No Stupid Questions

[just]

In honor of ohgillian's wise words in the other thread ...

What are your March not-stupid MM questions?

[just]

If I have a three fund portfolio, and I get to a point that I want to withdraw money ...

Do you

--liquidate each fund in your chosen proportion (60% of needed total from stocks, 30% of needed total from bonds, 10% from international)
--liquidate from the fund that would signify the strongest return rate at that time, and rebalance at your usual point in the future ...

I'm guessing the first one since the balance is the whole point of the three fund portfolio, but then it seems like you're squandering the benefit if say ... the stock market was significantly down ...

[Poppy]

I think ideally you'd sell the amounts needed to bring your investments in line with your target asset allocation.

For example, if stocks have been underperforming bonds, you'd sell more bonds.

It kind of depends on your account types. I think rebalancing more often is considered better (at least by the Bogleheads who generally don't believe in timing the market), but if you are doing that in non-tax advantaged plans, frequent rebalancing can trigger excess tax.

[ohgillian]

My accountant told me that the tax return we file for a family trust* is "informational only." What is that? What is an informational return?


*It's a trust we created to hold this random commercial property I inherited that I cannot seem to sell or even give away. Not a "real trust" as I think of it. Not one with, you know, money. LOL

[Covergirl82]

Since the Federal W-4 form was updated, I have no idea how to update my W-4 so that it deducts the right amount each pay period (biweekly). I changed jobs in Feb 2020, and apparently whatever I selected on the Fed form when I started was not enough, so we owe $5K in Fed taxes for 2020. (In my previous job, I think I was having too much withheld, because we'd typically get around $2-3K in a Fed refund.)

I just changed my Fed W-4 to have $200 additional deducted, but I see in the pending deposit in my bank account for the pay period that pays out tomorrow that my deposit is almost $500 less than it was before I made the change. (As a note, I am also being paid my annual incentive tomorrow, but it's a separate check.) Does anyone know of an accurate and easy-to-use withholding calculator that I could use to identify what I should have on my W-4?

[just]

Mar 3, 2021 8:39:20 GMT -5 ohgillian said:

My accountant told me that the tax return we file for a family trust* is "informational only." What is that? What is an informational return?


*It's a trust we created to hold this random commercial property I inherited that I cannot seem to sell or even give away. Not a "real trust" as I think of it. Not one with, you know, money. LOL

NOT a tax expert.

I had to file a 3250 form this year and had a consultation with a tax accountant. The 3250 is also an informational return rather than a tax return. I could submit my tax return as usual with FreeTaxUSA and then send the 3250 separately. It didn't impact my taxes, and is purely just to declare to the IRS a non-taxable financial situation.

Still very much not a tax expert.

[sometimesrunner]

Covergirl82, google "ADP salary calculator." You can play around with the different boxes on the W-4 to get to your desired withholding.

[mrsd2006]

Why is it such a bad idea to let something go to probate? Every time I bring up us doing a will, DH says that it will just "go to probate" like it's not a big deal (this is what happened when his mom passed away). The problem is he is the big earner, and I can't pay both mortgages with what I make so I have a concern about this. So I know it could take months and we need to be better prepared. But he doesn't think it's a big deal.

[simpsongal]

mrsd2006 , not legal advice, but going to probate should *NOT* be an issue when a spouse dies. Generally, you should be regarded as the beneficiary on everything and there's no formal process to effectuate that. I assume you have a jointly held mortgage and whatnot.

But yeah probate in my experience is otherwise a long, PITA process. I'm actually glad my mom has a modest life insurance policy b/c it should pay out quickly/easily for funeral expenses one day.

ETA - b/c a "not" was missing

[goldengirlz]

Mar 3, 2021 14:16:05 GMT -5 mrsd2006 said:

Why is it such a bad idea to let something go to probate? Every time I bring up us doing a will, DH says that it will just "go to probate" like it's not a big deal (this is what happened when his mom passed away). The problem is he is the big earner, and I can't pay both mortgages with what I make so I have a concern about this. So I know it could take months and we need to be better prepared. But he doesn't think it's a big deal.

It’s state dependent. The way it was explained to us by the trust and estate attorney we worked with is that going to probate (at least here) is a months-long process and also incurs legal fees. Having a will — and putting your assets in a trust — allows the easiest transfer of assets.

Here probate is also triggered by the size of the estate, though I’m not sure if it’s waived if the spouse is the only beneficiary. If both of you were to pass at the same time, though, it could get messy.

