$250k - help me take my investment plan to the next level

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
thegreathambino
Posts: 23
Joined: Wed Oct 24, 2018 4:54 pm

$250k - help me take my investment plan to the next level

Post by thegreathambino » Thu Jul 30, 2020 2:49 am

- 35 years old, single
- no debt other than mortgage (owe $100k, 3.5%)
- $140k income from W2 job
- 85/15 stocks/bonds - looking to possibly rebalance to 80/20 or maybe even 75/25
- 90/10 US to INT stocks - not sure if I should adjust this?
- Using the 3 fund approach - VTSAX (US stocks), VTIAX (int stocks), VBTLX (bonds)
- 401k and HSA offer VIIIX (stocks) and VBMPX (bonds) so I use it there
- Started by Boglehead journey maybe year ago, pardon any noob paradigms

Roth 401k
- $200k and maxing out regular contributions
- VBMPX for all my bonds (ALL meaning across all accounts - no bonds in any other account)
- VIIIX for US stocks

Roth IRA:
- $65K and maxing out regular contributions (60% already contributed for the year)
- All in VTSAX

HSA:
- 20k and maxing out regular contributions
- All in VIIIX

Taxable account:
- $130k and contributing about $300/month
- VTSAX and VTIAX

Goals:
- reasonable liquidity - I could need access to the funds in upcoming years for a future investment in a family business, real estate property, and/or house down payment, etc. No concrete timelines for any of that but hopefully all will eventually happen
- moderate to "slightly aggressive" risk in asset allocation for my age - I'd like to have my AA be slightly on the more aggressive side, but still in the range of what might be considered common for someone age 35
- reduce tax liability - any advice other than marriage and kids (working on that) that can help me on taxes - I paid WAY too much this year
- generally passive investing approach that is a simple to navigate, rebalance, understand, etc

My Plan...so far
- put 90-100% of the $250k into the taxable account
- hold back a small but safe emergency fund
- put most or potentially all of it in equities for tax efficiency purposes

My Questions
1. What is the best way to leverage the $250k? Main goal there is to earn more than high interest savings account, but to have some reasonable access to it if needed.
2. How do I plan for getting at the money if/when needed? Assuming the taxable account is the way to go, is it as simple as selling with no tax consequence (since I put it all in myself, not a gain) or is there more to consider?
3. My understanding is that taxable accounts should ideally not have bonds in them due to the tax inefficiency. But if I go $250k stocks only it will drastically shift my allocation stock-heavy and I'm potentially trying to go slightly more bond-heavy if anything. How do I make that work?
4. What other changes should I consider making to improve my overall approach/plan?

as9
Posts: 196
Joined: Mon Jan 27, 2020 9:26 am

Re: $250k - help me take my investment plan to the next level

Post by as9 » Thu Jul 30, 2020 6:00 am

Almost certainly the first thing you should do is switch all figure contributions to a traditional 401k. This will help on taxes.

HomeStretch
Posts: 4790
Joined: Thu Dec 27, 2018 3:06 pm

Re: $250k - help me take my investment plan to the next level

Post by HomeStretch » Thu Jul 30, 2020 6:22 am

What is your marginal Federal tax rate? State?

lakpr
Posts: 5810
Joined: Fri Mar 18, 2011 9:59 am

Re: $250k - help me take my investment plan to the next level

Post by lakpr » Thu Jul 30, 2020 6:25 am

HomeStretch wrote:
Thu Jul 30, 2020 6:22 am
What is your marginal Federal tax rate? State?
OP listed $140k income, single, so must be 24% Federal, and almost certainly ineligible for direct Roth IRA contributions since he is choosing to go Roth 401k way.

HomeStretch
Posts: 4790
Joined: Thu Dec 27, 2018 3:06 pm

Re: $250k - help me take my investment plan to the next level

Post by HomeStretch » Thu Jul 30, 2020 6:38 am

lakpr wrote:
Thu Jul 30, 2020 6:25 am
HomeStretch wrote:
Thu Jul 30, 2020 6:22 am
What is your marginal Federal tax rate? State?
OP listed $140k income, single, so must be 24% Federal, and almost certainly ineligible for direct Roth IRA contributions since he is choosing to go Roth 401k way.
OP states s/he is making direct Roth IRA contributions.

lakpr
Posts: 5810
Joined: Fri Mar 18, 2011 9:59 am

Re: $250k - help me take my investment plan to the next level

Post by lakpr » Thu Jul 30, 2020 6:39 am

@thegreathambino,,

First thing, as as9 mentioned above, quit the Roth 401k and start contributing Traditional 401k.

