Originally Posted by ChiliConCarnage:
Good reminder, kicked off 2025 IRA contribution from my bank.
I do. I contribute actively to both Roth and traditional through my company 401k plan as well. I know some people try to work out exactly which is best for them but it takes a lot of assumptions about taxes and your life decades into the future so I use both a bit. Plus, knowing myself, I'll hate pulling out money once I have little to no income. Not owing taxes on some of it may help it not hurt so bad.
Originally Posted by DaFace:
I do ROTH primarily but my trad is a dumping ground for all of my orphaned 401ks. I find the idea of predicting future income in retirement to be pretty ambiguous, so I figure having a blend will give me a little flexibility.
For the record if you're talking about me, I'm not necessarily leaning on predicting income tax liability in retirement. I did the math to end of life using todays tax code, but that's not where the crux of the decision making is.
The basis of the decision landed on the idea of taking the tax savings from the pre-tax contributions (into a qualified plan, so the limits are higher and worthwhile) which, when I calculated them were more substantial than I'd anticipated, and investing them into a taxable brokerage account. The math is fairly complicated following all the different components through over time, but it's pretty sizable, even at modest compounding returns.
You have to know what you're signing on for, even in a buy and hold situation (which I'm doing). Even things like VOO have close to a 1% dividend, which is taxable, and those taxes have to be accounted for in the return calculation as well as cash flow to pay the taxes.
You also have to have the discipline to transfer the money into a brokerage. I've been doing well doing it, but it's definitely a consideration. If you don't get it in there, you've wasted the tax savings. I haven't done the math on making sure I'm getting it all in there, but I think I am. Cost efficiency is a big thing.
I'm not whole hog. Basically I'm putting my stuff in pre-tax and the wife's in as ROTH as a hedge against uber high tax rates in retirements (which looking at the national debt and associated budget deficits, is a real risk. However, getting a compounding return in play is hard for me to believe taxes efficiency is going to outperform compounding returns. After I file my return I'm going to take a hard look at moving at least some of the wife's contributions to pre-tax.
It adds complication and required management and cash flow for tax on the brokerage account, but in my specific case the math was compelling.
My big discovery a while back is that my tax rates likely won't be lower in retirement. Between Social Security and Required Minimum Distributions and Dividends, I'll be fortunate enough to generate a healthy income. But that diminishes the value of a traditional IRA.
You still get to invest the deferred taxes for a few decades, so I'm not saying a traditional IRA is a bad proposition, but all I've ever heard is that "you'll benefit from a lower tax rate in retirement", and that's not true if you're a dedicated saver during your career. The Roth is much better in that case, because if you're going to pay the same tax rate earlier or later, pay it earlier so you can get the tax-free growth.
I have both, by the way, but my Roths are newer for some various logistical reasons. I'm now in a multi-year process of converting the traditional IRAs to Roth because I'm going to have an income trough for the next several years (with a lower tax rate) before Social Security kicks in. [Reply]
Originally Posted by Rain Man:
My big discovery a while back is that my tax rates likely won't be lower in retirement. Between Social Security and Required Minimum Distributions and Dividends, I'll be fortunate enough to generate a healthy income. But that diminishes the value of a traditional IRA.
You still get to invest the deferred taxes for a few decades, so I'm not saying a traditional IRA is a bad proposition, but all I've ever heard is that "you'll benefit from a lower tax rate in retirement", and that's not true if you're a dedicated saver during your career. The Roth is much better in that case, because if you're going to pay the same tax rate earlier or later, pay it earlier so you can get the tax-free growth.
I have both, by the way, but my Roths are newer for some various logistical reasons. I'm now in a multi-year process of converting the traditional IRAs to Roth because I'm going to have an income trough for the next several years (with a lower tax rate) before Social Security kicks in.
Right, I didn't plan on lower taxes, because I didn't back out any expense from the calculation except I think 10K/yr/kid when they graduate and P&I when I pay the mortgage off. [Reply]
Jackass comes on TV and says the words rate hike and the market promptly takes a 500 point swing. As soon as I heard it I knew the market was going to tank. I'd like to kick him in the nuts:-) [Reply]
Originally Posted by philfree:
Jackass comes on TV and says the words rate hike and the market promptly takes a 500 point swing. As soon as I heard it I knew the market was going to tank. I'd like to kick him in the nuts:-)
Originally Posted by DaFace:
You'd prefer inflation?
That's a stupid question.
I prefer competence but the Fed always gets it wrong. "We follow the data"! Well the data has been fudged for the last four years so what could possibly go wrong? And then no matter what the Fed does the Biden administration sabotages it with more government spending. What a cluster fuck.
And then the Jackass who suggested a rate hike is probably intentionally trying to cause a selloff so he can swoop in and buy those shares up. Just utter those words and the algorithms start shitting shares left and right. [Reply]
Originally Posted by philfree:
That's a stupid question.
I prefer competence but the Fed always gets it wrong. "We follow the data"! Well the data has been fudged for the last four years so what could possibly go wrong? And then no matter what the Fed does the Biden administration sabotages it with more government spending. What a cluster fuck.
And then the Jackass who suggested a rate hike is probably intentionally trying to cause a selloff so he can swoop in and buy those shares up. Just utter those words and the algorithms start shitting shares left and right.
Total net worth up by 11.8 percent.
