I believe that we're currently in a good spot for our age assuming traditional retirement, but we would like to plan on being able to retire earlier than our 60s/70s and be able to reap the benefits of long term planning while we still hopefully are young and fit enough to do a lot traveling, etc.
I'm aiming to meet with Fidelity Tues Nov 13, and would very much like to have all my ducks in a row before I walk in.
Monthly Routine Non-Discretionary Expenses: $3500
Emergency funds: Three to six months of expenses ($21K)
Home: $118K outstanding @ 4.625% matures 2043 (Payoff expected 2033 or earlier)
Auto: $27K outstanding @ 2.39% matures 2022
Student Loan: $9700 @ 2.125%
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal (Effective 12% 2017), 0% State
State of Residence:TX
Age: 35 / 34
Desired Asset allocation: Unsure. Maybe somewhere around 75/10/10/5 Equites/Bond/REIT/Options(hedging and/or speculation with a full understanding of the risks)
Desired International allocation: Unsure, maybe 20 – 35% of equities?
Current retirement assets
$44,000 cash (for investing – do not include emergency funds. Currently in checking accounts)
Will contribute to Mega Roth Backdoor if possible.
His 401k at Fidelity
$163,400 TRP INST LGCP CORE (TPLGX) 0.57%
Company match at 6%, contributions at 6%
His HSA at Fidelity
Current Allocation irrelevant, will be adjusting allocation to match goals
Her 401k at Fidelity
$40,000 FID FREEDOM 2050 (FFFHX) @ 0.75%
Company match at 6%, contributions at 6%
Her Inherited IRA at Fidelity
$5000 in cash
16.5% Cash to be invested
61.3% His 401k
5.4% His HAS
15% Her 401k
1.8% Her I-IRA
Current annual Contributions
$5565 his 401k (employer matches $5565)
$3450 his HAS (Max out every year)
$2400 her 401k (employer matches 2400)
Planned New Annual Contributions (2019+)
$19,000 his 401k (employer matches $5565)
$6,000 his Roth IRA (new, max contribution)
$3,500 his HSA (Max out every year)
$19,000 her 401k (employer matches 2400)
$6,000 her Roth IRA (new, max contribution)
$13,000 (Funds in excess of expenses + discretionary budget)
Funds available in his 401(k)
FID 500 INDEX (FXAIX) @ 0.015% (new addition)
FID EXTD MKT IDX (FSMAX) @ 0.045% (new addition)
JH DISCPL VALUE R6 (JDVWX) @ 0.71%
*TRP INST LGCP CORE (TPLGX) @ 0.57%
WM BLAIR SM CP VAL I (BVDIX) @ 1.29%
ABDN EMERG MKTS INST (ABEMX) @ 1.13%
DODGE & COX INTL STK (DODFX) @ 0.63%
MIP II CL 1 @ 0.57%
DODGE & COX INCOME (DODIX) @ 0.43%
H & W HIGH YIELD I (HWHIX) @ 0.74%
FID GOVT MMKT (SPAXX) @ 0.42%
FID 500 INDEX INST (FXSIX) @ 0.02% (removed)
FID EXT MKT IDX PR (FSEVX) @ 0.05% (removed)
VANG SMCP GR IDX ADM (VSGAX) @ 0.07%
VANG TOT INTL STK AD (VTIAX) @ 0.11%
VANG TOT BD MKT ADM (VBTLX) @ 0.05%
Funds available in her 401(k)
FID 500 INDEX IPR (FXAIX) @ 0.015%
INVS DIVRS DIVD INV (LCEIX) @ 0.8%
TRP BLUE CHIP GRTH I (TBCIX) @ 0.57%
CRLN E MID CAP GR R6 (HRAUX) @ 0.69%
FID MID CAP IDX IPR (FSMDX) @ 0.025%
VRTS C MDCP VAL EQ I (SMVTX) @ 1.02%
FID SM CAP IDX IPR (FSSNX) @ 0.025%
FID SMALL CAP GROWTH (FCPGX) @ 1.02%
FID SMALL CAP VALUE (FCPVX) @ 0.91%
FID INTL DISCOVERY (FIGRX) @ 0.94%
FID INTL INDEX IPR (FSPSX) @ 0.045%
FID REAL EST IDX INS (FSRNX) @ 0.07%
FID BALANCED (FBALX) @ 0.53%
FID FREEDOM 2005 (FFFVX) @ 0.49%
FID FREEDOM 2010 (FFFCX) @ 0.53%
FID FREEDOM 2015 (FFVFX) @ 0.57%
FID FREEDOM 2020 (FFFDX) @ 0.61%
FID FREEDOM 2025 (FFTWX) @ 0.66%
FID FREEDOM 2030 (FFFEX) @ 0.7%
FID FREEDOM 2035 (FFTHX) @ 0.74%
FID FREEDOM 2040 (FFFFX) @ 0.75%
FID FREEDOM 2045 (FFFGX) @ 0.75%
* FID FREEDOM 2050 (FFFHX) @ 0.75%
FID FREEDOM 2055 (FDEEX) @ 0.75%
FID FREEDOM 2060 (FDKVX) @ 0.75%
FID FREEDOM INCOME (FFFAX) @ 0.47%
PUTNAM STABLE VALUE (???) @ 0.42%
FID TOTAL BOND (FTBFX) @ 0.45%
FID US BOND IDX IPR (FXNAX) @ 0.025%
VANG GNMA ADM (VFIJX) @ 0.11%
- Be able to retire in 2033 at 50 with $50,000 (2018 dollars ~ $4,167 / month) in withdrawals. Preferably with tax-free funds from Roth contributions and/or others funds to minimize taxes.