Secondly, Roth accounts should almost always be stocks, no bonds. Including Roth 401k.

So the action plan for you would be to start contributing Traditional 401k with all new contributions going to bond funds. All money currently in Roth 401k should be switched to all stocks.

Thirdly, with a $100k mortgage, pay it down as fast as possible. Liquidate your $130k taxable account. View your mortgage as a negative bond. Every dollar you are paying down the mortgage is equivalent to earning a 3.5% after tax return CD, whose term is the remainder of your mortgage term. At a 24% bracket, it is equivalent to earning a 4.6% CD.

Say 10 years left in the amortization schedule. Paying $1000 of the mortgage down is equivalent to buying a 4.6% CD for 10 years.

Say that $1000 will reduce the amortization by two months. The next $1000 you put down on the mortgage is equivalent to a CD earning 4.6% for 9 years and 10 months, guaranteed.

Etc.

There is nothing in the market right now that gives you 4.6% guaranteed returns, so rather than investing in bonds, pay down the mortgage.

Of course, the draw back of paying down the mortgage is loss of liquidity. Unlike bonds, you cannot sell your home equity within a day and raise cash immediately. To retain liquidity, I suggest you either have a HELOC ready, or increase your emergency fund by at least another 6 months of expenses, or both.
Last edited by lakpr on Thu Jul 30, 2020 6:42 am, edited 1 time in total.

lakpr
Posts: 5810
Joined: Fri Mar 18, 2011 9:59 am

Re: $250k - help me take my investment plan to the next level

Post by lakpr » Thu Jul 30, 2020 6:40 am

HomeStretch wrote:
Thu Jul 30, 2020 6:38 am
lakpr wrote:
Thu Jul 30, 2020 6:25 am
HomeStretch wrote:
Thu Jul 30, 2020 6:22 am
What is your marginal Federal tax rate? State?
OP listed $140k income, single, so must be 24% Federal, and almost certainly ineligible for direct Roth IRA contributions since he is choosing to go Roth 401k way.
OP states s/he is making direct Roth IRA contributions.
Yes, noticed that, and I am certain that he does not recognize he is going to have a tax mess next year.

HomeStretch
Posts: 4790
Joined: Thu Dec 27, 2018 3:06 pm

Re: $250k - help me take my investment plan to the next level

Post by HomeStretch » Thu Jul 30, 2020 6:55 am

lakpr wrote:
Thu Jul 30, 2020 6:40 am
HomeStretch wrote:
Thu Jul 30, 2020 6:38 am
lakpr wrote:
Thu Jul 30, 2020 6:25 am
HomeStretch wrote:
Thu Jul 30, 2020 6:22 am
What is your marginal Federal tax rate? State?
OP listed $140k income, single, so must be 24% Federal, and almost certainly ineligible for direct Roth IRA contributions since he is choosing to go Roth 401k way.
OP states s/he is making direct Roth IRA contributions.
Yes, noticed that, and I am certain that he does not recognize he is going to have a tax mess next year.
Maybe. Or s/he may have a lower marginal tax rate than 24% due to some fact missing from the OP.

OP, below is a link to the BH wiki page about deciding whether to use Traditional v. Roth. It doesn’t have to be an either/or decision. For example, you might choose Traditional 401k contributions and Roth IRA contributions. If your MAGI is too high for a direct Roth contribution, you can consider a backdoor Roth (BH wiki link below).

https://www.bogleheads.org/wiki/Traditional_versus_Roth

https://www.bogleheads.org/wiki/Backdoor_Roth

Topic Author
thegreathambino
Posts: 23
Joined: Wed Oct 24, 2018 4:54 pm

Re: $250k - help me take my investment plan to the next level

Post by thegreathambino » Thu Jul 30, 2020 12:54 pm

Thanks for your responses so far. I think I understand the logic behind using the traditional 401k vs roth (and likely the same for the IRA). But I dont' think I follow putting bonds in the taxable account. If I'm misunderstanding something - I'd like to know because putting some portion of bonds there would help a lot to control my overall asset allocation, but everything I've researched seems to say bonds in taxable is not the way to go unless they are a special bond class that is tax free (municipal bonds I believe).

