Best way to build an emergency fund?

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Topic Author
AC1984
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Best way to build an emergency fund?

Post by AC1984 »

I'm wondering the best way to build a cash emergency fund given my situation. I'm a 36-year-old married homeowner with $90k yearly income. My job is considered essential with a stable income. My wife ($75k income) and I both work full time and we've invested heavily in retirement accounts over the last few years. We file taxes separate because I'm pursuing PSLF, which should happen by 2025. For the past two years we've been maxing out two 401k's, a 457 (I'm a state employee and have access to both) and two back door Roth IRAs. We have about $330k in these tax-advantaged accounts. We also share a taxable account with around $30k. Overall our combined holdings are 100% stocks for now, mostly S&P 500 and VTSAX (78%) a little VTIAX (5%...been adding more to this lately though), small cap value and S&P 600 (17% of portfolio...I've stopped contributing to the small cap because I'd like to have them a bit lower percentage for my comfort zone).

I'm amazed to have accumulated so much in the investments at this point in time, but feel like I got carried away and haven't kept up the cash reserves. With maxing out all the tax-advantaged accounts plus whatever I could throw into taxable, there's not enough extra cash to save much...or at least when I think there is a big expense comes up. Plus we'd like to buy a teardrop trailer for around $14k and paying cash would be preferred to using any investments.

Currently I have $4,000 in my primary savings account, $2,500 in the emergency fund savings account, and another $5,200 in a savings account designated for our nieces' and nephews as an eventual gift. I've been contributing $100 biweekly to the nieces and nephews fund, which I haven't stopped but did reduce from $200 biweekly. I was also paying an extra $100 biweekly on the mortgage but in the past month have redirected that extra $100 biweekly into the emergency fund account. I've already paused the taxable contributions cause that was a no brainer. My thought is that I should pause the Roth contributions until the emergency fund is around $40-50k (roughly 3.5-4 months expenses) so I still get the tax break for a $39k income reduction with the deferred retirement accounts. Another possibility is to use the $5,200 cash account designated for our neices and nephews as part of the emergency fund, and if needed withdraw money from the taxable account or Roth contributions for them when the time comes. I don't see this as likely though considering that by that time (at least 7 years out) I can likely build up more cash for that purpose. I'd prefer not to withdraw from any investments if possible, but it's an option.

Does this sound right or is there a better way? I'm open to any suggestions. Thanks!
frugalecon
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Re: Best way to build an emergency fund?

Post by frugalecon »

I am struggling a little at the idea of having $5200 in an account designated for nieces and nephews when you have about half that in your emergency fund. In a true emergency, what would stop you from accessing these funds? I like my nieces and nephews, but I would put my EF ahead of a fund for them. I certainly would be hesitant to withdraw from valuable Roth space for anything that wasn't a true emergency.
tashnewbie
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Re: Best way to build an emergency fund?

Post by tashnewbie »

frugalecon wrote: Tue Sep 08, 2020 1:48 pm I am struggling a little at the idea of having $5200 in an account designated for nieces and nephews when you have about half that in your emergency fund. In a true emergency, what would stop you from accessing these funds? I like my nieces and nephews, but I would put my EF ahead of a fund for them. I certainly would be hesitant to withdraw from valuable Roth space for anything that wasn't a true emergency.
+1. Also, I'm assuming you live in a VHCOL, with expenses of ~12.5k per month.
chassis
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Re: Best way to build an emergency fund?

Post by chassis »

It seems you are looking for support to decide to stop funding 401k and nieces/nephews account, right?

You are pursuing PSLF, this means you have student loan debt, correct?

To build an emergency fund, put money into the fund. If you are "maxed out" with other savings such as 401k or nieces/nephews fund, you need to un-max out and direct after tax cash into the emergency fund. It's simple, but you need to make decisions.

1. Reduce or temporarily eliminate 401k contributions
2. Reduce or eliminate nieces/nephews fund contributions
3. Eliminate student loan debt
4. Postpone the teardrop trailer idea until the emergency fund is at its target value that you set, and student loans are paid off.

There is no "best way" to do anything. There are always multiple ways to skin a cat, or in this case, build an emergency fund.
Topic Author
AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

I'm in Michigan, cost of living isn't too high. My expenses are roughly $8k monthly, though I'm sure we could trim it a bit. We have student loans, car notes, and some other fixed expenses (cars were before my current job, and my wife's loans are on a regular payment plan). To be sure, in a true emergency I would absolutely use the $5k account before breaking into anything else. I'm just trying to figure out the best way to add more cash in the least amount of time without sacrificing more than I have to as far as investments.
Topic Author
AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

chassis wrote: Tue Sep 08, 2020 1:57 pm It seems you are looking for support to decide to stop funding 401k and nieces/nephews account, right?

You are pursuing PSLF, this means you have student loan debt, correct?

To build an emergency fund, put money into the fund. If you are "maxed out" with other savings such as 401k or nieces/nephews fund, you need to un-max out and direct after tax cash into the emergency fund. It's simple, but you need to make decisions.

1. Reduce or temporarily eliminate 401k contributions
2. Reduce or eliminate nieces/nephews fund contributions
3. Eliminate student loan debt
4. Postpone the teardrop trailer idea until the emergency fund is at its target value that you set, and student loans are paid off.

There is no "best way" to do anything. There are always multiple ways to skin a cat, or in this case, build an emergency fund.
I agree here, really my question is this: Is it better to stop maxing out the pretax retirement accounts or the back door Roths? Either of those will put a lot more cash in my savings but I don't know which makes more sense. I do have student loan debt but that's awaiting forgiveness and is a static factor for now.
lazynovice
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Re: Best way to build an emergency fund?

Post by lazynovice »

What are the unrealized gains on the taxable account?

You have an emergency fund:

4,000 primary savings
2,500 EF
5,200 gift fund
30,000 taxable account
———————————-
41,000

The issue is the biggest part is in stocks which you may want to sell and move to something safer if the tax hit is not too large.

I would not stop any of the retirement contributions. And I would prioritize my own needs over a gift to nieces and nephews. You can gift to them out of monthly cash flow later.
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SmileyFace
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Re: Best way to build an emergency fund?

Post by SmileyFace »

Uncle AC1984 - at what point do I get that account?

seriously though - I know other folks that have assumed they have stable/essential jobs only to find out they weren't so stable and essential so be careful with that assumption. I would just start funneling new money into the emergency fund account - if your niece/nephew account isn't equities - that could also be considered part of your emergency fund (then can be used for gifts if not used). I used ibonds as a second tier emergency fund (as described in the emergency funds wiki: https://www.bogleheads.org/wiki/Emergency_fund).
chassis
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Re: Best way to build an emergency fund?

