justme
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Post by justme on Sept 16, 2020 13:45:21 GMT -5
The question has been rolling around in my head for a bit, and figured some of you might enjoy playing with numbers.
So the breakdown is I'm 34, single, and I own my condo (which I'm not and will not pay extra towards). My car is a 2008 with 120k miles, but is well maintained and I could likely still have it for another year or two easy unless something happens outside of my control. My condo is not my forever home, but if I stay single I can't tell you when I'd be looking at buying a house (with the hopes of renting out the condo, but that might not happen). I'm currently putting 12% in 401k with 1% in Roth version and 3% match. I have an automatic bump of 1% in Oct which I plan to make Roth. I have around $130k in retirement with only around $10k of that in Roth. I max my HSA but use it too, so have around $4k in there and each year around $1500 "rolls over" to the next year unused. And I'm in the 22% tax bracket.
My savings got hit with a huge assessment my condo place had, but with a cash out refi of my condo helping and my spending being a lot less with the pandemic that my savings has pretty much gotten back to where it was pre-assessment. It's in the low 5 figures and I'm starting to think I should part putting some of it in more long term situations.
So upping my 401k beyond the automatic 1%/year I think is off the table (depending upon raises, it'll be maxed in less than 5 years) - I don't want all my money tied up in stuff I can't touch until 60. Though I probably could be convinced to put more towards the Roth option. Which leaves either putting money in a Roth IRA or a taxable account. I haven't put any money in my 2020 Roth. I likely wouldn't put the full amount in the Roth if I went that way this year, but going forward it would be about the max I could put in a Roth that I would want to be investing each year.
Ask me other questions if it would help! And suggestions on what to invest in and if it would be different if it was Roth vs Taxable.
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Tiny
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Post by Tiny on Sept 16, 2020 13:56:26 GMT -5
How much are we talking here - an exta 1K per year to invest or 10K per year to invest?
How will you paying for your next vehicle and do you need the vehicle to get to work (could you tough out some weeks/months without the car)- are you saving for the downpayment? Do you know how much you can pull out of your current budget for a car payment?
It's hard to determine if you are saving enough for retirement. Does your current employer have a pension plan that you are included in? Have you attempted to figure out how much you MIGHT need for retirement if you are funding it yourself? (401K/Roth + SS)?
At a high level - I'd be saving down payment money for the next car (a 1 or 2 year goal) and then maybe figuring to use the monthly amount I was 'saving' towards the Car Payment. that would make the least amount of waves in your finances - and it would let you concentrate on other financial stuff for upto the next 7 years (2 years of saving, 5 years of car loan).
My hindsight advice is to keep your pretax % as is and up the % going to Roth.
I have really big pretax investments and I'm in the 24% tax bracket now. I'm nearing retirement. I should have put more money into a Roth when I had the lower income. I was maxing my pretax 401K and had extra money and was in the 22% bracket. OK, I used the post tax money I saved to buy rental properties (along with mortgages) but still... I wish I had been more consistent with putting $$ into a Roth back when I was in my late 30's and early 40's . I didn't pay attention to it until I was 45... And now my income is flirting with the Roth income limits and any money I can put in feels like it's at the 24% tax level...
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Deleted
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Post by Deleted on Sept 16, 2020 14:04:50 GMT -5
I would max the Roth IRA before anything else. Contributions can always be taken out, but you'll never get that space back.
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steph08
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Post by steph08 on Sept 16, 2020 14:07:28 GMT -5
I'm interested in the answers here as well, because I am in the same-ish boat, though I think with a lower salary.
35 here (though married with two kids) and about $150k in retirement savings - current employer 401k and rollover IRA from my previous company. I save 15% toward retirement, but my contribution is still several thousand dollars away from hitting the max (this doesn't include a 4% company contribution - some years it is doubled to 8%).
I am having a hard time figuring out whether I should continue bumping up the 401k to hit the max beyond upping it 2-3%/year with raises, or if I should be doing a Roth 401k or IRA. Or a taxable account, as you mentioned.
For me, and maybe you too, I like upping the 401k because it is gone before I even see it. However, I think the Roth IRA is a better bet because I can withdraw those contributions in case of emergency.