Total return on liquid investments up by 16.1 percent.
The difference between the two is that my house value took another big hit in 2024, according to Zillow estimates. My house value is down 23 percent from its peak, which is kind of astounding.
In terms of liquid investments, this is a total, so it includes some contributions to my account this year, and also includes some static amounts like my bank accounts and some static dividend investments that don't appreciate until I sell them. If I take out those static investments and exclude the one account that got new contributions, I was up 19.6 percent on my stocks. That trails the market, but it includes a lot of low-risk CDs in my accounts, so I'm happy with my returns.
The returns of my top ten stock holdings at the beginning of the year. You probably recognize most of these symbols.
At the beginning of the year, these ten holdings were 24.9 percent of my investment holdings. NVDA is a game-changer, of course, tripling for the second year in a row. I also got fantastic returns out of GOOG, AMZN, AAPL, and BX (Blackstone). MSFT and QCOM were up nicely, too. I took losses on three of my top ten. I was surprised at AMD and NVO (Novo - weight loss drugs) since both have been hot in recent years. PSX (Phillips 66) is not a surprise as my energy stocks have nearly all been in the doldrums.
I had some other big winners over the year, so my top ten at the end of the year changed a bit as some other stocks grew. I’m a lot more concentrated now as my top ten are now 31.4 percent of my investment holdings, mostly due to the dominance of NVDA.
Here's my current top ten and how they performed. You probably know most of these stocks.
PSX, QCOM, and NVO dropped off the top 10, despite a pretty good year by QCOM. They were replaced by a target date fund that rose pretty dramatically because it's the only account I contributed to last year, and they only offer target date funds. I put a lot of my paycheck into it last year, so the balance rose by far more than the 24% return. TSM (Taiwan Semiconductor) and ANF both got onto the top ten list due to really strong performances in 2024. ANF is Abercrombie & Fitch, which is rampaging through the retail clothing market like a gorilla in a china shop.
I'm excluding fixed-incomes from the above list. I bought a ton of them last year, and then they started getting called, so now I've got a big mix of CDs and cash. 13.6 percent of my investment dollars are in those holdings, and I'm getting roughly a 4.8% return on those funds, albeit with very low risk so I'm happy with them even if the return wasn't high. It was a great risk mitigator.
My top ten stocks in terms of returns totaled 12.8 percent of my holdings at the end of the year, and all were up more than 80 percent. However, of that 12.8 figure, 9.2 is NVDA. The story of my year is NVDA.
Four of these stocks are asterisks. I started buying them as new investments mid-year and didn't get nearly the return that's shown. (I'm just listing 1-year returns, not my personal returns.). Those are RDDT (Reddit), IAG (gold mine), CALM (eggs and other foodstuffs), and PAM (Argentine utility). Combined, the four of them are 0.4% of my holdings, so I just started building positions in them.
I'm selling off a little bit of NVDA at this point because it's been so stratospheric. It's far and away my largest holding now.
GEV (energy infrastructure company) is a stock that I didn't initially buy. I hold some GE stock, and GEV is the energy group that spun off last year. It's done great, and per my investing rules I've been buying it regularly and increasing my holdings. It's still only 0.2 percent of my total holdings, though, since it's a newish stock.
TSM (Taiwan Semiconductor) and RCL (cruise line) have been long-time powerhouses for me. The major cruise lines all did fantastic this year. I have two other cruise lines and all were up more than 40%.
NFLX surprised me on this list because I have a bit of it, but nowhere near a top-ten holding. I hadn't watched it very closely other than noting it going up pretty consistently. I'm in good shape on this stock.
TPR is another good retail story for me. It's a luxury clothing/accessories brand and had been stagnant for a long time. I guess they were under threat of being "merged" in a deal that investors didn't like. That deal finally fell apart, which skyrocketed the stock.
My bottom ten stocks in terms of returns totaled 1.6 percent of my holdings at the end of the year, in part because they were declining notably in value and in part because my strategy is to sell off stocks that are underperforming, even if I take a loss to do it. I'm following market momentum in recent times as my core strategy.
MRNA (Moderna - vaccine company) has turned into a full-blown disaster. I'm selling it off, but I'm losing a ton of money on it. At one point it was a big winner when the vaccines were coming out, and now there's no bottom at all. It just keeps going down. I think SLP is hitting the same vaccine fatigue - they do prescription interaction research.
INTC (Intel) is a well-known story. I was okay on it until this year. I'm hanging on in case they make a comeback. STM is basically Switzerland's version of INTC.
I've held NEOG (animal food safety) forever, and I'm finally giving up on it. It was a great stock for years and then has steadily declined for the past few. I'm at a notable loss on it now. DOW is a similar story, and if not for the big dividend I would be selling it off. I might start.
ALB (lithium miner) is another past big winner, but lithium prices have tanked in the past two years. I'll hold onto this one and hope it comes back.
EDPFY is a Portugese utility provider. I've held them forever for steady returns, even if they aren't high flyers. But the last year or two has been rough for them and I don't understand why. I'm holding them in hopes of a recovery.
TNK (maritime tanker) is a new purchase that has tanked. No pun intended. It's too early to pull the plug here. It's a very small holding right now.
SYNA (touchscreen manufacturer) is another stock that I did well on and then suddenly the bottom dropped out. I've started to reluctantly sell it off. [Reply]
