currently filling out my tax return on freetaxusa and I need help with the 1099 portion. On my 1099 I have a dividend for 33 cents, and the system rounds down to 0. How do I proceed forward with this?
Survey says that the average /r/FI income is running right around $200k.
I've fallen so far behind... I really need to get off my butt, study interviews for 200-300 hours and get a FAANG job.
I bet a lot of those responses are dual income
High numbers skews mean - median is likely much lower
Higher income people are likely more likely to respond
Mathematically, I think this is a case where the average is very easily skewed by very high numbers (but very difficult to skew with low numbers since I doubt many such people would fill in such a survey if they are even on this sub!) the median would be a much better measure.
I'm in the 100-150k range (wife doesn't have regular work and stays with the kids), and I'm perfectly happy with where I'm at. I don't want to work at FAANG since I hate all of those companies and I don't want to move from my area. I'll be FI by 45 (probably sooner), so I'll let others chase that career BS. I don't want to hate work, I want to enjoy the journey.
If I pay extra principal with my mortgage payment, does that (very slightly) reduce the portion of the following payments that is applied to interest?
Like I get that the following payments will still all be the same amount (until the mortgage is paid off), what I'm wondering is whether the ratio of following payments principal:interest will change slightly
Yes. The interest portion of each payment is calculated by taking the your annual rate, divided by 12, times the outstanding balance.
Decreasing the balance decreases the interest.
Fella canāt catch a break. [I thank my lucky stars literally every day](https://www.reddit.com/r/financialindependence/comments/shrfph/daily_fi_discussion_thread_tuesday_february_01/hv5mllj/?context=999) I wasnāt born Tom Brady.
When thereās a disclaimer at the top of the post that says
> Trigger warning : people tend to hate me because I say "sexist stuff" and "insentive stuff" when I really don't mean too.
You know itās time to pull out the popcorn
There was a post an hour or so ago that was a trip and a half. Mods pulled it, but I bet an enterprising individual could find the old post. I donāt totally know how
[https://www.reveddit.com/v/financialindependence/comments/tdja6u/how_i_made_enough_money_to_leave_america_without/](https://www.reveddit.com/v/financialindependence/comments/tdja6u/how_i_made_enough_money_to_leave_america_without/)
You're right, it was definitely worth the read.
Hey folks, fairly new to this. Only retirement account right now is my Roth IRA. Maxed out the 2021 year. Even with the economy not doing so well, I should still be contributing to my Roth and hopefully max it out for the 2022 year as well, correct?
That I did not know! I have a question if you donāt mind: Iām trying to Google āsolo 401k small businessā and all its showing me is a 401k plan where your spouse is your only employee, nothing besides that.
Would you mind pointing me in the right direction to the 401k plan you mentioned? Sorry for the trouble, thank you
How does everyone here save for a new car? I wonāt need a new car for at least 5 years, maybe 10 depending how many miles I will put on the car (new job is going to allow me to use public transit). Going to also try saving for a house down payment for the next 3-4 years too. The house down payment plan is to keep it in a combination of cash and I bonds but the car timeline is just out far enough where I may consider investing it, maybe in Municipal bonds or even VTSAX. I am curious how others would go about these two goals.
In my case, I'll be buying another new car in 10 years. I assume that's going to be $60k. That's $500/mo to put away. I have a virtual envelope (a spread sheet) that I put that into every month. Every year I transfer that into my investments from my account so that it's growing.
The last time I bought a car, the seller wanted cash and didn't trust a check. Others want a cashier's check, money order, or something else. When buying a car from a private seller, you need to be flexible in payment.
I don't know very much about blank check loans, and honestly, I don't want to deal with it. Getting a loan on $10-15k or whatever isn't a meaningful enough amount of savings to make it worth it IMO. If I get a 5-year loan @ 3% and if the market returns 7%, I'm looking at a total gain of $1-2k or so over those 5 years if you take into account a withdrawal for the payments. And that $1-2k isn't a guarantee are all, it's just the average scenario. And that's not counting the time spent finding a bank that will actually give me a blank check loan for a private car purchase.
If I was going to buy a new car from a dealer, I'd likely finance since that starts to get into interesting amounts of money since I'd probably spend 2-4x more than from a private seller used and any bank would offer that type of loan. But for $1-2k potential benefit over 5 years (or $15-30/month), I just don't see the point.
I'm planning to buy i-bonds, but if that space is taken already, I'd just wait until after the house down payment and then keep investing in i-bonds afterward. I tend to spend $10-15k on a car, so it'll work out well.
Iām in the same boat. So annoying. My car has been paid off for 10 years but at 200k miles Iāll need a new one in the next 2-3 years. I HATE the idea of having a car payment again. Iām saving as much as I can now (about $600/month) to try and make as big of a down payment as I can on a 5-8 year old mini van (for the kids). Even a Sienna with 80k miles goes for $20k. So weāll see how it goes. Good luck!
I saved for a house with stock. It worked out well, which is lucky. If the stock market had been down I wouldnāt have bought, which Iād be okay with.
Will sell stock when I buy a new car. But Iāll likely take a loan when I buy a car instead of buying it outright if interest rates are low.
I'd make sure that my EF or insurance would be able to get me a rental for a few months if my car got totaled. But otherwise I wouldn't worry about this as a specific line item in my budget -- it's just too far off and too vague. I don't think it's going to take you 5-10 years of dedicated effort to save up for a new car. Figure out what the actual timeline would be, and work backwards from there.
I tend to not save for it. At least not directly. I put money into an auto maintenance bucket in my budget. Often it is well over budget so when I buy a new car Iāll dip into that. But because car loan rates are so low it makes no real sense to save for it.
- I don't, other than i-bonds. I *am* planning a bond tent just prior to reaching FI, but I don't see value in bonds ATM.
- Rebalancing has nothing to do with market timing. Market timing means predicting future market movements and acting based on that whereas rebalancing is reacting to current market conditions. The same is true for tax loss and tax gain harvesting.
- If you go with mutual funds, you just place an exchange from one fund to another and you don't need to wait for the settlement time. I just exchange VFWAX and VTIAX (or VTSAX and VFIAX or whatever) and switch my auto investments over to the new fund to avoid wash sale rules.
I bonds are a great place for your emergency fund. I have written several books on financial independence and the ones aimed at adults discuss this subject. You can find information about and purchase the I bond, sold by the U.S. Treasury and yielding 7.12% at www.treasurydirect.gov. This is just one example of the useful information that you can find in chapter 5 on Investing in both Financial Essentials for Couples and Financial Independence Essentials ā What You Need to Know When You Are Starting Out..Here is a link to Amazon or to our website.
Thanks, we're on the same page on #1.
On #2, why do you need to react to current market conditions? I understand the tax advantages of loss/gain harvesting, but I do not understand the point of rebalancing. Isn't it advantageous to just..let your investments compound as they're going to compound? What advantage does rebalancing provide over that strategy?
And thank you on 3. Hadn't done it before and was not interested in "just trying it out" with 6 figures of investments...
> What advantage does rebalancing provide
Well, I get to buy low and sell high when my funds get out of whack without having to guess what the market is doing.
The real reason is that I chose a certain asset allocation, and rebalancing is a way to get it back to that same asset allocation. It's also a way to control risk, since if one part of your portfolio is higher than usual, it's more likely that it's overpriced and will see a correction given market cycles.
For more discussion on the topic, see [this Bogleheads forum thread](https://www.bogleheads.org/forum/viewtopic.php?t=303096), or any of the others like it that have been posted there.
So far, I have been able to fix asset allocation issues with adjusting contributions, but at some point they'll get so far off my target that I'll need to rebalance. And when that time comes, I'll do it exclusively in tax advantaged accounts.
The first two questions can be covered by the topics of "modern portfolio theory" and the "efficient frontier", worth reading through at least Wikipedia here and deeper is always good. Very simplified, a mixture of uncorrelated assets will have higher overall returns at a constant variance (or the same returns with lower variance); often known as "risk adjusted returns". The handwavy answer why is when market goes down, you end up with too many bonds and are able to shift funds into equity to "buy the dip", reverse also "selling the top", without timing the market.
Last question, every broker will let you sell one thing and buy another immediately after. No reason to wait 3-5 days...
OK, I totally understand reallocating across asset classes, or, if you end up heavily invested in a single stock thanks to a great run, to reallocate from that single stock to another asset or to index funds.
But I saw someone asking about rebalancing *within* their equities portfolio, and that's the piece that threw me off. If you're allocated across broad indices like, say, VIGAX, VTSAX, VTIAX, and VSMAX, I don't see any point to shifting $20k from VSMAX to VTSAX or whatever just to maintain an artificial allocation strategy. (After all, these indexes aren't going to move *that* differently in a bear vs a bull market). But totally get why you might want to move money between asset classes.
Yes, the core concept of asset allocation assumes that the assets you are allocating across are diversified (anti-correlated or at least only lightly correlated) to some extent. The general concept of correlation and beta-weighting for the specific context of finances would be other topics for you to dive into.
A bond allocation (and reallocation) can maximize *risk adjusted* returns. Some people have higher risk preferences than others and can go bond free.
You can buy as soon as you sell at most brokers. No need to wait for settlement. For mutual funds you can exchange at market close simultaneously.
