finances: - what to do when you makes out retirment?

[Dred Pirate]

so - I have a good problem.

Currently Wife and I's 403b's are maxed (18k each), Roth Ira's for each maxed ($5500 each). HSA maxed. I have probably around $500-1000 a month that needs a home.

My options:
1. Pay down mortgage - That is a guaranteed 4% return on investment - but vitally guaranteed to move prior to mortgage being paid off - even with paying extra (just moved in)

2. Build up savings - get a crappy 1% interest rate - already have 4-6 months expenses in a liquid account - plus in true emergency can tap my Roth's initial investment with no penalty.

3. Taxable brokerage account - find a low turnover growth and income fund and ride the stock market.

4. Other options? Anything that has some sort of tax protection?

I don't live a frugal life - have all the car I need/want, travel a lot - and don't feel like I am missing out on anything by saving as much as I do - on pace to retire around 60 - would love to find a way to bump that down to 55 - currently no kids to worry about college for.

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[BMBiology]

If you want to retire early then I would use the extra money to pay off the mortgage.

401 k + ROTH IRA + HSA + social security = more enough to retire.

My concern is the government will find a way in the future to tax people who are saving a lot for retirement....maybe deduct their social security benefits? This money will then be distributed to people didn't save. So if you want to use it as "fun money", I would do it. Spending money while you are still young is way better than spending money when you are old and gray.



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[Dred Pirate]

If you want to retire early then I would use the extra money to pay off the mortgage.

401 k + ROTH IRA + HSA + social security = more enough to retire.

My concern is the government will find a way in the future to tax people who are saving a lot for retirement....maybe deduct their social security benefits? This money will then be distributed to people didn't save. So if you want to use it as "fun money", I would do it. Spending money while you are still young is way better than spending money when you are old and gray.



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agree - at some point changes will have to be made to ss to keep it solvent - the only issue is that all four will be enough to live on comfortably - but what do you do until ss kicks in? you can pull out the 403b at 55 if you have left the company - so that is an option.

I have plenty of fun - I travel more than anybody else I know, I am definitely not feeling deprived - I guess if I was mortgage free - that would help the most for retiring early. Agree - money when you are younger is better than when you are old and gray - my limitation in PDO - I get 7 weeks - and I would gladly take 2 weeks more without pay if my company would let me.

 

[pezdispenser]

I did a combination of 3 then 1. That is, I did some after-tax investments like my ESPP which I thought would be a pretty easy 10% return, but turned out to be much more lucrative. If your investment goes up a lot, sell it after 1 year to get the 15% long-term capital gains tax rate, then use the money to pay off your mortgage in large chunks. This way you balance investing with paying off debt and get the benefits of both.

Having a paid off mortgage should be everyone's goal before retiring. It changes everything, like massively improving your cash flow, and not having debt means a lot less to worry about for future cash flows as well. Because a big expense in your budget is eliminated, you won't have to save as much for retirement, and you won't need a massive emergency fund either. But even that becomes a moot point because you'll be so flush with cash and assets that you won't even have any financial emergencies anyway.

 

[quickpic007]

1,2,3 sound good already...investment prop maybe if in an appreciating area?

 

[lord999]

Out of the pocket matter, depending on how your parents and parent-in-laws are physically, you might want to put some away in some sort of Long Term Care Insurance while you're young. Medicare certainly isn't going to get better and we're not getting any younger. I'd take the extra $12,000 if it really is extra and buy yourself some time in terms of keeping healthy (better food, better exercise equipment, more time to stay healthy) as it's an investment that does pay off and then consider the rest although paying off the mortgage seems like a good idea unless you're thinking that property taxes in your jurisdiction will rapidly increase (I'm thinking IL, CA even with Prop 6, and RI especially). Possibly use it to hire household help for the little things.

 

[Dred Pirate]

Out of the pocket matter, depending on how your parents and parent-in-laws are physically, you might want to put some away in some sort of Long Term Care Insurance while you're young. Medicare certainly isn't going to get better and we're not getting any younger. I'd take the extra $12,000 if it really is extra and buy yourself some time in terms of keeping healthy (better food, better exercise equipment, more time to stay healthy) as it's an investment that does pay off and then consider the rest although paying off the mortgage seems like a good idea unless you're thinking that property taxes in your jurisdiction will rapidly increase (I'm thinking IL, CA even with Prop 6, and RI especially). Possibly use it to hire household help for the little things.

agree with you - I am 40 - don't think long term care ins makes sense - correct me if I am wrong

The biggest thing healthwise would be more time - but then again, not really an option - always could go to 0.9 - but that extra day may not necessarily make a difference

 

[lord999]

agree with you - I am 40 - don't think long term care ins makes sense - correct me if I am wrong

The biggest thing healthwise would be more time - but then again, not really an option - always could go to 0.9 - but that extra day may not necessarily make a difference

Long-Term Care Insurance would make sense if your parents or your in-law parents have a LTCM disease right now and you or your wife don't show signs yet (Alzheimer's or dementia or MS). If they are healthy (I hope so), then no. However, if they are ill, it's an actuarial maybe as right now, it's not legal to ask about family history in writing LTCM policies. That is expected to change. That said, I'd work now while I still could. There's a bunch of laid off 50 year old pharmacists that can't break back in, so there is a time and place to make money (and yes, this is given the opportunity cost of things that you can only enjoy in your youth).

