Author Topic: "NOBODY has ever said they put too much in their 403B"  (Read 8808 times)

trashmanz

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"NOBODY has ever said they put too much in their 403B"
« on: January 28, 2016, 11:45:34 AM »
Looking for some sanity checks from the collective mind here.  I'm thinking of having my wife stop contributions to her 403B.  She gets no matching by her work and goals are that we want to easier access to funds for 1) Business startup costs, 2) Buying an investment property to diversify our income stream, and possibly 3) Having a fund for helping kids with college expenses.  The financial planner at her work was skeptical that anyone should stop contributing to their 403B, stating flatly "NOBODY has ever said they put too much in their 403B"

A little about us currently:  Married aged 37 and 36, 3 kids, maybe 1 on the way.  Living in HCOL area (well just housing, we don't partake in lavish luxury and are able to eat relatively inexpensively).  Expenses about 38-40K a year for our family of 5, not including mortgage which is a hefty 25K a year.  26 more years to pay off the remaining 439,000.  Currently about 300-350 in imaginary zillow equity.  No other debt besides the mortgage. 

Wife brings in about 110,000/yr in a job she loves (I don't think she will quit willingly).  I bring in about 100,000 in a part time stay at home job I tolerate but I'm thinking to make a transition to stay at home dad and take care of the kids full time while also starting my own business/writing/blogging/enjoying life.  Life is too short to miss out, the kids are still young (aged 2, 4 and 6) and I love being with my family above all else in life right now.  Realistically I'll be contributing more income to the family in the future as I like to keep active, but I am doing all my projects assuming I'm FIRE/dead weight in the $ calculations.

Currently we have about 450K in various retirement accounts (about 100K of that is in ROTH).  Also have almost 100K in cash/taxable acct. and a 25K in 529 plans for kids (which I regret setting up and will not add more to). 

Here is a mindmap I did of some possible outcomes for us.





If our mostly total stock market vanguard funds do what they have historically, then the 450K we have should be enough to reach a million in 23 years which should be able to fund a decent 40K drawdown by itself.  Again, unlikely wife would want to stop working, so we can cover mortgage and expenses and still save some money until then. 

As the main tier of support, the 450K retirement seems possible to support us (20-26 years from now) if we target spend about 35/40K a year after all kids are gone and mortgage is paid (at 26 years or paying down the 146K owed in 20 years) or we are in a smaller house that is paid for, or RV or whatever.

As a next tier of support,
if the retirement disappears for some reason, she has pension vested at 7,000 but can get up to 23,000 a year if she works another 20 years.  SSI if she continues to work may be as high as 30K possibly if I did the numbers right.  If both of us were not working anymore after today it seems we should still have access to 22K combined SSI and the 7K pension she already has vested and we could survive frugally on that in retirement I think (we are talking one possible case scenario if all else fails).  So as is we should have ~29K, but if SSI is to be solvent and she continues working this may be as much as 23K pension, 30K SSI, 11K my SSI (if I work no more), and that should be more than enough for a 35/40K bountiful lifestyle.

As a next tier of support, if for some reason we squander all our retirement and also have no pension or SSI, we may have hopefully paid off our mortgage we could cash out the house (potentially a 1 Million $ asset) in 26 years and then make due with the proceeds ~30/40K drawdown, living in an RV, slow travel, etc.  I'm not particularlly attached to this house, it is just roof and walls to keep the family warm and is really more than we need now, but definitely more than we need with an empty nest.

As a final tier of support, we are not likely to squander the 100K in taxable accounts/savings and should be able to keep putting away some additional funds every year.  Assuming we can put in 12K a year this route may give us close to a million retirement as well (assuming we invest with return of 6% after inflation).  Ideally though this would be spent on things that might not provide a return on our money like business startup costs or money to kids for college, which is why it isn't really earmarked for retirement per se, but it may be there if all else fails. 

So, in all, if multiple tiers of support collapses it seems that we should be ok as long as one tier can hold us through.  However, it seems reasonable that based on historical stock market/real estate performance a possible outcome is much more than we really need if we are going by a minimum 30/40K retirement spend. 

There are some potential high costs of having 3/4 kids and also having parents that may need help in the future, and health care expenses etc.  So there has to be some leeway for some setbacks, but still it seems that having additional non-retirement funds would be good to have.  I thought about continuing contributions and then trying a ROTH conversion ladder to get the funds out later, but if my wife continues working it will be taxed heavily on withdrawal anyway, so not sure if its worth the trouble?

The point of this whole post is that I don't see the point in continuing to put in ~15K into my wifes 403B which has no matching when I would rather be moving towards the other goals above (business, real estate, kids).  What says the collective mind, what are some concerns that I didn't account for, or any other input?  What would everyone here do with my goals in mind?
 