[Cappy]

Mar 3, 2021 14:16:05 GMT -5 mrsd2006 said:

Why is it such a bad idea to let something go to probate? Every time I bring up us doing a will, DH says that it will just "go to probate" like it's not a big deal (this is what happened when his mom passed away). The problem is he is the big earner, and I can't pay both mortgages with what I make so I have a concern about this. So I know it could take months and we need to be better prepared. But he doesn't think it's a big deal.

Our atty actually advised us to let it all go to probate and I don't understand why either. She said it is no big deal and happens fast, which is the opposite of what I've always heard. We do have all retirement type assets set up where they are either joint or we are each others named beneficiary.

[orval]

Our attorney in NC also advised against a trust. Most of our assests have beneficiares. In NC, a house does not have to go through probate. That is about the only thing we have that does not have a beneficiary.
Anecdote - my mom had set up a trust but didn't put anything in it! So we had to do probate. Cost about 5k but only had a few things - small vacation home and a car. still a pain to go through all of the paperwork etc. She did own quite a few timeshare weeks which we use. We were already in the process of redeeding those to put in a trust before she passed. THat way we don't have to do any redeeding again just pass them down through the trust.

[carmenere]

Mar 3, 2021 14:16:05 GMT -5 mrsd2006 said:

Why is it such a bad idea to let something go to probate? Every time I bring up us doing a will, DH says that it will just "go to probate" like it's not a big deal (this is what happened when his mom passed away). The problem is he is the big earner, and I can't pay both mortgages with what I make so I have a concern about this. So I know it could take months and we need to be better prepared. But he doesn't think it's a big deal.

Ideally you'd want your H to have enough life insurance to cover his final expenses plus some months of his salary to help sustain you while go through all the paperwork and adjust to life without him. Also, if you're listed as the beneficiary on all his bank and retirement accounts, that should be fairly easy. I think how long it takes varies by state and county, so you may want to consult a local attorney.

I'm not sure how much you mean by "big earner" but it sounds like a will would be worth it for the peace of mind it would give you.

[sicilygirl]

Mar 3, 2021 8:39:20 GMT -5 ohgillian said:

My accountant told me that the tax return we file for a family trust* is "informational only." What is that? What is an informational return?


*It's a trust we created to hold this random commercial property I inherited that I cannot seem to sell or even give away. Not a "real trust" as I think of it. Not one with, you know, money. LOL

An informational return is any tax return that's required to be filed but does not assess tax, such as a Form 990 for nonprofits, a Form 1065 for partnerships, or, in some cases - depending on the type and circumstances, a Form 1041 for trusts.  In the case of the partnership and these trusts, income is passed through to the owners/beneficiaries so the 1065 or 1041 is just considered "informational."

ETA: Form 3520 that just mentioned above is for foreign trusts.

[ohgillian]

I have another.

When we talk about things being "pre-tax" (like traditional IRA contributions, or daycare flex contributions), does that mean you don't pay payroll taxes on it AND you don't pay income taxes?

[sometimesrunner]

Mar 22, 2021 8:15:38 GMT -5 ohgillian said:

I have another.

When we talk about things being "pre-tax" (like traditional IRA contributions, or daycare flex contributions), does that mean you don't pay payroll taxes on it AND you don't pay income taxes?

Items like traditional 401k and Simple IRA contributions are pre fed/state tax only, whereas FSA contributions and HSA contributions are pre fed/state and pre ss/med tax. People use the phrase "pre-tax" to describe both types of deductions; you either have to ask or research yourself if they're subject to SS/Med tax. 

[seeyalater52]

This is probably too stupid even for the “no stupid questions” thread, but talk to me about opening a ROTH IRA for the first time. Aside from our work retirement accounts we have no retirement savings and I’d like to change that this year. Assume that given where our work retirement accounts are held that we don’t have ties to a particular financial institution.

Question:

Where is the best place to open? These will be modest accounts and I know that usually the lower amounts don’t have any/many fees although I’d like to eventually build to 50k+ in them down the road if that matters. Not having the principal eaten away by fees and charges is a priority for me (but not sure if that is a legit concern at this dollar amount.) What is really the difference between different options (Fidelity, Vanguard etc) at the end of the day? What about lesser known (to me) places like a Ellevest or Ally or whatever. Some of them seem to have fewer or lower fees but I’m not confident I’m smart enough to understand the differences.

I do not want to have to manage anything myself. I have no interest in trading anything or being fancy. I just want to be able to enter my target retirement year or something similar and let it do its thing.

If it’s the first year we are funding the account (for the full 6k) should we open it now am I understanding that we can do that retroactively for 2020 until April 15? What is the benefit to doing it now for 2020 vs now for 2021? I’m not sure yet if we will have the funds to add more this year for 2021 but if we did, is that the best option?

