Some more details on funding Roth IRAs with leftover 529 College savings
wsj.com said:
Personal Finance: Financial Planning & Investing
- Thread starter BamaNation
- Start date
-
HELLO AGAIN, Guest! We are back, live! We're still doing some troubleshooting and maintenance to fix a few remaining issues but everything looks stable now (except front page which we're working on over next day or two) Thanks for your patience and support! MUCH appreciated! --Brett (BamaNation) if you see any problems - please post them in the Troubleshooting board!
Some interesting points from a Quarterly Investment Review this morning.
Apparently Goldman Sachs is projecting a 3% return on the Stock Market. Comment was that for next 20 years market return will be approximate the total S&P 500 Dividend.
Warren Buffett is setting on cash of $260 Billion.
We are now seeing a correction in Muni and Corporate Bonds as Long Term Treasuries climb as necessary to fund US Debt. Bonds are going to be a difficult investment in terms of total return due to that pressure on long term rates as the US enters the market to fund $6.75 Trillion in debt with a cost of servicing it put at $2.4 Billion a day. Lot of implications to that particularly mortgage rates.
A chart of national debt by country was discussed in terms of percentage of GDP. The only time the US has exceeded 100% of GDP before now was following WW ll. Japan sits at 250% of GDP. Much of Europe is similar to the US except Germany who carries relatively small debt after their experience following WW l.
It was interesting to find that the Fed is now buying Gold which is likely an effort to support dollar value and maintain the Dollar as the reserve currency which is under pressure with Iran and Russia selling crude with other currencies.
It is difficult to absorb all of that from proprietary charts but I hope it provides food for thought.
Apparently Goldman Sachs is projecting a 3% return on the Stock Market. Comment was that for next 20 years market return will be approximate the total S&P 500 Dividend.
Warren Buffett is setting on cash of $260 Billion.
We are now seeing a correction in Muni and Corporate Bonds as Long Term Treasuries climb as necessary to fund US Debt. Bonds are going to be a difficult investment in terms of total return due to that pressure on long term rates as the US enters the market to fund $6.75 Trillion in debt with a cost of servicing it put at $2.4 Billion a day. Lot of implications to that particularly mortgage rates.
A chart of national debt by country was discussed in terms of percentage of GDP. The only time the US has exceeded 100% of GDP before now was following WW ll. Japan sits at 250% of GDP. Much of Europe is similar to the US except Germany who carries relatively small debt after their experience following WW l.
It was interesting to find that the Fed is now buying Gold which is likely an effort to support dollar value and maintain the Dollar as the reserve currency which is under pressure with Iran and Russia selling crude with other currencies.
It is difficult to absorb all of that from proprietary charts but I hope it provides food for thought.
Thanks for the summary!
My wife and I use a 4% return on our portfolio in our planning. Makes us save more and spend less. Of course I've been hearing the 3/4/5% return number for quite a while from a doomsday folks. Certainly, could happen if debt isn't controlled, over-regulation blocks innovation, AI takes a nasty turn, war, equities continue to be "overpriced" at least according to Sharpe ratio, etc., etc.
Here's some flavor from a blog this week about the Goldman 3% number:
3% Stock Market Returns For the Next Decade? - A Wealth of Common Sense
The U.S. stock market has been on fire of late. But it doesn’t feel like we’ve entered the euphoric phase of investor psychology just yet. In fact, many prognosticators have been lowering expectations. Goldman Sachs put out a research piece that posits the S&P 500 could return just 3%...
awealthofcommonsense.com
IRS has released tax changes for 2025
Announced on 11/1/24
Main points:
401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000
:max_bytes(150000):strip_icc()/GettyImages-1137410597-e4345c6c13b44b4e8886c47eb5d3d051.jpg)
www.investopedia.com
Tax Bracket, Deductions & Marginal Rate changes:
taxfoundation.org
Starting in 2025, people aged 60, 61, 62, or 63 who participate in workplace retirement plans can make even greater catch-up contributions of up to $11,250 instead of $7,500. [$$$}
www.irs.gov
Announced on 11/1/24
Main points:
- WSJ.com: Starting next year, workers between 60 and 63 can make a super catch-up contribution of up to $11,250, the IRS said Friday. People who turn those ages sometime during the year will be able to put up to $34,750 into their workplace retirement plans. That is about 14% more than in 2024 and marks the biggest change to 401(k) contribution rules in two decades.
