Portfolio Review: Just Hit $500,000!

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Topic Author
ofrivia
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Joined: Mon Oct 02, 2017 7:17 am

Portfolio Review: Just Hit $500,000!

Post by ofrivia »

Hello fellow Bogleheads!

Long time lurker but long time boglehead from way back in the early 2000's when my grandfather introduced me to the sound financial advice of Mr. Bogle and those on this forum. It's thanks to that advice and these forums that my wife and I are where we are with our retirement savings. So thank you!

My wife and I just hit the wonderful milestone of $500,000 in our retirement portfolio this year. What an achievement! :sharebeer
Given that milestone, as well as a recent new job that has increased revenue, and a couple of questions I haven't been able to answer, I'd love your feedback.

Gross Income
2019 Federal Taxable Income:$167,000

2020 Expected Income:
FT Job: $160,000
Projected Business Income: $100,000
Wife: SAHM

I was previously self employed as a consultant. I still have that business and generate the business income I shared above, but as of mid 2019 I went full time with a company and now generate the FT job income I shared above in addition to the business income. The business income I utilize to max out my solok ($56,000) and the occasional assist on building the emergency fund for paying off student loan debt. Otherwise it remains in the business for business emergency fund and cash flow assist.

Emergency funds: Three months cash in a Savings Account.

Debt:
Home Mortgage $280,165.55 at 15 year term 3.25%, Remaining term 12 years home value around $450,000
No credit card, student loan, car loan, or other debt.

Cars have been loan free for 2 years now and are in good shape, no anticipated need for a new car for a few years.
Student loan debt we funneled efforts into paying off, and did, in 2020.

Tax Filing Status: Married Filing Jointly, with 3 Dependent Children

Tax Rate: 22% Federal, 6.370% State in 2019. We are going to hit the 24% bracket in 2020 given new income stream.

State of Residence: NJ

Age: 38 for us both

Desired Asset allocation: 95% stocks / 5% bonds
(I’m not in a rush to get serious about bonds until I’m 40)
Desired International allocation: 25% of stocks

Current portfolio size: $512,000

Additional Savings: $1,000 a month in total contribution to 529 for kids, and roughly $2,000 a month into savings accounts for various projected future expenses (car, roof replacement, bathroom remodel)

Life insurance:
Him $1 million policy
Her $500,000 policy

Current retirement assets breakdown: See below image from an xls chart. If you prefer this in another format let me know.

Image

New Annual Contributions
$57,000 - Solo 401k - Traditional
$19,500 Company 401k - Roth
$7,000 HSA - We are projected to max out at annually.
0 - Roth/tIRA - We are ineligible due to our income level
$12,000 529 for our kids


Questions:
1. General Feedback - This year we achieved a great milestone, hitting $500,000 in our combined retirement accounts. We are looking for overall feedback as we set course for the next milestone of a million.

2. Backdoor Roth Conversion - I’ve seen many threads on this. After all my reading, I feel that at this point in time, we shouldn’t worry about a conversion. We are doing well financially but we aren’t yet at the point where we have spare money to throw into a taxed account, and we don’t have the spare money to pay the extra taxes from the conversion. I’d rather keep putting our savings into maxing out the solok and work roth ira. Is it ok to hold off on a conversion until I’m semi retired and my income is less, tax bracket is lower.

3. HSA - I had been keeping a % of the HSA funds in cash and the overflow into bonds in case of medical emergency. But after some reading and the tremendous benefits of the HSA, I think I need to revise my approach. I won't keep any of the HSA in cash, and I’ll put it all into Total International to build towards my goal of 20% holdings there.

4. HSA Delayed Reimbursement - I read that reimbursement can be delayed for qualified medical expenses. In 2020 we were using the HSA to pay off even little things like prescription medication. In 2021 I intend to pay everything out of pocket, save the receipts, and delay the reimbursement until we retire. Thoughts?
Last edited by ofrivia on Fri Oct 16, 2020 8:36 am, edited 1 time in total.
ccf
Posts: 169
Joined: Mon Mar 09, 2015 9:13 pm

Re: Portfolio Review: Just Hit $500,000!

