Starting from SCRATCH at 40 yrs old! Portfolio questions!

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Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

Hi everyone- A few years ago without going into why but I had to make a major decision and the decision I had to make was I had to use the full amount of my 401k plan I had with my previous employer and ran through $110k of it. Now I am 40 years old at a new employer and I'm literally starting from scratch. I never would of thought I would be in this position I am today. I'm a single father of a 5 year old boy and I am grateful I found this forum so I can reach out let you know where I'm at financially and to get help and advice on what I should be doing to ensure I can still build a nice sized retirement along with saving for my son's college in 13 years which is a very important goal for me and I know some of you won't agree with my priority's but I'm just asking for your help on how to best position myself for these goals I personally have.

I still want your expert advice on what you believe is the best route I take with my employer 401k or if I should also fund a ira perhaps too? My portfolio is obviously thin and it's at it's beginning again and I hope I will find your responses to where I feel better about the fact that I'm 40 and I'm very nervous that I'm too late to still amount a large retirement fund along with funding college for my son.

Below you will find the 401k I am in, the fund I'm currently in, the plan's other funds that if you say is a better route to take I will do that, then you'll see that I have a profit sharing plan from my previous employer worth $23,000 and I need your advice on if I should rollover to my 401k or should i open an ira or brokeage account?

I guess after you view my plans funds you will know what I should do with that money that I'm waiting to rollover to somewhere. Then I want to know if I should stay in the Roth 401k or switch to traditional? Or is my 401k plan not the way to go and should I move all to a ira? I chose Roth 401k because of the one fact that I don't feel like being taxed in retirement but I've heard I'm might be wrong about thinking like that. You will see below my ytd income and also know that I earn income by commissions and it's difficult to do a budget or projections on how much my 401k will be worth in 30 years because it asks what your salary is and I don't know the correct number to put in. Okay all is below for you to digest and hopefully guide me in a direction to build my retirement back up and get it on the correct track or the best option for me to use. Thanks all!

Current income
$70,000 ytd (keep in mind I get paid weekly and I don't know what each week's paycheck will be since I rely on how many sales I will make and some weeks my paychecks are zero. Also, I project that when I am 55-70 my income will be under $50,000 due to the business I'm in and being older won't help)

Current contributions to Roth 401k
15% to Roth 401k (contributions made every week on Friday's)
-I would like to retire by 65-70. 70 to get full social security if it's still around.

Employer 401k Plan
Lincoln Financial
Fund: YourPath Passive 2055 Aggressive
Allocation: 97% equity 3% Bonds/Total Fixed Income
Investment Fund Allocations:
iShares Total US Stock Market Index K 36%
iShares S&P 500 Index K 5%
iShares Russell Mid-Cap Index K 6%
iShares Russell 2000 Small Cap Index K 5%
iShares Russell Small-Mid Cap Index K 3%
iShares MSCI Total Index K 38%
iShares MSCI EAFE International Index K 1%
iShares Developed Real Estate Index K 3%
iShares US Aggregate Bond Index 3%
iShares Short term TIPS Bond Index K 0%
Lincoln Fixed Account 0%

Total Annual operating expenses 0.13%
Inv Mgmt, Trustee and Admin fees (bps) 0.06%
Acquired Fund Fee (bps) 0.07%

Plans other Fund Options:
Guarantee Stable Value
AB Global Bond SA3h
Baird Aggregate Bond Inst SAEJ
Fed Hermes Gov Ultsht Dur SAC7
VG High Yld Corp Admrl SAAV
VG Inflation Protectd Sec SAAW
Western Ast Core Plus SABX
JPMorgan US Equity SA8Y
Neu Berman RET SA9S
Vanguard Value Index Adml SAE5
Vanguard 500 Index SACG
AmerFunds Perspective SA6H
As Adv Spl Mid Cap Val SABV
SS Rsl Lrg Cap Grw NL SAA7
The Hartford Int Opps SAAQ
Vanguard Sm Cap Grwth Ind SAE6
VG Dev Markets Idx Admrl SACH
VG Int Grw Admrl Shares SAAX
VG Int Val Inv Shares SAAY
American Funds New World SA6J
Federated Clvr Sm Val Fnd SACE
PIMCO CmdtyRlRetrn Strat SA9Y
VG Mid Cap Grw Idx Admrl SAB3
AmerFunds AmerBal SA6B

-On another note, I am also currently saving $800 per month for my son Utah's 529 Plan in an enrollment date fund. I have 13 more years to save. Do you suggest I cut down on the $800 and use it towards my retirement or if I'm able to keep up with this savings rate is it okay if I put the $800 and keep it towards the 529 plan? It's extremely important to me to be able to have a shot a chance to make my son be debt free after college. I don't want him to be in $100k debt like I was. I wouldn't be able to live with myself and I know some of you are going to say it shouldn't be a priority over my retirement but my questions to that is well if I'm putting in 15% of my weekly paycheck into retirement and I have this $800 without strapping me what is the reason why I shouldn't put $800 towards his education?

Thanks for anyone who will read this entire post and help me, guide me, and answer all of my questions so I can understand if I'm going to be able to catch up and make my retirement one without worries even though I'm starting from scratch again and also if I'm in the right fund or if my plans other funds are the way to go or if my plan isn't strong should I rollover to an ira?

Thanks again!!!!
Mr.BB
Posts: 2061
Joined: Sun May 08, 2016 10:10 am

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Mr.BB »

You should put down what the expense ratios are for each of the funds you listed. Keeping your expense ratios low = more money in your savings account. Starting at 40 you have a shorter time to grow your money, assuming that you are going to work to age 65 or 70. One of your big questions will be "what is your risk tolerance?" If you have a good tolerance to risk you might want to look at a higher equity holding for the next 20 years to help make up for the reduced time in the market to get a bigger bang for your buck. The key is can you handle a large draw down when it happens?
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."
User avatar
FiveK
Posts: 13055
Joined: Sun Mar 16, 2014 2:43 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by FiveK »

You could do worse than following the suggestions in Prioritizing investments and Investment Order.

With no current traditional balance and no mention of a pension, going 100% traditional in the 401k is likely best. You are above the IRA Deduction Limits so Roth for any IRA, using the Backdoor Roth process if you will be close to or over the Roth IRA Contribution Limit.

The 401k looks overly complex. Do you have the option to choose only one or a few funds, and if so what are the expense ratios for those options?

As the saying goes, one can borrow for college but not retirement. There is also the "put on your own oxygen mask before assisting others" analogy when it comes to retirement vs. college savings, and "give your child the gift of not having to worry about you as you age." The choice is yours....
Mr.BB
Posts: 2061
Joined: Sun May 08, 2016 10:10 am

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Mr.BB »

FiveK wrote: Mon Aug 01, 2022 7:08 pm You could do worse than following the suggestions in Prioritizing investments and Investment Order.

With no current traditional balance and no mention of a pension, going 100% traditional in the 401k is likely best. You are above the IRA Deduction Limits so Roth for any IRA, using the Backdoor Roth process if you will be close to or over the Roth IRA Contribution Limit.

The 401k looks overly complex. Do you have the option to choose only one or a few funds, and if so what are the expense ratios for those options?

As the saying goes, one can borrow for college but not retirement. There is also the "put on your own oxygen mask before assisting others" analogy when it comes to retirement vs. college savings, and "give your child the gift of not having to worry about you as you age." The choice is yours....
There is also the "put on your own oxygen mask before assisting others" analogy when it comes to retirement vs. college savings, and "give your child the gift of not having to worry about you as you age." This statement sums it up!
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."
the_wiki
Posts: 94
Joined: Thu Jul 28, 2022 11:14 am

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by the_wiki »

It looks like you are currently in a 2055 target date plan with only .13% fees. That's honestly a pretty good portfolio with good allocations that will adjust as you age, so no real need to change it unless you want to. If you are 40, 2055 is age 73 retirement, so maybe drop to 2050 or 2045, but it looks like a solid portfolio.

25-30 years is still plenty of time to compound into some wealth, but you will need to be sure to come as close to maxing out that 401k as you can every year.
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

Mr.BB wrote: Mon Aug 01, 2022 7:03 pm You should put down what the expense ratios are for each of the funds you listed. Keeping your expense ratios low = more money in your savings account. Starting at 40 you have a shorter time to grow your money, assuming that you are going to work to age 65 or 70. One of your big questions will be "what is your risk tolerance?" If you have a good tolerance to risk you might want to look at a higher equity holding for the next 20 years to help make up for the reduced time in the market to get a bigger bang for your buck. The key is can you handle a large draw down when it happens?

Help me understand. What is your suggestion on what steps I would take to do this? Would I have to choose my own funds that I listed in the plan? If so, which funds do you advise? And what would my proposed allocations be from now through 20 years be? Then what would they be for the next 10? This is where I lack in understanding how to do what you suggested. I do have a stomach for high risk. My question though do I have to load up like this for 20 years to have the ability to have a real nice size retirement? Are you able to configure an approx amount at retirement using the savings rate I listed if around 15,000 per year? And should I switch to traditional or keep it in the Roth 401k? Or do you suggest I need to save more too? If you can help me on these questions I have it would be so helpful for me. Thank you for everything!
firefox
Posts: 90
Joined: Tue Apr 05, 2022 8:26 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by firefox »

1.I would suggest you try to save 25% of your gross income for your retirement . If you fully fund your 401K, plan to fund Roth IRA( or back door Roth IRA) to the max limit of 6K/year.

2. Have an emergency fund for about 3-6 months of your expense

3.Have a disability and sufficient life insurance( as you have a dependent)

2. After doing that, if you have money left, put that into you son's 529 plan.

As the saying goes you can take loans for college but not for retirement. Also, there are many ways college can be funded or cost reduced( grant, scholarship, loan or simply choosing a low cost state school), but you can't so that for retirement. Also you don't want your son to worry about taking care of you when he is building his own portfolio.
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

Mr.BB wrote: Mon Aug 01, 2022 7:16 pm
FiveK wrote: Mon Aug 01, 2022 7:08 pm You could do worse than following the suggestions in Prioritizing investments and Investment Order.

With no current traditional balance and no mention of a pension, going 100% traditional in the 401k is likely best. You are above the IRA Deduction Limits so Roth for any IRA, using the Backdoor Roth process if you will be close to or over the Roth IRA Contribution Limit.

The 401k looks overly complex. Do you have the option to choose only one or a few funds, and if so what are the expense ratios for those options?

As the saying goes, one can borrow for college but not retirement. There is also the "put on your own oxygen mask before assisting others" analogy when it comes to retirement vs. college savings, and "give your child the gift of not having to worry about you as you age." The choice is yours....
There is also the "put on your own oxygen mask before assisting others" analogy when it comes to retirement vs. college savings, and "give your child the gift of not having to worry about you as you age." This statement sums it up!
Current contributions to Roth 401k
15% to Roth 401k (contributions made every week on Friday's)
-I would like to retire by 65-70. 70 to get full social security if it's still around.