- For everybody else, the change is $500 increase (max of $23,500 for under 50, catchup 50-59 and 64+ is $31,000)
- Bigger "all-in" limits up to $70,000
- Roth & traditional IRA limit increases (and phase-out ranges increased)
- Tax bracket, deduction changes
401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000
The IRS Revealed 2025 Changes To Retirement 401(k) and IRA Contribution Limits
Retirement savers can stash more money in their 401(k)s next year. Friday, the IRS announced cost-of-living adjustments for retirement plans and IRAs.
Tax Bracket, Deductions & Marginal Rate changes:
2025 Tax Brackets
Explore the IRS inflation-adjusted 2025 tax brackets, for which taxpayers will file tax returns in early 2026.
taxfoundation.org
Starting in 2025, people aged 60, 61, 62, or 63 who participate in workplace retirement plans can make even greater catch-up contributions of up to $11,250 instead of $7,500. [$$$}
https://www.wsj.com/personal-finance/retirement/401k-retirement-account-catch-up-limit-2025-5ed60a7b
401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000 | Internal Revenue Service
IR-2024-285, Nov. 1, 2024 — The Internal Revenue Service announced today that the amount individuals can contribute to their 401(k) plans in 2025 has increased to $23,500, up from $23,000 for 2024.
Last edited:
An article from Morningstar on what's been driving nice returns in the 2024 stock market.
5 Reasons Stocks Keep Hitting Record Highs | Morningstar
For 2025, Morningstar recommends overweighting small cap stocks and value stocks. But to me that smacks of trying to predict the market. I personally say create a diversified portfolio and stick with it, rebalancing as needed.
Rebalancing would naturally eliminate being overweight in sectors that have had a nice runup, and underweight in sectors that haven't. But the shift is a function of the rebalancing process, not of trying to predict what the markets will do -- which is a fool's errand.
5 Reasons Stocks Keep Hitting Record Highs | Morningstar
For 2025, Morningstar recommends overweighting small cap stocks and value stocks. But to me that smacks of trying to predict the market. I personally say create a diversified portfolio and stick with it, rebalancing as needed.
Rebalancing would naturally eliminate being overweight in sectors that have had a nice runup, and underweight in sectors that haven't. But the shift is a function of the rebalancing process, not of trying to predict what the markets will do -- which is a fool's errand.
I’ve skimmed through and don’t see any info on 403b’s. My wife’s business just got bought out and the new employer is a non-profit and offers a 403b instead of the 401k the previous ownership offered. Is there any need-to-knows? She has options on what to do with the money in her existing 401k.
Your wife has the option of rolling over the existing 401(k) into an IRA. Depending on the terms of the sale, she might or might not be able to keep her existing 401(k) investment allocation.
If she can keep existing money in the 401(k), I would suggest evaluating the 403(b)'s investment options vs. those in the 401(k), and make the decision to (1) go with the new choices, or (2) roll the existing money into a self-managed IRA accordingly.
Going forward, for new money contributed, she will need to make investment choices from what the new 403(b) offers. Those choices and associated fees might be better than the former plan, or they might not be as good.
Either way, unless you're stuck with options consisting of only annuities or funds with nasty high fees, I'd suggest putting as much as you can into the 403(b) to take advantage of the pre-tax treatment of new contributions.
For reasons discussed earlier in this thread, I'd suggest contributing as much as you possibly can. You're not "maxed out" at the point at which the new employer ceases to match contributions. You're maxed out at $23,500 annual contributions if your wife is under 50, or $31,000 if she's 50 or older.
