Insider Selling: salesforce.com, inc. CEO Unloads 60,000 Shares of Stock (CRM) / 120,000 Shares of Salesforce.com sold in 1 week by CEO

Interesting.....but $7 Million is not a lot of money for a man worth $3 Billion.   Nonethless we're mindful of this stuff....so on that note:

Last week it was reported, "John Ramos for InterCooler.com writes: salesforce.com, inc. (NYSE:CRM) CEO Marc Benioff unloaded 60,000 shares of the company’s stock in a transaction dated Wednesday, August 27th. The shares were sold at an average price of $59.35, for a total value of $3,561,000.00. "  This is the link: bit.ly/1tSMJYe 

----1 week later it's being reported Marc Benioff is selling another 60,000 shares (see below).   What's been reported are 2 separate selling transactions separated by 1 week covering 120,000 total shares of salesforce.com

Nolan Pearson for WKRB13.com writes: salesforce.com, inc. (NYSE:CRM) CEO Marc Benioff unloaded 60,000 shares of the company’s stock on the open market in a transaction dated Tuesday, September 2nd. The shares were sold at an average price of $59.11, for a total transaction of $3,546,600.00. The transaction was disclosed in a legal filing with the SEC, which is available at this link.

A number of analysts have recently weighed in on CRM shares. Analysts at Zacks reiterated a “neutral” rating on shares of salesforce.com, inc. in a research note on Monday, August 25th. They now have a $63.00 price target on the stock. Separately, analysts at Argus reiterated a “buy” rating on shares of salesforce.com, inc. in a research note on Monday, August 25th. They now have a $71.00 price target on the stock. Finally, analysts at Deutsche Bank raised their price target on shares of salesforce.com, inc. from $65.00 to $70.00 in a research note on Friday, August 22nd. They now have a “buy” rating on the stock. Five analysts have rated the stock with a hold rating, twenty-four have given a buy rating and two have issued a strong buy rating to the stock. The stock presently has an average rating of “Buy” and a consensus price target of $67.90.

salesforce.com, inc. (NYSE:CRM) opened at 59.85 on Wednesday. salesforce.com, inc. has a 1-year low of $48.02 and a 1-year high of $67.00. The stock has a 50-day moving average of $55.16 and a 200-day moving average of $55.87. The company’s market cap is $37.047 billion.

salesforce.com, inc. (NYSE:CRM) last posted its quarterly earnings results on Thursday, August 21st. The company reported $0.13 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.12 by $0.01. The company had revenue of $1.32 billion for the quarter, compared to the consensus estimate of $1.29 billion. During the same quarter in the previous year, the company posted $0.09 earnings per share. The company’s revenue for the quarter was up 37.9% on a year-over-year basis. Analysts expect that salesforce.com, inc. will post $0.51 EPS for the current fiscal year.

salesforce.com, inc. is a provider of enterprise cloud computing and social enterprise solutions. The Company provides a customer and collaboration relationship management (NYSE:CRM), applications through the Internet or cloud.

H&R Block's Loss Widens Slightly

Tess Stynes for The Wall St Journal writes: H&R Block Inc. HRB -0.30% said its fiscal first-quarter loss widened slightly after a smaller tax benefit and losses at discontinued operations, while the tax-services provider's revenue benefited from a five-day extension of Canada's tax season.

For the period ended July 31, H&R Block reported a loss of $116.2 million, compared with a year-earlier loss of $115.2 million. On a per-share basis, the loss was unchanged at 42 cents after an increase in shares outstanding. The latest period included a per-share loss of two cents from discontinued operations. Adjusted earnings from continuing operations were flat at 40 cents.

Revenue increased 5% to $133.6 million, mostly owing to an extension of the Canadian tax filing season.

Analysts polled by Thomson Reuters expected a per-share loss of 40 cents and revenue of $130 million.

H&R Block reported a tax benefit of $70 million in the latest period, while the year-earlier tax benefit was $71.2 million.

The company, which generates a bulk of its revenue in the back half of the fiscal year when the U.S. tax season occurs, has renewed its focus on its tax-preparation business after shedding its brokerage and mortgage-lending operations.

