Case Study - New Chapter/ Financial Plans Moving Forward

[TexTexTex]

Hello All,

Life Situation:
December 2021:
Recently I received a job offer that I plan on accepting. The motivation for the switch is to decrease current stress levels and escape an unhappy work environment. Needless to say that I'm excited about the change! The past 2.5 years have been extremely stressful and have resulted in my indulging in non-MMM habits in order to cope with the stress. The end result is 2.5 years that essentially feel like a wash from a savings perspective. Long story short, I took a chance at commission-only sales without any support (except my own savings) and flopped. It was an experience I do not regret, but instead I respect. Given that this is a large change in my life, I wanted to get some input from the MMM community on my financial plans and I'm hoping to receive some input/tips/advice that may help me moving forward. The goal is to play catchup on the savings I failed to accumulate these last 2.5 years.

March 2023 Update:
It's been approximately 1 year since I accepted my new position. See below for a list of updates over the last year:
- Successfully completed my first Backdoor IRA transaction. Contributed $6K for the 2022.
- As of January I successfully completed a Backdoor IRA transaction in the amount of $6.5K for 2023.
- Received a 5% raise during my first year.
- Received confirmation that my 2022 bonus will be paid out at the end of March and is equivalent 20% of my base salary ($26K).

Personal Information
Location: TX (No state income tax)
Age: 31 in 2023
Marital Status: Single
Kids: None.



Net Worth 1/01/2022 Compared to 1/01/2023


Assets :
                                         2022           2023
Checking:....................$2,000             $2,000
Emergency Fund:.........$45,600           $13,000
Crypto:.......................$8,500             $2,703 (Bitcoin)
Fidelity Brokerage:.......$53,500            $105,905 (VTI & FZROX)
Fidelity Roth IRA:.........$14,700            $23,716 (VTI)
Traditional 401K/IRA:...$33,500            $57,025 (VTI)
HSA Acct....................$0                     $3,651


Total Assets:      $157,800            $208,000

Net Worth increased 29% despite horrible market returns in 2022.

Liabilities:
No Student Loans
No Mortgages
No Car Payment


2023 PLAN


Income/Wages
                             2022            2023
Salary:                $125,000         $131,325
Sign-On Bonus     $25,000                 0
Annual Bonus       $26,000               TBD

Income Assumptions:
1.   2023 Performance will continue to reward me with a 20% bonus.
2.   2023 will provide a 3% raise.
2023 Gross Income based on assumptions = $162,317

Gross Income:..........................$162,317
Health Insurance..........................($768)
Dental.........................................($312)
Traditional 401K Contributions........($22,500) company provides a 4% match. (Roth 401K option is available, but have elected to use traditional so far)
HSA Contributions........................($3,850)
Adjusted Gross Income:.................$134,879
Taxes...........................................($29,203) 21.65%
Take Home Pay:..........................$105,676



Monthly Expenses:
                                                          2022                        2023
Rent................................................$1,500                     $1,725
Home/Rent Insurance........................$10                          $10
Personal Grooming............................$2                            $2
Cable TV...........................................n/a                          n/a
Car Insurance...................................$100                        $100
Car Maintenance, Registration, etc.......$20                         $20
Christmas/Holidays............................$75                         $75
Clothing/Shoes..................................$15                         $15
Electronics   .......................................$10                          $12
Credit Card Annual Fees.....................$16                          $6
Dry Cleaning.....................................$10                          $5
Electricity.........................................$48                          $75
Emergency Fund...............................$0                            $0   (already established my Emergency Fund)   
Entertainment..................................$50                          $50
Fuel/Public Transport.........................$50                          $40
Gas bill (apt)....................................$20                          $23
Groceries.........................................$200                        $265
Gym................................................n/a                          $20 (bought a Whoop 4.0 to better measure my progress of achieving my goal to increase my physical health this year.)
Hair Care.........................................n/a                           n/a (The Rock, Jason Statham, and I have similar hairstyles.
Household; Maintenance....................$2                            $2 (only responsible for air filters in my apt)
Internet...........................................$50                          $76 (Xfinity bent me over on this year's renewal)
Medical (Doctor/Hospital)...................$10                          $10 (hoping 0 injuries, rest is for co-pays twice a year)
Medicine (OTC + Prescription).............$5                            $5
Miscellaneous...................................$5                            $5
Phone (cell)......................................$0                            $0(company pays for it)
Sports/Recreation.............................$83                          $83 (Epic Ski Pass)
Subscriptions....................................$20                         $15
Travel/Vacation.................................$415                        $415 (3 ski trips + 2 road trips)
Umbrella Insurance...........................n/a                          n/a
Water/Sewer....................................$20                          $20
Wine/Beer........................................$40                         $30
Total Monthly Expenses.................$2,806                 $3,105
Total Annual Expenses......................$33,672           $37,248
Available for Taxable Investment:...$75,189             $68,428   

Shooting for a 60% savings rate for 2023.

