Investing: Difference between revisions

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# Checking account

* 1-3 will be tax-advantaged (either tax-free or tax-deferred)

* 1-3 will be tax-advantaged (either tax-free or tax-deferred) since they are retirement accounts

* 4-6 will not be tax-advantaged

==401(k)/403(b)==

A 401(k) or 403(b) is an employer-sponsored retirement plan.

That means, it is managed by a company cooperating with your employer.

If you work for a for-profit company, you will have a 401k.

If you work for a public school or non-profit company, you get a 403b.

If you work for the federal government, you will have a thrift savings plan.

For the most part, 401k and 403b rules are identical.

* Employees can contribute up to $19,500 for 2020 ($19,000 in 2019) [https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits]

** These are called "elective deferrals" which are tax-deferred. You may also contribute after-tax deferrals subject to the total maximum contribution below.

* In total, you can add up to $57,000 to your 401k each year, or up to 100% of your income, whichever is lower. This includes both your contributions and your employer's contributions

==Individual Retirement Account (IRA)==

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===Traditional IRA===

In a traditional IRA, you deposit pre-tax money.

In a traditional IRA, you deposit pre-tax money (see notes).

Thus, your deposit counts as a tax-deduction.

You pay taxes when you withdraw your money.

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* You must start taking required minimum distributions (RMDs) at age 72

* No more contributions after age 70.5

* While there are no income limits to contributing to a traditional IRA, there are income limits to deducting from your taxes

** See [https://www.irs.gov/retirement-plans/ira-deduction-limits IRA Deduction Limits]

** To avoid being double taxed on your Traditional IRA contributions, be sure to complete [https://www.irs.gov/forms-pubs/about-form-8606 IRS Form 8606]

===Roth IRA===

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===Backdoor Roth IRA===

~~===Mega Backdoor~~ Roth IRA~~===~~

If you are a high-earner and believe you will earn more money in retirement,

you may want to do a backdoor Roth IRA to grow your retirement account tax-free rather than tax-deferred.

~~==ETFs==~~

;Basic Idea

~~Exchange-traded funds. Typically these will have~~ a ~~fee called an expense ratio.~~

* Contribute to a traditional IRA

~~However, since they are not usually actively managed, their fees are often lower than mutual funds.~~

* Convert the traditional IRA into a Roth IRA

~~The expense ratio is measured in basis points.~~

~~25 basis points is an annual fee of 0~~.~~25%~~.

;Notes

~~===Stocks===~~

* To avoid tax complications, you should eliminate all other pre-tax IRAs beforehand by rolling them over to a 401k. Otherwise, you will be subject to the pro-rata rule.

====~~S&P 500~~====

* [https://www.ssga.com/us/en/individual/etfs/funds/spdr-sp-500-etf-trust-spy <code>SPY</code> SPDR S&P 500 Trust ETF]

===Mega Backdoor Roth===

** Expense Ratio: 0.0945%

Requirements: Your 401k allows after-tax contributions and non-hardship withdrawals.

* [https:~~//investor.vanguard.com/etf/profile/VOO <code>VOO</code> Vanguard S&P 500 ETF]~~

** Expense Ratio: 0.03%

** Holdings: 512

* [https://www.ishares.com/us/products/239726/ishares-core-sp-~~500~~-~~etf <code>IVV</code> iShares Core S&P 500 ETF]~~

** Expense Ratio: 0.~~04%~~

*** Holdings: 505

~~====Total US Stock Market====~~

;Basic Idea:

* [https:~~//investor.vanguard.com/etf/profile/VTI <code>VTI</code> Vanguard Total Stock Market ETF]~~

* Max out after-tax contributions to your 401k

** Expense Ratio: 0.03%

* Rollover or withdraw the after-tax portion to a Roth IRA or Roth 401K

** Holdings: 3,592

* ~~[https://www.schwabfunds.com/public/csim/home/products/exchange_traded_funds/summary.html?symbol=SCHB <code>SCHB</code> Schwab U.S. Broad Market ETF]~~

** Expense Ratio: 0.03%

** Holdings: 2,477

* [https://www.ishares.com/us/products/239724/ishares-~~core-sp-total-us-stock-market-etf <code>ITOT</code> iShares Core S&P Total U.S. Stock Market ETF]~~

** Expense Ratio: 0.03%

** Holdings: 3,685

==~~Brokers~~==

==ETFs==

~~===Vanguard===~~

Exchange-traded funds. Typically these will have a fee called an expense ratio.

