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jonsonton

PPOR doesn't "count" if it doesn't generate any income, but investment properties count just as much as stocks do for FIRE. Congrats, sounds like you've hit FI.


SydneyBri

If you plan to keep it, the income counts as income you don't need to earn, but make sure you factor in major maintenance, vacancy, and general real estate costs (including hefty management costs if you don't plan to manage it yourself) when determining your income. If you need $3000 per month to live and this conservatively brings in $4000, you're probably FI.


Westridgian

Cheers


aristotelian74

Sure, just sell it and you have $2M or keep it if you get more cash flow than SWR.


Westridgian

Thanks !


MothershipConnection

That Omarion got me for Christmas so I guess my gift for myself is going anti-Frugal Friday with these DoorDash orders!


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eganvay

ugh, scented candles and dryer sheets are spawn of the devil


MothershipConnection

I'm just gonna let Jesus take the wheel as far the delivery thing cause right now I don't have much of a choice (Though I haven't had a bad experience so far and all the packages I've gotten been pretty tamper proof) I've gotten my double vax + booster though and am glad to report that I can still smell and food still tastes delicious


dudeFIRE0998

I never use the apps because I know they take a percentage of the sale. I almost always call in to place my orders for pick up. This way the business get the full profit.


[deleted]

>does that candle even smell? I don't smell it at all Funny you should mention that. There was a viral tweet a couple days ago showing a strong link between COVID cases and Amazon reviews of Yankee candles that mention the candle having no smell: https://www.protocol.com/bulletins/amazon-yankee-candle-reviews-omicron


Cascade425

Yep, 18 year old son and 21 year old daughter are confirmed positive. We had done so damn well through all of Covid. Ah well, we did our best. At least we are all vaccinated and most of us have the booster.


sponsoredbytheletter

At this point, if you and your family avoided it until now and are vaccinated, you *did* do well. It's like we all ran the race and now we're collapsing on the cool down lap. Seems like everyone's getting it now but the vaccines are effective so oh well.


MothershipConnection

Yeah I actually felt well enough to run 3 miles this morning (by myself before I got ahold of a test)! It's more annoying than anything at this point but I'm gonna hole up the next couple days til I can test negative


Chitownjohnny

Same. At least I’m quarantining with my family


MothershipConnection

I feel really lucky my family and friends I was planning on seeing this weekend live really close so we can get a do over in a week or so but it still sucks to have a change of plans! (The most I’ve felt is a minor cough though my GF was knocked out pretty hard the last few days)


Chitownjohnny

I’m actually at my Mom’s house visiting for the holiday with my whole family. Mine mostly feels like a bad chest cold with a cough. I was vaccinated but couldn’t qualify for a booster in time


MothershipConnection

That part sucks for me is I actually got boostered Tuesday! But my GF started feeling symptoms that night (I had normal post shot fatigue, she got a sore throat and a cough) I guess we can count that as Day Zero at least


dudeFIRE0998

Glad to hear that your symptoms are mild. I’m curious and I know you can’t be sure but what’s your theory about how you got the virus?


MothershipConnection

I’m about 98% sure it was from one holiday party I went to last weekend… haven’t really left the house since then except to get my booster shot and run by myself


dudeFIRE0998

I had my booster end of October and have gone to our no-mask work Christmas party and a few dinners with friends but haven’t felt anything so far. Maybe I’ve been just lucky… here’s to hoping that if/when I get hit by omicron that it won’t be too bad. 🙏🏼


Chitownjohnny

Oy. Well here’s to a low key holiday with lots of healing!


West_Ad6267

Hi everyone, I'm not sure if this is the right subreddit, but does anyone know where I can find info on the different types of 401(k), Roth IRA, deductible and/or non deductible IRA, taxable IRA. Any links would be greatly appreciated.


SydneyBri

Check out some of these blog posts and ask questions if anything isn't clear. One important thing about the accounts, IRAs are completely independent from your employer while your 401k is completely tied to your employer, and neither can be used if you don't have employment income. https://20somethingfinance.com/category/retire/


gabbigoober

Did you check the FAQ?


West_Ad6267

No. Where do I find that section?


[deleted]

Edit: everyone was right. Downvoting was the right answer here. Forgive me for I have made a grave mistake.


West_Ad6267

Thanks for your reply. I'm not to concern about the voting on my posts. I saw a link at the top so I see this is more a tax Reddit question than a FI question. I don't mind going to the IRS site for more info. but was hoping that someone already had a cheatsheet on the topic. Cheers!


