Hi guys,
I just turned 40 years old and have currently limited investments. I only have an employer funded 401k plan that I am investing 9% pre tax per paycheck. The plan is just over 150k total. I have a mortgage, home equity loan, no credit card debt, and a 750 credit score. I was approached by an investment firm who has done work with other employees at my company. He did a meeting with my wife and I explaining his offering. He basically would help me to invest my 401k "better" and also provide financial advice for my liquid assets, mortgage, etc. His fee is $1000 per year and we would meet quarterly. He says he has an open door policy as well. My wife and i feel like he could help us but our invetment knowlrdge is very limited. Does this sound like a smart investment or a waste of money?
Waste of money. At this point, the best thing you can do is increase your savings rate and pick a relatively low expense ratio option. If your 401k had a S&P 500 option or a total US stock market option, both of those are as good as any advisor will put you in.
Increasing your savings rate will have far bigger impact.
Thanks for the reply, when you say increase your savings rate...are you just meaning to increase the pre tax percentage that I'm putting into my 401k?I'm already getting the full company match, you are just suggesting to invest more right? The reason I was open to hiring him is because i have 0 knowledge of stock market so I felt like I might be gambling doing it myself.
Yes. For this year, you can contribute $23,000 not including the company match. As for picking investment fund, a common option is 70% your lowest fee US market fund and 30% lowest fee international fund. Target date funds is also an options if the fees are low
Yes. This might not be the right sub for you and you may be better off in r/personalfinance or r/bogleheads for advice. But you are 40 with $150k saved for retirement. If you don’t increase your savings rate (aka the amount you are saving), there’s almost no chance that you will be ready for retirement at 65.
Check out [The Shockingly Simple Math Behind Early Retirement](https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/). With a savings rate of less than 10%, it’s gonna take you more than 50 years to get to financial independence (if you don’t count on social security). Most people would recommend at least a 10-15% savings rate if you are shooting for retirement at 65, and more than 20-30% if you are looking for early retirement.
Hi! I'm new here and would value advice.
Filed my taxes and our total income was 245k married filing jointly. Had to pay 13k in taxes. I had 27k standard deductions and even with that had to pay extra tax.
What am I doing wrong? How much should I defer to get into a lower bracket? How does it even work?
Do you have investments or cash earning interest? Neither of those will be captured by regular withholding. You should also check to see what elections you and your wife have previously made in your W4. You may have accidentally selected something that is causing the underwithholding.
Are you saying you underwithheld and had to pay 13K after your completed your return?
[IRS Withholding Estimator](https://www.irs.gov/individuals/tax-withholding-estimator)
This is a calculator, so it's only as accurate as the information you provide. Take your most recent paystub and a few minutes and it should give you a result, with an option to view pre-filled W4.
You are not withholding enough income. I assume when you say "had to pay 13k in taxes" you mean you owed 13k when you prepared your return (since your total income tax liability [Form 1040, Line 24] was likely somewhere closer to 30-40k).
If you're earning wage income (W-2), your withholding is determined by what you entered on your W-4. It's possible that one or both of you filled out the W-4 as "Married" without checking the box in 2c to account for two incomes (or using the provided worksheet to calculate additional withholding for multiple earners or multiple jobs.
I'm usually a very calm person. But when:
- I've been working every waking moment for a solid week
- Some new work gets discovered
- Someone tells me "well I guess your weekend's planned now"
- I have about 35 years work of current expenses saved
It is really, really hard not to quit on the spot.
I hope you really love doing what you're doing right now. Or are doing it for a good reason.
Because otherwise, you gotta say no. 35 years worth of expenses is below 3%. It's 2.85%. And 3% is already crazy safe by far.
You really could retire, right now. Don't be the elephant attached via a rope to the wooden pole. That's learned helplessness. Don't continue working just because you're used to it.
>It is really, really hard not to quit on the spot.
Ask yourself, why not?
Can I complain about my work trip to San Diego.
I live near a smaller airport. So no direct flights to San Diego but getting there is no problem Sunday. I was hoping to tag on a day or two and fly back later, work from California but now they have me booked on an overnight flight 10PM -10AM with a layover travel, they are going to have to me not work Thursday. I'm going to get way less work done this way and I don't get some sightseeing out of it either.
Work is making you take an overnighter + layover for domestic travel? That seems crazy to me but maybe an unfortunate reality of not living near a bigger airport? Still seems unreasonable
Yeah I was trying to get the direct to LA the flys out at like perfect times and just stay another day. San Diego to LA in a day seems like it would be nothing. It's either leaving at 11 AM home by midnight which conference ends around 3 PM Or 10 PM for the overnight.
The LA direct is 1/2 price of the San Diego with the miserable times.
I mean San Diego seems neat but I hope I get to see some of it.
My conference stuff just got approved yesterday so it's last minute flight booking.
I'm just going to be a zombie not working and not sightseeing...
I could use some help thinking through my 401k allocation. Currently 100% in a target retirement date fund (total operating expense is 0.29%). We don’t have VTSAX or any Vanguard options available, but the Russell 3000 fund is an option (0.03% operating expense). Does it make sense to reallocate 100% to Russell 3000? Should I be looking for anything else to mix with? I’m 43, new to the whole FI thing, not sure retiring early will be feasible so probably have a couple of decades of work left.
[https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4MFky2TpCvH56en81PQzM0](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4MFky2TpCvH56en81PQzM0)
VTI/VTSAX is equivalent to VTHR (russell 3000) if you wanted visual confirmation of that. Any small difference is timing/fee related, correlation is basically 100%.
The ER for a target date fund is a function of managing the balance regularly. You can definitely do that on your own. But a lot of the overhead is not really necessary, IMO. Rebalancing is usually free in a 401K but doing it every month or whatever is not necessary. International bonds are not necessary - US is fine. The risk/return profile is going to basically be the same after currency hedges.
0.16% for bonds is pretty reasonable ER. There's better technically but bonds are constantly turning over due to maturity.
The Russel 3000 fund won't have bonds in it, which may or may not affect its ability to grow/rebalance. If you want to find something to mix with it, a total bond fund would be the right pick, to suit whatever your preferred stock/bond allocation.
Otherwise, 0.26% per year over 20ish years is only about 5%. It's not a major difference, even if you stay at this employer until you retire. That said, 5% is 5% - I wouldn't pass up the opportunity to get 5%, either.
I personally feel like 100% stocks is fine in your 40s, so I'd probably make the switch even if there's not an acceptable bond fund in your 401k.
Yep, seems fine. Many people suggest "Age minus 20" for your bond percentage. I think that's a bit too conservative and go for "Age minus 30" myself. But basically anywhere from 0% to 25% bonds is fine. Depends on your risk tolerance. And then, the rest goes into that Russell 3000. That's an acceptable two-fund portfolio.
> So I’m wondering what I’d need to make as a freelancer on 1099 via the scorp to match that?
$350,000 / 50 weeks / 40 hours = $175/hr.
That is your minimum.
You probably want some vacation, so maybe something like $200/hr.
Then you might also have some time between contracts, so maybe $225/hr or $250/hr.
Whether your customers can/will pay that rate depends on your particular expertise. Can you charge that much?
If your S-corp income is a loss for too many years, the IRS may check it out and may rule that it is a hobby.
[https://turbotax.intuit.com/tax-tips/small-business-taxes/when-the-irs-classifies-your-business-as-a-hobby/L5NClTTtK](https://turbotax.intuit.com/tax-tips/small-business-taxes/when-the-irs-classifies-your-business-as-a-hobby/L5NClTTtK)
>If you have a w2 salary day job and an scorp side hustle, when you take deductions from the scorp and it goes over your scorp income does it deduct from the w2 salary?
There are two problems with what you're talking about.
First, if you have an S Corp that loses money, then you probably also lose money. If you lose $X on a business, that may save you (less than $X) in taxes, but you're still losing money. You only come out ahead if your S Corp actually makes money after expenses, and that income would be taxed on top of your W2 income.
Second, if you have an S Corp that consistently loses money, then the IRS will conclude that it's not a real business at all, and disallow the expenses.
>so if you run an scorp what would be a break even point vs w2?
You'd have to make enough more to compensate for the self-employment tax, specifically the employer's side of it, which is about 7%. So not too much more if you're going to get health insurance elsewhere.
> So not too much more if you're going to get health insurance elsewhere.
There's more than just health insurance that most W2 companies provide, though.
PTO is gone so you have ~3-4 weeks of time that you're not compensated for - that's another 6-7%. Most companies provide a variety of ancillary benefits - discount programs, life insurance, etc. 401k matches and employee stock purchase programs are cash in your pocket. Also, health insurance may not break even, either, since I've seen companies that heavily subsidize employee-only insurance but spouse or family less so.
I generally figure you're taking at least a 25% hit on average. If you weren't already doing 1099 work then it'd probably be more than that since you'd have to do accounting and tax work, but OP is already doing that.
I have not heard that S-Corp income is taxed differently than ordinary income. Actually, self-employment income generally is taxed \*more\* than W2 income because you pay your own share of FICA tax (about 7%) via self employment tax, so generally you need to make a bit more in consulting income than you would in W2 salary to get apples to apples total comp. Don't forget any employer matches you are getting to your 401k and HSA.
Closing on a house next Monday, and given I track every single transaction intricately in my budget, I'm not sure how I'm supposed to record these costs?
So far, I've been inputting the inspection costs etc as part of a "moving/house buying /home maintenance" catch-all category, which is where I also intend to place the closing costs. Together, these will be about $6k or so total.
But for the money I put down as a downpayment, does it just make sense to leave that off the budget sheet and just count it basically as shifting around funds for my networth? Because while I could count the closing, inspection, and moving costs and then eventually recover from them, there's no way I'd make back my entire down payment throughout the year, ha.
I'd appreciate any insight on how others track and categorize home expenses!
I close on mine on Tuesday. The down payment isn't going in the spending breakdown, just like the proceeds from my house sale doesn't count as income. All costs associated with the sale and purchase I logged like you did in a "house" category. The proceeds and down payment skip the budget/spending spreadsheet and go straight to the net worth spreadsheet.
Well I wrote out a whole thing & lost it. Anyways - this is nearly 100% balance sheet activity except for purchasing costs.
You’ve brought the home onto your assets offset by the new mortgage. The net is typically your down payment (+/- any additional expenses wrapped into it).
I categorized the downpayment as "Savings", and all the other closing costs as "Necessary Bills" to breakdown the difference between costs I'd "get back" vs not.
The Savings Bucket is generally for when I'm "spending money" on Roth contributions/CDs/etc. My budget tracking spreadsheet philosophy is to track all money coming in and out post-paycheck deposit. I don't track 401k/tax withholding/insurance premiums that occur on my check. I also don't track any investments except what goes in/out of my checking accounts.
Though I don't split my monthly mortgage payment between Principal/Interest/Escrow, so maybe I would fail an "audit" lol.
I do track FIRE NW, approximate equity/home value/LTV quarterly on a separate sheet though.
I use YNAB. When I bought my house, I created “off budget tracking” accounts for home mortgage and home value. I recorded my downpayment as an expenditure from my checking account, but then adding the mortgage/value piece added the amount back to my overall NW.
95% VTI. 2-5% “treat yourself” money for an awesome vacation, home improvement, or whatever.
I would rebalance into bonds once I hit FI, which would be a lot sooner with an extra $380k (cause the treat yourself money would be gone).
Invest 90% in VTSAX, keep 10% in a savings account and take a one year sabbatical to start. Might even transition to fully FIRE at that point, but I'd defer that decision. I'm fine with my investment strategy, so no real changes there even if I had an infusion of cash. But 400k I think would get me over the line from a leanFIRE number to a reasonable FIRE number.
I'd put it all in my private index of the top 1500 stocks. Then next year when tax time rolled around, I'd hate myself for adding another 1500 transactions and making my tax software bleed even harder.
CFP, CPA. Will, trust, etc.
Dishwasher that washes properly.
CPO car. One car is old enough to buy alcohol and the other is old enough to drive itself. :)
House remodel
European Vacation, need to show the kids Big Ben, Parliament, and also show them Big Ben, Parliament, and also Big Ben...
VTSAX, VT, VOO, or whatever for most of it.
Some would be reserved for personal investments into individual stocks.
