The more I learn the less I know: general checkup, lots of questions.

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Hermione
Posts: 8
Joined: Thu Aug 31, 2017 11:00 pm

The more I learn the less I know: general checkup, lots of questions.

Post by Hermione » Sun Aug 19, 2018 3:28 pm

Hi all,

I'm a lurker 'round these parts, about 2 years or so.

If you're one of "those people" or one of the forum admins who responds to all the one-time posters, I want you to know how much I appreciate everything you write. Seriously, it's not just the OP who reads your advice and takes it to heart! You are making a difference in the world, even if most of the folks who read your advice are just lurkers like me :happy

I'm also verbose, as you'll find from this ginormous post.

So, TL:DR; Too many options, not enough decision making. What's your one piece of advice you think most important on this crazy journey?


The Long Version:
I've searched and read many, many, many Forum posts, articles, books and... the more I learn the less I know. I have just enough information to be dangerous, but feel as though there is a "right" answer for my family just outside my understanding. I don't really want to go to a financial planner - I was in sales, so I don't wanna sit through anyone's pitch (no offense!) but I feel like I am missing some puzzle piece to make the best choices I can.

I had been more aggressive than Boglehead-recommended, but recently rebalanced aggressive funds in to more moderate income-y funds to preserve our gains. I love the idea of using the 401ks for bonds and Roths for growth to max the long term tax advantages - thanks BH Forum folks for that awesome tip!

Have selected funds available that fit Boglehead principles as best as possible - indexes, low cost, etc.


The Stats:
Emergency fund/savings: 32k +5k "cash on hand"
Debt: Nope. Got a credit card to build credit score. Pay it every few days or so. Own the condo we live in outright.
Tax Filing Status: Married Filing Jointly, 1 year old.
Tax Rate: 15% Federal, but next year will likely be 25%.
**Edit: 2018 bracket will likely be 22, unless I continue writing off business stuff, see below

State of Residence: CA
Age: me 38, him 40


The Breakdown:
<<Class - Boglehead's Guide to Investing book, 2014 edition recommended for our age - Our % - Fund(s)>>
the * are from hubby's MegaCorp job 401k thru Fidelity, so they don't have tickers.

Large cap - 30% - 22.37% - vwnfx, usaux, ushyx, Large Cap index*, MegaCorp shares fund*
Small cap/mid cap - 15% - 15.71% - Sm/Midcap index*, Transamerica Vanguard Sm Cap Index
International - 10% - 6.15% - International Index*
REIT 5% - 0 - hubs doesn't trust r.e. market, thinks crash is heading this way, so none for now at his request
Intermediate term bond - 20% - 25.02% - vwinx (66% bond, so I put it here), usibx, Total Return bond*
TIPS - 20% - 7.59% - Transamerica DFAprotected securities portfolio
Funds of funds (retirement target date, "conservative" fund) - ?? - 22.95% - Fidelity 2045 target date fund, usccx - only about 2k. Not sure which class to put these in as they're so mixed?

Total - 106k ish
Plus :18k ish his pension that we pretend doesn't exist.
2k ish 529 for little dude.

Currently contribute 6% of his salary to his 401k to max the match. I contribute 4% of my salary to 401k, no match. Maxing both our Roths. The rest of our cash is beefing up savings - 1-2k a month.


The Questions:

1. Work, worth, and future impact vs lifestyle now

I work at a place about 20 min easy commute from home. They give me lots of freedom - with the little dude, I can work from home or leave early for well-baby checkups. I like what I do and enjoy where I work. They pay me about 20% less than market value - a fair trade for flexibility. Several months ago got "promoted" and was told to wait until annual review time to see if a raise comes. Hmmm...

I do worry what are the long term repercussions of "settling" for a lower salary on our futures - especially as a woman. I also worry that I'll someday experience mom-guilt of spending so much time at work when little dude was little. I'm going for balance... and your experiences on this one would be helpful.


2. How are we - really - not counting the "extras" (social security, pension, residual income)?

I ran a business unsuccessfully for several years, so feel like we started the appropriate level of savings late. We're in a good spot (having been broke for so long, we're used to living cheaply) so last year we saved about 20% annual income in our retirement accounts, and another 20% in cash to replenish the emergency fund post-baby. I don't want to over-save and miss quality of life now, but I also don't want to be broke at retirement.

I tried Firecalc, but it didn't make sense to me. Vanguard's online calculator says we're on track, but I feel like it's too simple and can't change enough factors to be prepped for the worst case scenario. Fidelity's online tools couldn't handle all the various accounts. Looked at Portfolio Visualizer, but I'm overwhelmed. Considering buying ESPlanner so I can play with their simulations, but need to have a budget committee meeting before spending the $200 bucks on it :P
Is this my next step to figuring out if the "financial plan" is working?


