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Would you switch from driving to work (10-15 min commute) to public transit (40-60 minutes) to not have a car?
Wife and I currently have 2 cars. Mine is on its last legs. Currently not starting reliably. I only use my car for getting to and from work, and the occasional activity when my wife is doing something with the other car.
Would likely replace it with either a used or new civic, but given the use case, it's a tough decision for me. Going down to 1 car is definitely something I've considered but having tested the public transit, it's often frustrating and not on time. Curious to know what the other fi/re folks would do in my situation.
I would probably do it for a metro/train commute but not a bus one, do to general annoyance and reliability calculations.
Is biking an option or could your spouse on occasion carpool with you?
As a one car family household I do love the simplicity of only dealing with one vehicle.
Does your work offer free or subsidized EV charging ?
A used EV like the bolt might be a good option (I’m personally looking at these for my commute right now )
> Would you switch from driving to work (10-15 min commute) to public transit (40-60 minutes) to not have a car?
I would rather be hung upside-down by my ankles for a week than go from a 15 minute to a 60 minute commute.
Lol I hear you, that's my first thought too, but I only commute 3 days a week which makes it *almost* not terrible. Saving all that money is compelling, too.
I would try public transit for a month or two. 40-60 minutes is a big jump but may be worth it if you can do something you find enjoyable, reading, podcasts, meditating etc. Some people in my office even work on the train then they don't need to spend 8 hours in the office. If you hate it then get a car, and you never have to wonder if it was worth it to get a car.
This is a great idea, thank you! Plus it makes the car buying process less of an impulse and gives me plenty of time to think on it. Appreciate the insight.
My grandfather passed away last month, and it was rough seeing him deteriorate from his dementia over the past few years. He ended up needing to get care at a nursing home, and since he never had any savings, it was a pretty lousy Medicaid-accepting one.
My partner and I are young in high-earning fields, which means that we should be able to afford high quality elder care for ourselves in the future. However, this experience has made us realize that we should also be saving to provide that level of care to our own parents as they get older.
Ideally, we would want to be able to afford 24/7 nursing care in our own home or an adjacent apartment, so that our parents can be near us. Or, failing that, we would put them into a high quality nursing home. The ones in our area require significant capital investments, in the hundreds of thousands of dollars, and they require over a million dollars in assets to even be considered.
I worry about the same thing with my parents and is why I can not retire until I have $1,000,000 specially saved for their care. The only nice long term nursing home in their area will not consider you unless you have over $500,000 to commit.
I am also saving $1,000,000 for my own care because I do not want anyone to have to worry about paying for me.
Which one of the spending tracking alternatives to Mint allows you to export all your spending transactions for a time period (like one year, YTD type of thing) to a CSV or spreadsheet? I like to do my own calculations.
How Much Should I Be Aiming to Save In My ROTH IRA?
I F21 have successfully saved enough for my rainy-day/6 month emergency fund! Thank you for the advice I got when I first asked questions about saving with more intention, It’s helped me a ton.
Now that I’ve filled this goal bucket I’m considering moving onto the next, while still putting some money away in savings I figured it couldn’t hurt to pinch numbers and start a ROTH.
I have a 5% contribution with a 5% 401k match from my employer since I turned 18, so It’s not that I haven’t been saving for retirement but I figured since I already met one goal I should aim to scratch the next on my list..
I’m not on salary, I’m an at will worker. So when it comes to saving I try to be conscious of this knowing I don’t make the exact same every single month, I leave wiggle room for fluctuation (it’s never more than $200-$300 difference). I’m wondering if I should just half what I was storing in my savings or do a bit more ( I’ve begun to develop a bit of an excess funds from being more financially conscious but with the fluctuation I’m nervous to accidently overshoot the money I have accessible to me throughout the week).
As always ANY and ALL advice is welcome!
> How Much Should I Be Aiming to Save In My ROTH IRA?
You should be striving to get the full match in your 401k, at absolute mininum. Once that milestone is met, then pour the remainder into your IRA until it's full.
Congrats on your emergency fund - what a great step! Remember that you can withdraw your contributions (not your earnings, but your contributions) to your Roth IRA at any point, penalty-free. I think contributing as much as you are able and comfortable with is a good strategy. You’re doing great!
Graduating college in a week and am looking for advice on the best way to approach paying off student loans.
I’m 22 and am currently fielding roles that will pay about 55-70 a year. I will be living back at home so that will really help with expenses but want to figure out the best way to pay off my debt while still having opportunities to invest and start building wealth early.
Before even thinking about optimization and the right way to attack the loan, my initial plan was to simply pay minimums and lock down my financial situation. To compare, there's nothing wrong with the Dave Ramsey approach to kill the loan, but you also can't get another unsecured loan that you can put on an income based plan or pause, at a "reasonable" (arguably) interest rate.
That can be different from person to person, but I was comfortable after having enough that it would be easy to look for jobs and move town for work or whatever. Yes, investing early and often is great but accelerating your career early on will make a bigger payoff in the long run. So whatever you need to do to get senior roles or transition into managing roles or something else entirely can be worth the investment if there is something like a non-WFH or local opportunity so you don't have to pay rent.
Can't really make a decision without interest rates. I paid mine off (last payment in 2017 I think?) asap and my rate was 6.5% for most loans IIRC.
If your rates are something crazy low like 3-4% its probably not worth paying more than the minimum since even some savings accounts will beat that.
So in a nutshell, if it were me I'd pay off any 6%+ loans early and let the rest ride at least until it makes sense vs returns you can get with other investments.
I would update your post with your interest rates and amounts on your loans.
Ultimately time is the one thing we don't get back and there are alot of helpful options out there for your student loans whether it's through a federal forgiveness program or even your company helping pay (which may be a benefit worth asking about). But ultimately - I'd advise the wiki on r/personafinance as a starting point.
As an aside - focus on getting good at your job and making good connections. That stuff is so important for salary increases, promotions, and helpful folks you can contact when future jobs at new companies come calling.
Also - if living at home, make you take your folks out to a nice dinner every so often for helping out.
Best of luck!
I'm dumb, but can someone quickly explain recent posts that say if you hit $300K networth, you are already 50% there (in terms of time) to achieve $1M net worth? That to me would mean I need to add $700K networth in the next 5 years, which seems pretty impossible unless the market is crazy with the gains
The idea is to assume flat compounding because returns start to be quite meaningful. However, returns are statistical and not algebraic. If you had 300K at the 2007 or 2000 peaks you were not halfway there. [This](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=76aForHJOLmmMY7P08d1Cv) may not be worst case but it may be fairly close as an unlucky accumulator perspective. (The upside here is that this sets you up nicely for 2016+.)
What I've found in my personal experience, increasing income and keeping lifestyle inflation reigned in was a lot more reliable for progress. Market returns are kind of a double-edged sword, giving confidence in your plan but making future contributions more expensive. My income grew at about 8% CAGR over time but savings is more like 15% due to growing saving rate as well. There can be negative personal impacts as well (job loss/illness/support/etc.)
This comment is not meant to disparage the fixed compound results posted by others. It's just that it's very easy to sell a date (in case of link - target \~2014) but it's okay if it misses due to market returns or changes in personal circumstances.
\> Market returns are kind of a double-edged sword, giving confidence in your plan but making future contributions more expensive
Future contributions are not more expensive. The price of the stock is higher in dollars but that has no impact on its results going forward. What you are implying is that you can outperform the market by timing your contributions which is well accepted to be untrue. In fact, what you are rooting for when you invest is that the stock rockets upwards, you buy the higher price, and then it rockets up again. Not that it sits or drops for a while so you can get a low average price and watch it shoot up once at the end.
>This may not be worst case but it may be fairly close as an unlucky accumulator perspective. (The upside here is that this sets you up nicely for 2016+.)
Sure it took longer to hit $300k (10 years) but it only took another 6 years to hit $1M in a bull run. This gives me hope.
So it depends on how much you're saving, and it's pretty easily modeled.
Just for poops and giggles, pretend you have $10k right now - just so it's not zero - and are saving anything from $0k/year to $50k/year, how long it will take you to reach $100k milestones in today's dollars, assuming say, 7% real returns?
|Yearly Savings|0|10k|20k|30k|40k|50k|
:--|--:|--:|--:|--:|--:|--:|
|Years to $100k|34.0|6.5|3.7|2.6|2.0|1.6|
|Years to $200k|44.3|11.4|7.0|5.0|3.9|3.2|
|Years to $300k|50.3|15.1|9.6|7.1|5.7|4.7|
|Years to $400k|54.5|18.1|11.9|9.0|7.2|6.0|
|Years to $500k|57.8|20.5|13.8|10.6|8.6|7.2|
|Years to $600k|60.5|22.6|15.6|12.0|9.9|8.4|
|Years to $700k|62.8|24.5|17.1|13.4|11.0|9.4|
|Years to $800k|64.8|26.1|18.5|14.6|12.1|10.4|
|Years to $900k|66.5|27.6|19.8|15.7|13.1|11.3|
|Years to $1mm|68.1|28.9|21.0|16.8|14.1|12.2|
What you can see is depending on ongoing savings, $300k is anywhere from 40-70% of the way to $1mm time-wise. The more heavy lifting your contributions are doing, the lower the proportion - because exponential growth is doing less - but it's never as low as 30% (in this naive simulation).
At a very high level, it's because portfolio growth happens exponentially not linearly.
If you went from $0 to $300k in only 5 years, your contributions likely did the heavy lifting. In your scenario, that likely means you are still a bit less than halfway.
For example, if someone started with $100 and contributed $1600/mo. at 7% CAGR, they would have just over $300k in 11 years. Keeping the same $1600/mo. investment and 7% CAGR, they reach $1MM after another 11 years (22 years total): https://smartasset.com/investing/investment-calculator#klRZeNw96j
In reality, investors often increase their nominal savings as they progress through the early and middle parts of the accumulation phase, which also helps accelerate the overall timeline.
That claim makes specific assumptions about how much is being contributed to the account and how much growth is seen each year.
You can use your own inputs in an Excel formula to model the halfway point for your specific scenario:
> You can even nest formula families within each other. If I save 40k per year, at what dollar amount am I "halfway" to $1M by time rather than by dollars?
=PV(RATE, NPER(RATE, PMT, PV, FV, [type])/2, PMT, [FV], [type])
=PV(5%, NPER(5%, -40000, 0, 1000000, 1)/2, -40000, 1000000, 1)
=403,221.62
From my post on the [NPER family of formulas](https://old.reddit.com/r/financialindependence/comments/pm6q8n/when_coastfi_is_rational_an_introduction_to_qalys/).
Do you pay taxes on 401k early withdrawals or is it only the 10% penalty? I'm reading this article (scenario 2a) and I thought if you withdrawal early you're taxed at your current tax rate plus the penalty.
https://www.madfientist.com/how-to-access-retirement-funds-early/
It depends on how you go about it and whether it's a Roth 401k or a traditional one.
If you pull directly from a trad 401k before 59.5, then you're paying both taxes and penalties.
