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  #1  
Old 06-20-2007, 11:10 PM
Jurollo Jurollo is offline
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Default WSOP Windfall... What am I to do?

Hey all,
I recently posted this in the El Diablo forum and was told to repost here. So here I go. If you need any more information then please ask as I don't know exactly what info you folks will need. I want to learn about this stuff so I can do it on my own and am fairly zealous about the process so I look forward to book recommendations as well.

I am a 23 yr old college grad who currently is renting a 1BR in Boston till Sept 1. After that I don't really have a problem renting for a little while longer, I enjoy the city and dont have any real need to buy a house immediately. I have $19,000 in college loans left sitting @ 4.75% interest and besides that am totally debt free.

Along with the $244k I won at the WSOP I have another $100k+ in winnings this year so I looking at around $380k or so net income before taxes. My main goal right now would be to knock that number down a bit with some tax deferred accounts, but unfortunately I think I might make too much for some of the options out there.

I plan on investing approximately $150k-$200k of my winnings right now and would like to use it for the future rather then the here and now. I am employed right now part time as well and make about 30k outside of poker, which I file as income from my own business (as it is contracted work). That pays for bills for the most part and I use my poker money for savings. My main goals here are to:
A) Decrease my tax liability
B) Build for early retirement
C) Increase my attractiveness for a mortgage (As a self-employed poker playing 23 yr old I am not candidate #1 on mortgage company's lists)

Also I have a credit score in the high 600s if that makes any different. Thanks.
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  #2  
Old 06-21-2007, 01:38 AM
stoxtrader stoxtrader is offline
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Default Re: WSOP Windfall... What am I to do?

im not sure if the student loan debt is tax advantaged or not. if it is, definitely don't pay it off as you have an arbitrage there, and even if it isnt I still think you might not want to pay it off right away (but if the alternative is money simply sitting in a csavings account you are probably losing a small amount in return for the flexibility of having access to that money for the period of the loan).

I think you should be able to open a SEP_IRA account - this has the massive benefit of a 45k max contribution limit in 2007 and rising going forward. you can confirm your eligibility easily by doing it through ameritrade or schwab or vanguard, they want to make it easy for you to give them your money.

the sep-ira is great - total amount contributed is deductible and growth is tax deferred, downside is you cannot access the money without penalyt until 59 1/2 - there may be an exception or two to that last part, not positive.

with the balance of your money i would think about opening a vanguard or discount brokerage account and investing in index funds. you may also want to explore your mortgage options because I think a smart thing to do at some point would be to buy a place to live - but this would have to be at a time in your life when you are less transitive because renting definitely is more flexible and it is cheaper in the short run.

I think that you would be surprised what type of mortgages you qualify for and i would guess buying a place for you the bottleneck will not be the mortgage, but finding a place that suits you and a time in your life when it makes sense.
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  #3  
Old 06-21-2007, 01:39 AM
Jurollo Jurollo is offline
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Default Re: WSOP Windfall... What am I to do?

stox,
thank you very much for the response.
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  #4  
Old 06-21-2007, 02:56 AM
jason6633 jason6633 is offline
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Join Date: Jun 2007
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Default Re: WSOP Windfall... What am I to do?

If your a professional player (and your winnings suggest so) have you considered the possibilty of expatriation? Seeing as a professional online player has reasons to reside out of the united states it is an option worth thinking of. By formally moving your permanent residency out of the country you have the potential to severely limit your tax liability, and do so legally. Remember not only income earnings but investment earnings like dividends and capital gains. Think of the increased cumulation to a non-taxable brokerage account.

Not that you have to give up your homeland and country, but is spending half the year and a day elsewhere (think beeches and resort living) so bad? You can still visit whenever you like, fammily friends and B&M casino's / tournamnents. Just an idea fwiw.
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  #5  
Old 06-21-2007, 03:58 AM
Jurollo Jurollo is offline
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Default Re: WSOP Windfall... What am I to do?

So I just ran some numbers on what $45k would be in 2044 when I am 60 and it comes out to like 775k, so if I could do the same kind of lump investment a few times in the next few years I will be good when I get to my blue haired years.
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  #6  
Old 06-21-2007, 08:54 AM
mtgordon mtgordon is offline
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Default Re: WSOP Windfall... What am I to do?

Don't forget that the 775k in 2044 might not be worth as much as you think it is (assuming you didn't discount for inflation). Most people assume somewhere around 10% for investments and 4% for inflation (I'm guessing here and would be interested in other people's #s). So you're only netting 6%.

Now if it's in a taxable account and you're paying 30% tax you're paying 3% in taxes (10% earnings at 30%) so you're only netting 3%.
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  #7  
Old 06-21-2007, 09:13 AM
Fishhead24 Fishhead24 is offline
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Default Re: WSOP Windfall... What am I to do?

I hope you are planning on writing off some gambling losses.

This will reduce your tax bill considerably.
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  #8  
Old 06-21-2007, 09:26 AM
jaydub jaydub is offline
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Default Re: WSOP Windfall... What am I to do?

[ QUOTE ]
im not sure if the student loan debt is tax advantaged or not.

[/ QUOTE ]

It's not deductible at his income level.

[ QUOTE ]

the sep-ira is great - total amount contributed is deductible and growth is tax deferred, downside is you cannot access the money without penalyt until 59 1/2 - there may be an exception or two to that last part, not positive.


[/ QUOTE ]

Accessible but with penalties.


[ QUOTE ]

I think that you would be surprised what type of mortgages you qualify for and i would guess buying a place for you the bottleneck will not be the mortgage, but finding a place that suits you and a time in your life when it makes sense.

[/ QUOTE ]

Yes a low LTV will open lots of doors. I agree with the time in his life sentiment. I'm frankly a bit puzzled by the 23 year old poker player wanting to lock himself into a particular home and area for the next 5-10+ years.

OP,

I said it in the previous thread and will say it again. Call Vanguard, you qualify for a Voyager account which has all the hand holding and advice you will need. I say this as you do not seem all that interested in learning about investments on your own and have expressed concern about commission based advisors.

J
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  #9  
Old 06-21-2007, 09:36 AM
Fishhead24 Fishhead24 is offline
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Default Re: WSOP Windfall... What am I to do?

Start watching CNBC religously.
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  #10  
Old 06-21-2007, 09:48 AM
rapidacid rapidacid is offline
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Default Re: WSOP Windfall... What am I to do?

Congratulations on your winnings.

I'd imagine there's going to be quite a few foreclosures in the upcoming months in Boston ... if it interests you, I would read up on foreclosures and try to take advantage of that situation

Since it sounds like you're kind of a low maintenance guy, you might also want to look at properties in your area that are multi-units ... that way you could buy one, live in one unit and rent out the other 1+ units to help pay your mortgage
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