« Last Edit: January 28, 2016, 01:38:33 PM by trashmanz »

norabird

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #1 on: January 28, 2016, 11:51:14 AM »
'Business startup costs' is a little fuzzy as is (currently) the hypothetical investment property, but I think it's fine if you'd rather, effectively, start investing in other ways, such as a business or rental. If you think you have enough cash for yourselves and want to save in 529s for the kids, that's fine too. Really seems a matter of your personal priorities and preferences. However keep contributing for now (or perhaps funnel some straightaway into the college fund) until you have actual info on what type of business investment you're considering and until you've figured out how to go ahead with the rental. Have you actually looked at properties, would it be direct management, etc. Make the choice to stop the 403b once you know the next step--and figure out what that step is.

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #2 on: January 28, 2016, 11:58:45 AM »
'Business startup costs' is a little fuzzy as is (currently) the hypothetical investment property, but I think it's fine if you'd rather, effectively, start investing in other ways, such as a business or rental. If you think you have enough cash for yourselves and want to save in 529s for the kids, that's fine too. Really seems a matter of your personal priorities and preferences. However keep contributing for now (or perhaps funnel some straightaway into the college fund) until you have actual info on what type of business investment you're considering and until you've figured out how to go ahead with the rental. Have you actually looked at properties, would it be direct management, etc. Make the choice to stop the 403b once you know the next step--and figure out what that step is.

Yes, you are correct, it is a bit vague as I haven't really had the free mental capacity to plan out what I want to do in that regard.  As far as the investment property, costs are so high here, that realistically a small single family house would cost about 500K nearby and that would require about 125K down at 25%, so we are still short for that downpayment, and also would not have enough to fix it up and also have a buffer in case we can't rent etc.  So in my mind, we probably should have access to 150K in liquid cash to begin seriously looking to invest in the local market (but still also not entirely convinced that is a sensible thing in the current market).   Right now we don't have enough to buy any real estate investment locally here and also have an emergency fund.  There still is the possibility of investing out of state though or out of area, but thats another discussion I suppose...

I think your point is good though that it is probably prudent to continue with the default max 403B contribution unless we are clear how the money will be working for us if it isn't in that account.
« Last Edit: January 28, 2016, 12:05:30 PM by trashmanz »

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #3 on: January 28, 2016, 12:03:27 PM »
If you think you have enough cash for yourselves

This is my main struggle as well.  What is enough?  If we fix our retirement spend at 35K is our current assets enough?  I struggle to know since it is difficult to see into the future as to what will happen while also avoiding the possibility of over contributing. 

norabird

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #4 on: January 28, 2016, 12:19:08 PM »
I wouldn't really worry about over-contributing. If you both are unsure you're saving enough and want to save for your kid's schooling, perhaps put the max into a roth ira each year on top of everything? The roth money can go to you if you need it or can be pulled out for the kids and so is more flexible than a 529. Of course that's not a lot of money annually but your kids are young and it will grow. It can at least give you peace of mind in its accessibility. Remember that there may be unexpected health costs down the line, too.

I think usually it isn't recommended to buy an investment property somewhere HCOL so read what you can find on the real estate and landlording forum. There is a cash flow formula used to determine profitability but I am in the dark about details! And of course a LCOL area would require a management company, probably. Duplexes are usually more popular than single family I think. It does not seem to make financial sense for you to buy a costly single family. You can always invest in more REITs instead? Unless you have a passion for rehabbing. I doubt that since you want to spend more time with your young kids.

Do your research and I think the answer to what your savings should do for you--whether 403b, 529, new startup, or rentals--will become clear.

Le Dérisoire

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #5 on: January 28, 2016, 12:45:48 PM »
I bring in about 100,000 in a part time stay at home job

100000$ for a part time stay at home job? What is it? Can I have your job?

It sounds like these binary options adds I see on Facebook.

Dicey

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #6 on: January 28, 2016, 12:52:13 PM »
Funny, I believe there is much merit to your thinking, but it does qualify you as an outlier, which is something to be proud of, IMO. It's not mentioned often, but for mustachians, it's entirely possible that you could end up with more income in retirement than during your working years. All of our projections look like we're going to be in that lucky boat (Why yes, it is named the SS FWP.), which makes me cringe that I avoided paying taxes, when in fact, it would have been a far smaller hit back then than it will be when the withdrawals start. Esteemed minds have said that I still benefitted from the tax delay, but if since I was a good saver anyway, I'm not so sure I agree with that point. True for the masses, but not guaranteed for mustachians.

Another key point if you're gunning for FIRE is that you are going to need money to live on until you can start withdrawing from your retirement accounts (Yes, I know about the loopholes, but what if they get closed?) or if your FIRE date happens during a market downturn and you don't want to draw down too much too early, you'll be glad for big, fat taxable investment accounts.