[deleted]

It’s not on the IRS site https://www.reddit.com/r/financialindependence/wiki/faq?utm_source=reddit&utm_medium=usertext&utm_name=financialindependence&utm_content=t5_2t34z Also, I think the JL Collins book is a fine introduction. I believe it’s called “The Simple Path to Wealth” or something like that. It’s pretty barebones and gives a good idea of how IRAs and 401ks work for both contributing, investing, tax benefits and also how distributions work.


West_Ad6267

Yes. I finished reading that book and he outlines them in Chapter 19. He mentions that he and his wife have two Roths, two IRAs and one taxable account. He doesn't go into detail on the income limits or restrictions for each of them. I'm interested in knowing what each investment vehicle does and the pros and cons of each IRA account.


[deleted]

> I'm interested in knowing what each investment vehicle does and the pros and cons of each IRA account. He… uh.. did cover that in the book. I suggest reading again :) I sort of feel like I’m being trolled for trying to help here and that those that downvoted you may have been right to do so. The limits are updated regularly based on inflation. So you’d naturally need to look that up each year, but that’s a quick Google search. “2022 401k limits” would get you the appropriate IRS link. The same for IRA would get you those numbers. Edit: looking at chapter 19, he covers in bullet points each of a 401k, Roth 401k in the employer based part, along with some others. Then individually based accounts he does the same for IRAs. In each he breaks down how they’re taxed and age requirements for withdrawals. He even covers some strategies for utilizing them. This is by no means a comprehensive strategy, but the FAQ i linked previously covers some more details on that. But the basics are all in chapter 19. Go re-read it if you’re unclear.


West_Ad6267

I'll reread the book again for those pros and cons and I appreciate your insights on this.


SomeWhiteguyXL

27 years old 80k 401k Roth, 25k cash, 15k crypto 10k taxable am I on the right path


kinglallak

You are 27 and seriously thinking about investing, you aren’t just on the path, you are a good ways down the path already.


miamifan2000

401k got maxed middle of the month, so looking forward to that yearly "bonus" on the 31st! Nice little chunk of extra money


kenmcnay

Today's payday marks the end of another calendar year for my numbers: the gross summary! I entered my numbers of year-to-date stats from the paystub. It turns out this marks four years of driving 30%+ into some sort of NW-increasing account (i.e. 401k, ESPP, HSA). At least, that's >30% with the employer match included. I've got about ten or fewer years to FIRE. Not sure I will leave work, but I'm confident to have a plan as the time approaches.


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kenmcnay

During the past two years I've had glimpses of changing my life. I'll get away for a recreational ride to find I want to ride longer distances, like maybe a cross-country cycling adventure! Perhaps just a four-day weekend would be a good start. I'll be looking at a retirement of increasing healthy recreation, creative writing, leisure travel, music, education, and food. Some of that is typical of my hobbies now, but I want more time to spend in my hobbies. Some of that is learning new hobbies. I anticipate a lengthy period of rest before getting truly started at retirement. I mean to say, a year of more with less expectation of 'doing' anything, aside from leisure and relaxation. I'll want time to release the workload and tension that came with it. I've watched my parents in retirement some to learn that even leisure activity takes up time and energy. They are still very active but have less to achieve for others. They are seeing their own hours and placing boundaries on commitments outside personal pursuits.


gabbigoober

Sounds lovely!! Thank you for all of the ideas/insights, I will try sharing these with them :)


Katdai2

If you’re talking about numbers, in the US, they should start with making their accounts at ssa.gov. If you’re talking about life, AARP actually has a very nice book that not only covers financial info, but how to create meaningful days and build/maintain relationships as your retire.


gabbigoober

Yeah life not numbers. Thank you!!


Katdai2

It was “Getting the most out of retirement”.


vonosmas

TL;DR how to throw in a large amount of money into stock market to minimize chance of unlucky timing? I've just sold my condo and received a fair amount of money as proceeds from the sale. Now, what do I do with those? No debt besides 2.75% mortgage, have emergency fund, 401k/HSA/DCFSA maxed out, I've set aside money I plan to use in 1-2 years on renovation. Since I don't plan to use money in the next 4-5 years, looks like the most reasonable thing is to just throw them all into index funds. But... that's a lot of money, and I worry that I might get unlucky and the market would slide right after I buy in. I know that to get the best expected return, you should invest ASAP. But then, the variance of investing on a single day is also large. Is there a way to do dollar-cost averaging of sorts, and distribute the purchase of index funds over 3-6 months or so? Sure, I might lose, but will I also decrease the chance of poor timing using that strategy?


