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Duckman2008 posted:Just curious: Any reason you’re doing Value vs Small cap or small cap growth ? Small cap growth has been pretty bad historically, reducing the overall size premium (http://www.youtube.com/watch?v=uErHwq4M6pg). It seems like small cap value is where you want to be if you want to go small.
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Jun 5, 2021 20:21
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Crosby B. Alfred posted:You just need to set your contribution to the max. but your employer might have some limits on it. While uncommon it's a cool idea assuming you have enough savings to do it and often referred to as 401k Front Loading. I set mine to 100%, but make sure to check with HR that they still fund your benefits (healthcare, etc) on $0 paychecks. My company does, and I think most do, but this could theoretically be a problem. Crosby B. Alfred posted:Are you holding on to your ESPP Stocks? I need to look into this more but I get a slight discount if I do buy stocks from employer and I am thinking that if I just held them for the absolutely minimum amount of time needed to sell them I'd probably come out ahead? To me the obvious choice is to take the easy gains by selling immediately, then reinvesting wherever. Seems better than consolidating all your risk when you could just nab a few low effort percents from the ESPP discount. But! Every situation is different.
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Jun 5, 2021 20:22
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Crosby B. Alfred posted:You just need to set your contribution to the max. but your employer might have some limits on it. While uncommon it's a cool idea assuming you have enough savings to do it and often referred to as 401k Front Loading. Depending on the terms of your ESPP and your personal situation, it may be great or may it kind of suck. A typical example of a good ESPP gives you a 15% discount on the lower of the market price on the first day or the last day of the window. So even in the case the stock goes down, you'll get a 15% discount of the price on the last day of the window. Then you just turn around and sell for a 15% profit. But if your trading blackout is significant and introduces a holding period then yeah there is more risk there and it becomes a personal risk tolerance choice. Not to mention the other option of holding for 18 months for more favorable tax treatment (way higher risk). If you are high income and already maxing out your retirement accounts and have an appetite for some risk it is really up to you. But if you have a short-to-zero holding requirement and can sell the right away the general advice is that it's basically free money.
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Jun 5, 2021 20:32
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Crosby B. Alfred posted:Are you holding on to your ESPP Stocks? I need to look into this more but I get a slight discount if I do buy stocks from employer and I am thinking that if I just held them for the absolutely minimum amount of time needed to sell them I'd probably come out ahead? Generally this is the way to do ESPP. If you can sell immediately then the only risk is that the stock tanks by more than the discount in that short time frame. If it doesn’t drop then the discount is free money from your company. If you are required to hold for longer then the risk goes up.
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Jun 5, 2021 21:00
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withak posted:Generally this is the way to do ESPP. If you can sell immediately then the only risk is that the stock tanks by more than the discount in that short time frame. If it doesn’t drop then the discount is free money from your company. If you are required to hold for longer then the risk goes up. This sound way to good to be true. 
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Jun 5, 2021 21:03
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Crosby B. Alfred posted:This sound way to good to be true. This is how it worked at my last place. It's almost entirely risk free money. I had to teach so many people about this and how to handle it/budget to just be able to throw in the max.
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Jun 5, 2021 21:09
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Motronic posted:This is how it worked at my last place. It's almost entirely risk free money. Looks like my plan doesn't have a holding period but I am subject to IRS Section 423 ESPP and there's a disqualifying period which lasts 21 Months? Everything else about this makes sense but tax implications are going way over my head and Google isn't helping. Going through an example, if I have a salary of a $100k put in 10% of my paycheck into the ESSP in the first quarter I'll own $2,500 stock. What's the difference in taxes if I sell it right away or wait until the qualifying period? Or am I going to have to work with someone to run through these numbers?
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Jun 5, 2021 21:48
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I am not an accountant and your mileage may vary, but generally with ESPPs if you sell immediately, your profit is ordinary income, e.g. you'll be taxed at your top marginal rate. If you hold the waiting period, your profit is long term capital gains, taxed at that rate instead, which is typically lower than your top marginal rate. The difference between the two tax rates may or may not be enough for you to feel the risk of holding that long is worth it.