Post by ccf »

Congrats! 2 cents from another roughly 40 year old with kids

First - refinance the 3.25% 15 year mortgage! You should be able to do better than 2.5% right now.
2. Roth Conversion - I’ve seen many threads on this. After all my reading, I feel that at this point in time, we shouldn’t worry about a conversion
Do you mean a backdoor Roth, where you contribute post tax dollars to a Trad IRA and then convert it? For a couple you can only do $12,000 per year so I do really like this option as a way of building up a the fattest Roth that you can while you have the most growth years ahead. If it would mean not contributing to your 529s then ... do whatever feels right to you.
3. HSA - I had been keeping a % of the HSA funds in cash and the overflow into bonds in case of medical emergency. But after some reading and the tremendous benefits of the HSA, I think I need to revise my approach. I won't keep any of the HSA in cash, and I’ll put it all into Total International to build towards my goal of 20% holdings there.
HSA space is precious to me. HSA growth is not taxed going in and not taxed going out when used for medical expenses. We'll all need money for medical expenses if we make it to retirement. I'd make it look like your Roth allocations and would not risk concentrating it all in international (which I do like to hold but not like this).
4. HSA Delayed Reimbursement -... In 2021 I intend to pay everything out of pocket, save the receipts, and delay the reimbursement until we retire. Thoughts?
If you can afford to do out of pocket, I can't think of any reason to use HSA funds. Let them grow.
Last edited by ccf on Fri Oct 16, 2020 8:38 am, edited 2 times in total.
HomeStretch
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Re: Portfolio Review: Just Hit $500,000!

Post by HomeStretch »

ofrivia wrote: Fri Oct 16, 2020 8:13 am 2020 Expected Income:
FT Job: $160,000
Projected Business Income: $100,000
Wife: SAHM

New Annual Contributions
$57,000 - Solo 401k - Traditional
$19,500 Company 401k - Roth
Congratulations on your milestone and new job!

Are you sure you are eligible to contribute $19.5k to your employer 401k plan and $57k to your Solo 401k plan for 2020?

Your 2020 401k employee deferral limit of $19,500 is across all plans. If you are making a $19.5k deferral to your employer plan, that means only employer contributions can be made to your Solo 401k. With self-employment income of $100k, the maximum Solo 401k employer contribution will be $20k or less.
Topic Author
ofrivia
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Joined: Mon Oct 02, 2017 7:17 am

Re: Portfolio Review: Just Hit $500,000!

Post by ofrivia »

Thanks for quick replies!
HomeStretch wrote: Fri Oct 16, 2020 8:36 am Are you sure you are eligible to contribute $19.5k to your employer 401k plan and $57k to your Solo 401k plan for 2020?

Your 2020 401k employee deferral limit of $19,500 is across all plans. If you are making a $19.5k deferral to your employer plan, that means only employer contributions can be made to your Solo 401k. With self-employment income of $100k, the maximum Solo 401k employer contribution will be $20k or less.
Great point. I'm not sure actually. I already pinged my accountant on this and am waiting for an answer next week. I have the cash flow to support the max that I posted, but if I'm limited as you said, we'll max whatever the limit is.
ccf wrote: Fri Oct 16, 2020 8:26 am Congrats! 2 cents from another roughly 40 year old with kids

First - refinance the 3.25% 15 year mortgage! You should be able to do better than 2.5% right now.
That's a big "duh" for me. Thanks for pointing that out!
ccf wrote: Fri Oct 16, 2020 8:26 am
2. Roth Conversion - I’ve seen many threads on this. After all my reading, I feel that at this point in time, we shouldn’t worry about a conversion
Do you mean a backdoor Roth, where you contribute post tax dollars to a Trad IRA and then convert it? For a couple you can only do $12,000 per year so I do really like this option as a way of building up a the fattest Roth that you can while you have the most growth years ahead. If it would mean not contributing to your 529s then ... do whatever feels right to you.
Yes, I meant backdoor roth. I just updated my OP to be more clear. Gotcha, so I'd only be able to convert $12,000 a year.... I'll continue reading up on this. I'm unsure of tax implications with my traditional 401k being so large.
ccf
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Re: Portfolio Review: Just Hit $500,000!

Post by ccf »

A 401k won't affect your backdoor Roth but I did just notice that one of you has a large trad Rollover IRA. You don't want to convert that and pay taxes on it....so you've got one person's $6000 of Roth space that you can convert into and not $12000.

I'd do that. From your post it looks like you can come up with $6K a year + taxes on that no problem.
Living Free
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Re: Portfolio Review: Just Hit $500,000!

Post by Living Free »

With only one income earner in the family and 3 children I'd recommend increasing the emergency fund to 6 months (possibly more).
Outer Marker
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Re: Portfolio Review: Just Hit $500,000!

Post by Outer Marker »

ofrivia wrote: Fri Oct 16, 2020 8:13 am My wife and I just hit the wonderful milestone of $500,000 in our retirement portfolio this year. What an achievement! :sharebeer
Given that milestone, as well as a recent new job that has increased revenue, and a couple of questions I haven't been able to answer, I'd love your feedback.

