Financial Independence Daily FI discussion thread - Thursday, October 28, 2021 |
- Daily FI discussion thread - Thursday, October 28, 2021
- 10 Years to $1m NW
- Backdoor Roth (and other) retirement account restrictions removed from newest reconciliation bill draft
- Retirement Planning Video (& my notes) from 'Normal' Financial Planners
- 401k Excess Contributions
- Not sure if I should pay off my house in 5 years but be stuck in an area I hate
- Really dumb excel question
- Just passed the 5m net worth mark. AMA
- How does the FIRE community approach Christmas/gift giving?
| Daily FI discussion thread - Thursday, October 28, 2021 Posted: 28 Oct 2021 02:02 AM PDT 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]  |
| Posted: 28 Oct 2021 11:48 AM PDT As the title suggests, I achieved $1m NW in 10 years. I'm 33, SO is 31, Son is 6. We live in a MCOL suburb in the Midwest. 2011 - Graduated college in May 2011. Started job in July earning $43k. Wife graduated in December 2011. 2012 - We bought a house for $140k (used all of our savings for a down payment off $7k). Our combined salary was approx. $65k. Net Worth = $25k 2013 - Combined salary approx. $70k. Net Worth = $55k 2014 - Paid of student loans ($19k). Wife got a new job. Combined salary of $80k. Net Worth = $91k 2015 - Son was born. Paid off car loans ($20k). Promotion/raise at work - combined salary of $100k. Net Worth = $125k 2016 - Combined Salary of $110k. Started after tax brokerage account. Net Worth = $215k 2017 - Bought a new house ($267k). Combined salary of $125k. Net Worth = $351k 2018 - Combined salary of $130k. Net Worth = $460k 2019 - Combined salary of $135k. Net Worth = $635k 2020 - Combined salary of $140k. Net Worth = $825k 2021 - Combined salary of $150k. Net Worth = $1m+ (hit $1m in Aug 2021). It took 10 years and 1 month of working to surpass $1m net worth, which breaks down as follows: -$17k cash -$300k stocks (after-tax) -$525k retirement -$150k house equity -$35k HSA We've averaged ~$100k as our combined salary over the past 10 years. I could be misremembering exact salaries throughout the years, but those listed are probably pretty close. We've maxed out ROTH IRA's since 2012 and have maxed 403B (w/ 10% match), HSA, and contributed about $25k to after-tax account for the past 5 years (saving ~$75k annually). We still go on vacations, buy stuff on Amazon, order take-out…etc. Our expenses have always between between $45k-$50k since having our son in 2015. Lessons learned: 1.) Prioritize savings. When I received a promotion/raise in 2015, I started maxing out my 403B, instead of spending the extra money. After doing that, I think I actually lost $50/mo in my paycheck - worth it. 2.) Kids don't have to be that expensive - We kept our starter home (very low payment) while our son was in daycare ($800/mo), and didn't move until we eliminated that expense. We spend a lot of time with family, going to parks, camping….These aren't expensive activities. 3.) Reaching $1m was a total let down. I plugged in the numbers, realized it, and then just went about my day. It's too abstract (spreadsheet money). 4.). Write a 5 year - 10 year plan. We did that in 2012 (listed out our assets, debts, goals for each year). It helped provide direction, in the event we found ourself with extra money. Our goal was to reach $1m by age 36. [link] [comments]  |
| Posted: 28 Oct 2021 03:15 PM PDT It appears the restrictions on Roths have been removed from the most recent draft of the reconciliation bill. I've skimmed the text and searched for references to Roth, IRAs, or retirement accounts and don't see anything, so my initial analysis indicates most of the concerning elements have been removed, but I welcome others' input. Link to text: https://rules.house.gov/sites/democrats.rules.house.gov/files/Section-by-Section-117HR5376RH-RCP117-17_0.pdf Link to another post coming to the same conclusion: https://www.asppa-net.org/news/browse-topics/retirement-mega-roth-provisions-dropped-reconciliation-bill [link] [comments]  |
| Retirement Planning Video (& my notes) from 'Normal' Financial Planners Posted: 27 Oct 2021 10:57 PM PDT I joined a webinar this week on Retirement Planning, being run by some accountants and financial planners I know - I thought it would be good to step outside the FIRE bubble for a half hour -https://businessdepot.com.au/blog/retirement-planning-webinar/ With nary a "Safe Withdrawal Rate" in sight, I still had some takeaways. 