r/Bogleheads

I live in the US and I recently started my first investment into an IRA, specifically a Roth IRA since my income tax is so low right now, so I expected I'd put X money in, have a deduction for taxes, then have a slightly lower amount that would actually get invested. However, I got a bit blindsided when I put money into the account and the amount invested was the same as I put in, i.e. there was no deduction for taxes. Lets say I put $1000 in and my tax rate is 10%; I thought I'd only have $900 going into the investment, but I still have that full $1000. Since there wasn't any apparent tax taken out, I'm worried it will show up later when I don't expect it.

My understanding was Roth accounts require taxes paid when money is deposited and then offer tax-free growth and withdrawals, whereas Traditional accounts have tax-free deposits and taxes are deferred for when you withdraw. But with experiencing this, I realized I don't really know exactly what taxes retirement accounts concern themselves with.

Trying to reason through this myself, I'm thinking since my initial deposit was transferred manually from my bank account, i.e. with money from my paychecks which already have income-tax accounted for, technically my tax obligation on the investment was already met. Whereas if I set up a portion of my income to be deposited into my Roth IRA, I'd then first see a deduction on that and then the remaining amount would get invested.

Is that correct? Does "tax-deferred" refer to income tax or is there another tax I should be considering? Will this be something that's only accounted for when I file my taxes next year?

Apologies if this seems like a stupid question; when it comes to economics, I really have some kind of blindspot. I'm lucky to understand this particular passive-investment strategy at all.

I'm just starting to get into investing, and I don't want to have to change brokerages later on. I've heard that Robinhood is pretty beginner friendly, but I've also heard some negative things.

Can someone break down the pros/cons of both? Also, should I be sticking with one brokerage or use more than one?

Hi everyone!

I am 35 and maxing out my 401k, roth, and contribute to an individual brokerage. In my 401k I chose a TDF as a easy investment option. However I see it has only returned 11% over the last 3 years, is this acceptable with the bull market we have seen or should I change my investment elections? My options are very limited which complicates things, but the 11% feels unacceptable when such a large chunk of my investments are going to my 401k.

Below are my available stock options and their expense ratios:

AF GRTH FUND Amer R6, .29

PUTN LG CAP VAL TR IA, .33

FXAIX, .015

FSMDX, .025

EAGLE MID CAP GR F, .49

JMVYX, .7

FSSNX, .025

JGMNX, .67

NDVVX, .87

FSGGX, .055

RERGX, .47

FPADX, .075

If I were to pick a two fund portfolio I am looking at 60% FXAIX and 40% RERGX, but I am wondering if that isn't diverse enough for bogleheads.

Should I have faith in my TDF or which stocks would be the best option? At the end of the day I am happy to set and forget it, but the 11% strikes me as ridiculously low considering the market the last three years, I just want to be smart with my investments! Please advise, thank you!​

EDIT: Looks like the ROR 11% is YTD, over the last three years it is 15.96%

Early 70’s and been a long time index mutual fund (more recently ETF) investor. A lot of S&P and a couple of other high tech concentrated funds. Hold virtually no bonds as my pension/SS basically cover my income needs, but have enough in money market funds for major emergencies. I want to significantly reduce my exposure to high tech and contemplating moving a fair amount into VXUS and VTV. Want to stay invested in the market, but as I said - reduce my exposure to tech as it feels very pre dot.com bubble burst to me which is when I adopted the buy and hold index fund philosophy and never wavered- but I’m older now. Final point. Doing this only in my IRA’s, so no capital tax gains at this time.
Your thoughtful input will be greatly appreciated.

I purchased a small amount of Apple stock through a taxable brokerage decades ago, and it's now at roughly $250k in a $2M portfolio. I also hold a lot of VOO and I know that Apple is playing an outsized role in my accounts. I know the reasons to sell it off, but are there reasons NOT to sell it at this point, besides the sentimental pull of keeping something that has done so well for me over the years?

Apologies up front if this has already been asked, but I’ve searched “newbies” info and cannot find a simple guide to the smart combinations of ownership regarding simplifying the overlap of vanguard index funds. Such as “if own VT no need to own VOO and VXUS together” or “if only owning VOO you’re lacking VXUS”…I’m sure I’ve missed it on here. I just get lost in the recommendations and was wondering if anyone has something like that already compiled?

I hold 60% FSKAX, 30% FTIHX, and 10% FXNAX in a Fidelity taxable account. I heard bonds in a taxable account isn't great and I've heard mixed things about holding mutual funds.

I'm looking to offload FXNAX but I'm not sure if I should buy more FSKAX or FTIHX, or perhaps VOO. What is everybody holding in their taxable accounts?

I'm also looking at replacing the mutual funds with VTI and VXUS now before my balance grows (currently $27k).

Any advice for this noob would be appreciated.

Thanks!

