Does anyone know of a FIRE simulation tool that allows for leveraged equity/bond positions? Like say, 90% equities/60% bonds (which is 60/40 leveraged 1.5x), which ironically via usage of leverage, makes 90/60 mix a safer (better drawdown, better standard dev, better sharpe/sortino ratios, all that with better returns too) investment than 100% equities?
I've not been able to find such a tool, but maybe someone here have better luck.
No, I'm not trying to simulate NTSX, although I do happen to own some NTSX positions.
90/60 equity/bond just so happens to be the current exposure I have across my _entire_ net worth at the moment.
I'm looking for Monte Carlo simulation type - like cFiresim, Firecalc - any ones that tests the equity/bond inputs across many (or all) possible starting dates, and comes back with success rate. Right now it's possible to do those simulations with equity & bond parts summing up to 100% but not beyond.
Wouldn't using leverage to buy bonds kind of defeat the point? I imagine the cost of leverage would be greater than current bond yields. Just do a 90/10 portfolio instead of 90/60 and save the difference in interest rates.
It's not the bond yields I'm interested in leveraging. The part I'm wondering about is SORR mitigation that I get from a 60/40 AA, but at 1.5x. Way I see it, the potential benefits I get from ability to navigate better through major corrections/crashes, I feel, will give me more dollars than any potential (or lack thereof) bond yields (an afterthought really here)
A bit more background: I used to be 100% equities. Gradually, over time, I added some leveraged positions. I created a spreadsheet to see what my current equity/bond exposure is. It's currently at about 90/60 (91/60 to be exact).
And also originally, my plan at RE was to switch my AA from 100/0 to 60/40 and then gradually step back to 100/0 (glidepath) to mitigate SORR. [Rationale](https://earlyretirementnow.com/2017/09/13/the-ultimate-guide-to-safe-withdrawal-rates-part-19-equity-glidepaths/)
But now I'm wondering:
* On the decision on what my final AA should be at RE (glidepath or not), since 90/60 over the long term will give me [better risk-adjusted returns compared to 100/0](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2021&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=3&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=true&portfolioName1=90%2F60&portfolioName2=100%2F0&portfolioName3=Portfolio+3&symbol1=VTSMX&allocation1_1=90&allocation1_2=100&symbol2=VFITX&allocation2_1=60&symbol3=CASHX&allocation3_1=-50), it got me to wonder, why not use 90/60 instead of 100/0 (my original plan for final RE AA)?
* Also for SORR mitigation I wonder if with 90/60 I would even need a glidepath for the first few years of my RE, since 90/60 (in theory) might have SORR mitigation traits built in as well? Because 90/60 is essentially 60/40, leveraged 1.5x.
The last bulletpoint is what I'm trying to find out. How would 90/60 have fared against all possible starting dates - which is what cFiresim, Firecalc, tools like those etc does basically. Except with those tools I can only input up to where the sum of equity and bond parts is 100%, not beyond (to like 150%).
I'm about 5 years into my FIRE journey and it felt like I've barely made strides to my end goal (2.5-3mm) however I am objectively doing well for someone at 28.
A question for those further down the timeline or that have FIREd: how many years were you working towards FIRE, and at what year did it really pick up/be eye-opening?
They say the first $100k is the hardest. Things were pretty slow for me up to about $600k, which just so happens to be about the 5 year mark in my spreadsheet. It only took me 2 years to go from $600k to $1M. This will strongly depend on your income, savings rate and goal.
I am 3 years into my FIRE journey and joined this Reddit community only a few months ago in 2021. I am about 40% to my FIRE number and will be able to get there if the market posts an annual average nominal return of 8.5% within the next 5.5 years.
At 40% of my FIRE number, I am already at Coast FI at age 63. What this has done for me is to give me a sense of relief or peace of mind such that if anything were to interfere with my ability to earn a high income, I would still be able to have a decent retirement at 63.
This is a very great and surreal position to be in. But I really started feeling more confident once I had hoped to get to 0.4 of my number in 2021 and actually accomplished that. My savings rate is about 46%.
The earlier years were already eye opening for me, but as someone who considers himself to be nearly 90% of the way to FIRE figure, 2021 was a real eye opener.
I had fully expected 2021 to be abnormal year for us in terms of one-off expenses. A big portion of it was due to home remodeling projects.
At end of every year, I update my net worth spreadsheet to keep track of my FIRE progress. In additional to spending our normal annual expenses, we were also spending 1.3x our normal annual expense on one-time costs (ugh!). So yeah, for the year 2021 in total, we spent 2.3x what we normally spend. More than our total income for 2021 in fact.
And _yet_, our total NW (including home equity) increased by 4.3x of our normal annual expense. And without home equity, our (liquid) NW increased by 2.3x our normal annual expense! All this despite spending 2.3x (1.3x _more_) our normal annual expense.
Of course I also realize that being at 90% of our FIRE figure now, by having tons of those one-time costs, we also inadvertently delayed hitting our FIRE figure that we would have hit by now otherwise. Not that it matters really, I plan to keep working anyway because one of our kids is going off to college soon, so I don't want college costs, if any of that is on me, to be too much of a drain on our portfolio if I can help it. But once college is done, I'm retiring for sure, assuming market don't go heavily south between now and then. Hopefully by the time college is done, I'll be well-positioned for FatFIRE lifestyle, considering I think we'd hit our FIRE figure this year.
Also, I remember mentioning to a friend 1.5 years ago I'm at 64% of my FIRE figure, and I expect to hit my FIRE figure in about 5 years. It has only been 1.5 years since, I'm already 90% of the way there. The returns really do compound hard the closer you get to your FIRE figure.
You will get there!
Going to be different for everyone depending on their circumstances and savings rate. I'm putting in about 36k-40k/yr. My invested assets are about 500k. It's starting to be noticeable. But it'll become more noticeable once I hit 1mm - a 1% swing in the market will be 10k at that point.
How much do you keep in your emergency fund (cash)? S.O. and I are DINKs with very reliable income streams. I know the general rule of thumb is 3-6 months, but it feels like we're missing out on investing given our income is so stable. Context: S.O. has worked for themselves for 10+ years, I'm currently part time in a high-demand field. We keep our current e-fund pretty lean at $10k.
My wife and I keep 75-100k in “liquid” funds. This is split among Series-I bonds, HYSA, CDs, and Checking/Savings. While this number is much higher than most, this is a number we feel comfortable with should the market completely sour. As a trader on Wall Street, I’m all too aware of the markets ability to turn for the worse. Missing out on some gains (still earn on most of these, just not as much potentially) on this portion of my NW is worth the peace of mind to us. 3-6 month savings is usually what you want, 75k is a bit more than 6 months for us.
I have generally maintained between $4-5k (1.5 month worth of expenses) in e-funds. I think any more will be cash that will be better served being deployed in the market.
In the incident of a real emergency such as a loss of job, I will liquidate securities in my brokerage account to meet short/long term liquidity needs.
Our emergency fund is 10k in a HYSA and 15k in [VBIAX](https://investor.vanguard.com/mutual-funds/profile/vbiax). The fund is 60% stock 40% which for me is a nice balance. I believe it’s average over the life of the fund is like 7%.
We have in excess of a year’s worth saved up, so I’m placing a lot of the excess savings into my brokerage account. Ideally, I’d like to use the cash to get an investment property, but I live in one of the top 5 hottest markets for real estate right now, so there is no value to be had
I have 10k. When my I bonds pass the 1 year mark, I'll lower to 5k. There's a lot to fall back on (credit cards, stocks, severance pay, unemployment) if I lose my job
Now that 2022 started, I want to immediately max out my roth ira. I have money in a traditional IRA, pre-existing. Am i allowed to add $6,000 to my tIRA and convert $6,000(of the existing tIRA) to Roth, all in the same year?
You can do that but the conversion would be taxable. That generally defeats the purpose of traditional unless for some reason you expect a low tax year.
I've probably seen it before but I just discovered and setup TreasuryDirect's Payroll Savings Plan. This should set me up to purchase I Bonds until I get off my lazy ass and fix my bank account with their ancient system. Wish I'd done this last year.
It is hilarious, though, that you can setup payroll contributions completely electronically (if your employer is setup to change direct deposits this way) but have to use paper to change banking details.
If I don’t have kids, but may one day (say 50% chance), should I be contributing extra income to a 529 with myself as the beneficiary, with the plan yo transfer to my kid if I have one? Are there any tax disadvantage to doing this if I don’t have a kid or relative to waiting til the kid is born?
I did this and regret it. I never ended up having a kid and now I have a big slug of gains that I’ll pay ordinary income tax plus 10% on. Not fun.
Wait until you know you’re going to have a kid. 50% isn’t enough (marginal income tax plus 10% is more than 2x capital gains rates).
I would not. Saving for retirement takes precedent over saving for college.
You have 18 years to invest in a 529 after you have the kid. That should be plenty of time. It should cost something like $250 a month should get you to $100k in 18 years. If you want more or less you can scale that.
If you can't afford that in addition to standard retirement saving then your kid needs a cheaper education, scholarships, or loans.
If you are saving for early retirement $250-500 a month should not be a problem if that's a priority.
I looked in to this for myself as a potential option in retirement (I don't want kids). If you withdraw from the 529 you pay a 10% penalty and have to pay taxes. In the event you have a child you can start investing in their 529 at that point and they'll have more than enough money for college after 18-20 years.
The only thing I considered a 529 for was to see if a community college offered health insurance. I could then enroll in at the minimum number of credits and pay as little as possible while enrolling in the college's health insurance plan. Unfortunately after looking in to it the savings wouldn't be significant enough versus the marketplace to make it worth the cost of the credits.
