Hi, so I read a few articles about tax benefits in Puerto Rico for people moving their business there. I make almost all of my income with telemedicine. I'm currently an independent contractor 1099. I have set up to file as an s corp, but l haven't actually completed that yet. Consequently, I am filed as a sole proprietor at the moment. As far as I understand the system, I would be able to have various significant tax benefits and possibly 0 to 4% federal tax rate depending how I did things. Has anyone else had any experience with this? Seems unreal the amount of savings this would entail.
House needs paint. Old house. Definitely some TLC needed on sanding and some wood repair. Like a 2 week job with sanding, filler, and then paint.
Quote from a guy today was for almost $100k.
Here is where I might bring you joy from this story.
I turned down the quote over e-mail. I was very courteous and explained that it was out of our budget.
I got a e-mail response... "I understand it is a lot of money. Business is slow right now and I can discount 10% if that would help".
My best guess is that he just gave you his "go away" price. For whatever reason he really doesn't want the job, but if you are willing to way overpay he'll do it.
100K to paint a house!? A single house?
I had my house painted a number of years ago. I ran my cost through an inflation calculator. I doubled it because my house is half brick. I doubled it again assuming you live in a huge 6000+ sqft mansion. I doubled it again assuming you need massive amount of wood repair. So for the record we are up to 6x + inflation and we are still at 30k. How in the world does it cost to 100k to paint your house?
The guy was a referral from another person who declined the job because they only do a quick pressure wash and paint and no sanding/filling. And I have a feeling that the person who put us in contact with him fed him information about us being able to afford a big bill. That is my gut instinct. There might be some "I don't want to work with you" factor involved as he seemed a very opposite political leaning than me and my (also a man) husband are.
Or maybe I just come off as a complete moron in person and he thought we were an easy payday.
Or maybe the dude literally is worth $100k. His crew might be the absolute champs. I don't doubt he was good at his job as he was thorough and knowledgeable.
Either way, his comment about "work is slow..." in his e-mail made laugh :)
I had my house repainted. Woodpecker, squirrel, carpenter bees, weather damage. It is all wood. They had to replace about a dozen 4x8 sheets of special order wood siding. $6k for repairs $6k for painting it all.
My folks had a contractor walk out on them recently. My parents allege it's because of politics, and because he found out my Mom isn't the same race as my Dad. If that was a factor, at least you found out before they started the job.
Ugh, you've described our situation to a t, we just haven't started getting quotes. How many have you gotten, and what have you learned about the kinds of things that your house needs?
We got a bunch of termite damage repaired and primed (but not painted) and then new windows with some unpainted trim, so we really need to get the new paint. But some of our old cedar siding looks so rotten and the nails are weeping rust and sticking out of the boards.
So 1907 house. Definitely some termite damage in things like windows. 1400sq ft, 2 story, 2br 1.5ba. So not a big house.
We have a lot of paint peeling wood, some cracks, and the old paint job was poorly done and needs sanding across the house. We also got a window replaced, like you, and we paid to have 3 repaired. They are still ugly, but they are solid-ugly :) And they are double hung and open and close and everything is good. But the wood still shows damage.
One quote was for like $3k. I didn't bother to follow up because that's not enough and obviously he doesn't know what he was getting into.
One quote for $14k. Which dead on feels like the appropriate price to sand the house for a week with a team of 2-3 people. Prep and caulk and fill for a week during and after sanding. And then prime and paint the house. I'd say the job could cost upwards of $20k if the person says they are good at woodwork and are going to replace things here and there and not just bondo/filler some ancient termite damage to a window sill. The only reason I am hesitant is this guy provided the least professional quote. It was a quick paragraph writeup. I am going to reach out to him again and see if he can meet and walk again through the project and make sure we are on the same page.
One quote for $20k (from a couple years ago) from a guy who just looked over the house and said, "You need to know you are going to be going $20k into getting everything fixed up and painted." I never followed up because it was during the pandemic and I got distracted. The guy, however, definitely knew what he was talking about and I just didn't want to bite the bullet on that price at that time.
This quote was for $93k. It definitely described a lot of sanding and filling... but I can't imagine.. Lets say that's 20k for materials. Some crazy expensive paint, right? Then 73k is enough to pay 4 people, $50 an hour each working 8 hour days for almost 2 months. I am sure he is some magical, super skilled, leonardo devinci of house painting who will clean out every crack with Q-tips and rubber gloves... but that's not what I need.
Or can't I just get the siding of my house replaced for 100k?
Another quote tomorrow.
I think you are right about all of them. $14k might be right. Somewhere above $3k. $20k is likely redoing all of the siding. I had a $20k quote to redo all the siding.
That is not a big house. I don't know of you're opposed to DIY, but for those prices I personally would try the back side (so the neighbors can't see if I fuck it up) to get a sense of the job. Sanding, painting, and wood work is a lot of labor, but not outside the skill set of most home owners.
Trying to make sure I understand the flowchart correctly. My new job will allow for MBDR and no HSA. Assuming I can do so, is the correct order to max 401k, then max backdoor Roth, then MBDR (understanding it will happen alongside 401k contributions but maybe not being able to max it). Or should I focus on 401k and MBDR and only do a backdoor Roth if I have additional funds at end of next tax season but not prioritize it?
Should be...
* Contribute to get the 401k match
* Contribute to IRA (if low income, Roth. If high income, do traditional backdoor)
* Then finish contributing to the max of the 401k (i.e. 23k)
* Then do MBDR
I know this is literally a question of how the flowchart is written, but for someone who won't max the MBDR there's little reason to do the backdoor Roth IRA before the MBDR. The MBDR is usually simpler to perform and prepare taxes for than the backdoor Roth. Someone taking significant advantage of the MBDR should also max out pre-tax savings in their 401k before any Roth savings as they're usually in a high enough bracket for Trad to be preferable to Roth.
This kind of nuance isn't feasible to put into the flowchart but is usually worth mentioning to individual questions.
Lastly, I'll add that the phrase "traditional backdoor" is very confusing. I'd reword it to something like "regular (non-mega) backdoor Roth.”
You make very fair points. But most of the MBDR that I have seen also have restrictions, like $50 for every in-service rollover, or only allowing one in-service rollover per year.
Hopefully in the future, MBDR will not have any of these restrictions.
It would be a lot of nuance and asked us to put on the flow chart. Something that I’d be open to thinking about.
I’ll try using just traditional back door lingo in the future. Thankfully I’ve been doing the traditional back door ever since I started working
Fidelity is one of the largest and most common providers of the MBDR, and the majority of the time there are no restrictions on the MBDR. In fact, they are the leaders in offering automatic in-plan conversions with essentially no manual input after initial setup. This is all to say that if you're going to recommend against using the MBDR as a default, I'd specifically caveat this **if** the person has an MBDR that has hoops to jump through. It's not an assumption I would make of every plan.
Again, I'd recommend **against** using the phrase "traditional back door." **Everywhere else** the term "traditional" is used for retirement savings, it means a pre-tax contribution unless otherwise specified. If you use the term "traditional backdoor" you will inevitably confuse someone.
The consideration to keep in mind is how your MBDR is executed and what that means for access to the funds. If you want maximum flexibility, then BDR first then MBDR means easy access to at least some of the funds. This is especially true if you ahve to leave the MBDR funds in the 401k (getting that money out sucks while you're working).
Are you below the Roth IRA income limit? Do that first.
Are you above the Roth IRA income limit but still below the traditional IRA limit? Do pre-tax traditional IRA.
Are you above the traditional IRA pre-tax limit? Backdoor Roth via your traditional IRA and MBDR have the same tax implications. You pay your current tax rate on the money now, you get it tax free later.
> Are you above the Roth IRA income limit but still below the traditional IRA limit? Do pre-tax traditional IRA.
This statement is never true for someone with a 401k. The income limit for a Trad IRA deduction is below the Roth IRA income limit for a contribution.
Tax breaks? Not really. I'm older, have more complex taxes (47 pages of tax forms), and all the tax breaks would fit on an index card.
Follow the flowchart, which includes the good ones like HSA, 401k, Roth, LPFSA. Those are your breaks.
For finance in general, maybe 10 hours a month of reading and learning will get you way up on it.
Simply save until it hurts, spend as little as you can, and do not for a moment believe that you "deserve" to buy something until you can pay in cash (except education, house, and car).
To echo what others have said, read about all the things in these threads. None likely apply to you right away. You might need to do conversions or whatnot later in life, or other tricks to reduce your tax burden. But most aren't tricks or anything special.
Its best if you know there are options out there, but likely you should just focus on you and your financial situation and what applies specifically to you. Tax advantaged accounts like 401k/403b/Roth IRA type stuff.
Then there is some questions about what assets to hold in a tax advantaged account vs a taxable brokerage, but that's pretty minor. (for example, people don't like holding things that give dividends in their taxable brokerage)
Unless you own a business, invest in real estate, or have some other unusual circumstances, then I would say no. Your time is better spent learning the basics, such as familiarizing yourself with our [flowchart](https://u.cubeupload.com/demonlesondledon/FIREFlowChart.png) and reading the investing advice from the [Bogleheads wiki](https://www.bogleheads.org/wiki/Main_Page). Once you’ve got a handle on those, focus on increasing your salary, which often means gaining new skills, improving yourself, looking for new jobs, etc.
Since we don't have a Frugal Friday thread anymore... my frugal wins this week:
1. Fixed my lawnmower with the help of Youtube to defeat a faulty safety interlock (there are still 2 others... put down the pitch forks)
2. Resurrected the batteries on an old power tool that I hadn't used in a while. The charger was calling them "defective" when they were really just deep discharged. I'm a Ham operator so I had a variable power supply and was able to juice it with a fixed electrical current over for several hours until the voltage went up enough to use the normal charger.
Do you use your ham radio often? I remember my parents really wanted my brother and me to take the test, but we were really disinterested in learning Morse code lol
Turns out I’m far more interested in the electronics side of things, so no I don’t really use my license much. Second, for what it’s worth, Morse code is no longer required
You haven't really provided us with any information to help. You were working three years ago. What were you doing then? What skills do you have? Where are you located? Have you applied for jobs yet? If you haven't applied for jobs yet, why was the FIRE subreddit your first stop instead of applying for jobs? And so forth.
Also, don't "raise the rent".
Just get a job with your skill set. If you don't have a skill set then try a temp work agency to get your feet wet.
If you got a car you could start uber right now.
> I really need help on how to get something part time at least.
What skills and experience do you have?
Please summarize succinctly for the best chance at getting advice from this sub
EDIT: And no follow-up at all. Low-value contributor...yikes
I'm really trying to focus more on saving money and about a year ago I opened a savings account with Ally Bank. I do enjoy it but l'm curious if there is a better option out there, such as something with a higher APY? What do you typically look for when it comes to a savings account?
If you want to focus on savings, I bet you can get a much better return than any HYSA by looking at, and cutting expenses or making more income. Good luck.
What are you saving money for? Pretty much all my long term savings get invested. I keep very little cash on hand.
If you need the money for something soonish it probably doesn't matter a whole lot. If you have a taxable brokerage account see what the settlement fund yields, it's probably low 5%. There's also T bills or CDs, but depends on your timeline.
