Since math seems to check out, convince me to use leverage

[FoolMeOnce]

The car is a big distraction here and totally irrelevant to your question. You should edit the post or create a new post asking the single question you want feedback on:

should you borrow $150,000 at 4.49% for 60 months to invest?

[Normchad]

Such an absolutely terrible idea. I could tell from the original post you were pretty young. M

If you want it and can pay for it, then get it.

But stop trying to convince yourself that this is somehow financially smart. It isn’t. And that’s obvious to people older than you……

I think Rolex watches have also beaten the S&P recently. Lots of things do. It’s very hard to buy a Rolex at an authorized dealer right now. They’re highly sought after. But I also remember when nobody wanted them, and they could be bought at Costco.

Some luxury items and brands do fine during recessions. But almost nothing does fine over 40 years…..

You’re assuming that about a dozen different speculative things all go the way you assume they will.

If you want, get it. If you want to be rich, buy index funds instead.

[HomerJ]

"If the amount you can make between borrowing and investing is a significant number to you, then you can't afford the toy. Because then the prudent thing is to not buy the toy, and invest all the money, which would be far more significant gains."

Liquidating funds all at once when you have higher income which causes more funds at higher rates almost never makes sence - certainly when you do not need to. Loans are often a good choice when making larger purchases een when you can choose cash. The math is pretty clear as we have been through this excercise a few times ourselves.

I don't think he should liquidate funds that would cause a taxable event, but he's not asking about that.

He has $220k in cash, and is asking if he should put that all down on the car, and borrow a minimal amount that he could pay off quickly.

Or make a small down payment, get a loan, and invest the rest and hope the investments pay more than the interest costs on the loan.

The "math" works out, if you assume the investments will make more than the loan, but that's an assumption. A decent assumption, but certainly not guaranteed.

Again, just my personal opinion. If you're worried about trying to arbitrage 1%-2% on a luxury toy purchase, you probably shouldn't buy the toy.

It's a pretty big amount, so the money generated could be decent, but there is a chance for a decent loss as well.

Why not tell him to take a mortgage out on his house, and invest all that money as well?

All I'm looking to do is question the math of putting $150K of additional money in 50% US/20% ex-US/30% cash, instead of lump summing it directly into a car that won't see any material appreciation for at least 15 years. I believe the consensus here is, "Yes, put it in the market, especially if you're just going to sit on it forever. Duh."

It's not a 15 year proposition or a forever thing. It's a 5-year loan, so it's a 5-year thing. Will you make more in the market over 5 years than the interest rate? Maybe. That's short-term though, so who knows?

"I don't think he should liquidate funds that would cause a taxable event, but he's not asking about that."
Please read his posts like this one....
"I absolutely can write a check for 100% of it. But that would involve liquidating assets in taxable accounts, which is a taxable event. I consider that a no go. The best I can do without a taxable event is 80% of the T-cost."

I did read that. I addressed EXACTLY that. There is no discussion here about liquidating assets. We're talking about the 80%, the $220k in cash. Should he put it all down with a small loan, or get a big 5-year loan, and invest most of the $220k?

You did not reply to the previous question you asked....
"Buying a luxury toy should only happen if it makes very little difference in your financial life."
- 55X times expenses at 42 years old
- home of 650K fully paid off not included
- adding 4-5 times more expenses each year
- multiple jobs and mulitple 'employers'
- SS will likely cover all expenses at FRA
Does the purchase make any difference in this financial life ....when the person could be fully FIRE at 42?

All that says to me, he should just put the money down and pay it off quickly. Why is he messing around?

If he wants to get the loan, and invest, he may or may not beat the interest rate over 5 years. Up to him. It won't move the needle much either way.

[HomerJ]

The car is a big distraction here and totally irrelevant to your question. You should edit the post or create a new post asking the single question you want feedback on:

should you borrow $150,000 at 4.49% for 60 months to invest?

This. The car distracted me as well.

The OP can 100% afford the car.

[Watty]

The car is a big distraction here and totally irrelevant to your question. You should edit the post or create a new post asking the single question you want feedback on:

should you borrow $150,000 at 4.49% for 60 months to invest?

Bingo.

[smitcat]

"If the amount you can make between borrowing and investing is a significant number to you, then you can't afford the toy. Because then the prudent thing is to not buy the toy, and invest all the money, which would be far more significant gains."

Liquidating funds all at once when you have higher income which causes more funds at higher rates almost never makes sence - certainly when you do not need to. Loans are often a good choice when making larger purchases een when you can choose cash. The math is pretty clear as we have been through this excercise a few times ourselves.