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Jun 5, 2021 21:56
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Leperflesh posted:I am not an accountant and your mileage may vary, but generally with ESPPs if you sell immediately, your profit is ordinary income, e.g. you'll be taxed at your top marginal rate. If you hold the waiting period, your profit is long term capital gains, taxed at that rate instead, which is typically lower than your top marginal rate. The difference between the two tax rates may or may not be enough for you to feel the risk of holding that long is worth it. To add to this, the discount you get on the stock is immediately taxable. The full share price is your cost basis. So even if you hold it, you have a top marginal tax bracket amount due on that dollar amount of your discount. So if the stock was at $100 at the beginning of the period and ended the period at $200 and you get a 15% discount you would be paying $85 for each share, meaning you have an immediately taxable regular income amount of $115 per share.
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Jun 5, 2021 22:37
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Crosby B. Alfred posted:Looks like my plan doesn't have a holding period but I am subject to IRS Section 423 ESPP and there's a disqualifying period which lasts 21 Months? Everything else about this makes sense but tax implications are going way over my head and Google isn't helping. Disqualifying Dispositions are just when you sell before it would all be LTCG, better known as Qualifying Dispositions. This is different from your lockup (0-6 months plus trading window restrictions.) If you wait the 21 months then the spread from the purchase price to the sell price is all LTCG. On a theoretical 24% marginal income tax rate (look yours up, take your AGI from the tax return you just did and look it up on a tax rate table) you would save 9% in taxes by waiting 21 months at substantial risk. Your ESPP plan brokerage should tell you the exact date once you have a purchase. I would suggest selling the first day you are able to sell.  Crosby B. Alfred posted:This sound way to good to be true. They can be. Ours is the price on the first day of the offering period less a 15% discount. Our offerings are 2 years long (or 2.5?) so my May purchase was using a price from like Nov 2018 I want to say?  We do have a 6 month lockup though, so I cannot sell until Nov 15th assuming a window is open then, which it only wouldn't be if "something something insider trading policy." We also roll over 2 prior limits, so as long as people enroll (which is FREE) you can wait until you have the cash saved up to start contributing and catch up like crazy.
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Jun 5, 2021 22:37
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Yeah, disqualifying/disqualified generally means that you pay taxes on the free money like any other income. Up to you whether the difference in taxes is worth the risk of having that money tied up in a single company’s stock for a year or two. Not worth it IMO.
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Jun 5, 2021 22:42
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Leperflesh posted:I am not an accountant and your mileage may vary, but generally with ESPPs if you sell immediately, your profit is ordinary income, e.g. you'll be taxed at your top marginal rate. If you hold the waiting period, your profit is long term capital gains, taxed at that rate instead, which is typically lower than your top marginal rate. The difference between the two tax rates may or may not be enough for you to feel the risk of holding that long is worth it. Looks like this correct. That's not too much of a difference with $100k salary. The capital gains for 2021 is only 15%. $100k is 22%.
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Jun 5, 2021 22:44
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Motronic posted:To add to this, the discount you get on the stock is immediately taxable. The full share price is your cost basis. So even if you hold it, you have a top marginal tax bracket amount due on that dollar amount of your discount. So if the stock was at $100 at the beginning of the period and ended the period at $200 and you get a 15% discount you would be paying $85 for each share, meaning you have an immediately taxable regular income amount of $115 per share. Let be me sure if I am understanding this... Even if I don't sell but make a profit during my purchase that's as typical income and would be included on my W-2?
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Jun 5, 2021 22:48
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Crosby B. Alfred posted:Let be me sure if I am understanding this... Even if I don't sell but make a profit during my purchase that's as typical income and would be included on my W-2? Yes. And the share price on that day will become your new cost basis. So if you sell at a profit in the future, you would be paying regular income or LTCG (depending on how long you hold of course) on however much you sold at over $200 to use the numbers from my example.
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Jun 5, 2021 22:52
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Crosby B. Alfred posted:Let be me sure if I am understanding this... Even if I don't sell but make a profit during my purchase that's as typical income and would be included on my W-2? Edit: N/m, I misread the question. withak fucked around with this message at 22:58 on Jun 5, 2021 |
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Jun 5, 2021 22:53
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withak posted:Yes, if you sell right away, not waiting the required amount of time. If you wait long enough before selling then it is taxed a bit less. This is not at all how it worked for me. And I have a CPA doing my taxes.
