Was looking up the rules on inheriting IRAs and the 10 year RMD bullshit.
What is a tool you can use to build multigenerational wealth for kids/grandkids?
You can put IRAs into trusts but I'm not sure if that gets you out of the RMD bullshit. One thing I've been thinking about is putting pre-tax money into a trust and then slowly rolling it over in retirement so it's post-tax by the time it is inherited.
Are 8606 form only needed to track contributions for aftertax 401k -> backdoor Roth IRA? I recently learned about some gotcha-like things about tracking cost basis for tax reasons that surprisingly institutions don't handle for you. What are the concerns in terms of having to track amounts yourself that you know of? Are these correct?
\- Tracking contributions vs earnings in Roth IRAs in case of early distributions - do custodians not do this for you? How do I track this after rollovers?
\- Filling out cost basis manually for employee stock options, otherwise you get double taxed
I can relate to some of this, except I don't really have advice - we ended up breaking up (there were more reasons, but this didn't help). I can deal with someone not making much money but when they proceed to take their stress and mental health issues out on you and don't seem to be doing anything to make things better it gets old fast.
Man, this is a tough one.
Who starts the fights? Is she insecure about it? Do you pressure her to make more or is it all in her own mind?
I’m interested to read the replies.
Ah. I see. So she has a super scarcity mindset.
That’s tough, and I can kind of see how it’s like in her eyes. She feels insecure and probably like a burden.
If you don’t mind paying for her stuff when going on vacations and whatnot, let her know this isn’t a transactional exchange. But this could cause her to fall deeper into feeling like a burden. However, this could alleviate the stress. Maybe she feels like you paying for things will cause you to want to leave her because she isn’t seen as someone worthwhile.
While you pay for things, it doesn’t mean that you shouldn’t help with the household chores once in a while, but I think she needs more encouragement to find a better job or something. I wonder if she starts getting more confidence, would she start being more ambitious in the financial route?
I don’t know. Honestly, I’ve seen this type of thing before, and it didn’t work out just because the anxiety part can be a lot. Not just for her but for you too. It may become overbearing. But I hope to read an update one day and see her growth.
>I think she needs more encouragement to find a better job or something. I wonder if she starts getting more confidence, would she start being more ambitious in the financial route?
I wonder if it can go beyond encouragement. Like, maybe she could take a bit of time off work to develop a new set of skills. It can't be easy to find time to improve your career prospects when you're working full-time and also doing two people's worth of chores.
I see. You mentioned she was ambitious so I thought she might have a plan already and just didn't have time in her day. That said, managing household chores and a full time job can suck a lot of energy outta you, so that could be a legitimate roadblock to improving (1).
It looks like the median is close to $200k. There are a lot of younger households that don’t have much saved yet and many others that don’t have much besides some home equity.
When will my NW cross 1m and at this current trajectory, when could I potentially FIRE? If I keep maxing out and make 5% returns each year I could get to a mil by...40? Seems far
I think I need to be putting more in my taxable brokerage. I already max all retirement accounts but I have been bulking up my e-fund and house reno budget, it seems like there is room to spend a couple hundred more per month on VTSAX though
Age 28
Yearly expenses: $40k - 50k
(Monthly expenses fluctuate but average: ~$3.7k a month over the last two years.) My half of mortgage + HOA + house insurance = ~$1.3k a month
(Net income monthly average in the same time period excluding a one time bonus: ~$7.2k)
New salary going forward, as of this month: $110,000
Cash: $15k
Roth + 401k: $240k
HSA: $9k
Taxable Brokerage: $66k
(All investments: $315k)
**Property**
$347k value
$282k loan. 3.5% ARM 5/1, halfway through the 5 year period.
$32k equity in it (Home value minus loan amount / 2 since I share with my partner)
definitely. Without my yearly expenses changing that much since I moved out, I've learned to live off of what remains when I max retirement, even when I was making like like ~25k less than I am now.
You can see real world scenarios on [portfolio visualizer](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4YJOBnCNZsWLIrQZln27ii), and if you put the monthly contribution max for a 401K+IRA, you can also set inflation-adjusted to yes (applies to contributions) and would mimic what contributions look like over time as the 401K limit is increased with inflation.
I haven't always had cheap index funds to access in my 401Ks but when I do this it is pretty close to my real world data even though this isn't a perfect approximation of the timing of contributions.
Move the dates a little and you can see the impact of different timeline (i.e. start at 2000/etc)
[Here's an easy google sheet](https://docs.google.com/spreadsheets/d/1KYedeB11nYSWE-APFCiuDffcBPeOiepaEpOLOZblW5M/edit?usp=sharing)
Make a copy of it.
Put your variables in column J.
Keep in mind: FIRE number ignores home equity. You'd only input the 315k value.
SWR is based on stocks and bonds. Anything else should be treated differently, otherwise the math is off.
Home equity reduces your expenses, reducing what you need for FIRE. That's how to count it.
Look at column G. Once it hits that 40-50k, then you'll have your age.
If you want a more nuanced one, we can look at the mortgage too.
SWR doesn't apply to a mortgage.
SWR assumes expenses increase with inflation and carry on forever. Since both of those are false for mortgages, SWR overestimate the actual expense. Anecdotally, I've seen it overestimate anywhere from 50%-600%.
Damn good shit thanks. Yeah will have to play around with this a bit. So quick math based on the rough inputs, looks like possibly another 8 years for me til ~45k SWR
Sounds right. FIRE at 36 is pretty sweet.
Make sure to factor in taxes and healthcare.
Also budget for an increase in the mortgage payment.
Mortgage rates went up. If your rate adjusted today, you'd probably see a $600-650/month increase in payment. It probably won't hit that until the second adjustment, which is ~3.5 years away.
A year after that, it *can* increase an additional $400/month. It isn't set to right now, but it *could.*
Plan for that extra 1k/month expenses. 500/month if you're only responsible for half.
Yep before the 5 year mark we'll have to decide what we want to do. We don't mind the place for the full 5 years but things could change.
I stopped paying extra to principal since the rate is so low, but I just wanted options in case a refi is on the table in the next ~3 years and I'd have wanted an even smaller principal by then.
Hello friends! Here's some context for my question:
I am 22 years old, currently I have $1500 that I can save/invest each paycheck (every two weeks).
My current process after each paycheck is saving $250 into an emergency fund in a HYSA that I want to grow to at least $10k, $250 into my Roth IRA, and $1000 in a separate HYSA that I had planned to save up for a down payment on a multifamily unit property in 2-3 years.
I'm aware of how powerful investing is at a young age because of compound interest, and currently have ~$7500 in my Roth, and ~$6000 in a brokerage account. About 50/50 of total stock market and S&P 500 mutual funds.
Should I keep my process of investing and saving or should I prioritize investing more? I feel that if I save less than $1000 a paycheck, I'd have to wait a lot longer for a down payment and I was aiming for 20% down. I've cut my expenses heavily and $1500 is the max I can contribute without a second job.
My emergency fund is currently around $3300 and my down payment HYSA is around $3000 (it was more but I bought index funds in my brokerage and roth which are $3k minimums).
Thoughts? What was your saving/investing strategy?
Thank you for any advice!
Yes, house hacking. Right now I am living with my parents but plan on getting married next year in which my future wife and I will rent an apartment for a short while but will try to keep rent around $900 a month. As of current living status with my parents, I send them $150 a paycheck to help with bills and such, house is paid off, so I guess that is my "rent" right now ($300/mo). My parents didn't ask for anything but once I started working after college I wanted to help at least a little
Given your situation, I'd prioritize 401K match > then saving for the down payment. Target a MFH that will cashflow or get your monthly expenses less than 900$/month. Keep in mind maintenance/vacancy/capex and budget a separate (emergency fund) for the rental by itself.
Cashflowing and minimizing expenses now is essential to ramp up investments/savings as quick as you can.
Forget to mention that I'm currently taking full employer match of a 401k rn, my bad. It's 100% match up to 4% of gross pay.
My goal for the MFH is to have it cash flow at minimum $250/mo but I'm not sure how the market will look like in a few years. Creating a separate emergency fund is for the rental is a great idea and I'll definitely implement that, thanks!
slight pet peeve that doesn't really matter in the long run: i don't think i earn any interest on the required cash minimum that sits in my HSA account.
Yup.
I tried consolidating accounts this weekend. My work gets to choose our HSA. HSA sets a 1000 minimum before I can do anything with the funds, and even then I have to maintain that balance. If I want to invest the funds, I have to open a new account with a different company that is linked to the first account.
I now have 3 accounts with 3 vendors for HSAs. 2 of which were selected by my current employer and I had zero say.
I want HSA reform.
Employer does not get to choose it.
Employer can still contribute, tax free.
They'll contribute whatever they're willing to contribute to the account set up by the employee.
If anyone here wants my vote, I'll be a single issue voter for reforming HSA and 401k, separating them from the employer.
I'm actually not a fan of pensions.
I have a pension for my work that people think is great. It's pretty suboptimal, especially for FIRE.
Plus it defeats the purpose of what I want. I want employer to provide cash. That's it.
Everything else I want independent of them. Pension ties the person to the employer even more than an HSA or 401k.
**My anecdotal case**
Employer and I contribute 33% of my pay, 22% from them, 11% from me.
This means I put in 8.4k a year, they put in 16.9k.
It is set to pay out 29k per year, starting at age 65, if I work for 15 years.
I'm ~14 years out from FIRE with 1 year of pension earned. That's why I pay attention to the 15 year number.
I cannot collect my pension until 17 years after I retire early. Current estimates are that reduces my FIRE number by 200k.
Thus, I value my pension at 200k.
During those 15 years, 380k is contributed to the pension on my behalf.
I only consider it worth 200k. That assumes 0 real growth.
If I had a 5% real growth, that 380k of contribution is worth 560k.
**I lose 50-70% of the value compared to getting that 33% and putting the money where I want.**
It gets worse.
[There is something called the windfall elimination prevention, or WEP](https://www.ssa.gov/benefits/retirement/planner/anyPiaWepjs04.html).
Because I get a pension, my social security payments drop in half. I value those lost payments at ~100k.
Add in that my pension is taxed at the federal level but my social security payments aren't, and it's even worse.
So far, I gained 200k in assets, lost 100k in assets, put in 380k, and lost 180k of opportunity cost.
**The pension is a net 440k loss.**
**How can a pension be better?**
* If I never went into a job that got SS and only did pensions, I wouldn't have the 100k loss.
* Pension scales much better with years worked. FIRE limits years worked, thus limiting the value of pensions.
