This was a lot of fun, thanks for joining me everyone! Our three tumbler winners are Mary, Mike, and Nick. I've sent each of you an email letting you know you won. If you didn't win a tumbler today, we will definitely be doing another Q&A in the future so stay tuned! And we also give away tumblers on the show every other Tuesday. Thanks again to everyone that participated in the Q&A!
59 and retired earlier this year. Do the net worth statements! I have them going back nearly 30 years. It is amazing what you can accomplish if you stick to your plan. Best wishes to all in your journey to retirement. (Would say good luck but it is more discipline than luck!)
This will be the first year I do a Net Worth statement. I hear from the show so many people like doing this. I think it will become something I like as well.
Hi Daniel! I'm curious about the money guy take on ESG investing, trying to put my dollars to work in companies that align with my values. Can this be part of a reasonable retirement plan? How does this type of investing compare to the more standard index target retirement funds? Thanks in advance!
What is the best way to balance trying to reach the max retirement contributions and trying to fund high dollar items, ie home renovations and other quality of life items? I am in my mid-twenties (50k pre-tax) and would not be able to max my Roth and HSA contributions without having a slim budget. I am also using my employer match at 6%
My husband and I were in this predicament before in our 20s. We prioritized maxing out all of my IRA and 401K contributions. To fund other quality of life items, we both took on side hustles to fund vacations, car purchase(s) and home renovations. 13 years later, we have $675K in both pre-tax and post-tax. We don't do much side hustles now as our salaries increased since then. Best of luck! Just keep going! Stay motivated my friend.😉
I also am in a similar predicament and close to mid 20s. We’re maxing 2 401ks, IRAs, HSAs, and a 15 yr note, our budget covers all the little purchases, vacations, etc. but only leaves us with $200 leftover every month to put towards big purchases like cars or remodels. We should compare budgets sometime.
I’m wondering where in your three bucket strategy you should put REITS. I feel like it should be in a Roth because of the high amount of dividends but on the other hand they probably won’t grow as much as stocks.
Many times I have seen Money Guys, B&B, present a chart attributed to you, showing what it takes to become a Millionaire by age 65 starting at various ages today. I seems like this is really a moving target. Clearly, a 65yo (year old) with a million today has a much larger buying power that a 30yo today who dutifully saves to become a millionaire in 35 years. And the Millionaire that today's 65yo saw as a child had a much larger buying power. The buying power degrades with time given inflation; for instance, at a 2% inflation rate, the 30yo will experience about 99% price inflation or 49% erosion of his/her buying power. Wouldn't be a good idea to set more realistic expectation? How about putting up a constant buying power savings chart.
On our "Wealth Multiplier for Young Savers" resource, we do have how much you should save to get to $2 million as well as $1 million. Especially for younger savers $1 million may not be enough (although for someone with a lower income who is younger, $1 million may be plenty - it just depends). Our charts that show how much someone needs to save to reach $1 million, $2 million, etc. are more for motivation and inspiration. You don't want a young person to think "even if I'm able to save $1 million for retirement, I still won't have enough to retire." It's probably more productive to think "wow, I can start now saving $XX a month and have $1 million by 65!"
Our savings rate charts are more geared towards someone thinking about how much they should save for retirement. We show how much someone would need to save to replace 80% of their pre-retirement gross income, assuming a 6% annual rate of return and 1.5% wage growth. These more conservative assumptions help account for your portfolio becoming more conservative as you get older, inflation, etc. We want young people to realize how little they need to become a millionaire, but also to strive for saving 20-25% of their gross income. I think if you tell an 20-year-old they need to invest 25% for retirement they might get overwhelmed and discouraged. I like our multifaceted approach where we aim to motivate/inspire as well as show more conservative numbers.
You can always double up or add a multiplier and be a multi millionaire instead of keeping pace at 1M to help hedge for inflation. I think they have said that before.
You miss my point. I suggest that they show the chart (occasionally) based on purchasing power, not on the shrinking dollar. It is a bit like comparing sport stats over time - we keep the distances the same; we don't shrink the distance. Please note I'm retired and looking backwards: I have way more numerical dollars than I ever expected, but prices are not what they were (no worries, we're fine!).
What are the best resources for health insurance during early retirement? How to know how much to budget for health insurance if you want to retire early?
What is the right mix between pre-tax contributions and Roth contributions to ensure you have maximum flexibility using the three bucket strategy you all discuss for retirement.
I have this same question as Kyle. Tax loss harvesting is a newer consideration to me in my investment life. Show us in “True FTE Daniel style” some scenarios and charts for inspiration!