1. Retirement Spending will vary They break down retirement into 'Active' and 'Passive', and there's a nice chart at the 10 minute mark that shows how spending changes. "Active Retirement" is the higher-spending first few years, when traditional retirees are spending money on a few luxuries - maybe house or car improvements, or that big world trip. "Passive Retirement" kicks in after 75-80 years of age, when spending typically declines (save perhaps some healthcare increases towards end of life). To that I might add a third category for 'Early' retirement - the years between FIRE and say 55/60, when you need to be more mindful of protecting your stash from the sequence of returns risk. So this is why I doubt many financial planners will dive too deeply into things like The 4% Rule - much more sensible, based on their experience of typical retirees, to be more granular year-by-year or chunk-by-chunk because your spending will (on average) go down as you age. 2. Not Leaving an Inheritance Not advice, but their observation - more people are choosing to give kids a financial leg up rather than leaving them money in an inheritance. That makes sense to me - my parents gave me $15K in my mid-20s (related to our first home and our wedding), and that had way more of a financial benefit than the likely $100,000s I will inherit in my 60s or 70s. I know some of us hope to never dip into our capital, and leave heaps to kids and grandkids. My takeaway was not to be stingy on the journey, because a little bit now may be worth more to them than a lot much later. 3. People Fear asking for professional advice One of the experts is a Superannuation specialist (Australia's 401k equivalent, though with far tighter access rules) - it was nice to hear her talking about how that's not the only smart thing to do (maybe because she's on the FIRE path as well, though perhaps not as early as many of us). People do fear asking for retirement planning advice, either because they don't know the cost or they worry it will be an ongoing suckle at the teat of their retirement money. I thought it was good they talked about once-off or short-term fee-for-service work - spend a little money to have someone look over your assumptions and plans, which might be a good idea for the many "Am I ready to retire?" questions get raised in various FIRE threads each week. Paying for advice may not be relevant for many of us here, since I think we're more knowledgeable than the average person. That's why I enjoyed this for free - identify some different viewpoints, then go back to my spreadsheets and wonder why we spend so much on toilet paper... [link] [comments]  |
| Posted: 28 Oct 2021 03:40 PM PDT Hey gang, looks like a have a little bit of a dilemma on my hands this year with my 401k contributions, and hoping I can get some advice on how best to navigate the situation. Quick background, I'm in sales and therefore work off a mix of salary + commissions, with the commissions being paid out quarterly. I'm set to receive my Q3 check tomorrow and realize it's going to put my contributions for the year over the 19.5k limit. Payroll was already processed, so there isn't anything I can do to change my elections at this point, so I'm curious what the best route is to mitigate any penalties and to make sure I don't leave the employer match on the table. Employer matches 100% up to 4%. I guess in a way this is a great problem to have since it's the most I've ever contributed to my 401k, but I wish I was a bit more prepared and anticipated that my commissions would put me in this situation. This is the first year I've had this issue, so any advice you all might have would be greatly appreciated. Thanks! [link] [comments]  |
| Not sure if I should pay off my house in 5 years but be stuck in an area I hate Posted: 28 Oct 2021 05:22 PM PDT Sorry if this is the wrong sub. Trying to find some advice but nobody I know personally is equipped to help with this. I live in an area I very much dislike and feels like a dead end, but I could easily pay off my house in 5 years and potentially retire early. The thing is, I'm miserable here. I moved to the Midwest to try and get ahead and improve my career, which I did, but living here kinda sucks and I want to be in a bigger city. I work from home and make decent money so I would be able to travel a lot and more. If I sold and move I would be further away from financial independence but happier in the moment. I have considered renting it out and moving, but I don't want the responsibility of all the maintenance. Any advice or experiences are appreciated. [link] [comments]  |
| Posted: 28 Oct 2021 05:11 PM PDT Trying to simply model my investable assets by year presuming my present balance, presumed rate of return and flat/linear annual contributions to savings/investments. Is it simply: =fv(presumed rate of return, years away from present, annual savings, current investable assets) [link] [comments]  |