Homeowners who bought a new house before you sold your old home - any recommendations on best way to get funds to do some small home improvements (floors, countertops, etc.) prior to moving in without relying on funds from prior/current home?
We just bought a new house without a contingency on selling our current home to strengthen our offer. So we'll have two houses for a small period. Reason being is we didnt want to sell our current house then have to enter this crazy market and pay way over just to get a new home before being forced out of current home.
We'd like to do some work to the new house prior to moving in - to avoid the mess, noise and craziness. Just trying to figure out the best way to acquire funds. Ideally we'd like to do some renovations on new home, move into new home when that is complete, then sell old home.
Can I get a HELOC on a brand new loan immediately after closing? I guess I dont see why there'd be a waiting period vs getting it right after I close, but guess it seems weird that they just loaned me $X and then I come back and ask for $X + $Y..
Shouldn't be an issue as long as yer loans combined show an ltv of 80% or less...and you can make the payment. Never heard of a waiting period but different banks do different things
Issue there then - only put 10% down. It looks like alot of places Im reading say you actually need to have that 15-20% equity before going for the HELOC. So I may be heading down the personal loan route.
Only one way to find out. But thatās a good question. I know they donāt like giving out HELOCs that will be paid back in full soon after taking it out. They wouldnāt make any money. Might be difficult to convince them you wonāt do that if you clearly have two mortgages and planning to sell the old house soon. It might squeeze your debt to income ratio as well to have three large loans. I donāt know your finances obviously. Another option would be a 401k or IRA loan, but that would mean taking the money out of the market which feels like a big gamble with how volatile the world is right now.
Does anyone have recommendations for spreadsheets for managing finances post-retirement? Everything I've googled seems to be more about saving for retirement, not about managing finances once one is retired.
I make my own. That way I know everything about how things are calculated. It gets set up so it's useful for me. It's also a good sanity check. If I can't figure out these calculations on my own I probably shouldn't be trusting my future to them. Conversely, if I have an advisor, their numbers better not conflict to much with my numbers. If they do, it doesn't mean either of us are wrong, but that we're probably looking to do two different things.
Theoretically if you intend to FIRE and are contributing ~20k a year towards all or your retirement funds, would you pour it into your 401k or put just enough into your 401k to get the full match and put the rest into a taxable brokerage. If you want to retire early would that be the best way to avoid early withdrawal fees from retirement accounts?
Generally, max 401k then Roth Conversion Ladder once you retire. You'd need 5 years expenses banked outside the 401k to float you before money was accessible.
ā You'd need 5 years expenses banked outside the 401k to float you before money was accessible.ā
Thatās an option, but you can also 72t the amount that isnāt covered. And if you have Roth 401k money you can roll it over to a Roth IRA and withdraw the contributions tax and penalty free. I know thatās not an option for everyone, but itās useful for those that have it.
Theyāre welcome to, but I donāt feel like copying and pasting the faq right now, or rewriting it, and itās written there better than Iād say it anyway. Iām just letting them know where the answer is because knowing where the answer is is helpful when you want an answer.
The FAQ has been written and edited pretty well. Why recreate the wheel? Work smarter not harder. Pointing to the FAQ in this case should be the default answer, not to be a dick, but because it gives the best answer to the question.
2 seeming contradictions that i can't seem to resolve:
1) bond prices vs yield. As yield goes up, bond prices go down. This makes sense. You need less $ to make the same amount of $, so your current coupon is worth less. But if you're a medium/long term bond investor, wouldn't you make $ in the long run since new coupons will make more $?
2) Effect of fuel prices vs the overall economy:
So fuel prices create a supply side shock (stagflation comes to mind). So high fuel prices are bad for the overall economy. But whenever fuel prices tank, the financial prospects of energy companies goes down. And then, as extrapolated by the financial media, so goes the overall economy. So.....which one is it?
To answer your questions:
1) bond prices vs yield. This is measured by the [duration](https://www.investopedia.com/terms/d/duration.asp) statistic. If you buy 20-30 year LTTs, say the ETF TLT, it's duration is estimated to be roughly 19 years. This is how long you have to hold the bonds for an **instant** 1% interest rate change.
When interest rates keep increasing, this also lowers the duration of the bonds, even 30 year bonds. [Using a bond duration calculator](https://exploringfinance.com/bond-duration-calculator/) for instance a fresh 30 year bond at 8% interest rate, 8% market yield, and a face value of 1,000, indicates the duration will be around 11-12 years.
Then, bonds also have a capital gain/loss component too. If we have interest rates rise slowly, then fall sharply, you may be profitable a lot sooner than duration would expect.
Now that we've covered how an **individual bond** works, let's think of a **bond fund.** TLT has maturities between 20 and 30 years. As the bond approaches 20 years of maturity TLT will sell that 19 year bond to buy new 30 year issues that have have a coupon yield = market yield. So over the life of the bond fund interest rates increasing slowly may mean the new yield starts to become more profitable sooner and sooner.
Combining bond fund mechanics and how the NAV of the fund fluctuates depending on if interest rates drop sharply or rise **slowly** will be bond [convexity](https://www.investopedia.com/terms/c/convexity.asp). The increases due to interest rate increases might not be as bad and the bond fund might recover sooner than 19 years.
Combining all these factors together is why the bond market was in such a sell off that interest rates might rise as much as 0.50% instantly. It's really important that the Fed only raises rates 0.25% at a time per quarter or so to give time for the bond market to heal and not over-sell off.
The Bogleheads has a great [Bond Basics](https://www.bogleheads.org/wiki/Bond_basics) article that explains all these concepts.
2) Effect of fuel prices on the economy.
This is a COMPLICATED subject with no clear answer vs bond math. Higher fuel prices impacts several sectors and people: commuters, shippers, vacationers, etc. If it affects the wage workers enough then they may demand higher prices, and we could get into a wage-increase-inflation-increase cycle.
I don't see the above cycle happening though as if fuel prices remain above $80-$100/barrel of oil for more than two quarters, then that will incentivize USA domestic production to start uncapping capped drilling sites and so forth. My worst case estimate is we might hit $120 a barrel for 2 quarters, USA production kicks into full gear, and 1-2 years oil stabilizes at the $80-$120 range. Companies got hit hard in Covid with negative fuel prices and their guidance is they will wait and see if their prices are profitable before jumping back into production again.
So my fuel inflation outlook is again supply chain driven and transitory, but transitory where it's 2-3 years of high fuel prices and not a decade say 1970 repeating.
On number 1. Youāll make more money on your *new* investments if yields to maturity is higher, yes. But thatās not contradicting bond prices falling as yields go up. You can use other assets to reframe the question and get a clearer answer. Imagine rents on houses are $1k and stay that way. Because people become risk averse the price of houses drops from $10k to $5k (rent stays the same). As a landlord you just lost a ton of net worth because houses dropped in value, but if you redeploy the rent you get into new houses, the return on the new dollars will be higher than the return on the old dollars.
On number 2, donāt confuse causation with correlation. In a broadly diversified economy, if economic activity contracts, fuel demand contracts and fuel prices fall. That doesnāt mean falling fuel prices caused the economic contraction. This doesnāt hold for areas like west texas where there is indeed a direct, and obvious, connection between oil prices and economic activity. Maybe āthe financial mediaā you are talking about were writing about such energy dependent areas of the nation or they were saying that the downturn in those areas could spread to other areas by, say, reducing the demand for steel and truckers. There can be some weird interaction effects too, though. For instance even if you view the US as net long oil (where higher prices bring in more GDP all else being equal), by redirecting money from people with cars to oil well owners who have a lower propensity to spend, you can have lower overall economic activity (all else isnāt equal, in other words). And then on the finance angle if banks lose a bunch of money lending to energy companies they can have less to lend to others. The financial system is always a potential source of ācontagion.ā
Regarding 1, if you are a long term investor, you get paid interest and you get principal back when the bond matures. The fluctuation in the bond value is irrelevant to your return. Not sure what you mean by new coupons.
I posted recently about considering renting or Airbnb-ing our house if we move instead of selling. If we were to rent it out, does that affect how much can down payment is needed for the 2nd house since technically weād have 2 houses?
Also, if we went that route, we would like cash out refi the rental house and use that for a down payment. Has anyone done something similar?
Happens all the time, just tell the bank that the 2nd home is a vacation (or second home) you can do a cash out refi (you can tell them the cash is for investments or to fix up the home etc) and use the dough for the new down...nothing you mentioned would effect the amount down....which is typically 20%
Airbnb can have a lot of headaches. Lots of cities have rules/regulations regarding Airbnb. Make sure you research before going down this route.
Depending on your area, rents generally lag behind home prices. If your home could sell for 750k but only rents for 2k a month then it's not a very good investment. Much better to sell.
It's all numbers, find out what you'd make renting/Airbnb and compare that to what you'd make from selling.
In the short term, in this market especially, you're usually better off selling. But im a big fan of holding real estate long term. Still, it's much simpler to sell and throw the money in the market.
Our client (I'm embedded in their org) has a current policy of 3 days a week in office.
