Frozen by uncertainty, really want to unfreeze

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Autobot
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Frozen by uncertainty, really want to unfreeze

Post by Autobot » Tue May 21, 2019 10:00 pm

Hello. I discovered this forum tonight looking for some information. I read through a few threads and while I ended up more informed, I felt even less confident about making a choice, and that's a perpetual problem for me. I know how to avoid bad financial decisions, but I have no idea how to make good choices. I get so overwhelmed by options which look good at first, but then I start getting concerned with fees, and I back off, so I effectively make no decisions. I have no sense for investments. So I figured I'd lay all my cards out on the table and ask for some advice. Sorry for the info dump, but I wanted to paint a pretty clear picture in order to get more meaningful advice.

I'm a 43 year old software engineer. My wife is a Nurse Practitioner. Combined, we make a little over $200k/year. We're on year 4 of a 30yr mortgage @ $2,400/month

I have two 401ks. An old one that I was advised to keep and not roll up due to having class A shares in a big public company is currently sitting at $156k. The currently active 401k that I rolled everything up from since 2010 is at $104k and my current contribution rate is at 11% (company matches up to 6%).

We have two kids (we're done) and 529s set up for both of them. We contribute $250/month to each of them. My 6yo's is just under $30k, and my 3yo's is a little over $13k.

We have no savings account, just one checking account, which is currently sitting @ $34k and fluctuates between $25k and $45k depending on vacations and bonus payouts.

I have been holding steady like this for well over 4 years. I don't feel like I'm saving enough for retirement, and I don't feel like having the money just sitting in checking is wise, but like I said, when I start looking at the savings account options and the associated fees, I just crawl back into my turtle shell.

My wife just got accepted into a graduate school program which if she graduated from and got a job in the field, would double her salary, which would be a nice boost. We're considering how we're going to pay for that (she already carries a good chunk of student debt from her last masters program), but on top of that, we're looking into finishing our basement for the kids, and we've been getting quotes for like $50k, which was a shock. So we were looking for good CFPs.

What brought me here was looking up people's thoughts on Creative Planning which I was almost gung-ho about until I saw people complaining about how high their fees were, and the number of recommendations to just go with Vanguard. I would have posted in the Personal Investing section, but I can't even get myself to start investing, so this seemed like a more appropriate forum.

Do any of you have advice on how I can alter my approach to personal finance for the better? Thank you.

EDIT: I posted this in the "Personal Finance" board, but I guess the mods thought the "Personal Investments" board was more appropriate?

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Re: Frozen by uncertainty, really want to unfreeze

Post by jbranx » Tue May 21, 2019 10:37 pm

{Topic is now in the Personal Investments Forum}

mhalley
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Re: Frozen by uncertainty, really want to unfreeze

Post by mhalley » Tue May 21, 2019 10:47 pm

Welcome to the forum. I’m not sure I see a specific question.
A couple things:
There are many ways to pay for college, but only one way to save for retirement. If you don’t feel you are saving enough for retirement, stop funding the 529 plans. You can start them up again after wife doubles her salary.
As for having so sense of investments, there is nothing wrong with just putting everything in a low er target retirement fund. Having paid a load is a sunk cost, and there is no reason to not move that money into a better fund. If you post the funds available to you we can help you pick an appropriate aa.
17% is on the low side for savings rate. I don’t see if spouse is contributing? How long it takes to save for retirement is directly related to it, as per this article.

https://www.mrmoneymustache.com/2012/01 ... etirement/
There are several threads on creative planning.
viewtopic.php?t=212743

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mhadden1
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Re: Frozen by uncertainty, really want to unfreeze

Post by mhadden1 » Wed May 22, 2019 12:40 am

With 250k in retirement savings, you are doing well, but you can probably do better. You will get a lot of good feedback if you post your portfolio details using the format described here:

viewtopic.php?t=6212
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

Cyanide123
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Re: Frozen by uncertainty, really want to unfreeze

Post by Cyanide123 » Wed May 22, 2019 12:44 am

Out of curiosity, what sort of Masters is your wife planning to do that apparently is giving her a guaranteed 200k salary, I'm assuming that as a NP she's probably in the ballpark of 100k right now as a NP. I'm fairly certain most Masters degrees do not have starting salaries of 200k, unless she is going to go to medical school.

Also, what are your expenses? Have you ever sat down and figured out exactly where your money is going? With a 200k salary, you probably pay 50-60k in taxes. After mortgage payments that should still leave you with about 110-120 annual post tax income. Sounds like you should really look into your expenses to see where your money is going. Most families of 4 should easily be able to run a home with 40-50k post tax and post mortgage which should leave a lot of money for retirement investing. To me, it sounds like your current expenses are very high if you're not saving a lot

ohai
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Re: Frozen by uncertainty, really want to unfreeze

Post by ohai » Wed May 22, 2019 12:52 am

OP, I recommend that you look up some retirement calculators online and see if you can get a rough idea of how much you should be saving in order to fund some target retirement.

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Tamarind
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Re: Frozen by uncertainty, really want to unfreeze

Post by Tamarind » Wed May 22, 2019 6:20 am

Yes, we need to know a little more about your expenses to advise. Let us know what the major categories in your monthly budget are, and how much you usually have left over. Also tell us about the amounts and rates of all your debts.

You might benefit from an advisor, but it needs to be someone who only bills by the hour, to help you make a plan and actually execute on it. Think of them like a financial therapist. I would never recommend going to anyone who charges a percent of assets under management.