I need to find a support group for spending my saved money and passive income. Do you have clients with similar issues and how do you help them. 39, Married, Dual Military Pension and very frugal.
I'd like to hear what they have to say, because I'm feeling the same way. You may want to check out the book "Die With Zero". I've heard it mentioned on some other podcasts and just ordered it...used off eBay of course.
Do the Roth changes only affect IRAs or is it also on 457bs? My earnings are above the income limit to contribute directly to a Roth IRA, but I can contribute to my work Roth 457b. Is it better to just contribute to the 457b and bypass all the hassle of doing a backdoor Roth conversion?
Roth IRAs do have some advantages over Roth 457 plans (or 401(k) plans, etc.); Roth IRAs don't have RMDs, and you typically have access to a wider range of low-cost investment options (since you can choose your provider). The proposed legislation would not impact the ability of higher income individuals to contribute to the Roth portion of employer-sponsored plans.
Open enrollment is going on in our company and we have to decide on the HSA plan and funding. I've been investing in my HSA since it started and doing well, but it's hard to "spread the word" without feeling like I'm bragging. What's a good way to share the power of investing in the HSA for the future? As pointed out in previous shows, most people will only put in what they think they will use for the year and are missing out on some powerful tax-free growth. I've looked into some of the older Money Guy videos and articles, but they are either little snippets or a few years old. Not bad, but not as good as the recent content that has been put out.
When you have Roth v. Traditional accounts - a lot of people talk about them pre-tax post-tax advantages - if you are maxing them out, and can afford to do so, wouldn't that be a larger part of the strategy before moving into traditional investing accounts?
Love the show! What's your opinion on the rise of "financial coaches" commonly found on social media? Do they have their place alongside certified financial advisors/planners, or should all financial coaching be handled by licensed professionals?
Disclaimer, I haven't personally dealt with any financial coaches. When I hear "coach," I imagine someone who is there for support, encouragement, and to help with more of the behavioral/emotional aspect of your personal finances. This is a really important aspect of money, and one that's often overlooked; someone may not necessarily need certifications to help with this aspect. For more of the nuts & bolts financial planning, I do think a fee-only CFP® is worth considering. Anyone can call themselves a financial advisor or financial coach, and you want to make sure the person you are allowing into your financial life has the experience and credentials to help manage your money.
Hey Daniel...I know you are only mentioning backdoor Roths, but do you think that is just the beginning? Do you think the Roth option will go away altogether? I currently contribute 6% to my Roth 401K and am looking to start a Roth IRA once I am debt free (beginning of 2023). Thanks for the help. Have a great day.
I think it is unlikely Roth goes away anytime soon. Whoever is in power politically, it is probably better for them to receive tax dollars now (from individuals paying taxes now to contribute to Roth accounts) rather than tax dollars in 5, 10, 20, 30, 40 years (from individuals who contributed to pre-tax accounts). If you look at the long-term, yeah, Roth IRAs probably aren't as beneficial to the government from a "how much tax revenue can we collect" standpoint. But politicians and political parties don't often think that long-term, usually they're focused on the next election and allowing Roth accounts means more tax revenue upfront, which means more money available to accomplish whatever policies they're trying to accomplish.
Also means less they will need to pay out to retirees. Putting the savings onus on the individual saves the government much more in future payments then lost growth tax revenue. Roth’s are likely here to stay.
I am currently at step 7 and looking to build up a taxable account. Should I start simple with just a total us stock index fund or should I mix in international for the foreign tax credit and tax loss harvesting?
i am interested in tax free retirement income steam, i have been doing a mixture of pre-tax 401k and after tax with roth conversion. Let's say backdoor and mega backdoor is completely gone, would it be making more sense to do pretax, or do Roth?
We have marginal tax bracket of 35%, the thought process is 2 x 19500 can save about $12000 to put after tax brokerage account or currently the after tax 401k as of right now.
It is still appealing to get rid of the uncertainly down the road and do Roth, then, the tax burden is also kinda high right now, when adding other FICA tax, etc.
In a world of building a better future for our children and ever changing path for what there career could be, should a 529 be the best route or maybe have an IRA or something different as an Avenue of saving for them but having the money free enough to where if they do not go to school they could at least have a down payment for a home?
My 403b combines Roth and pre-tax contributions together. Should I put future Roth contributions in a separate fund in an effort to keep Roth money separate from pre-tax money?
Aloha! I recently received a 25% raise through a promotion. I'm currently saving for a duplex to "house hack". For the past year, I reduced my Roth 401k contribution to 15% (excluding employer match) to save more cash for a house, but with rising inflation across the board, should I be putting more money aside for day to day expenses? Should I lower my retirement savings rate to save more cash for a duplex?
