All Forum Posts by: Daniel Murphy

Similar to what others have said... You first need to identity your goal for the money.  IE - your timeframe.  If it's short term, CD's are probably still the best.  Shorter term CD's actually have higher rates than longer term so staying in the 3-6 month range is best.  

If however you don't have any specific goal or timeframe, I generally default to "long term".  Long term money, you could invest into a taxable account so you have access to it whenever you want. Similar to a checking or savings. But by putting it into a broadly diversified index fund like others have mentioned, you'll get the higher "expected" returns of the stock market.  

As for not feeling like it's the right time, I would urge you to focus more on the goals than your feelings.  No offense meant by this... I've been a financial planner for 17+ years and one of the main things I've learned is that the more I think I know what's going on, the less I'm actually correct.  You really have to believe you know more than BILLIONS of investors... 
The stock market is up something like 80% of the days long term. The old saying is "Time IN the market, not TIMING the market."  

I'm happy to chat if you ever want to reach out... 

I'm a financial planner by profession so you'd think the default answer is, "heck yeah, always hire a planner!"  
But in reality, for younger people with moderate income, I actually see less benefit to financial planning.  
The one aspect I'd say where planning can really provide benefit however is with tax planning.  

If you're pretty smart with this stuff, I think can definitely make sense for you two to talk with a tax planner. The intricacies tax planning with a rental are worth hiring a professional, even if you just do it once for an overview.  Given that you're not married, that adds some additional complexity.  
All this is to say, I believe it would be money well spent for sure... 

Does anyone have a pre-built spreadsheet available to run projections for the sale of a house?  Either a personal residential home or an investment property?  Thanks in advance!

Unfortunately, I don't believe such a calculator exists.  There are too many variables to account for with everyone's unique taxes.  

A very simplistic calculation could be, the amount of conversion * 22% would give you your rough taxes. I say this because, (I've been doing partial Roth conversions for years with clients), all of my Roth conversions have been to fill up the 22% tax bracket. I have only had one case where we filled up the 24% bracket and that was a very unique situation.  

I'm not sure what you mean by "one more multiple conversion options".  I either convert when the market is down, or at the end of the year for the most part... 

The investment % of growth of IRA vs Roth is a bit broad. If you use the same investment pre and post-roth conversion, the growth would be the same. However, if you're managing your investments with a bit more tact, you will put your bonds in the IRA and your higher growth investments in the Roth which would give you differing growth rates. But these are "EXPECTED" returns, so they are just estimates.

RMD amounts can be calculated post-conversion, but they are estimates too.  

All of this is nuanced & complicated which is why I don't believe any single calculator exists.  I also don't believe many or any CFP's are charging $5,000 for Roth conversion calculations. 

Hey everyone, I have a client who owns a bed & breakfast property in CA.  They're running into issues with potential refinancing.  Ideally, they would have access to a line of credit, or some type of loan for misc purchases.  But here is what they are running into.  Does anyone have ideas of who to talk? 

1. You can’t get an ag loan because you don’t grow anything. 
2. You can’t get a residential loan because you run a business on the property. Appraisers would do on-line and see the business website. We even had one guy book a room and then cancel.
3. You can’t get a commercial loan because you live in the property

Hey all, I have a home in MN and a home in FL. I'm recently divorced and kept the 2 properties.  My understanding is that I will need to refi in order to get my ex off of the properties.  My question is, both of these homes were purchased under my name only because she had no income. So all closing docs, title etc. only have my signature.  I understand joint legal ownership, but that normally seems to apply at selling.  

Are there any thoughts, options or opinions on how to remove her name from the titles without a refi?  

Hey Michael, a few quick questions. When did he inherit the IRA and was it from a spouse or non spouse?
If it's from a spouse, it just becomes his and follows normal IRA distributions rules.  If it's from a non spouse, he will have to withdraw the entire account within 10 years. In 16+ years, I have never heard of an exception to this.  In fact, the IRS levies the largest penalty that I'm aware of (50% of whatever the required distribution was supposed to be) on IRA required distributions. 

Full transparency, I've also never heard of this penalty being enforced... 

His withdrawals will be taxable, but they should not affect his benefits. 

Help me understand Rental Agreements, outside of Airbnb.

According to the Airbnb TOS, when a guest books with us, they are entering into an agreement directly with us as the host (the Airbnb TOS).

Does getting a secondary rental agreement through a management software really add any extra security or liability release? 

I understand the benefit of having guests' contact info for myself, but in 2 years we have not had much success yet with recurring guests coming back to book directly.

As a financial planner, I would say that one of the main things I'm trying to do for my clients long term is to get money as efficiently into Roth IRA's as possible. The real benefits of a Roth, you won't see for 30+ years. Roth assets are withdrawn tax free, which gives you incredible options in retirement. Plus, they pass to heirs tax free.

Imagine yourself as a 70+ year old. You've built up a decent RE portfolio. You're retired & you don't need your investments to survive (which are now likely worth well over $1M).  You start to run into troubles when you're required to take distributions from your Traditional IRA's & 401k's.  Essentially, you've lost some control over your taxes now because of these required distributions.  This is one scenario when Roth assets are incredibly helpful.  You can control your tax bracket more because you have the option to withdraw tax free assets when needed. 

To your current situation. Your total income of $176k minus the standard deduction of $27,700 gives you an estimated taxable income of ~$148k.  This puts you in the 22% tax bracket which caps out around $178k.  So until your income grows by another $30k, investing in the Roth is still a good strategy. Once your income grows more than this, you'll likely want to shift your savings to the standard 401k. 

You'll also want to determine what your goals are. If you want to buy more RE soon, I would shift your savings to a taxable brokerage. Continue to put the min amount into your 401k to get the employer match, but you could put the rest into a taxable brokerage account which will be 100% available to purchase more RE.  

Long winded answer, but ultimately you want to save where you get the most tax benefit, and the most "how am I going to use this money" benefit.  Reach out to me if you want to talk about it more.  

 A few thoughts on this... 

First, your return comparison is likely not an apples to apples comparison.  Usually, you're comparing your 401k portfolio returns (which are usually in a default target date fund) vs SPY.  It's like comparing a wide, stable & safe pontoon, to a speedboat.  As long as the expenses in the 401k are not abnormally high, investment returns should be similar if you're comparing like investments.  

You mentioned you make too much to contribute to a Roth. One benefit you may want to take advantage of with the 401k is the tax deduction.  Look at your previous years tax return, then go to your taxable income line.  Google "IRS tax rates" for your filing status.  If you're at or near an increasing tax bracket, it could make sense to contribute to the 401k just enough to get your taxable income one tax bracket lower.  (in fairness, this is not super common).  

All that being said, I normally recommend people invest 1st in their 401k to get the employer match. Then to a Roth IRA (neither of these are applicable to you). Next step is to look back at the 401k (for the tax deduction) or a taxable investment account. The taxable investment account will not give you a tax deduction, but you're right. It will be tax-advantaged to you & fully accessible to use for future real estate purchases.

This is a nuanced situation, but you're on the right track with your thinking.  Reach out if you have any other questions... I nerd out on this stuff.