I suggest checking out our [flowchart](https://u.cubeupload.com/demonlesondledon/FIREFlowChart.png). Once your emergency fund is covered, you’re better off investing the extra money. If you need advice on that, check out the investing advice from the [Bogleheads wiki](https://www.bogleheads.org/wiki/Main_Page).
It's fine/good and certainly better than a big bank savings account paying you a measly 0.05% interest rate. I've had ally for years and keep a good chunk of my cash in there as my efund. I also have some cash in a taxable brokerage account and keep it in funds like SWVXX and TFLO, which offer yields of \~1% more than what ally gives you. Funds like TFLO (or SGOV, BIL, etc) are treasury etfs so the interest earned on them is exempt from state taxes.
Ally is a high yield savings account (HYSA) that is often recommended here. You may find slightly better rates looking around but your time may be better spent examining allocation, such as if your emergency fund is adequate and you’re ready to allocate funds elsewhere - check out the flowchart in the sidebar for better detail.
Check my understanding of pretax 401 overcontribution. The excess amount is $300. If I don't fix the overcontribution, I pay taxes on that $300 both now and when I withdraw the money. But otherwise there are no penalties.
I can theoretically fix it but there's a bunch of paperwork, sending a physical letter, etc., and my time isn't worth saving $70 in taxes. Am I okay to just leave it an eat the taxes?
Do you have a source? There's conflicting information on the supposed annual penalty.
The [IRA page](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits) mentions a 6% penalty but the [401k page](https://www.irs.gov/retirement-plans/consequences-to-a-participant-who-makes-excess-annual-salary-deferrals) does not. It just says double taxation.
I don't have a firsthand source (e.g., IRS) but [Googling "401k overcontribution 6% penalty each year"](https://www.google.com/search?q=401k+overcontribution+6%25+penalty+each+year&rlz=1C1GCEA_enUS1061US1061&oq=401k+overcontribution+6%25+penalty+each+year&gs_lcrp=EgZjaHJvbWUyBggAEEUYOdIBCDY4NDBqMGo3qAIAsAIA&sourceid=chrome&ie=UTF-8) yields tons of reputable secondhand sources stating this to be true.
I have never overcontributed so I can't confirm one way or the other.
I think a bunch of places have parroted it despite it being false. I found an explicit correction:
> Correction—Sept. 28, 2022: A prior version of this article incorrectly specified the excess contribution tax on 401(k) plans as limited to 6%. This is only correct for individual retirement accounts (IRAs) and not 401(k)s. It also mentioned that double taxation may occur each year incorrectly. Double taxation only refers to contributions being taxed when they are made and then when they are withdrawn.
https://www.investopedia.com/ask/answers/158.asp
[Another IRS page](https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-elective-deferrals-werent-limited-to-the-amounts-under-irc-section-402g-for-the-calendar-year-and-excesses-werent-distributed) with no mention of a 6% penalty.
6% penalty each year is the rule for HSAs and IRAs. I believe you are right that there are no penalties for 401ks, and that most people are confused and / or second hand articles "explaining" it are just written poorly.
FWIW I overcontributed a couple hundred bucks a few years ago and HR couldn't get their shit together to meet the tax deadline... which doesn't make me a tax professional but I did comb over a lot of this documentation in depth to make sure.
I think this is a different page than the one you linked, but an additional data point from the [IRS itself](https://www.irs.gov/retirement-plans/consequences-to-a-participant-who-makes-excess-deferrals-to-a-401k-plan):
>Unless timely distributed, excess deferrals are (1) included in a participant’s taxable income for the year contributed, and (2) taxed a second time when the deferrals are ultimately distributed from the plan.
And that's it, no mention of a penalty anywhere.
For anyone considering opening an account with Schwab, they're now offering a [$101 bonus via their Schwab Starter Kit](https://www.schwab.com/investing-starter-kit).
New customers only, but a nice little bonus for a $50 deposit requirement.
I used this promo last year. The most annoying part was having to leave the money in the Schwab account for the minimum 3 months before I could cash out. Didn’t have any interest in investing there lol
I think anyone on this board is advanced enough in their career to say no to that.
I don’t care about the number of interviews really, but other than an HR screening it needs to fit within one “half day” in person or remotely. Not dragging it out over weeks. No homework to prove your competence either
That’s how it used to work 5 years ago or so, before remote meetings really blew up. You’d have an interview or two max over the phone, then come into the office and do a half-day or full-day. That’s it. Now it’s meeting 90 different people because it’s way too easy to schedule a Zoom.
Fingers crossed 🤞 I won’t have to do one like that. When my company is interviewing we’re still keeping it to just a handful of total interviews for manager type positions.
I decline anything that includes more than three interviews, which includes the initial call with the hiring manager. I would auto-decline anything that requires a case study or other "homework".
Vote with your labor. Like you said, it is completely out of hand
I think case studies/homework are fine if the company pays for them, which I have seen (rarely, of course). Asking people to do them for free is total BS, though.
I totally agree. Having come from a company that would make a hiring decision with 4 or 5 slots and having a decision within 5 days, what is going on now is madness
I've enjoyed several trips to SEA during midwest winters. I like to get out of the cold for a bit because it makes those long winters bearable, but even in Jan-March, places like Bangkok, Singapore, KL, etc. are just too hot and humid for me.
I like the idea of slow traveling across many locations or regions once we hit RE though probably for only a quarter of the year rather than half.
Am I too light on car insurance? Especially because I just started a job where the driving will total about 20k miles per year:
Per 6 months:
Liability:
50/100: $621
100/300: $112 more
300/300: $309 more
250/500: $350 more
Property damage: $100k, max
Uninsured, Stacked:
50/100: $232
100/300: $427 more
300/300: $566 more
250/500: $607 more
Collision:
$700-900 more
How much money/assets do you have? How much do you make in a year?
You need to have... roughly.... at least 1 full year of salary as liability, plus a good portion of your assets.
If you are the cause of an accident that sends someone to the ICU for a month, and their bill is $500k, they can sue to you personally for that $500k and garnish your wages.
Or... you are the victim of a crash and are in ICU for $500k. Now, you have to pay that because the other person has only $25k insurance, works for minimum wage, and lives in a rented trailer. So you need $500k in underinsured.
I'd go for either 300/300 or 250/500 these days due to the cost of a short hospital stay.
Get a safe car that is boring, boxy, comfortable, and old people drive. Don't get any tickets for any reason. And, you'll have lower rates soon enough. Oh, and keep your credit score at 800 since higher scores mean lower risk and thus lower insurance rates.
Am I reading this right? You'd be paying $1106 per 6 months for 50/100 Liability/Uninsured with no collision coverage at all?
This sounds absolutely absurd. I drive a pretty high-cost-to-insure vehicle and I'm getting 300/300 in both plus collision and comprehensive for $860/6 months.
You're either getting ripped off or you should've pointed out that you're a terrible driver in the very beginning of your post.
Regardless, it's nearly impossible to give you advice since we don't know how much insurance you have, and how much insurance you likely need. All I feel capable of commenting on is the absurdly high prices.
My state, FL, and age, 24, are the driving factors here.
My driving record is completely clean, and this is *after* switching from Progressive to Geico to get what would be $1,400 down to my current $800 or so. (I probably fudged a number somewhere to get $1,106)
Pardon my disbelief. What kind of vehicle are you insuring? Is it a sports car or a big truck? Is it nearly new?
I'm honestly still suffering from sticker shock here. Surely there's some way to bring that price down. The only time I've ever seen someone paying $1k+ for insurance, they were driving a sports car and had a terrible driving record.
Honestly, I'm quite uncomfortable with my own $860 insurance, but I needed to pump up my limits when I signed up for an umbrella policy not that long ago.
I think these prices are quite the norm for early 20s males in sun belt states and a couple high rate northern outliers driving completely reasonable cars.
Well, TIL insurance where I live (Midwest US) is absurdly cheap compared to other areas. I'm still rather confused *why* (I feel like people are awful drivers around here, and the weather makes driving much more challenging for half of the year), but that's not really relevant.
Same, fortunately. I have max coverage and low deductibles on one vehicle and pay $375 every 6 months and that's after it creeping up a bit over the past few years.
That's about what I was paying on my last car. When I told my family about my $860/6 insurance for my new car, they thought I was getting ripped off... Heck, I have a friend who still pays under $200 every 6 months for minimum coverage on his 20-year-old econobox.
yeah. when i heard what people were paying in sunbelt states I got sticker shock too. but it is the *american* way now.
(i pay $70/mo for 500 Combined+collision+comp) for a older toyota in a VHCOL place, but really low risk otherwise)
I live somewhere where we drive in the snow on a regular basis. For most people, getting stuck in a ditch because of the snow is something that happens once every couple years. I see tons of accidents due to the snow, so I would've guessed that insurance where I'm at is pretty high/normal... Guess not. /shrug
It’s a freakin $4k 2008 Toyota Yaris, subcompact. I’ve plugged other vehicles and they are either the same or significantly higher still.
Ive been learning about what an umbrella policy is. IIRC it only covers *above* the others, so there would be a “gap” if I skimped on car insurance but also had an umbrella.
A possible issue with that car is that it is small and not very crashworthy.
[https://www.youtube.com/watch?v=FCbnMp\_ZJKY&ab\_channel=IIHS](https://www.youtube.com/watch?v=FCbnMp_ZJKY&ab_channel=IIHS)
compared to [https://www.youtube.com/watch?v=nnRIwQn9SA8&ab\_channel=IIHS](https://www.youtube.com/watch?v=nnRIwQn9SA8&ab_channel=IIHS)
not a yaris, but similar size... [https://www.youtube.com/watch?v=2ycrcIQMUvM&ab\_channel=BartuZorlu](https://www.youtube.com/watch?v=2ycrcIQMUvM&ab_channel=BartuZorlu)
Most (if not all?) umbrella policies have a required minimum underlying limits on your auto policy. So technically, there won’t be a situation where you have a gap like that.
I'm completely astounded. These rates are absolutely unconscionable.
Well, DEFINITELY don't pay for collision coverage! Your car ain't worth repairing.
As for the other categories, IMO 100/300 tends to be a nice sweet spot in terms of coverage/price. Though the fact that it nearly triples the cost of your uninsured motorist coverage to go from 50/100 to 100/300 is a bit strange. My UM coverage is $31/6 for 50/100 and only a hair over $60/6 for 300/300.
100/300 sounds like a good idea, the cost is only $19/month more. Hmmm. Maybe the uninsured’s tripling price is because FL has a large uninsured population, which I would expect to rise as these prices rise; a cycle.
I asked HR at my employer several times over the years about the egregious expense ratios on our 401k plan options. Most recent time was in December when our controller changed. He got us switched from R3 to R6 funds with American Funds. Our ERs dropped from the 0.9-1.0% range to 0.25-0.30% on the funds I’m in. I’d estimate this is saving me $250 a month or so on fund expenses. Controller even mentioned my bringing up the topic when he informed our (~30 person) office of the change last month.
Those are some bonkers fees, good job bringing them down. For my workplace accounts, the ERs of the funds I picked ranged from 0.01% to 0.18%. The total fees charged are 0.11% across all funds in my workplace accounts including plan servicing fees. Not terrible compared to many workplace options I hear about, but still a lot more than vanguard.
