Investment showdown -- beyond the Roth, SDP, & TSP

[ClearedHot]

9 minutes ago, VMFA187 said:

Crypto. Seriously. 

Bitcoin is back to $50,000.  As inflation continues and the clowns pushing more stimulus get closer to success Bitcoin is looking better and better.  I think $300,000 within two years.

[VMFA187]

2 minutes ago, ClearedHot said:

Bitcoin is back to $50,000.  As inflation continues and the clowns pushing more stimulus get closer to success Bitcoin is looking better and better.  I think $300,000 within two years.

Concur. I think it gets to six figures in November / December, maybe even as high as $140k. 

[Day Man]

4 hours ago, KWings06j said:

Looking for advice on short term investments. I've got a sizeable chunk of change from selling my house that I need to figure out what to do with. I'm going to be renting for the next couple years and then looking to buy again when the market has hopefully returned to sanity. Main concern is just not losing buying power to inflation but also want to make sure I'm not going to lose half of it in the next correction. Any advice?

bro, that's the million dollar question for everyone (no pun intended)...real estate is in a bubble, stocks are inflated, crypto is super volatile, savings can't keep up with inflation.  if you figure it out, let us know. 🍻

[HeloDude]

Don’t worry, everything is fine.  Biden told me so.  And if things like gas goes up, then that’s just the price we have to pay to fight climate change.

[ViperMan]

9 hours ago, KWings06j said:

Looking for advice on short term investments. I've got a sizeable chunk of change from selling my house that I need to figure out what to do with. I'm going to be renting for the next couple years and then looking to buy again when the market has hopefully returned to sanity. Main concern is just not losing buying power to inflation but also want to make sure I'm not going to lose half of it in the next correction. Any advice?

Yeah, go back in time and don't sell your house.

[kaputt]

6 hours ago, HeloDude said:

Don’t worry, everything is fine.  Biden told me so.  And if things like gas goes up, then that’s just the price we have to pay to fight climate change.

At least we saved 10¢ on that 4th of July Cookout!

[Day Man]

On 8/18/2021 at 7:18 AM, ClearedHot said:

I also have a longtime investment property that I am selling and reinvesting via the IRS 1031 provision.

Is this your first time doing a 1031? Looking for any intel/recommendations around this process 🍻

[ClearedHot]

17 minutes ago, Day Man said:

Is this your first time doing a 1031? Looking for any intel/recommendations around this process 🍻

Yes first time doing a 1031, have owned the home for 27 years.  Three items;

1.  Identify the new property soonest and have a backup.  I am lucky already had a property that I am buying from a friend.  Would have to go back and review the rules but I think you have to close on the replacement "like kind" property within 120 days.

2.  You will need an intermediary, by IRS rules you can't touch the proceeds of the sale.  In my case I have a lawyer in South Carolina (where the original property is), that performs this service.  He will hold the funds in escrow and deliver to title company in Florida upon closing on the new property.

3.  Try to find a replacement "like kind" property that is slightly more than the property you are selling.  Some of the literature says it has to be equal to or greater but checked with my CPA and you can actually go lower.  It does trigger capital gains on the difference and you don't want to pay that out of your "winnings." 

Good luck.

[QAZqaz]

How about avoiding home country bias and investing in the world instead of just looking stateside for investment opportunities? There's some good research by Meb Faber on global portfolios. Yes, here at home everything is expensive and there's not many good places to put money. But internationally that's not the case. In fact there has been research suggesting that buying the cheapest 25% countries overall beats the S and P, though will have some years of underperformance. That's the conclusion I came to. The US market is only 50% of the stock world and like 15-20% of the bond world. Anyone on here invest globally? Cambria has some interesting funds like GVAL that I've started diversifying into. Curious on everyone's thoughts.

[KWings06j]

23 hours ago, QAZqaz said:

How about avoiding home country bias and investing in the world instead of just looking stateside for investment opportunities? There's some good research by Meb Faber on global portfolios. Yes, here at home everything is expensive and there's not many good places to put money. But internationally that's not the case. In fact there has been research suggesting that buying the cheapest 25% countries overall beats the S and P, though will have some years of underperformance. That's the conclusion I came to. The US market is only 50% of the stock world and like 15-20% of the bond world. Anyone on here invest globally? Cambria has some interesting funds like GVAL that I've started diversifying into. Curious on everyone's thoughts.

I have an international stock fund and international bond fund in my portfolio just for this reason. Majority of my investment is in the US though.