She can also make annual contributions into a regular IRA of up to $7,000 if under 50, or $8,000 if 50 or older. Depending on income, the contributions to an IRA could be pre-tax dollars or post-tax dollars.
The second most important thing, behind only keeping on investing, is this: If you do decide to roll over the 401(k) balance into a self-managed IRA, be sure neither you nor your wife touch the money in the process of the transition. It should go straight from the existing 401(k) into the IRA.
If the money is in your personal name at any point in the transition, you haven't rolled over the balance....you've taken a distribution. And if you take a distribution, you trigger all sorts of tax consequences and penalties. So I'd strongly suggest doing that with a knowledgeable broker who does it all the time. I personally use Schwab, but any number of nationally-recognized names can do it as well.
If she can keep existing money in the 401(k), I would suggest evaluating the 403(b)'s investment options vs. those in the 401(k), and make the decision to (1) go with the new choices, or (2) roll the existing money into a self-managed IRA accordingly.
Going forward, for new money contributed, she will need to make investment choices from what the new 403(b) offers. Those choices and associated fees might be better than the former plan, or they might not be as good.
Either way, unless you're stuck with options consisting of only annuities or funds with nasty high fees, I'd suggest putting as much as you can into the 403(b) to take advantage of the pre-tax treatment of new contributions.
For reasons discussed earlier in this thread, I'd suggest contributing as much as you possibly can. You're not "maxed out" at the point at which the new employer ceases to match contributions. You're maxed out at $23,500 annual contributions if your wife is under 50, or $31,000 if she's 50 or older.
She can also make annual contributions into a regular IRA of up to $7,000 if under 50, or $8,000 if 50 or older. Depending on income, the contributions to an IRA could be pre-tax dollars or post-tax dollars.
The second most important thing, behind only keeping on investing, is this: If you do decide to roll over the 401(k) balance into a self-managed IRA, be sure neither you nor your wife touch the money in the process of the transition. It should go straight from the existing 401(k) into the IRA.
If the money is in your personal name at any point in the transition, you haven't rolled over the balance....you've taken a distribution. And if you take a distribution, you trigger all sorts of tax consequences and penalties. So I'd strongly suggest doing that with a knowledgeable broker who does it all the time. I personally use Schwab, but any number of nationally-recognized names can do it as well.
Last edited:
401K - TO ROLL OR NOT TO ROLL, THAT IS THE QUESTION
The only substantive thing I'll add to 4Q's excellent breakdown is that 401k's have some legal protections that IRA's may not so just make sure you understand the options available and the "consequences/benefits" of choosing any particular action. Also, new for 2025 if your wife is 60-63 she can max the 403b at $34,750 instead of $31,000.
Here is some great info on 403b's:
MATCHING/MAXING/MERGING
As 4Q notes, contribute at least up to the company match if at all possible and then up to the IRS limits if you can. I will say when we first started maxing everything we could, it was a bit of a shock to our system, and required some re-thinking about cashflow, purchases & timing, etc. but now, I'm very happy we have done so for all these years !
I have a 403b and a 457b. My wife has 401k. She also has a 401k from her old firm from 10+ years ago. We chose to not roll it over to the current 401k b/c it gave us much lower fees for a decent chunk of our allocation. We may merge this year as both 401ks now have Fidelity as custodian and they have already proven to be competent and capable - very important points 4Q emphasizes. I have also considered funding a solo 401k but haven't yet pulled the trigger.
ALL ACCOUNTS ALLOCATION
As I have mentioned before we use an "all accounts" allocation philosophy. We decide what we want our overall allocation across all accounts (Roth IRAs, 401k, 403b, 457b, HSA, etc.), to be and then figure out the most efficient / best / least cost account to hold particular assets depending on what's available in all accounts.