My answer is a qualified "Yes! provided that you put away as much or more in non-retirement investment vehicles. I'm okay with things other than equities, but proceed very carefully with anything new, such as rental property. Do your homework and always provide a worst-case scenario buffer, because shit does happen.

Note to all the "Get a Roth" people - I'm no tax expert, but IIRC, at their income levels, there is little or no Roth option available to them. OTOH, with three point maybe kids, they might squeak in under the wire, but it will be close.

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #7 on: January 28, 2016, 01:01:22 PM »
Funny, I believe there is much merit to your thinking, but it does qualify you as an outlier, which is something to be proud of, IMO. It's not mentioned often, but for mustachians, it's entirely possible that you could end up with more income in retirement than during your working years. All of our projections look like we're going to be in that lucky boat (Why yes, it is named the SS FWP.), which makes me cringe that I avoided paying taxes, when in fact, it would have been a far smaller hit back then than it will be when the withdrawals start. Esteemed minds have said that I still benefitted from the tax delay, but if since I was a good saver anyway, I'm not so sure I agree with that point. True for the masses, but not guaranteed for mustachians.

Another key point if you're gunning for FIRE is that you are going to need money to live on until you can start withdrawing from your retirement accounts (Yes, I know about the loopholes, but what if they get closed?) or if your FIRE date happens during a market downturn and you don't want to draw down too much too early, you'll be glad for big, fat taxable investment accounts.

My answer is a qualified "Yes! provided that you put away as much or more in non-retirement investment vehicles. I'm okay with things other than equities, but proceed very carefully with anything new, such as rental property. Do your homework and always provide a worst-case scenario buffer, because shit does happen.

Note to all the "Get a Roth" people - I'm no tax expert, but IIRC, at their income levels, there is little or no Roth option available to them. OTOH, with three point maybe kids, they might squeak in under the wire, but it will be close.

Thanks for the input, yes the ROTH is phased out for us currently so not really an option, but if I am going to stop working then it would be possible, so definitely something that I would consider in that scenario (I don't really see a downside large to ROTHs as you can always at least take out what you put in without penalty).   

You bring up a good point I hadn't really considered about the taxes on withdrawals coming back during retirement if the nest egg gets too excessive. 

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #8 on: January 28, 2016, 01:06:07 PM »

I bring in about 100,000 in a part time stay at home job

100000$ for a part time stay at home job? What is it? Can I have your job?

It sounds like these binary options adds I see on Facebook.

Its IP transactional legal work, but although its "part time" in the field and I don't have benefits, I still end up having to put in a fair amount of billable work, just less than the full time folks.  In reality my wife actually works less hours than I do since she doesn't "take work home" and gets everything done in two 12 hour shifts for the week.

PhysicianOnFIRE

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #9 on: January 28, 2016, 02:20:33 PM »
Funny, I believe there is much merit to your thinking, but it does qualify you as an outlier, which is something to be proud of, IMO. It's not mentioned often, but for mustachians, it's entirely possible that you could end up with more income in retirement than during your working years. All of our projections look like we're going to be in that lucky boat (Why yes, it is named the SS FWP.), which makes me cringe that I avoided paying taxes, when in fact, it would have been a far smaller hit back then than it will be when the withdrawals start. Esteemed minds have said that I still benefitted from the tax delay, but if since I was a good saver anyway, I'm not so sure I agree with that point. True for the masses, but not guaranteed for mustachians.

Another key point if you're gunning for FIRE is that you are going to need money to live on until you can start withdrawing from your retirement accounts (Yes, I know about the loopholes, but what if they get closed?) or if your FIRE date happens during a market downturn and you don't want to draw down too much too early, you'll be glad for big, fat taxable investment accounts.

My answer is a qualified "Yes! provided that you put away as much or more in non-retirement investment vehicles. I'm okay with things other than equities, but proceed very carefully with anything new, such as rental property. Do your homework and always provide a worst-case scenario buffer, because shit does happen.

Note to all the "Get a Roth" people - I'm no tax expert, but IIRC, at their income levels, there is little or no Roth option available to them. OTOH, with three point maybe kids, they might squeak in under the wire, but it will be close.

Thanks for the input, yes the ROTH is phased out for us currently so not really an option, but if I am going to stop working then it would be possible, so definitely something that I would consider in that scenario (I don't really see a downside large to ROTHs as you can always at least take out what you put in without penalty).   

You bring up a good point I hadn't really considered about the taxes on withdrawals coming back during retirement if the nest egg gets too excessive.

