Skeptical Tuna hit it big, but questions remain.

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skepticaltuna
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Joined: Tue Apr 11, 2017 6:01 pm

Skeptical Tuna hit it big, but questions remain.

Post by skepticaltuna » Thu Dec 14, 2017 5:37 pm

Thanks to your help in April, my wife and I locked down our plan for 2017 and beyond. With the year nearly over, I've waddled out of the water to offer an update. Note, due to time restrictions, some work investments couldn't take effect until recent months. The old thread is here: viewtopic.php?t=216247

When I posted, we only had $10,000 in savings and $7,000 mouldering away in an old 401k. Right now we have saved about $40,000. The investments listed below are wholly reliant on my wife's income of $90,000. (I've taken steps to generate more income, but am not currently counting below.)

Current Yearly Investments:

- $12,000 (Ally Savings)
- $5,500 (Ms. Skeptical Tuna Vanguard IRA)
- $5,500 (Skeptical Tuna Vanguard IRA)
- $27,500 (Ms. Skeptical Tuna Vanguard 401k w/ match)

- TOTAL AMOUNT SAVED YEARLY: $50,500.


Our goal is to get from $0 to $250,000 (invested, perhaps not actual value) in five years, and our plan is designed to reach that goal.

Our entire household monthly budget (minus rent) continues to be under $1,000. With December nearly half over, we've spent just $152 total, which includes groceries, household items, medical bills, and $56 of gas. Clearly, frugality isn't a problem for us. With that in mind...

Questions:

- At what point should I consider umbrella insurance?
- Is there a reliable third investment option (other than cash/CD/etc. and stocks) I can branch out into?
- Any other thoughts?
- Help me settle a debate with Ms. Skeptical Tuna that chocolate and peanut butter DO NOT go together, correct?

Thanks!
-- Skeptical Tuna

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mhc
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Location: NoCo

Re: Skeptical Tuna hit it big, but questions remain.

Post by mhc » Thu Dec 14, 2017 6:05 pm

Good job this year. I'll try to answer your questions.

1. I assume you are young. I wouldn't get umbrella insurance for quite some time. Umbrella insurance can protect your assets and future income stream. Once your assets get large enough (maybe $1 million) and you start running out of human capital (40's), then consider it.

2. Stock and bond mutual funds are all you really need. Some people use CDs instead of bonds because of current interest rates.

3. Keep living below your means and investing in low cost mutual funds. Take advantage of tax advantaged accounts. Stay the course.

4. Remember Ms Tuna is always right when it comes to chocolate and peanut butter.

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Tamarind
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Re: Skeptical Tuna hit it big, but questions remain.

Post by Tamarind » Thu Dec 14, 2017 6:23 pm

Think about umbrella insurance again when you have 7-figure net worth, IMO. Instead, buy business coverage for your endeavors if they are risky. I used to get my clients up close and personal with honey bees, and a local agent covered my LLC to the tune of 20x personal assets for $50 annually, just in case of accidents. If your business ideas do not court death, dismemberment, or major property damage, you can probably skip that until you pass your 5-year goal.

Don't get fancy with the investments; stick with domestic and international stock, bonds, CDs. If you wouldn't want a mortgage for yourself, don't be tempted to invest in real estate.

You have a great plan, now go execute on it and don't fiddle with it too much.

I think you're right, but soon to be Ms. Tamarind sides with your wife. They are obviously correct.

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dual
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Re: Skeptical Tuna hit it big, but questions remain.

Post by dual » Thu Dec 14, 2017 7:06 pm

Congratulations. Living below your means and saving a significant portion of your income is THE key to long term wealth accumulation.

Some points:
1. Consider opening a personal Roth IRA instead of continuing to fund your traditional IRA. Your marginal tax rate is probably fairly low now and if you continue to save it will be higher when you retire. Your 401K is plenty of tax deferred contribution and the additional tax you pay for the Roth contribution will be relatively small.

2. Put your CDs and bonds in your 401K and your IRA and your taxable savings and Roth in a broadly diversified index fund such as the Vanguard Total Stock Market fund.