Wages have really taken off lately and it seems like everyone is hiring. My husband has been a stay-at-home dad for about five years now and is planning on re-entering the workforce in the near future. He will be making considerably less than I do and is considering working only part time. What's the best way for us to use the extra income? We are in our mid-thirties and on step nine of the FOO.
Hey Daniel! My husband and I are needing to buy another car. We have been saving for quite some time to make this purchase. Should we finance the car? Or pay cash?
Our bank isn't open on weekends, and we live in a rural area- about 2 to 3 hours from anywhere we can buy a car. How do you manage a weekend car purchase if you aren't financing and your bank isn't open?
Should I do all Roth? I’m divorced with 2 kids. I’ll have a size able pension when I retire. Online calculator says 1.6 million cash out or about 8k/month payment. I currently have 250k in retirement (80k of this is Roth). Social security should be about 3k/month and I make $145k/yr. I live in California.
What do you think about holding part of a large emergency fund in I bonds? My rudimentary understanding is the quarterly interest is based on the inflation index which seems appealing right now. This money is for possible vehicle replacement in the next 3-5 years.
Today is my 30th birthday and happy to be fully representing the messy middle with a 1-year-old!
My wife and I have a strong retirement nest egg but are not sure how to navigate college savings.
Granted we have no idea if our child or maybe eventual children will want to go to college.
Currently, we have a 529 plan set up but, is there any value in setting up a different investment account for our child even though it won't have the tax benefits of a 529 we know it won't be penalized if not used for school expenses? what even are my options?
I’m in this messy middle as well. I have both 529 and a custodial account open. 529 for education only and custodial for education and other expenses not covered by 529. Custodial account leaves me a little worried but I hope I’m raising financially responsible kids since they’ll have control after hitting legal age.
I assume if we're having these thoughts we'll raise financially responsible kids but it's just so hard to know so many variables. that is one thing that crossed my when looking at some account options such as a custodial account.
I have a relative who is 55 and is now just starting to get active on building for retirement.
She makes $40k a year at her new job. She will be on moving to step 5 of the FOO as she will be clearing her credit card debt of $1000 this month.
Seeing as she may not be retiring till at least 70, would you still recommend a target date retirement index fund for her ROTH IRA if the percentage of bonds in the fund will be higher, as opposed to going aggressive into a sole S&P500 index fund?
If you are older than your spouse by several years, should you focus on Roth conversations with your account first, even if your IRA is lower in value.
How far apart? We are 1 year apart, so not a big deal. And what is the relative size. If you are several years, I would start on the older. But also take into account the relative size, as it will take longer to conv the larger.
Not sure you will get this... Assuming you file married, the total is the determining factor. I suggest calculating what you can convert, use half for each, when yours is done, use all of that for hers. You do not mention ages or current employment.
Plan out the many years that you can convert, this will help you decide how much; do you go to the top of 12%, top of 22%, or top of 24%. Note that 22% today becomes 25% tomorrow. Don't start small now, determine if you need to be big the entire time.
Both retired, just turned 70 & 68 & top of 22%. Is it good to prioritize high dividend paying ETFs and stocks so as to increase tax free income and keep some growth in tax deferred and tax able accounts?
I am a 68 yo retired fellow that enjoys thinking about finances. I would be happy to discuss this, but lets move to email and perhaps the phone as that is easier.
I built a spreadsheet to examine the nuclear blast that trad IRA cause. I am currently working to convert about $1.3M at today's lower tax rates.
Has inflation affected the calculation used to decide whether or not to delay social security? If the cumulative COLA is greater than the delayed benefit, then is it worth collecting sooner?
You can always include your own pension contributions in your savings rate, and can include employer contributions if your gross income is under $200k. If you aren't sure what your or her employer's pension contributions are, you should be able to pull her annual pension statement and see.
My company doesn't have a 401k match. As long as I can still meet my other financial goals, is there any reason to dollar cost average into my Roth 401k over the whole year instead of just filling it up in the first six months? (I do this with my Roth IRA and wondered if I should do the same with my Roth 401k.) After my two Roth accounts are maxed out I invest in my taxable brokerage account. Thanks for the help!
Should you always roll over your retirement accounts to your new employer? I have a 457b governmental account that allows withdrawals at any age as long as I leave the employer. If I take a position elsewhere, I would rather not rollover to a new type of account and simply keep with my previous employer. Any cons to watch out for with this method?