3. How much emergency fund? and, do you count funding retirement savings as an expense during an emergency?

Hubby is in the "as much as we can!!!" camp and wants $25k. I feel there's a certain level where the opportunity cost (and ) outweighs the security of a big pile o'money. We "negotiated" $10k - about 5 months expenses with no modification to lifestyle. My job is in the building industry and directly related to the ups&downs of the housing market, so should it be more?


4. Buy a single family house house? Stay in condo? Rent condo?

***Please focus on the investment risk/strategy only, NO CAUTIONS NECESSARY on the risks and pitfalls of being a landlord - we've had roommates/renters for many years until little dude got here, so I've done the flooded toilets, wrecked screens, trashed walls and it doesn't bug me.

We bought a wrecked short sale condo at the bottom of the market in '11/'12. Condo comps now running 475k-ish, so more than 100% ROI'd. Single family homes in the next neighborhood over are 650-800k. Obviously, CA is expensive and challenging to cashflow rental property, and the whole favorable to renters thing ups the risk factor.

Could we sell and buy a single family with a a mortgage on our incomes? Yes... but the condo would rent out in the $2,500-ish/mo range, which would (theoretically) cover a mortgage on a single family. Conversely, a bank can't foreclose on a house without a mortgage. On the other hand, there's association fee hikes, special assessments, etc.

We definitely don't need to move - have plenty of space, good schools, good neighborhood, etc., but having a yard and no crazy neighbors screaming and banging on the walls at 11pm would be... nice. As well as the secondary stream of income diversifying the portfolio. Or, better to stay safe where we are with no mortgage, maxing the Roths/401k's and "live well" by spending more on travel, etc while we're young-ish? Maybe this is more of a quality of life question... If you had it to do over again, what would you do?


5. 401k tax advantages versus saving cash?

With all this extra cash we're stashing, should we be putting more in the 401ks for tax purposes? My business is still generating passive residual income, a couple hundred bucks a month, and we're no longer renting, so our bracket will likely jump to 25% next year because I'm getting to the point where I no longer feel comfortable writing off as much as I used to. I'm not evading taxes, certainly, but I am concerned as my time in my business lessens that my audit risk goes up. Wondering how much it will hurt us to be in the higher tax bracket and if that's offset-able by 401k contribution maxes, or if it's even worth it?


6. 529 funding.
I want to aim to save $60k ($15k/year for 4 years). Hubby is concerned about overfunding or little dude deciding not to go to college. I explained 529 can be passed on to grandkids, or used like a Roth where principal can be taken out, but interest will be taxed. Can you point me to easy resources so I can help explain this better?


7. General anxiety about future. Planning for the uncontrollable or unnecessary worry?

Part of me feels like investing in- even via diversified index mutual funds - is still a low-risk form of gambling. Talk me off a ledge here. I wonder what happens when all the Boomers retire and take all their money out of the market. Supply and demand: Boomers all sell, prices of funds go down, so portfolio declines, and... then what? Has anyone see any historical information or research about this that might give some insight? Like the evolution from pension to 401k, I feel like the personal retirement savings system is going to shift in the future.

That's a whole lotta questions! I turned on notification for clarifications and replies, though it might take me a bit with toddler running around...

If you hung in to this point, THANK YOU. I look forward to seeing your insights and observations. Thanks in advance!
Last edited by Hermione on Tue Aug 21, 2018 9:03 pm, edited 1 time in total.

User avatar
BolderBoy
Posts: 4471
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: The more I learn the less I know: general checkup, lots of questions.

Post by BolderBoy » Sun Aug 19, 2018 9:54 pm

Hermione wrote:
Sun Aug 19, 2018 3:28 pm
7. General anxiety about future. Planning for the uncontrollable or unnecessary worry?

I wonder what happens when all the Boomers retire and take all their money out of the market. Supply and demand: Boomers all sell, prices of funds go down, so portfolio declines, and... then what? Has anyone see any historical information or research about this that might give some insight?
This one is easy. For every seller there has to be a buyer. So the Boomers can't crash the market by selling everything all at once.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

flyingaway
Posts: 2531
Joined: Fri Jan 17, 2014 10:19 am

Re: The more I learn the less I know: general checkup, lots of questions.

Post by flyingaway » Sun Aug 19, 2018 10:07 pm

The general idea here is: the more you learn, the less you care. Because nobody knows anything for sure.
Find a suitable asset allocation and buy the corresponding index funds, and you are done.