3. I think you and any saver needs an umbrella fund. Your main asset now is your earning capacity and that could be attached if God forbid you get hit with a large legal settlement. The price of a one or two million umbrella policy is very low, a few hundred dollars per year, and for it you get the best defense lawyers your insurance company has if something bad happens.

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Watty
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Re: Skeptical Tuna hit it big, but questions remain.

Post by Watty » Thu Dec 14, 2017 10:42 pm

dual wrote:
Thu Dec 14, 2017 7:06 pm
The price of a one or two million umbrella policy is very low, a few hundred dollars per year, and for it you get the best defense lawyers your insurance company has if something bad happens.
+1

For someone that can save $50,000 a year then getting an umbrella policy is a no brainer easy choice.

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CaliJim
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Re: Skeptical Tuna hit it big, but questions remain.

Post by CaliJim » Thu Dec 14, 2017 10:56 pm

You are making good progress.

I didn't get an umbrella until I had teenage drivers in the household... but I'd say it is at least worth getting a quote and then you can decide.

Has she even tasted a Reeses Cup?

Image I mean... of all the guilty pleasures... these are among the best.
-calijim- | | For more info, click this Wiki

Derby
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Re: Skeptical Tuna hit it big, but questions remain.

Post by Derby » Fri Dec 15, 2017 5:13 pm

Good Work!

Right now, you and Ms. T need Long Term Disability Insurance more than Umbrella Insurance.

When you have need to protect your ability to earn (human capital), use LTDI.
When you need to protect your assets (financial capital), use Umbrella Insurance.

You still have a lot more of A than B at the moment.
Carpe Diem.

skepticaltuna
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Joined: Tue Apr 11, 2017 6:01 pm

Re: Skeptical Tuna hit it big, but questions remain.

Post by skepticaltuna » Tue Jan 02, 2018 4:03 pm

Really, really sorry for leaving all of you in breathless anticipation for my return.

Got kidnapped by a large man wearing red who forced me to eat cookies and candy.

Bumping this again. There seems to be differences of opinion on LTDI vs UI. Any further insight to push me in one direction?
-- Skeptical Tuna

senex
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Re: Skeptical Tuna hit it big, but questions remain.

Post by senex » Tue Jan 02, 2018 5:03 pm

Congrats on the savings & spending control. Admirable work!

I agree with Derby on LTDI -- numerically, disability is probably a bigger risk (probability of occurrence times monetary loss if it occurs) than a liability lawsuit, unless you're engaged in particularly dangerous activities. And you can often buy LTDI through your employer for pretty cheap. So I would do that first.

I also admire Derby's mindset about Umbrella: it's used to protect assets, which isn't a huge issue for you -- you could rebuild from scratch in one year. Most comments here, and people I personally know, didn't consider umbrella until they were well into the 6 figures of assets. On the other hand, UI is so cheap (often $100-150/year for $1M coverage) that if you live if you live somewhere litigious, or have any elevated risks, or even if you just feel better with the extra coverage, it's totally fine & reasonable to sign up now. It won't derail your savings plans.

soccerrules
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Re: Skeptical Tuna hit it big, but questions remain.

Post by soccerrules » Tue Jan 02, 2018 6:04 pm

Tuna-
1st get Mrs Tuna a Reese's stat. Best Candy on the planet.

IMO, you need insurance to "protect" something -- protect Loss of income (disability and life) or protect for accidents or other events (auto, home/renters, and umbrella).

What are YOU wanting to protect ?
It would seem that Mrs. Tuna's income (disability and life) needs to be protected before you protect the potential for other losses (umbrella)

I have just stared to consider Umbrella Insurance and probably a little late. (I have Life, LT Disability(work provided), Auto and Home)
I think i could be a little more of a target or more exposure to loss based on my situation. ( Decent Net worth ($ and Home Owner) and 4 drivers (2 are teens))

I would agree with others based on the information you provided, Umbrella is probably not a need for you right now. I'd look into LT Disability and Life Insurance for Mrs. Tuna. If you currently don't have income nor providing care for kids-- I could see a case that you Mr Tuna do not need to replace an income (Life, Disability). If something happened to Mrs. Tuna , you would need to go find employment.
Don't let your outflow exceed your income or your upkeep will be your downfall.

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