Investing • Page 67

This is an amazing toe to toe. Hasan takes off the gloves and goes after how financial influencers like O'Leary take advantage of us retail investors.

 

O'leary is such a hardcore grifter.

 

Hasan giving him shit for charging $6,000 for a Cameo is pure gold.

 

why the fuck is kevin o leary wearing two iphone watches

 

Sorry, should have early exercised all your options and filed an 83(b) election.

If your strike price (price you can exercise for) is lower than the current fair market value, then the increase in FMV is taxable income for the year you exercise.

Example: Your 1000 shares are 10 cents apiece. You do not buy them until the stock is $1.10. You will owe taxes on the $1.00 increase in stock value. Problem is, if it's not public, then you might owe tax on something that is illiquid (unable to sell) so if you do not have cash to cover the bill, you can be SOL.

An 83(b) election coupled with early exercising allows you to buy shares before they vest. If the FMV is $.10 and you pay $.10 per share, then the tax hit is zero. Furthermore, if your company granted you those shares when they had less than $50MM in revenue, then the gains upon sale could qualify for the QSBS (qualified small business stock) exception, where up to $10mm in gains are federally and state tax free. However you need to have owned the exercised shares for 5 years before you can sell to be eligible for the tax free gains.

The QSBS deduction does not apply to the taxable exercise amount if there is a gap in the strike price and the FMV. However it would still hold if you then hold the shares for 5 years and sell, if the options were granted while the company's revenue was under $50MM, AND you then hold the shares after purchasing for 5+ years.

SOURCE: Am a piss-poor midwest former educator who got out by working remotely with a startup.. gotta find SOME WAY to make up for lost time ($25K salary in mid Mo for teachers, woo!)

Also: https://carta.com/blog/qsbs/

 

I have an incredibly noob question/discussion, and I apologize if it’s been discussed before (but uh 67 pages), or if it’s too big to discuss, but this is the first time I’ve ever thought about long-term financial planning besides signing up for my company’s 401k and HSA.

I’ve been reading a lot about IRA’s and brokerage accounts, but does this mean people typically carry a 401k, Roth IRA, *and* a brokerage account(s), or are these things inherently more interlinked than that? for example I know people may invest their HSA, does that mean they’re setting up multiple brokerage accounts? Do people do that anyway? I have lofty student loans, rent, and a car payment so it sounds like investing in each of things, even if trying to live frugally, doesn’t leave much else. If that’s the price to pay for security later, so be it, but just wanna make sure I’m understanding the difference between the two worlds. Alternatively, I’d appreciate comprehensive resources like favorite books and whatnot. I’ve got a few on my list already.

 

If you have excess income, contributing to your employers 401k to the level they match and an IRA (roth, regular, sep, etc. depending on your specific situation) is a good idea. If you have further excess income beyond that, you could open a brokerage account. IRAs offer significant tax advantages over a traditional brokerage account. I don't know much about HSAs, so I can't help you there. My basic understanding is they are not a typical investment vehicle beyond maximizing the value of that account for when you have unexpected medical bills.

 

thanks! Do the 401k and IRA’s just sorta exist on their own or are they themselves invested in various stocks/etc, and if so, can you/do people choose what those funds are? Like if the IRA has the tax advantages, do people ever just treat that as their brokerage account and invest aggressively through that instead?

 

there are generally limits to what you can invest your 401k in though i think there may be ways around it. But you also don’t really want to. Stick with an S&P or total market index fund or some sort of life path plan that’s targeted at your expected retirement date.

 

incidentally, I’ve been reading a book that just started covering these things today and answered a lot of my questions in a way that aligns with what you said. My 401k was in a target date fund but seems fidelity offers a 500 index that sounds more attractive. No total market one is listed.