Employer 401k Plan
Lincoln Financial
My current investment: YourPath Passive 2055 Aggressive
Allocation: 97% equity 3% Bonds/Total Fixed Income
Investment Fund Allocations:
iShares Total US Stock Market Index K 36%
iShares S&P 500 Index K 5%
iShares Russell Mid-Cap Index K 6%
iShares Russell 2000 Small Cap Index K 5%
iShares Russell Small-Mid Cap Index K 3%
iShares MSCI Total Index K 38%
iShares MSCI EAFE International Index K 1%
iShares Developed Real Estate Index K 3%
iShares US Aggregate Bond Index 3%
iShares Short term TIPS Bond Index K 0%
Lincoln Fixed Account 0%
Total Annual operating expenses 0.13%
Inv Mgmt, Trustee and Admin fees (bps) 0.06%
Acquired Fund Fee (bps) 0.07%

The other Fund Options that I can invest in if you think it’s best I invest by choosing one or a few of these funds and if so which ones and how would you do the allocations and at what intervals?
Guarantee Stable Value
AB Global Bond SA3h
Baird Aggregate Bond Inst SAEJ
Fed Hermes Gov Ultsht Dur SAC7
VG High Yld Corp Admrl SAAV
VG Inflation Protectd Sec SAAW
Western Ast Core Plus SABX
JPMorgan US Equity SA8Y
Neu Berman RET SA9S
Vanguard Value Index Adml SAE5
Vanguard 500 Index SACG
AmerFunds Perspective SA6H
As Adv Spl Mid Cap Val SABV
SS Rsl Lrg Cap Grw NL SAA7
The Hartford Int Opps SAAQ
Vanguard Sm Cap Grwth Ind SAE6
VG Dev Markets Idx Admrl SACH
VG Int Grw Admrl Shares SAAX
VG Int Val Inv Shares SAAY
American Funds New World SA6J
Federated Clvr Sm Val Fnd SACE
PIMCO CmdtyRlRetrn Strat SA9Y
VG Mid Cap Grw Idx Admrl SAB3
AmerFunds AmerBal SA6B
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

Mr.BB wrote: Mon Aug 01, 2022 7:16 pm
FiveK wrote: Mon Aug 01, 2022 7:08 pm You could do worse than following the suggestions in Prioritizing investments and Investment Order.

With no current traditional balance and no mention of a pension, going 100% traditional in the 401k is likely best. You are above the IRA Deduction Limits so Roth for any IRA, using the Backdoor Roth process if you will be close to or over the Roth IRA Contribution Limit.

The 401k looks overly complex. Do you have the option to choose only one or a few funds, and if so what are the expense ratios for those options?

As the saying goes, one can borrow for college but not retirement. There is also the "put on your own oxygen mask before assisting others" analogy when it comes to retirement vs. college savings, and "give your child the gift of not having to worry about you as you age." The choice is yours....
There is also the "put on your own oxygen mask before assisting others" analogy when it comes to retirement vs. college savings, and "give your child the gift of not having to worry about you as you age." This statement sums it up!
I forgot to ask why do you suggest I switch from my Roth option to traditional? I guess the only important item to me on why I would choose either is to know which way will I have more money in after taxes for when I take Distrubutions. Going traditional to get tax deductions only does not entice me to switch unless traditional is the option where I’ll have the highest amount of money versus Roth. I need your help on this bc I don’t know which option creates more retirement income yearly for me.
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

firefox wrote: Mon Aug 01, 2022 8:48 pm 1.I would suggest you try to save 25% of your gross income for your retirement . If you fully fund your 401K, plan to fund Roth IRA( or back door Roth IRA) to the max limit of 6K/year.

2. Have an emergency fund for about 3-6 months of your expense

3.Have a disability and sufficient life insurance( as you have a dependent)

2. After doing that, if you have money left, put that into you son's 529 plan.

As the saying goes you can take loans for college but not for retirement. Also, there are many ways college can be funded or cost reduced( grant, scholarship, loan or simply choosing a low cost state school), but you can't so that for retirement. Also you don't want your son to worry about taking care of you when he is building his own portfolio.
Thanks for your help!

How do I know when to fund a Roth IRA if I don’t know if and when my 401k totals up. Do I make decision to fund Roth IRA at year end when I know how much I saved in my 401k?

I’m doing 15% now and it’s not hurting me as of yet but how did you come up with 25%. Is that 25% the figure that gets me to max it out?

Then how do I know exactly which percentage to save when I get paid in commissions and I don’t know and can’t track my income per weeks paycheck bc it all depends on if I sell enough cars or not. So there’s weeks where my check is zero or weeks where it’s $3000. Honestly it’s so different every week I have no idea how to know what’s the right percentage to at least get close to maxing it out.

Should I stick with the Roth option I’m in or switch to traditional? I’m def going to be in lower tax bracket when I’m 55-70 yrs old. Which option creates the highest retirement income for me?

Would you stick to the target date fund I’m in or suggest I choose the funds I listed above that’s available in my plan. If so which funds do you advise and what allocations and what intervals do I change the allocations and at what percentages at each interval?

Extremely grateful and appreciative having your expert advice and thank you for answering my questions!!
User avatar
FiveK
Posts: 13055
Joined: Sun Mar 16, 2014 2:43 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by FiveK »

Hazlesac wrote: Mon Aug 01, 2022 8:55 pmI guess the only important item to me on why I would choose either is to know which way will I have more money in after taxes for when I take Distrubutions. Going traditional to get tax deductions only does not entice me to switch unless traditional is the option where I’ll have the highest amount of money versus Roth. I need your help on this bc I don’t know which option creates more retirement income yearly for me.
Well done - you have identified exactly the right question!

Maximizing after-tax income is indeed the way to evaluate the traditional vs. Roth choice. As the t vs. R wiki article notes, after-tax value is entirely determined by the marginal tax rate on contributions and withdrawals.

Perhaps the simplest way for you to estimate your future income from today's traditional contributions is
  • (future income/yr) = (current pre-tax balance + this year's contribution) * (1 + i)^n * WR
i = Real rate of return on pre-tax investments, %
n = Number of years until withdrawals start (e.g., at retirement)
WR = Withdrawal rate from pre-tax accounts, %/yr

Reasonable guesses for i, n, and WR can vary widely within (and even outside) the following ranges:
i - from 2% to 6% (depends on market behavior and asset allocation within the pre-tax accounts)
n - from 0 to ? (very dependent on individual circumstances)
WR - from 3% (e.g., those who think the “4% rule” is optimistic) to 8% (e.g., those who want to reduce pre-tax balances before starting Social Security and Required Minimum Distributions)

An example if you want to check your understanding of this equation: with
(current pre-tax balance + this year's contribution) = $100K,
i = 4%,
n = 25 years, and
WR = 5%,
future income = $13,329/yr. Knowing that the federal marginal tax rate on $13,329/yr using current tax law is 0%, in this case it would be better to save on taxes now and expect to pay no taxes on withdrawals later.

If your traditional balance ever gets high enough that expected growth would provide "too much" income (i.e., you would pay a higher marginal tax rate to withdraw than you would save by contributing), then Roth contributions would become favorable.

Does that make sense?
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

the_wiki wrote: Mon Aug 01, 2022 7:31 pm It looks like you are currently in a 2055 target date plan with only .13% fees. That's honestly a pretty good portfolio with good allocations that will adjust as you age, so no real need to change it unless you want to. If you are 40, 2055 is age 73 retirement, so maybe drop to 2050 or 2045, but it looks like a solid portfolio.

25-30 years is still plenty of time to compound into some wealth, but you will need to be sure to come as close to maxing out that 401k as you can every year.

I chose 2055 to stay in the plans 97% equity and 3% bond allocation to be high risk so I could have a chance for larger returns to make up the fact that I’m starting at scratch at the age 40. What are your thoughts on this?
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

FiveK wrote: Mon Aug 01, 2022 9:12 pm
Hazlesac wrote: Mon Aug 01, 2022 8:55 pmI guess the only important item to me on why I would choose either is to know which way will I have more money in after taxes for when I take Distrubutions. Going traditional to get tax deductions only does not entice me to switch unless traditional is the option where I’ll have the highest amount of money versus Roth. I need your help on this bc I don’t know which option creates more retirement income yearly for me.
Well done - you have identified exactly the right question!

Maximizing after-tax income is indeed the way to evaluate the traditional vs. Roth choice. As the t vs. R wiki article notes, after-tax value is entirely determined by the marginal tax rate on contributions and withdrawals.

Perhaps the simplest way for you to estimate your future income from today's traditional contributions is
  • (future income/yr) = (current pre-tax balance + this year's contribution) * (1 + i)^n * WR
i = Real rate of return on pre-tax investments, %
n = Number of years until withdrawals start (e.g., at retirement)
WR = Withdrawal rate from pre-tax accounts, %/yr

Reasonable guesses for i, n, and WR can vary widely within (and even outside) the following ranges:
i - from 2% to 6% (depends on market behavior and asset allocation within the pre-tax accounts)
n - from 0 to ? (very dependent on individual circumstances)
WR - from 3% (e.g., those who think the “4% rule” is optimistic) to 8% (e.g., those who want to reduce pre-tax balances before starting Social Security and Required Minimum Distributions)

An example if you want to check your understanding of this equation: with
(current pre-tax balance + this year's contribution) = $100K,
i = 4%,
n = 25 years, and
WR = 5%,
future income = $13,329/yr. Knowing that the federal marginal tax rate on $13,329/yr using current tax law is 0%, in this case it would be better to save on taxes now and expect to pay no taxes on withdrawals later.

If your traditional balance ever gets high enough that expected growth would provide "too much" income (i.e., you would pay a higher marginal tax rate to withdraw than you would save by contributing), then Roth contributions would become favorable.

Does that make sense?
Wow I think I’m lost. I might be reading this wrong but I’m reading it as you think I’m in a traditional account right now. Im actually using the Roth 401k option. But my questions are the same which option should I actually be in if I am of course wanting the option that distributes the most income in retirement. The larger balance all said and done that is.

I know you answered it but I’m not following your equation. That’s my fault.

But if you need to know I’m saving 15% now. I know I’m going to be in a lower tax bracket between ages 55-70 than I’m in now. And it’s also hard for me to know how to project what I’ll save per year or project and be able to track what I’m able to save by age 70 because I get paid commissions weekly and every week is completely different. One week might be zero the next 3000 and then I could go a month with less than 2000 but the next 3 months be 30,000. So how do I know what percentage to save each week and how can I get an approx of my total retirement fund on how much I possibly might have if I keep my savings the same for the next 30 years. Sorry I’m not following. Maybe you can break it down for someone who is age 3? Hahaha.

Much appreciate it!!! Very grateful for your input and expertise!!!
User avatar
FiveK
Posts: 13055
Joined: Sun Mar 16, 2014 2:43 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by FiveK »

Hazlesac wrote: Mon Aug 01, 2022 9:26 pm Wow I think I’m lost. I might be reading this wrong but I’m reading it as you think I’m in a traditional account right now. Im actually using the Roth 401k option. But my questions are the same which option should I actually be in if I am of course wanting the option that distributes the most income in retirement. The larger balance all said and done that is.
Yes, understood that you are using Roth 401k now, and that means you are incurring whatever marginal rate, perhaps 22%, as the cost of contributing to the Roth this year.

If in retirement you pay 0% on withdrawals, then you have paid 22% now for the "privilege" of paying nothing later. It would be better to pay nothing now (i.e., use traditional now) and pay only 0% or 10% or 12% later. See the commutative property of multiplication explanation for how this works.
I know I’m going to be in a lower tax bracket between ages 55-70 than I’m in now.
And that's what suggests the use of traditional now: don't pay the high tax rate to use Roth now, and do pay a lower tax rate to withdraw from traditional later.
And it’s also hard for me to know how to project what I’ll save per year or project and be able to track what I’m able to save by age 70 because I get paid commissions weekly and every week is completely different. One week might be zero the next 3000 and then I could go a month with less than 2000 but the next 3 months be 30,000. So how do I know what percentage to save each week....
Trying to do week by week amounts is more complicated than I'd suggest. Can you take a guess at your annual income, divide $20,500 by that income, and have your employer put that fraction of each paycheck into your 401k?
...and how can I get an approx of my total retirement fund on how much I possibly might have if I keep my savings the same for the next 30 years.
Do you have any familiarity with spreadsheets? E.g., how to use the FV function?
Mr.BB
Posts: 2061
Joined: Sun May 08, 2016 10:10 am

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Mr.BB »

Here is a great calculator to use to see why expense ratios and AUM's matter. Compare two funds exp. ratio's costs side by side with a $0 starting investment and lets says you invest $10,000 a year for the next 30 years.
https://www.begintoinvest.com/expense-ratio-calculator/
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

FiveK wrote: Mon Aug 01, 2022 10:14 pm
Hazlesac wrote: Mon Aug 01, 2022 9:26 pm Wow I think I’m lost. I might be reading this wrong but I’m reading it as you think I’m in a traditional account right now. Im actually using the Roth 401k option. But my questions are the same which option should I actually be in if I am of course wanting the option that distributes the most income in retirement. The larger balance all said and done that is.
Yes, understood that you are using Roth 401k now, and that means you are incurring whatever marginal rate, perhaps 22%, as the cost of contributing to the Roth this year.