Gross Income
2019 Federal Taxable Income:$167,000

2020 Expected Income:
FT Job: $160,000
Projected Business Income: $100,000
Wife: SAHM

***

Debt:
Home Mortgage $280,165.55 at 15 year term 3.25%, Remaining term 12 years home value around $450,000

***
Cars have been loan free for 2 years now and are in good shape, no anticipated need for a new car for a few years.

***
Age: 38 for us both

Desired Asset allocation: 95% stocks / 5% bonds
(I’m not in a rush to get serious about bonds until I’m 40)
Desired International allocation: 25% of stocks
Congratulations on hitting a milestone!

First, as has been noted, refi the mortgage immediately to a 15 year at 2.5% or less. That is guaranteed, risk free, free money.

Second, look to boost your savings rate with the additional income. You've been living comfortably on what you were making. Bank all of your increase.

Third, reconsider the importance of getting serious about bonds/fixed income sooner. The market is at frothy highs that are not supported by current earnings. You could well see that milestone slip away. I agree with Benjamin Graham that the reasonable bound on equities is between 75% to 25% of the portfolio. True, bonds aren't sexy, but they add much needed stability in these turbulent times, and may present some strategic rebalancing opportunities. Consider iBonds, stable value in your tax-advantaged, and cd's.

Finally, unless mechanics or family size require it, drive your cars into the ground and don't plan on regularly replacing them. Its not clear how long you've had your cars, but sounds like they are recently paid off and should not require a new one in "a few years."

That should get you to your next milestone more quickly!

Best of luck . . .
ccf
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Re: Portfolio Review: Just Hit $500,000!

Post by ccf »

+1 on the advice to reconsider bonds. You are 95% equities and "not in a rush to get serious about bonds until I’m 40" but you are 40 in 2 years :)

Were invested 95/5 before COVID hit?
Topic Author
ofrivia
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Re: Portfolio Review: Just Hit $500,000!

Post by ofrivia »

ccf wrote: Fri Oct 16, 2020 12:16 pm +1 on the advice to reconsider bonds. You are 95% equities and "not in a rush to get serious about bonds until I’m 40" but you are 40 in 2 years :)

Were invested 95/5 before COVID hit?
Fair point, and it's exactly why I posted - such great feedback I've received. Thank you!

So in thinking about it and having read other posts about this, here's my thought.

I'll put $100,000 of my 401k's total stock market into bonds. That will put me to 20% bonds, 67% total stock market. I'd leave international alone. This would be about 1/3 of my traditional 401k being in bonds at that point.

Then I would market time and when we have the next big crash like march 2020, allocate 10% of those bonds into stocks.

Thoughts?
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Re: Portfolio Review: Just Hit $500,000!

Post by Outer Marker »

ofrivia wrote: Fri Oct 16, 2020 3:50 pm I'll put $100,000 of my 401k's total stock market into bonds. That will put me to 20% bonds, 67% total stock market. I'd leave international alone. This would be about 1/3 of my traditional 401k being in bonds at that point.

Then I would market time and when we have the next big crash like march 2020, allocate 10% of those bonds into stocks.

Thoughts?
20% fixed income is good; 30% would be better IMO. I would consider diversifying fixed income among both bonds and stable value and/or ibonds.

Just rebalance when you are 5% or more out of whack back to target. I wouldn't pre-plan anything.
260chrisb
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Re: Portfolio Review: Just Hit $500,000!

Post by 260chrisb »

Well done for your age!! Keep your foot on the gas but make sure you're comfy with your asset allocation. On a separate note; can you really get 2.5% on a re-fi?? I'm skeptical, doubt it, would like to know, and would sooner just start lump sum payments to save on interest way before I would pay anything for a re-fi at your income level.
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Re: Portfolio Review: Just Hit $500,000!

Post by Outer Marker »

260chrisb wrote: Fri Oct 16, 2020 5:41 pm On a separate note; can you really get 2.5% on a re-fi?? I'm skeptical, doubt it, would like to know, and would sooner just start lump sum payments to save on interest way before I would pay anything for a re-fi at your income level.
Yes, you can absolutely get 2.5% or lower on a refi. At 2.5% the lender is effectively paying all closing costs. i.e. a $1,895 credit at 2.5% If you want a lower rate, you have to pay a bit out of pocket. This is from AmeriSave's rate options yesterday on a 15 year refi:

Apply Now $704,500 2.250% 2.317% $4,615 $0 $4,615 $2,916 View
Apply Now $704,500 2.375% 2.405% $4,656 $0 $4,656 $1,064 View
Apply Now $704,500 2.500%[/b] 2.518% $4,698 $0 $4,698 $-1,895 [/b] View
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anon_investor
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Re: Portfolio Review: Just Hit $500,000!