If you don't have traditional IRA money in your name, you are eligible for a backdoor Roth (no income limit). Same goes for your spouse.  That's $11,000 in Roth rather than taxable each year if you're both able.  If your spouse has an IRA, she can transfer that money into her 401(k) to become eligible for the backdoor Roth.  You may not have that option.
http://whitecoatinvestor.com/backdoor-roth-ira-tutorial/

If you find yourself struggling to stay within the 15% tax bracket in retirement and you don't need the extra $ that's coming in, consider opening a donor advised fund and become a philanthropist.  Donate as much as you need each year to keep taxable income below the threshold.

MDM

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #10 on: January 28, 2016, 03:45:13 PM »
..."part time" in the field and I don't have benefits
W-2 or 1099 income?  In other words, could you do an individual 401k?

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #11 on: January 28, 2016, 05:10:30 PM »
Funny, I believe there is much merit to your thinking, but it does qualify you as an outlier, which is something to be proud of, IMO. It's not mentioned often, but for mustachians, it's entirely possible that you could end up with more income in retirement than during your working years. All of our projections look like we're going to be in that lucky boat (Why yes, it is named the SS FWP.), which makes me cringe that I avoided paying taxes, when in fact, it would have been a far smaller hit back then than it will be when the withdrawals start. Esteemed minds have said that I still benefitted from the tax delay, but if since I was a good saver anyway, I'm not so sure I agree with that point. True for the masses, but not guaranteed for mustachians.

Another key point if you're gunning for FIRE is that you are going to need money to live on until you can start withdrawing from your retirement accounts (Yes, I know about the loopholes, but what if they get closed?) or if your FIRE date happens during a market downturn and you don't want to draw down too much too early, you'll be glad for big, fat taxable investment accounts.

My answer is a qualified "Yes! provided that you put away as much or more in non-retirement investment vehicles. I'm okay with things other than equities, but proceed very carefully with anything new, such as rental property. Do your homework and always provide a worst-case scenario buffer, because shit does happen.

Note to all the "Get a Roth" people - I'm no tax expert, but IIRC, at their income levels, there is little or no Roth option available to them. OTOH, with three point maybe kids, they might squeak in under the wire, but it will be close.

Thanks for the input, yes the ROTH is phased out for us currently so not really an option, but if I am going to stop working then it would be possible, so definitely something that I would consider in that scenario (I don't really see a downside large to ROTHs as you can always at least take out what you put in without penalty).   

You bring up a good point I hadn't really considered about the taxes on withdrawals coming back during retirement if the nest egg gets too excessive.

If you don't have traditional IRA money in your name, you are eligible for a backdoor Roth (no income limit). Same goes for your spouse.  That's $11,000 in Roth rather than taxable each year if you're both able.  If your spouse has an IRA, she can transfer that money into her 401(k) to become eligible for the backdoor Roth.  You may not have that option.
http://whitecoatinvestor.com/backdoor-roth-ira-tutorial/

If you find yourself struggling to stay within the 15% tax bracket in retirement and you don't need the extra $ that's coming in, consider opening a donor advised fund and become a philanthropist.  Donate as much as you need each year to keep taxable income below the threshold.

I haven't thought about that but I would need to roll about 120K from our separate IRA accounts into our 401K and 403B accounts, and those accounts have higher fees than Vanguard, so I'm not sure its worth the trouble to get some money into a ROTH.  But I will run the numbers and see if it might be.  I'm still not sure the specifics on rolling an IRA into a 403B, but at least one site suggests this is possible. 

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #12 on: January 28, 2016, 05:11:17 PM »
..."part time" in the field and I don't have benefits
W-2 or 1099 income?  In other words, could you do an individual 401k?

W-2 and I have a 401K that I've stopped contributing to as well, so not sure how an individual 401K would change things?

onlykelsey

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #13 on: January 28, 2016, 05:14:39 PM »
Its IP transactional legal work, but although its "part time" in the field and I don't have benefits, I still end up having to put in a fair amount of billable work, just less than the full time folks.  In reality my wife actually works less hours than I do since she doesn't "take work home" and gets everything done in two 12 hour shifts for the week.

Off-topic, but would love to hear more about that.  I'm not in IP, but biglaw transactional work and pretty comfortable taking a salary hit for a part-time gig at some point.

MDM

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #14 on: January 28, 2016, 05:56:08 PM »
..."part time" in the field and I don't have benefits
W-2 or 1099 income?  In other words, could you do an individual 401k?
W-2 and I have a 401K that I've stopped contributing to as well, so not sure how an individual 401K would change things?

Ok, I thought "don't have benefits" implied "don't have access to a 401k."  Given that you do have 401k access, what do you think about the following?
 1) Both contribute $18K to your respective traditional accounts, saving 28% for most, and 25% for the rest, in federal tax alone.  Do you have state income tax also?
 2) Doing #1 puts you under the Roth limit so you can also put $11K into Roth accounts.
 3) When you retire, you could roll your 401k over to your IRA, then convert tIRA to Roth up to the top of the 15% federal bracket each year.

