About to ramp up accumulation! Looking for some guidance

[StarBright]

Hi All,

DH and I are both 35 and have been saving since we got married but starting next month will really be able to start accumulating. We have a few circumstances that make me not want to just max out 401ks and I would love some guidance.

What we have currently:
Me:
401k currently sitting around $71,000 - currently putting in 10% with company 3% match
Roth IRA around $15,000 - currently putting in $100 a month
investment accounts: approx $6,000

DH:
410a around $8,500 - currently putting in 14% (state mandated) with 10% university contribution
Roth IRA around $29,000 - currently putting in $100 a month

As a couple: about $15k sitting in cash/easily accessible savings monthly. A house sale this week will bring the number in savings to about 70k

So what makes things a little different now?
We made a last minute move last September for my husband's new profession (Professor). This Thursday (god willing) we close on the sale of our old house netting us about $750 a month. We also just found out that our kids are coming off the wait list for university day care in August. This is an amazing perk which means that starting August 1 we'll go from paying $1800 a month for daycare to $500 a month.

So we have about $2000 extra a month to play around with.

So what do we do with all this extra bank?!

We want to leave enough in savings for emergencies and probably a house down payment (if DH's job works out we'll be buying in 12-18 months) but w/ 70k in there obviously we don't need to throw anymore money into the money market account right now.

Confounder 1: The easiest thing would be to max out my 401k option through my job, but I've posted on here before that my boss never puts in 401k deposits in a timely fashion. As of today he hasn't made any deposits since the beginning of February. He's out of town for the next couple of weeks at conferences so I suspect I won't see any deposits until about June. I just hate the thought of him holding on to that much of my money. Is it irrational?

Confounder 2: DH is on a year to year academic contract. It might turn into tenure or the program may lose funding which means we could be packing up and moving cross country a year from now. I would like to have our money accessible and not tied up another 30 years.


So we have Roths and we have options of 403b or 457 for my husband through his job - also should I be considering regular taxable investments a la Vanguard?

Additionally - DH is NOT looking to retire early as he just began his career this year. He hopes to teach for 25-30 years. I'm in a well paying but soul sucking job that I have a love/hate relationship with but I feel is the responsible choice for our family until my husband's career path is more settled.
Thanks everyone for any thoughts.

[rubybeth]

I was going to ask about a 457b option, but if your DH is going to continue working, that won't work to get money out (you need to leave employment in order to access 457b funds; but there are major advantages--tax free deposits and no early withdrawal penalty).

I guess I'd ask, what is the goal? FIRE for you, and then DH keeps working? If that's the scenario, can you live on just your DH's income (assuming you're doing childcare or the kids are grown up by the time you retire) and not touch your stash until it grows more? Then the 457b may be the best option, because it would give your DH some flexibility to leave his job prior to age 59.5.

The other thing I want to ask about is the idea of buying a house when your husband's job may not be secure--maybe that's the best option for your family and you can afford a house on just your income, but I would be uncomfortable with that. Will he know at some point if this job may become tenure-track?

Maybe a Roth IRA would be the best to give you some flexibility with all of these unknowns. Curious what others will say.

[Jeremy E.]

Hi All,

DH and I are both 35 and have been saving since we got married but starting next month will really be able to start accumulating. We have a few circumstances that make me not want to just max out 401ks and I would love some guidance.

What we have currently:
Me:
401k currently sitting around $71,000 - currently putting in 10% with company 3% match
Roth IRA around $15,000 - currently putting in $100 a month
investment accounts: approx $6,000

DH:
410a around $8,500 - currently putting in 14% (state mandated) with 10% university contribution
Roth IRA around $29,000 - currently putting in $100 a month

As a couple: about $15k sitting in cash/easily accessible savings monthly. A house sale this week will bring the number in savings to about 70k

So what makes things a little different now?
We made a last minute move last September for my husband's new profession (Professor). This Thursday (god willing) we close on the sale of our old house in NC - netting us about $750 a month. We also just found out that our kids are coming off the wait list for university day care in August. This is an amazing perk which means that starting August 1 we'll go from paying $1800 a month for daycare to $500 a month.

So we have about $2000 extra a month to play around with.

So what do we do with all this extra bank?!

We want to leave enough in savings for emergencies and probably a house down payment (if DH's job works out we'll be buying in 12-18 months) but obviously we don't need to throw anymore money into generic savings right now.

Confounder 1: The easiest thing would be to max out my 401k option through my job, but I've posted on here before that my boss never puts in 401k deposits in a timely fashion. As of today he hasn't made any deposits since the beginning of February. He's out of town for the next couple of weeks at conferences so I suspect I won't see any deposits until about June. I just hate the thought of him holding on to that much of my money. Is it irrational?

Confounder 2: DH is on a year to year academic contract. It might turn into tenure or the program may lose funding which means we could be packing up and moving cross country a year from now. I would like to have our money accessible and not tied up another 30 years.