Post by anon_investor »

260chrisb wrote: Fri Oct 16, 2020 5:41 pm Well done for your age!! Keep your foot on the gas but make sure you're comfy with your asset allocation. On a separate note; can you really get 2.5% on a re-fi?? I'm skeptical, doubt it, would like to know, and would sooner just start lump sum payments to save on interest way before I would pay anything for a re-fi at your income level.
Check out the refinance mega thread. No cost 2.5% 15yr fixed refi is widely available. Some report even no cost 2.5% 30yr fixed. I did my refi in July and got at no cost 2.75% 30yr fixed, so the OP can def improve on the mortgage rate at 0 cost (really 0 cost, all costs offset by lender credits), so 0 break even.
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anon_investor
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Re: Portfolio Review: Just Hit $500,000!

Post by anon_investor »

ofrivia wrote: Fri Oct 16, 2020 3:50 pm
ccf wrote: Fri Oct 16, 2020 12:16 pm +1 on the advice to reconsider bonds. You are 95% equities and "not in a rush to get serious about bonds until I’m 40" but you are 40 in 2 years :)

Were invested 95/5 before COVID hit?
Fair point, and it's exactly why I posted - such great feedback I've received. Thank you!

So in thinking about it and having read other posts about this, here's my thought.

I'll put $100,000 of my 401k's total stock market into bonds. That will put me to 20% bonds, 67% total stock market. I'd leave international alone. This would be about 1/3 of my traditional 401k being in bonds at that point.

Then I would market time and when we have the next big crash like march 2020, allocate 10% of those bonds into stocks.

Thoughts?
At your age I think you can get away with 5% in bonds if you have a larger emergency fund (at least 6 months, probably closer to 12 months since your spouse does not work).
Topic Author
ofrivia
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Re: Portfolio Review: Just Hit $500,000!

Post by ofrivia »

Thanks to this thread, I'm looking at a possible 2.15% rate on a 10 year which is very much doable at this point. I'm just waiting a few days to do some due diligence as the broker offering that is offering United Wholesale Mortgage as the lender. I've read people on this forum are happy but have read some issues with escrow and customer service... Gonna check out that mega thread, thanks!
ivgrivchuck
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Re: Portfolio Review: Just Hit $500,000!

Post by ivgrivchuck »

I'm surprised that so many recommend bonds. Holding bonds (unless it's part of emergency fund) and having a mortgage at the same time is almost always a losing deal with the current rates.

So my advice is:
- Make sure that you have a proper emergency fund.
- If you feel like that you have too much risk in stocks, put more money towards paying back the mortgage quicker. Then your total net worth is not so exposed to a market correction.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
Topic Author
ofrivia
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Re: Portfolio Review: Just Hit $500,000!

Post by ofrivia »

ivgrivchuck wrote: Fri Oct 16, 2020 8:16 pm I'm surprised that so many recommend bonds. Holding bonds (unless it's part of emergency fund) and having a mortgage at the same time is almost always a losing deal with the current rates.

So my advice is:
- Make sure that you have a proper emergency fund.
- If you feel like that you have too much risk in stocks, put more money towards paying back the mortgage quicker. Then your total net worth is not so exposed to a market correction.
It's already in the ira held as stocks. If it was cash in the bank or taxable I could see your point, but that isn't the case
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geerhardusvos
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Re: Portfolio Review: Just Hit $500,000!

Post by geerhardusvos »

ofrivia wrote: Fri Oct 16, 2020 3:50 pm
ccf wrote: Fri Oct 16, 2020 12:16 pm +1 on the advice to reconsider bonds. You are 95% equities and "not in a rush to get serious about bonds until I’m 40" but you are 40 in 2 years :)

Were invested 95/5 before COVID hit?
Fair point, and it's exactly why I posted - such great feedback I've received. Thank you!

So in thinking about it and having read other posts about this, here's my thought.

I'll put $100,000 of my 401k's total stock market into bonds. That will put me to 20% bonds, 67% total stock market. I'd leave international alone. This would be about 1/3 of my traditional 401k being in bonds at that point.

Then I would market time and when we have the next big crash like march 2020, allocate 10% of those bonds into stocks.

Thoughts?
My opinion, don’t try to make any drastic changes to your asset allocation. It has worked well for you. It will continue to do so in the long run. I am a similar profile and I don’t have hardly any bonds. Add 20% bonds when you retire, but I personally will never have less than 80% equities, even when I’m 85 (if the Lord tarries).
VTSAX and chill
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Re: Portfolio Review: Just Hit $500,000!

