We’ve doubled our $ in 4 years

[Mrs. Dinero]

Was updating spreadsheet and noticed our investment balances have doubled since June 2017. Nice!
Thrift: $137k to $250k (DH current)
401k: $14k to $79k (current employer)
401A: $110k to $181k (past employer)
Traditional IRA: $47k to $80k (past)
Roth IRAs: $104k to $241k (current)
403B: $17k to $29k (past)
Current = we are currently contributing

We are 45 & almost 47, see any financial moves you would make now if you were us? Otherwise we’ll continue as is until we meet with advisor in 5 or so years.

[buystoys]

I'd be putting some money into taxable accounts right now.  You may want or have to retire early and having taxable account access can really help with financial planning.

[gs11rmb]

You inspired me to look and we've doubled our retirement savings since August 2017 .  

I agree with buystoys that you should look at adding a taxable account.

Hope it continues but I'm very worried about the national debt.

[thyme4change]

Jun 9, 2021 9:23:47 GMT -5 buystoys said:

I'd be putting some money into taxable accounts right now.  You may want or have to retire early and having taxable account access can really help with financial planning.

I can testify to this one. We have 85% of our assets in 401ks and IRAs. And the rest is split between our house and regular investments and savings. Now we are coming up on paying for 8 years of college in the next 5 years. We have plenty of money, but to get to it, it will be taxed at our current high tax bracket. We might have to refinance the house and then pay it off when we retire, carefully managing withdrawals and taxes. Also, I want to retire the minute my kids are done with college, but won't have access to my 401k money for a few years after that. I purposely gave myself no flexibility, because I was afraid if the penalty wasn't there, I would just spend my investments. And I may have been right about that. But, all choices have consequences. 🤷‍♂️

[azucena]

Can you be more specific by what you mean about taxable accounts?  Explain it to me like I'm an 8th grader pls.

[mary2029]

A taxable account is a account where you deposit money that has already been taxed (e.g., take home pay from your pay check). 

[Mrs. Dinero]

I’ve been told that taxable accounts should happen only after you’ve met your 401k match and contributed to Roth IRA. We’re currently at 72% pretax. All our Roth IRAs are after tax. We’ll be opening a taxable account soon. Thank you all for the reminder.
We paid for 1 kid’s college with 529 and the other received a full ride scholarship.

[alabamagal]

Jun 9, 2021 9:56:44 GMT -5 thyme4change said:

Jun 9, 2021 9:23:47 GMT -5 buystoys said:

I'd be putting some money into taxable accounts right now.  You may want or have to retire early and having taxable account access can really help with financial planning.

I can testify to this one. We have 85% of our assets in 401ks and IRAs. And the rest is split between our house and regular investments and savings. Now we are coming up on paying for 8 years of college in the next 5 years. We have plenty of money, but to get to it, it will be taxed at our current high tax bracket. We might have to refinance the house and then pay it off when we retire, carefully managing withdrawals and taxes. Also, I want to retire the minute my kids are done with college, but won't have access to my 401k money for a few years after that. I purposely gave myself no flexibility, because I was afraid if the penalty wasn't there, I would just spend my investments. And I may have been right about that. But, all choices have consequences. 🤷‍♂️

Check out rule of 55 option for 401k, which allows withdrawal without penalty (just taxes). It only applies to 401k at the employer you leave at age 55, but if you have multiple ones you can rollover and access when you leave.

I am assuming you are near 55, if not sorry for mid-ageing!

[jerseygirl]

Also set up Roth accounts, not tax deferred so pay taxes upfront but no taxes on withdrawals
I assume taxes will increase in coming years and you may actually be in a higher tax bracket when retired snd withdrawals from the tax deferred IRAs are mandated.

[The Walk of the Penguin Mich]

I would look into converting your trad IRA into Roths up to a certain percentage of tax rate right now. Depending upon what your marginal tax rate is, it might make sense to convert up to the 22% bracket from either your past 403b or the trad IRA you have.  Assuming the thrift plan is untaxed, that would start balancing your already taxed and untaxed retirement accounts so they are more equivalent.

[sesfw]

A taxable account is a account where you deposit money that has already been taxed (e.g., take home pay from your pay check).

Savings account, investment account.

[Tiny]

Jun 9, 2021 10:09:53 GMT -5 azucena said:

Can you be more specific by what you mean about taxable accounts?  Explain it to me like I'm an 8th grader pls.

