Gen-X Boglehead Thoughts

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hornet96
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Re: Gen-X Boglehead Thoughts

Post by hornet96 »

grogu wrote: Sat Jul 17, 2021 6:53 am
hornet96 wrote: Wed Jul 14, 2021 9:52 am At some point, though, we expect (hope?) that the taxable account will dwarf our tax-sheltered accounts, and we would run out of room in the tax-sheltered accounts to add more bonds.
Curious why/how you expect your taxable account to dwarf the size of your tax-sheltered accounts. Assuming one maxes out 401k/IRA (and possibly mega-back door and HSA) limits each year throughout one's career, that's a sizeable amount of contributions. Barring a large one-time event like an inheritance or sale of a business, I'd think it would be tough for an after-tax account to exceed all of those contributions. Or are you only talking about the bond portion of your overall holdings?
“Dwarf” may be an overstatement, but yes, we are very fortunate at this stage of our lives to be able to save 4-5x the amount in taxable each year vs. the max limits to tax-deferrred. And the taxable savings multiplier is growing each year. Neither of us have access to mega backdoor Roths right now, unfortunately. So in 10 years or so, barring unforeseen changes in circumstances, I expect our tax sheltered balances to probably be around 40% or less of our total. So assuming a 60/40 allocation, all of our tax sheltered accounts would have to be in bonds at that point.
Last edited by hornet96 on Sat Jul 17, 2021 8:55 am, edited 1 time in total.
lazynovice
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Re: Gen-X Boglehead Thoughts

Post by lazynovice »

grogu wrote: Sat Jul 17, 2021 6:53 am
hornet96 wrote: Wed Jul 14, 2021 9:52 am At some point, though, we expect (hope?) that the taxable account will dwarf our tax-sheltered accounts, and we would run out of room in the tax-sheltered accounts to add more bonds.
Curious why/how you expect your taxable account to dwarf the size of your tax-sheltered accounts. Assuming one maxes out 401k/IRA (and possibly mega-back door and HSA) limits each year throughout one's career, that's a sizeable amount of contributions. Barring a large one-time event like an inheritance or sale of a business, I'd think it would be tough for an after-tax account to exceed all of those contributions. Or are you only talking about the bond portion of your overall holdings?
Most people do not have access to a mega back door Roth at least until recently. I never have. I might get access to one this year when my employer adds a Roth option to the 401(k) but I am not sure they will add the after tax contributions and in service conversion features.

Once we passed a certain level of earnings, living beneath our means was not very difficult and our taxable “contributions” have dwarfed the tax deferred for more than a decade. Because our entire bond allocation was in the 401(k) and the taxable is all equities, the taxable account has grown much faster than the 401(k)s.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
stan1
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Re: Gen-X Boglehead Thoughts

Post by stan1 »

drumboy256 wrote: Mon Jul 12, 2021 9:20 am 2.) I would consider myself an apostle of Vineviz because the first 20% of my Bonds are LTT. 6 months ago, I had 0% Bonds. What changed? Realizing that my portfolio was 1) not diversified enough and 2) I couldn't stomach a 40-50% drop of my retirement accounts. Not owning LTT as a core tenet of your portfolio seems wrong to me--- not like you're drinking the wrong koolaid wrong--- but still, a burger without cheese wrong. You mention sticking to the IPS--- this is most key to me. If your risk tolerance changes, the first place you need to go is look in the mirror--- say the words out loud and then update your IPS and plan accordingly.
Of the investment professionals who post on the forum I think Vineviz understands potential Gen X risks better than most especially for someone who is Gen X who does not plan to work until 70. I don't do everything he posts about and my situation doesn't exactly fit into his template (I have a large taxable account while he's told us he does not), but I think about every post he writes.
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hornet96
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Re: Gen-X Boglehead Thoughts

Post by hornet96 »

lazynovice wrote: Sat Jul 17, 2021 8:49 am
grogu wrote: Sat Jul 17, 2021 6:53 am
hornet96 wrote: Wed Jul 14, 2021 9:52 am At some point, though, we expect (hope?) that the taxable account will dwarf our tax-sheltered accounts, and we would run out of room in the tax-sheltered accounts to add more bonds.
Curious why/how you expect your taxable account to dwarf the size of your tax-sheltered accounts. Assuming one maxes out 401k/IRA (and possibly mega-back door and HSA) limits each year throughout one's career, that's a sizeable amount of contributions. Barring a large one-time event like an inheritance or sale of a business, I'd think it would be tough for an after-tax account to exceed all of those contributions. Or are you only talking about the bond portion of your overall holdings?
Most people do not have access to a mega back door Roth at least until recently. I never have. I might get access to one this year when my employer adds a Roth option to the 401(k) but I am not sure they will add the after tax contributions and in service conversion features.

