Investing, Stock Market and Retirement Planning Thread

[dodint]

Anyone use Ally? Particularly their savings bucketing feature? Supposedly they have a 4.5% savings account right now. I have a five-figure balance I hope to grow into a six-figure balance in the next 24-30 months. Right now I am using a credit union money market account that is at 2.5% which is good but not optimal.
The other option is to stay with the CU and do 12mo CDs at 5%. But that means the new deposits won't enjoy that rate during the year.

I don't need frills, just want to send a bulk of my paycheck to a high yield account and then worry about accessing it in ~2-3 years.

In a somewhat similar boat and just started researching different savings accounts. Want something where I can access it quickly and easily if need be and…that’s pretty much it

The Ally money market is 4.4% and has ATM/checks. The Savings is 4.25% but you have to ACH or wire everything. I might just do the MM. I can do buckets on my own with a spreadsheet and bank the slightly higher rate.

[NTP66]

Another thing to consider, if it matters to you, are daily/monthly transfer limits. Marcus’s limits are really high, especially compared to a lot of CUs. I routinely have to push/pull money from Marcus to get around absurd limits from Andrews FCU, etc.

Also, it’s worth using https://www.depositaccounts.com to see the best checking/savings/CD rates. I have always used them because they always post membership rules and steps to join if they have requirements, making the process easy. Plenty of reviews from others to help you decide, too.

[dodint]

I spent the weekend thinking about the tax implications of a HYSA vs. capital gains. Then I checked and realized that (Thanks Trump) the long term capital gains tax changed in 2018 and now it's 0% for the space I'll be playing in. I think I favor that over giving 22% of my savings account gains to the government for doing absolutely nothing. So rather than go with the HYSA I'm going to setup a recurring investment in index funds. Shoot for a 10% annual return that I won't have to pay taxes on. Barring a full economic collapse in the next 3-5 years that should work well for me.

Of course I haven't logged into my Schwab account in a year and it doesn't recognize me. Yay.

[dodint]

Whoops, Chuck closed my account when I went on a break last year. It turns out they acquired TD Ameritrade and this is the weekend they chose to migrate the accounts. They have financial advisors fielding phone calls because the actual techs are overwhelmed. My timing is trash, as is typical with anything market related.

[Dickie Dunn]

Yea I had to setup my stupid Schwab account last week.

[mac5155]

Is a money market subject to capital gains but a HYSA is interest (ordinary income)?

[dodint]

Savings accounts and money market accounts are subject to taxes on interest as ordinary income. You'll get a 1099-INT. It's not subject to capital gains because it's not a capital asset for that purpose, it's a savings vehicle not something you buy low and sell high.

A money market fund is a kind of mutual fund that is subject to capital gains, but I don't think anyone was talking about that.

[mac5155]

Oh OK, you mentioned a difference so I wasn't sure.

[dodint]

Probably poorly worded on my part. I was going to do a HYSA and pay taxes on the interest. But then I decided to switch to mutual funds and stay in the 0% long-term capital gains tax bracket. The only reason to stay with HYSA is if I think I'll get less than a 4.5% annual return for the next 3-5 years, and I firmly believe the VFIAX Vanguard 500 Index Fund Admiral Shares will outperform that (currently at 18.9% YTD).

As usual I asked a simple question and then fell down a rabbit hole and came to an entirely different conclusion.

[mac5155]

Yeah that's what NTP told me to do with VTSAX and I'm still down 21 months later lol

[dodint]

Yeah, that'll happen.

[NTP66]

I would still tell you to go that route today, mac. VTSAX is the gold standard, long-term.

[dodint]

Not to cloud it up even more but I didn't realize the long-term capital gains tax isn't progressive. So it's not 0%, but rather 15% for me. So, again, I make too much to benefit but not enough to not care about this stuff. Yay. 15% is still less than my highest tax bracket so it still works out, I just don't get to feel good about it.

[robbiestoupe]

Yeah I was wondering why you had 0% up there as I was pretty sure you made more than $85k with your wife's salary added.

[dodint]

Ain't nothing in life free.

[NTP66]

Time to cash in that 2021 I-Bond purchase. Good timing, as my local credit union has a 12-month CD @ 5.11% APY right now. Hope that sticks around for another month, because my 2022 I-Bond will be cashed in then.

My 2022 bond still has another month at the 6.x and then I'm probably dumping after 3 months with the new rate.

Vanguard started a cash management program at 4.7 so I moved some money there as that beats both Marcus and my PNC account at 4.3.

Funny, I didn't have the VG cash option the other day (there was a disclaimer about it not being available for all). Today, I received an invite e-mail from them to open an account (same 4.7% rate). Not sure if I'll do it since we're likely to use a good portion of this I-Bonds money on solar panels, but good to know that it's an available option for me now. Thanks for the heads up.

[dodint]

I went to put in a significant order for VFIAX. On the Review Order screen there was a $74.95 transaction fee. It looks like there is an 8% principle fee with a cap of $74.95. This is a recurring order I'd like to place every two weeks so that's a problem. Did a quick look at Schwab has their own S&P 500 index, that has an identical makeup as VFIAX. No fees.

An interesting article about the slight differences: https://thoughtfulfinance.com/swppx-vs- ... X_vs_VFIAX

VFIAX won't be able to overcome that repeated 8% hit so as a Schwab customer SWPPX is a bit of a no-brainer if I want an S&P 500 Index Fund.

[count2infinity]

Likely the dumbest question ever, but... what's the best way to start a 529? Like are there different 529 plans out there?

[Dickie Dunn]

Go to https://www.pa529.com/

[count2infinity]

Thanks.

[NTP66]

Don't go to pa529.com because there are better options out there. Go to https://www.savingforcollege.com and read through their guides. PA is one of those states where we can use an outside plan and not miss out on anything. My daughter's 529 is actually with Utah (UESP/my529), and I have been very happy with them. @Tomas has had some thoughts on this area in the past, as well.

[robbiestoupe]

I started with PA but did some research and ended up with NY. Fees are much lower, similar if not better returns

[NTP66]

NY and NV were my next two choices.

[Dickie Dunn]

Don't go to pa529.com because there are better options out there. Go to https://www.savingforcollege.com and read through their guides. PA is one of those states where we can use an outside plan and not miss out on anything. My daughter's 529 is actually with Utah (UESP/my529), and I have been very happy with them. @Tomas has had some thoughts on this area in the past, as well.

WHAT!?

[mac5155]

I went with Ohio cause I liked Vanguard.