Post by chassis »

AC1984 wrote: Tue Sep 08, 2020 2:03 pm
chassis wrote: Tue Sep 08, 2020 1:57 pm It seems you are looking for support to decide to stop funding 401k and nieces/nephews account, right?

You are pursuing PSLF, this means you have student loan debt, correct?

To build an emergency fund, put money into the fund. If you are "maxed out" with other savings such as 401k or nieces/nephews fund, you need to un-max out and direct after tax cash into the emergency fund. It's simple, but you need to make decisions.

1. Reduce or temporarily eliminate 401k contributions
2. Reduce or eliminate nieces/nephews fund contributions
3. Eliminate student loan debt
4. Postpone the teardrop trailer idea until the emergency fund is at its target value that you set, and student loans are paid off.

There is no "best way" to do anything. There are always multiple ways to skin a cat, or in this case, build an emergency fund.
I agree here, really my question is this: Is it better to stop maxing out the pretax retirement accounts or the back door Roths? Either of those will put a lot more cash in my savings but I don't know which makes more sense. I do have student loan debt but that's awaiting forgiveness and is a static factor for now.
@AC1984 Roth contributions have no current or present day benefit. The benefit is in future tax benefits.

If your employer matches 401k or 403b contributions, there is a current or present day benefit; to wit: the match.

If it were me, the order of operations would be to first stop funding the Roth, then stop funding the 401k. Both funding suspensions would, in theory, be temporary until you achieve the target balance in the emergency fund.

Don't buy a teardrop now. Demand is sky high which means prices are likely sky high, and manufacturing quality from the factories will be lower than the usual terribly low quality from the recreational vehicle industry. I have been in manufacturing over 30 years in an adjacent industry to recreational vehicles. The RV industry, without exception as to brand or model, is one of the lowest quality manufacturing sectors in the United States.
pasadena
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Re: Best way to build an emergency fund?

Post by pasadena »

I would stop contributing to the gift account - honestly I would pour the whole thing into my EF until I was satisfied with it.

Then I would take a long hard look at my expenses, because 12k a month with $175 gross income seems like a lot to me

And finally, I would also stop contributing to the taxable account, and maybe sell some of it if it makes sense from a tax perspective.

Then we can talk about retirement contributions.
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AlabamaPaul
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Re: Best way to build an emergency fund?

Post by AlabamaPaul »

Just to be frank. At this point in your life, maintaining and contributing monthly to gift funds for nieces and nephews is not a wise choice. This is something one would do with excess after tax funds after all other priorities have been met. You could consider the taxable account as part of your emergency fund, but that is not optimal...
MathWizard
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Re: Best way to build an emergency fund?

Post by MathWizard »

401k loans are also possible, using this as a 2nd tier in case of an emergency
beyond what your current EF can handle. This seems a better strategy than not
maxing your 401k's just to build up a large cash balance EF.
dru808
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Re: Best way to build an emergency fund?

Post by dru808 »

This is the easiest way to pad the fund. I only use $5 bills and larger when paying for anything, never use $1’s, never use change. $1.05 I use a $5 bill. I’ve built a substantial emergency emergency fund doing this the past 5 years.
60% SCHK | 25% VIGI | 15% ILTB
Monsterflockster
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Re: Best way to build an emergency fund?

Post by Monsterflockster »

AC1984 wrote: Tue Sep 08, 2020 1:35 pm For the past two years we've been maxing out two 401k's, a 457 (I'm a state employee and have access to both) and two back door Roth IRAs.
Others have responded so nothing new to add other than Why are you doing a backdoor Roth when you are under the limit & can contribute directly?
Jags4186
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Re: Best way to build an emergency fund?

Post by Jags4186 »

Cut your $12,000/mo in expenses to $7,000/mo and you'll have $50k saved in no time.
tashnewbie
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Re: Best way to build an emergency fund?

Post by tashnewbie »

Monsterflockster wrote: Tue Sep 08, 2020 4:46 pm
AC1984 wrote: Tue Sep 08, 2020 1:35 pm For the past two years we've been maxing out two 401k's, a 457 (I'm a state employee and have access to both) and two back door Roth IRAs.
Others have responded so nothing new to add other than Why are you doing a backdoor Roth when you are under the limit & can contribute directly?
It's because he and his spouse file MFS. The phase out range starts at $0 MAGI and ends at $10k.
MotoTrojan
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Re: Best way to build an emergency fund?

Post by MotoTrojan »

Rather than halting Roth IRA contributions I would just use it as part of your emergency fund (leave it in money market). If an emergency comes up, you withdraw it penalty free and lose the Roth space, oh well. If no emergency comes up you can eventually move it to your asset allocation once you have a taxable emergency fund built up in the more distant future, yay!
tashnewbie
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Re: Best way to build an emergency fund?

Post by tashnewbie »

MotoTrojan wrote: Tue Sep 08, 2020 4:58 pm Rather than halting Roth IRA contributions I would just use it as part of your emergency fund (leave it in money market). If an emergency comes up, you withdraw it penalty free and lose the Roth space, oh well. If no emergency comes up you can eventually move it to your asset allocation once you have a taxable emergency fund built up in the more distant future, yay!
I thought about this too, but didn't comment, because I wondered if there would be different withdrawal rules for backdoor conversion amounts vs. direct contributions. Is there a 5-year rule to withdrawing converted amounts without penalty?