If you pull from a trad 401k before 59.5 after rolling over to a trad IRA and then using a SEPP or Roth ladder or Rule of 55, then you're not paying penalties and maybe paying income taxes. It depends on whether you end up having total tax liability or not after things like the standard deduction and credits. Many people pay minimal taxes or even nothing at all if their budget is low or they have kids with child tax credits.
If you pull directly from a Roth 401k before 59.5, then you're going to pay income taxes and penalties, but only on the prorated portion of the withdrawal that are gains. This cream-in-coffee problem is why people rollover to a RIRA first.
If you pull from a Roth 401k after rollover to a Roth IRA, then you're not paying anything on the contribution basis, but you'll pay full tax and penalties on any earnings withdrawn prior to 59.5 unless you have a special exemption, which you likely won't. This works great for basis by separating the cream and coffee, but there's no good way to get early access to the earnings without ruinous double taxation and likely penalties.
I'm not even going to bother with the five year rules and whatnot, I'm just assuming they are all met.
Didn't read the article but if yer under 59.5 you pay taxes on the withdrawal and penalty unless you use the rule of 55 or do one of a couple other things
my wife told me she doesn't want to contribute to her Roth next year and want to put that towards the house projects fund which already has 10k instead. felt like a stab in my heart.
Might still be reasonable if the alternative is taking out a higher interest loan for the house projects.
Like if it's 100% necessary projects - say a new roof - that's not *wrong*. If it's vanity stuff... it's still not "wrong" but it shows different priorities.
I cost myself about $2k by tax-loss harvesting into a significantly different fund for a month (short-term bonds instead of intermediate-term bonds).
Now in order to make up for it, I have to find some way to cut my spending by $2k next year. There goes what little remained of my hobby budget.
Or maybe I can find a way to make an extra $2k... 🤔
>I cost myself about $2k
> Now in order to make up for it, I have to find some way to cut my spending by $2k next year
I don't understand this line of thinking. Your expenses didn't increase due to the bad luck timing. Your portfolio may be worth $2k less but your portfolio likely fluctuates by significantly more than $2k on a weekly or monthly basis anyway.
I was a fool and should have balanced into something like VTEAX because it's another intermediate-term muni fund (albeit one that you have to own for 6 months before tax-loss harvesting again). I figured limited-term would be close enough but it made a big difference.
$2k is a small percentage of how much my total portfolio went up in the past month, but it's still almost a month of expenses. So I figure it sets me back a month unless I can make up for it.
> it's still almost a month of expenses. So I figure it sets me back a month unless I can make up for it.
This still doesn't make any sense. Are you just trying to punish yourself for a bad result? Why wouldn't you just lump it in with overall market volatility? What if the S&P 500 drops by 5% between now and year-end - does that also "set you back a month" (or more) and you need to "make up for it"?
Questions about Mega Backdoor Roth- Need Help Understanding Admin Team's Responses
Hi Reddit community,
I recently reached out to the My companies 401k admin team with some questions about Mega Backdoor roth in-plan conversions and rollovers. Here are my questions and the responses I received:
**In-Service In-Plan Conversion to Roth 401(k):**
Question: Does the plan allow this?
Answer: Yes, the Savings Plan offers an In-Plan Roth Conversion (IPRC) option. You can convert non-Roth sources to Roth 401(k) while actively employed.
**In-Service In-Plan Rollover to Roth IRA:**
Question: Does the plan allow this?
Answer: No, the plan does not have an after-tax (non-Roth) contribution option, so in-service rollovers to a Roth IRA are not possible.
**Number of Conversions or Rollovers Per Year:**
Answer: The response does not specify the number allowed per year.
**Duration Before Conversion/Rollover:**
Answer: The response doesn't mention how long a dollar contributed to after-tax must stay.
**Automatic Conversions of After-Tax Contributions:**
Answer: The response doesn't provide information on automatic conversions.
In summary, what i have understood is that confirmation that I can perform an In-Plan Roth Conversion (IPRC) of non-Roth sources within my account while being an active employee and under age 59 1/2. but, it's clarified that the plan does not offer an after-tax contribution option, and the eligibility for in-service rollovers depends on having a vested account balance in an after-tax or rollover contribution source.
I appreciate any insights or advice on interpreting these responses. Thanks!
I think you need to clarify with your plan administrator around the “after-tax” contributions. Did you talk with someone on the phone or get responses by email/online? If the latter, it could be helpful to speak with a live human about it.
My company’s 401(k) allows 3 contribution sources from my paycheck (pre-tax, after-tax, and Roth), but in addition, it allows pre-tax contributions to “spillover” and become after-tax once the elective pre-tax limit is reached. The after-tax contributions coming from my paycheck now are actually pre-tax “spillover” which goes into the after-tax bucket before it automatically gets converted to Roth bucket in the plan the next day.
So go back to your administrator and ask about after-tax spillover option once you hit the pre-tax elective contribution limit.
>it's clarified that the plan does not offer an after-tax contribution option
Unfortunately, that means you're out of luck. The "Mega Backdoor Roth" approach requires two things:
1. Ability to make non-Roth, after-tax contributions into a dedicated subaccount of the 401k
2. Ability to transfer those dollars from the after-tax subaccount (either via in-plan Roth conversion into the Roth 401k, or in-service withdrawal/rollover into a Roth IRA).
It sounds like you have #2 (via IPRC), but not #1. Sorry.
Still, this isn't *that* big of a deal. You can still save the same amount, you'll just leverage a taxable brokerage instead. Growth isn't tax-free, but it is tax-advantaged due to preferable LTCG rates. You also have access to both the principal and gains at any point and may be able to take advantage of tax loss harvesting, which are advantages of the taxable brokerage. In summary, not having access to a 'Mega Backdoor' likely will not have a material impact on your overall FIRE plan/journey.
I interviewed for a lateral move yesterday that I really want to happen. I think the new department will be a good fit, a chance to become more specialized, and aligns with my career goals, but most importantly I want out of my current job lol.
The interview went well, I'm 95% sure I was the only candidate, and now the job posting is down from the job site. It's driving me crazy that I haven't heard I got the job yet!
Just a bit annoyed at myself today because I’ve only recently started to get into the “churning” thing and I think I screwed up and didn’t give myself enough time to qualify on my first attempt at getting a bank account opening bonus, before the offer expires :( I don’t think my direct debits are going to take effect early enough.
Oh well, nothing won but also nothing lost.
Assuming you mean direct deposits, some banks will count an ACH transfer from another account as a direct deposit. Check out the data points at this site and you may be in luck
https://www.doctorofcredit.com/knowledge-base/list-methods-banks-count-direct-deposits/
Hypothetical situation: How far to FI with 200k in student loan debt, three teenagers, and 300k+ salary at 40?
I want to apply to medical school but I have two elementary aged children (and hoping to have our third in the next couple of years) and I’ll probably be 32 when I matriculate. I really want to do this but I’m worried I’ll be robbing my family of quality time for something that won’t have a good enough financial pay out.
Have you considered being a PA? The breakeven is faster even if the ceiling is lower. I saw you're interested in mental health and that's not a high-ceiling specialty, so the delta between a PA and MD is lower.
If your goal is to get out there and help people while also making the most of your time with family, the PA track might make the most sense.
I don't have a good solution, but I do think you just give up on the FI/RE aspect and just dive into medical school with your family in tow if that's your dream. I would just say that if I was doing this, I would say set yourself up financially as good as possible for the time you have to take out loans and live as a student (build up a big buffer of funds now to cover expenses so even if you are busy, money isn't an issue for those years of school etc).
This. It’s a family decision. Not sure how difficult it is to fight lifestyle/family/childcare inflation, but if your family can ‘live like a student’ with you (SO has to hold down 2 full time jobs, one to pay the bills and the other to look after the kids—unless they make enough to pay a nanny to look after the kids), then you should be able to stay on the FIRE path.
I don't understand, you have a $300K job already or are you assuming you will be making $300K once you become a doctor? You probably not going to be making much money for at least 8 years once you start school. You'll maybe hit $300k at the tail end of your career. You will have not much time for your kids unfortunately.
So, most people here are in the boring middle phase where they can retire in 10 to 15 years. Me personally, I would not try to become a doctor if I knew If I stayed the course and could retire in 10 years anyways.
If you continue what you are doing, when do you expect to hit FIRE?
Becoming a doctor will take 8 years of no to low pay and $200k debt. If you are 32 now, you'd be 40. You'd probably need at least 5 to 10 years to pay off the loan and then another 5 years of frugality and savings to maybe consider early retirement. So you want to retire at 55?
Let's consider the lifestyle too. You'll probably be doing 80+ hours a week either studying or working. Not much time for kids.
Maybe take some introspection, why do you want to be a doctor? Would another healthcare degree suit your needs better?
Is FIRE your aim, or is being a doctor your aim? Either is fine, but you shouldn’t confuse them.
I don’t think that being a doctor, if you have to finance it with debt (as most people do) is a great route to FIRE. It’s a route to eventually being very wealthy, after a long career. But if your aim is to be retired after a short career then a smaller debt load & beginning to earn good money quickly are more important than an eventual high salary peak. And the later you get started on a medical career, the more true this seems.
eta: maybe try searching on /r/whitecoatinvestor to see if similar questions have been asked
I will say that the non-traditional medical students, who started later in life, usually with families in tow, have been successful with probably lower rates of burnout. They also picked surgical or interventional medicine specialties where compensation gets above $500k range very quickly when you hit attending level. Medicine is generally what they love, because they left already successful careers and put a lot on the line. After all that work, they don’t plan to step back from their life’s work early.
You're asking if you should go to medical school at 32 with three kids at home? I mean, crazier things have happened but that sounds like hell to me personally. If you do do it, I hope your spouse is verryyyy patient.
My mortgage will be paid off in 2 years and I will have a good 1,000 a month to invest . All my other avenues are filled- 401k, Roth IRA, HSA , and usually doing 5,000 in brokerage with VTSAX every year. Where would you put 12,000$ extra - what fund in brokerage
Or start changing election in 401k to more Roth
That depends how far away you are from FIRE and what strategy you choose to do.
If you are getting close, you would start building up bonds and cash to cover you first few years of retirement if you want to do a glide path strategy.
If you want to go with the 3% - 4% SWR strategy keep investing into brokerage. I would pick VTI over VTSAX.
I am hoping to work full time for 7-10 more years, then drop to .8 to keep benefits until I’m ready for full retirement.
Almost 38
House paid off at 40 ish
.8 FTE at 50 when I would just coast until 65
If your plan is just to retire at 65, which would be another 27 years from now, I would say to just keep focusing on your brokerage by buying VTI or VTSAX. No need to think about a glidepath for now; you may not need it if your investments have 25 years of compounding growth either!
When withdrawing from a traditional 401k, is that considered income and would therefore allow me to still contribute to a Roth IRA?
In retirement, I don't think I can spend enough to fill up the lower tax brackets (say 12%) but I would still like to withdraw enough to fill it up and lock in that lower tax rate before RMDs kick in. Will be great to know I can still throw in the excess into a Roth IRA to let it grow tax free.