So we have Roths and we have options of 403b or 457 for my husband through his job - also should I be considering regular taxable investments a la Vanguard?

Additionally - DH is NOT looking to retire early as he just began his career this year. He hopes to teach for 25-30 years. I'm in a well paying but soul sucking job that I have a love/hate relationship with but I feel is the responsible choice for our family until my husband's career path is more settled.
Thanks everyone for any thoughts.

I would first get your match through 401k, then max 457, then max traditional IRAs, then if able max 401k/403b, and lastly if you've filled all those, save in taxable vanguard account, all while saving enough in your savings or emergency fund to make you comfortable, and saving for a house down payment if you decide you are sure you want to buy another house. I've never been with a small company, as all of my companies have had my 401k deductions automatically taken from my paycheck, I'm not sure about how the deposits from your company work, but I'd guess that if the company offers a 401k, it would be required to send your 401k funds to the 401k provider, just as it is required to give you a paycheck, and that they shouldn't be allowed to delay this, however this is merely an assumption, best to look it up and then talk to your employer.

[MustacheAndaHalf]

"... my boss never puts in 401k deposits in a timely fashion ..."

This suggests your boss runs a small company, if he does the 401(k) himself.  In 4 of 5 cases, small companies get "sold" a 401(k) rather than investigate the best options.  Most likely, the expense ratios in your plan are near 1.00% a year where a company like Vanguard has most funds with expense ratios under 0.25% a year.  Take a look and see if that's true (your small company might be the exception).  If expense ratios are high, that's another reason to stop contributing after the point of the 401(k) match.


"... we close on the sale of our old house in NC - netting us about $750 a month ..."

A house sale that pays you monthly income sounds like seller financing.  A buyer who borrows from you instead of the bank is a higher risk.  Another reason to invest this money is so you don't rely on it to pay the bills, which would make your finances dependent on the buyer's financial situation.

[beltim]

Additionally - DH is NOT looking to retire early as he just began his career this year. He hopes to teach for 25-30 years. I'm in a well paying but soul sucking job that I have a love/hate relationship with but I feel is the responsible choice for our family until my husband's career path is more settled.
Thanks everyone for any thoughts.

I would first get your match through 401k, then max 457, then max traditional IRAs, then if able max 401k/403b, and lastly if you've filled all those, save in taxable vanguard account, all while saving enough in your savings or emergency fund to make you comfortable, and saving for a house down payment if you decide you are sure you want to buy another house.

Given that the husband of the OP does not want to retire early, I think the 457 is a bad choice if the OP does want to retire early – that would lock up funds that could otherwise be used when the OP retires but the husband has not yet retired.

[rubybeth]

Additionally - DH is NOT looking to retire early as he just began his career this year. He hopes to teach for 25-30 years. I'm in a well paying but soul sucking job that I have a love/hate relationship with but I feel is the responsible choice for our family until my husband's career path is more settled.
Thanks everyone for any thoughts.

I would first get your match through 401k, then max 457, then max traditional IRAs, then if able max 401k/403b, and lastly if you've filled all those, save in taxable vanguard account, all while saving enough in your savings or emergency fund to make you comfortable, and saving for a house down payment if you decide you are sure you want to buy another house.

Given that the husband of the OP does not want to retire early, I think the 457 is a bad choice if the OP does want to retire early – that would lock up funds that could otherwise be used when the OP retires but the husband has not yet retired.

But if DH is, for example, 30 years old and thinks he wants to work another 25-30 years, the 457b can just be his retirement. Or if he burns out sooner rather than later (or switches employers), he can take that money at age 50 or 55 with minimal hassle (no Roth pipeline needed). Maybe don't max out the 457b, but consider adding to it.

The 401k stuff with the boss sounds really bad. I would avoid it altogether except enough to get the match, and then do IRAs or taxable investments instead. I got annoyed when my payroll person was delaying out 457b contributions by not doing them the day before payroll (so they ended up deposited on Mondays instead of Fridays), and I wasn't the only one who was miffed--this has been rectified with the hiring of someone else for that job. ;)

[beltim]

Additionally - DH is NOT looking to retire early as he just began his career this year. He hopes to teach for 25-30 years. I'm in a well paying but soul sucking job that I have a love/hate relationship with but I feel is the responsible choice for our family until my husband's career path is more settled.
Thanks everyone for any thoughts.

I would first get your match through 401k, then max 457, then max traditional IRAs, then if able max 401k/403b, and lastly if you've filled all those, save in taxable vanguard account, all while saving enough in your savings or emergency fund to make you comfortable, and saving for a house down payment if you decide you are sure you want to buy another house.

Given that the husband of the OP does not want to retire early, I think the 457 is a bad choice if the OP does want to retire early – that would lock up funds that could otherwise be used when the OP retires but the husband has not yet retired.

But if DH is, for example, 30 years old and thinks he wants to work another 25-30 years, the 457b can just be his retirement. Or if he burns out sooner rather than later (or switches employers), he can take that money at age 50 or 55 with minimal hassle (no Roth pipeline needed). Maybe don't max out the 457b, but consider adding to it.