 

[Momus]

This is all depending on time horizon on that left over money. If you don't think you will use the left over money for 5-10 years minimum, dump it into index funds. If you need the money less than 5 years, put it in savings account.

With your current house, you can always choose to become accidental landlord when you move. It's not that hard to manage 3 calls a year getting a handyman and collecting rent. It's very likely your rental will have positive cash flow if you bought in 09-2013. With this route, you can keep saving your left over to build up for your next house down payment. This path will net you handsomely in 20-30 years once it's paid off, with 100% passive income from rent to fund your retirement.

If you hate being a landlord, then paying down the mortgage is not a bad choice either at a guaranteed 4% return. You can just sell when you move and roll over your equity to another house. I do hate RE high transaction cost around 6%+ every time you buy/sell, that's something you have to keep in mind dealing with RE.

 

[MrBonita]

Listen to Mad Money on your podcast at work and invest it.

 

[BMBiology]

I would not be surprised at all if the government in 2040 goes, "since you have so much money in your 401 k, you are going to get nothing in social security" or "since you have so much money in your 401 k, we are going to tax you at 50% rate".

At the end of the day, the only safe assets are your house, gold and maybe cash....real, tangible assets.

Don't spend your whole life working your butt off so you can "save" for retirement by maxing out your 401 k, ROTH IRA. Life is much more than just working. Spend your money. Do it wisely. Do it while you are still young.


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[WVUPharm2007]

I just started dribbling in a little to the HSA and I thought I was ahead of the game. You're maxing out all the tax evaders. Tip my hat to you.

 

[BidingMyTime]

I would pay off your house, but then I don't like debt. That is an incredible amount of saving. Seriously incredible.

 

[spacecowgirl]

I would not be surprised at all if the government in 2040 goes, "since you have so much money in your 401 k, you are going to get nothing in social security" or "since you have so much money in your 401 k, we are going to tax you at 50% rate".

At the end of the day, the only safe assets are your house, gold and maybe cash....real, tangible assets.

Don't spend your whole life working your butt off so you can "save" for retirement by maxing out your 401 k, ROTH IRA. Life is much more than just working. Spend your money. Do it wisely. Do it while you are still young.


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Word. I have a couple of friends whose parents died within months of retirement. You may not get those golden years or you might not be in good health. No, you don't want to be eating Fancy Feast but no one was awarded at the pearly gates for saving the most or for accruing the least interest.

 

[URIpharmD2013]

I'm confused...don't you have to use the money in a HSA by the end of the year? Otherwise, you lose it. Also, what should I do if i'm over the income limit for the roth ira. Thanks in advance!

 

[HouTX]

I'm confused...don't you have to use the money in a HSA by the end of the year? Otherwise, you lose it. Also, what should I do if i'm over the income limit for the roth ira. Thanks in advance!

1. HSA rolls over, you need HDHP to be able to contribute to one (FSA on the other hand.. use it or lose it)

2. google backdoor roth

 

[Dred Pirate]

I'm confused...don't you have to use the money in a HSA by the end of the year? Otherwise, you lose it. Also, what should I do if i'm over the income limit for the roth ira. Thanks in advance!

you are confusing an HSA for a FSA

and like was said - backdoor roth.

 

[NewRPh2006]

so - I have a good problem.

Currently Wife and I's 403b's are maxed (18k each), Roth Ira's for each maxed ($5500 each). HSA maxed. I have probably around $500-1000 a month that needs a home.

My options:
1. Pay down mortgage - That is a guaranteed 4% return on investment - but vitally guaranteed to move prior to mortgage being paid off - even with paying extra (just moved in)

2. Build up savings - get a crappy 1% interest rate - already have 4-6 months expenses in a liquid account - plus in true emergency can tap my Roth's initial investment with no penalty.

3. Taxable brokerage account - find a low turnover growth and income fund and ride the stock market.

4. Other options? Anything that has some sort of tax protection?

I don't live a frugal life - have all the car I need/want, travel a lot - and don't feel like I am missing out on anything by saving as much as I do - on pace to retire around 60 - would love to find a way to bump that down to 55 - currently no kids to worry about college for.

Cool. I take it you are free of student loan debt, so I would pay down the mortgage. Simple and clean. Even though you will likely move, you are still on the hook for whatever you borrowed. Good job having a plan and paying attention with your money!