pay off. In our roulette analogy, this is like putting 30 chips on the Even bet of the roulette wheel. The variable payoff is as in the previous paragraph. But you're more likely to get a payoff. And you will lose it all of the roulette ball lands on an Odd number, 0, or 00. (That is, the underlying of your put goes up or stays the same.) If your research shows you what good stocks to buy, it may also tell you which stocks are ripe for a fall. You could short-sell these stocks or buy puts on them. Similar to short-selling stocks or buying puts, you could sell short overpriced sectors or buy puts on them. There are ETFs that will allow you benefit from falling prices without needing to have a margin agreement or options agreement in place. Sorry to have a lengthy answer. Many other answers emphasize that one shouldn't try to time the market. But that is not the OP's question. Provided here are both:" }, { "docid": "400016", "title": "", "text": "While debt increases the likelihood and magnitude of a crash, speculation, excess supply and other market factors can result in crashes without requiring excessive debt. A popular counter example of crashes due to speculation is 16th century Dutch Tulip Mania. The dot com bubble is a more recent example of a speculative crash. There were debt related issues for some companies and the run ups in stock prices were increased by leveraged traders, but the actual crash was the result of failures of start up companies to produce profits. While all tech stocks fell together, sound companies with products and profits survive today. As for recessions, they are simply periods of time with decreased economic activity. Recessions can be caused by financial crashes, decreased demand following a war, or supply shocks like the oil crisis in the 1970's. In summary, debt is simply a magnifier. It can increase profits just as easily as can increase losses. The real problems with crashes and recessions are often related to unfounded faith in increasing value and unexpected changes in demand." }, { "docid": "186184", "title": "", "text": "\"In general, I think you're conflating a lot of ideas. The stock market is not like a supermarket. With the exception of a direct issue, you're not buying your shares from the company or from the New York Stock Exchange you're buying from an owner of stock, Joe, Sally, a pension fund, a hedge fund, etc; it's not sitting on a shelf at the stock market. When you buy an Apple stock you don't own $10 of Apple, you own 1/5,480,000,000th of Apple because Apple has 5,480,000,000 shares outstanding. When a the board gets together to vote on and approve a dividend the approved dividend is then divided by 5.48 billion to determine how much each owner receives. The company doesn't pay dividends out to owners from a pot of money it received from new owners; it sold iPhones at a profit and is sending a portion of that profit to the owners of the company. \"\"When you buy stock, it is claimed that you own a small portion of the company. This statement has no backing, as you cannot exchange your stock for the company's assets.\"\" The statement does have backing. It's backed by the US Judicial system. But there's a difference between owning a company and owning the assets of the company. You own 1/5,480,000,000 of the company and the company owns the company's assets. Nevermind how disruptive it would be if any shareholder could unilaterally decide to sell a company's buildings or other assets. This is not a ponzi scheme because when you buy or sell your Apple stock, it has no impact on Apple, you're simply transacting with another random shareholder (barring a share-repurchase or direct issue). Apple doesn't receive the proceeds of your private transaction, you do. As far as value goes, yes the stock market provides tons of value and is a staple of capitalism. The stock market provides an avenue of financing for companies. Rather than taking a loan, a company's board can choose to relinquish some control and take on additional owners who will share in the spoils of the enterprise. Additionally, the exchanges deliver value via an unbelievable level of liquidity. You don't have to go seek out Joe or Sally when you want to sell your Apple stock. You don't need to put your shares on Craigslist in the hope of finding a buyer. You don't have to negotiate a price with someone who knows you want to sell. You just place an order at an exchange and you're aligned with a buyer. Also understand that anything can move up or down in value without any money actually changing hands. Say you get your hands on a pair of shoes (or whatever), they're hot on the market, very rare and sought after. You think you can sell them for $1,000. On tonight's news it turns out that the leather is actually from humans and the CEO of the company is being indicted, the company is falling apart, etc. Your shoes just went from $1,000 to $0 with no money changing hands (or from $1,000 to $100,000 depending on how cynical you are).\"" }, { "docid": "235772", "title": "", "text": "Don't ever, ever, ever let someone else handle your money, unless you want somebody else have your money. Nobody can guarantee a return on stocks. That's utter bullshit. Stock go up and down according to market emotions. How can your guru predict the market's future emotions? Keep your head cool with stocks. Only buy when you are 'sure' you are not going to need the money in the next 10 years. Buy obligations before stocks, invest in 'defensive' stocks before investing in 'aggressive' stocks. Keep more money in obligations and defensive stock than in aggressive stocks. See how you can do by yourself. Before buying (or selling) anything, think about the risks, the market, the expert's opinion about this investment, etc. Set a target for selling (and adjust the target according to the performance of the stock). Before investing, try to learn about investing, really. I've made my mistakes, you'll make yours, let's hope they're not the same :)" }, { "docid": "509819", "title": "", "text": "I am a believer in stocks for the long term, I sat on the S&P right though the last crash, and am 15% below the high before the crash. For individual stocks, you need to look more closely, and often ask yourself about its valuation. The trick is to buy right and not be afraid to sell when the stock appears to be too high for the underlying fundamentals. Before the dotcom bubble I bought Motorola at $40. Sold some at $80, $100, and out at $120. Coworkers who bought in were laughing as it went to $160. But soon after, the high tech bubble burst, and my sales at $100 looked good in hindsight. The stock you are looking at - would you buy more at today's price? If not, it may be time to sell at least some of that position." }, { "docid": "440805", "title": "", "text": "\"Who are the losers going to be? If you can tell me for certain which firms will do worst in a bear market and can time it so that this information is not already priced into the market then you can make money. If not don't try. In a bull market stocks tend to act \"\"normally\"\" with established patterns such as correlations acting as expected and stocks more or less pricing to their fundamentals. In a bear market fear tends to overrule all of those things. You get large drops on relatively minor bad news and modest rallies on even the best news which results in stocks being undervalued against their fundamentals. In the crash itself it is quite easy to make money shorting. In an environment where stocks are undervalued, such as a bear market, you run the risk that your short, no matter how sure you are that the stock will fall, is seen as being undervalued and will rise. In fact your selling of a \"\"losing\"\" stock might cause it to hit levels where value investors already have limits set. This could bring a LOT of buyers into the market. Due to the fact that correlations break down creating portfolios with the correct risk level, which is what funds are required to do not only by their contracts but also by law to an extent, is extremely difficult. Risk management (keeping all kinds to within certain bounds) is one of the most difficult parts of a manager's job and is even difficult in abnormal market conditions. In the long run (definitions may vary) stock prices in general go up (for those companies who aren't bankrupted at least) so shorting in a bear market is not a long term strategy either and will not produce long term returns on capital. In addition to this risk you run the risk that your counterparty (such as Lehman brothers?) will file for bankruptcy and you won't be able to cover the position before the lender wants you to repay their stock to them landing you in even more problems.\"" }, { "docid": "47795", "title": "", "text": "The long term view you are referring to would be over 30 to 40 years (i.e. your working life). Yes in general you should be going for higher growth options when you are young. As you approach retirement you may change to a more balanced or capital guaranteed option. As the higher growth options will have a larger proportion of funds invested into higher growth assets like shares and property, they will be affected by market movements in these asset classes. So when there is a market crash like with the GFC in 2007/2008 and share prices drop by 40% to 50%, then this will have an effect on your superannuation returns for that year. I would say that if your fund was invested mainly in the Australian stock market over the last 7 years your returns would still be lower than what they were in mid-2007, due to the stock market falls in late 2007 and early 2008. This would mean that for the 7 year time frame your returns would be lower than a balanced or capital guaranteed fund where a majority of funds are invested in bonds and other fixed interest products. However, I would say that for the 5 and possibly the 10 year time frames the returns of the high growth options should have outperformed the balanced and capital guaranteed options. See examples below: First State Super AMP Super Both of these examples show that over a 5 year period or less the more aggressive or high growth options performed better than the more conservative options, and over the 7 year period for First State Super the high growth option performed similar to the more conservative option. Maybe you have been looking at funds with higher fees so in good times when the fund performs well the returns are reduced by excessive fees and when the fund performs badly in not so good time the performance is even worse as the fees are still excessive. Maybe look at industry type funds or retail funds that charge much smaller fees. Also, if a fund has relatively low returns during a period when the market is booming, maybe this is not a good fund to choose. Conversely, it the fund doesn't perform too badly when the market has just crashed, may be it is worth further investigating. You should always try to compare the performance to the market in general and other similar funds. Remember, super should be looked at over a 30 to 40 year time frame, and it is a good idea to get interested in how your fund is performing from an early age, instead of worrying about it only a few years before retirement." }, { "docid": "115652", "title": "", "text": "\"Of the two, an option is a more reliable but more expensive means to get rid of a stock. As sdg said, a put option is basically an insurance policy on the stock; you pay a certain price for the contract itself, which locks in a sale price up to a particular future date. If the stock depreciates significantly, you exercise the option and get the contract price; otherwise you let the contract expire and keep the stock. Long-term, these are bad bets as each expired contract will offset earnings, but if you foresee a near-term steep drop in the stock price but aren't quite sure, a put option is good peace of mind. A sell stop order is generally cheaper, but less reliable. You set a trigger price, say a loss of 10% of the stock's current value. If that threshold is reached, the stop order becomes a sell order and the broker will sell the stock on the market, take his commission (or a fixed price depending on your broker) and you get the rest. However, there has to be a buyer willing to buy at that price at the moment the trigger fires; if a stock has lost 10% rapidly, it's probably on the way down hard, and the order might not complete until you realize a 12% loss, or a 15%, or even 20%. A sell stop limit (a combination stop order and limit order) allows you to say that you want to sell if the stock drops to $X, but not sell if it drops below $X-Y. This allows you to limit realized losses by determining a band within which it should be sold, and not to sell above or below that price. These are cheaper because you only pay for the order if it is executed successfully; if you never need it, it's free (or very cheap; some brokers will charge a token service fee to maintain a stop or stop limit). However, if the price drops very quickly or you specify too narrow a band, the stock can drop through that band too quickly to execute the sell order and you end up with a severely depreciated stock and an unexercised order. This can happen if the company whose stock you own buys another company; VERY quickly, both stocks will adjust, the buying company will often plummet inside a few seconds after news of the merger is announced, based on the steep drop in working capital and/or the infusion of a large amount of new stock in the buying company to cover the equity of the purchased company. You end up with devalued stock and a worthless option (but one company buying another is not usually reason to sell; if the purchase is a good idea, their stock will recover). Another option which may be useful to you is a swaption; this basically amounts to buying a put option on one financial instrument and a call on another, rolled into one option contract specifying a swap. This allows you to pick something you think would rise if your stock fell and exchange your stock for it at your option. For example, say the stock on which you buy this swaption is an airline stock, and you contract the option to swap for oil. If oil surges, the airline's stock will tank sharply, and you win both ways (avoiding loss and realizing a gain). You'd also win if either half of this option realized a gain over the option price; oil could surge or the airline could tank and you could win. You could even do this \"\"naked\"\" since its your option; if the airline's stock tanks, you buy it at the crashed price to exercise the option and then do so. The downside is a higher option cost; the seller will be no fool, so if your position appears to be likely, anyone who'd bet against you by selling you this option will want a pretty high return.\"" }, { "docid": "273565", "title": "", "text": "Try to find out (online) what 'the experts' think about your stock. Normally, there are some that advise you to sell, some to hold and some to buy. Hold on to your stock when most advise you to buy, otherwise, just sell it and get it over with. A stock's estimated value depends on a lot of things, the worst of these are human emotions... People buy with the crowd and sell on panic. Not something you should want to do. The 'real' value of a stock depends on assets, cash-flow, backlog, benefits, dividends, etc. Also, their competitors, the market position they have, etc. So, once you have an estimate of how much the stock is 'worth', then you can buy or sell according to the market value. Beware of putting all your eggs in one basket. Look at what happened to Arthur Andersen, Lehman Brothers, Parmalat, Worldcom, Enron, etc." }, { "docid": "279782", "title": "", "text": "\"Usually insiders are in a better position than you to understand their business, but that doesn't mean they will know the future with perfect accuracy. Sometimes they are wrong, sometimes life events force them to liquidate an otherwise promising investment, sometimes their minds change. So while it is indeed valuable information, as everything in fundamental analysis it must be taken with a grain of salt. Automatic Sell I think these refer to how the sell occurred. Often the employees don't get actual shares but options or warrants that can be converted to shares. Or there may be special predetermined arrangements regarding when and how the shares may be traded. Since the decision to sell here has nothing to do with the prospects of the business, but has to do with the personal situation of the employee, it's not quite the same as outright selling due to market concerns. Some people, for instance, are not interested in holding stock. Part of their compensation is given in stock, so they immediately sell the stock to avoid the headache of watching an investment. This obviously doesn't indicate that they expect the company will go south. I think automatic sell refers to these sorts of situations, but your broker should provide a more detailed definition. Disposition (Non Open Market) These days people trade through a broker, but there's nothing stopping you from taking the physical shares and giving them to someone in exchange for say a stack of cash. With a broker, you only \"\"sell\"\" without considering who is buying. The broker then finds buyers for you according to their own system. If selling without a broker you can also be choosy with who is buying, and it's not like anybody can just call up the CEO and ask to buy some stock, so it's a non-open market. Ultimately though it's still the insider selling. Just on a different exchange. So I would treat this as any insider sell - if they are selling, they may be expecting the stock to become less valuable. indirect ownership I think this refers to owning an entity that in turn owns the asset. For instance CEO of XYZ owns stock in ACME, but ACME holds shares of XYZ. This is a somewhat complicated situation, it comes down to whether you think they sold ACME because of the exposure to XYZ or because of some other risk that applies only to ACME and not XYZ. Generally speaking, I don't think you would find a rule like \"\"if insider transactions of so and so kinds > X then buy\"\" that provides guaranteed success. If such a rule was possible it would have been exploited already by the professionals. The more sensible option is to consider all data available to you and try to make a holistic evaluation. All of these insider activities can be bullish or bearish depending on many other factors.\"" }, { "docid": "72979", "title": "", "text": "The total value of the stock market more or less tracks the total value of the companies listed in the stock market, which is more or less the total value of the US economy (since very few industries are nationalized or dominated by privately held companies). The US economy has consistently grown over time, thanks to the wonders of industrialization, the discovery of new markets, new natural resources, etc. Thus, the stock market has continued to grow as well. Will it forever? No. The United States will not exist for ever. But there's no obvious reason it won't continue to grow, at least for a while, though of course if I could accurately predict that I would be far richer than I am. Why do other countries not have the same result? China is its own ball of wax since it's a sort-of-market-sort-of-command economy. Japan has major issues economically right now and doesn't really have the natural or people resources; it also had a huge market bubble a while back that it's never recovered from. And many European countries are doing fine. German's DAX30 index was at around 2500 in 2004 and is now at nearly 13000. That's pretty fast growth. If you go back further (there was a crash ending in around 2004), you can see around the fall of the Berlin wall it was still around 2000; even going that far back, that's about an 8% annual bump. The FTSE was also around 2000 back then, around 8000 now, which is around 5% annual growth. Many of these indexes were more seriously hurt than the US markets in the two major crashes of this millenium; while the US markets fell a lot in 2008, they didn't fall nearly as much as many smaller markets in 2002, so had less to recover from. Both DAX and FTSE suffered similar falls in 2002 to 2008, and so even though during good periods they've grown quite quickly, they haven't overall done as well as they could have given the crashes." }, { "docid": "238024", "title": "", "text": "Just before a crash or at the start of the crash most of the smart money would have gotten out, the remaining technical traders would be out by the time the market has dropped 10 to 15%, and some of them would be shorting their positions by now. Most long-term buy and hold investors would stick to their guns and stay in for the long haul. Some will start to get nervous and have sleepless nights when the markets have fallen 30%+ and look to get out as well. Others stay in until they cannot stand it anymore. And some will stick it out throughout the downturn. So who are the buyers at this stage? Some are the so called bargain hunters that buy when the market has fallen over 30% (only to sell again when it falls another 20%), or maybe buy more (because they think they are dollar cost averaging and will make a packet when the price goes back up - if and when it does). Some are those with stops covering their short positions, whilst others may be fund managers and individuals looking to rebalance their portfolios. What you have to remember during both an uptrend and a downtrend the price does not move straight up or straight down. If we take the downtrend for instance, it will have lower lows and lower highs (that is the definition of a downtrend). See the chart below of the S&P 500 during the GFC falls. As you can see just before it really started falling in Jan 08 there was ample opportunity for the smart money and the technical traders to get out of the market as the price drops below the 200 MA and it fails to make a higher peak. As the price falls from Jan 08 to Mar 08 you suddenly start getting some movement upwards. This is the bargain hunters who come into the market thinking the price is a bargain compared to 3 months ago, so they start buying and pushing the price up somewhat for a couple of months before it starts falling again. The reason it falls again is because the people who wanted to sell at the start of the year missed the boat, so are taking the opportunity to sell now that the prices have increased a bit. So you get this battle between the buyers (bulls) and seller (bears), and of course the bears are winning during this downtrend. That is why you see more sharper falls between Aug to Oct 08, and it continues until the lows of Mar 09. In short it has got to do with the phycology of the markets and how people's emotions can make them buy and/or sell at the wrong times." }, { "docid": "563798", "title": "", "text": "\"You got out in time, great, but how did you know when to get back in? The internet is littered with threads by people who got out (in advance, or during), then didn't get back in in time, because the recoveries didn't 'feel real'. Some people are still sitting out, just hoping against hope the market crashes - but it probably won't to those 2009 levels. I recommend looking at [Trinity Study](https://www.bogleheads.org/wiki/Safe_withdrawal_rates) results as a place to start getting a sense of portfolio longevity when totally out of the market. The reality is that all cash (which is basically a zero-duration bond) is a dangerous position, as is all stocks. A balanced portfolio gives you diversification, the only \"\"free lunch\"\" in investing. Better to not try and time your way in and out of the market, but rather glide within a range (Benjamin Graham recommends no more/less than 75/25, 25/75). If you want to skip the research headaches, stick with a 'total bond' or 'intermediate-term bond' fund (or Google around for 'lazy portfolios'). The real key is not to let emotions drive your decisions - it always 'feels different this time' until it isn't. Much better to set a target portfolio of stocks/bonds (rule of thumb: imagine you might lose half the stock portion in a downturn) then ride it out. That way you don't have to worry about being at one extreme or the other.\"" }, { "docid": "295498", "title": "", "text": "It is unlikely that buying 100 shares will have any effect on a stock's price, unless the stock's average trading volume is incredibly low. That being said, no matter how many share you buy, there's no way to know what the impact on the price will be, because that's only one factor in how shares are priced. If anyone could figure out the answer to your question then they'd be extremely rich, because they'd simply watch for big share trades and then buy those stocks on the way up. The market makers who actually execute the trades are the ones who set the prices, and most stocks have multiple market makers trading the stock, so the bid/ask you see is the highest bid and lowest ask. The market makers set the price based on what the trend of the stock is. If, for instance, there's a large number of sell orders against a stock, the market makers will start dropping the bid prices as they fill execution orders, and as they see buy orders increase, they'll raise ask prices as they fill execution orders. The market makers earn the difference between what they paid to buy someone's stock who was selling and what they get from someone else who buys it. This is a simplified explanation, so pro traders, don't beat me up! (grin) So, basically, it takes quite a bit of share volume in one direction or another to affect a stock's price. I can guarantee a 100-share trade wouldn't even be noticed by market makers. I hope this helps. Good luck!" }, { "docid": "449143", "title": "", "text": "This guy has been saying this for the last 6 years: &gt; 2011: 100% Chance of Crisis, Worse Than 2008: Jim Rogers 2012: Jim Rogers: It’s Going To Get Really “Bad After The Next Election” 2013: Jim Rogers Warns: “You Better Run for the Hills!” 2014: JIM ROGERS – Sell Everything &amp; Run For Your Lives 2015: Jim Rogers: “We’re Overdue” for a Stock Market Crash 2016: $68 TRILLION “BIBLICAL CRASH” Dead Ahead? Jim Rogers Issues a DIRE WARNING 2017: THE BOTTOM LINE: Legendary investor Jim Rogers expects the worst crash in our lifetime https://finance.yahoo.com/news/extreme-market-predictions-like-jim-rogers-provide-no-value-144747654.html He'll eventually be right. As they say, a broken clock is right two times a day." }, { "docid": "89947", "title": "", "text": "\"I would add to the other excellent answers that another factor besides just high unemployment numbers is the fear people have regarding the \"\"financial\"\" aspects of the country, that is the value of stocks and the value of the dollar. When the economy is sluggish it means people aren't buying enough, therefore companies aren't making enough, therefore their profits are too low and people start to divest from them, and stock prices drop. Or even the fear of this happening can induce people to sell off shares. The point is, people are worried \"\"in this economy\"\" because if--due to unemployment, low spending/consumer confidence--the stock market crashes again as it did in 2008/09, that represents a lot of savings lost, e.g. 40-50% of what one was counting on to retire with, particularly if you panic sell at the bottom. Now suddenly it's as if you had a huge robbery, and you will have to work longer into your retirement years than you'd planned. Similarly, if, due to monetary policy, the U.S. inflates the dollar, what one saved for retirement may not be sufficient. (These arguments are true for shorter periods than just one's retirement, but just taking that as an example). So it's not just unemployment that is worrisome \"\"in this economy\"\". This said, I agree with George Marian that one ought to be careful and plan well regardless of the winds of the economy. I guess for most people (and companies), though, \"\"in this economy\"\" means they can't get away with the kind of carelessness they might have during a boom.\"" }, { "docid": "501984", "title": "", "text": "To short a stock you actually borrow shares and sell them. The shorter gets the money from selling immediately, and pays interest for the share he borrows until he covers the short. The amount of interest varies depending on the stock. It's typically under 1% a year for large cap stocks, but can be 20% or more for small, illiquid, or heavily shorted stocks. In this scam only a few people own the shares that are lent to shorters, so they essentially have a monopoly and can set really high borrow costs. The shorter probably assumes that a pump-and-dump will crash quickly, so wouldn't mind paying a high borrow cost." }, { "docid": "466711", "title": "", "text": "Because buying at discount provides a considerable safety of margin -- it increases the likelihood of profiting. The margin serves to cushion future adverse price movement. Why is so much effort made to get a small percentage off an investment, if one is then willing to let the investment drop another 20% or more with the reason of being in it for the long term? Nobody can predict the stock price. Now if a long term investor happens to buy some stocks and the market crashes the next day, he could afford to wait for the stock prices to bounce back. Why should he sells immediately to incur a definite loss, should he has confidence in the underlying companies to recover eventually? One can choose to buy wisely, but the market fluctuation is out of his/her control. Wouldn't you agree that he/she should spend much efforts on something that can be controlled?" } ]

[ { "docid": "543589", "title": "", "text": "\"Your question contains a faulty assumption: During crashes and corrections the amount of sellers is of course higher than the amount of buyers, making it difficult to sell stocks. This simply isn't true. Every trade has two sides; thus, by definition, for every seller there is buyer and vice versa. Even if we broaden the definition of \"\"buyers\"\" and \"\"sellers\"\" to mean \"\"people willing to buy (or sell) at some price\"\", the assumption still isn't true. When a stock is falling it is generally not because potential buyers are exiting the market; it is because they are revising the prices they are willing to buy at downward. For example, say there are a bunch of orders to buy Frobnitz Consolidated (DUMB) at $5. Suppose DUMB announces a downward revision to its earnings guidance. Those people might not be willing to buy at $50 anymore, so they'll probably cancel their $50 buy orders. However, just because DUMB isn't worth as much as they thought it was, that doesn't mean it's completely worthless. So, those prospective buyers will likely enter new orders at some lower value, say, $45. With that, the value of DUMB has just dropped by $5, a 10% correction. However, there are still plenty of buyers, and you can still sell your DUMB holdings, if you're willing to take $45 for them. In other words, the value of a security is not determined by the relative numbers of buyers and sellers. It is determined by the prices those buyers and sellers are willing to pay to buy or accept to sell. Except for cases of massive IT disruptions, such as we saw in the \"\"flash crash\"\", there is always somebody willing to buy or sell at some price.\"" } ]

[ { "docid": "114092", "title": "", "text": "I would also be getting out of the stock market if I noticed prices starting to fall and a crash possibly on the way. There are some good and quite simple techniques I would use to time the markets over the medium to long term. I have described some of them in the answer to this question of mine: What are some simple techniques used for Timing the Stock Market over the long term? You could use similar techniques in your investing. And in regards to back-testing DCA to Timing The Markets, I have done that too in my answer to the following question: Investing in low cost index fund — does the timing matter? Timing the Markets wins hand down. In regards to back-testing and the concerns Kent Anderson has brought up, when I back-test a trading strategy, if that strategy is successful, I then forward test it over a year or two to confirm the results. As with back-testing you can sometimes curve fit your criteria too much. By forward testing you are confirming that the strategy is robust over different market conditions. One strategy you can take when the market does start to fall is short selling, as mentioned by some already. I am now short selling using CFDs over the short to medium term as one of my more aggressive strategies. I have a longer term strategy where I do not short, but tighten my stop losses when the market starts to tank. Sometimes my positions will keep going up even though the market as a whole is heading down, and I can make an extra 5% to 10% on these positions before I get taken out. The rare position even continues going up during the whole downturn and when the market starts to recover. So I let the market decide when I get out and when I stay in, I leave my emotions out of it. The best thing you can do is have a written trading plan with all your criteria for getting into the market, your criteria for getting out of the market and your position sizing and risk management incorporated in the plan." }, { "docid": "214798", "title": "", "text": "Like @littleadv, I don't consider a mortgage on a primary residence to be a low-risk investment. It is an asset, but one that can be rather illiquid, depending on the nature of the real estate market in your area. There are enough additional costs associated with home-ownership (down-payment, insurance, repairs) relative to more traditional investments to argue against a primary residence being an investment. Your question didn't indicate when and where you bought your home, the type of home (single-family, townhouse, or condo) the nature of your mortgage (fixed-rate or adjustable rate), or your interest rate, but since you're in your mid-20s, I'm guessing you bought after the crash. If that's the case, your odds of making a profit if/when you sell your home are higher than they would be if you bought in the 2006/2007 time-frame. This is no guarantee of course. Given the amount of housing stock still available, housing prices could still fall further. While it is possible to lose money in all sorts of investments, the illiquid nature of real estate makes it a lot more difficult to limit your losses by selling. If preserving principal is your objective, money market funds and treasury inflation protected securities are better choices than your home. The diversification your financial advisor is suggesting is a way to manage risk. Not all investments perform the same way in a given economic climate. When stocks increase in value, bonds tend to decrease (and vice versa). Too much money in a single investment means you could be wiped out in a downturn." }, { "docid": "107688", "title": "", "text": "Since you mention the religion restriction, you should probably look into the stock market or funds investing in it. Owning stock basically means you own a part of a company and benefit from any increase in value the company may have (and 'loose' on decreases, provided you sell your stock) and you also earn dividends over the company's profit. If you do your research properly and buy into stable companies you shouldn't need to bother about temporary market movements or crashes (do pay attention to deterioration on the businesses you own though). When buying stocks you should be aiming for the very long run. As mentioned by Victor, do your research, I recommend you start it by looking into 'value stocks' should you choose that path." }, { "docid": "138096", "title": "", "text": "\"If you're asking this question, you probably aren't ready to be buying individual stock shares, and may not be ready to be investing in the market at all. Short-term in the stock market is GAMBLING, pure and simple, and gambling against professionals at that. You can reduce your risk if you spend the amount of time and effort the pros do on it, but if you aren't ready to accept losses you shouldn't be playing and if you aren't willing to bet it all on a single throw of the dice you should diversify and accept lower potential gain in exchange for lower risk. (Standard advice: Index funds.) The way an investor, as opposed to a gambler, deals with a stock price dropping -- or surging upward, or not doing anything! -- is to say \"\"That's interesting. Given where it is NOW, do I expect it to go up or down from here, and do I think I have someplace to put the money that will do better?\"\" If you believe the stock will gain value from here, holding it may make more sense than taking your losses. Specific example: the mortgage-crisis market crash of a few years ago. People who sold because stock prices were dropping and they were scared -- or whose finances forced them to sell during the down period -- were hurt badly. Those of us who were invested for the long term and could afford to leave the money in the market -- or who were brave/contrarian enough to see it as an opportunity to buy at a better price -- came out relatively unscathed; all I have \"\"lost\"\" was two years of growth. So: You made your bet. Now you have to decide: Do you really want to \"\"buy high, sell low\"\" and take the loss as a learning experience, or do you want to wait and see whether you can sell not-so-low. If you don't know enough about the company to make a fairly rational decision on that front, you probably shouldn't have bought its stock.\"" }, { "docid": "384857", "title": "", "text": "The common advice you mentioned is just a guideline and has little to do with how your portfolio would look like when you construct it. In order to diversify you would be using correlations and some common sense. Recall the recent global financial crisis, ones of the first to crash were AAA-rated CDO's, stocks and so on. Because correlation is a statistical measure this can work fine when the economy is stable, but it doesn't account for real-life interrelations, especially when population is affected. Once consumers are affected this spans to the entire economy so that sectors that previously seemed unrelated have now been tied together by the fall in demand or reduced ability to pay-off. I always find it funny how US advisers tell you to hold 80% of US stocks and bonds, while UK ones tell you to stick to the UK securities. The same happens all over the world, I would assume. The safest portfolio is a Global Market portfolio, obviously I wouldn't be getting, say, Somalian bonds (if such exist at all), but there are plenty of markets to choose from. A chance of all of them crashing simultaneously is significantly lower. Why don't people include derivatives in their portfolios? Could be because these are mainly short-term, while most of the portfolios are being held for a significant amount of time thus capital and money markets are the key components. Derivatives are used to hedge these portfolios. As for the currencies - by having foreign stocks and bonds you are already exposed to FX risk so you, again, could be using it as a hedging instrument." }, { "docid": "419747", "title": "", "text": "This is not hypothetical, this is an accurate story. I am a long-term investor. I have a bunch of money that I'd like to invest and I plan on spreading it out over five or six mutual funds and ETFs, roughly according to the Canadian Couch Potato model portfolio (that is, passive mutual funds and ETFs rather than specific stocks). I am concerned that if I invest the full amount and the stock market crashes 30% next month, I will have paid more than I had to. As I am investing for the long term, I expect to more than regain my investment, but I still wouldn't be thrilled with paying 30% more than I had to. Instead, I am investing my money in three stages. I invested the first third earlier this month. I'll invest the next third in a few months, and the final third a few months after that. If the stock market climbs, as I expect is more likely the case, I will have lost out on some potential upside. However, if the stock market crashes next month, I will end up paying a lower average cost as two of my three purchases will occur after the crash. On average, as a long-term investor, I expect the stock market to go up. In the short term, I expect much more fluctuation. Statistically speaking, I'd do better to invest all the money at once as most of the time, the trend is upward. However, I am willing to trade some potential upside for a somewhat reduced risk of downside over the course of the next few months. If we were talking a price difference of 1% as mentioned in the question, I wouldn't care. I expect to see average annual returns far above this. But stock market crashes can cause the loss of 20 to 30% or more, and those are numbers I care about. I'd much rather buy in at 30% less than the current price, after all." }, { "docid": "96228", "title": "", "text": "\"&gt; the president has little to nothing to do with the stock market. Absolutely not! Nonsense! The president can easily kill the economy and cause a crash in the stock market in few day. The current improvement in the economy, employment, stock market, etc is directly because of Trump stance against the TPP, Immigration, over-regulation, etc. &gt; What I do is listen to the idiotic words that your leader says. He's your president! He's much smarter than Hillary who can't even handle debate questions unless she cheat with another fake-News, CNN. For God sake, never ever any candidate did such a thing and if my son cheated on a test like this, he would be expelled from school. In any case, Trump must be smart because he's very successful business person, and Hillary is just \"\"the wife of\"\". How can anyone vote for Hillary or Democrats in the last elections is beyond me. And for your information, I am a democrat who voted for Obama twice, for Al Gore (idiot!) and Kerry (a bigger idiot!). The DNC is totally corrupt, evil, untrustworthy and dysfunctioning. I hope that by next election they will fix the issues and have a descent candidate. Most likely not.\"" }, { "docid": "471870", "title": "", "text": "That's not why they crashed. They crashed because the only reason people were buying them is because they would go up in value and then they could sell them for profit later. Sounds exactly like Bitcoin in my opinion. The only difference is Bitcoin is useful in the sense that criminals can use it and not get in trouble. How many people do you know using Bitcoin as a currency? They aren't, they are only buying it to sell it for a profit later. That isn't sustainable. It isn't backed by a government or military and it is too volatile to actually use as a currency. When it crashes and criminals are the only ones using it, then what is it worth? Maybe $100 a coin? $10? Who knows, it sure as hell isn't $5,000 a coin though." }, { "docid": "251715", "title": "", "text": "Market Capitalization is the product of the current share price (the last time someone sold a share of the stock, how much?) times the number of outstanding shares of stock, summed up over all of the stock categories. Assuming the efficient market hypothesis and a liquid market, this gives the current total value of the companies' assets (both tangible and intangible). Both the EMH and perfect liquidity may not hold at all times. Beyond those theoretical problems, in practice, someone trying to buy or sell the company at that price is going to be in for a surprise; the fact that someone wants to sell that many stocks, or buy that many stocks, will move the price of the company stock." }, { "docid": "563798", "title": "", "text": "\"You got out in time, great, but how did you know when to get back in? The internet is littered with threads by people who got out (in advance, or during), then didn't get back in in time, because the recoveries didn't 'feel real'. Some people are still sitting out, just hoping against hope the market crashes - but it probably won't to those 2009 levels. I recommend looking at [Trinity Study](https://www.bogleheads.org/wiki/Safe_withdrawal_rates) results as a place to start getting a sense of portfolio longevity when totally out of the market. The reality is that all cash (which is basically a zero-duration bond) is a dangerous position, as is all stocks. A balanced portfolio gives you diversification, the only \"\"free lunch\"\" in investing. Better to not try and time your way in and out of the market, but rather glide within a range (Benjamin Graham recommends no more/less than 75/25, 25/75). If you want to skip the research headaches, stick with a 'total bond' or 'intermediate-term bond' fund (or Google around for 'lazy portfolios'). The real key is not to let emotions drive your decisions - it always 'feels different this time' until it isn't. Much better to set a target portfolio of stocks/bonds (rule of thumb: imagine you might lose half the stock portion in a downturn) then ride it out. That way you don't have to worry about being at one extreme or the other.\"" }, { "docid": "167322", "title": "", "text": "\"I probably don't understand something. I think you are correct about that. :) The main way money enters the stock market is through investors investing and taking money out. Money doesn't exactly \"\"enter\"\" the stock market. Shares of stock are bought and sold by investors to investors. The market is just a mechanism for a buyer and seller to find each other. For the purposes of this question, we will only consider non-dividend stocks. Okay. When you buy stock, it is claimed that you own a small portion of the company. This statement has no backing, as you cannot exchange your stock for the company's assets. For example, if I bought $10 of Apple Stock early on, but it later went up to $399, I can't go to Apple and say \"\"I own $399 of you, here you go it back, give me an iPhone.\"\" The only way to redeem this is to sell the stock to another investor (like a Ponzi Scheme.) It is true that when you own stock, you own a small portion of the company. No, you can't just destroy your portion of the company; that wouldn't be fair to the other investors. But you can very easily sell your portion to another investor. The stock market facilitates that sale, making it very easy to either sell your shares or buy more shares. It's not a Ponzi scheme. The only reason your hypothetical share is said to be \"\"worth\"\" $399 is that there is a buyer that wants to buy it at $399. But there is a real company behind the stock, and it is making real money. There are several existing questions that discuss what gives a stock value besides a dividend: The stock market goes up only when more people invest in it. Although the stock market keeps tabs on Businesses, the profits of Businesses do not actually flow into the Stock Market. In particular, if no one puts money in the stock market, it doesn't matter how good the businesses do. The value of a stock is simply what a buyer is willing to pay for it. You are correct that there is not always a correlation between the price of a stock and how well the company is doing. But let's look at another hypothetical scenario. Let's say that I started and run a publicly-held company that sells widgets. The company is doing very well; I'm selling lots of widgets. In fact, the company is making incredible amounts of money. However, the stock price is not going up as fast as our revenues. This could be due to a number of reasons: investors might not be aware of our success, or investors might not think our success is sustainable. I, as the founder, own lots of shares myself, and if I want a return on my investment, I can do a couple of things with the large revenues of the company: I can either continue to reinvest revenue in the company, growing the company even more (in the hopes that investors will start to notice and the stock price will rise), or I can start paying a dividend. Either way, all the current stock holders benefit from the success of the company.\"" }, { "docid": "115652", "title": "", "text": "\"Of the two, an option is a more reliable but more expensive means to get rid of a stock. As sdg said, a put option is basically an insurance policy on the stock; you pay a certain price for the contract itself, which locks in a sale price up to a particular future date. If the stock depreciates significantly, you exercise the option and get the contract price; otherwise you let the contract expire and keep the stock. Long-term, these are bad bets as each expired contract will offset earnings, but if you foresee a near-term steep drop in the stock price but aren't quite sure, a put option is good peace of mind. A sell stop order is generally cheaper, but less reliable. You set a trigger price, say a loss of 10% of the stock's current value. If that threshold is reached, the stop order becomes a sell order and the broker will sell the stock on the market, take his commission (or a fixed price depending on your broker) and you get the rest. However, there has to be a buyer willing to buy at that price at the moment the trigger fires; if a stock has lost 10% rapidly, it's probably on the way down hard, and the order might not complete until you realize a 12% loss, or a 15%, or even 20%. A sell stop limit (a combination stop order and limit order) allows you to say that you want to sell if the stock drops to $X, but not sell if it drops below $X-Y. This allows you to limit realized losses by determining a band within which it should be sold, and not to sell above or below that price. These are cheaper because you only pay for the order if it is executed successfully; if you never need it, it's free (or very cheap; some brokers will charge a token service fee to maintain a stop or stop limit). However, if the price drops very quickly or you specify too narrow a band, the stock can drop through that band too quickly to execute the sell order and you end up with a severely depreciated stock and an unexercised order. This can happen if the company whose stock you own buys another company; VERY quickly, both stocks will adjust, the buying company will often plummet inside a few seconds after news of the merger is announced, based on the steep drop in working capital and/or the infusion of a large amount of new stock in the buying company to cover the equity of the purchased company. You end up with devalued stock and a worthless option (but one company buying another is not usually reason to sell; if the purchase is a good idea, their stock will recover). Another option which may be useful to you is a swaption; this basically amounts to buying a put option on one financial instrument and a call on another, rolled into one option contract specifying a swap. This allows you to pick something you think would rise if your stock fell and exchange your stock for it at your option. For example, say the stock on which you buy this swaption is an airline stock, and you contract the option to swap for oil. If oil surges, the airline's stock will tank sharply, and you win both ways (avoiding loss and realizing a gain). You'd also win if either half of this option realized a gain over the option price; oil could surge or the airline could tank and you could win. You could even do this \"\"naked\"\" since its your option; if the airline's stock tanks, you buy it at the crashed price to exercise the option and then do so. The downside is a higher option cost; the seller will be no fool, so if your position appears to be likely, anyone who'd bet against you by selling you this option will want a pretty high return.\"" }, { "docid": "23116", "title": "", "text": "\"Between 1 and 2 G is actually pretty decent for a High School Student. Your best bet in my opinion is to wait the next (small) stock market crash, and then invest in an index fund. A fund that tracks the SP500 or the Russel 2000 would be a good choice. By stock market crash, I'm talking about a 20% to 30% drop from the highest point. The stock market is at an all time high, but nobody knows if it's going to keep going. I would avoid penny stocks, at least until you can read their annual report and understand most of what they're claiming, especially the cash flow statement. From the few that I've looked at, penny stock companies just keep issuing stock to raise money for their money loosing operations. I'd also avoid individual stocks for now. You can setup a practice account somewhere online, and try trading. Your classmates probably brag about how much they've made, but they won't tell you how much they lost. You are not misusing your money by \"\"not doing anything with it\"\". Your classmates are gambling with it, they might as well go to a casino. Echoing what others have said, investing in yourself is your best option at this point. Try to get into the best school that you can. Anything that gives you an edge over other people in terms of experience or education is good. So try to get some leadership and team experience. , and some online classes in a field that interests you.\"" }, { "docid": "485801", "title": "", "text": "&gt;What is your prediction for the next 12 months of the stock market? Not good. I'm not seeing any of the factors that contributed to what happened in 2008 change, which suggests, imho, that the market is still really unstable and prone to wild fluctuation and crashes. If you like risk perhaps that's okay, but for most investors it's a nightmare. Austerity seems to be winning out in government reaction to economic problems instead of stimulus, which is only going to shrink demand across the board. If you can find something for which there is a hungry consumer base willing and able to pay, maybe that's a good direction to go in, but those are more and more rare these days. I'm almost completely withdrawn from the market, save for my 'fun stocks', investments I've made not to make money but just to toy around with, and my Apple investments, which defy logic. And Netflix, which I support on principle. Last year was a good year for investing in healthcare, but I'm not sure how that's going to pan out this year." }, { "docid": "546125", "title": "", "text": "If your purchases are done at year end, but the money withheld over that 12 month period, the 17% return is for an average time of 6 months, and the return annualizes to 38% or so. All due respect to Alex B, the return would be 100/85 as he states, if the investment were funded in January and sold in December. But this isn't the case on ESPP, the average time you are out that money is 6 months. I will warn you. Don't let the tax tail wag your investing dog. It's easy to wait for long term gains to kick in and then ignore the stock. You then find yourself overloaded on one stock and risk some bad losses. I enjoyed my 15% discount all the way to the stock crashing by 60%+. If you must wait and hold some, be religious about selling the long term shares like clockwork. The 15% is virtually risk free (unless the shares crash between purchase and hitting your account.)" }, { "docid": "137073", "title": "", "text": "Trying to make money on something going down is inherently more complicated, risky and speculative than making money on it going up. Selling short allows for unlimited losses. Put options expire and have to be rebought if you want to keep playing that game. If you are that confident that the European market will completely crash (I'm not, but then again, I tend to be fairly contrarian) I'd recommend just sitting it out in cash (possibly something other than the Euro) and waiting until it gets so ridiculously cheap due to panic selling that it defies all common sense. For example, when companies that aren't completely falling apart are selling for less than book value and/or less than five times prior peak earnings that's a good sign. Another indicator is when you hear absolutely nothing other than doom-and-gloom and people swearing they'll never buy another stock as long as they live. Then buy at these depressed prices and when all the panic sellers realize that the world didn't end, it will go back up." }, { "docid": "211447", "title": "", "text": "A falling $AUD would be beneficial to exporters, and thus overall good for the economy. If the economy improves and exporters start growing profits, that means they will start to employ more people and employment will increase - and with higher employment, employees will become more confident to make purchases, including purchasing property. I feel the falling $AUD will be beneficial for the economy and the housing market. However, what you should consider is that with an improving economy and a rising property market, it will only be a matter of time before interest rates start rising. With a lower $AUD the RBA will be more confident in starting to increase interest rates. And increasing interest rates will have a dampening effect on the housing market. You are looking to buy a property to live in - so how long do you intend to live in and hold the property? I would assume at least for the medium to long term. If this is your intention then why are you getting cold feet? What you should be concerned about is that you do not overstretch on your borrowings! Make sure you allow a buffer of 2% to 3% above current interest rates so that if rates do go up you can still afford the repayments. And if you get a fixed rate - then you should allow the buffer in case variable rates are higher when your fixed period is over. Regarding the doomsayers telling you that property prices are going to crash - well they were saying that in 2008, then again in 2010, then again in 2012. I don't know about you but I have seen no crash. Sure when interest rates have gone up property prices have levelled off and maybe gone down by 10% to 15% in some areas, but as soon as interest rates start falling again property prices start increasing again. It's all part of the property cycle. I actually find it is a better time to buy when interest rates are higher and you can negotiate a better bargain and lower price. Then when interest rates start falling you benefit from lower repayments and increasing property prices. The only way there will be a property crash in Australia is if there was a dramatic economic downturn and unemployment rates rose to 10% or higher. But with good economic conditions, an increasing population and low supplies of newly build housing in Australia, I see no dramatic crashes in the foreseeable future. Yes we may get periods of weakness when interest rates increase, with falls up to 15% in some areas, but no crash of 40% plus. As I said above, these periods of weakness actually provide opportunities to buy properties at a bit of a discount. EDIT In your comments you say you intend to buy with a monthly mortgage repayment of $2500 in place of your current monthly rent of $1800. That means your loan amount would be somewhere around $550k to $600K. You also mention you would be taking on a 5 year fixed rate, and look to sell in about 2 years time if you can break even (I assume that is break even on the price you bought at). In 2 years you would have paid $16,800 more on your mortgage than you would have in rent. So here are the facts: A better strategy:" }, { "docid": "238024", "title": "", "text": "Just before a crash or at the start of the crash most of the smart money would have gotten out, the remaining technical traders would be out by the time the market has dropped 10 to 15%, and some of them would be shorting their positions by now. Most long-term buy and hold investors would stick to their guns and stay in for the long haul. Some will start to get nervous and have sleepless nights when the markets have fallen 30%+ and look to get out as well. Others stay in until they cannot stand it anymore. And some will stick it out throughout the downturn. So who are the buyers at this stage? Some are the so called bargain hunters that buy when the market has fallen over 30% (only to sell again when it falls another 20%), or maybe buy more (because they think they are dollar cost averaging and will make a packet when the price goes back up - if and when it does). Some are those with stops covering their short positions, whilst others may be fund managers and individuals looking to rebalance their portfolios. What you have to remember during both an uptrend and a downtrend the price does not move straight up or straight down. If we take the downtrend for instance, it will have lower lows and lower highs (that is the definition of a downtrend). See the chart below of the S&P 500 during the GFC falls. As you can see just before it really started falling in Jan 08 there was ample opportunity for the smart money and the technical traders to get out of the market as the price drops below the 200 MA and it fails to make a higher peak. As the price falls from Jan 08 to Mar 08 you suddenly start getting some movement upwards. This is the bargain hunters who come into the market thinking the price is a bargain compared to 3 months ago, so they start buying and pushing the price up somewhat for a couple of months before it starts falling again. The reason it falls again is because the people who wanted to sell at the start of the year missed the boat, so are taking the opportunity to sell now that the prices have increased a bit. So you get this battle between the buyers (bulls) and seller (bears), and of course the bears are winning during this downtrend. That is why you see more sharper falls between Aug to Oct 08, and it continues until the lows of Mar 09. In short it has got to do with the phycology of the markets and how people's emotions can make them buy and/or sell at the wrong times." }, { "docid": "485760", "title": "", "text": "\"Do you want to do it pre or post correction? If you're bearish on the market the obvious thing to do is short an index. I would say this is kind of dumb. The main problem is that it may take months or years for the market to crash, and by then it will have gone up so much that even the crash doesn't bring you profit, and you're paying borrowing fees meanwhile as well. You need to watch the portfolio also, when you short sell you'll get a bunch of cash, which you most likely will want to invest, but once you invest it, the market can spike and pummel your short position, resulting in negative remaining cash (since you already spent it). At that point you get a margin call from your broker. If you check your account regularly, not a big deal, but bad things can happen if you treat it as a fire and forget strategy. These days they have inverse funds so you don't have to borrow anything. The fund manager borrows for you. I'd say those are much better. The less cumbersome choice is to simply sell call options on the index or buy puts. These are even cash options, so when you exercise you get/lose money, not shares. You can even arrange them so that your potential loss is capped. (but honestly, same goes for shorts - it's called a stop loss) You could also wait for the correction and buy the dip. Less worrying about shorts and such, but of course the issue is timing the crash. Usually the crashes are very quick, and there are several \"\"pre-crashes\"\" that look like it bottomed out but then it crashes more. So actually very difficult thing to tell. You have to know either exactly when the correction will be, or exactly what the price floor is (and set a limit buy). Hope your crystal ball works! Yet another choice is finding asset classes uncorrelated or even anticorrelated with the broader market. For instance some emerging markets (developing countries), some sectors, individual stocks that are not inflated, bonds, gold and so on can have these characteristics where if S&P goes down they go up. Buying those may be a safer approach since at least you are still holding a fundamentally valuable thing even if your thesis flops, meanwhile shorts and puts and the like are purely speculative.\"" } ]

[ { "docid": "3095", "title": "", "text": "What is essential is that company you are selling is transparent enough. Because it will provide additional liquidity to market. When I decide to sell, I drop all volume once at a time. Liquidation price will be somewhat worse then usual. But being out of position will save you nerves for future thinking where to step in again. Cold head is best you can afford in such scenario. In very large crashes, there could be large liquidity holes. But if you are on upper side of sigmoid, you will be profiting from selling before that holes appear. Problem is, nobody could predict if market is on upper-fall, mid-fall or down-fall at any time." } ]

[ { "docid": "378189", "title": "", "text": "@victor has the most descriptive and basic idea on how this is done. The only thing I would add is that one benefit to real estate is that you can control how much the property is worth. By increasing rents and making the property one of the best in the neighborhood, you increase the value. As for the comment that this is the type of investing that caused the 1929 stock market crash, there are many other aspects that are overlooked. Taking equity out of real estate has been happening long before and after the depression. People do it all the time by taking out home equity loans, just not everyone uses it to purchase another investment." }, { "docid": "137073", "title": "", "text": "Trying to make money on something going down is inherently more complicated, risky and speculative than making money on it going up. Selling short allows for unlimited losses. Put options expire and have to be rebought if you want to keep playing that game. If you are that confident that the European market will completely crash (I'm not, but then again, I tend to be fairly contrarian) I'd recommend just sitting it out in cash (possibly something other than the Euro) and waiting until it gets so ridiculously cheap due to panic selling that it defies all common sense. For example, when companies that aren't completely falling apart are selling for less than book value and/or less than five times prior peak earnings that's a good sign. Another indicator is when you hear absolutely nothing other than doom-and-gloom and people swearing they'll never buy another stock as long as they live. Then buy at these depressed prices and when all the panic sellers realize that the world didn't end, it will go back up." }, { "docid": "211447", "title": "", "text": "A falling $AUD would be beneficial to exporters, and thus overall good for the economy. If the economy improves and exporters start growing profits, that means they will start to employ more people and employment will increase - and with higher employment, employees will become more confident to make purchases, including purchasing property. I feel the falling $AUD will be beneficial for the economy and the housing market. However, what you should consider is that with an improving economy and a rising property market, it will only be a matter of time before interest rates start rising. With a lower $AUD the RBA will be more confident in starting to increase interest rates. And increasing interest rates will have a dampening effect on the housing market. You are looking to buy a property to live in - so how long do you intend to live in and hold the property? I would assume at least for the medium to long term. If this is your intention then why are you getting cold feet? What you should be concerned about is that you do not overstretch on your borrowings! Make sure you allow a buffer of 2% to 3% above current interest rates so that if rates do go up you can still afford the repayments. And if you get a fixed rate - then you should allow the buffer in case variable rates are higher when your fixed period is over. Regarding the doomsayers telling you that property prices are going to crash - well they were saying that in 2008, then again in 2010, then again in 2012. I don't know about you but I have seen no crash. Sure when interest rates have gone up property prices have levelled off and maybe gone down by 10% to 15% in some areas, but as soon as interest rates start falling again property prices start increasing again. It's all part of the property cycle. I actually find it is a better time to buy when interest rates are higher and you can negotiate a better bargain and lower price. Then when interest rates start falling you benefit from lower repayments and increasing property prices. The only way there will be a property crash in Australia is if there was a dramatic economic downturn and unemployment rates rose to 10% or higher. But with good economic conditions, an increasing population and low supplies of newly build housing in Australia, I see no dramatic crashes in the foreseeable future. Yes we may get periods of weakness when interest rates increase, with falls up to 15% in some areas, but no crash of 40% plus. As I said above, these periods of weakness actually provide opportunities to buy properties at a bit of a discount. EDIT In your comments you say you intend to buy with a monthly mortgage repayment of $2500 in place of your current monthly rent of $1800. That means your loan amount would be somewhere around $550k to $600K. You also mention you would be taking on a 5 year fixed rate, and look to sell in about 2 years time if you can break even (I assume that is break even on the price you bought at). In 2 years you would have paid $16,800 more on your mortgage than you would have in rent. So here are the facts: A better strategy:" }, { "docid": "485801", "title": "", "text": "&gt;What is your prediction for the next 12 months of the stock market? Not good. I'm not seeing any of the factors that contributed to what happened in 2008 change, which suggests, imho, that the market is still really unstable and prone to wild fluctuation and crashes. If you like risk perhaps that's okay, but for most investors it's a nightmare. Austerity seems to be winning out in government reaction to economic problems instead of stimulus, which is only going to shrink demand across the board. If you can find something for which there is a hungry consumer base willing and able to pay, maybe that's a good direction to go in, but those are more and more rare these days. I'm almost completely withdrawn from the market, save for my 'fun stocks', investments I've made not to make money but just to toy around with, and my Apple investments, which defy logic. And Netflix, which I support on principle. Last year was a good year for investing in healthcare, but I'm not sure how that's going to pan out this year." }, { "docid": "197856", "title": "", "text": "Obviously there are good answers about the alternatives to the stock market in the referenced question. HFT has been debated heavily over the past couple of years, and the Flash crash of May 6, 2010, has spurred regulators to rein in heavy automated trading. HFT takes advantage of churn and split second reactions to changing market trends, news and rumors. It is not wise for individual investors to fight the big boys in these games and you will likely lose money in day trading as a result. HFT's defender's may be right when they claim that it makes the market more liquid for you to get the listed price for a security, but the article points out that their actions more closely resemble the currently illegal practice of front-running than a negotiated trade where both parties feel that they've received a fair value. There are many factors including supply and demand which affect stock prices more than volume does. While market makers are generating the majority of volume with their HFT practices, volume is merely the number of shares bought and sold in a day. Volume shows how many shares people are interested in trading, not the actual underlying value of the security and its long term prospects. Extra volume doesn't affect most long term investments, so your long term investments aren't in any extra danger due to HFT. That said, the stock market is a risky place whether panicked people or poorly written programs are trading out of control. Most people are better off investing rather than merely trading. Long term investors don't need to get the absolute lowest price or the highest sell. They move into and out of positions based on overall value and long term prospects. They're diversified so bad apples like Enron, etc. won't destroy their portfolio. Investors long term view allows them to ignore the effects of churn, while working like the tortoise to win the race while the hare eventually gets swallowed by a bad bet. There are a lot of worrying and stressful uncertainties in the global economy. If it's a question of wisdom, focus on sound investments and work politically (as a citizen and shareholder) to fix problems you see in the system." }, { "docid": "166313", "title": "", "text": "Stock market Tends to follow the DJIA and FTSE, so unlikely to see an Australia-only crash, especially while resources are doing so well. If China's growth slows before other ailing sectors improve, a downturn becomes more likely and the potential severity of the downturn increases. Economy A huge question to which I would refer you to Steve Keen: http://www.debtdeflation.com/blogs/ See A Fork in the Road. Housing Market It's a bubble, stupid! Seriously, it's as though the Aussies waited for the US to get done and then simply borrowed the copy book. There are a multitude of articles out there about likely outcomes from where the housing market is and where it's going. See this for a sample of what's out there: http://blogs.forbes.com/greatspeculations/2010/07/26/aussie-housing-bubble-gets-popped-with-chinese-credit-crash/ Note: All three of the areas you raise - economy, stock mkt, housing - are so intertwined that it's tricky separating them out. A lot of reading on Steve Keen's site can help." }, { "docid": "129997", "title": "", "text": "I can understand your fears, and there is nothing wrong with taking action to protect yourself from them. How much income do you need in retirement? For arguments sake, lets say you need to pull 36K per year from your 401K or 3K per month. Lets also assume that you current contribute (with any match) 1,000 per month. Please adjust to your actual numbers accordingly. One option would be to pull out 48K right now and put it in a money market. With your contributions, I would then put half into the money market and half into more aggressive investments. In 10 years, you would have about 110K in your money market account. You could live off of that for three years. If the market does crash, this should give you plenty of time to recover. Taking this option opens you to another risk, which is being beat up by inflation or lack of growth on a nice pile of cash. My time frame is not that different then yours (I am about 12 years away), but am still all in stocks. Having 48K and more with not opportunity for growth frightens me more than any temporary stock market crash. Having said that I think it would be a horrible mistake to get completely out of stocks. Many of those destroyed in 2008 also missed 2012 through 2014 which were awesome years. So do some. Set aside a year or three of income in something nice and safe. Maybe one year of income in money market, one in bonds and preferred stocks, and one in blue chips." }, { "docid": "438103", "title": "", "text": "\"The statement can be true, but isn't a general rule. Crashes and recessions are two different things. A crash is when the market rapidly revalues something when prices are out of equilibrium, whether it be stocks, a commodity or even a service. When the internet was new, nobody knew how to design webpages, so web page designers were in huge demand and commanded insane price premiums. I literally had college classmates billing real companies $200+/hr for marginal web skills. Eventually, the market \"\"clued up\"\" and that industry collapsed overnight. Another example of a crash from the supply point of view was the discovery of silver in the western US during the 19th century -- these discoveries increased the supply of the commodity to the point that silver coin eroded in value and devastated small family farms, who mostly dealt in silver currency. Recessions are often linked to crashes, but you don't need a crash to have a recession. Basically, during a recession, trade and industrial activity drop. The economy operates in cycles, and the euphoria and over-optimistic projections of a growing or booming economy lead to periods of reduced growth where the economy essentially reorganizes itself. Capital is a (if not the) key element of the economic cycle -- it's a catalyst that makes things happen. Debt is one form of capital -- it's not good, not bad. Generally cheap capital (ie. low interest rates) bring economic growth. Why? If I can borrow at 4%, I can then perform some sort of economic activity (bake bread, make computers, assemble cars, etc) that will earn myself 6, 8 or 10% on the dollar. When interest rates go up, economic activity slows, because the higher cost of credit increases the risk of losing money on an investment. The downside of cheap capital is that risk taking gets too easy and you can run into situations like the $2M ranch houses in California. The downside of expensive/tight capital is that it gets harder for businesses to operate and economic activity slows down. The effects of either extreme cascade and snowball.\"" }, { "docid": "251715", "title": "", "text": "Market Capitalization is the product of the current share price (the last time someone sold a share of the stock, how much?) times the number of outstanding shares of stock, summed up over all of the stock categories. Assuming the efficient market hypothesis and a liquid market, this gives the current total value of the companies' assets (both tangible and intangible). Both the EMH and perfect liquidity may not hold at all times. Beyond those theoretical problems, in practice, someone trying to buy or sell the company at that price is going to be in for a surprise; the fact that someone wants to sell that many stocks, or buy that many stocks, will move the price of the company stock." }, { "docid": "351055", "title": "", "text": "Thanks for the link. The way I interpretet is like this: IPOs are underpriced to make sure they will sell all the shares to the market, avoiding lose of face. (short term andslide 4) But that doesn't mean it is a good investment in the long run, because these companies have their reasons to go public, and one of those reasons could be that they think the market is overpricing stocks (long term and slide 5) There are of course other reasons, one of them to finance the business. By the way, I think the data is heavily skewed because of the dotcom crash, but interesting nonetheless." }, { "docid": "89947", "title": "", "text": "\"I would add to the other excellent answers that another factor besides just high unemployment numbers is the fear people have regarding the \"\"financial\"\" aspects of the country, that is the value of stocks and the value of the dollar. When the economy is sluggish it means people aren't buying enough, therefore companies aren't making enough, therefore their profits are too low and people start to divest from them, and stock prices drop. Or even the fear of this happening can induce people to sell off shares. The point is, people are worried \"\"in this economy\"\" because if--due to unemployment, low spending/consumer confidence--the stock market crashes again as it did in 2008/09, that represents a lot of savings lost, e.g. 40-50% of what one was counting on to retire with, particularly if you panic sell at the bottom. Now suddenly it's as if you had a huge robbery, and you will have to work longer into your retirement years than you'd planned. Similarly, if, due to monetary policy, the U.S. inflates the dollar, what one saved for retirement may not be sufficient. (These arguments are true for shorter periods than just one's retirement, but just taking that as an example). So it's not just unemployment that is worrisome \"\"in this economy\"\". This said, I agree with George Marian that one ought to be careful and plan well regardless of the winds of the economy. I guess for most people (and companies), though, \"\"in this economy\"\" means they can't get away with the kind of carelessness they might have during a boom.\"" }, { "docid": "440805", "title": "", "text": "\"Who are the losers going to be? If you can tell me for certain which firms will do worst in a bear market and can time it so that this information is not already priced into the market then you can make money. If not don't try. In a bull market stocks tend to act \"\"normally\"\" with established patterns such as correlations acting as expected and stocks more or less pricing to their fundamentals. In a bear market fear tends to overrule all of those things. You get large drops on relatively minor bad news and modest rallies on even the best news which results in stocks being undervalued against their fundamentals. In the crash itself it is quite easy to make money shorting. In an environment where stocks are undervalued, such as a bear market, you run the risk that your short, no matter how sure you are that the stock will fall, is seen as being undervalued and will rise. In fact your selling of a \"\"losing\"\" stock might cause it to hit levels where value investors already have limits set. This could bring a LOT of buyers into the market. Due to the fact that correlations break down creating portfolios with the correct risk level, which is what funds are required to do not only by their contracts but also by law to an extent, is extremely difficult. Risk management (keeping all kinds to within certain bounds) is one of the most difficult parts of a manager's job and is even difficult in abnormal market conditions. In the long run (definitions may vary) stock prices in general go up (for those companies who aren't bankrupted at least) so shorting in a bear market is not a long term strategy either and will not produce long term returns on capital. In addition to this risk you run the risk that your counterparty (such as Lehman brothers?) will file for bankruptcy and you won't be able to cover the position before the lender wants you to repay their stock to them landing you in even more problems.\"" }, { "docid": "517323", "title": "", "text": "The stock market is just like any other market, but stocks are bought and sold here. Just like you buy and sell your electronics at the electronics market, this is a place where buyers and sellers come together to buy and sell shares or stocks or equity, no matter what you call it. What are these shares? A share is nothing but a portion of ownership of a company. Suppose a company has 100 shares issued to it, and you were sold 10 out of those, it literally means you are a 10% owner of the company. Why do companies sell shares? Companies sell shares to grow or expand. Suppose a business is manufacturing or producing and selling goods or services that are high in demand, the owners would want to take advantage of it and increase the production of his goods or services. And in order to increase production he would need money to buy land or equipment or labor, etc. Now either he could go get a loan by pledging something, or he could partner with someone who could give him money in exchange for some portion of the ownership of the company. This way, the owner gets the money to expand his business and make more profit, and the lender gets a portion of profit every time the company makes some. Now if the owner decides to sell shares rather than getting a loan, that's when the stock market comes into the picture. Why would a person want to trade stocks? First of all, please remember that stocks were never meant to be traded. You always invest in stocks. What's the difference? Trading is short term and investing is long term, in very simple language. It's the greed of humans which led to this concept of trading stocks. A person should only buy stocks if he believes in the business the company is doing and sees the potential of growth. Back to the question: a person would want to buy stocks of the company because: How does a stock market help society? Look around you for the answer to this question. Let me give you a start and I wish everyone reading this post to add at least one point to the answer. Corporations in general allow many people come together and invest in a business without fear that their investment will cause them undue liability - because shareholders are ultimately not liable for the actions of a corporation. The cornerstone North American case of how corporations add value is by allowing many investors to have put money towards the railroads that were built across America and Canada. For The stock market in particular, by making it easier to trade shares of a company once the company sells them, the number of people able to conveniently invest grows exponentially. This means that someone can buy shares in a company without needing to knock door to door in 5 years trying to find someone to sell to. Participating in the stock market creates 'liquidity', which is essentially the ease with which stocks are converted into cash. High liquidity reduces risk overall, and it means that those who want risk [because high risk often creates high reward] can buy shares, and those who want low risk [because say they are retiring and don't have a risk appetite anymore] can sell shares." }, { "docid": "583708", "title": "", "text": "It might seem like the PE ratio is very useful, but it's actually pretty useless as a measure used to make buy or sell decisions, and taken largely on its own, pretty useless becomes utterly and completely useless. Stocks trade at prices based on future expectations and speculation, so that means if traders expect a company to double its profits next year, the share price could easily double (there are reasons it might not increase so much, and there are reasons it could increase even more than that, but that's not the point). The Price is now double, but the Earnings is still the same, so the PE ratio is double, and this doubling is based on something some traders know, or think they know, but other traders might not know or not believe! Once you understand that, what use is a PE ratio really? The PE ratio of a company might be low because it is in a death spiral, with many traders believing it will report lower and lower profits in years to come, and the lower the PE ratio of a given company gets probably, relatively, the more likely it is to go bust! If you buy a stock with a low PE ratio you must do so because you feel you understand the company, understand why the market is viewing it negatively, believe that the negativity is wrong or over done, and believe that it will turn around. Equally a PE ratio might be high, but be an excellent buy still because it has excellent growth prospects and potential even beyond what is priced in already! Lets face it, SOMEONE has been buying at the price that's put that PE ratio where is is, right? They might be wrong of course, or not! Or they might be justified now but circumstances might change before earnings ever reach the current priced in expectation. You'll know next year probably! To answer your actual question... first you should now understand there is no such thing as a stock that is on sale, just stocks that are priced broadly according to the markets consensus on its value in years to come, the closest thing being a stock that is 'over sold' (but one man's 'over sold' is another man's train crash remember)... so what to actually look for? The only way to (on average) make good buy and sell decisions is to know about investing and trading (buy some books, I have 12), understand the businesses you propose to invest in and understand their market(s) (which may also mean understanding national and international economics somewhat)." }, { "docid": "543589", "title": "", "text": "\"Your question contains a faulty assumption: During crashes and corrections the amount of sellers is of course higher than the amount of buyers, making it difficult to sell stocks. This simply isn't true. Every trade has two sides; thus, by definition, for every seller there is buyer and vice versa. Even if we broaden the definition of \"\"buyers\"\" and \"\"sellers\"\" to mean \"\"people willing to buy (or sell) at some price\"\", the assumption still isn't true. When a stock is falling it is generally not because potential buyers are exiting the market; it is because they are revising the prices they are willing to buy at downward. For example, say there are a bunch of orders to buy Frobnitz Consolidated (DUMB) at $5. Suppose DUMB announces a downward revision to its earnings guidance. Those people might not be willing to buy at $50 anymore, so they'll probably cancel their $50 buy orders. However, just because DUMB isn't worth as much as they thought it was, that doesn't mean it's completely worthless. So, those prospective buyers will likely enter new orders at some lower value, say, $45. With that, the value of DUMB has just dropped by $5, a 10% correction. However, there are still plenty of buyers, and you can still sell your DUMB holdings, if you're willing to take $45 for them. In other words, the value of a security is not determined by the relative numbers of buyers and sellers. It is determined by the prices those buyers and sellers are willing to pay to buy or accept to sell. Except for cases of massive IT disruptions, such as we saw in the \"\"flash crash\"\", there is always somebody willing to buy or sell at some price.\"" }, { "docid": "501984", "title": "", "text": "To short a stock you actually borrow shares and sell them. The shorter gets the money from selling immediately, and pays interest for the share he borrows until he covers the short. The amount of interest varies depending on the stock. It's typically under 1% a year for large cap stocks, but can be 20% or more for small, illiquid, or heavily shorted stocks. In this scam only a few people own the shares that are lent to shorters, so they essentially have a monopoly and can set really high borrow costs. The shorter probably assumes that a pump-and-dump will crash quickly, so wouldn't mind paying a high borrow cost." }, { "docid": "350366", "title": "", "text": "If you want to make money while European equities markets are crashing and the Euro itself is devaluing: None of these strategies are to be taken lightly. All involve risk. There are probably numerous ways that you can lose even though it seems like you should win. Transaction fees could eat your profits, especially if you have only a small amount of capital to invest with. The worst part is that they all involve timing. If you think the crash is coming next week, you could, say, buy a bunch of puts. But if the crash doesn't come for another 6 months, all of your puts are going to expire worthless and you've lost all of your capital. Even worse, if you sell short an index ETF this week in advance of next week's impending crash, and some rescue package arrives over the weekend, equity prices could spike at the beginning of the week and you'd be screwed." }, { "docid": "14989", "title": "", "text": "I know this is heresy but if you have funds for significantly more than 6 months of expenses (let's say 12 months), how risky would it be to put it all into stock index funds? Quite risky as if you do need to dip into it, how fast could you get the cash? Also, do you realize the tax implications when you do sell the shares should you have an emergency? In the worst-case scenario, let's say you have a financial emergency at the same time the stock market crashes and loses half its value. You could still liquidate the rest and have sufficient funds for 6 months. Am I underestimating the risks of this strategy? That's not worst case scenario though. Worst case scenario would be another 9/11 where the markets are closed for nearly a week and you need the money but can't get the funds converted to cash in the bank that you can use. This is in addition to the potential wait for a settlement in the case of using ETFs if you choose to go that way. In the case of money market funds, CDs and other near cash equivalents these can be accessed relatively easily which is part of the point. A staggered approach where some cash is kept in house, some in accounts that can easily accessed and some in other investments may make sense though the breakdown would differ depending on how much risk people are willing to take. If it truly is an emergency fund then the odds of needing it should be very slim, so why live with near zero return on that money? Something to consider is what is called an emergency here? For some people a sudden $1,000 bill to fix their car that just broke down is an emergency. For others, there could be emergency trips to visit family that may have gotten into accidents or gotten a diagnosis that they may pass away soon. Consider what do you want to call an emergency here as chances are you may not be considering all that people would think is an emergency. There is the question of what other sources of money do you have to cover should issues arise." }, { "docid": "105343", "title": "", "text": "\"This is a complicated subject, because professional traders don't rely on brokers for stock quotes. They have access to market data using Level II terminals, which show them all of the prices (buy and sell) for a given stock. Every publicly traded stock (at least in the U.S.) relies on firms called \"\"market makers\"\". Market makers are the ones who ultimately actually buy and sell the shares of companies, making their money on the difference between what they bought the stock at and what they can sell it for. Sometimes those margins can be in hundreds of a cent per share, but if you trade enough shares...well, it adds up. The most widely traded stocks (Apple, Microsoft, BP, etc) may have hundreds of market makers who are willing to handle share trades. Each market maker sets their own price on what they'll pay (the \"\"bid\"\") to buy someone's stock who wants to sell and what they'll sell (the \"\"ask\"\") that share for to someone who wants to buy it. When a market maker wants to be competitive, he may price his bid/ask pretty aggressively, because automated trading systems are designed to seek out the best bid/ask prices for their trade executions. As such, you might get a huge chunk of market makers in a popular stock to all set their prices almost identically to one another. Other market makers who aren't as enthusiastic will set less competitive prices, so they don't get much (maybe no) business. In any case, what you see when you pull up a stock quote is called the \"\"best bid/ask\"\" price. In other words, you're seeing the highest price a market maker will pay to buy that stock, and the lowest price that a market maker will sell that stock. You may get a best bid from one market maker and a best ask from a different one. In any case, consumers must be given best bid/ask prices. Market makers actually control the prices of shares. They can see what's out there in terms of what people want to buy or sell, and they modify their prices accordingly. If they see a bunch of sell orders coming into the system, they'll start dropping prices, and if people are in a buying mood then they'll raise prices. Market makers can actually ignore requests for trades (whether buy or sell) if they choose to, and sometimes they do, which is why a limit order (a request to buy/sell a stock at a specific price, regardless of its current actual price) that someone places may go unfilled and die at the end of the trading session. No market maker is willing to fill the order. Nowadays, these systems are largely automated, so they operate according to complex rules defined by their owners. Very few trades actually involve human intervention, because people can't digest the information at a fast enough pace to keep up with automated platforms. So that's the basics of how share prices work. I hope this answered your question without being too confusing! Good luck!\"" } ]

[ { "docid": "6771", "title": "", "text": "Conceptually, yes, you need to worry about it. As a practical matter, it's less likely to be exercised until expiry or shortly prior. The way to think about paying a European option is: [Odds of paying out] = [odds that strike is in the money at expiry] Whereas the American option can be thought of as: [Odds of paying out] = [odds that strike price is in the money at expiry] + ( [odds that strike price is in the money prior to expiry] * [odds that other party will exercise early] ). This is just a heuristic, not a formal financial tool. But the point is that you need to consider the odds that it will go into the money early, for how long (maybe over multiple periods), and how likely the counterparty is to exercise early. Important considerations for whether they will exercise early are the strategy of the other side (long, straddle, quick turnaround), the length of time the option is in the money early, and the anticipated future movement. A quick buck strategy might exercise immediately before the stock turns around. But that could leave further gains on the table, so it's usually best to wait unless the expectation is that the stock will quickly reverse its movement. This sort of counter-market strategy is generally unlikely from someone who bought the option at a certain strike, and is equivalent to betting against their original purchase of the option. So most of these people will wait because they expect the possibility of a bigger payoff. A long strategy is usually in no hurry to exercise, and in fact they would prefer to wait until the end to hold the time value of the option (the choice to get out of the option, if it goes back to being unprofitable). So it usually makes little sense for these people to exercise early. The same goes for a straddle, if someone is buying an option for insurance or to economically exit a position. So you're really just concerned that people will exercise early and forgo the time value of the American option. That may include people who really want to close a position, take their money, and move on. In some cases, it may include people who have become overextended or need liquidity, so they close positions. But for the most part, it's less likely to happen until the expiration approaches because it leaves potential value on the table. The time value of an option dwindles at the end because the implicit option becomes less likely, especially if the option is fairly deep in the money (the implicit option is then fairly deep out of the money). So early exercise becomes more meaningful concern as the expiration approaches. Otherwise, it's usually less worrisome but more than a nonzero proposition." } ]

[ { "docid": "11456", "title": "", "text": "The short answer to your initial question is: yes. The option doesn't expire until the close of the market on the day of expiration. Because the option is expiring so soon, the time value of the option is quite small. That is why the option, once it is 'in-the-money', will track so closely to the underlying stock price. If someone buys an in-the-money option on the day of expiration, they are likely still expecting the price to go up before they sell it or exercise it. Many brokers will exercise your in-the-money options sometime after 3pm on the day of expiration. If this is not what you desire, you should communicate that with them prior to that day." }, { "docid": "95415", "title": "", "text": "\"You may look into covered calls. In short, selling the option instead of buying it ... playing the house. One can do this on the \"\"buying side\"\" too, e.g. let's say you like company XYZ. If you sell the put, and it goes up, you make money. If XYZ goes down by expiration, you still made the money on the put, and now own the stock - the one you like, at a lower price. Now, you can immediately sell calls on XYZ. If it doesn't go up, you make money. If it does goes up, you get called out, and you make even more money (probably selling the call a little above current price, or where it was \"\"put\"\" to you at). The greatest risk is very large declines, and so one needs to do some research on the company to see if they are decent -- e.g. have good earnings, not over-valued P/E, etc. For larger declines, one has to sell the call further out. Note there are now stocks that have weekly options as well as monthly options. You just have to calculate the rate of return you will get, realizing that underneath the first put, you need enough money available should the stock be \"\"put\"\" to you. An additional, associated strategy, is starting by selling the put at a higher than current market limit price. Then, over a couple days, generally lowering the limit, if it isn't reached in the stock's fluctuation. I.e. if the stock drops in the next few days, you might sell the put on a dip. Same deal if the stock finally is \"\"put\"\" to you. Then you can start by selling the call at a higher limit price, gradually bringing it down if you aren't successful -- i.e. the stock doesn't reach it on an upswing. My friend is highly successful with this strategy. Good luck\"" }, { "docid": "147361", "title": "", "text": "\"Yes, long calls, and that's a good point. Let's see... if I bought one contract at the Bid price above... $97.13 at expiry of $96.43 option = out of the money =- option price(x100) = $113 loss. $97.13 at expiry of $97.00 option = out of the money =- option price(x100) = $77 loss. $97.13 at expiry of $97.14 option = in the money by 1-cent=$1/contract profit - option price(x100) = $1-$58 = $57 loss The higher strike prices have much lower losses if they expire with the underlying stock at- or near-the-money. So, they carry \"\"gentler\"\" downside potential, and are priced much higher to reflect that \"\"controlled\"\" risk potential. That makes sense. Thanks.\"" }, { "docid": "331598", "title": "", "text": "To get the probability of hitting a target price you need a little more math and an assumption about the expected return of your stock. First let's examine the parts of this expression. IV is the implied volatility of the option. That means it's the volatility of the underlying that is associated with the observed option price. As a practical matter, volatility is the standard deviation of returns, expressed in annualized terms. So if the monthly standard deviation is Y, then Y*SQRT(12) is the volatility. From the above you can see that IV*SQRT(DaysToExpire/356) de-annualizes the volatility to get back to a standard deviation. So you get an estimate of the expected standard deviation of the return between now and expiration. If you multiply this by the stock price, then you get what you have called X, which is the standard deviation of the dollars gained or lost between now and expiration. Denote the price change by A (so that the standard deviation of A is X). Note that we seek the expression for the probability of hitting a target level, Q, so mathematically we want 1 - Pr( A < Q - StockPrice) We do 1 minus the probability of being below this threshold because cumulative distribution functions always find the probability of being BELOW a threshold, not above. If you are using excel and assuming a mean of zero for returns, the probability of hitting or exceeding Q at expiration, then, is That's your answer for the probability of exceeding Q. Accuracy is in the eye of the beholder. You'd have to specify a criterion by which to judge it to know the answer. I'm sure more sophisticated methods exist that are more unbiased and have less error, but I think it's a fine first approximation." }, { "docid": "292045", "title": "", "text": "\"When the strike price ($25 in this case) is in-the-money, even by $0.01, your shares will be sold the day after expiration if you take no action. If you want to let your shares go,. allow assignment rather than close the short position and sell the long position...it will be cheaper that way. If you want to keep your shares you must buy back the option prior to 4Pm EST on expiration Friday. First ask yourself why you want to keep the shares. Is it to write another option? Is it to hold for a longer term strategy? Assuming this is a covered call writing account, you should consider \"\"rolling\"\" the option. This involves buying back the near-term option and selling the later date option of a similar or higher strike. Make sure to check to see if there is an upcoming earnings report in the latter month because you may want to avoid writing a call in that situation. I never write a call when there's an upcoming ER prior to expiration. Good luck. Alan\"" }, { "docid": "480337", "title": "", "text": "\"So, if an out-of-the-money option (all time value) has a price P (say $3.00), and there are N days... The extrinsic value isn't solely determined by time value as your quote suggests. It's also based on volatility and demand. Here is a quote from http://www.tradingmarkets.com/options/trading-lessons/the-mystery-of-option-extrinsic-value-767484.html distinguishing between extrinsic time value and extrinsic non-time value: The time value of an option is entirely predictable. Time value premium declines at an accelerating rate, with most time decay occurring in the last one to two months before expiration. This occurs on a predictable curve. Intrinsic value is also predictable and easily followed. It is worth one point for every point the option is in the money. For example, a call with a strike of 30 has three points of intrinsic value when the current value of the underlying stock is $33 per share; and a 40 put has two points of intrinsic value when the underlying stock is worth $38. The third type of premium, extrinsic value, increases or decreases when the underlying stock changes and when the distance between current value of stock and strike of the option get closer together. As a symptom of volatility, extrinsic value may be greater for highly volatile underlying stock, and lower for less volatile stocks. Extrinsic value is the only classification of option premium that is unpredictable. The SPYs you point out probably had a volatility component affecting value. This portion is a factor of expectations or uncertainty. So an event expected to conclude prior to expiration, but of unknown outcome can cause theta to be higher than p/n. For example, a drug company is being sued and the outcome of a trial will determine whether that company pays out millions or not. The extrinsic will be higher than p/n prior to the outcome of the trial then drops after. Of course, the most common situation where this happens is earnings. After the announcement, it's not unusual to see a dramatic drop in the extrinsic portion of options. This is why sometimes a new option trader gets angry when buying calls prior to earnings. When 'surprise' good earnings are announced as hoped, the rise is stock price is largely offset by a fall in extrinsic value giving call holders little or no gain! As for the reverse situation where theta is lower than p/n would expect? Well you can actually have negative theta meaning the extrinsic portion rises over time. (this statement is a little confusing because theta is usually described as negative, but since you describe it as a positive number, negative here means the opposite of what you'd expect). This is a quote from \"\"Option Volatility & Pricing\"\". Keep in mind that they use 'positive' theta to mean the time value increases up over time: Is it ever possible for an option to have a positive theta such that if nothing changes the option will be worth more tomorrow than it is today? When futures options are subject to stock-type settlement, as they currently are in the United States, the carrying cost on a deeply in-the-money option, either a call or a put, can, under some circumstances, be greater than the volatility component. If this happens, and the option is European (no early exercise permitted), it will have a theoretical value less than parity (less than intrinsic value). As expiration approaches, the value of the option will slowly rise to parity. Hence, the option will have a positive theta. Sheldon Natenberg. Option Volatility & Pricing: Advanced Trading Strategies and Techniques (Kindle Locations 1521-1525). Kindle Edition.\"" }, { "docid": "446856", "title": "", "text": "Yes. If I own a call, an American call option can be exercised at my wish. A European call can only be exercised at expiration, by the way. Your broker doesn't give you anything but a current quote for a given strike price. There are a number of good option related questions here. A bit of searching and reading will help you understand the process." }, { "docid": "69395", "title": "", "text": "\"Your plan already answers your own question in the best possible way: If you want to be able to make the most possible profit from a large downward move in a stock (in this case, a stock that tracks gold), with a limited, defined risk if there is an upward move, the optimal strategy is to buy a put option. There are a few Exchange Traded Funds (ETFs) that track the price of gold. think of them as stocks that behave like gold, essentially. Two good examples that have options are GLD and IAU. (When you talk about gold, you'll hear a lot about futures. Forget them, for now. They do the same essential thing for your purposes, but introduce more complexity than you need.) The way to profit from a downward move without protection against an upward move is by shorting the stock. Shorting stock is like the opposite of buying it. You make the amount of money the stock goes down by, or lose the amount it goes up by. But, since stocks can go up by an infinite amount, your possible loss is unlimited. If you want to profit on a large downward move without an unlimited loss if you're wrong and it goes up, you need something that makes money as the stock drops, but can only lose so much if it goes up. (If you want to be guaranteed to lose nothing, your best investment option is buying US Treasuries, and you're technically still exposed to the risk that US defaults on its debt, although if you're a US resident, you'll likely have bigger problems than your portfolio in that situation.) Buying a put option has the exact asymmetrical exposure you want. You pay a limited premium to buy it, and at expiration you essentially make the full amount that the stock has declined below the strike price, less what you paid for the option. That last part is important - because you pay a premium for the option, if it's down just a little, you might still lose some or all of what you paid for it, which is what you give up in exchange for it limiting your maximum loss. But wait, you might say. When I buy an option, I can lose all of my money, cant I? Yes, you can. Here's the key to understanding the way options limit risk as compared to the corresponding way to get \"\"normal\"\" exposure through getting long, or in your case, short, the stock: If you use the number of options that represent the number of shares you would have bought, you will have much, much less total money at risk. If you spend the same \"\"bag 'o cash\"\" on options as you would have spent on stock, you will have exposure to way more shares, and have the same amount of money at risk as if you bought the stock, but will be much more likely to lose it. The first way limits the total money at risk for a similar level of exposure; the second way gets you exposure to a much larger amount of the stock for the same money, increasing your risk. So the best answer to your described need is already in the question: Buy a put. I'd probably look at GLD to buy it on, simply because it's generally a little more liquid than IAU. And if you're new to options, consider the following: \"\"Paper trade\"\" first. Either just keep track of fake buys and sells on a spreadsheet, or use one of the many online services where you can track investments - they don't know or care if they're real or not. Check out www.888options.com. They are an excellent learning resource that isn't trying to sell you anything - their only reason to exist is to promote options education. If you do put on a trade, don't forget that the most frustrating pitfall with buying options is this: You can be basically right, and still lose some or all of what you invest. This happens two ways, so think about them both before you trade: If the stock goes in the direction you think, but not enough to make back your premium, you can still lose. So you need to make sure you know how far down the stock has to be to make back your premium. At expiration, it's simple: You need it to be below the strike price by more than what you paid for the option. With options, timing is everything. If the stock goes down a ton, or even to zero - free gold! - but only after your option expires, you were essentially right, but lose all your money. So, while you don't want to buy an option that's longer than you need, since the premium is higher, if you're not sure if an expiration is long enough out, it isn't - you need the next one. EDIT to address update: (I'm not sure \"\"not long enough\"\" was the problem here, but...) If the question is just how to ensure there is a limited, defined amount you can lose (even if you want the possible loss to be much less than you can potentially make, the put strategy described already does that - if the stock you use is at $100, and you buy a put with a 100 strike for $5, you can make up to $95. (This occurs if the stock goes to zero, meaning you could buy it for nothing, and sell it for $100, netting $95 after the $5 you paid). But you can only lose $5. So the put strategy covers you. If the goal is to have no real risk of loss, there's no way to have any real gain above what's sometimes called the \"\"risk-free-rate\"\". For simplicity's sake, think of that as what you'd get from US treasuries, as mentioned above. If the goal is to make money whether the stock (or gold) goes either up or down, that's possible, but note that you still have (a fairly high) risk of loss, which occurs if it fails to move either up or down by enough. That strategy, in its most common form, is called a straddle, which basically means you buy a call and a put with the same strike price. Using the same $100 example, you could buy the 100-strike calls for $5, and the 100-strike puts for $5. Now you've spent $10 total, and you make money if the stock is up or down by more than $10 at expiration (over 110, or under 90). But if it's between 90 and 100, you lose money, as one of your options will be worthless, and the other is worth less than the $10 total you paid for them both.\"" }, { "docid": "260101", "title": "", "text": "I know there are a lot of papers on bubbles already, but I was always interested in how many were retail/individually driven vs institutionally driven bubbles - at least who plays a larger role. The American pension crisis is also another interesting topic that may be fun to write about. With everyone calling doomsday on them, maybe you can shed some light on some (if any) of the bs or touch on what options they may actually have to survive. Topics on investor behaviour is always a safe bet - potential returns lost due to home bias, investment behaviour of millennials, bla bla bla. The dangers of the rise of passive investments (ETFs) if any &amp; if it actually generates more room to capture alpha since there may be greater inefficiencies. Also the impact of a stock's return relative to the amount of ETFs it is a constituent of So many things - pls advise what you end up deciding to choose and post the paper when the time comes!" }, { "docid": "212783", "title": "", "text": "\"Federal taxes are generally lower in Canada. Canada's top federal income tax rate is 29%; the US rate is 35% and will go to 39.6% when Bush tax cuts expire. The healthcare surcharge will kick in in a few years, pushing the top bracket by a few more points and over 40%. State/provincial taxes are lower in the US. You may end up in the 12% bracket in New York City or around 10% in California or other \"\"bad\"\" income-tax states. But Alberta is considered a tax haven in Canada and has a 10% flat tax. Ontario's top rate is about 11%, but there are surtaxes that can push the effective rate to about 17%. Investment income taxes: Canada wins, narrowly. Income from capital gains counts as half, so if you're very rich and live in Ontario, your rate is about 23% and less than that in Alberta. The only way to match or beat this deal in the US in the long term is to live in a no-income-tax state. Dividends are taxed at rates somewhere between capital gains and ordinary income - not as good a deal as Bush's 15% rate on preferred dividends, but that 15% rate will probably expire soon. Sales taxes: US wins, but the gap is closing. Canada has a national VAT-like tax, called GST and its rate came down from 7% to 5% when Harper became the Prime Minister. Provinces have sales taxes on top of that, in the range of 7-8% (but Alberta has no sales tax). Some provinces \"\"harmonized\"\" their sales taxes with the GST and charge a single rate, e.g. Ontario has a harmonized sales tax (HST) of 13% (5+8). 13% is of course a worse rate than the 6-8% charged by most states, but then some states and counties already charge 10% and the rates have been going up in each recession. Payroll taxes: much lower in Canada. Canadian employees' CPP and EI deductions have a low threshold and top out at about $3,000. Americans' 7.65% FICA rate applies to even $100K, resulting in a tax of $7,650. Property taxes: too dependent on the location, hard to tell. Tax benefits for retirement savings: Canada. If you work in the US and don't have a 401(k), you get a really bad deal: your retirement is underfunded and you're stuck with a higher tax bill, because you can't get the deduction. In Canada, if you don't have an RRSP at work, you take the money to the financial company of your choice, invest it there, and take the deduction on your taxes. If you don't like the investment options in your 401(k), you're stuck with them. If you don't like them in your RRSP, contribute the minimum to get the match and put the rest of the money into your individual RRSP; you still get the same deduction. Annual 401(k) contribution limits are use-it-or-lose-it, while unused RRSP limits and deductions can be carried forward and used when you need to jump tax brackets. Canada used to lack an answer to Roth IRAs, but the introduction of TFSAs took care of that. Mortgage interest deduction: US wins here as mortgage interest is not deductible in Canada. Marriage penalty: US wins. Canadian tax returns are of single or married-filing-separately type. So if you have one working spouse in the family or a big disparity between spouses' incomes, you can save money by filing a joint return. But such option is not available in Canada (there are ways to transfer some income between spouses and fund spousal retirement accounts, but if the income disparity is big, that won't be enough). Higher education: cheaper in Canada. This is not a tax item, but it's a big expense for many families and something the government can do about with your tax dollars. To sum it up, you may face higher or lower or about the same taxes after moving from US to Canada, depending on your circumstances. Another message here is that the high-tax, socialist, investment-unfriendly Canada is mostly a convenient myth.\"" }, { "docid": "454892", "title": "", "text": "First, keep about six months' expenses in immediately-available form (savings account or similar). Second, determine how long you expect to hold on to the rest of it. What's your timeframe for buying a house or starting a family? This determines what you should do with the rest of it. If you're buying a house next year, then a CD (Certificate of Deposit) is a reasonable option; low-ish interest reate, but something, probably roughly inflation level, and quite safe - and you can plan things so it's available when you need it for the down payment. If you've got 3-5 years before you want to touch this money, then invest it in something reasonably safe. You can find reasonable funds that have a fairly low risk profile - usually a combination of stock and bonds - with a few percent higher rate of return on average. Still could lose money, but won't be all that risky. If you've got over five years, then you should probably invest them in an ETF that tracks a large market sector - in the US I'd suggest VOO or similar (Vanguard's S&P 500 fund), I'm sure Australia has something similar which tracks the larger market. Risky, but over 5+ years unlikely to lose money, and will likely have a better rate of return than anything else (6% or higher is reasonable to expect). Five years is long enough that it's vanishingly unlikely to lose money over the time period, and fairly likely to make a good return. Accept the higher risk here for the greater return; and don't cringe when the market falls, as it will go up again. Then, when you get close to your target date, start pulling money out of it and into CDs or safer investments during up periods." }, { "docid": "227399", "title": "", "text": "It depends on the broker, each one's rules may vary. Your broker should be able to answer this question for how they handle such a situation. The broker I used would execute and immediately sell the stock if the option was 25 cents in the money at expiration. If they simply executed and news broke over the weekend (option expiration is always on Friday), the client could wake up Monday to a bad margin call, or worse." }, { "docid": "138703", "title": "", "text": "This can be done, you can be prosecuted for some forms of it, in any case there are more riskless ways of doing what you suggested. First, buying call options from market makers results in market makers buying shares at the same delta as the call option. (100 SHARES X DELTA = How many shares MM's bought). You can time this with the volume and depth of the shares market to get a bigger resulting move caused by your options purchase to get bigger quote changes in your option. So on expiration day you can be trade near at the money options back and forth between being out the money and in the money. You would exit the position into liquidity at a profit. The risk here is that you can be sitting on a big options position, where the commissions costs get really big, but you can spread this out amongst several options contracts. Second, you can again take advantage of market maker inefficiencies by getting your primary position (whether in the share market or options market) placed, and then your other position being a very large buy order a few levels below the best bid. Many market makers and algorithms will jump in front of your, they think they are being smart, but it will raise the best bid and likely make a few higher prints for the mark, raising the price of your call option. And eventually remove your large buy order. Again, you exit into liquidity. This is called spoofing. There have been some regulatory actions against people in doing this in the last few years. As for consequences, you need to put things into perspective. US capital market regulators have the most nuanced regulations and enforcement actions of worldwide capital market regulators, and even then they get criticized for being unable or unwilling to curb these practices. With that perspective American laws are basically a blueprint on what to do in 100 other country's stock exchanges, where the legislature has never gotten around to defining the same laws, the securities regulator is even more underfunded and toothless, and the markets more inefficient. Not advice, just reality." }, { "docid": "340730", "title": "", "text": "When your options vest, you will have the option to buy your company's stock at a particular price (the strike price). A big part of the value of the option is the difference between the price that your company's stock is trading at, and the strike price of the option. If the price of the company stock in the market is lower than the strike price of the option, they are almost worthless. I say 'almost' because there is still the possibility that the stock price could go up before the options expire. If your company is big enough that their stock is not only listed on an exchange, but there is an active options market in your company's stock, you could get a feel for what they are worth by seeing what the market is willing to buy or sell similar exchange listed options. Once the options have vested, you now have the right to purchase your company's stock at the specified strike price until the options expire. When you use that right, you are exercising the option. You don't have to do that until you think it is worthwhile buying company stock at that price. If the company pays a dividend, it would probably be worth exercising the options sooner, (options don't receive a dividend). Ultimately you are buying your company's stock (albeit at a discount). You need to see if your company's stock is still a good investment. If you think your company has growth prospects, you might want to hold onto the stock. If you think you'd be better off putting your money elsewhere in the market, sell the stock you acquired at a discount and use the money to invest in something else. If there are any additional benefits to holding on to the stock for a period of time (e.g. selling part to fit within your capital gain allowance for that year) you should factor that into your investment decision, but it shouldn't force you to invest in, or remain invested in something you would otherwise view as too risky to invest in. A reminder of that fact is that some employees of Enron invested their entire retirement plans into Enron stock, so when Enron went bankrupt, these employees not only lost their job but their savings for retirement as well..." }, { "docid": "315748", "title": "", "text": "When dividend is announced the stock and option price may react to that news, but the actual payout of the dividend on the ex-dividend date is what you probably are referring to. The dividend payout affects the stock price on the ex-dividend date as the stock price will drop by the amount of paid out dividend (not taking into account other factors). This in turn drives the prices of all options. The amount of change in the option price for this event is not only dependent the dividend payout, but also on how far these are in our out of the money and what there time to expiration is. The price of a call option that is far out of the money would react less than the price of a put that would be far in the money. Therefore I would argue that these two will not necessarily offset each other." }, { "docid": "229626", "title": "", "text": "\"As already noted, options contain inherent leverage (a multiplier on the profit or loss). The amount of \"\"leverage\"\" is dictated primarily by both the options strike relative to the current share price and the time remaining to expiration. Options are a far more difficult investment than stocks because they require that you are right on both the direction and the timing of the future price movement. With a stock, you could choose to buy and hold forever (Buffett style), and even if you are wrong for 5 years, your unrealized losses can suddenly become realized profits if the shares finally start to rise 6 years later. But with options, the profits and losses become very final very quickly. As a professional options trader, the single best piece of advice I can give to investors dabbling in options for the first time is to only purchase significantly ITM (in-the-money) options, for both calls and puts. Do a web search on \"\"in-the-money options\"\" to see what calls or puts qualify. With ITM options, the leverage is still noticeably better than buying/selling the shares outright, but you have a much less chance of losing all your premium. Also, by being fairly deep in-the-money, you reduce the constant bleed in value as you wait for the expected move to happen (the market moves sideways more than people usually expect). Fairly- to deeply-ITM options are the ones that options market-makers like least to trade in, because they offer neither large nor \"\"easy\"\" premiums. And options market-makers make their living by selling options to retail investors and other people that want them like you, so connect the dots. By trading only ITM options until you become quite experienced, you are minimizing your chances of being the average sucker (all else equal). Some amateur options investors believe that similar benefits could be obtained by purchasing long-expiration options (like LEAPS for 1+ years) that are not ITM (like ATM or OTM options). The problem here is that your significant time value is bleeding away slowly every day you wait. With an ITM option, your intrinsic value is not bleeding out at all. Only the relatively smaller time value of the option is at risk. Thus my recommendation to initially deal only in fairly- to deeply-ITM options with expirations of 1-4 months out, depending on how daring you wish to be with your move timing.\"" }, { "docid": "576364", "title": "", "text": "\"You're forgetting the fundamental issue, that you never have to actually exercise the options you buy. You can either sell them to someone else or, if they're out of the money, let them expire and take the loss. It isn't uncommon at all for people to buy both a put and call option (this is a \"\"straddle\"\" when the strike price of both the put and call are the same). From Investopedia.com: A straddle is an options strategy in which the investor holds a position in both a call and put with the same strike price and expiration date, paying both premiums. This strategy allows the investor to make a profit regardless of whether the price of the security goes up or down, assuming the stock price changes somewhat significantly. Read more: Straddle http://www.investopedia.com/terms/s/straddle.asp#ixzz4ZYytV0pT\"" }, { "docid": "557356", "title": "", "text": "\"There are two reasons why most options aren't exercised. The first is obvious, and the second, less so. The obvious: An option that's practically worthless doesn't get exercised. Options that reach expiry and remain unexercised are almost always worthless bets that simply didn't pay off. This includes calls with strikes above the current underlying price, and puts with strikes below it. A heck of a lot of options. If an option with value was somehow left to expire, it was probably a mistake, or else the transaction costs outweighed the value remaining; not quite worthless, but not \"\"worth it\"\" either. The less obvious: An option with value can be cancelled any time before expiration. A trader that buys an option may at some point show a gain sooner than anticipated, or a loss in excess of his tolerance. If a gain, he may want to sell before expiry to realize the gain sooner. Similarly, if a loss, he may want to take the loss sooner. In both cases, his capital is freed up and he can take another position. And — this is the key part — the other end matched up with that option sale is often a buyer that had created (written) exactly such an option contract in the first place – the option writer – and who is looking to get out of his position. Option writers are the traders responsible, in the first place, for creating options and increasing the \"\"open interest.\"\" Anybody with the right kind and level of options trading account can do this. A trader that writes an option does so by instructing his broker to \"\"sell to open\"\" a new instance of the option. The trader then has a short position (negative quantity) in that option, and all the while may be subject to the obligations that match the option's exercise rights. The only way for the option writer to get out of that short position and its obligations are these: Not by choice: To get assigned. That is to say: a buyer exercised the option. The writer has to fulfill his obligation by delivering the underlying (if a call) to the option holder, or buying the underlying (if a put) from the option holder. Not by choice: The option expires worthless. This is the ideal scenario for a writer because 100% of the premium received (less transaction costs) is profit. By choice: The writer is free to buy back exactly the same kind of option before expiry using a \"\"buy to close\"\" order with their broker. Once the option has been purchased with a \"\"buy to close\"\", it eliminates the short position and obligation. The option is cancelled. The open interest declines. Options thus cancelled just don't live long enough to either expire or be exercised.\"" }, { "docid": "197863", "title": "", "text": "Focusing on options, many people and companies use them to mitigate risk(hedge) When used as a hedge the objective is not to win big, it is to create a more predictable outcome. Option traders win big by consistenly structuring trades with a high probability of success. In this way, they take 100 and turn it into 1000 with 100 small trades with a target profit of $10/trade. Although options are a 'zero sum' game, a general theory among options traders is the stock market only has a 54-56 probability of profit(PoP) - skewed from 50-50 win/loss because the market tends to go up over a long time frame. Using Option trading strategies strategically, you have more control over PoP and you can set yourself up to win whether the security goes up/down/sideways. A quick and dirty measure of PoP is an options' delta. If the delta on a call option is 19, there is roughly a 19% chance your option will be in the money at expiration - or a 19% chance of hitting a home run and multiplyimg your money. If the delta is 68, there is a 68% chance of a profitable trade or getting on base. There are more variables to this equation, but I hope this clearly explains the essence." } ]

[ { "docid": "589970", "title": "", "text": "\"If you're really a part-time worker, then there are some simple considerations.... The remote working environment, choice of own hours, and non-guarantee of work availability point to your \"\"part-time\"\" situation being more like a consultancy, and that would normally double or triple the gross hourly rate. But if they're already offering or paying you a low hourly figure, they are unlikely to give you consultant rates.\"" } ]

[ { "docid": "386264", "title": "", "text": "In general no, if you just have one employer and work there with the same salary for the whole year. Typically an employer does tax withholding by extrapolating your monthly income to the entire year and withholding the right amount so that at the end, what is withheld is what you owe. It's not a surprise to them when your income crosses a tax bracket threshold, because they knew how much they were paying you and knew when you would cross into another bracket, so they factored that in. If you have multiple jobs or only worked for part of the year, or if your income varied from month to month (e.g., you got a raise) there could be a discrepancy between what is withheld and what you owe, because each employer only knows about what it's paying you, not what money you may have earned from other sources. (Even here, though, the discrepancy wouldn't be due to the tax brackets per se.) You can adjust your withholdings on form W-4 if needed, to tell the employer to withhold more or less than they otherwise would." }, { "docid": "542651", "title": "", "text": "I've heard from friends in high paying companies that the norm is under 4 hours: you can upgrade yourself. Above 4 hours: business. Sounds reasonable to me. Usually people that fly business aren't flying one or two times a year. They're doing it a couple of days per week. And these people are usually in high demand. If someone doesn't offer this as the norm, they can probably get a job someplace that does." }, { "docid": "173401", "title": "", "text": "\"The statistics are misleading. The German autoworkers do not \"\"make\"\" $67/hour, that is basically a $140k job! Back in 2009, some sensationalist articles said that the average UAW worker \"\"made\"\" $75/hr sitting in the jobs bank. That is taking the total labor cost and dividing it by the number of existing employees. The most obvious example of why this number is so lopsided is through health care benefits and pensions. You get the illusion that the auto worker gets paid very high when labor cost per employee is very high, but the labor cost actually includes the current worker's cost as well as some past worker's costs, so it gets double counted. So yes, GM went bankrupt because labor costs were $75/hr. No, the UAW auto worker did not make $75 per hour. And yes, labor costs for the German workforce is a lot higher than the US workforce. But no, they don't actually get paid 2-3x more.\"" }, { "docid": "157728", "title": "", "text": "A common rule of thumb is the 28/36 ratio. It's described here. In your case, with a gross (?) salary of £50,000, that means that you should spend no more than 28% of it, or £1,167 per month on housing. You may be able to swing a bit more because you have no debts and a modest amount in your savings. The 36% part comes in as the amount you can spend servicing all your debt, including mortgage. In your case, based on a gross (?) salary of £50,000, that'd be £1,500 per month. Again, that is to cover your housing costs and any additional debt you are servicing. So, you need to figure out how much you could bring in through rent to make up the rest. As at least one other person has commented, the rule of thumb is that your mortgage should be no more than 2.5 - 3 times your income. I personally think you are not a good candidate for a mortgage of the size you are discussing. That said, I no longer live in England. If you could feel fairly secure getting someone to pay you enough in rent to bring down your total mortgage and loan repayment amounts to £1,500 or so a month, you may want to consider it. Remember, though, that it may not always be easy to find renters." }, { "docid": "260959", "title": "", "text": "\"Money is a token that you can trade to other people for favors. Debt is a tool that allows you to ask for favors earlier than you might otherwise. What you have currently is: If the very worst were to happen, such as: You would owe $23,000 favors, and your \"\"salary\"\" wouldn't make a difference. What is a responsible amount to put toward a car? This is a tricky question to answer. Statistically speaking the very worst isn't worth your consideration. Only the \"\"very bad\"\", or \"\"kinda annoying\"\" circumstances are worth worrying about. The things that have a >5% chance of actually happening to you. Some of the \"\"very bad\"\" things that could happen (10k+ favors): Some of the \"\"kinda annoying\"\" things that could happen (~5k favors): So now that these issues are identified, we can settle on a time frame. This is very important. Your $30,000 in favors owed are not due in the next year. If your student loans have a typical 10-year payoff, then your risk management strategy only requires that you keep $3,000 in favors (approx) because that's how many are due in the next year. Except you have more than student loans for favors owed to others. You have rent. You eat food. You need to socialize. You need to meet your various needs. Each of these things will cost a certain number of favors in the next year. Add all of them up. Pretending that this data was correct (it obviously isn't) you'd owe $27,500 in favors if you made no money. Up until this point, I've been treating the data as though there's no income. So how does your income work with all of this? Simple, until you've saved 6-12 months of your expenses (not salary) in an FDIC or NCUSIF insured savings account, you have no free income. If you don't have savings to save yourself when bad things happen, you will start having more stress (what if something breaks? how will I survive till my next paycheck? etc.). Stress reduces your life expectancy. If you have no free income, and you need to buy a car, you need to buy the cheapest car that will meet your most basic needs. Consider carpooling. Consider walking or biking or public transit. You listed your salary at \"\"$95k\"\", but that isn't really $95k. It's more like $63k after taxes have been taken out. If you only needed to save ~$35k in favors, and the previous data was accurate (it isn't, do your own math): Per month you owe $2,875 in favors (34,500 / 12) Per month you gain $5,250 in favors (63,000 / 12) You have $7,000 in initial capital--I mean--favors You net $2,375 each month (5,250 - 2,875) To get $34,500 in favors will take you 12 months ( ⌈(34,500 - 7,000) / 2,375⌉ ) After 12 months you will have $2,375 in free income each month. You no longer need to save all of it (Although you may still need to save some of it. Be sure recalculate your expenses regularly to reevaluate if you need additional savings). What you do with your free income is up to you. You've got a safety net in saved earnings to get you through rough times, so if you want to buy a $100,000 sports car, all you have to do is account for it in your savings and expenses in all further calculations as you pay it off. To come up with a reasonable number, decide on how much you want to spend per month on a car. $500 is a nice round number that's less than $2,375. How many years do you want to save for the car? OR How many years do you want to pay off a car loan? 4 is a nice even number. $500 * 12 * 4 = $24,000 Now reduce that number 10% for taxes and fees $24,000 * 0.9 = $21,600 If you're getting a loan, deduct the cost of interest (using 5% as a ballpark here) $21,600 * 0.95 = $20,520 So according to my napkin math you can afford a car that costs ~$20k if you're willing to save/owe $500/month, but only after you've saved enough to be financially secure.\"" }, { "docid": "406314", "title": "", "text": "Math time. 24 means 2 years out of college, or 6 years out of highschool, the latter being much more plausible given the poster's content quality. $100k / 6 = $16.7k/year 16.7k / 52 weeks = $321/week $321 / (11/hr * (1 - 15% taxes)) = 34 hours per week. So he worked 34 hours per week, without fail, for 6 years, with NO expenses of any kind whatsoever. OR, much more likely, he managed to save only $10k, not $100k in 6 years." }, { "docid": "569145", "title": "", "text": "Depending on how much freelance work we're talking about you could set up a limited company, with you and your wife as directors. By invoicing all your work through the limited company (which could have many other benefits for you, an accountant/advisor would... well, advise...) it's the company earning the money, not you or her personally. You can then pay your wife up to £10,000 per year (as of writing this) without income tax kicking in. You would probably have to pay yourself a small amount to minimise exposure to HMRC's snooping, but possibly not... as far as I'm aware the rules do not state anything about working for free, for yourself - and I wouldn't worry about the ethics, you're already paying plenty into HMRC's bank account through your day job! Some good information here if you're interested: https://www.whitefieldtax.co.uk/web/psc-guide/pscguide-how-does-it-all-work-in-practice-salaries-and-dividends/" }, { "docid": "233385", "title": "", "text": "Kinda. I'd be interested in seeing broader studies because minimum wage also influences other pay as well. I work in the medical field and most insurances base their rates off of what Medicare/Medicaid pay in each geographic area. By artificially setting the min wage too high you're going to influence the jobs that require marginally more skills and experience than min wage jobs. Obviously this influence has less effect the higher skilled and experience the position is but nonetheless influences them. Moreover there are other things that minimum wage influences such as here in California the government thought it was a bright idea to require servers be paid the regular minimum wage plus tips instead of the lower federally legal server min wage. This has had the effect that there are significantly more servers than low to mid skilled workers in CA because you can easily earn $20-30 or more per hour. Not to mention they get OT for every minute over 8 hours they work. Not to mention IIRC Cali requires that salaried employees must be paid twice min wage. So yeah while it doesn't directly affect a lot of people but it indirectly affects a lot. But ask me if I think raising the min wage is a good idea . . . Fuck no." }, { "docid": "302310", "title": "", "text": "\"The only thing worse than finding out you are paid less than a co-worker is finding out that you are paid more than all of your co-workers. A lot of people who *think* they would prefer an open and transparent pay-scale (as in unions), change their minds, when placed in one. I have worked in and implemented both types, as both an employee and as an owner/manager. There are pluses and minuses to both. - \"\"Transparent\"\" pay-scale is most effective in a high-turnover, aggressively performance-metric-oriented environment where you expect people to be competing for jobs, including their own job, every day. For example, a pool of commissioned sales-agents: the more you sell, the more you make. Winner gets a Cadillac. Runner-up gets a set of steak knives. Loser gets fired, that kind of thing. If you can't meet your numbers, we let other people start poaching your territory/clients and see what they can do. - Where it doesn't work is in a salary-type position where people are expected to have multiple \"\"soft\"\" duties outside of core performance metrics. The reasons are multi-fold: - One immediate effect of implementing performance-based pay for salary-type employees is that people who are in the office for 8 hours a day, five days a week, immediate start devoting their time and energy towards getting another notch up on the pay-scale, even at the expense of their co-workers, or the company. It intrinsically incentivizes \"\"gaming the system\"\", finding ways to attach your name to easy metrics, and to remove yourself from the most difficult problems. The people who are best at hitting metrics are often not even close to the MVPs. - If instead you take a \"\"soft metrics\"\" or subjective/holistic approach to evaluation, then you get a culture of brown-nosing and office-politics. People start sabotaging the \"\"boss's favorite\"\" and pursuing approval and credit, rather than performance. Instead of fostering a team-oriented, problem-solving approach, it fosters a counter-productive buck-passing, credit-grabbing, and blame-avoidance approach. Note that both of the above intrinsically incentivize risk-avoidance. If you get paid for the number of projects that have your name on them, you find some way to get your name attached to every project, and then move on to the next one, whether the last one was done or not. If you get based on how \"\"successful\"\" the projects bearing your name are, then you avoid anything challenging and make sure only to be attached to the easy ones with the best co-workers. And so on. - Alternately, let's say we keep the same, generic, salary-oriented pay-structure, we just make everyone in a certain \"\"tier\"\" get equal salary, that everyone knows. That sucks all the life out of everyone's sails so fast it will make your head spin: you cannot get a raise for doing a better job, you get paid the same raise as your worst co-worker, every year, for as long as you work here. We will never cut your pay, all you have to do is not be the canary in the coalmine-- so long as you can identify the worst performer in your group, and so long as it's not you, your job is safe. What time do you have to arrive? 5 minutes earlier than the latest-arriving person. How early can you leave? 5 minutes after the earliest one to check out. How much work do you have to get done? Only as much as anyone else is doing. What will you get for being the hardest-working, earliest-to-arrive, latest-to-leave? The same as the worst performer gets: you'll be splitting your raise with him, since we don't credit individuals here, just job-titles. Most jobs that can be easily automated, are automated. If you need a human employee to do it, it's usually because it involves a nontrivial amount of \"\"soft\"\" skills and fuzzy-logic type thinking and behavior. A machine programmed purely to make as many widgets per hour as possible, and motivated to so with human-style skills, ingenuity, and incentives, will tear down the whole factory and dismantle all its co-workers and ignore all quality-controls in order to keep producing widgets. You can't reduce human beings to input-process-output flowcharts (or rather you can, but they will invariably find unintended ways to outsmart your design criteria, with unintended consequences). The reason you need a person instead of an automated process is because you need a whole host hard-to-define, soft/fuzzy/flexible critical-thinking type skills. **Everyone's job seems easier to the people who don't have to do it, and there is a tremendous hidden danger to de-valuing personal desire to do a subjectively \"\"good job\"\" by quantifying/genericizing the value of their contribution.** Personnel management is very difficult to reduce to an engineering problem. You usually need good managers who can identify and motivate good employees, who will feel lucky to have the job and the salary they have, and who will come in every day trying to earn it. Posting everyone's pay on a bulletin-board negates all those \"\"soft\"\" skills, by putting a quantified, black-and-white, relative value on everyone's contribution. Even in a very large organization, the \"\"marketplace\"\" of employees is rarely large enough, and the quality of real-time metrics is almost never good enough to \"\"digitize\"\" the bell-curve of employee performance. You end up making it a square-wave that demotivates all but the most extreme outliers.\"" }, { "docid": "2325", "title": "", "text": "\"Economic hardship is just as misleading as \"\"economic slavery\"\". If you are working two jobs and can't afford rent... How can you better yourself? Sure, if you are exceptionally intelligent and/or charismatic and/or exceptionally great in some other way, you could find a way out of the hole. But if you are working two full-time jobs and are trying your best - that should be enough. I personally am against a $15 minimum wage - even on a local level, much less a state or federal level, but I very much support legislation that ensures someone who works 85 (or 60) hours a week (that's 12 hours a day for 85 hours per week) can get by. By \"\"getting by\"\" I mean can rent modest housing, can afford nutritious food, can afford decent health insurance, can buy clothes (maybe second-hand), can put a bit into savings, etc. Minimum wage jobs are done by young people just entering the job market and older people with few skills. Better to have legislation that takes that into account. High school and college kids won't be working 60-85+ hours a week. Save the subsidies for the people that really need them.\"" }, { "docid": "463042", "title": "", "text": "If you enjoy driving 5 minutes out of the way to get gas (or mowing the lawn or whatever), then it is perfectly rational to do it. If not, the value of your time is how much you would value (not necessarily how much you would get paid) doing something else. MrChrister is right, the concept behind the comic is opportunity cost. In a nutshell, if driving an extra 5 minutes for gas is complete drudgery to you and you would only do it to save money, may as well get a part-time job at minimum wage instead. If you would rather, say, go watch TV instead of getting that part-time job, then you value TV-watching at greater than the minimum wage, and it is still irrational to drive 5 minutes for the gas. Basically, the answer to your question is to figure out what else you could be doing that offers similar overall pleasure/pain to the task at hand and see how much you would get paid to do that instead. It doesn't matter that you are on a fixed salary." }, { "docid": "547574", "title": "", "text": "Welcome to the real world. BTW, you have far too rosy a view of this if you think you're only paying 28.5% of your income in taxes. Remember that your employer theoretically pays half your FICA tax. But as far as they're concerned, that's part of the cost of having you as an employee. If FICA was abolished, supply and demand would quickly push salaries up by an amount equal to the FICA tax. So add another 7.65% to your taxes. Plus your employer has to pay unemployment tax (federal unemployment tax is $420 per employee per year, states vary) and workman's compensation tax (no idea how much that is) for the privilege of having you as an employee. You likely pay sales taxes on most everything you buy. I believe sales tax in Massachusetts is 6.25%. Assuming you pay that on only half of what you buy, add another 3% or so. Do you work for a corporation? Between when they sell the fruits of your labor and when they pay you, they have to pay corporate income tax. There are a lot of deductions so that gets complicated, but figure another few percent. Do you drive a car? You're paying gas tax -- 41.9 cents per gallon in MA. Do you smoke or drink alcohol? Extra taxes on those. Travel by plane or stay in a hotel? More special taxes. When you get around to buying a house, you'll pay property taxes on it every year, year after year. For me in Michigan that's another 3% of my income. I understand it's a lot more in Massachusetts. Etc, many other smaller taxes that add up." }, { "docid": "492186", "title": "", "text": "An education. A new car. Houses are made bigger so that's not really fair. An article on here previously mentioned someone paying for a dependable car and a small apartment, along with school tuition working part time as a dishwasher. Tuition at my closest state school (in state cost) is just under $9k per year. If you could only work 20 hours per week, amortized the school loan, payed $250 a month for an apartment with a roommate, $100 a month for utilities, $150 a month for groceries (all very difficult to achive and be healthy), you would have to make $15.35 an hour after taxes to do it without debt. This is assuming you don't have a car." }, { "docid": "451457", "title": "", "text": "\"A major thing to consider when deciding whether to invest or pay off debt is cash flow. Specifically, how each choice affects your cash flow, and how your cash flow is affected by various events. Simply enough, your cash flow is the amount of money that passes through your finances during a given period (often a month or a year). Some of this is necessary payments, like staying current on loans, rent, etc., while other parts are not necessary, such as eating out. For example, you currently have $5,500 debt at 3% and another $2,500 at 5%. This means that every month, your cashflow effect of these loans is ($5,500 * 3% / 12) + ($2,500 * 5% / 12) = $24 interest (before any applicable tax effects), plus any required payments toward the principal which you don't state. To have the $8,000 paid off in 30 years, you'd be paying another $33 toward the principal, for a total of about $60 per month before tax effects in your case. If you take the full $7,000 you have available and use it to pay off the debt starting with the higher-interest loan, then your situation changes such that you now: Assuming that the repayment timeline remains the same, the cashflow effect of the above becomes $1,000 * 3% / 12 = $2.50/month interest plus $2.78/month toward the principal, again before tax effects. In one fell swoop, you just reduced your monthly payment from $60 to $5.25. Per year, this means $720 to $63, so on the $7,000 \"\"invested\"\" in repayment you get $657 in return every year for a 9.4% annual return on investment. It will take you about 11 years to use only this money to save another $7,000, as opposed to the 30 years original repayment schedule. If the extra payment goes toward knocking time off the existing repayment schedule but keeping the amount paid toward the principal per month the same, you are now paying $33 toward the principal plus $2.50 interest against the $1,000 loan, which means by paying $35.50/month you will be debt free in 30 months: two and a half years, instead of 30 years, an effective 92% reduction in repayment time. You immediately have another about $25/month in your budget, and in two and a half years you will have $60 per month that you wouldn't have if you stuck with the original repayment schedule. If instead the total amount paid remains the same, you are then paying about $57.50/month toward the principal and will be debt free in less than a year and a half. Not too shabby, if you ask me. Also, don't forget that this is a known, guaranteed return in that you know what you would be paying in interest if you didn't do this, and you know what you will be paying in interest if you do this. Even if the interest rate is variable, you can calculate this to a reasonable degree of certainty. The difference between those two is your return on investment. Compare this to the fact that while an investment in the S&P might have similar returns over long periods of time, the stock market is much more volatile in the shorter term (as the past two decades have so eloquently demonstrated). It doesn't do you much good if an investment returns 10% per year over 30 years, if when you need the money it's down 30% because you bought at a local peak and have held the investment for only a year. Also consider if you go back to school, are you going to feel better about a $5.25/month payment or a $60/month payment? (Even if the payments on old debt are deferred while you are studying, you will still have to pay the money, and it will likely be accruing interest in the meantime.) Now, I really don't advocate emptying your savings account entirely the way I did in the example above. Stuff happens all the time, and some stuff that happens costs money. Instead, you should be keeping some of that money easily available in a liquid, non-volatile form (which basically means a savings account without withdrawal penalties or a money market fund, not the stock market). How much depends on your necessary expenses; a buffer of three months' worth of expenses is an often recommended starting point for an emergency fund. The above should however help you evaluate how much to keep, how much to invest and how much to use to pay off loans early, respectively.\"" }, { "docid": "28254", "title": "", "text": "\"I did this 20 years ago. I wanted desperately to quit my job, but my wife wouldn't let me -- not because she thought it would fail, but just because she thought it would take longer than I thought. It took us 2 or 3 years to get to roughly half my previous salary as a software engineer. It's been my full time job for 15 years now. It's much better to not have enough time to finish X, Y, or Z on your startup than to have finished it and be waiting for someone to show up and pay. I agree with \"\"Don't quit your day job until you are very confident your startup can support you and is making money\"\". Validate your startup idea early. In the words of the Lean Startup movement, \"\"Fail Early\"\". This is absolutely critical. Starting a company requires extreme confidence. Succeeding requires extreme humility and a willingness to face your mistakes (because how else can you improve?). You've clearly got the confidence. Now you need to to be realistic and look at \"\"What could go wrong?\"\" and \"\"How will I know that this is working?\"\" There are some parts of a startup that require what I call \"\"Calendar Time\"\". It's just elapsed time for things like: You tweaked your landing page and you're A/B testing whether that improves things. And you wait for a week or two. You are waiting for a contractor to finish something on your website's Payment feature. Read The Lean Startup (and similar books) to get an idea of all the things you'll need to do. You'll need to:\"" }, { "docid": "145824", "title": "", "text": "\"The crazy thing about this is that $30 million in annual salary and compensation really isn't the end of the story for rich guys. I worked for a REIT a few years back and the guy that founded that REIT made a few million in salary a year. I thought the number seemed a bit low for his lifestyle. He had many properties in the US for his own personal use (around 6-8 BIG homes). He also had a garage that was insane. He had over 25 very expensive cars. My co-workers would say \"\"Nick is airing out his garage\"\" when he drove one to work every day for a month without driving the same vehicle twice in one month. It turns out he owned 30 million shares of stock that paid him $1.00 per share per year. So while his annual compensation was \"\"only\"\" a few million per year, his dividend income was many, many, times that. Think about that next time you see a CEO's annual income and you think that it really isn't as much as you expect.\"" }, { "docid": "569224", "title": "", "text": "What most respondents are forgetting, is when a company allows its employees to purchase its shares at a discount with their salary, the employee is usually required to hold the stock for a number of years before they can sell them. The reason the company is allowing or promoting its employees to purchase its shares at a discount is to give the employees a sense of ownership of the company. Being a part owner in the company, the employee will want the company to succeed and will tend to be more productive. If employees were allowed to purchase the shares at a discount and sell them straight away, it would defeat this purpose. Your best option to decide whether or not to buy the shares is to work out if the investment is a good one as per any other investment you would undertake, i.e. determine how the company is currently performing and what its future prospects are likely to be. Regarding what percentage of pay to purchase the shares with, if you do decide to buy them, you need to work that out based on your current and future budgetary needs and your savings plan for the future." }, { "docid": "574654", "title": "", "text": "I would say that, for the most part, money should not be invested in the stock market or real estate. Mostly this money should be kept in savings: I feel like your emergency fund is light. You do not indicate what your expenses are per month, but unless you can live off of 1K/month, that is pretty low. I would bump that to about 15K, but that really depends upon your expenses. You may want to go higher when you consider your real estate investments. What happens if a water heater needs replacement? (41K left) EDIT: As stated you could reduce your expenses, in an emergency, to 2K. At the bare minimum your emergency fund should be 12K. I'd still be likely to have more as you don't have any money in sinking funds or designated savings and the real estate leaves you a bit exposed. In your shoes, I'd have 12K as a general emergency fund. Another 5K in a car fund (I don't mind driving a 5,000 car), 5k in a real estate/home repair fund, and save about 400 per month for yearly insurance and tax costs. Your first point is incorrect, you do have debt in the form of a car lease. That car needs to be replaced, and you might want to upgrade the other car. How much? Perhaps spend 12K on each and sell the existing car for 2K? (19K left). Congratulations on attempting to bootstrap a software company. What kind of cash do you anticipate needing? How about keeping 10K designated for that? (9K left) Assuming that medical school will run you about 50K per year for 4 years how do you propose to pay for it? Assuming that you put away 4K per month for 24 months and have 9K, you will come up about 95K short assuming some interests in your favor. The time frame is too short to invest it, so you are stuck with crappy bank rates." }, { "docid": "511977", "title": "", "text": "\"Inflation is a bad thing. It makes it much more difficult for people to compare prices and prosperity over a long period of time. This causes people to ignore the wisdom of their elders (who remember prices from a long time ago). Back in my day, you could get a burger and fries for 15 cents -- a dime for the burger, and a nickel for the fries. But the minimum wage was only a quarter an hour! That doesn't help me decide if things have gotten better or worse. How long is \"\"a long period of time\"\"? That depends on the inflation rate. At 1 percent per year, 50 or 100 years is \"\"a long time\"\". At 10 percent per year, 5 or 10 years. At 100 percent per year, a few months. Because of the Spanish conquests of gold and silver mines in Mexico and Peru, prices in the sixteenth century rose by a factor of 5.5 during the century. This inflation was recognized as causing lots of social and governmental problems. Note that this means an average inflation rate of 2 percent per year for a century is known to be a very bad thing. There are several reasons that most governments want some inflation:\"" } ]

[ { "docid": "263481", "title": "", "text": "Rule of thumb: Double your hourly rate to get a yearly salary (in thousands). Halve your yearly salary to get your hourly rate. (assuming a 40hr/week job). eg: $50k/year = $25/hr." } ]