The Goal:
My goal is to retire and have the freedom of no longer working by age 45. Below are the assumptions I’m making for the future:
Income Growth Rate 3% (conservative as there is a high likelihood of an opportunity to be promoted in the next 3-5 years. This would most likely result in a $40-50K increase)
Planned SWR = 4% (Admittedly I just threw this number in as I haven’t done enough research to change it)
Planned Annual Retirement Spending = $75,000?




Additional Questions:
1. Still debating on whether I should be putting these 401K contributions in Traditional or Roth. To date i've been maximizing my Traditional 401K and putting $6k in a Roth IRA via backdoor. Any thoughts on this?

[joe189man]

The Goal:
My goal is to retire and have the freedom of no longer working by age 45. Below are the assumptions I’m making for the future:
Income Growth Rate 3% (conservative as there is a high likelihood of an opportunity to be promoted in the next 3-5 years. This would most likely result in a $40-50K increase)
Planned SWR = 4% (Admittedly I just threw this number in as I haven’t done enough research to change it)
Planned Annual Retirement Spending = $50,000

Anyone care to help me calculate what my nest egg would realistically look like at age 45?
How many years would I technically be able to stay in retirement?


Additional Questions:
1.   My new employer gives me the option for a traditional $401K or a Roth 401K, which should I choose? Given that my income will prevent me from contributing to a Roth IRA I feel I should take advantage of the Roth 401K option.

2.   Do you see any monthly expenses I could reduce besides the Travel and the Epic Ski Pass? This is my main opportunity to see my friends scattered around the country each year so really don’t want to sacrifice those expenses. That being said, the figures plugged in for these two values are abnormally large due to the destinations we elected to visit this coming year.

3.   What rate of return should I expect and/or target for an individual my age (30) on my invested returns? Specifically in the marketplace?

4.   I’m currently renting as I’m working from home 100% of the time. This allows some extreme flexibility in location (within TX). That being said I’ve been fearing of locking myself into a house/mortgage. Even if it means paying a little more for the convenience of a low-maintenance housing lifestyle. Do you foresee any issues with this train of thought?

5.   Real Estate investing is quite hyped these days and I have a reluctancy in investing in real estate given my exposure to it from a young age. My parents both work in real estate and then also take roles as landlords to 10 rental properties at any given time since I was born. From my experience watching them, the investments can have slim margins if not managed actively. Although they’ve done well I feel it’s because they’ve done a lot of DIY when it comes to maintenance/improvements, some of which I was tasked at helping with when I was younger. I’m proud to have done so because I learned a lot of valuable home maintenance skills. Point is the transaction costs and the maintenance costs (if not self-performed) seem to eat the returns on these investments fairly quickly. Am I wrong for this reluctancy to jump on the rental property game?

If you want $50k FIRE income at 45 and you are 30 thats 15 years to grow the stash

if you inflate your base wages by 4% a year, at 45 you will make ~$225k, 6% of that is ~$13,500. assuming you receive this amount as a pension that reduces your stash payout to $36.5k -

That factored by the 4% rule and you are in the $912.5K range or round up to $1 mill for safety.

i see about $110k of assets not counting savings. Factor that by 7% interest, assume you max your 401k each year ($20,500 for 2022) and you get the 4% match each year, that alone should get you to ~$978k by age 45.

learn to use excel so you can do this math for yourself, you will be glad you took the time to learn.

i think most would say use traditional over roth as your anticipated spend is so much lower than your current income.

i use 7-8% for my projections

i have done well buying homes, but thats me in my market, YMMV

you budget is ok already, but i have face punch level spending in my budget so others may have better advice there

if you max your 401k, get the match, get your pension and add $6k per year to an ira, you could have ~$1.1 million at 45 (or ~$900-1 mill at 43-44) , if you can do an additional $1000 a month on top of the previous, to a brokerage you could have $1.4 million (or ~$900-1 mill at 41-42)

that $18k in additional IRA and Brokerage funding is $1500 a month - looks like no big deal with your budget/income

looks like you have lots of options in your current situation and breathing room to consider home ownership