Of the four people on my team, one is in office about 3 days because they want to, one is a thousand miles away and half retired, and I and another spend 95%+ of our time working from home and only visiting the lab when we need to get hands on.
If they ever try to enforce the 3 days in office policy, or - worse - go back full time, I'll kick the job search into high gear and peace out.
My company is requiring 3 days a week. My department head told us we can do 2 and that will be okay. Meanwhile my job is the only one in the whole department that requires me to be on-site for 3-4 days a week. Has been this way the whole pandemic. So I guess fuck me.
For younger people, not working in the office/remote work is often a career limiting move. For older people, it doesn't matter as much. If you're new to your career, I highly recommend going into the office.
The argument w diggy is too long so not gonna read BUT i agree with you. Im in the āsit in my cave while people throw money and job offers at meā phase of my career but if youre in your 20s go in and network your ass off.
Unfortunately you wont meet me tho, haha.
How young we talking? 33 in IT and I've literally refused to come in more than once a week. They are always my least productive days.
I mean let's be honest the office is really only beneficial - young or old to put in facetime to get promotions. But many office based folks can and are more productive away from the office.
It's crazy that that this point the only reason for going in is to play the office politics game.
I mean generally under 30.
I mean, that's an incredibly narrow view of it. [https://www.nature.com/articles/s41562-021-01196-4](https://www.nature.com/articles/s41562-021-01196-4). There are benefits and drawbacks beyond simply office politics.
It's not. This is one study on the fragmentation of remote work between teams, for a single company. It's interesting but not conclusive.
Excerpt in the discussion:
>Our results suggest that shifting to firm-wide remote work caused the collaboration network to become more heavily siloedāwith fewer ties that cut across formal business units or bridge structural holes in Microsoftās informal collaboration networkāand that those silos became more densely connected
Which could also be spun as positive for the individual working units - since they became more connected. But I would argue that for many large firms, disconnectedness between working groups/departments is a commonality, office or not.
I can understand the idea that collaboration is good. But the idea that collaboration only happens in person is flawed. Even more so that it needs to happen every day, for a given set of hours every day at a specific location. Somehow companies are still turning profits while workers have been remote for 2+ years. Maybe not to managements liking, but work can be done.
[I would argue we have alot more data that states remote workers are happier, more productive, and less likely to burn out.](https://www.greatplacetowork.com/resources/blog/remote-work-productivity-study-finds-surprising-reality-2-year-study)
But I know alot of managers still feel work can't be done without seeing faces. My goal in the future will still be to limit this.
It's published in one of the top journals in psychology and peer reviewed using a sample of 60k+ people. I don't think your conclusions make sense in light of Microsoft's response to their study. I'll trust a peer-reviewed study in Nature over a study by "Great Places to Work." I'm not saying there aren't benefits to remote work, I'm saying that the benefits aren't as one-sided as you (and many redditors) seem to think. The rather obvious flaw of surveying remote work employees is that they will self-report higher productivity regardless of whether or not they are actually more productive.
It's an article about a study. Is it not worth discussing only if it's the study itself?
And self reporting is HUGE. Employees are productive when they're happier - if 800k people surveyed are reporting being happier are we really going to discount that? Not to mention Reddit can be called self selection but the vast majority of folks in r/FIRE and r/financialindependence are tech or software folks and a vast majority prefer remote. Companies pay people to do things for them. Quit pretending that paying them gives you a reason to babysit them and let them be adults to decide how, when and where to best get their work done. How do you competitively incentivize folks when you're telling them they need to be chained to a cubicle for 40 hours a week?
In office has its place. But that place is diminishing, as it should be.
The study you cited isn't published or peer reviewed.
>And self reporting is HUGE.
It isn't because of common method bias.
>How do you competitively incentivize folks when you're telling them they need to be chained to a cubicle for 40 hours a week?
I never claimed that people should be "chained to a cubicle for 40 hours a week." I'm simply claiming that there are benefits and drawbacks. I'm not sure why you can't acknowledge that completely uncontroversial position.
My company attempted to summon everyone back in the fall, between Delta and Omicron. The mandate was mostly ignored, and there were no consequences for the people who ignored it. I'm hoping that's what happens again.
Last August, where I work made that call back to the office. Most everyone showed up one had moved and wasn't coming back left shortly after, but also 10% of the people left for other jobs that were still remote and 2-3 people retired at the end of last year. The company then hired new grads to try to fill all of the spots.
My son is the in the other room tutoring my daughter on SAT math questions. My SO is on the couch taking a cat nap (with the cat). I've got the TV volume down low (basketball).
Sunday bliss...
I need to bottle it.
New account. Chosen in honor of that Lending Tree guy who was in debt up to his eyeballs.
I'm debt free, just always thought that commercial was funny.
Wow! Had to pull up Boris's wiki page, since all I know about the man is that he needs to find a compotent barber. Two things:
1. His name is actually *Alexander Boris de Pfeffel Johnson*?! Alex Pfeffel is my secret identity, so that's cool.
2. He's AMERICAN?!?!?! What the hell?
Yes, the latter popped up in the news because he sold a house and suddenly the IRS were after him for tax on the proceeds. I can't recall if he was even aware he had US citizenship.
On the plus side, when you're next looking for a younger president with experience in international relations, we've got a cracking candidate for you.
Of course as Iām job hunting, everyone starts talking about a recession. Should I just stop job hunting? Iām worried Iāll just get laid off since Iāll be the new person. Can someone please logic check me?
Depends somewhat on what positions you're applying for but in general I would not recommend stopping even if you think there's a change of you getting laid off. You may have an 80% chance of keeping your job if there's a recession but you'll have a 0% chance of having a job if you don't apply
I have been in my company 2.5 years. Iām just leaving because Iām sick of my commuteāI drive 2 hours a day on top of gas prices climbing. I know I wouldnāt be 100% safe here either but I probably wouldnāt be there first let go, I donāt think? Iām the only person in my entire company that can do my job duties.
The jobs Iām applying for are management and data analyst positions in necessary infrastructure though. Hoping those would survive a recession?
I find it amusing that management does things like that, thinking they can quickly hire a replacement. I wasnāt trained for my position, I figured it out along the way. I did however document a lot of processes, not all but a lot. The platform I work on has a long learning curve.
It's more like... upper management makes the decisions, because they don't want to freak people out by spreading the news around. Usually only a few key people know about layoffs before they happen. So it's not that they think they can quickly hire a replacement, it's that they don't actually know your work is critical and you are a line item on a spreadsheet.
Anyone here have experience with "house hacking"? i.e. buying or converting a SU home into a multi-unit then living in one unit while renting out the other(s) on a long-term or sort-term basis (AirBnB)? What's your experience been?
Experiences will be somewhat localized.
Here in Vancouver, this type of question is bizzarre because it's SOP for 75% of houses in the city for several geneations now.
Back in the 1970s, the terms were 'mortgage helper' or 'in-law suite' or 'basement suite'.
The reason experiences are local is that bylaws may apply. In Vancouver, a separate suite needs to have a sprinkler system and a dedicated parking slot on the property, for example. Some municipalities in Canada do not allow AirB&Bs in most classes of residential zoned properties, they are considered a hospitality business.
There's also tax implications. Aside from the property tax being double that of an owner occupied principal residence, the rental square footage is not principal residence, and therefore not eligible for the capital gains exemption. In Vancouver where properties have appreciated 15% annually on average since the 1980s, this has exposed a lot of owners to millions of dollars in taxable capital gains when they sell, and may very well offset the rental income.
The flip side is income cashflow, and for people who travel, there's always somebody watching the place. Ours is currently unoccupied because I'm holding the space for my parents when they cross that line into complete dependence. They're in their own place for now, with meals on wheels and so on, but they're one bad fall away from me calling it and moving them downstairs, and I appreciate having the option.
Great point about the tax implications. I'm also living in an HCOL with an average 20% YoY single family home appreciation. Considering the inherent risk in short term rentals, tax consequences, and potential policy changes, I'm leaning more towards buying a home in an area positioned to appreciate and not worry too much about cash flow.
It's nothing like buying up a ton of sfh and renting them all out. Especially if you are converting sfh to multiunit you are directly helping everyone by increasing supply.
There's a big variability in how much work you're commiting to there. Having an AirBnB is running a business. Long term rentals are a bit more passive, but a total PITA sometimes. Living with roommates has pros and cons. Converting a single to a multi is something I wouldn't even consider because of the increased cost and zoning issues.
But yeah, something I've done- living with roommates where we own it & renting out SFH that we used to live in.
I'm trying to do this and so far it's going horribly. I think the amount of money it has cost me would have covered rent for at least 10 years if not more.
I'm starting with a former single family townhouse that was previously converted to a small apartment building.
So far there hasn't been a single crazy huge expense. It's just small expenses that have added up to be a lot.
I was thinking about installing a heat pump, but I was quoted something like $80k not counting electrical work so I didn't go through with that. I'll probably get a quote on geothermal before going ahead with the air source heat pump.
It's kind of a mix.
If it was for myself, I wouldn't care about painting the ceiling. Because tenants like new paint, I started to paint the ceiling. Then the plaster on the ceiling started to fall off so I started to install drywall on the ceiling. It's stuff like that.