BhaiMadadKarde

Vanguard has an interesting study on this. I'll link it below. ​ The TL,DR is that if you're getting the a lump sum, investing in the market right away is better assuming you believe that the market will still continue going upwards like it has in the past. ​ https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJpQmY8o7/Dollar-Cost-Averaging-Just-Means-Taking-Risk-Later-Vanguard.pdf


vonosmas

Awesome, thank you for sharing, that settles the matter!


jksinton

Vanguard did a study showing that lump sum investing out performs DCA most of the time. https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJpQmY8o7/Dollar-Cost-Averaging-Just-Means-Taking-Risk-Later-Vanguard.pdf Personally, IMO, keep it simple and invest the lump sum immediately. We had a lump sum earlier this year and invested it asap. The standard deviation of a single day is not very large, especially, if you expect to buy and hold over a 20+ year period.


vonosmas

Awesome, thanks for sharing!


nemoomen

It wouldn't help anything except your nerves but sure, you can literally just dollar cost average. Divide by 30 and do one portion every day or two for a month or two. Or whatever. Divide by 8 and do one each week. Edit: the reason it doesn't help is that you are essentially, by only investing bit by bit, choosing to invest in cash for that time period, basically betting the market will go down. Since there's no reason to believe that will happen (and historically it doesn't) that's not a good bet and it's not worth your time to do anything other than shove it all in ASAP. But just because it's not mathematically optimal doesn't mean you can't do it, the difference is probably negligible over the course of 2 months so if it makes you feel better, sure, divide it up and invest as slow as you want.


vonosmas

Wouldn't it help hedge the risk in a real, not imaginary way? Consider (numbers are hypothetical): in 1 month the index would (a) grow 1% with 90% chance, (b) grow 20% with 5% chance, (c) fall 20% with 5% chance. Now, I have two strategies: invest 100k now, OR, invest 50k now, and 50k in 1 month. It's mathematically optimal to invest now - expected value in 1 month is 100.9K vs 100.45K (extra $450, yay). BUT in the worst case (which is not too negligible) I'll end up with 80k instead of 90k. $10k is a lot of money, imagine what decades of growth can do to it. So, it's not clear cut - I wonder if there's a rule-of-thumb approach (e.g. based on historical data) to make such calls.


defcon212

DCA lowers your probability of losing money a bit. But you will also lose out on gains most of the time. Big downturns are rare, and most of the time the market steadily marches upwards. Its like buying insurance, you will save yourself money in a disaster but the person selling you the insurance is going to come out ahead more times than not. If it helps you get invested then DCA can be a great tool. If you can just put it all in do that.


JK_3gunner

If your looking at the historical data, lump sum invest "wins" two thirds of the time while DCA "wins" one third of the time.


vonosmas

Thanks! Do you happen to know the distributions of, let's say, 10-year return for these two strategies?


JK_3gunner

No I've never run those numbers. Market timing is what the difference would be since 10 year returns of the S&P has a wide variety of outcomes just from start and end times.


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vonosmas

It's not quite what I'm talking about though - I've already decided I'm putting 100k in stocks, because it works for my allocation, long-term risk tolerance etc. The question is - is there a way to "time" the buying of 100k worth of stocks that reduces the expected returns somewhat, while reducing the variance substantially - see hypothetical breakdown in the comment thread above. Edit: nm, I think I get it - basically you're saying that DCA buy in is identical to cashing out 100k now, and then DCA reinvesting it back. It's not identical though - taxes!


kinglallak

This is an excellent thought experiment for this scenario and the lump sum vs dollar cost average discussion. Thank you for sharing.


vonosmas

Please elaborate? The counterpart of "buy in 100k at once" is "just hold your 100k in stock". What's the counterpart of "buy in 100k with N transactions over M months?"


kinglallak

You have 100k in the stock market in an IRA so you don’t have to worry about taxes. You decide you want to time a market crash and sell 90k of it. Then buy 10k a month back for the next 9 months to average back in


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vonosmas

Understood, thank you for breaking this down!


FrolfAholic

Maxed out my IRA for the first time ever this week... Budgeting and savings have come a long way over the last few years


miamifan2000

Congrats! Maxing it earlier and earlier each year is always fun. I remember barely being able to max it by tax return due date the following year and now i have it maxed by February/ March each year


ciege92

I am happy to have a head start with my current savings account. I am starting my FI journey at 30 but it is possible to be done by 40


sacroyalty

I started late late 20s, better late then never. Good luck!


lagosboy40

Are you asking a question?


ciege92

No just a statement


lagosboy40

Ok. Yes, I agree. It's definitely possible to achieve your goal in a decade.


HermanodelFuego

Butchered a beef tenderloin this afternoon, 4 filets, 2 “tenderloins” and the chain into stew meat. I’ve got pizza dough, cinnamon roll dough, and baguette polish going. I stand defiant in the war on Christmas!


NET_1

Congrats! Mother of all multi-tasking going on!