[Anon-E-Mouze]

Company Pension Plan:
My new employer offers a pension. This is a new vehicle to me that I’m not quite sure I understand. There is no contributions on my part from what it describes, simply a formula they provided:
Accrual of benefits start after 1 year of service. For me that would be 1/1/2023.
Employer contributions based on my tenure plus an interest credit based on the 30-year treasury limit (2% min).
On 1/2025 I would be fully Vested.
Contribution Schedule:
<5 years of service = 4% of base salary + 2% for “Additional applicable percentage for compensation above Social Secuity wage base” (not sure what this means)
5-9 years = 5% + 2.5% for “Additional applicable percentage for compensation above Social Secuity wage base” (not sure what this means)
10-19 years = 6% + 3% for “Additional applicable percentage for compensation above Social Secuity wage base” (not sure what this means)
20+ years = 7% + 3.5% for “Additional applicable percentage for compensation above Social Secuity wage base” (not sure what this means)
At the bottom is mentions that “The Social Security taxable wage base (SSTWB) for 2022 is projected to be $146,700”
Assuming I work for 15 more years I’m assuming that means I get 6% of my base salary? + something?

No, I don't think this means you get a pension of 6%+ of your base salary.

I worked at a company that had a fully employer-funded pension plan like this. Those figures they're talking about (e.g. 6%+ in the 10-19 year range) represent an amount that your employer notionally "contributes" to an account that will generate a pension stream in the future, assuming that your employer doesn't go bankrupt. (Since this is an exclusively employer-funded plan, there's no bankruptcy protection for this plan.)

The pension is derived from a notional account that consists of the sum of the contributions that the employer makes every year for you, theoretically invested very conservatively (that's the interest credit based on the 30-year treasury).

Just as an example, let's say your total employment income in 2023 (based on base + bonus) is $145,000. Your employer would credit the notional account with 6% of that figure: $8700. Remember that this isn't money coming from your salary; it's just an amount that is calculated based on your salary.

In 2024, your total salary increases to $150,000. Your employer credits the pension account with 6%: $9000

In 2025, your salary stays the same. Your employer credits the pension account with $9000.

You can continue doing this with estimates for the next few years.  I won't do that but let's say that at the point you quit your job, the notional pension account has $100,000 in it. You would receive a pension, depending on when you elected to start, that is more like an annuity derived from the value of that $100,000. Or you'll probably be able to take a lump sum (or a partial pension plus a lump sum).

FWIW, I worked at a BigCorp for 10 years, made a much higher salary than yours but had a pension like this with a lower contribution %. (At my company, the % contribution was based a combination of my age and my years of work there.) I'll be entitled to a pension of about $1600 a month, if I take it at age 65 and don't elect a survivor option.

My husband worked at a BigCorp for 9 years, made a salary closer to your expected salary but his company contributed a much higher percentage to his pension plan. He expects to get a pension from that company of about $2200 per month.

Depending on the quality of your company's benefits website, you might have access to a calculator once the pension contributions start that enable you to calculate your expected pension based on various assumptions. Fidelity ran our benefits and we had a calculator like that. My husband's company didn't and it was like pulling teeth to get useful data from them.

[Freedomin5]

I can't answer most of your questions, but https://www.firecalc.com may help you answer this question:

Anyone care to help me calculate what my nest egg would realistically look like at age 45?
How many years would I technically be able to stay in retirement?

3.   What rate of return should I expect and/or target for an individual my age (30) on my invested returns? Specifically in the marketplace?

This question is not as relevant if you use the FIRECalc website. It takes it into account. I use 7%, but you might be more/less optimistic than I am.

4.   I’m currently renting as I’m working from home 100% of the time. This allows some extreme flexibility in location (within TX). That being said I’ve been fearing of locking myself into a house/mortgage. Even if it means paying a little more for the convenience of a low-maintenance housing lifestyle. Do you foresee any issues with this train of thought?

I don't see an issue with that train of thought. The only worry I might have is if rental rates shoot up. Is your state's rental laws and regulations more tenant-friendly or more landlord-friendly? In Ontario where I hold a rental property, it's tenant-friendly, and I can't raise the rent beyond the rate of inflation each year as long as the tenant renews the lease. I can raise the rent if it's a new tenant renting my unit.

