Thanks!
Thanks!
@HRSMom Thatās a clear explanation on tax advantages of ETFs. From what I understand Vanguard ETFs are structured differently and plainly mirror their corresponding mutual fund. I did point out to Vanguard rep how one ends up undesired capital gains in mutual funds when other people sell. He maintained it doesnāt make a difference. I have both ETFs and Mutual fund shares of Vanguard Total Stock Market index Fund. When I do my taxes, I can look what income I have to report from them and compare.
Igloo: It is mostly about the āforced capital gain distributionsā and is mainly felt if you bought toward year end and all of a sudden get hit with it. If you buy and hold, I would not expect you would see much difference.
Capital gains on, for example, Vanguardās Total Stock Market is usually very low, and sometimes zero. Itās driven by which stocks are dropped from the index. This year, iirc, it was zero. Dividends are usually around 2%.
Active funds, e.g., PRIMECAP, do more buying and selling, and they have more significant capital gains.
In neither case, @Iglooo, are those CG driven by other fund holders selling of the fund. That goes to their realized capital gains, reported by them directly to the IRS.
Vanguardās mutual funds and ETFs are sui generis because of the ownership characteristics, and their tax treatment is identical.
As of midnight I am retirement eligible!
I am thinking I will retire in about 2 years, but if I had to retire tomorrow it would be fine. YEAH!
Congrats on the milestone even if you donāt exercise the option immediately, @1214mom! <:-P
Thanks @doschicos. My job is more or less fine, but I am considering looking for a job thatās more āfunā or at least less stressful. I do find I have a slightly different attitude than I had even just a few months ago.
Congrats!! In terms of your attitude now towards you job, I always say that I wouldnāt quit my job if I won the lottery though it wouldnāt take long for me to get fired.
Having the retirement opportunity and seeing a date in the near future is uplifting for sure!
Setting and reaching goals gives momentum, like paying off the home mortgage.
Iāve worked with a fabulous accountant ā name partner of a local accounting firm. I found him by asking when I first moved back to Boston for a tax guy whoād be a) proactive in finding me savings, b) would listen to my agenda and be a problem solver rather than a naysayer (which most accountants Iāve dealt with are), and c) offer me choices and explain the risks associated with various choices. An outstanding professional service provider. I believe the initial structure he helped me set up has saved something like $10K per year for 25 years.
Heās retiring. He appears to love what heās doing, but at times (March/April) he seemed pretty tired. I asked why he was retiring and it turns out is firm policy ā a mandatory retirement age. Not sure Iād like to be forced out by an arbitrary age.
Mandatory retirement ages are not uncommon in accounting and law firms. Helps provide opportunity for younger partners. Also helps with planning in terms of succession. If it knows someone will leave at 65, firm can plan accordingly in terms of succession. If you may stay until 70 or 75 or even longer, it makes succession planning more challenging.
Maybe this guy can freelance part time? He may need to leave his old clients with the firm, but he sounds like a guy that could easily get new business.
@colorado_mom, Iām sure that is the case. Iām also guessing that heās been one of the name partners of a firm that has has several mergers over the years and I would hope he has some interesting investments, etc.
@igloo , the info is on the irs.gov website, under Retirement Savings Contributions Credit (Saverās Credit)
But here are the numbers for a single filer (different for married filing jointly or head of household)
and a real life example.
For a single person, if your adjusted gross income is over $31,500, no credit for you!
Between $20,501 and $31,500 your credit is 10% of your contribution
Between $19,001 and $20,500 your credit is 20% of your contribution
AGI not more than $19,000 your credit is 50% of your contribution.
So if a single filer earned $23,000 last year, and made a $1000 IRA contribution, his AGI would still leave him in the 10% range and that $1000 contribution would give him a tax credit of $100. This is in addition to the $1000 deduction.
But, if that same person was able to make a $4500 IRA contribution, that would reduce AGI from $23,000 down to $18,500 which is in the 50% range, so he could take a credit of $2250. This would probably wipe out any federal tax liability, and the credit is not refundable.
@NJres - thanks for this info and example. Very interesting to me that the deduction can be used as a means to increase the percentage of the credit. With ds not starting his full-time job until mid-Septemebr, I believe he will be able to take advantage of this next year, at least to some extent.
Can contributions be made to multiple types of retirement accounts? Is there a cap on the max for calculating the credit? In other words, if he participates and contributes toward an employer-sponsored plan, can he still contribute the max to his Roth IRA?
EDIT - oops re-read. Looks like itās limited to $2,000.
Our S always contributes the max to all the possible accounts he canāthe 401K with employer, the 401K for also being self-employed, and a backdoor Roth IRA as well.
@HImom - wise of your Ds. I was asking about the max amount that the credit could be applied to.
Hereās the webpage from irs on qualifying for saverās credit. Per the IRS, itās only offsetting a portion of up to the first $2000, so probably doesnāt matter whether IRA or other retirement plan.
https://www.irs.gov/newsroom/save-twice-with-the-savers-credit
@HImom - yes, I read that it applies to different types of plans. I just initially missed the āfirst $2,000ā part. I should have just deleted the last part of my post that contained the question. That would have been less confusing! Thanks, though!