~~===Robinhood===~~

However, since they are not usually actively managed, their fees are often lower than mutual funds.

The expense ratio is measured in basis points.

25 basis points is an annual fee of 0.25%.

The following classifications are stolen from Wealthfront and Acorns

==Robo-Investors==

~~===Acorns===~~

~~{{ main | Acorns (company) }}~~

~~You can select between 5 different portfolios of ETFs based on your risk level.~~

~~====Later====~~

~~Acorns later is an IRA account. ~~

~~They offer a traditional IRA, Roth IRA, and SEP IRA. ~~

~~You can signup and deposit money but you have no other choices. ~~

~~Your portfolio is selected by Acorns based on your age.~~

===Wealthfront===

; [https://www.wealthfront.com/c/affiliates/invited/AFFA-BMT8-AIJ3-FS7E Referral]

;~~Benefits~~

* Tax-Loss Harvesting

; Cash Account

~~====~~Cash Account~~====~~

Wealthfront offers a cash account.

Wealthfront offers a cash ~~(i.e. savings)~~ account.

This account is distributed between up to several banks so it is FDIC Insured up to $3 million <ref name="wealthfrontfdic" />.

This account is distributed between 4 banks so it is FDIC Insured up to $1 million

==References==

{{reflist|refs=

<ref name="wealthfrontfdic">https://www.wealthfront.com/blog/wealthfront-fdic-insurance/</ref>

