investing opinions

[KTP]

We talked it over and we decided to exercise all of the microsoft options we have that will expire in early 2011 at the time the price (hopefully) hits $32. Even though I think there could be a run up to $34 or $35, I would hate for a stupid move (like paying $.25 for yahoo or something) to drop the price back where these options ($21 strike) were barely above water. We also have some $26 strike options expiring in late 2012 that I am considering letting ride, at least for most of next year.

Ok, assuming we hit $32 sometime in early Jan, we will get about $60K from these which means maybe $37K after taxes. It could be much worse as I think this will push us into AMT next year and I am not sure how bad that is going to be. I am going to try and run some numbers when I pick up some tax software for year 2009. Kind of unknown what new ways of taxing there might be for 2010 though.

Was thinking of putting 5K into Jan 2010 of dw IRA/Roth rollover trick, bringing that to 10K and putting the other 32K into our Vanguard muni fund, bringing it up to 62K or so. Does this seem too conservative, considering we are trying to build up to retirement in ~8 years?

[jIM_Ohio]

Are 401ks available? Are they maxed?

take steps to max 401k for 2010 if not already to shelter more income from taxes
consider using an HSA or another tax shelter for more income- use the 37k to live on, then look to shelter another 37k in income if you can.

Income has more tax shelters than capital gains.

[KTP]

Unfortunately the options will be treated as ordinary income when exercised, so not a lot of choice there. $16,500 is going into spouse's 401k and I am going to school full time and do not have an income or ability to contribute to a Roth (discussed that in another thread, but boils down to too much married filing jointly income for me to do a normal Roth and if I rollover my IRA it will be taxed fully since I have made mad profits with it. Did set up a non-ded. IRA for wife in Nov. and will be contributing another 5k in Jan before converting it to a Roth).

I should look into what an HSA could do. We have really good full insurance through her company as a benefit, so I do not know of any expenses that the HSA could pay (unless you can buy camping/hiking/sailing gear or something with it for exercise???)

[jIM_Ohio]

HSA requires HDHP insurance plan. If you are cash rich (which you are this year) its a good time to set that plan up- but you would need open enrollment or a qualifying event (like spouse changing jobs) to change plans if a HDHP is available. HDHP=High Deductable Health Plan- the IRS defines what an HDHP is if you have any doubts.

Basically an HDHP does this
a) sets a yearly maximum on your out of pocket health care costs- prevents you from going broke for health care.
b) requires you to pay more up front for health care costs (meaning no co pays, and might have to pay in full for an office visit until other parameters are met)
c) a payment split once a deductable is met (for example we pay first $1500 each year per person, and once family hits $3000 spent, we pay 10% and plan pays 90% of costs until we hit max of $7000 per year.
d) the main advantage to me is we pay about $60/month for the family HDHP plan (lower premiums) and direct about $6000 annually to our HSA which is a tax deduction.

HSA gives you deduction like a 401k
and withdraws like a Roth (tax free)
there are some restrictions past age 65, read up on them if interested.

If you are diabetic or have another chronic disease, this plan might not make sense (so I am told)- a plan with co pays is cheaper according to co-workers.

In general, my opinion is that this really helps control the budget because more cash is in our budget.

We pay $500-$600 per month for health care
most goes into HSA and a small amount goes to premiums
most other insurance plans have most of that $500-$600 going to premiums and a small amount to co-pays, but there is no cap on how much goes to co pays each year.

[KTP]

We are both covered under a very good company provided plan and thus do not have a HDHP so can't have a HSA (I just read the wiki on all of this)

Too bad because that would have been a great way to shelter some more income from the big bad tax man. Also it would have been nice to have a fat account to draw from tax free for medical expenses when we early retire.

Any other neat tricks we might qualify for to ease our tax or keep us below AMT? We are maxing her 401k, doing the IRA->Roth (which actually doesn't provide any immediate tax relief), but I don't know of a lot else we can do.

[jIM_Ohio]

I do not know AMT tax law and what gets exempt or not.

I might consider posting to this tax forum

Discussions - misc.taxes.moderated | Google Groups

or this financial forum

Discussions - misc.invest.financial-plan | Google Groups

or this tax site

Fairmark Forum

and then report back here what you learn... (for me to sponge off you LOL)