5.   Real Estate investing is quite hyped these days and I have a reluctancy in investing in real estate given my exposure to it from a young age. My parents both work in real estate and then also take roles as landlords to 10 rental properties at any given time since I was born. From my experience watching them, the investments can have slim margins if not managed actively. Although they’ve done well I feel it’s because they’ve done a lot of DIY when it comes to maintenance/improvements, some of which I was tasked at helping with when I was younger. I’m proud to have done so because I learned a lot of valuable home maintenance skills. Point is the transaction costs and the maintenance costs (if not self-performed) seem to eat the returns on these investments fairly quickly. Am I wrong for this reluctancy to jump on the rental property game?

Rental property is a job, and it's not for everyone. It's not 100% hands-off, and there are many people who choose not to enter the rental property game. Sometimes it's better to just keep things simple.

[TexTexTex]

The Goal:
My goal is to retire and have the freedom of no longer working by age 45. Below are the assumptions I’m making for the future:
Income Growth Rate 3% (conservative as there is a high likelihood of an opportunity to be promoted in the next 3-5 years. This would most likely result in a $40-50K increase)
Planned SWR = 4% (Admittedly I just threw this number in as I haven’t done enough research to change it)
Planned Annual Retirement Spending = $50,000

Anyone care to help me calculate what my nest egg would realistically look like at age 45?
How many years would I technically be able to stay in retirement?


Additional Questions:
1.   My new employer gives me the option for a traditional $401K or a Roth 401K, which should I choose? Given that my income will prevent me from contributing to a Roth IRA I feel I should take advantage of the Roth 401K option.

2.   Do you see any monthly expenses I could reduce besides the Travel and the Epic Ski Pass? This is my main opportunity to see my friends scattered around the country each year so really don’t want to sacrifice those expenses. That being said, the figures plugged in for these two values are abnormally large due to the destinations we elected to visit this coming year.

3.   What rate of return should I expect and/or target for an individual my age (30) on my invested returns? Specifically in the marketplace?

4.   I’m currently renting as I’m working from home 100% of the time. This allows some extreme flexibility in location (within TX). That being said I’ve been fearing of locking myself into a house/mortgage. Even if it means paying a little more for the convenience of a low-maintenance housing lifestyle. Do you foresee any issues with this train of thought?

5.   Real Estate investing is quite hyped these days and I have a reluctancy in investing in real estate given my exposure to it from a young age. My parents both work in real estate and then also take roles as landlords to 10 rental properties at any given time since I was born. From my experience watching them, the investments can have slim margins if not managed actively. Although they’ve done well I feel it’s because they’ve done a lot of DIY when it comes to maintenance/improvements, some of which I was tasked at helping with when I was younger. I’m proud to have done so because I learned a lot of valuable home maintenance skills. Point is the transaction costs and the maintenance costs (if not self-performed) seem to eat the returns on these investments fairly quickly. Am I wrong for this reluctancy to jump on the rental property game?

If you want $50k FIRE income at 45 and you are 30 thats 15 years to grow the stash

if you inflate your base wages by 4% a year, at 45 you will make ~$225k, 6% of that is ~$13,500. assuming you receive this amount as a pension that reduces your stash payout to $36.5k -

That factored by the 4% rule and you are in the $912.5K range or round up to $1 mill for safety.

i see about $110k of assets not counting savings. Factor that by 7% interest, assume you max your 401k each year ($20,500 for 2022) and you get the 4% match each year, that alone should get you to ~$978k by age 45.

learn to use excel so you can do this math for yourself, you will be glad you took the time to learn.

i think most would say use traditional over roth as your anticipated spend is so much lower than your current income.

i use 7-8% for my projections

i have done well buying homes, but thats me in my market, YMMV

you budget is ok already, but i have face punch level spending in my budget so others may have better advice there

if you max your 401k, get the match, get your pension and add $6k per year to an ira, you could have ~$1.1 million at 45 (or ~$900-1 mill at 43-44) , if you can do an additional $1000 a month on top of the previous, to a brokerage you could have $1.4 million (or ~$900-1 mill at 41-42)

that $18k in additional IRA and Brokerage funding is $1500 a month - looks like no big deal with your budget/income

looks like you have lots of options in your current situation and breathing room to consider home ownership

Thank you for the input. This gives me some good direction moving forward. Appreciated!

