Author Topic: How much savings composed of non-retirement funds  (Read 2752 times)

MoneyGoatee

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How much savings composed of non-retirement funds
« on: June 16, 2019, 09:50:59 AM »
Just want to discuss this with mustachians.  How much of your savings are composed of non-retirement funds?  Since retirement funds like IRA and 401k don't necessarily allow you to save a lot of money, I imagine most of you have mostly non-retirement savings.  I started saving back in the days when the max IRA contribution was only 2k, and that was just too little amount for you to save a high percentage of your income such as 30% to 50%.  Even at today's max of 5.6-6k, it is still too little.  So a majority (77%) of my retirement savings are non-retirement money (so ironic).  Yes, Roth IRA gives you tax-free withdrawal, but I have so little of it that that tax savings will be negligible.  What are the mustachians' opinions on this matter?  Did some of you even bother with IRAs and such?
« Last Edit: June 16, 2019, 10:26:00 AM by MoneyGoatee »

kpd905

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Re: How much savings composed of non-retirement funds
« Reply #1 on: June 16, 2019, 12:49:10 PM »
You should definitely max out all tax advantaged accounts (401k, 457b, IRA, HSA) while you are working and have high income.  Avoid high taxes now and pay low taxes in retirement.

wenchsenior

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Re: How much savings composed of non-retirement funds
« Reply #2 on: June 16, 2019, 01:01:47 PM »
We max DH's 401K first (25K) and my IRA every year; then we throw 10-15K to a taxable account b/c we want cash flexibility. If we have extra at years' end, we fund DH's Roth IRA. 

Financial.Velociraptor

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Re: How much savings composed of non-retirement funds
« Reply #3 on: June 16, 2019, 01:12:44 PM »
Six and half years into RE, I have about 60% in various taxable vehicles.

FIREstache

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Re: How much savings composed of non-retirement funds
« Reply #4 on: June 16, 2019, 01:15:11 PM »
60% of my stash is in non-retirement accounts.  I didn't contribute more because of the very high fees in my work retirement account, but this balance has turned out to be a good thing because I can draw more from my non-retirement accounts than from my work retirement account while keeping my MAGI low enough for a much better ACA PCT and CSR while limiting withdrawals from my 457B and 401a until I'm 65 and am eligible for Medicare.  Note - I have a Roth, so those funds don't add to MAGI income either, but it's less than $120K, much less than my other investments/accounts.

foghorn

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Re: How much savings composed of non-retirement funds
« Reply #5 on: June 16, 2019, 03:14:29 PM »
Interesting question. 

About 33% of my Total Net Worth is in my FU fund (which is all of my non-retirement and other non-tax advantaged funds) .  I max out my 401k, my tIRA and my HSA every year.  In am in the fortunate position of making too much to contribute to my Roth.




Paul der Krake

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Re: How much savings composed of non-retirement funds
« Reply #6 on: June 16, 2019, 03:25:11 PM »
After just seven years of working, we're around 40% in taxable, 35% in pre-tax, 25% in Roth. We've always maxed out tax-advantaged accounts when we had them. Now that the finish line is in sight, I'm starting to look at whether we need to switch things around a little bit. It's very hard to answer when your investing horizon is another 50 years.

seattlecyclone

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Re: How much savings composed of non-retirement funds
« Reply #7 on: June 16, 2019, 05:03:33 PM »
We have roughly half of our investments in taxable accounts. I'd love to have more in retirement accounts, but even having a mega backdoor Roth available for the past five years there's only so much of our savings that can fit in the retirement accounts. #mustachianProblems

JSMustachian

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Re: How much savings composed of non-retirement funds
« Reply #8 on: June 17, 2019, 03:11:37 PM »
83% of our funds are in retirement accounts and 17% are in taxable non-retirement accounts. Our retirement accounts are much higher mainly because of our access to a 457b and HSA's. After everything is maxed out (403b's, IRA's, 457b, HSA's) there isn't as much left for taxable investing.

Once we get closer to our FIRE date I may back off the retirement account investing to help build up my taxable account for the 5 year waiting period on roth conversions.

Laserjet3051

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Re: How much savings composed of non-retirement funds
« Reply #9 on: June 17, 2019, 03:16:48 PM »
Just want to discuss this with mustachians.  How much of your savings are composed of non-retirement funds?  Since retirement funds like IRA and 401k don't necessarily allow you to save a lot of money, I imagine most of you have mostly non-retirement savings.  I started saving back in the days when the max IRA contribution was only 2k, and that was just too little amount for you to save a high percentage of your income such as 30% to 50%.  Even at today's max of 5.6-6k, it is still too little.  So a majority (77%) of my retirement savings are non-retirement money (so ironic).  Yes, Roth IRA gives you tax-free withdrawal, but I have so little of it that that tax savings will be negligible.  What are the mustachians' opinions on this matter?  Did some of you even bother with IRAs and such?

Really? The IRS allows me to contribute up to $62,000 each year to my solo401k. Thats a shit ton of money and the main reason why almost all of my savings (aside from EF and college for kids) is socked away in retirement accounts.