User avatar
whodidntante
Posts: 6648
Joined: Thu Jan 21, 2016 11:11 pm
Location: outside the echo chamber

Re: The more I learn the less I know: general checkup, lots of questions.

Post by whodidntante » Sun Aug 19, 2018 10:26 pm

Oh, a buffet post. :sharebeer I'll take only the stuff that looks good.

1. If you're available when it really matters and if you're working 40+ hours a week excluding paid time off, then I would ask for a raise. But if you really only work 30 hours, or if people have to cover for you for urgent stuff that falls under your job because of mom duties, maybe you don't deserve full pay.

3 & 5. I agree that you seem a bit cash heavy. I only have about three weeks of cash myself and the rest is in the capital markets, but I have plenty of liquidity. I would really try to max the 401k if you can, but since your marginal rate is low, maybe do a Roth 401k if available. I think you need to update your tax rates though, the 25% rate doesn't exist for 2019.

6. I would prioritize maxing the 401k, maxing an HSA, and maxing a Roth IRA over any 529 contribution.

7. C'est la vie. Sometimes you lose with aces, even if you play the hand perfectly. You are investing because of expected returns. It's a good bet that is likely to pay off over your lifetime.

HEDGEFUNDIE
Posts: 3621
Joined: Sun Oct 22, 2017 2:06 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by HEDGEFUNDIE » Sun Aug 19, 2018 10:34 pm

BolderBoy wrote:
Sun Aug 19, 2018 9:54 pm
Hermione wrote:
Sun Aug 19, 2018 3:28 pm
7. General anxiety about future. Planning for the uncontrollable or unnecessary worry?

I wonder what happens when all the Boomers retire and take all their money out of the market. Supply and demand: Boomers all sell, prices of funds go down, so portfolio declines, and... then what? Has anyone see any historical information or research about this that might give some insight?
This one is easy. For every seller there has to be a buyer. So the Boomers can't crash the market by selling everything all at once.
OP, it sounds to me like your risk tolerance is low. That’s ok, nothing to be ashamed of. But just be honest with yourself about that and invest accordingly. Perhaps a 60/40 asset allocation.

User avatar
nedsaid
Posts: 12748
Joined: Fri Nov 23, 2012 12:33 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by nedsaid » Sun Aug 19, 2018 11:00 pm

Don't feel bad. We all have been there.

In 1999, I was the man. I was going to be the next Peter Lynch and maybe the next Warren Buffett. It seemed like I knew everything there was to know about investing. I went to the library and researched with ValueLine, the Wall Street Journal, Barron's, Forbes, and other financial publications to come up with ideas for stock picks. Man, I was just it.

Then the 2000-2002 bear market happened. I went from champ to chump. I went from the swashbuckling Errol Flynn to the hen pecked Caspar Milquetoast. All that self assuredness just went away and I realized that I was probably...well...you know...average. Didn't know as much as I thought I knew. Lost interest in all that research.

Markets will do that to you. Teach humility. Post on the Bogleheads, that will teach you humility as well. I am right about something around here only about every six months or so. Other than the rare occasion I am right, you can ignore everything else I say!

You will be learning about investing as you go.
A fool and his money are good for business.

Jablean
Posts: 297
Joined: Sat Jun 02, 2018 2:38 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by Jablean » Mon Aug 20, 2018 2:26 am

Had my kid in my late 30s too. Kid's are only young once. They are fun to do things with through grade school, once they hit junior high you see less and less of them except during family vacations. Mine loves the big yard in theory, never goes outside to see it.

Fund your 401s, they'll be in funds that have growth potential, the 529 probably won't and you can add money to it later.

Flyer24
Moderator
Posts: 1200
Joined: Sun Apr 08, 2018 4:21 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by Flyer24 » Mon Aug 20, 2018 3:48 am

You should generally keep 3-6 months of expenses in an emergency fund. It seems like you have plenty of cash so I would stop adding to it. Put that extra savings towards your 401ks. Make sure you have a good comfortable amount going towards retirement before contributing to HSA. You can always borrow for college but you can’t for retirement.

passiveTiger
Posts: 94
Joined: Tue Apr 17, 2018 9:22 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by passiveTiger » Mon Aug 20, 2018 5:01 am

BolderBoy wrote:
Sun Aug 19, 2018 9:54 pm
Hermione wrote:
Sun Aug 19, 2018 3:28 pm
7. General anxiety about future. Planning for the uncontrollable or unnecessary worry?

I wonder what happens when all the Boomers retire and take all their money out of the market. Supply and demand: Boomers all sell, prices of funds go down, so portfolio declines, and... then what? Has anyone see any historical information or research about this that might give some insight?
This one is easy. For every seller there has to be a buyer. So the Boomers can't crash the market by selling everything all at once.
Not really. It’s not 1-to-1. For any number of sellers, there technically only has to be one buyer. When the number of buyers is low, they demand a lower price.