I don't think he should liquidate funds that would cause a taxable event, but he's not asking about that.

He has $220k in cash, and is asking if he should put that all down on the car, and borrow a minimal amount that he could pay off quickly.

Or make a small down payment, get a loan, and invest the rest and hope the investments pay more than the interest costs on the loan.

The "math" works out, if you assume the investments will make more than the loan, but that's an assumption. A decent assumption, but certainly not guaranteed.

Again, just my personal opinion. If you're worried about trying to arbitrage 1%-2% on a luxury toy purchase, you probably shouldn't buy the toy.

It's a pretty big amount, so the money generated could be decent, but there is a chance for a decent loss as well.

Why not tell him to take a mortgage out on his house, and invest all that money as well?

All I'm looking to do is question the math of putting $150K of additional money in 50% US/20% ex-US/30% cash, instead of lump summing it directly into a car that won't see any material appreciation for at least 15 years. I believe the consensus here is, "Yes, put it in the market, especially if you're just going to sit on it forever. Duh."

It's not a 15 year proposition or a forever thing. It's a 5-year loan, so it's a 5-year thing. Will you make more in the market over 5 years than the interest rate? Maybe. That's short-term though, so who knows?

"I don't think he should liquidate funds that would cause a taxable event, but he's not asking about that."
Please read his posts like this one....
"I absolutely can write a check for 100% of it. But that would involve liquidating assets in taxable accounts, which is a taxable event. I consider that a no go. The best I can do without a taxable event is 80% of the T-cost."

I did read that. I addressed EXACTLY that. There is no discussion here about liquidating assets. We're talking about the 80%, the $220k in cash. Should he put it all down with a small loan, or get a big 5-year loan, and invest most of the $220k?

You did not reply to the previous question you asked....
"Buying a luxury toy should only happen if it makes very little difference in your financial life."
- 55X times expenses at 42 years old
- home of 650K fully paid off not included
- adding 4-5 times more expenses each year
- multiple jobs and mulitple 'employers'
- SS will likely cover all expenses at FRA
Does the purchase make any difference in this financial life ....when the person could be fully FIRE at 42?

All that says to me, he should just put the money down and pay it off quickly. Why is he messing around?

If he wants to get the loan, and invest, he may or may not beat the interest rate over 5 years. Up to him. It won't move the needle much either way.

If not now ....then when will the OP be in a better position to take any risk in his entire life?

[HomerJ]

If not now ....then when will the OP be in a better position to take any risk in his entire life?

I really don't know what you are asking.

The amount he might make from taking the loan and hoping the market beats the interest rate over the next 5 years is probably a rounding error for him.

He saves more every 3 weeks it seems.

Are you suggesting that he get a mortgage for his house and invest all that too? I mean, he's in a great position to take risk, right?

[smitcat]

If not now ....then when will the OP be in a better position to take any risk in his entire life?

I really don't know what you are asking.

The amount he might make from taking the loan and hoping the market beats the interest rate over the next 5 years is probably a rounding error for him.

He saves more every 3 weeks it seems.

Are you suggesting that he get a mortgage for his house and invest all that too? I mean, he's in a great position to take risk, right?

I think this is the best time he will ever have to take risk. Take the care loan for now and not miss out on his allocation timing. Take some extar cash and add the garage and the few other home alterations he wants to add - if not now then when?

"Are you suggesting that he get a mortgage for his house and invest all that too? I mean, he's in a great position to take risk, right?"
Too high a rate now - but if he wanted to take more risk he can adust his AA.

[Meg77]

The car is a big distraction here and totally irrelevant to your question. You should edit the post or create a new post asking the single question you want feedback on:

should you borrow $150,000 at 4.49% for 60 months to invest?

Bingo.

Exactly. And I vote no. 7 years is too short of a time frame to bet on stock performance, especially starting near all time highs (and before a pivotal US election and with war spreading in Europe and the Middle East).

More importantly, people get tripped up looking at the long term averages of investment performance. You can have an AVERAGE rate of return of 5% over 7 years and STILL LOSE MONEY. Consider this example: you start with $100,000 and lose 50% in year one, ending with $50,000. Then you have a 50% return in year two, ending with $75,000. Your AVERAGE return is 0% (-50+50) but you actually have 25% less than you started with.

Don't do it.

[nisiprius]

Only Goof knows how badly he

a) wants the car,
b) wants to keep out of debt, and
c) wants to do the financially optimum thing.