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justme
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Post by justme on Sept 16, 2020 14:57:03 GMT -5
How much are we talking here - an exta 1K per year to invest or 10K per year to invest? How will you paying for your next vehicle and do you need the vehicle to get to work (could you tough out some weeks/months without the car)- are you saving for the downpayment? Do you know how much you can pull out of your current budget for a car payment? It's hard to determine if you are saving enough for retirement. Does your current employer have a pension plan that you are included in? Have you attempted to figure out how much you MIGHT need for retirement if you are funding it yourself? (401K/Roth + SS)? At a high level - I'd be saving down payment money for the next car (a 1 or 2 year goal) and then maybe figuring to use the monthly amount I was 'saving' towards the Car Payment. that would make the least amount of waves in your finances - and it would let you concentrate on other financial stuff for upto the next 7 years (2 years of saving, 5 years of car loan). My hindsight advice is to keep your pretax % as is and up the % going to Roth. I have really big pretax investments and I'm in the 24% tax bracket now. I'm nearing retirement. I should have put more money into a Roth when I had the lower income. I was maxing my pretax 401K and had extra money and was in the 22% bracket. OK, I used the post tax money I saved to buy rental properties (along with mortgages) but still... I wish I had been more consistent with putting $$ into a Roth back when I was in my late 30's and early 40's . I didn't pay attention to it until I was 45... And now my income is flirting with the Roth income limits and any money I can put in feels like it's at the 24% tax level... Somewhere in between. I put what I need to cover my budgets in certain accounts and then just the extra in savings. The main reason I dip into savings is for vacations that can't be absorbed in my regular spending. With the promotion a bit over $10k/year is going in to savings now - probably half or less would I be looking towards more long term savings right now. Probably depends on whether I do $$$$ vacations or $$ vacations. If work lets me work from home I could tough it out without a car - but it would be tough. I have a grocery store I can walk to and restaurants/bars/entertainment, and uber/lyft is an option, but our public transportation mostly sucks - like 30 mins to go 5-10 miles. I plan to finance it, but if interest rates get crazy I might reassess. I don't have specific car savings. And the payment would probably more come out the money currently going to savings than budget (which is more than a car payment), but there's definitely money to cut back there if needed. No pension. I haven't focused too much on estimating that far out. I more focused on the articles talking about a certain % of your income or the multiple of salary rule of thumb. All told I'm above the 15% I see (I'm fully vested in work match so I include it) and I think it was twice your salary by 35 - and I'm a little below that partially thanks to the crash, but if you use my AGI I'm above that already. Plus I need to get around to moving my HSA money into investments since I am purposefully putting in about half of the max as long term savings. I'm just in the crux of what do I do with money that I might want to use in the next 2/5/10 years? Parking it in savings account earning less than 2% is stupid, but I obviously don't want to sock it into a 401k. Roth IRA makes some sense because I can pull out the contributions when I need them and the money it grows can stay for retirement. But I haven't done that so I have no idea if realistically it's a PITA to take contributions out of Roth. Or if it makes more sense to put the money in a taxable account that after a year you just pay the 10/15% and call it good and keep the Roth IRA more for retirement only.
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Deleted
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Post by Deleted on Sept 16, 2020 15:05:44 GMT -5
Personally, if it was ME and I was in the 22% tax bracket, I would be maxing that 401K as well, how much more a year do you need to increase to get to that? That 15% rule of thumb is just a rule of thumb (and it's supposed to be 15% not counting the match, if you're going to follow that anyhow). Even if you're on track, getting ahead is a good thing. You never know when you might be forced to scale back or quit saving entirely for a stretch.
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Deleted
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Post by Deleted on Sept 16, 2020 15:10:48 GMT -5
But I haven't done that so I have no idea if realistically it's a PITA to take contributions out of Roth. At Vanguard and Fidelity, it's literally a few clicks of the mouse. Keep track of your basis (what you've contributed) and save all the 5498 forms as proof and that's all you need for doing taxes.
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Regis
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Post by Regis on Sept 16, 2020 15:11:15 GMT -5
I would also max out your Roth IRA contributions and then go back and put more in your 401(k). Take the tax advantage on everything you can before opening a taxable account.
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justme
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Post by justme on Sept 16, 2020 15:28:01 GMT -5
I would also max out your Roth IRA contributions and then go back and put more in your 401(k). Take the tax advantage on everything you can before opening a taxable account. But tax advantage shoe-horns all your money into not be able to be accessed until 60. This is money that there's a good chance I'll want access to wayyyyyy before I turn 60. Plus it'll max on its own without me doing anything within the next 5 years.