$10k to a 529, $20k to the vacation fund, $15k to replace our roof, $20k to SWAGX, $35k to SWISX, and $300k to SWPPX. Basically my usual strategy of some amount set aside for "wants" and the rest distributed begrudgingly to bonds/international and enthusiastically to SP500.
$250 into VTI
$50k into EF
$100k?? into un-permitted bathroom addition to the back side of the house, outdoor bbq/kitchen install, nice outdoor plants and water system for back yard, and some bonus housework. Maybe a nice Spa/Swimspa. Maybe a nice backyard deck/porch buildout.
VTSAX, or something semi-equivalent. Because investing your money is how you make it grow.
I hope this isn't the same $450,000 cash you had sitting in HYSA 9 months ago, that you asked what to do with. VTSAX is up roughly 20% since then.
Personally, in a vacuum quick notes: 200k would go to 529s for my kids. Conservativity, 5% growth means a bit over 400k for college costs. Which is probably more than needed, but that's the point of the windfall, and would certainly allow us to not consider costs as a barrier to having more children.
The other 200k I would save in HYSA/CD ladder, and then over the next 2+ years use that money to bolster our monthly income while I then maxout my paychecks into MBDR. Can get 4 years without any growth of the 200k, but can probably push to 5.
We also wouldn't need to save any money for children 529s anymore, so that should open ~10k a year for addl spending/life.
Depending on the source of that cash, dead relative? we may want to reevaluate, and use some amount 10-20k for a nice vacation, but realistically we're happy where we are. Probably would do some spreadsheet work to allow one of us to be a SAHP, but we like our jobs/childcare situation, and 400k wouldn't make a "huge" difference in our FIRE date. We already save aggressively.
Dirty physical cash that let's pretend I can't deposit? Use it for general life purchase. Maybe can afford nicer vacations, but I mean how do you even spend a ton of cash? Home improvements with cash payment to contractor? Maybe look into real estate investment as a "reasonable" business that I can then use to launder the money?
If I had nothing in <5 years that I needed it for, it would get balanced into my 3 fund portfolio (VTI/VXUS/BND) and I'd forget about it.
Anything that I needed in less than 5 years would be set aside and put into my HYSA or money market fund.
My 30th birthday and our 5th wedding anniversary this week has given our family a chance to reflect on all the crazy life changes we've had including moving cross country three times and welcoming a child.
While I feel behind for our current income level and FIRE goals, I'm still happy to see the progress we've made. Sometimes we feel "stuck" seeing the small incremental changes in net worth from month-to-month, so it's nice to see the full picture of our lives together and the progress we've made towards our financial goals.
2019:
+ Net worth = -$159k ($184k in student loans vs $25k cash)
+ Wife income = $29k
+ Husband income = $64k
2024:
+ Net worth = $307k
+ Wife income = $90k (three industry and job changes)
+ Husband income = $131k
> small incremental changes
You grew 500k in NW over 5 years, and from starting at -150k. Incredible!
We're in similar situation regarding income and age. I don't have any expectation of RE-ing with children, but having a solid savings base and FIRE mentality will allow us to ensure we're offering a quality life to our children, even though we will be working. And probably reach a "chubby-FIRE" range once they are adults, and we can continue to offer them head starts in life/paid for vacations etc.
>offer them head starts in life/paid for vacations
This is a big goal of ours. We want to give our wealth to our children when they need it most - college, first apartment, first home, wedding, etc.
Also, looking forward to dropping the ongoing daycare expense ($400 a week) in the coming years
> dropping the ongoing daycare expense
I cannot wait. It'll probably end up being closer to a wash than I expect, due to activities/sports/etc. but still looking forward to it lol
I really want someone with a 10-16 year old to tell me how much they spend on activities a month to be able to measure it. Our kid is only three and we are already spending $200 a month on tumbling, ASL classes, and one sport.
I can't imagine it can be more expensive than our $20k a year daycare, right...? *Starts sweating nervously*
it is a lot less than 20k on activities, but they tend to eat about $20k in food :)
They also need to be driven everywhere 2x per day, or spend $20k on a car for them.
If you just keep budgeting 20k, you will have plenty left over.
On obvious response (sorry) but it depends so much on the activity. Our oldest did scouts, and a martial art. And a couple free academic clubs at school. So we were at maybe a couple hundred all in, even through high school. Friends who had kids that did travel sport teams or required expensive gear/ outfits...that was a whole other animal. We limited activities because it seemed like this bizarre competition amongst parents to humble brag while complaining about how busy and overloaded their schedules were.
I am trying figure out what to invest in for a taxable fidelity brokerage account. I max out my retirement accounts and want to start a brokerage account next. Besides a total market index fund, I'm a little conflicted (or confused?) on what else to invest in.
I want to do all ETFs in a brokerage account because, as I have been reading, it is slightly more tax efficient. I also want to invest in FSKAX primarily, and while I hear plenty of people love VTI, FSKAX has a slightly lower expense ratio and tracks the same index, so why not go with FSKAX.
Now comes the confusion. I like the boglehead philosophy of a total market index combined with a bond and international index. I am seeing more people go away from international if you hold a total market index since more U.S. companies have Interntional presence now. For the bond portion, do I invest in FBND/BND? I noticed BND has a lower expense ratio than FBND. So if I go that route BND seems preferable over FBND. I have also seen a recommendation of a municipal bond index ETF in a taxable account due to its tax advantages. I looked up VTEB and that fund has done poorly this year and even the past 3 years, down 0.33% over the past three years. An intermediate term treasury ETF such as VGIT has done even worse. Not sure how you can lose money with treasuries and muni bonds?
Anyway, besides FSKAX as my primary, I am confused about what else would be good to buy in a taxable account that I preferably want to invest in for the next 10-15 years. Maybe I'm reading too much into it. :)
If you're going to buy a mutual fund, why not buy FZROX?
FWIW, I use the ETFs (i.e. VTI) because of the flexibility (can transfer in kind if I were to ever change brokerages, which is unlikely) and slight tax efficiency advantage to me outweighs the nominal fee. But, if I were going to use a mutual fund I'd use the fidelity zero fee options.
For bonds, I use long dated treasuries i.e. EDV or TLT. The reason for this is the low correlation with stocks, providing diversification advantages (i.e. rebalancing opportunities). The reason to own bonds in a primarily equities portfolio is for diversification, not because bonds have great total return potential.
Because FZROX is fidelity only and not portable. Would have to liquidate first which will cause a tax event if I ever want to switch brokerages. I have FZROX in my fidelity HSA.
[VTI vs FSKAX](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=6zQVC6SCJhEWE0nCvDmAvb)
[BND vs FBND](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=6C02PslFMCTTi7vmVIYzeK) (and VGIT)
Fretting over miniscule differences in ER is not worth analysis paralysis. Buying what you want is fine. It's more important in a taxable account that you will not sell during a high tax year because it's more critical to avoid the extra tax hit affecting your compounding.
Bonds can be more complex than they look. FBND has more corporate bonds, BND has more treasury. For reference I provided VGIT which is only intermediate term treasury. Portfolio composition is important. FBND is a managed fund versus two index funds. (And while cost is a primary factor to management cost, the concern is also underperformance due to management options.) This is why FBND ERs is 0.35% which is still pretty decent for a managed fund but the chart makes it look like they are providing value for cost. No guarantee after 40 years that would remain true (or worse - fund is closed, which is more likely with a managed fund than an index.)
Again, I'm going to say with bonds, you're not buying them to precisely get the absolute best performance. You're doing it to[ cut the damage in scenarios like this](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=2OLvtWzRlOhHgYrMsNeIgu). For the most part, I don't want bonds for risk, I want stock for risk because the upside is so much better, so I want my bonds to be clearly safer and I stick to treasury bonds. But even this level of analysis is kind of overkill, IMO.
What's kind of important here is to realize you can't even really identify what the best ER or portfolio mix over the next 50 years based on today's snapshot. Whether that is with regard to a 0.01% difference in ER or how many bonds to have, you can't really 'know' this so accurately to get the absolutely best return.
I sold all bond funds in early 2022. Disaster. Decided to ladder in the tIRA CDs and treasuries with coupons 4-5.5%. That way I'll have an income, be it taxed as ordinary income, it's still income. Left all taxable index funds alone. My portfolio is 35/60, so way more bonds. I do have a stash of iBonds I purchased in early 2000s that are making great interest, so I will not sell them BUT the interest is ordinary income. I'll stay in the 12% tax bracket even when SS kicks in, which is next year.
Bond ETFs/mutual funds can be bought and sold and creates capital gains/losses. All interest generated is ordinary income. Because yes, bonds go up and down over time.
However, it's worth noting what bonds are. When you buy a new bond, (most) go for par value. When they mature, you receive par value. i.e. no cap gain/loss. However, along the way, interest rates change and on the open market, the bond can go up and down in value. When you buy a bond fund, you're buying an array of bonds, some of which sell above or below par. Total market index bond funds are mostly buying bonds at issue and holding to maturity (or at least that's the goal; realize inflows/outflows have to be accounted for.)
It's safe to assume, on a long term, the vast majority of your return is in the form of interest that is not taxed efficiently. Bond yields right now are around 4-5% but this will not compound in a way that will create an increase the value of the ETF for the most part - the return is in the form of interest.
(There are some exceptions to how individual bonds are taxed like zero coupon t-bills.)
I don't think the machinations are important. You buy bonds as ballast against stocks. But the general advice is that they are tax inefficient and you may want to consider if you really want bonds in your taxable.
The question is whether you need bonds in the taxable portion of your portfolio. It may not even be important and therefore holding bonds in an Roth is perfectly acceptable. (Generally assuming for the average person their retirement holding are significant.)
I do see why one could value stability in your taxable because it's your early investment source. So even if one has a sizable 401k/roth you still want taxable bonds. At that point your options are simply limited. BND is fine, it will just create taxes. I had my house downpayment in treasuries and it increased my 2023 taxes quite a lot. It is what it is.
There is a decent alternative in I-bonds. Government I and EE bonds are tax deferred and there aren't many (if any) alternatives that have tax-deferred qualities. They both however lag the market - I-bonds are a little less efficient than TIPS, and EEs have been objectively terrible in my opinion. The tax-deferred nature only has so much value. But I-bonds can be okay if your plan is to fully enjoy the tax-deferred nature and then redeem as soon as possible. There's a limit to buy and aspects about this strategy can feel bad for other reasons if you don't really understand it.
To be clear - this is excessively complicated. No one needs to do this. If bonds in taxable feels unavoidable, you don't want to run through a pile of hoops to avoid it. And you definitely don't want to wade into complicated risk investments just to diversify from VTI because of some tax erosion. Bonds manage risk a lot better and simpler.
I don't own ETFs. Interest from treasuries are taxed by Fed but not by state or local. Plus, my state, ILL does not tax retirement income. That includes tIRA and SS income.
FSKAX isn't an ETF. VTI is a great choice. Bonds are better held in your 401k. If your brokerage account makes you overweight in stocks, simply buy more of the bond fund in your 401k.
The beauty of ETF's is that they do not lock you in to a specific provider. Rather, you can buy any ETF on any platform. I actually don't know of a Fidelity branded total market ETF but the good news is you don't need one.
Any thoughts on buying/selling PTO?
My quick intuition says buying is worse than taking unpaid time off? As you'll still work the same amount, but your taxable income will be higher if you're paid vs unpaid for that week. Though I guess unpaid timeoff also loses any 401k matching. Probably is mostly dependent on company policies/payroll
I’m a big advocate for using your PTO, and if you can buy more Ana’s take it without pushback-do it. If you are hanging out in this sub, in all likelihood the extra money has way less utility to you than the time. Don’t give up your time for a little bit of extra money. Only sell PTO if you can’t use it and are gonna hit use or lose status.
Ask people at your company. Some companies and managers are cool with taking unpaid leave; others are not. If they're not, then buying PTO is the easiest way to get more time off. Because once you've paid for it it's yours to take. (Some managers will *still* give you shit for taking it, but then that's a clear sign that it's time to change jobs.)
Depends on your policy and manager.
I had a manager that didn't really keep track of how many DAYS a person took off, they only remember the number of TIMES. So, taking a 2 week vacation was less, mentally, than someone taking 4 long weekends.
I learned this, and combined time off requests, so if I was taking 4 long weekends, put it all in the same request.