In April, H&R Block agreed to sell its bank business to a unit of BofI Holding Inc., which will take the tax-preparation company out of a sector that has been hit by increasing regulation.

Two of the biggest complexities of running your own practice are hiring employees and reporting payroll.

Betty Black for MD News writes: Human resource and payroll management is a daunting task. The best recommendation is to use a reputable payroll service, such as ADP or Paychex. But if you are determined to do it on your own, you need to know some basic points before you get started. When setting up an office and hiring employees, you enter a whole new area of responsibility.

When you hire a new employee, he or she must fill out the Form W-4, Employee’s Withholding Allowance Certificate. You must verify that each new employee is legally eligible to work in the United States. This includes completing the Form I-9, Employment Eligibility Verification. You can get the form from USCIS offices or at uscis.gov.

You or your accountant has probably filled out Form SS-4 to receive an employer identification number (EIN). Your next step would be to fill out the Texas Workforce Commission (TWC) Form Status Report (C-1) to apply for a Texas unemployment account number. This process is available to complete online atservices.twc.state.tx.us. This website has a vast amount of employment information for new employers. You can review Texas labor laws, minimum wage and overtime information. Texas employers must report all new hires within 20 calendar days of the hire. This can also be done online.

TWC has streamlined their services, and you can file and pay your unemployment taxes on its website. These returns are due by the last day of the month following each calendar quarter. The purpose of this report is to inform the TWC how much an employee was paid and to calculate how much state unemployment tax the employer must contribute based on their employees’ wages. Your tax rate depends on the amount of unemployment claims for the past year, but your beginning rate will be 2.7 percent of the first $9,000 paid to each employee.

Each payday, you will withhold federal income tax based on each employee’s Form W-4. You will also withhold the employee’s share of Social Security and Medicare taxes from his or her paycheck. These amounts, along with the employer’s portion of Social Security and Medicare taxes, need to be deposited periodically. The due date of the deposit depends on your deposit schedule — typically monthly or semiweekly. Generally, all new employers are monthly depositors. For monthly depositors, you must pay the taxes withheld by the 15th of the following month of issuing paychecks. All tax deposits must be made via the Electronic Federal Tax Payment System (EFTPS). EFTPS is a free service provided by the Department of the Treasury. To get more information or to enroll, visit eftps.gov.

Each quarter, all employers who pay wages must file Form 941, Employer’s Quarterly Federal Tax Return. This report is due the last day of the month that follows the end of the quarter. This report is used to report Social Security, Medicare and withheld federal income taxes deducted from your employees’ paychecks.

Another tax paid by the employer, based on its employees’ wages, is paid with the filing of Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. This return is due annually Jan. 31. The FUTA tax rate is 0.6 percent based on the first $7,000 paid to each employee.

Also due at year-end is Form W-2, Wage and Tax Statement. Every employer who pays wages for the year for services performed by an employee must file a Form W-2 for each employee. You must furnish each employee his or her copy of the completed Form W-2 by the last day of January of the following year. The W-2 not only informs employees how much their salary and taxes deducted for the year were but also lists certain benefits received and amounts deducted. You must also file a Form W-3 to transmit Copy A of Forms W-2 to the Social Security Administration. The W-3 and Copy A of Form W-2 are due to the Social Security Administration by the last day February.

As you can see, payroll calculation and reporting involves more than one report and more than one governing agency. Payroll compliance is a very important aspect of your business and, if not completed correctly, can result in various penalties and interest. That is why it is very important to know and understand all aspects of the payroll process.

The author Betty Black is an Enrolled Agent @ SS & Assoc.

Xero vs. QuickBooks: The Battle for Your Small Business Accounting

Jennifer Riggines for Fox Small Business writes: You are running your small business, but sometimes it seems more like it’s running you, as you spend more and more of your time doing administrative work, rather than the things you love. Often, nothing is more straining than maintaining your books — which, nowadays Excel spreadsheets are replacing ledgers. Most small businesses are either chained to spreadsheets or have housed on their desktop Intuit QuickBooks.  For years, Quickbooks has remained synonymous with small business accounting.