Only Goof can make the tradeoffs. I just want to point out that item C is one of the tradeoffs.

For some of us, one goal of investing is to obtain some kind of feeling of freedom. To me, financial freedom means not being constantly constrained by having to plan carefully about money. If you place such a high value on always doing the financially optimum thing that you have run spreadsheets before every financial decision, then you are almost as constrained as the person who has to juggle to pay the bills. You certainly don't suffer as much, it's a psychological constraint rather than a financial constraint, but constraint it is.

Some people take C as an unexamined, non-negotiable imperative. I don't.

[HomerJ]

Only Goof knows how badly he

a) wants the car,
b) wants to keep out of debt, and
c) wants to do the financially optimum thing.

Only Goof can make the tradeoffs. I just want to point out that item C is one of the tradeoffs.

For some of us, one goal of investing is to obtain some kind of feeling of freedom. To me, financial freedom means not being constantly constrained by having to plan carefully about money. If you place such a high value on always doing the financially optimum thing that you have run spreadsheets before every financial decision, then you are almost as constrained as the person who has to juggle to pay the bills. You certainly don't suffer as much, it's a psychological constraint rather than a financial constraint, but constraint it is.

Some people take C as an unexamined, non-negotiable imperative. I don't.

And just note that the point some of us are making is that getting the loan may or may not be the financially optimum thing, which makes the decision harder.

5 year loan, stock market could easily be down in 5 years, so it may turn out that the financially optimum move is to NOT take the loan and invest it.

If he can get a loan for 4.5%, and take that money he was going to use on the car and put it in a 5-year CD paying 5.5%, then sure, no reason to turn down free money (well assuming it IS free money with taxes - he'd have to do the math).

[smitcat]

Only Goof knows how badly he

a) wants the car,
b) wants to keep out of debt, and
c) wants to do the financially optimum thing.

Only Goof can make the tradeoffs. I just want to point out that item C is one of the tradeoffs.

For some of us, one goal of investing is to obtain some kind of feeling of freedom. To me, financial freedom means not being constantly constrained by having to plan carefully about money. If you place such a high value on always doing the financially optimum thing that you have run spreadsheets before every financial decision, then you are almost as constrained as the person who has to juggle to pay the bills. You certainly don't suffer as much, it's a psychological constraint rather than a financial constraint, but constraint it is.

Some people take C as an unexamined, non-negotiable imperative. I don't.

And just note that the point some of us are making is that getting the loan may or may not be the financially optimum thing, which makes the decision harder.

5 year loan, stock market could easily be down in 5 years, so it may turn out that the financially optimum move is to NOT take the loan and invest it.

If he can get a loan for 4.5%, and take that money he was going to use on the car and put it in a 5-year CD paying 5.5%, then sure, no reason to turn down free money (well assuming it IS free money with taxes - he'd have to do the math).

Reading his posts gives me a good feeling that the loan is a good deal for a number of reasons in addition to the math ...which is still a good reason.
I do not think many people have bought items like this and know what is involved and how he is likely pursuing and viewing this purchase overall.

[HomerJ]

Only Goof knows how badly he

a) wants the car,
b) wants to keep out of debt, and
c) wants to do the financially optimum thing.

Only Goof can make the tradeoffs. I just want to point out that item C is one of the tradeoffs.

For some of us, one goal of investing is to obtain some kind of feeling of freedom. To me, financial freedom means not being constantly constrained by having to plan carefully about money. If you place such a high value on always doing the financially optimum thing that you have run spreadsheets before every financial decision, then you are almost as constrained as the person who has to juggle to pay the bills. You certainly don't suffer as much, it's a psychological constraint rather than a financial constraint, but constraint it is.

Some people take C as an unexamined, non-negotiable imperative. I don't.

And just note that the point some of us are making is that getting the loan may or may not be the financially optimum thing, which makes the decision harder.

5 year loan, stock market could easily be down in 5 years, so it may turn out that the financially optimum move is to NOT take the loan and invest it.

If he can get a loan for 4.5%, and take that money he was going to use on the car and put it in a 5-year CD paying 5.5%, then sure, no reason to turn down free money (well assuming it IS free money with taxes - he'd have to do the math).

Reading his posts gives me a good feeling that the loan is a good deal for a number of reasons in addition to the math ...which is still a good reason.
I do not think many people have bought items like this and know what is involved and how he is likely pursuing and viewing this purchase overall.

That's cool. He's in great shape financially no matter what he does. If he wants the loan, he can get the loan.

[one_speed]

How much for the new marble floor in the garage?