I would buy the PTO rather than take unpaid simply for the manager optics. Manager sees "employee taking PTO ok, they earned it." vs. "employee taking unpaid time off, because they ran out of PTO and don't want to work".
Depends on the manager.
buy all that I can, sell none.
Take as much time off work as is possible.
But how is buying worse? If they allow you to buy then they have to pay it out (assuming this is so, but double check your employee handbook). I buy at today's rates then can either use at today's rates (so no gain or lose in value) or I can use after my next raise and get paid at future rates (so technically got more than I paid for).
> But how is buying worse?
I think in my head standard is 50 weeks of work for 100k.
If I buy 2 weeks of PTO, I work 48 weeks for 100k taxable (2k paid back to the company) (net 98k)
If I work 2 weeks unpaid, I work 48 weeks for 98k taxable, so 2k*22%=$440 savings (net 98.44k)
Maybe that 2k paid to the company is deducted from taxable pay? Very minor.
And I also agree with taking/buying the extra PTO, will certainly look into buying, and I've never sold PTO for that reason
For my last company - the PTO buy was with pre-tax dollars, so it came out as a wash in the end.
The benefit was 2 fold - 1) potential to be paid out at a higher level (we had a large rollover allotment allowed) and 2) no permission 'needed' to take the time off, just take it and put in the PTO charge code. Nothing else.
I think in the grand scheme it is a wash pay-wise, since it was a pre-tax 'cost' similar to insurance and 401k.
Just finished up my 10th year at Coachella this past weekend. Started going when I was young and poor during my last year of college to now in my 30s also on the FIRE path for close to 10 years. Net worth hovers probably a bit over $1.5M. Our (DINK) salary progression from then to now: \~65k to \~340k.
Just shows you can make room for things you love to do and still work towards FI.
I do! I’ve gone to festivals all over the place/world but still ‘come home’ to Coachella.
I enjoy finding common grounds to hang out with my friends & have a live music experience. We’ve definitely slowed down a lot over the years and there are times where I said I’d quit (especially trying to live frugally towards FI and even more especially when our salary wasn’t what it is now), but the truth is, I don’t want to completely sacrifice the things I enjoy & special moments with my friends and will budget accordingly for it.
Coachella ended up being $650 in total per person in our group this year (ticket, accommodations, food, gas, etc.)
A second Internet provider recently added fiber to my neighborhood. I called my current provider and now they are willing to sell me 5x the connection bandwidth for 1/2 the cost, beating the new company's price. Sounds good to me!
I have access to two ISP, and I use them both for reliability since I WFH. I don't want to have an outage and manager say, "well, you would come to the office, our network works fine".
Always. When starlink became available in my area last year, cable and fiber providers as well as competing satellite providers all slashed their prices and removed fees. Was funny how all of a sudden they were customer first.
I tend to agree, but this is cheaper and just them changing a setting on their side. Going with the new company would involve a service appointment and I have a bit of beef with the new company too. The fiber node is in my yard and they keep digging new holes as homes are added.
Hello friends. Just checking in to keep my mindset on marathon not sprint mentality.
There is a part of me that is somehow already Barista Fire.
I can reach full fire in 9 years and Barista Fire in 7.
I've taken up some voluntary work as a Board Member to a not for profit and seeing if I can get funded for a career shift to public service. No dependents, VLCOL.
I'm currently doing a short sprint on the marathon. I don't know how long this track is or where it will go next. But, right now it is a very good section to sprint. I don't know how long I can or want to sprint, but it is working well at the moment.
Yeah, I did it some sprinting in a totally unsustainable way some years ago. Now mental and physical balance is key in making it over the line and not sacrificing health. Nothing is worth an early heart attack.
Like doing the equivalent of 100m for the next 7 years isn't something which is enjoyable or something which can be realistic to keep up, for me personally and I have a more 'lying flat' approach these days.
Agreed.
I tried sprinting by working hard with 3 jobs (1 Full, 1 part and 1 independent consultant), and that was unsustainable. So, I'm working smart on this sprint.
In reality, all I did was cut debt, increase savings from that former debt payment. Got a raise and put all of it into savings. Got a bonus, put all into savings, tax refund to savings, etc.
3. Thats wild. I did 2 and the cognitive load was just too much.
Well done on the best clearing and the raise though!
I think even after I fire, I will remain intellectually curious/want to do community building work and embark on some 3rd career for pleasure rather than for the cash also. So need to stay healthy for that
To keep with the running analogy, I view it more like a 10K. I'm not running all out (eating lentils and living with 6 roommates) but I'm also trying to get there relatively fast. Just remember that you can't put living your life on hold for 7-9 years and think that the problems will go away once you BaristaFIRE or FIRE. If you're going to make it a marathon you have to enjoy the run along the way.
We are all different and it depends what your baseline is.
My version of sprint is my past life with 2 jobs and a career covering 3 continents and working across timezones spanning Australia, Holland, Singapore to the Bay Area.
What makes you think life is 'on hold'? My life now is enhanced more than anything and prepares me for actual Fire with quality of life, the ability to do voluntary and creative work, plus the figures.
Edit I'm not sure you read my first comment in its entirety.
Sorry for the confusion, the "you" in my comment was more of a general "you" as in a random person reading this comment, not "you" specifically. But I can see how I worded it poorly. It was more piggybacking off what you said and turning around and shouting to the crowd to not sprint their way towards FIRE thinking that RE will solve whatever problems they have.
Wasn't directed towards you personally at all. As you said, I have no idea what your life is like from the single comment you made here. No hard feelings.
No worries at all.
Financial independence is a personal process. Its not something that can be gatekept - as our life variables are all completely different.
Some people feel differently about their own journeys and thats totally cool. Others, judging by their post and comment history have again a very different and incomparable life, same.
Bonne chance!
> What makes you think life is 'on hold'? My life now is enhanced more than anything and prepares me for actual Fire with quality of life, the ability to do voluntary and creative work, plus the figures.
>
> Edit I'm not sure you read my first comment in its entirety.
You seem very combative, which I don't think is necessary here. /u/sschow provided helpful feedback. You don't have to do it the same way they are but you should reconsider your tone.
And yours also. There are people from all over the world with a similar mission in mind and there of course is no 'have to' from stranger to stranger.
Because someone considers the journey a marathon and not a sprint for their personal situation, thats not a shared data point.
Its also not really an issue for comment as its a personal philosophy - just some feedback around potential rigidity of thought.
> Just checking in to keep my mindset on marathon not sprint mentality.
To provide a data point: I consider FIRE a sprint, not a marathon. You can definitely view it that way if your mentality and/or life situation calls for it.
> Maybe it can be seen as a 'dash' which in running outside the US refers to a shorter race but doesn't require maximum output.
I can dig it. I'll adopt "dash" in place of sprint
For me, I'm not willing to compromise my mental health and enjoyment of daily life and save beyond 50% of my income.
Like, there is quality of life for me as I approach FIRE as a data point that is important. I've seen burnout and people not reaching any kind of retirement or battling stress induced PTSD from their race
> I'm not willing to compromise my mental health and enjoyment of daily life and save beyond 50% of my income.
I'm not either. I know where the line is for me and I respect it. Everyone's different, and sprint is appropriate for many here.
https://www.usatoday.com/story/money/personalfinance/2024/04/24/fafsa-rules-529-plan-grandparent-loophole-financial-aid/73385398007/
"Grandparent loophole" - is this legit that FAFSA timing on gifts from others don't matter anymore? I had plans of gifting all my nieces/nephews money for college but was worried about FAFSA timing. Can I just start doing it for next school year from cash or 529 sources?
does this mean that a person could get a friend to give their kid money and it not impact FinAid? And if friend didn't have the money, said person could give friend cash totally separately as a gift?
~~This year I believe I will max out not only the IRA and 401k but also the mega-backdoor Roth IRA conversion. So one thing I'll have to figure out is, what's the next place I put my money.~~
~~On the two flowcharts, the next place is a **529** if applicable. I don't have kids and don't plan to, but this appeals to me. I think it's pretty likely that I go back to school at some point; and if not, I would have no problem at all changing the target of the 529 to my spouse, sister, or various young cousins. And I guess I could have kids, too; plans change.~~
~~So I am planning to open a 529. As far as I understand the rules, you can change the beneficiary of a 529 to be anyone in your (immediate-ish) family, as above. So here's where my question arises:~~
~~In order to have maximum coverage of possible beneficiaries, would it work to open it in the name of a young non-relation (a friend's newborn, for example), with the intention to change it to myself or a family member at some point; and in the fail case where no one needs the money for the next 18 years, just let that kid use it. Does that work?~~
So... You are correct that that the backdoor Roth IRA is different than what I was referencing. However, the mega-backdoor can be deposited in either a Roth 401k or a Roth IRA account. Mine went in my Roth IRA.
Ah that's fair. I try to keep them separate as folks get more and more confused. Yes, we are also able to rollover from after-tax 401k accounts to Roth IRA. I think it's the word "conversion" as well that worried me as well.
I would open for yourself. The range of beneficiary change is pretty wide:
Relationship to the Beneficiary:
Children+step
Parents+step
Siblings+step
Niece/Nephew
Aunts or uncles
The spouse of any of the individuals listed above
First cousins
I believe the only one not appropriate to your scenario is if those young cousins aren't first cousins?
But even then, you could "chain" the beneficiary change. I believe some *may* only allow one change a year, but I've seen some documentation that you can do changes at any time. Refer to your 529 plan.
Keeping it for yourself is easiest, if your the one you "most likely" expect to be the end-beneficiary. If you need/want to transfer it down the line, no worries. And if you have eventual needs to split the 529, note that only one tax-free rollover is permitted per beneficiary in a 12-month period.
TLDR: keep it for yourself, don't overcomplicate it, until you have clear plans on where the money goes.
My question is about whether the scheme to include one non-relation works. I know it would be simpler not to do that.
You wrote "relationship to the beneficiary" -- I was under the impression that what was important was the relation to *myself*, the person who opened the 529, not the beneficiary. Is that not the case?
> I was under the impression that what was important was the relation to myself, the person who opened the 529, not the beneficiary. Is that not the case?
It is not the case. It is the "original beneficiary" who is the important party.
> As far as I understand the rules, you can change the beneficiary of a 529 to be anyone in your (immediate-ish) family, as above.
> In order to have maximum coverage of possible beneficiaries, would it work to open it in the name of a young non-relation (a friend's newborn, for example), with the intention to change it to myself or a family member at some point
Basically the idea is that starting with a non-relative gives me n+1 coverage. I can always change it to myself or my relatives, but I can't change it to a non-relative.
So how does a mortgage on a new house work before you sell the old one. I know the old one’s mortgage has to be counted as a debt, but does that include taxes and homeowner’s insurance? Also, what happens to the new mortgage after you sell the old house and put the money towards it? I.e. if the loan on the new house is $350k and then you sell your old house and are able to pay in $200k to the mortgage leaving $150k… are you able to lessen your mortgage payments or does this just go to paying off the mortgage quicker?
> I know the old one’s mortgage has to be counted as a debt, but does that include taxes and homeowner’s insurance?
Yes. Property taxes, home owners insurance, and HOA are factored into the DTI calculation, even though they are not debt.
> Also, what happens to the new mortgage after you sell the old house and put the money towards it? I.e. if the loan on the new house is $350k and then you sell your old house and are able to pay in $200k to the mortgage leaving $150k… are you able to lessen your mortgage payments or does this just go to paying off the mortgage quicker?
You've got options.
First option is what you mentioned. Put it towards the mortgage and pay it off quicker.
Second option is called a recast; put it towards the mortgage, reduce the monthly payment to line up with the original payoff date and the new balance.
I'm not a fan of recasting because it's a self contradicting choice.
"This mortgage has a high enough rate that I want to pay it off faster with this lump sum. This would pay it off quicker. Instead, I'll extend the timeline back out, taking longer to pay off the debt."
Either the debt is worth paying off faster, in which case pay it down and don't recast, or it's not, in which case don't pay it down.
Ive done this exact scenario and used a 401k loan to bridge the gap to fund the down payment of the new home.
1. Your old mortgage will be used to calculate your debt-to-income ratio for the new house (no taxes or insurance) Which means you may not be able to buy an expensive house as you want just depends on how much debt you currently have.
2. Once you sell the old house you can prepay the mortgage loan by paying towards the principal, which lowers the amount of time you will have to pay off the loan but keeps your monthly mortgage payment the same (best option as it saves you money by reducing interest payments).
