The Intersection of FIRE and Disney

[jen7233]

John Bogle passed away (founder of Vanguard). Most people in the FIRE movement owe a lot to John and his creation of the index fund.

I just read this on another site. He left a legacy.
RIP

 

[BridgetBordeaux]

John Bogle passed away (founder of Vanguard). Most people in the FIRE movement owe a lot to John and his creation of the index fund.

He was a really great guy. He will be missed.

 

[amalone1013]

Have I mentioned how much I hate DHs company? They match 25% of his contribution up to 4%, aka when he hits 4% they put in 1%, the end. I swear it was a 1 to 1 match up to 3% when he started in 2014. Honestly that's the only reason DH would have put in 3% originally. They don't have any documentation for this anywhere DH can access, and when he asked his HR guy he just sent a one sentence email response. I can only look back for 24 months of history online so I'll have to look at older statements when I get home to see if it did change. Also noticing that his vesting report has the same amount for 12/31/16 and 12/31/17 - I believe they do the type where you are 20% vested each year up to 5 years to get to 100%. I can see it say as of 12/31/15 20%, but both 2016 and 2017 say 40%.

Ugh, this makes me mad which gives me a headache. Seriously, ask for the 401k info and get a 12 word 1 sentence response on the match. Is the easiest way to figure out contributing to 401k or IRA after your employer match just to go off the expense ratio? That's my big struggle, what fees am I looking for to decide?

 

[pillow]

Ugh, this makes me mad which gives me a headache. Seriously, ask for the 401k info and get a 12 word 1 sentence response on the match. Is the easiest way to figure out contributing to 401k or IRA after your employer match just to go off the expense ratio? That's my big struggle, what fees am I looking for to decide?

Are you asking how to decide which funds to choose within the 401k? The expense ratio is what I use, but I also look up the funds on the Morningstar site too. Typically index funds have the lowest expense ratio so I go with those. However, since the expense ratio is charged by the fund itself (not your husband's company), I think I would double check your statements to ensure his company isn't adding some kind of fee you don't know about.

 

[trenty]

Never mind. Wrong thread.

 

[amalone1013]

Are you asking how to decide which funds to choose within the 401k? The expense ratio is what I use, but I also look up the funds on the Morningstar site too. Typically index funds have the lowest expense ratio so I go with those. However, since the expense ratio is charged by the fund itself (not your husband's company), I think I would double check your statements to ensure his company isn't adding some kind of fee you don't know about.

Thanks. Yeah, I was confusing myself looking at them. Mine went into a Target Date fund automatically, so I need to compare it to other options and see what I want to do. DHs came up in an account that was named Low Growth something or other, and had the highest expense ratio out of all his choices... I thought the expense ratio was a big deciding factor but again, was confusing myself

 

[pillow]

Thanks. Yeah, I was confusing myself looking at them. Mine went into a Target Date fund automatically, so I need to compare it to other options and see what I want to do. DHs came up in an account that was named Low Growth something or other, and had the highest expense ratio out of all his choices... I thought the expense ratio was a big deciding factor but again, was confusing myself

Full disclosure - I am not an investment advisor lol. But I think generally those target date funds have higher expense ratios (they do the work for you by rebalancing). Index funds tend to be the lowest since they don't require any management. Have fun researching!

 

[SouthFayetteFan]

Full disclosure - I am not an investment advisor lol. But I think generally those target date funds have higher expense ratios (they do the work for you by rebalancing). Index funds tend to be the lowest since they don't require any management. Have fun researching!

I agree with the thought on target date funds...if you just look at what they're made up of and buy those index funds instead you can cut your expenses down a bit

 

[amalone1013]

So looking at the funds... DH has a lot of choices, like over 30 plus target date funds, with ERs ranging from 0.69% to 1.20%. They're all things I can easily look up on Morningstar.

I have 6 choices including the target date funds. The ERs are from 0.09% to 0.20%. Good grief they felt hard to dig through, both for seeing what my target date fund is made up of vs the other choices (with names like US Stock Fund - the end).

 

[georgina]

Target date funds are for people like my son who have zero interest in managing their money, I put him in a Vanguard Target Date 2060 fund (he's 26). It works for him, my daughter who is more interested I have steered toward a stock index ETF.

 

[SouthFayetteFan]

For those not happy with the HSA investment options through their employer:

When doing my taxes I tested some things to see how doing a "self-rollover" works. You'll get a 1099-SA that says you took a normal distribution for whatever amount you withdrew. You'll fill in on your taxes the amount that was for medical. You'll fill in the amount that was rolled over. As long as those two things add up to the total normal distribution you're fine. I believe you have to complete the rollover within 60 days so don't mess around with it (and you can only do one of these every 365 days I believe). Don't rely on me for tax advice though...research this yourself!!