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gs11rmb
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Post by gs11rmb on Sept 16, 2020 15:31:44 GMT -5
I would also max out your Roth IRA contributions and then go back and put more in your 401(k). Take the tax advantage on everything you can before opening a taxable account. But tax advantage shoe-horns all your money into not be able to be accessed until 60. This is money that there's a good chance I'll want access to wayyyyyy before I turn 60. Plus it'll max on its own without me doing anything within the next 5 years. If you're pretty sure you're going to want to tap it at some point before 60 then I'd just go with a taxable account.
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justme
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Post by justme on Sept 16, 2020 15:42:43 GMT -5
But I haven't done that so I have no idea if realistically it's a PITA to take contributions out of Roth. At Vanguard and Fidelity, it's literally a few clicks of the mouse. Keep track of your basis (what you've contributed) and save all the 5498 forms as proof and that's all you need for doing taxes. Is it bad that that kinda sounds like a PITA I know I just need to accept that I'm crossing over to the point where my finances are going to get complicated and have to start keeping track of more things.
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Tiny
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Post by Tiny on Sept 16, 2020 15:55:36 GMT -5
How much are we talking here - an exta 1K per year to invest or 10K per year to invest? How will you paying for your next vehicle and do you need the vehicle to get to work (could you tough out some weeks/months without the car)- are you saving for the downpayment? Do you know how much you can pull out of your current budget for a car payment? It's hard to determine if you are saving enough for retirement. Does your current employer have a pension plan that you are included in? Have you attempted to figure out how much you MIGHT need for retirement if you are funding it yourself? (401K/Roth + SS)? At a high level - I'd be saving down payment money for the next car (a 1 or 2 year goal) and then maybe figuring to use the monthly amount I was 'saving' towards the Car Payment. that would make the least amount of waves in your finances - and it would let you concentrate on other financial stuff for upto the next 7 years (2 years of saving, 5 years of car loan). My hindsight advice is to keep your pretax % as is and up the % going to Roth. I have really big pretax investments and I'm in the 24% tax bracket now. I'm nearing retirement. I should have put more money into a Roth when I had the lower income. I was maxing my pretax 401K and had extra money and was in the 22% bracket. OK, I used the post tax money I saved to buy rental properties (along with mortgages) but still... I wish I had been more consistent with putting $$ into a Roth back when I was in my late 30's and early 40's . I didn't pay attention to it until I was 45... And now my income is flirting with the Roth income limits and any money I can put in feels like it's at the 24% tax level... I'm just in the crux of what do I do with money that I might want to use in the next 2/5/10 years? Parking it in savings account earning less than 2% is stupid, but I obviously don't want to sock it into a 401k. Roth IRA makes some sense because I can pull out the contributions when I need them and the money it grows can stay for retirement. But I haven't done that so I have no idea if realistically it's a PITA to take contributions out of Roth. Or if it makes more sense to put the money in a taxable account that after a year you just pay the 10/15% and call it good and keep the Roth IRA more for retirement only. it sounds like you need a car - but have a 'pool' of money to divert to a carpayment without derailing your other savings. That's good. As for money you may want to spend in the future - How much will you need in 2 years? 5 years? 10 years? What are you saving for? If you are just saving for "you don't know what - just something special" I'd definitely fund the Roth every year. I found it helpful to think in terms of "I need 6K for a new car in 24 months that's 250 a month. I need 10K for my 5 year goal - that's $170 per month, I think I want 20K for something I don't know I want yet in 10 years - that's $170 per month - so a total of $590 - round up to $600. I would then opt to put $250 into a savings account for the car, and I'd put $350 into a Roth every month. If I maxed the Roth - I'd divert the money to savings or to my 401K. Every year I'd review my goals and costs and how I wanted to allocate the budgeted $600 per month that I had for "future spending goals". In theory, in 2 years you could put 6k down on a car and maybe have a 250.00 payment. you could then either find $250 in your budget and keep the $600 going to "future spending goals" ($250 to savings/350 to Roth) and still have 10K in 3 years for that 5 year goal. And you got $4200 into your Roth each year. And get your 2 and 5 year goals. I did some version of this in my 40's with a 2/3/5/10 year "I need X amount of money by" goals. I allocated $750 of monthly income with $250 going to my Roth each month. I met my goals (as the years past I was able to cash flow more out of my paycheck for some of the things I was saving for AND I was able to bump up my Roth contribution.) If I hadn't done it that way - I would have about 15K less in contributions to my Roth today.