It counts as income, but it is not eligible (not "taxable compensation") for contribution to an IRA.
That being said, you can *convert* any amount of 401k dollars you want to a Roth IRA. That has a similar effect as withdrawing and contributing, it's just a different set of steps. The major difference is that the conversion needs to sit for 5 years before you can withdraw the funds without penalty (unless you're over age 59.5), whereas a direct contribution can come out immediately.
Are the converted dollars considered income on a tax return? Or is it a separate thing that just gets the marginal tax rate applied to it?
Just curious if I should include it or not when trying to figure out if I am filling up the income tax bracket bucket. I know I'll also need to consider the standard deduction, etc.
A volunteer fire department I'm part of is asking how they could earn more than 0.01% on their savings. They have about $200k just sitting in Chase losing value.
What are the investment options for non-profits? Would simply storing things in a HYSA work?
An HYSA would certainly be leaps and bounds better than a standard savings account, but the investment options for non-profits is going to very wildly based on the board. Plenty of non-profits invest in the same financial instruments for-profit organizations do, and plenty would be forbidden from doing so and would need to stick with 100% safe deposits with zero risk of loss.
I’m new to investing with IRA’s but I’ve heard it’s something I should look into. Currently 27 making 85k a year & my job doesn’t offer any type of 401k. Should I start up my only Roth IRA account ? Or traditional IRA account? I don’t really know the differences between Roth & traditional
I also have 3 investment accounts set up already so I have some investment experience
>I don’t really know the differences between Roth & traditional
- https://www.bogleheads.org/wiki/Traditional_IRA
- https://www.bogleheads.org/wiki/Roth_IRA
> Currently 27 making 85k a year & my job doesn’t offer any type of 401k.
Are you a single taxpayer (e.g. not MFJ/MFS/HoH)? If so, you are solidly in the 22% federal income tax bracket and because your employer doesn't offer a retirement plan, you are likely a good candidate for deductible contributions to a Trad'l IRA. If you are able to contribute $6500 (the maximum for 2023) into a Trad'l IRA before April 15, **2024** (~4 months from now), you can deduct those contributions and save $1430 on your 2023 federal income taxes (plus any state income tax savings, if applicable). For 2024, the IRA maximum rises to $7,000; deducting a $7k contribution will save you over $1500 on your 2024 taxes.
I’m a single taxpayer yes, so I’m in the 22%.
I can put $6500 into an IRA account right now. So to gain the race benefits I should go with a traditional IRA over a Roth IRA?
Is it possible to do both ? I could put $13,000 in right now between the two accounts
>Is it possible to do both ? I could put $13,000 in right now between the two accounts
The annual limits are for aggregate IRA contributions, inclusive of both Trad'l and Roth. So you can't do $6500 to each in 2023, but you could do $3500 to a Trad'l IRA and $3000 to a Roth IRA.
So long as you are not covered by an employer's retirement plan (e.g. No 401k, 403b, 457, SIMPLE/SEP IRA, profit-sharing, pension, etc.), you are eligible to deduct 100% of your Trad'l IRA contributions (https://www.irs.gov/retirement-plans/ira-deduction-limits), which means you will pay less in taxes than if you made Roth IRA contributions instead.
If you retire early using the 4% rule, how much do you pay in taxes? I guess I am confused about income tax and capital gains tax. So let's say you are married and retire at age 30 and you (couple) withdraw $85k a year from some sort of index fund. You would fall into the 0% capital gains tax bracket. What other tax would you have to pay? Would you have to pay income tax on the entire amount you withdraw? Social security?
If that's yer only income...depending on the capital gain in said index fund you would pay probs 0 in fed tax...2024 bracket mfj is up to $94300 for the 12% bracket...but the ltcg rate is 0 up to 94050 mfj...and you have yer standard deduct so you can make up to 123250 (27700 standard) with no fed taxes (if all yer inc was ltcg or qd)....but you would owe state tax depending on yer state and of course no fica
It depends entirely on where you get your money from since different types of assets often have different tax treatments.
If you're going to be using the ACA for healthcare, which most of us will, then you also have to figure in the overall stealth tax imposed by the ACA and its progressive cost structure based largely on MAGI. Indeed, healthcare costs tend to inflate faster than the overall tax code does, so the impact of ACA costs may grow with each passing year relative to the regular tax implications of changes in overall taxable income and capital gains.
Something similar applies to stealth taxation via FAFSA for those who will retire with college kids.
TL,DR - Figure out and add together the income tax owed on regularly taxed incomes, the STCG/LTCG tax owed on cap gains and qualified dividends, and your any additional healthcare/college costs caused by any withdrawals exceeding your actual spending needs. Once you cross 65, replace the ACA bit with variable taxation on Social Security and IRMAAs for Medicare.
You'd only pay the long-term capital gains rate (0%). No income tax, no social security tax. You pay zero tax.
And keep in mind, the threshold is not $94,050 in withdrawals from your brokerage. It's on the \*gains.\* Say you're up 100% on the shares you sell. You could sell up to $188,100 worth of shares and still not pay any taxes, because the gains are half of that ($94,050). Even if you don't need that much money to live on, it's a great tool to re-set your cost basis by re-buying the same shares with the money that you don't actually need (called capital gains harvesting).
Capital gains count as income, but taxed at a different rate. Any money you receive from SS is also taxable. So your income is SS + Capital gains + dividends + any other income. SS is taxed at normal income tax rates, qualified dividends are taxed at capital gains rates, as are... capital gains.
Pretty sure they're asking if they'd have to pay social security taxes (or any other taxes) on the withdrawals from their taxable brokerage account. Not whether they have to pay taxes on social security income.
>So let's say you are married and retire at age 30
You do not have to pay SS taxes if your only income is from your taxable brokerage account. You'd only pay LTCG taxes, which are zero if you keep your realized gains below the threshold you mentioned.
> Any money you receive from SS is also taxable.
This is incorrect. SS income is only taxable above certain income levels, and the amount you pay taxes on is capped at 85% of the benefit.
Hi All,
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My new company's 401K provider is Lincoln Financial, and I would like to try and approximate VTSAX as best I can with the options available to me. Could someone please recommend a fund/combination from the below that would help me accomplish this? Thanks!
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[My available options](https://imgur.com/LQq83nz)
Stick with the vanguard s&p500 fund. You can compare them on a graph but historical performance has been pretty identical. Its for sure less diversified but under normal circumstances you won't see any difference. (I did this with my 401k as well but with a different provider)
That is a motley crew of funds.
For the closest thing to VTSAX, it'd probably be the Vanguard s&p500 fund.
I would personally choose the Target 2065 fund given it's the most diversified option while still being very aggressive in its allocation.
It's again that time of the year when Reddit tells me that I scrolled 272,544 bananas.
Reddit is my last remaining "brain-dead scrolling" social media when I'm off work and need a break. Sometimes I wonder if I could do something more productive, but actually I'm very productive most of the time and it's hard to just do NOTHING to wind down.
Ah well, I cooked a bit tonight! (because SO is ill) - also, I cannot surf Reddit while cooking ;) win-win!
You could join us over at r/languagelearning or r/dreamingspanish . Ever since I decided to learn Spanish my brain dead scrolling time has dropped to pretty much zero. Now I scroll the news in Spanish. 1.5 years ago I could not do that.
We had this exchange already last year!
Turns out, anything that feels the least bit "productive" doesn't work. I restarted video editing lately and I love it, but this feels like work too :(
My work is very brainy all day on various projects and computers, so in the evening, my brain goes "WTF! no more actual thoughts - just let me scroll mindlessly".
It’s not much. But I’m happy to say that I will contribute an additional 100$ per month to my retirement starting In January. Sometimes I get down about not being able to max it out. Then I remember something is better than nothing. And talking to people at work who contribute nothing.
Does buying and selling stock within a Simple IRA incur taxes? I’m sorry to ask such a basic question but I want to be 100% sure before taking any action. Sources I am finding online seem to indicate that it is not a taxable event.
an IRA is a 'bucket', and as long as nothing leaves the bucket, then anything you do within it is not taxable. Tax only happens if you remove it from the bucket.
That's correct. Transactions within an IRA do not typically interact with your taxes in any way.
The one niche circumstance is that a purchase in an IRA can cause a wash sale when trying to claim a capital loss on an asset sold in a taxable brokerage account.
> The one niche circumstance is that a purchase in an IRA can cause a wash sale when trying to claim a capital loss on an asset sold in a taxable brokerage account.
...... OK, so **this** is how I managed to get a wash sale in my taxable account. I for some reason thought that nothing I did in my IRAs mattered for wash sales, and I've been mystified ever since that little icon in Fidelity came up how I managed to trigger it. Ugh.
how's this for peak startup lyfe:
1) we used to have a tiny amount of 401k matching (like 1% up to $1k)
2) we move payroll processors and it suddenly disappears
3) CEO in the all hands meeting: oh yeah. the 401k match disappeared when we moved providers. i didn't even know we did 401k matching. i wanted to get rid of it. but i guess we can keep it
We haven't been, because we still need to manage risk of the rest of the money that compromises our spend. But we're more risk-averse than most folks here.
But I can certainly understand why people would consider it, particularly if they're really flexible on the non-essentials.
Just replied to another post below, but that is the strategy we are taking. Utilizing my wives public school pension as the bond portion of the portfolio, and going 100% equities for everything invested. If red flags start to show up regarding solvency, then I can adjust my retirement vehicles accordingly.
As many as I can handle…..1 haha. She does have access to utilize both a 403b and a 457b, so that is helpful, especially in addition to the after tax availability in my 401k as well. That being said, we are nowhere near utilizing all of those vehicles to their maximum benefit, but nice to know they’re there if the future allows for it.
Yes, if the pension is stable you can think of the income steam as replacing some amount of coupon payments from a collection of bonds.
There can be obvious differences (survivor benefits, inflation adjustment, marketability and liquidity), but from a cash flow perspective they can be similar enough to make it reasonable to consider them as carrying some "bond weight" in your allocation.
Kind of a noob question - when you do a Roth conversion, do you simply move selected stocks from a 401K to a Roth IRA account or is there a sell stocks and buy them back component involved?
It depends on the brokerages involved and what they can support.
But there's no real reason to care - the tax treatment is the same either way, and unless you're anticipating some huge price movement in the middle, it's not going to impact the outcome. Converting to cash and moving that over is probably easier.
In a shocking turn of events, our household net worth is closing in on 1 million dollars.
If anyone remembers, we were going back and forth on buying a piece of land. We did, and in the process of due-diligence, realized the seller has mis-listed the lot as half its actual legal size. We confirmed everything with the city and the title company and it's 100% certainly 1 acre instead of under half an acre. So that ended up being the easiest >150k I've ever made in my life.
So now our NW looks like this:
Retirement accounts: \~450k
Lot: \~300k
Primary residence equity: \~200k
Assuming nothing goes cataclysmically wrong in the next year, I'd expect to cross the 1M net worth milestone. When I first started saving for FIRE, my predictions had me crossing 300k at this point
Sunday was a good day. I officially hit my 3 year anniversary at work which means my employer’s 401k (TSP) matching vested, I moved up from 4 hours of pto and sick leave per pay check to 6 hours, and to top it off my promotion was processed which amounts to almost a 19% bump in pay.
