Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
utvolfan
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by utvolfan »

Chipperd, in some states teachers also pay into Social Security so they do collect. My state's pensions are quite a bit less than the states who won't get SS. Perhaps this in all figured into the state's pension formula.
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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

Ron Ronnerson wrote: Thu Mar 25, 2021 12:59 pm
investingfan wrote: Thu Mar 25, 2021 12:32 pm Your property tax seems high for 500k purchased. Do you pay mello roos?
Yes
Just thought I'd expand a bit more on this. Mello Roos is a special tax assessment in California for those who may not be familiar. My home was a new construction when it was built in 2010. The entire neighborhood is actually new (built in the last 20 years or so). Mello Roos helps pay for local projects like schools and parks in the area. It is usually for a certain time period. In our area, it was to be for 30 years and I believe we have about 9 years left. After that, my property tax payment should go down by $2k-$3k.

When we bought our house, a 2150 sq. ft. townhouse with four bedrooms and four bathrooms, the value was $500k. Our property tax payment the first year was about $9k. The house is now valued close to $1M and our property tax payment has inched up to $10k. Due to Prop 13 in California, property taxes only rise 2% per year and are based on the purchase price. So, in another 10 years, the house might be valued at $1.5M (could be more or less, of course) and, with the Mello Roos expiring, our property tax bill might actually be a little bit lower than it was when the house value was far less (perhaps 3 or even 4 times less).

In many threads on purchasing a home in California, I've been a bit more liberal than some when people ask about home affordability. Understanding the unique property tax laws in California is important in my view. California recently passed Prop 19 which allows people over age 55 to be able to transfer their property tax base up to three times if they move elsewhere in California. For us, age 55 is only about 8 years away and being able to take our property tax base when we move makes us more likely to consider staying in the state. Luckily that base was set years ago, when prices were much more lower. These types of things should be considered when there are questions about purchasing a home in California. Over the long term, if one intends to possibly stay in the state, locking in the property tax base for a lifetime can be huge.

Similarly, it can be a smart move to not move around from house to house. If you stretch your budget (but not to the breaking point) and stay in a house for many years rather than buying a "starter home," you can keep your low property tax base if you move only after turning 55.

So, if you take a low property tax payment, add in a sales tax that exempts many categories (such as food, housing, insurance, services, etc.), throw in a very progressive income tax (as I've mentioned, we are currently paying nothing to California in income taxes), and add in perks such as an additional subsidy toward health insurance bought on the exchange, California can be a low-tax state for some people. It's really helpful to figure the system out in order to try to optimize the situation.
Maverick3320
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Maverick3320 »

I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
mervinj7
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by mervinj7 »

Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
Ron just mentioned that his house has doubled in value since 2010. Could a new teacher at the current salary levels buy his house now? Or another similar one? Doubling housing cost without doubling salary takes its toll.
Zillions
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Zillions »

Duplicate
Last edited by Zillions on Fri Mar 26, 2021 1:05 pm, edited 1 time in total.
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ray.james
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by ray.james »

mervinj7 wrote: Fri Mar 26, 2021 12:30 pm
Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
Ron just mentioned that his house has doubled in value since 2010. Could a new teacher at the current salary levels buy his house now? Or another similar one? Doubling housing cost without doubling salary takes its toll.
In addition to this important point by Mervinj about current housing costs(own/rental), Ron's income is more akin to median household income of the area(south Bay). I do not know his exact school district but it doesn't matter as all these areas have similar median income. Having said that, most teachers who are starting make close to 65-80K in their first year. Here is a sample salary range in San Mateo :http://www.smfcsd.net/en/assets/files/E ... 202019.pdf

The key is to optimize additional stipends, get full hours, get certification to optimize the pay. It is not all that rosy in the beginning. Also, 25% of the employees are either substitutes/interns which have much less pay. A side effect of this, teachers are commuting from far away to afford rent. They are tired and many hours are spent on road. Many leave when they have kids and may not come back once their personal life is more settled.
Last edited by ray.james on Fri Mar 26, 2021 1:16 pm, edited 1 time in total.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939
Zillions
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Zillions »

Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
My niece was born & raised in the Bay Area and earned her Master's and teaching credential recently. Her first year income would have been 72K. She felt she would never be able to buy her own home here, so she took a job in a LCOL area, in another state.

Ron was lucky in that he was able to buy during a significant downturn. Many do not expect such an opportunity again.

We're also in a VHCOL area, in CA. But my son's district pays $16 / hr for SDC aides and limits their hours to 19.5 per week (to avoid paying benefits).

Meanwhile, the rent in our neighborhood is $2000 for a one bedroom unit and we're not close to public transport. Our district is unable to hire SDC staff, cannot seem to retain teachers or OTs / SLPs and is a hot mess. Our regional center says vendors are unable to find staff to do respite or IHSS. Those jobs pay minimum or slightly above minimum wage. Since housing then becomes a big issue for these lower income earners, they simply don't take these jobs.

We're moving out of CA as soon as our other kid graduates high school. It'd be financial suicide for us to buy even a condo here, barring a repeat of 2008. But even that would not be advisable in our situation because a housing crash would mean higher rents and then we'd be left with no respite providers (as lower / minimum wage workers simply can't afford ro live in such places).
fareastwarriors
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by fareastwarriors »

Zillions wrote: Fri Mar 26, 2021 12:57 pm
Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
My niece was born & raised in the Bay Area and earned her Master's and teaching credential recently. Her first year income would have been 72K. She felt she would never be able to buy her own home here, so she took a job in a LCOL area, in another state.
If she finds a partner with similar income, then $150k HHI is definitely doable to buy a house in the Bay. Why would someone single try to buy in one of the MOST expensive area in the country with a 70k salary?

With that said, people should move to make their lifestyle/dreams work to the fullest extent.
Zillions
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Zillions »

fareastwarriors wrote: Fri Mar 26, 2021 1:03 pm
Zillions wrote: Fri Mar 26, 2021 12:57 pm
Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
My niece was born & raised in the Bay Area and earned her Master's and teaching credential recently. Her first year income would have been 72K. She felt she would never be able to buy her own home here, so she took a job in a LCOL area, in another state.
If she finds a partner with similar income, then $150k HHI is definitely doable to buy a house in the Bay. Why would someone single try to buy in one of the MOST expensive area in the country with a 70k salary?

With that said, people should move to make their lifestyle/dreams work to the fullest extent.
Well, what if she intends to stay single? Even worse, unfortunately, divorce isn't unheard of in this day and age. [expletive deleted by moderator oldcomputerguy] happens.

A $2000 rent on a 72K income will leave her with very little to save & invest. Or she would need to sign up for a significant grinding commute daily.

Point is, the Bay Area is no place for anyone making less than 200K & it's sad when locals have to leave due to lack of affordability
Last edited by Zillions on Fri Mar 26, 2021 1:09 pm, edited 1 time in total.
tj
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by tj »

Zillions wrote: Fri Mar 26, 2021 1:06 pm
fareastwarriors wrote: Fri Mar 26, 2021 1:03 pm
Zillions wrote: Fri Mar 26, 2021 12:57 pm
Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
My niece was born & raised in the Bay Area and earned her Master's and teaching credential recently. Her first year income would have been 72K. She felt she would never be able to buy her own home here, so she took a job in a LCOL area, in another state.
If she finds a partner with similar income, then $150k HHI is definitely doable to buy a house in the Bay. Why would someone single try to buy in one of the MOST expensive area in the country with a 70k salary?

With that said, people should move to make their lifestyle/dreams work to the fullest extent.
Well, what if she intends to stay single? Even worse, unfortunately, divorce isn't unheard of in this day and age. [expletive deleted by moderator oldcomputerguy] happens.

A $2000 rent on a 72K income will leavr her with very little to save & invest. Or she would need to sign up for a significant grinding commute daily.

Point is, the Bay Area is no place for anyone making less than 200K & it's sad when locals have to leave due to lack of affordability
Spending 1/3 of your income on rent is hardly out of the norm.
stoptothink
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by stoptothink »

Maverick3320 wrote: Fri Mar 26, 2021 12:22 pmI do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
As someone with a step-father, sister, SIL, and countless friends/neighbors who are public school teachers, along with another sister who is currently working on her credential so she can teach public school, it's just another narrative that doesn't make any sense when you dig into the data. My step-father started teaching because he toiled for a decade or so in lower paying corporate jobs (he's not a career go-getter, but a fantastic teacher), I also had 3 employees leave (normal first private corp gig for recent graduate) to teach public school because they could make more (at least initially). Teacher compensation varies significantly throughout the country, but for the most part they do pretty well considering the overall situation (work schedule, benefits, guaranteed raises, job stability, etc.).
fareastwarriors
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by fareastwarriors »

Zillions wrote: Fri Mar 26, 2021 1:06 pm
fareastwarriors wrote: Fri Mar 26, 2021 1:03 pm
Zillions wrote: Fri Mar 26, 2021 12:57 pm
Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
My niece was born & raised in the Bay Area and earned her Master's and teaching credential recently. Her first year income would have been 72K. She felt she would never be able to buy her own home here, so she took a job in a LCOL area, in another state.
If she finds a partner with similar income, then $150k HHI is definitely doable to buy a house in the Bay. Why would someone single try to buy in one of the MOST expensive area in the country with a 70k salary?

With that said, people should move to make their lifestyle/dreams work to the fullest extent.
Well, what if she intends to stay single? Even worse, unfortunately, divorce isn't unheard of in this day and age. [expletive deleted by moderator oldcomputerguy] happens.

A $2000 rent on a 72K income will leave her with very little to save & invest. Or she would need to sign up for a significant grinding commute daily.

Point is, the Bay Area is no place for anyone making less than 200K & it's sad when locals have to leave due to lack of affordability
Yes she can stay single. Yes, divorce/health/life stuff happens, I get it. But 72k is her Starting salary though. How many of us were maxing 401k/IRAs with our first job? Some but not most. It takes time to get the snowball rolling.

If $200k is the bar, the Bay Area should be pretty deserted.


*To be clear, I do think the Bay is Way too expensive. We should be building more housing, affordable and mid-income.*
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mmmodem
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by mmmodem »

luminous wrote: Fri Mar 26, 2021 10:32 am
mmmodem wrote: Fri Mar 26, 2021 9:48 am We generated ~$400 in foreign taxes out of a max $600 in foreign tax credit for married filing jointly that can be deducted in a single year due to quarterly dividend distributions from those funds.
I’m not aware of any such limit. My family deducted more foreign tax credit than that on our 2020 taxes.
I stand corrected. Thank you. :happy
Zillions wrote: Fri Mar 26, 2021 12:57 pm Ron was lucky in that he was able to buy during a significant downturn. Many do not expect such an opportunity again.
Many of my peers and colleagues lamented this opinion in 2005 as well. I didn't make any predictions then and I won't now about whether housing prices continue going up or not. Some may say it was good luck that we had the means in 2009 to purchase our first home. Others may say bad luck that two college educated incomes was not able to afford a home in 2005 and had to wait 4 more years. I think neither. We just rented and waited until the market offered a home we could afford.
asap
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by asap »

Zillions wrote: Fri Mar 26, 2021 12:57 pm
Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
My niece was born & raised in the Bay Area and earned her Master's and teaching credential recently. Her first year income would have been 72K. She felt she would never be able to buy her own home here, so she took a job in a LCOL area, in another state.

Ron was lucky in that he was able to buy during a significant downturn. Many do not expect such an opportunity again.

We're also in a VHCOL area, in CA. But my son's district pays $16 / hr for SDC aides and limits their hours to 19.5 per week (to avoid paying benefits).

Meanwhile, the rent in our neighborhood is $2000 for a one bedroom unit and we're not close to public transport. Our district is unable to hire SDC staff, cannot seem to retain teachers or OTs / SLPs and is a hot mess. Our regional center says vendors are unable to find staff to do respite or IHSS. Those jobs pay minimum or slightly above minimum wage. Since housing then becomes a big issue for these lower income earners, they simply don't take these jobs.

We're moving out of CA as soon as our other kid graduates high school. It'd be financial suicide for us to buy even a condo here, barring a repeat of 2008. But even that would not be advisable in our situation because a housing crash would mean higher rents and then we'd be left with no respite providers (as lower / minimum wage workers simply can't afford ro live in such places).

She can easily afford Sacramento on 72K. Many people downplay Sac weather then move to Phoenix.
Drovor
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Drovor »

asap wrote: Fri Mar 26, 2021 3:22 pm
Zillions wrote: Fri Mar 26, 2021 12:57 pm
Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
My niece was born & raised in the Bay Area and earned her Master's and teaching credential recently. Her first year income would have been 72K. She felt she would never be able to buy her own home here, so she took a job in a LCOL area, in another state.