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Lizard Queen
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Post by Lizard Queen on Sept 16, 2020 15:59:34 GMT -5
I'd go with Roth. (Has something changed that you can't take your contributions out?) What is your goal here? Do you want to RE? If you're just saving for the hell of it, I guess it doesn't matter too much where you put it, but if you have a goal, then you can plan for that goal.
Tell ya what, at 48 and 46, my DH is ecstatic that I saved so much early on. I mean 15% when I was making $5/hr, plus match. I bumped it up to 18% for a little while after we got married and making about $35k, to make up for his lack of a 401k. Plus the match, whatever it was at the time. I had no business saving so much on such a small salary, but it bought us a whole lot of options now, when I have few to no fucks left to give. I hit that wall around 40 yo. YMMV. (BTW, I wish I had saved even more when I think about some of the stupid shit I wasted money on.)
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Post by Deleted on Sept 16, 2020 16:07:46 GMT -5
(BTW, I wish I had saved even more when I think about some of the stupid shit I wasted money on.) I could have done much better in my 20's. I don't even want to do the math on where I could be right now.
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Tiny
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Post by Tiny on Sept 16, 2020 16:08:08 GMT -5
I would also max out your Roth IRA contributions and then go back and put more in your 401(k). Take the tax advantage on everything you can before opening a taxable account. But tax advantage shoe-horns all your money into not be able to be accessed until 60. This is money that there's a good chance I'll want access to wayyyyyy before I turn 60. Plus it'll max on its own without me doing anything within the next 5 years. Aren't employer contributions on top of the 19,500 that you can contribute to the 401K? If you mean you will be putting 19500 (or more the amount goes up every year) into your 401K in 5years with a less than 20% contribution rate - it sounds like you've got high income... which means you might not be able to contribute to a Roth in say 10 or more years. (oK, you could back door roth - maybe.. but still...) My 56 year old self would recommend putting more in a Roth now. expecially if you aren't saving for something very specific that's more than 5 years out into the future. Odds are your income will increase and you'll be able to cash flow some of the "savings" you thought you'd need when 5 years gets here. ADDED: if you think you are going to FI/RE at 50 - you'll need to have a good idea of how much you'll need in after tax accounts to bridge you to 60 and to 65 (medicare and maybe SS). If that's what you are working towards - then an after tax investment is the way to go - probably a S&P500 fund or a target fund.
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Tiny
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Post by Tiny on Sept 16, 2020 16:15:33 GMT -5
I did some version of this in my 40's with a 2/3/5/10 year "I need X amount of money by" goals. I allocated $750 of monthly income with $250 going to my Roth each month. I met my goals (as the years past I was able to cash flow more out of my paycheck for some of the things I was saving for AND I was able to bump up my Roth contribution.) If I hadn't done it that way - I would have about 15K less in contributions to my Roth today. I just want to clarify that was 15K in contributions that have since generated about 15K in "earnings".... and I got the convertible, the rental property, a cool vacation, and continued to do all the cool/fun things I like to do... the power of that $750 per month allocated out of my monthly spending plan towards "stuff I want in the future" was eye opening to me. I also was working towards maxing my 401K a couple % at a time each year... and my income was only going up 3% per year.
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justme
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Post by justme on Sept 16, 2020 16:20:35 GMT -5
I think the problem is I don't have a concrete goal for the near future. If I happen to find someone worth marrying I could be married and with kids in 5 years which would change just about everything. But I have so little control of that outcome it doesn't make sense to live like that's a good chance (especially based on the number of years I've been single). No desire to single mom it (don't know how those of you that are do it, I need someone I can the kids on and run out to be by myself for a few hours!) so at least that's one life path out.
But if I'm still single?
I do plan to spend some of my current savings on like upgrading my floors, but I have that money so my question is more about the future money coming in.
I know I need a new car at some point in the near future, but I like not having a payment so plan to put that off until I can't. Ideally interest rates are low enough that I can go that route. I pretty much know what car I want and it's around $30k, though ideally I'd like a year old just off lease version of it to save some $$$.