[TexTexTex]

Company Pension Plan:
My new employer offers a pension. This is a new vehicle to me that I’m not quite sure I understand. There is no contributions on my part from what it describes, simply a formula they provided:
Accrual of benefits start after 1 year of service. For me that would be 1/1/2023.
Employer contributions based on my tenure plus an interest credit based on the 30-year treasury limit (2% min).
On 1/2025 I would be fully Vested.
Contribution Schedule:
<5 years of service = 4% of base salary + 2% for “Additional applicable percentage for compensation above Social Secuity wage base” (not sure what this means)
5-9 years = 5% + 2.5% for “Additional applicable percentage for compensation above Social Secuity wage base” (not sure what this means)
10-19 years = 6% + 3% for “Additional applicable percentage for compensation above Social Secuity wage base” (not sure what this means)
20+ years = 7% + 3.5% for “Additional applicable percentage for compensation above Social Secuity wage base” (not sure what this means)
At the bottom is mentions that “The Social Security taxable wage base (SSTWB) for 2022 is projected to be $146,700”
Assuming I work for 15 more years I’m assuming that means I get 6% of my base salary? + something?

No, I don't think this means you get a pension of 6%+ of your base salary.

I worked at a company that had a fully employer-funded pension plan like this. Those figures they're talking about (e.g. 6%+ in the 10-19 year range) represent an amount that your employer notionally "contributes" to an account that will generate a pension stream in the future, assuming that your employer doesn't go bankrupt. (Since this is an exclusively employer-funded plan, there's no bankruptcy protection for this plan.)

The pension is derived from a notional account that consists of the sum of the contributions that the employer makes every year for you, theoretically invested very conservatively (that's the interest credit based on the 30-year treasury).

Just as an example, let's say your total employment income in 2023 (based on base + bonus) is $145,000. Your employer would credit the notional account with 6% of that figure: $8700. Remember that this isn't money coming from your salary; it's just an amount that is calculated based on your salary.

In 2024, your total salary increases to $150,000. Your employer credits the pension account with 6%: $9000

In 2025, your salary stays the same. Your employer credits the pension account with $9000.

You can continue doing this with estimates for the next few years.  I won't do that but let's say that at the point you quit your job, the notional pension account has $100,000 in it. You would receive a pension, depending on when you elected to start, that is more like an annuity derived from the value of that $100,000. Or you'll probably be able to take a lump sum (or a partial pension plus a lump sum).

FWIW, I worked at a BigCorp for 10 years, made a much higher salary than yours but had a pension like this with a lower contribution %. (At my company, the % contribution was based a combination of my age and my years of work there.) I'll be entitled to a pension of about $1600 a month, if I take it at age 65 and don't elect a survivor option.

My husband worked at a BigCorp for 9 years, made a salary closer to your expected salary but his company contributed a much higher percentage to his pension plan. He expects to get a pension from that company of about $2200 per month.

Depending on the quality of your company's benefits website, you might have access to a calculator once the pension contributions start that enable you to calculate your expected pension based on various assumptions. Fidelity ran our benefits and we had a calculator like that. My husband's company didn't and it was like pulling teeth to get useful data from them.

Thank you for explaining this. Sounds like I may need to be a bit more conservative on the amount this pension will assist in my FIRE plan.

[TexTexTex]

I can't answer most of your questions, but https://www.firecalc.com may help you answer this question:

Anyone care to help me calculate what my nest egg would realistically look like at age 45?
How many years would I technically be able to stay in retirement?

3.   What rate of return should I expect and/or target for an individual my age (30) on my invested returns? Specifically in the marketplace?

This question is not as relevant if you use the FIRECalc website. It takes it into account. I use 7%, but you might be more/less optimistic than I am.

4.   I’m currently renting as I’m working from home 100% of the time. This allows some extreme flexibility in location (within TX). That being said I’ve been fearing of locking myself into a house/mortgage. Even if it means paying a little more for the convenience of a low-maintenance housing lifestyle. Do you foresee any issues with this train of thought?

I don't see an issue with that train of thought. The only worry I might have is if rental rates shoot up. Is your state's rental laws and regulations more tenant-friendly or more landlord-friendly? In Ontario where I hold a rental property, it's tenant-friendly, and I can't raise the rent beyond the rate of inflation each year as long as the tenant renews the lease. I can raise the rent if it's a new tenant renting my unit.

I'm not familiar with the state's rental laws here in Texas when it comes to rental increases. To my knowledge there isn't a limit on how much so I probably have to just be cautious. That being said I do agree with keeping a good pulse on the rental rates and avoid getting bent over a log in the future.