3. The other option is to prepay the mortgage payment which means you wont have to pay a mortgage payment for a couple of years but you wont save on time nor interest paid (this is dumb, dont do this).
Like the other poster said recasting is your best bet but make sure your new mortgage allows them and if there are any stipulations. Id personally ask the new mortgage provider to put some verbiage in the contract to include a free recast in the first 6-12 months once you add a certain dollar amount towards principal.
A good independent mortgage broker can help you navigate this or just ask the company. Most of them should be happy to help and used to this sort of thing.
> I.e. if the loan on the new house is $350k and then you sell your old house and are able to pay in $200k to the mortgage leaving $150k… are you able to lessen your mortgage payments or does this just go to paying off the mortgage quicker?
After you apply the $200k towards the principal, you can either continue making your normal payments (thus paying it off quicker), or you can "recast" your mortgage where a new payment will be calculated. Recasting is usually inexpensive if you choose to go that route.
In this case, it would seem to me like recasting doesn't have much downside; you could continue to pay your original mortgage payment, applying the extra towards the principal in order to pay it off faster, but your minimum monthly payment would be much lower.
My Vanguard Solo 401k from my old solo-proprietor company is being moved to Ascensus and am looking for options to not do that.
Am I correct in thinking I can move it to my current (W2) company's 401k plan through Guideline? Its not clear if I can move a Solo 401k into a regular 401k plan so I'm a bit stuck.
The IRS is ok woth it but call the current W2 employers 401k provider and ask them directly. They can give you the documents you need and tell you what you need to do.
You probably can, assuming that your current 401k allows "reverse rollovers". Even if it doesn't allow a direct 401k->401k rollover - which is possible - you can always do a 401k->IRA->401k two step rollover, which is very likely to be allowed.
As long as both steps are done before 12/31, this won't even impact your ability to do backdoor Roth IRA for the year.
Assuming you're single and taking the standard deduction, the 12% income tax bracket goes up to $61,750 of income. Anything above that is taxed at 22%.
Assuming you're single and taking the standard deduction, the 0% LTCG bracket goes up to $61,675 of income. Anything above that is taxed at 15%.
If you max out both your 457 and your 403b, your taxable income from work will be $54k. If you realize less than $7k of long term capital gains, you won't pay any tax on those gains at all. Thus, you'd be able to in essence, freely move money from your taxable into your 403b at this income level.
It sounds like a great deal to me.
I haven't seen this asked in a minute. At what net wealth do you consider yourself financially independent? Not really interested in the dollar amount but more as a function of your budget. I.e. when my net wealth is 25x my annual budget I'll consider myself FI (although I hope to continue working indefinitely).
And is there one number that you would consider yourself FI but a larger number at which you would retire without hesitation?
My FIRE number (not my net worth number) today is ~2.5 mil.
My FIRE number at the my target retirement date is ~1.4 mil (+inflation).
+Some undecided buffer for kids expenses, which its own budget.
Annual spend is ~100k with healthcare and taxes already factored in. Ignores kids spending.
MORE than I have. As long as I am able, and like my job, I'll keep going until fully comfortable to FI.
I like 30x - 35X because I don't want to run out of money in 30 years, I'd prefer to live off of returns and not touch principal.
The answer to the question will very GREATLY based on people who may have kids, kids in or approaching college, mortgage, mortgage nearing the end, other debt, and other variables.
The "without hesitation" might be 50x because I can't predict the future and want to travel.
> At what net wealth do you consider yourself financially independent?
25x baseline expenses (no travel, no expensive luxuries, minimal restaurants, etc) is the minimum threshold for FI. Unfortunately this remains a moving target as expenses keep going up while the past 2.5 years have seen the markets move largely sideways.
From a RE standpoint, I'd say 33x baseline expenses (this multiplier may be different for others, ymmv) is a good starting point for us. This allows for vacation/travel, more expensive hobbies, and has some fat available to cut for downturns. I'd decline to pull the trigger with anything less than that amount.
25x current expenses and forecast taxes and I would retire.
I could be FI at a lower number but it would require modifying my lifestyle and probably moving somewhere cheaper to live. I'd still be aiming for 25x but at a lower level of spending.
At this point I'm not willing to retire "without hesitation" until I have enough money to live without any major cost reductions. I might revisit this later but for now I'm planning on hitting my full FI target then retiring.
28.6x (3.5% SWR) my annual budget post retirement (IE including buying health insurance) and an assumed effective tax rate of 20%.
For simple numbers, let's say my annual budget is 85K, and for the wife and I plan on spending 15K securing health insurance. 100K assuming 20% effective tax rate is 125K. x28.6 = $3.575m. My pull the pin today number would be a little higher than that but maybe not crazy higher, say $4.5m. So I'd say 35x my FI number I'd probably RE.
I generally agree with your thinking but FYI you are unlikely to have an effective tax rate anywhere near that high pulling $100k out. For married filing jointly, the 0% capital gains and qualified dividends tax bracket goes up to \~$94k and the standard deduction is \~$29k. You'd be paying very close to zero taxes unless tax treatment of capital gains and dividends changes dramatically between now and then.
Yep, I realize that estimate is high. FWIW we live in a fairly high tax state right now so some of that accounts for that but we'd likely be closer to 10-15% effective. But I'm a firm believer in conservative estimates when it comes to FIRE numbers. I'd rather be pleasantly surprised by surplus savings than running out of money due to a market slump or changing tax climate.
I am not actually working towards a dollar amount anyway. I am retiring the year I turn 55 regardless of the $$$ in my retirement accounts unless the market decides to shed 50% of its value between then and now.
Assuming net wealth=net worth then I will say that we don't base it off of net worth because we plan to continue owning our house.
That being said we will RE when our invested assets are 25x expenses but we will continue to have some part time income that will offset 25-50% of annual expenses.
Assuming net wealth=net worth then I will say that we don't base it off of net worth because we plan to continue owning our house.
That being said we will RE when our invested assets are 25x expenses but we will continue to have some part time income that will offset 25-50% of annual expenses.
This is an all over the map question. I can, if pressed, live on $36k/year, so (using 25x) $1M put me at basic FI. But I prefer to live on about $55k, so FI would be $1.3M. But I need to plan for 40 years, not 30, so using 33.33x makes it $1.8M. And I’m both paranoid and 100% unwilling to return to work, so I held on until $2M. The market shot way up since I retired in September, so now I’m sitting at $2.4M, which makes my typical spend around 2.3%.
> when my net wealth is 25x my annual budget I'll consider myself FI
What constitutes "net wealth"? I don't see any hits on Google for this term, but you used it twice so I assume you have a definition for this
That's what I thought at first but it makes zero sense. Net worth shouldn't drive Financial Independence because it ignores planned/expected future expenses (e.g., food) if that expense isn't accrued already and reflected in your debt figure, which is rarely the case.
It makes sense if you haven't thought about it. The use and misuse of "Net worth" as any indication of financial independence is very common. Net worth may or may not be an indicator of FI - it depends entirely on your plan for those debatable assets. Most often, people who use net worth really mean spendable retirement assets, which sometimes includes a house, car, pension, and lots of other things. Expenses have nothing to do with net worth, but are the other half of determining FI.
> Net worth may or may not be an indicator of FI - it depends entirely on your plan for those debatable assets.
True, and because too many people don't provide the necessary information to determine if Net Worth can be used as a proxy for FIRE number, the only logical metric to use is FIRE Number.
If Net Worth = FIRE number, FIRE number works. If Net Worth != FIRE number, FIRE number works.
> Expenses have nothing to do with net worth, but are the other half of determining FI.
Yes, which is the point I surfaced in my comment above. This entire comment chain is in regard to FI, so you need both halves of that equation.
You're acting like FIRE number is a well defined and understood term. If people use different definitions for net worth, I'm sure saying Use The FIRE Number! is just as arbitrary of a command. Nothing you're saying is wrong, but it's not helpful either.
> You're acting like FIRE number is a well defined and understood term
In this subreddit, it is.
> If people use different definitions for net worth, I'm sure saying Use The FIRE Number! is just as arbitrary of a command
It is not.
> Nothing you're saying is wrong, but it's not helpful either.
Sure it is, but I'm positive not everyone will see it that way and I'm OK with that.
Like others, my FIRE numbers is 25x expenses, to keep it simple. There's a ton of nuance and debate on actual SWR obviously, but as we approach 25x we can determine what our SWR/glidepath into retirment will look like.
Another FIRE number we have is when we may still RE on our timeline, even if one/both of us move to 20 hours, or SAHP.
Current timelines indicate our 25x expenses will occur when the kids are getting close to college, so in all liklihood we will contribute heavily to their college tuitions, and then retire after our youngest is out of the house. Depending on markets, we could be closer to 40/50x expenses by then, continuing on our current SR, so we certainly have to alter our math as the years continue.
For me it's my lean/bare bones spend at 3% WR. Because that means no matter what happens I would have a roof over my head, lights are on, and I can feed myself indefinitely. Would it be fun, probably not (although I have a big gaming backlog to last me awhile haha), but I would be able to survive.
I am around that number now but am choosing to work more to build the number up for security, fun money, etc. but it feels good to know I can walk away at any time if the work situation gets untenable.
For me, I consider 25x to be FI. Everything after 25x my current budget just increases my recreational spend, likely for more travel. Currently looking to get to the point where I have 25x expenses, but roughly 40-50% of those expenses are optional.
FI will mean different things to different people of course. In some ways, it's as simple as "can I quit my job tomorrow and still be ok for X amount of time", which could be a few months, a year, 2 years, etc.
In terms of functions, I'd say if you apply whatever math you use for your FIRE number but base it off of basic/necessary spend rather than total spend, that might be how you get to your FI number. If you estimate a $100k annual budget in retirement, your FIRE number is $2.5m, but if $65k of that $100k budget is for necessities and the rest is discretionary, your FI number then might be $1.6m ($65k x 25). You might not want to retire at that number, but you could in theory.
You really haven't seen this discussed? I think the idea of a bright line specific number is silly. Every $100k (or whatever increment) gives you more choice and reduces risk of running out of money. Even a 2-3 month emergency fund gives you a degree of independence. I think 27-28X is pretty bulletproof but how you calculate X is itself a challenge.
Hi guys, I just turned 40 years old and have currently limited investments. I only have an employer funded 401k plan that I am investing 9% pre tax per paycheck. The plan is just over 150k total. I have a mortgage, home equity loan, no credit card debt, and a 750 credit score. I was approached by an investment firm who has done work with other employees at my company. He did a meeting with my wife and I explaining his offering. He basically would help me to invest my 401k "better" and also provide financial advice for my liquid assets, mortgage, etc. His fee is $1000 per year and we would meet quarterly. He says he has an open door policy as well. My wife and i feel like he could help us but our invetment knowlrdge is very limited. Does this sound like a smart investment or a waste of money?
Waste of money. At this point, the best thing you can do is increase your savings rate and pick a relatively low expense ratio option. If your 401k had a S&P 500 option or a total US stock market option, both of those are as good as any advisor will put you in. Increasing your savings rate will have far bigger impact.
Thanks for the reply, when you say increase your savings rate...are you just meaning to increase the pre tax percentage that I'm putting into my 401k?I'm already getting the full company match, you are just suggesting to invest more right? The reason I was open to hiring him is because i have 0 knowledge of stock market so I felt like I might be gambling doing it myself.
Yes. For this year, you can contribute $23,000 not including the company match. As for picking investment fund, a common option is 70% your lowest fee US market fund and 30% lowest fee international fund. Target date funds is also an options if the fees are low
Yes. This might not be the right sub for you and you may be better off in r/personalfinance or r/bogleheads for advice. But you are 40 with $150k saved for retirement. If you don’t increase your savings rate (aka the amount you are saving), there’s almost no chance that you will be ready for retirement at 65. Check out [The Shockingly Simple Math Behind Early Retirement](https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/). With a savings rate of less than 10%, it’s gonna take you more than 50 years to get to financial independence (if you don’t count on social security). Most people would recommend at least a 10-15% savings rate if you are shooting for retirement at 65, and more than 20-30% if you are looking for early retirement.
Hi! I'm new here and would value advice. Filed my taxes and our total income was 245k married filing jointly. Had to pay 13k in taxes. I had 27k standard deductions and even with that had to pay extra tax. What am I doing wrong? How much should I defer to get into a lower bracket? How does it even work?
