Author Topic: Mandatory Salary Deferment - any tips to best manage?  (Read 577 times)

icyappraiser

  • 5 O'Clock Shadow
  • *
  • Posts: 35
Mandatory Salary Deferment - any tips to best manage?
« on: March 27, 2020, 02:22:30 PM »
I was just told I would have to defer 20% of my salary for the 6 mo. April - Septmber 2020 due to COVID-19 business impact. The deferred amount will be repaid to us as a lump sum, along with 6% annualized interest, between 10/1/20 and 3/31/21. Given I have a 65% savings rate, this doesn't impact my ability to cover expenses in any way, but wanted to see if fellow Mustachians have any tips to manage this most efficiently?

I could cut back on investing, but would not like to do that with stocks on sale right now.

Currently, I have $11k in cash and $19k in US Savings Bonds (earning 4% interest) I could cash. I am getting married in September and will need about $7-8k for that still over the next 6 mo (I'm not planning to change this plan at all), including honeymoon. I am considering cashing the bonds slowly so the amount I am investing per month does not go down.

Any other tips/ideas?

terran

  • Magnum Stache
  • ******
  • Posts: 3300
Re: Mandatory Salary Deferment - any tips to best manage?
« Reply #1 on: March 27, 2020, 03:26:19 PM »
Assuming your employer remains solvent it sounds like you you'll have lower than normal income this year and higher than normal income next year, which might favor more Roth contributions or conversions this year and more traditional contributions next year compared to your normal contributions to smooth out the differences. Or it might not change anything if your income both years is low enough to always justify Roth or high enough to always justify traditional.

plog

  • Stubble
  • **
  • Posts: 243
Re: Mandatory Salary Deferment - any tips to best manage?
« Reply #2 on: March 27, 2020, 03:52:34 PM »
If you have a 401k  make sure your allocations are correct to get the full 19,500 in it for 2020

Sibley

  • Magnum Stache
  • ******
  • Posts: 4869
  • Location: Northwest Indiana
Re: Mandatory Salary Deferment - any tips to best manage?
« Reply #3 on: March 27, 2020, 04:29:30 PM »
The easy path is to invest whatever you have left over after living expenses, and if that means you invest a lot more later than now, so be it.

Do not compromise your emergency fund however. If you're being told that your salary is being deferred like this, that's not actually reassuring for the company as a whole. Yes, it could be a cash flow issue which will be resolved in a few months. However, we don't know how long the shutdowns will go on, we don't know how badly the economy is going to suffer, etc. They may not fully recover.

Systems101

  • Stubble
  • **
  • Posts: 196
Re: Mandatory Salary Deferment - any tips to best manage?
« Reply #4 on: March 27, 2020, 05:57:20 PM »
The easy path is to invest whatever you have left over after living expenses, and if that means you invest a lot more later than now, so be it.

Do not compromise your emergency fund however. If you're being told that your salary is being deferred like this, that's not actually reassuring for the company as a whole. Yes, it could be a cash flow issue which will be resolved in a few months. However, we don't know how long the shutdowns will go on, we don't know how badly the economy is going to suffer, etc. They may not fully recover.

^ This.

Don't assume the deferred money will become income.  Also, the market isn't so cheap right now that it's worth leveraging yourself.  We're barely around average; it's certainly not cheap.