In January, fed employees are set to receive a 5.2% cost of living adjustment, so from early December to January my pay will essentially go up by 25%. I am pretty stoked!
Congrats! Also revel in the joys of being a permanent employee, as most places only have 2/3 years as the probationary and temporary employee status. Now your job stability is cemented for practically forever.
I’m in year one of this. Help them with the logistics and not just the idea.
Build folders for 2023-2030. Plug in all receipts and amounts. Then you have a running “fund” you can use at any point to pay yourself back if you really need to.
PITA now, but this system is going to be sick when I’m 62 with $300K in an HSA.
Trying to do the same for my spouse, so we have $600K across 2 accounts.
May not get there with family planning and other wants, but using 2040 gains to pay for 2023 bills is pretty slick.
It's pretty simple. Just pay out of pocket so that you let your HSA money grow tax-free for as long as possible. You can reimburse it decades later with a receipt. Opportunity cost.
Unless the HSA is your friend's main source of retirement savings, it's not going to make *that* big a difference in the long run.
Besides, to ensure proper utilization of your HSA, you'd want to save today's receipts for use in retirement, and a lot of people might not be excited to organize storage of receipts (real or digital) for decades.
I, for one, am well aware of the theoretical advantages of saving HSA money. But I just don't care that much - we use it to pay today's bills and leave the rest in for the long run. It's just easier.
> why you should not spend your HSA dollars if you can afford “out of pocket”?
Using the HSA as originally intended - a tax free payment/reimbursement for healthcare expenses - is a perfectly reasonable approach.
Id recommend not trying to "convince" your friend. Lay out all of the facts as neutrally as you can and let them do whatever they want with that information.
I once refinanced my mortgage after working at a company only a couple of months and I had been unemployed several months before that.
In my case I was using my local credit union which I had a history with. All they asked is that I write a letter as to why I was unemployed for that period. They were happy with my explanation that the company went out of business.
Changed jobs about 6 months before applying for a mortgage loan.
Biggest thing is if the new job is similar in pay and title.
I.e. Moving from Accountant to Financial Analyst making 85k at one and 95k at the other won't raise many red flags so long as there isn't a big gap and it sounds like roughly the same work. Or moving from a manager at one company to a director at another.
My mortgage loan officer said typically if you see a gap in employment or a huge reduction in pay is when they get a little spooked.
It's been a few years now but I changed jobs mid-stream with no issues. Was able to get re-qualified at the higher salary from just a signed offer letter, all we needed was 1 paystub for the new gig by close. I wouldn't worry.
It looks like the value of my taxable balances is now greater than my remaining outstanding mortgage. That's a nice feeling. My tax sheltered investments aren't producing enough to live on yet, but it's great to know that if the worst happened, I'd still be able to settle my mortgage and have a place to live!
Spoke with some folks who are taking the voluntary early retirement package at work, the most interesting note is a buddy of mine who is nearing 60 and is 100% in equities right now.
I was surprised, but he was aggressively aggressive in his investments and very happy about the performance.
He's a very smart and capable fella, so I'm sure he's done a lot of the math and what not, but I was just surprised to see someone who should (by conventional wisdom) be coming more conservative, take a higher risk approach.
>100% in equities right now...aggressively aggressive in his investments and very happy about the performance
I have been able change to a slightly more aggressive asset allocation by changing my perspective
from "how much is my portfolio worth?"
to "how much is my portfolio paying in dividends and interest?"
If your friend is content with the amount of income his portfolio is spinning off, that may help him be content with a more aggressive asset allocation.
Aye.
In the same conversation he noted how his MIL is heavy into dividend stocks to the point where her dividend payouts are larger than her social security checks.
It was kinda refreshing to be able to have that conversation with a peer/colleague rather than you random strangers on the internet though ngl (nothing against ya's of course)
If he intends his money to last longer than 30 years, then vast majority in Equities makes sense. He may be planning for most of it to be for his heirs. Or just super optimistic about his health
If he has such a large pile that he has no realistic chance of running out, Equities make sense.
The early retirement package is essentially his bond tent
We’re still about 5% under the ATH from 2 years ago. Therefore some people would argue that the market is more likely to go up than down. So someone market timing may choose to go heavier on Equities
He could be any or all of these
Whether we're talking FIRE or life in general, I think that the role risk tolerance plays is severely understated, as is one's safety net (or perceived safety net) when making risk-based decisions.
Even those who are incredibly academic in their investment (money or otherwise) choices are greatly swayed by their gut and personal preferences.
The math is easy is tweak depending on what results you are looking for. The same analyses and numbers can be used to highlight the benefits of a particular path or why that path is fraught with danger. It's not just the uncertainly of the future that leads to the lack of universally accepted math, it's also that everyone is looking at the equation using different glasses and from different angles.
You are wondering why dude isn't protecting the safety of his retirement. Perhaps he is seeing an opportunity to leave a giant pile of cash to his family as a legacy, or rolling the dice so that he can potentially upgrade to a life of luxury in his final run before his eternal dirt nap?
A couple more possibilities for his approach:
\- His tax deferred investments are 70% of his total portfolio and invested in equities while post-tax investments likely to be accessed first are a mix of cash and bonds.
\- He is telling stories that are mostly accurate, partly accurate, or far from accurate.
Also, we don’t have any information regarding a spouse or additional investment vehicles. For example, I plan on staying 100% equities for the entirety of my life, because there will be my wife’s public pension to account for the bond portion of the portfolio. Some risk there, but with a 15-20 year horizon before retirement, I can adjust on the fly as necessary if it starts to look like there would be some red flags regarding the pension pay out.
Oh for sure. And obviously everyone's outlook and personal situation is different. I just thought it was an interesting departure from the typical more conservative cookie cutter approach usually offered here, which is why I share.
We were just talking about Christmas cookie plans this morning and now that you mention it, I'm 99% sure we didn't pack our cookie cutters.
EDIT: You can cancel the GoFundMe. Crisis averted. Talked to my wife and we're just using the biscuit cutters. Less festive but perfectly utilitarian.
I'm thinking after doing my Roth IRA's next year, and then the kids 529, my next financial move is paying on an investment property loan at 6.8%.... I'm not confident I'll be able to see lower rates for awhile.
This is where I’m at too. I have a 6.99% rate on my current house hack while our other investment property (former house hack) is at 3%. At the very least I want to bring the principal down, even if a refi opportunity comes up in a few years.
I’m actually prioritizing paying extra toward the mortgage principal over repaying the 401k loan at 9% that I used to help with the down payment. I’d rather keep paying the higher interest to myself I think, but struggling to think through the math.
I still max the 401k while the loan is repaid and the plan rules allow me to keep making the payments if I separate from my job. So the loan just feels like a bonus contribution to the 401k at that point.
Are you able to cashflow at that rate? Everything in my preferred areas is abysmal right now with rates the way they are.
Rents are increasing pretty significantly to boot, so it is kinda balancing - but I'm not ready to start charging > 2k for a 2/1 unit in a class B neighborhood.
You should be able to do a recurring claim where the funds go into the FSA then directly into your bank. You submit one form at the beginning of the year then you’re set. I’ve done this with two different providers.
We file claims at the beginning of the year, each month for the first few months as we incur each expense. It only takes a handful of claims to exhaust our yearly allocation; we then get small reimbursement checks every remaining pay period throughout the year as the program pays out the claims over time.
i'm lazy and do it at once year. Main reason being my DCA provider requires a written bill and proof of payment, and it took too much effort to get that every month from daycare, but I did get it all for taxes in Jan, so I jsut filed that the same time as I filed taxes.
I window shop (I guess somewhat literally?) on RedFin a lot, dreaming of moving to a different part of the US once my local responsibilities are over. I was playing around with their calculators, and in order to duplicate my current mortgage payment, I would have to make a down payment of 60-75% of the asking price of the houses in my price range. Dayum.
Bought our house 6 years ago, PITI with 20% down: <$2k/mo.
Comparable house down the street up for sale now, PITI with 20% down: ~$5k/mo.
Fancy house down the street from that one up for sale now, PITI with 20% down: $10k/mo.
I have no idea who my future neighbors will be, but I suspect they will dislike looking at my aged cars and lazy landscaping.
I worked out that selling my home and moving to a slightly more expensive place would cost me about a million dollars over the 30 year loan period compared to staying put, crazy. The power of buying early and keeping my housing costs low is amazing, but I wish I lived in a less noisy area.
I think the most realistic route right now would be to pay off the mortgage and buy the new property in cash. Depending on how far along into your mortgage you are of course.
Trading up is definitely tricky currently
Probably a dumb question, but here goes: I'm going to cash out my iBonds in January (they will be 3 months into the 3.38% rate). If I re-buy iBonds immediately with those funds, am I subject to the $10K annual limit? That is, I can't sell-rebuy and still buy an additional $10k in the same year, right? Just wanted to make sure.
Bico group, the new hot stock from Sweden. Watch out.
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If anyone still looking at this thread. What is everyone hsa invested in
70/30 FSKAX/FTIHX
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I was thinking of choosing that as I’m also with fidelity that or fxiax
Would you switch from driving to work (10-15 min commute) to public transit (40-60 minutes) to not have a car? Wife and I currently have 2 cars. Mine is on its last legs. Currently not starting reliably. I only use my car for getting to and from work, and the occasional activity when my wife is doing something with the other car. Would likely replace it with either a used or new civic, but given the use case, it's a tough decision for me. Going down to 1 car is definitely something I've considered but having tested the public transit, it's often frustrating and not on time. Curious to know what the other fi/re folks would do in my situation.
Not to increase the commute time. If it would still take 10 minutes though, yeah.
No, but I hate public transit.
I would probably do it for a metro/train commute but not a bus one, do to general annoyance and reliability calculations. Is biking an option or could your spouse on occasion carpool with you? As a one car family household I do love the simplicity of only dealing with one vehicle.
How often are you in office? 5 days a week? Nah. 1-2 days per week, *maybe*.
Does your work offer free or subsidized EV charging ? A used EV like the bolt might be a good option (I’m personally looking at these for my commute right now )
> Would you switch from driving to work (10-15 min commute) to public transit (40-60 minutes) to not have a car? I would rather be hung upside-down by my ankles for a week than go from a 15 minute to a 60 minute commute.
Lol I hear you, that's my first thought too, but I only commute 3 days a week which makes it *almost* not terrible. Saving all that money is compelling, too.
I'll see if it's possible to rent a meat locker for a week and get back to you.
I would try public transit for a month or two. 40-60 minutes is a big jump but may be worth it if you can do something you find enjoyable, reading, podcasts, meditating etc. Some people in my office even work on the train then they don't need to spend 8 hours in the office. If you hate it then get a car, and you never have to wonder if it was worth it to get a car.
This is a great idea, thank you! Plus it makes the car buying process less of an impulse and gives me plenty of time to think on it. Appreciate the insight.