At some point I'm going to get tired of having someone live above me. If I sell my condo it'd work as a down payment, but if not I'd need that. But I'm not jumping at the bit to change where I live and hopefully will have a bump up in salary to deal with that. But it's something that I might need savings for.
Other than that I think the only financial goals I can think of is trying to retire as young as I can swing it without being a frugal nanny currently and traveling.
So it's a lot more of a I have money and know I need money to do things, but don't have concrete things that I want to do with my money and don't want a ton sitting in a 1.8% savings account for years and years.
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justme
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Post by justme on Sept 16, 2020 16:33:08 GMT -5
But tax advantage shoe-horns all your money into not be able to be accessed until 60. This is money that there's a good chance I'll want access to wayyyyyy before I turn 60. Plus it'll max on its own without me doing anything within the next 5 years. Aren't employer contributions on top of the 19,500 that you can contribute to the 401K? If you mean you will be putting 19500 (or more the amount goes up every year) into your 401K in 5years with a less than 20% contribution rate - it sounds like you've got high income... which means you might not be able to contribute to a Roth in say 10 or more years. (oK, you could back door roth - maybe.. but still...) My 56 year old self would recommend putting more in a Roth now. expecially if you aren't saving for something very specific that's more than 5 years out into the future. Odds are your income will increase and you'll be able to cash flow some of the "savings" you thought you'd need when 5 years gets here. ADDED: if you think you are going to FI/RE at 50 - you'll need to have a good idea of how much you'll need in after tax accounts to bridge you to 60 and to 65 (medicare and maybe SS). If that's what you are working towards - then an after tax investment is the way to go - probably a S&P500 fund or a target fund. No, I'm not maxing it yet. I did my maths wrong because I thought it was lower lol. I thought at 20% I would hit it, but not without a promotion. Which I should get to the next level soon (depends how much covid messes up finding a new job), but without it I wouldn't be at the limit in 5 years unless I bumped it beyond the automatic increase. I don't have a concrete age of retiring. I know my parents did it in the 50s, but with a good pension and the built their house so never had a mortgage. I accept that as a solo it'll be a lot harder for me to retire and an earlier age. Or if I have kids they'll take up too much money lol. I just want to retire as soon as it's realistic whenever that is - I have no desire to keep working cuz I lurve it or something. But I'm also not going to forego a vacation just to put another $2000 in retirement if that makes sense. Can you sense the pattern of vague direction but no concrete decisions? Good thing it's just natural for me to save money and like seeing my accounts grow or who knows what the hell I would have done.
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Deleted
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Post by Deleted on Sept 16, 2020 16:46:47 GMT -5
Budget is a dirty word here for some, but an annual budget is a great place to start for answering questions like this. You don't have to live like a pauper and save every dime, but saving with no purpose doesn't seem helpful (to me anyhow). Instead use the budget to set savings goals. Prioritize them and go down the list filling the buckets for each. Maybe you'll decide 10K/year on vacations is not what you want to do if it keeps you from putting money in the next bucket on your priority list (just an example, not saying you spend too much on vacations)
When do you want to retire? How do you want to live in retirement?
How much a year do you think is reasonable for vacations? Big one every year? Or just occasional large trips with smaller ones in between?
When do you think you'll need a car and how much do you want to spend on the replacement.
A down payment on a new house? When? How much?
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Lizard Queen
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Post by Lizard Queen on Sept 16, 2020 16:47:31 GMT -5
Well I, for one, would never suggest foregoing vacation to save more, but perhaps those shoes that were cute, but uncomfortable. (Talking about myself here).
The possibility of marriage doesn't matter. Just plan as if you aren't. If you do, you simply shift your priorities. It happens to everyone. I'd just concentrate on saving for the next car purchase, and doing more Roth. Unfortunately, I don't know of any good places to park $ short-term.
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justme
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Post by justme on Sept 16, 2020 17:18:56 GMT -5
I do budget to an extent. I have YNAB and broke down for the paid version cuz my ass couldn't keep up with the old version for long. I'm definitely fast and loose with it in a just add to that category if I go over sort of way. I use it much more as just being able to view what I have spent that sometimes curtails what I spend. If I'm like oh shit I've bought too much clothes this month I stop or stuff like that. Or tell myself I really don't need to go out again tonight.