[FDNYOldGuy]

23 hours ago, QAZqaz said:

Anyone on here invest globally?

I like picking countries with demographics I like (young populations heading to consumerism, growing industry/QoL, reasonably stable governments, etc.) and throwing money in ETFs of those countries for my IRA. Still got a few years (although getting closer quickly, it seems) until I can access my IRA without penalties, so it’s a long play hoping the numbers do their thing. But, definitely have had some decent unrealized gains on the journey thus far. 

Then again, these days, most US large/mega caps are pretty internationally diversified, so you’re getting decent exposure even investing in US companies. 

[QAZqaz]

15 hours ago, FDNYOldGuy said:

I like picking countries with demographics I like (young populations heading to consumerism, growing industry/QoL, reasonably stable governments, etc.) and throwing money in ETFs of those countries for my IRA. Still got a few years (although getting closer quickly, it seems) until I can access my IRA without penalties, so it’s a long play hoping the numbers do their thing. But, definitely have had some decent unrealized gains on the journey thus far. 

Then again, these days, most US large/mega caps are pretty internationally diversified, so you’re getting decent exposure even investing in US companies. 

Take a look at this article:

https://mebfaber.com/2019/01/06/you-would-have-missed-961-in-gains-using-the-cape-ratio-and-thats-a-good-thing/

"This strategy beat the S&P 500 by four percentage points per year.  Despite higher volatility (mostly the good “upside” volatility, by the way), it still resulted in a higher Sharpe ratio and lower drawdowns than sitting in expensive US stocks."

The chart that goes along with that quote is definitely worth looking at. CAPE might just be another metric you use to pick countries that look appealing to you. The point though, is these days I'm coming to the conclusion that diversification away from large companies / US companies might be a wise move. It is true that borders matter less and less, but if you're investing in expensive companies, international or not,  your future expected returns will still go down.

WRT investing in mega caps when they are the largest cap company at the time...see chart below. 

 

[herkbier]

On 10/13/2021 at 10:42 AM, QAZqaz said:

Take a look at this article:

https://mebfaber.com/2019/01/06/you-would-have-missed-961-in-gains-using-the-cape-ratio-and-thats-a-good-thing/

"This strategy beat the S&P 500 by four percentage points per year.  Despite higher volatility (mostly the good “upside” volatility, by the way), it still resulted in a higher Sharpe ratio and lower drawdowns than sitting in expensive US stocks."

The chart that goes along with that quote is definitely worth looking at. CAPE might just be another metric you use to pick countries that look appealing to you. The point though, is these days I'm coming to the conclusion that diversification away from large companies / US companies might be a wise move. It is true that borders matter less and less, but if you're investing in expensive companies, international or not,  your future expected returns will still go down.

WRT investing in mega caps when they are the largest cap company at the time...see chart below. 

 

Interesting article, definitely need to explore his website a bit more. Curious of course what others opinions on this metric are. 

[Tonka]

On 9/14/2021 at 9:43 AM, SocialD said:

 

No, Roth TSP/401k would still be a thing.  It's just saying you can't convert after tax monies into a Roth IRA.  This would mean most of us "rich" guys wouldn't be able to contribute to our Roth IRAs via the "back-door" or "mega back-door," like we do now.  It's simply a money grab by the dems...something we've all known they've wanted to do for a long time.

A lot of us Delta guys (not sure what other companies have the option) use this to stuff our Roth IRAs to the gills. As an example, last year I used the "mega-back door roth," to convert 30k into my Roth IRA and was still able to contribute 6k into a traditional IRA (after tax), the convert that into my Roth IRA.  So even though I made too much to directly contribute to my Roth IRA, I was still able to put 36k into it.  That option would go away.  Not the end of the world, but certainly a loss in a very nice benefit.

This is just the start of what they really want to do, because us rich guys are so greedy and "we didn't earn that."  Means testing SS, eventual taxing of our currently "tax-free" Roth TSP/IRAs will likely be the next things in their sites.  I'm certainly not planning on getting SS as part of my retirement plan, if it's there, cool more beer money.

 

If that still doesn't make sense, check this out. It's different than the standard back-door roth.

