Hi All! I've lurked the forums for a bit, and I'm excited to write my first post!
I've been aware of Financial Independence for about four years, and have been working to achieve it via real estate (as a side hustle). I have done fairly well in real estate thus far, and have worked out a road map that should generate a decent income over the next 10 years. Currently I live n' flip single family homes (using IRS Section 121: capital gains tax exclusion up to $250K of gain, on the sale of a primary residence), but will transition to buy and hold rentals next year, when I turn 30. The goal is then to acquire one 2-4 unit property each year, for the next 10 years. That said, I cannot provide a dollar figure for the income I will generate at this time, but I am confident in my ability to execute this plan, as I have built the cash reserves to do so.
In addition to my live n' flip side hustle, I work a full time job as a fleet manager/supervisor. This, is where my dilemma begins to take place, and why I have been heavily lurking the Mr. Money Mustache forums to develop a plan. Hoping the community can point me in the right direction and help select the appropriate strategy for my 401K! Please see figures and explanations below. Any advice or information is greatly appreciated. Thanks a million in advance!
Age: 29
Retirement Goal: 39 (10 years from today)
Current Salary: 75K
Occupation: Fleet Manager/Government
Projected Salary in 3 years: $85K - $105K
*Almost guaranteed 5% salary increase for merit each year, for the next three years (would be the $85K minimum). As a government employee, the bargaining unit that represents my unit is currently negotiating cost of living increases. They have asked for 21% cost of living increase over 3 years, in addition to 5% merit salary raises above. So, best case scenario is $105K.
Savings Rate: Percentage not calculated, but I have a very low cost of living. My housing expenses are minimal, and I am a saver by nature. You can say $1000-$1500 goes into my savings account each month after all expenses. I will work on calculating this, and tightening it down.
Debt: Debt free, with the exception of my current mortgage.
Monthly Pension Contributions - $432/month (pre-tax - roughly 7.5%)
Monthly Roth 401K Contributions - $500/ Month
Current Pension Balance - $20K, will be vested next month.
Current 401K Roth Balance - $10,900
I have only been contributing to my Roth 401K for about 2.5 years. I was saving as much as possible for a down payment on my first property out of college, and did not feel contributing to my 401K was feasible at the time (kicking myself now). And although I feel real estate will be the major driver of my financial freedom, I do not want to neglect the power of compound interest and additional revenue stream my 401K (or some other retirement account) can provide.
Here's where I'm at personally with my 401K; I feel like I'm extremely far behind in contributions, and that I should not have selected a Roth 401K.
After reviewing some Mr. Money Mustache forum posts, and blog posts by the Mad Fientist, it seems like I should have selected a t401K or 457b and planned to use the Roth Conversion Ladder when I retire.
My major questions:
Should I switch over to a traditional 401K or 457b? What benefit would the traditional 401k/457b have over the other (I believe I could play catch up on the 457b???)?
Did I waste the last 2 years putting $10K in my Roth 401K? What should I do with those funds?
If I can roll my Roth 401K into a Roth IRA now, should I do so?
Is there still any hope for me in contributing to a 401K/457B over the next 10 years from scratch ($0 as of today)?
All of this is sparked in my recent promotion/raise, and knowing that I am behind in traditional retirement savings. I considered increasing my Roth 401K contribution to $1000/month, and could do so comfortably, but that brought me to think I could probably put $1250/$1300 each month into a traditional.
My initial reasoning for starting a Roth was that I feel I'll make more money in "retirement" than I do now, as my rental property will likely be generating more gross revenue when I hit traditional retirement age. Now, I am not sure if that was the right move. Regardless, I feel like I am on the right path, but just need to be steered in a different direction with my 401k contributions.
If at all possible, can someone please share your thoughts on my situation?
Again, thank you in advance for reading and any information/thoughts/resources/advice provided.
Best,
TJ