Single. No kids, but I support my parents. One parent has Alzheimer’s, and both have a variety of other health issues. They have zero assets and will continue to live with me until death (no siblings to split support). Update: I do claim head-of-household on my taxes, and also max my pre-tax FSA for medical expenses each year.
I live in HCOL area, and don’t see moving anytime soon (at least until parent with dementia passes). My goal is FIRE before age 50 if possible.
Assets:
297k - 401k (split: 28k in Roth, 269k traditional)
670k - house (536k mortgage)
18k - 2 cars
5k – cash
Update: 5.5k IRA
Liabilities:
536k – 15 year Mortgage @ 3.75%
Income:
21k – parents combined social security contributed to household
102k – 2013 salary/bonus (after tax and deductions)
Current expenses: 94k - Facepunch deserved here, but situation is improving. I’ve been working to correct my mistakes, paid off all debt. Purchased current house in 2012 but only 3.5% down (including borrowing from 401k), so last year my focus was on re-paying 401k loan and paying down mortgage so I could refi and remove $600 monthly MIP.
Expected ER expenses: 40k per year (assumes paid off mortgage). Amount will be less when living solo and no longer have parent medical expenses, etc., but since I can’t predict timing I’d like to plan for the higher amount.
Specific Question(s):
I’m still reading and learning, and I don’t fully understand all the complexities in investment/retirement planning. Here are some of my initial questions:
1) I’m making 17,500 in 401k contributions, and get employer match up to first 6%. I have my contribution split 13% traditional and 4% roth (started roth in 2008), to maximize pre-tax contribution. Should I put higher percentage into Roth? Does the IRA limit of 5,500/year still apply when it is part of my employers 401k plan? I am in a high tax bracket, which is why I was prioritizing my pre-tax contributions to the traditional 401k. Is it still better to build up my Roth since it allows penalty-free withdrawal prior to age 59.5?
update: based on responses below my action is to start a new Roth before April to max 5500 for 2013, and then add 5500 in 2014 as I have additional funds avail. Thanks for this info, as I had incorrectly understand the rules for a roth are separate from the one imbedded within my 401k plan. Also, I will adjust my contribution maximize all of the 17500 pre-tax into my 401k.
2) My plan was to throw additional funds towards mortgage to pay-off in ~10 years. I’ve read through several threads about folks choosing investing instead since mortgage interest rates are so low, but I live in such a high-cost area don’t think ER is possible with a mortgage. I also like the comfort of zero debt, but I’m open to hearing alternate suggestions.
3) Bonus varies every year, but it may be an extra 10-20k this year. I also have employee stock options vesting in the future. Per #2 above, I was thinking I should apply it to mortgage, but since all my assets are currently tied up in house & 401k, should I open a separate investment account? I’ve seen numerous recommendations for vanguard index funds, so that would be as a taxable brokerage account, correct?
4) I’ve been reading about folks using real-estate rentals to help grow their stash and diversify investments. I have no idea how I would get started, especially since this would need to be located elsewhere due to crazy real estate costs here. Any book/internet suggestions to read-up on the subject?
Thanks for reading and suggestions to help me get on the right track!
edited to update based on responses received thus far