Does your wife also get analysis paralysis? How interested is she in investments and saving? Would it help to get her more involved?

Regardless, I can recommend two steps:
1) Open a high yield savings account. If your bank does not offer a savings account over 2%, consider switching banks. It's not best practice to keep so much money in checking, so move everything outside of a month or two of expenses to savings.

2) Consider maxing out Roth IRAs for both of you. Your wife can still contribute based on your income. Those contributions ($12k) will be taxed in the year you make them, but their growth will never be taxed, which makes them fantastic retirement accounts. In years when your income is above $192k, you might need to do a "backdoor" Roth, which this board can walk you through step-by-step.

bradinsky
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Re: Frozen by uncertainty, really want to unfreeze

Post by bradinsky » Wed May 22, 2019 6:22 am

OP -
I believe that you & your wife need to sit down, discuss finances, and create a budget. With an annual income of $200K, you certainly should have a decent emergency fund, and still be able to save for retirement. Typically, a home is your largest expense. With your mortgage payment at about 14 1/2% of your income, you definitely seem to have plenty of room to do so. Sometimes, it just takes a little restraint to run a more efficient household. Good luck to you & your family!

Brad

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RickBoglehead
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Re: Frozen by uncertainty, really want to unfreeze

Post by RickBoglehead » Wed May 22, 2019 6:32 am

I'd suggest the OP spend some time reviewing info in the Wiki. Reading the Boglehead's Guide to Investing would be a good first step.

The old 401k investment with guidance from someone could be way off. You can sell a 401k investment, and roll it to an IRA or a current 401k, with no tax ramifications.

I'd point out that having up to $45,000 in a checking account is a loss of interest.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

k3vb0t
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Re: Frozen by uncertainty, really want to unfreeze

Post by k3vb0t » Wed May 22, 2019 6:58 am

Agree with others that you should post a breakdown of monthly expenses. Where are you spending roughly $100k per year? (200k - approx 60k taxes - 28.8k mortgage)? That’s $8,300/month.

Drop $35k of that checking account into an online account like Ally (2.2%, there are others paying slightly higher) and you automatically $770 in pre-tax interest per year that you could throw toward retirement... but that’s likely peanuts compared to what is going missing through spending every month.

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jabberwockOG
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Re: Frozen by uncertainty, really want to unfreeze

Post by jabberwockOG » Wed May 22, 2019 7:11 am

I'd suggest cutting back on expenses as others have suggested. Also set up online savings and CDs at a bank like Ally. It is easy to set up and move money around very quickly, and the big online banks are secure and pay highest avail interest.

I'd also cut way back on college education funding and increase IRA/401K contributions and work on paying off all debt. In terms of aid provided by colleges if you have any money in a 529 the school will expect you to spend 100% of it. If the savings are in other types of accounts, or in the form of a paid off house, the schools expect you to spend a much smaller percentage when they put together their aid/grant/scholarship packages. The dirty little secret is that in many cases the more you have specifically saved for college costs, the more it will actually cost you. We paid partial tuition/living costs for kids (who got good aid packages and took out small loans) directly out of current salary but by that time we had no debt of any kind, low expenses, and relatively high income.
Last edited by jabberwockOG on Wed May 22, 2019 7:17 am, edited 3 times in total.

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Wiggums
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Re: Frozen by uncertainty, really want to unfreeze

Post by Wiggums » Wed May 22, 2019 7:15 am

Welcome to the forum. I agree with all the suggestions made so far so I won’t repeat them.

If you have specific questions, feel free to ask them.

Good luck to you...

Living Free
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Re: Frozen by uncertainty, really want to unfreeze

Post by Living Free » Wed May 22, 2019 8:06 am

Autobot wrote:
Tue May 21, 2019 10:00 pm


I have two 401ks. An old one that I was advised to keep and not roll up due to having class A shares in a big public company is currently sitting at $156k. The currently active 401k that I rolled everything up from since 2010 is at $104k and my current contribution rate is at 11% (company matches up to 6%).
You might want to avoid rolling over to an IRA given that you might need to do the backdoor Roth in the future. But that's a more advanced step. First I think that unless there are things that we are unaware of you should be able to max out your retirement accounts based on your income. edit - might be more challenging with significant child care expenses and student loans, but hopefully still do-able
Autobot wrote:
Tue May 21, 2019 10:00 pm
We have two kids (we're done) and 529s set up for both of them. We contribute $250/month to each of them. My 6yo's is just under $30k, and my 3yo's is a little over $13k.
In general I'd max out retirement accounts prior to doing the 529.
Autobot wrote:
Tue May 21, 2019 10:00 pm
We have no savings account, just one checking account, which is currently sitting @ $34k and fluctuates between $25k and $45k depending on vacations and bonus payouts.
I agree with using an online high yield savings account for the majority of your cash. I use Ally and have been happy with them. see https://www.bankrate.com/ for other options.
Last edited by Living Free on Wed May 22, 2019 9:39 am, edited 1 time in total.

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Sandtrap
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Re: Frozen by uncertainty, really want to unfreeze

Post by Sandtrap » Wed May 22, 2019 8:11 am

Great advice thus far.
Suggest doing this for a comprehensive financial overview and strategy suggestions:

Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212

Welcome to the forum.
j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

dcw213
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Re: Frozen by uncertainty, really want to unfreeze

Post by dcw213 » Wed May 22, 2019 8:28 am

OP, you are asking all the right questions and you are right to be wary of fees for financial planners and savings accounts. For most people both are completely unnecessary and are structured to take advantage of the uninformed. Here is some advice:

1) Open an online savings account at Ally. No fees, very user friendly platform. Currently paying 2.20% with a long history of being competitive. No reason not to earn an extra $1k per year on your idle cash. Can link to your checking account and withdraw into checking within a few business days. Good place for emergency fund.