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #15 on: January 28, 2016, 06:58:00 PM »
..."part time" in the field and I don't have benefits
W-2 or 1099 income?  In other words, could you do an individual 401k?
W-2 and I have a 401K that I've stopped contributing to as well, so not sure how an individual 401K would change things?

Ok, I thought "don't have benefits" implied "don't have access to a 401k."  Given that you do have 401k access, what do you think about the following?
 1) Both contribute $18K to your respective traditional accounts, saving 28% for most, and 25% for the rest, in federal tax alone.  Do you have state income tax also?
 2) Doing #1 puts you under the Roth limit so you can also put $11K into Roth accounts.
 3) When you retire, you could roll your 401k over to your IRA, then convert tIRA to Roth up to the top of the 15% federal bracket each year.

Thing is that I don't think my wife is one for early retirement, she likes her job and will probably continue to work, so if all keeps going as is without any additional contribution past today it is possible the retirement accounts could be worth 2 million or more if history is any indication, which is far in excess of what we would need to live comfortably (but who knows of course barring any medical problems or emergencies etc.) especially given all the other sources of savings as above.  If I start drawing down while she is still working then it would be at 28-25% bracket not 15% so I'm not sure retirement accounts is something we should still keep funding over real estate or other more readily accessible accounts compared to trying and planning for ROTH laddering to try to gain access to funds.

MDM

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #16 on: January 28, 2016, 08:13:22 PM »
Thing is that I don't think my wife is one for early retirement, she likes her job and will probably continue to work, so if all keeps going as is without any additional contribution past today it is possible the retirement accounts could be worth 2 million or more if history is any indication, which is far in excess of what we would need to live comfortably (but who knows of course barring any medical problems or emergencies etc.) especially given all the other sources of savings as above.  If I start drawing down while she is still working then it would be at 28-25% bracket not 15% so I'm not sure retirement accounts is something we should still keep funding over real estate or other more readily accessible accounts compared to trying and planning for ROTH laddering to try to gain access to funds.
Real estate may well be better for you - that's a related but separate discussion.

$115K/yr with $18K pre-tax deduction and 6 exemptions (if baby #4 appears) puts you in the 15% federal bracket for $14,500/yr of tIRA->Roth conversions.  Might not be best for you but something to consider.

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #17 on: January 28, 2016, 08:43:37 PM »
Thing is that I don't think my wife is one for early retirement, she likes her job and will probably continue to work, so if all keeps going as is without any additional contribution past today it is possible the retirement accounts could be worth 2 million or more if history is any indication, which is far in excess of what we would need to live comfortably (but who knows of course barring any medical problems or emergencies etc.) especially given all the other sources of savings as above.  If I start drawing down while she is still working then it would be at 28-25% bracket not 15% so I'm not sure retirement accounts is something we should still keep funding over real estate or other more readily accessible accounts compared to trying and planning for ROTH laddering to try to gain access to funds.
Real estate may well be better for you - that's a related but separate discussion.

$115K/yr with $18K pre-tax deduction and 6 exemptions (if baby #4 appears) puts you in the 15% federal bracket for $14,500/yr of tIRA->Roth conversions.  Might not be best for you but something to consider.

True, that would be within the 15% bracket.  It is worth considering keeping up with retirement contributions, however I am leaning towards the flexibility of keeping a taxable account (maybe setup with the permanent portfolio holdings to minimize volatility) as "dry powder" (potential RE investment should there be an opportunity, or a business venture) or in 12 years to help kids with college expenses (should they decide to go), or emergency measures should we need it. 

Playing with Fire UK

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #18 on: January 29, 2016, 04:46:03 AM »
Can't help with 403b specifics.

The FP I spoke to said they had never met anyone who wanted to spend less on handbags, they may be right; but that doesn't mean that there can't be a first time; or that their narrow experience means I need more handbags.

The UK pension system is different (we don't have a roth conversion ladder option and our governments can't decide at what age we will be able to access our personal pensions); but over on the UK FIRE blogs talk of having too much in a SIPP (or other pension account) is fairly common.

One of the things I'm considering is a big-ass mortgage that I can pay off when I access my pension to balance it out if I end up with too much locked away until I'm old enough to be responsible with the money I saved by being responsible /rant.

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #19 on: January 29, 2016, 08:17:08 AM »
Can't help with 403b specifics.

The FP I spoke to said they had never met anyone who wanted to spend less on handbags, they may be right; but that doesn't mean that there can't be a first time; or that their narrow experience means I need more handbags.