If in retirement you pay 0% on withdrawals, then you have paid 22% now for the "privilege" of paying nothing later. It would be better to pay nothing now (i.e., use traditional now) and pay only 0% or 10% or 12% later. See the commutative property of multiplication explanation for how this works.
I know I’m going to be in a lower tax bracket between ages 55-70 than I’m in now.
And that's what suggests the use of traditional now: don't pay the high tax rate to use Roth now, and do pay a lower tax rate to withdraw from traditional later.
And it’s also hard for me to know how to project what I’ll save per year or project and be able to track what I’m able to save by age 70 because I get paid commissions weekly and every week is completely different. One week might be zero the next 3000 and then I could go a month with less than 2000 but the next 3 months be 30,000. So how do I know what percentage to save each week....
Trying to do week by week amounts is more complicated than I'd suggest. Can you take a guess at your annual income, divide $20,500 by that income, and have your employer put that fraction of each paycheck into your 401k?
...and how can I get an approx of my total retirement fund on how much I possibly might have if I keep my savings the same for the next 30 years.
Do you have any familiarity with spreadsheets? E.g., how to use the FV function?
I think I’m slow. Haha. I’m trying to divide 20,500 by 100,000 but it’s coming to an amount like .0045??? What am I doing wrong?

Also I’m confused by all the examples of showing if I should be in traditional or Roth 401k because there are “bumps” and social security amounts that can change your marginal tax rate and examples where you might find both options and examples where where if your contributions are Very high that can cause or reduce your withdrawals in retirement if I recollect? There’s all these moving parts I’m a not understanding it enough to know how to find my 401k. Traditional or Roth? Or am I supposed to follow an equation each year to determine which option I contribute bc that’s how I read their examples.

So you know I’m putting 15% in now. I’m 40 and I’m hoping to make it to 70. I only have 7,000 in my Roth 401k. I’m predicting that from age 40-55 I will stay in the $75k low range to $125k high range. Then from 56-60 $60k to $90k. From 60-70 most likely $40k -$70k max. I also don’t know how to actually follow the marginal tax rates but the link suggests I should be looking at that yearly did it say to determine where to contribute? Or am I wrong? And also how do I know what my social security will be so I’m able to figure out my marginal tax with these so called “bumps” that change your tax rate. I guess I’m confused on just what’s the steps I should be taking based on this information and is it as easy for you to provide me with an answer with my predictions of income and is it possible that I am at my best interest to just contribute to one option and not change it up yearly on where I contribute or what is the way to do it. Because I’m having problems following their examples and how to interpret them since I’m not the best at equations etc.

Thanks for all your time. Your really helping me on what moves I should make.

Also if you suggest I change to traditional am I able to move the funds in my Roth to the traditional?
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

Hazlesac wrote: Mon Aug 01, 2022 8:50 pm
Mr.BB wrote: Mon Aug 01, 2022 7:16 pm
FiveK wrote: Mon Aug 01, 2022 7:08 pm You could do worse than following the suggestions in Prioritizing investments and Investment Order.

With no current traditional balance and no mention of a pension, going 100% traditional in the 401k is likely best. You are above the IRA Deduction Limits so Roth for any IRA, using the Backdoor Roth process if you will be close to or over the Roth IRA Contribution Limit.

The 401k looks overly complex. Do you have the option to choose only one or a few funds, and if so what are the expense ratios for those options?

As the saying goes, one can borrow for college but not retirement. There is also the "put on your own oxygen mask before assisting others" analogy when it comes to retirement vs. college savings, and "give your child the gift of not having to worry about you as you age." The choice is yours....
There is also the "put on your own oxygen mask before assisting others" analogy when it comes to retirement vs. college savings, and "give your child the gift of not having to worry about you as you age." This statement sums it up!
Current contributions to Roth 401k
15% to Roth 401k (contributions made every week on Friday's)
-I would like to retire by 65-70. 70 to get full social security if it's still around.

Employer 401k Plan
Lincoln Financial
My current investment: YourPath Passive 2055 Aggressive
Allocation: 97% equity 3% Bonds/Total Fixed Income
Investment Fund Allocations:
iShares Total US Stock Market Index K 36%
iShares S&P 500 Index K 5%
iShares Russell Mid-Cap Index K 6%
iShares Russell 2000 Small Cap Index K 5%
iShares Russell Small-Mid Cap Index K 3%
iShares MSCI Total Index K 38%
iShares MSCI EAFE International Index K 1%
iShares Developed Real Estate Index K 3%
iShares US Aggregate Bond Index 3%
iShares Short term TIPS Bond Index K 0%
Lincoln Fixed Account 0%
Total Annual operating expenses 0.13%
Inv Mgmt, Trustee and Admin fees (bps) 0.06%
Acquired Fund Fee (bps) 0.07%

The other Fund Options that I can invest in if you think it’s best I invest by choosing one or a few of these funds and if so which ones and how would you do the allocations and at what intervals?
Guarantee Stable Value
AB Global Bond SA3h
Baird Aggregate Bond Inst SAEJ
Fed Hermes Gov Ultsht Dur SAC7
VG High Yld Corp Admrl SAAV
VG Inflation Protectd Sec SAAW
Western Ast Core Plus SABX
JPMorgan US Equity SA8Y
Neu Berman RET SA9S
Vanguard Value Index Adml SAE5
Vanguard 500 Index SACG
AmerFunds Perspective SA6H
As Adv Spl Mid Cap Val SABV
SS Rsl Lrg Cap Grw NL SAA7
The Hartford Int Opps SAAQ
Vanguard Sm Cap Grwth Ind SAE6
VG Dev Markets Idx Admrl SACH
VG Int Grw Admrl Shares SAAX
VG Int Val Inv Shares SAAY
American Funds New World SA6J
Federated Clvr Sm Val Fnd SACE
PIMCO CmdtyRlRetrn Strat SA9Y
VG Mid Cap Grw Idx Admrl SAB3
AmerFunds AmerBal SA6B
Did you see my last post to you above?

Also I have $23,000 sitting in a profit sharing plan from my old employer. What does everyone suggest I move it to? My 401k? Open a traditional or Roth IRA and start funding one of them as well as my 401k?
the_wiki
Posts: 94
Joined: Thu Jul 28, 2022 11:14 am

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by the_wiki »

Hazlesac wrote: Mon Aug 01, 2022 9:16 pm
the_wiki wrote: Mon Aug 01, 2022 7:31 pm It looks like you are currently in a 2055 target date plan with only .13% fees. That's honestly a pretty good portfolio with good allocations that will adjust as you age, so no real need to change it unless you want to. If you are 40, 2055 is age 73 retirement, so maybe drop to 2050 or 2045, but it looks like a solid portfolio.

25-30 years is still plenty of time to compound into some wealth, but you will need to be sure to come as close to maxing out that 401k as you can every year.

I chose 2055 to stay in the plans 97% equity and 3% bond allocation to be high risk so I could have a chance for larger returns to make up the fact that I’m starting at scratch at the age 40. What are your thoughts on this?
As long as it is a conscious choice to hit a specific risk allocation, then it’s a reasonable strategy. Just understand it could backfire if stocks do bad your last 10 years. Nobody knows, that’s why it is called risk.
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Lincoln Financial 401k questions and help needed!!

Post by Hazlesac »

[Thread merged into here --admin LadyGeek]

Current income
$70,000 ytd (keep in mind I get paid weekly and I don't know what each week's paycheck will be since I rely on how many sales I will make and some weeks my paychecks are zero. Also, I project that my income will be in the 75k-125k range from 40-55 then 56-65 50k-90k and from 65-70 around $50,000. I’m in commission business that varies a lot every year. So it’s hard to track what I’ll make since it’s all due to market conditions and how many units I sell. I get paid weekly.

1. Roth or traditional?
2. Stay in target date fund I’m in listed below?
3. If not, which funds below would you choose and what allocations of them and at what intervals would you change them at?
4. I have $23,000 from a previous employer profit sharing plan that I can rollover. Where do you suggest I roll this money over to? My 401k in traditional or open a Roth IRA and start funding that?

Current contributions to Roth 401k
15% to Roth 401k (contributions made every week on Friday's)
-I would like to retire by 65-70. 70 to get full social security if it's still around.

Employer 401k Plan
Lincoln Financial
Current Invest Fund I’m in: YourPath Passive 2055 Aggressive
Allocation: 97% equity 3% Bonds/Total Fixed Income
YourPath Passive 2055 Aggressive Investment Fund Allocations:
iShares Total US Stock Market Index K 36%
iShares S&P 500 Index K 5%
iShares Russell Mid-Cap Index K 6%
iShares Russell 2000 Small Cap Index K 5%
iShares Russell Small-Mid Cap Index K 3%
iShares MSCI Total Index K 38%
iShares MSCI EAFE International Index K 1%
iShares Developed Real Estate Index K 3%
iShares US Aggregate Bond Index 3%
iShares Short term TIPS Bond Index K 0%
Lincoln Fixed Account 0%
-Total Annual operating expenses 0.13%
-Inv Mgmt, Trustee and Admin fees (bps) 0.06%
-Acquired Fund Fee (bps) 0.07%

Lincoln Financial Investment Fund Options if I chose to invest this way:
-Expense ratios next to each fund:
-Since Inception next to expense ratios:

Guarantee Stable Value 0.00%
AB Global Bond Fund Class Z SA3h 0.50% Since Inception 1.66%
Baird Aggregate Bond Inst SAEJ
Fed Hermes Gov Ultsht Dur SAC7 0.39% Since inception 1.13%
VG High Yld Corp Admrl SAAV 0.13% Since inception 5.00%
VG Inflation Protectd Sec SAAW 0.10% Since inception 3.58%
Western Ast Core Plus Bond Fund Class IS SABX 0.42% Since inception 2.43%
JPMorgan US Equity SA8Y 0.47% Since inception 18.08%
Neu Berman RET SA9S 0.93% Since inception 10.13%
Vanguard Value Index Adml SAE5 0.05% Since inception 12.54%
Vanguard 500 Index SACG 0.04% Since inception 16.37%
AmerFunds Perspective SA6H 0.41% Since inception 15.97%
Allspring Special Mud Cap Value Fund Class R6 0.70% Since inception 12.05%
SS Rsl Lrg Cap Grw NL SAA7 0.04% Since inception 20.70%
The Hartford Int Opps SAAQ 0.69% Since inception 8.40%
Vanguard Sm Cap Grwth Ind SAE6 0.07% Since inception 12.74%
VG Dev Markets Idx Admrl SACH 0.07% Since inception 8.42%
VG Int Grw Admrl Shares SAAX 0.32% Since inception 15.10%
VG Int Val Inv Shares SAAY 0.36% Since inception 7.76%
American Funds New World SA6J 0.57% Since inception 10.70%
Federated Clvr Sm Val Fnd SACE 1.15% Since inception 11.46%
PIMCO CmdtyRlRetrn Strat SA9Y 0.99% Since inception 8.86%
VG Mid Cap Grw Idx Admrl SAB3 0.07% Since inception 15.33%
AmerFunds AmerBal SA6B 0.25% Since inception 10.04%
User avatar
FiveK
Posts: 13055
Joined: Sun Mar 16, 2014 2:43 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by FiveK »

Hazlesac wrote: Tue Aug 02, 2022 9:06 am I’m trying to divide 20,500 by 100,000 but it’s coming to an amount like .0045??? What am I doing wrong?
Don't know what you are doing but 20500/100000 = 0.205 or 20.5%.
Also I’m confused by all the examples of showing if I should be in traditional or Roth 401k because there are “bumps” and social security amounts that can change your marginal tax rate and examples where you might find both options and examples where where if your contributions are Very high that can cause or reduce your withdrawals in retirement if I recollect? There’s all these moving parts I’m a not understanding it enough to know how to find my 401k. Traditional or Roth? Or am I supposed to follow an equation each year to determine which option I contribute bc that’s how I read their examples.
As it stands the wiki page for Traditional versus Roth can be overly complex. You would be well served to look only at the Simplest situation section and ignore everything else.
So you know I’m putting 15% in now. I’m 40 and I’m hoping to make it to 70. I only have 7,000 in my Roth 401k. I’m predicting that from age 40-55 I will stay in the $75k low range to $125k high range. Then from 56-60 $60k to $90k. From 60-70 most likely $40k -$70k max. I also don’t know how to actually follow the marginal tax rates but the link suggests I should be looking at that yearly did it say to determine where to contribute?
Yes, whether to use traditional or Roth contributions can be a yearly choice (e.g., if you win the lottery one year or only have $20K income another year). But if you have $75K-$125K each year, that puts you in the 22%-24% federal tax bracket for the next 15 years, so let's just focus on that - we can revisit in 16 years if needed. ;)
And also how do I know what my social security will be so I’m able to figure out my marginal tax with these so called “bumps” that change your tax rate.
A couple of spreadsheets and a web tool that work well for calculating an individual's benefit:
- The 'SocialSecurity' tab of the personal finance toolbox spreadsheet.
- The Downloadable Social Security Benefit Estimator
- Social Security Calculator

But for now (and for many years to come), ignore social security's effect on your retirement marginal tax rate (again, just focus on the Simplest situation section and ignore everything else).
I guess I’m confused on just what’s the steps I should be taking based on this information and is it as easy for you to provide me with an answer with my predictions of income and is it possible that I am at my best interest to just contribute to one option and not change it up yearly on where I contribute or what is the way to do it.
Just put all your 401k contributions into traditional. Your income may be too high to deduct traditional IRA contributions, so use Roth for your IRA.