2) For investments you do not need a financial planner. Spend some time on this site and you will learn more than you will ever learn through your quarterly portfolio review meetings with a salesman. Vanguard and Fidelity offer many low cost options for stock and bond funds and it really is all you need. If sensitive to risk of principal loss on fixed income look into I-Bonds (US Savings bonds), a good option for tax deferred low risk fixed income that also offers inflation protection. With access to 4 vanguard index funds, my savings and checking account, and some US Savings bonds I have all I will ever need.

3) With #2 being said, you will need to spend time thinking about the right asset allocation and how much risk you need or want to take. Creeping out onto the ledge of investing and seeing paper losses on investments can be very tough emotionally. I started investing a few years before the last crisis and it took me probably 5 years to sort out all my emotions and really understand my tolerance for risk. Reading this forum will help a lot, you need to invest for the long term with goals in mind.

4) I agree that a review of expenses is always helpful but I chuckled a bit reading the comment that $40k should be sufficient for a family of 4. Both spouses work in OP’s situation. Being in a similar boat with toddlers I pay about $30k per year in childcare costs in a MCOL city. I have found that many aren’t in touch with the out of control costs of childcare these days.

Good luck OP, you will get lots of good info here.

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ruralavalon
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Re: Frozen by uncertainty, really want to unfreeze

Post by ruralavalon » Wed May 22, 2019 9:29 am

Welcome to the forum :) .

You can become unconfused fairly rapidly, this is not highly technical. You already grasp that low expenses are very important.

You don't need a perfect plan, you only need to avoid big mistakes. Keep expenses low, use tax-advantaged accounts when possible, make regular contributions every pay period, and be diversified. Wiki article, "Bogleheads® investment philosophy".



Autobot wrote:
Tue May 21, 2019 10:00 pm
Hello. I discovered this forum tonight looking for some information. I read through a few threads and while I ended up more informed, I felt even less confident about making a choice, and that's a perpetual problem for me. I know how to avoid bad financial decisions, but I have no idea how to make good choices. I get so overwhelmed by options which look good at first, but then I start getting concerned with fees, and I back off, so I effectively make no decisions. I have no sense for investments. So I figured I'd lay all my cards out on the table and ask for some advice. Sorry for the info dump, but I wanted to paint a pretty clear picture in order to get more meaningful advice.
Some additional information will be necessary, I have asked some questions below. You can simply add answers and any other information to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

Please see this for other information needed and format: "Asking Portfolio Questions".



What to do with the old 401k?
Autobot wrote:
Tue May 21, 2019 10:00 pm
I have two 401ks. An old one that I was advised to keep and not roll up due to having class A shares in a big public company is currently sitting at $156k. The currently active 401k that I rolled everything up from since 2010 is at $104k and my current contribution rate is at 11% (company matches up to 6%).
What are the funds offered in your old 401k? What are the funds offered in your new 401k? Please give fund names, tickers and expense ratios.

There are three basic possibilities for what to do with your old 401k, depending almost entirely on the funds offered and expenses.

1) If the funds offered in the old 401k are good with low expense ratios, and there is no account maintenance fee charged for keeping the account there or only a small fee, then it may be best to leave the old 401k where it is.

2) If the new 401k offers better funds with lower expense ratios, and will accept a rollover from the old 401k, then it may be best to roll the old 401k over into the new 401k.

3) If neither 401k offers good funds with low expense ratios then it may be best to roll the old 401k over to an IRA at a low cost provider like Vanguard or Fidelity.

Wiki article, 401k, ”Rollover to IRA".

Additional considerations include:

1) the convenience of having one fewer account to keep track and manage, if you move the old 401k into the new plan or an IRA;

2) depending on your state, a 401k plan may have greater protection from creditors than does an IRA;

3) a rollover to an IRA may impede ability to do a Backdoor Roth IRA for higher income individuals, and

4) a 401k allows distributions penalty free starting at age 55 if no longer employed, and has other provisions for withdrawals earlier than age 59.5. Wiki article, 401k, "Move to new 401k".



Prioritizing investments.
Autobot wrote:
Tue May 21, 2019 10:00 pm
I'm a 43 year old software engineer. My wife is a Nurse Practitioner. Combined, we make a little over $200k/year. We're on year 4 of a 30yr mortgage @ $2,400/month.
. . . . .
. . . (she already carries a good chunk of student debt from her last masters program), . . .
What is the interest rate on the mortgage note?

What is the student debt she already carries from her last masters program? Amount and interest rate?

What other debt do you have? Please give types, amounts and interest rates?

Sometimes paying off higher interest debt is a good "investment".
Autobot wrote:
Tue May 21, 2019 10:00 pm
We have two kids (we're done) and 529s set up for both of them. We contribute $250/month to each of them. My 6yo's is just under $30k, and my 3yo's is a little over $13k.
In general I suggest retirement investing and paying off debt as a priority ahead of saving for the childrens' college expenses.

Autobot wrote:
Tue May 21, 2019 10:00 pm
We have no savings account, just one checking account, which is currently sitting @ $34k and fluctuates between $25k and $45k depending on vacations and bonus payouts.

