30-40k all in Disney stock what do I do?

[loreec]

My grandparents invested money for me about 15 years ago. I always assumed it was a few hundred, so I thought I had $3-4k. Turns out I have closer to $30-40k. This money hasn’t been touched in a long time.

I’m a recent graduate student and don’t have a job. Should I sell my Disney stock, pay capital gains, and reinvest it all into the S&P 500? I don’t plan on touching it for a while.

If I do sell, should I do it before year end, or in January? For any tax implications: I did work from the beginning of January-May (made around $15-20k). Once I graduate late summer, I plan to get a job related to my field. I could get a high paying consulting job, or I could get a research position that’s lower paying. Please let me know what you think is best!

 

[dayboivietnam]

@loreec If you want it to be included in taxes for this year (due next April 2024), you need to sell it by end of year.

Given that you had no income this year, it's best you realize the capital gain this year so you can leverage standard deduction to wipe out 14k and also you won't have to pay any federal long term capital tax because your taxable income puts you in the 0% bucket for long term capital gains.

Whether you want to reinvest the money into SP500 is up to you. Personally I think that's a good idea since I don't think much of Disney as a stock and leaving in SPY and forgetting about it will be a safe and good move. Doing this while you have no income is also saving you a ton of taxes vs when do sell this position when you have a job.

And as the other guy mentioned, I totally forgot, throw 6500 into Roth IRA so future gains for that 6500 won't be taxed.

 

[allroads]

@dayboivietnam I’d also say throw $6500 into an IRA for this year and $7000 on Jan 1 for next year.

 

[newlove]

@dayboivietnam Need earned income to put into a Roth IRA. Selling stocks doesn't count as earned income

 

[koko5273]

@newlove More than one kind of Roth/ IRA

Payroll deduction 401k roth max contribution is like ~$22,400/yr
And you can just open any Roth IRA and contribute another $6500/yr

 

[newlove]

@koko5273 OP doesn't have a job. Selling stock is not earned income.

 

[koko5273]

@newlove OP said he had a job this year, you have up to tax time to contribute for the year….

am I wrong?

 

[janeevans89]

@koko5273 As far as I know you are correct. I had an independent Roth for a while. I just deposited cash didn’t matter if it was earned income or not. We now have started a 401 at work. Our limit is $19,500 until you’re 58 then you can contribute $22,400. I think Hank is getting the 2 convoluted because all funds in my work Roth have to came from payroll.

 

[gharlant]

@newlove Had earned income, worked early part of the year.

 

[saskia]

@dayboivietnam Hey what’s your thoughts on my situation. I’m similar to OP but it’s my wife who has the stock. And we do have taxable income. AGI is maybe going to be 180k. But our amount is smaller. She has like 7k worth at today’s value.

It’s been a roller coaster but wouldn’t you say we probably just leave it and not capitalize the gain considering it’s not a large amount of money and we have other investments that are slowly lowering its affect on the overall portfolio?

Thanks for a response if you have time.

 

[koko5273]

@saskia Take ~ 20% of your income for investments for your future.
It’s good to be diversified so if you have a small percentage of that 20% in one stock like Disney it’s not the end of the world, but if it’s a high percentage of your portfolio I’d be cautious and either sell (if you have decent gains) or hold on and let it grow.

You didn’t specify investments but with your income you should be able to easily max out contributions for IRA and HSA and also have a decent chunk for investing in a diversified portfolio.

 

[saskia]

@koko5273 I wish I could max got two kids I’m paying day care for and student loans those things together eat most of our money. We have about 1500/mo after all bills and 401k retirement to put into a Roth. And I don’t have access to a HSA.

But no it’s not a big part of my portfolio. We aren’t adding to it, we are building the Roth with ETFs like VOO, SCHD, & AVUV.

My wife has the 401k I do not and it’s the TSP with the feds.

I’m hoping when my kids are out of daycare I can increase contributions to our roths and her 401k but I’m also saving into 2 529 plans. I’m stretched a bit thin but I still think we’re doing decently.

 

[koko5273]

@saskia Keep in mind don’t put too much into 529. Min 15years in the dependents name before able to move without penalty and also there is a limit I think 30k if not used for school.

You didn’t say anything about debt, if any over 4% pay them off first then keep up with the childcare (my childcare is $3,100/m) the childcare will drop and the debts will drop allowing you to cash flow more for your future! Down the road you can invest more

 

[saskia]

@koko5273 Yes thank you I’m excited for 5 years from now when something like 4k/mo will drop.

I’m sitting in the attorneys office buying a house right this moment. $1200 mortgage at 3% is gone and traded for a $2600 mortgage but I couldn’t be happier. That’s where our cash flow is going to this new mortgage and I hope to refi within 5 years too. So 2029 is looking like that’s when I’ll be able to go balls in. I’m 31 now so we still have time.

 

[koko5273]

@saskia I’m just curious
What’s the new mortgage rate?

I’ve outgrown my house and with our next kid within a couple years I won’t have enough bedrooms!

But I don’t have cash sitting around for a 20% down payment and also be able to cash flow a 12% rate… (last I checked few months back)

 

[saskia]

@koko5273 Well my rate was abnormally low according to my attorney at closing. I had a 5.75% ARM 5/5 with navy federal credit union. I hear a 30 yr is around 7% maybe slightly lower.

I sold my 3% home took my 100k check and bought this house at 477k so about 90k down for 20%.

We have one kid 2nd is due in April. This home is perfect location for us and perfect size at 3900sqft. I’m glad I ignored the noise and did this.

 

[koko5273]

@saskia ARM loans can be scary since you don’t control the rate. As long as you keep 3-6months of expenses in an HYSA growing at 5% (today) for your emergency fund (I would stick closer to the 6month end Incase the rate goes up and you have trouble cash flowing)

Other than that I would try to make an extra $100/month mortgage payment (so you pay a fraction of the interest) If you follow the fed rates and as soon as it makes financial sense to refi to get a lower rate that isn’t adjustable I would look into it. Keep in mine refi costs money with closing costs again and other fees.

Congrats on your financial situation!

I’ve been looking into buying a larger house but I’d much rather keep my 3.5% rate and build an addition with cash and keep investing (the interest on financing anything is crippling for 99% of Americans right now)

Good for thought
Most people want to invest and calculate 7% gains year over year for inflation, if you switch roles with the bank who gave you the loan they are seeing this loan as safe since it’s paying the same as them just holding a fund that performs similarly to s&p

 

[saskia]

@koko5273 Yes so when I told you what I have left each month (about $1000-1500) that’s my main job and my wife’s. I have two other jobs I work remote part time and make about 55k from. I plan to use that income to pay the mortgage down about 100k over the next 5 years then I’ll consider refiing. If I take the adjustment it’ll adjust to the lower loan balance so I’ll basically get a free refi in 5 years. I do want to swap into a 30 year fixed though to further leverage my house to have a low payment versus paying it off but if rates remained high I’ll continue to pay it down aggressively.

My home at 3% wasn’t worth keeping to me. Not a good area for my kids even worse neighborhood. The new payment on my primary job and my wife’s is not exceeding 30% and it makes us happy for the very long term. If we were happy with the house I would have stayed longer.

 

[crl]

@dayboivietnam This is all solid advise but don’t forget state taxes.

 

[laurencem]

@dayboivietnam would this earned income on selling the stocks effect any of OP's financial aid in school if any of it was based on income?

Or does the fact that they already earned $15-20K this year indicate that either way, they would have been disqualified from any income based aid?