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re: Looking for advice for my finances
Posted on 8/28/24 at 9:09 pm to Double Oh
Posted on 8/28/24 at 9:09 pm to Double Oh
I agree with Double O. Pay down house. There is no tax deduction for the interest you are paying. Once paid off you will feel even more liberated to build up additional investments. At some point you may enjoy an opportunity to retire early and the taxable account will be your source of funds until you draw from 401K.
2
Posted on 8/28/24 at 9:36 pm to CEB
My first house had a 5.5% mortgage that we paid off early. I missed out on years of stock market returns and will always regret it. I was debt averse and not thinking long term. Fortunately, it waant at the expense of maxing Roth IRAs and 401k that would have been a much worse mistake.
Posted on 8/28/24 at 9:42 pm to TorchtheFlyingTiger
I can take it or leave it with a 5.5% mortgage and today’s stock valuations, but I wouldn’t add a penny extra to the house until the Roth is maxed out. Just so dumb to skimp there in the long run.
Posted on 8/28/24 at 10:22 pm to Redstickbaw
quote:
we are maxing out 401k, putting money in 529s, and HSA. We have roughly 3-4k extra each month
How much do you make and how old are your kids?? Good grief.
Posted on 8/28/24 at 11:21 pm to Redstickbaw
quote:
For those who are maxing tax advantage accounts, what do you do after that with your extra cash flow?
I’m in the same boat where I’ve maxed my tax deferrable options. All of my cash is going into a Fidelity MM with a 70/30 split between the MM and a growth and value ETF. If the SHTF that’s going into RE.
Posted on 8/29/24 at 8:48 am to FMtTXtiger
quote:
HSA? max out that if you have an account 3% interest with no tax is a pretty good return.
No reason to have the HSA in cash. Many people don't realize, but you have no requirement to keep HSA funds in the employer plan. Transfer it to Fidelity or whichever brokerage you use and invest away.
Posted on 8/29/24 at 8:54 am to CEB
quote:
I agree with Double O. Pay down house. There is no tax deduction for the interest you are paying. Once paid off you will feel even more liberated to build up additional investments. At some point you may enjoy an opportunity to retire early and the taxable account will be your source of funds until you draw from 401K.
Amazing that me and you got downvoted by saying pay off the house..
I guess some people like being in debt there whole life
Posted on 8/29/24 at 8:58 am to HarveyBanger
quote:
This is where you are wrong. Many people including myself don’t want to tie up all of their wealth until they are 59.5. And yes I am fully aware the Roth contributions can be accessed any time tax free.
So you are imagining a problem that doesn't exist and solve this imaginary problem with a brokerage?
Posted on 8/29/24 at 10:55 am to kung fu kenny
(no message)
This post was edited on 2/27/25 at 9:26 am
Posted on 8/29/24 at 12:18 pm to Redstickbaw
So, you are under limit for Roth IRA no need to even do backdoor and fool w prorata.
Why in the hell wouldnt you want to max Roth IRAs and get $14k working for you w tax free growth?
Gains in taxable brokerage face 15-20% tax rate (unless you drop into lowest brackets) plus potential 3.8% NIIT and state taxes. If worried about future tax rates, it could go higher.
Unless you expect to need the gains before retiring which you havent indicated, there's no advantage to taxable over Roth IRA. Plus, IRA may afford you some asset protection against lawsuits etc depending on state.
Why in the hell wouldnt you want to max Roth IRAs and get $14k working for you w tax free growth?
Gains in taxable brokerage face 15-20% tax rate (unless you drop into lowest brackets) plus potential 3.8% NIIT and state taxes. If worried about future tax rates, it could go higher.
Unless you expect to need the gains before retiring which you havent indicated, there's no advantage to taxable over Roth IRA. Plus, IRA may afford you some asset protection against lawsuits etc depending on state.
This post was edited on 8/29/24 at 12:22 pm
Posted on 8/29/24 at 12:32 pm to Double Oh
quote:
Amazing that me and you got downvoted by saying pay off the house..
Because it's not a savy financial move. You'd lock up the capital flr potentially decades (until house is sold) doing nothing but saving the equivalent of recent HYSA interest. Until hojse is fully paid off extra payments dont even reduce risk significantly because in a layoff or other personal financial crisis the funds arent accessible and OP still has to make regular payments. If invested that capital could be used to cover mortgage or other expenses. Meanwhile, he is passing up tax free growth in Roth IRA or full accessibility in taxable. Not to mention missing out on potentially decades of investment gains. I'm very confident I can exceed 5.5% over long term.
Only way throwing at mortgage makes sense is later once enough is accumulated to pay it off in full. Thats still mostly a peace of mind play but at least reduces risk in event of job loss etc by removing mortgage payment.
Posted on 8/29/24 at 1:59 pm to TorchtheFlyingTiger
(no message)
This post was edited on 2/27/25 at 9:26 am
Posted on 8/29/24 at 4:16 pm to Redstickbaw
quote:
What I usually do at the end of the year is I’ll roll my after tax 401k contributions into my Roth IRA as a in service distribution
This thread has actually convinced me to start maximizing my rollover to Roth
I wasn’t maximizing it before because I was thinking along the same lines as you are.
Posted on 8/29/24 at 9:04 pm to Redstickbaw
quote:
So say this year I’ll end up maxing the 23k but then I’ll also probably put a few thousand in after tax in my 401k. What I usually do at the end of the year is I’ll roll my after tax 401k contributions into my Roth IRA as a in service distribution
If you convert from your 401K, even after tax contributions, to a Roth IRA, there are a couple of five year rules that apply and complicate things. One of them is that conversions have to be in the Roth for five years before you can get them. So if you are trying to reduce the restrictions on accessing your money you are working backwards, because if you had done regular contributions to your Roth you could get the contributions at any time.
However, all that being said, it sounds like you are going to do well whatever you decide.
Posted on 8/30/24 at 1:48 am to Redstickbaw
I just keep it simple. I max my 401k and max my Roth IRA at the beginning of the calendar year if possible. Any extra goes to either paying off debt or if no debt, a taxable brokerage account.
Posted on 8/30/24 at 6:46 am to Redstickbaw
quote:
We are projecting around 4.5 mil in retirement which is a 180k withdraw rate based on 4%. I honestly don’t need anywhere near that kind of income in retirement as we live a very simple life so I’m not worried about adding even more to those accounts.
It is objectively better to save in the Roth over the brokerage, a brokerage account you brought up yourself. You sound willing to save the money but not willing to save it in the way that saves the most taxes.
It’s odd.
Posted on 8/30/24 at 7:00 am to Redstickbaw
quote:If you figure out something objectively better to do with money than put it in a Roth IRA, please let me know because I’ll be right behind you.
I stopped adding directly to both our Roth IRAs because I was thinking maybe there was something different to do with our extra money right now
Posted on 8/30/24 at 7:22 pm to Redstickbaw
I max out the 401k between my contributions and my employer’s, we’ll hit the $76,500 max. I also contribute post tax to the 401k and the post tax contributions I do a jumbo Roth rollover at the end of the year. We also max out Roth IRAs and the HSA.
Posted on 9/4/24 at 9:12 am to Redstickbaw
5.5% is a decent rate, but might be high enough to thrown an extra $500/month principal at it, given the other details you shared. That is real cost savings.
You could consider real estate investing as a good diversification. This could be rentals, new construction, land purchases ( if in a growth area), or commercial (a commercial realtor could teach you about investing in leases)
You could consider real estate investing as a good diversification. This could be rentals, new construction, land purchases ( if in a growth area), or commercial (a commercial realtor could teach you about investing in leases)
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