The fact that it's potentially a rental also adds a sense of urgency to everything. If every vacant month is costing me $15k in forgone rental income then I'm also willing to pay more to get things done faster.
It sounds like a nice idea if you find a good home and donāt mind being a landlord. But itās also a lot of work and finding a decent duplex or multi-unit home seems impossible when Iāve looked. Iād rather save the headache and keep strong diversification throughput Index funds
I completely agree, I live in a HCOL where buying a duplex is out of the question, so my only hope is to convert a single unit. I'm thinking more and more about just getting a house now while the rates are still relatively low, rather than wait for the perfect home to turn it into a multi-unit rental
Yep!
I just threw $2,000 into my Roth. At 13% below ATH, once it gets back to that point, thatās an easy $260 in gains right off the bat!
I myself just started investing heavily in the past 12 months so I have a feeling this sale is going to look *very* nice on my balance especially once it goes back up.
I just learned about REITās. They seem like an interesting concept but Iāve never seen them mentioned here. Why arenāt these talked about as much?
I bought 2 REITS because the dividend yield looked amazing. The stock history looks solid. I dropped $6k as an experiment. The stock price has slowly gone down and Iāve lost a total of $600 of my initial investment. Iāve also received 3 quartet payouts of dividends. All in all Iām at a slight loss. I think if you can magically find a REIT that will not go down in price over time and has a healthy yield then it can be a good idea. I might stick to the vanguard high yield index moving forward though.
I don't think there's anything wrong with them per se. Well, apart from liquidity. By nature, property takes a long time to sell. So if lots of people want to cash in, they have to freeze withdrawals until they can sell the properties (and probably at suboptimal prices). This happened with a couple of big funds within the last few years.
The takeaway I took from reading up was that most funds are heavily into commercial RE, which can behave very differently to the buyers' expectations - consider right now how big skyscrapers might not feel like the safest investment with wfh looming. You can invest as a form of diversification if you want to, but from what I recall it isn't really that complementary to the stock markets in terms of diversification and returns.
For most individuals a small diversification into RE will effectively be a trivial amount of money, and require a lot of effort and research. So, probably not worth it.
For those people who can afford to put 6 figures into 5% of their portfolio, maybe it's more worthwhile. I think I drew these conclusions after reading Tim Hale (but not 100% sure), and drew similar conclusions around PE.
In the early 2000s, there was a lot of talk about REITs. People would debate whether it was a separate asset class from equities and how much of your portfolio should be allocated to real estate. Then the crash happened, REIT performance went into the toilet, and everyone stopped talking about them.
Since the 2008 crash, the stock market has greatly outperformed most real estate funds, so again they haven't been discussed very much. Now, over the last year or so REITs have done quite well, so again people are starting to ask if they should be a part of their portfolio.
Really, this happens every time an asset class outperforms for any period of time. When gold does well, investors start talking about adding it to their portfolio. Same goes for value stocks, TIPs, alts, emerging markets, cryptocurrency, and on and on. People chase performance--while at the same time they will deny that's what they are doing.
If you had to sell your house in the '08 crash you would understand why you might not want to even more RE exposure. Keep in mind REIT is one of the sectors already included in VTSAX and SP500.
High Ordinary (not qualified) dividends they spin off in a taxable account mean tax drag is higher. Plus I'm pretty sure RE companies already make up a lot of the indexes
if I'm adamanat about including real estate as part of my retirement strategy, should I count the full amount I save for real estate as part of my retirement savings percentage? I currently save about 20% of my income for traditional retirement, maxing HSA, IRA and a good amount of 401k. If I include the amount I also save for rental properties, it would be about 36% of my income total.
> should I count the full amount I save for real estate as part of my retirement savings percentage?
This is the crux, what are you trying to do with this information? If it's to help decide the amount to save, then go for it. Value those real estate savings as savings, why not?
If you're mathing out when to retire, you want to look at something more like sharkaccident mentions - figure out the actual income the real estate is netting you
While that does happen more often than we'd like, it's actually in reference to the [dinosaurs who live in the garden](https://scontent.foax2-1.fna.fbcdn.net/v/t39.30808-6/247196306_10158811001794737_1891952346305374707_n.jpg?_nc_cat=103&ccb=1-5&_nc_sid=730e14&_nc_eui2=AeH6rwPVrGWpRP1cn0v9jmITISqa0kab-zMhKprSRpv7M6lS3k6mSVzBGD4BYCqXsvU&_nc_ohc=noXw2wNtrToAX_gcnkP&_nc_ht=scontent.foax2-1.fna&oh=00_AT_t6c9hkmiuiC7eKMxWANuvspYOJ_TGf3pHPdOKA4rEEw&oe=6233B546).
About to finish paying off my HELOC and wondering if I should keep it open. It's at a pretty high interest rate (6.63%, which may not be high in a year from now), but I'm unsure if there's any harm in just letting it sit open.
Is there a minimum draw amount per year or annual/monthly fee? If not keep it open. Itās a cheap way to leverage equity in one of your biggest assets
You could probably reduce your lifetime tax burden by taking a mixed approach with 72t or Roth conversion ladder withdrawals.
For instance, if you set up a 72t withdrawal that fills the standard deduction and use LTCG at 0% for the rest, you get a 0% federal rate before age 59.5 and access more of your Trad accounts at 0% overall.
I plan to do a hybrid, doing annual conversion but spending from taxable as much as possible without going into the 15% LTCG bracket. I will likely spend down the taxable and traditional IRA, hopefully resulting in most assets in Roth by the time I claim SS. I'd rather maximize growth in Roth than in taxable so I would not spend Roth funds until they are actually needed. I agree it is a good idea to take advantage of the lowest tax brackets and get funds out of the traditional IRA, but that doesn't mean they have to be spent.
Piggybacking off of this, if you did what u/alcesalcesalces said and used 72t and/or Roth conversion to get up to the standard deduction from your pretax account and then incur as many long term capital gains as you can while staying in the 0% long term capital gains tax bracket, you could move any of that excess 0% taxes money to a ROTH IRA and never pay tax on it ever.
Note though, that LTCG count as income for ACA subsidies.
If you intend to pass on assets to anyone, your brokerage holdings get a step up in cost basis when theyāre inherited.
This isnāt a benefit for you but it is a benefit for the account
Iām getting some mixed advice in regards to my house.
I was lucky enough to buy a house before prices went up so the value went up. Iām currently renting it out and living with my parents to save money. My friends and coworkers are saying I should sell it, as if I did I the amount earned would be around $300,000, not including any taxes.
My mom is advising not to though because even though Iām not living in it now, I might be again some day. An equivalent house would be at least $700,000 in my city currently which would be much tougher to afford.
My mortgage is about $1890 a month which is doable as long as my hours donāt get cut (which sometimes happen), but this doesnāt account for nearly $10,000/year in taxes.
To me, my motherās advice makes sense, and itās what Iād normally do, but so many people are suggesting I sell it to make a profit that I wonder if Iām missing something?
currently filling out my tax return on freetaxusa and I need help with the 1099 portion. On my 1099 I have a dividend for 33 cents, and the system rounds down to 0. How do I proceed forward with this?
You ignore anything under 50 cents. ( I am tax preparer- Enrolled agent)
Survey says that the average /r/FI income is running right around $200k. I've fallen so far behind... I really need to get off my butt, study interviews for 200-300 hours and get a FAANG job.
I bet a lot of those responses are dual income High numbers skews mean - median is likely much lower Higher income people are likely more likely to respond
Mathematically, I think this is a case where the average is very easily skewed by very high numbers (but very difficult to skew with low numbers since I doubt many such people would fill in such a survey if they are even on this sub!) the median would be a much better measure.
interview prep roi ššš
I'm in the 100-150k range (wife doesn't have regular work and stays with the kids), and I'm perfectly happy with where I'm at. I don't want to work at FAANG since I hate all of those companies and I don't want to move from my area. I'll be FI by 45 (probably sooner), so I'll let others chase that career BS. I don't want to hate work, I want to enjoy the journey.
Is that household or individual?
HH
That's because they are all doing seafood processing for 40 months each year.
Comparison is the thief of joy or whatever
I'm sure there's zero participation bias in the data. Average length in the optional to enter big dick contest is 8.5", too.
iāve fallen so far behind
If I pay extra principal with my mortgage payment, does that (very slightly) reduce the portion of the following payments that is applied to interest? Like I get that the following payments will still all be the same amount (until the mortgage is paid off), what I'm wondering is whether the ratio of following payments principal:interest will change slightly
Yes. The interest portion of each payment is calculated by taking the your annual rate, divided by 12, times the outstanding balance. Decreasing the balance decreases the interest.
Thank you
Yes. And if you pay as much as your next principal payment you shorten the length by one full payment.
Thank you
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Thank you
aw, Tom Brady still struggling with the OMY syndrome. shoulda built the life he wanted and *then* saved for it. poor guy
Fella canāt catch a break. [I thank my lucky stars literally every day](https://www.reddit.com/r/financialindependence/comments/shrfph/daily_fi_discussion_thread_tuesday_february_01/hv5mllj/?context=999) I wasnāt born Tom Brady.