The UK pension system is different (we don't have a roth conversion ladder option and our governments can't decide at what age we will be able to access our personal pensions); but over on the UK FIRE blogs talk of having too much in a SIPP (or other pension account) is fairly common.

One of the things I'm considering is a big-ass mortgage that I can pay off when I access my pension to balance it out if I end up with too much locked away until I'm old enough to be responsible with the money I saved by being responsible /rant.

So the UK allows penalty free withdrawal for mortgage payments?  I'm guessing that is just for primary residence?  The US has something similar for withdrawal with first time home purchase, but I think it is a 10,000 limit? 

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #20 on: January 29, 2016, 11:47:27 AM »
You basically have standard retirement age fully funded, lots of money you don't need, and a spouse that looks likely to be unintersted in retiring early. Talk about first world problems!

I agree that you should be saving something in taxable or Roth accounts to provide opportunities prior to reaching the age where you can directly access your tax-deferred retirement accounts without penalty; however, I'd still consider contributing to them enough to get into the 15% marginal tax rate if possible. I'd focus on being a great SAHP while building up enough in taxable accounts + Roth contributions to fund 5 full years with the goal that tax-deferred accounts have enough to take over after that with a Roth conversion ladder. At that point you are fully FI! This is the point I'd want to get to before completely cutting off contributions to tax-deferred accounts. If your spouse decideds at that point that she wants to RE, she's earned it!

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #21 on: January 29, 2016, 12:24:16 PM »
You basically have standard retirement age fully funded, lots of money you don't need, and a spouse that looks likely to be unintersted in retiring early. Talk about first world problems!

I agree that you should be saving something in taxable or Roth accounts to provide opportunities prior to reaching the age where you can directly access your tax-deferred retirement accounts without penalty; however, I'd still consider contributing to them enough to get into the 15% marginal tax rate if possible. I'd focus on being a great SAHP while building up enough in taxable accounts + Roth contributions to fund 5 full years with the goal that tax-deferred accounts have enough to take over after that with a Roth conversion ladder. At that point you are fully FI! This is the point I'd want to get to before completely cutting off contributions to tax-deferred accounts. If your spouse decideds at that point that she wants to RE, she's earned it!

I'd have to figure out how the numbers look, the 15% joint filing rate is 74,900, which would mean for a 110K salary I'd need to stash away or get rid of $35,000 income, but I suppose tax deductions come into play somehow like home interest, children, etc?   Tax planning is definitely not my strongest area of understanding. 

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #22 on: January 29, 2016, 12:26:33 PM »
Its IP transactional legal work, but although its "part time" in the field and I don't have benefits, I still end up having to put in a fair amount of billable work, just less than the full time folks.  In reality my wife actually works less hours than I do since she doesn't "take work home" and gets everything done in two 12 hour shifts for the week.

Off-topic, but would love to hear more about that.  I'm not in IP, but biglaw transactional work and pretty comfortable taking a salary hit for a part-time gig at some point.

Transactional loosely defined, more specifically patent preparation and prosecution.  Don't need a law degree, but do have to have the necessary science background to take the USPTO registration exam to be at least a patent agent to assist inventors at the USPTO. 

Gin1984

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #23 on: January 29, 2016, 12:30:29 PM »
You basically have standard retirement age fully funded, lots of money you don't need, and a spouse that looks likely to be unintersted in retiring early. Talk about first world problems!

I agree that you should be saving something in taxable or Roth accounts to provide opportunities prior to reaching the age where you can directly access your tax-deferred retirement accounts without penalty; however, I'd still consider contributing to them enough to get into the 15% marginal tax rate if possible. I'd focus on being a great SAHP while building up enough in taxable accounts + Roth contributions to fund 5 full years with the goal that tax-deferred accounts have enough to take over after that with a Roth conversion ladder. At that point you are fully FI! This is the point I'd want to get to before completely cutting off contributions to tax-deferred accounts. If your spouse decideds at that point that she wants to RE, she's earned it!

I'd have to figure out how the numbers look, the 15% joint filing rate is 74,900, which would mean for a 110K salary I'd need to stash away or get rid of $35,000 income, but I suppose tax deductions come into play somehow like home interest, children, etc?   Tax planning is definitely not my strongest area of understanding.
$110,000-18,000=$92,000- standard deduction ($12600)=$79400- personal exemptions ($4000/person X 5)= $59,400

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #24 on: January 29, 2016, 12:52:46 PM »
You basically have standard retirement age fully funded, lots of money you don't need, and a spouse that looks likely to be unintersted in retiring early. Talk about first world problems!