Be gentle... I’ve never had any extra money before. 🤣

[Pilsy]

Mar 22, 2021 9:02:37 GMT -5 seeyalater52 said:

This is probably too stupid even for the “no stupid questions” thread, but talk to me about opening a ROTH IRA for the first time. Aside from our work retirement accounts we have no retirement savings and I’d like to change that this year. Assume that given where our work retirement accounts are held that we don’t have ties to a particular financial institution.

Question:

Where is the best place to open? These will be modest accounts and I know that usually the lower amounts don’t have any/many fees although I’d like to eventually build to 50k+ in them down the road if that matters. Not having the principal eaten away by fees and charges is a priority for me (but not sure if that is a legit concern at this dollar amount.) What is really the difference between different options (Fidelity, Vanguard etc) at the end of the day? What about lesser known (to me) places like a Ellevest or Ally or whatever. Some of them seem to have fewer or lower fees but I’m not confident I’m smart enough to understand the differences.

I do not want to have to manage anything myself. I have no interest in trading anything or being fancy. I just want to be able to enter my target retirement year or something similar and let it do its thing.

If it’s the first year we are funding the account (for the full 6k) should we open it now am I understanding that we can do that retroactively for 2020 until April 15? What is the benefit to doing it now for 2020 vs now for 2021? I’m not sure yet if we will have the funds to add more this year for 2021 but if we did, is that the best option?

Be gentle... I’ve never had any extra money before. 🤣

I happen to be a Vanguard fan, so I'd go with them, but I don't think Fidelity is all that different. I'm not familiar with the others you mentioned, but I think fees, fund options, website functionality, and customer service are usually the differentiators. Some places are bigger and well-known, so there's a certain level of comfort that comes with using them, but they are likely more expensive. 

You can use target date funds to set and forget any investing you do. 

I would fund for 2020 now and then hope to have enough to fund for 2021 before that window closes. The 2020 window will close earlier, as you know, so take advantage of it while you still can. 

I'm no expert, but I think you're doing great. How does anyone know this stuff before experiencing it?

[ohgillian]

Mar 22, 2021 8:59:48 GMT -5 sometimesrunner said:

Mar 22, 2021 8:15:38 GMT -5 ohgillian said:

I have another.

When we talk about things being "pre-tax" (like traditional IRA contributions, or daycare flex contributions), does that mean you don't pay payroll taxes on it AND you don't pay income taxes?

Items like traditional 401k and Simple IRA contributions are pre fed/state tax only, whereas FSA contributions and HSA contributions are pre fed/state and pre ss/med tax. People use the phrase "pre-tax" to describe both types of deductions; you either have to ask or research yourself if they're subject to SS/Med tax. 

Thank you! In the HSA thread, puppylove64 mentioned the ss/med tax benefit and I realized I was confused about this who question. I definitely didn't understand/ hadn't thought of the difference you just described, but it makes sense. 

[imojoebunny]

Mar 3, 2021 14:16:05 GMT -5 mrsd2006 said:

Why is it such a bad idea to let something go to probate? Every time I bring up us doing a will, DH says that it will just "go to probate" like it's not a big deal (this is what happened when his mom passed away). The problem is he is the big earner, and I can't pay both mortgages with what I make so I have a concern about this. So I know it could take months and we need to be better prepared. But he doesn't think it's a big deal.

For us, doing a trust and wills, allowed DH's retirement accounts to be taken out over a much longer term, should he pass away.  Otherwise, either the kids or I would have to take them over 5 years, which would be bad from an income/tax perspective.  With the trust, we don't have to do that.  

I, also, know several people whose parents died young without a will.  Their remaining parent, and the children all inherited equally, so Mom got 1/3, kid A got a 1/3, and Kid B got a 1/3.  This is state specific, I am sure, but let me just say that the average 21 year old kid doesn't make good choices with $1M or whatever, and the poor remaining spouse had to deal with their retirement being cut by 2/3rds.   

[ohgillian]

seeyalater52, go easy on yourself. This thread is great for any kinds of questions.

I like Pilsy's response. I especially agree that if you are contributing now, you should do it as a 2020 contribution, because it gives you more flexibility in case you find yourself with extra $ to contribute in 2021. When I've contributed in the past, in the Jan - April months, there has usually been a specific question where you have to click which year you're contributing for. So you shouldn't have to go thru anything complicated to contribute for last year.