It means an account where you deposit money (that has already been taxed - say from the money deposited into your checking account every payday) and buy investments - maybe the same funds? as are in your tax advantaged accounts (401k, Roth, etc).

A 'taxable account' might also be a CD or the Savings account where you keep your Emergency Fund (If you are focusing on building a EF before you move on to investing). I get a 1099 from the bank (I have CDs and a Savings Acct) and pay taxes on the interest accrued.

A 'taxable account' might be owning individual shares of stock in a Dividend Reinvestment Plan (back in the day you could buy stock directly from a company (I own shares in Utilities - I was gifted 4 shares when I was 11 after my dad died. The shares aren't held by Fidelity/Vangaurd/etc... I have way more than 4 shares now. I get a 1099-DIV statement every year so I can pay taxes on the dividends.

I think more generally when someone says "taxable account' it usually means their account (that's not a retirement tax advantaged account - IRA or Roth for example) that they use to purchase shares in different funds (or sometimes individual stocks).

I have accounts at Fidelity. I have a "personal account" or maybe they call it an Investment Account In this account, I have a "money market" fund and then I bought shares in an S&P 500 fund and a couple of other funds.  This "personal account" or "investment Account" is my taxable account. I get a 1099 (or some other form) from Fidelity to be used when I do my taxes.

I have a "roll over 401K" and a Roth accounts - I can move money around - transfer (sell) from one fund and (buy) another fund with out worrying about being taxed on the gains. these are "tax advantaged" Retirement accounts.

Taxable Accounts generally generate Taxable Income (they can loose value, too) - that you have to account for (and pay taxes on the income) every year.

[Tiny]

On that "rule" about maxing your tax advantaged accounts before adding to an after tax account. I think this really depends on your income, when you want to retire, and what your philosophy about Emergency Funds is...

I haven't had enough disposable income to fully fund my tax advantaged accounts (401K, Roth, HSA) AND make meaningful additions to an after tax account (I've got between 3 and 5K per year - compared to the 37K I can put into tax advantaged accounts). And so my "taxable account" was rather light in comparison to my retirement accounts. I realized I would need to be able to access/spend money that wasn't in a tax advantaged account if I wanted to "retire" before 59.5. I also realized if/when I could easily access my "tax advantaged" accounts having a sizeable pool of money already available would be to my advantage (so I could influence my taxable "income" levels once I FIre'd).

I've been doing what I can to put money into my "taxable account" in order to build up that sizeable "pool of money". I'm glad I realized this was an issue and took action. Even the little bits add up over time.

I can see where aggressively building up to the max on tax advantaged accounts to the point where there's no way to save in a taxable account  even as retirement approaches (ones income plateaus for years at a time)  can be a problem.    I was in this boat for almost 8 years - I could keep building my contributions year after year to get to the max - but then there wasn't much money left over for everyday spending much less additional saving/investing.   

I think at some income levels - there should be a plan to contribute to retirement accounts (without maxing them) and to also get some long term $$ into a taxable account.     I dont' know what the magic numbers would be for this.    

[justme]

Jun 9, 2021 10:09:53 GMT -5 azucena said:

Can you be more specific by what you mean about taxable accounts?  Explain it to me like I'm an 8th grader pls.

A brokerage account. An investment account. Basically anything that's not tax advantaged for retirement. 

The taxable account is subject to your income taxes for anything you've held less than a year, capital gains if you've held it over a year - but you only pay taxes on when you sell things. Dividends vary I believe. 

[minnesotapaintlady]

Jun 9, 2021 18:52:05 GMT -5 justme said:

Jun 9, 2021 10:09:53 GMT -5 azucena said:

Can you be more specific by what you mean about taxable accounts?  Explain it to me like I'm an 8th grader pls.

A brokerage account. An investment account. Basically anything that's not tax advantaged for retirement. 

The taxable account is subject to your income taxes for anything you've held less than a year, capital gains if you've held it over a year - but you only pay taxes on when you sell things. Dividends vary I believe. 

Not necessarily.  My oldest pays a lot in taxes on capital gains distributions every year. 

[justme]

Jun 9, 2021 22:00:35 GMT -5 minnesotapaintlady said:

Jun 9, 2021 18:52:05 GMT -5 justme said:

A brokerage account. An investment account. Basically anything that's not tax advantaged for retirement. 

The taxable account is subject to your income taxes for anything you've held less than a year, capital gains if you've held it over a year - but you only pay taxes on when you sell things. Dividends vary I believe. 