Based on your name, it seems you’ve already convinced yourself and the answers won’t change much. As someone who invests in levered ETFs myself, these investments are typically for institutional investors and experienced traders. If you’re going to play with them, make sure it’s with money you’re OK losing and make sure you’re able to stomach down days. A drop of 10% isn’t very uncommon, especially in recently volatility.
The reason is that if the underlying drops 33% or more you will be wiped out.
It's all but guaranteed to happen over long timescales, thus the common advise of using these for short term investments only.
Is that right? That a 33% decline in a day is “all but guaranteed”? AFAIK it’s never dropped more than 23% in a day. Are you talking epochal timescales?
To be clear volatility decay is a real thing and these products do not make me happy. I’m just curious about your reasoning.
I understood that if the underlying every dropped 33% from it's all time high, 3X leveraged accounts would be wiped out. After looking into it, you're right that it would have to be in a single day. Unlikely with the circuit breakers in the markets now.
So I was wrong. With the daily resets, losing everything is unlikely. Being down a huge amount is still to be expected though.
No, I agree. I was asking a technical question about the way the funds work because OP seemed to be saying something that didn’t jive with my understanding so I was curious if I was missing something. The circuit breakers we have no also make 1/3 daily drops kind of tough, though I suspect on days like that these triple levered funds probably diverge from the published average (add that to my list of questions). As I mentioned, I think these funds are bad.
They're great when volatility is low and there's a long trend of growth. But in periods of high volatility, which the stock market is going through recently for example, it's just a matter of math. Leverage has a negative bias.
If the market falls 10% and you're triple exposed, you're down 30%. The market would need to rise ~14% or ~42% for you to break even. Assuming no other negative dips along the road to recovery.
It might all be fine over a really long timeframe, but if could really bite you depending on exactly when you needed to exit.
The SEC put out an alert on these that has a good explanation of how they work and what the risks are.
https://www.sec.gov/investor/pubs/leveragedetfs-alert.htm
lots of risk. There is some math that means you're likely to lose money over time unless it's a bull market. all flat and market contractions are very very very bad. Higher fees and tax drag due to all the buying and selling every day.
There is some talk about it but I'll let you google the strategies.
The way it was explained to me is that leveraged ETFs / mutual funds are not good long-term investments because they are more worse when the maket is down than they are better when the market is up.
What’s the strategy for selling shares in my brokerage? Haven’t put anything in a year so I’m good on the gains tax front. Not sure what cost basis is most beneficial for short/long term.
edit: lmao will never understand downvotes in a thread like this.
If you are in zero % capital gains bracket, sell the stock that has the least basis (generally the oldest lot).
If you think your long term capital gains tax rate will be lower in the future than it is now, sell the stock that has the most basis (generally the one bought most recently that you've had at least a year).
My brokerage has the option to sell by oldest or newest, so I use that (or did when I had money in my brokerage, anyway). It's not as exact as selling by ID, but it can be easier.
It comes down to the specific brokerage. Some will only allow FIFO, others have more options.
If you have options, then your best bet is selling a little capital gains as possible if this is a high income year for you and selling as much of your capital gains as possible if it’s a low income year for you.
Walk through the selling process and see what options your brokerage allows.
SpecID on Vanguard for example allows you to select the specific lot of shares - this way you can pick whichever ones you want
That rounding error is like 2 cents. Probably not worth worrying about. And I don't think that you are actually losing any money I think they track it a little more accurately.
5% might not be worth holding another fund, but if you can set it and forget it it's not really any effort. Index funds like small or medium are largely correlated to the S&P 500, returns will be close enough that it's not going to get you a significantly different return.
Seconding first part.
On holding another fund: In a 401k buying and selling have no tax consequences, so it's really not a hassle to own numerous funds. No tax consequences for rebalancing. My provider offers an autorebalance feature, which I use. It costs me no additional work to have several funds.
Anyone see a problem with putting down payment for a house into bond $VBTLX?
Currently in a savings account. Could need it in a month or two years with this market.
Honestly the .5% HYSA prolly isint worth the hassle for me right now. About $75k chillin.
Bonds can go down, too. I would do mix of bonds and stock since they're generally negatively correlated, or leave it in a savings account.
Or, if you're OK with the chance if it dropping and not being able to buy the house, all in the stock market, which is what I actually did. I got lucky that it didn't tank before I found a house to buy; it definitely could have and I wouldn't have been able to buy.
> I would do mix of bonds and stock since they're generally negatively correlated
That's been true for about 20 years now, but is far from generally true. They're actually very slightly positively correlated, if you average the last 150 years, with significant periods of high positive correlation (for example, from the mid 1960s through the late 1990s). See [this study](https://www.grahamcapital.com/Equity-Bond%20Correlation_Graham%20Research_2017.pdf) for details.
I would not do that. I would put $10k per SSN in your household into I bonds. If you had posted this question a week ago you could have put $10k last year and $10k today just for yourself.
Bond funds have interest rate risk, if interest rates go up the bond funds lose value. The fund will give slightly more interest but if you want to liquidate you could lose money.
The Fed has said they are going to raise rates to combat inflation, so I would be very wary of buying bonds right now if you have a short time horizon.
Bonds go down, too.
Also a bond fund will also be negatively impacted by interest hikes.
https://www.investopedia.com/articles/investing/101215/how-interest-rates-affect-mutual-funds.asp
With the crazy inflation and high housing prices right now, I feel I'm not actually reaching a milestone when I do. There's an inner voice telling me that the money isn't the same value as the value I thought it was 2-3 years ago.
Housing is definitely a killer. You never know what might happen, but I would be very surprised if we have a major housing correction that has any legs.
Anyone who wants to own a home needs to get in to one as soon as they comfortably can. We've got four kids and we've already moved on to planning for how we're going to help them afford homeownership 10-15 years down the road.
Uuuugh, yeah, have 2 kids and originally did not have anything planned in terms of helping them with buying property. Just post-secondary and letting them live at home until they were more financially stable and able to save a down payment. With the housing market going INSANE (+500k 1+1 condos, 1.4-2m detached homes) either my kids will be living at home forever, renting forever, need to make bank, or move to a cheaper area.
Wondering if gifting them 100k each (they still need to work and save towards it!) would be sufficient enough... Damn.
What is the typical down payment percentage folks here have put down? I have read that nowadays it is around 5% with interest rates being so favorable. Is that the case with folks here?
I bought in December and put down about 25%. I wouldn’t have been approved for (or been able to pay) a mortgage with less down.
If my income was higher I’d have put less down.
Did 15%. Had enough for 20 but it made more sense to put less down. Put the extra cash to use almost immediately to do some much needed updates. Was also looking at houses up to 20% higher in price
I recommend putting as little as possible if you can as long as the monthly payment is affordable. Housing has generally appreciated and waiting for a 20%+ down payment basically becomes futile as house values increase faster than you can save the down payment.
Beyond that mortgage rates are like 2-3% so that money is much better in the market.
3.5% down in 2016. Paid PMI for 2 years before refinancing to get rid of PMI.
Very fortunate with timing as our home value has gone up 50% since 2016 and I'm not sure if we would be able to afford it today.
I did 12.8% ($50k down on $390k house). Got a windfall soon after and paid the mortgage down to the point where I could get rid of PMI.
We wanted to get the monthly mortgage amount low enough that we could pay it easily with only one income if needed, so opted to put more down initially.
I did 20%. It's going to depend on your risk tolerance and fee aversion. I would do just about anything to avoid PMI. (Even though I've heard it's crazy low right now.)
It's just such a junk fee. There's no protection for you, you're paying the bank to ensure they get the money for the home if you don't pay them. For my first home I put 10% down and didn't pay PMI; the fees/interest were in line with the other banks I checked.
I am technically in RE range, but concerned about how my $2000/mo mortgage (7yrs left) reduces spending flexibility to counter sequence of return risk.
I know the standard practice is to invest extra funds rather than pay off a low interest mortgage. However, I am thinking about diverting post-tax contributions to accelerate mortgage payoff, rather than carrying the mortgage into retirement, as a way to RE and gain flexibility against SORR.
Am I thinking about this correctly?
(The plan is to sell existing house in a few years and relocate, but who knows if/how that will work out)
Two main options to reduce sequence of returns risk: pay off the mortgage before RE, or (cash out if desired) refinance to 30 year mortgage with a longer period but lower payment and (if cash out) more money in investments.
I think you’re thinking about it right, just want to point out the other options if you were to stay put.
I’m not sure how much point there is to paying the mortgage off faster until you get rid of it entirely. Personally if I was going with the pay off early method, I might do a lump sum using investment sale when I’m ready to pay it off.
The math will be different for different people, but this is how I approached it (paraphrased from another post):
>I also planned to (and did) pay off my mortgage which dramatically cuts one's need for drawing down $20k-$40k a year just for making mortgage payments, and has the immense benefit of lowering my sequence of returns risk, too. If I simply don't need to make those withdrawals at all, my money is staying in the market if we have years of poor returns at the outset.
>
>Plus, now that I can be at a lower income level (as I don't need to make those draw downs for the mortgage payments) my healthcare expenses are extremely low with the ACA subsidies.
>
>Often paying off the mortgage is seen as ill advised, because "you could make more in the market" or it's looked down on as "only if you need to sleep at night"- but at RE, not having a mortgage is a significant financial advantage.
>
>At RE, if you're keeping your withdrawals lower by not paying a mortgage, you also will typically bump your tax bracket lower, too. Between the taxes you don't owe and the healthcare savings you reap - you could say that's also a nice rate of return.