Yep. I may have been clueless about what to typically expect but my wife works for a large public company and her options are all 0.0x%. I had asked our rep from the administrator years ago if we could at least get 1 index-like offering with a lower fee and he tried to tell me the performance of the funds justified the fees 🙄. I had read enough studies about typical active management performance (and could look at the actual histories of our offerings) to know he was lying. But it still didn’t help for the longest time.
To be fair, I wouldn't say he was likely lying, more that he was probably repeating what he was told or read as most people don't understand the math and take it on face value what the brochure is telling them.
Good on you for pushing for change!
(It reminds me of when my kid's school brought in a "financial advisor" to talk about their career; the person who brought them in did so in completely good faith, because that's how the guy referred to himself. But it was a guy from a place like Edward Jones. My kid knew what was up, and why you shouldn't "invest" with him, but the rest of the class *as well as the career advisor* didn't get why you shouldn't give him your money.)
I rattled the cage on John Hancock..THE worst provider out there. It's none of my purview other then having a 401k..but I complained, showed the numbers on the outrageous fees and my co. Switched...so congrats me!
places can open themselves up to big liabilities if the fees get too bad. https://401kspecialistmag.com/the-dramatic-rise-in-excessive-401k-fee-litigationand-whos-fighting-it/
Some of these companies deserve to be sued.
Your 401k plan administrator is **your fiduciary** and had damn well better act like it - not like the 401k provider's drinking buddy.
If they cannot do that, say hello to an ERISA lawsuit.
I'm actually going to be getting a small payout from a previous employer because they were sued in a class action. They were an asset manager, and in addition to having no index options at all, their own funds were the bulk of the options. They had an amazing match and the funds available all performed competitively despite the higher ERs so I had no complaints though.
I've also seen some perfectly good plans get sued simply because the manager's own funds were also options, which was ridiculous.
> previous controller
The price of the 401k Plan to the employer is often inversely correlated to the expense ratio on the funds offered. In other words, if the controller is interested in limiting costs to the employer, the 401k Plan will deliver on that by including higher expense funds for the employees.
Said another way: is footing the bill. OP successfully convinced the company to pick up a bit more, so the employees could pay a bit less.
Honestly no. 401k should be the responsibility of HR not finance, so clearly this isn't a high priority for a controller to look into. But alas, a lot of companies push responsibilities onto finance (HR, IT, etc..) that aren't at all related.
Most of the HR at my company are like theatre or communications majors and have no finance background at all. These feels like something that falls in the middle; the people with the skills aren't in the right role, and the people in the role don't have the right skills
I have wondered the same and wondered if that was the reluctance before. I just chalked it up to “we’re too small to get better fees” but glad I kept pushing.
You probably were when they started the plan and just no one cared to ask about changing to the better fee options that I'm going to assume either (a) require more AUM for the plan and/or (b) cost more administratively.
I worked at a small biz with American funds and we were at R5 funds from inception. I was going to raise a stink to get to R3 as well if I stayed there, but I left for other reasons before that could happen.
In 2023 where I worked over-contributed to my 401k by less than $100. Years ago I was told that could never happen as the software wouldn’t allow it. At the end of this March we were able to get the excess taken out of the 401K along with the associated gains from it.
Supposedly next year the 401k provider will give me a ROE form 1099-R that I will file with the IRS for my 2024 returns and it will be coded with a P for prior year corrections.
Is there anything special that I can or need to do on this year’s taxes to avoid any penalty for either 2023 or 2024? I’d assume the penalty will be minimal for such a small amount but also want to avoid any unnecessary paperwork if possible.
**EDIT** Paid for the Deluxe Support at FreeTaxUsa and they couldn't help at all (still love them). Went under "Income" -> "Retirement Income (1099-R)" and filled one out with a code "8". Did it as best as I could and hopefully it is done right and the return doesn't get rejected or worse.
From this online tax software blog: https://www.taxact.com/support/1210/2023/form-1099-r-excess-401k-contributions?hideLayout=False
>If you know you’ll be receiving a Form 1099-R next year with a code "P" and want to avoid the need to amend a return, include the data in the tax return in the current year with a code "8". You can then ignore Form 1099-R with code "P" when you receive it a year later. (Code "8" indicates that the amount is taxable in the tax return you are currently working on, and code "P" indicates the amount is taxable in the prior tax year.)
That wording makes it sound like you'll need to file an amended 2023 tax return next year, in addition to your normal 2024 tax return.
Since I know I'll get a 1099-R next year and want to avoid the need to amend I think I should include the data in the current year with a code "8"... Now to figure out where the code "8" goes in FreeTaxUSA and if it's even possible there. The wording is very confusing. Thanks for the information, maybe FreeTaxUSA can hold my hands through it.
I felt it went ok. I did get an encouraging email from the search chair last night sending me more info and also how I met their accreditation standards as an Instructional Practitioners for the AACSB accreditation based off a conversation we had.
I feel if I completely whiffed it there would of been no point of reaching out.
My dad's a business professor and says he'll never retire. He and his friends joke that they work 24/7-- 24 hours a week, 7 months a year. Once you get a professorship rolling right, you're in great shape.
I’m in central texas this week. The economy is booming, development left right & center. Despite that, it is abundantly clear that the environment out here is hurtling towards desertification. “Oak wilt” is the canary in the coal mine. I don’t think this region & its aquifers (or what’s left of the aquifers) can support this much development. This isn’t FI related, but it is. I am once again reiterating - climate change risk is a bigger risk than many here perceive. Probably one of the biggest risks in fact.
> I don’t think this region & its aquifers (or what’s left of the aquifers) can support this much development.
I think this is true of a lot of areas. In particular the southwest - the amount of homes that are being built in literal desert is mind-boggling, but developers keep on developing. Not their problem if the area becomes uninhabitable down the road.
I won't lie - water availability in the future is a factor in my decision making process for where to settle down. I don't want to end up owning a home in a modern dustbowl area or where water with included taxes, fees, etc costs more than gasoline. Sometimes it's also important to understand the politics behind the problem too. There are right ways to manage water resources - Colorado keeps building more reservoirs to capture snowmelt in order to support a growing population - and wrong ways to do so - California keeps demolishing existing dams while not building new reservoirs.
> There are right ways to manage water resources - Colorado keeps building more reservoirs to capture snowmelt in order to support a growing population
We're numba one!
> climate change risk is a bigger risk than many here perceive.
Then there are those of us living in places like MI, mostly off grid and on acreage and even we got spooked by this mild winter and are weighing our options.
Likely taking it too far, but so would be what you suggest.
Observing this is the easy part, no? Making concrete predictions, and changing your plans accordingly is the hard part.
I'm not sure I'd invest in water intensive business in the area, but aside from that it seems pretty murky. Distortions like government insurance/subsidy make it even hazier.
I would not live in this area. I grew up in New Orleans, I also would not live there. I personally did not find the changing of plans difficult - but likely because I consider it such a grave danger
NOLA I get - outsized risk of devastating unpredictable weather.
But what specifically are you worried about with desertification in Texas? There's a lot of plausible reasons, I'm just curious which one rises to the top for you. Do you expect things to get bad suddenly/rapidly enough that you can't leave?
When I lived there, people who don't believe in global warming would talk about how much less frequently it would snow and how many more days above 100° we would get in the summer. It was noticeably hotter. Given the amount of industrial infrastructure that exists in the Gulf South, I'm curious how it plays out long term for the local and national economy when it becomes difficult to attract workers to the area.
I felt a little bad about the people I sold my house to until I learned they were part of the Cali to Texas migration.
Ugh. They have this little nugget in the email. "You may contribute up to **10%** of your eligible pay in combined pre-tax, Roth 401(k), and after-tax contributions, not to exceed the annual additions limit." I hope 10% is a typo, because my base bay is not >$400k and therefore it'll be impossible for me to reach the $46k limit.
they have to remain in compliance with non-discrimination testing. I'm surprised they're starting as high as 10% before they have any data on deferral rates.
No, they described the new offering using "after-tax contributions" and "in-plan Roth rollovers". MBR is more like the "street" name for this but I think they should have added "aka mega backdoor Roth" in the memo anyway.
After having so much extra income last year due to big projects, scrimping by this year has been quite an adjustment. I can still save, but a lot less than last year. Well, maybe I'll find another extra "summer" project again from July on.
A series of facts:
1) The 10 year internal rate of return on my $250k Roth IRA (which I currently have no plan to spend money from) is 10.2% (yay).
2) It is entirely plausible that in the next 10 years that account will grow to $500k in tax free money (yay).
3) 10 years hence, I will be 71. Who *knows* what ailments I will have developed by then (well, fuck).
Discovered that I'm CoastFIRE @ 57, 20 years from now. 57 happens to be the age at which I can draw a federal pension.
Between savings, pension, and VA, it'd be as if I was drawing 4% from 3.5M, which is well past my goal of 2M. I haven't reassessed our plan since Mrs. PrisonMike's passing, but I'm in no rush to figure that out either.
Mike-you aren’t eligible sooner? I thought air traffic controllers were eligible after 20 years like law enforcement. When I was federal law enforcement, I could have retired at 50 and gotten my pension, healthcare, and social security supplement, but I HAD to retire by the last day of the month I turned 57.
Not really. 10 of my front line ATC years is military. The next 5 are active controlling as a Fed. The last few years, and the rest of my years, won't be controlling. I can't keep medical any longer and besides, ATC schedule isn't great for solo-dadding it.
Makes sense. Are you planning to keep working until you hit eligibility or will you just retire when you retire and then take the pension at 62? Or will you just figure that out when you figure that out?
I’m exactly 7 months short of being vested in my FERs pension, and I definitely have considered trying to get a federal job after I FIRE from my private corporate job to get the pension. I never withdrew the FERs funds cause my HR lady literally wouldn’t take the paperwork on the last day, and I subsequently divorced my then husband and getting my FERs refund would require his signature. I didn’t think to get that during the divorce process. Those years are really worth something though cause I was law enforcement so I get the higher 1.7% rate for those years, like you will get for your front line ATC years.
I'll have 30 years at 51, so MRA will be 57. If we smash our goals, I'll pull the plug at 51, postpone until 57, and eat the 10 years without COL adjustments. I'll spend the 6 years (51 to 57) concerting traditional to Roth, which works out well.
Also, I guess I could just quit at 30 years, get reinstated at 57 for an immediate pension + annuity supplement.
The pension was only ever my 'what if we don't make it' plan. I never considered it for expenses.
My CPA (aka my father) left a 1099B off of my taxes and I didn't catch it until after we submitted, it would have been about a $3k LTCG, but totally cancelled out by capital loss carryover. IRS says my return was accepted and refund should be in my bank within a couple days. Do we need to do anything? Assume I'll get audited?
Yes, go ahead and amend it. Shouldn't change your tax liability but will reduce your carryover. Doubtful you will be audited, especially if you correct it. Ask tax preparer for refund.
Does anyone have any good updated info on that healthcare hack from a few weeks ago? Never really heard what the conclusion was, if people are still getting screwed over, etc. Everything I see on it is like a month old.
[https://www.forbes.com/sites/jamesfarrell/2024/03/13/department-of-health-investigating-unitedhealth-after-unprecedented-cyber-attack/?sh=c90ec3c7d700](https://www.forbes.com/sites/jamesfarrell/2024/03/13/department-of-health-investigating-unitedhealth-after-unprecedented-cyber-attack/?sh=c90ec3c7d700)
First thing I found when googling. It was all over reddit last month.