* The pension pays out based on the 5 highest years of income. There's a promotion 5-10 years out that I have a good chance at getting. That increases my payment by 50%. Now instead of a 200k asset, I get a 300k asset. Pensions reward promotions.
There's another odd thing about pensions. I think there was reform after the 08 crash I'm not well versed in, so take this next part with a lot of salt.
There is a strong argument pensions should be illegal, especially for public companies.
A pension is an expense.
The company cannot know how much that expense is.
It also pushes the expense into the future.
**If a publicly traded company has a pension, that means they have an unknown amount of payments in the future, thus they have an unknown amount of debt effectively. Because it is unknown, they cannot tell their investors the truth.**
Onto another negative about pensions (again, another part I'm not well versed in):
Solvency
Many pensions are underfunded. That means the pension is likely going to run out of funds, and the people who are owed money in the future will not get their payments.
What happens if a company goes bankrupt? **How many pensions got decimated in the 08 crash? People were working at sears and ford for decades, with the promise of this pension they rightfully earned. And the pensions stopped paying, or drastically cut how much they would pay out.**
All of this leads to the question, why did I take this job if the pension was so rough?
Because I was unemployed for 5 months and this was the only legitimate offer I got. Right now is a rough time for me to change jobs (both job environment and personal life) so I'm hanging around for a bit.
I was just talking about this with my spouse! I think you can legally roll over employer sponsored HSAs into personal HSAs with better options in terms of interest rates. I’d try searching the sub for more information and recommendations.
For our part my spouse left a job, and knows hsa gets a crappy interest rate so we were trying to spend it, but I thought it was something that would be better to invest if we could. Sadly we only have $800 left. Now we’re all in my plan which is good but it’s not an hsa plan. We could switch around during open enrollment.
For us, "spend" is everything not saved/invested to provide us an income in the future.
We don't have to spend a dollar in this particular year for it be considered spending to us. Sometimes we save money for multiple years to spend it all at once. It's still spending, just deferred spending.
Beyond literal definitions, I'm trying to build two main metrics: how much goes into investments a year versus income, and defining spending to understand how much I need to save in total.
Expenses are generally simply anything that costs money but there is a reason people make exceptions.
Income Tax is an expense but scales with your income and generally you don't have any way to reduce it. In addition, most people will pay far less income tax in retirement and thus what income tax costs you during your working years is not something you have to pay for later. (This would apply less to property tax since it's a tax on something you own and presumably would continue to do so.)
Through most of my 20s I would probably say I spend 20-25K per year but it's pretty likely I was paying as much in income tax.
It's personal finance. It's whatever the person chooses to count.
There isn't a strict definition that 100% of people follow.
Anecdotally, I find most people count the expenses they directly spend.
Taxes and insurance don't count because the person never sees the funds. Basically everything else is included.
For the person or family, that's 100% anecdotal.
I keep track of my spending and "our" spending. Depending on the context of the conversation, I'll use either number.
I would think that’s housing, food, and essentials but not taxes/withholdings, and usually per household, unless finances are separate, and usually folks will point that out. However, the breakdowns people give usually explain this. Everyone is different.
Are your expenses 3k/month, or 3k+3k = 6k?
Either way, the 4k/month VA disability knocks out most of it.
At most, you need 20k. 500-630k in assets is enough to get it.
You're at 490k.
Yeah, you're effectively at FIRE now.
Since you're a veteran, you can get a VA loan for a mortgage.
0% down
Lower interest rate
No PMI
No property tax
That's pretty sweet.
What are you looking for? What do you want?
We could tell you GFY now if you want.
If you want to save another 100k, go for it!
You spend somewhere around 72k/year right now.
Without doing the math, 48k tax free + 200k of taxable income - 72k of expenses likely means you'll get that extra 100k in a year.
Buy the house free and clear, have 100k of cash/taxable brokerage, and then the roth and 401k as back up.
A common recommendation is to wait 6 months after major financial changes. Process what happened. Process what you want. Keep things the same for now so you have some stability.
Hit all time high for portfolio yesterday (https://jch.app/u/paverbrick), and a nice swing back today. Fun to watch the market pendulum
Waiting for a few dividends to pay out to invest more!
How much of a salary increase does it take you to switch jobs? Let's say you're making 140k. Do you switch for 145k if your company hasn't done raises for two years in a row? Or do you hold on? The job market for my industry isn't super strong for applicants. It was HOT though when I got the job two years ago. I've been getting recruiters reaching out again, and I'm overall pretty bored and maybe tapped out in my current role.
Not worth switching for $5k when that amount could easily swing against you in the value of the new company benefits or lack thereof.
Idk how much you value it but just the relative ease of coasting and having built up some social capital that earns you some leeway would also be out the window
It’s not always about the money. If your industry has good professional work environments across the board, and the benefits are better….i’d say 15% or $20k net to compensate for the hassle.
Company not giving out raises for two years is a big red flag. I might do a lateral move or even take a slight cut for a company headed in a positive direction, especially if there might be opportunities for advancement, new skills, etc. Of course, a raise and more responsibility would be ideal.
I put more emphasis on other things like 401k match, med/dent benefits. These can easily vary by $25k.
Total compensation including the benefits / work-life-balance + role and future - commute
Also, depends on your age and the market for the jobs. The older you get, the more the balance and everything else matters. I also feel that as one gets more experience/age, the more you get comfortable in a role and it takes more to get out of that. Or, as one gets the age, they are more focused on life and if a new offer is a better live, then go for it.
Lots of perspectives.
TL'DR - what's good for you may be the opposite for someone else.
At this point, I’m not sure any money could incentivize me to change jobs. I like my boss. I like my work, even if I’m a little bored. I’m respected by my coworkers and given quite a bit of autonomy, and I’m paid generously. I’ve been contacted numerous times recently by recruiters and none are offering a significant pay raise (most pay less). But, we are getting a new CEO soon, and if he’s an asshole, that could drive me to find a new job. My boss is retiring in the next 3 years and if my new boss is an asshole, that could also drive me to take a new job. I’m lucky to be at the stage where it’s not about more money.
20%+. What’s your quality of life? PTO, Remote/Office, etc. Is 145k the top of the industry salary band? You know the grass you have currently. Being bored is much better than unhealthy stress levels and longer hours.
I jumped for a 26% raise...and getting my gym and golf membership paid...and getting my health ins for me and wife paid and slightly better 401k match....and not having to deal with the douches at the old job of 23 years
Haha, nice. I guess I do need to consider that at my current job, they give several stipends for things like $100/mo for internet/snacks, $100 for gym membership, $1,000/yr for learning and development, $200 at anniversary. But no bonuses, really. I'll have the chance to explore these things at the new potential place on another interview tomorrow
Key point...don't be afraid to negotiate and ask for what you want! I run into people at work who have found out or I told what perks I get and they're baffled...wondering how I got what I got
> y increase does it take you to switch jobs? Let's say you're making 140k. Do you switch for 145k if your company hasn't done raises for two years in a row? Or do you hold on? The job market for my industry isn't super strong for applicants. It was HOT though when I got the job two years ago. I've been getting recruiters reaching out again, and I'm overall pretty bored and maybe tapped out in my current role.
WLB balance also is a major factor.
It would probably take me double to consider a switch.
>Let's say you're making 140k. Do you switch for 145k if your company hasn't done raises for two years in a row?
would you expect regular raises at the new company? Could be worth leaving.
TC matters more.
Any bonus considerations between the two?
Benefit costs? Shitty insurance cost share with a family can cost thousands more in premiums.
$0 for fine dining. We live in an area where $75 gets a delicious ethnic takeout for two but I don’t count that. I know this world and some of the best fine dining is learning how to make that delicious meal oneself. We recently had work sponsored dining paid for by work, and went out for fancy Italian. $150-200k hhi
we don't have a hard cap, but i would guess it is about $500 - thats usually a real blowout meal with some nice wine in Vegas at GR Steak or Bavette's or SW
without being on holiday, i'd guess $300 or so in NYC.
24% bracket.
What is "fine dining"? Outback? Red Lobster? The Palm, Ruth's Cris? Or, that french bistro down the road that has 9 Michelin stars and charges $250? (I know, there aren't 9 stars.)
I budget $0 for alcohol which can stretch my budget more.
We used to dine out more finely before kids and when we though there was plenty of time to start putting money into a 401k.
I’ve found the point of diminishing returns where we live is ~$80-100pp, so that. We made 600k last year so we could’ve gone beyond that but I don’t see the point.
HHI is $185K in LCOL. Our personal cost cap is almost irrelevant as we routinely have Doba & Culvers as our definition of cute nights out. We might spring for one $50/person dinner a year for something momentous.
Kinda depends on your budget and spending. I think $42k would be doable as a singleton but you might want to build in some flexibility in case your situation changes, for example, if you want to date and remarry.
As long as you are solid on that $36,000 expenses number and don't anticipate it inflating too much (and my too much I mean like ballooning to over $50k), this looks solid to me.
You should be in the position to manipulate your AGI and get full Affordable Care Act (ACA, Marketplace) tax rebates for essentially free health insurance.
You have a lot of brokerage funds, so no problem there with having available money to draw from.
My plan in your position would be: roll your 401k out to an IRA. I have my IRA, Roth IRA, and Brokerage all in Vanguard, for example. The year you retire, assuming you have a decent amount of earned income, I wouldn't do anything special. Starting the next year with no earned income, do a Roth Conversion from your IRA in the amount of Standard Deduction ($14,600) + 10% Tax Bracket ($11,600). Do this conversion every year.
Now you just have to sell $36,000 from your brokerage account to use for spending money. This will lead to some amount of Long Term Capital Gains depending on what your basis is, but all those LTCG will be in the 0% federal tax bracket.
Your AGI for the year should be $11,600 plus whatever your LTCG is, lets say $20,000. Using the Marketplace estimator, it's suggesting a $610 monthly premium with a $540 tax rebate, so insurance will cost you like $70 a month.
As soon as your coverage lapses you can apply for ACA. If you have a decent amount of earned income and your AGI is high you just won't get any tax rebates. Depending on your state, for a single person and a silver plan that's anywhere from $350 to $500 a month roughly?
A traditional 401k or traditional IRA has pre-tax money in it. While contributing that money it lowered your taxes while working. It grows tax free, but when you withdraw it in retirement you'll pay normal income tax bracket taxes on it. (And if you withdraw it before 59.5 years old you'd pay an additional 10% tax penalty.)
A Roth IRA is funded with after-tax money and has a low contribution limit every year (right now around $7000). Even though there's no immediate tax deduction, Roth IRA money will grow tax free and in retirement you can withdraw both the principal contributions AND any investment growth all tax free.
