Best no-income investments?

[jim584672]

To keep the highest health subsidies one should have low income, this can be a problem if someone has a decent amount of money. What is the best method of showing no current income, yet getting a decent return? The idea is to get to 65 to reap the income then.

Cash in mattress (Not a great return)
Physical Gold (Risky)
I-Bonds (Limited to $10,000 a year, too small)
Non dividend stocks (BRK-B set and forget?)
Land (Expensive with taxes)
Bitcoin (Risky)
Art (Not liquid)
Deferred Annuity (Inflexible, risky)

Any other ideas?

 

[Senator]

Marijuana business, where legal.

All transactions are cash, in those businesses you can't even open a bank account to put it in. You run cash.

I have a friend who invested in one, he gets a FedEx package every month with his return on investment.

I am not sure how you go about investing in one.

 

[frank]

be interesting to know about marijuana investment. How are they taxed? is it legal?

 

[eta2020]

BRK-B looking at past. Who knows what future will bring.

 

[athena53]

BRK-B looking at past. Who knows what future will bring.

I was just going to say that. We know Warren Buffet won't last forever but Apple seems to have done OK post- Steve Jobs. Our Berkshire-Hathaway just sits there and (mostly) appreciates. No dividends, and when we sell it will be at long-term capital gain rates. Bonus: we're 3 hours from Omaha and occasionally attend the Annual Meeting just for fun. Great way to get Justin Boots at a substantial discount!

 

[eta2020]

Well we know that something that emulates BRK will do great. So if you can find some stocks like Amex and Coke and Gillette. That is boring reliable stocks that grow 7-10 annually for decades then you will make killings....If you are patient.

Buy them and hold them like Buffet (forever). But this has two problems: it will generate dividend income and even bigger problem is to find Next Coke

 

[MooreBonds]

Don't many ETFs have the sweet advantage of being able to 'exchange' shares with large capital gains out to large investors who convert their ETF shares into the individual securities, thereby raising the effective cost basis of the ETF's shares, and greatly reducing any capital gain distributions?

Various Vanguard ETFs have yields that aren't enormous (maybe 1.8% or so). Most of those dividends are qualified, so you'll pay just 15% tax (20% if highest bracket) on a smallish yield, leaving most of your return hopefully in the form of capital gains at a later date.

Then there are MLPs - but each MLP is different, as some companies have different types of income that you share in each year on the K-1s, which would show some small partial taxable income (less than the distributions from an ETF).

 

[Animorph]

I'd try a total US or Global ETF/fund (itot is one) if you can deal with the dividends.

If not, try something like jke, jkh, and/or jkk, large, mid, and small cap growth ETF's. They have lower yields than value funds. They are about as tax efficient as you can get without getting fairly specialized or buying your own non-dividend growth stocks.

 

[photoguy]

Various Vanguard ETFs have yields that aren't enormous (maybe 1.8% or so). Most of those dividends are qualified, so you'll pay just 15% tax (20% if highest bracket) on a smallish yield, leaving most of your return hopefully in the form of capital gains at a later date.

Bogleheads wiki Tax-managed fund comparison - Bogleheads has a summary of various tax managed funds. They get down to about 1% dividend yield compared with 2% for S&P 500.

Personally I'd be very hesitant to do drastic shifts in my allocation to reduce dividends unless perhaps I was coming up against a very large subsidy cliff (i.e. I wouldn't do it for just a few k).

 

[Rustic23]

So let me see if I have this right. You want to know the best way to invest your money so you can spend other peoples money until you reach 65 and then you will spend your money. Have I got that right?

 

[jim584672]

I am taking advantage of the legal framework to maximize my results. No different than taking steps to minimize taxes or increase benefits where possible.

I look at it as recovery of stolen property, since they have been stealing (taxing) me for 30 years I am totally justified in getting whatever I can back from them.

 

[daylatedollarshort]

If you have a small business legitimate busines expenses are deductible from your gross income, which may include items like your ISP cost, a home office, business phone, business travel and the unsubsidized portion of health insurance premiums. Many types of retirement contributions can reduce your MAGI and tax defer ongoing income.

Health savings accounts are deductible. Complete list here:
http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

Most travel rewards are not considered taxable income.

Updating with sweat equity and flipping your personal residence usually is untaxed income, but it can be taxable. Tax implications here:
https://turbotax.intuit.com/tax-too...ship--Selling-a-Home/INF12035.html#reportsale

I bonds are limited per unique tax id. Businesses can have their own tax numbers as can trusts, spouse if you are married, etc. plus 5K on tax returns.

 

[Alan]

Various Vanguard ETFs have yields that aren't enormous (maybe 1.8% or so). Most of those dividends are qualified, so you'll pay just 15% tax (20% if highest bracket) on a smallish yield, leaving most of your return hopefully in the form of capital gains at a later date.

This is the tactic I am trying, but for a different reason. We are moving back to the UK in a couple of years and Vanguard ETF's are treated by HMRC as regular funds, unlike US mutual funds which are treated as PFIC's. Dividends from stock etf's and any capital gains from sales of etf's are each tax free to the tune of ~$17k each, then taxed at 15% above that. I'll still be paying 15% in the US, as US citizens have to file taxes regardless of where they live, but I'll be avoiding additional taxes due to owning PFIC's.

Consequently my regular MF's (ie Wellesley and Wellington) are in my ROTH and IRA since they receive the same treatment as in the US. (ie IRA's are tax deferred and ROTH's are tax free)

 

[marko]

So let me see if I have this right. You want to know the best way to invest your money so you can spend other peoples money until you reach 65 and then you will spend your money. Have I got that right?

That's the name of the game, isn't it?

 

[daylatedollarshort]

That's the name of the game, isn't it?