https://www.bogleheads.org/wiki/Tax-eff ... e_accounts
Lower tax rates. In tax-advantaged accounts, all investments are taxed equally (not at all in a tax-free account, or only on withdrawal in a tax-deferred account). In taxable accounts, almost all the return on bonds are taxed at your full rate every year, but most of the return on stocks is tax-favored.
https://www.bogleheads.org/wiki/Asset_a ... e_accounts
By putting bonds in taxable, your portfolio is less tax-efficient than it could be if you concentrated bond holdings in tax-advantaged accounts.

petulant
Posts: 1597
Joined: Thu Sep 22, 2016 1:09 pm

Re: $250k - help me take my investment plan to the next level

Post by petulant » Thu Jul 30, 2020 1:02 pm

thegreathambino wrote:
Thu Jul 30, 2020 12:54 pm
Thanks for your responses so far. I think I understand the logic behind using the traditional 401k vs roth (and likely the same for the IRA). But I dont' think I follow putting bonds in the taxable account. If I'm misunderstanding something - I'd like to know because putting some portion of bonds there would help a lot to control my overall asset allocation, but everything I've researched seems to say bonds in taxable is not the way to go unless they are a special bond class that is tax free (municipal bonds I believe).

https://www.bogleheads.org/wiki/Tax-eff ... e_accounts
Lower tax rates. In tax-advantaged accounts, all investments are taxed equally (not at all in a tax-free account, or only on withdrawal in a tax-deferred account). In taxable accounts, almost all the return on bonds are taxed at your full rate every year, but most of the return on stocks is tax-favored.
https://www.bogleheads.org/wiki/Asset_a ... e_accounts
By putting bonds in taxable, your portfolio is less tax-efficient than it could be if you concentrated bond holdings in tax-advantaged accounts.
I don't think they're saying you should put bonds in the taxable account. They're saying to buy bonds in the traditional 401(k) and move Roth balances to stocks. Then, with taxable balances currently in existence, pay off the mortgage since its risk-adjusted return is better than all other options for taxable money.

tashnewbie
Posts: 535
Joined: Thu Apr 23, 2020 12:44 pm

Re: $250k - help me take my investment plan to the next level

Post by tashnewbie » Thu Jul 30, 2020 1:29 pm

1. I definitely think you should transition to Traditional 401k contributions instead of Roth 401k, because you're in the 24% marginal federal tax bracket. That will help you with taxes. You'll save almost $5k with that move alone (plus whatever you'll save from your state, if your state has income tax).

2. Stop direct Roth IRA contributions right now. With no pretax 401k deferrals, your gross income will only be reduced to get to your adjusted gross income/modified gross income (MAGI) by whatever healthcare premiums, FSA & HSA contributions, and pension contributions you make in 2020. The ability to contribute directly to a Roth IRA stops completely at $139k MAGI as a single (phase out range from $124k to $139k). Assuming you have paid some healthcare premiums, you're likely in the phase out range. It might be worth contacting the IRA custodian now and asking it to re-characterize the Roth IRA contributions (along with the earnings) to Traditional IRA, and then using the backdoor method to convert the Traditional IRA balance to Roth IRA. You'll owe taxes on the earnings.

3. If you sell stocks in a taxable account, you will owe taxes depending on whether you're selling at a loss or a gain and how long you've held the stock. If there's a gain and you've held the stock for at least one year, you'll owe taxes at the long-term capital gains tax rate, which will be 15% for you. If you've held the stock less than 1 year, you'll owe taxes on any gains at your ordinary income tax rate. Bonds are also taxed at your ordinary income tax rate, regardless of how long you've held them ETA: I'm actually not sure about taxes on bonds, so check on that (tax-exempt muni bonds are exempt from federal tax and also state tax if it's a state-specific fund and you live in that state). If you sell the stock at a loss, you can use the losses to offset $3k in ordinary income for that year and carryover any additional losses to offset future gains.

ETA: when do you think you would need some of the $250k? I agree with others that it probably makes sense to take $100k of that and pay off your mortgage. I'd put the rest into a taxable brokerage account. How you invest it depends to some extent on when you think you'll need it.
Last edited by tashnewbie on Fri Jul 31, 2020 8:46 am, edited 1 time in total.