[AdaraMarie]

seeyalater52 I did this earlier this year with a very small amount of money. I looked at reviews online that compared them and gave recommendations. I think nerdwallet was one of the main ones, but it's been a couple months. I ended up going with an automated account at SoFi. I think they had the lowest fees for a fully automated account. I am nowhere near maxing anything out so I just did it for 2021, I don't think it makes any difference for me because I can only put in $50 per month.
I don't know if I would recommend this place or not, I haven't had it very long, but that is how I chose.

[wanderingback]

Mar 22, 2021 9:02:37 GMT -5 seeyalater52 said:

This is probably too stupid even for the “no stupid questions” thread, but talk to me about opening a ROTH IRA for the first time. Aside from our work retirement accounts we have no retirement savings and I’d like to change that this year. Assume that given where our work retirement accounts are held that we don’t have ties to a particular financial institution.

Question:

Where is the best place to open? These will be modest accounts and I know that usually the lower amounts don’t have any/many fees although I’d like to eventually build to 50k+ in them down the road if that matters. Not having the principal eaten away by fees and charges is a priority for me (but not sure if that is a legit concern at this dollar amount.) What is really the difference between different options (Fidelity, Vanguard etc) at the end of the day? What about lesser known (to me) places like a Ellevest or Ally or whatever. Some of them seem to have fewer or lower fees but I’m not confident I’m smart enough to understand the differences.

I do not want to have to manage anything myself. I have no interest in trading anything or being fancy. I just want to be able to enter my target retirement year or something similar and let it do its thing.

If it’s the first year we are funding the account (for the full 6k) should we open it now am I understanding that we can do that retroactively for 2020 until April 15? What is the benefit to doing it now for 2020 vs now for 2021? I’m not sure yet if we will have the funds to add more this year for 2021 but if we did, is that the best option?

Be gentle... I’ve never had any extra money before. 🤣

I'd just like to point out that everyone on this board is generally very nice.
This isn't a stupid question at all. Outside of having a bank account and possibly a credit card, I don't think finance, especially retirement vehicle savings options are "general knowledge" and wouldn't fault anyone for not knowing these things. 

I don't have the answers because again, this isn't a stupid question, so just wanted to point this out to you and anyone else reading. All questions welcomed. 

[ohgillian]

Mar 22, 2021 10:05:13 GMT -5 wanderingback said:

Mar 22, 2021 9:02:37 GMT -5 seeyalater52 said:

This is probably too stupid even for the “no stupid questions” thread, but talk to me about opening a ROTH IRA for the first time. Aside from our work retirement accounts we have no retirement savings and I’d like to change that this year. Assume that given where our work retirement accounts are held that we don’t have ties to a particular financial institution.

Question:

Where is the best place to open? These will be modest accounts and I know that usually the lower amounts don’t have any/many fees although I’d like to eventually build to 50k+ in them down the road if that matters. Not having the principal eaten away by fees and charges is a priority for me (but not sure if that is a legit concern at this dollar amount.) What is really the difference between different options (Fidelity, Vanguard etc) at the end of the day? What about lesser known (to me) places like a Ellevest or Ally or whatever. Some of them seem to have fewer or lower fees but I’m not confident I’m smart enough to understand the differences.

I do not want to have to manage anything myself. I have no interest in trading anything or being fancy. I just want to be able to enter my target retirement year or something similar and let it do its thing.

If it’s the first year we are funding the account (for the full 6k) should we open it now am I understanding that we can do that retroactively for 2020 until April 15? What is the benefit to doing it now for 2020 vs now for 2021? I’m not sure yet if we will have the funds to add more this year for 2021 but if we did, is that the best option?

Be gentle... I’ve never had any extra money before. 🤣

I'd just like to point out that everyone on this board is generally very nice.
This isn't a stupid question at all. Outside of having a bank account and possibly a credit card, I don't think finance, especially retirement vehicle savings options are "general knowledge" and wouldn't fault anyone for not knowing these things. 

I don't have the answers because again, this isn't a stupid question, so just wanted to point this out to you and anyone else reading. All questions welcomed. 

Definitely this. And even if it's "how do I get a credit card or a bank account?" we can answer that too. I like this board; I find that everyone's really kind and people explain things well. 

[egishere]

If you did not have your normal childcare expenses in 2020 due to Covid but still paid some-maybe to a private sitter how are you writing it off? The camp at the school that I normally send my kids to in the summer was closed so I used a teen babysitter 2-3 times a week and also used her some when school shut down again before Thanksgiving. It was over $3000 we paid her in 2020. My accountant wants me to get her ss#, address etc for our taxes. He said we can still file without that info but will have to paper file and he doesn't recommend that. So I guess we are out of luck on claiming any of this for 2020? No way am I asking for that info and don't want her to be taxed.