[ { "docid": "28254", "title": "", "text": "\"I did this 20 years ago. I wanted desperately to quit my job, but my wife wouldn't let me -- not because she thought it would fail, but just because she thought it would take longer than I thought. It took us 2 or 3 years to get to roughly half my previous salary as a software engineer. It's been my full time job for 15 years now. It's much better to not have enough time to finish X, Y, or Z on your startup than to have finished it and be waiting for someone to show up and pay. I agree with \"\"Don't quit your day job until you are very confident your startup can support you and is making money\"\". Validate your startup idea early. In the words of the Lean Startup movement, \"\"Fail Early\"\". This is absolutely critical. Starting a company requires extreme confidence. Succeeding requires extreme humility and a willingness to face your mistakes (because how else can you improve?). You've clearly got the confidence. Now you need to to be realistic and look at \"\"What could go wrong?\"\" and \"\"How will I know that this is working?\"\" There are some parts of a startup that require what I call \"\"Calendar Time\"\". It's just elapsed time for things like: You tweaked your landing page and you're A/B testing whether that improves things. And you wait for a week or two. You are waiting for a contractor to finish something on your website's Payment feature. Read The Lean Startup (and similar books) to get an idea of all the things you'll need to do. You'll need to:\"" }, { "docid": "302310", "title": "", "text": "\"The only thing worse than finding out you are paid less than a co-worker is finding out that you are paid more than all of your co-workers. A lot of people who *think* they would prefer an open and transparent pay-scale (as in unions), change their minds, when placed in one. I have worked in and implemented both types, as both an employee and as an owner/manager. There are pluses and minuses to both. - \"\"Transparent\"\" pay-scale is most effective in a high-turnover, aggressively performance-metric-oriented environment where you expect people to be competing for jobs, including their own job, every day. For example, a pool of commissioned sales-agents: the more you sell, the more you make. Winner gets a Cadillac. Runner-up gets a set of steak knives. Loser gets fired, that kind of thing. If you can't meet your numbers, we let other people start poaching your territory/clients and see what they can do. - Where it doesn't work is in a salary-type position where people are expected to have multiple \"\"soft\"\" duties outside of core performance metrics. The reasons are multi-fold: - One immediate effect of implementing performance-based pay for salary-type employees is that people who are in the office for 8 hours a day, five days a week, immediate start devoting their time and energy towards getting another notch up on the pay-scale, even at the expense of their co-workers, or the company. It intrinsically incentivizes \"\"gaming the system\"\", finding ways to attach your name to easy metrics, and to remove yourself from the most difficult problems. The people who are best at hitting metrics are often not even close to the MVPs. - If instead you take a \"\"soft metrics\"\" or subjective/holistic approach to evaluation, then you get a culture of brown-nosing and office-politics. People start sabotaging the \"\"boss's favorite\"\" and pursuing approval and credit, rather than performance. Instead of fostering a team-oriented, problem-solving approach, it fosters a counter-productive buck-passing, credit-grabbing, and blame-avoidance approach. Note that both of the above intrinsically incentivize risk-avoidance. If you get paid for the number of projects that have your name on them, you find some way to get your name attached to every project, and then move on to the next one, whether the last one was done or not. If you get based on how \"\"successful\"\" the projects bearing your name are, then you avoid anything challenging and make sure only to be attached to the easy ones with the best co-workers. And so on. - Alternately, let's say we keep the same, generic, salary-oriented pay-structure, we just make everyone in a certain \"\"tier\"\" get equal salary, that everyone knows. That sucks all the life out of everyone's sails so fast it will make your head spin: you cannot get a raise for doing a better job, you get paid the same raise as your worst co-worker, every year, for as long as you work here. We will never cut your pay, all you have to do is not be the canary in the coalmine-- so long as you can identify the worst performer in your group, and so long as it's not you, your job is safe. What time do you have to arrive? 5 minutes earlier than the latest-arriving person. How early can you leave? 5 minutes after the earliest one to check out. How much work do you have to get done? Only as much as anyone else is doing. What will you get for being the hardest-working, earliest-to-arrive, latest-to-leave? The same as the worst performer gets: you'll be splitting your raise with him, since we don't credit individuals here, just job-titles. Most jobs that can be easily automated, are automated. If you need a human employee to do it, it's usually because it involves a nontrivial amount of \"\"soft\"\" skills and fuzzy-logic type thinking and behavior. A machine programmed purely to make as many widgets per hour as possible, and motivated to so with human-style skills, ingenuity, and incentives, will tear down the whole factory and dismantle all its co-workers and ignore all quality-controls in order to keep producing widgets. You can't reduce human beings to input-process-output flowcharts (or rather you can, but they will invariably find unintended ways to outsmart your design criteria, with unintended consequences). The reason you need a person instead of an automated process is because you need a whole host hard-to-define, soft/fuzzy/flexible critical-thinking type skills. **Everyone's job seems easier to the people who don't have to do it, and there is a tremendous hidden danger to de-valuing personal desire to do a subjectively \"\"good job\"\" by quantifying/genericizing the value of their contribution.** Personnel management is very difficult to reduce to an engineering problem. You usually need good managers who can identify and motivate good employees, who will feel lucky to have the job and the salary they have, and who will come in every day trying to earn it. Posting everyone's pay on a bulletin-board negates all those \"\"soft\"\" skills, by putting a quantified, black-and-white, relative value on everyone's contribution. Even in a very large organization, the \"\"marketplace\"\" of employees is rarely large enough, and the quality of real-time metrics is almost never good enough to \"\"digitize\"\" the bell-curve of employee performance. You end up making it a square-wave that demotivates all but the most extreme outliers.\"" }, { "docid": "69042", "title": "", "text": "From a long-term planning point of view, is the bump in salary worth not having a 401(k)? In this case, absolutely. At $30k/year, the 4% company match comes to about $1,200 per year. To get that you need to save $1,200 yourself, so your gross pay after retirement contributions is about $28,800. Now you have an offer making $48,000. If you take the new job, you can put $2,400 in retirement (to get to an equivalent retirement rate), and now your gross pay after retirement contributions is $45,600. Now if the raise in salary were not as high, or you were getting a match that let you exceed the individual contribution max, the math might be different, but in this case you can effectively save the company match yourself and still be way ahead. Note that there are MANY other factors that may also be applicable as to whether to take this job or not (do you like the work? The company? The coworkers? The location? Is there upward mobility? Are the benefits equivalent?) but not taking a 67% raise just because you're losing a 4% 401(k) match is not a wise decision." }, { "docid": "576008", "title": "", "text": "Buying the right shares gives higher return. Buying the wrong ones gives worse return, possibly negative. The usual recommendation, even if you have a pro advising you, is to diversify most of your investments to reduce the risk, even though that may reduce the possible gain. A mutual fund is diversification-in-a-can. It requires little to no active maintenance. Yes, you pay a management fee, but you aren't paying per-transaction fees every time you adjust your holdings, and the management costs can be quite reasonable if you pick the right funds; minimal in the case of computer-managed (index) funds. If you actively enjoy playing with stocks and bonds and are willing/able to accept your failures and less-than-great choices as part of the game, and if you can convince yourself that you will do better this way, go for it. For those of us who just want to deposit out money, watch it grow, and maybe rebalance once a year if that, index funds are a perfectly good choice. I spend at least 8 hours a day working for my money; the rest of the time, I want my money to work for me. Risk and reward tend to be proportional to each other; when they aren't, market prices tend to move to correct that. You need to decide how much risk you're comfortable with, and how much time and effort and money you're willing to spend managing that risk. Personally, I am perfectly happy with the better-than-market-rate-of-return I'm getting, and I don't have any conviction that I could do better if I was more involved. Your milage will vary. If folks didn't disagree, there wouldn't be a market." }, { "docid": "317260", "title": "", "text": "10 years into my career. Here are my notes: 1. Don't work overtime as a salaried employee. If there's more work than people then management needs to hire more people. Sure, there are times when shit hits the fan and there's no other option, but that should be a 'once every two years' event, not a 'once every week' event. 2. Be a rockstar. If you're spending time 'looking busy' because you finished a 3 hour job in 1 hour ship the results to your manager and ask for more. Those results will be noticed and will move you from entry-level to mid-level to senior. 3. Skills pay the bills. Always work on learning new things to bring value to your employer. This is also required to move up the chain in your career, and leads into my #4. 4. Get paid what you're worth. Maintain an understanding of what similar skillsets are paying in your area and either maintain or exceed that. Your employer has an incentive to pay you as little as possible. Show them comparable salaries for the same position paying more and make them match it. If they won't match it find someone who will. 5. Don't correct your boss/salesperson when they are presenting to management/customers. Instead, let them know after the meeting. Your #2 points (both of them) are something that I struggled with when I was new in my career. It was incredibly frustrating to *know* something, but not have anyone listen due to the fact that I was a 'kid'. Unfortunately it's a part of life. If you can do #2 and #3 on my list for a couple of years people will start listening. It's a great feeling being a 24 year old kid in a room full of my boss's bosses, and my boss's boss's bosses and having them listen and consider my opinion, but it's not something that's given to everyone. You need to earn it." }, { "docid": "360322", "title": "", "text": "If you want a career that gets you lots of money and you want to advance, you are going to be working more than 40 hours per week. I am at a 45 hour a week job, and its nice to have time off at home and all that, but I don't make enough money to really do too much in my free time. I'm looking for a new job currently, Its tough, because this is what you spend the majority of your week doing, and no one wants to be miserable doing it." }, { "docid": "592780", "title": "", "text": "How realistic is it that I will be able to get a home within the 250,000 range in the next year or so? Very unlikely in the next year. The debt/income ratio isn't good enough, and your credit score needs to show at least a year of regular payments without late or default issues before you can start asking for mortgages in this range. You don't mention how long you've been employed at these incomes, this can also count against you if you haven't both been employed for a full year at these incomes. They will look even more unfavorably on the employment situation if they aren't both full time jobs, although if you have a full year's worth of paychecks showing the income is regular then that might mitigate the full time/part time issue. next year or so? If you pay down your high interest debt (car, credit cards), and maintain employment (keep your check stubs and tax returns, the loan officer will want copies), then there's a slight chance. And, from this quick snap shot of our finances, does it look like we would be able to qualify for a USDA loan? Probably not. Mostly for the same reasons - the only time a USDA loan helps is when you would be able to get a regular loan if you had the down payment. Even with an available down payment of 50k, you wouldn't be able to get a regular loan, therefore it's unlikely that you'd qualify for a USDA loan. If you are anxious to get into a house, choose something much smaller, in the 100k-150k range. It would improve your debt/loan ratio enough that you might then qualify for a USDA loan. However, I think you'd still have issues if you haven't both been employed at this rate of income for at least a year, and have made regular payments on all your debts for at least a year. I'll echo what others have suggested, though, strengthen your credit, eliminate as much of your high interest debt as you can (car, credit cards), and keep your jobs for a year or two. Start a savings plan so you can contribute a small down payment - at least 3-5% of the desired home price - when you are in a better position to buy. During this time keep track of your paycheck stubs, you may need them to prove income over the time period your loan officer will request. Note that even with a USDA loan you still have to pay closing costs, and those can run several thousand dollars, so don't expect to be able to come to the table with no cash. Lastly, there's good reason to be very conservative regarding house cost and size. If you can, consider buying the house as if you only had the 46k per year. Move the debt to the person making the lower income, and if you buy the house in the name of the person only making 46k per year, then the debt/loan ratio looks very positive. Further it may be that the credit history of that person is better, and the employment history is better. If one of you has better history in these ways, then you might have a better chance if only one of you buys the house. Banks can't tell you about this, but it does work. Keep in mind, though, that if you two part ways it could be very unhappy since one would be left with all the debt and the house would be in the other's name. Not a great situation to be in, so make sure that you both carefully consider the risks associated with the decisions made." }, { "docid": "274722", "title": "", "text": "The fact that this is what’s being reported is horribly misleading. At the bottom of the same page of that report, there is data intended to show the difference between the pay rates in genders. This data accidently proves that individual incomes are still stagnant and that the reason for our increased household wages is that more people per household are working, and part timers are working longer hours. Following is how this conclusion is drawn: The section titled “Earnings of Full Time, Year-Round Workers,” can be used to find 2015’s average income per full time worker, and 2016’s average income per full time worker. The 2015 data shows that men made up 57.51% of the full time, year round working population (63,887/111,098) and earned $51,859.00. Women made up 42.49% of the full time, year round working population (47,211/111,098) and earned $41,257.00. This means that the average income for a full time, year round worker in 2015 was $47,353.69 (51,859 x .5751 + 41,257 x .4249). The 2016 data shows that men made up 57.34% of the full time, year round working population (64,953/113,281) and earned $51,640.00. Women made up 42.66% of the population (48,328/113,281) and earned $41,554.00. This means the average income for a full time, year round worker in 2016 was $47,337.11 (51,640 x .5734 + 41,554 x .4266). So while the news is reporting the increase in household income, the average income for a full time, year round worker actually fell by $16.58 in 2016." }, { "docid": "574654", "title": "", "text": "I would say that, for the most part, money should not be invested in the stock market or real estate. Mostly this money should be kept in savings: I feel like your emergency fund is light. You do not indicate what your expenses are per month, but unless you can live off of 1K/month, that is pretty low. I would bump that to about 15K, but that really depends upon your expenses. You may want to go higher when you consider your real estate investments. What happens if a water heater needs replacement? (41K left) EDIT: As stated you could reduce your expenses, in an emergency, to 2K. At the bare minimum your emergency fund should be 12K. I'd still be likely to have more as you don't have any money in sinking funds or designated savings and the real estate leaves you a bit exposed. In your shoes, I'd have 12K as a general emergency fund. Another 5K in a car fund (I don't mind driving a 5,000 car), 5k in a real estate/home repair fund, and save about 400 per month for yearly insurance and tax costs. Your first point is incorrect, you do have debt in the form of a car lease. That car needs to be replaced, and you might want to upgrade the other car. How much? Perhaps spend 12K on each and sell the existing car for 2K? (19K left). Congratulations on attempting to bootstrap a software company. What kind of cash do you anticipate needing? How about keeping 10K designated for that? (9K left) Assuming that medical school will run you about 50K per year for 4 years how do you propose to pay for it? Assuming that you put away 4K per month for 24 months and have 9K, you will come up about 95K short assuming some interests in your favor. The time frame is too short to invest it, so you are stuck with crappy bank rates." }, { "docid": "462609", "title": "", "text": "If the 6 credits per semester working part time schedule includes no loans, consider this. Yes, it may take you twice as long to finish, BUT, you'll have a lot of working experience, AND zero student loans when you're done. Compare this to someone who graduates in four years and has 20k in student loans. If they set up a 20 year repayment for the loans, they'll still have 16-18k left to pay and 4 years of job experience. You'll have 8 years of half time job experience and zero debt. The key would be to find a job in your area of interest. More ideal would be one that pays for classes as a benefit. Then you might increase your class load and decrease the total time to graduate, AND have relevant job experience when you graduate." }, { "docid": "319331", "title": "", "text": "TL;DR: The difference is $230. Just for fun, and to illustrate how brackets work, let's look at the differences you could see from changing when you're paid based on the tax bracket information that Ben Miller provided. If you're paid $87,780 each year, then each year you'll pay $17,716 for a total of $35,432: $5,183 + $12,532 (25% of $50,130 (the amount over $37,650)) If you were paid nothing one year and then double salary ($175,560) the next, you'd pay $0 the first year and $42,193 the next: $18,558 + $23,634 (28% of $84,410 (the amount over $91,150)) So the maximum difference you'd see from shifting when you're paid is $6,761 total, $3,380 per year, or about 4% of your average annual salary. In your particular case, you'd either be paying $35,432 total, or $14,948 followed by $20,714 for $35,662 total, a difference of $230 total, $115 per year, less than 1% of average annual salary: $5,183 + $9,765 (25% of $39,060 (the amount $87,780 - $11,070 is over $37,650)) $18,558 + $2,156 (28% of $7,700 (the amount $87,780 + $11,070 is over $91,150))" }, { "docid": "243356", "title": "", "text": "\"You cannot deduct commute expenses. Regarding your specific example, something to consider is that if the standard of living is higher in San Francisco, presumably the wages are higher too. Therefore, you must make a choice to trade \"\"time and some money for commuting costs\"\" for \"\"even more money\"\" in the form of higher wages. For example, if you can make $50K working 2 hours away from SF, or $80K working in SF, and it costs you $5K extra per year in commute costs, you still come out ahead by $25K (minus taxes). If it ends up costing $20K more to live in SF (due to higher rent/mortgage/food/etc), some people choose to trade 4 extra hours of commuting time to put that extra $20K in their pocket. It's sort of like having an extra part time job, except you get paid to read/watch tv/sleep on the job (assuming you can take a train to work).\"" }, { "docid": "181588", "title": "", "text": "Investment in public infrastructure is different than subsidy to private companies. Comparison to the interstate system here is irrelevant. The state of Wisconsin is giving a company $230k per worker per year in tax breaks for jobs that will pay the workers $53k per year. There is no tax rate that can earn that investment back for the state. In fact, that state income tax rate on these salaries is 6.27%. Even considering all of the additional jobs that will be created for construction and as an effect of having a large employer in the area, this investment will never pay for itself in terms of taxes generated." }, { "docid": "82024", "title": "", "text": "\"My wife and I have been car-free since 2011. We spent about $3500 on car shares and rentals last year (I went through it recently to flag trips that were medical transportation and unreimbursed work related for taxes). This compares favorably with the last year of car ownership. I had reached a point I started needing $200+ repairs every couple of months and the straw that broke the camels back was a (dealer mechanic estimate but still) $3000 estimate to pass emissions inspection. Over 11 years the value went from $24000 to $3600, so it depreciated about 2k per year. I was easily spending $40 per week on gasoline on my last commute. I now use transit with the IRS commuter benefit so I do have a base after tax transportation expense of 1200 per year. We use weekend rentals about 2x per month (and do use a warehouse club) She uses rentals for her job about 12 times per year, and the medical transportation came in an intense burst. Access: Our nearest carshare pod is 0.22 miles (3 blocks); there are two hotels with full service rental car desks about half a mile from our house and every brand at the Amtrak station a mile away. There are concrete benefits to density, take every advantage. Insurance: I always take the rental company SLI daily insurance for $15 per day. Certain no annual fee credit cards automatically include CDW. Every time an insurance agent cold calls me, I ask for a quote for a \"\"named non owner\"\" policy, I'd probably take it if the premium was $300 or less per 6 months. Tips and tricks: a carshare minivan or truck rate is probably higher than a carshare car, but compared to a full service rental, may be much lower . The best value I spend no time in my life looking for a parking spot, and spend \"\"this hour\"\" tapping away on SE on a train instead of driving.\"" }, { "docid": "347072", "title": "", "text": "\"Assuming you've got no significant prepayment penalty, I would think about getting a longer mortgage, but making payments like it was a shorter mortgage. This will get the mortgage paid off in a shorter time period - but if you run into financial difficulties and/or find a better use for your money, you can drop back to paying the minimum necessary to retire the loan in 30 years without needing to refinance. (If you need to reduce your payments because you're between jobs, you don't have a very good negotiating position). For the most part, there's nothing that says you can only make one payment per month, or that it must be in the amount printed on the statement. If you want to, you can make payments weekly (or biweekly, or every 4 weeks) which typically means that you'll pay more every year. If your mortgage payments are $1000/month, that's $12,000 per year. If you tell yourself that 1000/month = $250 weekly and make yourself send a payment every week (or 500 every 2 weeks), you'll end up paying 250 * 52 = $13,000 per year, without particularly feeling the difference, especially if you get paid on a weekly/biweekly schedule instead of monthly or semi-monthly. Also, by paying more often, you're borrowing a tiny bit less money over the course of the year (because the money didn't sit in your account waiting until the 1st of the month to make a payment) so you save a little in interest there, too. Think of \"\"30 years\"\" or \"\"10 years\"\" as the basis for a minimum payment schedule, not necessarily the length of time that you or the lender really intend to keep the loan.\"" }, { "docid": "35680", "title": "", "text": "Yes, you should be saving for retirement. There are a million ideas out there on how much is a reasonable amount, but I think most advisor would say at least 6 to 10% of your income, which in your case is around $15,000 per year. You give amounts in dollars. Are you in the U.S.? If so, there are at least two very good reasons to put money into a 401k or IRA rather than ordinary savings or investments: (a) Often your employer will make matching contributions. 50% up to 6% of your salary is pretty common, i.e. if you put in 6% they put in 3%. If either of your employers has such a plan, that's an instant 50% profit on your investment. (b) Any profits on money invested in an IRA or 401k are tax free. (Effectively, the mechanics differ depending on the type of account.) So if you put $100,000 into an IRA today and left it there until you retire 30 years later, it would likely earn something like $600,000 over that time (assuming 7% per year growth). So you'd pay takes on your initial $100,000 but none on the $600,000. With your income you are likely in a high tax bracket, that would make a huge difference. If you're saying that you just can't find a way to put money away for retirement, may I suggest that you cut back on your spending. I understand that the average American family makes about $45,000 per year and somehow manages to live on that. If you were to put 10% of your income toward retirement, then you would be living on the remaining $171,000, which is still almost 4 times what the average family has. Yeah, I make more than $45,000 a year too and there are times when I think, How could anyone possibly live on that? But then I think about what I spend my money on. Did I really need to buy two new computer printers the last couple of months? I certainly could do my own cleaning rather than hiring a cleaning lady to come in twice a month. Etc. A tough decision to make can be paying off debt versus putting money into an investment account. If the likely return on investment is less than the interest rate on the loan, you should certainly concentrate on paying off the loan. But if the reverse is true, then you need to decide between likely returns and risk." }, { "docid": "294602", "title": "", "text": "&gt; You can't find anyone else who would pay you more, or you would have left. That's a reflection of what you have to offer the world. Your comment was thoughtful, and this last bit in particular I feel is like something that I've been wrestling with for a while. It's a very libertarian view as you probably know. It makes a lot of sense to me, but I can't help to think of some possible flaws and wonder what you think: 1. Availability of work: If somebody has a choice between no job and being grossly underpaid, wouldn't the choice be between having no money and a little money at that point? Doesn't that run the risk of exploitation? Wouldn't exploitation be working for less than what you're worth? 2. Value: Unskilled pretty much means replaceable. They don't give a shit if you come or go, and vice versa. That's not a reflection of a job's worth to the company, nor is a real reflection of how difficult it is. There's no competition for wages. Eventually workers get sick of it and leave, not expecting improved wages elsewhere but a job they can deal with for 40 hours per week. But there are always more people in need to take their place, so the company has no incentive to raise wages. Like you said, it *is* a reflection of what you have to offer to the world, in a sense that your skills are not uncommon. However, is this everything? The world *needs* unskilled labor to run. Is there something wrong with being a cashier? A doorman? A guy who unpacks the trucks that carry the things we all use? No, the world *needs* these people...should people who are needed have jobs that don't allow for them to meet basic living standards? 3. Expectation: The only reason why most people won't work for less than 8 or 9 dollars/hr, expect reasonable flexibility to balance work and personal life, don't expect to be forced to work more than 8-9 hours per day, have weekends off, and those working 40 hrs/week demand holiday pay/sick days/access to insurance/vacation time, is because that's what people expect out of a job in this day and age. None of these things are law (i think). People used to be treated considerably worse by their employers, and likely there will be a time when people will think that the people of our day were stupid for settling for less. The labor movement has done much in this regard. &gt; Maybe, instead of bitching that you are paid shit wages, you should ask why you ever expected to earn more after failing to acquire any skill a teenager couldn't master in a week. 4. Everyone's solution?: Let's say everyone learns to do a skilled job, who will be left to do the unskilled jobs? Someone will have to do them. Some countries have hordes of college educated workers working unskilled jobs, because of the high % that go to college. Ok, so then leave it to merit. Does merit always work though? What about nepotism? Personality, when it doesn't matter for the job? Age, Race, Sex, Ethnicity...think these play any part in the hiring process? If all else fails, not everyone can be expected to be a successful entrepreneur. 5. Life: Life can throw you some curveballs, and people make mistakes. Some tend to pay for them more than others. Some have talent, others don't. Some are born with money, some not. Some have a large and caring family, others have no family at all. Again, I'm not saying these things necessarily invalidate your original point, but it's something to consider. Your thoughts?" }, { "docid": "58937", "title": "", "text": "In general What does this mean? Assume 10 holidays and 2 weeks of vacation. So you will report to the office for 240 days (48 weeks * 5 days a week). If you are a w2 they will pay you for 260 days (52 weeks * 5 days a week). At $48 per hour you will be paid: 260*8*48 or $99,840. As a 1099 you will be paid 240*8*50 or 96,000. But you still have to cover insurance, the extra part of social security, and your retirement through an IRA. A rule of thumb I have seen with government contracting is that If the employee thinks that they make X,000 per year the company has to bill X/hour to pay for wages, benefits, overhead and profit. If the employee thinks they make x/hour the company has to bill at 2X/hour. When does a small spread make sense: The insurance is covered by another source, your spouse; or government/military retirement program. Still $2 per hour won't cover the 6.2% for social security. Let alone the other benefits. The IRS has a checklist to make sure that a 1099 is really a 1099, not just a way for the employer to shift the costs onto the individual." }, { "docid": "188816", "title": "", "text": "I'll start with the bottom line. Below the line I'll address the specific issues. Becoming a US tax resident is a very serious decision, that has significant consequences for any non-American with >$0 in assets. When it involves cross-border business interests, it becomes even more significant. Especially if Switzerland is involved. The US has driven at least one iconic Swiss financial institution out of business for sheltering US tax residents from the IRS/FinCEN. So in a nutshell, you need to learn and be afraid of the following abbreviations: and many more. The best thing for you would be to find a good US tax adviser (there are several large US tax firms in the UK handling the US expats there, go to one of those) and get a proper assessment of all your risks and get a proper advice. You can get burnt really hard if you don't prepare and plan properly. Now here's that bottom line. Q) Will I have to submit the accounts for the Swiss Business even though Im not on the payroll - and the business makes hardly any profit each year. I can of course get our accounts each year - BUT - they will be in Swiss German! That's actually not a trivial question. Depending on the ownership structure and your legal status within the company, all the company's bank accounts may be reportable on FBAR (see link above). You may also be required to file form 5471. Q) Will I need to have this translated!? Is there any format/procedure to this!? Will it have to be translated by my Swiss accountants? - and if so - which parts of the documentation need to be translated!? All US forms are in English. If you're required to provide supporting documentation (during audit, or if the form instructions require it with filing) - you'll need to translate it, and have the translation certified. Depending on what you need, your accountant will guide you. I was told that if I sell the business (and property) after I aquire a greencard - that I will be liable to 15% tax of the profit I'd made. Q) Is this correct!? No. You will be liable to pay income tax. The rate of the tax depends on the kind of property and the period you held it for. It may be 15%, it may be 39%. Depends on a lot of factors. It may also be 0%, in some cases. I also understand that any tax paid (on selling) in Switzerland will be deducted from the 15%!? May be. May be not. What you're talking about is called Foreign Tax Credit. The rules for calculating the credit are not exactly trivial, and from my personal experience - you can most definitely end up being paying tax in both the US and Switzerland without the ability to utilize the credit in full. Again, talk to your tax adviser ahead of time to plan things in the most optimal way for you. I will effectively have ALL the paperwork for this - as we'll need to do the same in Switzerland. But again, it will be in Swiss German. Q) Would this be a problem if its presented in Swiss German!? Of course. If you need to present it (again, most likely only in case of audit), you'll have to have a translation. Translating stuff is not a problem, usually costs $5-$20 per page, depending on complexity. Unless a lot of money involved, I doubt you'll need to translate more than balance sheet/bank statement. I know this is a very unique set of questions, so if you can shed any light on the matter, it would be greatly appreciated. Not unique at all. You're not the first and not the last to emigrate to the US. However, you need to understand that the issue is very complex. Taxes are complex everywhere, but especially so in the US. I suggest you not do anything before talking to a US-licensed CPA/EA whose practice is to work with the EU/UK expats to the US or US expats to the UK/EU." } ]

[ { "docid": "470289", "title": "", "text": "All things being equal, a $55,000/year job with 25% benefit load is about $68,750/year. That's a little more than $34/hr. Your rate really depends on the nature of the work. If it's strictly a part-time job where you are an employee, you're probably looking at a $28-38/hr range. If you're an independent contractor, the rate should be higher, as you're paying the taxes, doing other administrative stuff. How much higher depends on the industry... software/it rates are usually 1.5-2x, construction is driven by the union scale in many places, etc. Note that you need to meet criteria defined by the IRS to successfully maintain independent contractor status from a tax POV." } ]

[ { "docid": "220198", "title": "", "text": "These comments are crazy in here with regards to earnings after 4 years of college. I'm an account exec(field tech support)with a Fortune 500 company and make a $110k per year, with no degree. In my same industry with no experience I was making 65k when I was 27 in an entry level sales job. We have mechanics that start out at $20 per hour and make $30-35 per hour after 5 years. My point is that you can make really good money without a college degree." }, { "docid": "394768", "title": "", "text": "This is going to seem pretty far off the beaten path, but I hope when you finish reading it you'll see the point... Suppose someone offered you a part time job: Walk their dog once per day for at least 20 minutes, and once per week pick up the dog poo from their lawn. Your compensation is $300/month. Now suppose instead you are given two choices for a job: Your preference probably has more to do with your personality and interests than the finances involved." }, { "docid": "508666", "title": "", "text": "Luck doesn't exist, any more than God or faeries. A full time class load at my university was 7-10 credit hours per semester. I averaged 25 credit hours and finished a 4 year program in 2. All while working 40+ hours a week at four part time jobs. My days began at 5:00 a.m. and ended well after 10:00 p.m., six days a week. I wouldn't have got the interview without *networking*, which for me involved joining a service club and serving as communications officer for a local professional association related to my industry. The president of the service club ended up being the stock broker of my future boss. The president of the professional association was in touch with the industry and was able to give me a lead on an internship weeks before it opened. Neither reference would have done me a damn bit of good if I hadn't *proven* to them that I was an outstanding candidate, something that's become obvious to me as I am now in the position to provide people with references myself. That's not luck, my intention at joining both organizations was to network and it's exactly what I did. If you're looking for a job and you aren't networking you're doing it wrong. EDIT: Oh man the butthurt on this thread is *sooooo* strong. **EDIT: SCUMBAG REDDIT. HATES RELIGION ALL DAY EVERY DAY, STILL BELIEVES IN LUCK**" }, { "docid": "569145", "title": "", "text": "Depending on how much freelance work we're talking about you could set up a limited company, with you and your wife as directors. By invoicing all your work through the limited company (which could have many other benefits for you, an accountant/advisor would... well, advise...) it's the company earning the money, not you or her personally. You can then pay your wife up to £10,000 per year (as of writing this) without income tax kicking in. You would probably have to pay yourself a small amount to minimise exposure to HMRC's snooping, but possibly not... as far as I'm aware the rules do not state anything about working for free, for yourself - and I wouldn't worry about the ethics, you're already paying plenty into HMRC's bank account through your day job! Some good information here if you're interested: https://www.whitefieldtax.co.uk/web/psc-guide/pscguide-how-does-it-all-work-in-practice-salaries-and-dividends/" }, { "docid": "417728", "title": "", "text": "&gt;Okay but still three people at $12/hr is $16 more per hour than one person at $20/hr. You forgot the times 3 part. &gt;I still don't see how u/NEVERDOUBTED asserts that the three at $12/hr cost less. Cause they are wrong, but too hard headed to see that." }, { "docid": "294150", "title": "", "text": "There is no right and wrong answer to this question. What you and your business partner perceive as Fair is the best way to split the ownership of the new venture. First, regarding the two issues you have raised: Capital Contributions: The fact that you are contributing 90% of initial capital does not necessarily translate to 90% of equity. In my opinion, what is fair is that you transform your contributions into a loan for the company. The securitization of your contribution into a loan will make it easier to calculate your fair contribution and also compensate you for your risk by choosing whatever combination of interest income and equity you see suitable. For example, you might decide to split the company in half and consider your contributions a loan with 20%, 50% or 200% annual interest. Salary: It is common that co-founders of start-ups forgo their wages at the start of the company. I do not recommend that this forgone salary be compensated through equity because it is impossible to determine the suitable amount of equity to be paid. I suggest the translation of forgone wages into loans or preferred stocks in similar fashion to capital contribution Also, consider the following in deciding the best way to allocate equity between both of you and your partner Whose idea was it? Talk with you business partner how both of you value the inventor of the concept. In general, execution is more important but talking about how you both feel about it is good. Full-time vs. part-time: A person who works full time at the new venture should have more equity than the partner who is only a part-time helper. Control: It is important to talk about control and decision making of the company. You can separate the control and decision making of important decisions from ownership. You can also check the following article about this topic at http://www.forbes.com/sites/dailymuse/2012/04/05/what-every-founder-needs-to-know-about-equity/#726842f3668a" }, { "docid": "592780", "title": "", "text": "How realistic is it that I will be able to get a home within the 250,000 range in the next year or so? Very unlikely in the next year. The debt/income ratio isn't good enough, and your credit score needs to show at least a year of regular payments without late or default issues before you can start asking for mortgages in this range. You don't mention how long you've been employed at these incomes, this can also count against you if you haven't both been employed for a full year at these incomes. They will look even more unfavorably on the employment situation if they aren't both full time jobs, although if you have a full year's worth of paychecks showing the income is regular then that might mitigate the full time/part time issue. next year or so? If you pay down your high interest debt (car, credit cards), and maintain employment (keep your check stubs and tax returns, the loan officer will want copies), then there's a slight chance. And, from this quick snap shot of our finances, does it look like we would be able to qualify for a USDA loan? Probably not. Mostly for the same reasons - the only time a USDA loan helps is when you would be able to get a regular loan if you had the down payment. Even with an available down payment of 50k, you wouldn't be able to get a regular loan, therefore it's unlikely that you'd qualify for a USDA loan. If you are anxious to get into a house, choose something much smaller, in the 100k-150k range. It would improve your debt/loan ratio enough that you might then qualify for a USDA loan. However, I think you'd still have issues if you haven't both been employed at this rate of income for at least a year, and have made regular payments on all your debts for at least a year. I'll echo what others have suggested, though, strengthen your credit, eliminate as much of your high interest debt as you can (car, credit cards), and keep your jobs for a year or two. Start a savings plan so you can contribute a small down payment - at least 3-5% of the desired home price - when you are in a better position to buy. During this time keep track of your paycheck stubs, you may need them to prove income over the time period your loan officer will request. Note that even with a USDA loan you still have to pay closing costs, and those can run several thousand dollars, so don't expect to be able to come to the table with no cash. Lastly, there's good reason to be very conservative regarding house cost and size. If you can, consider buying the house as if you only had the 46k per year. Move the debt to the person making the lower income, and if you buy the house in the name of the person only making 46k per year, then the debt/loan ratio looks very positive. Further it may be that the credit history of that person is better, and the employment history is better. If one of you has better history in these ways, then you might have a better chance if only one of you buys the house. Banks can't tell you about this, but it does work. Keep in mind, though, that if you two part ways it could be very unhappy since one would be left with all the debt and the house would be in the other's name. Not a great situation to be in, so make sure that you both carefully consider the risks associated with the decisions made." }, { "docid": "208261", "title": "", "text": "\"What makes a \"\"standard\"\" raise depends on how well the economy is doing, how well your particular industry is doing, and how well your employer is doing. All these things change constantly, so anyone who says, \"\"a good raise is 5%\"\" or whatever number is being simplistic. Even if true when he said it, it won't necessarily be true next year, or this year in a different industry, etc. The thing to do is to look for salary surveys that are reasonably current and applicable. If today, in your industry, the average annual raise is 3% -- again, just making up a number -- then that's what you should think of as \"\"standard\"\". If you want a number, okay: In general, as a first-draft number, I look for a raise that's 2% or so above the current inflation rate. Yes, of course I'd LIKE to get a 20% raise every year, but that's not going to happen in real life. On the other hand if a company gives me raises that don't keep pace with inflation, than barring special circumstances I'm going to be looking for another job. But there are all sorts of special circumstances. If the economy is in a depression and unemployment in my field is 50%, I'll probably figure I'm lucky to have a job at all and not be too worried about raises. If the economy is booming and all my friends are getting 10% and 20% raises, then I'll want that too. As others have said, in the United States at least, the best way to get a pay raise is to change jobs. I think most American companies are absolutely stupid about this. They don't want to give current employees big raises, so they let them quit, and then hire replacements at a much higher salary than they were paying the guy they just drove to quit. And the replacement doesn't know the company and may have a lot to learn before he is fully productive. And then they congratulate themselves that they kept raises this year to only 3% -- even though total salaries paid went up by 10% because the new hires demanded higher salaries. They actively punish employees for staying with the company. (Reminds me of an article I read in a business magazine by an executive of a cell phone company. He bemoaned the fact that in the cell phone industry it is very hard to keep customers: they are constantly switching to other vendors. And I thought, Duh, maybe it's because you offer big discounts for the first year or two, and after that you jack your prices up through the roof. You actively punish your customers for staying with you more than 2 years, and then you wonder why customers leave after 2 years.) Oh, if you do change jobs: Absolutely do not buy a line of \"\"we'll start you off with this lower salary but don't worry because you'll get a big raise in a year\"\". When you're looking for a job, it's very easy to turn down a poor offer. Once you have taken a job, leaving to get another job is a big decision and a lot of work. So you have way more bargaining power on starting salary than on raises. And the company knows it and is trying to take advantage of it. Also consider not just percentage increase but what you're making now versus what other people with similar experience are making. If people comparable to you are making $50k and you're making $30k, you're more likely to get a big raise than if you're already making $80k. If the company says, \"\"We just don't have the budget to give you a raise\"\", the key question is, \"\"Is that true?\"\" If the company is tottering on the edge of bankruptcy and trying to cut costs everywhere, then even if they know you're a good and productive employee, they may really just not have the money to give you a good raise. But if business is booming, this could just be an excuse. It might be an excuse for \"\"we're trying to bleed employees white so the CEO can get another million dollar bonus this year\"\". Or it might be a euphemism for \"\"you're really not a very useful employee and we're seriously thinking of firing you, no way we're going to give you a raise for the little bit of work you do when you bother to show up\"\". My final word: Be realistic. What matters isn't what you want or think you need, but what you are worth to the company, and what other people with similar skills are willing to work for. If you are doing work that brings in $20k per year for the company, there is no way they are going to pay you more than $20k for very long. You can go on and on about how expensive it is these days to pay the mortgage and pay medical bills and feed your 10 children and support your cocaine addiction, but none of that is relevant to what you are worth to the company. Likewise if there are millions of people out there who would love to have your job for $20k, if you demand a lot more than that they're going to fire you and hire one of them. Conversely, if you're bringing in $100k a year for the company, they'll be willing to pay you a substantial percentage of that.\"" }, { "docid": "302310", "title": "", "text": "\"The only thing worse than finding out you are paid less than a co-worker is finding out that you are paid more than all of your co-workers. A lot of people who *think* they would prefer an open and transparent pay-scale (as in unions), change their minds, when placed in one. I have worked in and implemented both types, as both an employee and as an owner/manager. There are pluses and minuses to both. - \"\"Transparent\"\" pay-scale is most effective in a high-turnover, aggressively performance-metric-oriented environment where you expect people to be competing for jobs, including their own job, every day. For example, a pool of commissioned sales-agents: the more you sell, the more you make. Winner gets a Cadillac. Runner-up gets a set of steak knives. Loser gets fired, that kind of thing. If you can't meet your numbers, we let other people start poaching your territory/clients and see what they can do. - Where it doesn't work is in a salary-type position where people are expected to have multiple \"\"soft\"\" duties outside of core performance metrics. The reasons are multi-fold: - One immediate effect of implementing performance-based pay for salary-type employees is that people who are in the office for 8 hours a day, five days a week, immediate start devoting their time and energy towards getting another notch up on the pay-scale, even at the expense of their co-workers, or the company. It intrinsically incentivizes \"\"gaming the system\"\", finding ways to attach your name to easy metrics, and to remove yourself from the most difficult problems. The people who are best at hitting metrics are often not even close to the MVPs. - If instead you take a \"\"soft metrics\"\" or subjective/holistic approach to evaluation, then you get a culture of brown-nosing and office-politics. People start sabotaging the \"\"boss's favorite\"\" and pursuing approval and credit, rather than performance. Instead of fostering a team-oriented, problem-solving approach, it fosters a counter-productive buck-passing, credit-grabbing, and blame-avoidance approach. Note that both of the above intrinsically incentivize risk-avoidance. If you get paid for the number of projects that have your name on them, you find some way to get your name attached to every project, and then move on to the next one, whether the last one was done or not. If you get based on how \"\"successful\"\" the projects bearing your name are, then you avoid anything challenging and make sure only to be attached to the easy ones with the best co-workers. And so on. - Alternately, let's say we keep the same, generic, salary-oriented pay-structure, we just make everyone in a certain \"\"tier\"\" get equal salary, that everyone knows. That sucks all the life out of everyone's sails so fast it will make your head spin: you cannot get a raise for doing a better job, you get paid the same raise as your worst co-worker, every year, for as long as you work here. We will never cut your pay, all you have to do is not be the canary in the coalmine-- so long as you can identify the worst performer in your group, and so long as it's not you, your job is safe. What time do you have to arrive? 5 minutes earlier than the latest-arriving person. How early can you leave? 5 minutes after the earliest one to check out. How much work do you have to get done? Only as much as anyone else is doing. What will you get for being the hardest-working, earliest-to-arrive, latest-to-leave? The same as the worst performer gets: you'll be splitting your raise with him, since we don't credit individuals here, just job-titles. Most jobs that can be easily automated, are automated. If you need a human employee to do it, it's usually because it involves a nontrivial amount of \"\"soft\"\" skills and fuzzy-logic type thinking and behavior. A machine programmed purely to make as many widgets per hour as possible, and motivated to so with human-style skills, ingenuity, and incentives, will tear down the whole factory and dismantle all its co-workers and ignore all quality-controls in order to keep producing widgets. You can't reduce human beings to input-process-output flowcharts (or rather you can, but they will invariably find unintended ways to outsmart your design criteria, with unintended consequences). The reason you need a person instead of an automated process is because you need a whole host hard-to-define, soft/fuzzy/flexible critical-thinking type skills. **Everyone's job seems easier to the people who don't have to do it, and there is a tremendous hidden danger to de-valuing personal desire to do a subjectively \"\"good job\"\" by quantifying/genericizing the value of their contribution.** Personnel management is very difficult to reduce to an engineering problem. You usually need good managers who can identify and motivate good employees, who will feel lucky to have the job and the salary they have, and who will come in every day trying to earn it. Posting everyone's pay on a bulletin-board negates all those \"\"soft\"\" skills, by putting a quantified, black-and-white, relative value on everyone's contribution. Even in a very large organization, the \"\"marketplace\"\" of employees is rarely large enough, and the quality of real-time metrics is almost never good enough to \"\"digitize\"\" the bell-curve of employee performance. You end up making it a square-wave that demotivates all but the most extreme outliers.\"" }, { "docid": "290441", "title": "", "text": "\"Thank God you have your child back, it is so awesome that you finally found a medical treatment that worked. It must have been a truly trying time in your lives. That situation is an important template in personal finance. Through no fault of your own, a series of events occurred that caused you to spend far more money then you anticipated. Per your post this was complicated by lost income due to economic situations. What is to say that this does not happen again in the future? While we can all hope that our child does not get sick, there are other events that could also fit into this template. Because of this I hate all options you present. Per your post, you are pretty thin with free cash flow and have high income, and yet you are looking to borrow more. That is a recipe for disaster with it being made worse as you are considering putting your home at risk. The 20K per year per kid sounds like a live at the university state school; or, a close by private school. Your finances do not support either option. There are times when the word \"\"No\"\" is in order when answering questions. Doing a live at home community college to university will cost you a total of about 30K per kid rather than the 80K you are proposing. Doing this alone will greatly reduce the risk you are attempting to assume. Doing that and having your child work some, you could cash flow college. That is what I would recommend. Given that you are so thin, you will also have to put constraints on college attendance. No changing major three times, only majors with an employable skills, and studying before partying. It may be worth it to wait a year of two before attending if a decision cannot be made. I was in a similar situation when my son started college. High income, but broke. He worked and went to a community college and was able to pay for the bulk of it himself. From there he obtained a job with a healthy salary and completed his degree at the University. It took him a little longer, but he is debt free and has a fantastic work ethic.\"" }, { "docid": "270221", "title": "", "text": "\"There are no risk-free high-liquidity instruments that pay a significant amount of interest. There are some money-market accounts around that pay 1%-2%, but they often have minimum balance or transaction limits. Even if you could get 3%, on a $4K balance that would be $120 per year, or $10 per month. You can do much better than that by just going to $tarbucks two less times per month (or whatever you can cut from your expenses) and putting that into the savings account. Or work a few extra hours and increase your income. I appreciate the desire to \"\"maximize\"\" the return on your money, but in reality increasing income and reducing expenses have a much greater impact until you build up significant savings and are able to absorb more risk. Emergency funds should be highly liquid and risk-free, so traditional investments aren't appropriate vehicles for them.\"" }, { "docid": "169267", "title": "", "text": "\"&gt; * How did you get started? I realized there's little to no overhead for a service-based business, so I thought up a name and concept and spent a few hundred on licensing with the state. &gt; * What kind of services do you offer? All the simple shit an average person can't do. OS upgrade, RAM upgrades, home entertainment installation and troubleshooting, purchase consulting, HIPAA compliance, and whatever else works for both me and my customer. &gt; * Do you follow an \"\"Hourly Rate\"\" or \"\"Flat Rate\"\" payment system? Depends on the job, but usually hourly. My standard rate is $30 an hour, if you were wondering. I could charge more, but my rate is already flexible, so I don't really care to push away potential client experiences with a high price tag. &gt; * What services make you the most income? The easy stuff. Upgrading a businesses machines. I get paid $30 an hour to reddit and click buttons, not because the business can't, but because they don't want to. &gt; * What physical things would you recommend I acquire prior to getting started? Go on ifixit.com. Buy every unique tool they have. I wish I was kidding. &gt; * How long until you were able to \"\"make a living\"\" from your business? I still don't because I'm in school. In theory, if I just doubled my hours per week, I'd be able to make more than enough to support myself for about four or less work days a week. &gt; * What would you do differently if you were to start again from scratch? Not name the business after myself... &gt; * Any other tips / words of wisdom on how to make this work? Consultants only thrive on word of mouth. It's better to lose money supporting a client than losing their trust. Their recommendations mean EVERYTHING. Widespread dvertising is a good way to get a ton of one-time customers who don't respect your services or your rate.\"" }, { "docid": "243356", "title": "", "text": "\"You cannot deduct commute expenses. Regarding your specific example, something to consider is that if the standard of living is higher in San Francisco, presumably the wages are higher too. Therefore, you must make a choice to trade \"\"time and some money for commuting costs\"\" for \"\"even more money\"\" in the form of higher wages. For example, if you can make $50K working 2 hours away from SF, or $80K working in SF, and it costs you $5K extra per year in commute costs, you still come out ahead by $25K (minus taxes). If it ends up costing $20K more to live in SF (due to higher rent/mortgage/food/etc), some people choose to trade 4 extra hours of commuting time to put that extra $20K in their pocket. It's sort of like having an extra part time job, except you get paid to read/watch tv/sleep on the job (assuming you can take a train to work).\"" }, { "docid": "157728", "title": "", "text": "A common rule of thumb is the 28/36 ratio. It's described here. In your case, with a gross (?) salary of £50,000, that means that you should spend no more than 28% of it, or £1,167 per month on housing. You may be able to swing a bit more because you have no debts and a modest amount in your savings. The 36% part comes in as the amount you can spend servicing all your debt, including mortgage. In your case, based on a gross (?) salary of £50,000, that'd be £1,500 per month. Again, that is to cover your housing costs and any additional debt you are servicing. So, you need to figure out how much you could bring in through rent to make up the rest. As at least one other person has commented, the rule of thumb is that your mortgage should be no more than 2.5 - 3 times your income. I personally think you are not a good candidate for a mortgage of the size you are discussing. That said, I no longer live in England. If you could feel fairly secure getting someone to pay you enough in rent to bring down your total mortgage and loan repayment amounts to £1,500 or so a month, you may want to consider it. Remember, though, that it may not always be easy to find renters." }, { "docid": "547574", "title": "", "text": "Welcome to the real world. BTW, you have far too rosy a view of this if you think you're only paying 28.5% of your income in taxes. Remember that your employer theoretically pays half your FICA tax. But as far as they're concerned, that's part of the cost of having you as an employee. If FICA was abolished, supply and demand would quickly push salaries up by an amount equal to the FICA tax. So add another 7.65% to your taxes. Plus your employer has to pay unemployment tax (federal unemployment tax is $420 per employee per year, states vary) and workman's compensation tax (no idea how much that is) for the privilege of having you as an employee. You likely pay sales taxes on most everything you buy. I believe sales tax in Massachusetts is 6.25%. Assuming you pay that on only half of what you buy, add another 3% or so. Do you work for a corporation? Between when they sell the fruits of your labor and when they pay you, they have to pay corporate income tax. There are a lot of deductions so that gets complicated, but figure another few percent. Do you drive a car? You're paying gas tax -- 41.9 cents per gallon in MA. Do you smoke or drink alcohol? Extra taxes on those. Travel by plane or stay in a hotel? More special taxes. When you get around to buying a house, you'll pay property taxes on it every year, year after year. For me in Michigan that's another 3% of my income. I understand it's a lot more in Massachusetts. Etc, many other smaller taxes that add up." }, { "docid": "2325", "title": "", "text": "\"Economic hardship is just as misleading as \"\"economic slavery\"\". If you are working two jobs and can't afford rent... How can you better yourself? Sure, if you are exceptionally intelligent and/or charismatic and/or exceptionally great in some other way, you could find a way out of the hole. But if you are working two full-time jobs and are trying your best - that should be enough. I personally am against a $15 minimum wage - even on a local level, much less a state or federal level, but I very much support legislation that ensures someone who works 85 (or 60) hours a week (that's 12 hours a day for 85 hours per week) can get by. By \"\"getting by\"\" I mean can rent modest housing, can afford nutritious food, can afford decent health insurance, can buy clothes (maybe second-hand), can put a bit into savings, etc. Minimum wage jobs are done by young people just entering the job market and older people with few skills. Better to have legislation that takes that into account. High school and college kids won't be working 60-85+ hours a week. Save the subsidies for the people that really need them.\"" }, { "docid": "407218", "title": "", "text": "\"Lots of good answers here about budgeting and other ideas. Here's a couple more: Think about offense and defense. Offense is how much money you make. Are you making enough to survive on? Is there a way you could bring in more income? Defense is what you do with your money. Do you have expensive habits? Do you have problems with impulse spending? Do you live in an expensive area with a high cost-of-living? Think about some of these areas and pick one to attack first. If it is the defense side that is causing you problems (you did mention trying to live on less), consider reading Your Money or Your Life by Joe Dominguez and Vicki Robin. There's a really good summary of it on the authors' site. The basic idea of the mechanical part of the book is that you figure out how much you're truly making per hour, and then evaluate your expenses based on how many hours of your \"\"life energy\"\" you are using for that expense. Then you evaluate whether you think that's a fair trade or not. There's a lot more to it than that, but it's an interesting way to get a different perspective on your spending habits, and may be enough to entice you to change those habits.\"" }, { "docid": "526383", "title": "", "text": "First off, great job on your finances so far. You are off on the right foot and have some sense of planning for the future. Also, it is a great question. First, I agree with @littleadv. Take advantage of your employer match. Do not drop your 401(k) contributions below that. Also, good job on putting your contributions into the Roth account. Second, I would ask: Are you out of debt? If not, put all your extra income towards paying off debt, and then you can work your plan. Third, time to do some math. What will your business look like? How much capital would you need to get started? Are there things you can do now on a part-time basis to start this business or prepare you to start the business? Come up with a figure, find some mutual funds that have a low beta, and back out how much money you need to save per month, so you have around that total. Then you have a figure. e.g. Assume you need $20,000, and you find a fund that has done 8% over the past 20 years. Then, you would need to save about $110/month to be ready to go in 10 years, or $273/month to go in about 5 years. (It's a time value of money calculation.) The house is really a long way off, but you could do the same kind of calculation. I feel that you think your income, and possibly locale, will change dramatically over the next few years. It might not be bad to double what you are saving for the business, and designate one half for the house." }, { "docid": "359303", "title": "", "text": "The nature of this question (finding a financial adviser) can make it a conundrum. Those who have little financial experience are often in the greatest need of a financial adviser and at the same time are the least qualified to select one. I'm not putting you or anyone in particular in this category. And of course it's a sliding scale: In general the more capable you are of running your own finances the more prepared you are to answer this question. With that said, I would recommend backing up half a step. Consider advisers other than strictly fee-only advisers. Perhaps you have already considered this decision. But perhaps others reading this have not. My (Ameriprise) adviser charges a monthly (~$50) fee, but also gets percentage-based portions of certain investments. Based on a $150/hr rate that amounts to four hours per year. Does he spend four hours per year on my account? Well so far he does (~2 yrs). But that is determined primarily by how much interaction I choose to have with him. (I suppose I could spend more time asking him questions and less time on this forum. :P) I have never fully understood the gravitation towards fee-based advisers on principle. I guess the theory is they are not making biased decisions about your investments because they don't have as much of a stake in how well your investments to do. I don't necessarily see that as an advantage. It seems they would have less of an incentive to ensure the growth of your investments. Although if you're nearing retirement then growth isn't your biggest concern. Perhaps a fee-based adviser makes more sense in that scenario. Whatever pay structure your adviser uses, it would seem to make sense to consider a successful adviser with a good client base. This implies that the adviser knows what he/she is doing. (But it could also just be a sign that they are good at marketing themselves.) If your adviser has a good base of wealthy clients then choosing a strictly-fee based adviser would mitigate the risk of your adviser having less incentive to consider your portfolio vs that of more wealthy clients. To more directly answer your question I suggest asking several of your adviser candidates for advice on choosing an adviser. I suspect you will get some good advice as well as good insight on the integrity and honesty of the adviser." } ]

[ { "docid": "225718", "title": "", "text": "There is no fixed formulae, its more of how much you can negotiate Vs how many others are willing to work at a lower cost. Typically in software industry the rates for part time work would be roughly in the range of 1.5 to 2 times that of the full time work for the same job. With the above premise roughly the company would be willing to pay $100,000 for 2000 hrs of Part time work(1), translating into around $50 per hour. How much you actually get would depend on if there is someone else who can work for less say at $30 at hour. (1) The company does not have 2000 hrs of work and hence its engaging part time worker instead of full time at lesser cost." } ]

[ { "docid": "317260", "title": "", "text": "10 years into my career. Here are my notes: 1. Don't work overtime as a salaried employee. If there's more work than people then management needs to hire more people. Sure, there are times when shit hits the fan and there's no other option, but that should be a 'once every two years' event, not a 'once every week' event. 2. Be a rockstar. If you're spending time 'looking busy' because you finished a 3 hour job in 1 hour ship the results to your manager and ask for more. Those results will be noticed and will move you from entry-level to mid-level to senior. 3. Skills pay the bills. Always work on learning new things to bring value to your employer. This is also required to move up the chain in your career, and leads into my #4. 4. Get paid what you're worth. Maintain an understanding of what similar skillsets are paying in your area and either maintain or exceed that. Your employer has an incentive to pay you as little as possible. Show them comparable salaries for the same position paying more and make them match it. If they won't match it find someone who will. 5. Don't correct your boss/salesperson when they are presenting to management/customers. Instead, let them know after the meeting. Your #2 points (both of them) are something that I struggled with when I was new in my career. It was incredibly frustrating to *know* something, but not have anyone listen due to the fact that I was a 'kid'. Unfortunately it's a part of life. If you can do #2 and #3 on my list for a couple of years people will start listening. It's a great feeling being a 24 year old kid in a room full of my boss's bosses, and my boss's boss's bosses and having them listen and consider my opinion, but it's not something that's given to everyone. You need to earn it." }, { "docid": "451457", "title": "", "text": "\"A major thing to consider when deciding whether to invest or pay off debt is cash flow. Specifically, how each choice affects your cash flow, and how your cash flow is affected by various events. Simply enough, your cash flow is the amount of money that passes through your finances during a given period (often a month or a year). Some of this is necessary payments, like staying current on loans, rent, etc., while other parts are not necessary, such as eating out. For example, you currently have $5,500 debt at 3% and another $2,500 at 5%. This means that every month, your cashflow effect of these loans is ($5,500 * 3% / 12) + ($2,500 * 5% / 12) = $24 interest (before any applicable tax effects), plus any required payments toward the principal which you don't state. To have the $8,000 paid off in 30 years, you'd be paying another $33 toward the principal, for a total of about $60 per month before tax effects in your case. If you take the full $7,000 you have available and use it to pay off the debt starting with the higher-interest loan, then your situation changes such that you now: Assuming that the repayment timeline remains the same, the cashflow effect of the above becomes $1,000 * 3% / 12 = $2.50/month interest plus $2.78/month toward the principal, again before tax effects. In one fell swoop, you just reduced your monthly payment from $60 to $5.25. Per year, this means $720 to $63, so on the $7,000 \"\"invested\"\" in repayment you get $657 in return every year for a 9.4% annual return on investment. It will take you about 11 years to use only this money to save another $7,000, as opposed to the 30 years original repayment schedule. If the extra payment goes toward knocking time off the existing repayment schedule but keeping the amount paid toward the principal per month the same, you are now paying $33 toward the principal plus $2.50 interest against the $1,000 loan, which means by paying $35.50/month you will be debt free in 30 months: two and a half years, instead of 30 years, an effective 92% reduction in repayment time. You immediately have another about $25/month in your budget, and in two and a half years you will have $60 per month that you wouldn't have if you stuck with the original repayment schedule. If instead the total amount paid remains the same, you are then paying about $57.50/month toward the principal and will be debt free in less than a year and a half. Not too shabby, if you ask me. Also, don't forget that this is a known, guaranteed return in that you know what you would be paying in interest if you didn't do this, and you know what you will be paying in interest if you do this. Even if the interest rate is variable, you can calculate this to a reasonable degree of certainty. The difference between those two is your return on investment. Compare this to the fact that while an investment in the S&P might have similar returns over long periods of time, the stock market is much more volatile in the shorter term (as the past two decades have so eloquently demonstrated). It doesn't do you much good if an investment returns 10% per year over 30 years, if when you need the money it's down 30% because you bought at a local peak and have held the investment for only a year. Also consider if you go back to school, are you going to feel better about a $5.25/month payment or a $60/month payment? (Even if the payments on old debt are deferred while you are studying, you will still have to pay the money, and it will likely be accruing interest in the meantime.) Now, I really don't advocate emptying your savings account entirely the way I did in the example above. Stuff happens all the time, and some stuff that happens costs money. Instead, you should be keeping some of that money easily available in a liquid, non-volatile form (which basically means a savings account without withdrawal penalties or a money market fund, not the stock market). How much depends on your necessary expenses; a buffer of three months' worth of expenses is an often recommended starting point for an emergency fund. The above should however help you evaluate how much to keep, how much to invest and how much to use to pay off loans early, respectively.\"" }, { "docid": "592780", "title": "", "text": "How realistic is it that I will be able to get a home within the 250,000 range in the next year or so? Very unlikely in the next year. The debt/income ratio isn't good enough, and your credit score needs to show at least a year of regular payments without late or default issues before you can start asking for mortgages in this range. You don't mention how long you've been employed at these incomes, this can also count against you if you haven't both been employed for a full year at these incomes. They will look even more unfavorably on the employment situation if they aren't both full time jobs, although if you have a full year's worth of paychecks showing the income is regular then that might mitigate the full time/part time issue. next year or so? If you pay down your high interest debt (car, credit cards), and maintain employment (keep your check stubs and tax returns, the loan officer will want copies), then there's a slight chance. And, from this quick snap shot of our finances, does it look like we would be able to qualify for a USDA loan? Probably not. Mostly for the same reasons - the only time a USDA loan helps is when you would be able to get a regular loan if you had the down payment. Even with an available down payment of 50k, you wouldn't be able to get a regular loan, therefore it's unlikely that you'd qualify for a USDA loan. If you are anxious to get into a house, choose something much smaller, in the 100k-150k range. It would improve your debt/loan ratio enough that you might then qualify for a USDA loan. However, I think you'd still have issues if you haven't both been employed at this rate of income for at least a year, and have made regular payments on all your debts for at least a year. I'll echo what others have suggested, though, strengthen your credit, eliminate as much of your high interest debt as you can (car, credit cards), and keep your jobs for a year or two. Start a savings plan so you can contribute a small down payment - at least 3-5% of the desired home price - when you are in a better position to buy. During this time keep track of your paycheck stubs, you may need them to prove income over the time period your loan officer will request. Note that even with a USDA loan you still have to pay closing costs, and those can run several thousand dollars, so don't expect to be able to come to the table with no cash. Lastly, there's good reason to be very conservative regarding house cost and size. If you can, consider buying the house as if you only had the 46k per year. Move the debt to the person making the lower income, and if you buy the house in the name of the person only making 46k per year, then the debt/loan ratio looks very positive. Further it may be that the credit history of that person is better, and the employment history is better. If one of you has better history in these ways, then you might have a better chance if only one of you buys the house. Banks can't tell you about this, but it does work. Keep in mind, though, that if you two part ways it could be very unhappy since one would be left with all the debt and the house would be in the other's name. Not a great situation to be in, so make sure that you both carefully consider the risks associated with the decisions made." }, { "docid": "493264", "title": "", "text": "To generate a passive income you need lots of TIME or MONEY, you are short of both. As other people have said, do whatever you can to reduce you spending and start saving. Don’t think “I work very hard, therefore I deserve xxx”, start thinking “x cost y hrs of work, is it truly worth it?” (Remember to consider your take home pay per hr, not you before tax pay!) What would it take to get paid more per hr in one of your jobs? Maybe investing a little time/money in training would increase your pay. Doing your job a little better can often lead to a good outcome. (I see from your profile that you are a new computer programmer; I assume that one of your jobs is programming, if so put your time and effort into it. As you become more skilful within a few years you will start earning more. Maybe even give up one of the other jobs by spending less so you can do better at programming) Then as your incomes goes up, don’t allow your spending to increase, save the additional money." }, { "docid": "576008", "title": "", "text": "Buying the right shares gives higher return. Buying the wrong ones gives worse return, possibly negative. The usual recommendation, even if you have a pro advising you, is to diversify most of your investments to reduce the risk, even though that may reduce the possible gain. A mutual fund is diversification-in-a-can. It requires little to no active maintenance. Yes, you pay a management fee, but you aren't paying per-transaction fees every time you adjust your holdings, and the management costs can be quite reasonable if you pick the right funds; minimal in the case of computer-managed (index) funds. If you actively enjoy playing with stocks and bonds and are willing/able to accept your failures and less-than-great choices as part of the game, and if you can convince yourself that you will do better this way, go for it. For those of us who just want to deposit out money, watch it grow, and maybe rebalance once a year if that, index funds are a perfectly good choice. I spend at least 8 hours a day working for my money; the rest of the time, I want my money to work for me. Risk and reward tend to be proportional to each other; when they aren't, market prices tend to move to correct that. You need to decide how much risk you're comfortable with, and how much time and effort and money you're willing to spend managing that risk. Personally, I am perfectly happy with the better-than-market-rate-of-return I'm getting, and I don't have any conviction that I could do better if I was more involved. Your milage will vary. If folks didn't disagree, there wouldn't be a market." }, { "docid": "290441", "title": "", "text": "\"Thank God you have your child back, it is so awesome that you finally found a medical treatment that worked. It must have been a truly trying time in your lives. That situation is an important template in personal finance. Through no fault of your own, a series of events occurred that caused you to spend far more money then you anticipated. Per your post this was complicated by lost income due to economic situations. What is to say that this does not happen again in the future? While we can all hope that our child does not get sick, there are other events that could also fit into this template. Because of this I hate all options you present. Per your post, you are pretty thin with free cash flow and have high income, and yet you are looking to borrow more. That is a recipe for disaster with it being made worse as you are considering putting your home at risk. The 20K per year per kid sounds like a live at the university state school; or, a close by private school. Your finances do not support either option. There are times when the word \"\"No\"\" is in order when answering questions. Doing a live at home community college to university will cost you a total of about 30K per kid rather than the 80K you are proposing. Doing this alone will greatly reduce the risk you are attempting to assume. Doing that and having your child work some, you could cash flow college. That is what I would recommend. Given that you are so thin, you will also have to put constraints on college attendance. No changing major three times, only majors with an employable skills, and studying before partying. It may be worth it to wait a year of two before attending if a decision cannot be made. I was in a similar situation when my son started college. High income, but broke. He worked and went to a community college and was able to pay for the bulk of it himself. From there he obtained a job with a healthy salary and completed his degree at the University. It took him a little longer, but he is debt free and has a fantastic work ethic.\"" }, { "docid": "290782", "title": "", "text": "\"Zero? Ten grand? Somewhere in the middle? It depends. Your stated salary, in U.S. dollars, would be high five-figures (~$88k). You certainly should not be starving, but with decent contributions toward savings and retirement, money can indeed be tight month-to-month at that salary level, especially since even in Cardiff you're probably paying more per square foot for your home than in most U.S. markets (EDIT: actually, 3-bedroom apartments in Cardiff, according to Numbeo, range from £750-850, which is US$1200-$1300, and for that many bedrooms you'd be hard-pressed to find that kind of deal in a good infield neighborhood of the DFW Metro, and good luck getting anywhere close to downtown New York, LA, Miami, Chicago etc for that price. What job do you do, and how are you expected to dress for it? Depending on where you shop and what you buy, a quality dress shirt and dress slacks will cost between US$50-$75 each (assuming real costs are similar for the same brands between US and UK, that's £30-£50 per shirt and pair of pants for quality brands). I maintain about a weeks' wardrobe at this level of dress (my job allows me to wear much cheaper polos and khakis most days and I have about 2 weeks' wardrobe of those) and I typically have to replace due to wear or staining, on average, 2 of these outfits a year (I'm hard on clothes and my waistline is expanding). Adding in 3 \"\"business casual\"\" outfits each year, plus casual outfits, shoes, socks, unmentionables and miscellany, call it maybe $600(£400)/year in wardrobe. That doesn't generally get metered out as a monthly allowance (the monthly amount would barely buy a single dress shirt or pair of slacks), but if you're socking away a savings account and buying new clothes to replace old as you can afford them it's a good average. I generally splurge in months when the utilities companies give me a break and when I get \"\"extra\"\" paychecks (26/year means two months have 3 checks, effectively giving me a \"\"free\"\" check that neither pays the mortgage nor the other major bills). Now, that's just to maintain my own wardrobe at a level of dress that won't get me fired. My wife currently stays home, but when she worked she outspent me, and her work clothes were basic black. To outright replace all the clothes I wear regularly with brand-new stuff off the rack would easily cost a grand, and that's for the average U.S. software dev who doesn't go out and meet other business types on a daily basis. If I needed to show up for work in a suit and tie daily, I'd need a two-week rotation of them, plus dress shirts, and even at the low end of about $350 (£225) per suit, $400 (£275) with dress shirt and tie, for something you won't be embarrassed to wear, we're talking $4000 (£2600) to replace and $800 (£520) per year to update 2 a year, not counting what I wear underneath or on the weekends. And if I wore suits I'd probably have to update the styles more often than that, so just go ahead and double it and I turn over my wardrobe once every 5 years. None of this includes laundering costs, which increase sharply when you're taking suits to the cleaners weekly versus just throwing a bunch of cotton-poly in the washing machine. What hobbies or other entertainment interests do you and your wife have? A movie ticket in the U.S. varies between $7-$15 depending on the size of the screen and 2D vs 3D screenings. My wife and I currently average less than one theater visit a month, but if you took in a flick each weekend with your wife, with a decent $50 dinner out, that's between $260-$420 (£165-270) monthly in entertainment expenses. Not counting babysitting for the little one (the going rate in the US is between $10 and $20 an hour for at-home child-sitting depending on who you hire and for how long, how often). Worst-case, without babysitting that's less than 5% of your gross income, but possibly more than 10% of your take-home depending on UK effective income tax rates (your marginal rate is 40% according to the HMRC, unless you find a way to deduct about £30k of your income). That's just the traditional American date night, which is just one possible interest. Playing organized sports is more or less expensive depending on the sport. Soccer (sorry, football) just needs a well-kept field, two goals and and a ball. Golf, while not really needing much more when you say it that way, can cost thousands of dollars or pounds a month to play with the best equipment at the best courses. Hockey requires head-to-toe padding/armor, skates, sticks, and ice time. American football typically isn't an amateur sport for adults and has virtually no audience in Europe, but in the right places in the U.S., beginning in just a couple years you'd be kitting your son out head-to-toe not dissimilar to hockey (minus sticks) and at a similar cost, and would keep that up at least halfway through high school. I've played them all at varying amateur levels, and with the possible exception of soccer they all get expensive when you really get interested in them. How much do you eat, and of what?. My family of three's monthly grocery budget is about $300-$400 (£190-£260) depending on what we buy and how we buy it. Americans have big refrigerators (often more than one; there's three in my house of varying sizes), we buy in bulk as needed every week to two weeks, we refrigerate or freeze a lot of what we buy, and we eat and drink a lot of high-fructose corn-syrup-based crap that's excise-taxed into non-existence in most other countries. I don't have real-world experience living and grocery-shopping in Europe, but I do know that most shopping is done more often, in smaller quantities, and for more real food. You might expect to spend £325 ($500) or more monthly, in fits and starts every few days, but as I said you'd probably know better than me what you're buying and what it's costing. To educate myself, I went to mysupermarket.co.uk, which has what I assume are typical UK food prices (mostly from Tesco), and it's a real eye-opener. In the U.S., alcohol is much more expensive for equal volume than almost any other drink except designer coffee and energy drinks, and we refrigerate the heck out of everything anyway, so a low-budget food approach in the U.S. generally means nixing beer and wine in favor of milk, fruit juices, sodas and Kool-Aid (or just plain ol' tap water). A quick search on MySupermarkets shows that wine prices average a little cheaper, accounting for the exchange rate, as in the States (that varies widely even in the U.S., as local and state taxes for beer, wine and spirits all differ). Beer is similarly slightly cheaper across the board, especially for brands local to the British Isles (and even the Coors Lite crap we're apparently shipping over to you is more expensive here than there), but in contrast, milk by the gallon (4L) seems to be virtually unheard of in the UK, and your half-gallon/2-liter jugs are just a few pence cheaper than our going rate for a gallon (unless you buy \"\"organic\"\" in the US, which carries about a 100% markup). Juices are also about double the price depending on what you're buying (a quart of \"\"Innocent\"\" OJ, roughly equivalent in presentation to the U.S. brand \"\"Simply Orange\"\", is £3 while Simply Orange is about the same price in USD for 2 quarts), and U.S.-brand \"\"fizzy drinks\"\" are similarly at a premium (£1.98 - over $3 - for a 2-liter bottle of Coca-Cola). With the general preference for room-temperature alcohol in Europe giving a big advantage to the longer unrefrigerated shelf lives of beer and wine, I'm going to guess you guys drink more alcohol and water with dinner than Americans. Beef is cheaper in the U.S., depending on where you are and what you're buying; prices for store-brand ground beef (you guys call it \"\"minced\"\") of the grade we'd use for hamburgers and sauces is about £6 per kilo in the UK, which works out to about $4.20/lb, when we're paying closer to $3/lb in most cities. I actually can't remember the last time I bought fresh chicken on the bone, but the average price I'm seeing in the UK is £10/kg ($7/lb) which sounds pretty steep. Anyway, it sounds like shopping for American tastes in the UK would cost, on average, between 25-30% more than here in the US, so applying that to my own family's food budget, you could easily justify spending £335 a month on food.\"" }, { "docid": "261900", "title": "", "text": "\"To answer the investment aspect takes a bit of math. First, solar insolation numbers: This represents the average sun-hours per day for a given area. You can see the range from 4 to 6, or 1460 hrs to about 2190 hrs of sun per year depending on location. I believe electricity also has a range of cost, but 15 cents per KWH is a good average. So, a 1KW panel will produce as much as $328 per year of electricity in a high sun-hrs area, but only $219 in a lower sun-hrs area. If we agree to ignore the government subsidies and look for the stable price unaffected by outside influence, an installed price of even $2500 would produce a return of 13% and a reasonable full payback over an 8 year period. I call this installed price a tipping point, the price where this purchase provides a decent return. Some would accept a lower return, and therefore a higher price. As duff points out, this should be treated as the post rebate/tax credit price. Those help to push the price below this point. At the price point where the energy cost per panel is below, the government intervention may be unnecessary. The power companies may find consumer owned panels are the cheapest way to clip the peak consumption which tends to be the most expensive power demand.) One can take the insolation numbers and cost of local power to produce a grid showing the return for a 1KW panel in $$/year. (At this point the cost of money kick in. The present value of $100/yr is far higher today than if short term rates were say, 8%) Once panels drop to where they are compelling for the higher return areas, I'd expect volume to drive continued improvements in cost and better economies of scale. Initially, the need for storage isn't there, as the infrastructure is in place to drive your meter backwards if you produce more than you use. The peek sun coincides with peek demand and the electric companies are happy to have your demand go negative during those times. Update - the conversation with Duff led me to research 'demand charge' a bit more. You see, the utility company has to have equipment to generate the peak demand, usually occurring in the early afternoon, say 12N-2PM as the sun is brightest and AC use in particular, highest. I found that Austin energy has a PDF describing the fee for this. Simply put, the last kW of demand will cost you $14.03 in summer months and $12.65 in winter. This adds to $160/yr that a 1kW panel might save the owner. Even if one does capture the full power at peak every month, $100 is still non-trivial. This factor alone justifies $1000 worth of panel cost, and as Duff points out, the government may find it cheaper to use this method to clip peak demand than by funding bigger power generators. To summarize, the question isn't so much \"\"are they worth it\"\" as \"\"what is a xKW panel worth?\"\" (A function of annual savings and time value of money.) The ever decreasing installed cost for a given system makes solar an inevitable part of the future power technology. I am not a green tree hugging guy, but I do like to breathe fresh air as much as anyone. I'm happy with whatever role solar plays in cutting down pollution.\"" }, { "docid": "467044", "title": "", "text": "Yes, quite easily, in fact. You left a lot of numbers out, so lets start with some assumptions. If you are at the median of middle income families in the US that might mean $70,000/year. 15% of that is an investment of $875 per month. If you invest that amount monthly and assume a 6% return, then you will have a million dollars at approximately 57 years old. 6% is a very conservative number, and as Ben Miller points out, the S&P 500 has historically returned closer to 11%. If you assumed an aggressive 9% return, and continued with that $875/month for 40 years until you turn 65, that becomes $4 million. Start with a much more conservative $9/hr for $18,720 per year (40 hours * 52 weeks, no overtime). If that person saved 14% of his/her income or about $219 per month from 25 to 65 years old with the same 9%, they would still achieve $1 million for retirement. Is it much harder for a poor person? Certainly, but hopefully these numbers illustrate that it is better to save and invest even a small amount if that's all that can be done. High income earners have the most to gain if they save and the most to lose if they don't. Let's just assume an even $100,000/year salary and modest 401(k) match of 3%. Even married filing jointly a good portion of that salary is going to be taxed at the 25% rate. If single you'll be hitting the 28% income tax rate. If you can max out the $18,000 (2017) contribution limit and get an additional $3,000 from an employer match (for a total monthly contribution of $1750) 40 years of contributions would become $8.2 million with the 9% rate of return. If you withdrew that money at 4% per year you would have a residual income of $300k throughout your retirement." }, { "docid": "294602", "title": "", "text": "&gt; You can't find anyone else who would pay you more, or you would have left. That's a reflection of what you have to offer the world. Your comment was thoughtful, and this last bit in particular I feel is like something that I've been wrestling with for a while. It's a very libertarian view as you probably know. It makes a lot of sense to me, but I can't help to think of some possible flaws and wonder what you think: 1. Availability of work: If somebody has a choice between no job and being grossly underpaid, wouldn't the choice be between having no money and a little money at that point? Doesn't that run the risk of exploitation? Wouldn't exploitation be working for less than what you're worth? 2. Value: Unskilled pretty much means replaceable. They don't give a shit if you come or go, and vice versa. That's not a reflection of a job's worth to the company, nor is a real reflection of how difficult it is. There's no competition for wages. Eventually workers get sick of it and leave, not expecting improved wages elsewhere but a job they can deal with for 40 hours per week. But there are always more people in need to take their place, so the company has no incentive to raise wages. Like you said, it *is* a reflection of what you have to offer to the world, in a sense that your skills are not uncommon. However, is this everything? The world *needs* unskilled labor to run. Is there something wrong with being a cashier? A doorman? A guy who unpacks the trucks that carry the things we all use? No, the world *needs* these people...should people who are needed have jobs that don't allow for them to meet basic living standards? 3. Expectation: The only reason why most people won't work for less than 8 or 9 dollars/hr, expect reasonable flexibility to balance work and personal life, don't expect to be forced to work more than 8-9 hours per day, have weekends off, and those working 40 hrs/week demand holiday pay/sick days/access to insurance/vacation time, is because that's what people expect out of a job in this day and age. None of these things are law (i think). People used to be treated considerably worse by their employers, and likely there will be a time when people will think that the people of our day were stupid for settling for less. The labor movement has done much in this regard. &gt; Maybe, instead of bitching that you are paid shit wages, you should ask why you ever expected to earn more after failing to acquire any skill a teenager couldn't master in a week. 4. Everyone's solution?: Let's say everyone learns to do a skilled job, who will be left to do the unskilled jobs? Someone will have to do them. Some countries have hordes of college educated workers working unskilled jobs, because of the high % that go to college. Ok, so then leave it to merit. Does merit always work though? What about nepotism? Personality, when it doesn't matter for the job? Age, Race, Sex, Ethnicity...think these play any part in the hiring process? If all else fails, not everyone can be expected to be a successful entrepreneur. 5. Life: Life can throw you some curveballs, and people make mistakes. Some tend to pay for them more than others. Some have talent, others don't. Some are born with money, some not. Some have a large and caring family, others have no family at all. Again, I'm not saying these things necessarily invalidate your original point, but it's something to consider. Your thoughts?" }, { "docid": "547574", "title": "", "text": "Welcome to the real world. BTW, you have far too rosy a view of this if you think you're only paying 28.5% of your income in taxes. Remember that your employer theoretically pays half your FICA tax. But as far as they're concerned, that's part of the cost of having you as an employee. If FICA was abolished, supply and demand would quickly push salaries up by an amount equal to the FICA tax. So add another 7.65% to your taxes. Plus your employer has to pay unemployment tax (federal unemployment tax is $420 per employee per year, states vary) and workman's compensation tax (no idea how much that is) for the privilege of having you as an employee. You likely pay sales taxes on most everything you buy. I believe sales tax in Massachusetts is 6.25%. Assuming you pay that on only half of what you buy, add another 3% or so. Do you work for a corporation? Between when they sell the fruits of your labor and when they pay you, they have to pay corporate income tax. There are a lot of deductions so that gets complicated, but figure another few percent. Do you drive a car? You're paying gas tax -- 41.9 cents per gallon in MA. Do you smoke or drink alcohol? Extra taxes on those. Travel by plane or stay in a hotel? More special taxes. When you get around to buying a house, you'll pay property taxes on it every year, year after year. For me in Michigan that's another 3% of my income. I understand it's a lot more in Massachusetts. Etc, many other smaller taxes that add up." }, { "docid": "473809", "title": "", "text": "\"It depends on the role you take. If you go into front office investment banking, there's no avoiding horrible hours as an analyst (slightly less terrible as associate, less terrible still as VP, etc.). If you're doing corporate finance for for a F500 or otherwise large company, it doesn't have to be terrible -- from what I understand, you'll get busy periodically but for the most part your schedule is consistent and you have agency over your weekends. \"\"Finance\"\" is a broad term that encompasses many different roles at many different institutions. In general, the closer to the \"\"client\"\" you are, the less hours you can expect in general (simply because even large corporations' M&amp;A departments do far fewer transactions per month / year than do investment banking groups). But no, you don't have to expect 80-100 hour weeks by virtue of going into \"\"finance\"\".\"" }, { "docid": "35680", "title": "", "text": "Yes, you should be saving for retirement. There are a million ideas out there on how much is a reasonable amount, but I think most advisor would say at least 6 to 10% of your income, which in your case is around $15,000 per year. You give amounts in dollars. Are you in the U.S.? If so, there are at least two very good reasons to put money into a 401k or IRA rather than ordinary savings or investments: (a) Often your employer will make matching contributions. 50% up to 6% of your salary is pretty common, i.e. if you put in 6% they put in 3%. If either of your employers has such a plan, that's an instant 50% profit on your investment. (b) Any profits on money invested in an IRA or 401k are tax free. (Effectively, the mechanics differ depending on the type of account.) So if you put $100,000 into an IRA today and left it there until you retire 30 years later, it would likely earn something like $600,000 over that time (assuming 7% per year growth). So you'd pay takes on your initial $100,000 but none on the $600,000. With your income you are likely in a high tax bracket, that would make a huge difference. If you're saying that you just can't find a way to put money away for retirement, may I suggest that you cut back on your spending. I understand that the average American family makes about $45,000 per year and somehow manages to live on that. If you were to put 10% of your income toward retirement, then you would be living on the remaining $171,000, which is still almost 4 times what the average family has. Yeah, I make more than $45,000 a year too and there are times when I think, How could anyone possibly live on that? But then I think about what I spend my money on. Did I really need to buy two new computer printers the last couple of months? I certainly could do my own cleaning rather than hiring a cleaning lady to come in twice a month. Etc. A tough decision to make can be paying off debt versus putting money into an investment account. If the likely return on investment is less than the interest rate on the loan, you should certainly concentrate on paying off the loan. But if the reverse is true, then you need to decide between likely returns and risk." }, { "docid": "233385", "title": "", "text": "Kinda. I'd be interested in seeing broader studies because minimum wage also influences other pay as well. I work in the medical field and most insurances base their rates off of what Medicare/Medicaid pay in each geographic area. By artificially setting the min wage too high you're going to influence the jobs that require marginally more skills and experience than min wage jobs. Obviously this influence has less effect the higher skilled and experience the position is but nonetheless influences them. Moreover there are other things that minimum wage influences such as here in California the government thought it was a bright idea to require servers be paid the regular minimum wage plus tips instead of the lower federally legal server min wage. This has had the effect that there are significantly more servers than low to mid skilled workers in CA because you can easily earn $20-30 or more per hour. Not to mention they get OT for every minute over 8 hours they work. Not to mention IIRC Cali requires that salaried employees must be paid twice min wage. So yeah while it doesn't directly affect a lot of people but it indirectly affects a lot. But ask me if I think raising the min wage is a good idea . . . Fuck no." }, { "docid": "359303", "title": "", "text": "The nature of this question (finding a financial adviser) can make it a conundrum. Those who have little financial experience are often in the greatest need of a financial adviser and at the same time are the least qualified to select one. I'm not putting you or anyone in particular in this category. And of course it's a sliding scale: In general the more capable you are of running your own finances the more prepared you are to answer this question. With that said, I would recommend backing up half a step. Consider advisers other than strictly fee-only advisers. Perhaps you have already considered this decision. But perhaps others reading this have not. My (Ameriprise) adviser charges a monthly (~$50) fee, but also gets percentage-based portions of certain investments. Based on a $150/hr rate that amounts to four hours per year. Does he spend four hours per year on my account? Well so far he does (~2 yrs). But that is determined primarily by how much interaction I choose to have with him. (I suppose I could spend more time asking him questions and less time on this forum. :P) I have never fully understood the gravitation towards fee-based advisers on principle. I guess the theory is they are not making biased decisions about your investments because they don't have as much of a stake in how well your investments to do. I don't necessarily see that as an advantage. It seems they would have less of an incentive to ensure the growth of your investments. Although if you're nearing retirement then growth isn't your biggest concern. Perhaps a fee-based adviser makes more sense in that scenario. Whatever pay structure your adviser uses, it would seem to make sense to consider a successful adviser with a good client base. This implies that the adviser knows what he/she is doing. (But it could also just be a sign that they are good at marketing themselves.) If your adviser has a good base of wealthy clients then choosing a strictly-fee based adviser would mitigate the risk of your adviser having less incentive to consider your portfolio vs that of more wealthy clients. To more directly answer your question I suggest asking several of your adviser candidates for advice on choosing an adviser. I suspect you will get some good advice as well as good insight on the integrity and honesty of the adviser." }, { "docid": "208261", "title": "", "text": "\"What makes a \"\"standard\"\" raise depends on how well the economy is doing, how well your particular industry is doing, and how well your employer is doing. All these things change constantly, so anyone who says, \"\"a good raise is 5%\"\" or whatever number is being simplistic. Even if true when he said it, it won't necessarily be true next year, or this year in a different industry, etc. The thing to do is to look for salary surveys that are reasonably current and applicable. If today, in your industry, the average annual raise is 3% -- again, just making up a number -- then that's what you should think of as \"\"standard\"\". If you want a number, okay: In general, as a first-draft number, I look for a raise that's 2% or so above the current inflation rate. Yes, of course I'd LIKE to get a 20% raise every year, but that's not going to happen in real life. On the other hand if a company gives me raises that don't keep pace with inflation, than barring special circumstances I'm going to be looking for another job. But there are all sorts of special circumstances. If the economy is in a depression and unemployment in my field is 50%, I'll probably figure I'm lucky to have a job at all and not be too worried about raises. If the economy is booming and all my friends are getting 10% and 20% raises, then I'll want that too. As others have said, in the United States at least, the best way to get a pay raise is to change jobs. I think most American companies are absolutely stupid about this. They don't want to give current employees big raises, so they let them quit, and then hire replacements at a much higher salary than they were paying the guy they just drove to quit. And the replacement doesn't know the company and may have a lot to learn before he is fully productive. And then they congratulate themselves that they kept raises this year to only 3% -- even though total salaries paid went up by 10% because the new hires demanded higher salaries. They actively punish employees for staying with the company. (Reminds me of an article I read in a business magazine by an executive of a cell phone company. He bemoaned the fact that in the cell phone industry it is very hard to keep customers: they are constantly switching to other vendors. And I thought, Duh, maybe it's because you offer big discounts for the first year or two, and after that you jack your prices up through the roof. You actively punish your customers for staying with you more than 2 years, and then you wonder why customers leave after 2 years.) Oh, if you do change jobs: Absolutely do not buy a line of \"\"we'll start you off with this lower salary but don't worry because you'll get a big raise in a year\"\". When you're looking for a job, it's very easy to turn down a poor offer. Once you have taken a job, leaving to get another job is a big decision and a lot of work. So you have way more bargaining power on starting salary than on raises. And the company knows it and is trying to take advantage of it. Also consider not just percentage increase but what you're making now versus what other people with similar experience are making. If people comparable to you are making $50k and you're making $30k, you're more likely to get a big raise than if you're already making $80k. If the company says, \"\"We just don't have the budget to give you a raise\"\", the key question is, \"\"Is that true?\"\" If the company is tottering on the edge of bankruptcy and trying to cut costs everywhere, then even if they know you're a good and productive employee, they may really just not have the money to give you a good raise. But if business is booming, this could just be an excuse. It might be an excuse for \"\"we're trying to bleed employees white so the CEO can get another million dollar bonus this year\"\". Or it might be a euphemism for \"\"you're really not a very useful employee and we're seriously thinking of firing you, no way we're going to give you a raise for the little bit of work you do when you bother to show up\"\". My final word: Be realistic. What matters isn't what you want or think you need, but what you are worth to the company, and what other people with similar skills are willing to work for. If you are doing work that brings in $20k per year for the company, there is no way they are going to pay you more than $20k for very long. You can go on and on about how expensive it is these days to pay the mortgage and pay medical bills and feed your 10 children and support your cocaine addiction, but none of that is relevant to what you are worth to the company. Likewise if there are millions of people out there who would love to have your job for $20k, if you demand a lot more than that they're going to fire you and hire one of them. Conversely, if you're bringing in $100k a year for the company, they'll be willing to pay you a substantial percentage of that.\"" }, { "docid": "492186", "title": "", "text": "An education. A new car. Houses are made bigger so that's not really fair. An article on here previously mentioned someone paying for a dependable car and a small apartment, along with school tuition working part time as a dishwasher. Tuition at my closest state school (in state cost) is just under $9k per year. If you could only work 20 hours per week, amortized the school loan, payed $250 a month for an apartment with a roommate, $100 a month for utilities, $150 a month for groceries (all very difficult to achive and be healthy), you would have to make $15.35 an hour after taxes to do it without debt. This is assuming you don't have a car." }, { "docid": "270221", "title": "", "text": "\"There are no risk-free high-liquidity instruments that pay a significant amount of interest. There are some money-market accounts around that pay 1%-2%, but they often have minimum balance or transaction limits. Even if you could get 3%, on a $4K balance that would be $120 per year, or $10 per month. You can do much better than that by just going to $tarbucks two less times per month (or whatever you can cut from your expenses) and putting that into the savings account. Or work a few extra hours and increase your income. I appreciate the desire to \"\"maximize\"\" the return on your money, but in reality increasing income and reducing expenses have a much greater impact until you build up significant savings and are able to absorb more risk. Emergency funds should be highly liquid and risk-free, so traditional investments aren't appropriate vehicles for them.\"" }, { "docid": "514550", "title": "", "text": "\"I'm in my 40's, and fully paid off the mortgage early. My ex would have preferred that I'd given it to her as spending money instead. It can be said that since interest rates after year 2000 went down not up, I am a mug to have paid off early when perhaps I could have just bought more stuff like everyone else does. I looked at the 1970 to 1990 average interest rate; about 10%, and thought that it would be imprudent to have a big debt which would be crippling at 10 or 15% interest rates, so I paid it off while I could. A factor to consider is how you expect your own income to change over the next decade. If you work in shops, call centres, taxi driving, import warehousing, language translation, news writing, or anything which can be offshored or automated, then either the expectation of your salary diminishes towards the worldwide typical, or if it goes below £7.50 per hour typical then your employer goes bust. Or blags a subsidy. That is, I am a pessimist and would pay off early while possible. I don't know chinese for \"\"he's not here\"\" to say to the debt collector.\"" } ]

[ { "docid": "426278", "title": "", "text": "\"As an easy and rough rule of thumb, a job for $55,000 per year is $55 per hour as a contractor. That's roughly twice the hourly rate. In return, the company gets the rate to vary your hours or cease your employment with less financial, legal or managerial overhead than a full time employee. You have less stability, less benefits, perhaps need to put some time into finding another job sooner. Of course the ultimate, though less helpful, answer is \"\"whatever the market will bear.\"\"\"" } ]

[ { "docid": "274722", "title": "", "text": "The fact that this is what’s being reported is horribly misleading. At the bottom of the same page of that report, there is data intended to show the difference between the pay rates in genders. This data accidently proves that individual incomes are still stagnant and that the reason for our increased household wages is that more people per household are working, and part timers are working longer hours. Following is how this conclusion is drawn: The section titled “Earnings of Full Time, Year-Round Workers,” can be used to find 2015’s average income per full time worker, and 2016’s average income per full time worker. The 2015 data shows that men made up 57.51% of the full time, year round working population (63,887/111,098) and earned $51,859.00. Women made up 42.49% of the full time, year round working population (47,211/111,098) and earned $41,257.00. This means that the average income for a full time, year round worker in 2015 was $47,353.69 (51,859 x .5751 + 41,257 x .4249). The 2016 data shows that men made up 57.34% of the full time, year round working population (64,953/113,281) and earned $51,640.00. Women made up 42.66% of the population (48,328/113,281) and earned $41,554.00. This means the average income for a full time, year round worker in 2016 was $47,337.11 (51,640 x .5734 + 41,554 x .4266). So while the news is reporting the increase in household income, the average income for a full time, year round worker actually fell by $16.58 in 2016." }, { "docid": "319331", "title": "", "text": "TL;DR: The difference is $230. Just for fun, and to illustrate how brackets work, let's look at the differences you could see from changing when you're paid based on the tax bracket information that Ben Miller provided. If you're paid $87,780 each year, then each year you'll pay $17,716 for a total of $35,432: $5,183 + $12,532 (25% of $50,130 (the amount over $37,650)) If you were paid nothing one year and then double salary ($175,560) the next, you'd pay $0 the first year and $42,193 the next: $18,558 + $23,634 (28% of $84,410 (the amount over $91,150)) So the maximum difference you'd see from shifting when you're paid is $6,761 total, $3,380 per year, or about 4% of your average annual salary. In your particular case, you'd either be paying $35,432 total, or $14,948 followed by $20,714 for $35,662 total, a difference of $230 total, $115 per year, less than 1% of average annual salary: $5,183 + $9,765 (25% of $39,060 (the amount $87,780 - $11,070 is over $37,650)) $18,558 + $2,156 (28% of $7,700 (the amount $87,780 + $11,070 is over $91,150))" }, { "docid": "261900", "title": "", "text": "\"To answer the investment aspect takes a bit of math. First, solar insolation numbers: This represents the average sun-hours per day for a given area. You can see the range from 4 to 6, or 1460 hrs to about 2190 hrs of sun per year depending on location. I believe electricity also has a range of cost, but 15 cents per KWH is a good average. So, a 1KW panel will produce as much as $328 per year of electricity in a high sun-hrs area, but only $219 in a lower sun-hrs area. If we agree to ignore the government subsidies and look for the stable price unaffected by outside influence, an installed price of even $2500 would produce a return of 13% and a reasonable full payback over an 8 year period. I call this installed price a tipping point, the price where this purchase provides a decent return. Some would accept a lower return, and therefore a higher price. As duff points out, this should be treated as the post rebate/tax credit price. Those help to push the price below this point. At the price point where the energy cost per panel is below, the government intervention may be unnecessary. The power companies may find consumer owned panels are the cheapest way to clip the peak consumption which tends to be the most expensive power demand.) One can take the insolation numbers and cost of local power to produce a grid showing the return for a 1KW panel in $$/year. (At this point the cost of money kick in. The present value of $100/yr is far higher today than if short term rates were say, 8%) Once panels drop to where they are compelling for the higher return areas, I'd expect volume to drive continued improvements in cost and better economies of scale. Initially, the need for storage isn't there, as the infrastructure is in place to drive your meter backwards if you produce more than you use. The peek sun coincides with peek demand and the electric companies are happy to have your demand go negative during those times. Update - the conversation with Duff led me to research 'demand charge' a bit more. You see, the utility company has to have equipment to generate the peak demand, usually occurring in the early afternoon, say 12N-2PM as the sun is brightest and AC use in particular, highest. I found that Austin energy has a PDF describing the fee for this. Simply put, the last kW of demand will cost you $14.03 in summer months and $12.65 in winter. This adds to $160/yr that a 1kW panel might save the owner. Even if one does capture the full power at peak every month, $100 is still non-trivial. This factor alone justifies $1000 worth of panel cost, and as Duff points out, the government may find it cheaper to use this method to clip peak demand than by funding bigger power generators. To summarize, the question isn't so much \"\"are they worth it\"\" as \"\"what is a xKW panel worth?\"\" (A function of annual savings and time value of money.) The ever decreasing installed cost for a given system makes solar an inevitable part of the future power technology. I am not a green tree hugging guy, but I do like to breathe fresh air as much as anyone. I'm happy with whatever role solar plays in cutting down pollution.\"" }, { "docid": "407218", "title": "", "text": "\"Lots of good answers here about budgeting and other ideas. Here's a couple more: Think about offense and defense. Offense is how much money you make. Are you making enough to survive on? Is there a way you could bring in more income? Defense is what you do with your money. Do you have expensive habits? Do you have problems with impulse spending? Do you live in an expensive area with a high cost-of-living? Think about some of these areas and pick one to attack first. If it is the defense side that is causing you problems (you did mention trying to live on less), consider reading Your Money or Your Life by Joe Dominguez and Vicki Robin. There's a really good summary of it on the authors' site. The basic idea of the mechanical part of the book is that you figure out how much you're truly making per hour, and then evaluate your expenses based on how many hours of your \"\"life energy\"\" you are using for that expense. Then you evaluate whether you think that's a fair trade or not. There's a lot more to it than that, but it's an interesting way to get a different perspective on your spending habits, and may be enough to entice you to change those habits.\"" }, { "docid": "171557", "title": "", "text": "\"Just a real-world counterpoint, in the UK, we negotiate the \"\"before tax\"\" salary as some number of pounds per period of time. Out of this amount, income tax is typically deducted and this calculation is quoted on the payslip. (Like most of the rest of the world.) However, there's another grade of income tax called \"\"Employer’s National Insurance\"\". This is calculated just like the other forms of income tax, paid by the employer directly, but the employee never sees this on their payslip and it is not part of the negotiated salary. https://www.gov.uk/national-insurance-rates-letters/contribution-rates So say you're an employer and you've budgeted £1000/month for a potential employee's salary. You'd have to offer that person £878.73/month salary to bring the amount you'd actually be paying to the £1000 you've budgeted. Why they do this, I have no idea. https://politics.stackexchange.com/questions/4917/what-is-the-rationale-for-employers-national-insurance-in-the-uk\"" }, { "docid": "317260", "title": "", "text": "10 years into my career. Here are my notes: 1. Don't work overtime as a salaried employee. If there's more work than people then management needs to hire more people. Sure, there are times when shit hits the fan and there's no other option, but that should be a 'once every two years' event, not a 'once every week' event. 2. Be a rockstar. If you're spending time 'looking busy' because you finished a 3 hour job in 1 hour ship the results to your manager and ask for more. Those results will be noticed and will move you from entry-level to mid-level to senior. 3. Skills pay the bills. Always work on learning new things to bring value to your employer. This is also required to move up the chain in your career, and leads into my #4. 4. Get paid what you're worth. Maintain an understanding of what similar skillsets are paying in your area and either maintain or exceed that. Your employer has an incentive to pay you as little as possible. Show them comparable salaries for the same position paying more and make them match it. If they won't match it find someone who will. 5. Don't correct your boss/salesperson when they are presenting to management/customers. Instead, let them know after the meeting. Your #2 points (both of them) are something that I struggled with when I was new in my career. It was incredibly frustrating to *know* something, but not have anyone listen due to the fact that I was a 'kid'. Unfortunately it's a part of life. If you can do #2 and #3 on my list for a couple of years people will start listening. It's a great feeling being a 24 year old kid in a room full of my boss's bosses, and my boss's boss's bosses and having them listen and consider my opinion, but it's not something that's given to everyone. You need to earn it." }, { "docid": "29548", "title": "", "text": "Assumptions made for this answer, they may not be true for anybody: For the numbers part we will assume you are single and make 96,000 per year. Unknowns: how long you have to wait post accumulation to convince the bank you really do make $96,000 per year." }, { "docid": "290782", "title": "", "text": "\"Zero? Ten grand? Somewhere in the middle? It depends. Your stated salary, in U.S. dollars, would be high five-figures (~$88k). You certainly should not be starving, but with decent contributions toward savings and retirement, money can indeed be tight month-to-month at that salary level, especially since even in Cardiff you're probably paying more per square foot for your home than in most U.S. markets (EDIT: actually, 3-bedroom apartments in Cardiff, according to Numbeo, range from £750-850, which is US$1200-$1300, and for that many bedrooms you'd be hard-pressed to find that kind of deal in a good infield neighborhood of the DFW Metro, and good luck getting anywhere close to downtown New York, LA, Miami, Chicago etc for that price. What job do you do, and how are you expected to dress for it? Depending on where you shop and what you buy, a quality dress shirt and dress slacks will cost between US$50-$75 each (assuming real costs are similar for the same brands between US and UK, that's £30-£50 per shirt and pair of pants for quality brands). I maintain about a weeks' wardrobe at this level of dress (my job allows me to wear much cheaper polos and khakis most days and I have about 2 weeks' wardrobe of those) and I typically have to replace due to wear or staining, on average, 2 of these outfits a year (I'm hard on clothes and my waistline is expanding). Adding in 3 \"\"business casual\"\" outfits each year, plus casual outfits, shoes, socks, unmentionables and miscellany, call it maybe $600(£400)/year in wardrobe. That doesn't generally get metered out as a monthly allowance (the monthly amount would barely buy a single dress shirt or pair of slacks), but if you're socking away a savings account and buying new clothes to replace old as you can afford them it's a good average. I generally splurge in months when the utilities companies give me a break and when I get \"\"extra\"\" paychecks (26/year means two months have 3 checks, effectively giving me a \"\"free\"\" check that neither pays the mortgage nor the other major bills). Now, that's just to maintain my own wardrobe at a level of dress that won't get me fired. My wife currently stays home, but when she worked she outspent me, and her work clothes were basic black. To outright replace all the clothes I wear regularly with brand-new stuff off the rack would easily cost a grand, and that's for the average U.S. software dev who doesn't go out and meet other business types on a daily basis. If I needed to show up for work in a suit and tie daily, I'd need a two-week rotation of them, plus dress shirts, and even at the low end of about $350 (£225) per suit, $400 (£275) with dress shirt and tie, for something you won't be embarrassed to wear, we're talking $4000 (£2600) to replace and $800 (£520) per year to update 2 a year, not counting what I wear underneath or on the weekends. And if I wore suits I'd probably have to update the styles more often than that, so just go ahead and double it and I turn over my wardrobe once every 5 years. None of this includes laundering costs, which increase sharply when you're taking suits to the cleaners weekly versus just throwing a bunch of cotton-poly in the washing machine. What hobbies or other entertainment interests do you and your wife have? A movie ticket in the U.S. varies between $7-$15 depending on the size of the screen and 2D vs 3D screenings. My wife and I currently average less than one theater visit a month, but if you took in a flick each weekend with your wife, with a decent $50 dinner out, that's between $260-$420 (£165-270) monthly in entertainment expenses. Not counting babysitting for the little one (the going rate in the US is between $10 and $20 an hour for at-home child-sitting depending on who you hire and for how long, how often). Worst-case, without babysitting that's less than 5% of your gross income, but possibly more than 10% of your take-home depending on UK effective income tax rates (your marginal rate is 40% according to the HMRC, unless you find a way to deduct about £30k of your income). That's just the traditional American date night, which is just one possible interest. Playing organized sports is more or less expensive depending on the sport. Soccer (sorry, football) just needs a well-kept field, two goals and and a ball. Golf, while not really needing much more when you say it that way, can cost thousands of dollars or pounds a month to play with the best equipment at the best courses. Hockey requires head-to-toe padding/armor, skates, sticks, and ice time. American football typically isn't an amateur sport for adults and has virtually no audience in Europe, but in the right places in the U.S., beginning in just a couple years you'd be kitting your son out head-to-toe not dissimilar to hockey (minus sticks) and at a similar cost, and would keep that up at least halfway through high school. I've played them all at varying amateur levels, and with the possible exception of soccer they all get expensive when you really get interested in them. How much do you eat, and of what?. My family of three's monthly grocery budget is about $300-$400 (£190-£260) depending on what we buy and how we buy it. Americans have big refrigerators (often more than one; there's three in my house of varying sizes), we buy in bulk as needed every week to two weeks, we refrigerate or freeze a lot of what we buy, and we eat and drink a lot of high-fructose corn-syrup-based crap that's excise-taxed into non-existence in most other countries. I don't have real-world experience living and grocery-shopping in Europe, but I do know that most shopping is done more often, in smaller quantities, and for more real food. You might expect to spend £325 ($500) or more monthly, in fits and starts every few days, but as I said you'd probably know better than me what you're buying and what it's costing. To educate myself, I went to mysupermarket.co.uk, which has what I assume are typical UK food prices (mostly from Tesco), and it's a real eye-opener. In the U.S., alcohol is much more expensive for equal volume than almost any other drink except designer coffee and energy drinks, and we refrigerate the heck out of everything anyway, so a low-budget food approach in the U.S. generally means nixing beer and wine in favor of milk, fruit juices, sodas and Kool-Aid (or just plain ol' tap water). A quick search on MySupermarkets shows that wine prices average a little cheaper, accounting for the exchange rate, as in the States (that varies widely even in the U.S., as local and state taxes for beer, wine and spirits all differ). Beer is similarly slightly cheaper across the board, especially for brands local to the British Isles (and even the Coors Lite crap we're apparently shipping over to you is more expensive here than there), but in contrast, milk by the gallon (4L) seems to be virtually unheard of in the UK, and your half-gallon/2-liter jugs are just a few pence cheaper than our going rate for a gallon (unless you buy \"\"organic\"\" in the US, which carries about a 100% markup). Juices are also about double the price depending on what you're buying (a quart of \"\"Innocent\"\" OJ, roughly equivalent in presentation to the U.S. brand \"\"Simply Orange\"\", is £3 while Simply Orange is about the same price in USD for 2 quarts), and U.S.-brand \"\"fizzy drinks\"\" are similarly at a premium (£1.98 - over $3 - for a 2-liter bottle of Coca-Cola). With the general preference for room-temperature alcohol in Europe giving a big advantage to the longer unrefrigerated shelf lives of beer and wine, I'm going to guess you guys drink more alcohol and water with dinner than Americans. Beef is cheaper in the U.S., depending on where you are and what you're buying; prices for store-brand ground beef (you guys call it \"\"minced\"\") of the grade we'd use for hamburgers and sauces is about £6 per kilo in the UK, which works out to about $4.20/lb, when we're paying closer to $3/lb in most cities. I actually can't remember the last time I bought fresh chicken on the bone, but the average price I'm seeing in the UK is £10/kg ($7/lb) which sounds pretty steep. Anyway, it sounds like shopping for American tastes in the UK would cost, on average, between 25-30% more than here in the US, so applying that to my own family's food budget, you could easily justify spending £335 a month on food.\"" }, { "docid": "547574", "title": "", "text": "Welcome to the real world. BTW, you have far too rosy a view of this if you think you're only paying 28.5% of your income in taxes. Remember that your employer theoretically pays half your FICA tax. But as far as they're concerned, that's part of the cost of having you as an employee. If FICA was abolished, supply and demand would quickly push salaries up by an amount equal to the FICA tax. So add another 7.65% to your taxes. Plus your employer has to pay unemployment tax (federal unemployment tax is $420 per employee per year, states vary) and workman's compensation tax (no idea how much that is) for the privilege of having you as an employee. You likely pay sales taxes on most everything you buy. I believe sales tax in Massachusetts is 6.25%. Assuming you pay that on only half of what you buy, add another 3% or so. Do you work for a corporation? Between when they sell the fruits of your labor and when they pay you, they have to pay corporate income tax. There are a lot of deductions so that gets complicated, but figure another few percent. Do you drive a car? You're paying gas tax -- 41.9 cents per gallon in MA. Do you smoke or drink alcohol? Extra taxes on those. Travel by plane or stay in a hotel? More special taxes. When you get around to buying a house, you'll pay property taxes on it every year, year after year. For me in Michigan that's another 3% of my income. I understand it's a lot more in Massachusetts. Etc, many other smaller taxes that add up." }, { "docid": "526383", "title": "", "text": "First off, great job on your finances so far. You are off on the right foot and have some sense of planning for the future. Also, it is a great question. First, I agree with @littleadv. Take advantage of your employer match. Do not drop your 401(k) contributions below that. Also, good job on putting your contributions into the Roth account. Second, I would ask: Are you out of debt? If not, put all your extra income towards paying off debt, and then you can work your plan. Third, time to do some math. What will your business look like? How much capital would you need to get started? Are there things you can do now on a part-time basis to start this business or prepare you to start the business? Come up with a figure, find some mutual funds that have a low beta, and back out how much money you need to save per month, so you have around that total. Then you have a figure. e.g. Assume you need $20,000, and you find a fund that has done 8% over the past 20 years. Then, you would need to save about $110/month to be ready to go in 10 years, or $273/month to go in about 5 years. (It's a time value of money calculation.) The house is really a long way off, but you could do the same kind of calculation. I feel that you think your income, and possibly locale, will change dramatically over the next few years. It might not be bad to double what you are saving for the business, and designate one half for the house." }, { "docid": "243356", "title": "", "text": "\"You cannot deduct commute expenses. Regarding your specific example, something to consider is that if the standard of living is higher in San Francisco, presumably the wages are higher too. Therefore, you must make a choice to trade \"\"time and some money for commuting costs\"\" for \"\"even more money\"\" in the form of higher wages. For example, if you can make $50K working 2 hours away from SF, or $80K working in SF, and it costs you $5K extra per year in commute costs, you still come out ahead by $25K (minus taxes). If it ends up costing $20K more to live in SF (due to higher rent/mortgage/food/etc), some people choose to trade 4 extra hours of commuting time to put that extra $20K in their pocket. It's sort of like having an extra part time job, except you get paid to read/watch tv/sleep on the job (assuming you can take a train to work).\"" }, { "docid": "406314", "title": "", "text": "Math time. 24 means 2 years out of college, or 6 years out of highschool, the latter being much more plausible given the poster's content quality. $100k / 6 = $16.7k/year 16.7k / 52 weeks = $321/week $321 / (11/hr * (1 - 15% taxes)) = 34 hours per week. So he worked 34 hours per week, without fail, for 6 years, with NO expenses of any kind whatsoever. OR, much more likely, he managed to save only $10k, not $100k in 6 years." }, { "docid": "271266", "title": "", "text": "\"If you're single, the only solution I'm aware of, assuming you are truly getting a 1099-misc and not a W-2 (and don't have a W-2 option available, like TAing), is to save in a nondeductible account for now. Then, when you later do have a job, use that nondeductible account (in part) to fund your retirement accounts. Particularly the first few years (if you're a \"\"young\"\" grad student in particular), you'll probably be low enough on the income side that you can fit this in - in particular if you've got a 401k or 403b plan at work; make your from-salary contributions there, and make deductible IRA or Roth IRA contributions from your in-school savings. If you're not single, or even if you are single but have a child, you have a few other options. Spouses who don't have earned income, but have a spouse who does, can set up a Spousal IRA. You can then, combined, save up to your spouse's total earned income (or the usual per-person maximums). So if you are married and your wife/husband works, you can essentially count his/her earned income towards your earned income. Second, if you have a child, consider setting up a 529 plan for them. You're probably going to want to do this anyway, right? You can even do this for a niece or nephew, if you're feeling generous.\"" }, { "docid": "220794", "title": "", "text": "\"Look for jobs you can do PRN - pro re nada or \"\"as the need arises.\"\" Basically very part-time work, where you are free to decide whether or not you want to work given shift offered. It's pretty common in medicine and in education. If you want to work a whole week, you probably can! If you don't, they just call the next person on the list. Obviously you'll need some extra education, but I'm assuming that isn't a problem. Beyond that, as far as 'leisure' pursuits - try to write a book! Fiction, nonfiction, doesn't matter. You'll suck at that for long enough to take up a few years of your life :). You could get a pilot's license - also pretty time intensive, and could lead to some interesting part-time gigs as a charter pilot down the line. General kind of tour guide/leisure activity instructor work seems to be very rewarding. I'm active in my local motorcycling community, and I've never met an instructor who didn't love his job. MSF instructor is a 12 hour per week gig. Good luck!\"" }, { "docid": "417728", "title": "", "text": "&gt;Okay but still three people at $12/hr is $16 more per hour than one person at $20/hr. You forgot the times 3 part. &gt;I still don't see how u/NEVERDOUBTED asserts that the three at $12/hr cost less. Cause they are wrong, but too hard headed to see that." }, { "docid": "121621", "title": "", "text": "\"As a contractor, I have done this exact calculation many times so I can compare full time employment offers when they come. The answer varies greatly depending on your situation, but here's how to calculate it: So, subtracting the two and you get I've run many different scenarios with multiple plans and employers, and in my situation with a spouse and 1 child, the employer plans usually ended up saving me approximately $5k per year. So then, to answer your question: ...salary is \"\"100k\"\", \"\"with healthcare\"\", or then \"\"X\"\" \"\"with no healthcare\"\" - what do we reckon? I reckon I would want to be paid $5K more, or $105K. This is purely hypothetical though and assumes there are no other differences except for with or without health insurance. In reality, contractor vs employee will have quite a few other differences. But in general, the calculation varies by company and the more generous the employer's health benefits, the more you need to be compensated to make up for not having it. Note: the above numbers are very rough, and there are many other factors that come into play, some of which are: As a side note, many years ago, during salary talks with a company, I was able to negotiate $2K in additional yearly salary by agreeing not to take the health insurance since I had better insurance through my spouse. Health insurance in the US was much cheaper back then so I think closer to $5K today would be about right and is consistent with my above ballpark calculation. I always wondered what would have happened if I turned around and enrolled the following year. I suspect had I done that they could not have legally lowered my salary due to my breaking my promise, but I wouldn't be surprised if I didn't get a raise that year either.\"" }, { "docid": "294602", "title": "", "text": "&gt; You can't find anyone else who would pay you more, or you would have left. That's a reflection of what you have to offer the world. Your comment was thoughtful, and this last bit in particular I feel is like something that I've been wrestling with for a while. It's a very libertarian view as you probably know. It makes a lot of sense to me, but I can't help to think of some possible flaws and wonder what you think: 1. Availability of work: If somebody has a choice between no job and being grossly underpaid, wouldn't the choice be between having no money and a little money at that point? Doesn't that run the risk of exploitation? Wouldn't exploitation be working for less than what you're worth? 2. Value: Unskilled pretty much means replaceable. They don't give a shit if you come or go, and vice versa. That's not a reflection of a job's worth to the company, nor is a real reflection of how difficult it is. There's no competition for wages. Eventually workers get sick of it and leave, not expecting improved wages elsewhere but a job they can deal with for 40 hours per week. But there are always more people in need to take their place, so the company has no incentive to raise wages. Like you said, it *is* a reflection of what you have to offer to the world, in a sense that your skills are not uncommon. However, is this everything? The world *needs* unskilled labor to run. Is there something wrong with being a cashier? A doorman? A guy who unpacks the trucks that carry the things we all use? No, the world *needs* these people...should people who are needed have jobs that don't allow for them to meet basic living standards? 3. Expectation: The only reason why most people won't work for less than 8 or 9 dollars/hr, expect reasonable flexibility to balance work and personal life, don't expect to be forced to work more than 8-9 hours per day, have weekends off, and those working 40 hrs/week demand holiday pay/sick days/access to insurance/vacation time, is because that's what people expect out of a job in this day and age. None of these things are law (i think). People used to be treated considerably worse by their employers, and likely there will be a time when people will think that the people of our day were stupid for settling for less. The labor movement has done much in this regard. &gt; Maybe, instead of bitching that you are paid shit wages, you should ask why you ever expected to earn more after failing to acquire any skill a teenager couldn't master in a week. 4. Everyone's solution?: Let's say everyone learns to do a skilled job, who will be left to do the unskilled jobs? Someone will have to do them. Some countries have hordes of college educated workers working unskilled jobs, because of the high % that go to college. Ok, so then leave it to merit. Does merit always work though? What about nepotism? Personality, when it doesn't matter for the job? Age, Race, Sex, Ethnicity...think these play any part in the hiring process? If all else fails, not everyone can be expected to be a successful entrepreneur. 5. Life: Life can throw you some curveballs, and people make mistakes. Some tend to pay for them more than others. Some have talent, others don't. Some are born with money, some not. Some have a large and caring family, others have no family at all. Again, I'm not saying these things necessarily invalidate your original point, but it's something to consider. Your thoughts?" }, { "docid": "235048", "title": "", "text": "\"30 minutes of driving times 5 days is 2.5 hours of driving. Average 40mph is 100 miles per week. Guess of 25mpg on your car is 4 gallons of gas. 4 times 3 bucks a gallon is 12 dollars. Say 3 hours per week of your time, times 9/10 dollars per hour is 27/30 dollars per week. 12 plus 27 is 39. So I'd say around 40 dollars per week seems fair. You could do 50 but it is playing with a doggy for a couple hours. Unless it's a giant (or tiny) pain in the ass, it's hardly \"\"work\"\" but that's just me. $40/week sounds fair. Hope you work it out pal.\"" }, { "docid": "306816", "title": "", "text": "Where did you get the impression that it is a $70k per year job? Not even the apple picker is going to pick apples all year long. The seasonal nature of the work means that you'll put in time during certain times of year, but often you won't be needed at all. We're talking hourly pay here because it is an hourly, not a yearly, job. If you bring some skills to the table, I know some farms that would jump at the chance to pay you $70k per year. But most people don't have those skills and those that do can make even more elsewhere. Source: The real world. I don't know how to link to that. Sorry." } ]

[ { "docid": "62882", "title": "", "text": "It's difficult to quantify the intangible benefits, so I would recommend that you begin by quantifying the financials and then determine whether the difference between the pay of the two jobs justifies the value of the intangible benefits to you. Some Explainations You are making $55,000 per year, but your employer is also paying for a number of benefits that do not come free as a contractor. Begin by writing down everything they are providing you that you would like to continue to have. This may include: You also need to account for the FICA tax that you need to pay completely as a part time employee (normally a company pays half of it for you). This usually amounts to 7.8% of your income. Quantification Start by researching the cost for providing each item in the list above to yourself. For health insurance get quotes from providers. For bonuses average your yearly bonuses for your work history with the company. Items like stock options you need to make your best guess on. Calculations Now lets call your original salary S. Add up all of the costs of the list items mentioned above and call them B. This formula will tell you your real current annual compensation (RAC): Now you want to break your part time job into hours per year, not hours per month, as months have differing numbers of working days. Assuming no vacations that is 52 weeks per year multiplied by 20 hours, or 1040 hours (780 if working 15 hours per week). So to earn the same at the new job as the old you would need to earn an hourly wage of: The full equation for 20 hours per week works out to be: Assumptions DO NOT TAKE THIS SECTION AS REPRESENTATIVE OF YOUR SITUATION; ONLY A BALLPARK ESTIMATE You must do the math yourself. I recommend a little spreadsheet to simplify things and play what-if scenarios. However, we can ballpark your situation and show how the math works with a few assumptions. When I got quoted for health insurance for myself and my partner it was $700 per month, or $8400 per year. If we assume the same for you, then add 3% 401k matching that we'll assume you're taking advantage of ($1650), the equation becomes: Other Considerations Keep in mind that there are other considerations that could offset these calculations. Variable hours are a big risk, as is your status as a 'temporary' employee. Though on the flip side you don't need to pay taxes out of each check, allowing you to invest that money throughout the year until taxes are due. Also, if you are considered a private contractor you can write off many expenses that you cannot as a full time employee." } ]

[ { "docid": "526383", "title": "", "text": "First off, great job on your finances so far. You are off on the right foot and have some sense of planning for the future. Also, it is a great question. First, I agree with @littleadv. Take advantage of your employer match. Do not drop your 401(k) contributions below that. Also, good job on putting your contributions into the Roth account. Second, I would ask: Are you out of debt? If not, put all your extra income towards paying off debt, and then you can work your plan. Third, time to do some math. What will your business look like? How much capital would you need to get started? Are there things you can do now on a part-time basis to start this business or prepare you to start the business? Come up with a figure, find some mutual funds that have a low beta, and back out how much money you need to save per month, so you have around that total. Then you have a figure. e.g. Assume you need $20,000, and you find a fund that has done 8% over the past 20 years. Then, you would need to save about $110/month to be ready to go in 10 years, or $273/month to go in about 5 years. (It's a time value of money calculation.) The house is really a long way off, but you could do the same kind of calculation. I feel that you think your income, and possibly locale, will change dramatically over the next few years. It might not be bad to double what you are saving for the business, and designate one half for the house." }, { "docid": "556946", "title": "", "text": "\"As a self-employed Handyman I can tell you this. Any work that is done, be it professional, part-time, hobby or whatever else, has to answer to two primary criteria. As you asked, it has to be worthwhile in financial terms and more importantly in personal terms. In the long term, charging low rates will demoralize her. Not worth it. Someone once said; \"\"I have no quarrel with he who charges cheaply, because who better then he knows the value of his services\"\"? Obviously one has to remain reasonable. Then there is an ambush factor in working for yourself. I call it syphoning losses since they are extremely difficult to calculate as noted above here already. In the first place they are extremely difficult to detect anyway. Micro-management will not tell you the losses, you can only do it at the end of a period on a balance sheet. Then you have to calculate a fair price in terms of lessons given and monies received. The trick is to gain a fair assessment of worth to her without her needing to go into the books, just as a simple gut feel. She needs to really feel good about it to maintain motivation for the future. Otherwise, I did it, it does not work. The other consideration is that when money changes hands it places a benchmark on the tuition and the relationship. One. It locks her into delivering professional work as she already is one. Two. The students will be locked into giving fair and excellent commitment in being taught. A simple calculation goes like this; Use the time span of a month as it is easier to break down available time per week. Also remember that there will perforce be extra hours spent in consultation with parents, this is a syphoning cost, it has be calculated. Difficult at the start, but keep track of it. One other thing. I do not give discounts of extend favours, but I keep my prices reasonable. [[I was told I am some 25% more expensive than the latest quotes, but I kept on getting work with a high execution to quotation rate.]] Floating prices are impossible to track, manage and justify, people talk to each other, whether you like it or not. Do proper, reasonable calculations and be up front to all about how you work. In contract on paper. It just may be necessary to scale prices from beginner to advanced classes. OK, $50 seems a fair price, I don't live in the States, but about three/four Big Mac's would compare about right. You are NOT selling time, you ARE selling expertise. Decide how much she wants out of it per month. Forget retirement, you live now. This income will also cover other \"\"invisible\"\" extraneous work. Determine how much time will be spent in giving lessons. You can only charge for \"\"visible\"\" work done. Basic Hourly Rate = Monthly Income / Lesson Hours. Then there's a catch. Research has shown that owners of one man and small businesses spend about 55% of their time in getting new business. So,now. Charged Hourly Rate = Basic Hourly Rate DIVIDED by 45%. This could frighten you, but these are hard commercial facts. Things could appear to be extremely expensive. You will; however; have a solid base from which to decide as you go further. The accounting is a good place to start, but she, you both rather, have to feel good about the rewards and the counter performances. Great success to you both!\"" }, { "docid": "121621", "title": "", "text": "\"As a contractor, I have done this exact calculation many times so I can compare full time employment offers when they come. The answer varies greatly depending on your situation, but here's how to calculate it: So, subtracting the two and you get I've run many different scenarios with multiple plans and employers, and in my situation with a spouse and 1 child, the employer plans usually ended up saving me approximately $5k per year. So then, to answer your question: ...salary is \"\"100k\"\", \"\"with healthcare\"\", or then \"\"X\"\" \"\"with no healthcare\"\" - what do we reckon? I reckon I would want to be paid $5K more, or $105K. This is purely hypothetical though and assumes there are no other differences except for with or without health insurance. In reality, contractor vs employee will have quite a few other differences. But in general, the calculation varies by company and the more generous the employer's health benefits, the more you need to be compensated to make up for not having it. Note: the above numbers are very rough, and there are many other factors that come into play, some of which are: As a side note, many years ago, during salary talks with a company, I was able to negotiate $2K in additional yearly salary by agreeing not to take the health insurance since I had better insurance through my spouse. Health insurance in the US was much cheaper back then so I think closer to $5K today would be about right and is consistent with my above ballpark calculation. I always wondered what would have happened if I turned around and enrolled the following year. I suspect had I done that they could not have legally lowered my salary due to my breaking my promise, but I wouldn't be surprised if I didn't get a raise that year either.\"" }, { "docid": "547574", "title": "", "text": "Welcome to the real world. BTW, you have far too rosy a view of this if you think you're only paying 28.5% of your income in taxes. Remember that your employer theoretically pays half your FICA tax. But as far as they're concerned, that's part of the cost of having you as an employee. If FICA was abolished, supply and demand would quickly push salaries up by an amount equal to the FICA tax. So add another 7.65% to your taxes. Plus your employer has to pay unemployment tax (federal unemployment tax is $420 per employee per year, states vary) and workman's compensation tax (no idea how much that is) for the privilege of having you as an employee. You likely pay sales taxes on most everything you buy. I believe sales tax in Massachusetts is 6.25%. Assuming you pay that on only half of what you buy, add another 3% or so. Do you work for a corporation? Between when they sell the fruits of your labor and when they pay you, they have to pay corporate income tax. There are a lot of deductions so that gets complicated, but figure another few percent. Do you drive a car? You're paying gas tax -- 41.9 cents per gallon in MA. Do you smoke or drink alcohol? Extra taxes on those. Travel by plane or stay in a hotel? More special taxes. When you get around to buying a house, you'll pay property taxes on it every year, year after year. For me in Michigan that's another 3% of my income. I understand it's a lot more in Massachusetts. Etc, many other smaller taxes that add up." }, { "docid": "271266", "title": "", "text": "\"If you're single, the only solution I'm aware of, assuming you are truly getting a 1099-misc and not a W-2 (and don't have a W-2 option available, like TAing), is to save in a nondeductible account for now. Then, when you later do have a job, use that nondeductible account (in part) to fund your retirement accounts. Particularly the first few years (if you're a \"\"young\"\" grad student in particular), you'll probably be low enough on the income side that you can fit this in - in particular if you've got a 401k or 403b plan at work; make your from-salary contributions there, and make deductible IRA or Roth IRA contributions from your in-school savings. If you're not single, or even if you are single but have a child, you have a few other options. Spouses who don't have earned income, but have a spouse who does, can set up a Spousal IRA. You can then, combined, save up to your spouse's total earned income (or the usual per-person maximums). So if you are married and your wife/husband works, you can essentially count his/her earned income towards your earned income. Second, if you have a child, consider setting up a 529 plan for them. You're probably going to want to do this anyway, right? You can even do this for a niece or nephew, if you're feeling generous.\"" }, { "docid": "511977", "title": "", "text": "\"Inflation is a bad thing. It makes it much more difficult for people to compare prices and prosperity over a long period of time. This causes people to ignore the wisdom of their elders (who remember prices from a long time ago). Back in my day, you could get a burger and fries for 15 cents -- a dime for the burger, and a nickel for the fries. But the minimum wage was only a quarter an hour! That doesn't help me decide if things have gotten better or worse. How long is \"\"a long period of time\"\"? That depends on the inflation rate. At 1 percent per year, 50 or 100 years is \"\"a long time\"\". At 10 percent per year, 5 or 10 years. At 100 percent per year, a few months. Because of the Spanish conquests of gold and silver mines in Mexico and Peru, prices in the sixteenth century rose by a factor of 5.5 during the century. This inflation was recognized as causing lots of social and governmental problems. Note that this means an average inflation rate of 2 percent per year for a century is known to be a very bad thing. There are several reasons that most governments want some inflation:\"" }, { "docid": "235048", "title": "", "text": "\"30 minutes of driving times 5 days is 2.5 hours of driving. Average 40mph is 100 miles per week. Guess of 25mpg on your car is 4 gallons of gas. 4 times 3 bucks a gallon is 12 dollars. Say 3 hours per week of your time, times 9/10 dollars per hour is 27/30 dollars per week. 12 plus 27 is 39. So I'd say around 40 dollars per week seems fair. You could do 50 but it is playing with a doggy for a couple hours. Unless it's a giant (or tiny) pain in the ass, it's hardly \"\"work\"\" but that's just me. $40/week sounds fair. Hope you work it out pal.\"" }, { "docid": "63243", "title": "", "text": "\"I find the question interesting, but it's beyond an intelligent answer. Say what you will about Jim Cramer, his advice to spend \"\"an hour per month on each stock\"\" you own appears good to me. But it also limits the number of stocks you can own. Given that most of us have day jobs in other fields, you need to decide how much time and education you can put in. That said, there's a certain pleasure in picking stocks, buying a company that's out of favor, but your instinct tells you otherwise. For us, individual stocks are about 10% of total portfolio. The rest is indexed. The amount that \"\"should be\"\" in individual stocks? None. One can invest in low cost funds, never own shares of individual stocks, and do quite well.\"" }, { "docid": "106817", "title": "", "text": "1. It is difficult. There is no formal process outside of undergrad and MBA programs to easily gain access to interviews. At your level, its mostly about connections. If willing to start near bottom, go to your business school and start applying to bank associate programs. Sounds like you would like sales and trading more than M&amp;A, so focus there. 2. If you got in at associate level, you would do 1-3 months of training and then get assigned a desk. Finance going through a tough time right now, so trajectory isn't what it used to be. Expect to be a VP after 2-4 years, then its all dependent on luck and skill. 3. If you land a job at a top 15 bank, you should be making total comp of 150k or more after the first year. Salaries not quite at 150k, but most VPS make over 150k salary, not to mention bigger bonus's. 4. If you did M&amp;A you would be working very serious hours. If you go into Sales and Trading your hours will be anywhere from 40 to 60 hours a week depending on the desk. Trading hours tend to be the shortest. 5. Boston isn't a hot bed for i-banking finance. NYC, London, Sing, Hong Kong tend to be the places to be. I know nobody in Boston that could help." }, { "docid": "406314", "title": "", "text": "Math time. 24 means 2 years out of college, or 6 years out of highschool, the latter being much more plausible given the poster's content quality. $100k / 6 = $16.7k/year 16.7k / 52 weeks = $321/week $321 / (11/hr * (1 - 15% taxes)) = 34 hours per week. So he worked 34 hours per week, without fail, for 6 years, with NO expenses of any kind whatsoever. OR, much more likely, he managed to save only $10k, not $100k in 6 years." }, { "docid": "274722", "title": "", "text": "The fact that this is what’s being reported is horribly misleading. At the bottom of the same page of that report, there is data intended to show the difference between the pay rates in genders. This data accidently proves that individual incomes are still stagnant and that the reason for our increased household wages is that more people per household are working, and part timers are working longer hours. Following is how this conclusion is drawn: The section titled “Earnings of Full Time, Year-Round Workers,” can be used to find 2015’s average income per full time worker, and 2016’s average income per full time worker. The 2015 data shows that men made up 57.51% of the full time, year round working population (63,887/111,098) and earned $51,859.00. Women made up 42.49% of the full time, year round working population (47,211/111,098) and earned $41,257.00. This means that the average income for a full time, year round worker in 2015 was $47,353.69 (51,859 x .5751 + 41,257 x .4249). The 2016 data shows that men made up 57.34% of the full time, year round working population (64,953/113,281) and earned $51,640.00. Women made up 42.66% of the population (48,328/113,281) and earned $41,554.00. This means the average income for a full time, year round worker in 2016 was $47,337.11 (51,640 x .5734 + 41,554 x .4266). So while the news is reporting the increase in household income, the average income for a full time, year round worker actually fell by $16.58 in 2016." }, { "docid": "542651", "title": "", "text": "I've heard from friends in high paying companies that the norm is under 4 hours: you can upgrade yourself. Above 4 hours: business. Sounds reasonable to me. Usually people that fly business aren't flying one or two times a year. They're doing it a couple of days per week. And these people are usually in high demand. If someone doesn't offer this as the norm, they can probably get a job someplace that does." }, { "docid": "2325", "title": "", "text": "\"Economic hardship is just as misleading as \"\"economic slavery\"\". If you are working two jobs and can't afford rent... How can you better yourself? Sure, if you are exceptionally intelligent and/or charismatic and/or exceptionally great in some other way, you could find a way out of the hole. But if you are working two full-time jobs and are trying your best - that should be enough. I personally am against a $15 minimum wage - even on a local level, much less a state or federal level, but I very much support legislation that ensures someone who works 85 (or 60) hours a week (that's 12 hours a day for 85 hours per week) can get by. By \"\"getting by\"\" I mean can rent modest housing, can afford nutritious food, can afford decent health insurance, can buy clothes (maybe second-hand), can put a bit into savings, etc. Minimum wage jobs are done by young people just entering the job market and older people with few skills. Better to have legislation that takes that into account. High school and college kids won't be working 60-85+ hours a week. Save the subsidies for the people that really need them.\"" }, { "docid": "386264", "title": "", "text": "In general no, if you just have one employer and work there with the same salary for the whole year. Typically an employer does tax withholding by extrapolating your monthly income to the entire year and withholding the right amount so that at the end, what is withheld is what you owe. It's not a surprise to them when your income crosses a tax bracket threshold, because they knew how much they were paying you and knew when you would cross into another bracket, so they factored that in. If you have multiple jobs or only worked for part of the year, or if your income varied from month to month (e.g., you got a raise) there could be a discrepancy between what is withheld and what you owe, because each employer only knows about what it's paying you, not what money you may have earned from other sources. (Even here, though, the discrepancy wouldn't be due to the tax brackets per se.) You can adjust your withholdings on form W-4 if needed, to tell the employer to withhold more or less than they otherwise would." }, { "docid": "188816", "title": "", "text": "I'll start with the bottom line. Below the line I'll address the specific issues. Becoming a US tax resident is a very serious decision, that has significant consequences for any non-American with >$0 in assets. When it involves cross-border business interests, it becomes even more significant. Especially if Switzerland is involved. The US has driven at least one iconic Swiss financial institution out of business for sheltering US tax residents from the IRS/FinCEN. So in a nutshell, you need to learn and be afraid of the following abbreviations: and many more. The best thing for you would be to find a good US tax adviser (there are several large US tax firms in the UK handling the US expats there, go to one of those) and get a proper assessment of all your risks and get a proper advice. You can get burnt really hard if you don't prepare and plan properly. Now here's that bottom line. Q) Will I have to submit the accounts for the Swiss Business even though Im not on the payroll - and the business makes hardly any profit each year. I can of course get our accounts each year - BUT - they will be in Swiss German! That's actually not a trivial question. Depending on the ownership structure and your legal status within the company, all the company's bank accounts may be reportable on FBAR (see link above). You may also be required to file form 5471. Q) Will I need to have this translated!? Is there any format/procedure to this!? Will it have to be translated by my Swiss accountants? - and if so - which parts of the documentation need to be translated!? All US forms are in English. If you're required to provide supporting documentation (during audit, or if the form instructions require it with filing) - you'll need to translate it, and have the translation certified. Depending on what you need, your accountant will guide you. I was told that if I sell the business (and property) after I aquire a greencard - that I will be liable to 15% tax of the profit I'd made. Q) Is this correct!? No. You will be liable to pay income tax. The rate of the tax depends on the kind of property and the period you held it for. It may be 15%, it may be 39%. Depends on a lot of factors. It may also be 0%, in some cases. I also understand that any tax paid (on selling) in Switzerland will be deducted from the 15%!? May be. May be not. What you're talking about is called Foreign Tax Credit. The rules for calculating the credit are not exactly trivial, and from my personal experience - you can most definitely end up being paying tax in both the US and Switzerland without the ability to utilize the credit in full. Again, talk to your tax adviser ahead of time to plan things in the most optimal way for you. I will effectively have ALL the paperwork for this - as we'll need to do the same in Switzerland. But again, it will be in Swiss German. Q) Would this be a problem if its presented in Swiss German!? Of course. If you need to present it (again, most likely only in case of audit), you'll have to have a translation. Translating stuff is not a problem, usually costs $5-$20 per page, depending on complexity. Unless a lot of money involved, I doubt you'll need to translate more than balance sheet/bank statement. I know this is a very unique set of questions, so if you can shed any light on the matter, it would be greatly appreciated. Not unique at all. You're not the first and not the last to emigrate to the US. However, you need to understand that the issue is very complex. Taxes are complex everywhere, but especially so in the US. I suggest you not do anything before talking to a US-licensed CPA/EA whose practice is to work with the EU/UK expats to the US or US expats to the UK/EU." }, { "docid": "69042", "title": "", "text": "From a long-term planning point of view, is the bump in salary worth not having a 401(k)? In this case, absolutely. At $30k/year, the 4% company match comes to about $1,200 per year. To get that you need to save $1,200 yourself, so your gross pay after retirement contributions is about $28,800. Now you have an offer making $48,000. If you take the new job, you can put $2,400 in retirement (to get to an equivalent retirement rate), and now your gross pay after retirement contributions is $45,600. Now if the raise in salary were not as high, or you were getting a match that let you exceed the individual contribution max, the math might be different, but in this case you can effectively save the company match yourself and still be way ahead. Note that there are MANY other factors that may also be applicable as to whether to take this job or not (do you like the work? The company? The coworkers? The location? Is there upward mobility? Are the benefits equivalent?) but not taking a 67% raise just because you're losing a 4% 401(k) match is not a wise decision." }, { "docid": "559641", "title": "", "text": "&gt; Contingencies such as losing your job, being unemployed, or working for lower salary are excluded of course. Why? Lower education increases your likelihood of being unemployed for a prolonged period. Even during this Great Recession, [the unemployment rate for those with a bachelor's degree and older than 25 never exceeded 5%.](http://4.bp.blogspot.com/_4jIlyJ10uJU/TP1rTP2Me3I/AAAAAAAAKp0/JbKB1WQWVLE/s1600/UnemploymentEducationSept2010.jpg) Edit: &gt; 90% of the people will not reach 300-400K more in their lifetime. The difference of the median of those with a bachelor's compared to those with high school diploma in [2009 was 15K per year](http://nces.ed.gov/fastfacts/display.asp?id=77) for full-time, full-year wage and salary workers ages 25–34. At 15K per year for the 40+ years of work from 22 or so to 65, it will be 600K. But the gap will widen as the employees age. Professionals will have career advancement with resulting increase is salary. For all ages, [the difference between median salary for a bachelor's degree holder compare to high school diploma is 19.5K \\($46,930 compared to $27,380\\)](http://nces.ed.gov/programs/digest/d10/tables/dt10_392.asp)" }, { "docid": "181588", "title": "", "text": "Investment in public infrastructure is different than subsidy to private companies. Comparison to the interstate system here is irrelevant. The state of Wisconsin is giving a company $230k per worker per year in tax breaks for jobs that will pay the workers $53k per year. There is no tax rate that can earn that investment back for the state. In fact, that state income tax rate on these salaries is 6.27%. Even considering all of the additional jobs that will be created for construction and as an effect of having a large employer in the area, this investment will never pay for itself in terms of taxes generated." }, { "docid": "347072", "title": "", "text": "\"Assuming you've got no significant prepayment penalty, I would think about getting a longer mortgage, but making payments like it was a shorter mortgage. This will get the mortgage paid off in a shorter time period - but if you run into financial difficulties and/or find a better use for your money, you can drop back to paying the minimum necessary to retire the loan in 30 years without needing to refinance. (If you need to reduce your payments because you're between jobs, you don't have a very good negotiating position). For the most part, there's nothing that says you can only make one payment per month, or that it must be in the amount printed on the statement. If you want to, you can make payments weekly (or biweekly, or every 4 weeks) which typically means that you'll pay more every year. If your mortgage payments are $1000/month, that's $12,000 per year. If you tell yourself that 1000/month = $250 weekly and make yourself send a payment every week (or 500 every 2 weeks), you'll end up paying 250 * 52 = $13,000 per year, without particularly feeling the difference, especially if you get paid on a weekly/biweekly schedule instead of monthly or semi-monthly. Also, by paying more often, you're borrowing a tiny bit less money over the course of the year (because the money didn't sit in your account waiting until the 1st of the month to make a payment) so you save a little in interest there, too. Think of \"\"30 years\"\" or \"\"10 years\"\" as the basis for a minimum payment schedule, not necessarily the length of time that you or the lender really intend to keep the loan.\"" } ]