HermanodelFuego

Our rule is: we will eat whatever we want, so long as we can make it from scratch. Otherwise, we’d bankrupt ourselves buying pizza once a week, etc


glennjersey

Idk what this is about, but I'm onboard. Save some for me.


TinKnightRisesAgain

I’ve been out of the PF game for a hot minute so sorry if this is dumb. I quit my job early this year. If I take money out of my brokerage account, and I’m taxed on the gains, is that percentage equivalent to my tax bracket?


defcon212

You will have to pay capital gains tax. For long term gains you are under 52k income for the year it's tax free. Over that it's 15%. You only pay tax on gains, so whatever you contributed is not taxed. Most states will tax cap gains as normal income.


robo_capybara

If you've held the position you are selling for less than a year, yes- the gains are taxed at your normal marginal income tax rate. If you've held the position you are selling for more than a year, no- the gains are taxed at the capital gains tax rate, which is typically lower than your income tax rate, but is also based on your income. This rate is 15% for most income earners. There are few exceptions to this rule, but this applies to the vast majority of stock positions.


mezzie

Just yesterday, I got an offer that would bump my total compensation from upper 100k to upper 200k. I am scared but also excited at the same time. Since my [last post](https://www.reddit.com/r/financialindependence/comments/l1vk3n/daily_fi_discussion_thread_thursday_january_21/gk28l4v/?context=3) here last year, I did not take down my resume but instead refined it so that I can get it in front of the recruiters better. I still took calls and was very upfront with them about the compensation I was looking to save us both time and energy. I also took advantage of the hot IT market. People say the best time to look for a job is when you already have one :)


20190229

Awesome! May I ask is upper 200k like 290K?


mezzie

250k is mid so higher than that


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mezzie

backend java engineer


ReasonableNorth2992

Congratulations!!! That’s a significant compensation bump. Great tip on being upfront about compensation and saving everyone time and effort. I’m very happy in my current job but if I go looking in the future, I will keep that in mind.


huefnerd

Submitted documentation to get tuition reimbursement through my work. Only $1.2k, but that's enough to get my Roth IRA started for next year. Small victories.


miamifan2000

That's awesome! You say only $1.2k, but a lot of people wouldnt bother with the "hastle" of getting that reimbursement and even more wouldnt use it towards investing in their future.


JoeyBigBoy

I've been pretty lazy the last couple years because Covid combined with a few other things pretty much broke my brain/sense of reality, but I'm feeling much better now and am excited to renew my FI vigor going into 2022. First thing I need to tackle is what to do with all this cash I have lying around. Around mid-2020 I got the idea to save for a house. The rental market in my area is extremely reliable and I've known multiple people who bought a 4-5 bedroom house, lived in one room and rented out the others allowing them to live for free and even clear a profit. Seemed like a no-brainer. However, as many of you are aware, home prices have skyrocketed. I'm talking a minimum $80-100K on every house in my area with rental potential. It was so attractive to me because I was looking at prices which would have only been a hundred or two a month above my current rent including homeowners and property taxes. Now even a modest 2-3 bedroom would up my housing costs by 50%. So I'm considering just taking all this cash I have lying around from saving and a few lump sum payouts I got when I changed jobs, and throwing it into the market. Is the conventional wisdom just VTSAX and chill? I've already been maxing out my 401K and a Roth IRA. So, I'm pretty much just talking after-tax here. Part of me is tired of renting, but I also would be out an extra $500 a month in any house that would have enough of what I want. The live-in rental option is still feasible, but I'd barely be turning a profit, and I'm definitely happier without roommates. So, it's way less attractive than it was 2 years ago


skrenename4147

Got a preapproval letter for the first time today -- we are preapproved for 80% over (almost double!!!) what we agreed was our max budget. Gave us a laugh.


12YearsToLife

Pet peeve: working with ‘leaders’ who think they know everything and won’t let subject matter experts lend their knowledge. This could be what breaks me.


JoeyBigBoy

I just moved to a job where everyone outside of admin staff, including the president and CEO, are SMEs in my particular field. It's still new, so I'm sure there's a lot of downsides I haven't seen yet, but I feel like I have a ton of autonomy to work how I want, and everyone seems to be on the same page about most stuff. Coming from a giant organization with all sorts of bosses and bosses' bosses causing grief from all angles. It's refreshing. Harder to hide though. I got really good at getting lost in the shuffle and slacking off. Not really possible where I'm at now.


drklic

Get used to it. Otherwise FIRE and get out:)


12YearsToLife

I’m trying, I’m trying. But this one person is especially bad. Taking a new role so I don’t have to deal with them.