I agree that you should be saving something in taxable or Roth accounts to provide opportunities prior to reaching the age where you can directly access your tax-deferred retirement accounts without penalty; however, I'd still consider contributing to them enough to get into the 15% marginal tax rate if possible. I'd focus on being a great SAHP while building up enough in taxable accounts + Roth contributions to fund 5 full years with the goal that tax-deferred accounts have enough to take over after that with a Roth conversion ladder. At that point you are fully FI! This is the point I'd want to get to before completely cutting off contributions to tax-deferred accounts. If your spouse decideds at that point that she wants to RE, she's earned it!

I'd have to figure out how the numbers look, the 15% joint filing rate is 74,900, which would mean for a 110K salary I'd need to stash away or get rid of $35,000 income, but I suppose tax deductions come into play somehow like home interest, children, etc?   Tax planning is definitely not my strongest area of understanding.
$110,000-18,000=$92,000- standard deduction ($12600)=$79400- personal exemptions ($4000/person X 5)= $59,400

Thank you for the breakdown! :)

Gin1984

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #25 on: January 29, 2016, 01:01:09 PM »
One thing I noticed is that you accounted for gains in your 403/401k but not for inflation.  You pay $40K now, excluding your mortgage but you also save, I assume on your health care costs.  I would increase the 401k to cover a bit more than $40K especially given the extremely high tax rate you are in, as of now.  You have enough in your Roth/taxable to buy a rental if you want, so why not save the 25-35% until then?

beltim

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #26 on: January 29, 2016, 01:12:29 PM »
The OP, with talk of many multiple layers of failsafes, struck me as planning for the worst outcomes.  While I think that there is benefit to that, I think it's also worth considering the median outcome, if not above-average outcomes as well.  So, here's an outline of a what a median outcome would look like.

Given that the long-term real returns of equities in the US is about 6.5%, you can expect at age 65:
~$2.0 million in traditional 401k/403b accounts
~$580,000 in Roth accounts
~$580,000 in taxable investment accounts (assuming this is not used for business, etc.)
PLUS:
$39,000 in annual pension/Social Security income (if you both stopped working now)
OR
$64,000 in annual pension/Social Security income if only you stopped working

Assuming an annual withdrawal of 4% of your traditional retirement account balances, you'll have at least $119,000 in annual income in retirement, or $144,000 in annual income in retirement if your wife continues to work.  These amounts are in today's dollars!

This puts you well into the 25% tax bracket.  In other words, if your wife continues to work, but you don't, you will be in a higher tax bracket in retirement than you will be next year.  Thus based on everything you said you should definitely stop contributing to a traditional retirement account.

beltim

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #27 on: January 29, 2016, 01:17:27 PM »
I just realized that Gin's breakdown of deductions included an $18k traditional 403b deduction, so if you didn't do that contribution you would just break into the 25% tax bracket.  But my larger point stands – if you don't contribute another dollar to savings, your expected retirement income exceeds the income earned by your wife, and there's no advantage to a traditional 403b account.

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #28 on: January 29, 2016, 01:32:10 PM »
One thing I noticed is that you accounted for gains in your 403/401k but not for inflation.  You pay $40K now, excluding your mortgage but you also save, I assume on your health care costs.  I would increase the 401k to cover a bit more than $40K especially given the extremely high tax rate you are in, as of now.  You have enough in your Roth/taxable to buy a rental if you want, so why not save the 25-35% until then?

That is an interesting point that I think you are getting at, but I figured if I adjust future savings to present day dollars by accounting for inflation, then that should be fair to compare to present day spending?  Otherwise if I adjust my current spending to the projected inflation 23 years from now then I shouldn't adjust the end savings amount to current value, right?  If that makes sense.  Unless you are just saying that health care in general will be more than inflation historically and take a greater percentage of my expenses, which I can see as well. 

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #29 on: January 29, 2016, 01:40:22 PM »
I just realized that Gin's breakdown of deductions included an $18k traditional 403b deduction, so if you didn't do that contribution you would just break into the 25% tax bracket.  But my larger point stands – if you don't contribute another dollar to savings, your expected retirement income exceeds the income earned by your wife, and there's no advantage to a traditional 403b account.

Yes this is my thinking mostly as well, that if everything goes as historical averages do there will be a surplus and I would have ended tying up funds that could have been used for helping the kids, business, RE, etc.  Although I don't think there is "no advantage" because I still would get a larger up front investment since it is pre-tax that would be growing over time (e.g., $18,000 403B contributions vs. maybe 15,300K after tax contributions? if I can get into the 15% bracket).  That 2,300 "free money" difference would add up over 23 years =  ~$115,000 assuming 6% returns if my quick calculations are correct?  Basically it would seem that is how much it would cost me vs. 403B contributions all the way through. 