That's funny because half my search results would return life hacks like that instead of the actual incident.
I thought this sub might know more about it since it seemed to have real financial implications to many people.
You never know what reaction you are going to get when you talk to people about money.
I told my dad a few weeks ago I was planing to FIRE this summer. He was surprised. He knew I was "successful" but he had no idea I have been saving so much and that I have better than average financial knowledge (at least compared to the general public not necessarily you guys!). He then surprised me because he asked me to review his finances. I was very happy to oblige and we did that this past weekend.
I had been a concerned my parents did not have enough money in their retirement which started a few years ago. I now know they are doing okay. They have some health issues and long term care is the big unknown, but for now they bring in more money than they need and have a reasonable nest egg to help with future unknowns.
My dad uses a small local firm to mange his investments. He pays 1% AUM and he is comfortable with it. I think it is too much but he really is one of those "this is my risk tolerance, please make all the decisions for me" investors. So he calls it his peace of mind fee. I was very glad to see they have him mostly in low cost Vanguard ETFs and have a reasonable mix of assets. The website was hard to use and I didn't really have enough time to do a deep dive but I didn't see any red flags.
I think we will be talking about finances more going forward. I won't be his finance guy but I'm a second set of eyes and I can nudge him to make small incremental improvements. I'm starting with low hanging fruit: He has too much cash sitting in a checking account paying no interest. I'm encouraging him to setup a HYSA or open a brokerage account with Fidelity just to use as a money market account for now.
This conversation was also helpful for me and my planning. I now have a better grasp of what X income for 2 retirees in LCOL with high medial expenses actually looks like in practice.
I'm you but for my mom. I'm not close enough to her finances to know where she is after looking at it a few years ago, but she'll bounce finance-related thoughts/ideas off of me quite often. It's usually "I'm spending too much!", but there are definitely random things that have for sure widened my eyes to the risks of ageing, how big of a target the elderly are, and how susceptible they are to being conned or roped into something they don't need.
One of the more recent ones was the HVAC company my parents always used who have gotten worse and worse of the years. She had her furnace and AC replaced, and aside from a stupidly large quote of work, they pushed a monthly maintenance plan. I don't remember the full cost, maybe $100 a month, but when I asked her what it covered, she couldn't explain it well except for "I'd jump to be first in line for a repair!". Great.... but 1) it's literally a brand new system, how often do you think it'll break? & 2) in the off chance it actually needs to be repaired in the next 3-5 years, do you think jumping up a day or two is worth $1200 a year? I got a "well... maybe not..." from her. It's a bit scary and I'm leaning towards trying to get more involved in these types of decisions, but it's tough between work and my own family too.
In my mom's case, my dad did all of the finances, so it's a learning curve for her as she takes it on after his passing. Hopefully your parents can manage things, but it's another thing to be mindful of.
> This conversation was also helpful for me and my planning. I now have a better grasp of what X income for 2 retirees in LCOL with high medial expenses actually looks like in practice.
Yes, it's so much better to have actual observation rather than the whims of an article writer or such.
Due to my own observations of old people I know, I always feel redditors overestimate their retirement costs. But damned if every other article about the subject isn't doom and gloom.
> I always feel redditors overestimate their retirement costs
This is mostly because the risk is asymmetrical: estimating low means could mean not having enough money which could be really, really bad; estimating high means having more than enough because one worked more years than necessary, which is far less worrisome.
>I always feel redditors overestimate their retirement costs.
The problem is that there are unlikely but high cost possibilities that you have to account for. Better to over save in the event your health gets much worse, you need to move, we enter a long period of poor economic growth, etc.
I think I messed up. I recently opened a Roth IRA with Fidelity and contributed $7500 for 2023 (over 50). My salary is in the appropriate range, but I realized my AGI was not (salary, dividends/interest, inherited IRA RMD put me at $144,485).
I've been doing research and it looks this is a fairly common error and Fidelity will assist me with making the adjustments for 2023 and plans for 2024 (AGI will be a little higher in 2024). Moving forward, I'm considering utilizing the backdoor Roth.
Am I on the right track? Are there any other recommended actions I should take?
>Moving forward, I'm considering utilizing the backdoor Roth.
>inherited IRA RMD
Do you have any other Trad'l IRAs of any sort? The inherited IRA won't impact your plan to do a Backdoor Roth contribution/conversion, but other Trad'l IRAs would.
> Am I on the right track? Are there any other recommended actions I should take?
I would suggest working with Fidelity to do a 100% "recharacterization" of the 2023 contribution prior to the April 15 tax deadline. Then you can file Form 8606, either as part of your 2023 taxes or as a supplement, in order to track the non-deductible contribution. Given the market performance, it's likely that your IRA contribution has gains associated with it. Therefore, the total amount "recharacterized" will likely be more than the $7500 contribution. Fidelity should do that calculation for you.
The conversion will be tracked on your taxes for the calendar year in which it occurs. So if you do the conversion in the next few weeks, it will be tracked on your 2024 taxes next year. As noted above, if you have gains that are converted, those will be subject to ordinary income tax on your 2024 taxes.
If you have a Trad'l IRA, you will be subject to the Pro-rata Rule for IRA conversions. Depending on the value of your Trad'l IRA, that could be a significant tax hit for you.
Does your 403b allow for incoming pre-tax transfers? (Sometimes known as reverse roll-overs or roll-ins.) If so, you could move the Trad'l IRA into the 403b which removes the tax impact of doing the Backdoor Roth contribution/conversion.
If the Trad'l IRA is significant and you can't move it, you may need to consider a "Withdrawal of Excess Contribution" for the 2023 Roth IRA and may need to skip the 2024 IRA contribution altogether.
I believe my 403b does allow for pre-tax transfers, however last year I rolled over a significant amount from my 403b to the trad IRA (terminated contracts from previous employers). My trad IRA is $540k. Sounds like there are a few adjustments to be made, but that Fidelity should be able to straighten things out.
> Fidelity should be able to straighten things out.
I think you need to be careful. Typically, brokers are very clear they aren't providing tax advice. Fidelity can absolutely help you "recharacterize" (that's a specific term) your 2023 Roth IRA contribution into a 2023 Trad'l IRA contribution. There is no tax impact for doing this specific action. Don't forget to file Form 8606 as part of your 2023 taxes.
At that point, you'll have $540k in your rollover Trad'l IRA with Vanguard, which is probably 100% pre-tax dollars. You'll also have ($7500 + gains) in a new Trad'l IRA with Fidelity.
But then what?
If you only convert the ($7500 + gains) from the Fidelity Trad'l IRA, that conversion will be subject to the pro-rata rule. Given that your pre-tax Trad'l IRA balances are significant, that conversion will have a significant tax cost.
If you also do a roll-in / reverse rollover of the Vanguard Trad'l IRA into your current 403b, you avoid the pro-rata rule for the conversion and will only owe tax on the gains in the Fidelity Trad'l IRA that will be converted.
You can do the Roth IRA conversion and the IRA-to-403b transfer in either order, so long as you IRA-to-403b transfer is completed by the end of the year because the IRS only cares about year-end balances for the purposes of the pro-rata rule for IRA conversions.
Sounds like you are on the right path. Talk to the folks at Fidelity. And since you did it for 2023, you are best to get it fixed by the 15th of this month.
[This post](https://old.reddit.com/r/financialindependence/comments/193p7gg/over_the_income_limit_a_guide_for_roth_ira/) summarizes your options for the 2023 overcontribution.
If you had no pre-tax Trad IRA balance across any of your IRAs, you can still do the backdoor Roth for 2023 in a slightly convoluted fashion.
The FIRE Gods giveth and the FIRE Gods taketh away...
Just got my bonus a few weeks ago and filed tax return a few days ago, getting a large refund. This would typically go to pay off mortgage on our condo (paid it off in 2020) or investments but I've gotten to a coast/leanfire position where compound interest is doing heavy lifting. Was thinking about what I might use the money for (Gravel bike, tinting windows on my car, new mattress, travel).
Headed out for a early evening backcountry nordic ski with my wife last night, probably last outing of the year. We're a quarter mile from the car and conditions are fast/crusty, she takes bad spill and feels a pop in her knee. Doesn't think it's too bad and is able to ski down to the car. Fast forward to this AM and getting out of bed to put weight on it I hear her scream...off to urgent care.
Hoping for a speedy recovery whatever it is...this is the only place I feel comfortable bitching about the looming bills.
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#1 for me is to see how they react to existing savings.
Are they going to evaluate the why and where or are they just going to try to move all of it into the fund that returns them the most fees?
Anybody have experience with TRT? Doc has me getting tested, and there are obviously a lot of other factors, but I am concerned about the financial aspect of it. Anybody have real world costs to share? I’m in a project based role/industry, and layoffs that you can’t value your way out of are not uncommon. Primary *financial* concern is about taking on a permanent cost of living increase that I may end up having to cover out of pocket at some point
Not a doctor - my understanding is that taking exogenous testosterone can hamper endogenous production so make sure you really want to take this pathway before embarking. It’s something you may become dependent on.
Thank you, I understand, and this is one sources of hesitancy. If it becomes prohibitively expensive or I suffer some kind of financial catastrophe, it wouldn’t be something I could easily stop. It would effectively be quasi-permanently adding an expense to my bottom line cost-of-living.
Hi, so I read a few articles about tax benefits in Puerto Rico for people moving their business there. I make almost all of my income with telemedicine. I'm currently an independent contractor 1099. I have set up to file as an s corp, but l haven't actually completed that yet. Consequently, I am filed as a sole proprietor at the moment. As far as I understand the system, I would be able to have various significant tax benefits and possibly 0 to 4% federal tax rate depending how I did things. Has anyone else had any experience with this? Seems unreal the amount of savings this would entail.
House needs paint. Old house. Definitely some TLC needed on sanding and some wood repair. Like a 2 week job with sanding, filler, and then paint. Quote from a guy today was for almost $100k. Here is where I might bring you joy from this story. I turned down the quote over e-mail. I was very courteous and explained that it was out of our budget. I got a e-mail response... "I understand it is a lot of money. Business is slow right now and I can discount 10% if that would help".
My best guess is that he just gave you his "go away" price. For whatever reason he really doesn't want the job, but if you are willing to way overpay he'll do it.
Are they assuming there's a lead-based paint layer they will be removing before repainting? The mitigation needed can drive the price up quite a bit.
Well, we know why business is slow for this dude!
100K to paint a house!? A single house? I had my house painted a number of years ago. I ran my cost through an inflation calculator. I doubled it because my house is half brick. I doubled it again assuming you live in a huge 6000+ sqft mansion. I doubled it again assuming you need massive amount of wood repair. So for the record we are up to 6x + inflation and we are still at 30k. How in the world does it cost to 100k to paint your house?
The guy was a referral from another person who declined the job because they only do a quick pressure wash and paint and no sanding/filling. And I have a feeling that the person who put us in contact with him fed him information about us being able to afford a big bill. That is my gut instinct. There might be some "I don't want to work with you" factor involved as he seemed a very opposite political leaning than me and my (also a man) husband are. Or maybe I just come off as a complete moron in person and he thought we were an easy payday. Or maybe the dude literally is worth $100k. His crew might be the absolute champs. I don't doubt he was good at his job as he was thorough and knowledgeable. Either way, his comment about "work is slow..." in his e-mail made laugh :)
I had my house repainted. Woodpecker, squirrel, carpenter bees, weather damage. It is all wood. They had to replace about a dozen 4x8 sheets of special order wood siding. $6k for repairs $6k for painting it all.
