@busdriver11, all bond funds are at risk price-wise if rates go up. If you paid $100 for a bond that would give you $2 interest every year, and new bonds you could buy for $100 were paying $3 per year, nobody would value your bond at $100 any longer. It would be worth less (but not worthless ). OTOH, it would also mean that bonds, as they matured (when they get face value, which is unaffected by rate changes), would be replaced with the newer higher-yielding bonds.
Retirees like it when rates go up, even if thereâs a short-term hit to the prices of bonds, because it is nice to see that interest income come rolling in. Iâm retired, my wife isnât, so we call ourselves semi-retired. In taxable accounts, weâve been more into tax-exempt bond funds, because otherwise the taxes kill us.
Total Bond Market Institutional Plus (VBTIX) is what my wife has at Fidelity.
Itâs a disappointment that Quicken canât seem to track performance better than it does. Iâm really careful about taxable accounts because I like to do tax loss harvesting (TLH), and it matters which lots I sell if Iâm selling. In tax-deferred accounts, itâs not such a big deal, but Iâd still like to know that it isnât all messed up.
Quicken seems to have screwed things up for years. They need to figure that up.
I think I need to stay in the 2% return bond fund Iâm in, at least it never goes down. It just seems like the others have too much risk, and I really think rates will go up within the next few years. Unfortunately. Or fortunately for the retirees.
WSJ article âwho Says All Index Funds Are The Same?â
ERs (Expense Ratios)
Vanguard, Fidelity Spartan = 0.05% (minimum investment of $10,000)
Schwab = 0.09%
T. Rowe Price = 0.28%
MassMutual Financial Group = 0.13%-0.63% (dependent on share class)
Itâs hard to understand how someone could justify it costing 5-13x as much to put together an S&P index than Vanguard or Fidelity charge. A bit more because of diseconomies of scale, or better customer service perhaps, but 5-13x? Shameful. The real shame is that people let them get away with it.
@HImom, Schwab, Fidelity, and Vanguard are all pretty similar, one higher here, the other there. For example, the S&P500 difference between 0.09% vs 0.05% seems like a lot, proportionally, but itâs only 4 basis points. 23 or 58 basis points difference? Now youâre talking a material difference.
yep, but all of them DO also have many higher expense ratio funds and managed funds as well, so folks have to check carefully and KNOW how much theyâll be paying each year. People should also avoid LOAD funds (either front or back), since thatâs just throwing away money, literally.
DH has a non-deductible IRA with a little over 10 years of contributions, which was not such a good move in hindsight, but our income exceeded the limit for both deductible and Roth IRAâs. There really isnât much benefit of a non-deductible IRA except earnings are tax deferred, then come time for RMD, withdrawals (earnings) are taxed as ordinary income. The only way is to convert it to Roth IRA, but with tax liability up front. We may convert a manageable amount each year moving forward. Any comments or recommendations are appreciated.
@Hopeful820, you should be paying taxes only on the gains but not your basis (i.e., DHâs contributions). It would be, in effect, a slow-motion back-door Roth
If you go from the non-deductible IRA to Roth IRA every year (up to the annual limit) quickly, then you have no gains to speak of.
ETA: Iâm talking through my hat a bit. I donât know if a slow-motion back-door Roth is a thing. Iâd ask your CPA or the experts at Bogleheads.org. At BH they will debate how many IRAs can dance on the head of a pink but theyâre helpful.
@Hopeful820â
I have this matter on my to-do list but it makes my head hurt. I believe it boils down to income tax rate differentials â now and what is anticipated for retirement years. If the sums are significant, you should check with your financial planner or accountant.
If, however, you want to use the Roth IRA as an estate-planning vehicle, it is a different calculus. Then, there are the rumblings of tax law changesâŠ
@lxnayBob, I was hoping you would respond! Also would like to thank you for pointing us to the Boglehead.org forum, I have started reading it, but often the topics and responses go over my head, lol.
I am just slow so please bear with me, why would it be âin effect a slow-motion back-door Roth IRAâ?
If I go from the non-deductible IRA to Roth IRA, I have to pay tax on the gains during the year I convert, right? So, it is just paying tax over the next few years of conversion vs at RMD time.
@AttorneyMother, thank you for the links, you have also been so helpful with the Estate Planning thread. Now you give me more to read lol, trust me, I have been reading so much articles about retirement planning, estate planning, when to take social security, long term care insurance in the past few months that my head spins, I wish I could just go back to work and do things I am good at vs. trying to understand all these issues! Granted, we should all be prepared about retirement and estate planning in earlier years.
I am also debating what to do with my 457 plan, thinking of a IRA rollover, but it is such a tough decision, where to put the money (likely Fidelity or Vanguard), what AA (which is always a challenge for me to decide) and when to do it etc. My current plan has a guaranteed 4% income account.
@Hopeful820, normally, in a backdoor Roth you make a non-deductible contribution to a tIRA (in a MM fund) and then almost immediately convert it to a Roth. You have no gains to pay taxes on, since at most itâs a dayâs interest in a MM fund. Next year, you do it again.
The reason I called it a slow motion back-door is that you put non-deductible contributions in a tIRA for 10 years and want to convert to a Roth. My understanding, assuming that you donât have a tIRA with tax-deferred contributions, is that you may proportionally move contributions and their associated earnings into a Roth, paying taxes on the earnings but not the contributions. But, what I know could fit in a thimble, so donât take what I say as necessarily accurate. The principle is to not tax you twice on your basis (ie, your contributions) on which youâve already paid taxes, but to tax you on the previously tax-deferred gains.
I know BH gets very much into the weeds sometimes, but why not start a thread and state your situation much as you have here?
Yes, the folks at Bogleheads.org are very nice and mostly very helpful. Have posted there several times. Some are tax profesionals and GOOD financial planners who believe in low cost index funds.
Little steps help. And, sometimes, itâs best to get a professional involved. After having done the reading, you know the right questions to ask and wonât feel like youâre just handing your financial life over to someone else. You will have armed yourself with good questions and criteria to look for. CC is a great resource, as is Bogleheads, but if you find DIY overwhelming and end up not accomplishing your goal (not saying that is your case), then itâs not a good result for cheap.
Donât do too much at once. If you are finding things to be tough decisions, then you should probably obtain prof advice. It may be as simple as having Fidelity or Vanguard go over your retirement plan or IRA before you decide.
Agree that consulting with your CPA, Vanguard or Fidelity can be very helpful and relieving to have your thoughts confirmed or refined We will be meeting with our tax CPA after April, to talk about tax planning and good actions to take going forward, just to see if weâre missing anything and can do things more tax efficiently.
@AttorneyMother, you are absolutely right. I feel much better if I myself have good understanding of the topic or issue at hand, then I can ask good/right questions when I meet with the professionals. DHâs Traditional IRA is with Fidelity, so eventually I may reach out to them, especially if I decide to do a Rollover IRA.
@attorneyMother â Thanks â I didnât even know you could do the @ thing. How long has this been an option? Iâm halfway through the retirement thread. What a gold mine of info! I still have one more kiddo in high school, so one more to get through college. But at this point in time, trying to figure out retirement has become top priority. Because, suddenly, we seem to have gotten, um, old. Of course my kids think we have been old for a long time now . . .
). OTOH, it would also mean that bonds, as they matured (when they get face value, which is unaffected by rate changes), would be replaced with the newer higher-yielding bonds.
Also would like to thank you for pointing us to the 