Ron was lucky in that he was able to buy during a significant downturn. Many do not expect such an opportunity again.

We're also in a VHCOL area, in CA. But my son's district pays $16 / hr for SDC aides and limits their hours to 19.5 per week (to avoid paying benefits).

Meanwhile, the rent in our neighborhood is $2000 for a one bedroom unit and we're not close to public transport. Our district is unable to hire SDC staff, cannot seem to retain teachers or OTs / SLPs and is a hot mess. Our regional center says vendors are unable to find staff to do respite or IHSS. Those jobs pay minimum or slightly above minimum wage. Since housing then becomes a big issue for these lower income earners, they simply don't take these jobs.

We're moving out of CA as soon as our other kid graduates high school. It'd be financial suicide for us to buy even a condo here, barring a repeat of 2008. But even that would not be advisable in our situation because a housing crash would mean higher rents and then we'd be left with no respite providers (as lower / minimum wage workers simply can't afford ro live in such places).

She can easily afford Sacramento on 72K. Many people downplay Sac weather then move to Phoenix.
Pretty sure she wont be making 72K starting out around Sacramento.
Drovor
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Drovor »

Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
I think it depends. If you are a teacher that started decades ago? Sure, should not have a problem. A new teacher starting out today I would say very difficult, at least in the Bay Area.

My parents worked at a grocery store starting in the 70s/80s. They had an actual career, great pay and benefits w/ pension. That would not be the case for various reasons if starting out in the last 15 years or so.
Zillions
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Zillions »

fareastwarriors wrote: Fri Mar 26, 2021 1:19 pm
Zillions wrote: Fri Mar 26, 2021 1:06 pm
fareastwarriors wrote: Fri Mar 26, 2021 1:03 pm
Zillions wrote: Fri Mar 26, 2021 12:57 pm
Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
My niece was born & raised in the Bay Area and earned her Master's and teaching credential recently. Her first year income would have been 72K. She felt she would never be able to buy her own home here, so she took a job in a LCOL area, in another state.
If she finds a partner with similar income, then $150k HHI is definitely doable to buy a house in the Bay. Why would someone single try to buy in one of the MOST expensive area in the country with a 70k salary?

With that said, people should move to make their lifestyle/dreams work to the fullest extent.
Well, what if she intends to stay single? Even worse, unfortunately, divorce isn't unheard of in this day and age. [expletive deleted by moderator oldcomputerguy] happens.

A $2000 rent on a 72K income will leave her with very little to save & invest. Or she would need to sign up for a significant grinding commute daily.

Point is, the Bay Area is no place for anyone making less than 200K & it's sad when locals have to leave due to lack of affordability
Yes she can stay single. Yes, divorce/health/life stuff happens, I get it. But 72k is her Starting salary though. How many of us were maxing 401k/IRAs with our first job? Some but not most. It takes time to get the snowball rolling.

If $200k is the bar, the Bay Area should be pretty deserted.


*To be clear, I do think the Bay is Way too expensive. We should be building more housing, affordable and mid-income.*
It's not deserted because of the 400K dual income tech workers, foreign money etc, pricing natives out of their neighborhoods. Many middle income earners live with their parents or in-laws or have inherited homes or received assistance with housing purchase. Multi-generational living is something I'm seeing quite often in my particular neck of the woods. Yet others were able to buy during the great crash. They were patient, waited and seized the opportunity that presented itself. Not all were that smart or in a position to take advantage.

In any case, the Bay Area is already starting to get deserted by lower income hourly workers esp respite care workers, IHSS workers, behavioral therapty aides, school aides etc. Now, new school teachers are choosing to work elsewhere. Many people don't want to commute a long distance, even for a job that they love. ABA therapy staffing is limited, due to the same issue. Lower wage hourly workers making less than $20/hr cannot afford housing. Some districts in rhe Bay Area simply cannot find OTs or SLPs or even special ed teachers. This is a fact, not just statistic. This is the lived experience of parents of kids with special needs who are not able to access services on their IEPs because there's no staff available! They pay district superintendents 300K to sit in an office but pay aides $16/hr to work with challenging kids, and make sure that no aide works for more than 19.5 hours to avoid paying benefits. It's someone else's kid, after all! Sociopaths!

Ending my rant here. But it says a lot about a place when people who work in professions that make a difference in the lives of the vulnerable, the young, the elderly, and the disabled simply cannot afford to live there.
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watchnerd
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by watchnerd »

Brianmcg321 wrote: Sat Sep 14, 2019 10:46 am Unfortunately most people are just dumb. They think if they are not able to do it, then nobody can.

If you went to the Mr Money Mustache forum, you'd be chastised for not saving 90% of your income. You'd be mr spendy pants in your clown house and your cable and not riding your bike to work.
So true.

We're saving 2 years of living expenses for every 1 year we work.

But in MM land, we'd be chastised for not using our 1 acre of forested land to harvest 10 years of firewood, turn off our central heating, and plant corn and raise chickens to feed ourselves so we could stop shopping for groceries.
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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

OrangeKiwi wrote: Thu Mar 25, 2021 8:32 am
mervinj7 wrote: Thu Mar 25, 2021 8:10 am
Monsterflockster wrote: Thu Mar 25, 2021 1:29 am To reach that number on your pension you’re going to need to teach 40+ years. You sure your numbers are right?
Since the pension is based on the highest single salary, if OP worked even one year somewhere else with higher pay, then it's possible with just 35 years of service. What he makes now or his average salary over his working career is irrelevant.
35 years * 2%* $143k = $100k pension.

Obviously, an even higher one time salary leads to less years of service required for a $100k pension.
The present value of this annuity is sufficiently large that I do not think it is accurate to describe this person’s income as $115k and exclude the value of their defined benefit pension.
I agree that including benefits is the only way to get a complete picture. For whatever reason, it is not conventional to include things like medical & dental benefits, pension benefits, and whatever other perks an employer may offer (free food, gym membership, travel, etc.) as part of "income." While these benefits definitely change things in terms of what the total compensation package is like, I think it would be a challenge to get most people to include these "extras" (which can be substantial in terms of their value) in their definition of "income."

For example, my income is about $115k. However, I get summers off while most people don't. So is my income actually higher? The IRS doesn't seem to think so. However, I value the time off very much because I get to go to the pool with my family in the middle of the day whenever I want from June through August. I'm not sure how we should quantify the value of the benefit of this time off but it shouldn't be ignored. However, for purposes of defining someone's income, it is almost always ignored.

At the same time, my employer doesn't pay anything toward health benefits while most people who work a full time job usually get somewhere between decent to excellent coverage for their families through their employer. These benefits are worth five figures in some case but usually also get left out when someone describes their income. The same situation happens with 401k matches.

In any case, I do agree with you. I actually consider my income higher than what it appears to be because the pension is of considerable value.
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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

mmmodem wrote: Fri Mar 26, 2021 9:48 am
Ron Ronnerson wrote: Thu Mar 25, 2021 6:23 pm Thanks for the link and I appreciate the pointer on using international for the foreign tax credit. Congrats on being able to deduct the loss for that many years!

We currently have total international stock market fund in our IRA accounts and developed markets index in my 457b (total international wasn't available in that account). I don't want to end up accidentally creating a wash sale so I am not sure exactly which funds to use in the taxable account. I haven't had a taxable account in a while so I'm a little rusty on this stuff. Anyone have suggestions on specific funds for the taxable account?
Thank you. I'm no expert in taxable accounts. I followed whitecoatinvestor's blog. We used the VTIAX and VFWAX wash sale partners he used in the example.
https://www.whitecoatinvestor.com/tax-l ... -vanguard/

I'm not sure if any funds in our retirement accounts are "substantially similar" but it was simpler to just rebalance all of it out. I did not want to worry about automatic reinvestments triggering a wash sale when we do a TLH event.

A data point for your decision making: With an average $200k balance in either VFWAX or VTIAX for the entirety of 2020. We generated ~$400 in foreign taxes out of a max $600 in foreign tax credit for married filing jointly that can be deducted in a single year due to quarterly dividend distributions from those funds. It's not a lot of tax credit and we didn't expect a lot since these are tax efficient index funds. At 22% tax bracket, that's a good chunk of change for us. Filling out Form 1116 on our income tax was difficult to fill out last year, (our first time claiming the credit) but either TurboTax improved upon the process or I am used to it the second year. It was easy for 2020.

edit: Incorrect statement
Thanks very much. I appreciate the info about your experience and which funds you've utilized.
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by fareastwarriors »

Zillions wrote: Fri Mar 26, 2021 4:59 pm
fareastwarriors wrote: Fri Mar 26, 2021 1:19 pm
Zillions wrote: Fri Mar 26, 2021 1:06 pm
fareastwarriors wrote: Fri Mar 26, 2021 1:03 pm
Zillions wrote: Fri Mar 26, 2021 12:57 pm

My niece was born & raised in the Bay Area and earned her Master's and teaching credential recently. Her first year income would have been 72K. She felt she would never be able to buy her own home here, so she took a job in a LCOL area, in another state.
If she finds a partner with similar income, then $150k HHI is definitely doable to buy a house in the Bay. Why would someone single try to buy in one of the MOST expensive area in the country with a 70k salary?

With that said, people should move to make their lifestyle/dreams work to the fullest extent.
Well, what if she intends to stay single? Even worse, unfortunately, divorce isn't unheard of in this day and age. [expletive deleted by moderator oldcomputerguy] happens.

A $2000 rent on a 72K income will leave her with very little to save & invest. Or she would need to sign up for a significant grinding commute daily.

Point is, the Bay Area is no place for anyone making less than 200K & it's sad when locals have to leave due to lack of affordability
Yes she can stay single. Yes, divorce/health/life stuff happens, I get it. But 72k is her Starting salary though. How many of us were maxing 401k/IRAs with our first job? Some but not most. It takes time to get the snowball rolling.

If $200k is the bar, the Bay Area should be pretty deserted.


*To be clear, I do think the Bay is Way too expensive. We should be building more housing, affordable and mid-income.*
It's not deserted because of the 400K dual income tech workers, foreign money etc, pricing natives out of their neighborhoods. Many middle income earners live with their parents or in-laws or have inherited homes or received assistance with housing purchase. Multi-generational living is something I'm seeing quite often in my particular neck of the woods. Yet others were able to buy during the great crash. They were patient, waited and seized the opportunity that presented itself. Not all were that smart or in a position to take advantage.

In any case, the Bay Area is already starting to get deserted by lower income hourly workers esp respite care workers, IHSS workers, behavioral therapty aides, school aides etc. Now, new school teachers are choosing to work elsewhere. Many people don't want to commute a long distance, even for a job that they love. ABA therapy staffing is limited, due to the same issue. Lower wage hourly workers making less than $20/hr cannot afford housing. Some districts in rhe Bay Area simply cannot find OTs or SLPs or even special ed teachers. This is a fact, not just statistic. This is the lived experience of parents of kids with special needs who are not able to access services on their IEPs because there's no staff available! They pay district superintendents 300K to sit in an office but pay aides $16/hr to work with challenging kids, and make sure that no aide works for more than 19.5 hours to avoid paying benefits. It's someone else's kid, after all! Sociopaths!

Ending my rant here. But it says a lot about a place when people who work in professions that make a difference in the lives of the vulnerable, the young, the elderly, and the disabled simply cannot afford to live there.
I hear you and share most of the same frustration as you. My mom does IHSS and my dad is a cook, not chef. I lived in multi-generational home until last year and I'm in my 30s!
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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

ray.james wrote: Fri Mar 26, 2021 12:55 pm
mervinj7 wrote: Fri Mar 26, 2021 12:30 pm
Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
Ron just mentioned that his house has doubled in value since 2010. Could a new teacher at the current salary levels buy his house now? Or another similar one? Doubling housing cost without doubling salary takes its toll.
In addition to this important point by Mervinj about current housing costs(own/rental), Ron's income is more akin to median household income of the area(south Bay). I do not know his exact school district but it doesn't matter as all these areas have similar median income. Having said that, most teachers who are starting make close to 65-80K in their first year. Here is a sample salary range in San Mateo :http://www.smfcsd.net/en/assets/files/E ... 202019.pdf

The key is to optimize additional stipends, get full hours, get certification to optimize the pay. It is not all that rosy in the beginning. Also, 25% of the employees are either substitutes/interns which have much less pay. A side effect of this, teachers are commuting from far away to afford rent. They are tired and many hours are spent on road. Many leave when they have kids and may not come back once their personal life is more settled.
Both Mervinj and Ray James make great points. It is much more challenging for newer teachers. Where I work, a new teacher starts with a salary of about $70k. Let's say two teachers in my district have 10 years in the profession, marry each other, and are bringing home a gross salary of $200k combined. Let's give them a kid as well in this example. $20k comes right off the top and goes toward their pensions and then, of course, there are taxes to contend with. They will also not get any health insurance benefits through the school district but can choose to buy insurance for $25k/year through the employer for a family of three or more. Since both spouses work, they have to pay child care for the kid. It will cost a lot in a VHCOL area. So, now their income has been nicely sliced and diced. They simply won't be able to afford my $1M home.