[smitcat]

How much for the new marble floor in the garage?

Tile will run a oouple of grand on the existing garage but I would do the expansion first.

[afan]

Another standard boglehead response coming.
This is not even a close call.

Extravagant purchases should be paid with what is for the purchaser a trivial amount of cash.
If the OP had $26,500,000 and wanted to spend $265,000 on a car, then sure, why not?
I would call spending 10% (or 5%) of one's networth on such a car to be an irresponsible waste of money.
If one needs to finance the purchase, then it is too expensive.
If one could pay cash but it would require scrimping or undesirable investment moves, then again it is too expensive.

55X times expenses at 42 years old
- home of 650K fully paid off not included
- adding 4-5 times more expenses each year
- multiple jobs and mulitple 'employers'
- SS will likely cover all expenses at FRA
Does the purchase make any difference in this financial life ....when the person could be fully FIRE at 42?

Yes, it makes a difference in OPs financial life. All of this could change abruptly with a down market and recession. Down markets and recessions happen regularly.
With a job loss, "adding 4-5 time expense each year" becomes "drawing down assets to pay bills".
SS will likely cover all expenses at FRA??? No one has any idea what SS will cover 30 years from now.

Keep working and saving for another 10 years and see how things look. At that point, if all goes well, then maybe the cost of the car will be 1% of networth. If so, then buy it then. If things do not work out as planned, OP will be very glad they did not spend so much on a luxury purchase.

[smitcat]

Another standard boglehead response coming.
This is not even a close call.

Extravagant purchases should be paid with what is for the purchaser a trivial amount of cash.
If the OP had $26,500,000 and wanted to spend $265,000 on a car, then sure, why not?
I would call spending 10% (or 5%) of one's networth on such a car to be an irresponsible waste of money.
If one needs to finance the purchase, then it is too expensive.
If one could pay cash but it would require scrimping or undesirable investment moves, then again it is too expensive.

55X times expenses at 42 years old
- home of 650K fully paid off not included
- adding 4-5 times more expenses each year
- multiple jobs and mulitple 'employers'
- SS will likely cover all expenses at FRA
Does the purchase make any difference in this financial life ....when the person could be fully FIRE at 42?

Yes, it makes a difference in OPs financial life. All of this could change abruptly with a down market and recession. Down markets and recessions happen regularly.
With a job loss, "adding 4-5 time expense each year" becomes "drawing down assets to pay bills".
SS will likely cover all expenses at FRA??? No one has any idea what SS will cover 30 years from now.

Keep working and saving for another 10 years and see how things look. At that point, if all goes well, then maybe the cost of the car will be 1% of networth. If so, then buy it then. If things do not work out as planned, OP will be very glad they did not spend so much on a luxury purchase.

Here are a few thoughts on these points....
- his costs are low and have always been low
- he has more than one job, either one covers more than expenses
- he can survive a much larger market drop for very much longer than just about anyone else I know
- the car (assett) may lose value but no where near typical deprection
- SS is still here, and with his income and expenses it will be very significant

"If things do not work out as planned, OP will be very glad they did not spend so much on a luxury purchase."
Perhaps you missed it but the OP has no other interests and has waited til now to pay off his home annd accumulate these excessive funds already.
Are you suggesting he get to maybe 100X before realizing any happiness from his endeavors?

[afan]

Well, I would not assert that someone who chooses not to pay $265,000 for a car has failed to realize any happiness. At least, I hope they would not believe that any happiness can only be achieved by purchasing such an expensive car. Some people could eek out a measure of happiness with a $50,000 car. Or not define their happiness as even related to the cost of their car.

If there is a recession, there is no reason to assume both jobs will be safe. If they are in a field with a high beta on the economy, it would be typical to lose both in a recession.
Having low expenses while young is not that difficult. But it does require not having health problems that force higher expenses, for example.

[Goof]

After thinking about it and running numbers, I've come to the conclusion that I should stick to the plan of 80% down and financing the balance which I burn down in 18 months.

-----

The primary reason is, "stay the course." It's what I planned 27+ months ago, so why change now? Everything was planned around being able to shrug off a significant duration (5-year) 70% reduction in income if it were to transpire (it's happened once before!) and sticking with the additional plan ensures such a scenario is another nothing sandwich as it was last time.

Although there's interest, it amounts to 0.75% of T-cost with the original plan, which although I'm allergic to interest, seems fair for the ability to not incur a taxable event. I have the ability to pay 100% cash, but what's in my taxable account isn't intended for a toy, so I refuse to use it for one so it can continue to grow. That's a hard rule I refuse to deviate from.