BACKDOOR ROTH IMPACT ON IRAs
Also, if you're a candidate for doing a backdoor Roth, then you need to not have funds in an IRA. If considering this, note the Cautions section in that link which explains the details. WhiteCoatInvestor.com also has a step-by-step process on how to do it.
(I realize some of this may not apply to you / your wife's particular situation. Details/links provided for others who may have changes coming in 2025, as well)
The only substantive thing I'll add to 4Q's excellent breakdown is that 401k's have some legal protections that IRA's may not so just make sure you understand the options available and the "consequences/benefits" of choosing any particular action. Also, new for 2025 if your wife is 60-63 she can max the 403b at $34,750 instead of $31,000.
Here is some great info on 403b's:
MATCHING/MAXING/MERGING
As 4Q notes, contribute at least up to the company match if at all possible and then up to the IRS limits if you can. I will say when we first started maxing everything we could, it was a bit of a shock to our system, and required some re-thinking about cashflow, purchases & timing, etc. but now, I'm very happy we have done so for all these years !
I have a 403b and a 457b. My wife has 401k. She also has a 401k from her old firm from 10+ years ago. We chose to not roll it over to the current 401k b/c it gave us much lower fees for a decent chunk of our allocation. We may merge this year as both 401ks now have Fidelity as custodian and they have already proven to be competent and capable - very important points 4Q emphasizes. I have also considered funding a solo 401k but haven't yet pulled the trigger.
ALL ACCOUNTS ALLOCATION
As I have mentioned before we use an "all accounts" allocation philosophy. We decide what we want our overall allocation across all accounts (Roth IRAs, 401k, 403b, 457b, HSA, etc.), to be and then figure out the most efficient / best / least cost account to hold particular assets depending on what's available in all accounts.
BACKDOOR ROTH IMPACT ON IRAs
Also, if you're a candidate for doing a backdoor Roth, then you need to not have funds in an IRA. If considering this, note the Cautions section in that link which explains the details. WhiteCoatInvestor.com also has a step-by-step process on how to do it.
(I realize some of this may not apply to you / your wife's particular situation. Details/links provided for others who may have changes coming in 2025, as well)
Last edited:
I’ve seen HSA’s mentioned several times. We actually have one now (and try to kick in all we can) because we more or less got forced on to a HDHP insurance plan. Is there a way to have a HSA outside of a HDHP? We have the option of getting affordable “real†health insurance again and it seems we have to give up the HSA if we take it. The HSA is a useful thing except the HDHP pays for absolutely NOTHING till you hit deductible which means the insurance doesn’t kick in unless you’ve got something really bad or have surgery at which point you empty the HSA.
If we choose to rollover, does that amount count as/toward the yearly contribution limits?
This may be counter to the idea of this thread, so I believe we may need a thread for casual / day traders. I enjoy the stock market like some go to casinos . BTW, I have enjoyed an 18 % ROI since I started in August. I would like to talk about things this thread probably shouldn’t cover, like self directed accounts or crypto or speculation on IPO’s .
Good question. The answer is no, it doesn't. Your contributions are entirely separate from the rollover.
Regarding your question on an HSA, a man's gotta know his limitations, and I don't know.
Another poster might, or you might be able to research it. If you have an accountant or other financial advisor, that person will definitely know.
Last edited:
Thought I'd expand on two strategies that almost anybody can execute, but almost nobody does.
Either can have a huge impact on your financial position heading into retirement. Together, they can make your golden years truly golden.
Truly Maxing Out 401(k) or 403(b) Contributions
Above I mentioned maxing out your 401(k) / 403(b) contributions. Most of the people you heard at holiday parties holding forth on how they "maxed out" their 401(k) are talking about maxing out their employer's match.
That's a nice start. But for the vast majority of us, it's nowhere near enough for a comfortable retirement.
You need to max out the legal limit -- currently $23,500 up to age 50, $31,000 from age 50 to 60, and $34,750 from age 60 to 63 (thanks on that point, @BamaNation...I wasn't aware of that new provision).