That said, they won’t do it all at once, and the bottom 80% of the United States public could sell everything and the impact would be noticeable but relatively small.

https://www.cnbc.com/2017/11/02/stocks- ... e-low.html

“81 percent of the stock market worth is concentrated in the top 10 percent of households by wealth. More than 93 percent of the stock is owned by the top 20 percent of households. The bottom 80 percent of households owns only about 7 percent of stock.

By the way, this includes direct ownership of stocks and indirect ownership through mutual funds, trusts, IRAs, Keogh plans and other retirement accounts. Everything.”

student
Posts: 4131
Joined: Fri Apr 03, 2015 6:58 am

Re: The more I learn the less I know: general checkup, lots of questions.

Post by student » Mon Aug 20, 2018 5:20 am

I would let others answer the more difficult questions. I think you are doing fine. Yes, you have some catching up to do in contributing to your retirement but it seems that it is due to a unsuccessful business, and not overspending. But you were able to save enough to pay off a condo. So it terms of net worth, I would say that you are doing fine. You are already in about the top 25% in the US. ($500,000 for a couple in your age group.)

Strayshot
Posts: 598
Joined: Thu Mar 05, 2015 8:04 am
Location: New Mexico

Re: The more I learn the less I know: general checkup, lots of questions.

Post by Strayshot » Mon Aug 20, 2018 8:08 am

Thoughts after reading your post:

Your investments are in my opinion overly conservative. If you look up the target date fund it will tell you the approximate mix of asset classes inside that -25% of your portfolio. The very first thing I would do is just sell the TIPS alltogether and put it into the target 2045. Next I would think about moving about 5% of the bond fund into the international fund. It would be useful if you could list the expense ratios of the various funds in your 401k’s as well as options that you are not currently invested in.

Your EF is too big. You own your condo outright, if you needed immediate liquidity you could easily utilize a home equity line of credit (HELOC) which should be available for little to no money out of pocket. I would put at least half of your current EF into a taxable account in a total market fund.

You are funding things in the correct order: 401k to the match, Roth’s, remainder of 401k. You need to be saving at least 15% of gross income, and you are easily there between 2 maxed Roth’s and the ~16% going into the 401k’s. I think you are doing well.

My personal opinion, I would not trade a paid off condo in an area you like to live with a mortgage on a new SFH in the CA housing market, regardless of if the condo was getting sold or rented. That is just me. You got lucky with timing and now have a solid property that meets your needs and is worth a very large chunk of your portfolio and net worth. Don’t make your single sector risk to real estate any larger than it already is.

TTBG
Posts: 109
Joined: Sun Nov 09, 2014 8:16 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by TTBG » Mon Aug 20, 2018 10:08 am

I'll comment on #1 Work, worth, and future impact vs lifestyle now.

It sounds like you're doing fine here.

I'm a software engineer and I raised my kids in the 90s when engineers were pretty much treated like gold, so obviously YMMV, but I worked part-time/flexible hours for about 5 years. I tended to take on the grunt work that no one else wanted (code maintenance instead of development) because it was lower pressure, so my salary fell behind what it could have been. But I kept my skills up and once I went back to full-time, my salary caught up within a year or two, due to promotion + a job change.

I think the important thing is to keep your job skills current. Then just enjoy the time with your little one -- it goes by quickly!

P.S. Pat yourselves on the back for buying a condo at the right time, but I wouldn't rush into buying a house in the Bay Area. Sooner or later this market has to cool down, and you're in a comfortable position to wait for a better time to buy.

pkcrafter
Posts: 13642
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: The more I learn the less I know: general checkup, lots of questions.

Post by pkcrafter » Mon Aug 20, 2018 10:48 am

From 401k -
Funds of funds (retirement target date, "conservative" fund) - ?? - 22.95% - Fidelity 2045 target date fund, usccx - only about 2k. Not sure which class to put these in as they're so mixed?
The conservative fund is USAA Cornerstone Conservative fund (USCCX) with ~20% equity. ER - 0.1%
Fidelity 2045 TR fund is "Freedom" fund with 85% stock (FFFGX) ER - 0.63%

Does 401k offer any Fidelity "Freedom Index" funds.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Topic Author
Hermione
Posts: 8
Joined: Thu Aug 31, 2017 11:00 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by Hermione » Mon Aug 20, 2018 6:19 pm

Wow, all!

Some amazing stuff here!