ETA: Even if there's a 10% penalty, it may be worth paying it, versus no longer adding to a Roth IRA.
Topic Author
AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

Monsterflockster wrote: Tue Sep 08, 2020 4:46 pm
AC1984 wrote: Tue Sep 08, 2020 1:35 pm For the past two years we've been maxing out two 401k's, a 457 (I'm a state employee and have access to both) and two back door Roth IRAs.
Others have responded so nothing new to add other than Why are you doing a backdoor Roth when you are under the limit & can contribute directly?
Because I had a lot of overtime the last two years and was over the limit. Either way I make too much to make sense for a tIRA so it's easier at this point to keep doing it in case OT comes back...probably wishful thinking at this point :P
Topic Author
AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

chassis wrote: Tue Sep 08, 2020 3:13 pm
AC1984 wrote: Tue Sep 08, 2020 2:03 pm
chassis wrote: Tue Sep 08, 2020 1:57 pm

Don't buy a teardrop now. Demand is sky high which means prices are likely sky high, and manufacturing quality from the factories will be lower than the usual terribly low quality from the recreational vehicle industry. I have been in manufacturing over 30 years in an adjacent industry to recreational vehicles. The RV industry, without exception as to brand or model, is one of the lowest quality manufacturing sectors in the United States.
Good point, and we weren't planning to buy anything yet, in the next year or so. But also no interest in a big RV company. There's a cottage industry of small companies who hand build awesome stuff for a similar price.
Topic Author
AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

Jags4186 wrote: Tue Sep 08, 2020 4:52 pm Cut your $12,000/mo in expenses to $7,000/mo and you'll have $50k saved in no time.
I may have overstated the expenses, we're at around $8,000/month.
Topic Author
AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

tashnewbie wrote: Tue Sep 08, 2020 5:00 pm
MotoTrojan wrote: Tue Sep 08, 2020 4:58 pm Rather than halting Roth IRA contributions I would just use it as part of your emergency fund (leave it in money market). If an emergency comes up, you withdraw it penalty free and lose the Roth space, oh well. If no emergency comes up you can eventually move it to your asset allocation once you have a taxable emergency fund built up in the more distant future, yay!
I thought about this too, but didn't comment, because I wondered if there would be different withdrawal rules for backdoor conversion amounts vs. direct contributions. Is there a 5-year rule to withdrawing converted amounts without penalty?

ETA: Even if there's a 10% penalty, it may be worth paying it, versus no longer adding to a Roth IRA.
Thanks for asking this, I would never have considered it. Am I thinking right that the 5-year-rule only applies for earnings and not contributions?
Topic Author
AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

MotoTrojan wrote: Tue Sep 08, 2020 4:58 pm Rather than halting Roth IRA contributions I would just use it as part of your emergency fund (leave it in money market). If an emergency comes up, you withdraw it penalty free and lose the Roth space, oh well. If no emergency comes up you can eventually move it to your asset allocation once you have a taxable emergency fund built up in the more distant future, yay!
This is really compelling. Is there a downside to this that isn't apparent? If you pull out the contribution and lose the Roth space, what's the difference if you were gonna use the money anyway? If not then you still have the cash in the MMA and can invest if you want in the future. I still want to build more cash in the regular savings account but this is peace of mind in the mean time.
MotoTrojan
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Re: Best way to build an emergency fund?

Post by MotoTrojan »

AC1984 wrote: Tue Sep 08, 2020 6:35 pm
MotoTrojan wrote: Tue Sep 08, 2020 4:58 pm Rather than halting Roth IRA contributions I would just use it as part of your emergency fund (leave it in money market). If an emergency comes up, you withdraw it penalty free and lose the Roth space, oh well. If no emergency comes up you can eventually move it to your asset allocation once you have a taxable emergency fund built up in the more distant future, yay!
This is really compelling. Is there a downside to this that isn't apparent? If you pull out the contribution and lose the Roth space, what's the difference if you were gonna use the money anyway? If not then you still have the cash in the MMA and can invest if you want in the future. I still want to build more cash in the regular savings account but this is peace of mind in the mean time.
Glad it may be helpful. If your options are...:

A - Invest in Roth and have no emergency fund

B - Save emergency fund in Roth (leave in MMA) and potentially invest that contribution in future when you have more free cash to build a taxable MMA emergency fund

C - No Roth at all, just save emergency fund in taxable MMA

... then it is a no-brainer to me.

Like I said, worst case with B you need to pull the cash out for an emergency and you don't get that Roth space in the future, but if you instead had done C then you wouldn't have had it anyways, even if no emergencies came up.
L82GAME
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Re: Best way to build an emergency fund?

Post by L82GAME »

AC1984 wrote: Tue Sep 08, 2020 5:59 pm
tashnewbie wrote: Tue Sep 08, 2020 5:00 pm
MotoTrojan wrote: Tue Sep 08, 2020 4:58 pm Rather than halting Roth IRA contributions I would just use it as part of your emergency fund (leave it in money market). If an emergency comes up, you withdraw it penalty free and lose the Roth space, oh well. If no emergency comes up you can eventually move it to your asset allocation once you have a taxable emergency fund built up in the more distant future, yay!
I thought about this too, but didn't comment, because I wondered if there would be different withdrawal rules for backdoor conversion amounts vs. direct contributions. Is there a 5-year rule to withdrawing converted amounts without penalty?

ETA: Even if there's a 10% penalty, it may be worth paying it, versus no longer adding to a Roth IRA.
Thanks for asking this, I would never have considered it. Am I thinking right that the 5-year-rule only applies for earnings and not contributions?
There are two primary five year rules for Roths. The first applies to opening a Roth and making contributions. Those earnings can be qualified distributions (i.e., tax free), as early as 59 1/2, only once five tax years have passed since the initial contribution was made.

The other five year rule pertaining to the original account owner applies to conversions. In that case, the rule applies to converted principal and respective penalties.
Topic Author
AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

L82GAME wrote: Tue Sep 08, 2020 7:04 pm
AC1984 wrote: Tue Sep 08, 2020 5:59 pm
tashnewbie wrote: Tue Sep 08, 2020 5:00 pm
MotoTrojan wrote: Tue Sep 08, 2020 4:58 pm Rather than halting Roth IRA contributions I would just use it as part of your emergency fund (leave it in money market). If an emergency comes up, you withdraw it penalty free and lose the Roth space, oh well. If no emergency comes up you can eventually move it to your asset allocation once you have a taxable emergency fund built up in the more distant future, yay!
I thought about this too, but didn't comment, because I wondered if there would be different withdrawal rules for backdoor conversion amounts vs. direct contributions. Is there a 5-year rule to withdrawing converted amounts without penalty?

ETA: Even if there's a 10% penalty, it may be worth paying it, versus no longer adding to a Roth IRA.
Thanks for asking this, I would never have considered it. Am I thinking right that the 5-year-rule only applies for earnings and not contributions?
There are two primary five year rules for Roths. The first applies to opening a Roth and making contributions. Those earnings can be qualified distributions (i.e., tax free), as early as 59 1/2, only once five tax years have passed since the initial contribution was made.

The other five year rule pertaining to the original account owner applies to conversions. In that case, the rule applies to converted principal and respective penalties.
To clarify, when you say "converted principle and respective penalties," does that mean the same as a back door contribution? Are those contributions able to be withdrawn without penalty the same as a regular Roth contribution?
L82GAME
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Re: Best way to build an emergency fund?