If you're early in your investing life, I know $23,500 seems an impossibly high number. And for most 30-year-olds, it is. But it doesn't have to be in your mid-40s. Here's how Mrs. Basket Case and I did it.
1. Have an honest conversation about needs vs. wants. You have to eat. You don't have to take the family out to dinner 3-4 times a week. You need a reliable car. You don't need a tricked-out electric F-150 new off the lot. You need a social life. You don't need a $500 a month country club membership, with a $2,500 set of golf clubs, plus 10 rounds a month of golf cart fees, Nassau bets and 19th hole tabs. You need time off to re-charge. You don't need 10 days at Disney World staying at the Grand Floridian, eating at Victoria and Albert's.
2. After completing a tough assessment of needs vs. wants vs. income, start off with as much as you can make room to contribute.
Remember that your contributions are in pre-tax dollars. IOW, Uncle Sam pays part of your contribution. Suppose you're in the 28% tax bracket, and you put in $200 a paycheck. Your take-home is only $144 less than if you had contributed nothing at all. Yet your 401(k) balance goes up $200, plus whatever match your employer makes.
Depending on your tax bracket and your employer's match, your first-year returns on each year's new money can easily reach well over 100%, maybe even 200%.
You can't get anywhere remotely approaching that return anywhere else, and are leaving tons of money on the table if you don't take advantage of this.
3. This is the hard part and it takes discipline. Every raise, whether through annual salary increases or promotions, goes into the 401(k). And you keep on doing that for as long as it takes you to reach the legal max.
I won't lie -- it's no fun. I didn't have a take-home raise for 8 solid years. But when I finally did, it was fantabulously glorious.
Plus, as BamaNation alludes, after 2-3 months, it kind of gets baked into your monthly cash flow and it's not as painful as you might imagine.
4. Keep on maxing out until the day you retire. The legal max increases every few years, so you'll have to increase accordingly. Believe me, your retired self will thank your young self every single day.
Pay Off Your Mortgage Early
Currently, 30 year mortgage rates are about 7%. So for a $250K mortgage, that works out to principal and interest of $1,663. Over 30 years, you pay 360 x $1,663 = $598,680.
Note: This is principal and interest only. It doesn't include taxes and insurance.
Suppose you want to be done in 20 years. A lot of people think you'd have to pay 1.5x your 30 year payment. You don't. First, the 20 year interest rate is a bit lower (6.5% or so today). Second, exponential arithmetic works in your favor.
Together, that means that a $250K mortgage at 6.5% for 20 years works out to a payment of $1,863. Over 20 years, you pay $447,120 -- a savings of over $150,000. And 10 fewer years of making payments.
One neat trick: You can pay more than the required payment on your mortgage. If you do that, the extra reduces the outstanding principal. On a 30 year mortgage at today's rates, that's a guaranteed return of 7%.
Where else are you going to find a mathematically guaranteed return of 7%?
Mrs. Basket Case and I did this:
1. We started with a goal of being finished with mortgage payments after 15 years.
2. We agreed that we might trade up houses over time, but 15 years from the original start date, we'd be done.
So suppose 3 years into the plan, we had our eye on a new house. We'd have to have that house paid off in 12 years -- 15 years from the original start date, less 3 years elapsed time. If we couldn't afford that, we couldn't afford the house.
3. We actually had mortgage notes on a 25 year amortization schedule. But we took advantage of the option to pay more. So we paid on a 15 year schedule -- or 12, or however many years we had left on the original plan when we bought the new house.
The cool thing about that was it gave us the flexibility to drop back to the lower contractually required payment in the event of a no-foolin' emergency. Sure, the interest rate was a tick higher, but not much. We just figured it was the price of having the flexibility if we needed it.
We were fortunate that we never had to use that option. But the fact that it was there was a source of peace of mind.
Both of these plans require discipline. You have to watch your friends have a big time spending, spending, spending, hear them brag about their stuff or where they just ate or went on vacation, and listen to them laugh and shake their heads at you.