Whodidntante - Lol! Buffet... love it.
1. Fair points. Previous guy in my position was slower worker, less skilled, less in-field experience, but had a masters where I have Bachelor's. What took him 8 hours takes me 3. I'm doing more in less time. Not sure if that changes the equation?

3/5. Good point about cash heavy. Will look in to Roth 401 - can do through MegaCorp 401.

Hedgefundie - good point. I have traditionally been pretty aggressive thus far, so being called conservative is a bit mind bending, lol!

Nedsaid - a great tale. I've heard it called analysis paralysis.

Jablean - good points about gradeschool fun and the yard... also yard work may take more time that I could be spending doing fun things!

Flyer24 - "borrow for college, not retirement". Brilliant. Will pass that on to hubby to kick me in arse when being too conservative, lol!!

PassiveTiger - Wow. I mean, wow. That's an incredible gem. Thank you!!

Student - Reassuring. Thank you! Wow, good to know I'm better than I thought.
Yes, we did some fairly dumb... things. And learned a lot. Pay for education one way or the other, right?

Strayshot - Well reasoned about tips/international! Yes, I have likely shifted too conservative - this seems to be a theme among what y'all posted.

Also love your advice about single sector risk. This is an additional factor to discuss w hubby when determining next move for the savings/emergency cash.

Maybe we'll just go to Vegas... lol!!

TTBG - Thanks for your kid experience. I thought about that too, once he's in school maybe reevaluate and start looking for new job then.
Perhaps RE prices will crash by then, lol! We certainly aren't in a hurry to buy - too cheap to pay full retail!

PkCrafter - I'm not sure about Fidelity Freedom funds... let me check. I'll update in a bit about available funds in both 401's - sounds like nap may be ending...


Thank you so much all!

Wow.

Just wow.

User avatar
camillus
Posts: 600
Joined: Thu Feb 28, 2013 9:55 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by camillus » Mon Aug 20, 2018 6:36 pm

Keep in mind that your Roth IRA contributions can be withdrawn tax & penalty free - and can serve as an extended emergency fund. There are few reasons to miss the opportunity to max out Roths while you are piling up cash for no identifiable reason.

PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by PFInterest » Mon Aug 20, 2018 6:48 pm

Hermione wrote:
Sun Aug 19, 2018 3:28 pm
The Stats:
Emergency fund/savings: yes
Debt: No
Tax Filing Status: Married Filing Jointly
Tax Rate: 15% Federal, but next year will likely be 25%
- these brackets no longer exist, please update.
- please also add your CA marginal bracket

State of Residence: CA
Age: me 38, him 40, 1yo

The Breakdown:
<<Class - Boglehead book recommended for our age - Our % - Fund(s)>>
- where are you getting this from?
the * are from hubby's MegaCorp job 401k thru Fidelity, so they don't have tickers.

Large cap -22.37% - vwnfx, usaux, ushyx, Large Cap index*, MegaCorp shares fund*
Small cap/mid cap -15.71% - Sm/Midcap index*, Transamerica Vanguard Sm Cap Index
International - 6.15% - International Index*
REIT 0% - hubs doesn't trust r.e. market, thinks crash is heading this way, so none for now at his request
- They are market weight in TSM now anyways, so fine to be 0.
Intermediate term bond - 25.02% - vwinx (66% bond, so I put it here), usibx, Total Return bond*
TIPS - 7.59% - Transamerica DFAprotected securities portfolio
- why do you feel you need TIPS? you are young, have stocks for inflation protection.
Funds of funds (retirement target date, "conservative" fund) - 22.95% - Fidelity 2045 target date fund, usccx - only about 2k. Not sure which class to put these in as they're so mixed?
- you need to add them to all the above as they contain US, Intl, FI, etc. mixing TDF makes it more complicated.

Total - 106k
Plus :18k his pension that we pretend doesn't exist.
2k 529 for little dude.

Currently contribute 6% of his salary to his 401k to max the match.
I contribute 4% of my salary to 401k, no match.
Maxing both our Roths.
The rest of our cash is beefing up savings - 1-2k a month.

The Questions:

1. Work, worth, and future impact vs lifestyle now
They pay me about 20% less than market value - a fair trade for flexibility.
I do worry what are the long term repercussions of "settling" for a lower salary on our futures - especially as a woman.
- are you doing 20% less work? otherwise its setting you up for repercussions. its why women are still lagging behind the men.

2. How are we - really - not counting the "extras" (social security, pension, residual income)?

Last year we saved about 20% annual income in our retirement accounts, and another 20% in cash to replenish the emergency fund post-baby.
- that is excellent.
- 20% for retirement is a good goal to aim for. the rest is saved for car, vacation, house, etc.