Post by L82GAME »

AC1984 wrote: Tue Sep 08, 2020 7:26 pm
L82GAME wrote: Tue Sep 08, 2020 7:04 pm
AC1984 wrote: Tue Sep 08, 2020 5:59 pm
tashnewbie wrote: Tue Sep 08, 2020 5:00 pm
MotoTrojan wrote: Tue Sep 08, 2020 4:58 pm Rather than halting Roth IRA contributions I would just use it as part of your emergency fund (leave it in money market). If an emergency comes up, you withdraw it penalty free and lose the Roth space, oh well. If no emergency comes up you can eventually move it to your asset allocation once you have a taxable emergency fund built up in the more distant future, yay!
I thought about this too, but didn't comment, because I wondered if there would be different withdrawal rules for backdoor conversion amounts vs. direct contributions. Is there a 5-year rule to withdrawing converted amounts without penalty?

ETA: Even if there's a 10% penalty, it may be worth paying it, versus no longer adding to a Roth IRA.
Thanks for asking this, I would never have considered it. Am I thinking right that the 5-year-rule only applies for earnings and not contributions?
There are two primary five year rules for Roths. The first applies to opening a Roth and making contributions. Those earnings can be qualified distributions (i.e., tax free), as early as 59 1/2, only once five tax years have passed since the initial contribution was made.

The other five year rule pertaining to the original account owner applies to conversions. In that case, the rule applies to converted principal and respective penalties.
To clarify, when you say "converted principle and respective penalties," does that mean the same as a back door contribution? Are those contributions able to be withdrawn without penalty the same as a regular Roth contribution?
No, each conversion has its own 5 year clock, so to speak. Upon withdrawal from a Roth, the ordering rules require that contributions are withdrawn first, converted principle second in the order that the conversions originally occurred (FIFO), and earnings last.
rascott
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Re: Best way to build an emergency fund?

Post by rascott »

AC1984 wrote: Tue Sep 08, 2020 6:35 pm
MotoTrojan wrote: Tue Sep 08, 2020 4:58 pm Rather than halting Roth IRA contributions I would just use it as part of your emergency fund (leave it in money market). If an emergency comes up, you withdraw it penalty free and lose the Roth space, oh well. If no emergency comes up you can eventually move it to your asset allocation once you have a taxable emergency fund built up in the more distant future, yay!
This is really compelling. Is there a downside to this that isn't apparent? If you pull out the contribution and lose the Roth space, what's the difference if you were gonna use the money anyway? If not then you still have the cash in the MMA and can invest if you want in the future. I still want to build more cash in the regular savings account but this is peace of mind in the mean time.

No.... using Roth as EF is a totally legit and highly recommended method. The Roth is a use it or lose it opportunity each year. .... and chances are quite high you'll never need to actually tap the full EF. But even if you do.... no harm, no foul.
Jags4186
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Re: Best way to build an emergency fund?

Post by Jags4186 »

AC1984 wrote: Tue Sep 08, 2020 5:57 pm
Jags4186 wrote: Tue Sep 08, 2020 4:52 pm Cut your $12,000/mo in expenses to $7,000/mo and you'll have $50k saved in no time.
I may have overstated the expenses, we're at around $8,000/month.
It's pretty simple:

You make $90k, wife makes $75k, $165k total income.
You save: $19,500 x3, $58,500 into 401ks and 457s and $12,000 into Roth IRAs. Total saved $70,500.
You live on $8,000/mo. Total $96,000.

$96,000 + $70,500 = $166,500. Income = $165,000. No taxes, no health insurance premiums included.

I'd suggest you need to either significantly cut expenses or stop saving so much into 401ks/457s. You can't build an emergency fund because your expenses exceed your takehome pay.
Fishing50
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Re: Best way to build an emergency fund?

Post by Fishing50 »

rascott wrote: Tue Sep 08, 2020 7:35 pm
AC1984 wrote: Tue Sep 08, 2020 6:35 pm
MotoTrojan wrote: Tue Sep 08, 2020 4:58 pm Rather than halting Roth IRA contributions I would just use it as part of your emergency fund (leave it in money market). If an emergency comes up, you withdraw it penalty free and lose the Roth space, oh well. If no emergency comes up you can eventually move it to your asset allocation once you have a taxable emergency fund built up in the more distant future, yay!
This is really compelling. Is there a downside to this that isn't apparent? If you pull out the contribution and lose the Roth space, what's the difference if you were gonna use the money anyway? If not then you still have the cash in the MMA and can invest if you want in the future. I still want to build more cash in the regular savings account but this is peace of mind in the mean time.

No.... using Roth as EF is a totally legit and highly recommended method. The Roth is a use it or lose it opportunity each year. .... and chances are quite high you'll never need to actually tap the full EF. But even if you do.... no harm, no foul.
+2

This seems perfect for you!
With a govt job, you don’t need as large of an EF.
2yrs from military pension. 80 equites / 20 bonds for life, ZERO emergency fund, 100% taxable in equities (dividends in cash), 33% taxable, 30% Roth, 37% tax deferred. | Gone Fishing At 52yrs old!
nix4me
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Re: Best way to build an emergency fund?

Post by nix4me »

Seems like you are trying to fill too many buckets at the same time with too small of a hose.

1. Increase hose size (make more money)
2. Prioritize buckets and fill one at a time until you run out of water.
Topic Author
AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

Fishing50 wrote: Tue Sep 08, 2020 7:40 pm
rascott wrote: Tue Sep 08, 2020 7:35 pm
AC1984 wrote: Tue Sep 08, 2020 6:35 pm
MotoTrojan wrote: Tue Sep 08, 2020 4:58 pm Rather than halting Roth IRA contributions I would just use it as part of your emergency fund (leave it in money market). If an emergency comes up, you withdraw it penalty free and lose the Roth space, oh well. If no emergency comes up you can eventually move it to your asset allocation once you have a taxable emergency fund built up in the more distant future, yay!
This is really compelling. Is there a downside to this that isn't apparent? If you pull out the contribution and lose the Roth space, what's the difference if you were gonna use the money anyway? If not then you still have the cash in the MMA and can invest if you want in the future. I still want to build more cash in the regular savings account but this is peace of mind in the mean time.

