The wealth-building thread

[EJ3]

I understand that there is a portion of income earned outside the US that isn't taxed if you are living in another country and working as an expat. There are caveats around it (e.g. how long you are outside the country, etc.)

The US isn't the only country that taxes income on it's citizens even if the income is earned outside the US. Brazil, for example, is another (I know as I am also a permanent resident of Brazil). That said, neither taxes the income where tax was paid in the other country.

Correct, As a US Citizen, I paid my taxes in the country I was a resident of (which had a MAXIMIM tax rate of 12%) and I paid it there (even though the company was a US company, deposited into my bank account in full with the SS, Medicare, etc taxes already pulled out.
I paid my taxes in that country quarterly.
At some point the US Internal Revenue Service sent me a letter asking me why I had not paid my taxes.
I took that letter to the Governors office of the country that I was in & someone from there sent a letter back to the IRS that I had paid & would continue to pay my taxes there.
The next letter I received from the IRS indicated that they were aware that I had paid the taxes that i was supposed to in the country that I was in & that all was good.
I was out of the USA for 17 years and I have now been back for 6 years & paying my taxes in the USA since I came back.
And all is good.
I believe that there should be a consumption tax.
If you are rich or poor, the more you buy, the more that you pay. There should be caveats, most food, medicines & clothing, for example should be tax free.
There are other details that would need to be worked out...but...

 

[Prana Ferox]

I wish the crypto thread was still around. BTC is up 115% on the 1yr chart. Dow is up 12%. But grandpa says its a beanie baby bubble.

It deserves a place in most portfolios imo nfa.

NVDA is up 230% in the same timeframe with exactly zero of the downsides of handling BTC; it is clearly more profitable to sell to BTC miners than it is to actually hold BTC

 

[amper42]

All the shorts are getting killed today. End of day, I will sell some of my S&P500. This is hilarious...

 

[OCA]

All the shorts are getting killed today. End of day, I will sell some of my S&P500. This is hilarious...

Mean reversion is the name of the game.

 

[JeffS7444]

Recently, I've become aware of financial services claiming FDIC coverage, sometimes for balances far in excess of the usual $250K limit per institution, e.g., Fidelity's FDIC-Insured Deposit Sweep Program. Just be aware that they are getting around this limit, by depositing your funds in any number of banks, and should Fidelity become insolvent, the FDIC doesn't currently have any guidelines for investors to access funds directly from said banks. This is exactly the predicament that Yotta Savings (Who? I'm so not fintech ) customers are facing now:

https://www.forbes.com/sites/emilym...ally-safe-in-an-fdic-insured-fintech-account/

 

[levimax]

Buy T-bills with a treasury direct account, unlimited US government backing and no commissions.

 

[sdrichard]

Buy T-bills with a treasury direct account, unlimited US government backing and no commissions.

And any income is exempt from state and local taxes.

 

[Chrispy]

And any income is exempt from state and local taxes.

How does that work?

 

[sdrichard]

How does that work?

How Are Treasury Bills (T-Bills) Taxed?

Interest from Treasury bills (T-bills) is subject to federal income taxes but not state or local taxes, and is reported on Form 1099-INT.

www.investopedia.com

See the Tax Advantages section.

 

[Chrispy]

How Are Treasury Bills (T-Bills) Taxed?

Interest from Treasury bills (T-bills) is subject to federal income taxes but not state or local taxes, and is reported on Form 1099-INT.

www.investopedia.com

See the Tax Advantages section.

Saw initially still subject to fed tax, cute they got around state tax but then the whole cap gains stuff is pretty much crap

 

[Blumlein 88]

How does that work?

Interest from Treasury bills is exempt. CD interest is not.

 

[Chrispy]

Interest from Treasury bills is exempt. CD interest is not.

This is both fed and state? I was only curious about tbills fwiw

 

[Blumlein 88]

This is both fed and state? I was only curious about tbills fwiw

Sorry for the imprecision. Feds tax tbills and CD interest or Money market interest as income. States and some local gov't taxes CD and Money Market. They are not allowed to tax Tbills. If you are in a state with no income tax doesn't matter. If you are in a state with income tax then CD and Money markets have to pay more than the same as Tbill interest to put the same amount of money in your pocket.

 

[Chromatischism]

Saw initially still subject to fed tax, cute they got around state tax but then the whole cap gains stuff is pretty much crap

Well, in the current regime you want to pay capital gains tax. The alternative is you pay income tax, which is probably higher.

 

[Tom C]

We’re talking short-term notes here. If held to maturity, capital gains is moot. An interest rate drop will increase the market value of t-bills, but the effect will be greater for t-notes and t-bonds, which have a longer maturity.

 

[Prana Ferox]

Tax-wise CDs are the same as a savings account. Money market funds are taxed based on their underlying investments so if your MM fund is T-bills, it's taxed as T-bills, if it's state securities it's usually state tax free, etc.

I keep some cash in a short-term T-bill ladder. It gets a little higher interest than a savings account and it's a little tax friendlier, but it's still barely-maybe keeping ahead of inflation. No one's getting rich off these things

Recently, I've become aware of financial services claiming FDIC coverage, sometimes for balances far in excess of the usual $250K limit per institution, e.g., Fidelity's FDIC-Insured Deposit Sweep Program. Just be aware that they are getting around this limit, by depositing your funds in any number of banks, and should Fidelity become insolvent, the FDIC doesn't currently have any guidelines for investors to access funds directly from said banks. This is exactly the predicament that Yotta Savings (Who? I'm so not fintech ) customers are facing now:

https://www.forbes.com/sites/emilym...ally-safe-in-an-fdic-insured-fintech-account/

I have cash in the F product too, and I'm going to go out on a limb and say Fidelity's better organized than 'Yotta Savings' / Synapse and if Fidelity goes under without a buyer we've probably got more stuff to worry about.

 

[levimax]

I have cash in the F product too, and I'm going to go out on a limb and say Fidelity's better organized than 'Yotta Savings' / Synapse and if Fidelity goes under without a buyer we've probably got more stuff to worry about.

It doesn't make any sense to take the extra risk of an "unproven under fire" product like Fidelity's as you don't get any extra yield and you are taking on additional risk compared to buying T-bills directly. It is possible Fidelity could run into trouble with or without some type of systemic financial crisis and adding the worry of "losing all of your money for no reason" is always worse than "not losing all of your money".

 

[Petrushka]

“fearful when others are greedy, and greedy when others are fearful.”

When covid started I was tempted to sell my stock, but didn’t, because I was fearful.

The stock went from 54 to 27, at which point I could have bought. I eventually sold at 95, which was a good deal, but a lot less profit than I could have had.

 

[amper42]

The real risk in the last 24 months was being out of or under-weight the SPY500 along with Microsoft and Apple. Bonds have been a painfully sub-par investment in comparison. That may change eventually but with so much US debt bonds could under perform for years.

 

[levimax]

The real risk in the last 24 months was being out of or under-weight the SPY500 along with Microsoft and Apple. Bonds have been a painfully sub-par investment in comparison. That may change eventually but with so much US debt bonds could under perform for years.

There are many different types of risks and when managing a portfolio, the goal is to try to minimize risk and maximize returns. Hopefully "cash or equivalents" are only a small part of your portfolio. The "problem" with having more than $250K of cash in an uninsured or "untested insured" account is that you are taking unnecessary risk without any additional returns. The absolute worst thing that could happen is that you lose the "cash" part of your portfolio (which is supposed to be the defensive part of your portfolio) because it was in an uninsured account earning the same return as an insured account. Extra risk (even if it is low), especially on the defensive part of your portfolio, for no additional return, makes no sense.