I tried Firecalc, but it didn't make sense to me. Vanguard's online calculator says we're on track, but I feel like it's too simple and can't change enough factors to be prepped for the worst case scenario. Fidelity's online tools couldn't handle all the various accounts. Looked at Portfolio Visualizer, but I'm overwhelmed. Considering buying ESPlanner so I can play with their simulations, but need to have a budget committee meeting before spending the $200 bucks on it :P
Is this my next step to figuring out if the "financial plan" is working?
- no. you dont have an end goal? why do you need to strategize? do you even know what your spending is like in retirement? start there.
- call it 100K. then figure out SS. lets say you get 20K. then you have a pension which should only count up to the point you have vested, but call it 20k. so 100-20-20 means you only need to replace 60K with the portfolio. x25 (4% rule) means you need to save 1.5MM. once you hit 1.5MM, then you re-visit your plan and adjust.


3. How much emergency fund? and, do you count funding retirement savings as an expense during an emergency?
- this is personal. but with a child and house definitely 6-9 months worth.
- you can define an emergency however you like. if you want to keep up a level of saving, then you need to bake that into your EF.

Hubby is in the "as much as we can!!!" camp and wants $25k.
- thats half mine, so i think thats small.
I feel there's a certain level where the opportunity cost (and ) outweighs the security of a big pile o'money.
- true. you need to sleep at night.
We "negotiated" $10k - about 5 months expenses with no modification to lifestyle.
- thats fine.
My job is in the building industry and directly related to the ups&downs of the housing market, so should it be more?
- whats the statistical likelihood you would find a job in 5 months during 2008-2009?

4. Buy a single family house house? Stay in condo? Rent condo?

***Please focus on the investment risk/strategy only, NO CAUTIONS NECESSARY on the risks and pitfalls of being a landlord - we've had roommates/renters for many years until little dude got here, so I've done the flooded toilets, wrecked screens, trashed walls and it doesn't bug me.

Could we sell and buy a single family with a a mortgage on our incomes? Yes... but the condo would rent out in the $2,500-ish/mo range, which would (theoretically) cover a mortgage on a single family. Conversely, a bank can't foreclose on a house without a mortgage. On the other hand, there's association fee hikes, special assessments, etc.

We definitely don't need to move - have plenty of space, good schools, good neighborhood, etc., but having a yard and no crazy neighbors screaming and banging on the walls at 11pm would be... nice. As well as the secondary stream of income diversifying the portfolio. Or, better to stay safe where we are with no mortgage, maxing the Roths/401k's and "live well" by spending more on travel, etc while we're young-ish? Maybe this is more of a quality of life question... If you had it to do over again, what would you do?
- homes are lifestyle purchases first. if thats your plan, then do that. second is a financial decision. what is your expected budget for a SFH in you good school/neighborhood/space criteria? you didnt give any #s, so dont have anywhere to start...

5. 401k tax advantages versus saving cash?
Wondering how much it will hurt us to be in the higher tax bracket and if that's offset-able by 401k contribution maxes, or if it's even worth it?
-you should fill those first before taxable investing yes. the tax advantage is second to the efficiency of saving for retirement. since you didnt give us numbers, we dont know what 20% of your income would be for retirement.

6. 529 funding.
I want to aim to save $60k ($15k/year for 4 years). Hubby is concerned about overfunding or little dude deciding not to go to college. I explained 529 can be passed on to grandkids, or used like a Roth where principal can be taken out, but interest will be taxed. Can you point me to easy resources so I can help explain this better?
- show him the cost of some CA universities.

7. General anxiety about future. Planning for the uncontrollable or unnecessary worry?

Part of me feels like investing in- even via diversified index mutual funds - is still a low-risk form of gambling. Talk me off a ledge here.
- a better word is speculation.
I wonder what happens when all the Boomers retire and take all their money out of the market.
- then theyll spend it...
Supply and demand: Boomers all sell, prices of funds go down, so portfolio declines, and... then what?
- like what, at once? good luck with that.
Has anyone see any historical information or research about this that might give some insight? Like the evolution from pension to 401k, I feel like the personal retirement savings system is going to shift in the future.
i streamlined your post.
you didnt mention some other anxiety things like: do you have a will and a trust? cause who takes care of the toddler otherwise...
do you have insurance in place? same reason.

goblue100
Posts: 1019
Joined: Sun Dec 01, 2013 10:31 am

Re: The more I learn the less I know: general checkup, lots of questions.