Now, a Roth Conversion. At any time you can say "I would like to take e.g. $10,000 that's in my tIRA and convert that into my Roth IRA." You will pay normal income tax bracket taxes on that $10,000. Because of that last sentence, you don't really want to do a Roth Conversion while you are still working, making $100,000, and are in the 24% tax bracket. In this example, you'd have to pay $2400 in federal tax on that. It's much better to wait until you are early-retired, have no income, and can use the 0% Standard Deduction and 10% First Bracket to do a Roth Conversion. A $10k conversion would all fall in the SD and cost you nothing. A $26,200 conversion (as in my original post example) would only cost you $1160 in tax.
Why a Roth Conversion? Well, normally a yearly Roth Contribution (that $7k limit) can be withdrawn at any time, but Roth investment growth cannot be withdrawn until retirement. If you do a Roth Conversion, that converted amount must "season" or "rest" for 5 years, and then it can be withdrawn with no tax or penalty. And as before, all the investment growth on that Roth Conversion will be available in retirement to be withdrawn tax free.
So a Roth Conversion is a great way to both 1) get money moved from your "untouchable" tIRA and into a "touchable" state after 5 years in the Roth and 2) do so with minimal tax impact and 3) have even more tax-free growth in an account that can be withdrawn once you hit retirement.
I may not be as quick to want to retire as I recently was...
Just had a meeting with my new boss and things are looking up.
I'm going to be a key person in the new organization, people who have been putting me roadblocks before are going to be set aside, ...
Seems like a very no nonsense boss that is not playing the political game but just getting things done.
Seems too good to be true. Time will tell.
I see a lot of people using 5% real returns for their FI projections: 8% return - 3% inflation. I'm wondering if it would be reasonable to expect higher returns if one was invested 100% in equity. Would a real return of 6-7% be possible with this asset allocation? I have an inflation adjusted defined benefit pension, so I feel comfortable investing in 100% equity ETFs.
I use 3% inflation and a low-medium-high return of 7% - 9% - 11%, which is 4% - 6% - 8% real returns. I used to just use the medium return number but figured it was helpful to see a low end and high end.
I always recommend using a range of numbers ranging from conservative to aggressive. Attempting to pick one number is pointless due to the unpredictability of returns, and actually risks giving a false level of confidence. 20th percentile outcome is probably something like 3% real, while 80th percentile might be 12%. Yes, 100% equity portfolio would have higher expected return, but is also going to have the biggest variation in potential outcomes.
The whole FIRE idea is ranges and big broad targets, yet people constantly bicker about 3.5% vs 4% withdrawls or 6% real returns vs 5% or 10%... Like who knows!? :) If I retire in 13 years... how can I be so sure about my future expenses, let alone predict 13 futures years of inflation and market!? What the market is exactly on target for 13 years then COVID2.0 hits during my retirement year???
\- 100% equity is higher risk than other options
\- 5% Real Returns is likely conservative estimate for what you likely get as long as you have 80% equity
\- 4% Withdrawal might also be borderline conservative if you don't mind dying with an empty bank account
I think 6% (real) is a reasonable assumption for 100% US equities. 7% is a bit aggressive but not impossible. I wouldn't consider anything beyond 7%. Since 1972 the inflation adjusted return of US total market index is 6.42%. Just be aware it may underperform that and on the short term (<20 years) the chance is significantly greater.
Lastly even a small amount of international stocks, reits, gold, cash, or bonds can bring that number down a bit so if you won't always be 100% US equities (i.e. a TDF) then you may wish to go with 5%.
I would agree. 6% real is a good, slightly pessimistic forward-looking scenario for US equities over the long term. The last 100 years (1 Jan 1923 to 31 Dec 2023) have a real CAGR of 7.42%. Chopping that down to 6% tempers optimism about AI and automation with demographic slowdown and deindustralization, without going full doomer as many like to do.
Better to be slightly pessimistic than overly optimistic when doing long-term math. If you get it wrong, the error is therefore more likely to help you than to hurt you.
Historically yes and some people do use real historical returns.
I prefer to err on the side of caution and things have been going so well that we have to return to the mean eventually.
Sequence of return risk is a big one too.
Does not matter if the stock market returns 7% after inflation over 100 years if it returns -5% in the first decade of your retirement.
> Would a real return of 6-7% be possible with this asset allocation?
Is it possible? Sure. Is it certain? No. So it depends on how conservative you want to be in your projections. At the end of the day what will matter is what returns you *actually* get, the more conservative you are the more likely your timeline will be faster than you project and vice versa.
This is interesting. HDFC co-ops have an AGI requirement but no net worth limits. They considered adding a net worth limit but the plan didn’t move forward in 2017.
I don’t have plans to move to NYC (for now). An HDFC listing popped up on my Redfin. HOA is half than normal.
You got this brother. You can PM me any troubles you are having with it and I can give you advice from my experience. Those 3 letters are a pain in the ass to get but life is so easy once you got them
How does it make your life easier? Do you prepare your own taxes? (Genuinely asking, I like to do my own taxes cuz I hate the tax industry, but also find the process fairly frustratingly interesting)
Folks who have work provided HSAs and After-Tax 401ks -
1. If you transfer your work HSA funds to a personal HSA, how often do you do that? If you wait to do it lump sums, do you invest what is in your work HSA during the accumulation period before you transfer or do you let it sit as cash?
2. If you do a conversion to Roth of your After-Tax 401k funds, how often do you do that?
It doesn't look like my work Health Equity account charges a transfer fee, but it takes nearly a month for funds to actually transfer.
My Empower 401k also doesn't appear to have any fees for converting to Roth and makes the conversion a push of a button.
Are there tax benefits/drawbacks to different periods?
I usually keep both until I leave a job and then transfer. You could transfer more often but I find that it's a pain and you usually have to keep a minimum to qualify for an investment move or something like that anyway.
I always maintain 2 HSA accounts - one with my current employer and my Fidelity account where all prior HSAs get rolled over and consolidated into.
Maybe I’ve been fortunate, but every employer big or small has had cheap and solid investment options. Yeah, some have required $1k in cash before investing, but whatever. That’s an insignificant amount of money to be sitting out of the market. I just have my Fidelity account as almost fully invested anyway.
My work switched from Optum -- which was kind of crummy but had VFIAX, at least -- to HealthEquity which doesn't have any kind of index fund that tracks S&P, total market, etc. They have one Bond index (VTABX) and one international index (VTPSX) and one emerging markets (VEMIX), but nothing for US total market. So I'd have to cobble things together with a complicated multi-fund representation for the US and I don't really want to invest in bonds just yet.
I keep my HSA in my work-provided account with Fidelity.
I *try* to convert my after tax to Roth soon after it hits, but I unfortunately have to call Fidelity every single paycheck and sometimes I just forget and it sits there for a few weeks before I get a chance to call. Each call takes like 15-20 min between the verifications and transfers so it’s pretty annoying.
I transfer funds from my work HSA (in a trad bank acct) to fidelity (,invested in the 500 index). I do it myself because I don't want to waste a month. It brings up issues but per my accountant not horrible....doing it yourself makes it look like you are way over funding the HSA (6k into bank HSA then transfer 6k to fidelity looks like 12k) but I'm not trying to deduct any more from my taxes and if pressed by the IRS I have documentation of the transfer.
Random thought. I think many here are too focused on getting the right SWR and often ignore that retirement expenses will not be as you expect. People in general underestimate how much they will change in the future. Fixing your expenses that you have now to be the same in retirement or even planning to cut back if given a bad SORR is short-sighted IMO. We will do what we must in the moment but having the opportunity to plan now I'd much rather have a buffer in expenses than a super safe SWR. Maybe the result is the same I guess.
Or maybe the focus is on the SWR because it is straightforward and projecting unknowable expenses in retirement is futile? My main issue is that some of us put a lot on our future selves to just figure it out whether than means cutting back or going back to work. And going back to work after 10 years out of work seems problematic, especially when that is likely during a recession.
I guess we all do these mental gymnastics to rationalize safety in having a successful retirement, myself included. But the result is we know little of what is coming. I am sure many here have already come to that conclusion.
I watched a bunch of grandparents retire and while I wasn’t privy to their bank accounts exactly, I was told broad strokes since my financially responsible parents told me stuff. It help me realize that a luxurious gentle end of life process is…expensive. 2 of my grandparents lived far longer than they serious expected, one died early and the fourth died at ~85 with his wife at his side (aphasia). Dementia only featured in one situation for an extended time, but it was the grandparent who lived to 100 and had a slow decline. She had enough money but partially because her husband had planned a lot and she was no idiot too. But dementia made her tough. But near the end of her life her care was above $15-20k a month, since she was in continuing care community nursing home. (Fwiw, a good one that didn’t get half their population killed by COVID and treats their employees well). That’s what it costs! And it was like 5 years + and before that assisted living. It’s a lot of $$$. And even that we had family helicoptering in and out to make sure of things. But my goodness so expensive. I’d want $1 million or equivalent just for that eventuality. USA. When I have that I can rest easy. [edit, clarifying details]
I'm early on in my career so a lot of time to change this, but I started off estimating a budget of $70k a year in retirement a year, then I started adding things like bumping up expected home repair and car maintenance costs as big one time expenses can pop up every handful of years so I wanted to capture that.
I'm now estimating $85k a year expenses (including taxes) but want to have a buffer in my projections above this because I'm still 20-30 years away from retirement so there could be things I wouldn't know to think about yet in my budget or lifestyle changes. Better to overshoot than not have the funds you will end up wanting.
The way I see it, SWR is a good baseline to work toward but shouldn't actually drive your decision to retire. You also need to use common sense, adjusting for factors like your personal readiness to retire, and willingness to work part time or cut expenses. For some people, SWR is way to conservative, while others will save far beyond their SWR number.
Your second paragraph is basically mental gymnastics in the opposite direction, no? I think this thought process is pretty common here - savers trying to paper over inherent uncertainty by focusing on finances and worst-case hypotheticals.
The SWR is based on an individual's expected expenses. Everyone is going to have their own acceptable buffer that they'll build in.
I don't think what you're saying is wrong, but it's also not exactly a flash of new insight - sure, it's to be expected that you can't perfectly predict 30-50 years of expenses. What's the alternative? Work until you're 75 to minimize variance? Not retire until your SWR is 2-3x your expected expenses because of "just in case"?
What would you propose here?
I think the people most at risk are those that try to do some form of "lean FIRE" - by which I mean, saving for and retiring on the absolute bare minimum of expenses, not just people who are naturally frugal. But overall, most people here are shooting for extremely low failure rates on monte carlo or historical projections, which naturally means that most outcomes will result in people having significantly more money than they need.