I have been holding steady like this for well over 4 years. I don't feel like I'm saving enough for retirement, and I don't feel like having the money just sitting in checking is wise, but like I said, when I start looking at the savings account options and the associated fees, I just crawl back into my turtle shell.
Here is a general account funding priority that usually works well for many people (when there is no HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, SIMPLE IRA, TSP, etc.) enough to get the full employer match (the match is like free money, your best possible investment);
2) Pay off high interest debt (a guaranteed high return, the next best thing to free money);
3) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances;
4) Contribute the remainder of the maximum employee contribution to the work-based accounts; and
5) Contribute to a taxable investing account.

"If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA." Please see the wiki article "Prioritizing investments".

If you kept 3-6 months of basic living expenses as an emergency fund, how much would that be?

How much (in dollars) are you contributing annually to your 401k? How much (in dollars) is the employer match you receive?

Do you have any other accounts, like IRAs or taxable accounts?

About how much (in dollars) could you contribute to investing annually (total, all accounts)?


Questions.
Autobot wrote:
Tue May 21, 2019 10:00 pm
What brought me here was looking up people's thoughts on Creative Planning which I was almost gung-ho about until I saw people complaining about how high their fees were, and the number of recommendations to just go with Vanguard. I would have posted in the Personal Investing section, but I can't even get myself to start investing, so this seemed like a more appropriate forum.

Do any of you have advice on how I can alter my approach to personal finance for the better? Thank you.
What are the funds offered in your old 401k? What are the funds offered in your new 401k? Please give fund names, tickers and expense ratios.

What is the interest rate on the mortgage note?

What is the student debt she already carries from her last masters program? Amount and interest rate?

What other debt do you have? Please give types, amounts and interest rates?

What is your tax bracket, both federal and state? What state do you pay any state income tax to? What is your tax filing status?

If you kept 3-6 months of basic living expenses as an emergency fund, how much would that be?

How much (in dollars) are you contributing annually to your 401k? How much (in dollars) is the employer match you receive?

Do you have any other accounts, like IRAs or taxable accounts?

About how much (in dollars) could you contribute to investing annually (total, all accounts)?

Once account funding priorties and what to do with the old 401k are fgured out, then its often pretty easy to determine what asset allocation and mutual funds to use.
Last edited by ruralavalon on Wed May 22, 2019 9:34 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

SDLinguist
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Re: Frozen by uncertainty, really want to unfreeze

Post by SDLinguist » Wed May 22, 2019 9:34 am

Autobot wrote:
Tue May 21, 2019 10:00 pm
I have two 401ks. An old one that I was advised to keep and not roll up due to having class A shares in a big public company is currently sitting at $156k. The currently active 401k that I rolled everything up from since 2010 is at $104k and my current contribution rate is at 11% (company matches up to 6%).
Are you saying your 401k with $156k is all shares of a single company?

delamer
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Re: Frozen by uncertainty, really want to unfreeze

Post by delamer » Wed May 22, 2019 12:07 pm

SDLinguist wrote:
Wed May 22, 2019 9:34 am
Autobot wrote:
Tue May 21, 2019 10:00 pm
I have two 401ks. An old one that I was advised to keep and not roll up due to having class A shares in a big public company is currently sitting at $156k. The currently active 401k that I rolled everything up from since 2010 is at $104k and my current contribution rate is at 11% (company matches up to 6%).
Are you saying your 401k with $156k is all shares of a single company?
That was what caught my eye too.

If that is the case, then the best single step that you can take is to roll the old 401(k) into either your current 401(k) or into an IRA and diversify your investments. (This will not create a tax obligation.)

Having over 50% of your retirement funds in one stock is a really bad idea.

This is a short article outlining the key elements of a good investing plan. It is geared toward younger people but the basic messages apply to any age: https://www.etf.com/docs/IfYouCan.pdf

If you follow the 3 fund portfolio outlined in the article, you’ll be on a better track. As you learn more, you can make adjustments if you choose.

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Autobot
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Re: Frozen by uncertainty, really want to unfreeze

Post by Autobot » Wed May 22, 2019 12:13 pm

Wow, I'm blown away by both the quantity and sheer quality of the responses here. I want to thank all of you tremendously for the help and advice you have been offering. I want to answer several of your questions in order to give everyone the clearest picture possible, and I intend to do so tonight when I can gather all the data. It's a bit harder to do at my desk and apart from my wife.

To be honest, I don't know the answer to all of the questions. For example, I'm not certain which tax bracket I'm in. I have an accountant who simply tells me whether I owe anything or get a refund. I'll float the question to him and see if I can get a response before I supply more information tonight. Thanks again!

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mhadden1
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Re: Frozen by uncertainty, really want to unfreeze

Post by mhadden1 » Wed May 22, 2019 1:19 pm

Autobot wrote:
Wed May 22, 2019 12:13 pm
For example, I'm not certain which tax bracket I'm in. I have an accountant who simply tells me whether I owe anything or get a refund. I'll float the question to him and see if I can get a response before I supply more information tonight.
Understanding your tax situation will play a big part as you optimize your financial life. So, put that on your to-do list. Don't worry, you will figure out what you need to know with a little attention, no problem.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

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ruralavalon
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Re: Frozen by uncertainty, really want to unfreeze

Post by ruralavalon » Wed May 22, 2019 1:40 pm

Autobot wrote:
Wed May 22, 2019 12:13 pm
Wow, I'm blown away by both the quantity and sheer quality of the responses here. I want to thank all of you tremendously for the help and advice you have been offering. I want to answer several of your questions in order to give everyone the clearest picture possible, and I intend to do so tonight when I can gather all the data. It's a bit harder to do at my desk and apart from my wife.