Then one evening when you're a few months from retirement, you'll be at some cocktail party. You're talking about your plans, and they're moaning about having to work forever. They ask how you did it, and you tell them the two points above -- max out tax-advantaged retirement plans and pay off the house early. They'll look at you like you have three heads and say, "I remember you talking about that...but you really did it?!?"
It's sad to watch their faces as they realize that they're too far along in life to get their finances in order to retire in the way they want. I also have to confess to a bit of schadenfreude when I remember how much they mocked what the Basket Cases were doing.
Of all the assets you have as a young person, time is both the most valuable and the most perishible.
Either can have a huge impact on your financial position heading into retirement. Together, they can make your golden years truly golden.
Truly Maxing Out 401(k) or 403(b) Contributions
Above I mentioned maxing out your 401(k) / 403(b) contributions. Most of the people you heard at holiday parties holding forth on how they "maxed out" their 401(k) are talking about maxing out their employer's match.
That's a nice start. But for the vast majority of us, it's nowhere near enough for a comfortable retirement.
You need to max out the legal limit -- currently $23,500 up to age 50, $31,000 from age 50 to 60, and $34,750 from age 60 to 63 (thanks on that point, @BamaNation...I wasn't aware of that new provision).
If you're early in your investing life, I know $23,500 seems an impossibly high number. And for most 30-year-olds, it is. But it doesn't have to be in your mid-40s. Here's how Mrs. Basket Case and I did it.
1. Have an honest conversation about needs vs. wants. You have to eat. You don't have to take the family out to dinner 3-4 times a week. You need a reliable car. You don't need a tricked-out electric F-150 new off the lot. You need a social life. You don't need a $500 a month country club membership, with a $2,500 set of golf clubs, plus 10 rounds a month of golf cart fees, Nassau bets and 19th hole tabs. You need time off to re-charge. You don't need 10 days at Disney World staying at the Grand Floridian, eating at Victoria and Albert's.
2. After completing a tough assessment of needs vs. wants vs. income, start off with as much as you can make room to contribute.
Remember that your contributions are in pre-tax dollars. IOW, Uncle Sam pays part of your contribution. Suppose you're in the 28% tax bracket, and you put in $200 a paycheck. Your take-home is only $144 less than if you had contributed nothing at all. Yet your 401(k) balance goes up $200, plus whatever match your employer makes.
Depending on your tax bracket and your employer's match, your first-year returns on each year's new money can easily reach well over 100%, maybe even 200%.
You can't get anywhere remotely approaching that return anywhere else, and are leaving tons of money on the table if you don't take advantage of this.
3. This is the hard part and it takes discipline. Every raise, whether through annual salary increases or promotions, goes into the 401(k). And you keep on doing that for as long as it takes you to reach the legal max.
I won't lie -- it's no fun. I didn't have a take-home raise for 8 solid years. But when I finally did, it was fantabulously glorious.
Plus, as BamaNation alludes, after 2-3 months, it kind of gets baked into your monthly cash flow and it's not as painful as you might imagine.
4. Keep on maxing out until the day you retire. The legal max increases every few years, so you'll have to increase accordingly. Believe me, your retired self will thank your young self every single day.
Pay Off Your Mortgage Early
Currently, 30 year mortgage rates are about 7%. So for a $250K mortgage, that works out to principal and interest of $1,663. Over 30 years, you pay 360 x $1,663 = $598,680.
Note: This is principal and interest only. It doesn't include taxes and insurance.
Suppose you want to be done in 20 years. A lot of people think you'd have to pay 1.5x your 30 year payment. You don't. First, the 20 year interest rate is a bit lower (6.5% or so today). Second, exponential arithmetic works in your favor.
Together, that means that a $250K mortgage at 6.5% for 20 years works out to a payment of $1,863. Over 20 years, you pay $447,120 -- a savings of over $150,000. And 10 fewer years of making payments.
