Help me understand where to go from here.... Cash? Roth Ira? 401k?

[b4laura]

Thanks all for providing feedback in advance! 

[SuperSecretName]

put your cottage savings in the 401k , and then purchase it with funds when you sell off house.  having two dwellings is not very mustachian.  Especially since you are not maxing out all available tax advantaged space.  Unless you are getting a good state benefit from the 529 contribution, I'd maybe max out the Roth first.  Haven't run the numbers on that.

look up the roth conversion ladder for getting money out of 401k/tIRA. 

oh, and don't justify not maxing 401k/roth by saying you'll have more money that you need in there.  You can cross that bridge later (and get it out with the roth ladder).  What you are doing now is paying more taxes than necessary.

[b4laura]

Thanks for the response. The state tax for the 529 is 3.6%. Are you saying that the money should not be saved in cash but rather save it as a tax protected investment even for the ages between 47 and 62? My wife and I will have to look more into the roth IRA and 401k early withdrawals. We are trying to figure out what exactly we need to do to be able to retire at age 47.

[leighb]

I don't understand hair getting its own budget line item. To me that would be an easy place to cut costs. (2034-2017)*80*12= $16,320 in hair care over your projected period of savings. But I get that this might just be me.

[MDM]

my wife and I want to figure out what we need to do to retire in 16-17 years but are currently on the standard retirement savings plan that assumes working to 62... I will not work till I'm 62.

If you put your numbers into the case study spreadsheet and do some "what if...?"s while checking the simple "Time to FI" section - or use one or more of the Best and/or Recommended Retirement Calculators - Bogleheads.org - what do you see?

[b4laura]

Thanks MDM.

In row 2 and 3 column B I entered my gross income... then entered the pretax expense for medical/dental/etc below, however, it is adding to to the total in row 10 B rather than subtracting from.  Should row 2 and 3 column B be net?

[MDM]

Thanks MDM.

In row 2 and 3 column B I entered my gross income... then entered the pretax expense for medical/dental/etc below, however, it is adding to to the total in row 10 B rather than subtracting from.  Should row 2 and 3 column B be net?

B2 and B3 should be monthly gross.

All entries (except where specifically indicated otherwise: e.g., B28 and B29) should be positive numbers.

If you use the inputs shown here (B2: =101000/12; B3: =14000/12), do you get the same results in row 10?

[b4laura]

Thanks MDM.

In row 2 and 3 column B I entered my gross income... then entered the pretax expense for medical/dental/etc below, however, it is adding to to the total in row 10 B rather than subtracting from.  Should row 2 and 3 column B be net?

B2 and B3 should be monthly gross.

All entries (except where specifically indicated otherwise: e.g., B28 and B29) should be positive numbers.

If you use the inputs shown here (B2: =101000/12; B3: =14000/12), do you get the same results in row 10?

Ok - It worked the second time around.

What a great tool... not to mention I am ok with the outcomes.  Our goal is to be done when our kids go away to school in 17 years, modeling those dates provided we will have an excess of 892,000 and we could hit in 10 years!  Motivating!

So how about investment order?
Right now I put 7% in 401k (No match but they put 8% in a cash pension that grows at 30 year treasury rate... so very low return of 2.5-3.5%), I put 400/month in Roth (200 each), and I have not been frugal with the rest (lots of big vacations, dinners, etc.) recently but it's time to adjust the mindset.

As someone has stated earlier... I am not taking the full benefit and paying much more tax than needed.

My thought moving forward:
1. I did not participate in my company HSA ... Mistake and I will next year.
2. 18% Margin rate - I will max out my Roth 2nd
3. 80% remaining available in 401k?  This will allow me to utilize the roth ladder for the gap years until 62.
4. 20% in cash (taxable) mutual funds. 

Thoughts?

[MDM]

So how about investment order?
...
My thought moving forward:
1. I did not participate in my company HSA ... Mistake and I will next year.
2. 18% Margin rate - I will max out my Roth 2nd
3. 80% remaining available in 401k?  This will allow me to utilize the roth ladder for the gap years until 62.
4. 20% in cash (taxable) mutual funds. 

Thoughts?

18% is an unusual marginal rate, unless it is something like 15% federal + 3% state/local.

The suggestions in Investment Order will be appropriate for most people, so unless there are special circumstances....

[b4laura]

So how about investment order?
...
My thought moving forward:
1. I did not participate in my company HSA ... Mistake and I will next year.
2. 18% Margin rate - I will max out my Roth 2nd
3. 80% remaining available in 401k?  This will allow me to utilize the roth ladder for the gap years until 62.
4. 20% in cash (taxable) mutual funds. 

Thoughts?

18% is an unusual marginal rate, unless it is something like 15% federal + 3% state/local.

The suggestions in Investment Order will be appropriate for most people, so unless there are special circumstances....

It's 25% .... 2:30 AM did not serve me well.

Thanks again!!!

[SuperSecretName]

As someone has stated earlier... I am not taking the full benefit and paying much more tax than needed.

My thought moving forward:
1. I did not participate in my company HSA ... Mistake and I will next year.
2. 18% Margin rate - I will max out my Roth 2nd
3. 80% remaining available in 401k?  This will allow me to utilize the roth ladder for the gap years until 62.
4. 20% in cash (taxable) mutual funds. 

0 in cash until everything tax-advantaged is maxed.  I'd also dial back the 529 until that happens.

[b4laura]

As someone has stated earlier... I am not taking the full benefit and paying much more tax than needed.

My thought moving forward:
1. I did not participate in my company HSA ... Mistake and I will next year.
2. 18% Margin rate - I will max out my Roth 2nd
3. 80% remaining available in 401k?  This will allow me to utilize the roth ladder for the gap years until 62.
4. 20% in cash (taxable) mutual funds. 

0 in cash until everything tax-advantaged is maxed.  I'd also dial back the 529 until that happens.

Yeah I can review that as well.  Reducing 529 to maximize Roth and 401k. Something about pride to have money in kids college is a weakness. Same with saving cash vs retirement. Always nice to have cash even when it doesn't make sense. I'll adjust.