5.   Real Estate investing is quite hyped these days and I have a reluctancy in investing in real estate given my exposure to it from a young age. My parents both work in real estate and then also take roles as landlords to 10 rental properties at any given time since I was born. From my experience watching them, the investments can have slim margins if not managed actively. Although they’ve done well I feel it’s because they’ve done a lot of DIY when it comes to maintenance/improvements, some of which I was tasked at helping with when I was younger. I’m proud to have done so because I learned a lot of valuable home maintenance skills. Point is the transaction costs and the maintenance costs (if not self-performed) seem to eat the returns on these investments fairly quickly. Am I wrong for this reluctancy to jump on the rental property game?

Rental property is a job, and it's not for everyone. It's not 100% hands-off, and there are many people who choose not to enter the rental property game. Sometimes it's better to just keep things simple.

Couldn't agree more. I've seen it be extremely lucrative but it's only because those landlords were hands on. Still something I'm bouncing around in my head.

[JGS1980]

1.   My new employer gives me the option for a traditional $401K or a Roth 401K, which should I choose? Given that my income will prevent me from contributing to a Roth IRA I feel I should take advantage of the Roth 401K option.

2.   Do you see any monthly expenses I could reduce besides the Travel and the Epic Ski Pass? This is my main opportunity to see my friends scattered around the country each year so really don’t want to sacrifice those expenses. That being said, the figures plugged in for these two values are abnormally large due to the destinations we elected to visit this coming year.

3.   What rate of return should I expect and/or target for an individual my age (30) on my invested returns? Specifically in the marketplace?

4.   I’m currently renting as I’m working from home 100% of the time. This allows some extreme flexibility in location (within TX). That being said I’ve been fearing of locking myself into a house/mortgage. Even if it means paying a little more for the convenience of a low-maintenance housing lifestyle. Do you foresee any issues with this train of thought?

5.   Real Estate investing is quite hyped these days and I have a reluctancy in investing in real estate given my exposure to it from a young age. My parents both work in real estate and then also take roles as landlords to 10 rental properties at any given time since I was born. From my experience watching them, the investments can have slim margins if not managed actively. Although they’ve done well I feel it’s because they’ve done a lot of DIY when it comes to maintenance/improvements, some of which I was tasked at helping with when I was younger. I’m proud to have done so because I learned a lot of valuable home maintenance skills. Point is the transaction costs and the maintenance costs (if not self-performed) seem to eat the returns on these investments fairly quickly. Am I wrong for this reluctancy to jump on the rental property game?

1. Use the 401K (not the Roth) as this will save you in your federal taxes at your marginal rate. 24% at max $19500 contribution will be $4680 in tax savings in 2021 alone. I would also "Backdoor Roth" $6000/year with the the majority of that tax savings.

2. Your expenses our excellent. Keep up the good work.

3. I estimate 5% per year, anything above is gravy. I realize this is conservative. My asset allocation is 90/10 Stocks/Bonds, with 20% of stocks international.

4. Your housing situation seems adequate for your needs.

5.  Only invest in RE if you want to do RE. Don't do it just because others do or you will just make yourself miserable, regardless of the returns.

Hope this helps,

JGS

[TexTexTex]

1.   My new employer gives me the option for a traditional $401K or a Roth 401K, which should I choose? Given that my income will prevent me from contributing to a Roth IRA I feel I should take advantage of the Roth 401K option.

2.   Do you see any monthly expenses I could reduce besides the Travel and the Epic Ski Pass? This is my main opportunity to see my friends scattered around the country each year so really don’t want to sacrifice those expenses. That being said, the figures plugged in for these two values are abnormally large due to the destinations we elected to visit this coming year.

3.   What rate of return should I expect and/or target for an individual my age (30) on my invested returns? Specifically in the marketplace?

4.   I’m currently renting as I’m working from home 100% of the time. This allows some extreme flexibility in location (within TX). That being said I’ve been fearing of locking myself into a house/mortgage. Even if it means paying a little more for the convenience of a low-maintenance housing lifestyle. Do you foresee any issues with this train of thought?

5.   Real Estate investing is quite hyped these days and I have a reluctancy in investing in real estate given my exposure to it from a young age. My parents both work in real estate and then also take roles as landlords to 10 rental properties at any given time since I was born. From my experience watching them, the investments can have slim margins if not managed actively. Although they’ve done well I feel it’s because they’ve done a lot of DIY when it comes to maintenance/improvements, some of which I was tasked at helping with when I was younger. I’m proud to have done so because I learned a lot of valuable home maintenance skills. Point is the transaction costs and the maintenance costs (if not self-performed) seem to eat the returns on these investments fairly quickly. Am I wrong for this reluctancy to jump on the rental property game?