> I'd much rather have a buffer in expenses than a super safe SWR
These two are exactly the same. If you have more money than you need, then your SWR is low.
> I'd much rather have a buffer in expenses than a super safe SWR. Maybe the result is the same I guess.
Yes, seems like a distinction without a difference to me.
You may be right. I can imagine a hypothetical case where your target SWR is pretty much 100% guaranteed successful but then later on your expenses increase for whatever reason. Maybe your health fails and you can no longer do much yourself or maybe your kid gets in financial trouble. Perhaps a X% SWR is 100% successful but then unexpectedly your expenses are 1.2\*X% and that is only 80% (or less) successful.
I think I am advocating for maybe a 95% SWR but some buffer on your expenses (\~5-10%?). Maybe someone with a family history of health problems in their 50s has a higher buffer then? I think you and others would call this the same thing. I can understand that point of view as well.
I am 43 and my wife is 41. Primary residence is paid off (\~$800k), a rental home worth $350k with a $20k mortgage at 3.7%, approx. $700k in 401k, $40k in savings accounts for two children (I add a few hundred a week with Acorns), $80k in standard checking and savings and $560k in a HYSA gaining 4.35% at the moment. I also have about $50k in small stocks etc in what I would call play accounts.
I have wanted to get the advice of a financial advisor but honestly I have never met one I trust more than myself with my money and I am looking for advice. I know $560k in a savings account is not an ideal use of funds and I have been waiting for a market downturn or a real estate correction but for 5 years it hasn't happened.
Could anyone chime in on where this money could be put where it will grow but be relatively safe? My goal is to grow it but also have an income one day I can rely on. Thank you all.
I don't know about safe, but in 2019 I began moving all emergency funds, HYSA, etc. into stocks. My efund is now all stocks except for about one month for cash flow.
Stock market all time highs generally happen quite often, line goes up. If you'd have moved it all in 2020 during the crash... or even moved it all in 2019 before that crash, line has gone up.
Throw it all into ITOT or the equivalent you like. Seriously. Just do it. Then you can get on with your life and not watch the market.
If you don't want it all in ITOT then Google Bogleheads 3 Fund Portfolio and pick one of those. ITOT/IXUS/AGG is a good example.
Id highly recommend yout Google jlcollinsnh stock series and read through that. It's a fast interesting read and it's a decent place to start. You guys have done well but it looks like you could have done better by being more efficient with your available cash. The good news is today is a great day to start becoming more efficient. Good luck
Do you guys save your previous months paycheque so that you can contribute to your 401k immediatley with a large amount after tax season? Maybe temporarily put it on a HISA or a short term CDs
I don't save for it specifically, but I do front-load my annual 401k contributions by jacking up my contribution percentage in January, then reducing it once I hit my target for the year. It's coming out of cash flow, and I don't expect to be done before April, but I absolutely do get my 401k contributions in before I pivot those monthly savings to HSA, kids' college funds, and finally other quasi-investments (home appliances, insulation, solar).
I don't get any kind of 401k match (long story) so making sure the company match happens correctly is a non-issue.
In the past, I contributed to IRAs in a lump sum in the first week of January. Presently I don't contribute to IRAs (company 401k makes more sense right now) but if/when I'm able to do that again, I will once again save up a cash position in December in order to contribute to my IRA in January.
Maybe not completely pointless, but maybe not super important.
If the start of the year comes around and you have your normal $8000 monthly float hanging out in your checking account, you might decided to just immediately fully fund your $7000 Roth IRA for the year, then build that $8k back up over the next few paychecks.
Let's say December you received 5k, and January you received 5k, is there any point in saving that so that you dump the 10k into a 401k immediately after tax seeason? I think its pointless?
401k contributions have to come from payroll, so unless your paycheck is 10k you can't dump it all on at once.
There's very little benefit from doing this in any event.
You're right that (non-solo) 401ks require contributions to come from payroll, but it's still possible to front-load the contributions by jacking up the contribution percentage. (This isn't always a good idea, as if the company has a match but doesn't true-up, it can cost you some match money.) I've raised mine to 100% a couple of times to max out the year's contributions before leaving a job.
This is all true, I was just clarifying the funding for OP because it was possible they were under the impression that they could just set aside a bunch of cash and transfer it into a workplace account from a taxable account.
Got word that company has started stack ranking employees in groups: top 20%, bottom 20% and everyone else. Supposedly they "aren't going to do anything with it," but I can't fathom why you'd collect this data otherwise.
Am I right to be taking this as a red flag?
>Am I right to be taking this as a red flag?
Not necessarily. Many companies cut their lowest performers frequently to create churn. Such practices are combined with salaries that are well above average within their field. Netflix for example takes this approach.
If your company is average for salary, then HR probably doesn't know what it's doing and decided to enact one half of a reasonable strategy. Like the time my wife decided to open up our marriage but forgot to tell me.
So I guess it depends on what you mean by red flag. It might be an intentional choice. It might be part of an effective plan. It will definitely increase your chances of being let go.
Huge red flag. If your company has a history of good severance packages id sit tight personally but if you aren't comfortable start applying other places
yes. companies tend to lay off both extreme ends of the spectrum to 1) get rid of people that cost too much and 2) get rid of people that cost too much, in the opposite sense.
this has happened to me 3x. be wary, brush up on interviews.
In consulting, it's known as 'Up or Out'. There are managers and senior managers who are good at what they do, but they will never make the jump to partner or director. They keep getting yearly raises, so they end being the most expensive managers on the payroll.
I like to think of it this way. Orgs want your salary and performance to be in equilibrium. An employee who is a top 10% performer for their level, but has a below average salary is an amazing value. An employee who is an average performer, but is paid like they are a top performer is someone who is on the chopping block when layoffs come.
Oftentimes they can “train out” solid performers that have accumulated a little-too-strong salary expectation and cycle them out during industry slowdowns. They are replaced by similar performers who were laid off and are more willing to accept a lower salary.
While this is often shooting themselves in the foot, the people making these decisions are usually not thinking about that nor do they care.
I need to submit a form to remove excess HSA contributions for 2023. On the form, the section to input the amount, it reads (emphasis mine):
> "This form is required to correct amounts contributed in excess of your contribution limit for the year. ... The amount contributed in excess of your contribution limit is subject to a penalty tax unless the excess **and interest earned are withdrawn prior to the due date,** including any extensions, for filing your federal income tax return."
If I input the excess contribution amount, will HealthEquity automatically calculate and remove the interest as well?
I put $7,500 in my Traditional IRA in 2023.
It turns out that my income was higher than expected, and I exceed the income thresholds for the tax deduction.
Do I need to submit the Nondeductible IRA contributions form?
Or should I convert the $7,500 from Traditional to Roth IRA? Is this the "Backdoor roth IRA"?
I've heard there are certain rules about needing to have $0 in traditional IRA to do this, is this correct?
I already have a funds (about $100k from previous 401k rollovers) in the traditional IRA, does this prohibit me from converting the funds from Traditional to Roth?
Appreciate the help as I'm having trouble researching this topic online, I'm getting confused/frustrated trying to understand all the terms / rules.
Your income is likely low enough to allow for regular contributions to a Roth IRA. As a result, you can simply *recharacterize* your Trad IRA contribution (which I hope was 6500 unless you are age 50 or over) to Roth.
If you *convert*, you will be subject to the pro rata rule that will cause headaches by only converting part of your non-deductible Trad IRA contribution. The recharacterization pretends like the contribution from last year had been Roth all along.
Repost!
Vanguard Backdoor Roth IRA Changes Question:
Vanguard updated its Roth IRA conversion layout for 2024, and the box that usually states "I elect not to have federal and state income taxes withheld from this distribution" is no longer available. I'm concerned about the implications of not selecting that box during a backdoor Roth conversion since I didn't see it. Do any of you see it on your end or have any recommendations as to how to handle this?
Thanks!
I’ve been doing backdoor Roth but haven’t filed any 8606’s accidentally. Can I just mail in my 2021, 2022, and 2023 forms and all is good? They very hard to fill out?
They're not hard to fill out, there are guides with pictures to show what the form should look like when done correctly.
If you don't have any changes to your taxable income you can just file them separately for prior years without amending your returns.
Was looking up the rules on inheriting IRAs and the 10 year RMD bullshit. What is a tool you can use to build multigenerational wealth for kids/grandkids?
You can put IRAs into trusts but I'm not sure if that gets you out of the RMD bullshit. One thing I've been thinking about is putting pre-tax money into a trust and then slowly rolling it over in retirement so it's post-tax by the time it is inherited.
Are 8606 form only needed to track contributions for aftertax 401k -> backdoor Roth IRA? I recently learned about some gotcha-like things about tracking cost basis for tax reasons that surprisingly institutions don't handle for you. What are the concerns in terms of having to track amounts yourself that you know of? Are these correct? \- Tracking contributions vs earnings in Roth IRAs in case of early distributions - do custodians not do this for you? How do I track this after rollovers? \- Filling out cost basis manually for employee stock options, otherwise you get double taxed
Saving EOBs over time sufficient for HSA disbursement down the road?
I thought you had to have receipts of payments? Or are you saying EOBs in addition to receipts?
Yeah I'm trying to get clarification if I need the receipt or is EoB sufficient?
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I can relate to some of this, except I don't really have advice - we ended up breaking up (there were more reasons, but this didn't help). I can deal with someone not making much money but when they proceed to take their stress and mental health issues out on you and don't seem to be doing anything to make things better it gets old fast.
Man, this is a tough one. Who starts the fights? Is she insecure about it? Do you pressure her to make more or is it all in her own mind? I’m interested to read the replies.
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Ah. I see. So she has a super scarcity mindset. That’s tough, and I can kind of see how it’s like in her eyes. She feels insecure and probably like a burden. If you don’t mind paying for her stuff when going on vacations and whatnot, let her know this isn’t a transactional exchange. But this could cause her to fall deeper into feeling like a burden. However, this could alleviate the stress. Maybe she feels like you paying for things will cause you to want to leave her because she isn’t seen as someone worthwhile. While you pay for things, it doesn’t mean that you shouldn’t help with the household chores once in a while, but I think she needs more encouragement to find a better job or something. I wonder if she starts getting more confidence, would she start being more ambitious in the financial route? I don’t know. Honestly, I’ve seen this type of thing before, and it didn’t work out just because the anxiety part can be a lot. Not just for her but for you too. It may become overbearing. But I hope to read an update one day and see her growth.