Curious to know if Roth contributions are more valuable with the proposed legislation… for someone who is 28 does it make sense to go over the 30% combined marginal tax bracket to be able to get Roth dollars
FTE Daniel: How do you recommend valuing a pension in retirement planning? I will be fortunate enough to be eligible for a pension after serving >20 years in the military. I will start receiving the pension when I retire from the military at age 43 (I am currently 37). My wife and I are diligent savers and investors and have accumulated approximately 900K across taxable and non taxable accounts, but am unsure how to account for the pension. Appreciate your guidance and love the show!
Can my spouse have a Family HSA with the intention to max it out at 7200 if I elect a low deductible plan at my work and he elects the high deductible plan at his?
Hi Daniel, what advice can you give about tax burden implications for a brokerage account? My wife and I buy and hold the Fidelity S&P 500 index fund and the Fidelity Large Cap Index Fund. Thanks!
I am thinking about getting a new car since the used car market is crazy right now. I make more than enough where the truck I want would be well un 10% of my annual and i would still be able to fully max out retirement acounts and save more on top of that. But as my first big purchase it feels werid to be spending so much? Any suggestions on how to get over the fear of spending?
What is the best way to use a Donor Advised Fund as part of step 7-9. Is it best to think of those funds as step 8 pre-paid future expenses? What else falls into step 8 as we are saving 15% beyond the 19.5k and Roth/HSA are maxed as well...
Daniel - I understand the power of contributing to an HSA, now that open enrollment is coming up, what considerations other than the tax advantages should I look at when deciding if a high-deductible plan is a good fit for my family? My wife and I are already in step 5 (sans the HSA) of the FOO. Both of us worked outside the US until 2014 so we feel we are a little behind in retirement savings.
If you think you might have any major medical expenses coming up (like having a baby), a better plan may be worth considering. Otherwise, if you are young and healthy and don't imagine having that many medical expenses, an HDHP is certainly worth a look.
I retired last year and have a paid off house and retirement of about a million. 10% is in Roth and 90% in IRA. How can I tell if doing Roth conversions would be helpful to me during these initial few years of retirement?
Calculate what your taxes will be over time. Those trad IRA RMD will move you up the tax brackets and there will someday be a Widow Tax Trap. Convert while tax rates are on sale.
I enjoy listening to the Animal Spirits podcast and occasionally Odd Lots. Outside of those two I don't really listen to any financial podcasts, although we're big fans of White Coat Investor, Stacking Benjamins, and Minority Mindset.
Just crossed step 7 of the FOO. I am in a higher education program part-time while I work full-time (200k hh income, 28 years old). I have $35k of tuition left in my program. Option 1 is to used the rest of my cash (beyond step 7) to pay for my final year of tuition. Option 2 is to invest that cash and use student loans to pay for tuition. I'm leaning towards option 2 since I can service the debt and it would be <3% interest once I refi, and give me another $35k in market.
This was a lot of fun, thanks for joining me everyone! Our three tumbler winners are Mary, Mike, and Nick. I've sent each of you an email letting you know you won. If you didn't win a tumbler today, we will definitely be doing another Q&A in the future so stay tuned! And we also give away tumblers on the show every other Tuesday. Thanks again to everyone that participated in the Q&A!
FTE Daniel,
It’s October! Do you know what that means?
Only 2 more months until Net Worth By Age!
-Roku
We are actually already working on our annual Net Worth By Age show! It's gonna be a good one.
59 and retired earlier this year. Do the net worth statements! I have them going back nearly 30 years. It is amazing what you can accomplish if you stick to your plan. Best wishes to all in your journey to retirement. (Would say good luck but it is more discipline than luck!)
This will be the first year I do a Net Worth statement. I hear from the show so many people like doing this. I think it will become something I like as well.
Best time of the year!
I'll be "really excited" about that show!
I love that my budgeting app (YNAB) keeps an up-to-date net worth report on the dashboard!
I can't wait!😆
Hi Daniel! I'm curious about the money guy take on ESG investing, trying to put my dollars to work in companies that align with my values. Can this be part of a reasonable retirement plan? How does this type of investing compare to the more standard index target retirement funds? Thanks in advance!
What is the best way to balance trying to reach the max retirement contributions and trying to fund high dollar items, ie home renovations and other quality of life items? I am in my mid-twenties (50k pre-tax) and would not be able to max my Roth and HSA contributions without having a slim budget. I am also using my employer match at 6%
My husband and I were in this predicament before in our 20s. We prioritized maxing out all of my IRA and 401K contributions. To fund other quality of life items, we both took on side hustles to fund vacations, car purchase(s) and home renovations. 13 years later, we have $675K in both pre-tax and post-tax. We don't do much side hustles now as our salaries increased since then. Best of luck! Just keep going! Stay motivated my friend.😉
I also am in a similar predicament and close to mid 20s. We’re maxing 2 401ks, IRAs, HSAs, and a 15 yr note, our budget covers all the little purchases, vacations, etc. but only leaves us with $200 leftover every month to put towards big purchases like cars or remodels. We should compare budgets sometime.