It's less of a choice of how much to save and more of a where. When I bought my condo after a couple months I figured out my spending and set a "budget" based on two paychecks a month (even though I get 26 a year). My main checking account gets a set amount and that's what I use for all my expenses and I haven't upped in in 5 years. I have another checking account that gets enough in it to cover my mortgage & HOA. The two extra paychecks work as a cushion for those accounts usually (I had 4 weeks of furlough so that wiped my cushion out). Anything over those two set amounts goes directly into my main savings account. I'm usually pretty mindful of when I'm spending more than usual and will have to take money out of that account and normally doesn't happen.
I have one savings account I put in $2500 as my oh shit fund years ago and it's just been collecting interest since then.
I have a vacation savings account that gets $250 a month (a few years back it was $100, and I decided I wanted to be able to take some nicer vacations so I upped it) and with the pandemic it's currently as high as it's ever been. It's usually only used for large portions of a trip. Smaller things like meals and entertainment flow into the normal budget categories for those things. Heck most years my flight to Canada is often cash flowed from my regular account thanks to those extra paychecks.
And a final account that I pull the overage from the mortgage account into periodically so it can earn some pitiful interest. It has a few thousand sitting in it hanging out.
So I've got the amount that currently is my "savings" (excluding 401k/HSA) is pretty set. It's just all going in to savings accounts earning little and I figure it should be going elsewhere. Seems like Roth might be the best elsewhere to put some of the money that I don't think I'll need in the next 18 months or so. Just gotta figure out what funds now.
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gs11rmb
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Post by gs11rmb on Sept 16, 2020 18:22:22 GMT -5
(BTW, I wish I had saved even more when I think about some of the stupid shit I wasted money on.) I could have done much better in my 20's. I don't even want to do the math on where I could be right now.
I'll one-up-ya...I didn't start saving for retirement until I was 32 .
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Deleted
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Post by Deleted on Sept 16, 2020 18:31:18 GMT -5
Do you have a high yield checking account? Even those are crap these days, but mine does pay 2.5% up to 15K so I definitely take advantage of that for funds I expect to use within a few years.
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TheOtherMe
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Post by TheOtherMe on Sept 16, 2020 18:50:51 GMT -5
The only reason I started putting money in to a retirement fund when I was young was because I was a federal employee and it was automatically deducted from my pay check. 7% of my income for my entire career. It is a pension, not a 401(k) and we do get COLA increases. I am happy that I worked under CSRS.
I made plenty of financial mistakes over the years, most of them in my mid 20's through early 30's.
I paid my own way to college, so I saved 50% of my salary when I started working to pay for that. I was renting a room from mom and dad for cheap so I could do that. That gave me the money to take time off for my MBA. I worked part time and went to school full time to finish my BA and then took a leave of absence for grad school.
I was very tight with money while I was going to school.
When I moved to my first apartment, I could still save 50% of my income. Then I bought my first house......
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justme
Senior Associate
Joined: Feb 10, 2012 13:12:47 GMT -5
Posts: 14,618
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Post by justme on Sept 16, 2020 19:47:21 GMT -5
Do you have a high yield checking account? Even those are crap these days, but mine does pay 2.5% up to 15K so I definitely take advantage of that for funds I expect to use within a few years. No. My savings accounts are the highest I've seen around, but are back down to only 0.8%. Haven't seen 2.5% anywhere. Is it a local bank?