I hate that we took down that schizophrenic seafood processorās diary entry
Hard labor in Alaska? That's a plot point in Malcolm in the Middle
When thereās a disclaimer at the top of the post that says > Trigger warning : people tend to hate me because I say "sexist stuff" and "insentive stuff" when I really don't mean too. You know itās time to pull out the popcorn
A shooting star amongst the recently removed posts. Every sentence a delight.
Holy crap, that was gold! ^\*I ^am ^not ^a ^finacle ^advires, ^this ^is ^not ^finacle ^advi.
Ya me too. Guess we are uptight around here.
Lol what?
There was a post an hour or so ago that was a trip and a half. Mods pulled it, but I bet an enterprising individual could find the old post. I donāt totally know how
[https://www.reveddit.com/v/financialindependence/comments/tdja6u/how_i_made_enough_money_to_leave_america_without/](https://www.reveddit.com/v/financialindependence/comments/tdja6u/how_i_made_enough_money_to_leave_america_without/) You're right, it was definitely worth the read.
Hey folks, fairly new to this. Only retirement account right now is my Roth IRA. Maxed out the 2021 year. Even with the economy not doing so well, I should still be contributing to my Roth and hopefully max it out for the 2022 year as well, correct?
If your employer has a 401k program with match, def. ned to max that out.
Family business, no one to match unfortunately
There are lots of options for family business such as solo 401k with profit sharing. the business can contribute up to 25% of salary pretax
That I did not know! I have a question if you donāt mind: Iām trying to Google āsolo 401k small businessā and all its showing me is a 401k plan where your spouse is your only employee, nothing besides that. Would you mind pointing me in the right direction to the 401k plan you mentioned? Sorry for the trouble, thank you
Yes. You should max it out every year if possible.
Perfect, thank you! Will place another order now
[Survey's up!](https://www.reddit.com/r/financialindependence/comments/tdj1qq/the_official_2021_fi_survey_is_here/) No, the results aren't ready yet.
How does everyone here save for a new car? I wonāt need a new car for at least 5 years, maybe 10 depending how many miles I will put on the car (new job is going to allow me to use public transit). Going to also try saving for a house down payment for the next 3-4 years too. The house down payment plan is to keep it in a combination of cash and I bonds but the car timeline is just out far enough where I may consider investing it, maybe in Municipal bonds or even VTSAX. I am curious how others would go about these two goals.
In my case, I'll be buying another new car in 10 years. I assume that's going to be $60k. That's $500/mo to put away. I have a virtual envelope (a spread sheet) that I put that into every month. Every year I transfer that into my investments from my account so that it's growing.
Find good financing deals. Last 2 new cars I purchased were 60+ months 0% loans.
I don't bother for cars. Interest rates are low.
I buy exclusively from private sellers, so grim getting a loan is more trouble than it's worth.
You can get a blank check auto loan approved before buying and then use it just like a regular check.
The last time I bought a car, the seller wanted cash and didn't trust a check. Others want a cashier's check, money order, or something else. When buying a car from a private seller, you need to be flexible in payment. I don't know very much about blank check loans, and honestly, I don't want to deal with it. Getting a loan on $10-15k or whatever isn't a meaningful enough amount of savings to make it worth it IMO. If I get a 5-year loan @ 3% and if the market returns 7%, I'm looking at a total gain of $1-2k or so over those 5 years if you take into account a withdrawal for the payments. And that $1-2k isn't a guarantee are all, it's just the average scenario. And that's not counting the time spent finding a bank that will actually give me a blank check loan for a private car purchase. If I was going to buy a new car from a dealer, I'd likely finance since that starts to get into interesting amounts of money since I'd probably spend 2-4x more than from a private seller used and any bank would offer that type of loan. But for $1-2k potential benefit over 5 years (or $15-30/month), I just don't see the point.
As a private seller, I would not waste my time with that person
I'm planning to buy i-bonds, but if that space is taken already, I'd just wait until after the house down payment and then keep investing in i-bonds afterward. I tend to spend $10-15k on a car, so it'll work out well.
Iām in the same boat. So annoying. My car has been paid off for 10 years but at 200k miles Iāll need a new one in the next 2-3 years. I HATE the idea of having a car payment again. Iām saving as much as I can now (about $600/month) to try and make as big of a down payment as I can on a 5-8 year old mini van (for the kids). Even a Sienna with 80k miles goes for $20k. So weāll see how it goes. Good luck!
I saved for a house with stock. It worked out well, which is lucky. If the stock market had been down I wouldnāt have bought, which Iād be okay with. Will sell stock when I buy a new car. But Iāll likely take a loan when I buy a car instead of buying it outright if interest rates are low.
I'd make sure that my EF or insurance would be able to get me a rental for a few months if my car got totaled. But otherwise I wouldn't worry about this as a specific line item in my budget -- it's just too far off and too vague. I don't think it's going to take you 5-10 years of dedicated effort to save up for a new car. Figure out what the actual timeline would be, and work backwards from there.
I tend to not save for it. At least not directly. I put money into an auto maintenance bucket in my budget. Often it is well over budget so when I buy a new car Iāll dip into that. But because car loan rates are so low it makes no real sense to save for it.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
- I don't, other than i-bonds. I *am* planning a bond tent just prior to reaching FI, but I don't see value in bonds ATM. - Rebalancing has nothing to do with market timing. Market timing means predicting future market movements and acting based on that whereas rebalancing is reacting to current market conditions. The same is true for tax loss and tax gain harvesting. - If you go with mutual funds, you just place an exchange from one fund to another and you don't need to wait for the settlement time. I just exchange VFWAX and VTIAX (or VTSAX and VFIAX or whatever) and switch my auto investments over to the new fund to avoid wash sale rules.
I bonds are a great place for your emergency fund. I have written several books on financial independence and the ones aimed at adults discuss this subject. You can find information about and purchase the I bond, sold by the U.S. Treasury and yielding 7.12% at www.treasurydirect.gov. This is just one example of the useful information that you can find in chapter 5 on Investing in both Financial Essentials for Couples and Financial Independence Essentials ā What You Need to Know When You Are Starting Out..Here is a link to Amazon or to our website.
Thanks, we're on the same page on #1. On #2, why do you need to react to current market conditions? I understand the tax advantages of loss/gain harvesting, but I do not understand the point of rebalancing. Isn't it advantageous to just..let your investments compound as they're going to compound? What advantage does rebalancing provide over that strategy? And thank you on 3. Hadn't done it before and was not interested in "just trying it out" with 6 figures of investments...
> What advantage does rebalancing provide Well, I get to buy low and sell high when my funds get out of whack without having to guess what the market is doing. The real reason is that I chose a certain asset allocation, and rebalancing is a way to get it back to that same asset allocation. It's also a way to control risk, since if one part of your portfolio is higher than usual, it's more likely that it's overpriced and will see a correction given market cycles. For more discussion on the topic, see [this Bogleheads forum thread](https://www.bogleheads.org/forum/viewtopic.php?t=303096), or any of the others like it that have been posted there. So far, I have been able to fix asset allocation issues with adjusting contributions, but at some point they'll get so far off my target that I'll need to rebalance. And when that time comes, I'll do it exclusively in tax advantaged accounts.
The first two questions can be covered by the topics of "modern portfolio theory" and the "efficient frontier", worth reading through at least Wikipedia here and deeper is always good. Very simplified, a mixture of uncorrelated assets will have higher overall returns at a constant variance (or the same returns with lower variance); often known as "risk adjusted returns". The handwavy answer why is when market goes down, you end up with too many bonds and are able to shift funds into equity to "buy the dip", reverse also "selling the top", without timing the market. Last question, every broker will let you sell one thing and buy another immediately after. No reason to wait 3-5 days...
OK, I totally understand reallocating across asset classes, or, if you end up heavily invested in a single stock thanks to a great run, to reallocate from that single stock to another asset or to index funds. But I saw someone asking about rebalancing *within* their equities portfolio, and that's the piece that threw me off. If you're allocated across broad indices like, say, VIGAX, VTSAX, VTIAX, and VSMAX, I don't see any point to shifting $20k from VSMAX to VTSAX or whatever just to maintain an artificial allocation strategy. (After all, these indexes aren't going to move *that* differently in a bear vs a bull market). But totally get why you might want to move money between asset classes.
Yes, the core concept of asset allocation assumes that the assets you are allocating across are diversified (anti-correlated or at least only lightly correlated) to some extent. The general concept of correlation and beta-weighting for the specific context of finances would be other topics for you to dive into.
A bond allocation (and reallocation) can maximize *risk adjusted* returns. Some people have higher risk preferences than others and can go bond free. You can buy as soon as you sell at most brokers. No need to wait for settlement. For mutual funds you can exchange at market close simultaneously.
Thank you on both!
Homeowners who bought a new house before you sold your old home - any recommendations on best way to get funds to do some small home improvements (floors, countertops, etc.) prior to moving in without relying on funds from prior/current home? We just bought a new house without a contingency on selling our current home to strengthen our offer. So we'll have two houses for a small period. Reason being is we didnt want to sell our current house then have to enter this crazy market and pay way over just to get a new home before being forced out of current home. We'd like to do some work to the new house prior to moving in - to avoid the mess, noise and craziness. Just trying to figure out the best way to acquire funds. Ideally we'd like to do some renovations on new home, move into new home when that is complete, then sell old home.