But lately, other small business accounting apps have been cropping up ready to take that throne, each positioning themselves as an alternative to QuickBooks.

The biggest stir seems to be coming from one app — Xero. (At least it’s the one that Quickbooks is spending the most of its resources trying to combat.) Haven’t tried out or even heard of Xero accounting software yet? Maybe that’s because you’re over there stateside. As you can see in this graph, Quickbooks dominates the U.S. marketplace, while the New Zealand-bred Xero is the household name in Australia, the United Kingdom and their home country. But that six percent isn’t too bad when you know that translates to 18,000 U.S. small businesses. Plus, while Quickbooks is marketing heavily to Australia, Xero is doing the same in the U.S., having moved their office to San Francisco and eyeing an American IPO for 2015.

However, while we all really like a David and Goliath story, the battle of Quickbooks vs. Xero for your small business accounting all comes down to what each can do for you. That’s why today we set out to point out the differences that matter to you and your business.

What do they have in common?

Well, they’re accounting apps, so quite a lot. They all come equipped with these necessities:

• Online accounting
• Accounts payable / accounts receivable
• Banking synchronization
• Invoicing
• Payroll
• Financial reporting
• Quick view of cash flow
• Bank reconciliation
• Multi-currency
• Document sharing
• Billing management
• Countless integrations and add-ons with other
• See outstanding balances
• Both are mobile friendly
• Both you can take for Free Trials (no credit card required)

But the similarities largely end there.

Mobile vs. Desktop

From the start, Xero was built specifically to work online in what we now call “the cloud,” while Quickbooks and its Intuit friends Quicken and TurboTax are better associated with the boxed software you buy at Staples and bring home to download. While Xero has always been right at home on mobile devices. That said, QuickBooks’ redesign in the last year has made the move to mobile while still retaining a familiar workflow.

Xero’s mobile app (called Xero Touch) has an idiot-proof approach to its mobile-ready iteration, and it’s ideal for monitoring your real-time cash flow keeping track of transactions while on the move. Xero also has a couple of really nifty invoicing and receipt-tracking features. You can create invoices with just a few clicks, as well as send them, right from Xero Touch’s clearly laid-out interface. You can also snap pictures of invoices and store them within the app.

QuickBooks retains most of its desktop functions in its mobile interface, but it’s an admittedly tight squeeze at times. QuickBooks Online’s tablet app is feature-rich and easy to look at, but not quite as manageable on an iPhone or other smaller-screened device, compared with Xero.

Bank reconciliation made simple

One of the key differences between Xero and QuickBooks Online has to do with reconciling accounts — probably the whole reason your small business first looked for an accounting app, it’s the way that you verify the accuracy of all the money coming and going from your account. It’s to make sure all invoices clear in a timely fashion, and all bills are kept current, and this real-time cashflow insights lets your small business make better decisions.

Both QuickBooks and Xero come equipped with bank reconciliation, but the user experience is quite different.

Xero stands out because it allows you to match invoices and receipts with account transactions, helping you to find not only errors, but also potentially fraudulent charges, all at a glance.

Bank reconciliation in Xero consists of choosing “Reconcile Account” from the Manage Account menu in the Bank Account view. From there, you are presented with two (very logical) columns, one on the left showing bank statement line items; the right, showing transactions recorded in Xero. [snip].  The article continues @ Fox Business, click here to continue reading....

Jennifer Riggins is a writer and content marketing queen. This Jersey girl is the marketing director at Barcelona-based GetApp business software marketplace, and she loves writing about startups in Spain

It's September, Fall means it's time to hit the (tax) books / By using the next four months strategically, you may be able to reduce your tax liability

Linda Stern for MSN/Money - Reuters writes: When everyone else starts loading their backpacks and shopping the back-to-school sales, I know it is time for me to dive back into TurboTax.

That's because fall is the perfect time to plan my approach to the tax forms I won't file until next April. By using the next four months strategically, I may be able to reduce the amount I have to pay then.