[ { "docid": "195044", "title": "", "text": "Set your xirr formula to a very tall column, leaving lots of empty rows for future additions. In column C, instead of hardcoding the value, use a formula that tests if it's the current bottom entry, like this: =IF(ISBLANK(A7),-C6, C6) If the next row has no date entered (yet), then this is the latest value, and make it negative. Now, to digress a bit, there are several ways to measure returns. I feel XIRR is good for individual positions, like holding a stock, maybe buying more via DRIP, etc. For the whole portfolio it stinks. XIRR is greatly affected by timing of cash flows. Steady deposits and no withdrawals dramatically skew the return lower. And the opposite is true for steady withdrawals. I prefer to use TWRR (aka TWIRR). Time Weighted Rate of Return. The word 'time' is confusing, because it's the opposite. TWRR is agnostic to timing of cashflows. I have a sample Excel spreadsheet that you're welcome to steal from: http://moosiefinance.com/static/models/spreadsheets.html (it's the top entry in the list). Some people prefer XIRR. TWRR allows an apples-to-apples comparison with indexes and funds. Imagine twin brothers. They both invest in the exact same ideas, but the amount of cash deployed into these ideas is different, solely because one brother gets his salary bonus annually, in January, and the other brother gets no bonus, but has a higher bi-weekly salary to compensate. With TWRR, their percent returns will be identical. With XIRR they will be very different. TWRR separates out investing acumen from the happenstance timing of when you get your money to deposit, and when you retire, when you choose to take withdrawals. Something to think about, if you like. You might find this website interesting, too: http://www.dailyvest.com/" } ]

[ { "docid": "203670", "title": "", "text": "\"Using the fact that you'd save $160/mo by spending $7000, I'd look at it this way - If I were to lend you the $7000 at 12%/yr, $160 would pay it off in 58 months. At 18%/yr, 72 months or just 6 years. You can run spreadsheets to get breakeven scenarios, and mhoran is on track with his answer, but breakeven is just one point to consider. Beyond that date, it's free money. My approach is to look at it with a question - \"\"How much interest could I afford to pay to make that monthly savings worthwhile?\"\"\"" }, { "docid": "450808", "title": "", "text": "\"One way to do these sorts of calculations is to use the spreadsheet version of IRS form 1040 available here. This is provided by a private individual and is not an official IRS tool, but in practice it is usually accurate enough for these purposes. You may have to spend some time figuring out where to enter the info. However, if you enter your self-employment income on Schedule C, this spreadsheet will calculate the self-employment tax as well as the income tax. An advantage is that it is the full 1040, so you can also select the standard deduction and the number of exemptions you are entitled to, enter ordinary W-2 income, even capital gains, etc. Of course you can also make use of other tax software to do this, but in my experience the \"\"Excel 1040\"\" is more convenient, as most websites and tax-prep software tend to be structured in a linear fashion and are more cumbersome to update in an ad-hoc way for purposes like tax estimation. You can do whatever works for you, but I would recommend taking a look at the Excel 1040. It is a surprisingly useful tool.\"" }, { "docid": "189006", "title": "", "text": "\"First, a clarification. No assets are immune to inflation, apart from inflation-indexed securities like TIPS or inflation-indexed gilts (well, if held to maturity, these are at least close). Inflation causes a decline in the future purchasing power of a given dollar1 amount, and it certainly doesn't just affect government bonds, either. Regardless of whether you hold equity, bonds, derivatives, etc., the real value of those assets is declining because of inflation, all else being equal. For example, if I invest $100 in an asset that pays a 10% rate of return over the next year, and I sell my entire position at the end of the year, I have $110 in nominal terms. Inflation affects the real value of this asset regardless of its asset class because those $110 aren't worth as much in a year as they are today, assuming inflation is positive. An easy way to incorporate inflation into your calculations of rate of return is to simply subtract the rate of inflation from your rate of return. Using the previous example with inflation of 3%, you could estimate that although the nominal value of your investment at the end of one year is $110, the real value is $100*(1 + 10% - 3%) = $107. In other words, you only gained $7 of purchasing power, even though you gained $10 in nominal terms. This back-of-the-envelope calculation works for securities that don't pay fixed returns as well. Consider an example retirement portfolio. Say I make a one-time investment of $50,000 today in a portfolio that pays, on average, 8% annually. I plan to retire in 30 years, without making any further contributions (yes, this is an over-simplified example). I calculate that my portfolio will have a value of 50000 * (1 + 0.08)^30, or $503,132. That looks like a nice amount, but how much is it really worth? I don't care how many dollars I have; I care about what I can buy with those dollars. If I use the same rough estimate of the effect of inflation and use a 8% - 3% = 5% rate of return instead, I get an estimate of what I'll have at retirement, in today's dollars. That allows me to make an easy comparison to my current standard of living, and see if my portfolio is up to scratch. Repeating the calculation with 5% instead of 8% yields 50000 * (1 + 0.05)^30, or $21,6097. As you can see, the amount is significantly different. If I'm accustomed to living off $50,000 a year now, my calculation that doesn't take inflation into account tells me that I'll have over 10 years of living expenses at retirement. The new calculation tells me I'll only have a little over 4 years. Now that I've clarified the basics of inflation, I'll respond to the rest of the answer. I want to know if I need to be making sure my investments span multiple currencies to protect against a single country's currency failing. As others have pointed out, currency doesn't inflate; prices denominated in that currency inflate. Also, a currency failing is significantly different from a prices denominated in a currency inflating. If you're worried about prices inflating and decreasing the purchasing power of your dollars (which usually occurs in modern economies) then it's a good idea to look for investments and asset allocations that, over time, have outpaced the rate of inflation and that even with the effects of inflation, still give you a high enough rate of return to meet your investment goals in real, inflation-adjusted terms. If you have legitimate reason to worry about your currency failing, perhaps because your country doesn't maintain stable monetary or fiscal policies, there are a few things you can do. First, define what you mean by \"\"failing.\"\" Do you mean ceasing to exist, or simply falling in unit purchasing power because of inflation? If it's the latter, see the previous paragraph. If the former, investing in other currencies abroad may be a good idea. Questions about currencies actually failing are quite general, however, and (in my opinion) require significant economic analysis before deciding on a course of action/hedging. I would ask the same question about my home's value against an inflated currency as well. Would it keep the same real value. Your home may or may not keep the same real value over time. In some time periods, average home prices have risen at rates significantly higher than the rate of inflation, in which case on paper, their real value has increased. However, if you need to make substantial investments in your home to keep its price rising at the same rate as inflation, you may actually be losing money because your total investment is higher than what you paid for the house initially. Of course, if you own your home and don't have plans to move, you may not be concerned if its value isn't keeping up with inflation at all times. You're deriving additional satisfaction/utility from it, mainly because it's a place for you to live, and you spend money maintaining it in order to maintain your physical standard of living, not just its price at some future sale date. 1) I use dollars as an example. This applies to all currencies.\"" }, { "docid": "258306", "title": "", "text": "Reading and analyzing financial statements is one of the most important tasks of Equity Analysts which look at a company from a fundamental perspective. However, analyzing a company and its financial statements is much more than just reading the absolute dollar figures provided in financial statements: You need to calculate financial ratios which can be compared over multiple periods and companies to be able to gauge the development of a company over time and compare it to its competitors. For instance, for an Equity Analyst, the absolute dollar figures of a company's operating profit is less important than the ratio of the operating profit to revenue, which is called the operating margin. Another very important figure is Free Cash Flow which can be set in relation to sales (= Free Cash Flow / Sales). The following working capital related metrics can be used as a health check for a company and give you early warning signs when they deviate too much: You can either calculate those metrics yourself using a spreadsheet (e.g. Excel) or use a professional solution, e.g. Bloomberg Professional, Reuters Eikon or WorldCap." }, { "docid": "317399", "title": "", "text": "The major drawback to borrowing to invest (i.e. using leverage) is that your return on investment must be high enough to overcome the cost of finance. The average return on the S&P 500 is about 9.8% (from CNBC) a typical unsecured personal loan will have an interest rate of around 18-36% APR (from NerdWallet). This means that on average you will be paying more interest than you are receiving in returns so are losing money on the margin investment. Sometimes the S&P falls and over those periods you would be paying out interest having lost money so will have a negative return! You may have better credit and so be able to get a lower rate but I don't know your loan terms currently. Secured loans, such as remortgaging your house, will have lower costs but come with more life changing risks. The above assumes that you are getting financing by directly borrowing money, however, it is also possible to trade on margin. This is where you post a proportion of the value that you wish to trade with as collateral against a loan to buy the security. This form of finance is normally used by day traders and other short term holders of stocks. Although the financing costs here are low (I am not charged an interest rate on intraday margin trading) there are very high costs if you exceed the term of the loan. An example is that I am charged a fee if I hold a position overnight and my profits and losses are crystallised at that time. If I am in a losing position at that time the crystallisation process and fee can result in not having enough margin to recover the position and the loss of a potentially profit making position. Additionally if the amount of collateral cash (margin) posted is insufficient to cover the expected losses as calculated by your broker they will initiate a margin call asking for more collateral money. If you do not (or cannot) post this extra margin your losing position will be cashed out and you will take as a loss the total loss at that time. Since the market can change very rapidly, such as in a flash crash, this can result in your losing more money than you had in the first place. As this is essentially a loan you can be bankrupted by this. Overall using leverage to invest magnifies your potential profits but it also magnifies your potential losses. In many cases this magnification could be sufficient to lose you more money than you had originally invested. In addition to magnification you need to consider the cost of finance and that your return over the course of the loan needs to be higher than your cost of finance as well as inflation and other opportunity costs of capital. The S&P 500 is a relatively low volatility market in general so is unlikely to return losses in any given period that will mean that leverage of 1.25 times will take you into losses beyond your own capital investment but it is not impossible. The low level of risk automatically means that your returns are lower and so your cost of capital is likely to be a large proportion of your returns and your returns may not completely cover the cost of capital even when you are making money. The key thing if you are going to trade or invest on leverage is to understand the terms and costs of your leverage and discount them from any returns that you receive before declaring to yourself that you are profitable. It is even more important than usual to know how your positions are doing and whether you are covering your cost of capital when using leverage. It is also very important to know the terms of your leverage in detail, especially what will happen when and if your credit runs out for whatever reason be it the end of the financing period (the length of the loan) or your leverage ratio gets too high. You should also be aware of the costs of closing out the loan early should you need to do so and how to factor that into your investing decisions." }, { "docid": "365262", "title": "", "text": "Add a few more cells to your header that list the interest paid in in the next 3 to 4 years on your current mortgage. Use the cumulative interest function from your spreadsheet program. In the main body of your spreadsheet, add columns that summarize the total cost over 3-4 years for each loan. Add columns that list the interest cost, total cost of interest + refi cost, and the difference between that approach and the interest costs from your current loan. Add 6 columns total: a set for 3 years and a set for 4. Something like this: Repeat that 3 year block off to the right and plug in the 4 year numbers. You requested that we factor in a 3.5% penalty against the money that goes to the discount fee. You could do that by adding a column that calculates this, like Joe described in his answer. Add that 3.5% accrual into the total calculation above, which in turn will knock down the amount of savings for each refi loan. PS: How are you going to earn 3.5% over 48 months?" }, { "docid": "244104", "title": "", "text": "If you've been using TurboTax, let me suggest a compromise: Let TTax fill out the forms, but then print them out and go through it again by hand. If you don't get the same numbers, investigate why. If you do, you can probably conclude that you could do it by hand if you really want to, especially if you have the previous year's returns as a reference. (I've gone through every version of this from before personal tax software existed thru hand-constructed spreadsheets to commercial software and e-filing (federal only; I refuse to pay for something that reduces THEIR work). I can't use the free online version -- my return's got complications it won't handle -- and I'm uncomfortable putting that much data on a machine I don't control, so I'm still buying software each year. I COULD save the money, but it's worth a few bucks to me to make the process less annoying.) Late edit: Note that a self-constructed spreadsheet is one answer to the annoyance of pencil and paper -- you're still doing all the data manipulation yourself, but you're recording HOW you manipulated it as you go, and if numbers change you don't have to redo all the work. And it avoids raw math errors. It does require that you enter all the formulas rather than just their results, and figuring out how to express some things in stylesheet form can be a nuisance, but it isn't awful... and once you've done it (assuming you got it right) updating it for the next year is usually not hard unless you've introduced a completely new set of issues." }, { "docid": "494808", "title": "", "text": "Interesting. When you say DIY you mean pencil and paper. For most of us the choice came down to using a professional vs using the software. Your second bullet really hits the point. The tax return is a giant spreadsheet with multiple cells depending on each other. Short of building my own spreadsheet to perform the task, I found the software, at $30-$50, to be the happy medium between the full DIY and the Pro at $400+. With a single W2, and no other items, the form is likely just a 1040-EZ, and there shouldn't be any recalculating so long as you have the data you need. Pencil/paper is fine. There's no exact time to say go with the software, except, perhaps, when you realize there are enough fields to fill out where the recalculating might be cumbersome, or the need to see the exact tax bracket has value for you. You are clearly in the category that can fill out the one form. At some point, you might have investment income (Schedule D) enough mortgage interest to itemize deductions (Schedule A) etc. You'll know when it's time to go the software route. Keep in mind, there are free online choices from each of the tax software providers. Good for simple returns up to a certain level. Thanks to Phil for noting this in comments. I'll offer an anecdote exemplifying the distinction between using the software as a tool vs having a high knowledge of taxes. I wrote an article The Phantom Tax Zone, in which I explained how the process of taxing Social Security benefits at a certain level created what I called a Phantom Tax Rate. I knew that $1000 more in income could cause $850 of the benefit to be taxed as well, but with a number of factors to consider, I wanted to create a chart to show the tax at each incremental $1000 of income added. Using the software, I simply added $1000, noted the tax due, and repeated. Doing this by hand would have taken a day, not 30 minutes. For you, the anecdote may have no value, Social Security is too far off. For others, who in March are doing their return, the process may hold value. Many people are deciding whether to make their IRA deposit be pre-tax or the Post tax Roth IRA. The software can help them quickly see the effect of +/- $1000 in income and choose the mix that's ideal for them." }, { "docid": "552299", "title": "", "text": "Whether it is better to buy or to rent depends on several factors. Most of them are fairly uncertain, but calculations can be made to see how they play out in the long-term for insight into their impact. The results below are made on the basis that both the buyer and the tenant spend the same amount, in this case $1,480.03 per month. The buyer pays his mortgage and when it's all paid for he switches to investing $1,480.03 per month at the fund deposit rate. Meanwhile the tenant pays rent and invests whatever remains from $1,480.03 per month at the fund deposit rate. The amount $1,480.03 is set by the mortgage case and used by buyer and tenant for equal comparison. Taking some hopefully not too unrealistic rate estimates, these are the calculation inputs:- (All percentages are expressed as effective annual rates) Plot of buyer's and tenant's accumulated assets over time The simulation extends for twice the term of the mortgage. If the investment fund can return 7% and a $900 rental is comparable to a $300,000 house then there isn't much of a compelling case either way. Lowering the expected fund return shows a different picture. Sticking with the 5.0% fund return, lowering the rent brings the tenant's asset accumulation closer to the buyer's. If there is a particular set of inputs you would like to see plotted I'm sure I could add another example to this post. There is also an interactive version of the calculation which you can find via this page. However, unlike the examples above which include a deposit and grant, it just explores the simple case of a 100% mortgage. The aim is just to see how rate variations affect asset value over time." }, { "docid": "220176", "title": "", "text": "The periodic rate (here, the interest charged per month), as you would enter into a finance calculator is 9.05%. Multiply by 12 to get 108.6% or calculate APR at 182.8%. Either way it's far more than 68%. If the $1680 were paid after 365 days, it would be simple interest of 68%. For the fact that payment are made along the way, the numbers change. Edit - A finance calculator has 5 buttons to cover the calculations: N = number of periods or payments %i = the interest per period PV = present value PMT = Payment per period FV= Future value In your example, you've given us the number of periods, 12, present value, $1000, future value, 0, and payment, $140. The calculator tells me this is a monthly rate of 9%. As Dilip noted, you can compound as you wish, depending on what you are looking for, but the 9% isn't an opinion, it's the math. TI BA-35 Solar. Discontinued, but available on eBay. Worth every cent. Per mhoran's comment, I'll add the spreadsheet version. I literally copied and pasted his text into a open cell, and after entering the cell shows, which I rounded to 9.05%. Note, the $1000 is negative, it starts as an amount owed. And for Dilip - 1.0905^12 = 2.8281 or 182.8% effective rate. If I am the loanshark lending this money, charging 9% per month, my $1000 investment returns $2828 by the end of the year, assuming, of course, that the payment is reinvested immediately. The 108 >> 182 seems disturbing, but for lower numbers, even 12% per year, the monthly compounding only results in 12.68%" }, { "docid": "522358", "title": "", "text": "Personally, I have a little checkbook program that I use to keep track of my spending and balance. Like you -- and I presume like most people -- I have certain recurring bills: the mortgage, insurance payments, car payment, etc. I simply enter these into the checkbook program about a month before the bill is due. Then I can run a transaction list that shows the date, amount, and remaining balance after each transaction. So if I want to know how much money I really have available to spend, I just look for the last transaction before my next payday, and see what the balance will be on that day. Personally, I always keep a certain amount of pad in my account so if I made a mistake and entered an incorrect amount for a check, or forgot to enter one completely, I don't overdraw the account. (I like to keep $1000 in such padding but that's way more than really necessary, it's very rare that I make a mistake of more than $100.) In my case, I don't enter electric bills or heating bills because I don't know the amount until I get the bill, and the amounts fall well within my padding, and for just two bills I can factor them in in my head. BTW I wrote this program myself but I'm sure there are similar products on the market. I used to use a spreadsheet and that worked pretty well. (Mainly I wrote the program because I have a tiny side business that I have to keep tax records for even though it makes almost no money.) You could in principle do it on paper, but the catch to that is that when you write payments on your paper ledger in advance of actually writing the check, you will often be writing down payments out of order, and so it becomes difficult to see what your balance is or was or will be on any given date. But a computer system can easily accept transactions out of order and then sort them and re-do the balance calculations in a fraction of a second." }, { "docid": "403514", "title": "", "text": "\"How will contribution limits rise? Contribution limits are raised based on COLA. COLA (Cost of Living Adjustment) is a number based on CPI (Consumer Price Index) which is published by the Bureau of Labor Statistics. The IRS publishes these limits annually and a simple search term to find them each year is \"\"415 limits\"\" because section 415 lists how much the various qualified plans can set aside each year. CPI is a heavily managed and very political number. It is the number that is cited when the media talks about \"\"inflation.\"\" Since it drives increases in salaries, deductions, Social Security and pension payments, there is very heavy pressure to keep the number smaller than it really is. My next step was to calculate how long that money will last One traditional rule-of-thumb is to withdraw 4% of your balance each year. Another alternative is to purchase annuities. While younger people think that annuities are horrible investments, they appeal to older people because they protect the annuitant from excessive risk of losing your capital. When you are 30, and another 2008 comes along wiping out half your savings, you have time to re-earn that money. When you are 60, and another 2008 comes along wiping out half your savings, you have very few years to recover that money. So an annuity pushes that risk onto insurance companies. If you think you will die in your 90s, then an annuity is going to be a good investment (the insurance company will be betting that you won't be living that long). I have a simple spreadsheet that I use to calculate estimated projected balances and compare them to actual performance. Don't forget that when you reach 50, the amount you can contribute goes up due to \"\"catch up contributions.\"\" There are 2 views of the same tab in this picture. There are 3 growth rates: pessimistic, nominal and optimistic. You can change the numbers to suit your own projections of future growth. Other tabs on this spreadsheet include measurements of actual performance by my 401k and IRA accounts. At the end of the year, I replace the numbers in columns F, G & H with the actual end-of-year dollar amounts. This way, future estimates do not get too far unhinged from reality. If you need more sophisticated planning, such as Monte Carlo analysis to attempt to cope with inflation, I recommend the book Engineering Your Retirement. The book is aimed at younger engineers, so there is a bit more math than the average person would want.\"" }, { "docid": "245648", "title": "", "text": "It's not compound interest. It is internal rate of return. If you have access to Excel look up the XIRR built-in function." }, { "docid": "39781", "title": "", "text": "I’ve spent roughly $70,000 at Amazon the past 3 years (calculated using their spreadsheet data of spending in the account section). What these businesses don’t understand is that the products are all the same and the pricing varies minimally; customer service is and always will be my number one determining factor in where I do business. It takes me 30 seconds to get an Amazon agent on the line and 20 minutes for a Best Buy agent, plus Amz’s return policies beat the shit out of B.B’s." }, { "docid": "331295", "title": "", "text": "\"Let's start by saying that of all the things to solve in a mortgage equation, the rate is the toughest. It's the least friendly to solving with pencil and paper. While I never tire of expressing my love for my Texas Instruments BA-35 financial calculator, it's no longer in production, and most folk won't have access, but Excel is right there. The financial function pops up for you with RATE as a choice for solving. I filled in the cells to show the numbers. The -665.30 is a typical convention for money flows as it's a payment from you not a credit for interest you earn. Note, some mortgage calculators leave this entry as positive. It takes a second to see how one's calculation or spreadsheet does this. Last, you can see the software wants a \"\"guess.\"\" This is because the software has a loop, guessing and getting closer to the solution. I entered .005 to guess 6% per year. The correct solution is .006 or 7.2% per year. Class dismissed.\"" }, { "docid": "309037", "title": "", "text": "You are comparing a risk-free cost with a risky return. If you can tolerate that level of risk (the ups and downs of the investment) for the chance that you'll come out ahead in the long-run, then sure, you could do that. So the parameters to your equation would be: If you assume that the risky returns are normally distributed, then you can use normal probability tables to determine what risk level you can tolerate. To put some real numbers to it, take the average S&P 500 return of 10% and standard deviation of 18%. Using standard normal functions, we can calculate the probability that you earn more than various interest rates: so even with a low 3% interest rate, there's roughly a 1 in 3 chance that you'll actually be worse off (the gains on your investments will be less than the interest you pay). In any case there's a 3 in 10 chance that your investments will lose money." }, { "docid": "550642", "title": "", "text": "If annualized rate of return is what you are looking for, using a tool would make it a lot easier. In the post I've also explained how to use the spreadsheet. Hope this helps." }, { "docid": "194017", "title": "", "text": "To get the factors you want, start with a complete amortization calculator and a tax deduction calculator, filling in values for your down payment, purchase price, tax rates, and mortgage rate. If you are talking about a specific property, you should be able to get taxes for the current year, and perhaps using historical values estimate taxes going out. Some calculators will include PMI (which you should avoid like the plague in an actual purchase). Given some preliminary data, you can calculate your insurance. So once you have your PITI (principal, interest, tax, and insurance) monthly payment and tax deduction, you can calculate how much you spend a month on the house minus the deduction. To estimate maintenance costs, you could either figure out about what you'd need to replace in the given time you plan to stay put and use a rough estimate on what it is. You can also use some rough estimates like this (1% of the property value yearly!) or this (moving the number up to a whopping 2%). Don't forget closing costs as a buyer and seller. You can find estimates for these as well, and they are a function of the purchase price (usually around 2%). So to figure out how much it costs you to live in a house for X months, you can do So your total cost is Total Return Is: You can adjust that total return for inflation using this calculator to get your total return adjusted for inflation. If projecting into the future, you can try a formula found here. To figure out the return on your investment, use So to figure out the total return adjusted you need for a given ROI, find" }, { "docid": "595759", "title": "", "text": "See this spread sheet I worked up for fun. https://docs.google.com/spreadsheets/d/1ZhI-Rls4FpwpdpEYgdn20lWmcqkIEhB-2AH0fQ7G2wY/edit?usp=sharing If you are really crazy you can do what I did and model the rates (modified normal) and expenses (large items like the roofing being replaced on exponential) distribution and run a monte carlo simulation to get maximum likely losses by years and ranges of final values. P.S. As a side note, this spreadsheet makes a lot of assumptions and I would consider it absolutely necessary to be able to build a sheet like this and understand all the assumptions and play with it to see how quickly this can turn into a losing investment before making any business investments." } ]

[ { "docid": "374956", "title": "", "text": "\"I could not figure out a good way to make XIRR work since it does not support arrays. However, I think the following should work for you: Insert a column at D and call it \"\"ratio\"\" (to be used to calculate your answer in column E). Use the following equation for D3: =1+(C3-B3-C2)/C2 Drag that down to fill in the column. Set E3 to: =(PRODUCT(D$3:D3)-1)*365/(A3-A$2) Drag that down to fill in the column. Column E is now your annual rate of return.\"" } ]

[ { "docid": "257168", "title": "", "text": "\"A tax return is a document you sign and file with the government to self-report your tax obligations. A tax refund is the payment you receive from the government if your payments into the tax system exceeded your obligations. As others have mentioned, if an extra $2K in income generated $5K in taxes, chances are your return was prepared incorrectly. The selection of an appropriate entity type for your business depends a lot on what you expect to see over the next several years in terms of income and expenses, and the extent to which you want or need to pay for fringe benefits or make pretax retirement contributions from your business income. There are four basic flavors of entity which are available to you: Sole proprietorship. This is the simplest option in terms of tax reporting and paperwork required for ongoing operations. Your net (gross minus expenses) income is added to your wage income and you'll pay tax on the total. If your wage income is less than approximately $100K, you'll also owe self-employment tax of approximately 15% in addition to income tax on your business income. If your business runs at a loss, you can deduct the loss from your other income in calculating your taxable income, though you won't be able to run at a loss indefinitely. You are liable for all of the debts and obligations of the business to the extent of all of your personal assets. Partnership. You will need at least two participants (humans or entities) to form a partnership. Individual items of income and expense are identified on a partnership tax return, and each partner's proportionate share is then reported on the individual partners' tax returns. General partners (who actively participate in the business) also must pay self-employment tax on their earnings below approximately $100K. Each general partner is responsible for all of the debts and obligations of the business to the extent of their personal assets. A general partnership can be created informally or with an oral agreement although that's not a good idea. Corporation. Business entities can be taxed as \"\"S\"\" or \"\"C\"\" corporations. Either way, the corporation is created by filing articles of incorporation with a state government (doesn't have to be the state where you live) and corporations are typically required to file yearly entity statements with the state where they were formed as well as all states where they do business. Shareholders are only liable for the debts and obligations of the corporation to the extent of their investment in the corporation. An \"\"S\"\" corporation files an information-only return similar to a partnership which reports items of income and expense, but those items are actually taken into account on the individual tax returns of the shareholders. If an \"\"S\"\" corporation runs at a loss, the losses are deductible against the shareholders' other income. A \"\"C\"\" corporation files a tax return more similar to an individual's. A C corporation calculates and pays its own tax at the corporate level. Payments from the C corporation to individuals are typically taxable as wages (from a tax point of view, it's the same as having a second job) or as dividends, depending on how and why the payments are made. (If they're in exchange for effort and work, they're probably wages - if they're payments of business profits to the business owners, they're probably dividends.) If a C corporation runs at a loss, the loss is not deductible against the shareholders' other income. Fringe benefits such as health insurance for business owners are not deductible as business expenses on the business returns for S corps, partnerships, or sole proprietorships. C corporations can deduct expenses for providing fringe benefits. LLCs don't have a predefined tax treatment - the members or managers of the LLC choose, when the LLC is formed, if they would like to be taxed as a partnership, an S corporation, or as a C corporation. If an LLC is owned by a single person, it can be considered a \"\"disregarded entity\"\" and treated for tax purposes as a sole proprietorship. This option is not available if the LLC has multiple owners. The asset protection provided by the use of an entity depends quite a bit on the source of the claim. If a creditor/plaintiff has a claim based on a contract signed on behalf of the entity, then they likely will not be able to \"\"pierce the veil\"\" and collect the entity's debts from the individual owners. On the other hand, if a creditor/plaintiff has a claim based on negligence or another tort-like action (such as sexual harassment), then it's very likely that the individual(s) involved will also be sued as individuals, which takes away a lot of the effectiveness of the purported asset protection. The entity-based asset protection is also often unavailable even for contract claims because sophisticated creditors (like banks and landlords) will often insist the the business owners sign a personal guarantee putting their own assets at risk in the event that the business fails to honor its obligations. There's no particular type of entity which will allow you to entirely avoid tax. Most tax planning revolves around characterizing income and expense items in the most favorable ways possible, or around controlling the timing of the appearance of those items on the tax return.\"" }, { "docid": "336284", "title": "", "text": "\"the \"\"how\"\" all depends on your level of computer savvy. Are you an Excel spreadsheet user or can you write in programming languages such as python? Either approach have math functions that make the calculation of ROI and Volatility trivial. If you're a python coder, then look up \"\"pandas\"\" (http://pandas.pydata.org/) - it handles a lot of the book-keeping and downloading of end of day equities data. With a dozen lines of code, you can compute ROI and volatility.\"" }, { "docid": "496159", "title": "", "text": "Okay, I think I managed to find the precise answer to this problem! It involves solving a non-linear exponential equation, but I also found a good approximate solution using the truncated Taylor series. See below for a spreadsheet you can use. Let's start by defining the growth factors per period, for money in the bank and money invested: Now, let S be the amount ready to be invested after n+1 periods; so the first of that money has earned interest for n periods. That is, The key step to solve the problem was to fix the total number of periods considered. So let's introduce a new variable: t = the total number of time periods elapsed So if money is ready to invest every n+1 periods, there will be t/(n+1) separate investments, and the future value of the investments will be: This formula is exact in the case of integer t and n, and a good approximation when t and n are not integers. Substituting S, we get the version of the formula which explicitly depends on n: Fortunately, only a couple of terms in FV depend on n, so we can find the derivative after some effort: Equating the derivative to zero, we can remove the denominator, and assuming t is greater than zero, we can divide by the constant ( 1-G t ): To simplify the equation, we can define some extra constants: Then, we can define a function f(n) and write the equation as: Note that α, β, γ, G, and R are all constant. From here there are two options: Use Newton's method or another numerical method for finding the positive root of f(n). This can be done in a number of software packages like MATLAB, Octave, etc, or by using a graphics calculator. Solve approximately using a truncated Taylor series polynomial. I will use this method here. The Taylor series of f(n), centred around n=0, is: Truncating the series to the first three terms, we get a quadratic polynomial (with constant coefficients): Using R, G, α, β and γ defined above, let c0, c1 and c2 be the coefficients of the truncated Taylor series for f(n): Then, n should be rounded to the nearest whole number. To be certain, check the values above and below n using the formula for FV. Using the example from the question: For example, I might put aside $100 every week to invest into a stock with an expected growth of 9% p.a., but brokerage fees are $10/trade. For how many weeks should I accumulate the $100 before investing, if I can put it in my high-interest bank account at 4% p.a. until then? Using Newton's method to find roots of f(n) above, we get n = 14.004. Using the closed-form approximate solution, we get n = 14.082. Checking this against the FV with t = 1680 (evenly divisible by each n + 1 tested): Therefore, you should wait for n = 14 periods, keeping that money in the bank, investing it together with the money in the next period (so you will make an investment every 14 + 1 = 15 weeks.) Here's one way to implement the above solution with a spreadsheet. StackExchange doesn't allow tables in their syntax at this time, so I'll show a screenshot of the formulae and columns you can copy and paste: Formulae: Copy and paste column A: Copy and paste column B: Results: Remember, n is the number of periods to accumulate money in the bank. So you will want to invest every n+1 weeks; in this case, every 15 weeks." }, { "docid": "258306", "title": "", "text": "Reading and analyzing financial statements is one of the most important tasks of Equity Analysts which look at a company from a fundamental perspective. However, analyzing a company and its financial statements is much more than just reading the absolute dollar figures provided in financial statements: You need to calculate financial ratios which can be compared over multiple periods and companies to be able to gauge the development of a company over time and compare it to its competitors. For instance, for an Equity Analyst, the absolute dollar figures of a company's operating profit is less important than the ratio of the operating profit to revenue, which is called the operating margin. Another very important figure is Free Cash Flow which can be set in relation to sales (= Free Cash Flow / Sales). The following working capital related metrics can be used as a health check for a company and give you early warning signs when they deviate too much: You can either calculate those metrics yourself using a spreadsheet (e.g. Excel) or use a professional solution, e.g. Bloomberg Professional, Reuters Eikon or WorldCap." }, { "docid": "117049", "title": "", "text": "\"It's easy for me to look at an IRA, no deposits or withdrawal in a year, and compare the return to some index. Once you start adding transactions, not so easy. Here's a method that answers your goal as closely as I can offer: SPY goes back to 1993. It's the most quoted EFT that replicates the S&P 500, and you specifically asked to compare how the investment would have gone if you were in such a fund. This is an important distinction, as I don't have to adjust for its .09% expense, as you would have been subject to it in this fund. Simply go to Yahoo, and start with the historical prices. Easy to do this on a spreadsheet. I'll assume you can find all your purchases inc dates & dollars invested. Look these up and treat those dollars as purchases of SPY. Once the list is done, go back and look up the dividends, issues quarterly, and on the dividend date, add the shares it would purchase based on that day's price. Of course, any withdrawals get accounted for the same way, take out the number of SPY shares it would have bought. Remember to include the commission on SPY, whatever your broker charges. If I've missed something, I'm sure we'll see someone point that out, I'd be happy to edit that in, to make this wiki-worthy. Edit - due to the nature of comments and the inability to edit, I'm adding this here. Perhaps I'm reading the question too pedantically, perhaps not. I'm reading it as \"\"if instead of doing whatever I did, I invested in an S&P index fund, how would I have performed?\"\" To measure one's return against a benchmark, the mechanics of the benchmarks calculation are not needed. In a comment I offer an example - if there were an ETF based on some type of black-box investing for which the investments were not disclosed at all, only day's end pricing, my answer above still applies exactly. The validity of such comparisons is a different question, but the fact that the formulation of the EFT doesn't come into play remains. In my comment below which I removed I hypothesized an ETF name, not intending it to come off as sarcastic. For the record, if one wishes to start JoesETF, I'm ok with it.\"" }, { "docid": "39781", "title": "", "text": "I’ve spent roughly $70,000 at Amazon the past 3 years (calculated using their spreadsheet data of spending in the account section). What these businesses don’t understand is that the products are all the same and the pricing varies minimally; customer service is and always will be my number one determining factor in where I do business. It takes me 30 seconds to get an Amazon agent on the line and 20 minutes for a Best Buy agent, plus Amz’s return policies beat the shit out of B.B’s." }, { "docid": "317399", "title": "", "text": "The major drawback to borrowing to invest (i.e. using leverage) is that your return on investment must be high enough to overcome the cost of finance. The average return on the S&P 500 is about 9.8% (from CNBC) a typical unsecured personal loan will have an interest rate of around 18-36% APR (from NerdWallet). This means that on average you will be paying more interest than you are receiving in returns so are losing money on the margin investment. Sometimes the S&P falls and over those periods you would be paying out interest having lost money so will have a negative return! You may have better credit and so be able to get a lower rate but I don't know your loan terms currently. Secured loans, such as remortgaging your house, will have lower costs but come with more life changing risks. The above assumes that you are getting financing by directly borrowing money, however, it is also possible to trade on margin. This is where you post a proportion of the value that you wish to trade with as collateral against a loan to buy the security. This form of finance is normally used by day traders and other short term holders of stocks. Although the financing costs here are low (I am not charged an interest rate on intraday margin trading) there are very high costs if you exceed the term of the loan. An example is that I am charged a fee if I hold a position overnight and my profits and losses are crystallised at that time. If I am in a losing position at that time the crystallisation process and fee can result in not having enough margin to recover the position and the loss of a potentially profit making position. Additionally if the amount of collateral cash (margin) posted is insufficient to cover the expected losses as calculated by your broker they will initiate a margin call asking for more collateral money. If you do not (or cannot) post this extra margin your losing position will be cashed out and you will take as a loss the total loss at that time. Since the market can change very rapidly, such as in a flash crash, this can result in your losing more money than you had in the first place. As this is essentially a loan you can be bankrupted by this. Overall using leverage to invest magnifies your potential profits but it also magnifies your potential losses. In many cases this magnification could be sufficient to lose you more money than you had originally invested. In addition to magnification you need to consider the cost of finance and that your return over the course of the loan needs to be higher than your cost of finance as well as inflation and other opportunity costs of capital. The S&P 500 is a relatively low volatility market in general so is unlikely to return losses in any given period that will mean that leverage of 1.25 times will take you into losses beyond your own capital investment but it is not impossible. The low level of risk automatically means that your returns are lower and so your cost of capital is likely to be a large proportion of your returns and your returns may not completely cover the cost of capital even when you are making money. The key thing if you are going to trade or invest on leverage is to understand the terms and costs of your leverage and discount them from any returns that you receive before declaring to yourself that you are profitable. It is even more important than usual to know how your positions are doing and whether you are covering your cost of capital when using leverage. It is also very important to know the terms of your leverage in detail, especially what will happen when and if your credit runs out for whatever reason be it the end of the financing period (the length of the loan) or your leverage ratio gets too high. You should also be aware of the costs of closing out the loan early should you need to do so and how to factor that into your investing decisions." }, { "docid": "275422", "title": "", "text": "\"Not to state the obvious, but whenever an investment is being made, the \"\"nuts and bolts\"\" is your return on investment. Analyzing the rate of return on an investment is the primary factor in any decision. Ideally, once the actual mechanics of investment and side \"\"benefits\"\" are factored out, the goal is to be able to analyze the pure financial return. Usually the biggest problem faced in analyzing various investments is comparing the Present Value of an investment to a series of payments that may be made or received in the future. When considering the purchase of a large equity, for example, you might be looking at what series of payments are required to purchase the asset. You can also reverse this and ask, \"\"What amount of money is equivalent to this series of payments?\"\" Ultimately, the Present Value of an Annuity is the way to make these comparisons equal. Fundamentally, the Present Value of an annuity is an amount of money that should, in theory, be equivalent to a series of payments. There is, for example, technically no difference between $1064.94 today and $100 a month for a year, at an interest rate of 1% per month. Grant you, most people would be happier with the money now, but that is what interest does - it compensates you for waiting on your money. You can fire up a spreadsheet and calculate the Present Value as long as you have the monthly payment, interest rate, and number of periods. Alternatively, you can calculate any one of those missing four variables - and the key is usually to understand what that rate would be in order to compare the investments. Finally, the taxable implication is really just an adjustment to the rate of return. Imagine the following three scenarios: (Obviously the rates are fictional - the goal is to show they are the same). Scenarios 1 & 2 are really just two sides of the same coin. Using the Future Value formula in Excel = FV(0.5%, 12, -100), you get $1233.56. In scenario 1, you would have $1233.56 in your bank account. In scenario 2, your bank would have $1233.56 from you, and you would have $100 less debt per month. They are equivalent transactions. Scenario 3 is really just a variation on scenario 2, localized to the United States. Because the interest is tax deductible, however, the rate of 6% isn't really accurate. Assuming you had a 25% tax bracket, you'd actually be getting back one quarter of your interest. Put another way, 7.5% mortgage interest costs you as much as 6% credit card debt. This is how you compare apples and organges - just turn everything into an annuity or a lump sum, using Present Value calculations. Finally, quick rule of thumb - if you owe taxes in both Canada and the US, your Canadian taxes are probably higher than your American ones. As such, any tax incentives will be concomitantly higher. If you only can only use Canadian tax incentives, then look to those incentives, other things being equal.\"" }, { "docid": "189006", "title": "", "text": "\"First, a clarification. No assets are immune to inflation, apart from inflation-indexed securities like TIPS or inflation-indexed gilts (well, if held to maturity, these are at least close). Inflation causes a decline in the future purchasing power of a given dollar1 amount, and it certainly doesn't just affect government bonds, either. Regardless of whether you hold equity, bonds, derivatives, etc., the real value of those assets is declining because of inflation, all else being equal. For example, if I invest $100 in an asset that pays a 10% rate of return over the next year, and I sell my entire position at the end of the year, I have $110 in nominal terms. Inflation affects the real value of this asset regardless of its asset class because those $110 aren't worth as much in a year as they are today, assuming inflation is positive. An easy way to incorporate inflation into your calculations of rate of return is to simply subtract the rate of inflation from your rate of return. Using the previous example with inflation of 3%, you could estimate that although the nominal value of your investment at the end of one year is $110, the real value is $100*(1 + 10% - 3%) = $107. In other words, you only gained $7 of purchasing power, even though you gained $10 in nominal terms. This back-of-the-envelope calculation works for securities that don't pay fixed returns as well. Consider an example retirement portfolio. Say I make a one-time investment of $50,000 today in a portfolio that pays, on average, 8% annually. I plan to retire in 30 years, without making any further contributions (yes, this is an over-simplified example). I calculate that my portfolio will have a value of 50000 * (1 + 0.08)^30, or $503,132. That looks like a nice amount, but how much is it really worth? I don't care how many dollars I have; I care about what I can buy with those dollars. If I use the same rough estimate of the effect of inflation and use a 8% - 3% = 5% rate of return instead, I get an estimate of what I'll have at retirement, in today's dollars. That allows me to make an easy comparison to my current standard of living, and see if my portfolio is up to scratch. Repeating the calculation with 5% instead of 8% yields 50000 * (1 + 0.05)^30, or $21,6097. As you can see, the amount is significantly different. If I'm accustomed to living off $50,000 a year now, my calculation that doesn't take inflation into account tells me that I'll have over 10 years of living expenses at retirement. The new calculation tells me I'll only have a little over 4 years. Now that I've clarified the basics of inflation, I'll respond to the rest of the answer. I want to know if I need to be making sure my investments span multiple currencies to protect against a single country's currency failing. As others have pointed out, currency doesn't inflate; prices denominated in that currency inflate. Also, a currency failing is significantly different from a prices denominated in a currency inflating. If you're worried about prices inflating and decreasing the purchasing power of your dollars (which usually occurs in modern economies) then it's a good idea to look for investments and asset allocations that, over time, have outpaced the rate of inflation and that even with the effects of inflation, still give you a high enough rate of return to meet your investment goals in real, inflation-adjusted terms. If you have legitimate reason to worry about your currency failing, perhaps because your country doesn't maintain stable monetary or fiscal policies, there are a few things you can do. First, define what you mean by \"\"failing.\"\" Do you mean ceasing to exist, or simply falling in unit purchasing power because of inflation? If it's the latter, see the previous paragraph. If the former, investing in other currencies abroad may be a good idea. Questions about currencies actually failing are quite general, however, and (in my opinion) require significant economic analysis before deciding on a course of action/hedging. I would ask the same question about my home's value against an inflated currency as well. Would it keep the same real value. Your home may or may not keep the same real value over time. In some time periods, average home prices have risen at rates significantly higher than the rate of inflation, in which case on paper, their real value has increased. However, if you need to make substantial investments in your home to keep its price rising at the same rate as inflation, you may actually be losing money because your total investment is higher than what you paid for the house initially. Of course, if you own your home and don't have plans to move, you may not be concerned if its value isn't keeping up with inflation at all times. You're deriving additional satisfaction/utility from it, mainly because it's a place for you to live, and you spend money maintaining it in order to maintain your physical standard of living, not just its price at some future sale date. 1) I use dollars as an example. This applies to all currencies.\"" }, { "docid": "254245", "title": "", "text": "What's the present value of using the payment plan? In all common sense the present value of a loan is the value that you can pay in the present to avoid taking a loan, which in this case is the lump sum payment of $2495. That rather supposes the question is a trick, providing irrelevant information about the stock market. However, if some strange interpretation is required which ignores the lump sum and wants to know how much you need in the present to pay the loan while being able to make 8% on the stock market that can be done. I will initially assume that since the lender's APR works out about 9.6% per month that the 8% from the stock market is also per month, but will also calculate for 8% annual effective and an 8% annual nominal rate. The calculation If you have $x in hand (present value) and it is exactly enough to take the loan while investing in the stock market, the value in successive months is $x plus the market return less the loan payment. In the third month the loan is paid down so the balance is zero. I.e. So the present value of using the payment plan while investing is $2569.37. You would need $2569.37 to cover the loan while investing, which is more than the $2495 lump sum payment requires. Therefore, it would be advisable to make the lump sum payment because it is less expensive: If you have $2569.37 in hand it would be best to pay the lump sum and invest the remaining $74.37 in the stock market. Otherwise you invest $2569.37 (initially), pay the loan and end up with $0 in three months. One might ask, what rate of return would the stock market need to yield to make it worth taking the loan? The APR proposed by the loan can be calculated. The present value of a loan is equal to the sum of the payments discounted to present value. I.e. with ∴ by induction So by comparing the $2495 lump sum payment with $997 over 3 x monthly instalments the interest rate implied by the loan can be found. Solving for r If you could obtain 9.64431% per month on the stock market the $x cash in hand required would be calculated by This is equal to the lump sum payment, so the calculated interest is comparable to the stock market rate of return. If you could gain more than 9.64431% per month on the stock market it would be better to invest and take the loan. Recurrence Form Solving the recurrence form shows the calculation is equivalent to the loan formula, e.g. becomes v[m + 1] = (1 + y) v[m] - p where v[0] = pv where In the final month v[final] = 0, i.e. when m = 3 Compare with the earlier loan formula: s = (d - d (1 + r)^-n) / r They are exactly equivalent, which is quite interesting, (because it wasn't immediately obvious to me that what the lender charges is the mirror opposite of what you gain by investing). The present value can be now be calculated using the formula. Still assuming the 8% stock market return is per month. If the stock market yield is 8% per annum effective rate and if it is given as a nominal annual yield, 8% compounded monthly" }, { "docid": "331295", "title": "", "text": "\"Let's start by saying that of all the things to solve in a mortgage equation, the rate is the toughest. It's the least friendly to solving with pencil and paper. While I never tire of expressing my love for my Texas Instruments BA-35 financial calculator, it's no longer in production, and most folk won't have access, but Excel is right there. The financial function pops up for you with RATE as a choice for solving. I filled in the cells to show the numbers. The -665.30 is a typical convention for money flows as it's a payment from you not a credit for interest you earn. Note, some mortgage calculators leave this entry as positive. It takes a second to see how one's calculation or spreadsheet does this. Last, you can see the software wants a \"\"guess.\"\" This is because the software has a loop, guessing and getting closer to the solution. I entered .005 to guess 6% per year. The correct solution is .006 or 7.2% per year. Class dismissed.\"" }, { "docid": "235271", "title": "", "text": "\"For 3X, it's about 114, and for 4X, 144, which naturally, is twice 72. These are close, back of napkin, results. With smart phone apps offering scientific calculators, you should get comfortable just taking the nth root of a number for a more precise answer. Update in response to Brick's comment. The rule of 72 says that (n)(y)=72 to double your money. It answers both questions, how much time do I need, given a rate, and how much return do I need, given a time? Logic tells me that if 72 is the number to double, 144 is the 4X. But I'm a math guy, and my logic might not be logical to OP. So - Let's take the 20th root of 4. This is the key to use. 4, (hit key) 20, equals. The result is 1.07177 or 7.177%. And this is the precise rate you'd need to quadruple your money in 20 years) Now (n)(y)= 20* 7.177 = 143.55 which rounds to 144. \"\"Rule of 144\"\" to quadruple your money. This now answers OP's question, \"\"How to derive a Rule of X\"\" for a return other than doubling. One more example? I want 10X my money. Of course I need the initial guess to enter one calculation. People like 8%, in general. It's a bit below the 10% long term S&P return, and a good round number. The Rule of 72 says 9 years to double, so, 18 years is 4X, and 36 years is 8X. For my initial calculation, I'll use 40 years. The 40th root of 10. I get 5.925% (Again the precise rate that gives 10 fold over 40 years) and multiplying this by 40, I get a \"\"Rule of 237\"\" which I'm tempted to round to 240. At 6%, 237/6= 39.5 yrs, 1.06^39.5 = 9.99 At 6%, 240/6= 40.0 yrs, 1.06^40.0 = 10.29 You can see that you lose some accuracy for the sake of a number that's easier to remember, and manipulate. 72 to double is pretty darn accurate, so I'll stick with \"\"Rule of 237\"\" to get 10X my money. To close, the purpose of these rules is to create the tool that lets you perform some otherwise tough calculations away from any electronic device. Of course I know how to use logs, and in real life I'm paid to explain them to students who are typically glad when that chapter is over. I've shown above how the \"\"Rule of X\"\" can be formulated with a power/root key, which, for most people, is simpler. Ironically, log calculations as @jkuz offered, force a continuous compounding which may not be desired at all. It would give a result of 230 for my 10X return example, and the following (using the first equation he offered) - At 6%, 230/6= 38.3 yrs, 1.06^38.3 = 9.31 which is further away from the desired 10X than my 237 or rounded 240.\"" }, { "docid": "406409", "title": "", "text": "\"The definition I use for financial independence is 99% confidence that, at a specific estimated spending rate per year (allowing for estimated inflation, and budgeting for likely medical emergencies, and taxes on taxable investments), the money will outlast me. This translates to needing an average annual return on investment which covers the average yearly spending. For my purposes, that works out to my relying on being able to draw only a 4% income from the money each year, which should give me good odds of the money not just being sufficient but being able to deliver that rate \"\"forever\"\". (Historically, average US stock market rate if return is around 8%.) That is overkill, if course, I could plan on the money just barely lasting past my 120th birthday or something of that sort, but the goal us to be pretty sure not only that I won't run out but that I will have some cash unexpected needs. Which in turn means that I estimate I need investments 1/.04 times the yearly spending estimate to declare the \"\"forever\"\" independence/retirement, or 25x the yearly. From that, I can calculate how much longer, at a given savings rate and rate of return, it'll take for me to reach that target. Obviously you need to adjust all these numbers to reflect your opinions/understanding if the market, your own needs, your priorities and expected maximum age, and the phase of Saturn's moons. But that's the basic rationale. Or you can pay a financial planner to give you this number, and a strategy for getting there, based on the numbers you give him or her plus some statistical analysis of the market's overall history.\"" }, { "docid": "56555", "title": "", "text": "In my opinion, the simplest way to run these numbers is to first assume you are borrowing the full amount, including the points, if any. They run a spreadsheet, and while using the new rate, apply your full current payment each month. Then compare balances at month 48. You'll find it easy to calculate the breakeven. In the case of the negative points, it's immediate. For higher points, the B/E is later but then you are further ahead each month." }, { "docid": "66119", "title": "", "text": "How can I calculate my currency risk exposure? You own securities that are priced in dollars, so your currency risk is the amount (all else being equal) that your portfolio drops if the dollar depreciates relative to the Euro between now and the time that you plan to cash out your investments. Not all stocks, though, have a high correlation relative to the dollar. Many US companies (e.g. Apple) do a lot of business in foreign countries and do not necessarily move in line with the Dollar. Calculate the correlation (using Excel or other statistical programs) between the returns of your portfolio and the change in FX rate between the Dollar and Euro to see how well your portfolio correlated with that FX rate. That would tell you how much risk you need to mitigate. how can I hedge against it? There are various Currency ETFs that will track the USD/EUR exchange rate, so one option could be to buy some of those to offset your currency risk calculated above. Note that ETFs do have fees associated with them, although they should be fairly small (one I looked at had a 0.4% fee, which isn't terrible but isn't nothing). Also note that there are ETFs that employ currency risk mitigation internally - including one on the Nasdaq 100 . Note that this is NOT a recommendation for this ETF - just letting you know about alternative products that MIGHT meet your needs." }, { "docid": "211308", "title": "", "text": "Say you buy a bond that currently costs $950, and matures in one year, at $1000 face value. It has one coupon ($50 interest payment) left. The coupon, $50, is 50/950 or 5.26%, but you get the face value, $1000, for an additional $50 return. This is why the yield to maturity is higher than current yield. If the maturity were in two years, the coupons still provide 5.26%, and the extra 1000/950 is another 5.26% over 2 years, or (approx) 2.6%/yr compounded, for a total YTM of 7.86%. This is a back-of envelope calculation, the real way to calculate is with a finance calculator. Entering PV (present value) FV (future value) PMT (coupon payment(s)) and N (number of periods). With no calculator or spreadsheet, my estimate will be pretty close." }, { "docid": "595759", "title": "", "text": "See this spread sheet I worked up for fun. https://docs.google.com/spreadsheets/d/1ZhI-Rls4FpwpdpEYgdn20lWmcqkIEhB-2AH0fQ7G2wY/edit?usp=sharing If you are really crazy you can do what I did and model the rates (modified normal) and expenses (large items like the roofing being replaced on exponential) distribution and run a monte carlo simulation to get maximum likely losses by years and ranges of final values. P.S. As a side note, this spreadsheet makes a lot of assumptions and I would consider it absolutely necessary to be able to build a sheet like this and understand all the assumptions and play with it to see how quickly this can turn into a losing investment before making any business investments." }, { "docid": "469599", "title": "", "text": "The Investopedia article you linked to is a good start. Its key takeaway is that you should always consider risk-adjusted return when evaluating your portfolio. In general, investors seeking a higher level of return must face a higher likelihood of taking a loss (risk). Different types of stocks (large vs small; international vs US; different industry sectors) have different levels of historical risk and return. Not to mention stocks vs bonds or other financial instruments... So, it's key to make an apples-to-apples comparison against an appropriate benchmark. A benchmark will tell you how your portfolio is doing versus a comparable portfolio. An index, such as the S&P 500, is often used, because it tells you how your portfolio is doing compared against simply passively investing in a diversified basket of securities. First, I would start with analyzing your portfolio to understand its asset allocation. You can use a tool like the Morningstar X-Ray to do this. You may be happy with the asset allocation, or this tool may inform you to adjust your portfolio to meet your long-term goals. The next step will be to choose a benchmark. Given that you are investing primarily in non-US securities, you may want to pick a globally diversified index such as the Dow Jones Global Index. Depending on the region and stock characteristics you are investing in, you may want to pick a more specialized index, such as the ones listed here in this WSJ list. With your benchmark set, you can then see how your portfolio's returns compare to the index over time. IRR and ROI are helpful metrics in general, especially for corporate finance, but the comparison-based approach gives you a better picture of your portfolio's performance. You can still calculate your personal IRR, and make sure to include factors such as tax treatment and investment expenses that may not be fully reflected by just looking at benchmarks. Also, you can calculate the metrics listed in the Investopedia article, such as the Sharpe ratio, to give you another view on the risk-adjusted return." }, { "docid": "365262", "title": "", "text": "Add a few more cells to your header that list the interest paid in in the next 3 to 4 years on your current mortgage. Use the cumulative interest function from your spreadsheet program. In the main body of your spreadsheet, add columns that summarize the total cost over 3-4 years for each loan. Add columns that list the interest cost, total cost of interest + refi cost, and the difference between that approach and the interest costs from your current loan. Add 6 columns total: a set for 3 years and a set for 4. Something like this: Repeat that 3 year block off to the right and plug in the 4 year numbers. You requested that we factor in a 3.5% penalty against the money that goes to the discount fee. You could do that by adding a column that calculates this, like Joe described in his answer. Add that 3.5% accrual into the total calculation above, which in turn will knock down the amount of savings for each refi loan. PS: How are you going to earn 3.5% over 48 months?" } ]

[ { "docid": "28291", "title": "", "text": "\"If you want a ~12% rate of return on your investments.... too bad. For returns which even begin to approach that, you need to be looking at some of the riskiest stuff. Think \"\"emerging markets\"\". Even funds like Vanguard Emerging Markets (ETF: VWO, mutual fund, VEIEX) or Fidelity Advisor Emerging Markets Income Trust (FAEMX) seem to have yields which only push 11% or so. (But inflation is about nil, so if you're used to normal 2% inflation or so, these yields are like 13% or so. And there's no tax on that last 2%! Yay.) Remember that these investments are very risky. They go up lots because they can go down lots too. Don't put any money in there unless you can afford to have it go missing, because sooner or later you're likely to lose something half your money, and it might not come back for a decade (or ever). Investments like these should only be a small part of your overall portfolio. So, that said... Sites which make investing in these risky markets easy? There are a good number, but you should probably just go with vanguard.com. Their funds have low fees which won't erode your returns. (You can actually get lower expense ratios by using their brokerage account to trade the ETF versions of their funds commission-free, though you'll have to worry more about the actual number of shares you want to buy, instead of just plopping in and out dollar amounts). You can also trade Vanguard ETFs and other ETFs at almost any brokerage, just like stocks, and most brokerages will also offer you access to a variety of mutual funds as well (though often for a hefty fee of $20-$50, which you should avoid). Or you can sign up for another fund providers' account, but remember that the fund fees add up quickly. And the better plan? Just stuff most of your money in something like VTI (Vanguard Total Stock Market Index) instead.\"" } ]

[ { "docid": "599436", "title": "", "text": "\"1. Interest rates What you should know is that the longer the \"\"term\"\" of a bond fund, the more it will be affected by interest rates. So a short-term bond fund will not be subject to large gains or losses due to rate changes, an intermediate-term bond fund will be subject to moderate gains or losses, and a long-term bond fund will be subject to the largest gains or losses. When a book or financial planner says to buy \"\"bonds\"\" with no other qualification, they almost always mean investment-grade intermediate-term bond funds (or for individual bonds, the equivalent would be a bond ladder averaging an intermediate term). If you want technical details, look at the \"\"average duration\"\" or \"\"average maturity\"\" of the bond fund; as a rough guide, if the duration is 10, then a 1% change in interest rates would be a 10% gain or loss on the fund. Another thing you can do is look at long-term (10 years or ideally longer) performance history on some short, intermediate, and long term bond index funds, and you can see how the long term funds bounced around more. Non-investment-grade bonds (aka junk bonds or high yield bonds) are more affected by factors other than interest rates, including some of the same factors (economic booms or recessions) that affect stocks. As a result, they aren't as good for diversifying a portfolio that otherwise consists of stocks. (Having stocks, investment grade bonds, and also a little bit in high-yield bonds can add diversification, though. Just don't replace your bond allocation with high-yield bonds.) A variety of \"\"complicated\"\" bonds exist (convertible bonds are an example) and these are tough to analyze. There are also \"\"floating rate\"\" bonds (bank loan funds), these have minimal interest rate sensitivity because the rate goes up to offset rate rises. These funds still have credit risks, in the credit crisis some of them lost a lot of money. 2. Diversification The purpose of diversification is risk control. Your non-bond funds will outperform in many years, but in other years (say the -37% S&P 500 drop in 2008) they may not. You will not know in advance which year you'll get. You get risk control in at least a few ways. There's also an academic Modern Portfolio Theory explanation for why you should diversify among risky assets (aka stocks), something like: for a given desired risk/return ratio, it's better to leverage up a diverse portfolio than to use a non-diverse portfolio, because risk that can be eliminated through diversification is not compensated by increased returns. The theory also goes that you should choose your diversification between risk assets and the risk-free asset according to your risk tolerance (i.e. select the highest return with tolerable risk). See http://en.wikipedia.org/wiki/Modern_portfolio_theory for excruciating detail. The translation of the MPT stuff to practical steps is typically, put as much in stock index funds as you can tolerate over your time horizon, and put the rest in (intermediate-term investment-grade) bond index funds. That's probably what your planner is asking you to do. My personal view, which is not the standard view, is that you should take as much risk as you need to take, not as much as you think you can tolerate: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ But almost everyone else will say to do the 80/20 if you have decades to retirement and feel you can tolerate the risk, so my view that 60/40 is the max desirable allocation to stocks is not mainstream. Your planner's 80/20 advice is the standard advice. Before doing 100% stocks I'd give you at least a couple cautions: See also:\"" }, { "docid": "370244", "title": "", "text": "Behind the scenes, mutual funds and ETFs are very similar. Both can vary widely in purpose and policies, which is why understanding the prospectus before investing is so important. Since both mutual funds and ETFs cover a wide range of choices, any discussion of management, assets, or expenses when discussing the differences between the two is inaccurate. Mutual funds and ETFs can both be either managed or index-based, high expense or low expense, stock or commodity backed. Method of investing When you invest in a mutual fund, you typically set up an account with the mutual fund company and send your money directly to them. There is often a minimum initial investment required to open your mutual fund account. Mutual funds sometimes, but not always, have a load, which is a fee that you pay either when you put money in or take money out. An ETF is a mutual fund that is traded like a stock. To invest, you need a brokerage account that can buy and sell stocks. When you invest, you pay a transaction fee, just as you would if you purchase a stock. There isn't really a minimum investment required as there is with a traditional mutual fund, but you usually need to purchase whole shares of the ETF. There is inherently no load with ETFs. Tax treatment Mutual funds and ETFs are usually taxed the same. However, capital gain distributions, which are taxable events that occur while you are holding the investment, are more common with mutual funds than they are with ETFs, due to the way that ETFs are structured. (See Fidelity: ETF versus mutual funds: Tax efficiency for more details.) That having been said, in an index fund, capital gain distributions are rare anyway, due to the low turnover of the fund. Conclusion When comparing a mutual fund and ETF with similar objectives and expenses and deciding which to choose, it more often comes down to convenience. If you already have a brokerage account and you are planning on making a one-time investment, an ETF could be more convenient. If, on the other hand, you have more than the minimum initial investment required and you also plan on making additional regular monthly investments, a traditional no-load mutual fund account could be more convenient and less expensive." }, { "docid": "371176", "title": "", "text": "First, you need to understand the difference in discussing types of investments and types of accounts. Certificate of Deposits (CDs), money market accounts, mutual funds, and stocks are all examples of types of investments. 401(k), IRA, Roth IRA, and taxable accounts are all examples of types of accounts. In general, those are separate decisions to make. You can invest in any type of investment inside any type of account. So your question really has two different parts: Tax-advantaged retirement accounts vs. Standard taxable accounts FDIC-insured CDs vs. at-risk investments (such as stock mutual funds) Retirement accounts are special accounts allowed by the federal government that allow you to delay (or, in some cases, completely avoid) paying taxes on your investment. The trade-off for these accounts is that, in general, you cannot access any of the money that you put into these accounts until you get to retirement age without paying a steep penalty. These accounts exist to encourage citizens to save for their own retirement. Examples of retirement accounts include 401(k) and IRAs. Standard taxable accounts have no tax advantages, but no restrictions, either. You can put money in and take money out whenever you like. However, anything that your investment earns is taxable each year. Inside any of these accounts, you can invest in FDIC-insured bank accounts, such as savings accounts or CDs, or you can invest in any number of non-insured investments, including money market accounts, bonds, mutual funds, stocks, precious metals, etc. Something you need to understand about investing in general is that your potential returns are directly related to the amount of risk that you take on. Investing in an insured investment, which is guaranteed by the government to never lose its value, will result in the lowest potential investment returns that you can get. Interest-bearing savings accounts are currently paying less than 1% interest. A CD will get you a slightly higher interest rate in exchange for you agreeing not to withdraw your money for a period of time. However, it takes a long time for your investments to grow with these investments. If you are earning 1%, it takes 72 years for your investment to double. If you are willing to take some risk, you can earn much more with your investments. Bonds are often considered quite safe; with a bond, you loan money to a government or corporation, and they pay you back with interest. The risk comes from the possibility that the government or corporation won't pay you back, so it is important to choose a bond from an entity that you trust. Stocks are shares in for-profit companies. Your potential investment gain is unlimited, but it is risky, as stocks can go down in value, and companies can close. However, it is important to note that if you take the largest 500 stocks together (S&P 500), the average value has consistently gone up over the long term. In the last 35 years, this average value has gone up about 11%. At this rate, your investment would double in less than 7 years. To avoid the risk of picking a losing stock, you can invest in a mutual fund, which is a collection of stocks, bonds, or other investments. The idea is that you can, with one investment, invest in many stocks, essentially earning the average performance of all the stocks. There is still risk, as the market can be down as a whole, but you are insulated from any one stock being bad because you are diversified. If you are investing for something in the long-term future, such as retirement, stock mutual funds provide a good rate of return at an acceptably-low level of risk, in my opinion." }, { "docid": "322049", "title": "", "text": "I think this question is very nearly off-topic for this site, but I also believe that a basic understanding of the why the tax structure is what it is can help someone new to investing to understand their actual tax liability. The attempt at an answer I provide below is from a Canadian & US context, but should be similar to how this is viewed elsewhere in the world. First note that capital gains today are much more fluid in concept than even 100 years ago. When the personal income tax was first introduced [to pay for WWI], a capital gain was viewed as a very deliberate action; the permanent sale of property. Capital gains were not taxed at all initially [in Canada until 1971], under the view that income taxes would have been paid on income-earning assets all along [through interest, dividends, and rent], and therefore taxing capital gains would be a form of 'double-taxation'. This active, permanent sale was also viewed as an action that an investor would need to work for. Therefore it was seen as foolish to prevent investors from taking positive economic action [redistributing their capital in the most effective way], simply to avoid the tax. However today, because of favourable taxation on capital gains, many financial products attempt to package and sell capital gains to investors. For example, many Canadian mutual funds buy and sell investments to earn capital gains, and distribute those capital gains to the owners of the mutual fund. This is no longer an active action taken by the investor, it is simply a function of passive investing. The line between what is a dividend and what is a capital gain has been blurred by these and similar advanced financial products. To the casual investor, there is no practical difference between receiving dividends or capital gain distributions, except for the tax impact. The notional gain realized on the sale of property includes inflation. Consider a rental property bought in 1930 for $100,000, and sold in 1960 for $180,000, assuming inflation between 1930 and 1960 was 70%. In 1960 dollars, the property was effectively bought for 170k. This means the true gain after accounting for inflation is only $10k. But, the notional gain is $80k, meaning a tax on that capital gain would be almost entirely a tax on inflation. This is viewed by many as being unfair, as it does not actually represent true income. I will pause to note that any tax on any investment at all, taxes inflation; interest, for example, is taxed in full even though it can be almost entirely inflationary, depending on economic conditions. A tax on capital gains may restrict market liquidity. A key difference between capital gains and interest/rent/dividends, is that other forms of investment income are taxed annually. If you hold a bond, you get taxed on interest from that bond. You cannot gain value from a bond, deferring tax until the date it matures [at least in Canada, you are deemed to accrue bond interest annually, even if it is a 0 coupon bond]. However, what if interest rates have gone down, increasing the value of your bond, and you want to sell it to invest in a business? You may choose not to do this, to avoid tax on that capital gain. If it were taxed as much as regular income, you might be even more inclined to never sell any asset until you absolutely have to, thus restricting the flow of capital in the market. I will pause here again, to note that laws could be enacted to minimize capital gains tax, as long as the money is reinvested immediately, thus reducing this impact. Political inertia / lobbying from key interests has a significant impact on the tax structure for investments. The fact remains that the capital gains tax is most significantly an impact on those with accrued wealth. It would take significant public support to increase capital gain tax rates, for any political party to enact such laws. When you get right down to it, tax laws are complex, and hard to push in the public eye. The general public barely understands that their effective tax rate is far lower than their top marginal tax rate. Any tax increases at all are often viewed negatively, even by those who would never personally pay any of that tax due to lack of investment income. Therefore such changes are typically made quietly, and with some level of bi-partisan support. If you feel the capital gains tax rules are illogical, just add it to the pile of such tax laws that exist today." }, { "docid": "281865", "title": "", "text": "On reading couple of articles & some research over internet, I got to know about diversified investment where one should invest 70% in equity related & rest 30% in debt related funds Yes that is about right. Although the recommendation keeps varying a bit. However your first investment should not aim for diversification. Putting small amounts in multiple mutual funds may create paper work and tracking issues. My suggestion would be to start with an Index EFT or Large cap. Then move to balanced funds and mid caps etc. On this site we don't advise on specific funds. You can refer to moneycontrol.com or economictimes or quite a few other personal finance advisory sites to understand the top funds in the segments and decide on funds accordingly. PS: Rather than buying paper, buy it electronic, better you can now buy it as Demat. If you already have an Demat account it would be best to buy through it." }, { "docid": "182042", "title": "", "text": "\"The fund will take a small percentage of its assets to cover the expenses. Reported returns come after the expense ratio has been factored into things. Money market mutual funds can have a zero yield in some cases though breaking the buck can happen in some cases as noted on Wikipedia: The first money market mutual fund to break the buck was First Multifund for Daily Income (FMDI) in 1978, liquidating and restating NAV at 94 cents per share. An argument has been made that FMDI was not technically a money market fund as at the time of liquidation the average maturity of securities in its portfolio exceeded two years.[7] However, prospective investors were informed that FMDI would invest \"\"solely in Short-Term (30-90 days) MONEY MARKET obligations.\"\" Furthermore, the rule, which restricts the maturities which money market funds are permitted to invest in, Rule 2-a7 of the Investment Company Act of 1940, was not promulgated until 1983. Prior to the adoption of this rule, a mutual fund had to do little other than present itself as a money market fund, which FMDI did. Seeking higher yield, FMDI had purchased increasingly longer maturity securities and rising interest rates negatively impacted the value of its portfolio. In order to meet increasing redemptions the fund was forced to sell a certificate of deposit at a 3% loss, triggering a restatement of its NAV and the first instance of a money market fund \"\"breaking the buck\"\". The Community Bankers US Government Fund broke the buck in 1994, paying investors 96 cents per share. This was only the second failure in the then 23-year history of money funds and there were no further failures for 14 years. The fund had invested a large percentage of its assets into adjustable rate securities. As interest rates increased, these floating rate securities lost value. This fund was an institutional money fund, not a retail money fund, thus individuals were not directly affected. No further failures occurred until September 2008, a month that saw tumultuous events for money funds. However, as noted above, other failures were only averted by infusions of capital from the fund sponsors. Thus consider how likely is Fidelity Investments prepared to have people question how safe is their money with them which is why fund sponsors rarely break the buck.\"" }, { "docid": "537603", "title": "", "text": "If I invest X each month, where does X go - an existing (low yield) bond, or a new bond (at the current interest rate)? This has to be viewed in a larger context. If the fund has outflows greater than or equal to inflows then chances are there isn't any buying being done with your money as that cash is going to those selling their shares in the fund. If though inflows are greater than outflows, there may be some new purchases or not. Don't forget that the new purchase could be an existing bond as the fund has to maintain the duration of being a short-term, intermediate-term or long-term bond fund though there are some exceptions like convertibles or high yield where duration isn't likely a factor. Does that just depend on what the fund manager is doing at the time (buying/selling)? No, it depends on the shares being created or redeemed as well as the manager's discretion. If I put Y into a fund, and leave it there for 50 years, where does Y go when all of the bonds at the time I made the purchase mature? You're missing that the fund may buy and sell bonds at various times as for example a long-term bond fund may not have issues nearing maturity because of what part of the yield curve it is to mimic. Does Y just get reinvested in new bonds at the interest rate at that time? Y gets mixed with the other money in the fund that may increase or decrease in value over time. This is part of the risk in a bond fund where NAV can fluctuate versus a money market mutual fund where the NAV is somewhat fixed at $1/share." }, { "docid": "219910", "title": "", "text": "I was active in Prosper when it started up. It was very easy to get attracted to the high risk loans with big interest rates and I lost about 14% after all my loans ran their course. (There's 10 still active, but it won't change the figure by much). Prosper has wider standards than Lending club, so more borrowers with worse credit scores could ask for loans. Lenders could also set interest rates far lower, so they could end up having loans with rates lower than the risk implied. This was set up with the idea of a free market where anyone could ask to borrow and anyone could loan money at whatever interest rate they wanted, It turns out a lot of lenders were not as smart as they thought they were. (Aside: it's funny how people will clamor for a free market, but when they lose money will suddenly be against the free market they said they wanted, this seems to apply to both individual p2p lenders up to massive multinational banks.). Since then Prosper has tightened their standards on who can borrow and the interest rates are now fixed. So I expect going forward it will be less easy to lose a bunch of money. The key is that one bad loan will erase the return of many good ones. So it's best to examine the loans carefully and stick with the high quality. Simplified Example If you have 10 1 yr loans of $100 each paying 10% interest/year, you get 10% return at the end of the year, so $100 (10% of $1000.). BUT if one loan goes bad at the start, you have lost money. So a 90% success rate in picking borrowers leads to a loss. You want to diversity over quite a few loans and you want to fund quality loans. I think really enjoyed investing through Prosper, because it gave me an insight into lending and loss ratios that I had not had before. It also caused me to look at the banks with even more incredulity when the case of the no-doc loans and neg-am loans came to light." }, { "docid": "26939", "title": "", "text": "Don't start by investing in a few individual companies. This is risky. Want an example? I'm thinking of a big company, say $120 billion or so, a household name, and good consistent dividends to boot. They were doing fairly well, and were generally busy trying to convince people that they were looking to the future with new environmentally friendly technologies. Then... they went and spilled a bunch of oil into the Gulf of Mexico. Yes, it wasn't a pretty picture if BP was one of five companies in your portfolio that day. Things would look a lot better if they were one of 500 or 5000 companies, though. So. First, aim for diversification via mutual funds or ETFs. (I personally think you should probably start with the mutual funds: you avoid trading fees, for one thing. It's also easier to fit medium-sized dollar amounts into funds than into ETFs, even if you do get fee-free ETF trading. ETFs can get you better expense ratios, but the less money you have invested the less important that is.) Once you have a decent-sized portfolio - tens of thousands of dollars or so - then you can begin to consider holding stocks of individual companies. Take note of fees, including trading fees / commissions. If you buy $2000 worth of stock and pay a $20 commission you're already down 1%. If you're holding a mutual fund or ETF, look at the expense ratio. The annualized real return on the stock market is about 4%. (A real return is after adjusting for inflation.) If your fee is 1%, that's about a quarter of your earnings, which is huge. And while it's easy for a mutual fund to outperform the market by 1% from time to time, it's really really hard to do it consistently. Once you're looking at individual companies, you should do a lot of obnoxious boring stupid research and don't just buy the stock on the strength of its brand name. You'll be interested in a couple of metrics. The main one is probably the P/E ratio (price/earnings). If you take the inverse of this, you'll get the rate at which your investment is making you money (e.g. a P/E of 20 is 5%, a P/E of 10 is 10%). All else being equal, a lower P/E is a good thing: it means that you're buying the company's income really cheap. However, all else is seldom equal: if a stock is going for really cheap, it's usually because investors don't think that it's got much of a future. Earnings are not always consistent. There are a lot of other measures, like beta (correlation to the market overall: riskier volatile stocks have higher numbers), gross margins, price to unleveraged free cash flow, and stuff like that. Again, do the boring research, otherwise you're just playing games with your money." }, { "docid": "345954", "title": "", "text": "Generally value funds (particularly large value funds) will be the ones to pay dividends. You don't specifically need a High Dividend Yield fund in order to get a fund that pays dividends. Site likes vanguards can show you the dividends paid for mutual funds in the past to get an idea of what a fund would pay. Growth funds on the other hand don't generally pay dividends (or at least that's not their purpose). Instead, the company grows and become worth more. You earn money here because the company (or fund) you invested in is now worth more. If you're saying you want a fund that pays dividends but is also a growth fund I'm sure there are some funds like that out there, you just have to look around" }, { "docid": "323228", "title": "", "text": "In general, the higher the return (such as interest), the higher the risk. If there were a high-return no-risk investment, enough people would buy it to drive the price up and make it a low-return no-risk investment. Interest rates are low now, but so is inflation. They generally go up and down together. So, as a low risk (almost no-risk) investment, the savings account is not at all useless. There are relatively safe investments that will get a better return, but they will have a little more risk. One common way to spread the risk is to diversify. For example, put some of your money in a savings account, some in a bond mutual fund, and some in a stock index fund. A stock index fund such as SPY has the benefit of very low overhead, in addition to spreading the risk among 500 large companies. Mutual funds with a purchase or sale fee, or with a higher management fee do NOT perform any better, on average, and should generally be avoided. If you put a little money in different places regularly, you'll be fairly safe and are likely get a better return. (If you trade back and forth frequently, trying to outguess the market, you're likely to be worse off than the savings account.)" }, { "docid": "434279", "title": "", "text": "\"Here is the \"\"investing for retirement\"\" theoretical background you should have. You should base your investment decisions not simply on the historical return of the fund, but on its potential for future returns and its risk. Past performance does not indicate future results: the past performance is frequently at its best the moment before the bubble pops. While no one knows the specifics of future returns, there are a few types of assets that it's (relatively) safe to make blanket statements about: The future returns of your portfolio will primarily be determined by your asset allocation . The general rules look like: There are a variety of guides out there to help decide your asset allocation and tell you specifically what to do. The other thing that you should consider is the cost of your funds. While it's easy to get lucky enough to make a mutual fund outperform the market in the short term, it's very hard to keep that up for decades on end. Moreover, chasing performance is risky, and expensive. So look at your fund information and locate the expense ratio. If the fund's expense ratio is 1%, that's super-expensive (the stock market's annualized real rate of return is about 4%, so that could be a quarter of your returns). All else being equal, choose the cheap index fund (with an expense ratio closer to 0.1%). Many 401(k) providers only have expensive mutual funds. This is because you're trapped and can't switch to a cheaper fund, so they're free to take lots of your money. If this is the case, deal with it in the short term for the tax benefits, then open a specific type of account called a \"\"rollover IRA\"\" when you change jobs, and move your assets there. Or, if your savings are small enough, just open an IRA (a \"\"traditional IRA\"\" or \"\"Roth IRA\"\") and use those instead. (Or, yell at your HR department, in the event that you think that'll actually accomplish anything.)\"" }, { "docid": "459596", "title": "", "text": "\"Morningstar is often considered a trusted industry standard when it comes to rating mutual funds and ETFs. They offer the same data-centric information for other investments as well, such as individual stocks and bonds. You can consult Morningstar directly if you like, but any established broker will usually provide you with Morningstar's ratings for the products it is trying to sell to you. Vanguard offers a few Emerging Markets stock and bond funds, some actively managed, some index funds. Other investment management companies (Fidelity, Schwab, etc.) presumably do as well. You could start by looking in Morningstar (or on the individual companies' websites) to find what the similarities and differences are among these funds. That can help answer some important questions: I personally just shove a certain percentage of my portfolio into non-US stocks and bonds, and of that allocation a certain fraction goes into \"\"established\"\" economies and a certain fraction into \"\"emerging\"\" ones. I do all this with just a few basic index funds, because the indices make sense (to me) and index funds cost very little.\"" }, { "docid": "593475", "title": "", "text": "There are more than a few ideas here. Assuming you are in the U.S., here are a few approaches: First, DRIPs: Dividend Reinvestment Plans. DRIP Investing: How To Actually Invest Only A Hundred Dollars Per Month notes: I have received many requests from readers that want to invest in individual stocks, but only have the available funds to put aside $50 to $100 into a particular company. For these investors, keeping costs to a minimum is absolutely crucial. I have often made allusions and references to DRIP Investing, but I have never offered an explanation as to how to logistically set up DRIP accounts. Today, I will attempt to do that. A second option, Sharebuilder, is a broker that will allow for fractional shares. A third option are mutual funds. Though, these often will have minimums but may be waived in some cases if you sign up with an automatic investment plan. List of mutual fund companies to research. Something else to consider here is what kind of account do you want to have? There can be accounts for specific purposes like education, e.g. a college or university fund, or a retirement plan. 529 Plans exist for college savings that may be worth noting so be aware of which kinds of accounts may make sense for what you want here." }, { "docid": "135176", "title": "", "text": "\"It can be pretty hard to compute the right number. What you need to know for your actual return is called the dollar-weighted return. This is the Internal Rate of Return (IRR) http://en.wikipedia.org/wiki/Internal_rate_of_return computed for your actual cash flows. So if you add $100 per month or whatever, that has to be factored in. If you have a separate account then hopefully your investment manager is computing this. If you just have mutual funds at a brokerage or fund company, computing it may be a bunch of manual labor, unless the brokerage does it for you. A site like Morningstar will show a couple of return numbers on say an S&P500 index fund. The first is \"\"time weighted\"\" and is just the raw return if you invested all money at time A and took it all out at time B. They also show \"\"investor return\"\" which is the average dollar-weighted return for everyone who invested in the fund; so if people sold the fund during a market crash, that would lower the investor return. This investor return shows actual returns for the average person, which makes it more relevant in one way (these were returns people actually received) but less relevant in another (the return is often lower because people are on average doing dumb stuff, such as selling at market bottoms). You could compare yourself to the time-weighted return to see how you did vs. if you'd bought and held with a big lump sum. And you can compare yourself to the investor return to see how you did vs. actual irrational people. .02, it isn't clear that either comparison matters so much; after all, the idea is to make adequate returns to meet your goals with minimum risk of not meeting your goals. You can't spend \"\"beating the market\"\" (or \"\"matching the market\"\" or anything else benchmarked to the market) in retirement, you can only spend cash. So beating a terrible market return won't make you feel better, and beating a great market return isn't necessary. I think it's bad that many investment books and advisors frame things in terms of a market benchmark. (Market benchmarks have their uses, such as exposing index-hugging active managers that aren't earning their fees, but to me it's easy to get mixed up and think the market benchmark is \"\"the point\"\" - I feel \"\"the point\"\" is to achieve your financial goals.)\"" }, { "docid": "460457", "title": "", "text": "In my mind, when looking at a five year period you have a number of options. You didn't specify where you are based, which admittedly makes it harder, to give you good advice. If you are looking for an investment that can achieve large gains, equities are impossible to ignore. By investing in an index fund or other diverse asset forms (such as mutual funds), your risk is relatively minimal. However there has historically been five year periods where you would lose/flatline your money. If this was to be the case you would likely be better off waiting more than five years to buy a house, which would be frustrating. When markets rebound, they often do it hard. If you are in a major economy, taking something like the top 100 of your stock market is a safe bet, although admittedly you would have made terrible returns if you invested in the Polish markets. While they often achieve lower returns than equity investments, they are generally considered safer - especially government issued bonds. If you were willing to sacrifice returns for safety, you must always consider them. This is an interesting new addition, and I can't comment on the state of it in the United States, however in Europe we have a number of platforms which do this. In the UK, for example you can achieve ~7.3% returns YoY using sites like Funding Circle. If you invest in a diverse range of businesses, you have minimal risk from and individual company not paying. Elsewhere in Europe (although not appropriate for me as everything I do is denominated in Sterling), you can secure 12% in places like Georgia, Poland, and Estonia. This is a very good rate and the platforms seem reputable, and 'guarantee' their loans. However unlike funding circle, they are for consumer loans. The risk profile in my mind is similar to that of equities, but it is hard to say. Whatever you do, you need to do your homework, and ensure that you can handle the level of risk offered by the investments you make. I haven't included things like Savings accounts in here, as the rates aren't worth bothering with." }, { "docid": "75326", "title": "", "text": "Good job. Assuming that you are also contributing to retirement, you are bound to be a wealthy person. I'm not really sure how Australia works as far as retirement, but I am pretty sure you are taking care of that too. Given your time frame (more than 5 years) I would consider investing at least a portion of the money. If I was you, I would tend to make that amount significant, say 75% in mutual funds, 25% in your high interest savings. The ratio you choose is up to you, but I would be heavier in the investment than savings side. As the time for home purchase approaches, you may want more in savings and less in investments. You may want to look at a mutual fund with a low beta. Beta is a measure of the price volatility. I did a google search on low beta funds, and came up with a number of good articles that explains this further. Having a fund with a low beta insulates you, a bit, from radical swings in the market allowing you to count more on the money being there when needed. One way to get to the proper ratio, is to contribute all new money to the mutual fund until it is in proper balance. This way you don't lower your interest rate for a month. Given your time frame, salary, and sense of responsibility you may be able to do the 100% down plan. Again, good work!" }, { "docid": "339716", "title": "", "text": "\"You need to track all of your expenses first, inventarize all of your assets and liabilities, and set financial goals. For example, you need to know your average monthly expenses and exactly what percentages interest each loan charges, and you need to know what to save for (your children, retirement, large purchases, etc). Then you create an emergency fund: keep between 4 to 6 months worth of your monthly expenses in a savings account that you can readily access. Base the size of your emergency fund on your expenses rather than your salary. This also means its size changes over time, for example, it must increase once you have children. You then pay off your loans, starting with the loan charging the highest interest. You do this because e.g. paying off $X of a 7% loan is equivalent to investing $X and getting a guaranteed 7% return. The stock market does generally does not provide guarantees. Starting with the highest interest first is mathematically the most rewarding strategy in the long run. It is not a priori clear whether you should pay off all loans as fast as possible, particularly those with low interest rates, and the mortgage. You need to read up on the subject in order to make an informed decision, this would be too personal advice for us to give. After you've created that emergency fund, and paid of all high interest loans, you can consider investing in vessels that achieve your set financial goals. For example, since you are thinking of having children within five years, you might wish to save for college education. That implies immediately that you should pick an investment vessels that is available after 20 year or so and does not carry too much risk (e.g. perhaps bonds or deposits). These are a few basic advices, and I would recommend to look further on the internet and perhaps read a book on the topic of \"\"personal finance\"\".\"" }, { "docid": "445782", "title": "", "text": "The 20%+ returns you have observed in the mutual funds are not free money. They are compensation for the risk associated with owning those funds. Given the extraordinarily high returns you are seeing I would expect extremely high risk. This means there is a good possibility of extreme losses at some point. By putting a lot of money in those mutual funds you are taking a gamble that may or may not pay off. Assuming what your friend is paying you for rent is fair, you are not losing money on your house relative to the market. You are earning less because you are invested in a less risky asset. If you want a higher return, you should borrow some money (or sell your house) and invest in the market. You may make more money that way. But if you do that, you will have a larger chance of losing a lot of money at some point. That's the way risk works. No one can promise a 20% return on a risky asset, they can only hint that it may do in the future what it did in the past. A reasonable approach to investment is to get invested in lots of different things: stocks, bonds, real estate. If you are afraid of risk and willing to earn less, keep more money in safe assets. If you are willing to take big risks in exchange for the possibility of high returns, move more assets into risky stuff. If you want extreme returns and are willing to take extreme risk, borrow and use the money to invest in risky assets. As you look over investment options, remember that anything that pays high returns most likely has high risk as well." } ]

[ { "docid": "487052", "title": "", "text": "Any investment company or online brokerage makes investing in their products easy. The hard part is choosing which fund(s) will earn you 12% and up." } ]

[ { "docid": "61575", "title": "", "text": "\"Thanks for the info, things are starting to make more sense now. For some reason I've always neglected learning about investments, now that Im in a position to invest (and am still fairly young) I'm motivated to start learning. As for help with TD Ameritrade, I was looking into Index Funds (as another commenter mentioned that I should) on their site and am a little overwhelmed with the options. First, I'm looking at Mutual Funds, going to symbol lookup and using type = \"\"indeces\"\". I'm assuming that's the same thing as an \"\"Index Fund\"\" but since the language is slightly different I'm not 100% sure. However, at that point I need some kind of search for a symbol in order to see any results (makes sense, but I dont know where to start looking for \"\"good\"\" index funds). So my first question is: If I FIND a good mutual fund, is it correct to simply go to \"\"Buy Mutual Funds\"\" and find it from there? and if so, my second question is: How do I find a good mutual fund? My goal is to have my money in something that will likely grow faster than a savings account. I don't mind a little volatility, I can afford to lose my investment, I'd plan on leaving my money in the fund for a several years at least. My last question is: When investing in these types of funds (or please point me in another direction if you think Index Funds aren't the place for me to start) should I be reinvesting in the funds, or having them pay out dividends? I would assume that reinvesting is the smart choice, but I can imagine situations that might change that in order to mitigate risk...and as I've said a few times in this thread including the title, I'm a complete amateur so my assumptions aren't necessarily worth that much. Thanks for the help, I really appreciate all the info so far.\"" }, { "docid": "323228", "title": "", "text": "In general, the higher the return (such as interest), the higher the risk. If there were a high-return no-risk investment, enough people would buy it to drive the price up and make it a low-return no-risk investment. Interest rates are low now, but so is inflation. They generally go up and down together. So, as a low risk (almost no-risk) investment, the savings account is not at all useless. There are relatively safe investments that will get a better return, but they will have a little more risk. One common way to spread the risk is to diversify. For example, put some of your money in a savings account, some in a bond mutual fund, and some in a stock index fund. A stock index fund such as SPY has the benefit of very low overhead, in addition to spreading the risk among 500 large companies. Mutual funds with a purchase or sale fee, or with a higher management fee do NOT perform any better, on average, and should generally be avoided. If you put a little money in different places regularly, you'll be fairly safe and are likely get a better return. (If you trade back and forth frequently, trying to outguess the market, you're likely to be worse off than the savings account.)" }, { "docid": "549654", "title": "", "text": "Overall I think it sounds like it's worth it. It's hard to find that high of a rate on a checking account these days. It looks like you're looking at this bank, and I can see they have a few more requirements that seem a little tedious: If you don't do these things every month, then you lose the great interest rate. If you can think of an easy way to jump through these hoops and not forget, then it's probably worth it. For example, if you routinely eat out for lunch or buy a morning coffee, you can use that card to pay for it. Set yourself a recurring reminder in your calendar or smartphone to remind you to login to the online banking site. Ultimately, since this is an emergency fund, it's a good idea to keep it nice and liquid in a checking account. You're not likely going to find many other options that will give you a better (and safe) return and still keep your funds available for when you need them. In summary, it sounds like a good idea to me so long as you think you can reliably jump through their hoops." }, { "docid": "281865", "title": "", "text": "On reading couple of articles & some research over internet, I got to know about diversified investment where one should invest 70% in equity related & rest 30% in debt related funds Yes that is about right. Although the recommendation keeps varying a bit. However your first investment should not aim for diversification. Putting small amounts in multiple mutual funds may create paper work and tracking issues. My suggestion would be to start with an Index EFT or Large cap. Then move to balanced funds and mid caps etc. On this site we don't advise on specific funds. You can refer to moneycontrol.com or economictimes or quite a few other personal finance advisory sites to understand the top funds in the segments and decide on funds accordingly. PS: Rather than buying paper, buy it electronic, better you can now buy it as Demat. If you already have an Demat account it would be best to buy through it." }, { "docid": "24702", "title": "", "text": "It looks like your Solo 401K loan will need to repaid in 5 years. If you borrow too much in order to pay back in this time you run into the typical 401K loan risks, that it is considered a distribution. Don't borrow more then can be repaid in that time. When you borrow money from your 401K, it is no longer invested in the market. Lets assume that you are borrowing at 6% or so, and your LOC is at 3.5%, and the mutual funds you are invested in are returning 9%. You would be better off with the LOC. As you are paying 3.5% but earning 9%. Keep in mind with a LOC that is variable you have interest rate risk, where you don't really have that with the 401K loan. I think the 401K loan is riskier then you are allowing. If you do not pay it back within the allotted time, you get nailed for 40% of the unpaid balance. That is quite high. With the HELOC, you can weather quite a few negative credit events without your home ever being in jeopardy." }, { "docid": "549364", "title": "", "text": "\"As you alluded to in your question, there is not one answer that will be true for all mutual funds. In fact, I would argue the question is not specific to mutual funds but can be applied to almost anyone who must make an investment decision: a mutual fund manager, hedge fund manager, or an individual investor. Even though money going into a company 401(k) retirement savings plan is typically automatically allocated to different funds as we have specified, this is generally not the case for other investment accounts. For example, I also have a Roth IRA in which I have some money from each paycheck direct deposited and it's up to me to decide whether to leave that money in cash or to invest it somewhere else. Every time you invest more money into a mutual fund, the fund manager has the same decision to make. There are two commonly used mutual fund figures that relate to your question: turnover rate, and cash reserves. Turnover rate measures the percent of a fund's portfolio that changes every year. For example, a turnover rate of 100% indicates that a fund replaces every asset it held at the beginning of the year with something else at the end of the year – funds with turnover rates greater than 100% average a holding period for a given asset of less than one year, and funds with turnover rates less than 100% average a holding period for a given asset of more than one year. Cash reserves simply measure the amount of money funds choose to keep as cash instead of investing in other assets. Another important distinction to make is between actively managed funds and passively managed funds. Passively managed funds are often referred to as \"\"index funds\"\" and have as their goal only to match the returns of a given index or some other benchmark. Actively managed funds on the other hand try to beat the market by exploiting so-called market inefficiencies; e.g. buying undervalued assets, selling overvalued assets, \"\"timing\"\" the market, etc. To answer your question for a specific fund, I would encourage you to look at the fund's prospectus. I take as one example of a passively managed fund the Vanguard 500 Index Fund (VFINX), a mutual fund that was created to track the S&P 500. In its prospectus, the fund states that, \"\"to track its target index as closely as possible, the Fund attempts to remain fully invested in stocks\"\". Furthermore, the prospectus states that \"\"the fund's daily cash balance may be invested in one or more Vanguard CMT Funds, which are very low-cost money market funds.\"\" Therefore, we would expect both this fund's turnover rate and cash reserves to be extremely low. When we look at its portfolio composition, we see this is true – it is currently at a 4.8% turnover rate and holds 0.0% in short term reserves. Therefore, we can assume this fund is regularly purchasing shares (similar to a dollar cost averaging strategy) instead of holding on to cash and purchasing shares together at a specific time. For actively managed funds, the picture will tend to look a little different. For example, if we look at the Magellan Fund's portfolio composition, we can see it has a turnover rate of 42%, and holds around .95% in cash/short term reserves. In this case, we can safely guess that trading activity may not be as regular as a passively managed fund, as an active manager attempts to time the market. You may find mutual funds that have much higher cash reserves – perhaps 10% or even more. Granted, it is impossible to know the exact trading strategy of a mutual fund, and for good reason – if we knew for example, that a fund purchases shares every day at 2:30PM in order to realign with the S&P 500, then sellers of S&P components could up the prices at that time to exploit the mutual fund's trade strategy. Large traders are constantly trying to find ways to conceal their actual trading activity in order to avoid these exact problems. Finally, I feel obligated to note that it is important to keep in mind that trade frequency is linked to transactions costs – in general, the more frequently an investment manager (whether it be you or a mutual fund manager) executes trades, the more that manager will lose in transactions costs.\"" }, { "docid": "173967", "title": "", "text": "The S&P500 is an index, not an investment by itself. The index lists a large number of stocks, and the value of the index is the price of all the stocks added together. If you want to make an investment that tracks the S&P500, you could buy some shares of each stock in the index, in the same proportions as the index. This, however, is impractical for just about everyone. Index mutual funds provide an easy way to make this investment. SPY is an ETF (exchange-traded mutual fund) that does the same thing. An index CFD (contract for difference) is not the same as an index mutual fund. There are a number of differences between investing in a security fund and investing in a CFD, and CFDs are not available everywhere." }, { "docid": "460402", "title": "", "text": "This is literally the worst article ever. First dividends are not guaranteed, and the higher the yield the higher the risk for a dividend paying stock. When buying a stock that pays dividends make sure they have the cash flows to cover it long term. Utility stocks are interest rate sensitive. If we head into a period of high interest rates, utility stocks are going to underperform, if not get killed. Exchange traded funds can be extremely risky, and some have much higher fees than mutual funds. Variable Annuities should never be purchased unless you have exhausted all other tax deferred strategies, and then probably still to be avoided because of high fees. Money markets and CDs aren't really investments. They're a cash alternatives that May not keep up with inflation." }, { "docid": "583203", "title": "", "text": "You did something that you shouldn't have done; you bought a dividend. Most mutual fund companies have educational materials on their sites that recommend against making new investments in mutual funds in the last two months of the year because most mutual funds distribute their earnings (dividends, capital gains etc) to their shareholders in December, and the share price of the funds goes down in the amount of the per share distribution. These distributions can be taken in cash or can be re-invested in the fund; you most likely chose the latter option (it is often the default choice if you ignored all this because you are a newbie). For those who choose to reinvest, the number of shares in the mutual fund increases, but since the price of the shares has decreased, the net amount remains the same. You own more shares at a lower price than the day before when the price was higher but the total value of your account is the same (ignoring normal market fluctuations in the price of the actual stocks held by the fund. Regardless of whether you take the distributions as cash or re-invest in the fund, that money is taxable income to you (unless the fund is owned inside a 401k or IRA or other tax-deferred investment program). You bought 56 shares at a price of $17.857 per share (net cost $1000). The fund distributed its earnings shortly thereafter and gave you 71.333-56= 15.333 additional shares. The new share price is $14.11. So, the total value of your investment is $1012, but the amount that you have invested in the account is the original $1000 plus the amount of the distribution which is (roughly) $14.11 x 15.333 = $216. Your total investment of $1216 is now worth $1012 only, and so you have actually lost money. Besides, you owe income tax on that $216 dividend that you received. Do you see why the mutual fund companies recommend against making new investments late in the year? If you had waited till after the mutual fund had made its distribution, you could have bought $1000/14.11 = 70.871 shares and wouldn't have owed tax on that distribution that you just bought by making the investment just before the distribution was made. See also my answer to this recent question about investing in mutual funds." }, { "docid": "368938", "title": "", "text": "\"Answers: 1: No, Sections 1291-1298 of the IRC were passed in the Reagan adminstration. 2: Not only can a foreign company like a chocolate company fall afoul of the definition of PFIC because of the \"\"asset test\"\", which you cite, but it can also be called a PFIC because of the \"\"income test\"\". For example, I have shares in a development-stage Canadian biotech which is considered a PFIC because it has no income at all, except for a minor amount of bank interest on its working capital. This company is by no means \"\"passive\"\" (it has run 31 clinical trials in over 1100 human research subjects, burning $250M of investor's money in the process) nor is it an \"\"investment company\"\", but the stupid IRS considers it to be a \"\"passive foreign investment company\"\"! The IRS looks at it and sees only the bank account, and assumes it is a foreign shell corporation set up to shield the bank interest from them. 3: Yes, a foreign mutual fund is EXACTLY what congress intended to be a PFIC when passed IRC 1291-1298. (Biotechs, candy factories, ect got nailed as innocent bystanders.) Note that if you hold a US mutual fund then every year you'll get a form 1099 in the mail. The 1099 will report your share of the mutual fund's own income and capital gains, which you must report on your taxes. (You can also have capital gains from selling your shares of the mutual fund, but that's a different thing.) Now suppose that there was no PFIC law. Then the US investors in the mutual fund would do better if the mutual fund were in a foreign country, for two reasons: a) The fund would no longer distribute 1099's. That means the shareholders wouldn't have to pay tax every year on their proportions of the fund's own income/gains. The money that would have sooner gone to the IRS can sit around for years earning interest. b) The fund could return profits to shareholders exclusively through capital gains rather than dividends, thus ensuring that all of the investors' income on the fund would be taxed at <15%-20% rather than up to 39%. The fund could do this by returning cash to shareholders exclusively through buybacks. However, the US mutual fund industry doesn't want to move the industry to Canada, and it only takes a few newspaper articles about a foreign loophole to make congress spring to action. 4) It depends. If you have a PEDIGREED QEF election in place (as I do for my biotech shares) then form 8621 takes a few minutes by hand. However, this requires both the company and the investor to fully cooperate with congress's vision for PFICs. The company cooperates by providing a so-called \"\"PFIC annual information sheet\"\", which replaces the 1099 form for a US mutual fund. The investor cooperates by having a \"\"QEF election\"\" in place for EACH AND EVERY TAX YEAR in which he held the stock and by reporting the numbers from the PFIC annual information sheet on his return. (Note that the QEF election persists once made, until revoked. There are subtleties here that I am glossing over, since \"\"deemed sale\"\" elections and other means may be used to modify a share's holding period to come into compliance.) Note that there is software coming out to handle PFICs, and that the software makers will already run their software to make your form 8621 for $75 or so. I should also warn you that the blogs of tax accountants and tax lawyers all contradict each other on the basic issue of whether you can take capital losses on PFICs for which you have no form 8621 elections. (See section 2.3 of my notes http://tinyurl.com/mh9vlnr for commentary on this mess.) I do not know if the software people will tell you which elections are best made on form 8621, though, or advise you if it's time to simply dump your investment. The professional software is at 8621.com, and the individual 8621 preparation is at http://expattaxtools.com/?page_id=242. BTW, in case you're interested, I wrote up a very careful analysis of how to deal with the PFIC situation for the small biotech I invested in in certain cases. It is posted http://tinyurl.com/mh9vlnr. (For tax reasons it was quite fortunate that the share price dipped to near an all-time low on Jan 1, 2015, making the (next) 2015 tax year ripe for a so-called \"\"deemed sale\"\" election. This was only possible because the company provides the necessary \"\"PFIC annual information statements\"\", which your chocolate factory may or may not do.)\"" }, { "docid": "459596", "title": "", "text": "\"Morningstar is often considered a trusted industry standard when it comes to rating mutual funds and ETFs. They offer the same data-centric information for other investments as well, such as individual stocks and bonds. You can consult Morningstar directly if you like, but any established broker will usually provide you with Morningstar's ratings for the products it is trying to sell to you. Vanguard offers a few Emerging Markets stock and bond funds, some actively managed, some index funds. Other investment management companies (Fidelity, Schwab, etc.) presumably do as well. You could start by looking in Morningstar (or on the individual companies' websites) to find what the similarities and differences are among these funds. That can help answer some important questions: I personally just shove a certain percentage of my portfolio into non-US stocks and bonds, and of that allocation a certain fraction goes into \"\"established\"\" economies and a certain fraction into \"\"emerging\"\" ones. I do all this with just a few basic index funds, because the indices make sense (to me) and index funds cost very little.\"" }, { "docid": "483777", "title": "", "text": "If I were in your shoes (I would be extremely happy), here's what I would do: Get on a detailed budget, if you aren't doing one already. (I read the comments and you seemed unsure about certain things.) Once you know where your money is going, you can do a much better job of saving it. Retirement Savings: Contribute up to the employer match on the 401(k)s, if it's greater than the 5% you are already contributing. Open a Roth IRA account for each of you and make the max contribution (around $5k each). I would also suggest finding a financial adviser (w/ the heart of a teacher) to recommend/direct your mutual fund investing in those Roth IRAs and in your regular mutual fund investments. Emergency Fund With the $85k savings, take it down to a six month emergency fund. To calculate your emergency fund, look at what your necessary expenses are for a month, then multiply it by six. You could place that six month emergency fund in ING Direct as littleadv suggested. That's where we have our emergency funds and long term savings. This is a bare-minimum type budget, and is based on something like losing your job - in which case, you don't need to go to starbucks 5 times a week (I don't know if you do or not, but that is an easy example for me to use). You should have something left over, unless your basic expenses are above $7083/mo. Non-retirement Investing: Whatever is left over from the $85k, start investing with it. (I suggest you look into mutual funds) it. Some may say buy stocks, but individual stocks are very risky and you could lose your shirt if you don't know what you're doing. Mutual funds typically are comprised of many stocks, and you earn based on their collective performance. You have done very well, and I'm very excited for you. Child's College Savings: If you guys decide to expand your family with a child, you'll want to fund what's typically called a 529 plan to fund his or her college education. The money grows tax free and is only taxed when used for non-education expenses. You would fund this for the max contribution each year as well (currently $2k; but that could change depending on how the Bush Tax cuts are handled at the end of this year). Other resources to check out: The Total Money Makeover by Dave Ramsey and the Dave Ramsey Show podcast." }, { "docid": "31581", "title": "", "text": "When interest rates rise, the price of bonds fall because bonds have a fixed coupon rate, and since the interest rate has risen, the bond's rate is now lower than what you can get on the market, so it's price falls because it's now less valuable. Bonds diversify your portfolio as they are considered safer than stocks and less volatile. However, they also provide less potential for gains. Although diversification is a good idea, for the individual investor it is far too complicated and incurs too much transaction costs, not to mention that rebalancing would have to be done on a regular basis. In your case where you have mutual funds already, it is probably a good idea to keep investing in mutual funds with a theme which you understand the industry's role in the economy today rather than investing in some special bonds which you cannot relate to. The benefit of having a mutual fund is to have a professional manage your money, and that includes diversification as well so that you don't have to do that." }, { "docid": "322806", "title": "", "text": "\"Diversification is the only real free lunch in finance (reduction in risk without any reduction in expected returns), so clearly every good answer to your question will be \"\"yes.\"\" Diversification is good.\"\" Let's talk about many details your question solicits. Many funds are already pretty diversified. If you buy a mutual fund, you are generally already getting a large portion of the gains from diversification. There is a very large difference between the unnecessary risk in your portfolio if you only hold a couple of stocks and if you hold a mutual fund. Should you be diversified across mutual funds as well? It depends on what your funds are. Many funds, such as target-date funds, are intended to be your sole investment. If you have funds covering every major asset class, then there may not be any additional benefit to buying other funds. You probably could not have picked your \"\"favorite fund\"\" early on. As humans, we have cognitive biases that make us think we knew things early on that we did not. I'm sure at some point at the very beginning you had a positive feeling toward that fund. Today you regret not acting on it and putting all your money there. But the number of such feelings is very large and if you acted on all those, you would do a lot of crazy and harmful things. You didn't know early on which fund would do well. You could just as well have had a good feeling about a fund that subsequently did much worse than your diversified portfolio did. The advice you have had about your portfolio probably isn't based on sound finance theory. You say you have always kept your investments in line with your age. This implies that you believe the guidelines given you by your broker or financial advisor are based in finance theory. Generally speaking, they are not. They are rules of thumb that seemed good to someone but are not rigorously proven either in theory or empirics. For example the notion that you should slowly shift your investments from speculative to conservative as you age is not based on sound finance theory. It just seems good to the people who give advice on such things. Nothing particularly wrong with it, I guess, but it's not remotely on par with the general concept of being well-diversified. The latter is extremely well established and verified, both in theory and in practice. Don't confuse the concept of diversification with the specific advice you have received from your advisor. A fund averaging very good returns is not an anomaly--at least going forward it will not be. There are many thousand funds and a large distribution in their historical performance. Just by random chance, some funds will have a truly outstanding track record. Perhaps the manager really was skilled. However, very careful empirical testing has shown the following: (1) You, me, and people whose profession it is to select outperforming mutual funds are unable to reliably detect which ones will outperform, except in hindsight (2) A fund that has outperformed, even over a long horizon, is not more likely to outperform in the future. No one is stopping you from putting all your money in that fund. Depending on its investment objective, you may even have decent diversification if you do so. However, please be aware that if you move your money based on historical outperformance, you will be acting on the same cognitive bias that makes gamblers believe they are on a \"\"hot streak\"\" and \"\"can't lose.\"\" They can, and so can you. ======== Edit to answer a more specific line of questions =========== One of your questions is whether it makes sense to buy a number of mutual funds as part of your diversification strategy. This is a slightly more subtle question and I will indicate where there is uncertainty in my answer. Diversifying across asset classes. Most of the gains from diversification are available in a single fund. There is a lot of idiosyncratic risk in one or two stocks and much less in a collection of hundreds of stocks, which is what any mutual fund will hold. Still,you will probably want at least a couple of funds in your portfolio. I will list them from most important to least and I will assume the bulk of your portfolio is in a total US equity fund (or S&P500-style fund) so that you are almost completely diversified already. Risky Bonds. These are corporate, municipal, sovereign debt, and long-term treasury debt funds. There is almost certainly a good deal to be gained by having a portion of your portfolio in bonds, and normally a total market fund will not include bond exposure. Bonds fund returns are closely related to interest rate and inflation changes. They are also exposed to some market risk but it's more efficient to get that from equity. The bond market is very large, so if you did market weights you would have more in bonds than in equity. Normally people do not do this, though. Instead you can get the exposure to interest rates by holding a lesser amount in longer-term bonds, rather than more in shorter-term bonds. I don't believe in shifting your weights toward nor away from this type of bond (as opposed to equity) as you age so if you are getting that advice, know that it is not well-founded in theory. Whatever your relative weight in risky bonds when you are young is should also be your weight when you are older. International. There are probably some gains from having some exposure to international markets, although these have decreased over time as economies have become more integrated. If we followed market weights, you would actually put half your equity weight in an international fund. Because international funds are taxed differently (gains are always taxed at the short-term capital gains rate) and because they have higher management fees, most people make only a small investment to international funds, if any at all. Emerging markets International funds often ignore emerging markets in order to maintain liquidity and low fees. You can get some exposure to these markets through emerging markets funds. However, the value of public equity in emerging markets is small when compared with that of developed markets, so according to finance theory, your investment in them should be small as well. That's a theoretical, not an empirical result. Emerging market funds charge high fees as well, so this one is kind of up to your taste. I can't say whether it will work out in the future. Real estate. You may want to get exposure to real estate by buying a real-estate fund (REIT). Though, if you own a house you are already exposed to the real estate market, perhaps more than you want to be. REITs often invest in commercial real estate, which is a little different from the residential market. Small Cap. Although total market funds invest in all capitalization levels, the market is so skewed toward large firms that many total market funds don't have any significant small cap exposure. It's common for individuals to hold a small cap fund to compensate for this, but it's not actually required by investment theory. In principle, the most diversified portfolio should be market-cap weighted, so small cap should have negligible weight in your portfolio. Many people hold small cap because historically it has outperformed large cap firms of equal risk, but this trend is uncertain. Many researchers feel that the small cap \"\"premium\"\" may have been a short-term artifact in the data. Given these facts and the fact that small-cap funds charge higher fees, it may make sense to pass on this asset class. Depends on your opinion and beliefs. Value (or Growth) Funds. Half the market can be classed as \"\"value\"\", while the other half is \"\"growth.\"\" Your total market fund should have equal representation in both so there is no diversification reason to buy a special value or growth fund. Historically, value funds have outperformed over long horizons and many researchers think this will continue, but it's not exactly mandated by the theory. If you choose to skew your portfolio by buying one of these, it should be a value fund. Sector funds. There is, in general, no diversification reason to buy funds that invest in a particular sector. If you are trying to hedge your income (like trying to avoid investing in the tech sector because you work in that sector) or your costs (buying energy because you buy use a disproportionate amount of energy) I could imagine you buying one of these funds. Risk-free bonds. Funds specializing in short-term treasuries or short-term high-quality bonds of other types are basically a substitute for a savings account, CD, money market fund, or other cash equivalent. Use as appropriate but there is little diversification here per se. In short, there is some value in diversifying across asset classes, and it is open to opinion how much you should do. Less well-justified is diversifying across managers within the same asset class. There's very little if any advantage to doing that.\"" }, { "docid": "117875", "title": "", "text": "If you are in an economy which has a decent liquid debt market (corporate bonds, etc.), then you may look into investing in AA or AA+ rated bonds. They can provide higher returns than bank deposits and are virtually risk-free. (Though in severe economic downturns, you can see defaults in even very high-rated bonds, leading to partial or complete loss of value however, this is statistically quite rare). You can make this investment through a debt mutual fund but please make sure that you read through the offer document carefully to understand the investment style of the mutual fund and their expense ratio (which directly affect your returns). In any case, it is always recommended to reach out to an investment adviser who is good with local tax laws to minimize taxes and maximize returns." }, { "docid": "371176", "title": "", "text": "First, you need to understand the difference in discussing types of investments and types of accounts. Certificate of Deposits (CDs), money market accounts, mutual funds, and stocks are all examples of types of investments. 401(k), IRA, Roth IRA, and taxable accounts are all examples of types of accounts. In general, those are separate decisions to make. You can invest in any type of investment inside any type of account. So your question really has two different parts: Tax-advantaged retirement accounts vs. Standard taxable accounts FDIC-insured CDs vs. at-risk investments (such as stock mutual funds) Retirement accounts are special accounts allowed by the federal government that allow you to delay (or, in some cases, completely avoid) paying taxes on your investment. The trade-off for these accounts is that, in general, you cannot access any of the money that you put into these accounts until you get to retirement age without paying a steep penalty. These accounts exist to encourage citizens to save for their own retirement. Examples of retirement accounts include 401(k) and IRAs. Standard taxable accounts have no tax advantages, but no restrictions, either. You can put money in and take money out whenever you like. However, anything that your investment earns is taxable each year. Inside any of these accounts, you can invest in FDIC-insured bank accounts, such as savings accounts or CDs, or you can invest in any number of non-insured investments, including money market accounts, bonds, mutual funds, stocks, precious metals, etc. Something you need to understand about investing in general is that your potential returns are directly related to the amount of risk that you take on. Investing in an insured investment, which is guaranteed by the government to never lose its value, will result in the lowest potential investment returns that you can get. Interest-bearing savings accounts are currently paying less than 1% interest. A CD will get you a slightly higher interest rate in exchange for you agreeing not to withdraw your money for a period of time. However, it takes a long time for your investments to grow with these investments. If you are earning 1%, it takes 72 years for your investment to double. If you are willing to take some risk, you can earn much more with your investments. Bonds are often considered quite safe; with a bond, you loan money to a government or corporation, and they pay you back with interest. The risk comes from the possibility that the government or corporation won't pay you back, so it is important to choose a bond from an entity that you trust. Stocks are shares in for-profit companies. Your potential investment gain is unlimited, but it is risky, as stocks can go down in value, and companies can close. However, it is important to note that if you take the largest 500 stocks together (S&P 500), the average value has consistently gone up over the long term. In the last 35 years, this average value has gone up about 11%. At this rate, your investment would double in less than 7 years. To avoid the risk of picking a losing stock, you can invest in a mutual fund, which is a collection of stocks, bonds, or other investments. The idea is that you can, with one investment, invest in many stocks, essentially earning the average performance of all the stocks. There is still risk, as the market can be down as a whole, but you are insulated from any one stock being bad because you are diversified. If you are investing for something in the long-term future, such as retirement, stock mutual funds provide a good rate of return at an acceptably-low level of risk, in my opinion." }, { "docid": "434279", "title": "", "text": "\"Here is the \"\"investing for retirement\"\" theoretical background you should have. You should base your investment decisions not simply on the historical return of the fund, but on its potential for future returns and its risk. Past performance does not indicate future results: the past performance is frequently at its best the moment before the bubble pops. While no one knows the specifics of future returns, there are a few types of assets that it's (relatively) safe to make blanket statements about: The future returns of your portfolio will primarily be determined by your asset allocation . The general rules look like: There are a variety of guides out there to help decide your asset allocation and tell you specifically what to do. The other thing that you should consider is the cost of your funds. While it's easy to get lucky enough to make a mutual fund outperform the market in the short term, it's very hard to keep that up for decades on end. Moreover, chasing performance is risky, and expensive. So look at your fund information and locate the expense ratio. If the fund's expense ratio is 1%, that's super-expensive (the stock market's annualized real rate of return is about 4%, so that could be a quarter of your returns). All else being equal, choose the cheap index fund (with an expense ratio closer to 0.1%). Many 401(k) providers only have expensive mutual funds. This is because you're trapped and can't switch to a cheaper fund, so they're free to take lots of your money. If this is the case, deal with it in the short term for the tax benefits, then open a specific type of account called a \"\"rollover IRA\"\" when you change jobs, and move your assets there. Or, if your savings are small enough, just open an IRA (a \"\"traditional IRA\"\" or \"\"Roth IRA\"\") and use those instead. (Or, yell at your HR department, in the event that you think that'll actually accomplish anything.)\"" }, { "docid": "460457", "title": "", "text": "In my mind, when looking at a five year period you have a number of options. You didn't specify where you are based, which admittedly makes it harder, to give you good advice. If you are looking for an investment that can achieve large gains, equities are impossible to ignore. By investing in an index fund or other diverse asset forms (such as mutual funds), your risk is relatively minimal. However there has historically been five year periods where you would lose/flatline your money. If this was to be the case you would likely be better off waiting more than five years to buy a house, which would be frustrating. When markets rebound, they often do it hard. If you are in a major economy, taking something like the top 100 of your stock market is a safe bet, although admittedly you would have made terrible returns if you invested in the Polish markets. While they often achieve lower returns than equity investments, they are generally considered safer - especially government issued bonds. If you were willing to sacrifice returns for safety, you must always consider them. This is an interesting new addition, and I can't comment on the state of it in the United States, however in Europe we have a number of platforms which do this. In the UK, for example you can achieve ~7.3% returns YoY using sites like Funding Circle. If you invest in a diverse range of businesses, you have minimal risk from and individual company not paying. Elsewhere in Europe (although not appropriate for me as everything I do is denominated in Sterling), you can secure 12% in places like Georgia, Poland, and Estonia. This is a very good rate and the platforms seem reputable, and 'guarantee' their loans. However unlike funding circle, they are for consumer loans. The risk profile in my mind is similar to that of equities, but it is hard to say. Whatever you do, you need to do your homework, and ensure that you can handle the level of risk offered by the investments you make. I haven't included things like Savings accounts in here, as the rates aren't worth bothering with." }, { "docid": "210939", "title": "", "text": "\"When we talk about compounding, we usually think about interest payments. If you have a deposit in a savings account that is earning compound interest, then each time an interest payment is made to your account, your deposit gets larger, and the amount of your next interest payment is larger than the last. There are compound interest formulas that you can use to calculate your future earnings using the interest rate and the compounding interval. However, your mutual fund is not earning interest, so you have to think of it differently. When you own a stock (and your mutual fund is simply a collection of stocks), the value of the stock (hopefully) grows. Let's say, for example, that you have $1000 invested, and the value goes up 10% the first year. The total value of your investment has increased by $100, and your total investment is worth $1100. If it grows by another 10% the following year, your investment is then $1210, having gained $110. In this way, your investment grows in a similar way to compound interest. As your investment pays off, it causes the value of the investment to grow, allowing for even higher earnings in the future. So in that sense, it is compounding. However, because it is not earning a fixed, predictable amount of interest as a savings account would, you can't use the compound interest formula to calculate precisely how much you will have in the future, as there is no fixed compounding interval. If you want to use the formula to estimate how much you might have in the future, you have to make an assumption on the growth of your investment, and that growth assumption will have a time period associated with it. For example, you might assume a growth rate of 10% per year. Or you might assume a growth rate of 1% per month. This is what you could use in a compound interest formula for your mutual fund investment. By reinvesting your dividends and capital gains (and not taking them out in cash), you are maximizing your \"\"compounding\"\" by allowing those earnings to cause your investment to grow.\"" } ]

[ { "docid": "484599", "title": "", "text": "Are you looking for something like Morningstar.com? They provide information about lots of mutual funds so you can search based on many factors and find good candidate mutual funds. Use their fund screener to pick funds with long track records of beating the S&P500." } ]

