Author Topic: Retirement accounts maxed - questioning next investment steps  (Read 1445 times)

Trudie

  • Handlebar Stache
  • *****
  • Posts: 1717
Retirement accounts maxed - questioning next investment steps
« on: January 28, 2016, 01:02:11 PM »
Short story, no debt (other than mortgage of $120K).  Net worth (including home equity) is 1.25M.

We're on target to max our tax-advantaged retirement accounts in 2016 as follows:
Me 401K - $18K
Me Roth - $5.5K
Husb 401K - $23K
Husb Roth - $6.5K

Our employers also kick in 10% of our incomes, which results in another $15K per year.  So, total er and ee retirement savings are at $68K.  I have an HSA for the first time this year and am maxing that.  My employer kicks in $3750 and I'm throwing in the other $3K.

We are DINKs, and with careful planning each year I manage to keep us just barely in the 15% bracket.  In past years I've prepaid charitable donations and would consider stacking my real estate taxes if it made a difference.  We will be helped this year by the HSA contributions.

But... we're right on the cusp and I'm deciding whether I want to continue to throw excess savings into unqualified funds or to use a mega back door roth strategy -- which just became available to me.  I like the flexibility of unqualified funds (for emergencies, etcetera) and I've been using the unqualified funds to build a "mortgage payoff sinking fund."  If all goes as I anticipate, sometime later this year I will have accumulated enough in our unqualified funds to kill the mortgage.  Technically, I will probably let the funds be for awhile, but it's decent peace of mind.

But obviously, the more current income we have can cause tax issues.  I do still have options left to mitigate this (stacking deductions) but am wondering where to go next??

Options:
(1) Megabackdoor roth
(2) Continue to invest in unqualified funds, but change mix (emphasis on tax free munis, for instance)
(3) Invest as we are now, stack deductions to stay in 15% bracket as long as possible

I'm leaning toward to staying the course with our investing until the "mortgage sinking fund" kills the mortgage, then doing the megabackdoor roth.  I think I probably have a few more years where I can make this work with some planning.

Your thoughts?

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5166
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Retirement accounts maxed - questioning next investment steps
« Reply #1 on: January 28, 2016, 01:56:12 PM »
I'm a big fan of the mega backdoor Roth. It's a way to stash a bunch of money in a place where you have immediate tax-free access to the principal and any earnings can be withdrawn tax-free once you hit the right age. Right now you get a certain amount of tax-free earnings in your taxable account as well, but that's only up until the top of the 15% bracket and only as long as Congress sees fit to keep the capital gains rate at zero.

Geekenstein

  • 5 O'Clock Shadow
  • *
  • Posts: 34
Re: Retirement accounts maxed - questioning next investment steps
« Reply #2 on: January 28, 2016, 05:35:04 PM »
+1

With success it's hard not to climb the tax ladder.  On the bright side, the more money you have working for you, the less time (hopefully) you have to work for it.