Financial Independence Made more from my investments than my labor yesterday |
- Made more from my investments than my labor yesterday
- People without any retirement
- Just bought $35k of VTSAX, was planning on dumping all disposable income into this fund, should I also buy international and bonds???
- Daily FI discussion thread - January 27, 2018
- How long did it take your net worth to increase to the next $100k higher and beyond?
- Non-deductible tIRA vs taxable - no backdoor Roth
- New Teacher Looking for Advice
- Formerly totally risk averse FI hopeful. Are we still too risk averse?
- 529 as Tax-Deferred Investment Account
- Is it wrong to just invest in the stock market? And just in one ETF?
- If you had a sizable chunk of cash right now, what would you do?
- Buying house early in life
- Calculating Living Expenses in Retirement
- Which is better for FI? Buying a $500k-$600k condo in a rapidly increasing real estate market or renting for $2k in rent?
- How should I split retirement contributions
- What is it like working towards FIRE with or without children?
- Growth stocks for 22 year old on FIRE path
- How much faster did compound interest help you raise your net worth when you increased your 401k (and/or other retirement) contributions?
- How Your Psychology Affects Your Finances
- What's the best way to contribute to IRA when you're over the income limit?
- Risk in taking a year off?
| Made more from my investments than my labor yesterday Posted: 27 Jan 2018 05:10 AM PST |
| Posted: 27 Jan 2018 01:23 PM PST I have a question regarding some of my coworkers retirement. I am retiring in one year at 41 and have been saving my entire life to achieve that goal. I recently started a new job and I was asking the people I work with about the 401k plan. I work on the road with 5 other people and all of them do not have a 401k or any other retirement. They range in age from mid 40's to mid 50's. One guy said he couldn't afford to pay into a retirement, but everyday we went out to eat at a restaurant. Eating out twice a day is expensive and our company does not reimburse us for food. All of us go out to eat and I know they could easily save by not eating out everyday. I guess I don't understand the mindset of people who do not save anything for retirement. Does anyone have any insight on why people don't save for retirement? I mean who wants to work until they are dead? [link] [comments]  |
| Posted: 27 Jan 2018 11:23 AM PST Hey guys, 28M newly practicing pharmacist making 120k gross (85k post tax), living frugally on 35k (30K expenses, 5k vacation), saving the rest of my money. Just opened a Vanguard account and bought 35K worth of VTSAX. Posted here before and people just said dump all your money in here and wait 10 years and youll be rich. With advice like that that was going to be my plan dumping aound 35-40K a year into the fund and riding it. Should I diversify as well and get into the international and bonds as well. Thanks My goal is to have 500K in about 7-10 years, is this the best way to do this, I hate working and want to work part time after that. Thanks guys [link] [comments]  |
| Daily FI discussion thread - January 27, 2018 Posted: 27 Jan 2018 03:08 AM PST Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| How long did it take your net worth to increase to the next $100k higher and beyond? Posted: 26 Jan 2018 09:29 PM PST |
| Non-deductible tIRA vs taxable - no backdoor Roth Posted: 27 Jan 2018 01:32 PM PST Not the worst problem to have, but my MAGI was too high this last year to contribute to a Roth IRA. Due to the pro-rata rule, I cannot do a backdoor Roth because of previously rolling over a traditional 401K into an IRA. I'm already maxing out my 401K and HSA, so my choices to proceed are: non-deductible tIRA or taxable account. From what I can see, the non-deductible tIRA has the advantage of tax-free growth. But it has the disadvantages of being locked up until retirement age (yes, I know the work-arounds) and being taxed as ordinary income. It also requires careful tracking of the contributions so that the contributions aren't taxed again. It also has the state-level asset protections offered to IRAs. The taxable account has the advantages of easier access at any time and being taxed at the lower capital gains rate. The key disadvantage is that it growth is taxed when taxable events occur, such as account rebalancing. Which one is generally considered better? If I go with taxable, what type of assets should be avoided due to tax inefficiency? I know REITs are in that category, and my understanding is that I should really focus more on ETFs than mutual funds. [link] [comments]  |
| New Teacher Looking for Advice Posted: 27 Jan 2018 05:42 AM PST I've been lurking on this sub for a while - thought I'd come out of the woodworks and ask for your good advice. I'm a first year teacher, and I was lucky enough to have most of my college expenses covered by scholarships and help from family, but I do have about $21,000 in student loan debt, broken up as follows:
As a teacher in a Title I school, I can have up to $5,000 of the loan forgiven after 5 years of teaching (so in June 2022). With my current income and spending, I have about $1,600/mo to throw at either paying down debt or saving. Right now, I'm putting $200 towards the loans each month (minimum payment of $175) and $1,400 into a 457 plan invested in a TIAA target date fund, which I figure will be great to heavily front-load now for RE to give the funds maximum time to grow. I would love to have enough in savings to RE (or at least be able to take a few years off from work to focus on parenting) in 10 years or so. I also have about $10,000 in savings beyond my emergency fund, half of which is reserved for going into my 2017 year Roth IRA contribution - I could repurpose this to pay off half the loan right now if that would be a better idea than investing in the IRA. Only thing is, I don't really know what I'm doing. Would it be a better idea to aggressively pay down the debt before putting into savings? Pay down the debt but leave $5000 of the lower interest loans until I can have the rest forgiven in 2022? Stay the course and keep balancing between TIAA investments and paying off debt? I hate having the loan looming over me, and there would definitely be a huge emotional benefit to paying it off ASAP. I just want to make sure it wouldn't be an mistake missing out on potential investment returns beyond the guaranteed 4.6% return of paying off the higher interest loans. Appreciate any advice! [link] [comments]  |
| Formerly totally risk averse FI hopeful. Are we still too risk averse? Posted: 27 Jan 2018 03:49 PM PST TL;DR: 47 yo couple, aiming to FI/RE. 43% of ~700k wealth is in very low or no-risk accounts. That's way too risk averse--aint it? This has been a year of waking up. In fits and starts. The past two weeks have been the most recent waking, and I hope to stay awake. Part of waking up was finally investing. I've griped here before that I would have been FI/RE by my early 40s had I invested in the most vanilla way, but my wife was adamantly against it, I was lazy and distracted and utterly news avoiding, and my friends and family all told me it was risky. But I got over it, with your help, and we invested finally, last year. As part of staying, I have now looked at every penny we have, and finally saw how we're doing and how our investments did. Previously, I was just not looking since I was concerned about freaking out if they went down or whatever. The good news is they went up, a lot by my standards...but.... ...the could have gone up a LOT more, like 80% more--almost doubling our gains!--accelerating us more more toward FI (not just this year, but with the compound effect of future gains on that return). That's because a large amount of our money is still in either low risk or no risk accounts. That's largely due to my wife, who is incredibly risk averse and believes investing is no different than gambling. In the summer, she finally relented and allowed us to put our large cash savings at risk in the market, but she also insisted a good chunk of it (22%) be in bond funds, whereas I wanted less in bond funds at our age (46 then). She also insisted we leave about $35,000 in cash in the bank as a safety buffer. And finally--and this hadn't even occurred to me then--our 403b accounts are mostly all in "guaranteed 3%" interest, as are some inherited annuities. And then, as we saved aggressively this year, we just let more money pile up in cash in banks. So here's where we are now: Of our "non-risky" money, which represents about 43% of our wealth, we currently have about:
Question: Just from a standpoint of sensible investing at our age (47) for getting to a robust and probably home-owning FI/RE as soon as is reasonably possible, we're still way too risk averse, aren't we? I'm not asking about how much money I would have made this year had we been "all in"--as I said above, it's a tremendous amount more. I'm asking for what is a recommended portfolio, and whether ours is just too risk-averse compared to that. I suspect it truly is, and I think we should be way more into index, growth, and dividend funds. I should say we have no kids nor will; I have no parents now; we don't own any house but would like to someday; my wife hates her job but it pays 6 figures; I currently make $25k/year but am looking or better; we're currently able to save probably $40k+ a year into retirement and brokerage accounts. I know the market can also go down, way down. My wife thinks, though, that all our money is at risk of completely disappearing, and was at first adamant to keep her $20k in 3% guaranteed. She has since relented and will allow me to unwind that money into an index fund (unfortunately that will take 9 years! That's the deal with this investment...argh). I'd like to begin that process, plus put the $35k (partial inheritance) right into a growth or index fund (with 11k of it in our tIRAs), then on Monday shlep down to Schwab again and put about $20k more into more ETFs. But I also don't want to be "irrationally exuberant" about this. What's your call? [link] [comments]  |