Post by goblue100 » Mon Aug 20, 2018 7:01 pm

Hermione wrote:
Sun Aug 19, 2018 3:28 pm
What's your one piece of advice you think most important on this crazy journey?
Don't worry so much. Live your life, have fun. As long as you are saving a reasonable percentage of your income and not investing in orange juice futures, everything else will take care of itself. And just remember, nobody knows nothing. Including the optimal asset allocation over the next 30 years.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

Topic Author
Hermione
Posts: 8
Joined: Thu Aug 31, 2017 11:00 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by Hermione » Tue Aug 21, 2018 9:26 pm

Camillus - great point I completely forgot :oops: this does make it easier.

PFInterest -
This is fantastic.
Great catch on the tax bracket!! With the new bracketing, no longer having renters and writing off less for my business (for integrity) this would be a BIG jump for us tax bill-wise. W2s last year were 88k, but both of us off 3 mos for little dude no income. Had 15k legit business losses that won't be repeated this year. With back of napkin math, that's like a 10k tax bill... criminy. Upping 401k contributions, here I come!

2. Thanks for breaking this down. EXACTLY what I needed.

3. 2008/09 would have been 1-2 years. Got it.

We do have wills, are working toward trust as soon as possible. We also have life insurance for both of us, disability for him. Need to go through forum for disability insurer recommendations.

Goblue - But the glassywinged sharpshooter makes oranges so profitable, lol!! (Not!)
Thanks for the reminder to have more fun.

You all are so great. Thanks!

megabad
Posts: 2487
Joined: Fri Jun 01, 2018 4:00 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by megabad » Wed Aug 22, 2018 4:46 pm

Hermione wrote:
Sun Aug 19, 2018 3:28 pm
1. Work, worth, and future impact vs lifestyle now

I work at a place about 20 min easy commute from home. They give me lots of freedom - with the little dude, I can work from home or leave early for well-baby checkups. I like what I do and enjoy where I work. They pay me about 20% less than market value - a fair trade for flexibility. Several months ago got "promoted" and was told to wait until annual review time to see if a raise comes. Hmmm...

I do worry what are the long term repercussions of "settling" for a lower salary on our futures - especially as a woman. I also worry that I'll someday experience mom-guilt of spending so much time at work when little dude was little. I'm going for balance... and your experiences on this one would be helpful.
You should never settle for less than what you are worth (man or woman). Explicitly ask for a raise before the review process starts (it typically has to be budgeted for). Ask for a raise during the review process explaining why (you were promoted and presumably took on more responsibility). As a manager, I want to hear it from you. That said, I am male and I would take flexibility over pay anytime for my family. This still wouldn't stop from asking the flexible company for a raise.

2. How are we - really - not counting the "extras" (social security, pension, residual income)?

I ran a business unsuccessfully for several years, so feel like we started the appropriate level of savings late. We're in a good spot (having been broke for so long, we're used to living cheaply) so last year we saved about 20% annual income in our retirement accounts, and another 20% in cash to replenish the emergency fund post-baby. I don't want to over-save and miss quality of life now, but I also don't want to be broke at retirement.

I tried Firecalc, but it didn't make sense to me. Vanguard's online calculator says we're on track, but I feel like it's too simple and can't change enough factors to be prepped for the worst case scenario. Fidelity's online tools couldn't handle all the various accounts. Looked at Portfolio Visualizer, but I'm overwhelmed. Considering buying ESPlanner so I can play with their simulations, but need to have a budget committee meeting before spending the $200 bucks on it :P
Is this my next step to figuring out if the "financial plan" is working?
That depends. What is your financial plan? What is on track? When is retirement? And of course, what are spouse's answers to these questions. I think that only you and spouse can truly judge whether you are on track or not and no calculator will be complex enough to give you a complete answer. The equity you have in your condo and your retirement account balances constitute a reasonable networth in my opinion.


3. How much emergency fund? and, do you count funding retirement savings as an expense during an emergency?

Hubby is in the "as much as we can!!!" camp and wants $25k. I feel there's a certain level where the opportunity cost (and ) outweighs the security of a big pile o'money. We "negotiated" $10k - about 5 months expenses with no modification to lifestyle. My job is in the building industry and directly related to the ups&downs of the housing market, so should it be more?
As others have posted, this is a personal family decision. My opinion would be closer to hubby's than yours. One special assessment in my area would clear out your entire emergency fund instantly.


4. Buy a single family house house? Stay in condo? Rent condo?

***Please focus on the investment risk/strategy only, NO CAUTIONS NECESSARY on the risks and pitfalls of being a landlord - we've had roommates/renters for many years until little dude got here, so I've done the flooded toilets, wrecked screens, trashed walls and it doesn't bug me.

We bought a wrecked short sale condo at the bottom of the market in '11/'12. Condo comps now running 475k-ish, so more than 100% ROI'd. Single family homes in the next neighborhood over are 650-800k. Obviously, CA is expensive and challenging to cashflow rental property, and the whole favorable to renters thing ups the risk factor.