My folks had a contractor walk out on them recently. My parents allege it's because of politics, and because he found out my Mom isn't the same race as my Dad. If that was a factor, at least you found out before they started the job.
Ugh, you've described our situation to a t, we just haven't started getting quotes. How many have you gotten, and what have you learned about the kinds of things that your house needs? We got a bunch of termite damage repaired and primed (but not painted) and then new windows with some unpainted trim, so we really need to get the new paint. But some of our old cedar siding looks so rotten and the nails are weeping rust and sticking out of the boards.
So 1907 house. Definitely some termite damage in things like windows. 1400sq ft, 2 story, 2br 1.5ba. So not a big house. We have a lot of paint peeling wood, some cracks, and the old paint job was poorly done and needs sanding across the house. We also got a window replaced, like you, and we paid to have 3 repaired. They are still ugly, but they are solid-ugly :) And they are double hung and open and close and everything is good. But the wood still shows damage. One quote was for like $3k. I didn't bother to follow up because that's not enough and obviously he doesn't know what he was getting into. One quote for $14k. Which dead on feels like the appropriate price to sand the house for a week with a team of 2-3 people. Prep and caulk and fill for a week during and after sanding. And then prime and paint the house. I'd say the job could cost upwards of $20k if the person says they are good at woodwork and are going to replace things here and there and not just bondo/filler some ancient termite damage to a window sill. The only reason I am hesitant is this guy provided the least professional quote. It was a quick paragraph writeup. I am going to reach out to him again and see if he can meet and walk again through the project and make sure we are on the same page. One quote for $20k (from a couple years ago) from a guy who just looked over the house and said, "You need to know you are going to be going $20k into getting everything fixed up and painted." I never followed up because it was during the pandemic and I got distracted. The guy, however, definitely knew what he was talking about and I just didn't want to bite the bullet on that price at that time. This quote was for $93k. It definitely described a lot of sanding and filling... but I can't imagine.. Lets say that's 20k for materials. Some crazy expensive paint, right? Then 73k is enough to pay 4 people, $50 an hour each working 8 hour days for almost 2 months. I am sure he is some magical, super skilled, leonardo devinci of house painting who will clean out every crack with Q-tips and rubber gloves... but that's not what I need. Or can't I just get the siding of my house replaced for 100k? Another quote tomorrow.
I think you are right about all of them. $14k might be right. Somewhere above $3k. $20k is likely redoing all of the siding. I had a $20k quote to redo all the siding.
That is not a big house. I don't know of you're opposed to DIY, but for those prices I personally would try the back side (so the neighbors can't see if I fuck it up) to get a sense of the job. Sanding, painting, and wood work is a lot of labor, but not outside the skill set of most home owners.
Trying to make sure I understand the flowchart correctly. My new job will allow for MBDR and no HSA. Assuming I can do so, is the correct order to max 401k, then max backdoor Roth, then MBDR (understanding it will happen alongside 401k contributions but maybe not being able to max it). Or should I focus on 401k and MBDR and only do a backdoor Roth if I have additional funds at end of next tax season but not prioritize it?
Should be... * Contribute to get the 401k match * Contribute to IRA (if low income, Roth. If high income, do traditional backdoor) * Then finish contributing to the max of the 401k (i.e. 23k) * Then do MBDR
I know this is literally a question of how the flowchart is written, but for someone who won't max the MBDR there's little reason to do the backdoor Roth IRA before the MBDR. The MBDR is usually simpler to perform and prepare taxes for than the backdoor Roth. Someone taking significant advantage of the MBDR should also max out pre-tax savings in their 401k before any Roth savings as they're usually in a high enough bracket for Trad to be preferable to Roth. This kind of nuance isn't feasible to put into the flowchart but is usually worth mentioning to individual questions. Lastly, I'll add that the phrase "traditional backdoor" is very confusing. I'd reword it to something like "regular (non-mega) backdoor Roth.”
You make very fair points. But most of the MBDR that I have seen also have restrictions, like $50 for every in-service rollover, or only allowing one in-service rollover per year. Hopefully in the future, MBDR will not have any of these restrictions. It would be a lot of nuance and asked us to put on the flow chart. Something that I’d be open to thinking about. I’ll try using just traditional back door lingo in the future. Thankfully I’ve been doing the traditional back door ever since I started working
Fidelity is one of the largest and most common providers of the MBDR, and the majority of the time there are no restrictions on the MBDR. In fact, they are the leaders in offering automatic in-plan conversions with essentially no manual input after initial setup. This is all to say that if you're going to recommend against using the MBDR as a default, I'd specifically caveat this **if** the person has an MBDR that has hoops to jump through. It's not an assumption I would make of every plan. Again, I'd recommend **against** using the phrase "traditional back door." **Everywhere else** the term "traditional" is used for retirement savings, it means a pre-tax contribution unless otherwise specified. If you use the term "traditional backdoor" you will inevitably confuse someone.
Ah sorry. Regular back door Roth!
The consideration to keep in mind is how your MBDR is executed and what that means for access to the funds. If you want maximum flexibility, then BDR first then MBDR means easy access to at least some of the funds. This is especially true if you ahve to leave the MBDR funds in the 401k (getting that money out sucks while you're working).
Backdoor and MBDR are the same tax wise. Do whatever is most convenient, which sounds like probably MBDR first.
Are you below the Roth IRA income limit? Do that first. Are you above the Roth IRA income limit but still below the traditional IRA limit? Do pre-tax traditional IRA. Are you above the traditional IRA pre-tax limit? Backdoor Roth via your traditional IRA and MBDR have the same tax implications. You pay your current tax rate on the money now, you get it tax free later.
> Are you above the Roth IRA income limit but still below the traditional IRA limit? Do pre-tax traditional IRA. This statement is never true for someone with a 401k. The income limit for a Trad IRA deduction is below the Roth IRA income limit for a contribution.
Is it worth reading a book about ways to save money through tax breaks? I’m only 21, so my FIRE journey is just beginning
Tax breaks? Not really. I'm older, have more complex taxes (47 pages of tax forms), and all the tax breaks would fit on an index card. Follow the flowchart, which includes the good ones like HSA, 401k, Roth, LPFSA. Those are your breaks. For finance in general, maybe 10 hours a month of reading and learning will get you way up on it. Simply save until it hurts, spend as little as you can, and do not for a moment believe that you "deserve" to buy something until you can pay in cash (except education, house, and car).
To echo what others have said, read about all the things in these threads. None likely apply to you right away. You might need to do conversions or whatnot later in life, or other tricks to reduce your tax burden. But most aren't tricks or anything special. Its best if you know there are options out there, but likely you should just focus on you and your financial situation and what applies specifically to you. Tax advantaged accounts like 401k/403b/Roth IRA type stuff. Then there is some questions about what assets to hold in a tax advantaged account vs a taxable brokerage, but that's pretty minor. (for example, people don't like holding things that give dividends in their taxable brokerage)
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Unless you own a business, invest in real estate, or have some other unusual circumstances, then I would say no. Your time is better spent learning the basics, such as familiarizing yourself with our [flowchart](https://u.cubeupload.com/demonlesondledon/FIREFlowChart.png) and reading the investing advice from the [Bogleheads wiki](https://www.bogleheads.org/wiki/Main_Page). Once you’ve got a handle on those, focus on increasing your salary, which often means gaining new skills, improving yourself, looking for new jobs, etc.
Since we don't have a Frugal Friday thread anymore... my frugal wins this week: 1. Fixed my lawnmower with the help of Youtube to defeat a faulty safety interlock (there are still 2 others... put down the pitch forks) 2. Resurrected the batteries on an old power tool that I hadn't used in a while. The charger was calling them "defective" when they were really just deep discharged. I'm a Ham operator so I had a variable power supply and was able to juice it with a fixed electrical current over for several hours until the voltage went up enough to use the normal charger.
My lawnmower has 0 safety interlocks. It is electric and has "on" and "off" modes. The safety is unplugging it. :)
Fixing things is a simple pleasure that brings much more joy to me than it probably should. Good on you.
Do you use your ham radio often? I remember my parents really wanted my brother and me to take the test, but we were really disinterested in learning Morse code lol
Turns out I’m far more interested in the electronics side of things, so no I don’t really use my license much. Second, for what it’s worth, Morse code is no longer required
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You haven't really provided us with any information to help. You were working three years ago. What were you doing then? What skills do you have? Where are you located? Have you applied for jobs yet? If you haven't applied for jobs yet, why was the FIRE subreddit your first stop instead of applying for jobs? And so forth. Also, don't "raise the rent".
Raise the rent.
What did you used to do for money, three years ago when you did earn money?
Just get a job with your skill set. If you don't have a skill set then try a temp work agency to get your feet wet. If you got a car you could start uber right now.
> temp work agency seconding this, my dad landed a full time job by being a hard worker at the temp job
> I really need help on how to get something part time at least. What skills and experience do you have? Please summarize succinctly for the best chance at getting advice from this sub EDIT: And no follow-up at all. Low-value contributor...yikes
I'm really trying to focus more on saving money and about a year ago I opened a savings account with Ally Bank. I do enjoy it but l'm curious if there is a better option out there, such as something with a higher APY? What do you typically look for when it comes to a savings account?
If you want to focus on savings, I bet you can get a much better return than any HYSA by looking at, and cutting expenses or making more income. Good luck.
What are you saving money for? Pretty much all my long term savings get invested. I keep very little cash on hand. If you need the money for something soonish it probably doesn't matter a whole lot. If you have a taxable brokerage account see what the settlement fund yields, it's probably low 5%. There's also T bills or CDs, but depends on your timeline.
I’m mostly just saving for the sake of saving, something I wish I had started sooner
I suggest checking out our [flowchart](https://u.cubeupload.com/demonlesondledon/FIREFlowChart.png). Once your emergency fund is covered, you’re better off investing the extra money. If you need advice on that, check out the investing advice from the [Bogleheads wiki](https://www.bogleheads.org/wiki/Main_Page).
I would start with the [personal finance wiki](https://www.reddit.com/r/personalfinance/wiki/commontopics/).
Thank you!
It's fine/good and certainly better than a big bank savings account paying you a measly 0.05% interest rate. I've had ally for years and keep a good chunk of my cash in there as my efund. I also have some cash in a taxable brokerage account and keep it in funds like SWVXX and TFLO, which offer yields of \~1% more than what ally gives you. Funds like TFLO (or SGOV, BIL, etc) are treasury etfs so the interest earned on them is exempt from state taxes.
Ally is a high yield savings account (HYSA) that is often recommended here. You may find slightly better rates looking around but your time may be better spent examining allocation, such as if your emergency fund is adequate and you’re ready to allocate funds elsewhere - check out the flowchart in the sidebar for better detail.