Also, I don't live where I teach. If you plucked my home and dropped it near where I work, the value would instantly go up by several hundred thousand dollars, rendering the home even more unaffordable for these poor teachers, each of whom are making six figures. Renting an apartment would be about $3k/month and that will get harder for them as you add children to the equation and as those children grow older.

In my case, not only did I buy my home when the price was half as much, but I also don't have to pay for health insurance, child care, or much in the way of income taxes (I expect to have about $500 in liability in 2021 for federal and CA combined). I also plan to drive my Corolla into the ground. Keeping expenses low has been my approach. I don't work any extra hours or take on additional responsibilities for greater pay because I'm trying to work primarily on the other side of the equation in order to maximize the amount of free time I have available.

I am not sure what the answer is for newer teachers but I can tell you that there was a big shortage of teachers in my district when I started this thread 18 months ago. It is much worse today as many have left the profession or retired due to the pandemic. Some who were close to retirement have decided that remote teaching is not something they're interested in doing and others have left due to needing to take care of kids at home.

I honestly think the pay isn't all that great when you consider the context. While the pension is nice (and can even be very nice), it is decades away for someone who joins the profession at a young age. They have to survive until then and it can be hard to do on a teacher's income around these parts. All that being said, in my opinion, many don't optimize their situations either. That's common of people in any profession, though.

I would advise younger teachers to come up with a game plan on how to make the most of their situation in expensive areas. It can be tough but we've managed to make it work. These days, renting a home, commuting, and figuring out a way to minimize child care costs and taxes would likely be a part of the formula. I think home prices are too high right now for most teachers to be able to afford, unfortunately.
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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

mmmodem wrote: Fri Mar 26, 2021 1:32 pm
Zillions wrote: Fri Mar 26, 2021 12:57 pm Ron was lucky in that he was able to buy during a significant downturn. Many do not expect such an opportunity again.
Many of my peers and colleagues lamented this opinion in 2005 as well. I didn't make any predictions then and I won't now about whether housing prices continue going up or not. Some may say it was good luck that we had the means in 2009 to purchase our first home. Others may say bad luck that two college educated incomes was not able to afford a home in 2005 and had to wait 4 more years. I think neither. We just rented and waited until the market offered a home we could afford.
This is exactly what we did. My wife and I were 35 years old in 2009. We though we had missed the boat and had completely given up hope of being able to buy a home in the Bay Area. But then, suddenly, prices fell and it became possible. We bought a home in the summer of 2009 and moved in during the winter of 2010. In my view, luck played an element but living frugally and being prepared to take advantage of the opportunity when it presented itself were also important factors.
Zillions
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Zillions »

fareastwarriors wrote: Fri Mar 26, 2021 5:30 pm
Zillions wrote: Fri Mar 26, 2021 4:59 pm
fareastwarriors wrote: Fri Mar 26, 2021 1:19 pm
Zillions wrote: Fri Mar 26, 2021 1:06 pm
fareastwarriors wrote: Fri Mar 26, 2021 1:03 pm

If she finds a partner with similar income, then $150k HHI is definitely doable to buy a house in the Bay. Why would someone single try to buy in one of the MOST expensive area in the country with a 70k salary?

With that said, people should move to make their lifestyle/dreams work to the fullest extent.
Well, what if she intends to stay single? Even worse, unfortunately, divorce isn't unheard of in this day and age. [expletive deleted by moderator oldcomputerguy] happens.

A $2000 rent on a 72K income will leave her with very little to save & invest. Or she would need to sign up for a significant grinding commute daily.

Point is, the Bay Area is no place for anyone making less than 200K & it's sad when locals have to leave due to lack of affordability
Yes she can stay single. Yes, divorce/health/life stuff happens, I get it. But 72k is her Starting salary though. How many of us were maxing 401k/IRAs with our first job? Some but not most. It takes time to get the snowball rolling.

If $200k is the bar, the Bay Area should be pretty deserted.


*To be clear, I do think the Bay is Way too expensive. We should be building more housing, affordable and mid-income.*
It's not deserted because of the 400K dual income tech workers, foreign money etc, pricing natives out of their neighborhoods. Many middle income earners live with their parents or in-laws or have inherited homes or received assistance with housing purchase. Multi-generational living is something I'm seeing quite often in my particular neck of the woods. Yet others were able to buy during the great crash. They were patient, waited and seized the opportunity that presented itself. Not all were that smart or in a position to take advantage.

In any case, the Bay Area is already starting to get deserted by lower income hourly workers esp respite care workers, IHSS workers, behavioral therapty aides, school aides etc. Now, new school teachers are choosing to work elsewhere. Many people don't want to commute a long distance, even for a job that they love. ABA therapy staffing is limited, due to the same issue. Lower wage hourly workers making less than $20/hr cannot afford housing. Some districts in rhe Bay Area simply cannot find OTs or SLPs or even special ed teachers. This is a fact, not just statistic. This is the lived experience of parents of kids with special needs who are not able to access services on their IEPs because there's no staff available! They pay district superintendents 300K to sit in an office but pay aides $16/hr to work with challenging kids, and make sure that no aide works for more than 19.5 hours to avoid paying benefits. It's someone else's kid, after all! Sociopaths!

Ending my rant here. But it says a lot about a place when people who work in professions that make a difference in the lives of the vulnerable, the young, the elderly, and the disabled simply cannot afford to live there.
I hear you and share most of the same frustration as you. My mom does IHSS and my dad is a cook, not chef. I lived in multi-generational home until last year and I'm in my 30s!
Absolutely, NO shame living in a multi-generational home, esp now when it's rapidly becoming the norm. My niece's parents both moved out of the area. Had they continued residing in the Bay Area, I think she would have taken that job and stayed put. It was the same district she attended for her entire K-12 education, but it was no longer a place she could afford to live in. Sad to see the younger generation having to move away and put down roots elsewhere.
Zillions
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Zillions »

Ron Ronnerson wrote: Fri Mar 26, 2021 6:37 pm
mmmodem wrote: Fri Mar 26, 2021 1:32 pm
Zillions wrote: Fri Mar 26, 2021 12:57 pm Ron was lucky in that he was able to buy during a significant downturn. Many do not expect such an opportunity again.
Many of my peers and colleagues lamented this opinion in 2005 as well. I didn't make any predictions then and I won't now about whether housing prices continue going up or not. Some may say it was good luck that we had the means in 2009 to purchase our first home. Others may say bad luck that two college educated incomes was not able to afford a home in 2005 and had to wait 4 more years. I think neither. We just rented and waited until the market offered a home we could afford.
This is exactly what we did. My wife and I were 35 years old in 2009. We though we had missed the boat and had completely given up hope of being able to buy a home in the Bay Area. But then, suddenly, prices fell and it became possible. We bought a home in the summer of 2009 and moved in during the winter of 2010. In my view, luck played an element but living frugally and being prepared to take advantage of the opportunity when it presented itself were also important factors.
Yes, it was not just blind luck, it was also you being patient and being ready and able to act when an opportunity finally presented itself. That part is not something that can be said of most people (including us).
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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

Drovor wrote: Fri Mar 26, 2021 4:05 pm
asap wrote: Fri Mar 26, 2021 3:22 pm
Zillions wrote: Fri Mar 26, 2021 12:57 pm
Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
My niece was born & raised in the Bay Area and earned her Master's and teaching credential recently. Her first year income would have been 72K. She felt she would never be able to buy her own home here, so she took a job in a LCOL area, in another state.

Ron was lucky in that he was able to buy during a significant downturn. Many do not expect such an opportunity again.

We're also in a VHCOL area, in CA. But my son's district pays $16 / hr for SDC aides and limits their hours to 19.5 per week (to avoid paying benefits).

Meanwhile, the rent in our neighborhood is $2000 for a one bedroom unit and we're not close to public transport. Our district is unable to hire SDC staff, cannot seem to retain teachers or OTs / SLPs and is a hot mess. Our regional center says vendors are unable to find staff to do respite or IHSS. Those jobs pay minimum or slightly above minimum wage. Since housing then becomes a big issue for these lower income earners, they simply don't take these jobs.

We're moving out of CA as soon as our other kid graduates high school. It'd be financial suicide for us to buy even a condo here, barring a repeat of 2008. But even that would not be advisable in our situation because a housing crash would mean higher rents and then we'd be left with no respite providers (as lower / minimum wage workers simply can't afford ro live in such places).

She can easily afford Sacramento on 72K. Many people downplay Sac weather then move to Phoenix.
Pretty sure she wont be making 72K starting out around Sacramento.
I think newer teachers start at about $50k there. After subtracting pension contributions and other required things like Medicare tax and union dues, the salary would approach close to $40k even before taking income taxes into account.
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

watchnerd wrote: Fri Mar 26, 2021 5:14 pm
Brianmcg321 wrote: Sat Sep 14, 2019 10:46 am Unfortunately most people are just dumb. They think if they are not able to do it, then nobody can.

If you went to the Mr Money Mustache forum, you'd be chastised for not saving 90% of your income. You'd be mr spendy pants in your clown house and your cable and not riding your bike to work.
So true.

We're saving 2 years of living expenses for every 1 year we work.

But in MM land, we'd be chastised for not using our 1 acre of forested land to harvest 10 years of firewood, turn off our central heating, and plant corn and raise chickens to feed ourselves so we could stop shopping for groceries.
Haha! You've got their number! I've gone to the MMM site to look for useful tips on how to keep costs low and find the discussions there sort of bizarre. I'm interested in optimizing my situation, working until about age 60, retiring comfortably and living reasonably well in the meantime. I find that I fit in much more on this forum than over there. There are discussion on that site about making your own soap and how to haul your own garbage to the landfill. I just don't get it but am glad they have found like-minded people with whom to have such discussions.
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

Zillions wrote: Fri Mar 26, 2021 6:45 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 6:37 pm
mmmodem wrote: Fri Mar 26, 2021 1:32 pm
Zillions wrote: Fri Mar 26, 2021 12:57 pm Ron was lucky in that he was able to buy during a significant downturn. Many do not expect such an opportunity again.
Many of my peers and colleagues lamented this opinion in 2005 as well. I didn't make any predictions then and I won't now about whether housing prices continue going up or not. Some may say it was good luck that we had the means in 2009 to purchase our first home. Others may say bad luck that two college educated incomes was not able to afford a home in 2005 and had to wait 4 more years. I think neither. We just rented and waited until the market offered a home we could afford.
This is exactly what we did. My wife and I were 35 years old in 2009. We though we had missed the boat and had completely given up hope of being able to buy a home in the Bay Area. But then, suddenly, prices fell and it became possible. We bought a home in the summer of 2009 and moved in during the winter of 2010. In my view, luck played an element but living frugally and being prepared to take advantage of the opportunity when it presented itself were also important factors.
Yes, it was not just blind luck, it was also you being patient and being ready and able to act when an opportunity finally presented itself. That part is not something that can be said of most people (including us).
There is no telling when opportunities may present themselves again. I'm not saying you should sit around and wait but it's good to be prepared. We thought we'd missed the boat but then it came by again.

I'm not sure if you've read the entire thread (it's very long so wouldn't fault you if you hadn't) but I shared at one point how we purchased our home. To make a long story short, I slept in a tent for three days in front of the sales office in 2009. You have to be ready to pounce.

Anyhow, I wish you the best of luck! You never know what might happen in life. I certainly didn't expect a pandemic that would bring down the 30-year rate to 2.375%. When it did, I locked it in and took out a bunch of home equity so I could use the cash for both increased liquidity as well as for arbitrage opportunities.
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by anon3838 »

marcopolo wrote: Sat Sep 14, 2019 2:09 pm
HEDGEFUNDIE wrote: Sat Sep 14, 2019 12:10 pm There are two Bay Areas.

The one for long time residents and the one for newcomers. The newcomers shoulder the burden of the infamous high housing costs, but they also tend to have the lucrative high paying tech jobs.