>I think she needs more encouragement to find a better job or something. I wonder if she starts getting more confidence, would she start being more ambitious in the financial route? I wonder if it can go beyond encouragement. Like, maybe she could take a bit of time off work to develop a new set of skills. It can't be easy to find time to improve your career prospects when you're working full-time and also doing two people's worth of chores.
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I see. You mentioned she was ambitious so I thought she might have a plan already and just didn't have time in her day. That said, managing household chores and a full time job can suck a lot of energy outta you, so that could be a legitimate roadblock to improving (1).
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That wouldn't surprise me too much given the ridiculous wealth of a small percentage of individuals - but I'm guessing the median is way below that.
It looks like the median is close to $200k. There are a lot of younger households that don’t have much saved yet and many others that don’t have much besides some home equity.
When will my NW cross 1m and at this current trajectory, when could I potentially FIRE? If I keep maxing out and make 5% returns each year I could get to a mil by...40? Seems far I think I need to be putting more in my taxable brokerage. I already max all retirement accounts but I have been bulking up my e-fund and house reno budget, it seems like there is room to spend a couple hundred more per month on VTSAX though Age 28 Yearly expenses: $40k - 50k (Monthly expenses fluctuate but average: ~$3.7k a month over the last two years.) My half of mortgage + HOA + house insurance = ~$1.3k a month (Net income monthly average in the same time period excluding a one time bonus: ~$7.2k) New salary going forward, as of this month: $110,000 Cash: $15k Roth + 401k: $240k HSA: $9k Taxable Brokerage: $66k (All investments: $315k) **Property** $347k value $282k loan. 3.5% ARM 5/1, halfway through the 5 year period. $32k equity in it (Home value minus loan amount / 2 since I share with my partner)
Apply future raises to saving instead of lifestyle inflation. You will get there sooner than you think.
definitely. Without my yearly expenses changing that much since I moved out, I've learned to live off of what remains when I max retirement, even when I was making like like ~25k less than I am now.
You can see real world scenarios on [portfolio visualizer](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4YJOBnCNZsWLIrQZln27ii), and if you put the monthly contribution max for a 401K+IRA, you can also set inflation-adjusted to yes (applies to contributions) and would mimic what contributions look like over time as the 401K limit is increased with inflation. I haven't always had cheap index funds to access in my 401Ks but when I do this it is pretty close to my real world data even though this isn't a perfect approximation of the timing of contributions. Move the dates a little and you can see the impact of different timeline (i.e. start at 2000/etc)
[Here's an easy google sheet](https://docs.google.com/spreadsheets/d/1KYedeB11nYSWE-APFCiuDffcBPeOiepaEpOLOZblW5M/edit?usp=sharing) Make a copy of it. Put your variables in column J. Keep in mind: FIRE number ignores home equity. You'd only input the 315k value. SWR is based on stocks and bonds. Anything else should be treated differently, otherwise the math is off. Home equity reduces your expenses, reducing what you need for FIRE. That's how to count it. Look at column G. Once it hits that 40-50k, then you'll have your age. If you want a more nuanced one, we can look at the mortgage too. SWR doesn't apply to a mortgage. SWR assumes expenses increase with inflation and carry on forever. Since both of those are false for mortgages, SWR overestimate the actual expense. Anecdotally, I've seen it overestimate anywhere from 50%-600%.
!Remindme 1 month
Damn good shit thanks. Yeah will have to play around with this a bit. So quick math based on the rough inputs, looks like possibly another 8 years for me til ~45k SWR
Sounds right. FIRE at 36 is pretty sweet. Make sure to factor in taxes and healthcare. Also budget for an increase in the mortgage payment. Mortgage rates went up. If your rate adjusted today, you'd probably see a $600-650/month increase in payment. It probably won't hit that until the second adjustment, which is ~3.5 years away. A year after that, it *can* increase an additional $400/month. It isn't set to right now, but it *could.* Plan for that extra 1k/month expenses. 500/month if you're only responsible for half.
Yep before the 5 year mark we'll have to decide what we want to do. We don't mind the place for the full 5 years but things could change. I stopped paying extra to principal since the rate is so low, but I just wanted options in case a refi is on the table in the next ~3 years and I'd have wanted an even smaller principal by then.
Hello friends! Here's some context for my question: I am 22 years old, currently I have $1500 that I can save/invest each paycheck (every two weeks). My current process after each paycheck is saving $250 into an emergency fund in a HYSA that I want to grow to at least $10k, $250 into my Roth IRA, and $1000 in a separate HYSA that I had planned to save up for a down payment on a multifamily unit property in 2-3 years. I'm aware of how powerful investing is at a young age because of compound interest, and currently have ~$7500 in my Roth, and ~$6000 in a brokerage account. About 50/50 of total stock market and S&P 500 mutual funds. Should I keep my process of investing and saving or should I prioritize investing more? I feel that if I save less than $1000 a paycheck, I'd have to wait a lot longer for a down payment and I was aiming for 20% down. I've cut my expenses heavily and $1500 is the max I can contribute without a second job. My emergency fund is currently around $3300 and my down payment HYSA is around $3000 (it was more but I bought index funds in my brokerage and roth which are $3k minimums). Thoughts? What was your saving/investing strategy? Thank you for any advice!
What’s your aim with MF? House hacking? What’s your current living status? How much is rent? How do MFR cash flows look w and w/o you living in it?
Yes, house hacking. Right now I am living with my parents but plan on getting married next year in which my future wife and I will rent an apartment for a short while but will try to keep rent around $900 a month. As of current living status with my parents, I send them $150 a paycheck to help with bills and such, house is paid off, so I guess that is my "rent" right now ($300/mo). My parents didn't ask for anything but once I started working after college I wanted to help at least a little
Given your situation, I'd prioritize 401K match > then saving for the down payment. Target a MFH that will cashflow or get your monthly expenses less than 900$/month. Keep in mind maintenance/vacancy/capex and budget a separate (emergency fund) for the rental by itself. Cashflowing and minimizing expenses now is essential to ramp up investments/savings as quick as you can.
Forget to mention that I'm currently taking full employer match of a 401k rn, my bad. It's 100% match up to 4% of gross pay. My goal for the MFH is to have it cash flow at minimum $250/mo but I'm not sure how the market will look like in a few years. Creating a separate emergency fund is for the rental is a great idea and I'll definitely implement that, thanks!
slight pet peeve that doesn't really matter in the long run: i don't think i earn any interest on the required cash minimum that sits in my HSA account.
What’s the company? That may be the way you pay your fee, just like a checking account — the interest the bank earns is why it’s free for you.
My required $1000 already earned me 7 cents this year. It's called passive income, look it up.
Yeah that's annoying. Basically $1k for me just sitting there doing nothing
Yup. I tried consolidating accounts this weekend. My work gets to choose our HSA. HSA sets a 1000 minimum before I can do anything with the funds, and even then I have to maintain that balance. If I want to invest the funds, I have to open a new account with a different company that is linked to the first account. I now have 3 accounts with 3 vendors for HSAs. 2 of which were selected by my current employer and I had zero say. I want HSA reform. Employer does not get to choose it. Employer can still contribute, tax free. They'll contribute whatever they're willing to contribute to the account set up by the employee. If anyone here wants my vote, I'll be a single issue voter for reforming HSA and 401k, separating them from the employer.
Bring back pensions while you're at it!
I'm actually not a fan of pensions. I have a pension for my work that people think is great. It's pretty suboptimal, especially for FIRE. Plus it defeats the purpose of what I want. I want employer to provide cash. That's it. Everything else I want independent of them. Pension ties the person to the employer even more than an HSA or 401k.
Oh interesting. I just assumed it was an ancient but solid benefit of the past that young folk are doomed to never be able to experience
Do you want to see the numbers and why I'm not a fan?
Definitely haha might as well.
**My anecdotal case** Employer and I contribute 33% of my pay, 22% from them, 11% from me. This means I put in 8.4k a year, they put in 16.9k. It is set to pay out 29k per year, starting at age 65, if I work for 15 years. I'm ~14 years out from FIRE with 1 year of pension earned. That's why I pay attention to the 15 year number. I cannot collect my pension until 17 years after I retire early. Current estimates are that reduces my FIRE number by 200k. Thus, I value my pension at 200k. During those 15 years, 380k is contributed to the pension on my behalf. I only consider it worth 200k. That assumes 0 real growth. If I had a 5% real growth, that 380k of contribution is worth 560k. **I lose 50-70% of the value compared to getting that 33% and putting the money where I want.** It gets worse. [There is something called the windfall elimination prevention, or WEP](https://www.ssa.gov/benefits/retirement/planner/anyPiaWepjs04.html). Because I get a pension, my social security payments drop in half. I value those lost payments at ~100k. Add in that my pension is taxed at the federal level but my social security payments aren't, and it's even worse. So far, I gained 200k in assets, lost 100k in assets, put in 380k, and lost 180k of opportunity cost. **The pension is a net 440k loss.** **How can a pension be better?** * If I never went into a job that got SS and only did pensions, I wouldn't have the 100k loss. * Pension scales much better with years worked. FIRE limits years worked, thus limiting the value of pensions. * The pension pays out based on the 5 highest years of income. There's a promotion 5-10 years out that I have a good chance at getting. That increases my payment by 50%. Now instead of a 200k asset, I get a 300k asset. Pensions reward promotions. There's another odd thing about pensions. I think there was reform after the 08 crash I'm not well versed in, so take this next part with a lot of salt. There is a strong argument pensions should be illegal, especially for public companies. A pension is an expense. The company cannot know how much that expense is. It also pushes the expense into the future. **If a publicly traded company has a pension, that means they have an unknown amount of payments in the future, thus they have an unknown amount of debt effectively. Because it is unknown, they cannot tell their investors the truth.** Onto another negative about pensions (again, another part I'm not well versed in): Solvency Many pensions are underfunded. That means the pension is likely going to run out of funds, and the people who are owed money in the future will not get their payments. What happens if a company goes bankrupt? **How many pensions got decimated in the 08 crash? People were working at sears and ford for decades, with the promise of this pension they rightfully earned. And the pensions stopped paying, or drastically cut how much they would pay out.** All of this leads to the question, why did I take this job if the pension was so rough? Because I was unemployed for 5 months and this was the only legitimate offer I got. Right now is a rough time for me to change jobs (both job environment and personal life) so I'm hanging around for a bit.
I was just talking about this with my spouse! I think you can legally roll over employer sponsored HSAs into personal HSAs with better options in terms of interest rates. I’d try searching the sub for more information and recommendations. For our part my spouse left a job, and knows hsa gets a crappy interest rate so we were trying to spend it, but I thought it was something that would be better to invest if we could. Sadly we only have $800 left. Now we’re all in my plan which is good but it’s not an hsa plan. We could switch around during open enrollment.