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Jun 5, 2021 22:55
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There are a bunch of ways it might work if you wait, depending on how your company’s plan is set up. If you sell right away then it all should just add to your AGI.
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Jun 5, 2021 22:56
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Motronic posted:This is not at all how it worked for me. And I have a CPA doing my taxes. I think you're both right, which is why I didn't delve into it, because I think the exact treatment has varied both by specific ESPP type (or various other share purchase plans that aren't, strictly speaking, "ESPPs" but are sometimes discussed using that term for ease of understanding), and by year because it's an area of taxation that congress has hosed with. How long ago did you have your ESPP thing?
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Jun 5, 2021 22:58
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withak posted:There are a bunch of ways it might work if you wait, depending on how your company’s plan is set up. I really don't see how. If you own these shares free and clear and did not pay market rate for them it's a taxable event. If it's some other type of equity purchase then maybe it's different, but I'm not aware of anything fitting the definition of an ESPP that would make this change. Leperflesh posted:How long ago did you have your ESPP thing? As recently as 2020.
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Jun 5, 2021 22:58
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The discount amount is always ordinary income. (It's not capital gains at all.) So if your stock is at $100, the 15% discount puts you at $85 purchase price. The $15 is immediately ordinary income on your taxes, and your basis is $100. Your accountant will need to MANUALLY EDIT THIS because everything is really that terrible. You wait two years to do a qualifying sell at $201. Your LTCG is $101/share. Alternatively you sell two years later for $85. Congratulations on your capital loss of $15/share. You sell 2 days later (once it settles, no lockup) for $102 then you have $2/share in STCG. Edit: And yes, like 401k's there are a thousand ways to slice it. Refer to your plan documents.
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Jun 5, 2021 23:01
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Idk how the more complicated ones work if you wait, mine is the simplest possible where you put money in for two months, then they buy you shares at a discount at the end of the two months. No lookback or anything like that. I mash the sell button as soon as it appears every two months and the amount of the discount shows up in my W-2 at the end of the year.
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Jun 5, 2021 23:05
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withak posted:Idk how the more complicated ones work if you wait, mine is the simplest possible where you put money in for two months, then they buy you shares at a discount at the end of the two months. No lookback or anything like that. I mash the sell button as soon as it appears every two months and the amount of the discount shows up in my W-2 at the end of the year.  Make sure you are adjusting the basis on your 1099-B to account for the discount so you aren't double taxed. If you sell at for example exactly $100 on a 15% discount / bought at $85 you need to adjust the basis up to $100 on the broker income form which should make it $0 in extra taxes ontop of the w-2 amount.
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Jun 5, 2021 23:20
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Am I getting this right? I had to draw a diagram, assuming the value of SA Corp remains flat. 
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Jun 6, 2021 00:06
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Motronic posted:I really don't see how. If you own these shares free and clear and did not pay market rate for them it's a taxable event. If it's some other type of equity purchase then maybe it's different, but I'm not aware of anything fitting the definition of an ESPP that would make this change. H110Hawk posted:The discount amount is always ordinary income. (It's not capital gains at all.) So if your stock is at $100, the 15% discount puts you at $85 purchase price. The $15 is immediately ordinary income on your taxes, and your basis is $100. Your accountant will need to MANUALLY EDIT THIS because everything is really that terrible. About ten years back my then-company had an ESPP where employees got a modest discount on the stock price, with a mandatory one-year holding period after the exercise date. If you sold the stock before that year was up, the company clawed back the dollar amount (not the percentage, even) of the discount. It was a pretty garbage ESPP, but I never paid short-term anything on it.
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Jun 6, 2021 02:25
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Yond Cassius posted:About ten years back my then-company had an ESPP where employees got a modest discount on the stock price, with a mandatory one-year holding period after the exercise date. If you sold the stock before that year was up, the company clawed back the dollar amount (not the percentage, even) of the discount. It was a pretty garbage ESPP, but I never paid short-term anything on it. So you didn't hold the shares free and clear. That's probably the difference. I guess that still falls into the definitions of an ESPP.
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Jun 6, 2021 02:56
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H110Hawk posted:
Yeah, luckily my employer hosed something up on everyone’s W-2 the first time they offered this and they had to send out a corrected one with a clarifying message shortly after. That made me go back to check their math and figure out how I would get double-taxed if I didn’t add that in.