I am in my early 70s and I have two funds at a brokerage that I would like to move to Fidelity. One is a traditional IRA and one is a Roth. Since my funds have always been managed I haven't had much experience concerning buying and selling. The money in these two funds is money that I can afford to play with and I would like to buy a couple of stocks or ETFs with it. If I move these funds into a Fidelity brokerage account I understand that I will have to liquidate these funds and buy what I want to buy. Is there any way that I can avoid/minimize such a tax burden in going forth with my plans? Thanks for any advice.

I like the evidence based approach regarding the small-cap companies they take off. But what do y’all think? I’m not a boglehead but have a similar philosophy.

Hello everyone,
I’m 21 years old and currently a third-year engineering student studying in Thailand. My goal is to become at least partially financially independent by the time I graduate in 2028. I currently have around €5,000 saved and want to start taking investing seriously.

Before putting a significant amount of money into the market, I want to build a strong foundation. I’m interested in learning about portfolio construction, fundamental analysis, technical analysis, risk management, and how experienced investors make decisions. I’m looking for educational resources as well as practical advice.

Here are a few questions I’d appreciate your thoughts on:

1. If you were starting with around €5,000 at my age, how would you allocate it between:
   - Long-term investments
   - Cash/emergency savings
   - Learning or experimenting (paper trading or a small trading account)
   - Other opportunities such as personal projects, if any

2. What are the best resources for learning investing and technical analysis? (Books, YouTube channels, Investopedia, Reddit communities, online courses, etc.)

3. Which platforms do you use to follow market news, company earnings, and live stock data?

4. How long would you recommend spending on learning before investing with real money? Would you start with a small amount immediately while continuing to learn, or wait until you feel more confident? (I have set my goal to learn all the fundamentals by the end of this year)

5. Looking back, what is one piece of advice you wish someone had given you before you started investing?

For context, my goal is long-term wealth building rather than getting rich quickly. I’m happy to spend several months learning if it means avoiding expensive beginner mistakes.
Thank you in advance for any advice!

My partner is the only one working, as I stay home with our little one and am in college full time(graduating soon).

We have a fully funded emergency fund, no debt, and are maxing out their 401k and both of our Roth IRAs.

What do we do with the money we have leftover each month?

Hi all. I am new to investing other than starting a Roth IRA for myself years ago. I am currently a stay-at-home-mom and just cut my gym membership which was $114 a month. My husband does not have a Roth or traditional IRA but I want to help set one up for him with that gym money we are saving now.

Currently he makes about 80k but we expect his income to go up to about 250k in the next couple of years and I will likely go back to work part-time but I worked in childcare so it won’t be much. He is also expecting to get a large inheritance in the future but I want to operate regardless of that but might be something to think about considering taxes that we will likely owe then. Do you recommend I set him up with a traditional or Roth IRA? I don’t mind paying the extra taxes now (albeit not easy) if the benefit seems better later. I always assumed the Roth was better but truly don’t know and not a math wizard. Thank you so much!

Update: it seems the consensus is a Roth IRA now and then no consensus on whether to switch to traditional IRA or back door the Roth so I’ll have to look further into this. I also acknowledge that gym money alone isn’t going to make much difference now but hoping to add some bonus. Thank you all for your thoughts.

If you were to inherit a portion of a managed portfolio in various Mutual funds and some individual stocks, who would you hire to advise you how or actually do the work to unwind those investments and turn them into index funds? The intention is to keep the most money after taxes, and possibly fees. Especially if you don't trust the current managers?

Getting good data is a big hurdle for retail investors. Reliable return histories are often locked behind thousand dollar a year subscriptions. But you can get a lot for free.

I put together a small return dataset covering developed-market stocks, sovereign bonds, interest rates, and currencies.

The goal is to consolidate the kinds of return series that are useful for testing global asset allocation strategies, especially those involving foreign equity, sovereign bonds, currency hedging, and excess returns.

The dataset includes 50+ years of coverage across several files. All available for free. Check it out!

https://github.com/birjusuketupatel/ReturnDataFiles/tree/main

All I’m going to do is VTI and VXUS for my Roth. I also want auto investing so I don’t need to worry about it. Should I do the etf or mutual fund of those 2 funds?

I’m 21 and wanting fast growth.

Originally it seemed like the best idea to do this in reverse for the foreign tax credit, but it feel like I would getting tens of dollars in foreign tax credit with vxus and it would be cheaper and easier to rebalance keeping VTI-VXUS in ROTH IRA.

I'm less likely to touch VT and so it feels like it makes sense to have that in brokerage and less likely to mess with it.

Am I missing something?

They both hold foreign investments and so they both have dividends for which the FTC can apply. VTI-VXUS is the only one I can choose the percentages/change them if I decide but then would have to sell triggering a tax event.

So I'm surprised that this is the path many have taken.

Average Joe, just starting, not working with huge numbers yet.