At any rate, I plan to take almost all of my HSA money out of my employer plan and roll it to Health Equity soon for 2019. I just wanted to see how it would "mock" work on a tax return before actually doing it!

 

[amalone1013]

Oh man, now I need to check what I put my HSA fund in

 

[pillow]

For those not happy with the HSA investment options through their employer:

When doing my taxes I tested some things to see how doing a "self-rollover" works. You'll get a 1099-SA that says you took a normal distribution for whatever amount you withdrew. You'll fill in on your taxes the amount that was for medical. You'll fill in the amount that was rolled over. As long as those two things add up to the total normal distribution you're fine. I believe you have to complete the rollover within 60 days so don't mess around with it (and you can only do one of these every 365 days I believe). Don't rely on me for tax advice though...research this yourself!!

At any rate, I plan to take almost all of my HSA money out of my employer plan and roll it to Health Equity soon for 2019. I just wanted to see how it would "mock" work on a tax return before actually doing it!

I really should think about doing this. I hate that currently our cash balance earns almost zero percent interest. Ideally, the cash reserves would earn a couple percent while the remainder goes to an index fund.

 

[amalone1013]

Oh good, I put my invested HSA funds into a Vanguard Total Stock Market Fund. And my employer contribution is now in there so I can move that over

 

[tzolkin]

Wanted to give an update since joining the group...

No progress yet on the house-hunting/downsizing because there is really just nothing in the price range we want available in our current school district. Watching every day for new listings as we get closer to spring.

However, I will be starting a new job in the next few weeks that pays about $40k MORE than my current job. I am excited and nervous and now trying to recalculate our finances, goals, etc. I’m really hoping that I’m not making any major mistakes or oversights.

Joining this group for the motivation...

We decided to sell our house and downsize to something about half the price. (Looked at a few houses this morning.) DH has been working crazy overtime hours. And I’m still figuring out what I want to do “when I grow up”.

We are 37/38, but we are in a different life situation than many our age. Most of our friends have pre-schoolers but our oldest already lives on her own and we only have a few more years until the younger two are done with high school.

I have stayed home and/or worked flexible (but low paying) jobs since college/marriage/kids. We were debt free other than mortgage but bought a piece of property earlier this year and didn’t want to completely deplete our emergency fund so we did finance a portion of that. With the extra work and selling our current home we should be completely debt free in a very short period of time.

DH enjoys working and we both definitely need to keep busy, but we would like to travel and have more opportunities for volunteering. DH will likely never completely retire but would like to possibly do travel nursing or some type of consulting. That way he has the ability to work and earn some money, but can take several weeks or months off at a time.

 

[alryan]

Wanted to give an update since joining the group...

No progress yet on the house-hunting/downsizing because there is really just nothing in the price range we want available in our current school district. Watching every day for new listings as we get closer to spring.

However, I will be starting a new job in the next few weeks that pays about $40k MORE than my current job. I am excited and nervous and now trying to recalculate our finances, goals, etc. I’m really hoping that I’m not making any major mistakes or oversights.

Congratulations on the new job with the big pay increase!! That sounds like a lot of fun to me to redo finances based on a $40K increase. Are you thinking of saving a big portion of that since you are already living off your current income?

 

[tzolkin]

Congratulations on the new job with the big pay increase!! That sounds like a lot of fun to me to redo finances based on a $40K increase. Are you thinking of saving a big portion of that since you are already living off your current income?

My old job only paid $6k last year. It did increase so it would have been a bit more for this year, but the new job will be a drastic change. It pays more than what our entire family income was until just a few years ago. So having that as “extra” seems kind of crazy to me.

As far as saving, DHs OT has pushed us up a tax bracket so whatever I make will fall into the 22% category. I’m thinking we should both contribute a large chunk (maybe half of my total pay?) to our tax-deferred plans to avoid nearly a quarter of my income going to taxes.

In the past DH had just done what his employer would match and then maxed his Roth.

We are still planning to go ahead with the house downsizing and pay off mortgage ASAP so the extra not being invested would probably just go toward accelerating that.

Any suggestions?

 

[1st*toright]

My old job only paid $6k last year. It did increase so it would have been a bit more for this year, but the new job will be a drastic change. It pays more than what our entire family income was until just a few years ago. So having that as “extra” seems kind of crazy to me.

As far as saving, DHs OT has pushed us up a tax bracket so whatever I make will fall into the 22% category. I’m thinking we should both contribute a large chunk (maybe half of my total pay?) to our tax-deferred plans to avoid nearly a quarter of my income going to taxes.