This is a particularly easy year to do tax planning, because the rules haven't changed much from 2013. If you do your own taxes on a program like Intuit's TurboTax or TaxAct, you can use last year's version to create a new return using this year's numbers, and play some what-if games to see how different actions will affect your tax bill.

If you use a tax professional, it's a good time to ask for a fall review and some advice.

Here are some of the actions to take now and through the end of the year to minimize your 2014 taxes.

- Feed the tax-advantaged plans. Start by making sure you're putting the maximum amount possible into your own health savings account, if you have one associated with a high-deductible health plan. That conveys maximum tax advantage for the long term. Also boost the amount you are contributing to your 401(k) plan and your own Individual Retirement Account if you're not already contributing the maximum.

- Plan your year-end charitable giving. You probably have decent gains in some stocks or mutual funds. If you give your favorite charity shares of an investment, you can save taxes and help the charity. Instead of selling the shares, paying capital gains taxes on your profits and giving the remainder to your charity, you can transfer the shares, get a charitable deduction for their full value and let the charity - which is not required to pay income taxes - sell the shares. Start early in the year to identify the right shares and the right charity.

- Take losses, and some gains. If you have any investment losses, you can sell the shares now and lock in the losses. They can help you offset any taxable gains as well as some ordinary income. You can re-buy the same security after 31 days, or buy something different immediately. In some cases, you may want to lock in gains, too. You might sell winners now if you want to make changes to your holdings and have the losses to offset them. [snip]. The article continues at MSN Money, click here to continue reading...

Optimizing Tax Efficiency vs. Minimizing Expenses / Investing

 Over at Bogleheads we came across the following discussion:  Optimizing Tax Efficiency vs. Minimizing Expenses

by Ganacel » Tue Sep 02, 2014 4:32 pm

Like everyone, I want to pay less for my investments, whether it is in the form of expense ratios or taxes. But how do you balance the two when they're at odds?

In my case, I have a 403(b) with investment options that have relatively high expense ratios for nearly every category except one large cap fund, which has an ER of 0.18%. Any other option in any category is at least twice that expensive, if not three or four times as expensive. My employer mandates that I contribute to this account. So my original plan was to put all of my mandatory contributions into this low-ER large cap fund, and then use a taxable account with Vanguard to diversify with international, bonds, and maybe a small amt of REIT contributions. The problem, of course, is that this reverses the best way to structure my accounts for tax purposes. Does anyone have any suggestions for how to get around this issue?

If it helps, I also have an option for a guaranteed 3% annuity in my 403(b). Maybe I could use that in place of a bond fund?

Thanks in advance for any insight you can give me.

Editing to add what additional info I have for those who requested it:

Yearly Income/Tax Bracket not yet known. No state income tax. Monthly pay varies widely.
First time investor. No debt, no spouse, no kids, no other retirement accounts to take into consideration.

 

Last edited by Ganacel on Tue Sep 02, 2014 10:57 pm, edited 2 times in total.

Ganacel

 

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by Ganacel » Tue Sep 02, 2014 10:08 pm

After some more reading, I see that other people have solved this type of problem by using the Vanguard intermediate tax-exempt bond funds in their taxable accounts, along with either the Total US Stock Market Index and Total International funds to make a three fund portfolio, or else separating the US component into the 500 Index + completion fund in an 80:20 ratio (or slightly greater if they want to over-value). The second option will definitely work better for me so that I can use the 403(b) funds as part of my total US fund contribution. I'm a little bummed there is no equivalent tax-managed or tax-exempt option for REITs, but I guess you can't have everything.

In case this helps anyone else, or if anyone has any comments/suggestions, here's my plan.

Allocation is 25% bonds, 50% US, 25% international. I do not get paid a constant amount of money each pay period, so my initial contributions to both the mandated 403(b) and my taxable account will vary pretty widely until I build up a good amount of money in both where the monthly contribution swings won't affect the account allocations as much. My 403(b) contributions are made biweekly, but I was only going to contribute to the taxable account on a monthly basis, because I don't think it's worth rebalancing everything on a biweekly basis!

