Author Topic: Investment Question  (Read 1322 times)

supercouper96

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Investment Question
« on: July 15, 2021, 07:19:15 PM »
Hi,

I'm a bit confused on where to go with my investments. I'm 33 wife is also 33, two kids 3 and 6. I have an annuity through work that, I'm unable to withdraw until 59-1/2, I will also receive a small pension. My wife has a 403b that we have started max funding. We want to set aside some  money for college for our kids, and for early retirement. I'm just unsure if I should be maxing out the roths or just investing into a taxable brokerage account for the college/ early retirement fund? I'm anti 529 because I just can't guarantee my kids will go to college for any length of time even though we encourage education, since we have established a life off of two community college educations.
 
The numbers.
Age 33
kids 3 & 6
Own our home valued around $350k, no debt.
Income $165,000 gross
Annuity $440,000
403b $82,000
Roth $4,000
Taxable $6,000

Thanks for your help.

EvenSteven

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Re: Investment Question
« Reply #1 on: July 16, 2021, 08:05:59 AM »
I think a good place to start is this sticky at the top:

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


Does that help at all or do you have any questions or disagreements with that account priority?


supercouper96

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Re: Investment Question
« Reply #2 on: July 16, 2021, 08:58:26 AM »
I read more about annuities and I don't believe that's what I have. It's just an investment account that I pick my investments, it's funded via a match of 25% of my wage scale so currently around $9 per hour. Many of my coworkers are currently retiring with around $1 million to $2 million. Im on track for a much higher number just due to our wage scale constantly rising.

I understand the investment order, my only concern was I will need the college savings around 50 years old, and if I understand correctly I will only be able to withdraw my contributions from the roth, which depending on the cost of college I could easily come up short. But if I did the taxable I could contribute the same $11,000 per year and be able to use the gains to fund college as needed.

Thanks for the help.

MustacheAndaHalf

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Re: Investment Question
« Reply #3 on: July 16, 2021, 11:35:10 AM »
Own our home valued around $350k, no debt.
Income $165,000 gross
Annuity $440,000
403b $82,000
Roth $4,000
Taxable $6,000
You make $14k/month but have just $6k in taxable?  Where is your emergency fund?

You asked about contributing to a Roth, but you can't.  Your income is over the limit for tax-deductible contributions to a Roth IRA.

I've read a number of stories where people try to withdraw their money from an annuity, instead of taking the payments, and get much less than face value.  I suspect you do not actually have $440k to withdraw from an annuity.

youngwildandfree

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Re: Investment Question
« Reply #4 on: July 16, 2021, 11:53:17 AM »
Own our home valued around $350k, no debt.
Income $165,000 gross
Annuity $440,000
403b $82,000
Roth $4,000
Taxable $6,000
You make $14k/month but have just $6k in taxable?  Where is your emergency fund?

You asked about contributing to a Roth, but you can't.  Your income is over the limit for tax-deductible contributions to a Roth IRA.

I've read a number of stories where people try to withdraw their money from an annuity, instead of taking the payments, and get much less than face value.  I suspect you do not actually have $440k to withdraw from an annuity.

If they are MFG I thought the gross limit was 208K for 2021?

supercouper96

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Re: Investment Question
« Reply #5 on: July 16, 2021, 11:58:23 AM »
Haha.. Rough crowd. Emergency fund is $50k.... if that's even relevant.... Taxable is a taxable trading account... The roth income limit is $198,000.... so we are well under that by my math.

I misspoke if you read my reply, it's not an "annuity" by annuity definition... I know how the retirement  works... it's a construction union based retirement that I will not be the first person to retire out of...

Apparently asking opinions on college funding will get you anything but.

I will just follow the investment order and fund the roth.

Thanks

FLBiker

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Re: Investment Question
« Reply #6 on: July 16, 2021, 12:26:37 PM »
There are undoubtedly different opinions on this, but we also opted not to do a 529 for similar reasons.  Our daughter is 6.  We haven't earmarked anything in particular for college for her, but we're older (I'm 44) and pretty close to FIRE.  Remember with Roth you could pull out your contributions to pay for college (so it isn't totally locked up) but with taxable (obviously) you could use the gains as well.

