Gotta move to a red state if you want to save on taxes
Yeah, sadly not really in the cards for me
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Donāt plan on Social Securityā¦
This was the actual notice I got trying to log in to the website.
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Today I totaled up our non-retirement brokerage and our bank accounts.
We might be a few thousand short after accounting for long-term capital gains tax, but more or less as of today, we could pay off our remaining mortgage of $148k.
Still waiting until at least 2027 when my ARM adjusts to do anything, at which time the mortgage will be closer to $100k. Our HYSA may take a hit if we total a car or something, but all our standard credit card bills, taxes, etc. are coming out of other bank accounts and the HYSA gets any leftover. Currently itās just at $17k but should be over $50k by 2027 when the mortgage is around $100k.
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I donāt see the attraction of a HYSA if you are in your peak earning years.
Bank interest gets the WORST possible tax treatment. Full freight marginal tax rate on Fed, state (and local if you will) and perhaps the full hit on the Obamacare tax too. Look for savings vessels that offer favorable qualified dividends and deferred capital gains, so that you donāt have to pay the gubbermints so much monies.
Summary of Obamacare Tax
Since 2013, certain higher-income individuals have been
subject to a 3.8% āunearned income Medicare contributionā
tax, more commonly referred to as the net investment
income tax (NIIT). The statutory authority for the tax is
included in Internal Revenue Code Section 1411. The tax
was included as a revenue-raising offset in the Health Care
and Education Reconciliation Act of 2010 (HCERA, P.L.
111-152), shortly after the Patient Protection and
Affordable Care Act (P.L. 111-148) was signed into law.
These two laws are commonly referred to as the Affordable
Care Act or ACA.
Like where? Where do you put money that you might need to use in the next 6 months but donāt need right away? Where do you put money that you might need in 2 months but donāt need right away?
If it helps, assume I donāt have to pay the Obamacare tax
Off the top of my head, I suggest looking at dividend paying ETF funds from Schwab or Vanguard, or Blackrock or Fidelity. Those are the big 4 in my observation. SCHD, or VYM or HDV for example.
ok, and then the draw is that you get the capital gains tax treatment for whatever you donāt take out within the first year. But the downside is that if the stock market drops you donāt have as much money in the short termā¦ am i thinking about this correctly?
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High yield and low volatility stock ETFs should act a bit like bondsā¦ they will still go down if the markets fall, but experience lower movements while paying ~4-5% dividends.
Iām a big fan of consumer staples and utility company ETFs
I havenāt found any cranking out 4%+ dividend yet tho
If you really want something resembling savings, you might invest in SGOV or TBIL. Those yield about 5% in the form of dividends rather than interest. But thatās all you get. For now.
VWOB currently yields 5.6%. PGHY yields 8%. The value of those funds came down a bit over the last few years, probably due to the interest rate situation?
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Tbil will pay a non qualified dividend, so it will be taxes at marginal income tax rates.
2023 was a bit of a learning year for meā¦my brokerage statement just showed up, so i can dig in and see how all these options work net of taxes. Iād like to invest more for capital gains, thatās just hard to chase when the markets are where they are right now.
I prefer my emergency funds not be held up in equities. I might be better off keeping the bare minimum of like $5k in a bank account and closely monitoring that I always have enough cash for all my bills and sell when needed, but thatās annoying.
My HYSA is growing beyond the bounds needed for an EF, but I have specific goals for it in a shorter time span than I care to bother with equities to maybe squeeze out a couple thousand more over a few years.
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What is the HYSA paying?
5.07% I believe.
Cash aināt trash
Dang, Iām getting hosed by Marcus and Ally (currently 4.5% and 4.35%).
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I use Upgrade Bank. The UI is trash but it does what I need - it holds money, adds to it a little each month, and I can add and remove money. Iām not using it for anything beyond just holding money. Only took me like 20 minutes to set up and most of a day for money to move over. Think Iām making around $75-80 in interest on 3/1.
Since I set it up mid-November with less cash than today, had to pay taxes on like $31 of interest, hah.
Other banks might offer higher but be more likely to do the bait and switch. The trick is to find a bank that doesnāt bait that much.
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I was under he impression that Marcus was getting shut down
Apparently the consumer savings arm is the only survivor
I suggest online banks, they tend to consistently offer the highest interest rates