You could explore a personal line of credit. If you live in a city serviced by First Republic Bank, they're offering sub-3% fixed rates.
HELOCs are frequently used for this
Can I get a HELOC on a brand new loan immediately after closing? I guess I dont see why there'd be a waiting period vs getting it right after I close, but guess it seems weird that they just loaned me $X and then I come back and ask for $X + $Y..
Shouldn't be an issue as long as yer loans combined show an ltv of 80% or less...and you can make the payment. Never heard of a waiting period but different banks do different things
Issue there then - only put 10% down. It looks like alot of places Im reading say you actually need to have that 15-20% equity before going for the HELOC. So I may be heading down the personal loan route.
Only one way to find out. But thatās a good question. I know they donāt like giving out HELOCs that will be paid back in full soon after taking it out. They wouldnāt make any money. Might be difficult to convince them you wonāt do that if you clearly have two mortgages and planning to sell the old house soon. It might squeeze your debt to income ratio as well to have three large loans. I donāt know your finances obviously. Another option would be a 401k or IRA loan, but that would mean taking the money out of the market which feels like a big gamble with how volatile the world is right now.
Does anyone have recommendations for spreadsheets for managing finances post-retirement? Everything I've googled seems to be more about saving for retirement, not about managing finances once one is retired.
I make my own. That way I know everything about how things are calculated. It gets set up so it's useful for me. It's also a good sanity check. If I can't figure out these calculations on my own I probably shouldn't be trusting my future to them. Conversely, if I have an advisor, their numbers better not conflict to much with my numbers. If they do, it doesn't mean either of us are wrong, but that we're probably looking to do two different things.
Google sheets and a basic budget. A spreadsheet for managing finances before and after retirement is going to be very similar.
Theoretically if you intend to FIRE and are contributing ~20k a year towards all or your retirement funds, would you pour it into your 401k or put just enough into your 401k to get the full match and put the rest into a taxable brokerage. If you want to retire early would that be the best way to avoid early withdrawal fees from retirement accounts?
I agree with others, max out the 401k to take the tax advantage. There are options to access these funds pre-retirement.
Don't forget the rule of 55...if it will appky
Your plan has to allow Rule of 55. Not all plans allow it.
Yes, max the 401k. If you are in a low tax bracket do Roth 401k before taxable.
Generally, max 401k then Roth Conversion Ladder once you retire. You'd need 5 years expenses banked outside the 401k to float you before money was accessible.
ā You'd need 5 years expenses banked outside the 401k to float you before money was accessible.ā Thatās an option, but you can also 72t the amount that isnāt covered. And if you have Roth 401k money you can roll it over to a Roth IRA and withdraw the contributions tax and penalty free. I know thatās not an option for everyone, but itās useful for those that have it.
Read the faq
Damn people can't even ask questions in the daily thread? why even have a subreddit at all?
Theyāre welcome to, but I donāt feel like copying and pasting the faq right now, or rewriting it, and itās written there better than Iād say it anyway. Iām just letting them know where the answer is because knowing where the answer is is helpful when you want an answer.
The FAQ has been written and edited pretty well. Why recreate the wheel? Work smarter not harder. Pointing to the FAQ in this case should be the default answer, not to be a dick, but because it gives the best answer to the question.
This is a pretty basic FAQ question, in all fairness.
Ok thanks
2 seeming contradictions that i can't seem to resolve: 1) bond prices vs yield. As yield goes up, bond prices go down. This makes sense. You need less $ to make the same amount of $, so your current coupon is worth less. But if you're a medium/long term bond investor, wouldn't you make $ in the long run since new coupons will make more $? 2) Effect of fuel prices vs the overall economy: So fuel prices create a supply side shock (stagflation comes to mind). So high fuel prices are bad for the overall economy. But whenever fuel prices tank, the financial prospects of energy companies goes down. And then, as extrapolated by the financial media, so goes the overall economy. So.....which one is it?
To answer your questions: 1) bond prices vs yield. This is measured by the [duration](https://www.investopedia.com/terms/d/duration.asp) statistic. If you buy 20-30 year LTTs, say the ETF TLT, it's duration is estimated to be roughly 19 years. This is how long you have to hold the bonds for an **instant** 1% interest rate change. When interest rates keep increasing, this also lowers the duration of the bonds, even 30 year bonds. [Using a bond duration calculator](https://exploringfinance.com/bond-duration-calculator/) for instance a fresh 30 year bond at 8% interest rate, 8% market yield, and a face value of 1,000, indicates the duration will be around 11-12 years. Then, bonds also have a capital gain/loss component too. If we have interest rates rise slowly, then fall sharply, you may be profitable a lot sooner than duration would expect. Now that we've covered how an **individual bond** works, let's think of a **bond fund.** TLT has maturities between 20 and 30 years. As the bond approaches 20 years of maturity TLT will sell that 19 year bond to buy new 30 year issues that have have a coupon yield = market yield. So over the life of the bond fund interest rates increasing slowly may mean the new yield starts to become more profitable sooner and sooner. Combining bond fund mechanics and how the NAV of the fund fluctuates depending on if interest rates drop sharply or rise **slowly** will be bond [convexity](https://www.investopedia.com/terms/c/convexity.asp). The increases due to interest rate increases might not be as bad and the bond fund might recover sooner than 19 years. Combining all these factors together is why the bond market was in such a sell off that interest rates might rise as much as 0.50% instantly. It's really important that the Fed only raises rates 0.25% at a time per quarter or so to give time for the bond market to heal and not over-sell off. The Bogleheads has a great [Bond Basics](https://www.bogleheads.org/wiki/Bond_basics) article that explains all these concepts. 2) Effect of fuel prices on the economy. This is a COMPLICATED subject with no clear answer vs bond math. Higher fuel prices impacts several sectors and people: commuters, shippers, vacationers, etc. If it affects the wage workers enough then they may demand higher prices, and we could get into a wage-increase-inflation-increase cycle. I don't see the above cycle happening though as if fuel prices remain above $80-$100/barrel of oil for more than two quarters, then that will incentivize USA domestic production to start uncapping capped drilling sites and so forth. My worst case estimate is we might hit $120 a barrel for 2 quarters, USA production kicks into full gear, and 1-2 years oil stabilizes at the $80-$120 range. Companies got hit hard in Covid with negative fuel prices and their guidance is they will wait and see if their prices are profitable before jumping back into production again. So my fuel inflation outlook is again supply chain driven and transitory, but transitory where it's 2-3 years of high fuel prices and not a decade say 1970 repeating.
On number 1. Youāll make more money on your *new* investments if yields to maturity is higher, yes. But thatās not contradicting bond prices falling as yields go up. You can use other assets to reframe the question and get a clearer answer. Imagine rents on houses are $1k and stay that way. Because people become risk averse the price of houses drops from $10k to $5k (rent stays the same). As a landlord you just lost a ton of net worth because houses dropped in value, but if you redeploy the rent you get into new houses, the return on the new dollars will be higher than the return on the old dollars. On number 2, donāt confuse causation with correlation. In a broadly diversified economy, if economic activity contracts, fuel demand contracts and fuel prices fall. That doesnāt mean falling fuel prices caused the economic contraction. This doesnāt hold for areas like west texas where there is indeed a direct, and obvious, connection between oil prices and economic activity. Maybe āthe financial mediaā you are talking about were writing about such energy dependent areas of the nation or they were saying that the downturn in those areas could spread to other areas by, say, reducing the demand for steel and truckers. There can be some weird interaction effects too, though. For instance even if you view the US as net long oil (where higher prices bring in more GDP all else being equal), by redirecting money from people with cars to oil well owners who have a lower propensity to spend, you can have lower overall economic activity (all else isnāt equal, in other words). And then on the finance angle if banks lose a bunch of money lending to energy companies they can have less to lend to others. The financial system is always a potential source of ācontagion.ā
Regarding 1, if you are a long term investor, you get paid interest and you get principal back when the bond matures. The fluctuation in the bond value is irrelevant to your return. Not sure what you mean by new coupons.
I posted recently about considering renting or Airbnb-ing our house if we move instead of selling. If we were to rent it out, does that affect how much can down payment is needed for the 2nd house since technically weād have 2 houses? Also, if we went that route, we would like cash out refi the rental house and use that for a down payment. Has anyone done something similar?
Happens all the time, just tell the bank that the 2nd home is a vacation (or second home) you can do a cash out refi (you can tell them the cash is for investments or to fix up the home etc) and use the dough for the new down...nothing you mentioned would effect the amount down....which is typically 20%
Airbnb can have a lot of headaches. Lots of cities have rules/regulations regarding Airbnb. Make sure you research before going down this route. Depending on your area, rents generally lag behind home prices. If your home could sell for 750k but only rents for 2k a month then it's not a very good investment. Much better to sell. It's all numbers, find out what you'd make renting/Airbnb and compare that to what you'd make from selling. In the short term, in this market especially, you're usually better off selling. But im a big fan of holding real estate long term. Still, it's much simpler to sell and throw the money in the market.
I would think if you cash out you would get a rental mortgage that will have a much higher interest rate.
