Webull versus Robinhood

[z987k]

They’re better off. Cramer is a crackpot and Bartiromo is a right wing shill.



Eh, there is a growing school of thought that this is wrong. The idea is that income tax rates will have to be radically higher in the coming decades in order to cover the massive Medicare and Social Security obligations, so you’re better off paying the taxes now at the lowest rates they’ve ever been. I’m not sure which school of thought will end up being right, but it’s effectively a crapshoot.

They'll be so high as to negate the gains on the portion of the income that wasn't taxed when first put in? That's going to be some incredibly high taxes. And also there's the Roth, which I would include in the "tax advantaged" account.
If you cannot max both the 401k and roth personal limits every year.... 25.5k this year. You really don't have the income to be trading outside those accounts.

 

[z987k]

People are stupid, a little 30% of our coworkers give zero to their 401K and a little under 50% don't get the max match.

I mean, how can you pay for a citation if you're giving money to your retirement?

 

[SlumTodd_Millionaire]

They'll be so high as to negate the gains on the portion of the income that wasn't taxed when first put in? That's going to be some incredibly high taxes.

The problem with a tax deferred account is that you end up paying taxes later not only on the initial investment, but also on all of the gains. All you’re doing is pushing out the taxable date to a future date. And instead of paying dividend and capital gains rates on the growth, which are generally more advantageous, you pay normal income tax rates on it. And yes, the rates are likely to be incredibly high by our current standards. The math is pretty clear.

And also there's the Roth, which I would include in the "tax advantaged" account.

Roths are a different animal. You pay your income taxes up front, and then don’t have to pay at taxes on the gains or withdrawals. Roths are a good strategy if you believe that taxes will be higher in the future. Traditional IRAs would not be, though.

 

[z987k]

The problem with a tax deferred account is that you end up paying taxes later not only on the initial investment, but also on all of the gains. All you’re doing is pushing out the taxable date to a future date. And instead of paying dividend and capital gains rates on the growth, which are generally more advantageous, you pay normal income tax rates on it. And yes, the rates are likely to be incredibly high by our current standards. The math is pretty clear.



Roths are a different animal. You pay your income taxes up front, and then don’t have to pay at taxes on the gains or withdrawals. Roths are a good strategy if you believe that taxes will be higher in the future. Traditional IRAs would not be, though.

I'm aware of how they work. With the pre-tax money in the 401k, let's say it's 20k/yr, of that 25%(well, more but easy math) of it would have been taxed, so 5k. That 5k sits in the market and makes gains that it otherwise would not. I know you have to pay tax on all of it on the back end, but 8% on just that 5k for 30 years is 600k. Even if we had a 50% income tax for those above 100k in todays dollars, it'd still be more than 20 years before that breaks even on additional tax paid vs current tax rates, during which time that extra 600k will have earned another 2.1mil.
We going to have 90% taxes on the middle class?

 

[SlumTodd_Millionaire]

I'm aware of how they work. With the pre-tax money in the 401k, let's say it's 20k/yr, of that 25%(well, more but easy math) of it would have been taxed, so 5k. That 5k sits in the market and makes gains that it otherwise would not. I know you have to pay tax on all of it on the back end, but 8% on just that 5k for 30 years is 600k. Even if we had a 50% income tax for those above 100k in todays dollars, it'd still be more than 20 years before that breaks even on additional tax paid vs current tax rates, during which time that extra 600k will have earned another 2.1mil.
We going to have 90% taxes on the middle class?

Your math begins with a faulty assumption: that the taxes that are being paid on the gains in the taxable account are actually being paid from the assets in the taxable account, which leaves less to grow over time. Problem is, nobody actually does that, so that math is nonsensical. What people actually do is live a tiny bit more frugally, and they pay their dividend and capital gains taxes out of ordinary income, not by reducing the amount of assets left to grow in their taxable account. So, in both situations, you still end up with the same $600k in extra money at the end. The only difference is that you paid your taxes along the way instead of at the end, and you paid them at lower rates in the forms of capital gains and dividend taxes, which are already tax advantaged, rather than at normal income tax rates when you take withdrawals, which are taxed higher and are likely to be taxed a lot higher in the future.