Not necessarily.  My oldest pays a lot in taxes on capital gains distributions every year. 

You mean like when funds pay out some distributions of funds? I know they're named differently but I categorize that in the same vein as dividends even though it's not exactly the same. I have some funds that could do that but so far they've stuck with dividends instead. 

[minnesotapaintlady]

Jun 9, 2021 22:03:35 GMT -5 justme said:

Jun 9, 2021 22:00:35 GMT -5 minnesotapaintlady said:

Not necessarily.  My oldest pays a lot in taxes on capital gains distributions every year. 

You mean like when funds pay out some distributions of funds? I know they're named differently but I categorize that in the same vein as dividends even though it's not exactly the same. I have some funds that could do that but so far they've stuck with dividends instead. 

Well, sort of, but LTCG and STCG can be a lot and they don't change the value of your fund any. Like last year my son had 7K in capital gains distributions on a 54K account. It was still worth 54K after the distribution but he had to pay capital gains tax on that 7K. Luckily federal is at my rate, so O%, but the state is not as nice about it.

[CCL]

Agree with MPL. Another thing about capital gains (and dividends) is you have no control over when they will be paid out. At least the payouts are added to your basis, so when you eventually sell, there is less tax to pay at that time.

My brokerage account pays out varying amounts and I never know exactly what they will be til the end of the year. It's sometimes difficult to determine what my taxes will be on them. I'm trying to convert as much as I can to Roth each year. Sometimes my capital gains and dividends have bumped me into a higher tax bracket and caused me to have to pay taxes on the long-term gains and dividends. I'd much rather pay 0% than 15%. Then I have to pay my ordinary rate on short-term.

[tallguy]

Jun 10, 2021 3:24:21 GMT -5 CCL said:

Agree with MPL. Another thing about capital gains (and dividends) is you have no control over when they will be paid out. At least the payouts are added to your basis, so when you eventually sell, there is less tax to pay at that time.

My brokerage account pays out varying amounts and I never know exactly what they will be til the end of the year. It's sometimes difficult to determine what my taxes will be on them. I'm trying to convert as much as I can to Roth each year. Sometimes my capital gains and dividends have bumped me into a higher tax bracket and caused me to have to pay taxes on the long-term gains and dividends. I'd much rather pay 0% than 15%. Then I have to pay my ordinary rate on short-term.

I am limiting my income for tax purposes.  I have a certain range of amount that I know I want to either withdraw or convert from my IRA each year, but like you have no idea until at least mid-December what the real amount will be.  I get around that by taking most of it whenever I want, but leaving room for an amount sufficient to cover potential year-end dividends and capital gain distributions.  Once I know what those numbers are, I can fine-tune the withdrawal/conversion number to get as close as reasonably possible without going over my limit.  There is no rule that says you have to do your entire conversion at one time, so break it up into two pieces.  Do the first part early enough to make sure it gets done.  Do the last couple/few thousand after you know how much room is left.  And if time gets away from you and you don't get the second small conversion done, so what?  Missing that does not throw off your plan.

[CCL]

That's pretty much what I've been doing. It's just a lot to keep track of.

[justme]

Jun 9, 2021 22:34:38 GMT -5 minnesotapaintlady said:

Jun 9, 2021 22:03:35 GMT -5 justme said:

You mean like when funds pay out some distributions of funds? I know they're named differently but I categorize that in the same vein as dividends even though it's not exactly the same. I have some funds that could do that but so far they've stuck with dividends instead. 

Well, sort of, but LTCG and STCG can be a lot and they don't change the value of your fund any. Like last year my son had 7K in capital gains distributions on a 54K account. It was still worth 54K after the distribution but he had to pay capital gains tax on that 7K. Luckily federal is at my rate, so O%, but the state is not as nice about it.

Yeah, if you buy funds that do that it's a consideration to take into account. Not all funds do that though. The few I do have that can do it can do dividends instead and so far have chosen dividends. Tax treatment is a bit different, but l just lump it into unexpected dividends.

[phil5185]

One thing that I try to focus on is the return - it is easy to get wrapped up in the tax rate and forget the rate of return.

The generic SP500 Index has a longterm average of 11%/yr. It doubles about every 6.5 years (The Rule of 72).

If you focus on investing your current $900k at about 11%/yr, and let it continually compound, you should have about $7.5 million in 20 years, $23 million in 30 years, and so on. And that's without adding any new money to your accounts. The point is, your tax rate won't be the big factor - yes, you'll pay 10% or 22%, maybe 30%, but you will keep the remaining 70%, 80%, 90%.