MoneyGoatee

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Re: How much savings composed of non-retirement funds
« Reply #10 on: June 17, 2019, 03:35:10 PM »
Really? The IRS allows me to contribute up to $62,000 each year to my solo401k. Thats a shit ton of money and the main reason why almost all of my savings (aside from EF and college for kids) is socked away in retirement accounts.

That's true, but many employers don't offer 401k, and even when they do, you are forced to invest in a firm your employer chooses, not one that you choose nor necessarily one that you like.  That has been my case.  From the few employers that offered me 401k, I got funds I didn't like and/or didn't perform well.  So I ended up investing very little in 401k.  Only IRAs and non-retirement investments are truly open to everyone, where everyone can choose exactly what they want.

use2betrix

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Re: How much savings composed of non-retirement funds
« Reply #11 on: June 17, 2019, 06:10:45 PM »
Savings/Checking = $74k (I work as a contractor with a sorta volatile job and like long sabbaticals between jobs)
401k = $130k
HSA = $15k
Roth IRA = $39k
Taxable = $180k

MoneyTree

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Re: How much savings composed of non-retirement funds
« Reply #12 on: June 17, 2019, 08:35:13 PM »
I've got about 75% taxable, 25% retirement, but only because I foolishly ignored 401k contributions in my early working years. If I could do it over again I'd probably be at around 60-40, AND my overall total stash would likely be a bit higher as well, since these accounts allow you to invest dollars that would have otherwise been taxed.
« Last Edit: June 17, 2019, 08:39:05 PM by MoneyTree »

appleshampooid

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Re: How much savings composed of non-retirement funds
« Reply #13 on: June 20, 2019, 08:35:49 AM »
For me and my wife, it breaks down 43.95% pre-tax (trad 401(k) and IRAs), 23.11% Roth IRAs, and 32.94% taxable.

Actively we are putting the most into pre-tax through my work 401(k). She doesn't work outside the home presently, but depending on total income this year she will max out her trad IRA contribution. And I will max out my Roth this year, using backdoor if necessary.

Whatever is left goes into taxable. Actually I probably misspoke above, I bet we will put more into taxable than pre-tax all up, at end of year.
« Last Edit: June 20, 2019, 08:40:58 AM by appleshampooid »

Exflyboy

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Re: How much savings composed of non-retirement funds
« Reply #14 on: June 20, 2019, 10:34:47 AM »
Almost exactly 50:50 for us in retirement.

I only spend taxable (<59.5) to maximise ACA subsidy etc.

fuzzy math

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Re: How much savings composed of non-retirement funds
« Reply #15 on: June 20, 2019, 10:40:33 AM »
Seeing as DH and I have access to $99k worth of tax advantaged retirement accounts, we currently have nothing in brokerage accounts. When we are much closer to FIRE and can anticipate what we will actually need, we will begin to divert funds there.

Paul der Krake

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Re: How much savings composed of non-retirement funds
« Reply #16 on: June 20, 2019, 10:52:23 AM »
Almost exactly 50:50 for us in retirement.

I only spend taxable (<59.5) to maximise ACA subsidy etc.
For now, old man.

Exflyboy

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Re: How much savings composed of non-retirement funds
« Reply #17 on: June 20, 2019, 02:21:36 PM »
Almost exactly 50:50 for us in retirement.

I only spend taxable (<59.5) to maximise ACA subsidy etc.
For now, old man.

 You'll be old too one day.. If you're lucky..

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SimpleLifer

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Re: How much savings composed of non-retirement funds
« Reply #18 on: June 21, 2019, 11:14:21 AM »
I'm still a w-2 FTE, planning RE in ~3 years.  I max out every tax-deferred option at work, and stash most of my RSU income into taxable account.

tax deferred:  47%
taxable:  53%

sisto

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Re: How much savings composed of non-retirement funds
« Reply #19 on: June 21, 2019, 01:47:05 PM »
20-25% in post tax. I max out all my other pre-tax options. I will still be better off even if I were to have to pay the penalty to take from retirement accounts, but will likely be doing a SEPP.

Davnasty

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Re: How much savings composed of non-retirement funds
« Reply #20 on: June 21, 2019, 02:47:34 PM »
Really? The IRS allows me to contribute up to $62,000 each year to my solo401k. Thats a shit ton of money and the main reason why almost all of my savings (aside from EF and college for kids) is socked away in retirement accounts.

That's true, but many employers don't offer 401k, and even when they do, you are forced to invest in a firm your employer chooses, not one that you choose nor necessarily one that you like.  That has been my case.  From the few employers that offered me 401k, I got funds I didn't like and/or didn't perform well.  So I ended up investing very little in 401k.  Only IRAs and non-retirement investments are truly open to everyone, where everyone can choose exactly what they want.

What kind of funds are we talking about? It's quite possible that a suboptimal fund in a 401k still outperforms something better after taxes. Could you tell us what's available to you?