No.... using Roth as EF is a totally legit and highly recommended method. The Roth is a use it or lose it opportunity each year. .... and chances are quite high you'll never need to actually tap the full EF. But even if you do.... no harm, no foul.
+2

This seems perfect for you!
With a govt job, you don’t need as large of an EF.
Does the fact that my Roth contributions are back door change the soundness of this plan? In other words, do they have to be in the MMA for 5 years for the funds to be EF accessible?
lakpr
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Re: Best way to build an emergency fund?

Post by lakpr »

AC1984 wrote: Tue Sep 08, 2020 8:25 pm Does the fact that my Roth contributions are back door change the soundness of this plan? In other words, do they have to be in the MMA for 5 years for the funds to be EF accessible?
https://www.bogleheads.org/wiki/Roth_IRA
Bogleheads_Wiki wrote: The amounts you withdraw from a Roth IRA are considered to consist of the following amounts, in the following order. In each case, you move to the next category when the lifetime total of distributions from all your Roth IRAs exceed the preceding category.

Regular contributions
Taxable portion of first conversion (portion that was taxed at time of conversion)
Nontaxable portion of first conversion
Each subsequent conversion, in order, with the taxable portion coming out first for each conversion
Earnings (any increase in value occurring inside the Roth IRA) [18]
  • You don't have regular contributions.
  • Taxable portion of the first conversion ==> dig out the paperwork from your first Backdoor Roth contribution (or Form 8606 for that year). If the first Backdoor Roth is not more than 5 years ago, you owe both penalty and taxes; if older than 5 years, only taxes but no penalty.
  • Nontaxable portion of first conversion ==> your first backdoor Roth contribution amount to the Traditional IRA
  • Repeat for each subsequent year.
So you end up paying taxes and penalties on the tiny gains incurred in the Traditional IRA before the Roth conversion took place (and perhaps penalty if the corresponding contribution hasn't been yet 5 years old).
Topic Author
AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

lakpr wrote: Tue Sep 08, 2020 8:44 pm
AC1984 wrote: Tue Sep 08, 2020 8:25 pm Does the fact that my Roth contributions are back door change the soundness of this plan? In other words, do they have to be in the MMA for 5 years for the funds to be EF accessible?
https://www.bogleheads.org/wiki/Roth_IRA
Bogleheads_Wiki wrote: The amounts you withdraw from a Roth IRA are considered to consist of the following amounts, in the following order. In each case, you move to the next category when the lifetime total of distributions from all your Roth IRAs exceed the preceding category.

Regular contributions
Taxable portion of first conversion (portion that was taxed at time of conversion)
Nontaxable portion of first conversion
Each subsequent conversion, in order, with the taxable portion coming out first for each conversion
Earnings (any increase in value occurring inside the Roth IRA) [18]
  • You don't have regular contributions.
  • Taxable portion of the first conversion ==> dig out the paperwork from your first Backdoor Roth contribution (or Form 8606 for that year). If the first Backdoor Roth is not more than 5 years ago, you owe both penalty and taxes; if older than 5 years, only taxes but no penalty.
  • Nontaxable portion of first conversion ==> your first backdoor Roth contribution amount to the Traditional IRA
  • Repeat for each subsequent year.
So you end up paying taxes and penalties on the tiny gains incurred in the Traditional IRA before the Roth conversion took place (and perhaps penalty if the corresponding contribution hasn't been yet 5 years old).
In my situation, I don't have any real gains from a traditional IRA because I immediately converted each monthly deposit to Roth and the only gains have been after the money is there. All my IRA contributions have been nondeductible.
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peetsperk
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Re: Best way to build an emergency fund?

Post by peetsperk »

Some simple advice. First, you must believe building an Emergency Fund is important. If you don’t believe, it won’t happen. Second, I recommend constructing a visual that can be updated as you meet key savings milestones. I used a graphic where each brick was worth a $1,000. Each time we saved a $1,000, the brick got colored in. It hung on our refrigerator to keep the goal front and center. Having a positive graphic that helps reinforces your effort is important. Good luck!
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AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

lakpr wrote: Tue Sep 08, 2020 8:44 pm
AC1984 wrote: Tue Sep 08, 2020 8:25 pm Does the fact that my Roth contributions are back door change the soundness of this plan? In other words, do they have to be in the MMA for 5 years for the funds to be EF accessible?
https://www.bogleheads.org/wiki/Roth_IRA
Bogleheads_Wiki wrote: The amounts you withdraw from a Roth IRA are considered to consist of the following amounts, in the following order. In each case, you move to the next category when the lifetime total of distributions from all your Roth IRAs exceed the preceding category.

Regular contributions
Taxable portion of first conversion (portion that was taxed at time of conversion)
Nontaxable portion of first conversion
Each subsequent conversion, in order, with the taxable portion coming out first for each conversion
Earnings (any increase in value occurring inside the Roth IRA) [18]
  • You don't have regular contributions.
  • Taxable portion of the first conversion ==> dig out the paperwork from your first Backdoor Roth contribution (or Form 8606 for that year). If the first Backdoor Roth is not more than 5 years ago, you owe both penalty and taxes; if older than 5 years, only taxes but no penalty.
  • Nontaxable portion of first conversion ==> your first backdoor Roth contribution amount to the Traditional IRA
  • Repeat for each subsequent year.
  • So you end up paying taxes and penalties on the tiny gains incurred in the Traditional IRA before the Roth conversion took place (and perhaps penalty if the corresponding contribution hasn't been yet 5 years old).


Thank you for all the feedback everyone! And thank you Jags4186 for pointing out the simple math deficit, it was partly due to the large amount of overtime I was accruing in the past few years and didn't alter the contribution amount accordingly. I'll work to correct that piece. Please tell me if I'm missing anything here...My thinking at this point to simultaneously get the Roth benefits and build an EF is:
  • Use the amount in the nieces/nephew savings account as part of my cash EF savings (easy enough, I don't have to do anything here except maybe move it to another savings account).
  • For the time being, stop all taxable brokerage account contributions.
  • For the next few years, I can't use any of my prior Roth conversions as part of an EF because of the 5 year rule. I started contributing to the back door Roth IRAs in 2018. All my Traditional IRA contributions are non-deductible, which as I understand means that just like a regular Roth IRA, I can pull out contributions any time without penalty (right?). It makes sense then to keep maxing out the Traditional IRA, but from this point onward rather than immediately converting them I'll keep these contributions in the Traditional IRA MMA until I have enough cash in my regular bank savings account to satisfy my EF needs and justify converting some of it. I don't imagine it will have much earnings anyway because it's hardly any interest and I'm not going to let it sit there for longer than I need. Even a few hundred bucks over time isn't that much taxable earnings when I convert it (as an aside I didn't mention, I don't have any money in the Traditional IRA, I've been converting each monthly contribution from day one). As my regular bank cash savings account increases over time, I can rely less on the Roth for the purposes of an EF. Worst case as previously mentioned is to withdraw the contributions and lose the ability to max out the IRA for the year, which would have happened anyway if I put the money directly into a regular savings account.
  • If these don't prove enough to build cash savings, I can lessen 401k/457 contributions.
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Re: Best way to build an emergency fund?