| 529 as Tax-Deferred Investment Account Posted: 27 Jan 2018 02:10 PM PST TL;DR: For investors in a high tax bracket who have exhausted their other tax-advantaged accounts, a 529 plan could be used as a tax-deferred investment account even if they don't expect to use it for education. In order to have a tax-efficient asset allocation, so far, I have kept all of my bonds in my traditional 401k while putting stocks in my taxable account, Roth IRA, and remaining space in my 401k. However, I am about to run out of room in my 401k to continue doing this while keeping my asset allocation (my taxable accounts are growing faster than my tax-advantaged accounts since there are no contribution limits). While I could hold bonds in my taxable account, this isn't enticing as my marginal tax rate is quite high (53.1% between 37% federal income tax, 12.3% state income tax, and 3.8% NIIT). I have realized that a 529 would be a better option to hold the bonds even taking into account the 10% penalty for withdrawals that are not used for education. While the money is in the account, it grows tax-deferred on both a federal and state level and I can then withdraw it in the future when I am in a lower tax bracket during retirement. Consider the following example. Suppose I put $10,000 in bonds in a taxable account. It earns 3% on a pre-tax basis (1.407% after-tax) for each of the next 10 years. At the end of the ten years (including re-investment of the interest), I will have 10000*(1.01407)10 or $11,499.51. Now suppose instead I put $10,000 into a 529 plan and invest it in bonds. I'll assume it earns less because the expense ratios are higher within Vanguard's 529 plans than normal Admiral fund shares. Specifically, I will use 2.84% as the expense ratio on the Vanguard total bond market option is 0.16% higher for 529 plans. Then, after 10 years, the balance of the 529 plan will be 10000*(1.0284)10 or $13,231.85. Now, suppose I withdraw the full balance then. Now, the original principal of $10,000 is untaxed, but I must pay tax on the $3,231.85 of earnings. Now, I expect at this time to be in a lower bracket since I will be retired. Let's suppose I am in the 24% federal income tax bracket (income up to $157,500), 5% state income tax bracket (not sure what state I will be in so this is a rough number, but don't plan to be in California still), and pay 10% penalty for a total of 39% marginal rate. Consequently, I would pay $1,260.42 in taxes and be left with $11971.43. Better than achieved if I just used a normal taxable account. Obviously, this is not applicable to everyone, but this is a tax planning option that I haven't heard here or on other FI forums/blogs so I wanted to put the idea out there. If anyone sees any flaws in this reasoning/provisions of the tax code that this violates, please let me know. [link] [comments]  |
| Is it wrong to just invest in the stock market? And just in one ETF? Posted: 27 Jan 2018 01:48 PM PST I've seen Buffett say something along the lines of: invest in an index like the S&P 500 incremental over time and put some money in bonds, depending how old you are. He also says to not have money just sitting there. You should invest in assets. With this in mind if you have zero debt, enough emergency cash to be comfortable for an extended period, you're not interested in purchasing property or having a family. Should you just put all your remaining cash into the S&P 500 or a similar index? [link] [comments]  |
| If you had a sizable chunk of cash right now, what would you do? Posted: 27 Jan 2018 03:59 PM PST Marketing timing aside - Invest all immediately, DCA it, or hold? [link] [comments]  |
| Posted: 27 Jan 2018 03:53 PM PST Is it a smart move to buy a house early on in life? I'm going to graduate this coming semester and I have a job lined up that will pay pretty good, and I think that after I work there for less than a year I should be able to afford the down payment on a decent house. I live in a very quickly growing area, and I think the value of real estate will only go up. Is this a good decision or not? [link] [comments]  |
| Calculating Living Expenses in Retirement Posted: 27 Jan 2018 03:40 PM PST I'm fairly new to this sub and have a question about how you calculate living expenses in retirement. Since many here plan to be retired for quite some time, how do you predict what your expenses will be? I have a long way to go before retirement and can't figure out how inflation and all that is factored into these figures. Let's say wife and I make ~$82k per year pre-tax and will be happy to live off 85% of this lifestyle in retirement. After 30 years of inflation (and compounding interest on our retirement funds), what's a ballpark number for what we'll need yearly? [link] [comments]  |