To be honest, I don't know the answer to all of the questions. For example, I'm not certain which tax bracket I'm in. I have an accountant who simply tells me whether I owe anything or get a refund. I'll float the question to him and see if I can get a response before I supply more information tonight. Thanks again!
I think that you will find that the exercise of gathering all information together in one place by itself helps you see the big picture, makes everything less confusing, and helps you see what you need to do going forward.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Tamarind
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Re: Frozen by uncertainty, really want to unfreeze

Post by Tamarind » Wed May 22, 2019 7:33 pm

Autobot wrote:
Wed May 22, 2019 12:13 pm
Wow, I'm blown away by both the quantity and sheer quality of the responses here. I want to thank all of you tremendously for the help and advice you have been offering. I want to answer several of your questions in order to give everyone the clearest picture possible, and I intend to do so tonight when I can gather all the data. It's a bit harder to do at my desk and apart from my wife.

To be honest, I don't know the answer to all of the questions. For example, I'm not certain which tax bracket I'm in. I have an accountant who simply tells me whether I owe anything or get a refund. I'll float the question to him and see if I can get a response before I supply more information tonight. Thanks again!
If you need help organizing all that data, take a look at the link in my signature for a standard format.

Re your tax bracket, if you have the copy of your 1040 your accountant gave you from the most recent year's taxes, you can share your AGI (line 7, Adjusted Gross Income) to answer that question.

22twain
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Re: Frozen by uncertainty, really want to unfreeze

Post by 22twain » Wed May 22, 2019 7:34 pm

Autobot wrote:
Wed May 22, 2019 12:13 pm
I'm not certain which tax bracket I'm in. I have an accountant who simply tells me whether I owe anything or get a refund.
Do you have a copy of your 2018 tax return which was submitted this past April? If so, look up your taxable income on line 10, then do a Google search for "tax brackets 2018" and find a suitable table for your situation (single, married filing jointly, etc.).

[added] Adjusted gross income comes before your deductions (standard or itemized). Taxable income (after your deductions) is what you actually pay tax on.
My investing princiPLEs do not include absolutely preserving princiPAL.

Elena
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Re: Frozen by uncertainty, really want to unfreeze

Post by Elena » Wed May 22, 2019 8:11 pm

I agree on not actually doing anything for now, and spending a good chunk of time reading until you get a hold of things. You just discovered the forum, and it takes a while to devise a plan for oneself. Knowing more about all the options will probably get you into taking more action, and maybe even liking investments, but it does take a while if you have never done it.

RCL
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Re: Frozen by uncertainty, really want to unfreeze

Post by RCL » Wed May 22, 2019 8:47 pm

Please take your time with this. There is no real reason to be in a hurry.
You have come to a great place to ask your questions. The collective knowledge base here is staggering!
It will take you some time just to read through the already recommended links and suggestions, which will probably spur even more questions.
Oh, almost forgot...Welcome to the forum!!
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Topic Author
Autobot
Posts: 3
Joined: Tue May 21, 2019 9:24 pm

Re: Frozen by uncertainty, really want to unfreeze

Post by Autobot » Wed May 22, 2019 8:57 pm

OK, I gathered up as much information as I possibly could. It may not be in precisely the format that is recommended by one of the responses, but I did my best to come close. There are some things I simply didn't understand, and while my original post paints the gross overall picture, it hides some of the more complicated details that I was afraid would bore people. I get now that many of you seem to be avid fans of this kind of stuff, so I will attempt to be as detailed as possible. I recognize that I may appear a bit foolish in the outcome, but I'm here for the truth, so it doesn't pay to be anything but honest.

Income:
For calendar year 2018 we filed a gross income of $209,826, of which $117 and $67 came strictly from our reported wages. The difference came from other sources including a performance bonus I was paid, a small salary from a LLC that I own and operate with partners for a website, and a weird payout schedule for purchased shares in my current company when it got purchased.

Line 10 of my 2018 return says $185,373 which, since we file jointly, I guess puts me in the 24% tax bracket for federal. Not sure about state.

Based SOLELY on our two salaries alone, and not on any of the other less regular income, we net about $10,333 income per month on average. Other pieces slide in irregularly. I also have $5000 coming out pre-tax every year which goes into a Dependent Care Account to offset daycare and summer camp payments.

Monthly Expenses:
We carry 0 credit card debt. Whatever credit we charge over a month, we pay 100% of it every time.

For the regular fixed amounts, they add up to $5528, which breaks down as follows:
Mortgage: $2404 (30 yr. fixed at 4%)
Preschool: $866
Student loan: $663
Auto payment 1: $390
Auto payment 2: $375
529s: $500 ($250 x2)
Cable bill: $190... Comcast :(
Cell phones: $140
That does not include stuff which changes constantly such as electric (ranges from $100 to $300), gas, groceries, and swim lessons. Admittedly, we eat out a lot and entertain the kids. We recently saved quite a bit on auto/home insurance by switching from AllState (~$380 per month) to Travelers through my wife's work (~$160 per month).