Post by Dottie57 »

tashnewbie wrote: Tue Sep 08, 2020 1:54 pm
frugalecon wrote: Tue Sep 08, 2020 1:48 pm I am struggling a little at the idea of having $5200 in an account designated for nieces and nephews when you have about half that in your emergency fund. In a true emergency, what would stop you from accessing these funds? I like my nieces and nephews, but I would put my EF ahead of a fund for them. I certainly would be hesitant to withdraw from valuable Roth space for anything that wasn't a true emergency.
+1. Also, I'm assuming you live in a VHCOL, with expenses of ~12.5k per month.
+1
carmonkie
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Re: Best way to build an emergency fund?

Post by carmonkie »

Jags4186 wrote: Tue Sep 08, 2020 7:38 pm
AC1984 wrote: Tue Sep 08, 2020 5:57 pm
Jags4186 wrote: Tue Sep 08, 2020 4:52 pm Cut your $12,000/mo in expenses to $7,000/mo and you'll have $50k saved in no time.
I may have overstated the expenses, we're at around $8,000/month.
It's pretty simple:

You make $90k, wife makes $75k, $165k total income.
You save: $19,500 x3, $58,500 into 401ks and 457s and $12,000 into Roth IRAs. Total saved $70,500.
You live on $8,000/mo. Total $96,000.

$96,000 + $70,500 = $166,500. Income = $165,000. No taxes, no health insurance premiums included.

I'd suggest you need to either significantly cut expenses or stop saving so much into 401ks/457s. You can't build an emergency fund because your expenses exceed your takehome pay.
I was going to say there was a budget problem, you beat me to it.
@35 you are doing well. I would stop contributing your 401(k) and free up those funds. I think 457 are better because of when you can withdraw the money. I would not pause Roth contributions because of all the tax benefits of those accounts. While the contributions can be used for emergencies, you can't refill the Roth space back.

I would roll the nieces and nephews fund to my EM fund (Sorry little ones). If things get bad, you have already 30K in the taxable account you can use in a pinch. Look at your cost basis, set your Cost basis to SpecID, and unload shares with a loss (tax harvest the loss) or with marginal gains.
Sounds like you want the cake and eat it too. You need to give up something to get something...
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Re: Best way to build an emergency fund?

Post by Jags4186 »

Fishing50 wrote: Tue Sep 08, 2020 7:40 pm
This seems perfect for you!
With a govt job, you don’t need as large of an EF.
I’d argue the opposite. Haven’t we had multiple government shutdowns and furloughs in the past few years? [OT comment removed by admin LadyGeek] I’d expect more shutdowns going forward.
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Re: Best way to build an emergency fund?

Post by LadyGeek »

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AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

I'm reading different answers in different places regarding whether one can withdraw contributions to a nondeductible traditional IRA tax/penalty free. In my case it would likely not be in the same year as it was contributed if used as a backup emergency fund. I called Vanguard and the person said I would incur a 10% penalty for a withdrawal from a nondeductible IRA contribution. Can anyone confirm or refute this?
AnonLady
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Re: Best way to build an emergency fund?

Post by AnonLady »

AC1984 wrote: Tue Sep 08, 2020 1:35 pm I'm amazed to have accumulated so much in the investments at this point in time, but feel like I got carried away and haven't kept up the cash reserves.
We are pretty similar actually. I Dave Ramsey-ed away my debt in 2011, then went all in on all my various tax advantaged retirement options and got lazy about budgeting so my spending wasn't very in control. I'm not a huge spender so it wasn't horrible and I didn't get back into debt, but I could have saved more with a budget, even with my level of retirement contributions (and I could have made a lot better decisions in life that would have not cost me so much financially, but that's another story), but at least I had money going directly out of my paycheck and out of my checking to fund my work retirement accounts and my Roth IRA, so it's not like I wasted all my income in that time or went into more debt.

Last year I had to take a HEL due to an unfortunate life situation that I would have much preferred to take out of my emergency fund. I certainly didn't want to take money out of my retirement for it. So now I'm working on building up an emergency fund and various other sinking funds.

If you don't keep a budget, I highly recommend YNAB, I bet you can save an emergency fund faster than you think if you aren't budgeting and start to keep a budget. You may need to stop some of those other contributions to speed it up, but I highly recommend you have one. It feels great knowing that cushion is there, especially now that I learned the hard way how useful it can be. It would have been much easier to build it back up than it was to pay off the debt and then build it up, but you live you learn.
inbox788
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Re: Best way to build an emergency fund?

Post by inbox788 »

I think you're confusing emergency funds with emergency plan. And you're commingling some of your bigger cash expenses. Are you helping your nieces and nephews pay tuition or completely spoiling them? Or do you just have a whole lot of them?

I agree with those that say keep maxing out ALL the tax advantaged accounts, especially Roth.

You don't really need an emergency fund, just enough liquidity. When you add some bonds to your current 100% equities, that can provide some of the cash needs.

https://www.bogleheads.org/wiki/Placing ... ed_account

If you have access to low cost loans, not paying them back early is a way to access some liquidity. What are the rates on the loans (any subsidized or tax beneficial) and are you paying minimum or paying down principal?
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AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

inbox788 wrote: Wed Sep 09, 2020 3:53 pm I think you're confusing emergency funds with emergency plan. And you're commingling some of your bigger cash expenses. Are you helping your nieces and nephews pay tuition or completely spoiling them? Or do you just have a whole lot of them?

I agree with those that say keep maxing out ALL the tax advantaged accounts, especially Roth.

You don't really need an emergency fund, just enough liquidity. When you add some bonds to your current 100% equities, that can provide some of the cash needs.

https://www.bogleheads.org/wiki/Placing ... ed_account

If you have access to low cost loans, not paying them back early is a way to access some liquidity. What are the rates on the loans (any subsidized or tax beneficial) and are you paying minimum or paying down principal?
Thanks for the thoughtful feedback. The "gift" account is not specifically earmarked if we really need it, but we thought it would be nice. I'm nearly positive our (at this point 5) nieces' and nephews' parents don't have any savings to speak of and we don't have kids, so whether a small boost for school or getting out on their own or any pressing need was our thought.

