[USER]

Please help me get on track! I just got a raise and to avoid lifestyle inflation, I would like to get this extra money invested pronto.

I already live quite comfortably.

My details:

-I’m 30, and a little late to FI. I started learning about 6 months ago and trying to “catch up” (I know I’m young).

-I make $70,000, my husband and I are DINKs, and all we have is a very low interest rate mortgage, no other debt.

-I max out my Roth IRA and my employer offers a SEP IRA.

I do not have access to a 401K.

I have plenty in a HYSA.
-I also have an HSA through my employer, that I JUST learned I could be investing instead of sitting in a bank account.

So I’ll be moving that to Fidelity ASAP to invest it.

…Now what do I do with my extra raise money?

Open a taxable brokerage account?

Let’s say I was able to put $5K a year in it to start.

What are the tax implications of this?

I want to be careful with this account not being tax advantaged, but also think it seems as though this is indeed my next step if I have money.

Can someone give me insight? I also got married like a month ago in case that is relevant when talking about taxes.

Also, I use Fidelity and all my investments are currently in a mix of VTI, FSKAX, and FITLX.

Should I do anything to diversify when I invest my HSA (about $4,300) and start up my brokerage account?

Choose my portfolio continues to confuse and stress me out.

Thank you!!

[Christopher]

Tax implications of a taxable brokerage are minimal unless you day trade or do weird stuff (options, junk bonds, etc).

Let’s say you put $500,000 into a total us index fund.

It’ll throw off about 2% in dividends, or $10,000.

Those $10,000 will be taxed, at worst, at 20%, with a 3.8% NIIT tax bolted on, or $2,380 in tax liability.

State income taxes will vary.

This is assuming you’re in the highest of federal tax brackets, so it’s a worst-case projection.

For $5,000, you’re looking at a worst case federal tax liability of … $24.

[Darryll]

Keep it simple. If you have a brokerage account, you maxed out your pre-tax accounts, and you are happy with your emergency fund, dump it all into the brokerage account.

If you put it in an ETF like VTI you won’t have to pay taxes until you sell.

Then, if you start changing your investment decisions, you can do so.

You’ll have months/years of money stuck in a great investment spot.

You can always change your system or plan later.

Though as a side note, if you just got married you may want to re-analyze your emergency plan with the spouse.

Bug life events change things.

I’ll be off my soap box now.

[Caro]

Side note now is the time to sign up for life insurance (outside of the work place) while you’re young and freshly married! Esp if you plan to have kids but maybe even if not!

[张扬]

If you’re not contributing to your SEP IRA then I would do that before using a brokerage account.

[Frank]

You should already have a brokerage account. Do that immediately.
It is barely taxed if properly managed.

Meaning just buy index funds and leave them alone.

If you want something different than what you already have, try AVUV.

[Amy]

If you’re already maxing all tax-deferred and tax-sheltered accounts and aren’t carrying high-interest debt, a taxable brokerage account is the next step.

Taxable accounts are also tax-advantaged.

The money you use to buy an investment in a taxable account is called basis.

It has already been taxed and is not taxed again when you sell the investment. Only the earnings are taxed.

If you hold the investment for less than one year before selling, the earnings are called short-term capital gains (STCG) and are taxed as ordinary income.

If you hold the investment for one year or longer before selling, the earnings are called long-term capital gains (LTCG) and are taxed at a more favorable rate than ordinary income–15% for most people.

That is one way taxable accounts are tax-advantaged.

The other way is that a taxable account enables you to “harvest” investment losses in order to offset the tax on capital gains, called tax loss harvesting (TLH).

VTI and FSKAX are the same asset class so you really only need one or the other.

You should consider all your various accounts as a single portfolio.

Decide on your overall asset allocation for your whole portfolio then you can decide where to place your different investments.

[Author]

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