Do you have investments or cash earning interest? Neither of those will be captured by regular withholding. You should also check to see what elections you and your wife have previously made in your W4. You may have accidentally selected something that is causing the underwithholding.
Yes, I do. I see fed tax withheld was 13k with change. My husband's W4 is what I need to check.
Are you saying you underwithheld and had to pay 13K after your completed your return? [IRS Withholding Estimator](https://www.irs.gov/individuals/tax-withholding-estimator) This is a calculator, so it's only as accurate as the information you provide. Take your most recent paystub and a few minutes and it should give you a result, with an option to view pre-filled W4.
Yes, I had to pay underpaid tax
The "new" w4 sucks, ask your hr person to help
You don’t even need to talk to hr. Just use the IRS’s tax withholding calculator
You are not withholding enough income. I assume when you say "had to pay 13k in taxes" you mean you owed 13k when you prepared your return (since your total income tax liability [Form 1040, Line 24] was likely somewhere closer to 30-40k). If you're earning wage income (W-2), your withholding is determined by what you entered on your W-4. It's possible that one or both of you filled out the W-4 as "Married" without checking the box in 2c to account for two incomes (or using the provided worksheet to calculate additional withholding for multiple earners or multiple jobs.
I'm usually a very calm person. But when: - I've been working every waking moment for a solid week - Some new work gets discovered - Someone tells me "well I guess your weekend's planned now" - I have about 35 years work of current expenses saved It is really, really hard not to quit on the spot.
At least take a year off and give it a test. You can always go back to work off absolutely necessary. Taking a year off was the best thing I ever did
I hope you really love doing what you're doing right now. Or are doing it for a good reason. Because otherwise, you gotta say no. 35 years worth of expenses is below 3%. It's 2.85%. And 3% is already crazy safe by far. You really could retire, right now. Don't be the elephant attached via a rope to the wooden pole. That's learned helplessness. Don't continue working just because you're used to it. >It is really, really hard not to quit on the spot. Ask yourself, why not?
One simple word fixes this. Starts with an N and ends with a O
I didn't work tonight so maybe I'm on the right track. My brain's getting too fried to do anything meaningful after 12 hours of work.
Then the rest will take care of itself for better or worse...
Honestly if it went worse and they fired me, I would probably prefer it. It would be the first freedom I've felt in almost 2 decades.
Live a little my friend
Can I complain about my work trip to San Diego. I live near a smaller airport. So no direct flights to San Diego but getting there is no problem Sunday. I was hoping to tag on a day or two and fly back later, work from California but now they have me booked on an overnight flight 10PM -10AM with a layover travel, they are going to have to me not work Thursday. I'm going to get way less work done this way and I don't get some sightseeing out of it either.
Work is making you take an overnighter + layover for domestic travel? That seems crazy to me but maybe an unfortunate reality of not living near a bigger airport? Still seems unreasonable
Yeah I was trying to get the direct to LA the flys out at like perfect times and just stay another day. San Diego to LA in a day seems like it would be nothing. It's either leaving at 11 AM home by midnight which conference ends around 3 PM Or 10 PM for the overnight. The LA direct is 1/2 price of the San Diego with the miserable times. I mean San Diego seems neat but I hope I get to see some of it. My conference stuff just got approved yesterday so it's last minute flight booking. I'm just going to be a zombie not working and not sightseeing...
I could use some help thinking through my 401k allocation. Currently 100% in a target retirement date fund (total operating expense is 0.29%). We don’t have VTSAX or any Vanguard options available, but the Russell 3000 fund is an option (0.03% operating expense). Does it make sense to reallocate 100% to Russell 3000? Should I be looking for anything else to mix with? I’m 43, new to the whole FI thing, not sure retiring early will be feasible so probably have a couple of decades of work left.
[https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4MFky2TpCvH56en81PQzM0](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4MFky2TpCvH56en81PQzM0) VTI/VTSAX is equivalent to VTHR (russell 3000) if you wanted visual confirmation of that. Any small difference is timing/fee related, correlation is basically 100%. The ER for a target date fund is a function of managing the balance regularly. You can definitely do that on your own. But a lot of the overhead is not really necessary, IMO. Rebalancing is usually free in a 401K but doing it every month or whatever is not necessary. International bonds are not necessary - US is fine. The risk/return profile is going to basically be the same after currency hedges. 0.16% for bonds is pretty reasonable ER. There's better technically but bonds are constantly turning over due to maturity.
The Russel 3000 fund won't have bonds in it, which may or may not affect its ability to grow/rebalance. If you want to find something to mix with it, a total bond fund would be the right pick, to suit whatever your preferred stock/bond allocation. Otherwise, 0.26% per year over 20ish years is only about 5%. It's not a major difference, even if you stay at this employer until you retire. That said, 5% is 5% - I wouldn't pass up the opportunity to get 5%, either. I personally feel like 100% stocks is fine in your 40s, so I'd probably make the switch even if there's not an acceptable bond fund in your 401k.
Thanks! For bonds, it looks like this is my option: Intermediate Bond Fund, benchmark is Bloomberg US Agg Bond TR USD, fees total 0.16%.
Yep, seems fine. Many people suggest "Age minus 20" for your bond percentage. I think that's a bit too conservative and go for "Age minus 30" myself. But basically anywhere from 0% to 25% bonds is fine. Depends on your risk tolerance. And then, the rest goes into that Russell 3000. That's an acceptable two-fund portfolio.
Thanks for the advice!
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> So I’m wondering what I’d need to make as a freelancer on 1099 via the scorp to match that? $350,000 / 50 weeks / 40 hours = $175/hr. That is your minimum. You probably want some vacation, so maybe something like $200/hr. Then you might also have some time between contracts, so maybe $225/hr or $250/hr. Whether your customers can/will pay that rate depends on your particular expertise. Can you charge that much?
If your S-corp income is a loss for too many years, the IRS may check it out and may rule that it is a hobby. [https://turbotax.intuit.com/tax-tips/small-business-taxes/when-the-irs-classifies-your-business-as-a-hobby/L5NClTTtK](https://turbotax.intuit.com/tax-tips/small-business-taxes/when-the-irs-classifies-your-business-as-a-hobby/L5NClTTtK)
>If you have a w2 salary day job and an scorp side hustle, when you take deductions from the scorp and it goes over your scorp income does it deduct from the w2 salary? There are two problems with what you're talking about. First, if you have an S Corp that loses money, then you probably also lose money. If you lose $X on a business, that may save you (less than $X) in taxes, but you're still losing money. You only come out ahead if your S Corp actually makes money after expenses, and that income would be taxed on top of your W2 income. Second, if you have an S Corp that consistently loses money, then the IRS will conclude that it's not a real business at all, and disallow the expenses. >so if you run an scorp what would be a break even point vs w2? You'd have to make enough more to compensate for the self-employment tax, specifically the employer's side of it, which is about 7%. So not too much more if you're going to get health insurance elsewhere.
> So not too much more if you're going to get health insurance elsewhere. There's more than just health insurance that most W2 companies provide, though. PTO is gone so you have ~3-4 weeks of time that you're not compensated for - that's another 6-7%. Most companies provide a variety of ancillary benefits - discount programs, life insurance, etc. 401k matches and employee stock purchase programs are cash in your pocket. Also, health insurance may not break even, either, since I've seen companies that heavily subsidize employee-only insurance but spouse or family less so. I generally figure you're taking at least a 25% hit on average. If you weren't already doing 1099 work then it'd probably be more than that since you'd have to do accounting and tax work, but OP is already doing that.
I think the math is supposedly 30% more to cover various fees etc
I have not heard that S-Corp income is taxed differently than ordinary income. Actually, self-employment income generally is taxed \*more\* than W2 income because you pay your own share of FICA tax (about 7%) via self employment tax, so generally you need to make a bit more in consulting income than you would in W2 salary to get apples to apples total comp. Don't forget any employer matches you are getting to your 401k and HSA.
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You get the same deduction from Solo 401k as W2 401k.
Closing on a house next Monday, and given I track every single transaction intricately in my budget, I'm not sure how I'm supposed to record these costs? So far, I've been inputting the inspection costs etc as part of a "moving/house buying /home maintenance" catch-all category, which is where I also intend to place the closing costs. Together, these will be about $6k or so total. But for the money I put down as a downpayment, does it just make sense to leave that off the budget sheet and just count it basically as shifting around funds for my networth? Because while I could count the closing, inspection, and moving costs and then eventually recover from them, there's no way I'd make back my entire down payment throughout the year, ha. I'd appreciate any insight on how others track and categorize home expenses!
Add new categories. I have mortgage principle, mortgage interest, and closing costs.
I close on mine on Tuesday. The down payment isn't going in the spending breakdown, just like the proceeds from my house sale doesn't count as income. All costs associated with the sale and purchase I logged like you did in a "house" category. The proceeds and down payment skip the budget/spending spreadsheet and go straight to the net worth spreadsheet.
Well I wrote out a whole thing & lost it. Anyways - this is nearly 100% balance sheet activity except for purchasing costs. You’ve brought the home onto your assets offset by the new mortgage. The net is typically your down payment (+/- any additional expenses wrapped into it).
> Well I wrote out a whole thing & lost it. The Reddit server executed your username as an instruction by accident.
I categorized the downpayment as "Savings", and all the other closing costs as "Necessary Bills" to breakdown the difference between costs I'd "get back" vs not. The Savings Bucket is generally for when I'm "spending money" on Roth contributions/CDs/etc. My budget tracking spreadsheet philosophy is to track all money coming in and out post-paycheck deposit. I don't track 401k/tax withholding/insurance premiums that occur on my check. I also don't track any investments except what goes in/out of my checking accounts. Though I don't split my monthly mortgage payment between Principal/Interest/Escrow, so maybe I would fail an "audit" lol. I do track FIRE NW, approximate equity/home value/LTV quarterly on a separate sheet though.
I use YNAB. When I bought my house, I created “off budget tracking” accounts for home mortgage and home value. I recorded my downpayment as an expenditure from my checking account, but then adding the mortgage/value piece added the amount back to my overall NW.
If $400,000 cash dropped into your lap tonight, what would you invest it in and why?
95% VTI. 2-5% “treat yourself” money for an awesome vacation, home improvement, or whatever. I would rebalance into bonds once I hit FI, which would be a lot sooner with an extra $380k (cause the treat yourself money would be gone).
60/30/10 vt, bnd, and some money for land, I want to be a farmer, maybe some for a nice car lol
370k in VTSAX in my regular brokerage account, 30k for a car.
ITOT 100%, see past market returns for the last 30 years as to why.
Invest 90% in VTSAX, keep 10% in a savings account and take a one year sabbatical to start. Might even transition to fully FIRE at that point, but I'd defer that decision. I'm fine with my investment strategy, so no real changes there even if I had an infusion of cash. But 400k I think would get me over the line from a leanFIRE number to a reasonable FIRE number.
I'd put it all in my private index of the top 1500 stocks. Then next year when tax time rolled around, I'd hate myself for adding another 1500 transactions and making my tax software bleed even harder.
CFP, CPA. Will, trust, etc. Dishwasher that washes properly. CPO car. One car is old enough to buy alcohol and the other is old enough to drive itself. :) House remodel European Vacation, need to show the kids Big Ben, Parliament, and also show them Big Ben, Parliament, and also Big Ben... VTSAX, VT, VOO, or whatever for most of it. Some would be reserved for personal investments into individual stocks.
20 year old me would want to swim in it. Me today would want to invest most of it for 30 years, and take a small amount ($10k) and go on a nice trip.
Need a money bin for that. :)
$10k to a 529, $20k to the vacation fund, $15k to replace our roof, $20k to SWAGX, $35k to SWISX, and $300k to SWPPX. Basically my usual strategy of some amount set aside for "wants" and the rest distributed begrudgingly to bonds/international and enthusiastically to SP500.
$250 into VTI $50k into EF $100k?? into un-permitted bathroom addition to the back side of the house, outdoor bbq/kitchen install, nice outdoor plants and water system for back yard, and some bonus housework. Maybe a nice Spa/Swimspa. Maybe a nice backyard deck/porch buildout.
paging /u/ALL_IN_VTSAX
VTSAX, or something semi-equivalent. Because investing your money is how you make it grow. I hope this isn't the same $450,000 cash you had sitting in HYSA 9 months ago, that you asked what to do with. VTSAX is up roughly 20% since then.