 

total market and 500 index fund are honestly going to be pretty similar.

target date funds vs either of those... they are also going to be pretty similar. especially at a younger age, its pretty much going to be all stocks anyways. in theory, as you get closer to the target date that fund should get a bit more conservative though which is probably a good thing and a reason to keep stuff there. just make sure the expense ratio is super low (it should be)

 

Do people generally invest their 401, IRA, and/or brokerage accounts in the same funds?

what kind of IRA is recommended if you’re not sure what your future income is gonna look like (and is the tax bracket you’re comparing your future self to referring to your income right before you retire or on money you’re making in retirement)? Bit of a niche question but I have a chronic illness that may unpredictably wreck me financially later. Not sure how to prepare for it.

 

do you mean like Roth vs traditional?

 

Yea Roth v deductible v non-deductible

 

So with traditional you're basically delaying when you take the income. Everything you put into your traditional account you can deduct from your taxes this year, but then have to pay income tax on when you withdraw it. Whereas with Roth, you pay income tax on it now, but then don't have to withdraw it later.

In general, your retirement income needs will probably be lower than your income today as you won't need to save anything. Meaning you're better off with traditional. But obviously things can change that -- if you're young and expecting your standard of living to increase a lot doing roth for a few years might make sense. Or if you're currently living in a state with no income tax but wanna retire in a state with income tax roth might also make sense there.

 

It's best to get an overall "asset allocation" that you are comfortable with—ie, stocks vs bonds, and/or us vs international. If you want any further customization, put highest expected return funds into your roth IRA. For example, I put all my small cap value index fund in my Roth, as it has the highest expected return over the long haul.

 

when people refer to whether you expect your retirement income/tax bracker to be higher or lower than current, do they mean based off your final salary before retirement (when your salary is effectively 0) or your income during retirement itself? I see an overwhelming amount of people online saying go Roth, which seems obvious because I’d imagine most people expect to make more as they age, no?

I find choosing the type of Roth very frustrating because I have a chronic illness and have no idea what my income is going to look like that far in the future. I could do well and make good money, I can end up on disability early, or I might not live that long *shrug*

I’ve been reading about the popularity of low cost index funds and going more aggressive or conservative, but regardless, do people just invest both their IRA and 401k in the same fund? I don’t anticipate trying to pick stocks, and the other kinds of investments seem much more esoteric.

 

income during your retirement. Which includes your 401k withdrawals and I believe social security too though don’t take my word in that

So if you’re making 200k a year, retire, and then only withdraw enough to live on 70k a year you’re only playing taxes on that 70k. Which means it’s better to get the tax deduction on the 200k income

On the other hand, if you’re only making 70k but plan to live off 150k a year in retirement… then maybe Roth makes sense

 

NCLH announced a better than expected earnings report today. To the moon!*


*probably not because the Fed is expected to raise rates again this week, but still.

 

So our state's deferred retirement plan is through Voya. It appears we can choose three different paths--one that's basically "set it and forget it", based on the planned retirement date, one where we have SOME say in the investments and can choose where some of the money goes (I can post a screenshot of that option later if it'll help), and then one where we're in total control.

Anyone have any experiences with these? And anyone know if there's any real huge difference between a 403b and a 457b?

 

So I was just reading up on how apparently, if you die, the capital gains on your stocks literally never gets taxed. If you leave a large enough estate sure the inheritance tax kicks in, but say you invested $100,000 in the S&P back in 1985. Today it would be worth around 2,500,000. If you sell it, you owe around 500k in taxes on all those gains, as you should. But if you wait to die, leave it to your kids... they won't anything.

I know the whole tax system is designed to benefit the rich but that just seems like total bullshit

 

My travel stocks are all blowing up today what happened why is today good for travel stocks haha

 

Start of summer travel maybe?

 

I think I'm gonna buy some Novavax stock. It'd be by far the riskiest thing I've done I think based on what I've read about the company. BUT if things go right with their booster and the FDA expands availability, there could be a huge boost to their stock price. They're protein based vaccine instead of mRNA so the ability to market it to mRNA skeptics is there.

 

I'm a more aggressive investor so I always choose my retirement investments, generally just heavy in vanguard ETFs.

Is your 403b a Roth?