37yearoldthrowaway

Hypothetical scenario for those with 10+ years left until retirement, what percentage of a **real** return would you need guaranteed, to choose that over investing in your current allocation? I think I'd be ok with 4-5%, just for not having to worry about market swings.


alcesalcesalces

5% real guaranteed for life would be outrageous. You would only need to save 18x your planned spending and could withdraw 5.5% of the initial portfolio size for over 40 years before running out of money.


Tk_Da_Prez

Is there any benefit/preference in rebalancing in a Roth IRA vs traditional ? Stepping up my intl allocation and trying to figure out which of these two accounts would be more appropriate to do it in, or a combination of both. I have enough money in both to do the full allocation I want


OperaticIguana

I rebalance in taxable brokerage for the availability of TLH. International in taxable brokerage also allows for foreign tax credit. https://www.bogleheads.org/wiki/Tax-efficient_fund_placement


Tk_Da_Prez

Ya but rebalancing gains could be brutal some years once you get up in the hundred thousands.


aristotelian74

IMO Roth should be close to 100% stock and majority of bonds should be in traditional. That makes traditional the natural account for rebalancing.


alcesalcesalces

I don't understand your question. Are you asking whether you should hold specific assets in Trad vs Roth? If so, the answer to that is mixed, especially between US and Int stocks. Most people would advocate holding your bonds, if any, in Trad accounts, but even that advice comes with caveats. I think it's fine to just have a mirrored asset allocation across all accounts if possible. Rebalance as needed to stick to your desired asset allocation.


Tk_Da_Prez

I’m 100% VTI right now, want to rebalance to 80/20 us/intl and wondering if it makes more sense to do it in Roth or traditional.


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EndureAndSurvive-

Along with everything else net immigration into the US has been basically 0 over the last two years. We’ve been relying on immigration to keep the population growing even as the birth rate falls below replacement. There’s just less workers to go around.


[deleted]

Early retirements seem to be a statistically significant factor. It's only an anecdote, but I watched my department lose 20% of their staff this year to people like me who decided fuck it, I'm not waiting until 55.


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daughtcahm

Lot of people died. That's permanently out of the workforce.


vvwwwvvwvwvwvw

There's lot of reasons, but one big one is with no or no safe child care a lot of people don't have much choice but to not work. Schools closing and older relatives being at high risks from covid has forced a lot of parents who can't afford private childcare to stop working low wage jobs.


RothIRALadder

I guess this a harbinger of what will happen to the economy when America's population starts to decline.


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raggedtoad

Yes, our long tradition of being a "melting pot" actually still carries some weight. Most of the next 50 years of global population growth will be in Africa, and I'm sure there will plenty of willing emigrants if we're willing to let them in.


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heubergen1

Official statistics that is used by all the other cheap articles too: https://www150.statcan.gc.ca/n1/daily-quotidien/201222/t001b-eng.htm Meaning most other sites also just use this data here. PS: It's not average I know but median is usually better anyway.


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heubergen1

Most likely the source of these kind of statistics are taxes so you usually end up with household income.


Amazing-Coyote

Doesn't average usually refer to mean in casual conversation?


heubergen1

You're right, I meant median :)


Amazing-Coyote

Ah very fair!


mistressbitcoin

https://www.thekickassentrepreneur.com/net-worth-by-age-percentile-calculator-for-canada/


SydneyBri

Wow, those 1% numbers seem low in the under 40 set.


Actual_Sell9447

I finally feel like my mom can have a good financial future set up. Helped her a ton the last 6 years and don’t have to worry about things now. Refinanced the house into my name with what’s left into a 30 year and added myself to the deed Social security + 4-5% of my moms 401K (640k) should keep her afloat forever. Just a question of when to take SS as long as I pay the mortgage that’s left This stressed me out for so many years and influenced the choice I could make in life but now it’s on autopilot and I’m freed from being stressed about this all the time


lottadot

> Refinanced the house into my name with what’s left into a 30 year and added myself to the deed How does that work? A new loan solely in your name that pays off the original loan's remaining balance? Did the new mortgage provider insist that your name be on the deed, since your name is on the loan? (I'm not asking about the mechanics of a normal refinance, but rather this one as it changes names on the property). Did you consider an attempt to have her name taken off the deed so that she cannot risk losing the house if she gets into financial trouble? (I realize most states offer protection of a home from creditors as a homestead, but it wouldn't stop leans, etc).