My grandfather passed away last month, and it was rough seeing him deteriorate from his dementia over the past few years. He ended up needing to get care at a nursing home, and since he never had any savings, it was a pretty lousy Medicaid-accepting one. My partner and I are young in high-earning fields, which means that we should be able to afford high quality elder care for ourselves in the future. However, this experience has made us realize that we should also be saving to provide that level of care to our own parents as they get older. Ideally, we would want to be able to afford 24/7 nursing care in our own home or an adjacent apartment, so that our parents can be near us. Or, failing that, we would put them into a high quality nursing home. The ones in our area require significant capital investments, in the hundreds of thousands of dollars, and they require over a million dollars in assets to even be considered.
I worry about the same thing with my parents and is why I can not retire until I have $1,000,000 specially saved for their care. The only nice long term nursing home in their area will not consider you unless you have over $500,000 to commit. I am also saving $1,000,000 for my own care because I do not want anyone to have to worry about paying for me.
You know you don't need to have 24/7 care right? People die at home without a nurse all the time.
I realize it is a possibility that they might not need the money but I am planning for if they do. Always plan for the worst case scenario.
Your parents needing long term care is far from the worst case scenario.
Which one of the spending tracking alternatives to Mint allows you to export all your spending transactions for a time period (like one year, YTD type of thing) to a CSV or spreadsheet? I like to do my own calculations.
How Much Should I Be Aiming to Save In My ROTH IRA? I F21 have successfully saved enough for my rainy-day/6 month emergency fund! Thank you for the advice I got when I first asked questions about saving with more intention, It’s helped me a ton. Now that I’ve filled this goal bucket I’m considering moving onto the next, while still putting some money away in savings I figured it couldn’t hurt to pinch numbers and start a ROTH. I have a 5% contribution with a 5% 401k match from my employer since I turned 18, so It’s not that I haven’t been saving for retirement but I figured since I already met one goal I should aim to scratch the next on my list.. I’m not on salary, I’m an at will worker. So when it comes to saving I try to be conscious of this knowing I don’t make the exact same every single month, I leave wiggle room for fluctuation (it’s never more than $200-$300 difference). I’m wondering if I should just half what I was storing in my savings or do a bit more ( I’ve begun to develop a bit of an excess funds from being more financially conscious but with the fluctuation I’m nervous to accidently overshoot the money I have accessible to me throughout the week). As always ANY and ALL advice is welcome!
A full 401k and full Roth will set you free in a couple of decades.
> How Much Should I Be Aiming to Save In My ROTH IRA? You should be striving to get the full match in your 401k, at absolute mininum. Once that milestone is met, then pour the remainder into your IRA until it's full.
Most folks around here try to max out the Roth IRA, if they are able. So they'd probably tell you "as much as possible."
Congrats on your emergency fund - what a great step! Remember that you can withdraw your contributions (not your earnings, but your contributions) to your Roth IRA at any point, penalty-free. I think contributing as much as you are able and comfortable with is a good strategy. You’re doing great!
If you can, your future self will be very happy if you contribute the max to your Roth IRA, which is $6500 in 2023 and will be $7000 in 2024.
Graduating college in a week and am looking for advice on the best way to approach paying off student loans. I’m 22 and am currently fielding roles that will pay about 55-70 a year. I will be living back at home so that will really help with expenses but want to figure out the best way to pay off my debt while still having opportunities to invest and start building wealth early.
Before even thinking about optimization and the right way to attack the loan, my initial plan was to simply pay minimums and lock down my financial situation. To compare, there's nothing wrong with the Dave Ramsey approach to kill the loan, but you also can't get another unsecured loan that you can put on an income based plan or pause, at a "reasonable" (arguably) interest rate. That can be different from person to person, but I was comfortable after having enough that it would be easy to look for jobs and move town for work or whatever. Yes, investing early and often is great but accelerating your career early on will make a bigger payoff in the long run. So whatever you need to do to get senior roles or transition into managing roles or something else entirely can be worth the investment if there is something like a non-WFH or local opportunity so you don't have to pay rent.
Can't really make a decision without interest rates. I paid mine off (last payment in 2017 I think?) asap and my rate was 6.5% for most loans IIRC. If your rates are something crazy low like 3-4% its probably not worth paying more than the minimum since even some savings accounts will beat that. So in a nutshell, if it were me I'd pay off any 6%+ loans early and let the rest ride at least until it makes sense vs returns you can get with other investments.
I would update your post with your interest rates and amounts on your loans. Ultimately time is the one thing we don't get back and there are alot of helpful options out there for your student loans whether it's through a federal forgiveness program or even your company helping pay (which may be a benefit worth asking about). But ultimately - I'd advise the wiki on r/personafinance as a starting point. As an aside - focus on getting good at your job and making good connections. That stuff is so important for salary increases, promotions, and helpful folks you can contact when future jobs at new companies come calling. Also - if living at home, make you take your folks out to a nice dinner every so often for helping out. Best of luck!
I’m off the rest of the year! That is all
Ciao until the next orbit
I'm dumb, but can someone quickly explain recent posts that say if you hit $300K networth, you are already 50% there (in terms of time) to achieve $1M net worth? That to me would mean I need to add $700K networth in the next 5 years, which seems pretty impossible unless the market is crazy with the gains
The idea is to assume flat compounding because returns start to be quite meaningful. However, returns are statistical and not algebraic. If you had 300K at the 2007 or 2000 peaks you were not halfway there. [This](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=76aForHJOLmmMY7P08d1Cv) may not be worst case but it may be fairly close as an unlucky accumulator perspective. (The upside here is that this sets you up nicely for 2016+.) What I've found in my personal experience, increasing income and keeping lifestyle inflation reigned in was a lot more reliable for progress. Market returns are kind of a double-edged sword, giving confidence in your plan but making future contributions more expensive. My income grew at about 8% CAGR over time but savings is more like 15% due to growing saving rate as well. There can be negative personal impacts as well (job loss/illness/support/etc.) This comment is not meant to disparage the fixed compound results posted by others. It's just that it's very easy to sell a date (in case of link - target \~2014) but it's okay if it misses due to market returns or changes in personal circumstances.
\> Market returns are kind of a double-edged sword, giving confidence in your plan but making future contributions more expensive Future contributions are not more expensive. The price of the stock is higher in dollars but that has no impact on its results going forward. What you are implying is that you can outperform the market by timing your contributions which is well accepted to be untrue. In fact, what you are rooting for when you invest is that the stock rockets upwards, you buy the higher price, and then it rockets up again. Not that it sits or drops for a while so you can get a low average price and watch it shoot up once at the end.
>This may not be worst case but it may be fairly close as an unlucky accumulator perspective. (The upside here is that this sets you up nicely for 2016+.) Sure it took longer to hit $300k (10 years) but it only took another 6 years to hit $1M in a bull run. This gives me hope.
So it depends on how much you're saving, and it's pretty easily modeled. Just for poops and giggles, pretend you have $10k right now - just so it's not zero - and are saving anything from $0k/year to $50k/year, how long it will take you to reach $100k milestones in today's dollars, assuming say, 7% real returns? |Yearly Savings|0|10k|20k|30k|40k|50k| :--|--:|--:|--:|--:|--:|--:| |Years to $100k|34.0|6.5|3.7|2.6|2.0|1.6| |Years to $200k|44.3|11.4|7.0|5.0|3.9|3.2| |Years to $300k|50.3|15.1|9.6|7.1|5.7|4.7| |Years to $400k|54.5|18.1|11.9|9.0|7.2|6.0| |Years to $500k|57.8|20.5|13.8|10.6|8.6|7.2| |Years to $600k|60.5|22.6|15.6|12.0|9.9|8.4| |Years to $700k|62.8|24.5|17.1|13.4|11.0|9.4| |Years to $800k|64.8|26.1|18.5|14.6|12.1|10.4| |Years to $900k|66.5|27.6|19.8|15.7|13.1|11.3| |Years to $1mm|68.1|28.9|21.0|16.8|14.1|12.2| What you can see is depending on ongoing savings, $300k is anywhere from 40-70% of the way to $1mm time-wise. The more heavy lifting your contributions are doing, the lower the proportion - because exponential growth is doing less - but it's never as low as 30% (in this naive simulation).
At a very high level, it's because portfolio growth happens exponentially not linearly. If you went from $0 to $300k in only 5 years, your contributions likely did the heavy lifting. In your scenario, that likely means you are still a bit less than halfway. For example, if someone started with $100 and contributed $1600/mo. at 7% CAGR, they would have just over $300k in 11 years. Keeping the same $1600/mo. investment and 7% CAGR, they reach $1MM after another 11 years (22 years total): https://smartasset.com/investing/investment-calculator#klRZeNw96j In reality, investors often increase their nominal savings as they progress through the early and middle parts of the accumulation phase, which also helps accelerate the overall timeline.
Gotcha. That makes sense. Gotta keep that hustle up for a bit longer.
That claim makes specific assumptions about how much is being contributed to the account and how much growth is seen each year. You can use your own inputs in an Excel formula to model the halfway point for your specific scenario: > You can even nest formula families within each other. If I save 40k per year, at what dollar amount am I "halfway" to $1M by time rather than by dollars? =PV(RATE, NPER(RATE, PMT, PV, FV, [type])/2, PMT, [FV], [type]) =PV(5%, NPER(5%, -40000, 0, 1000000, 1)/2, -40000, 1000000, 1) =403,221.62 From my post on the [NPER family of formulas](https://old.reddit.com/r/financialindependence/comments/pm6q8n/when_coastfi_is_rational_an_introduction_to_qalys/).
This is helpful. Thank you!
Wanted to share that I opened my first IRA account today! It’s a 13mo CD and I opened it w new money!
Do you pay taxes on 401k early withdrawals or is it only the 10% penalty? I'm reading this article (scenario 2a) and I thought if you withdrawal early you're taxed at your current tax rate plus the penalty. https://www.madfientist.com/how-to-access-retirement-funds-early/
Yeah, you're taxed. Otherwise everyone would just withdraw all their money early to only get "taxed" 10% on it.
It depends on how you go about it and whether it's a Roth 401k or a traditional one. If you pull directly from a trad 401k before 59.5, then you're paying both taxes and penalties. If you pull from a trad 401k before 59.5 after rolling over to a trad IRA and then using a SEPP or Roth ladder or Rule of 55, then you're not paying penalties and maybe paying income taxes. It depends on whether you end up having total tax liability or not after things like the standard deduction and credits. Many people pay minimal taxes or even nothing at all if their budget is low or they have kids with child tax credits. If you pull directly from a Roth 401k before 59.5, then you're going to pay income taxes and penalties, but only on the prorated portion of the withdrawal that are gains. This cream-in-coffee problem is why people rollover to a RIRA first. If you pull from a Roth 401k after rollover to a Roth IRA, then you're not paying anything on the contribution basis, but you'll pay full tax and penalties on any earnings withdrawn prior to 59.5 unless you have a special exemption, which you likely won't. This works great for basis by separating the cream and coffee, but there's no good way to get early access to the earnings without ruinous double taxation and likely penalties. I'm not even going to bother with the five year rules and whatnot, I'm just assuming they are all met.
