Going to one income-seeking testimonials

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BradJ
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Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 6:16 pm

Hello,everyone.
Long time reader, but first post. My wife and I are having our second child in May, where she will be staying home with him and our 3 year old daughter. Our finances are good, not great:
I make lower six figures in “safe” industry
No debt besides home ($860.00 mortgage payment per month, on 15 year)
Currently over 200k in investments, we try to invest 15%
Good emergency fund

All that being said, I’m terrifed. I’ve heard great stories about one income experiences, but it just seems like a new world to me. Anyone out there have advice for a young family (lower 30s) transitioning to a one income?
Last edited by BradJ on Sun Jan 21, 2018 7:26 pm, edited 1 time in total.

Not Law
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Re: Going to one income-seeking testimonials

Post by Not Law » Sun Jan 21, 2018 6:36 pm

When we did it in the 80's, the loss of "take home" pay was 50% of spouse's gross wage. Eliminating commuting costs, day care and other such expenses made it pretty much a break even situation.

Olemiss540
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Re: Going to one income-seeking testimonials

Post by Olemiss540 » Sun Jan 21, 2018 6:36 pm

Get on a budget. Nothing else to it really! You seem in good shape, but realize that your savings rate is what is most important to your long term financial success. Save 15% at first and slowly ramp up from there. We have made some superficial sacrifices, but couldn't be happier with our decision.

We use cash envelopes and excel because we are old fashioned, but ynab is very popular as well,
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

skepticalobserver
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Re: Going to one income-seeking testimonials

Post by skepticalobserver » Sun Jan 21, 2018 6:42 pm

Olemiss540 wrote:
Sun Jan 21, 2018 6:36 pm
We use cash envelopes
Ah, Dave Ramsey stuff! You can use the TuneIn app (free) and find him on the radio as well as his podcasts. Lots of sound financial advice.

KlangFool
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Re: Going to one income-seeking testimonials

Post by KlangFool » Sun Jan 21, 2018 6:52 pm

OP,

1) Single income household. Lifetime 30+% gross income saver. Northern Virginia area. "Cash Flow" 2 kids through college now.

2) At your income level, it is very simple to find out whether you can make it. What is the price of your house? You can downsize everything easily except the house.

<<No debt besides home ($860 mortgage on 15 year)>>

3) I have no idea what do you meant by that statement?

A) 860K mortgage -> not so good.

B) $860 per month of mortgage payment -> Great.

KlangFool

BradJ
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 6:59 pm

Thank you for your replies, all advice is appreciated. I am a Dave Ramsey follower through and through,besides his investing advice, which is surface level stuff. As far as the 15%, that is honestly a target that becomes harder and harder to hit. That doesn’t count my company match, or the pension I have. I find it hard to see how people have money to do anything after tithing, investing and kids. I joke with people about hiring a private investigator to follow me around and tell me what I’m doing wrong! Just venting, thank you everyone.

BradJ
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 7:00 pm

Our mortgage is only $860.00 a month. Bought the house for $125,000, and remodeled.

Olemiss540
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Re: Going to one income-seeking testimonials

Post by Olemiss540 » Sun Jan 21, 2018 7:01 pm

skepticalobserver wrote:
Sun Jan 21, 2018 6:42 pm
Olemiss540 wrote:
Sun Jan 21, 2018 6:36 pm
We use cash envelopes
Ah, Dave Ramsey stuff! You can use the TuneIn app (free) and find him on the radio as well as his podcasts. Lots of sound financial advice.
Yep! Years of listening him helped me through nagging debt and consumerism, but kind of done with his radio show, etc. Now spend most of my time reading Klangfool talk about pretax 401ks and everyone else around here. DR is great when you can't see the light at the end of the tunnel, but can get a bit repetitive after you are out of debt working the higher Baby Steps.

I also am more for 30% pretax savings rate than 15% Roth 😁.....
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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Toons
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Re: Going to one income-seeking testimonials

Post by Toons » Sun Jan 21, 2018 7:05 pm

Without a shred of doubt you can do it.
You need food,shelter,clothing,healthcare,transportation,utilities.
Pretty much beyond that is up to your wants.
Time that Parent(s) can spend with their children while growing up is far more important than money.
"Been There Done That"
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

Olemiss540
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Re: Going to one income-seeking testimonials

Post by Olemiss540 » Sun Jan 21, 2018 7:09 pm

BradJ wrote:
Sun Jan 21, 2018 6:59 pm
Thank you for your replies, all advice is appreciated. I am a Dave Ramsey follower through and through,besides his investing advice, which is surface level stuff. As far as the 15%, that is honestly a target that becomes harder and harder to hit. That doesn’t count my company match, or the pension I have. I find it hard to see how people have money to do anything after tithing, investing and kids. I joke with people about hiring a private investigator to follow me around and tell me what I’m doing wrong! Just venting, thank you everyone.
Just keep in mind that many of your expenses will decrease with your spouse staying at home. Also, your effective tax rate will lower dramatically as well assuming you take advantage of pretax investments (401k, HSA). With a mortgage of 860/mo, you should be in good shape with your income.

You are in the top 15 or 20% of income earners BY YOUSELF with a six figure income. Try not to get discouraged by what those in your social circle are buying (most of the time through debt) and keep a larger world view. Your life is the dream of many, though it may not feel like it all the time.

Enjoy the new 12% tax bracket!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

KlangFool
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Re: Going to one income-seeking testimonials

Post by KlangFool » Sun Jan 21, 2018 7:10 pm

BradJ wrote:
Sun Jan 21, 2018 6:59 pm
Thank you for your replies, all advice is appreciated. I am a Dave Ramsey follower through and through,besides his investing advice, which is surface level stuff. As far as the 15%, that is honestly a target that becomes harder and harder to hit. That doesn’t count my company match, or the pension I have. I find it hard to see how people have money to do anything after tithing, investing and kids. I joke with people about hiring a private investigator to follow me around and tell me what I’m doing wrong! Just venting, thank you everyone.
BradJ,

The answer is very simple. But, you may not like the answer.