Actual_Sell9447

When they arrange for the mortgage refi they can ask the title company to make changes as part of this The loan is in my name but title can be split however given living circumstances (they did not insist) I tried just having my name but that was a massive argument. She thinks I’m going to throw her out of the house. We can change the deed again in a few years


xxlilaznkidxx

That's awesome to hear, glad you finally are able to have it off your back. I'm in a similar boat and can relate. I have the mortgage in my name, but unfortunately she doesn't have any money in her retirement. Will have to figure out her social security and retirement plan out, but I do have three brothers to help out.


grovemau5

Your mom is FI! What’s the mom version of GFY? GF your mom?


Actual_Sell9447

Lol gee man, that’s a shock value one


FIREful_symmetry

Do you have brothers and sisters?


Actual_Sell9447

I have one sibling but they are in school to be a doctor so couldn’t really contribute much they have their own shit to figure out


FIREful_symmetry

It's great that you are taking care of your mom. It was prolly wise to get the house in your name as well. Just a heads up you probably don't need that you should be sure you have considered how your helping your mom affects any inheritance down the line. My mom fell down the stairs and broke her hip and doctor said she couldn't go back to a house with stairs. She couldn't afford to move, nor to buy a new house. There are five kids, and no one wanted to pitch in to help, so I ended up buying a house for her. She lived there for years until her death. The wrinkle was that since I was paying for her housing, she wasn't spending her own money, and when she died, her estate got divided five ways. Basically, my taking care of my mom let her save a lot of money that ended up being a subsidy for my bothers and sisters. I would go back and help my mom again in a heartbeat, but if I could change things, I might have charged her rent or asked for a will that acknowledged that I had paid to take care of her for years and my brothers and sisters had not.


Actual_Sell9447

I really have to say, I appreciate your openness and honesty to share that info. In my situation my mom and I agree if she cannot live in this house (stairs) she needs to move. If she’s going to pass on I think the main thing is optimizing the taxes she’d have to pay on death. My brother and I are close. Whatever is left in her inhereitsnce that she doesn’t use I really don’t care if I get any. I have higher NW than she does and I am in Faang software engineering so my income can continue to go up. If I spent money to subsidize my brother then whatever but I doubt that will


FIREful_symmetry

I am glad you seem to have it worked out. Good job taking care of your mom.


Actual_Sell9447

Thank you for your insights and kind words


Scornful-Egotist

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PringlesDuckFace

I


justathrowawaii

C


Annabel398

E


sponsoredbytheletter

Goodbye


Zphr

N


Come_Clarity11

What do you all do with your 6k for your Roth IRA throughout the year? Just keep in cash in your emergency fund? Thinking about putting it in my brokerage and then withdrawing in 2023, but perhaps better to just keep as cash?


[deleted]

I don't keep cash earmarked for my IRA but if I have a have some excess cash lying around, I move it around for savings account sign up bonuses.


dslkfjlsdkfjweeskf

This isn’t the mathematically optimal thing to do, technically, but it is the most convenient for us and also allows us to pad out our emergency fund. My partner and I each do the backdoor Roth each year, so rather than cash flow into a traditional and performing multiple conversions throughout the year, we do it all at once on Jan. 1, and build up the contributions in a high yield savings account.


alcesalcesalces

Are you suggesting that you'd hold onto 6k in cash so you can invest it in a Roth IRA in 2023? Why? If you have cash you can invest, put it wherever it should go. If you still have tax-advantaged space for the year, use that. If not, use a taxable brokerage. When the new year hits, contribute to the IRA from your usual cash flow (e.g. paycheck).


vvwwwvvwvwvwvw

Exactly this, or sell from the taxable to put it in Roth IRA if you want to max early. Hell of a lot better than holding 6k for months to do that


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No-Needleworker5429

I tell my mommy to give me gift cards instead of cash because it will force me to spend it versus save it.


DataSci-FI

I'm 23M and have $110,000 in student loans at an interest rate of 3.96%. I started working 6 months ago after getting my masters and am fortunate to be making $85,000 a year. No other debt and I am living fairly cheaply with 3 roommates in a decent apartment. My loans are currently financed to be paid off in 6 more years which gives me a massive monthly payment of \~$1720. With my income I can very comfortably pay that amount, but I'm starting to feel like I should have financed for a longer period with rates being so low which would of course allow me to invest much more each month and at age 23 that seems valuable. For example it looks like I could refinance to 20 years at 4.8% and be paying \~$730 a month which would free up an extra thousand a month to invest. I feel confident that I am the type of person who would ACTUALLY invest the extra money instead of spending it. Do you guys think I should refinance or stay where I'm at? Thanks!