This should be 100% of needed funds for the gap between 50 and SS age of 67 including medical insurance/medicare/medicade (if applicable), etc . Around 17 years
Our families do not have particularly long lifespans, typically between 65 -75, planning on full retirement age to begin taking benefits
- Continue lifestyle from 2033 to death, drawing from all accounts while minimizing taxes.
- We are meeting with Fidelity next week to consolidate all of our accounts including checking/savings, open Roth IRAs, and verify Mega Roth allowances.
My 401 literature seems to indicate that I am mega qualified, unsure of her.
- Since both 401ks are with Fidelity, for ease of management if she needs to take over we will be staying with one provider for all investment accounts.
- In 2017 I had us significantly reduce our 401k contributions under a misunderstanding it would clearly be better to use taxable accounts for investing for early retirement. As a result, I expect our taxable income and tax bracket to be much higher for the 2018 tax year. What can I do to help reduce our tax burden this year?
- Would it make more sense to open TIRAs this year with pre-tax money instead of opening Roth IRAs, and open Roths in 2019 with a lower expected taxable income / tax bracket?
- Reading MadFientist articles here: https://www.madfientist.com/traditional ... -roth-ira/ and here: https://www.madfientist.com/how-to-acce ... nds-early/ it appears that a TIRA instead of RIRA may be a better way to go, but I don’t understand if any of these would apply to our situation or not. Can anyone offer any advice?
Basically the article recommends to use one of the following:
A: TIRA->RIRA conversion ladder, including rolling our 401s -> RIRAs using a conversion ladder or lump sums after stopping employment
B: Using the 72(t) SEPP method for ages 50 – 59.5
C: Leaving in 401 and/or TIRA, and withdrawing as needed, taking the 10% penalty and taxes owed as a matter of course.
- Does it make sense to plan for the current $44,000 cash balance to be rolled into mega roth?
Can this be done this tax year as lump after tax contribution, or does this need to be done via wage deductions?
- Will her inherited IRA cause potential issues with mega rollover? If so, how would we work around this?
- What is a reasonable accounts setup where we can keep our emergency funds relatively liquid, while not impacting our ability to pay bills, have fun, etc?
I recall someone mentioning some fidelity setup where a small checking account is held, and auto pulls from a MM(or other?) account as needed.
Ideally we will DD our wages into one interest bearing account(MM?), schedule bills through either the MM or checking (as above in this question), and schedule discretionary spending distributions to separate account(s).
- Should we plan to adjust 401k contributions to rebalance with an eye toward mega roth backdoor since we plan on 5 – 7 years pre 55 age rule for 401 distributions?
From my understanding, the rollover contributions will be able to be withdrawn early at no tax or penalty, while 401k distributions would incur tax and penalties.
Would it make more sense to ensure we have 5-7 years of expenses using roth contributions and let all else ride?
- Considering relatively mediocre life expectancy, would it make more sense to plan for SS starting at 66.5, or keep the plan in place and revisit in around 10 years?
- How can I better understand the differences, pros, and cons between low expense ETF and low expense mutual funds for investments into the equities/bonds space?
For example: VTSMX vs VTI, VGTSX vs VXUS, VBMFX vs BND
I understand that with the MF I should be able to buy fractional shares, which may realize some benefit over time, and assuming all of my accounts are tax advantaged, the difference between price increase and dividends on the ETFs may be relatively trivial
- From Fidelity, would I be able to hold Vanguard ETF/MFs? Would this include admiral class?
How can I weigh these against comission free and low/free expense for Fidelity funds(potentially using the new 0 ER funds)?
- Assuming we want to eventually become expat (after 2033), are there any special considerations for finances and/or taxes?
- Assuming I do not max tax-advantaged accounts, and do not have equities in any potential taxable accounts, I should not have to worry about wash sales, correct?
- Should I plan for taxable accounts in order to TLH, or is TLH something to not be concerned about with my current plan?
- Is there anything else that I should talk with Fidelity about, or obvious things that I have missed in putting together our initial plan?
Edited to reflect his 401k fund changes