Take a look at cells S2:V11 in the personal finance toolbox spreadsheet. For example, that shows you would need $323,750 in your traditional accounts before a 4%/yr safe withdrawal rate would put you past the standard deduction. With less than that in your traditional accounts (and assuming no other significant income) you wouldn't pay any federal income tax at all.

Because as you say you are starting from scratch, you should be starting to fill that traditional account bucket until it approaches $1 million or so before worrying much about using the Roth 401k option.
Also if you suggest I change to traditional am I able to move the funds in my Roth to the traditional?
No, that's water under the bridge, but you may be able to switch your future contributions to traditional for this year.
petulant
Posts: 2225
Joined: Thu Sep 22, 2016 1:09 pm

Re: Lincoln Financial 401k questions and help needed!!

Post by petulant »

1. What's your current age? Married? Spousal job? Plan to get married? Do you have an employer match on the 401K? What are your current Roth and traditional balances?

Traditional is the better default unless there's a good analysis showing otherwise based on things like 1) you have saved up in the hundreds of thousands in tax-deferred balances or 2) something specific, e.g. married with your sole income making less than $110K.

2-3. Do you have an opinion on your asset allocation (stocks/international/bonds) and glidepath (when to increase bonds in the future)? A target retirement date fund is going to give you some kind of standardized stock/bond allocation that edges up the bonds over time as you approach retirement. Many investors who don't want to think about things may be fine with that approach, but many investors who look into these questions find that they don't agree with the standardized allocation and glidepath.

Thing is, at a young age, it's probable that you would pick something very similar to the target retirement index--almost 100% stocks and some smattering of an international allocation. The big reason to go your own way is if you want more bonds (currently 3%, which is practically 0%) or to reduce international allocation (currently almost 40%).

If you were going to develop your own asset allocation, the basic approach would be to identify the ideal U.S. stock fund, international fund, and bond fund among the options and choose allocations accordingly. The relevant options in your list are the Vanguard 500 Index SACG for U.S. stocks, VG Dev Markets Idx Admrl SACH for international stocks, and then probably Baird Aggregate Bond Inst SAEJ for bonds, though some might argue for the stable value fund or the VG Inflation Protectd Sec fund.

To enact your pick, you probably complete a form (probably on website) to elect future contributions to be at the desired allocation, then you would do another one to transfer existing assets into the desired allocations, and then you would log in say once a year after that to transfer existing assets to desired allocations again if they are out of whack. The website may have an automated rebalancing tool to help.

4. Is your previous employer profit sharing plan balance tax-deferred, i.e. you have not paid taxes yet? I assume so, but if not, please clarify. Assuming it's tax-deferred, your options are a rollover into the new 401(k) if your new plan allows it or into an IRA. The rollover into an IRA can be a traditional IRA or a Roth IRA. If you do a rollover into a Roth IRA, you pay taxes now. Does that really make sense? It probably follows the same analysis as whether to contribute to a Roth 401(k) option or a traditional 401(k) option. Generally, with such a small amount of $, I would think your life would be simpler to pick a rollover into the current 401(k) plan.
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Lincoln Financial 401k questions and help needed!!

Post by Hazlesac »

petulant wrote: Tue Aug 02, 2022 1:32 pm 1. What's your current age? Married? Spousal job? Plan to get married? Do you have an employer match on the 401K? What are your current Roth and traditional balances?

Traditional is the better default unless there's a good analysis showing otherwise based on things like 1) you have saved up in the hundreds of thousands in tax-deferred balances or 2) something specific, e.g. married with your sole income making less than $110K.

2-3. Do you have an opinion on your asset allocation (stocks/international/bonds) and glidepath (when to increase bonds in the future)? A target retirement date fund is going to give you some kind of standardized stock/bond allocation that edges up the bonds over time as you approach retirement. Many investors who don't want to think about things may be fine with that approach, but many investors who look into these questions find that they don't agree with the standardized allocation and glidepath.

Thing is, at a young age, it's probable that you would pick something very similar to the target retirement index--almost 100% stocks and some smattering of an international allocation. The big reason to go your own way is if you want more bonds (currently 3%, which is practically 0%) or to reduce international allocation (currently almost 40%).

If you were going to develop your own asset allocation, the basic approach would be to identify the ideal U.S. stock fund, international fund, and bond fund among the options and choose allocations accordingly. The relevant options in your list are the Vanguard 500 Index SACG for U.S. stocks, VG Dev Markets Idx Admrl SACH for international stocks, and then probably Baird Aggregate Bond Inst SAEJ for bonds, though some might argue for the stable value fund or the VG Inflation Protectd Sec fund.

To enact your pick, you probably complete a form (probably on website) to elect future contributions to be at the desired allocation, then you would do another one to transfer existing assets into the desired allocations, and then you would log in say once a year after that to transfer existing assets to desired allocations again if they are out of whack. The website may have an automated rebalancing tool to help.

4. Is your previous employer profit sharing plan balance tax-deferred, i.e. you have not paid taxes yet? I assume so, but if not, please clarify. Assuming it's tax-deferred, your options are a rollover into the new 401(k) if your new plan allows it or into an IRA. The rollover into an IRA can be a traditional IRA or a Roth IRA. If you do a rollover into a Roth IRA, you pay taxes now. Does that really make sense? It probably follows the same analysis as whether to contribute to a Roth 401(k) option or a traditional 401(k) option. Generally, with such a small amount of $, I would think your life would be simpler to pick a rollover into the current 401(k) plan.
I am 40 years old and truth is I am starting from scratch because of huge mistakes I made with money in my 30’s. I am currently a single dad of a 5 year old boy. I would hope that I would get married again but if I go by the last 5 years it’s been very slow. Employer match is 3% on my gross income on each weekly paycheck. Currently I am in the Roth option because I figured I didn’t want to pay taxes lasted but I’m learning that I shouldn’t just base it off that. I have only built it up to $7,000. My traditional balance is about $1300 but that’s the match money since it only goes into traditional. Otherwise I have been putting in 15% into the Roth.

Should I change to traditional?

My thinking on assett allocation is I feel like I have to make up the time I misssed and recoup so me being in heavy stocks vs bonds like my target date fund I’m in feels good to me. But again I’m not an expert and don’t know if I should be picking my own stocks from my 401 plan and setting the allocations. What I’m looking for is for me to be in the most favorable option traditional or Roth and if target date fund is most attractive plan for me to amass close to 1 million as possible. If more great. Whatever gets me to have the best chance at the most income yearly in retirement.

Another question I have is should I have a traditional ira or Roth IRA to have a good mixture of how I’m taxed at retirement?

And do you suggest I put more into my 401k like 20-25% due to me starting over at 40?

Thanks for all your help!
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Lincoln Financial 401k questions and help needed!!

Post by Hazlesac »

Oh yes the profit sharing plan. I don’t believe I ever paid taxes on it. I spoke to my 401k plan and they said they will take a direct rollover. That means it won’t get taxed right? They said that it will go into the traditional part of my 401k. So I’m assuming on what you said is to move the $7,000 in my Roth part into traditional and then start investing strictly into traditional right?
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Lincoln Financial 401k questions and help needed!!

Post by Hazlesac »

petulant wrote: Tue Aug 02, 2022 1:32 pm 1. What's your current age? Married? Spousal job? Plan to get married? Do you have an employer match on the 401K? What are your current Roth and traditional balances?

Traditional is the better default unless there's a good analysis showing otherwise based on things like 1) you have saved up in the hundreds of thousands in tax-deferred balances or 2) something specific, e.g. married with your sole income making less than $110K.

2-3. Do you have an opinion on your asset allocation (stocks/international/bonds) and glidepath (when to increase bonds in the future)? A target retirement date fund is going to give you some kind of standardized stock/bond allocation that edges up the bonds over time as you approach retirement. Many investors who don't want to think about things may be fine with that approach, but many investors who look into these questions find that they don't agree with the standardized allocation and glidepath.

Thing is, at a young age, it's probable that you would pick something very similar to the target retirement index--almost 100% stocks and some smattering of an international allocation. The big reason to go your own way is if you want more bonds (currently 3%, which is practically 0%) or to reduce international allocation (currently almost 40%).

If you were going to develop your own asset allocation, the basic approach would be to identify the ideal U.S. stock fund, international fund, and bond fund among the options and choose allocations accordingly. The relevant options in your list are the Vanguard 500 Index SACG for U.S. stocks, VG Dev Markets Idx Admrl SACH for international stocks, and then probably Baird Aggregate Bond Inst SAEJ for bonds, though some might argue for the stable value fund or the VG Inflation Protectd Sec fund.

To enact your pick, you probably complete a form (probably on website) to elect future contributions to be at the desired allocation, then you would do another one to transfer existing assets into the desired allocations, and then you would log in say once a year after that to transfer existing assets to desired allocations again if they are out of whack. The website may have an automated rebalancing tool to help.

4. Is your previous employer profit sharing plan balance tax-deferred, i.e. you have not paid taxes yet? I assume so, but if not, please clarify. Assuming it's tax-deferred, your options are a rollover into the new 401(k) if your new plan allows it or into an IRA. The rollover into an IRA can be a traditional IRA or a Roth IRA. If you do a rollover into a Roth IRA, you pay taxes now. Does that really make sense? It probably follows the same analysis as whether to contribute to a Roth 401(k) option or a traditional 401(k) option. Generally, with such a small amount of $, I would think your life would be simpler to pick a rollover into the current 401(k) plan.