The subsidies are technically tax credits. Why would it be okay to minimize taxes owed, but not maximize tax credits due? I have never seen a forum post here on how to maximize one's taxes owed, though I admit I don't read every thread, so maybe they are here and I just missed them.

 

[jonc]

To keep the highest health subsidies one should have low income, this can be a problem if someone has a decent amount of money. What is the best method of showing no current income, yet getting a decent return? The idea is to get to 65 to reap the income then.

Cash in mattress (Not a great return)
Physical Gold (Risky)
I-Bonds (Limited to $10,000 a year, too small)
Non dividend stocks (BRK-B set and forget?)
Land (Expensive with taxes)
Bitcoin (Risky)
Art (Not liquid)
Deferred Annuity (Inflexible, risky)

Any other ideas?

I'd say a small cap index tracking mutual fund or ETF would give you growth over the long term and - last I checked - small cap index tracking securities didn't pay dividends.

-Jon

 

[Senator]

be interesting to know about marijuana investment. How are they taxed? is it legal?

It is a legal Colorado dispensary, I am not sure about anything else...

 

[haha]

So let me see if I have this right. You want to know the best way to invest your money so you can spend other peoples money until you reach 65 and then you will spend your money. Have I got that right?

Him along with a lot of other people. There has never been a group too dumb to jump through some hoops to be on the receiving end of meaningful transfer payments. It is socially and psychologically debilitating, but is gives more power to politicians who have never been shy about accruing power.

Ha

 

[EastWest Gal]

Marijuana business, where legal.

All transactions are cash, in those businesses you can't even open a bank account to put it in. You run cash.

I have a friend who invested in one, he gets a FedEx package every month with his return on investment.

I am not sure how you go about investing in one.

You have to report income and pay taxes, cash or no cash. This is tax evasion, not tax avoidance. The first is a crime, the second is perfectly legal. I hope you're kidding.


Sent from my iPhone using Early Retirement Forum

 

[daylatedollarshort]

You have to report income and pay taxes, cash or no cash. This is tax evasion, not tax avoidance. The first is a crime, the second is perfectly legal. I hope you're kidding.


Sent from my iPhone using Early Retirement Forum

Maybe I misunderstood, but I thought the cash was explained by the fact that the dispensaries are having trouble opening bank accounts, not because they are trying to launder money?

 

[MooreBonds]

Maybe I misunderstood, but I thought the cash was explained by the fact that the dispensaries are having trouble opening bank accounts, not because they are trying to launder money?

+1 That's the assumption I made.

Many companies involved in the marijuana trade are finding that most financial institutions are hesitant to do business with them, since current federal law makes it a crime to deal marijuana. By association, a financial institution knowingly holding a bank account for them could open up a heap of liability.

Ever hear of the laws that permit seizure of ALL assets by law enforcement which could be involved either directly or indirectly in the drug trade? Granted, it would require the feds to actually enforce it - and it would make for a very interesting standoff between the FDIC and the DEA....but with the laws clearly on the books, the banks aren't going to stick their neck out for an amount of money that doesn't even amount to a rounding error of a rounding error of their total deposits or income.

 

[Rustic23]

Subsidies, I thought, were for people that could not afford health care. Why not go all the way, Food stamps, public housing, there are lots of things designed for those less fortunate. IMHO, subsidies were not designed to make it easier for people could stop working.

 

[jonc]

I live in Washington State. Recently, the state legalized cannabis product sale.

I was listening to a radio-broadcast of testimony by a banking executive to the liquor control board last week. She testified that the DOJ has issued guidelines which, if adhered to, reduce the likelihood of the DOJ taking the bank to court. There were so many guidelines, I was unable to keep track of the count, let alone the specific details.

Her bank has branches in other states, which caused the bank to develop policies to assure cannabis funds didn't cross state lines. The bank was able to contract with an armored car service. The bank requires each store nominate one or two individuals that will make deposits into the commercial accounts in person. The bank wants the tellers and branch managers to personally know these individuals, in promotion of the DOJ guidelines.

She testified that the bank's board hired risk analysts and spoke in person to local DOJ representatives with a goal of reducing the probability of criminal prosecution around serving cannabis retailers.

Bottom line: banks in Washington State have been able to serve cannabis retailers, but it's a really slippery slope.

As an aside, the FDIC has declined requests from cannabis retailers' bankers to process point of sale transactions using credit cards.

The local stores apparently have a cash machine in their physical retail space. Local news reports indicate that cannabis product retail employees tell customers that the FDIC is the reason they can't swipe their credit/debit cards at the points of sale.

-Jon

 

[daylatedollarshort]

Subsidies, I thought, were for people that could not afford health care. Why not go all the way, Food stamps, public housing, there are lots of things designed for those less fortunate. IMHO, subsidies were not designed to make it easier for people could stop working.

W2 employees usually get subsidies through their employers for health care. Why should contractors, the self employed or pre-65 pensioners not be entitled to affordable health care as well? Pre ACA, our health care premiums went from $300 a month through DH's work to $2,300 a month with a COBRA conversion plan.

Why have employers be the middleman for health care? Should we have employers be the middlemen for car insurance, too? Ooops lost your job - now you can't get car insurance and drive either, too bad for you. Are there any other developed countries where affordable health care is tied to having a full time W2 job?

 

[travelover]

Subsidies, I thought, were for people that could not afford health care. Why not go all the way, Food stamps, public housing, there are lots of things designed for those less fortunate. IMHO, subsidies were not designed to make it easier for people could stop working.

Good point. Next thing you know billionaire sports team owners will want cities to subsidize their stadiums for them. Then the NFL will be want to be tax exempt. Companies could shield billions in profits by setting up a small office in Ireland and running all their profits through it.

It is a slippery slope