Post by dru808 »

Living Free wrote: Fri Oct 16, 2020 9:05 am With only one income earner in the family and 3 children I'd recommend increasing the emergency fund to 6 months (possibly more).
This, first and foremost.
60% SCHK | 25% VIGI | 15% ILTB
ivgrivchuck
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Re: Portfolio Review: Just Hit $500,000!

Post by ivgrivchuck »

ofrivia wrote: Fri Oct 16, 2020 9:04 pm
ivgrivchuck wrote: Fri Oct 16, 2020 8:16 pm I'm surprised that so many recommend bonds. Holding bonds (unless it's part of emergency fund) and having a mortgage at the same time is almost always a losing deal with the current rates.

So my advice is:
- Make sure that you have a proper emergency fund.
- If you feel like that you have too much risk in stocks, put more money towards paying back the mortgage quicker. Then your total net worth is not so exposed to a market correction.
It's already in the ira held as stocks. If it was cash in the bank or taxable I could see your point, but that isn't the case
I understand, but there is no hurry. You could lower your IRA/529 contributions somewhat (until the house is paid off) and use that money to pay off the mortgage quicker. After the mortgage has been fully paid off, max the IRA out again and then buy some bonds if you so desire.

Up to you of course, just an idea.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
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Re: Portfolio Review: Just Hit $500,000!

Post by Outer Marker »

Just because you can "get away with" 5% bonds does not mean its a wise and prudent thing to do. The expectation of increased returns is merly an expectation. It is not a guarantee. The potential higher equity returns need to be balanced against the need to take risk. Obviously, the OP posses the willingness to do so.

Bonds are not the same as as a inverse of your mortgage. You cannot easily rebalance your mortgage into equities during a downturn. You cannot pay your bills with a mortgage. Your mortgage does not earn you money if it turns out that bonds outperform stocks for the next decade. Yes, that happens.

Consider a few bits of wisdom from Warren Buffett:

"Rule No.1: -Never lose money.
Rule No.2: -Never forget rule No.1"

Warren is about as pro-equity as anyone out there, and generally favors a 90/10 portfolio consisting of the S&P 500 and Treasuries.

Yet, at his own Berkshire Hathaway, is sitting on a huge pile of uninvested cash. Clearly, in Warren's opinion, the market is over-valued and there are no bargains out there to be had at the moment.

At nearly 40 years old, and having reached an important milestone, I would take my foot off the gas just a bit and try to "not lose the money." That is, of course, impossible, and some risk is necessary. But you don't need to go all out.
ccf
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Re: Portfolio Review: Just Hit $500,000!

Post by ccf »

ofrivia wrote: Fri Oct 16, 2020 3:50 pm
I'll put $100,000 of my 401k's total stock market into bonds. That will put me to 20% bonds, 67% total stock market. I'd leave international alone. This would be about 1/3 of my traditional 401k being in bonds at that point.

Then I would market time and when we have the next big crash like march 2020, allocate 10% of those bonds into stocks.

Thoughts?
I'm sure there are lots of ~40 year olds here doing 20% bonds and it's a perfectly good number if it feels right to you :) However, like others have said, I'd be uncomfortable without more cash/bonds/CDs/etc that are accessible (in taxable and not a 401k) if one needs liquidity...

I personally don't have much of a cash emergency fund now that interest rates are so low but I have various things in my bond allocation that I can liquidate if I need to (CDs, I-Bonds, total bond)
terran
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Re: Portfolio Review: Just Hit $500,000!

Post by terran »

I'm afraid you might be over contributing to your solo 401(k). With $100k net business income, $160k other income (which increases your contribution limit by decreasing SE tax since your job is above the social security wage base), and $19,500 employee contribution to another 401(k), this calculator says your max contribution is $19,732.

If you want to see the calculations for yourself you can fill out the "Deduction Worksheet for Self-Employed" found in Publication 560. Make sure you account for lower Self Employment taxes on line 2 due to hitting the social security wage base in your W2 job, and $0 as your "allowable elective deferrals" on line 9 as that limit is combine across all 401(k) plans.

The only way I can think of to max out the full $57,000 limit on a solo 401(k) with that amount of self employment income is to move your plan to one that allows mega backdoor Roth contributions (after-tax non-Roth contribution followed by in-service withdrawal to Roth IRA or in plan conversion to Roth 401(k)). None of the free mainstream providers will allow this, but there are some custom plan providers that charge an setup and annual fee to administer your plan that do. You can search something like "solo 401(k) mega backdoor" in the upper right of this site to find past threads on this topic.

If you've already over-contributed to your solo 401(k) in past years that can be big trouble that's beyond my pay grade to offer guidance on. There are some other users on this forum with much more knowledge on this topic (Spirit Rider, Alan S., and DSInvestor come to mind) who might be able to help. If they don't pop in this thread I'd suggest starting a new thread with a subject line like "solo 401(k) over contribution" where you describe how much you've contributed and your total net business income each year. This isn't something to be messed around with as there can be big penalties and the plan can be considered invalid.