Sorry but I was just reading and am I correct when I say that the tax rate your retirement withdrawals are taxed at is based on your withdrawal amount for that year if your pulling funds from your traditional 401k? For me my income is probably only coming from my 401k. I’m confused because I thought your taxed at your marginal rate of what you made??? But that doesn’t make sense either because why do I read that it matters on where you think your tax rate is when you retire meaning how much you make later on not now? So how do I determine what my tax rate would be if I’m a retiree looking to start making yearly withdrawals??? I don’t get it how is the tax rate based on? The marginal tax rate form has different levels of income and the tax rate is based off that but what income are they talking about if I’m retired? So how does one guess what tax rate they will be in when retired? I’m confused on why people say do you think you’ll be in a higher tax rate now or later. Well I’m im retired my only income is going to come from my withdrawals from my 401k so why do people ask that question and what determines how you guess on if your going to be in higher or lower tax rate based on what actually? So confused.
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

FiveK wrote: Tue Aug 02, 2022 12:03 pm
Hazlesac wrote: Tue Aug 02, 2022 9:06 am I’m trying to divide 20,500 by 100,000 but it’s coming to an amount like .0045??? What am I doing wrong?
Don't know what you are doing but 20500/100000 = 0.205 or 20.5%.
Also I’m confused by all the examples of showing if I should be in traditional or Roth 401k because there are “bumps” and social security amounts that can change your marginal tax rate and examples where you might find both options and examples where where if your contributions are Very high that can cause or reduce your withdrawals in retirement if I recollect? There’s all these moving parts I’m a not understanding it enough to know how to find my 401k. Traditional or Roth? Or am I supposed to follow an equation each year to determine which option I contribute bc that’s how I read their examples.
As it stands the wiki page for Traditional versus Roth can be overly complex. You would be well served to look only at the Simplest situation section and ignore everything else.
So you know I’m putting 15% in now. I’m 40 and I’m hoping to make it to 70. I only have 7,000 in my Roth 401k. I’m predicting that from age 40-55 I will stay in the $75k low range to $125k high range. Then from 56-60 $60k to $90k. From 60-70 most likely $40k -$70k max. I also don’t know how to actually follow the marginal tax rates but the link suggests I should be looking at that yearly did it say to determine where to contribute?
Yes, whether to use traditional or Roth contributions can be a yearly choice (e.g., if you win the lottery one year or only have $20K income another year). But if you have $75K-$125K each year, that puts you in the 22%-24% federal tax bracket for the next 15 years, so let's just focus on that - we can revisit in 16 years if needed. ;)
And also how do I know what my social security will be so I’m able to figure out my marginal tax with these so called “bumps” that change your tax rate.
A couple of spreadsheets and a web tool that work well for calculating an individual's benefit:
- The 'SocialSecurity' tab of the personal finance toolbox spreadsheet.
- The Downloadable Social Security Benefit Estimator
- Social Security Calculator

But for now (and for many years to come), ignore social security's effect on your retirement marginal tax rate (again, just focus on the Simplest situation section and ignore everything else).
I guess I’m confused on just what’s the steps I should be taking based on this information and is it as easy for you to provide me with an answer with my predictions of income and is it possible that I am at my best interest to just contribute to one option and not change it up yearly on where I contribute or what is the way to do it.
Just put all your 401k contributions into traditional. Your income may be too high to deduct traditional IRA contributions, so use Roth for your IRA.

Take a look at cells S2:V11 in the personal finance toolbox spreadsheet. For example, that shows you would need $323,750 in your traditional accounts before a 4%/yr safe withdrawal rate would put you past the standard deduction. With less than that in your traditional accounts (and assuming no other significant income) you wouldn't pay any federal income tax at all.

Because as you say you are starting from scratch, you should be starting to fill that traditional account bucket until it approaches $1 million or so before worrying much about using the Roth 401k option.
Also if you suggest I change to traditional am I able to move the funds in my Roth to the traditional?
No, that's water under the bridge, but you may be able to switch your future contributions to traditional for this year.
Thanks for your major help!

So since I have to guess what my yearly income is because I’m in a crazy market paid by commissions I believe I’ll make 100,000. So that comes to 20.5%. That’s the amount I should be saving correct?

Second, your suggesting I open a Roth IRA up and fund that along with my 401k? What happens if I make more than the limit? Bc I’m paid commissions and can’t predict how much I’ll make each year how am I supposed to be careful on let’s say I’m December end of the year I can see that I’ll be over the limit but my almost 6,000 is already invested in the Roth IRA? What do I do about that as I don’t want to incur fees. I know I can’t rollover to traditional. So with my job being so unpredictable does it make sense to not have to worry every end of the year if I’m going to go over while already investing close to the full 6000 already and instead start a traditional ira? Or is the point of the ira is for tax purposes so I can pull from this account first as it’s not taxed at withdrawal time? Just trying to understand how I would work the Roth when I’m going to maybe be cutting it close every year and I will only know what my income for the year to be in December and that’s cutting it close and then if I’m over what do I do? Let’s say I make $135k but didn’t think I’d hit that amount until I had a huge month in December to put me over the limit.
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by FiveK »

Hazlesac wrote: Tue Aug 02, 2022 4:03 pmSo since I have to guess what my yearly income is because I’m in a crazy market paid by commissions I believe I’ll make 100,000. So that comes to 20.5%. That’s the amount I should be saving correct?
If you can afford it, that is what would go to your traditional 401k. For additional savings in an IRA (again subject to affordability) see below. For even more savings (again subject to affordability), you would use a regular brokerage account.
Second, your suggesting I open a Roth IRA up and fund that along with my 401k? What happens if I make more than the limit? Bc I’m paid commissions and can’t predict how much I’ll make each year how am I supposed to be careful on let’s say I’m December end of the year I can see that I’ll be over the limit but my almost 6,000 is already invested in the Roth IRA? What do I do about that as I don’t want to incur fees. I know I can’t rollover to traditional. So with my job being so unpredictable does it make sense to not have to worry every end of the year if I’m going to go over while already investing close to the full 6000 already and instead start a traditional ira? Or is the point of the ira is for tax purposes so I can pull from this account first as it’s not taxed at withdrawal time? Just trying to understand how I would work the Roth when I’m going to maybe be cutting it close every year and I will only know what my income for the year to be in December and that’s cutting it close and then if I’m over what do I do? Let’s say I make $135k but didn’t think I’d hit that amount until I had a huge month in December to put me over the limit.
Ways to handle all the above:
1) Make Roth contributions during the year. If at the end of the year you are
a) over the Roth contribution limit, then have your broker recharacterize those Roth contributions to be treated as traditional contributions, then use the backdoor Roth process to get the money into your Roth IRA
b) under the Roth contribution limit but over the traditional deduction limit, then you are all set - nothing more to do.
c) under the Roth contribution limit and under the traditional deduction limit, then you have a choice to make:
i) leave the money in the Roth, so you would be all set with nothing more to do.
ii) have your broker recharacterize those Roth contributions to be treated as traditional contributions, leave the money in the traditional IRA, and take the tax deduction on line 20 of Schedule 1 when you file. You probably won't want to do this, because if you have an unexpectedly low earning year, Roth contributions will likely be better, but the effects of credits such as the saver's and earned income might change that. A bridge to be crossed if and only if you get to it.
2) Make traditional contributions during the year, then use the backdoor Roth process to get it into your Roth IRA (unless you are in the unlikely situation, as mentioned in (1)(c)(ii), of wanting to leave it in traditional). You can use the backdoor Roth process whether you are over or under the Roth contribution limit.

If you think there is <50% chance you would be over the Roth contribution limit, using (1) seems best, and thus using (2) if you think there is >50% chance you would be over that limit. Either way works, and brokerage handles thousands of all the above each year so it's probably simpler to do than reading about it here. :)
petulant
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Re: Lincoln Financial 401k questions and help needed!!

Post by petulant »

Hazlesac wrote: Tue Aug 02, 2022 1:53 pmI am 40 years old and truth is I am starting from scratch because of huge mistakes I made with money in my 30’s. I am currently a single dad of a 5 year old boy. I would hope that I would get married again but if I go by the last 5 years it’s been very slow. Employer match is 3% on my gross income on each weekly paycheck. Currently I am in the Roth option because I figured I didn’t want to pay taxes lasted but I’m learning that I shouldn’t just base it off that. I have only built it up to $7,000. My traditional balance is about $1300 but that’s the match money since it only goes into traditional. Otherwise I have been putting in 15% into the Roth.

Should I change to traditional?
Thanks for sharing. It's admirable that you're trying to get your financial life in order, especially for your son. What you shared indicates that you've got at least 12 years as Head of Household but no long-term Married Filing Jointly status on the horizon. Also other details are helpful. I'll address your question on Roth/traditional in a reply to your later post.
Hazlesac wrote: Tue Aug 02, 2022 1:53 pmMy thinking on assett allocation is I feel like I have to make up the time I misssed and recoup so me being in heavy stocks vs bonds like my target date fund I’m in feels good to me. But again I’m not an expert and don’t know if I should be picking my own stocks from my 401 plan and setting the allocations. What I’m looking for is for me to be in the most favorable option traditional or Roth and if target date fund is most attractive plan for me to amass close to 1 million as possible. If more great. Whatever gets me to have the best chance at the most income yearly in retirement.
The issue is that there's a probabilistic element to what your balance will be at retirement. We don't know how the markets will do over the next 25-30 years. The conventional wisdom is that stocks imply more risk and volatility, so the outcomes are less predictable, even if they are expected to be better. To give you an idea of how your choices impact outcomes, I ran three simulations on portfoliovisualizer.com. These simulations used historical return and risk information for stocks and bonds to simulate what a future 30-year period could look like where somebody started with $7000 and saved $15000 per year. I ran simulations for three portfolios: 100% stocks; 60% stocks and 40% bonds; and 100% bonds. The table below shows the outcomes at the 10th, 25th, 50th, and 75th percentile by total $ in real (inflation-adjusted) terms. Superficially, you can interpret these as the 50th percentile being about "expected," 75th percentile being a great outcome, and 10th and 25th percentile being bad outcomes (10th being less probable than 25th).

Code: Select all

	10th	25th	50th	75th
100/0	634K	947K	1.49M	2.37M
60/40	849k	1.06M	1.37M	1.76M
0/100	593K	652K	725K	810K
Sources:
100/0 https://www.portfoliovisualizer.com/mon ... mount=7000
60/40 https://www.portfoliovisualizer.com/mon ... mount=7000
0/100 https://www.portfoliovisualizer.com/mon ... mount=7000

See how the 10th percentile for 100% stocks is almost as low as the 10th percentile for 100% bonds, and they're both much worse than the 10th percentile for 60/40? Also see how 100% stocks is lower than 60/40 at the 25th percentile? Notice how all of the bond outcomes are close together? See how the 50th percentile for 100% stocks is less than 10% better than for 60/40, but the "better" outcomes for 100% stocks like the 75th percentile are much better?

That's the tradeoff you're making. It's not about the best shot at $1M. If you can save $15K a year, you've got a good shot at any reasonable allocation. The question is, do you want to cut a bit of the upside in good times for a bit less downside in bad times.
Hazlesac wrote: Tue Aug 02, 2022 1:53 pmAnother question I have is should I have a traditional ira or Roth IRA to have a good mixture of how I’m taxed at retirement?
Yes and no. It can make sense to have some of both for flexibility and diversification purposes. Most people end up there just because of how limits on traditional IRA deductions vs. Roth IRA contributions work. But the numbers should come first. It depends. I'll look at Roth/traditional in a reply to your later post.
Hazlesac wrote: Tue Aug 02, 2022 1:53 pmAnd do you suggest I put more into my 401k like 20-25% due to me starting over at 40?
The maximum 401(k) contribution for 2022 is $20,500, and it's likely to be similar if a little higher next year. I imagine that if you increase your contributions to 20-25%, you will be able to max out your contributions. I think it's a good idea to do so, but only you know how that change would impact your family. Also remember that the hierarchy of financial priorities should be, after doing what it take to qualify for the employer match, make sure you have an emergency fund first.
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Re: Lincoln Financial 401k questions and help needed!!

Post by petulant »

Hazlesac wrote: Tue Aug 02, 2022 1:56 pm Oh yes the profit sharing plan. I don’t believe I ever paid taxes on it. I spoke to my 401k plan and they said they will take a direct rollover. That means it won’t get taxed right? They said that it will go into the traditional part of my 401k. So I’m assuming on what you said is to move the $7,000 in my Roth part into traditional and then start investing strictly into traditional right?
Yes, the most efficient thing to do is to do a rollover of the old profit sharing plan into your new 401(k). There is an argument that the fees on the new 401(k) are a bit higher than what you might get if you did a rollover to a traditional IRA or Roth IRA, but my opinion is that the fees are still low enough and the amount of money is low enough that a normal person is better off consolidating the accounts.