The long time residents have worked in “regular” jobs with “regular” incomes and aren’t exposed to market rate housing costs.

The long timers outnumber the newcomers by a lot. So if you want to describe what a “typical” Bay Area lifestyle is like, you should be describing someone like the OP, not a FAANG household making $500k.
I get your point, but people have been saying the same thing for several decades. Yet, newcomers somehow keep coming, make it work, and in a few years to a decade as one the "lucky" long time residents who bought "back when it was affordable".[/b


Yes. I’ve been hearing this for the last 3 decades that I have been here.
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Zillions »

Ron Ronnerson wrote: Fri Mar 26, 2021 6:48 pm I think newer teachers start at about $50k there. After subtracting pension contributions and other required things like Medicare tax and union dues, the salary would approach close to $40k even before taking income taxes into account.
I can tell you folks... Sacramento is quickly heading down the slippery slope of morphing into the next Bay Area. The housing madness hasn't helped one bit. It is still RELATIVELY affordable in comparison to the Bay Area, but if you think a new young teacher could afford to live in Sacramento on a new teacher's salary, nah...not unless they're married and the partner also has a good paycheck, or if they're living with their parents or grandparents or room mates etc to minimize housing costs. It's the result of former Bay Area residents fleeing to Sacramento after the pandemic hit, esp those who worked on a computer all day long (HR recruiters or insurance call center reps etc).
Ron Ronnerson wrote: Fri Mar 26, 2021 7:18 pm
Zillions wrote: Fri Mar 26, 2021 6:45 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 6:37 pm
mmmodem wrote: Fri Mar 26, 2021 1:32 pm
Zillions wrote: Fri Mar 26, 2021 12:57 pm Ron was lucky in that he was able to buy during a significant downturn. Many do not expect such an opportunity again.
Many of my peers and colleagues lamented this opinion in 2005 as well. I didn't make any predictions then and I won't now about whether housing prices continue going up or not. Some may say it was good luck that we had the means in 2009 to purchase our first home. Others may say bad luck that two college educated incomes was not able to afford a home in 2005 and had to wait 4 more years. I think neither. We just rented and waited until the market offered a home we could afford.
This is exactly what we did. My wife and I were 35 years old in 2009. We though we had missed the boat and had completely given up hope of being able to buy a home in the Bay Area. But then, suddenly, prices fell and it became possible. We bought a home in the summer of 2009 and moved in during the winter of 2010. In my view, luck played an element but living frugally and being prepared to take advantage of the opportunity when it presented itself were also important factors.
Yes, it was not just blind luck, it was also you being patient and being ready and able to act when an opportunity finally presented itself. That part is not something that can be said of most people (including us).
There is no telling when opportunities may present themselves again. I'm not saying you should sit around and wait but it's good to be prepared. We thought we'd missed the boat but then it came by again.

I'm not sure if you've read the entire thread (it's very long so wouldn't fault you if you hadn't) but I shared at one point how we purchased our home. To make a long story short, I slept in a tent for three days in front of the sales office in 2009. You have to be ready to pounce.

Anyhow, I wish you the best of luck! You never know what might happen in life. I certainly didn't expect a pandemic that would bring down the 30-year rate to 2.375%. When it did, I locked it in and took out a bunch of home equity so I could use the cash for both increased liquidity as well as for arbitrage opportunities.
Thanks, Ron. Yes, never say never. However, unless housing becomes affordable for support staff such as respite providers, and IHSS workers etc, it would be a terrible decision to decide to stay on even if we eventually could afford a home in an VHCOL.

BTW, speaking of arbitrage, could you expand on that, please? Interested to hear more about it!
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by 7eight9 »

Zillions wrote: Fri Mar 26, 2021 8:08 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 6:48 pm
Anyhow, I wish you the best of luck! You never know what might happen in life. I certainly didn't expect a pandemic that would bring down the 30-year rate to 2.375%. When it did, I locked it in and took out a bunch of home equity so I could use the cash for both increased liquidity as well as for arbitrage opportunities.
Thanks, Ron. Yes, never say never. However, unless housing becomes affordable for support staff such as respite providers, and IHSS workers etc, it would be a terrible decision to decide to stay on even if we eventually could afford a home in an VHCOL.

BTW, speaking of arbitrage, could you expand on that, please? Interested to hear more about it!
Curious as well. What risk-free investment is offering 2.375%?
I guess it all could be much worse. | They could be warming up my hearse.
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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

7eight9 wrote: Fri Mar 26, 2021 8:17 pm
Zillions wrote: Fri Mar 26, 2021 8:08 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 6:48 pm
Anyhow, I wish you the best of luck! You never know what might happen in life. I certainly didn't expect a pandemic that would bring down the 30-year rate to 2.375%. When it did, I locked it in and took out a bunch of home equity so I could use the cash for both increased liquidity as well as for arbitrage opportunities.
Thanks, Ron. Yes, never say never. However, unless housing becomes affordable for support staff such as respite providers, and IHSS workers etc, it would be a terrible decision to decide to stay on even if we eventually could afford a home in an VHCOL.

BTW, speaking of arbitrage, could you expand on that, please? Interested to hear more about it!
Curious as well. What risk-free investment is offering 2.375%?
Sure. It isn't necessarily free in terms of time and effort but I've found ways to put the money to use. Some of it is a guaranteed return but not all of it is (we're investing a portion of the cash we took out that we won't need for a while). I'm cutting-and-pasting this from the previous page as someone else had asked what I'm planning to do with the money I took out:
---

Okay, I’ll try to explain the best I can how we’ve begun to deploy the money from the cash-out refi. The rate is 2.375% on the loan with an effective rate of 2.28% since we itemize on state taxes. We are in the 12% federal bracket and don’t pay California income tax so we need to earn an after-tax rate above 2.59% in order to make money off this loan.

Roth IRAs (2020-2022): $32k
We put $10k into our Roth IRAs for 2020 ($2k was put into a traditional IRA for my wife about a year ago so we had $10k of space left). Additionally, my wife has already contributed $2k into a traditional IRA for 2021 as well. We will likely put in $10k into our Roth IRA accounts for 2021 also but are waiting until early 2022. The reason is that money put into traditional IRAs lower AGI and one can fund the account until April of the following year. I like having the option to use the space in traditional accounts if income turns out higher than projected for some reason. This is very important for us since we face a subsidy cliff when our MAGI exceeds $69,100. We also plan to use another $12k for 2022 Roth IRA contributions. The contributions made in these accounts may be accessed at any time so it also serves as a secondary emergency fund while, hopefully, earning greater than 2.6% in the years ahead.

Bonus Offers Already Completed: $21k
We may not necessarily keep the money put into these accounts for an entire year, but let’s assume we do in order to get an easy annualized return for the year. Here is what we have done so far this year:
Union Bank – deposited $1k and then spent the money using the debit card associated with the account and earned $300 – return of 30%
Capital One – deposit $2k and earn $400 x 2 accounts = $800 earned for $4k in deposits – return of 20%
US Bank - deposit $4k and earn $400 x 2 accounts = $800 earned for $8k in deposits – return of 10%
PNC Bank – deposit $2k and earn $200 x 2 accounts = $400 earned for $4k in deposits – return of 10%
Tastyworks – deposit $2k and earn 100 shares of stock worth about $2/share x 2 accounts = $400 earned for $4k in deposits – return of 10%

Bonus Offers - To Do Soon: $1k
TradeStation – deposit $500 and earn $100 bonus x2 accounts = $200 earned for $1k deposit – 20% return

High Yield Savings Accounts - Recently Opened: $2k
DCU - Deposited $1k each into 2 separate savings accounts – earns 6.17% on each account (this is ongoing on up to $1k per account)

High Yield Checking/Savings Accounts - To Open Soon: $51k
California Credit Union – Educator Summer Savings – pays 4% on up to $2k of deposits monthly – funds withdrawn in July and then program restarts in the summer (this is for teachers) – average balance in the account during the year will be $12k
Blue Federal Credit Union – Accelerated Savings – pays 5% on up to $1k (will open two accounts)
Service Credit Union – Pays 5% up to $500 on Primary Savings and 3% up to $3k on Holiday Club (will open two accounts for these)
Porte Bank – Pays 3% up to $15k (will open two accounts) – requires $1k+ direct deposit or ACH per month per account - this is low priority since it requires a monthly ACH (though that could be automated, it is still a requirement and the account only pays 3%)

Taxable Investing: $40k - HELP NEEDED
$40k will be put into two separate Merrill Edge taxable accounts. We’ll collect $150 bonus on each account ($300 total). So, we start with a 0.75% return to open the accounts. I am thinking we won’t need this money for a few years but I am not quite sure what to invest in and would appreciate guidance. The opportunity to tax loss harvest or tax gain harvest would be a plus since we would like to keep our AGI within a certain band (low enough that we qualify for the premium tax credit but high enough that we don’t lose out on fully taking advantage of non-refundable tax credits).

By the way, I heard of most of these opportunities either on this forum or on the Doctor of Credit site.
7eight9
Posts: 1933
Joined: Fri May 17, 2019 7:11 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by 7eight9 »

Ron Ronnerson wrote: Fri Mar 26, 2021 8:26 pm
7eight9 wrote: Fri Mar 26, 2021 8:17 pm
Zillions wrote: Fri Mar 26, 2021 8:08 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 6:48 pm
Anyhow, I wish you the best of luck! You never know what might happen in life. I certainly didn't expect a pandemic that would bring down the 30-year rate to 2.375%. When it did, I locked it in and took out a bunch of home equity so I could use the cash for both increased liquidity as well as for arbitrage opportunities.
Thanks, Ron. Yes, never say never. However, unless housing becomes affordable for support staff such as respite providers, and IHSS workers etc, it would be a terrible decision to decide to stay on even if we eventually could afford a home in an VHCOL.

BTW, speaking of arbitrage, could you expand on that, please? Interested to hear more about it!
Curious as well. What risk-free investment is offering 2.375%?
Sure. It isn't necessarily free in terms of time and effort but I've found ways to put the money to use. Some of it is a guaranteed return but not all of it is (we're investing a portion of the cash we took out that we won't need for a while). I'm cutting-and-pasting this from the previous page as someone else had asked what I'm planning to do with the money I took out:
---

Okay, I’ll try to explain the best I can how we’ve begun to deploy the money from the cash-out refi. The rate is 2.375% on the loan with an effective rate of 2.28% since we itemize on state taxes. We are in the 12% federal bracket and don’t pay California income tax so we need to earn an after-tax rate above 2.59% in order to make money off this loan.

Roth IRAs (2020-2022): $32k
We put $10k into our Roth IRAs for 2020 ($2k was put into a traditional IRA for my wife about a year ago so we had $10k of space left). Additionally, my wife has already contributed $2k into a traditional IRA for 2021 as well. We will likely put in $10k into our Roth IRA accounts for 2021 also but are waiting until early 2022. The reason is that money put into traditional IRAs lower AGI and one can fund the account until April of the following year. I like having the option to use the space in traditional accounts if income turns out higher than projected for some reason. This is very important for us since we face a subsidy cliff when our MAGI exceeds $69,100. We also plan to use another $12k for 2022 Roth IRA contributions. The contributions made in these accounts may be accessed at any time so it also serves as a secondary emergency fund while, hopefully, earning greater than 2.6% in the years ahead.

Bonus Offers Already Completed: $21k
We may not necessarily keep the money put into these accounts for an entire year, but let’s assume we do in order to get an easy annualized return for the year. Here is what we have done so far this year:
Union Bank – deposited $1k and then spent the money using the debit card associated with the account and earned $300 – return of 30%
Capital One – deposit $2k and earn $400 x 2 accounts = $800 earned for $4k in deposits – return of 20%
US Bank - deposit $4k and earn $400 x 2 accounts = $800 earned for $8k in deposits – return of 10%
PNC Bank – deposit $2k and earn $200 x 2 accounts = $400 earned for $4k in deposits – return of 10%
Tastyworks – deposit $2k and earn 100 shares of stock worth about $2/share x 2 accounts = $400 earned for $4k in deposits – return of 10%

Bonus Offers - To Do Soon: $1k
TradeStation – deposit $500 and earn $100 bonus x2 accounts = $200 earned for $1k deposit – 20% return

High Yield Savings Accounts - Recently Opened: $2k
DCU - Deposited $1k each into 2 separate savings accounts – earns 6.17% on each account (this is ongoing on up to $1k per account)

High Yield Checking/Savings Accounts - To Open Soon: $51k
California Credit Union – Educator Summer Savings – pays 4% on up to $2k of deposits monthly – funds withdrawn in July and then program restarts in the summer (this is for teachers) – average balance in the account during the year will be $12k
Blue Federal Credit Union – Accelerated Savings – pays 5% on up to $1k (will open two accounts)
Service Credit Union – Pays 5% up to $500 on Primary Savings and 3% up to $3k on Holiday Club (will open two accounts for these)
Porte Bank – Pays 3% up to $15k (will open two accounts) – requires $1k+ direct deposit or ACH per month per account - this is low priority since it requires a monthly ACH (though that could be automated, it is still a requirement and the account only pays 3%)

Taxable Investing: $40k - HELP NEEDED
$40k will be put into two separate Merrill Edge taxable accounts. We’ll collect $150 bonus on each account ($300 total). So, we start with a 0.75% return to open the accounts. I am thinking we won’t need this money for a few years but I am not quite sure what to invest in and would appreciate guidance. The opportunity to tax loss harvest or tax gain harvest would be a plus since we would like to keep our AGI within a certain band (low enough that we qualify for the premium tax credit but high enough that we don’t lose out on fully taking advantage of non-refundable tax credits).

