Author Topic: Investing for a Gig-to-Gig Worker  (Read 2357 times)

Nustachio

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Investing for a Gig-to-Gig Worker
« on: April 30, 2016, 08:59:55 PM »
Mustachians! I need your help and advice, if you're feeling charitable.

I can embrace frugality, but translating the investing ideas I've read here is a bit harder. I'm not a self-employed contractor, so I can't do those SEP IRAs or 401Ks.  I'm a might-have-20-different-employers-per-year job-to-job employee, so I don't have access to pension or benefits or 401Ks. My income can fluctuate between $10,000 and $100,000.

The Basics: Central California, mid-40s, $130,000 mortgage at 3.75%

The Good: I have a dedicated emergency fund greater than two years' expenses. (At local .01% bank)

The "Bad": The rest of my money is in individual stocks selected/managed by an advisor who gets 1.1%-1.5% AUM. (Most of this is in taxable: $650,00. Some is in a Roth IRA: $75,000.)

The side note: $150,000 cash ready to invest (or put in, say, a 5-yr CD @2.1%)

My plan: Transfer from the advisor to BofA or Vanguard. I'm leaning BofA for banking relationship and tasty perks reasons. Unwind the stock positions in as tax-efficient a way as possible (whatever that means). Buy index funds -- including some (30-40%) bond exposure in the taxable but not the Roth.

I realize it's an unpredictable and possibly unrelatable job/life/retirement path, but I'd welcome any insights you have. Any thoughts? Which funds? Asset allocations? Totally nuts for contemplating BofA/MerrillEdge as well as Vanguard?

Derrian

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Re: Investing for a Gig-to-Gig Worker
« Reply #1 on: May 01, 2016, 06:07:14 AM »
I just want to clarify, you have a 2 year emergency fund at a local bank, $650k invested through an advisor, and an additional $150k in cash?

If so, I would:
- Switch emergency fund to an online savings account for 1% interest (6 months - 1 year) or rewards checking with 2%+ interest. 2 years is too much for my taste but I understand if you need it for peace of mind.
- Switch the taxable account to vanguard using a lazy portfolio that will let you sleep at night (I use three fund)
- Invest the 150k according to the above asset allocation. A CD earning such low rates in addition to an emergency fund doesn't make sense to me unless you are looking for FIRE within the next few years.

Nustachio

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Re: Investing for a Gig-to-Gig Worker
« Reply #2 on: May 01, 2016, 07:49:46 AM »
I just want to clarify, you have a 2 year emergency fund at a local bank, $650k invested through an advisor, and an additional $150k in cash?

Yes, Derrian, that sums it up.  I too think it needs to be rearranged and maximized, so thank you for offering some guidance.

Is your three fund lazy portfolio Total U.S., Total World, and Bond?  Any allocation strategy you'd recommend?  Do I just suck up any unfortunate tax ramifications of using a taxable account and living in California?

Derrian

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Re: Investing for a Gig-to-Gig Worker
« Reply #3 on: May 01, 2016, 02:00:49 PM »
You can read more about lazy portfolios here: https://www.bogleheads.org/wiki/Lazy_portfolios

There are many, many different versions that include anywhere from 1-10 funds. I use:
Total US stock market
Total International stock market
Total US Bond

Since, your income puts you in a high tax bracket, you could look into a tax exempt bond fund for CA residents like this: https://personal.vanguard.com/us/funds/snapshot?FundId=5100&FundIntExt=INT
You will want to check the underlying investments of the fund to make sure that they are sound.

As for moving your assets from being under an advisor to vanguard (fidelity or another place) you will likely want to talk to someone about how to do so in a tax efficient way.

seattlecyclone

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Re: Investing for a Gig-to-Gig Worker
« Reply #4 on: May 01, 2016, 02:09:55 PM »
Since your income fluctuates so much from year to year, the most tax-efficient way to sell off the stocks would be to wait until a low-income year and sell them. That way you'll take advantage of the 0% federal capital gains tax up to the top of the 15% income bracket.

However taxes aren't the only thing. If you don't think you'll have a low-income year for a few years and you really don't want to hold those stocks for the long term, just bite the bullet, sell them, and invest in some longer-term funds sooner rather than later.