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investing with multiple revenue streams

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  • investing with multiple revenue streams

    Hello to all.

    Over the past few years I have been receiving only 1099 income and maxing out my tax deferred i401K at 53K/year (now around 275K) , contributing in January 5,500 to both mine and spousal roth IRA backdoor (11,000/year) [about 40k combined] , have 6 month emergency fund, have both childrens college prepaid in full 4 year university and 529 with 45K and another with 5K (planning to add 10k/year to the latter) and also taxable account around 700k.  I anticipate having about 100-125 K /year of 1099 income which at 25% level being applicable to i401k contribution... leaves me with about 30K more or less available for contribution (with 18,000 of salary deferral and the remainder corporate contribution).  The remainder of income stream will be w-2 employee (275k/year) and question is what to do with excess in employee income in personal checking account and the corporate money excess since I can not contribute as much to the i401K at this time given changes in revenue total coming into the company.

    After all monthly expenses paid... Do I use remainder of excess personal w-2 funds and a proportion of excess corporate funds as an equity distribution for contribution strictly to taxable brokerage account and continue in that manner... any other ideas on any other tax deferred or taxable vehicles I am not thinking of with funds in corporate and personal accounts?   thanks

  • #2

    • Do you have any debts that you need to pay off?

    • Do you have any 5-year goals that need to be funded (should not be in stock market)?

    • Do you have adequate amounts of term life and disability insurance?

    • Do you have any charitable goals that you are not meeting?

    If all answers are no, I recommend building a taxable account. There are many advantages to a taxable account, such as complete flexibility and reduced long-term capital gains and dividend rates. You might find my Guide for Established Attendings/Pre-Retirement helpful, also.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


    • #3
      No debts, 3 mil term life and "own occ" disability policy, will/ living revocable trust/advance directive all done. no immediate funding needs or charitable goals in next 5 years.   So if building taxable account. I was planning on it exclusively being established blue chip dividend yield stocks around 15-20 companies with 50 year plus history of steady increasing dividend payments (like coke, Johnson and Johnson for example).  The i401k and roth  have diversified low cost index funds (mid/small/large cap,  value/ growth, emerging market, bond, international) with approximately 0.05 average operating cost and no load/commission. any comments on current asset allocation/diversification plan?   taxable annual return about 11% (not including taxes or harvesting) and roth 10% and i401K 6-7% with current setup.     other suggestions?


      • #4
        Yes - you need a financial plan and you should read the most recent version of Simple Wealth, Inevitable Wealth. It will tell you all you need to know and say it better than could I.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


        • #5
          I invested in individual stocks for many years along with funds.  Now I do indexed funds primarily.  There is simply too much evidence that individuals cannot outperform the market. (Neither do professional investors.)  If you do buy 15-20 individual stocks you need to read the news about 15-20 stocks. This is time consuming to do.  If you index all you really need to follow is just the general market direction.  Individual stocks can and do go bankrupt so you have to keep track of things.  Also it is easier to panic with individual stocks. One thing to consider as you age is to put some municipal bonds in the taxable account.


          • #6
            One may be able to out perform the market, but as time has gone on that has become even harder for those that its their sole purpose. Most have turned to ever riskier bets to do so, and have rarely been successful, and if they have, it is not consistent and repeatedly so.

            Everyone loves to ridicule hedge funds, which have a fee structure that pretty much guarantees they cannot outperform (after fees), however, there was a time when they absolutely crushed it. We've learned a lot in the interim time and any alpha has pretty much shrunk to almost zero, and everything that used to be called alpha has been studied and redefined as beta which grows every day and participants are arbitraging it out faster than ever.

            So while it may be possible, the odds are stacked hugely against you and the premium has shrunk to so small that there is no real incentive to over complicate your life in order to do so. Maybe you really like following stocks/market (as I do, but I still use index funds) or something, but you should be honest about the commitment and its likely below market return.

            If you want to do better than the market take advantage during bear markets and big dips associated with short term gyrations (assuming a longer term horizon), or just put it on autopilot. Really our advantage is income and if self employed the amount of options for tax deferred you have available.


            • #7
              hello all,

              I am a recent medical school graduate starting residency and I happen to have some basic roth IRA questions.

              How do I go about doing so? Should I contact vanguard and have them set one up for me?
              Do they pick the index funds or do I? How do I know which to chose?


              If you could help me with these basic questions, I would greatly appreciate it.


              Thank you



              • #8
                Its very easy to open an account at Vanguard online. Open a roth IRA and put at least $3000 (I think this is the minimum required) in Vanguard Total Stock Market Index Fund Investor Shares (VTSMX). As you start learning more about investing you can buy some more index funds, but you really don't need to.