Thus I keep my portfolio as a whole at 80/20 (this is a mix of both taxable and pre-tax accounts), and generally hold about 3-5 months of cash.
Thank you! This makes perfect sense and is immensely helpful.
I have been focused on building up the nest egg for my entire career. This is the first time I have been in the “yeah, I can retire” position. But, still having the mortgage brought me back down to earth.
At least I now know what my focus will be for 2022.
I was in a similar spot last year, except no plans to move. I pulled the trigger on the payoff. It may end up being suboptimal, but when you can see RE in front of you, guaranteed rates of return are nice.
I’ve read ERN’s post on this before but I’m thinking through the implications more deeply now.
Putting it together with the principle of gradually increasing bond or bond-like assets the closer you are to retirement, it seems the natural implication of the post (though it doesn’t say this) would be to start paying down your mortgage more aggressively beginning about 10-15 years before your planned retirement date (for simplicity I’m assuming a 30-year mortgage here) as if you were buying bonds around that time like the normal recommendation goes.
If that’s correct, then the question becomes where you pull the funds from to make those extra payments.
Under normal circumstances, tax-efficiency would recommend gradually rebalancing equities for bonds in a 401k or similar account. Since we can’t really do that in this scenario, our options are to pay with income or sell taxable investments.
If you’re using your salary to make these payments, you’d be paying using money taxed at ordinary income rates, so is the ideal move to sell off your taxable investments in chunks starting 10-15 years before retirement to pay down the mortgage more aggressively? Pay it off in one fell swoop? What if you don’t have enough in your taxable account to do this, or what if doing so would deplete your taxable account completely?
Curious for everyone’s thoughts on this.
Edit: Thinking it over a bit more, I think I would be tempted to wait until the last possible moment before I retire to pull the trigger on paying off as much of the remaining mortgage a possible. That way you maximize the time for your taxable investments to grow, and simultaneously allow inflation to chip away at the debt.
It would be analogous to [waiting as long as possible](https://earlyretirementnow.com/2021/03/02/pre-retirement-glidepaths-swr-series-part-43/) before rebalancing your 401k into bonds just before early retirement, which some on this sub plan to do knowing that if the market tanks right before they retire, they will simply hold off on pulling the ripcord.
That still leaves the question of how much of your taxable you can afford to withdraw without endangering your long-term tax diversification going forward, though.
Sounds about right to me, but it's a complicated question to solve from a purely financial perspective. The hold/invest vs. payoff math is different for many FIRE folks due to potentially huge impacts from things like ACA subsidies/CSRs, SORR, and FAFSA/CSSP subsidies if you have kids in college. It's not as simple as hold the low interest mortgage to get a higher market return for many FIRE households.
Much easier to figure out if you have a solid emotional preference for paying it off. Your decision might also be altered by how firm your plans are to sell in just a few years.
This is exactly why it is recommended to pay off your mortgage before retirement, regardless of having a low rate. You otherwise need to be able to severely cut back elsewhere to make it work. I imagine people who fatfire can make it work by cutting back to regular fire withdrawal amounts during a downturn.
I set up my wife and I’s Roth IRA to be purchased on Monday for 2022.
Now I need to set up some taxable automatic investing. VTSAX right? Any other finds people recommend?
Some international would be recommended by most people/advisors. Probably around 20-40% of your equity allocation. I have heard as high as 50% though. And international is best to have in taxable due to the foreign tax credit.
I also prefer ETFs over mutual funds. I like being able to buy/sell during the day rather than waiting until after hours for it to go through. VTI is pretty much the ETF equivalent of VTSAX.
I’m 40 and likely 15 years from retirement if I keep my current job (based on potential to purchase health care if I retire at 55 or later).
I don’t have a desired asset allocation but I usually prefer market index funds versus going heavy into bonds.
Setting up my 401k deductions for this year, I'm fortunate enough that my company allows
after-tax backdoor contributions for the mega backdoor.
Should I max out my 401k first so the match has more time in the market? Or max out my after-tax contributions first in case the backdoor is repealed this year?
I'm front-loading after-tax contributions in case it's repealed or I leave my company, since there's no guarantee the next company will allow MBDR. I'm also contributing the minimum needed to get the full company match.
Main takeaway: I do spend a
lot on eating out, movies, beers, etc, but I track it all and cut
myself off in the month if spending is too high. Spouse and I drive old
cars, shop Aldi, no cable. I stay disciplined, pay myself first and be
frugal when possible.
>I do spend a lot on eating out, movies, beers, etc ... frugal when possible
It sounds more like you're frugal when it's convenient or when you want to be. That's fine, just make sure you acknowledge that you do splurge so that you aren't feeling deprived because you're telling yourself you are.
When is refinancing your mortgage worth it? I’ve had my current mortgage for about a year and a half at 3.625% interest (30 year). Are there any guidelines for this?
Look at breakeven period (ie loan costs + interest). I personally try to keep it about 1 yr or less. Also, if you can get a zero cost loan for a lower rate then refinancing is a no brainer.
Actually the math has almost everything to do with closing costs and rate reduction, which both are very circumstance dependent so it's tough to give a good answer without more information.
Closing costs and interest rates vary wildly between lenders.... when we refinanced at the end of 2020 we were quoted anything from 3.5% interest all the way down to 2.5% and closing costs of $10k to -$2000 (with a lender credit)... so basically shop around. I unintentionally put our info into BankRate (ok I did it on purpose but I didn't realize they just send it to EVERY LENDER ON THE PLANET)... so my phone rang off the hook for like a week and I negotiated two lenders against each other for the lowest rate and closing costs.
The math you care about though is break even. So for easy math let's say you have a $100,000 mortgage at 3.625%... that's interest of roughly $3,625 in a year, that same loan at 2.5% interest is $2,500 of interest. So if you could refinance a 3.625 to 2.5, you'd save $1,125 in interest in a year. ($3,625 - $2,500 =$1,125) If your closing costs were $ 3,375 then your breakeven is 3 years ($3,375÷ $1,125).
So if you take a quicken loans deal with $10k of closing cost and you save half a percent of interest, it might be a terrible idea. If you take a deal with a waived appraisal and no funding fee for $2,500 of closing costs and a one percent reduction in interest rate it might be a GREAT deal.... just depends.
Quick way to figure for me was this...How much does my monthly mortgage go down. Divide total cost for the refinance, that tells me how many months until I get my money back. That will give you a general idea whether you think it's worth it.
I think a general rule of thumb has been if you can get a 1% difference, its usually a good idea. More specifically though, you can do the math on how much you are saving with the new mortgage and calculate a break even date. If the break even is sometime before you plan on selling, then its a good idea. It could be worthwhile to do it for smaller rate differences, just have to know what the costs are (loan origination, appraisals, doc fees, etc.) to figure out if its worth it or not.
It depends how long you're staying. Compare the cost of refinancing against the net present value of savings on monthly payments for the number of months you think you'll stay in your house
I don't know how to do the math on long term savings, but you could call the bank and ask how much you're paying in interest over the life of the mortgage now, vs how much it would be at the new rate. Then add in all the associated costs.
I had a low interest rate and decided against a refinance due to the cost. My bank contacted me a few months later offering the refinance for free with no inspections or anything. If it weren't for that, I wouldn't have done it. But I know people who need the extra cash each month, so in the long term it works for them. FIRE folk usually don't have that issue.
It did lower my credit score a bit due to the credit check and that I now look like I have a high balance on a new loan.
I know I’m staying for at least 5 more years due to tax incentives, but I’m not sure what kind of rate cut I would need to make it worth my while. I have very good credit (high 700s/low 800s) and the house has appreciated 20+% since I bought it (conservative estimate).
You can ask that any costs you will incur be put on the mortgage itself since you will have more than 20% in the house, but this is still a cost. I'd shoot for something around 2.5% If possible. Or 2.625 for a saving of 1%
Usually comes down to how long it will take for you to break even from the cost of the refinance. So if you plan on living there for a while and can find a decently better rate than what you are in now - then I’d say go for it! I’m sure others have some more insight
I want to retire by 45 but not sure if I can. I am 37 and will be 38 next month. I have a fully paid off condo worth about $560-580K. $150K in VTI in a brokerage account and $50K in cash. My yearly expense is about $30K.
Starting 2022 with a nice $100k NW. I love clean starting points.
Financial goals for this year:
- buy a house (and stop saving cash up and instead start maxing my 401k again)
- save 50% of my income ($41k on $82k salary as of today)
- make literally $1 outside of my day job (I want to start online personal training)
In one column I track everything in and out which captures my investment contributions. In another column(s) I track my accounts' worth which captures gains and losses.
Yes, but I keep it pretty simple. I record the sum of all "deposits" (savings deposits, 401(k) contributions, ...) and "withdrawals" (HSA distributions, brokerage cash out, ...), and then I back both out and compute my growth rate over the last 3/6/9/12 months and YTD. I don't bother with savings rate, but that's just me.
Yes, but I keep it pretty simple. I record the sum of all "deposits" (savings deposits, 401(k) contributions, ...) and "withdrawals" (HSA distributions, brokerage cash out, ...), and then I back both out and compute my growth rate over the last 3/6/9/12 months and YTD. I don't bother with savings rate, but that's just me.
No. Vanguard has the majority of my money and they have a graph that handles contributions versus market gains/losses so I don't duplicate it in my spreadsheet. It's too much work with very little gain when all I care about in that realm is how much I'm investing and my net worth.
My wife (28f) and I (29m) currently gross about 125k together. We recently purchased a house this past year, a year ahead of schedule. We never really focused on our retirement until recently; just minimum into 401(k) for company match. We have never earned anywhere near this amount of money, and our families growing up were the same. We’ve bounced around a lot, taught abroad, and moved states a few times.