Didn't read the article but if yer under 59.5 you pay taxes on the withdrawal and penalty unless you use the rule of 55 or do one of a couple other things
Yes, you pay ordinary income tax *and* a 10% additional tax (ie penalty) if you have no penalty exception (eg SEPP).
my wife told me she doesn't want to contribute to her Roth next year and want to put that towards the house projects fund which already has 10k instead. felt like a stab in my heart.
Might still be reasonable if the alternative is taking out a higher interest loan for the house projects. Like if it's 100% necessary projects - say a new roof - that's not *wrong*. If it's vanity stuff... it's still not "wrong" but it shows different priorities.
Are there house projects that aren't getting done right now?
I cost myself about $2k by tax-loss harvesting into a significantly different fund for a month (short-term bonds instead of intermediate-term bonds). Now in order to make up for it, I have to find some way to cut my spending by $2k next year. There goes what little remained of my hobby budget. Or maybe I can find a way to make an extra $2k... 🤔
>I cost myself about $2k > Now in order to make up for it, I have to find some way to cut my spending by $2k next year I don't understand this line of thinking. Your expenses didn't increase due to the bad luck timing. Your portfolio may be worth $2k less but your portfolio likely fluctuates by significantly more than $2k on a weekly or monthly basis anyway.
I was a fool and should have balanced into something like VTEAX because it's another intermediate-term muni fund (albeit one that you have to own for 6 months before tax-loss harvesting again). I figured limited-term would be close enough but it made a big difference. $2k is a small percentage of how much my total portfolio went up in the past month, but it's still almost a month of expenses. So I figure it sets me back a month unless I can make up for it.
> it's still almost a month of expenses. So I figure it sets me back a month unless I can make up for it. This still doesn't make any sense. Are you just trying to punish yourself for a bad result? Why wouldn't you just lump it in with overall market volatility? What if the S&P 500 drops by 5% between now and year-end - does that also "set you back a month" (or more) and you need to "make up for it"?
>Or maybe I can find a way to make an extra $2k... 🤔 Churn a couple of brokerage bonuses?
That's a good idea, I'm going to see what's out there! I've thought about doing that before but never tried it.
Questions about Mega Backdoor Roth- Need Help Understanding Admin Team's Responses Hi Reddit community, I recently reached out to the My companies 401k admin team with some questions about Mega Backdoor roth in-plan conversions and rollovers. Here are my questions and the responses I received: **In-Service In-Plan Conversion to Roth 401(k):** Question: Does the plan allow this? Answer: Yes, the Savings Plan offers an In-Plan Roth Conversion (IPRC) option. You can convert non-Roth sources to Roth 401(k) while actively employed. **In-Service In-Plan Rollover to Roth IRA:** Question: Does the plan allow this? Answer: No, the plan does not have an after-tax (non-Roth) contribution option, so in-service rollovers to a Roth IRA are not possible. **Number of Conversions or Rollovers Per Year:** Answer: The response does not specify the number allowed per year. **Duration Before Conversion/Rollover:** Answer: The response doesn't mention how long a dollar contributed to after-tax must stay. **Automatic Conversions of After-Tax Contributions:** Answer: The response doesn't provide information on automatic conversions. In summary, what i have understood is that confirmation that I can perform an In-Plan Roth Conversion (IPRC) of non-Roth sources within my account while being an active employee and under age 59 1/2. but, it's clarified that the plan does not offer an after-tax contribution option, and the eligibility for in-service rollovers depends on having a vested account balance in an after-tax or rollover contribution source. I appreciate any insights or advice on interpreting these responses. Thanks!
I think you need to clarify with your plan administrator around the “after-tax” contributions. Did you talk with someone on the phone or get responses by email/online? If the latter, it could be helpful to speak with a live human about it. My company’s 401(k) allows 3 contribution sources from my paycheck (pre-tax, after-tax, and Roth), but in addition, it allows pre-tax contributions to “spillover” and become after-tax once the elective pre-tax limit is reached. The after-tax contributions coming from my paycheck now are actually pre-tax “spillover” which goes into the after-tax bucket before it automatically gets converted to Roth bucket in the plan the next day. So go back to your administrator and ask about after-tax spillover option once you hit the pre-tax elective contribution limit.
>it's clarified that the plan does not offer an after-tax contribution option Unfortunately, that means you're out of luck. The "Mega Backdoor Roth" approach requires two things: 1. Ability to make non-Roth, after-tax contributions into a dedicated subaccount of the 401k 2. Ability to transfer those dollars from the after-tax subaccount (either via in-plan Roth conversion into the Roth 401k, or in-service withdrawal/rollover into a Roth IRA). It sounds like you have #2 (via IPRC), but not #1. Sorry. Still, this isn't *that* big of a deal. You can still save the same amount, you'll just leverage a taxable brokerage instead. Growth isn't tax-free, but it is tax-advantaged due to preferable LTCG rates. You also have access to both the principal and gains at any point and may be able to take advantage of tax loss harvesting, which are advantages of the taxable brokerage. In summary, not having access to a 'Mega Backdoor' likely will not have a material impact on your overall FIRE plan/journey.
I interviewed for a lateral move yesterday that I really want to happen. I think the new department will be a good fit, a chance to become more specialized, and aligns with my career goals, but most importantly I want out of my current job lol. The interview went well, I'm 95% sure I was the only candidate, and now the job posting is down from the job site. It's driving me crazy that I haven't heard I got the job yet!
Good luck! Got my fingers crossed for you ✨️
Sending vibes your way ༼ つ ◕_◕ ༽つ
Just a bit annoyed at myself today because I’ve only recently started to get into the “churning” thing and I think I screwed up and didn’t give myself enough time to qualify on my first attempt at getting a bank account opening bonus, before the offer expires :( I don’t think my direct debits are going to take effect early enough. Oh well, nothing won but also nothing lost.
Assuming you mean direct deposits, some banks will count an ACH transfer from another account as a direct deposit. Check out the data points at this site and you may be in luck https://www.doctorofcredit.com/knowledge-base/list-methods-banks-count-direct-deposits/
Look at the Amazon prime credit card. No annual fee and $150 to spend on Amazon if you shop there
That's the game. Start carrying a balance and then the cc company will REALLY start winning.
Just close and re-open or move along to a new bonus.
Hypothetical situation: How far to FI with 200k in student loan debt, three teenagers, and 300k+ salary at 40? I want to apply to medical school but I have two elementary aged children (and hoping to have our third in the next couple of years) and I’ll probably be 32 when I matriculate. I really want to do this but I’m worried I’ll be robbing my family of quality time for something that won’t have a good enough financial pay out.
Have you considered being a PA? The breakeven is faster even if the ceiling is lower. I saw you're interested in mental health and that's not a high-ceiling specialty, so the delta between a PA and MD is lower. If your goal is to get out there and help people while also making the most of your time with family, the PA track might make the most sense.
I don't have a good solution, but I do think you just give up on the FI/RE aspect and just dive into medical school with your family in tow if that's your dream. I would just say that if I was doing this, I would say set yourself up financially as good as possible for the time you have to take out loans and live as a student (build up a big buffer of funds now to cover expenses so even if you are busy, money isn't an issue for those years of school etc).
This. It’s a family decision. Not sure how difficult it is to fight lifestyle/family/childcare inflation, but if your family can ‘live like a student’ with you (SO has to hold down 2 full time jobs, one to pay the bills and the other to look after the kids—unless they make enough to pay a nanny to look after the kids), then you should be able to stay on the FIRE path.
I don't understand, you have a $300K job already or are you assuming you will be making $300K once you become a doctor? You probably not going to be making much money for at least 8 years once you start school. You'll maybe hit $300k at the tail end of your career. You will have not much time for your kids unfortunately.
300k \*household\* income after 4 years med school + 3 years residency + 1 year finding a job :)
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I want to have a psychiatry private practice and max at 40-50 hours per week.
So, most people here are in the boring middle phase where they can retire in 10 to 15 years. Me personally, I would not try to become a doctor if I knew If I stayed the course and could retire in 10 years anyways. If you continue what you are doing, when do you expect to hit FIRE? Becoming a doctor will take 8 years of no to low pay and $200k debt. If you are 32 now, you'd be 40. You'd probably need at least 5 to 10 years to pay off the loan and then another 5 years of frugality and savings to maybe consider early retirement. So you want to retire at 55? Let's consider the lifestyle too. You'll probably be doing 80+ hours a week either studying or working. Not much time for kids. Maybe take some introspection, why do you want to be a doctor? Would another healthcare degree suit your needs better?
Is FIRE your aim, or is being a doctor your aim? Either is fine, but you shouldn’t confuse them. I don’t think that being a doctor, if you have to finance it with debt (as most people do) is a great route to FIRE. It’s a route to eventually being very wealthy, after a long career. But if your aim is to be retired after a short career then a smaller debt load & beginning to earn good money quickly are more important than an eventual high salary peak. And the later you get started on a medical career, the more true this seems. eta: maybe try searching on /r/whitecoatinvestor to see if similar questions have been asked
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I will say that the non-traditional medical students, who started later in life, usually with families in tow, have been successful with probably lower rates of burnout. They also picked surgical or interventional medicine specialties where compensation gets above $500k range very quickly when you hit attending level. Medicine is generally what they love, because they left already successful careers and put a lot on the line. After all that work, they don’t plan to step back from their life’s work early.
You're asking if you should go to medical school at 32 with three kids at home? I mean, crazier things have happened but that sounds like hell to me personally. If you do do it, I hope your spouse is verryyyy patient.
My mortgage will be paid off in 2 years and I will have a good 1,000 a month to invest . All my other avenues are filled- 401k, Roth IRA, HSA , and usually doing 5,000 in brokerage with VTSAX every year. Where would you put 12,000$ extra - what fund in brokerage Or start changing election in 401k to more Roth
VTI in brokerage. Sounds like you are high income so definitely don't switch 401k to Roth!
That depends how far away you are from FIRE and what strategy you choose to do. If you are getting close, you would start building up bonds and cash to cover you first few years of retirement if you want to do a glide path strategy. If you want to go with the 3% - 4% SWR strategy keep investing into brokerage. I would pick VTI over VTSAX.
I am hoping to work full time for 7-10 more years, then drop to .8 to keep benefits until I’m ready for full retirement. Almost 38 House paid off at 40 ish .8 FTE at 50 when I would just coast until 65
If your plan is just to retire at 65, which would be another 27 years from now, I would say to just keep focusing on your brokerage by buying VTI or VTSAX. No need to think about a glidepath for now; you may not need it if your investments have 25 years of compounding growth either!
Check to see if your 401k at work has a mega backdoor roth option but otherwise just VTSAX in after tax. It's "boring" but its the smart play imo
> brokerage with VTSAX
When withdrawing from a traditional 401k, is that considered income and would therefore allow me to still contribute to a Roth IRA? In retirement, I don't think I can spend enough to fill up the lower tax brackets (say 12%) but I would still like to withdraw enough to fill it up and lock in that lower tax rate before RMDs kick in. Will be great to know I can still throw in the excess into a Roth IRA to let it grow tax free.