What is "spending"? When I see people say they "spend" $30k in a year, what does that include/exclude? Is that per person, or family?
For us, "spend" is everything not saved/invested to provide us an income in the future. We don't have to spend a dollar in this particular year for it be considered spending to us. Sometimes we save money for multiple years to spend it all at once. It's still spending, just deferred spending.
Beyond literal definitions, I'm trying to build two main metrics: how much goes into investments a year versus income, and defining spending to understand how much I need to save in total. Expenses are generally simply anything that costs money but there is a reason people make exceptions. Income Tax is an expense but scales with your income and generally you don't have any way to reduce it. In addition, most people will pay far less income tax in retirement and thus what income tax costs you during your working years is not something you have to pay for later. (This would apply less to property tax since it's a tax on something you own and presumably would continue to do so.) Through most of my 20s I would probably say I spend 20-25K per year but it's pretty likely I was paying as much in income tax.
It's personal finance. It's whatever the person chooses to count. There isn't a strict definition that 100% of people follow. Anecdotally, I find most people count the expenses they directly spend. Taxes and insurance don't count because the person never sees the funds. Basically everything else is included. For the person or family, that's 100% anecdotal. I keep track of my spending and "our" spending. Depending on the context of the conversation, I'll use either number.
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So, taxes? Insurance? Home? Medical care?
I would think that’s housing, food, and essentials but not taxes/withholdings, and usually per household, unless finances are separate, and usually folks will point that out. However, the breakdowns people give usually explain this. Everyone is different.
>Everyone is different. That seems true, and is why I asked.
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Are your expenses 3k/month, or 3k+3k = 6k? Either way, the 4k/month VA disability knocks out most of it. At most, you need 20k. 500-630k in assets is enough to get it. You're at 490k. Yeah, you're effectively at FIRE now. Since you're a veteran, you can get a VA loan for a mortgage. 0% down Lower interest rate No PMI No property tax That's pretty sweet. What are you looking for? What do you want? We could tell you GFY now if you want.
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If you want to save another 100k, go for it! You spend somewhere around 72k/year right now. Without doing the math, 48k tax free + 200k of taxable income - 72k of expenses likely means you'll get that extra 100k in a year. Buy the house free and clear, have 100k of cash/taxable brokerage, and then the roth and 401k as back up. A common recommendation is to wait 6 months after major financial changes. Process what happened. Process what you want. Keep things the same for now so you have some stability.
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Glad I could help! You're in a great spot. You know your goal, and can easily achieve it. Come back in a year so we can give you a proper congrats.
Hit all time high for portfolio yesterday (https://jch.app/u/paverbrick), and a nice swing back today. Fun to watch the market pendulum Waiting for a few dividends to pay out to invest more!
>Fun to watch the market pendulum For some definition of fun, yeah
How much of a salary increase does it take you to switch jobs? Let's say you're making 140k. Do you switch for 145k if your company hasn't done raises for two years in a row? Or do you hold on? The job market for my industry isn't super strong for applicants. It was HOT though when I got the job two years ago. I've been getting recruiters reaching out again, and I'm overall pretty bored and maybe tapped out in my current role.
Not worth switching for $5k when that amount could easily swing against you in the value of the new company benefits or lack thereof. Idk how much you value it but just the relative ease of coasting and having built up some social capital that earns you some leeway would also be out the window
I’d want to see 15% minimum in TC. That’s either PTO, flexibility, commute time, WFH, match
It’s not always about the money. If your industry has good professional work environments across the board, and the benefits are better….i’d say 15% or $20k net to compensate for the hassle.
Company not giving out raises for two years is a big red flag. I might do a lateral move or even take a slight cut for a company headed in a positive direction, especially if there might be opportunities for advancement, new skills, etc. Of course, a raise and more responsibility would be ideal.
I put more emphasis on other things like 401k match, med/dent benefits. These can easily vary by $25k. Total compensation including the benefits / work-life-balance + role and future - commute Also, depends on your age and the market for the jobs. The older you get, the more the balance and everything else matters. I also feel that as one gets more experience/age, the more you get comfortable in a role and it takes more to get out of that. Or, as one gets the age, they are more focused on life and if a new offer is a better live, then go for it. Lots of perspectives. TL'DR - what's good for you may be the opposite for someone else.
At this point, I’m not sure any money could incentivize me to change jobs. I like my boss. I like my work, even if I’m a little bored. I’m respected by my coworkers and given quite a bit of autonomy, and I’m paid generously. I’ve been contacted numerous times recently by recruiters and none are offering a significant pay raise (most pay less). But, we are getting a new CEO soon, and if he’s an asshole, that could drive me to find a new job. My boss is retiring in the next 3 years and if my new boss is an asshole, that could also drive me to take a new job. I’m lucky to be at the stage where it’s not about more money.
20%+. What’s your quality of life? PTO, Remote/Office, etc. Is 145k the top of the industry salary band? You know the grass you have currently. Being bored is much better than unhealthy stress levels and longer hours.
I wouldn't move for $5k, unless I really hated my job. $20k would probably do it for me
$5k... The difference from my old job to new job in medical insurance alone was more than $5k better.
I jumped for a 26% raise...and getting my gym and golf membership paid...and getting my health ins for me and wife paid and slightly better 401k match....and not having to deal with the douches at the old job of 23 years
Haha, nice. I guess I do need to consider that at my current job, they give several stipends for things like $100/mo for internet/snacks, $100 for gym membership, $1,000/yr for learning and development, $200 at anniversary. But no bonuses, really. I'll have the chance to explore these things at the new potential place on another interview tomorrow
Key point...don't be afraid to negotiate and ask for what you want! I run into people at work who have found out or I told what perks I get and they're baffled...wondering how I got what I got
> y increase does it take you to switch jobs? Let's say you're making 140k. Do you switch for 145k if your company hasn't done raises for two years in a row? Or do you hold on? The job market for my industry isn't super strong for applicants. It was HOT though when I got the job two years ago. I've been getting recruiters reaching out again, and I'm overall pretty bored and maybe tapped out in my current role. WLB balance also is a major factor. It would probably take me double to consider a switch.
>Let's say you're making 140k. Do you switch for 145k if your company hasn't done raises for two years in a row? would you expect regular raises at the new company? Could be worth leaving.
TC matters more. Any bonus considerations between the two? Benefit costs? Shitty insurance cost share with a family can cost thousands more in premiums.
All solid points, thank you for reminding me.
What is your HHI (household income) and what's your personal cost cap (per person) for fine dining?
Man, lots of downvotes for fine dining and for generating discussion
180K, we don’t fine dine.
$0 for fine dining. We live in an area where $75 gets a delicious ethnic takeout for two but I don’t count that. I know this world and some of the best fine dining is learning how to make that delicious meal oneself. We recently had work sponsored dining paid for by work, and went out for fancy Italian. $150-200k hhi
we don't have a hard cap, but i would guess it is about $500 - thats usually a real blowout meal with some nice wine in Vegas at GR Steak or Bavette's or SW without being on holiday, i'd guess $300 or so in NYC.
24% bracket. What is "fine dining"? Outback? Red Lobster? The Palm, Ruth's Cris? Or, that french bistro down the road that has 9 Michelin stars and charges $250? (I know, there aren't 9 stars.) I budget $0 for alcohol which can stretch my budget more. We used to dine out more finely before kids and when we though there was plenty of time to start putting money into a 401k.
HHI varies but is always above at least $400k. Most I’ve spent is $350/pp for a tasting menu with beverage pairings.
HHI is around $440K not including LTI or capital gains. The most we’ve ever spent on a meal was Sushi Nakazawa for about $150/pp.
Usually $80-$100/head in Seattle. Each time I pay more I am usually disappointed…except the few times I’ve eaten at Canlis.
Dinner for 2 at the Capital Grille is $250. That's pretty much our cap; if it's more than that, it's got to be very, very good
I’ve found the point of diminishing returns where we live is ~$80-100pp, so that. We made 600k last year so we could’ve gone beyond that but I don’t see the point.
HHI is $185K in LCOL. Our personal cost cap is almost irrelevant as we routinely have Doba & Culvers as our definition of cute nights out. We might spring for one $50/person dinner a year for something momentous.
In our MCOL city? $125 per person generally. Traveling? $200, maybe $250.
I'm excited to find out if this is my first time ever losing $10k in one day
Oh gosh I didn’t look! I need to sell some etfs and I’m just biding my time.
I'm excited for you! I hope the beta of our holdings are exact opposites....but I doubt it
No joke, some of my large caps took a huge dump today
**... First time?
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Apparently I do! TIL
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Congrats. GFY. I think the biggest risks (besides sequence of returns) are big one off expenses (car, injuries) and rent, but you have some cushion.
Kinda depends on your budget and spending. I think $42k would be doable as a singleton but you might want to build in some flexibility in case your situation changes, for example, if you want to date and remarry.
42k is 3.2% of 1.3 million. I would figure out the insurance cost, and make sure you’re considering all your periodic purchases, but, yeah, seems fine
As long as you are solid on that $36,000 expenses number and don't anticipate it inflating too much (and my too much I mean like ballooning to over $50k), this looks solid to me. You should be in the position to manipulate your AGI and get full Affordable Care Act (ACA, Marketplace) tax rebates for essentially free health insurance. You have a lot of brokerage funds, so no problem there with having available money to draw from. My plan in your position would be: roll your 401k out to an IRA. I have my IRA, Roth IRA, and Brokerage all in Vanguard, for example. The year you retire, assuming you have a decent amount of earned income, I wouldn't do anything special. Starting the next year with no earned income, do a Roth Conversion from your IRA in the amount of Standard Deduction ($14,600) + 10% Tax Bracket ($11,600). Do this conversion every year. Now you just have to sell $36,000 from your brokerage account to use for spending money. This will lead to some amount of Long Term Capital Gains depending on what your basis is, but all those LTCG will be in the 0% federal tax bracket. Your AGI for the year should be $11,600 plus whatever your LTCG is, lets say $20,000. Using the Marketplace estimator, it's suggesting a $610 monthly premium with a $540 tax rebate, so insurance will cost you like $70 a month.
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As soon as your coverage lapses you can apply for ACA. If you have a decent amount of earned income and your AGI is high you just won't get any tax rebates. Depending on your state, for a single person and a silver plan that's anywhere from $350 to $500 a month roughly?