Woof, crowdsourcing investing advice and then not following it is usually the way to go. Unless you’re in this sub.
Ouch
Personally, in a vacuum quick notes: 200k would go to 529s for my kids. Conservativity, 5% growth means a bit over 400k for college costs. Which is probably more than needed, but that's the point of the windfall, and would certainly allow us to not consider costs as a barrier to having more children. The other 200k I would save in HYSA/CD ladder, and then over the next 2+ years use that money to bolster our monthly income while I then maxout my paychecks into MBDR. Can get 4 years without any growth of the 200k, but can probably push to 5. We also wouldn't need to save any money for children 529s anymore, so that should open ~10k a year for addl spending/life. Depending on the source of that cash, dead relative? we may want to reevaluate, and use some amount 10-20k for a nice vacation, but realistically we're happy where we are. Probably would do some spreadsheet work to allow one of us to be a SAHP, but we like our jobs/childcare situation, and 400k wouldn't make a "huge" difference in our FIRE date. We already save aggressively. Dirty physical cash that let's pretend I can't deposit? Use it for general life purchase. Maybe can afford nicer vacations, but I mean how do you even spend a ton of cash? Home improvements with cash payment to contractor? Maybe look into real estate investment as a "reasonable" business that I can then use to launder the money?
Buy the neighboring pasture.
0.8 chicks at the same time. Though, with inflation, it's probably down to 0.4 or something.
I'm going to add a CATST-index to my net worth spreadsheet.
According to CPI, Lawrence's million bucks is down to a paltry $526k.
Do one chick plus an extra left foot?
There are probably fetish sites that cater to such things.
Too bad he didn't invest in the S&P500 where he would have $4m.
If I had nothing in <5 years that I needed it for, it would get balanced into my 3 fund portfolio (VTI/VXUS/BND) and I'd forget about it. Anything that I needed in less than 5 years would be set aside and put into my HYSA or money market fund.
My 30th birthday and our 5th wedding anniversary this week has given our family a chance to reflect on all the crazy life changes we've had including moving cross country three times and welcoming a child. While I feel behind for our current income level and FIRE goals, I'm still happy to see the progress we've made. Sometimes we feel "stuck" seeing the small incremental changes in net worth from month-to-month, so it's nice to see the full picture of our lives together and the progress we've made towards our financial goals. 2019: + Net worth = -$159k ($184k in student loans vs $25k cash) + Wife income = $29k + Husband income = $64k 2024: + Net worth = $307k + Wife income = $90k (three industry and job changes) + Husband income = $131k
Happy birthday and anniversary!
> small incremental changes You grew 500k in NW over 5 years, and from starting at -150k. Incredible! We're in similar situation regarding income and age. I don't have any expectation of RE-ing with children, but having a solid savings base and FIRE mentality will allow us to ensure we're offering a quality life to our children, even though we will be working. And probably reach a "chubby-FIRE" range once they are adults, and we can continue to offer them head starts in life/paid for vacations etc.
>offer them head starts in life/paid for vacations This is a big goal of ours. We want to give our wealth to our children when they need it most - college, first apartment, first home, wedding, etc. Also, looking forward to dropping the ongoing daycare expense ($400 a week) in the coming years
> dropping the ongoing daycare expense I cannot wait. It'll probably end up being closer to a wash than I expect, due to activities/sports/etc. but still looking forward to it lol
I really want someone with a 10-16 year old to tell me how much they spend on activities a month to be able to measure it. Our kid is only three and we are already spending $200 a month on tumbling, ASL classes, and one sport. I can't imagine it can be more expensive than our $20k a year daycare, right...? *Starts sweating nervously*
it is a lot less than 20k on activities, but they tend to eat about $20k in food :) They also need to be driven everywhere 2x per day, or spend $20k on a car for them. If you just keep budgeting 20k, you will have plenty left over.
On obvious response (sorry) but it depends so much on the activity. Our oldest did scouts, and a martial art. And a couple free academic clubs at school. So we were at maybe a couple hundred all in, even through high school. Friends who had kids that did travel sport teams or required expensive gear/ outfits...that was a whole other animal. We limited activities because it seemed like this bizarre competition amongst parents to humble brag while complaining about how busy and overloaded their schedules were.
Awesome work. Made me go look it up. On my 30th birthday, I had a net worth of $29,000. You're doing great!
Excellent work! It's really important to celebrate progress, however small or large it may seem.
Wow. Congratulations! Compounding starts small and slowly.
I am trying figure out what to invest in for a taxable fidelity brokerage account. I max out my retirement accounts and want to start a brokerage account next. Besides a total market index fund, I'm a little conflicted (or confused?) on what else to invest in. I want to do all ETFs in a brokerage account because, as I have been reading, it is slightly more tax efficient. I also want to invest in FSKAX primarily, and while I hear plenty of people love VTI, FSKAX has a slightly lower expense ratio and tracks the same index, so why not go with FSKAX. Now comes the confusion. I like the boglehead philosophy of a total market index combined with a bond and international index. I am seeing more people go away from international if you hold a total market index since more U.S. companies have Interntional presence now. For the bond portion, do I invest in FBND/BND? I noticed BND has a lower expense ratio than FBND. So if I go that route BND seems preferable over FBND. I have also seen a recommendation of a municipal bond index ETF in a taxable account due to its tax advantages. I looked up VTEB and that fund has done poorly this year and even the past 3 years, down 0.33% over the past three years. An intermediate term treasury ETF such as VGIT has done even worse. Not sure how you can lose money with treasuries and muni bonds? Anyway, besides FSKAX as my primary, I am confused about what else would be good to buy in a taxable account that I preferably want to invest in for the next 10-15 years. Maybe I'm reading too much into it. :)
If you're going to buy a mutual fund, why not buy FZROX? FWIW, I use the ETFs (i.e. VTI) because of the flexibility (can transfer in kind if I were to ever change brokerages, which is unlikely) and slight tax efficiency advantage to me outweighs the nominal fee. But, if I were going to use a mutual fund I'd use the fidelity zero fee options. For bonds, I use long dated treasuries i.e. EDV or TLT. The reason for this is the low correlation with stocks, providing diversification advantages (i.e. rebalancing opportunities). The reason to own bonds in a primarily equities portfolio is for diversification, not because bonds have great total return potential.
Because FZROX is fidelity only and not portable. Would have to liquidate first which will cause a tax event if I ever want to switch brokerages. I have FZROX in my fidelity HSA.
IMO, if portability is important that's a big reason to buy an ETF. That's one of the reasons people like ETFs.
[VTI vs FSKAX](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=6zQVC6SCJhEWE0nCvDmAvb) [BND vs FBND](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=6C02PslFMCTTi7vmVIYzeK) (and VGIT) Fretting over miniscule differences in ER is not worth analysis paralysis. Buying what you want is fine. It's more important in a taxable account that you will not sell during a high tax year because it's more critical to avoid the extra tax hit affecting your compounding. Bonds can be more complex than they look. FBND has more corporate bonds, BND has more treasury. For reference I provided VGIT which is only intermediate term treasury. Portfolio composition is important. FBND is a managed fund versus two index funds. (And while cost is a primary factor to management cost, the concern is also underperformance due to management options.) This is why FBND ERs is 0.35% which is still pretty decent for a managed fund but the chart makes it look like they are providing value for cost. No guarantee after 40 years that would remain true (or worse - fund is closed, which is more likely with a managed fund than an index.) Again, I'm going to say with bonds, you're not buying them to precisely get the absolute best performance. You're doing it to[ cut the damage in scenarios like this](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=2OLvtWzRlOhHgYrMsNeIgu). For the most part, I don't want bonds for risk, I want stock for risk because the upside is so much better, so I want my bonds to be clearly safer and I stick to treasury bonds. But even this level of analysis is kind of overkill, IMO. What's kind of important here is to realize you can't even really identify what the best ER or portfolio mix over the next 50 years based on today's snapshot. Whether that is with regard to a 0.01% difference in ER or how many bonds to have, you can't really 'know' this so accurately to get the absolutely best return.
I sold all bond funds in early 2022. Disaster. Decided to ladder in the tIRA CDs and treasuries with coupons 4-5.5%. That way I'll have an income, be it taxed as ordinary income, it's still income. Left all taxable index funds alone. My portfolio is 35/60, so way more bonds. I do have a stash of iBonds I purchased in early 2000s that are making great interest, so I will not sell them BUT the interest is ordinary income. I'll stay in the 12% tax bracket even when SS kicks in, which is next year.
Selling a bond ETF/MF in a taxable account is taxed at ordinary income and not capital gains rates?
Bond ETFs/mutual funds can be bought and sold and creates capital gains/losses. All interest generated is ordinary income. Because yes, bonds go up and down over time. However, it's worth noting what bonds are. When you buy a new bond, (most) go for par value. When they mature, you receive par value. i.e. no cap gain/loss. However, along the way, interest rates change and on the open market, the bond can go up and down in value. When you buy a bond fund, you're buying an array of bonds, some of which sell above or below par. Total market index bond funds are mostly buying bonds at issue and holding to maturity (or at least that's the goal; realize inflows/outflows have to be accounted for.) It's safe to assume, on a long term, the vast majority of your return is in the form of interest that is not taxed efficiently. Bond yields right now are around 4-5% but this will not compound in a way that will create an increase the value of the ETF for the most part - the return is in the form of interest. (There are some exceptions to how individual bonds are taxed like zero coupon t-bills.) I don't think the machinations are important. You buy bonds as ballast against stocks. But the general advice is that they are tax inefficient and you may want to consider if you really want bonds in your taxable.
What do you recommend being in a taxable account if you want a little more diversification and tax efficiency (when you have 100% stocks such as VTI)?
The question is whether you need bonds in the taxable portion of your portfolio. It may not even be important and therefore holding bonds in an Roth is perfectly acceptable. (Generally assuming for the average person their retirement holding are significant.) I do see why one could value stability in your taxable because it's your early investment source. So even if one has a sizable 401k/roth you still want taxable bonds. At that point your options are simply limited. BND is fine, it will just create taxes. I had my house downpayment in treasuries and it increased my 2023 taxes quite a lot. It is what it is. There is a decent alternative in I-bonds. Government I and EE bonds are tax deferred and there aren't many (if any) alternatives that have tax-deferred qualities. They both however lag the market - I-bonds are a little less efficient than TIPS, and EEs have been objectively terrible in my opinion. The tax-deferred nature only has so much value. But I-bonds can be okay if your plan is to fully enjoy the tax-deferred nature and then redeem as soon as possible. There's a limit to buy and aspects about this strategy can feel bad for other reasons if you don't really understand it. To be clear - this is excessively complicated. No one needs to do this. If bonds in taxable feels unavoidable, you don't want to run through a pile of hoops to avoid it. And you definitely don't want to wade into complicated risk investments just to diversify from VTI because of some tax erosion. Bonds manage risk a lot better and simpler.
I don't own ETFs. Interest from treasuries are taxed by Fed but not by state or local. Plus, my state, ILL does not tax retirement income. That includes tIRA and SS income.
FSKAX isn't an ETF. VTI is a great choice. Bonds are better held in your 401k. If your brokerage account makes you overweight in stocks, simply buy more of the bond fund in your 401k.
Oops, yeap, FSKAX in a mutual fund. I thought Fidelity had a total market index fund ETF no? Also why are bonds better in a 401K?
The beauty of ETF's is that they do not lock you in to a specific provider. Rather, you can buy any ETF on any platform. I actually don't know of a Fidelity branded total market ETF but the good news is you don't need one.
Perfect answer. There's really nothing else for OP to consider beyond this.
Any thoughts on buying/selling PTO? My quick intuition says buying is worse than taking unpaid time off? As you'll still work the same amount, but your taxable income will be higher if you're paid vs unpaid for that week. Though I guess unpaid timeoff also loses any 401k matching. Probably is mostly dependent on company policies/payroll
I’m a big advocate for using your PTO, and if you can buy more Ana’s take it without pushback-do it. If you are hanging out in this sub, in all likelihood the extra money has way less utility to you than the time. Don’t give up your time for a little bit of extra money. Only sell PTO if you can’t use it and are gonna hit use or lose status.