User avatar
ruralavalon
Posts: 18828
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: $250k - help me take my investment plan to the next level

Post by ruralavalon » Thu Jul 30, 2020 1:49 pm

It's great to see that you are debt free, and making maximum annual contributions to all tax-advantaged accounts.

thegreathambino wrote:
Thu Jul 30, 2020 2:49 am
- 35 years old, single
- no debt other than mortgage (owe $100k, 3.5%)
- $140k income from W2 job
- 85/15 stocks/bonds - looking to possibly rebalance to 80/20 or maybe even 75/25
- 90/10 US to INT stocks - not sure if I should adjust this?
- Using the 3 fund approach - VTSAX (US stocks), VTIAX (int stocks), VBTLX (bonds)
- 401k and HSA offer VIIIX (stocks) and VBMPX (bonds) so I use it there
- Started by Boglehead journey maybe year ago, pardon any noob paradigms

Roth 401k
- $200k and maxing out regular contributions
- VBMPX for all my bonds (ALL meaning across all accounts - no bonds in any other account)
- VIIIX for US stocks

Roth IRA:
- $65K and maxing out regular contributions (60% already contributed for the year)
- All in VTSAX

HSA:
- 20k and maxing out regular contributions
- All in VIIIX

Taxable account:
- $130k and contributing about $300/month
- VTSAX and VTIAX

Goals:
- reasonable liquidity - I could need access to the funds in upcoming years for a future investment in a family business, real estate property, and/or house down payment, etc. No concrete timelines for any of that but hopefully all will eventually happen
- moderate to "slightly aggressive" risk in asset allocation for my age - I'd like to have my AA be slightly on the more aggressive side, but still in the range of what might be considered common for someone age 35
- reduce tax liability - any advice other than marriage and kids (working on that) that can help me on taxes - I paid WAY too much this year
- generally passive investing approach that is a simple to navigate, rebalance, understand, etc

My Plan...so far
- put 90-100% of the $250k into the taxable account
- hold back a small but safe emergency fund
- put most or potentially all of it in equities for tax efficiency purposes

My Questions
1. What is the best way to leverage the $250k? Main goal there is to earn more than high interest savings account, but to have some reasonable access to it if needed.
2. How do I plan for getting at the money if/when needed? Assuming the taxable account is the way to go, is it as simple as selling with no tax consequence (since I put it all in myself, not a gain) or is there more to consider?
3. My understanding is that taxable accounts should ideally not have bonds in them due to the tax inefficiency. But if I go $250k stocks only it will drastically shift my allocation stock-heavy and I'm potentially trying to go slightly more bond-heavy if anything. How do I make that work?
4. What other changes should I consider making to improve my overall approach/plan?
The $250k.
Where do you currently have "the $250k" which you want to leverage ?

Paying off the "mortgage (owe $100k, 3.5%)" might be your best possible "investment ".


Traditional vs Roth.
We need more information on the traditional vs Roth issue.

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

You said "140k income from W2 job". Do you also have 1099 income from self-employment? If so how much?

Will you be eligible for a significant pension in addition to Social Security? What is your profession or occupation?

Do you have anything in traditional tax-deferred accounts? If so how much?

Is there some reason you have for making only Roth contributions to your 401k?


Asset allocation.
At age 35 for "slightly aggressive" I suggest around 20% bonds or other fixed income, the rest in stocks.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
thegreathambino
Posts: 23
Joined: Wed Oct 24, 2018 4:54 pm

Re: $250k - help me take my investment plan to the next level

Post by thegreathambino » Thu Jul 30, 2020 8:00 pm

The $250k.
Where do you currently have "the $250k" which you want to leverage ?

Paying off the "mortgage (owe $100k, 3.5%)" might be your best possible "investment ".


Traditional vs Roth.
We need more information on the traditional vs Roth issue.

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

You said "140k income from W2 job". Do you also have 1099 income from self-employment? If so how much?

Will you be eligible for a significant pension in addition to Social Security? What is your profession or occupation?

Do you have anything in traditional tax-deferred accounts? If so how much?

Is there some reason you have for making only Roth contributions to your 401k?


Asset allocation.
At age 35 for "slightly aggressive" I suggest around 20% bonds or other fixed income, the rest in stocks.
Thanks for your responseses and interested to hear some continued feedback if possible.