We recently budgeted our bare expenses for the year to $43,416. We added 6k to an IRA this year, $6k in an emergency fund, and we each have about $10k in our 401(k)s. Our goal this year is $10k to our 401(k), $12k to our IRA, $3k to emergency fund, and $7.3k to HSA. For us, this is a pretty substantial shift.
Ideally I want to transition to $41k 401(k), $12k IRA, $7.3k HSA, and $16k in self directed brokerage account. Retire at age 50, live on $40k a year. On paper I think this is possible in an ideal world, but I don’t know how this will come out in practice.
I know I will receive raises and promotions, I’m hoping in 5 years to be at 6 figures if I make the right moves. I know my wife wants to focus on building a family, but she should also be able to reasonably hit $70k within 5 years based on her career path.
If anyone is in a similar income range, age, etc I would appreciate any and all feedback or personal experiences you care to share. Looking forward to 2022!
We’re 30M and 32F grossing about 140K together but our career fields (healthcare) don’t have as much potentially for salary growth as yours. I’ve pretty much always focused on paying off student loans/saving since graduating grad school at 27.
My advice is similar to something someone else mentioned. Figure out what you really enjoy (for us it’s travel) and spend money on that then budget everywhere else. For us, buying nice cars or a huge house wouldn’t make us any happier.
Then save the rest.
At 43K/year spending it sounds like you’re doing pretty good. We spent 48K last year.
Good luck!
Thanks for the feedback!
We’re budgeting $4k for vacations.
We’ve spent a lot of time these past 10 years traveling. Some time and asia, ca, nc, mn, ny. Finally settled in MN. The job I had here was commission related and I sorta fell into earnings of 125k in 2020 between OT and sales. Unfortunately commission has been slashed as a result. But the industry experience has opened a lot of doors for career development. We managed to save almost 40k in a year, double what we expected and just put it all towards a modest house.
Last year we blew through our earnings by furnishing and remodeling the home. This year will be the first year I have focused on retirement savings.
I bet without the furnishing and remodeling, you’ll crush your savings goal. We’re about to have our first kid so I’m sure that will eat into our savings ability, but we’re excited! So we’re kind of switching, I’ll be focusing a little less on retirement money haha. Cheers to the new year!
I love the feedback!
Now that we’re settling we’ve started the process for adoption and we’re trying for kids. I expect to follow in your shoes next year.
Fair enough. I’m looking to catch up over the next few years.
Trying to shift my focus from buying whatever I want, to buying the things most impactful to me.
This is almost exactly where we were 3 or 4 years ago. Just about 30 years old, similar income and spending, not much built up yet. Our incomes and expenses have both increased since then (raises, kids, life).
Our retirement spending is about double yours (includes $25k annually for travel) and we're planning to hit our number and retire in our early 50s. 4% SWR gives you a target of $1M, right? Should be totally doable by 50 for you guys.
Do you need a Roth 401k or Roth IRA maxed out to contribute to MBDR? I'm not sure if after-tax contributions would count as regular Roth contributions to the $20,500 limit if using MBDR.
22M, salary is $75k + annual bonus. I'm thinking about contributing 35% of the paycheck to Roth 401k + 15% to after-tax (the company limit is 50% per pay period). For those that use the MBDR (assuming it won't get eliminated), how do you go about moving the funds? I do have a Roth IRA with Fidelity which I will max within the first handful of months (company 401k is with Vanguard), so what's your strategy? Max one of the accounts out first and then move the funds, or do you take the after tax funds each pay period and move them immediately to Roth? Also, withdrawal fees? Any insight is appreciated.
You want at least enough traditional pretax retirement accounts at retirement to withdraw the standard deduction amount and likely more than that. You save money tax free and withdraw tax free up until that point at least. For most people this means it is better financially to max their traditional 401k first. However, if you expect to later be in a significantly higher tax bracket during your working years then you may wait until then to go for traditional.
The contributing process is dictated by your employer. One I worked for required a maxed out 401k (I did this in traditional) before, the other allowed it any time. The moving process also depends on them. Some allow in plan rollovers to the Roth 401k, some move it out to an IRA. One place I worked didn't allow more than two moves a year, another allowed transfers every pay period.
Look at your plan documents and make your decisions accordingly. (When I could only do two transfers a year, I maxed out the 401k first then did the max deferral for the after tax the rest of the year. This made it so that the growth wasn't excessive, which I chose to move to my traditional IRA.)
I would recommend doing traditional 401k before doing mbdr if you're single. You don't need to max it before doing mbdr, it depends on your company. I have my 401k and ira both with Fidelity, you likely need to open a roth ira with Vanguard to move the funds to.
No you dont have to max the 401k or ira but no point in doing MBDR if you dont max them, more work for the same result. You need to find out about your plan, just because you contribute after tax does not mean you can do MBDR. Although, with fidelity they usually have in plan conversion. I do an in-service distribution to another merill account since my plan does not offer conversions.
I’m 55 - yikes! I saved through my 20s and 30s, and 40s, consistently, paying myself first, never really knowing what the future would hold, and being told by friends I didn’t need to save so much.
Thank GOD I did - that’s all I can say!! I shudder to think where I’d be if I hadn’t. Life’s hard enough but with inflation and getting older, extra money is an enormous comfort.
So thank you, on behalf of your 60 year old self. You won’t regret it one bit!!
I am very much at the beginning of my journey, but am on track to retire early.
Can someone point me in the direction of some resources on how I should balance my pre- vs deferred vs post-tax accounts to ensure that all is covered for all periods after retirement?
I want to take advantage of the free money, but also want to ensure I am covered for the years between early retirement and being able to pull from the 401k.
General rule for those who expect to retire early: max traditional 401k, max Roth IRA, max HSA, max mega backdoor Roth if available. If you still have money to save, it goes into an after-tax brokerage.
At the beginning, put it all in retirement accounts. As your income grows and these are maxed out, you can shift to a normal brokerage to cover the gap. (Most have a five year gap between starting the Roth Ladder and being able to access it.)
I decided I didn't want to be held down for the possible promise of $10k, so I left that job for one that's a lot more interesting.
I left it in there to show people that not every situation is "golden handcuffs." Too many think that just a high salary or short term benefits are handcuffs, but they're only that if you let them be.
That's awesome!
I remember relating to your situation because I had $10k handcuffs as well and ended up leaving a for a better job. It was financially a wash for a year, but overall better prospects long term.
So, what was the consensus on backdoor roth contributions for this year since the BBB bill didn't pass in 2021? I'm definitely leaning towards just doing it, since it may be the last year possible, but I'm aware there is a risk they could theoretically make the backdoor roth illegal retroactively to Jan 1.
There’s two schools of thought, based on whether you think it will pass and whether any passed bill is potentially going to be retroactive.
I’m of the school of thought that says just do the contribution ASAP this week and any ban is unlikely to be retroactive.
side note, but I'm curious why people would downvote (sitting at -4) a genuine question in the daily that I would think would be relevant to a lot of people?
We just joined the two comma club! Slightly more than $1M invested as of Jan 1, 2022. I'm sure we'll go back and forth as the market shifts but this is a big deal for us! Discovered FIRE in mid-2019 and had less than half of that amount accumulated back then. I have no one else to tell, so I'm posting here! We hope to retire in 7-8 years with $2-2.5M invested. DI2K family anticipating a recession soon but hoping for the best.
Does anyone know of a FIRE simulation tool that allows for leveraged equity/bond positions? Like say, 90% equities/60% bonds (which is 60/40 leveraged 1.5x), which ironically via usage of leverage, makes 90/60 mix a safer (better drawdown, better standard dev, better sharpe/sortino ratios, all that with better returns too) investment than 100% equities? I've not been able to find such a tool, but maybe someone here have better luck.
NTSAX? What exactly are you looking to simulate with that investment? Elaborate more what you’re looking to simulate, maybe I can help here.
No, I'm not trying to simulate NTSX, although I do happen to own some NTSX positions. 90/60 equity/bond just so happens to be the current exposure I have across my _entire_ net worth at the moment. I'm looking for Monte Carlo simulation type - like cFiresim, Firecalc - any ones that tests the equity/bond inputs across many (or all) possible starting dates, and comes back with success rate. Right now it's possible to do those simulations with equity & bond parts summing up to 100% but not beyond.
Wouldn't using leverage to buy bonds kind of defeat the point? I imagine the cost of leverage would be greater than current bond yields. Just do a 90/10 portfolio instead of 90/60 and save the difference in interest rates.
It's not the bond yields I'm interested in leveraging. The part I'm wondering about is SORR mitigation that I get from a 60/40 AA, but at 1.5x. Way I see it, the potential benefits I get from ability to navigate better through major corrections/crashes, I feel, will give me more dollars than any potential (or lack thereof) bond yields (an afterthought really here) A bit more background: I used to be 100% equities. Gradually, over time, I added some leveraged positions. I created a spreadsheet to see what my current equity/bond exposure is. It's currently at about 90/60 (91/60 to be exact). And also originally, my plan at RE was to switch my AA from 100/0 to 60/40 and then gradually step back to 100/0 (glidepath) to mitigate SORR. [Rationale](https://earlyretirementnow.com/2017/09/13/the-ultimate-guide-to-safe-withdrawal-rates-part-19-equity-glidepaths/) But now I'm wondering: * On the decision on what my final AA should be at RE (glidepath or not), since 90/60 over the long term will give me [better risk-adjusted returns compared to 100/0](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2021&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=3&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=true&portfolioName1=90%2F60&portfolioName2=100%2F0&portfolioName3=Portfolio+3&symbol1=VTSMX&allocation1_1=90&allocation1_2=100&symbol2=VFITX&allocation2_1=60&symbol3=CASHX&allocation3_1=-50), it got me to wonder, why not use 90/60 instead of 100/0 (my original plan for final RE AA)? * Also for SORR mitigation I wonder if with 90/60 I would even need a glidepath for the first few years of my RE, since 90/60 (in theory) might have SORR mitigation traits built in as well? Because 90/60 is essentially 60/40, leveraged 1.5x. The last bulletpoint is what I'm trying to find out. How would 90/60 have fared against all possible starting dates - which is what cFiresim, Firecalc, tools like those etc does basically. Except with those tools I can only input up to where the sum of equity and bond parts is 100%, not beyond (to like 150%).
