vanguard vs fidelity

Discussion of the Bond portion of the Permanent Portfolio

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jhogue
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Re: vanguard vs fidelity

Post by jhogue » Fri Jun 08, 2018 8:55 am

pugchief wrote:
Fri Jun 08, 2018 7:55 am
jhogue wrote:
Thu Jun 07, 2018 11:05 pm
pugchief 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.,...
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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pugchief
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Re: vanguard vs fidelity

Post by pugchief » Fri Jun 08, 2018 10:14 am

jhogue wrote:
Fri Jun 08, 2018 8:55 am
pugchief wrote:
Fri Jun 08, 2018 7:55 am
jhogue wrote:
Thu Jun 07, 2018 11:05 pm


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.,...
True, IL does not currently tax withdrawals from tax deferred plans at all. So I'm still gonna lose the preference, since ANY investment there would be free of state income tax.
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jhogue
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Re: vanguard vs fidelity

Post by jhogue » 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.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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pugchief
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Re: vanguard vs fidelity

Post by pugchief » Fri Jun 08, 2018 11:44 am

Hogue, you are to I-bonds what Mathjak is to Fidelity Insight. A relentless cheerleader. :P
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Kriegsspiel
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Re: vanguard vs fidelity

Post by Kriegsspiel » Fri Jun 08, 2018 12:30 pm

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.
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jhogue
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Re: vanguard vs fidelity

Post by jhogue » Fri Jun 08, 2018 1:54 pm

pugchief 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.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Kriegsspiel
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Re: vanguard vs fidelity

Post by Kriegsspiel » Fri Jun 08, 2018 3:07 pm

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."
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Re: vanguard vs fidelity

Post by thisisallen » 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
Dieter
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Re: vanguard vs fidelity

Post by Dieter » Fri Jun 08, 2018 5:37 pm

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.
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Re: vanguard vs fidelity

Post by jhogue » Sat Jun 09, 2018 1:01 pm

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.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
thisisallen
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Re: vanguard vs fidelity

Post by thisisallen » Sat Jun 09, 2018 1:52 pm

Very good, actionable replies about handling these things as cash. Appreciated
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sophie
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Re: vanguard vs fidelity

Post by sophie » Sat Jun 09, 2018 5:19 pm

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.
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