403(b):
- Large cap US fund (100% of my mandated contribution + match)

Taxable account (Vanguard):
- Large cap US fund or ETF like VFINX (whatever amt is needed to have 0.8 x 50% = ~40% overall portfolio allocation)
- Completion US fund or ETF like VEXMX (whatever amt is needed to have 0.2 x 50% = ~10% overall portfolio allocation)
- Total international fund or ETF like VTIAX (whatever amt is needed to have ~25% overall portfolio allocation)
- Intermediate tax-exempt bond fund like VWITX (whatever amt is needed to have ~25% overall portfolio allocation)

Still not decided on whether to go with ETFs vs. mutual funds for the taxable account, so if anyone has any input about that, I'd appreciate it.

Ganacel

 

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by Beth* » Tue Sep 02, 2014 10:20 pm

Based upon your post, it sounds like you have a lot of options in your 403(b) with ERs of significantly less than one percent. In the world of 403(b)s and 401(k)s, that's not bad. Most people don't have options to very inexpensive Vanguard funds in these accounts.

You might want to post the various options available in your 403(b) and ask for advice on evaluating them. While ideally it would be less, paying an ER of .46 or .64 is not the end of the world when combined with the tax advantages of maximizing a 403(b).

Beth*

 

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by cherijoh » Tue Sep 02, 2014 10:23 pm

Ganacel wrote:After some more reading, I see that other people have solved this type of problem by using the Vanguard intermediate tax-exempt bond funds in their taxable accounts, along with either the Total US Stock Market Index and Total International funds to make a three fund portfolio, or else separating the US component into the 500 Index + completion fund in an 80:20 ratio (or slightly greater if they want to over-value). The second option will definitely work better for me so that I can use the 403(b) funds as part of my total US fund contribution. I'm a little bummed there is no equivalent tax-managed or tax-exempt option for REITs, but I guess you can't have everything.

In case this helps anyone else, or if anyone has any comments/suggestions, here's my plan.

Allocation is 25% bonds, 50% US, 25% international. I do not get paid a constant amount of money each pay period, so my initial contributions to both the mandated 403(b) and my taxable account will vary pretty widely until I build up a good amount of money in both where the monthly contribution swings won't affect the account allocations as much. My 403(b) contributions are made biweekly, but I was only going to contribute to the taxable account on a monthly basis, because I don't think it's worth rebalancing everything on a biweekly basis!

403(b):
- Large cap US fund (100% of my mandated contribution + match)

Taxable account (Vanguard):
- Large cap US fund or ETF like VFINX (whatever amt is needed to have 0.8 x 50% = ~40% overall portfolio allocation)
- Completion US fund or ETF like VEXMX (whatever amt is needed to have 0.2 x 50% = ~10% overall portfolio allocation)
- Total international fund or ETF like VTIAX (whatever amt is needed to have ~25% overall portfolio allocation)
- Intermediate tax-exempt bond fund like VWITX (whatever amt is needed to have ~25% overall portfolio allocation)

Still not decided on whether to go with ETFs vs. mutual funds for the taxable account, so if anyone has any input about that, I'd appreciate it.

Can you do a ROTH IRA? That might be a good place for a REIT fund. I would skip it altogether if the only place for it was taxable.

If you are going to continue to invest monthly, I'd stick with the mutual funds for the taxable accounts. Vanguard index funds only require a $10K balance to get Admiral class shares.

cherijoh

 

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by sdsailing » Tue Sep 02, 2014 10:31 pm

All of this strategy depends at least partially on your tax bracket. It would be helpful to reveal this.

Edit. If that annuity that you mention is TIAA at 3 percent, then yes I would use that, for at least part of your bond allocation.

sdsailing

 

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by Ganacel » Tue Sep 02, 2014 10:44 pm

No, I do not qualify to contribute to a Roth. TBH, I don't absolutely have my heart set on doing the REIT fund, especially given the level of complexity I already have introduced because of the unequal monthly contributions and the dual accounts. So like you alluded, I'm not going to worry about REIT funds for now, because I can always add one later. Thanks for your input.