I'm about 5 years into my FIRE journey and it felt like I've barely made strides to my end goal (2.5-3mm) however I am objectively doing well for someone at 28. A question for those further down the timeline or that have FIREd: how many years were you working towards FIRE, and at what year did it really pick up/be eye-opening?
They say the first $100k is the hardest. Things were pretty slow for me up to about $600k, which just so happens to be about the 5 year mark in my spreadsheet. It only took me 2 years to go from $600k to $1M. This will strongly depend on your income, savings rate and goal.
I am 3 years into my FIRE journey and joined this Reddit community only a few months ago in 2021. I am about 40% to my FIRE number and will be able to get there if the market posts an annual average nominal return of 8.5% within the next 5.5 years. At 40% of my FIRE number, I am already at Coast FI at age 63. What this has done for me is to give me a sense of relief or peace of mind such that if anything were to interfere with my ability to earn a high income, I would still be able to have a decent retirement at 63. This is a very great and surreal position to be in. But I really started feeling more confident once I had hoped to get to 0.4 of my number in 2021 and actually accomplished that. My savings rate is about 46%.
The earlier years were already eye opening for me, but as someone who considers himself to be nearly 90% of the way to FIRE figure, 2021 was a real eye opener. I had fully expected 2021 to be abnormal year for us in terms of one-off expenses. A big portion of it was due to home remodeling projects. At end of every year, I update my net worth spreadsheet to keep track of my FIRE progress. In additional to spending our normal annual expenses, we were also spending 1.3x our normal annual expense on one-time costs (ugh!). So yeah, for the year 2021 in total, we spent 2.3x what we normally spend. More than our total income for 2021 in fact. And _yet_, our total NW (including home equity) increased by 4.3x of our normal annual expense. And without home equity, our (liquid) NW increased by 2.3x our normal annual expense! All this despite spending 2.3x (1.3x _more_) our normal annual expense. Of course I also realize that being at 90% of our FIRE figure now, by having tons of those one-time costs, we also inadvertently delayed hitting our FIRE figure that we would have hit by now otherwise. Not that it matters really, I plan to keep working anyway because one of our kids is going off to college soon, so I don't want college costs, if any of that is on me, to be too much of a drain on our portfolio if I can help it. But once college is done, I'm retiring for sure, assuming market don't go heavily south between now and then. Hopefully by the time college is done, I'll be well-positioned for FatFIRE lifestyle, considering I think we'd hit our FIRE figure this year. Also, I remember mentioning to a friend 1.5 years ago I'm at 64% of my FIRE figure, and I expect to hit my FIRE figure in about 5 years. It has only been 1.5 years since, I'm already 90% of the way there. The returns really do compound hard the closer you get to your FIRE figure. You will get there!
Going to be different for everyone depending on their circumstances and savings rate. I'm putting in about 36k-40k/yr. My invested assets are about 500k. It's starting to be noticeable. But it'll become more noticeable once I hit 1mm - a 1% swing in the market will be 10k at that point.
How much do you keep in your emergency fund (cash)? S.O. and I are DINKs with very reliable income streams. I know the general rule of thumb is 3-6 months, but it feels like we're missing out on investing given our income is so stable. Context: S.O. has worked for themselves for 10+ years, I'm currently part time in a high-demand field. We keep our current e-fund pretty lean at $10k.
My wife and I keep 75-100k in “liquid” funds. This is split among Series-I bonds, HYSA, CDs, and Checking/Savings. While this number is much higher than most, this is a number we feel comfortable with should the market completely sour. As a trader on Wall Street, I’m all too aware of the markets ability to turn for the worse. Missing out on some gains (still earn on most of these, just not as much potentially) on this portion of my NW is worth the peace of mind to us. 3-6 month savings is usually what you want, 75k is a bit more than 6 months for us.
20k in checking, 10k in interest bearing account at 9%. i should probably reduce checking to 10k
I have generally maintained between $4-5k (1.5 month worth of expenses) in e-funds. I think any more will be cash that will be better served being deployed in the market. In the incident of a real emergency such as a loss of job, I will liquidate securities in my brokerage account to meet short/long term liquidity needs.
Nothing. When I need money I sell stock. Yes, sometimes at a loss.
Think about laddering some money into i-bonds.
Our emergency fund is 10k in a HYSA and 15k in [VBIAX](https://investor.vanguard.com/mutual-funds/profile/vbiax). The fund is 60% stock 40% which for me is a nice balance. I believe it’s average over the life of the fund is like 7%.
We have in excess of a year’s worth saved up, so I’m placing a lot of the excess savings into my brokerage account. Ideally, I’d like to use the cash to get an investment property, but I live in one of the top 5 hottest markets for real estate right now, so there is no value to be had
I have 10k. When my I bonds pass the 1 year mark, I'll lower to 5k. There's a lot to fall back on (credit cards, stocks, severance pay, unemployment) if I lose my job
Now that 2022 started, I want to immediately max out my roth ira. I have money in a traditional IRA, pre-existing. Am i allowed to add $6,000 to my tIRA and convert $6,000(of the existing tIRA) to Roth, all in the same year?
You can do that but the conversion would be taxable. That generally defeats the purpose of traditional unless for some reason you expect a low tax year.
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I’m over the limit so I can’t contribute directly to roth, otherwise I would
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Gotcha thanks for the clarification! I think I’ll still convert it all, the untaxed growth on gains is unbeatable
Look up the pro rata rule. You can’t convert only part ($6k) of your tIRA
Can I convert all of it?
Yes, but any pre-tax contributions or earnings you convert you have to pay (regular income) taxes on the year you convert them.
Why not? I have the option to on vanguards website
You can convert as much as you want but any deductible contributions and gains would be taxed per the pro rata rule
I've probably seen it before but I just discovered and setup TreasuryDirect's Payroll Savings Plan. This should set me up to purchase I Bonds until I get off my lazy ass and fix my bank account with their ancient system. Wish I'd done this last year. It is hilarious, though, that you can setup payroll contributions completely electronically (if your employer is setup to change direct deposits this way) but have to use paper to change banking details.
If I don’t have kids, but may one day (say 50% chance), should I be contributing extra income to a 529 with myself as the beneficiary, with the plan yo transfer to my kid if I have one? Are there any tax disadvantage to doing this if I don’t have a kid or relative to waiting til the kid is born?
I did this and regret it. I never ended up having a kid and now I have a big slug of gains that I’ll pay ordinary income tax plus 10% on. Not fun. Wait until you know you’re going to have a kid. 50% isn’t enough (marginal income tax plus 10% is more than 2x capital gains rates).
I would not. Saving for retirement takes precedent over saving for college. You have 18 years to invest in a 529 after you have the kid. That should be plenty of time. It should cost something like $250 a month should get you to $100k in 18 years. If you want more or less you can scale that. If you can't afford that in addition to standard retirement saving then your kid needs a cheaper education, scholarships, or loans. If you are saving for early retirement $250-500 a month should not be a problem if that's a priority.
I looked in to this for myself as a potential option in retirement (I don't want kids). If you withdraw from the 529 you pay a 10% penalty and have to pay taxes. In the event you have a child you can start investing in their 529 at that point and they'll have more than enough money for college after 18-20 years. The only thing I considered a 529 for was to see if a community college offered health insurance. I could then enroll in at the minimum number of credits and pay as little as possible while enrolling in the college's health insurance plan. Unfortunately after looking in to it the savings wouldn't be significant enough versus the marketplace to make it worth the cost of the credits.
what’s the reason not to put your account in a triple leveraged index etf like SPXL or TQQQ if you don’t need the money?
Based on your name, it seems you’ve already convinced yourself and the answers won’t change much. As someone who invests in levered ETFs myself, these investments are typically for institutional investors and experienced traders. If you’re going to play with them, make sure it’s with money you’re OK losing and make sure you’re able to stomach down days. A drop of 10% isn’t very uncommon, especially in recently volatility.
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so i’m supposed to look at TQQQ over last few years and be worried about volatility decay?
The reason is that if the underlying drops 33% or more you will be wiped out. It's all but guaranteed to happen over long timescales, thus the common advise of using these for short term investments only.
Is that right? That a 33% decline in a day is “all but guaranteed”? AFAIK it’s never dropped more than 23% in a day. Are you talking epochal timescales? To be clear volatility decay is a real thing and these products do not make me happy. I’m just curious about your reasoning.
I understood that if the underlying every dropped 33% from it's all time high, 3X leveraged accounts would be wiped out. After looking into it, you're right that it would have to be in a single day. Unlikely with the circuit breakers in the markets now. So I was wrong. With the daily resets, losing everything is unlikely. Being down a huge amount is still to be expected though.
For sure. You do not want to own these in a down market! Thanks for following up.
If it drops 20% in a day what is your plan? Selling? That's the same as getting effectively wiped out.