In the past DH had just done what his employer would match and then maxed his Roth.

We are still planning to go ahead with the house downsizing and pay off mortgage ASAP so the extra not being invested would probably just go toward accelerating that.

Any suggestions?

Not sure how far into the 22% bracket you are, but remember that you get the standard deduction of $24k, so lets say that he's making $80k per year (take home - after all deductions like 401k, health insurance and taxes etc) and you are making $40k (again, take-home, after taxes etc). You combine for $120k, then take the standard deduction of $24k (so now your adjusted gross income is $96k). Only the $16k that is above the 80k threshold (roughly when 22% kicks in) will be at 22%.

Your actual calculation will be similar to what @SouthFayetteFan was talking about a couple weeks ago - figure out how much you will be over the $80k threshold ($78,950 is the actual 2019 threshold) and make sure you are putting at least that much into your tax-deferred accounts so that you keep to the lower bracket. Once you've figured that out, then what you do with the rest of the money is tax-neutral in the present. You could use it to pay off the mortgage, put it in a Roth IRA (so was taxed today at the 12% rate when you earned it, but any earnings will grow tax free), or just invest in index funds or whatever investment vehicle floats your boat.

Good problems to have

 

[tzolkin]

Not sure how far into the 22% bracket you are, but remember that you get the standard deduction of $24k, so lets say that he's making $80k per year (take home - after all deductions like 401k, health insurance and taxes etc) and you are making $40k (again, take-home, after taxes etc). You combine for $120k, then take the standard deduction of $24k (so now your adjusted gross income is $96k). Only the $16k that is above the 80k threshold (roughly when 22% kicks in) will be at 22%.

Your actual calculation will be similar to what @SouthFayetteFan was talking about a couple weeks ago - figure out how much you will be over the $80k threshold ($78,950 is the actual 2019 threshold) and make sure you are putting at least that much into your tax-deferred accounts so that you keep to the lower bracket. Once you've figured that out, then what you do with the rest of the money is tax-neutral in the present. You could use it to pay off the mortgage, put it in a Roth IRA (so was taxed today at the 12% rate when you earned it, but any earnings will grow tax free), or just invest in index funds or whatever investment vehicle floats your boat.

Good problems to have

Thanks. I’ve got all kinds of spreadsheets going. Definitely never had this “problem” before.

He has been working some ridiculous OT so I’m projecting that even if he limits it he will still wind up around $113k this year (before any taxes or deductions). So that’s well into the 22%. Just his income alone after the standard deduction would still be about $11,000 into that bracket, right?

I don’t mind putting this info out there if anyone has any suggestions because this is completely new to me and I may be missing something.

Reductions to taxable income would be:
$24,400 New Standard Deduction
+ tax deferred contribution amounts

Tax deferred contributions limited to $19k (per person?) and that amount includes my elective deferrals and employer match. Or is the employer contribution in addition to the limit?

 

[1st*toright]

Thanks. I’ve got all kinds of spreadsheets going. Definitely never had this “problem” before.

He has been working some ridiculous OT so I’m projecting that even if he limits it he will still wind up around $113k this year (before any taxes or deductions). So that’s well into the 22%. Just his income alone after the standard deduction would still be about $11,000 into that bracket, right?

I don’t mind putting this info out there if anyone has any suggestions because this is completely new to me and I may be missing something.

Reductions to taxable income would be:
$24,400 New Standard Deduction
+ tax deferred contribution amounts

Tax deferred contributions limited to $19k (per person?) and that amount includes my elective deferrals and employer match. Or is the employer contribution in addition to the limit?

I'm assuming he has to pay something for health insurance, maybe dental etc. You want to figure out what his pay is after insurance, HSA deductions as well as his 401k contributions (items listed as deductions on his paystub). Then do the same with yours (a little challenging before you actually get your new paycheck and see what those items will be, unless you've seen all the benefit info from your new employer). I carry the insurance for my family, plus I have 401k deductions so my "Box 1" wages on my W2 are significantly lower than the total of my salary + bonus for the year. There are a couple of items (for me, life insurance) that come out post-tax, but most of the deductions reduce my taxable wages. If you take a look at his 2018 W-2, it should give you a good idea of what the difference between his pay and his "box 1" wages will be going forward (if you don't adjust the 401k amounts).

The cap is $19k is per person, and that is employee contribution only - anything the employer contributes doesn't count towards that cap. There is a cap to the employer contribution, but its another $35k or so (wouldn't that be a nice problem to have!) Depending on how much he is currently contributing and the impact of other deductions, you may be able to get down to where not too much of your income is in the 22% range (again, not a terrible position to be in).