By the way, I heard of most of these opportunities either on this forum or on the Doctor of Credit site.
So, bottom line, you are gaming some bank/brokerage bonuses. Kudos. Done the same. You don't have a risk-free investment that is offering 2.375% for the next 30 years.
I guess it all could be much worse. | They could be warming up my hearse.
VtsaxParade
Posts: 85
Joined: Sat Jan 30, 2021 9:19 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by VtsaxParade »

Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
I think it really depends on the state/city/district. However, the parameters of my family are eerily similar to the original poster's.

I find the money to be incredibly good and the working conditions/hours/days/benefits to be fantastic.

Unfortunately many people, teachers included, overspend.

It really is amazing what is possible with a frugal lifestyle and boglehead strategy.


I encounter the zeitgeist you mention often and always rebut with what I've stated here and that after having done many other jobs, I simply love teaching. So, to have all that and a great wage? Truly a blessing. I just wish more of my colleagues had the same outlook! :) But I do try to remind them often about how sweet it is. ;)
Zillions
Posts: 332
Joined: Sun May 24, 2020 12:58 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Zillions »

Ron Ronnerson wrote: Fri Mar 26, 2021 8:26 pm
Sure. It isn't necessarily free in terms of time and effort but I've found ways to put the money to use. Some of it is a guaranteed return but not all of it is (we're investing a portion of the cash we took out that we won't need for a while). I'm cutting-and-pasting this from the previous page as someone else had asked what I'm planning to do with the money I took out:
---

Okay, I’ll try to explain the best I can how we’ve begun to deploy the money from the cash-out refi. The rate is 2.375% on the loan with an effective rate of 2.28% since we itemize on state taxes. We are in the 12% federal bracket and don’t pay California income tax so we need to earn an after-tax rate above 2.59% in order to make money off this loan.

Roth IRAs (2020-2022): $32k
We put $10k into our Roth IRAs for 2020 ($2k was put into a traditional IRA for my wife about a year ago so we had $10k of space left). Additionally, my wife has already contributed $2k into a traditional IRA for 2021 as well. We will likely put in $10k into our Roth IRA accounts for 2021 also but are waiting until early 2022. The reason is that money put into traditional IRAs lower AGI and one can fund the account until April of the following year. I like having the option to use the space in traditional accounts if income turns out higher than projected for some reason. This is very important for us since we face a subsidy cliff when our MAGI exceeds $69,100. We also plan to use another $12k for 2022 Roth IRA contributions. The contributions made in these accounts may be accessed at any time so it also serves as a secondary emergency fund while, hopefully, earning greater than 2.6% in the years ahead.

Bonus Offers Already Completed: $21k
We may not necessarily keep the money put into these accounts for an entire year, but let’s assume we do in order to get an easy annualized return for the year. Here is what we have done so far this year:
Union Bank – deposited $1k and then spent the money using the debit card associated with the account and earned $300 – return of 30%
Capital One – deposit $2k and earn $400 x 2 accounts = $800 earned for $4k in deposits – return of 20%
US Bank - deposit $4k and earn $400 x 2 accounts = $800 earned for $8k in deposits – return of 10%
PNC Bank – deposit $2k and earn $200 x 2 accounts = $400 earned for $4k in deposits – return of 10%
Tastyworks – deposit $2k and earn 100 shares of stock worth about $2/share x 2 accounts = $400 earned for $4k in deposits – return of 10%

Bonus Offers - To Do Soon: $1k
TradeStation – deposit $500 and earn $100 bonus x2 accounts = $200 earned for $1k deposit – 20% return

High Yield Savings Accounts - Recently Opened: $2k
DCU - Deposited $1k each into 2 separate savings accounts – earns 6.17% on each account (this is ongoing on up to $1k per account)

High Yield Checking/Savings Accounts - To Open Soon: $51k
California Credit Union – Educator Summer Savings – pays 4% on up to $2k of deposits monthly – funds withdrawn in July and then program restarts in the summer (this is for teachers) – average balance in the account during the year will be $12k
Blue Federal Credit Union – Accelerated Savings – pays 5% on up to $1k (will open two accounts)
Service Credit Union – Pays 5% up to $500 on Primary Savings and 3% up to $3k on Holiday Club (will open two accounts for these)
Porte Bank – Pays 3% up to $15k (will open two accounts) – requires $1k+ direct deposit or ACH per month per account - this is low priority since it requires a monthly ACH (though that could be automated, it is still a requirement and the account only pays 3%)

Taxable Investing: $40k - HELP NEEDED
$40k will be put into two separate Merrill Edge taxable accounts. We’ll collect $150 bonus on each account ($300 total). So, we start with a 0.75% return to open the accounts. I am thinking we won’t need this money for a few years but I am not quite sure what to invest in and would appreciate guidance. The opportunity to tax loss harvest or tax gain harvest would be a plus since we would like to keep our AGI within a certain band (low enough that we qualify for the premium tax credit but high enough that we don’t lose out on fully taking advantage of non-refundable tax credits).

By the way, I heard of most of these opportunities either on this forum or on the Doctor of Credit site.
What is DCU?

Also, there's no direct deposit requirement to take advantage of any or these offers? Any need that money needs to stay in the a/c for a minimum period of time etc?

Do any of them run your credit? That's important to us.

I'll check out the doctor of credit website as well. Thanks for sharing
7eight9
Posts: 1933
Joined: Fri May 17, 2019 7:11 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by 7eight9 »

Zillions wrote: Fri Mar 26, 2021 9:35 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 8:26 pm
Sure. It isn't necessarily free in terms of time and effort but I've found ways to put the money to use. Some of it is a guaranteed return but not all of it is (we're investing a portion of the cash we took out that we won't need for a while). I'm cutting-and-pasting this from the previous page as someone else had asked what I'm planning to do with the money I took out:
---

Okay, I’ll try to explain the best I can how we’ve begun to deploy the money from the cash-out refi. The rate is 2.375% on the loan with an effective rate of 2.28% since we itemize on state taxes. We are in the 12% federal bracket and don’t pay California income tax so we need to earn an after-tax rate above 2.59% in order to make money off this loan.

Roth IRAs (2020-2022): $32k
We put $10k into our Roth IRAs for 2020 ($2k was put into a traditional IRA for my wife about a year ago so we had $10k of space left). Additionally, my wife has already contributed $2k into a traditional IRA for 2021 as well. We will likely put in $10k into our Roth IRA accounts for 2021 also but are waiting until early 2022. The reason is that money put into traditional IRAs lower AGI and one can fund the account until April of the following year. I like having the option to use the space in traditional accounts if income turns out higher than projected for some reason. This is very important for us since we face a subsidy cliff when our MAGI exceeds $69,100. We also plan to use another $12k for 2022 Roth IRA contributions. The contributions made in these accounts may be accessed at any time so it also serves as a secondary emergency fund while, hopefully, earning greater than 2.6% in the years ahead.

Bonus Offers Already Completed: $21k
We may not necessarily keep the money put into these accounts for an entire year, but let’s assume we do in order to get an easy annualized return for the year. Here is what we have done so far this year:
Union Bank – deposited $1k and then spent the money using the debit card associated with the account and earned $300 – return of 30%
Capital One – deposit $2k and earn $400 x 2 accounts = $800 earned for $4k in deposits – return of 20%
US Bank - deposit $4k and earn $400 x 2 accounts = $800 earned for $8k in deposits – return of 10%
PNC Bank – deposit $2k and earn $200 x 2 accounts = $400 earned for $4k in deposits – return of 10%
Tastyworks – deposit $2k and earn 100 shares of stock worth about $2/share x 2 accounts = $400 earned for $4k in deposits – return of 10%

Bonus Offers - To Do Soon: $1k
TradeStation – deposit $500 and earn $100 bonus x2 accounts = $200 earned for $1k deposit – 20% return

High Yield Savings Accounts - Recently Opened: $2k
DCU - Deposited $1k each into 2 separate savings accounts – earns 6.17% on each account (this is ongoing on up to $1k per account)

High Yield Checking/Savings Accounts - To Open Soon: $51k
California Credit Union – Educator Summer Savings – pays 4% on up to $2k of deposits monthly – funds withdrawn in July and then program restarts in the summer (this is for teachers) – average balance in the account during the year will be $12k
Blue Federal Credit Union – Accelerated Savings – pays 5% on up to $1k (will open two accounts)
Service Credit Union – Pays 5% up to $500 on Primary Savings and 3% up to $3k on Holiday Club (will open two accounts for these)
Porte Bank – Pays 3% up to $15k (will open two accounts) – requires $1k+ direct deposit or ACH per month per account - this is low priority since it requires a monthly ACH (though that could be automated, it is still a requirement and the account only pays 3%)

Taxable Investing: $40k - HELP NEEDED
$40k will be put into two separate Merrill Edge taxable accounts. We’ll collect $150 bonus on each account ($300 total). So, we start with a 0.75% return to open the accounts. I am thinking we won’t need this money for a few years but I am not quite sure what to invest in and would appreciate guidance. The opportunity to tax loss harvest or tax gain harvest would be a plus since we would like to keep our AGI within a certain band (low enough that we qualify for the premium tax credit but high enough that we don’t lose out on fully taking advantage of non-refundable tax credits).

By the way, I heard of most of these opportunities either on this forum or on the Doctor of Credit site.
What is DCU?

Also, there's no direct deposit requirement to take advantage of any or these offers? Any need that money needs to stay in the a/c for a minimum period of time etc?

Do any of them run your credit? That's important to us.

I'll check out the doctor of credit website as well. Thanks for sharing
DCU --- https://www.dcu.org/
I guess it all could be much worse. | They could be warming up my hearse.
Topic Author
Ron Ronnerson
Posts: 2263
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

7eight9 wrote: Fri Mar 26, 2021 8:49 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 8:26 pm
7eight9 wrote: Fri Mar 26, 2021 8:17 pm
Zillions wrote: Fri Mar 26, 2021 8:08 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 6:48 pm
Anyhow, I wish you the best of luck! You never know what might happen in life. I certainly didn't expect a pandemic that would bring down the 30-year rate to 2.375%. When it did, I locked it in and took out a bunch of home equity so I could use the cash for both increased liquidity as well as for arbitrage opportunities.
Thanks, Ron. Yes, never say never. However, unless housing becomes affordable for support staff such as respite providers, and IHSS workers etc, it would be a terrible decision to decide to stay on even if we eventually could afford a home in an VHCOL.

BTW, speaking of arbitrage, could you expand on that, please? Interested to hear more about it!
Curious as well. What risk-free investment is offering 2.375%?
Sure. It isn't necessarily free in terms of time and effort but I've found ways to put the money to use. Some of it is a guaranteed return but not all of it is (we're investing a portion of the cash we took out that we won't need for a while). I'm cutting-and-pasting this from the previous page as someone else had asked what I'm planning to do with the money I took out:
---

Okay, I’ll try to explain the best I can how we’ve begun to deploy the money from the cash-out refi. The rate is 2.375% on the loan with an effective rate of 2.28% since we itemize on state taxes. We are in the 12% federal bracket and don’t pay California income tax so we need to earn an after-tax rate above 2.59% in order to make money off this loan.