Our current loans consist of two car's (one's almost paid off, the other in two years, both less than 3% interest so just paying the minimum). That will free up $400/month when paid off. Mortgage is $550 biweekly for another 15 yrs, but we are paying at this point $200 principal every two weeks. My student loans are typically $800/month - but for now they're suspended and will be forgiven by 2025. My wife's student loans are about $225/month and will be paid off in 2025.

As far as your suggestion for bonds, I have none at this point but could buy a total bond market fund with future contributions for a while. Am I right in thinking they would have to be in a taxable account to access without penalty? I'm hesitant though because I keep hearing they're not tax efficient or typically recommended in a taxable account. I also don't know from my prior question whether you can withdraw nondeductible tIRA contributions without a 10% penalty, which if so could be a good place.
lakpr
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Re: Best way to build an emergency fund?

Post by lakpr »

AC1984 wrote: Thu Sep 10, 2020 8:30 am Our current loans consist of two car's (one's almost paid off, the other in two years, both less than 3% interest so just paying the minimum). That will free up $400/month when paid off. Mortgage is $550 biweekly for another 15 yrs, but we are paying at this point $200 principal every two weeks. My student loans are typically $800/month - but for now they're suspended and will be forgiven by 2025. My wife's student loans are about $225/month and will be paid off in 2025.

As far as your suggestion for bonds, I have none at this point but could buy a total bond market fund with future contributions for a while. Am I right in thinking they would have to be in a taxable account to access without penalty? I'm hesitant though because I keep hearing they're not tax efficient or typically recommended in a taxable account. I also don't know from my prior question whether you can withdraw nondeductible tIRA contributions without a 10% penalty, which if so could be a good place.
The two sentences in red, in my mind, are contradictory. First, auto-loans are not tax deductible, so a 3% after-tax interest rate for a person in the 24% tax bracket (which you are in since you file MFS), is equivalent to a before-tax interest rate of 3.94%. If you include any state taxes into consideration, then the before-tax equivalent shoots up north of 4%.

The SEC yield of the total bond market fund, today is yielding just about 1.4%, and its yield is also before-tax.

By paying only the minimum on the car loans and yet choosing to invest in a bond market fund is exactly equivalent to borrowing at 4% and investing for 1.4%. You are losing almost 3% every year you keep this scheme. Either do NOT invest in the bond market fund (in this case the expectation of higher yields in stock market justifies the use of lower-cost loan), or pay down/pay off the car loans in entirety. That's the same as buying a 4% CD for 2 years -- the remainder period on the car loan.

Edited to add: What I wrote above is also true for mortgage loans, and I advocate paying down / paying off the mortgage than investing in bond funds. But there is one big argument against that, namely, liquidity. Unlike investment in a bond fund, you cannot sell a brick of your house to raise cash in a pinch. Selling a house is at least a 3 month process, if not longer. And this is a darn good reason to incur, even if mathematically disadvantageous, to keep the mortgage as well as invest in bond funds.

Assuming the car is in a reasonable shape, there are legitimate outfits (credit unions, for example) that would offer you title loans; you turn in the title to the credit union and register them as lien holder, in return for a wad of cash that you then repay in the future. Trying to say here that the 'liquidity' is not a concern with car loans.
Last edited by lakpr on Thu Sep 10, 2020 8:45 am, edited 1 time in total.
Topic Author
AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

AnonLady wrote: Wed Sep 09, 2020 2:34 pm
AC1984 wrote: Tue Sep 08, 2020 1:35 pm I'm amazed to have accumulated so much in the investments at this point in time, but feel like I got carried away and haven't kept up the cash reserves.
We are pretty similar actually. I Dave Ramsey-ed away my debt in 2011, then went all in on all my various tax advantaged retirement options and got lazy about budgeting so my spending wasn't very in control. I'm not a huge spender so it wasn't horrible and I didn't get back into debt, but I could have saved more with a budget, even with my level of retirement contributions (and I could have made a lot better decisions in life that would have not cost me so much financially, but that's another story), but at least I had money going directly out of my paycheck and out of my checking to fund my work retirement accounts and my Roth IRA, so it's not like I wasted all my income in that time or went into more debt.

Last year I had to take a HEL due to an unfortunate life situation that I would have much preferred to take out of my emergency fund. I certainly didn't want to take money out of my retirement for it. So now I'm working on building up an emergency fund and various other sinking funds.

If you don't keep a budget, I highly recommend YNAB, I bet you can save an emergency fund faster than you think if you aren't budgeting and start to keep a budget. You may need to stop some of those other contributions to speed it up, but I highly recommend you have one. It feels great knowing that cushion is there, especially now that I learned the hard way how useful it can be. It would have been much easier to build it back up than it was to pay off the debt and then build it up, but you live you learn.
Sticking to a budget is the one obvious part we haven't done. I don't know why it's so hard to start, but definitely worth exploring.
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AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

lakpr wrote: Thu Sep 10, 2020 8:39 am
AC1984 wrote: Thu Sep 10, 2020 8:30 am Our current loans consist of two car's (one's almost paid off, the other in two years, both less than 3% interest so just paying the minimum). That will free up $400/month when paid off. Mortgage is $550 biweekly for another 15 yrs, but we are paying at this point $200 principal every two weeks. My student loans are typically $800/month - but for now they're suspended and will be forgiven by 2025. My wife's student loans are about $225/month and will be paid off in 2025.

As far as your suggestion for bonds, I have none at this point but could buy a total bond market fund with future contributions for a while. Am I right in thinking they would have to be in a taxable account to access without penalty? I'm hesitant though because I keep hearing they're not tax efficient or typically recommended in a taxable account. I also don't know from my prior question whether you can withdraw nondeductible tIRA contributions without a 10% penalty, which if so could be a good place.
The two sentences in red, in my mind, are contradictory. First, auto-loans are not tax deductible, so a 3% after-tax interest rate for a person in the 24% tax bracket (which you are in since you file MFS), is equivalent to a before-tax interest rate of 3.94%. If you include any state taxes into consideration, then the before-tax equivalent shoots up north of 4%.

The SEC yield of the total bond market fund, today is yielding just about 1.4%, and its yield is also before-tax.