So to pull this onion back some... I need some help.  Bad on me, but I didn't realize I would be over the ROTH contribution AGI limit this year, so 1) I believe my only option is to recharacterize those contributions to a newly opened traditional IRA, correct? 2) am I then able to reduce my tax burden on those contributions, since they are now traditional?   I do not have another traditional IRA, but I a SEP IRA through my employer, TSP, and my wife has a simple IRA... do I have to worry about the pro-rata bs? 3) can I then at some point in the future, convert the traditional back to a roth ala the backdoor method above?  Yes, I probably need an accountant, but I want to learn something before I do...

[FDNYOldGuy]

49 minutes ago, Tonka said:

So to pull this onion back some... I need some help.  Bad on me, but I didn't realize I would be over the ROTH contribution AGI limit this year, so 1) I believe my only option is to recharacterize those contributions to a newly opened traditional IRA, correct? 2) am I then able to reduce my tax burden on those contributions, since they are now traditional?   I do not have another traditional IRA, but I a SEP IRA through my employer, TSP, and my wife has a simple IRA... do I have to worry about the pro-rata bs? 3) can I then at some point in the future, convert the traditional back to a roth ala the backdoor method above?  Yes, I probably need an accountant, but I want to learn something before I do...

So, it’s been awhile since I was deep in this stuff, so please check my work. But, if you’re over the Roth limit, you won’t be able to write off the Traditional money, either. The income limit is what cuts you off from either benefit. 

That said, you can still open up a Traditional IRA that you CANNOT write off the contribution and quickly wrangle the backdoor Roth re-characterization. Seriously, you can open your Traditional one day, put your contribution in, then roll it to the Roth the following day. You should avoid tax implications/pro rata if you don’t invest in anything in the Traditional account.

Here’s a good article that goes over it pretty well.

[Tonka]

Nice, at least in that article they specifically say “traditional” and not mention sep or simple iras… so I’m thinking I’ll be in the clear.  Also wonder if I should just go ahead and start contributing to the Roth again this year and do the same thing next year.

[FDNYOldGuy]

8 hours ago, Tonka said:

Also wonder if I should just go ahead and start contributing to the Roth again this year and do the same thing next year.

Always worth a shot, but you could hit the same bumps with income. You could just plan on doing the same backdoor option with contributions.
 

Or you can look into Roth TSP (if you’re still in/an ART) or Roth 401k if you’re in Gen Pop. You won’t have the options to invest in securities outside of those plans’ offerings, but it’s an easy way to contribute to a Roth option and not have the income caps (and more than the $6k/yr). You can also roll them over after you retire into your already-established Roth IRA and avoid the RMD requirement. 

[Tonka]

Good video... I'll just give a bottom line for the younger guys (because this is something I had no awareness of - and one day you might be surprised)... there is an Modified Adjusted Gross Income (MAGI) limit to investing in the ROTH IRA, if you are over that limit and still invest in a ROTH IRA you are penalized (6%?) yearly until you do something "legal" with those contributions... if you realize you invested too much, you have until the tax filing dead line to "recharacterize" the ROTH contributions into a traditional (or something else? not sure) ... and currently (2022) it is now legal to the convert the traditional to a ROTH (crazy I know!)  The recharacterization is though it happened in the original year (2021) and the conversion happens in the current year (2022)...

There are a lot of caveats and gotchas (so do the research) and most likely this loop hole is going to be fixed this year. 

 

[Tonka]

https://www.irahelp.com/slottreport/pro-rata-rule-explained-–-you-are-not-getting-double-taxed#:~:text=The pro-rata rule dictates,tax-free and taxable funds.

One of the Gotchas - pro rata rule, basically you pay tax on a % of that conversion that is commensurate with your current IRA pre-tax to after-tx ratio (don't think of this as ROTH to traditional ratio, but all within ALL of your deductible IRAs).  This includes traditional, SEP, and SIMPLE... most likely all the $ you have in those are pre-tax $ and the $ you are converting from the traditional to the ROTH is after-tax.  So if you have a lot in those accounts, you are going to pay tax on almost all of that conversion... crazy.

[Standby]

I know this is a “Beyond the…” thread, but am I the only dude who didn’t realize that Roth TSP has no income limits? Any advantage (or possibility) of to trying to recharacterize my Trad TSP into the Roth?

[CaptainMorgan]

I know this is a “Beyond the…” thread, but am I the only dude who didn’t realize that Roth TSP has no income limits? Any advantage (or possibility) of to trying to recharacterize my Trad TSP into the Roth?

It’s not possible to rollover your Traditional TSP to ROTH TSP. Best option would be to roll it into your ROTH IRA post separation/retirement, if it is still allowed.