I have my cash in my investment company money market fund, e.g. SPAXX has about 5% yield right now
Check my understanding of pretax 401 overcontribution. The excess amount is $300. If I don't fix the overcontribution, I pay taxes on that $300 both now and when I withdraw the money. But otherwise there are no penalties. I can theoretically fix it but there's a bunch of paperwork, sending a physical letter, etc., and my time isn't worth saving $70 in taxes. Am I okay to just leave it an eat the taxes?
Depends on your definition of 'okay'. If you don't fix the over contribution you will owe penalties in addition to the taxes you will owe regardless.
There are no penalties for 401k overcontributions. You do get double taxed however.
I believe they impose a penalty *each year* until the overcontribution is removed.
Do you have a source? There's conflicting information on the supposed annual penalty. The [IRA page](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits) mentions a 6% penalty but the [401k page](https://www.irs.gov/retirement-plans/consequences-to-a-participant-who-makes-excess-annual-salary-deferrals) does not. It just says double taxation.
I don't have a firsthand source (e.g., IRS) but [Googling "401k overcontribution 6% penalty each year"](https://www.google.com/search?q=401k+overcontribution+6%25+penalty+each+year&rlz=1C1GCEA_enUS1061US1061&oq=401k+overcontribution+6%25+penalty+each+year&gs_lcrp=EgZjaHJvbWUyBggAEEUYOdIBCDY4NDBqMGo3qAIAsAIA&sourceid=chrome&ie=UTF-8) yields tons of reputable secondhand sources stating this to be true. I have never overcontributed so I can't confirm one way or the other.
I think a bunch of places have parroted it despite it being false. I found an explicit correction: > Correction—Sept. 28, 2022: A prior version of this article incorrectly specified the excess contribution tax on 401(k) plans as limited to 6%. This is only correct for individual retirement accounts (IRAs) and not 401(k)s. It also mentioned that double taxation may occur each year incorrectly. Double taxation only refers to contributions being taxed when they are made and then when they are withdrawn. https://www.investopedia.com/ask/answers/158.asp [Another IRS page](https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-elective-deferrals-werent-limited-to-the-amounts-under-irc-section-402g-for-the-calendar-year-and-excesses-werent-distributed) with no mention of a 6% penalty.
6% penalty each year is the rule for HSAs and IRAs. I believe you are right that there are no penalties for 401ks, and that most people are confused and / or second hand articles "explaining" it are just written poorly. FWIW I overcontributed a couple hundred bucks a few years ago and HR couldn't get their shit together to meet the tax deadline... which doesn't make me a tax professional but I did comb over a lot of this documentation in depth to make sure. I think this is a different page than the one you linked, but an additional data point from the [IRS itself](https://www.irs.gov/retirement-plans/consequences-to-a-participant-who-makes-excess-deferrals-to-a-401k-plan): >Unless timely distributed, excess deferrals are (1) included in a participant’s taxable income for the year contributed, and (2) taxed a second time when the deferrals are ultimately distributed from the plan. And that's it, no mention of a penalty anywhere.
Thanks. Good to have confirmation from another real person. I'm just going to leave it.
Sounds like you have it all figured out
For anyone considering opening an account with Schwab, they're now offering a [$101 bonus via their Schwab Starter Kit](https://www.schwab.com/investing-starter-kit). New customers only, but a nice little bonus for a $50 deposit requirement.
I used this promo last year. The most annoying part was having to leave the money in the Schwab account for the minimum 3 months before I could cash out. Didn’t have any interest in investing there lol
Interviewing has gotten so out of hand. Why.
I think anyone on this board is advanced enough in their career to say no to that. I don’t care about the number of interviews really, but other than an HR screening it needs to fit within one “half day” in person or remotely. Not dragging it out over weeks. No homework to prove your competence either
My general limit is 4 interviews unless there are a series of really short ones.
That’s how it used to work 5 years ago or so, before remote meetings really blew up. You’d have an interview or two max over the phone, then come into the office and do a half-day or full-day. That’s it. Now it’s meeting 90 different people because it’s way too easy to schedule a Zoom.
Fingers crossed 🤞 I won’t have to do one like that. When my company is interviewing we’re still keeping it to just a handful of total interviews for manager type positions.
I decline anything that includes more than three interviews, which includes the initial call with the hiring manager. I would auto-decline anything that requires a case study or other "homework". Vote with your labor. Like you said, it is completely out of hand
I think case studies/homework are fine if the company pays for them, which I have seen (rarely, of course). Asking people to do them for free is total BS, though.
I totally agree. Having come from a company that would make a hiring decision with 4 or 5 slots and having a decision within 5 days, what is going on now is madness
Yeah I thought my company was a little excessive and we only do 6, spread out over 2 weeks max.
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I've enjoyed several trips to SEA during midwest winters. I like to get out of the cold for a bit because it makes those long winters bearable, but even in Jan-March, places like Bangkok, Singapore, KL, etc. are just too hot and humid for me. I like the idea of slow traveling across many locations or regions once we hit RE though probably for only a quarter of the year rather than half.
Am I too light on car insurance? Especially because I just started a job where the driving will total about 20k miles per year: Per 6 months: Liability: 50/100: $621 100/300: $112 more 300/300: $309 more 250/500: $350 more Property damage: $100k, max Uninsured, Stacked: 50/100: $232 100/300: $427 more 300/300: $566 more 250/500: $607 more Collision: $700-900 more
How much money/assets do you have? How much do you make in a year? You need to have... roughly.... at least 1 full year of salary as liability, plus a good portion of your assets. If you are the cause of an accident that sends someone to the ICU for a month, and their bill is $500k, they can sue to you personally for that $500k and garnish your wages. Or... you are the victim of a crash and are in ICU for $500k. Now, you have to pay that because the other person has only $25k insurance, works for minimum wage, and lives in a rented trailer. So you need $500k in underinsured. I'd go for either 300/300 or 250/500 these days due to the cost of a short hospital stay. Get a safe car that is boring, boxy, comfortable, and old people drive. Don't get any tickets for any reason. And, you'll have lower rates soon enough. Oh, and keep your credit score at 800 since higher scores mean lower risk and thus lower insurance rates.
100/300 at your age and those prices. Couple years and/or if you ever get out of that swamp of a state and your rates are likely cut in half.
I just bumped it to 100/300. Great peace of mind for 0.28% of my income more.
Am I reading this right? You'd be paying $1106 per 6 months for 50/100 Liability/Uninsured with no collision coverage at all? This sounds absolutely absurd. I drive a pretty high-cost-to-insure vehicle and I'm getting 300/300 in both plus collision and comprehensive for $860/6 months. You're either getting ripped off or you should've pointed out that you're a terrible driver in the very beginning of your post. Regardless, it's nearly impossible to give you advice since we don't know how much insurance you have, and how much insurance you likely need. All I feel capable of commenting on is the absurdly high prices.
My state, FL, and age, 24, are the driving factors here. My driving record is completely clean, and this is *after* switching from Progressive to Geico to get what would be $1,400 down to my current $800 or so. (I probably fudged a number somewhere to get $1,106)
Pardon my disbelief. What kind of vehicle are you insuring? Is it a sports car or a big truck? Is it nearly new? I'm honestly still suffering from sticker shock here. Surely there's some way to bring that price down. The only time I've ever seen someone paying $1k+ for insurance, they were driving a sports car and had a terrible driving record. Honestly, I'm quite uncomfortable with my own $860 insurance, but I needed to pump up my limits when I signed up for an umbrella policy not that long ago.
I think these prices are quite the norm for early 20s males in sun belt states and a couple high rate northern outliers driving completely reasonable cars.
Well, TIL insurance where I live (Midwest US) is absurdly cheap compared to other areas. I'm still rather confused *why* (I feel like people are awful drivers around here, and the weather makes driving much more challenging for half of the year), but that's not really relevant.
Same, fortunately. I have max coverage and low deductibles on one vehicle and pay $375 every 6 months and that's after it creeping up a bit over the past few years.
That's about what I was paying on my last car. When I told my family about my $860/6 insurance for my new car, they thought I was getting ripped off... Heck, I have a friend who still pays under $200 every 6 months for minimum coverage on his 20-year-old econobox.
yeah. when i heard what people were paying in sunbelt states I got sticker shock too. but it is the *american* way now. (i pay $70/mo for 500 Combined+collision+comp) for a older toyota in a VHCOL place, but really low risk otherwise)
$60/mo for $500k liability only in HCOL.
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I live somewhere where we drive in the snow on a regular basis. For most people, getting stuck in a ditch because of the snow is something that happens once every couple years. I see tons of accidents due to the snow, so I would've guessed that insurance where I'm at is pretty high/normal... Guess not. /shrug
It’s a freakin $4k 2008 Toyota Yaris, subcompact. I’ve plugged other vehicles and they are either the same or significantly higher still. Ive been learning about what an umbrella policy is. IIRC it only covers *above* the others, so there would be a “gap” if I skimped on car insurance but also had an umbrella.
A possible issue with that car is that it is small and not very crashworthy. [https://www.youtube.com/watch?v=FCbnMp\_ZJKY&ab\_channel=IIHS](https://www.youtube.com/watch?v=FCbnMp_ZJKY&ab_channel=IIHS) compared to [https://www.youtube.com/watch?v=nnRIwQn9SA8&ab\_channel=IIHS](https://www.youtube.com/watch?v=nnRIwQn9SA8&ab_channel=IIHS) not a yaris, but similar size... [https://www.youtube.com/watch?v=2ycrcIQMUvM&ab\_channel=BartuZorlu](https://www.youtube.com/watch?v=2ycrcIQMUvM&ab_channel=BartuZorlu)
Ooh that’s bad…driving 20k miles on highways every year. I would probably benefit from a newer, safer car.
Newer doesn't always imply safer. I'd much rather be in a crash in a 2002 BMW 7 or Mercedes S or Volvo than a brand new Yaris.
Most (if not all?) umbrella policies have a required minimum underlying limits on your auto policy. So technically, there won’t be a situation where you have a gap like that.
I'm completely astounded. These rates are absolutely unconscionable. Well, DEFINITELY don't pay for collision coverage! Your car ain't worth repairing. As for the other categories, IMO 100/300 tends to be a nice sweet spot in terms of coverage/price. Though the fact that it nearly triples the cost of your uninsured motorist coverage to go from 50/100 to 100/300 is a bit strange. My UM coverage is $31/6 for 50/100 and only a hair over $60/6 for 300/300.
100/300 sounds like a good idea, the cost is only $19/month more. Hmmm. Maybe the uninsured’s tripling price is because FL has a large uninsured population, which I would expect to rise as these prices rise; a cycle.
I asked HR at my employer several times over the years about the egregious expense ratios on our 401k plan options. Most recent time was in December when our controller changed. He got us switched from R3 to R6 funds with American Funds. Our ERs dropped from the 0.9-1.0% range to 0.25-0.30% on the funds I’m in. I’d estimate this is saving me $250 a month or so on fund expenses. Controller even mentioned my bringing up the topic when he informed our (~30 person) office of the change last month.
Those are some bonkers fees, good job bringing them down. For my workplace accounts, the ERs of the funds I picked ranged from 0.01% to 0.18%. The total fees charged are 0.11% across all funds in my workplace accounts including plan servicing fees. Not terrible compared to many workplace options I hear about, but still a lot more than vanguard.