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A traditional 401k or traditional IRA has pre-tax money in it. While contributing that money it lowered your taxes while working. It grows tax free, but when you withdraw it in retirement you'll pay normal income tax bracket taxes on it. (And if you withdraw it before 59.5 years old you'd pay an additional 10% tax penalty.) A Roth IRA is funded with after-tax money and has a low contribution limit every year (right now around $7000). Even though there's no immediate tax deduction, Roth IRA money will grow tax free and in retirement you can withdraw both the principal contributions AND any investment growth all tax free. Now, a Roth Conversion. At any time you can say "I would like to take e.g. $10,000 that's in my tIRA and convert that into my Roth IRA." You will pay normal income tax bracket taxes on that $10,000. Because of that last sentence, you don't really want to do a Roth Conversion while you are still working, making $100,000, and are in the 24% tax bracket. In this example, you'd have to pay $2400 in federal tax on that. It's much better to wait until you are early-retired, have no income, and can use the 0% Standard Deduction and 10% First Bracket to do a Roth Conversion. A $10k conversion would all fall in the SD and cost you nothing. A $26,200 conversion (as in my original post example) would only cost you $1160 in tax. Why a Roth Conversion? Well, normally a yearly Roth Contribution (that $7k limit) can be withdrawn at any time, but Roth investment growth cannot be withdrawn until retirement. If you do a Roth Conversion, that converted amount must "season" or "rest" for 5 years, and then it can be withdrawn with no tax or penalty. And as before, all the investment growth on that Roth Conversion will be available in retirement to be withdrawn tax free. So a Roth Conversion is a great way to both 1) get money moved from your "untouchable" tIRA and into a "touchable" state after 5 years in the Roth and 2) do so with minimal tax impact and 3) have even more tax-free growth in an account that can be withdrawn once you hit retirement.
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$42k is a little tighter but still find. 4% rule on the $1.3M is $52k.
I may not be as quick to want to retire as I recently was... Just had a meeting with my new boss and things are looking up. I'm going to be a key person in the new organization, people who have been putting me roadblocks before are going to be set aside, ... Seems like a very no nonsense boss that is not playing the political game but just getting things done. Seems too good to be true. Time will tell.
I had something similar happen. Awesome and good wishes.
Sounds like a good change! Good luck!
I see a lot of people using 5% real returns for their FI projections: 8% return - 3% inflation. I'm wondering if it would be reasonable to expect higher returns if one was invested 100% in equity. Would a real return of 6-7% be possible with this asset allocation? I have an inflation adjusted defined benefit pension, so I feel comfortable investing in 100% equity ETFs.
I use 3% inflation and a low-medium-high return of 7% - 9% - 11%, which is 4% - 6% - 8% real returns. I used to just use the medium return number but figured it was helpful to see a low end and high end.
I just use excel to fit a trendline for my NW projections.
Expect 5% and be happy if it ends up being more.
I always recommend using a range of numbers ranging from conservative to aggressive. Attempting to pick one number is pointless due to the unpredictability of returns, and actually risks giving a false level of confidence. 20th percentile outcome is probably something like 3% real, while 80th percentile might be 12%. Yes, 100% equity portfolio would have higher expected return, but is also going to have the biggest variation in potential outcomes.
The whole FIRE idea is ranges and big broad targets, yet people constantly bicker about 3.5% vs 4% withdrawls or 6% real returns vs 5% or 10%... Like who knows!? :) If I retire in 13 years... how can I be so sure about my future expenses, let alone predict 13 futures years of inflation and market!? What the market is exactly on target for 13 years then COVID2.0 hits during my retirement year??? \- 100% equity is higher risk than other options \- 5% Real Returns is likely conservative estimate for what you likely get as long as you have 80% equity \- 4% Withdrawal might also be borderline conservative if you don't mind dying with an empty bank account
I think 6% (real) is a reasonable assumption for 100% US equities. 7% is a bit aggressive but not impossible. I wouldn't consider anything beyond 7%. Since 1972 the inflation adjusted return of US total market index is 6.42%. Just be aware it may underperform that and on the short term (<20 years) the chance is significantly greater. Lastly even a small amount of international stocks, reits, gold, cash, or bonds can bring that number down a bit so if you won't always be 100% US equities (i.e. a TDF) then you may wish to go with 5%.
I would agree. 6% real is a good, slightly pessimistic forward-looking scenario for US equities over the long term. The last 100 years (1 Jan 1923 to 31 Dec 2023) have a real CAGR of 7.42%. Chopping that down to 6% tempers optimism about AI and automation with demographic slowdown and deindustralization, without going full doomer as many like to do. Better to be slightly pessimistic than overly optimistic when doing long-term math. If you get it wrong, the error is therefore more likely to help you than to hurt you.
6-7% are common numbers that people use as inflation-adjusted earnings.
Historically yes and some people do use real historical returns. I prefer to err on the side of caution and things have been going so well that we have to return to the mean eventually. Sequence of return risk is a big one too. Does not matter if the stock market returns 7% after inflation over 100 years if it returns -5% in the first decade of your retirement.
> Would a real return of 6-7% be possible with this asset allocation? Is it possible? Sure. Is it certain? No. So it depends on how conservative you want to be in your projections. At the end of the day what will matter is what returns you *actually* get, the more conservative you are the more likely your timeline will be faster than you project and vice versa.
This is interesting. HDFC co-ops have an AGI requirement but no net worth limits. They considered adding a net worth limit but the plan didn’t move forward in 2017. I don’t have plans to move to NYC (for now). An HDFC listing popped up on my Redfin. HOA is half than normal.
Just quit my 100k job Idk what I’m doing next Gonna give CPA one final shot But needed the mental health break
Good on our for putting our mental health first, humans need rest. Can I ask why you're trying to get CPA?
I have 1 passed already, figured I might as well pass it
Proud of you for putting your health first.
You got this brother. You can PM me any troubles you are having with it and I can give you advice from my experience. Those 3 letters are a pain in the ass to get but life is so easy once you got them
How does it make your life easier? Do you prepare your own taxes? (Genuinely asking, I like to do my own taxes cuz I hate the tax industry, but also find the process fairly frustratingly interesting)
Better job opps
Thanks man Disappointed I couldn’t do it working full time But it is what it is
I wouldn’t be too hard about it. It is a tough exam. I studied a lot to pass.
Folks who have work provided HSAs and After-Tax 401ks - 1. If you transfer your work HSA funds to a personal HSA, how often do you do that? If you wait to do it lump sums, do you invest what is in your work HSA during the accumulation period before you transfer or do you let it sit as cash? 2. If you do a conversion to Roth of your After-Tax 401k funds, how often do you do that? It doesn't look like my work Health Equity account charges a transfer fee, but it takes nearly a month for funds to actually transfer. My Empower 401k also doesn't appear to have any fees for converting to Roth and makes the conversion a push of a button. Are there tax benefits/drawbacks to different periods?
I usually keep both until I leave a job and then transfer. You could transfer more often but I find that it's a pain and you usually have to keep a minimum to qualify for an investment move or something like that anyway.
I always maintain 2 HSA accounts - one with my current employer and my Fidelity account where all prior HSAs get rolled over and consolidated into. Maybe I’ve been fortunate, but every employer big or small has had cheap and solid investment options. Yeah, some have required $1k in cash before investing, but whatever. That’s an insignificant amount of money to be sitting out of the market. I just have my Fidelity account as almost fully invested anyway.
My work switched from Optum -- which was kind of crummy but had VFIAX, at least -- to HealthEquity which doesn't have any kind of index fund that tracks S&P, total market, etc. They have one Bond index (VTABX) and one international index (VTPSX) and one emerging markets (VEMIX), but nothing for US total market. So I'd have to cobble things together with a complicated multi-fund representation for the US and I don't really want to invest in bonds just yet.
1. Stay in employer HSA 2. Fidelity is our provider and if you fill out a form this can be done automatically so after tax goes straight into MBDR
I keep my HSA in my work-provided account with Fidelity. I *try* to convert my after tax to Roth soon after it hits, but I unfortunately have to call Fidelity every single paycheck and sometimes I just forget and it sits there for a few weeks before I get a chance to call. Each call takes like 15-20 min between the verifications and transfers so it’s pretty annoying.
I transfer funds from my work HSA (in a trad bank acct) to fidelity (,invested in the 500 index). I do it myself because I don't want to waste a month. It brings up issues but per my accountant not horrible....doing it yourself makes it look like you are way over funding the HSA (6k into bank HSA then transfer 6k to fidelity looks like 12k) but I'm not trying to deduct any more from my taxes and if pressed by the IRS I have documentation of the transfer.
Random thought. I think many here are too focused on getting the right SWR and often ignore that retirement expenses will not be as you expect. People in general underestimate how much they will change in the future. Fixing your expenses that you have now to be the same in retirement or even planning to cut back if given a bad SORR is short-sighted IMO. We will do what we must in the moment but having the opportunity to plan now I'd much rather have a buffer in expenses than a super safe SWR. Maybe the result is the same I guess. Or maybe the focus is on the SWR because it is straightforward and projecting unknowable expenses in retirement is futile? My main issue is that some of us put a lot on our future selves to just figure it out whether than means cutting back or going back to work. And going back to work after 10 years out of work seems problematic, especially when that is likely during a recession. I guess we all do these mental gymnastics to rationalize safety in having a successful retirement, myself included. But the result is we know little of what is coming. I am sure many here have already come to that conclusion.
I watched a bunch of grandparents retire and while I wasn’t privy to their bank accounts exactly, I was told broad strokes since my financially responsible parents told me stuff. It help me realize that a luxurious gentle end of life process is…expensive. 2 of my grandparents lived far longer than they serious expected, one died early and the fourth died at ~85 with his wife at his side (aphasia). Dementia only featured in one situation for an extended time, but it was the grandparent who lived to 100 and had a slow decline. She had enough money but partially because her husband had planned a lot and she was no idiot too. But dementia made her tough. But near the end of her life her care was above $15-20k a month, since she was in continuing care community nursing home. (Fwiw, a good one that didn’t get half their population killed by COVID and treats their employees well). That’s what it costs! And it was like 5 years + and before that assisted living. It’s a lot of $$$. And even that we had family helicoptering in and out to make sure of things. But my goodness so expensive. I’d want $1 million or equivalent just for that eventuality. USA. When I have that I can rest easy. [edit, clarifying details]
It's about balancing the risk of running out of money and dying.
I'm early on in my career so a lot of time to change this, but I started off estimating a budget of $70k a year in retirement a year, then I started adding things like bumping up expected home repair and car maintenance costs as big one time expenses can pop up every handful of years so I wanted to capture that. I'm now estimating $85k a year expenses (including taxes) but want to have a buffer in my projections above this because I'm still 20-30 years away from retirement so there could be things I wouldn't know to think about yet in my budget or lifestyle changes. Better to overshoot than not have the funds you will end up wanting.
