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What to do with extra monthly cash flow in my scenario?
Posted on 1/15/15 at 3:15 pm
Posted on 1/15/15 at 3:15 pm
Here is what I had been doing last year? I am 37 and the wife is 35 and we have 2 young ones. Only debt is a house (15 year mortgage with 12.5 years left if I make the minimum payment).
*Already started a 429b for each kid.
*Contribute $458.33 for myself and $458.33 for my wife into a Roth IRA monthly so that we both max out our contributions at $5,500 per year.
*Wife contributes 8% of her gross to fund her pension with the state.
*Was contributing 16.3% of my salary to my 401k through work in order to achieve the $18,000 maximum yearly contribution. I just received notification that my company has classified me as a highly comepnsated employee and thus, I am only able to put a max of 7% of my salary into the 40lk. My work matches the first 4% of my salary.
If I contribute the 7%, I will have an extra $600 after tax dollars per month to do something with. If I reduce by contribution to just 4% in order get the max company match, I would have about $800 or so after tax dollars to do something with.
Thoughts on what to do with the extra cash from an investment perspective?
*Already started a 429b for each kid.
*Contribute $458.33 for myself and $458.33 for my wife into a Roth IRA monthly so that we both max out our contributions at $5,500 per year.
*Wife contributes 8% of her gross to fund her pension with the state.
*Was contributing 16.3% of my salary to my 401k through work in order to achieve the $18,000 maximum yearly contribution. I just received notification that my company has classified me as a highly comepnsated employee and thus, I am only able to put a max of 7% of my salary into the 40lk. My work matches the first 4% of my salary.
If I contribute the 7%, I will have an extra $600 after tax dollars per month to do something with. If I reduce by contribution to just 4% in order get the max company match, I would have about $800 or so after tax dollars to do something with.
Thoughts on what to do with the extra cash from an investment perspective?
6
Posted on 1/15/15 at 3:18 pm to Springlake Tiger
quote:
Thoughts on what to do with the extra cash
Use it to do something fun! Sounds like you are doing great!
quote:
from an investment perspective?
Open a brokerage account and trade/invest on your own.
Posted on 1/15/15 at 3:20 pm to Springlake Tiger
Some ideas -
1) Emergency Fund
2) Extra principal towards house
3) A tax-managed mutual fund (so you don't have a lot of annual taxation - i.e. mimic the tax deferred growth of the retirement plans)
4) Do you have enough term life insurance and disability insurance?
5) Do you have an HSA you can put it in?
1) Emergency Fund
2) Extra principal towards house
3) A tax-managed mutual fund (so you don't have a lot of annual taxation - i.e. mimic the tax deferred growth of the retirement plans)
4) Do you have enough term life insurance and disability insurance?
5) Do you have an HSA you can put it in?
Posted on 1/15/15 at 3:22 pm to Springlake Tiger
Save it for vacations?
Sounds like you are doing good saving.
Doesn't sound like you can do any other tax sheltered accounts like a traditional IRA
Sounds like you are doing good saving.
Doesn't sound like you can do any other tax sheltered accounts like a traditional IRA
Posted on 1/15/15 at 3:25 pm to LSUFanHouston
quote:
1) Emergency Fund 2) Extra principal towards house 3) A tax-managed mutual fund (so you don't have a lot of annual taxation - i.e. mimic the tax deferred growth of the retirement plans) 4) Do you have enough term life insurance and disability insurance? 5) Do you have an HSA you can put it in?
1) Have about $25k cash, could probably use a little more.
2) Thought about that, but my interest rate is only about 3%
3) Sounds interesting
4) I have too much
5) I don't and don't really understand how those work. Both my wife and I have traditional healthcare plans through work with little to no deductibles.
Posted on 1/15/15 at 3:26 pm to Springlake Tiger
(no message)
Posted on 1/15/15 at 3:26 pm to aaronb023
quote:
Doesn't sound like you can do any other tax sheltered accounts like a traditional IRA
I think you are limited to a $5,500 contribution to any IRA, so since I max out my contribution to the Roth, I can't contribute to a traditional.
Posted on 1/15/15 at 4:53 pm to Springlake Tiger
How are you eligible for a Roth and yet classified as a highly compensated employee? Are there different thresholds for "highly compensated" depending on the employer? Not knocking you... I know nothing on the subject.
Posted on 1/15/15 at 5:09 pm to Springlake Tiger
How can your company limit what you put in a 401k?
Posted on 1/15/15 at 5:27 pm to jimbeam
quote:
How can your company limit what you put in a 401k?
Welcome to the world of 401K testing... as a group, highly compensated employees can't contribute a higher percentage of pay than non-highly compensated employees (there is a little wiggle room).
You can get out of this testing by having a safe harbor plan.
Posted on 1/15/15 at 5:28 pm to LSUFanHouston
Wow I had no idea
Posted on 1/15/15 at 5:30 pm to Big Saint
quote:
Are there different thresholds for "highly compensated" depending on the employer? Not knocking you... I know nothing on the subject.
Yes, A HCE is anyone that owns more than 5 percent of the company OR has family that does, OR makes more than I believe 120K a year (the amount adjusts for inflation).
Posted on 1/15/15 at 5:32 pm to jimbeam
quote:
Wow I had no idea
So if the plan fails, then the HCEs are refunded their money enough to get the percentages to the passing level. Of course, that's income to the HCE.
The whole idea is to ensure that the lower employees take advantage of the plan as well. So in typical government parlance, we punish the successful if the lower employees don't participate at roughly the same percentage levels.
Posted on 1/15/15 at 7:42 pm to LSUFanHouston
quote:
OR makes more than I believe 120K a year (the amount adjusts for inflation).
This part can't be true unless that number is significantly higher due to inflation nowadays. I have read that you can't make contributions at $250k or so but if you contribute the max before you hot that I believe you're fine. I may be wrong on that.
Posted on 1/15/15 at 7:49 pm to Big Saint
If a plan is subject to discrimination testing, those rules supersede the general contribution limits.
Posted on 1/15/15 at 7:51 pm to LSUFanHouston
Are these type plans more typical for smaller businesses vs large corporations?
Posted on 1/16/15 at 8:44 am to Big Saint
quote:
Are these type plans more typical for smaller businesses vs large corporations?
I don't know if one group is more likely to have them than the other. I've seen companies of all sizes have safe harbor plans.
To be a safe harbor plan, you either have to give all eligible participants a flat 3 percent (regardless of their contribution level) or you have to do a match plan of dollar for dollar for first 3 percent and 50 cents on the dollar for the next 2 percent.
Posted on 1/16/15 at 9:31 am to Springlake Tiger
I would beef up my emergency fund and pay the house off. And if after that, you are enjoying your money and still have some left over....GIVE IT AWAY GIVE IT AWAY GIVE IT AWAY NOW! You probably already give, but give some more. Enjoy your situation, not many people go through it.
Posted on 1/16/15 at 10:11 am to Springlake Tiger
I'd try and pay the house off and from there, start buying other pieces of property as investments.
Posted on 1/16/15 at 4:11 pm to hiltacular
I would say pay extra on your house note but 3% is so so low. Judging by how well you are doing saving other wise I would add to your cash.
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