[ { "docid": "345954", "title": "", "text": "Generally value funds (particularly large value funds) will be the ones to pay dividends. You don't specifically need a High Dividend Yield fund in order to get a fund that pays dividends. Site likes vanguards can show you the dividends paid for mutual funds in the past to get an idea of what a fund would pay. Growth funds on the other hand don't generally pay dividends (or at least that's not their purpose). Instead, the company grows and become worth more. You earn money here because the company (or fund) you invested in is now worth more. If you're saying you want a fund that pays dividends but is also a growth fund I'm sure there are some funds like that out there, you just have to look around" }, { "docid": "406711", "title": "", "text": "No, SPDR ETFs are not a good fit for a novice investor with a low level of financial literacy. In fact, there is no investment that is safe for an absolute beginner, not even a savings account. (An absolute beginner could easily overdraw his savings account, leading to fees and collections.) I would say that an investment becomes a good fit for an investor as soon as said investor understands how the investment works. A savings account at a bank or credit union is fairly easy to understand and is therefore a suitable place to hold money after a few hours to a day of research. (Even after 0 hours of research, however, a savings account is still better than a sock drawer.) Money market accounts (through a bank), certificates of deposit (through a bank), and money market mutual funds (through a mutual fund provider) are probably the next easiest thing to understand. This could take a few hours to a few weeks of research depending on the learner. Equities, corporate bonds, and government bonds are another step up in complexity, and could take weeks or months of schooling to understand well enough to try. Equity or bond mutual funds -- or the ETF versions of those, which is what you asked about -- are another level after that. Also important to understand along the way are the financial institutions and market infrastructure that exist to provide these products: banks, credit unions, public corporations, brokerages, stock exchanges, bond exchanges, mutual fund providers, ETF providers, etc." }, { "docid": "70702", "title": "", "text": "\"This is not a direct answer to your question, but you might want to consider whether you want to have a financial planner at all. Would a large mutual fund company or brokerage serve your needs better than a bank? You are still quite young and so have been contributing to IRAs for only a few years. Also, the wording in your question suggests that your IRA investments have not done spectacularly well, and so it is reasonable to infer that your IRA is not a large amount, or at least not as large as what it would be 30 years from now. At this level of investment, it would be difficult for you to find a financial planner who spends all that much time looking after your interests. That you should get away from your current planner, presumably a mid-level employee in what is typically called the trust division of the bank, is a given. But, to go to another bank (or even to a different employee in the same bank), where you will also likely be nudged towards investing your IRA in CDs, annuities, and a few mutual funds with substantial sales charges and substantial annual expense fees, might just take you from the frying pan into the fire. You might want to consider transferring your IRA to a large mutual fund company and investing it in something simple like one of their low-cost (meaning small annual expense ratio) index funds. The Couch Potato portfolio suggests equal amounts invested in a no-load S&P 500 Index fund and a no-load Bond Index fund, or a 75%-25% split favoring the stock index fund (in view of your age and the fact that the IRA should be a long-term investment). But the point is, you can open an IRA account, have the money transferred from your IRA account with the bank, and make the investments on-line all by yourself instead of having a financial advisor do it on your behalf and charge you a fee for doing so (not to mention possibly screwing it up.) You can set up Automated Investment too; the mutual fund company will gladly withdraw money from your checking account and invest it in whatever fund(s) you choose. All this is not complicated at all. If you would like to follow the Couch Potato strategy and rebalance your portfolio once a year, you can do it by yourself too. If you want to invest in funds other than the S&P 500 Index fund, etc. most mutual fund companies offer a \"\"portfolio analysis\"\" and advice for a fee (and the fee is usually waived when the assets increase above certain levels - varies from company to company). You could thus have a portfolio analysis done each year, and hopefully it will be free after a few more years. Indeed, at that level, you also typically get one person assigned as your advisor, just as you have with a bank. Once you get the recommendations, you can choose to follow them or not, but you have control over how and where your IRA assets are invested. Over the years, as your IRA assets grow, you can branch out into investments other than \"\"staid\"\" index funds, but right now, having a financial planner for your IRA might not be worth it. Later, when you have more assets, by all means if you want to explore investing in specific stocks with a brokerage instead of sticking to mutual funds only but this might also mean phone calls urging you to sell Stock A right now, or buy hot Stock B today etc. So, one way of improving your interactions and have a better experience with your new financial planner is to not have a planner at all for a few years and do some of the work yourself.\"" }, { "docid": "537603", "title": "", "text": "If I invest X each month, where does X go - an existing (low yield) bond, or a new bond (at the current interest rate)? This has to be viewed in a larger context. If the fund has outflows greater than or equal to inflows then chances are there isn't any buying being done with your money as that cash is going to those selling their shares in the fund. If though inflows are greater than outflows, there may be some new purchases or not. Don't forget that the new purchase could be an existing bond as the fund has to maintain the duration of being a short-term, intermediate-term or long-term bond fund though there are some exceptions like convertibles or high yield where duration isn't likely a factor. Does that just depend on what the fund manager is doing at the time (buying/selling)? No, it depends on the shares being created or redeemed as well as the manager's discretion. If I put Y into a fund, and leave it there for 50 years, where does Y go when all of the bonds at the time I made the purchase mature? You're missing that the fund may buy and sell bonds at various times as for example a long-term bond fund may not have issues nearing maturity because of what part of the yield curve it is to mimic. Does Y just get reinvested in new bonds at the interest rate at that time? Y gets mixed with the other money in the fund that may increase or decrease in value over time. This is part of the risk in a bond fund where NAV can fluctuate versus a money market mutual fund where the NAV is somewhat fixed at $1/share." }, { "docid": "368938", "title": "", "text": "\"Answers: 1: No, Sections 1291-1298 of the IRC were passed in the Reagan adminstration. 2: Not only can a foreign company like a chocolate company fall afoul of the definition of PFIC because of the \"\"asset test\"\", which you cite, but it can also be called a PFIC because of the \"\"income test\"\". For example, I have shares in a development-stage Canadian biotech which is considered a PFIC because it has no income at all, except for a minor amount of bank interest on its working capital. This company is by no means \"\"passive\"\" (it has run 31 clinical trials in over 1100 human research subjects, burning $250M of investor's money in the process) nor is it an \"\"investment company\"\", but the stupid IRS considers it to be a \"\"passive foreign investment company\"\"! The IRS looks at it and sees only the bank account, and assumes it is a foreign shell corporation set up to shield the bank interest from them. 3: Yes, a foreign mutual fund is EXACTLY what congress intended to be a PFIC when passed IRC 1291-1298. (Biotechs, candy factories, ect got nailed as innocent bystanders.) Note that if you hold a US mutual fund then every year you'll get a form 1099 in the mail. The 1099 will report your share of the mutual fund's own income and capital gains, which you must report on your taxes. (You can also have capital gains from selling your shares of the mutual fund, but that's a different thing.) Now suppose that there was no PFIC law. Then the US investors in the mutual fund would do better if the mutual fund were in a foreign country, for two reasons: a) The fund would no longer distribute 1099's. That means the shareholders wouldn't have to pay tax every year on their proportions of the fund's own income/gains. The money that would have sooner gone to the IRS can sit around for years earning interest. b) The fund could return profits to shareholders exclusively through capital gains rather than dividends, thus ensuring that all of the investors' income on the fund would be taxed at <15%-20% rather than up to 39%. The fund could do this by returning cash to shareholders exclusively through buybacks. However, the US mutual fund industry doesn't want to move the industry to Canada, and it only takes a few newspaper articles about a foreign loophole to make congress spring to action. 4) It depends. If you have a PEDIGREED QEF election in place (as I do for my biotech shares) then form 8621 takes a few minutes by hand. However, this requires both the company and the investor to fully cooperate with congress's vision for PFICs. The company cooperates by providing a so-called \"\"PFIC annual information sheet\"\", which replaces the 1099 form for a US mutual fund. The investor cooperates by having a \"\"QEF election\"\" in place for EACH AND EVERY TAX YEAR in which he held the stock and by reporting the numbers from the PFIC annual information sheet on his return. (Note that the QEF election persists once made, until revoked. There are subtleties here that I am glossing over, since \"\"deemed sale\"\" elections and other means may be used to modify a share's holding period to come into compliance.) Note that there is software coming out to handle PFICs, and that the software makers will already run their software to make your form 8621 for $75 or so. I should also warn you that the blogs of tax accountants and tax lawyers all contradict each other on the basic issue of whether you can take capital losses on PFICs for which you have no form 8621 elections. (See section 2.3 of my notes http://tinyurl.com/mh9vlnr for commentary on this mess.) I do not know if the software people will tell you which elections are best made on form 8621, though, or advise you if it's time to simply dump your investment. The professional software is at 8621.com, and the individual 8621 preparation is at http://expattaxtools.com/?page_id=242. BTW, in case you're interested, I wrote up a very careful analysis of how to deal with the PFIC situation for the small biotech I invested in in certain cases. It is posted http://tinyurl.com/mh9vlnr. (For tax reasons it was quite fortunate that the share price dipped to near an all-time low on Jan 1, 2015, making the (next) 2015 tax year ripe for a so-called \"\"deemed sale\"\" election. This was only possible because the company provides the necessary \"\"PFIC annual information statements\"\", which your chocolate factory may or may not do.)\"" }, { "docid": "61575", "title": "", "text": "\"Thanks for the info, things are starting to make more sense now. For some reason I've always neglected learning about investments, now that Im in a position to invest (and am still fairly young) I'm motivated to start learning. As for help with TD Ameritrade, I was looking into Index Funds (as another commenter mentioned that I should) on their site and am a little overwhelmed with the options. First, I'm looking at Mutual Funds, going to symbol lookup and using type = \"\"indeces\"\". I'm assuming that's the same thing as an \"\"Index Fund\"\" but since the language is slightly different I'm not 100% sure. However, at that point I need some kind of search for a symbol in order to see any results (makes sense, but I dont know where to start looking for \"\"good\"\" index funds). So my first question is: If I FIND a good mutual fund, is it correct to simply go to \"\"Buy Mutual Funds\"\" and find it from there? and if so, my second question is: How do I find a good mutual fund? My goal is to have my money in something that will likely grow faster than a savings account. I don't mind a little volatility, I can afford to lose my investment, I'd plan on leaving my money in the fund for a several years at least. My last question is: When investing in these types of funds (or please point me in another direction if you think Index Funds aren't the place for me to start) should I be reinvesting in the funds, or having them pay out dividends? I would assume that reinvesting is the smart choice, but I can imagine situations that might change that in order to mitigate risk...and as I've said a few times in this thread including the title, I'm a complete amateur so my assumptions aren't necessarily worth that much. Thanks for the help, I really appreciate all the info so far.\"" }, { "docid": "19364", "title": "", "text": "\"Loads may be widespread but they are absolutely not an \"\"industry standard\"\". Almost every major provider of mutual funds has \"\"no load\"\" funds. I'm sure your bank wants you to buy the funds with front loads, but they can't force you to buy those funds (unless you sign such a disclaimer when you open the account). What your bank can do is charge their own transaction fees for \"\"third-party\"\" funds, and those may end up being as much as or more than the funds' own loads. I don't know which bank you have, but many banks have their own mutual funds that have no loads or other transaction fees. Essentially you can rearrange your portfolio however you want (within reason) at no cost as long as you buy and sell their funds exclusively. But of course every bank is different, and in many cases those funds will perform poorly compared to investment companies like Vanguard. Of course every mutual fund must report its performance so you can always check that yourself. If your bank refuses to let you buy any no-load mutual funds (even ones that they run themselves) and/or wants to charge you steep transaction fees in order to discourage buying them, then may I suggest a different bank? FYI, mutual funds generally \"\"make their money\"\" on management fees. If a fund advertises a load but a particularly low management fee, it may actually be worth buying compared to another fund with no load and a high management fee, if you don't expect to be buying and selling frequently. On the other hand, if a fund has a high management fee and a high load, it's probably garbage.\"" }, { "docid": "120133", "title": "", "text": "I quite like the Canadian Couch Potato which provides useful information targeted at investors in Canada. They specifically provide some model portfolios. Canadian Couch Potato generally suggests investing in indexed ETFs or mutual funds made up of four components. One ETF or mutual fund tracking Canadian bonds, another tracking Canadian stocks, a third tracking US stocks, and a fourth tracking international stocks. I personally add a REIT ETF (BMO Equal Weight REITs Index ETF, ZRE), but that may complicate things too much for your liking. Canadian Couch Potato specifically recommends the Tangerine Streetwise Portfolio if you are looking for something particularly easy, though the Management Expense Ratio is rather high for my liking. Anyway, the website provides specific suggestions, whether you are looking for a single mutual fund, multiple mutual funds, or prefer ETFs. From personal experience, Tangerine's offerings are very, very simple and far cheaper than the 2.5% you are quoting. I currently use TD's e-series funds and spend only a few minutes a year rebalancing. There are a number of good ETFs available if you want to lower your overhead further, though Canadians don't get quite the deals available in the U.S. Still, you shouldn't be paying anything remotely close to 2.5%. Also, beware of tax implications; the website has several articles that cover these in detail." }, { "docid": "118999", "title": "", "text": "\"To be completely honest, I think that a target of 10-15% is very high and if there were an easy way to attain it, everyone would do it. If you want to have such a high return, you'll always have the risk of losing the same amount of money. Option 1 I personally think that you can make the highest return if you invest in real estate, and actively manage your property(s). If you do this well with short term rental and/or Airbnb I think you can make healthy returns BUT it will cost a lot of time and effort which may diminish its appeal. Think about talking to your estate agent to find renters, or always ensuring your AirBnB place is in good nick so you get a high rating and keep getting good customers. If you're looking for \"\"passive\"\" income, I don't think this is a good choice. Also make sure you take note of karancan's point of costs. No matter what you plan for, your costs will always be higher than you think. Think about water damage, a tenant that breaks things/doesn't take care of stuff etc. Option 2 I think taking a loan is unnecessarily risky if you're in good financial shape (as it seems), unless you're gonna buy a house with a mortgage and live in it. Option 3 I think your best option is to buy bonds and shares. You can follow karancan's 100 minus your age rule, which seems very reasonable (personally I invest all my money in shares because that's how my father brought me up, but it's really a matter of taste. Both can be risky though bonds are usually safer). I think I should note that you cannot expect a return of 10% or more because, as everyone always says, if there were a way to guarantee it, everyone would do it. You say you don't have any idea how this works so I'd go to my bank and ask them. You probably have access to private banking so that should mean someone will be able to sit you down and talk you through. Also look at other banks that have better rates and/or pretend you're leaving your bank to negotiate a better deal. If I were you I'd invest in blue chips (big international companies listed on the main indeces (DAX, FTSE 100, Dow Jones)), or (passively managed) mutual funds/ETFs that track these indeces. Just remember to diversify by country and industry a bit. Note: i would not buy the vehicles/plans that my bank (no matter what they promise, and they promise a lot) suggest because if you do that then the bank always takes a cut off your money. TlDr, dont expect to make 10-15% on a passive investment and do what a lot of others do: shares and bonds. Also make sure you get a lot of peoples opinions :)\"" }, { "docid": "460457", "title": "", "text": "In my mind, when looking at a five year period you have a number of options. You didn't specify where you are based, which admittedly makes it harder, to give you good advice. If you are looking for an investment that can achieve large gains, equities are impossible to ignore. By investing in an index fund or other diverse asset forms (such as mutual funds), your risk is relatively minimal. However there has historically been five year periods where you would lose/flatline your money. If this was to be the case you would likely be better off waiting more than five years to buy a house, which would be frustrating. When markets rebound, they often do it hard. If you are in a major economy, taking something like the top 100 of your stock market is a safe bet, although admittedly you would have made terrible returns if you invested in the Polish markets. While they often achieve lower returns than equity investments, they are generally considered safer - especially government issued bonds. If you were willing to sacrifice returns for safety, you must always consider them. This is an interesting new addition, and I can't comment on the state of it in the United States, however in Europe we have a number of platforms which do this. In the UK, for example you can achieve ~7.3% returns YoY using sites like Funding Circle. If you invest in a diverse range of businesses, you have minimal risk from and individual company not paying. Elsewhere in Europe (although not appropriate for me as everything I do is denominated in Sterling), you can secure 12% in places like Georgia, Poland, and Estonia. This is a very good rate and the platforms seem reputable, and 'guarantee' their loans. However unlike funding circle, they are for consumer loans. The risk profile in my mind is similar to that of equities, but it is hard to say. Whatever you do, you need to do your homework, and ensure that you can handle the level of risk offered by the investments you make. I haven't included things like Savings accounts in here, as the rates aren't worth bothering with." }, { "docid": "599436", "title": "", "text": "\"1. Interest rates What you should know is that the longer the \"\"term\"\" of a bond fund, the more it will be affected by interest rates. So a short-term bond fund will not be subject to large gains or losses due to rate changes, an intermediate-term bond fund will be subject to moderate gains or losses, and a long-term bond fund will be subject to the largest gains or losses. When a book or financial planner says to buy \"\"bonds\"\" with no other qualification, they almost always mean investment-grade intermediate-term bond funds (or for individual bonds, the equivalent would be a bond ladder averaging an intermediate term). If you want technical details, look at the \"\"average duration\"\" or \"\"average maturity\"\" of the bond fund; as a rough guide, if the duration is 10, then a 1% change in interest rates would be a 10% gain or loss on the fund. Another thing you can do is look at long-term (10 years or ideally longer) performance history on some short, intermediate, and long term bond index funds, and you can see how the long term funds bounced around more. Non-investment-grade bonds (aka junk bonds or high yield bonds) are more affected by factors other than interest rates, including some of the same factors (economic booms or recessions) that affect stocks. As a result, they aren't as good for diversifying a portfolio that otherwise consists of stocks. (Having stocks, investment grade bonds, and also a little bit in high-yield bonds can add diversification, though. Just don't replace your bond allocation with high-yield bonds.) A variety of \"\"complicated\"\" bonds exist (convertible bonds are an example) and these are tough to analyze. There are also \"\"floating rate\"\" bonds (bank loan funds), these have minimal interest rate sensitivity because the rate goes up to offset rate rises. These funds still have credit risks, in the credit crisis some of them lost a lot of money. 2. Diversification The purpose of diversification is risk control. Your non-bond funds will outperform in many years, but in other years (say the -37% S&P 500 drop in 2008) they may not. You will not know in advance which year you'll get. You get risk control in at least a few ways. There's also an academic Modern Portfolio Theory explanation for why you should diversify among risky assets (aka stocks), something like: for a given desired risk/return ratio, it's better to leverage up a diverse portfolio than to use a non-diverse portfolio, because risk that can be eliminated through diversification is not compensated by increased returns. The theory also goes that you should choose your diversification between risk assets and the risk-free asset according to your risk tolerance (i.e. select the highest return with tolerable risk). See http://en.wikipedia.org/wiki/Modern_portfolio_theory for excruciating detail. The translation of the MPT stuff to practical steps is typically, put as much in stock index funds as you can tolerate over your time horizon, and put the rest in (intermediate-term investment-grade) bond index funds. That's probably what your planner is asking you to do. My personal view, which is not the standard view, is that you should take as much risk as you need to take, not as much as you think you can tolerate: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ But almost everyone else will say to do the 80/20 if you have decades to retirement and feel you can tolerate the risk, so my view that 60/40 is the max desirable allocation to stocks is not mainstream. Your planner's 80/20 advice is the standard advice. Before doing 100% stocks I'd give you at least a couple cautions: See also:\"" }, { "docid": "24846", "title": "", "text": "\"If you are like most people, your timing is kind of awful. What I mean by most, is all. Psychologically we have strong tendencies to buy when the market is high and avoid buying when it is low. One of the easiest to implement strategies to avoid this is Dollar Cost Averaging. In most cases you are far better off making small investments regularly. Having said that, you may need to \"\"save\"\" a bit in order to make subsequent investments because of minimums. For me there is also a positive psychological effect of putting money to work sooner and more often. I find it enjoyable to purchase shares of a mutual fund or stock and the days that I do so are a bit better than the others. An added benefit to doing regular investing is to have them be automated. Many wealthy people describe this as a key to success as they can focused on the business of earning money in their chosen profession as opposed to investing money they have already earned. Additionally the author of I will Teach You to be Rich cites this as a easy, free, and key step in building wealth.\"" }, { "docid": "210939", "title": "", "text": "\"When we talk about compounding, we usually think about interest payments. If you have a deposit in a savings account that is earning compound interest, then each time an interest payment is made to your account, your deposit gets larger, and the amount of your next interest payment is larger than the last. There are compound interest formulas that you can use to calculate your future earnings using the interest rate and the compounding interval. However, your mutual fund is not earning interest, so you have to think of it differently. When you own a stock (and your mutual fund is simply a collection of stocks), the value of the stock (hopefully) grows. Let's say, for example, that you have $1000 invested, and the value goes up 10% the first year. The total value of your investment has increased by $100, and your total investment is worth $1100. If it grows by another 10% the following year, your investment is then $1210, having gained $110. In this way, your investment grows in a similar way to compound interest. As your investment pays off, it causes the value of the investment to grow, allowing for even higher earnings in the future. So in that sense, it is compounding. However, because it is not earning a fixed, predictable amount of interest as a savings account would, you can't use the compound interest formula to calculate precisely how much you will have in the future, as there is no fixed compounding interval. If you want to use the formula to estimate how much you might have in the future, you have to make an assumption on the growth of your investment, and that growth assumption will have a time period associated with it. For example, you might assume a growth rate of 10% per year. Or you might assume a growth rate of 1% per month. This is what you could use in a compound interest formula for your mutual fund investment. By reinvesting your dividends and capital gains (and not taking them out in cash), you are maximizing your \"\"compounding\"\" by allowing those earnings to cause your investment to grow.\"" }, { "docid": "28291", "title": "", "text": "\"If you want a ~12% rate of return on your investments.... too bad. For returns which even begin to approach that, you need to be looking at some of the riskiest stuff. Think \"\"emerging markets\"\". Even funds like Vanguard Emerging Markets (ETF: VWO, mutual fund, VEIEX) or Fidelity Advisor Emerging Markets Income Trust (FAEMX) seem to have yields which only push 11% or so. (But inflation is about nil, so if you're used to normal 2% inflation or so, these yields are like 13% or so. And there's no tax on that last 2%! Yay.) Remember that these investments are very risky. They go up lots because they can go down lots too. Don't put any money in there unless you can afford to have it go missing, because sooner or later you're likely to lose something half your money, and it might not come back for a decade (or ever). Investments like these should only be a small part of your overall portfolio. So, that said... Sites which make investing in these risky markets easy? There are a good number, but you should probably just go with vanguard.com. Their funds have low fees which won't erode your returns. (You can actually get lower expense ratios by using their brokerage account to trade the ETF versions of their funds commission-free, though you'll have to worry more about the actual number of shares you want to buy, instead of just plopping in and out dollar amounts). You can also trade Vanguard ETFs and other ETFs at almost any brokerage, just like stocks, and most brokerages will also offer you access to a variety of mutual funds as well (though often for a hefty fee of $20-$50, which you should avoid). Or you can sign up for another fund providers' account, but remember that the fund fees add up quickly. And the better plan? Just stuff most of your money in something like VTI (Vanguard Total Stock Market Index) instead.\"" }, { "docid": "129724", "title": "", "text": "The way the question is worded, it is slightly opinion based. Just to point out; Tax benefits - Upto 50000 INR is tax free when invested here. This is actually 200,000 INR under 80C. So if you invest max of 150,000 in other instruments in 80C; you can still invest 50,000 into NPS. Hopefully it will provide some lumpsum money that I could probably use to buy a house / kid's education / kid's marriage. There are very few withdrawal options. Generally in the current scenario; By the time you retire; you would already have house, kid would have got married. Answers given the current data is it a worthwhile investment? It is a good investment option available. It is up to individual to select this or invest else where. If yes, would be better to fix choice at 50% in E and 25% in C and E or go for the auto choice? As you are young it is better to have max 50% in Equity and actively monitor this and change the percentage as you near the retirement age. If you don't have time, or are not financial savy, or one is plain simple lazy; going with Auto choice makes sense. bad investment because if you put the same money into equity oriented mutual funds then you will get better returns ... This depends. If you are currently investing everything into Equity; then yes at absolute level, the returns are high. However if you are investing into Equity and debt to achieve a balance, then NPS is doing it automatically for you. As the NPS has very low costs, there is substantial advantage. In some years [2013-2014?] the NPS equity return has been excellent and exceeded leading mutual funds. Other Aspect Edits: The Annuities need to invest in guaranteed risk free instruments; generally bonds. As the rates are locked for life, they need to factor things like average life expectancy, demographics, etc. This is largely statistical. Similar to how the Insurance premiums are decided. This is adjusted periodically. Say they offer 6.5% for 100 people. The investments into bonds is yielding only 6%. Then for next 100 people, they would offer 5.5%. However if the mortality increases, i.e. 50 people die at age of 70, they just need to adjust it to 5.75% for next 100 ... so there are quite a few parameters that go in and statical models output what the rate should be offered. At times the corpus manager may take a hedge to minimize downside. This is a specialized subject and there no dummies that show how rates are determined. It is also a trade secret." }, { "docid": "168402", "title": "", "text": "\"I am in a different situation, because I earn more than I spend, but I have found that I need to make the money inaccessible if I want to really avoid spending it. I used to just throw my paychecks into a high-yield savings account, but eventually the balance was large enough that a \"\"large purchase\"\" didn't seem like \"\"that much\"\" (because I would have had so much left in the account after the purchase). It was way too easy for me to spend way too much. Now, I invest my savings automatically. The obvious benefit is my money has a much higher growth rate than a simple savings account (especially with fed interest rates so low). I invest most of my savings in 401(k)/IRA retirement accounts, where there are severe penalties for withdrawing prior to retirement age. Then, I invest a significant portion to a regular brokerage account, where the money is invested in stock and bond funds. This money is accessible within a few days of whenever I need it. The remainder of my savings goes into a savings account as cash I can get to at any time. All 3 accounts grow with every paycheck (market fluctuations aside). This 3-tiered system helps me to categorize my savings as \"\"Never, ever touch\"\" (retirement accounts), \"\"Touch, only if I can wait 3 days and am willing to pay taxes\"\" (brokerage account), or \"\"touch whenever you need it, with no penalties\"\" (Savings account). If my savings account grows too much, I'll move money from there to the brokerage account (where it has more growth potential). The longer my money is invested in the brokerage accounts, the less taxes I'll need to pay when I sell/withdraw the funds, so that's even more incentive for me to keep those funds where they are. I have credit cards, so in my opinion, having to wait 3 days for funds from my investment account to become accessible is considered \"\"accessible in an emergency,\"\" because my credit cards can be used to cover a large purchase for 3 days, and as long as I pay it off within the grace period, there's no interest charged. tl;dr investing is probably the smartest way to both grow your money and prevent the urge to spend it right away. My advice is to start with a 401(k) or IRA as soon as you can, since the younger you are, the more time until retirement that your money has to compound. Investing $100 more a month can mean hundreds of thousands of additional dollars in your account when you're ready to retire.\"" }, { "docid": "106620", "title": "", "text": "\"The best predictor of mutual fund performance is low expense ratio, as reported by Morningstar despite the fact that it produces the star ratings you cite. Most of the funds you list are actively managed and thus have high expense ratios. Even if you believe there are mutual fund managers out there that can pick investments intelligently enough to offset the costs versus a passive index fund, do you trust that you will be able to select such a manager? Most people that aren't trying to sell you something will advise that your best bet is to stick with low-cost, passive index funds. I only see one of these in your options, which is FUSVX (Fidelity Spartan 500 Index Fund Fidelity Advantage Class) with an exceptionally low expense ratio of 0.05%. Do you have other investment accounts with more choices, like an IRA? If so you might consider putting a major chunk of your 401(k) money into FUSVX, and use your IRA to balance your overall porfolio with small- and medium-cap domestic stock, international stock, and bond funds. As an aside, I remember seeing a funny comment on this site once that is applicable here, something along the lines of \"\"don't take investment advice from coworkers unless they're Warren Buffett or Bill Gross\"\".\"" }, { "docid": "457989", "title": "", "text": "\"In answering your question as it's written: I don't think you're really \"\"missing\"\" something. Different banks offer different rates. Online banks, or eBanking solutions, such as CapitalOne, Ally, Barclays, etc., typically offer higher interest rates on basic savings accounts. There are differences between Money Market accounts and Standard Savings accounts, but primarily it comes down to how you can access your cash. This may vary based on bank, but Ally has a decent blurb about it: Regular savings accounts are easy to open and, when you choose an online bank like Ally Bank, you tend to get interest rates that are more competitive than brick-and-mortar counterparts, according to Bankrate.com. Additionally, as a member of the FDIC, Ally Bank gives you peace of mind knowing that the money in your Ally Bank Online Savings Account is insured to the maximum allowed by the law. Money market accounts are easy to open, too. And again, online banks may offer better rates than traditional banks. Generally, you have a bit more flexibility of access with a money market account than you do with a savings account. You can access funds in your Ally Bank Money Market Account through electronic fund transfers, checks, debit cards and ATM withdrawals. With savings accounts, your access is limited to electronic funds transfers or telephone withdrawals (and in-person withdrawals at traditional banks). Both types of accounts are subject to federal transaction limits. Here's a bit more information about a Money Market Account and why the rate might be a little bit higher (from thesimpledollar.com): A money market deposit account is a bit different. The restrictions on what a bank can do with that money are somewhat looser – they can often invest that money in things such as treasury notes, certificates of deposit, municipal bonds, and so on in addition to the tight restrictions of a normal savings accounts. In other words, the bank can take your money and invest it in other investments that are very safe. Now outside of your question, if you have $100K that you want to earn interest on, I'd suggest looking at options with higher rates of return rather than a basic savings account which will top out around 1% or so. What you do with that money is dependent on how quickly you need access to it, and there are a lot of Q&A's on this site that cover suggestions.\"" }, { "docid": "75326", "title": "", "text": "Good job. Assuming that you are also contributing to retirement, you are bound to be a wealthy person. I'm not really sure how Australia works as far as retirement, but I am pretty sure you are taking care of that too. Given your time frame (more than 5 years) I would consider investing at least a portion of the money. If I was you, I would tend to make that amount significant, say 75% in mutual funds, 25% in your high interest savings. The ratio you choose is up to you, but I would be heavier in the investment than savings side. As the time for home purchase approaches, you may want more in savings and less in investments. You may want to look at a mutual fund with a low beta. Beta is a measure of the price volatility. I did a google search on low beta funds, and came up with a number of good articles that explains this further. Having a fund with a low beta insulates you, a bit, from radical swings in the market allowing you to count more on the money being there when needed. One way to get to the proper ratio, is to contribute all new money to the mutual fund until it is in proper balance. This way you don't lower your interest rate for a month. Given your time frame, salary, and sense of responsibility you may be able to do the 100% down plan. Again, good work!" } ]

[ { "docid": "103362", "title": "", "text": "Levarge in simple terms is how of your own money to how much of borrowed money. So in 2008 Typical leverage ratios were Investment Banks 30:1 means that for every 1 Unit of Banks money [shareholders capital/ long term debts] there was 30 Units of borrowed money [from deposits/for other institutions/etc]. This is a very unstable situation as typically say you lent out 31 to someone else, half way through repayments, the depositors and other lends are asking you 30 back. You are sunk. Now lets say if you lent 31 to some one, but 30 was your moeny and 1 was from deposits/etc. Then you can anytime more easily pay back the 1 to the depositor. In day trading, usually one squares away the position the same day or within a short period. Hence say you want to buy something worth 1000 in the morning and are selling it say the same day. You are expecting the price to by 1005 and a gain 5. Now when you buy via your broker/trader, you may not be required to pay 1000. Normally one just needs to pay a margin money, typically 10% [varies from market to market, country to country]. So in the first case if you put 1000 and get by 5, you made a profit of 0.5%. However if you were to pay only 10 as margin money [rest 990 is assumed loan from your broker]. You sell at 1005, the broker deducts his 990, and you get 15. So technically on 10 you have made 5 more, ie 50% returns. So this is leveraging of 10:1. If say your broker allowed only 5% margin money, then you just need to pay 5 for the 1000 trade, get back 5. You have made a 100% profit, but the leveraging is 20:1. Now lets say at this high leveraging when you are selling you get only 990. So you still owe the broker 5, if you can't pay-up and if lot of other such people can't pay-up, then the broker will also go bankrupt and there is a huge risk. Hence although leveraging helps in quite a few cases, there is always an associated risk when things go wrong badly." } ]

[ { "docid": "279488", "title": "", "text": "To start, I hope you are aware that the properties' basis gets stepped up to market value on inheritance. The new basis is the start for the depreciation that must be applied each year after being placed in service as rental units. This is not optional. Upon selling the units, depreciation is recaptured whether it's taken each year or not. There is no rule of thumb for such matters. Some owners would simply collect the rent, keep a reserve for expenses or empty units, and pocket the difference. Others would refinance to take cash out and leverage to buy more property. The banker is not your friend, by the way. He is a salesman looking to get his cut. The market has had a good recent run, doubling from its lows. Right now, I'm not rushing to prepay my 3.5% mortgage sooner than it's due, nor am I looking to pull out $500K to throw into the market. Your proposal may very well work if the market sees a return higher than the mortgage rate. On the flip side I'm compelled to ask - if the market drops 40% right after you buy in, will you lose sleep? And a fellow poster (@littleadv) is whispering to me - ask a pro if the tax on a rental mortgage is still deductible when used for other purposes, e.g. a stock purchase unrelated to the properties. Last, there are those who suggest that if you want to keep investing in real estate, leverage is fine as long as the numbers work. From the scenario you described, you plan to leverage into an already pretty high (in terms of PE10) and simply magnifying your risk." }, { "docid": "409403", "title": "", "text": "Moronic question I'm sure. Listening to the Bloomberg Surveillance podcast and they mentioned that the vast majority of financial transactions in China and even North Korea are denominated in US dollars. They go on to say that this means they HAVE to go through US banks giving the US tremendous leverage. Can someone explain this whole idea to me. 1. Why do transactions done in US dollars have to go through US banks? 2. Does that leverage the US has just come from our ability to prevent transactions from occurring if they are run through our banks?" }, { "docid": "199133", "title": "", "text": "How should we disregard leverage when it's the leverage that creates the 'wipe-out' potential? If you simply convert 100K EUR to USDollars, you dollars might then fluctuate a few thousand, maybe even 10K over a year, but the guy that only put up 1000 EUR to do this has a disproportionally higher risk." }, { "docid": "570285", "title": "", "text": "It's based on potential. Things like market share, market size, competitive analysis and growth opportunity. Ex: being as big as reddit is + the fact they are a large player = how they could leverage this to drive even more value than they currently have in the future Also everything is inflated right now and the value factors in how much someone might (over) pay to acquire them." }, { "docid": "329226", "title": "", "text": "Diversification is one aspect to this question, and Dr Fred touches on its relationship to risk. Another aspect is leverage: So it again comes down to your appetite for risk. A further factor is that if you are successfully renting out your property, someone else is effectively buying that asset for you, or at least paying the interest on the mortgage. Just bear in mind that if you get into a situation where you have 10 properties and the rent on them all falls at the same time as the property market crashes (sound familiar?) then you can be left on the hook for a lot of interest payments and your assets may not cover your liabilities." }, { "docid": "475199", "title": "", "text": "Degree of Operating Leverage (DOL) measures the percent change in EBIT given a 1% change in Revenue. In other words, if DOL is 1.5, then increasing Revenue by 1% will increase EBIT by 1.5%. Degree of Financial Leverage (DFL) measures the percent change in NI given a 1% change in EBIT. Degree of Total Leverage (DTL) cuts EBIT out and measures the percent change in NI given a 1% change in Revenue. What all three of these numbers measure is “elasticity.” The elasticity between two variables is always the percentage change effect on one due to a 1% change in the other. Before we talk about why you would multiply elasticities, let’s first just look at absolute changes between a change of three variables, X Y and Z. Lets say X impacts Y (X-&gt;Y) and Y impacts Z (Y-&gt;Z). To make it even more concrete, let’s imagine a classroom where every student is required to have 2 books and every book has 100 pages. So X = # students, Y = # of books, and Z = # of pages. If we add one student to the class, we need to add 2 books. If we add 1 book to the class, we have added 100 pages. With absolute changes like this it is obvious that we don’t add, we multiply. In other words, to directly see the impact of a new student on the number of pages (X -&gt; Z), we would say 1 student -&gt; 2 books -&gt; 200 pages. To say 102 pages would obviously be silly. For percent changes, this looks pretty similar. To make it easy say the class has 100 students. So adding 1 student is a 1% change. Then we go from 200 books to 202 books, a 1% change. So the degree of Student to Book Leverage is 1 (which make sense there are no “fixed pages”). We go from 20,000 pages to 20,200 pages, also a 1% change so the degree of Book to Page leverage is also 1. Thus, the Student to Page leverage is also just a flat 1. Let’s add fixed amounts. The teacher has a single 2,000 page book on how to teach. We’ll assume the class has 20 students. So we start with 20*2 + 1 = 41 books and 40*100 + 2,000 = 6,000 pages. Let’s add a student. We have a 21/20 -1 = 4% increase in students. 43/41 -1 = 4.89% increase in books. 6,200/6,000 – 1 = 3.33% increase in pages. So the Degree of Student to Book Leverage is 4.00/4.89 = 0.818 and the Degree of Book to Page Leverage is 4.89/3.33 = 1.47. And the direct Student to Page Leverage is 4.00/3.33 = 1.20. Again, note that here it would be silly to add the degrees of leverage, and when we do multiply them we get 0.82*1.47 = 1.2, the right answer. From here the application to EBIT [= Sales - Fixed Cost - Variable Cost = (Gross Margin * Sales) - Fixed Cost] and the application to EPS [= EBIT - Interest – Taxes = (1 – tax rate)*(EBIT – Interest)] should be obvious. I can supply the full proof mathematically, however, if you would like." }, { "docid": "346188", "title": "", "text": "\"If there's one thing the futures markets don't lack, it's leverage. It's more than even most of the most aggressive investors use. Trading options might make more sense for some investors, but I can't think of how this would be \"\"a safer way\"\" compared to owning actual futures contracts, even at relatively high leverage.\"" }, { "docid": "237215", "title": "", "text": "It depends on how you define trading. If you're looking at day-trading, where you're probably going to be in a highly-leveraged position for minutes or hours, the automated traders are probably going to kill you. But, if you have a handful (less than a dozen) equities, and spend about an hour or so every week conducting research, you have a good chance of doing pretty well. You need to understand the market, listen to the earnings calls, and understand the factors that contribute to the bottom line of your investments. You should not be trading for the sake of trading, you're trading to try to achieve the best returns. Beware of dogmatists and people selling products that align with their dogma. Warren Buffet invests in companies for an extremely long investment window. Mr. Buffet also expends significant resources to gain a deep understanding of the fundamentals of the businesses that he invests in and the factors affecting those fundamentals. Buffet does not buy an S&P 500 index fund and whistle dixie." }, { "docid": "325787", "title": "", "text": "If you don't need leverage, then it's a better idea to just buy the underlying sock itself. This will net you the following benefits: Leverage is for speculating. If you don' want to be leveraged, then invest long term." }, { "docid": "80871", "title": "", "text": "long deep ITM calls is equivalent to owning the equity. You're going to pay alot and hence will start off in a hole already, and you aren't getting too much leverage there at all depending how deep ITM you go. Covariance scales, but assuming B-S in order to get nice scaling and ignoring the risks you are actually taking with options (unlimited down-size ie you can lose your entire investment in the option, people forget this) will screw you unless you really know what you are dong. Leverage means increasing your risk. long dep ITM is not obtaining much leverage and therefore not risking too much. but you aren't going ot get 3-4x leverage this way. you get leverage by saying: oh, i have 100, i could invest in 1 share of stock OR I could buy 100 worth of some option. If I pick a deep ITM (think strike = 0) it's identical to owing the stock. If i pick ATM, i have a ~50/50 chance of wining, so i should be able to double my upside. If I go OTM, i can increase my exposure to the upside while increasing hte chance that my options expire worthless. So really, i have no idea why deep ITM do what you are trying to do. and If you don't either, you probably shouldn't do it." }, { "docid": "244303", "title": "", "text": "\"I made an investing mistake many (eight?) years ago. Specifically, I invested a very large sum of money in a certain triple leveraged ETF (the asset has not yet been sold, but the value has decreased to maybe one 8th or 5th of the original amount). I thought the risk involved was the volatility--I didn't realize that due to the nature of the asset the value would be constantly decreasing towards zero! Anyhow, my question is what to do next? I would advise you to sell it ASAP. You didn't mention what ETF it is, but chances are you will continue to lose money. The complicating factor is that I have since moved out of the United States and am living abroad (i.e. Japan). I am permanent resident of my host country, I have a steady salary that is paid by a company incorporated in my host country, and pay taxes to the host government. I file a tax return to the U.S. Government each year, but all my income is excluded so I do not pay any taxes. In this way, I do not think that I can write anything off on my U.S. tax return. Also, I have absolutely no idea if I would be able to write off any losses on my Japanese tax return (I've entrusted all the family tax issues to my wife). Would this be possible? I can't answer this question but you seem to be looking for information on \"\"cross-border tax harvesting\"\". If Google doesn't yield useful results, I'd suggest you talk to an accountant who is familiar with the relevant tax codes. Are there any other available options (that would not involve having to tell my wife about the loss, which would be inevitable if I were to go the tax write-off route in Japan)? This is off topic but you should probably have an honest conversation with your wife regardless. If I continue to hold onto this asset the value will decrease lower and lower. Any suggestions as to what to do? See above: close your position ASAP For more information on the pitfalls of leveraged ETFs (FINRA) What happens if I hold longer than one trading day? While there may be trading and hedging strategies that justify holding these investments longer than a day, buy-and-hold investors with an intermediate or long-term time horizon should carefully consider whether these ETFs are appropriate for their portfolio. As discussed above, because leveraged and inverse ETFs reset each day, their performance can quickly diverge from the performance of the underlying index or benchmark. In other words, it is possible that you could suffer significant losses even if the long-term performance of the index showed a gain.\"" }, { "docid": "553304", "title": "", "text": "Actually, most of the forex traders do not prefer the practice of leveraging. In forex trading, a contract signed by a common trader is way more than any common man can afford to risk. It is not a compulsion for the traders to use leveraging yet most of the traders practice it. The other side of it is completely different. Trading companies or brokers specifically like it because you turn into a kind of cash cow when your account gets exhausted. As for trader, most of them don’t practice leveraging." }, { "docid": "153179", "title": "", "text": "Its the relative leverage available to retail traders between the two. In the US one can trade equities with 2:1 leverage while with commodities the leverage can go much higher. Combine this with the highly volatile nature of commodities, and it makes losing BIG too easy for the average trader." }, { "docid": "163641", "title": "", "text": "Leverage comes in many forms. You'll learn about things like operational leverage, financial leverage, and total leverage throughout school. In the real world, tier 1 capital ratio has become the most commonly scrutinized because it is essentially a ratio of the core equity capital of a firm divided by the risk weighted assets (assets multiplied by a credit weighting which for most banks now a days is using the standard of Basel 2.5 and moving towards Basel III). The multiples you talked about were references to the reciprocal of this formula. You could reciprocate the T1C ratio and get a whole number that is the multiplier. This multiplier would show for every 1$ in core capital, how much the firm held in risk weighted assets. The 30x number would have represented a tier 1 cap of 3.33%. The concept behind it being, a 10% growth in risk weighted assets with a 3.33% T1CR would result in a 300% growth in core equity capital value. As proven in 2008, it is a double edge blade and works the same way in both directions." }, { "docid": "189894", "title": "", "text": "In addition to the excellent answers here I might suggest a reason for investing in leveraged funds and the original purpose for their existence. Lets say you run a mutual fund that is supposed to track the performance of the S&P 500. If you have cash inflows and outflows from your fund due to people investing and selling shares of your fund you may have periods where not all funds are invested appropriately because some of the funds are in cash. Lets say 98% of your funds are invested in the securities that reflect the stocks in the S&P 500. You will will miss matching the S&P 500 because you have 2% not invested in some money market account. If you take 1/3 of the cash balance and invest in a triple leveraged fund or take 1/2 of the funds and invest in a double leveraged fund you will more accurately track the index to which your fund is supposed to track. I am not sure what percentage mutual fund owners keep in cash but this is one use that I know these ETFs are used for. The difference over time that compounding effects have on leveraged funds is called Beta Slippage. There are many fine articles explaining it at you can find one located at this link." }, { "docid": "103528", "title": "", "text": "\"If you're looking to leverage your capital more efficiently, at the money options offer the best balance. Options deep in the money will have little time premium remaining on them, but don't allow for greater leverage. On the other hand deep out of the money options may be thinly traded, or might not offer the \"\"mirroring\"\" you'd like of the underlying. By purchasing ATM you will likely be buying some time premium, but still be leveraging your capital, potentially several times over.\"" }, { "docid": "58690", "title": "", "text": "\"The problem with daily-rebalanced \"\"inverse\"\" or \"\"leveraged\"\" ETFs is that since they rebalance every day, you can lose money even if your guess as to the market's direction is correct. Quoting from FINRA'S guide as to why these are a bad idea: How can this apparent breakdown between longer term index returns and ETF returns happen? Here’s a hypothetical example: let’s say that on Day 1, an index starts with a value of 100 and a leveraged ETF that seeks to double the return of the index starts at $100. If the index drops by 10 points on Day 1, it has a 10 percent loss and a resulting value of 90. Assuming it achieved its stated objective, the leveraged ETF would therefore drop 20 percent on that day and have an ending value of $80. On Day 2, if the index rises 10 percent, the index value increases to 99. For the ETF, its value for Day 2 would rise by 20 percent, which means the ETF would have a value of $96. On both days, the leveraged ETF did exactly what it was supposed to do—it produced daily returns that were two times the daily index returns. But let’s look at the results over the 2 day period: the index lost 1 percent (it fell from 100 to 99) while the 2x leveraged ETF lost 4 percent (it fell from $100 to $96). That means that over the two day period, the ETF's negative returns were 4 times as much as the two-day return of the index instead of 2 times the return. That example is for \"\"just\"\" leveraging 2x in the same direction. Inverse funds have the same kind of issue. An example from Bogleheads Wiki page on these kinds of funds says that over 12/31/2007 to 12/31/2010, The funds do exactly what they say on any given day. But any losses get \"\"locked in\"\" each day. While normally a 50% loss needs a 100% gain to get back to a starting point, a fund like this needs more than a 100% gain to get back to its starting point. The result of these funds across multiple days doesn't match the index it's matching over those several days, and you won't make money over the long term. Do look at the further examples at the links I've referenced above, or do your own research into the performance of these funds during time periods both when the market is going up and going down. Also refer to these related and/or duplicate questions:\"" }, { "docid": "330683", "title": "", "text": "I've had a small forex investment in the AUDUSD since Oct of 2010 at 50:1 leverage, and have more than doubled my investment on the swap alone. Granted this is high risk with virtually every guarantee that it will fail *eventually*, but the AUD hasn't dropped at anytime during this trade enough to stop me out so far. With a higher interest rate, there's a natural scarcity in the AUD, especially when compared to the USD. Unless there's another crash like 2008, Asian trading with Aus significantly weakens, or the RBA screws the pooch, the AUD doesn't have many factors with a high probability for devastating impact on the currency." }, { "docid": "72289", "title": "", "text": "Correct. By putting expenses on to a credit card which does not charge interest during the grace period, and paying that balance every month, in effect you earn interest on money you've already spent. However, first, savings account interest is something like .05% right now depending on your bank. Yeah it's money, but seriously, that's 4 cents per month on $1000. Second, two things can make this very wrong. If you carry a balance, you'll pay much more in interest than you'd get from practically any investment you could make with the cash in the meantime. Second, a debit card can be used to get cash you already have from an ATM (not everyone takes credit, you know), and it'll cost you little or nothing. Use a credit card for the same purpose and you're paying 40% from the second the money comes out of the machine. Also correct. Rewards cards earn you more the more they're used. That's because the card issuer makes money based on usage; they get 3% of each transaction. They're happy to turn 1% of that, up to a limit or subject to a spending floor, back around to you. Again, check the terms and conditions. Most cards have a limit on total rewards. Many of them also have fees, either while you hold the card or when you try to redeem the rewards. Look for a card with high limits or no limits on rewards from spending, and with no annual fee or reward redemption fee. In addition to the above, you build good credit history with good spending patterns. However, your credit score can fluctuate wildly, because on one day you have very low leverage (percent of credit limit used), and on the next you've bought $200 in groceries and so your leverage went up 20% on a card with a $1000 limit. Leverage under 10% is good, leverage under 40% is OK and leverage over that starts looking bad. With a $1000 limit, with you maxing it out and then paying it off, your credit score can fluctuate by 30 points on any given day." } ]

[ { "docid": "286141", "title": "", "text": "This would clear out a lot more. 1) Leverage is the act of taking on debt in lieu of the equity you hold. Not always related to firms, it applies to personal situations too. When you take a loan, you get a certain %age of the loan, the bank establishes your equity by looking at your past financial records and then decides the amount it is going to lend, deciding on the safest leverage. In the current action leverage is the whole act of borrowing yen and profiting from it. The leverage factor mentions the amount of leverage happening. 10000 yen being borrowed with an equity of 1000 yen. 2) Commercial banks: 10 to 1 -> They don't deal in complicated investments, derivatives except for hedging, and are under stricter controls of the government. They have to have certain amount of liquidity and can loan out the rest for business. Investment banks: 30 to 1 -> Their main idea is making money and trade heavily. Their deposits are limited by the amount clients have deposited. And as their main motive is to get maximum returns from the available amount, they trade heavily. Derivatives, one of the instruments, are structured on underlyings and sometimes in multiple layers which build up quite a bit of leverage. And all of the trades happen on margins. You don't invest $10k to buy $10k of a traded stock. You put in, maybe $500 to take up the position and borrow the rest of the amount per se. It improves liquidity in the markets and increases efficiency. Else you could do only with what you have. So these margins add up to the leverage the bank is taking on." } ]

[ { "docid": "532269", "title": "", "text": "That's not 100% correct, as some leveraged vehicles choose to re-balance on a monthly basis making them less risky (but still risky). If I'm not mistaken the former oil ETN 'DXO' was a monthly re-balance before it was shut down by the 'man' Monthly leveraged vehicles will still suffer slippage, not saying they won't. But instead of re-balancing 250 times per year, they do it 12 times. In my book less iterations equals less decay. Basically you'll bleed, just not as much. I'd only swing trade something like this in a retirement account where I'd be prohibited from trading options. Seems like you can get higher leverage with less risk trading options, plus if you traded LEAPS, you could choose to re-balance only once per year." }, { "docid": "557324", "title": "", "text": "There are a few reasons, particularly for businesses. The first is opportunity cost. That chunk of money they have could be used to get higher returns somewhere else. If they can borrow from a bank at low interest rates to finance their ongoing operations, they can use their cash to get a higher return somewhere else. The second is credit rating. For public companies, ratings companies give high emphasis to companies with large reserves. This strengthens their ability to pay back the loan should it become necessary. A good credit rating in turn let's the company borrow money at lower rates. When a company can borrow money at low rates, it circles back to the first point where they can now put their reserves to better use. The third is leverage. Companies can use the cash they have built up to leverage into a larger investment. Assuming the investment works out, it will pay for the cost of borrowing over time. For instance let's say I have $1 million to invest. I can pay all cash for a $1 million apartment building or I can leverage that into a $3 million building. Assuming I run it well, the tenants will pay for the cost of borrowing $2 million and at the end of the term I'll be left with my $3 million building." }, { "docid": "558466", "title": "", "text": "Well, let me take your question for baremetal, and aknowledge you did not asked about the difference between daytrading and investing which is obviously leverage. I would not consider daytrading more risky as long as you keep leverageout of the equation. Daytrading can be turbolent and confusing, where things unfold in a very short amount of time, (let trade nfp payroll or some breaking event, yay), eventually the risk is more overseeable in long term trading, as soon as you put leverage into the equation things look vary different, indeed." }, { "docid": "428187", "title": "", "text": "First, make sure you understand the objective of an ETF. In some cases, they may use leverage to get a multiple of the index's return that is different than 1. Some may be ultra funds that go for double the return or double the inverse of the return and thus will try to apply the appropriate leverage to achieve that return. Those that use physical replication can still have a small portion be used to try to minimize the tracking error as there is something to be said for what kind of tracking error do you accept as the fund's returns may differ from the index by some measure. Yes. For example, if you were to have a fund that had a 50% and -50% return in back to back periods, what would your final return be? Answer: -25%, which if you need to visualize this, take $1 that then becomes $1.50 by going up 50% and then becomes $.75 by going down 50% in a compounded fashion. This is where you have to be careful of the risks of leverage as those returns will compound in a possibly negative way." }, { "docid": "552089", "title": "", "text": "Doomsayers can just buy the 5x Short ETFs instead of the 5x long, see where it leaves them. People who don't understand leverage shouldn't be writing articles about them. 3 seems to be a valid point to some degree, but why should there be a cap at 3x for ETFs when you can get way more leverage with other instruments. I feel like these are the people who blame anything that qualifies as a derivative for 2008." }, { "docid": "409403", "title": "", "text": "Moronic question I'm sure. Listening to the Bloomberg Surveillance podcast and they mentioned that the vast majority of financial transactions in China and even North Korea are denominated in US dollars. They go on to say that this means they HAVE to go through US banks giving the US tremendous leverage. Can someone explain this whole idea to me. 1. Why do transactions done in US dollars have to go through US banks? 2. Does that leverage the US has just come from our ability to prevent transactions from occurring if they are run through our banks?" }, { "docid": "445887", "title": "", "text": "\"I'm a little confused on the use of the property today. Is this place going to be a personal residence for you for now and become a rental later (after the mortgage is paid off)? It does make a difference. If you can buy the house and a 100% LTV loan would cost less than 125% of comparable rent ... then buy the house, put as little of your own cash into it as possible and stretch the terms as long as possible. Scott W is correct on a number of counts. The \"\"cost\"\" of the mortgage is the after tax cost of the payments and when that money is put to work in a well-managed portfolio, it should do better over the long haul. Don't try for big gains because doing so adds to the risk that you'll end up worse off. If you borrow money at an after-tax cost of 4% and make 6% after taxes ... you end up ahead and build wealth. A vast majority of the wealthiest people use this arbitrage to continue to build wealth. They have plenty of money to pay off mortgages, but choose not to. $200,000 at 2% is an extra $4000 per year. Compounded at a 7% rate ... it adds up to $180k after 20 years ... not exactly chump change. Money in an investment account is accessible when you need it. Money in home equity is not, has a zero rate of return (before inflation) and is not accessible except through another loan at the bank's whim. If you lose your job and your home is close to paid off but isn't yet, you could have a serious liquidity issue. NOW ... if a 100% mortgage would cost MORE than 125% of comparable rent, then there should be no deal. You are looking at a crappy investment. It is cheaper and better just to rent. I don't care if prices are going up right now. Prices move around. Just because Canada hasn't seen the value drops like in the US so far doesn't mean it can't happen in the future. If comparable rents don't validate the price with a good margin for profit for an investor, then prices are frothy and cannot be trusted and you should lower your monthly costs by renting rather than buying. That $350 per month you could save in \"\"rent\"\" adds up just as much as the $4000 per year in arbitrage. For rentals, you should only pull the trigger when you can do the purchase without leverage and STILL get a 10% CAP rate or higher (rate of return after taxes, insurance and other fixed costs). That way if the rental rates drop (and again that is quite possible), you would lose some of your profit but not all of it. If you leverage the property, there is a high probability that you could wind up losing money as rents fall and you have to cover the mortgage out of nonexistent cash flow. I know somebody is going to say, \"\"But John, 10% CAP on rental real estate? That's just not possible around here.\"\" That may be the case. It IS possible somewhere. I have clients buying property in Arizona, New Mexico, Alberta, Michigan and even California who are finding 10% CAP rate properties. They do exist. They just aren't everywhere. If you want to add leverage to the rental picture to improve the return, then do so understanding the risks. He who lives by the leverage sword, dies by the leverage sword. Down here in the US, the real estate market is littered with corpses of people who thought they could handle that leverage sword. It is a gory, ugly mess.\"" }, { "docid": "244303", "title": "", "text": "\"I made an investing mistake many (eight?) years ago. Specifically, I invested a very large sum of money in a certain triple leveraged ETF (the asset has not yet been sold, but the value has decreased to maybe one 8th or 5th of the original amount). I thought the risk involved was the volatility--I didn't realize that due to the nature of the asset the value would be constantly decreasing towards zero! Anyhow, my question is what to do next? I would advise you to sell it ASAP. You didn't mention what ETF it is, but chances are you will continue to lose money. The complicating factor is that I have since moved out of the United States and am living abroad (i.e. Japan). I am permanent resident of my host country, I have a steady salary that is paid by a company incorporated in my host country, and pay taxes to the host government. I file a tax return to the U.S. Government each year, but all my income is excluded so I do not pay any taxes. In this way, I do not think that I can write anything off on my U.S. tax return. Also, I have absolutely no idea if I would be able to write off any losses on my Japanese tax return (I've entrusted all the family tax issues to my wife). Would this be possible? I can't answer this question but you seem to be looking for information on \"\"cross-border tax harvesting\"\". If Google doesn't yield useful results, I'd suggest you talk to an accountant who is familiar with the relevant tax codes. Are there any other available options (that would not involve having to tell my wife about the loss, which would be inevitable if I were to go the tax write-off route in Japan)? This is off topic but you should probably have an honest conversation with your wife regardless. If I continue to hold onto this asset the value will decrease lower and lower. Any suggestions as to what to do? See above: close your position ASAP For more information on the pitfalls of leveraged ETFs (FINRA) What happens if I hold longer than one trading day? While there may be trading and hedging strategies that justify holding these investments longer than a day, buy-and-hold investors with an intermediate or long-term time horizon should carefully consider whether these ETFs are appropriate for their portfolio. As discussed above, because leveraged and inverse ETFs reset each day, their performance can quickly diverge from the performance of the underlying index or benchmark. In other words, it is possible that you could suffer significant losses even if the long-term performance of the index showed a gain.\"" }, { "docid": "181239", "title": "", "text": "These spots could easily be filled by MSFT, but they're going to do whatever they can to make you think they can't be... The problem with the programming and computer engineering industry is that anyone smart enough to be good at their craft can probably put food on their table on their own (subcontracting, developing their own software, consulting, etc.). In other words, they have plenty of leverage in salary negotiations. Foreigners are a different story. I've worked with plenty, and most are great at what they do. But, the biggest barrier they have that keeps them from going into business in the Western market themselves is often their communication ability, or the fact that they are so specialized in their knowledge that they aren't very business savvy (and xenophobic ignorance by many Westerner's, to be honest). Put those two factors together, and I'm more than willing to bet that MSFT gets a fat discount during negotiations, that saves them way more than the 10g's that the Visa's would cost." }, { "docid": "55022", "title": "", "text": "The most obvious use of a collateral is as a risk buffer. Just as when you borrow money to buy a house and the bank uses the house as a collateral, so when people borrow money to loan financial instruments (or as is more accurate, gain leverage) the lender keeps a percentage of that (or an equivalent instrument) as a collateral. In the event that the borrower falls short of margin requirements, brokers (in most cases) have the right to sell that collateral and mitigate the risk. Derivatives contracts, like any other financial instrument, come with their risks. And depending on their nature they may sometimes be much more riskier than their underlying instruments. For example, while a common stock's main risk comes from the movements in its price (which may itself result from many other macro/micro-economic factors), an option in that common stock faces risks from those factors plus the volatility of the stock's price. To cover this risk, lenders apply much higher haircuts when lending against these derivatives. In many cases, depending upon the notional exposure of the derivative, that actual dollar amount of the collateral may be more than the face value or the market value of the derivatives contract. Usually, this collateral is deposited not as the derivatives contract itself but rather as the underlying financial instrument (an equity in case of an option, a bond in case of a CDS, and so on). This allows the lender to offset the risk by executing a trade on that collateral itself." }, { "docid": "237215", "title": "", "text": "It depends on how you define trading. If you're looking at day-trading, where you're probably going to be in a highly-leveraged position for minutes or hours, the automated traders are probably going to kill you. But, if you have a handful (less than a dozen) equities, and spend about an hour or so every week conducting research, you have a good chance of doing pretty well. You need to understand the market, listen to the earnings calls, and understand the factors that contribute to the bottom line of your investments. You should not be trading for the sake of trading, you're trading to try to achieve the best returns. Beware of dogmatists and people selling products that align with their dogma. Warren Buffet invests in companies for an extremely long investment window. Mr. Buffet also expends significant resources to gain a deep understanding of the fundamentals of the businesses that he invests in and the factors affecting those fundamentals. Buffet does not buy an S&P 500 index fund and whistle dixie." }, { "docid": "329226", "title": "", "text": "Diversification is one aspect to this question, and Dr Fred touches on its relationship to risk. Another aspect is leverage: So it again comes down to your appetite for risk. A further factor is that if you are successfully renting out your property, someone else is effectively buying that asset for you, or at least paying the interest on the mortgage. Just bear in mind that if you get into a situation where you have 10 properties and the rent on them all falls at the same time as the property market crashes (sound familiar?) then you can be left on the hook for a lot of interest payments and your assets may not cover your liabilities." }, { "docid": "103528", "title": "", "text": "\"If you're looking to leverage your capital more efficiently, at the money options offer the best balance. Options deep in the money will have little time premium remaining on them, but don't allow for greater leverage. On the other hand deep out of the money options may be thinly traded, or might not offer the \"\"mirroring\"\" you'd like of the underlying. By purchasing ATM you will likely be buying some time premium, but still be leveraging your capital, potentially several times over.\"" }, { "docid": "450178", "title": "", "text": "\"how can I get started knowing that my strategy opportunities are limited and that my capital is low, but the success rate is relatively high? A margin account can help you \"\"leverage\"\" a small amount of capital to make decent profits. Beware, it can also wipe out your capital very quickly. Forex trading is already high-risk. Leveraged Forex trading can be downright speculative. I'm curious how you arrived at the 96% success ratio. As Jason R has pointed out, 1-2 trades a year for 7 years would only give you 7-14 trades. In order to get a success rate of 96% you would have had to successful exploit this \"\"irregularity\"\" at 24 out of 25 times. I recommend you proceed cautiously. Make the transition from a paper trader to a profit-seeking trader slowly. Use a low leverage ratio until you can make several more successful trades and then slowly increase your leverage as you gain confidence. Again, be very careful with leverage: it can either greatly increase or decrease the relatively small amount of capital you have.\"" }, { "docid": "547865", "title": "", "text": "\"Question - Why does Renn Tech limit capital from outside investors while also leveraging their positions 4-5X ? Wouldn't they rather gain more in fees than pay interest on the leverage? Quote: \"\"The investment paid off. Today the equities group accounts for the majority of Medallion’s profits, primarily using derivatives and leverage of four to five times its capital, according to documents filed with the U.S. Department of Labor. 4\"\" https://www.bloomberg.com/news/articles/2016-11-21/how-renaissance-s-medallion-fund-became-finance-s-blackest-box\"" }, { "docid": "103362", "title": "", "text": "Levarge in simple terms is how of your own money to how much of borrowed money. So in 2008 Typical leverage ratios were Investment Banks 30:1 means that for every 1 Unit of Banks money [shareholders capital/ long term debts] there was 30 Units of borrowed money [from deposits/for other institutions/etc]. This is a very unstable situation as typically say you lent out 31 to someone else, half way through repayments, the depositors and other lends are asking you 30 back. You are sunk. Now lets say if you lent 31 to some one, but 30 was your moeny and 1 was from deposits/etc. Then you can anytime more easily pay back the 1 to the depositor. In day trading, usually one squares away the position the same day or within a short period. Hence say you want to buy something worth 1000 in the morning and are selling it say the same day. You are expecting the price to by 1005 and a gain 5. Now when you buy via your broker/trader, you may not be required to pay 1000. Normally one just needs to pay a margin money, typically 10% [varies from market to market, country to country]. So in the first case if you put 1000 and get by 5, you made a profit of 0.5%. However if you were to pay only 10 as margin money [rest 990 is assumed loan from your broker]. You sell at 1005, the broker deducts his 990, and you get 15. So technically on 10 you have made 5 more, ie 50% returns. So this is leveraging of 10:1. If say your broker allowed only 5% margin money, then you just need to pay 5 for the 1000 trade, get back 5. You have made a 100% profit, but the leveraging is 20:1. Now lets say at this high leveraging when you are selling you get only 990. So you still owe the broker 5, if you can't pay-up and if lot of other such people can't pay-up, then the broker will also go bankrupt and there is a huge risk. Hence although leveraging helps in quite a few cases, there is always an associated risk when things go wrong badly." }, { "docid": "163641", "title": "", "text": "Leverage comes in many forms. You'll learn about things like operational leverage, financial leverage, and total leverage throughout school. In the real world, tier 1 capital ratio has become the most commonly scrutinized because it is essentially a ratio of the core equity capital of a firm divided by the risk weighted assets (assets multiplied by a credit weighting which for most banks now a days is using the standard of Basel 2.5 and moving towards Basel III). The multiples you talked about were references to the reciprocal of this formula. You could reciprocate the T1C ratio and get a whole number that is the multiplier. This multiplier would show for every 1$ in core capital, how much the firm held in risk weighted assets. The 30x number would have represented a tier 1 cap of 3.33%. The concept behind it being, a 10% growth in risk weighted assets with a 3.33% T1CR would result in a 300% growth in core equity capital value. As proven in 2008, it is a double edge blade and works the same way in both directions." }, { "docid": "70738", "title": "", "text": "In a business environment, this phenomenon could be easily explained by 'operational leverage'. Operational leverage is the principle that increasing revenues by a small amount can have a disproportionately large impact on net income. Consider this example: you run a business that rents out a factory and produces goods to sell to consumers. The rent costs you $10k / month, and all of your other costs depend on how many goods you produce. Assume each good gives you $10 in profit, after factoring your variable costs. If you sell 1,000 units, you break-even, because your variable profit will pay for your rent. If you sell 1,100 units, you make $1,000 net profit. If you sell 1,200 units, you double your overall profit, making $2,000 for the month. Operational leverage is the principle that adding incremental revenue will have a greater impact than the revenue already received, because your fixed costs are already 'paid for'. Similarly in personal finance, consider these scenarios: You have $1,000 in monthly expenses, and make $1,000 - your monthly savings (and therefore your wealth) will be zero. You have $1,000 in monthly expenses, and make $1,100 - your monthly savings will be $100 per month. You have $1,000 in monthly expenses, and make $1,200 - increasing your income by ~10% has allowed your monthly savings double, at $200 per month. You have $1,000 in monthly expenses, and make $2,000 - your monthly savings are 5 times higher, when your income only increased by ~80%. Now in the real world, when someone makes more money, they will increase their expenses. This is because spending money can increase one's quality of life. So the incline does not happen quite so quickly - as pointed out by @Pete & @quid, there comes a point where increased spending provides someone with less increase in quality of life - at that point, savings really would quickly ramp up as income increases incrementally. But assuming you live the same making $2,000 / month as $1,000 / month, you can save, every month, a full month's worth of living expenses. This doesn't even factor in the impact of earning investment income on those savings. As to why the wealth exceeds income at that specific point, I couldn't say, but what I've outlined above should show how it is quite reasonable that the data is as-reported." }, { "docid": "45674", "title": "", "text": "I don't know what you are on about, as most online brokers should offer standard brokerage without margin. As trading with magin is considered more risky by most (especially if you don't know what you are doing), so one would have to fill out additional application forms and possibly undergo some training before getting a margin account open. A quick search on the net provided some examples, here is one - IG, who provide 3 type of accounts - Spread Betting and CFDs (both leveraged) and Stockbroking (which is non-leveraged)." } ]

[ { "docid": "242524", "title": "", "text": "Your original example is a little confusing because just shorting for 1k and buying for 1k is 100% leveraged or an infinitive leverage ratio. (and not allowed) Brokerage houses would require you to invest some capital in the trade. One example might be requiring you to hold $100 in the brokerage. This is where the 10:1 ratio comes from. (1000/10) Thus a return of 4.5% on the 1000k bond and no movement on the short position would net you $45 and voila a 45% return on your $100 investment. A 40 to 1 leverage ratio would mean that you would only have to invest $25 to make this trade. Something that no individual investor are allowed to do, but for some reason some financial firms have been able to." } ]

[ { "docid": "35414", "title": "", "text": "My favorite part: Any bank with a leverage ratio greater than 10% can elect to be exempt from: &gt;(1) Any Federal law, rule, or regulation addressing capital or liquidity requirements or standards. &gt;(2) Any Federal law, rule, or regulation that permits an appropriate Federal banking agency to object to a capital distribution. &gt;(3) Any consideration by an appropriate Federal banking agency of the following: &gt;(A) Any risk the qualifying banking organization may pose to “the stability of the financial system of the United States”, under section 5(c)(2) of the Bank Holding Company Act of 1956. &gt;(B) The “extent to which a proposed acquisition, merger, or consolidation would result in greater or more concentrated risks to the stability of the United States banking or financial system”, under section 3(c)(7) of the Bank Holding Company Act of 1956, so long as the banking organization, after such proposed acquisition, merger, or consolidation, would maintain a quarterly leverage ratio of at least 10 percent. &gt;(C) Whether the performance of an activity by the banking organization could possibly pose a “risk to the stability of the United States banking or financial system”, under section 4(j)(2)(A) of the Bank Holding Company Act of 1956. &gt;(D) Whether the acquisition of control of shares of a company engaged in an activity described in section 4(j)(1)(A) of the Bank Holding Company Act of 1956 could possibly pose a “risk to the stability of the United States banking or financial system”, under section 4(j)(2)(A) of the Bank Holding Company Act of 1956, so long as the banking organization, after acquiring control of such company, would maintain a quarterly leverage ratio of at least 10 percent. &gt;(E) Whether a merger would pose a “risk to the stability of the United States banking or financial system”, under section 18(c)(5) of the Federal Deposit Insurance Act, so long as the banking organization, after such proposed merger, would maintain a quarterly leverage ratio of at least 10 percent. &gt;(F) Any risk the qualifying banking organization may pose to “the stability of the financial system of the United States”, under section 10(b)(4) of the Home Owners' Loan Act. &gt;(4) Subsections (i)(8) and (k)(6)(B)(ii) of section 4 and section 14 of the Bank Holding Company Act of 1956. &gt;(5) Section 18(c)(13) of the Federal Deposit Insurance Act. &gt;(6) Section 163 of the Financial Stability Act of 2010. &gt;(7) Section 10(e)(2)(E) of the Home Owners’ Loan Act. &gt;(8) Any Federal law, rule, or regulation implementing standards of the type provided for in subsections (b), (c), (d), (e), (g), (h), (i), and (j) of section 165 of the Financial Stability Act of 2010. &gt;(9) Any Federal law, rule, or regulation providing limitations on mergers, consolidations, or acquisitions of assets or control, to the extent such limitations relate to capital or liquidity standards or concentrations of deposits or assets, so long as the banking organization, after such proposed merger, consolidation, or acquisition, would maintain a quarterly leverage ratio of at least 10 percent. yeah, what could go wrong?" }, { "docid": "255102", "title": "", "text": "You miss the step where the return being doubled is daily. Consider you invested $100 today, went up 10%, and tomorrow you went down 10%. Third day market went up 1.01% and without leverage - got even. Here's the calculation for you: day - start - end 1 $100 $120 - +10% doubled 2 $120 $96 - -10% doubled 3 $96 $97.94 - +1.01% doubled So in fact you're in $2.06 loss, while without leveraging you would break even. That means that if the trend is generally positive, but volatile - you'll end up barely breaking even while the non-leveraged investment would make profits. That's what the quote means. edit to summarize the long and fruitless discussion in the comments: The reason that the leveraged ETF's are very good for day-trading is exactly the same reason why they are bad for continuous investment. You should buy them when there's a reasonable expectation for the market to immediately go in the direction you expect. If for whatever reason you believe the markets will plunge, or soar, tomorrow - you should buy a leveraged ETF, ride the plunge, and sell it in the end of the day. But you asked the question about volatile markets, not markets going in one direction. There - you lose." }, { "docid": "244303", "title": "", "text": "\"I made an investing mistake many (eight?) years ago. Specifically, I invested a very large sum of money in a certain triple leveraged ETF (the asset has not yet been sold, but the value has decreased to maybe one 8th or 5th of the original amount). I thought the risk involved was the volatility--I didn't realize that due to the nature of the asset the value would be constantly decreasing towards zero! Anyhow, my question is what to do next? I would advise you to sell it ASAP. You didn't mention what ETF it is, but chances are you will continue to lose money. The complicating factor is that I have since moved out of the United States and am living abroad (i.e. Japan). I am permanent resident of my host country, I have a steady salary that is paid by a company incorporated in my host country, and pay taxes to the host government. I file a tax return to the U.S. Government each year, but all my income is excluded so I do not pay any taxes. In this way, I do not think that I can write anything off on my U.S. tax return. Also, I have absolutely no idea if I would be able to write off any losses on my Japanese tax return (I've entrusted all the family tax issues to my wife). Would this be possible? I can't answer this question but you seem to be looking for information on \"\"cross-border tax harvesting\"\". If Google doesn't yield useful results, I'd suggest you talk to an accountant who is familiar with the relevant tax codes. Are there any other available options (that would not involve having to tell my wife about the loss, which would be inevitable if I were to go the tax write-off route in Japan)? This is off topic but you should probably have an honest conversation with your wife regardless. If I continue to hold onto this asset the value will decrease lower and lower. Any suggestions as to what to do? See above: close your position ASAP For more information on the pitfalls of leveraged ETFs (FINRA) What happens if I hold longer than one trading day? While there may be trading and hedging strategies that justify holding these investments longer than a day, buy-and-hold investors with an intermediate or long-term time horizon should carefully consider whether these ETFs are appropriate for their portfolio. As discussed above, because leveraged and inverse ETFs reset each day, their performance can quickly diverge from the performance of the underlying index or benchmark. In other words, it is possible that you could suffer significant losses even if the long-term performance of the index showed a gain.\"" }, { "docid": "45674", "title": "", "text": "I don't know what you are on about, as most online brokers should offer standard brokerage without margin. As trading with magin is considered more risky by most (especially if you don't know what you are doing), so one would have to fill out additional application forms and possibly undergo some training before getting a margin account open. A quick search on the net provided some examples, here is one - IG, who provide 3 type of accounts - Spread Betting and CFDs (both leveraged) and Stockbroking (which is non-leveraged)." }, { "docid": "588877", "title": "", "text": "FX is often purchased with leverage by both retail and wholesale speculators on the assumption daily movements are typically more restrained than a number of other asset classes. When volatility picks up unexpectedly these leveraged accounts can absolutely be wiped out. While these events are relatively rare, one happened as recently as 2016 when the Swiss National Bank unleashed the Swiss Franc from its Euro mooring. You can read about it here: http://www.reuters.com/article/us-swiss-snb-brokers-idUSKBN0KP1EH20150116" }, { "docid": "329226", "title": "", "text": "Diversification is one aspect to this question, and Dr Fred touches on its relationship to risk. Another aspect is leverage: So it again comes down to your appetite for risk. A further factor is that if you are successfully renting out your property, someone else is effectively buying that asset for you, or at least paying the interest on the mortgage. Just bear in mind that if you get into a situation where you have 10 properties and the rent on them all falls at the same time as the property market crashes (sound familiar?) then you can be left on the hook for a lot of interest payments and your assets may not cover your liabilities." }, { "docid": "375302", "title": "", "text": "Generally not, however some brokers may allow it. My previous CFD Broker - CMC Markets, used to allow you to adjust the leverage from the maximum allowed for that stock (say 5%) to 100% of your own money before you place a trade. So obviously if you set it at 100% you pay no interest on holding open long positions overnight. If you can't find a broker that allows this (as I don't think there would be too many around), you can always trade within your account size. For example, if you have an account size of $20,000 then you only take out trades that have a face value up to the $20,000. When you become more experienced and confident you can increase this to 2 or 3 time your account size. Maybe, if you are just starting out, you should first open a virtual account to test your strategies out and get used to using leverage. You should put together a trading plan with position sizing and risk management before starting real trading, and you can test these in your virtual trading before putting real money on the table. Also, if you want to avoid leverage when first starting out, you could always start trading the underlying without any leverage, but you should still have a trading plan in place first." }, { "docid": "261016", "title": "", "text": "\"This is second hand information as I am not a millionaire, but I work with such people everyday and have an understanding of how they handle cash: The wealthy people don't. Simple. Definitely not if they don't have to. Cash is a tool to them that they use only if they get benefit of it being a cash transaction (one of my friends is a re-seller and he gets a 10% discount from suppliers for settling lines using cash). Everything else they place on a line of credit. For people who \"\"dislike\"\" credit cards and pay using ATM or debit cards might actually have a very poor understanding of leverage. I assure you, the wealthy people have a very good understanding of it! Frankly, wealthy people pay less for everything, but they deserve it because of the extreme amount of leverage they have built for themselves. Their APRs are low, their credit limits are insanely high, they have longer billing periods and they get spoiled by credit card vendors all the time. For example, when you buy your groceries at Walmart, you pay at least a 4% markup because that's the standardized cost of processing credit cards. Even if you paid in cash! A wealthy person uses his credit card to pay for the same but earns the same percentage amount in cash back, points and what not. I am sure littleadv placed the car purchase on his credit card for similar reasons! The even more wealthy have their groceries shipped to their houses and if they pay cash I won't be surprised if they actually end up paying much less for fresh (organic) vegetables than what equivalent produce at Walmart would get them! I apologize for not being able to provide citations for these points I make as they are personal observations.\"" }, { "docid": "409403", "title": "", "text": "Moronic question I'm sure. Listening to the Bloomberg Surveillance podcast and they mentioned that the vast majority of financial transactions in China and even North Korea are denominated in US dollars. They go on to say that this means they HAVE to go through US banks giving the US tremendous leverage. Can someone explain this whole idea to me. 1. Why do transactions done in US dollars have to go through US banks? 2. Does that leverage the US has just come from our ability to prevent transactions from occurring if they are run through our banks?" }, { "docid": "297764", "title": "", "text": "\"Leverage means you can make more investments with the same amount of money. In the case of rental properties, it means you can own more properties and generate more rents. You exchange a higher cost of doing business (higher interest fees) and a higher risk of total failure, for a larger number of rents and thus higher potential earnings. As with any investment advice, whenever someone tells you \"\"Do X and you are guaranteed to make more money\"\", unless you are a printer of money that is not entirely true. In this case, taking more leverage exposes you to more risk, while giving you more potential gain. That risk is not only on the selling front; in fact, for most small property owners, the risk is primarily that you will have periods of time of higher expense or lower income. These can come in several ways: If you weather these and similar problems, then you will stand to make more money using higher leverage, assuming you make more money from each property than your additional interest costs. As long as you're making any money on your properties this is likely (as interest rates are very low right now), but making any money at all (above and beyond the sale value) may be challenging early on. These sorts of risks are magnified for your first few years, until you've built up a significant reserve to keep your business afloat in downturns. And of course, any money in a reserve is money you're not leveraging for new property acquisition - the very same trade-off. And while you may be able to sell one or more properties if you did end up in a temporarily bad situation, you also may run into 2008 again and be unable to do so.\"" }, { "docid": "279488", "title": "", "text": "To start, I hope you are aware that the properties' basis gets stepped up to market value on inheritance. The new basis is the start for the depreciation that must be applied each year after being placed in service as rental units. This is not optional. Upon selling the units, depreciation is recaptured whether it's taken each year or not. There is no rule of thumb for such matters. Some owners would simply collect the rent, keep a reserve for expenses or empty units, and pocket the difference. Others would refinance to take cash out and leverage to buy more property. The banker is not your friend, by the way. He is a salesman looking to get his cut. The market has had a good recent run, doubling from its lows. Right now, I'm not rushing to prepay my 3.5% mortgage sooner than it's due, nor am I looking to pull out $500K to throw into the market. Your proposal may very well work if the market sees a return higher than the mortgage rate. On the flip side I'm compelled to ask - if the market drops 40% right after you buy in, will you lose sleep? And a fellow poster (@littleadv) is whispering to me - ask a pro if the tax on a rental mortgage is still deductible when used for other purposes, e.g. a stock purchase unrelated to the properties. Last, there are those who suggest that if you want to keep investing in real estate, leverage is fine as long as the numbers work. From the scenario you described, you plan to leverage into an already pretty high (in terms of PE10) and simply magnifying your risk." }, { "docid": "556574", "title": "", "text": "Agreed, unfortunately what is right seldom matters when it comes to these kinds of decisions. If you don't have any leverage then you won't matter. While it may suck, it is how the world works so you'd better try finding some leverage." }, { "docid": "153179", "title": "", "text": "Its the relative leverage available to retail traders between the two. In the US one can trade equities with 2:1 leverage while with commodities the leverage can go much higher. Combine this with the highly volatile nature of commodities, and it makes losing BIG too easy for the average trader." }, { "docid": "547865", "title": "", "text": "\"Question - Why does Renn Tech limit capital from outside investors while also leveraging their positions 4-5X ? Wouldn't they rather gain more in fees than pay interest on the leverage? Quote: \"\"The investment paid off. Today the equities group accounts for the majority of Medallion’s profits, primarily using derivatives and leverage of four to five times its capital, according to documents filed with the U.S. Department of Labor. 4\"\" https://www.bloomberg.com/news/articles/2016-11-21/how-renaissance-s-medallion-fund-became-finance-s-blackest-box\"" }, { "docid": "189894", "title": "", "text": "In addition to the excellent answers here I might suggest a reason for investing in leveraged funds and the original purpose for their existence. Lets say you run a mutual fund that is supposed to track the performance of the S&P 500. If you have cash inflows and outflows from your fund due to people investing and selling shares of your fund you may have periods where not all funds are invested appropriately because some of the funds are in cash. Lets say 98% of your funds are invested in the securities that reflect the stocks in the S&P 500. You will will miss matching the S&P 500 because you have 2% not invested in some money market account. If you take 1/3 of the cash balance and invest in a triple leveraged fund or take 1/2 of the funds and invest in a double leveraged fund you will more accurately track the index to which your fund is supposed to track. I am not sure what percentage mutual fund owners keep in cash but this is one use that I know these ETFs are used for. The difference over time that compounding effects have on leveraged funds is called Beta Slippage. There are many fine articles explaining it at you can find one located at this link." }, { "docid": "469125", "title": "", "text": "Leverage increase returns, but also risks, ie, the least you can pay, the greater the opportunity to profit, but also the greater the chance you will be underwater. Leverage is given by the value of your asset (the house) over the equity you put down. So, for example, if the house is worth 100k and you put down 20k, then the leverage is 5 (another way to look at it is to see that the leverage is the inverse of the margin - or percentage down payment - so 1/0.20 = 5). The return on your investment will be magnified by the amount of your leverage. Suppose the value of your house goes up by 10%. Had you paid your house in full, your return would be 10%, or 10k/100k. However, if you had borrowed 80 dollars and your leverage was 5, as above, a 10% increase in the value of your house means you made a profit of 10k on a 20k investment, a return of 50%, or 10k/20k*100. As I said, your return was magnified by the amount of your leverage, that is, 10% return on the asset times your leverage of 5 = 50%. This is because all the profit of the house price appreciation goes to you, as the value of your debt does not depend on the value of the house. What you borrowed from the bank remains the same, regardless of whether the price of the house changed. The problem is that the amplification mechanism also works in reverse. If the price of the house falls by 10%, it means now you only have 10k equity. If the price falls enough your equity is wiped out and you are underwater, giving you an incentive to default on your loan. In summary, borrowing tends to be a really good deal: heads you win, tails the bank loses (or as happened in the US, the taxpayer loses)." }, { "docid": "63091", "title": "", "text": "More leverage means more risk. There is more upside. There is also more downside. If property prices and/or rents fall then your losses are amplified. If you leverage at 90% then a 5% fall means you've lost half your money." }, { "docid": "150867", "title": "", "text": "I agree with a lot of what you said, and I know a great many esteemed economists are trying to point the big finger of blame at the rating agencies who could have and should have scrutinized what they were evaluating as opposed to capitulating because of cash. However, you did not mention leveraging. Leveraging, when left unchecked becomes very dangerous. Although you have an opportunity to make far more than the initial investment would supply without the added leverage, any loss becomes exponentially more devastating, and quickly your loss from this one transaction is more than your initial investment. Not to mention when everyone finds out, and nobody wants to buy the bullshit funds you were peddling, and you can't repay the person who gave you leverage.......then kabbboooom" }, { "docid": "346188", "title": "", "text": "\"If there's one thing the futures markets don't lack, it's leverage. It's more than even most of the most aggressive investors use. Trading options might make more sense for some investors, but I can't think of how this would be \"\"a safer way\"\" compared to owning actual futures contracts, even at relatively high leverage.\"" } ]

[ { "docid": "451935", "title": "", "text": "\"When you say \"\"set aside,\"\" you mean you saved to pay the tax due in April? That's underpaying. It's a rare exception the IRS makes for this penalty, hopefully it wasn't too large, and you now know how much to withhold through payroll deductions. Problem is, this wasn't unusual, it was an oversight. You have no legitimate grounds to dispute. Sorry.\"" } ]

[ { "docid": "261189", "title": "", "text": "IANAL but I'd think common sense would say that if you take advantage of one of the special cases that allow you to withdraw from a retirement plan without penalty, and then for whatever reason you don't use the money for a legal purpose, you would have to either return the money or pay the tax penalty. And I'll go out on a limb here without any documentation and guess that if you lie to the IRS and say that you withdrew the money for an exempt purpose and instead use it to go on vacation and you get caught, that you will not only have to pay the tax penalty but will also be liable for criminal charges of tax fraud. If the law and/or IRS regulations say that the only legal exceptions are A, B, and C, that pretty clearly means that if you do D, you are breaking the law. And in the eyes of the government, failing to pay the taxes you owe is way worse than robbery, murder, or rape." }, { "docid": "257443", "title": "", "text": "I assume the OP is the US and that he is, like most people, a cash-basis tax payer and not an accrual basis tax payer. Suppose the value of the rental of the unit the OP is occupying was reported as income on the OP's 2010 and 2011 W-2 forms but the corresponding income tax was not withheld. If the OP correctly transcribed these income numbers onto his tax returns, correctly computed the tax on the income reported on his 2010 and 2011 1040 forms, and paid the amount due in timely fashion, then there is no tax or penalty due for 2010 and 2011. Nor is the company entitled to withhold tax on this income for 2010 and 2011 at this time; the tax on that income has already been paid by the OP directly to the IRS and the company has nothing to do with the matter anymore. Suppose the value of the rental of the unit the OP is occupying was NOT reported as income on the OP's 2010 and 2011 W-2 forms. If the OP correctly transcribed these income numbers onto his tax returns, correctly computed the tax on the income reported on his 2010 and 2011 1040 forms, and paid the amount due in timely fashion, then there is no tax or penalty due for 2010 and 2011. Should the OP have declared the value of the rental of the unit as additional income from his employer that was not reported on the W-2 form, and paid taxes on that money? Possibly, but it would be reasonable to argue that the OP did nothing wrong other than not checking his W-2 form carefully: he simply assumed the income numbers included the value of the rental and copied whatever the company-issued W-2 form said onto his 1040 form. At least as of now, there is no reason for the IRS to question his 2010 and 2011 returns because the numbers reported to the IRS on Copy A of the W-2 forms match the numbers reported by the OP on his tax returns. My guess is that the company discovered that it had not actually declared the value of the rental payments on the OP's W-2 forms for 2010 and 2011 and now wants to include this amount as income on subsequent W-2 forms. Now, reporting a lump-sum benefit of $38K (but no actual cash) would have caused a huge amount of income tax to need to be withheld, and the OP's next couple of paychecks might well have had zero take-home pay as all the money was going towards this tax withholding. Instead, the company is saying that it will report the $38K as income in 78 equal installments (weekly paychecks over 18 months?) and withhold $150 as the tax due on each installment. If it does not already do so, it will likely also include the value of the current rent as a benefit and withhold tax on that too. So the OP's take-home pay will reduce by $150 (at least) and maybe more if the current rental payments also start appearing on the paychecks and tax is withheld from them too. I will not express an opinion on the legality of the company withholding an additional $150 as tax from the OP's paycheck, but will suggest that the solution proposed by the company (have the money appear as taxable benefits over a 78-week period, have tax withheld, and declare the income on your 2012, 2013 and 2014 returns) is far more beneficial to the OP than the company declaring to the IRS that it made a mistake on the 2010 and 2011 W-2's issued to the OP, and that the actual income paid was higher. Not only will the OP have to file amended returns for 2010 and 2011 but the company will need to amend its tax returns too. In summary, the OP needs to know that He will have to pay taxes on the value of the waived rental payments for 2010 and 2011. The company's mistake in not declaring this as income to the OP for 2010 and 2011 does not absolve him of the responsibility for paying the taxes What the company is proposing is a very reasonable solution to the problem of recovering from the mistake. The alternative, as @mhoran_psprep points out, is to amend your 2010 and 2011 federal and state tax returns to declare the value of the rental during those years as additional income, and pay taxes (and possibly penalties) on the additional amount due. This takes the company completely out of the picture, but does require a lot more work and a lot more cash now rather than in the future." }, { "docid": "407316", "title": "", "text": "\"As long as you paid 100% of your last year's tax liability (overall tax liability, the total tax to pay on your 1040) or 90% of the total tax liability this year, or your underpayment is no more than $1000, you won't be penalized as long as you pay the difference by April 15th. That's per the IRS. I don't know where the \"\"10% of my income\"\" came from, I'm not aware of any such rule.\"" }, { "docid": "381884", "title": "", "text": "IANAL, I am married to someone in your situation. As a US citizen age 26 who has not had any contact with the IRS, you should most definitely be worried... As a US citizen, you are (and always have been) required to file a US tax return and pay any tax on all income, no matter where earned, and no matter where you reside. There are often (but not always) agreements between governments to reduce double taxation. The US rule as to whether a particular type of income is taxable will prevail. As a US citizen with financial accounts (chequing, saving, investment, etc.) above a minimum balance, abroad, you are required to report information, including the amounts in the account, to the US government annually (Look up FBAR). Failure to file these forms carries harsh penalties. A recent law (FATCA) requires foreign financial institutions to report information on their US citizen clients to the US, irrespective of any local banking privacy laws. It's possible that your application triggered these reporting requirements. You will not be allowed to renounce your US citizenship until you have paid all past US taxes and penalties. Good new: you are eligible in ten years or so to run for President. Don't believe any of this, or that nothing has been missed; you must consult with a local tax expert specializing in US/UK tax laws." }, { "docid": "469601", "title": "", "text": "Here's an answer received elsewhere. Yes, it looks like you have a pretty good understanding the concept and the process. Your wife's income will be so low - why? If she is a full-time student in any of those months, you may attribute $250 x 2 children worth of income for each of those months. Incidentally, even if you do end up paying taxes on the extra $3000, you won't be paying the employee's share of Social Security and Medicare (7.65%) or state disability on those funds. So you still end up saving some tax money. No doubt, there's no need to remind you to be sure that you submit all the valid receipts to the administrator in time to get reimbursed. And a must-have disclaimer: Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this email, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. ... Any information contained in this email does not fall under the guidelines of IRS Circular 230." }, { "docid": "453639", "title": "", "text": "(All for US.) Yes you (will) have a realized long-term capital gain, which is taxable. Long-term gains (including those distributed by a mutual fund or other RIC, and also 'qualified' dividends, both not relevant here) are taxed at lower rates than 'ordinary' income but are still bracketed almost (not quite) like ordinary income, not always 15%. Specifically if your ordinary taxable income (after deductions and exemptions, equivalent to line 43 minus LTCG/QD) 'ends' in the 25% to 33% brackets, your LTCG/QD income is taxed at 15% unless the total of ordinary+preferred reaches the top of those brackets, then any remainder at 20%. These brackets depend on your filing status and are adjusted yearly for inflation, for 2016 they are: * single 37,650 to 413,350 * married-joint or widow(er) 75,300 to 413,350 * head-of-household 50,400 to 441,000 (special) * married-separate 37,650 to 206,675 which I'd guess covers at least the middle three quintiles of the earning/taxpaying population. OTOH if your ordinary income ends below the 25% bracket, your LTCG/QD income that 'fits' in the lower bracket(s) is taxed at 0% (not at all) and only the portion that would be in the ordinary 25%-and-up brackets is taxed at 15%. IF your ordinary taxable income this year was below those brackets, or you expect next year it will be (possibly due to status/exemption/deduction changes as well as income change), then if all else is equal you are better off realizing the stock gain in the year(s) where some (or more) of it fits in the 0% bracket. If you're over about $400k a similar calculation applies, but you can afford more reliable advice than potential dogs on the Internet. (update) Near dupe found: see also How are long-term capital gains taxed if the gain pushes income into a new tax bracket? Also, a warning on estimated payments: in general you are required to pay most of your income tax liability during the year (not wait until April 15); if you underpay by more than 10% or $1000 (whichever is larger) you usually owe a penalty, computed on Form 2210 whose name(?) is frequently and roundly cursed. For most people, whose income is (mostly) from a job, this is handled by payroll withholding which normally comes out close enough to your liability. If you have other income, like investments (as here) or self-employment or pension/retirement/disability/etc, you are supposed to either make estimated payments each 'quarter' (the IRS' quarters are shifted slightly from everyone else's), or increase your withholding, or a combination. For a large income 'lump' in December that wasn't planned in advance, it won't be practical to adjust withholding. However, if this is the only year increased, there is a safe harbor: if your withholding this year (2016) is enough to pay last year's tax (2015) -- which for most people it is, unless you got a pay cut this year, or a (filed) status change like marrying or having a child -- you get until next April 15 (or next business day -- in 2017 it is actually April 18) to pay the additional amount of this year's tax (2016) without underpayment penalty. However, if you split the gain so that both 2016 and 2017 have income and (thus) taxes higher than normal for you, you will need to make estimated payment(s) and/or increase withholding for 2017. PS: congratulations on your gain -- and on the patience to hold anything for 10 years!" }, { "docid": "536849", "title": "", "text": "\"I've done various side work over the years -- computer consulting, writing, and I briefly had a video game company -- so I've gone through most of this. Disclaimer: I have never been audited, which may mean that everything I put on my tax forms looked plausible to the IRS and so is probably at least generally right, but it also means that the IRS has never put their stamp of approval on my tax forms. So that said ... 1: You do not need to form an LLC to be able to claim business expenses. Whether you have any expenses or not, you will have to complete a schedule C. On this form are places for expenses in various categories. Note that the categories are the most common type of expenses, there's an \"\"other\"\" space if you have something different. If you have any property that is used both for the business and also for personal use, you must calculate a business use percentage. For example if you bought a new printer and 60% of the time you use it for the business and 40% of the time you use it for personal stuff, then 60% of the cost is tax deductible. In general the IRS expects you to calculate the percentage based on amount of time used for business versus personal, though you are allowed to use other allocation formulas. Like for a printer I think you'd get away with number of pages printed for each. But if the business use is not 100%, you must keep records to justify the percentage. You can't just say, \"\"Oh, I think business use must have been about 3/4 of the time.\"\" You have to have a log where you write down every time you use it and whether it was business or personal. Also, the IRS is very suspicious of business use of cars and computers, because these are things that are readily used for personal purposes. If you own a copper mine and you buy a mine-boring machine, odds are you aren't going to take that home to dig shafts in your backyard. But a computer can easily be used to play video games or send emails to friends and relatives and lots of things that have nothing to do with a business. So if you're going to claim a computer or a car, be prepared to justify it. You can claim office use of your home if you have one or more rooms or designated parts of a room that are used \"\"regularly and exclusively\"\" for business purposes. That is, if you turn the family room into an office, you can claim home office expenses. But if, like me, you sit on the couch to work but at other times you sit on the couch to watch TV, then the space is not used \"\"exclusively\"\" for business purposes. Also, the IRS is very suspicious of home office deductions. I've never tried to claim it. It's legal, just make sure you have all your ducks in a row if you claim it. Skip 2 for the moment. 3: Yes, you must pay taxes on your business income. If you have not created an LLC or a corporation, then your business income is added to your wage income to calculate your taxes. That is, if you made, say, $50,000 salary working for somebody else and $10,000 on your side business, then your total income is $60,000 and that's what you pay taxes on. The total amount you pay in income taxes will be the same regardless of whether 90% came from salary and 10% from the side business or the other way around. The rates are the same, it's just one total number. If the withholding on your regular paycheck is not enough to cover the total taxes that you will have to pay, then you are required by law to pay estimated taxes quarterly to make up the difference. If you don't, you will be required to pay penalties, so you don't want to skip on this. Basically you are supposed to be withholding from yourself and sending this in to the government. It's POSSIBLE that this won't be an issue. If you're used to getting a big refund, and the refund is more than what the tax on your side business will come to, then you might end up still getting a refund, just a smaller one. But you don't want to guess about this. Get the tax forms and figure out the numbers. I think -- and please don't rely on this, check on it -- that the law says that you don't pay a penalty if the total tax that was withheld from your paycheck plus the amount you paid in estimated payments is more than the tax you owed last year. So like lets say that this year -- just to make up some numbers -- your employer withheld $4,000 from your paychecks. At the end of the year you did your taxes and they came to $3,000, so you got a $1,000 refund. This year your employer again withholds $4,000 and you paid $0 in estimated payments. Your total tax on your salary plus your side business comes to $4,500. You owe $500, but you won't have to pay a penalty, because the $4,000 withheld is more than the $3,000 that you owed last year. But if next year you again don't make estimated payment, so you again have $4,000 withheld plus $0 estimated and then you owe $5,000 in taxes, you will have to pay a penalty, because your withholding was less than what you owed last year. To you had paid $500 in estimated payments, you'd be okay. You'd still owe $500, but you wouldn't owe a penalty, because your total payments were more than the previous year's liability. Clear as mud? Don't forget that you probably will also owe state income tax. If you have a local income tax, you'll owe that too. Scott-McP mentioned self-employment tax. You'll owe that, too. Note that self-employment tax is different from income tax. Self employment tax is just social security tax on self-employed people. You're probably used to seeing the 7-whatever-percent it is these days withheld from your paycheck. That's really only half your social security tax, the other half is not shown on your pay stub because it is not subtracted from your salary. If you're self-employed, you have to pay both halves, or about 15%. You file a form SE with your income taxes to declare it. 4: If you pay your quarterly estimated taxes, well the point of \"\"estimated\"\" taxes is that it's supposed to be close to the amount that you will actually owe next April 15. So if you get it at least close, then you shouldn't owe a lot of money in April. (I usually try to arrange my taxes so that I get a modest refund -- don't loan the government a lot of money, but don't owe anything April 15 either.) Once you take care of any business expenses and taxes, what you do with the rest of the money is up to you, right? Though if you're unsure of how to spend it, let me know and I'll send you the address of my kids' colleges and you can donate it to their tuition fund. I think this would be a very worthy and productive use of your money. :-) Back to #2. I just recently acquired a financial advisor. I can't say what a good process for finding one is. This guy is someone who goes to my church and who hijacked me after Bible study one day to make his sales pitch. But I did talk to him about his fees, and what he told me was this: If I have enough money in an investment account, then he gets a commission from the investment company for bringing the business to them, and that's the total compensation he gets from me. That commission comes out of the management fees they charge, and those management fees are in the same ballpark as the fees I was paying for private investment accounts, so basically he is not costing me anything. He's getting his money from the kickbacks. He said that if I had not had enough accumulated assets, he would have had to charge me an hourly fee. I didn't ask how much that was. Whew, hadn't meant to write such a long answer!\"" }, { "docid": "225511", "title": "", "text": "\"I know nothing about this stuff. Am I in trouble? You might be. If you don't file your return the IRS may \"\"make up\"\" one for you based on the (partial) information they have. Then they'll assess taxes and penalties and will go after you to pay those. Will I be hit with interest/penalties? You may if any money is owed. You may also lose the refund if you wait for too long (3 years after the due date). You may also be hit with the penalties for non-filing/late filing by your State. Not owing to IRS doesn't mean you also don't owe to the State - you can get hit with interest and late payment penalties there too. He has all my paperwork (I probably have copies... somewhere...) Should I go somewhere else and start fresh? He must return all the original paperwork you gave him. He can be disbarred if he doesn't. If you did 2013 yourself - what was significantly different in 2012 that you couldn't do yourself? If nothing - then just do it yourself and be done with it. You can buy 2012 preparation software at very deep discounts now. Otherwise - yes, go somewhere else. Busy season is over and it shouldn't be difficult to find another preparer/EA/CPA to do the work for you.\"" }, { "docid": "594652", "title": "", "text": "The only way you will incur underpayment penalties is if you withhold less than 90% of the current year's tax liability or 100% of last years tax liability (whichever is smaller). So as long as your total tax liability last year (not what you paid at filing, but what you paid for the whole year) was more than $1,234, you should not have any penalty. What you pay (or get back) when you file will be your total tax liability less what was withheld. For example, you had $1,234 withheld from your pay for taxes. If after deduction and other factors, your tax liability is $1,345, you will owe $111 when you file. On the other hand, if your tax liability is only $1,000, you'll get a refund of $234 when you file, since you've had more withheld that what you owe. Since your income was only for part of the year, and tax tables assume that you make that much for the whole year, I would suspect that you over-withheld during your internship, which would offset the lack of withholding on the other $6,000 in income." }, { "docid": "336272", "title": "", "text": "1) Document that you held the bitcoins for more than one year. This should not be particularly difficult. Since you haven't moved the bitcoins, you hold the key to an address that has held them for more than one year. While this isn't absolute proof, it should be sufficient. 2) Since you can't document how you bought them easily, you can just assume a tax basis of zero. This will mean you will pay microscopically more in taxes, but don't worry about it. 3) Sign up with an exchange that can handle your sales. Coinbase will work if you want to sell it slowly. Gemini will work if you want to sell more quickly. 4) Get a decent, secure bitcoin wallet. Transfer the bitcoins to the exchange only as you're selling them. Make you first sale fairly small just in case something goes wrong. 5) Keep meticulous notes about each sale -- the date of the sale, the number of bitcoins you sold, and the number of dollars you got. 6) Make sure to keep enough money for taxes. In Michigan, 24.3% would be the highest possible tax rate you might have to pay if you sold a lot or had high income otherwise. 7) Either get a professional to file your taxes for you or learn how to correctly report long-term capital gains. You must report each individual sale. You may get audited or investigated, but there's nothing to find. The bitcoins have been in stasis for a long time, and it's completely plausible that you bought them and held them. If you can find any proof you bought them (such as a transfer to an exchange) that would be great, but it's not essential. Many people have this same story and unless you're connected to something illegal, you probably don't have anything to worry about. Congratulations! So thats my question, what steps do I need to take to declare this money and obtain it without getting arrested / investigated? There's nothing special you need to do other than keep very good documentation. When you file your taxes, you will need to declare each sale. (This answer assumes that you didn't have a lot of income last year and significantly less income this year. If that's the case, you may have to pay estimated taxes to avoid a penalty. But that penalty is very small and will be calculated by the IRS for you automatically. So I wouldn't worry about it.) You may wish to read up on gift taxes to understand how they work. You won't owe any, but you may need to file paperwork with the IRS if you give large gifts (over $14,000) to people and you will use up some of your lifetime exemption. Keep records of any gifts you give." }, { "docid": "53496", "title": "", "text": "First, if you haven't seen it yet, check out the IRS Taxpayer Advocate Service's I Don't Have My Refund page. It discusses different things that can go wrong with receiving your refund and what to do about it. From your post, it sounds like you've tried all of the normal things to do, and you've tried calling in to the IRS. What you might not know is that there are local IRS offices that you can visit and talk to a real person face-to-face. Hopefully, you'll find someone helpful there who can either explain to you what is going on or put you in touch with someone who can help. To find your local IRS office, go to the Contact Your Local IRS Office page and click on the Office Locator button. Office visits are generally by appointment only, so you'll need to call the number for the office you want to visit and make an appointment. Alternatively, if you can't get anywhere with the IRS, you could contact the Taxpayer Advocate Service, which is an independent organization within the IRS that exists to help people with disputes with the IRS, and they have an office in every state. You could try contacting them and seeing if they can help you with your issue. To answer your question about this year's tax return: At least for the federal return, your refund from last year does not really affect this year's tax return. You should be able to file this year's return no matter what happens with last year's refund. That having been said, you should get the refund matter straightened out as soon as you can. Good luck." }, { "docid": "38046", "title": "", "text": "I think the issue would be that Wachovia/Wells Fargo who converted the Traditional IRA to a Roth IRA has told the IRS that you did the conversion, and so the IRS will want taxes on the money that came out of the Traditional IRA. You need to get Wells Fargo to issue a corrected 1099-R saying that it was a Roth to Roth roll-over, and possibly get a corrected 5498 for 2011 showing that the Wachovia Roth was converted to a Wells Fargo Roth. Else, the IRS might want an excise tax for a premature withdrawal from your Wachovia Roth, and assess penalties for excess contributions to a Traditional IRA in 2011 when the erroneous conversion was made, because to them it might look like you withdrew money from a Roth IRA, and made an excessive contribution to a Traditional IRA." }, { "docid": "101490", "title": "", "text": "I'm in a similar situation as I have a consulting business in addition to my regular IT job. I called the company who has my IRA to ask about setting up the Individual 401k and also mentioned that I contribute to my employer's 401k plan. The rep was glad I brought this up because he said the IRS has a limit on how much you can contribute to BOTH plans. For me it would be $24K max (myAge >= 50; If you are younger than 50, then the limit might be lower). He said the IRS penalties can be steep if you exceed the limit. I don't know if this is an issue for you, but it's something you need to consider. Be sure to ask your brokerage firm before you start the process." }, { "docid": "591495", "title": "", "text": "\"Your 401K (and IRA) is a legally distinct entity from yourself. In fact, it is a \"\"trust,\"\" and your Administrator is a \"\"trustee,\"\" while you are both creator and benefactor. This fact, and the 10% early withdrawal penalty, makes it immune from most judgments. The IRS can \"\"levy\"\" your 401K or IRA for back taxes, but must waive the 10% penalty (under the 1997 Tax Reform law). That gives them the power to do what most others can't. A \"\"tricky\"\" banker may persuade you to take money out of your 401K to pay the bank. If you do, s/he has won. But s/he can't go after your 401k.\"" }, { "docid": "261003", "title": "", "text": "ADP does not know your full tax situation and while the standard exemption system (actually designed by the IRS not ADP) works fairly well for most people it is an approximation. This system is designed so most people will end up with a small refund while some people will end up owing small amounts. So, while it is possible that ADP has messed up the calculations it is unlikely this is the cause. The most likely cause is that approximation ends ups making you pay less tax during the year than you actually owe. A few people like your friend may end up owing large amounts due to various circumstances. It is always your responsibility to make sure you pay enough tax throughout the year. While this technically means that you need to do your taxes every quarter during the year to make sure you pay the correct tax during the year, for most people this ends up being unnecessary as the approximation works fine. It is possible the exemption system failed your friend, but much more commonly people owe penalties because they put the wrong number of exemptions or had other side income. On a related note, most people in finance would argue that your situation where you owe some money at tax time, but not so much that you have to pay a penalty, is actually the best way to go. Getting a tax refund actually means you paid more tax than you needed to. This is similar to giving an interest-free loan to the government." }, { "docid": "487638", "title": "", "text": "\"Would I only have to pay regular taxes plus the excess contribution tax on any contributions? Yes, you'll pay regular taxes plus the excess contribution taxes on the contributions until you withdraw. So what would be your gain in doing this? The whole point in HSA is to use pre-tax money for medical expenses, and you're not only going to use post-tax money - you'll pay extra tax for doing that (6% for each year the contribution remains in the account). Are you trying to get the \"\"employer match\"\" in this way? Maybe just ask for a raise instead? Would this cause problems for my employer in any way? Not sure, but it might. Is it possible to simply receive funds in my HSA even though I am not eligible, and then transfer them to his HSA to avoid any penalties? No, HSA is a personal account. You can pay for dependents, but you can't move money between the accounts. You can roll over to your own account. See the IRS publication 969 for more details.\"" }, { "docid": "75568", "title": "", "text": "Here's the real reason OKPay (actually the banks they interface with) won't accept US Citizens. The Foreign Account Tax Compliance Act Congress passed the Foreign Account Tax Compliance Act (FATCA) in 2010 without much fanfare. One reason the act was so quiet was its four-year long ramp up; FATCA did not really take effect until 2014. Never before had a single national government attempted, and so far succeeded in, forcing compliance standards on banks across the world. FATCA requires any non-U.S. bank to report accounts held by American citizens worth over $50,000 or else be subject to 30% withholding penalties and possible exclusion from U.S. markets. By mid-2015, more than 100,000 foreign entities had agreed to share financial information with the IRS. Even Russia and China agreed to FATCA. The only major global economy to fight the Feds is Canada; however it was private citizens, not the Canadian government, who filed suit to block FATCA under the International Governmental Agreement clause making it illegal to turn over private bank account information. Read more: The Tax Implications of Opening a Foreign Bank Account | Investopedia http://www.investopedia.com/articles/personal-finance/102915/tax-implications-opening-foreign-bank-account.asp#ixzz4TzEck9Yo Follow us: Investopedia on Facebook" }, { "docid": "154839", "title": "", "text": "Conversion of after-tax 401K into a Roth is known (on Bogleheads for instance) as a Mega Backdoor Roth IRA. Recent tax rulings seem to allow for this kind of transfer more cleanly. After conversions, the money is treated as a normal Roth - you don't pay any taxes or penalties on contributions. For investment earnings, the Roth IRA has the standard five-year rule: most commonly - you must hold the account for five years and be 59.5 years old (there are other criteria). Otherwise, you may pay taxes plus a 10% penalty on the earnings portion of your distribution. There are other reasons you can withdraw early - spelled out in IRS Publication 590B Figure 2-1." }, { "docid": "150062", "title": "", "text": "The Indian lawyer areas are commercial and investment laws, corporate law and intellectual property laws. You can seek online legal dispute resolution without personally approaching any arbitrator or mediator. This is the most economical way of resolving disputes in minimum possible time." } ]

[ { "docid": "46737", "title": "", "text": "\"If you file the long-form Form 2210 in which you have to figure out exactly how much you should have had withheld (or paid via quarterly payments of estimated tax), you might be able to reduce the underpayment penalty somewhat, or possibly eliminate it entirely. This often happens because some of your income comes late in the year (e.g. dividend and capital gain distributions from stock mutual funds) and possibly because some of your itemized deductions come early (e.g. real estate tax bills due April 1, charitable deductions early in the year because of New Year resolutions to be more philanthropic) etc. It takes a fair amount of effort to gather up the information you need for this (money management programs help), and it is easy to make mistakes while filling out the form. I strongly recommend use of a \"\"deluxe\"\" or \"\"premier\"\" version of a tax program - basic versions might not include Form 2210 or have only the short version of it. I also seem to remember something to the effect that the long form 2210 must be filed with the tax return and cannot be filed as part of an amended return, and if so, the above advice would be applicable to future years only. But you might be able to fill out the form and appeal to the IRS that you owe a reduced penalty, or don't owe a penalty at all, and that your only mistake was not filing the long form 2210 with your tax return and so please can you be forgiven this once? In any case, I strongly recommend paying the underpayment penalty ASAP because it is increasing day by day due to interest being charged. If the IRS agrees to your eloquent appeal, they will refund the overpayment.\"" } ]

[ { "docid": "446190", "title": "", "text": "\"I assume you are filing US taxes because you are a US citizen, resident alien, or other \"\"US person\"\". If you have a total of $10,000 or more in assets in non-US accounts, you are required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts, also known as FBAR, to report those accounts. See Comparison of Form 8938 and FBAR Requirements. Note this refers to the total balance in the account (combined with any other accounts you may have); the amount you transferred this year is not relevant. Also note that the FBAR is filed separately from your income tax return (it does not go to the IRS), though if you have over $50,000 in offshore assets you may also have to file IRS Form 8938. Simply reporting those accounts does not necessarily mean you will owe extra taxes. Most US taxes are based on income, not assets. According to the page linked, the maximum penalty for a \"\"willful\"\" failure to report such accounts is a fine of $100,000 or 50% of the assets in question, whichever is greater, in addition to possible criminal sanctions. There may be other US filing requirements that I don't know about, so you may want to consult a tax professional. I do not know anything about your filing requirements under Indian law.\"" }, { "docid": "595121", "title": "", "text": "There are penalties for failure to file and penalties for failure to pay tax. The penalties for both are based on the amount of tax due. So you would owe % penalties of zero, otherwise meaning no penalties at all. The IRS on late 1040 penalties: Here are eight important points about penalties for filing or paying late. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time. If the IRS owes you a refund, April 15 isn't much of a deadline. I suppose the real deadline is April 15, three years later - that's when the IRS keeps your refund and it becomes property of the Treasury. Of course, there's little reason to wait that long. Don't let the Treasury get all your interest." }, { "docid": "168530", "title": "", "text": "\"I spent some time searching, and couldn't find the answer written explicitly in IRS regulations. What I did find was this chart from the irs showing that nonqualified distributions from a Roth 401k are pro-rated between contributions and earnings. It is well documented that you can't withdraw any money early or tax free (even contributions) from a Roth 401k (\"\"Designated Roth Account\"\" in IRS parlance) that has made any money. source You can do a direct rollover from a \"\"Designated Roth Account\"\" to a Roth IRA and the basis describing contributions vs. earnings is preserved. source And there is plenty of evidence showing you can withdraw contributions from a Roth IRA without penalty. source All that being said, I can't find anything from the IRS that says this is a legitimate strategy.\"" }, { "docid": "500562", "title": "", "text": "If you withdraw the money, regardless of how small the balance is, the IRS will still insist you pay a 10% penalty when you file your taxes (assuming you're under 59 1/2). Your 401K plan provider might have a policy that allows you to avoid the usual automatic withholding. You should check with them. $600 in additional income isn't likely to move your tax bill much, unless you're really close to a boundary in the tax brackets. Rather than withdrawing the money, you can transfer the 401K to your next 401K, or roll it over to an IRA (plenty of no-fee options around). Once in a traditional IRA, you can convert the money to a Roth IRA. You pay the taxes on the amount, but no 10% penalty. Converting to a Roth has eligibility rules. You should double check with your financial institution before doing it. Edit: You can withdraw without the 10% penalty if you leave your job after age 55 (credit to @JoeTaxpayer for the correction). This IRS Page lists the conditions under which the penalty can be avoided. Edit: The original question has been edited to add more background details. Due to OP's investment preferences, I would also recommend that he simply withdraw the funds, pay the taxes and the $60 penalty and put the $500 or so dollars somewhere else." }, { "docid": "449001", "title": "", "text": "There are too many nuances to the question asked to explore fully but here are a few points to keep in mind. If you are a cash-basis taxpayer (most individuals are), then you are not required to pay taxes on the money that has been billed but not received as yet. If you operate on an accrual basis, then the income accrues to you the day you perform the service and not on the day you bill the client. You can make four equal payments of estimated tax on the due dates, and if these (together with any income tax withholding from wage-paying jobs) are at least 90% of your tax liability for that year, then you owe no penalties for underpayment of tax regardless of how your income varied over the year. If your income does vary considerably over the year (even for people who only have wages but who invest in mutual funds, the income can vary quite a bit since mutual funds typically declare dividends and capital gains in December), then you can pay different amounts in each quarterly installment of estimated tax. This is called the annualization method (a part of Form 2210 that is best avoided unless you really need to use it). Your annualized income for the payment due on June 15 is 2.4 = 12/5 times your taxable income through May 31. Thus, on Form 2210, you are allowed to assume that your average monthly taxable income through May 31 will continue for the rest of the year. You then compute the tax due on that annualized income and you are supposed to have paid at least 45% of that amount by June 15. Similarly for September 15 for which you look at income through August 31, you use a multiplier of 1.5 = 12/8 and need to pay 67.5% of the tax on the annualized income, and so on. If you miscalculate these numbers and pay too little tax in any installment, then you owe penalties for that quarter. Most people find that guesstimating the tax due for the entire year and paying it in equal installments is simpler than keeping track of nuances of the annualized method. Even simpler is to pay 100% of last year's tax in four equal installments (110% for high earners) and then no penalty is due at all. If your business is really taking off and your income is going to be substantially higher in one year, then this 100%/110% of last year's tax deal could allow you to postpone a significant chunk of your tax bill till April 15." }, { "docid": "535207", "title": "", "text": "\"Did I do anything wrong by cashing a check made out to \"\"trustee of <401k plan> FBO \"\", and if so how can I fix it? I thought I was just getting a termination payout of the balance. Yes, you did. It was not made to you, and you were not supposed to even be able to cash it. Both you and your bank made a mistake - you made a mistake by depositing a check that doesn't belong to you, and the bank made a mistake by allowing you to deposit a check that is not made out to you to your personal account. How do I handle the taxes I owe on the payout, given that I had a tax-free 1099 two years ago and no 1099 now? It was not tax free two years ago. It would have been tax free if you would forward it to the entity to which the check was intended - since that would not be you. But you didn't do that. As such, there was no withdrawal two years ago, and I believe the 401k plan is wrong to claim otherwise. You did however take the money out in 2014, and it is fully taxable to you, including penalties. You should probably talk to a licensed tax adviser (EA/CPA licensed in your State). My personal (and unprofessional) opinion is that you didn't withdraw the money in 2012 since the check was not made out to you and the recipient never got it. You did withdraw money in 2014 since that's when you actually got the money (even if by mistake). As such, I'd report this withdrawal on the 2014 tax return. However, as I said, I'm not a professional and not licensed to provide tax advice, so this is my opinion only. I strongly suggest you talk to a licensed tax adviser to get a proper opinion and guidance on the matter. If it is determined that the withdrawal was indeed in 2012, then you'll have to amend the 2012 tax return, report the additional income and pay the additional tax (+interest and probably underpayment penalty).\"" }, { "docid": "300254", "title": "", "text": "I suggest you have a professional assist you with this audit, if the issue comes into questioning. It might be that it wouldn't. There are several different options to deal with such situation, and each can be attacked by the IRS. You'll need to figure out the following: Have you paid taxes on the reimbursement? Most likely you haven't, but if you had - it simplifies the issue for you. Is the program qualified under the employers' plan, and the only reason you're not qualified for reimbursement is that you decided to quit your job? If so, you might not be able to deduct it at all, because you can't take tax benefits on something you can be reimbursed for, but chose not to. IRS might claim that you quitting your job is choosing not to get reimbursement you would otherwise get. I couldn't find from my brief search any examples of what happened after such a decision. You can claim it was a loan, but I doubt the IRS will agree. The employer most likely reported it as an expense. If the IRS don't contest based on what I described in #2, and you haven't paid taxes on the reimbursement (#1), I'd say what you did was reasonable and should be accepted (assuming of course you otherwise qualify for all the benefits you're asking for). I would suggest getting a professional advice. Talk to a EA or a a CPA in your area. This answer was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer" }, { "docid": "126007", "title": "", "text": "&gt;According to the IRS, penalties and fines are only non-deductible when they are paid for actual violations of laws/regulations. That's not quite correct. Section 162(f) says [bolding is mine]: &gt;No deduction shall be allowed under subsection (a) for any fine or similar penalty **paid to a government** for the violation of any law. That means they can only claim a deduction on the portion of the fine that isn't paid to the US government. I'm doing a little research to see if I can find out what the dealy-o is." }, { "docid": "352136", "title": "", "text": "First of all, consult an accountant who is familiar with tax laws and online businesses. While most accountants know tax laws, fewer know how to handle online income like you describe although the number is growing. Right now, since you're a minor, this complicates things a bit. That's why you'll need a tax accountant to come up with the best business structure to use. You'll need to keep your own records to estimate your quarterly taxes. At the amount you're making, you'll want to do this since you'll pay a substantial penalty at the end of the year if you don't. You can use a small business accounting software package for this or just track everything using Excel or the like. As long as taxes are paid, you won't go to jail. But you need to pay them along with any penalties by April 15, 2013. If you don't do this, then the IRS will want to have a 'discussion' with you." }, { "docid": "175072", "title": "", "text": "\"If you are in the US, you legally must file taxes on any income whatsoever. How much you will pay in taxes, if any, will depend on your total taxable income. Now, for small transactions, the payments are often not reported to the IRS so some people do not file or pay. The threshold at which they payer is required to send a 1099 to the IRS is $600. Patreon considers each donation a separate transaction and therefore does not send a 1099 to the IRS unless you make more than $20,000 in a calendar year. If they do not report it, the IRS will not know about it unless they audit you or something. However, you are technically and legally responsible to report income whether the IRS knows about it or not. -------- EDIT ------- Note that the payer files a 1099, not the recipient. In order to report your patreon income you will either use schedule C or add it to the amount on 1040 line 21 (\"\"other income\"\") depending on whether you consider this a business or a hobby. If it's a business and it's a lot of money you should consider sending in quarterly payments using a 1040-ES in order to avoid a penalty for too little withholding.\"" }, { "docid": "123531", "title": "", "text": "To be fair, Inland Revenue has options here. They don't have to accept this transfer pricing scheme Starbucks has come up with to funnel their profits to, almost certainly, some overseas tax haven. I work with the Treasury team at a large British multinational pharma company in Japan. There are constant disputes between Inland Revenue and the IRS and the Japanese NTA and the British, Japanese and U.S. companies over what is an appropriate or inappropriate level of royalty for patents and trademarks owned by the three and licensed back and forth." }, { "docid": "154839", "title": "", "text": "Conversion of after-tax 401K into a Roth is known (on Bogleheads for instance) as a Mega Backdoor Roth IRA. Recent tax rulings seem to allow for this kind of transfer more cleanly. After conversions, the money is treated as a normal Roth - you don't pay any taxes or penalties on contributions. For investment earnings, the Roth IRA has the standard five-year rule: most commonly - you must hold the account for five years and be 59.5 years old (there are other criteria). Otherwise, you may pay taxes plus a 10% penalty on the earnings portion of your distribution. There are other reasons you can withdraw early - spelled out in IRS Publication 590B Figure 2-1." }, { "docid": "128451", "title": "", "text": "\"Yes you can do the withdraw if you turned 55 during the year you separated from service. http://www.401khelpcenter.com/401k_education/Early_Dist_Options.html#.VdMrqPlVhBc Leaving Your Job On or After Age 55 The age 59½ distribution rule says any 401k participant may begin to withdraw money from his or her plan after reaching the age of 59½ without having to pay a 10 percent early withdrawal penalty. There is an exception to that rule, however, which allows an employee who retires, quits or is fired at age 55 to withdraw without penalty from their 401k (the \"\"rule of 55\"\"). There are three key points early retirees need to know. First, this exception applies if you leave your job at any time during the calendar year in which you turn 55, or later, according to IRS Publication 575. Second, if you still have money in the plan of a former employer and assuming you weren't at least age 55 when you left that employer, you'll have to wait until age 59½ to start taking withdrawals without penalty. Better yet, get any old 401k's rolled into your current 401k before you retire from your current job so that you will have access to these funds penalty free. Third, this exception only applies to funds withdrawn from a 401k. IRAs operate until different rules, so if you retire and roll money into an IRA from your 401k before age 59½, you will lose this exception on those dollars.\"" }, { "docid": "576082", "title": "", "text": "Here's your problem: The debt is valid and it is your debt, regardless of your arrangement with the insurance company. The insurance company (possibly) owes you money, and you owe the Doctor money. You are stuck in the middle, and in the end it doesn't matter whether the insurance company pays as to whether you owe the money. Don't ignore them. Also, disputing the debt it pointless because the truth is that you do owe the debt. The insurance company may owe you money (which is in dispute), but the debt to your medical provider is your own. You are just stuck in the middle. It sucks, but is pretty common. I think the best you can do is keep working on the insurance company and responding to the bill collectors letting them know that you are working on it and will need to pay late. In theory they deal with this a lot and probably understand, not that it will make them lay off you in the meantime. In the end it is possible you might have to sue the insurance company to get the money. One thing to be careful about: If the debt is fairly old (several years) you may want to avoid making partial payments because if this goes on your credit report, that payment may extend the period where the negative information can appear on your credit history." }, { "docid": "87987", "title": "", "text": "\"The 2 months extension is automatic, you just need to tell them that you're using it by attaching a statement to the return, as Pete Becker mentioned in the comments. From the IRS pub 54: How to get the extension. To use this automatic 2-month extension, you must attach a statement to your return explaining which of the two situations listed earlier qualified you for the extension. The \"\"regular\"\" 6 months extension though is granted automatically, upon request, so if you cannot make it by June deadline you should file the form 4868 to request a further extension. Automatic 6-month extension. If you are not able to file your return by the due date, you generally can get an automatic 6-month extension of time to file (but not of time to pay). To get this automatic extension, you must file a paper Form 4868 or use IRS e-file (electronic filing). For more information about filing electronically, see E-file options , later. Keep in mind that the due date is still April 15th (18th this year), so the 6-month extension pushes it back to October. Previous 2-month extension. If you cannot file your return within the automatic 2-month extension period, you generally can get an additional 4 months to file your return, for a total of 6 months. The 2-month period and the 6-month period start at the same time. You have to request the additional 4 months by the new due date allowed by the 2-month extension. You can ask an additional 2 months extension (this is no longer automatic) to push it further to December. See the publication. These are extension to file, not to pay. With the form 4868 you're also expected to submit a payment that will cover your tax liability (at least in the ballpark). The interest is pretty low (less than 1% right now), but there's also a penalty which may be pretty substantial if you don't pay enough by the due date. See the IRS tax topic 301. There are \"\"safe harbor\"\" rules to avoid the penalty.\"" }, { "docid": "150062", "title": "", "text": "The Indian lawyer areas are commercial and investment laws, corporate law and intellectual property laws. You can seek online legal dispute resolution without personally approaching any arbitrator or mediator. This is the most economical way of resolving disputes in minimum possible time." }, { "docid": "489790", "title": "", "text": "\"There is no penalty for foreigners but rather a 30% mandatory income tax withholding from distributions from 401(k) plans. You will \"\"get it back\"\" when you file the income tax return for the year and calculate your actual tax liability (including any penalties for a premature distribution from the 401(k) plan). You are, of course, a US citizen and not a foreigner, and thus are what the IRS calls a US person (which includes not just US citizens but permanent immigrants to the US as well as some temporary visa holders), but it is entirely possible that your 401(k) plan does not know this explicitly. This IRS web page tells 401(k) plan administrators Who can I presume is a US person? A retirement plan distribution is presumed to be made to a U.S. person only if the withholding agent: A payment that does not meet these rules is presumed to be made to a foreign person. Your SSN is presumably on file with the 401(k) plan administrator, but perhaps you are retired into a country that does not have an income tax treaty with the US and that's the mailing address that is on file with your 401(k) plan administrator? If so, the 401(k) administrator is merely following the rules and not presuming that you are a US person. So, how can you get around this non-presumption? The IRS document cited above (and the links therein) say that if the 401(k) plan has on file a W-9 form that you submitted to them, and the W-9 form includes your SSN, then the 401(k) plan has valid documentation to associate the distribution as being made to a US person, that is, the 401(k) plan does not need to make any presumptions; that you are a US person has been proved beyond reasonable doubt. So, to answer your question \"\"Will I be penalized when I later start a regular monthly withdrawal from my 401(k)?\"\" Yes, you will likely have mandatory 30% income tax withholding on your regular 401(k) distributions unless you have established that you are a US person to your 401(k) plan by submitting a W-9 form to them.\"" }, { "docid": "499864", "title": "", "text": "\"I have a related issue, since I have some income which is large enough to matter and hard to predict. Start with a best guess. Check what tax bracket you were in last year and withhold that percentage of the expected non-withheld income. Adjust upward a bit, if desired, to reflect the fact that you're getting paid more at the new job. Adjust again, either up or down, to reflect whether you were over-withheld or under-withheld last year (whether the IRS owed you a refund or you had to send a check with your return). Repeat that process next year after next tax season, when you see how well your guess worked out. (You could try pre-calculating the entire tax return based on your expected income and then divide any underpayment into per-paycheck additional withholding... but I don't think it's worth the effort.) I don't worry about trying to get this exactly correct. I don't stress about lost interest if I've over-withheld a bit, and as long as your withholding was reasonably close and you have the cash float available to send them a check for the rest when it comes due, the IRS generally doesn't grumble if your withholding was a bit low. (It would be really nice if the IRS paid us interest on over-withholding, to mirror the fact that they charge us interest if we're late in returning our forms. Oh well.) Despite all the stories, the IRS really is fairly reasonable; if you aren't deliberately trying to get away with something, the process is annoying but shouldn't be scary. The one time they mail-audited me, it was several thousand dollars in my favor; I'd forgotten to claim some investment losses, and their computers noticed the error. Though I still say the motto of the next revolution will be \"\"No taxation without proper instructions!\"\"\"" }, { "docid": "15448", "title": "", "text": "When you take any money out of an HSA, you'll get a 1099-SA. HSAs work a little differently than a 401(k). With a 401(k), you aren't supposed to take any money out until retirement. HSAs, however, are spending accounts. I take money out of my HSA every year. As long as you spend the money you take out of your HSA on qualified medical expenses, there are no taxes or penalties due. The bank that holds your HSA doesn't know or care what you spend the money on; they will certainly allow you to empty your HSA account. Anything you take out will be reported to the IRS (and to you) on a 1099-SA. At tax time, along with your tax return, you send in a form 8889, on which you report to the IRS what you took out of HSA, and you also certify how much of that money was spent on medical expenses. If any of it was spent on something else, taxes and penalties are due." } ]

[ { "docid": "314455", "title": "", "text": "didn't pay the extra underpayment penalty on the grounds that it was an honest mistake. You seem to think a penalty applies only when the IRS thinks you were trying to cheat the system. That's not the case. A mistake (honest or otherwise) still can imply a penalty. While you can appeal just about anything, on any grounds you like, it's unlikely you will prevail." } ]

[ { "docid": "350692", "title": "", "text": "Yes, I think you will be able to withdraw from your 401(k) without penalty. Normally, you need to be age 59½ before you can withdraw without incurring a 10% penalty. However, an exception to this rule is described in an IRS 401(k) Resource Guide: Exceptions. The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances: What this means is that if you leave the company that you have the 401(k) with in the calendar year that you turn 55 (or later), you can take early distributions from the 401(k) without penalty. This year is the year that you turn 55, so it appears that you are eligible for early distributions under this rule." }, { "docid": "87987", "title": "", "text": "\"The 2 months extension is automatic, you just need to tell them that you're using it by attaching a statement to the return, as Pete Becker mentioned in the comments. From the IRS pub 54: How to get the extension. To use this automatic 2-month extension, you must attach a statement to your return explaining which of the two situations listed earlier qualified you for the extension. The \"\"regular\"\" 6 months extension though is granted automatically, upon request, so if you cannot make it by June deadline you should file the form 4868 to request a further extension. Automatic 6-month extension. If you are not able to file your return by the due date, you generally can get an automatic 6-month extension of time to file (but not of time to pay). To get this automatic extension, you must file a paper Form 4868 or use IRS e-file (electronic filing). For more information about filing electronically, see E-file options , later. Keep in mind that the due date is still April 15th (18th this year), so the 6-month extension pushes it back to October. Previous 2-month extension. If you cannot file your return within the automatic 2-month extension period, you generally can get an additional 4 months to file your return, for a total of 6 months. The 2-month period and the 6-month period start at the same time. You have to request the additional 4 months by the new due date allowed by the 2-month extension. You can ask an additional 2 months extension (this is no longer automatic) to push it further to December. See the publication. These are extension to file, not to pay. With the form 4868 you're also expected to submit a payment that will cover your tax liability (at least in the ballpark). The interest is pretty low (less than 1% right now), but there's also a penalty which may be pretty substantial if you don't pay enough by the due date. See the IRS tax topic 301. There are \"\"safe harbor\"\" rules to avoid the penalty.\"" }, { "docid": "175072", "title": "", "text": "\"If you are in the US, you legally must file taxes on any income whatsoever. How much you will pay in taxes, if any, will depend on your total taxable income. Now, for small transactions, the payments are often not reported to the IRS so some people do not file or pay. The threshold at which they payer is required to send a 1099 to the IRS is $600. Patreon considers each donation a separate transaction and therefore does not send a 1099 to the IRS unless you make more than $20,000 in a calendar year. If they do not report it, the IRS will not know about it unless they audit you or something. However, you are technically and legally responsible to report income whether the IRS knows about it or not. -------- EDIT ------- Note that the payer files a 1099, not the recipient. In order to report your patreon income you will either use schedule C or add it to the amount on 1040 line 21 (\"\"other income\"\") depending on whether you consider this a business or a hobby. If it's a business and it's a lot of money you should consider sending in quarterly payments using a 1040-ES in order to avoid a penalty for too little withholding.\"" }, { "docid": "413694", "title": "", "text": "\"The \"\"hire a pro\"\" is quite correct, if you are truly making this kind of money. That said, I believe in a certain amount of self-education so you don't follow a pro's advice blindly. First, I wrote an article that discussed Marginal Tax Rates, and it's worth understanding. It simply means that as your income rises past certain thresholds, the tax rate also will change a bit. You are on track to be in the top rate, 33%. Next, Solo 401(k). You didn't ask about retirement accounts, but the combined situations of making this sum of money and just setting it aside, leads me to suggest this. Since you are both employer and employee, the Solo 401(k) limit is a combined $66,500. Seems like a lot, but if you are really on track to make $500K this year, that's just over 10% saved. Then, whatever the pro recommends for your status, you'll still have some kind of Social Security obligation, as both employer and employee, so that's another 15% or so for the first $110K. Last, some of the answers seemed to imply that you'll settle in April. Not quite. You are required to pay your tax through the year and if you wait until April to pay the tax along with your return, you will have a very unpleasant tax bill. (I mean it will have penalties for underpayment through the year.) This is to be avoided. I offer this because often a pro will have a specialty and not go outside that focus. It's possible to find the guy that knows everything about setting you up as an LLC or Sole Proprietorship, yet doesn't have the 401(k) conversation. Good luck, please let us know here how the Pro discussion goes for you.\"" }, { "docid": "568165", "title": "", "text": "\"I'm mostly guessing based on existing documentation, and have no direct experience, so take this with a pinch of salt. My best understanding is that you need to file Form 843. The instructions for the form say that it can be used to request: A refund or abatement of a penalty or addition to tax due to reasonable cause or other reason (other than erroneous written advice provided by the IRS) allowed under the law. The \"\"reasonable cause\"\" here is a good-faith confusion about what Line 79 of the form was referring to. In Form 843, the IRC Section Code you should enter is 6654 (estimated tax). For more, see the IRC Section 6654 (note, however, that if you already received a CP14 notice from the IRS, you should cross-check that this section code is listed on the notice under the part that covers the estimated tax penalty). If your request is accepted, the IRS should issue you Notice 746, item 17 Penalty Removed: You can get more general information about the tax collection process, and how to challenge it, from the pages linked from Understanding your CP14 Notice\"" }, { "docid": "446190", "title": "", "text": "\"I assume you are filing US taxes because you are a US citizen, resident alien, or other \"\"US person\"\". If you have a total of $10,000 or more in assets in non-US accounts, you are required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts, also known as FBAR, to report those accounts. See Comparison of Form 8938 and FBAR Requirements. Note this refers to the total balance in the account (combined with any other accounts you may have); the amount you transferred this year is not relevant. Also note that the FBAR is filed separately from your income tax return (it does not go to the IRS), though if you have over $50,000 in offshore assets you may also have to file IRS Form 8938. Simply reporting those accounts does not necessarily mean you will owe extra taxes. Most US taxes are based on income, not assets. According to the page linked, the maximum penalty for a \"\"willful\"\" failure to report such accounts is a fine of $100,000 or 50% of the assets in question, whichever is greater, in addition to possible criminal sanctions. There may be other US filing requirements that I don't know about, so you may want to consult a tax professional. I do not know anything about your filing requirements under Indian law.\"" }, { "docid": "142623", "title": "", "text": "\"You need to hire a tax professional and have them sort it out for you properly and advise you on how to proceed next. Don't do it yourself, you're way past the stage when you could. You're out of compliance, and you're right - there are penalties that a professional might know how to mitigate, and maybe even negotiate a waiver with the IRS, depending on the circumstances of the case. Be careful of answers like \"\"you don't need to pay anything\"\" that are based on nothing of facts. Based on what you said in the question and in the comments, it actually sounds like you do have to pay something, and you're in trouble with the IRS already. It might be that you misunderstood something in the past (e.g.: you said the business had filed taxes before, but in fact that might never happened and you're confusing \"\"business filed taxes\"\" with \"\"I filed schedule C\"\") or it might be the actual factual representation of things (you did in fact filed a tax return for your business with the IRS, either form 1120 of some kind or 1065). In any case a good licensed (CPA or EA) professional will help you sort it out and educate you on what you need to do in the future.\"" }, { "docid": "292811", "title": "", "text": "\"You don't actually have to make four equal payments on US federal taxes; you can pay different amounts each quarter. To avoid penalties, you must have paid \"\"enough\"\" at the end of each quarter. If you pay too much in an early quarter, the surplus counts towards the amount due in later quarters. If you have paid too little as of the end of a quarter, that deficit counts against you for interest and penalties until it is made up in later quarters (or at year-end settlement). How much is \"\"enough\"\"? There are a number of ways of figuring it. You can see the list of exceptions to the penalty in the IRS documentation. Using unequal payments may require more complicated calculation methods to avoid or reduce penalties at year-end. If you have the stomach for it, you may want to study the Annualized Income Installment Method to see how uneven income might affect the penalty.\"" }, { "docid": "536849", "title": "", "text": "\"I've done various side work over the years -- computer consulting, writing, and I briefly had a video game company -- so I've gone through most of this. Disclaimer: I have never been audited, which may mean that everything I put on my tax forms looked plausible to the IRS and so is probably at least generally right, but it also means that the IRS has never put their stamp of approval on my tax forms. So that said ... 1: You do not need to form an LLC to be able to claim business expenses. Whether you have any expenses or not, you will have to complete a schedule C. On this form are places for expenses in various categories. Note that the categories are the most common type of expenses, there's an \"\"other\"\" space if you have something different. If you have any property that is used both for the business and also for personal use, you must calculate a business use percentage. For example if you bought a new printer and 60% of the time you use it for the business and 40% of the time you use it for personal stuff, then 60% of the cost is tax deductible. In general the IRS expects you to calculate the percentage based on amount of time used for business versus personal, though you are allowed to use other allocation formulas. Like for a printer I think you'd get away with number of pages printed for each. But if the business use is not 100%, you must keep records to justify the percentage. You can't just say, \"\"Oh, I think business use must have been about 3/4 of the time.\"\" You have to have a log where you write down every time you use it and whether it was business or personal. Also, the IRS is very suspicious of business use of cars and computers, because these are things that are readily used for personal purposes. If you own a copper mine and you buy a mine-boring machine, odds are you aren't going to take that home to dig shafts in your backyard. But a computer can easily be used to play video games or send emails to friends and relatives and lots of things that have nothing to do with a business. So if you're going to claim a computer or a car, be prepared to justify it. You can claim office use of your home if you have one or more rooms or designated parts of a room that are used \"\"regularly and exclusively\"\" for business purposes. That is, if you turn the family room into an office, you can claim home office expenses. But if, like me, you sit on the couch to work but at other times you sit on the couch to watch TV, then the space is not used \"\"exclusively\"\" for business purposes. Also, the IRS is very suspicious of home office deductions. I've never tried to claim it. It's legal, just make sure you have all your ducks in a row if you claim it. Skip 2 for the moment. 3: Yes, you must pay taxes on your business income. If you have not created an LLC or a corporation, then your business income is added to your wage income to calculate your taxes. That is, if you made, say, $50,000 salary working for somebody else and $10,000 on your side business, then your total income is $60,000 and that's what you pay taxes on. The total amount you pay in income taxes will be the same regardless of whether 90% came from salary and 10% from the side business or the other way around. The rates are the same, it's just one total number. If the withholding on your regular paycheck is not enough to cover the total taxes that you will have to pay, then you are required by law to pay estimated taxes quarterly to make up the difference. If you don't, you will be required to pay penalties, so you don't want to skip on this. Basically you are supposed to be withholding from yourself and sending this in to the government. It's POSSIBLE that this won't be an issue. If you're used to getting a big refund, and the refund is more than what the tax on your side business will come to, then you might end up still getting a refund, just a smaller one. But you don't want to guess about this. Get the tax forms and figure out the numbers. I think -- and please don't rely on this, check on it -- that the law says that you don't pay a penalty if the total tax that was withheld from your paycheck plus the amount you paid in estimated payments is more than the tax you owed last year. So like lets say that this year -- just to make up some numbers -- your employer withheld $4,000 from your paychecks. At the end of the year you did your taxes and they came to $3,000, so you got a $1,000 refund. This year your employer again withholds $4,000 and you paid $0 in estimated payments. Your total tax on your salary plus your side business comes to $4,500. You owe $500, but you won't have to pay a penalty, because the $4,000 withheld is more than the $3,000 that you owed last year. But if next year you again don't make estimated payment, so you again have $4,000 withheld plus $0 estimated and then you owe $5,000 in taxes, you will have to pay a penalty, because your withholding was less than what you owed last year. To you had paid $500 in estimated payments, you'd be okay. You'd still owe $500, but you wouldn't owe a penalty, because your total payments were more than the previous year's liability. Clear as mud? Don't forget that you probably will also owe state income tax. If you have a local income tax, you'll owe that too. Scott-McP mentioned self-employment tax. You'll owe that, too. Note that self-employment tax is different from income tax. Self employment tax is just social security tax on self-employed people. You're probably used to seeing the 7-whatever-percent it is these days withheld from your paycheck. That's really only half your social security tax, the other half is not shown on your pay stub because it is not subtracted from your salary. If you're self-employed, you have to pay both halves, or about 15%. You file a form SE with your income taxes to declare it. 4: If you pay your quarterly estimated taxes, well the point of \"\"estimated\"\" taxes is that it's supposed to be close to the amount that you will actually owe next April 15. So if you get it at least close, then you shouldn't owe a lot of money in April. (I usually try to arrange my taxes so that I get a modest refund -- don't loan the government a lot of money, but don't owe anything April 15 either.) Once you take care of any business expenses and taxes, what you do with the rest of the money is up to you, right? Though if you're unsure of how to spend it, let me know and I'll send you the address of my kids' colleges and you can donate it to their tuition fund. I think this would be a very worthy and productive use of your money. :-) Back to #2. I just recently acquired a financial advisor. I can't say what a good process for finding one is. This guy is someone who goes to my church and who hijacked me after Bible study one day to make his sales pitch. But I did talk to him about his fees, and what he told me was this: If I have enough money in an investment account, then he gets a commission from the investment company for bringing the business to them, and that's the total compensation he gets from me. That commission comes out of the management fees they charge, and those management fees are in the same ballpark as the fees I was paying for private investment accounts, so basically he is not costing me anything. He's getting his money from the kickbacks. He said that if I had not had enough accumulated assets, he would have had to charge me an hourly fee. I didn't ask how much that was. Whew, hadn't meant to write such a long answer!\"" }, { "docid": "388713", "title": "", "text": "As a new (very!) small business, the IRS has lots of advice and information for you. Start at https://www.irs.gov/businesses/small-businesses-self-employed and be sure you have several pots of coffee or other appropriate aid against somnolence. By default a single-member LLC is 'disregarded' for tax purposes (at least for Federal, and generally states follow Federal although I don't know Mass. specifically), although it does have other effects. If you go this route you simply include the business income and expenses on Schedule C as part of your individual return on 1040, and the net SE income is included along with your other income (if any) in computing your tax. TurboTax or similar software should handle this for you, although you may need a premium version that costs a little more. You can 'elect' to have the LLC taxed as a corporation by filing form 8832, see https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc . In principle you are supposed to do this when the entity is 'formed', but in practice AIUI if you do it by the end of the year they won't care at all, and if you do it after the end of the year but before or with your first affected return you qualify for automatic 'relief'. However, deciding how to divide the business income/profits into 'reasonable pay' to yourself versus 'dividends' is more complicated, and filling out corporation tax returns in addition to your individual return (which is still required) is more work, in addition to the work and cost of filing and reporting the LLC itself to your state of choice. Unless/until you make something like $50k-100k a year this probably isn't worth it. 1099 Reporting. Stripe qualifies as a 'payment network' and under a recent law payment networks must annually report to IRS (and copy to you) on form 1099-K if your account exceeds certain thresholds; see https://support.stripe.com/questions/will-i-receive-a-1099-k-and-what-do-i-do-with-it . Note you are still legally required to report and pay tax on your SE income even if you aren't covered by 1099-K (or other) reporting. Self-employment tax. As a self-employed person (if the LLC is disregarded) you have to pay 'SE' tax that is effectively equivalent to the 'FICA' taxes that would be paid by your employer and you as an employee combined. This is 12.4% for Social Security unless/until your total earned income exceeds a cap (for 2017 $127,200, adjusted yearly for inflation), and 2.9% for Medicare with no limit (plus 'Additional Medicare' tax if you exceed a higher threshold and it isn't 'repealed and replaced'). If the LLC elects corporation status it has to pay you reasonable wages for your services, and withhold+pay FICA on those wages like any other employer. Estimated payments. You are required to pay most of your individual income tax, and SE tax if applicable, during the year (generally 90% of your tax or your tax minus $1,000 whichever is less). Most wage-earners don't notice this because it happens automatically through payroll withholding, but as self-employed you are responsible for making sufficient and timely estimated payments, and will owe a penalty if you don't. However, since this is your first year you may have a 'safe harbor'; if you also have income from an employer (reported on W-2, with withholding) and that withholding is sufficent to pay last year's tax, then you are exempt from the 'underpayment' penalty for this year. If you elect corporation status then the corporation (which is really just you) must always make timely payments of withheld amounts, according to one of several different schedules that may apply depending on the amounts; I believe it also must make estimated payments for its own liability, if any, but I'm not familiar with that part." }, { "docid": "568324", "title": "", "text": "Because the question puts moral obligations aside, I'll answer from the practical point of view. There are two reasons for declaring side income, even cash income. If you buy a house in a year or two, the additional income will help qualify you for a mortgage. The IRS has ways to discover that you earned the money. a. A client might be audited. If the client deducts the cost of your services from their income, they could be asked for proof that they paid you. Suppose they saved ATM receipts that show the withdrawals of cash used to pay you, and kept records that document the dates they paid you. The IRS might want to ask you if you were paid by the client on those dates, and how much. The asking might be in the form of an audit, and you'd have to lie to the IRS to avoid penalty. b. A client might develop a grudge against you and report you to the IRS. Someone could do this even if they don't know for sure that you don't declare the income. If you were interviewed or audited, you'd have to lie to the IRS to avoid penalty. c. You could fall prey to an algorithm. There might be one that compares deductions and income. If you run a crazy-high ratio year after year, you could be flagged for audit. Once again, you'd have to lie to avoid penalty." }, { "docid": "237331", "title": "", "text": "If you're under audit - you should get a proper representation. I.e.: EA or CPA licensed in California and experienced with the FTB audit representation. There's a penalty on failure to file form 1099, but it is with the IRS, not the FTB. If I remember correctly, it's something like $50 or $100 per instance. Technically they can disqualify deductions claiming you paid under the table and no taxes were paid on the other side, however I doubt they'd do it in a case of simple omission of filing 1099 forms. Check with your licensed tax adviser. Keep in mind that for the IRS 2011 is now closed, since the 3-year statute of limitations has passed. For California the statute is 4 years, and you're almost at the end of it. However since you're already under audit they may ask you to agree to extend it." }, { "docid": "591495", "title": "", "text": "\"Your 401K (and IRA) is a legally distinct entity from yourself. In fact, it is a \"\"trust,\"\" and your Administrator is a \"\"trustee,\"\" while you are both creator and benefactor. This fact, and the 10% early withdrawal penalty, makes it immune from most judgments. The IRS can \"\"levy\"\" your 401K or IRA for back taxes, but must waive the 10% penalty (under the 1997 Tax Reform law). That gives them the power to do what most others can't. A \"\"tricky\"\" banker may persuade you to take money out of your 401K to pay the bank. If you do, s/he has won. But s/he can't go after your 401k.\"" }, { "docid": "583321", "title": "", "text": "\"You should dispute the transaction with the credit card. Describe the story and attach the cash payment receipt, and dispute it as a duplicate charge. There will be no impact on your score, but if you don't have the cash receipt or any other proof of the alternative payment - it's your word against the merchant, and he has proof that you actually used your card there. So worst case - you just paid twice. If you dispute the charge and it is accepted - the merchant will pay a penalty. If it is not accepted - you may pay the penalty (on top of the original charge, depending on your credit card issuer - some charge for \"\"frivolous\"\" charge backs). It will take several more years for either the European merchants to learn how to deal with the US half-baked chip cards, or the American banks to start issue proper chip-and-PIN card as everywhere else. Either way, until then - if the merchant doesn't know how to handle signatures with the American credit cards - just don't use them. Pay cash. Given the controversy in the comments - my intention was not to say \"\"no, don't talk to the merchant\"\". From the description of the situation it didn't strike me as the merchant would even bother to consider the situation. A less than honest merchant knows that you have no leverage, and since you're a tourist and will probably not be returning there anyway - what's the worst you can do to them? A bad yelp review? You can definitely get in touch with the merchant and ask for a refund, but I would not expect much to come out from that.\"" }, { "docid": "183688", "title": "", "text": "I just want to point out something that seems to be generally true: If you are supposed to report something to the IRS, and you don't, the IRS will probably send you a letter assuming the maximum possible tax liability, and it's up to you to prove that scenario is incorrect. In your case you obviously owe no tax, but since you didn't report it, the IRS simply assumed that you do owe tax until you prove otherwise. You're one form away from fixing the issue. I have first hand experience that this is also true if you forget to report an HSA distribution. I received a letter considering my entire distribution as if it was for non eligible medical expenses. This made the amount taxable and had an additional 20% penalty to boot. Of course I have medical receipts for all of the distributions which makes them not taxable, and had I simply put the correct number on my return to begin with I wouldn't have had to fill out the additional form to correct my mistake." }, { "docid": "150062", "title": "", "text": "The Indian lawyer areas are commercial and investment laws, corporate law and intellectual property laws. You can seek online legal dispute resolution without personally approaching any arbitrator or mediator. This is the most economical way of resolving disputes in minimum possible time." }, { "docid": "261003", "title": "", "text": "ADP does not know your full tax situation and while the standard exemption system (actually designed by the IRS not ADP) works fairly well for most people it is an approximation. This system is designed so most people will end up with a small refund while some people will end up owing small amounts. So, while it is possible that ADP has messed up the calculations it is unlikely this is the cause. The most likely cause is that approximation ends ups making you pay less tax during the year than you actually owe. A few people like your friend may end up owing large amounts due to various circumstances. It is always your responsibility to make sure you pay enough tax throughout the year. While this technically means that you need to do your taxes every quarter during the year to make sure you pay the correct tax during the year, for most people this ends up being unnecessary as the approximation works fine. It is possible the exemption system failed your friend, but much more commonly people owe penalties because they put the wrong number of exemptions or had other side income. On a related note, most people in finance would argue that your situation where you owe some money at tax time, but not so much that you have to pay a penalty, is actually the best way to go. Getting a tax refund actually means you paid more tax than you needed to. This is similar to giving an interest-free loan to the government." }, { "docid": "595121", "title": "", "text": "There are penalties for failure to file and penalties for failure to pay tax. The penalties for both are based on the amount of tax due. So you would owe % penalties of zero, otherwise meaning no penalties at all. The IRS on late 1040 penalties: Here are eight important points about penalties for filing or paying late. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time. If the IRS owes you a refund, April 15 isn't much of a deadline. I suppose the real deadline is April 15, three years later - that's when the IRS keeps your refund and it becomes property of the Treasury. Of course, there's little reason to wait that long. Don't let the Treasury get all your interest." }, { "docid": "555406", "title": "", "text": "\"There's no such thing as \"\"leniency\"\" when enforcing the law. Not knowing the law, as you have probably heard, is not a valid legal defence. Tax law is a law like any other. That said, some penalties and fines can be abated if the error was done in good faith and due to a reasonable cause. First time penalties can be abated in many cases assuming you're compliant otherwise (for example - first time late filing penalty can be abated if you're compliant in the last 5 years. Not many people know about that.). Examples for a reasonable cause (from the IRS IRM 20.1.1): Reliance on the advice of a tax advisor generally relates to the reasonable cause exception in IRC 6664(c) for the accuracy-related penalty under IRC 6662. See IRM 20.1.5, Return Related Penalties, and If the taxpayer does not meet the criteria for penalty relief under IRC 6404(f), the taxpayer may qualify for other penalty relief. For instance, taxpayers who fail to meet all of the IRC 6404(f) criteria may still qualify for relief under reasonable cause if the IRS determines that the taxpayer exercised ordinary business care and prudence in relying on the IRS’s written advice. IRM 20.1.1.3.2.2.5 - Erroneous Advice or Reliance. Treas. Reg. 1.6664–4(c). There are more. IRM is the \"\"Internal Revenue Manual\"\" - the book of policies for the IRS agents. Of course, you should seek a professional advice when you're non-compliant and want to ask for abatement and become compliant again. Talk to a CPA/EA licensed in your state.\"" } ]