 

[SlumTodd_Millionaire]

To be clear, though, I'm not taking an actual position on which is better. I'm just making the alternate argument, because people don't often hear it, and they should. Which strategy is actually better is a matter of conjecture about future events, and partially an individual matter, because human psychology plays into the mix also (whether someone is likely to rack up debt rather than live more frugally, for example).

 

[z987k]

Your math begins with a faulty assumption: that the taxes that are being paid on the gains in the taxable account are actually being paid from the assets in the taxable account, which leaves less to grow over time. Problem is, nobody actually does that, so that math is nonsensical. What people actually do is live a tiny bit more frugally, and they pay their dividend and capital gains taxes out of ordinary income, not by reducing the amount of assets left to grow in their taxable account. So, in both situations, you still end up with the same $600k in extra money at the end. The only difference is that you paid your taxes along the way instead of at the end, and you paid them at lower rates in the forms of capital gains and dividend taxes, which are already tax advantaged, rather than at normal income tax rates when you take withdrawals, which are taxed higher and are likely to be taxed a lot higher in the future.

No, my assumption is that you earned the income and therefore paid taxes on it, and THEN took your paycheck and put 20k for the year into an account. While the other person had the 25k taken from their paycheck before taxes were paid, which in this scenario I made the taxes 5k for easy math. The first person would have to take an additional 5k from their post tax money to be equal. Which you can do, but then so could person 2.
Since person 2 is being taxed 5k less per year, they have an additional 5k to grow over time.
The 5k in taxes we're talking about is 100% on earned income.

 

[SlumTodd_Millionaire]

You’re making assumptions that simply don’t match human behavior, especially when you factor in that the amount of money that can be put into a tax advantaged plan is limited, anyway. But it’s okay. No need to keep going back and forth on it. The average reader of slightly above average intellect can do the math here and figure it out.

 

[drunkenbeagle]

Just go to Schwab. Free trades, and they have fractional shares now.

Doesn't everyone have free trades by now?

 

[drunkenbeagle]

Your math begins with a faulty assumption: that the taxes that are being paid on the gains in the taxable account are actually being paid from the assets in the taxable account, which leaves less to grow over time. Problem is, nobody actually does that, so that math is nonsensical.

Assuming you are actually realizing gains in the taxable account, which may or may not be the case.

Ironically, the only place I have substantial dividend yield is in tax sheltered retirement accounts. Since I've been out of stocks for 2 years, junk bond funds are a good substitute putting up north of 10% right now (substantially better than the S&P 500 and ironically probably less risk).

 

[Cessnaflyer]

Since I've been out of stocks for 2 years, junk bond funds are a good substitute putting up north of 10% right now (substantially better than the S&P 500 and ironically probably less risk).

I wish that was true for VWEHX so far a -3.67% return with a yield of 5.33%

 

[drunkenbeagle]

I wish that was true for VWEHX so far a -3.67% return with a yield of 5.33%

Well, I was buying in late March/early April when they were on sale. Mostly GHY around $10.50. With spreads this wide, it's hard to not make money on the higher yielding debt.

 

[MFT1Air]

Doesn't everyone have free trades by now?

Webull gives me free commissions and free stock.

 

[MFT1Air]

Doesn't everyone have free trades by now?

Actually, I've been using Etrade since 2003. With the pandemic and market loss, I added Webull and Robinhood. Simply for signing up and/or funding with $100, referrals provide me with free stocks.

I enjoy free! To the most layperson of people who have ZERO clue about 401Ks, TSPs, or CDs living check to check, this is an education/epiphany to disciplining one's self toward financial management. You'd might be surprised how clueless many people are. More importantly, I owe NOT allegiance to any brokerage firm. You'd also be surprised how many "referrals" one can receive simply by having over 3000 Facebook friends or 300k YouTube followers who like this type of marketing/advertising approach.

Win win. . .teamwork makes the dream work.