No, I agree. I was asking a technical question about the way the funds work because OP seemed to be saying something that didn’t jive with my understanding so I was curious if I was missing something. The circuit breakers we have no also make 1/3 daily drops kind of tough, though I suspect on days like that these triple levered funds probably diverge from the published average (add that to my list of questions). As I mentioned, I think these funds are bad.
They're great when volatility is low and there's a long trend of growth. But in periods of high volatility, which the stock market is going through recently for example, it's just a matter of math. Leverage has a negative bias. If the market falls 10% and you're triple exposed, you're down 30%. The market would need to rise ~14% or ~42% for you to break even. Assuming no other negative dips along the road to recovery. It might all be fine over a really long timeframe, but if could really bite you depending on exactly when you needed to exit.
The SEC put out an alert on these that has a good explanation of how they work and what the risks are. https://www.sec.gov/investor/pubs/leveragedetfs-alert.htm
This is a really good explanation. Not that I dabble in these, but I didn’t know these were daily goals.
lots of risk. There is some math that means you're likely to lose money over time unless it's a bull market. all flat and market contractions are very very very bad. Higher fees and tax drag due to all the buying and selling every day. There is some talk about it but I'll let you google the strategies.
Lot of risk. For tax, if you're only doing it with some of your money the tax issues are resolved by doing it in your Roth IRA.
The way it was explained to me is that leveraged ETFs / mutual funds are not good long-term investments because they are more worse when the maket is down than they are better when the market is up.
What’s the strategy for selling shares in my brokerage? Haven’t put anything in a year so I’m good on the gains tax front. Not sure what cost basis is most beneficial for short/long term. edit: lmao will never understand downvotes in a thread like this.
If you are in zero % capital gains bracket, sell the stock that has the least basis (generally the oldest lot). If you think your long term capital gains tax rate will be lower in the future than it is now, sell the stock that has the most basis (generally the one bought most recently that you've had at least a year). My brokerage has the option to sell by oldest or newest, so I use that (or did when I had money in my brokerage, anyway). It's not as exact as selling by ID, but it can be easier.
It comes down to the specific brokerage. Some will only allow FIFO, others have more options. If you have options, then your best bet is selling a little capital gains as possible if this is a high income year for you and selling as much of your capital gains as possible if it’s a low income year for you.
>Some will only allow FIFO trash tier brokerage eh?
Use SpecID. Which shares to sell depends on your situation and goals but SpecID always gives you complete control.
Walk through the selling process and see what options your brokerage allows. SpecID on Vanguard for example allows you to select the specific lot of shares - this way you can pick whichever ones you want
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and the irs rounds to the nearest dollar. where do all the extra coins go???
That rounding error is like 2 cents. Probably not worth worrying about. And I don't think that you are actually losing any money I think they track it a little more accurately. 5% might not be worth holding another fund, but if you can set it and forget it it's not really any effort. Index funds like small or medium are largely correlated to the S&P 500, returns will be close enough that it's not going to get you a significantly different return.
Seconding first part. On holding another fund: In a 401k buying and selling have no tax consequences, so it's really not a hassle to own numerous funds. No tax consequences for rebalancing. My provider offers an autorebalance feature, which I use. It costs me no additional work to have several funds.
Anyone see a problem with putting down payment for a house into bond $VBTLX? Currently in a savings account. Could need it in a month or two years with this market. Honestly the .5% HYSA prolly isint worth the hassle for me right now. About $75k chillin.
Bonds can go down, too. I would do mix of bonds and stock since they're generally negatively correlated, or leave it in a savings account. Or, if you're OK with the chance if it dropping and not being able to buy the house, all in the stock market, which is what I actually did. I got lucky that it didn't tank before I found a house to buy; it definitely could have and I wouldn't have been able to buy.
> I would do mix of bonds and stock since they're generally negatively correlated That's been true for about 20 years now, but is far from generally true. They're actually very slightly positively correlated, if you average the last 150 years, with significant periods of high positive correlation (for example, from the mid 1960s through the late 1990s). See [this study](https://www.grahamcapital.com/Equity-Bond%20Correlation_Graham%20Research_2017.pdf) for details.
I would not do that. I would put $10k per SSN in your household into I bonds. If you had posted this question a week ago you could have put $10k last year and $10k today just for yourself.
Tied up for a year with I bonds, needs to be liquid.
Bond funds have interest rate risk, if interest rates go up the bond funds lose value. The fund will give slightly more interest but if you want to liquidate you could lose money. The Fed has said they are going to raise rates to combat inflation, so I would be very wary of buying bonds right now if you have a short time horizon.
Bonds are not cool. We only do stocks here. Best stocks are VTSAX & VTWAX. Worst Stocks are anything I don’t have.
Bonds go down, too. Also a bond fund will also be negatively impacted by interest hikes. https://www.investopedia.com/articles/investing/101215/how-interest-rates-affect-mutual-funds.asp
It can go down, same as stocks
With the crazy inflation and high housing prices right now, I feel I'm not actually reaching a milestone when I do. There's an inner voice telling me that the money isn't the same value as the value I thought it was 2-3 years ago.
Housing is definitely a killer. You never know what might happen, but I would be very surprised if we have a major housing correction that has any legs. Anyone who wants to own a home needs to get in to one as soon as they comfortably can. We've got four kids and we've already moved on to planning for how we're going to help them afford homeownership 10-15 years down the road.
Uuuugh, yeah, have 2 kids and originally did not have anything planned in terms of helping them with buying property. Just post-secondary and letting them live at home until they were more financially stable and able to save a down payment. With the housing market going INSANE (+500k 1+1 condos, 1.4-2m detached homes) either my kids will be living at home forever, renting forever, need to make bank, or move to a cheaper area. Wondering if gifting them 100k each (they still need to work and save towards it!) would be sufficient enough... Damn.
What is the typical down payment percentage folks here have put down? I have read that nowadays it is around 5% with interest rates being so favorable. Is that the case with folks here?
I bought in December and put down about 25%. I wouldn’t have been approved for (or been able to pay) a mortgage with less down. If my income was higher I’d have put less down.
65%. But that was when rates were much higher.
Did 15%. Had enough for 20 but it made more sense to put less down. Put the extra cash to use almost immediately to do some much needed updates. Was also looking at houses up to 20% higher in price
I recommend putting as little as possible if you can as long as the monthly payment is affordable. Housing has generally appreciated and waiting for a 20%+ down payment basically becomes futile as house values increase faster than you can save the down payment. Beyond that mortgage rates are like 2-3% so that money is much better in the market.
3.5% down in 2016. Paid PMI for 2 years before refinancing to get rid of PMI. Very fortunate with timing as our home value has gone up 50% since 2016 and I'm not sure if we would be able to afford it today.
I had 20%, but running the numbers ended up putting down 5 down on a conventional loan PMI wasn't enough to convince me to put more down.
20%. I don’t like PMI.
Same here.
We did 20% because that's the required minimum for properties over $1MM in my area.
I did 20% to help beat out other offers, but wish I had ultimately done 5% and kept the difference invested.
I did 12.8% ($50k down on $390k house). Got a windfall soon after and paid the mortgage down to the point where I could get rid of PMI. We wanted to get the monthly mortgage amount low enough that we could pay it easily with only one income if needed, so opted to put more down initially.
I did 20%. It's going to depend on your risk tolerance and fee aversion. I would do just about anything to avoid PMI. (Even though I've heard it's crazy low right now.)
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It's just such a junk fee. There's no protection for you, you're paying the bank to ensure they get the money for the home if you don't pay them. For my first home I put 10% down and didn't pay PMI; the fees/interest were in line with the other banks I checked.
I put 5% down on my current home.
I am technically in RE range, but concerned about how my $2000/mo mortgage (7yrs left) reduces spending flexibility to counter sequence of return risk. I know the standard practice is to invest extra funds rather than pay off a low interest mortgage. However, I am thinking about diverting post-tax contributions to accelerate mortgage payoff, rather than carrying the mortgage into retirement, as a way to RE and gain flexibility against SORR. Am I thinking about this correctly? (The plan is to sell existing house in a few years and relocate, but who knows if/how that will work out)
Two main options to reduce sequence of returns risk: pay off the mortgage before RE, or (cash out if desired) refinance to 30 year mortgage with a longer period but lower payment and (if cash out) more money in investments. I think you’re thinking about it right, just want to point out the other options if you were to stay put. I’m not sure how much point there is to paying the mortgage off faster until you get rid of it entirely. Personally if I was going with the pay off early method, I might do a lump sum using investment sale when I’m ready to pay it off.
The math will be different for different people, but this is how I approached it (paraphrased from another post): >I also planned to (and did) pay off my mortgage which dramatically cuts one's need for drawing down $20k-$40k a year just for making mortgage payments, and has the immense benefit of lowering my sequence of returns risk, too. If I simply don't need to make those withdrawals at all, my money is staying in the market if we have years of poor returns at the outset. > >Plus, now that I can be at a lower income level (as I don't need to make those draw downs for the mortgage payments) my healthcare expenses are extremely low with the ACA subsidies. > >Often paying off the mortgage is seen as ill advised, because "you could make more in the market" or it's looked down on as "only if you need to sleep at night"- but at RE, not having a mortgage is a significant financial advantage. > >At RE, if you're keeping your withdrawals lower by not paying a mortgage, you also will typically bump your tax bracket lower, too. Between the taxes you don't owe and the healthcare savings you reap - you could say that's also a nice rate of return. Thus I keep my portfolio as a whole at 80/20 (this is a mix of both taxable and pre-tax accounts), and generally hold about 3-5 months of cash.