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[bfargin]

Alright, a question for any of you that invest in bullion. So I recently bought some Platinum Eagles. How can a state charge sales tax on what is officially United States legal tender?

I realize the face value is only $100 but according to the mint's own website it is legal tender (even if the face value is a nominal value). The wholesalers I checked with (Cal Numismatic, JM bullion, apmex)) all say states are now collecting sales tax on bullion coins sales (even ones that are US Mint products and are U.S. legal tender). I've never paid sales tax on US coins before and it doesn't seem right to pay on official US minted coins.

[Royal]

Interesting...Was it shipped to you?

There are state by state rules apparently:

https://www.bgasc.com/sales-tax-gold-silver-bullion-coins#california

 

Why the Change in Tax Collection?

In short, a U.S. Supreme Court decision in June of 2018 triggered a chain reaction of new laws governing the collection of sales tax on orders shipped to you from out-of-state retailers.

Prior to the aforementioned Supreme Court decision, we were only required to collect state sales tax on orders shipping to an address within California, the same state in which our BGASC headquarter offices are physically located (aka our "physical nexus"). This was because back in 1992, the Supreme Court set a precedent for how each state would deal with online retailers in the case of "Quill Corp v. North Dakota". The court ruled in favor of Quill Corp, ruling that the company did not need to collect tax on sales in North Dakota as they had no physical presence within the state.

Flash forward to June 21, 2018, the day that the Supreme Court announced a new decision in the "South Dakota v. Wayfair Inc." case. South Dakota argued that it was losing out on local sales taxes because consumers were spending more money shopping online with out-of-state companies than they were in local brick-and-mortar stores. SCOTUS decided in favor of South Dakota, ruling that now economic activity (such as a certain number of sales made to a state) is considered "economic nexus" and can trigger a sales tax collection obligation. South Dakota blazed a new trail, and other states have followed close behind.

Now, online retailers are required to adapt to the varying state sales tax rules and regulations across the United States. For precious metals dealers this is exceptionally complex as there are special rules and regulations governing the collection of sales tax on precious metals bullion for each state. At BGASC, we are working to make this transition easy, especially as we begin enforcing the tax laws of an increasing number of states. We hope our state sales tax map and information pages will help our customers understand how sales tax is collected for orders placed with BGASC. If you have specific questions, you may want to contact your tax professional.

 

Also:

 

Many states charge sales tax on the purchase of precious metals and other items that we sell on our website. Taxes can vary based on the type of metal, the dollar amount and even the premium charged for an item. The exact rules are quite complex, so we use the largest provider of state tax information in the nation to determine the taxes due for each order, based on all these criteria.

To find out if there will be sales tax due on your order, add the desired items to your shopping cart and enter your shipping address during the checkout process. The website will automatically calculate the sales tax due -- based on the exact items in your cart and your shipping address.

In the State of Texas, sales of gold and silver are not subject to sales tax. If shipping an order to your state would cause you to incur sales tax for silver and gold bullion, coins or rare coins, you can prevent being charged sales tax on your order by storing your items at the Texas Bullion Depository. Since the order will not have a shipping address to your state, no state sales tax will be due.

[bfargin]

Yes I had them shipped. It just shocked me because TN also has such high sales tax (9.75%) it makes it difficult to think any investment has a 10% hit (added base) the day you get it. I thought about having it sent to my brother in TX but just had it sent straight to me. I get that I'm buying the precious metal but if the US puts a legal tender value, you'd think it wouldn't be taxable. If I go to the bank I don't get charged for buying a roll of quarters (legal tender). I was just surprised and frustrated, so thought I'd see if anybody else had been hit by that lately.

[Swizzle]

Hmmm, pondering, that bullet prices have increased and bullets are useful in multiple ways, like you infer bullion. Both can be bartered if need arises. Both taxed during online transactions. However differently, I'd only eat beef bouillon! Some other poor schmuck can eat lead, then they lose their bullion.  Anywho...

Diversifying is prudent so go with bullion and ammo!! (Maybe some bouillon - gotta eat.) Your portfolio and risk tolerance will dictate what quantity of each. Remember, both are heavy.

 

Effective 4/1/2022, CCI, Federal, Hevi–Shot, Remington, and SPEER ammunition will take the following price increases: 

• Primers – 5%
• Powder – 5%
• Handgun – 2-8%
• Rifle – 3-8%
• Shotgun – 3-12%