By paying only the minimum on the car loans and yet choosing to invest in a bond market fund is exactly equivalent to borrowing at 4% and investing for 1.4%. You are losing almost 3% every year you keep this scheme. Either do NOT invest in the bond market fund (in this case the expectation of higher yields in stock market justifies the use of lower-cost loan), or pay down/pay off the car loans in entirety. That's the same as buying a 4% CD for 2 years -- the remainder period on the car loan.

Edited to add: What I wrote above is also true for mortgage loans, and I advocate paying down / paying off the mortgage than investing in bond funds. But there is one big argument against that, namely, liquidity. Unlike investment in a bond fund, you cannot sell a brick of your house to raise cash in a pinch. Selling a house is at least a 3 month process, if not longer. And this is a darn good reason to incur, even if mathematically disadvantageous, to keep the mortgage as well as invest in bond funds.

Assuming the car is in a reasonable shape, there are legitimate outfits (credit unions, for example) that would offer you title loans; you turn in the title to the credit union and register them as lien holder, in return for a wad of cash that you then repay in the future. Trying to say here that the 'liquidity' is not a concern with car loans.
So if I'm understanding you right, are you suggesting I just need to save more cash in a liquid savings account and/or pay off those loans? Our student loan interest also aren't tax deductible because of MFS. No plans to sell the house so that's not an option.
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Re: Best way to build an emergency fund?

Post by lakpr »

AC1984 wrote: Thu Sep 10, 2020 8:54 am So if I'm understanding you right, are you suggesting I just need to save more cash in a liquid savings account and/or pay off those loans? Our student loan interest also aren't tax deductible because of MFS. No plans to sell the house so that's not an option.
I advocate keeping just 2 months of expenses in liquid form for now, no more. Based on $8k expenses mentioned up-thread, that's $16k. Once the $16k threshold is achieved, I suggest knocking off the car loans, then the student loans, then finally the mortgage in that order. Well, at least the car loans and student loans; no bond fund investments until then. I am ok with keeping the mortgage AND investing in a bond fund at the same time due to liquidity concerns.
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Re: Best way to build an emergency fund?

Post by CyclingDuo »

AC1984 wrote: Thu Sep 10, 2020 8:44 amSticking to a budget is the one obvious part we haven't done. I don't know why it's so hard to start, but definitely worth exploring.
Download one of the free budget apps - and enter everything religiously for a few months to get the true picture of what comes in and what goes out. It's well worth it - especially the first few months - to get a handle on your household cash flow. Once you get the true picture after a few months of collecting receipts, logging in online to enter every purchase/bill/deposit/etc..., you can make decisions on where any potential trims and cuts could occur in your budget.

I never saw the answer, but why are you saving money for a niece & nephew? Conventional wisdom is you take care of your immediate family first and foremost. Let your siblings take care of their own children. Your house must be in order as the number one thing you focus on.

Are you absolutely 100% positive that your student loans will be forgiven?

Simple answer in my mind would be for you to stop maxing out all 3 plans (the two 457b's, and one 401k) plus the backdoor Roth IRA's until you get all of your debt paid off ASAP for the cars and student loans, and you build up your EF. At your rate of income, that should be able to be done in very little time compared to decades of investing you have during all of your accumulation years. Once all those loans are paid off, then you can make some serious hay. If that means a year or two, so be it. You'll be debt free (outside of your mortgage) and can go right back to your high rate of savings.

Tear drop camper? Why purchase yet another depreciating asset? Why even contemplate it when you have debt beyond your mortgage to take care of first? Buy a tent and do some real camping. :mrgreen: Or rent a pull behind every year for a week or two for your vacation.

CyclingDuo
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AC1984
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Re: Best way to build an emergency fund?

Post by AC1984 »

CyclingDuo wrote: Thu Sep 10, 2020 9:17 am
AC1984 wrote: Thu Sep 10, 2020 8:44 amSticking to a budget is the one obvious part we haven't done. I don't know why it's so hard to start, but definitely worth exploring.
Download one of the free budget apps - and enter everything religiously for a few months to get the true picture of what comes in and what goes out. It's well worth it - especially the first few months - to get a handle on your household cash flow. Once you get the true picture after a few months of collecting receipts, logging in online to enter every purchase/bill/deposit/etc..., you can make decisions on where any potential trims and cuts could occur in your budget.

I never saw the answer, but why are you saving money for a niece & nephew? Conventional wisdom is you take care of your immediate family first and foremost. Let your siblings take care of their own children. Your house must be in order as the number one thing you focus on.

Are you absolutely 100% positive that your student loans will be forgiven?

Simple answer in my mind would be for you to stop maxing out all 3 plans (the two 457b's, and one 401k) plus the backdoor Roth IRA's until you get all of your debt paid off ASAP for the cars and student loans, and you build up your EF. At your rate of income, that should be able to be done in very little time compared to decades of investing you have during all of your accumulation years. Once all those loans are paid off, then you can make some serious hay. If that means a year or two, so be it. You'll be debt free (outside of your mortgage) and can go right back to your high rate of savings.

Tear drop camper? Why purchase yet another depreciating asset? Why even contemplate it when you have debt beyond your mortgage to take care of first? Buy a tent and do some real camping. :mrgreen: Or rent a pull behind every year for a week or two for your vacation.

CyclingDuo
I'll look into the budget apps. I have Personal Capital for overall snapshot, but it wrongly categorizes so many things it's a pain to redo it...not to say I shouldn't try for a while and see, unless you have another suggestion for an app to try.

Saving for nieces and nephews because we don't have kids and their parents have no significant savings (just guessing, but pretty sure), and we'd like to be able to help them out with a little boost for living expenses or whatever they need when they're moving out of the house or a head start for their own investing. If we get into an emergency situation I'd for sure use that cash before pulling any investments, so I guess it is part of the EF until it's not.

My wife's student loans are on a regular 10-yr plan and will be paid off, my loans are on track for PSLF and I'm sure they'll be forgiven. I mean how can I be 100% till they are? but I've gotten 70 out of 120 qualifying payments certified and I have no plans to change my job or loan type.

I appreciate the suggestion of not maxing out the retirement accounts, it is a ton of money over the course of a year. As for the tear drop, it's a lifestyle decision more than a financial asset. We're not pulling that trigger till we have cash to do so. We also do a lot of tent camping/backpacking, but the teardrop is with longer road trips in mind. It's a fantasy, but doesn't have to be forever 8-)
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