Sorry to be the bearer of bad news.
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ofrivia
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Re: Portfolio Review: Just Hit $500,000!

Post by ofrivia »

terran wrote: Sat Oct 17, 2020 8:52 am I'm afraid you might be over contributing to your solo 401(k).
Sorry to be the bearer of bad news.
I actually haven't yet made the contribution to the business solo 401k precisely because of that concern. The cash is parked in the bank, allocated for the 401k, once I get the final number crunch and advisement from my business accountant. Maybe it was misleading to put it as "new annual contribution" when that hasn't been put in yet. But your advise is spot on. I very well am likely to not be able to contribution the max.
terran
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Re: Portfolio Review: Just Hit $500,000!

Post by terran »

ofrivia wrote: Sat Oct 17, 2020 10:19 am
terran wrote: Sat Oct 17, 2020 8:52 am I'm afraid you might be over contributing to your solo 401(k).
Sorry to be the bearer of bad news.
I actually haven't yet made the contribution to the business solo 401k precisely because of that concern. The cash is parked in the bank, allocated for the 401k, once I get the final number crunch and advisement from my business accountant. Maybe it was misleading to put it as "new annual contribution" when that hasn't been put in yet. But your advise is spot on. I very well am likely to not be able to contribution the max.
Phew, that's a relief! Since you're already maxing out the $19,500 limit you'll be limited to 20% of net business income minus 1/2 of self employment tax if you want a quick ongoing estimate rather than using the calculator or worksheet I linked above or waiting on your accountant for a final number.
260chrisb
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Re: Portfolio Review: Just Hit $500,000!

Post by 260chrisb »

anon_investor wrote: Fri Oct 16, 2020 6:44 pm
260chrisb wrote: Fri Oct 16, 2020 5:41 pm Well done for your age!! Keep your foot on the gas but make sure you're comfy with your asset allocation. On a separate note; can you really get 2.5% on a re-fi?? I'm skeptical, doubt it, would like to know, and would sooner just start lump sum payments to save on interest way before I would pay anything for a re-fi at your income level.
Check out the refinance mega thread. No cost 2.5% 15yr fixed refi is widely available. Some report even no cost 2.5% 30yr fixed. I did my refi in July and got at no cost 2.75% 30yr fixed, so the OP can def improve on the mortgage rate at 0 cost (really 0 cost, all costs offset by lender credits), so 0 break even.
I guess I'm lazy but will look just for the sake of knowledge but will remain skeptical. :D Separately I never see the value of paying fees to a bank for a better rate but understand the benefits of course and have no understanding of lender credits that you mention. I'm at 3% for mine so I would never go through the process of a re-fi but for my money based on the OPs income I'd just start to lump sum it. Reducing the principal of the loan technically reduces the "rate" as you pay less interest for the loan thus creating a lower "rate" (cost of the money) over the term of the loan. When I got my 3% 15 year mortgage 5 years ago I thought there would be no way rates would ever be lower......
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Re: Portfolio Review: Just Hit $500,000!

Post by Outer Marker »

260chrisb wrote: Sat Oct 17, 2020 11:37 am I guess I'm lazy but will look just for the sake of knowledge but will remain skeptical. :D Separately I never see the value of paying fees to a bank for a better rate but understand the benefits of course and have no understanding of lender credits that you mention. I'm at 3% for mine so I would never go through the process of a re-fi but for my money based on the OPs income I'd just start to lump sum it. Reducing the principal of the loan technically reduces the "rate" as you pay less interest for the loan thus creating a lower "rate" (cost of the money) over the term of the loan. When I got my 3% 15 year mortgage 5 years ago I thought there would be no way rates would ever be lower......
Your laziness is hurting you. The rates now are definitely lower, and you can get 2.5% with the lender paying all closing costs. I've done easily 20 refi's over the years on various properties and will do it again tomorrow in a heartbeat for a lower rate at no cost. My only cost is the 2 hours or so it takes me to pull the verification documents off the internet, upload them, and sign the papers. They even send a closing agent to my house to collect the signatures. Which we did on the porch during covid.

Let's say you've got a $300,000 principal balance remaining. That half point savings is roughly $1,500 a year in guaranteed free money. When I see a quarter on the street, I bend down to pick it up. Maybe not a penny. But this for sure.

Take 5 minutes today and pull your rate quote from the Amerisave website. Actual out-of-pocket expenses are going to be around $2000 for the appraisal and legal fees. Ignore the prepaids and everything else that is just a wash. Any option featuring a lender credit at or around that amount is going to be cash positive on day one.
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anon_investor
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Re: Portfolio Review: Just Hit $500,000!