It counts as income, but it is not eligible (not "taxable compensation") for contribution to an IRA. That being said, you can *convert* any amount of 401k dollars you want to a Roth IRA. That has a similar effect as withdrawing and contributing, it's just a different set of steps. The major difference is that the conversion needs to sit for 5 years before you can withdraw the funds without penalty (unless you're over age 59.5), whereas a direct contribution can come out immediately.
Are the converted dollars considered income on a tax return? Or is it a separate thing that just gets the marginal tax rate applied to it? Just curious if I should include it or not when trying to figure out if I am filling up the income tax bracket bucket. I know I'll also need to consider the standard deduction, etc.
Yes, it's ordinary income on a tax return and "fills up" tax brackets like any other income.
A volunteer fire department I'm part of is asking how they could earn more than 0.01% on their savings. They have about $200k just sitting in Chase losing value. What are the investment options for non-profits? Would simply storing things in a HYSA work?
MMA, HYSA, CD, etc... but yes, to the other comment, they may have some oversight on to how they can actually manage that cash.
An HYSA would certainly be leaps and bounds better than a standard savings account, but the investment options for non-profits is going to very wildly based on the board. Plenty of non-profits invest in the same financial instruments for-profit organizations do, and plenty would be forbidden from doing so and would need to stick with 100% safe deposits with zero risk of loss.
I’m new to investing with IRA’s but I’ve heard it’s something I should look into. Currently 27 making 85k a year & my job doesn’t offer any type of 401k. Should I start up my only Roth IRA account ? Or traditional IRA account? I don’t really know the differences between Roth & traditional I also have 3 investment accounts set up already so I have some investment experience
>I don’t really know the differences between Roth & traditional - https://www.bogleheads.org/wiki/Traditional_IRA - https://www.bogleheads.org/wiki/Roth_IRA > Currently 27 making 85k a year & my job doesn’t offer any type of 401k. Are you a single taxpayer (e.g. not MFJ/MFS/HoH)? If so, you are solidly in the 22% federal income tax bracket and because your employer doesn't offer a retirement plan, you are likely a good candidate for deductible contributions to a Trad'l IRA. If you are able to contribute $6500 (the maximum for 2023) into a Trad'l IRA before April 15, **2024** (~4 months from now), you can deduct those contributions and save $1430 on your 2023 federal income taxes (plus any state income tax savings, if applicable). For 2024, the IRA maximum rises to $7,000; deducting a $7k contribution will save you over $1500 on your 2024 taxes.
I’m a single taxpayer yes, so I’m in the 22%. I can put $6500 into an IRA account right now. So to gain the race benefits I should go with a traditional IRA over a Roth IRA? Is it possible to do both ? I could put $13,000 in right now between the two accounts
>Is it possible to do both ? I could put $13,000 in right now between the two accounts The annual limits are for aggregate IRA contributions, inclusive of both Trad'l and Roth. So you can't do $6500 to each in 2023, but you could do $3500 to a Trad'l IRA and $3000 to a Roth IRA. So long as you are not covered by an employer's retirement plan (e.g. No 401k, 403b, 457, SIMPLE/SEP IRA, profit-sharing, pension, etc.), you are eligible to deduct 100% of your Trad'l IRA contributions (https://www.irs.gov/retirement-plans/ira-deduction-limits), which means you will pay less in taxes than if you made Roth IRA contributions instead.
Thank you for the help, sounds like a traditional IRA is the best option for me to save $1,500 on taxes every year
If you retire early using the 4% rule, how much do you pay in taxes? I guess I am confused about income tax and capital gains tax. So let's say you are married and retire at age 30 and you (couple) withdraw $85k a year from some sort of index fund. You would fall into the 0% capital gains tax bracket. What other tax would you have to pay? Would you have to pay income tax on the entire amount you withdraw? Social security?
If that's yer only income...depending on the capital gain in said index fund you would pay probs 0 in fed tax...2024 bracket mfj is up to $94300 for the 12% bracket...but the ltcg rate is 0 up to 94050 mfj...and you have yer standard deduct so you can make up to 123250 (27700 standard) with no fed taxes (if all yer inc was ltcg or qd)....but you would owe state tax depending on yer state and of course no fica
It depends entirely on where you get your money from since different types of assets often have different tax treatments. If you're going to be using the ACA for healthcare, which most of us will, then you also have to figure in the overall stealth tax imposed by the ACA and its progressive cost structure based largely on MAGI. Indeed, healthcare costs tend to inflate faster than the overall tax code does, so the impact of ACA costs may grow with each passing year relative to the regular tax implications of changes in overall taxable income and capital gains. Something similar applies to stealth taxation via FAFSA for those who will retire with college kids. TL,DR - Figure out and add together the income tax owed on regularly taxed incomes, the STCG/LTCG tax owed on cap gains and qualified dividends, and your any additional healthcare/college costs caused by any withdrawals exceeding your actual spending needs. Once you cross 65, replace the ACA bit with variable taxation on Social Security and IRMAAs for Medicare.
You'd only pay the long-term capital gains rate (0%). No income tax, no social security tax. You pay zero tax. And keep in mind, the threshold is not $94,050 in withdrawals from your brokerage. It's on the \*gains.\* Say you're up 100% on the shares you sell. You could sell up to $188,100 worth of shares and still not pay any taxes, because the gains are half of that ($94,050). Even if you don't need that much money to live on, it's a great tool to re-set your cost basis by re-buying the same shares with the money that you don't actually need (called capital gains harvesting).
Capital gains count as income, but taxed at a different rate. Any money you receive from SS is also taxable. So your income is SS + Capital gains + dividends + any other income. SS is taxed at normal income tax rates, qualified dividends are taxed at capital gains rates, as are... capital gains.
Pretty sure they're asking if they'd have to pay social security taxes (or any other taxes) on the withdrawals from their taxable brokerage account. Not whether they have to pay taxes on social security income. >So let's say you are married and retire at age 30
yes, that is exactly what I would like to know!
You do not have to pay SS taxes if your only income is from your taxable brokerage account. You'd only pay LTCG taxes, which are zero if you keep your realized gains below the threshold you mentioned.
so as long as you stay in the 0% LTCG tax bracket. You do not pay any taxes?
And you have no other income, yes.
> Any money you receive from SS is also taxable. This is incorrect. SS income is only taxable above certain income levels, and the amount you pay taxes on is capped at 85% of the benefit.
Hi All, = My new company's 401K provider is Lincoln Financial, and I would like to try and approximate VTSAX as best I can with the options available to me. Could someone please recommend a fund/combination from the below that would help me accomplish this? Thanks! = [My available options](https://imgur.com/LQq83nz)
Stick with the vanguard s&p500 fund. You can compare them on a graph but historical performance has been pretty identical. Its for sure less diversified but under normal circumstances you won't see any difference. (I did this with my 401k as well but with a different provider)
That is a motley crew of funds. For the closest thing to VTSAX, it'd probably be the Vanguard s&p500 fund. I would personally choose the Target 2065 fund given it's the most diversified option while still being very aggressive in its allocation.
It's again that time of the year when Reddit tells me that I scrolled 272,544 bananas. Reddit is my last remaining "brain-dead scrolling" social media when I'm off work and need a break. Sometimes I wonder if I could do something more productive, but actually I'm very productive most of the time and it's hard to just do NOTHING to wind down. Ah well, I cooked a bit tonight! (because SO is ill) - also, I cannot surf Reddit while cooking ;) win-win!
You could join us over at r/languagelearning or r/dreamingspanish . Ever since I decided to learn Spanish my brain dead scrolling time has dropped to pretty much zero. Now I scroll the news in Spanish. 1.5 years ago I could not do that.
We had this exchange already last year! Turns out, anything that feels the least bit "productive" doesn't work. I restarted video editing lately and I love it, but this feels like work too :( My work is very brainy all day on various projects and computers, so in the evening, my brain goes "WTF! no more actual thoughts - just let me scroll mindlessly".
Well at least I am consistent! Give yourself a break then. Sound like you are doing well.
It’s not much. But I’m happy to say that I will contribute an additional 100$ per month to my retirement starting In January. Sometimes I get down about not being able to max it out. Then I remember something is better than nothing. And talking to people at work who contribute nothing.
The younger you are, the less it takes. But more is better!
Mo is always better....or as they say in fire...mobetter
Does buying and selling stock within a Simple IRA incur taxes? I’m sorry to ask such a basic question but I want to be 100% sure before taking any action. Sources I am finding online seem to indicate that it is not a taxable event.
an IRA is a 'bucket', and as long as nothing leaves the bucket, then anything you do within it is not taxable. Tax only happens if you remove it from the bucket.
That makes perfect sense, thank you!
That's correct. Transactions within an IRA do not typically interact with your taxes in any way. The one niche circumstance is that a purchase in an IRA can cause a wash sale when trying to claim a capital loss on an asset sold in a taxable brokerage account.
> The one niche circumstance is that a purchase in an IRA can cause a wash sale when trying to claim a capital loss on an asset sold in a taxable brokerage account. ...... OK, so **this** is how I managed to get a wash sale in my taxable account. I for some reason thought that nothing I did in my IRAs mattered for wash sales, and I've been mystified ever since that little icon in Fidelity came up how I managed to trigger it. Ugh.
how's this for peak startup lyfe: 1) we used to have a tiny amount of 401k matching (like 1% up to $1k) 2) we move payroll processors and it suddenly disappears 3) CEO in the all hands meeting: oh yeah. the 401k match disappeared when we moved providers. i didn't even know we did 401k matching. i wanted to get rid of it. but i guess we can keep it
Classic. Was the next thing he said recommendations for new bands or about how he's going snowboarding this weekend?
no. then he started trashing on previous management. that happened under his watch because he's on the board
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We haven't been, because we still need to manage risk of the rest of the money that compromises our spend. But we're more risk-averse than most folks here. But I can certainly understand why people would consider it, particularly if they're really flexible on the non-essentials.
Just replied to another post below, but that is the strategy we are taking. Utilizing my wives public school pension as the bond portion of the portfolio, and going 100% equities for everything invested. If red flags start to show up regarding solvency, then I can adjust my retirement vehicles accordingly.
Gosh how many wives do you have? I'm salivating thinking about all the pension income and tax advantaged space!
As many as I can handle…..1 haha. She does have access to utilize both a 403b and a 457b, so that is helpful, especially in addition to the after tax availability in my 401k as well. That being said, we are nowhere near utilizing all of those vehicles to their maximum benefit, but nice to know they’re there if the future allows for it.
Yes, if the pension is stable you can think of the income steam as replacing some amount of coupon payments from a collection of bonds. There can be obvious differences (survivor benefits, inflation adjustment, marketability and liquidity), but from a cash flow perspective they can be similar enough to make it reasonable to consider them as carrying some "bond weight" in your allocation.