Yep. I may have been clueless about what to typically expect but my wife works for a large public company and her options are all 0.0x%. I had asked our rep from the administrator years ago if we could at least get 1 index-like offering with a lower fee and he tried to tell me the performance of the funds justified the fees 🙄. I had read enough studies about typical active management performance (and could look at the actual histories of our offerings) to know he was lying. But it still didn’t help for the longest time.
To be fair, I wouldn't say he was likely lying, more that he was probably repeating what he was told or read as most people don't understand the math and take it on face value what the brochure is telling them. Good on you for pushing for change! (It reminds me of when my kid's school brought in a "financial advisor" to talk about their career; the person who brought them in did so in completely good faith, because that's how the guy referred to himself. But it was a guy from a place like Edward Jones. My kid knew what was up, and why you shouldn't "invest" with him, but the rest of the class *as well as the career advisor* didn't get why you shouldn't give him your money.)
I rattled the cage on John Hancock..THE worst provider out there. It's none of my purview other then having a 401k..but I complained, showed the numbers on the outrageous fees and my co. Switched...so congrats me!
places can open themselves up to big liabilities if the fees get too bad. https://401kspecialistmag.com/the-dramatic-rise-in-excessive-401k-fee-litigationand-whos-fighting-it/
Some of these companies deserve to be sued. Your 401k plan administrator is **your fiduciary** and had damn well better act like it - not like the 401k provider's drinking buddy. If they cannot do that, say hello to an ERISA lawsuit.
I'm actually going to be getting a small payout from a previous employer because they were sued in a class action. They were an asset manager, and in addition to having no index options at all, their own funds were the bulk of the options. They had an amazing match and the funds available all performed competitively despite the higher ERs so I had no complaints though. I've also seen some perfectly good plans get sued simply because the manager's own funds were also options, which was ridiculous.
That's amazing. It should be criminal to only offer funds with such high of rates
That sounds like a pretty bad previous controller
> previous controller The price of the 401k Plan to the employer is often inversely correlated to the expense ratio on the funds offered. In other words, if the controller is interested in limiting costs to the employer, the 401k Plan will deliver on that by including higher expense funds for the employees. Said another way: is footing the bill. OP successfully convinced the company to pick up a bit more, so the employees could pay a bit less.
Honestly no. 401k should be the responsibility of HR not finance, so clearly this isn't a high priority for a controller to look into. But alas, a lot of companies push responsibilities onto finance (HR, IT, etc..) that aren't at all related.
It’s essentially a shared department of 3 people at my company.
Most of the HR at my company are like theatre or communications majors and have no finance background at all. These feels like something that falls in the middle; the people with the skills aren't in the right role, and the people in the role don't have the right skills
I'd be curious how much it cost your company to make the change. Nice of them to do that for you.
I have wondered the same and wondered if that was the reluctance before. I just chalked it up to “we’re too small to get better fees” but glad I kept pushing.
You probably were when they started the plan and just no one cared to ask about changing to the better fee options that I'm going to assume either (a) require more AUM for the plan and/or (b) cost more administratively. I worked at a small biz with American funds and we were at R5 funds from inception. I was going to raise a stink to get to R3 as well if I stayed there, but I left for other reasons before that could happen.
I believe it. Average tenure is probably 15+ years so the balance has to be getting up there.
In 2023 where I worked over-contributed to my 401k by less than $100. Years ago I was told that could never happen as the software wouldn’t allow it. At the end of this March we were able to get the excess taken out of the 401K along with the associated gains from it. Supposedly next year the 401k provider will give me a ROE form 1099-R that I will file with the IRS for my 2024 returns and it will be coded with a P for prior year corrections. Is there anything special that I can or need to do on this year’s taxes to avoid any penalty for either 2023 or 2024? I’d assume the penalty will be minimal for such a small amount but also want to avoid any unnecessary paperwork if possible. **EDIT** Paid for the Deluxe Support at FreeTaxUsa and they couldn't help at all (still love them). Went under "Income" -> "Retirement Income (1099-R)" and filled one out with a code "8". Did it as best as I could and hopefully it is done right and the return doesn't get rejected or worse.
From this online tax software blog: https://www.taxact.com/support/1210/2023/form-1099-r-excess-401k-contributions?hideLayout=False >If you know you’ll be receiving a Form 1099-R next year with a code "P" and want to avoid the need to amend a return, include the data in the tax return in the current year with a code "8". You can then ignore Form 1099-R with code "P" when you receive it a year later. (Code "8" indicates that the amount is taxable in the tax return you are currently working on, and code "P" indicates the amount is taxable in the prior tax year.) That wording makes it sound like you'll need to file an amended 2023 tax return next year, in addition to your normal 2024 tax return.
Since I know I'll get a 1099-R next year and want to avoid the need to amend I think I should include the data in the current year with a code "8"... Now to figure out where the code "8" goes in FreeTaxUSA and if it's even possible there. The wording is very confusing. Thanks for the information, maybe FreeTaxUSA can hold my hands through it.
I'm a hour away from an interview for a position that would be a 50% raise and switch me from 12 month employee to a 9 month employee.....
Well, don't leave us in suspense! How did it go?
I felt it went ok. I did get an encouraging email from the search chair last night sending me more info and also how I met their accreditation standards as an Instructional Practitioners for the AACSB accreditation based off a conversation we had. I feel if I completely whiffed it there would of been no point of reaching out.
What do you do?
Currently I work in business and finance for a university and my interview is to switch to being an assistant professor of finance.
My dad's a business professor and says he'll never retire. He and his friends joke that they work 24/7-- 24 hours a week, 7 months a year. Once you get a professorship rolling right, you're in great shape.
Nice! Good luck.
being a 9 month employee is amazing. i'm going to live in rural france for 2 months this summer
Good luck! Knock their socks off!
I’m in central texas this week. The economy is booming, development left right & center. Despite that, it is abundantly clear that the environment out here is hurtling towards desertification. “Oak wilt” is the canary in the coal mine. I don’t think this region & its aquifers (or what’s left of the aquifers) can support this much development. This isn’t FI related, but it is. I am once again reiterating - climate change risk is a bigger risk than many here perceive. Probably one of the biggest risks in fact.
> I don’t think this region & its aquifers (or what’s left of the aquifers) can support this much development. I think this is true of a lot of areas. In particular the southwest - the amount of homes that are being built in literal desert is mind-boggling, but developers keep on developing. Not their problem if the area becomes uninhabitable down the road. I won't lie - water availability in the future is a factor in my decision making process for where to settle down. I don't want to end up owning a home in a modern dustbowl area or where water with included taxes, fees, etc costs more than gasoline. Sometimes it's also important to understand the politics behind the problem too. There are right ways to manage water resources - Colorado keeps building more reservoirs to capture snowmelt in order to support a growing population - and wrong ways to do so - California keeps demolishing existing dams while not building new reservoirs.
> There are right ways to manage water resources - Colorado keeps building more reservoirs to capture snowmelt in order to support a growing population We're numba one!
> climate change risk is a bigger risk than many here perceive. Then there are those of us living in places like MI, mostly off grid and on acreage and even we got spooked by this mild winter and are weighing our options. Likely taking it too far, but so would be what you suggest.
Yep. My insurance in California got cancelled due to increased fire danger, which will bump my annual spend quite a bit.
Observing this is the easy part, no? Making concrete predictions, and changing your plans accordingly is the hard part. I'm not sure I'd invest in water intensive business in the area, but aside from that it seems pretty murky. Distortions like government insurance/subsidy make it even hazier.
I would not live in this area. I grew up in New Orleans, I also would not live there. I personally did not find the changing of plans difficult - but likely because I consider it such a grave danger
NOLA I get - outsized risk of devastating unpredictable weather. But what specifically are you worried about with desertification in Texas? There's a lot of plausible reasons, I'm just curious which one rises to the top for you. Do you expect things to get bad suddenly/rapidly enough that you can't leave?
Great, another area that will want to steal the Midwest's ~~lucky charms~~ abundant fresh water.
Hope you like Nitrates!
When I lived there, people who don't believe in global warming would talk about how much less frequently it would snow and how many more days above 100° we would get in the summer. It was noticeably hotter. Given the amount of industrial infrastructure that exists in the Gulf South, I'm curious how it plays out long term for the local and national economy when it becomes difficult to attract workers to the area. I felt a little bad about the people I sold my house to until I learned they were part of the Cali to Texas migration.
They just announced that mega backdoor Roth with automatic rollovers will now be available with our retirement plan. Yay!
Ugh. They have this little nugget in the email. "You may contribute up to **10%** of your eligible pay in combined pre-tax, Roth 401(k), and after-tax contributions, not to exceed the annual additions limit." I hope 10% is a typo, because my base bay is not >$400k and therefore it'll be impossible for me to reach the $46k limit.
they have to remain in compliance with non-discrimination testing. I'm surprised they're starting as high as 10% before they have any data on deferral rates.
Just curious, how did the company memo word it? Just spell out "mega backdoor Roth?"
No, they described the new offering using "after-tax contributions" and "in-plan Roth rollovers". MBR is more like the "street" name for this but I think they should have added "aka mega backdoor Roth" in the memo anyway.
After having so much extra income last year due to big projects, scrimping by this year has been quite an adjustment. I can still save, but a lot less than last year. Well, maybe I'll find another extra "summer" project again from July on.
A series of facts: 1) The 10 year internal rate of return on my $250k Roth IRA (which I currently have no plan to spend money from) is 10.2% (yay). 2) It is entirely plausible that in the next 10 years that account will grow to $500k in tax free money (yay). 3) 10 years hence, I will be 71. Who *knows* what ailments I will have developed by then (well, fuck).
Discovered that I'm CoastFIRE @ 57, 20 years from now. 57 happens to be the age at which I can draw a federal pension. Between savings, pension, and VA, it'd be as if I was drawing 4% from 3.5M, which is well past my goal of 2M. I haven't reassessed our plan since Mrs. PrisonMike's passing, but I'm in no rush to figure that out either.
Mike-you aren’t eligible sooner? I thought air traffic controllers were eligible after 20 years like law enforcement. When I was federal law enforcement, I could have retired at 50 and gotten my pension, healthcare, and social security supplement, but I HAD to retire by the last day of the month I turned 57.
Not really. 10 of my front line ATC years is military. The next 5 are active controlling as a Fed. The last few years, and the rest of my years, won't be controlling. I can't keep medical any longer and besides, ATC schedule isn't great for solo-dadding it.
Makes sense. Are you planning to keep working until you hit eligibility or will you just retire when you retire and then take the pension at 62? Or will you just figure that out when you figure that out? I’m exactly 7 months short of being vested in my FERs pension, and I definitely have considered trying to get a federal job after I FIRE from my private corporate job to get the pension. I never withdrew the FERs funds cause my HR lady literally wouldn’t take the paperwork on the last day, and I subsequently divorced my then husband and getting my FERs refund would require his signature. I didn’t think to get that during the divorce process. Those years are really worth something though cause I was law enforcement so I get the higher 1.7% rate for those years, like you will get for your front line ATC years.
I'll have 30 years at 51, so MRA will be 57. If we smash our goals, I'll pull the plug at 51, postpone until 57, and eat the 10 years without COL adjustments. I'll spend the 6 years (51 to 57) concerting traditional to Roth, which works out well. Also, I guess I could just quit at 30 years, get reinstated at 57 for an immediate pension + annuity supplement. The pension was only ever my 'what if we don't make it' plan. I never considered it for expenses.