I’m wondering where in your three bucket strategy you should put REITS. I feel like it should be in a Roth because of the high amount of dividends but on the other hand they probably won’t grow as much as stocks.
Daniel, I don’t really understand crypto and haven’t put any money into in. Am I missing out on a great investment by rebuking it?
Many times I have seen Money Guys, B&B, present a chart attributed to you, showing what it takes to become a Millionaire by age 65 starting at various ages today. I seems like this is really a moving target. Clearly, a 65yo (year old) with a million today has a much larger buying power that a 30yo today who dutifully saves to become a millionaire in 35 years. And the Millionaire that today's 65yo saw as a child had a much larger buying power. The buying power degrades with time given inflation; for instance, at a 2% inflation rate, the 30yo will experience about 99% price inflation or 49% erosion of his/her buying power. Wouldn't be a good idea to set more realistic expectation? How about putting up a constant buying power savings chart.
On our "Wealth Multiplier for Young Savers" resource, we do have how much you should save to get to $2 million as well as $1 million. Especially for younger savers $1 million may not be enough (although for someone with a lower income who is younger, $1 million may be plenty - it just depends). Our charts that show how much someone needs to save to reach $1 million, $2 million, etc. are more for motivation and inspiration. You don't want a young person to think "even if I'm able to save $1 million for retirement, I still won't have enough to retire." It's probably more productive to think "wow, I can start now saving $XX a month and have $1 million by 65!"
Our savings rate charts are more geared towards someone thinking about how much they should save for retirement. We show how much someone would need to save to replace 80% of their pre-retirement gross income, assuming a 6% annual rate of return and 1.5% wage growth. These more conservative assumptions help account for your portfolio becoming more conservative as you get older, inflation, etc. We want young people to realize how little they need to become a millionaire, but also to strive for saving 20-25% of their gross income. I think if you tell an 20-year-old they need to invest 25% for retirement they might get overwhelmed and discouraged. I like our multifaceted approach where we aim to motivate/inspire as well as show more conservative numbers.
You have to hit 1 Million first.
Yes, but as you do not get more time added to the game, it would be nice to plan accurately.
You can always double up or add a multiplier and be a multi millionaire instead of keeping pace at 1M to help hedge for inflation. I think they have said that before.
You miss my point. I suggest that they show the chart (occasionally) based on purchasing power, not on the shrinking dollar. It is a bit like comparing sport stats over time - we keep the distances the same; we don't shrink the distance. Please note I'm retired and looking backwards: I have way more numerical dollars than I ever expected, but prices are not what they were (no worries, we're fine!).
https://youtu.be/t2OAurkRpt8 skip to 11:30
Yes, but still a constant target amount, albeit $5M. It does not show the changing target over time to reach a give lifestyle.
They do.. they did a 2 or 3 mil show about 3 months ago.
What are the best resources for health insurance during early retirement? How to know how much to budget for health insurance if you want to retire early?
Ditto on this question…
What is the right mix between pre-tax contributions and Roth contributions to ensure you have maximum flexibility using the three bucket strategy you all discuss for retirement.
Daniel, how do you feel about the robot vesting trend? The automatic tax loss harvest features look enticing. Am I missing something?
I have this same question as Kyle. Tax loss harvesting is a newer consideration to me in my investment life. Show us in “True FTE Daniel style” some scenarios and charts for inspiration!
What role does investing in crypto play vs traditional mutual fund / ETFs in hedging inflation?
I need to find a support group for spending my saved money and passive income. Do you have clients with similar issues and how do you help them. 39, Married, Dual Military Pension and very frugal.
I'd like to hear what they have to say, because I'm feeling the same way. You may want to check out the book "Die With Zero". I've heard it mentioned on some other podcasts and just ordered it...used off eBay of course.
Do the Roth changes only affect IRAs or is it also on 457bs? My earnings are above the income limit to contribute directly to a Roth IRA, but I can contribute to my work Roth 457b. Is it better to just contribute to the 457b and bypass all the hassle of doing a backdoor Roth conversion?
Roth IRAs do have some advantages over Roth 457 plans (or 401(k) plans, etc.); Roth IRAs don't have RMDs, and you typically have access to a wider range of low-cost investment options (since you can choose your provider). The proposed legislation would not impact the ability of higher income individuals to contribute to the Roth portion of employer-sponsored plans.