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Deleted
Joined: Apr 19, 2024 0:18:35 GMT -5
Posts: 0
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Post by Deleted on Sept 16, 2020 21:27:52 GMT -5
Do you have a high yield checking account? Even those are crap these days, but mine does pay 2.5% up to 15K so I definitely take advantage of that for funds I expect to use within a few years. No. My savings accounts are the highest I've seen around, but are back down to only 0.8%. Haven't seen 2.5% anywhere. Is it a local bank? Local credit union (Altra Federal Credit Union). I could get 3% if I did 20 debit transactions a month, but I don't wan to mess with that for the extra half percent. Not sure how to find ones in your area, but it seems like credit unions are the way to go for high yield accounts. www.magnifymoney.com/blog/earning-interest/best-high-yield-checking-accounts376922578/
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Tiny
Senior Associate
Joined: Dec 29, 2010 21:22:34 GMT -5
Posts: 13,362
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Post by Tiny on Sept 16, 2020 22:54:20 GMT -5
I think the problem is I don't have a concrete goal for the near future. So it's a lot more of a I have money and know I need money to do things, but don't have concrete things that I want to do with my money and don't want a ton sitting in a 1.8% savings account for years and years. kind of cherry picked your thoughts. Since you aren't saving for something specific long term (other than old age/retirement - cause you know that's gonna happen. ) now is a great time to money into a Roth OR set up an after tax account and invest with the idea that you're not gonna spend what you save. I'd also put some to a sinking fund for your car DP - I'm not a big fan of paying cash for every thing - but I am a big fan of having payments that don't impact my other saving streams/spending plans. In a year or two if you don't use all the DP on the car - you just move it somewhere else. Just because you are saving alot for retirement now (or for the next year or two) it doesn't mean you have to keep doing it for the rest of your life. If you can front load your investments now - it means you may very likely have to save LESS later in life. Save for your retirement now, while you are looking for Mr. Right or before you start having kids. You can "repurpose" the amounts you were saving as you get closer to those events. It's not like you are gonna wake up one morning and need 30K in a suitcase at midnight to put down on the house of your dreams or pay for the wedding of your dreams... I'm guessing you'd have atleast a year or two of warning that you are ready and looking for a house or that a "wedding" might be imminent. Same thing goes for the arrival of children these days. I think many couples kind of schedule when they will be putting in an order with the Stork for a bundle of joy. You can just re-arrange your budget as you get to those points. I guess I'm advising that it's not such a bad plan to front load your retirement accounts since you don't really know what your midterm future holds. You can always 'cut back' on the savings in 2 or 3 or 5 or 10 years - or just 'freeze' the amount you are contributing so you have more disposable income as your income goes up. Kind of like how a mortgage payment amount starts to feel 'smaller' as your income goes up.
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vonna
Well-Known Member
Joined: Aug 11, 2012 15:58:51 GMT -5
Posts: 1,249
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Post by vonna on Sept 17, 2020 6:47:10 GMT -5
I don't think your future self would ever regret a healthy Roth account.
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azucena
Junior Associate
Joined: Jan 17, 2011 13:23:14 GMT -5
Posts: 5,187
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Post by azucena on Sept 17, 2020 8:50:09 GMT -5
I was so proud of myself when I got to the point of maxing my 401k. Plus I think that's really when the investment earnings started to reach a tipping point of growth.
I save without a concrete goal of what it's for. One motivation is posting in the savers' thread and trying to meet my annual goal.
Stash more in the HSA that you don't touch.
$30k for a car seems like a lot to me. Plus, even with interest rates so low, it's been my goal to be able to buy $15k replacement cars after running prior ones to the ground. We just did our 2nd "flip" this summer. Not having a car payment is very freeing.
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resolution
Junior Associate
Joined: Dec 20, 2010 13:09:56 GMT -5
Posts: 6,967
Mini-Profile Name Color: 305b2b
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Post by resolution on Sept 17, 2020 9:29:28 GMT -5
I don't have a concrete age of retiring. I know my parents did it in the 50s, but with a good pension and the built their house so never had a mortgage. I accept that as a solo it'll be a lot harder for me to retire and an earlier age. Or if I have kids they'll take up too much money lol. I just want to retire as soon as it's realistic whenever that is - I have no desire to keep working cuz I lurve it or something. But I'm also not going to forego a vacation just to put another $2000 in retirement if that makes sense. Can you sense the pattern of vague direction but no concrete decisions? Good thing it's just natural for me to save money and like seeing my accounts grow or who knows what the hell I would have done. I did the vague direction thing when i was your age, and it worked out really well for me. Now that I am 50 and closer to retirement, I can get a much better picture of what I will need and what I can do with the money I invested years ago. I like setting aside a car fund in a high yield savings account and investing in the Roth IRA with the remainder. If you are willing to take a lot of risk, I would recommend investing the Roth in a mix of domestic and international index funds (like 80% VTSAX and 20% VTIAX) or in one of the target date retirement funds. If you don't want a lot of risk, most brokerages will have some kind of balanced fund like the Wellington Fund, but your return is likely to be lower in the long run. The only caveat to the Roth is that I found I couldn't bear to withdraw from a retirement account, even though my original intent was to use the principle as needed. So far I haven't touched the Roth money and have always found other ways.
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