| Posted: 27 Jan 2018 01:25 PM PST *or paying $2k in rent? I cashed out $22k earlier this month (sort of regretting now..) because it was originally for my down payment that I might need in 1-2 years (that's not all I have for downpayment). I'm thinking of buying a property in Seattle now and the real estate market seems to be increasing at 10-20%. I used this tool to find out whether it's better to rent or buy, and it says for $605k home, it's better to rent at $2k unless I plan to stay for more than 9 years. I wonder if the tool is based on a very pessimistic view of housing market tho. Although it's impossible to guess the housing market, seeing what happened to SF, I wonder if I should get a property in Seattle asap. I want to have a place of my own by the time I retire; so it's a question of whether to buy now or later. Which would be better for FI? Buying a $500-600k condo in a rapidly increasing housing market, or rather continuously investing in index funds while renting? In the latter case, I better put back my $22k that I recently cashed out...:( [link] [comments]  |
| How should I split retirement contributions Posted: 27 Jan 2018 11:59 AM PST I have the option of putting money into a trad 401K or a Roth-401K from my work plan. Between myself and the company I have been maxing my trad 401K, ~$54K each year. Someone recently suggested I switch over to the Roth 401K for my contributions. The breakdown this year would be $18.5K in the Roth and then the other $36K into the trad since the companies part is not allowed to go into the Roth. Does this make sense from a FIRE stand point since having some Roth probably makes withdrawals before retirement age a little easier? [link] [comments]  |
| What is it like working towards FIRE with or without children? Posted: 27 Jan 2018 04:02 AM PST I'm interested in hearing people's experiences about working towards/achieving FIRE while having/not having children. Obviously if you choose not to have children your living expenses are lower, and it is easier to achieve FIRE. Also, several articles state that the cost of raising a child is around $250k, which can be higher or lower depending on the COL in your area. This post is to delve more deeply into how this affects you and your journey for FIRE. Some questions to motivate the topic:
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| Growth stocks for 22 year old on FIRE path Posted: 26 Jan 2018 08:03 PM PST First time poster here. Fresh college grad with a 30k net worth and currently saving around 90% of take home pay. I have an itch to take bigger risks when I am young and I was thinking of putting 10% of my net worth in highly speculative stocks (after doing my due diligence of course). Does anyone here buy growth stocks as part of their FIRE strategy? Has investing in this manner paid off for you and accelerated your FIRE progress? Would love to hear everyone's opinions! Edit: Seems like my question is being misunderstood. I am not interested in penny stocks, cryptocurrencies, weed stocks, or anything along those lines. I'm thinking of buying stocks of companies that actively reinvest their profits to grow the business and have the potential to outperform (ie. NVDA, NFLX, CAT, ABBV, etc.). [link] [comments]  |
| Posted: 27 Jan 2018 02:29 PM PST |
| How Your Psychology Affects Your Finances Posted: 27 Jan 2018 09:49 AM PST https://twocents.lifehacker.com/how-your-psychology-affects-your-finances-1821986465 There are some interesting FIRE-related concepts in here that can be used as psychological strategies to trick your brain and leap off the hedonistic treadmill. [link] [comments]  |
| What's the best way to contribute to IRA when you're over the income limit? Posted: 26 Jan 2018 04:39 PM PST EDIT: Over the income limit for receiving any deductions for traditional IRA contributions. I'm not sure what the best way would be or if I even understand it correctly. Let's say I put $5500 after tax into a traditional IRA. When you convert from traditional to Roth IRA, you pay income tax on the amount, so does that mean I have to pay tax twice? How does conversion work taxwise? I'm not sure how long the money should be in traditional or Roth and when the best time to convert would be. Should I immediately transfer money from traditional to Roth IRA or let it grow in Traditional IRA and transfer the amount I'd need in 5 years before I plan to retire (so I'd pay less income tax)? I want to utilize backdoor and mega backdoor plan but am unclear about the time my money should be in traditional vs Roth. [link] [comments]  |
| Posted: 26 Jan 2018 08:12 PM PST What is the collective wisdom on taking a year off voluntarily? I'm mid-40's, making low six figures, have 25x current expenses in investment accounts (60/40), wife/kids, and a paid off house in a relatively LCOL location. Still have college and braces for kids to deal with in the future. In the next couple of years I'm expecting a one-time payout that could be anywhere from 1-3x current annual salary (taxed at LTCG). At that point I will have been working 25 straight years in the software industry and to be honest, I might be ready for a change. It's easy to fantasize about FIRE during these heady days of never ending all time highs in the market. Assuming we don't have another 2008-2009 headed our way I'm wondering if taking a year off after that payout might scratch that FIRE itch. My biggest concern is explaining a one year gap in employment when I look to get back into the workforce. Is this something others have found problematic? Any suggestions? [link] [comments]  |
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