Would the proposed changes prevent rolling a Roth 401k (or TSP in our case) into a Roth IRA?
Fantastic news! Thanks!
Open enrollment is going on in our company and we have to decide on the HSA plan and funding. I've been investing in my HSA since it started and doing well, but it's hard to "spread the word" without feeling like I'm bragging. What's a good way to share the power of investing in the HSA for the future? As pointed out in previous shows, most people will only put in what they think they will use for the year and are missing out on some powerful tax-free growth. I've looked into some of the older Money Guy videos and articles, but they are either little snippets or a few years old. Not bad, but not as good as the recent content that has been put out.
Knowing that international and bond funds have not performed well for a while, does it make sense to continue investing in those two types of funds?
When you have Roth v. Traditional accounts - a lot of people talk about them pre-tax post-tax advantages - if you are maxing them out, and can afford to do so, wouldn't that be a larger part of the strategy before moving into traditional investing accounts?
traditional investing account (no tax advantaged)
Love the show! What's your opinion on the rise of "financial coaches" commonly found on social media? Do they have their place alongside certified financial advisors/planners, or should all financial coaching be handled by licensed professionals?
Disclaimer, I haven't personally dealt with any financial coaches. When I hear "coach," I imagine someone who is there for support, encouragement, and to help with more of the behavioral/emotional aspect of your personal finances. This is a really important aspect of money, and one that's often overlooked; someone may not necessarily need certifications to help with this aspect. For more of the nuts & bolts financial planning, I do think a fee-only CFP® is worth considering. Anyone can call themselves a financial advisor or financial coach, and you want to make sure the person you are allowing into your financial life has the experience and credentials to help manage your money.
Good question.
- Steve from Seattle
Hey Daniel...I know you are only mentioning backdoor Roths, but do you think that is just the beginning? Do you think the Roth option will go away altogether? I currently contribute 6% to my Roth 401K and am looking to start a Roth IRA once I am debt free (beginning of 2023). Thanks for the help. Have a great day.
I think it is unlikely Roth goes away anytime soon. Whoever is in power politically, it is probably better for them to receive tax dollars now (from individuals paying taxes now to contribute to Roth accounts) rather than tax dollars in 5, 10, 20, 30, 40 years (from individuals who contributed to pre-tax accounts). If you look at the long-term, yeah, Roth IRAs probably aren't as beneficial to the government from a "how much tax revenue can we collect" standpoint. But politicians and political parties don't often think that long-term, usually they're focused on the next election and allowing Roth accounts means more tax revenue upfront, which means more money available to accomplish whatever policies they're trying to accomplish.
Also means less they will need to pay out to retirees. Putting the savings onus on the individual saves the government much more in future payments then lost growth tax revenue. Roth’s are likely here to stay.
I am currently at step 7 and looking to build up a taxable account. Should I start simple with just a total us stock index fund or should I mix in international for the foreign tax credit and tax loss harvesting?
i am interested in tax free retirement income steam, i have been doing a mixture of pre-tax 401k and after tax with roth conversion. Let's say backdoor and mega backdoor is completely gone, would it be making more sense to do pretax, or do Roth?
We have marginal tax bracket of 35%, the thought process is 2 x 19500 can save about $12000 to put after tax brokerage account or currently the after tax 401k as of right now.
It is still appealing to get rid of the uncertainly down the road and do Roth, then, the tax burden is also kinda high right now, when adding other FICA tax, etc.
Thanks for your comments and feedback in advance.
In a world of building a better future for our children and ever changing path for what there career could be, should a 529 be the best route or maybe have an IRA or something different as an Avenue of saving for them but having the money free enough to where if they do not go to school they could at least have a down payment for a home?
Hey Daniel, aka FYI by FTE the CFP!
sometimes I still think of him as "Intern Daniel"... haha
My 403b combines Roth and pre-tax contributions together. Should I put future Roth contributions in a separate fund in an effort to keep Roth money separate from pre-tax money?
How could I get the Money Guys to take me on as a client?
Hi Gwen! Check out our Work With Us page to learn more and submit a form: https://www.moneyguy.com/work-with-us/
Did $34,192 as a Roth conversion with tax rate of 15.4%. Took my RMD $13436.71. Should I do more with the back door Roth?
Do you know if the proposed legislation still includes changing the marginal tax rates and standard deductions from the tax cut and jobs act?
Aloha! I recently received a 25% raise through a promotion. I'm currently saving for a duplex to "house hack". For the past year, I reduced my Roth 401k contribution to 15% (excluding employer match) to save more cash for a house, but with rising inflation across the board, should I be putting more money aside for day to day expenses? Should I lower my retirement savings rate to save more cash for a duplex?