I choose to save 30+% of my gross income. I do not budget. I do "Pay Yourself First". The 30+% saving is automatically deducted from my paycheck every month. I have to live on whatever remains. It is my highest priority.

In your case, you choose to allocate your money to something else. Then, you save whatever remains. Aka, spend first and save later.

If you choose "Pay Yourself First" and deduct 15% from your paycheck, you will find that you save 15%. We adapt our spending to whatever amount of money that we have.

KlangFool

denovo
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Re: Going to one income-seeking testimonials

Post by denovo » Sun Jan 21, 2018 7:14 pm

BradJ wrote:
Sun Jan 21, 2018 6:16 pm

All that being said, I’m terrifed. I’ve heard great stories about one income experiences, but it just seems like a new world to me. Anyone out there have advice for a young family (lower 30s) transitioning to a one income?
My advice is to post your budget on a separate thread. I am sure you can find enough suggestions to cut back your expenses and increase your savings if that's what you want to do.
"Don't trust everything you read on the Internet"- Abraham Lincoln

BradJ
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 7:15 pm

30% life time saver, my hat goes off to you. We have a big hurdle in August, my wife has to intern as a teacher (pay=$0) to wrap up her degree (Masters in Teaching, cash flowed). That means both kids in daycare for 4 months, with only one income. We are also fighting back the urge to buy a bigger house, maybe upsize to a mortgage around 180k, or so.

BradJ
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 7:18 pm

My current investments/savings are:
8% pre tax in 401k
4% post tax in Roth 401
4% in ROTH IRA
+40k in emergency fund

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White Coat Investor
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Re: Going to one income-seeking testimonials

Post by White Coat Investor » Sun Jan 21, 2018 7:21 pm

BradJ wrote:
Sun Jan 21, 2018 6:16 pm
Hello,everyone.
Long time reader, but first post. My wife and I are having our second child in May, where she will be staying home with him and our 3 year old daughter. Our finances are good, not great:
I make lower six figures in “safe” industry
No debt besides home ($860 mortgage on 15 year)
Currently over 200k in investments, we try to invest 15%
Good emergency fund

All that being said, I’m terrifed. I’ve heard great stories about one income experiences, but it just seems like a new world to me. Anyone out there have advice for a young family (lower 30s) transitioning to a one income?
We did this back in residency in our late 20s. Went from a resident income ($40K) + a teacher income ($30K) to just the resident income. We stayed there for a couple of years until I got out of residency and my income went up to about $120K. We certainly didn't have $200K at the time. We still managed to save 10%+ after the change.

I don't see anything you should be terrified about other than a $860K mortgage. But if that is really an $860/month mortgage, you have nothing to worry about.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

denovo
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Re: Going to one income-seeking testimonials

Post by denovo » Sun Jan 21, 2018 7:22 pm

denovo wrote:
Sun Jan 21, 2018 7:14 pm
BradJ wrote:
Sun Jan 21, 2018 6:16 pm

All that being said, I’m terrifed. I’ve heard great stories about one income experiences, but it just seems like a new world to me. Anyone out there have advice for a young family (lower 30s) transitioning to a one income?
My advice is to post your budget on a separate thread. I am sure you can find enough suggestions to cut back your expenses and increase your savings if that's what you want to do.
A few things come to my mind that may provide substantial savings.

1. Shop around and/or try to bundle your home and auto insurance. You should do this every 1-2 years and it's easy to do online.

2. Look through all your subscriptions/ monthly billed services to see what you really need. Sometimes if you call to cancel they can get you better deals.

3. Plan on keeping your cars for at least 150k miles. Find a good independent mechanic. They will be much cheaper than dealerships.

4. If your wife is going to be a stay-at-home mom, get in the habit of scouring the weekly grocery ads and Costco and do most cooking at home chasing sales and adjusting menus based on what's on sale.

5. Buy used stuff for your children. They won't notice.
"Don't trust everything you read on the Internet"- Abraham Lincoln

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MikeWillRetire
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Re: Going to one income-seeking testimonials

Post by MikeWillRetire » Sun Jan 21, 2018 7:26 pm

Financially, you can do it. But it really depends on what your wife wants to do. She should be happy with the decision. What does she want to do? You can make it work either way, as long as you are both on the same page. Good luck to you.

BradJ
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 7:30 pm

MikeWillRetire wrote:
Sun Jan 21, 2018 7:26 pm
Financially, you can do it. But it really depends on what your wife wants to do. She should be happy with the decision. What does she want to do? You can make it work either way, as long as you are both on the same page. Good luck to you.

My wife is the one who brought the idea to me, but I still have doubts how well she will enjoy it. Her mom worked, and my wife is not a “homemaker” type. But, as many people who life on the frugal edge of life, we live that way to have freedom and options. We are ready to see how it turns out.

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MikeWillRetire
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Re: Going to one income-seeking testimonials

Post by MikeWillRetire » Sun Jan 21, 2018 7:38 pm

That's good that she brought it up. But, not being a "homemaker" type .....she may change her mind. I recommend being flexible with this decision, allow time to see how it goes, and be willing to change things. My wife chose to work, so we both had to change our paths (we sought out government jobs that did not expect us to work more than 40 hours/week, found nice daycare, etc.) Again, good luck to both of you.