The second is remembering how important goals are in keeping myself motivated and prevent laziness. I've been spinning the business back up after-hours, and finally spending the long-term "fun fund" will keep me driven to replenish it. My goal with the business is to first approach completely capping out the 401k (max W-2 401k elective deferral, max W-2 401k employer match, then +$30K SE 401k profit-sharing instead of current $10K after-tax for mega-backdoor, then backdoor Roth IRA) to maximize tax-advantaged savings, and then there's an additional $3000-3500/mo left after taxes from the business to add to the long-term goal pile. This excludes the $10K/yr I put into Series I-Bonds, and what I already stuff into taxable accounts.

-----

So stick with the plan, use the business to put another +$20K into 401k (so additional $30K all tax-deferred!) try to add an additional $35-40K a year to replenish the "long term goal" non-retirement pile, on top of the existing $50K+ a year I'm already putting in that pile. I'll feel comfy and secure, and by March-ish 2027, that $150K I was considering adding to the taxable account in January 2025, should be wholly replenished if I stay on the gas.

[JBTX]

This is two financial decisions:

- how much purchasing power loss will I experience with purchase
- whether or not to finance.

As to the first - if we assume $300 purchase and you can sell it for $300k in 5 years (which seems aggressive to me but I have no expertise ) that is an approximate $80k purchasing power loss over 5 years, assuming you could invest the money at 5.0%. 300k times 1.05xy8 = $380k. Perhaps considering taxes 4% is more reasonable - $365k - or a $65k purchasing power loss.

That $65k does not include any insurance storage maintenance or other such costs. Is $13k a year purchasing power loss worth it to you? Only you can answer that. Even though a Toyota Camry or Lexus depreciates, the purchasing power loss is less because the up front out of pocket is less. A $50k Lexus that sells in five years for $30k is a loss of $28k : $58k (1.04@5 years ) less 30k. $28k is less than $65k.

So don’t fool yourself with the notion that since an assets doesn’t depreciate in nominal terms, it does depreciate in relative terms.


As to financing 4.45% is kind of a push. My thought is it isn’t worth it, because risk free rates are 4-5% but are taxable. In terms of liquidity you only hold the money for five years so that’s not that helpful. I would never invest in stocks for a 5 year duration so stock returns are not a good basis of comparison. So if it were me I probably wouldn’t bother - although for me driving something that costs as much as a house on public roads with idiot drivers is not something I would ever contemplate doing.

[406mtnfire]

I don't understand how you make $270k+, spend $4k a month, but save $50k per year (including matches). Shouldn't you save $150k per year?

In general, if you can't pay cash, you can't afford it. Houses or businesses or income producing investments (like rental RE) are probably different, but those aren't what is being discussed.

I think if you'd have $3M? leftover, sure go buy a 250k car or whatever.

If you want to look cool, buy it. Or buy a $100k corvette. Or buy a used Lexus or Corvette for $50k.

If you want to be wealthy, buy things that make you money.

[Goof]

should you borrow $150,000 at 4.49% for 60 months to invest?

So ultimately that is the question.

Granted, I should've asked myself that in early 2017. I had good information in early 2017 that the car would exist (revealed officially about 17 months ago). Hence why I decided not to change now. However, it's something I'll re-evaluate for future goals, and they'll be duration-matched as appropriate.

The main reason I didn't start accumulating earlier is I wanted the house paid off. At 4.5% it was mathematically sub-optimal (paid off a 30-year in 87 months)... but I can't predict the future, I skew very fiscally conservative, and I like that the house is mine.

Exactly. And I vote no. 7 years is too short of a time frame to bet on stock performance, especially starting near all time highs (and before a pivotal US election and with war spreading in Europe and the Middle East).

Agreed. The original plan was conservative for a reason -- make failure as difficult as possible. In general I also get, "number go down" syndrome, which I watched enough people I know succumb to during the early pandemic. Number goes down less when fixed expenses remain reasonable.

If there is a recession, there is no reason to assume both jobs will be safe. If they are in a field with a high beta on the economy, it would be typical to lose both in a recession.

Yep! Original plan was based around what I can control, and hedging against things out of my control.

It's why the consulting spinning back up was excluded aside from what's already booked -- it's on me to start lining that work up, and I'm still to figure out what my appetite is to grind more after-hours. Until I am reliably lining up engagements all I can guarantee is the existing $36K booked.

It's also another reason why I'm consulting again. My current boss is a former CTO at a former client where I put out many fires. I'm trying to build more relationships to potentially tap if required in the future.