To answer your first question, investing in tax sheltered accounts is a priority for mustachians. If you're not already familiar, read this:

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

ETA: reading your post again it sounds like maybe you have no 401k available currently?

« Last Edit: June 21, 2019, 02:52:32 PM by Dabnasty »

BTDretire

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Re: How much savings composed of non-retirement funds
« Reply #21 on: June 21, 2019, 08:59:09 PM »
Seeing as DH and I have access to $99k worth of tax advantaged retirement accounts, we currently have nothing in brokerage accounts. When we are much closer to FIRE and can anticipate what we will actually need, we will begin to divert funds there.

What does access to tax advantaged accounts mean? Do you have  $99K in tax advantaged accounts, or are you able to contribute $99K into tax advantaged accounts each year?
  If you have nothing in brokerage accounts, where is your tax advantaged money?
I'm at retirement and almost all of my money is in brokerage accounts whether tax advantaged or not.
 I think we need some terminology defined.

FIREstache

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Re: How much savings composed of non-retirement funds
« Reply #22 on: June 21, 2019, 09:16:36 PM »
Seeing as DH and I have access to $99k worth of tax advantaged retirement accounts, we currently have nothing in brokerage accounts. When we are much closer to FIRE and can anticipate what we will actually need, we will begin to divert funds there.

What does access to tax advantaged accounts mean? Do you have  $99K in tax advantaged accounts, or are you able to contribute $99K into tax advantaged accounts each year?
  If you have nothing in brokerage accounts, where is your tax advantaged money?
I'm at retirement and almost all of my money is in brokerage accounts whether tax advantaged or not.
 I think we need some terminology defined.

I think fuzzy means a $99K yearly limit to tax advantaged retirement plans, which is why they contribute to that instead of to brokerage investments.  This sounds easily possible as my limit alone in my 457B and 401a combined is over $80K per year, but I contribute considerably less than that limit.

fuzzy math

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Re: How much savings composed of non-retirement funds
« Reply #23 on: June 22, 2019, 12:04:46 PM »
Seeing as DH and I have access to $99k worth of tax advantaged retirement accounts, we currently have nothing in brokerage accounts. When we are much closer to FIRE and can anticipate what we will actually need, we will begin to divert funds there.

What does access to tax advantaged accounts mean? Do you have  $99K in tax advantaged accounts, or are you able to contribute $99K into tax advantaged accounts each year?
  If you have nothing in brokerage accounts, where is your tax advantaged money?
I'm at retirement and almost all of my money is in brokerage accounts whether tax advantaged or not.
 I think we need some terminology defined.

I think fuzzy means a $99K yearly limit to tax advantaged retirement plans, which is why they contribute to that instead of to brokerage investments.  This sounds easily possible as my limit alone in my 457B and 401a combined is over $80K per year, but I contribute considerably less than that limit.

Yes this! I always struggle with what people call their taxable accounts. I've seen it listed as brokerage before. Yes all of our tax advantaged stuff is also invested with a firm. I own a tiny amount of stock in a taxable account, but the rest is in IRAs, 403b, 401k and 457b's that DH and I each have. Its hard for me to envision just placing all of it in a taxable account and ignoring the giant gaping hole that would remain in my available work retirement pots (and think of the taxes I'd be paying as a result), but its something I may have to do to effectively get a Roth pipeline going early on in FIRE.

Paul der Krake

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Re: How much savings composed of non-retirement funds
« Reply #24 on: June 22, 2019, 01:00:53 PM »
There is a lot of highly compensated employees working in the private sector represented here. Most of us do not have access to the 401(a)/457(b) combo, or similar. We have one 401(k), one (backdoor) Roth IRA. The luckiest get an HSA and/or a mega backdoor Roth. Having to put extra savings in a taxable account is the epitome of a first world problem, but a very common one.

Exflyboy

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Re: How much savings composed of non-retirement funds
« Reply #25 on: June 22, 2019, 02:26:27 PM »
There is a lot of highly compensated employees working in the private sector represented here. Most of us do not have access to the 401(a)/457(b) combo, or similar. We have one 401(k), one (backdoor) Roth IRA. The luckiest get an HSA and/or a mega backdoor Roth. Having to put extra savings in a taxable account is the epitome of a first world problem, but a very common one.

Yeah, if you expect to save 50% or more of your income and you earn over 6 figures, its almost impossible to NOT save after tax.

I started saving everything pre tax (high income tax State), then as our incomes rose together with the savings rate the extra savings naturally ended up in after tax investments.

When we got to 70% savings then we were saving almost twice as much post tax as we were pre tax.

Its worked out really good for minimising "income" in retirement.

HBFIRE

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Re: How much savings composed of non-retirement funds
« Reply #26 on: June 22, 2019, 04:41:04 PM »
Approximately 50/50 for us.   Trying to get the non-retirement closer to 70%.

drumstache

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Re: How much savings composed of non-retirement funds
« Reply #27 on: June 26, 2019, 08:17:58 AM »
Plus or  Minus...
401K - 25%
Roth - 10%
Rollover IRA's - 27%
Taxable - 23%
Cash - 15%