MDM

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #30 on: January 29, 2016, 01:45:48 PM »
I just realized that Gin's breakdown of deductions included an $18k traditional 403b deduction, so if you didn't do that contribution you would just break into the 25% tax bracket.  But my larger point stands – if you don't contribute another dollar to savings, your expected retirement income exceeds the income earned by your wife, and there's no advantage to a traditional 403b account.
Agreed, if one or both continue working until age 65.  That is almost 30 years away.  If between now and then the siren song of 9 to 5 loses its attraction, they could convert large chunks of traditional to Roth and stay in the 15% bracket while delaying SS to age 70.

No inherently right or wrong answer, but you raise a good point: it's worthwhile to examine assumptions and determine the best strategy based on those assumptions.  Change the assumptions and the best strategy may also change.

robartsd

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #31 on: January 29, 2016, 01:52:56 PM »
With just your wife's income: 110,000-12,600(standard deduction)-20,000(5x4,000 personal exemption)=77,400<79,400. So as long as you make less than $2,000 in taxable accounts and your side hussles, your within the 15% bracket if you quit your job (I haven't checked the values given against tax laws). I guess a $0 contribution to your traditional retirement accounts makes sense tax wise assuming your wife works for 15+ more years. I'd personally still want to allocate savings in the way that would make the most sense if both of you wanted to retire as early as possible, so if that worked out to continued retirement account contributions, I would do it - it might not optimize taxes in later years (because you choose to work longer than needed), but it would optimize freedom (because you have the choice as early as possible).

Playing with Fire UK

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #32 on: January 30, 2016, 12:18:53 AM »
Can't help with 403b specifics.

The FP I spoke to said they had never met anyone who wanted to spend less on handbags, they may be right; but that doesn't mean that there can't be a first time; or that their narrow experience means I need more handbags.

The UK pension system is different (we don't have a roth conversion ladder option and our governments can't decide at what age we will be able to access our personal pensions); but over on the UK FIRE blogs talk of having too much in a SIPP (or other pension account) is fairly common.

One of the things I'm considering is a big-ass mortgage that I can pay off when I access my pension to balance it out if I end up with too much locked away until I'm old enough to be responsible with the money I saved by being responsible /rant.

So the UK allows penalty free withdrawal for mortgage payments?  I'm guessing that is just for primary residence?  The US has something similar for withdrawal with first time home purchase, but I think it is a 10,000 limit?

No, sorry, I misled you. You can't tap a SIPP in th UK before 55 (or whatever the rules change to) unless you are dying. You can take out a mortgage or loan from a bank before you can access your pension and then pay it back after you access your pension. There are a couple of illegal ways to access cash but you tend to end up with a penalty of 55% plus your tax rate of up to 40%.

arebelspy

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #33 on: February 07, 2016, 12:22:56 PM »
If you make that much, you should be maxing the 403b.  And 457b, if you have access to one of those as well (often someone who has access to one has access to both).

I reduced our contributions to our tax advantaged accounts to buy a bunch of real estate, and I wish I had taken more advantage of our tax-advantaged space.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #34 on: February 12, 2016, 02:10:06 PM »
If you make that much, you should be maxing the 403b.  And 457b, if you have access to one of those as well (often someone who has access to one has access to both).

I reduced our contributions to our tax advantaged accounts to buy a bunch of real estate, and I wish I had taken more advantage of our tax-advantaged space.

But the problem is how to buy the real estate without the money that would have been going into the 403B?

trashmanz

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #35 on: February 12, 2016, 02:11:49 PM »
Met with the advisor today.  He didn't think we had enough in our retirement yet.  He volunteered that he is going to be contributing until he has 7Million available.  I guess we have to just agree to disagree on strategy for the money.

Alternatepriorities

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #36 on: February 12, 2016, 02:57:18 PM »
Met with the advisor today.  He didn't think we had enough in our retirement yet.  He volunteered that he is going to be contributing until he has 7Million available.  I guess we have to just agree to disagree on strategy for the money.

Wow... I almost want to do a survey of mustachians to see if anyone has a goal that high... I'm sure some of use will end up there with a little luck and good fortune, but I can't imagine saying 6Million isn't enough to walk away... With goals like that your Financial Advisor probably needs to collect some more fees and doesn't want to loose such a good contributor...

It seems like you're going to do well either way, you just need to calculate the value of the taxes saved verse the flexibility to invest in a new business or buy property.

arebelspy

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #37 on: February 12, 2016, 04:12:07 PM »
Wow... I almost want to do a survey of mustachians to see if anyone has a goal that high...

Yes.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Alternatepriorities

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Re: "NOBODY has ever said they put too much in their 403B"
« Reply #38 on: February 12, 2016, 04:50:26 PM »
Wow... I almost want to do a survey of mustachians to see if anyone has a goal that high...

Yes.

I stand corrected. Also in just a bit of awe...