If you've already contributed $7,000 as Roth contributions, you can't move it back to traditional. You can only change the status of your future contributions.
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by LadyGeek »

Hazlesac - In order to provide appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread. If you have any questions, ask them here.

(Thanks to the member who reported the post and provided a link to this thread.)
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petulant
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Re: Lincoln Financial 401k questions and help needed!!

Post by petulant »

Hazlesac wrote: Tue Aug 02, 2022 3:43 pmSorry but I was just reading and am I correct when I say that the tax rate your retirement withdrawals are taxed at is based on your withdrawal amount for that year if your pulling funds from your traditional 401k? For me my income is probably only coming from my 401k. I’m confused because I thought your taxed at your marginal rate of what you made??? But that doesn’t make sense either because why do I read that it matters on where you think your tax rate is when you retire meaning how much you make later on not now? So how do I determine what my tax rate would be if I’m a retiree looking to start making yearly withdrawals??? I don’t get it how is the tax rate based on? The marginal tax rate form has different levels of income and the tax rate is based off that but what income are they talking about if I’m retired? So how does one guess what tax rate they will be in when retired? I’m confused on why people say do you think you’ll be in a higher tax rate now or later. Well I’m im retired my only income is going to come from my withdrawals from my 401k so why do people ask that question and what determines how you guess on if your going to be in higher or lower tax rate based on what actually? So confused.
That's the funny thing about some of the blurbs on investment websites. They can be a bit silly when you think about it. Should I contribute to Roth or traditional options? It depends on what you expect your tax rate to be. Well, doesn't my future tax rate depend on whether I pick Roth or traditional today? Oops.

The best way to think about it is in terms of what financial advisor education guru Michael Kitces calls the "equilibrium tax rate." This is the tax rate that tries to get your marginal tax rates in all years as close to the same as possible. For most people, their high income years are work years, but then they don't have any income when they retire until they take social security. So the normal person wants to shift income (taxable income) from the working years to future low-income retirement years. Consider the following table:

Code: Select all

Year	1	2	3	4	5	6	7	8	9	10
Income	$100K	$100K	$100K	$100K	$100K	$100K	$0K	$0K	$0K	$0K
MTR	22%	22%	22%	22%	22%	22%	0%	0%	0%	0%
It shows that the saver has a stable work income in years 1 to 6, then no income in years 7 to 10--probably retired, but maybe taking a long sabbatical or disabled.

From a tax perspective, the saver if single would be near the top of the 22% tax bracket for years 1 to 6, but wouldn't be using any of the 0%-taxed standard deduction in years 7 to 10. We would say the marginal tax rate (MTR) for years 1 to 6 is maybe 22%, almost 24%, while the marginal tax rate for later years is currently $0. So the ideal would be to shift income from years 1 to 6 into years 7 to 10. If the saver could move $20K per year of income with a 4% fixed return, it might look like this:

Code: Select all

Year	1	2	3	4	5	6	7	8	9	10
Income	$80K	$80K	$80K	$80K	$80K	$80K	$35K	$35K	$35K	$35K
MTR	22%	22%	22%	22%	22%	22%	12%	12%	12%	12%
TDB	$20K	$40.8K	$62.4K	$84.9K	$108K $133K	$101K	$68.9K	$35.1K	$0
See, the saver reduced their income by $20K per year and saved 22% of that in taxes for those years, and then had income to fill the standard deduction, the 10% bracket, and some of the 12% bracket for years 7 to 10. (TDB is the tax-deferred balance at the end of each year.) The marginal tax rate for years 1 to 6 is now solidly 22%, and the marginal tax rate for years 7 to 10 is 12%. More tax deferral is still good.

What if the saver had shifted $40K per year instead (which is not available to most people)?

Code: Select all

Year	1	2	3	4	5	6	7	8	9	10
Income	$60K	$60K	$60K	$60K	$60K	$60K	$70K	$70K	$70K	$70K
MTR	22%	22%	22%	22%	22%	22%	22%	22%	22%	22%
TDB	$40K	$81.6K	$125K	$170K	$217K $265K	$202K	$138K	$70.3K	$0
Well, now, somehow the saver has more income to realize in years 7 to 10 than in the earlier years! These I think all have a 22% marginal bracket, but you could see how if somebody maxed out things and got good returns for long enough, it's possible they could walk into a situation where there's a large traditional balance so that they end up in a higher tax bracket. So about halfway through the above scenario, maybe the saver realizes what they're doing and switches to half Roth contributions:

Code: Select all

Year	1	2	3	4	5	6	7	8	9	10
Income	$60K	$60K	$60K	$80K	$80K	$80K	$53K	$53K	$53K	$53K
MTR	22%	22%	22%	22%	22%	22%	22%	22%	22%	22%
TDB	$40K	$81.6K	$125K	$150K	$176K $203K	$155K	$105K	$53.7K	$0
Now that's pretty much ideal--pretty much just filling up the 12% bracket, the saver has achieved "equilibrium" and put extra money in a Roth option instead.

I hope this gets across the theory, but you could imagine a really solid analysis or spreadsheet going for 30 years and then on into social security for another 30 (with all the complexity of social security taxes) is a lot of work. Plus, the analysis could look at "scenarios" like retiring early because of industry layoffs or burnout; low returns; etc. That's why it's a fair default or first pass to go completely traditional with your 401(k) contributions when you're just starting out: chances are, you're going to have some low-income years to use, and in "bad" situations where you have to retire early, you have even more tax room. For you, you're not in a position yet where you're close to filling up the 401(k). Once you've got more money built up and you're learning more, it can be a good idea to work on this analysis.

Also, some people end up with both traditional and Roth balances even following the logic above due to restrictions on traditional IRA contributions. The maximum contribution for a 401(k) is $20,500 this year. So a saver might do that, then look around for the next step. If they had enough spare cash lying around to max out the 401(k), they probably make too much money for a tax-deferred contribution to a traditional IRA, but they might still be able to do a Roth IRA or a backdoor Roth IRA for $6000. So they end up getting a bit of Roth anyway. Nothing wrong with that.
petulant
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by petulant »

Note--my responses were all prepared in response to the new thread before merger. I think I was trying to get across the same points as FiveK on Roth vs. traditional. Hopefully they add a bit of understanding.
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Hazlesac
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

I don’t want to get in trouble but I’m new to posting and I don’t know what the admin means about my posts? I’ve been hitting the quotation icon so that the person that wrote the reply sees that I’m mentioning their post and then me asking questions. Can someone help me understand what I’m doing wrong with the post reply’s? Should I just be hitting the reply button at the bottom of the thread? If so how do I attach a members post so they know what my reply is discussing?

Thanks all!
petulant
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by petulant »

Hazlesac wrote: Tue Aug 02, 2022 9:26 pm I don’t want to get in trouble but I’m new to posting and I don’t know what the admin means about my posts? I’ve been hitting the quotation icon so that the person that wrote the reply sees that I’m mentioning their post and then me asking questions. Can someone help me understand what I’m doing wrong with the post reply’s? Should I just be hitting the reply button at the bottom of the thread? If so how do I attach a members post so they know what my reply is discussing?

Thanks all!
Nothing wrong with the quotes. The issue was that you started a new thread when you provided updates about your plan's expenses. The admin merged the thread. Keep quoting in replies.
Topic Author
Hazlesac
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

I did that in response to someone’s reply that said to post the expense ratios so they can see if it makes sense to pick my own funds. Why is that an issue?

Also this thread I made does not show in “my posts” anymore. I’m only finding it by seeing notification on reply’s to a post? Meaning my topic thread is not there anymore under my profile
petulant
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by petulant »

Hazlesac wrote: Mon Aug 01, 2022 6:41 pm-On another note, I am also currently saving $800 per month for my son Utah's 529 Plan in an enrollment date fund. I have 13 more years to save. Do you suggest I cut down on the $800 and use it towards my retirement or if I'm able to keep up with this savings rate is it okay if I put the $800 and keep it towards the 529 plan? It's extremely important to me to be able to have a shot a chance to make my son be debt free after college. I don't want him to be in $100k debt like I was. I wouldn't be able to live with myself and I know some of you are going to say it shouldn't be a priority over my retirement but my questions to that is well if I'm putting in 15% of my weekly paycheck into retirement and I have this $800 without strapping me what is the reason why I shouldn't put $800 towards his education?
Another option is to put this amount into a taxable brokerage account--if you like the target date fund in your 401(k), you could do a similar approach through something like the fund AOM, which also picks all your funds for you, or you could pick a selection of a U.S. stock ETF (like VTI), an international ETF (like VXUS), and a bond ETF (like BND) in a conservative proportion. These will not have the same tax advantages, but you would have 100% flexibility to sell them to put toward your son's college OR, if he gets scholarships or you're worried about affording it, you could reduce how much you sell. I don't recommend the 529 for you right now because of the lock-in.
petulant
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by petulant »

Hazlesac wrote: Tue Aug 02, 2022 9:31 pm I did that in response to someone’s reply that said to post the expense ratios so they can see if it makes sense to pick my own funds. Why is that an issue?

Also this thread I made does not show in “my posts” anymore. I’m only finding it by seeing notification on reply’s to a post? Meaning my topic thread is not there anymore under my profile
When they said to post the expense ratios, they meant to make a reply in the original thread or update your original post.

I don't know about the "my posts" issue. The thread to look for should be "Starting from SCRATCH at 40 yrs old! Portfolio questions!"
Topic Author
Hazlesac
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

Oh they merged my one thread called Lincoln Financial and starting from scratch together. Hmmm idk why
petulant
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by petulant »

Hazlesac wrote: Tue Aug 02, 2022 9:37 pm Oh they merged my one thread called Lincoln Financial and starting from scratch together. Hmmm idk why
It's more efficient for the people trying to help you if all of the information is in one thread.
Topic Author
Hazlesac
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

So my target date fund is aggressive and it’s 97% stocks and 3% bonds. I’m not sure how they allocate the glide path and when it changes allocations. Nothing on Lincoln financial website for my 401k shows anything about it which I find odd. So that’s something I should find out correct?

I’m regards to the simulations you ran isn’t kind of off because it’s saying that my allocation is 60/40 for the next 30 years whereas my target date fund will be changing at whichever interval they change at in the glide path. So is it a fair projection when it’s going to change downwards to all diff allocations? Am I asking a good question? If so, then how does one actually simulate an amount at the end of 25-30 years if it’s 97%/3% now but will be changing during those years?

Thanks again!!!
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Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Big Heart »

Hi, I am also a single parent of a 5 year old and I have a few ideas.

1) There is a budget app called YNAB that helped me deal with variable income. (where you can't predict from month to month). They have a system around it that really works, which involves building a 'buffer'. Their approach is a very different way of budgeting, and it takes some practice, but they have many video tutorials, and the app itself is really easy (and fun) to use once you understand how they approach budgeting. 100% recommend paying the money for this app, especially if any part of your history involves poor financial management. I have learned so much about money in my 2 years of using that app , in fact it's all the surplus I started having which brought me to this forum. Also, the YNAB app has helped me become a good financial educator to my son. I used to have no clue what I was doing, but now my son and I have conversations about budgets and it's quite deep, and I feel like I am actually imparting some wisdom and life skill to him.

2) You need a big emergency fund as a single parent with highly variable income. Do you have at least 6 mos of your monthly expenses available to you? If not, I would focus on that before college savings. $800/month builds up fast. You cannot afford not to have options in an emergency. Yes you want your son to have college paid for, but if something terribly or traumatic happens, you are his buffer. People live wonderful lives without college, but a child's life can be destroyed by certain forms of toxic stress. Or if you or your child ever needed intensive mental health support, or had a serious injury of some kind . . you have to make sure that you are in a position to protect him from toxic stress events, and that involves creating some safety with your resources. Again, people thrive without college, but unaddressed toxic stress events are another matter. So you need a good sized emergency fund.

3) You need term life insurance and disability insurance.