- The $250k is in high interest savings right now
- Tax bracket is 24%, not sure on state but I'm in Utah
- No major 1099 income requiring a 1099
- No pension
- I'm in tech
- I don't have anything in traditional tax-defferred accounts
- I started my Roth IRA when I was very young and definitely should have started it that way, but of course life moves on and now I'm in a much higher tax bracket where perhaps traditional makes more sense
When do you think you would need some of the $250k?
- Very difficult to predict but I would say sometime in the next 5 years, hard to narrow it more than that as it could be in as little as 6 months

tashnewbie
Posts: 535
Joined: Thu Apr 23, 2020 12:44 pm

Re: $250k - help me take my investment plan to the next level

Post by tashnewbie » Fri Jul 31, 2020 8:53 am

thegreathambino wrote:
Thu Jul 30, 2020 8:00 pm
I started my Roth IRA when I was very young and definitely should have started it that way, but of course life moves on and now I'm in a much higher tax bracket where perhaps traditional makes more sense
Did you mean Roth 401k? I assume you mean that, not IRA. I think you should definitely transition to making contributions to a traditional 401k if you're in the 24% tax bracket.
thegreathambino wrote:
Thu Jul 30, 2020 8:00 pm
When do you think you would need some of the $250k?
- Very difficult to predict but I would say sometime in the next 5 years, hard to narrow it more than that as it could be in as little as 6 months
Some people would say if you need the money within 5 years, don't invest it in the stock market. You'll have to decide if you're willing to take on some risk to principal by investing in the stock market. Your willingness to take on risk probably will depend to some extent on how flexible the timing of your need for the money is. I have no specific recommendations on this front, but this is something you need to think through, and other users may have some suggestions as far as investing some of the $250k in taxable and shifting to more bonds in the 401k.

User avatar
ruralavalon
Posts: 18828
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: $250k - help me take my investment plan to the next level

Post by ruralavalon » Fri Jul 31, 2020 2:34 pm

thegreathambino wrote:
Thu Jul 30, 2020 8:00 pm
The $250k.
Where do you currently have "the $250k" which you want to leverage ?

Paying off the "mortgage (owe $100k, 3.5%)" might be your best possible "investment ".


Traditional vs Roth.
We need more information on the traditional vs Roth issue.

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

You said "140k income from W2 job". Do you also have 1099 income from self-employment? If so how much?

Will you be eligible for a significant pension in addition to Social Security? What is your profession or occupation?

Do you have anything in traditional tax-deferred accounts? If so how much?

Is there some reason you have for making only Roth contributions to your 401k?


Asset allocation.
At age 35 for "slightly aggressive" I suggest around 20% bonds or other fixed income, the rest in stocks.
Thanks for your responseses and interested to hear some continued feedback if possible.

- The $250k is in high interest savings right now
- Tax bracket is 24%, not sure on state but I'm in Utah
- No major 1099 income requiring a 1099
- No pension
- I'm in tech
- I don't have anything in traditional tax-defferred accounts
- I started my Roth IRA when I was very young and definitely should have started it that way, but of course life moves on and now I'm in a much higher tax bracket where perhaps traditional makes more sense
When do you think you would need some of the $250k?
- Very difficult to predict but I would say sometime in the next 5 years, hard to narrow it more than that as it could be in as little as 6 months
$250k cash.
In my opinion a good use for $100k of your cash is to pay off the 3.5% mortgage note. That gives you a higher guaranteed return than you could get in any other guaranteed investment. 3.5% is as high as many current forecasts for the stock market or bond market. Morningstar (4/23/2020), "Experts Forecast Stock and Bond Returns: Crisis Edition".

Because you may want to use in 5 years or less, for the remaining $150k consider a very safe bond or conservative balanced fund. Examples include
(1) Vanguard Intermediate-Term Treasury Fund Admiral Shares (VFIUX) effective duration = 5.17 years credit rating = AAA,
(2) Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), effective duration = 6.45 years credit rating = AA,
(3) Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX) effective duration = 6.48 years credit rating = A ,
(4) Vanguard LifeStrategy Income Fund (VASIX) 70% bonds, or
(5) Vanguard LifeStrategy Conservative Growth Fund (VSCGX) 60% bonds.

Extra cash flow, from the mortgage payments no longer made, can go into these investments too if necessary to meet your anticipate need in 5 years or less.


Traditional contributions to 401k.
Because you are in the 24% tax bracket, do not expect a pension, and currently have nothing in traditional tax-deferred accounts, I suggest traditional 401k contributions. For most people traditional deductible 401k contributions will likely be better.

The income tax code is progressive, with a lower tax rate for lower income. Retirement usually means that employment income has ended. Therefore, most people are in a lower tax bracket in retirement and for most people traditional deductible 401k contributions will probably be better.