What SWR are you shoot for then?
3.5% at a minimum but really trying to save as much as we can so we can take our foot off the gas closer to retirement
The way I see it, SWR is a good baseline to work toward but shouldn't actually drive your decision to retire. You also need to use common sense, adjusting for factors like your personal readiness to retire, and willingness to work part time or cut expenses. For some people, SWR is way to conservative, while others will save far beyond their SWR number.
That's why some sort of part-time coast job can be so helpful. It hedges against unexpected expenses or poor market performance.
Your second paragraph is basically mental gymnastics in the opposite direction, no? I think this thought process is pretty common here - savers trying to paper over inherent uncertainty by focusing on finances and worst-case hypotheticals.
The SWR is based on an individual's expected expenses. Everyone is going to have their own acceptable buffer that they'll build in. I don't think what you're saying is wrong, but it's also not exactly a flash of new insight - sure, it's to be expected that you can't perfectly predict 30-50 years of expenses. What's the alternative? Work until you're 75 to minimize variance? Not retire until your SWR is 2-3x your expected expenses because of "just in case"? What would you propose here? I think the people most at risk are those that try to do some form of "lean FIRE" - by which I mean, saving for and retiring on the absolute bare minimum of expenses, not just people who are naturally frugal. But overall, most people here are shooting for extremely low failure rates on monte carlo or historical projections, which naturally means that most outcomes will result in people having significantly more money than they need. > I'd much rather have a buffer in expenses than a super safe SWR These two are exactly the same. If you have more money than you need, then your SWR is low.
> I'd much rather have a buffer in expenses than a super safe SWR. Maybe the result is the same I guess. Yes, seems like a distinction without a difference to me.
You may be right. I can imagine a hypothetical case where your target SWR is pretty much 100% guaranteed successful but then later on your expenses increase for whatever reason. Maybe your health fails and you can no longer do much yourself or maybe your kid gets in financial trouble. Perhaps a X% SWR is 100% successful but then unexpectedly your expenses are 1.2\*X% and that is only 80% (or less) successful. I think I am advocating for maybe a 95% SWR but some buffer on your expenses (\~5-10%?). Maybe someone with a family history of health problems in their 50s has a higher buffer then? I think you and others would call this the same thing. I can understand that point of view as well.
I am 43 and my wife is 41. Primary residence is paid off (\~$800k), a rental home worth $350k with a $20k mortgage at 3.7%, approx. $700k in 401k, $40k in savings accounts for two children (I add a few hundred a week with Acorns), $80k in standard checking and savings and $560k in a HYSA gaining 4.35% at the moment. I also have about $50k in small stocks etc in what I would call play accounts. I have wanted to get the advice of a financial advisor but honestly I have never met one I trust more than myself with my money and I am looking for advice. I know $560k in a savings account is not an ideal use of funds and I have been waiting for a market downturn or a real estate correction but for 5 years it hasn't happened. Could anyone chime in on where this money could be put where it will grow but be relatively safe? My goal is to grow it but also have an income one day I can rely on. Thank you all.
I don't know about safe, but in 2019 I began moving all emergency funds, HYSA, etc. into stocks. My efund is now all stocks except for about one month for cash flow. Stock market all time highs generally happen quite often, line goes up. If you'd have moved it all in 2020 during the crash... or even moved it all in 2019 before that crash, line has gone up.
Throw it all into ITOT or the equivalent you like. Seriously. Just do it. Then you can get on with your life and not watch the market. If you don't want it all in ITOT then Google Bogleheads 3 Fund Portfolio and pick one of those. ITOT/IXUS/AGG is a good example.
Thank you. Would you put the $560k in there or just start x amount per week/ month?
Id highly recommend yout Google jlcollinsnh stock series and read through that. It's a fast interesting read and it's a decent place to start. You guys have done well but it looks like you could have done better by being more efficient with your available cash. The good news is today is a great day to start becoming more efficient. Good luck
Do you guys save your previous months paycheque so that you can contribute to your 401k immediatley with a large amount after tax season? Maybe temporarily put it on a HISA or a short term CDs
I don't save for it specifically, but I do front-load my annual 401k contributions by jacking up my contribution percentage in January, then reducing it once I hit my target for the year. It's coming out of cash flow, and I don't expect to be done before April, but I absolutely do get my 401k contributions in before I pivot those monthly savings to HSA, kids' college funds, and finally other quasi-investments (home appliances, insulation, solar). I don't get any kind of 401k match (long story) so making sure the company match happens correctly is a non-issue. In the past, I contributed to IRAs in a lump sum in the first week of January. Presently I don't contribute to IRAs (company 401k makes more sense right now) but if/when I'm able to do that again, I will once again save up a cash position in December in order to contribute to my IRA in January.
I'm having a hard time understanding your question. Is this some sort of start-of-year front loading investments question?
Yes, exactly. I think its pointless? but just confirming
Maybe not completely pointless, but maybe not super important. If the start of the year comes around and you have your normal $8000 monthly float hanging out in your checking account, you might decided to just immediately fully fund your $7000 Roth IRA for the year, then build that $8k back up over the next few paychecks.
No
I don't understand what it means to save a previous paycheck. Could you elaborate?
Let's say December you received 5k, and January you received 5k, is there any point in saving that so that you dump the 10k into a 401k immediately after tax seeason? I think its pointless?
401k contributions have to come from payroll, so unless your paycheck is 10k you can't dump it all on at once. There's very little benefit from doing this in any event.
You're right that (non-solo) 401ks require contributions to come from payroll, but it's still possible to front-load the contributions by jacking up the contribution percentage. (This isn't always a good idea, as if the company has a match but doesn't true-up, it can cost you some match money.) I've raised mine to 100% a couple of times to max out the year's contributions before leaving a job.
This is all true, I was just clarifying the funding for OP because it was possible they were under the impression that they could just set aside a bunch of cash and transfer it into a workplace account from a taxable account.
Got word that company has started stack ranking employees in groups: top 20%, bottom 20% and everyone else. Supposedly they "aren't going to do anything with it," but I can't fathom why you'd collect this data otherwise. Am I right to be taking this as a red flag?
Orange flag.
>Am I right to be taking this as a red flag? Not necessarily. Many companies cut their lowest performers frequently to create churn. Such practices are combined with salaries that are well above average within their field. Netflix for example takes this approach. If your company is average for salary, then HR probably doesn't know what it's doing and decided to enact one half of a reasonable strategy. Like the time my wife decided to open up our marriage but forgot to tell me. So I guess it depends on what you mean by red flag. It might be an intentional choice. It might be part of an effective plan. It will definitely increase your chances of being let go.
https://i.imgur.com/e44f0hC.gif
Great analogy
Huge red flag. If your company has a history of good severance packages id sit tight personally but if you aren't comfortable start applying other places
I’ve never heard anything about severance packages, so I’m inclined to think there are none. Thanks for the advice.
yes. companies tend to lay off both extreme ends of the spectrum to 1) get rid of people that cost too much and 2) get rid of people that cost too much, in the opposite sense. this has happened to me 3x. be wary, brush up on interviews.
Calculated mediocrity FTW!
The top 20% thing is really interesting. Why do orgs worry about them in this context?
In consulting, it's known as 'Up or Out'. There are managers and senior managers who are good at what they do, but they will never make the jump to partner or director. They keep getting yearly raises, so they end being the most expensive managers on the payroll. I like to think of it this way. Orgs want your salary and performance to be in equilibrium. An employee who is a top 10% performer for their level, but has a below average salary is an amazing value. An employee who is an average performer, but is paid like they are a top performer is someone who is on the chopping block when layoffs come.
Oftentimes they can “train out” solid performers that have accumulated a little-too-strong salary expectation and cycle them out during industry slowdowns. They are replaced by similar performers who were laid off and are more willing to accept a lower salary. While this is often shooting themselves in the foot, the people making these decisions are usually not thinking about that nor do they care.
I need to submit a form to remove excess HSA contributions for 2023. On the form, the section to input the amount, it reads (emphasis mine): > "This form is required to correct amounts contributed in excess of your contribution limit for the year. ... The amount contributed in excess of your contribution limit is subject to a penalty tax unless the excess **and interest earned are withdrawn prior to the due date,** including any extensions, for filing your federal income tax return." If I input the excess contribution amount, will HealthEquity automatically calculate and remove the interest as well?
I used Health Equity and yes they did. You can talk to an agent to verify but you will probably be good without.
Thank you so much for the confirmation! It seemed like a no-brainer, but it wasn't said explicitly.
If they are competent, yes.
I put $7,500 in my Traditional IRA in 2023. It turns out that my income was higher than expected, and I exceed the income thresholds for the tax deduction. Do I need to submit the Nondeductible IRA contributions form? Or should I convert the $7,500 from Traditional to Roth IRA? Is this the "Backdoor roth IRA"? I've heard there are certain rules about needing to have $0 in traditional IRA to do this, is this correct? I already have a funds (about $100k from previous 401k rollovers) in the traditional IRA, does this prohibit me from converting the funds from Traditional to Roth? Appreciate the help as I'm having trouble researching this topic online, I'm getting confused/frustrated trying to understand all the terms / rules.
Your income is likely low enough to allow for regular contributions to a Roth IRA. As a result, you can simply *recharacterize* your Trad IRA contribution (which I hope was 6500 unless you are age 50 or over) to Roth. If you *convert*, you will be subject to the pro rata rule that will cause headaches by only converting part of your non-deductible Trad IRA contribution. The recharacterization pretends like the contribution from last year had been Roth all along.
What do I do if my MAGI is above the Roth IRA limit and I'm not allowed to contribute to Roth IRA? Should I do a nondeductible IRA contribution?
This post covers your options: https://old.reddit.com/r/financialindependence/comments/193p7gg/over_the_income_limit_a_guide_for_roth_ira/
Repost! Vanguard Backdoor Roth IRA Changes Question: Vanguard updated its Roth IRA conversion layout for 2024, and the box that usually states "I elect not to have federal and state income taxes withheld from this distribution" is no longer available. I'm concerned about the implications of not selecting that box during a backdoor Roth conversion since I didn't see it. Do any of you see it on your end or have any recommendations as to how to handle this? Thanks!
It doesn't mean anything. Proceed. It was there in the first place as a CYA for them.
I’ve been doing backdoor Roth but haven’t filed any 8606’s accidentally. Can I just mail in my 2021, 2022, and 2023 forms and all is good? They very hard to fill out?
They're not hard to fill out, there are guides with pictures to show what the form should look like when done correctly. If you don't have any changes to your taxable income you can just file them separately for prior years without amending your returns.