I might agree with you except such a huge percentage of the couple's retirement assets are in the husband's 401a account, which likely isn't accessible until he retires at a near-normal retirement age.

I don't think contributing to the 457b is a bad thing objectively, just that it doesn't serve a very useful purpose in planning for the OP's early retirement.

[Jeremy E.]

Additionally - DH is NOT looking to retire early as he just began his career this year. He hopes to teach for 25-30 years. I'm in a well paying but soul sucking job that I have a love/hate relationship with but I feel is the responsible choice for our family until my husband's career path is more settled.
Thanks everyone for any thoughts.

I would first get your match through 401k, then max 457, then max traditional IRAs, then if able max 401k/403b, and lastly if you've filled all those, save in taxable vanguard account, all while saving enough in your savings or emergency fund to make you comfortable, and saving for a house down payment if you decide you are sure you want to buy another house.

Given that the husband of the OP does not want to retire early, I think the 457 is a bad choice if the OP does want to retire early – that would lock up funds that could otherwise be used when the OP retires but the husband has not yet retired.

But if DH is, for example, 30 years old and thinks he wants to work another 25-30 years, the 457b can just be his retirement. Or if he burns out sooner rather than later (or switches employers), he can take that money at age 50 or 55 with minimal hassle (no Roth pipeline needed). Maybe don't max out the 457b, but consider adding to it.

I might agree with you except such a huge percentage of the couple's retirement assets are in the husband's 401a account, which likely isn't accessible until he retires at a near-normal retirement age.

I don't think contributing to the 457b is a bad thing objectively, just that it doesn't serve a very useful purpose in planning for the OP's early retirement.

If he continues working, they likely won't need a ton of money from retirement accounts, as they can probably live mostly off his income.

[StarBright]

Rubybeth - I was thinking about your original comment a lot the last few days, ie "what is the goal?"

It was a great question because I don't think I have a goal. My husband definitely doesn't want to retire early and I'm not particularly interested in retiring (super) early either. I ended up on these forums because I've always been frugal, minimal and into finances and none of my friends or family really nerd out about those things in the same way I do.

Mustache forums are a fantastic fit for me, other than the early retirement part :)

While my current job was not one that I originally imagined for myself, it is a very interesting field and my current position offers me incredible flexibility to support my husband and kids both financially and with my time.

I suppose the option to retire early would be nice, though I'd likely still work because I like working. But I also like the idea of being able to quit a job and head off with my husband and kids for a year while he takes sabbatical. Basically for me, I'd like the freedom to job hop and the freedom to take less well paid but interesting to me jobs (arts administration and fundraising, non-profit type work). Since we could pretty easily live on just my husband's income  I guess this is already an option for me -except that his position is not currently stable.

Thanks for asking me that because it helped me clarify some stuff.

All that being said - I have no idea what to do with the extra money when it starts coming in next month! We're also getting a few thousand more than I thought from the house sale so that money will go into Roths immediately. Good (mustachian) problem to have :)

[rubybeth]

If retiring early isn't the goal, I'd still say to do the 457b, assuming it has good fund options. It gives more flexibility than other account types, plus the tax advantages.

As for taking time off, maybe taxable is the way to go, at least for a year or two worth of replacement income for you--so that you could quit during your DH's sabbatical and not worry about income for a while. Honestly, that sounds pretty awesome. Being able to take time off for yourselves, then have time to look for a job you feel passionate about, would be amazing. A Roth IRA is definitely another good choice, since my understanding is that you can take out contributions without penalty prior to age 59.5. This money could also be used to fund a future house purchase if your DH's job becomes more stable.

The other thing I'd want to make sure you both have is good term life insurance--just in case, and with kids, you need that income replacement. You seem like the type of people to already have this, but if not, term policies for both you and DH would be my suggestion.

[beltim]

A Roth IRA is definitely another good choice, since my understanding is that you can take out contributions without penalty prior to age 59.5. This money could also be used to fund a future house purchase if your DH's job becomes more stable.

I was wondering why no one suggested maxing the Roth IRA every year and instead suggested traditional IRAs.

Literally the first response suggested Roth IRA.

They already have Roth IRAs set up and have been funding them for several years (at $100 per month they likely already have funded Roth IRAs for >5 years).  You can pull out your contribution to Roth IRAs 5 years after you first contribute without penalty (but you can not touch any earnings or gains).  This would give them access to money if in dire need with few restrictions on working/not working/not 59.5 yet.

Roths provide some flexibility and some potential tax savings.  I think in this case a traditional account may make the most sense because it has the most flexibility – and, depending on the salaries involved, may not involve higher taxes, or much higher taxes, than a Roth IRA.

Since they are both covered under workplace retirement plans, do they even qualify for a traditional IRA?

Good question; it depends on their income and how much they're contributing to their workplace plans.