Author Topic: Advising my son...  (Read 1360 times)

eyemgh

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Advising my son...
« on: December 27, 2017, 11:48:20 PM »
I'm a classic, non-musdachian, in that I maxed my 401k, and blew the rest. Suddenly, at age 55, I saw the light and decided to be more mindful in my spending. I have plenty in my 401k, and really do like my job, but it got me thinking, my son could do it completely differently.

He's much more a natural mustachian than I, plus he'll have some intrinsic advantages. He will be debt free, with at least $5k in a Roth, with a paid for, reliable car, by the time he starts a job starting at least $70k at age 22.

We ran the numbers on 401k and he can amass plenty if he maxes between 22 and 35 and then never contributes again, assuming 7%.

The question is, where does the money for earlier FI come from? Should he contribute a little less and a little longer to his 401k in order to free up post tax savings to invest to live off in early retirement?

In other words, max the 401k or not?

Thanks!
« Last Edit: December 27, 2017, 11:53:09 PM by eyemgh »

marty998

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Re: Advising my son...
« Reply #1 on: December 28, 2017, 12:09:00 AM »
The trick is to do both!

On $70k - if he contributes $18k to his 401k, and lives off say $20k annually, then after taxes etc he could still be investing $20k a year at least...

Add in pay rises over the next few years and $20k per year could easily become $30k+

Entirely doable.

Wayward

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Re: Advising my son...
« Reply #2 on: December 28, 2017, 11:50:30 AM »
Your son is super lucky to have such an educated, thoughtful parent and this incredible opportunity!

I would suggest reading http://jlcollinsnh.com/2013/06/04/my-path-for-my-kid-the-first-10-years/

Following these steps should set him up for life :)

eyemgh

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Re: Advising my son...
« Reply #3 on: December 28, 2017, 12:05:47 PM »
Great post. Thanks!

I do have some questions about assumptions going forward.

We figured $47k after max 401k contribution and taxes. What we are struggling with is coming up with an accurate model of monthly expenses. The biggest thing is, he may end up in the bay area. That's where lots of the companies that do what he does are. Rent is a BIG unknown. We have car insurance and gas figured. Also, even though it is anti-mustachian, food out. It's one of his only indulgences. He loves great food.

What's a reasonable non-ramen monthly budget for food? What else can you think of?

Thanks!

ysette9

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Re: Advising my son...
« Reply #4 on: December 28, 2017, 12:12:27 PM »
In the Bay Area the most important thing is to minimize housing expenses. Stuff like food will often come in a distant second so focus first on getting the most bang for his buck. The best way to do that is plan on shared housing for as long as possible. Roommates, housemates, etc. Where exactly he is in the Bay Area will make a big difference as well. Does he know where he will be?

eyemgh

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Re: Advising my son...
« Reply #5 on: December 28, 2017, 12:22:02 PM »
He doesn't know even if he'll be in the bay, yet, but the bay or LA and the surrounds are a distinct possibility.
« Last Edit: December 28, 2017, 12:48:50 PM by eyemgh »

boarder42

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Re: Advising my son...
« Reply #6 on: December 28, 2017, 12:34:23 PM »
To answer your actual question you ended the post with. You use your 401k money in earlier fire.

See
https://www.madfientist.com/retire-even-earlier/
And this for the Roth ladder
https://www.madfientist.com/how-to-access-retirement-funds-early/

He'll just need a 5 year bridge with brokerage and Roth accounts to start tapping that 401k money.

dtl

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Re: Advising my son...
« Reply #7 on: December 28, 2017, 04:36:35 PM »
Re: housing, I would check craiglist for the areas to see what the going rates are for different types of living situations (roommates, studios, 1bdrms) this will give you a good idea about the $$ range for housing in the area. In the bay area, consider cost of public transportation, BART, ferry, and bridge tolls can quickly add up.