BradJ
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 7:40 pm

denovo wrote:
Sun Jan 21, 2018 7:22 pm
denovo wrote:
Sun Jan 21, 2018 7:14 pm
BradJ wrote:
Sun Jan 21, 2018 6:16 pm

All that being said, I’m terrifed. I’ve heard great stories about one income experiences, but it just seems like a new world to me. Anyone out there have advice for a young family (lower 30s) transitioning to a one income?
My advice is to post your budget on a separate thread. I am sure you can find enough suggestions to cut back your expenses and increase your savings if that's what you want to do.
A few things come to my mind that may provide substantial savings.

1. Shop around and/or try to bundle your home and auto insurance. You should do this every 1-2 years and it's easy to do online.

2. Look through all your subscriptions/ monthly billed services to see what you really need. Sometimes if you call to cancel they can get you better deals.

3. Plan on keeping your cars for at least 150k miles. Find a good independent mechanic. They will be much cheaper than dealerships.

4. If your wife is going to be a stay-at-home mom, get in the habit of scouring the weekly grocery ads and Costco and do most cooking at home chasing sales and adjusting menus based on what's on sale.

5. Buy used stuff for your children. They won't notice.
Great advice, thank you for those. We currently only have internet, Netflix and amazon-very few monthly subscriptions.

We drive old cars, currently on the lookout to pay cash for a new (to us) car for my wife.

Groceries are a fixed budget item at $140/week (that’s everything from snacks to shampoo).

We are not big buyers when it comes to our little one, she’s a Tom-boy so we just let her go crazy outside at parks and in the neighborhood (free!).

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camillus
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Re: Going to one income-seeking testimonials

Post by camillus » Sun Jan 21, 2018 7:51 pm

BradJ wrote:
Sun Jan 21, 2018 6:59 pm
As far as the 15%, that is honestly a target that becomes harder and harder to hit. That doesn’t count my company match, or the pension I have.
I believe Dave Ramsey is one of the only gurus that advises not counting company match towards your savings rate goal. How much is the match? A pension is harder to reckon.

For example, without company matches, my wife and I save about 10% of gross - not good. With company matches, 20% - pretty good. Dave Ramsey would have us increase our savings rate.

Regarding buying a bigger house, perhaps that might be an area to think about compromising and staying in the smaller home. One spouse at home can make a smaller house more efficient. I plan on staying in my "starter home" until I retire. I love my neighborhood.

BradJ
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 7:52 pm

MikeWillRetire wrote:
Sun Jan 21, 2018 7:38 pm
That's good that she brought it up. But, not being a "homemaker" type .....she may change her mind. I recommend being flexible with this decision, allow time to see how it goes, and be willing to change things. My wife chose to work, so we both had to change our paths (we sought out government jobs that did not expect us to work more than 40 hours/week, found nice daycare, etc.) Again, good luck to both of you.
You are correct, she may change her mind. She will have her Masters in Teaching finished by the end of the year, and she’s wrapping up an 11 year career at a company. Hopefully those two things are good insurances to have once she’s ready to get back into the workforce, whenever that may be.

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willthrill81
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Re: Going to one income-seeking testimonials

Post by willthrill81 » Sun Jan 21, 2018 7:55 pm

BradJ wrote:
Sun Jan 21, 2018 6:16 pm
Hello,everyone.
Long time reader, but first post. My wife and I are having our second child in May, where she will be staying home with him and our 3 year old daughter. Our finances are good, not great:
I make lower six figures in “safe” industry
No debt besides home ($860.00 mortgage payment per month, on 15 year)
Currently over 200k in investments, we try to invest 15%
Good emergency fund

All that being said, I’m terrifed. I’ve heard great stories about one income experiences, but it just seems like a new world to me. Anyone out there have advice for a young family (lower 30s) transitioning to a one income?
Wow, it's downright scary how similar your position is to ours. My wife has stayed home for the last nine years, we have a two year old daughter (we will have no more children), my income and nest egg are both very similar to yours, we too have no debt besides a mortgage that should be repaid in a little over two years, and we have a nice emergency fund. Not making this up!

Being single-income has been totally fine for us, and millions of American homes operate this way. Given that you are in a 'safe' industry (I am too), this just makes it all the more reasonable.

We currently save about 50% of my pre-tax income annually and hope to raise that even further in about a year and half after I get promoted. I'm shooting to retire between the ages of 50-55, and the numbers indicate that this shouldn't be a problem at all. I say that simply to help you see that you can be in great shape with a single income. Prior to the 1980s, this was the norm.

You'll be a-okay. :beer
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

KlangFool
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Re: Going to one income-seeking testimonials

Post by KlangFool » Sun Jan 21, 2018 7:57 pm

BradJ wrote:
Sun Jan 21, 2018 7:18 pm
My current investments/savings are:
8% pre tax in 401k
4% post tax in Roth 401
4% in ROTH IRA
+40k in emergency fund
BradJ.

If you have 6 figures income, it rarely makes any sense to contribute to Roth 401K.

A) Max up your Trad. 401K

B) Put your tax savings into the Roth IRAs.

KlangFool

BradJ
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 7:58 pm

camillus wrote:
Sun Jan 21, 2018 7:51 pm
BradJ wrote:
Sun Jan 21, 2018 6:59 pm
As far as the 15%, that is honestly a target that becomes harder and harder to hit. That doesn’t count my company match, or the pension I have.
I believe Dave Ramsey is one of the only gurus that advises not counting company match towards your savings rate goal. How much is the match? A pension is harder to reckon.

For example, without company matches, my wife and I save about 10% of gross - not good. With company matches, 20% - pretty good. Dave Ramsey would have us increase our savings rate.

Regarding buying a bigger house, perhaps that might be an area to think about compromising and staying in the smaller home. One spouse at home can make a smaller house more efficient. I plan on staying in my "starter home" until I retire. I love my neighborhood.
My company match is 4.75%, if I put in 6% (I currently put in 12%). My pension is Years service x highest income in last 5 years x 1.5%. I have a pension from an old company as well, not much in it but it grows around 5%. Once I become vested in my current company (4 more years) I plan on moving the old pension to something more aggressive. I also may receive a 15% bonus (not the 3% standard of living raise) every year, but not promised. They will match that as well, which is nice.