I don't understand how you make $270k+, spend $4k a month, but save $50k per year (including matches). Shouldn't you save $150k per year?

In general, if you can't pay cash, you can't afford it. Houses or businesses or income producing investments (like rental RE) are probably different, but those aren't what is being discussed.

Of that $270K, based on what's already logged in Quicken and what I can seriously project for rest of 2024...

* $67.0K into federal and state taxes
* $41.5K went into fixed expenses
* $ 1.0K went into unplanned medical expenses
* $ 2.5K went into discretionary spending
* $60.5K went into 401k and IRA (didn't include SE 401K profit-share which is $9K)
* $15.0K went into Series I-Bonds
* $20.5K should end up in Taxable
* $62.0K got diverted into accumulating for the car this year

Outside of the car, I spent < 1% of gross income on discretionary expenses which includes buying gifts for family members on their birthdays and for holidays... unless I'm going to audit every bag of chips I get on a big sale once in a while.

I'll have saved 35.55% of my GROSS INCOME this year towards the future. I don't think I need a higher savings rate than that.

[smitcat]

Well, I would not assert that someone who chooses not to pay $265,000 for a car has failed to realize any happiness. At least, I hope they would not believe that any happiness can only be achieved by purchasing such an expensive car. Some people could eek out a measure of happiness with a $50,000 car. Or not define their happiness as even related to the cost of their car.

If there is a recession, there is no reason to assume both jobs will be safe. If they are in a field with a high beta on the economy, it would be typical to lose both in a recession.
Having low expenses while young is not that difficult. But it does require not having health problems that force higher expenses, for example.

I think he could 'burn' $300K and it would not be significant problem to his current financial situaion. He could also book a $300K flight on Space-X , donate $300K, world tour for $300K, book a yatch at $300K, etc without significant impact.
If people need to worry about recessions with 2 jobs and these backstopped savings then I would guess its not prudent for anyone to spend anything other than 'needs.
42 is not that young, and long ago I had given up judging others for their goals, lifestyes or what supplies their happiness.

[smitcat]

After thinking about it and running numbers, I've come to the conclusion that I should stick to the plan of 80% down and financing the balance which I burn down in 18 months.

-----

The primary reason is, "stay the course." It's what I planned 27+ months ago, so why change now? Everything was planned around being able to shrug off a significant duration (5-year) 70% reduction in income if it were to transpire (it's happened once before!) and sticking with the additional plan ensures such a scenario is another nothing sandwich as it was last time.

Although there's interest, it amounts to 0.75% of T-cost with the original plan, which although I'm allergic to interest, seems fair for the ability to not incur a taxable event. I have the ability to pay 100% cash, but what's in my taxable account isn't intended for a toy, so I refuse to use it for one so it can continue to grow. That's a hard rule I refuse to deviate from.

The second is remembering how important goals are in keeping myself motivated and prevent laziness. I've been spinning the business back up after-hours, and finally spending the long-term "fun fund" will keep me driven to replenish it. My goal with the business is to first approach completely capping out the 401k (max W-2 401k elective deferral, max W-2 401k employer match, then +$30K SE 401k profit-sharing instead of current $10K after-tax for mega-backdoor, then backdoor Roth IRA) to maximize tax-advantaged savings, and then there's an additional $3000-3500/mo left after taxes from the business to add to the long-term goal pile. This excludes the $10K/yr I put into Series I-Bonds, and what I already stuff into taxable accounts.

-----

So stick with the plan, use the business to put another +$20K into 401k (so additional $30K all tax-deferred!) try to add an additional $35-40K a year to replenish the "long term goal" non-retirement pile, on top of the existing $50K+ a year I'm already putting in that pile. I'll feel comfy and secure, and by March-ish 2027, that $150K I was considering adding to the taxable account in January 2025, should be wholly replenished if I stay on the gas.

That removes any problems and opportunities with leverage certianly not a problem either way.
Still suggest you consider the garage upgrade prior to delivery. Also good to have a good insurance company and some paper on the car untill you have the car in hand with no damage and operating at least a few months with no issues.

With regards to where you are saving all of these funds - if you are accumulating now well past your spending needs where will these funds be used?
The reasons to start to assess whare these funds will be used is that building larger accounts in tax deferred that may never be used can be problematic. Best to at least consider your longer range plan prior to closing in on FIRE. If you intend to work untill maybe 50 maybe not so much a problem but if your goals are another 10 years to 60 then the numbers start to get interesting.