Once we passed a certain level of earnings, living beneath our means was not very difficult and our taxable “contributions” have dwarfed the tax deferred for more than a decade. Because our entire bond allocation was in the 401(k) and the taxable is all equities, the taxable account has grown much faster than the 401(k)s.
This, exactly. My employer just added a Roth option this year, and I just inquired about making after tax contributions to the “regular” account and then converting them to the Roth account. They said that our plan doesn’t currently allow for in-service conversions or withdrawals, so the mega backdoor still remains elusive for me. I honestly wouldn’t be surprised if I’m the only one at my company who understands what this is and/or why it is beneficial for those who are in a position to take advantage of it. Maybe someday.
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Nestegg_User
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Re: Gen-X Boglehead Thoughts

Post by Nestegg_User »

mikejuss wrote: Thu Jul 08, 2021 6:01 pm
Greg in Idaho wrote: Thu Jul 08, 2021 5:49 pm Whatever...nevermind...
+1.
"Boomer" here...get off my lawn (yeah, retired, with p/o house)
(spouse is at the very end of Boomer (end of '64)... so there's a bit of overlap vis-a-vis those on different segments of "millennial")

-- as for rent vs buy, I didn't buy first house until mid-30's. Geographic arbitrage is important especially in early career... but it can even be important later as I've witnessed locations being closed and employees (especially those in later 40's/early 50's) have to move hundreds of miles away (and depending upon their current location the immediate placement of multiple houses on the market can have a significant impact on the resale prices). Agree that the changes in tax code limiting deductions will/has impacted the buy vs rent calculus with it pushing towards rent in high tax and HCOL areas especially.

-- assuming that, as millennials, you are in a higher salary position than earlier, maximizing 401k and regular IRA may be preferred... I know that prior to retirement we were in the 30x% fed plus state tax level and it would be hard to beat the overall savings even with robust growth in accounts (taxable or deferred). There's room after retirement to do conversions at lower tax rates... and now you even have two more years to accomplish conversions. (make sure that you have some money in taxable accounts in early retirement to maximize tax efficiency...we had a five year CD ladder (yeah, interest rates were better but the important part was the ability to not have to pull from other investments in the SOR early period.

-- not a real fan of LTT, especially now that interest rates are so low. I use intermediate treasuries as they are not as sensitive yet provide a somewhat higher yield than MM. (In fact, for a while ITT have been the "sweet spot" for risk-return.) {muni's might still be appropriate for the upper tier of income individuals, just not quite as good as before as their yields after tax aren't that much higher anymore. }

--as for ageism, I saw that enough...so remember to get your chute packed early. It's obviously good to be a high performer/technical expert but even then there's the C suite that doesn't see the level of performance and just wants reduced FTE (sometimes whole areas). At least get to the FI part of FIRE to give yourself options. "Stay safe out there"
NiceUnparticularMan
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Re: Gen-X Boglehead Thoughts

Post by NiceUnparticularMan »

hornet96 wrote: Sat Jul 17, 2021 8:03 am
grogu wrote: Sat Jul 17, 2021 6:53 am
hornet96 wrote: Wed Jul 14, 2021 9:52 am At some point, though, we expect (hope?) that the taxable account will dwarf our tax-sheltered accounts, and we would run out of room in the tax-sheltered accounts to add more bonds.
Curious why/how you expect your taxable account to dwarf the size of your tax-sheltered accounts. Assuming one maxes out 401k/IRA (and possibly mega-back door and HSA) limits each year throughout one's career, that's a sizeable amount of contributions. Barring a large one-time event like an inheritance or sale of a business, I'd think it would be tough for an after-tax account to exceed all of those contributions. Or are you only talking about the bond portion of your overall holdings?
“Dwarf” may be an overstatement, but yes, we are very fortunate at this stage of our lives to be able to save 4-5x the amount in taxable each year vs. the max limits to tax-deferrred. And the taxable savings multiplier is growing each year. Neither of us have access to mega backdoor Roths right now, unfortunately. So in 10 years or so, barring unforeseen changes in circumstances, I expect our tax sheltered balances to probably be around 40% or less of our total. So assuming a 60/40 allocation, all of our tax sheltered accounts would have to be in bonds at that point.
Yeah, this is a great "problem" to have, but I think if, say, you are a dual-career household and by the middle-ish point of your career you set things up in terms of expenses such that you can have more or less the lifestyle you want, also provide for kids (including funding 529s if you feel like it), and still max out your tax-advantaged space, then what can happen next is you keep getting more income from work that provides a further excess over all that.

You could of course do things like keep buying nicer and nicer cars, move into nicer and nicer residences, eat out at fancier and fancier restaurants, and so on. But we're Bogleheads, and we didn't get to that midcareer point with such consumption habits.--may a little bit of extra indulgence here or there, but no big radical changes in consumption.