Because the tax code is progressive, when you withdraw from your 401k in retirement the income is not all taxed at the marginal tax rate specified for your tax bracket. TFB blog post, "The case against Roth 401k". "I think for most people the majority, if not 100%, of the contribution should go to a Traditional 401(k)." Because the tax code is progressive, "Until you know you can generate from your Traditional 401(k) enough income to fill the lower brackets, it doesn’t make sense to contribute to a Roth 401(k). For people without a traditional defined benefit pension plan, it means the majority of the retirement savings should go to a Traditional 401(k), not Roth."

Here is some more insight on this issue. Grabiner post, 7/30/2020.

Wiki article, "Traditional vs Roth".



Roth IRA.
Contribute to a Roth IRA as long as your income is not so high as to make you ineligible.

If ineligible because your income is too high, then consider using the backdoor Roth IRA technique. "A Backdoor Roth IRA is a technique for contributing to a Roth IRA when your income exceeds the contribution limit. There is no income limit on contributing to a nondeductible Traditional IRA, nor on converting a Traditional IRA to a Roth IRA" Wiki article, "Backdoor Roth IRA.".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

User avatar
TNL
Posts: 374
Joined: Sat Jul 25, 2015 2:13 pm

Re: $250k - help me take my investment plan to the next level

Post by TNL » Fri Jul 31, 2020 4:58 pm

thegreathambino wrote:
Thu Jul 30, 2020 8:00 pm
The $250k.
Where do you currently have "the $250k" which you want to leverage ?

Paying off the "mortgage (owe $100k, 3.5%)" might be your best possible "investment ".


Traditional vs Roth.
We need more information on the traditional vs Roth issue.

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

You said "140k income from W2 job". Do you also have 1099 income from self-employment? If so how much?

Will you be eligible for a significant pension in addition to Social Security? What is your profession or occupation?

Do you have anything in traditional tax-deferred accounts? If so how much?

Is there some reason you have for making only Roth contributions to your 401k?


Asset allocation.
At age 35 for "slightly aggressive" I suggest around 20% bonds or other fixed income, the rest in stocks.
Thanks for your responseses and interested to hear some continued feedback if possible.

- The $250k is in high interest savings right now
- Tax bracket is 24%, not sure on state but I'm in Utah
- No major 1099 income requiring a 1099
- No pension
- I'm in tech
- I don't have anything in traditional tax-defferred accounts
- I started my Roth IRA when I was very young and definitely should have started it that way, but of course life moves on and now I'm in a much higher tax bracket where perhaps traditional makes more sense
When do you think you would need some of the $250k?
- Very difficult to predict but I would say sometime in the next 5 years, hard to narrow it more than that as it could be in as little as 6 months
Utah has a flat 5% income tax based on your AGI.

Good job on getting to where you are so far. I agree with the other posters on paying off the mortgage and converting to a traditional 401k.

I don't see above where you say what your desired emergency fund is. For single people who are homeowners I suggest 6 months of your full expenses. Maybe 9 if you think it would take a little longer to find a job in the case of layoff, but if you are in tech in Utah you could probably find new work quite quickly.

Topic Author
thegreathambino
Posts: 23
Joined: Wed Oct 24, 2018 4:54 pm

Re: $250k - help me take my investment plan to the next level

Post by thegreathambino » Fri Jul 31, 2020 7:41 pm

Thanks to all for helping out - the forum is such a good place for valuable info and I appreciate the help and advice.

- I changed to traditional 401k contributions. It makes sense.
- I most likely will pay off my house after confiming liquidity needs
- I need a little extra guidance on the backdoor Roth (I confirmed I am in fact am over the limit with my MAGI)

Questions
1. The first conversion - in my case where I have a current Roth IRA with regular contributions accumulating so far this year - I'm assuming the easiest process would be to stop contributing now, create the traditional IRA, contribute a one time bulk amount (the limit ($6,000) minus whatever I've contributed so far this year) then convert it over to the Roth IRA correct?

2. Conversion timing - there seems to be a debate about how long to wait but I also see a lot of people do it essentially immediately - anyone had problems with a quick/immediate conversion?

3. Ongoing maintenance - any tips on doing this over several years? I could be splitting hairs but I'm wondering if I should make it a one time a year event or gradually contribute and/or convert throughout the year.

Post Reply