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Re: vanguard vs fidelity

Posted: Thu Jun 07, 2018 6:28 am
by sophie
stuper1 wrote:
Wed Jun 06, 2018 3:30 pm
If I understand correctly, you can start with $50k+ in VUSXX and then later drop well below $50k without any problem, as long as: (a) this is in a retirement account (e.g., IRA, Roth IRA, 401k), or (b) you have at least $50k of total assets invested with Vanguard. So, you could open a PP with just slightly over $50k in VUSXX and soon thereafter use 75% of the money to buy stocks/bonds/gold.
Are you sure you can do that??

VUSXX is outstanding but alas not available at Fidelity. I didn't know it had reopened. If so, it's the best "online savings account" available!! But, it has to be possible for the balance to drop below the $50K minimum. Do you know if a employer retirement account at Vanguard counts toward the $50K total assets invested requirement?

Re: vanguard vs fidelity

Posted: Thu Jun 07, 2018 9:22 am
by stuper1
I'm not sure. I would think so if the employer account is held directly at Vanguard. I don't think it would apply if you held VUSXX through another brokerage.

Re: vanguard vs fidelity

Posted: Thu Jun 07, 2018 11:05 pm
by jhogue
MangoMan wrote:
Wed Jun 06, 2018 6:41 pm
So the T-bills I purchased are zero coupon, i.e., they were sold at a discount and mature at $1000 in 3 months. Does anyone know if you hold these over Dec 31/Jan1, is there imputed interest that tax has to be paid on, or how does that work tax-wise?
The IRS taxes phantom income on zero coupon bonds annually. You can, however, buy zeroes in tax deferred accounts (which I have done), and their interest is not taxed by the federal government. Also, don't forget that regardless of what kind of account in which you hold them, T-bills are exempt from state and local taxes, which effectively increases their tax equivalent yield.

Re: vanguard vs fidelity

Posted: Fri Jun 08, 2018 8:55 am
by jhogue
MangoMan wrote:
Fri Jun 08, 2018 7:55 am
jhogue wrote:
Thu Jun 07, 2018 11:05 pm
MangoMan wrote:
Wed Jun 06, 2018 6:41 pm
So the T-bills I purchased are zero coupon, i.e., they were sold at a discount and mature at $1000 in 3 months. Does anyone know if you hold these over Dec 31/Jan1, is there imputed interest that tax has to be paid on, or how does that work tax-wise?
The IRS taxes phantom income on zero coupon bonds annually. You can, however, buy zeroes in tax deferred accounts (which I have done), and their interest is not taxed by the federal government. Also, don't forget that regardless of what kind of account in which you hold them, T-bills are exempt from state and local taxes, which effectively increases their tax equivalent yield.
That's what I thought, thanks. But if you hold them in a tax deferred account, you lose the state tax exemption. I guess I'll find out how complicated it is April 15. Usually, the big brokers make reporting pretty easy.
Hmmm...
If I read the finance buff.com correctly it appears that SOME states (including IL) exempt income from an IRA distribution from state taxes. Is that right??
See:
https://thefinancebuff.com/deduct-and-c ... tions.html

Ugh. State taxes regarding tax deferred accounts are getting more complicated all the time. Some have an exemption. Some have a minimum age. Some have a cap on the exemption, etc., etc., etc.,...

Re: vanguard vs fidelity

Posted: Fri Jun 08, 2018 11:41 am
by jhogue
Tax simplification: yet another reason to buy I bonds!

With I bonds, you get 30 years of tax deferral outside the increasing complications of an IRA. And that means no RMDs after age 70 ½.

Besides that, in a rising interest rate environment a ladder of I bonds is the best guaranteed protection against inflation. Currently, I-bonds are yielding 2.52%, with a fixed income component (real yield) of +0.3%. Should the Fed raise interests again, I bonds’ variable rate will reset twice per year.

I do like STTs in taxable, and Treasury zeroes in tax deferred accounts, but only after I fill my quota of I bonds.

Re: vanguard vs fidelity

Posted: Fri Jun 08, 2018 12:30 pm
by Kriegsspiel
jhogue wrote:
Fri Jun 08, 2018 8:55 am


Hmmm...
If I read the finance buff.com correctly it appears that SOME states (including IL) exempt income from an IRA distribution from state taxes. Is that right??
See:
https://thefinancebuff.com/deduct-and-c ... tions.html

Ugh. State taxes regarding tax deferred accounts are getting more complicated all the time. Some have an exemption. Some have a minimum age. Some have a cap on the exemption, etc., etc., etc.,...
From what I can gather, Pennsylvania does not exempt traditional IRA contributions from state income tax, which kinda blows.

Re: vanguard vs fidelity

Posted: Fri Jun 08, 2018 1:54 pm
by jhogue
MangoMan wrote:
Fri Jun 08, 2018 11:44 am
Hogue, you are to I-bonds what Mathjak is to Fidelity Insight. A relentless cheerleader. :P
Nah, I actually think that I bonds are the worst form of Cash equivalent, except for all others.

Besides, Medium Tex holds the tenured chair in I Bond Cheerleading. I still laugh to myself when I think about him parading around in a suit made of paper I bonds.

Re: vanguard vs fidelity

Posted: Fri Jun 08, 2018 3:07 pm
by Kriegsspiel
jhogue wrote:
Fri Jun 08, 2018 1:54 pm
I still laugh to myself when I think about him parading around in a suit made of paper I bonds.
"C'mon! Vince could go wearing a t-shirt and get laid!"
"Yea and you could go wrapped in bearer bonds I-Bonds and STILL not get laid, put the fucking pajamas back Turtle."