And so at least if everything goes well with the careers past that midcareer point, you just keep generating more and more savings that ends up in a taxable account. Of course you could also retire early, but then if you still have pre-college kids in the house and such, maybe that is not really all that appealing . . . .

Exactly how that works out in terms of percentages in each type of account depends on all the details, of course. But I suspect that sort of second-half-of-career rotation toward taxable accounts is going to be a common experience for Gen X Bogleheads with sufficiently lucrative career paths (either individually or in combination with a spouse).
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SantaClaraSurfer
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Re: Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

Quick EE Bond reflection: just pulled the lever on the remaining $4,500 of our $9,000 annual EE Bond purchase.

As a Gen-X'er I have to admit this feels a bit weird and oldey-time to me, and there's some FOMO thoughts about taking $9,000 off the table and putting it in deep freeze for 20 years.

But at our combined age the math on this works out:

-we need some bonds in our mix (we are currently at about 25% FI investments overall depending on how you count a small pension)
-we can bank on the future predictable, guaranteed income of an EE Bond ladder (ie. $18,000 per year for 20 years starting 19 years from now)
-EE Bond's 3.53% guaranteed return is not on offer elsewhere
-the Yield to Maturity will most likely guarantee that we keep our EE Bonds in place versus pulling them and reinvesting in something else
-this adds to our pool of funds in the Emergency/Cash-like access category

It still feels conservative to me, but the math part of my brain likes what this strategy looks like 12 years from now when our average age will be 58 and we might be very glad to have made EE Bonds a part of our mix.
investingdad
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Re: Gen-X Boglehead Thoughts

Post by investingdad »

My wife and I are both 48, so right in the middle of GenX. You know, I really miss the mall arcade experience of my teen years Meh, whatever.

We hold only a small amount of i bonds. But I do have us in a 70/30 mix. I began shifting to more bond funds about a decade ago in anticipation of an earlier retirement.

I don’t know about all of you, but I’ve been dogged by downsizing my entire career, right from the word go in 1995. It only caught me once, but it was a major reason I started focusing on retirement when I was only 23.

Our kids are both in high school this year and while we do tax advantaged everything we passed on 529 plans. We made retirement investing our focus instead and I didn’t want to potentially have money in a vehicle that depended on what our kids may or may not need. I’m fine with the decision but I realize it’s not what others may have done.
FamilyMan
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Re: Gen-X Boglehead Thoughts

Post by FamilyMan »

Wannaretireearly wrote: Wed Jul 14, 2021 9:26 am Interesting thread. We're roughly mid forties.
There is the concept of not always being on autopilot in the book die with zero. I haven't read everything, but I think the concept is whatever you've done to get 'here' may need to change from now on. I believe the concept is untying the purse strings, and aggressively spending now in your 50s vs 60s vs 70s.
I also enjoyed that book. It’s kinda summed up by enjoy the journey, not just the destination.

But I find it very difficult to balance saving for retirement and spending available money on current wants. No one wants to have that difficult choice of running out of money too soon. Or worse yet, it happens to your partner after your demise. If only we knew the date we would die and spend accordingly.
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MrBobcat
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Re: Gen-X Boglehead Thoughts

Post by MrBobcat »

investingdad wrote: Thu Jul 22, 2021 5:53 am Our kids are both in high school this year and while we do tax advantaged everything we passed on 529 plans. We made retirement investing our focus instead and I didn’t want to potentially have money in a vehicle that depended on what our kids may or may not need. I’m fine with the decision but I realize it’s not what others may have done.
We passed on 529 plans for our kids as well. Retirement savings and debt pay down came first and we had no extra money what so ever when they were young so benefits would have been minimal by the time we could put money into them. Worked out fine for them and us.
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Portfolio7
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Re: Gen-X Boglehead Thoughts

Post by Portfolio7 »

MrBobcat wrote: Thu Jul 22, 2021 9:13 am
investingdad wrote: Thu Jul 22, 2021 5:53 am Our kids are both in high school this year and while we do tax advantaged everything we passed on 529 plans. We made retirement investing our focus instead and I didn’t want to potentially have money in a vehicle that depended on what our kids may or may not need. I’m fine with the decision but I realize it’s not what others may have done.
We passed on 529 plans for our kids as well. Retirement savings and debt pay down came first and we had no extra money what so ever when they were young so benefits would have been minimal by the time we could put money into them. Worked out fine for them and us.
We mostly passed on 529's as well. We set them up for both our boys, and encouraged family contributions on birthdays and such. Turns out that was a very inneffective approach, automated savings does a lot better. We saved about $20k or so by they time they were of age. My oldest is autistic and not ready for college (intellectually he could, but lots of other issues). My youngest dropped out (very long story). We have ended up not needing any more than we saved.
"An investment in knowledge pays the best interest" - Benjamin Franklin
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