Just as a general aside: Someone PMed me to suggest that I should post more details about my situation to get a better answer. I just wanted to say that there aren't any other details. This is my first time investing, and I'm starting both accounts from scratch. So these are going to be the only two accounts I have, at least for now. I'm also not married and have no spousal or children's accounts to consider. I don't have any competing debt like a school loan or mortgage to pay off either. Sorry if it seemed like I was being uninformative about my situation in the earlier posts to some of you, but I lead a pretty boring life!

Edit: I'm sorry, I also don't know what my tax bracket is going to be. I have only been working here for one month, and like I said, my monthly income varies widely. I can tell you that I have no state income tax, federal only.

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by Beth* » Tue Sep 02, 2014 10:52 pm

Ganacel wrote:No, I do not qualify to contribute to a Roth.

If this is your first time investing and you have no money in an IRA, you can almost certainly do a backdoor Roth IRA if your income is too high to contribute directly to a Roth IRA:

http://www.bogleheads.org/wiki/Backdoor_Roth_IRA

Beth*

 

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by sdsailing » Tue Sep 02, 2014 11:03 pm

In that case I would say don't worry about tax consequences now. It will not matter until you have accumulated a fair sum. At that point you will have learned the basics of investing and will be ready to address more advanced topics such as tax efficiency.

sdsailing

 

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by Ganacel » Tue Sep 02, 2014 11:09 pm

Beth* wrote:

Ganacel wrote:No, I do not qualify to contribute to a Roth.

If this is your first time investing and you have no money in an IRA, you can almost certainly do a backdoor Roth IRA if your income is too high to contribute directly to a Roth IRA:

http://www.bogleheads.org/wiki/Backdoor_Roth_IRA

Yes, I have read about the backdoor Roth. I will look into this again at the end of the year when I have a better idea what my income is going to be. Thank you.

sdsailing wrote:In that case I would say don't worry about tax consequences now. It will not matter until you have accumulated a fair sum. At that point you will have learned the basics of investing and will be ready to address more advanced topics such as tax efficiency.

What qualifies as "a fair sum?" Just curious to know at what point tax issues should be considered as significant. Thank you.

Ganacel

 

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by Beth* » Tue Sep 02, 2014 11:13 pm

sdsailing wrote:In that case I would say don't worry about tax consequences now. It will not matter until you have accumulated a fair sum. At that point you will have learned the basics of investing and will be ready to address more advanced topics such as tax efficiency.

I disagree with this. You have a certain amount of tax advantage space each year. Either you use it or you lose it. You can't save up $25,000 in a taxable account and then decide to go back and convert it to a Roth IRA. It doesn't work that way.

If you have specific goals other than retirement for which you need to save money, save in a taxable account. Otherwise, take advantage of your tax advantaged space. In particular, if you start saving in a Roth IRA at a young age and don't touch it, I guarantee that you will ultimately be very happy you made that decision.

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by Beth* » Tue Sep 02, 2014 11:16 pm

And even if you are saving for pre-retirement goals in a taxable account, put something into a retirement account. Start with a smallish percentage of your salary if that is all you can afford. Then every time you get a raise, increase the amount you are saving by some portion of that raise. Keep doing this until you hit the maximum amount you can put in retirement accounts. Don't touch the money in your retirement accounts. That's what I did and that is what I have advised my children to do.

Beth*

 

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by grabiner » Tue Sep 02, 2014 11:19 pm

Get as much into the 403(b) (and Roth IRA) as possible. As long as you have a few decent options, investing inside the 403(b) is better than investing outside it.

If you still have money for taxable investing, it is worth using slightly less tax-efficient options in your taxable account to get the lowest costs. REITs should not be in your taxable account; you should probably limit your REIT holding to the amount in the Roth IRA. But you can use the large-cap fund, and the stable value fund in place of a bond fund, and then hold Tax-Managed Small-Cap, Total International, and a muncipal-bond fund if necessary in your taxable account.

My guess is that the stable value fund is a better investment than anything else in the 403(b). Therefore, you may actually want to treat this as your main "bond" holding. (TIAA-CREF investors often do this.)