Roth IRAs (2020-2022): $32k
We put $10k into our Roth IRAs for 2020 ($2k was put into a traditional IRA for my wife about a year ago so we had $10k of space left). Additionally, my wife has already contributed $2k into a traditional IRA for 2021 as well. We will likely put in $10k into our Roth IRA accounts for 2021 also but are waiting until early 2022. The reason is that money put into traditional IRAs lower AGI and one can fund the account until April of the following year. I like having the option to use the space in traditional accounts if income turns out higher than projected for some reason. This is very important for us since we face a subsidy cliff when our MAGI exceeds $69,100. We also plan to use another $12k for 2022 Roth IRA contributions. The contributions made in these accounts may be accessed at any time so it also serves as a secondary emergency fund while, hopefully, earning greater than 2.6% in the years ahead.

Bonus Offers Already Completed: $21k
We may not necessarily keep the money put into these accounts for an entire year, but let’s assume we do in order to get an easy annualized return for the year. Here is what we have done so far this year:
Union Bank – deposited $1k and then spent the money using the debit card associated with the account and earned $300 – return of 30%
Capital One – deposit $2k and earn $400 x 2 accounts = $800 earned for $4k in deposits – return of 20%
US Bank - deposit $4k and earn $400 x 2 accounts = $800 earned for $8k in deposits – return of 10%
PNC Bank – deposit $2k and earn $200 x 2 accounts = $400 earned for $4k in deposits – return of 10%
Tastyworks – deposit $2k and earn 100 shares of stock worth about $2/share x 2 accounts = $400 earned for $4k in deposits – return of 10%

Bonus Offers - To Do Soon: $1k
TradeStation – deposit $500 and earn $100 bonus x2 accounts = $200 earned for $1k deposit – 20% return

High Yield Savings Accounts - Recently Opened: $2k
DCU - Deposited $1k each into 2 separate savings accounts – earns 6.17% on each account (this is ongoing on up to $1k per account)

High Yield Checking/Savings Accounts - To Open Soon: $51k
California Credit Union – Educator Summer Savings – pays 4% on up to $2k of deposits monthly – funds withdrawn in July and then program restarts in the summer (this is for teachers) – average balance in the account during the year will be $12k
Blue Federal Credit Union – Accelerated Savings – pays 5% on up to $1k (will open two accounts)
Service Credit Union – Pays 5% up to $500 on Primary Savings and 3% up to $3k on Holiday Club (will open two accounts for these)
Porte Bank – Pays 3% up to $15k (will open two accounts) – requires $1k+ direct deposit or ACH per month per account - this is low priority since it requires a monthly ACH (though that could be automated, it is still a requirement and the account only pays 3%)

Taxable Investing: $40k - HELP NEEDED
$40k will be put into two separate Merrill Edge taxable accounts. We’ll collect $150 bonus on each account ($300 total). So, we start with a 0.75% return to open the accounts. I am thinking we won’t need this money for a few years but I am not quite sure what to invest in and would appreciate guidance. The opportunity to tax loss harvest or tax gain harvest would be a plus since we would like to keep our AGI within a certain band (low enough that we qualify for the premium tax credit but high enough that we don’t lose out on fully taking advantage of non-refundable tax credits).

By the way, I heard of most of these opportunities either on this forum or on the Doctor of Credit site.
So, bottom line, you are gaming some bank/brokerage bonuses. Kudos. Done the same. You don't have a risk-free investment that is offering 2.375% for the next 30 years.
I wouldn't describe it as gaming. Let's just say that I'm giving these banks the privilege of having me as their customer and allowing them to compensate me for this privilege :happy Just kidding. Call it what you will but I personally don't like to use words like "gaming" as terms like these sound judgmental.

Anyhow, I wanted the extra liquidity and would have taken some cash out anyway from this refinance. I looked at various amounts from $50k to $150k and found out that the terms were identical (2.375% at no-cost). So, I took out $150k even though I could have gone with less.

I can earn more than 2.6% for just this year and then, next year, put the entire amount that I took out of the house back into it if I so choose. I would still come out on top from doing this. For example, let's say that I take out $150k at 2.375%. I would be charged $3500 in interest for the year to do this. If I earn $8500 during that year from bank bonuses and interest by putting money into a bunch of ultra-high-yield checking and savings accounts, I would have made $5k for the year. If no such opportunities exist in year 2 (or if I am satisfied with a $5k profit), I can pay back the money I took out of the house if I so desired. So I suppose I don't see it as a requirement that I need to earn 2.375% for 30 years. If, in a year, banks are paying less than they are now, I just may pay back a portion of what I took out. However, if they're paying more, that'd be really nice.

I'm willing to work for this extra yield, by the way. And it is most definitely work. It involves researching, reading fine print, filling out applications for accounts, keep up on spreadsheets, putting appointments in the calendar on my phone, initiating transfers by certain dates, linking accounts, and closing accounts. But the hourly rate is pretty good if you're organized. It does require having money to work with and I have that available now.

Also, some of the money (the part that I won't need for a while) is being invested in stock funds. I'm expecting them to return more than 2.375% over the medium to long term but it is not a guaranteed return. So I want to be clear and fully admit that this is a different risk level and I am essentially making a bet with this portion of the money. I do sort of expect to win, though. Please keep your fingers crossed for me, friend.
Topic Author
Ron Ronnerson
Posts: 2263
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

VtsaxParade wrote: Fri Mar 26, 2021 9:05 pm
Maverick3320 wrote: Fri Mar 26, 2021 12:22 pm I think your personal story is an awesome one, and congratulations.

I do find it curious, though: knowing quite a few teachers myself (including my mom), and reading stories like this...one has to wonder about the current zeitgeist regarding teachers not making enough to live on.
I think it really depends on the state/city/district. However, the parameters of my family are eerily similar to the original poster's.

I find the money to be incredibly good and the working conditions/hours/days/benefits to be fantastic.

Unfortunately many people, teachers included, overspend.

It really is amazing what is possible with a frugal lifestyle and boglehead strategy.


I encounter the zeitgeist you mention often and always rebut with what I've stated here and that after having done many other jobs, I simply love teaching. So, to have all that and a great wage? Truly a blessing. I just wish more of my colleagues had the same outlook! :) But I do try to remind them often about how sweet it is. ;)

You and I see it the same way. I get to work with the most amazing students and there is nothing else I'd rather do. I honestly wouldn't retire if I had $10 million in the bank. You're right. It doesn't get much better.
Topic Author
Ron Ronnerson
Posts: 2263
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

Zillions wrote: Fri Mar 26, 2021 9:35 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 8:26 pm
Sure. It isn't necessarily free in terms of time and effort but I've found ways to put the money to use. Some of it is a guaranteed return but not all of it is (we're investing a portion of the cash we took out that we won't need for a while). I'm cutting-and-pasting this from the previous page as someone else had asked what I'm planning to do with the money I took out:
---

Okay, I’ll try to explain the best I can how we’ve begun to deploy the money from the cash-out refi. The rate is 2.375% on the loan with an effective rate of 2.28% since we itemize on state taxes. We are in the 12% federal bracket and don’t pay California income tax so we need to earn an after-tax rate above 2.59% in order to make money off this loan.

Roth IRAs (2020-2022): $32k
We put $10k into our Roth IRAs for 2020 ($2k was put into a traditional IRA for my wife about a year ago so we had $10k of space left). Additionally, my wife has already contributed $2k into a traditional IRA for 2021 as well. We will likely put in $10k into our Roth IRA accounts for 2021 also but are waiting until early 2022. The reason is that money put into traditional IRAs lower AGI and one can fund the account until April of the following year. I like having the option to use the space in traditional accounts if income turns out higher than projected for some reason. This is very important for us since we face a subsidy cliff when our MAGI exceeds $69,100. We also plan to use another $12k for 2022 Roth IRA contributions. The contributions made in these accounts may be accessed at any time so it also serves as a secondary emergency fund while, hopefully, earning greater than 2.6% in the years ahead.

Bonus Offers Already Completed: $21k
We may not necessarily keep the money put into these accounts for an entire year, but let’s assume we do in order to get an easy annualized return for the year. Here is what we have done so far this year:
Union Bank – deposited $1k and then spent the money using the debit card associated with the account and earned $300 – return of 30%
Capital One – deposit $2k and earn $400 x 2 accounts = $800 earned for $4k in deposits – return of 20%
US Bank - deposit $4k and earn $400 x 2 accounts = $800 earned for $8k in deposits – return of 10%
PNC Bank – deposit $2k and earn $200 x 2 accounts = $400 earned for $4k in deposits – return of 10%
Tastyworks – deposit $2k and earn 100 shares of stock worth about $2/share x 2 accounts = $400 earned for $4k in deposits – return of 10%

Bonus Offers - To Do Soon: $1k
TradeStation – deposit $500 and earn $100 bonus x2 accounts = $200 earned for $1k deposit – 20% return

High Yield Savings Accounts - Recently Opened: $2k
DCU - Deposited $1k each into 2 separate savings accounts – earns 6.17% on each account (this is ongoing on up to $1k per account)

High Yield Checking/Savings Accounts - To Open Soon: $51k
California Credit Union – Educator Summer Savings – pays 4% on up to $2k of deposits monthly – funds withdrawn in July and then program restarts in the summer (this is for teachers) – average balance in the account during the year will be $12k
Blue Federal Credit Union – Accelerated Savings – pays 5% on up to $1k (will open two accounts)
Service Credit Union – Pays 5% up to $500 on Primary Savings and 3% up to $3k on Holiday Club (will open two accounts for these)
Porte Bank – Pays 3% up to $15k (will open two accounts) – requires $1k+ direct deposit or ACH per month per account - this is low priority since it requires a monthly ACH (though that could be automated, it is still a requirement and the account only pays 3%)

Taxable Investing: $40k - HELP NEEDED
$40k will be put into two separate Merrill Edge taxable accounts. We’ll collect $150 bonus on each account ($300 total). So, we start with a 0.75% return to open the accounts. I am thinking we won’t need this money for a few years but I am not quite sure what to invest in and would appreciate guidance. The opportunity to tax loss harvest or tax gain harvest would be a plus since we would like to keep our AGI within a certain band (low enough that we qualify for the premium tax credit but high enough that we don’t lose out on fully taking advantage of non-refundable tax credits).

By the way, I heard of most of these opportunities either on this forum or on the Doctor of Credit site.
What is DCU?

Also, there's no direct deposit requirement to take advantage of any or these offers? Any need that money needs to stay in the a/c for a minimum period of time etc?

Do any of them run your credit? That's important to us.

I'll check out the doctor of credit website as well. Thanks for sharing
DCU stands for Digital Credit Union. You can earn 6.17% on only up to $1k per year. So we're talking about a measly $60 before taxes. However, with my spouse doing the same, it becomes a little less measly at $120. That's enough to pay for six months of cell phone service.

There are no direct deposit requirements except for with Porte Bank. That one requires $1k per month. ACH counts so you could have $1k put in at the start of the month, taken out at the end of the month, put back in at the start of the next month, and so on. This can be automated so you don't have to think about it. That bank pays 3% on up to $15k. Multiply by 2 accounts and we're talking about $900 for the year.

As far I know, these do not run credit. To be more confident on that front, read the information on Doctor of Credit, including people's comments. If you're asked about overdraft protection, turn it down.

I want to emphasize that doing all this is work. There is a definite learning curve involved. I've been at it for years and would recommend getting your feet wet first if you want to go down this path rather than jumping in and opening 20 accounts all at once. If you're not organized and don't have the time and energy to dedicate to something like this, it can be more trouble than it's worth. Anyway, it's not for everyone. A couple of friends and relatives have tried it and they did not enjoy the experience. I've gotten relatively efficient at it.

I found it difficult to open an account at DCU, by the way. The website was clunky and had to scan documents and even made a phone call.
Zillions
Posts: 332
Joined: Sun May 24, 2020 12:58 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Zillions »

Ron Ronnerson wrote: Fri Mar 26, 2021 10:22 pm
Zillions wrote: Fri Mar 26, 2021 9:35 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 8:26 pm
Sure. It isn't necessarily free in terms of time and effort but I've found ways to put the money to use. Some of it is a guaranteed return but not all of it is (we're investing a portion of the cash we took out that we won't need for a while). I'm cutting-and-pasting this from the previous page as someone else had asked what I'm planning to do with the money I took out:
---

Okay, I’ll try to explain the best I can how we’ve begun to deploy the money from the cash-out refi. The rate is 2.375% on the loan with an effective rate of 2.28% since we itemize on state taxes. We are in the 12% federal bracket and don’t pay California income tax so we need to earn an after-tax rate above 2.59% in order to make money off this loan.