Wages have really taken off lately and it seems like everyone is hiring. My husband has been a stay-at-home dad for about five years now and is planning on re-entering the workforce in the near future. He will be making considerably less than I do and is considering working only part time. What's the best way for us to use the extra income? We are in our mid-thirties and on step nine of the FOO.
Hey Daniel! My husband and I are needing to buy another car. We have been saving for quite some time to make this purchase. Should we finance the car? Or pay cash?
Our bank isn't open on weekends, and we live in a rural area- about 2 to 3 hours from anywhere we can buy a car. How do you manage a weekend car purchase if you aren't financing and your bank isn't open?
Should I do all Roth? I’m divorced with 2 kids. I’ll have a size able pension when I retire. Online calculator says 1.6 million cash out or about 8k/month payment. I currently have 250k in retirement (80k of this is Roth). Social security should be about 3k/month and I make $145k/yr. I live in California.
Forgot to mention that I’m 43 years old.
What do you think about holding part of a large emergency fund in I bonds? My rudimentary understanding is the quarterly interest is based on the inflation index which seems appealing right now. This money is for possible vehicle replacement in the next 3-5 years.
At what net worth is it a good idea to have an estate plan and not only a will?
Today is my 30th birthday and happy to be fully representing the messy middle with a 1-year-old!
My wife and I have a strong retirement nest egg but are not sure how to navigate college savings.
Granted we have no idea if our child or maybe eventual children will want to go to college.
Currently, we have a 529 plan set up but, is there any value in setting up a different investment account for our child even though it won't have the tax benefits of a 529 we know it won't be penalized if not used for school expenses? what even are my options?
I’m in this messy middle as well. I have both 529 and a custodial account open. 529 for education only and custodial for education and other expenses not covered by 529. Custodial account leaves me a little worried but I hope I’m raising financially responsible kids since they’ll have control after hitting legal age.
I assume if we're having these thoughts we'll raise financially responsible kids but it's just so hard to know so many variables. that is one thing that crossed my when looking at some account options such as a custodial account.
I have a relative who is 55 and is now just starting to get active on building for retirement.
She makes $40k a year at her new job. She will be on moving to step 5 of the FOO as she will be clearing her credit card debt of $1000 this month.
Seeing as she may not be retiring till at least 70, would you still recommend a target date retirement index fund for her ROTH IRA if the percentage of bonds in the fund will be higher, as opposed to going aggressive into a sole S&P500 index fund?
If you are older than your spouse by several years, should you focus on Roth conversations with your account first, even if your IRA is lower in value.
How far apart? We are 1 year apart, so not a big deal. And what is the relative size. If you are several years, I would start on the older. But also take into account the relative size, as it will take longer to conv the larger.
Just two years apart, but hers is twice as much.
Not sure you will get this... Assuming you file married, the total is the determining factor. I suggest calculating what you can convert, use half for each, when yours is done, use all of that for hers. You do not mention ages or current employment.
Plan out the many years that you can convert, this will help you decide how much; do you go to the top of 12%, top of 22%, or top of 24%. Note that 22% today becomes 25% tomorrow. Don't start small now, determine if you need to be big the entire time.
Both retired, just turned 70 & 68 & top of 22%. Is it good to prioritize high dividend paying ETFs and stocks so as to increase tax free income and keep some growth in tax deferred and tax able accounts?
Hey!
I am a 68 yo retired fellow that enjoys thinking about finances. I would be happy to discuss this, but lets move to email and perhaps the phone as that is easier.
I built a spreadsheet to examine the nuclear blast that trad IRA cause. I am currently working to convert about $1.3M at today's lower tax rates.
Charles
[email protected]
Has inflation affected the calculation used to decide whether or not to delay social security? If the cumulative COLA is greater than the delayed benefit, then is it worth collecting sooner?
I am in the wait period at 68. Interesting question. As I understand it, one gets both the COLA and the DRCs, so it should not change the calculus.
My wife is a school teacher and will retire with a pension. How do you account for pension income when looking at the 20/25% of income?
You can always include your own pension contributions in your savings rate, and can include employer contributions if your gross income is under $200k. If you aren't sure what your or her employer's pension contributions are, you should be able to pull her annual pension statement and see.
It is important to know if she pays SS or not. If not, look at the WEP/GPO rules.