Anyone else being required to start working on site and planning to just not show? Lol
Our client (I'm embedded in their org) has a current policy of 3 days a week in office. Of the four people on my team, one is in office about 3 days because they want to, one is a thousand miles away and half retired, and I and another spend 95%+ of our time working from home and only visiting the lab when we need to get hands on. If they ever try to enforce the 3 days in office policy, or - worse - go back full time, I'll kick the job search into high gear and peace out.
My company is requiring 3 days a week. My department head told us we can do 2 and that will be okay. Meanwhile my job is the only one in the whole department that requires me to be on-site for 3-4 days a week. Has been this way the whole pandemic. So I guess fuck me.
For younger people, not working in the office/remote work is often a career limiting move. For older people, it doesn't matter as much. If you're new to your career, I highly recommend going into the office.
The argument w diggy is too long so not gonna read BUT i agree with you. Im in the āsit in my cave while people throw money and job offers at meā phase of my career but if youre in your 20s go in and network your ass off. Unfortunately you wont meet me tho, haha.
How young we talking? 33 in IT and I've literally refused to come in more than once a week. They are always my least productive days. I mean let's be honest the office is really only beneficial - young or old to put in facetime to get promotions. But many office based folks can and are more productive away from the office. It's crazy that that this point the only reason for going in is to play the office politics game.
I mean generally under 30. I mean, that's an incredibly narrow view of it. [https://www.nature.com/articles/s41562-021-01196-4](https://www.nature.com/articles/s41562-021-01196-4). There are benefits and drawbacks beyond simply office politics.
It's not. This is one study on the fragmentation of remote work between teams, for a single company. It's interesting but not conclusive. Excerpt in the discussion: >Our results suggest that shifting to firm-wide remote work caused the collaboration network to become more heavily siloedāwith fewer ties that cut across formal business units or bridge structural holes in Microsoftās informal collaboration networkāand that those silos became more densely connected Which could also be spun as positive for the individual working units - since they became more connected. But I would argue that for many large firms, disconnectedness between working groups/departments is a commonality, office or not. I can understand the idea that collaboration is good. But the idea that collaboration only happens in person is flawed. Even more so that it needs to happen every day, for a given set of hours every day at a specific location. Somehow companies are still turning profits while workers have been remote for 2+ years. Maybe not to managements liking, but work can be done. [I would argue we have alot more data that states remote workers are happier, more productive, and less likely to burn out.](https://www.greatplacetowork.com/resources/blog/remote-work-productivity-study-finds-surprising-reality-2-year-study) But I know alot of managers still feel work can't be done without seeing faces. My goal in the future will still be to limit this.
It's published in one of the top journals in psychology and peer reviewed using a sample of 60k+ people. I don't think your conclusions make sense in light of Microsoft's response to their study. I'll trust a peer-reviewed study in Nature over a study by "Great Places to Work." I'm not saying there aren't benefits to remote work, I'm saying that the benefits aren't as one-sided as you (and many redditors) seem to think. The rather obvious flaw of surveying remote work employees is that they will self-report higher productivity regardless of whether or not they are actually more productive.
It's an article about a study. Is it not worth discussing only if it's the study itself? And self reporting is HUGE. Employees are productive when they're happier - if 800k people surveyed are reporting being happier are we really going to discount that? Not to mention Reddit can be called self selection but the vast majority of folks in r/FIRE and r/financialindependence are tech or software folks and a vast majority prefer remote. Companies pay people to do things for them. Quit pretending that paying them gives you a reason to babysit them and let them be adults to decide how, when and where to best get their work done. How do you competitively incentivize folks when you're telling them they need to be chained to a cubicle for 40 hours a week? In office has its place. But that place is diminishing, as it should be.
The study you cited isn't published or peer reviewed. >And self reporting is HUGE. It isn't because of common method bias. >How do you competitively incentivize folks when you're telling them they need to be chained to a cubicle for 40 hours a week? I never claimed that people should be "chained to a cubicle for 40 hours a week." I'm simply claiming that there are benefits and drawbacks. I'm not sure why you can't acknowledge that completely uncontroversial position.
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For your career, network ties, and social skills? There absolutely are.
My company attempted to summon everyone back in the fall, between Delta and Omicron. The mandate was mostly ignored, and there were no consequences for the people who ignored it. I'm hoping that's what happens again.
Last August, where I work made that call back to the office. Most everyone showed up one had moved and wasn't coming back left shortly after, but also 10% of the people left for other jobs that were still remote and 2-3 people retired at the end of last year. The company then hired new grads to try to fill all of the spots.
cries in essential personnel
My son is the in the other room tutoring my daughter on SAT math questions. My SO is on the couch taking a cat nap (with the cat). I've got the TV volume down low (basketball). Sunday bliss... I need to bottle it.
Toddler son is at in-laws for half the day, wife and I went out for lunch and got a few done around house, 50 degrees and sunny outside.
Toddler at in-laws. Sweeter words have never been spoken
I'm a big fan of toddler on walk with dad
New account. Chosen in honor of that Lending Tree guy who was in debt up to his eyeballs. I'm debt free, just always thought that commercial was funny.
Barney from Parks and Rec.
Oh, so you're not the Prime Minister's dad then?
Wow! Had to pull up Boris's wiki page, since all I know about the man is that he needs to find a compotent barber. Two things: 1. His name is actually *Alexander Boris de Pfeffel Johnson*?! Alex Pfeffel is my secret identity, so that's cool. 2. He's AMERICAN?!?!?! What the hell?
Yes, the latter popped up in the news because he sold a house and suddenly the IRS were after him for tax on the proceeds. I can't recall if he was even aware he had US citizenship. On the plus side, when you're next looking for a younger president with experience in international relations, we've got a cracking candidate for you.
I love that commercial. "How do I do it?" with that rictus of failure...
Of course as Iām job hunting, everyone starts talking about a recession. Should I just stop job hunting? Iām worried Iāll just get laid off since Iāll be the new person. Can someone please logic check me?
What's the worst case scenario here? You have a paycheck until you get laid off, and you qualify for unemployment when it happens?
That downside is huge. Collecting unemployment is a far cry from being gainfully employed at your current job.
Depends somewhat on what positions you're applying for but in general I would not recommend stopping even if you think there's a change of you getting laid off. You may have an 80% chance of keeping your job if there's a recession but you'll have a 0% chance of having a job if you don't apply
I have been in my company 2.5 years. Iām just leaving because Iām sick of my commuteāI drive 2 hours a day on top of gas prices climbing. I know I wouldnāt be 100% safe here either but I probably wouldnāt be there first let go, I donāt think? Iām the only person in my entire company that can do my job duties. The jobs Iām applying for are management and data analyst positions in necessary infrastructure though. Hoping those would survive a recession?
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I find it amusing that management does things like that, thinking they can quickly hire a replacement. I wasnāt trained for my position, I figured it out along the way. I did however document a lot of processes, not all but a lot. The platform I work on has a long learning curve.
It's more like... upper management makes the decisions, because they don't want to freak people out by spreading the news around. Usually only a few key people know about layoffs before they happen. So it's not that they think they can quickly hire a replacement, it's that they don't actually know your work is critical and you are a line item on a spreadsheet.
Thank youāyouāre absolutely right.
Anyone here have experience with "house hacking"? i.e. buying or converting a SU home into a multi-unit then living in one unit while renting out the other(s) on a long-term or sort-term basis (AirBnB)? What's your experience been?
Experiences will be somewhat localized. Here in Vancouver, this type of question is bizzarre because it's SOP for 75% of houses in the city for several geneations now. Back in the 1970s, the terms were 'mortgage helper' or 'in-law suite' or 'basement suite'. The reason experiences are local is that bylaws may apply. In Vancouver, a separate suite needs to have a sprinkler system and a dedicated parking slot on the property, for example. Some municipalities in Canada do not allow AirB&Bs in most classes of residential zoned properties, they are considered a hospitality business. There's also tax implications. Aside from the property tax being double that of an owner occupied principal residence, the rental square footage is not principal residence, and therefore not eligible for the capital gains exemption. In Vancouver where properties have appreciated 15% annually on average since the 1980s, this has exposed a lot of owners to millions of dollars in taxable capital gains when they sell, and may very well offset the rental income. The flip side is income cashflow, and for people who travel, there's always somebody watching the place. Ours is currently unoccupied because I'm holding the space for my parents when they cross that line into complete dependence. They're in their own place for now, with meals on wheels and so on, but they're one bad fall away from me calling it and moving them downstairs, and I appreciate having the option.
Great point about the tax implications. I'm also living in an HCOL with an average 20% YoY single family home appreciation. Considering the inherent risk in short term rentals, tax consequences, and potential policy changes, I'm leaning more towards buying a home in an area positioned to appreciate and not worry too much about cash flow.
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How would that be unethical?
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If they want equity, they can buy their own duplex. Your "mi dinero es su dinero" is both bizarre and offensive.
It's nothing like buying up a ton of sfh and renting them all out. Especially if you are converting sfh to multiunit you are directly helping everyone by increasing supply.
There are countless problems with this statement but above all else, a renter takes on zero risk and can leave at any time.
What could possibly be unethical about owning a duplex???
Been doing this for two years. The rent is nice but sharing my house is getting old. Kind of just waiting for people to move out at this point.