BradJ
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 7:59 pm

KlangFool wrote:
Sun Jan 21, 2018 7:57 pm
BradJ wrote:
Sun Jan 21, 2018 7:18 pm
My current investments/savings are:
8% pre tax in 401k
4% post tax in Roth 401
4% in ROTH IRA
+40k in emergency fund
BradJ.

If you have 6 figures income, it rarely makes any sense to contribute to Roth 401K.

A) Max up your Trad. 401K

B) Put your tax savings into the Roth IRAs.

KlangFool
Could you please educate me on why it’s not smart? Is it because pre-tax may put me in a better bracket? I hate to be thick about things, my strength is saving a penny, but I am clueless on tax strategy.

KlangFool
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Re: Going to one income-seeking testimonials

Post by KlangFool » Sun Jan 21, 2018 8:05 pm

BradJ wrote:
Sun Jan 21, 2018 7:59 pm
KlangFool wrote:
Sun Jan 21, 2018 7:57 pm
BradJ wrote:
Sun Jan 21, 2018 7:18 pm
My current investments/savings are:
8% pre tax in 401k
4% post tax in Roth 401
4% in ROTH IRA
+40k in emergency fund
BradJ.

If you have 6 figures income, it rarely makes any sense to contribute to Roth 401K.

A) Max up your Trad. 401K

B) Put your tax savings into the Roth IRAs.

KlangFool
Could you please educate me on why it’s not smart? Is it because pre-tax may put me in a better bracket? I hate to be thick about things, my strength is saving a penny, but I am clueless on tax strategy.
BradJ,

The short answer is you are paying a lot more taxes by contributing to Roth 401K.

The longer answer is you are unlikely to pay more taxes when you retire than what you are paying now. Hence, it is smarter to save tax and defer paying your taxes by contributing to Trad. 401K instead of Roth 401K.

KlangFool

BradJ
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 8:09 pm

KlangFool wrote:
Sun Jan 21, 2018 8:05 pm
BradJ wrote:
Sun Jan 21, 2018 7:59 pm
KlangFool wrote:
Sun Jan 21, 2018 7:57 pm
BradJ wrote:
Sun Jan 21, 2018 7:18 pm
My current investments/savings are:
8% pre tax in 401k
4% post tax in Roth 401
4% in ROTH IRA
+40k in emergency fund
BradJ.

If you have 6 figures income, it rarely makes any sense to contribute to Roth 401K.

A) Max up your Trad. 401K

B) Put your tax savings into the Roth IRAs.

KlangFool
Could you please educate me on why it’s not smart? Is it because pre-tax may put me in a better bracket? I hate to be thick about things, my strength is saving a penny, but I am clueless on tax strategy.
BradJ,

The short answer is you are paying a lot more taxes by contributing to Roth 401K.

The longer answer is you are unlikely to pay more taxes when you retire than what you are paying now. Hence, it is smarter to save tax and defer paying your taxes by contributing to Trad. 401K instead of Roth 401K.

KlangFool

Thank you for that information. I was told if I could afford the hit, to put some money in post tax, so I decided to mix it up a bit. But your advice is heard loud and clear, thank you.

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willthrill81
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Re: Going to one income-seeking testimonials

Post by willthrill81 » Sun Jan 21, 2018 8:10 pm

BradJ wrote:
Sun Jan 21, 2018 7:59 pm
Could you please educate me on why it’s not smart? Is it because pre-tax may put me in a better bracket? I hate to be thick about things, my strength is saving a penny, but I am clueless on tax strategy.
Klangfool is right. It's interesting how the 'Roth brand' has been sold to the public as a 'magic' account that eliminates future taxes and sounds very appealing to lots of people. However, it comes with the usually 'high' price tag of paying taxes today. Paying taxes down the road is usually the better solution, but of course there are a lot of considerations to make.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Olemiss540
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Re: Going to one income-seeking testimonials

Post by Olemiss540 » Sun Jan 21, 2018 8:14 pm

KlangFool wrote:
Sun Jan 21, 2018 8:05 pm
BradJ wrote:
Sun Jan 21, 2018 7:59 pm
KlangFool wrote:
Sun Jan 21, 2018 7:57 pm
BradJ wrote:
Sun Jan 21, 2018 7:18 pm
My current investments/savings are:
8% pre tax in 401k
4% post tax in Roth 401
4% in ROTH IRA
+40k in emergency fund
BradJ.

If you have 6 figures income, it rarely makes any sense to contribute to Roth 401K.

A) Max up your Trad. 401K

B) Put your tax savings into the Roth IRAs.

KlangFool
Could you please educate me on why it’s not smart? Is it because pre-tax may put me in a better bracket? I hate to be thick about things, my strength is saving a penny, but I am clueless on tax strategy.
BradJ,

The short answer is you are paying a lot more taxes by contributing to Roth 401K.

The longer answer is you are unlikely to pay more taxes when you retire than what you are paying now. Hence, it is smarter to save tax and defer paying your taxes by contributing to Trad. 401K instead of Roth 401K.

KlangFool
Klangfool,

Being in (most likely) the 12% fed bracket and probably paying very little taxes given the 4k in tax credits, are you certain this kind of blanket advice is appropriate given the new tax law and the OP's situation?

I would personally fully fund RIRAs once receiving the 401k match and fully funding an HSA (if applicable) given their flexibility and the new tax plan on taxable incomes up to 77k seeing very low tax rates....