1. Use the 401K (not the Roth) as this will save you in your federal taxes at your marginal rate. 24% at max $19500 contribution will be $4680 in tax savings in 2021 alone. I would also "Backdoor Roth" $6000/year with the the majority of that tax savings.

2. Your expenses our excellent. Keep up the good work.

3. I estimate 5% per year, anything above is gravy. I realize this is conservative. My asset allocation is 90/10 Stocks/Bonds, with 20% of stocks international.

4. Your housing situation seems adequate for your needs.

5.  Only invest in RE if you want to do RE. Don't do it just because others do or you will just make yourself miserable, regardless of the returns.

Hope this helps,

JGS

First off thank you for responding and providing input. I found that your answer to #1 was interesting. I figured that since it was a company roth 401K option my contribution limit was higher and therefore I should optimize that. That being said you're saying optimize the 401K contributions (19,500) and then drop 6k in a backdoor Roth IRA. I'll need to do some more research on the backdoor method as it looks somewhat complicated and tedious. I don't want a situation where I screw it up and Uncle Sam is up my rear.

Lastly do my fund selections look okay? Specifically for the Fidelity accounts?

[JGS1980]

1. My understanding is that the limit on either 401K or Roth401K are exactly the same (19500 in 2021). Choose the one that saves you on taxes now.

2. Backdoor Roth
https://www.physicianonfire.com/backdoor/
Backdoor is not as hard as it seems. I've been doing it for 5-6 years and very glad to have done so.

3. I choose to approximate the Total Stock Marker with my investment choices (across all my accounts which are 401K, Roth, and Taxable)

https://www.bogleheads.org/wiki/Approximating_total_stock_market

4. Also recommend reading "The Simple Path to Wealth" and "Bogelheads Guide to Investing". Best return on a a $10 investment ever.

[TexTexTex]

1. My understanding is that the limit on either 401K or Roth401K are exactly the same (19500 in 2021). Choose the one that saves you on taxes now.

2. Backdoor Roth
https://www.physicianonfire.com/backdoor/
Backdoor is not as hard as it seems. I've been doing it for 5-6 years and very glad to have done so.

3. I choose to approximate the Total Stock Marker with my investment choices (across all my accounts which are 401K, Roth, and Taxable)

https://www.bogleheads.org/wiki/Approximating_total_stock_market

4. Also recommend reading "The Simple Path to Wealth" and "Bogelheads Guide to Investing". Best return on a a $10 investment ever.

Books are on the way from Amazon. Thank you for those recommendations.

In regards to #2, I went ahead and read that article and there is one particular part i'm confused about. The article mentions you CANNOT have a traditional IRA account opened in order to do this. My question is this limitation only with the brokerage company I use (Fidelity)? Or is it that i'm not allowed to have a traditional IRA whatsoever? Currently I have a traditional IRA through a financial advisor but it's not linked to my fidelity account. Will that foul up this process?

[JGS1980]

1. My understanding is that the limit on either 401K or Roth401K are exactly the same (19500 in 2021). Choose the one that saves you on taxes now.

2. Backdoor Roth
https://www.physicianonfire.com/backdoor/
Backdoor is not as hard as it seems. I've been doing it for 5-6 years and very glad to have done so.

3. I choose to approximate the Total Stock Marker with my investment choices (across all my accounts which are 401K, Roth, and Taxable)

https://www.bogleheads.org/wiki/Approximating_total_stock_market

4. Also recommend reading "The Simple Path to Wealth" and "Bogelheads Guide to Investing". Best return on a a $10 investment ever.

Books are on the way from Amazon. Thank you for those recommendations.

In regards to #2, I went ahead and read that article and there is one particular part i'm confused about. The article mentions you CANNOT have a traditional IRA account opened in order to do this. My question is this limitation only with the brokerage company I use (Fidelity)? Or is it that i'm not allowed to have a traditional IRA whatsoever? Currently I have a traditional IRA through a financial advisor but it's not linked to my fidelity account. Will that foul up this process?

Yes that Trad IRA will muck things up. The way to get around this is to ROLLOVER your Traditional IRA away from your advisor and into your 401K at your current workplace (if they accept rollovers).