One neat trick: You can pay more than the required payment on your mortgage. If you do that, the extra reduces the outstanding principal. On a 30 year mortgage at today's rates, that's a guaranteed return of 7%.
Where else are you going to find a mathematically guaranteed return of 7%?
Mrs. Basket Case and I did this:
1. We started with a goal of being finished with mortgage payments after 15 years.
2. We agreed that we might trade up houses over time, but 15 years from the original start date, we'd be done.
So suppose 3 years into the plan, we had our eye on a new house. We'd have to have that house paid off in 12 years -- 15 years from the original start date, less 3 years elapsed time. If we couldn't afford that, we couldn't afford the house.
3. We actually had mortgage notes on a 25 year amortization schedule. But we took advantage of the option to pay more. So we paid on a 15 year schedule -- or 12, or however many years we had left on the original plan when we bought the new house.
The cool thing about that was it gave us the flexibility to drop back to the lower contractually required payment in the event of a no-foolin' emergency. Sure, the interest rate was a tick higher, but not much. We just figured it was the price of having the flexibility if we needed it.
We were fortunate that we never had to use that option. But the fact that it was there was a source of peace of mind.
Both of these plans require discipline. You have to watch your friends have a big time spending, spending, spending, hear them brag about their stuff or where they just ate or went on vacation, and listen to them laugh and shake their heads at you.
Then one evening when you're a few months from retirement, you'll be at some cocktail party. You're talking about your plans, and they're moaning about having to work forever. They ask how you did it, and you tell them the two points above -- max out tax-advantaged retirement plans and pay off the house early. They'll look at you like you have three heads and say, "I remember you talking about that...but you really did it?!?"
It's sad to watch their faces as they realize that they're too far along in life to get their finances in order to retire in the way they want. I also have to confess to a bit of schadenfreude when I remember how much they mocked what the Basket Cases were doing.
Of all the assets you have as a young person, time is both the most valuable and the most perishible.
Last edited:
This is the best financial advice I have ever seen. I wish I had followed this beginning in my early 30's. We had each church put an amount equal to 10% of salary and housing into retirement -- should have been 20% and we should have had more guidance on how to invest that. The SBC gave little or nothing advice wise to its retirees.
Best help we currently have is that funds coming from a church related financial retirement institution can be designated as housing allowance -- within certain limits. This reduces or eliminates income tax for most ministerial retirees. I have several friends who opted out of SS and did not invest the money as they intended. They are my age, early to mid 70's, and still working.
We use my wife’s insurance and have a HDHP so get to contribute to an HSA. We then roll over the amount contributed once a year into an HSA we opened at Fidelity. We use it as a “stealth Roth.†This means we invest the funds in a total market index and don’t touch it. Our plan is to let it ride until we retire and use as needed or later on use to pay our health insurance (at whatever age that’s allowed). We just cash flow any doctor visits. Fortunately we have all (me, Mrs BN, and 2 daughters) been pretty healthy so this has been a great decision. We can access it anytime needed for health costs. HSAs are triple tax advantaged- pre-tax if contributed out of your paycheck, can grow if invested without earnings being taxed, and can be withdrawn anytime without being taxed if used for healthcare expenses.
We used to run a sophisticated analysis each year to decide which plan to use but my wife’s company plan is now so good we dont even do that. We just max out the HSA and then add on their limited purpose fsa plan to pay for dental and vision needs (new lenses or contacts for multiple people, dentist visits, braces, etc) so thats tax advantaged too.
for those who have costly health issues or expensive pharmaceuticals then an HDHP + HSA may not be the right choice.
You can contribute to an HSA if you have a HDHP (high-deductible health plan). Otherwise, you cannot. When filing taxes each year you actually have to confirm your plan (and I think you get a tax form from your employer verifying what you have. You'll also get a form / info on how much you contributed to the HSA and its current value and you have to report that as well (from what I remember).