Roth IRAs (2020-2022): $32k
We put $10k into our Roth IRAs for 2020 ($2k was put into a traditional IRA for my wife about a year ago so we had $10k of space left). Additionally, my wife has already contributed $2k into a traditional IRA for 2021 as well. We will likely put in $10k into our Roth IRA accounts for 2021 also but are waiting until early 2022. The reason is that money put into traditional IRAs lower AGI and one can fund the account until April of the following year. I like having the option to use the space in traditional accounts if income turns out higher than projected for some reason. This is very important for us since we face a subsidy cliff when our MAGI exceeds $69,100. We also plan to use another $12k for 2022 Roth IRA contributions. The contributions made in these accounts may be accessed at any time so it also serves as a secondary emergency fund while, hopefully, earning greater than 2.6% in the years ahead.

Bonus Offers Already Completed: $21k
We may not necessarily keep the money put into these accounts for an entire year, but let’s assume we do in order to get an easy annualized return for the year. Here is what we have done so far this year:
Union Bank – deposited $1k and then spent the money using the debit card associated with the account and earned $300 – return of 30%
Capital One – deposit $2k and earn $400 x 2 accounts = $800 earned for $4k in deposits – return of 20%
US Bank - deposit $4k and earn $400 x 2 accounts = $800 earned for $8k in deposits – return of 10%
PNC Bank – deposit $2k and earn $200 x 2 accounts = $400 earned for $4k in deposits – return of 10%
Tastyworks – deposit $2k and earn 100 shares of stock worth about $2/share x 2 accounts = $400 earned for $4k in deposits – return of 10%

Bonus Offers - To Do Soon: $1k
TradeStation – deposit $500 and earn $100 bonus x2 accounts = $200 earned for $1k deposit – 20% return

High Yield Savings Accounts - Recently Opened: $2k
DCU - Deposited $1k each into 2 separate savings accounts – earns 6.17% on each account (this is ongoing on up to $1k per account)

High Yield Checking/Savings Accounts - To Open Soon: $51k
California Credit Union – Educator Summer Savings – pays 4% on up to $2k of deposits monthly – funds withdrawn in July and then program restarts in the summer (this is for teachers) – average balance in the account during the year will be $12k
Blue Federal Credit Union – Accelerated Savings – pays 5% on up to $1k (will open two accounts)
Service Credit Union – Pays 5% up to $500 on Primary Savings and 3% up to $3k on Holiday Club (will open two accounts for these)
Porte Bank – Pays 3% up to $15k (will open two accounts) – requires $1k+ direct deposit or ACH per month per account - this is low priority since it requires a monthly ACH (though that could be automated, it is still a requirement and the account only pays 3%)

Taxable Investing: $40k - HELP NEEDED
$40k will be put into two separate Merrill Edge taxable accounts. We’ll collect $150 bonus on each account ($300 total). So, we start with a 0.75% return to open the accounts. I am thinking we won’t need this money for a few years but I am not quite sure what to invest in and would appreciate guidance. The opportunity to tax loss harvest or tax gain harvest would be a plus since we would like to keep our AGI within a certain band (low enough that we qualify for the premium tax credit but high enough that we don’t lose out on fully taking advantage of non-refundable tax credits).

By the way, I heard of most of these opportunities either on this forum or on the Doctor of Credit site.
What is DCU?

Also, there's no direct deposit requirement to take advantage of any or these offers? Any need that money needs to stay in the a/c for a minimum period of time etc?

Do any of them run your credit? That's important to us.

I'll check out the doctor of credit website as well. Thanks for sharing
DCU stands for Digital Credit Union. You can earn 6.17% on only up to $1k per year. So we're talking about a measly $60 before taxes. However, with my spouse doing the same, it becomes a little less measly at $120. That's enough to pay for six months of cell phone service.

There are no direct deposit requirements except for with Porte Bank. That one requires $1k per month. ACH counts so you could have $1k put in at the start of the month, taken out at the end of the month, put back in at the start of the next month, and so on. This can be automated so you don't have to think about it. That bank pays 3% on up to $15k. Multiply by 2 accounts and we're talking about $900 for the year.

As far I know, these do not run credit. To be more confident on that front, read the information on Doctor of Credit, including people's comments. If you're asked about overdraft protection, turn it down.

I want to emphasize that doing all this is work. There is a definite learning curve involved. I've been at it for years and would recommend getting your feet wet first if you want to go down this path rather than jumping in and opening 20 accounts all at once. If you're not organized and don't have the time and energy to dedicate to something like this, it can be more trouble than it's worth. Anyway, it's not for everyone. A couple of friends and relatives have tried it and they did not enjoy the experience. I've gotten relatively efficient at it.

I found it difficult to open an account at DCU, by the way. The website was clunky and had to scan documents and even made a phone call.

Well, nothing venture, nothing have. This will take work of course. And I wouldn't call free money "measly".

I'm more concerned about opening up too many checking a/cs for a different reason - I don't want multiple pulls on our credit, just in case we jump on any home purchasing opportunity. Plus, I was an ID theft victim a few years & we've frozen our credit report. In addition to having to lift and replace the freeze with every application, I am paranoid about ID theft and becoming a victim again.

I noticed you use Mint Mobile. How is the experience so far?
Topic Author
Ron Ronnerson
Posts: 2263
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

Zillions wrote: Fri Mar 26, 2021 10:30 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 10:22 pm
Zillions wrote: Fri Mar 26, 2021 9:35 pm
Ron Ronnerson wrote: Fri Mar 26, 2021 8:26 pm
Sure. It isn't necessarily free in terms of time and effort but I've found ways to put the money to use. Some of it is a guaranteed return but not all of it is (we're investing a portion of the cash we took out that we won't need for a while). I'm cutting-and-pasting this from the previous page as someone else had asked what I'm planning to do with the money I took out:
---

Okay, I’ll try to explain the best I can how we’ve begun to deploy the money from the cash-out refi. The rate is 2.375% on the loan with an effective rate of 2.28% since we itemize on state taxes. We are in the 12% federal bracket and don’t pay California income tax so we need to earn an after-tax rate above 2.59% in order to make money off this loan.

Roth IRAs (2020-2022): $32k
We put $10k into our Roth IRAs for 2020 ($2k was put into a traditional IRA for my wife about a year ago so we had $10k of space left). Additionally, my wife has already contributed $2k into a traditional IRA for 2021 as well. We will likely put in $10k into our Roth IRA accounts for 2021 also but are waiting until early 2022. The reason is that money put into traditional IRAs lower AGI and one can fund the account until April of the following year. I like having the option to use the space in traditional accounts if income turns out higher than projected for some reason. This is very important for us since we face a subsidy cliff when our MAGI exceeds $69,100. We also plan to use another $12k for 2022 Roth IRA contributions. The contributions made in these accounts may be accessed at any time so it also serves as a secondary emergency fund while, hopefully, earning greater than 2.6% in the years ahead.

Bonus Offers Already Completed: $21k
We may not necessarily keep the money put into these accounts for an entire year, but let’s assume we do in order to get an easy annualized return for the year. Here is what we have done so far this year:
Union Bank – deposited $1k and then spent the money using the debit card associated with the account and earned $300 – return of 30%
Capital One – deposit $2k and earn $400 x 2 accounts = $800 earned for $4k in deposits – return of 20%
US Bank - deposit $4k and earn $400 x 2 accounts = $800 earned for $8k in deposits – return of 10%
PNC Bank – deposit $2k and earn $200 x 2 accounts = $400 earned for $4k in deposits – return of 10%
Tastyworks – deposit $2k and earn 100 shares of stock worth about $2/share x 2 accounts = $400 earned for $4k in deposits – return of 10%

Bonus Offers - To Do Soon: $1k
TradeStation – deposit $500 and earn $100 bonus x2 accounts = $200 earned for $1k deposit – 20% return

High Yield Savings Accounts - Recently Opened: $2k
DCU - Deposited $1k each into 2 separate savings accounts – earns 6.17% on each account (this is ongoing on up to $1k per account)

High Yield Checking/Savings Accounts - To Open Soon: $51k
California Credit Union – Educator Summer Savings – pays 4% on up to $2k of deposits monthly – funds withdrawn in July and then program restarts in the summer (this is for teachers) – average balance in the account during the year will be $12k
Blue Federal Credit Union – Accelerated Savings – pays 5% on up to $1k (will open two accounts)
Service Credit Union – Pays 5% up to $500 on Primary Savings and 3% up to $3k on Holiday Club (will open two accounts for these)
Porte Bank – Pays 3% up to $15k (will open two accounts) – requires $1k+ direct deposit or ACH per month per account - this is low priority since it requires a monthly ACH (though that could be automated, it is still a requirement and the account only pays 3%)

Taxable Investing: $40k - HELP NEEDED
$40k will be put into two separate Merrill Edge taxable accounts. We’ll collect $150 bonus on each account ($300 total). So, we start with a 0.75% return to open the accounts. I am thinking we won’t need this money for a few years but I am not quite sure what to invest in and would appreciate guidance. The opportunity to tax loss harvest or tax gain harvest would be a plus since we would like to keep our AGI within a certain band (low enough that we qualify for the premium tax credit but high enough that we don’t lose out on fully taking advantage of non-refundable tax credits).

By the way, I heard of most of these opportunities either on this forum or on the Doctor of Credit site.
What is DCU?

Also, there's no direct deposit requirement to take advantage of any or these offers? Any need that money needs to stay in the a/c for a minimum period of time etc?

Do any of them run your credit? That's important to us.

I'll check out the doctor of credit website as well. Thanks for sharing
DCU stands for Digital Credit Union. You can earn 6.17% on only up to $1k per year. So we're talking about a measly $60 before taxes. However, with my spouse doing the same, it becomes a little less measly at $120. That's enough to pay for six months of cell phone service.

There are no direct deposit requirements except for with Porte Bank. That one requires $1k per month. ACH counts so you could have $1k put in at the start of the month, taken out at the end of the month, put back in at the start of the next month, and so on. This can be automated so you don't have to think about it. That bank pays 3% on up to $15k. Multiply by 2 accounts and we're talking about $900 for the year.

As far I know, these do not run credit. To be more confident on that front, read the information on Doctor of Credit, including people's comments. If you're asked about overdraft protection, turn it down.

I want to emphasize that doing all this is work. There is a definite learning curve involved. I've been at it for years and would recommend getting your feet wet first if you want to go down this path rather than jumping in and opening 20 accounts all at once. If you're not organized and don't have the time and energy to dedicate to something like this, it can be more trouble than it's worth. Anyway, it's not for everyone. A couple of friends and relatives have tried it and they did not enjoy the experience. I've gotten relatively efficient at it.

I found it difficult to open an account at DCU, by the way. The website was clunky and had to scan documents and even made a phone call.

Well, nothing venture, nothing have. This will take work of course. And I wouldn't call free money "measly".

I'm more concerned about opening up too many checking a/cs for a different reason - I don't want multiple pulls on our credit, just in case we jump on any home purchasing opportunity. Plus, I was an ID theft victim a few years & we've frozen our credit report. In addition to having to lift and replace the freeze with every application, I am paranoid about ID theft and becoming a victim again.

I noticed you use Mint Mobile. How is the experience so far?
I’ve been very happy with Mint Mobile. We’re paying about $20/month per line for 10 GB on each line. The service works well for our needs.
calwatch
Posts: 430
Joined: Wed Oct 02, 2013 1:48 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by calwatch »

Ron, since money is fungible and you need to be careful to not have too much income to keep your ACA subsidy, I might invest in a growth ETF (like VUG) in taxable and offset that by shifting an index allocation in your Roth to value (VTV). The VUG will spin off little in dividends. You might have a large tax hit when you sell it, but that shouldn't happen for a long time.

I assume your district doesn't pay into retiree healthcare if their current healthcare contribution is so poor, but at least you can buy it.

As far as people in the Bay Area living, a lot of folks are building accessory dwelling units for their family members and descendants. It gives folks space and privacy while still keeping them close, and maximizes the value of the existing land. Almost all single family homes can accommodate ADUs and you can get pre fab ones relatively cheaply. It does suck for those who are coming in without family ties though.

Good discussion of the Prop 19 property value transfer and the loophole that helps create intergenerational wealth. I could inherit my parents' home, purchased in 1989, move into it, and transfer that value when I turn 55 into a beach house or something similar. Prop 19 allows for both upgrades and downgrades in property value to qualify for the tax discount. I was lucky to purchase in 2010 and so have seen my property value double, if Zillow is to be believed. Of course, if I had moved closer into town (I live in the eastern LA suburbs), that could have increased by a greater percentage, but my mom insisted that I made sure I could afford the house on a 15 year fixed mortgage. Ironically a few year later I switched to a 30 year ARM, then recently paid it off when I couldn't find anything better to invest in, while getting a HELOC in case I needed to access home equity quickly.