4) Consider putting all your money in retirement accounts , I mean all of it, and then figure out college when he's 18. I have a thread called "Saving for college the Klang Fool way." Klang Fool is a contributor to this forum. His approach involves *achieving* your retirement number and then funding college from your retirement accounts and/or cashflow. 401k and Roth accounts are better resources than 529, even if you eventually do end up paying for his college. Check out Klang Fool's posts on this. He has a lot to teach about money and resilience against adversity. The punchline of this approach is don't put more money in a 529, put it all in your Roth or your 401k (or both) , and then leave decisions about financing college for later, understanding you actually can get money out of both vehicles for college expenses if you deem that appropriate when the time comes.

5) the YNAB app will help you figure out how to budget your contributions to the 401k and Roth in a context of variable income. Their method is really good.

Those are my thoughts. Good luck!!
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Hazlesac
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Re: Lincoln Financial 401k questions and help needed!!

Post by Hazlesac »

Hazlesac wrote: Tue Aug 02, 2022 11:56 am [Thread merged into here --admin LadyGeek]

Current income
$70,000 ytd (keep in mind I get paid weekly and I don't know what each week's paycheck will be since I rely on how many sales I will make and some weeks my paychecks are zero. Also, I project that my income will be in the 75k-125k range from 40-55 then 56-65 50k-90k and from 65-70 around $50,000. I’m in commission business that varies a lot every year. So it’s hard to track what I’ll make since it’s all due to market conditions and how many units I sell. I get paid weekly.

1. Roth or traditional?
2. Stay in target date fund I’m in listed below?
3. If not, which funds below would you choose and what allocations of them and at what intervals would you change them at?
4. I have $23,000 from a previous employer profit sharing plan that I can rollover. Where do you suggest I roll this money over to? My 401k in traditional or open a Roth IRA and start funding that?

Current contributions to Roth 401k
15% to Roth 401k (contributions made every week on Friday's)
-I would like to retire by 65-70. 70 to get full social security if it's still around.

Employer 401k Plan
Lincoln Financial
Current Invest Fund I’m in: YourPath Passive 2055 Aggressive
Allocation: 97% equity 3% Bonds/Total Fixed Income
YourPath Passive 2055 Aggressive Investment Fund Allocations:
iShares Total US Stock Market Index K 36%
iShares S&P 500 Index K 5%
iShares Russell Mid-Cap Index K 6%
iShares Russell 2000 Small Cap Index K 5%
iShares Russell Small-Mid Cap Index K 3%
iShares MSCI Total Index K 38%
iShares MSCI EAFE International Index K 1%
iShares Developed Real Estate Index K 3%
iShares US Aggregate Bond Index 3%
iShares Short term TIPS Bond Index K 0%
Lincoln Fixed Account 0%
-Total Annual operating expenses 0.13%
-Inv Mgmt, Trustee and Admin fees (bps) 0.06%
-Acquired Fund Fee (bps) 0.07%

Lincoln Financial Investment Fund Options if I chose to invest this way:
-Expense ratios next to each fund:
-Since Inception next to expense ratios:

Guarantee Stable Value 0.00%
AB Global Bond Fund Class Z SA3h 0.50% Since Inception 1.66%
Baird Aggregate Bond Inst SAEJ
Fed Hermes Gov Ultsht Dur SAC7 0.39% Since inception 1.13%
VG High Yld Corp Admrl SAAV 0.13% Since inception 5.00%
VG Inflation Protectd Sec SAAW 0.10% Since inception 3.58%
Western Ast Core Plus Bond Fund Class IS SABX 0.42% Since inception 2.43%
JPMorgan US Equity SA8Y 0.47% Since inception 18.08%
Neu Berman RET SA9S 0.93% Since inception 10.13%
Vanguard Value Index Adml SAE5 0.05% Since inception 12.54%
Vanguard 500 Index SACG 0.04% Since inception 16.37%
AmerFunds Perspective SA6H 0.41% Since inception 15.97%
Allspring Special Mud Cap Value Fund Class R6 0.70% Since inception 12.05%
SS Rsl Lrg Cap Grw NL SAA7 0.04% Since inception 20.70%
The Hartford Int Opps SAAQ 0.69% Since inception 8.40%
Vanguard Sm Cap Grwth Ind SAE6 0.07% Since inception 12.74%
VG Dev Markets Idx Admrl SACH 0.07% Since inception 8.42%
VG Int Grw Admrl Shares SAAX 0.32% Since inception 15.10%
VG Int Val Inv Shares SAAY 0.36% Since inception 7.76%
American Funds New World SA6J 0.57% Since inception 10.70%
Federated Clvr Sm Val Fnd SACE 1.15% Since inception 11.46%
PIMCO CmdtyRlRetrn Strat SA9Y 0.99% Since inception 8.86%
VG Mid Cap Grw Idx Admrl SAB3 0.07% Since inception 15.33%
AmerFunds AmerBal SA6B 0.25% Since inception 10.04%

Also, after viewing my other funds rather than the target date fund I’m in now would you suggest I choose some of these individual funds especially the ones with high returns from inception and make my own allocation and glide path and if so which funds and what example of a best approach allocation of I started this action now and at what intervals would I mandatory change the allocations and what should be the allocation percentages at each proposed interval. I’m interested in your response because I have read a lot that target date funds are great esp for people like me but a lot of expert investors like the approach in choosing their funds and setting and changing their allocations based on whatever intervals they have set forth for their plans life and they suggest it is us usually a road to better performance that leads to having better chances of higher returns and lastly a larger total amount at retirement time. I know people go back and forth with this but I’d be one willing to do this if I knew which funds to use and examples of an allocation currently should be and when it should be changed and changed to what percentages throughout the 25-30 years I’m looking at and I would make sure I wouldn’t deviate from this plan. Part of me would want to stay more aggressive for the next 10 years to try and make up for my 20’s and 30’s after I had to use up every dime of my 401k I had built up. Starting at 40 scares me. What if my heath doemst allow me to work past 60 am I going to have enough or what if it’s not possible to save 20,500 as I turn 55-69 years old then what do I do? A lot of unknown factors that haunt me for diminishing my 100k of 401k that I had. But I can’t look back I have a son to support too so thinking positive is the only way. I’ll deal with setback if they happen.
Charon
Posts: 498
Joined: Thu May 03, 2018 12:08 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Charon »

Hazlesac wrote: Tue Aug 02, 2022 9:44 pm I’m regards to the simulations you ran isn’t kind of off because it’s saying that my allocation is 60/40 for the next 30 years whereas my target date fund will be changing at whichever interval they change at in the glide path. So is it a fair projection when it’s going to change downwards to all diff allocations? Am I asking a good question? If so, then how does one actually simulate an amount at the end of 25-30 years if it’s 97%/3% now but will be changing during those years?
You're asking a reasonable question, but the truth is that the simulations aren't super helpful for you right now. There will be a huge range of possibilities even just based on historical performance, because you're looking 25-30 years out and you just can't predict that far with any certainty.

So focus on what you can affect right now. Save as much as you can in a traditional 401(k) (not Roth). Check back in occasionally to see how it's going. In 10 years you'll have a better sense.

As for college, the University of Utah currently charges about $9000 year for in-state tuition, Utah State nearly the same. Average total cost of attendance (including room and board) after aid is <$14k/year for each. There is zero reason to expect that your son will incur $100k in college debt, which is way above normal.
Last edited by Charon on Tue Aug 02, 2022 10:31 pm, edited 1 time in total.
User avatar
FiveK
Posts: 13055
Joined: Sun Mar 16, 2014 2:43 pm

Re: Lincoln Financial 401k questions and help needed!!

Post by FiveK »

Hazlesac wrote: Tue Aug 02, 2022 10:00 pm 1. Roth or traditional?
2. Stay in target date fund I’m in listed below?
3. If not, which funds below would you choose and what allocations of them and at what intervals would you change them at?
4. I have $23,000 from a previous employer profit sharing plan that I can rollover. Where do you suggest I roll this money over to? My 401k in traditional or open a Roth IRA and start funding that?
1. Traditional 401k, Roth IRA (as described in this post)
2&3. Either stay in the target date fund or go with 80-90% Vanguard 500 Index SACG and 10-20% Guarantee Stable Value (assuming a decent guaranteed rate). Neither of those choices is likely to be optimal, but the same would be said for any choice you make. Both are reasonable (as would many other suggestions be), and that's the best you can do. Whatever you choose, keep that choice for 10 years or so and then reevaluate.
4. If the $23K is in a traditional account now (is it?) then roll it over to your current 401k if your current 401k will accept it.

How do those suggestions look to you?
er999
Posts: 324
Joined: Wed Nov 05, 2008 11:00 am

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by er999 »

If your income is expected to remain in the $70k range for the next 10-15 years, maybe consider not saving for college. I’m not an expert so would research elsewhere to make sure but you
might get substantial aid at that income level. I’d focus more on retirement and if it looks like you are ahead in retirement in 13 years when college starts maybe reduce retirement savings then to cash flow part of college.
invest4
Posts: 1145
Joined: Wed Apr 24, 2019 2:19 am

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by invest4 »

Welcome!

Some comments:

* Asset Allocation: The past may not be the future If you want to have a high allocation to stocks, that is up to you. However, you should consider it carefully as it can be very bumpy, nothing is guaranteed and you may find yourself making poor decisions (like selling), because your tolerance for risk is not what you thought it was. Happens to people all the time when they see their portfolio quickly evaporate.


* Simplicity: Do not underestimate the value simplicity in your portfolio!

- Consolidating any eligible accounts into your new 401k sounds like a great idea to me

- Target date fund is also fine..you invest and let it run its course

- Make it easy for yourself...so you can focus on your job and son


* College Savings: As mentioned by others, I also strongly encourage you to prioritize your retirement over saving for college right now. It is imperative you take care of yourself first. Further, it is absolutely possible to achieve a college education without significant debt.

We have 4 children and this is how we are doing it:

- Student lives at home for the entire duration of their college years

- Community college first two years - significantly lower cost vs university

- University for the rest

- Reasonable expectation that son can get transfer scholarships / other. You may also be eligible for financial aid.


* 401k vs Roth: Fully agreed - max out traditional first...then Roth contributions if you can swing it. Suggest you heed the advice provided by some of the others and don't sweat the variable income too much. There are options available to you to be flexible and avoid mistakes.


* Emergency fund: Yes!


* Life insurance and disability: absolutely


You will receive lots of help here. Step by step...you will be fine.

Best wishes.
User avatar
Wiggums
Posts: 5209
Joined: Thu Jan 31, 2019 8:02 am

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Wiggums »

invest4 wrote: Wed Aug 03, 2022 3:10 am Welcome!

Some comments:

* Asset Allocation: The past may not be the future If you want to have a high allocation to stocks, that is up to you. However, you should consider it carefully as it can be very bumpy, nothing is guaranteed and you may find yourself making poor decisions (like selling), because your tolerance for risk is not what you thought it was. Happens to people all the time when they see their portfolio quickly evaporate.


* Simplicity: Do not underestimate the value simplicity in your portfolio!

- Consolidating any eligible accounts into your new 401k sounds like a great idea to me

- Target date fund is also fine..you invest and let it run its course

- Make it easy for yourself...so you can focus on your job and son


* College Savings: As mentioned by others, I also strongly encourage you to prioritize your retirement over saving for college right now. It is imperative you take care of yourself first. Further, it is absolutely possible to achieve a college education without significant debt.

We have 4 children and this is how we are doing it:

- Student lives at home for the entire duration of their college years

- Community college first two years - significantly lower cost vs university

- University for the rest

- Reasonable expectation that son can get transfer scholarships / other. You may also be eligible for financial aid.


* 401k vs Roth: Fully agreed - max out traditional first...then Roth contributions if you can swing it. Suggest you heed the advice provided by some of the others and don't sweat the variable income too much. There are options available to you to be flexible and avoid mistakes.


* Emergency fund: Yes!


* Life insurance and disability: absolutely


You will receive lots of help here. Step by step...you will be fine.

Best wishes.
+1

This is a good plan.