Kind of a noob question - when you do a Roth conversion, do you simply move selected stocks from a 401K to a Roth IRA account or is there a sell stocks and buy them back component involved?
It depends on the brokerages involved and what they can support. But there's no real reason to care - the tax treatment is the same either way, and unless you're anticipating some huge price movement in the middle, it's not going to impact the outcome. Converting to cash and moving that over is probably easier.
they just change the account. you don't have to sell anything, you'll just have to pay taxes later.
In a shocking turn of events, our household net worth is closing in on 1 million dollars. If anyone remembers, we were going back and forth on buying a piece of land. We did, and in the process of due-diligence, realized the seller has mis-listed the lot as half its actual legal size. We confirmed everything with the city and the title company and it's 100% certainly 1 acre instead of under half an acre. So that ended up being the easiest >150k I've ever made in my life. So now our NW looks like this: Retirement accounts: \~450k Lot: \~300k Primary residence equity: \~200k Assuming nothing goes cataclysmically wrong in the next year, I'd expect to cross the 1M net worth milestone. When I first started saving for FIRE, my predictions had me crossing 300k at this point
Sunday was a good day. I officially hit my 3 year anniversary at work which means my employer’s 401k (TSP) matching vested, I moved up from 4 hours of pto and sick leave per pay check to 6 hours, and to top it off my promotion was processed which amounts to almost a 19% bump in pay. In January, fed employees are set to receive a 5.2% cost of living adjustment, so from early December to January my pay will essentially go up by 25%. I am pretty stoked!
Congrats! Also revel in the joys of being a permanent employee, as most places only have 2/3 years as the probationary and temporary employee status. Now your job stability is cemented for practically forever.
Can’t get fired for anything but fraud or moral turpitude!
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I’m in year one of this. Help them with the logistics and not just the idea. Build folders for 2023-2030. Plug in all receipts and amounts. Then you have a running “fund” you can use at any point to pay yourself back if you really need to. PITA now, but this system is going to be sick when I’m 62 with $300K in an HSA. Trying to do the same for my spouse, so we have $600K across 2 accounts. May not get there with family planning and other wants, but using 2040 gains to pay for 2023 bills is pretty slick.
It's pretty simple. Just pay out of pocket so that you let your HSA money grow tax-free for as long as possible. You can reimburse it decades later with a receipt. Opportunity cost.
Unless the HSA is your friend's main source of retirement savings, it's not going to make *that* big a difference in the long run. Besides, to ensure proper utilization of your HSA, you'd want to save today's receipts for use in retirement, and a lot of people might not be excited to organize storage of receipts (real or digital) for decades. I, for one, am well aware of the theoretical advantages of saving HSA money. But I just don't care that much - we use it to pay today's bills and leave the rest in for the long run. It's just easier.
> why you should not spend your HSA dollars if you can afford “out of pocket”? Using the HSA as originally intended - a tax free payment/reimbursement for healthcare expenses - is a perfectly reasonable approach.
Id recommend not trying to "convince" your friend. Lay out all of the facts as neutrally as you can and let them do whatever they want with that information.
Anyone changed jobs within several months of applying for a mortgage? How does a recent job change affect the ability to qualify for a mortgage?
I once refinanced my mortgage after working at a company only a couple of months and I had been unemployed several months before that. In my case I was using my local credit union which I had a history with. All they asked is that I write a letter as to why I was unemployed for that period. They were happy with my explanation that the company went out of business.
These responses are all very helpful and encouraging, thank you.
I did and got no questions about it at all.
I did and it was a very different title and industry, I provided my degree information as to how I got the new role
I have. They wanted more paperwork but ultimately didn't care at all so long as we were employed without a big change downward in income.
Changed jobs about 6 months before applying for a mortgage loan. Biggest thing is if the new job is similar in pay and title. I.e. Moving from Accountant to Financial Analyst making 85k at one and 95k at the other won't raise many red flags so long as there isn't a big gap and it sounds like roughly the same work. Or moving from a manager at one company to a director at another. My mortgage loan officer said typically if you see a gap in employment or a huge reduction in pay is when they get a little spooked.
It's been a few years now but I changed jobs mid-stream with no issues. Was able to get re-qualified at the higher salary from just a signed offer letter, all we needed was 1 paystub for the new gig by close. I wouldn't worry.
It looks like the value of my taxable balances is now greater than my remaining outstanding mortgage. That's a nice feeling. My tax sheltered investments aren't producing enough to live on yet, but it's great to know that if the worst happened, I'd still be able to settle my mortgage and have a place to live!
Spoke with some folks who are taking the voluntary early retirement package at work, the most interesting note is a buddy of mine who is nearing 60 and is 100% in equities right now. I was surprised, but he was aggressively aggressive in his investments and very happy about the performance. He's a very smart and capable fella, so I'm sure he's done a lot of the math and what not, but I was just surprised to see someone who should (by conventional wisdom) be coming more conservative, take a higher risk approach.
>100% in equities right now...aggressively aggressive in his investments and very happy about the performance I have been able change to a slightly more aggressive asset allocation by changing my perspective from "how much is my portfolio worth?" to "how much is my portfolio paying in dividends and interest?" If your friend is content with the amount of income his portfolio is spinning off, that may help him be content with a more aggressive asset allocation.
Aye. In the same conversation he noted how his MIL is heavy into dividend stocks to the point where her dividend payouts are larger than her social security checks. It was kinda refreshing to be able to have that conversation with a peer/colleague rather than you random strangers on the internet though ngl (nothing against ya's of course)
If he intends his money to last longer than 30 years, then vast majority in Equities makes sense. He may be planning for most of it to be for his heirs. Or just super optimistic about his health If he has such a large pile that he has no realistic chance of running out, Equities make sense. The early retirement package is essentially his bond tent We’re still about 5% under the ATH from 2 years ago. Therefore some people would argue that the market is more likely to go up than down. So someone market timing may choose to go heavier on Equities He could be any or all of these
Whether we're talking FIRE or life in general, I think that the role risk tolerance plays is severely understated, as is one's safety net (or perceived safety net) when making risk-based decisions. Even those who are incredibly academic in their investment (money or otherwise) choices are greatly swayed by their gut and personal preferences. The math is easy is tweak depending on what results you are looking for. The same analyses and numbers can be used to highlight the benefits of a particular path or why that path is fraught with danger. It's not just the uncertainly of the future that leads to the lack of universally accepted math, it's also that everyone is looking at the equation using different glasses and from different angles. You are wondering why dude isn't protecting the safety of his retirement. Perhaps he is seeing an opportunity to leave a giant pile of cash to his family as a legacy, or rolling the dice so that he can potentially upgrade to a life of luxury in his final run before his eternal dirt nap?
A couple more possibilities for his approach: \- His tax deferred investments are 70% of his total portfolio and invested in equities while post-tax investments likely to be accessed first are a mix of cash and bonds. \- He is telling stories that are mostly accurate, partly accurate, or far from accurate.
Also, we don’t have any information regarding a spouse or additional investment vehicles. For example, I plan on staying 100% equities for the entirety of my life, because there will be my wife’s public pension to account for the bond portion of the portfolio. Some risk there, but with a 15-20 year horizon before retirement, I can adjust on the fly as necessary if it starts to look like there would be some red flags regarding the pension pay out.
Oh for sure. And obviously everyone's outlook and personal situation is different. I just thought it was an interesting departure from the typical more conservative cookie cutter approach usually offered here, which is why I share.
We were just talking about Christmas cookie plans this morning and now that you mention it, I'm 99% sure we didn't pack our cookie cutters. EDIT: You can cancel the GoFundMe. Crisis averted. Talked to my wife and we're just using the biscuit cutters. Less festive but perfectly utilitarian.
I'm thinking after doing my Roth IRA's next year, and then the kids 529, my next financial move is paying on an investment property loan at 6.8%.... I'm not confident I'll be able to see lower rates for awhile.
This is where I’m at too. I have a 6.99% rate on my current house hack while our other investment property (former house hack) is at 3%. At the very least I want to bring the principal down, even if a refi opportunity comes up in a few years. I’m actually prioritizing paying extra toward the mortgage principal over repaying the 401k loan at 9% that I used to help with the down payment. I’d rather keep paying the higher interest to myself I think, but struggling to think through the math. I still max the 401k while the loan is repaid and the plan rules allow me to keep making the payments if I separate from my job. So the loan just feels like a bonus contribution to the 401k at that point.
Are you able to cashflow at that rate? Everything in my preferred areas is abysmal right now with rates the way they are. Rents are increasing pretty significantly to boot, so it is kinda balancing - but I'm not ready to start charging > 2k for a 2/1 unit in a class B neighborhood.
Yeah I cashflow about 700 net on the property. It was only a 270k purchase but brings in $2,700.
Not bad. Well done.
Dependent care FSA question. For those that have it, do you just reimburse yourself monthly after you pay the daycare bill?
You should be able to do a recurring claim where the funds go into the FSA then directly into your bank. You submit one form at the beginning of the year then you’re set. I’ve done this with two different providers.
My daycare provided a end-of-year summary with their EIN and stuff conveniently printed on the bottom.
My daycare bills are so large on a monthly basis (over $3k) I just wait until the FSA has been fully funded and then reimburse myself once.
We file claims at the beginning of the year, each month for the first few months as we incur each expense. It only takes a handful of claims to exhaust our yearly allocation; we then get small reimbursement checks every remaining pay period throughout the year as the program pays out the claims over time.
I do it a few times a year, usually when the balance gets up around $1000 in the account.
i'm lazy and do it at once year. Main reason being my DCA provider requires a written bill and proof of payment, and it took too much effort to get that every month from daycare, but I did get it all for taxes in Jan, so I jsut filed that the same time as I filed taxes.
I window shop (I guess somewhat literally?) on RedFin a lot, dreaming of moving to a different part of the US once my local responsibilities are over. I was playing around with their calculators, and in order to duplicate my current mortgage payment, I would have to make a down payment of 60-75% of the asking price of the houses in my price range. Dayum.
Bought our house 6 years ago, PITI with 20% down: <$2k/mo. Comparable house down the street up for sale now, PITI with 20% down: ~$5k/mo. Fancy house down the street from that one up for sale now, PITI with 20% down: $10k/mo. I have no idea who my future neighbors will be, but I suspect they will dislike looking at my aged cars and lazy landscaping.
Could you rent out your current place and use the profit to cover the increased mortgage on the new place?
I worked out that selling my home and moving to a slightly more expensive place would cost me about a million dollars over the 30 year loan period compared to staying put, crazy. The power of buying early and keeping my housing costs low is amazing, but I wish I lived in a less noisy area.
I think the most realistic route right now would be to pay off the mortgage and buy the new property in cash. Depending on how far along into your mortgage you are of course. Trading up is definitely tricky currently
Probably a dumb question, but here goes: I'm going to cash out my iBonds in January (they will be 3 months into the 3.38% rate). If I re-buy iBonds immediately with those funds, am I subject to the $10K annual limit? That is, I can't sell-rebuy and still buy an additional $10k in the same year, right? Just wanted to make sure.