[ { "docid": "342756", "title": "", "text": "\"The underpayment \"\"penalty\"\" is just interest on the late payments--willful or not has nothing to do with it. When they feel it's willful there will be additional penalties.\"" } ]

[ { "docid": "11454", "title": "", "text": "\"Assuming U.S. law, there are \"\"safe harbor\"\" provisions for exactly this kind of situation. There are several possibilities, but the most likely one is that if your withholding and estimated tax payments for 2016 totaled at least as much as your tax bill for 2015 there's no penalty. For the full rules, see IRS Publication 17.\"" }, { "docid": "535207", "title": "", "text": "\"Did I do anything wrong by cashing a check made out to \"\"trustee of <401k plan> FBO \"\", and if so how can I fix it? I thought I was just getting a termination payout of the balance. Yes, you did. It was not made to you, and you were not supposed to even be able to cash it. Both you and your bank made a mistake - you made a mistake by depositing a check that doesn't belong to you, and the bank made a mistake by allowing you to deposit a check that is not made out to you to your personal account. How do I handle the taxes I owe on the payout, given that I had a tax-free 1099 two years ago and no 1099 now? It was not tax free two years ago. It would have been tax free if you would forward it to the entity to which the check was intended - since that would not be you. But you didn't do that. As such, there was no withdrawal two years ago, and I believe the 401k plan is wrong to claim otherwise. You did however take the money out in 2014, and it is fully taxable to you, including penalties. You should probably talk to a licensed tax adviser (EA/CPA licensed in your State). My personal (and unprofessional) opinion is that you didn't withdraw the money in 2012 since the check was not made out to you and the recipient never got it. You did withdraw money in 2014 since that's when you actually got the money (even if by mistake). As such, I'd report this withdrawal on the 2014 tax return. However, as I said, I'm not a professional and not licensed to provide tax advice, so this is my opinion only. I strongly suggest you talk to a licensed tax adviser to get a proper opinion and guidance on the matter. If it is determined that the withdrawal was indeed in 2012, then you'll have to amend the 2012 tax return, report the additional income and pay the additional tax (+interest and probably underpayment penalty).\"" }, { "docid": "128451", "title": "", "text": "\"Yes you can do the withdraw if you turned 55 during the year you separated from service. http://www.401khelpcenter.com/401k_education/Early_Dist_Options.html#.VdMrqPlVhBc Leaving Your Job On or After Age 55 The age 59½ distribution rule says any 401k participant may begin to withdraw money from his or her plan after reaching the age of 59½ without having to pay a 10 percent early withdrawal penalty. There is an exception to that rule, however, which allows an employee who retires, quits or is fired at age 55 to withdraw without penalty from their 401k (the \"\"rule of 55\"\"). There are three key points early retirees need to know. First, this exception applies if you leave your job at any time during the calendar year in which you turn 55, or later, according to IRS Publication 575. Second, if you still have money in the plan of a former employer and assuming you weren't at least age 55 when you left that employer, you'll have to wait until age 59½ to start taking withdrawals without penalty. Better yet, get any old 401k's rolled into your current 401k before you retire from your current job so that you will have access to these funds penalty free. Third, this exception only applies to funds withdrawn from a 401k. IRAs operate until different rules, so if you retire and roll money into an IRA from your 401k before age 59½, you will lose this exception on those dollars.\"" }, { "docid": "595121", "title": "", "text": "There are penalties for failure to file and penalties for failure to pay tax. The penalties for both are based on the amount of tax due. So you would owe % penalties of zero, otherwise meaning no penalties at all. The IRS on late 1040 penalties: Here are eight important points about penalties for filing or paying late. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time. If the IRS owes you a refund, April 15 isn't much of a deadline. I suppose the real deadline is April 15, three years later - that's when the IRS keeps your refund and it becomes property of the Treasury. Of course, there's little reason to wait that long. Don't let the Treasury get all your interest." }, { "docid": "292811", "title": "", "text": "\"You don't actually have to make four equal payments on US federal taxes; you can pay different amounts each quarter. To avoid penalties, you must have paid \"\"enough\"\" at the end of each quarter. If you pay too much in an early quarter, the surplus counts towards the amount due in later quarters. If you have paid too little as of the end of a quarter, that deficit counts against you for interest and penalties until it is made up in later quarters (or at year-end settlement). How much is \"\"enough\"\"? There are a number of ways of figuring it. You can see the list of exceptions to the penalty in the IRS documentation. Using unequal payments may require more complicated calculation methods to avoid or reduce penalties at year-end. If you have the stomach for it, you may want to study the Annualized Income Installment Method to see how uneven income might affect the penalty.\"" }, { "docid": "291460", "title": "", "text": "I went through this too. There's a safe-harbor provision. If you prepay as estimated tax payments, 110% of your previous year's tax liability, there's no penalty for underpayment of the big liquidity-event tax liability. https://www.irs.gov/publications/p17/ch04.html That's with the feds. Your state may have different rules. You would be very wise indeed to hire an accountant to prepare your return this year. If I were you I'd ask your company's CFO or finance chief to suggest somebody. Congratulations, by the way." }, { "docid": "507077", "title": "", "text": "\"If you don't withhold enough you'll pay penalties. The best would be to withhold just enough not to have any additional liabilities or refunds at the end of the year. IRS gives you some space to play in case you miscalculate and withhold a little bit less (they'll \"\"look the other way\"\" if you end up withholding up to as low as 90% of your tax liability). Anything below that triggers penalties, interests and fees. IRS pub 505 for details.\"" }, { "docid": "183688", "title": "", "text": "I just want to point out something that seems to be generally true: If you are supposed to report something to the IRS, and you don't, the IRS will probably send you a letter assuming the maximum possible tax liability, and it's up to you to prove that scenario is incorrect. In your case you obviously owe no tax, but since you didn't report it, the IRS simply assumed that you do owe tax until you prove otherwise. You're one form away from fixing the issue. I have first hand experience that this is also true if you forget to report an HSA distribution. I received a letter considering my entire distribution as if it was for non eligible medical expenses. This made the amount taxable and had an additional 20% penalty to boot. Of course I have medical receipts for all of the distributions which makes them not taxable, and had I simply put the correct number on my return to begin with I wouldn't have had to fill out the additional form to correct my mistake." }, { "docid": "413694", "title": "", "text": "\"The \"\"hire a pro\"\" is quite correct, if you are truly making this kind of money. That said, I believe in a certain amount of self-education so you don't follow a pro's advice blindly. First, I wrote an article that discussed Marginal Tax Rates, and it's worth understanding. It simply means that as your income rises past certain thresholds, the tax rate also will change a bit. You are on track to be in the top rate, 33%. Next, Solo 401(k). You didn't ask about retirement accounts, but the combined situations of making this sum of money and just setting it aside, leads me to suggest this. Since you are both employer and employee, the Solo 401(k) limit is a combined $66,500. Seems like a lot, but if you are really on track to make $500K this year, that's just over 10% saved. Then, whatever the pro recommends for your status, you'll still have some kind of Social Security obligation, as both employer and employee, so that's another 15% or so for the first $110K. Last, some of the answers seemed to imply that you'll settle in April. Not quite. You are required to pay your tax through the year and if you wait until April to pay the tax along with your return, you will have a very unpleasant tax bill. (I mean it will have penalties for underpayment through the year.) This is to be avoided. I offer this because often a pro will have a specialty and not go outside that focus. It's possible to find the guy that knows everything about setting you up as an LLC or Sole Proprietorship, yet doesn't have the 401(k) conversation. Good luck, please let us know here how the Pro discussion goes for you.\"" }, { "docid": "446190", "title": "", "text": "\"I assume you are filing US taxes because you are a US citizen, resident alien, or other \"\"US person\"\". If you have a total of $10,000 or more in assets in non-US accounts, you are required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts, also known as FBAR, to report those accounts. See Comparison of Form 8938 and FBAR Requirements. Note this refers to the total balance in the account (combined with any other accounts you may have); the amount you transferred this year is not relevant. Also note that the FBAR is filed separately from your income tax return (it does not go to the IRS), though if you have over $50,000 in offshore assets you may also have to file IRS Form 8938. Simply reporting those accounts does not necessarily mean you will owe extra taxes. Most US taxes are based on income, not assets. According to the page linked, the maximum penalty for a \"\"willful\"\" failure to report such accounts is a fine of $100,000 or 50% of the assets in question, whichever is greater, in addition to possible criminal sanctions. There may be other US filing requirements that I don't know about, so you may want to consult a tax professional. I do not know anything about your filing requirements under Indian law.\"" }, { "docid": "260998", "title": "", "text": "The 60 day pay back rule of a distribution your are referring to is a reportable IRS rule so you won't be able to circumvent that by opening your own company with its own 401K and borrowing the funds from there. Failure to accurately report to the IRS leads to fines and possible jail time. It's not advisable to withdraw from a retirement account but if you really need the money then you can move the funds to a Rollover IRA at the new broker/dealer, or custodian etc. Once you withdraw funds, the plan sponsor has to abide by a mandatory 20% tax withholding on the distribution, you'll be hit with a 10% tax penalty for early withdraw and you'll have to report the distribution as income when you file your personal income taxes. The move from a 401K to a Rollover however is legal and has no tax implications or penalties (besides possible closing fees at the old account) - that is until you decide to withdraw from it assuming you are under age 59 1/2. Regarding your last point, 401Ks are administered by 3rd parties. You wouldn't be opening up any accounts directly with them necessarily. Best advice? Get a Financial Advisor in your area. I recommend going with an advisor who is backed by independent broker-dealer. Independent broker dealers don't offer their own investment products therefore don't push their advisors to sell you their 'in-house' products like big banks. Here's a good article on using Rollover funds to start a venture: http://www.ehow.com/how_6789743_rollover-directed-ira-start-business.html Here is a resource guide direct from the IRS (you can CTRL+F for any specific topics) http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/401%28k%29-Resource-Guide---Plan-Participants---General-Distribution-Rules" }, { "docid": "126007", "title": "", "text": "&gt;According to the IRS, penalties and fines are only non-deductible when they are paid for actual violations of laws/regulations. That's not quite correct. Section 162(f) says [bolding is mine]: &gt;No deduction shall be allowed under subsection (a) for any fine or similar penalty **paid to a government** for the violation of any law. That means they can only claim a deduction on the portion of the fine that isn't paid to the US government. I'm doing a little research to see if I can find out what the dealy-o is." }, { "docid": "123531", "title": "", "text": "To be fair, Inland Revenue has options here. They don't have to accept this transfer pricing scheme Starbucks has come up with to funnel their profits to, almost certainly, some overseas tax haven. I work with the Treasury team at a large British multinational pharma company in Japan. There are constant disputes between Inland Revenue and the IRS and the Japanese NTA and the British, Japanese and U.S. companies over what is an appropriate or inappropriate level of royalty for patents and trademarks owned by the three and licensed back and forth." }, { "docid": "313012", "title": "", "text": "\"You are not the only one with this problem. When Intuit changed their pricing and services structure in 2015 a lot of people got angry, facing larger fees and having to go through an annoying upgrade just to get the same functionality (such as Schedule D, capital gains). You have several options: (1) Forget Turbo Tax and just use paper forms. That is what I do. Paper is reliable. (2) Use forms mode in Turbo Tax. Of course, that may be even more complicated than simply filing out paper forms. (3) Use a different service. If your income is below $64,000 the IRS has a free electronic filing service. Other online vendors have full taxes services for less than Turbo Tax. (4) Add the amount to ordinary income. Technically, as long as you report the income, you cannot be penalized, so if you add the capital gain to your ordinary income, then you have paid taxes on the income. Even if they send you a letter, you can send an answer that you added it to ordinary income and that will satisfy them. Of course you pay a higher rate on your $26 if you do that. (5) If you are in the 15% or below income bracket you are exempt from capital gains, and you can omit it. Don't believe the nervous Nellies who say the IRS will burn your house down if you don't report $26 in capital gains. Penalties are assessed on the percentage of TAXES you did not pay (0.5% penalty per month). Since 0.5% of $0 is $0 your penalty is $0. The IRS knows this. The IRS does not send out assessment letters for $0. (6) Even if you are above the 15% bracket, there is likelihood it is still a no-tax situation (see 5 above). (7) Worst case scenario: you are making a million dollars per year and you omit your $26 capital gains from your return. The IRS will send you an assessment letter for about $10. You can then send them a separate check or money order to pay it. In all honesty I have omitted documented tax items, like taxable interest, that the IRS knows about many times and never gotten an assessment letter. Once I made a serious math error on my return and they sent me an assessment letter, which I just paid, end of story. And that was for a lot more than $26. The technical verbiage for something like this in IRS lingo is CP-2000, underreported income. As you can see from this official IRS web page, basically what they do is guess how much they think you owe and send you a bill. Then you pay it. If you do so in time, you don't even get a 0.5% interest penalty on your $6.75 owed or whatever it is. (8) Go hog wild. As long as you are risking an assessment on your $26, why not go hog wild and just let the IRS compute all your taxes for you? Make a copy of your income statements, then mail them to the IRS with a letter that says, \"\"Hi, I am Mr. Odinson, my SSN is XXX-XX-XXXX. My address is XYZ. I am unable to compute my taxes due to a confused state of mind. I am hereby requesting a tax assessment for the 2016 tax year.\"\" Make sure you sign and date the letter. In all probability they will compute the full assessment and send you a bill (or refund).\"" }, { "docid": "216849", "title": "", "text": "\"The IRS has a FAQ page about Hardship Distributions from a 401(k). The IRS defines a hardship in this case as \"\"an immediate and heavy financial need of the employee and the amount must be necessary to satisfy the financial need.\"\" Included in the list of examples is \"\"certain expenses for the repair of damage to the employee's principal residence.\"\" However, whether your former employer allows this particular reason is up to their plan documents. It sounds like, from what you described on the website, that your plan does include this reason as a possibility for you. Next, you need to decide if the projects you have in mind qualify as \"\"repair of damage.\"\" This uses the same rules as the deductible casualty rules found in IRS Publication 547, which defines a casualty this way: A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. A sudden event is one that is swift, not gradual or progressive. An unexpected event is one that is ordinarily unanticipated and unintended. An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. Examples are given in Pub 547. If the projects you have in mind are necessary due to an event (like a flood or a fire), it might be allowed. But most \"\"home improvement\"\" projects would not qualify for this. If you'd like a way to simplify your financial profile, an option for you, since you no longer work at this employer, is to roll over this 401(k) into a Rollover (traditional) IRA. This way, you won't have to deal with your former employer anymore. You could pick an IRA custodian that you already have another account with, if you like, and reduce the number of statements that you get. But the IRA will not let you take money out without penalty for home improvement projects, either.\"" }, { "docid": "168530", "title": "", "text": "\"I spent some time searching, and couldn't find the answer written explicitly in IRS regulations. What I did find was this chart from the irs showing that nonqualified distributions from a Roth 401k are pro-rated between contributions and earnings. It is well documented that you can't withdraw any money early or tax free (even contributions) from a Roth 401k (\"\"Designated Roth Account\"\" in IRS parlance) that has made any money. source You can do a direct rollover from a \"\"Designated Roth Account\"\" to a Roth IRA and the basis describing contributions vs. earnings is preserved. source And there is plenty of evidence showing you can withdraw contributions from a Roth IRA without penalty. source All that being said, I can't find anything from the IRS that says this is a legitimate strategy.\"" }, { "docid": "76530", "title": "", "text": "\"All transactions within an IRA are irrelevant as far as the taxation of the distributions from the IRA are concerned. You can only take cash from an IRA, and a (cash) distribution from a Traditional IRA is taxable as ordinary income (same as interest from a bank, say) without the advantage of any of the special tax rates for long-term capital gains or qualified dividends even if that cash was generated within the IRA from sales of stock etc. In short, just as with what is alleged to occur with respect to Las Vegas, what happens within the IRA stays within the IRA. Note: some IRA custodians are willing to make a distribution of stock or mutual fund shares to you, so that ownership of the 100 shares of GE, say, that you hold within your IRA is transferred to you in your personal (non-IRA) brokerage account. But, as far as the IRS is concerned, your IRA custodian sold the stock as the closing price on the day of the distribution, gave you the cash, and you promptly bought the 100 shares (at the closing price) in your personal brokerage account with the cash that you received from the IRA. It is just that your custodian saved the transaction fees involved in selling 100 shares of GE stock inside the IRA and you saved the transaction fee for buying 100 shares of GE stock in your personal brokerage account. Your basis in the 100 shares of GE stock is the \"\"cash_ that you imputedly received as a distribution from the IRA, so that when you sell the shares at some future time, your capital gains (or losses) will be with respect to this basis. The capital gains that occurred within the IRA when the shares were imputedly sold by your IRA custodian remain within the IRA, and you don't get to pay taxes on that at capital gains rates. That being said, I would like to add to what NathanL told you in his answer. Your mother passed away in 2011 and you are now 60 years old (so 54 or 55 in 2011?). It is likely that your mother was over 70.5 years old when she passed away, and so she likely had started taking Required Minimum Distributions from her IRA before her death. So, You should have been taking RMDs from the Inherited IRA starting with Year 2012. (The RMD for 2011, if not taken already by your mother before she passed away, should have been taken by her estate, and distributed to her heirs in accordance with her will, or, if she died intestate, in accordance with state law and/or probate court directives). There would not have been any 10% penalty tax due on the RMDs taken by you on the grounds that you were not 59.5 years old as yet; that rule applies to owners (your mom in this case) and not to beneficiaries (you in this case). So, have you taken the RMDs for 2012-2016? Or were you waiting to turn 59.5 before taking distributions in the mistaken belief that you would have to pay a 10% penalty for early wthdrawal? The penalty for not taking a RMD is 50% of the amount not distributed; yes, 50%. If you didn't take RMDs from the Inherited IRA for years 2012-2016, I recommend that you consult a CPA with expertise in tax law. Ask the CPA if he/she is an Enrolled Agent with the IRS: Enrolled Agents have to pass an exam administered by the IRS to show that they really understand tax law and are not just blowing smoke, and can represent you in front of the IRS in cases of audit etc,\"" }, { "docid": "301266", "title": "", "text": "I don't do this at all, but it's the internet, so hey, why not? According to the IRS, penalties and fines are only non-deductible when they are paid for actual violations of laws/regulations. So what crushedbyadwarf said is probably correct. The penalty/fine reduces their income, and they become entitled to a refund on the tax they paid on that income. It's still a questionable tax treatment of the penalty/fine." }, { "docid": "31699", "title": "", "text": "In reference to the original question: You put pretax (untaxed) money into an IRA. If this was a rollover from a company plan (like a 401k), your company may have also put pretax dollars in. As the account grows, you get gains on all of this money. The government gives you this amazing deal because they want you to save for retirement. But, they also want you to eventually spend the money in retirement and they want to collect those deferred taxes. So they require RMDs starting at age 70.5. To guarantee that people follow the rules, they make a stiff penalty for not doing so. The IRS has the option to forgive a forgotten RMD distribution penalty, if you can convince them that it was a true oversight and not a deliberate flouting of the rules." } ]

[ { "docid": "160786", "title": "", "text": "JoeTapayer has good advice here. I would like to add my notes. If they give a 50% match that means you are getting a 50% return on investment(ROI) immediately. I do not know of a way to get a better guaranteed ROI. Next, when investing you need to determine what kind of investor you are. I would suggest you make yourself more literate in investments, as I suggest to anyone, but there are basic things you want to look for. If your primary worry is loss of your prinicipal, go for Conservative investments. This means that you are willing to accept a reduced expected ROI in exchange for lower volatility(risk of loss of principal). This does not mean you have a 100% safe investment as the last market issues have shown, but in general you are better protected. The fidelity investments should give you some information as to volatility or if they deem the investments conservative. Conservative investments are normally made up of trading bonds, which have the lowest ROI in general but are the most secure. You can also invest in blue chip companies, although stock is inherently riskier. It is pointed out in comments that stocks always outperform bonds in the long term, and this has been true over the last 100 years. I am just suggesting ways you can protect yourself against market downturns. When the market is doing very well bonds will not give you the return your friends are seeing. I am just trying to give you a basic idea of what to look for when you pick your investments, nothing can replace a solid investment adviser and taking the time to educate yourself." } ]

[ { "docid": "414737", "title": "", "text": "\"You do not need to inform your employer of your additional activity, but it is your responsibility not to work for more than 48 hours per week as long as you are an employee. So if you are working 38 hours for your employer, you may not work for yourself for more than 10 hours. It is, however, not so easy in practice to draw the line between work and a hobby, as long as you are not being paid by the hour. The main reason to present your employer with an addition to your work contract is to make it legally very clear that he holds no intentions to claim copyright to your work. He may attempt to do something funky like claim your home computer is, in fact, a work computer because you used it once a month to work from home, and your work contract may contain a paragraph that all work performed on a work computer results in copyright ownership for your employer. I have no idea how likely this is in practice, but this is the reason I know is commonly given as legal advice to have a contract. So the normal contract you present your employer with says: In order to earn user contribution money from a website, you need to register as a sole proprietor (Gewerbeanmeldung) and pay trade tax (Gewerbesteuer) and sales tax (Umsatzsteuer, alternatively you claim small trade exception, Kleingewerbe), which also makes a tax return mandatory. I would guess, however, (and this is not legal advice in any way, just my guess), that a couple of contributions towards server cost in a strictly non-profit endeavor is not commercial (\"\"gewerblich\"\") at all but private, in the same way that you may write an invoice to someone you sold your old bike to, or a kid may get paid to mow someone's lawn. Based on that guess, my non-legal-advice recommendation is to take the contributions and do nothing else, as long as the amount is nowhere near breaking even if you count your work input.\"" }, { "docid": "81148", "title": "", "text": "Your assumptions are flawed or miss crucial details. An employer sponsored 401k typically limits the choices of investments, whereas an IRA typically gives you self directed investment choices at a brokerage house or through a bank account. You are correct in noticing that you are limited in making your own pre-tax contributions to a traditional IRA in many circumstances when you also have an employer sponsored 401k, but you miss the massive benefit you have: You can rollover unlimited amounts from a traditional 401k to a traditional IRA. This is a benefit that far exceeds the capabilities of someone without a traditional 401k who is subject to the IRA contribution limits. Your rollover capabilities completely gets around any statutory contribution limit. You can contribution, at time of writing, $18,000 annually to a 401k from salary deferrals and an additional $35,000 from employer contributions for a maximum of $53,000 annually and roll that same $53,000 into an IRA if you so desired. That is a factor. This should be counterweighed with the borrowing capabilities of a 401k, which vastly exceeds an IRA again. The main rebuttal to your assumptions is that you are not necessarily paying taxes to fund an IRA." }, { "docid": "552887", "title": "", "text": "My observations is that this seems like hardly enough to kill inflation. Is he right? Or are there better ways to invest? The tax deferral part of the equation isn't what dominates regarding whether your 401k beats 30 years of inflation; it is the return on investment. If your 401k account tanks due to a prolonged market crash just as you retire, then you might have been better off stashing the money in the bank. Remember, 401k money at now + 30 years is not a guaranteed return (though many speak as though it were). There is also the question as to whether fees will eat up some of your return and whether the funds your 401k invests in are good ones. I'm uneasy with the autopilot nature of the typical 401k non-strategy; it's too much the standard thing to do in the U.S., it's too unconscious, and strikes me as Ponzi-like. It has been a winning strategy for some already, sure, and maybe it will work for the next 30-100 years or more. I just don't know. There are also changes in policy or other unknowns that 30 years will bring, so it takes faith I don't have to lock away a large chunk of my savings in something I can't touch without hassle and penalty until then. For that reason, I have contributed very little to my 403b previously, contribute nothing now (though employer does, automatically. I have no match.) and have built up a sizable cash savings, some of which may be used to start a business or buy a house with a small or no mortgage (thereby guaranteeing at least not paying mortgage interest). I am open to changing my mind about all this, but am glad I've been able to at least save a chunk to give me some options that I can exercise in the next 5-10 years if I want, instead of having to wait 25 or more." }, { "docid": "184077", "title": "", "text": "\"Your employer sends the money that you choose to contribute, plus employer match if any, to the administrator of the 401k plan who invests the money as you have directed, choosing between the alternatives offered by the administrator. Typically, the alternatives are several different mutual funds with different investment styles, e.g. a S&P 500 index fund, a bond fund, a money-market fund, etc. Now, a statement such as \"\"I see my 401k is up 10%\"\" is meaningless unless you tell us how you are making the comparison. For example, if you have just started employment and $200 goes into your 401k each month and is invested in a money-market fund (these are paying close to 0% interest these days), then your 11th contribution increases your 401k from $2000 to $2200 and your 401k is \"\"up 10%\"\". More generally, suppose for simplicity that all the 401k investment is in just one (stock) mutual fund and that you own 100 shares of the fund as of right now. Suppose also that your next contribution will not occur for three weeks when you get your next paycheck, at which time additional shares of the mutual fund will be purchased Now, the value of the mutual fund shares (often referred to as net asset value or NAV) fluctuates as stock prices rise and fall, and so the 401k balance = number of shares times NAV changes in accordance with these fluctuations. So, if the NAV increases by 10% in the next two weeks, your 401k balance will have increased by 10%. But you still own only 100 shares of the mutual fund. You cannot use the 10% increase in value to buy more shares in the mutual fund because there is no money to pay for the additional shares you wish to purchase. Notice that there is no point selling some of the shares (at the 10% higher NAV) to get cash because you will be purchasing shares at the higher NAV too. You could, of course, sell shares of the stock mutual fund at the higher NAV and buy shares of some other fund available to you in the 401k plan. One advantage of doing this inside the 401k plan is that you don't have to pay taxes (now) on the 10% gain that you have made on the sale. Outside tax-deferred plans such as 401k and IRA plans, such gains would be taxable in the year of the sale. But note that selling the shares of the stock fund and buying something else indicates that you believe that the NAV of your stock mutual fund is unlikely to increase any further in the near future. A third possibility for your 401k being up by 10% is that the mutual fund paid a dividend or made a capital gains distribution in the two week period that we are discussing. The NAV falls when such events occur, but if you have chosen to reinvest the dividends and capital gains, then the number of shares that you own goes up. With the same example as before, the NAV goes up 10% in two weeks at which time a capital gains distribution occurs, and so the NAV falls back to where it was before. So, before the capital gains distribution, you owned 100 shares at $10 NAV which went up to $11 NAV (10% increase in NAV) for a net increase in 401k balance from $1000 to $1100. The mutual fund distributes capital gains in the amount of $1 per share sending the NAV back to $10, but you take the $100 distribution and plow it back into the mutual fund, purchasing 10 shares at the new $10 NAV. So now you own 110 shares at $10 NAV (no net change in price in two weeks) but your 401k balance is $1100, same as it was before the capital gains distribution and you are up 10%. Or, you could have chosen to invest the distributions into, say, a bond fund available in your 401k plan and still be up 10%, with no change in your stock fund holding, but a new investment of $100 in a bond fund. So, being up 10% can mean different things and does not necessarily mean that the \"\"return\"\" can be used to buy more shares.\"" }, { "docid": "546150", "title": "", "text": "I have managed two IRA accounts; one I inherited from my wife's 401K and my own's 457B. I managed actively my wife's 401 at Tradestation which doesn't restrict on Options except level 5 as naked puts and calls. I moved half of my 457B funds to TDAmeritrade, the only broker authorized by my employer, to open a Self Directed account. However, my 457 plan disallows me from using a Cash-secured Puts, only Covered Calls. For those who does not know investing, I resent the contention that participants to these IRAs should not be messing around with their IRA funds. For years, I left my 401k/457B funds with my current fund custodian, Great West Financial. I checked it's current values once or twice a year. These last years, the market dived in the last 2 quarters of 2015 and another dive early January and February of 2016. I lost a total of $40K leaving my portfolio with my current custodian choosing all 30 products they offer, 90% of them are ETFs and the rest are bonds. If you don't know investing, better leave it with the pros - right? But no one can predict the future of the market. Even the pros are at the mercy of the market. So, I you know how to invest and choose your stocks, I don't think your plan administrator has to limit you on how you manage your funds. For example, if you are not allowed to place a Cash-Secured Puts and you just Buy the stocks or EFT at market or even limit order, you buy the securities at their market value. If you sell a Cash-secured puts against the stocks/ETF you are interested in buying, you will receive a credit in fraction of a dollar in a specific time frame. In average, your cost to owning a stock/ETF is lesser if you buy it at market or even a limit order. Most of the participants of the IRA funds rely too much on their portfolio manager because they don't know how to manage. If you try to educate yourself at a minimum, you will have a good understanding of how your IRA funds are tied up to the market. If you know how to trade in bear market compared to bull market, then you are good at managing your investments. When I started contributing to my employer's deferred comp account (457B) as a public employee, I have no idea of how my portfolio works. Year after year as I looked at my investment, I was happy because it continued to grow. Without scrutinizing how much it grew yearly, and my regular payroll contribution, I am happy even it only grew 2% per year. And at this age that I am ready to retire at 60, I started taking investment classes and attended pre-retirement seminars. Then I knew that it was not totally a good decision to leave your retirement funds in the hands of the portfolio manager since they don't really care if it tanked out on some years as long at overall it grew to a meager 1%-4% because they managers are pretty conservative on picking the equities they invest. You can generalize that maybe 90% of IRA investors don't know about investing and have poor decision making actions which securities/ETF to buy and hold. For those who would like to remain as one, that is fine. But for those who spent time and money to study and know how to invest, I don't think the plan manager can limit the participants ability to manage their own portfolio especially if the funds have no matching from the employer like mine. All I can say to all who have IRA or any retirement accounts, educate yourself early because if you leave it all to your portfolio managers, you lost a lot. Don't believe much in what those commercial fund managers also show in their presentation just to move your funds for them to manage. Be proactive. If you start learning how to invest now when you are young, JUST DO IT!" }, { "docid": "357340", "title": "", "text": "Someone messed up here. My tax accountant says she is supposed to enter the values as they are on the W2 and CompanyB said they will not issue a new W2 because they were not involved in the refund of the money. Correct. We decided that we will enter a value different from 12b-d, subtract the money that was refunded to me because it's already on the 1099. Incorrect. Is there an alternative to avoid paying taxes twice on the 401k overages? If not, is there a better way to do this to minimize the risk of an audit? You should enter the amounts in W2 as they are. Otherwise things won't tie at the IRS and they will come back asking questions. The amount in box 12-D was deducted from your wages pre-tax, so you didn't pay tax on it. The distribution is taxable, and if it was made before the tax day next year - only taxable once. So if you withdrew the same year of the contribution, as it sounds like you did, you will only pay tax on it once because the amounts were not included in your salary. If the 1099-R is marked with the correct code, the IRS will be able to match the excess contribution (box 12-D) and the removal of the excess contribution (1099-R with the code) and it will all tie, no-one will audit you. The accountant is probably clueless as to how her software works. By default, the accounting software will add the excess contribution on W2 box 12-D back into wages, and it will be added to taxable income on your tax return. However, when you type in the 1099 with the proper code, this should be reversed by the software, and if it is not - should be manually overridden. This should be done at the adjustment entry, not the W2 entry screen, since a copy of the W2 will be transmitted with your tax return and should match the actual W2 transmitted by your employer. If she doesn't know what she's doing, find someone who does." }, { "docid": "150883", "title": "", "text": "There are a couple of cases where I'd argue in favor of the 401k: Employer matching - If the employer matches your contributions, then it makes sense to get these additional investments which if you are in a low bracket may exist as highly-compensated employees may want those in the lower brackets to contribute as much as they can. Investment options - If the employer has enough assets in the plan, there could be access to institutional versions of those funds. For example, compare Vanguard Institutional Index Instl Pl (VIIIX) with Vanguard 500 Index Inv (VFINX), where the expense ratio in the former is just .02% while the latter is .17%. Granted this is a minor difference in expenses, there is something to be said for how much a .15% drag year over year could add up." }, { "docid": "406561", "title": "", "text": "\"The limit on SEP IRA is 25%, not 20%. If you're self-employed (filing on Schedule C), then it's taken on net earning, which in your example would be 25% of $90,000. (https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people) JoeTaxpayer is correct as regards the 401(k) limits. The elective deferrals are per person - That's a cap in sum across multiple plans and across both traditional and Roth if you have those. In general, it's actually across other retirement plan types too - See below. If you're self-employed and set-up a 401(k) for your own business, the elective deferral is still aggregated with any other 401(k) plans in which you participate that year, but you can still make the employer contribution on your own plan. This IRS page is current a pretty good one on this topic: https://www.irs.gov/retirement-plans/one-participant-401k-plans Key quotes that are relevant: The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both: •Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit: ◦$18,000 in 2015 and 2016, or $24,000 in 2015 and 2016 if age 50 or over; plus •Employer nonelective contributions up to: ◦25% of compensation as defined by the plan, or ◦for self-employed individuals, see discussion below It continues with this example: The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $18,000 in 2015 and 2016. Although a plan's terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans. EXAMPLE Ben, age 51, earned $50,000 in W-2 wages from his S Corporation in 2015. He deferred $18,000 in regular elective deferrals plus $6,000 in catch-up contributions to the 401(k) plan. His business contributed 25% of his compensation to the plan, $12,500. Total contributions to the plan for 2015 were $36,500. This is the maximum that can be contributed to the plan for Ben for 2015. A business owner who is also employed by a second company and participating in its 401(k) plan should bear in mind that his limits on elective deferrals are by person, not by plan. He must consider the limit for all elective deferrals he makes during a year. Notice in the example that Ben contributed more that than his elective limit in total (his was $24,000 in the example because he was old enough for the $6,000 catch-up in addition to the $18,000 that applies to everyone else). He did this by declaring an employer contribution of $12,500, which was limited by his compensation but not by any of his elective contributions. Beyond the 401(k), keep in mind that elective contributions are capped across different types of retirement plans as well, so if you have a SEP IRA and a solo 401(k), your total contributions across those plans are also capped. That's also mentioned in the example. Now to the extent that you're considering different types of plans, that's a whole question in itself - One that might be worth consulting a dedicated tax advisor. A few things to consider (not extensive list): As for payroll / self-employment tax: Looks like you will end up paying Medicare, including the new \"\"Additional Medicare\"\" tax that came with the ACA, but not SS: If you have wages, as well as self-employment earnings, the tax on your wages is paid first. But this rule only applies if your total earnings are more than $118,500. For example, if you will have $30,000 in wages and $40,000 in selfemployment income in 2016, you will pay the appropriate Social Security taxes on both your wages and business earnings. In 2016, however, if your wages are $78,000, and you have $40,700 in net earnings from a business, you don’t pay dual Social Security taxes on earnings more than $118,500. Your employer will withhold 7.65 percent in Social Security and Medicare taxes on your $78,000 in earnings. You must pay 15.3 percent in Social Security and Medicare taxes on your first $40,500 in self-employment earnings and 2.9 percent in Medicare tax on the remaining $200 in net earnings. https://www.ssa.gov/pubs/EN-05-10022.pdf Other good IRS resources:\"" }, { "docid": "24404", "title": "", "text": "For the rollover, you should probably talk to the recipient manager. This would be your broker or whomever (your new employer if rolling into another 401k). They should be able to update you on progress and let you know if you need to do anything. In a comment, you say I could be putting in money but instead im lossing. There is no requirement that an IRA have 401k money in it. Just put the money in without the existing money. Eventually the rollover will complete and add that money to whatever you contribute to the IRA. The rollover should not affect your future contributions in any way." }, { "docid": "379911", "title": "", "text": "\"The error in the example is here: \"\"Now, if you contribute 5% to a Roth 401(k), your employer would match your after-tax 5% contribution. If the tax rate is 25%, that would be 5% of $60,000, which is $3,000. However, that $3,000 is put in to a traditional 401(k), so it is taxed when withdrawn. Assuming the tax rate is still 25% when you withdraw, you are only getting $2,250. Essentially you are giving up $750 of free money in this case.\"\" You set your contribution to Roth 401k as a function of the gross, 80,000. You choose 5% and contribute 4000 Your employer matches 4000. At the end of the year, your taxable income to the IRS is 80000, and you pay 30% or 24000. You have 80K-4K-24K to live on, or 52K If you chose the alternate regular 401k,then you contribute 4K, your income to the IRS is (80-4=) 76k, and you pay 30%, 22.8K in tax. You have 80-4-22.8 or 53.2K to live on. Or, to come at it the other way, you have 4000*30% =1200 extra tax reduction in your income this year. If the extra income in 401k versus extra current year tax in Roth IRA means you have to reduce less, like 2800K to the roth so you maintain a 53.2K lifestyle, then yes, the Roth IRA match is reduced. If you have the cash flow to prepay the current year tax and maximum-match contribution, you will get the full match based on your gross income.\"" }, { "docid": "42999", "title": "", "text": "After reading OP Mark's question and the various answers carefully and also looking over some old pay stubs of mine, I am beginning to wonder if he is mis-reading his pay stub or slip of paper attached to the reimbursement check for the item(s) he purchases. Pay stubs (whether paper documents attached to checks or things received in one's company mailbox or available for downloading from a company web site while the money is deposited electronically into the employee's checking account) vary from company to company, but a reasonably well-designed stub would likely have categories such as Taxable gross income for the pay period: This is the amount from which payroll taxes (Federal and State income tax, Social Security and Medicare tax) are deducted as well as other post-tax deductions such as money going to purchase of US Savings Bonds, contributions to United Way via payroll deduction, contribution to Roth 401k etc. Employer-paid group life insurance premiums are taxable income too for any portion of the policy that exceeds $50K. In some cases, these appear as a lump sum on the last pay stub for the year. Nontaxable gross income for the pay period: This would be sum total of the amounts contributed to nonRoth 401k plans, employee's share of group health-care insurance premiums for employee and/or employee's family, money deposited into FSA accounts, etc. Net pay: This is the amount of the attached check or money sent via ACH to the employee's bank account. Year-to-date amounts: These just tell the employee what has been earned/paid/withheld to date in the various categories. Now, OP Mark said My company does not tax the reimbursement but they do add it to my running gross earnings total for the year. So, the question is whether the amount of the reimbursement is included in the Year-to-date amount of Taxable Income. If YTD Taxable Income does not include the reimbursement amount, then the the OP's question and the answers and comments are moot; unless the company has really-messed-up (Pat. Pending) payroll software that does weird things, the amount on the W2 form will be whatever is shown as YTD Taxable Income on the last pay stub of the year, and, as @DJClayworth noted cogently, it is what will appear on the W2 form that really matters. In summary, it is good that OP Mark is taking the time to investigate the matter of the reimbursements appearing in Total Gross Income, but if the amounts are not appearing in the YTD Taxable Income, his Payroll Office may just reassure him that they have good software and that what the YTD Taxable Income says on the last pay stub is what will be appearing on his W2 form. I am fairly confident that this is what will be the resolution of the matter because if the amount of the reimbursement was included in Taxable Income during that pay period and no tax was withheld, then the employer has a problem with Social Security and Medicare tax underwithholding, and nonpayment of this tax plus the employer's share to the US Treasury in timely fashion. The IRS takes an extremely dim view of such shenanigans and most employers are unlikely to take the risk." }, { "docid": "300665", "title": "", "text": "US corporations are allowed to automatically enter employees into a 401K plan. A basic automatic enrollment 401(k) plan must state that employees will be automatically enrolled in the plan unless they elect otherwise and must specify the percentage of an employee's wages that will be automatically deducted from each paycheck for contribution to the plan. The document must also explain that employees have the right to elect not to have salary deferrals withheld or to elect a different percentage to be withheld. An eligible automatic contribution arrangement (EACA) is similar to the basic automatic enrollment plan but has specific notice requirements. An EACA can allow automatically enrolled participants to withdraw their contributions within 30 to 90 days of the first contribution. A qualified automatic contribution arrangement (QACA) is a type of automatic enrollment 401(k) plan that automatically passes certain kinds of annual required testing. The plan must include certain features, such as a fixed schedule of automatic employee contributions, employer contributions, a special vesting schedule, and specific notice requirements. You generally have a period of time to stop the first deposit. One I saw recently gave new employees to the first paycheck after the 60 day mark to refuse to join. You also may be able to get back the first deposit if you really don't want to join. If you don't want to participate look on the corporate website or the Fidelity website to set your future contributions to 0% of your paycheck. Keep in mind several things: Personally I'm against any type of government sponsored investments or savings. I can save money on my own and I don't care about their benefits. Some companies provide an annual contribution to all employees regardless of participation in the 401K. They do need to establish an account to do that. Again that is free money Does it mean if I never contribute any money so I will have 0 I might go below 0 and owe them money in case they bankrupt or do bad investments? Even in total market collapse the value of the 401K could never go below zero, unless the 401K was setup to allow very exotic investments." }, { "docid": "32009", "title": "", "text": "\"So many complicated answers for a straight forward question. First to this point \"\"I am failing to see why would a person get an IRA, instead of just putting the same amount of money into a mutual fund...\"\" An IRA can be invested in a mutual fund. The IRA benefit over standard mutual fund is pre-tax contribution lowering your current tax liability. The advantage of an IRA over a 401k is control. Your employer controls where the 401k is invested, you control where your IRA is invested. Often employers have a very small number of options, because this keeps their costs with the brokerage low. 401k is AMAZING if you have employer matched contributions. Use them to the maximum your employer will match. After that OWN your IRA. Control is key when it comes to your money. On IRA's. Buy ROTH first. Contribute the calendar maximum. Then get a traditional. The benefit of ROTH is that you already paid taxes on the contribution so your withdrawal is not taxed AND they do not tax the interest earned like they do on a standard mutual fund.\"" }, { "docid": "551403", "title": "", "text": "\"From a purely analytical standpoint, assuming you are investing your Roth IRA contributions in broad market securities (such as the SPDR S&P 500 ETF, which tracks the S&P 500), the broader market has historically had more upward movement than downward, and therefore a dollar invested today will have a greater expected value than a dollar invested tomorrow. So from this perspective, it is better to \"\"max out\"\" your Roth on the first day of the contribution year and immediately invest in broad market (or at least well diversified) securities. That being said, opportunity costs must also be taken into account--every dollar you use to fund your Roth IRA is a dollar that is no longer available to be invested elsewhere (hence, a lost opportunity). With this in mind, if you are currently eligible for a 401k in which your employer matches some portion of your contributions, it is generally advised that you contribute to the 401k up to the employer-match. For example, if your employer matches 75% of contributions up to 3.5% of your gross salary, then it is advisable that you first contribute this 3.5% to your 401k before even considering contributing to a Roth IRA. The reasoning behind this is two-fold: first, the employer-match can be considered as a guaranteed Return on Investment--so for example, for an employer that matches 75%, for every dollar you contribute you already have earned a 75% return up to the employer's limit. Secondly, 401k contributions have tax implications: not only is the money contributed to the 401k pre-tax (i.e., contributions are not taxed), it also reduces your taxable income, so the marginal tax benefit of these contributions must also be taken into account. Keep in mind that in the usual circumstances, 401k disbursements are taxable. Finally, many financial advisors will also suggest establishing an \"\"emergency fund\"\", which is money that you will not use unless you suffer an emergency that has an impact on your normal income--loss of job, medical emergency, etc. These funds are often kept in highly liquid accounts (savings accounts, money-market funds, etc.) so they can be accessed immediately when you run into one of \"\"life's little surprises\"\". Generally, it is advised that an emergency fund between $500-$1000 is established ASAP, and over time the emergency fund should be increased until it has reached a value equivalent to the sum of 8 months' worth of expenses. If funding an IRA is preventing you from working towards such an emergency fund, then you may want to consider waiting on maxing out the IRA before you have that EF established. Of course, it goes without saying that credit card balances with APRs other than 0.00% (or similar) should be paid off before an IRA is funded, since while you can only hope to match the market at best (between 10-15% a year) in your IRA investments, paying down credit card balances is an instant \"\"return\"\" of whatever the APR is, which usually tends to be between a 15-30% APR. In a nutshell, assuming you are maxing out your 401k (if applicable), have an emergency fund established, are not carrying any high-APR credit card balances, and are able to do so, historical price movements in the markets suggest that funding your Roth IRA upfront and investing these funds immediately in a broadly diversified portfolio will yield a higher expected return than funding the account periodically throughout the year (using dollar cost averaging or similar strategies). If this is not the case, take some time to consider the opportunity costs you are incurring from not fully contributing to your 401k, carrying high credit card balances, or not having a sufficient emergency fund established. This is not financial advice specific to any individual and your mileage may vary. Consider consulting a Certified Financial Planner, Certified Public Accountant, etc. before making any major financial decisions.\"" }, { "docid": "224530", "title": "", "text": "\"Logic fail. The qty of shares is irrelevant. What matters is the value, which is, of course, quite high -- and, what's more, the P/E ratio, which is extremely favorable. Having worked in operations at Apple for 7 years, I can tell you that the company is very lean and efficient. 25% matching is extremely generous. 25% contribution rates are standard in corporate jobs (contribution rates are what maximum percentage of your pre-tax income you can opt to set aside into a 401K; this is different than matching). It absolutely is not bare bones to be given 25% matching. Although I no longer work at Apple, I still have my 401K, and the administration of it is good, as is the choice of funds. Back to the matching... It's free money. For every $1 you put in your 401K (pretax, btw), Apple puts in a quarter. Having worked in other corporations over my career, I can tell you that this level of matching is pretty much as good as it gets. For a good part of the time I worked there I made around $30K (not in Retail, but in Operations, as mentioned before). I maxed out the Employee Stock Purchase Program contribution and mostly maxed out my 401K contribution. Now, 12 years later, my stock appreciated beyond my wildest expectations. I have made well over six figures on it over the years. If I never sold any, it would be worth over $500,000 by now. All that from 10% contributions on a salary that ranged from about $26K when I started out to about $46K when I left 7 years later. My 401K holdings are worth about $60K, I think, invested extremely conservatively. I have had it in money market funds since right before the 2008/2009 crash, which I anticipated. So the investment benefits at Apple served me extremely well. My stock appreciation paid for my car, and it will soon cover the down payment on a house. I was essentially able to \"\"retire\"\" to be a stay-at-home-mom when my son was born, thanks to the safety net I have from my Apple stock. Regarding health benefits... I think you meant to say copays, not deductibles. When I was there, there were no copays. I forgot what the deductibles were, but for most routine visits, you wouldn't need to pay out of pocket. Annual physicals are included in the health plan, up to $250. The health plan works with various local providers to ensure that the $250 allotment will cover all expenses needed for an annual physical. This physical is separate and in addition to a women's health annual exam (pap smear/pelvic exam/etc) that is also included without copay. I'm pretty sure annual mammograms are covered. All prenatal visits are covered with zero copay. All child well checks, including immunizations, covered with zero copay. Two dental checks a year. Dental Xrays at regular intervals included. Annual vision exams and, I think $300 annually towards glasses or contacts included, IIRC. Time off was pretty standard and accrued by the hour worked, which was nice. There was no \"\"you have to be with the company for X length of time\"\" before time off benefits began to accrue, or before any benefits kicked in, for that matter. By about Year 5, I had easily racked up enough vacation days to take 3 weeks off at a time. The longer you have been with the company, the faster your time off accrues. And each summer they'd offer a cash-out program, where you could double up on time off, where if you took off a week, you could opt to deplete your accrued vacation time by two weeks and get double pay for it. A lot of people liked this option. The points for absenteeism thing seemed a bit silly -- and seemed to only have been implemented in one store and then only for a brief time. From what I gathered in the article, it was an experiment that failed miserably. The other corporation I have spent a significant amount of time working at is Whole Foods Market, in their corporate office. While both Apple and Whole Foods always are selected as two of the top companies to work for by Forbes in their annual report, as far as benefits went, Apple's were far superior in most aspects. With respect to company culture, I personally found Whole Foods to be better, but that was sort of a personal preference. Both were dream jobs, and I consider myself very fortunate to have had the opportunity to work for two outstanding companies that both treated me very well. Oh- and incidentally, Ron Johnson, who was VP of Retail at Apple from the inception of the stores until like a year ago, now is CEO of JC Penny, and, I suspect, is fully behind JCP's ad campaigns which include images of families with same-sex parents. JCP has stepped deliberately and full-on into what is, unfortunately, still a controversial topic and has taken a firm stand in support of all types of loving families. I have to wonder if part of this might have been inspired by the fact that Apple's new CEO, Tim Cook, is gay. Ron Johnson would have worked closely alongside Cook during his tenure. I met Ron once and found him to be a great guy, and I worked with the Retail operations folks from the time the stores launched. They were a great team that worked hard and were very sincere and dedicated. You could see his leadership reflecting in each member of the team.\"" }, { "docid": "545759", "title": "", "text": "There are lots of sub-parts to your question. Let's takle them one at a time. Should I worry about an IRA at this age? Absolutely! Or at least some form of retirement account. When you are young is the BEST time to start putting money into a retirement account because you have so much time for it to grow. Compounding interest is a magical thing. Even if you can only afford to put a very small amount in the account, do it! You will have to put a heck of a lot less money into the account over your working career if you start now. Is there a certain amount you need for the IRA deduction? No. Essentially with a traditional IRA you can just subtract the amount you deposited (up to the contribution limit) from your income when calculating your taxes. What kind of IRA should I get? I suggest a ROTH IRA, but be warned that with that kind you get the tax breaks when you retire, not now. If you think taxes will be higher in 40 years or so, then the Roth is a clear winner. Traditional IRA: Tax deduction this year for contribution; investment plus gains are taxed as income when you take the money out at retirement. Roth IRA: Investment amount is taxed in the year you put it in; no taxes on investment amount or gains when you take it out at retirement. Given the long horizon that you will be investing, the money is likely going to at least double. So the total amount you are taxed on over your lifetime would probably be less with the ROTH even if tax rates remain the same. Is the 401K a better option? If they offer a match (most do) then it is a no-brainer, the employer 401K always comes out on top because they are basically paying you extra to put money into savings. If there is no match, I suggest a Roth because company 401K plans usually have hidden fees that are much higher than you are going to pay for setting up your own IRA or Roth IRA with a broker." }, { "docid": "554739", "title": "", "text": "\"There are certain allowable reasons to withdraw money from a 401K. The desire to free your money from a \"\"bad\"\" plan is not one of them. A rollover is a special type of withdrawal that is only available after one leaves their current employer. So as long as you stay with your current company, you cannot rollover. [Exception: if you are over age 59.5] One option is to talk to HR, see if they can get a expansion of offerings. You might have some suggestions for mutual funds that you would like to see. The smaller the company the more likely you will have success here. That being said, there is some research to support having few choices. Too many choices intimidates people. It's quite popular to have \"\"target funds\"\" That is funds that target a certain retirement year. Being that I will be 50 in 2016, I should invest in either a 2030 or 2035 fund. These are a collection of funds that rebalances the investment as they age. The closer one gets to retirement the more goes into bonds and less into stocks. However, I think such rebalancing is not as smart as the experts say. IMHO is almost always better off heavily invested in equity funds. So this becomes a second option. Invest in a Target fund that is meant for younger people. In my case I would put into a 2060 or even 2065 target. As JoeTaxpayer pointed out, even in a plan that has high fees and poor choices one is often better off contributing up to the match. Then one would go outside and contribute to an individual ROTH or IRA (income restrictions may apply), then back into the 401K until the desired amount is invested. You could always move on to a different employer and ask some really good questions about their 401K. Which leads me back to talking with HR. With the current technology shortage, making a few tweaks to the 401K, is a very cheap way to make their employees happy. If you can score a 1099 contracting gig, you can do a SEP which allows up to a whopping 53K per year. No match but with typically higher pay, sometimes overtime, and a high contribution limit you can easily make up for it.\"" }, { "docid": "427997", "title": "", "text": "\"typically, your employer will automatically stop making contributions once you hit the 18k$ limit. it is worth noting that employer contributions (e.g. \"\"matching\"\") do not count towards the 18k$ employee pre-tax contribution limit. however, if you have 2 employers during the year their combined payroll deductions might exceed the limit if you do not inform your later employer of the contributions you made at your former employer (or they ignore the info). in which case, you must request a refund of \"\"excess contributions\"\" from one of the plans (your choice). you must report the refund as taxable income on your taxes. if you do not make this request by the time you file your taxes, the tax man will reject your filing and \"\"adjust\"\" your return with more taxes and penalties. sometimes requesting a refund of excess contributions might cause your employer to remove \"\"matching\"\" funds, but i am not clear on the rules behind that. there are some 401k plans that allow \"\"supplemental after-tax contributions\"\" up to the combined employee/employer limit (53k$ in 2015 and 2016). it is a rare feature, and if your company offers it, you probably already know. however, generally it is governed by a separate contribution election that only take effect once you hit the employee pre-tax contribution limit (18k$ in 2015 and 2016). you could ask your hr department to be sure. 401k plans can be changed if there is enough employee demand for a rule change. especially in a small company, simply asking for them to allow dollar based contributions instead of percent based contributions can cause them to change the plan to allow it. similarly, you could request they allow \"\"supplemental after-tax contributions\"\", but that might be a harder change to get.\"" }, { "docid": "447482", "title": "", "text": "if you have a work-sponsored retirement plan A 401k plan counts as a work-sponsored retirement plan. If you are a highly compensated employee (this is $115,000 for 2012), even your 401k contributions are limited. Given that, is there any difference at all between having a traditional IRA and a normal, taxable (non-retirement) investment account? You should consider a Roth IRA if you are making too much for a traditional IRA. When you make even more, then you can't contribute to a Roth, but can only contribute post-tax money to a traditional IRA. Use Form 8606 to keep track of non-deductable contributions over the years. Publication 590 is the official IRS explanation of what is deductable or not." } ]

[ { "docid": "42301", "title": "", "text": "You can only contribute up to 5% of your salary? Odd. Usually 401(k) contributions are limited to some dollar amount in the vicinity of $15,000 or so a year. Normal retirement guidelines suggest that putting away 10-15% of your salary is enough that you probably won't need to worry much when you retire. 5% isn't likely to be enough, employer match or no. I'd try to contribute 10-15% of my salary. I think you're reading the rules wrong. I'm almost certain. It's definitely worth checking. If you're not, you should seriously consider supplementing this saving with a Roth IRA or just an after-tax account. So. If you're with Fidelity and don't know what to do, look for a target date fund with a date near your retirement (e.g. Target Retirement 2040) and put 100% in there until you have a better idea of what going on. All Fidelity funds have pretty miserable expense ratios, even their token S&P500 index fund from another provider, so you might as let them do some leg work and pick your asset allocation for you. Alternatively, look for the Fidelity retirement planner tools on their website to suggest an asset allocation. As a (very rough) rule of thumb, as you're saving for retirement you'll want to have N% of your portfolio in bonds and the rest in stocks, where N is your age in years. Your stocks should probably be split about 70% US and 30% rest-of-world, give or take, and your US stocks should be split about 64% large-cap, 28% mid-cap and 8% small-cap (that's basically how the US stock market is split)." } ]

[ { "docid": "317419", "title": "", "text": "I see you've marked an answer as accepted but I MUST tell you that STOPPING your 401k contribution all together is a bad idea. Your company match is 100% rate of return(or 50% depending on structure). I don't care what market you look at, or how bad a loan you take out, you will not receive 100% rate of return, or be charged 100% interest. Further, taking out a loan against your 401k effectively does two things: It is a loan that must be repaid according to the terms of your 401k AND in every 401k I've ever encountered, you cannot make contributions to the 401k until the loan is repaid. This in effect stops your contributions, and will almost certainly save you very little on your interest rates on your current loans. I have 4 potential solutions that may help achieve your goal without sacrificing your 401k match and transferring the debt from one lender to another, but they are conditional. Is your company match 100% up to 4% of your salary, or 50% of your contribution (up to a limit you have not yet reached)? This is important. If it is 100% up to 4%, stop committing the additional 4% and use that to pay down your debt...and after ward set up that 4% as auto pay into an IRA, not into the 401k. An IRA will make you more money because YOU have control over its management, not your employer. If it is 50% match, contribute until the match is met because you cannot get 50% rate of return anywhere, then take your additional monies and get an IRA. As far as your debt, in this scenario simply suck it up and pay it as is. You will lose far more than you gain by stopping your contributions. If you simply must reduce your expenses by 150$ month try refinancing the mortgage and rolling the 6500$ into it. If you get a big enough drop in the interest rate you could still end up paying less. OR If you cannot make the gain there, try snowballing the three payments. You do this by calling your student loan vendor and telling them you need to make much smaller payments, like even zero depending on the type of loan. Then take ALL of the money you are currently spending on the 3 loans and put into the car payment. When it's gone, roll the whole thing into the higher interest student loan, then finally roll it all into the last student loan. You'll pay it off faster, and student loans have lots of laws and regulations regarding working with payers to keep them paying something without breaking them. WHATEVER YOU DO, DO NOT STOP YOUR CONTRIBUTIONS. 50% OR 100%, THAT MONEY IS GUARANTEED AT A HIGHER RATE OF RETURN THAN YOU CAN GET ANYWHERE, ESPECIALLY GUARANTEED." }, { "docid": "122910", "title": "", "text": "The biggest challenge as a young person maxing out a 401k in my opinion is the challenge of saving for a house, and (if necessary) paying off student loans. You have to consider - are you OK renting for the next 3, 5, 10 years? Or do you eventually want to buy a place? how much will that cost vs your current expenses? That being said, I didn't max out but had over 8-10% of 401k contribution in the same situation you're in right now and I don't regret it. Rereading your question, I see you are considering investing in a Roth IRA. Especially at your current age, assuming your wages will go UP, investing to the company match with the 401K and then maxing out a Roth IRA would be my recommendation. THEN continue maxing out the 401k (if you wish). P.S. I highly recommend doing two things if you go down this path:" }, { "docid": "448067", "title": "", "text": "There's no such requirement in general. If your particular employer requires that - you should address the question to the HR/payroll department. From my experience, matches are generally not conditioned on when you contribute, only how much." }, { "docid": "552887", "title": "", "text": "My observations is that this seems like hardly enough to kill inflation. Is he right? Or are there better ways to invest? The tax deferral part of the equation isn't what dominates regarding whether your 401k beats 30 years of inflation; it is the return on investment. If your 401k account tanks due to a prolonged market crash just as you retire, then you might have been better off stashing the money in the bank. Remember, 401k money at now + 30 years is not a guaranteed return (though many speak as though it were). There is also the question as to whether fees will eat up some of your return and whether the funds your 401k invests in are good ones. I'm uneasy with the autopilot nature of the typical 401k non-strategy; it's too much the standard thing to do in the U.S., it's too unconscious, and strikes me as Ponzi-like. It has been a winning strategy for some already, sure, and maybe it will work for the next 30-100 years or more. I just don't know. There are also changes in policy or other unknowns that 30 years will bring, so it takes faith I don't have to lock away a large chunk of my savings in something I can't touch without hassle and penalty until then. For that reason, I have contributed very little to my 403b previously, contribute nothing now (though employer does, automatically. I have no match.) and have built up a sizable cash savings, some of which may be used to start a business or buy a house with a small or no mortgage (thereby guaranteeing at least not paying mortgage interest). I am open to changing my mind about all this, but am glad I've been able to at least save a chunk to give me some options that I can exercise in the next 5-10 years if I want, instead of having to wait 25 or more." }, { "docid": "391896", "title": "", "text": "Your question is very widely scoped, making it difficult to reply to, but I can provide my thoughts on at least the following part of the question: I have a 401k plan with T. Rowe Price, should I use them for other investments too? Using your employer's decision, on which 401k provider they've chosen, as a basis for making your own decision on a broker for investing $100k when you don't even know what kind of investments you want seems relatively unwise to me, even if one of your focuses is simplicity. That is, unless your $100k is tax-advantaged (e.g. an IRA or other 401k) and your drive for simplicity means you'd be happy to add $100k to any of your existing 401k investments. In which case you should look into whether you can roll the $100k over into your employer's 401k program. For the rest of my answer, I'll assume the $100k is NOT tax-advantaged. I assume you're suggesting this idea because of some perceived bundling of the relationship and ease of dealing with one company & website? Yes, they may be able to combine both accounts into a single login, and you may be able to interact with both accounts with the same basic interface, but that's about where the sharing will end. And even those benefits aren't guaranteed. For example, I still have a separate site to manage my money in my employer's 401k @ Fidelity than I do for my brokerage/banking accounts @ Fidelity. The investment options aren't the same for the two types of accounts, so the interface for making and monitoring investments isn't either. And you won't be able to co-mingle funds between the 401k and non-tax-advantaged money anyway, so you'll have two different accounts to deal with even if you have a single provider. Given that you'll have two different accounts, you might as well pick a broker/provider for the $100k that gives you the best investment options, lowest fees, and best UI experience for your chosen type/goal of investments. I would strongly recommend figuring out how you want to invest the $100k before trying to figure out which provider to use as a broker for doing the investment." }, { "docid": "32009", "title": "", "text": "\"So many complicated answers for a straight forward question. First to this point \"\"I am failing to see why would a person get an IRA, instead of just putting the same amount of money into a mutual fund...\"\" An IRA can be invested in a mutual fund. The IRA benefit over standard mutual fund is pre-tax contribution lowering your current tax liability. The advantage of an IRA over a 401k is control. Your employer controls where the 401k is invested, you control where your IRA is invested. Often employers have a very small number of options, because this keeps their costs with the brokerage low. 401k is AMAZING if you have employer matched contributions. Use them to the maximum your employer will match. After that OWN your IRA. Control is key when it comes to your money. On IRA's. Buy ROTH first. Contribute the calendar maximum. Then get a traditional. The benefit of ROTH is that you already paid taxes on the contribution so your withdrawal is not taxed AND they do not tax the interest earned like they do on a standard mutual fund.\"" }, { "docid": "447482", "title": "", "text": "if you have a work-sponsored retirement plan A 401k plan counts as a work-sponsored retirement plan. If you are a highly compensated employee (this is $115,000 for 2012), even your 401k contributions are limited. Given that, is there any difference at all between having a traditional IRA and a normal, taxable (non-retirement) investment account? You should consider a Roth IRA if you are making too much for a traditional IRA. When you make even more, then you can't contribute to a Roth, but can only contribute post-tax money to a traditional IRA. Use Form 8606 to keep track of non-deductable contributions over the years. Publication 590 is the official IRS explanation of what is deductable or not." }, { "docid": "290105", "title": "", "text": "I would hire an accountant to help set this up, given the sums of money involved. $53,000 would be the minimum amount of compensation needed to maximize the 401k. The total limit of contributions is the lesser of: 100% of the participant's compensation, or $53,000 ($59,000 including catch-up contributions) for 2015 and 2016. and they don't count contributions as compensation Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. (Your employer can tell you whether your retirement plan is qualified.) On the bright side, employer contributions aren't subject to FICA withholdings." }, { "docid": "545759", "title": "", "text": "There are lots of sub-parts to your question. Let's takle them one at a time. Should I worry about an IRA at this age? Absolutely! Or at least some form of retirement account. When you are young is the BEST time to start putting money into a retirement account because you have so much time for it to grow. Compounding interest is a magical thing. Even if you can only afford to put a very small amount in the account, do it! You will have to put a heck of a lot less money into the account over your working career if you start now. Is there a certain amount you need for the IRA deduction? No. Essentially with a traditional IRA you can just subtract the amount you deposited (up to the contribution limit) from your income when calculating your taxes. What kind of IRA should I get? I suggest a ROTH IRA, but be warned that with that kind you get the tax breaks when you retire, not now. If you think taxes will be higher in 40 years or so, then the Roth is a clear winner. Traditional IRA: Tax deduction this year for contribution; investment plus gains are taxed as income when you take the money out at retirement. Roth IRA: Investment amount is taxed in the year you put it in; no taxes on investment amount or gains when you take it out at retirement. Given the long horizon that you will be investing, the money is likely going to at least double. So the total amount you are taxed on over your lifetime would probably be less with the ROTH even if tax rates remain the same. Is the 401K a better option? If they offer a match (most do) then it is a no-brainer, the employer 401K always comes out on top because they are basically paying you extra to put money into savings. If there is no match, I suggest a Roth because company 401K plans usually have hidden fees that are much higher than you are going to pay for setting up your own IRA or Roth IRA with a broker." }, { "docid": "128107", "title": "", "text": "\"You can (and definitely should) withdraw any part of the contribution that will put you over the contribution limit. You can (and should if you need to) withdraw to repay any medical payments you made from outside the account. You can (but should avoid at all costs) withdraw (distribute) from the HSA for non-medical reasons. Here's the IRS publication which covers this: https://www.irs.gov/publications/p969 Here's the bit about distributions that covers what you're trying to do: You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. You don’t have to make distributions from your HSA each year. It is better to pay from your checking and reimburse than to over-fund the HSA. Best route forward is to reduce your contributions for the rest of the year, especially if continuing them will cause excess contributions. Another nasty gotcha: Excess contributions. You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. Excess contributions aren’t deductible. Excess contributions made by your employer are included in your gross income. If the excess contribution isn’t included in box 1 of Form W-2, you must report the excess as \"\"Other income\"\" on your tax return. Generally, you must pay a 6% excise tax on excess contributions. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. The excise tax applies to each tax year the excess contribution remains in the account. You may withdraw some or all of the excess contributions and avoid paying the excise tax on the amount withdrawn if you meet the following conditions. •You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made. •You withdraw any income earned on the withdrawn contributions and include the earnings in \"\"Other income\"\" on your tax return for the year you withdraw the contributions and earnings. If you will not be over your maximum contribution, let the contribution ride. Make sure your HSA balance is divided between cash, stock fund, bond fund. Much like your 401k. Because the part that you don't spend on medical expenses this year can be spent in future years' medical expenses, and if you have anything left when you retire you can spend it on whatever you want. And the funds, including growth, are not taxed until you distribute them. Bottom line: if the funds will not cause excess contribution, leave them in. Otherwise, take them out as soon as possible.\"" }, { "docid": "224530", "title": "", "text": "\"Logic fail. The qty of shares is irrelevant. What matters is the value, which is, of course, quite high -- and, what's more, the P/E ratio, which is extremely favorable. Having worked in operations at Apple for 7 years, I can tell you that the company is very lean and efficient. 25% matching is extremely generous. 25% contribution rates are standard in corporate jobs (contribution rates are what maximum percentage of your pre-tax income you can opt to set aside into a 401K; this is different than matching). It absolutely is not bare bones to be given 25% matching. Although I no longer work at Apple, I still have my 401K, and the administration of it is good, as is the choice of funds. Back to the matching... It's free money. For every $1 you put in your 401K (pretax, btw), Apple puts in a quarter. Having worked in other corporations over my career, I can tell you that this level of matching is pretty much as good as it gets. For a good part of the time I worked there I made around $30K (not in Retail, but in Operations, as mentioned before). I maxed out the Employee Stock Purchase Program contribution and mostly maxed out my 401K contribution. Now, 12 years later, my stock appreciated beyond my wildest expectations. I have made well over six figures on it over the years. If I never sold any, it would be worth over $500,000 by now. All that from 10% contributions on a salary that ranged from about $26K when I started out to about $46K when I left 7 years later. My 401K holdings are worth about $60K, I think, invested extremely conservatively. I have had it in money market funds since right before the 2008/2009 crash, which I anticipated. So the investment benefits at Apple served me extremely well. My stock appreciation paid for my car, and it will soon cover the down payment on a house. I was essentially able to \"\"retire\"\" to be a stay-at-home-mom when my son was born, thanks to the safety net I have from my Apple stock. Regarding health benefits... I think you meant to say copays, not deductibles. When I was there, there were no copays. I forgot what the deductibles were, but for most routine visits, you wouldn't need to pay out of pocket. Annual physicals are included in the health plan, up to $250. The health plan works with various local providers to ensure that the $250 allotment will cover all expenses needed for an annual physical. This physical is separate and in addition to a women's health annual exam (pap smear/pelvic exam/etc) that is also included without copay. I'm pretty sure annual mammograms are covered. All prenatal visits are covered with zero copay. All child well checks, including immunizations, covered with zero copay. Two dental checks a year. Dental Xrays at regular intervals included. Annual vision exams and, I think $300 annually towards glasses or contacts included, IIRC. Time off was pretty standard and accrued by the hour worked, which was nice. There was no \"\"you have to be with the company for X length of time\"\" before time off benefits began to accrue, or before any benefits kicked in, for that matter. By about Year 5, I had easily racked up enough vacation days to take 3 weeks off at a time. The longer you have been with the company, the faster your time off accrues. And each summer they'd offer a cash-out program, where you could double up on time off, where if you took off a week, you could opt to deplete your accrued vacation time by two weeks and get double pay for it. A lot of people liked this option. The points for absenteeism thing seemed a bit silly -- and seemed to only have been implemented in one store and then only for a brief time. From what I gathered in the article, it was an experiment that failed miserably. The other corporation I have spent a significant amount of time working at is Whole Foods Market, in their corporate office. While both Apple and Whole Foods always are selected as two of the top companies to work for by Forbes in their annual report, as far as benefits went, Apple's were far superior in most aspects. With respect to company culture, I personally found Whole Foods to be better, but that was sort of a personal preference. Both were dream jobs, and I consider myself very fortunate to have had the opportunity to work for two outstanding companies that both treated me very well. Oh- and incidentally, Ron Johnson, who was VP of Retail at Apple from the inception of the stores until like a year ago, now is CEO of JC Penny, and, I suspect, is fully behind JCP's ad campaigns which include images of families with same-sex parents. JCP has stepped deliberately and full-on into what is, unfortunately, still a controversial topic and has taken a firm stand in support of all types of loving families. I have to wonder if part of this might have been inspired by the fact that Apple's new CEO, Tim Cook, is gay. Ron Johnson would have worked closely alongside Cook during his tenure. I met Ron once and found him to be a great guy, and I worked with the Retail operations folks from the time the stores launched. They were a great team that worked hard and were very sincere and dedicated. You could see his leadership reflecting in each member of the team.\"" }, { "docid": "501290", "title": "", "text": "On the statement it now tracks how much is contributed to the account pre and post tax. This is the key. Your withdrawals will be proportional. Assuming you have contributed 90% in regular contributions (pre-tax) and 10% in Roth (post tax), when you withdraw $1000, it will be $900 from the regular (taxed fully) and $100 from the Roth (not taxed, assuming its a qualified distribution). Earnings attributed proportionally to the contributions. I agree with you that it is not the best option, and would also prefer separate accounts, but with 401k - the account is per employee. Instead of doing 401k Roth/Non-Roth consider switching to Regular 401k and Roth IRA - then you can separate the funds easily as you wish." }, { "docid": "49614", "title": "", "text": "\"401k plans are required to not discriminate against the non-HCE participants, and one way they achieve this is by limiting the percentage of wages that HCEs can contribute to the plan to the average annual percentage contribution by the non-HCE participants or 3% whichever is higher. If most non-HCE employees contribute only 3% (usually to capture the employer match but no more), then the HCEs are stuck with 3%. However, be aware that in companies that award year-end bonuses to all employees, many non-HCEs contribute part of their bonuses to their 401k plans, and so the average annual percentage can rise above 3% at the end of year. Some payroll offices have been known to ask all those who have not already maxed out their 401k contribution for the year (yes, it is possible to do this even while contributing only 3% if you are not just a HCE but a VHCE) whether they want to contribute the usual 3%, or a higher percentage, or to contribute the maximum possible under the nondiscrimination rules. So, you might be able to contribute more than 3% if the non-HCEs put in more money at the end of the year. With regard to NQSPs, you pretty much have their properties pegged correctly. That money is considered to be deferred compensation and so you pay taxes on it only when you receive it upon leaving employment. The company also gets to deduct it as a business expense when the money is paid out, and as you said, it is not money that is segregated as a 401k plan is. On the other hand, you have earned the money already: it is just that the company is \"\"holding\"\" it for you. Is it paying you interest on the money (accumulating in the NQSP, not paid out in cash or taxable income to you)? Would it be better to just take the money right now, pay taxes on it, and invest it yourself? Some deferred compensation plans work as follows. The deferred compensation is given to you as a loan in the year it is earned, and you pay only interest on the principal each year. Since the money is a loan, there is no tax of any kind due on the money when you receive it. Now you can invest the proceeds of this loan and hopefully earn enough to cover the interest payments due. (The interest you pay is deductible on Schedule A as an Investment Interest Expense). When employment ceases, you repay the loan to the company as a lump sum or in five or ten annual installments, whatever was agreed to, while the company pays you your deferred compensation less taxes withheld. The net effect is that you pay the company the taxes due on the money, and the company sends this on to the various tax authorities as money withheld from wages paid. The advantage is that you do not need to worry about what happens to your money if the company fails; you have received it up front. Yes, you have to pay the loan principal to the company but the company also owes you exactly that much money as unpaid wages. In the best of all worlds, things will proceed smoothly, but if not, it is better to be in this Mexican standoff rather than standing in line in bankruptcy court and hoping to get pennies on the dollar for your work.\"" }, { "docid": "289064", "title": "", "text": "\"If you are the sole owner (or just you and your spouse) and expect to be that way for a few years, consider the benefits of an individual 401(k). The contribution limits are higher than an IRA, and there are usually no fees involved. You can google \"\"Individual 401k\"\" and any of the major investment firms (Fidelity, Schwab, etc) will set one up free of charge. This option gives you a lot of freedom to decide how much money to put away without any plan management fees. The IRS site has all the details in an article titled One-Participant 401(k) Plans. Once you have employees, if you want to set up a retirement plan for them, you'll need to switch to a traditional, employer-sponsored 401k, which will involve some fees on your part. I seem to recall $2k/yr in fees when I had a sponsored 401(k) for my company, and I'm sure this varies widely. If you have employees and don't feel a need to have a company-wide retirement plan, you can set up your own personal IRA and simply not offer a company plan to your employees. The IRA contribution limits are lower than an individual 401(k), but setting it up is easy and fee-free. So basically, if you want to spend $0 on plan management fees, get an individual 401(k) if you are self-employed, or an IRA for yourself if you have employees.\"" }, { "docid": "517078", "title": "", "text": "\"Generally if you need to tap into your retirement for the house - you probably shouldn't buy the house. But that's your call. There are several things you could do. Sue your CPA \"\"friend\"\" for malpractice. Especially if there's any actual proof of that stupid suggestion. Check with your 401k administrator about home-purchase loan from the 401k. You'll be borrowing your own money, and repaying yourself back with interest, but it will be tax free and with no penalties. Keep in mind: if you cannot repay the loan, or you leave your employer without repaying it in full - the remaining balance will be considered withdrawal and you'll pay income taxes + 10% penalty on it. If you have an IRA, you can withdraw up to 10K without penalty if this is your first house (i.e.: you didn't own a house in the last 3 years), and is going to be your primary residence. You'll still pay taxes on the 10K. But, this is not available for 401k plans. You can request equal payments distribution calculated based on your life expectancy (This is the infamous 72(t)(2) distribution, even though many of the exceptions are in the IRC 72(t)(2). This in particular is 72(t)(2)(A)(iv)). Here's the full list of exceptions. Note that even if you're willing to pay the 10% penalty, many 401k plans do not allow distributions as long as you're still employed with the sponsoring employer. If you take a hardship distribution from your 401k (if it even allows it), you'll be prohibited from contributing for 6 months, and your employer will be prohibited from contributing on your behalf as well. I.e.: not only you take out your savings, you'll be barred from saving back. Also, in the same FAQ, it tells you that the hardship distribution can only include the amounts up to the original contributions (less whatever distributions already made), and not earnings or match. I.e.: it may actually be much less than the 40K you're counting on.\"" }, { "docid": "406561", "title": "", "text": "\"The limit on SEP IRA is 25%, not 20%. If you're self-employed (filing on Schedule C), then it's taken on net earning, which in your example would be 25% of $90,000. (https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people) JoeTaxpayer is correct as regards the 401(k) limits. The elective deferrals are per person - That's a cap in sum across multiple plans and across both traditional and Roth if you have those. In general, it's actually across other retirement plan types too - See below. If you're self-employed and set-up a 401(k) for your own business, the elective deferral is still aggregated with any other 401(k) plans in which you participate that year, but you can still make the employer contribution on your own plan. This IRS page is current a pretty good one on this topic: https://www.irs.gov/retirement-plans/one-participant-401k-plans Key quotes that are relevant: The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both: •Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit: ◦$18,000 in 2015 and 2016, or $24,000 in 2015 and 2016 if age 50 or over; plus •Employer nonelective contributions up to: ◦25% of compensation as defined by the plan, or ◦for self-employed individuals, see discussion below It continues with this example: The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $18,000 in 2015 and 2016. Although a plan's terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans. EXAMPLE Ben, age 51, earned $50,000 in W-2 wages from his S Corporation in 2015. He deferred $18,000 in regular elective deferrals plus $6,000 in catch-up contributions to the 401(k) plan. His business contributed 25% of his compensation to the plan, $12,500. Total contributions to the plan for 2015 were $36,500. This is the maximum that can be contributed to the plan for Ben for 2015. A business owner who is also employed by a second company and participating in its 401(k) plan should bear in mind that his limits on elective deferrals are by person, not by plan. He must consider the limit for all elective deferrals he makes during a year. Notice in the example that Ben contributed more that than his elective limit in total (his was $24,000 in the example because he was old enough for the $6,000 catch-up in addition to the $18,000 that applies to everyone else). He did this by declaring an employer contribution of $12,500, which was limited by his compensation but not by any of his elective contributions. Beyond the 401(k), keep in mind that elective contributions are capped across different types of retirement plans as well, so if you have a SEP IRA and a solo 401(k), your total contributions across those plans are also capped. That's also mentioned in the example. Now to the extent that you're considering different types of plans, that's a whole question in itself - One that might be worth consulting a dedicated tax advisor. A few things to consider (not extensive list): As for payroll / self-employment tax: Looks like you will end up paying Medicare, including the new \"\"Additional Medicare\"\" tax that came with the ACA, but not SS: If you have wages, as well as self-employment earnings, the tax on your wages is paid first. But this rule only applies if your total earnings are more than $118,500. For example, if you will have $30,000 in wages and $40,000 in selfemployment income in 2016, you will pay the appropriate Social Security taxes on both your wages and business earnings. In 2016, however, if your wages are $78,000, and you have $40,700 in net earnings from a business, you don’t pay dual Social Security taxes on earnings more than $118,500. Your employer will withhold 7.65 percent in Social Security and Medicare taxes on your $78,000 in earnings. You must pay 15.3 percent in Social Security and Medicare taxes on your first $40,500 in self-employment earnings and 2.9 percent in Medicare tax on the remaining $200 in net earnings. https://www.ssa.gov/pubs/EN-05-10022.pdf Other good IRS resources:\"" }, { "docid": "184077", "title": "", "text": "\"Your employer sends the money that you choose to contribute, plus employer match if any, to the administrator of the 401k plan who invests the money as you have directed, choosing between the alternatives offered by the administrator. Typically, the alternatives are several different mutual funds with different investment styles, e.g. a S&P 500 index fund, a bond fund, a money-market fund, etc. Now, a statement such as \"\"I see my 401k is up 10%\"\" is meaningless unless you tell us how you are making the comparison. For example, if you have just started employment and $200 goes into your 401k each month and is invested in a money-market fund (these are paying close to 0% interest these days), then your 11th contribution increases your 401k from $2000 to $2200 and your 401k is \"\"up 10%\"\". More generally, suppose for simplicity that all the 401k investment is in just one (stock) mutual fund and that you own 100 shares of the fund as of right now. Suppose also that your next contribution will not occur for three weeks when you get your next paycheck, at which time additional shares of the mutual fund will be purchased Now, the value of the mutual fund shares (often referred to as net asset value or NAV) fluctuates as stock prices rise and fall, and so the 401k balance = number of shares times NAV changes in accordance with these fluctuations. So, if the NAV increases by 10% in the next two weeks, your 401k balance will have increased by 10%. But you still own only 100 shares of the mutual fund. You cannot use the 10% increase in value to buy more shares in the mutual fund because there is no money to pay for the additional shares you wish to purchase. Notice that there is no point selling some of the shares (at the 10% higher NAV) to get cash because you will be purchasing shares at the higher NAV too. You could, of course, sell shares of the stock mutual fund at the higher NAV and buy shares of some other fund available to you in the 401k plan. One advantage of doing this inside the 401k plan is that you don't have to pay taxes (now) on the 10% gain that you have made on the sale. Outside tax-deferred plans such as 401k and IRA plans, such gains would be taxable in the year of the sale. But note that selling the shares of the stock fund and buying something else indicates that you believe that the NAV of your stock mutual fund is unlikely to increase any further in the near future. A third possibility for your 401k being up by 10% is that the mutual fund paid a dividend or made a capital gains distribution in the two week period that we are discussing. The NAV falls when such events occur, but if you have chosen to reinvest the dividends and capital gains, then the number of shares that you own goes up. With the same example as before, the NAV goes up 10% in two weeks at which time a capital gains distribution occurs, and so the NAV falls back to where it was before. So, before the capital gains distribution, you owned 100 shares at $10 NAV which went up to $11 NAV (10% increase in NAV) for a net increase in 401k balance from $1000 to $1100. The mutual fund distributes capital gains in the amount of $1 per share sending the NAV back to $10, but you take the $100 distribution and plow it back into the mutual fund, purchasing 10 shares at the new $10 NAV. So now you own 110 shares at $10 NAV (no net change in price in two weeks) but your 401k balance is $1100, same as it was before the capital gains distribution and you are up 10%. Or, you could have chosen to invest the distributions into, say, a bond fund available in your 401k plan and still be up 10%, with no change in your stock fund holding, but a new investment of $100 in a bond fund. So, being up 10% can mean different things and does not necessarily mean that the \"\"return\"\" can be used to buy more shares.\"" }, { "docid": "552031", "title": "", "text": "Roth and 401k are first because with the Roth you have tax free withdrawals (awesome!) and with the 401k you have tax free contributions (awesome!) as well as potential employer matching. Traditional IRAs would be the final thing I would contribute to after both of those. And in your case, unless you make around 150k, you aren't maxing your 401k; so I'd do that first." }, { "docid": "140330", "title": "", "text": "Adding to the excellent answers already given, we typically advise members to contribute as much as needed to get a full employer match in their 401K, but not more. We then redirect any additional savings to a traditional IRA or ROTH IRA (depending on their age, income, and future plans). Only once they've exhausted the $5000 maximum in their IRA will we look at putting more money into the 401K. The ROTH IRA is a beautiful and powerful vehicle for savings. The only reason to consider taking money out of the ROTH is in a case of serious catastrophe." } ]

[ { "docid": "7748", "title": "", "text": "\"For your first question, the general guidelines I've seen recommended are as follows: As to your second question, portfolio management is something you should familiarize yourself with. If you trust it to other people, don't be surprised when they make \"\"mistakes\"\". Remember, they get paid regardless of whether you make money. Consider how much any degree of risk will affect you. When starting out, your contributions make up most of the growth of your accounts; now is the time when you can most afford to take higher risk for higher payouts (still limiting your risk as much as possible, of course). A 10% loss on a portfolio of $50k can be replaced with a good year's contributions. Once your portfolio has grown to a much larger sum, it will be time to dial back the risk and focus on preserving your capital. When choosing investments, always treat your porfolio as a whole - including non-retirement assets (other investment accounts, savings, even your house). Don't put too many eggs from every account into the same basket, or you'll find that 30% of your porfolio is a single investment. Also consider that some investments have different tax consequences, and you can leverage the properties of each account to offset that.\"" } ]

[ { "docid": "545759", "title": "", "text": "There are lots of sub-parts to your question. Let's takle them one at a time. Should I worry about an IRA at this age? Absolutely! Or at least some form of retirement account. When you are young is the BEST time to start putting money into a retirement account because you have so much time for it to grow. Compounding interest is a magical thing. Even if you can only afford to put a very small amount in the account, do it! You will have to put a heck of a lot less money into the account over your working career if you start now. Is there a certain amount you need for the IRA deduction? No. Essentially with a traditional IRA you can just subtract the amount you deposited (up to the contribution limit) from your income when calculating your taxes. What kind of IRA should I get? I suggest a ROTH IRA, but be warned that with that kind you get the tax breaks when you retire, not now. If you think taxes will be higher in 40 years or so, then the Roth is a clear winner. Traditional IRA: Tax deduction this year for contribution; investment plus gains are taxed as income when you take the money out at retirement. Roth IRA: Investment amount is taxed in the year you put it in; no taxes on investment amount or gains when you take it out at retirement. Given the long horizon that you will be investing, the money is likely going to at least double. So the total amount you are taxed on over your lifetime would probably be less with the ROTH even if tax rates remain the same. Is the 401K a better option? If they offer a match (most do) then it is a no-brainer, the employer 401K always comes out on top because they are basically paying you extra to put money into savings. If there is no match, I suggest a Roth because company 401K plans usually have hidden fees that are much higher than you are going to pay for setting up your own IRA or Roth IRA with a broker." }, { "docid": "564796", "title": "", "text": "\"Since most of the answers are flawed in their logic, I decided to respond here. 1) \"\"What if you lose your job, you can't pay back the loan\"\" The point of the question was to reduce the amount paid per month. So obviously it would be easier to pay off the 401k loan rather than the 3 separate loans that are in place now. Also it's stated in the question that there's a mortgage, a child with medical costs, a car loan, student loans, other debt. On the list of priorities the 401k loan does not make the top 10 concerns if they lost their job. 2) \"\"Consider stopping the 401k contribution\"\" This is such a terrible idea. If you make the full contribution to the 401k and then just withdraw from the 401k rather than getting a loan you only pay a 10% penalty tax. You still get 90% of the company match. 3) \"\"You lose compound interest\"\" While currently the interest you get on a 401k (depending on how that money is invested) is higher than the interest you pay on your loans (which means it would be advantageous to keep the loans and keep contributing to the 401k), it's very unreliable and might even go down. I think you actually have a good case for getting a loan against the 401k if a) You have your spending and budget under control b) Your income is consistent c) You are certain that the loan will be paid back. My suggestion would be to take a loan against the 401k, but keep the current spending on the loans consistent. If you don't need the extra $150 per month, you really should try to pay off the loans as fast as you can. If you do need the $150 extra, you are lowering the mental threshold for getting more loans in the future.\"" }, { "docid": "224530", "title": "", "text": "\"Logic fail. The qty of shares is irrelevant. What matters is the value, which is, of course, quite high -- and, what's more, the P/E ratio, which is extremely favorable. Having worked in operations at Apple for 7 years, I can tell you that the company is very lean and efficient. 25% matching is extremely generous. 25% contribution rates are standard in corporate jobs (contribution rates are what maximum percentage of your pre-tax income you can opt to set aside into a 401K; this is different than matching). It absolutely is not bare bones to be given 25% matching. Although I no longer work at Apple, I still have my 401K, and the administration of it is good, as is the choice of funds. Back to the matching... It's free money. For every $1 you put in your 401K (pretax, btw), Apple puts in a quarter. Having worked in other corporations over my career, I can tell you that this level of matching is pretty much as good as it gets. For a good part of the time I worked there I made around $30K (not in Retail, but in Operations, as mentioned before). I maxed out the Employee Stock Purchase Program contribution and mostly maxed out my 401K contribution. Now, 12 years later, my stock appreciated beyond my wildest expectations. I have made well over six figures on it over the years. If I never sold any, it would be worth over $500,000 by now. All that from 10% contributions on a salary that ranged from about $26K when I started out to about $46K when I left 7 years later. My 401K holdings are worth about $60K, I think, invested extremely conservatively. I have had it in money market funds since right before the 2008/2009 crash, which I anticipated. So the investment benefits at Apple served me extremely well. My stock appreciation paid for my car, and it will soon cover the down payment on a house. I was essentially able to \"\"retire\"\" to be a stay-at-home-mom when my son was born, thanks to the safety net I have from my Apple stock. Regarding health benefits... I think you meant to say copays, not deductibles. When I was there, there were no copays. I forgot what the deductibles were, but for most routine visits, you wouldn't need to pay out of pocket. Annual physicals are included in the health plan, up to $250. The health plan works with various local providers to ensure that the $250 allotment will cover all expenses needed for an annual physical. This physical is separate and in addition to a women's health annual exam (pap smear/pelvic exam/etc) that is also included without copay. I'm pretty sure annual mammograms are covered. All prenatal visits are covered with zero copay. All child well checks, including immunizations, covered with zero copay. Two dental checks a year. Dental Xrays at regular intervals included. Annual vision exams and, I think $300 annually towards glasses or contacts included, IIRC. Time off was pretty standard and accrued by the hour worked, which was nice. There was no \"\"you have to be with the company for X length of time\"\" before time off benefits began to accrue, or before any benefits kicked in, for that matter. By about Year 5, I had easily racked up enough vacation days to take 3 weeks off at a time. The longer you have been with the company, the faster your time off accrues. And each summer they'd offer a cash-out program, where you could double up on time off, where if you took off a week, you could opt to deplete your accrued vacation time by two weeks and get double pay for it. A lot of people liked this option. The points for absenteeism thing seemed a bit silly -- and seemed to only have been implemented in one store and then only for a brief time. From what I gathered in the article, it was an experiment that failed miserably. The other corporation I have spent a significant amount of time working at is Whole Foods Market, in their corporate office. While both Apple and Whole Foods always are selected as two of the top companies to work for by Forbes in their annual report, as far as benefits went, Apple's were far superior in most aspects. With respect to company culture, I personally found Whole Foods to be better, but that was sort of a personal preference. Both were dream jobs, and I consider myself very fortunate to have had the opportunity to work for two outstanding companies that both treated me very well. Oh- and incidentally, Ron Johnson, who was VP of Retail at Apple from the inception of the stores until like a year ago, now is CEO of JC Penny, and, I suspect, is fully behind JCP's ad campaigns which include images of families with same-sex parents. JCP has stepped deliberately and full-on into what is, unfortunately, still a controversial topic and has taken a firm stand in support of all types of loving families. I have to wonder if part of this might have been inspired by the fact that Apple's new CEO, Tim Cook, is gay. Ron Johnson would have worked closely alongside Cook during his tenure. I met Ron once and found him to be a great guy, and I worked with the Retail operations folks from the time the stores launched. They were a great team that worked hard and were very sincere and dedicated. You could see his leadership reflecting in each member of the team.\"" }, { "docid": "517078", "title": "", "text": "\"Generally if you need to tap into your retirement for the house - you probably shouldn't buy the house. But that's your call. There are several things you could do. Sue your CPA \"\"friend\"\" for malpractice. Especially if there's any actual proof of that stupid suggestion. Check with your 401k administrator about home-purchase loan from the 401k. You'll be borrowing your own money, and repaying yourself back with interest, but it will be tax free and with no penalties. Keep in mind: if you cannot repay the loan, or you leave your employer without repaying it in full - the remaining balance will be considered withdrawal and you'll pay income taxes + 10% penalty on it. If you have an IRA, you can withdraw up to 10K without penalty if this is your first house (i.e.: you didn't own a house in the last 3 years), and is going to be your primary residence. You'll still pay taxes on the 10K. But, this is not available for 401k plans. You can request equal payments distribution calculated based on your life expectancy (This is the infamous 72(t)(2) distribution, even though many of the exceptions are in the IRC 72(t)(2). This in particular is 72(t)(2)(A)(iv)). Here's the full list of exceptions. Note that even if you're willing to pay the 10% penalty, many 401k plans do not allow distributions as long as you're still employed with the sponsoring employer. If you take a hardship distribution from your 401k (if it even allows it), you'll be prohibited from contributing for 6 months, and your employer will be prohibited from contributing on your behalf as well. I.e.: not only you take out your savings, you'll be barred from saving back. Also, in the same FAQ, it tells you that the hardship distribution can only include the amounts up to the original contributions (less whatever distributions already made), and not earnings or match. I.e.: it may actually be much less than the 40K you're counting on.\"" }, { "docid": "81148", "title": "", "text": "Your assumptions are flawed or miss crucial details. An employer sponsored 401k typically limits the choices of investments, whereas an IRA typically gives you self directed investment choices at a brokerage house or through a bank account. You are correct in noticing that you are limited in making your own pre-tax contributions to a traditional IRA in many circumstances when you also have an employer sponsored 401k, but you miss the massive benefit you have: You can rollover unlimited amounts from a traditional 401k to a traditional IRA. This is a benefit that far exceeds the capabilities of someone without a traditional 401k who is subject to the IRA contribution limits. Your rollover capabilities completely gets around any statutory contribution limit. You can contribution, at time of writing, $18,000 annually to a 401k from salary deferrals and an additional $35,000 from employer contributions for a maximum of $53,000 annually and roll that same $53,000 into an IRA if you so desired. That is a factor. This should be counterweighed with the borrowing capabilities of a 401k, which vastly exceeds an IRA again. The main rebuttal to your assumptions is that you are not necessarily paying taxes to fund an IRA." }, { "docid": "294573", "title": "", "text": "You should always always enroll in an espp if there is no lockup period and you can finance the contributions at a non-onerous rate. You should also always always sell it right away regardless of your feelings for the company. If you feel you must hold company stock to be a good employee buy some in your 401k which has additional advantages for company stock. (Gains treated as gains and not income on distribution.) If you can't contribute at first, do as much as you can and use your results from the previous offering period to finance a greater contribution the next period. I slowly went from 4% to 10% over 6 offering periods at my plan. The actual apr on a 15% discount plan is ~90% if you are able to sell right when the shares are priced. (Usually not the case, but the risk is small, there usually is a day or two administrative lockup (getting the shares into your account)) even for ESPP's that have no official lockup period. see here for details on the calculation. http://blog.adamnash.com/2006/11/22/your-employee-stock-purchase-plan-espp-is-worth-a-lot-more-than-15/ Just a note For your reference I worked for Motorola for 10 years. A stock that fell pretty dramatically over those 10 years and I always made money on the ESPP and more than once doubled my money. One additional note....Be aware of tax treatment on espp. Specifically be aware that plans generally withhold income tax on gains over the purchase price automatically. I didn't realize this for a couple of years and double taxed myself on those gains. Fortunately I found out my error in time to refile and get the money back, but it was a headache." }, { "docid": "597574", "title": "", "text": "The amount you contribute will reduce the taxable income for each paycheck, but it won't impact the level of your social security and medicare taxes. A 401(k) plan is a qualified deferred compensation plan in which an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pretax basis. Generally, these deferred wages (commonly referred to as elective contributions) are not subject to income tax withholding at the time of deferral, and they are not reflected on your Form 1040 (PDF) since they were not included in the taxable wages on your Form W-2 (PDF). However, they are included as wages subject to withholding for social security and Medicare taxes. In addition, employers must report the elective contributions as wages subject to federal unemployment taxes. You might be able to keep this up for more than 7 weeks if the company offers health, dental and vision insurance. Your contributions for these policies would need to be paid for before you contribute to the 401K. Of course these items are also pre-tax so they will keep the taxable amount at zero. If there was a non-pretax deduction on your pay check that would keep the check at zero, but there would be taxes owed. This might be union dues, but it can also be some life and disability insurance polices. Most stubs specify which deductions are pre-tax, and which are post-tax. Warning. If you get the company match some companies give you the maximum match for those 7 weeks, then zero for the rest of the year. Others will still credit you with a match at the end of the year saying if you should get the benefit. It is not required that they do this. Check the company documents. You could also contribute post-tax money, which is different than Roth 401K, for the rest of the year to keep the match going. Note: If you are turning 50 this year, or are already 50, then you can contribute an additional $5,500" }, { "docid": "554739", "title": "", "text": "\"There are certain allowable reasons to withdraw money from a 401K. The desire to free your money from a \"\"bad\"\" plan is not one of them. A rollover is a special type of withdrawal that is only available after one leaves their current employer. So as long as you stay with your current company, you cannot rollover. [Exception: if you are over age 59.5] One option is to talk to HR, see if they can get a expansion of offerings. You might have some suggestions for mutual funds that you would like to see. The smaller the company the more likely you will have success here. That being said, there is some research to support having few choices. Too many choices intimidates people. It's quite popular to have \"\"target funds\"\" That is funds that target a certain retirement year. Being that I will be 50 in 2016, I should invest in either a 2030 or 2035 fund. These are a collection of funds that rebalances the investment as they age. The closer one gets to retirement the more goes into bonds and less into stocks. However, I think such rebalancing is not as smart as the experts say. IMHO is almost always better off heavily invested in equity funds. So this becomes a second option. Invest in a Target fund that is meant for younger people. In my case I would put into a 2060 or even 2065 target. As JoeTaxpayer pointed out, even in a plan that has high fees and poor choices one is often better off contributing up to the match. Then one would go outside and contribute to an individual ROTH or IRA (income restrictions may apply), then back into the 401K until the desired amount is invested. You could always move on to a different employer and ask some really good questions about their 401K. Which leads me back to talking with HR. With the current technology shortage, making a few tweaks to the 401K, is a very cheap way to make their employees happy. If you can score a 1099 contracting gig, you can do a SEP which allows up to a whopping 53K per year. No match but with typically higher pay, sometimes overtime, and a high contribution limit you can easily make up for it.\"" }, { "docid": "42301", "title": "", "text": "You can only contribute up to 5% of your salary? Odd. Usually 401(k) contributions are limited to some dollar amount in the vicinity of $15,000 or so a year. Normal retirement guidelines suggest that putting away 10-15% of your salary is enough that you probably won't need to worry much when you retire. 5% isn't likely to be enough, employer match or no. I'd try to contribute 10-15% of my salary. I think you're reading the rules wrong. I'm almost certain. It's definitely worth checking. If you're not, you should seriously consider supplementing this saving with a Roth IRA or just an after-tax account. So. If you're with Fidelity and don't know what to do, look for a target date fund with a date near your retirement (e.g. Target Retirement 2040) and put 100% in there until you have a better idea of what going on. All Fidelity funds have pretty miserable expense ratios, even their token S&P500 index fund from another provider, so you might as let them do some leg work and pick your asset allocation for you. Alternatively, look for the Fidelity retirement planner tools on their website to suggest an asset allocation. As a (very rough) rule of thumb, as you're saving for retirement you'll want to have N% of your portfolio in bonds and the rest in stocks, where N is your age in years. Your stocks should probably be split about 70% US and 30% rest-of-world, give or take, and your US stocks should be split about 64% large-cap, 28% mid-cap and 8% small-cap (that's basically how the US stock market is split)." }, { "docid": "152595", "title": "", "text": "\"Well, as you say, the instructions for form W-2 (for your employer to fill out) say You must report all employer contributions (including an employee's contributions through a cafeteria plan) to an HSA in box 12 of Form W-2 with code W. Employer contributions to an HSA that are not excludable from the income of the employee also must be reported in boxes 1, 3, and 5. However, while it's your employer's job to fill out W-2 correctly, it's only your job to file your taxes correctly. Especially as you say your box 1/3/5 income is correct, this isn't too hard to do. You should file Form 8889 with your return and report the contributions on Line 9 as Employer Contributions. (And as you say, both what the employer contributed outright and what you had deducted from your pay are both Employer Contributions.) Be sure to keep your final pay stub for the year (or other documentation) showing that your employer did contribute that amount, just in case the IRS does end up questioning it for some reason. If you really want to, you could try calling the IRS and letting them know that you have contributions that weren't reported on your W-2 to see if they want to follow up with your employer about correcting their documentation, if your efforts have been fruitless. There's even a FAQ page on the IRS site about how to contact them when your employer isn't giving you a correct W-2 and how to fill out a Form 4852 instead of using the W-2, which I'd recommend if the amount of income listed was wrong or if there were some other more \"\"major\"\" problem with the form. Most likely, though, since it's not going to affect the amount of tax anybody will pay, it's not going to be at the top of their list. I would worry more filling out the forms you need to fill out correctly rather than worrying about the forms your employer isn't filling out correctly.\"" }, { "docid": "117845", "title": "", "text": "\"Your employer could consider procuring benefits via a third party administrator, which provides benefits to and bargains collectively on behalf of multiple small companies. I used to work for a small start-up that did exactly that to improve their benefits across the board, including the 401k. The fees were still higher than buying a Vanguard index or ETF directly, but much better than the 1% you're talking about. In the meantime, here's my non-professional advice from personal experience and hindsight: If you're in a low/medium tax bracket and your 401k sucks, you might be better off to pay the tax up front and invest in a taxable account for the flexibility (assuming you're disciplined enough that you don't need the 401k to protect you from yourself). If you max out a crappy 401k today, you might miss a better opportunity to contribute to a 401k in the future. Big expenses could pop up at exactly the same time you get better investment options. Side note: if not enough employees participate in the 401k, the principals won't be able to take full advantage of it themselves. I think it's called a \"\"nondiscrimination test\"\" to ensure that the plan benefits all employees, not just the owners and management. So voting with your feet might be the best way to spark improvement with your employer. Good luck!\"" }, { "docid": "140330", "title": "", "text": "Adding to the excellent answers already given, we typically advise members to contribute as much as needed to get a full employer match in their 401K, but not more. We then redirect any additional savings to a traditional IRA or ROTH IRA (depending on their age, income, and future plans). Only once they've exhausted the $5000 maximum in their IRA will we look at putting more money into the 401K. The ROTH IRA is a beautiful and powerful vehicle for savings. The only reason to consider taking money out of the ROTH is in a case of serious catastrophe." }, { "docid": "271233", "title": "", "text": "Sure it is quite easy depending on income. If one receives a bonus that is high in relationship to their income, it is very easy to max out a 401K prior to when one intended. The later in the year such a bonus occurs the more likely that one will max out prematurely. If one only has a single employer in the year, the custodial company will not accept amounts above the max, so one need not worry about that case. If there is more than one employer, a refund is typically issued with the appropriate tax withheld. Assume that a person makes about 60K per year. They intend to put 12k into their 401K, thus have their contribution set to 20%. By the beginning of September, they have 8K into their retirement, but they also receive a bonus of 50K. Their 401K contribution for that bonus will be 10K, and thus they have maxed out their individual contribution for the year. So they will not be able to contribute for the rest of the year, including the first paycheck in September. They will miss out on any match that the company may supply. While that sucks, it should be relieved by the bless of receiving such a large bonus." }, { "docid": "501290", "title": "", "text": "On the statement it now tracks how much is contributed to the account pre and post tax. This is the key. Your withdrawals will be proportional. Assuming you have contributed 90% in regular contributions (pre-tax) and 10% in Roth (post tax), when you withdraw $1000, it will be $900 from the regular (taxed fully) and $100 from the Roth (not taxed, assuming its a qualified distribution). Earnings attributed proportionally to the contributions. I agree with you that it is not the best option, and would also prefer separate accounts, but with 401k - the account is per employee. Instead of doing 401k Roth/Non-Roth consider switching to Regular 401k and Roth IRA - then you can separate the funds easily as you wish." }, { "docid": "92442", "title": "", "text": "Is there any benefit to investing in a Roth 401(k) plan, as opposed to a Roth IRA? They have separate contribution limits, so how much you contribute to one does not change the amount you can contribute to the other. Which is relevant to your question because you said the earnings on that account compounded over the next 40 years growing tax-free will be much higher than what I'd save on current taxes on a traditional 401(k). This is only true if you max out your contribution limits. If you start with the same amount of money and have the same marginal tax rate in both years, it doesn't matter which one you pick. Start with $10,000 to invest. With the traditional, you can invest all $10,000. With the Roth, you pay taxes on it and then invest it. Let's assume a tax rate of 25%. So invest $7500. Let's assume that you invest either amount long enough to double four times (forty years at 7% return after inflation is about right). So the traditional has $160,000 and the Roth has $120,000. Now you withdraw them. For simplicity's sake, we'll pretend it's all one year. It's probably over several years, but the math is easier in a single year. With the Roth, you have $120,000. With the traditional, you have to pay tax. Again, let's assume 25%. So that's $40,000, leaving you with $120,000 from the traditional. That is the same amount as the Roth! So it would make sense to If you can max out both, great. You do that for forty years and your retirement will be as financially secure as you can make it. If you can't max them out, the most important thing is the employer match. That's free money. Then you may prefer your Roth IRA to the 401k. Note that you can also roll over your Roth 401k to a Roth IRA. Then you can withdraw your contributions from the Roth IRA without penalty or additional tax. Alternate source. Beyond answering your question, I would still like to reiterate that Roth or traditional does not have a big effect on your investment unless you max them out or you have different tax rates now versus in retirement. It may change other things. For example, you can roll over a Roth 401k to a Roth IRA without paying taxes. And the Roth IRA will act like it was contributed directly. You have to check with your employer what their rollover rules are. They may allow it any time or only at employment separation (when you leave the job). If you do max out your Roth accounts, then they will perform better than the traditional accounts at the same nominal contribution. This is because they are tax free while your returns in the other accounts will have to pay taxes. But it doesn't matter until you hit the limits. Until then, you could just invest the tax savings of the traditional as well as the money you could invest in a Roth." }, { "docid": "194155", "title": "", "text": "Unless you have an actual hardship (bankruptcy or other emergency), you will be better off leaving that money alone. This excellent answer, gives more than enough reasons why a withdrawal or loan is not recommended. I would love some advice because I need to know if I should contribute more into my 401k or less. If your priority to purchase is high enough, it may be worth considering stopping 401k contributions for a short time to help pile up a down payment. I also encourage you to consider that if you cannot pool the money from non-retirement sources, then you cannot afford that much house at this time. This might mean looking for cheaper houses or delaying purchase for a number of years." }, { "docid": "591069", "title": "", "text": "Much of this is incorrect. Aetna owns Payflex for starters, and it's your EMPLOYER who decides which banks and brokers to offer, not Payflex. An HSA is a checking account with an investment account option after a minimum balance is met. A majority of U.S. employers only OFFER an HSA option but don't contribute a penny, so you're lucky you get anything. The easy solution is just keep the money that is sent to your HSA checking account in your checking account, and once a year roll it over into a different bank's HSA. The vast majority of banks offer HSAs that have no ties to a particular broker (i.e. Citibank, PNC, Chase). I have all my HSA funds in HSA Bank which is online but services lots of employers. Not true that most payroll deductions or employer contributions go to a single HSA custodian (bank). They might offer a single bank that either contracts with an investment provider or lets you invest anywhere. But most employers making contributions are large or mid-market employers offering multiple banks, and that trend is growing fast because of defined contribution, private exchanges and vendor product redesigns. Basically, nobody likes having a second bank account for their HSA when their home bank offers one." }, { "docid": "24404", "title": "", "text": "For the rollover, you should probably talk to the recipient manager. This would be your broker or whomever (your new employer if rolling into another 401k). They should be able to update you on progress and let you know if you need to do anything. In a comment, you say I could be putting in money but instead im lossing. There is no requirement that an IRA have 401k money in it. Just put the money in without the existing money. Eventually the rollover will complete and add that money to whatever you contribute to the IRA. The rollover should not affect your future contributions in any way." }, { "docid": "462956", "title": "", "text": "\"Publication 590a covers this in a fairly specific manner. Page 11, section \"\"Are You Covered by an Employer Plan?\"\", specifies: The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. The “Retirement Plan” box should be checked if you were covered. So, by default, if that's checked, you're covered. 590 does go into more detail, though. Assuming you're covered under a Defined Contribution plan (a 401k for example): Defined contribution plan. Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. Tax Year: Tax year. Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. For almost all people, the tax year is the calendar year. Further, they cover issues related to an employee leaving Dec. 31 very specifically: A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made. Example: Example. Mickey was covered by a profit-sharing plan and left the company on December 31, 2014. The plan year runs from July 1 to June 30. Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. As of June 30, 2015, no contributions were made that were allocated to the June 30, 2015, plan year, and no forfeitures had been allocated within the plan year. In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. On December 31, 2015, the company decided to contribute to the plan for the plan year ending June 30, 2015. That contribution was made on February 15, 2016. Mickey is an active participant in the plan for his 2016 tax year but not for his 2015 tax year. Mickey is in a similar (but different) circumstance, and it's clear from the IRS's treatment of his circumstance that you would be in the same boat (just a year less off) - but be aware given Mickey's situation that it's theoretically possible for them to make another contribution next year, as Mickey had, depending on when their plan year/etc. ends. So - from the IRS's point of view, everything you said the company did is correct. They paid you in January, contributed to your 401k as a result of that paycheck, and thus you were officially considered covered for 2015.\"" } ]

[ { "docid": "107554", "title": "", "text": "\"First - yes, take the 2.5%. It could be better, but it's better than many get. Second - choosing from \"\"a bunch\"\" can be tough. Start by looking at the expenses for each. Read a bit of the description, if you can't tell your spouse what the fund's goal is, don't buy it.\"" } ]

[ { "docid": "301194", "title": "", "text": "\"I assume you get your information from somewhere where they don't report the truth. I'm sorry if mentioning Fox News offended you, it was not my intention. But the way the question is phrased suggests that you know nothing about what \"\"pension\"\" means. So let me explain. 403(b) is not a pension account. Pension account is generally a \"\"defined benefit\"\" account, whereas 403(b)/401(k) and similar - are \"\"defined contribution\"\" accounts. The difference is significant: for pensions, the employer committed on certain amount to be paid out at retirement (the defined benefit) regardless of how much the employee/employer contributed or how well the account performed. This makes such an arrangement a liability. An obligation to pay. In other words - debt. Defined contribution on the other hand doesn't create such a liability, since the employer is only committed for the match, which is paid currently. What happens to your account after the employer deposited the defined contribution (the match) - is your problem. You manage it to the best of your abilities and whatever you have there when you retire - is yours, the employer doesn't owe you anything. Here's the problem with pensions: many employers promised the defined benefit, but didn't do anything about actually having money to pay. As mentioned, such a pension is essentially a debt, and the retiree is a debt holder. What happens when employer cannot pay its debts? Employer goes bankrupt. And when bankrupt - debtors are paid only part of what they were owed, and that includes the retirees. There's no-one raiding pensions. No-one goes to the bank with a gun and demands \"\"give me the pension money\"\". What happened was that the employers just didn't fund the pensions. They promised to pay - but didn't set aside any money, or set aside not enough. Instead, they spent it on something else, and when the time came that the retirees wanted their money - they didn't have any. That's what happened in Detroit, and in many other places. 403(b) is in fact the solution to this problem. Instead of defined benefit - the employers commit on defined contribution, and after that - it's your problem, not theirs, to have enough when you're retired.\"" }, { "docid": "459677", "title": "", "text": "\"This is an excellent topic as it impacts so many in so many different ways. Here are some thoughts on how the accounts are used which is almost as important as the as calculating the income or tax. The Roth is the best bang for the buck, once you have taken full advantage of employer matched 401K. Yes, you pay taxes upfront. All income earned isn't taxed (under current tax rules). This money can be passed on to family and can continue forever. Contributions can be funded past age 70.5. Once account is active for over 5 years, contributions can be withdrawn and used (ie: house down payment, college, medical bills), without any penalties. All income earned must be left in the account to avoid penalties. For younger workers, without an employer match this is idea given the income tax savings over the longer term and they are most likely in the lowest tax bracket. The 401k is great for retirement, which is made better if employer matches contributions. This is like getting paid for retirement saving. These funds are \"\"locked\"\" up until age 59.5, with exceptions. All contributed funds and all earnings are \"\"untaxed\"\" until withdrawn. The idea here is that at the time contributions are added, you are at a higher tax rate then when you expect to withdrawn funds. Trade Accounts, investments, as stated before are the used of taxed dollars. The biggest advantage of these are the liquidity.\"" }, { "docid": "128107", "title": "", "text": "\"You can (and definitely should) withdraw any part of the contribution that will put you over the contribution limit. You can (and should if you need to) withdraw to repay any medical payments you made from outside the account. You can (but should avoid at all costs) withdraw (distribute) from the HSA for non-medical reasons. Here's the IRS publication which covers this: https://www.irs.gov/publications/p969 Here's the bit about distributions that covers what you're trying to do: You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. You don’t have to make distributions from your HSA each year. It is better to pay from your checking and reimburse than to over-fund the HSA. Best route forward is to reduce your contributions for the rest of the year, especially if continuing them will cause excess contributions. Another nasty gotcha: Excess contributions. You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. Excess contributions aren’t deductible. Excess contributions made by your employer are included in your gross income. If the excess contribution isn’t included in box 1 of Form W-2, you must report the excess as \"\"Other income\"\" on your tax return. Generally, you must pay a 6% excise tax on excess contributions. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. The excise tax applies to each tax year the excess contribution remains in the account. You may withdraw some or all of the excess contributions and avoid paying the excise tax on the amount withdrawn if you meet the following conditions. •You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made. •You withdraw any income earned on the withdrawn contributions and include the earnings in \"\"Other income\"\" on your tax return for the year you withdraw the contributions and earnings. If you will not be over your maximum contribution, let the contribution ride. Make sure your HSA balance is divided between cash, stock fund, bond fund. Much like your 401k. Because the part that you don't spend on medical expenses this year can be spent in future years' medical expenses, and if you have anything left when you retire you can spend it on whatever you want. And the funds, including growth, are not taxed until you distribute them. Bottom line: if the funds will not cause excess contribution, leave them in. Otherwise, take them out as soon as possible.\"" }, { "docid": "414737", "title": "", "text": "\"You do not need to inform your employer of your additional activity, but it is your responsibility not to work for more than 48 hours per week as long as you are an employee. So if you are working 38 hours for your employer, you may not work for yourself for more than 10 hours. It is, however, not so easy in practice to draw the line between work and a hobby, as long as you are not being paid by the hour. The main reason to present your employer with an addition to your work contract is to make it legally very clear that he holds no intentions to claim copyright to your work. He may attempt to do something funky like claim your home computer is, in fact, a work computer because you used it once a month to work from home, and your work contract may contain a paragraph that all work performed on a work computer results in copyright ownership for your employer. I have no idea how likely this is in practice, but this is the reason I know is commonly given as legal advice to have a contract. So the normal contract you present your employer with says: In order to earn user contribution money from a website, you need to register as a sole proprietor (Gewerbeanmeldung) and pay trade tax (Gewerbesteuer) and sales tax (Umsatzsteuer, alternatively you claim small trade exception, Kleingewerbe), which also makes a tax return mandatory. I would guess, however, (and this is not legal advice in any way, just my guess), that a couple of contributions towards server cost in a strictly non-profit endeavor is not commercial (\"\"gewerblich\"\") at all but private, in the same way that you may write an invoice to someone you sold your old bike to, or a kid may get paid to mow someone's lawn. Based on that guess, my non-legal-advice recommendation is to take the contributions and do nothing else, as long as the amount is nowhere near breaking even if you count your work input.\"" }, { "docid": "289064", "title": "", "text": "\"If you are the sole owner (or just you and your spouse) and expect to be that way for a few years, consider the benefits of an individual 401(k). The contribution limits are higher than an IRA, and there are usually no fees involved. You can google \"\"Individual 401k\"\" and any of the major investment firms (Fidelity, Schwab, etc) will set one up free of charge. This option gives you a lot of freedom to decide how much money to put away without any plan management fees. The IRS site has all the details in an article titled One-Participant 401(k) Plans. Once you have employees, if you want to set up a retirement plan for them, you'll need to switch to a traditional, employer-sponsored 401k, which will involve some fees on your part. I seem to recall $2k/yr in fees when I had a sponsored 401(k) for my company, and I'm sure this varies widely. If you have employees and don't feel a need to have a company-wide retirement plan, you can set up your own personal IRA and simply not offer a company plan to your employees. The IRA contribution limits are lower than an individual 401(k), but setting it up is easy and fee-free. So basically, if you want to spend $0 on plan management fees, get an individual 401(k) if you are self-employed, or an IRA for yourself if you have employees.\"" }, { "docid": "552887", "title": "", "text": "My observations is that this seems like hardly enough to kill inflation. Is he right? Or are there better ways to invest? The tax deferral part of the equation isn't what dominates regarding whether your 401k beats 30 years of inflation; it is the return on investment. If your 401k account tanks due to a prolonged market crash just as you retire, then you might have been better off stashing the money in the bank. Remember, 401k money at now + 30 years is not a guaranteed return (though many speak as though it were). There is also the question as to whether fees will eat up some of your return and whether the funds your 401k invests in are good ones. I'm uneasy with the autopilot nature of the typical 401k non-strategy; it's too much the standard thing to do in the U.S., it's too unconscious, and strikes me as Ponzi-like. It has been a winning strategy for some already, sure, and maybe it will work for the next 30-100 years or more. I just don't know. There are also changes in policy or other unknowns that 30 years will bring, so it takes faith I don't have to lock away a large chunk of my savings in something I can't touch without hassle and penalty until then. For that reason, I have contributed very little to my 403b previously, contribute nothing now (though employer does, automatically. I have no match.) and have built up a sizable cash savings, some of which may be used to start a business or buy a house with a small or no mortgage (thereby guaranteeing at least not paying mortgage interest). I am open to changing my mind about all this, but am glad I've been able to at least save a chunk to give me some options that I can exercise in the next 5-10 years if I want, instead of having to wait 25 or more." }, { "docid": "501290", "title": "", "text": "On the statement it now tracks how much is contributed to the account pre and post tax. This is the key. Your withdrawals will be proportional. Assuming you have contributed 90% in regular contributions (pre-tax) and 10% in Roth (post tax), when you withdraw $1000, it will be $900 from the regular (taxed fully) and $100 from the Roth (not taxed, assuming its a qualified distribution). Earnings attributed proportionally to the contributions. I agree with you that it is not the best option, and would also prefer separate accounts, but with 401k - the account is per employee. Instead of doing 401k Roth/Non-Roth consider switching to Regular 401k and Roth IRA - then you can separate the funds easily as you wish." }, { "docid": "194155", "title": "", "text": "Unless you have an actual hardship (bankruptcy or other emergency), you will be better off leaving that money alone. This excellent answer, gives more than enough reasons why a withdrawal or loan is not recommended. I would love some advice because I need to know if I should contribute more into my 401k or less. If your priority to purchase is high enough, it may be worth considering stopping 401k contributions for a short time to help pile up a down payment. I also encourage you to consider that if you cannot pool the money from non-retirement sources, then you cannot afford that much house at this time. This might mean looking for cheaper houses or delaying purchase for a number of years." }, { "docid": "574037", "title": "", "text": "\"(Insert usual disclaimer that I'm just a random guy on the Internet, not any kind of certified tax professional.) But once I withdraw the money, how is that money taxable? If I'm understanding your situation correctly, you want to look at the instructions for form 8889, under Excess Employer Contributions. It simply says, \"\"If the excess was not included in income on Form W-2, you must report it as 'Other income' on your tax return.\"\" There doesn't look to be any particular wording beyond that, so I'd just put it on Form 1040 Line 21 Other Income, and label the line really specifically like \"\"Excess Employer Contributions distributed from HSA\"\". Also there is no mention of whether any FICA taxes (social security and Medicare) apply to these amounts. You say that this was entirely contributed by the employer. But even for cases where one contributes directly through payroll with an optional pre-tax deduction, this is usually implemented as a \"\"salary reduction agreement\"\" where the company is actually paying less money in salary (and thus less showing up on the W-2) and just contributing to the HSA account instead. It's listed on the 8889 as an \"\"Employer Contribution\"\", even if in fact one sees it as a deduction on one's pay stub. In either case, since the company didn't pay you the money as salary (and merely contributed to the HSA instead), I wouldn't expect any FICA taxes to be owed on it. The fact that the IRS wants it listed under \"\"Other income\"\" instead of \"\"Wages\"\" also implies to me that it doesn't count as salary that needs FICA taxes. Presumably, if people abused this in some way (like getting their employer to deliberately over-contribute each year and getting a refund in some sort of crazy scheme to try to reduce their SS taxes) the government would get rather upset and probably call it some sort of tax evasion. But for the amounts involved here, particularly as you're following the instructions listed, I just wouldn't worry about it. Assuming that I withdraw excess contribution and report everything on Form 8889 and Form 1040, is there any further action required from my previous employer? It's your HSA, so I wouldn't think so. Since the eligibility for HSAs is based on what you do, and not what they do (you could, for instance, get covered by a different HDHP and they wouldn't be notified nor really care), I don't think they have anything more to do with it. Also I am not sure how to calculate amount of interest attributable to excess contribution. I have only around $0.20 of total interest this year. The bank holding the HSA could probably help with that, as I'd expect it to be a normal part of the excess contribution withdrawal process. If not, I'd just make a reasonable effort based on the interest rate, amount involved, and number of days that the excess was in the account. Also keep in mind that in general when filing taxes, anything under $0.49 can round to $0. At some point, one can only be \"\"as honest as the law allows\"\".\"" }, { "docid": "545759", "title": "", "text": "There are lots of sub-parts to your question. Let's takle them one at a time. Should I worry about an IRA at this age? Absolutely! Or at least some form of retirement account. When you are young is the BEST time to start putting money into a retirement account because you have so much time for it to grow. Compounding interest is a magical thing. Even if you can only afford to put a very small amount in the account, do it! You will have to put a heck of a lot less money into the account over your working career if you start now. Is there a certain amount you need for the IRA deduction? No. Essentially with a traditional IRA you can just subtract the amount you deposited (up to the contribution limit) from your income when calculating your taxes. What kind of IRA should I get? I suggest a ROTH IRA, but be warned that with that kind you get the tax breaks when you retire, not now. If you think taxes will be higher in 40 years or so, then the Roth is a clear winner. Traditional IRA: Tax deduction this year for contribution; investment plus gains are taxed as income when you take the money out at retirement. Roth IRA: Investment amount is taxed in the year you put it in; no taxes on investment amount or gains when you take it out at retirement. Given the long horizon that you will be investing, the money is likely going to at least double. So the total amount you are taxed on over your lifetime would probably be less with the ROTH even if tax rates remain the same. Is the 401K a better option? If they offer a match (most do) then it is a no-brainer, the employer 401K always comes out on top because they are basically paying you extra to put money into savings. If there is no match, I suggest a Roth because company 401K plans usually have hidden fees that are much higher than you are going to pay for setting up your own IRA or Roth IRA with a broker." }, { "docid": "300665", "title": "", "text": "US corporations are allowed to automatically enter employees into a 401K plan. A basic automatic enrollment 401(k) plan must state that employees will be automatically enrolled in the plan unless they elect otherwise and must specify the percentage of an employee's wages that will be automatically deducted from each paycheck for contribution to the plan. The document must also explain that employees have the right to elect not to have salary deferrals withheld or to elect a different percentage to be withheld. An eligible automatic contribution arrangement (EACA) is similar to the basic automatic enrollment plan but has specific notice requirements. An EACA can allow automatically enrolled participants to withdraw their contributions within 30 to 90 days of the first contribution. A qualified automatic contribution arrangement (QACA) is a type of automatic enrollment 401(k) plan that automatically passes certain kinds of annual required testing. The plan must include certain features, such as a fixed schedule of automatic employee contributions, employer contributions, a special vesting schedule, and specific notice requirements. You generally have a period of time to stop the first deposit. One I saw recently gave new employees to the first paycheck after the 60 day mark to refuse to join. You also may be able to get back the first deposit if you really don't want to join. If you don't want to participate look on the corporate website or the Fidelity website to set your future contributions to 0% of your paycheck. Keep in mind several things: Personally I'm against any type of government sponsored investments or savings. I can save money on my own and I don't care about their benefits. Some companies provide an annual contribution to all employees regardless of participation in the 401K. They do need to establish an account to do that. Again that is free money Does it mean if I never contribute any money so I will have 0 I might go below 0 and owe them money in case they bankrupt or do bad investments? Even in total market collapse the value of the 401K could never go below zero, unless the 401K was setup to allow very exotic investments." }, { "docid": "323934", "title": "", "text": "\"Open an investment account on your own and have them roll the old 401K accounts into either a ROTH or traditional IRA. Do not leave them in old 401k accounts and definitely don't roll them into your new employer's 401K. Why? Well, as great as 401K accounts are, there is one thing that employers rarely mention and the 401K companies actively try to hide: Most 401K plans are loaded with HUGE fees. You won't see them on your statements, they are often hidden very cleverly with accounting tricks. For example, in several plans I have participated in, the mutual fund symbols may LOOK like the ones you see on the stock tickers, but if you read the fine print they only \"\"approximate\"\" the underlying mutual fund they are named for. That is, if you multiply the number of shares by the market price you will arrive at a number higher than the one printed on your statement. The \"\"spread\"\" between those numbers is the fee charged by the 401K management company, and since employees don't pick that company and can't easily fire them, they aren't very competitive unless your company is really large and has a tough negotiator in HR. If you work for a small company, you are probably getting slammed by these fees. Also, they often charge fees for the \"\"automatic rebalancing\"\" service they offer to do annually to your account to keep your allocation in line with your current contribution allocations. I have no idea why it is legal for them not to disclose these fees on the statements, but they don't. I had to do some serious digging to find this out on my own and when I did it was downright scary. In one case they were siphoning off over 3% annually from the account using this standard practice. HOWEVER, that is not to say that you shouldn't participate in these plans, especially if there is an employer match. There are fees with any investment account and the \"\"free money\"\" your employer is kicking in almost always offsets these fees. My point here is just that you shouldn't keep the money in the 401K after you leave the company when you have an option to move it to an account with much cheaper fees.\"" }, { "docid": "182305", "title": "", "text": "You asked specifically about the ROTH IRA option and stated you want to get the most bang for your buck in retirement. While others have pointed out the benefits of a tax deduction due to using a Traditional IRA instead, I haven't seen anyone point out some of the other differences between ROTH and Traditional, such as: I agree with your thoughts on using an IRA once you maximize the company match into a 401k plan. My reasoning is: I personally prefer ETFs over mutual funds for the ability to get in and out with limit, stop, or OCO orders, at open or anytime mid-day if needed. However, the price for that flexibility is that you risk discounts to NAV for ETFs that you wouldn't have with the equivalent mutual fund. Said another way, you may find yourself selling your ETF for less than the holdings are actually worth. Personally, I value the ability to exit positions at the time of my choosing more highly than the impact of tracking error on NAV. Also, as a final comment to your plan, if it were me I'd personally pay off the student loans with any money I had after contributing enough to my employer 401k to maximize matching. The net effect of paying down the loans is a guaranteed avg 5.3% annually (given what you've said) whereas any investments in 401k or IRA are at risk and have no such guarantee. In fact, with there being reasonable arguments that this has been an excessively long bull market, you might figure your chances of a 5.3% or better return are pretty low for new money put into an IRA or 401k today. That said, I'm long on stocks still, but then I don't have debt besides my mortgage at the moment. If I weren't so conservative, I'd be looking to maximize my leverage in the continued low rate environment." }, { "docid": "399543", "title": "", "text": "Does your employer provide a matching contribution to your 401k? If so, contribute enough to the 401k that you can fully take advantage of the 401k match (e.g. if you employer matches 3% of your income, contribute 3% of your income). It's free money, take advantage of it. Next up, max out your Roth IRA. The limit is $5000 currently a year. After maxing your Roth, revisit your 401k. You can contribute up to 16,500 per year. You savings account is a good place to keep a rainy day fund (do you have one?), but it lacks the tax advantages of a Roth IRA or 401k, so it is not really suitable for retirement savings (unless you have maxed out both your 401k and Roth IRA). Once you have take care of getting money into your 401k and Roth IRA accounts, the next step is investing it. The specific investment options available to you will vary depending on who provides your retirement account(s), so these are general guidelines. Generally, you want to invest in higher-risk, higher-return investments when you are young. This includes things like stocks and developing countries. As you get older (>30), you should look at moving some of your investments into things that less volatile. Bond funds are the usual choice. They tend to be safer than stocks (assuming you don't invest in Junk bonds), but your investment grows at a slower rate. Now this doesn't mean you immediately dump all of your stock and buy bonds. Rather, it is a gradual transition over time. As you get older and older, you gradually shift your investments to bond funds. A general rule of thumb I have seen: 100 - (YOUR AGE) = Percentage of your portfolio that should be in stocks Someone that is 30 would have 70% of their portfolio in stock, someone that is 40 would have 60% in stock, etc. As you get closer to retirement (50s-60s), you will want to start looking at investments that are more conservatie than bonds. Start to look at fixed-income and money market funds." }, { "docid": "181652", "title": "", "text": "If you have self-employment income you can open a Solo 401k. Your question is unclear as to what your employment status is. If you are self-employed as an independent contractor, you can open a Solo 401k. You can still do this even if you also earn non-self-employment income (i.e., you are an employee and receive a W-2). However, the limits for contributions to a Solo 401k are based on your self-mployment income, not your total income, so if you have only a small amount of self-employment income, you won't be able to contribute much to the Solo 401k. You may be able to reduce your taxes somewhat, but it's not like you can earn $1000 of self-employment income, open a Solo 401k, and dump $5000 into it; the limits don't work that way." }, { "docid": "104134", "title": "", "text": "\"You can move money from a 403b to a 401k plan, but the question you should ask yourself is whether it is a wise decision. Unless there are specific reasons for wanting to invest in your new employer's 401k (e.g. you can buy your employer's stock at discounted rates within the 401k, and this is a good investment according to your friends, neighbors, and brothers-in-law), you would be much better off moving the 403b money into an IRA, where you have many more choices for investment and usually can manage to find investments with lower investment costs (e.g. mutual fund fees) than in a typical employer's 401k plan. On the other hand, 401k assets are better protected than IRA assets in case you are sued and a court finds you to be liable for damages; the plaintiff cannot come after the 401k assets if you cannot pay. To answer the question of \"\"how?\"\", you need to talk to the HR people at your current employer to make sure that they are willing to accept a roll-over from another tax-deferred plan (not all plans are agreeable to do this) and get any paperwork from them, especially making sure that you find out where the check is to be sent, and to whom it should be payable. Then, talk to your previous employer's HR people and tell them that you want to roll over your 403b money into the 401k plan of your new employer, fill out the paperwork, make sure they know to whom to cut the check to, and where it is to be sent etc. In my personal experience, I was sent the check payable to the custodian of my new (IRA) account, and I had to send it on to the custodian; my 403b people refused to send the check directly to the new custodian. The following January, you will receive a 1099-R form from your 403b plan showing the amount transferred to the new custodian, with hopefully the correct code letter indicating that the money was rolled over into another tax-deferred account.\"" }, { "docid": "300438", "title": "", "text": "The account doesn't have to be associated with a specific health plan. There are some accounts that work that way. In fact, mine does. But I didn't go to a bank and open it up, it came as a package deal with my employer's health plan. Furthermore I don't contribute to it, the company does. If I wish to contribute my own funds, I have a separate Flexible Spending Account (FSA). This is not tied to my health plan. I can make qualified purchases at Wal Mart, Target, or wherever I choose. Then I can submit the receipts for reimbursement. In your case it sounds like your HSA works more like my FSA. The relevant question here is 'How do I (you) withdraw funds from the HSA?' There are a few different possibilities. Some accounts have a debit card, some give you checks, some have a reimbursement process similar to my FSA. (Some have more than one option available.) In your case you should contact Bank of America to determine how to withdraw funds from your account." }, { "docid": "554739", "title": "", "text": "\"There are certain allowable reasons to withdraw money from a 401K. The desire to free your money from a \"\"bad\"\" plan is not one of them. A rollover is a special type of withdrawal that is only available after one leaves their current employer. So as long as you stay with your current company, you cannot rollover. [Exception: if you are over age 59.5] One option is to talk to HR, see if they can get a expansion of offerings. You might have some suggestions for mutual funds that you would like to see. The smaller the company the more likely you will have success here. That being said, there is some research to support having few choices. Too many choices intimidates people. It's quite popular to have \"\"target funds\"\" That is funds that target a certain retirement year. Being that I will be 50 in 2016, I should invest in either a 2030 or 2035 fund. These are a collection of funds that rebalances the investment as they age. The closer one gets to retirement the more goes into bonds and less into stocks. However, I think such rebalancing is not as smart as the experts say. IMHO is almost always better off heavily invested in equity funds. So this becomes a second option. Invest in a Target fund that is meant for younger people. In my case I would put into a 2060 or even 2065 target. As JoeTaxpayer pointed out, even in a plan that has high fees and poor choices one is often better off contributing up to the match. Then one would go outside and contribute to an individual ROTH or IRA (income restrictions may apply), then back into the 401K until the desired amount is invested. You could always move on to a different employer and ask some really good questions about their 401K. Which leads me back to talking with HR. With the current technology shortage, making a few tweaks to the 401K, is a very cheap way to make their employees happy. If you can score a 1099 contracting gig, you can do a SEP which allows up to a whopping 53K per year. No match but with typically higher pay, sometimes overtime, and a high contribution limit you can easily make up for it.\"" }, { "docid": "88597", "title": "", "text": "\"You're getting great wisdom and options. Establishing your actionable path will require the details that only you know, such as how much is actually in each paycheck (and how much tax is withheld), how much do you spend each month (and yearly expenses too), how much spending can you actually cut or replace, how comfortable are you with considering (or not considering) unexpected/emergency spending. You mentioned you were cash-poor, but only you know what your current account balances are, which will affect your actions and priorities. Btw, interestingly, your \"\"increase 401k contributions by 2% each year\"\" will need to end before hitting the $18K contribution limit. I took some time and added the details you posted into a cash-flow program to see your scenario over the next few years. There isn't a \"\"401k loan\"\" activity in this program yet, so I build the scenario from other simple activities. You seem financially minded enough to continue modeling on your own. I'm posting the more difficult one for you (borrow from 401k), but you'll have to input your actual balances, paycheck and spending. My spending assumptions must be low, and I entered $70K as \"\"take-home,\"\" so the model looks like you've got lots of cash. If you choose to play with it, then consider modeling some other scenarios from the advice in the other posts. Here's the \"\"Borrow $6500 from 401k\"\" scenario model at Whatll.Be: https://whatll.be/d1x1ndp26i/2 To me, it's all about trying the scenarios and see which one seems to work with all of the details. The trick is knowing what scenarios to try, and how to model them. Full disclosure: I needed to do similar planning, so I wrote Whatll.Be and I now share it with other people. It's in beta, so I'm testing it with scenarios like yours. (Notice most of the extra activity occurs on 2018-Jan-01)\"" } ]