[Goof]

That removes any problems and opportunities with leverage certianly not a problem either way.
Still suggest you consider the garage upgrade prior to delivery. Also good to have a good insurance company and some paper on the car untill you have the car in hand with no damage and operating at least a few months with no issues.

The garage is genuinely a non-issue outside of the “want” for future expansion. In the words of the last assessor, “Wait, your garage actually has a hip roof?” Even the approach angle of the driveway onto the lot I had re-done years ago to reduce it to 3 degrees (had to be under 6.5 degrees), and I spent a good six weeks DIY trenching, addressing drainage concerns to eliminate frost-heave risk, then re-landscaping. Heaven forfend, but I’m prepared for a magnesium fire. There’s the existing inconvenience when rotating tires of doing two, putting the car into the garage the other way round, then doing the other two, but maintenance will be minimal for a long while.

With regards to where you are saving all of these funds - if you are accumulating now well past your spending needs where will these funds be used?
The reasons to start to assess whare these funds will be used is that building larger accounts in tax deferred that may never be used can be problematic. Best to at least consider your longer range plan prior to closing in on FIRE. If you intend to work untill maybe 50 maybe not so much a problem but if your goals are another 10 years to 60 then the numbers start to get interesting.

Right. Next is car two — and it’ll likely be 2.5 years until I’ve narrowed down the candidates — and the garage and home improvement projects. I’m putting the rough timeline for both at 8-11 years. I will likely upgrade all the insulation and re-evaluate the sheathing under the siding in the same timeframe, but the main cost for those is my time. Accumulation for both resumes next year, though this time I’ll not do a 100% “cash” asset allocation.

After that, it’s having all the major items on the house I can’t easily do myself — primarily roof and windows — done within 20 years so they’re done and I don’t have to care much about them until I’m 90. I’m just going to assign a bucket in taxable and let that accumulate in the interim.

At that point all the boxes are ticked. Perhaps I shift back to exotic car sales, consignment and brokerage (I went from tech -> exotic car sales -> tech) to wind the career down doing something I enjoy more than the tech I returned to.

[smitcat]

That removes any problems and opportunities with leverage certianly not a problem either way.
Still suggest you consider the garage upgrade prior to delivery. Also good to have a good insurance company and some paper on the car untill you have the car in hand with no damage and operating at least a few months with no issues.

The garage is genuinely a non-issue outside of the “want” for future expansion. In the words of the last assessor, “Wait, your garage actually has a hip roof?” Even the approach angle of the driveway onto the lot I had re-done years ago to reduce it to 3 degrees (had to be under 6.5 degrees), and I spent a good six weeks DIY trenching, addressing drainage concerns to eliminate frost-heave risk, then re-landscaping. Heaven forfend, but I’m prepared for a magnesium fire. There’s the existing inconvenience when rotating tires of doing two, putting the car into the garage the other way round, then doing the other two, but maintenance will be minimal for a long while.

With regards to where you are saving all of these funds - if you are accumulating now well past your spending needs where will these funds be used?
The reasons to start to assess whare these funds will be used is that building larger accounts in tax deferred that may never be used can be problematic. Best to at least consider your longer range plan prior to closing in on FIRE. If you intend to work untill maybe 50 maybe not so much a problem but if your goals are another 10 years to 60 then the numbers start to get interesting.

Right. Next is car two — and it’ll likely be 2.5 years until I’ve narrowed down the candidates — and the garage and home improvement projects. I’m putting the rough timeline for both at 8-11 years. I will likely upgrade all the insulation and re-evaluate the sheathing under the siding in the same timeframe, but the main cost for those is my time. Accumulation for both resumes next year, though this time I’ll not do a 100% “cash” asset allocation.

After that, it’s having all the major items on the house I can’t easily do myself — primarily roof and windows — done within 20 years so they’re done and I don’t have to care much about them until I’m 90. I’m just going to assign a bucket in taxable and let that accumulate in the interim.

At that point all the boxes are ticked. Perhaps I shift back to exotic car sales, consignment and brokerage (I went from tech -> exotic car sales -> tech) to wind the career down doing something I enjoy more than the tech I returned to.