I'm 25, have a masters and bachelors, but they're arts degrees, so now I live at home. I recently started working as a mail carrier for the USPS, after having worked as a substitute teacher this past school year. I have no debt and $31k sitting in a high yield savings account, nothing more, nothing less. My primary goal is to move out of home, out of Wisconsin, and begin working in the field I'm actually interested in, that field being the film/media industry.

My question is: for someone in my position, somebody who wants to make a change sooner rather than later, is my current, conservative strategy of just keeping my money in a high yield savings account the right one?

I know that saving for retirement basically requires you to invest in the market, ideally passively through shares of VT, but right now I feel like my life has yet to truly start, so I think it's a bit strange to save for retirement when I haven't even started my career and I need cash in the short term to possibly do so, hence why I keep all of my money in a high yield savings account. I know the earlier you start investing in the market, the quicker you experience compounding growth and the quicker you can retire, but it seems like this is the mindset for someone who has already secured a career position. Basically, the straightforward, distilled question I have is this: should I keep putting all of my money in the savings account yielding 3.4% APY, or should I start putting part of it toward shares of VT?

I love the ability to convert the 530(A) account to a Roth IRA, but I’ve read about the kiddie tax, and the benefit of waiting until the child turns 24 if they are in college, etc.

I’m wondering if I’ve done the math/reasoning correctly in the scenarios below, to minimize taxes on conversion?

Assumptions:

• Total Contributions (Basis): $50,000 (Tax-free)
• Projected Investment Growth: $25,000 (Taxable upon conversion)
• Total Account Value at Age 18: $75,000

Scenario 1: Early Retirement, No Earned Income

The year my child starts college (Sept 2036), I will (hopefully) also retire from my current job, and my plan is to live solely off of my savings coming from an HYSA or Roth contributions for the first 2 years. This would effectively give me $0 earned income in tax year 2037, and being divorced and the custodial parent, my child's unearned income (the $25k of projected investment growth), would be taxed at my marginal rate as follows:

Child Cap: My child would be permitted to use a maximum of $2,700 of their own brackets for unearned income.  The first half is tax-free ($1,350), and the second half is locked at 10% ($135 tax).

Because I have $0 of income, the IRS would fill up my unused 10% bracket and 12% bracket with the remainder of the $25k of growth.

 

First $1,350: Tax-free (first half of child cap). $0 tax.

Next $1,350: Taxed at 10% (second half of child cap). $135 tax.

Next $12,400: Shifted, taxed using my unused parental brackets. Taxed at 10%. $1,240 tax.

Remaining $9,900: Taxed at 12% using my parental bracket. $1,188 tax.

 

$2,563 Total Federal Tax Bill.

 

Scenario 2: Child Takes a Gap Year

As far as I understand the Kiddie Tax: The IRS applies the Kiddie Tax to all 18-year-olds unless they provide more than half of their own financial support using their own earned income (wages from a job).

For young adults aged 19 to 23, the Kiddie Tax only applies if they are full-time students.

The IRS defines a full-time student as anyone enrolled in school full-time during any part of 5 calendar months out of the year

My child is a late school birthday, born in October.  They turn 18 in October of 2035, graduate high school in May of 2036, and would typically start college in September of 2036.  If they defer for a year, this means they turn 19 in October of 2036, and would not start college until September of 2037.

Therefore, in the tax year of 2037, at ages 19 to 20, they will only have attended school full-time for four months of the year (Sep, Oct, Nov, Dec), giving them non-student status, meaning the Kiddie Tax would not apply.

If I convert the full 530(A) account amount to a Roth IRA during 2037 in this scenario, the entire conversion would be taxed strictly using my child’s own independent tax brackets. If they do not work and have $0 in earned income (let’s say they take the year to travel, funded by me, all falling within the lifetime gift tax exemption), then the following is true:

 

Assuming the 2026/2027 standard deduction of $16,100, the $25,000 of 530(A) Account growth would be taxed like this:

Tax-Free Layer ($16,100): Covered entirely by the Single Standard Deduction. $0 tax.

10% Bracket Layer ($8,900): The remaining growth taxed at the lowest bracket. $890 tax.

$890 Total Federal Tax Bill.

If the above scenarios are accurate, then I see a huge benefit to doing a lump-sum conversion to a Roth IRA in 2037 in either case, rather than waiting until age 24/25 when my child's earned income from their first job would also impact the conversion tax rates, but am I missing anything?

Wow! finally. We can press a button and lock outgoing money transfers. This is amazing! And yes you can choose which accounts to lock.

Thank you.

Edit: thanks everyone. Yeah I noticed it! And said I have to go to the bogleheads subreddit to let the VANGUARD DIEHARDS know.

Keep on BOGLE’ing.

50% VTI
20%VXUS

15% SPMO
15% FMTM

25m with 20+years horizon. Any thoughts?