Fundamentally, we just felt like education was too unpredictable to lock money in for.  Then we ended up moving to Canada, and 529s aren't covered by the tax treaty, so it ended up being a good thing.  My wife and I are both semi-former college instructors, and I personally would be totally supportive of community college, not going to college, etc.  A traditional 4 year degree is just one valid path among many (whereas I definitely thought it was the next required step after high school).

EvenSteven

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Re: Investment Question
« Reply #7 on: July 16, 2021, 12:27:32 PM »
Haha.. Rough crowd. Emergency fund is $50k.... if that's even relevant.... Taxable is a taxable trading account... The roth income limit is $198,000.... so we are well under that by my math.

I misspoke if you read my reply, it's not an "annuity" by annuity definition... I know how the retirement  works... it's a construction union based retirement that I will not be the first person to retire out of...

Apparently asking opinions on college funding will get you anything but.

I will just follow the investment order and fund the roth.

Thanks

I think funding the Roth is the best option. If you are unsure enough about the need for college expenses to forgo a 529, then I would not worry about possibly needing the capital gains from the Roth to fund college.

Also, you do not need to have the entire 4 years (or 8 years) saved in an account that you are earmarking for college by the time they get there. You will have the option to cash flow part of that from your income, or take it into consideration if you will be retired before then. If they choose to do 2 years of CC, then transfer to a 4-year, that seems like it would not be a strain from your income. Even 4 years at the in-state flagship you should be able to cash flow.

brellis1vt

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Re: Investment Question
« Reply #8 on: July 16, 2021, 01:24:14 PM »
Haha.. Rough crowd. Emergency fund is $50k.... if that's even relevant.... Taxable is a taxable trading account... The roth income limit is $198,000.... so we are well under that by my math.

I misspoke if you read my reply, it's not an "annuity" by annuity definition... I know how the retirement  works... it's a construction union based retirement that I will not be the first person to retire out of...

Apparently asking opinions on college funding will get you anything but.

I will just follow the investment order and fund the roth.

Thanks

I agree with following the investment order.  Another option is to fund a Roth IRA just for them (if they have qualifying income-Lemonade Stand, etc.)  I am doing this as a complement to a 529.

supercouper96

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Re: Investment Question
« Reply #9 on: July 16, 2021, 08:06:08 PM »
Thanks for the help, nice to hear a real word situation that played out. We are gonna let the kids choose they're own path, but unfortunately in the careers we are both in career growth is very limited, so we want the 4 year degree to be a possibility for them.

Thanks

MustacheAndaHalf

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Re: Investment Question
« Reply #10 on: July 17, 2021, 10:23:16 AM »
Income $165,000 gross
You asked about contributing to a Roth, but you can't.  Your income is over the limit for tax-deductible contributions to a Roth IRA.
If they are MFG I thought the gross limit was 208K for 2021?
Yes, my mistake, I used the single filer limit rather than married:
https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2021

MustacheAndaHalf

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Re: Investment Question
« Reply #11 on: July 17, 2021, 10:26:13 AM »
Apparently asking opinions on college funding will get you anything but.
You're mispresenting what you asked in your original post:

We want to set aside some  money for college for our kids, and for early retirement.

Chris Pascale

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Re: Investment Question
« Reply #12 on: July 18, 2021, 03:00:20 PM »
Reading to the end, I'll answer about college funding:

Since you're kids are so young you have time to get into a college work-wise, and then it could be free. I know a guy with young kids who, after 8 years of teaching 1 class a year minimum, won't have to pay tuition there. So he's already telling his young kids that that's where they are going.

Also, your kids can get a job at a college.

With the Roth you can take out anything you put in 5+ years ago. For example, I'm putting $6k a year in, and maybe in 10 years I'll have a kid who gets into some overpriced medical school, but, hey, it's still a medical school and I'll pay for it. Well, I can start by pulling out the max allowed from that resource.

I do have a 529 that I'd put $10k in, in 2015, and panned out as a good investment.