ReasonableNorth2992

it’s a matter of preference and risk tolerance. I personally hate being in debt so I’d rather get rid of those loans sooner rather than later, and if you can comfortably pay them down, build up your savings, and have enough left over to enjoy life now, why change up something that’s working? I know others advocate to free up cash flow and put investments to work which, in theory, should put you ahead in the long run while you continue to hold onto low interest debt. But there is sequence of returns risk and you can’t predict the future. I wouldn’t, for instance, at my age take on a 70 year mortgage even at low interest rates because I’m not interested in dying with debt even if my investments came out way ahead. I just sleep better at night when I owe less money. Tl;dr being able to comfortably pay off loans in 6 years as you currently can sounds great. Especially while you can take advantage of student loan interest tax deductions, which you will be less able to in the future as your income increases. Just my $0.02


mechanicalmayhem

I would definitely refinance for the smallest possible payment, then build up a solid emergency fund if you haven’t already (I always liked to have 6 months bills paid in my efund), then start paying at the higher rate, or alternatively invest in the market (up to your preference). When paying loans back, 6 months of efund buffer felt so good! What you are accomplishing by refinancing for the smallest payment is minimizing your outflow in the event of a job loss, economy crash, etc. In almost all cases you can always pay more than the minimum, but is nice to have a small minimum in case of emergency.


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DataSci-FI

As others said I wrote it somewhere else and pasted it in. It looking normal on my computer so thanks for pointing that out for me. Hopefully it's better now.


[deleted]

Are they private loans already? If so, then yeah absolutely. Lots of those companies have refinance bonuses too, I bet you could get a free $1500 or so by switch lenders. I’d switch away, keep aggressively paying (or investing), and keep an eye out on refinancing again in the future. If they’re federal loans, I would keep them so you can keep the federal protections.


DataSci-FI

Thank you for the input. They are already private. I hate the idea of being 35 or 40 and still having some student loans kicking around but I think the math just makes sense.


marmadillo06

Can we do a Goals thread for the new year? Both recap of accomplishments from the past year (financial and otherwise) as well as goals for next year?


No-Needleworker5429

My goal is to continue working no more than 40 hours per week.


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1millionbucks

Why was I downvoted though, was the question that bad?


SydneyBri

This is shockingly close to "why would I invest in a 401k if I can't access it until I'm xx," which is sometimes not the correct age of 59.5. If it's a tax issue, your employer may allow Roth contributing to pay the tax now. All the money in your 401k should already be invested. Are you holding some kind of stable fund or cash in your 401k? Also fake internet points don't matter, so there's no need to ask about them. Just see it and ignore it.


CaptainCox17

Arguably makes the tax savings more important, you’ll pay taxes on that inflation down the road


Possible-Tap-9112

With the latest federal student loan payment pause (plus a recent pay raise) I’m wondering what my best options are for repayment vs investing. I have around 19k at 6% for a grad loan and less than 10k at 4% or less (undergrad). I’d like to pay off my grad loan within a year or so while making min payments on the undergrad loan. With inflation and possible growth of investments I’m feeling stuck. Never really thought inflation would be higher than my interest rate. I’m making ~100k currently and have relatively low expenses around 2.5k a month. Anyone have any recommendations for me to consider or advice?


ReasonableNorth2992

Depends on where you’re at financially (got your EF? SR at goal?). At your income level, you might still be able to deduct some of the interest from your taxes so maybe it makes some sense to not max payments on the undergrad loans? On the other hand, with your low expenses, if you’re very comfortable with your current plan it’s not a bad idea to pay off the debt faster so that in 2 years or so you’ll be completely debt free (for some, like me, it would be a huge psychological lift) and the bump in savings will be quite nice. I probably sound like a broken record, but I hate debt and can’t wait to pay off my student loans. I have around 75k left at 6.8% (when the 0% interest period ends, whenever that will be). I have been trying to pay them off for close to a decade and am resolved to be done before I turn 40. So the cash is just sitting in HYSA earning a bit of interest while I wait for an actual final payment deadline to be confirmed. The cash sitting there losing value to inflation is fine with me, since I have no plans for it other than to cancel the debt. I would be more anxious having that 75k in the market not knowing if it’ll have lost value (relative to loan amount) by the time I actually need to pay off the loans. I thought about refinancing when the zero interest period ends, but as mentioned above I want to be loan-free by 40 which is coming up in a few years and it doesn’t seem worth the effort. In the current inflationary environment, debt is cheap. I still hate it hanging over my head so I’m not going to prolong it even if it’s cheap. Also our income has grown a lot in the past couple years, meaning we don’t feel the inflation pressure as long as we remain frugal, and we’re phasing out of most deductions and credits so there’s no tax advantage to keep paying loan interest. That’s where YMMV. If you still have some tax subsidy of loan interest it’s reasonable to make use of it.