Post by anon_investor »

260chrisb wrote: Sat Oct 17, 2020 11:37 am
anon_investor wrote: Fri Oct 16, 2020 6:44 pm
260chrisb wrote: Fri Oct 16, 2020 5:41 pm Well done for your age!! Keep your foot on the gas but make sure you're comfy with your asset allocation. On a separate note; can you really get 2.5% on a re-fi?? I'm skeptical, doubt it, would like to know, and would sooner just start lump sum payments to save on interest way before I would pay anything for a re-fi at your income level.
Check out the refinance mega thread. No cost 2.5% 15yr fixed refi is widely available. Some report even no cost 2.5% 30yr fixed. I did my refi in July and got at no cost 2.75% 30yr fixed, so the OP can def improve on the mortgage rate at 0 cost (really 0 cost, all costs offset by lender credits), so 0 break even.
I guess I'm lazy but will look just for the sake of knowledge but will remain skeptical. :D Separately I never see the value of paying fees to a bank for a better rate but understand the benefits of course and have no understanding of lender credits that you mention. I'm at 3% for mine so I would never go through the process of a re-fi but for my money based on the OPs income I'd just start to lump sum it. Reducing the principal of the loan technically reduces the "rate" as you pay less interest for the loan thus creating a lower "rate" (cost of the money) over the term of the loan. When I got my 3% 15 year mortgage 5 years ago I thought there would be no way rates would ever be lower......
There are net no fees. The lenders credits cover any fees. I have actually completed 2 refis this year, paying nothing either time, and actually getting enough lenders credit on one them to pocket $2k. It was so little work I will do it again if rates continue to drop. It literally is free money.
260chrisb
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Re: Portfolio Review: Just Hit $500,000!

Post by 260chrisb »

Outer Marker wrote: Sat Oct 17, 2020 11:49 am
260chrisb wrote: Sat Oct 17, 2020 11:37 am I guess I'm lazy but will look just for the sake of knowledge but will remain skeptical. :D Separately I never see the value of paying fees to a bank for a better rate but understand the benefits of course and have no understanding of lender credits that you mention. I'm at 3% for mine so I would never go through the process of a re-fi but for my money based on the OPs income I'd just start to lump sum it. Reducing the principal of the loan technically reduces the "rate" as you pay less interest for the loan thus creating a lower "rate" (cost of the money) over the term of the loan. When I got my 3% 15 year mortgage 5 years ago I thought there would be no way rates would ever be lower......
Your laziness is hurting you. The rates now are definitely lower, and you can get 2.5% with the lender paying all closing costs. I've done easily 20 refi's over the years on various properties and will do it again tomorrow in a heartbeat for a lower rate at no cost. My only cost is the 2 hours or so it takes me to pull the verification documents off the internet, upload them, and sign the papers. They even send a closing agent to my house to collect the signatures. Which we did on the porch during covid.

Let's say you've got a $300,000 principal balance remaining. That half point savings is roughly $1,500 a year in guaranteed free money. When I see a quarter on the street, I bend down to pick it up. Maybe not a penny. But this for sure.

Take 5 minutes today and pull your rate quote from the Amerisave website. Actual out-of-pocket expenses are going to be around $2000 for the appraisal and legal fees. Ignore the prepaids and everything else that is just a wash. Any option featuring a lender credit at or around that amount is going to be cash positive on day one.
Okay, point well taken and I appreciate it! I've just returned from a 25 mile bike ride so I'm not TOTALLY LAZY..... :D While I certainly would pick up the quarter as well I think before I go through the work to re-fi I'd just continue to throw extra money at mine each month for the savings. I'm at about 250, have the money to do it, and know in the end I'll save some money. I'll look around as well and learn.
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anon_investor
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Re: Portfolio Review: Just Hit $500,000!

Post by anon_investor »

260chrisb wrote: Sat Oct 17, 2020 2:39 pm
Outer Marker wrote: Sat Oct 17, 2020 11:49 am
260chrisb wrote: Sat Oct 17, 2020 11:37 am I guess I'm lazy but will look just for the sake of knowledge but will remain skeptical. :D Separately I never see the value of paying fees to a bank for a better rate but understand the benefits of course and have no understanding of lender credits that you mention. I'm at 3% for mine so I would never go through the process of a re-fi but for my money based on the OPs income I'd just start to lump sum it. Reducing the principal of the loan technically reduces the "rate" as you pay less interest for the loan thus creating a lower "rate" (cost of the money) over the term of the loan. When I got my 3% 15 year mortgage 5 years ago I thought there would be no way rates would ever be lower......
Your laziness is hurting you. The rates now are definitely lower, and you can get 2.5% with the lender paying all closing costs. I've done easily 20 refi's over the years on various properties and will do it again tomorrow in a heartbeat for a lower rate at no cost. My only cost is the 2 hours or so it takes me to pull the verification documents off the internet, upload them, and sign the papers. They even send a closing agent to my house to collect the signatures. Which we did on the porch during covid.