Investments:
I have a neglected Roth IRA through Vanguard that's so old, the mail still goes to my parent's home. Last check, my dad thought it had around $49k in it. I couldn't tell you much else about it, and I suspect I should fix that. As for the rest:

Fidelity 401k (through my current company)
$103,982.95
11% contribution, company matches 50% of first 6%
Last month: $963.84 self, $289.16 match
YTD: $6,918.67 self, $1,892.24 match
100% BlackRock LifePath® Index 2040 Fund Class K Shares

Voya UPS 401k (the one 401k that I haven't rolled over)
$157,449.23
41.24% Bright Horizon 2035 Fund
4.61% Short-Term Bond Index Fund
21.6% U.S. Large Cap Equity Index Fund
22.63% U.S. Small/Mid Cap Equity Index Fund
9.92% UPS Stock Fund

Fidelity 403b (wife's retirement plan)
$19,267.56
contributes $150/month
100% Fidelity Freedom 2050 Fund - Class K

I recognize that there is still some information missing, especially given everything that ruralavalon asked. I think I chipped away at some of those questions, but not all.

While I know getting a solid investment strategy should be a priority, right now I'm mainly concerned with devising a strategy to cover both my wife's graduate program ($18k), and finishing our basement ($52k, or $40k if we ditch installing the bathroom right now). Maybe the basement is a little out of reach. It just seems a shame because the kids would appreciate it while they're little. Gonna stop typing for now.
Last edited by Autobot on Wed May 22, 2019 9:18 pm, edited 1 time in total.

k3vb0t
Posts: 347
Joined: Mon Jun 02, 2014 4:42 pm

Re: Frozen by uncertainty, really want to unfreeze

Post by k3vb0t » Wed May 22, 2019 9:15 pm

You’re burning through $3-4K per month on things besides gas and groceries and you want to do your basement???

Sure your Comcast bill could be lower but what, $50 per month less? That’s meaningless when you are burning through so much cash.

I’d get all of my credit card statements out and name a category for every single thing charged going back 3 months. I imagine that will be painful and the categories to start cutting back on will become really clear.

User avatar
ruralavalon
Posts: 15955
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Frozen by uncertainty, really want to unfreeze

Post by ruralavalon » Thu May 23, 2019 8:31 am

Autobot wrote:
Wed May 22, 2019 8:57 pm
I recognize that there is still some information missing, especially given everything that ruralavalon asked. I think I chipped away at some of those questions, but not all.
The new information is helpful, take the time to gather the rest and add later.

I agree with elena " . . . on not actually doing anything for now, and spending a good chunk of time reading until you get a hold of things. You just discovered the forum, and it takes a while to devise a plan for oneself. Knowing more about all the options will probably get you into taking more action, and maybe even liking investments, but it does take a while if you have never done it." In other words make an overall plan before you start to change what you are doing.

I also agree with k3vb0t that you should carefully examine your spending.



401ks.
I think that it will probably be a good idea to increase your contributions to your current 401k with Fidelity. You are currently contributing at the rate of about $11.6k annually. Under age 50 the maximum annual employee contribution permitted is $19k.

It looks like you may have some good funds offered in your current Fidelity 401k. The fund you are using in that account, BlackRock LifePath® Index 2040 Fund Class K Shares, is an excellent fund. What expense ratio are you charged for that fund in your 401k? (Sometimes the expense ratio charged in a 401k is different that the expense ratio charged the general public for the same fund.) What other funds are offered?

Expense ratios are primary factors in determining the best funds to use. Low expense ratios are critical to long-term investing performance. Low expense ratios are the best predictor of future performance. Morningstar, 8/9/10 . “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”

"The expense ratio is the most proven predictor of future fund returns." "There are many other things to consider, but investors should make expense ratios their first or second screen." Morningstar, 5/5/18.

What expense ratios are you charged for the funds used in the old Voya 401k? What are the ticker symbols for those funds? If there are no ticker symbols, then what index is used by each fund?
Autobot wrote:
Tue May 21, 2019 10:00 pm
I have two 401ks. An old one that I was advised to keep and not roll up due to having class A shares in a big public company . . .
Can you elaborate on what you were told as a reason for not rolling over the old Voya 401k into your current 401k with Fidelity?


Debt.
It's good to see that you have a fixed rate mortgage.

Can you add the interest rates, balance due, and remaining duration for each of these these debts?
Student loan: $663
Auto payment 1: $390
Auto payment 2: $375
(Total = $1,428/month.)


Autobot wrote:
Wed May 22, 2019 8:57 pm
While I know getting a solid investment strategy should be a priority, right now I'm mainly concerned with devising a strategy to cover both my wife's graduate program ($18k), and finishing our basement ($52k, or $40k if we ditch installing the bathroom right now). Maybe the basement is a little out of reach. It just seems a shame because the kids would appreciate it while they're little. Gonna stop typing for now.
Money is fungible. Any dollar can be used for retirement investing, or entertainment and dining out, or paying off debt, or wife's graduate degree, or college funds for the children, or home improvements, etc.

How long will your wife's graduate program be? When will that start?