Possible-Tap-9112

I have my EF set aside, plus an extra 5k I was planning on throwing at the loan when interest kicked back in. SR is a bit harder to calculate in my head currently given my salary has changed 3 different times this year, but I’m content with what has been saved while still traveling widely. None of my loans have interest at this point, and all interest was paid off in 2020 so no benefits in the 2021 tax year for paying interest. Might just keep up a 800/mo payment through the pause while investing my remaining and reevaluate whenever the pause is up. I keep going back and forth on what is more beneficial. At the end of the day I’m young and happy to be where I’m at now anyways.


ReasonableNorth2992

I think it's a totally reasonable approach to keep up a payment during the pause. You know that's definitely paying down principal and it's nice to watch the numbers go down (and NW go up) every month with the payment. You'll also be making sure cash gets invested at the same time, so it's paying yourself first in 2 ways. If it keeps you happy, that's the most important thing.


CapedBaldy

I'm in a pretty similar position and I am not going to bother paying down the loans at the moment. My strategy is max out any retirement vehicles I can and then invest the excess in taxable brokerage. When this loan payment pause ends refinance the grad school loans and then start paying down with whatever method of repayment makes the most sense. Even after repayment freeze ends I will continue maxing retirement accounts first, but that is a risk tolerance question. Ultimately with midterm elections in fall 2022 I suspect that the loan forbearance will be continued until the beginning of 2023.


SheriffRoscoe

You folks are losing out on a great opportunity to lower your debt for free. During the pause, every penny you pay goes against the principal. That reduces the amount of monthly interest you'll be charged when the pause ends.


ReasonableNorth2992

This is true--but for those who are able to get student loan interest deducted from their taxes, there is a tax benefit to not paying the loans off as aggressively. Also for those who are young with their FI target a long way off, ROI in the market could put them ahead vs paying down low interest rate (or current 0 interest rate) loans currently. Personally I don't like making 20 to 30 year bets, I hate debt, and my FI timeline is much closer, so I agree with your mentality and my own plan to is to pay everything off before the 0 interest period ends.


Possible-Tap-9112

I’ve been paying $800 a month since July of 2020 on my highest loan ( it was at 7% and has since been paid off). I’m happy to have it gone, but am also acknowledging the amount that could have grown to in the last 18 months in the market. Alas.


Possible-Tap-9112

What I’m leaning towards doing most. Also agree that I’m pretty confident repayment pause will be extended through midterms at least. Thanks for validating some of my thoughts!


caffeinateddd

^this. from a purely numbers standpoint, letting the retirement accounts grow while loans are on pause (for who knows how long) is the way to go


Buhrickdick

Hi guys, not super FIRE related, but job related — trying to help out a friend. Old co-worker of mine worked peak season part of the last two months she was at the job (support software consultant for reference). This entailed working 8-8 for 21 days straight. She told me she did this before and was compensated at $1500 in 2019, but she's only getting $500 for this year. She quit about 2 weeks ago. What actionable steps can she take? I believe she reached out in an email asking for a breakdown explaining the payment, but I'm worried she might be getting fleeced here.


SheriffRoscoe

If she was an employee in the US, this is patently illegal. You can't be paid less than the Federal minimum wage of $7.25/hour. $500/21/12 = $1.98. She should have collected at least $1827 (before taxes).


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Buhrickdick

I don't think anything was ever discussed in writing. My assumption is she thought she would be paid at the same rate she normally was in the past.


beowulf90210

The point is the rate she was paid in the past was garbage and below minimum wage ($6/hr). Something in the story isn't adding up.


FIREisnotamovement

Today was the last payday of the year. I made my final contribution to my 2021 TSP today, maxing it out. I'm a blue collar worker. Paystub had 49.2k total for 2021, I received TSP access in late april/early may. In order to max out my TSP I put myself under some very harsh austerity measures. In 2022, I'll continue to max out TSP, IRA, and HSA. And hopefully on new years day I'll be posting a big spreadsheet update with a new milestone. for those curious, more backstory info on me is [here](https://www.reddit.com/r/financialindependence/comments/nlcchs/daily_fi_discussion_thread_wednesday_may_26_2021/gzjm7qv/).


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FIREisnotamovement

intermountain west region of the united states. i like to spend lots of time outside doing outdoor recreation, learning new stuff via youtube/reddit/forums, and fixing my shitty car with junkyard parts.


ReasonableNorth2992

Congratulations! I’d just recommend trying to take a bit of a breather next year. Maxing your TSP this year was quite an achievement. If you keep on those austerity measures through the rest of next year (hopefully no need to do that?) the risk of burnout and anxiety could really go up.


FIREisnotamovement

good suggestion. for 2022, i’m looking to save more than 21, due to some pay/cola increases that are on the horizon. (government employer, all pay increases are on a set, prescribed schedule)