An anonymous caller is reflecting on a choice he made in 2023 to contribute to his Roth rather than a pre-tax account. How can he move past this decision?
June is frustrated that her asset sales in a taxable brokerage resulted in short-term capital gains and wash sales last year. What steps can she take to prevent similar issues in the future?
Zerai wishes to gain exposure to mid and small-cap stocks, but his 457 plan offers a limited range of mutual funds. What is the best approach to identify the optimal fund from the options available?
Former financial planner Joe Saul-Sehy and I examine these questions in today’s episode.
Enjoy!
P.S. If you have a question, feel free to ask here.
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Anonymous asks (at 01:13 minutes): I’ve been really engaged with your recent talks about the Roth versus pre-tax debate. After reviewing my choices from 2023 and 2024, I think I may have made an error and would value your opinion.
In 2023, I fully contributed to my 401(k) with Roth dollars while being in the 32 percent tax bracket, even though I knew I would drop to 24 percent in 2024. Wouldn't it have been wiser to contribute pre-tax in 2023 and then do a Roth conversion the following year?
I can almost hear Joe saying, “It’s just 8 percent. You can’t optimize everything.” But for those of us who like to hone our financial decisions, this feels like a significant miscalculation. My 2023 contribution was set to be my only pre-tax contribution, meaning the conversion would have been capped at $23,000.
Did I genuinely make a mistake? Moreover, how do you let go of the frustration that comes with making an optimization error? Any personal experiences or insights from your financial missteps would be appreciated.
June asks (at 28:22 minutes): As I get ready for tax season, I discovered that by selling some assets in my taxable brokerage, I incurred short-term capital gains and wash sales. Although most of my gains were long-term, I want to steer clear of unnecessary taxes and wash sale complications in the future.
Do you have suggestions for more effectively recognizing and avoiding these issues when managing a taxable brokerage account? I use Vanguard, which many of your listeners also do, so any specific insights related to their platform would be especially valuable.
Zerai asks (at 48:16 minutes): I have a 457 plan through my job, but the selection of mutual funds is limited. Currently, I’ve allocated 65 percent to the S&P 500 and 35 percent to international equities, but I’m eager to add some mid-cap or small-cap exposure.
I have two options: the Fidelity Extended Market Index Fund (FSMAX) and the Wellington CIF II SMID Cap Research Fund (SMICRX). There seems to be limited public information available on SMICRX, and its fees are somewhat higher than FSMAX.
Between these two, which would be the better option for diversifying my portfolio?
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An anonymous caller is reflecting on an error he made in 2023 when he opted to invest in his Roth account rather than a pre-tax account. How can he move past this?