During the February 2020 downturn, I drew down the HELOC fearful that banks would start closing lines down like they did in 2008. I put that money into bank bonuses and short and intermediate term corporate and high yield bonds, which were starting to be guaranteed by the federal government, in order to spin off interest that would offset my HELOC interest (which is reported as investment interest on my return). Of course, I could have taken a gamble and put it in the stock market, and doubled my money since March, but I think the return on investment was good enough. And, I've continued to pay down the HELOC given that I can't get a low risk investment earning more than 2.24% elsewhere.
Topic Author
Ron Ronnerson
Posts: 2263
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

calwatch wrote: Sat Mar 27, 2021 12:18 am Ron, since money is fungible and you need to be careful to not have too much income to keep your ACA subsidy, I might invest in a growth ETF (like VUG) in taxable and offset that by shifting an index allocation in your Roth to value (VTV). The VUG will spin off little in dividends. You might have a large tax hit when you sell it, but that shouldn't happen for a long time.

I assume your district doesn't pay into retiree healthcare if their current healthcare contribution is so poor, but at least you can buy it.

As far as people in the Bay Area living, a lot of folks are building accessory dwelling units for their family members and descendants. It gives folks space and privacy while still keeping them close, and maximizes the value of the existing land. Almost all single family homes can accommodate ADUs and you can get pre fab ones relatively cheaply. It does suck for those who are coming in without family ties though.

Good discussion of the Prop 19 property value transfer and the loophole that helps create intergenerational wealth. I could inherit my parents' home, purchased in 1989, move into it, and transfer that value when I turn 55 into a beach house or something similar. Prop 19 allows for both upgrades and downgrades in property value to qualify for the tax discount. I was lucky to purchase in 2010 and so have seen my property value double, if Zillow is to be believed. Of course, if I had moved closer into town (I live in the eastern LA suburbs), that could have increased by a greater percentage, but my mom insisted that I made sure I could afford the house on a 15 year fixed mortgage. Ironically a few year later I switched to a 30 year ARM, then recently paid it off when I couldn't find anything better to invest in, while getting a HELOC in case I needed to access home equity quickly.

During the February 2020 downturn, I drew down the HELOC fearful that banks would start closing lines down like they did in 2008. I put that money into bank bonuses and short and intermediate term corporate and high yield bonds, which were starting to be guaranteed by the federal government, in order to spin off interest that would offset my HELOC interest (which is reported as investment interest on my return). Of course, I could have taken a gamble and put it in the stock market, and doubled my money since March, but I think the return on investment was good enough. And, I've continued to pay down the HELOC given that I can't get a low risk investment earning more than 2.24% elsewhere.
Thanks so much for the etf suggestions! I was looking for something that wouldn't throw off much in the way of dividends and sounds like VUG might serve the purpose well.

My district provides retirees excellent health insurance and the district fully pays for it. Since employees get no health benefits, it actually motivates some people to retire earlier than they might do otherwise.

I can understand why you would have drawn down the HELOC early last year when things looked like they could get hairy and also why you've chosen to pay it down since then in light of where rates are these days.

A big part of the reason I took cash out of the home was for increased liquidity. Due to the situation I am in, I have to keep AGI down and I'm forced to either save more than I need for the future or else deal with a high marginal tax rate due to the loss of the premium tax credit. We've been on a frugal path and, as time goes by, it is looking more and more like we'll have more than we need during our retirement years. In order to smooth out the ride from now to then, I thought it might be good to find a way to get cash that wouldn't count as income. I considered tapping Roth IRA contributions but didn't think that was the best option since we're only in our 40s and I'm expecting a pretty big pension in the future. I also seriously considered a HELOC. With mortgage rates being so low recently, I thought that seemed like a very good option and am glad to have locked in 2.375% for the next three decades. There's no rule saying we can't pay it off faster, of course.

Anyhow, I appreciate your response and thanks again for the suggestions with the taxable account.
calwatch
Posts: 430
Joined: Wed Oct 02, 2013 1:48 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by calwatch »

Also Ron, I realized that you have a kid so you absolutely need to be maxing out your money in retirement accounts and avoid draining them to the greatest extent possible. The Cal Grant and UC Middle Class Scholarship have hard asset limits, that exclude home equity and retirement accounts. This could lead to an odd corner case where you might want to start expanding your home, buy new car(s), etc. prior to your kid going to college (if they are going to a CSU or UC), and certainly pay down your house, rather than take any money out in retirement accounts - because once that allocation is used, you can't put it back.

https://www.csac.ca.gov/sites/main/file ... 1597785909
https://www.csac.ca.gov/middle-class-scholarship
Ron Ronnerson wrote: Sat Mar 27, 2021 1:05 am A big part of the reason I took cash out of the home was for increased liquidity. Due to the situation I am in, I have to keep AGI down and I'm forced to either save more than I need for the future or else deal with a high marginal tax rate due to the loss of the premium tax credit. We've been on a frugal path and, as time goes by, it is looking more and more like we'll have more than we need during our retirement years. In order to smooth out the ride from now to then, I thought it might be good to find a way to get cash that wouldn't count as income. I considered tapping Roth IRA contributions but didn't think that was the best option since we're only in our 40s and I'm expecting a pretty big pension in the future. I also seriously considered a HELOC. With mortgage rates being so low recently, I thought that seemed like a very good option and am glad to have locked in 2.375% for the next three decades. There's no rule saying we can't pay it off faster, of course.

Anyhow, I appreciate your response and thanks again for the suggestions with the taxable account.
Topic Author
Ron Ronnerson
Posts: 2263
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

calwatch wrote: Sat Mar 27, 2021 1:20 am Also Ron, I realized that you have a kid so you absolutely need to be maxing out your money in retirement accounts and avoid draining them to the greatest extent possible. The Cal Grant and UC Middle Class Scholarship have hard asset limits, that exclude home equity and retirement accounts. This could lead to an odd corner case where you might want to start expanding your home, buy new car(s), etc. prior to your kid going to college (if they are going to a CSU or UC), and certainly pay down your house, rather than take any money out in retirement accounts - because once that allocation is used, you can't put it back.

https://www.csac.ca.gov/sites/main/file ... 1597785909
https://www.csac.ca.gov/middle-class-scholarship
Ron Ronnerson wrote: Sat Mar 27, 2021 1:05 am A big part of the reason I took cash out of the home was for increased liquidity. Due to the situation I am in, I have to keep AGI down and I'm forced to either save more than I need for the future or else deal with a high marginal tax rate due to the loss of the premium tax credit. We've been on a frugal path and, as time goes by, it is looking more and more like we'll have more than we need during our retirement years. In order to smooth out the ride from now to then, I thought it might be good to find a way to get cash that wouldn't count as income. I considered tapping Roth IRA contributions but didn't think that was the best option since we're only in our 40s and I'm expecting a pretty big pension in the future. I also seriously considered a HELOC. With mortgage rates being so low recently, I thought that seemed like a very good option and am glad to have locked in 2.375% for the next three decades. There's no rule saying we can't pay it off faster, of course.

Anyhow, I appreciate your response and thanks again for the suggestions with the taxable account.
Thanks for the ideas about how to arrange things so as to increase our daughter's chances of qualifying for aid when it's time for college. It's definitely important to keep that in mind.

It does raise some things I need to consider regarding the taxable accounts I'm thinking of opening shortly. I may need to harvest some gains along the way so as not to end up with a large amount of gains in any one year as that could pose a problem for keeping our AGI low enough to qualify for the premium tax credit that year. At the same time, I don't want a taxable account (or at least not a sizeable one) when the kid goes to college for the reasons you mentioned. So the taxable account adds some more complexity to things.

Since a major part of my reason for doing a cash-out refi was to increase our spending, I may just invest a portion of it for now, slowly take some gains over time (particularly after turning 50, as I will be able to control our AGI even more from the additional tax-deferred space that will become available relatively soon), and then spend the money on new cars, some vacations, and perhaps pay down the mortgage before it's time to start filling out the forms for college.

It's kind of a lot to keep all this in proper balance so as to optimize things.
elle
Posts: 122
Joined: Thu Mar 13, 2014 3:13 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by elle »

Congrats on making it work. There will be naysayers and those who make excuses for how you have made it work.

Regardless, you should be proud of the progress you made and your diligence to living below your means. This thread was an enjoyable read.
hoops777
Posts: 3561
Joined: Sun Apr 10, 2011 12:23 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by hoops777 »

Congrats on the succcess. I read a lot of the posts.
I bought a home in the same area in 2009 for 465,000.
I am a bit confused about this though to be honest.

The OP bought a house years ago during a huge downturn. The OP is paid much more than most teachers. Very easy to live anywhere under those conditions.
The saving part is pretty much what we have seen countless times by a frugal person.
It does not take a special committee to understand someone buying a house today at a million plus vs 500K 10 years ago will have a tougher time.

Bay Area housing is ridiculous. I made the decision to downsize at age 57 to set us up for retirement. A couple looking to do the same today would have the misfortune of paying 900,000 for our little piece of heaven, so of course much tougher.
My wife and I are not frugal, but not big spenders by any means. We live comfortably for about 5000 a month which includes taxes and paying for LTC, MedicareAdvantage,etc.

When you eliminate the housing, the Bay Area is not that much different than most places in terms of cost.
K.I.S.S........so easy to say so difficult to do.
calwatch
Posts: 430
Joined: Wed Oct 02, 2013 1:48 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by calwatch »

Ron Ronnerson wrote: Sat Mar 27, 2021 11:51 am It does raise some things I need to consider regarding the taxable accounts I'm thinking of opening shortly. I may need to harvest some gains along the way so as not to end up with a large amount of gains in any one year as that could pose a problem for keeping our AGI low enough to qualify for the premium tax credit that year. At the same time, I don't want a taxable account (or at least not a sizeable one) when the kid goes to college for the reasons you mentioned. So the taxable account adds some more complexity to things.

Since a major part of my reason for doing a cash-out refi was to increase our spending, I may just invest a portion of it for now, slowly take some gains over time (particularly after turning 50, as I will be able to control our AGI even more from the additional tax-deferred space that will become available relatively soon), and then spend the money on new cars, some vacations, and perhaps pay down the mortgage before it's time to start filling out the forms for college.

It's kind of a lot to keep all this in proper balance so as to optimize things.
For taxable investments, one way to reduce it for financial aid purposes would be to take out a margin loan at low interest - Interactive Brokers and M1 have sub 3% APRs - and place that into a non-counted asset (first home equity, retirement plans, life insurance, annuities). Of course, only do it if it makes sense with your overall plan, and interest rates ten years from now may be completely different. https://studentaid.gov/2122/help/students-investments
Topic Author
Ron Ronnerson
Posts: 2263
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

hoops777 wrote: Sat Mar 27, 2021 2:15 pm Congrats on the succcess. I read a lot of the posts.
I bought a home in the same area in 2009 for 465,000.
I am a bit confused about this though to be honest.
Thanks. I'm not sure I understand which part is confusing; perhaps I can clarify if you explain what you mean.
hoops777 wrote: Sat Mar 27, 2021 2:15 pm The OP bought a house years ago during a huge downturn. The OP is paid much more than most teachers. Very easy to live anywhere under those conditions.
Yes, the timing of the house purchase turned out to be quite good in hindsight. We just bought when it was finally affordable. The home cost $500k and we earned a combined salary of about $125k at the time. We put down 3% and our net worth at the time was in the five figures. Over the past 11 years, we paid down roughly $150k in principal and we just took that entire amount out of the home two months ago primarily to increase our level of spending. Our mortgage payment has gone up and we have restarted the 30 year clock so that the home won't be paid off until we're 76 years old. All this goes against what is generally advised. People often use rules-of-thumb such as "don't spend more than 3x your income on a home" or "you must have a 20% down payment" or "pay off your house before retiring." In this thread, I've tried to show how some of those rules can be bent sometimes and it's actually okay.

While I do make more than most teachers in the country (it is a VHCOL area after all), my salary is pretty typical in the region. The nearby districts to where I work all pay roughly the same. I'm also mid-career and people with more experience than me in my district are making up to $20k more per year than I do.
hoops777 wrote: Sat Mar 27, 2021 2:15 pm The saving part is pretty much what we have seen countless times by a frugal person.
Maybe so but this thread was started because a bunch of people questioned how it was possible (see the very first post of this thread). I have tried to answer that question to the best of my ability.
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