 

[minnesotapaintlady]

Jun 10, 2021 11:31:16 GMT -5 justme said:

Jun 9, 2021 22:34:38 GMT -5 minnesotapaintlady said:

Well, sort of, but LTCG and STCG can be a lot and they don't change the value of your fund any. Like last year my son had 7K in capital gains distributions on a 54K account. It was still worth 54K after the distribution but he had to pay capital gains tax on that 7K. Luckily federal is at my rate, so O%, but the state is not as nice about it.

Yeah, if you buy funds that do that it's a consideration to take into account. Not all funds do that though. The few I do have that can do it can do dividends instead and so far have chosen dividends. Tax treatment is a bit different, but l just lump it into unexpected dividends.

Its not a choice they make. Capital gains are from selling stocks within the funds. They can't just say they'll pay that out as dividends instead. Typically index funds do not churn much and there are little to no capital gains, but some managed funds can have a lot.

[Mrs. Dinero]

Jun 10, 2021 19:07:19 GMT -5 phil5185 said:

One thing that I try to focus on is the return - it is easy to get wrapped up in the tax rate and forget the rate of return.

The generic SP500 Index has a longterm average of 11%/yr. It doubles about every 6.5 years (The Rule of 72).

If you focus on investing your current $900k at about 11%/yr, and let it continually compound, you should have about $7.5 million in 20 years, $23 million in 30 years, and so on. And that's without adding any new money to your accounts. The point is, your tax rate won't be the big factor - yes, you'll pay 10% or 22%, maybe 30%, but you will keep the remaining 70%, 80%, 90%.

 

Phil- I’ve missed hearing your advice . Hope all is well. I feel like doubling of $ has more to do with you than anything. Thanks for the guidance over the years. Please write a book/memoir. I’d love to read it ❤️

[justme]

Jun 10, 2021 20:30:08 GMT -5 minnesotapaintlady said:

Jun 10, 2021 11:31:16 GMT -5 justme said:

Yeah, if you buy funds that do that it's a consideration to take into account. Not all funds do that though. The few I do have that can do it can do dividends instead and so far have chosen dividends. Tax treatment is a bit different, but l just lump it into unexpected dividends.

Its not a choice they make. Capital gains are from selling stocks within the funds. They can't just say they'll pay that out as dividends instead. Typically index funds do not churn much and there are little to no capital gains, but some managed funds can have a lot.

Oh, hmm...interesting. I'm new to funds outside of retirement account and the only thing I've seen recently from the ones I have is asking if I want they money they're sending out as stock or cash. And I have everything set to reinvest. But I haven't held those funds for a year yet so maybe I don't have a choice? Honestly disbursements are better than dividends for me as I'm in like the 22% tax bracket I think so my capital gains is less than that. 

Guess when I decided to say fuck it and go taxable and make shit weird - I've made it weirder than I thought! Though I think most of my funds are still in tax advantaged accounts. Though I'm probably about to buy some more ETFs after I get my next ESPP. 

[justme]

HOLY SHIT Y'ALL!!

So it took steps to figure this out because I only switched to the new YNAB about 2 years ago so I didn't have 4 years of history and not all my accounts will go back all that way. 

My current 401k went from $23k to $104k

My old one I can't go back more than 2 years but it went from $50k to $72k. I think 2 years back it was more like $40k. 

I also started my HSA which the investment part is currently almost $3k, a Roth that's almost $5k, and a taxable account that's a little over $2k. 

So 4 years got me almost 3 times as much! Holy shit!!! 

I kinda wanna run down the street screaming that, but I can't. 

That set it and forget it shit works yo. 

Damn, my parents will get a lot of money off me if I die.



I'm going to cry when the market corrects. Buy a lot of booze and not log in. 

ETA Eek didn't meant to take away from OP! Everything but my 401ks were in the last year so a lot of them were timing - ie my Roth was mostly bought at the bottom of the corona shit so I lucked out on adding stuff in. And the rest is super aggressive stocks. 

[tallguy]

Jun 10, 2021 22:25:15 GMT -5 justme said:

Jun 10, 2021 20:30:08 GMT -5 minnesotapaintlady said:

Its not a choice they make. Capital gains are from selling stocks within the funds. They can't just say they'll pay that out as dividends instead. Typically index funds do not churn much and there are little to no capital gains, but some managed funds can have a lot.