[ { "docid": "95282", "title": "", "text": "\"Contribute as much as you can. When do you want to retire and how much income do you think you'll need? A $1M portfolio yielding 5% will yield $50,000/year. Do some research about how to build a portfolio... this site is a good start, but check out books on retirement planning and magazines like Money and Kiplinger. If you don't speak \"\"money\"\" or are intimidated by investing, look for a fee-based financial advisor whom you are comfortable with.\"" } ]

[ { "docid": "349706", "title": "", "text": "\"The presenter suggested we keep records of our claims for 10+ years in paper form. This seemed to be overkill. It would be overkill if you're taking distributions regularly and you have enough valid (and otherwise unreimbursed) medical receipts each year to correspond to your distributions. However, if you are pumping money into the HSA without regular distributions, then you may need to keep receipts for a long time, possibly since the beginning of your HSA. For example: If the IRS was to audit my HSA deductions would the Aetna online claims be adequate? It's better than nothing, but it is not ideal. You need to provide proof of what you actually paid, not just what was billed. (How would the IRS know if you actually paid the bill?) So, the bill and receipt together would be preferred. Also, there are many eligible expenses for HSA that would not be covered by your health insurance and would not appear in your Aetna statements (dental work for example). Personally I have an excel spreadsheet with every eligible expense listed, every contribution and distribution I make, and a box of receipts since I opened the HSA account. Should I also archive screenshots of these claims digitally somewhere? If you have the time and diligence to do it, then it wouldn't hurt. I personally am only one house fire away from having to make a lot of phone calls if I wanted to re-build my receipts folder from scratch. I actually have \"\"scan my HSA receipts\"\" on my todo list (where's it been for years as a pretty low priority). Lastly it makes sense to spend the money in my HSA on anything eligible because you can never roll it over into a retirement account, its shaky if another person (spouse) could get reimbursed for eligible medical expenses if you die, and if you lose your receipts you may not be able to spend all of the HSA money tax free. Is this an accurate assessment or is there a reason why I should not touch the HSA money at all and wait to reimburse my eligible expenses. First off, if you are married the HSA can be transferred to your spouse. But in general, it really depends on what you would do with the money if you distributed it right away. If you need the money to pay debts, bills, etc, then it might make sense to take it, but if it would be extra money that you would invest somewhere, then you should leave it in the HSA because it grows tax free while it's in there and (probably) wouldn't if you take it out. The caveat though is that you need to find an HSA administrator that offers your preferred investment choices. As for your worry that you might lose your receipts, well, that's a valid point- but I wouldn't drive my decision based on that- I would archive them digitally to remove that concern completely. ...Should I reimburse myself from ... the HSA funds if I am not hitting the 401k limit yet? It depends. If it's a Roth 401k, all other things being equal, (you are able to choose the same investments with your HSA as you can choose in your 401K, and the costs are the same), then you are better off leaving the money in your HSA rather than pulling it out and putting it into the Roth 401k. The reason is that there is no tax difference, and once you put it into the 401K you (probably) can't touch it (for free) until you retire. With the HSA, if you could have taken a distribution but chose not to, then you can take that amount of money out anytime you want to without any consequences, just like your normal checking account. However, if you have a traditional 401k, and if taking HSA distributions would increase your cash flow such that you could afford to contribute more to the 401k, then this would lower your tax burden that year by reducing your taxable income.\"" }, { "docid": "181652", "title": "", "text": "If you have self-employment income you can open a Solo 401k. Your question is unclear as to what your employment status is. If you are self-employed as an independent contractor, you can open a Solo 401k. You can still do this even if you also earn non-self-employment income (i.e., you are an employee and receive a W-2). However, the limits for contributions to a Solo 401k are based on your self-mployment income, not your total income, so if you have only a small amount of self-employment income, you won't be able to contribute much to the Solo 401k. You may be able to reduce your taxes somewhat, but it's not like you can earn $1000 of self-employment income, open a Solo 401k, and dump $5000 into it; the limits don't work that way." }, { "docid": "167438", "title": "", "text": "Congrats! That's a solid accomplishment for someone who is not even in college yet. I graduated college 3 years ago and I wish I was able to save more in college than I did. The rule of thumb with saving: the earlier the better. My personal portfolio for retirement is comprised of four areas: Roth IRA contributions, 401k contributions, HSA contributions, Stock Market One of the greatest things about the college I attended was its co-op program. I had 3 internships - each were full time positions for 6 months. I strongly recommend, if its available, finding an internship for whatever major you are looking into. It will not only convince you that the career path you chose is what you want to do, but there are added benefits specifically in regards to retirement and savings. In all three of my co-ops I was able to apply 8% of my paycheck to my company's 401k plan. They also had matching available. As a result, my 401k had a pretty substantial savings amount by the time I graduated college. To circle back to your question, I would recommend investing the money into a Roth IRA or the stock market. I personally have yet to invest a significant amount of money in the stock market. Instead, I have been maxing out my retirement for the last three years. That means I'm adding 18k to my 401k, 5.5k to my Roth, and adding ~3k to my HSA (there are limits to each of these and you can find them online). Compounded interest is amazing (I'm just going to leave this here... https://www.moneyunder30.com/power-of-compound-interest)." }, { "docid": "379911", "title": "", "text": "\"The error in the example is here: \"\"Now, if you contribute 5% to a Roth 401(k), your employer would match your after-tax 5% contribution. If the tax rate is 25%, that would be 5% of $60,000, which is $3,000. However, that $3,000 is put in to a traditional 401(k), so it is taxed when withdrawn. Assuming the tax rate is still 25% when you withdraw, you are only getting $2,250. Essentially you are giving up $750 of free money in this case.\"\" You set your contribution to Roth 401k as a function of the gross, 80,000. You choose 5% and contribute 4000 Your employer matches 4000. At the end of the year, your taxable income to the IRS is 80000, and you pay 30% or 24000. You have 80K-4K-24K to live on, or 52K If you chose the alternate regular 401k,then you contribute 4K, your income to the IRS is (80-4=) 76k, and you pay 30%, 22.8K in tax. You have 80-4-22.8 or 53.2K to live on. Or, to come at it the other way, you have 4000*30% =1200 extra tax reduction in your income this year. If the extra income in 401k versus extra current year tax in Roth IRA means you have to reduce less, like 2800K to the roth so you maintain a 53.2K lifestyle, then yes, the Roth IRA match is reduced. If you have the cash flow to prepay the current year tax and maximum-match contribution, you will get the full match based on your gross income.\"" }, { "docid": "253373", "title": "", "text": "What is my best course of action, trying to minimize future debt? Minimizing expenses is the best thing you can do. The first step to financial independence is making do with less. Assuming I receive this $3500, am I better off using the bulk to pay off my credit cards, or should I keep as much cash available as I can? This would depend on the interest rate that is associated with the credit cards and the $3500. If the $3500 has a higher interest rate than your credit cards, then do not use any of it to pay your credit cards. Paying back the money you borrow hurts but it's the interest rate that does you in. If the interest rate for the $3500 is lower than the credit card interest, then placing some of it on the credit cards may be a wise course of action. But this depends on how long you are out of work. If you could be out of work for an extended period of time, I would recommend holding on to all of the funds. Note on saving I know this goes against the grain, but I would actually not recommend saving several months worth of funds (maybe one month though). Most employers offer some type of retirement savings account (401(k), Thrift Savings Plan, etc.). I contribute 5% to this fund instead of putting the money in savings. This is an especially effective strategy if your employer offers matching contributions such as mine. Because the divedends for a savings account are so low, it is not a wise place to store your money in the long run. If I had placed my Thrift Savings Plan contributions in a standard savings account, I would now be $12,000 poorer. In addition to this, most long term investment accounts allow you to withdraw the money early in case of emergency, such as being without work. (I also find it too temping to have huge amounts of funds on hand)." }, { "docid": "300438", "title": "", "text": "The account doesn't have to be associated with a specific health plan. There are some accounts that work that way. In fact, mine does. But I didn't go to a bank and open it up, it came as a package deal with my employer's health plan. Furthermore I don't contribute to it, the company does. If I wish to contribute my own funds, I have a separate Flexible Spending Account (FSA). This is not tied to my health plan. I can make qualified purchases at Wal Mart, Target, or wherever I choose. Then I can submit the receipts for reimbursement. In your case it sounds like your HSA works more like my FSA. The relevant question here is 'How do I (you) withdraw funds from the HSA?' There are a few different possibilities. Some accounts have a debit card, some give you checks, some have a reimbursement process similar to my FSA. (Some have more than one option available.) In your case you should contact Bank of America to determine how to withdraw funds from your account." }, { "docid": "88597", "title": "", "text": "\"You're getting great wisdom and options. Establishing your actionable path will require the details that only you know, such as how much is actually in each paycheck (and how much tax is withheld), how much do you spend each month (and yearly expenses too), how much spending can you actually cut or replace, how comfortable are you with considering (or not considering) unexpected/emergency spending. You mentioned you were cash-poor, but only you know what your current account balances are, which will affect your actions and priorities. Btw, interestingly, your \"\"increase 401k contributions by 2% each year\"\" will need to end before hitting the $18K contribution limit. I took some time and added the details you posted into a cash-flow program to see your scenario over the next few years. There isn't a \"\"401k loan\"\" activity in this program yet, so I build the scenario from other simple activities. You seem financially minded enough to continue modeling on your own. I'm posting the more difficult one for you (borrow from 401k), but you'll have to input your actual balances, paycheck and spending. My spending assumptions must be low, and I entered $70K as \"\"take-home,\"\" so the model looks like you've got lots of cash. If you choose to play with it, then consider modeling some other scenarios from the advice in the other posts. Here's the \"\"Borrow $6500 from 401k\"\" scenario model at Whatll.Be: https://whatll.be/d1x1ndp26i/2 To me, it's all about trying the scenarios and see which one seems to work with all of the details. The trick is knowing what scenarios to try, and how to model them. Full disclosure: I needed to do similar planning, so I wrote Whatll.Be and I now share it with other people. It's in beta, so I'm testing it with scenarios like yours. (Notice most of the extra activity occurs on 2018-Jan-01)\"" }, { "docid": "140330", "title": "", "text": "Adding to the excellent answers already given, we typically advise members to contribute as much as needed to get a full employer match in their 401K, but not more. We then redirect any additional savings to a traditional IRA or ROTH IRA (depending on their age, income, and future plans). Only once they've exhausted the $5000 maximum in their IRA will we look at putting more money into the 401K. The ROTH IRA is a beautiful and powerful vehicle for savings. The only reason to consider taking money out of the ROTH is in a case of serious catastrophe." }, { "docid": "24404", "title": "", "text": "For the rollover, you should probably talk to the recipient manager. This would be your broker or whomever (your new employer if rolling into another 401k). They should be able to update you on progress and let you know if you need to do anything. In a comment, you say I could be putting in money but instead im lossing. There is no requirement that an IRA have 401k money in it. Just put the money in without the existing money. Eventually the rollover will complete and add that money to whatever you contribute to the IRA. The rollover should not affect your future contributions in any way." }, { "docid": "206285", "title": "", "text": "\"First off, I highly recommend the book Get a Financial Life. The basics of personal finance and money management are pretty straightforward, and this book does a great job with it. It is very light reading, and it really geared for the young person starting their career. It isn't the most current book (pre real-estate boom), but the recommendations in the book are still sound. (update 8/28/2012: New edition of the book came out.) Now, with that out of the way, there's really two kinds of \"\"investing\"\" to think about: For most individuals, it is best to take care of #1 first. Most people shouldn't even think about #2 until they have fully funded their retirement accounts, established an emergency fund, and gotten their debt under control. There are lots of financial incentives for retirement investing, both from your employer, and the government. All the more reason to take care of #1 before #2! Your employer probably offers some kind of 401k (or equivalent, like a 403b) with a company-provided match. This is a potential 100% return on your investment after the vesting period. No investment you make on your own will ever match that. Additionally, there are tax advantages to contributing to the 401k. (The money you contribute doesn't count as taxable income.) The best way to start investing is to learn about your employer's retirement plan, and contribute enough to fully utilize the employer matching. Beyond this, there are also Individual Retirement Accounts (IRAs) you can open to contribute money to on your own. You should open one of these and start contributing, but only after you have fully utilized the employer matching with the 401k. The IRA won't give you that 100% ROI that the 401k will. Keep in mind that retirement investments are pretty much \"\"walled off\"\" from your day-to-day financial life. Money that goes into a retirement account generally can't be touched until retirement age, unless you want to pay lots of taxes and penalties. You generally don't want to put the money for your house down payment into a retirement account. One other thing to note: Your 401K and your IRA is an account that you put money into. Just because the money is sitting in the account doesn't necessarily mean it is invested. You put the money into this account, and then you use this money for investments. How you invest the retirement money is a topic unto itself. Here is a good starting point. If you want to ask questions about retirement portfolios, it is probably worth posting a new question.\"" }, { "docid": "130118", "title": "", "text": "I'm afraid you're mistaking 401k as an investment vehicle. It's not. It is a vehicle for retirement. Roth 401k/IRA has the benefit of tax free distributions at retirement, and as long as you're in the low tax bracket - it is for your benefit to take advantage of that. However, that is not the money you would be using to start a business or buy a home (except for maybe up to $10K you can withdraw without penalty for first time home buyers, but I wouldn't bother with $10k, if that's what will help you buying a house - maybe you shouldn't be buying at all). In addition, you should make sure you take advantage of the employer 401k match in full. That is free money added to your Traditional 401k retirement savings (taxed at distribution). Once you took the full advantage of the employer's match, and contributed as much as you consider necessary for your retirement above that (there are various retirement calculators on line that can help you in making that determination), everything else will probably go to taxable (regular) savings/investments." }, { "docid": "437706", "title": "", "text": "Your comment regarding your existing finances is very relevant and helpful. You need to understand that generally in personal finance circles, when a strong earning 22 year-old is looking for a loan it's usually a gross spending problem. Their car costs $1,000 /month and their bar tabs are adding up so the only logical thing to do is get a loan. Most 22-year-olds don't have a mortgage soaking up their income, or a newborn. With all of this in mind I essentially agree with DStanley and, personally, and many people here would probably disagree, I'd stop the 401(K) contribution and use that money to pay the debt. You're still very young from a retirement standpoint, let the current balance ride and forego the match until the debt is paid. I think this is more about being debt free at 22 quickly than it's about how much marginal money could be saved via 401(k) or personal loan or this strategy or that strategy. I think at your age, you'll benefit greatly from simply being debt free. There are other very good answers on this site and other places regarding the pitfalls of a 401(k) loan. The most serious of which is that you have an extremely limited time to pay the entire loan upon leaving the company. Failure to repay in that situation incurs tax liability and penalties. From my quick math, assuming your contribution is 8% of $70,000 /year, you're contributing something in the neighborhood of $460/month to your 401(k). If you stopped contributing you'd probably take home a high $300 number net of taxes. It'll take around 20 months to pay the loan off using this contribution money without considering your existing payments, in total you're probably looking at closer to 15 months. You'll give up something in the neighborhood of $3,500 in match funds over the repayment time. But again, you're 22, you'll resume your contributions at 24; still WAY ahead of most people from a retirement savings standpoint. I don't think my first retirement dollar was contributed until I was about 29. Sure, retirement savings is important, but if you've already started at age 22 you're probably going to end up way ahead of most either way. When you're 60 you're probably not going to bemoan giving up a few grand of employer match in your 20s. That's what I would do. Edit: I actually like stannius's suggestion in the comments below. IF there's enough vested in your plan that is also available for withdrawal that you could just scoop $6,500 out of your 401(k) net of the 10% penalty and federal and state taxes (which would be on the full amount) to pay the debt, I'd consider that instead of stopping the prospective contributions. That way you could continue your contributions and receive the match contributions on a prospective basis. I doubt this is a legitimate option because it's very common for employers to restrict or forbid withdrawal of employee and/or employer contributions made during your employment, but it would be worth looking in to." }, { "docid": "3481", "title": "", "text": "\"Yes it's entirely possible; see below. If you can't find anything on transfers out (partial or otherwise) on anyone's site it's because they don't want to give anyone ideas. I have successfully done exactly what you're proposing earlier this year, transferring most of the value from my employer's group personal pension scheme - also Aviva! - to a much lower-cost SIPP. The lack of any sign of movement by Aviva to post-RDR \"\"clean priced\"\" charge-levels on funds was the final straw for me. My only regret is that I didn't do it sooner! Transfer paperwork was initiated from the SIPP end but I was careful to make clear to HR people and Aviva's rep (or whatever group-scheme/employee benefits middleman organization he was from) that I was not exiting the company scheme and expected my employee and matching employer contributions to continue unchanged (and that I'd not be happy if some admin mess up led to me missing a month's contributions). There's a bit more on the affair in a thread here. Aviva's rep did seem to need a bit of a prod to finally get it to happen. With hindsight my original hope of an in-specie transfer does seem naive, but the out-of-the-market time was shorter and less scary than anticipated. Just in case you're unaware of it, Monevator's online broker list is an excellent resource to help decide who you might use for a SIPP; cheapest choice depends on level of funds and what you're likely to hold in it and how often you'll trade.\"" }, { "docid": "545759", "title": "", "text": "There are lots of sub-parts to your question. Let's takle them one at a time. Should I worry about an IRA at this age? Absolutely! Or at least some form of retirement account. When you are young is the BEST time to start putting money into a retirement account because you have so much time for it to grow. Compounding interest is a magical thing. Even if you can only afford to put a very small amount in the account, do it! You will have to put a heck of a lot less money into the account over your working career if you start now. Is there a certain amount you need for the IRA deduction? No. Essentially with a traditional IRA you can just subtract the amount you deposited (up to the contribution limit) from your income when calculating your taxes. What kind of IRA should I get? I suggest a ROTH IRA, but be warned that with that kind you get the tax breaks when you retire, not now. If you think taxes will be higher in 40 years or so, then the Roth is a clear winner. Traditional IRA: Tax deduction this year for contribution; investment plus gains are taxed as income when you take the money out at retirement. Roth IRA: Investment amount is taxed in the year you put it in; no taxes on investment amount or gains when you take it out at retirement. Given the long horizon that you will be investing, the money is likely going to at least double. So the total amount you are taxed on over your lifetime would probably be less with the ROTH even if tax rates remain the same. Is the 401K a better option? If they offer a match (most do) then it is a no-brainer, the employer 401K always comes out on top because they are basically paying you extra to put money into savings. If there is no match, I suggest a Roth because company 401K plans usually have hidden fees that are much higher than you are going to pay for setting up your own IRA or Roth IRA with a broker." }, { "docid": "270818", "title": "", "text": "\"You seem to be treating your Roth IRA as a sort of savings account for use in emergency situations. I would use a savings account for savings as withdrawing money from an IRA will have penalties under various circumstances (more than contributions, Roth IRA less than 5 years old, more than $10k for a down payment). Also, you mention folding your IRA into your 401k so that it will \"\"grow faster\"\". However, this will not have that effect. Imagine you have $30k in an IRA and $100k in a 401k and you are averaging a return of 8% / year on each. This will be identical to having a single 401k with $130k and an 8% / year return. This is not one of your questions, but employer matches are not counted in the 401k contribution limit. If your 22% calculation of your salary includes the match to reach the max contribution, you can still contribute more.\"" }, { "docid": "406561", "title": "", "text": "\"The limit on SEP IRA is 25%, not 20%. If you're self-employed (filing on Schedule C), then it's taken on net earning, which in your example would be 25% of $90,000. (https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people) JoeTaxpayer is correct as regards the 401(k) limits. The elective deferrals are per person - That's a cap in sum across multiple plans and across both traditional and Roth if you have those. In general, it's actually across other retirement plan types too - See below. If you're self-employed and set-up a 401(k) for your own business, the elective deferral is still aggregated with any other 401(k) plans in which you participate that year, but you can still make the employer contribution on your own plan. This IRS page is current a pretty good one on this topic: https://www.irs.gov/retirement-plans/one-participant-401k-plans Key quotes that are relevant: The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both: •Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit: ◦$18,000 in 2015 and 2016, or $24,000 in 2015 and 2016 if age 50 or over; plus •Employer nonelective contributions up to: ◦25% of compensation as defined by the plan, or ◦for self-employed individuals, see discussion below It continues with this example: The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $18,000 in 2015 and 2016. Although a plan's terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans. EXAMPLE Ben, age 51, earned $50,000 in W-2 wages from his S Corporation in 2015. He deferred $18,000 in regular elective deferrals plus $6,000 in catch-up contributions to the 401(k) plan. His business contributed 25% of his compensation to the plan, $12,500. Total contributions to the plan for 2015 were $36,500. This is the maximum that can be contributed to the plan for Ben for 2015. A business owner who is also employed by a second company and participating in its 401(k) plan should bear in mind that his limits on elective deferrals are by person, not by plan. He must consider the limit for all elective deferrals he makes during a year. Notice in the example that Ben contributed more that than his elective limit in total (his was $24,000 in the example because he was old enough for the $6,000 catch-up in addition to the $18,000 that applies to everyone else). He did this by declaring an employer contribution of $12,500, which was limited by his compensation but not by any of his elective contributions. Beyond the 401(k), keep in mind that elective contributions are capped across different types of retirement plans as well, so if you have a SEP IRA and a solo 401(k), your total contributions across those plans are also capped. That's also mentioned in the example. Now to the extent that you're considering different types of plans, that's a whole question in itself - One that might be worth consulting a dedicated tax advisor. A few things to consider (not extensive list): As for payroll / self-employment tax: Looks like you will end up paying Medicare, including the new \"\"Additional Medicare\"\" tax that came with the ACA, but not SS: If you have wages, as well as self-employment earnings, the tax on your wages is paid first. But this rule only applies if your total earnings are more than $118,500. For example, if you will have $30,000 in wages and $40,000 in selfemployment income in 2016, you will pay the appropriate Social Security taxes on both your wages and business earnings. In 2016, however, if your wages are $78,000, and you have $40,700 in net earnings from a business, you don’t pay dual Social Security taxes on earnings more than $118,500. Your employer will withhold 7.65 percent in Social Security and Medicare taxes on your $78,000 in earnings. You must pay 15.3 percent in Social Security and Medicare taxes on your first $40,500 in self-employment earnings and 2.9 percent in Medicare tax on the remaining $200 in net earnings. https://www.ssa.gov/pubs/EN-05-10022.pdf Other good IRS resources:\"" }, { "docid": "122910", "title": "", "text": "The biggest challenge as a young person maxing out a 401k in my opinion is the challenge of saving for a house, and (if necessary) paying off student loans. You have to consider - are you OK renting for the next 3, 5, 10 years? Or do you eventually want to buy a place? how much will that cost vs your current expenses? That being said, I didn't max out but had over 8-10% of 401k contribution in the same situation you're in right now and I don't regret it. Rereading your question, I see you are considering investing in a Roth IRA. Especially at your current age, assuming your wages will go UP, investing to the company match with the 401K and then maxing out a Roth IRA would be my recommendation. THEN continue maxing out the 401k (if you wish). P.S. I highly recommend doing two things if you go down this path:" }, { "docid": "546150", "title": "", "text": "I have managed two IRA accounts; one I inherited from my wife's 401K and my own's 457B. I managed actively my wife's 401 at Tradestation which doesn't restrict on Options except level 5 as naked puts and calls. I moved half of my 457B funds to TDAmeritrade, the only broker authorized by my employer, to open a Self Directed account. However, my 457 plan disallows me from using a Cash-secured Puts, only Covered Calls. For those who does not know investing, I resent the contention that participants to these IRAs should not be messing around with their IRA funds. For years, I left my 401k/457B funds with my current fund custodian, Great West Financial. I checked it's current values once or twice a year. These last years, the market dived in the last 2 quarters of 2015 and another dive early January and February of 2016. I lost a total of $40K leaving my portfolio with my current custodian choosing all 30 products they offer, 90% of them are ETFs and the rest are bonds. If you don't know investing, better leave it with the pros - right? But no one can predict the future of the market. Even the pros are at the mercy of the market. So, I you know how to invest and choose your stocks, I don't think your plan administrator has to limit you on how you manage your funds. For example, if you are not allowed to place a Cash-Secured Puts and you just Buy the stocks or EFT at market or even limit order, you buy the securities at their market value. If you sell a Cash-secured puts against the stocks/ETF you are interested in buying, you will receive a credit in fraction of a dollar in a specific time frame. In average, your cost to owning a stock/ETF is lesser if you buy it at market or even a limit order. Most of the participants of the IRA funds rely too much on their portfolio manager because they don't know how to manage. If you try to educate yourself at a minimum, you will have a good understanding of how your IRA funds are tied up to the market. If you know how to trade in bear market compared to bull market, then you are good at managing your investments. When I started contributing to my employer's deferred comp account (457B) as a public employee, I have no idea of how my portfolio works. Year after year as I looked at my investment, I was happy because it continued to grow. Without scrutinizing how much it grew yearly, and my regular payroll contribution, I am happy even it only grew 2% per year. And at this age that I am ready to retire at 60, I started taking investment classes and attended pre-retirement seminars. Then I knew that it was not totally a good decision to leave your retirement funds in the hands of the portfolio manager since they don't really care if it tanked out on some years as long at overall it grew to a meager 1%-4% because they managers are pretty conservative on picking the equities they invest. You can generalize that maybe 90% of IRA investors don't know about investing and have poor decision making actions which securities/ETF to buy and hold. For those who would like to remain as one, that is fine. But for those who spent time and money to study and know how to invest, I don't think the plan manager can limit the participants ability to manage their own portfolio especially if the funds have no matching from the employer like mine. All I can say to all who have IRA or any retirement accounts, educate yourself early because if you leave it all to your portfolio managers, you lost a lot. Don't believe much in what those commercial fund managers also show in their presentation just to move your funds for them to manage. Be proactive. If you start learning how to invest now when you are young, JUST DO IT!" }, { "docid": "509772", "title": "", "text": "The reason your 401k match is always counted as pre-tax whether you are contributing to a traditional 401k or a Roth is that the money is contributed by the employer and is not counted as income, and that contribution is not taxed as income. Should you wish to pay taxes on it and convert it to a Roth, you can do that, though perhaps not until you change jobs." } ]

[ { "docid": "191588", "title": "", "text": "The values of 12, 26 and 9 are the typical industry standard setting used with the MACD, however other values can be substituted depending on your trading style and goals. The 26d EMA is considered the long moving average when in this case it is compared to the shorter 12d EMA. If you used a 5d EMA and a 10d EMA then the 10d EMA would be considered the long MA. It is based on what you are comparing it with. Apart from providing signals for a reversal in trend, MACD can also be used as an early indication to a possible end to a trend. What you look out for is divergence between the price and the MACD. See chart below of an example: Here I have used 10d & 3d EMAs and 1 for the signal (as I did not want the signal to show up). I am simply using the MACD as a momentum indicator - which work by providing higher highs in the MACD with higher highs in price. This shows that the momentum in the trend is good so the trend should continue. However the last high in price is not met with a higher high in the MACD. The green lines demonstrate bearish divergence between price and the MACD, which is an indication that the momentum of the trend is slowing down. This could provide forewarning that the trend may be about to end and to take caution - i.e. not a good time to be buying this stock or if you already own it you may want to tighten up your stop loss." } ]

[ { "docid": "176687", "title": "", "text": "First, assuming you are making payments for a savings deposit. The present value of the deposit is the sum of the all the payments discounted to present value. In this case they would be discounted by the rate of inflation: £100 deposited next year is worth less than £100 today because it will be eroded by inflation. With a higher rate of inflation the payments are discounted more heavily, so the present value decreases. A deposit, or annuity due (see Calculating the Present Value of an Annuity Due), can be expressed mathematically like so:- ∴ by induction So for example, the following annuity has a present value of £1,136.76 The total amount that will be paid for the annuity is 12 x £100 = £1,200. With a higher rate of inflation, say 2% per month, and with the same 12 x £100 payments, the present value of the annuity decreases. In Excel (£1,078.68) A similar case is that for a loan, or ordinary annuity (see Calculating the Present Value of an Ordinary Annuity), except the discounting factor is the loan interest rate rather than inflation and repayments are made at the end of each period rather than at the start. The present value of a loan is the value of the all the future repayments discounted to present value. With a higher interest rate the payments are discounted more heavily, so the present value decreases. A loan can be expressed mathematically like so:- ∴ by induction So for example, the following values fulfill a loan worth £1,125.51 The total amount that will be paid for the loan is 12 x £100 = £1,200. With a higher rate of interest, say 2% per month, and the same 12 x £100 repayments, the present value of the loan that can be obtained decreases. In Excel (£1,057.53)" }, { "docid": "381849", "title": "", "text": "\"You sound like you know what you're talking about, but you say: \"\"foreign buyers will laugh at them\"\" But the Wall Street Journal, 9/20/12, says that in the last quarter FOREIGN INVESTORS ARE FLOCKING TO BUY JAPANESE BONDS IN RECORD LEVELS even though the yields are very much below other industrialized countries. LOL\"" }, { "docid": "70657", "title": "", "text": "The term 'interest' tends to be used loosely when discussing valuation of stocks. Especially when referring to IRAs which are generally the purvey of common-folk who aren't in the finance industry. Often it is used colloquially to include: Using this definition (which is what I'm guessing your IRA Calculator is doing), your stock would have increased in value by a total of $26 over the course of 10 months. Still not terribly good (only a couple percent increase), but certainly not a couple cents." }, { "docid": "173052", "title": "", "text": "\"Probably the best way to investigate this is to look at an example. First, as the commenters above have already said, the log-return from one period is log(price at time t/price at time t-1) which is approximately equal to the percentage change in the price from time t-1 to time t, provided that this percentage change is not big compared to the size of the price. (Note that you have to use the natural log, ie. log to the base e -- ln button on a calculator -- here.) The main use of the log-return is that is a proxy for the percentage change in the price, which turns out to be mathematically convenient, for various reasons which have mostly already been mentioned in the comments. But you already know this; your actual question is about the average log-return over a period of time. What does this indicate about the stock? The answer is: if the stock price is not changing very much, then the average log-return is about equal to the average percentage change in the price, and is very easy and quick to calculate. But if the stock price is very volatile, then the average log-return can be wildly different to the average percentage change in the price. Here is an example: the closing prices for Pitchfork Oil from last week's trading are: 10, 5, 12, 5, 10, 2, 15. The percentage changes are: -0.5, 1.4, -0.58, 1, -0.8, 6.5 (where -0.5 means -50%, etc.) The average percentage change is 1.17, or 117%. On the other hand, the log-returns for the same period are -0.69, 0.88, -0.88, 0.69, -1.6, 2, and the average log-return is about 0.068. If we used this as a proxy for the average percentage change in the price over the whole seven days, we would get 6.8% instead of 117%, which is wildly wrong. The reason why it is wrong is because the price fluctuated so much. On the other hand, the closing prices for United Marshmallow over the same period are 10, 11, 12, 11, 12, 13, 15. The average percentage change from day to day is 0.073, and the average log-return is 0.068, so in this case the log-return is very close to the percentage change. And it has the advantage of being computable from just the first and last prices, because the properties of logarithms imply that it simplifies to (log(15)-log(10))/6. Notice that this is exactly the same as for Pitchfork Oil. So one reason why you might be interested in the average log-return is that it gives a very quick way to estimate the average return, if the stock price is not changing very much. Another, more subtle reason, is that it actually behaves better than the percentage return. When the price of Pitchfork jumps from 5 to 12 and then crashes back to 5 again, the percentage changes are +140% and -58%, for an average of +82%. That sounds good, but if you had bought it at 5, and then sold it at 5, you would actually have made 0% on your money. The log-returns for the same period do not have this disturbing property, because they do add up to 0%. What's the real difference in this example? Well, if you had bought $1 worth of Pitchfork on Tuesday, when it was 5, and sold it on Wednesday, when it was 12, you would have made a profit of $1.40. If you had then bought another $1 on Wednesday and sold it on Thursday, you would have made a loss of $0.58. Overall, your profit would have been $0.82. This is what the average percentage return is calculating. On the other hand, if you had been a long-term investor who had bought on Tuesday and hung on until Thursday, then quoting an \"\"average return\"\" of 82% is highly misleading, because it in no way corresponds to the return of 0% which you actually got! The moral is that it may be better to look at the log-returns if you are a buy-and-hold type of investor, because log-returns cancel out when prices fluctuate, whereas percentage changes in price do not. But the flip-side of this is that your average log-return over a period of time does not give you much information about what the prices have been doing, since it is just (log(final price) - log(initial price))/number of periods. Since it is so easy to calculate from the initial and final prices themselves, you commonly won't see it in the financial pages, as far as I know. Finally, to answer your question: \"\"Does knowing this single piece of information indicate something about the stock?\"\", I would say: not really. From the point of view of this one indicator, Pitchfork Oil and United Marshmallow look like identical investments, when they are clearly not. Knowing the average log-return is exactly the same as knowing the ratio between the final and initial prices.\"" }, { "docid": "426343", "title": "", "text": "Another way to look at this is if we separate the owner's account from the business's account. At the start of the year, the owner puts $9 into the business account to get the business started. At the end of the first day, the business account has $10, and at the end of the second day, the business account has $11. The owner doesn't need to add any more of his own money into the business account. At the end of the 365th day, the business will have $374, which is $365 profit + $9 investment. Assuming the business has no other expenses, the business will calculate profit for the year like this: The author is making a strange point. The two numbers he is talking about are two different quantities. The business owner's return on investment is $365 / $9 = 4056%. But the business's profit margin is $365 / $3650 = 10%. Both are useful numbers when running the business. I disagree with the author's insinuation that a business is doing something tricky when calculating profit margin. Remember that, in addition to the business owner's monetary investment, he worked every day for a year to earn that $365." }, { "docid": "523303", "title": "", "text": "\"Why there is this huge difference? I am not able to reconcile Yahoo's answer of 5.75%, even using their definition for ROA of: Return on Assets Formula: Earnings from Continuing Operations / Average Total Equity This ratio shows percentage of Returns to Total Assets of the company. This is a useful measure in analyzing how well a company uses its assets to produce earnings. I suspect the \"\"Average Total Equity\"\" in their formula is a typo, but using either measure I cannot come up with 5.75% for any 12-month period. I can, however, match MarketWatch's answer by looking at the 2016 fiscal year totals and using a \"\"traditional\"\" formula of Net Income / Average Total Assets: I'm NOT saying that MatketWatch is right and Yahoo is wrong - MW is using fiscal year totals while Yahoo is using trailing 12-month numbers, and Yahoo uses \"\"Earnings from Continuing Operations\"\", but even using that number (which Yahoo calculates) I am not able to reconcile the 5.75% they give.\"" }, { "docid": "301698", "title": "", "text": "\"As per the age of your son you mentions i would suggest Yes, charge them an interest amount but lesser than the market rate. And give them a valid reason behind taking interest on given amount. The reason you might grab from below real incident happen with me at the time of Diwali last year. I am 26, and i am currently doing job and my salary is not so much that i can accomplish all my dreams of buying expensive Watch and many things. So i borrowed some strong amount from my mom. She gave me the amount but she asked me to pay interest of 5% and when i asked the reason behind demanding the interest she said something which was valuable things. She said me \"\"If i would not give you money then you will definitely ask money from some money lenders or your friends because now that watch is your first priority. And in that case you need to pay the higher interest rate to them. And in life there might be situation where we would not capable to help you in terms of financial. So this is the time you should learn to pay interest and responsibility of borrowing amount and repaying it on time with interest rate. This will help you also to learn a lesson and our money will be withing home I am not expert in parenting because i am still unmarried but i shared my point of view for your question. Thanks\"" }, { "docid": "422879", "title": "", "text": "\"From a talk by entrepreneur and investor Gary Vaynerchuk: @2:37: Look yourself in the mirror and ask yourself: \"\"What do I want to do every day for the rest of my life?\"\" Do that. I promise you can monetize that shit. @12:04: I don't want to hear about this \"\"9 to 5, I don't have time\"\" thing. If you want this, if you have a passion, work 9 to 5, spend a couple hours with your family, 7[pm] to 2 in the morning it's plenty of time to do damage. But that's it; it's not gonna happen any other way. @You work 9 to 6, you get home, you kiss the dog, and you go to town. Everybody has time. Stop watching fucking Lost. If you want this, if you want bling-bling, if you want to buy the Jets, work. That's how you get it.\"" }, { "docid": "42639", "title": "", "text": "You cannot use continuous compounding for returns less than or equal to 100% because a natural logarithm can only be taken for a positive amount. This answer includes the accurate way to ascertain r, for which many people use an approximation. For example, using -20% monthly return for 12 months:- -0.2 -0.223144 0.0687195 Checking: 0.0687195 True Now trying -100% monthly return:- -1. Indeterminate Why? Because a natural logarithm can only be taken for a positive amount. So the latter calculation can not be done using (logarithmic) continuous compounding. Of course, the calculation can still be done using regular compounding. For -100% the results go to zero in the first month, but -150% produces a more interesting result: -1.5 -11920.9" }, { "docid": "410564", "title": "", "text": "Like azam pointed out, fundamentally you need to decide if the money invested elsewhere will grow faster than the Interest you are paying on the loan. In India, the safe returns from Fixed Deposits is around 8-9% currently. Factoring taxes, the real rate of return would be around 6-7%. This is less than what you are paying towards interest. The PPF gives around 9% with Tax break [if there are no other options] and tax free interest, the real return can be as high as 12-14%. There is a limit on how much you can invest in PPF. However this looks higher than your average interest. The stock markets in long term [7 Years] averages give you around 15% returns, but are not predictable year to year. So the suggest from azam is valid, you would need to see what are the high rate of interest loans and if they accept early repayment, you should complete it ASAP. If there are loans that are less than average, say in the range of 7-8%, you can keep it and pay as per schedule." }, { "docid": "351209", "title": "", "text": "Unless you are getting the loan from a loan shark, it is the most common case that each payment is applied to the interest accrued to date and the rest is applied towards reducing the principal. So, assuming that fortnightly means 26 equally-spaced payments during the year, the interest accrued at the end of the first fortnight is $660,000 x (0.0575/26) = $1459.62 and so the principal is reduced by $2299.61 - $1459.62 = $839.99 For the next payment, the principal still owing at the beginning of that fortnight will be $660,000-$839.99 = $659,160.01 and the interest accrued will be $659,160.01 x (0.0575/26) = $1457.76 and so slightly more of the principal will be reduced than the $839.99 of the previous payment. Lather, rinse, repeat until the loan is paid off which should occur at the end of 17.5 years (or after 455 biweekly payments). If the loan rate changes during this time (since you say that this is a variable-rate loan), the numbers quoted above will change too. And no, it is not the case that just %5.75 of the $2300 is interest, and the rest comes off the principle (sic)? Interest is computed on the principal amount still owed ($660,000 for starters and then decreasing fortnightly). not the loan payment amount. Edit After playing around with a spreadsheet a bit, I found that if payments are made every two weeks (14 days apart) rather than 26 equally spaced payments in one year as I used above, interest accrues at the rate of 5.75 x (14/365)% for the 14 days rather than at the rate of (5.75/26)% for the time between payments as I used above each 14 days, $2299.56 is paid as the biweekly mortgage payment instead of the $2299.61 stated by the OP, then 455 payments (slightly less than 17.5 calendar years when leap years are taken into account) will pay off the loan. In fact, that 455-th payment should be reduced by 65 cents. In view of rounding of fractional cents and the like, I doubt that it would be possible to have the last equal payment reduce the balance to exactly 0." }, { "docid": "213714", "title": "", "text": "Buying options on a highly volatile underlying like AMD or JNUG. You may make piles of cash or go to zero, but it will be fast at least. Also working 6-12 and not just 9-5. Also you want /r/personalfinance" }, { "docid": "156793", "title": "", "text": "According to my calculations, you always lose money on group B. x = average monthly balance Income for a year = 0.015 * (12 * x) = 0.18 * x Cost of funds for one month = 0.04 * x Cost of funds for one year = 12 * (0.04 * x) = 0.48 * x Profit? at end of year = income_for_year - cost_of_funds_for_one_year = (0.18 * x) - (0.48 * x) = forever loss" }, { "docid": "536610", "title": "", "text": "\"The wash sale rule only applies when the sale in question is at a loss. So the rule does not apply at all to your cases 3, 4, 7, 8, 11, 12, 15, and 16, which all start with a gain. You get a capital gain at the first sale and then a separately computed gain / loss at the second sale, depending on the case, BUT any gain or loss in the IRA is not a taxable event due to the usual tax-advantaged rules for the IRA. The wash sale does not apply to \"\"first\"\" sales in your IRA because there is no taxable gain or loss in that case. That means that you wouldn't be seeking a deduction anyway, and there is nothing to get rolled into the repurchase. This means that the rule does not apply to 1-8. For 5-8, where the second sale is in your brokerage account, you have a \"\"usual\"\" capital gain / loss as if the sale in the IRA didn't happen. (For 1-4, again, the second sale is in the IRA, so that sale is not taxable.) What's left are 9-10 (Brokerage -> IRA) and 13-14 (Brokerage -> Brokerage). The easier two are 13-14. In this case, you cannot take a capital loss deduction for the first sale at a loss. The loss gets added to the basis of the repurchase instead. When you ultimately close the position with the second sale, then you compute your gain or loss based on the modified basis. Note that this means you need to be careful about what you mean by \"\"gain\"\" or \"\"loss\"\" at the second sale, because you need to be careful about when you account for the basis adjustment due to the wash sale. Example 1: All buys and sells are in your brokerage account. You buy initially at $10 and sell at $8, creating a $2 loss. But you buy again within the wash sale window at $9 and sell that at $12. You get no deduction after the first sale because it's wash. You have a $1 capital gain at the second sale because your basis is $11 = $9 + $2 due to the $2 basis adjustment from wash sale. Example 2: Same as Example 1, except that final sale is at $8 instead of at $12. In this case you appear to have taken a $2 loss on the first buy-sell and another $1 loss on the second buy-sell. For taxes however, you cannot claim the loss at the first sale due to the wash. At the second sale, your basis is still $11 (as in Example 1), so your overall capital loss is the $3 dollars that you might expect, computed as the $8 final sale price minus the $11 (wash-adjusted) basis. Now for 9-10 (Brokerage->IRA), things are a little more complicated. In the IRA, you don't worry about the basis of individual stocks that you hold because of the way that tax advantages of those accounts work. You do need to worry about the basis of the IRA account as a whole, however, in some cases. The most common case would be if you have non-deductable contributions to your traditional IRA. When you eventually withdraw, you don't pay tax on any distributions that are attributable to those nondeductible contributions (because you already paid tax on that part). There are other cases where basis of your account matters, but that's a whole question in itself - It's enough for now to understand 1. Basis in your IRA as a whole is a well-defined concept with tax implications, and 2. Basis in individual holdings within your account don't matter. So with the brokerage-IRA wash sale, there are two questions: 1. Can you take the capital loss on the brokerage side? 2. If no because of the wash sale, does this increase the basis of your IRA account (as a whole)? The answer to both is \"\"no,\"\" although the reason is not obvious. The IRS actually put out a Special Bulletin to answer the question specifically because it was unclear in the law. Bottom line for 9-10 is that you apparently are losing your tax deduction completely in that case. In addition, if you were counting on an increase in the basis of your IRA to avoid early distribution penalties, you don't get that either, which will result in yet more tax if you actually take the early distribution. In addition to the Special Bulletin noted above, Publication 550, which talks about wash sale rules for individuals, may also help some.\"" }, { "docid": "176883", "title": "", "text": "\"A 'Call' gives you the right, but not the obligation, to buy a stock at a particular price. The price, called the \"\"strike price\"\" is fixed when you buy the option. Let's run through an example - AAPL trades @ $259. You think it's going up over the next year, and you decide to buy the $280 Jan11 call for $12. Here are the details of this trade. Your cost is $1200 as options are traded on 100 shares each. You start to have the potential to make money only as Apple rises above $280 and the option trades \"\"in the money.\"\" It would take a move to $292 for you to break even, but after that, you are making $100 for each dollar it goes higher. At $300, your $1200 would be worth $2000, for example. A 16% move on the stock and a 67% increase on your money. On the other hand, if the stock doesn't rise enough by January 2011, you lose it all. A couple points here - American options are traded at any time. If the stock goes up next week, your $1200 may be worth $1500 and you can sell. If the option is not \"\"in the money\"\" its value is pure time value. There have been claims made that most options expire worthless. This of course is nonsense, you can see there will always be options with a strike below the price of the stock at expiration and those options are \"\"in the money.\"\" Of course, we don't know what those options were traded at. On the other end of this trade is the option seller. If he owns Apple, the sale is called a \"\"covered call\"\" and he is basically saying he's ok if the stock goes up enough that the buyer will get his shares for that price. For him, he knows that he'll get $292 (the $280, plus the option sale of $12) for a stock that is only $259 today. If the stock stays under $280, he just pocketed $12, 4.6% of the stock value, in just 3 months. This is why call writing can be a decent strategy for some investors. Especially if the market goes down, you can think of it as the investor lowering his cost by that $12. This particular strategy works best in a flat to down market. Of course in a fast rising market, the seller misses out on potentially high gains. (I'll call it quits here, just to say a Put is the mirror image, you have the right to sell a stock at a given price. It's the difference similar to shorting a stock as opposed to buying it.) If you have a follow up question - happy to help. EDIT - Apple closed on Jan 21, 2011 at $326.72, the $280 call would have been worth $46.72 vs the purchase price of $12. Nearly 4X return (A 289% gain) in just over 4 months for a stock move of 26%. This is the leverage you can have with options. Any stock could just as easily trade flat to down, and the entire option premium, lost.\"" }, { "docid": "545902", "title": "", "text": "The key to understanding a mortgage is to look at an amortization schedule. Put in 100k, 4.5% interest, 30 years, 360 monthly payments and look at the results. You should get roughly 507 monthly P&I payment. Amortization is only the loan portion, escrow for taxes and insurance and additional payments for PMI are extra. You'll get a list of all the payments to match the numbers you enter. These won't exactly match what you really get in a mortgage, but they're close enough to demonstrate the way amortization works, and to plan a budget. For those terms, with equal monthly payments, you'll start paying 74% interest from the first payment. Each payment thereafter, that percentage drops. The way this is all calculated is through the time value of money equations. https://en.wikipedia.org/wiki/Time_value_of_money. Read slowly, understand how the equations work, then look at the formula for Repeating Payment and Present Value. That is used to find the monthly payment. You can validate that the formula works by using their answer and making a spreadsheet that has these columns: Previous balance, payment, interest, new balance. Each line represents a month. Calculate interest as previous balance * APR/12. Calculate new balance as previous balance minus payment plus interest. Work through all this for a 1 year loan and you will understand a lot better." }, { "docid": "78675", "title": "", "text": "\"Just to be clear to start, beta is a statistical property. So if your beta is 0.8 over a period of time. Stock X moved on average 0.8 for a point move in the index. We might hope this property is persistent and it seems to be fairly persistent (predictable) but it doesn't have to be. Also it is important to note this is not a lag in time. Beta is a measure of the average size of a move in the stock at the same time as a move in the index. In your example both the stock and index are measured at end of day. You can say that the stock \"\"lags\"\" behind the index because it doesn't grow as quickly as the market when the market is growing, but this is not a lag in time just a lag in magnitude. People do occasionally calculate betas between a stock and lagged in time market prices, but this is not the commonly used meaning of beta. This might actually be a more useful measure as then you could bet on the future of the stock given what happened today in the market, but these \"\"betas\"\" tend to be much more unstable than the synchronized version and hard to trade on. When you calculated beta you choose a time scale, in this case daily. So if your calculation is on a day-to-day basis then you have only tested the relationship on a day-to-day basis not, for instance, on a week-to-week basis. Now day-to-day and week-to-week betas are often related and are generally reasonably close but they do not have to be. There can be longer term effects only picked up on the longer scale. Stock X could day-to-day with a (average) beta of 1 to the stock market, but could have even a negative beta year-to-year with the market if the stock is counter-cyclical to longer scale trends on the market. So beta can change with the time scale used in the calculation.\"" }, { "docid": "564453", "title": "", "text": "It will depend on how much you expect to earn this way, and whether you expect the company to become profitable soon. Has the company just not made a profit yet, or has it actually made a significant loss that your invoices would just be offsetting? If you're earning over £10,000 per year then invoicing through the company is preferable. Above that level, you'd be taking money from the company as dividends after paying 20% corporation tax with no other tax to pay on your personal tax return. As a sole trader you'd be paying 20% income tax and 9% NI. (Note however that the company can only pay dividends from profits, which is a problem if there are significant losses to offset.) Below £10,000, there's little difference. Through the company, you can take a salary of £7956 per year without paying any income tax or NI. With the new £2000 discount on employers' NI you could then take salary up to £10,000 and just pay 12% employee's NI. As a sole trader, you pay 9% Class 4 NI over £7956 and a fixed £143 per year for Class 2 NI. Paying 9% rather than 12% saves you £60, but then you add the £143. In practice the company would work out more expensive at this level because you'll probably want to pay an accountant to deal with the payroll for you. Having the company repay your £2000 from the invoices doesn't really save any tax if the company will become profitable in the future. You don't pay any tax now since the money you receive isn't income, and the company doesn't pay any tax if the extra £2000 of revenue doesn't put it back in profit. However, if the company is profitable next year then it will have an extra £2000 of profit that would otherwise have been offset against this year's loss, and you do end up paying 20% corporation tax on the £2000. You could still have the company repay the loan in order to delay the tax liability, but it's not really tax free money. Loaning additional money to the company has no tax benefit, you just give the company £1000 and get your original £1000 back later. You pay no tax and neither does the company, but it was your money in the first place." }, { "docid": "46967", "title": "", "text": "I would suggest you to put your money in an FD for a year, and as soon as you get paid the interest, start investing that interest in a SIP(Systematic investment plan). This is your safest option but it will not give you a lot of returns. But I can guarantee that you will not lose your capital(Unless the economy fails as a whole, which is unlikely). For example: - you have 500000 rupees. If you put it in a fixed deposit for 1 year, you earn 46500 in interest(At 9% compounded quarterly). With this interest you can invest Rs.3875(46500/12) every month in an SIP for 12 months and also renew your FD, so that you can keep earning that interest.So at the end of 10 years, you will have 5 lacs in your FD and Rs. 4,18,500 in your SIP(Good funds usually make 13-16 % a year). Assuming your fund gives you 14%, you make: - 1.) 46500 at 14% for 9 years - 1,51,215 2.)8 years - 1,32,645 3.) 7 years - 1,16,355 4.) 6 years - 1,02,066 5.) 5 years - 89,531 6.) 4 years - 78,536 7.) 3 years - 68891 8.) 2 years 60,431 9.) 1 year - 53010 Total Maturity Value on SIP = Rs, 8,52,680 Principal on FD = Rs 5,00,000 Interest earned on 10th year = Rs. 46,500 Total = Rs. 13,99,180(14 lacs). Please note: - Interest rates and rate of return on funds may vary. This figure can only be assumed if these rates stay the same.:). Cheers!" } ]

[ { "docid": "518721", "title": "", "text": "\"Unless you are buying a significant value of your goods in USD then the relative strength of USD versus your local currency will have little to no effect on what the value of your investments is worth to you. In fact only (de|in)flation will effect your purchasing power. If your investments are in your local currency and your future expenses (usage of the returns on the investments) will be in your local currency FX has no effect. To answer your question, however, since all investments involve flows of money there can be no investment (other than perhaps gold which is really a form of currency) that isn't bound to at least one currency. In general investments are expected to be valued against the investor's home currency (I tend to call it \"\"fund currency\"\" as I work with hedge funds) as the return on the investment will be paid out in the fund currency and returns will be compared on the same basis. If investments are to be made internationally then it is necessary to reduce, or \"\"hedge\"\" the exchange rate risk. This is normally done using FX swaps or futures that allow an exchange rate in the future to be locked in today. Far from being unbound from FX moves these derivatives are closely bound to any moves but crucially are bound in the opposite direction to the hoped for FX move. an example of this would be if I'm investing 100GBP (my local currency) in a US company XYZ corp which I expect to do well. Suppose I get 200USD for my 100GBP and so buy 1 * 200USD shares in XYZ. No matter what happens to XYZ stock any move in GBP/USD will affect my P&L so I buy a future that allows me to exchange 200USD for 100GBP in 6 month's time. If GBP rises I can sell the future and make money on both the higher exchange rate and the increase in XYZ corp. If GBP falls I can keep the future until maturity and exchange the 200USD from XYZ corp for 100GBP so I only take the foreign exchange hit on any profits. If I expect my profits to be 10USD I can even buy futures such that I can lock in the exchange rate for 110USD in 6 months so that I will lose even less of my profit from the exchange rate move.\"" } ]

[ { "docid": "63848", "title": "", "text": "The only way for a mutual fund to default is if it inflated the NAV. I.e.: it reports that its investments worth more than they really are. Then, in case of a run on the fund, it may end up defaulting since it won't have the money to redeem shares at the NAV it published. When does it happen? When the fund is mismanaged or is a scam. This happened, for example, to the fund Madoff was managing. This is generally a sign of a Ponzi scheme or embezzlement. How can you ensure the funds you invest in are not affected by this? You'll have to read the fund reports, check the independent auditors' reports and check for clues. Generally, this is the job of the SEC - that's what they do as regulators. But for smaller funds, and private (i.e.: not public) investment companies, SEC may not be posing too much regulations." }, { "docid": "60020", "title": "", "text": "I prefer to use a Foreign Exchange transfer service. You will get a good exchange rate (better than from Paypal or from your bank) and it is possible to set it up with no transfer fees on both ends. You can use an ACH transfer from your US bank account to the FX's bank account and then a SEPA transfer in Europe to get the funds into your bank account. Transfers can also go in the opposite direction (Europe to USA). I've used XE's service (www.xe.com) and US Forex's service (www.usforex.com). Transferwise (www.transferwise.com) is another popular service. US Forex's service calls you to confirm each transfer. They also charge a $5 fee on transfers under $1000. XE's service is more convenient: they do not charge fees for small transfers and do not call you to confirm the tramsfer. However, they will not let you set up a free ACH transfer from US bank accounts if you set up your XE account outside the US. In both cases, the transfer takes a few business days to complete. EDIT: In my recent (Summer 2015) experience, US Forex has offered slightly better rates than XE. I've also checked out Transferwise, and for transfers from the US it seems to be a bit of a gimmick with a fee added late in the process. For reference, I just got quotes from the three sites for converting 5000 USD to EUR:" }, { "docid": "528475", "title": "", "text": "\"This is an old post I feel requires some more love for completeness. Though several responses have mentioned the inherent risks that currency speculation, leverage, and frequent trading of stocks or currencies bring about, more information, and possibly a combination of answers, is necessary to fully answer this question. My answer should probably not be the answer, just some additional information to help aid your (and others') decision(s). Firstly, as a retail investor, don't trade forex. Period. Major currency pairs arguably make up the most efficient market in the world, and as a layman, that puts you at a severe disadvantage. You mentioned you were a student—since you have something else to do other than trade currencies, implicitly you cannot spend all of your time researching, monitoring, and investigating the various (infinite) drivers of currency return. Since major financial institutions such as banks, broker-dealers, hedge-funds, brokerages, inter-dealer-brokers, mutual funds, ETF companies, etc..., do have highly intelligent people researching, monitoring, and investigating the various drivers of currency return at all times, you're unlikely to win against the opposing trader. Not impossible to win, just improbable; over time, that probability will rob you clean. Secondly, investing in individual businesses can be a worthwhile endeavor and, especially as a young student, one that could pay dividends (pun intended!) for a very long time. That being said, what I mentioned above also holds true for many large-capitalization equities—there are thousands, maybe millions, of very intelligent people who do nothing other than research a few individual stocks and are often paid quite handsomely to do so. As with forex, you will often be at a severe informational disadvantage when trading. So, view any purchase of a stock as a very long-term commitment—at least five years. And if you're going to invest in a stock, you must review the company's financial history—that means poring through 10-K/Q for several years (I typically examine a minimum ten years of financial statements) and reading the notes to the financial statements. Read the yearly MD&A (quarterly is usually too volatile to be useful for long term investors) – management discussion and analysis – but remember, management pays themselves with your money. I assure you: management will always place a cherry on top, even if that cherry does not exist. If you are a shareholder, any expense the company pays is partially an expense of yours—never forget that no matter how small a position, you have partial ownership of the business in which you're invested. Thirdly, I need to address the stark contrast and often (but not always!) deep conflict between the concepts of investment and speculation. According to Seth Klarman, written on page 21 in his famous Margin of Safety, \"\"both investments and speculations can be bought and sold. Both typically fluctuate in price and can thus appear to generate investment returns. But there is one critical difference: investments throw off cash flow for the benefit of the owners; speculations do not. The return to the owners of speculations depends exclusively on the vagaries of the resale market.\"\" This seems simple and it is; but do not underestimate the profound distinction Mr. Klarman makes here. (and ask yourself—will forex pay you cash flows while you have a position on?) A simple litmus test prior to purchasing a stock might help to differentiate between investment and speculation: at what price are you willing to sell, and why? I typically require the answer to be at least 50% higher than the current salable price (so that I have a margin of safety) and that I will never sell unless there is a material operating change, accounting fraud, or more generally, regime change within the industry in which my company operates. Furthermore, I then research what types of operating changes will alter my opinion and how severe they need to be prior to a liquidation. I then write this in a journal to keep myself honest. This is the personal aspect to investing, the kind of thing you learn only by doing yourself—and it takes a lifetime to master. You can try various methodologies (there are tons of books) but overall just be cautious. Money lost does not return on its own. I've just scratched the surface of a 200,000 page investing book you need to read if you'd like to do this professionally or as a hobbyist. If this seems like too much or you want to wait until you've more time to research, consider index investing strategies (I won't delve into these here). And because I'm an investment professional: please do not interpret anything you've read here as personal advice or as a solicitation to buy or sell any securities or types of securities, whatsoever. This has been provided for general informational purposes only. Contact a financial advisor to review your personal circumstances such as time horizon, risk tolerance, liquidity needs, and asset allocation strategies. Again, nothing written herein should be construed as individual advice.\"" }, { "docid": "566598", "title": "", "text": "\"Most credit cards allow you to take \"\"cash advances\"\", but the fees and limits for cash advances are different than for regular purchases. You can buy stock after taking a cash advance from your credit card. When you make a cash advance, you normally pay the credit card company a fee. When you make a regular purchase, the merchant (ie, the stockbroker) pays a fee. Additionally, credit card companies can make merchants wait up to 3 months to actually receive the money, in case the transaction is disputed. Your stockbroker is unlikely to want to pay the fee, accept the delay in receiving the funds, and risking that you will dispute the transaction. Having said that, many FOREX brokers will accept credit card deposits (treated as purchases), although FOREX can be considerably riskier than the stock market. Of course, if you max out your credit cards and lose all your money, you can normally negotiate to pay back the debt for less than the original amount, especially since it's unsecured debt.\"" }, { "docid": "291229", "title": "", "text": "\"The other option apart from the above which I feel is quite good is \"\"Travel Card\"\" [also called Forex Card] issued in USD. These cards are like prepaid debit cards. They are available from almost quite a few Indian Banks like HDFC / ICICI / UTI. The limit for students is around 100 K USD per year. http://www.hdfcbank.com/personal/cards/prepaid_cards/forexplus_card/pre_forex_elg.htm The card can be reloaded by any amount [i think the minimum is USD 100] by visiting the Branch or certain Forex agents. There loading fee is INR 75. The Fx is typical Card Rate prevailing on the day. In US this card can be used as a credit card for almost everything [I have used this without any hassel]. Avoid using the card for blocking anything [at Hotel for room booking, or initial block at car rentals]. Although its mentioned that there is a withdrawl fees, i was never charged anything for withdrawls. The card comes with an internet based login to monitor account balance and transactions. Any unused funds can be withdrawn in India. The payment will be make in INR.\"" }, { "docid": "133602", "title": "", "text": "On June 1, 2014, the Financial Post reported that small businesses are very optimistic about the economy – with the Canadian Federation of Independent Businesses stating that their Business Barometer index rose again for the second straight month (a score of 67.1). In response to the increased revenue that an improved economy would bring, businesses are investing in MONEXgroup’s fast and secure credit card processing terminals." }, { "docid": "487980", "title": "", "text": "The collapse of the US economic system is one of the many things I am preparing for. To answer the how, me personally I am doing some investing in gold and silver. However I am investing more in the tools, goods and gear that will help me be independent of the system around me. In short nothing will change for me if the US dollar goes belly up. A book I recommend is Possum Living (http://www.possumliving.net/). Other than that I am investing in trade goods such as liquor, cigarettes, medical supplies." }, { "docid": "567079", "title": "", "text": "CDs pay less than the going rate so that the banks can earn money. Investing is risky right now due to the inaction of the Fed. Try your independent life insurance agent. You could get endowment life insurance. It would pay out at age 21. If you decide to invest it yourself try to buy a stable equity fund. My 'bedrock' fund is PGF. It pays dividends each month and is currently yealding 5.5% per year. Scottrade has a facility to automatically reinvest the dividend each month at no commission. http://www.marketwatch.com/investing/Fund/PGF?CountryCode=US" }, { "docid": "100087", "title": "", "text": "CreditKarma review I don't personally use HelloWallet, but I have also heard very good things about it. Independence from financial products is a HUGE thing in the field because so many investment advisers place the firm before the customer (c.f. Too Big To Fail), so having an independent resource is a huge benefit." }, { "docid": "227479", "title": "", "text": "It really depends on your specific goals. Since you are considering trading FOREX, I assume you hate money. It's more efficient to withdraw your money from the bank and light it on fire. Perhaps you like trading FOREX like some old ladies like to gamble away their social security checks. Well then its impossible to answer your question as it is based upon personal preference." }, { "docid": "57841", "title": "", "text": "I'm in the US as well, but some basic things are still the same. You need to trade through a broker, but the need for a full service broker is no longer necessary. You may be able to get by with a web based brokerage that charges less fees. If you are nervous, look for a big name, and avoid a fly by night company. Stick with non-exotic investments. don't do options, or futures or Forex. You may even want to skip shares all together and see if UK offers something akin to an index fund which tracks broad markets (like the whole of the FTSE 100 or the S&P 500) as a whole." }, { "docid": "183898", "title": "", "text": "It is true that this is possible, however, it's very remote in the case of the large and reputable fund companies such as Vanguard. FDIC insurance protects against precisely this for bank accounts, but mutual funds and ETFs do not have an equivalent to FDIC insurance. One thing that does help you in the case of a mutual fund or ETF is that you indirectly (through the fund) own actual assets. In a cash account at a bank, you have a promise from the bank to pay, and then the bank can go off and use your money to make loans. You don't in any sense own the bank's loans. With a fund, the fund company cannot (legally) take your money out of the fund, except to pay the expense ratio. They have to use your money to buy stocks, bonds, or whatever the fund invests in. Those assets are then owned by the fund. Legally, a mutual fund is a special kind of company defined in the Investment Company Act of 1940, and is a separate company from the investment advisor (such as Vanguard): http://www.sec.gov/answers/mfinvco.htm Funds have their own boards, and in principle a fund board can even fire the company advising the fund, though this is not likely since boards aren't usually independent. (a quick google found this article for more, maybe someone can find a better one: http://www.marketwatch.com/story/mutual-fund-independent-board-rule-all-but-dead) If Vanguard goes under, the funds could continue to exist and get a new adviser, or could be liquidated with investors receiving whatever the assets are worth. Of course, all this legal stuff doesn't help you with outright fraud. If a fund's adviser says it bought the S&P 500, but really some guy bought himself a yacht, Madoff-style, then you have a problem. But a huge well-known ETF has auditors, tons of different employees, lots of brokerage and exchange traffic, etc. so to me at least it's tough to imagine a risk here. With a small fund company with just a few people - and there are lots of these! - then there's more risk, and you'd want to carefully look at what independent agent holds their assets, who their auditors are, and so forth. With regular mutual funds (not ETFs) there are more issues with diversifying across fund companies: With ETFs, there probably isn't much downside to diversifying since you could buy them all from one brokerage account. Maybe it even happens naturally if you pick the best ETFs you can find. Personally, I would just pick the best ETFs and not worry about advisor diversity. Update: maybe also deserving a mention are exchange-traded notes (ETNs). An ETN's legal structure is more like the bank account, minus the FDIC insurance of course. It's an IOU from the company that runs the ETN, where they promise to pay back the value of some index. There's no investment company as with a fund, and therefore you don't own a share of any actual assets. If the ETN's sponsor went bankrupt, you would indeed have a problem, much more so than if an ETF's sponsor went bankrupt." }, { "docid": "286226", "title": "", "text": "Risk is reduced but isn't zero The default risk is still there, the issuer can go bankrupt, and you can still loose all or some of your money if restructuring happens. If the bond has a callable option, the issuer can retire them if conditions are favourable for the issuer, you can still loose some of your investment. Callable schedule should be in the bond issuer's prospectus while issuing the bond. If the issuer is in a different country, that brings along a lot of headaches of recovering your money if something goes bad i.e. forex rates can go up and down. YTM, when the bond was bought was greater than risk free rate(govt deposit rates) Has to be greater than the risk free rate, because of the extra risk you are taking. Reinvestment risk is less because of the short term involved(I am assuming 2-3 years at max), but you should also look at the coupon rate of your bond, if it isn't a zero-coupon bond, and how you invest that. would it be ideal to hold the bond till maturity irrespective of price change It always depends on the current conditions. You cannot be sure that everything is fine, so it pays to be vigilant. Check the health of the issuer, any adverse circumstances, and the overall economy as a whole. As you intend to hold till maturity you should be more concerned about the serviceability of the bond by the issuer on maturity and till then." }, { "docid": "245931", "title": "", "text": "Foreign Exchange (Forex) trading is extremely difficult to do profitably over time – for retail investors and institutional investors alike. Many Forex traders enter the markets with hope of a profitable trading adventure, only to find themselves overwhelmed by the complexity of the markets. Binary options trading enables traders who have experienced difficulty in the Forex market to trade options." }, { "docid": "329161", "title": "", "text": "I'm a big fan of indie movie theaters. But I'm going to have to advise you to come up with another idea if you want a for profit business. Many independent theaters are non-profits, others are vanity investments by wealthy owners who don't mind losing money. The rest just go under. Also, if you don't have any industry knowledge you will never make it to opening night." }, { "docid": "266194", "title": "", "text": "\"If you want a Do-It-Yourself solution, look to a Vanguard account with their total market index funds. There's a lot of research that's been done recently in the financial independence community. Basically, there's not many money managers who can outperform the market index (either S&P 500 or a total market index). Actually, no mutual funds have been identified that outperform the market, after fees, consistently. So there's not much sense in paying someone to earn you less than a low fee index fund could do. And some of the numbers show that you can actually lose value on your 401k due to high fees. That's where Vanguard comes in. They offer some of the lowest fees (if not the lowest) and a selection of index funds that will let you balance your portfolio the way you want. Whether you want to go 100% total stock market index fund or a balance between total stock market index fund and total bond index fund, or a \"\"lazy 3 fund portfolio\"\", Vanguard gives you the tools to do it yourself. Rebalancing would require about an hour every quarter. (Or time span you declare yourself). jlcollinsnh A Simple Path to Wealth is my favorite blog about financial independence. Also, Warren Buffet recommended that the trustees for his wife's inheritance when he passes invest her trust in one investment. Vanguard's S&P500 index fund. The same fund he chose in a 10 year $1M bet vs. hedge fund managers. (proceeds go to charity). That was about 9 years ago. So far, Buffet's S&P500 is beating the hedge funds. Investopedia Article\"" }, { "docid": "394924", "title": "", "text": "Interactive Brokers advertises the percent of profitable forex accounts for its own customers and for competitors. They say they have 46.9% profitable accounts which is higher than the other brokers listed. It's hard to say exactly how this data was compiled- but I think the main takeaway is that if a broker actually advertises that most accounts lose money, it is probably difficult to make money. It may be better for other securities because forex is considered a very tough market for retail traders to compete in. https://www.interactivebrokers.com/en/?f=%2Fen%2Ftrading%2Fpdfhighlights%2FPDF-Forex.php" }, { "docid": "450740", "title": "", "text": "If I knew a surefire way to make money in FOREX (or any market for that matter) I would not be sharing it with you. If you find an indicator that makes sense to you and you think you can make money, use it. For what it's worth, I think technical analysis is nonsense. If you're just now wading in to the FOREX markets because of the Brexit vote I suggest you set up a play-money account first. The contracts and trades can be complicated, losses can be very large and you can lose big -- quickly. I suspect FOREX brokers have been laughing to the bank the last couple weeks with all the guppies jumping in to play with the sharks." }, { "docid": "76466", "title": "", "text": "\"It looks like these types of companies have to disclose the health of their accounts to CFTC (Commodity Futures Trading Commission). That is the gist I get at least from this article about the traders that lost money due to the Swiss removing the franc’s cap against the euro. The article says about the U.S. retail FOREX brokerage: Most of FXCM’s retail clients lost money in 2014, according to the company’s disclosures mandated by the CFTC. The percentage of losing accounts climbed from 67 percent in the first and second quarters to 68 percent in the third quarter and 70 percent in the fourth quarter. Side note: The Swiss National Bank abandoned the cap on the currency's value against the euro in mid-January 2015. But above paragraph provides data on FXCM’s retail clients in 2014. It could consequently be concluded that, even without \"\"freak events\"\" (such as Switzerland removing the franc cap), it is more likely for an investor to NOT make a profit on the FOREX market. This is also in line with what \"\"sdfasdf\"\" and \"\"Dario Fumagalli\"\" say in their answers.\"" } ]

[ { "docid": "104134", "title": "", "text": "\"You can move money from a 403b to a 401k plan, but the question you should ask yourself is whether it is a wise decision. Unless there are specific reasons for wanting to invest in your new employer's 401k (e.g. you can buy your employer's stock at discounted rates within the 401k, and this is a good investment according to your friends, neighbors, and brothers-in-law), you would be much better off moving the 403b money into an IRA, where you have many more choices for investment and usually can manage to find investments with lower investment costs (e.g. mutual fund fees) than in a typical employer's 401k plan. On the other hand, 401k assets are better protected than IRA assets in case you are sued and a court finds you to be liable for damages; the plaintiff cannot come after the 401k assets if you cannot pay. To answer the question of \"\"how?\"\", you need to talk to the HR people at your current employer to make sure that they are willing to accept a roll-over from another tax-deferred plan (not all plans are agreeable to do this) and get any paperwork from them, especially making sure that you find out where the check is to be sent, and to whom it should be payable. Then, talk to your previous employer's HR people and tell them that you want to roll over your 403b money into the 401k plan of your new employer, fill out the paperwork, make sure they know to whom to cut the check to, and where it is to be sent etc. In my personal experience, I was sent the check payable to the custodian of my new (IRA) account, and I had to send it on to the custodian; my 403b people refused to send the check directly to the new custodian. The following January, you will receive a 1099-R form from your 403b plan showing the amount transferred to the new custodian, with hopefully the correct code letter indicating that the money was rolled over into another tax-deferred account.\"" } ]

[ { "docid": "184077", "title": "", "text": "\"Your employer sends the money that you choose to contribute, plus employer match if any, to the administrator of the 401k plan who invests the money as you have directed, choosing between the alternatives offered by the administrator. Typically, the alternatives are several different mutual funds with different investment styles, e.g. a S&P 500 index fund, a bond fund, a money-market fund, etc. Now, a statement such as \"\"I see my 401k is up 10%\"\" is meaningless unless you tell us how you are making the comparison. For example, if you have just started employment and $200 goes into your 401k each month and is invested in a money-market fund (these are paying close to 0% interest these days), then your 11th contribution increases your 401k from $2000 to $2200 and your 401k is \"\"up 10%\"\". More generally, suppose for simplicity that all the 401k investment is in just one (stock) mutual fund and that you own 100 shares of the fund as of right now. Suppose also that your next contribution will not occur for three weeks when you get your next paycheck, at which time additional shares of the mutual fund will be purchased Now, the value of the mutual fund shares (often referred to as net asset value or NAV) fluctuates as stock prices rise and fall, and so the 401k balance = number of shares times NAV changes in accordance with these fluctuations. So, if the NAV increases by 10% in the next two weeks, your 401k balance will have increased by 10%. But you still own only 100 shares of the mutual fund. You cannot use the 10% increase in value to buy more shares in the mutual fund because there is no money to pay for the additional shares you wish to purchase. Notice that there is no point selling some of the shares (at the 10% higher NAV) to get cash because you will be purchasing shares at the higher NAV too. You could, of course, sell shares of the stock mutual fund at the higher NAV and buy shares of some other fund available to you in the 401k plan. One advantage of doing this inside the 401k plan is that you don't have to pay taxes (now) on the 10% gain that you have made on the sale. Outside tax-deferred plans such as 401k and IRA plans, such gains would be taxable in the year of the sale. But note that selling the shares of the stock fund and buying something else indicates that you believe that the NAV of your stock mutual fund is unlikely to increase any further in the near future. A third possibility for your 401k being up by 10% is that the mutual fund paid a dividend or made a capital gains distribution in the two week period that we are discussing. The NAV falls when such events occur, but if you have chosen to reinvest the dividends and capital gains, then the number of shares that you own goes up. With the same example as before, the NAV goes up 10% in two weeks at which time a capital gains distribution occurs, and so the NAV falls back to where it was before. So, before the capital gains distribution, you owned 100 shares at $10 NAV which went up to $11 NAV (10% increase in NAV) for a net increase in 401k balance from $1000 to $1100. The mutual fund distributes capital gains in the amount of $1 per share sending the NAV back to $10, but you take the $100 distribution and plow it back into the mutual fund, purchasing 10 shares at the new $10 NAV. So now you own 110 shares at $10 NAV (no net change in price in two weeks) but your 401k balance is $1100, same as it was before the capital gains distribution and you are up 10%. Or, you could have chosen to invest the distributions into, say, a bond fund available in your 401k plan and still be up 10%, with no change in your stock fund holding, but a new investment of $100 in a bond fund. So, being up 10% can mean different things and does not necessarily mean that the \"\"return\"\" can be used to buy more shares.\"" }, { "docid": "136627", "title": "", "text": "\"Congratulations on the job offer! That type of matching sounds good if you plan to stay at a company for more than a year. My experience has been that 401k matching can range from 2% up to 8% for your typical starting job, so a total of 6% is good. You would definitely want to contribute at least 5% to take advantage of the \"\"Free\"\" money. Loan provision could mean that loans from 401k are allowed. I did some research and found that not all company 401ks allow for you to take a loan out of your 401k. Typically this is bad practice since you are robbing your 401k of it's major advantage - tax free compound interest. Source\"" }, { "docid": "349706", "title": "", "text": "\"The presenter suggested we keep records of our claims for 10+ years in paper form. This seemed to be overkill. It would be overkill if you're taking distributions regularly and you have enough valid (and otherwise unreimbursed) medical receipts each year to correspond to your distributions. However, if you are pumping money into the HSA without regular distributions, then you may need to keep receipts for a long time, possibly since the beginning of your HSA. For example: If the IRS was to audit my HSA deductions would the Aetna online claims be adequate? It's better than nothing, but it is not ideal. You need to provide proof of what you actually paid, not just what was billed. (How would the IRS know if you actually paid the bill?) So, the bill and receipt together would be preferred. Also, there are many eligible expenses for HSA that would not be covered by your health insurance and would not appear in your Aetna statements (dental work for example). Personally I have an excel spreadsheet with every eligible expense listed, every contribution and distribution I make, and a box of receipts since I opened the HSA account. Should I also archive screenshots of these claims digitally somewhere? If you have the time and diligence to do it, then it wouldn't hurt. I personally am only one house fire away from having to make a lot of phone calls if I wanted to re-build my receipts folder from scratch. I actually have \"\"scan my HSA receipts\"\" on my todo list (where's it been for years as a pretty low priority). Lastly it makes sense to spend the money in my HSA on anything eligible because you can never roll it over into a retirement account, its shaky if another person (spouse) could get reimbursed for eligible medical expenses if you die, and if you lose your receipts you may not be able to spend all of the HSA money tax free. Is this an accurate assessment or is there a reason why I should not touch the HSA money at all and wait to reimburse my eligible expenses. First off, if you are married the HSA can be transferred to your spouse. But in general, it really depends on what you would do with the money if you distributed it right away. If you need the money to pay debts, bills, etc, then it might make sense to take it, but if it would be extra money that you would invest somewhere, then you should leave it in the HSA because it grows tax free while it's in there and (probably) wouldn't if you take it out. The caveat though is that you need to find an HSA administrator that offers your preferred investment choices. As for your worry that you might lose your receipts, well, that's a valid point- but I wouldn't drive my decision based on that- I would archive them digitally to remove that concern completely. ...Should I reimburse myself from ... the HSA funds if I am not hitting the 401k limit yet? It depends. If it's a Roth 401k, all other things being equal, (you are able to choose the same investments with your HSA as you can choose in your 401K, and the costs are the same), then you are better off leaving the money in your HSA rather than pulling it out and putting it into the Roth 401k. The reason is that there is no tax difference, and once you put it into the 401K you (probably) can't touch it (for free) until you retire. With the HSA, if you could have taken a distribution but chose not to, then you can take that amount of money out anytime you want to without any consequences, just like your normal checking account. However, if you have a traditional 401k, and if taking HSA distributions would increase your cash flow such that you could afford to contribute more to the 401k, then this would lower your tax burden that year by reducing your taxable income.\"" }, { "docid": "420727", "title": "", "text": "One way to analyze the opportunity cost of using a 401K loan would be to calculate your net worth after using a 401K loan. If your net worth increases then the 401K loan would be advisable. Note that the calculations provided below do not take into account tax considerations. A net worth calculation is where you add all your assets and then subtract all your liabilities. The resulting number is your net worth. First, calculate the net worth of not taking the loan and simply paying the credit card interest. This means you only pay the interest on the credit card. In addition to the parameters identified in your question, two additional parameters will need to be considered: Cash and the market rate of return on the 401K. Scenario 1 (only pay credit card interest): After 12 months all you have paid is the interest on the credit card. The 401K balance is untouched so it will hopefully grow. The balance on the credit card remains at the end of 12 months. Scenario 2 (use 401K loan to pay credit card balance): You borrow $5,000 from your 401K to pay the credit card balance. You will have to pay $5,000 plus the 401K interest rate back into your 401K account. Use the following equation to determine when Scenario 2 increases your net worth more than scenario 1: Thus, if your credit card interest rate is greater than the rate you can earn on your 401K then use the 401K loan to pay off the credit card balance. Another scenario that should be considered: borrow money from somewhere else to pay off the credit card balance. Scenario 3 (external loan to pay credit card balance): You borrow $5,000 from somewhere besides your 401K to pay off the credit card balance. The following is used to determine if you should use an external loan over the 401K loan: This means you should use an external loan if you can obtain an interest rate less than the rate of return you can earn on your 401K. The same methodology can be used to compare Scenario 3 to Scenario 1." }, { "docid": "424427", "title": "", "text": "Edited in response to JoeTaxpayer's comment and OP Tim's additional question. To add to and clarify a little what littleadv has said, and to answer OP Tim's next question: As far as the IRS is concerned, you have at most one Individual Retirement Account of each type (Traditional, Roth) though the money in each IRA can be invested with as many different custodians (brokerages, banks, etc.) and different investments as you like. Thus, the maximum $5000 ($6000 for older folks) that you can contribute each year can be split up and invested any which way you like, and when in later years you take a Required Minimum Distribution (RMD) from a Traditional IRA, you can get the money by selling just one of the investments, or from several investments; all that the IRS cares is that the total amount that is distributed to you is at least as large as the RMD. An important corollary is that the balance in your IRA is the sum total of the value of all the investments that various custodians are holding for you in IRA accounts. There is no loss in an IRA until every penny has been withdrawn from every investment in your IRA and distributed to you, thus making your IRA balance zero. As long as you have a positive balance, there is no loss: everything has to come out. After the last distribution from your Roth IRA (the one that empties your entire Roth IRA, no matter where it is invested and reduces your Roth IRA balance (see definition above) to zero), total up all the amounts that you have received as distributions from your Roth IRA. If this is less than the total amount of money you contributed to your Roth IRA (this includes rollovers from a Traditional IRA or Roth 401k etc., but not the earnings within the Roth IRA that you re-invested inside the Roth IRA), you have a loss that can be deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI limit. This 2% is not a cap (in the sense that no more than 2% of your AGI can be deducted in this category) but rather a threshold: you can only deduct whatever part of your total Miscellaneous Deductions exceeds 2% of your AGI. Not many people have Miscellaneous Deductions whose total exceeds 2% of their AGI, and so they end up not being able to deduct anything in this category. If you ever made nondeductible contributions to your Traditional IRA because you were ineligible to make a deductible contribution (income too high, pension plan coverage at work etc), then the sum of all these contributions is your basis in your Traditional IRA. Note that your deductible contributions, if any, are not part of the basis. The above rules apply to your basis in your Traditional IRA as well. After the last distribution from your Traditional IRA (the one that empties all your Traditional IRA accounts and reduces your Traditional IRA balance to zero), total up all the distributions that you received (don't forget to include the nontaxable part of each distribution that represents a return of the basis). If the sum total is less than your basis, you have a loss that can be deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI threshold. You can only deposit cash into an IRA and take a distribution in cash from an IRA. Now, as JoeTaxpayer points out, if your IRA owns stock, you can take a distribution by having the shares transferred from your IRA account in your brokerage to your personal account in the brokerage. However, the amount of the distribution, as reported by the brokerage to the IRS, is the value of the shares transferred as of the time of the transfer, (more generally the fair market value of the property that is transferred out of the IRA) and this is the amount you report on your income tax return. Any capital gain or loss on those shares remains inside the IRA because your basis (in your personal account) in the shares that came out of the IRA is the amount of the distribution. If you sell these shares at a later date, you will have a (taxable) gain or loss depending on whether you sold the shares for more or less than your basis. In effect, the share transfer transaction is as if you sold the shares in the IRA, took the proceeds as a cash distribution and immediately bought the same shares in your personal account, but you saved the transaction fees for the sale and the purchase and avoided paying the difference between the buying and selling price of the shares as well as any changes in these in the microseconds that would have elapsed between the execution of the sell-shares-in-Tim's-IRA-account, distribute-cash-to-Tim, and buy-shares-in-Tim's-personal account transactions. Of course, your broker will likely charge a fee for transferring ownership of the shares from your IRA to you. But the important point is that any capital gain or loss within the IRA cannot be used to offset a gain or loss in your taxable accounts. What happens inside the IRA stays inside the IRA." }, { "docid": "398520", "title": "", "text": "Don’t take the cash deposit whatever you do. This is a retirement savings vehicle after all and you want to keep this money designated as such. You have 3 options: 1) Rollover the old 401k to the new 401k. Once Your new plan is setup you can call who ever runs that plan and ask them how to get started. It will require you filling out a form with the old 401k provider and they’ll transfer the balance of your account directly to the new 401k. 2) Rollover the old 401k to a Traditional IRA. This involves opening a new traditional IRA if you don’t already have one (I assume you don’t). Vanguard is a reddit favorite and I can vouch for them as Well. Other shops like Fidelity and Schwab are also good but since Vanguard is very low cost and has great service it’s usually a good choice especially for beginners. 3) Convert the old 401k to a ROTH IRA. This is essentially the same as Step 2, the difference is you’ll owe taxes on the balance you convert. Why would you voluntarily want to pay taxes f you can avoid them with options 1 or 2? The beauty of the ROTH is you only pay taxes on the money you contribute to the ROTH, then it grows tax free and when you’re retired you get to withdraw it tax free as well. (The money contained in a 401k or a traditional IRA is taxed when you withdraw in retirement). My $.02. 401k accounts typically have higher fees than IRAs, even if they own the same mutual funds the expense ratios are usually more in the 401k. The last 2 times I’ve changed jobs I’ve converted the 401k money into my ROTH IRA. If it’s a small sum of money and/or you can afford to pay the taxes on the money I’d suggest doing the same. You can read up heavily on the pros/cons of ROTH vs Traditional but My personal strategy is to have 2 “buckets” or money when I retire (some in ROTH and some in Traditional). I can withdraw as much money from the Traditional account until I Max out the lowest Tax bracket and then pull any other money I need from the ROTH accounts that are tax free.This allows you to keep taxes fairly low in retirement. If you don’t have a ROTH now this is a great way to start one." }, { "docid": "63532", "title": "", "text": "You cannot roll over your 401k money in an employer's 401k plan into an IRA (of any kind) while you are still employed by that employer. The only way you can start on the conversion before you retire (as Craig W suggests) is to change employers and start rolling over money in the previous employer's 401k into your Roth IRA while possibly contributing to the 401k plan of your new employer. Since the amount rolled over is extra taxable income (that is, in addition to your wages from your new job), you may end up paying more tax (or at higher rates) than you expect." }, { "docid": "505993", "title": "", "text": "Buy the minimum of one fund now. (Eg total bond market) Buy the minimum of the next fund next time you have $2500. (Eg large-cap stocks.) Continue with those until you have enough to buy the next fund (eg small-cap stocks). Adjust as you go to balance these funds according to your planned ratios, or as close as you can reasonably get without having to actually transfer money between the funds more than once a year or so. Build up to your targets over time. If you can't easily afford to tie up that first $2500, stay with banks and CDs and maybe money market accounts until you can. And don't try to invest (except maybe through a matched 401k) before you have adequate savings both for normal life and for an emergency reserve. Note too that the 401k can be a way to buy into funds without a minimum. Check with your employer. If you haven't maxed out your 401k yet, and it has matching funds, that is usually the place to start saving for retirement; otherwise you are leaving free money on the table." }, { "docid": "258431", "title": "", "text": "Do you think your 403b will earn more than the mortgage interest rate? If so, then mortgage seems the way to go. Conservative investment strategies might not earn much more than a 3-4% mortgage, and if you're paying 5-6% it's more likely you'll be earning less than the mortgage. From another point of view, though, I would probably take a loan anyway just from a security standpoint - you have more risk if you put a third of your retirement savings into one purchase directly, whereas if you do a 10-15 year loan, you'll have more of a cushion. Also, if you don't outlive the mortgage, you'll have had use of more of your retirement income than otherwise - though I do wonder if it puts you at some risk if you have significant medical bills (which might require you to liquidate your 403b but wouldn't require you to sell your house, so paying it off has some upside). Also, as @chili555 notes in comments, you should consider the taxation of your 403(b) income. If you pull it out in one lump sum, some of it may be taxed at a higher rate than if you pulled it out more slowly over time, which will easily overwhelm any interest rate differences. This assumes it's not a Roth 403(b) account; if it is Roth then it doesn't matter." }, { "docid": "128451", "title": "", "text": "\"Yes you can do the withdraw if you turned 55 during the year you separated from service. http://www.401khelpcenter.com/401k_education/Early_Dist_Options.html#.VdMrqPlVhBc Leaving Your Job On or After Age 55 The age 59½ distribution rule says any 401k participant may begin to withdraw money from his or her plan after reaching the age of 59½ without having to pay a 10 percent early withdrawal penalty. There is an exception to that rule, however, which allows an employee who retires, quits or is fired at age 55 to withdraw without penalty from their 401k (the \"\"rule of 55\"\"). There are three key points early retirees need to know. First, this exception applies if you leave your job at any time during the calendar year in which you turn 55, or later, according to IRS Publication 575. Second, if you still have money in the plan of a former employer and assuming you weren't at least age 55 when you left that employer, you'll have to wait until age 59½ to start taking withdrawals without penalty. Better yet, get any old 401k's rolled into your current 401k before you retire from your current job so that you will have access to these funds penalty free. Third, this exception only applies to funds withdrawn from a 401k. IRAs operate until different rules, so if you retire and roll money into an IRA from your 401k before age 59½, you will lose this exception on those dollars.\"" }, { "docid": "591495", "title": "", "text": "\"Your 401K (and IRA) is a legally distinct entity from yourself. In fact, it is a \"\"trust,\"\" and your Administrator is a \"\"trustee,\"\" while you are both creator and benefactor. This fact, and the 10% early withdrawal penalty, makes it immune from most judgments. The IRS can \"\"levy\"\" your 401K or IRA for back taxes, but must waive the 10% penalty (under the 1997 Tax Reform law). That gives them the power to do what most others can't. A \"\"tricky\"\" banker may persuade you to take money out of your 401K to pay the bank. If you do, s/he has won. But s/he can't go after your 401k.\"" }, { "docid": "403930", "title": "", "text": "Since your comment on @JoeTaxpayer's answer says that you are still under the 2012 contribution limits if the extra money is left in your 401k account, I do not think that there is any problem for you if the money is left in the 401k account. As I understand it, your salary is $X for 2012 of which you contribute some percentage per paycheck to your 401k account. Your contributions would have totaled $Y for 2012 if the glitch of extra money being out into your 401k account had not occurred. In the absence of the glitch, your W-2 form would have reported $X as gross wages, $(X-Y) as taxable wages and $Y as 401k contributions. Since an additional $z has been put into your 401k account, but not deducted from your paycheck, your employer could do one of two things. The extra money could be withdrawn from your 401k account by your employer. If this is done, then your W-2 form will be as described above. The extra money is not withdrawn by your employer. Your W-2 form will still report $(X-Y) as taxable wages, but $(Y+z) as the 401k contribution and $(X+z) as gross wages. Since $(Y+z) is less than the maximum 2012 contribution, everything is fine. In your position, I would very much prefer the latter alternative over the former, not just because there is a larger contribution to the 401k account with no change in tax liability, but also because there is always the possibility that HR/Payroll will screw up the withdrawal of the excess contribution so that it appears as a premature withdrawal by the participant. In this case, the participant not only has to pay income tax on $z but also a 10% excise tax for premature withdrawal, without actually getting even a penny from that $z taken out, which will go right back into the employer's coffers." }, { "docid": "120394", "title": "", "text": "\"Some 401k plans allow you to make \"\"supplemental post-tax contributions\"\". basically, once you hit the pre-tax contribution limit (17.5k$ in 2014), you are then allowed to contribute funds on a post-tax basis. Because of this timing, they are sometimes called \"\"spillover\"\" contributions. Usually, this option is advertised as a way of continuing to get company match even if you accidentally hit the pre-tax limit. But if you actually pay attention to your finances, it is instead a handy way to put away additional tax-advantaged money. That said, you would only want to use this option if you already maxed out your pre-tax and Roth options since you don't get the traditional tax break on contributions or the Roth tax break on the earnings. However, when you leave the company, you can transfer the post-tax money directly into a Roth IRA when you transfer the pre-tax money, match, and earnings into a traditional IRA.\"" }, { "docid": "104793", "title": "", "text": "This situation, wanting desperately to have access to an investment vehicle in a 401K, but it not being available reminds me of two suggestions some make regarding retirement investing: This allows you the maximum flexibility in your retirement investing. I have never, in almost 30 years of 401K investing, seen a pure cash investment, is was always something that was at its core very short term bonds. The exception is one company that once you had a few thousand in the 401K, you could transfer it to a brokerage account. I have no idea if there was a way to invest in a money market fund via the brokerage, but I guess it was possible. You may have to look and see if the company running the 401K has other investment options that your employer didn't select. Or you will have to see if other 401K custodians have these types of investments. Then push for changes next year. Regarding external IRA/Roth IRA: You can buy a CD with FDIC protection from funds in an IRA/Roth IRA. My credit union with NCUA protection currently has CDs and even bump up CDs, minimum balance is $500, and the periods are from 6 months to 3 years." }, { "docid": "505362", "title": "", "text": "I currently do not have an IRA (other than a rollover IRA from my 401k from a previous employer) The source is irrelevant. You have an IRA. The reason to keep contributing is that at some point, you might transfer the pretax dollars into a 401(k) and the post tax dollars can be converted to Roth. Other than the above, investing in a standard brokerage account (a non-retirement account) has its positives. Gains can see long term cap gain treatment, and the assets see a step-up in basis when you die." }, { "docid": "538238", "title": "", "text": "I am in a similar situation (sw developer, immigrant waiting for green card, no debt, healthy, not sure if I will stay here forever, only son of aging parents). I am contributing to my 401k to max my employer contribution (which is 3.5%, you should find that out from your HR). I don't have any specific financial goal in my mind, so beside an emergency fund (I was recommended to have at least 6 months worth of salary in cash) I am stashing away 10% of my income which I invest with a notorious robot-adviser. The rate is 80% stocks, 20% bonds, as I don't plan to use those funds anytime soon. Should I go back to my country, I will bring with me (or transfer) the cash, and leave my investments here. The 401K will keep growing and so the investments, and perhaps I will be able to retire earlier than expected. It's quite vague I know, but in the situation we are, it's hard to make definite plans." }, { "docid": "232049", "title": "", "text": "No. Few reasons. 1) You'll pay a penalty (tax) if you liquidate your 401k. 2) Instead of using your 401k, adjust your monthly budget and live frugal for some time. 3) Look for 0% balance transfer offers and transfer debt to that so you'll be able to reduce interest accumulation. 4) 401k is your savings, one of many I hope, keep that as is and don't touch it. 5) Sell things that you don't need and pay it towards the credit card 6) Do an analysis of your spending and figure out how you got to 21k." }, { "docid": "287391", "title": "", "text": "You won't get taxed twice because it's different money going into each account type. In the Roth you've put after tax earnings and those will continue to grow tax free (assuming you wait til 59.5 to start your withdraws). The traditional IRA is going to be funded with your old 401k, which was funded with pre-tax dollars they took from your paycheck. So you'll still pay taxes on the back end for the traditional IRA (money you've never been taxed on) but your Roth has money where tax has already been taken out so no extra tax there. You can have both types of accounts, it's pretty common considering most 401k plans are pre tax but many people see the benefit of a Roth as greater than the tax write off you get from the 401k, but if your company matches you're not gonna leave free money on the table. Hope that helps." }, { "docid": "264023", "title": "", "text": "\"when you contribute to a 401k, you get to invest pre-tax money. that means part of it (e.g. 25%) is money you would otherwise have to pay in taxes (deferred money) and the rest (e.g. 75%) is money you could otherwise invest (base money). growth in the 401k is essentially tax free because the taxes on the growth of the base money are paid for by the growth in the deferred portion. that is of course assuming the same marginal tax rate both now and when you withdraw the money. if your marginal tax rate is lower in retirement than it is now, you would save even more money using a traditional 401k or ira. an alternative is to invest in a roth account (401k or ira). in which case the money goes in after tax and the growth is untaxed. this would be advantageous if you expect to have a higher marginal tax rate during retirement. moreover, it reduces tax risk, which could give you peace of mind considering u.s. marginal tax rates were over 90% in the 1940's. a roth could also be advantageous if you hit the contribution limits since the contributions are after-tax and therefore more valuable. lastly, contributions to a roth account can be withdrawn at any time tax and penalty free. however, the growth in a roth account is basically stuck there until you turn 60. unlike a traditional ira/401k where you can take early retirement with a SEPP plan. another alternative is to invest the money in a normal taxed account. the advantage of this approach is that the money is available to you whenever you need it rather than waiting until you retire. also, investment losses can be deducted from earned income (e.g. 15-25%), while gains can be taxed at the long term capital gains rate (e.g. 0-15%). the upshot being that even if you make money over the course of several years, you can actually realize negative taxes by taking gains and losses in different tax years. finally, when you decide to retire you might end up paying 0% taxes on your long term capital gains if your income is low enough (currently ~50k$/yr for a single person). the biggest limitation of this strategy is that losses are limited to 3k$ per year. also, this strategy works best when you invest in individual stocks rather than mutual funds, increasing volatility (aka risk). lastly, this makes filing your taxes more complicated since you need to report every purchase and sale and watch out for the \"\"wash sale\"\" rules. side note: you should contribute enough to get all the 401k matching your employer offers. even if you cash out the whole account when you want the money, the matching (typically 50%-200%) should exceed the 10% early withdrawal penalty.\"" } ]

[ { "docid": "61022", "title": "", "text": "\"From the way you frame the question it sounds like you more or less know the answer already. Yes - you can make a non-deductable contribution to a traditional IRA and convert it to a Roth IRA. Here is Wikipedia's explanation: Regardless of income but subject to contribution limits, contributions can be made to a Traditional IRA and then converted to a Roth IRA.[10] This allows for \"\"backdoor\"\" contributions where individuals are able to avoid the income limitations of the Roth IRA. There is no limit to the frequency with which conversions can occur, so this process can be repeated indefinitely. One major caveat to the entire \"\"backdoor\"\" Roth IRA contribution process, however, is that it only works for people who do not have any pre-tax contributed money in IRA accounts at the time of the \"\"backdoor\"\" conversion to Roth; conversions made when other IRA money exists are subject to pro-rata calculations and may lead to tax liabilities on the part of the converter. [9] Do note the caveat in the second paragraph. This article explains it more thoroughly: The IRS does not allow converters to specify which dollars are being converted as they can with shares of stock being sold; for the purposes of determining taxes on conversions the IRS considers a person’s non-Roth IRA money to be a single, co-mingled sum. Hence, if a person has any funds in any non-Roth IRA accounts, it is impossible to contribute to a Traditional IRA and then “convert that account” to a Roth IRA as suggested by various pundits and the Wikipedia piece referenced above – conversions must be performed on a pro-rata basis of all IRA money, not on specific dollars or accounts. Say you have $20k of pre-tax assets in a traditional IRA, and make a non-deductable contribution of $5k. The account is now 80% pre-tax assets and 20% post-tax assets, so if you move $5k into a Roth IRA, $4k of it would be taxed in the conversion. The traditional IRA would be left with $16k of pre-tax assets and $4k of post-tax assets.\"" } ]

[ { "docid": "79375", "title": "", "text": "The presence of the 401K option means that your ability to contribute to an IRA will be limited, it doesn't matter if you contribute to the 401K or not. Unless your company allows you to roll over 401K money into an IRA while you are still an employee, your money in the 401K will remain there. Many 401K programs offer not just stock mutual funds, but bond mutual funds, and international funds. Many also have target date funds. You will have to look at the paperwork for the funds to determine if any of them meet your definition of low expense. Because any money you have in those 401K funds is going to remain in the 401K, you still need to look at your options and make the best choice. Very few companies allow employees to invest in individual stocks, but some do. You can ask your employer to research other options for the 401K. The are contracting with a investment company to make the plan. They may be able to switch to a different package from the same company or may need to switch companies. How much it will cost them is unknown. You will have to understand when their current contract is up for renewal. If you feel their current plan is poor, it may be making hiring new employees difficult, or ti may lead to some employees to leave in search of better options. It may also be a factor in the number of employees contributing and how much they contribute." }, { "docid": "539021", "title": "", "text": "\"Note that even if you are limited to the HSAs your employer provides, you can still set up your own HSA with whatever trustee you want and periodically transfer the funds from your employer sponsored HSA to your own HSA: according to IRS pub 969 \"\"Contributions to an HSA\"\" section: Rollovers A rollover contribution is not included in your income, is not deductible, and does not reduce your contribution limit. Archer MSAs and other HSAs. You can roll over amounts from Archer MSAs and other HSAs into an HSA. You do not have to be an eligible individual to make a rollover contribution from your existing HSA to a new HSA. Rollover contributions do not need to be in cash. Rollovers are not subject to the annual contribution limits. You must roll over the amount within 60 days after the date of receipt. You can make only one rollover contribution to an HSA during a 1-year period. Note. If you instruct the trustee of your HSA to transfer funds directly to the trustee of another HSA, the transfer is not considered a rollover. There is no limit on the number of these transfers. Do not include the amount transferred in income, deduct it as a contribution, or include it as a distribution on Form 8889. (italics mine) There may be minimums, opening, closing costs, etc. or whatever depending on each plan, but that's not limited by the IRS. So if you transfer the money yourself, you can only do it once per year, but there are no limits to when or how many times you can instruct the old HSA trustee to transfer funds directly to the new trustee. I also talked to the IRS today and they confirmed that you can have multiple HSA accounts as long as your total contributions don't exceed the yearly maximum (and from the quote above, transfers don't count as contributions).\"" }, { "docid": "482768", "title": "", "text": "There are a few incorrect assumptions in your question but the TL;DR version is: All, or most, of the withdrawal is taxable income that is reported on Lines 15a (total distribution) and 15b (taxable amount) of Form 1040. None of the distribution is given special treatment as Qualified Dividends or Capital Gains regardless of what happened inside the IRA, and none of the distribution is subject to the 3.8% Net Investment Income Tax that some high-income people need to compute on Form 8960. If the withdrawal is not a Qualified Distribution, it will be subject to a 10% excise tax (tax penalty on premature withdrawal). Not all contributions to Traditional IRAs are deductible from income for the year for which the contribution was made. People with high income and/or coverage by a workplace retirement plan (pension plan, 401(k) plan, 403(b) plan, etc) cannot deduct any contributions that they choose to make to a Traditional IRA. Such people can always make a contribution (subject to them having compensation (earned income such as salary or wages, self-employment income, commissions on sales, etc), but they don't get a tax deduction for it (just as contributions to Roth IRAs are not deductible). Whether it is wise to make such nondeductible contributions to a Traditional IRA is a question on which reasonable people can hold different opinions. Be that as it may, nondeductible contributions to a Traditional IRA create (or add to) what is called the basis of an IRA. They are reported to the IRS on Form 8606 which is attached to the Federal Form 1040. Note that the IRA custodian or trustee is not told that the contributions are not deductible. Earnings on the basis accumulate tax-deferred within the IRA just as do the earnings on the deductible contributions. Now, when you make a withdrawal from your Traditional IRA, no matter which of your various IRA accounts you take the money from, part of the money is deemed to be taken from the basis (and is not subject to income tax) while the rest is pure taxable income. That is, none of the rest is eligible for the reduced taxation rates for Qualified Dividends or Capital Gains and since it does not count as investment income, it is not subject to the 3.8% Net Investment Tax of Form 8960 either. Computation of how much of your withdrawal is nontaxable basis and how much is taxable income is done on Form 8606. Note that you don't get to withdraw your entire basis until such time as when you close all your Traditional IRA accounts. How is all this reported? Well, your IRA custodian(s) will send you Form 1099-R reporting the total amount of the withdrawal, what income tax, if any, was withheld, etc. The custodian(s) don't know what your basis is, and so Box 2b will say that the taxable amount is not determined. You need to fill out Form 8606 to figure out what the taxable amount is, and then report the taxable amount on Line 15b of Form 1040. (The total withdrawal is reported on Line 15a which is not included in the AGI computations). Note that as far as the IRS is concerned, you have only one Traditional IRA. The A in IRA stands for Arrangement, not Account as most everybody thinks, and your Traditional IRA can invest in many different things, stocks, bonds, mutual funds, etc with different custodians if you choose, but your basis is in the IRA, not the specific investment that you made with your nondeductible contribution. That's why the total IRA contribution is limited, not the per-account contribution, and why you need to look that the total value of your IRA in determining the taxable portion, not the specific account(s) from which you withdrew the money. So, how much basis did you withdraw? Well, if you withdrew $W during 2016 and the total value of all your Traditional IRA accounts was $X at the end of 2016 and your total basis in your Traditional IRA is $B, then (assuming that you did not indulge in any Traditional-to-Roth rollovers for 2016), multiply W by B/(W+X) to get the amount of nontaxable basis in the withdrawal. B thus gets reduced for 2017 by amount of basis withdrawal. What if you never made a nondeductible contribution to your Traditional IRA, or you made some nondeductible contributions many years ago and have forgotten about them? Well, you could still fill out Form 8606 reporting a zero basis, but it will just tell you that your basis continues $0. Or, you could just enter the total amount of your withdrawal in Lines 15a and 15b, effectively saying that all of the withdrawal is taxable income to you. The IRS does not care if you choose to pay taxes on nontaxable income." }, { "docid": "63532", "title": "", "text": "You cannot roll over your 401k money in an employer's 401k plan into an IRA (of any kind) while you are still employed by that employer. The only way you can start on the conversion before you retire (as Craig W suggests) is to change employers and start rolling over money in the previous employer's 401k into your Roth IRA while possibly contributing to the 401k plan of your new employer. Since the amount rolled over is extra taxable income (that is, in addition to your wages from your new job), you may end up paying more tax (or at higher rates) than you expect." }, { "docid": "353009", "title": "", "text": "Some companies allow you to make a post-tax contribution to the 401K. This is not a Roth contribution. This can be money beyond the 18,000 or 24,000 401k limit. The best news is that eventually that money can be rolled into 1 Roth-IRA. Not all companies allow this option. One company I worked for did this automatically when you hit the annual max. Of course that was made more complex if you had multiple employers that year." }, { "docid": "189989", "title": "", "text": "Are the $18,000 401k 2017 limit and the $5,500 IRA limit mutually exclusive for a combined limit of $23,500 (under 49)? Yes, but the amount that you can deduct from a traditional IRA depends on your gross income and marital status - See publication 590-A for details. Also note that the limit applies to your combined traditional and Roth IRA contributions (meaning you can't contribute $5,500 to both; just a total of $5,500 between the two). I'm also assuming employee match $ count towards these limits - is this correct No - the limit for combined contributions between you and your employer is $54,000 in 2017. So if you contribute $18,000 your employer can only contribute $36,000." }, { "docid": "410675", "title": "", "text": "Why would you want to withdraw only the company match, and presumably leave your personal contributions sitting in your ex-company's 401k plan? Generally, 401k plans have larger annual expenses and provide for poorer investment choices than are available to you if you roll over your 401k investments into an IRA. So, unless you have specific reasons for wanting to continue to leave your money in the 401k plan (e.g. you have access to investments that are not available to nonparticipants and you think those investments are where you want your money to be), roll over part (or all) of your 401k assets into an IRA, and withdraw the rest for personal expenses. If your personal contributions are in a Roth 401k, roll them over to a Roth IRA, but, as I remember it, company contributions are not part of the Roth 401k and must be rolled over into a Traditional IRA. Perhaps this is why you want to take those in cash to pay for your personal purchase? Also, what is this 30% hit you are talking about? You will owe income tax on the money withdrawn from the 401k (and custodians traditionally withhold 20% and send it to the IRS on your behalf) plus penalty for early withdrawal (which the custodian may also withhold if you ask them), but the tax that you will pay on the money withdrawn will depend on your tax bracket, which may be lower if you are laid off and do not immediately take on a new job. That is, the 30% hit may be on the cash flow, but you may get some of it back as a refund when you file your income tax return." }, { "docid": "271266", "title": "", "text": "\"If you're single, the only solution I'm aware of, assuming you are truly getting a 1099-misc and not a W-2 (and don't have a W-2 option available, like TAing), is to save in a nondeductible account for now. Then, when you later do have a job, use that nondeductible account (in part) to fund your retirement accounts. Particularly the first few years (if you're a \"\"young\"\" grad student in particular), you'll probably be low enough on the income side that you can fit this in - in particular if you've got a 401k or 403b plan at work; make your from-salary contributions there, and make deductible IRA or Roth IRA contributions from your in-school savings. If you're not single, or even if you are single but have a child, you have a few other options. Spouses who don't have earned income, but have a spouse who does, can set up a Spousal IRA. You can then, combined, save up to your spouse's total earned income (or the usual per-person maximums). So if you are married and your wife/husband works, you can essentially count his/her earned income towards your earned income. Second, if you have a child, consider setting up a 529 plan for them. You're probably going to want to do this anyway, right? You can even do this for a niece or nephew, if you're feeling generous.\"" }, { "docid": "547218", "title": "", "text": "The general advise is to contribute to the 401K up to the match limit. Then put money into a Roth IRA. Then put the rest into the 401K above the match. Yes you can have an IRA and a 401K. You can even have Roth and non-Roth versions. You do have to watch the limits, and exclusions, but there is nothing stopping you from contributing to multiple types in one year. Over a long career you may find your self with all the possible types of accounts. When you re-qualify for the company 401K, there is no need to roll over the IRA money into the 401K. Just keep the IRA." }, { "docid": "399543", "title": "", "text": "Does your employer provide a matching contribution to your 401k? If so, contribute enough to the 401k that you can fully take advantage of the 401k match (e.g. if you employer matches 3% of your income, contribute 3% of your income). It's free money, take advantage of it. Next up, max out your Roth IRA. The limit is $5000 currently a year. After maxing your Roth, revisit your 401k. You can contribute up to 16,500 per year. You savings account is a good place to keep a rainy day fund (do you have one?), but it lacks the tax advantages of a Roth IRA or 401k, so it is not really suitable for retirement savings (unless you have maxed out both your 401k and Roth IRA). Once you have take care of getting money into your 401k and Roth IRA accounts, the next step is investing it. The specific investment options available to you will vary depending on who provides your retirement account(s), so these are general guidelines. Generally, you want to invest in higher-risk, higher-return investments when you are young. This includes things like stocks and developing countries. As you get older (>30), you should look at moving some of your investments into things that less volatile. Bond funds are the usual choice. They tend to be safer than stocks (assuming you don't invest in Junk bonds), but your investment grows at a slower rate. Now this doesn't mean you immediately dump all of your stock and buy bonds. Rather, it is a gradual transition over time. As you get older and older, you gradually shift your investments to bond funds. A general rule of thumb I have seen: 100 - (YOUR AGE) = Percentage of your portfolio that should be in stocks Someone that is 30 would have 70% of their portfolio in stock, someone that is 40 would have 60% in stock, etc. As you get closer to retirement (50s-60s), you will want to start looking at investments that are more conservatie than bonds. Start to look at fixed-income and money market funds." }, { "docid": "73344", "title": "", "text": "\"Unless your 401(k) plan is particularly good (i.e. good fund choices with low fees), you probably want to contribute enough to get the maximum match from your employer, then contribute to an IRA through a low-cost brokerage like Vanguard or Fidelity, then contribute more to your 401(k). As JoeTaxpayer said, contributions to a Roth IRA can be withdrawn tax- and penalty-free, so they are useful for early retirement. But certainly use your 401(k) as well--the tax benefits almost certainly outweigh the difficulty in accessing your money. JB King's link listing ways to access retirement money before the traditional age is fairly exhaustive. One of the main ways you may want to consider that hasn't been highlighted yet is IRS section 72(t) i.e. substantially equal periodic payments (SEPP). With this rule you can withdraw early from retirement plans without penalties. You have a few different ways of calculating the withdrawal amount. The main risk is you have to keep withdrawing that amount for the greater of five years or until you reach age 59½. In your case this is is only 4-5 years, which isn't too bad. Finally, in addition to being able to withdraw from a Roth IRA tax- and penalty-free, you can do the same for Roth conversions, provided 5 years have passed. So after you leave a job, you can rollover 401(k) money to a traditional IRA, then convert to a Roth IRA (the caveat being you have to pay taxes on the amount as income at this point). But after 5 years you can access the money without penalty, and no taxes since they've already been paid. This is commonly called a \"\"Roth conversion ladder\"\".\"" }, { "docid": "38532", "title": "", "text": "\"Your contribution limit to a 401(k) is $18,000. Your employer is allowed to contribute to your 401(k), usually a \"\"matching contribution\"\". That matching contribution comes from your employer, so is not subject to your personal contribution limit. A contribution to a regular 401(k) is typically made with pre-tax money (i.e. you don't pay payroll taxes on the money you contribute) so you pay less taxes for the current tax year. However when you retire and you take money out, you pay taxes on the money you take out. On one hand, your tax rate may be lower when you have retired, but on the other hand, if your investments have appreciated over time, the total amount of tax you pay would be higher. If your company offers a Roth 401(k) plan, you can contribute $18,000 of after tax money. This way you pay the tax on the $18,000 today, as you would if you did not put the money in the 401(k), but when you take the money out at retirement, you would not have to pay tax. In my opinion, that serves as a way to pay effectively more money into your 401(k). Some firms put vesting provisions on the amount that they match in your 401(k), e.g. 4 years at 25% per year. So you have to work 1 full year to be entitled to 25% of their matching contribution, 2 years for 50%, and 4 years to receive all of it. Check your company's Summary Plan Description of the 401(k) to be sure. You are not allowed to invest pre-tax money into a Traditional IRA if you are already contributing to a 401(k) plan and have reached the income limits ($62,000 AGI for single head of household). You are allowed to contribute post-tax money to a Traditional IRA plan if you have already contributed to a 401(k), which you can then Roll-over into a Roth IRA (look up 'backdoor IRA'). The IRA contribution limit applies to all IRA accounts over that calendar year. You could put some money in a traditional IRA, a Roth IRA, another traditional IRA, etc. so long as the total amount is not more than the contribution limit. This gives you an upper limit of 5.5k + 18k = 23.5 investments in retirement accounts. Note however, once you reach age 50, these limits increase to 6.5k (IRA) + 24k (401(k)). They also are adjusted periodically with the rate of inflation. The following approach may be more efficient for building wealth: This ordering is the subject of debate and people have different opinions. There is a separate discussion of these priorities here: Best way to start investing, for a young person just starting their career? Note however, a 401(k) loan becomes payable if you leave your company, and if not repaid, is an unauthorised distribution from your 401k (and therefore subject to an additional 10% tax penalty). You should also be careful putting money into an IRA, as you will be subject to an additional 10% tax penalty if you take out the money (distribution) before retirement, unless one of the exceptions defined by the IRA applies (e.g. $10,000 for first time home purchase), which could wipe out more than any gains you made by putting it in there in the first place. Your specific circumstances may vary, so this approach may not be best for you. A registered financial advisor may be able to help - ensure they are legitimate: https://adviserinfo.sec.gov\"" }, { "docid": "49614", "title": "", "text": "\"401k plans are required to not discriminate against the non-HCE participants, and one way they achieve this is by limiting the percentage of wages that HCEs can contribute to the plan to the average annual percentage contribution by the non-HCE participants or 3% whichever is higher. If most non-HCE employees contribute only 3% (usually to capture the employer match but no more), then the HCEs are stuck with 3%. However, be aware that in companies that award year-end bonuses to all employees, many non-HCEs contribute part of their bonuses to their 401k plans, and so the average annual percentage can rise above 3% at the end of year. Some payroll offices have been known to ask all those who have not already maxed out their 401k contribution for the year (yes, it is possible to do this even while contributing only 3% if you are not just a HCE but a VHCE) whether they want to contribute the usual 3%, or a higher percentage, or to contribute the maximum possible under the nondiscrimination rules. So, you might be able to contribute more than 3% if the non-HCEs put in more money at the end of the year. With regard to NQSPs, you pretty much have their properties pegged correctly. That money is considered to be deferred compensation and so you pay taxes on it only when you receive it upon leaving employment. The company also gets to deduct it as a business expense when the money is paid out, and as you said, it is not money that is segregated as a 401k plan is. On the other hand, you have earned the money already: it is just that the company is \"\"holding\"\" it for you. Is it paying you interest on the money (accumulating in the NQSP, not paid out in cash or taxable income to you)? Would it be better to just take the money right now, pay taxes on it, and invest it yourself? Some deferred compensation plans work as follows. The deferred compensation is given to you as a loan in the year it is earned, and you pay only interest on the principal each year. Since the money is a loan, there is no tax of any kind due on the money when you receive it. Now you can invest the proceeds of this loan and hopefully earn enough to cover the interest payments due. (The interest you pay is deductible on Schedule A as an Investment Interest Expense). When employment ceases, you repay the loan to the company as a lump sum or in five or ten annual installments, whatever was agreed to, while the company pays you your deferred compensation less taxes withheld. The net effect is that you pay the company the taxes due on the money, and the company sends this on to the various tax authorities as money withheld from wages paid. The advantage is that you do not need to worry about what happens to your money if the company fails; you have received it up front. Yes, you have to pay the loan principal to the company but the company also owes you exactly that much money as unpaid wages. In the best of all worlds, things will proceed smoothly, but if not, it is better to be in this Mexican standoff rather than standing in line in bankruptcy court and hoping to get pennies on the dollar for your work.\"" }, { "docid": "20323", "title": "", "text": "If you invest in a 401(k), the shares in that plan are yours for as long as you live, or until you pull them out. So, if the employer is offering any sort of matching and those matched funds remain yours after you leave, then definitely contribute; that's an immediate return on your money. If the employer is NOT matching funds, then usually it is better to contribute to an IRA instead; you get the same income tax benefits from the deduction, without the headaches of going through your company (or the company from 3 jobs ago or whoever bought them) to get to your money. If I were in your position, the most I personally would do after I quit the company (which I'm assuming you'd be doing if you were going back to your country of origin) would be to have the 401k shares rolled over into a traditional IRA; that way I'd have more control over it from outside the country. Just keep the bank holding your IRA apprised of your movements around the world and how they can get ahold of you (it may be wise to grant a limited power of attorney to someone who will be staying in the U.S. if you don't want the bank mailing your statements all around the world), and the money can stay in an American account while you do whatever you have to outside it. As long as you don't take the money out in cash before you're 59 1/2 years old, you don't need to pay taxes or penalties on it. If you were to need it to cover unexpected expenses (perhaps relating to the aforementioned family emergency), then that decision can be made at that time. If you think that's even remotely likely, you may consider a Roth IRA. With a Roth, you pay the income taxes on your contributions, but the money is then yours; you can withdraw anything up to the total amount of your contributions without any additional taxes or penalties, and once you hit 59 and a half the interest also becomes available, also tax- and penalty- free. So if you had to leave the country and take a lot of cash with you, you could get out everything you actually put into a Roth with only minor if any transaction fees, and the interest will still be there compounding." }, { "docid": "216243", "title": "", "text": "To your question. Yes. What you propose is typically called the back door Roth. You make the (non-deductible) IRA deposit, and soon after, convert to Roth. As long as you have no other existing IRA, the process is simple, and actually a loophole that's still open. If you have an existing IRA, the conversion may be partially taxed based on untaxed balance. As comments frequently get overlooked, I'm adding @DilipSarwate excellent warning regarding this - Depending on the value of the existing Traditional IRA and its pre-existing basis, if any, the backdoor Roth conversion might be almost completely taxable. Example: Traditional IRA worth $250K with zero basis. New nondeductible contribution increase value to $255.5K and basis $5.5K. Converting $5.5K into a Roth IRA leaves $250K in the Traditional IRA with basis $5381.60. That is, of that $5500 conversion, only $118.40 was nontaxable and so, not only is the original $5500 taxable income to the OP but he also owes taxes on $5381.60 of that $5.5K conversion. In short, discussions of backdoor Roth conversions as a great idea should always be tempered with an acknowledgement that it does not work very well if there is any other money in the Traditional IRA. Once that nondeductible contribution enters a Traditional IRA, it does not come out completely until all your Traditional IRA accounts are drained of all money. All your Traditional IRA money is considered by the IRS to be in a single pot, and you can't set up a Traditional IRA (possibly with a new custodian) via nondeductible contribution, convert just that Traditional IRA account into a Roth IRA account, and claim that the whole conversion amount is nontaxable because all the tax-deferred money is in the other IRAs that you haven't touched at all. Last - you disclosed that you are depositing to a Roth 401(k) to the match. Which prompts me to ask if this is best. If your marginal rate is 25% or higher, you are missing the opportunity to save 'off the top', at that rate, and 'fill the lower brackets' at retirement, or, via conversion, any year before then when you are in a lower bracket for whatever reason. See my answer for Saving for retirement: How much is enough? which addresses this further. From new comments - Won't his Roth 401k contributions max out his overall Roth contributions? No. They are separate numbers, each with own annual limits. Wouldn't this prevent any back-door Roth conversions? The 401(k) has no effect on back door Roth, except for the fact that the 401(k) and high income make the Roth IRA unavailable by normal deposit. Back door is the only door. At the end are you encouraging him to look for a Traditional 401(k) at work to max out, then contributing to a Roth? Yes! Read the linked SE article, and consider the annual withdrawal that would get you to 25%. As I wrote, it would take $2M+ to 'fill' the 15% bracket at retirement." }, { "docid": "590232", "title": "", "text": "To determine how much you can contribute to a regular and roth IRA you have to calculate your compensation: What Is Compensation? Generally, compensation is what you earn from working. For a summary of what compensation does and does not include, see Table 1-1. Compensation includes all of the items discussed next (even if you have more than one type).Wages, salaries, etc. Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for provid-ing personal services are compensation. The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Scholarship and fellowship payments are compen-sation for IRA purposes only if shown in box 1 of Form W-2. It a also includes commissions, self-employment income, and alimony an non-taxable combat pay. For most people it is what i in box 1 of the W-2. For the example in the question. If the sum of Box 1's equals $3,200 that is the maximum you can contribute to all your IRAs (regular and Roth). The funds can come from anywhere. It is not related to your net check. The money can be from savings, gifts, parents, grandparents... The IRS doesn't care about the source of the funds, only that you don't over contribute. Of course the calculation is more complex if the person is married, and if they have access to a retirement account." }, { "docid": "151042", "title": "", "text": "You can buy stocks in the IRA, similarly to your regular investment account. Generally, when you open an account with a retail provider like TDAmeritrade, all the options available for you on that account are allowable. Keep in mind that you cannot just deposit money to IRA. There's a limit on how much you can deposit a year ($5500 as of 2015, $6500 for those 50 or older), and there's also a limit on top of that - the amount you deposit into an IRA cannot be more than your total earned income (i.e. income from work). In addition, there are limits on how much of your contribution you can deduct (depending on your income and whether you/your spouse have an employer-sponsored retirement plan)." }, { "docid": "475748", "title": "", "text": "Adapted from an answer to a somewhat different question. Generally, 401k plans have larger annual expenses and provide for poorer investment choices than are available to you if you roll over your 401k investments into an IRA. So, unless you have specific reasons for wanting to continue to leave your money in the 401k plan (e.g. you have access to investments that are not available to nonparticipants and you think those investments are where you want your money to be), roll over your 401k assets into an IRA. But I don't think that is the case here. If you had a Traditional 401k, the assets will roll over into a Traditional IRA; if it was a Roth 401k, into a Roth IRA. If you had started a little earlier, you could have considered considered converting part or all of your Traditional IRA into a Roth IRA (assuming that your 2012 taxable income will be smaller this year because you have quit your job). Of course, this may still hold true in 2013 as well. As to which custodian to choose for your Rollover IRA, I recommend investing in a low-cost index mutual fund such as VFINX which tracks the S&P 500 Index. Then, do not look at how that fund is doing for the next thirty years. This will save you from the common error made by many investors when they pull out at the first downturn and thus end up buying high and selling low. Also, do not chase after exchange-traded mutual funds or ETFs (as many will likely recommend) until you have acquired more savvy or interest in investing than you are currently exhibiting. Not knowing which company stock you have, it is hard to make a recommendation about selling or holding on. But since you are glad to have quit your job, you might want to consider making a clean break and selling the shares that you own in your ex-employer's company. Keep the $35K (less the $12K that you will use to pay off the student loan) as your emergency fund. Pay off your student loan right away since you have the cash to do it." }, { "docid": "47614", "title": "", "text": "If you can afford it, there are very few reasons not to save for retirement. The biggest reason I can think of is that, simply, you are saving in general. The tax advantages of 401k and IRA accounts help increase your wealth, but the most important thing is to start saving at an early age in your career (as you are doing) and making sure to continue contributing throughout your life. Compound interest serves you well. If you are really concerned that saving for retirement in your situation would equate to putting money away for no good reason, you can do a couple of things: Save in a Roth IRA account which does not require minimum distributions when you get past a certain age. Additionally, your contributions only (that is, not your interest earnings) to a Roth can be withdrawn tax and penalty free at any time while you are under the age of 59.5. And once you are older than that you can take distributions as however you need. Save by investing in a balanced portfolio of stocks and bonds. You won't get the tax advantages of a retirement account, but you will still benefit from the time value of money. The bonus here is that you can withdraw your money whenever you want without penalty. Both IRA accounts and mutual fund/brokerage accounts will give you a choice of many securities that you can invest in. In comparison, 401k plans (below) often have limited choices for you. Most people choose to use their company's 401k plan for retirement savings. In general you do not want to be in a position where you have to borrow from your 401k. As such it's not a great option for savings that you think you'd need before you retire. Additionally 401k plans have minimum distributions, so you will have to periodically take some money from the account when you are in retirement. The biggest advantage of 401k plans is that often employers will match contributions to a certain extent, which is basically free money for you. In the end, these are just some suggestions. Probably best to consult with a financial planner to hammer out all the details." } ]