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Jun 6, 2021 03:12
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Mine is nice and nearly risk free. Up to 15% of your income can be diverted to buy the stock with a 15% discount off the lower price of the stock from the last day of the previous quarter or last day of this quarter. As soon as they buy and it goes into our accounts, we can sell. No reason not to participate. One I got into index fund investing, I sold a bunch of stock I'd been accumulating over the years through it and put half of it against my mortgage principal and the other half into diversified funds in a taxable account, and rearranged things to make sure I was maxing retirement accounts by selling off ESPP right away and using it to e.g. reimburse myself for Roth IRA contributions and make up some of the shrink in my paycheck from upping my 401(k) contribution.
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Jun 6, 2021 03:17
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Motronic posted:So you didn't hold the shares free and clear. That's probably the difference. Yes, I should have clarified that I agreed with your "free and clear" provision, but sometimes exactly what constitutes an "ESPP" can be wonky.
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Jun 6, 2021 03:25
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Potentially dumb question because I don't understand the US banking system. I get US stock grants in a Fidelity Netbenefits account which I'd like to convert into index funds. I have an Interactive Brokers account which is effectively in the US (but in CHF as base currency). I can sell the stock and transfer to IB, however it asks me for a correspondence bank account. Does that mean I need to have an actual US bank account to make the transfer? I don't want to just send the cash to my Swiss account as Fidelity will charge me 2.5% and presumably gently caress me on the exchange rate. Alternatively I think I could transfer the stock from Netbenefits to IB with an ACATS transfer (?) and sell it there. I have a stock plan participant number but a test transfer was rejected by IB when I gave it a go. It seems impossible to speak with anyone at Fidelity so I thought I'd ask here. Any ideas? (unrelated but my employer is taxing me at 45% on my share distributions which is extremely irritating. My marginal rate is 22% and I thought this was supposed to be a tax haven!)
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Jun 6, 2021 11:42
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Crosby B. Alfred posted:You just need to set your contribution to the max. but your employer might have some limits on it. While uncommon it's a cool idea assuming you have enough savings to do it and often referred to as 401k Front Loading. I guess the next obvious question here is, does it make sense to set aside money to 401k front load at the beginning of the year? Say, for example, the beginning of 2022. Instead of investing outside of a tax-sheltered account, would it make sense to sit on that cash until I can front-load it in the 401k in the first four or five months of 22? I know that You Can't Time The Market, but perhaps the tax-sheltered benefit of the 401k would be worth it.
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Jun 6, 2021 15:30
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Ramrod Hotshot posted:I guess the next obvious question here is, does it make sense to set aside money to 401k front load at the beginning of the year? Say, for example, the beginning of 2022. Instead of investing outside of a tax-sheltered account, would it make sense to sit on that cash until I can front-load it in the 401k in the first four or five months of 22? I know that You Can't Time The Market, but perhaps the tax-sheltered benefit of the 401k would be worth it. Seems like it'd be better to invest that money ASAP in a taxable account then (potentially, depending on actual performance) sell off and frontload with (ideally slightly more money). Depending on how flexible you can be. This thing a while back suggests the expected benefits of front-loading to be positive but probably negligible for the amount of hassle. https://www.physicianonfire.com/front-loading-investments/ Over the past few years I've tried front-loading and messing around with 401k contribution percentages, trying to calculate how long I can float a $0 take-home, weighing the possibility of switching jobs to a company that would have a match, etc has gotten old. Starting next year I'm just going to flatline contribute for stability and simplicity.