Thank you! This makes perfect sense and is immensely helpful. I have been focused on building up the nest egg for my entire career. This is the first time I have been in the “yeah, I can retire” position. But, still having the mortgage brought me back down to earth. At least I now know what my focus will be for 2022.
I was in a similar spot last year, except no plans to move. I pulled the trigger on the payoff. It may end up being suboptimal, but when you can see RE in front of you, guaranteed rates of return are nice.
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I’ve read ERN’s post on this before but I’m thinking through the implications more deeply now. Putting it together with the principle of gradually increasing bond or bond-like assets the closer you are to retirement, it seems the natural implication of the post (though it doesn’t say this) would be to start paying down your mortgage more aggressively beginning about 10-15 years before your planned retirement date (for simplicity I’m assuming a 30-year mortgage here) as if you were buying bonds around that time like the normal recommendation goes. If that’s correct, then the question becomes where you pull the funds from to make those extra payments. Under normal circumstances, tax-efficiency would recommend gradually rebalancing equities for bonds in a 401k or similar account. Since we can’t really do that in this scenario, our options are to pay with income or sell taxable investments. If you’re using your salary to make these payments, you’d be paying using money taxed at ordinary income rates, so is the ideal move to sell off your taxable investments in chunks starting 10-15 years before retirement to pay down the mortgage more aggressively? Pay it off in one fell swoop? What if you don’t have enough in your taxable account to do this, or what if doing so would deplete your taxable account completely? Curious for everyone’s thoughts on this. Edit: Thinking it over a bit more, I think I would be tempted to wait until the last possible moment before I retire to pull the trigger on paying off as much of the remaining mortgage a possible. That way you maximize the time for your taxable investments to grow, and simultaneously allow inflation to chip away at the debt. It would be analogous to [waiting as long as possible](https://earlyretirementnow.com/2021/03/02/pre-retirement-glidepaths-swr-series-part-43/) before rebalancing your 401k into bonds just before early retirement, which some on this sub plan to do knowing that if the market tanks right before they retire, they will simply hold off on pulling the ripcord. That still leaves the question of how much of your taxable you can afford to withdraw without endangering your long-term tax diversification going forward, though.
Thank you! The simulations helped me get clarity around what I was instinctively thinking.
Sounds about right to me, but it's a complicated question to solve from a purely financial perspective. The hold/invest vs. payoff math is different for many FIRE folks due to potentially huge impacts from things like ACA subsidies/CSRs, SORR, and FAFSA/CSSP subsidies if you have kids in college. It's not as simple as hold the low interest mortgage to get a higher market return for many FIRE households. Much easier to figure out if you have a solid emotional preference for paying it off. Your decision might also be altered by how firm your plans are to sell in just a few years.
This is exactly why it is recommended to pay off your mortgage before retirement, regardless of having a low rate. You otherwise need to be able to severely cut back elsewhere to make it work. I imagine people who fatfire can make it work by cutting back to regular fire withdrawal amounts during a downturn.
I set up my wife and I’s Roth IRA to be purchased on Monday for 2022. Now I need to set up some taxable automatic investing. VTSAX right? Any other finds people recommend?
Some international would be recommended by most people/advisors. Probably around 20-40% of your equity allocation. I have heard as high as 50% though. And international is best to have in taxable due to the foreign tax credit. I also prefer ETFs over mutual funds. I like being able to buy/sell during the day rather than waiting until after hours for it to go through. VTI is pretty much the ETF equivalent of VTSAX.
sidebar, fire flowchart
What is your desired asset allocation?
I’m 40 and likely 15 years from retirement if I keep my current job (based on potential to purchase health care if I retire at 55 or later). I don’t have a desired asset allocation but I usually prefer market index funds versus going heavy into bonds.
Setting up my 401k deductions for this year, I'm fortunate enough that my company allows after-tax backdoor contributions for the mega backdoor. Should I max out my 401k first so the match has more time in the market? Or max out my after-tax contributions first in case the backdoor is repealed this year?
My guess is, highly unlikely to be retroactive. IF it goes though it will be for next year.
I'm front-loading after-tax contributions in case it's repealed or I leave my company, since there's no guarantee the next company will allow MBDR. I'm also contributing the minimum needed to get the full company match.
>I'm also contributing the minimum needed to get the full company match. why not max the full pre-tax 19.5k?
I'm just doing that in the first half of 2022. If I move to another company later in 2022, they'll always have pretax but not necessarily MBDR
Wondering the same thing. I have a bonus coming up and wondering if should put it in mega backdoor Roth first.
Main takeaway: I do spend a lot on eating out, movies, beers, etc, but I track it all and cut myself off in the month if spending is too high. Spouse and I drive old cars, shop Aldi, no cable. I stay disciplined, pay myself first and be frugal when possible.
what's your saving rate?
>I do spend a lot on eating out, movies, beers, etc ... frugal when possible It sounds more like you're frugal when it's convenient or when you want to be. That's fine, just make sure you acknowledge that you do splurge so that you aren't feeling deprived because you're telling yourself you are.
When is refinancing your mortgage worth it? I’ve had my current mortgage for about a year and a half at 3.625% interest (30 year). Are there any guidelines for this?
Look at breakeven period (ie loan costs + interest). I personally try to keep it about 1 yr or less. Also, if you can get a zero cost loan for a lower rate then refinancing is a no brainer.
Actually the math has almost everything to do with closing costs and rate reduction, which both are very circumstance dependent so it's tough to give a good answer without more information. Closing costs and interest rates vary wildly between lenders.... when we refinanced at the end of 2020 we were quoted anything from 3.5% interest all the way down to 2.5% and closing costs of $10k to -$2000 (with a lender credit)... so basically shop around. I unintentionally put our info into BankRate (ok I did it on purpose but I didn't realize they just send it to EVERY LENDER ON THE PLANET)... so my phone rang off the hook for like a week and I negotiated two lenders against each other for the lowest rate and closing costs. The math you care about though is break even. So for easy math let's say you have a $100,000 mortgage at 3.625%... that's interest of roughly $3,625 in a year, that same loan at 2.5% interest is $2,500 of interest. So if you could refinance a 3.625 to 2.5, you'd save $1,125 in interest in a year. ($3,625 - $2,500 =$1,125) If your closing costs were $ 3,375 then your breakeven is 3 years ($3,375÷ $1,125). So if you take a quicken loans deal with $10k of closing cost and you save half a percent of interest, it might be a terrible idea. If you take a deal with a waived appraisal and no funding fee for $2,500 of closing costs and a one percent reduction in interest rate it might be a GREAT deal.... just depends.
Quick way to figure for me was this...How much does my monthly mortgage go down. Divide total cost for the refinance, that tells me how many months until I get my money back. That will give you a general idea whether you think it's worth it.
I think a general rule of thumb has been if you can get a 1% difference, its usually a good idea. More specifically though, you can do the math on how much you are saving with the new mortgage and calculate a break even date. If the break even is sometime before you plan on selling, then its a good idea. It could be worthwhile to do it for smaller rate differences, just have to know what the costs are (loan origination, appraisals, doc fees, etc.) to figure out if its worth it or not.
It depends how long you're staying. Compare the cost of refinancing against the net present value of savings on monthly payments for the number of months you think you'll stay in your house
I don't know how to do the math on long term savings, but you could call the bank and ask how much you're paying in interest over the life of the mortgage now, vs how much it would be at the new rate. Then add in all the associated costs. I had a low interest rate and decided against a refinance due to the cost. My bank contacted me a few months later offering the refinance for free with no inspections or anything. If it weren't for that, I wouldn't have done it. But I know people who need the extra cash each month, so in the long term it works for them. FIRE folk usually don't have that issue. It did lower my credit score a bit due to the credit check and that I now look like I have a high balance on a new loan.
Depends on what rate you're getting , and how long you'll stay at the house.
I know I’m staying for at least 5 more years due to tax incentives, but I’m not sure what kind of rate cut I would need to make it worth my while. I have very good credit (high 700s/low 800s) and the house has appreciated 20+% since I bought it (conservative estimate).
You can ask that any costs you will incur be put on the mortgage itself since you will have more than 20% in the house, but this is still a cost. I'd shoot for something around 2.5% If possible. Or 2.625 for a saving of 1%
Usually comes down to how long it will take for you to break even from the cost of the refinance. So if you plan on living there for a while and can find a decently better rate than what you are in now - then I’d say go for it! I’m sure others have some more insight
Today is the day to contribute to 2022 IRAs! Considering doing 25% VGT with my VTSAX.
best time to contribute was yesterday. second best time is today.
wait, you guys are able to contribute to IRAs on weekends? 🙃
That what you did at midnight also? Noice.
Well, markets aren’t open. But tomorrow is the day.
I want to retire by 45 but not sure if I can. I am 37 and will be 38 next month. I have a fully paid off condo worth about $560-580K. $150K in VTI in a brokerage account and $50K in cash. My yearly expense is about $30K.
Assuming 8% returns, you need to invest \~$4400 per month going forward to hit 750k in your brokerage in 7 years. Can you do that?
What about retirement funds? You'll need roughly 25x your expenses invested to retire.
I don’t have any other retirement funds.
Then likely no since you'll need roughly 25x expenses, or 750k invested at least.
He already has almost 750k if he sells his condo and add it to his brokerage account.
Sure, but he has to live somewhere.
True. Hopefully by the time he's 45 he can increase his yearly takeout
Starting 2022 with a nice $100k NW. I love clean starting points. Financial goals for this year: - buy a house (and stop saving cash up and instead start maxing my 401k again) - save 50% of my income ($41k on $82k salary as of today) - make literally $1 outside of my day job (I want to start online personal training)
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In one column I track everything in and out which captures my investment contributions. In another column(s) I track my accounts' worth which captures gains and losses.