[TexTexTex]

1. My understanding is that the limit on either 401K or Roth401K are exactly the same (19500 in 2021). Choose the one that saves you on taxes now.

2. Backdoor Roth
https://www.physicianonfire.com/backdoor/
Backdoor is not as hard as it seems. I've been doing it for 5-6 years and very glad to have done so.

3. I choose to approximate the Total Stock Marker with my investment choices (across all my accounts which are 401K, Roth, and Taxable)

https://www.bogleheads.org/wiki/Approximating_total_stock_market

4. Also recommend reading "The Simple Path to Wealth" and "Bogelheads Guide to Investing". Best return on a a $10 investment ever.

Books are on the way from Amazon. Thank you for those recommendations.

In regards to #2, I went ahead and read that article and there is one particular part i'm confused about. The article mentions you CANNOT have a traditional IRA account opened in order to do this. My question is this limitation only with the brokerage company I use (Fidelity)? Or is it that i'm not allowed to have a traditional IRA whatsoever? Currently I have a traditional IRA through a financial advisor but it's not linked to my fidelity account. Will that foul up this process?

Yes that Trad IRA will muck things up. The way to get around this is to ROLLOVER your Traditional IRA away from your advisor and into your 401K at your current workplace (if they accept rollovers).

Understood. Thanks for the clarification.

[simple money]

VTI is a good ETF for the fidelity brokerage account, this you can buy during trading hours at the current trading price.

FSKAX is good for Roth or IRA BUT was recommended not for brokerage for tax reasons.

There is a good rate on series i bonds you might want to look into that for your 35K savings. If

you put 10k in before the end of the year and 10k in Jan (limit is 10k a year)

*I am new to this but the above advice has worked very well for me.

[TexTexTex]

VTI is a good ETF for the fidelity brokerage account, this you can buy during trading hours at the current trading price.

FSKAX is good for Roth or IRA BUT was recommended not for brokerage for tax reasons.

There is a good rate on series i bonds you might want to look into that for your 35K savings. If

you put 10k in before the end of the year and 10k in Jan (limit is 10k a year)

*I am new to this but the above advice has worked very well for me.

Appreciate the tips. Since the original post I've invested 30K of the cash savings into VTI. Figured it was time to get that idle money moving. Leaving $15K for the emergency fund.

[MrThatsDifferent]

VTI is a good ETF for the fidelity brokerage account, this you can buy during trading hours at the current trading price.

FSKAX is good for Roth or IRA BUT was recommended not for brokerage for tax reasons.

There is a good rate on series i bonds you might want to look into that for your 35K savings. If

you put 10k in before the end of the year and 10k in Jan (limit is 10k a year)

*I am new to this but the above advice has worked very well for me.

Appreciate the tips. Since the original post I've invested 30K of the cash savings into VTI. Figured it was time to get that idle money moving. Leaving $15K for the emergency fund.

You’re single, no kids, 30, renting and employed, what emergency are you expecting that you would need $15k for? I talked myself out of emergency funds because I reasoned that anything I wanted that cost more I could just wait a month or two and pay from my salary. I’d put that $15k to work. If you buy property have an emergency fund, or lose your job. Otherwise, don’t stress, invest (not with crypto though ;-)

[Freedomin5]

VTI is a good ETF for the fidelity brokerage account, this you can buy during trading hours at the current trading price.

FSKAX is good for Roth or IRA BUT was recommended not for brokerage for tax reasons.

There is a good rate on series i bonds you might want to look into that for your 35K savings. If

you put 10k in before the end of the year and 10k in Jan (limit is 10k a year)

*I am new to this but the above advice has worked very well for me.

Appreciate the tips. Since the original post I've invested 30K of the cash savings into VTI. Figured it was time to get that idle money moving. Leaving $15K for the emergency fund.

You’re single, no kids, 30, renting and employed, what emergency are you expecting that you would need $15k for? I talked myself out of emergency funds because I reasoned that anything I wanted that cost more I could just wait a month or two and pay from my salary. I’d put that $15k to work. If you buy property have an emergency fund, or lose your job. Otherwise, don’t stress, invest (not with crypto though ;-)

I think it makes sense to have an emergency fund, just in case you lose your job or have to go on unpaid leave because COVID has shut your company down, or whatever. You want to have enough cash to cover a few months of expenses. It’s not wise to optimize savings down to the last little penny and not have enough wiggle room for life’s curveballs.