Re: vanguard vs fidelity

Posted: Fri Jun 08, 2018 5:08 pm
by thisisallen
Following the bouncing ball here...
if tax deferral is not an issue right now then is it best to buy I bonds or 1 yr t-bills or what?
Thx

Re: vanguard vs fidelity

Posted: Fri Jun 08, 2018 5:37 pm
by Dieter
IBonds rock if can lock up the funds for a year.

Actually beat inflation before (deferred) taxes; no state taxes (same as STT); tax free if spend on qualified education or a couple other things.

IBonds (2.52%) slightly higher than current 1 year TBill rate.

Inflation protection.
Limited to $10k per SSN per year.
Hard locked in for a year (I think). 3-Month penalty if withdraw before 5years.

Slightly higher yield than Vangiards STT adm fund (which has principle risk - 2.2yr duration)

For deep cash, IBonds are hard to beat.

Re: vanguard vs fidelity

Posted: Sat Jun 09, 2018 1:01 pm
by jhogue
thisisallen wrote:
Fri Jun 08, 2018 5:08 pm
Following the bouncing ball here...
if tax deferral is not an issue right now then is it best to buy I bonds or 1 yr t-bills or what?
Thx
I think of Cash as the most customized and personalized part of the HBPP. Both I bonds and and 1 yr T-bills are US Treasury issued debt, so they are equally as safe and stable as a Uncle Harry's proverbial Treasury money market fund.

But I bonds and 1 year T-bills do have different features and therefore can play different roles in each individual investor's Cash strategy. I bonds are not liquid until they are one year old, so I only use I bonds for Deep Cash, with funds I don't need for at least 2-3 years. 1 year T-bills are completely liquid from the day you buy them to their date of maturity. Currently, I use T bills as a backstop for money market funds.

Re: vanguard vs fidelity

Posted: Sat Jun 09, 2018 1:52 pm
by thisisallen
Very good, actionable replies about handling these things as cash. Appreciated

Re: vanguard vs fidelity

Posted: Sat Jun 09, 2018 5:19 pm
by sophie
Sort of like cash. Strong emphasis on 'deep cash', as in you never want rebalance out of them. Take them into retirement and cash them in when you're ready to deal with the tax implications. I use 1/3 of total cash as my rule of thumb, so I don't buy I bonds every year.

Re: vanguard vs fidelity

Posted: Mon Feb 17, 2020 1:17 pm
by vnatale
jhogue wrote:
Fri Jun 08, 2018 11:41 am
Tax simplification: yet another reason to buy I bonds!

With I bonds, you get 30 years of tax deferral outside the increasing complications of an IRA. And that means no RMDs after age 70 ½.

Besides that, in a rising interest rate environment a ladder of I bonds is the best guaranteed protection against inflation. Currently, I-bonds are yielding 2.52%, with a fixed income component (real yield) of +0.3%. Should the Fed raise interests again, I bonds’ variable rate will reset twice per year.

I do like STTs in taxable, and Treasury zeroes in tax deferred accounts, but only after I fill my quota of I bonds.
It's obvious from the many times you extolled the virtues of I bonds that you are a major fan of them.

However, in the case of either a flat interest rate environment or a declining one what are the downsides to holding I bonds rather than their alternatives?

Also, it seems due to the limitations on the $$$$ asmount a single person can purchase in a year any actual achieved advantages from holding I bonds would be fairly tiny in a portfolio of any size?

Vinny

Re: vanguard vs fidelity

Posted: Mon Feb 17, 2020 2:32 pm
by jhogue
Vinny,

1. I bonds are guaranteed by the US Treasury to not go below 0% yield in a deflationary interest rate environment. There is no such guarantee for T-bills or TIPS. Also, if you are particularly worried about long term deflation, you might want to investigate EE bonds, which are guaranteed to double in value in 20 years regardless of where interest rates go in the intervening years. I personally believe that the threat of inflation is much greater than the threat of deflation, but who knows for sure? You could always buy some of each.

2. Each person can buy $10,000 in I-Bonds from TreasuryDirect + $5,000 with their tax refund + $10,000 for a living trust, or a total of $25,000 per year. After a decade or two of adding to that principal, plus semi-annual compounded interest, plus state and local tax exemption, plus federal income tax deferral, they do add up. Currently, I have about 40% of my PP Cash in savings bonds, with the rest in T-bills and a Treasury only Money Market Fund.

To be sure, I am not saying that a pile of I-bonds will make you rich. But I do regard them as the closest thing there is to a free lunch for those who aspire to financial independence and a well-diversified portfolio.

Re: vanguard vs fidelity

Posted: Wed Apr 22, 2020 7:10 pm
by vnatale
jhogue wrote:
Fri Jun 08, 2018 11:41 am
Tax simplification: yet another reason to buy I bonds!

With I bonds, you get 30 years of tax deferral outside the increasing complications of an IRA. And that means no RMDs after age 70 ½.

Besides that, in a rising interest rate environment a ladder of I bonds is the best guaranteed protection against inflation. Currently, I-bonds are yielding 2.52%, with a fixed income component (real yield) of +0.3%. Should the Fed raise interests again, I bonds’ variable rate will reset twice per year.

I do like STTs in taxable, and Treasury zeroes in tax deferred accounts, but only after I fill my quota of I bonds.
Can this ladder be set up at the time of a first initial purchase? Or, does it only naturally occur as one is making annual purchases?

Vinny

Re: vanguard vs fidelity

Posted: Thu Apr 23, 2020 2:06 pm
by jhogue
I normally max out my quota of electronic I-bond quota once each year.

However, you can also purchase I-bonds monthly through TreasuryDirect's Payroll Savings Plan as well, which would give you more rungs on your I-bond ladder.

See:
https://www.treasurydirect.gov/indiv/he ... asesavings