}}

@@ Line 8: / Line 8: @@
 # Checking account
-* 1-3 will be tax-advantaged (either tax-free or tax-deferred)
+* 1-3 will be tax-advantaged (either tax-free or tax-deferred) since they are retirement accounts
 * 4-6 will not be tax-advantaged
+==401(k)/403(b)==
+A 401(k) or 403(b) is an employer-sponsored retirement plan.<br>
+That means, it is managed by a company cooperating with your employer.<br>
+If you work for a for-profit company, you will have a 401k.
+If you work for a public school or non-profit company, you get a 403b.<br>
+If you work for the federal government, you will have a thrift savings plan.<br>
+For the most part, 401k and 403b rules are identical.
+* Employees can contribute up to $19,500 for 2020 ($19,000 in 2019) [https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits]
+** These are called "elective deferrals" which are tax-deferred. You may also contribute after-tax deferrals subject to the total maximum contribution below.
+* In total, you can add up to $57,000 to your 401k each year, or up to 100% of your income, whichever is lower. This includes both your contributions and your employer's contributions
 ==Individual Retirement Account (IRA)==
@@ Line 19: / Line 31: @@
 ===Traditional IRA===
-In a traditional IRA, you deposit pre-tax money.
+In a traditional IRA, you deposit pre-tax money (see notes).
 Thus, your deposit counts as a tax-deduction.
 You pay taxes when you withdraw your money.
@@ Line 27: / Line 39: @@
 * You must start taking required minimum distributions (RMDs) at age 72
 * No more contributions after age 70.5
+* While there are no income limits to contributing to a traditional IRA, there are income limits to deducting from your taxes
+** See [https://www.irs.gov/retirement-plans/ira-deduction-limits IRA Deduction Limits]
+** To avoid being double taxed on your Traditional IRA contributions, be sure to complete [https://www.irs.gov/forms-pubs/about-form-8606 IRS Form 8606]
 ===Roth IRA===
@@ Line 42: / Line 56: @@
 ===Backdoor Roth IRA===
-===Mega Backdoor Roth IRA===
+If you are a high-earner and believe you will earn more money in retirement,
+you may want to do a backdoor Roth IRA to grow your retirement account tax-free rather than tax-deferred.
-==ETFs==
+;Basic Idea
-Exchange-traded funds. Typically these will have a fee called an expense ratio.
+* Contribute to a traditional IRA
-However, since they are not usually actively managed, their fees are often lower than mutual funds.
+* Convert the traditional IRA into a Roth IRA
-The expense ratio is measured in basis points.
-basis points is an annual fee of 0.25%.
+;Notes
-===Stocks===
+* To avoid tax complications, you should eliminate all other pre-tax IRAs beforehand by rolling them over to a 401k. Otherwise, you will be subject to the pro-rata rule.
-====S&P 500====
-* [https://www.ssga.com/us/en/individual/etfs/funds/spdr-sp-500-etf-trust-spy <code>SPY</code> SPDR S&P 500 Trust ETF]
+===Mega Backdoor Roth===
-** Expense Ratio: 0.0945%
+Requirements: Your 401k allows after-tax contributions and non-hardship withdrawals.
-* [https://investor.vanguard.com/etf/profile/VOO <code>VOO</code> Vanguard S&P 500 ETF]
-** Expense Ratio: 0.03%
-** Holdings: 512
-* [https://www.ishares.com/us/products/239726/ishares-core-sp-500-etf <code>IVV</code> iShares Core S&P 500 ETF]
-** Expense Ratio: 0.04%
-*** Holdings: 505
-====Total US Stock Market====
+;Basic Idea:
-* [https://investor.vanguard.com/etf/profile/VTI <code>VTI</code> Vanguard Total Stock Market ETF]
+* Max out after-tax contributions to your 401k
-** Expense Ratio: 0.03%
+* Rollover or withdraw the after-tax portion to a Roth IRA or Roth 401K
-** Holdings: 3,592
-* [https://www.schwabfunds.com/public/csim/home/products/exchange_traded_funds/summary.html?symbol=SCHB <code>SCHB</code> Schwab U.S. Broad Market ETF]
-** Expense Ratio: 0.03%
-** Holdings: 2,477
-* [https://www.ishares.com/us/products/239724/ishares-core-sp-total-us-stock-market-etf <code>ITOT</code> iShares Core S&P Total U.S. Stock Market ETF]
-** Expense Ratio: 0.03%
-** Holdings: 3,685
-==Brokers==
+==ETFs==
+{{main | Exchange-traded fund}}
-===Vanguard===
+Exchange-traded funds. Typically these will have a fee called an expense ratio.<br>
-===Robinhood===
+However, since they are not usually actively managed, their fees are often lower than mutual funds.<br>
+The expense ratio is measured in basis points.<br>
+basis points is an annual fee of 0.25%.<br>
+The following classifications are stolen from Wealthfront and Acorns<br>
 ==Robo-Investors==
-===Acorns===
-{{ main | Acorns (company) }}
-You can select between 5 different portfolios of ETFs based on your risk level.
-====Later====
-Acorns later is an IRA account.<br>
-They offer a traditional IRA, Roth IRA, and SEP IRA.<br>
-You can signup and deposit money but you have no other choices.<br>
-Your portfolio is selected by Acorns based on your age.
 ===Wealthfront===
 {{main | Wealthfront }}
 ; [https://www.wealthfront.com/c/affiliates/invited/AFFA-BMT8-AIJ3-FS7E Referral]<br>
-;Benefits
-* Tax-Loss Harvesting
+; Cash Account
-====Cash Account====
+Wealthfront offers a cash account.
-Wealthfront offers a cash (i.e. savings) account.
+This account is distributed between up to several banks so it is FDIC Insured up to $3 million <ref name="wealthfrontfdic" />.
-This account is distributed between 4 banks so it is FDIC Insured up to $1 million
+==References==
+{{reflist|refs=
+<ref name="wealthfrontfdic">https://www.wealthfront.com/blog/wealthfront-fdic-insurance/</ref>
+}}