Last edited:
I truly believe this to be good advice, but not for everyone. Your strategy for 80%+ of Americans is not possible. No amount of sacrifice would allow a family making $40k a year to save more than half of that.
But my biggest concern with this advice is that it leaves no room to enjoy life through those savings years unless you are in the top 10%. And life is meant to be lived, not survived.
Each individual has to examine what works for him/her/their family. I know multiple teachers who saved, lived fairly well on their teacher salary (traveled, were generous, etc) and left multiple millions to family and/or charities.
The key is to not spend more than you have. Save as much as you can and you then have options on how and when to spend it. It was something I knew but didn't execute as early as I should have. Having said that, not saving much early on allowed us to live in NYC and London fairly comfortably 25 years ago
Yet, when I do the calculations now for what I would have invested if I HAD saved $$ then, I realize I would be retired from a "normal job" yesterday.
There are ways to save even if you have little to start with. Choices have to be made. That also includes choice of career and/or specific job. Once you make the choice to save over, say buying bling bling tires or a new car every year or traveling to Cabo every 6 months or drinking/drugging yourself silly, then you have options in later years.
This thread is mostly about how to maximize your options through investing for retirement in programs offered by your employer. It doesn't mean everybody can take advantage of every option 4Q & I have mentioned when you're 25 or 35 or 45, but as 4Q constantly points out, starting early is a step-function game changer.
Some of these options are things I've only learned about and/or implemented in the last 15 years (i.e. Backdoor Roth, Mega Backdoor Roth, HSA as stealth Roth, etc.). There is also wisdom in realizing that there are certainly things we talk about that are really more aligned with mid-late career folks who are making more money than they ever have and, instead of blowing it on a $1 or $2MM house and a $100K truck might be better off putting that moolah toward maximizing the options we've mentioned.
I share with my college classes/students all of what I have talked about on here. Many of them are getting 1st jobs at $60K+ in IT fields (or accounting/finance, etc). A lot of them are at six figures after 3 years. Most are probably making double to triple what they have ever made or anyone in their family ever made. So, they need guidance on how to not waste an opportunity... and giving them a gold nugget thought or two might be something that changes their life forever. Not everything can be implemented by everyone but doing what you (they) can creates options. Options are valuable the longer you hold them.
In short and to be sure, I am 100% against being miserly or for that matter, even being over--aggressively frugal. I'm certainly neither. One "modern" way to do what we've mentioned - especially for younger folks - is to get a side gig. This can also work for retired folks who want to have a few things to do each week. (consulting, uber driving, etc.). There are ways to make it happen.
Last edited:
I agree, starting early is the key. My oldest son is 27, owns a farm and has a substantial 401k, but he also makes a very good salary for his age. My younger son chose a different path, has no savings, but is far happier. Who is better off?Each individual has to examine what works for him/her/their family. I know multiple teachers who saved, lived fairly well on their teacher salary (traveled, were generous, etc) and left multiple millions to family and/or charities.
The key is to not spend more than you have. Save as much as you can and you then have options on how and when to spend it. It was something I knew but didn't execute as early as I should have. Having said that, not saving much early on allowed us to live in NYC and London fairly comfortably 25 years ago
Yet, when I do the calculations now for what I would have invested if I HAD saved $$ then, I realize I would be retired from a "normal job" yesterday.
There are ways to save even if you have little to start with. Choices have to be made. Once you make the choice to save over, say buying bling bling tires or a new car every year or traveling to Cabo every 6 months or drinking/drugging yourself silly, then you have options in later years.
This thread is mostly about how to maximize your options through investing for retirement in programs offered by your employer. It doesn't mean everybody can take advantage of every option 4Q & I have mentioned when you're 25 or 35 or 45, but as 4Q constantly points out, starting early is a step-function game changer.
Trending content
Latest threads
-
-
Video: Film Guy on The Next Round - Is Ty the best QB in the SEC?- Started by Cruloc
- Replies: 5
-
-