[ { "docid": "148728", "title": "", "text": "\"Assuming these are standardized and regulated contracts, the short answer is yes. In your example, Trader A is short while Trader B is long. If Trader B wants to exit his long position, he merely enters a \"\"sell to close\"\" order with his broker. Trader B never goes short as you state. He was long while he held the contract, then he \"\"sold to close\"\". As to who finds the buyer of Trader B's contract, I believe that would be the exchange or a market maker. Therefore, Trader C ends up the counterparty to Trader A's short position after buying from Trader B. Assuming the contract is held until expiration, Trader A is responsible for delivering contracted product to Trader C for contracted price. In reality this is generally settled up in cash, and Trader A and Trader C never even know each other's identity.\"" } ]

[ { "docid": "27401", "title": "", "text": "\"With stocks, you can buy or sell. If you sell first, that's called 'shorting.' As in \"\"I think linkedin is too high, I'm going to short it.\"\" With options, the terminology is different, the normal process is to buy to open/sell to close, but if you were shorting the option itself, you would first sell to open, i.e you are selling a position to start it, effectively selling it short. Eventually, you may close it out, by buying to close. Options trading is not for the amateur. If you plan to trade, study first and be very cautious.\"" }, { "docid": "171819", "title": "", "text": "\"There some specific circumstances when you would have a long-term gain. Option 1: If you meet all of these conditions: Then you've got a long-term gain on the stock. The premium on the option gets rolled into the capital gain on the stock and is not taxed separately. From the IRS: If a call you write is exercised and you sell the underlying stock, increase your amount realized on the sale of the stock by the amount you received for the call when figuring your gain or loss. The gain or loss is long term or short term depending on your holding period of the stock. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010630 Option 2: If you didn't hold the underlying and the exercise of the call that you wrote resulted in a short position, you might also be able to get to a long-term gain by buying the underlying while keeping your short position open and then \"\"crossing\"\" them to close both positions after one year. (In other words, don't \"\"buy to cover\"\" just \"\"buy\"\" so that your account shows both a long and a short position in the same security. Your broker probably allows this, but if not you, could buy in a different account than the one with the short position.) That would get you to this rule: As a general rule, you determine whether you have short-term or long-term capital gain or loss on a short sale by the amount of time you actually hold the property eventually delivered to the lender to close the short sale. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010586 Option 1 is probably reasonably common. Option 2, I would guess, is uncommon and likely not worthwhile. I do not think that the wash sale rules can help string along options from expiration to expiration though. Option 1 has some elements of what you wrote in italics (I find that paragraph a bit confusing), but the wash sale does not help you out.\"" }, { "docid": "482871", "title": "", "text": "\"Yahoo's \"\"Adj Close\"\" data is adjusted for splits, but not for dividends. Despite Yahoo's webpage's footnote saying *Close price adjusted for dividends and splits. we can see empirically that the \"\"Adj Close\"\" is only adjusted for splits. For example, consider Siemens from Jan 27, 2017 to Mar 15, 2017: The Adj Close adjusts for splits: On any particular day, the \"\"Adj Close\"\" is equal to the \"\"Close\"\" price divided by the cumulative product of all splits that occurred after that day. If there have been no splits after that day, then the \"\"Adj Close\"\" equals the \"\"Close\"\" price. Since there is a 2-for-1 split on Mar 14, 2017, the Adj Close is half the Close price for all dates from Jan 27, 2017 to Mar 13, 2017. Note that if Siemens were to split again at some time in the future, the Adj Close prices will be readjusted for this future split. For example, if Siemens were to split 3-for-1 tomorrow, then all the Adj Close prices seen above will be divided by 3. The Adj Close is thus showing the price that a share would have traded on that day if the shares had already been split in accordance with all splits up to today. The Adj Close does not adjust for dividends: Notice that Siemens distributed a $1.87 dividend on Feb 02, 2017 and ~$3.74 dividend on Jan 30, 2017. If the Adj Close value were adjusted for these dividends then we should expect the Adj Close should no longer be exactly half of the Close amount. But we can see that there is no such adjustment -- the Adj Close remains (up to rounding) exactly half the Close amount: Note that in theory, the market reacts to the distribution of dividends by reducing the trading price of shares post-dividend. This in turn is reflected in the raw closing price. So in that sense the Adj Close is also automatically adjusted for dividends. But there is no formula for this. The effect is already baked in through the market's closing prices.\"" }, { "docid": "115436", "title": "", "text": "\"I believe they manage a bit over 500 million. He is still the founder and probably has control of the company but he is not the ceo. He has probably gotten the company to a stable position and wants to move on to other things... big deal. If tradeworx is stable and making money it is not a big deal if narang doesn't want to micro manage people and run day to day shit, someone else can handle that while he can go explore other things. Just like De shaw did.... de shaw got his fund up and running, make a ton on money, left to do research and the fund still makes money. [you can read this to see why he left](http://www.reuters.com/article/us-markets-tradeworx-narangdeparture/exclusive-tradeworx-founder-narang-leaves-high-frequency-firm-idUSKBN0KM1Z720150113) \"\"Narang declined to spell out why he was leaving Red Bank, New Jersey-based Tradeworx, but said, “I had a few differences with the board about the direction of the company.” Narang said there were no losses or expected losses at closely held Tradeworx, which he said has a bright future and where he remains a shareholder. Tradeworx accounts for about 5 to 6 percent of daily U.S. equity market volume, sources say. There was no immediate response from Tradeworx management. Narang has not decided on a future venture, but he said he is likely to remain in the financial services industry, is talking to people and is looking closely at the options market. “I have a whole lot of ideas that I‘m excited about that I’ve been wanting to pursue, so now is the time to figure out which of those ideas I’d like to pursue,” Narang told Reuters. “I‘m particularly interested in options trading, I have been for some time, that’s something Tradeworx doesn’t do. Many of my ideas are in that space,” said Narang, 45, who has degrees in computer science and mathematics from the Massachusetts Institute of Technology.\"\" edit- This all really has nothing to do with the original post about actuallyserious65 comment regarding hft.\"" }, { "docid": "221427", "title": "", "text": "With a short position you make your money (profit) when you buy the stocks back to close the position at a lower price than what you bought them at. As short selling is classed as speculation and not investing and you at no time own any actual assets, you cannot donate any short possition to charity. If you did want to avoid paying tax on the profits you could donate the proceeds of the profits after closing the position and thus get a tax deduction equal to the profits you made. But that raises a new and more important question, why are you trading in the first place if you are afraid to make profits in case you have to pay tax on those profits?" }, { "docid": "521897", "title": "", "text": "With margin accounts you will be able to use the proceeds from a closed trade INSTANTLY. Without margin accounts this is the time you close the trade + 3 business days for clearing. In practice this means 4-5 days if there is a weekend or holiday involved between those 3 business days. This ties up your capital for an unfavorable amount of time, where as a margin account lets you continue to use the capital over and over again for more opportunities. You CANNOT sell to open a position in cash accounts. This means no short selling. This means no covered calls or spreads and MANY other strategies. These are the real differences you'll notice in a margin account vs a cash account. Then there are the myriad of regulations that dictate how much cash you should keep in your account for any margin position." }, { "docid": "9274", "title": "", "text": "\"Futures are an agreement to buy or sell something in the future. The futures \"\"price\"\" is the price at which you agree to make the trade. This price does not indicate what will happen in the future so much as it indicates the cost of buying the item today and holding it until the future date. Hence, for very liquid products such as stock index futures, the futures price is a very simple function of today's stock index value and current short-term interest rates. If the stock exchange is closed but the futures exchange is open, then using the futures price and interest rates one can back out an implied \"\"fair value\"\" for the index, which is in essence the market's estimate of what the stock index value would be right now if the stock market were open. Of course, as soon as the stock exchange opens, the futures price trades to within a narrow band of the actual index value, where the size of the band depends on transaction costs (bid-ask spread, commissions, etc.).\"" }, { "docid": "149420", "title": "", "text": "The shift to trading at the close began in 2008. Traders did not want to be caught off guard by surprise news and there was a lot of volatility during the financial crisis, so they would close their position in the evening. Thats how it began. There are two reasons why it sticks around. First, there has been an increase usage of index funds or passive funds. These funds tend to update their positions at the end of the day. From the WSJ: Another factor behind the shift has been the proliferation of passively managed investments, such as index funds. These funds aim to mimic an index, like the S&P 500, by owning the shares that comprise it. Index funds don’t trade as often as active investors, but when they do, it is typically near the market close, traders say. That is because buying or selling a stock at its closing price better aligns their performance with the index they are trying to emulate. The second reason is simply that volume attracts volume. As a result of whats mentioned above, you have a shift to end of day trading, and the corrolary to that is that there is a liquidity shortage from 10am to 3pm. Thus, if you want to buy or sell a stock, but there are few buyers or sellers around, you will significant move the price when you enter your order. Obviously this does not affect retail traders, but imagine hedge funds entering or closing a billion dollar position. It can make a huge impact on price. And one way to mitigate that is to wait until there are more market participants to take the other end of your trade, just as at the end of the day. So this is a self-reinforcing trend that has begun in the markets and will likely stick around. http://www.wsj.com/articles/traders-pile-in-at-the-close-1432768080" }, { "docid": "92695", "title": "", "text": "Yes there will be enough liquidity to sell your position barring some sort of Flash Crash anomaly. Volume generally rises on the day of expiration to increase this liquidity. Don't forget that there are many investment strategies--buying to cover a short position is closing out a trade similar to your case." }, { "docid": "479874", "title": "", "text": "\"Treat each position or partial position as a separate LOT. Each time you open a position, a new lot of shares is created. If you sell the whole position, then the lot is closed. Done. But if you sell a partial quantity, you need to create a new lot. Split the original lot into two. The quantities in each are the amount sold, and the amount remaining. If you were to then buy a few more shares, create a third lot. If you then sell the entire position, you'll be closing out all the remaining lots. This allows you to track each buy/sell pairing. For each lot, simply calculate return based on cost and proceeds. You can't derive an annualized number for ALL the lots as a group, because there's no common timeframe that they share. If you wish to calculate your return over time on the whole series of trades, consider using TWIRR. It treats these positions, plus the cash they represent, as a whole portfolio. See my post in this thread: How can I calculate a \"\"running\"\" return using XIRR in a spreadsheet?\"" }, { "docid": "6771", "title": "", "text": "Conceptually, yes, you need to worry about it. As a practical matter, it's less likely to be exercised until expiry or shortly prior. The way to think about paying a European option is: [Odds of paying out] = [odds that strike is in the money at expiry] Whereas the American option can be thought of as: [Odds of paying out] = [odds that strike price is in the money at expiry] + ( [odds that strike price is in the money prior to expiry] * [odds that other party will exercise early] ). This is just a heuristic, not a formal financial tool. But the point is that you need to consider the odds that it will go into the money early, for how long (maybe over multiple periods), and how likely the counterparty is to exercise early. Important considerations for whether they will exercise early are the strategy of the other side (long, straddle, quick turnaround), the length of time the option is in the money early, and the anticipated future movement. A quick buck strategy might exercise immediately before the stock turns around. But that could leave further gains on the table, so it's usually best to wait unless the expectation is that the stock will quickly reverse its movement. This sort of counter-market strategy is generally unlikely from someone who bought the option at a certain strike, and is equivalent to betting against their original purchase of the option. So most of these people will wait because they expect the possibility of a bigger payoff. A long strategy is usually in no hurry to exercise, and in fact they would prefer to wait until the end to hold the time value of the option (the choice to get out of the option, if it goes back to being unprofitable). So it usually makes little sense for these people to exercise early. The same goes for a straddle, if someone is buying an option for insurance or to economically exit a position. So you're really just concerned that people will exercise early and forgo the time value of the American option. That may include people who really want to close a position, take their money, and move on. In some cases, it may include people who have become overextended or need liquidity, so they close positions. But for the most part, it's less likely to happen until the expiration approaches because it leaves potential value on the table. The time value of an option dwindles at the end because the implicit option becomes less likely, especially if the option is fairly deep in the money (the implicit option is then fairly deep out of the money). So early exercise becomes more meaningful concern as the expiration approaches. Otherwise, it's usually less worrisome but more than a nonzero proposition." }, { "docid": "371105", "title": "", "text": "\"There is no Federal law that mandates that they must re-open a closed account. They can either refuse the transfer / return the money, or they can optionally re-open your account so they get money (makes more sense for them). It is, however, in one of your agreements that they reserve the right to re-open a closed account in order to receive the deposit. At which point, your account will become active, and the balance may be below the required minimum balance threshold, so you may have maintenance or low-balance fees charged against the account (Credit Unions are less likely to have these fees). If you want to call them out on their BS, you can ask them to cite the law which mandates the re-opening of closed accounts. They will likely fall back on your Member agreement. There may be some state laws that discuss this, but I haven't found anything. This has become such a problem for some bank customers (where they are charged fees on the money they weren't aware they had) that a law was proposed in Sept. 2013, called the Freedom and Mobility in Consumer Banking Act, which would essentially only allow the named account holder(s) to re-open a closed account. I went ahead and looked up the NACHA guidelines for ACH transfers (I got the 2013 version) 2013 Corporate Rules and Guidelines. These lines reference \"\"Article 4A\"\", which is Uniform Commercial Code Section 4A - Funds Transfer. This means that if your account is actually closed, they have an exception to the standard timeframe for issuing a Return Entry. This means that if you notify them (in writing) that you refuse any future credit Entries to the account, they MUST return them. I then went looking for the return reason codes RDFI = Receiving Depository Financial Institution From what I gather, based on these NACHA guidelines, your CU didn't actually close your account. They put it on \"\"hold\"\" or some similar state. If they actually close your account, they are required to issue a Return Entry with Code R02. In your case, your CU doesn't charge you any maintenance fees, but for those working with banks, the best bet is to notify them in writing that you refuse any future credits to the account, or go into a branch and insist on fully closing out the account.\"" }, { "docid": "278025", "title": "", "text": "\"First, I'm really sorry to hear about your mother. My wife was recently diagnosed with Stage 4 cancer, so I know that there is a possibility that your mind is in \"\"survival\"\" mode, trying to preserve as much as you can in the way of things that you can effect (that's how I've been feeling recently). Having a loved one with cancer is really tough because there is absolutely, positively nothing tangible that you can do to change the fact that they have cancer. You will have to ask yourself some questions: How important is it that your mom can stay in her house? Moving could add some unneeded stress. How may years have you been contributing to your 401k? If you have 30 years left, you could have enough time to recover some of your losses from reducing the amount of money you have given up for your mom. Will your mom be able to pay you back for paying the taxes over time, or would this be a 'gift'? Have her doctors told her that she \"\"... has N months left...\"\"? What is the next step after you are able to pay her taxes and save the house? Someone close to me recently told me that \"\"There is no point in trying to save for someone for the future, if you can't sustain them until they get to that future. What will happen to your mom if she loses her house? Will it make it easier or harder for her to recover if she can stay? To paraphrase someone famous, \"\"you can't take a loan out for your retirement, but you could take a loan out for this event.\"\" At any rate, good luck. My thoughts are with you and your mother.\"" }, { "docid": "384221", "title": "", "text": "This depends on a combination of factors: What are you charged (call it margin interest) to hold the position? How does this reduce your buying power and what are the opportunity costs? What are the transaction costs alternative ways to close the position? What are your risks (exposure while legging out) for alternative ways to close? Finally, where is the asset closing relative to the strike? Generally, If asset price is below the put strike then the call expires worthless and you need to exercise the put. If asset is above the call strike then put expires worthless and you'll likely get assigned. Given this framework: If margin interest is eating up your profit faster than you're earning theta (a convenient way to represent the time value) then you have some urgency and you need to exit that position before expiry. I would not exit the stock until the call is covered. Keep minimal risk at all times. If you are limited by the position's impact on your buying power and probable value of available opportunities is greater than the time decay you're earning then once again, you have some urgency about closing instead of unwinding at expiry. Same as above. Cover that call, before you ditch your hedge in the long stock. Playing the tradeoff game of expiration/exercise cost against open market transactions is tough. You need sub-penny commissions on stock (and I would say a lot of leverage) and most importantly you need options charges much lower than IB to make that kind of trading work. IB is the cheapest in the retail brokerage game, but those commissions aren't even close to what the traders are getting who are more than likely on the other side of your options trades." }, { "docid": "226546", "title": "", "text": "\"Your broker likely didn't close your position out because it is a covered position. Why interfere with a trade that has no risk to it, from their perspective? There's no risk for the broker since your account holds the shares available for delivery (definition of covered), for if and when the options you wrote (sold) are exercised. And buyers of those options will eventually exercise the options (by expiration) if they remain in-the-money. There's only a chance that an option buyer exercises prematurely, and usually they don't because there's often time value left in the option. That the option buyer has an (ahem) \"\"option\"\" to exercise is a very key point. You wrote: \"\"I fully expected my position to be automatically liquidated by whoever bought my call\"\". That's a false assumption about the way options actually work. I suggest some study of the option exercise FAQs here: Perhaps if your position were uncovered – i.e. you wrote the call without owning the stock (don't try this at home, kids!) – and you also had insufficient margin to cover such a short position, then the broker might have justifiably liquidated your position. Whereas, in a covered call situation, there's really no reason for them to want to interfere – and I would consider that interference, as opposed to helpful. The situation you've described is neither risky for them, nor out of the ordinary. It is (and should be) completely up to you to decide how to close out the position. Anyway, your choices generally are:\"" }, { "docid": "410887", "title": "", "text": "\"I'll answer this question: \"\"Why do intraday traders close their position at then end of day while most gains can be done overnight (buy just before the market close and sell just after it opens). Is this observation true for other companies or is it specific to apple ?\"\" Intraday traders often trade shares of a company using intraday leverage provided by their firm. For every $5000 dollars they actually have, they may be trading with $100,000, 20:1 leverage as an example. Since a stock can also decrease in value, substantially, while the markets are closed, intraday traders are not allowed to keep their highly leveraged positions opened. Probabilities fail in a random walk scenario, and only one failure can bankrupt you and the firm.\"" }, { "docid": "258447", "title": "", "text": "The Net Present Value calculation would need to include 1) payments on the debt of $50 million (negative future cashflows) 2) returns from the project (positive future cashflows) If both of those things are taken into account and the NPV is positive then the project could be accepted." }, { "docid": "45065", "title": "", "text": "You would generally have to pay interest for everyday you hold the position overnight. If you never close the position and the stock price goes to zero, you will be closed out and credited with your profit. If you never close the position and the stock price keeps going up and up, your potential loss is an unlimited amount of money. Of course your broker may close you out early for a number of reasons, particularly if your loss goes above the amount of capital you have in your trading account." }, { "docid": "422467", "title": "", "text": "The problem with rate of return calculation on short positions is, that the commonly used approach assumes an initial investment creating a cash outflow. If we want to apply this approach to short selling, we should look at the trade from another perspective. We buy money and pay for this money with stock. Our investment to buy 50$ in your example is 1 share. When closing the short position, we effectively sell back our money (50$) and receive 2 shares. Our profit on this position is obviously 1 share. Setting this in relation to our investment of 1 share yields a performance of 100% in reality, we do not sell back the entire cash but only the amount needed to get back our investment of 1 share. This is actually comparable to a purchase of stock which we only partially close to get back our invested cash amount and keep the remaining shares as our profit" } ]

[ { "docid": "164001", "title": "", "text": "\"Ignoring the complexities of a standardised and regulated market, a futures contract is simply a contract that requires party A to buy a given amount of a commodity from party B at a specified price. The future can be over something tangible like pork bellies or oil, in which case there is a physical transfer of \"\"stuff\"\" or it can be over something intangible like shares. The purpose of the contract is to allow the seller to \"\"lock-in\"\" a price so that they are not subject to price fluctuations between the date the contract is entered and the date it is complete; this risk is transferred to the seller who will therefore generally pay a discounted rate from the spot price on the original day. In many cases, the buyer actually wants the \"\"stuff\"\"; futures contracts between farmers and manufacturers being one example. The farmer who is growing, say, wool will enter a contract to supply 3000kg at $10 per kg (of a given quality etc. there are generally price adjustments detailed for varying quality) with a textile manufacturer to be delivered in 6 months. The spot price today may be $11 - the farmer gives up $1 now to shift the risk of price fluctuations to the manufacturer. When the strike date rolls around the farmer delivers the 3000kg and takes the money - if he has failed to grow at least 3000kg then he must buy it from someone or trigger whatever the penalty clauses in the contract are. For futures over shares and other securities the principle is exactly the same. Say the contract is for 1000 shares of XYZ stock. Party A agrees to sell these for $10 each on a given day to party B. When that day rolls around party A transfers the shares and gets the money. Party A may have owned the shares all along, may have bought them before the settlement day or, if push comes to shove, must buy them on the day of settlement. Notwithstanding when they bought them, if they paid less than $10 they make a profit if they pay more they make a loss. Generally speaking, you can't settle a futures contract with another futures contract - you have to deliver up what you promised - be it wool or shares.\"" } ]

[ { "docid": "17231", "title": "", "text": "This is often the case where traders are closing out short positions they don't want to hold overnight, for a variety of reasons that matter to them. Most frequently, this is from day traders or high-frequency traders settling their accounts before the markets close." }, { "docid": "43087", "title": "", "text": "Perhaps it was to close a short position. Suppose the seller had written the calls at some time in the past and maybe made a buck or two off of them. By buying the calls now they can close out the position and go away on vacation, or at least have one less thing they have to pay attention to. If they were covered calls, perhaps the buyer wants to sell the underlying and in order to do so has to get out of the calls." }, { "docid": "10558", "title": "", "text": "\"At the most fundamental level, every market is comprised of buyers and selling trading securities. These buyers and sellers decide what and how to trade based on the probability of future events, as they see it. That's a simple statement, but an example demonstrates how complicated it can be. Picture a company that's about to announce earnings. Some investors/traders (from here on, \"\"agents\"\") will have purchased the company's stock a while ago, with the expectation that the company will have strong earnings and grow going forward. Other agents will have sold the stock short, bought put options, etc. with the expectation that the company won't do as well in the future. Still others may be unsure about the future of the company, but still expecting a lot of volatility around the earnings announcement, so they'll have bought/sold the stock, options, futures, etc. to take advantage of that volatility. All of these various predictions, expectations, etc. factor into what agents are bidding and asking for the stock, its associated derivatives, and other securities, which in turn determines its price (along with overall economic factors, like the sector's performance, interest rates, etc.) It can be very difficult to determine exactly how markets are factoring in information about an event, though. Take the example in your question. The article states that if market expectations of higher interest rates tightened credit conditions... In this case, lenders could expect higher interest rates in the future, so they may be less willing to lend money now because they expect to earn a higher interest rate in the future. You could also see this reflected in bond prices, because since interest rates are inversely related to bond prices, higher interest rates could decrease the value of bond portfolios. This could lead agents to sell bonds now in order to lock in their profits, while other agents could wait to buy bonds because they expect to be able to purchase bonds with a higher rate in the future. Furthermore, higher interest rates make taking out loans more expensive for individuals and businesses. This potential decline in investment could lead to decreased revenue/profits for businesses, which could in turn cause declines in the stock market. Agents expecting these declines could sell now in order to lock in their profits, buy derivatives to hedge against or ride out possible declines, etc. However, the current low interest rate environment makes it cheaper for businesses to obtain loans, which can in turn drive investment and lead to increases in the stock market. This is one criticism of the easy money/quantitative easing policies of the US Federal Reserve, i.e. the low interest rates are driving a bubble in the stock market. One quick example of how tricky this can be. The usual assumption is that positive economic news, e.g. low unemployment numbers, strong business/residential investment, etc. will lead to price increases in the stock market as more agents see growth in the future and buy accordingly. However, in the US, positive economic news has recently led to declines in the market because agents are worried that positive news will lead the Federal Reserve to taper/stop quantitative easing sooner rather than later, thus ending the low interest rate environment and possibly tampering growth. Summary: In short, markets incorporate information about an event because the buyers and sellers trade securities based on the likelihood of that event, its possible effects, and the behavior of other buyers and sellers as they react to the same information. Information may lead agents to buy and sell in multiple markets, e.g. equity and fixed-income, different types of derivatives, etc. which can in turn affect prices and yields throughout numerous markets.\"" }, { "docid": "6771", "title": "", "text": "Conceptually, yes, you need to worry about it. As a practical matter, it's less likely to be exercised until expiry or shortly prior. The way to think about paying a European option is: [Odds of paying out] = [odds that strike is in the money at expiry] Whereas the American option can be thought of as: [Odds of paying out] = [odds that strike price is in the money at expiry] + ( [odds that strike price is in the money prior to expiry] * [odds that other party will exercise early] ). This is just a heuristic, not a formal financial tool. But the point is that you need to consider the odds that it will go into the money early, for how long (maybe over multiple periods), and how likely the counterparty is to exercise early. Important considerations for whether they will exercise early are the strategy of the other side (long, straddle, quick turnaround), the length of time the option is in the money early, and the anticipated future movement. A quick buck strategy might exercise immediately before the stock turns around. But that could leave further gains on the table, so it's usually best to wait unless the expectation is that the stock will quickly reverse its movement. This sort of counter-market strategy is generally unlikely from someone who bought the option at a certain strike, and is equivalent to betting against their original purchase of the option. So most of these people will wait because they expect the possibility of a bigger payoff. A long strategy is usually in no hurry to exercise, and in fact they would prefer to wait until the end to hold the time value of the option (the choice to get out of the option, if it goes back to being unprofitable). So it usually makes little sense for these people to exercise early. The same goes for a straddle, if someone is buying an option for insurance or to economically exit a position. So you're really just concerned that people will exercise early and forgo the time value of the American option. That may include people who really want to close a position, take their money, and move on. In some cases, it may include people who have become overextended or need liquidity, so they close positions. But for the most part, it's less likely to happen until the expiration approaches because it leaves potential value on the table. The time value of an option dwindles at the end because the implicit option becomes less likely, especially if the option is fairly deep in the money (the implicit option is then fairly deep out of the money). So early exercise becomes more meaningful concern as the expiration approaches. Otherwise, it's usually less worrisome but more than a nonzero proposition." }, { "docid": "482871", "title": "", "text": "\"Yahoo's \"\"Adj Close\"\" data is adjusted for splits, but not for dividends. Despite Yahoo's webpage's footnote saying *Close price adjusted for dividends and splits. we can see empirically that the \"\"Adj Close\"\" is only adjusted for splits. For example, consider Siemens from Jan 27, 2017 to Mar 15, 2017: The Adj Close adjusts for splits: On any particular day, the \"\"Adj Close\"\" is equal to the \"\"Close\"\" price divided by the cumulative product of all splits that occurred after that day. If there have been no splits after that day, then the \"\"Adj Close\"\" equals the \"\"Close\"\" price. Since there is a 2-for-1 split on Mar 14, 2017, the Adj Close is half the Close price for all dates from Jan 27, 2017 to Mar 13, 2017. Note that if Siemens were to split again at some time in the future, the Adj Close prices will be readjusted for this future split. For example, if Siemens were to split 3-for-1 tomorrow, then all the Adj Close prices seen above will be divided by 3. The Adj Close is thus showing the price that a share would have traded on that day if the shares had already been split in accordance with all splits up to today. The Adj Close does not adjust for dividends: Notice that Siemens distributed a $1.87 dividend on Feb 02, 2017 and ~$3.74 dividend on Jan 30, 2017. If the Adj Close value were adjusted for these dividends then we should expect the Adj Close should no longer be exactly half of the Close amount. But we can see that there is no such adjustment -- the Adj Close remains (up to rounding) exactly half the Close amount: Note that in theory, the market reacts to the distribution of dividends by reducing the trading price of shares post-dividend. This in turn is reflected in the raw closing price. So in that sense the Adj Close is also automatically adjusted for dividends. But there is no formula for this. The effect is already baked in through the market's closing prices.\"" }, { "docid": "148728", "title": "", "text": "\"Assuming these are standardized and regulated contracts, the short answer is yes. In your example, Trader A is short while Trader B is long. If Trader B wants to exit his long position, he merely enters a \"\"sell to close\"\" order with his broker. Trader B never goes short as you state. He was long while he held the contract, then he \"\"sold to close\"\". As to who finds the buyer of Trader B's contract, I believe that would be the exchange or a market maker. Therefore, Trader C ends up the counterparty to Trader A's short position after buying from Trader B. Assuming the contract is held until expiration, Trader A is responsible for delivering contracted product to Trader C for contracted price. In reality this is generally settled up in cash, and Trader A and Trader C never even know each other's identity.\"" }, { "docid": "92695", "title": "", "text": "Yes there will be enough liquidity to sell your position barring some sort of Flash Crash anomaly. Volume generally rises on the day of expiration to increase this liquidity. Don't forget that there are many investment strategies--buying to cover a short position is closing out a trade similar to your case." }, { "docid": "313135", "title": "", "text": "\"You gave your own answer - the 80% is positions, not contracts. Most actors on the option market have no interest in the underlying asset. They want \"\"just\"\" exposure to its price movement. It makes more sense to close your position than to be handed over bushels of wheat or whatever.\"" }, { "docid": "479874", "title": "", "text": "\"Treat each position or partial position as a separate LOT. Each time you open a position, a new lot of shares is created. If you sell the whole position, then the lot is closed. Done. But if you sell a partial quantity, you need to create a new lot. Split the original lot into two. The quantities in each are the amount sold, and the amount remaining. If you were to then buy a few more shares, create a third lot. If you then sell the entire position, you'll be closing out all the remaining lots. This allows you to track each buy/sell pairing. For each lot, simply calculate return based on cost and proceeds. You can't derive an annualized number for ALL the lots as a group, because there's no common timeframe that they share. If you wish to calculate your return over time on the whole series of trades, consider using TWIRR. It treats these positions, plus the cash they represent, as a whole portfolio. See my post in this thread: How can I calculate a \"\"running\"\" return using XIRR in a spreadsheet?\"" }, { "docid": "333496", "title": "", "text": "\"Your strategy fails to control risk. Your \"\"inversed crash\"\" is called a rally. And These kind of things often turn into bigger rallies because of short squeezes, when all the people that are shorting a stock are forced to close their stock because of margin calls - its not that shorts \"\"scramble\"\" to close their position, the broker AUTOMATICALLY closes your short positions with market orders and you are stuck with the loss. So no, your \"\"trick\"\" is not enough. There are better ways to profit from a bearish outlook.\"" }, { "docid": "41130", "title": "", "text": "\"First, do you get charged a commission or other fee for reinvesting? Second, why would capital gains and dividends be grouped together? If the broker charges you for that run away. As Joe explained, it is done as a courtesy. Doesn't this mean if I sell the stock, the profit will be used to buy that stock right back? No, this is only the capital gains distributions of funds. Lastly, there are two additional checkbox options I was hoping somebody could explain: \"\"All equity positions currently held in this account\"\" and \"\"Future equity purchases, transfers, and deposits to this account\"\". \"\"All equity positions\"\" means your selection will be valid for all the positions you already have. \"\"Future positions\"\" means it will only affect future positions, not the ones you already have. For example: FOLLOW-UP: Looking around, some people suggest not doing this for taxable accounts because it complicates cost basis reporting. Is this a valid concern? Doesn't the brokerage handle that and send you the information when you sell the stock? Yes, because you end up with tons of positions and you need to track the cost basis for each. Brokers are required to report cost-basis on 1099-B now, so its less of a problem, but before 2011 you'd have 10's of positions each year (if you have a monthly dividend, for example) each with different cost basis, and you'd usually sell them all at once. Go figure the gain. So the new 1099-B reporting regulations help a little on this, but it only kicks in for everything starting of 2013 IIRC. Fortunately, for some investments (mutual funds, mainly) you may chose averaging, but it has drawbacks as well.\"" }, { "docid": "278025", "title": "", "text": "\"First, I'm really sorry to hear about your mother. My wife was recently diagnosed with Stage 4 cancer, so I know that there is a possibility that your mind is in \"\"survival\"\" mode, trying to preserve as much as you can in the way of things that you can effect (that's how I've been feeling recently). Having a loved one with cancer is really tough because there is absolutely, positively nothing tangible that you can do to change the fact that they have cancer. You will have to ask yourself some questions: How important is it that your mom can stay in her house? Moving could add some unneeded stress. How may years have you been contributing to your 401k? If you have 30 years left, you could have enough time to recover some of your losses from reducing the amount of money you have given up for your mom. Will your mom be able to pay you back for paying the taxes over time, or would this be a 'gift'? Have her doctors told her that she \"\"... has N months left...\"\"? What is the next step after you are able to pay her taxes and save the house? Someone close to me recently told me that \"\"There is no point in trying to save for someone for the future, if you can't sustain them until they get to that future. What will happen to your mom if she loses her house? Will it make it easier or harder for her to recover if she can stay? To paraphrase someone famous, \"\"you can't take a loan out for your retirement, but you could take a loan out for this event.\"\" At any rate, good luck. My thoughts are with you and your mother.\"" }, { "docid": "355319", "title": "", "text": "One of the fundamental of technical analysis suggests that holding a security overnight represents a huge commitment. Therefore it would follow that traders would tend to close their positions prior to market close and open them when it opens." }, { "docid": "414636", "title": "", "text": "In the US you specify explicitly what stocks you're selling. Brokers now are required to keep track of cost basis and report it to the IRS on the 1099-B, so you have to tell the broker which position it is that you're closing. Usually, the default is FIFO (i.e.: when you sell, you're assumed to be closing the oldest position), but you can change it if you want. In the US you cannot average costs basis of stocks (you can for mutual funds), so you either do FIFO, LIFO (last position closed first), or specify the specific positions when you submit the sale order." }, { "docid": "171819", "title": "", "text": "\"There some specific circumstances when you would have a long-term gain. Option 1: If you meet all of these conditions: Then you've got a long-term gain on the stock. The premium on the option gets rolled into the capital gain on the stock and is not taxed separately. From the IRS: If a call you write is exercised and you sell the underlying stock, increase your amount realized on the sale of the stock by the amount you received for the call when figuring your gain or loss. The gain or loss is long term or short term depending on your holding period of the stock. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010630 Option 2: If you didn't hold the underlying and the exercise of the call that you wrote resulted in a short position, you might also be able to get to a long-term gain by buying the underlying while keeping your short position open and then \"\"crossing\"\" them to close both positions after one year. (In other words, don't \"\"buy to cover\"\" just \"\"buy\"\" so that your account shows both a long and a short position in the same security. Your broker probably allows this, but if not you, could buy in a different account than the one with the short position.) That would get you to this rule: As a general rule, you determine whether you have short-term or long-term capital gain or loss on a short sale by the amount of time you actually hold the property eventually delivered to the lender to close the short sale. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010586 Option 1 is probably reasonably common. Option 2, I would guess, is uncommon and likely not worthwhile. I do not think that the wash sale rules can help string along options from expiration to expiration though. Option 1 has some elements of what you wrote in italics (I find that paragraph a bit confusing), but the wash sale does not help you out.\"" }, { "docid": "13672", "title": "", "text": "like any share, valuing facebook requires a projection of earnings and earnings growth to arrive at a present value for the right to share in these future earnings. there are economic arguments to be had for facebook to see either a negative or positive future long term net income growth. given the uncertainty we can establish a very rough baseline value by treating it as a perpetuity (zero growth) discounted at historical equity growth rate (8%) with some very simple math. An annual net income of 900 million discounted at 8 percent in perpetuity is worth 11.25 Billion. Now, take into account the fact that tech stocks trade at an inflated PE multiple of around 3 times that of a mature company in an established industry (PE x10-20 for average stocks and anywhere between x30-60+ for tech stocks), and I would expect the market cap for this perpetuity to be around 34 Billion. A market cap of 34 billion is a share value of around 15.5, which is the point where I would take up a long position with fair confidence. I do think that the share deserves a premium for potential income growth (despite the current and potential future revenue losses) simply due to the incredibly large user base and the potential to monetize this. Of course, it wasn't worth the 22 dollar premium that IPO buyers paid but its worth something. I think there is simply too much uncertainty for me to go long in the next 6 months unless it hits 15/share which may never happen. If the company can monetize mobile and show quarterly results in the next year I would consider a long position for anywhere from 15-20 a share." }, { "docid": "393418", "title": "", "text": "By buying the call option, you are getting the benefit of purchasing the underlying shares (that is, if the shares go up in value, you make money), but transferring the risk of the shares reducing in value. This is more apparent when you are using the option to offset an explicit risk that you hold. For example, if you have a short position, you are at unlimited risk of the position going up in value. You could decide you only want to take the risk that it might rise to $X. In that case, you could buy a call option with $X strike price. Then you have transferred the risk that the position goes over $X to the counterpart, since, even if the shares are trading at $X+$Y you can close out the short position by purchasing the shares at $X, while the option counterpart will lose $Y." }, { "docid": "557582", "title": "", "text": "Absolutely. There is no requirement that an option be in-the-money for you to close out a position. Remember that there are alwayes two sides to a trade - a buyer and a seller. When you bought your option, it's entirely possible that someone else was closing out their long position by selling it to you." }, { "docid": "589127", "title": "", "text": "\"There are more than a few different ways to consider why someone may have a transaction in the stock market: Employee stock options - If part of my compensation comes from having options that vest over time, I may well sell shares at various points because I don't want so much of my new worth tied up in one company stock. Thus, some transactions may happen from people cashing out stock options. Shorting stocks - This is where one would sell borrowed stock that then gets replaced later. Thus, one could reverse the traditional buy and sell order in which case the buy is done to close the position rather than open one. Convertible debt - Some companies may have debt that come with warrants or options that allow the holder to acquire shares at a specific price. This would be similar to 1 in some ways though the holder may be a mutual fund or company in some cases. There is also some people that may seek high-yield stocks and want an income stream from the stock while others may just want capital appreciation and like stocks that may not pay dividends(Berkshire Hathaway being the classic example here). Others may be traders believing the stock will move one way or another in the short-term and want to profit from that. So, thus the stock market isn't necessarily as simple as you state initially. A terrorist attack may impact stocks in a couple ways to consider: Liquidity - In the case of the attacks of 9/11, the stock market was closed for a number of days which meant people couldn't trade to convert shares to cash or cash to shares. Thus, some people may pull out of the market out of fear of their money being \"\"locked up\"\" when they need to access it. If someone is retired and expects to get $x/quarter from their stocks and it appears that that may be in jeopardy, it could cause one to shift their asset allocation. Future profits - Some companies may have costs to rebuild offices and other losses that could put a temporary dent in profits. If there is a company that makes widgets and the factory is attacked, the company may have to stop making widgets for a while which would impact earnings, no? There can also be the perception that an attack is \"\"just the beginning\"\" and one could extrapolate out more attacks that may affect broader areas. Sometimes what recently happens with the stock market is expected to continue that can be dangerous as some people may believe the market has to continue like the recent past as that is how they think the future will be.\"" } ]

[ { "docid": "362762", "title": "", "text": "For exchange contracts, yes. A trader can close a position by taking an offsetting position. CME's introduction to Futures explains it quite well (on page 22). Exiting the Market Jack entered the market on the buy side, speculating that the S&P 500 futures price would move higher. He has three choices for exiting the market:" } ]

[ { "docid": "112321", "title": "", "text": "\"Simple answer: Breakeven is when the security being traded reaches a price equal to the cost of the option plus the option's strike price, assuming you choose to exercise it. So for example, if you paid $1.00 for,say, a call option with a strike price of $19.00, breakeven would be when the security itself reaches $20.00. That being said, I can't imagine why you'd \"\"close out a position\"\" at the breakeven point. You wouldn't make or lose money doing that, so it wouldn't be rational. Now, as the option approaches expiration, you may make adjustments to the position to reflect shifts in momentum of the stock. So, if it looks as though the stock may not reach the option strike price, you could close out the position and take your lumps. But if the stock has momentum that will carry it past the strike price by expiration, you may choose to augment your position with additional contracts, although this would obviously mean the new contracts would be priced higher, which raises your dollar cost basis, and this may not make much sense. Another option in this scenario is that if the stock is going to surpass strike price, it might be a good opportunity to buy additional calls with either later expiration dates or with higher strike prices, depending on how much higher you speculate the stock will climb. I've managed to make some money doing this, buying options with strike prices just a dollar or two higher (or lower when playing puts), because the premiums were (in my opinion) underpriced to the potential peak of the stock by the expiration date. Sometimes the new options were actually slightly cheaper than my original positions, so my dollar cost basis overall dropped somewhat, improving my profit percentages.\"" }, { "docid": "589127", "title": "", "text": "\"There are more than a few different ways to consider why someone may have a transaction in the stock market: Employee stock options - If part of my compensation comes from having options that vest over time, I may well sell shares at various points because I don't want so much of my new worth tied up in one company stock. Thus, some transactions may happen from people cashing out stock options. Shorting stocks - This is where one would sell borrowed stock that then gets replaced later. Thus, one could reverse the traditional buy and sell order in which case the buy is done to close the position rather than open one. Convertible debt - Some companies may have debt that come with warrants or options that allow the holder to acquire shares at a specific price. This would be similar to 1 in some ways though the holder may be a mutual fund or company in some cases. There is also some people that may seek high-yield stocks and want an income stream from the stock while others may just want capital appreciation and like stocks that may not pay dividends(Berkshire Hathaway being the classic example here). Others may be traders believing the stock will move one way or another in the short-term and want to profit from that. So, thus the stock market isn't necessarily as simple as you state initially. A terrorist attack may impact stocks in a couple ways to consider: Liquidity - In the case of the attacks of 9/11, the stock market was closed for a number of days which meant people couldn't trade to convert shares to cash or cash to shares. Thus, some people may pull out of the market out of fear of their money being \"\"locked up\"\" when they need to access it. If someone is retired and expects to get $x/quarter from their stocks and it appears that that may be in jeopardy, it could cause one to shift their asset allocation. Future profits - Some companies may have costs to rebuild offices and other losses that could put a temporary dent in profits. If there is a company that makes widgets and the factory is attacked, the company may have to stop making widgets for a while which would impact earnings, no? There can also be the perception that an attack is \"\"just the beginning\"\" and one could extrapolate out more attacks that may affect broader areas. Sometimes what recently happens with the stock market is expected to continue that can be dangerous as some people may believe the market has to continue like the recent past as that is how they think the future will be.\"" }, { "docid": "567034", "title": "", "text": "You want to buy when the stock market is at an all-time low for that day. Unfortunately, you don't know the lowest time until the end of the day, and then you, uh can't buy the stock... Now the stock market is not random, but for your case, we can say that effectively, it is. So, when should you buy the stock to hopefully get the lowest price for the day? You should wait for 37% of the day, and then buy when it is lower than it has been for all of that day. Here is a quick example (with fake data): We have 18 points, and 37% of 18 is close to 7. So we discard the first 7 points - and just remember the lowest of those 7. We bear in mind that the lowest for the first 37% was 5. Now we wait until we find a stock which is lower than 5, and we buy at that point: This system is optimal for buying the stock at the lowest price for the day. Why? We want to find the best position to stop automatically ignoring. Why 37%? We know the answer to P(Being in position n) - it's 1/N as there are N toilets, and we can select just 1. Now, what is the chance we select them, given we're in position n? The chance of selecting any of the toilets from 0 to K is 0 - remember we're never going to buy then. So let's move on to the toilets from K+1 and onwards. If K+1 is better than all before it, we have this: But, K+1 might not be the best price from all past and future prices. Maybe K+2 is better. Let's look at K+2 For K+2 we have K/K+1, for K+3 we have K/K+2... So we have: This is a close approximation of the area under 1/x - especially as x → ∞ So 0 + 0 + ... + (K/N) x (1/K + 1/K+1 + 1/K+2 ... + 1/N-1) ≈ (K/N) x ln(N/K) and so P(K) ≈ (K/N) x ln(N/K) Now to simplify, say that x = K/N We can graph this, and find the maximum point so we know the maximum P(K) - or we can use calculus. Here's the graph: Here's the calculus: To apply this back to your situation with the stocks, if your stock updates every 30 seconds, and is open between 09:30 and 16:00, we have 6.5 hours = 390 minutes = 780 refreshes. You should keep track of the lowest price for the first 289 refreshes, and then buy your stock on the next best price. Because x = K/N, the chance of you choosing the best price is 37%. However, the chance of you choosing better than the average stock is above 50% for the day. Remember, this method just tries to mean you don't loose money within the day - if you want to try to minimise losses within the whole trading period, you should scale this up, so you wait 37% of the trading period (e.g. 37% of 3 months) and then select. The maths is taken from Numberphile - Mathematical Way to Choose a Toilet. Finally, one way to lose money a little slower and do some good is with Kiva.org - giving loans to people is developing countries. It's like a bank account with a -1% interest - which is only 1% lower than a lot of banks, and you do some good. I have no affiliation with them." }, { "docid": "394886", "title": "", "text": "As far as trading is concerned, these forward curves are the price at which you can speculate on the future value of the commodity. Basically, if you want to speculate on gold, you can either buy the physical and store it somewhere (which may have significant costs) or you can buy futures (ETFs typically hold futures or hold physical and store it for you). If you buy futures, you will have to roll your position every month, meaning you sell the current month's futures and buy the next month's. However, these may not be trading at the same price, so each time you roll your position, you face a risk. If you know you want to hold gold for exactly 1 year, then you can buy a 1-year future, which in this case according to your graph will cost you about $10 more than buying the front month. The forward curve (or sometimes called the futures term structure) represents the prices at which gold can be bought or sold at various points in the future." }, { "docid": "493012", "title": "", "text": "\"Well, futures don't have a \"\"strike\"\" like an option - the price represents how much you're obligated to buy/sell the index for at a specified date in the future. You are correct that there's no cost to enter a contract (though there may be broker fees and margin payments). Any difference between the contract price and the price of the index at settlement is what is exchanged at settlement. It's analogous to the bid/ask on a stock - the bid price represents the price at which someone is willing to \"\"buy\"\" a futures contract (meaning enter into a long position) and the ask is how much someone is willing to \"\"sell\"\" a contract. So if you want to take a long position on S&P500 mini futures you'd have to enter in at the \"\"ask\"\" price. If the index is above your contract price on the future expiry date you'll make a profit; if it is below the contract price you'll take a loss.\"" }, { "docid": "314478", "title": "", "text": "\"And what exactly do I profit from the short? I understand it is the difference in the value of the stock. So if my initial investment was $4000 (200 * $20) and I bought it at $3800 (200 * $19) I profit from the difference, which is $200. Do I also receive back the extra $2000 I gave the bank to perform the trade? Either this is extremely poorly worded or you misunderstand the mechanics of a short position. When you open a short position, your are expecting that the stock will decline from here. In a short position you are borrowing shares you don't own and selling them. If the price goes down you get to buy the same shares back for less money and return them to the person you borrowed from. Your profit is the delta between the original sell price and the new lower buy price (less commissions and fees/interest). Opening and closing a short position is two trades, a sell then a buy. Just like a long trade there is no maximum holding period. If you place your order to sell (short) 200 shares at $19, your initial investment is $3,800. In order to open your $3,800 short position your broker may require your account to have at least $5,700 (according to the 1.5 ratio in your question). It's not advisable to open a short position this close to the ratio requirement. Most brokers require a buffer in your account in case the stock goes up, because in a short trade if the stock goes up you're losing money. If the stock goes up such that you've exhausted your buffer you'll receive what's known as a \"\"margin call\"\" where your broker either requires you to wire in more money or sell part or all of your position at a loss to avoid further losses. And remember, you may be charged interest on the value of the shares you're borrowing. When you hold a position long your maximum loss is the money you put in; a position can only fall to zero (though you may owe interest or other fees if you're trading on margin). When you hold a position short your maximum loss is unlimited; there's no limit to how high the value of something can go. There are less risky ways to make short trades by using put options, but you should ensure that you have a firm grasp on what's happening before you use real money. The timing of the trades and execution of the trades is no different than when you take a plain vanilla long position. You place your order, either market or limit or whatever, and it executes when your trade criteria occurs.\"" }, { "docid": "279185", "title": "", "text": "\"Simplest way to answer this is that on margin, one is using borrowed assets and thus there are strings that come with doing that. Thus, if the amount of equity left gets too low, the broker has a legal obligation to close the position which can be selling purchased shares or buying back borrowed shares depending on if this is a long or short position respectively. Investopedia has an example that they walk through as the call is where you are asked to either put in more money to the account or the position may be closed because the broker wants their money back. What is Maintenance Margin? A maintenance margin is the required amount of securities an investor must hold in his account if he either purchases shares on margin, or if he sells shares short. If an investor's margin balance falls below the set maintenance margin, the investor would then need to contribute additional funds to the account or liquidate stocks in the account to bring the account back to the initial margin requirement. This request is known as a margin call. As discussed previously, the Federal Reserve Board sets the initial margin requirement (currently at 50%). The Federal Reserve Board also sets the maintenance margin. The maintenance margin, the amount of equity an investor needs to hold in his account if he buys stock on margin or sells shares short, is 25%. Keep in mind, however, that this 25% level is the minimum level set, brokerage firms can increase, but not decrease this level as they desire. Example: Determining when a margin call would occur. Assume that an investor had purchased 500 shares of Newco's stock. The shares were trading at $50 when the transaction was executed. The initial margin requirement on the account was 70% and the maintenance margin is 30%. Assume no transaction costs. Determine the price at which the investor will receive a margin call. Answer: Calculate the price as follows: $50 (1- 0.70) = $21.43 1 - 0.30 A margin call would be received when the price of Newco's stock fell below $21.43 per share. At that time, the investor would either need to deposit additional funds or liquidate shares to satisfy the initial margin requirement. Most people don't want \"\"Margin Calls\"\" but stocks may move in unexpected ways and this is where there are mechanisms to limit losses, especially for the brokerage firm that wants to make as much money as possible. Cancel what trade? No, the broker will close the position if the requirement isn't kept. Basically think of this as a way for the broker to get their money back if necessary while following federal rules. This would be selling in a long position or buying in a short sale situation. The Margin Investor walks through an example where an e-mail would be sent and if the requirement isn't met then the position gets exited as per the law.\"" }, { "docid": "479874", "title": "", "text": "\"Treat each position or partial position as a separate LOT. Each time you open a position, a new lot of shares is created. If you sell the whole position, then the lot is closed. Done. But if you sell a partial quantity, you need to create a new lot. Split the original lot into two. The quantities in each are the amount sold, and the amount remaining. If you were to then buy a few more shares, create a third lot. If you then sell the entire position, you'll be closing out all the remaining lots. This allows you to track each buy/sell pairing. For each lot, simply calculate return based on cost and proceeds. You can't derive an annualized number for ALL the lots as a group, because there's no common timeframe that they share. If you wish to calculate your return over time on the whole series of trades, consider using TWIRR. It treats these positions, plus the cash they represent, as a whole portfolio. See my post in this thread: How can I calculate a \"\"running\"\" return using XIRR in a spreadsheet?\"" }, { "docid": "17231", "title": "", "text": "This is often the case where traders are closing out short positions they don't want to hold overnight, for a variety of reasons that matter to them. Most frequently, this is from day traders or high-frequency traders settling their accounts before the markets close." }, { "docid": "422467", "title": "", "text": "The problem with rate of return calculation on short positions is, that the commonly used approach assumes an initial investment creating a cash outflow. If we want to apply this approach to short selling, we should look at the trade from another perspective. We buy money and pay for this money with stock. Our investment to buy 50$ in your example is 1 share. When closing the short position, we effectively sell back our money (50$) and receive 2 shares. Our profit on this position is obviously 1 share. Setting this in relation to our investment of 1 share yields a performance of 100% in reality, we do not sell back the entire cash but only the amount needed to get back our investment of 1 share. This is actually comparable to a purchase of stock which we only partially close to get back our invested cash amount and keep the remaining shares as our profit" }, { "docid": "106314", "title": "", "text": "\"The gap up/down and rapid movement immediately following market open is due to overnight futures activity. In your example, SP500 on June 20, 2016 saw a 20-point gap up at market open. This was because the SP500 futures were trading 20 points higher at 9:30 AM than at its close on Friday. The index will always \"\"catch up\"\" with futures at market open. You can see that below. The top chart is the E-mini SP500 futures from Sunday night to Monday. Beneath it is the SP500 index.\"" }, { "docid": "171819", "title": "", "text": "\"There some specific circumstances when you would have a long-term gain. Option 1: If you meet all of these conditions: Then you've got a long-term gain on the stock. The premium on the option gets rolled into the capital gain on the stock and is not taxed separately. From the IRS: If a call you write is exercised and you sell the underlying stock, increase your amount realized on the sale of the stock by the amount you received for the call when figuring your gain or loss. The gain or loss is long term or short term depending on your holding period of the stock. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010630 Option 2: If you didn't hold the underlying and the exercise of the call that you wrote resulted in a short position, you might also be able to get to a long-term gain by buying the underlying while keeping your short position open and then \"\"crossing\"\" them to close both positions after one year. (In other words, don't \"\"buy to cover\"\" just \"\"buy\"\" so that your account shows both a long and a short position in the same security. Your broker probably allows this, but if not you, could buy in a different account than the one with the short position.) That would get you to this rule: As a general rule, you determine whether you have short-term or long-term capital gain or loss on a short sale by the amount of time you actually hold the property eventually delivered to the lender to close the short sale. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010586 Option 1 is probably reasonably common. Option 2, I would guess, is uncommon and likely not worthwhile. I do not think that the wash sale rules can help string along options from expiration to expiration though. Option 1 has some elements of what you wrote in italics (I find that paragraph a bit confusing), but the wash sale does not help you out.\"" }, { "docid": "362765", "title": "", "text": "\"In general economic theory, there are always two markets created based on a need for a good; a spot market (where people who need something now can go outbid other people who need the same thing), and a futures market (where people who know they will need something later can agree to buy it for a pre-approved price, even if the good in question doesn't exist yet, like a grain crop). Options exist as a natural extension of the futures market. In a traditional future, you're obligated, by buying the contract, to execute it, for good or ill. If it turns out that you could have gotten a lower price when buying, or a higher price when selling, that's tough; you gave up the ability to say no in return for knowing, a month or three months or even a year in advance, the price you'll get to buy or sell this good that you know you need. Futures thus give both sides the ability to plan based on a known price, but that's their only risk-reduction mechanism. Enter the option. You're the Coors Brewing Company, and you want to buy 50 tons of barley grain for delivery in December in order to brew up for the Super Bowl and other assorted sports parties. A co-op bellies up to close the deal. But, since you're Coors, you compete on price with Budweiser and Miller, and if you end up paying more than the grain's really worth, perhaps because of a mild wet fall and a bumper crop that the almanac predicts, then you're going to have a real bad time of it in January. You ask for the right to say \"\"no\"\" when the contract falls due, if the price you negotiate now is too high based on the spot price. The co-op now has a choice; for such a large shipment, if Coors decided to leave them holding the bag on the contract and instead bought it from them anyway on a depressed spot market, they could lose big if they were counting on getting the contract price and bought equipment or facilities on credit against it. To mitigate those losses, the co-op asks for an option price; basically, this is \"\"insurance\"\" on the contract, and the co-op will, in return for this fee (exactly how and when it's paid is also negotiable), agree to eat any future realized losses if Coors were to back out of the contract. Like any insurance premium, the option price is nominally based on an outwardly simple formula: the probability of Coors \"\"exercising\"\" their option, times the losses the co-op would incur if that happened. Long-term, if these two figures are accurate, the co-op will break even by offering this price and Coors either taking the contract or exercising the option. However, coming up with accurate predictions of these two figures, such that the co-op (or anyone offering such a position) would indeed break even at least, is the stuff that keeps actuaries in business (and awake at night).\"" }, { "docid": "362473", "title": "", "text": "\"Seems like you are concerned with something called assignment risk. It's an inherent risk of selling options: you are giving somebody the right, but not the obligation, to sell to you 100 shares of GOOGL. Option buyers pay a premium to have that right - the extrinsic value. When they exercise the option, the option immediately disappears. Together with it, all the extrinsic value disappears. So, the lower the extrinsic value, the higher the assignment risk. Usually, option contracts that are very close to expiration (let's say, around 2 to 3 weeks to expiration or less) have significantly lower extrinsic value than longer option contracts. Also, generally speaking, the deeper ITM an option contract is, the lower extrinsic value it will have. So, to reduce assignment risk, I usually close out my option positions 1-2 weeks before expiration, especially the contracts that are deep in the money. edit: to make sure this is clear, based on a comment I've just seen on your question. To \"\"close out an options position\"\", you just have to create the \"\"opposite\"\" trade. So, if you sell a Put, you close that by buying back that exact same put. Just like stock: if you buy stock, you have a position; you close that position by selling the exact same stock, in the exact same amount. That's a very common thing to do with options. A post in Tradeking's forums, very old post, but with an interesting piece of data from the OCC, states that 35% of the options expire worthless, and 48% are bought or sold before expiration to close the position - only 17% of the contracts are actually exercised! (http://community.tradeking.com/members/optionsguy/blogs/11260-what-percentage-of-options-get-exercised) A few other things to keep in mind: certain stocks have \"\"mini options contracts\"\", that would correspond to a lot of 10 shares of stock. These contracts are usually not very liquid, though, so you might not get great prices when opening/closing positions you said in a comment, \"\"I cannot use this strategy to buy stocks like GOOGL\"\"; if the reason is because 100*GOOGL is too much to fit in your buying power, that's a pretty big risk - the assignment could result in a margin call! if margin call is not really your concern, but your concern is more like the risk of holding 100 shares of GOOGL, you can help manage that by buying some lower strike Puts (that have smaller absolute delta than your Put), or selling some calls against your short put. Both strategies, while very different, will effectively reduce your delta exposure. You'd get 100 deltas from the 100 shares of GOOGL, but you'd get some negative deltas by holding the lower strike Put, or by writing the higher strike Call. So as the stock moves around, your account value would move less than the exposure equivalent to 100 shares of stock.\"" }, { "docid": "105373", "title": "", "text": "It's unclear what you're asking. When I originally read your question, it seemed that you had closed out one options position and opened another. When I read your question the second time, it seemed that you were writing a second option while the first was still open. In the second case, you have one covered and one naked position. The covered call will expire worthless, the naked call will expire in the money. How your broker will resolve that is a question best left for them, but my expectation is that they will assign the non-worthless calls. Whereas, if both options expired in the money, you would be assigned and you would have to come up with the additional shares (and again, that depends on how your broker works). In general, for both cases, your net is the premiums you received, plus the difference between strike price and the price that you paid for the stock, minus any cost to close out the position. So whether you make a profit is very much dependent on how much you received for your premiums. Scenario #1: close first call, write second: Scenario #2: write covered + naked, one expires worthless Scenario #3: write covered + naked, both expire in the money Disclaimer: the SEC does not consider me a financial/investment advisor, so this is not financial/investment advice" }, { "docid": "575408", "title": "", "text": "An option is freely tradable, and all options (of the same kind) are equal. If your position is 0 and you sell 1 option, your new position in that option is -1. If the counterparty to your trade buys or sells more options to close, open, or even reopen their position afterwards, that doesn't matter to your position at all. Of course there's also the issue with American and European Options. European Options expire at their due date, but American Options expire at their due date or at any time before their due date if the holder decides they expire. With American Options, if a holder of an American Option decides to exercise the option, someone who is short the same option will be assigned as the counterparty (this is usually random). Expiry is after market close, so if one of your short American Options expires early, you will need to reopen the position the next day. Keep in mind dividends for slightly increased complexity. American and European Options do not in any way refer to the continents they are traded on, or to the location of the companies. These terms simply describe the expiry rules." }, { "docid": "73846", "title": "", "text": "\"For stock options, where I'm used to seeing these terms: Volume is usually reported per day, whereas open interest is cumulative. In addition, some volume closes positions and some opens positions. For example, if I am long one contract and sell it to someone who was short one contract, then that adds to volume and reduces open interest. If I hold no contracts and sell (creating a short position) to someone who also had no contracts, then I add to volume and I increase open interest. EDIT: With the clarification in your comment, then I would say some people opened and closed positions in that one day. Their opening and closing trades both contribute to \"\"volume\"\" but they have not net position in the \"\"open interest.\"\"\"" }, { "docid": "313135", "title": "", "text": "\"You gave your own answer - the 80% is positions, not contracts. Most actors on the option market have no interest in the underlying asset. They want \"\"just\"\" exposure to its price movement. It makes more sense to close your position than to be handed over bushels of wheat or whatever.\"" }, { "docid": "216404", "title": "", "text": "Generally stock trades will require an additional Capital Gains and Losses form included with a 1040, known as Schedule D (summary) and Schedule D-1 (itemized). That year I believe the maximum declarable Capital loss was $3000--the rest could carry over to future years. The purchase date/year only matters insofar as to rank the lot as short term or long term(a position held 365 days or longer), short term typically but depends on actual asset taxed then at 25%, long term 15%. The year a position was closed(eg. sold) tells you which year's filing it belongs in. The tiny $16.08 interest earned probably goes into Schedule B, typically a short form. The IRS actually has a hotline 800-829-1040 (Individuals) for quick questions such as advising which previous-year filing forms they'd expect from you. Be sure to explain the custodial situation and that it all recently came to your awareness etc. Disclaimer: I am no specialist. You'd need to verify everything I wrote; it was just from personal experience with the IRS and taxes." } ]

[ { "docid": "121158", "title": "", "text": "Futures exchanges are essentially auction houses facilitating a two-way auction. While they provide a venue for buyers and sellers to come together and transact (be that a physical venue such as a pit at the CME or an electronic network such as Globex), they don't actively seek out or find buyers and sellers to pair them together. The exchanges enable this process through an order book. As a futures trader you may submit one of two types of order to an exchange: Market Order - this is sent to the exchange and is filled immediately by being paired with a limit order. Limit Order - this is placed on the books of the exchange at the price you specify. If other participants enter opposing market orders at this price, then their market order will be paired with your limit order. In your example, trader B wishes to close his long position. To do this he may enter a market sell order, which will immediately close his position at the lowest possible buy limit price, or he may enter a limit sell order, specifying the price at or above which he is willing to sell. In the case of the limit order, he will only sell and successfully close his position if his order becomes the lowest sell order on the book. All this may be a lot easier to understand by looking at a visual image of an order book such as the one given in the explanation that I have published here: Stop Orders for Futures Finally, not that as far as the exchange is concerned, there is no difference between an order to open and an order to close a position. They're all just 'buy' or 'sell' orders. Whether they cause you to reduce/exit a position or increase/establish a position is relative to the position you currently hold; if you're flat a buy order establishes a new position, if you're short it closes your position and leaves you flat." } ]

[ { "docid": "211122", "title": "", "text": "In addition to the expatriation case already mentioned by Ben Miller, traders/investors are required to use mark-to-market accounting on certain investments. These go by Section 1256 contracts due to the part of the law that defines them. Mark-to-market is also required on straddles (combination of a long and and a short position in equities that are expected to vary inversely to each other). Mark-to-market means that you have to treat the positions as if you closed them at their end-of-year market value (even if you still have the position across the new year)." }, { "docid": "367928", "title": "", "text": "It would be nice if the broker could be instructed to clear out the position for you, but in my experience the broker will simply give you the shares that you can't afford, then freeze your account because you are over your margin limit, and issue a margin call. This happened to me recently because of a dumb mistake: options I paid $200 for and expected to expire worthless, ended up slightly ITM, so they were auto-exercised on Friday for about $20k, and my account was frozen (only able to close positions). By the next Monday, market news had shifted the stock against me and I had to sell it at a loss of $1200 to meet the margin call. This kind of thing is what gives option trading a reputation for danger: A supposedly max-$200-risk turned into a 6x greater loss. I see no reason to ever exercise, I always try to close my positions, but these things can happen." }, { "docid": "92695", "title": "", "text": "Yes there will be enough liquidity to sell your position barring some sort of Flash Crash anomaly. Volume generally rises on the day of expiration to increase this liquidity. Don't forget that there are many investment strategies--buying to cover a short position is closing out a trade similar to your case." }, { "docid": "17231", "title": "", "text": "This is often the case where traders are closing out short positions they don't want to hold overnight, for a variety of reasons that matter to them. Most frequently, this is from day traders or high-frequency traders settling their accounts before the markets close." }, { "docid": "278025", "title": "", "text": "\"First, I'm really sorry to hear about your mother. My wife was recently diagnosed with Stage 4 cancer, so I know that there is a possibility that your mind is in \"\"survival\"\" mode, trying to preserve as much as you can in the way of things that you can effect (that's how I've been feeling recently). Having a loved one with cancer is really tough because there is absolutely, positively nothing tangible that you can do to change the fact that they have cancer. You will have to ask yourself some questions: How important is it that your mom can stay in her house? Moving could add some unneeded stress. How may years have you been contributing to your 401k? If you have 30 years left, you could have enough time to recover some of your losses from reducing the amount of money you have given up for your mom. Will your mom be able to pay you back for paying the taxes over time, or would this be a 'gift'? Have her doctors told her that she \"\"... has N months left...\"\"? What is the next step after you are able to pay her taxes and save the house? Someone close to me recently told me that \"\"There is no point in trying to save for someone for the future, if you can't sustain them until they get to that future. What will happen to your mom if she loses her house? Will it make it easier or harder for her to recover if she can stay? To paraphrase someone famous, \"\"you can't take a loan out for your retirement, but you could take a loan out for this event.\"\" At any rate, good luck. My thoughts are with you and your mother.\"" }, { "docid": "148141", "title": "", "text": "\"In essence the problem that the OP identified is not that the FX market itself has poor liquidity but that retail FX brokerage sometimes have poor counterparty risk management. The problem is the actual business model that many FX brokerages have. Most FX brokerages are themselves customers of much larger money center banks that are very well capitalized and provide ample liquidity. By liquidity I mean the ability to put on a position of relatively decent size (long EURUSD say) at any particular time with a small price impact relative to where it is trading. For spot FX, intraday bid/ask spreads are extremely small, on the order of fractions of pips for majors (EUR/USD/GBP/JPY/CHF). Even in extremely volatile situations it rarely becomes much larger than a few pips for positions of 1 to 10 Million USD equivalent notional value in the institutional market. Given that retail traders rarely trade that large a position, the FX spot market is essentially very liquid in that respect. The problem is that there are retail brokerages whose business model is to encourage excessive trading in the hopes of capturing that spread, but not guaranteeing that it has enough capital to always meet all client obligations. What does get retail traders in trouble is that most are unaware that they are not actually trading on an exchange like with stocks. Every bid and ask they see on the screen the moment they execute a trade is done against that FX brokerage, and not some other trader in a transparent central limit order book. This has some deep implications. One is the nifty attribute that you rarely pay \"\"commission\"\" to do FX trades unlike in stock trading. Why? Because they build that cost into the quotes they give you. In sleepy markets, buyers and sellers cancel out, they just \"\"capture\"\" that spread which is the desired outcome when that business model functions well. There are two situations where the brokerage's might lose money and capital becomes very important. In extremely volatile markets, every one of their clients may want to sell for some reason, this forces the FX brokers to accumulate a large position in the opposite side that they have to offload. They will trade in the institutional market with other brokerages to net out their positions so that they are as close to flat as possible. In the process, since bid/ask spreads in the institutional market is tighter than within their own brokerage by design, they should still make money while not taking much risk. However, if they are not fast enough, or if they do not have enough capital, the brokerage's position might move against them too quickly which may cause them lose all their capital and go belly up. The brokerage is net flat, but there are huge offsetting positions amongst its clients. In the example of the Swiss Franc revaluation in early 2015, a sudden pop of 10-20% would have effectively meant that money in client accounts that were on the wrong side of the trade could not cover those on the other side. When this happens, it is theoretically the brokerage's job to close out these positions before it wipes out the value of the client accounts, however it would have been impossible to do so since there were no prices in between the instantaneous pop in which the brokerage could have terminated their client's losing positions, and offload the risk in the institutional market. Since it's extremely hard to ask for more money than exist in the client accounts, those with strong capital positions simply ate the loss (such as Oanda), those that fared worse went belly up. The irony here is that the more leverage the brokerage gave to their clients, the less money would have been available to cover losses in such an event. Using an example to illustrate: say client A is long 1 contract at $100 and client B is short 1 contract at $100. The brokerage is thus net flat. If the brokerage had given 10:1 leverage, then there would be $10 in each client's account. Now instantaneously market moves down $10. Client A loses $10 and client B is up $10. Brokerage simply closes client A's position, gives $10 to client B. The brokerage is still long against client B however, so now it has to go into the institutional market to be short 1 contract at $90. The brokerage again is net flat, and no money actually goes in or out of the firm. Had the brokerage given 50:1 leverage however, client A only has $2 in the account. This would cause the brokerage close client A's position. The brokerage is still long against client B, but has only $2 and would have to \"\"eat the loss\"\" for $8 to honor client B's position, and if it could not do that, then it technically became insolvent since it owes more money to its clients than it has in assets. This is exactly the reason there have been regulations in the US to limit the amount of leverage FX brokerages are allowed to offer to clients, to assure the brokerage has enough capital to pay what is owed to clients.\"" }, { "docid": "9274", "title": "", "text": "\"Futures are an agreement to buy or sell something in the future. The futures \"\"price\"\" is the price at which you agree to make the trade. This price does not indicate what will happen in the future so much as it indicates the cost of buying the item today and holding it until the future date. Hence, for very liquid products such as stock index futures, the futures price is a very simple function of today's stock index value and current short-term interest rates. If the stock exchange is closed but the futures exchange is open, then using the futures price and interest rates one can back out an implied \"\"fair value\"\" for the index, which is in essence the market's estimate of what the stock index value would be right now if the stock market were open. Of course, as soon as the stock exchange opens, the futures price trades to within a narrow band of the actual index value, where the size of the band depends on transaction costs (bid-ask spread, commissions, etc.).\"" }, { "docid": "567034", "title": "", "text": "You want to buy when the stock market is at an all-time low for that day. Unfortunately, you don't know the lowest time until the end of the day, and then you, uh can't buy the stock... Now the stock market is not random, but for your case, we can say that effectively, it is. So, when should you buy the stock to hopefully get the lowest price for the day? You should wait for 37% of the day, and then buy when it is lower than it has been for all of that day. Here is a quick example (with fake data): We have 18 points, and 37% of 18 is close to 7. So we discard the first 7 points - and just remember the lowest of those 7. We bear in mind that the lowest for the first 37% was 5. Now we wait until we find a stock which is lower than 5, and we buy at that point: This system is optimal for buying the stock at the lowest price for the day. Why? We want to find the best position to stop automatically ignoring. Why 37%? We know the answer to P(Being in position n) - it's 1/N as there are N toilets, and we can select just 1. Now, what is the chance we select them, given we're in position n? The chance of selecting any of the toilets from 0 to K is 0 - remember we're never going to buy then. So let's move on to the toilets from K+1 and onwards. If K+1 is better than all before it, we have this: But, K+1 might not be the best price from all past and future prices. Maybe K+2 is better. Let's look at K+2 For K+2 we have K/K+1, for K+3 we have K/K+2... So we have: This is a close approximation of the area under 1/x - especially as x → ∞ So 0 + 0 + ... + (K/N) x (1/K + 1/K+1 + 1/K+2 ... + 1/N-1) ≈ (K/N) x ln(N/K) and so P(K) ≈ (K/N) x ln(N/K) Now to simplify, say that x = K/N We can graph this, and find the maximum point so we know the maximum P(K) - or we can use calculus. Here's the graph: Here's the calculus: To apply this back to your situation with the stocks, if your stock updates every 30 seconds, and is open between 09:30 and 16:00, we have 6.5 hours = 390 minutes = 780 refreshes. You should keep track of the lowest price for the first 289 refreshes, and then buy your stock on the next best price. Because x = K/N, the chance of you choosing the best price is 37%. However, the chance of you choosing better than the average stock is above 50% for the day. Remember, this method just tries to mean you don't loose money within the day - if you want to try to minimise losses within the whole trading period, you should scale this up, so you wait 37% of the trading period (e.g. 37% of 3 months) and then select. The maths is taken from Numberphile - Mathematical Way to Choose a Toilet. Finally, one way to lose money a little slower and do some good is with Kiva.org - giving loans to people is developing countries. It's like a bank account with a -1% interest - which is only 1% lower than a lot of banks, and you do some good. I have no affiliation with them." }, { "docid": "259659", "title": "", "text": "\"There are many reasons. Here are just some possibilities: The stock has a lot of negative sentiment and puts are being \"\"bid up\"\". The stock fell at the close and the options reflect that. The puts closed on the offer and the calls closed on the bid. The traders with big positions marked the puts up and the calls down because they are long puts and short calls. There isn't enough volume in the puts or calls to make any determination - what you are seeing is part of the randomness of a moment in time.\"" }, { "docid": "416307", "title": "", "text": "\"Can anyone explain what each of them mean and how they're different from each other? When you \"\"buy to open\"\", you are purchasing an option and opening a new position. When you \"\"sell to open\"\", you are creating a brand new options contract and selling it. \"\"Covered\"\" means that you have assets in your account to satisfy the terms of the options contract. A \"\"covered call\"\" is a call option for which you own shares of the underlying stock that you will sell to the buyer at the option's strike price if he exercises the option. If you previously made a \"\"sell to open\"\" trade to create a new position, and you want to close the position, you can buy back the option. If you previously made a \"\"buy to open\"\" trade, you can \"\"sell to close\"\" which will sell back your option and close your position. In summary:\"" }, { "docid": "110966", "title": "", "text": "\"Nobody has mentioned the futures market yet. Although the stock market closes at 4pm, the futures market continues trading 24 hours a day and 5.5 days a week. Amongst the products that trade in the future market are stock index futures. That includes the Dow Jones, the S&P 500. These are weighted averages of stocks and their sectors. You would think that the price of the underlying stock dictates the price of the average, but in this day and age, the derivative actually changes the value of the underlying stock due to a very complex combination of hedging practices. (this isn't meant to be vague and mysterious, it is \"\"delta hedging\"\") So normal market fluctuations coupled with macroeconomic events affect the futures market, which can ripple down to individual stocks. Very popular stocks with large market caps will most certainly be affected by futures market trading. But it is also worth mentioning that futures can function completely independently of a \"\"spot\"\" price. This is where things start to get complicated and long winded. The futures market factor is worth mentioning because it extends even outside of the aftermarket and pre-market hours of stock trading.\"" }, { "docid": "115436", "title": "", "text": "\"I believe they manage a bit over 500 million. He is still the founder and probably has control of the company but he is not the ceo. He has probably gotten the company to a stable position and wants to move on to other things... big deal. If tradeworx is stable and making money it is not a big deal if narang doesn't want to micro manage people and run day to day shit, someone else can handle that while he can go explore other things. Just like De shaw did.... de shaw got his fund up and running, make a ton on money, left to do research and the fund still makes money. [you can read this to see why he left](http://www.reuters.com/article/us-markets-tradeworx-narangdeparture/exclusive-tradeworx-founder-narang-leaves-high-frequency-firm-idUSKBN0KM1Z720150113) \"\"Narang declined to spell out why he was leaving Red Bank, New Jersey-based Tradeworx, but said, “I had a few differences with the board about the direction of the company.” Narang said there were no losses or expected losses at closely held Tradeworx, which he said has a bright future and where he remains a shareholder. Tradeworx accounts for about 5 to 6 percent of daily U.S. equity market volume, sources say. There was no immediate response from Tradeworx management. Narang has not decided on a future venture, but he said he is likely to remain in the financial services industry, is talking to people and is looking closely at the options market. “I have a whole lot of ideas that I‘m excited about that I’ve been wanting to pursue, so now is the time to figure out which of those ideas I’d like to pursue,” Narang told Reuters. “I‘m particularly interested in options trading, I have been for some time, that’s something Tradeworx doesn’t do. Many of my ideas are in that space,” said Narang, 45, who has degrees in computer science and mathematics from the Massachusetts Institute of Technology.\"\" edit- This all really has nothing to do with the original post about actuallyserious65 comment regarding hft.\"" }, { "docid": "234935", "title": "", "text": "I guess the opposite of being hedged is being unhedged. Typically, a hedge is an additional position that you would take on in order to mitigate the potential for losses on another position. I'll give an example: Say that I purchase 100 shares of stock XYZ at $10 per share because I believe its price will increase in the future. At that point, my full investment of $1000 is at risk, so the position is not hedged. If the price of XYZ decreases to $8, then I've lost $200. If the price of XYZ increases to $12, then I've gained $200; the profit/loss curve has a linear relationship to the future stock price. Suppose that I decide to hedge my XYZ position by purchasing a put option. I purchase a single option contract (corresponding to my 100 shares) with a strike price of $10 and an expiration date in January 2013 for a price of $0.50/share. This means that until the contract expires, I can always sell my XYZ shares for a minimum of $10. Therefore, if the price of XYZ decreases to $8, then I've only lost $50 (the price of the option contract), compared to the $200 that I would have lost if the position was unhedged. Likewise, however, if the price increases to $12, then I've only gained a net total of $150 due to the money I spent on the hedge. (the details of how much money you would actually lose in the hedged scenario are simplified out above; even out-of-the-money options retain some value before expiration, but pricing of options is outside of the scope of this post) So, as a more pointed answer to your question, I would say that the hedged/unhedged status of a position can be characterized by its potential for loss. If you don't have any other assets that will increase in value to offset losses on your position of interest, I would call it unhedged." }, { "docid": "41130", "title": "", "text": "\"First, do you get charged a commission or other fee for reinvesting? Second, why would capital gains and dividends be grouped together? If the broker charges you for that run away. As Joe explained, it is done as a courtesy. Doesn't this mean if I sell the stock, the profit will be used to buy that stock right back? No, this is only the capital gains distributions of funds. Lastly, there are two additional checkbox options I was hoping somebody could explain: \"\"All equity positions currently held in this account\"\" and \"\"Future equity purchases, transfers, and deposits to this account\"\". \"\"All equity positions\"\" means your selection will be valid for all the positions you already have. \"\"Future positions\"\" means it will only affect future positions, not the ones you already have. For example: FOLLOW-UP: Looking around, some people suggest not doing this for taxable accounts because it complicates cost basis reporting. Is this a valid concern? Doesn't the brokerage handle that and send you the information when you sell the stock? Yes, because you end up with tons of positions and you need to track the cost basis for each. Brokers are required to report cost-basis on 1099-B now, so its less of a problem, but before 2011 you'd have 10's of positions each year (if you have a monthly dividend, for example) each with different cost basis, and you'd usually sell them all at once. Go figure the gain. So the new 1099-B reporting regulations help a little on this, but it only kicks in for everything starting of 2013 IIRC. Fortunately, for some investments (mutual funds, mainly) you may chose averaging, but it has drawbacks as well.\"" }, { "docid": "271741", "title": "", "text": "\"Yes this is possible in the most liquid securities, but currently it would take several days to get filled in one contract at that amount There are also position size limits (set by the OCC and other Self Regulatory Organizations) that attempt to prevent people from cornering a market through the options market. (getting loads of contacts without effecting the price of the underlying asset, exercising those contracts and suddenly owning a huge stake of the asset and nobody saw it coming - although this is still VERY VERY possible) So for your example of an option of $1.00 per contract, then the position size limits would have prevented 100 million of those being opened (by one person/account that is). Realistically, you would spread out your orders amongst several options strike prices and expiration dates. Stock Indexes are some very liquid examples, so for the Standard & Poors you can open options contracts on the SPY ETF, as well as the S&P 500 futures, as well as many other S&P 500 products that only trade options and do not have the ability to be traded as the underlying shares. And there is also the saying \"\"liquidity begets liquidity\"\", meaning that because you are making the market more liquid, other large market participants will also see the liquidity and want to participate, where they previously thought it was too illiquid and impossible to close a large position quickly\"" }, { "docid": "149420", "title": "", "text": "The shift to trading at the close began in 2008. Traders did not want to be caught off guard by surprise news and there was a lot of volatility during the financial crisis, so they would close their position in the evening. Thats how it began. There are two reasons why it sticks around. First, there has been an increase usage of index funds or passive funds. These funds tend to update their positions at the end of the day. From the WSJ: Another factor behind the shift has been the proliferation of passively managed investments, such as index funds. These funds aim to mimic an index, like the S&P 500, by owning the shares that comprise it. Index funds don’t trade as often as active investors, but when they do, it is typically near the market close, traders say. That is because buying or selling a stock at its closing price better aligns their performance with the index they are trying to emulate. The second reason is simply that volume attracts volume. As a result of whats mentioned above, you have a shift to end of day trading, and the corrolary to that is that there is a liquidity shortage from 10am to 3pm. Thus, if you want to buy or sell a stock, but there are few buyers or sellers around, you will significant move the price when you enter your order. Obviously this does not affect retail traders, but imagine hedge funds entering or closing a billion dollar position. It can make a huge impact on price. And one way to mitigate that is to wait until there are more market participants to take the other end of your trade, just as at the end of the day. So this is a self-reinforcing trend that has begun in the markets and will likely stick around. http://www.wsj.com/articles/traders-pile-in-at-the-close-1432768080" }, { "docid": "145892", "title": "", "text": "\"Because you've sold something you've received cash (or at least an entry on your brokerage statement to say you've got cash) so you should record that as a credit in your brokerage account in GnuCash. The other side of the entry should go into another account that you create called something like \"\"Open Positions\"\" and is usually marked as a Liability account type (if you need to mark it as such). If you want to keep an accurate daily tally of your net worth you can add a new entry to your Open Positions account and offset that against Income which will be either negative or positive depending on how the position has moved for/against you. You can also do this at a lower frequency or not at all and just put an entry in when your position closes out because you bought it back or it expired or it was exercised. My preferred method is to have a single entry in the Open Positions account with an arbitrary date near when I expect it to be closed and each time I edit that value (daily or weekly) so I only have the initial entry and the current adjust to look at which reduces the number of entries and confusion if there are too many.\"" }, { "docid": "226546", "title": "", "text": "\"Your broker likely didn't close your position out because it is a covered position. Why interfere with a trade that has no risk to it, from their perspective? There's no risk for the broker since your account holds the shares available for delivery (definition of covered), for if and when the options you wrote (sold) are exercised. And buyers of those options will eventually exercise the options (by expiration) if they remain in-the-money. There's only a chance that an option buyer exercises prematurely, and usually they don't because there's often time value left in the option. That the option buyer has an (ahem) \"\"option\"\" to exercise is a very key point. You wrote: \"\"I fully expected my position to be automatically liquidated by whoever bought my call\"\". That's a false assumption about the way options actually work. I suggest some study of the option exercise FAQs here: Perhaps if your position were uncovered – i.e. you wrote the call without owning the stock (don't try this at home, kids!) – and you also had insufficient margin to cover such a short position, then the broker might have justifiably liquidated your position. Whereas, in a covered call situation, there's really no reason for them to want to interfere – and I would consider that interference, as opposed to helpful. The situation you've described is neither risky for them, nor out of the ordinary. It is (and should be) completely up to you to decide how to close out the position. Anyway, your choices generally are:\"" }, { "docid": "221427", "title": "", "text": "With a short position you make your money (profit) when you buy the stocks back to close the position at a lower price than what you bought them at. As short selling is classed as speculation and not investing and you at no time own any actual assets, you cannot donate any short possition to charity. If you did want to avoid paying tax on the profits you could donate the proceeds of the profits after closing the position and thus get a tax deduction equal to the profits you made. But that raises a new and more important question, why are you trading in the first place if you are afraid to make profits in case you have to pay tax on those profits?" } ]

[ { "docid": "496820", "title": "", "text": "When you invest (say $1000) in (say 100 shares) of a mutual fund at $10 per share, and the price of the shares changes, you do not have a capital gain or loss, and you do not have to declare anything to the IRS or make any entry on any line on Form 1040 or tell anyone else about it either. You can brag about it at parties if the share price has gone up, or weep bitter tears into your cocktail if the price has gone down, but the IRS not only does not care, but it will not let you deduct the paper loss or pay taxes on the paper gain. What you put down on Form 1040 Schedules B and D is precisely what the mutual fund will tell you on Form 1099-DIV (and Form 1099-B), no more, no less. If you did not report any of these amounts on your previous tax returns, you need to file amended tax returns, both Federal as well as State, A stock mutual fund invests in stocks and the fund manager may buy and sell some stocks during the course of the year. If he makes a profit, that money will be distributed to the share holders of the mutual fund. That money can be re-invested in more shares of the same mutual fund or taken as cash (and possibly invested in some other fund). This capital gain distribution is reported to you on Form 1099-DIV and you have to report sit on your tax return even if you re-invested in more share of the same mutual fund, and the amount of the distribution is taxable income to you. Similarly, if the stocks owned by the mutual fund pay dividends, those will be passed on to you as a dividend distribution and all the above still applies. You can choose to reinvest, etc, the amount will be reported to you on Form 1099-DIV, and you need to report it to the IRS and include it in your taxable income. If the mutual fund manager loses money in the buying and selling he will not tell you that he lost money but it will be visible as a reduction in the price of the shares. The loss will not be reported to you on Form 1099-DIV and you cannot do anything about it. Especially important, you cannot declare to the IRS that you have a loss and you cannot deduct the loss on your income tax returns that year. When you finally sell your shares in the mutual fund, you will have a gain or loss that you can pay taxes on or deduct. Say the mutual fund paid a dividend of $33 one year and you re-invested the money into the mutual fund, buying 3 shares at the then cost of $11 per share. You declare the $33 on your tax return that year and pay taxes on it. Two years later, you sell all 103 shares that you own for $10.50 per share. Your total investment was $1000 + $33 = $1033. You get $1081.50 from the fund, and you will owe taxes on $1081.50 - $1033 = $48.50. You have a profit of $50 on the 100 shares originally bought and a loss of $1.50 on the 3 shares bought for $11: the net result is a gain of $48.50. You do not pay taxes on $81.50 as the profit from your original $1000 investment; you pay taxes only on $48.50 (remember that you already paid taxes on the $33). The mutual fund will report on Form 1099-B that you sold 103 shares for $1081.50 and that you bought the 103 shares for an average price of $1033/103 = $10.029 per share. The difference is taxable income to you. If you sell the 103 shares for $9 per share (say), then you get $927 out of an investment of $1033 for a capital loss of $106. This will be reported to you on Form 1099-B and you will enter the amounts on Schedule D of Form 1040 as a capital loss. What you actually pay taxes on is the net capital gain, if any, after combining all your capital gains and losses for the year. If the net is a loss, you can deduct up to $3000 in a year, and carry the rest forward to later years to offset capital gains in later years. But, your unrealized capital gains or losses (those that occur because the mutual fund share price goes up and down like a yoyo while you grin or grit your teeth and hang on to your shares) are not reported or deducted or taxed anywhere. It is more complicated when you don't sell all the shares you own in the mutual fund or if you sell shares within one year of buying them, but let's stick to simple cases." } ]

[ { "docid": "195156", "title": "", "text": "Now the question: is advisable for a beginner to speculate in CfDs? No. If not, is there a better way to invest with a small amount of money? In the US, and I'm sure this carries to the UK, most (if not all) big brokerages (Schwab, TD Ameritrade, Fidelity, Vanguard, etc) have a set of funds that are zero load and zero commission though the fund will still have an expense ratio. This is the Barclay's UK page related to zero cost investing in the Barclay's funds. Barclay's might not be the right fit for a beginner as it seems there is a hefty account minimum, but the same zero commission concept exists in the UK. Again, most of these brokerages will also have an extremely low expense ratio S&P index (or some other market index) fund. As a beginner that's where you should start. This is not meant to patronize beginners, it's just math. Assume your trade commission is £7. If your investment is £100, you'll lose £7 right up front to the buy commission, then another £7 when you sell. Lets say your position raises 10%, you'll be at a net loss of 4.7%. Meanwhile if you put your £100 in to a 0.1% expense fee mutual fund with no transaction commissions and no load fees, after a 10% gain you'd owe £0.11 due to the expense ratio at the of the year. You'd have £109.89. Beginners get crushed by fees and commission. It is not advisable, by any stretch of the imagination, to attempt to day trade or actively manage a portfolio of any sort of security; and commodities and currency are the WORST place to start." }, { "docid": "217499", "title": "", "text": "\"I don't know if it's common or necessary to include capital stock as a liability? Yes, if you look at the title of the nonasset part of the balance sheet it actually is titled \"\"Liabilities and Shareholders' Equity\"\". Your capital stock is a component of Equity. This sounds like it was reported in a reasonable manner. \"\"$2,582 listed under Loans from Shareholders (Line 19).\"\" Did you have a basis issue with your distributions? That is did you take shareholder distributions more than your adjusted basis that you have been taxed on? I have seen the practice of considering distributions in excess of basis as short term loans to prevent the additional taxation of the excess distribution. Be careful when you adjust this entry, your balance sheet had to roll from one year to the next. You must have a reasonable transaction to substantiate the removal of the shareholder loan.\"" }, { "docid": "15169", "title": "", "text": "\"The difference between dividend and growth in mutual funds has to do with the types of stocks the mutual fund invests in. Typically a company in the early stages are considered growth investments. In this phase the company needs to keep most of its profits to reinvest in the business. Typically once a company gets a significant size the company's growth prospects are not as good so the company pays some of its profits in the form of a dividend to the shareholders. As far as which is the best buy is totally a personal choice. There will be times when one is better then the other. Most likely you will want to \"\"diversify\"\" and invest in both types.\"" }, { "docid": "337993", "title": "", "text": "\"This answer is about the USA. Each time you sell a security (a stock or a bond) or some other asset, you are expected to pay tax on the net gain. It doesn't matter whether you use a broker or mutual fund to make the sale. You still owe the tax. Net capital gain is defined this way: Gross sale prices less (broker fees for selling + cost of buying the asset) The cost of buying the asset is called the \"\"basis price.\"\" You, or your broker, needs to keep track of the basis price for each share. This is easy when you're just getting started investing. It stays easy if you're careful about your record keeping. You owe the capital gains tax whenever you sell an asset, whether or not you reinvest the proceeds in something else. If your capital gains are modest, you can pay all the taxes at the end of the year. If they are larger -- for example if they exceed your wage earnings -- you should pay quarterly estimated tax. The tax authorities ding you for a penalty if you wait to pay five- or six-figure tax bills without paying quarterly estimates. You pay NET capital gains tax. If one asset loses money and another makes money, you pay on your gains minus your losses. If you have more losses than gains in a particular year, you can carry forward up to $3,000 (I think). You can't carry forward tens of thousands in capital losses. Long term and short term gains are treated separately. IRS Schedule B has places to plug in all those numbers, and the tax programs (Turbo etc) do too. Dividend payments are also taxable when they are paid. Those aren't capital gains. They go on Schedule D along with interest payments. The same is true for a mutual fund. If the fund has Ford shares in it, and Ford pays $0.70 per share in March, that's a dividend payment. If the fund managers decide to sell Ford and buy Tesla in June, the selling of Ford shares will be a cap-gains taxable event for you. The good news: the mutual fund managers send you a statement sometime in February or March of each year telling what you should put on your tax forms. This is great. They add it all up for you. They give you a nice consolidated tax statement covering everything: dividends, their buying and selling activity on your behalf, and any selling they did when you withdrew money from the fund for any purpose. Some investment accounts like 401(k) accounts are tax free. You don't pay any tax on those accounts -- capital gains, dividends, interest -- until you withdraw the money to live on after you retire. Then that money is taxed as if it were wage income. If you want an easy and fairly reliable way to invest, and don't want to do a lot of tax-form scrambling, choose a couple of different mutual funds, put money into them, and leave it there. They'll send you consolidated tax statements once a year. Download them into your tax program and you're done. You mentioned \"\"riding out bad times in cash.\"\" No, no, NOT a good idea. That investment strategy almost guarantees you will sell when the market is going down and buy when it's going up. That's \"\"sell low, buy high.\"\" It's a loser. Not even Warren Buffett can call the top of the market and the bottom. Ned Johnson (Fidelity's founder) DEFINITELY can't.\"" }, { "docid": "90858", "title": "", "text": "\"First, consider what causes taxes to apply to a mutual fund, index or actively managed. Dividends and capital gains are generally what will be distributed to shareholders given the nature of a mutual fund since the fund itself doesn't pay taxes. For funds held in IRAs or other tax-advantaged accounts, this isn't a concern and thus people may not have this concern for those situations which can account for a lot of investing situations as people may have 401(k)s and IRAs that hold their investments rather than taxable accounts. Second, there can be tax-managed funds so there can be cases where a fund is managed with taxes in mind that is worth noting here as what is referenced is a \"\"Dummies\"\" link that is making a generalization. For taxable accounts, it may make more sense to have a tax-managed fund rather than an index fund though I'd also argue to be careful of asset allocation as to maintain a purity of style can require selling of stocks that grow too big and thus trigger capital gains,e.g. small-cap and mid-cap funds that can't hold onto the winners as they would become mid-cap and large-cap instead of representing the proper asset class. A FUND THAT PLAYED IT SAFE--AND WAS SORRY would be a Businessweek story from 1998 of an actively managed fund that went mostly to cash and missed the rise of the stock market at that time if you want a specific example of what an actively managed fund can do that an index fund often cannot do. The index fund is to track the index and stay nearly all invested all the time.\"" }, { "docid": "266457", "title": "", "text": "TL; DR version of my answer: In view of your age and the fact that you have just opened a Roth IRA account with Vanguard, choose the Reinvest Dividend and Capital Gains distributions option. If Vanguard is offering an option of having earnings put into a money market settlement account, it might be that you have opened your Roth IRA account with Vanguard's brokerage firm. Are you doing things like investing your Roth money into CDs or bonds (including zero-coupon or STRIP bonds) or individual stocks? If so, then the money market settlement account (might be VMMXX, the Vanguard Prime Money Market Fund) within the Roth IRA account is where all the money earned as interest on the CDs or bonds, dividends from the stocks, and the proceeds (including any resulting capital gains) from the sales of any of these will go. You can then decide where to invest that money (all within the Roth IRA). Leaving the money in the settlement account for a long time is not a good idea even if you are just accumulating the money so as to be able to buy 100 shares of APPL or GOOG at some time in the future. Put it into a CD in your Roth IRA brokerage account while you wait. If your Roth IRA is invested only in Vanguard's mutual funds and is likely to remain so in the foreseeable future, then you don't really need an account with their brokerage. You can still use a money market settlement fund to transfer money between various mutual fund investments within the Roth IRA account, but it really is adding an extra layer of money movement where it is not really necessary. You can sell one Vanguard mutual fund and invest the proceeds into another Vanguard mutual fund or even into several Vanguard funds without needing to have the funds transit through a money market account. Vanguard calls such a transaction an Exchange on their site. And, of course, you can just choose to reinvest all the dividends and capital gains distributions made by a mutual fund into the fund itself. Mutual funds allow purchases of fractional shares (down to three or even four decimal places) instead of insisting on integer numbers of shares let alone round lots of 100 shares. All this, of course, within the Roth IRA." }, { "docid": "122012", "title": "", "text": "In a taxable account you're going to owe taxes when you sell the shares for a gain. You're also going to owe taxes on any distributions you receive from the holdings in the account; these distributions can happen one or more times a year. Vanguard has a writeup on mutual fund taxation. Note: for a fund like you linked, you will owe taxes annually, regardless of whether you sell it. The underlying assets will pay dividends and those are distributed to you either in cash, or more beneficially as additional shares of the mutual fund (look into dividend reinvestment.) Taking VFIAX's distributions as an example, if you bought 1 share of the fund on March 19, 2017, on March 20th you would have been given $1.005 that would be taxable. You'd owe taxes on that even if you didn't sell your share during the year. Your last paragraph is based on a false premise. The mutual fund does report to you at the end of the year the short and long term capital gains, along with dividends on a 1099-DIV. You get to pay taxes on those transactions, that's why it's advantageous to hold low turnover mutual funds in taxable accounts." }, { "docid": "364735", "title": "", "text": "I think that assuming that you're not looking to trade the fund, an index Mutual Fund is a better overall value than an ETF. The cost difference is negligible, and the ability to dollar-cost average future contributions with no transaction costs. You also have to be careful with ETFs; the spreads are wide on a low-volume fund and some ETFs are going more exotic things that can burn a novice investor. Track two similar funds (say Vanguard Total Stock Market: VTSMX and Vanguard Total Stock Market ETF: VTI), you'll see that they track similarly. If you are a more sophisticated investor, ETFs give you the ability to use options to hedge against declines in value without having to incur capital gains from the sale of the fund. (ie. 20 years from now, can use puts to make up for short-term losses instead of selling shares to avoid losses) For most retail investors, I think you really need to justify using ETFs versus mutual funds. If anything, the limitations of mutual funds (no intra-day trading, no options, etc) discourage speculative behavior that is ultimately not in your best interest. EDIT: Since this answer was written, many brokers have begun offering a suite of ETFs with no transaction fees. That may push the cost equation over to support Index ETFs over Index Mutual Funds, particularly if it's a big ETF with narrow spreads.." }, { "docid": "399149", "title": "", "text": "\"The article \"\"Best Stock Fund of the Decade: CGM Focus\"\" from the Wall Street Journal in 2009 describe the highest performing mutual fund in the USA between 2000 and 2009. The investor return in the fund (what the shareholders actually earned) was abysmal. Why? Because the fund was so volatile that investors panicked and bailed out, locking in losses instead of waiting them out. The reality is that almost any strategy will lead to success in investing, so long as it is actually followed. A strategy keeps you from making emotional or knee-jerk decisions. (BTW, beware of anyone selling you a strategy by telling you that everyone in the world is a failure except for the few special people who have the privilege of knowing their \"\"secrets.\"\") (Link removed, as it's gone dead)\"" }, { "docid": "470687", "title": "", "text": "There are at least a couple of ways you could view this to my mind: Make an Excel spreadsheet and use the IRR function to compute the rate of return you are having based on money being added. Re-invested distributions in a mutual fund aren't really an additional investment as the Net Asset Value of the fund will drop by the amount of the distribution aside from market fluctuation. This is presuming you want a raw percentage that could be tricky to compare to other funds without doing more than a bit of work in a way. Look at what is the fund's returns compared to both the category and the index it is tracking. The tracking error is likely worth noting as some index funds could lag the index by a sizable margin and thus may not be that great. At the same time there may exist cases where an index fund isn't quite measuring up that well. The Small-Growth Indexing Anomaly would be the William Bernstein article from 2001 that has some facts and figures for this that may be useful." }, { "docid": "93882", "title": "", "text": "\"I hope a wall of text with citations qualifies as \"\"relatively easy.\"\" Many of these studies are worth quoting at length. Long story short, a great deal of research has found that actively-managed funds underperform market indexes and passively-managed funds because of their high turnover and higher fees, among other factors. Longer answer: Chris is right in stating that survivorship bias presents a problem for such research; however, there are several academic papers that address the survivorship problem, as well as the wider subject of active vs. passive performance. I'll try to provide a brief summary of some of the relevant literature. The seminal paper that started the debate is Michael Jensen's 1968 paper titled \"\"The Performance of Mutual Funds in the Period 1945-1964\"\". This is the paper where Jensen's alpha, the ubiquitous measure of the performance of mutual fund managers, was first defined. Using a dataset of 115 mutual fund managers, Jensen finds that The evidence on mutual fund performance indicates not only that these 115 mutual funds were on average not able to predict security prices well enough to outperform a buy-the-market-and-hold policy, but also that there is very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance. Although this paper doesn't address problems of survivorship, it's notable because, among other points, it found that managers who actively picked stocks performed worse even when fund expenses were ignored. Since actively-managed funds tend to have higher expenses than passive funds, the actual picture looks even worse for actively managed funds. A more recent paper on the subject, which draws similar conclusions, is Martin Gruber's 1996 paper \"\"Another puzzle: The growth in actively managed mutual funds\"\". Gruber calls it \"\"a puzzle\"\" that investors still invest in actively-managed funds, given that their performance on average has been inferior to that of index funds. He addresses survivorship bias by tracking funds across the entire sample, including through mergers. Since most mutual funds that disappear are merged into existing funds, he assumes that investors in a fund that disappear choose to continue investing their money in the fund that resulted from the merger. Using this assumption and standard measures of mutual fund performance, Gruber finds that mutual funds underperform an appropriately weighted average of the indices by about 65 basis points per year. Expense ratios for my sample averaged 113 basis points a year. These numbers suggest that active management adds value, but that mutual funds charge the investor more than the value added. Another nice paper is Mark Carhart's 1997 paper \"\"On persistence in mutual fund performance\"\" uses a sample free of survivorship bias because it includes \"\"all known equity funds over this period.\"\" It's worth quoting parts of this paper in full: I demonstrate that expenses have at least a one-for-one negative impact on fund performance, and that turnover also negatively impacts performance. ... Trading reduces performance by approximately 0.95% of the trade's market value. In reference to expense ratios and other fees, Carhart finds that The investment costs of expense ratios, transaction costs, and load fees all have a direct, negative impact on performance. The study also finds that funds with abnormally high returns last year usually have higher-than-expected returns next year, but not in the following years, because of momentum effects. Lest you think the news is all bad, Russ Wermer's 2000 study \"\"Mutual fund performance: An empirical decomposition into stock‐picking talent, style, transactions costs, and expenses\"\" provides an interesting result. He finds that many actively-managed mutual funds hold stocks that outperform the market, even though the net return of the funds themselves underperforms passive funds and the market itself. On a net-return level, the funds underperform broad market indexes by one percent a year. Of the 2.3% difference between the returns on stock holdings and the net returns of the funds, 0.7% per year is due to the lower average returns of the nonstock holdings of the funds during the period (relative to stocks). The remaining 1.6% per year is split almost evenly between the expense ratios and the transaction costs of the funds. The final paper I'll cite is a 2008 paper by Fama and French (of the Fama-French model covered in business schools) titled, appropriately, \"\"Mutual Fund Performance\"\". The paper is pretty technical, and somewhat above my level at this time of night, but the authors state one of their conclusions bluntly quite early on: After costs (that is, in terms of net returns to investors) active investment is a negative sum game. Emphasis mine. In short, expense ratios, transaction costs, and other fees quickly diminish the returns to active investment. They find that The [value-weight] portfolio of mutual funds that invest primarily in U.S. equities is close to the market portfolio, and estimated before fees and expenses, its alpha is close to zero. Since the [value-weight] portfolio of funds produces an α close to zero in gross returns, the alpha estimated on the net returns to investors is negative by about the amount of fees and expenses. This implies that the higher the fees, the farther alpha decreases below zero. Since actively-managed mutual funds tend to have higher expense ratios than passively-managed index funds, it's safe to say that their net return to the investor is worse than a market index itself. I don't know of any free datasets that would allow you to research this, but one highly-regarded commercial dataset is the CRSP Survivor-Bias-Free US Mutual Fund Database from the Center for Research in Security Prices at the University of Chicago. In financial research, CRSP is one of the \"\"gold standards\"\" for historical market data, so if you can access that data (perhaps for a firm or academic institution, if you're affiliated with one that has access), it's one way you could run some numbers yourself.\"" }, { "docid": "350260", "title": "", "text": "If you have a public company and shareholder A owns 25% and shareholder B owns 25%, and lets say the remaining 50% is owned by various funds/small investors. Say profits are 100mil, and a dividend is payed. Say 50 mil worth is payed out as dividend and 30 mil is kept as retained earnings for future investment. Can the remaining 20 mil be distributed to shareholders A and B, so that they both get 10mil each? Can certain shareholders be favored and get a bigger cut of profits than the dividends pay out is my question basically." }, { "docid": "429568", "title": "", "text": "Dividends from mutual funds reduce the share value the day they are distributed. Mutual funds do this at least once a year, or more times in the year if there are a lot of gains, to pass through taxable gains to individuals who may have lower tax rates or deferred tax accounts such as you. This is meaningful for investors who hold the mutual funds in taxable accounts, but immaterial for 401ks. Your account balance is not affected if you don't get the distribution before roll over." }, { "docid": "345400", "title": "", "text": "Why? Balance sheet is balance sheet, why is it complicated? Bank shareholders get dividends in exactly the same way as any other company shareholders do: the company ends up with net profits, which the board of directors decides to distribute to shareholders based on certain amount per share. If at all. Not all the profits are distributed, and in fact - there are companies who don't distribute dividends at all. Apple, for example, hasn't ever distributed dividends until very very recently." }, { "docid": "210713", "title": "", "text": "No, you will not have to pay taxes on the corpus (principal) of the trust distribution. If the trust tax forms were filed correctly, you might have as much as a $9000 loss that will flow to you on the trust's termination. Previously, the trust was supposed to file a return each year, and either claim the dividends or realized cap gains each year, and pay taxes at trust's rate, or distribute them to the beneficiaries via K-1 form. This is the best way to handle this as the trust has a steep tax table (relative high rates) vs the kiddie tax which would let you get nearly $1K/yr tax free each year as a minor. During that time, losses net again gains, but can't be 'distributed' to the beneficiary. They are carried forward year to year. In the year the trust is terminated, that loss is not lost, but it's then passed on to the beneficiary, still via K-1. See Schedule K-1 instructions and Schedule K-1 itself. On a lighter note, the trustee failed you. In the 16 years (Jan 2000-Dec 2015), the market (S&P) grew by 88%, with a compound 4.02%/yr return. Instead of any gain, you got a loss with a -2.75%/yr return. If this were a paid professional, you'd have a potential claim for a lawsuit. This is a reason why amateurs should not be assigned the role of trustee. To clearly answer the mix of questions you asked - Note - it's always a good idea to seek professional advice. But, the nature of this board is that if any of my answer isn't accurate, a high ranked member (top 20 or so on this list) will likely set me straight within 24 hours." }, { "docid": "131224", "title": "", "text": "\"A stock insurance company is structured like a “normal” company. It has shareholders (that are the company's investors), who elect a board of directors, who select the senior executive(s), who manage the people who run the actual company. The directors (and thus the executives and employees) have a legal responsibility to manage the company in a way which is beneficial for the shareholders, since the shareholders are the ultimate owner of the company. A mutual insurance company is similar, except that the people holding policies are also the shareholders. That is, the policyholders are the ultimate owners of the company, and there generally aren't separate shareholders who are just “investing” in the company. These policyholder-shareholders elect the board of directors, who select the senior executive(s), who manage the people who run the actual company. In practice, it probably doesn't really make a whole lot of difference, since even if you're just a \"\"customer\"\" and not an \"\"owner\"\" of the company, the company is still going to want to attract customers and act in a reasonable way toward them. Also, insurance companies are generally pretty heavily regulated in terms of what they can do, because governments really like them to remain solvent. It may be comforting to know that in a mutual insurance company the higher-ups are explicitly supposed to be working in your best interest, though, rather than in the interest of some random investors. Some might object that being a shareholder may not give you a whole lot more rights than you had before. See, for example, this article from the Boston Globe, “At mutual insurance firms, big money for insiders but no say for ‘owners’ — policyholders”: It has grown into something else entirely: an opaque, poorly understood, and often immensely profitable world in which some executives and insiders operate with minimal scrutiny and, no coincidence, often reap maximum personal rewards. Policyholders, despite their status as owners, have no meaningful oversight of how mutual companies spend their money — whether to lower rates, pay dividends, or fund executive salaries and perks — and few avenues to challenge such decisions. Another reason that one might not like the conversion is the specific details of how the current investor-shareholders are being paid back for their investment in the process of the conversion to mutual ownership, and what that might do to the funds on hand that are supposed to be there to keep the firm solvent for the policyholders. From another Boston Globe article on the conversion of SBLI to a mutual company, “Insurer SBLI wants to get banks out of its business,” professor Robert Wright is cautiously optimistic but wants to ensure the prior shareholders aren't overpaid: Robert Wright, a professor in South Dakota who has studied insurance companies and owns an SBLI policy, said he would prefer the insurer to be a mutual company that doesn’t have to worry about the short-term needs of shareholders. But he wants to ensure that SBLI doesn’t overpay the banks for their shares. “It’s fine, as long as it’s a fair price,” he said. That article also gives SBLI's president's statement as to why they think it's a good thing for policyholders: If the banks remained shareholders, they would be likely to demand a greater share of the profits and eat into the dividends the insurance company currently pays to the 536,000 policyholders, about half of whom live in Massachusetts, said Jim Morgan, president of Woburn-based SBLI. “We’re trying to protect the policyholders from having the dividends diluted,” Morgan said. I'm not sure there's an obvious pros/cons list for either way, but I'd think that I'd prefer the mutual approach, just on the principle that the policyholders “ought” to be the owners, because the directors (and thus the executives and employees) are then legally required to manage the company in the best interest of the policyholders. I did cast a Yes vote in my proxy on whether SBLI ought to become a mutual company (I'm a SBLI term-life policyholder.) But policy terms aren't changing, and it'd be hard to tell for sure how it'd impact any dividends (I assume the whole-life policies must be the ones to pay dividends) or company solvency either way, since it's not like we'll get to run a scientific experiment trying it out both ways. I doubt you'd have a lot of regrets either way, whether it becomes a mutual company and you wish it hadn't or it doesn't become one and you wish it had.\"" }, { "docid": "202960", "title": "", "text": "No. You shorted the stock so you are not a shareholder. If you covered your short, again you are not a shareholder as you statement of account must show. You cannot participate in the net settlement fund." }, { "docid": "514529", "title": "", "text": "\"The 0.14% is coming out of the assets of the fund itself. The expense ratio can be broken down so that on any given day, a portion of the fund's assets are set aside to cover the administrative cost of running the fund. A fund's total return already includes the expense ratio. This depends a lot on what kind of account in which you hold the fund. If you hold the fund in an IRA then you wouldn't have taxes from the fund itself as the account is sheltered. There may be notes in the prospectus and latest annual and semi-annual report of what past distributions have been as remember the fund isn't paying taxes but rather passing that along in the form of distributions to shareholders. Also, there is something to be said for what kinds of investments the fund holds as if the fund is to hold small-cap stocks then it may have to sell the stock if it gets too big and thus would pass on the capital gains to shareholders. Other funds may not have this issue as they invest in large-cap stocks that don't have this problem. Some funds may invest in municipal bonds which would have tax-exempt interest that may be another strategy for lowering taxes in bond funds. Depending on the fund quite a broad range actually. In the case of the Fidelity fund you link, it is a \"\"Fund of funds\"\" and thus has a 0% expense ratio as Fidelity has underlying funds that that fund holds. What level of active management are you expecting, what economies of scale does the fund have to bring down the expense ratio and what expense ratio is typical for that category of fund would come to mind as a few things to consider. That Fidelity link is incorrect as both Morningstar and Fidelity's site list an expense ratio for the fund of funds at .79%. I'd expect an institutional US large-cap index fund to have the lowest expense ratio outside of the fund of fund situation while if I were to pick an actively managed fund that requires a lot of research then the expense ratio may well be much higher though this is where you have to consider what strategy do you want the fund to be employing and how much of a cost are you prepared to accept for that? VTTHX is Vanguard Target Retirement 2035 Fund which has a .14% expense ratio which is using index funds in the fund of funds system.\"" }, { "docid": "57457", "title": "", "text": "Since you are paying taxes on the distributions from your mutual funds anyway, instead of reinvesting the distributions back into the mutual funds, you could receive them as cash, then contribute them to your Roth IRA once you are able to open one." } ]

[ { "docid": "212394", "title": "", "text": "\"I'll try to answer using your original example. First, let me restate your assumptions, slightly modified: The mutual fund has: Note that I say the \"\"mutual fund has\"\" those gains and losses. That's because they occur inside the mutual fund and not directly to you as a shareholder. I use \"\"realized\"\" gains and losses because the only gains and losses handled this way are those causes by actual asset (stock) sales within the fund (as directed by fund management). Changes in the value of fund holdings that are not sold are not included in this. As a holder of the fund, you learn the values of X, Y, and Z after the end of the year when the fund management reports the values. For gains, you will also typically see the values reported on your 1099-DIV under \"\"capital gains distributions\"\". For example, your 1099-DIV for year 3 will have the value Z for capital gains (besides reporting any ordinary dividends in another box). Your year 1 1099 will have $0 \"\"capital gains distributions\"\" shown because of the rule you highlighted in bold: net realized losses are not distributed. This capital loss however can later be used to the mutual fund holder's tax advantage. The fund's internal accounting carries forward the loss, and uses it to offset later realized gains. Thus your year 2 1099 will have a capital gain distribution of (Y-X), not Y, thus recognizing the loss which occurred. Thus the loss is taken into account. Note that for capital gains you, the holder, pay no tax in year 1, pay tax in year 2 on Y-X, and pay tax in year 3 on Z. All the above is the way it works whether or not you sell the shares immediately after the end of year 3 or you hold the shares for many more years. Whenever you do sell the shares, you will have a gain or loss, but that is different from the fund's realized losses we have been talking about (X, Y, and Z).\"" } ]

[ { "docid": "385073", "title": "", "text": "It's whatever you decide. Taking money out of an S-Corp via distribution isn't a taxable event. Practically speaking, yes, you should make sure you have enough money to afford the distribution after paying your expenses, lest you have to put money back a few days later in to pay the phone bill. You might not want to distribute every penny of profit the moment you book it, either -- keeping some money in the business checking account is probably a good idea. If you have consistent cash flow you could distribute monthly or quarterly profits 30 or 60 days in arrears, for example, and then still have cash on hand for operations. Your net profit is reflected on the Schedule K for inclusion on your personal tax return. As an S-Corp, the profit is passed through to the shareholders and is taxable whether or not you actually distributed the money. You owe taxes on the profit reported on the Schedule K, not the amounts distributed. You really should get a tax accountant. Long-term, you'll save money by having your books set up correctly from the start rather than have to go back and fix any mistakes. Go to a Chamber of Commerce meeting or ask a colleague, trusted vendor, or customer for a recommendation." }, { "docid": "549181", "title": "", "text": "A company's Return on Equity (ROE) is its net income divided by its shareholder's equity. The shareholder's equity is the difference between total assets and total liabilities, and is not dependent on the stock price. What it takes to have a ROE over 100% is to have the income be greater than the equity. This might happen for a variety of reasons, but one way a high ROE happens is if the shareholder's equity (the divisor) is small, which can occur if past losses have eroded the company's capital (the original invested cash and retained earnings). If the equity has become a small value, the income for some period might exceed it, and so the ROE would be over 100%. Operating margin is not closely related to ROE. Although operating income is related to net income, to calculate the margin you divide by sales, which is completely unrelated to shareholder's equity. So there is no relationship with ROE to be expected. Operating margin is primarily dependent on market conditions, and can be substantially different in different industries." }, { "docid": "161019", "title": "", "text": "Your tax efficient reasoning is solid for where you want to distribute your assets. ETFs are often more tax efficient than their equivalent mutual funds but the exact differences would depend on the comparison between the fund and ETF you were considering. The one exception to this rule is Vanguard funds and ETFs which have the exact same tax-efficiency because ETFs are a share class of the corresponding mutual fund." }, { "docid": "476517", "title": "", "text": "Your idea is a good one, but, as usual, the devil is in the details, and implementation might not be as easy as you think. The comments on the question have pointed out your Steps 2 and 4 are not necessarily the best way of doing things, and that perhaps keeping the principal amount invested in the same fund instead of taking it all out and re-investing it in a similar, but different, fund might be better. The other points for you to consider are as follows. How do you identify which of the thousands of conventional mutual funds and ETFs is the average-risk / high-gain mutual fund into which you will place your initial investment? Broadly speaking, most actively managed mutual fund with average risk are likely to give you less-than-average gains over long periods of time. The unfortunate truth, to which many pay only Lipper service, is that X% of actively managed mutual funds in a specific category failed to beat the average gain of all funds in that category, or the corresponding index, e.g. S&P 500 Index for large-stock mutual funds, over the past N years, where X is generally between 70 and 100, and N is 5, 10, 15 etc. Indeed, one of the arguments in favor of investing in a very low-cost index fund is that you are effectively guaranteed the average gain (or loss :-(, don't forget the possibility of loss). This, of course, is also the argument used against investing in index funds. Why invest in boring index funds and settle for average gains (at essentially no risk of not getting the average performance: average performance is close to guaranteed) when you can get much more out of your investments by investing in a fund that is among the (100-X)% funds that had better than average returns? The difficulty is that which funds are X-rated and which non-X-rated (i.e. rated G = good or PG = pretty good), is known only in hindsight whereas what you need is foresight. As everyone will tell you, past performance does not guarantee future results. As someone (John Bogle?) said, when you invest in a mutual fund, you are in the position of a rower in rowboat: you can see where you have been but not where you are going. In summary, implementation of your strategy needs a good crystal ball to look into the future. There is no such things as a guaranteed bond fund. They also have risks though not necessarily the same as in a stock mutual fund. You need to have a Plan B in mind in case your chosen mutual fund takes a longer time than expected to return the 10% gain that you want to use to trigger profit-taking and investment of the gain into a low-risk bond fund, and also maybe a Plan C in case the vagaries of the market cause your chosen mutual fund to have negative return for some time. What is the exit strategy?" }, { "docid": "202960", "title": "", "text": "No. You shorted the stock so you are not a shareholder. If you covered your short, again you are not a shareholder as you statement of account must show. You cannot participate in the net settlement fund." }, { "docid": "312821", "title": "", "text": "\"Everything that I'm saying presumes that you're young, and won't need your money back for 20+ years, and that you're going to invest additional money in the future. Your first investments should never be individual stocks. That is far too risky until you have a LOT more experience in the market. (Once you absolutely can't resist, keep it to under 5% of your total investments. That lets you experiment without damaging your returns too much.) Instead you would want to invest in one or more mutual funds of some sort, which spreads out your investment across MANY companies. With only $50, avoiding a trading commission is paramount. If you were in the US, I would recommend opening a free online brokerage account and then purchasing a no-load commission-free mutual fund. TD Ameritrade, for example, publishes a list of the funds that you can purchase without commission. The lists generally include the type of fund (index, growth, value, etc.) and its record of return. I don't know if Europe has the same kind of discount brokerages / mutual funds the US has, but I'd be a little surprised if it didn't. You may or may not be able to invest until you first scrape together a $500 minimum, but the brokerages often have special programs/accounts for people just starting out. It should be possible to ask. One more thing on picking a fund: most charge about a 1% annual expense ratio. (That means that a $100 investment that had a 100% gain after one year would net you $198 instead of $200, because 1% of the value of your asset ($200) is $2. The math is much more complicated, and depends on the value of your investment at every given point during the year, but that's the basic idea.) HOWEVER, there are index funds that track \"\"the market\"\" automatically, and they can have MUCH lower expense fees (0.05%, vs 1%) for the same quality of performance. Over 40 years, the expense ratio can have a surprisingly large impact on your net return, even 20% or more! You'll want to google separately about the right way to pick a low-expense index fund. Your online brokerage may also be able to help. Finally, ask friends or family what mutual funds they've invested in, how they chose those funds, and what their experience has been. The point is not to have them tell you what to do, but for you to learn from the mistakes and successes of other experienced investors with whom you can follow up.\"" }, { "docid": "346474", "title": "", "text": "I'm looking for ways to geared to save for retirement, not general investment. Many mutual fund companies offer a range of target retirement funds for different retirement dates (usually in increments of 5 years). These are funds of funds, that is, a Target 2040 Fund, say, will be invested in five or six different stock and bond mutual funds offered by the same company. Over the years and as the target date approaches closer, the investment mix will change from extra weight given to stock mutual funds towards extra weight being given to bond mutual funds. The disadvantage to these funds is that the Target Fund charges its own expense ratio over and above the expense ratios charged by the mutual funds it invests in: you could do the same investments yourself (or pick your own mix and weighting of various funds) and save the extra expense ratio. However, over the years, as the Target Fund changes its mix, withdrawing money from the stock mutual funds and investing the proceeds into bond mutual funds, you do not have to pay taxes on the profits generated by these transactions except insofar as some part of the profits become distributions from the Target Fund itself. If you were doing the same transactions outside the Target Fund, you would be liable for taxes on the profits when you withdrew money from a stock fund and invested the proceeds into the bond fund." }, { "docid": "210713", "title": "", "text": "No, you will not have to pay taxes on the corpus (principal) of the trust distribution. If the trust tax forms were filed correctly, you might have as much as a $9000 loss that will flow to you on the trust's termination. Previously, the trust was supposed to file a return each year, and either claim the dividends or realized cap gains each year, and pay taxes at trust's rate, or distribute them to the beneficiaries via K-1 form. This is the best way to handle this as the trust has a steep tax table (relative high rates) vs the kiddie tax which would let you get nearly $1K/yr tax free each year as a minor. During that time, losses net again gains, but can't be 'distributed' to the beneficiary. They are carried forward year to year. In the year the trust is terminated, that loss is not lost, but it's then passed on to the beneficiary, still via K-1. See Schedule K-1 instructions and Schedule K-1 itself. On a lighter note, the trustee failed you. In the 16 years (Jan 2000-Dec 2015), the market (S&P) grew by 88%, with a compound 4.02%/yr return. Instead of any gain, you got a loss with a -2.75%/yr return. If this were a paid professional, you'd have a potential claim for a lawsuit. This is a reason why amateurs should not be assigned the role of trustee. To clearly answer the mix of questions you asked - Note - it's always a good idea to seek professional advice. But, the nature of this board is that if any of my answer isn't accurate, a high ranked member (top 20 or so on this list) will likely set me straight within 24 hours." }, { "docid": "527939", "title": "", "text": "\"The Roth vs not debate is irrelevant to the question. It doesn't matter where your emergency fund is kept, as long as it is liquid and safe. I said it before in an answer to another question: your emergency fund is not an investment -- it's your safety net This answer also says it well: an \"\"emergency fund\"\" is just that... for emergencies... NOT investment. While it \"\"hurts\"\" not to have your emergency money making more money... its MORE IMPORTANT to have quick access to it. So at TD Ameritrade, just park it in their FDIC deposit account. It will not earn any meaningful interest (at least until rates rise), but you'll be able to have access to it when you need it. Note that I would caution against putting it in a money market mutual fund. They're safer than many other investments, but they're not FDIC insured against loss and there is a potential for temporary loss of liquidity. In late 2008 when the credit markets collapsed, a lot of people suddenly became unemployed -- and needed access to their emergency funds. When Lehman Brothers went bust in September, the Reserve Primary Fund (with billions of dollars in their fund) \"\"broke the buck\"\" -- they lowered the price of shares below $1, meaning investors lost principal. The worst part is that investors were not as liquid as they wanted to be: the fund froze and it was hard to get money out. The lesson to take away from this is that one of the times you're likely to need access to your emergency fund is during a macroeconomic crisis. This is also the time when any investment that isn't guaranteed safe may potentially be (at least temporarily) unavailable or decline in value. Emergency funds should be 100% government insured. When you have your Roth funded to the point where there's extra money beyond the emergency fund, you can start investing in higher-yielding vehicles: stock or bond index ETFs would be a good start. But then that part of your Roth starts to look like a retirement account and not an emergency fund. If it were me, I'd open a Roth at a stable local bank and just keep it in their FDIC insured money market deposit account. Then if I wanted a slight boost, I might put the \"\"upper half\"\" of my emergency fund into short term CDs, but even CDs aren't worth much at the moment.\"" }, { "docid": "41176", "title": "", "text": "\"What does ETFs have to do with this or Amazon? Actually, investing in ETFs means you are killing actively managed Mutual Funds (managed by people, fund managers) to get an average return (and loss) of the market that a computer manage instead of a person. And the ETF will surely have Amazon stocks because they are part of the index. I only invest in actively managed mutual funds. Yes, most actively managed mutual funds can't do better than the index, but if you work a bit harder, you can find the many that do much better than the \"\"average\"\" that an index give you.\"" }, { "docid": "449124", "title": "", "text": "In addition to all the good information that JoeTaxpayer has provided, be aware of this. When you sell mutual fund shares, you can, if you choose to do so, tell the mutual fund company which shares you want to sell (e.g. all shares purchased on xx/yy/2010 plus 10 shares out of 23.147 shares purchased on ss/tt/2011 plus...) and pay taxes on the gains/losses on those specific shares. If you do not specify which shares you want sold, the mutual fund company will tell you the gains/losses based on the average cost basis and you can use this information if you like. Note that some of your gains/losses will be short-term gains or losses if you use the average cost basis. Or, you can use the FIFO method (usually resulting in the largest gain) in which the shares are sold in the order in which they were purchased. This usually results in no short-term gains/losses. Just so that you know, most mutual fund companies will link your checking account in your bank to your account with them (a one-time paperwork deal is necessary in which your bank manager's signature is required on the authorization to be sent to the fund company). After that, the connection is nearly as seamless as with your current system. Tell the fund company you want to invest money in a certain mutual fund and to take the money from your linked checking account, and they will take care of it. Sell some shares and they will deposit the money into your linked bank account, and so on. The mutual fund company will not accept instructions from you (or someone purporting to be you) to sell shares and to send the money to Joe Blow (or to Joe Taxpayer for that matter): the proceeds of redemptions go to your checking account or are used to buy shares in other mutual funds offered by the company (called an exchange and not a redemption). Oh, and most fund companies offer automatic investments (as well as automatic redemptions) at fixed time intervals, just as with your bank." }, { "docid": "393693", "title": "", "text": "For the Roth the earnings: interest, dividends, capital gains distributions and capital gains are tax deferred. Which means that as long as the money stays inside of a Roth or is transferred/rolled over to another Roth there are no taxes due. In December many mutual funds distribute their gains. Let's say people invested in S&P500index fund receive a dividend of 1% of their account value. The investor in a non-retirement fund will be paying tax on that dividend in the Spring with their tax form. The Roth and IRA investors will not be paying tax on those dividends. The Roth investor never will, and the regular IRA investor will only pay taxes on it when they pull the money out." }, { "docid": "580802", "title": "", "text": "You cannot do a 1031 exchange with stocks, bonds, mutual funds, or ETFs. There really isn't much difference between an ETF and its equivalent index mutual fund. Both will have minimal capital gains distributions. I would not recommend selling an index mutual fund and taking a short-term capital gain just to buy the equivalent ETF." }, { "docid": "93882", "title": "", "text": "\"I hope a wall of text with citations qualifies as \"\"relatively easy.\"\" Many of these studies are worth quoting at length. Long story short, a great deal of research has found that actively-managed funds underperform market indexes and passively-managed funds because of their high turnover and higher fees, among other factors. Longer answer: Chris is right in stating that survivorship bias presents a problem for such research; however, there are several academic papers that address the survivorship problem, as well as the wider subject of active vs. passive performance. I'll try to provide a brief summary of some of the relevant literature. The seminal paper that started the debate is Michael Jensen's 1968 paper titled \"\"The Performance of Mutual Funds in the Period 1945-1964\"\". This is the paper where Jensen's alpha, the ubiquitous measure of the performance of mutual fund managers, was first defined. Using a dataset of 115 mutual fund managers, Jensen finds that The evidence on mutual fund performance indicates not only that these 115 mutual funds were on average not able to predict security prices well enough to outperform a buy-the-market-and-hold policy, but also that there is very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance. Although this paper doesn't address problems of survivorship, it's notable because, among other points, it found that managers who actively picked stocks performed worse even when fund expenses were ignored. Since actively-managed funds tend to have higher expenses than passive funds, the actual picture looks even worse for actively managed funds. A more recent paper on the subject, which draws similar conclusions, is Martin Gruber's 1996 paper \"\"Another puzzle: The growth in actively managed mutual funds\"\". Gruber calls it \"\"a puzzle\"\" that investors still invest in actively-managed funds, given that their performance on average has been inferior to that of index funds. He addresses survivorship bias by tracking funds across the entire sample, including through mergers. Since most mutual funds that disappear are merged into existing funds, he assumes that investors in a fund that disappear choose to continue investing their money in the fund that resulted from the merger. Using this assumption and standard measures of mutual fund performance, Gruber finds that mutual funds underperform an appropriately weighted average of the indices by about 65 basis points per year. Expense ratios for my sample averaged 113 basis points a year. These numbers suggest that active management adds value, but that mutual funds charge the investor more than the value added. Another nice paper is Mark Carhart's 1997 paper \"\"On persistence in mutual fund performance\"\" uses a sample free of survivorship bias because it includes \"\"all known equity funds over this period.\"\" It's worth quoting parts of this paper in full: I demonstrate that expenses have at least a one-for-one negative impact on fund performance, and that turnover also negatively impacts performance. ... Trading reduces performance by approximately 0.95% of the trade's market value. In reference to expense ratios and other fees, Carhart finds that The investment costs of expense ratios, transaction costs, and load fees all have a direct, negative impact on performance. The study also finds that funds with abnormally high returns last year usually have higher-than-expected returns next year, but not in the following years, because of momentum effects. Lest you think the news is all bad, Russ Wermer's 2000 study \"\"Mutual fund performance: An empirical decomposition into stock‐picking talent, style, transactions costs, and expenses\"\" provides an interesting result. He finds that many actively-managed mutual funds hold stocks that outperform the market, even though the net return of the funds themselves underperforms passive funds and the market itself. On a net-return level, the funds underperform broad market indexes by one percent a year. Of the 2.3% difference between the returns on stock holdings and the net returns of the funds, 0.7% per year is due to the lower average returns of the nonstock holdings of the funds during the period (relative to stocks). The remaining 1.6% per year is split almost evenly between the expense ratios and the transaction costs of the funds. The final paper I'll cite is a 2008 paper by Fama and French (of the Fama-French model covered in business schools) titled, appropriately, \"\"Mutual Fund Performance\"\". The paper is pretty technical, and somewhat above my level at this time of night, but the authors state one of their conclusions bluntly quite early on: After costs (that is, in terms of net returns to investors) active investment is a negative sum game. Emphasis mine. In short, expense ratios, transaction costs, and other fees quickly diminish the returns to active investment. They find that The [value-weight] portfolio of mutual funds that invest primarily in U.S. equities is close to the market portfolio, and estimated before fees and expenses, its alpha is close to zero. Since the [value-weight] portfolio of funds produces an α close to zero in gross returns, the alpha estimated on the net returns to investors is negative by about the amount of fees and expenses. This implies that the higher the fees, the farther alpha decreases below zero. Since actively-managed mutual funds tend to have higher expense ratios than passively-managed index funds, it's safe to say that their net return to the investor is worse than a market index itself. I don't know of any free datasets that would allow you to research this, but one highly-regarded commercial dataset is the CRSP Survivor-Bias-Free US Mutual Fund Database from the Center for Research in Security Prices at the University of Chicago. In financial research, CRSP is one of the \"\"gold standards\"\" for historical market data, so if you can access that data (perhaps for a firm or academic institution, if you're affiliated with one that has access), it's one way you could run some numbers yourself.\"" }, { "docid": "2809", "title": "", "text": "\"I'm in a similar situation. First, a 529 plan can be use for \"\"qualifying\"\" international schools. There are 336 for 2015, which includes many well known schools but also excludes many schools, especially lower level or vocational schools and schools in non-English speaking countries. I ran 3 scenarios to see what the impact would be if you invested $3000 a year for 14 years in something tracking the S&P 500 Index: For each of these scenarios, I considered 3 cases: a state with 0% income tax, a state with the median income tax rate of 6% for the 25% tax bracket, and California with an income tax rate of 9.3% for the 25% tax bracket. California has an addition 2.5% penalty on unqualified distributions. Additionally, tax deductions taken on contributions that are part of unqualified distributions will be viewed as income and that portion of the distribution will be taxed as such at the state level. Vanguard's 500 Index Portfolio has a 10 year average return of 7.63%. Vanguard's S&P 500 Index fund has a 10 year average return of 7.89% before tax and 7.53% after taxes on distributions. Use a 529 as intended: Use a 529 but do not use as intended: Invest in a S&P 500 Index fund in a taxable account: Given similar investment options, using a 529 fund for something other than education is much worse than having an investment in a mutual fund in a taxable account, but there's also a clear advantage to using a 529 if you know with certainty you can use it for qualified expenses. Both the benefits for correct use of a 529 and the penalties for incorrect use increase with state tax rates. I live in a state with no income tax so the taxable mutual fund option is closer to the middle between correct and incorrect use of a 529. I am leaning towards the investment in a taxable account.\"" }, { "docid": "290184", "title": "", "text": "&gt;When a Business entity is so large and powerful its failure threatens the safety and well being of the nation it is based / present in. Don't you think we should approach this issue from the other side and say that the government should be enforcing these restrictions pre-emptively? In other words, firms should be prevented from attaining 'too big to fail' status. It seems a bit controversial to me for a government to go in after the fact and forcefully break up a private company. Where was the government beforehand? &gt;The government should be able to forcefully break up the company into smaller groups, or instate laws and regulations that promote competition and allow smaller businesses the ability to compete. How is management distributed across the new entities? How is intellectual property distributed? It is easy to say we should break these companies up, but actually breaking them up is a nightmare. Each of the new companies will need a duplicate management structure, and invariably they will have to source outside resources to fill these roles. If one firm retains the more valuable management then it has an advantage over the other firm. The same goes for intellectual property, or any other rare or unique assets. Shareholders will not receive the same dividend yield from their shares because the two companies once split will lose out on some economies of scale. Should the government compensate shareholders for the lost value of their shares? If not, why not and how is this different from the government directly seizing assets of the shareholders even though they have not committed any crime? Bear in mind nearly every American citizen owns shares in these companies through their retirement funding and so any loss in market cap will affect normal people, not just rich investors. &gt;National preservation. Once again, I think we need to be asking a different question: how did these firms come to exist in the first place? Its one thing to turn around and plead to the government to break the firms up but it as the government itself which was asleep on the job and allowed the firm to reach this point anyway. Should we really trust the government (who let the firms come into being) to break them up again?" }, { "docid": "530631", "title": "", "text": "\"It sounds like this is an entirely unsettled question, unfortunately. In the examples you provide, I think it is safe to say that none of those are 'substantially identical'; a small overlap or no overlap certainly should not be considered such by a reasonable interpretation of the rule. This article on Kitces goes into some detail on the topic. A few specifics. First, Former publication 564 explains: Ordinarily, shares issued by one mutual fund are not considered to be substantially identical to shares issued by another mutual fund. Of course, what \"\"ordinarily\"\" means is unspecified (and this is no longer a current publication, so, who knows). The Kitces article goes on to explain that the IRS hasn't really gone after wash sales for mutual funds: Over the years, the IRS has not pursued wash sale abuses against mutual funds, perhaps because it just wasn’t very feasible to crack down on them, or perhaps because it just wasn’t perceived as that big of an abuse. After all, while the rules might allow you to loss-harvest a particular stock you couldn’t have otherwise, it also limits you from harvesting ANY losses if the overall fund is up in the aggregate, since losses on individual stocks can’t pass through to the mutual fund shareholders. But then goes to explain about ETFs being very different: sell SPY, buy IVV or VTI, and you're basically buying/selling the identical thing (99% or so correlation in stocks owned). The recommendation by the article is to look at the correlation in owned stocks, and stay away from things over 95%; that seems reasonable in my book as well. Ultimately, there will no doubt be a large number of “grey” and murky situations, but I suspect that until the IRS provides better guidance (or Congress rewrites/updates the wash sale rules altogether!), in the near term the easiest “red flag” warning is simply to look at the correlation between the original investment being loss-harvested, and the replacement security; at correlations above 0.95, and especially at 0.99+, it’s difficult to argue that the securities are not ”substantially identical” to each other in performance. Basically - use common sense, and don't do anything you think would be hard to defend in an audit, but otherwise you should be okay.\"" }, { "docid": "346345", "title": "", "text": "If you want to go far upstream, you can get mutual fund NAV and dividend data from the Nasdaq Mutual Fund Quotation Service (MFQS). This isn't for end-users but rather is offered as a part of the regulatory framework. Not surprisingly, there is a fee for data access. From Nasdaq's MFQS specifications page: To promote market transparency, Nasdaq operates the Mutual Fund Quotation Service (MFQS). MFQS is designed to facilitate the collection and dissemination of daily price, dividends and capital distributions data for mutual funds, money market funds, unit investment trusts (UITs), annuities and structured products." }, { "docid": "347523", "title": "", "text": "according to the SEC: Shareholder Reports A mutual fund and a closed-end fund respectively must provide shareholders with annual and semi-annual reports 60 days after the end of the fund’s fiscal year and 60 days after the fund’s fiscal mid-year. These reports contain updated financial information, a list of the fund’s portfolio securities, and other information. The information in the shareholder reports will be current as of the date of the particular report (that is, the last day of the fund’s fiscal year for the annual report, and the last day of the fund’s fiscal mid-year for the semi-annual report). Other Reports A mutual fund and a closed-end fund must file a Form N-Q each quarter and a Form N-PX each year on the SEC’s EDGAR database, although funds are not required to mail these reports to shareholders. Funds disclose portfolio holdings on Form N-Q. Form N-PX identifies specific proposals on which the fund has voted portfolio securities over the past year and discloses how the fund voted on each. This disclosure enables fund shareholders to monitor their funds’ involvement in the governance activities of portfolio companies. which means that sixty days after the end of each quarter they will tell you what they owned 60 days ago. This makes sense; why would they want to tell the world what companies they are buying and selling." } ]