It all is really a matter of priorities, and adjusting to cover as many priorities as practical. Paying off higher interest debt frees up cash flow (perhaps $1.4k/month ???) for other priorites. Additional tax deductible contributions to your 401k decreases taxes and allows use of the tax savings (perhaps $1.8k/year ???) elsewhere.
Last edited by ruralavalon on Thu May 23, 2019 9:33 am, edited 3 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

blackholescion
Posts: 118
Joined: Fri Mar 22, 2019 6:41 pm

Re: Frozen by uncertainty, really want to unfreeze

Post by blackholescion » Thu May 23, 2019 9:14 am

Autobot wrote:
Wed May 22, 2019 8:57 pm
Based SOLELY on our two salaries alone, and not on any of the other less regular income, we net about $10,333 income per month on average. Other pieces slide in irregularly. I also have $5000 coming out pre-tax every year which goes into a Dependent Care Account to offset daycare and summer camp payments.

Monthly Expenses:
For the regular fixed amounts, they add up to $5528, which breaks down as follows:

That does not include stuff which changes constantly such as electric (ranges from $100 to $300), gas, groceries, and swim lessons. Admittedly, we eat out a lot and entertain the kids. We recently saved quite a bit on auto/home insurance by switching from AllState (~$380 per month) to Travelers through my wife's work (~$160 per month).

While I know getting a solid investment strategy should be a priority, right now I'm mainly concerned with devising a strategy to cover both my wife's graduate program ($18k), and finishing our basement ($52k, or $40k if we ditch installing the bathroom right now). Maybe the basement is a little out of reach. It just seems a shame because the kids would appreciate it while they're little. Gonna stop typing for now.
I'm going to focus on this part. You have 10,333 on average income after all your retirement contributions, Dependent Care, etc. Your fixed expenses are 5528. That means you have $4800 going to non fixed expenses. I find it hard to believe you're spending more than 2k-2500 on gas/electric/grocery/swim (swim lessons are what? $40 per lesson? 1 to 2 a week is $400 a month? x2 kids is 800). That means you're spending roughly 2k on eating out and entertainment?

You need to take a hard look at where this money is actually going. Fixed expenses are a good start but your variable expenses are the ones that are causing you to be under funded in your retirement. Imagine what just $1500 a month of that 2k would do to your retirement. At a 7% return, over 10 years, you're looking at 250k+. You're looking at 3 years of savings to pay for the full basement. 1 year of savings for the masters program.

I fully believe you can do this. You just have to take a hard long look at where your money is actually going. Pull out your credit card statements, start a mint account, YNAB, etc.

sjt
Posts: 222
Joined: Fri May 26, 2017 3:03 pm
Location: NC

Re: Frozen by uncertainty, really want to unfreeze

Post by sjt » Thu May 23, 2019 9:21 am

Lots of good advice here, at your income you should be able to save 1 year of expense every year. Begin tracking your expenses every month (every purchase) - find a budget app that you and spouse can both update - create categories and record all purchases. I would skip the basement until your cars, student loans are paid off and you are maxing your tax advantaged accounts. Forget the 529's until this is done.

It will be painful. If it's not painful, you haven't made enough cuts.
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale

User avatar
goodenyou
Posts: 1681
Joined: Sun Jan 31, 2010 11:57 pm
Location: Skating to Where the Puck is Going to Be..or on the golf course

Re: Frozen by uncertainty, really want to unfreeze

Post by goodenyou » Thu May 23, 2019 12:04 pm

The most important thing you have done is to stumble onto this site, and, most importantly, you have made your financial future a priority. Both you and your wife are competent enough to figure this out. Making it a priority is the genius.

Stick with reading this forum daily and sort through the threads that are pertinent. You will soon catch on. The motto here is to live below your means, be aware of waste in investing and educating yourself to strengthen your resolve.

You will be handsomely rewarded if you take the advice of the kind people on this forum. It is priceless.

Welcome and good luck.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

DaftInvestor
Posts: 4555
Joined: Wed Feb 19, 2014 10:11 am

Re: Frozen by uncertainty, really want to unfreeze

Post by DaftInvestor » Thu May 23, 2019 12:16 pm

Thinking ahead try to avoid ever having 2 car payments at the same time again.
If you do need to finance a car - you shouldn't have 2 financed at once (alternate the two car buys - If you buy one car every 10 years and finance for 4 years - you will never have 2 loans at once. Of course best thing to do is buy with cash).
I'd cut back the 529's to maybe $100 a month (or zero) until your own Student Loans are paid off (What's their interest rate? If lower than the Car Loans pay the Car Loans first).
It's great your not carrying any credit card debt - but between the Mortgage, 2 cars, and Student Loans - you are debt heavy. I wouldn't do the basement without first removing some debt.

you should also open an online High-Yield Savings Account (Marcus is at 2.25% and transfers only take a single day into/out of your checking) for your emergency/extra cash.

rascott
Posts: 246
Joined: Wed Apr 15, 2015 10:53 am

Re: Frozen by uncertainty, really want to unfreeze

Post by rascott » Thu May 23, 2019 1:22 pm

Autobot wrote:
Wed May 22, 2019 8:57 pm
OK, I gathered up as much information as I possibly could. It may not be in precisely the format that is recommended by one of the responses, but I did my best to come close. There are some things I simply didn't understand, and while my original post paints the gross overall picture, it hides some of the more complicated details that I was afraid would bore people. I get now that many of you seem to be avid fans of this kind of stuff, so I will attempt to be as detailed as possible. I recognize that I may appear a bit foolish in the outcome, but I'm here for the truth, so it doesn't pay to be anything but honest.

Income:
For calendar year 2018 we filed a gross income of $209,826, of which $117 and $67 came strictly from our reported wages. The difference came from other sources including a performance bonus I was paid, a small salary from a LLC that I own and operate with partners for a website, and a weird payout schedule for purchased shares in my current company when it got purchased.

