Author Topic: Want to open IRA with 5k, but I already put 1k into current IRA  (Read 4358 times)

solongtj

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I have a target mutual fund with Merrill Lynch. I really don't want to roll it over. I can contribute 4.5K left this year. I can't believe $500 bucks is holding me back. I opened a regular non-retirement account at LC but haven't funded it yet. I really prefer to have an IRA backed one.

Does anyone have anything positive to say about the non-retirement LC account, or should I wait until 2017 to contribute the 5k?

Thanks

AnilG

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Re: Want to open IRA with 5k, but I already put 1k into current IRA
« Reply #1 on: April 02, 2016, 09:05:05 PM »
Why do you prefer IRA account for P2P lending?

I most probably in a minority of people who prefer non-retirement account for P2P Lending. I don't have an IRA account with any of the P2P platforms. All my accounts with different P2P platforms are non-IRA, taxable accounts.

My decision to not have IRA for P2P loans is driven by the types of assets I prefer to have in my IRA accounts. Mitt Romney is my hero in this aspect (stuff and grow assets in IRAs as much as possible). In my IRAs, I prefer assets that typically have high upside return potential and/or positively skewed long-term rolling 5, 10, 15 year return average. P2P loans do not meet this criteria. The upside potential on P2P loans is restricted by the maximum interest that can be charged for the loans and downside risk is 100% loss.

My impression is that majority of people prefer IRAs for P2P lending to avoid too much paperwork at tax filing time and the somewhat negative tax treatment of interest income being taxed at ordinary income level (higher) while capital losses being taxed at lower level for most investors. I don't mind too much paperwork as I have other people prepare my tax return. And, I find the ability to generate capital losses using P2P loans valuable in adjusting capital gains from other investments and managing the level of taxable income.

In addition, personally I prefer simplicity (minimize number of IRA accounts and fewer IRA custodians the better).  I treat IRAs as investments with extra-long time horizons that not to be messed with too often. So, any new IRA account has to be created with future earned income rather than conversion from an existing IRA.

I have a target mutual fund with Merrill Lynch. I really don't want to roll it over. I can contribute 4.5K left this year. I can't believe $500 bucks is holding me back. I opened a regular non-retirement account at LC but haven't funded it yet. I really prefer to have an IRA backed one.

Does anyone have anything positive to say about the non-retirement LC account, or should I wait until 2017 to contribute the 5k?

Thanks
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Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
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solongtj

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Re: Want to open IRA with 5k, but I already put 1k into current IRA
« Reply #2 on: April 02, 2016, 11:58:01 PM »
Thanks for the response. I think I'll invest non-retirement for now and see what happens next year.

storm

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Re: Want to open IRA with 5k, but I already put 1k into current IRA
« Reply #3 on: April 03, 2016, 01:20:10 AM »
Did you make a contribution for 2015?  If not, you have until April 18th to do so.  If you are 50 or older, the limit is $6,500.  Otherwise, I think it comes down to doing a transfer or waiting until next year.

solongtj

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Re: Want to open IRA with 5k, but I already put 1k into current IRA
« Reply #4 on: April 03, 2016, 01:40:23 AM »
Did you make a contribution for 2015?  If not, you have until April 18th to do so.  If you are 50 or older, the limit is $6,500.  Otherwise, I think it comes down to doing a transfer or waiting until next year.

I'm 28. I maxed out 2015 already and will max out 2016. I guess I'll just transfer over $2,500 to start with. I signed up for LendingRobot and linked my Lending Club account. I'll consider the IRA next year.

Question: If I open an IRA next year in addition to the regular LC account I have now, does that mean I have two separate logins for LC or just one? Thanks

storm

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Re: Want to open IRA with 5k, but I already put 1k into current IRA
« Reply #5 on: April 03, 2016, 01:51:48 AM »
Question: If I open an IRA next year in addition to the regular LC account I have now, does that mean I have two separate logins for LC or just one? Thanks

You will have 2 logins...you'll need 2 different e-mail addresses.

jennrod12

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Re: Want to open IRA with 5k, but I already put 1k into current IRA
« Reply #6 on: April 03, 2016, 09:11:51 AM »
You can transfer $5000 from wherever last year's IRA is into Lending club.  You can replace most of that with this year's contribution if you don't want that account to go below a certain level.  That's what I'm doing, transferring periodically out of an existing IRA and into Lending Club, while my new contributions are dollar cost averaged into the existing IRA.  My existing IRA is with Vanguard and the transfer is pretty easy.

Jenn

Fudgenut

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Re: Want to open IRA with 5k, but I already put 1k into current IRA
« Reply #7 on: April 03, 2016, 11:54:26 AM »
Because P2P notes are taxed at your income bracket level,  while long term stock gains are taxed at the capital gain rate.   I'd rather not pay taxes on the thing with the higher tax rate. 

Additionally,  I am not convinced that stocks have a higher expected return than p2p notes, though it is tough to say at this point.

Why do you prefer IRA account for P2P lending?

solongtj

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Re: Want to open IRA with 5k, but I already put 1k into current IRA
« Reply #8 on: April 06, 2016, 08:47:35 PM »
You can transfer $5000 from wherever last year's IRA is into Lending club.  You can replace most of that with this year's contribution if you don't want that account to go below a certain level.  That's what I'm doing, transferring periodically out of an existing IRA and into Lending Club, while my new contributions are dollar cost averaged into the existing IRA.  My existing IRA is with Vanguard and the transfer is pretty easy.

Jenn

It's tempting. I transferred $2500 into a non-IRA account but I'm waiting for it to be available. I still think it should be an IRA. Not feeling as good as I would if it was an IRA, but I figure $2500 isn't the end of the world. I'll play around and go from there.

levijean

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Re: Want to open IRA with 5k, but I already put 1k into current IRA
« Reply #9 on: April 07, 2016, 12:30:29 PM »
In my IRAs, I prefer assets that typically have high upside return potential and/or positively skewed long-term rolling 5, 10, 15 year return average.
What sorts of assets are you referring to?

rawraw

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Re: Want to open IRA with 5k, but I already put 1k into current IRA
« Reply #10 on: April 07, 2016, 08:08:47 PM »
I don't use LendingClub in a retirement account.  My LC money could easily tomorrow be funding for starting a business or anything else