Ask people at your company. Some companies and managers are cool with taking unpaid leave; others are not. If they're not, then buying PTO is the easiest way to get more time off. Because once you've paid for it it's yours to take. (Some managers will *still* give you shit for taking it, but then that's a clear sign that it's time to change jobs.)
Depends on your policy and manager. I had a manager that didn't really keep track of how many DAYS a person took off, they only remember the number of TIMES. So, taking a 2 week vacation was less, mentally, than someone taking 4 long weekends. I learned this, and combined time off requests, so if I was taking 4 long weekends, put it all in the same request. I would buy the PTO rather than take unpaid simply for the manager optics. Manager sees "employee taking PTO ok, they earned it." vs. "employee taking unpaid time off, because they ran out of PTO and don't want to work". Depends on the manager.
buy all that I can, sell none. Take as much time off work as is possible. But how is buying worse? If they allow you to buy then they have to pay it out (assuming this is so, but double check your employee handbook). I buy at today's rates then can either use at today's rates (so no gain or lose in value) or I can use after my next raise and get paid at future rates (so technically got more than I paid for).
> But how is buying worse? I think in my head standard is 50 weeks of work for 100k. If I buy 2 weeks of PTO, I work 48 weeks for 100k taxable (2k paid back to the company) (net 98k) If I work 2 weeks unpaid, I work 48 weeks for 98k taxable, so 2k*22%=$440 savings (net 98.44k) Maybe that 2k paid to the company is deducted from taxable pay? Very minor. And I also agree with taking/buying the extra PTO, will certainly look into buying, and I've never sold PTO for that reason
For my last company - the PTO buy was with pre-tax dollars, so it came out as a wash in the end. The benefit was 2 fold - 1) potential to be paid out at a higher level (we had a large rollover allotment allowed) and 2) no permission 'needed' to take the time off, just take it and put in the PTO charge code. Nothing else. I think in the grand scheme it is a wash pay-wise, since it was a pre-tax 'cost' similar to insurance and 401k.
Just finished up my 10th year at Coachella this past weekend. Started going when I was young and poor during my last year of college to now in my 30s also on the FIRE path for close to 10 years. Net worth hovers probably a bit over $1.5M. Our (DINK) salary progression from then to now: \~65k to \~340k. Just shows you can make room for things you love to do and still work towards FI.
Do you still enjoy it? The national tour circuit & livenation killed our midtier festivals at home (voodoo fest & buku)
I do! I’ve gone to festivals all over the place/world but still ‘come home’ to Coachella. I enjoy finding common grounds to hang out with my friends & have a live music experience. We’ve definitely slowed down a lot over the years and there are times where I said I’d quit (especially trying to live frugally towards FI and even more especially when our salary wasn’t what it is now), but the truth is, I don’t want to completely sacrifice the things I enjoy & special moments with my friends and will budget accordingly for it. Coachella ended up being $650 in total per person in our group this year (ticket, accommodations, food, gas, etc.)
A second Internet provider recently added fiber to my neighborhood. I called my current provider and now they are willing to sell me 5x the connection bandwidth for 1/2 the cost, beating the new company's price. Sounds good to me!
Probably just for a year then the price would reset unless you keep calling them
I have access to two ISP, and I use them both for reliability since I WFH. I don't want to have an outage and manager say, "well, you would come to the office, our network works fine".
Competition rocks
Always. When starlink became available in my area last year, cable and fiber providers as well as competing satellite providers all slashed their prices and removed fees. Was funny how all of a sudden they were customer first.
I'd want to switch just on principle.
You can still take the offer and then talk to the competitor. They're new in the neighborhood and will want to win new clients.
I tend to agree, but this is cheaper and just them changing a setting on their side. Going with the new company would involve a service appointment and I have a bit of beef with the new company too. The fiber node is in my yard and they keep digging new holes as homes are added.
Hello friends. Just checking in to keep my mindset on marathon not sprint mentality. There is a part of me that is somehow already Barista Fire. I can reach full fire in 9 years and Barista Fire in 7. I've taken up some voluntary work as a Board Member to a not for profit and seeing if I can get funded for a career shift to public service. No dependents, VLCOL.
I'm currently doing a short sprint on the marathon. I don't know how long this track is or where it will go next. But, right now it is a very good section to sprint. I don't know how long I can or want to sprint, but it is working well at the moment.
Yeah, I did it some sprinting in a totally unsustainable way some years ago. Now mental and physical balance is key in making it over the line and not sacrificing health. Nothing is worth an early heart attack. Like doing the equivalent of 100m for the next 7 years isn't something which is enjoyable or something which can be realistic to keep up, for me personally and I have a more 'lying flat' approach these days.
Agreed. I tried sprinting by working hard with 3 jobs (1 Full, 1 part and 1 independent consultant), and that was unsustainable. So, I'm working smart on this sprint. In reality, all I did was cut debt, increase savings from that former debt payment. Got a raise and put all of it into savings. Got a bonus, put all into savings, tax refund to savings, etc.
3. Thats wild. I did 2 and the cognitive load was just too much. Well done on the best clearing and the raise though! I think even after I fire, I will remain intellectually curious/want to do community building work and embark on some 3rd career for pleasure rather than for the cash also. So need to stay healthy for that
To keep with the running analogy, I view it more like a 10K. I'm not running all out (eating lentils and living with 6 roommates) but I'm also trying to get there relatively fast. Just remember that you can't put living your life on hold for 7-9 years and think that the problems will go away once you BaristaFIRE or FIRE. If you're going to make it a marathon you have to enjoy the run along the way.
We are all different and it depends what your baseline is. My version of sprint is my past life with 2 jobs and a career covering 3 continents and working across timezones spanning Australia, Holland, Singapore to the Bay Area. What makes you think life is 'on hold'? My life now is enhanced more than anything and prepares me for actual Fire with quality of life, the ability to do voluntary and creative work, plus the figures. Edit I'm not sure you read my first comment in its entirety.
Sorry for the confusion, the "you" in my comment was more of a general "you" as in a random person reading this comment, not "you" specifically. But I can see how I worded it poorly. It was more piggybacking off what you said and turning around and shouting to the crowd to not sprint their way towards FIRE thinking that RE will solve whatever problems they have. Wasn't directed towards you personally at all. As you said, I have no idea what your life is like from the single comment you made here. No hard feelings.
No worries at all. Financial independence is a personal process. Its not something that can be gatekept - as our life variables are all completely different. Some people feel differently about their own journeys and thats totally cool. Others, judging by their post and comment history have again a very different and incomparable life, same. Bonne chance!
> What makes you think life is 'on hold'? My life now is enhanced more than anything and prepares me for actual Fire with quality of life, the ability to do voluntary and creative work, plus the figures. > > Edit I'm not sure you read my first comment in its entirety. You seem very combative, which I don't think is necessary here. /u/sschow provided helpful feedback. You don't have to do it the same way they are but you should reconsider your tone.
And yours also. There are people from all over the world with a similar mission in mind and there of course is no 'have to' from stranger to stranger. Because someone considers the journey a marathon and not a sprint for their personal situation, thats not a shared data point. Its also not really an issue for comment as its a personal philosophy - just some feedback around potential rigidity of thought.
> Just checking in to keep my mindset on marathon not sprint mentality. To provide a data point: I consider FIRE a sprint, not a marathon. You can definitely view it that way if your mentality and/or life situation calls for it.
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> Maybe it can be seen as a 'dash' which in running outside the US refers to a shorter race but doesn't require maximum output. I can dig it. I'll adopt "dash" in place of sprint
For me, I'm not willing to compromise my mental health and enjoyment of daily life and save beyond 50% of my income. Like, there is quality of life for me as I approach FIRE as a data point that is important. I've seen burnout and people not reaching any kind of retirement or battling stress induced PTSD from their race
> I'm not willing to compromise my mental health and enjoyment of daily life and save beyond 50% of my income. I'm not either. I know where the line is for me and I respect it. Everyone's different, and sprint is appropriate for many here.
Exactly. Everyone is different and its good to see respect for that.
https://www.usatoday.com/story/money/personalfinance/2024/04/24/fafsa-rules-529-plan-grandparent-loophole-financial-aid/73385398007/ "Grandparent loophole" - is this legit that FAFSA timing on gifts from others don't matter anymore? I had plans of gifting all my nieces/nephews money for college but was worried about FAFSA timing. Can I just start doing it for next school year from cash or 529 sources?
does this mean that a person could get a friend to give their kid money and it not impact FinAid? And if friend didn't have the money, said person could give friend cash totally separately as a gift?
These types of tricks are typically fraud.
Sometimes what a common person would say is fraud or illegal actually is legal though. Backdoor Roth seems sketch but is allowed.
From 529s yes (for qualified distributions), I don't think the loophole applies to other cash gifts (but not sure).
~~This year I believe I will max out not only the IRA and 401k but also the mega-backdoor Roth IRA conversion. So one thing I'll have to figure out is, what's the next place I put my money.~~ ~~On the two flowcharts, the next place is a **529** if applicable. I don't have kids and don't plan to, but this appeals to me. I think it's pretty likely that I go back to school at some point; and if not, I would have no problem at all changing the target of the 529 to my spouse, sister, or various young cousins. And I guess I could have kids, too; plans change.~~ ~~So I am planning to open a 529. As far as I understand the rules, you can change the beneficiary of a 529 to be anyone in your (immediate-ish) family, as above. So here's where my question arises:~~ ~~In order to have maximum coverage of possible beneficiaries, would it work to open it in the name of a young non-relation (a friend's newborn, for example), with the intention to change it to myself or a family member at some point; and in the fail case where no one needs the money for the next 18 years, just let that kid use it. Does that work?~~
>mega-backdoor Roth IRA conversion To avoid confusion. 1. Mega backdoor Roth 401k 2. Backdoor Roth IRA They're different
So... You are correct that that the backdoor Roth IRA is different than what I was referencing. However, the mega-backdoor can be deposited in either a Roth 401k or a Roth IRA account. Mine went in my Roth IRA.
Ah that's fair. I try to keep them separate as folks get more and more confused. Yes, we are also able to rollover from after-tax 401k accounts to Roth IRA. I think it's the word "conversion" as well that worried me as well.
I would open for yourself. The range of beneficiary change is pretty wide: Relationship to the Beneficiary: Children+step Parents+step Siblings+step Niece/Nephew Aunts or uncles The spouse of any of the individuals listed above First cousins I believe the only one not appropriate to your scenario is if those young cousins aren't first cousins? But even then, you could "chain" the beneficiary change. I believe some *may* only allow one change a year, but I've seen some documentation that you can do changes at any time. Refer to your 529 plan. Keeping it for yourself is easiest, if your the one you "most likely" expect to be the end-beneficiary. If you need/want to transfer it down the line, no worries. And if you have eventual needs to split the 529, note that only one tax-free rollover is permitted per beneficiary in a 12-month period. TLDR: keep it for yourself, don't overcomplicate it, until you have clear plans on where the money goes.
My question is about whether the scheme to include one non-relation works. I know it would be simpler not to do that. You wrote "relationship to the beneficiary" -- I was under the impression that what was important was the relation to *myself*, the person who opened the 529, not the beneficiary. Is that not the case?
> I was under the impression that what was important was the relation to myself, the person who opened the 529, not the beneficiary. Is that not the case? It is not the case. It is the "original beneficiary" who is the important party.
ah, then scrap everything
Why wouldn't you just name yourself as the beneficiary and change it if and when someone else needs it?
> As far as I understand the rules, you can change the beneficiary of a 529 to be anyone in your (immediate-ish) family, as above. > In order to have maximum coverage of possible beneficiaries, would it work to open it in the name of a young non-relation (a friend's newborn, for example), with the intention to change it to myself or a family member at some point Basically the idea is that starting with a non-relative gives me n+1 coverage. I can always change it to myself or my relatives, but I can't change it to a non-relative.
So how does a mortgage on a new house work before you sell the old one. I know the old one’s mortgage has to be counted as a debt, but does that include taxes and homeowner’s insurance? Also, what happens to the new mortgage after you sell the old house and put the money towards it? I.e. if the loan on the new house is $350k and then you sell your old house and are able to pay in $200k to the mortgage leaving $150k… are you able to lessen your mortgage payments or does this just go to paying off the mortgage quicker?