Your savings rate and time in the market are the most important things right now
Investors need to be better informed about the costs they pay. “High fund fees can be hazardous to your wealth in the same way that high calories can be hazardous for your health.”
petulant
Posts: 2225
Joined: Thu Sep 22, 2016 1:09 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by petulant »

Hazlesac wrote: Tue Aug 02, 2022 9:44 pmSo my target date fund is aggressive and it’s 97% stocks and 3% bonds. I’m not sure how they allocate the glide path and when it changes allocations. Nothing on Lincoln financial website for my 401k shows anything about it which I find odd. So that’s something I should find out correct?
You should review the glidepath for your target date of 2055. I believe I found a PDF illustrating the glidepaths:

https://cdn1-originals.webdamdb.com/131 ... IOLRFF2RHA

On page 3, there's a chart for the "aggressive" glide path. You can see it starts to add more fixed income about 15 years before retirement and gets close to half around the retirement date, but that's just eye-balling the graph.
Hazlesac wrote: Tue Aug 02, 2022 9:44 pmI’m regards to the simulations you ran isn’t kind of off because it’s saying that my allocation is 60/40 for the next 30 years whereas my target date fund will be changing at whichever interval they change at in the glide path. So is it a fair projection when it’s going to change downwards to all diff allocations? Am I asking a good question? If so, then how does one actually simulate an amount at the end of 25-30 years if it’s 97%/3% now but will be changing during those years?
The point wasn't to simulate a glidepath per se. It was to give you an idea of how stocks have higher possibilities of return but also higher downside risk. It's possible you will be more exposed to bad markets by having 100% equities over any period of your saving. Portfoliovisualizer.com has a multistage "financial planning" module that could simulate a linear glidepath, which you are free to use.
petulant
Posts: 2225
Joined: Thu Sep 22, 2016 1:09 pm

Re: Lincoln Financial 401k questions and help needed!!

Post by petulant »

Hazlesac wrote: Tue Aug 02, 2022 10:00 pmAlso, after viewing my other funds rather than the target date fund I’m in now would you suggest I choose some of these individual funds especially the ones with high returns from inception and make my own allocation and glide path and if so which funds and what example of a best approach allocation of I started this action now and at what intervals would I mandatory change the allocations and what should be the allocation percentages at each proposed interval. I’m interested in your response because I have read a lot that target date funds are great esp for people like me but a lot of expert investors like the approach in choosing their funds and setting and changing their allocations based on whatever intervals they have set forth for their plans life and they suggest it is us usually a road to better performance that leads to having better chances of higher returns and lastly a larger total amount at retirement time. I know people go back and forth with this but I’d be one willing to do this if I knew which funds to use and examples of an allocation currently should be and when it should be changed and changed to what percentages throughout the 25-30 years I’m looking at and I would make sure I wouldn’t deviate from this plan.
No, "high return from inception" is not a good way to choose funds. The returns for funds come from what they're invested in--stocks, bonds, etc. Stocks will return more in good times, bonds are more stable. If something looks like it has a high return from inception, it may be that it was just started during good times, it may be that it's high in stocks (and riskier), etc. You should choose the funds that express your chosen stock/bond allocation with the least expenses possible. I noted above the funds should be the Vanguard 500 Index SACG for U.S. stocks, VG Dev Markets Idx Admrl SACH for international stocks, and Baird Aggregate Bond Inst SAEJ (or stable value) for bonds. I also gave other pointers. Please review my earlier posts in this thread.
petulant wrote: Tue Aug 02, 2022 1:32 pmIf you were going to develop your own asset allocation, the basic approach would be to identify the ideal U.S. stock fund, international fund, and bond fund among the options and choose allocations accordingly. The relevant options in your list are the Vanguard 500 Index SACG for U.S. stocks, VG Dev Markets Idx Admrl SACH for international stocks, and then probably Baird Aggregate Bond Inst SAEJ for bonds, though some might argue for the stable value fund or the VG Inflation Protectd Sec fund.

To enact your pick, you probably complete a form (probably on website) to elect future contributions to be at the desired allocation, then you would do another one to transfer existing assets into the desired allocations, and then you would log in say once a year after that to transfer existing assets to desired allocations again if they are out of whack. The website may have an automated rebalancing tool to help.
A glidepath is okay but not mandatory depending on how you start. For example, if you just did 60/40 today and stuck with it, you might not need a glidepath at all. IF you were to design a glidepath, it might look like 100% stocks to age 45, then 3% more in bonds each year until 60% stocks, which would take 13-14 years and get you to almost 60. You can really make it how you want. But the thing is, you can make a decision about what you're doing *now* and then learn more about it later. You don't have to be an expert in every aspect of investing right now.
Hazlesac wrote: Tue Aug 02, 2022 10:00 pmPart of me would want to stay more aggressive for the next 10 years to try and make up for my 20’s and 30’s after I had to use up every dime of my 401k I had built up. Starting at 40 scares me. What if my heath doemst allow me to work past 60 am I going to have enough or what if it’s not possible to save 20,500 as I turn 55-69 years old then what do I do? A lot of unknown factors that haunt me for diminishing my 100k of 401k that I had. But I can’t look back I have a son to support too so thinking positive is the only way. I’ll deal with setback if they happen.
Yeah, it can be scary if you dwell on everything that can happen. But you have to separate anxiety from real risk. Here, there is a real risk of forced early retirement and lower income. Staying a bit more conservative with your stock/bond allocation, putting your $800 per month into something other than the 529 plan, and use the traditional account rather than the Roth account help reduce that risk. An emergency fund and disability insurance help as well. Other than those, there's nothing more to do financially than keep going.
User avatar
ruralavalon
Posts: 23608
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Location: Illinois

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by ruralavalon »

Hazlesac wrote: Mon Aug 01, 2022 6:41 pm70,000 ytd (keep in mind I get paid weekly and I don't know what each week's paycheck will be since I rely on how many sales I will make and some weeks my paychecks are zero. Also, I project that when I am 55-70 my income will be under $50,000 due to the business I'm in and being older won't help)

Current contributions to Roth 401k
15% to Roth 401k (contributions made every week on Friday's)
-I would like to retire by 65-70. 70 to get full social security if it's still around.
I think you can count on Social Security being around in some form.

Age 40 is not too late to make a big difference in your retirement, with a reasonable plan and a good rate of contributions. I did not start serious investing until my late 30s, and am now comfortably retired.

I suggest making traditional tax-deductible contributions to your 401k, rather than Roth contributions.

You said "70,000 ytd". Is your annual income going to be $70,000, or has it been $70,000 so far this year? If the former then it looks like you may currently be in the 22% federal tax bracket. Most people, without a pension or very large traditional tax-deferred accounts, will likely be in a lower tax bracket in retirement.

TFB, "The Case Against Roth 401(k): Still True After All These Years", link. "I think for most people the majority, if not 100% of the contribution should go to a Traditional 401(k)."

The savings from the tax deduction every year will enable you to make a higher level of contributions to your 401k.

Likewise I suggest stopping contributions to the 529 for now, and using that $800 to make higher contributions to your 401k account.

Establishing a high rate of contributions is the most important investing decision you can make, forum discussion. The maximum annual employee contribution to a 401k is $20.5k. Strive to get as close to that you as possible.

In my opinion making maximum contributions to your 401k should be your top priority.

Ruthlessly cut your spending. I suggest a budgeting app like YNAB or Mint.

My income was also very volatile, it varied enormously from month to month. I made a practice of contributing every month everything not needed for the next month's expenses.

I suggest continuing to use the target date fund (YourPath Passive 2055 AggressiveAllocation) in your employer's 401k plan. Using an allocation fund seems to insulate the investor against behavioral errors, and so produce higher investor returns. Morningstar, Mind the Gap, 2019.

If you don't use The target date fund (YourPath Passive 2055 Aggressive Allocation) then I suggest a combination of these funds:
1) Vanguard 500 Index SACG,;
2) VG Dev Markets Idx Admrl SACH; and
3) VG Dev Markets Idx Admrl SACH or Guarantee Stable Value.

What interest rate is currently being paid on the Guarantee Stable Value fund, and what rate if any is guaranteed?

What are the expense ratios charged for in your employer's plan those funds? In selecting funds to use strive a combination of both broad diversification (to reduce your risk) and low expense ratios (to increase your net returns).

Hazlesac wrote: Mon Aug 01, 2022 6:41 pm . . .I have a profit sharing plan from my previous employer worth $23,000 and I need your advice on if I should rollover to my 401k or should i open an ira or brokeage account?
I suggest a rollover into an IRA at a low cost fund provider like Vanguard, Fidelity or Schwab.

Finally I suggest buying a low cost term life insurance policy
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
Hazlesac
Posts: 35
Joined: Fri Jun 10, 2022 2:29 pm

Re: Starting from SCRATCH at 40 yrs old! Portfolio questions!

Post by Hazlesac »

Wiggums wrote: Wed Aug 03, 2022 4:09 am
invest4 wrote: Wed Aug 03, 2022 3:10 am Welcome!

Some comments:

* Asset Allocation: The past may not be the future If you want to have a high allocation to stocks, that is up to you. However, you should consider it carefully as it can be very bumpy, nothing is guaranteed and you may find yourself making poor decisions (like selling), because your tolerance for risk is not what you thought it was. Happens to people all the time when they see their portfolio quickly evaporate.


* Simplicity: Do not underestimate the value simplicity in your portfolio!

- Consolidating any eligible accounts into your new 401k sounds like a great idea to me

- Target date fund is also fine..you invest and let it run its course

- Make it easy for yourself...so you can focus on your job and son


* College Savings: As mentioned by others, I also strongly encourage you to prioritize your retirement over saving for college right now. It is imperative you take care of yourself first. Further, it is absolutely possible to achieve a college education without significant debt.

We have 4 children and this is how we are doing it:

- Student lives at home for the entire duration of their college years

- Community college first two years - significantly lower cost vs university

- University for the rest

- Reasonable expectation that son can get transfer scholarships / other. You may also be eligible for financial aid.


* 401k vs Roth: Fully agreed - max out traditional first...then Roth contributions if you can swing it. Suggest you heed the advice provided by some of the others and don't sweat the variable income too much. There are options available to you to be flexible and avoid mistakes.


* Emergency fund: Yes!


* Life insurance and disability: absolutely


You will receive lots of help here. Step by step...you will be fine.

Best wishes.
+1

This is a good plan.

Your savings rate and time in the market are the most important things right now

Thanks to all who have really helped me understand what I should be doing right now and what my concentration should be on.

I am confused when using any formula or 401k calculator to just get an idea where I’ll be in 25-30 years because I want to know if the savings rate I’m doing now will be enough or not. But here are my questions that come to my mind in my situation I’m in and how it affects my capability on using these calculators.

1. My profession is all based on the market and how many sales I make and I get paid weekly. The business I’m in there’s no way to predict what I’ll make each week no less try and track what I’ll make for the given year. We could have a string of great months and a string of no income. So what am I supposed to input for annual salary when asked since it’s going to base it off the amount I put in and use it as that’s the income for every year for the next 25-30 whichever I choose? Doemst it mess everything up?

2. Is there any tools out there that would say let me input what I believe I’ll make for each year while I work? Because I know my income will be higher now than when I’m 55-70. And I’d like to base it off what I believe will be my income ranges for all these years to get a better outlook.

3. Also I am putting in 15% into my 401k and I’m at $70k year to date as if today but again I’m not sure what I’ll end up at at year end and I can’t say since I’m at 70 now that means I’ll be close to 130k like people in salary positions can do.

4. This brings me to how am I supposed to find out what percentage of my weekly income I’m supposed to be saving towards my 401k since I don’t know how my yearly income will add up? Meaning if I would like to max the 401k out if I don’t know what I’m going to make yearly how do I know what percentage to put in? So I’m so confused on what I should be using as a percentage to try and max out my 401k. Is anybody else in this position?

Any help on how I am supposed to get around this and how I can get a more realistic look on what my 401k will be in 25-30 years plus what percentage I should be using to save to try to max out even though I don’t have a basis of what my yearly income will amount to until the last 2 months of the year where I can make a better prediction obviously.

Thank you everyone. If anybody can figure this out for me you are a TRUE expert and a savior!!
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