| Just passed the 5m net worth mark. AMA Posted: 28 Oct 2021 03:59 PM PDT Hi all! I've been an avid reader of this community for ~7 years now and have gained so much valuable information. A few days ago I officially passed the 5m NW mark: https://i.imgur.com/Slv0vhC.png (screenshot from my Personal Capital account). I've posted before (last time was when I passed the 3m mark), so I thought it'd be fun to do a follow-up and answer any questions. Stats
Story My wife and I started getting into the concept of FI and saving large portions of our money when we were 23/24 years old. We've always been fairly frugal, our yearly spend is between 60 and 80k per year. NOTE: Since the pandemic started, our spending has gone up. We bought new computers/gaming stuff and made some home upgrades to improve our quality of life. Over the years we've worked relatively high-income jobs (although this is a relatively new thing for us, we weren't paid well early in our careers). We are both in engineering roles at tech companies, my wife works for a popular tech company as a junior developer and I work for a small company that is private but doing well and might potentially IPO in the next few years. Over the years, we've maxed out our 401ks, saved money, and invested it into VTSAX with Vanguard, and generally not done anything fancy. We've also built a small portfolio of 6 rental properties in the midwest, as well as our primary residence in the bay area. Over the last few years we've paid off all our properties, so now we're 100% debt-free, living off the cash flow from our rentals, and investing nearly 100% of our incomes. Over the last two years during the pandemic, we've invested a lot and seen our portfolio grow in value (especially our real estate values). Goals Our initial goal was to hit 2.5m of invested assets with a paid-off house. This would allow us to live off ~100k (the 4% rule) per year. When I made my last post nearly two years ago, I said that my wife and I changed our minds and basically doubled our goal to have a paid-off house and ~5m invested, which we're nearing. Lately, however, I feel the need to keep working past that and double the goal once more (10m invested total). Since the pandemic started a lot changed for us: I think we both realized we wanted more entertainment/luxuries in our lives and started spending more. We're both interested in getting a nicer primary residence at some point and would like ~10m so that we've got a TON of buffer for living a bit more lavishly as well as funding our hobbies post-FIRE (I'd like to renovate and rent out properties). What I've learned along the way This advice hasn't changed since last time: the most important thing I've learned is that you really need to focus on your skills more than just about anything. If you're working as an engineer, you need to push yourself and become GOOD. Better than your peers. If you're able to execute well in your job, communicate clearly, and generally be a likable person and someone that is able to help lift everyone you work with up, you'll go far and be rewarded. While my experience is purely engineering-focused, I do believe this is true just about anywhere. In my case, one of the companies I was working at was acquired by a large firm which netted me approximately ~1m. This definitely helped us hit the 3m mark sooner than we thought but wasn't the only contributing factor. Years of saving/investing/doing boring stuff really pushed our NW up month after month. If you work hard and save that money, it really does snowball! <3 AMA? If you have any questions, I'd be happy to answer them. [link] [comments]  |
| How does the FIRE community approach Christmas/gift giving? Posted: 27 Oct 2021 05:34 PM PDT I'm new to FIRE and also new to actually having an income. I make decent money now, but I'm only in my fifth week of work and have a ton of credit card debt I'm hoping to pay off and a Roth IRA I'd like like to max out before April. I'm definitely not trying to be stingy, but I'm curious how you all approach gifts and holidays. Also, I know someone will suggest sentimental/DIY presents, and that is my plan for a couple family members, but many of them have made fun of these kinds of gifts in the past. To make it worse, my family and siblings make high incomes and tend to spend extravagantly on me for Christmas. I've directly asked/told them not to, especially since I was in school and couldn't reciprocate. Now that I'm out of school, it will definitely be the expectation that I spend extravagantly back (a few have already made jokes about my new job and Christmas presents). I'm feeling pretty awkward and guilty. But I also hate obligatory gift giving and buying fancy stuff just to buy it. Thoughts? [link] [comments]  |
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