David Grabiner

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by alife » Tue Sep 02, 2014 11:36 pm

A dissenting view on the conventional wisdom regarding asset location can be found at:

http://whitecoatinvestor.com/asset-loca ... n-taxable/

The argument for putting bonds in taxable looks pretty straightforward and compelling to me!

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by Ganacel » Tue Sep 02, 2014 11:38 pm

Yes, the 3% annuity is through TIAA-CREF. If I do this, my understanding is that I have to withdraw the money over 10 years in order to avoid a penalty. Does that lack of flexibility make it a less enticing option?

I do understand about maximizing the retirement account contributions, and I am making the maximum voluntary contribution along with my mandatory contribution and match. They determine the contribution amounts based on percentage of income, not dollar amount, so I do not know yet whether I will be able to contribute the entire $17,500 for this year. The mandatory contributions apparently do not count toward the $17,500 yearly limit. If I were to go over on the voluntary contributions, they would stop taking it out of my paycheck once I reach $17,500 for the year.

Thank you for your help.

Ganacel

 

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by grabiner » Wed Sep 03, 2014 12:06 am

Ganacel wrote:Yes, the 3% annuity is through TIAA-CREF. If I do this, my understanding is that I have to withdraw the money over 10 years in order to avoid a penalty. Does that lack of flexibility make it a less enticing option?

It's a bit less attractive because of this feature, because the fund effectively has a 4.5-year duration. If you want to withdraw the money, you get 10% now and 10% per year for the next nine years, as if you had ten bonds maturing over the 0-9 year period.

Still, 3% is better than the market rate on funds with a 5-year duration, and the fund is backed by TIAA-CREF, a very high quality institution. (In contrast, if you bought a corporate bond fund, it would have some BBB-rated corporates, which have somewhat more risk of default.) And TIAA-CREF has a good record of low expenses and maintaining good rates on its traditional annuity.

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by sdsailing » Wed Sep 03, 2014 12:13 am

Beth* wrote:

sdsailing wrote:In that case I would say don't worry about tax consequences now. It will not matter until you have accumulated a fair sum. At that point you will have learned the basics of investing and will be ready to address more advanced topics such as tax efficiency.

I disagree with this. You have a certain amount of tax advantage space each year. Either you use it or you lose it. You can't save up $25,000 in a taxable account and then decide to go back and convert it to a Roth IRA. It doesn't work that way.

If you have specific goals other than retirement for which you need to save money, save in a taxable account. Otherwise, take advantage of your tax advantaged space. In particular, if you start saving in a Roth IRA at a young age and don't touch it, I guarantee that you will ultimately be very happy you made that decision.

The question at hand is not whether to max out pre tax, that is a given. The issue is the distribution of investments...tax efficient vs less tax efficient...between pre tax and taxable.

sdsailing

 

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by Ganacel » Wed Sep 03, 2014 12:15 am

alife wrote:A dissenting view on the conventional wisdom regarding asset location can be found at:

http://whitecoatinvestor.com/asset-loca ... n-taxable/

The argument for putting bonds in taxable looks pretty straightforward and compelling to me!

Thank you for the link. That seems to support what I was proposing--using the tax-exempt bond fund in the taxable account and investing 100% in the large cap stock fund in the 403(b)--especially since the ERs will also be much lower if I do it this way.

I have to confess that I also like the relative simplicity of doing it that way versus trying to allocate different percentages of each account to fixed income versus bonds versus mutual funds. I still have to spend some time rebalancing the taxable account, but this would make it easy to put the 403(b) on total autopilot.

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Re: Optimizing Tax Efficiency vs. Minimizing Expenses

by chrysogonus » Wed Sep 03, 2014 12:45 am

If you have access to the TIAA traditional annuity, you probably have access to the TIAA Real Estate estate account as well. Since you mention REITs, that's worth a look for commercial real estate exposure that's less volatile. The expense ratio is a little high, but there's nothing else to compare it to, and the general consensus seems to be not to worry about it.. You'll find lots of discussions about it if you search for TREA.

Also, index funds with an ER of less than 0.50% in a 401(k)/403(b) are reasonably good. Sure, it's not as low as Vanguard, but it's still decent.