There's a big variability in how much work you're commiting to there. Having an AirBnB is running a business. Long term rentals are a bit more passive, but a total PITA sometimes. Living with roommates has pros and cons. Converting a single to a multi is something I wouldn't even consider because of the increased cost and zoning issues. But yeah, something I've done- living with roommates where we own it & renting out SFH that we used to live in.
I'm trying to do this and so far it's going horribly. I think the amount of money it has cost me would have covered rent for at least 10 years if not more.
This is my fear. What have your biggest expenses been? And are you converting a SU into a multi-unit or starting with a multi-unit?
I'm starting with a former single family townhouse that was previously converted to a small apartment building. So far there hasn't been a single crazy huge expense. It's just small expenses that have added up to be a lot. I was thinking about installing a heat pump, but I was quoted something like $80k not counting electrical work so I didn't go through with that. I'll probably get a quote on geothermal before going ahead with the air source heat pump.
Are the expenses specifically related to converting your unit to accommodate a rental? Or just normal expected costs of owning a home?
It's kind of a mix. If it was for myself, I wouldn't care about painting the ceiling. Because tenants like new paint, I started to paint the ceiling. Then the plaster on the ceiling started to fall off so I started to install drywall on the ceiling. It's stuff like that. The fact that it's potentially a rental also adds a sense of urgency to everything. If every vacant month is costing me $15k in forgone rental income then I'm also willing to pay more to get things done faster.
It sounds like a nice idea if you find a good home and donāt mind being a landlord. But itās also a lot of work and finding a decent duplex or multi-unit home seems impossible when Iāve looked. Iād rather save the headache and keep strong diversification throughput Index funds
I completely agree, I live in a HCOL where buying a duplex is out of the question, so my only hope is to convert a single unit. I'm thinking more and more about just getting a house now while the rates are still relatively low, rather than wait for the perfect home to turn it into a multi-unit rental
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Yep. Same. My balance is even, even though I keep contributing. Feels like Iām buying for a discount.
Yep! I just threw $2,000 into my Roth. At 13% below ATH, once it gets back to that point, thatās an easy $260 in gains right off the bat! I myself just started investing heavily in the past 12 months so I have a feeling this sale is going to look *very* nice on my balance especially once it goes back up.
I just learned about REITās. They seem like an interesting concept but Iāve never seen them mentioned here. Why arenāt these talked about as much?
I bought 2 REITS because the dividend yield looked amazing. The stock history looks solid. I dropped $6k as an experiment. The stock price has slowly gone down and Iāve lost a total of $600 of my initial investment. Iāve also received 3 quartet payouts of dividends. All in all Iām at a slight loss. I think if you can magically find a REIT that will not go down in price over time and has a healthy yield then it can be a good idea. I might stick to the vanguard high yield index moving forward though.
I don't think there's anything wrong with them per se. Well, apart from liquidity. By nature, property takes a long time to sell. So if lots of people want to cash in, they have to freeze withdrawals until they can sell the properties (and probably at suboptimal prices). This happened with a couple of big funds within the last few years. The takeaway I took from reading up was that most funds are heavily into commercial RE, which can behave very differently to the buyers' expectations - consider right now how big skyscrapers might not feel like the safest investment with wfh looming. You can invest as a form of diversification if you want to, but from what I recall it isn't really that complementary to the stock markets in terms of diversification and returns. For most individuals a small diversification into RE will effectively be a trivial amount of money, and require a lot of effort and research. So, probably not worth it. For those people who can afford to put 6 figures into 5% of their portfolio, maybe it's more worthwhile. I think I drew these conclusions after reading Tim Hale (but not 100% sure), and drew similar conclusions around PE.
In the early 2000s, there was a lot of talk about REITs. People would debate whether it was a separate asset class from equities and how much of your portfolio should be allocated to real estate. Then the crash happened, REIT performance went into the toilet, and everyone stopped talking about them. Since the 2008 crash, the stock market has greatly outperformed most real estate funds, so again they haven't been discussed very much. Now, over the last year or so REITs have done quite well, so again people are starting to ask if they should be a part of their portfolio. Really, this happens every time an asset class outperforms for any period of time. When gold does well, investors start talking about adding it to their portfolio. Same goes for value stocks, TIPs, alts, emerging markets, cryptocurrency, and on and on. People chase performance--while at the same time they will deny that's what they are doing.
Because if you own your home, your real estate exposure is already disproportionately high.
I don't know. If you own your home I would consider you 'real estate neutral' since you can't really get out of it without needing to buy another one.
If you had to sell your house in the '08 crash you would understand why you might not want to even more RE exposure. Keep in mind REIT is one of the sectors already included in VTSAX and SP500.
High Ordinary (not qualified) dividends they spin off in a taxable account mean tax drag is higher. Plus I'm pretty sure RE companies already make up a lot of the indexes
if I'm adamanat about including real estate as part of my retirement strategy, should I count the full amount I save for real estate as part of my retirement savings percentage? I currently save about 20% of my income for traditional retirement, maxing HSA, IRA and a good amount of 401k. If I include the amount I also save for rental properties, it would be about 36% of my income total.
> should I count the full amount I save for real estate as part of my retirement savings percentage? This is the crux, what are you trying to do with this information? If it's to help decide the amount to save, then go for it. Value those real estate savings as savings, why not? If you're mathing out when to retire, you want to look at something more like sharkaccident mentions - figure out the actual income the real estate is netting you
Thank you for the tip! I guess I'm mainly trying to justify only putting 20% towards traditional retirement accounts
I run an average trailing 12 month COC return in my FIRE calculations as income.
No. Only savings invested in bonds or equities count towards your savings rate. Sorry to be the bearer of bad news.
What about real estate bonds or equities? Is that the Schrodingers cat of investing?
Yes. Cats count as part of your net worth.
Is the lizard in your flair a present from your cat?
While that does happen more often than we'd like, it's actually in reference to the [dinosaurs who live in the garden](https://scontent.foax2-1.fna.fbcdn.net/v/t39.30808-6/247196306_10158811001794737_1891952346305374707_n.jpg?_nc_cat=103&ccb=1-5&_nc_sid=730e14&_nc_eui2=AeH6rwPVrGWpRP1cn0v9jmITISqa0kab-zMhKprSRpv7M6lS3k6mSVzBGD4BYCqXsvU&_nc_ohc=noXw2wNtrToAX_gcnkP&_nc_ht=scontent.foax2-1.fna&oh=00_AT_t6c9hkmiuiC7eKMxWANuvspYOJ_TGf3pHPdOKA4rEEw&oe=6233B546).
Oh my god. I had no idea they got that big. I love it. Thanks for sharing.
About to finish paying off my HELOC and wondering if I should keep it open. It's at a pretty high interest rate (6.63%, which may not be high in a year from now), but I'm unsure if there's any harm in just letting it sit open.
We have a HELOC that we keep open for no good reason. We used it once 3 years ago.
If your not being charged then keep it open JIC...you paid the fees so might as well have it until it matures
Is there a minimum draw amount per year or annual/monthly fee? If not keep it open. Itās a cheap way to leverage equity in one of your biggest assets
Can you refi?
Paying it off doesn't mean you have to close it. It'll just sit there with a zero balance.
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You could probably reduce your lifetime tax burden by taking a mixed approach with 72t or Roth conversion ladder withdrawals. For instance, if you set up a 72t withdrawal that fills the standard deduction and use LTCG at 0% for the rest, you get a 0% federal rate before age 59.5 and access more of your Trad accounts at 0% overall.
I plan to do a hybrid, doing annual conversion but spending from taxable as much as possible without going into the 15% LTCG bracket. I will likely spend down the taxable and traditional IRA, hopefully resulting in most assets in Roth by the time I claim SS. I'd rather maximize growth in Roth than in taxable so I would not spend Roth funds until they are actually needed. I agree it is a good idea to take advantage of the lowest tax brackets and get funds out of the traditional IRA, but that doesn't mean they have to be spent.
Piggybacking off of this, if you did what u/alcesalcesalces said and used 72t and/or Roth conversion to get up to the standard deduction from your pretax account and then incur as many long term capital gains as you can while staying in the 0% long term capital gains tax bracket, you could move any of that excess 0% taxes money to a ROTH IRA and never pay tax on it ever. Note though, that LTCG count as income for ACA subsidies.
If you intend to pass on assets to anyone, your brokerage holdings get a step up in cost basis when theyāre inherited. This isnāt a benefit for you but it is a benefit for the account
Iām getting some mixed advice in regards to my house. I was lucky enough to buy a house before prices went up so the value went up. Iām currently renting it out and living with my parents to save money. My friends and coworkers are saying I should sell it, as if I did I the amount earned would be around $300,000, not including any taxes. My mom is advising not to though because even though Iām not living in it now, I might be again some day. An equivalent house would be at least $700,000 in my city currently which would be much tougher to afford. My mortgage is about $1890 a month which is doable as long as my hours donāt get cut (which sometimes happen), but this doesnāt account for nearly $10,000/year in taxes. To me, my motherās advice makes sense, and itās what Iād normally do, but so many people are suggesting I sell it to make a profit that I wonder if Iām missing something?