My company doesn't have a 401k match. As long as I can still meet my other financial goals, is there any reason to dollar cost average into my Roth 401k over the whole year instead of just filling it up in the first six months? (I do this with my Roth IRA and wondered if I should do the same with my Roth 401k.) After my two Roth accounts are maxed out I invest in my taxable brokerage account. Thanks for the help!
I'm in step 9 of Foo and I'm doing the 3 bucket strategy. Which accounts do you recommend putting bonds, and growth stocks in?
Should you always roll over your retirement accounts to your new employer? I have a 457b governmental account that allows withdrawals at any age as long as I leave the employer. If I take a position elsewhere, I would rather not rollover to a new type of account and simply keep with my previous employer. Any cons to watch out for with this method?
Curious to know if Roth contributions are more valuable with the proposed legislation… for someone who is 28 does it make sense to go over the 30% combined marginal tax bracket to be able to get Roth dollars
FTE Daniel: How do you recommend valuing a pension in retirement planning? I will be fortunate enough to be eligible for a pension after serving >20 years in the military. I will start receiving the pension when I retire from the military at age 43 (I am currently 37). My wife and I are diligent savers and investors and have accumulated approximately 900K across taxable and non taxable accounts, but am unsure how to account for the pension. Appreciate your guidance and love the show!
Can my spouse have a Family HSA with the intention to max it out at 7200 if I elect a low deductible plan at my work and he elects the high deductible plan at his?
Hi Daniel, what advice can you give about tax burden implications for a brokerage account? My wife and I buy and hold the Fidelity S&P 500 index fund and the Fidelity Large Cap Index Fund. Thanks!
I am thinking about getting a new car since the used car market is crazy right now. I make more than enough where the truck I want would be well un 10% of my annual and i would still be able to fully max out retirement acounts and save more on top of that. But as my first big purchase it feels werid to be spending so much? Any suggestions on how to get over the fear of spending?
What is the best way to use a Donor Advised Fund as part of step 7-9. Is it best to think of those funds as step 8 pre-paid future expenses? What else falls into step 8 as we are saving 15% beyond the 19.5k and Roth/HSA are maxed as well...
Daniel - I understand the power of contributing to an HSA, now that open enrollment is coming up, what considerations other than the tax advantages should I look at when deciding if a high-deductible plan is a good fit for my family? My wife and I are already in step 5 (sans the HSA) of the FOO. Both of us worked outside the US until 2014 so we feel we are a little behind in retirement savings.
If you think you might have any major medical expenses coming up (like having a baby), a better plan may be worth considering. Otherwise, if you are young and healthy and don't imagine having that many medical expenses, an HDHP is certainly worth a look.
Thank you so much!
I retired last year and have a paid off house and retirement of about a million. 10% is in Roth and 90% in IRA. How can I tell if doing Roth conversions would be helpful to me during these initial few years of retirement?
Calculate what your taxes will be over time. Those trad IRA RMD will move you up the tax brackets and there will someday be a Widow Tax Trap. Convert while tax rates are on sale.
Other than the Moneyguy show, what other Personal Finance podcasts are worth subscribing to?
I enjoy listening to the Animal Spirits podcast and occasionally Odd Lots. Outside of those two I don't really listen to any financial podcasts, although we're big fans of White Coat Investor, Stacking Benjamins, and Minority Mindset.
Here's my list. Curious what Daniel would say as well.
The Money Guy Show
The Rob Berger Show / formerly Dough Roller
White Coat Investor
The Retirement Answer Man
Taxes in Retirement / Andy Panko
Retirement Starts Today
Stacking Benjamins
Your Money Your Wealth
The Wealthability Show
Radical Personal Finance
Marriage Kids and Money
The FI Show
Choose FI
Retirement Manifesto (blog)
Main Street Business Podcast
Directed IRA Podcast
Financial Samurai
Faith and Finances
Financial Advisor Success
I enjoy Your Money Your Wealth; a pair of fellows out of S. Cal. Josh Scandlen gives a lot of calculations, but he has some opinions.
haha.. YMYW have some good content, but they can be a bit snarky!
But it is entertaining! BTW, do you sleep? There is also the "2 cents" for the beginner.
"2 cents" is great! I have my 13 year old watch some of them. I pretty much always have airpods in at work listening to a podcast in the background.
Hi FTE!
Just crossed step 7 of the FOO. I am in a higher education program part-time while I work full-time (200k hh income, 28 years old). I have $35k of tuition left in my program. Option 1 is to used the rest of my cash (beyond step 7) to pay for my final year of tuition. Option 2 is to invest that cash and use student loans to pay for tuition. I'm leaning towards option 2 since I can service the debt and it would be <3% interest once I refi, and give me another $35k in market.
Any advice on either option?
Thanks!