Could we sell and buy a single family with a a mortgage on our incomes? Yes... but the condo would rent out in the $2,500-ish/mo range, which would (theoretically) cover a mortgage on a single family. Conversely, a bank can't foreclose on a house without a mortgage. On the other hand, there's association fee hikes, special assessments, etc.

We definitely don't need to move - have plenty of space, good schools, good neighborhood, etc., but having a yard and no crazy neighbors screaming and banging on the walls at 11pm would be... nice. As well as the secondary stream of income diversifying the portfolio. Or, better to stay safe where we are with no mortgage, maxing the Roths/401k's and "live well" by spending more on travel, etc while we're young-ish? Maybe this is more of a quality of life question... If you had it to do over again, what would you do?
Financially speaking, this is not a rental property in my opinion. You would lose preferential cap gains treatment and the return is very low (if positive at all). This leaves selling or staying and, financially speaking, I think you might be strained financially to buy what you really want in an single family home based on the values you have provided. That said, I would move to a single family home and eat ramen noodles if I had to. I love neighbors...in their own houses, far away from mine. Condo/apartment living is for people without kids and with more patience than me.


5. 401k tax advantages versus saving cash?

With all this extra cash we're stashing, should we be putting more in the 401ks for tax purposes? My business is still generating passive residual income, a couple hundred bucks a month, and we're no longer renting, so our bracket will likely jump to 25% next year because I'm getting to the point where I no longer feel comfortable writing off as much as I used to. I'm not evading taxes, certainly, but I am concerned as my time in my business lessens that my audit risk goes up. Wondering how much it will hurt us to be in the higher tax bracket and if that's offset-able by 401k contribution maxes, or if it's even worth it?
What are the expenses in your 401ks? If reasonable, than I would say investing more there seems wise. I would say you could easily drop into 12% bracket. In fact you might already be in it based on my rough guess.


6. 529 funding.
I want to aim to save $60k ($15k/year for 4 years). Hubby is concerned about overfunding or little dude deciding not to go to college. I explained 529 can be passed on to grandkids, or used like a Roth where principal can be taken out, but interest will be taxed. Can you point me to easy resources so I can help explain this better?
With no state tax deduction on contributions, I am not super thrilled about investing in 529s ahead of 401ks and Roth IRAs. I am afraid I lean a little toward hubby's view on this. Less because of overfunding of college and more because of underfunding retirement.

7. General anxiety about future. Planning for the uncontrollable or unnecessary worry?

Part of me feels like investing in- even via diversified index mutual funds - is still a low-risk form of gambling. Talk me off a ledge here. I wonder what happens when all the Boomers retire and take all their money out of the market. Supply and demand: Boomers all sell, prices of funds go down, so portfolio declines, and... then what? Has anyone see any historical information or research about this that might give some insight? Like the evolution from pension to 401k, I feel like the personal retirement savings system is going to shift in the future.
Getting up everyday and living your life is gambling. That's what makes life interesting! We do the best we can with the limited knowledge we have. I have not found a clairvoyant that can help you with the unknown yet.
That's a whole lotta questions! I turned on notification for clarifications and replies, though it might take me a bit with toddler running around...

If you hung in to this point, THANK YOU. I look forward to seeing your insights and observations. Thanks in advance!
It was so long, I had to read it. This is like the old markettimer thread... I went back and read every post.

Topic Author
Hermione
Posts: 8
Joined: Thu Aug 31, 2017 11:00 pm

Re: The more I learn the less I know: general checkup, lots of questions.

Post by Hermione » Wed Aug 22, 2018 8:52 pm

Megabad -

I believe this is the poat you're talking about, hope this is how one links to other posts: viewtopic.php?t=5934#p73150

If it is, I totally see the resemblance of writing style, he must have graduated with AP English in the 90's, LOL!! I did some equally hubris-driven things around that time, so wouldn't be surprised. Will go back and read the whole thing out of complete curiosity.

1. Solid advice. I brought it up at the time with the regional manager I work with most (though he's not the one who does my reviews) and he was... less than impressed with my query, to the point of being abrasive. I think perhaps this is the culture as I've since heard stories of people getting fired for asking for raises, then raise given to the person left behind. Will be an interesting balancing act when time comes.

4.
Financially speaking, this is not a rental property in my opinion. You would lose preferential cap gains treatment and the return is very low (if positive at all).
I don't get this... would you explain please?

5. His 401 expenses are good with Fidelity, mine suck with Transamerica.
I still need to look up the available funds for Paul pkcrafter, I didn't forget just haven't done it yet.

Thanks!

Post Reply