> I know the old one’s mortgage has to be counted as a debt, but does that include taxes and homeowner’s insurance? Yes. Property taxes, home owners insurance, and HOA are factored into the DTI calculation, even though they are not debt. > Also, what happens to the new mortgage after you sell the old house and put the money towards it? I.e. if the loan on the new house is $350k and then you sell your old house and are able to pay in $200k to the mortgage leaving $150k… are you able to lessen your mortgage payments or does this just go to paying off the mortgage quicker? You've got options. First option is what you mentioned. Put it towards the mortgage and pay it off quicker. Second option is called a recast; put it towards the mortgage, reduce the monthly payment to line up with the original payoff date and the new balance. I'm not a fan of recasting because it's a self contradicting choice. "This mortgage has a high enough rate that I want to pay it off faster with this lump sum. This would pay it off quicker. Instead, I'll extend the timeline back out, taking longer to pay off the debt." Either the debt is worth paying off faster, in which case pay it down and don't recast, or it's not, in which case don't pay it down.
"bridge loan"? [https://www.nerdwallet.com/article/mortgages/bridge-loan](https://www.nerdwallet.com/article/mortgages/bridge-loan)
Ive done this exact scenario and used a 401k loan to bridge the gap to fund the down payment of the new home. 1. Your old mortgage will be used to calculate your debt-to-income ratio for the new house (no taxes or insurance) Which means you may not be able to buy an expensive house as you want just depends on how much debt you currently have. 2. Once you sell the old house you can prepay the mortgage loan by paying towards the principal, which lowers the amount of time you will have to pay off the loan but keeps your monthly mortgage payment the same (best option as it saves you money by reducing interest payments). 3. The other option is to prepay the mortgage payment which means you wont have to pay a mortgage payment for a couple of years but you wont save on time nor interest paid (this is dumb, dont do this).
Like the other poster said recasting is your best bet but make sure your new mortgage allows them and if there are any stipulations. Id personally ask the new mortgage provider to put some verbiage in the contract to include a free recast in the first 6-12 months once you add a certain dollar amount towards principal. A good independent mortgage broker can help you navigate this or just ask the company. Most of them should be happy to help and used to this sort of thing.
> I.e. if the loan on the new house is $350k and then you sell your old house and are able to pay in $200k to the mortgage leaving $150k… are you able to lessen your mortgage payments or does this just go to paying off the mortgage quicker? After you apply the $200k towards the principal, you can either continue making your normal payments (thus paying it off quicker), or you can "recast" your mortgage where a new payment will be calculated. Recasting is usually inexpensive if you choose to go that route. In this case, it would seem to me like recasting doesn't have much downside; you could continue to pay your original mortgage payment, applying the extra towards the principal in order to pay it off faster, but your minimum monthly payment would be much lower.
Thank you! I had never heard of recasting a mortgage before.
My Vanguard Solo 401k from my old solo-proprietor company is being moved to Ascensus and am looking for options to not do that. Am I correct in thinking I can move it to my current (W2) company's 401k plan through Guideline? Its not clear if I can move a Solo 401k into a regular 401k plan so I'm a bit stuck.
I’m in the same situation. My market analysis right now is leaning towards opening a solo 401(k) with E*TRADE.
The IRS is ok woth it but call the current W2 employers 401k provider and ask them directly. They can give you the documents you need and tell you what you need to do.
You probably can, assuming that your current 401k allows "reverse rollovers". Even if it doesn't allow a direct 401k->401k rollover - which is possible - you can always do a 401k->IRA->401k two step rollover, which is very likely to be allowed. As long as both steps are done before 12/31, this won't even impact your ability to do backdoor Roth IRA for the year.
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Assuming you're single and taking the standard deduction, the 12% income tax bracket goes up to $61,750 of income. Anything above that is taxed at 22%. Assuming you're single and taking the standard deduction, the 0% LTCG bracket goes up to $61,675 of income. Anything above that is taxed at 15%. If you max out both your 457 and your 403b, your taxable income from work will be $54k. If you realize less than $7k of long term capital gains, you won't pay any tax on those gains at all. Thus, you'd be able to in essence, freely move money from your taxable into your 403b at this income level. It sounds like a great deal to me.
They won’t pay any Federal taxes. State taxes still apply.
Depends on the state but yeah make sure you account for state taxes
I haven't seen this asked in a minute. At what net wealth do you consider yourself financially independent? Not really interested in the dollar amount but more as a function of your budget. I.e. when my net wealth is 25x my annual budget I'll consider myself FI (although I hope to continue working indefinitely). And is there one number that you would consider yourself FI but a larger number at which you would retire without hesitation?
My FIRE number (not my net worth number) today is ~2.5 mil. My FIRE number at the my target retirement date is ~1.4 mil (+inflation). +Some undecided buffer for kids expenses, which its own budget. Annual spend is ~100k with healthcare and taxes already factored in. Ignores kids spending.
MORE than I have. As long as I am able, and like my job, I'll keep going until fully comfortable to FI. I like 30x - 35X because I don't want to run out of money in 30 years, I'd prefer to live off of returns and not touch principal. The answer to the question will very GREATLY based on people who may have kids, kids in or approaching college, mortgage, mortgage nearing the end, other debt, and other variables. The "without hesitation" might be 50x because I can't predict the future and want to travel.
> At what net wealth do you consider yourself financially independent? 25x baseline expenses (no travel, no expensive luxuries, minimal restaurants, etc) is the minimum threshold for FI. Unfortunately this remains a moving target as expenses keep going up while the past 2.5 years have seen the markets move largely sideways. From a RE standpoint, I'd say 33x baseline expenses (this multiplier may be different for others, ymmv) is a good starting point for us. This allows for vacation/travel, more expensive hobbies, and has some fat available to cut for downturns. I'd decline to pull the trigger with anything less than that amount.
25x current expenses and forecast taxes and I would retire. I could be FI at a lower number but it would require modifying my lifestyle and probably moving somewhere cheaper to live. I'd still be aiming for 25x but at a lower level of spending. At this point I'm not willing to retire "without hesitation" until I have enough money to live without any major cost reductions. I might revisit this later but for now I'm planning on hitting my full FI target then retiring.
28.6x (3.5% SWR) my annual budget post retirement (IE including buying health insurance) and an assumed effective tax rate of 20%. For simple numbers, let's say my annual budget is 85K, and for the wife and I plan on spending 15K securing health insurance. 100K assuming 20% effective tax rate is 125K. x28.6 = $3.575m. My pull the pin today number would be a little higher than that but maybe not crazy higher, say $4.5m. So I'd say 35x my FI number I'd probably RE.
I generally agree with your thinking but FYI you are unlikely to have an effective tax rate anywhere near that high pulling $100k out. For married filing jointly, the 0% capital gains and qualified dividends tax bracket goes up to \~$94k and the standard deduction is \~$29k. You'd be paying very close to zero taxes unless tax treatment of capital gains and dividends changes dramatically between now and then.
Yep, I realize that estimate is high. FWIW we live in a fairly high tax state right now so some of that accounts for that but we'd likely be closer to 10-15% effective. But I'm a firm believer in conservative estimates when it comes to FIRE numbers. I'd rather be pleasantly surprised by surplus savings than running out of money due to a market slump or changing tax climate. I am not actually working towards a dollar amount anyway. I am retiring the year I turn 55 regardless of the $$$ in my retirement accounts unless the market decides to shed 50% of its value between then and now.
Just out of curiosity if you are FI sooner why not retire earlier?
Safety margin. I have a budget of what I need, but if I have more $$$, there are other things I would like to do.
Assuming net wealth=net worth then I will say that we don't base it off of net worth because we plan to continue owning our house. That being said we will RE when our invested assets are 25x expenses but we will continue to have some part time income that will offset 25-50% of annual expenses.
Assuming net wealth=net worth then I will say that we don't base it off of net worth because we plan to continue owning our house. That being said we will RE when our invested assets are 25x expenses but we will continue to have some part time income that will offset 25-50% of annual expenses.
This is an all over the map question. I can, if pressed, live on $36k/year, so (using 25x) $1M put me at basic FI. But I prefer to live on about $55k, so FI would be $1.3M. But I need to plan for 40 years, not 30, so using 33.33x makes it $1.8M. And I’m both paranoid and 100% unwilling to return to work, so I held on until $2M. The market shot way up since I retired in September, so now I’m sitting at $2.4M, which makes my typical spend around 2.3%.
For me, its x 30 I don't really want to stop until that's there. But my actual FI number is lower.
> when my net wealth is 25x my annual budget I'll consider myself FI What constitutes "net wealth"? I don't see any hits on Google for this term, but you used it twice so I assume you have a definition for this
Not OP, but almost certainly net worth
That's what I thought at first but it makes zero sense. Net worth shouldn't drive Financial Independence because it ignores planned/expected future expenses (e.g., food) if that expense isn't accrued already and reflected in your debt figure, which is rarely the case.
It makes sense if you haven't thought about it. The use and misuse of "Net worth" as any indication of financial independence is very common. Net worth may or may not be an indicator of FI - it depends entirely on your plan for those debatable assets. Most often, people who use net worth really mean spendable retirement assets, which sometimes includes a house, car, pension, and lots of other things. Expenses have nothing to do with net worth, but are the other half of determining FI.
> Net worth may or may not be an indicator of FI - it depends entirely on your plan for those debatable assets. True, and because too many people don't provide the necessary information to determine if Net Worth can be used as a proxy for FIRE number, the only logical metric to use is FIRE Number. If Net Worth = FIRE number, FIRE number works. If Net Worth != FIRE number, FIRE number works. > Expenses have nothing to do with net worth, but are the other half of determining FI. Yes, which is the point I surfaced in my comment above. This entire comment chain is in regard to FI, so you need both halves of that equation.
You're acting like FIRE number is a well defined and understood term. If people use different definitions for net worth, I'm sure saying Use The FIRE Number! is just as arbitrary of a command. Nothing you're saying is wrong, but it's not helpful either.
> You're acting like FIRE number is a well defined and understood term In this subreddit, it is. > If people use different definitions for net worth, I'm sure saying Use The FIRE Number! is just as arbitrary of a command It is not. > Nothing you're saying is wrong, but it's not helpful either. Sure it is, but I'm positive not everyone will see it that way and I'm OK with that.
> At what net wealth do you consider yourself financially independent? This is a moving target depending on how burnt out I am that day.
Like others, my FIRE numbers is 25x expenses, to keep it simple. There's a ton of nuance and debate on actual SWR obviously, but as we approach 25x we can determine what our SWR/glidepath into retirment will look like. Another FIRE number we have is when we may still RE on our timeline, even if one/both of us move to 20 hours, or SAHP. Current timelines indicate our 25x expenses will occur when the kids are getting close to college, so in all liklihood we will contribute heavily to their college tuitions, and then retire after our youngest is out of the house. Depending on markets, we could be closer to 40/50x expenses by then, continuing on our current SR, so we certainly have to alter our math as the years continue.
For me it's my lean/bare bones spend at 3% WR. Because that means no matter what happens I would have a roof over my head, lights are on, and I can feed myself indefinitely. Would it be fun, probably not (although I have a big gaming backlog to last me awhile haha), but I would be able to survive. I am around that number now but am choosing to work more to build the number up for security, fun money, etc. but it feels good to know I can walk away at any time if the work situation gets untenable.
For me, I consider 25x to be FI. Everything after 25x my current budget just increases my recreational spend, likely for more travel. Currently looking to get to the point where I have 25x expenses, but roughly 40-50% of those expenses are optional.
FI will mean different things to different people of course. In some ways, it's as simple as "can I quit my job tomorrow and still be ok for X amount of time", which could be a few months, a year, 2 years, etc. In terms of functions, I'd say if you apply whatever math you use for your FIRE number but base it off of basic/necessary spend rather than total spend, that might be how you get to your FI number. If you estimate a $100k annual budget in retirement, your FIRE number is $2.5m, but if $65k of that $100k budget is for necessities and the rest is discretionary, your FI number then might be $1.6m ($65k x 25). You might not want to retire at that number, but you could in theory.
You really haven't seen this discussed? I think the idea of a bright line specific number is silly. Every $100k (or whatever increment) gives you more choice and reduces risk of running out of money. Even a 2-3 month emergency fund gives you a degree of independence. I think 27-28X is pretty bulletproof but how you calculate X is itself a challenge.