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Jun 6, 2021 16:03
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Ramrod Hotshot posted:I guess the next obvious question here is, does it make sense to set aside money to 401k front load at the beginning of the year? Say, for example, the beginning of 2022. Instead of investing outside of a tax-sheltered account, would it make sense to sit on that cash until I can front-load it in the 401k in the first four or five months of 22? I know that You Can't Time The Market, but perhaps the tax-sheltered benefit of the 401k would be worth it. Maybe I skimmed the thread, but why would this be worth the hassle? I understand the marginal difference between dollar cost averaging across the year vs. dumping it all in early, but that just seems like it's not worth the trouble. CubicalSucrose posted:Seems like it'd be better to invest that money ASAP in a taxable account then (potentially, depending on actual performance) sell off and frontload with (ideally slightly more money). Depending on how flexible you can be. flatline is the best line if the line is high enough
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Jun 6, 2021 16:13
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knox_harrington posted:Potentially dumb question because I don't understand the US banking system. I get US stock grants in a Fidelity Netbenefits account which I'd like to convert into index funds. I have an Interactive Brokers account which is effectively in the US (but in CHF as base currency). This is not at all my experience with Fidelity. Are you the sole international employee? Ask your cohorts how they get their cash stock out of fidelity. I assume you cannot open a brokerage account with them due to terrorism? Can you invest in usd directly in IB? Either way, talk to someone at IB and find out what they say. Do you have a way to call fidelity from the USA? Perhaps a voip line at work? I have never waited on hold with fidelity for more than a few minutes. Stock plans usually have a dedicated number you can call as well - ask your employer for help getting in touch with them. I bet there are some forms you have to fill out that the people on the phone can help you with. I know for our stock plan people outside the USA get a little bent over in fees. (And we have like a third or half of our workforce outside the USA I think.)
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Jun 6, 2021 16:27
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CubicalSucrose posted:Seems like it'd be better to invest that money ASAP in a taxable account then (potentially, depending on actual performance) sell off and frontload with (ideally slightly more money). Depending on how flexible you can be. Yeah makes sense. No reason to turn this into 11th dimensional chess and all that.
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Jun 6, 2021 17:31
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I'm a little unclear on last question but on subjecting of min/max finances has anyone gone through submarining? Or at least that's what one of my co-workers called it where he invests $10-20k in a CD or some kind of investment for a year then takes it out in March to pay taxes because he put down zero withholding. This only nets him about an extra grand or two a year which isn't a whole lot but still a nice extra chunk of change. My only take is that it's a bit of work and could be super risky if you didn't properly estimate your Federal Taxes correctly.
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Jun 6, 2021 19:28
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Crosby B. Alfred posted:I'm a little unclear on last question but on subjecting of min/max finances has anyone gone through submarining? Or at least that's what one of my co-workers called it where he invests $10-20k in a CD or some kind of investment for a year then takes it out in March to pay taxes because he put down zero withholding. Don't try to minmax your taxes by intentionally under withholding. It's a recipe for disaster. And to actually make "a few grand" the guy is either not investing in CD's or is paying far more in taxes. The lack of fdic insurance is one bad year away from having a huge tax bill with no money to pay it. Aim for a small amount owed each year and call it maxed.
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Jun 6, 2021 20:12
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Crosby B. Alfred posted:I'm a little unclear on last question but on subjecting of min/max finances has anyone gone through submarining? Or at least that's what one of my co-workers called it where he invests $10-20k in a CD or some kind of investment for a year then takes it out in March to pay taxes because he put down zero withholding. In addition to what the post above says, if you're not hitting the safe harbors, you might also get penalized for underwithholding.
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Jun 6, 2021 20:21
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H110Hawk posted:This is not at all my experience with Fidelity. Are you the sole international employee? Ask your cohorts how they get their cash stock out of fidelity. I assume you cannot open a brokerage account with them due to terrorism? Can you invest in usd directly in IB? Either way, talk to someone at IB and find out what they say. Do you have a way to call fidelity from the USA? Perhaps a voip line at work? I have never waited on hold with fidelity for more than a few minutes. Stock plans usually have a dedicated number you can call as well - ask your employer for help getting in touch with them. Yeah the Fidelity phone line doesn't recognise my participant number and just dumped me off the line when I tried. I work for a big company but the colleagues I've spoken with just withdrew in CHF and ate the exchange cost. I hadn't actually thought of opening a Fidelity brokerage account and from what I can see they do accept non-US residents. I'll have a look at what their fee structure is. The Netbenefits website is pretty crappy.
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Jun 6, 2021 20:33
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You should also try calling your IB customer service and see if they can help with the transfer
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Jun 6, 2021 20:45
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No-go for a Fidelity account http://personal.fidelity.com/accounts/services/FAQsforInvestors_Living_Outside_the_US.pdf
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Jun 6, 2021 21:14
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