DH has an investment account that came to him in an inheritance.
He has primarily used it for rental property investment, prior to our marriage (and prior to my basic financial literacy/competency).
His account is approximately $400k. He has it in 4 funds at Fidelity, a growth fund, a value fund, a low cost fund, and something else I am forgetting. When he purchased 2 separate rental properties about 10+ years ago, he went on margin to leverage the account. He currently owes about $220k.
He is very concerned about a market correction imminently, and would like to get out of margin, as his funds are at a 52 week high. It would involve between 50-60k in capital gains.
The reason this is coming up is that he recouped some of this in 12/2015, without discussion, and caused us to have a 10k, unanticipated by me, capital gains bill at tax time. This was in addition to us not with-holding enough (our income went up dramatically that year), and a penalty as we didn't complete taxes until Oct 2016, and missed the payment deadlines. Ouch!!!
So the up-side of that last paragraph is some financial stuff that I previously considered to be in "his" realm, I am now seeing can seriously affect my budgeting and planning. Also, he has promised to never again sell something like that without a discussion. We are now starting to approach our finances in more a of a team based approach than before, which is really important. We have even refinanced one of the rental properties together, which is a relief to me to know when and how much to anticipate paying for the year.
Yesterday, he told me about the desire to sell more shares, and get out from under margin (which I wasn't aware of, last time he just told me he had to sell because it was a good time and I was too pre-occupied with the tax bill to ask more questions). I now understand the desire to sell. I think this may be a good idea. But I am nervous about that Capital gains bill. It will be charged at the 15% rate, and will be about $9000 (or less I hope).
We also have ~200k in Student Loan debt, but no other debt. Income will be going up a bit this year, and will likely put us over the MAGI for Roth IRA for 2017.
I was basically financially illiterate prior to 2 years ago, when I found this website. I was also in a low pain training position, and a student prior to that, so my financial needs were less then.
We have a lot of Health Care expenses this year, and that is where all our cash is going at the moment, but we are hopeful that this will only continue for about 1 more year. We have about $45k in emergency fund, much of which is earmarked for this year, and which is basically our networth, excluding rentals. I need to dig into the rental numbers some more. Neither are upside down, and both are mostly paying for themselves (PII, we paid T on one last year).
I am wondering if there is any better way to come out of margin and avoid that big capital gains bill?
PS I have SO permission to discuss this and he will also review this. Let me know if I need to clarify something, or if it sounds like I don't understand something I should.
Thanks Moustachians! I feel like this is the smartest, best group of people and I am looking forward to continuing my education, even if it sometimes is the School of Hard Knocks!