[ { "docid": "53544", "title": "", "text": "A matching pension scheme is like free money. No wait, it actually IS free money. You are literally earning 100% interest rate on that money the instant you pay it in to the account. That money would have to sit in your credit card account for at least five years to earn that kind of return; five years in which the pension money would have earned an additional return over and above the 100%. Mathematically there is no contest that contributing to a matching pension scheme is one of the best investment there is. You should always do it. Well, almost always. When should you not do it?" } ]

[ { "docid": "590310", "title": "", "text": "Alright, team! I found answers to part 1) and part 2) that I've quote below, but still need help with 3). The facts in the article below seem to point to the ability for the LLC to contribute profit sharing of up to 25% of the wages it paid SE tax on. What part of the SE tax is that? I assume the spirit of the law is to only allow the 25% on the taxable portion of the income, but given that I would have crossed the SS portion of SE tax, I am not 100%. (From http://www.sensefinancial.com/services/solo401k/solo-401k-contribution/) Sole Proprietorship Employee Deferral The owner of a sole proprietorship who is under the age of 50 may make employee deferral contributions of as much as $17,500 to a Solo 401(k) plan for 2013 (Those 50 and older can tack on a $5,500 annual catch-up contribution, bringing their annual deferral contribution to as much as $23,000). Solo 401k contribution deadline rules dictate that plan participant must formally elect to make an employee deferral contribution by Dec. 31. However, the actual contribution can be made up until the tax-filing deadline. Pretax and/or after-tax (Roth) funds can be used to make employee deferral contributions. Profit Sharing Contribution A sole proprietorship may make annual profit-sharing contributions to a Solo 401(k) plan on behalf of the business owner and spouse. Internal Revenue Code Section 401(a)(3) states that employer contributions are limited to 25 percent of the business entity’s income subject to self-employment tax. Schedule C sole-proprietors must base their maximum contribution on earned income, an additional calculation that lowers their maximum contribution to 20 percent of earned income. IRS Publication 560 contains a step-by-step worksheet for this calculation. In general, compensation can be defined as your net earnings from self-employment activity. This definition takes into account the following eligible tax deductions: (1) the deduction for half of self-employment tax and (2) the deduction for contributions on your behalf to the Solo 401(k) plan. A business entity’s Solo 401(k) contributions for profit sharing component must be made by its tax-filing deadline. Single Member LLC Employee Deferral The owner of a single member LLC who is under the age of 50 may make employee deferral contributions of as much as $17,500 to a Solo 401(k) plan for 2013 (Those 50 and older can tack on a $5,500 annual catch-up contribution, bringing their annual deferral contribution to as much as $23,000). Solo 401k contribution deadline rules dictate that plan participant must formally elect to make an employee deferral contribution by Dec. 31. However, the actual contribution can be made up until the tax-filing deadline. Pretax and/or after-tax (Roth) funds can be used to make employee deferral contributions. Profit Sharing Contribution A single member LLC business may make annual profit-sharing contributions to a Solo 401(k) plan on behalf of the business owner and spouse. Internal Revenue Code Section 401(a)(3) states that employer contributions are limited to 25 percent of the business entity’s income subject to self-employment tax. Schedule C sole-proprietors must base their maximum contribution on earned income, an additional calculation that lowers their maximum contribution to 20 percent of earned income. IRS Publication 560 contains a step-by-step worksheet for this calculation. In general, compensation can be defined as your net earnings from self-employment activity. This definition takes into account the following eligible tax deductions: (i) the deduction for half of self-employment tax and (ii) the deduction for contributions on your behalf to the Solo 401(k). A single member LLC’s Solo 401(k) contributions for profit sharing component must be made by its tax-filing deadline." }, { "docid": "531051", "title": "", "text": "I completely agree with Pete that a 401(k) loan is not the answer, but I have an alternate proposal: Reduce your 401(k) contribution down to the 4% that you get a match on. If you are cash poor now and have debts to be cleaned up, those need to be addressed before retirement savings. You'll have plenty of time to make up the lost savings after you get the debts paid off. If your company matches 50% (meaning you have to contribute 8% to get the 4% match), then consider temporarily stopping your 401(k) altogether. A 100% match is very hard to give up, but a 50% match is less difficult. You have plenty of years left ahead of you to make up the lost match. Plus, the pain of knowing you're leaving money on the table will incentivize you to get the loans paid as quickly as possible. It seems to me that I would be reducing middle to high interest debt while also saving myself $150 per month. No, you'd be deferring $150 per month for an additional two years, and not reducing debt at all, just moving it to a different lender. Interest rate is not your problem. Right now you're paying less than $30 per month in interest on these 3 loans and about $270 in principal, and at the current rate should have them paid off in about 2 years. You're wanting to extend these loans to 4 years by borrowing from your retirement savings. I would buckle down, reduce expenses wherever possible (cable? cell phone? coffee? movies? restaurants?) until you get these debts paid off. You make $70,000 per year, or almost $6,000 per month. I bet if you try hard enough you can come up with $1,100 fairly quickly. Then the next $1,200 should come twice as fast. Then attack the next $4,000. (You can argue whether the $1,200 should come first because of the interest rate, but in the end it doesn't matter - either one should be paid off very quickly, so the interest saved is negligible) Maybe you can get one of them paid off, get yourself some breathing room, then loosen up a little bit, but extending the pain for an additional two years is not wise. Some more drastic measures:" }, { "docid": "301194", "title": "", "text": "\"I assume you get your information from somewhere where they don't report the truth. I'm sorry if mentioning Fox News offended you, it was not my intention. But the way the question is phrased suggests that you know nothing about what \"\"pension\"\" means. So let me explain. 403(b) is not a pension account. Pension account is generally a \"\"defined benefit\"\" account, whereas 403(b)/401(k) and similar - are \"\"defined contribution\"\" accounts. The difference is significant: for pensions, the employer committed on certain amount to be paid out at retirement (the defined benefit) regardless of how much the employee/employer contributed or how well the account performed. This makes such an arrangement a liability. An obligation to pay. In other words - debt. Defined contribution on the other hand doesn't create such a liability, since the employer is only committed for the match, which is paid currently. What happens to your account after the employer deposited the defined contribution (the match) - is your problem. You manage it to the best of your abilities and whatever you have there when you retire - is yours, the employer doesn't owe you anything. Here's the problem with pensions: many employers promised the defined benefit, but didn't do anything about actually having money to pay. As mentioned, such a pension is essentially a debt, and the retiree is a debt holder. What happens when employer cannot pay its debts? Employer goes bankrupt. And when bankrupt - debtors are paid only part of what they were owed, and that includes the retirees. There's no-one raiding pensions. No-one goes to the bank with a gun and demands \"\"give me the pension money\"\". What happened was that the employers just didn't fund the pensions. They promised to pay - but didn't set aside any money, or set aside not enough. Instead, they spent it on something else, and when the time came that the retirees wanted their money - they didn't have any. That's what happened in Detroit, and in many other places. 403(b) is in fact the solution to this problem. Instead of defined benefit - the employers commit on defined contribution, and after that - it's your problem, not theirs, to have enough when you're retired.\"" }, { "docid": "422142", "title": "", "text": "The long term growth is not 6.5%, it's 10% give or take. But, that return comes with risk. A standard deviation of 14%. Does the 401(k) have a match? And are you getting the full match? If no match, or you already top it off, the 6.5% is a rate that I'd be happy to get on my money. So, I would pay it off faster. My highest rate debt is my 3.5% mortgage, which is 2.5% after tax. At 2.5%, I prefer to be a borrower, as that gap 2.5%-10% is pretty appealing, long term." }, { "docid": "457945", "title": "", "text": "Depends upon the debt cost. Assuming it is consumer debt or credit card debt, it is better to pay that off first, it is the best investment you can make. Let's say it is credit card debt. If you pay 18% interst and have for example a $1,000 amount. If you pay it off you save $180 in interest ($1,000 times 18%). You would have to earn 18% on 1,000 to generate $180 if it was in aninvestment. Here is a link discussing ways of reducing debt Once you have debt paid off you have the cashflow to begin building wealth. The key is in the cashflow." }, { "docid": "507476", "title": "", "text": "If you're simply trading with your own money and have not incorporated, then you are not eligible for a solo 401(k). Nerdwallet has an excellent Q&A on the topic here for example. Solo 401(k) is only allowed to be funded with earned income, and capital gains are not earned income. From the IRS page on One Participant 401(k) plans: Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit Earned income is defined by the IRS here: But not including: Even more clearly, that page notes: There are two ways to get earned income: You work for someone who pays you or You own or run a business or farm Capital gains are certainly neither of these. Now, I have read several articles suggesting one way to go about using the Solo 401k. All of them suggest that you would need to incorporate in some fashion that would require a Schedule C tax return, though, and be trading with the company's money rather than your own, and then pay yourself a wage from that. In that case you would be eligible for a Solo 401(k), and you might even be better off as a result of all that maneuvering (even though you'll be taxed at a higher rate for any income you do keep, likely, and have to pay self-employment tax)." }, { "docid": "392924", "title": "", "text": "\"First of all, you need to stop using the card completely. Yes, that means you lose out on cash back, double miles, whatever, but that's how you got to this mess in the first place. Switch to a cash budget until you can consistently spend less than you bring home. Keep better track of your expenses, build an emergency fund, and learn to save for expenses rather than borrow for them until you have your spending under control. If you can't cut your expenses any more, consider ways to increase your income (more hours at work, part-time jobs, sell stuff, etc.) Assuming that the employer match is 1-to-1 up to 4%, and you're saving an additional 7 percent to get to 15% total, I would definitely lower your contribution down to 4%, get the card paid off, and ONLY bump your contribution back up once you can safely pay off the card each month and know how much you can contribute. It is not wise to put 15% in retirement if that causes you to spend more than your net take-home pay. Your \"\"13%\"\" in your Roth is not guaranteed by any means, but the interest you pay on your credit card is. I would even be tempted to cut your retirement completely until the debt is paid, but more for motivational reasons that mathematical: I would be more concerned about living within your income at this point than getting a company match. I believe the benefits of spending wisely will outweigh a temporary loss in matched retirement funds in the long run.\"" }, { "docid": "219907", "title": "", "text": "I'll respect the mod's suggestion. I'd answer with a warning. The concept of 401(k) pretax saving is to save at a high rate, while working, and withdraw at a lower rate. An annual expense pushing 1% or higher is likely to negate the benefit of the account over time. If your employer offers the Roth 401(k), I'd suggest using that for your deposits, and only up to the match. Then invest outside the 401(k). In the 25% bracket, it's good to have a mix of both pre and post tax retirement money." }, { "docid": "463892", "title": "", "text": "Your employer's matching contribution is calculated based on the dollar amounts you end up putting in. The nature of your 401(k) contribution—whether pre-tax or Roth after-tax—doesn't matter with respect to how their match gets calculated, and their match always goes into a pre-tax account, even if you are contributing after-tax. The onus is on you to choose a contribution amount that maximizes your employer match regardless of the nature of your contribution. Maximizing your employer match using Roth after-tax contributions will eat up more of your annual gross salary, but as long as you are willing to do that then you won't leave free employer match money on the table. Roth after-tax contributions don't get the tax deduction inherent in a pre-tax contribution. The tradeoff is that you end up with less take-home pay per period if you contribute the same number of dollars on a Roth after-tax basis to your 401(k) as opposed to on a pre-tax basis. For instance, to make a maximum $18,000 Roth after-tax contribution to a 401(k), it's going to cost you a lot more than $18,000 of your annual gross salary to net the same $18,000 number. (On the flip side, the Roth money is worth more in retirement than pre-tax money, because it won't be subject to taxes then.) However, 401(k) plan contribution amounts are almost always expressed as a percentage of gross salary, i.e. in pre-tax terms, even when electing to make after-tax contributions! So when electing after-tax, one is implicitly accepting that the contribution will cost more than the percentage of gross salary, because you'll need to pay the tax on a gross amount that would yield the same number of dollars but as an after-tax amount." }, { "docid": "59327", "title": "", "text": "Every $1,000 you use to pay off a 26% interest rate card saves you $260 / year. Every $1,000 you use to pay off a 23% interest rate card saves you $230 / year. Every $1,000 you put in a savings account earning ~0.5% interest earns you $5 / year. Having cash on hand is good in case of emergencies, but typically if your debt is on high interest credit cards, you should consider paying off as much of it as possible. In your case you may want to keep only some small amount (maybe $500, maybe $1000, maybe $100) in cash for emergencies. Paying off your high interest debt should be a top priority for you. You may want to look on this site for help with budgeting, also. Typically, being in debt to credit card companies is a sign of living beyond your means. It costs you a lot of money in the long run." }, { "docid": "242529", "title": "", "text": "\"IRA is not always an option. There are income limits for IRA, that leave many employees (those with the higher salaries, but not exactly the \"\"riches\"\") out of it. Same for Roth IRA, though the MAGI limits are much higher. Also, the contribution limits on IRA are more than three times less than those on 401K (5K vs 16.5K). Per IRS Publication 590 (page 12) the income limit (AGI) goes away if the employer doesn't provide a 401(k) or similar plan (not if you don't participate, but if the employer doesn't provide). But deduction limits don't change, it's up to $5K (or 100% of the compensation, the lesser) even if you're not covered by the employers' pension plan. Employers are allowed to match the employees' 401K contributions, and this comes on top of the limits (i.e.: with the employers' matching, the employees can save more for their retirement and still have the tax benefits). That's the law. The companies offer the option of 401K because it allows employee retention (I would not work for a company without 401K), and it is part of the overall benefit package - it's an expense for the employer (including the matching). Why would the employer offer matching instead of a raise? Not all employers do. My current employer, for example, pays above average salaries, but doesn't offer 401K match. Some companies have very tight control over the 401K accounts, and until not so long ago were allowed to force employees to invest their retirement savings in the company (see the Enron affair). It is no longer an option, but by now 401K is a standard in some industries, and employers cannot allow themselves not to offer it (see my position above).\"" }, { "docid": "210972", "title": "", "text": "\"Getting a mortgage for the interest write-off is like buying packs of baseball cards for the gum. That said, I'd refer you to The correct order of investing as much of that question really overlaps with this. This question boils down to priorities, the best use of the funds. There are those who suggest that a mortgage brings risk. Of course it does, just not for the borrower, the risk is borne by the lender. Risk comes from lack of liquidity. Say your girlfriend buys the house with cash, and leaves little reserve. She loses her job, and it's great that she has no mortgage. But she does have every other cost life brings, including a tax bill that can turn into a house getting foreclosed on. The details that you didn't disclose are those needed to look at the rest of the \"\"priorities\"\" list. A fully funded 401(k) with appropriate balance, and no other debt? And a 1 year emergency fund? I wouldn't argue against buying the house with cash. No real savings and passing on the 401(k) matched deposit? I'd think carefully about the longterm impact of the cash purchase.\"" }, { "docid": "422979", "title": "", "text": "The fact that you are planning to move abroad does not affect the decision to contribute to a 401(k). The reason for this is that after you leave your employer, you can roll all the money over from your 401(k) into a self-directed traditional IRA. That money can stay invested until retirement, and it doesn't matter where you are living before or after retirement age. So, when deciding whether or not to use a 401(k), you need to look at the details of your employer's plan: Does your employer offer a match? If so, you should definitely take advantage of it. Are there good investments available inside the 401(k)? Some plans offer very limited options. If you can't find anything good to invest in, you don't want to contribute anything beyond the match; instead, contribute to an IRA, where you can invest in a fund that you like. The other reason to use a 401(k) is that the contribution limits can be higher. If you want to invest more than you are allowed to in an IRA, the 401(k) might allow that. In your case, since there is no match, it is up to you whether you want to participate or not. An IRA will allow more flexibility in investing options. If you need to invest more than your IRA limit, the 401(k) might allow that. When you leave your employer, you should probably roll any 401(k) money into an IRA." }, { "docid": "345895", "title": "", "text": "\"I have never double-answered till now. This loan can't be taken out of context. By the way, how much is it? What rate? \"\"Debt bad.\"\" Really? Line the debt up. This is the highest debt you have. But, you work for a company that offers a generous match, i.e. the match to your 401(k). Now, it's a choice, pay off 6% debt or deposit that money to get an immediate 100% return. Your question has validity. In the end, we can tell you when to pay off the debt. After - The issue is that you are quoting a third party without having the discussion or ever being privy to it. In court, this is called 'hearsay.' The best we can do is offer both sides of the issue and priority for the payments. Welcome to Money.SE, nice first question.\"" }, { "docid": "171196", "title": "", "text": "The best option for maximizing your money long-term is to contribute to the 401(k) offered by your employer. If you park your inheritance in a savings account you can draw on it to augment your income while you max out your contributions to the 401(k). You will get whatever the employer matches right off the bat and your gains are tax deferred. In essence you will be putting your inheritance into the 401(k) and forcing your employer to match at whatever rate they do. So if your employer matches at 50 cents on the dollar you will turn your 50 thousand into 75 thousand." }, { "docid": "91183", "title": "", "text": "\"There is a very simple calculation that will answer the question: Is the expected ROI of the 401K including the match greater than the interest rate of your credit card? Some assumptions that don't affect the calculation, but do help illustrate the points. You have 30 years until you can pull out the 401K. Your credit card interest rate is 20% compounded annually. The minimum payoffs are being disregarded, because that would legally just force a certain percentage to credit card. You only have $1000. You can either pay off your credit card or invest, but not both. For most people, this isn't the case. Ideally, you would simply forego $1000 worth of spending, AND DO BOTH Worked Example: Pay $1000 in Credit Card Debt, at 20% interest. After 1 year, if you pay off that debt, you no longer owe $1200. ROI = 20% (Duh!) After 30 years, you no longer owe (and this is pretty amazing) $237,376.31. ROI = 23,638% In all cases, the ROI is GUARANTEED. Invest $1000 in matching 401k, with expected ROI of 5%. 2a. For illustration purposes, let's assume no match After 1 year, you have $1050 ($1000 principal, $0 match, 5% interest) - but you can't take it out. ROI = 5% After 30 years, you have $4321.94, ROI of 332% - assuming away all risk. 2b. Then, we'll assume a 50% match. After 1 year, you have $1575 ($1000 principle, $500 match, 5% interest) - but you can't take it out. ROI = 57% - but you are stuck for a bit After 30 years, you have $6482.91, ROI of 548% - assuming away all risk. 2c. Finally, a full match After 1 year, you have $2100 ($1000 principle, $1000 match, 5% interest) - but you can't take it out. ROI = 110% - but again, you are stuck. After 30 years, you have $8643.89, ROI of 764% - assuming away all risk. Here's the summary - The interest rate is really all that matters. Paying off a credit card is a guaranteed investment. The only reason not to pay off a 20% credit card interest rate is if, after taxes, time, etc..., you could earn more than 20% somewhere else. Note that at 1 year, the matching funds of a 401k, in all cases where the match exceeded 20%, beat the credit card. If you could take that money before you could have paid off the credit card, it would have been a good deal. The problem with the 401k is that you can't realize that gain until you retire. Credit Card debt, on the other hand, keeps growing until you pay it off. As such, paying off your credit card debt - assuming its interest rate is greater than the stock market (which trust me, it almost always is) - is the better deal. Indeed, with the exception of tax advantaged mortgages, there is almost no debt that has an interest rate than is \"\"better\"\" than the market.\"" }, { "docid": "464080", "title": "", "text": "\"Given that the 6 answers all advocate similar information, let me offer you the alternate scenario - You earn $60K and have an employer offering a 50% match on all deposits. All deposits. (Note, I recently read a Q&A here describing such an offer. If I see it again, I'll link). Let the thought of the above settle in. You think about the fact that $42K isn't a bad salary, and decide to deposit 30%, to gain the full match on your $18K deposit. Now, you budget to live your life, pay your bills, etc, but it's tight. When you accumulate $2000, and a strong want comes up (a toy, a trip, anything, no judgement) you have a tough decision. You think to yourself, \"\"after the match, I am literally saving 45% of my income. I'm on a pace to have the ability to retire in 20 years. Why do I need to save even more?\"\" Your budget has enough discretionary spending that if you have a $2000 'emergency', you charge it and pay it off over the next 6-8 months. Much larger, and you know that your super-funded 401(k) has the ability to tap a loan. Your choice to turn away from the common wisdom has the recommended $20K (about 6 months of your spending) sitting in your 401(k), pretax deposited as $26K, and matched to nearly $40K, growing long term. Note: This is a devil's advocate answer. Had I been the first to answer, it would reflect the above. In my own experience, when I got married, we built up the proper emergency fund. As interest rates fell, we looked at our mortgage balance, and agreed that paying down the loan would enable us to refinance and save enough in mortgage interest that the net effect was as if we were getting 8% on the money. At the same time as we got that new mortgage, the bank offered a HELOC, which I never needed to use. Did we somehow create high risk? Perhaps. Given that my wife and I were both still working, and had similar incomes, it seemed reasonable.\"" }, { "docid": "57526", "title": "", "text": "\"Yes, this is restricted by law. In plain language, you can find it on the IRS website (under the heading \"\"When Can a Retirement Plan Distribute Benefits?\"\"): 401(k), profit-sharing, and stock bonus plans Employee elective deferrals (and earnings, except in a hardship distribution) -- the plan may permit a distribution when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach age 59½; or •suffer a hardship. Employer profit-sharing or matching contributions -- the plan may permit a distribution of your vested accrued benefit when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach the age specified in the plan (any age); or •suffer a hardship or experience another event specified in the plan. Form of benefit - the plan may pay benefits in a single lump-sum payment as well as offer other options, including payments over a set period of time (such as 5 or 10 years) or a purchased annuity with monthly lifetime payments. Source: https://www.irs.gov/retirement-plans/plan-participant-employee/when-can-a-retirement-plan-distribute-benefits If you want to actually see it in the law, check out 26 USC 401(k)(2)(B)(i), which lists the circumstances under which a distribution can be made. You can get the full text, for example, here: https://www.law.cornell.edu/uscode/text/26/401 I'm not sure what to say about the practice of the company that you mentioned in your question. Maybe the law was different then?\"" }, { "docid": "301616", "title": "", "text": "The managers of the 401(k) have to make their money somewhere. Either they'll make it from the employer, or from the employees via the expense ratio. If it's the employer setting up the plan, I can bet whose interest he'll be looking after. Regarding your last comment, I'd recommend looking outside your 401(k) for investing. If you get free money from your employer for contributing to your 401(k), that's a plus, but I wouldn't -- actually, I don't -- contribute anything beyond the match. I pay my taxes and I'm done with it." } ]

[ { "docid": "202768", "title": "", "text": "Nope, take the match. I cannot see not taking the match unless you don't have enough money to cover the bills. Every situation is different of course, and if the option is to missing minimum payments or other bills in order to get the match, make your payments. But in all other circumstances, take the match. My reasoning is, it is hard enough to earn money so take every chance you can. If you save for retirement in the process, all the better." } ]

[ { "docid": "224434", "title": "", "text": "My answer would be yes. In addition, I'm not sure that anything requires you to roll your current 401(k) into a new one if you don't like the investment options. Keeping existing funds in your current 401(k) if you like their investment options might make sense for you (though they obviously wouldn't be adding funds once you're no longer an employee). As for the terms of the potential new 401(k), the matching percentage and vesting schedule match what I've seen at past employers. My current employer offers the same terms, but there's no vesting schedule." }, { "docid": "464080", "title": "", "text": "\"Given that the 6 answers all advocate similar information, let me offer you the alternate scenario - You earn $60K and have an employer offering a 50% match on all deposits. All deposits. (Note, I recently read a Q&A here describing such an offer. If I see it again, I'll link). Let the thought of the above settle in. You think about the fact that $42K isn't a bad salary, and decide to deposit 30%, to gain the full match on your $18K deposit. Now, you budget to live your life, pay your bills, etc, but it's tight. When you accumulate $2000, and a strong want comes up (a toy, a trip, anything, no judgement) you have a tough decision. You think to yourself, \"\"after the match, I am literally saving 45% of my income. I'm on a pace to have the ability to retire in 20 years. Why do I need to save even more?\"\" Your budget has enough discretionary spending that if you have a $2000 'emergency', you charge it and pay it off over the next 6-8 months. Much larger, and you know that your super-funded 401(k) has the ability to tap a loan. Your choice to turn away from the common wisdom has the recommended $20K (about 6 months of your spending) sitting in your 401(k), pretax deposited as $26K, and matched to nearly $40K, growing long term. Note: This is a devil's advocate answer. Had I been the first to answer, it would reflect the above. In my own experience, when I got married, we built up the proper emergency fund. As interest rates fell, we looked at our mortgage balance, and agreed that paying down the loan would enable us to refinance and save enough in mortgage interest that the net effect was as if we were getting 8% on the money. At the same time as we got that new mortgage, the bank offered a HELOC, which I never needed to use. Did we somehow create high risk? Perhaps. Given that my wife and I were both still working, and had similar incomes, it seemed reasonable.\"" }, { "docid": "315836", "title": "", "text": "With respect to the 401(k). Before taking a hardship withdrawal, one must first deplete the ability to take any 401(k) loans available. This is a regulation. The 401(k) loan limit is the lesser of $50k, 50% your vested balance, or $50k minus the highest loan balance within the last year. Here's the good news: it is not a taxable event; you can pay back over a maximum of 5 years; interest is low (usually 4.25% or so). The bad news: if you terminate employment then the loan balance must be repaid or else it becomes taxable income plus a 10% penalty. I suggest you consider eliminating the credit card debt via this option. Pay back as aggressively as possible and if/when you terminate you can take the 10% penalty - it will be far less of an impact than 25k accruing approximately 25% annually." }, { "docid": "341493", "title": "", "text": "\"Another consideration is that you are going to wind up with money in the \"\"regular\"\" 401(k) no matter which one you contribute to. The employer match can't go into the Roth 401(k). So all employer matching funds go in with pre-tax dollars and will be deposited in a normal 401(k) account. Edit from JoeTaxpayer - 2013 brought with it the Roth 401(k) conversion the ability to convert from the traditional pretax side of your 401(k) account to the Roth side.\"" }, { "docid": "352908", "title": "", "text": "You might also want to talk directly to a bank. If your credit report is clean, they may have some discretion in making the loan. Note - the 'normal' fully qualified loan has two thresholds, 28% (of monthly income) for housing costs, 36% for all debt servicing. A personal, disclosed loan from a friend/family which is not secured against the house, would count as part of the other debt, as would a credit card. While I don't recommend using a credit card for this purpose, the debt fits in that 28-36 gap. As Kevin points out below, not all paths are equally advisable. Nor are rules of thumb always true. Not having the OP's full details, income, assets, price of house, etc, this is just a list of things to consider. The use of a 401(k) loan in the US can be a great idea for some, bad mistake for others. This format doesn't make it easy to go into great detail, and I'm sure the 401(k) loan issue has been asked and answered in other questions. With respect to Kevin, if he wrote 'usually', I'd agree, but never say 'never.'" }, { "docid": "422421", "title": "", "text": "First, read my answer here: Oversimplify it for me: the correct order of investing For me, the answer to your question comes down to how badly you want to get rid of your student loan debt. I recommend that you get rid of it as fast as possible, and that you sacrifice a little in your budget temporarily to make that happen. If that is what you want, here is what I would do. Following the steps in my other answer, I would pay off the student loans first. Cash out your non-retirement growth fund to jump start that, then challenge yourself to take as much of your paycheck as you can and throw it at the debt. Figure out how many months it will take before the debt is gone. Once the debt is gone, you won't have those monthly payments anymore and you won't be continually losing money in interest to the bank. At that point, you can build up your cash savings, invest in your employer's 401(k) plan for retirement, and start saving toward other long-term saving goals (car, house, etc.) To address some of your other concerns: If you cash out the non-retirement fund, you'll probably owe some capital gains tax. (Although, on a $3k investment, the long term rate won't add up to very much, depending on your tax bracket and cost basis.) You can't use the money from your non-retirement fund to invest in your 401(k). You can only contribute to your 401(k) via payroll deduction. To explicitly answer your question, your non-retirement fund is not bound by the limitations of retirement funds, meaning that you can cash it out and use it however you like without penalty, only paying perhaps a few hundred dollars of capital gains tax at tax time next year. Think of it as another source of cash for you." }, { "docid": "403934", "title": "", "text": "An activity which can help improve your credit score and actually make you money is stoozing. It's a little complicated but can be beneficial to do. Using either a credit card which allows fee free money withdrawals from cashpoints or building up debt using your credit card gives you access to your credit amount. You then use a long term 0% balance transfer card to transfer the debt which you pay off at the minimum rate. It's 0% so no costs are associated except for the initial fee paid for the balance transfer amount. The money that would have been used to pay off the credit amount (or money withdrawn from a cashpoint) can then be deposited in a savings account so you are now earning interest on the credit balance. Continuing to make monthly minimum payments via direct debit will help improve your credit rating and the savings money will earn interest. (it is also available if you suddenly need to pay off the 0% card)" }, { "docid": "333219", "title": "", "text": "\"All of the provided advice is great, but a slightly different viewpoint on debt is worth mentioning. Here are the areas that you should concentrate your efforts and the (rough) order you should proceed. Much of the following is predicated upon your having a situation where you need to get out of debt, and learn to better budget and control your spending. You may already have accomplished some of these steps, or you may prioritize differently. Many people advise prioritizing contributing to a 401(k) savings plan. But with the assumption that you need advise because you have debt trouble, you are probably paying absurd interest rates, and any savings you might have will be earning much lower rates than you are paying on consumer debt. If you are already contributing, continue the plan. But remember, you are looking for advice because your financial situation is in trouble, so you need to put out the fire (your present problem), and learn how to manage your money and plan for the future. Compose a budget, comprised of the following three areas (the exact percentages are fungible, fit them to your circumstances). Here is where planning can get fun, when you have freed yourself from debt, and you can make choices that resonate with your individual goals. Once you have \"\"put out the fire\"\" of debt, then you should do two things at the same time. As you pay off debt (and avoid further debt), you will find that saving for both independence and retirement become easier. The average American household may have $8000+ credit card debt, and at 20-30%, the interest payments are $150-200/month, and the average car payment is nearly $500/month. Eliminate debt and you will have $500-800/month that you can comfortably allocate towards retirement. But you also need to learn (educate yourself) how to invest your money to grow your money, and earn income from your savings. This is an area where many struggle, because we are taught to save, but we are not taught how to invest, choose investments wisely and carefully, and how to decide our goals. Investing needs to be addressed separately, but you need to learn how. Live in an affordable house, and pay off your mortgage. Consider that the payment on a mortgage on even a modest $200K house is over $1000/month. Combine saving the money you would have paid towards a mortgage payment with the money you would have paid towards credit card debt or a car loan. Saving becomes easy when you are freed from these large debts.\"" }, { "docid": "350082", "title": "", "text": "I know of no way to answer your question without 'spamming' a particular investment. First off, if you are a USA citizen, max out your 401-K. Whatever your employer matches will be an immediate boost to your investment. Secondly, you want your our gains to be tax deferred. A 401-K is tax deferred as well as a traditional IRA. Thirdly, you probably want the safety of diversification. You achieve this by buying an ETF (or mutual fund) that then buys individual stocks. Now for the recommendation that may be called spamming by others : As REITs pass the tax liability on to you, and as an IRA is tax deferred, you can get stellar returns by buying a mREIT ETF. To get you started here are five: mREITs Lastly, avoid commissions by having your dividends automatically reinvested by using that feature at Scottrade. You will have to pay commissions on new purchases but your purchases from your dividend Reinvestment will be commission free. Edit: Taking my own advice I just entered orders to liquidate some positions so I would have the $ on hand to buy into MORL and get some of that sweet 29% dividend return." }, { "docid": "536262", "title": "", "text": "\"littleadv's first comment - check the note - is really the answer. But your issue is twofold - Every mortgage I've had (over 10 in my lifetime) allows early principal payments. The extra principal can only be applied at the same time as the regular payment. Think of it this way - only at that moment is there no interest owed. If a week later you try to pay toward only principal, the system will not handle it. Pretty simple - extra principal with the payment due. In fact, any mortgage I've had that offered a monthly bill or coupon book will have that very line \"\"extra principal.\"\" By coincidence, I just did this for a mortgage on my rental. I make these payments through my bank's billpay service. I noted the extra principal in the 'notes' section of the virtual check. But again, the note will explicitly state if there's an issue with prepayments of principal. The larger issue is that your friend wishes to treat the mortgage like a bi-weekly. The bank expects the full amount as a payment and likely, has no obligation to accept anything less than the full amount. Given my first comment above here is the plan for your friend to do 99% of what she wishes: Tell her, there's nothing magic about bi-weekly, it's a budget-clever way to send the money, but over a year, it's simply paying 108% of the normal payment. If she wants to burn the mortgage faster, tell her to add what she wishes every month, even $10, it all adds up. Final note - There are two schools of thought to either extreme, (a) pay the mortgage off as fast as you can, no debt is the goal and (b) the mortgage is the lowest rate you'll ever have on borrowed money, pay it as slow as you can, and invest any extra money. I accept and respect both views. For your friend, and first group, I'm compelled to add - Be sure to deposit to your retirement account's matched funds to gain the entire match. $1 can pay toward your 6% mortgage or be doubled on deposit to $2 in your 401(k), if available. And pay off all high interest debt first. This should stand to reason, but I've seen people keep their 18% card debt while prepaying their mortgage.\"" }, { "docid": "171196", "title": "", "text": "The best option for maximizing your money long-term is to contribute to the 401(k) offered by your employer. If you park your inheritance in a savings account you can draw on it to augment your income while you max out your contributions to the 401(k). You will get whatever the employer matches right off the bat and your gains are tax deferred. In essence you will be putting your inheritance into the 401(k) and forcing your employer to match at whatever rate they do. So if your employer matches at 50 cents on the dollar you will turn your 50 thousand into 75 thousand." }, { "docid": "422142", "title": "", "text": "The long term growth is not 6.5%, it's 10% give or take. But, that return comes with risk. A standard deviation of 14%. Does the 401(k) have a match? And are you getting the full match? If no match, or you already top it off, the 6.5% is a rate that I'd be happy to get on my money. So, I would pay it off faster. My highest rate debt is my 3.5% mortgage, which is 2.5% after tax. At 2.5%, I prefer to be a borrower, as that gap 2.5%-10% is pretty appealing, long term." }, { "docid": "353625", "title": "", "text": "\"For easy math, say you are in the 25% tax bracket. A thousand deposited dollars is $750 out of your pocket, but $2000 after the match. Now, you say you want to take the $750 and pay down the card. If you wait a year (at 20%) you'll owe $900, but have access to borrow a full $1000, at a low rate, 4% or so. The payment is less than $19/mo for 5 years. So long as one is comfortable juggling their debt a bit, the impact of a fully matched 401(k) cannot be beat. Keep in mind, this is a different story than those who just say \"\"don't take a 401(k) loan.\"\" Here, it's the loan that offers you the chance to fund the account. If you are let go, and withdraw the money, even at the 25% rate, you net $1500 less the $200 penalty, or $1300 compared to the $750 you are out of pocket. If you don't want to take the loan, you're still ahead so long as you are able to pay the cards over a reasonable time. I'll admit, a 20% card paid over 10+ years can still trash a 100% return. This is why I add the 401(k) loan to the mix. The question for you - jldugger - is how tight is the budget? And how much is the match? Is it dollar for dollar on first X%?\"" }, { "docid": "568784", "title": "", "text": "\"Can is fine, and other answered that. I'd suggest that you consider the \"\"should.\"\" Does your employer offer a matched retirement account, typically a 401(k)? Are you depositing up to the match? Do you have any higher interest short term debt, credit cards, car loan, student loan, etc? Do you have 6 months worth of living expenses in liquid funds? One point I like to beat a dead horse over is this - for most normal mortgages, the extra you pay goes to principal, but regardless of how much extra you pay, the next payment is still due next month. So it's possible that you are feeling pretty good that for 5 years you pay so much that you have just 10 left on the 30 year loan, but if you lose your job, you still risk losing the house to foreclosure. It's not like you can ask the bank for that money back. If you are as disciplined as you sound, put the extra money aside, and only when you have well over the recommended 6 months, then make those prepayments if you choose. To pull my comment to @MikeKale into my answer - I avoided this aspect of the discussion. But here I'll suggest that a 4% mortgage costs 3% after tax (in 25% bracket), and I'd bet cap gain rates will stay 15% for non-1%ers. So, with the break-even return of 3.5% (to return 3 after tax) and DVY yielding 3.33%, the questions becomes - do you think the DVY top yielders will be flat over the next 15 years? Any return over .17%/yr is profit. That said, the truly risk averse should heed the advise in original answer, then pre-pay. Update - when asked,in April 2012, the DVY I suggested as an example of an investment that beats the mortgage cost, traded at $56. It's now $83 and still yields 3.84%. To put numbers to this, a lump sum $100K would be worth $148K (this doesn't include dividends), and giving off $5700/yr in dividends for an after-tax $4800/yr. We happened to have a good 4 years, overall. The time horizon (15 years) makes the strategy low risk if one sticks to it.\"" }, { "docid": "463892", "title": "", "text": "Your employer's matching contribution is calculated based on the dollar amounts you end up putting in. The nature of your 401(k) contribution—whether pre-tax or Roth after-tax—doesn't matter with respect to how their match gets calculated, and their match always goes into a pre-tax account, even if you are contributing after-tax. The onus is on you to choose a contribution amount that maximizes your employer match regardless of the nature of your contribution. Maximizing your employer match using Roth after-tax contributions will eat up more of your annual gross salary, but as long as you are willing to do that then you won't leave free employer match money on the table. Roth after-tax contributions don't get the tax deduction inherent in a pre-tax contribution. The tradeoff is that you end up with less take-home pay per period if you contribute the same number of dollars on a Roth after-tax basis to your 401(k) as opposed to on a pre-tax basis. For instance, to make a maximum $18,000 Roth after-tax contribution to a 401(k), it's going to cost you a lot more than $18,000 of your annual gross salary to net the same $18,000 number. (On the flip side, the Roth money is worth more in retirement than pre-tax money, because it won't be subject to taxes then.) However, 401(k) plan contribution amounts are almost always expressed as a percentage of gross salary, i.e. in pre-tax terms, even when electing to make after-tax contributions! So when electing after-tax, one is implicitly accepting that the contribution will cost more than the percentage of gross salary, because you'll need to pay the tax on a gross amount that would yield the same number of dollars but as an after-tax amount." }, { "docid": "301194", "title": "", "text": "\"I assume you get your information from somewhere where they don't report the truth. I'm sorry if mentioning Fox News offended you, it was not my intention. But the way the question is phrased suggests that you know nothing about what \"\"pension\"\" means. So let me explain. 403(b) is not a pension account. Pension account is generally a \"\"defined benefit\"\" account, whereas 403(b)/401(k) and similar - are \"\"defined contribution\"\" accounts. The difference is significant: for pensions, the employer committed on certain amount to be paid out at retirement (the defined benefit) regardless of how much the employee/employer contributed or how well the account performed. This makes such an arrangement a liability. An obligation to pay. In other words - debt. Defined contribution on the other hand doesn't create such a liability, since the employer is only committed for the match, which is paid currently. What happens to your account after the employer deposited the defined contribution (the match) - is your problem. You manage it to the best of your abilities and whatever you have there when you retire - is yours, the employer doesn't owe you anything. Here's the problem with pensions: many employers promised the defined benefit, but didn't do anything about actually having money to pay. As mentioned, such a pension is essentially a debt, and the retiree is a debt holder. What happens when employer cannot pay its debts? Employer goes bankrupt. And when bankrupt - debtors are paid only part of what they were owed, and that includes the retirees. There's no-one raiding pensions. No-one goes to the bank with a gun and demands \"\"give me the pension money\"\". What happened was that the employers just didn't fund the pensions. They promised to pay - but didn't set aside any money, or set aside not enough. Instead, they spent it on something else, and when the time came that the retirees wanted their money - they didn't have any. That's what happened in Detroit, and in many other places. 403(b) is in fact the solution to this problem. Instead of defined benefit - the employers commit on defined contribution, and after that - it's your problem, not theirs, to have enough when you're retired.\"" }, { "docid": "149004", "title": "", "text": "You should try to take out other loans sufficient to pay off your 401(k) loan if you can. Maybe you can take out a home equity loan? You can also ask your bank about unsecured loans. You should also check the rules for your new employer's 401(k), if you're rolling over your 401(k). There's a small possibility that you could take out another loan right now and apply it to the previous loan balance. Or if you need to wait, you could use it to help pay off any temporary loans that were needed to avoid the distribution penalty." }, { "docid": "120706", "title": "", "text": "I like the way you framed this question. There is no single right answer for what to do with your savings, but there are some choices that are wrong in the sense that they are dominated by other choices you could make. Of the choices you listed, there are two that fall into that category. The ones that seem like a bad idea to me are: Putting it into your Roth 401(k). You can't do this directly anyhow, but you could do it indirectly by increasing your contributions and using the growth fund to cover the hole in your budget, but that's a lot of work for a relatively small gain. You would essentially be exchanging one long-term investment for another long-term investment. You would pay capital gains taxes on the investment when you sell it today, in order to not pay taxes on its earnings when you eventually withdraw it. There is some benefit there, but it's a long way off, not that large, and probably not worth the effort. Things that might change your mind: If your 401(k) was a traditional 401(k) (paying tax at capital gains rate today to get a deduction at your normal income rate is likely to be a win). You're not contributing enough to get the full company match (always try to get that match if you can). Putting it into your emergency fund. Once again, you are likely to pay capital gains tax if you do this, and you will be putting it into an investment that is likely to get a lower return than your current one. It isn't really necessary to incur these costs, since if you encounter an emergency that you can't cover with your existing emergency fund, you could always liquidate the growth fund then, when you know you need it. Now, a growth fund is going to be more volatile than what you would normally want for an emergency fund, but the risk isn't that bad, if you think about it. Say your emergency comes up and you find that the growth fund is down 20% (which would be a pretty horrible run). That's $600 less that you have to deal with the situation. Keep in mind that you already have $2000 (and building) in your current emergency fund. Is that $600 going to make the difference between meeting the need and not? It's not likely. Better to leave the investment where it is and keep building your emergency fund week by week. Things that might change your mind: Your level of risk aversion (if having that money in a more risky investment is keeping you up at night, move it). You face significant job uncertainty (if you have reason to think your job is at risk, it might be a good idea to top off that emergency fund sooner rather than later.) Your other two choices both seem like solid options under the right circumstances. If it were me, I'd leave the investment in place rather than use it to pay off the student loan. The investment is likely (though of course not guaranteed) to earn more than the interest rate even on the highest-rate loan, especially when you consider that the interest on the student loan is probably tax deductible. Moreover, the size of the investment isn't enough to fully repay the loan, so putting it toward the loan won't even improve your cash flow for some time to come. However, there is always a chance that the investment will perform poorly and some people prefer the guaranteed return from paying off the loan. It depends on your personal risk tolerance. The one thing I would recommend is to think of putting the money toward the loan not as a debt repayment, but as a fixed-income investment with a yield equal to your loan's interest rate. If you would still consider buying it then, then go ahead. If not, then stick with what you've got. In my experience people get way too emotional about debt; try to take that emotion out of your decision making if you can." }, { "docid": "79363", "title": "", "text": "Mathwise, I absolutely agree with the other answers. No contest, you should keep getting the match. But, just for completeness, I'll give a contrarian opinion that is generally not very popular, but does have some merit. If you can focus on just one main financial goal at a time, and throw every extra dollar you have at that one focus (i.e., getting out of debt, in your case), you will make better progress than if you're trying to do too many things at once. Also, there something incredibly freeing about being out of debt that has other beneficial impacts on your life. So, if you can bring a lot of focus to the credit card debt and get it paid off quickly, it may be worth deferring the 401(k) investing long enough to do that, even though it doesn't make as much mathematical sense. (This is essentially what Dave Ramsey teaches, BTW.)" } ]

[ { "docid": "353625", "title": "", "text": "\"For easy math, say you are in the 25% tax bracket. A thousand deposited dollars is $750 out of your pocket, but $2000 after the match. Now, you say you want to take the $750 and pay down the card. If you wait a year (at 20%) you'll owe $900, but have access to borrow a full $1000, at a low rate, 4% or so. The payment is less than $19/mo for 5 years. So long as one is comfortable juggling their debt a bit, the impact of a fully matched 401(k) cannot be beat. Keep in mind, this is a different story than those who just say \"\"don't take a 401(k) loan.\"\" Here, it's the loan that offers you the chance to fund the account. If you are let go, and withdraw the money, even at the 25% rate, you net $1500 less the $200 penalty, or $1300 compared to the $750 you are out of pocket. If you don't want to take the loan, you're still ahead so long as you are able to pay the cards over a reasonable time. I'll admit, a 20% card paid over 10+ years can still trash a 100% return. This is why I add the 401(k) loan to the mix. The question for you - jldugger - is how tight is the budget? And how much is the match? Is it dollar for dollar on first X%?\"" } ]

[ { "docid": "38532", "title": "", "text": "\"Your contribution limit to a 401(k) is $18,000. Your employer is allowed to contribute to your 401(k), usually a \"\"matching contribution\"\". That matching contribution comes from your employer, so is not subject to your personal contribution limit. A contribution to a regular 401(k) is typically made with pre-tax money (i.e. you don't pay payroll taxes on the money you contribute) so you pay less taxes for the current tax year. However when you retire and you take money out, you pay taxes on the money you take out. On one hand, your tax rate may be lower when you have retired, but on the other hand, if your investments have appreciated over time, the total amount of tax you pay would be higher. If your company offers a Roth 401(k) plan, you can contribute $18,000 of after tax money. This way you pay the tax on the $18,000 today, as you would if you did not put the money in the 401(k), but when you take the money out at retirement, you would not have to pay tax. In my opinion, that serves as a way to pay effectively more money into your 401(k). Some firms put vesting provisions on the amount that they match in your 401(k), e.g. 4 years at 25% per year. So you have to work 1 full year to be entitled to 25% of their matching contribution, 2 years for 50%, and 4 years to receive all of it. Check your company's Summary Plan Description of the 401(k) to be sure. You are not allowed to invest pre-tax money into a Traditional IRA if you are already contributing to a 401(k) plan and have reached the income limits ($62,000 AGI for single head of household). You are allowed to contribute post-tax money to a Traditional IRA plan if you have already contributed to a 401(k), which you can then Roll-over into a Roth IRA (look up 'backdoor IRA'). The IRA contribution limit applies to all IRA accounts over that calendar year. You could put some money in a traditional IRA, a Roth IRA, another traditional IRA, etc. so long as the total amount is not more than the contribution limit. This gives you an upper limit of 5.5k + 18k = 23.5 investments in retirement accounts. Note however, once you reach age 50, these limits increase to 6.5k (IRA) + 24k (401(k)). They also are adjusted periodically with the rate of inflation. The following approach may be more efficient for building wealth: This ordering is the subject of debate and people have different opinions. There is a separate discussion of these priorities here: Best way to start investing, for a young person just starting their career? Note however, a 401(k) loan becomes payable if you leave your company, and if not repaid, is an unauthorised distribution from your 401k (and therefore subject to an additional 10% tax penalty). You should also be careful putting money into an IRA, as you will be subject to an additional 10% tax penalty if you take out the money (distribution) before retirement, unless one of the exceptions defined by the IRA applies (e.g. $10,000 for first time home purchase), which could wipe out more than any gains you made by putting it in there in the first place. Your specific circumstances may vary, so this approach may not be best for you. A registered financial advisor may be able to help - ensure they are legitimate: https://adviserinfo.sec.gov\"" }, { "docid": "412", "title": "", "text": "The details of the 401(k) are critical to the decision. A high cost (the expenses charged within the) 401(k) - I would deposit only to the match, and I'd be sure to get the entire match offered. In which case, that $3000 might be good to have available if you start out with a tight budget. Low cost 401(k) w/match - a no-brainer, deposit what you can afford. Roth 401(k) w/match - same rules for expenses apply, with the added note to use Roth when getting started and in a lower bracket. Yes, it makes sense to have both. You should note, depositing to the Roth now is riskless. The account, not the investment. If you decide next year you didn't want it, you can withdraw the deposit with no penalty or tax. Edit to respond to updated question - there are two pieces to the Roth deposit issue. The deposit itself, which puts the $3000 earned income into tax sheltered account, and the choice to invest. These two are sequential and you can take your time in between. I'm not sure what you mean by the dividend timing. In an IRA or 401(k) the dividend isn't taxed, so it's a non-issue. In a cash account, you might quickly have a small tax issue, but this doesn't come into the picture in the tax deferred accounts." }, { "docid": "19272", "title": "", "text": "\"Years ago, a coworker bragged to me how his \"\"tax guy\"\" got him a huge refund. I told him my goal was to owe a couple thousand dollars, and that I'm glad I didn't have his guy. In the end, your return should reflect the truth, and a good tax guy will be little better than good tax software. The bottom line is that a refund is money you lend the government, interest free. If you can owe a bit of money but avoid paying a penalty, you'll have gotten a free loan from Uncle Sam. Given the fact that most (it seems that way, someone tell me if I'm wrong) families carry some balance on their credit cards, they are paying out 12% or more on their highest interest debt. Lending the government even $1000 for the year comes at a cost, if you file in time to get your refund by the end of March, that's an average 9 months you are out your money. 12%/yr is $90. Scale that up to $3000, the average refund, and the max 24% rate I've seen, $540 lost. Better to adjust your withholding, and get the extra money each paycheck to pay off other debt. Obviously, for those with no debt, their cost is minimal, perhaps 1%, but still better in your pocket for the year. If you pay in this money every paycheck, only to feel good getting it back every March or April, while paying 18% card interest every month, that's your choice. And Stevej will support that decision, or so it seems. EDIT - The Huffpost article Steve linked titled \"\"Big Tax Refunds Really Are Good\"\" ignores this debt, only focusing on the near zero rate banks offer now. The article listed 8 reasons the author felt this way. By the way, the author is the \"\"Chief Tax Officer, Jackson Hewitt Tax Service Inc\"\" which makes him a bit less than a disinterested third party. And all 8 of his reasons are far from compelling. \"\"In my opinion, getting a $3,000 check is never a bad thing.\"\" This was #1, and by now you know why I disagree. Next, \"\"More than 75 percent of all individual taxpayers get refunds year after year. It has been this way for decades.... It is unlikely that 75 percent of all taxpayers are all making bad financial decisions every year.\"\" That's enough. Rhetorical nonsense. Read the rest for yourself and decide if the next 6 reasons are any more compelling. Keep in mind, sellers of tax software or services have backed themselves into a corner with the \"\"largest refund\"\" claims. I'm sympathetic to the fact that \"\"we'll shoot for no refund at all, in fact, our goal is for you to owe just $100\"\" will not be their next campaign. EDIT 2 - I gave this more thought as I started to write a near 1000 word post on this topic. I came to find that 1 in 4 employees did not deposit enough in their 401(k) to capture the full match. This is the highest lost opportunity as the potential return is an instant 100% for matched deposits. Again, it's easy to dismiss the near zero bank rates, but that's not the alternative best use for the money.\"" }, { "docid": "406561", "title": "", "text": "\"The limit on SEP IRA is 25%, not 20%. If you're self-employed (filing on Schedule C), then it's taken on net earning, which in your example would be 25% of $90,000. (https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people) JoeTaxpayer is correct as regards the 401(k) limits. The elective deferrals are per person - That's a cap in sum across multiple plans and across both traditional and Roth if you have those. In general, it's actually across other retirement plan types too - See below. If you're self-employed and set-up a 401(k) for your own business, the elective deferral is still aggregated with any other 401(k) plans in which you participate that year, but you can still make the employer contribution on your own plan. This IRS page is current a pretty good one on this topic: https://www.irs.gov/retirement-plans/one-participant-401k-plans Key quotes that are relevant: The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both: •Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit: ◦$18,000 in 2015 and 2016, or $24,000 in 2015 and 2016 if age 50 or over; plus •Employer nonelective contributions up to: ◦25% of compensation as defined by the plan, or ◦for self-employed individuals, see discussion below It continues with this example: The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $18,000 in 2015 and 2016. Although a plan's terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans. EXAMPLE Ben, age 51, earned $50,000 in W-2 wages from his S Corporation in 2015. He deferred $18,000 in regular elective deferrals plus $6,000 in catch-up contributions to the 401(k) plan. His business contributed 25% of his compensation to the plan, $12,500. Total contributions to the plan for 2015 were $36,500. This is the maximum that can be contributed to the plan for Ben for 2015. A business owner who is also employed by a second company and participating in its 401(k) plan should bear in mind that his limits on elective deferrals are by person, not by plan. He must consider the limit for all elective deferrals he makes during a year. Notice in the example that Ben contributed more that than his elective limit in total (his was $24,000 in the example because he was old enough for the $6,000 catch-up in addition to the $18,000 that applies to everyone else). He did this by declaring an employer contribution of $12,500, which was limited by his compensation but not by any of his elective contributions. Beyond the 401(k), keep in mind that elective contributions are capped across different types of retirement plans as well, so if you have a SEP IRA and a solo 401(k), your total contributions across those plans are also capped. That's also mentioned in the example. Now to the extent that you're considering different types of plans, that's a whole question in itself - One that might be worth consulting a dedicated tax advisor. A few things to consider (not extensive list): As for payroll / self-employment tax: Looks like you will end up paying Medicare, including the new \"\"Additional Medicare\"\" tax that came with the ACA, but not SS: If you have wages, as well as self-employment earnings, the tax on your wages is paid first. But this rule only applies if your total earnings are more than $118,500. For example, if you will have $30,000 in wages and $40,000 in selfemployment income in 2016, you will pay the appropriate Social Security taxes on both your wages and business earnings. In 2016, however, if your wages are $78,000, and you have $40,700 in net earnings from a business, you don’t pay dual Social Security taxes on earnings more than $118,500. Your employer will withhold 7.65 percent in Social Security and Medicare taxes on your $78,000 in earnings. You must pay 15.3 percent in Social Security and Medicare taxes on your first $40,500 in self-employment earnings and 2.9 percent in Medicare tax on the remaining $200 in net earnings. https://www.ssa.gov/pubs/EN-05-10022.pdf Other good IRS resources:\"" }, { "docid": "551145", "title": "", "text": "None of your options seem mutually exclusive. Ordinarily nothing stops you from participating in your 401(k), opening an IRA, qualifying for your company's pension, and paying off your debts except your ability to pay for all this stuff. Moreover, you can open an IRA anywhere (scottrade, vanguard, etrade, etc.) and freely invest in vanguard mutual funds as well as those of other companies...you aren't normally locked in to the funds of your IRA provider. Consider a traditional IRA. To me your marginal tax rate of 25% doesn't seem that great. If I were in your shoes I would be more likely to contribute to a traditional IRA instead of a Roth. This will save you taxes today and you can put the extra 25% of $5,500 toward your loans. Yes, you will be taxed on that money when you retire, but I think it's likely your rate will be lower than 25%. Moreover, when you are retired you will already own a house and have paid off all your debt, hopefully. You kind of need money now. Between your current tax rate and your need for money now, I'd say a traditional makes good sense. Buy whatever funds you want. If you want a single, cheap, whole-market fund just buy VTSAX. You will need a minimum of $10K to get in, so until then you can buy the ETF version, VTI. Personally I would contribute enough to your 401(k) to get the match and anything else to an IRA (usually they have more and better investment options). If you max that out, go back to the 401(k). Your investment mix isn't that important. Recent research into target date funds puts them in a poor light. Since there isn't a good benchmark for a target date fund, the managers tend to buy whatever they feel like and it may not be what you would prefer if you were choosing. However, the fund you mention has a pretty low expense ratio and the difference between that and your own allocation to an equity index fund or a blend of equity and bond funds is small in expectation. Plus, you can change your allocation whenever you want. You are not locked in. The investment options you mention are reasonable enough that the difference between portfolios is not critical. More important is optimizing your taxes and paying off your debt in the right order. Your interest rates matter more than term does. Paying off debt with more debt will help you if the new debt has a lower interest rate and it won't if it has a higher interest rate. Normally speaking, longer term debt has a higher interest rate. For that reason shorter term debt, if you can afford it, is generally better. Be cold and calculating with your debt. Always pay off highest interest rate debt first and never pay off cheap debt with expensive debt. If the 25 year debt option is lower than all your other interest rates and will allow you to pay off higher interest rate debt faster, it's a good idea. Otherwise it most likely is not. Do not make debt decisions for psychological reasons (e.g., simplicity). Instead, always chose the option that maximizes your ultimate wealth." }, { "docid": "352908", "title": "", "text": "You might also want to talk directly to a bank. If your credit report is clean, they may have some discretion in making the loan. Note - the 'normal' fully qualified loan has two thresholds, 28% (of monthly income) for housing costs, 36% for all debt servicing. A personal, disclosed loan from a friend/family which is not secured against the house, would count as part of the other debt, as would a credit card. While I don't recommend using a credit card for this purpose, the debt fits in that 28-36 gap. As Kevin points out below, not all paths are equally advisable. Nor are rules of thumb always true. Not having the OP's full details, income, assets, price of house, etc, this is just a list of things to consider. The use of a 401(k) loan in the US can be a great idea for some, bad mistake for others. This format doesn't make it easy to go into great detail, and I'm sure the 401(k) loan issue has been asked and answered in other questions. With respect to Kevin, if he wrote 'usually', I'd agree, but never say 'never.'" }, { "docid": "52438", "title": "", "text": "\"Highly Compensated Employee Rules Aim to Make 401k's Fair would be the piece that I suspect you are missing here. I remember hearing of this rule when I worked in the US and can understand why it exists. A key quote from the article: You wouldn't think the prospect of getting money from an employer would be nerve-wracking. But those jittery co-workers are highly compensated employees (HCEs) concerned that they will receive a refund of excess 401k contributions because their plan failed its discrimination test. A refund means they will owe more income tax for the current tax year. Geersk (a pseudonym), who is also an HCE, is in information services and manages the computers that process his firm's 401k plan. 401(k) - Wikipedia reference on this: To help ensure that companies extend their 401(k) plans to low-paid employees, an IRS rule limits the maximum deferral by the company's \"\"highly compensated\"\" employees, based on the average deferral by the company's non-highly compensated employees. If the less compensated employees are allowed to save more for retirement, then the executives are allowed to save more for retirement. This provision is enforced via \"\"non-discrimination testing\"\". Non-discrimination testing takes the deferral rates of \"\"highly compensated employees\"\" (HCEs) and compares them to non-highly compensated employees (NHCEs). An HCE in 2008 is defined as an employee with compensation of greater than $100,000 in 2007 or an employee that owned more than 5% of the business at any time during the year or the preceding year.[13] In addition to the $100,000 limit for determining HCEs, employers can elect to limit the top-paid group of employees to the top 20% of employees ranked by compensation.[13] That is for plans whose first day of the plan year is in calendar year 2007, we look to each employee's prior year gross compensation (also known as 'Medicare wages') and those who earned more than $100,000 are HCEs. Most testing done now in 2009 will be for the 2008 plan year and compare employees' 2007 plan year gross compensation to the $100,000 threshold for 2007 to determine who is HCE and who is a NHCE. The threshold was $110,000 in 2010 and it did not change for 2011. The average deferral percentage (ADP) of all HCEs, as a group, can be no more than 2 percentage points greater (or 125% of, whichever is more) than the NHCEs, as a group. This is known as the ADP test. When a plan fails the ADP test, it essentially has two options to come into compliance. It can have a return of excess done to the HCEs to bring their ADP to a lower, passing, level. Or it can process a \"\"qualified non-elective contribution\"\" (QNEC) to some or all of the NHCEs to raise their ADP to a passing level. The return of excess requires the plan to send a taxable distribution to the HCEs (or reclassify regular contributions as catch-up contributions subject to the annual catch-up limit for those HCEs over 50) by March 15 of the year following the failed test. A QNEC must be an immediately vested contribution. The annual contribution percentage (ACP) test is similarly performed but also includes employer matching and employee after-tax contributions. ACPs do not use the simple 2% threshold, and include other provisions which can allow the plan to \"\"shift\"\" excess passing rates from the ADP over to the ACP. A failed ACP test is likewise addressed through return of excess, or a QNEC or qualified match (QMAC). There are a number of \"\"safe harbor\"\" provisions that can allow a company to be exempted from the ADP test. This includes making a \"\"safe harbor\"\" employer contribution to employees' accounts. Safe harbor contributions can take the form of a match (generally totaling 4% of pay) or a non-elective profit sharing (totaling 3% of pay). Safe harbor 401(k) contributions must be 100% vested at all times with immediate eligibility for employees. There are other administrative requirements within the safe harbor, such as requiring the employer to notify all eligible employees of the opportunity to participate in the plan, and restricting the employer from suspending participants for any reason other than due to a hardship withdrawal.\"" }, { "docid": "147889", "title": "", "text": "With a match, the 401(k) becomes the priority, up to that match, often ahead of other high interest debt. Without the match, the analysis is more about the cost within the 401(k). The 401(k) is a tax deferred account (let's not go on a tangent to Roth 401(k)) so ideally, you'd be skimming off money at 25% and saving it till you retire, so some of it is taxed at 0, 10, 15%. If the fees in the 401(k) are say 1.5% between the underlying funds and management fee, it doesn't take long to wipe out the potential 10 or 15% you are trying to gain. Yes, there's a risk that cap gain rates go away, but with today's tax law, the long term rate is 15%. So that money put into a long term low cost ETF will have reinvested dividends taxed at 15% and upon sale, a 15% rate on the gains. There are great index ETFs with sub - .1% annual cost. My simple answer is - If the total cost in that 401(k) is .5% or higher, I'd pass. Save the money in an outside account, using IRAs as best you can. (The exact situation needs to be looked at very carefully. In personal finance, there's a lot of 'grey'. For example, a frequent job changer can view the 401(k) as a way of saving pretax, knowing the fee will only last 2 years, and will end with a transfer to the IRA)" }, { "docid": "59327", "title": "", "text": "Every $1,000 you use to pay off a 26% interest rate card saves you $260 / year. Every $1,000 you use to pay off a 23% interest rate card saves you $230 / year. Every $1,000 you put in a savings account earning ~0.5% interest earns you $5 / year. Having cash on hand is good in case of emergencies, but typically if your debt is on high interest credit cards, you should consider paying off as much of it as possible. In your case you may want to keep only some small amount (maybe $500, maybe $1000, maybe $100) in cash for emergencies. Paying off your high interest debt should be a top priority for you. You may want to look on this site for help with budgeting, also. Typically, being in debt to credit card companies is a sign of living beyond your means. It costs you a lot of money in the long run." }, { "docid": "436331", "title": "", "text": "I suggest rolling it over to the 401(k) with your new employer. Particularly if they match any percentage of your contribution, it would be in your interest to take as much of that money as possible. When it comes to borrowing money from your 401(k), it looks like the issues AbraCadaver mentioned only apply if you don't pay back the money (http://www.kiplinger.com/article/real-estate/T010-C000-S002-borrowing-from-your-retirement-plan-to-buy-a-home.html). The reasonable argument against taking money out of your 401(k) to buy a home is that it leaves a dent in your retirement nest egg (and its earning power) during key earning years. On the plus side for borrowing from your 401(k), it's very low interest--and it's interest you're paying back to yourself over a 5-year period. At its current value, the most you could borrow from your 401(k) is $35K. If you're fortunate in where you live, that could be most or all of the downpayment. In my own experience, my wife borrowed against her 401(k) balance for the earnest money when we purchased a new home. Fortunately for us, an investor snapped up my previous home within 4 days of us listing it, so she was able to pay back her loan in full right away." }, { "docid": "589256", "title": "", "text": "\"For some people, it should be a top priority. For others, there are higher priorities. What it should be for you depends on a number of things, including your overall financial situation (both your current finances and how stable you expect them to be over time), your level of financial \"\"education\"\", the costs of your mortgage, the alternative investments available to you, your investing goals, and your tolerance for risk. Your #1 priority should be to ensure that your basic needs (including making the required monthly payment on your mortgage) are met, both now and in the near future, which includes paying off high-interest (i.e. credit card) debt and building up an emergency fund in a savings or money-market account or some other low-risk and liquid account. If you haven't done those things, do not pass Go, do not collect $200, and do not consider making advance payments on your mortgage. Mason Wheeler's statements that the bank can't take your house if you've paid it off are correct, but it's going to be a long time till you get there and they can take it if you're partway to paying it off early and then something bad happens to you and you start missing payments. (If you're not underwater, you should be able to get some of your money back by selling - possibly at a loss - before it gets to the point of foreclosure, but you'll still have to move, which can be costly and unappealing.) So make sure you've got what you need to handle your basic needs even if you hit a rough patch, and make sure you're not financing the paying off of your house by taking a loan from Visa at 27% annually. Once you've gotten through all of those more-important things, you finally get to decide what else to invest your extra money in. Different investments will provide different rewards, both financial and emotional (and Mason Wheeler has clearly demonstrated that he gets a strong emotional payoff from not having a mortgage, which may or may not be how you feel about it). On the financial side of any potential investment, you'll want to consider things like the expected rate of return, the risk it carries (both on its own and whether it balances out or unbalances the overall risk profile of all your investments in total), its expected costs (including its - and your - tax rate and any preferred tax treatment), and any other potential factors (such as an employer match on 401(k) contributions, which are basically free money to you). Then you weigh the pros and cons (financial and emotional) of each option against your imperfect forecast of what the future holds, take your best guess, and then keep adjusting as you go through life and things change. But I want to come back to one of the factors I mentioned in the first paragraph. Which options you should even be considering is in part influenced by the degree to which you understand your finances and the wide variety of options available to you as well as all the subtleties of how different things can make them more or less advantageous than one another. The fact that you're posting this question here indicates that you're still early in the process of learning those things, and although it's great that you're educating yourself on them (and keep doing it!), it means that you're probably not ready to worry about some of the things other posters have talked about, such as Cost of Capital and ROI. So keep reading blog posts and articles online (there's no shortage of them), and keep developing your understanding of the options available to you and their pros and cons, and wait to tackle the full suite of investment options till you fully understand them. However, there's still the question of what to do between now and then. Paying the mortgage down isn't an unreasonable thing for you to do for now, since it's a guaranteed rate of return that also provides some degree of emotional payoff. But I'd say the higher priority should be getting money into a tax-advantaged retirement account (a 401(k)/403(b)/IRA), because the tax-advantaged growth of those accounts makes their long-term return far greater than whatever you're paying on your mortgage, and they provide more benefit (tax-advantaged growth) the earlier you invest in them, so doing that now instead of paying off the house quicker is probably going to be better for you financially, even if it doesn't provide the emotional payoff. If your employer will match your contributions into that account, then it's a no-brainer, but it's probably still a better idea than the mortgage unless the emotional payoff is very very important to you or unless you're nearing retirement age (so the tax-free growth period is small). If you're not sure what to invest in, just choose something that's broad-market and low-cost (total-market index funds are a great choice), and you can diversify into other things as you gain more savvy as an investor; what matters more is that you start investing in something now, not exactly what it is. Disclaimer: I'm not a personal advisor, and this does not constitute investing advice. Understand your choices and make your own decisions.\"" }, { "docid": "301194", "title": "", "text": "\"I assume you get your information from somewhere where they don't report the truth. I'm sorry if mentioning Fox News offended you, it was not my intention. But the way the question is phrased suggests that you know nothing about what \"\"pension\"\" means. So let me explain. 403(b) is not a pension account. Pension account is generally a \"\"defined benefit\"\" account, whereas 403(b)/401(k) and similar - are \"\"defined contribution\"\" accounts. The difference is significant: for pensions, the employer committed on certain amount to be paid out at retirement (the defined benefit) regardless of how much the employee/employer contributed or how well the account performed. This makes such an arrangement a liability. An obligation to pay. In other words - debt. Defined contribution on the other hand doesn't create such a liability, since the employer is only committed for the match, which is paid currently. What happens to your account after the employer deposited the defined contribution (the match) - is your problem. You manage it to the best of your abilities and whatever you have there when you retire - is yours, the employer doesn't owe you anything. Here's the problem with pensions: many employers promised the defined benefit, but didn't do anything about actually having money to pay. As mentioned, such a pension is essentially a debt, and the retiree is a debt holder. What happens when employer cannot pay its debts? Employer goes bankrupt. And when bankrupt - debtors are paid only part of what they were owed, and that includes the retirees. There's no-one raiding pensions. No-one goes to the bank with a gun and demands \"\"give me the pension money\"\". What happened was that the employers just didn't fund the pensions. They promised to pay - but didn't set aside any money, or set aside not enough. Instead, they spent it on something else, and when the time came that the retirees wanted their money - they didn't have any. That's what happened in Detroit, and in many other places. 403(b) is in fact the solution to this problem. Instead of defined benefit - the employers commit on defined contribution, and after that - it's your problem, not theirs, to have enough when you're retired.\"" }, { "docid": "345895", "title": "", "text": "\"I have never double-answered till now. This loan can't be taken out of context. By the way, how much is it? What rate? \"\"Debt bad.\"\" Really? Line the debt up. This is the highest debt you have. But, you work for a company that offers a generous match, i.e. the match to your 401(k). Now, it's a choice, pay off 6% debt or deposit that money to get an immediate 100% return. Your question has validity. In the end, we can tell you when to pay off the debt. After - The issue is that you are quoting a third party without having the discussion or ever being privy to it. In court, this is called 'hearsay.' The best we can do is offer both sides of the issue and priority for the payments. Welcome to Money.SE, nice first question.\"" }, { "docid": "160780", "title": "", "text": "\"A fascinating view on this. The math of a 10% deposit and projected 10% return lead to an inevitable point when the account is worth 10X your income (nice) and the deposit, 10% of income only represents 1% of the account balance. The use of an IRA is neither here nor there, as your proposed deposit is still just 1% of your retirement account total. Pay off debt? For one with this level of savings, it should be assumed you aren't carrying any high interest debt. It really depends on your age and retirement budget. Our \"\"number\"\" was 12X our final income, so at 10X, we were still saving. For you, if you project hitting your number soon enough, I'd still deposit to the match, but maybe no more. It might be time to just enjoy the extra money. For others, their goal may be much higher and those extra years deposits are still needed. I'd play with a spreadsheet and see the impact of reduced retirement account deposits. Note - the question asks about funding the 401(k) vs paying down debt. I'd always advise to deposit to the match, but beyond that, one should focus on their high interest debt, especially by their 50's.\"" }, { "docid": "534837", "title": "", "text": "One should fund a 401(k) or matched retirement account up to the match, even if you have other debt. Long term, you will come out ahead, but you must be disciplined in making the payments. If one wants to point out the risk in a 401(k), I'd suggest the money need not be invested in stocks, there's always a short term safe option." }, { "docid": "242529", "title": "", "text": "\"IRA is not always an option. There are income limits for IRA, that leave many employees (those with the higher salaries, but not exactly the \"\"riches\"\") out of it. Same for Roth IRA, though the MAGI limits are much higher. Also, the contribution limits on IRA are more than three times less than those on 401K (5K vs 16.5K). Per IRS Publication 590 (page 12) the income limit (AGI) goes away if the employer doesn't provide a 401(k) or similar plan (not if you don't participate, but if the employer doesn't provide). But deduction limits don't change, it's up to $5K (or 100% of the compensation, the lesser) even if you're not covered by the employers' pension plan. Employers are allowed to match the employees' 401K contributions, and this comes on top of the limits (i.e.: with the employers' matching, the employees can save more for their retirement and still have the tax benefits). That's the law. The companies offer the option of 401K because it allows employee retention (I would not work for a company without 401K), and it is part of the overall benefit package - it's an expense for the employer (including the matching). Why would the employer offer matching instead of a raise? Not all employers do. My current employer, for example, pays above average salaries, but doesn't offer 401K match. Some companies have very tight control over the 401K accounts, and until not so long ago were allowed to force employees to invest their retirement savings in the company (see the Enron affair). It is no longer an option, but by now 401K is a standard in some industries, and employers cannot allow themselves not to offer it (see my position above).\"" }, { "docid": "457945", "title": "", "text": "Depends upon the debt cost. Assuming it is consumer debt or credit card debt, it is better to pay that off first, it is the best investment you can make. Let's say it is credit card debt. If you pay 18% interst and have for example a $1,000 amount. If you pay it off you save $180 in interest ($1,000 times 18%). You would have to earn 18% on 1,000 to generate $180 if it was in aninvestment. Here is a link discussing ways of reducing debt Once you have debt paid off you have the cashflow to begin building wealth. The key is in the cashflow." }, { "docid": "499606", "title": "", "text": "To answer your question: As far as what's available in addition to your 401(k) at work (most financial types will say to contribute up to the match first), you may qualify for a Roth IRA (qualification is based on income), if not, then you may have to go with a Traditional IRA. You and your husband can each have one and contribute up to the limit each year. After that, you could get just a straight up mutual fund, and/or contribute up to limit on your 401(k). My two cents: This may sound counter-intuitive (and I'm sure some folks will disagree), but instead of contributing to your 401(k) now, take whatever that amount is, and use it to pay extra on the car loan. Also take the extra being paid on the mortgage and pay it on the car loan too. Once the car loan is paid off, then set aside 15% of your gross income and use that amount to start your retirement investing. Any additional money beyond this can then go into the mortgage. Once it's paid off, then you can take the extra you were paying, plus the mortgage and invest that amount into mutual funds. You may want to check out Chris Hogan's Retire Inspired book or podcast as well." }, { "docid": "461933", "title": "", "text": "\"So you are paying taxes on your contributions regardless, the timing is just different. I am failing to see why would a person get an IRA, instead of just putting the same amount of money into a mutual fund (like Vanguard) or something like that. What am I missing? You are failing to consider the time value of money. Getting $1 now is more valuable to you than a promise to get $1 in a year, even though the nominal amount is the same. With a certain amount of principal now, you can invest it and it will (likely) grow into a bigger amount of money (principal + earnings) at a later time, and we can consider the two to have approximately equivalent value (the principal now has the same value as the principal + earnings later). With pre-tax money in Traditional IRA, the principal + earnings are taxed once at the time of withdrawal. Assuming the same flat rate of tax at contribution and withdrawal, this is equivalent to Roth IRA, where the principal is taxed at the time of contribution, because the principal now has the same value as the principal + earnings later, so the same rate of tax on the two have the same value of tax, even though when you look at nominal amounts, it might seem you are paying a lot less tax with Roth IRA (since the earnings are never \"\"taxed\"\"). With actual numbers, if we take a $1000 pre-tax contribution to Traditional IRA, it grows at 5% for 10 years, and a 25% flat rate tax, we are left with $1000 * 1.05^10 * 0.75 = $1221.67. With the same $1000 pre-tax contribution (so after 25% tax it's a $750 after-tax contribution) to a Roth IRA, growing at the same 5% for 10 years, and no tax at withdrawal, we are left with $1000 * 0.75 * 1.05^10 = $1221.67. You can see they are equivalent even though the nominal amount of tax is different (the lower amount of tax paid now is equivalent to the bigger amount of tax later). With a taxable investment which you will not buy and sell until you take it out, you contribute with after-tax money, and when you take it out, the \"\"earnings\"\" portion is subject to capital-gains tax. But remember that the principal + earnings later is equivalent to the principal now, which is already all taxed once, and if we tax the \"\"earnings\"\" portion later, that is effectively taxing a portion of the money again. Another way to look at it is the contribution is just like the Roth IRA, but the withdrawal is worse because you have to pay capital-gains tax instead of no tax. You can take the same numbers as for the Roth IRA, $1000 * 0.75 * 1.05^10 = $1221.67, but where the $1221.67 - $750 = $471.67 is \"\"earnings\"\" and is taxed again at, say, a 15% capital-gains rate, so you lose another $70.75 in tax and are left with $1150.92. You would need a capital-gains tax rate of 0% to match the advantage of the pre-tax Traditional IRA or Roth IRA. After-tax money in Traditional IRA has a similar problem -- the contribution is after tax, but after it grows into principal + earnings, the \"\"earnings\"\" part is taxed again, except it is worse than the capital-gains case because it is taxed as regular income. Like above, you can take the same numbers as for the Roth IRA, $1000 * 0.75 * 1.05^10 = $1221.67, but where the $471.67 \"\"earnings\"\" is taxed again at 25%, so you lose another $117.92 in tax and are left with $1103.75. So although the nominal amount of tax paid is the same as for pre-tax money in Traditional IRA, it ends up being a lot worse. (Everything I said above about pre-tax money in Traditional IRA, after-tax money in Traditional IRA, and Roth IRA, also applies to pre-tax money in Traditional 401(k), after-tax money in Traditional 401(k), and Roth 401(k), respectively.) Regarding the question you raise in the title of your question, why someone would get contribute to a Traditional IRA if they already have a 401(k), the answer is, mostly, they wouldn't. First, note that if you merely have a 401(k) account but neither you nor your employer contributes to it during the year, then that doesn't prevent you from deducting Traditional IRA contributions for that year, so basically you can contribute to one or the other; so if you only want to contribute below the IRA contribution limit, and don't need the bigger 401(k) contribution limit, and the IRA's investment options are more attractive to you than your 401(k)'s, then it might make sense for you to contribute to only Traditional IRA. If you or your employer is already contributing to your 401(k) during the year, then you cannot deduct your Traditional IRA contributions unless your income is very low, and if your income is really that low, you are in such a low tax bracket that Roth IRA may be more advantageous for you. If you make a Traditional IRA contribution but cannot deduct it, it is a non-deductible Traditional IRA contribution, i.e. it becomes after-tax money in a Traditional IRA, which as I showed in the section above has much worse tax situation in the long run because its earnings are pre-tax and thus taxed again. However, there is one good use for non-deductible Traditional IRA contributions, and that is as one step in a \"\"backdoor Roth IRA contribution\"\". Basically, there is an income limit for being able to make Roth IRA contributions, but there is no income limit for being able to make Traditional IRA contributions or for being able to convert money from Traditional IRA to Roth IRA. So what you can do is make a (non-deductible) Traditional IRA contribution, and then immediately convert it to Roth IRA, and if you did not previously have any pre-tax money in Traditional IRAs, this achieves the same as a regular Roth IRA contribution, with the same tax treatment, but you can do it at any income level.\"" } ]

[ { "docid": "293531", "title": "", "text": "\"Agree with Randy, if debt and debt reduction was all about math, nobody would be in debt. It is an emotional game. If you've taken care of the reasons you're in debt, changed your behaviors, then start focusing on the math of getting it done faster. Otherwise, if you don't have a handle on the behaviors that got you there, you're just going to get more rope to hang yourself with. I.e., makes sense to take a low-interest home equity loan to pay off high-interest credit card debt, but more likely than not, you'll just re-rack up the debt on the cards because you never fixed the behavior that put you into debt. Same thing here, if you opt not to contribute to \"\"pay off the cards\"\" without fixing the debt-accumulating behaviors, what you're going to do is stay in debt AND not provide for retirement. Take the match until you're certain you have your debt accumulation habits in check.\"" } ]

[ { "docid": "531051", "title": "", "text": "I completely agree with Pete that a 401(k) loan is not the answer, but I have an alternate proposal: Reduce your 401(k) contribution down to the 4% that you get a match on. If you are cash poor now and have debts to be cleaned up, those need to be addressed before retirement savings. You'll have plenty of time to make up the lost savings after you get the debts paid off. If your company matches 50% (meaning you have to contribute 8% to get the 4% match), then consider temporarily stopping your 401(k) altogether. A 100% match is very hard to give up, but a 50% match is less difficult. You have plenty of years left ahead of you to make up the lost match. Plus, the pain of knowing you're leaving money on the table will incentivize you to get the loans paid as quickly as possible. It seems to me that I would be reducing middle to high interest debt while also saving myself $150 per month. No, you'd be deferring $150 per month for an additional two years, and not reducing debt at all, just moving it to a different lender. Interest rate is not your problem. Right now you're paying less than $30 per month in interest on these 3 loans and about $270 in principal, and at the current rate should have them paid off in about 2 years. You're wanting to extend these loans to 4 years by borrowing from your retirement savings. I would buckle down, reduce expenses wherever possible (cable? cell phone? coffee? movies? restaurants?) until you get these debts paid off. You make $70,000 per year, or almost $6,000 per month. I bet if you try hard enough you can come up with $1,100 fairly quickly. Then the next $1,200 should come twice as fast. Then attack the next $4,000. (You can argue whether the $1,200 should come first because of the interest rate, but in the end it doesn't matter - either one should be paid off very quickly, so the interest saved is negligible) Maybe you can get one of them paid off, get yourself some breathing room, then loosen up a little bit, but extending the pain for an additional two years is not wise. Some more drastic measures:" }, { "docid": "301616", "title": "", "text": "The managers of the 401(k) have to make their money somewhere. Either they'll make it from the employer, or from the employees via the expense ratio. If it's the employer setting up the plan, I can bet whose interest he'll be looking after. Regarding your last comment, I'd recommend looking outside your 401(k) for investing. If you get free money from your employer for contributing to your 401(k), that's a plus, but I wouldn't -- actually, I don't -- contribute anything beyond the match. I pay my taxes and I'm done with it." }, { "docid": "103093", "title": "", "text": "Staying with your numbers - a 7% long term return will have a tax of 15% (today's long term cap gain tax) resulting in a post tax of 5.95%. On the other hand, even if the student loan interest remains deductible, it's subject to phaseout and a really successful grad will quickly lose the deduction. There's a similar debate regarding mortgage debt. When I've commented on my 3.5% mortgage costing 2.5% post tax, there's no consensus agreeing that this loan should remain as long as possible in favor of investing in the market for its long term growth. And in this case the advantage is a full 3.45%/yr. While I've made my decision, Ben's points remain, the market return isn't guaranteed, while that monthly loan payment is fixed and due each month. In the big picture, I'd prioritize to make deposits to the 401(k) up to the match, if offered, pay down any higher interest debt such as credit cards, build an emergency account, and then make extra payments to the student loan. Keep in mind, also - if buying a house is an important goal, the savings toward the downpayment might take priority. Student Loans and Your First Mortgage is an article I wrote which describes the interaction between that loan debt and your mortgage borrowing ability. It's worth understanding the process as paying off the S/L too soon can impact that home purchase." }, { "docid": "499606", "title": "", "text": "To answer your question: As far as what's available in addition to your 401(k) at work (most financial types will say to contribute up to the match first), you may qualify for a Roth IRA (qualification is based on income), if not, then you may have to go with a Traditional IRA. You and your husband can each have one and contribute up to the limit each year. After that, you could get just a straight up mutual fund, and/or contribute up to limit on your 401(k). My two cents: This may sound counter-intuitive (and I'm sure some folks will disagree), but instead of contributing to your 401(k) now, take whatever that amount is, and use it to pay extra on the car loan. Also take the extra being paid on the mortgage and pay it on the car loan too. Once the car loan is paid off, then set aside 15% of your gross income and use that amount to start your retirement investing. Any additional money beyond this can then go into the mortgage. Once it's paid off, then you can take the extra you were paying, plus the mortgage and invest that amount into mutual funds. You may want to check out Chris Hogan's Retire Inspired book or podcast as well." }, { "docid": "219907", "title": "", "text": "I'll respect the mod's suggestion. I'd answer with a warning. The concept of 401(k) pretax saving is to save at a high rate, while working, and withdraw at a lower rate. An annual expense pushing 1% or higher is likely to negate the benefit of the account over time. If your employer offers the Roth 401(k), I'd suggest using that for your deposits, and only up to the match. Then invest outside the 401(k). In the 25% bracket, it's good to have a mix of both pre and post tax retirement money." }, { "docid": "526383", "title": "", "text": "First off, great job on your finances so far. You are off on the right foot and have some sense of planning for the future. Also, it is a great question. First, I agree with @littleadv. Take advantage of your employer match. Do not drop your 401(k) contributions below that. Also, good job on putting your contributions into the Roth account. Second, I would ask: Are you out of debt? If not, put all your extra income towards paying off debt, and then you can work your plan. Third, time to do some math. What will your business look like? How much capital would you need to get started? Are there things you can do now on a part-time basis to start this business or prepare you to start the business? Come up with a figure, find some mutual funds that have a low beta, and back out how much money you need to save per month, so you have around that total. Then you have a figure. e.g. Assume you need $20,000, and you find a fund that has done 8% over the past 20 years. Then, you would need to save about $110/month to be ready to go in 10 years, or $273/month to go in about 5 years. (It's a time value of money calculation.) The house is really a long way off, but you could do the same kind of calculation. I feel that you think your income, and possibly locale, will change dramatically over the next few years. It might not be bad to double what you are saving for the business, and designate one half for the house." }, { "docid": "403934", "title": "", "text": "An activity which can help improve your credit score and actually make you money is stoozing. It's a little complicated but can be beneficial to do. Using either a credit card which allows fee free money withdrawals from cashpoints or building up debt using your credit card gives you access to your credit amount. You then use a long term 0% balance transfer card to transfer the debt which you pay off at the minimum rate. It's 0% so no costs are associated except for the initial fee paid for the balance transfer amount. The money that would have been used to pay off the credit amount (or money withdrawn from a cashpoint) can then be deposited in a savings account so you are now earning interest on the credit balance. Continuing to make monthly minimum payments via direct debit will help improve your credit rating and the savings money will earn interest. (it is also available if you suddenly need to pay off the 0% card)" }, { "docid": "457945", "title": "", "text": "Depends upon the debt cost. Assuming it is consumer debt or credit card debt, it is better to pay that off first, it is the best investment you can make. Let's say it is credit card debt. If you pay 18% interst and have for example a $1,000 amount. If you pay it off you save $180 in interest ($1,000 times 18%). You would have to earn 18% on 1,000 to generate $180 if it was in aninvestment. Here is a link discussing ways of reducing debt Once you have debt paid off you have the cashflow to begin building wealth. The key is in the cashflow." }, { "docid": "149004", "title": "", "text": "You should try to take out other loans sufficient to pay off your 401(k) loan if you can. Maybe you can take out a home equity loan? You can also ask your bank about unsecured loans. You should also check the rules for your new employer's 401(k), if you're rolling over your 401(k). There's a small possibility that you could take out another loan right now and apply it to the previous loan balance. Or if you need to wait, you could use it to help pay off any temporary loans that were needed to avoid the distribution penalty." }, { "docid": "379911", "title": "", "text": "\"The error in the example is here: \"\"Now, if you contribute 5% to a Roth 401(k), your employer would match your after-tax 5% contribution. If the tax rate is 25%, that would be 5% of $60,000, which is $3,000. However, that $3,000 is put in to a traditional 401(k), so it is taxed when withdrawn. Assuming the tax rate is still 25% when you withdraw, you are only getting $2,250. Essentially you are giving up $750 of free money in this case.\"\" You set your contribution to Roth 401k as a function of the gross, 80,000. You choose 5% and contribute 4000 Your employer matches 4000. At the end of the year, your taxable income to the IRS is 80000, and you pay 30% or 24000. You have 80K-4K-24K to live on, or 52K If you chose the alternate regular 401k,then you contribute 4K, your income to the IRS is (80-4=) 76k, and you pay 30%, 22.8K in tax. You have 80-4-22.8 or 53.2K to live on. Or, to come at it the other way, you have 4000*30% =1200 extra tax reduction in your income this year. If the extra income in 401k versus extra current year tax in Roth IRA means you have to reduce less, like 2800K to the roth so you maintain a 53.2K lifestyle, then yes, the Roth IRA match is reduced. If you have the cash flow to prepay the current year tax and maximum-match contribution, you will get the full match based on your gross income.\"" }, { "docid": "242529", "title": "", "text": "\"IRA is not always an option. There are income limits for IRA, that leave many employees (those with the higher salaries, but not exactly the \"\"riches\"\") out of it. Same for Roth IRA, though the MAGI limits are much higher. Also, the contribution limits on IRA are more than three times less than those on 401K (5K vs 16.5K). Per IRS Publication 590 (page 12) the income limit (AGI) goes away if the employer doesn't provide a 401(k) or similar plan (not if you don't participate, but if the employer doesn't provide). But deduction limits don't change, it's up to $5K (or 100% of the compensation, the lesser) even if you're not covered by the employers' pension plan. Employers are allowed to match the employees' 401K contributions, and this comes on top of the limits (i.e.: with the employers' matching, the employees can save more for their retirement and still have the tax benefits). That's the law. The companies offer the option of 401K because it allows employee retention (I would not work for a company without 401K), and it is part of the overall benefit package - it's an expense for the employer (including the matching). Why would the employer offer matching instead of a raise? Not all employers do. My current employer, for example, pays above average salaries, but doesn't offer 401K match. Some companies have very tight control over the 401K accounts, and until not so long ago were allowed to force employees to invest their retirement savings in the company (see the Enron affair). It is no longer an option, but by now 401K is a standard in some industries, and employers cannot allow themselves not to offer it (see my position above).\"" }, { "docid": "240373", "title": "", "text": "\"Just like all employee benefits there is a focus on removing or limiting owners of businesses' ability to abuse tax preferences under the guise of an employee benefit. As you point out there is an overall plan maximum 401(k) for employer contributions and match contributions. There is a nondiscrimination test for FSA programs (there is also a nondiscrimination test for medical plans under sections 125 and 105(h)). Employer contributions are counted toward the total of HSA contributions. Why an HSA has a different maximum arrangement than 401(k) is anyone's guess. But the purpose of the limit is to prevent owners of companies from setting up plans that do little more than funnel tax free funds to themselves. An owner/employee could pay themselves a wage, contribute the maximum, then have the \"\"employer\"\" also match the maximum, so there are limits in place.\"" }, { "docid": "525322", "title": "", "text": "\"The same author wrote in that article “they have a trillion? Really?” But that’s what happens when ten million dollars compounds at 2% over 200 years. Really? 2% compounded over 200 years produces a return of 52.5X, multiply that by 10M and you have $525 million. The author is off by a factor of nearly 2000 fold. Let's skip this minor math error. The article is not about 401(k)s. His next line is \"\"The whole myth of savings is gone.\"\" And the article itself, \"\"10 Reasons You Have To Quit Your Job In 2014\"\" is really a manifesto about why working for the man is not the way to succeed long term. And in that regard, he certainly makes good points. I've read this author over the years, and respect his views. 9 of the 10 points he lists are clear and valuable. This one point is a bit ambiguous and falls into the overgeneraluzation \"\"Our 401(k) have failed us.\"\" But keep in mind, even the self employed need to save, and in fact, have similar options to those working for others. I have a Solo 401(k) for my self employment income. To be clear, there are good 401(k) accounts and bad. The 401(k) with fees above 1%/yr, and no matching, awful. The 401(k) I have from my job before I retired has an S&P index with .02%/yr cost. (That's $200/$million invested per year.) The 401(k) is not dead.\"" }, { "docid": "79888", "title": "", "text": "This is called an in-plan Roth conversion and is discussed by the IRS here. If your 401(k) has a Roth option then it likely also has a provision to convert pre-tax dollars, but you'll have to check with the administrator to be sure. They could also potentially limit the type of money that can be converted. But most likely you should be able to convert any amount you want, and since it's all pre-tax (your contributions, employer matching, and earnings), it doesn't really matter which money is converted because it's all equivalent. One caveat is you won't able to convert any employer matching that hasn't fully vested." }, { "docid": "69774", "title": "", "text": "\"I am failing to see why would a person get an IRA, instead of just putting the same amount of money into a mutual fund (like Vanguard) or something like that. Well, this isn't a meaningful distinction. The mutual fund may or may not be in an IRA. Similarly, the mutual fund may or may not be in a 401(k), however. So I'm going to treat your question as if it's \"\"why would a person get a mutual fund (like Vanguard) or something like that in an IRA, instead of just putting the same amount of money into the same mutual fund in a 401(k).\"\" Same mutual fund, same amount of money, narrowing your question to the difference between the two types of accounts, as stated in your question's title. Others have answered that to the extent that you really have no choice other than \"\"pick which type of account to use for a given bundle of money\"\", other than nobody having mentioned the employer match. Even if there were no other difference at all in tax treatment, it's pretty typical that 401(k) contributions will be matched by free money from the employer. No IRA can compete with that. But, that's not the only choice either: Many of us contribute to both the 401(k) and the IRA. Why? Because we can. I'm not suggesting that just-anybody can, but, if you max out the employer matching in the 401(k), or if you max out the tax-advantaged contribution limit in the 401(k), and you still have more money that you want to save in a tax-advantaged retirement account this year, you can do so. The IRA is available, it's not \"\"instead-of\"\" the 401(k).\"" }, { "docid": "57526", "title": "", "text": "\"Yes, this is restricted by law. In plain language, you can find it on the IRS website (under the heading \"\"When Can a Retirement Plan Distribute Benefits?\"\"): 401(k), profit-sharing, and stock bonus plans Employee elective deferrals (and earnings, except in a hardship distribution) -- the plan may permit a distribution when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach age 59½; or •suffer a hardship. Employer profit-sharing or matching contributions -- the plan may permit a distribution of your vested accrued benefit when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach the age specified in the plan (any age); or •suffer a hardship or experience another event specified in the plan. Form of benefit - the plan may pay benefits in a single lump-sum payment as well as offer other options, including payments over a set period of time (such as 5 or 10 years) or a purchased annuity with monthly lifetime payments. Source: https://www.irs.gov/retirement-plans/plan-participant-employee/when-can-a-retirement-plan-distribute-benefits If you want to actually see it in the law, check out 26 USC 401(k)(2)(B)(i), which lists the circumstances under which a distribution can be made. You can get the full text, for example, here: https://www.law.cornell.edu/uscode/text/26/401 I'm not sure what to say about the practice of the company that you mentioned in your question. Maybe the law was different then?\"" }, { "docid": "171196", "title": "", "text": "The best option for maximizing your money long-term is to contribute to the 401(k) offered by your employer. If you park your inheritance in a savings account you can draw on it to augment your income while you max out your contributions to the 401(k). You will get whatever the employer matches right off the bat and your gains are tax deferred. In essence you will be putting your inheritance into the 401(k) and forcing your employer to match at whatever rate they do. So if your employer matches at 50 cents on the dollar you will turn your 50 thousand into 75 thousand." }, { "docid": "299819", "title": "", "text": "How old are you? With $15k, I assume late twenties. Do you still use your credit cards? or is this just past accumulated debt? (paying them off will do you no good if you just run them back up again.) Does your employer match you contributions? How much? Are you fully vested in their contributions? In general, it is not a good idea, but under the right circumstances it isn't a bad idea." }, { "docid": "244692", "title": "", "text": "\"One can generalize on Traditional vs Roth flavors of accounts, I suggest Roth for 15% money and going pretax to avoid 25% tax. If the student loan is much over 4%, it may make sense to put it right after emergency fund. For emergency fund priority - I'm assuming EF really requires 2 phases, the $2500 broken transmission/root canal bill, and the lose your job, or need a new roof level bills. I'm in favor of doing what let's you sleep well. I'm also quick to point out that if you owe $2500 at 18%, yet have $2500 in your emergency fund, you're really throwing away $450 in interest each year. There's an ongoing debate of \"\"credit card as emergency fund.\"\" No, I don't claim that your cards should be considered an emergency fund, per se, but I would prioritize knocking off the 18% debt as a high priority. Once that crazy interest debt is gone, fund the ER, and find a balance for savings and the next level ER, the 6-9mo of expenses one. One can choose to fund a Roth IRA, but keep the asset out of retirement calculations. It's simply an emergency account returning tax free interest, and if never used, it eventually is retirement money. A Roth permits withdrawal of deposited funds with no tax or penalty, just tracking it each year. This actually rubs some people the wrong way as it sounds like tapping your retirement account for emergencies. For my purpose, it's a tax free emergency fund. Not retirement, unless and until you are saving so much in the 401(k) you need more tax favored retirement money. I wrote an article some time ago, the Roth Emergency Fund which went into a bit more detail. Last - keep in mind, this is my opinion. I can intelligently argue my case, but at some point, it's up to the individual to do what feels right. Paying 18% debt off a bit slower, say 4 years instead of 3, in favor of funding the matched 401(k), to me, you run the numbers, watch the 401(k) balance grow by 2X your pretax deposits, and see that in year 3, your retirement account is jump-started and far, far more than your remaining 18% cards. Those who feel the opposite and wish to be debt free first are going to do what they want. And the truth is, if this lets you sleep better at night, I'm in favor of it.\"" } ]

[ { "docid": "249063", "title": "", "text": "I'd take the match, but I wouldn't contribute beyond your match, for two reasons:" } ]

[ { "docid": "536262", "title": "", "text": "\"littleadv's first comment - check the note - is really the answer. But your issue is twofold - Every mortgage I've had (over 10 in my lifetime) allows early principal payments. The extra principal can only be applied at the same time as the regular payment. Think of it this way - only at that moment is there no interest owed. If a week later you try to pay toward only principal, the system will not handle it. Pretty simple - extra principal with the payment due. In fact, any mortgage I've had that offered a monthly bill or coupon book will have that very line \"\"extra principal.\"\" By coincidence, I just did this for a mortgage on my rental. I make these payments through my bank's billpay service. I noted the extra principal in the 'notes' section of the virtual check. But again, the note will explicitly state if there's an issue with prepayments of principal. The larger issue is that your friend wishes to treat the mortgage like a bi-weekly. The bank expects the full amount as a payment and likely, has no obligation to accept anything less than the full amount. Given my first comment above here is the plan for your friend to do 99% of what she wishes: Tell her, there's nothing magic about bi-weekly, it's a budget-clever way to send the money, but over a year, it's simply paying 108% of the normal payment. If she wants to burn the mortgage faster, tell her to add what she wishes every month, even $10, it all adds up. Final note - There are two schools of thought to either extreme, (a) pay the mortgage off as fast as you can, no debt is the goal and (b) the mortgage is the lowest rate you'll ever have on borrowed money, pay it as slow as you can, and invest any extra money. I accept and respect both views. For your friend, and first group, I'm compelled to add - Be sure to deposit to your retirement account's matched funds to gain the entire match. $1 can pay toward your 6% mortgage or be doubled on deposit to $2 in your 401(k), if available. And pay off all high interest debt first. This should stand to reason, but I've seen people keep their 18% card debt while prepaying their mortgage.\"" }, { "docid": "531051", "title": "", "text": "I completely agree with Pete that a 401(k) loan is not the answer, but I have an alternate proposal: Reduce your 401(k) contribution down to the 4% that you get a match on. If you are cash poor now and have debts to be cleaned up, those need to be addressed before retirement savings. You'll have plenty of time to make up the lost savings after you get the debts paid off. If your company matches 50% (meaning you have to contribute 8% to get the 4% match), then consider temporarily stopping your 401(k) altogether. A 100% match is very hard to give up, but a 50% match is less difficult. You have plenty of years left ahead of you to make up the lost match. Plus, the pain of knowing you're leaving money on the table will incentivize you to get the loans paid as quickly as possible. It seems to me that I would be reducing middle to high interest debt while also saving myself $150 per month. No, you'd be deferring $150 per month for an additional two years, and not reducing debt at all, just moving it to a different lender. Interest rate is not your problem. Right now you're paying less than $30 per month in interest on these 3 loans and about $270 in principal, and at the current rate should have them paid off in about 2 years. You're wanting to extend these loans to 4 years by borrowing from your retirement savings. I would buckle down, reduce expenses wherever possible (cable? cell phone? coffee? movies? restaurants?) until you get these debts paid off. You make $70,000 per year, or almost $6,000 per month. I bet if you try hard enough you can come up with $1,100 fairly quickly. Then the next $1,200 should come twice as fast. Then attack the next $4,000. (You can argue whether the $1,200 should come first because of the interest rate, but in the end it doesn't matter - either one should be paid off very quickly, so the interest saved is negligible) Maybe you can get one of them paid off, get yourself some breathing room, then loosen up a little bit, but extending the pain for an additional two years is not wise. Some more drastic measures:" }, { "docid": "353625", "title": "", "text": "\"For easy math, say you are in the 25% tax bracket. A thousand deposited dollars is $750 out of your pocket, but $2000 after the match. Now, you say you want to take the $750 and pay down the card. If you wait a year (at 20%) you'll owe $900, but have access to borrow a full $1000, at a low rate, 4% or so. The payment is less than $19/mo for 5 years. So long as one is comfortable juggling their debt a bit, the impact of a fully matched 401(k) cannot be beat. Keep in mind, this is a different story than those who just say \"\"don't take a 401(k) loan.\"\" Here, it's the loan that offers you the chance to fund the account. If you are let go, and withdraw the money, even at the 25% rate, you net $1500 less the $200 penalty, or $1300 compared to the $750 you are out of pocket. If you don't want to take the loan, you're still ahead so long as you are able to pay the cards over a reasonable time. I'll admit, a 20% card paid over 10+ years can still trash a 100% return. This is why I add the 401(k) loan to the mix. The question for you - jldugger - is how tight is the budget? And how much is the match? Is it dollar for dollar on first X%?\"" }, { "docid": "470826", "title": "", "text": "The company match is not earnings. My company deposits 5% of my income into my 401(k) and it appears nowhere except on the paperwork for the 401(k). To be clear, it doesn't appear on any paystub or W2." }, { "docid": "551145", "title": "", "text": "None of your options seem mutually exclusive. Ordinarily nothing stops you from participating in your 401(k), opening an IRA, qualifying for your company's pension, and paying off your debts except your ability to pay for all this stuff. Moreover, you can open an IRA anywhere (scottrade, vanguard, etrade, etc.) and freely invest in vanguard mutual funds as well as those of other companies...you aren't normally locked in to the funds of your IRA provider. Consider a traditional IRA. To me your marginal tax rate of 25% doesn't seem that great. If I were in your shoes I would be more likely to contribute to a traditional IRA instead of a Roth. This will save you taxes today and you can put the extra 25% of $5,500 toward your loans. Yes, you will be taxed on that money when you retire, but I think it's likely your rate will be lower than 25%. Moreover, when you are retired you will already own a house and have paid off all your debt, hopefully. You kind of need money now. Between your current tax rate and your need for money now, I'd say a traditional makes good sense. Buy whatever funds you want. If you want a single, cheap, whole-market fund just buy VTSAX. You will need a minimum of $10K to get in, so until then you can buy the ETF version, VTI. Personally I would contribute enough to your 401(k) to get the match and anything else to an IRA (usually they have more and better investment options). If you max that out, go back to the 401(k). Your investment mix isn't that important. Recent research into target date funds puts them in a poor light. Since there isn't a good benchmark for a target date fund, the managers tend to buy whatever they feel like and it may not be what you would prefer if you were choosing. However, the fund you mention has a pretty low expense ratio and the difference between that and your own allocation to an equity index fund or a blend of equity and bond funds is small in expectation. Plus, you can change your allocation whenever you want. You are not locked in. The investment options you mention are reasonable enough that the difference between portfolios is not critical. More important is optimizing your taxes and paying off your debt in the right order. Your interest rates matter more than term does. Paying off debt with more debt will help you if the new debt has a lower interest rate and it won't if it has a higher interest rate. Normally speaking, longer term debt has a higher interest rate. For that reason shorter term debt, if you can afford it, is generally better. Be cold and calculating with your debt. Always pay off highest interest rate debt first and never pay off cheap debt with expensive debt. If the 25 year debt option is lower than all your other interest rates and will allow you to pay off higher interest rate debt faster, it's a good idea. Otherwise it most likely is not. Do not make debt decisions for psychological reasons (e.g., simplicity). Instead, always chose the option that maximizes your ultimate wealth." }, { "docid": "417257", "title": "", "text": "You might want to bring this fancy new IRS rule to your employer's attention. If your employer sets it up, an After-Tax 401(k) Plan allows employees to contribute after-tax money above the $18k/year limit into a special 401(k) that allows deferral of tax on all earnings until withdrawal in retirement. Now, if you think about it, that's not all that special on its own. Since you've already paid tax on the contribution, you could imitate the above plan all by yourself by simply investing in things that generate no income until the day you sell them and then just waiting to sell them until retirement. So basically you're locking up money until retirement and getting zero benefit. But here's the cool part: the new IRS rule says you can roll over these contributions into a Roth 401(k) or Roth IRA with no extra taxes or penalties! And a Roth plan is much better, because you don't have to pay tax ever on the earnings. So you can contribute to this After-Tax plan and then immediately roll over into a Roth plan and start earning tax-free forever. Now, the article I linked above gets some important things slightly wrong. It seems to suggest that your company is not allowed to create a brand new 401(k) bucket for these special After-Tax contributions. And that means that you would have to mingle pre-tax and post-tax dollars in your existing Traditional 401(k), which would just completely destroy the usefulness of the rollover to Roth. That would make this whole thing worthless. However, I know from personal experience that this is not true. Your company can most definitely set up a separate After-Tax plan to receive all of these new contributions. Then there's no mingling of pre-tax and post-tax dollars, and you can do the rollover to Roth with the click of a button, no taxes or penalties owed. Now, this new plan still sits under the overall umbrella of your company's total retirement plan offerings. So the total amount of money that you can put into a Traditional 401(k), a Roth 401(k), and this new After-Tax 401(k) -- both your personal contributions and your company's match (if any) -- is still limited to $53k per year and still must satisfy all the non-discrimination rules for HCEs, etc. So it's not trivial to set up, and your company will almost certainly not be able to go all the way to $53k, but they could get a lot closer than they currently do." }, { "docid": "568784", "title": "", "text": "\"Can is fine, and other answered that. I'd suggest that you consider the \"\"should.\"\" Does your employer offer a matched retirement account, typically a 401(k)? Are you depositing up to the match? Do you have any higher interest short term debt, credit cards, car loan, student loan, etc? Do you have 6 months worth of living expenses in liquid funds? One point I like to beat a dead horse over is this - for most normal mortgages, the extra you pay goes to principal, but regardless of how much extra you pay, the next payment is still due next month. So it's possible that you are feeling pretty good that for 5 years you pay so much that you have just 10 left on the 30 year loan, but if you lose your job, you still risk losing the house to foreclosure. It's not like you can ask the bank for that money back. If you are as disciplined as you sound, put the extra money aside, and only when you have well over the recommended 6 months, then make those prepayments if you choose. To pull my comment to @MikeKale into my answer - I avoided this aspect of the discussion. But here I'll suggest that a 4% mortgage costs 3% after tax (in 25% bracket), and I'd bet cap gain rates will stay 15% for non-1%ers. So, with the break-even return of 3.5% (to return 3 after tax) and DVY yielding 3.33%, the questions becomes - do you think the DVY top yielders will be flat over the next 15 years? Any return over .17%/yr is profit. That said, the truly risk averse should heed the advise in original answer, then pre-pay. Update - when asked,in April 2012, the DVY I suggested as an example of an investment that beats the mortgage cost, traded at $56. It's now $83 and still yields 3.84%. To put numbers to this, a lump sum $100K would be worth $148K (this doesn't include dividends), and giving off $5700/yr in dividends for an after-tax $4800/yr. We happened to have a good 4 years, overall. The time horizon (15 years) makes the strategy low risk if one sticks to it.\"" }, { "docid": "231012", "title": "", "text": "I'd hazard that Jim is mostly worried that people are getting ripped off by high employer 401(k) fund fees. A lot of employers offer funds with fees over 1% a year. This sounds low-ish if you don't realize that the real (inflation-adjusted) return for the fund will probably average out to about 4%, so it's really something like a quarter of your earnings gone. With an IRA, you don't have to do that. You can get an IRA provider which offers good, cheap index funds and the like (cough Vanguard cough). Fund fees will probably be closer to 0.1%-ish. HOWEVER. The maximum IRA contribution in 2013 will be $5,500. The maximum for a 401(k) contribution will be $17,500. That extra capacity is enough to recommend a 401(k) over an IRA for many people. These people may be best served by putting money into the 401(k) and then rolling it over into a rollover IRA when they change jobs. Also, certain people have retirement plans which offer them good cheap index funds. These people probably don't need to worry quite as much. Finally, having two accounts is more complicated. Please contact someone who knows more about taxes than I am to figure out what limitations apply for contributing to both IRAs and 401(k)s in the same year." }, { "docid": "352908", "title": "", "text": "You might also want to talk directly to a bank. If your credit report is clean, they may have some discretion in making the loan. Note - the 'normal' fully qualified loan has two thresholds, 28% (of monthly income) for housing costs, 36% for all debt servicing. A personal, disclosed loan from a friend/family which is not secured against the house, would count as part of the other debt, as would a credit card. While I don't recommend using a credit card for this purpose, the debt fits in that 28-36 gap. As Kevin points out below, not all paths are equally advisable. Nor are rules of thumb always true. Not having the OP's full details, income, assets, price of house, etc, this is just a list of things to consider. The use of a 401(k) loan in the US can be a great idea for some, bad mistake for others. This format doesn't make it easy to go into great detail, and I'm sure the 401(k) loan issue has been asked and answered in other questions. With respect to Kevin, if he wrote 'usually', I'd agree, but never say 'never.'" }, { "docid": "350082", "title": "", "text": "I know of no way to answer your question without 'spamming' a particular investment. First off, if you are a USA citizen, max out your 401-K. Whatever your employer matches will be an immediate boost to your investment. Secondly, you want your our gains to be tax deferred. A 401-K is tax deferred as well as a traditional IRA. Thirdly, you probably want the safety of diversification. You achieve this by buying an ETF (or mutual fund) that then buys individual stocks. Now for the recommendation that may be called spamming by others : As REITs pass the tax liability on to you, and as an IRA is tax deferred, you can get stellar returns by buying a mREIT ETF. To get you started here are five: mREITs Lastly, avoid commissions by having your dividends automatically reinvested by using that feature at Scottrade. You will have to pay commissions on new purchases but your purchases from your dividend Reinvestment will be commission free. Edit: Taking my own advice I just entered orders to liquidate some positions so I would have the $ on hand to buy into MORL and get some of that sweet 29% dividend return." }, { "docid": "175470", "title": "", "text": "I’m specifically curious as to how employer matches for Roth 401(k)s would work. Even if an employee contributes to a Roth 401(k), matching contributions by the employer must be treated as traditional 401(k) contributions. So even if the treatment of Roth accounts is unchanged, those of us who get an employer match on our Roth 401(k) contributions may still be impacted." }, { "docid": "243392", "title": "", "text": "&gt;What makes you think anything would change? If they allowed Match money to be distributed tax free, they are missing out on a future tax revenue opportunity. I agree that it's highly unlikely that matching contributions would be made entirely tax-free. If anything, I would expect employer contributions to be treated the same way that after-tax (non-Roth) 401(k) contributions are treated today to the extent that they exceed the new contribution limits. It's also possible that only individual contribution limits will be reduced and employer contribution limits will remain much higher - I haven't seen any reporting on the latter. &gt;I think the more likely way they would stick it to us is to sunset the Roth 401(k) all together and make plans go back to the old school pre-tax and after-tax only, where even the earnings on after-tax are taxed at distribution. I'm optimistic that Roth 401(k)s are here to stay. Trump's priorities seem to be centered around short-term budget characteristics with far less concern for the long-term (as is characteristic of populist administrations in general), and eliminating Roth 401(k)s would be unpopular and have a negligible impact on tax revenue in the short term." }, { "docid": "464080", "title": "", "text": "\"Given that the 6 answers all advocate similar information, let me offer you the alternate scenario - You earn $60K and have an employer offering a 50% match on all deposits. All deposits. (Note, I recently read a Q&A here describing such an offer. If I see it again, I'll link). Let the thought of the above settle in. You think about the fact that $42K isn't a bad salary, and decide to deposit 30%, to gain the full match on your $18K deposit. Now, you budget to live your life, pay your bills, etc, but it's tight. When you accumulate $2000, and a strong want comes up (a toy, a trip, anything, no judgement) you have a tough decision. You think to yourself, \"\"after the match, I am literally saving 45% of my income. I'm on a pace to have the ability to retire in 20 years. Why do I need to save even more?\"\" Your budget has enough discretionary spending that if you have a $2000 'emergency', you charge it and pay it off over the next 6-8 months. Much larger, and you know that your super-funded 401(k) has the ability to tap a loan. Your choice to turn away from the common wisdom has the recommended $20K (about 6 months of your spending) sitting in your 401(k), pretax deposited as $26K, and matched to nearly $40K, growing long term. Note: This is a devil's advocate answer. Had I been the first to answer, it would reflect the above. In my own experience, when I got married, we built up the proper emergency fund. As interest rates fell, we looked at our mortgage balance, and agreed that paying down the loan would enable us to refinance and save enough in mortgage interest that the net effect was as if we were getting 8% on the money. At the same time as we got that new mortgage, the bank offered a HELOC, which I never needed to use. Did we somehow create high risk? Perhaps. Given that my wife and I were both still working, and had similar incomes, it seemed reasonable.\"" }, { "docid": "103093", "title": "", "text": "Staying with your numbers - a 7% long term return will have a tax of 15% (today's long term cap gain tax) resulting in a post tax of 5.95%. On the other hand, even if the student loan interest remains deductible, it's subject to phaseout and a really successful grad will quickly lose the deduction. There's a similar debate regarding mortgage debt. When I've commented on my 3.5% mortgage costing 2.5% post tax, there's no consensus agreeing that this loan should remain as long as possible in favor of investing in the market for its long term growth. And in this case the advantage is a full 3.45%/yr. While I've made my decision, Ben's points remain, the market return isn't guaranteed, while that monthly loan payment is fixed and due each month. In the big picture, I'd prioritize to make deposits to the 401(k) up to the match, if offered, pay down any higher interest debt such as credit cards, build an emergency account, and then make extra payments to the student loan. Keep in mind, also - if buying a house is an important goal, the savings toward the downpayment might take priority. Student Loans and Your First Mortgage is an article I wrote which describes the interaction between that loan debt and your mortgage borrowing ability. It's worth understanding the process as paying off the S/L too soon can impact that home purchase." }, { "docid": "412", "title": "", "text": "The details of the 401(k) are critical to the decision. A high cost (the expenses charged within the) 401(k) - I would deposit only to the match, and I'd be sure to get the entire match offered. In which case, that $3000 might be good to have available if you start out with a tight budget. Low cost 401(k) w/match - a no-brainer, deposit what you can afford. Roth 401(k) w/match - same rules for expenses apply, with the added note to use Roth when getting started and in a lower bracket. Yes, it makes sense to have both. You should note, depositing to the Roth now is riskless. The account, not the investment. If you decide next year you didn't want it, you can withdraw the deposit with no penalty or tax. Edit to respond to updated question - there are two pieces to the Roth deposit issue. The deposit itself, which puts the $3000 earned income into tax sheltered account, and the choice to invest. These two are sequential and you can take your time in between. I'm not sure what you mean by the dividend timing. In an IRA or 401(k) the dividend isn't taxed, so it's a non-issue. In a cash account, you might quickly have a small tax issue, but this doesn't come into the picture in the tax deferred accounts." }, { "docid": "55954", "title": "", "text": "(Note: The OP does not state whether the employer-sponsored retirement savings are pre-tax or post-tax (such as a Roth 401(k)). The following answer assumes the more common case of a pre-tax plan.) This is a bad idea, IMHO. IRS Pub 970 lists exceptions to the 10% early withdrawal penalty for educational expenses. This doesn't include, as far as I can tell, student loan payments. So withdrawing from your retirement account would incur both income tax and penalties. Even if there were an exception, you'd still have to pay income taxes, which, depending on the amount and your income, could be at a higher marginal rate than you are currently paying. If you really want the debt gone as soon as possible, why not reduce the amount you contribute to the retirement plan (but not below the amount that gets you the maximum employer match) and use that money to increase your monthly payments to the student loan? Note that, if you do this, you will pay taxes on income that would have been tax-deferred in order to save money on interest, so there's still a trade-off. (One more thing: rather than rolling over to your new company's plan, you could roll over to a self-directed Traditional IRA.)" }, { "docid": "91183", "title": "", "text": "\"There is a very simple calculation that will answer the question: Is the expected ROI of the 401K including the match greater than the interest rate of your credit card? Some assumptions that don't affect the calculation, but do help illustrate the points. You have 30 years until you can pull out the 401K. Your credit card interest rate is 20% compounded annually. The minimum payoffs are being disregarded, because that would legally just force a certain percentage to credit card. You only have $1000. You can either pay off your credit card or invest, but not both. For most people, this isn't the case. Ideally, you would simply forego $1000 worth of spending, AND DO BOTH Worked Example: Pay $1000 in Credit Card Debt, at 20% interest. After 1 year, if you pay off that debt, you no longer owe $1200. ROI = 20% (Duh!) After 30 years, you no longer owe (and this is pretty amazing) $237,376.31. ROI = 23,638% In all cases, the ROI is GUARANTEED. Invest $1000 in matching 401k, with expected ROI of 5%. 2a. For illustration purposes, let's assume no match After 1 year, you have $1050 ($1000 principal, $0 match, 5% interest) - but you can't take it out. ROI = 5% After 30 years, you have $4321.94, ROI of 332% - assuming away all risk. 2b. Then, we'll assume a 50% match. After 1 year, you have $1575 ($1000 principle, $500 match, 5% interest) - but you can't take it out. ROI = 57% - but you are stuck for a bit After 30 years, you have $6482.91, ROI of 548% - assuming away all risk. 2c. Finally, a full match After 1 year, you have $2100 ($1000 principle, $1000 match, 5% interest) - but you can't take it out. ROI = 110% - but again, you are stuck. After 30 years, you have $8643.89, ROI of 764% - assuming away all risk. Here's the summary - The interest rate is really all that matters. Paying off a credit card is a guaranteed investment. The only reason not to pay off a 20% credit card interest rate is if, after taxes, time, etc..., you could earn more than 20% somewhere else. Note that at 1 year, the matching funds of a 401k, in all cases where the match exceeded 20%, beat the credit card. If you could take that money before you could have paid off the credit card, it would have been a good deal. The problem with the 401k is that you can't realize that gain until you retire. Credit Card debt, on the other hand, keeps growing until you pay it off. As such, paying off your credit card debt - assuming its interest rate is greater than the stock market (which trust me, it almost always is) - is the better deal. Indeed, with the exception of tax advantaged mortgages, there is almost no debt that has an interest rate than is \"\"better\"\" than the market.\"" }, { "docid": "120706", "title": "", "text": "I like the way you framed this question. There is no single right answer for what to do with your savings, but there are some choices that are wrong in the sense that they are dominated by other choices you could make. Of the choices you listed, there are two that fall into that category. The ones that seem like a bad idea to me are: Putting it into your Roth 401(k). You can't do this directly anyhow, but you could do it indirectly by increasing your contributions and using the growth fund to cover the hole in your budget, but that's a lot of work for a relatively small gain. You would essentially be exchanging one long-term investment for another long-term investment. You would pay capital gains taxes on the investment when you sell it today, in order to not pay taxes on its earnings when you eventually withdraw it. There is some benefit there, but it's a long way off, not that large, and probably not worth the effort. Things that might change your mind: If your 401(k) was a traditional 401(k) (paying tax at capital gains rate today to get a deduction at your normal income rate is likely to be a win). You're not contributing enough to get the full company match (always try to get that match if you can). Putting it into your emergency fund. Once again, you are likely to pay capital gains tax if you do this, and you will be putting it into an investment that is likely to get a lower return than your current one. It isn't really necessary to incur these costs, since if you encounter an emergency that you can't cover with your existing emergency fund, you could always liquidate the growth fund then, when you know you need it. Now, a growth fund is going to be more volatile than what you would normally want for an emergency fund, but the risk isn't that bad, if you think about it. Say your emergency comes up and you find that the growth fund is down 20% (which would be a pretty horrible run). That's $600 less that you have to deal with the situation. Keep in mind that you already have $2000 (and building) in your current emergency fund. Is that $600 going to make the difference between meeting the need and not? It's not likely. Better to leave the investment where it is and keep building your emergency fund week by week. Things that might change your mind: Your level of risk aversion (if having that money in a more risky investment is keeping you up at night, move it). You face significant job uncertainty (if you have reason to think your job is at risk, it might be a good idea to top off that emergency fund sooner rather than later.) Your other two choices both seem like solid options under the right circumstances. If it were me, I'd leave the investment in place rather than use it to pay off the student loan. The investment is likely (though of course not guaranteed) to earn more than the interest rate even on the highest-rate loan, especially when you consider that the interest on the student loan is probably tax deductible. Moreover, the size of the investment isn't enough to fully repay the loan, so putting it toward the loan won't even improve your cash flow for some time to come. However, there is always a chance that the investment will perform poorly and some people prefer the guaranteed return from paying off the loan. It depends on your personal risk tolerance. The one thing I would recommend is to think of putting the money toward the loan not as a debt repayment, but as a fixed-income investment with a yield equal to your loan's interest rate. If you would still consider buying it then, then go ahead. If not, then stick with what you've got. In my experience people get way too emotional about debt; try to take that emotion out of your decision making if you can." }, { "docid": "333219", "title": "", "text": "\"All of the provided advice is great, but a slightly different viewpoint on debt is worth mentioning. Here are the areas that you should concentrate your efforts and the (rough) order you should proceed. Much of the following is predicated upon your having a situation where you need to get out of debt, and learn to better budget and control your spending. You may already have accomplished some of these steps, or you may prioritize differently. Many people advise prioritizing contributing to a 401(k) savings plan. But with the assumption that you need advise because you have debt trouble, you are probably paying absurd interest rates, and any savings you might have will be earning much lower rates than you are paying on consumer debt. If you are already contributing, continue the plan. But remember, you are looking for advice because your financial situation is in trouble, so you need to put out the fire (your present problem), and learn how to manage your money and plan for the future. Compose a budget, comprised of the following three areas (the exact percentages are fungible, fit them to your circumstances). Here is where planning can get fun, when you have freed yourself from debt, and you can make choices that resonate with your individual goals. Once you have \"\"put out the fire\"\" of debt, then you should do two things at the same time. As you pay off debt (and avoid further debt), you will find that saving for both independence and retirement become easier. The average American household may have $8000+ credit card debt, and at 20-30%, the interest payments are $150-200/month, and the average car payment is nearly $500/month. Eliminate debt and you will have $500-800/month that you can comfortably allocate towards retirement. But you also need to learn (educate yourself) how to invest your money to grow your money, and earn income from your savings. This is an area where many struggle, because we are taught to save, but we are not taught how to invest, choose investments wisely and carefully, and how to decide our goals. Investing needs to be addressed separately, but you need to learn how. Live in an affordable house, and pay off your mortgage. Consider that the payment on a mortgage on even a modest $200K house is over $1000/month. Combine saving the money you would have paid towards a mortgage payment with the money you would have paid towards credit card debt or a car loan. Saving becomes easy when you are freed from these large debts.\"" } ]