Oh, hmm...interesting. I'm new to funds outside of retirement account and the only thing I've seen recently from the ones I have is asking if I want they money they're sending out as stock or cash. And I have everything set to reinvest. But I haven't held those funds for a year yet so maybe I don't have a choice? Honestly disbursements are better than dividends for me as I'm in like the 22% tax bracket I think so my capital gains is less than that. 

Guess when I decided to say fuck it and go taxable and make shit weird - I've made it weirder than I thought! Though I think most of my funds are still in tax advantaged accounts. Though I'm probably about to buy some more ETFs after I get my next ESPP. 

Your best bet is to have a mix of tax-deferred (IRA, 401k, etc.), tax-free (Roth) and taxable monies invested for retirement.  This will give you options in how to withdraw the monies when you need them, so yes, you should have taxable investments too.  As far as dividends and capital gains distributions, you do have a choice but I would always recommend that they be reinvested unless you are living off them in retirement.  If you believe in the stock or fund enough to hold it, then you should want to own more of it.  Dividend reinvestment has a surprisingly large effect on total returns over time.  Whether you take the distributions in cash or have them reinvested, you will still pay tax on that amount.  It is not, though, as clear-cut as you seem to think.  Long-term capital gains and qualified dividends are tax-favored.  Short-term capital gains and ordinary dividends are not.  

[tallguy]

If y'all want more eye-popping numbers, don't go back four years.  Go back to March 23 of last year.  I retired early a few years ago so have actually been taking money out of my IRA instead of adding contributions to various accounts.  Even with that, I am up almost double in less than fifteen months.  Sure, I lost a third in the five weeks previous, but if we are going to cherry-pick dates, do it right!  

[justme]

Jun 10, 2021 22:49:38 GMT -5 tallguy said:

Jun 10, 2021 22:25:15 GMT -5 justme said:

Oh, hmm...interesting. I'm new to funds outside of retirement account and the only thing I've seen recently from the ones I have is asking if I want they money they're sending out as stock or cash. And I have everything set to reinvest. But I haven't held those funds for a year yet so maybe I don't have a choice? Honestly disbursements are better than dividends for me as I'm in like the 22% tax bracket I think so my capital gains is less than that. 

Guess when I decided to say fuck it and go taxable and make shit weird - I've made it weirder than I thought! Though I think most of my funds are still in tax advantaged accounts. Though I'm probably about to buy some more ETFs after I get my next ESPP. 

Your best bet is to have a mix of tax-deferred (IRA, 401k, etc.), tax-free (Roth) and taxable monies invested for retirement.  This will give you options in how to withdraw the monies when you need them, so yes, you should have taxable investments too.  As far as dividends and capital gains distributions, you do have a choice but I would always recommend that they be reinvested unless you are living off them in retirement.  If you believe in the stock or fund enough to hold it, then you should want to own more of it.  Dividend reinvestment has a surprisingly large effect on total returns over time.  Whether you take the distributions in cash or have them reinvested, you will still pay tax on that amount.  It is not, though, as clear-cut as you seem to think.  Long-term capital gains and qualified dividends are tax-favored.  Short-term capital gains and ordinary dividends are not.  

Ok so that mostly backs up my 'dividends or capital distributions are the same' stance I've decided. I know I'll have taxes to pay every year out of my savings, but worth it to just reinvest everything. Which is where I currently am. I currently have 3% going to my ESPP which except for the first round that was at a rather low price, I've been selling the other stuff right away and reinvesting in other stuff. (Though a bummer I'm charged to sell it) I think my 401k is currently 11/3 traditional/roth with the 3 employee match in traditional. And then I've been kicking in 2% or so into a Roth IRA the last 2 years. 

I've kind of reached a fuck it point. Made shit complicated by doing taxable so might as well go all in. That's what tax software is for, right?

My only regret is being worried about work furloughs and stupidly not buying stock for a cruise line I frequent that would have gotten me $100 each sailing and it's now more than 3x what I could have bought it for. 

[djAdvocate]

Jun 9, 2021 9:23:47 GMT -5 buystoys said:

I'd be putting some money into taxable accounts right now.  You may want or have to retire early and having taxable account access can really help with financial planning.

agree with buystoys.

either that or allocate ALL future funds to taxable accounts, and let the retirement funds ride.

you could choose a spot where your needed funds going forward equaled your current funds.

and then give notice at work.