OP,

What state are you in?
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

delamer
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Re: Going to one income-seeking testimonials

Post by delamer » Sun Jan 21, 2018 8:17 pm

BradJ wrote:
Sun Jan 21, 2018 7:52 pm
MikeWillRetire wrote:
Sun Jan 21, 2018 7:38 pm
That's good that she brought it up. But, not being a "homemaker" type .....she may change her mind. I recommend being flexible with this decision, allow time to see how it goes, and be willing to change things. My wife chose to work, so we both had to change our paths (we sought out government jobs that did not expect us to work more than 40 hours/week, found nice daycare, etc.) Again, good luck to both of you.
You are correct, she may change her mind. She will have her Masters in Teaching finished by the end of the year, and she’s wrapping up an 11 year career at a company. Hopefully those two things are good insurances to have once she’s ready to get back into the workforce, whenever that may be.
Encourage your wife to find contract projects or other work that she can do at home in her current field. Or to consider part-time work in teaching, if that is what she plans on doing in the future.

Keeping her hand in professionally will make it easier to get good jobs in the future. It might only be breakeven financially now, but think long term.

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camillus
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Re: Going to one income-seeking testimonials

Post by camillus » Sun Jan 21, 2018 8:20 pm

BradJ wrote:
Sun Jan 21, 2018 7:58 pm
My company match is 4.75%, if I put in 6% (I currently put in 12%). My pension is ...
So 12 + 4.75 = 16.75% plus some pensions. Not bad at all.

Another thing to pay attention to apart from mere savings rate are if you are hitting benchmarks/milestones: https://www.fidelity.com/viewpoints/ret ... -to-retire

If you find your nest egg lagging per your age or time until you'd like to retire, you might need to do something about that (increase savings rate, work longer, lower standard of living).

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TxAg
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Re: Going to one income-seeking testimonials

Post by TxAg » Sun Jan 21, 2018 8:24 pm

BradJ wrote:
Sun Jan 21, 2018 6:59 pm
Thank you for your replies, all advice is appreciated. I am a Dave Ramsey follower through and through,besides his investing advice, which is surface level stuff. As far as the 15%, that is honestly a target that becomes harder and harder to hit. That doesn’t count my company match, or the pension I have. I find it hard to see how people have money to do anything after tithing, investing and kids. I joke with people about hiring a private investigator to follow me around and tell me what I’m doing wrong! Just venting, thank you everyone.

I hope you don’t think me a jerk, but you could always cut the tithing. I hear 10% thrown out a lot...that’s a huge number coming off the top.

Seal the Deal
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Re: Going to one income-seeking testimonials

Post by Seal the Deal » Sun Jan 21, 2018 8:25 pm

This can absolutely be done. Nothing to be terrified about, just and adjustment. With a slightly lower income and slightly higher mortgage payment we are on year 5 of my wife being a SAHM. By being fairly frugal we are still able to achieve around a 25% savings rate. There a lot of benefits to having a parent at home and it's great for the kids.

If you already have a solid budget for one income, maybe just some minor tweaks would be necessary. I made it a priority to lower expenses...cut newspaper, cut cable, get cheaper cell plan, cheaper home and auto insurance, etc.

With the new tax law you will probably be in the 12% bracket, and with the child tax credit ($2K per child) should end up paying little in federal tax. Our situation with 3 kids will allow a switch from traditional to Roth 401k, as our federal tax liability will be 0. Be sure to update your withholding allowances if you'd like a bump in take home instead of a larger refund. Note the IRS has not yet updated their W-4 calculator for 2018.
https://www.irs.gov/individuals/irs-wit ... calculator

KlangFool
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Re: Going to one income-seeking testimonials

Post by KlangFool » Sun Jan 21, 2018 8:27 pm

Olemiss540 wrote:
Sun Jan 21, 2018 8:14 pm
KlangFool wrote:
Sun Jan 21, 2018 8:05 pm
BradJ wrote:
Sun Jan 21, 2018 7:59 pm
KlangFool wrote:
Sun Jan 21, 2018 7:57 pm
BradJ wrote:
Sun Jan 21, 2018 7:18 pm
My current investments/savings are:
8% pre tax in 401k
4% post tax in Roth 401
4% in ROTH IRA
+40k in emergency fund
BradJ.

If you have 6 figures income, it rarely makes any sense to contribute to Roth 401K.

A) Max up your Trad. 401K

B) Put your tax savings into the Roth IRAs.

KlangFool
Could you please educate me on why it’s not smart? Is it because pre-tax may put me in a better bracket? I hate to be thick about things, my strength is saving a penny, but I am clueless on tax strategy.
BradJ,

The short answer is you are paying a lot more taxes by contributing to Roth 401K.

The longer answer is you are unlikely to pay more taxes when you retire than what you are paying now. Hence, it is smarter to save tax and defer paying your taxes by contributing to Trad. 401K instead of Roth 401K.

KlangFool
Klangfool,

Being in (most likely) the 12% fed bracket and probably paying very little taxes given the 4k in tax credits, are you certain this kind of blanket advice is appropriate given the new tax law and the OP's situation?
Olemiss540,

<<Being in (most likely) the 12% fed bracket >>

OP has low six figures income. So, please explain to me how does this translate into 12% Federal Tax Bracket for OP?

https://taxfoundation.org/2018-tax-brackets/

The standard deduction is 24K. To reach 22% tax bracket, you only need another $77,400. So, a taxable income exceeding $101,400 will reach 22% tax bracket.

KlangFool
Last edited by KlangFool on Sun Jan 21, 2018 8:31 pm, edited 1 time in total.