Let's say you've got a $300,000 principal balance remaining. That half point savings is roughly $1,500 a year in guaranteed free money. When I see a quarter on the street, I bend down to pick it up. Maybe not a penny. But this for sure.

Take 5 minutes today and pull your rate quote from the Amerisave website. Actual out-of-pocket expenses are going to be around $2000 for the appraisal and legal fees. Ignore the prepaids and everything else that is just a wash. Any option featuring a lender credit at or around that amount is going to be cash positive on day one.
Okay, point well taken and I appreciate it! I've just returned from a 25 mile bike ride so I'm not TOTALLY LAZY..... :D While I certainly would pick up the quarter as well I think before I go through the work to re-fi I'd just continue to throw extra money at mine each month for the savings. I'm at about 250, have the money to do it, and know in the end I'll save some money. I'll look around as well and learn.
It is at least worth the time to check out the refinance mega thread:
viewtopic.php?f=2&t=289559&start=7350
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Re: Portfolio Review: Just Hit $500,000!

Post by Outer Marker »

260chrisb wrote: Sat Oct 17, 2020 2:39 pm Okay, point well taken and I appreciate it! I've just returned from a 25 mile bike ride so I'm not TOTALLY LAZY..... :D While I certainly would pick up the quarter as well I think before I go through the work to re-fi I'd just continue to throw extra money at mine each month for the savings. I'm at about 250, have the money to do it, and know in the end I'll save some money. I'll look around as well and learn.
Chris, Just got back from a long autumn dog walk myself. We're all here to help each other. Don't mean to be too direct, but you're blowing this opportunity. It is literally free money. There is no real "work" to re-fi. Unless you have sketchy credit or employment, completing the documentation should take you less time than your contributions to this thread. Given that you're on bogleheads, I strongly suspect that is not a problem. Do yourself a favor and take the 5 minutes today to get an online quote from Amerisave. (I do not work for them! I just use them, a lot.) Shaving .5% off your $250,000 balance is $1,250 in the first year which can be done at zero cost to you. This is as close as you can come to a "no brainer." If you have extra money to put towards the mortgage, feel free to do so, but by all means get the lower rate for free. Don't pay any extra towards the mortgage until after you refi, because the negative points, i.e., lender credit, are a multiple of the outstanding balance. The larger the loan amount, the larger the credit.
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Re: Portfolio Review: Just Hit $500,000!

Post by whodidntante »

ivgrivchuck wrote: Fri Oct 16, 2020 8:16 pm I'm surprised that so many recommend bonds. Holding bonds (unless it's part of emergency fund) and having a mortgage at the same time is almost always a losing deal with the current rates.

So my advice is:
- Make sure that you have a proper emergency fund.
- If you feel like that you have too much risk in stocks, put more money towards paying back the mortgage quicker. Then your total net worth is not so exposed to a market correction.
Agreed.
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Re: Portfolio Review: Just Hit $500,000!

Post by mr_brightside »

Congratulations on hitting that financial milestone !
remember Enron?? I do
aerosurfer
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Re: Portfolio Review: Just Hit $500,000!

Post by aerosurfer »

260chrisb wrote: Fri Oct 16, 2020 5:41 pm Well done for your age!! Keep your foot on the gas but make sure you're comfy with your asset allocation. On a separate note; can you really get 2.5% on a re-fi?? I'm skeptical, doubt it, would like to know, and would sooner just start lump sum payments to save on interest way before I would pay anything for a re-fi at your income level.
I close tomorrow morning on a refi, 2.5% 15 yr, cost about $500 out of pocket, break even is 7 months. Incredibly easy and well worth it
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Re: Portfolio Review: Just Hit $500,000!

Post by mr_brightside »

dru808 wrote: Fri Oct 16, 2020 9:14 pm
Living Free wrote: Fri Oct 16, 2020 9:05 am With only one income earner in the family and 3 children I'd recommend increasing the emergency fund to 6 months (possibly more).
This, first and foremost.
totally agree

i have multiple children and am the sole earner in our family. no way i could sleep soundly at night without a sizeable cash reserve

life can come kick you in the butt sometimes when you least expect it

-----------------------------------------------------------
remember Enron?? I do
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