Please allow me to resay this thought....
It is likely a good time to review some of these numbers with whatever your plan is for the future.....
- purpose of funds at retirement
- age of planned retirement
- total amount in tax deferred
- total amount in taxable
- what role SS will play
- AA breakdowns in each type of account (taxable, tax deferred, Roth)
- the relationships between how you plan to 'spend' your funds and their amounts compared to those totals

[Goof]

Please allow me to resay this thought....
It is likely a good time to review some of these numbers with whatever your plan is for the future.....
- purpose of funds at retirement
- age of planned retirement
- total amount in tax deferred
- total amount in taxable
- what role SS will play
- AA breakdowns in each type of account (taxable, tax deferred, Roth)
- the relationships between how you plan to 'spend' your funds and their amounts compared to those totals

I have to get back to the grindstone so not going to lay out those projections, but generally, tools like New Retirement show funds vastly exceeding retirement needs even if I only averaged a 1% real return over the next 60 years. Vastly. It’s genuinely wild.

The entire savings plan revolved around “planning for a generally terrible outcome”, where the best mitigation was getting as far ahead as possible while I’m able — I can never truly know what the future holds regarding income, so let “time in market” do its job. If I can remain on the gas until I’m 50, I’ve at least told myself “catch up” contributions are wholly unnecessary, and barring a capital-intensive business, I may back off the gas a bit.

Considering I really only plan three vacations ever (they’ve never changed), the bigger issue is figuring out where the money ends up when I pass, as I’ve not focused on that while immediate family is still alive and healthy. It’s something that I’ll be thinking about more in the coming years.

[WhyNotUs]

For me, I would do your first plan and have it paid off in 8 months. However, I am past my peak earning and living in semi-retirement. Assuming that you are closer to 40 or maybe a little less, financing has some potential. Even at your age, I would probably do your original plan, not because of math but because I wanted to maintain a debt-free lifestyle. I would be concerned about an extended market and the potential that that also results in car price decline and lack of easy resale. We have been printing millionaires for a while, maybe that will continue, maybe not. I am more skeptical.

As for the math, If your loan is 6%, you need to earn more than that minus taxes to have this work in your favor. A higher risk portfolio that could earn 9 or 10% might do that or it might be a rough stretch for the next 10 years. No one here knows the answer to that.

[smitcat]

Please allow me to resay this thought....
It is likely a good time to review some of these numbers with whatever your plan is for the future.....
- purpose of funds at retirement
- age of planned retirement
- total amount in tax deferred
- total amount in taxable
- what role SS will play
- AA breakdowns in each type of account (taxable, tax deferred, Roth)
- the relationships between how you plan to 'spend' your funds and their amounts compared to those totals

I have to get back to the grindstone so not going to lay out those projections, but generally, tools like New Retirement show funds vastly exceeding retirement needs even if I only averaged a 1% real return over the next 60 years. Vastly. It’s genuinely wild.

The entire savings plan revolved around “planning for a generally terrible outcome”, where the best mitigation was getting as far ahead as possible while I’m able — I can never truly know what the future holds regarding income, so let “time in market” do its job. If I can remain on the gas until I’m 50, I’ve at least told myself “catch up” contributions are wholly unnecessary, and barring a capital-intensive business, I may back off the gas a bit.

Considering I really only plan three vacations ever (they’ve never changed), the bigger issue is figuring out where the money ends up when I pass, as I’ve not focused on that while immediate family is still alive and healthy. It’s something that I’ll be thinking about more in the coming years.

Again I failed to make my point effectively - I for one think you have way more funds then you will need. I believe some focus on where the funds are located (Tax deferred, taxable, Roth) as well as what their intended use is will likely be valuabe.

[Goof]

Again I failed to make my point effectively - I for one think you have way more funds then you will need. I believe some focus on where the funds are located (Tax deferred, taxable, Roth) as well as what their intended use is will likely be valuabe.

Trust me when I say I’ve not ignored your point, though I failed to acknowledge it! The Roth IRA probably has far more ($543K) than it should due to decisions I made when I was younger and dumber that happened to pay off. Though it’s a simple 3-fund portfolio at 3.5bps nowadays.

Things have been increasing more towards taxable and will shift further, save for where I can further tax shelter money (SE 401K profit sharing) as I increasingly move into the 32% federal bracket. 2025 or 2026 likely also adds new non-savings budget line items for returning to performance driving academies, as I’m aware of how much performance car I’m buying and know the best mod is “adjusting the nut behind the steering wheel.”

In general I’m not “getting off the gas” until 50-52. I want to make failure impossible as that’s always been the plan. I also don’t yet have goals set in stone, and until I do, I stay the course. Moreover, as the taxable pile grows it gives me the opportunity to consider things I might otherwise never would, so long as they don’t risk disrupting long term stability. Maybe the eventual Car 2 is a much higher TCO 8900rpm V12 instead of a 7000rpm V12?