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badbreath
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Re: Going to one income-seeking testimonials

Post by badbreath » Sun Jan 21, 2018 8:28 pm

read what Kitces has to say about a one income household.

www.kitces.com/blog/dual-income-househo ... linearity/

I have to agree with alot of his points as DW and I have been a 1 income for a long time.
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

Olemiss540
Posts: 549
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Re: Going to one income-seeking testimonials

Post by Olemiss540 » Sun Jan 21, 2018 8:38 pm

KlangFool wrote:
Sun Jan 21, 2018 8:27 pm
Olemiss540 wrote:
Sun Jan 21, 2018 8:14 pm
KlangFool wrote:
Sun Jan 21, 2018 8:05 pm
BradJ wrote:
Sun Jan 21, 2018 7:59 pm
KlangFool wrote:
Sun Jan 21, 2018 7:57 pm


BradJ.

If you have 6 figures income, it rarely makes any sense to contribute to Roth 401K.

A) Max up your Trad. 401K

B) Put your tax savings into the Roth IRAs.

KlangFool
Could you please educate me on why it’s not smart? Is it because pre-tax may put me in a better bracket? I hate to be thick about things, my strength is saving a penny, but I am clueless on tax strategy.
BradJ,

The short answer is you are paying a lot more taxes by contributing to Roth 401K.

The longer answer is you are unlikely to pay more taxes when you retire than what you are paying now. Hence, it is smarter to save tax and defer paying your taxes by contributing to Trad. 401K instead of Roth 401K.

KlangFool
Klangfool,

Being in (most likely) the 12% fed bracket and probably paying very little taxes given the 4k in tax credits, are you certain this kind of blanket advice is appropriate given the new tax law and the OP's situation?
Olemiss540,

<<Being in (most likely) the 12% fed bracket >>

OP has low six figures income. So, please explain to me how does this translate into 12% Federal Tax Bracket for OP?

https://taxfoundation.org/2018-tax-brackets/

The standard deduction is 24K. To reach 22% tax bracket, you only need another $77,400. So, a taxable income exceeding $101,400 will reach 22% tax bracket.

KlangFool
That's assuming no other above the line deductions such as healthcare or carryover capital losses. With healthcare costs alone, OP could be in 12% bracket making 105 or 107k per year. Would that effect your advice if so?
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

KlangFool
Posts: 9929
Joined: Sat Oct 11, 2008 12:35 pm

Re: Going to one income-seeking testimonials

Post by KlangFool » Sun Jan 21, 2018 8:44 pm

Olemiss540 wrote:
Sun Jan 21, 2018 8:38 pm
KlangFool wrote:
Sun Jan 21, 2018 8:27 pm
Olemiss540 wrote:
Sun Jan 21, 2018 8:14 pm
KlangFool wrote:
Sun Jan 21, 2018 8:05 pm
BradJ wrote:
Sun Jan 21, 2018 7:59 pm


Could you please educate me on why it’s not smart? Is it because pre-tax may put me in a better bracket? I hate to be thick about things, my strength is saving a penny, but I am clueless on tax strategy.
BradJ,

The short answer is you are paying a lot more taxes by contributing to Roth 401K.

The longer answer is you are unlikely to pay more taxes when you retire than what you are paying now. Hence, it is smarter to save tax and defer paying your taxes by contributing to Trad. 401K instead of Roth 401K.

KlangFool
Klangfool,

Being in (most likely) the 12% fed bracket and probably paying very little taxes given the 4k in tax credits, are you certain this kind of blanket advice is appropriate given the new tax law and the OP's situation?
Olemiss540,

<<Being in (most likely) the 12% fed bracket >>

OP has low six figures income. So, please explain to me how does this translate into 12% Federal Tax Bracket for OP?

https://taxfoundation.org/2018-tax-brackets/

The standard deduction is 24K. To reach 22% tax bracket, you only need another $77,400. So, a taxable income exceeding $101,400 will reach 22% tax bracket.

KlangFool
That's assuming no other above the line deductions such as healthcare or carryover capital losses. With healthcare costs alone, OP could be in 12% bracket making 105 or 107k per year. Would that effect your advice if so?
Olemiss540,

<<OP could be in 12% bracket making 105 or 107k per year.>>

As per my comprehension of English, 105 to 107 K per year does not translate into low 6 figures of income.

I guess OP could answer this question if he wants to.

KlangFool

BradJ
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 8:45 pm

TxAg wrote:
Sun Jan 21, 2018 8:24 pm
BradJ wrote:
Sun Jan 21, 2018 6:59 pm
Thank you for your replies, all advice is appreciated. I am a Dave Ramsey follower through and through,besides his investing advice, which is surface level stuff. As far as the 15%, that is honestly a target that becomes harder and harder to hit. That doesn’t count my company match, or the pension I have. I find it hard to see how people have money to do anything after tithing, investing and kids. I joke with people about hiring a private investigator to follow me around and tell me what I’m doing wrong! Just venting, thank you everyone.

I hope you don’t think me a jerk, but you could always cut the tithing. I hear 10% thrown out a lot...that’s a huge number coming off the top.
I appreciate your advice, and that’s not a jerk thing to say in the least. I try not to discuss my tithing (or finances in general), but it was worth the mention. I will continue the 10%, but I understand that is part of the reason my budget is tight, at times.

Olemiss540
Posts: 549
Joined: Fri Aug 18, 2017 8:46 pm

Re: Going to one income-seeking testimonials

Post by Olemiss540 » Sun Jan 21, 2018 8:45 pm

willthrill81 wrote:
Sun Jan 21, 2018 8:10 pm
BradJ wrote:
Sun Jan 21, 2018 7:59 pm
Could you please educate me on why it’s not smart? Is it because pre-tax may put me in a better bracket? I hate to be thick about things, my strength is saving a penny, but I am clueless on tax strategy.
Klangfool is right. It's interesting how the 'Roth brand' has been sold to the public as a 'magic' account that eliminates future taxes and sounds very appealing to lots of people. However, it comes with the usually 'high' price tag of paying taxes today. Paying taxes down the road is usually the better solution, but of course there are a lot of considerations to make.
I would say the following are pretty magical:

1.) No RMDs throughout your lifetime (or your heirs)
2.) Contributions to RIRA removed tax and penalty free ANYTIME
3.) Withdrawals have zero effect on medicare/social security/healthcare subsidies, costs or taxation.
4.) Possibly lock in zero state tax during working years (if applicable)

I personally think they can be a very resourceful tool if you are in the 12% marginal bracket or below.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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willthrill81
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Re: Going to one income-seeking testimonials

Post by willthrill81 » Sun Jan 21, 2018 8:48 pm

Olemiss540 wrote:
Sun Jan 21, 2018 8:38 pm
That's assuming no other above the line deductions such as healthcare or carryover capital losses. With healthcare costs alone, OP could be in 12% bracket making 105 or 107k per year. Would that effect your advice if so?
Don't forget that the OP will have $24k of potential withdrawals to take every year in retirement with no taxes at all, even when coming from tax-deferred sources. The next $19,050 will only be taxed at 10%. In order to take withdrawals of around $43k a year, you need a portfolio valued at about $1.075 million (assuming 4% withdrawals). If the OP isn't already on track to have a portfolio that size by retirement, then tax-deferred is almost certainly the way to go. Social Security complicates this somewhat but not too much.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

crg11
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Re: Going to one income-seeking testimonials

Post by crg11 » Sun Jan 21, 2018 8:49 pm

We have been 1 income for about 18 months now. It's definitely a challenge in some ways. Budgeting properly (we use YNAB) and using common sense is the key here. If you spend less than you earn, then you are ok :) We would be barely breaking even if we added a second salary to our household because of daycare, commute time, car maintenance, etc.

The biggest challenge is there isn't "margin for error" when it comes to work...if you don't work or something goes wrong with the company, then you could have problems as a single income family. The good news is an emergency fund greatly helps easing that fear. We can last ~6 months without me working and would be fine.

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willthrill81
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Re: Going to one income-seeking testimonials

Post by willthrill81 » Sun Jan 21, 2018 8:52 pm

Olemiss540 wrote:
Sun Jan 21, 2018 8:45 pm
willthrill81 wrote:
Sun Jan 21, 2018 8:10 pm
BradJ wrote:
Sun Jan 21, 2018 7:59 pm
Could you please educate me on why it’s not smart? Is it because pre-tax may put me in a better bracket? I hate to be thick about things, my strength is saving a penny, but I am clueless on tax strategy.
Klangfool is right. It's interesting how the 'Roth brand' has been sold to the public as a 'magic' account that eliminates future taxes and sounds very appealing to lots of people. However, it comes with the usually 'high' price tag of paying taxes today. Paying taxes down the road is usually the better solution, but of course there are a lot of considerations to make.
I would say the following are pretty magical:

1.) No RMDs throughout your lifetime (or your heirs)
2.) Contributions to RIRA removed tax and penalty free ANYTIME
3.) Withdrawals have zero effect on medicare/social security/healthcare subsidies, costs or taxation.
4.) Possibly lock in zero state tax during working years (if applicable)

I personally think they can be a very resourceful tool if you are in the 12% marginal bracket or below.
1. Unless you plan on leaving behind a large estate for others, that's an overrated benefit IMHO. With even conservative growth rate assumptions, retirees taking only RMDs aren't likely to actually see their withdrawals begin decreasing until they reach about 90 years old. Further, if you don't want to spend the RMD, then just stick it in a brokerage account. RMDs are not a bugaboo.
2. That is a nice perk, but there are situations where money can be pulled from tax-deferred accounts without penalty as well.
3. That's another nice perk, but I question how beneficial this truly is in dollars and cents when all the chips are down.
4. That cuts both ways; what if you're in a lower income tax state now than when you retire?

If it's a close call between the two, I'd certainly go with the Roth. But it doesn't seem close in this instance.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

BradJ
Posts: 210
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Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 8:59 pm

KlangFool wrote:
Sun Jan 21, 2018 8:44 pm
Olemiss540 wrote:
Sun Jan 21, 2018 8:38 pm
KlangFool wrote:
Sun Jan 21, 2018 8:27 pm
Olemiss540 wrote:
Sun Jan 21, 2018 8:14 pm
KlangFool wrote:
Sun Jan 21, 2018 8:05 pm


BradJ,

The short answer is you are paying a lot more taxes by contributing to Roth 401K.

The longer answer is you are unlikely to pay more taxes when you retire than what you are paying now. Hence, it is smarter to save tax and defer paying your taxes by contributing to Trad. 401K instead of Roth 401K.

KlangFool
Klangfool,

Being in (most likely) the 12% fed bracket and probably paying very little taxes given the 4k in tax credits, are you certain this kind of blanket advice is appropriate given the new tax law and the OP's situation?
Olemiss540,

<<Being in (most likely) the 12% fed bracket >>

OP has low six figures income. So, please explain to me how does this translate into 12% Federal Tax Bracket for OP?

https://taxfoundation.org/2018-tax-brackets/

The standard deduction is 24K. To reach 22% tax bracket, you only need another $77,400. So, a taxable income exceeding $101,400 will reach 22% tax bracket.

KlangFool
That's assuming no other above the line deductions such as healthcare or carryover capital losses. With healthcare costs alone, OP could be in 12% bracket making 105 or 107k per year. Would that effect your advice if so?
Olemiss540,

<<OP could be in 12% bracket making 105 or 107k per year.>>

As per my comprehension of English, 105 to 107 K per year does not translate into low 6 figures of income.

I guess OP could answer this question if he wants to.

KlangFool
I currently make a little over 108k, plus the possibility of 15k bonus (or 15% of current salary).