Line 10 of my 2018 return says $185,373 which, since we file jointly, I guess puts me in the 24% tax bracket for federal. Not sure about state.

Based SOLELY on our two salaries alone, and not on any of the other less regular income, we net about $10,333 income per month on average. Other pieces slide in irregularly. I also have $5000 coming out pre-tax every year which goes into a Dependent Care Account to offset daycare and summer camp payments.

Monthly Expenses:
We carry 0 credit card debt. Whatever credit we charge over a month, we pay 100% of it every time.

For the regular fixed amounts, they add up to $5528, which breaks down as follows:
Mortgage: $2404 (30 yr. fixed at 4%)
Preschool: $866
Student loan: $663
Auto payment 1: $390
Auto payment 2: $375
529s: $500 ($250 x2)
Cable bill: $190... Comcast :(
Cell phones: $140
That does not include stuff which changes constantly such as electric (ranges from $100 to $300), gas, groceries, and swim lessons. Admittedly, we eat out a lot and entertain the kids. We recently saved quite a bit on auto/home insurance by switching from AllState (~$380 per month) to Travelers through my wife's work (~$160 per month).

Investments:
I have a neglected Roth IRA through Vanguard that's so old, the mail still goes to my parent's home. Last check, my dad thought it had around $49k in it. I couldn't tell you much else about it, and I suspect I should fix that. As for the rest:

Fidelity 401k (through my current company)
$103,982.95
11% contribution, company matches 50% of first 6%
Last month: $963.84 self, $289.16 match
YTD: $6,918.67 self, $1,892.24 match
100% BlackRock LifePath® Index 2040 Fund Class K Shares

Voya UPS 401k (the one 401k that I haven't rolled over)
$157,449.23
41.24% Bright Horizon 2035 Fund
4.61% Short-Term Bond Index Fund
21.6% U.S. Large Cap Equity Index Fund
22.63% U.S. Small/Mid Cap Equity Index Fund
9.92% UPS Stock Fund

Fidelity 403b (wife's retirement plan)
$19,267.56
contributes $150/month
100% Fidelity Freedom 2050 Fund - Class K

I recognize that there is still some information missing, especially given everything that ruralavalon asked. I think I chipped away at some of those questions, but not all.

While I know getting a solid investment strategy should be a priority, right now I'm mainly concerned with devising a strategy to cover both my wife's graduate program ($18k), and finishing our basement ($52k, or $40k if we ditch installing the bathroom right now). Maybe the basement is a little out of reach. It just seems a shame because the kids would appreciate it while they're little. Gonna stop typing for now.


You aren't doing that bad...."normal" is what I'd call it.

I know he isn't loved around here for investing advice (rightfully) - but you could probably use Dave Ramsey more than Bogleheads at this juncture. Your main issues are budget/debt related. Over $1400/mo in non -mortgage debt payments. I'd be focused upon those a lot more than I would retirement accounts right now.

What are the balances on those 3 items?

jminv
Posts: 896
Joined: Tue Jan 02, 2018 10:58 pm

Re: Frozen by uncertainty, really want to unfreeze

Post by jminv » Thu May 23, 2019 2:23 pm

Am I right in reading that it’s your wife making 67k/year as a NP? That’s really low. Is she working part time? If she is, an easy way to increase your income and pay down her student loan debt or save more is to work full time, don’t need to go back to school to do that. If it’s just where’s she’s working, find a new job.

Unlikely that the 50k basement job will add 50k of value. Are they going to live down there or is that for ‘play’ space. If it’s not bedrooms it won’t be used nearly as much as you plan on.

Do your own taxes every year. It’ll save you money and you’ll better understand where everything goes.

Your cable and cell phone bills are ridiculous. Sprint has the unlimited Kickstarter promo that’s 25/line so 50 total and you’re paying 140 now. 190 for cable is also ridiculous didn’t realize people were still buying those kind of ‘deals’ cut it down to internet only at 30-50/month, and another maybe 20 in streaming. Use Pluto tv and the like lots of shows there for free. Look through your expenses for line items you can eliminate, not just try to find a better cable deal etc. Don’t let new items work their way in, this is really common. Look at your car situation. Try to buy lower cost ones and not get into a cycle of high priced cars.

Thesaints
Posts: 2824
Joined: Tue Jun 20, 2017 12:25 am

Re: Frozen by uncertainty, really want to unfreeze

Post by Thesaints » Thu May 23, 2019 2:33 pm

Autobot wrote:
Tue May 21, 2019 10:00 pm
We have no savings account, just one checking account, which is currently sitting @ $34k and fluctuates between $25k and $45k depending on vacations and bonus payouts.

I have been holding steady like this for well over 4 years. I don't feel like I'm saving enough for retirement, and I don't feel like having the money just sitting in checking is wise, but like I said, when I start looking at the savings account options and the associated fees, I just crawl back into my turtle shell.
The truth is that at present you don't really have "options" to speak of. Keeping that much money in your checking account is very wise: that is your emergency fund.
You can easily find savings accounts with no fees yielding north of 2%, which would be an even wiser choice. Try bankrate.com, for instance.

At this point, you are saving as much as you can and probably the only thing you should consider is rolling your 401k holding 156k-worth of Corporation XYZ into an IRA account, sell the stocks and diversify your investment.
Based on what you wrote, the one single big mistake you are doing is keeping half of your assets concentrated in a single company.

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