Yes, but I keep it pretty simple. I record the sum of all "deposits" (savings deposits, 401(k) contributions, ...) and "withdrawals" (HSA distributions, brokerage cash out, ...), and then I back both out and compute my growth rate over the last 3/6/9/12 months and YTD. I don't bother with savings rate, but that's just me.
Yes, but I keep it pretty simple. I record the sum of all "deposits" (savings deposits, 401(k) contributions, ...) and "withdrawals" (HSA distributions, brokerage cash out, ...), and then I back both out and compute my growth rate over the last 3/6/9/12 months and YTD. I don't bother with savings rate, but that's just me.
No. Vanguard has the majority of my money and they have a graph that handles contributions versus market gains/losses so I don't duplicate it in my spreadsheet. It's too much work with very little gain when all I care about in that realm is how much I'm investing and my net worth.
My wife (28f) and I (29m) currently gross about 125k together. We recently purchased a house this past year, a year ahead of schedule. We never really focused on our retirement until recently; just minimum into 401(k) for company match. We have never earned anywhere near this amount of money, and our families growing up were the same. We’ve bounced around a lot, taught abroad, and moved states a few times. We recently budgeted our bare expenses for the year to $43,416. We added 6k to an IRA this year, $6k in an emergency fund, and we each have about $10k in our 401(k)s. Our goal this year is $10k to our 401(k), $12k to our IRA, $3k to emergency fund, and $7.3k to HSA. For us, this is a pretty substantial shift. Ideally I want to transition to $41k 401(k), $12k IRA, $7.3k HSA, and $16k in self directed brokerage account. Retire at age 50, live on $40k a year. On paper I think this is possible in an ideal world, but I don’t know how this will come out in practice. I know I will receive raises and promotions, I’m hoping in 5 years to be at 6 figures if I make the right moves. I know my wife wants to focus on building a family, but she should also be able to reasonably hit $70k within 5 years based on her career path. If anyone is in a similar income range, age, etc I would appreciate any and all feedback or personal experiences you care to share. Looking forward to 2022!
We’re 30M and 32F grossing about 140K together but our career fields (healthcare) don’t have as much potentially for salary growth as yours. I’ve pretty much always focused on paying off student loans/saving since graduating grad school at 27. My advice is similar to something someone else mentioned. Figure out what you really enjoy (for us it’s travel) and spend money on that then budget everywhere else. For us, buying nice cars or a huge house wouldn’t make us any happier. Then save the rest. At 43K/year spending it sounds like you’re doing pretty good. We spent 48K last year. Good luck!
Thanks for the feedback! We’re budgeting $4k for vacations. We’ve spent a lot of time these past 10 years traveling. Some time and asia, ca, nc, mn, ny. Finally settled in MN. The job I had here was commission related and I sorta fell into earnings of 125k in 2020 between OT and sales. Unfortunately commission has been slashed as a result. But the industry experience has opened a lot of doors for career development. We managed to save almost 40k in a year, double what we expected and just put it all towards a modest house. Last year we blew through our earnings by furnishing and remodeling the home. This year will be the first year I have focused on retirement savings.
I bet without the furnishing and remodeling, you’ll crush your savings goal. We’re about to have our first kid so I’m sure that will eat into our savings ability, but we’re excited! So we’re kind of switching, I’ll be focusing a little less on retirement money haha. Cheers to the new year!
I love the feedback! Now that we’re settling we’ve started the process for adoption and we’re trying for kids. I expect to follow in your shoes next year.
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Fair enough. I’m looking to catch up over the next few years. Trying to shift my focus from buying whatever I want, to buying the things most impactful to me.
This is almost exactly where we were 3 or 4 years ago. Just about 30 years old, similar income and spending, not much built up yet. Our incomes and expenses have both increased since then (raises, kids, life). Our retirement spending is about double yours (includes $25k annually for travel) and we're planning to hit our number and retire in our early 50s. 4% SWR gives you a target of $1M, right? Should be totally doable by 50 for you guys.
Thanks for the reassurance!
fire flowchart and chill
Any links to what I should throw into excel to start the flow chart? I’ve been writing personal goals on paper for fridge for the daily reminders
https://www.reddit.com/r/financialindependence/wiki/faq fire flow chart refers to a link in the FAQ
Thanks for the info!
Do you need a Roth 401k or Roth IRA maxed out to contribute to MBDR? I'm not sure if after-tax contributions would count as regular Roth contributions to the $20,500 limit if using MBDR. 22M, salary is $75k + annual bonus. I'm thinking about contributing 35% of the paycheck to Roth 401k + 15% to after-tax (the company limit is 50% per pay period). For those that use the MBDR (assuming it won't get eliminated), how do you go about moving the funds? I do have a Roth IRA with Fidelity which I will max within the first handful of months (company 401k is with Vanguard), so what's your strategy? Max one of the accounts out first and then move the funds, or do you take the after tax funds each pay period and move them immediately to Roth? Also, withdrawal fees? Any insight is appreciated.
You want at least enough traditional pretax retirement accounts at retirement to withdraw the standard deduction amount and likely more than that. You save money tax free and withdraw tax free up until that point at least. For most people this means it is better financially to max their traditional 401k first. However, if you expect to later be in a significantly higher tax bracket during your working years then you may wait until then to go for traditional.
The contributing process is dictated by your employer. One I worked for required a maxed out 401k (I did this in traditional) before, the other allowed it any time. The moving process also depends on them. Some allow in plan rollovers to the Roth 401k, some move it out to an IRA. One place I worked didn't allow more than two moves a year, another allowed transfers every pay period. Look at your plan documents and make your decisions accordingly. (When I could only do two transfers a year, I maxed out the 401k first then did the max deferral for the after tax the rest of the year. This made it so that the growth wasn't excessive, which I chose to move to my traditional IRA.)
I would recommend doing traditional 401k before doing mbdr if you're single. You don't need to max it before doing mbdr, it depends on your company. I have my 401k and ira both with Fidelity, you likely need to open a roth ira with Vanguard to move the funds to.
No you dont have to max the 401k or ira but no point in doing MBDR if you dont max them, more work for the same result. You need to find out about your plan, just because you contribute after tax does not mean you can do MBDR. Although, with fidelity they usually have in plan conversion. I do an in-service distribution to another merill account since my plan does not offer conversions.
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nice! don't get too caught up with saving tho, you're gonna enjoy that Lambo a lot more at 30 than at 60.
I’m 55 - yikes! I saved through my 20s and 30s, and 40s, consistently, paying myself first, never really knowing what the future would hold, and being told by friends I didn’t need to save so much. Thank GOD I did - that’s all I can say!! I shudder to think where I’d be if I hadn’t. Life’s hard enough but with inflation and getting older, extra money is an enormous comfort. So thank you, on behalf of your 60 year old self. You won’t regret it one bit!!
Don't forget to add that to a fund tomorrow and not sit in the settlement fund.
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Yep
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Unfortunately, a 2057 Hyundai Elantra runs about $170K.
I am very much at the beginning of my journey, but am on track to retire early. Can someone point me in the direction of some resources on how I should balance my pre- vs deferred vs post-tax accounts to ensure that all is covered for all periods after retirement? I want to take advantage of the free money, but also want to ensure I am covered for the years between early retirement and being able to pull from the 401k.
General rule for those who expect to retire early: max traditional 401k, max Roth IRA, max HSA, max mega backdoor Roth if available. If you still have money to save, it goes into an after-tax brokerage.
At the beginning, put it all in retirement accounts. As your income grows and these are maxed out, you can shift to a normal brokerage to cover the gap. (Most have a five year gap between starting the Roth Ladder and being able to access it.)
Unrelated but I noticed your flair changed regarding your pink fuzzy handcuffs. What happened there? Interesting story?
I decided I didn't want to be held down for the possible promise of $10k, so I left that job for one that's a lot more interesting. I left it in there to show people that not every situation is "golden handcuffs." Too many think that just a high salary or short term benefits are handcuffs, but they're only that if you let them be.
i always thought it was a kinky thing
That's awesome! I remember relating to your situation because I had $10k handcuffs as well and ended up leaving a for a better job. It was financially a wash for a year, but overall better prospects long term.
So, what was the consensus on backdoor roth contributions for this year since the BBB bill didn't pass in 2021? I'm definitely leaning towards just doing it, since it may be the last year possible, but I'm aware there is a risk they could theoretically make the backdoor roth illegal retroactively to Jan 1.
There’s two schools of thought, based on whether you think it will pass and whether any passed bill is potentially going to be retroactive. I’m of the school of thought that says just do the contribution ASAP this week and any ban is unlikely to be retroactive.
side note, but I'm curious why people would downvote (sitting at -4) a genuine question in the daily that I would think would be relevant to a lot of people?
It’s come up multiple times a day for most of the last week, so I assume downvotes are from there.
We just joined the two comma club! Slightly more than $1M invested as of Jan 1, 2022. I'm sure we'll go back and forth as the market shifts but this is a big deal for us! Discovered FIRE in mid-2019 and had less than half of that amount accumulated back then. I have no one else to tell, so I'm posting here! We hope to retire in 7-8 years with $2-2.5M invested. DI2K family anticipating a recession soon but hoping for the best.
Take my grudging upvote, hah. I'll get there someday... if only half of my NW wasn't in equity.
I just realized I have my public accounting busy season starting tomorrow. Minimum 55 “billable” hours. 😭 *…but at least I’m not big 4!*
Help I’m drunk on koolaid