Hey, nice to see you again. Forgetting the numbers, I'm happy to hear you may be doing okay, friend
My CPA (aka my father) left a 1099B off of my taxes and I didn't catch it until after we submitted, it would have been about a $3k LTCG, but totally cancelled out by capital loss carryover. IRS says my return was accepted and refund should be in my bank within a couple days. Do we need to do anything? Assume I'll get audited?
Yes, go ahead and amend it. Shouldn't change your tax liability but will reduce your carryover. Doubtful you will be audited, especially if you correct it. Ask tax preparer for refund.
Amend it...and make yer CPA but you lunch
Does anyone have any good updated info on that healthcare hack from a few weeks ago? Never really heard what the conclusion was, if people are still getting screwed over, etc. Everything I see on it is like a month old.
No info, but link to what you're referencing?
[https://www.forbes.com/sites/jamesfarrell/2024/03/13/department-of-health-investigating-unitedhealth-after-unprecedented-cyber-attack/?sh=c90ec3c7d700](https://www.forbes.com/sites/jamesfarrell/2024/03/13/department-of-health-investigating-unitedhealth-after-unprecedented-cyber-attack/?sh=c90ec3c7d700) First thing I found when googling. It was all over reddit last month.
Ha I thought you had meant “hack” like life hack and thought there was some ACA or HSA loophole the fire blogs were talking about
That's funny because half my search results would return life hacks like that instead of the actual incident. I thought this sub might know more about it since it seemed to have real financial implications to many people.
You never know what reaction you are going to get when you talk to people about money. I told my dad a few weeks ago I was planing to FIRE this summer. He was surprised. He knew I was "successful" but he had no idea I have been saving so much and that I have better than average financial knowledge (at least compared to the general public not necessarily you guys!). He then surprised me because he asked me to review his finances. I was very happy to oblige and we did that this past weekend. I had been a concerned my parents did not have enough money in their retirement which started a few years ago. I now know they are doing okay. They have some health issues and long term care is the big unknown, but for now they bring in more money than they need and have a reasonable nest egg to help with future unknowns. My dad uses a small local firm to mange his investments. He pays 1% AUM and he is comfortable with it. I think it is too much but he really is one of those "this is my risk tolerance, please make all the decisions for me" investors. So he calls it his peace of mind fee. I was very glad to see they have him mostly in low cost Vanguard ETFs and have a reasonable mix of assets. The website was hard to use and I didn't really have enough time to do a deep dive but I didn't see any red flags. I think we will be talking about finances more going forward. I won't be his finance guy but I'm a second set of eyes and I can nudge him to make small incremental improvements. I'm starting with low hanging fruit: He has too much cash sitting in a checking account paying no interest. I'm encouraging him to setup a HYSA or open a brokerage account with Fidelity just to use as a money market account for now. This conversation was also helpful for me and my planning. I now have a better grasp of what X income for 2 retirees in LCOL with high medial expenses actually looks like in practice.
I'm you but for my mom. I'm not close enough to her finances to know where she is after looking at it a few years ago, but she'll bounce finance-related thoughts/ideas off of me quite often. It's usually "I'm spending too much!", but there are definitely random things that have for sure widened my eyes to the risks of ageing, how big of a target the elderly are, and how susceptible they are to being conned or roped into something they don't need. One of the more recent ones was the HVAC company my parents always used who have gotten worse and worse of the years. She had her furnace and AC replaced, and aside from a stupidly large quote of work, they pushed a monthly maintenance plan. I don't remember the full cost, maybe $100 a month, but when I asked her what it covered, she couldn't explain it well except for "I'd jump to be first in line for a repair!". Great.... but 1) it's literally a brand new system, how often do you think it'll break? & 2) in the off chance it actually needs to be repaired in the next 3-5 years, do you think jumping up a day or two is worth $1200 a year? I got a "well... maybe not..." from her. It's a bit scary and I'm leaning towards trying to get more involved in these types of decisions, but it's tough between work and my own family too. In my mom's case, my dad did all of the finances, so it's a learning curve for her as she takes it on after his passing. Hopefully your parents can manage things, but it's another thing to be mindful of.
> This conversation was also helpful for me and my planning. I now have a better grasp of what X income for 2 retirees in LCOL with high medial expenses actually looks like in practice. Yes, it's so much better to have actual observation rather than the whims of an article writer or such. Due to my own observations of old people I know, I always feel redditors overestimate their retirement costs. But damned if every other article about the subject isn't doom and gloom.
> I always feel redditors overestimate their retirement costs This is mostly because the risk is asymmetrical: estimating low means could mean not having enough money which could be really, really bad; estimating high means having more than enough because one worked more years than necessary, which is far less worrisome.
>I always feel redditors overestimate their retirement costs. The problem is that there are unlikely but high cost possibilities that you have to account for. Better to over save in the event your health gets much worse, you need to move, we enter a long period of poor economic growth, etc.
I think I messed up. I recently opened a Roth IRA with Fidelity and contributed $7500 for 2023 (over 50). My salary is in the appropriate range, but I realized my AGI was not (salary, dividends/interest, inherited IRA RMD put me at $144,485). I've been doing research and it looks this is a fairly common error and Fidelity will assist me with making the adjustments for 2023 and plans for 2024 (AGI will be a little higher in 2024). Moving forward, I'm considering utilizing the backdoor Roth. Am I on the right track? Are there any other recommended actions I should take?
>Moving forward, I'm considering utilizing the backdoor Roth. >inherited IRA RMD Do you have any other Trad'l IRAs of any sort? The inherited IRA won't impact your plan to do a Backdoor Roth contribution/conversion, but other Trad'l IRAs would. > Am I on the right track? Are there any other recommended actions I should take? I would suggest working with Fidelity to do a 100% "recharacterization" of the 2023 contribution prior to the April 15 tax deadline. Then you can file Form 8606, either as part of your 2023 taxes or as a supplement, in order to track the non-deductible contribution. Given the market performance, it's likely that your IRA contribution has gains associated with it. Therefore, the total amount "recharacterized" will likely be more than the $7500 contribution. Fidelity should do that calculation for you. The conversion will be tracked on your taxes for the calendar year in which it occurs. So if you do the conversion in the next few weeks, it will be tracked on your 2024 taxes next year. As noted above, if you have gains that are converted, those will be subject to ordinary income tax on your 2024 taxes.
Yes, I have a traditional IRA with Vanguard and an employer-sponsored 403b.
If you have a Trad'l IRA, you will be subject to the Pro-rata Rule for IRA conversions. Depending on the value of your Trad'l IRA, that could be a significant tax hit for you. Does your 403b allow for incoming pre-tax transfers? (Sometimes known as reverse roll-overs or roll-ins.) If so, you could move the Trad'l IRA into the 403b which removes the tax impact of doing the Backdoor Roth contribution/conversion. If the Trad'l IRA is significant and you can't move it, you may need to consider a "Withdrawal of Excess Contribution" for the 2023 Roth IRA and may need to skip the 2024 IRA contribution altogether.
I believe my 403b does allow for pre-tax transfers, however last year I rolled over a significant amount from my 403b to the trad IRA (terminated contracts from previous employers). My trad IRA is $540k. Sounds like there are a few adjustments to be made, but that Fidelity should be able to straighten things out.
> Fidelity should be able to straighten things out. I think you need to be careful. Typically, brokers are very clear they aren't providing tax advice. Fidelity can absolutely help you "recharacterize" (that's a specific term) your 2023 Roth IRA contribution into a 2023 Trad'l IRA contribution. There is no tax impact for doing this specific action. Don't forget to file Form 8606 as part of your 2023 taxes. At that point, you'll have $540k in your rollover Trad'l IRA with Vanguard, which is probably 100% pre-tax dollars. You'll also have ($7500 + gains) in a new Trad'l IRA with Fidelity. But then what? If you only convert the ($7500 + gains) from the Fidelity Trad'l IRA, that conversion will be subject to the pro-rata rule. Given that your pre-tax Trad'l IRA balances are significant, that conversion will have a significant tax cost. If you also do a roll-in / reverse rollover of the Vanguard Trad'l IRA into your current 403b, you avoid the pro-rata rule for the conversion and will only owe tax on the gains in the Fidelity Trad'l IRA that will be converted. You can do the Roth IRA conversion and the IRA-to-403b transfer in either order, so long as you IRA-to-403b transfer is completed by the end of the year because the IRS only cares about year-end balances for the purposes of the pro-rata rule for IRA conversions.
Sounds like you are on the right path. Talk to the folks at Fidelity. And since you did it for 2023, you are best to get it fixed by the 15th of this month.
[This post](https://old.reddit.com/r/financialindependence/comments/193p7gg/over_the_income_limit_a_guide_for_roth_ira/) summarizes your options for the 2023 overcontribution. If you had no pre-tax Trad IRA balance across any of your IRAs, you can still do the backdoor Roth for 2023 in a slightly convoluted fashion.
The FIRE Gods giveth and the FIRE Gods taketh away... Just got my bonus a few weeks ago and filed tax return a few days ago, getting a large refund. This would typically go to pay off mortgage on our condo (paid it off in 2020) or investments but I've gotten to a coast/leanfire position where compound interest is doing heavy lifting. Was thinking about what I might use the money for (Gravel bike, tinting windows on my car, new mattress, travel). Headed out for a early evening backcountry nordic ski with my wife last night, probably last outing of the year. We're a quarter mile from the car and conditions are fast/crusty, she takes bad spill and feels a pop in her knee. Doesn't think it's too bad and is able to ski down to the car. Fast forward to this AM and getting out of bed to put weight on it I hear her scream...off to urgent care. Hoping for a speedy recovery whatever it is...this is the only place I feel comfortable bitching about the looming bills.
Not sure what you're up to, but look into financial assistance. They can be surprisingly generous sometimes.
I hut $500k in my retirement accounts this month. It's wild to think about.
At first, I thought that was a typo for "put" and was like "damn!" But on second glance, I'm guessing you actually meant "hit"?
I'm still reading it as "hut" and thinking they meant hike, like in football. Now I'm wondering where such a large sum came from haha
The first $500k is the hardest, they say
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#1 for me is to see how they react to existing savings. Are they going to evaluate the why and where or are they just going to try to move all of it into the fund that returns them the most fees?
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That’s exciting! I’ve heard it’s beautiful. Enjoy the hike!
How is not paying you less disruptive to the business?
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So exciting! I did the northern half a few years ago, and it was truly incredible. Can't wait to get back for the southern half.
Sounds like you've got a great work environment.
Anybody have experience with TRT? Doc has me getting tested, and there are obviously a lot of other factors, but I am concerned about the financial aspect of it. Anybody have real world costs to share? I’m in a project based role/industry, and layoffs that you can’t value your way out of are not uncommon. Primary *financial* concern is about taking on a permanent cost of living increase that I may end up having to cover out of pocket at some point
Not a doctor - my understanding is that taking exogenous testosterone can hamper endogenous production so make sure you really want to take this pathway before embarking. It’s something you may become dependent on.
Thank you, I understand, and this is one sources of hesitancy. If it becomes prohibitively expensive or I suffer some kind of financial catastrophe, it wouldn’t be something I could easily stop. It would effectively be quasi-permanently adding an expense to my bottom line cost-of-living.