[AdaraMarie]

Mar 22, 2021 11:16:40 GMT -5 egishere said:

If you did not have your normal childcare expenses in 2020 due to Covid but still paid some-maybe to a private sitter how are you writing it off? The camp at the school that I normally send my kids to in the summer was closed so I used a teen babysitter 2-3 times a week and also used her some when school shut down again before Thanksgiving. It was over $3000 we paid her in 2020. My accountant wants me to get her ss#, address etc for our taxes. He said we can still file without that info but will have to paper file and he doesn't recommend that. So I guess we are out of luck on claiming any of this for 2020? No way am I asking for that info and don't want her to be taxed.

You can't deduct without the provider being reported/taxed.
The other thing that sucks that I found out yesterday is that you have to pay tax on money that was put into your fsa tax free that you had to forfeit.

[Poppy]

seeyalater52

Vanguard is unique in it's ownership structure. The company is owned by its own investment funds. So the incentives for the company are to reduce expenses for the funds as much as possible. Fidelity has created some funds with very low expense ratios to try to compete, but at the end of the day the company is beholden to shareholders in a more traditional way and is incentivized to maximize profit.

I am a huge Vanguard fan and it's super easy to create a Roth IRA account there. You can pick a "Target Retirement 20XX" fund (20XX = approximate year of retirement), and they will take care of all rebalancing to make the fund more conservative over time as that retirement date approaches. The minimum investment for those funds is $1000, and they waive the $20 account maintenance fee if you opt for edelivery of documents. An index fund is designed to match the performance of the stock market as a whole, so you are not at the mercy of some hedge fund manager who is speculating in order to try to generate outsized returns (which over the long term almost always fails, especially after fees are accounted for). Vanguard founder John Bogle pioneered these funds and started this unique company.


Although I'm a huge Vanguard fan, I think you would be fine to get an index fund (or target retirement date fund which holds index funds) at many other places, especially those low cost funds at Fidelity. But I've been super happy with Vanguard for ~20 years.

Agree with PPs that you might as well contribute for 2020 in hopes of also making a 2021 contribution.

[seeyalater52]

Mar 22, 2021 10:36:36 GMT -5 ohgillian said:

Mar 22, 2021 10:05:13 GMT -5 wanderingback said:

I'd just like to point out that everyone on this board is generally very nice.
This isn't a stupid question at all. Outside of having a bank account and possibly a credit card, I don't think finance, especially retirement vehicle savings options are "general knowledge" and wouldn't fault anyone for not knowing these things. 

I don't have the answers because again, this isn't a stupid question, so just wanted to point this out to you and anyone else reading. All questions welcomed. 

Definitely this. And even if it's "how do I get a credit card or a bank account?" we can answer that too. I like this board; I find that everyone's really kind and people explain things well. 

Thank you to you and wanderingback for emphasizing this. I am definitely struggling with some UMC imposter syndrome. We do not have family to guide us on things like retirement savings because we don't come from families who have had money to save. It's a little scary getting to your mid-30s and finally having more than you need to manage your everyday life and bills and realize that you know nothing! I appreciate that folks on this board are so generous with their knowledge. It's still intimidating (a personal problem, not the board's fault!) but it makes it so much easier. <3 


Pilsy ,ohgillian ,AdaraMarie , thank you for the suggestions and advice. I think it does make sense to fund ASAP for 2020 just in case we end up with extra to add for 2021 later in the year. I spoke with my wife this morning and I think we both agree it would make sense to put the $300/month child credit advance in starting in July (if it is indeed distributed in advance of the 2021 tax filing) and if not aim to put it in at tax time if we get it then. While the money is for our kiddo we are behind on retirement savings and I think one of the best gifts we can give him later on is our own financial stability as we near retirement age so we can support him vs. the other way around (which is what we are dealing with with our own families.) 


ETA: Poppy, I'd already pretty much settled on Vanguard and your post really helped solidify that for me. Thank you!! 

[ohgillian]

seeyalater52 Vanguard has particularly low fees and I mostly like their website (although it changed in the past month-ish and I'm definitely still adapting to it).

[AdaraMarie]

seeyalater52 Reading the posts reminded me of a couple other things. I have been listening to Suze Orman some and she is a big proponent of dollar cost averaging which is why I am doing a little at a time instead of lump sum. The theory makes sense to me.
www.nerdwallet.com/article/investing/dollar-cost-averaging-2

Also, I remembered that I didn't go with vanguard partly because my 401k is mostly within their year target fund and I wanted to attempt to use the roth to diversify. (For all I know it's probably a ton of the same stocks)