Lynette
Posts: 1785
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Re: Going to one income-seeking testimonials

Post by Lynette » Sun Jan 21, 2018 9:03 pm

delamer wrote:
Sun Jan 21, 2018 8:17 pm
BradJ wrote:
Sun Jan 21, 2018 7:52 pm
MikeWillRetire wrote:
Sun Jan 21, 2018 7:38 pm
That's good that she brought it up. But, not being a "homemaker" type .....she may change her mind. I recommend being flexible with this decision, allow time to see how it goes, and be willing to change things. My wife chose to work, so we both had to change our paths (we sought out government jobs that did not expect us to work more than 40 hours/week, found nice daycare, etc.) Again, good luck to both of you.
You are correct, she may change her mind. She will have her Masters in Teaching finished by the end of the year, and she’s wrapping up an 11 year career at a company. Hopefully those two things are good insurances to have once she’s ready to get back into the workforce, whenever that may be.
Encourage your wife to find contract projects or other work that she can do at home in her current field. Or to consider part-time work in teaching, if that is what she plans on doing in the future.

Keeping her hand in professionally will make it easier to get good jobs in the future. It might only be breakeven financially now, but think long term.
+1000 It seems your wife is planning to change fields and has put a lot of effort into her career. Any experience, even part-time will help her get back into the workforce later and give her a better idea of what she wants to do in the future. Take out some really good insurance policies in case something happens to either of you. I suppose it could work out but I've seen too many single mothers really struggling and especially if they do not have good careers.

HIinvestor
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Re: Going to one income-seeking testimonials

Post by HIinvestor » Sun Jan 21, 2018 9:05 pm

When we were married, we were dual income. After our S was born, I had 3 months maternity leave then H took 6 weeks of working part time and then I stopped out if the workforce for a decade or more when S and then D were very young.

Our income was a fraction—33 to 50%— of yours and our mortgage was much higher. It was a frugal bunch of years before I returned to work but no regrets. Wouldn’t trade the years when I was able to be at any activity bedded with little or no notice and active in the kids’ school for anything.

BradJ
Posts: 210
Joined: Sun Jan 21, 2018 6:06 pm

Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 9:08 pm

That is great advice. At the point, we don’t know if she will be out of work for 6 months, 3 years or forever. We are a young family trying to figure out what works best for us. If she loves staying at home, we will go forward with one income, if she hates it, I will encourage her to stay out of the workplace for a year before going back to teach. Currently, she has 300k life insurance, and I have 750k on myself.

BradJ
Posts: 210
Joined: Sun Jan 21, 2018 6:06 pm

Re: Going to one income-seeking testimonials

Post by BradJ » Sun Jan 21, 2018 9:10 pm

HIinvestor wrote:
Sun Jan 21, 2018 9:05 pm
When we were married, we were dual income. After our S was born, I had 3 months maternity leave then H took 6 weeks of working part time and then I stopped out if the workforce for a decade or more when S and then D were very young.

Our income was a fraction—33 to 50%— of yours and our mortgage was much higher. It was a frugal bunch of years before I returned to work but no regrets. Wouldn’t trade the years when I was able to be at any activity bedded with little or no notice and active in the kids’ school for anything.
But weren't you scared to death of not getting your parents inheritance?????? Joking, someone made a comment above that will make that joke more relevant. We appreciate your testimonial.

PS241
Posts: 39
Joined: Wed Jan 02, 2013 10:49 pm

Re: Going to one income-seeking testimonials

Post by PS241 » Sun Jan 21, 2018 9:44 pm

OP,
I have a very similar situation to yours. We have lived on 1 income for almost 5 years. Income is about $20k lower than yours. Very similar mortgage. We have 3 children, the oldest is in private (religious) school. We give 10+% gross and save 15% ala Dave Ramsey. You can do this!

We don't do a real strict budget, but do a sort of envelope system via gift cards in a fund raising system. I have found it helpful to have automated weekly savings into several sinking funds.

Most peoples numbers on this website *boggle* my mind. My wife and I budget $20 each every month in fun money! :moneybag :oops:

KlangFool
Posts: 9929
Joined: Sat Oct 11, 2008 12:35 pm

Re: Going to one income-seeking testimonials

Post by KlangFool » Sun Jan 21, 2018 9:46 pm

BradJ wrote:
Sun Jan 21, 2018 8:59 pm
KlangFool wrote:
Sun Jan 21, 2018 8:44 pm
Olemiss540 wrote:
Sun Jan 21, 2018 8:38 pm
KlangFool wrote:
Sun Jan 21, 2018 8:27 pm
Olemiss540 wrote:
Sun Jan 21, 2018 8:14 pm


Klangfool,

Being in (most likely) the 12% fed bracket and probably paying very little taxes given the 4k in tax credits, are you certain this kind of blanket advice is appropriate given the new tax law and the OP's situation?
Olemiss540,

<<Being in (most likely) the 12% fed bracket >>

OP has low six figures income. So, please explain to me how does this translate into 12% Federal Tax Bracket for OP?

https://taxfoundation.org/2018-tax-brackets/

The standard deduction is 24K. To reach 22% tax bracket, you only need another $77,400. So, a taxable income exceeding $101,400 will reach 22% tax bracket.

KlangFool
That's assuming no other above the line deductions such as healthcare or carryover capital losses. With healthcare costs alone, OP could be in 12% bracket making 105 or 107k per year. Would that effect your advice if so?
Olemiss540,

<<OP could be in 12% bracket making 105 or 107k per year.>>

As per my comprehension of English, 105 to 107 K per year does not translate into low 6 figures of income.

I guess OP could answer this question if he wants to.

KlangFool
I currently make a little over 108k, plus the possibility of 15k bonus (or 15% of current salary).
BradJ,

That is not low six figures income as per my comprehension. In any case, Roth 401K still may not make sense. You should max up 2 X 5.5K = 11K of Roth IRA instead of Roth 401K if you want to put the money into the Roth space.

KlangFool

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